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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter August 24, 2021 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise Indian Laws Articles JOINT LIABILITY IN CHEQUE DISHONOR CASES GST Actionable for September 2021 CA. Profession in Digital Era News CCI imposes ₹ 200 crore penalty on Maruti for restricting discounts by dealers Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman to launch the National Monetisation Pipeline today Notifications GST - States FTX.56/2017/Pt-IV/125 - dated 19-7-2021 - Assam SGST Assam Goods and Services Tax (Amendment) Rules, 2021 FTX.56/2017/Pt-IV/116 - dated 19-7-2021 - Assam SGST Seeks to bring into force certain provisions of Sl. No. 3, 4, 5, 6, 7, 8, 9, 10 and 14 of the Assam Goods and Services Tax (Amendment) Act, 2020, shall come into force FTX.56/2017/Pt-III/550 - dated 1-7-2021 - Assam SGST Seeks to waive penalty payable for non-compliance of provisions of Notification No. FTX.56//2017/Pt-II/546 dtd. 22/05/2020. FTX.56/2017/Pt-II/628 - dated 3-6-2021 - Assam SGST Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 50 Cr from 01st April 2021. Highlights / Catch Notes Income Tax Validity of order of Settlement Commission u/s 245D(4) - In this case, the 2nd respondent has been ill advised to not to make true and full disclosure and to take a chance considering the fact that the scope of enquiry before the 1st respondent Settlement Commission is a summary proceeding and proceeds on the principle of trust and assumption that an applicant has made a bona fide disclosure for settling the case. The 1st respondent merely relies on the inputs given by the departments to verify the claim of an income tax assessee. - no additional amount of income was offered over and above the amount disclosed in the returns filed u/s 139 - The impugned order is set aside. The case is remitted back to the jurisdictional AO to complete the assessments - HC Visit to Get Source Disallowance of payment of liquidated damages and interest on delayed payment of Value Added Tax (VAT) as deduction - any payment made for breach of contractual obligation in the form of liquidated damages, cannot be construed as penal in nature. Hence the provisions of Explanation 1 to section 37(1) of the Act cannot be brought into operation at all in the facts of the instant case. - AT Visit to Get Source Royalty u/s 9(1)(vi) - TDS u/s 195 - Assessee sells its products mainly through online marketing. - In the instant case, the recipients, i.e, M/s Facebook and Rocket Science group only allow the assessee to use their facilities for the purpose of creating advertisement content. The payment made to Amazon Web Services (AWS) is only for using the information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities - the payments made by the assessee to the three non-resident companies referred above cannot be considered ad “royalty payments” and hence they do not give rise any income chargeable in India - AT Visit to Get Source Addition u/s 68 - unexplained cash credit - amount received by the assessee from the NRIs - Admittedly, all the transactions were routed through the banking channel i.e. NRE account. In this regard, we find that there is a circular issued by the CBDT wherein it was instructed that there cannot be any tax liability on the amount remitted by the NRI in India for investment in India - AT Visit to Get Source Special rate of tax qua the interest income of the assessee - As stated by the A.R rightly that the assessee was not seeking credit of taxes paid on his income abroad, but was seeking taxing of his interest income as per the special rates on the basis of the India-USA DTAA. Considering the fact that the assessee had filed the TRC with the A.O though after the conclusion of the assessment, coupled with the reasons that had led to delay in obtaining of the same alongwith the Form 10F, we are unable to persuade ourselves to the summarily rejection or in fact discarding of the same by the CIT(A). - AT Visit to Get Source TDS u/s 194H OR 192 OR 194J - Disallowance of commission paid to director u/s 40(a)(ia) - where commission is paid to directors as per their terms of employment for work done in their capacity as whole time directors, such commission should be treated as an incentive in addition to salary and same would not come within the purview of commission and brokerage as defined in Section 194H nor a fees for Technical services as defined in Section 194J - AT Visit to Get Source TP Adjustment - Claim of depreciation on software - no ownership claim of the assessee proved - Section 32 of the Act provides depreciation on the eligible assets owned wholly or partly by the assessee and used for the business or profession. Hence, the law is clear. There is no ambiguity under the law. Without proper sale, the assessee could not have owned wholly and partly the assets on which depreciation have been claimed - AT Visit to Get Source TP Adjustment - international transaction pertaining to purchase of capital goods from AE - the issue of allowability or not of the markup of 8% charged by the AE has not been determined as per the approved methods, we hereby deem it fit to remand the matter to the file of the ld. DRP to determine the ALP as per the approved methods after giving an opportunity to the assessee to make their submissions. - AT Visit to Get Source Revision u/s 263 - treating the surrendered amount of income as deemed income u/s 69/69A or from normal business income - No additions made by the AO u/s 115BBE - Admittedly when two views are possible, then the view taken by the assessing officer cannot be said to be wrong as the same was not to the liking of the opinion of the PCIT - AT Visit to Get Source Capital Gain on the acquisition of Land - Claim of exemption u/s 10(37) - The SDM report categorically mentioned that no compensation for standing crops was given to the assessee. No evidence was found that the Land was used for agricultural purposes for two years prior to its acquisition. - Capital gain tax would be leviable on the said compensation received as the land would continue to be the capital asset within the meaning of section 45 of the Income Tax Act. - AT Visit to Get Source Assessment u/s 153A - Deemed dividend addition u/s 2(22)(e) - whether the statement recorded during search u/s 132(4) of the Act or extracts of books of accounts maintained by the assessee constitute incriminating materials found during search or not? - a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year - AT Visit to Get Source Validity of assessment order - imposition of penalty under Section 274 read with Section 271AAC(1) and penalty under Section 274 read with Section 270A of the Income Tax Act, 1961 - Since in the present case no prior show cause notice as well as draft assessment order have been issued, there is a violation of principles of natural justice as well as mandatory procedure prescribed under “Faceless Assessment Scheme”. - Matter restored back - HC Visit to Get Source Assessment u/s 153A - Bogus purchases - Admittedly in subsequent years there was no seized material available and the learned assessing officer has not extrapolated the gross profit in subsequent years, which he did for the impugned years in the appeal, however the acceptance of the subsequent years gross profit shows that the books of accounts prepared by the assessee are acceptable. The gross profit ratio of the subsequent years is also not of much difference compared to the years in this appeal. - CIT(A) rightly deleted the additions - AT Visit to Get Source Reopening of assessment u/s 147 - Bogus LTCG - AO has reason to believe that the petitioner is a beneficiary of accommodation entry and basis for formation of such belief is several inquiries and the investigation by the Investigation Wing, Ahmedabad and report thereof. The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. - HC Visit to Get Source Customs Mis-declaration of the goods - Levy of penalty on customs broker - Can the importer’s argument that they had placed an order for some other goods and the overseas supplier had sent the wrong goods and therefore, they have no liability, be accepted? - In fact, the only allegation in the SCN is that he failed to discharge his obligations under the CBLR 2013 and such a failure, even if correct, does not attract penalty under section 112. CBLR 2013 is a self contained set of regulations which provides for penalties for not fulfilling the obligations. - AT Visit to Get Source Permission to carry out the amendment in the shipping bills - rule 41 of the CESTAT (Procedural), Rules 1992 - About eighteen months have passed since the order was passed by the Tribunal on February 24, 2020 but till date it has not been implemented - before exercising our powers under rule 41 of the 1992 Rules, it is considered appropriate, as a last opportunity, to grant three weeks further time to the Department to either implement the order passed by the Tribunal or pursue the writ petition filed in the High Court. - AT Visit to Get Source Seeking inspection of the goods seized from the premises of the appellant - provisional release of goods - In the present case the goods have only been seized under sub-section(1) of section 110 and have not been confiscated under section 111 of the Customs Act. The ownership of the goods, therefore, continues to be with the person from whom the goods have been seized, namely the appellant. - Permission granted - AT Visit to Get Source Classification of imported goods - All the four goods, i.e., API supari, chikni supari, unflavoured supari, flavoured supari merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the heading 0802 80 90, and not under sub-heading 21069030, since the processes the raw betel nuts have been subjected to and addition of starch (and flavouring agents in the case of flavoured supari) are squarely covered by the scope of the Chapter Note 3 to Chapter 8. These processes are not substantive enough to render the goods with character of "preparations of betel nut", sine qua non for being eligible for classification under sub-heading 2106 90 30. - AAR Visit to Get Source Case Laws: GST 2021 (8) TMI 915 Cancellation of registration of petitioner - suppression of facts or not - reasons to believe - HELD THAT:- The core provision of Section 67 is that the proper officer has to have reasons to believe that the taxable person has suppressed any transaction - In the instant case, because of the aforementioned circumstance, it is an admitted position of the petitioner as well as the respondents that the petitioner assessee is unable to submit his returns as well as to pay the taxes for the period subsequent to January, 2018 as because the earlier issue raised in M/S RAMKY TK JV VERSUS THE UNION OF INDIA AND 4 ORS. REP BY THE COMMISSIONER AND SECRETARY TO THE GOVT. OF INDIA, MINISTRY OF FINANCE, THE COMMISSIONER OF STATE TAXES KAR BHAWAN GANESHGURI, THE COMMISSIONER OF CENTRAL GST GST BHAWAN KEDAR ROAD, COMMERCIAL TAX OFFICER (EARLIER KNOWN AS THE SUPERINTENDENT OF TAXES) , COMMERCIAL TAX OFFICER (EARLIER KNOWN AS THE SUPERINTENDENT OF TAXES) [ 2020 (10) TMI 1271 - GAUHATI HIGH COURT] has not been adjudicated. The issue raised in this writ petition is intricately connected with the issue mentioned in the case above and a decision therein would determine the rights of the parties as regards the issue raised in this writ petition. The circumstance narrated above gives a prima-facie indication that it cannot be an independent cause of action beyond the issue raised in the said order, which requires a separate consideration of its own. List the matter immediately on the expiry of two weeks. Income Tax 2021 (8) TMI 930 Denial of principles of natural justice - Penalty u/s 271AA - opportunity of hearing not being given - Whether it was incumbent on the A.O. to have given the writ applicant an opportunity of being heard before making a reference to the T.P.O. under Section 92CA(1) - Whether the A.O. must provide an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise ? - HELD THAT:- If the C.B.D.T. itself has accepted the dictum as laid by the Bombay High Court in Vodafone India Services (P) Ltd [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] and in Indorama Synthetics [ 2016 (8) TMI 151 - DELHI HIGH COURT] then, we see no good reason to take the view that no opportunity of hearing is required to be given to the taxpayer by the A.O. before recording his satisfaction or otherwise. Undoubtedly, in the case on hand, a show cause notice was issued by the A.O. and reply was filed by the assessee i.e. the writ applicant and considering the reply, the A.O., thereafter, proceeded to pass the order of reference to the T.P.O. We are of the view that an opportunity of hearing should have been given by the A.O. before he proceeded to overrule all the objections and refer the matter to the T.P.O. No satisfaction being recorded in the order disposing of the objections - We find substance in the contention raised as A.O. could be said to have overlooked or rather ignored the jurisdictional requirement of a satisfaction in accordance with para 3.4 of the instruction No.3 of 2016 referred to above that there ought to be an income or potential of an income arising and/or being affected on determination of the A.L.P. of an international transaction or specified domestic transaction. In the absence of such satisfaction being recorded in the order disposing of the objections, the reference to the T.P.O. would also be without jurisdiction. We take notice of the fact that in the objections, a specific plea in this regard was taken, however, we do not find a word in this regard in the order disposing of the objections. On this issue, the only reply of the learned Senior Counsel appearing for the Revenue is that the same is self-serving and adherence the record. In other words, the only argument is that the Arm s Length Price on the interest paid would have bearing on the income. We are not convinced with such stance of the Revenue. We allow the present writ application. The proceedings are remitted to the A.O. for fresh consideration of the matter and the issues as discussed in the present order. The A.O. shall give an opportunity of hearing to the assessee and thereafter, proceed to pass a reasoned order or a speaking order dealing with the objections in accordance with law. 2021 (8) TMI 929 Settlement Commission order u/s 245D(4) - whether no additional income was offered by the 2nd respondent for the assessment year 2012- 13 over and above the income disclosed in the returns filed under Section 139/142 (1) - whether the 1st respondent was justified in allowing the application filed by the 2nd respondent assessee to be proceeded particularly in the light of damning conclusions arrived by it in the course of proceedings before passing the impugned order settling the case of the 2nd respondent? - HELD THAT:- As attempt of the 2nd respondent was not bona fide and there was no true and full disclosure in the application filed under Section 245C (1) of the Income Tax Act, 1961. On this limited score itself, the 1st respondent Settlement Commission ought to have dismissed the application. The 1st respondent Settlement Commission failed to note that it is not obliged to settle every case which comes up for being settled before it, if on facts, it finds that the attempt of and income tax, assessee-applicant was not bona fide before it and there was no true and full disclosure in the application filed under section 245C (1) of the Income Tax Act, 1961. The olive branch extended to an assessee under the provisions of Chapter XIXA of the Income Tax Act, 1961 is intended to give a one-time chance to such defaulters who show remorse and make amendments by filing an application to settle the case with bona fides and sincerity by making a true and full disclosure of additional income which was not disclosed in the returns filed under section 139 of the Income Tax Act, 1961. In this case, the 2nd respondent has been ill advised to not to make true and full disclosure and to take a chance considering the fact that the scope of enquiry before the 1st respondent Settlement Commission is a summary proceeding and proceeds on the principle of trust and assumption that an applicant has made a bona fide disclosure for settling the case. The 1st respondent merely relies on the inputs given by the departments to verify the claim of an income tax assessee. Also noticed that even for the search year no additional amount of income was offered over and above the amount disclosed in the returns filed under section 139 of theIncome Tax Act, 1961. On this score also, the application was liable to be rejected for the aforesaid search assessment year. Therefore do not find any reasons to sustain the impugned order of the 1st respondent Settlement Commission as the 2nd respondent had not made true and full disclosure as was required under the provisions of the Income Tax Act, 1961. The 2nd respondent had a golden opportunity to settle the case under Chapter XIX A of the Income Tax Act, 1961 which was squandered by the 2nd respondent. Though, the 2nd respondent has eventually accepted the additional amounts determined by the 1st respondent Settlement Commission, the 1st respondent Settlement Commission ought to have dismissed the application filed by the 2nd respondent assessee, as the 2nd respondent took a calculated risk by not offering the correct amount as additional income which was not disclosed in the regular returns for the respective assessment years. The fact that the provisions of the Income Tax Act, 1961, pertaining to the settling a cases have been scrapped with effect from 1.4.2 2021 is of no consequence. Even if the provisions of the Income Tax Act, 1961 pertaining to settling of the case under Chapter XIXA were in the statute book, it would have made no difference. The impugned order is set aside. The case is remitted back to the jurisdictional assessing officer to complete the assessments for the respective assessment years preferably within a period of three months from date of receipt of this order 2021 (8) TMI 928 Disallowance of payment of liquidated damages and interest on delayed payment of Value Added Tax (VAT) as deduction - HELD THAT:- It is payment made for breach of contractual obligation by the assessee. These facts are not disputed by the revenue. Hence we hold that any payment made for breach of contractual obligation in the form of liquidated damages, cannot be construed as penal in nature. Hence the provisions of Explanation 1 to section 37(1) of the Act cannot be brought into operation at all in the facts of the instant case. Accordingly, we direct the ld AO to grant deduction towards liquidated damages. Assessee had remitted the VAT dues to the Government with some delay for which it had duly suffered interest upto the date of payment. This interest payment is purely compensatory in nature and becomes an allowable deduction. The same cannot be construed as penal in nature and does not fall within the provisions of Explanation 1 to section 37(1) - Reliance in this regard has been rightly placed by the ld AR on Lachmandas Mathuradas [ 1997 (12) TMI 16 - SUPREME COURT] wherein it was held that the interest on sales tax is compensatory in nature and would be allowable as deduction in computing profits of the business. Accordingly, we direct the ld AO to grant deduction towards interest on delayed payment of VAT. Disallowance of bad debts written off - HELD THAT:- We find that under invoicing of sale amounts got triggered pursuant to the Central Excise Audit conducted in earlier years and Audit Report dated 16.12.2005 was submitted wherein the under invoicing of sales to the extent of ₹ 39 lacs was pointed out to the assessee, which fastened an excise duty liability of ₹ 6,36,480/- on the assessee.This payment towards excise duty does not include any penalty for any violation of any law in force. Since the additional excise duty liability fastened on the assessee company could not be recovered from the customers, but still the assessee had to pay the same to the Government, the said excise duty was duly paid by the assessee and claimed as deduction during the year on the ground of bad debts written off. This is in our considered opinion, is squarely allowable as deduction both u/s 43B as well as u/s 36(1)(vii) of the Act. Hence we direct the ld AO to allow the same as deduction. Deposits written off - We find that these are regular business deposits paid by the assessee in its ordinary course and since the said deposits were not recoverable by the assessee company, the same were sought to be written off by the assessee in its books of accounts and claim the said business loss as deduction. The fact of those deposits becoming irrecoverable is not disputed by the revenue before us. Hence the regular business deposits which became irrecoverable, when written off, would be squarely allowable as deduction u/s 28 of the Act as a business loss. Disallowance of advances written off - HELD THAT:- As the deposits / advances written off were sought to be disallowed by the ld AO on the ground that no evidences were furnished by the assessee. But we find that from the bare perusal of the aforesaid chart, all the advances / deposits were given only in the ordinary course of its business by the assessee company - since the same were not properly examined by the ld AO in the original assessment proceedings, in the interest of justice and fairplay, we deem it fit and appropriate, to restore this issue to the file of ld AO for denovo adjudication in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is also at liberty to furnish fresh evidences, if any, in support of its contentions. Accordingly, the Ground No. 8 raised by the assessee is allowed for statistical purposes. Reduced claim of deduction u/s 10A - whether deduction u/s 10A of the Act is to be granted qua the eligible unit before setting off losses of other non-10A units? - AO restricted the claim of deduction u/s 10A of the Act by setting off the loss incurred by the non-eligible unit of the assessee with the profits made by the STPI unit which is eligible for deduction u/s 10A of the Act, which action was upheld by the ld CITA also - HELD THAT:- We find that this issue is no longer res integra in view of the decision of the Hon‟ble Supreme Court in the case of CIT vs Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT] holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. - Decided in favour of assessee. Computation of deduction u/s 10A - HELD THAT:- As AR stated that the ld AO had denied deduction u/s 10A of the Act in respect of export proceeds in the sum of ₹ 17.33 lacs which was realised beyond the prescribed period . In this regard, the ld AR submitted that the ld AO verify the Foreign Inward Remittance Certificate (FIRC) and decided the issue of allowability of deduction u/s 10A of the Act for the same in accordance with law. This was fairly agreed by the ld DR before us. Accordingly, we restore this issue to the file of ld AO to verify the FIRC and decide the issue of allowability of deduction u/s 10A of the Act for the same in accordance with law. Disallowance of interest u/s 36(1)(iii) - Sufficiency of own funds - HELD THAT:- We find from the perusal of the balance sheet of the assessee for the year under consideration, that the assessee is having sufficient own funds of ₹ 77.04 crores which is several times more than the Capital Work in Progress figure of ₹ 1.13 crores. Hence it could be safely presumed that the Capital Work in Progress had been invested only out of own funds and not out of borrowed funds, by following the ratio laid down in the case of HDFC Bank [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] . Respectfully following the same, we direct the ld AO to delete the disallowance of interest u/s 36(1)(iii). Deduction for share issue expenses - HELD THAT:- We find that there is no dispute that the amounts spent on account of share issue expenses were incurred only for increasing the authorised share capital of the assessee company. We find that the Hon‟ble Supreme Court in the case of Brooke Bond India Ltd [ 1997 (2) TMI 11 - SUPREME COURT] had held that expenditure incurred on issuing share to increase share capital by a company would not be allowable as revenue expenditure and it would only be capital in nature. Respectfully following the said decision, the Ground No. 8 raised by the assessee is hereby dismissed. Disallowance made on account of provision for warranties - HELD THAT:-We find that the assessee had furnished detailed explanation with regard to the provision for warranties before the ld CITA together with the basis of making the provision, its allowability as deduction in the earlier assessment years and with various decisions of Hon‟ble Supreme Court and Hon‟ble High Courts. We find that the ld CITA had simply brushed aside all the arguments of the assessee and made general observations which are not at all germane to the issue in dispute before him and upheld the action of the ld AO. We find that since sufficient opportunity was not given to the assessee by the ld AO in the assessment proceedings itself, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue to the file of ld AO for denovo adjudication in accordance with law by duly considering all the submissions of the assessee in this regard. Needless to mention that the assessee be given reasonable opportunity of being heard. 2021 (8) TMI 927 Royalty u/s 9(1)(vi) - TDS u/s 195 - Validity of demand raised u/s 201(1) and interest charged u/s 201(1A) - Assessee sells its products mainly through online marketing. - AO has mainly invoked the provisions of sec. 9(1)(vi) of the Act in respect of payments made to M/s Facebook and M/s Rocket Science Group (MailChimp) to hold that the same is royalty - for payments made for Amazon Web Services, the AO has also referred to the provisions of DTAA entered into India and USA in addition to sec.9(1)(vi) - HELD THAT:- On careful perusal of the relevant provisions of the agreement entered by the assessee with Facebook and Rocket Science Group (Mailchimp) would show that both these non-resident companies are allowing the assessee to use the facilities provided in their sites, which includes, inter alia, software facilities also. The purpose of compelling the assessee to use those facilities, as could be inferred by us, is to create an environment of ease in creating the advertisement content to suit the platforms of Facebook or Mailchimp. The environment of ease is beneficial and time saving to both the advertiser and the advertising platform. Thus the facilities have been created by the non-resident companies for mutual benefit. However, a person shall get the right to use those facilities only when he enters into an agreement with them for hosting his advertisement or for sending bulk mails, meaning thereby, the use of facilities is intertwined with the activity of placing advertisement in web portal of Facebook or sending bulk mails. In case of web hosting charges paid to AWS, the assessee is allowed to use the information technology infrastructure facilities. In the two case YAHOO INDIA (P.) LTD.[ 2011 (6) TMI 162 - ITAT, MUMBAI] and PINSTORM TECHNOLOGIES (P.) LTD.[ 2012 (12) TMI 601 - ITAT MUMBAI] Tribunal held that the amount paid by the assessee to M/s Google Ireland Ltd for the services rendered for uploading and display of banner advertisement on its portal was in the nature of business profit on which no tax is deductible at source, since the same was not chargeable to tax in India in the absence of PE of Google Ireland Ltd in India. In the instant case, the recipients, i.e, M/s Facebook and Rocket Science group only allow the assessee to use their facilities for the purpose of creating advertisement content. The payment made to Amazon Web Services (AWS) is only for using the information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities The right to use those facilities, as stated earlier, is intertwined with the main objective of placing advertisements in the case of Facebook and Mailchimp. In the case of AWS, the payment is made only for using of information technology infrastructure facilities on rental basis. Hence the question of transferring the copy right over those facilities does not arise at all. The agreements extracted above also make it clear that the copyright over those facilitating software is not shared with the assessee. In any case, the main purpose of making payment is to place advertisements only and not to use the facilities provided by the non-resident companies. Thus the facilities provided by the nonresident companies are only enabling facilities, which help a person to place his advertisement contents on the platform of Facebook or to use MailChimp facility effectively. In case of AWS, the payment is in the nature of rent payments for use of infrastructure facilities. We are of the view that the these non-resident recipients stand on a better footing than those assessees before the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Ltd (supra). Accordingly, following the ratio laid down by Hon'ble Supreme Court, we hold thatthe payments made to the above said three non-resident companies do not fall within the meaning of royalty as defined in DTAA. AO has not made out an alternative case that these payments are taxable as business income in India. Hence, there is no necessity for us to deal with that aspect We are of the view that the payments made by the assessee to the three non-resident companies referred above cannot be considered ad royalty payments and hence they do not give rise any income chargeable in India under Indian Income tax Act in all the three years under consideration. In that view of the matter, there is no requirement to deduct tax at source from those payments u/s 195 of the Act. Hence the assessee herein cannot be considered as an assessee in default u/s 201(1) of the Act. - Decided in favour of assessee. 2021 (8) TMI 926 Addition u/s 68 - unexplained cash credit - amount received by the assessee from the NRIs - creditworthiness of the parties who have subscribed the shares of the assessee company - HELD THAT:- On making the reference to the average conversion rate of the dollar into Indian currency, on the basis of information available on Google as applicable for the year 2011 and 2012. The return of income in Indian currency works out at ₹ 2,25,14,877/- only ( $ 2,20,215* ₹ 47 + $ 2,29,524* ₹ 53) for Shri Mayur Patel and ₹ 1,29,44,382/- only for Shri Vimal Patel. Based on these documents, we can draw an inference that there were sufficient funds available with these investors namely Shri Mayur Patel and Shri Vimal Patel for acquiring the shares of the assessee company. Accordingly, we do not find any infirmity in the order of the learned CIT (A) for the deletion made by him with respect to these two investor. Coming to the remaining three investors namely Shri Divyesh Patel, Ketu Patel and Rima Patel who have subscribed shares of the assessee company. In this connection we note that the assessee has not filed any copy of the income tax return filed by them in their country of residence i.e. USA. Likewise, the assessee has also not filed the bank statement of these parties maintained by them in their country of residence except the NRE accounts maintained in India. Admittedly, all the transactions were routed through the banking channel i.e. NRE account. In this regard, we find that there is a circular issued by the CBDT bearing number 05 of 1969 dated 20-02-1969 wherein it was instructed that there cannot be any tax liability on the amount remitted by the NRI in India for investment in India Thus the amount received by the assessee from the NRIs in the manner as discussed above cannot be treated as unexplained cash credit under the provisions of section 68 of the Act. Accordingly, there is no question for treating the amount of share capital received by the assessee as unexplained cash credit under section 68 - Appeal of the assessee is allowed. 2021 (8) TMI 925 Computation of Long Term Capital Gain - AO held that the buyback agreement was an independent transaction and worked out short term capital gains in respect of super structure to be constructed and to be transferred, thus, the long term capital gains was computed excessively - Revenue argued CIT(Appeals) adopted the value of land as on 1.4.1981 at ₹ 250/sq.ft. as against ₹ 100/sq.ft. by the AO - HELD THAT:- CIT(Appeals) after considering the submissions of the assessee that on reverse indexation method, the value of land as on 1.4.1981 is @ ₹ 781.25 / sq.ft., considered the same at ₹ 250 / sq.ft, which is most reasonable and the same is to be adopted. See LATE SMT KRISHNA BAJAJ VERSUS ASST COMMISSIONER OF INCOME TAX [ 2013 (12) TMI 544 - KARNATAKA HIGH COURT] Determining the value for the surrender of land to the developer by the assessee and the co-owner for development of a housing project - JDA entered - AR submitted that the JDA has to be read along with supplementary agreement to JDA which suggests that the assessee has transferred 75.72% proportionate share of undivided interest in land as against the original transfer of 51.85% of undivided share in land and assessee will retain only 24.28% of proportionate share of undivided interest in land - HELD THAT:- When we read JDA dated 13.10.2014 along with supplementary agreement it shows that assessee transferred only 24.28% of undivided interest in land to the developer for a consideration of ₹ 13.30 crores and 11475 sq.ft. of constructed area. Further, the 6 flats agreed to be surrendered by the landlord by the revised JDA agreement comprises of two components i.e., land and building. The value of proportionate area of undivided interest in the landed property of 8957.37 sq.ft at ₹ 24,611.64 per sq.ft. and the value of building of constructed area of 11934 sq.ft. charged at ₹ 2,500 per sq.ft. works out to ₹ 2,98,35,000. The land value will be ₹ 10,91,65,000 worked out at ₹ 24,611.44 per sq.ft. The registered valuer has given the value of land in his report at ₹ 20,000 to ₹ 22,000 per sq.ft. which is kept on record at page 127 of PB. Therefore, the valuation adopted for 11934 sq.ft. constructed area cannot be compared with the value of constructed area of 11475 sq.ft. retained by the Owner. Being so, this was rightly followed by the CIT(Appeals) as mentioned in his order. We do not find any infirmity in the valuation of the CIT(Appeals) towards transfer of 75.72% undivided interest in land to the developer. CIT(Appeals) calculated the short term capital gain on sale of built-up area at Nil - The assessee herein transferred 75.72% of undivided share in land to the developer. The JDA and supplementary agreement cannot be read isolatedly and it gives distorted picture on transfer of landed property to the developer. When we read JDA dated 13.10.2014 along with supplementary agreement to JDA dated 19.8.2015, it suggests that the whole arrangement is to transfer 75.72% of undivided share in land to the developer and this is a single transaction so that there is no computation of short term capital gain in this case as computed by the AO. The CIT(Appeals) has given relief on a different count and computed the short term capital gain at Nil. The same is confirmed. Exemption u/s 54 - HELD THAT:- As in this case the deduction was claimed by assessee u/s. 54 of the Act and there was no prohibition in this assessment year with regard to owning more than one residential house so as to deny exemption u/s. 54 The assessee in this case purchased new residential house situated at No.228 (originally part of No.285 and sub-numbered as 285/1, renumbered as 66 and later as No.228) 4th Main Road, Malleshwaram, Bangalore 560 055, PID No.7-3-66 for a consideration of ₹ 7.5 crores along with stamp duty totalling to ₹ 7,99,50,636. The assessee s share in the value of property is ₹ 3,99,75,318 on which the assessee is entitled to deduction u/s. 54. The same is directed to be granted. 2021 (8) TMI 924 Assessment of trust - carry forward of deficit - HELD THAT:- CIT(A) correctly drawing support from the decision of the Hon ble High Court of Delhi in the case of Raghuvanshi Charitable Trust [ 2010 (7) TMI 158 - DELHI HIGH COURT] directed the AO to allow the set off of carry forward deficit. - Decided against revenue. 2021 (8) TMI 923 Assessment u/s 153A - Whether no search conducted on the assessee but a survey under section 133A of the Act was conducted? - whether the assessment is to be framed under section 143(3) r.w.s.153C of the Act or under section 143(3) r.w.s.153A of the Act. - HELD THAT:- Assessment has to be framed u/s 143(3) r.w.s. 153C of the Act as there was no search on the assessee u/s 132(1) of the Act. The assessee was only covered under survey action u/s 133A of the Act on 24.01.2011. So the score the order of the AO is bad in law In the present case the assessee is a person other than the searched person. Proceedings u/s 153C of the Act can be initiated when the pre-conditions are fulfilled otherwise the proceedings and consequent assessment would be rendered bad and invalid. We note that no such satisfaction has been recorded by the AO of the searched person on the basis of incriminating materials seized during the search as has been testified and brought out by RTI application by the assessee and response thereto by the AO that no satisfaction has been recorded by the AO of the searched person i.e. Katrina Kaif. No incriminating documents were seized during search on Kaitrina Kaif belonging to the assessee as is apparent from the punchnama prepared during search. Also during the course of recording of statement of Kaitrina Kaif not even a single query was raised on the basis of materials seized from Ms Katrina Kaif about the assessee - contentions of the Ld. Counsel of the assessee carry weight that even if the assessment framed is presumed to be under section u/s 143(3) r.w.s. 153C of the Act, even then the assessment is bad in law as the notice has been issued with the satisfaction of the AO of the searched person. In our opinion the assessment framed by the AO is without jurisdiction and can not be sustained. Undisclosed receipt from the clients - Addition on the basis of some rough workings found from the back up of the computer of Ms. Sandhya Ramachandran for the period for which she was not employed with the assessee company - HELD THAT:- We find that seized documents do not prove that any cash is paid to Mr. Zarine Khan whose name is mentioned in the document. We also note that Mr. Zarine Khan has not been examined. Moreover Ms. Sandhya Ramachandran stated in her statement that she was not aware of the seized documents as the same pertain to the period prior to joining the employment. Addition in this case is based upon surmises and conjuncture and AO ld CIT(A) have failed to bring any material on record and consequently the same can not be sustained. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. The ground no. 1 of the assessee s appeal is allowed. Addition of undisclosed professional receipts on the basis of blackberry conversation between one Ms. Sandhya Ramachandran and unknown some third party - HELD THAT:- We find that this addition was also based on conjuncture and surmises. Upon perusal of the record before us we find that there is no evidence of any cash payment to Ms. Katrina Kaif or on her behalf. Even the third party who was on the chat with Ms. Sandhya Ramachandran is not known and Ms. Katrina Kaif in her statement has denied such transactions. Addition on the basis of entries in the loose papers seized - CIT(A) deleted the addition by observing and upholding that addition as made by the AO is based upon the presumptions, assumptions and extrapolation and there was no materials before the AO - HELD THAT:- The Supreme Court in Comman Cause [ 2017 (1) TMI 1164 - SUPREME COURT] was dealing with incriminating materials in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. which were found during search. It was held that entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not books of account and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. The Bombay High Court in CIT v Devesh Agarwal [ 2017 (3) TMI 893 - BOMBAY HIGH COURT] has held that no addition can be made on the basis of presumptions, surmises and conjectures. In view of these facts and the decisions as stated above, we are inclined to uphold the order passed by the ld CIT(A) on this issue. The ground no. 2 is allowed. 2021 (8) TMI 922 Rectification of mistake u/s 154 - debatable issue - Granting short interest u/s 244A - not adjusting the refund granted first towards the interest receivable and the balance remaining against the tax amount receivable by the assessee - HELD THAT:- Adjustment of refund issued earlier has to be adjusted against the interest and only thereafter against the principal amount of tax. The issue is squarely covered by the various decisions of Union Bank of India [ 2016 (8) TMI 688 - ITAT MUMBAI] , DCIT vs. State Bank of Saurashtra [ 2017 (10) TMI 1252 - ITAT MUMBAI] , Bank of Baroda vs. DCIT [ 2018 (12) TMI 1836 - ITAT MUMBAI] and DCIT vs. Peerless General Finance Investment Co. Ltd. [ 2017 (8) TMI 237 - ITAT KOLKATA] - Thus a refund issued to the assessee on various dates has to be first adjusted against the interest due on the income tax and thereafter against the principal amount. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to make adjustment of refund as indicated above. - Decided in favour of assessee. 2021 (8) TMI 921 Maintainability of appeal - low tax effect - Penalty u/s 271(1)(c) - Estimation of income on bogus purchases - whether addition is based on information received from external sources in the nature of law-enforcement agencies namely Sales Tax Authorities? - scope of CBDT Circular no 17/2019 dated 08.08.2019 r.w Circular No. 3/2018 dtd. 11/07/2018 as amended on 20.08.2018 - HELD THAT:- Admittedly, it is a settled position of law that quantum proceedings and penalty proceedings are independent and distinct proceedings and confirmation of an addition cannot on a standalone basis justify imposition/upholding of a penalty u/s 271(1)(c) of the Act. Adopting the same logic, we are of the considered view that unless a specific exception is provided in the circular w.r.t penalty also, it could by no means be construed that penalty was to be treated at par with the quantum additions. discernible from Clause 10(e) of the aforesaid CBDT Circular No. 3/2018 (as amended on 20.08.2018), the same applies only to additions which were based on information received from external sources. As noticed by us hereinabove, since the levy of penalty by no means could be construed as an addition within the meaning of Clause 10(e) of the aforesaid circular, therefore, we do not find any merit in the contentions advanced by the ld. D.R that the aforesaid exception carved out in the CBDT Circular No. 3/2018 (supra) would also take within its realm a penalty imposed under Sec. 271(1)(c) w.r.t the additions made by the A.O towards bogus purchases on the basis of information received from Sales Tax Department, i.e an external agency. Accordingly, we are of the considered view that the appeal of the revenue is covered by the CBDT Circular No. 17/2019, dated 08.08.2019, and thus, in our considered view is not maintainable. - Decided against revenue. 2021 (8) TMI 920 Special rate of tax qua the interest income of the assessee - exigibility to tax of the interest income on fixed deposits bank interest - assessee had failed to substantiate that the interest income in question was offered for tax in his return of income filed in U.S.A. - whether or not the assessee was eligible to avail special rate of tax on the interest income on fixed deposits bank interest @10% and 15% as per the India-USA DTAA? - CIT(A) had concluded that the assessee having failed to file the TRC and Form 10F with the A.O, thus, could not have sought exigibility to tax of the interest income on fixed deposits bank interest @10% and 15% on the basis of the India-USA DTAA - HELD THAT:- Assessee could not furnish the TRC in the course of the assessment proceedings because of paucity of time there were justifiable reasons for the assessee in not filing the TRC in the course of the assessment proceedings. But then, we cannot also remain oblivious of the fact that the A.O had declined to apply the special rate of tax as per the DTAA, for the reason, that the assessee had failed to substantiate that the interest income in question was offered by him for tax in his return of income filed in U.S.A. As observed by us hereinabove, the very basis of rejection of the assessee s claim for applying of special rate of tax as per the India-USA DTAA by the A.O is absolutely misconceived and in fact misplaced. As stated by the A.R rightly that the assessee was not seeking credit of taxes paid on his income abroad, but was seeking taxing of his interest income as per the special rates on the basis of the India-USA DTAA. Considering the fact that the assessee had filed the TRC with the A.O though after the conclusion of the assessment, coupled with the reasons that had led to delay in obtaining of the same alongwith the Form 10F, we are unable to persuade ourselves to the summarily rejection or in fact discarding of the same by the CIT(A). As the assessee had filed the TRC and Form 10F, therefore, there was no justification in declining the applying of the special rate of tax qua the interest income on fixed deposits bank interest amounting to ₹ 17,87,709/- @10% and 15% that was claimed by him on the basis of the India-USA DTAA in his return of income. - we direct the A.O to determine the taxability of the interest income as per the special rate of tax on the basis of India-USA tax treaty. - Decided in favour of assessee. 2021 (8) TMI 918 Reopening of assessment u/s 147 - Bogus LTCG - As per AO assessee taken accommodation entry for claiming bogus capital gain - HELD THAT:- We are of the considered view that it cannot be said that there is no reason to believe that the income chargeable to tax has escaped assessment because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to herein above, and on having found prima facie material, impugned notice is issued to the petitioner. It further appears that, no procedural lapse and/or deviation from procedure prescribed in reopening and the reasons recorded do not lack validity as necessary approvals from the competent authority appears to have been received. Function of the assessing authority at this stage is to administer the statute and what is required is a reason to believe and not to establish fact of escapement of income and therefore, looking to the scope of Section 147 as also sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen the assessment. AO has reason to believe that the petitioner is a beneficiary of accommodation entry and basis for formation of such belief is several inquiries and the investigation by the Investigation Wing, Ahmedabad and report thereof. The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. - Decided against assessee. 2021 (8) TMI 916 Assessment u/s 153A - Bogus purchases - suppression of the gross profit by obtaining bogus purchase bills by the assessee - HELD THAT:- Only addition made by the learned assessing officer is with respect to the gross profit rates of the assessee as per books of accounts and the gross profit rates derived on the basis of instances found from tally software during the course of search. The learned assessing officer has not disturbed the book results but has made an addition of the gross profit, which the assessee should have earned according to him based on the incriminating documents found for subsequent years for the impugned years. CIT A as also not deleted the addition on that basis but for the reason that the comparison made by the learned assessing officer of different material of different lots sold at different time. DR has agreed that that the learned assessing officer has computed the gross profit by taking transactions of the nearby dates. However, it is not denied that the learned assessing officer has taken the highest rate of sales as well as lowest rates of purchases for computing the additional gross profit that should have been earned by the assessee. The assessee has produced the copies of the paper book, which are placed before the learned CIT A wherein he has verified the details of the material sold, quantity sold with respect to the various bills placed in those paper books and found that the comparison of the gross profit made by the learned assessing officer is not comparable. Another argument of the learned departmental representative is that the subsequent year s acceptance of the book results by the learned assessing officer cannot help the case of the assessee in deleting the addition in those years, which are in appeal. We find that the subsequent years assessments are also completed u/s 143 (3) of the act and no addition has been made by the learned assessing officer. Admittedly in subsequent years there was no seized material available and the learned assessing officer has not extrapolated the gross profit in subsequent years, which he did for the impugned years in the appeal, however the acceptance of the subsequent years gross profit shows that the books of accounts prepared by the assessee are acceptable. The gross profit ratio of the subsequent years is also not of much difference compared to the years in this appeal. In view of this we do not find any infirmity in the order of the learned CIT A in deleting the addition on account of suppressed gross profit, which was not based on any incriminating material found during the course of search for the respective years and because of erroneous comparison made by the learned assessing officer. - Decided against revenue. 2021 (8) TMI 914 Validity of assessment order - imposition of penalty under Section 274 read with Section 271AAC(1) and penalty under Section 274 read with Section 270A of the Income Tax Act, 1961 - HELD THAT:- This Court is of the view that Section 144B(1)(xvi)(b) mandatorily provides for issuance of a prior show cause notice and draft assessment order before issuing the final assessment order - Since in the present case no prior show cause notice as well as draft assessment order have been issued, there is a violation of principles of natural justice as well as mandatory procedure prescribed under Faceless Assessment Scheme . The impugned assessment order, notice of demand, show cause notice for imposition of penalty under Section 274 read with Section 271AAC(1) and penalty under Section 274 read with Section 270A of the Act, dated 22nd April 2021, are set aside and the matter is remanded back to the Assessing Officer, who shall issue a draft assessment order and thereafter pass a reasoned order in accordance with law - petition allowed by way of remand. 2021 (8) TMI 912 Claim of deduction u/s 10AA in respect of an eligible undertaking to be allowed on standalone basis - HELD THAT:- We find that the deduction u/s 10AA of the Act is to be allowed on stand alone basis in respect of its profits derived from the eligible undertaking and that the losses of non-eligible units need not be set off with the profits of the eligible unit. This issue is no longer res integra in view of the decision of the Hon ble Supreme Court in the case of CIT vs Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT ] as held we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. TDS u/s 194H OR 192 OR 194J - Disallowance of commission paid to director u/s 40(a)(ia) - AO observed that the assessee had paid commission to the directors of the assessee company on which no tax was deducted at source - HELD THAT:- We find that this issue is squarely covered by the decision of this Tribunal in assessee s own case for the Asst Year 2009-10 Section 192, unlike other TDS provision, require deduction of tax at source under the head Salaries only at the time of payment only‟ and not otherwise. The quantum or accrual of expenses is nowhere disputed by revenue. The DR has fairly conceded the above position and therefore, we find no infirmity in the order of CIT(A) and hence, this ground of the revenue is also dismissed - where commission is paid to directors as per their terms of employment for work done in their capacity as whole time directors, such commission should be treated as an incentive in addition to salary and same would not come within the purview of commission and brokerage as defined in Section 194H nor a fees for Technical services as defined in Section 194J. - Decided against revenue. Apportioning the salary or operational expenses of CEO, MD or Finance Department etc which are common to both eligible and non-eligible undertakings of the assessee company - HELD THAT:- As decided in own case [ 2019 (2) TMI 1955 - ITAT MUMBAI] ITAT remanded the impugned issue back to the file of ld CITA for denovo adjudication. We find that the issue in dispute for the year under consideration should also be restored to the file of ld CITA for denovo adjudication in accordance with law. The assessee is at liberty to file fresh evidences, if any, together with all legal case laws, in support of its contentions and the ld CITA is directed to dispose of the set aside appeal after due consideration of all the factual and legal submissions of the assessee company, in accordance with law. Accordingly, the Ground No. 3 raised by the revenue is allowed for statistical purposes. 2021 (8) TMI 911 TP Adjustment - Comparable selection - exclusion of the comparables directed by Ld.CIT(A) i.e. Exensys Software Solutions Ltd.; Thirdware Solutions Ltd., Visualsoft Technologies (Seg.); Sankhya Infotech Ltd. from the final list of the comparables - HELD THAT:- We find that the Ld.CIT(A) after considering the material placed on records and has given finding on facts in respect of the functional comparability of the comparables selected by the TPO. The Revenue has failed to effectively rebut the finding of Ld.CIT(A). Moreover, this issue has already been examined in the case of Colt Technology Services India Pvt.Ltd . [ 2012 (10) TMI 1025 - ITAT DELHI] - No reason to interfere in the findings of Ld.CIT(A). Claim of depreciation on software - no ownership claim of the assessee proved - HELD THAT:- Undisputedly in this case, the invoices were raised after 15 months as observed by the Assessing Officer. Further, the Assessing Officer has categorically observed that invoices reflected that sales tax/VAT has been charged on sale of goods. Such taxes have been charged in August 2005. He observed that without invoices and charging of sales tax, sale could have not been affected. The assessee had not become the owner of the software wholly or partly before 31.03.2005 hence, on account of ownership claim of the assessee is failed. We are in agreement with the view expressed by the Assessing Officer in our considered view merely downloading of software and providing key to use by the vendor would not ipso facto entitle the assessee for claiming depreciation. Section 32 of the Act provides depreciation on the eligible assets owned wholly or partly by the assessee and used for the business or profession. Hence, the law is clear. There is no ambiguity under the law. Without proper sale, the assessee could not have owned wholly and partly the assets on which depreciation have been claimed. We, therefore, set aside the finding of Ld.CIT(A) on this issue and restore the finding of the Assessing Officer. Working capital adjustment while benchmarking the international transaction of provision of software services - HELD THAT:- In view of the direction given by Ld.CIT(A), we hereby direct the TPO to allow working capital adjustment to the assessee. Addition on account of liabilities returned back in relation to acquisition of fixed assets - HELD THAT:- applying the ratio laid down by Hon ble Supreme Court in the case of CIT vs Mahindra Mahindra Ltd [ 2018 (5) TMI 358 - SUPREME COURT] and Nectar Beverages Pvt.Ltd. [ 2009 (7) TMI 5 - SUPREME COURT] hence, the amount written back in respect of purchase of fixed assets, being capital in nature, is not a write back of trading liability covered u/s 41(1)We find merit in contentions of the assessee. We, therefore, direct the Assessing Officer to delete the addition made on account of liability written back related to capital assets. 2021 (8) TMI 909 Claim of Foreign Tax Credit under Section 90 - Whether lower authorities are not justified in failing to appreciate that the case of the Appellant falls under Section 90(1)(a)(ii) and hence the appellant is eligible for relief in respect of tax paid in Tanzania? - whether the tax deducted at source in Tanzania is not an income that accrues or arises outside India and therefore, the same cannot be included in the total income of the Appellant? - HELD THAT:- In the case of section 90(1)(a)(i), relief is granted in respect of income on which income tax is paid in both the countries. Whereas, u/s. 90(1)(a)(ii) of the Act, relief is granted in respect of income tax chargeable in both the countries - under clause (i) assessee should have paid tax in both countries, whereas under clause (ii) it is enough if the income is chargeable to tax in both the countries and there is no mandate that the tax should have been paid in both the countries. He also brought to our attention Article 23 of DTAA between India Tanzania. What is said in the case of India-Korea DTAA is squarely applicable to the facts of the present case. We have already referred to the observations of this Tribunal in the case of Ittiam Systems Pvt. Ltd. [ 2021 (1) TMI 1106 - ITAT BANGALORE] in the earlier paragraphs . Accordingly, relief u/s. 90 to be given on the amount which is lower of the following i.e., Tax paid on income outside India; or payable in India on such doubly taxable income, whichever is lower. Steps to compute the double taxation relief are as follows:- (i) Compute global income i.e., aggregate of Indian income and foreign income; (ii) Compute tax on such global income as per the slab rates applicable as per Indian Income-tax Act; (iii) Compute average rate of tax (i.e., global income divided by amount of tax); (iv) Compute amount by multiplying foreign income with such average rate of tax; and (v) Compute tax paid in foreign country. The amount of relief shall be lower of (iv) (v) i.e., tax paid on income outside India and tax payable under the Indian Income-tax. We direct the AO to grant FTC as above. This ground is partly allowed. Deduction u/s 80G - AR submitted that this issue though raised before the CIT(Appeals), but he failed to adjudicate the same. The evidence is available to the extent of ₹ 3,78,000 for payment of donation and the assessee is entitled to donation u/s. 80G - HELD THAT:- After hearing both the parties, we remit this issue to the file of AO for fresh decision on this issue with a direction to the assessee to provide necessary evidence in support of the claim of deduction u/s. 80G. 2021 (8) TMI 908 TP Adjustment - international transaction pertaining to purchase of capital goods from AE - AO made adjustment by denying the 8% markup charged by the AE on the supply of capital goods and disallowed the depreciation also to that extent - assessee contested that the purchase of capital goods cannot be benchmarked separately. The main argument was the depreciation do form a component of operating cost and hence cannot be given separate treatment - HELD THAT:- Since, the assessee has been denied proper opportunity, the TPO and the ld. DRP did not have the benefit of examining the purchase of capital goods, the issue of allowability or not of the markup of 8% charged by the AE has not been determined as per the approved methods, we hereby deem it fit to remand the matter to the file of the ld. DRP to determine the ALP as per the approved methods after giving an opportunity to the assessee to make their submissions. The assessee is also hereby directed to comply with the directions of the ld. DRP in furnishing the complete details and substantiating their case. Addition of liquidated damages incurred by the assessee pursuant to breach of contractual arrangements - HELD THAT:- As decided in ow case [ 2019 (12) TMI 667 - ITAT DELHI] the charges pertain to contractual obligation which was not complied with but the AO held it as penalty. The matter has been remanded back to the file of the AO for fresh examination in the assessment year 2014 -15 as well as 2013014. We have given due consideration to the observations of the ld. DRP, the expense also do not pertain to the year in question. Hence, the AO is hereby directed to examine the issue afresh with regard to the allowability of the expenses per se and also the year to which the expenses belong to. Interest on Foreign Term Loan - AO disallowed the interest paid on foreign term loan as no TDS was deducted by the assessee - AO disallowed it on the grounds that the assessee failed to deduct TDS on the interest credited in the books whereas the assessee submitted that only an amount of ₹ 5,06,995/- has been accrued on the loan received - HELD THAT:- As DRP referred the matter to the AO for factual verification. Since, it is a matter of factual verification, we decline to interfere with the order of the ld. DRP. Reconciliation of amounts in 26AS - HELD THAT:- The revenue as per the books of accounts of the assessee was ₹ 2,39,74,386/- against the revenue as per 26AS of ₹ 5,73,39,416/- thus, reflecting a difference of ₹ 3,33,65,030/- the sum which has been treated as income of the assessee by the Assessing Officer and the ld. DRP. The assessee is hereby directed to submit the reconciliation statement and the accounting principles used with reference to the continuity of treating the various receipts. Effect of order u/s 154 - HELD THAT:- AO failed to take into consideration the order u/s 154 passed by the TPO on 26.03.2021 reducing the TP addition. The same is hereby directed to be rectified. 2021 (8) TMI 905 Revision u/s 263 - treating the surrendered amount of income as deemed income u/s 69/69A or from normal business income - No additions made by the AO u/s 115BBE - HELD THAT:- As the assessee in rectification proceeding under section 154 had submitted the manner in which the amount of ₹ 1.5 crore was treated in the accounts of the assessee. After considering all the aspect and considering the decision of the Tribunal, the assessing officer has not proceeded against the assessee. In our view the decision of the Tribunal in the matter of Dev Raj Hi Tech Machines Ltd [ 2015 (11) TMI 1375 - ITAT AMRITSAR] was clearly applicable to the facts of the present case. In fact the said case was referred by the Principle CIT , however she had neither distinguished nor discussed while passing the impugned order. PCI had simply relied upon the explanation 2 to section 263 of Act and wrongly held that the assessing officer did not make sufficient inquiries. The order passed by the PCIT cannot be upheld because the assessing officer had made sufficient enquiries and had correctly taken income surrendered by the assessee as business income and after due considerations of reply. Secondly the view taken by the assessing officer was supported by the view of Tribunal in the case of Dev Raj Hi Tech Machines Ltd [ 2015 (11) TMI 1375 - ITAT AMRITSAR] thus it cannot be said that the view taken by the assessing officer was not a plausible view ,hence it was erroneous. Admittedly when two views are possible, then the view taken by the assessing officer cannot be said to be wrong as the same was not to the liking of the opinion of the PCIT, for the above-said purposes, we may rely upon Max India. [ 2007 (11) TMI 12 - SUPREME COURT] . Lastly the finding recorded by the DCIT relying upon explanation 2 to section 263 cannot be sustained, as explanation 2 to section 263, which was inserted w.e.f 1.6.2015 and was held to be prospective - We found that the order passed by PCIT was not in accordance with law and therefore, we quash the same. 2021 (8) TMI 904 Capital Gain on the acquisition of Land - Claim of exemption u/s 10(37) - Agriculture land - whether the acquired Land falls within the purview of 10(37) of the Income Tax Act or not? - HELD THAT:- CIT(A) has rightly held that the Land was the land reference u/s 2(14) (iii) of the Act as it is situated within 650 m of the Municipality limit. CIT appeal had rightly held that the Land was acquired by way of compulsory acquisition under National Highway Authority of India act. CIT(A) has wrongly held that the Land was under agricultural use for a period of two years before its acquisition. He was improperly swayed by the compensation order passed granted by the acquisition authorities, giving the compensation by treating the Land as agriculture. There is a distinction between the grant of compensation for the Land at an agriculture rate and cultivation of the Land fortwo years for agricultural purposes before acquisition. The SDM report categorically mentioned that no compensation for standing crops was given to the assessee. No evidence was found that the Land was used for agricultural purposes for two years prior to its acquisition. Capital gain tax would be leviable on the said compensation received as the land would continue to be the capital asset within the meaning of section 45 of the Income Tax Act. In our opinion, the assessee is liable to pay the capital gain tax on the compensation amount received by the assessee on the land that was not under cultivation. Undoubtedly, the Land other than 8 kanal 30 marlas was the capital asset within the meaning of section 2 (14)(iii) read with section 10(37) r/w section 45 of the Income Tax Act and therefore, any capital gain arising to the assessee on the sale of the land land would be the subject matter of the capital gain. Long terms capital gain to the file of the AO, therefore, the pro rata interest earned on compensation received for cultivated and non-cultivated land shall, be calculated by AO, and consequential benefit shall be given to the assessee on compensation received on cultivated land. As we have held, assessee's land partly was urbanized agricultural cultivated Land and remaining as a capital asset. Therefore the assessee would not be entitled to the benefit of section 54B of The Income Tax Act 1961. Appeal of the Revenue is partly allowed. 2021 (8) TMI 903 Addition on account of proportionate interest - CIT(A) confirmed the disallowance made by the AO only on the ground that the assessee failed to establish the commercial expediency regarding the interest free loans made in the year under consideration - HELD THAT:- DR vehemently argued the said decision of ITAT for A.Y. 2011-12 [ 2017 (1) TMI 1758 - ITAT PUNE] is not applicable for the year under consideration for the reason that the CIT(A) held clearly there is a change of facts compared to earlier years and the year under consideration. We note that the Co-ordinate Bench of Tribunal discussed the issue in detail wherein we find the facts and circumstances arose in A.Y. 2011-12 and in the year under consideration i.e. 2012-13 are identical. Respondent-Revenue did not bring on record any view contrary to the view taken by the Coordinate Bench of Tribunal in assessee's own case for A.Y. 2011-12 and in view of the same, we find the order of CIT(A) is not justified. The finding of Co-ordinate Bench of Tribunal rendered in A.Y. 2011-12 vide its order dated 27-01-2017 [ 2017 (1) TMI 1758 - ITAT PUNE] in assessee's own case is applicable to the facts and circumstances for A.Y. 2012-13. Thus, the addition made by the AO and confirmed by the CIT(A) is deleted and the grounds raised by the assessee are allowed. 2021 (8) TMI 901 Addition of short term capital gain - LIFO v/s FIFO method - Addition in respect of L T shares by following the LIFO method for calculating the short term capital gain - HELD THAT:- ICICI Bank securities statement had a mistake wherein the sale of shares were shown out of bonus shares considering the cost at nil. The assessee also produced correct statement before CIT(A). CIT(A) failed to consider the same and confirmed the order of AO. Similarly, there are several other mistakes which were pointed out by the Ld. Counsel of the assessee before us. Under these circumstances, we are of the opinion that the capital gain of the assessee should be computed on the basis of method followed by the assessee consistently which is stated to be FIFO method. We note this was the contention of the assesse before the first appellate authority. The capital gain is required to be computed on the basis of FIFO method and not on LIFO method as has been done by the AO. In other words, the capital gain on sale of shares by the assessee is to be computed by taking the cost of shares on LIFO basis meaning thereby that bonus shares issued on 17.07.2013 are not to be taken following the FIFO method. It is for this reason, we are not in agreement with the conclusion drawn by the CIT(A) and accordingly we restore the matter back to the file of the AO with the direction to compute the short term capital gain on FIFO method after allowing reasonable opportunity of hearing given to the assessee. Appeal of the assessee is allowed for statistical purposes 2021 (8) TMI 898 Assessment u/s 153A - Deemed dividend addition u/s 2(22)(e) - whether the statement recorded during search u/s 132(4) of the Act or extracts of books of accounts maintained by the assessee constitute incriminating materials found during search or not? - HELD THAT:- As decided in assessee;s own case [ 2021 (8) TMI 894 - ITAT MUMBAI] such materials/evidences can not be said to be found during the course of search. We further find merits in the contentions of the assessee that materials has to be found during search and it has to be incriminating. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. In our considered opinion, the findings of the ld CIT(A) that statement recorded during search constitutes incriminating material is also not correct as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search - we are of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year - Decided in favour of assessee. 2021 (8) TMI 897 Assessment u/s 153A - Addition u/s 68 - unsecured loan treated as unexplained cash credit - HELD THAT:- Indisputably the assessment in the instant year has not abated on the date of search. Keeping in view the said facts and circumstances, we are of the considered view that addition to the income of the assessee can only be made on the basis of incriminating record found during the course of search. In the present case, there is no such incriminating material and therefore, the AO has no jurisdiction to make addition in the unabated assessment. Addition u/s 68 - Assessee has discharged its burden by furnishing documents to establish the identity, creditworthiness of the lender, genuineness of the transaction and source of funds of the lender etc. It is a well settled proposition that with regard to burden of proof viz., the claim for deduction and/or exemption is upon an assessee - in matters of addition and disallowance, the same is on Revenue. Subsequently, once the assessee has submitted evidences, the burden on the assessee stood discharged and the onus to disprove lies and shifts to the revenue or on the other side by way of onus of proof. Therefore, in absence of any evidence, addition made merely on the basis of presumption and assumption cannot be sustained. The case of the assessee finds support from the decision in the case of Umacharan Shaw Bros. [ 1959 (5) TMI 11 - SUPREME COURT] wherein it was held that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. We also find merits in the without prejudice contention of the ld AR that under Section 68 assessee has no onus to explain the source of source as the 1st Proviso to section 68 of the Act was introduced via the Finance Act, 2012, w.e.f. 1st April 1, 2013. The provisions are applicable where the sum so credited consists of share application money, share capital, share premium. The impugned addition is made on account of not proving source of source of the alleged bogus loan entries. Therefore, the provision doesn t apply in the case of the assessee. Hence, the assessee only has to prove the source of the funds and not the source of source . - Decided in favour of assessee. 2021 (8) TMI 896 TP Adjustment made on account of notional interest on loan given to wholly owned subsidiary by the assessee company - As argued only LIBOR rate should be taken for the purpose of adding notional interest income on account of interest free loan given to foreign subsidiary - HELD THAT:- As relying on own case [ 2021 (2) TMI 1018 - ITAT MUMBAI] we direct the ld. TPO to consider only LIBOR rate @1.52% as arm s length price for benchmarking the interest free loan given by the assessee to its AE and recompute the transfer pricing adjustment accordingly. Accordingly, the ground No.1 raised by the assessee is partly allowed. Transfer pricing adjustment made on account of fee for corporate guarantee - HELD THAT:- As decided in own case [ 2021 (2) TMI 1018 - ITAT MUMBAI] we do not find any merit in the submissions of the assessee that provision of corporate guarantee is not an international transaction. As regard the arm's length rate of fee/commission, the learned Counsel for the assessee relying decision of the Asian Paints India Ltd. (supra) has submitted that it should be reduced to 0.2% - on careful perusal of the decision rendered in case of Asian Paints (supra), we find that in the facts of the said case the assessee itself had charged commission @ 0.2% over the years and the Tribunal has accepted the claim of the assessee which was not contested by the Revenue. Taking note of these facts the Hon'ble Jurisdictional High Court has dismissed the appeal of the Revenue. These are not the facts in case of the present assessee. Therefore, we are not inclined to interfere with the decision of learned Commissioner (Appeals) on this issue. Disallowance made on account of alleged non-genuine purchases - HELD THAT:- All the documents furnished by the assessee are only self-serving documents which are available in the books of accounts of the assessee company and which are not corroborated by third party confirmation. Even the assessee had failed to produce parties for examination as directed by the ld. AO. In these circumstances, it would be just and fair to conclude that the purchases made from the aforesaid suppliers remain unverifiable - corresponding sales made out of disputed purchases had not been doubted by the Revenue, it would be safe to conclude that assessee could have made purchases from grey market in order to have some savings in indirect taxes and the incidental profit element thereon for making purchases in cash. Based on the report of the task group for diamond sector published by the Government of India, Ministry of Commerce and Industry in this regard, wherein the benign / presumptive taxation threshold was set at 2.5%, we hold that profit percentage embedded in the value of disputed purchases estimated at 2.5% thereon would meet the ends of justice. The ld. AO is directed accordingly. Disallowance u/s.14A of the Act r.w.Rule 8D(2)(iii) - Assessee made suomoto disallowance of administrative expenses - HELD THAT:- We find that assessee had only made an adhoc disallowance of ₹ 1 lakh in the instant case u/s.14A of the Act and had also not provided the basis of arriving at such disallowance before the lower authorities. Hence, there is no need to record any satisfaction by the ld. AO to disapprove the said adhoc disallowance. The ld. AO had proceeded to make the disallowance based on computation mechanism provided under Rule 8D (2)(iii) of the Rules, which action cannot be faulted with. The only dispute before us is with regard to disallowance made under Rule 8D(2)(iii) of the Rules. Hon ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] had held that only those investments which had yielded exempt income to the assessee during the year alone should be considered for the purpose of making the disallowance under Rule 8D(2)(iii) of the Rules. Respectfully following the same, we hereby direct the ld. AO to consider only the investments of ₹ 40,01,64,994/- and apply 0.5% thereon for the purpose of working out the disallowance under Rule 8D(2)(iii) of the Rules which would work out to ₹ 20,00,825/-. AO is directed to disallow a sum of ₹ 19,00,825/- (20,00,825- 1,00,000) in the instant case u/s.14A of the Act read with Rule 8D(2)(iii) of the Rules. Accordingly, the ground No.4 raised by the assessee is partly allowed. 2021 (8) TMI 895 Maintainability of appeal - Monetary limit - Low tax effect - DR submitted that the appeal is protected under the exception provided in paragraph 10(e) of Circular No. 3/2018 dated 11.07.2018 as amended by the Central Board of Direct Taxes vide letter dated 20.08.2018 - HELD THAT:- We have not found any reference to information received from any of the external sources as mentioned in paragraph 10(e) of circular dated 20.08.2018. Even, in course of hearing, learned Departmental Representative was unable to demonstrate that any information from external sources as per paragraph 10(e) of circular noted above was received by the AO. It is to be concluded that the only information available with the AO was the information received from DGIT (Inv.). In case of ITO vs. Late Amarchand P. Shah [ 2019 (8) TMI 1402 - ITAT MUMBAI] the Tribunal has held that DGIT (Inv.) since works under the CBDT, could not be called an external source. The aforesaid decision has been followed in a number of decisions of the Tribunal as cited by the learned Authorized Representative. As per the ratio laid down in the decisions referred to above, information received from DGIT (Inv.) is not of the nature as referred to in paragraph 10(e) of CBDT Circular dated 20.08.2018. That being the case, the present appeal of the department will not be protected under the exception provided therein. Since, aforesaid decisions are by various Division Benches of the Tribunal, they are binding precedents. Accordingly, respectfully following the aforesaid decisions cited by the learned Authorised Representative, we hold that the instant appeal of the revenue is not protected by paragraph 10(e) of CBDT circular dated 20.08.2018. Hence, would not be maintainable in view of the CBDT circular No. 17/2019 dated 08.08.2019. Accordingly,dismiss the appeal. 2021 (8) TMI 894 Assessment u/s 153A - addition based on statement recorded u/s 132(4) - whether the statement recorded during search u/s 132(4) of the Act or extracts of books of accounts maintained by the assessee constitute incriminating materials found during search or not? - HELD THAT:-materials/evidences can not be said to be found during the course of search. We further find merits in the contentions of the assessee that materials has to be found during search and it has to be incriminating. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. In our considered opinion, the findings of the ld CIT(A) that statement recorded during search constitutes incriminating material is also not correct as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search. Therefore after perusing the material on record and considering rival contentions and also the decisions cited before us, we are of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year. The case of the assessee is supported by the decision of the co-ordinate bench of the Tribunal in the case of DCIT vs. Shivali Mahajan others [ 2019 (3) TMI 1196 - ITAT DELHI] On the issue of statement recorded u/s 132(4) of the Act being incriminating material, we are not in agreement with the conclusion drawn by the Ld. CIT(A). In our considered view the statement recorded under section 132(4) of the Act can not be considered as incriminating material found in the course of search. Besides it is a settled legal position that in an assessment framed under section 153A of the Act which is unabated on the date of search, no addition can be made without incriminating seized materials. Deemed dividend addition u/s 2(22)(e) - In the case of Akruti City Ltd. vs. DCIT [ 2010 (8) TMI 1081 - ITAT MUMBAI] The identical issue was decided in favour of the assessee by holding that financial transactions out of business expediency between two sister concerns can not be called as loans or advances for the purpose of invoking section 2(22)(e) of the Act. The same view as held by the Hon ble High Court of Punjab Haryana in the case of CIT vs. Suraj Dev Dada [ 2014 (5) TMI 625 - PUNJAB HARYANA HIGH COURT] wherein it has been held that it will be a travesty of law to apply the provision of section 2(22)(e) of the Act where the assessee had running account with the company with whom the assessee advanced money to the company as and when required for the purpose of business and also in real sense the assessee has not derived any benefit from the funds of the company. The issue is also clarified by CBDT in its circular No.19/2017 dated 12.06.2017 wherein it has been clarified that trade advances in the nature of commercial transactions would not fall within the ambit of words loans/advances within the meaning of section 2(22)(e) of the Act. Considering the facts and circumstances of the case in the light of various decisions as discussed above, we are of the considered view that the money advanced is used for the purpose of business of the former and therefore can not a loan/deposit to be treated as deemed dividend. Accordingly, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. Thus we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee. Customs 2021 (8) TMI 919 Classification of imported goods - API Supari (Boiled Supari) - Chikni Supari - Flavoured Supari - Unflavoured Supari - processed betel nut products do not contain specified ingredients namely lime, katha and tobacco but containing other flavouring materials/additives such as food starch, spices, mulethi, flavours, essence (food grade) etc. - classifiable under the Customs Tariff Heading 2106 90 30 of the First Schedule to the Customs Tariff Act, 1975 or otherwise? - value on the invoice/contract raised by overseas third party supplier on the applicant - transaction value or not - section 14 of the Customs Act, 1962 read with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. HELD THAT:- Advance ruling has been sought on classification of four different goods, each known as supari in common trade parlance, albeit with differentiator, viz. API, Chikni, unflavoured and flavoured. The basic raw material for each of the four goods is raw betel nut, which is indisputably classifiable under Chapter 8, more specifically sub-heading 080280. It is also noted that Chapter 8 covers only edible nuts; inedible nuts and fruits being excluded by virtue of Chapter Note 1; and that betel nut/supari are masticatory. However, these items have been subjected to certain processes and added with certain materials, resulting in the question being posed whether the said processes and mixing/addition of certain materials are substantive enough to lead to the said four goods be considered as preparation of betel nut that would make them classifiable under Chapter 21 by virtue of Supplementary note 2 of Chapter 21. The three goods, namely API supari, Chikni supari and unflavoured supari together - HELD THAT:- In these cases, one set of processes are found to be intended for cleaning; the second set for enhancing preservation; and third set for enhancing appearance or presentation, which are clearly covered by the Chapter Note 3 to Chapter 8. Cutting into pieces, boiling of raw betel and addition of starch would be included under such processes - the processes to which raw betel nuts have been subjected to obtain API supari, Chikni supari and unflavoured supari are in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Note. Therefore, at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as preparations of betel nut , classifiable under Chapter 21, which is considered to be sine qua non for a good to be classified in the latter Chapter. Flavoured supari - HELD THAT:- The judgment of the Hon'ble Supreme Court of India in the case of was CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. C. EX., TIRUPATHI [ 2007 (3) TMI 6 - SUPREME COURT] and of the CESTAT, Chennai in the case of AZAM LAMINATORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY (VICE-VERSA) [ 2019 (3) TMI 782 - CESTAT CHENNAI] [where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and marketed in small pouches as Nizam Pakku (in Tamil)/Betel Nut (in English), the Hon'ble CESTAT held the resultant product classifiable under sub-heading 08029019 of Central Excise Tariff and not under 21069030 as supari for period after 07.07.2009] are relevant. Put simply, these decisions clearly imply that addition of flavouring agents do not change the character of the good, meaning in the present case betel nut would continue to remain betel nut and not become preparations of betel nut. All the four goods, i.e., API supari, chikni supari, unflavoured supari, flavoured supari merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the heading 0802 80 90, and not under sub-heading 21069030, since the processes the raw betel nuts have been subjected to and addition of starch (and flavouring agents in the case of flavoured supari) are squarely covered by the scope of the Chapter Note 3 to Chapter 8. These processes are not substantive enough to render the goods with character of preparations of betel nut , sine qua non for being eligible for classification under sub-heading 2106 90 30. Having held that the four goods in question merit classification under heading 0802 80 90, it is held that in respect of the said goods, duty is chargeable with reference to tariff value, as prescribed by notification by the government. 2021 (8) TMI 917 Seeking direction to the respondent to permit the inspection of the goods seized from the premises of the appellant - provisional release of goods - Section 124 of the Customs Act, 1962 - Rule 41 of the 1982 Procedure Rules - HELD THAT:- Under rule 41, the Tribunal can make such orders or give such directions as may be necessary or expedient to secure the ends of justice. The appellant is seeking inspection of his own goods that were seized on 19.10.2012 for the reason that the condition of the goods seized nine years ago would be an important factor for deciding whether the appellant would like to pursue the remedy for provisional release of the seized goods. The appellant had also deposited an amount of ₹ 27,50,669/- on 28.11.2013 to take the benefit of the provisions of Section 28 (5) of the Customs Act - Section 110 of the Customs Act deals with seizure of goods, documents and things. Sub-section (1) of the section 110 provides that if the proper officer has reason to believe that any goods are liable to confiscation under the Act, he may seize such goods. In the present case the goods have only been seized under sub-section(1) of section 110 and have not been confiscated under section 111 of the Customs Act. The ownership of the goods, therefore, continues to be with the person from whom the goods have been seized, namely the appellant. Rule 41 of the 1982 Procedure Rule provides that the Tribunal may make such orders or give such directions as may be necessary or expedient to secure the ends of justice. In the facts and circumstances of the case, it is considered necessary and expedient to issue a direction to the respondent Commissioner of Customs (Preventive) to permit the applicant/appellant to inspect the goods seized on 29.10.2012 - the appellant shall appear before the Additional Director in the Office of the Directorate of Revenue Intelligence, New Delhi on August 31, 2021 at 11 am on which date the Additional Director may either permit the applicant to inspect the seized goods or may fix another date within the next one week for inspection of the seized goods. Application disposed off. 2021 (8) TMI 906 Mis-declaration of the goods - Bill of Entry filed by the CB on behalf of the importer in terms of nature of goods, quantity and value, etc. - goods even before the goods have been cleared for home consumption - goods which were seized from the shop of the importer, i.e., those goods which had been imported in the past - Competence of DRI to issue the SCN - confiscation - penalty - Violation of principles of natural justice. Was there a mis-declaration of the goods in the Bill of Entry filed by the CB on behalf of the importer in terms of nature of goods, quantity and value, etc. ? - HELD THAT:- The importer cannot escape his responsibility of making a true and accurate and complete declaration of the imported goods in the Bill of Entry. If the importer has any doubts about the goods, there are sufficient safeguards which enable him to examine the goods before filing the Bill of Entry, request for the goods to be deposited in the warehouse or even relinquish his title to the goods and thereby escape his liability to pay Customs duties. Merely saying that I have a purchase order which says X but my supplier sent me Y cannot be an excuse as the only person in India who has knowledge about the imported consignment is the importer. If he has doubts, there are sufficient safeguards in the Act itself. Can the importer s argument that they had placed an order for some other goods and the overseas supplier had sent the wrong goods and therefore, they have no liability, be accepted? - Is the imposition of penalty under section 112 (a) upon the CB valid? - HELD THAT:- The importer s assertion that the overseas supplier has sent different goods cannot be accepted. On the other hand, as far as the CB is concerned, he filed the Bill of Entry as per the documents provided by the importer. There is nothing on record to show that any act or omission on his part has rendered the goods liable for confiscation under section 111. In fact, the only allegation in the SCN is that he failed to discharge his obligations under the CBLR 2013 and such a failure, even if correct, does not attract penalty under section 112. CBLR 2013 is a self contained set of regulations which provides for penalties for not fulfilling the obligations. Whether any demand can be made under section 28(4) even before the proper officer has made an order clearing the goods for home consumption? - HELD THAT:- In the present case, the goods were not yet cleared. The importer (or his CB) filed a Bill of Entry self assessing the duty which has been found to be erroneous. The duty has to be reassessed and a speaking order has to be passed by the proper officer. If the officer of DRI is also the proper officer [under Section 28(11) or otherwise] and has done the reassessment, he must pass a speaking order. Any SCN under Section 28 can only arise after the goods have been cleared for Home Consumption and not before. This is because a demand under section 28 is in the nature of review of the assessment already done under section 17 by the proper officer. Without the assessment under section 17 being completed, there cannot be review under section 28 and the relevant date under section 28 for reckoning the time limit has not yet arisen. For this reason, the demand under section 28 in respect of the goods which have not yet been cleared for home consumption cannot be sustained. Whether a demand under section 28 can be raised in respect of goods seized from the shop of the importer? - HELD THAT:- The Show cause notice was issued by an officer of Director of Revenue Intelligence and not by the assessing officer under section 17 who had the assessment of the Bill of Entry in respect of the goods seized from the shop fo the importer - even if section 28(11) is considered, the SCN demanding duty under section 28 issued by the officer of DRI is invalid, because there is nothing on record to show that the officer of DRI or his predecessor in office had done the assessment of the Bill of Entry in respect of the goods which were seized from the shop of the importer. Penalty u/s 112(a) of Customs Act - non-fulfilment of obligations under the CBLR 2013 - HELD THAT:- No penalty can be imposed under section 112 for failure to fulfil obligations even if they are found to be true. Therefore, the penalty needs to be set aside. Confiscation of goods - HELD THAT:- There is nothing in the impugned order or the order of the original authority to show that the procedure prescribed under section 138B has been followed with respect to the statements relied upon. It is found necessary to remand it to the original authority to complete the procedure under section 138B with respect to each of the statements which has been relied upon in the SCN and decide afresh on the confiscations and penalties. Petition disposed off. 2021 (8) TMI 899 Permission to carry out the amendment in the shipping bills - rule 41 of the CESTAT (Procedural), Rules 1992 - HELD THAT:- In spite of the fact that an application was filed by the appellant and an order was passed by the Tribunal on March 22, 2021, no further instructions have been given by the Department to the learned Authorized Representative after April 15, 2021 - It goes without saying that mere filing of an appeal and that too a defective appeal would not mean that the Department has not to comply with the direction issued by the Tribunal. About eighteen months have passed since the order was passed by the Tribunal on February 24, 2020 but till date it has not been implemented - learned counsel for the appellant has placed Circulars issued by the Board that the order of the High Court/ Tribunal should be implemented, unless a stay has been obtained from the Higher Judicial forum on the implementation of the order, however, before exercising our powers under rule 41 of the 1992 Rules, it is considered appropriate, as a last opportunity, to grant three weeks further time to the Department to either implement the order passed by the Tribunal or pursue the writ petition filed in the High Court. List this application on August 23, 2021. 2021 (8) TMI 893 Seeking instructions whether the goods are available - case of applicant is that there are serious doubts as to whether the goods are at all available with the Department because even though an application was moved for inspection of the goods such inspection has not been permitted till date - HELD THAT:- List on July 15, 2021. Insolvency & Bankruptcy 2021 (8) TMI 910 Non-payment of salary is recurring cause of action - absence of any claim between the parties the Appellant - Time limitation - HELD THAT:- All the Appeals being hit by limitation is concerned that in view of order dated 23.03.2020 passed by Hon ble Supreme Court in Suo Motu Writ Petition (Civil) No(s). 3 of 2020 [ 2020 (5) TMI 418 - SC ORDER ] in re cognizance for extension of limitation has held that it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. Thus, all these Appeals filed by the Appellants are covered by the directions passed by the Hon ble Supreme Court. There is no illegality in the impugned orders. The Ld. Adjudicating Authority have rightly dismissed the Applications under Section 9 of the IBC filed by the Appellants by observing that if for delayed payment applicant(s) claim any interest, it well be open to them to move before a court of competent jurisdiction for recovery of interest, but initiation of Corporate Insolvency Resolution Process is not the answer. There is no merit in these Appeals - Appeal dismissed. Service Tax 2021 (8) TMI 900 CENVAT Credit - input services - Outdoor Catering Services - Rent-a-Cab Services - Rental Charges paid towards their office situated in Mumbai - HELD THAT:- The services on which credit has been denied are Outdoor Catering Service and Rent-a-Cab Service. These services were held to be eligible for credit in the appellant s own case for a different period in COMMISSIONER OF SERVICE TAX, CHENNAI VERSUS M/S. CHENNAI CONTAINER TERMINAL PVT. LTD. [ 2018 (4) TMI 1642 - CESTAT CHENNAI] - credit allowed. Credit on service tax paid on rental charges - HELD THAT:- On perusal of the invoice submitted along with appeal paper book, it is seen that it is raised in the name of the appellant-Company. Though, the department alleges that the premises is used by the Manager/Director of the company, they have not produced evidence to establish this allegation. The period is prior to 01.04.2011 and the definition of input services during such period included the words activities relating to business . For these reasons, the disallowance of the credit on these input services is unjustified. The disallowance of credit for the Outdoor Catering Service, Rent-a-Cab Service and Rental Charges for their Mumbai office cannot sustain - Appeal allowed - decided in favor of appellant. Central Excise 2021 (8) TMI 907 CENVAT Credit - input services - services used for carrying out trading of lube oil in the factory premises at Chennai - Rule 6(3) of CENVAT Credit Rules, 2004 - HELD THAT:- It was noticed by the department that the appellant had availed CENVAT credit on various input services based on the invoices issued by the service provider as well as on the basis of ISD invoices issued by their regional and head office. The department entertained a view that as the appellants were carrying out trading in the factory premises where from the lube oil received from other factories were sold and since trading is deemed as exempt services, the appellants have to reverse the credit availed on the input service used for such trading activity. The appellant has also produced a copy of the reply to the RTI application dated 10.8.2021 wherein department has stated that no appeal has been filed against the order passed by the Commissioner (Appeals). It was held by the Commissioner (Appeals) that no exempt services / trading is rendered by the appellant through their registered depot at the Chennai lube plant which is only a place of removal for various manufacturing units. There are no hesitation to hold that the demand cannot sustain - appeal allowed - decided in favor of appellant. 2021 (8) TMI 902 SSI Exemption - countervailing duty paid - right to use the trademark in India - affixation of MRP on packing of goods - HELD THAT:- Admittedly the goods in the present case are the imported goods and would have been cleared on the payment of countervailing duty, determined on the basis of the declared Retail Selling Price. If the goods at the time of clearance have suffered the countervailing duty on the basis of Retailing Selling Price and as per Section 4A, there cannot be any further demand, if the benefit of CENVAT Credit is allowed to the appellant. Tribunal has in the Appellants own case [ 2017 (5) TMI 619 - CESTAT MUMBAI ], held in favour of admissibility of the CENVAT Credit to the appellant, in case they are asked to pay duty by denying the SSI exemption. Extended period of limitation - penalty - HELD THAT:- Tribunal has held against invoking of the extended period for making the demand and penalties imposed in the earlier order, there are no reason to differ with that part of the order. Hence the penalties imposed are set aside and we hold that extended period cannot be invoked in this case, where the issue is purely an interpretational. The matter remanded back to original authority to allow the CENVAT Credit as admissible, of the duty paid by the appellants on these goods and other inputs and input services received by them, subject to production of the requisite duty paying documents - appeal allowed by way of remand. Indian Laws 2021 (8) TMI 913 Validity of revision of Assessment Orders - Levy of Entry Tax - Section 8/9 of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 - violation of principles of natural justice - HELD THAT:- In the impugned orders, the respondent have recorded the fact that the State has filed a Special Leave Petition before the Hon'ble Apex Court. Hence, the judgment of this Hon'ble High Court rendered in the cited cases, the proposal for levy of entry tax is kept pending till the outcome of the Special Leave Petition. However, the said Special Leave Petitions were converted as Civil Appeals and the Hon'ble Apex Court dismissed all the Civil Appeals on 30.03.2017 and Review filed was also dismissed in the case of ASSISTANT COMMISSIONER (CT) CHENNAI ANR. VERSUS THE KHIVARAJ MOTORS LTD. [ 2018 (9) TMI 2043 - SC ORDER] . The matters are to be remanded back to the respondent for reconsideration in the light of the orders passed by the Hon'ble Apex Court and by providing an opportunity to the Writ Petitioner to defend their cases - petition allowed by way of remand.
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