Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 7, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
GST - States
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03/2021-State Tax (Rate) - dated
2-6-2021
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Gujarat SGST
Amendment in Notification No. 6/2019-State Tax (Rate), dated 30th March, 2019
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02/2021-State Tax (Rate) - dated
2-6-2021
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Gujarat SGST
Amendment in Notification No. 11/2017-State Tax (Rate) dated 30th June, 2017
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01/2021-State Tax (Rate) - dated
2-6-2021
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Gujarat SGST
Amendment in Notification No. 1/2017-State Tax (Rate), dated 30th June, 2017
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G.O. Ms. No. 79 - dated
20-5-2021
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Tamil Nadu SGST
Tamil Nadu Goods and Services Tax (Fourth Amendment) Rules, 2021
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311/2021/3(120)/XXVII(8)/2021/CT-14 - dated
31-5-2021
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Uttarakhand SGST
Seeks to extend specified compliances falling between 15.04.2021 to 30.05.2021 till 31.05.2021 in exercise of powers under section 168A of UGST Act
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309/2021/3(120)/XXVII(8)/2021/CT-10 - dated
31-5-2021
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Uttarakhand SGST
Amendment in Notification No. 430/2019/3(120)/XXVII(8)/2019/CT-21 dated 31st May, 2019
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308/2021/3(120)/XXVII(8)/2021/CT-09 - dated
31-5-2021
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Uttarakhand SGST
Amendment in Notification No. 97/2019/14(120)/XXVII(8)/2018/CT-76 dated 24th Januay, 2019
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284/2021/01(120)/XXVII(8)/2021 - dated
12-5-2021
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Uttarakhand SGST
Amendment in Notification No. 16/2021/6(120)/XXVII(8)/2020/CT-89 dated 7th January, 2021
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283/2021/03(120)/XXVII(8)/2021 CT- 05 - dated
12-5-2021
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Uttarakhand SGST
Amendment in Notification No. 330/2020/5(120)/XXVII(8)/2020/CT-13 dated 20th May, 2020
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Reimbursement of GST on production charges/supply of meals with effect from 1st July 2017 - welcome drink served to the passengers was provided by IRCTC - IRCTC’s witness admitted that tax invoices uploaded by DC under GSTR-1, in the return filed for outward supplies, have been reflected in GSTR-2, in the return of inward supplies of IRCTC, which is auto populated on the basis of GSTR-1. - The learned Arbitrator has decided the dispute within the four corners of the contractual provisions, in light of the change in tax regime brought about by the introduction of GST laws - HC
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Seeking grant of Bail - Input tax credit - The Petitioner is said to have been involved in commission of the above Economic offences which are considered to be grave. Such dubious activities in committing offences for making huge unlawful gain by causing huge loss to the State Exchequer is a step towards not only scuttling the process of development in the country but also in standing as developed country in the globe in which our march is on - Bail not granted - HC
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Validity of assessment order under GST - order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. - Matter directed to be re-adjudicated - HC
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Refund of input tax credit lying unutilized which has been transitioned by filing with Trans-1 after the implementation of Central Goods and Services Tax Act, 2017 under Section 54 of the Central Goods and Services Tax Act, 2017 as in the Section 54 of the the Tamil Nadu Goods and Services Tax Act, 2017 cannot be considered. - HC
Income Tax
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Tax refund adjustment towards the arrears of the tax - respondent authorities have applied the refund tax towards penalty only but not towards the arrears of tax - the respondent authorities are directed to adjust the tax refundable to the petitioner for the year 1996-97 to the tax arrears instead of penalty - HC
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TDS u/s 194C or 194I - payment for the use of lounge facilities by the passengers - the payment of lounge facilities cannot, by any stretch of logic, be characterized as payment "under any lease, sub-lease, tenancy or any other agreement or arrangement" u/s 194I -payments in question have been rightly treated as payments for services rendered under a contract, which are covered under section 194C - AT
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Interest u/s.244A - whether assessee is entitled for additional interest - Provisions of section 244A (1A) would apply only prospectively w.e.f 01.06.2016 and hence additional interest would be eligible only from that date and not from 01.04.2016. As the Hon'ble High Court has imposed caveat explaining the circumstances under which the additional interest can be granted u/s. 244A[1A] of the Act, we are of the view that this matter should go back to the file of the AO - AT
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Taxability of profits arising on sale of three flats through execution of sale deeds - proportionate cost of construction for three flats out of total eight flats comes is higher than the total amount received during the year resulting in shortfall - in absence of any surplus, the question of taxability doesn’t arise for consideration and addition of profits made by the AO deserve to be deleted - AT
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Disallowance of swap charges on loans obtained by the assessee - The utilization of the loans for the purposes of business has not been disputed by the learned DR before us, hence, there is no question of disallowance of any interest, whether nomenclature as interest or swap charges. The nomenclature of the transaction is absolutely irrelevant than the substance of the transaction. Thus we hold that the assessee is entitled for deduction towards swap charges. - AT
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Set-off of MAT credit u/s 115JAA - surcharge and cess - The observation of the Ld.CIT(A) that the issue is debatable one is not sustainable - majority of the decisions including the decisions of the Hon'ble Calcutta High Court and Hon'ble Madras High Court are in favour of the assessee and therefore it cannot be said that it is a debatable issue. In the circumstances, respectfully following the above said decisions allowing the grounds of appeal of the assessee, we direct the Assessing Officer to allow set off of MAT credit inclusive of surcharge and education cess and recompute the tax payable by the assessee for the year under consideration - AT
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Capital gain computation - As such the assessee has claimed higher value than the fair market value as per the AO. Thus in our considered view, the AO has no power to substitute the value of capital assets in the given facts and circumstances. Accordingly, the AO cannot substitute the value declared by the assessee as on 1st April 1981. - AT
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Revision u/s 263 - The Pr. CIT has not pointed out as to what is the error committed by the AO in accepting the replies from various parties. Without pointing out any defects, it cannot be said that there is an error which caused prejudice to the interest of the Revenue. This is not a case of lack of enquiry or non-application of mind. The AO has made an enquiry and has taken a plausible view on the issues. - AT
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Deduction u/s 35(1)(ii) - Disallowance of donation made to School of Human Genetics & Population Health, Kolkata - The assessee would be eligible for benefit of weighted deduction u/s 35(1)(ii) in assessment year 2012-13. Subsequent withdrawal of approval under section 35(1)(ii) of the Act from the institution by the Department would not prejudice the assessee's claim of donation in the impugned assessment year. - AT
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Disallowance u/s 43B on account of GST remaining unpaid - Facts relating to the issue need to be determined and verified in the first place, including amongst other things as to which component of income the GST relates to whether rental income or income from business and profession. If it found to relate to rental income then whether it has been included in the rental income returned by the assessee . If it has not been returned, there is no occasion for making any disallowance at all, but if it has been returned as rental income, then the issue needs to be determined in the light of section 23 of the Act which allows deduction of “local taxes” from rental income on payment basis and it needs to be decided whether the GST is covered under the same or not. - AT
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Deduction u/s 80IC - whether process of deriving the finished products amount to manufacture? - each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognized by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. - AT
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Addition of profit shifted out and the loss shifted in by way of Client code modification - Profit or the loss during the time when code were modified - transactions in F & O segment through the involvement of the broker - There is no basis on the part of the AO alleging that changes in the code limited to one digit represent genuine punching errors whereas changes in the codes ranging between 4 to 5 digits do not represent the genuine punching errors. - The changes in the number of digits in the code cannot be a criteria to draw an inference against the assessee. - AT
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Deduction u/s 80IC - ‘initial assessment year’ - whether the initial Assessment Year can be re-fixed in case of substantial expansion? - Although, the Department has vehemently opposed the orders of the CIT(A) granting deduction @ 100%, we find no error either in law or on facts having been committed by Ld. CIT(A) in the two captioned appeals as the Ld. CIT(A) has only followed the interpretation as laid down by the Coordinate Bench of this Tribunal. - AT
Customs
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Validity of adjudication order - The original adjudicating authority i.e. Deputy Commissioner of Customs in terms of section 122 of Customs Act, 1962, has the pecuniary jurisdiction to decide the matter with the value of less than ₹ 5 lakh. Apparently, the value of the impugned matter is beyond ₹ 5 lakh. Also there is nothing on record till date about any delegation of power to the said Deputy Commissioner nor the law has the provision of such delegation. Hence, it is held that Deputy Commissioner of Customs was not competent authority to pass the order in original - AT
Indian Laws
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Dishonor of Cheque - The complaint under Section 138 of the NI Act was filed in 2015 against the company and the petitioners herein, who have been arraigned as original accused Nos.2 & 3, for being the Directors of the company - The petitioners, being the Directors of the company, could be dealt with vicariously under the NI Act. - HC
Service Tax
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Sabka Vishwas (Dispute Resolution) Scheme, 2019 - Recovery of erroneous double service tax liability - Works Contract Service - deposit of service tax was ignored - Respondent No. 2 is directed to re-consider the petitioner’s SVLDRS1 and after verifying the claim of an amount paid during adjudication of SCN having been paid towards the service tax referred to in the show cause notice issue revised SVLDRS-3 - HC
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Taxability - services rendered by ICICI Econet Internet and Technology Fund floated by the Settlor - The impugned trusts have violated the principles of mutuality by concerning themselves in commercial activities and by using the discretionary powers to benefit a certain class of investors or nominees or employees or subsidiaries. They can no longer be treated as trusts for the purposes of taxation statutes at least - the learned special counsel has rightly submitted that VCFs bear no comparison to members of club, which, by its very incorporation, is a grouping of individuals who have chosen to be members of a particular institution or club for fulfilment of certain human needs social, sporting, recreational etc that cannot be fulfilled except in such oragnised collectives. - the Department was in its right to invoke the extended period for the issue of SCN. - AT
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Levy of Service Tax - security agency service or not - Home Guards department - scope of the term ‘person’ - Since State cannot be a person, it cannot be a “security agency”. Therefore, no service tax under the head security agency service can be charged on the amounts collected by the Police or Home Guards or any officers of the Government for providing security. - AT
Central Excise
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CENVAT Credit - input services - Commercial and Industrial Construction Services - These are not related to ‘Commercial Construction Service’ rather they are input services received in the course of day-to-day running of the plant, operation and maintenance of STP plant, drain cleaning and scrap collection work, putting up of safety signage in the plant area and also for earth work and excavation work etc. at the ‘wet gas plant’ - Credit allowed - AT
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Clandestine removal - shortage of goods detected on stock taking - MS Ingots - Admissions are the best evidence and need no further proof as is the established principle of Indian Evidence Act in Section 58 thereof. Hence the argument of the appellant that the department has not produced any evidence is not sustainable in the eyes of the admission of the appellant’s Director for the noticed shortage and for simultaneous non compliance of Rule 10 thereof. - AT
VAT
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Input Tax Credit - failure to register as VAT dealer - Assessee applied for VAT registration only on 18.05.2007 i.e., long after the expiry of stipulated period. Therefore, the 2nd respondent rightly rejected his claim and passed the impugned order directing the petitioner to pay VAT @ 12.5% and also treating him as VAT dealer instead of imposing @ 1% tax treating as turnover tax dealer. - HC
Case Laws:
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GST
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2021 (7) TMI 235
Validity of interim arbitral award - Reimbursement of GST on production charges/supply of meals with effect from 1st July 2017 - welcome drink served to the passengers was provided by IRCTC - welcome drink formed a part of initial period of contract or not? - policy decision dated 07th February, 2017 - pecuniary jurisdiction as per the provision of Section 12(2) of the Commercial Courts Acts, 2015 - HELD THAT:- The contention that the policy decision dated 07th February, 2017 became a part of the contract between the parties has rightly been disallowed by the learned Arbitrator, by holding the same to be a fresh policy decision brought in by IRCTC post entering into the licensing agreement with DC. IRCTC could not give any justification for bearing the burden for the initial period between 19th December, 2016 to 4th March, 2017, despite it s alleged understanding to the contrary. Its continued supply of welcome drink without expressly affirming that the contractual obligation for the job lay on DC, reaffirms the uncertainty of contractual obligations. On the basis of the conduct and the testimony of witnesses, the learned Arbitrator has rightly held that the actions of IRCTC exhibit ambiguity about DC s contractually stipulated obligations, which were then redressed by way of the ex post facto policy decision. The interpretation of the contract, as done by the learned Arbitrator, is based on the conduct of the parties, the contractual stipulations, as well as the evidence on record. This court finds reasoning supporting such interpretation to be rational, balanced, and germane, and sees no reason to disagree with the same, especially when construction of contract falls within the realm of an arbitrator s jurisdiction. For the aforesaid reasons, the court finds no merit in this ground of challenge. GST on production charges / supply of meal, post the introduction of the GST regime - HELD THAT:- GST regime has been introduced by the Central Government and is applicable to the services being provided by DC and is not in lieu of VAT, which has since been abolished. Therefore, the payment of GST on production charges is admissible to DC, which is to be reimbursed upon furnishing proof of deposit of the same with the concerned authorities - the quotes for supply/production of food in terms of Annexure-F were inclusive of taxes. There was no GST on production of food, neither on the date of tender nor on the date of award of licence. It was introduced much later, with effect from 1st July 2017. Would this tax be reimbursable to DC, or, in light of contractual provisions, it would be included in the rates quoted in the tender, was the question before the Arbitrator. The GST laws has replaced the erstwhile indirect taxation regime. This value added tax subsumed several indirect taxes, including VAT, which was an indirect tax, levied state-wise. Earlier, VAT was levied on production, in accordance with State-specific VAT Acts, which was being borne by DC. DC has explained that since the trains were moving through several states and each state had a different rate of tax under State VAT laws, it was not feasible to account for the same, therefore production charges were paid inclusive of taxes. Besides, no Input Tax Credit was available to IRCTC for VAT - The bifurcation of production charges was done under the afore-noted circular and it was advised that GST is to be reimbursed to the service provider on submission of proof of deposit. IRCTC s witness admitted that tax invoices uploaded by DC under GSTR-1, in the return filed for outward supplies, have been reflected in GSTR-2, in the return of inward supplies of IRCTC, which is auto populated on the basis of GSTR-1. The tax paid to DC would thus be available as ITC for IRCTC to pay its outgoing tax liability. Further, in the train fare, GST charges are being included and recovered from the passengers on production of catering services (i.e. meals) at the agreed rates - the court does not find any fault with the interpretation of the relevant terms of the contract. The learned Arbitrator has decided the dispute within the four corners of the contractual provisions, in light of the change in tax regime brought about by the introduction of GST laws. It cannot be held that his findings are unfair or suffer from perversity. Therefore, the court cannot hold the reasoning to be wholly unsustainable, in the absence whereof, it is impermissible for the court to interfere - petition dismissed.
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2021 (7) TMI 233
Seeking grant of Bail - Input tax credit - credit availed without supply/ receipt of goods and services - offence under Section-132(1)(b)(e)(f)(i)(j)(l) of the Central Goods Services Tax Act, 2017 - HELD THAT:- The statement of the Petitioner being then recorded, the Officers strongly sensed something fishy and dubious going on in the matter touching the unwanted entitlement and availment of ITC. It is said that ten (10) Firms have been created by hatching conspiracy in carrying out such magnitude of business activities like transfer of goods and services inter se without those taking place in reality and showing fake transactions to be genuine with other financial adjustment as those were ascertained upon investigation leading to the arrest of the Petitioner on 16.12.2020. Materials are yet to surface as to the developments with regard to the notices/summons issued to those entitles for deposit of the ITC as according to the Prosecution, illegally availed for pecuniary gain by playing fraud on the system and mechanism in place. The Petitioner is said to have been involved in commission of the above Economic offences which are considered to be grave. Such dubious activities in committing offences for making huge unlawful gain by causing huge loss to the State Exchequer is a step towards not only scuttling the process of development in the country but also in standing as developed country in the globe in which our march is on - the roles alleged to have been played by the Petitioner stands in the direction of making unlawful financial gain by putting up the show that for such sincere involvement in business and carrying out the same, his entitlement to the huge sum as incentive in the form of Input Tax Credit (ITC) flowed which he received having the tendency of foiling the entire move in introducing this new Tax Regime. This Court is not inclined to accept the present move of the Petitioner for grant of bail - Application dismissed.
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2021 (7) TMI 229
Extended period of limitation for filing an appeal - on-going COVID-19 pandemic situation - reliance have been placed in the judgments of the Supreme Court, IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER] , IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (1) TMI 261 - SC ORDER] , IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [ 2020 (5) TMI 671 - SC ORDER] and IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [ 2020 (5) TMI 418 - SC ORDER] - HELD THAT:- Original orders dated 28.05.2020 passed by R2, i.e., the Assistant Commissioner of Central Tax, had been impugned before the first appellate authority/R1. As per the provisions of the Central Goods and Services Tax Act, 2017, the period of limitation for filing of first appeal is 90 days, extendable by 30 days at the discretion of the appellate authority. The first respondent is directed to take it on file the appeals filed by the petitioner, hear the same and dispose the same on merits after hearing the petitioner, either virtually or otherwise - Petition disposed off.
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2021 (7) TMI 228
Principles of Natural Justice - Seeking withdrawal of assessment order - valid return along with the requisite taxes was filed - seeking withdrawal of consequential Composite Notice to Third Person - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, we form an opinion that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. Petition disposed off.
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2021 (7) TMI 223
Transfer of accumulated unutilized Input Tax Credit - shifting of factory from one state to another - Rule 10 of the CENVAT Credit Rules, 2004 - HELD THAT:- There are no transactions within the State of Tamil Nadu after 2016. The petitioner had no scope for utilizing the same. Sub-clause (ii) to first proviso to Section 140 of the Tamil Nadu General and Service Tax Act, 2017 makes it clear that a registered person shall not be allowed to take credit where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date - The credit would have survived for being transitioned under the Tamil Nadu Goods and Service Tax Act, 2017 provided the petitioner continued to have transactions in Tamil Nadu. It is confined to credit which was carried forward under any existing law or goods which were held in stock on the appointed date. The amount of input tax credit, even if it was lying unutilized as on 01.07.2017 cannot be transitioned to a new registration obtained after implementation of the respective Goods and Service Tax enactments to its Sri City Unit in Andhra Pradesh in the light of Section 25 (5) of the respective Goods and Service Tax Enactments - petitioner s case also does not fall within the purview of Section 54 of the Tamil Nadu Goods and Service Tax Act, 2017 read with Chapter X of the Tamil Nadu Goods and Service Tax Rules, 2017. Refund of unutilized credit, it is permissible under Section 54(3) of the TNGST Act, 2017, only if such credit is lying unutilized at the end of the tax period. The prayer of the petitioner for either transfer or refund of such input tax which was credit lying utilized under TNVAT Act, 2006 does not arise - It is quite possible that the petitioner while removing the capital goods, work in progress and inputs had not discharged its liability under Rule 3(5) of the CENVAT Credit Rules, 2004. It would require for detailed examination by the concerned jurisdictional officer. Therefore, refund of input tax credit lying unutilized which has been transitioned by filing with Trans-1 after the implementation of Central Goods and Services Tax Act, 2017 under Section 54 of the Central Goods and Services Tax Act, 2017 as in the Section 54 of the the Tamil Nadu Goods and Services Tax Act, 2017 cannot be considered. There are no merits in this Writ Petition for either transfer of refund of input tax Credit (CENVAT Credit) which was transitioned by the petitioner by filing Trans-1 - petition dismissed.
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Income Tax
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2021 (7) TMI 227
Tax refund adjustment towards the arrears of the tax - respondent authorities have applied the refund tax towards penalty only but not towards the arrears of tax - HELD THAT:- On a conspectus of material on record, we find the action of the respondents in adjusting the tax refund towards penalty is legally impermissible. As rightly argued by the learned counsel for petitioner, the circular of the Board F.No.149/145/98-TPL dated 03.09.1998 is clear on this aspect. Division Bench set aside the method adopted by the Department and directed the 1st respondent therein to issue a fresh Certificate of Intimation in the light of the order of the Division Bench. Needless to emphasise that the above decision applies with all its fours to the case on hand. This writ petition is allowed and the respondent authorities are directed to adjust the tax refundable to the petitioner for the year 1996-97 to the tax arrears instead of penalty and accordingly, re-determine the amount payable by the petitioner under Section 90(1) of the Finance (No.2) Act, 1998 and grant certificate expeditiously, but not later than four (4) weeks from the date of receipt of a copy of this order
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2021 (7) TMI 226
Maintainability of Writ Petition - Appeal against original assessment - Writ Petitions tagged together for the purpose of common hearing - petitioner made a submission that the other connected Writ Petitions filed by the sons of the writ petitioner are pending before this Court - HELD THAT:- This Court is of the considered opinion that perusal of the order impugned, same was issued under Section 143(3) of the Act with reference to the Assessment Year 2015-16. Admittedly, the order impugned is the original assessment order. Regarding the ground raised, computation of capital gains, the respondent dealt with the merits with reference to the taxes and made a finding, more specifically, in Paragraph Nos. 6, 6.1 and 7 of the assessment order. If at all the petitioner is aggrieved from and out of the finding, it is left open to him to prefer an appeal, as contemplated under the statute. Exhausting the appellate remedy contemplated under the Act is the rule. Dispensing with the appellate remedy is an exception. Only in the event of an imminency, threat or urgency or damages, which cannot be compensated, the High Court may entertain a Writ Petition by dispensing with the appellate remedy. In all other circumstances, exhausting the appellate remedy is of paramount importance for exercise of power of judicial review under Article 226 of the Constitution of India. The point of delay may be an acceptable ground for the purpose of entertaining a Writ Petition. The practise of filing the Writ Petition without exhausting the statutory remedies are in ascending mode and such Writ Petitions are filed with a view to avoid pre-deposits to be made in statutory appeals and on the ground that the appellate remedies are time consuming. The order under challenge in the present Writ Petition is the original assessment order passed under Section 143(3) of the Act, the petitioner is at liberty to prefer an appeal before the appellate authority, namely the Commissioner of Income Tax (Appeals), within a period of three weeks from the date of receipt of a copy of this order. The appellate authorities are the final fact finding authorities. The High Court cannot conduct a roving enquiry with reference to the disputed facts, accounting details with reference to the documents and evidences.
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2021 (7) TMI 224
LTCG v/s STCG - profits arising from the sale of shares - Period of holding of shares - Whether Tribunal was right in holding that bonus units of Chola Freedom STF Units is to be treated as long term capital gains since the holding period is more than 12 months? - HELD THAT:- The Tribunal found that there is nothing on record to show that the assessee was maintaining separate books of account for trading in shares and investment in shares. Further, the bonus units of shares were allotted to the assessee on 26.02.2004 and the same were sold by the assessee on 01.03.2005. Since the holding period is more than 12 months, the Tribunal has rightly come to the conclusion that the same has to be treated as long term capital gains. We do not find any error or irregularity in the findings of the Tribunal.
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2021 (7) TMI 221
TDS u/s 194C or 194I - payment for the use of lounge facilities by the passengers - HELD THAT:- The nature of payment for the use of certain facilities for the passengers. What passenger gets by access to the lounge is the privilege of relaxing in a comfortable place with good ambience, reading material, computer and internet access, and being allowed to consume food and drinks etc. Viewed thus, the tax required to be withheld from these payments, for rendition of services under a contract, is 2% as per the requirements of section 194C. The authorities below are, however, not content by this tax withholding. Their view is that the assessee ought to have treated these payments as rental payments and, accordingly, deducted the tax at source @ 10% under section 194 I. However, the payment of lounge facilities cannot, by any stretch of logic, be characterized as payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,-(a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h)fittings as is the condition precedent for invoking section 194 I. The payments in question have been rightly treated as payments for services rendered under a contract, which are covered under section 194C, and, accordingly, we see no infirmity in the deduction of tax at source @ 2% from the payments in question.- Decided in favour of assessee.
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2021 (7) TMI 220
Validity of reopening of assessment u/s 147 - Non follow of procedure laid down - HELD THAT:- Recording of reasons and furnishing of the same has to be strictly complied with as it is a jurisdictional issue and in the absence of reasons being furnished when sought for would make an order passed on reassessment bad in law. We also find that in the case of Jayanthi Natarajan [ 2017 (9) TMI 1042 - MADRAS HIGH COURT] has held that when the procedure required to be followed has not been adhered to, the entire reassessment proceedings were vitiated. We, therefore, relying on the aforesaid decision in the case of Jayanthi Natarajan (supra) and Trend Electronics [ 2015 (9) TMI 1119 - BOMBAY HIGH COURT] hold that since the procedure required to be followed has not been followed the entire assessment proceedings are vitiated and therefore we hold the assessment order passed by the AO to be bad in law and thus set it aside. Appeals of the assessee are allowed.
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2021 (7) TMI 218
Disallowance of contribution of employee provident fund due to delay in furnishing the statement before due on dates before Provident Fund authorities - HELD THAT:- Assessee submitted that legislature by Finance Act, 2021 has amended section 36 substantial right of assessee are involved as the Assessing Officer has disallowed the entire payment of employee contribution, though it was deposited before the authorities concerned. Therefore, considering the facts and circumstances of the case and the prayer made by Ld. A.R. of the assessee, we deem it appropriate to restore this grounds of appeal raised by the assessee and restore that the issue to the file of Ld. CIT(A). Disallowance u/s 14A - AO made disallowance by taking view and the assessee has made investment of ₹ 1.69 crores and incurred expenses interest expenses - HELD THAT:- We find that during the assessment, in reply to the show cause notice, the assessee specifically contended that no exempt income earned during the relevant period under consideration - the assessee stated that no expenses was incurred for the purpose of earning exempt income - Assessing Officer in instead of verifying the fact invoked provision of Rule 8D(2) and made disallowance under Rule 8D(2)(ii) and under Rule 8D(2)(iii) thereby making total disallowance. As assessee made similar submission as made before us and contended that assessee has not earned any exempt income. The Ld. CIT(A) confirmed the action of Assessing Officer. It is now settled positional law that if no exempt income is earned, no disallowance under section 14A can be made. The Hon'ble Supreme Court recently in PCIT v. Oil Industry Development Board [ 2019 (3) TMI 1571 - SC ORDER] while dismissing appeal of the Revenue held that in absence of any exempt income, disallowance under section 14-A of any amount was not permissible. Considering the settled position under the law the Assessing Officer is directed to delete the entire disallowance under section 14A. Disallowance of various expenses to the extent of 10% - assessee submits that the assessee incurred total expenses on account of sales and business promotion office, miscellaneous expenses, labour expense and conveyance - whether expenses were incurred wholly and exclusively for the purpose of business? - HELD THAT:- As assessee is a corporate entity and all expenses were incurred wholly and exclusively for the purpose of business. We find merit in the submission of Ld. A.R. of the assessee that in absence of specifying specific discrepancies, or rejecting books of accounts no ad-hoc disallowance of various expenses is permissible. We further find that the disallowance are ad-hoc and not based on any reasoning. Thus we direct the Assessing Officer to delete the entire disallowance. In the result, ground No. 4 is allowed.
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2021 (7) TMI 217
Income from house property - Taxability of annual letting value in respect of unsold stocks in the case of builder / construction companies - deemed income from unsold unit/flats which was the closing stock of the assessee under the year of consideration in view of the provisions u/s 22 2 - HELD THAT:- As decided in own case [ 2019 (3) TMI 1892 - ITAT MUMBAI] flats which could not be sold at the end of the year was shown as stock-in- trade. - Estimating rental income by the AO for flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee‟s stock in trade as at the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23. - Decided in favour of assessee.
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2021 (7) TMI 215
Interest u/s.244A - whether assessee is entitled for additional interest as per the provisions of section 244A(1A) ? - HELD THAT?:- As decided in NIMA SPECIFIC FAMILY TRUST VERSUS ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 5 (2) [ 2018 (10) TMI 441 - GUJARAT HIGH COURT] assessment year for which the claim for additional interest u/s. 244(1A) of the Act was made is 2004-05. The Hon'ble High Court after analyzing provisions of section 244(1), 244(1A) and section 153 of the Act held that the claim for additional interest cannot be granted for the periods under provisions of section 244A[1A] and 153A of the Act when the same were not in the statute book at all i.e., prior to 01.06.2016. Provisions of section 244A (1A) would apply only prospectively w.e.f 01.06.2016 and hence additional interest would be eligible only from that date and not from 01.04.2016. As the Hon'ble High Court has imposed caveat explaining the circumstances under which the additional interest can be granted u/s. 244A[1A] of the Act, we are of the view that this matter should go back to the file of the Assessing Officer for examining the facts of the assessee in the present appeals and for application of the ratio of decision in view of the observations of their lordships on applicability of the additional interest to the present appeals.
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2021 (7) TMI 214
Penalty u/s 271(1)(c) - defective notice u/s 274 - HELD THAT:- We note that there is no any definite charge/ accusation on the assessee, whether initiation of penalty proceeding is on account of concealment of income or on account of furnishing inaccurate particulars of income . We note that in the case of Mohd. Farhan A. Shaikh,[ 2021 (3) TMI 608 - BOMBAY HIGH COURT] held that penalty notice under section 271(1) (c ) of the Act must clearly specify charges against assessee. The notice in printed form without deleting inapplicable portions by assessing officer would invalidate the penalty proceedings and penalty imposed by the assessing officer under section 271(1) (c ) of the Act would not sustain. - Decided in favour of assessee.
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2021 (7) TMI 212
Disallowance u/s 14A r.w.r. 8D - assessee had offered a suo motto disallowance - assessee while computing the disallowance under Sec. 14A had excluded the investment made in its subsidiary company - HELD THAT:- Hon ble High Court of Bombay in the case of Pruthvi Brokers Shareholders (Pvt). Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] and that of the Hon ble High Court of Madras in the case of Abhinitha Foundations (Pvt.) Ltd. [ 2017 (6) TMI 604 - MADRAS HIGH COURT] we are of the considered view, that now when the CIT(A) relying on the judgment in the case of HDFC Bank Ltd [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] had principally concurred with the assessee that as the interest-free funds available with it were more than the investments made in securities which have yielded exempt income, therefore, it had to be presumed that such investments were made out of the interest free funds, and thus, there was no justification on his part in sustaining any part of the disallowance relatable to the interest expenditure unde Sec. 14A r.w Rule 8D(2)(ii). We, thus, in the backdrop of the admitted fact that the assessee had significant interest-free funds to make the investments in the exempt income yielding securities, thus, are of the considered view that no part of the interest expenditure could have been disallowed under Sec. 14A r.w. Rule 8D(2)(ii). Accordingly, in the backdrop of our aforesaid deliberations we vacate the disallowance of the interest expenditure under Sec. 14A r.w Rule 8D(2)(ii) that was offered by the assessee in its return of income. Grounds of appeal nos. 1 to 3 are allowed in terms of our aforesaid observations. Fresh claim raised by an assessee before the appellate authorities - Revised claim of Deduction u/s 36(1)(vii) - Deduction would be the actual bad debts written off over and above the opening balance of the provision for bad and doubtful debts u/s 36(1)(viia) - HELD THAT:- In order to drive home our view that a fresh claim can be raised by an assessee before the appellate authorities, as long as the same arises from the facts borne on record, we draw support from the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Pruthvi Brokers Shareholders (P) Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] and Abhinitha Foundations (Pvt.) Ltd. [ 2017 (6) TMI 604 - MADRAS HIGH COURT] The observation of the CIT(A) that the amount of deduction u/s 36(1)(vii) would be the actual bad debts written off over and above the opening balance of the provision for bad and doubtful debts account created under Sec. 36(1)(viia) of the Act had not been assailed before us by the revenue, and thus, the same had attained finality. However, for the sake of completeness and in order to dispel all doubts, we may herein observe that the said claim of the assessee is duly supported by the CBDT Circular No. 17/2008, dated 26.11.2008; and the judgment of the Hon ble High Court of Gujarat in the case of CIT Vs. UTI Bank Ltd., 2013, [ 2013 (1) TMI 209 - GUJARAT HIGH COURT] Accordingly, in the backdrop of our aforesaid deliberations, we herein direct the A.O to allow the assessee s revised claim for deduction u/s 36(1)(vii) r.w.s 36(1)(viia) of the Act. Additional ground of appeal - As the assessee by raising the aforesaid additional ground of appeal has sought our indulgence for adjudicating an issue involving purely a question of law based on the facts available on record, we, thus, admit the same. Education Cess or any other cess viz. the Secondary and Higher Education Cess as disallowable expenditure u/s 40(a)(ii) - HELD THAT:- As in the case of Sesa Gold Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] and therein conclude that Education Cess and the Secondary and Higher Education Cess is not disallowable as a deduction u/s 40(a)(ii) of the Act. We, thus, restore the issue to the file of the A.O for the limited purpose of giving consequential effect.
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2021 (7) TMI 211
Addition u/s 68 - addition in hands of the assessee society - liability of individual members - sale deeds which have been executed during the financial year relevant to assessment year under consideration - HELD THAT:- Assessee society has received a total sum in terms of aforesaid three sale deeds and the same is clearly emerging from perusal of the contents of the sale deeds. It is also an admitted position that the said amount has been credited by the assessee society in individual members account in its books of accounts. The source of such receipts is clearly discernable from the sale deeds duly executed and the same cannot therefore be termed as amount received from undisclosed sources. The identity of the members in whose name the flats were allotted and have sold the flats, the identity of the buyers, the mode and manner of receipt of amount is clearly discernable from the sale deeds which are duly executed and registered with the stamp duty authorities and are therefore clear pieces of evidence in support of known sources of receipts which cannot be ignored in absence of any other contradictory and compelling documentary evidence brought on record. Therefore, as far as addition u/s 68 is concerned, there is no legal basis for such addition in hands of the assessee society which has been assessed as a separate assessable person in the status of AOP and the same is hereby directed to be deleted. Why the amount of sale consideration has been received by the assessee society and not retained by individual members who have executed the impugned sale deeds and in whose name the flats were initially allotted ? - We find that where there is an understanding between the individual members and the assessee society that the latter shall carry out the construction on behalf of the former and the former will bear the cost, it is clearly an obligation on part of the individual members to pay to the assessee society towards the cost of construction. In the instant three cases, we find that the respective members have not fully discharged their obligation towards the assessee society in the past in terms of cost of construction and the amount received on sale of the flats have therefore been paid by them to the assessee society towards cost of construction of their respective flats and which has been credited in their individual members account in the books of assessee s society. Taxability of profits arising on sale of three flats through execution of sale deeds - Once the assessee society has been assessed as a separate person, it carries its identity distinct from its members and revenues in the hands of members need not be revenues in the hands of the society. Even if we were to consider the receipts as revenues in the hands of the society, no basis has been spelt out as to how the 15% profit percentage has been arrived at by the AO or where any third party comparable data has been considered, the details of such data. In contrast, we find that we have the construction cost figures as per the assessee s society financial statements before us. If we look at the cumulative construction cost as on the close of the financial year 2008-09 relevant to impugned assessment year, proportionate cost of construction for three flats out of total eight flats comes to ₹ 46,67,392/- as against total receipts of ₹ 46,60,000/- received during the year resulting in shortfall of ₹ 7,392/. Therefore, in absence of any surplus, the question of taxability doesn t arise for consideration and addition of profits of ₹ 6,99,000/- made by the AO deserve to be deleted. Both the additions made in the hands of the assessee society are hereby directed to be deleted. Undisclosed investment - liability of power of attorney holder - HELD THAT:- there is nothing on record that the sale consideration has been received by the assessee in his personal capacity rather as we have noted above, the sale consideration has been paid by respective members to M/s VIP Group Housing Society towards discharge of their past obligations towards cost of construction. Therefore, in light of the aforesaid discussion, there is no basis to hold the assessee as liable to discharge any tax obligation in his individual capacity on profits on sale of the flats. Thus the amount of sale consideration has been credited in individual members accounts in the books of M/s VIP Group Housing Society and not in the individual account of the assessee nor the same has been received by him, therefore, the question of taxability doesn t arise in his hands and even addition towards undisclosed investment therefore deserve to be deleted. In the result, both the additions are deleted
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2021 (7) TMI 210
Bogus LTCG - Addition u/s 68 - penny stock purchases - denying the exemption u/s 10(38) of the Act for Long Term Capital Gain from sale of shares adding estimate brokerage expenses - HELD THAT:- We note that the assessee purchased 6000 equity shares of Conart Traders Ltd on 22.10.2011 at a cost of ₹ 1,50,000/- . There is no restriction under the law to purchase equity shares on off line mode. Vide order dated 22.3.2013 of the Hon ble Mumbai High Court M/s Conart Traders Limited was merged with M/s SAL and in lieu there of 6000 shares of M/s SAL were received by the assessee in its demat account. After holding the equity shares for more than 12 months since purchased on 22.10.2011, assessee sold the shares of M/s SAL during the period April 2014 to June 2014 through a registered broker and all the transactions of sale of shares took place on the recognised stock exchange. Sale consideration was received in the bank account attached with the Demat account. The detail of the persons purchasing the shares is not provided on the portal of SEBI and all the transactions of purchase and sale took place on the portal through registered brokers under the control of SEBI. M/s SAL has not been striked off as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Prime facie, all the conditions provided u/s 10(38) of the Act seems to have been fulfilled by the assessee. Whether assessee was not provided opportunity of cross examination? - A.O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. As not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A.O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided accommodation entries for the bogus LTCG, to the assessee. Thus claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect - transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended - also no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down in the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] that not allowing the assessee to cross examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected . - Decided in favour of assessee.
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2021 (7) TMI 209
Disallowance on amortization of the premium paid for the lease hold land - HELD THAT:- We find that the learned AR fairly stated that this issue is covered against the assessee by the order of this tribunal in its own case for assessment year 2004-05 [ 2011 (3) TMI 1630 - ITAT MUMBAI] wherein this Tribunal by placing reliance on case of Mukund Limited [ 2007 (2) TMI 358 - ITAT MUMBAI] against the assessee. Since this fact is not disputed by the parties before us, the operative portion of the said tribunal order is not reproduced herein for the sake of brevity. Respectfully, following the said order, the ground raised by the assessee are dismissed. Addition u/s 41(1) - absence of the breakup of the loan it is not clear whether the loan was solely on account of principal amount or some interest element was also embedded into it - HELD THAT:- As the amounts written back purely represent principal portion of the loan and does not contain any interest element thereon. Admittedly, no deduction has been claimed by the assessee in earlier years in respect of the principal portion of the loan liability. Hence, the provisions of Section 41(1) of the Act cannot come into operation at all. See MAHINDRA AND MAHINDRA LTD. THRG. M.D. [ 2018 (5) TMI 358 - SUPREME COURT] Disallowance of swap charges on loans obtained by the assessee - HELD THAT:- As the swap charges which the assessee has incurred for conversion from floating to fixed rate of interest, would necessarily partake the character of interest. The interest paid by the assessee when the loan was in floating rate, was duly allowed by the learned Assessing Officer. Hence, the character of the transaction does not change pursuant to this swap from floating to fixed rate. The utilization of the loans for the purposes of business has not been disputed by the learned DR before us, hence, there is no question of disallowance of any interest, whether nomenclature as interest or swap charges. The nomenclature of the transaction is absolutely irrelevant than the substance of the transaction. Thus we hold that the assessee is entitled for deduction towards swap charges. Accordingly, the ground raised by the assessee are allowed.
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2021 (7) TMI 208
Penalty u/s. 271G - non-compliance of sec.92D read with Rule 10D(1) - time period allowed to the assessee for furnishing of the requisite details - assessee failing to note that under TNMM adopted by the assessee, the profit of the international transaction has to be furnished, whereas the assessee has only furnished the entity level margins which consists of overall profits on AE and significant non-AE transactions - HELD THAT:- The last date for filing of the documents/information as were called for by the TPO lapsed on 30.10.2016. As such, the SCN Dated 31.10.2016 was subsequent to the lapse of the time period that was allowed by the TPO for furnishing of the requisite information/documents by the assessee. CIT(A) had misconceived the factual position, and observed, that as the time period allowed to the assessee for furnishing of the requisite details as were called for by the TPO u/s 92D(3) had not expired on the date on which the SCN u/s 271G was issued i.e on 31.10.2016, therefore, the penalty could not have been validly imposed. As the SCN, dated 31.10.2016 was issued by the TPO after the lapse of the time period that was allowed for furnishing of the requisite information/documents that were called for by him vide his aforementioned notices issued u/s 92D(3), therefore, no infirmity does arise therefrom. We thus, not being able to concur with the aforesaid view so arrived at by the CIT(A) therein vacate the same. Penalty u/s 271G - Considering the peculiar nature of the assessee s business of manufacturing and export of cut polished diamonds, no penalty u/s 271G could have validly been imposed - the issue is squarely covered by the orders of M/S D. NAVINCHANDRA GEMS PVT. LTD., M/S AKSHAR IMPEX PVT. LTD. AND M/S DHANERA DIAMONDS [ 2017 (11) TMI 1307 - ITAT MUMBAI] wherein it has been held that no penalty u/s 271G considering the nature of the business of manufacturing and export of cut polished diamonds could validly be imposed - Thus Tribunal after exhaustively deliberating on the nature of the business of the assessee before them, viz. manufacturing of diamonds, had concluded that penalty u/s 271G could not have been imposed on the assessee the aforesaid order of the Tribunal had thereafter been approved by the Hon ble High Court of Gujarat [ 2018 (7) TMI 2099 - GUJARAT HIGH COURT] - Decided against revenue.
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2021 (7) TMI 207
Computation of set-off of MAT credit u/s 115JAA excluding surcharge and cess resulting short grant of MAT credit - HELD THAT:- Format ITR 6 was amended from A.Y. 2012-13 wherein the tax liability in Part-B TTI both under normal provisions and under MAT provisions computed including surcharge and cess. MAT credit is computed automatically using the prescribed algorithm which is nothing but the balancing figure i.e. different between tax liability and MAT liability including surcharge and cess. Therefore, post A.Y. 2012-13 as the format of ITR-6 is so designed to compute MAT credit automatically using the prescribed algorithm i.e. difference between tax liability and MAT liability including surcharge and cess is a balancing figure. There cannot be any debate as to the exclusion of surcharge and cess. The observation of the Ld.CIT(A) that the issue is debatable one is not sustainable - majority of the decisions including the decisions of the Hon'ble Calcutta High Court and Hon'ble Madras High Court are in favour of the assessee and therefore it cannot be said that it is a debatable issue. In the circumstances, respectfully following the above said decisions allowing the grounds of appeal of the assessee, we direct the Assessing Officer to allow set off of MAT credit inclusive of surcharge and education cess and recompute the tax payable by the assessee for the year under consideration. - Decided in favour of assessee.
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2021 (7) TMI 206
Addition u/s 69C/68 - case of the assessee was selected for scrutiny assessment under Computer Aided Scrutiny Selection - investments in property made by her during the year were not commensurate to her returned income - CIT-A deleted the addition admiring additional evidence - HELD THAT:- A.O in the course of the assessment proceedings had called for the copies of the agreements in question from the Joint Sub-registrar(s), Mumbai. The aforesaid factual position can safely be gathered from a perusal of assessment order. On being confronted with the said fact, D.R could not rebut the same - as the copies of the agreements in question were there before the A.O in the course of the assessment proceedings, therefore, the claim of the ld. D.R that the CIT(A) had admitted the same in violation of Rule 46A of the Income-tax Rules, 1962, is devoid of any merit, and thus, is rejected. Unexplained investment - As revealed beyond any doubt that as observed by the CIT(A), and rightly so, except for a payment of ₹ 13,32,000/- (supra) that was made by the assessee with respect to an agreement pertaining to one of the property, viz. Flat No. 101 201 Insignia; dated 05.05.2014, no other investment as regards either of the aforesaid properties in question was made by her during the year under consideration. We, thus, are in agreement with the view taken by the CIT(A) that as the assessee had during the year under consideration not made any investment with respect to the properties in question, except for an amount that was sourced from her returned income, thus, the addition made by the A.O u/s. 69 or u/s. 68 could not be sustained and was liable to be vacated - neither there is anything discernible from the records nor any material has been brought to our notice by the ld. D.R which would prove that the assessee had made any investment qua the properties in question during the year under consideration. Accordingly, finding no infirmity in the view taken by the CIT(A) that no part of the addition made by the A.O either u/s 69 or u/s 68 can be sustained, we, thus, uphold his order. - Decided against revenue.
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2021 (7) TMI 205
Capital gain computation - addition made by AO replacing cost of acquisition based on valuation report of registered valuer as 01/04/1981 by arbitrary figure - whether the land in question was jointly held by the assessee and therefore the entire amount of capital gain cannot be taxed in the hands of the assessee? - HELD THAT:- AO himself in his order has recorded the fact that the assessee was the joint owner in the land in dispute after making a reference to the sale deed. The above observation of the AO supports the contention of the assessee that the land in dispute was jointly held. Furthermore, the learned AR has also filed the copy of the sale deed which is available on record and the same was not disputed by the learned DR. Accordingly we hold that, the authorities below erred in taxing the entire amount of capital gain in the hands of the assessee. Valuation of property - As basis adopted by the registered valuer for valuing the property as on 1 April 1981 was the gold rate index fixed by the Reserve Bank of India which was not doubted by the AO. Admittedly, the sales instances were given by the valuer in his report with the remark that these are not comparable and therefore the same cannot be used for valuing the property in question as on 1 April 1981- the authorities below without rejecting the basis adopted by the valuer has referred the sales instances for determining the value of the land in question as on 1 April 1981. As such, these sales instances were rejected by the valuer himself and therefore in our considered view the authorities below erred in using these sales instances in valuing the property in question as on 1 April 1981. Reference to Valuation Officer - Whether the AO can substitute the value determined by the registered valuer as on 1st April 1981? - AO may refer the valuation of capital assets to a valuation officer where he s of the opinion that the value so claimed by the assessee is less than its fair market value. It is an undisputed fact that the assessee did not claim the value of the impugned land as on 1st April 1981 which is less than the fair market value. As such the assessee has claimed higher value than the fair market value as per the AO. Thus in our considered view, the AO has no power to substitute the value of capital assets in the given facts and circumstances. Accordingly, the AO cannot substitute the value declared by the assessee as on 1st April 1981. No ambiguity that there was no power under the statute to the AO to refer the matter to the DVO or to substitute the value of the impugned land as on 1st April 1981. Therefore we hold that the AO in the given facts and circumstances cannot substitute the value of the impugned land as on 1st April 1981. Scope of amended provisions - Dispute before us relates to the year prior to the amended provisions of section 55A of the Act which is applicable prospectively. Therefore such amended provisions cannot be applied to the case on hand. Thus we are inclined to reverse the order of the learned CIT-A, and accordingly we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed
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2021 (7) TMI 204
Revision u/s 263 by CIT - AO failed to take up the case of assessment of assessee from Limited Scrutiny to complete scrutiny - PCIT s observation that since there was drop in G.P, AO should have taken up the case for complete scrutiny and failure to do so, makes the order erroneous - Scope of Conversion of assessment from Limited Scrutiny to complete scrutiny - HELD THAT:- When we examine such a contention of Ld. PCIT, first we have to examine whether the AO could have taken up this issue for complete scrutiny as per the CBDT Circular No. 5/2016 - AO could not have done so, because for doing so he should have credible material or information from the records before him for forming such a reasonable view that there is a possibility of under assessment of income. Since there was no such credible material or information available on record and being satisfied by the books of account of the assessee, the AO might have made a conscious decision not to take up the case for complete scrutiny as stipulated in CBDT circular which inference we draw because the Ld. PCIT has not mentioned about any such credible material or information available on record to take the opposite view. So when there is no such material or information available on records, the AO could not have formed a reasonable view of under assessment of income on the issue of drop in G.P. Therefore since there is no credible information or material available on record to form a reasonable view that there is a possibility of under assessment, the Ld. PCIT s allegation on this issue is noted to have been based on surmises and conjectures, so we are to the opinion that AO ought not to have taken up this issue (drop in G.P) for expanding the scope of limited scrutiny as per the CBDT Instruction No. 5/2016 dated 14.07.2016. So the fault pointed out by the Ld. PCIT on this score is erroneous. Receipts which assessee received from IOCL relating to tanker lorry - This issue was enquired into and considered by the AO; and thereafter, the AO had proceeded to tax separately the income by estimating as the income from tanker u/s 44AE of the Act. So therefore it is noted that the AO had enquired about the issue and even though the AO s view of adopting the percentage of profit u/s 44AE of the Act, strictly doesn t fall in its ken, however adoption of percentage of profit/estimate for the purpose of taxation on the facts of the case cannot be ground on which the Ld. PCIT can exercise his revisional jurisdiction because, assessee s case is that there is no business income from the tanker lorry. However, the AO made addition - So there is no prejudice caused to the Revenue; and moreover it is not the case of the Ld. PCIT that despite there was credible information or material to suggest that the assessee s tanker lorry was used for transport business of plying/running of tanker lorry, then also the AO failed to take up the issue for scrutiny by seeking approval as envisaged in the CBDT circular. Therefore, in the absence of any such material, the AO could not have taken up the case for enlarging the scope of scrutiny and further the decision of AO to apply presumptive tax rate u/s 44AD - Therefore, the Ld. PCIT erred in finding fault on this issue. Non-examination by the AO in respect of capital introduction by way of LIC / mutual fund maturity and gift etc . - It is not the case of Ld. PCIT that despite there was credible material or information with the AO to form a reasonable view that there was a possibility of under assessment unless this issue was not scrutinized, still the AO failed to act as envisaged in CBDT circular. So when there was no credible material or information available to the AO he could not have taken up the matter for further scrutiny on this issue. And the Ld. PCIT in the impugned order have not mentioned about any credible material or information on this issue in the assessment record which could have prompted the AO to have taken up the case for further scrutiny and therefore the Ld. PCIT erred in finding fault with the AO for not taking up this issue for scrutiny as stipulated by Instruction No. 5/2016 dated 14.07.2016 of CBDT. We are of the considered opinion that Ld. PCIT misdirected himself in law and facts to find that AO failed to take up the case of assessment of assessee from Limited Scrutiny to complete scrutiny as stipulated by CBDT in Instruction No. 5/2016 dated 14.07.2016. - Decided in favour of assessee.
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2021 (7) TMI 203
Revision u/s 263 - difference in share valuation - loss on sale of shares - HELD THAT:- CIT initiated proceedings u/s 263 of the Act based on the audit objections,which was with regard to a variation in value of shares.The assessee had filed an explanation on this variation. This Explanation is not doubted by Pr. CIT. When the Explanation is not rejected nor found fault with by the Pr. CIT, it cannot be said that there is an error in the order of the AO which is prejudicial to the interest of the Revenue.In our view, the assessee has properly explained the difference in value of shares. Just because Audit has raised an objection, the assessment order does not become erroneous to the extent it is prejudicial to the Revenue. On the issue of loss sustained by the assessee on the sale of shares of M/s. Ankit Metal Power, the AO had disallowed the loss and hence it cannot be a ground for making a revision u/s 263 of the Act. The disallowance of this loss was made on enquiry and this disallowance is not prejudicial to the interest of the Revenue. On the issue of loans and advances taken by the assessee for purchase of property, the AO made independent enquiries by issuing notice u/s 133(6) of the Act and thereafter accepted the replies after examining them. The Pr. CIT has not pointed out as to what is the error committed by the AO in accepting the replies from various parties. Without pointing out any defects, it cannot be said that there is an error which caused prejudice to the interest of the Revenue. This is not a case of lack of enquiry or non-application of mind. The AO has made an enquiry and has taken a plausible view on the issues. As relying on SPECTRA SHARES SCRIPS PVT. LTD [ 2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT] , JYOTI FOUNDATION [ 2013 (7) TMI 483 - DELHI HIGH COURT] and DG HOUSING PROJECTS LTD [ 2012 (3) TMI 227 - DELHI HIGH COURT] we hold that the revision is bad in law. Hence the order passed by the Pr. CIT u/s 263 of the Act is quashed.- Decided in favour of assessee.
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2021 (7) TMI 202
Revision u/s 263 - takeover of the limited company by the L.L.P. - non-conversion of a limited scrutiny into a complete scrutiny by the AO - Interest Expenses,Investment in Unlisted Equities, Low income and high loans/advances/investments AND Low income and high investments - HELD THAT:- Non-conversion of a limited scrutiny into a complete scrutiny by the AO cannot be considered as a ground for making a revision u/s 263 of the Act. Further the ld. Pr. CIT states that the AO should have made enquiry into the conversion certificate filed by the assessee. The nature of enquiry or the possible prejudice to the Revenue is not stated by the Pr. CIT. As ssessee submits that this is not a case of conversion but a case of takeover. There is no finding or even a whisper that the certificate is not genuine. As regards, the assets of the company and investments, we find from the copy of audited balance sheet of the company and copy of the audited balance sheet of the L.L.P., that there is no variation in figures and hence in our view there is no error which causes prejudice to the interest of the Revenue. The ld. Pr. CIT has not brought out any variations. It is also not true on the part of the Pr. CIT that the order was passed in a haste for the reason that, three hearings were taken place after the proceedings was initiated on 09.09.2017 and the assessment was completed on 11.12.2017. Even otherwise unless there is an error which is prejudicial to the interest of the Revenue it cannot be said that power u/s 263 of the Act can be invoked. In view of the above discussion we quash the order passed u/s 263 of the Act and allow this appeal of the assessee.
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2021 (7) TMI 201
Addition u/s 68 - unexpalined share application money - CIT(A) has deleted the additions made u/s. 68 only in the case of six share applicant companies for the reason that, these companies have filed their replies to the AO, consequent to receipt of notices issued u/s. 133(6) of the Act and also as all these six companies have been assessed to tax by the AO u/s. 143(3) - HELD THAT:- The assessee had submitted the source from where they have received funds for making investment in the assessee company. All the transactions are through banking channels and are documented. The ld. CIT(A) has deleted the addition made u/s. 68 of the Act of credits received from six companies, whose assessments were done u/s. 68 of the Act. The Section 68 additions of the other companies were confirmed by the ld. CIT(A). The issue before us is whether this deletion of the part of the addition made u/s. 68 of the Act by the ld. CIT(A) is in accordance with law. This Bench of the Tribunal in various decisions has taken a view that wherever the assessments of the share applicant companies have been made u/s. 143(3) of the Act, the amount received as share application money from these companies cannot be added u/s. 68 of the Act. As decided in M/S. GOODPOINT COMMODEAL PVT. LTD. [ 2019 (6) TMI 600 - ITAT KOLKATA] both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax assessments u/s. 143(3) were placed on record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - Decided in favour of assessee.
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2021 (7) TMI 200
Rejection of books of accounts - various information called for were not submitted by the assessee to AO - GP Estimation - HELD THAT:- We note that there is a clearcut finding given by the ld. CIT(A) that assessee has fabricated books of accounts that is why the books of accounts have been rejected by the Assessing Officer under section 145(3) of the Act. The assessee did not submit required documents during the assessment stage. Assessee has manufactured and fabricated its books of account. The assessee has also fabricated the excise register.We have gone through the order of the ld. CIT(A), in the light of the above narrated facts, and noted that conclusion arrived at by ld CIT(A) does not require interference. Addition on account of alleged fictitious liability and addition u/s 41 - HELD THAT:- As assessing officer has rejected the books of accounts of the assessee under section 145(3) of the Act and gross profit of the assessee was estimated at average gross profit rate of last two years which comes to 22.64% (19.81 + 25.46%). Thus, we note that, once books of account are rejected then it cannot be said that it shall be good for one purpose and not for other and, therefore, no separate addition of alleged fictitious liability and additionunder section 41 of the Act can be made. Therefore, we delete both additions .
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2021 (7) TMI 196
Revision u/s 263 - case of the assessee was selected for scrutiny and assessment u/s.143(3) - as per CIT AO failed to examine the admissibility of the interest expenses deducted under the head income from business - valuation officer had determined the fair market value of the sold property at ₹ 2,32,04,000/-, however, the Assessing Officer has taken the sale consideration of ₹ 2,02,50,000/- as per the sale deed instead of ₹ 2,32,04,000/- determined by the DVO - HELD THAT:- As noticed that during the course of assessment proceedings vide notice u/s. 142(1) Assessing Officer has made specific investigation and verification on the issue of claim of interest expenditure AO has asked the assessee in the notice u/s. 142(1) to furnish the copies of ledger accounts detail of lenders and purpose for which borrowed funds have been used. Again vide notice u/s. 142(1) AO has also asked the assessee to prove nexus between deduction claimed of and income earned. In response to query raised by the AO the assessee has duly furnished the copies of ledger account of interest paid on borrowed fund along with copies of ledger account of all the parties to whom the interest was paid -assessee has specifically explained that funds were utilized for the business purpose and also filed copies of balance sheet and ledger account for verification. It is noticed that again vide letter dated 9th March, 2015 the assessee has pointed out that he has submitted copies of balance sheet, confirmation of all the persons from whom the funds were borrowed and also given the break-up of the gross income before deducting any expenses. The assessee has also explained that many of the borrowed funds were carried forward from the earlier years and in all these earlier years he has claimed the deduction of interest on borrowed funds. Pr. CIT has failed to substantiate how the Assessing Officer has not examined the admissibility of interest expenses, therefore, the ld. Pr. CIT is unjustified in treating the interest payment as not allowable. Correct sale consideration adoption while determining the capital gain in the order u/s. 143(3) - We have gone through the report of the DVO and it is noticed that nowhere in his report the DVO has discussed the encroachment of the land which compelled assessee to sell the land at the price which was only less by about 12% from the value determined by the DVO in his report. - AO has considered the material facts of the existence of encroachment on the land and the finding since the variation in the value shown in the sale deed and the value reported in the DVO report was only 12.73% which was within the tolerable limit of 15% variation as recognized by the Hon ble Supreme Court in the case of C.B. Gautam [ 1992 (11) TMI 1 - SUPREME COURT ] .We consider that judicial findings as discussed in this order articulate the fact that small variation within the tolerable limit of 15% as held by Hon ble Supreme Court as elaborated supra between the value shown by the assessee and the value of the DVO is liable to be ignored because of element of estimation involved in valuation of immoveable property. Thus we consider that order passed under section 263 of the act is not sustainable - Decided in favour of assessee.
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2021 (7) TMI 194
Deduction u/s 35(1)(ii) - Disallowance of donation made to School of Human Genetics Population Health, Kolkata - assessee submitted that assessee had made donation to the aforesaid Trust on 21/02/2012 and claimed benefit of deduction u/s 35(1)(ii) - HELD THAT:- Undisputedly, on the date of donation institute was holding valid approval un// 35(1)(ii) - assessee has made donation to the institute through banking channel against receipt. Assessee's claim of deduction in return of income was accepted by the Department - withdrawal notification by the Revenue in 2016 would not operate retrospectively to disallow assessee's claim of deduction under section 35(1) in A.Y. 2012-13. The assessee would be eligible for benefit of weighted deduction u/s 35(1)(ii) in assessment year 2012-13. Subsequent withdrawal of approval under section 35(1)(ii) of the Act from the institution by the Department would not prejudice the assessee's claim of donation in the impugned assessment year. Hon'ble Supreme Court of India in the case of CIT vs. Chotatingrai Tea Ors [ 2002 (10) TMI 3 - SUPREME COURT] where the assessee had claimed deduction u/s 35CCA and the same was withdrawn by the Department on the ground that approval granted by the prescribed authority to the society to whom assessee had made donations was withdrawn with retrospective effect, the Hon'ble Court dismissing Revenue's appeal concurred with the reasoning wherein it was held that, 'once it was found that the assessee had fulfilled all the conditions which had been laid down u/s 35CCA for claiming deduction of the amount donated by it, there was no obligation on the part of the assessee to see that the amount was utilised for the purpose for which it was donated - deduction was allowed on the certificate furnished and it was not for the assessee to show whether the institution to which the money had been donated was carrying, on the rural development work, as envisaged u/s 35CCA of the Act.' Similar view has been expressed in the case of National Leather Cloth Manufacturing Co. [ 1999 (10) TMI 55 - BOMBAY HIGH COURT] , Seksaria Biswan Sugar Factory Ltd. [ 1990 (3) TMI 47 - BOMBAY HIGH COURT] and Bhanumati Malraj Kabali [ 2019 (1) TMI 1482 - BOMBAY HIGH COURT] . The Tribunal has also been taking consistent view on this issue in allowing assessee's claim of deduction where on the date of donation the donee institute was having valid approval. The findings of CIT(A) on assessee's claim of deduction u/s 35(1) are set-aside are allowed.
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2021 (7) TMI 192
Deduction u/s 10A, 10B, 10AA - computation of export turnover for purposes of computing deduction under section 10A - HELD THAT:- Both sides submit that the issue raised by revenue is no more res integra by virtue of the decision of Hon'ble Supreme Court in case of CIT vs. HCL Technologies Ltd.,[ 2018 (5) TMI 357 - SUPREME COURT] . Hon'ble Supreme Court upheld the observations of Hon'ble Karnataka High Court in case of CIT vs. Tata Elxi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein held that if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice - Decided against revenue. Addition made on account of selling commission and networking charges - reason for making adjustment in the hands of assessee towards selling commission and networking charges is that, there is no basis for such cost allocation - disallowance of networking charges is on the basis that the agreement does not mention about the markup on cost - HELD THAT:- We note that this issue has not been decided by the DRP though objection was raised. Under such circumstance we direct DRP to consider this issue based on various evidences/details filed by assessee having regards to various judicial pronouncements passed by Hon'ble High Courts, in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee in accordance with law. Addition made on account of outstanding receivables - AR submitted that, as TNMM is used as most appropriate method, the outstanding receivables get subsumed in the working capital adjustment and therefore separate addition is not warranted - HELD THAT:- We note that, the Ld. AO has not looked into various aspects in the light of the evidences filed by assessee. The submission by Ld. AR that under TNMM the working capital adjustment subsumes the outstanding receivables, needs to be verified by the Ld. AO/TPO. Several factors need to be considered before coming to the conclusion that the receivables from AE needs to be separately benchmarked. Most importantly the impact this would have on working capital of assessee would have to be studied. In the event any receivables needs to be separately benchmarked, we direct Ld. AO/TPO to compute the interest in accordance with the ratio of Hon'ble Delhi High Court in case of CIT vs. Cotton Naturals India Pvt. Ltd. [ 2015 (3) TMI 1031 - DELHI HIGH COURT ] - With the above directions we remand this issue back to the Ld. AO/TPO to reconsider the issue in accordance with law. Not granting deduction under section 10A/10AA/10B with respect to profits attributable towards on-site software development work being sub contractor to an performed by the AEs overseas - HELD THAT:- As relying on own case [ 2015 (10) TMI 2062 - KARNATAKA HIGH COURT] we direct the Ld. AO to verify the MSA having regard to the contract entered into by assessee with the foreign clients. In the event the services rendered by AE's under the total supervision of assessee and that the entire risk in respect of these contracts are owned by assessee then the expenditure deserves to be included for the purposes of computing deduction under section 10A/10AA/10B of the Act as they are attributable to rendering of services to foreign clients.
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2021 (7) TMI 191
Validity of Re-opening of assessment u/s. 147 - assessee had expired during the pendency of assessment proceedings - violation of the procedure prescribed in law - HELD THAT:- Legislature has prescribed u/s. 159(2), that where an assessee expires during pendency of proceedings, the proceedings have to be continued with the legal heir and assessment is to be framed in the name of the legal heir. In the facts of the present case, which stand recorded by the AO also in his assessment order, the AO we find has failed to follow the statutorily prescribed procedure. That despite the AO being duly informed on 08-01-2014, that the assessee had expired on 21-07-13 and that his wife was the legal heir, he continued the assessment proceedings, issuing notice u/s. 142(1) of the Act on 18-02-2014, in the name of the deceased assessee, and further even went on to frame the assessment and issue the demand notice dated 28-02-2014, in the name of the deceased assessee. The aforestated facts stand noted in the assessment order itself and have remained uncontroverted before us. As evident therefore that the assessment framed in the present case is not in accordance with law. The reliance placed by assessee on the decision of Dhalumal Shyamumal [ 2004 (11) TMI 57 - MADHYA PRADESH HIGH COURT] is apt, wherein in identical set of facts where the assessee had expired during the pendency of assessment proceedings, which fact was duly intimated to the AO, who despite the same, issued no notice to the legal representatives of the assessee and framed the assessment in the name of the deceased assessee, the Hon'ble High court held that the order so passed was a nullity having been passed against a dead person. The Hon'ble High court held that it was the duty of the AO to have followed the procedure prescribed in law in such cases u/s. 159. The non compliance by the AO of the statutorily prescribed procedure, applicable in the facts of the present case, cannot be said to be a mere technical error as held by the Ld. CIT(A). - Decided in favour of assessee.
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2021 (7) TMI 189
Short term capital gain - assessee submits that the AO made addition solely on the basis of AIR information that assessee sold piece of land along with co-owner - assessee is having 1/4th share in property - HELD THAT:- AO made addition on the basis of AIR information despite the facts that the assessee explained that the asset/ land is not transferred the purchaser and the assessee is still occupying the said land. The Ld. CIT(A) affirmed the action of the A.O. by taking view that transaction of sale rook place in A.Y. 2010-11 and that in case the assessee succeed in Civil Suit and incase interest or damage is awarded to the assessee would be treated under the head other sources . In our view the addition on the sole basis of AIR is not sustainable unless the same are not supported some other corroborated evidences. The assessing officer has not brought any evidence on record that the transaction of the land is completed, particularly, when the assessee reight from the beginning took his stand that the sale consideration was not passed to the assessee and the assessee has filed civil suit for declaration and cancellation of instrument of sale. Considering the facts that on common set of facts the revenue has granted relief to the co-owner [ 2021 (2) TMI 345 - ITAT SURAT ] therefore, in our view, the Revenue cannot treat the assessee indifferently as of his co-owner. - Decided in favour of assessee. Disallowance of Vehicle Expenses - disallowance of depreciation of motor vehicle and vehicle expenses by taking view that assessee has not carried out any business activities - HELD THAT:- CIT(A) after appreciating the fact that assessee has derived remuneration from three partnership firms held that depreciation on bike cannot be allowed that car is being sued by assessee for earning remuneration. The Ld. CIT(A) allowed depreciation @ 50% on Motor Car. Further the disallowance on expenses were restricted to 50% by taking view that no break up vehicle is used for earning the remuneration income. We have noted that on similar disallowances, the Revenue has allowed full relief in case of other partners of common firms. Therefore assessee cannot be treated indifferently on similar relief, therefore, this ground of appeal is allowed.
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2021 (7) TMI 186
Disallowance u/s 43B on account of GST remaining unpaid - tax auditor has reported the GST payable as outstanding - HELD THAT:- As noted that the assessee has returned income from business and profession also. The assessee has filed copies of GST returns and has also filed details of GST being levied on rental income. But, the findings of the CIT(A) do not reveal any verification conducted on this aspect nor is there any finding of fact relating to which component of income the GST relates to - as we have noted from the detail filed by the assessee that this GST has not even been included in the rental income returned by the assessee and therefore there cannot be any occasion for making any disallowance. This aspect also appears to have neither been noted by the Ld.CIT(A) and nor therefore verified - assessee has also argued that even as per section 23 of the Act, GST is not a tax covered under it for the purpose of being allowed as deduction only on payment basis. Facts relating to the issue need to be determined and verified in the first place, including amongst other things as to which component of income the GST relates to whether rental income or income from business and profession. If it found to relate to rental income then whether it has been included in the rental income returned by the assessee . If it has not been returned, there is no occasion for making any disallowance at all, but if it has been returned as rental income, then the issue needs to be determined in the light of section 23 of the Act which allows deduction of local taxes from rental income on payment basis and it needs to be decided whether the GST is covered under the same or not. Disallowance of GST therefore restored back to the CIT(A) to be decided afresh after ascertaining all relevant facts and thereafter adjudicating the issue in accordance with law, giving due opportunity of hearing to the assessee. Appeal of the assessee is partly allowed for statistical purposes.
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2021 (7) TMI 185
Deduction u/s 80IC - whether process of deriving the finished products amount to manufacture? - HELD THAT:- It is very much clear that the assessee is a manufacturer of finished products eligible for deduction under section 80IC of the Act. The revenue has not controverted the various factual findings of Commissioner (Appeals) regarding the manufacturing process undertaken by the assessee. In any case of the matter, it is a fact on record that the aforesaid manufacturing activity is being carried on by the assessee from the preceding assessment years. As decided in own case [ 2020 (5) TMI 683 - ITAT MUMBAI] applying the tests laid down by this Court in CIT Vs. N.C. Budharaja and Co. [ 1993 (9) TMI 6 - SUPREME COURT] to the facts of the present cases, we are of the view that blocks converted into polished slabs and tiles after undergoing the process indicated above certainly results in emergence of a new and distinct commodity. The original block does not remain the marble block, it becomes a slab or tile. In the circumstances, not only there is manufacture but also an activity which is something beyond manufacture and which brings a new product into existence and, therefore, on the facts of these cases, we are of the view that the High Court was right in coming to the conclusion that the activity undertaken by the respondents-assessees did constitute manufacture or production in terms of Section 80IA of the Income Tax Act, 1961. Also If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognized by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80IA of the Income Tax Act, 1961 Thus we hold that assessee is engaged in manufacturing and production of an article and therefore, the assessee shall be entitled for the deduction available u/s 80IC - Decided in favour of assessee.
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2021 (7) TMI 184
Addition of profit shifted out and the loss shifted in by way of Client code modification - Profit or the loss during the time when code were modified - transactions in F O segment through the involvement of the broker - AO on the basis of the data received from the National stock exchange found that there was the change in the code of the assessee maintained with the broker with respect to certain transactions carried out in F and O segment - HELD THAT:- Admittedly client codes were modified of the assessee as per the information received from the Stock Exchange. Client code modifications may give rise to the doubt/ suspicion which requires detailed investigations from the parties concerned to reveal the truth. Merely, there were client codes modifications carried out by the broker cannot be the basis to draw an inference against the assessee. In fact, in case of client code modification the code of the other party is entered at the place of the assessee. Thus the other party is also required to be investigated whether the other party was involved in such transaction. Besides this there has to be brought other corroborative evidences suggesting that there was the exchange of cash among the parties involved in such client code modification - no such exercise has been carried out by the authorities below. As such there is no whisper in the order of the authorities below that there was the cash transfer between the parties for transferring the income of the assessee to the other party and vice versa. Thus in the absence of such verification/examination carried out by the authorities below, we are not inclined to uphold the findings of the AO. The number of transactions in respect of which the client codes were modified are less than 1% of the total transactions carried out by the assessee. Therefore, such changes in the client code cannot be said as a colourable device adopted for shifting out and shifting in the profit/loss. The changes in the codes were not made at the fag end of the year under consideration i.e. March 2010. In other words it was not possible for the assessee to ascertain its profit or the loss during the time when code were modified as the changes were made in the mid-of the year. Thus it cannot be said that the assessee to reduce its taxable income has resorted to client code modification method. There is no basis on the part of the AO alleging that changes in the code limited to one digit represent genuine punching errors whereas changes in the codes ranging between 4 to 5 digits do not represent the genuine punching errors. The changes in the number of digits in the code cannot be a criteria to draw an inference against the assessee. We are not inclined to disturb the findings of the ld. CIT-A. Accordingly we uphold the same and direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed.
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2021 (7) TMI 183
Deduction u/s 80IC - initial assessment year - whether the initial Assessment Year can be re-fixed in case of substantial expansion? - permissible deduction of 30% because the law was very clear on the issue that for companies the deduction was allowable only @ 30% after expiry of the initial five assessment years - as per DR that the assessee does not have an option to re-fix the initial assessment year, and therefore, the claim of deduction @ 100% for the 6th and 7th Assessment Years from the initial assessment year was not valid in the eyes of law - HELD THAT:- Assessee can re-fix the initial Assessment Year in the case of substantial expansion from year in which the substantial expansion has taken place for the purpose of claiming deduction at full rate subject to over all limit of 10 years. Although, the Department has vehemently opposed the orders of the CIT(A) granting deduction @ 100%, we find no error either in law or on facts having been committed by Ld. CIT(A) in the two captioned appeals as the Ld. CIT(A) has only followed the interpretation as laid down by the Coordinate Bench of this Tribunal. Sr. DR also could not bring to our notice any order contrary to the order of the Coordinate Bench of this Tribunal in the case of Tirupati LPG Industries [ 2014 (1) TMI 1689 - ITAT DELHI ] The issue now stands squarely covered by the judgment of in the case of Pr. Commissioner of Income Tax vs. Aarham Softronics [ 2019 (2) TMI 1285 - SUPREME COURT ] as laid down that in case substantial expansion is carried out as defined in clause (ix) of Sub-section-8 of Section 80IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become initial assessment year and from that assessment year, the assessee shall be entitled to 100% deduction of profits and gains .Deduction would be for a total period of 10 years. - Decided against revenue.
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2021 (7) TMI 182
Addition of contractual revenue on protective basis in the hands of the assessee - case of the assessee was selected for scrutiny and AO passed the assessment order and proposed to complete the assessment holding that the consortium between TODDI and SASL (Assessee) constituted an Association of Person (AOP) under the provisions of the Act - HELD THAT:- In earlier assessment years, the Tribunal has been taking a consistent view that the Consortium agreement between the assessee and Transocean Offshore Deepwater Drilling Private Limited do not constitute an AOP and the Transocean Offshore Deepwater Drilling Inc. being consortium member has rightly offered to tax the receipts under section 44BB of the Act in the return of income. On the face of this consistent view taken by the Tribunal over a period of time, there is no reason for us now to take a different view since there is no change of circumstances to affect the applicability of this consistent view for the years under consideration in these two appeals. Allow the grounds of appeal in these two appeals also.
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Customs
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2021 (7) TMI 231
Seeking clarification of Plant Quarantine (Regulation of Import into India) Order, 2003, more specifically, Regulations 9(1) and 9(3) - grant of relaxation issued pursuant to the office memorandum - HELD THAT:- The issues raised by the petitioner involve certain disputed facts and circumstances. Thus, this Court cannot conduct an enquiry with reference to the documents and evidences, specifically, with reference to the provisions of the Regulations. Such an exercise cannot be done in a writ proceedings and therefore, the authorities competent has to consider the facts, as well as the grounds raised by the petitioner with reference to the said regulations. The 1st respondent is directed to consider the representation dated 06.10.2010 submitted by the petitioner on merits and in accordance with law and dispose of the same as expeditiously as possible and preferably, in a period of twelve weeks. Petition disposed off.
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2021 (7) TMI 181
Seeking extension of period for re-export - import of Container of Water treatment plant under N/N. 3/1989-Cus dated 09.01.1989 - pecuniary jurisdiction of Deputy Commissioner of Customs in terms of section 122 of Customs Act, 1962 - HELD THAT:- Admittedly, the appellant could not re-export the imported container within the required period. Hence requested for time extension for another six months - The appellant could not meet the extended time limit as well. Hence sought another time extension on the ground that the RWT is required for event at Varanasi to be demonstrated over a period of two months. Letter dated 15.3.2016 as annexed on the record shows that while seeking the time extension the appellants were repeatedly acknowledging that in case of failure to re-export within the time extended, the appellants shall be depositing the requisite customs duty along with interest. Further extension was not granted to the appellant despite that said RWT has not been re-exported till date. The original adjudicating authority i.e. Deputy Commissioner of Customs in terms of section 122 of Customs Act, 1962, has the pecuniary jurisdiction to decide the matter with the value of less than ₹ 5 lakh. Apparently, the value of the impugned matter is beyond ₹ 5 lakh. Also there is nothing on record till date about any delegation of power to the said Deputy Commissioner nor the law has the provision of such delegation. Hence, it is held that Deputy Commissioner of Customs was not competent authority to pass the order in original dated 19.5.2016, Commissioner (Appeals) should also have considered the plea of jurisdiction as was taken before him. Since the order passed without jurisdiction is not sustainable in law as being non-est, none of these orders are sustainable. The matter remanded to the department for being placed before the competent authority for the appropriate adjudication - appeal allowed by way of remand.
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Corporate Laws
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2021 (7) TMI 213
Approval of scheme of amalgamation - seeking orders and directions with regard to conduct the meetings of equity shareholders, secured creditors and unsecured creditors in connection with the Scheme of Amalgamation - HELD THAT:- Various directions regarding holding and convening of various meetings issued - directions regarding issuance of various notices also issued. The scheme is approved - application allowed.
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2021 (7) TMI 193
Composite Scheme of Arrangement - seeking dispensation as well as holding and convening of various meetings - HELD THAT:- The meetings of the Shareholders of all the applicant companies as well as meetings of the Unsecured Creditors of the Applicant Companies 2 to 8 are hereby dispensed with. Since there are NIL Secured Creditors in Applicant Companies No. 2, 3, 4, 5, 6 and 7, question for convening of meetings of Secured Creditors of Applicant Companies No. 2, 3, 4, 5, 6 and 7 does not arise at all. Various directions regarding holding and convening of various meetings issued - directions regarding issuance of notices also issued - application allowed.
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2021 (7) TMI 187
Prayer for restoring the name of the company in the Register maintained by the Registrar of Companies, Mumbai - Section 252(1) of the Companies Act, 2013 - HELD THAT:- The books of the Petitioner Company reflect that the company is in operation and Members intend to continue its business operations of the company. Therefore, it seems to be just and equitable and deserves to restore the name of the company in the Statutory Register of Companies maintained by the Respondent Registrar of Companies. The prayer sought by the Petitioner company deserves to be allowed - the name is restored - application allowed.
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Insolvency & Bankruptcy
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2021 (7) TMI 219
Seeking reconsideration of an already approved Resolution Plan - Seeking to send approved Resolution Plan back to Committee of Creditors for reconsideration - forfeiture of amount already paid - HELD THAT:- This Tribunal pertinently points out that the Appellants before this Tribunal reiterates that they remain committed to the Resolution Plan and as a matter of fact, as on date, according to the Learned Counsel for the Appellants , all amounts were paid, which fact is not disputed on the side of 1st Respondent/ Resolution Professional . This Tribunal taking note of the fact that all the amounts were paid by the Appellants (as informed by the Learned Counsel for the Appellants ) application passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Special Bench Court-1) inter alia to the effect that, it is prima facie clear that successful resolution applicant had paid first instalment and dragged on the matter till date without implementing the plan or without making payment. The approval of the plan, which has already been approved by the bench on 18.12.2019 and which was modified on 15.07.2020, requires reconsideration by the CoC. In view of the same entire Resolution Plan is remitted back to the CoC for fresh consideration and amounts paid by the successful resolution applicant is to be forfeited and CoC may consider the matter a fresh. Hence the order. is of the earnest opinion that the said order is not in accordance with law, considering the fact that the Adjudicating Authority had exceeded its jurisdiction besides cannot suo motto direct the reconsideration of an already approved Resolution Plan because of the fact that after the approval of the Resolution Plan the Committee of Creditors become functus officio . This Tribunal is of the considered view that the Adjudicating Authority had passed an illegal Impugned Order while it directed these Committee of Creditors to forfeit the amounts already paid to a sizeable extent - the matter is remitted back to the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench) for passing necessary reasoned orders de novo keeping in mind the object and spirit of the Insolvency and Bankruptcy Code and in accordance with law - Appeal allowed.
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2021 (7) TMI 198
Seeking approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT] the Hon'ble Apex Court held that if the CoC had approved the Resolution Plan with requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon'ble Court observed that the role of the NCLT is 'no more and no less'. The Hon'ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is limited to scrutiny of the Resolution Plan as approved by the requisite percent of voting share of financial creditors. The Resolution Plan as approved by the CoC under Section 30(4) of the Code meets the requirements of Section 30(2) of the Code and Regulations 37 and 38 of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same needs to be approved as provided under Section 31 of the Code - Application allowed.
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2021 (7) TMI 188
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make payment of its dues - corporate person is the applicant - Corporate Person keeping in view the interest of all stakeholders, filed this petition for revival of the Company CIRP under Section 10 of IBC - HELD THAT:- Due to the loss, the Company could not pay the banks and other creditors. As a result, the account became Non-Performing Asset (N.P.A.). The applicant further submits that the financial debt owed to Punjab National Bank was sanction on 30.03.2017. The said facility was utilised from time to time as and when the funds were required. Due to the severe incident of the fire and several losses, the Directors of the company were of the view that company will not be able to repay the defaults. Hence, the Corporate Person, keeping in view the interest of all stakeholders, filed this petition for revival of the Company CIRP U/s. 10 of the Code. Perusal of records shows that the Corporate Person furnished/disclosed all information relating to all Books of Account. The applicant has produced on record the Board Resolution dated 03.10.2020 authorising the Director i.e., Mr. Subhash Agrawal/applicant to file this application U/s. 10 of the Code for initiation of the CIRP - Corporate Person suggested/proposed name of one Mr. Pratim Bayal for appointment as Interim Resolution Professional. The application is defect free and deserves to be accepted - application admitted - moratorium declared.
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2021 (7) TMI 180
Seeking police protection and assistance to the Applicant and/or person(s) working under the Applicant in order to commence the process of auction and also the process of delivery of the Assets to the respective buyer - seeking necessary support and assistance to the Applicant and/or person(s) working under the Applicant to commence the process of auction - HELD THAT:- The Applicant states that, in order to commence the procedure of auction of Assets and to stop the Owner from creating obstruction, he addressed an email dated 11th March 2021 to Superintendent of Police and the in-charge of the Respondent No 1, additional Superintendent of Police and District Magistrate of Betul stating that the local vendors may create disturbance on site at the time of delivery of the assets and therefore requested for assistance to ensure smooth flow of sale process and delivery of the assets - Further the Applicant states that, he has not received any reply nor assistance from the local Authorities and he is still not able to commence the process of auction of the Assets. Respondent Nos. 1 2 shall provide police protection to the Applicant immediately and assist him from any untoward incident taking place, to carry out his job as per directions of this Cour - Application disposed off.
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Service Tax
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2021 (7) TMI 230
Interest on services tax - an adjudication was conducted and final order was passed on 17.09.2014, by the Settlement Commission seeking interest - error apparent on the face of record or not - HELD THAT:- This Court is of the considered opinion that admittedly the application filed under Section 32E of the 1944 Act, for settling the issues, was entertained by the Settlement Commission. The Settlement Commission also adjudicated the issues with reference to the informations and particulars provided by the assessee. The Settlement Commission accepted the terms of reference and finally granted partial immunity from penalty to the applicant and further, granted immunity from prosecution and the order was passed. The interest is chargeable based on certain admitted facts and circumstances placed before the Settlement Commission. If at all there is any error apparent in respect of such findings with reference to the original records, the petitioner is at liberty to approach the Settlement Commission for clarification or for rectification of any such error apparent regarding the facts admitted or pleaded. However, such an adjudication cannot be done by the High Court in a writ proceedings, which require examination of original records and the admission statements made by the parties before the Settlement Commission with reference to the application filed under Section 32E of the 1944 Act. This Court is of the opinion that the order passed by the Settlement Commission pursuant to the admission made by the parties need not be interfered with. However, if there is any error apparent on record or if there is any factual error regarding the admitted statements, the Settlement Commission is empowered to rectify such mistakes by following the procedures contemplated - Petition disposed off.
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2021 (7) TMI 222
Sabka Vishwas (Dispute Resolution) Scheme, 2019 - Recovery of erroneous double service tax liability - Works Contract Service - deposit of service tax was ignored - HELD THAT:- The position appears to be that the payment of ₹ 32,12,000/- during the proceedings after show cause notice from time to time has not been denied at all nor is there any allegation that the challans are non-existent or forged. It is claimed by the petitioner that challans in respect of payment aggregating to ₹ 32,12,000/- were produced before the adjudicating authority and the same had also been communicated to the designated authority and further that the department is wary of that and the office of respondent No. 3 had submitted a verification report dated 20.02.2020 stating the factual position as per challans submitted by the petitioner, the total service tax paid was ₹ 2,73,00,045/-. It is not a case at all that the payment is denied or the challans of payment are not available. There is no explanation with regard to the appropriation or receipt of amounts under challans. In such a case, while there is a report on record stating that going by the challans, the total amount paid by the petitioner towards service tax was ₹ 2,73,00,045/- comprising the amount of ₹ 32,12,000/-, the matter will have to be properly verified at the end of the respondents which would be necessary and pertinent. The authorities are not expected to go-about hyper-technically and/or unmindful of claims of assessees based on material while determining the estimated amount of payment in the matter. Respondent No. 2 is directed to re-consider the petitioner s SVLDRS1 and after verifying the claim of ₹ 32,12,000/- having been paid towards the service tax referred to in the show cause notice issue revised SVLDRS-3 - petition allowed.
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2021 (7) TMI 216
Taxability - Banking and other financial services - services rendered by ICICI Econet Internet and Technology Fund floated by the Settlor - trust is a legal entity or not - whether obtaining registration under any statute entails the trust to a Tax liability - Mutuality of Interest between Trust and Members - service provider-receiver relationship - tax liability on Carry Interest and performance fee - time limitation - computation errors - penalty - Revenue Neutrality - VCF established in the form of a trust - amorphous entity or not - doctrine of mutuality - VCFs equal to Clubs or not - Validity of the value taken for the purposes of working out service tax demand - Inclusion of Carry Interest. Mutuality of Interest - Does the doctrine of mutuality of interest exist between the trust and the contributors/beneficiaries - HELD THAT:- The OIO contending the claim of the appellants that the Fund is neither a corporate entity nor does it have a personality distinct from Contributors/ Subscribers/ Investors, records that the arguments of the appellants is not acceptable as per the facts of the case which indicate that the main object of the assess is capital appreciation through the investment of contributors/ Subscribers/ Investors in the schemes devised by the appellants to gain profits/income; the motive of the fund is purely commercial; the Fund has independent identity and distinct personality of its own which is evident from the fact that the Fund is established as a Trust by ICICI Ltd. and is registered with SEBI; the Fund made investment in various companies; only a legal obligation with respect of ownership of property rests with the Fund is not true as the appellant is involved in the activity of capital invested by Contributors/ Subscribers/ Investors; the Fund also collects KYC Forms from the Contributors; therefore the Fund acts as a commercial concern. A Trust are essentially mutual funds engaged in Portfolio management etc. It could be seen that though these mutual funds are named Trusts, the essential function of the Trust was of commercial concerns that is maximizing the profit. Similarly, it is mentioned clearly in various places that the Trust Fund shall be managed by the Trust and the object of the Trust is to carry on the activity of a Venture Capital Fund. It is interesting to notice that to enable the funds, to distribute the dividends and other amounts payable on or in respect of Units, a mechanism in the form of Private Placement Memorandum and/or Scheme Document are created. Thus, the profit motive of the Trust is evident. All these Trusts have registered themselves under VCF Regulations, 1996 issued under SEBI Act, 1992 - Taxation Law being a specific legislation just as the SEBI Act, 1992 should prevail over the general Trust Act and the definition given thereof. The impugned trusts have violated the principles of mutuality by concerning themselves in commercial activities and by using the discretionary powers to benefit a certain class of investors or nominees or employees or subsidiaries. They can no longer be treated as trusts for the purposes of taxation statutes at least - the learned special counsel has rightly submitted that VCFs bear no comparison to members of club, which, by its very incorporation, is a grouping of individuals who have chosen to be members of a particular institution or club for fulfilment of certain human needs social, sporting, recreational etc that cannot be fulfilled except in such oragnised collectives. Whether the appellants Rendered Taxable Services? - HELD THAT:- The argument that the banks need not pay service tax as the entities where they are further investing their monies are paying service tax. In a typical commercial activity various entity in the chain of activity needs to pay service tax and the subsequent entity may however, avail the credit of tax paid by the preceding entity. As long as the Trusts are performing the taxable services, they are liable to pay service tax. It has been demonstrated above by the learned Special Counsel for the Department and also found by us that the funds are managing the money invested by Subscribers/ Contributors/ Investors - the Trusts are not amorphous entities and the mutuality of interest is no longer applicable in the instant case; Funds are rendering the service of Portfolio Management or Asset Management under BOFS to the Subscribers/ Contributors/ Investors and the consideration is in the form of withholding the dividends/ profits distributable Subscribers/ Contributors/ Investors. The Appellants have relied on Circulars No. 94/5/2007- Service Tax dated 15.05.2007 and Circular No. 96/7/2007-ST dated 23.08.2007 which is claimed to have clarified that the entry load and exit load charged by mutual fund being for management of asset or not liable to service tax - These are huge amounts retained and distributed to the AMCs or their nominees subject to achieving certain levels of performance thus it is a variable expenditure and cannot be equated to entry or exit load. Moreover, it is found that the appellant s Trusts are managing Venture Capital Fund and not the mutual funds therefore the Circular is not applicable. Applicability of Board s Circular No. 86/04/06 - commercial concern or not - HELD THAT:- In the case at hand, it is seen that the totality of the activities and objective of the assessee is to effect capital appreciation of the investments of the consumers/ subscribers/ investors who are mentioned as customers in terms of their policies. Further, schemes are devised to generate income/ profit/ gains to the benefit of the consumer/ subscribers/ investors. Therefore, the said Circular is not applicable in the instant case. Quantification of Demand - HELD THAT:- The Trusts are floated for drawing Contributors/ Subscribers/ Investors and to facilitate such persons to earn profits or gains out of the acquisition, holding and subsequent disposal of assets by the Trust/ Fund. The principal liability and responsibility of managing the Trust/ Fund rests with the appellants. Any amount retained out of income distributable to subscribers is nothing but charge or fee for the services rendered - It is agreed that CI is paid subject to realizations generated by exiting portfolio investments and credited to the class B or C (special Units holders) only when the net realization recognized by selling and exiting portfolio investments exceeds the sum total of the capital committed and the appreciation gained as per the pre-agreed preferred rate of return. Levy of service tax - performance fee - carried interest and other expenses - HELD THAT:- The fact that the AMC, Settlors and Trustees are all ICICI Group concerns would further give credence to the inference. It is also seen the roles of different companies are rotated. One company is AMC in one Trust and a settlor in other funds - service tax has been rightly demanded on the amounts shown as performance fee, carried interest and other expenses. Loss of sale of investment - Accrued interest considered doubtful - Loss on revaluation of assets - HELD THAT:- The bench cannot decide over such calculations. It will be in the fitness of the things to remand the matter to the adjudicating authority to verify the veracity of the claims. Time Limitation - HELD THAT:- This is a matter of interpretation and all the information being in public domain, suppression of any material fact with intent to evade payment of duty cannot be alleged - It is not the case of the appellants that the material information available in the form of various contracts/ agreements and balance sheets/ ledgers have been submitted to the Department suo moto by the appellants. It is only after investigation has been initiated, the necessary documents were submitted. Thus, the information available in the public domain is of no avail - the Department was in its right to invoke the extended period for the issue of SCN. Penalties - HELD THAT:- The appellants have not obtained registration; have not paid applicable service tax and have not filed due returns. Therefore, the penalty under Section 77 is imposable. It is found that extended period is invokable; material facts have been deliberately suppressed by the appellants before the jurisdictional service tax authorities. Therefore, the imposition of penalty under Section 78 of the Finance Act, 1994 is justified. Revenue Neutrality - HELD THAT:- All the SCNs and annexures mention carried Interest to be includible in the Gross Consideration for the demand of duty. Therefore, we find that the OIO has not traversed beyond the SCN. Learned Counsel for the appellants also raised an issue that this is a standalone Show Cause Notice issued to the appellants alone, though there are many similar funds floated my others during the relevant time. All the appeals are disposed of, by way of remand to the adjudicating authority, subject to the following conditions: (i). Penalties imposed under Section 76 of Finance Act, 1994 are dropped. (ii). the adjudicating authority shall verify the following claims of the appellants, with documentary proof that may be submitted by the appellants, and give due allowance to the same, if found otherwise in order as per law, while computing the duty liability. (a). the claim that the amounts on account of Loss of sale of investment , Accrued interest considered doubtful , Loss on revaluation of assets , etc, are not actual expenses but are only accounting adjustments; and allow deduction if found in order. (b) claim of the appellants on the admissibility of the CENVAT (c)claims of the appellants on the cum duty benefit. (iii). The appellants shall submit necessary documentary proof with reference to the above claims within 4 weeks of the receipt of this order and the adjudicating authority shall complete the exercise within further 12 weeks of receipt of the documents from the appellants.
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2021 (7) TMI 195
Levy of Service Tax - security agency service or not - Home Guards department - scope of the term person - It is the case of the appellant that the term person does not include the Government or Governmental entities and, therefore, they are not covered by the definition of security agency - HELD THAT:- The term person appearing in the definition must be construed to be a natural person and by no stretch of imagination will include the State or its officers or the posts created under a statute as held by the Constitution Bench of the Hon ble Supreme Court in the case of STATE OF WB. PLAINTIFF VERSUS UOI. [ 1962 (12) TMI 64 - SUPREME COURT] . Since State cannot be a person, it cannot be a security agency . Therefore, no service tax under the head security agency service can be charged on the amounts collected by the Police or Home Guards or any officers of the Government for providing security. The appellant is not liable to pay service tax - Appeal allowed - decided in favor of appellant.
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Central Excise
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2021 (7) TMI 199
CENVAT Credit - input services - Commercial and Industrial Construction Services - time limitation - HELD THAT:- These are not related to Commercial Construction Service rather they are input services received in the course of day-to-day running of the plant, operation and maintenance of STP plant, drain cleaning and scrap collection work, putting up of safety signage in the plant area and also for earth work and excavation work etc. at the wet gas plant - These services are allowable as input services as no production can happen without carrying out the essential operation in the plant or factory of the appellant of the dutiable finished products. Time limitation - HELD THAT:- So far as the dispute before the Tribunal is concerned, the last voucher is dated 11.01.2012 and therefore show cause notice dated 30.03.2015 is also bad on the ground of limitation. Accordingly, Appeal is allowed both on merits regarding the amount of ₹ 4,29,051/- and also on the ground of limitation. The penalty imposed are also set aside. The invoices are of April to August, 2012 relating to raising of height of jerosite pond and repair and maintenance of the factory. Learned Counsel points out that jerosite pond is essential for carrying out manufacturing of dutiable final products. Secondly, repair and maintenance is a continuous process in this type of industry where the raw mineral is processed, and the process is called beneficiation for obtaining enriched ore for further processing. The show cause notice is misconceived as these services are not classifiable as commercial construction service, being in the nature of repair and maintenance in the course of day to day business of the appellant. It is further found that the last invoice is issued on 21.08.2012 whereas the show cause notice has been issued after more than twelve months on 14.12.2015. Thus, the demand is also barred by limitation. The appellant is entitled to cenvat credit. The penalties imposed are set aside - appeal allowed - decided in favor of appellant.
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2021 (7) TMI 197
CENVAT Credit - stock transfer of capital goods - Old machine cleared to sister unit after their use - amount on clearance of non-excisable waste and scrap - cenvat credit on ineligible input services - air travel agent service - Mandap keeper Service - Penalty. Old machine cleared to sister unit after their use - HELD THAT:- The issue is no more res-integra as is apparent from the decision of CESTAT Bench, Allahabad in the case of M/S RSPL LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GHAZIABAD [ 2018 (4) TMI 60 - CESTAT ALLAHABAD] . The decision is announced in the appellant s own case and the Department s appeal has been dismissed by holding that the transfer of machine between two sister units is not a trading activity. It being merely a stock transfer of inputs interse sister units which cannot be categorized as sale - From the invoice, it is also observed that the requirement of Rule 3 (5A) of CCR 2004 has fully been met by the appellant though the Department has alleged the said mention in the invoice as a mere book-entry but apparently and admittedly there is no evidence on record to falsify the said compliance for it being a mere book entry. Amount on clearance of non-excisable waste and scrap - HELD THAT:- Appellant has cleared leftovers of the packing material for the applicability of Rule 6 of CCR, 2004, as is alleged by the Department, word manufacture acquires the utmost importance and Rule 6 is applicable if and only if the appellant is manufacturing exempted as well as excisable goods. Even explanation to Rule 6 of CCR 2004 does not deem non-manufactured goods as exempted goods as defined under Rule 2 (d) of CCR - the issue stands already settled that the left over packing material cannot be considered as non-excisable goods or the exempted goods to fall under the scope of Rule 6 of CCR, 2004. Wrong availment of cenvat credit on ineligible input services - HELD THAT:- The adjudicating authority has taken a wrong view. Not only this, it has failed to observe the judicial protocol by ignoring the already settled issue by this Tribunal. Penalty - HELD THAT:- It has also been a settled law that there has to be some positive act on part of the assessee to be called as the act of deliberate malafide intent. There is no such evidence on record. The burden was on the Department to prove the same. The absence of such evidence extends benefits to the appellant and the result remains is that there is no apparent mensrea on the part of the appellant to note to pay the amount of impugned demand. Above all there is evidence on record to show that appellant has made compliance of Rule 3 (5) which could not have been rebutted. There is nothing on record to prove that the said record is a mere book entry - the impugned demand has already been held to be not sustainable. Question of imposition of penalty does not at all arise. Cenvat Credit - air travel agent service - Mandap keeper Service - HELD THAT:- The ground taken by the adjudicating authority below to deny the said admissibility is that the CA Certificate dated 19th November, 2014 is an old Certificate and as such has no relevance - once the issue stands settled by the Tribunal for the same appellant in the same facts and circumstances, there remains no burden of the appellant to produce CA Certificate either for the pre or the post period of the demand which stands already decided by this Tribunal. Appeal allowed - decided in favor of appellant.
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2021 (7) TMI 190
Principles of Natural Justice - order passed ex-parte as the notice of personal hearing was not served upon them - HELD THAT:- The presumption of service in normal course is not available, in the facts and circumstances of the case, as the ld. Commissioner (Appeals) has erred in drawing such presumption and ignoring the fact that the order-in-original was returned with postal remark. The impugned order is set aside and that the appeal was filed before the Commissioner (Appeals) in time from the date of knowledge - the appeal is allowed by way of remand and matter is remanded to the Commissioner (Appeals) with the direction to hear the appellant and pass order on merits in accordance with law.
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2021 (7) TMI 179
Clandestine removal - shortage of goods detected on stock taking - MS Ingots - production record for the respective day found not entered - recovery of loose documents - evidence proving the alleged guilt, present or not - failure to produce any positive evidence for proving the allegations as levelled in SCN - Absence of evidence - HELD THAT:- There is no denial on the part of the appellant about the noticed shortage of 182.340 MT of M.S. ingots. However, it is submitted that the same has duly been explained in the terms that the defective M.S. ingots were sent for being recycled/remanufactured. Apparently and admittedly, there is no evidence on record to support/corroborate the said explanation. Admittedly, the appellant was not maintaining any record of such defective M.S. ingots the noticed shortage which has otherwise not been denied to be a huge quantity shortage i.e. 292.560 MT ingots were found short out of 474.900 MT. It was mandatory for the appellant to maintain the requisite record. Rule 10 of Central Excise Rules, 2002 makes it mandate upon each assessee to maintain proper records that too on daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, quantity removed, inventory of goods etc. - Admissions are the best evidence and need no further proof as is the established principle of Indian Evidence Act in Section 58 thereof. Hence the argument of the appellant that the department has not produced any evidence is not sustainable in the eyes of the admission of the appellant s Director for the noticed shortage and for simultaneous non compliance of Rule 10 thereof. Apparently Shri Navnitya Prakash Goyal also has not tendered any explanation about those documents except he mentioned that the same will be explained by Shri Santosh, Lab Assistant thereof. However, no efforts were made by the appellant to produce Santosh before the adjudicating authority or too at least tendered his statement or any explanation given by him in the form of affidavit or by any other admissible mode of giving evidence before the adjudicating authority - No doubt these allegations cannot be based merely on the noticed shortage of M.S. ingots but definitely such allegations can sustain in the absence of any explanation for the noticed shortage. There is no proper explanation/evidence given by the appellant for the noticed shortage. The entire noticed shortage is not appealable to be defective. The only explanation given by the appellant is about those ingots to be defective without giving any supporting document of those defective ingots to either be recycled or remanufactured or cleared after being remanufactured. Appeal dismissed.
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CST, VAT & Sales Tax
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2021 (7) TMI 225
Input Tax Credit - failure to register as VAT dealer - Constitutional Validity of Section 17(3) and Section 49(2) of A.P. VAT Act, 2005 - Assessment Order passed an order imposing tax @ 12.5% as treating the petitioner as VAT dealer instead of imposing @ 1% tax treating as turnover tax dealer - HELD THAT:- Since the turnover of the petitioner for the 1st quarter ending 30.06.2006 was ₹ 13,14,724/- which exceeded ₹ 10 lakhs, the petitioner had an opportunity to apply for registration as VAT dealer - the petitioner should have applied before 15.07.2006 for VAT registration since the turnover for the 1st quarter ending 30.06.2006 exceeded ₹ 10 lakhs. He did not avail that opportunity but waited for completion of 12 months period. The total turnover for 12 months period from 01.04.2006 to 31.03.2007 was ₹ 43,47,418/-. As per the second leg of Section 17(3), he has to apply for VAT registration since the total turnover for 12 preceded months exceeded ₹ 40 lakhs. As per Rule-5 (b), he has to apply for VAT registration before 15.04.2007. However, he applied for VAT registration only on 18.05.2007 i.e., long after the expiry of stipulated period. Therefore, the 2nd respondent rightly rejected his claim and passed the impugned order directing the petitioner to pay VAT @ 12.5% and also treating him as VAT dealer - In the instant case, since the petitioner was liable to be registered as a VAT dealer, the 2nd respondent rightly levied the tax @ 12.5%. The petitioner cannot plead any illegality or irregularity in the order impugned. So also the petitioner cannot challenge the provision under Section 17(3) and Section 49(2) of A.P. VAT Act. There are no merits in the petitioner s case - petition dismissed.
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Indian Laws
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2021 (7) TMI 234
Dishonor of Cheque - stay on Trial - the Company of which the petitioners are the Directors is under moratorium under Section 14 of the IBC - Whether the order of moratorium under Section 14 of the IBC interdicts a criminal proceeding under Section 138 of the NI Act or not? - HELD THAT:- The moratorium under Section 14 is intended to keep the corporate debtor's assets together for successful insolvency resolution and hence, a criminal proceeding which may result in the assets of the corporate debtor being depleted as a result of having to pay compensation, which can amount to twice the amount of the cheque that has bounced, would directly impact the corporate insolvency resolution process in the same manner as the institution, continuation or execution of a decree in such suit in a civil Court for the amount of debt or other liability. Section 141 of the NI Act speaks of persons in charge of and responsible to the company for the conduct of the business of the company as well as the company . The words as well as the company appearing in Section 141 of NI Act make it absolutely clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be held vicariously liable for the offence. The legal impediment contained in Section 14 of the IBC would make it impossible for such proceeding to continue against the corporate debtor. Thus, during the period of moratorium, such proceeding can continue against the persons mentioned in Section 141(1) and (2) of the NI Act. The complaint under Section 138 of the NI Act was filed in 2015 against the company and the petitioners herein, who have been arraigned as original accused Nos.2 3, for being the Directors of the company - The petitioners, being the Directors of the company, could be dealt with vicariously under the NI Act. This Court is of the opinion that the trial Court has not committed any error in rejecting the applications filed by the petitioners - Petition dismissed.
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2021 (7) TMI 232
Dishonor of Cheque - Cheating - offence of cheating by dishonestly inducing PW-1 to deliver a cash sum for providing a government job to his brother - cross examination of the prosecution witnesses - HELD THAT:- It has not been denied by the petitioners that petitioner Aswini Debbarma developed a relationship with PW-1 while he was posted as teacher in a government school at Sabroom. It is not also denied by him that he used to meet PW-1 in his bakery frequently. By cross examination of the prosecution witnesses, the petitioners tried to establish that the cheques which were issued by accused Subhash Debbarma to PW-1 were not presented at the New Secretariat branch of SBI where the accused maintained his account and as a result the cheques were dishonoured. He also wanted to establish that accused Subhash Debbarma received the said sum of money from PW-1 as official expenses for arranging a job for his brother Babul Saha. He never denied the execution of the agreements [Exbt.1 2] and his signatures thereon. Petitioners did not also deny that Subhash Debbarma (one of the petitioners) received the said sum of money from PW-1 assuring him that he would arrange a government job for his brother. The learned trial court has rightly held that the facts of the case do not attract the provisions of Section 138 NI Act because in bringing the charge under NI Act the procedures prescribed thereunder have to be followed. In order to constitute an offence under Section 420 IPC, it has to be essentially proved that the accused has committed cheating within the meaning of Section 415 IPC and by such cheating has dishonestly induced the persons so cheated to deliver any property to the accused or to any person, or to make alter or destroy the whole or any part of the valuable security or anything which is signed or sealed, and which is capable of being converted into a valuable security - Clearly in this case the allegations which have been brought against the petitioners are that with a fraudulent intention they allured PW-1 with a government job for his brother and dishonestly induced him to pay ₹ 1,10,000/- to them and thereby committed the offence of cheating punishable under section 420 IPC. In the case of HRIDAYA RANGAN PD. VERMA AND ORS. VERSUS STATE OF BIHAR AND ANR. [ 2000 (3) TMI 1105 - SUPREME COURT OF INDIA ] the Supreme Court has succinctly held that to establish the charge of cheating against the accused, it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. Thus, the accused petitioners committed the offence of cheating by dishonestly inducing PW-1 to deliver a cash sum of ₹ 1,10,000/- for providing a government job to his brother. The receipt of the money is not denied by the petitioners. Rather they tried to establish that they had taken the money from PW-1 for processing his application for a government job and they also tried to refund the money when they failed to keep their promise by issuing cheque in favour of the complainant [PW-1] which was eventually dishonoured for the fault of the complainant - this court is of the view that there is no infirmity with regard to the conviction and sentence of the petitioners. Their conviction and sentence passed by the trial court has been rightly affirmed by the learned appellate court. The criminal revision petition stands dismissed.
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