Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 3, 2020
Case Laws in this Newsletter:
GST
Income Tax
Service Tax
Central Excise
TMI SMS
Articles
News
Notifications
Customs
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66/2020 - dated
31-7-2020
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Cus (NT)
Sea Cargo Manifest and Transhipment (Second Amendment) Regulations, 2020.
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65/2020 - dated
31-7-2020
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Cus (NT)
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver
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64/2020 - dated
31-7-2020
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Cus (NT)
Transhipment of Cargo to Nepal under Electronic Cargo Tracking System (Amendment) Regulations, 2020.
GST - States
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F.12 (46) FD/Tax/2017 Pt-III-205 - dated
6-7-2020
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Rajasthan SGST
Amendment in Notification No. F.12(46)FD/Tax/2017-Pt.III-184, dated the 11th June, 2020
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F.12 (46) FD/Tax/2017 Pt-III-204 - dated
6-7-2020
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Rajasthan SGST
Amendment in Notification No. F.12 (46) FD/ Tax/ 2017-Pt.V-177, dated the 18th May, 2020
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F. 12(25)FD/Tax/2020- 187 - dated
24-6-2020
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Rajasthan SGST
Notification regarding exemption from tax payable on goods under RTEGLA Act, 1999, if tax under RGST Act, 2017 has been paid
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F.12(46)FD/Tax/2017 pt. V-174 - dated
8-5-2020
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Rajasthan SGST
Rajasthan Goods and Services Tax (Fifth Amendment) Rules, 2020
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624-F.T. - dated
21-7-2020
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West Bengal SGST
Seeks to extend due date for furnishing FORM GSTR-4 for the Financial Year 2019-2020 till 31.08.2020 by amending notification No. 680-F.T. dated 23.04.2019.
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623-F.T. - dated
21-7-2020
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West Bengal SGST
West Bengal Goods and Services Tax (Eighth Amendment) Rules, 2020.
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622-F.T. - dated
21-7-2020
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West Bengal SGST
Seeks to amend notification no. 1895-F.T. dated 31.12.2018 in order to provide conditional waiver of late fees for delayed filing of GSTR-3B for the period from July, 2017 to July, 2020.
Highlights / Catch Notes
GST
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Place of supply - intermediary services - Export of Services - Only because, the invoices are raised on the person outside India with regard to the commission and foreign exchange is received in India, it would not qualify to be export of services, more particularly when the legislature has thought it fit to consider the place of supply of services as place of person who provides such service in India - Constitutional validity of Section 13(8)(b) of IGST upheld - HC
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GST fraud - creation of several dummy and non-existent entities to avail bogus Input Tax Credit (ITC) - Bail Application - The Government officials have also been making all efforts to ensure efficient collection of tax, so that the burden on the genuine tax payers can be reduced. All these efforts cannot be permitted to be sabotaged by such criminals who prey on the public exchequer. - HC
Income Tax
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Effect of amendment to section 40(a)(ia) - Failure to deduct / deposit TDS - Amendment made is effective from 1.4.2005 means it is effective from AY 2005-06 (i.e. FY 2004-05) - Further, the appellant had not been a bonafide assessee who had made the deduction and deposited it subsequently. Obviously, the appellant could not have derived the benefits that were otherwise available by the curative amendments of 2008 and 2010. Having defaulted at every stage, the attempt on the part of assessee-appellant to seek some succor in the amendment of Section 40(a)(ia) of the Act by the Finance (No.2) Act, 2014 could only be rejected as entirely baseless, rather preposterous.- SC
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Disallowance u/s 40(a)(ia) - Failure to deduct TDS - whether the scope is limited “payable” and not to the amount “already paid” - the expression "payable" is descriptive of the payments which attract the liability for deducting tax at source and it has not been used in the provision in question to specify any particular class of default on the basis as to whether payment has been made or not. The semantical suggestion by the learned counsel for the appellant, that this expression “payable” be read in contradistinction to the expression “paid”, sans merit and could only be rejected. - SC
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TDS u/s 194C - GTA - once a particular truck was engaged by the appellant on hire charges for carrying out the part of work undertaken by it (i.e., transportation of the goods of the company), the operator/owner of that truck became the sub-contractor and all the requirements of Section 194C came into operation. - SC
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Just to take a contrary view in favour of the Revenue, the authorities unneccesarily create a forum for litigation for the assessee by taking different and divergent views, despite there being binding precedents from the jurisdictional high Court. This tendency of the revenue authorities not to follow the judgments of superior Constitutional Courts deserves to be strongly deprecated by imposition of suitable costs on them - HC
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Reassessment against company not in existence - assessment of income in the year of discontinuance or even after discontinuance - Tribunal committed an error in not specifying as to what would be the relevant time in the case on hand. Our answer would be, the relevant time would be when the Company was in existence during the assessment year 2000-01, that alone would be the relevant time and the relevant year for the assessee's case. - HC
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Computing deduction u/s 10AA - exclusion from export turnover - The issue in the instant case is whether at all expenses were incurred for rendering any of the services outside India. On facts, it has been established that no such services have been rendered. Therefore, we are of the considered view that the Tribunal fell in error in reversing the decision of the DRP. - HC
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Disallowance of deduction claimed u/s 80-IA(4) - At the threshold, there is no ambiguity to the fact that all the development projects carried out by the assessee are the infrastructure projects/facilities as provided under the statute in explanation attached to section 80 IA (4) of the Act. - AT
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Deduction u/s 80IA(4) - work contractor in the projects of housing development - It may be concluded that even after the amendment by the Finance Act, 2007 and the Finance Act, 2009, the contractors performing the work in the nature of a developer-cum-contractor and assuming risks and responsibilities shall be eligible for deduction u/s 80-IA in respect of the eligible infrastructural facilities - AT
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Exemption u/s 11 - grant of registration under section 12AA - The word Schedule Cast, backward classes, Schedule Tribe and women and children means if the Trust is established for the benefit of the women and children then it is eligible to get such grant of relief under section 12AA of the Act. - AT
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Disallowance of bad debt/forfeiture of advance - If there is direct and proximate nexus between the business operation and the loss, or it is incidental to it, then the loss is deductible since without the business operation and doing all that is incidental to it, no profit can be earned - the same is business loss and not bad debts - Additions deleted - AT
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Applicability of section 167B - taxing at maximum marginal rate - assessment of AOP - Unambiguous provisions of 167B(2), if income of any member (other than the share of such Association) is higher than the basic exemption limit of the relevant year, the income of the Association is chargeable at the maximum marginal rate. - AT
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Rejection of books of account u/s 145(3) - non maintenance of stock register was not sufficient for exercising the power of rejecting the books of the assessee. - It is not unusual for businesses dealing in large number of small items and operating at a small or medium scale to do away with the maintenance of any stock register since it is not feasible maintaining movement of stock of every such item. Such businesses usually verify physically their stock at the end of the year - AT
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Levy of penalty u/s 271(1)(b) - It is a settled position that assessment and penalty proceedings are two separate and distinct proceedings and though reference can be drawn to the findings in the assessment order, the AO has to record independent findings as to why penalty may be levied in the given case - AT
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Undisclosed investment - Assessee has given advance for the property which was taken over by assessee’s sister concern and shown by assessee in its balance sheet and squared up in later year so no addition under section 69B of the Act is sustainable - method of accounting cannot determine the true character of a transaction - AT
Case Laws:
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GST
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2020 (8) TMI 24
Bail Application - GST fraud - creation of several dummy and non-existent entities to avail bogus Input Tax Credit (ITC) - offences punishable under Section 132(1)(b)(c) and (l) of OGST Act, 2017 - period February, 2018 to October, 2019 - HELD THAT:- There is no hard and fast rule regarding grant or refusal to grant bail. Each case has to be considered on the touchstone of its own generic facts and individual merits. However, the discretion of the court has to be exercised judiciously sans any element of arbitrariness. Even if the bail is the rule and jail is the exception - the basic bail jurisprudence remains unaltered, but in the instant case, the alleged GST fraud committed by the petitioner is having humongous ramification on the revenue collection by the State. At this backdrop, the possibility of the accused tampering the evidence and/or influencing/intimidating the witnesses also cannot be ruled out - Moreover, the courts cannot lose sight of the adverse impact such activities would have in the economy. It appears that a large number of cases have now emerged in different parts of the country, where such persons, with vested interests, have created a host of unscrupulous and bogus entities. These fake entities are then used for the purpose of indulging in issuances of false and fabricated invoices, without actual movement or supply of goods and services and without payment of any GST to the public exchequer, but for the purpose of claiming ITC, by defrauding the Revenue. This Court is well aware of the complications thrown in by the new GST regime and the problems posed in its implementation. It seems a countrywide cartel specializing in defrauding the GST system is operating to bring the economy to its knees. These complications created by the unscrupulous fraudsters, one would fear, could lead to arrest of innocent businessmen and traders. However, a reading of the GST code would make it abundantly clear that it is rooted with several checks and balances to ensure that the initiation of prosecution or an arrest is to be made only after following due and elaborate process - One cannot lose sight of the fact that the Governments are making their best efforts to enhance the ease of doing business, to reduce the burden on the tax payers, to make the procedures simpler with the use of new technologies. The Government officials have also been making all efforts to ensure efficient collection of tax, so that the burden on the genuine tax payers can be reduced. All these efforts cannot be permitted to be sabotaged by such criminals who prey on the public exchequer. The text book notion of tax collection needs to be overhauled by conjuring with the emerging technologies so as to get rid of practical hiccups. This Court is not inclined to release the accused Petitioner on bail at this stage - Bail application dismissed.
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2020 (8) TMI 11
Place of supply - intermediary services - Export of Services - Constitutional validity of Section 13(8)(b) of the Integrated Goods Service Tax Act, 2017 - refund of IGST paid on services provided by the members of the petitioner association and to their clients located outside India - place of provision of services - location of the supplier or location of the recipient? - inter-state supply - Section 13(8)(b) of the IGST Act, 2017 - Circular No.90/09/2019GST dated 18th January 2019. Whether the provisions of Section 13(8)(b) r.w.s. 2(13) and 8(1) of the IGST Act,2017 are ultra vires and unconstitutional or not? HELD THAT:- The introduction of Goods and Service Tax in India in the year 2017 is with an object of providing one tax for one nation so as to harmonize the indirect tax structure in the country. For the said purpose, the Constitution is amended by the Constitution (One Hundred First Amendment) Act, 2016 to bring on to introduce Article 246A which provides for special provision with respect to Goods and Service Tax. Article 246A begins with non-obstante clause stipulating that notwithstanding anything contained in Articles 246 and 254, the parliament subject to Clause-2, Legislature of every State, have power to make laws with respect to Goods and Service Tax imposed by the Union or by such State - The basic underlying change brought in by the GST regime is to shift the base of levy of tax from point of sale to the point of supply of goods or service. In that view of the matter, Section 13(8)(b) of the IGST Act,2017 which is framed by the parliament inconsonance with the Article 246(2) of the Constitution of India is required to be considered. Conjoint reading of Section 2(6) and 2(13), which defines export of service and intermediary service respectively, then the person who is intermediary cannot be considered as exporter of services because he is only a broker who arranges and facilitate the supply of goods or services or both. In such circumstances, the respondent no.3 have issued Circular No.20/2019 where exemption is granted in IGST rates from payment of IGST in respect of services provided by intermediary in case the goods are supplied in India. The basic logic or inception of section 13(8)(b) of the IGST Act,2017 considering the place of supply in case of intermediary to be the location of supply of service is in order to levy CGST and SGST and such intermediary service therefore, would be out of the purview of IGST. There is no distinction between the intermediary services provided by a person in India or outside India. Only because, the invoices are raised on the person outside India with regard to the commission and foreign exchange is received in India, it would not qualify to be export of services, more particularly when the legislature has thought it fit to consider the place of supply of services as place of person who provides such service in India - there is no deeming provision as tried to be canvassed by the petitioner, but there is stipulation by the Act legislated by the parliament to consider the location of the service provider of intermediary to be place of supply. Similar situation was also existing in service tax regime w.e.f. 1st October 2014 and as such same situation is continued in GST regime also. Therefore, this being a consistent stand of the respondents to tax the service provided by intermediary in India, the same cannot be treated as export of services under the IGST Act,2017 and therefore, rightly included in Section 13(8) (b) of the IGST Act to consider the location of supplier of service as place of supply so as to attract CGST and SGST. The contention of the petitioner that it would amount to double taxation is also not tenable in eyes of law because the services provided by the petitioner as intermediary would not be taxable in the hands of the recipient of such service, but on the contrary a commission paid by the recipient of service outside India would be entitled to get deduction of such payment of commission by way of expenses and therefore, it would not be a case of double taxation - the contentions raised on behalf of the petitioner are not tenable in view of the Notification No.20/2019 issued by the Government of India, Ministry of Finance whereby Entry no.12AA is inserted to provide Nil rate of tax granting exemption from payment of IGST for service provided by an intermediary when location of both supplier and recipient of goods is outside the taxable territory i.e. India. Therefore, the respondents have thought it fit to consider granting exemption to the intermediary services viz. service provider when the movement of goods is outside India. It cannot be said that the provision of Section 13(8)(b) r.w. Section 2(13) of the IGST Act,2017 are ultra vires or unconstitutional in any manner - petition disposed off.
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Income Tax
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2020 (8) TMI 23
TDS u/s 194C - Disallowance u/s 40(a)(ia) - non deduction of tds on payment to the truck operators/owners - payments exceeding ₹ 20,000/- in a single transaction or not? - Payments to contractors and sub-contractors - whether the payments in question have rightly been disallowed from deduction in computation of total income of the appellant? - HELD THAT:- AO held that the assessee had entered into a sub-contract with the said three persons within the meaning of Section 194C - Such findings of AO were concurrently upheld up to the High Court and, after interpretation of Section 40(a)(ia), this Court also approved the decision of the High Court while dismissing the appeal with costs. Appellant has made an attempt to distinguish the nature of contract in Palam Gas Service [ 2017 (5) TMI 242 - SUPREME COURT] by suggesting that therein, the assessee s sub-contractors were specific and identified persons with whom the assessee had entered into contract whereas the present appellant was free to hire the service of any truck operator/owner and, in fact, the appellant hired the trucks only on need basis. Such an attempt of differentiation is totally baseless and futile. Whether the appellant had specific and identified trucks on its rolls or had been picking them up on freelance basis, the legal effect on the status of parties had been the same that once a particular truck was engaged by the appellant on hire charges for carrying out the part of work undertaken by it (i.e., transportation of the goods of the company), the operator/owner of that truck became the sub-contractor and all the requirements of Section 194C came into operation. No hesitation in affirming the concurrent findings in regard to the applicability of Section 194C to the present case. Question No.1 is, therefore, answered in the negative; against the assessee-appellant and in favour of the revenue. Interpretation of Section 40(a)(ia) - appellant has strenuously argued that Section 40(a)(ia) of the Act remains limited in its scope and does not apply to the amount already paid - It is ex facie evident that the term payable has been used in Section 40(a)(ia) of the Act only to indicate the type or nature of the payments by the assessees to the payees referred therein. In other words, the expression payable is descriptive of the payments which attract the liability for deducting tax at source and it has not been used in the provision in question to specify any particular class of default on the basis as to whether payment has been made or not. The semantical suggestion by the learned counsel for the appellant, that this expression payable be read in contradistinction to the expression paid , sans merit and could only be rejected. In respectful agreement with the observations in Palam Gas Service that the enunciations in P.M.S. Diesels had been of correct interpretation of the provisions contained in Section 40(a)(ia) of the Act. The decision in Palam Gas Service covers the entire matter and the said decision, in our view, does not require any reconsideration. That being the position, the contention urged on behalf of the appellant that disallowance under Section 40(a)(ia) does not relate to the amount already paid stands rejected. Reference to the definition of the term paid in Section 43(2) of the Act is of no assistance to the appellant. Similarly, the observations in the case of J.K. Synthetics [ 1994 (5) TMI 233 - SUPREME COURT] as regards the difference in connotation of the expressions payable and paid , in the context of liability to pay interest on the tax payable under the Rajasthan Sales Tax Act, 1954, has no co-relation whatsoever to the present case. Further, when it is found that the process of interpretation of Section 40(a)(ia) of the Act in P.M.S. Diesels [ 2015 (5) TMI 617 - PUNJAB HARYANA HIGH COURT] as approved by this Court in Palam Gas Service (supra), had been with due application of the relevant principles, reference to the decision in the case of Institute of Chartered Accountants of India [ 1997 (7) TMI 649 - SUPREME COURT] on the general principles of interpretation, does not advance the case of the appellant in any manner. Question No.2 is also answered in the negative; against the assessee-appellant and in favour of the revenue. Scope of amendment of Section 40(a)(ia) - What this Court has held as regards retrospective operation is that the amendment of the year 2010, being curative in nature, would be applicable from the date of insertion of the provision in question i.e., sub-clause (ia) of Section 40(a) of the Act. This being the position, it is difficult to find any substance in the argument that the principles adopted by this Court in the case of Calcutta Export Company [ 2018 (5) TMI 356 - SUPREME COURT] dealing with curative amendment, relating more to the procedural aspects concerning deposit of the deducted TDS, be applied to the amendment of the substantive provision by the Finance (No.2) Act, 2014. Assessee-appellant was either labouring under the mistaken impression that he was not required to deduct TDS or under the mistaken belief that the methodology of splitting a single payment into parts below ₹ 20,000/- would provide him escape from the rigour of the provisions of the Act providing for disallowance. In either event, the appellant had not been a bonafide assessee who had made the deduction and deposited it subsequently. Obviously, the appellant could not have derived the benefits that were otherwise available by the curative amendments of 2008 and 2010. Having defaulted at every stage, the attempt on the part of assessee-appellant to seek some succor in the amendment of Section 40(a)(ia) of the Act by the Finance (No.2) Act, 2014 could only be rejected as entirely baseless, rather preposterous.Question No.3 is also answered in the negative, i.e., against the assessee-appellant and in favour of the revenue. Whether the payments in question have rightly been disallowed from deduction? - The proviso so amended, obviously, safeguarded the interest of a bonafide assessee who had made the deduction as required and had paid the same to the revenue. The appellant having failed to avail the benefit of such relaxation too, cannot now raise a grievance of alleged hardship. Thirdly, as noticed, the appellant had shown total payments in Truck Freight Account at ₹ 1,37,71,206/- and total receipts from the company at ₹ 1,43,90,632/-. What has been disallowed is that amount of ₹ 57,11,625/- on which the appellant failed to deduct the tax at source and not the entire amount received from the company or paid to the truck operators/owners Question No. 4 is clearly in the affirmative i.e., against the appellant and in favour of the revenue that the payments in question have rightly been disallowed from deduction while computing the total income of the assessee-appellant. - Decided in favour of revenue.
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2020 (8) TMI 22
Rectification application u/s 154 - refund along with interest in accordance with Section 244A - HELD THAT:-Issue notice. Mr.Deepak Anand, Advocate accepts notice on behalf of the respondents. Keeping in view the limited prayer sought in the present writ petition, this Court disposes of the same by directing the respondent No.2 to decide petitioner s aforesaid rectification application within six weeks by way of a reasoned order and to make payment of refund, if any, in accordance with law. All the rights and contentions of the parties are left open.
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2020 (8) TMI 21
Deduction u/s 80IA - Rental income from the I.T. Park - taxable under the head Income From Business OR under the head income from house property - HELD THAT:- The burden of the argument of Revenue, perhaps emanated from only the name of the company, forgetting that the main business activity of the company from its motor business had been diversified into developing a special kinds of property and earning lease rental income as its main business income. By no stretch of imagination, could a software park developed with the special facilities and amenities for software companies, be described or believed to be a property created for earning rental income as income from house property. The Tribunal not only relied upon an earlier decision of Madras High Court in the case of CIT v. Elnet Technologies Ltd. [ 2012 (11) TMI 671 - MADRAS HIGH COURT ] but also having considered all these aspects in great detail, the Division Bench of this Court to which one of us (VKJ) was a member, in M/s. PSTS Heavy Lift and Shift Ltd. [ 2020 (2) TMI 213 - MADRAS HIGH COURT ] had clearly held that where the main business of the company is to earn rental income as its business income, the income would be taxable under the head Income entitling the petitioner Assessee to have the deductions of notional expenses like depreciation and special deductions like Section 80IA etc. Just to take a contrary view in favour of the Revenue, the authorities unneccesarily create a forum for litigation for the assessee by taking different and divergent views, despite there being binding precedents from the jurisdictional high Court. This tendency of the revenue authorities not to follow the judgments of superior Constitutional Courts deserves to be strongly deprecated by imposition of suitable costs on them. - Decided against revenue.
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2020 (8) TMI 20
Reassessment against company not in existence - assessment of income in the year of discontinuance or even after discontinuance - Tribunal remanding back to the file of AO for investigation as to whether the company was in existence at the relevant time by holding that the assessment order passed was nullity - HELD THAT:- In the instant case, the assessee filed their Return of Income for the assessment year 2000-01 which assessment was reopened and the assessee fully participated in the reassessment proceedings and thereafter the Assessment Order has been passed. Therefore the reassessment order would take effect and to be effective for the assessment year 2000-01 and the striking off the name of the assessee Company from the Register of Companies on 25.05.2007, can in no manner impact the said assessment. More the question would be whether the Tribunal committed an error in permitting the assessee to raise such a ground for the first time before the Tribunal, especially when it is a factual issue which the assessee never raised before the Assessing Officer in the reassessment proceedings or before the CIT(Appeals) and sought to raise it before the Tribunal for the first time stating that it goes to the root of the matter. We do not agree with the reasoning of the Tribunal in this regard. If the assessee had failed to raise the factual issue before the AO at the first instance and consciously participated in the proceedings, could not have been permitted to canvass such factual issue for the first time before the Tribunal. Tribunal committed an error in not specifying as to what would be the relevant time in the case on hand. Our answer would be, the relevant time would be when the Company was in existence during the assessment year 2000-01, that alone would be the relevant time and the relevant year for the assessee's case. For the sake of arguments, if we are to accept the stand taken by the Tribunal to be correct, that this issue goes to the root of the matter, the Tribunal erred in not considering the provisions of Section 176 and without deciding the said issue, the question of remanding the matter to the Assessing Officer does not arise and consequently the Tribunal committed an error of law on that aspect. - Decided in favour of revenue
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2020 (8) TMI 19
Computing deduction u/s 10AA - expenditure incurred in foreign currency by the appellant - Whether to be excluded from export turnover for the purpose of computing deduction? - finding of the Tribunal that the expenditure incurred in foreign currency by the appellant needs to be excluded from the export turnover for the purpose of computation of deduction - HELD THAT:- Appeal before the Tribunal was on the direction of the DRP to exclude the foreign exchange expenditure. Unfortunately, the Tribunal did not discuss the matter but proceeded on the basis that foreign currency expenditures cannot be considered as part of 'export turnover' and at the same time, it cannot form part of 'total turnover'. The Tribunal did not decide as to whether it was expenses incurred by the assessee in respect of services rendered by the assessee outside India. Assessee has explained, nevertheless AO did not take into consideration as to whether there were any services outside India and held against the assessee and proceeded to make a draft assessment. Before the DRP, which is a fact finding expert body, the assessee placed all materials and established that the assessee did not render any services outside India and they operate on a cost plus model and the reimbursement constitute a part of the operating cost which was recovered by the assessee from their associated enterprises. This factual matrix had not been examined by the Tribunal. No useful purpose would be served in remanding the matter to the Tribunal for fresh consideration as submitted by the Revenue as an alternate submission. The principal submission of the Revenue is to support the order passed by the Tribunal and seeking for dismissal of this appeal. Even in the grounds of appeal filed by the Revenue before the Tribunal, a cost plus model of functioning by the assessee appears to be have not been disputed but their contention was that the definition of ''export turnover'' in explanation 1 to Section 10 AA does not distinguish or exclude reimbursement or advances. In our considered view, the issue is not as to whether reimbursement or advances, but the issue is whether these were incurred by the assessee in foreign exchange in respect of rendering services outside India. If it is established that no services have been rendered outside India and the assessee has been reimbursed the actual cost only, the question of exclusion from the 'export turnover' does not arise. The issue in the instant case is whether at all expenses were incurred for rendering any of the services outside India. On facts, it has been established that no such services have been rendered. Therefore, we are of the considered view that the Tribunal fell in error in reversing the decision of the DRP. Appeal filed by the assessee is allowed and the order passed by the Tribunal is set aside
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2020 (8) TMI 18
Disallowance of deduction claimed u/s 80-IA(4) - conditions specified under the relevant section have not been complied with - HELD THAT:- In the event where the assessee fails to provide the copies of the agreements, the AO was empowered under the provisions of section 131/133(6) of the Act to call for the requisite information from the authorities which awarded the contract to the assessee. But we find that the AO has not done so despite having all the necessary details of such undertakings /local authorities of the government of Gujarat. Requirement of having the valid agreement with the Government was also there in the provisions of the Act before the amendment in the year 2002 by the Finance Act 2001. Assessee on the basis of these tender documents was claiming deduction in the earlier assessment years which was allowed by the Revenue.AO in the under consideration cannot change his stand. Therefore, the deduction claimed by the assessee under section 80-IA of the Act cannot be denied to the assessee merely on the reasoning that there was no valid agreement furnished by the assessee in the present situations as there were other materials available before the AO. Infrastructure facilities started prior to 1 April 1995 were not eligible for such deduction. Thus the sub clause (c) provides the jurisdiction to the assessee for claiming the deduction only with respect to the projects which started or starts operating on or after 1 April 1995. In holding so we draw support and guidance from the order of Hon ble Mumbai ITAT in case of ACIT vs. Bharat Udyog Ltd [ 2008 (6) TMI 225 - ITAT BOMBAY-F] Interpretation that the deduction shall be allowed only with respect to the infrastructure facility upon the commencement of operation and maintenance, does not hold good, particularly in a situation where the assessee is engaged only in the development of infrastructure facility. Assessee has not filed the form 10CCB separately with respect to each infrastructure project being considered as an undertaking as mandated under rule 18BBB of Income Tax Rules - assessee was under the obligation to treat each project as separate and distinct undertaking for the purpose of claiming the deduction under section 80 IA (4) of the Act. However, we find important to mention/highlight the fact in the present facts and circumstances that what would be the impact on the deduction claimed by the assessee with respect to all the projects where the assessee furnished the reports combinedly and cumulatively. At the threshold, there is no ambiguity to the fact that all the development projects carried out by the assessee are the infrastructure projects/facilities as provided under the statute in explanation attached to section 80 IA (4) of the Act. There cannot be any dispute regarding the deduction claimed by the assessee under section 80-IA (4) of the Act based on combined and cumulative audit report for all the projects/infrastructure facilities in the present facts and circumstances. It is because there cannot be any dispute about the quantification of the amount for the deduction claimed by the assessee in the present facts of the case as all the projects are eligible projects and the assessee has furnished the audited profit loss account and form 10CCB combinedly along with the income details of each project eligible for deduction under section 80-IA. Assessee during the assessment proceedings has also contended that it has maintained separate books of accounts for each infrastructure projects. This contention was not rejected by the authorities below. Thus in the present facts and situation, we are of the view that the assessee should not be penalized merely for non-furnishing the separate report for each project. Whether the assessee is acting as a developer or a work contractor in the projects of road development? - the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the assessee in the tender documents as discussed above has clearly demonstrated the various risks undertaken by it. The assessee was to furnish a security deposit to the Government and indemnify at the same time of any losses/damage caused to any property/life in course of execution of works. Further, the assessee was responsible for the correction of defects arising in the works at its own cost. For that purpose the Government retained the money payable to the assessee as a measure to ensure the quality of the work and to make liable the assessee in the event of the defect, if any. Thus, it cannot be said that the assessee had not undertaken any risk. Thus on perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor simplicitor but a developer and hence Explanation to section 80- IA(13) does not apply to the assessee. It may be concluded that even after the amendment by the Finance Act, 2007 and the Finance Act, 2009, the contractors performing the work in the nature of a developer-cum-contractor and assuming risks and responsibilities shall be eligible for deduction under section 80-IA in respect of the eligible infrastructural facilities. Hence the ground of appeal of the assessee is allowed. Addition of income other than the income of 80-IA projects on the ground that the books of accounts are not reliable - HELD THAT:- In the case on hand undisputedly the books of accounts of the assessee have not been rejected. In such a situation, the onus is on the AO to point out the specific expenses which were not incurred in connection with the business and thereafter he can make the disallowance under the provisions of section 37 of the Act or any other provision of the Act as the case may be. As such there is no provision provided under the Act empowering the AO to make the disallowance on ad hoc basis despite the fact that the assessee consents for such disallowance during the assessment proceedings. In this connection a reference can be made to the CBDT instructions issued vide F. No. 286/98/2013-IT(Inv.II) dated 18th of December 2014 whereby the officers were discouraged to make any addition merely on the basis of the statement. Gross profit and the net profit declared by the assessee in the year under consideration was greater than the earlier years viz a viz the profit declared for non-eligible projects was accepted. Accordingly we are of the view that no addition in the given facts and circumstances is warranted in the hands of the assessee on ad-hoc basis - Decided in favour of assessee.
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2020 (8) TMI 17
Penalty u/s 271(1)(c) - non specification of charge - inaccurate particulars of income by claiming excess long-term capital loss which was otherwise not entitled - HELD THAT:- We find that the order imposing penalty has not specified the guilt committed by the assessee for such penalty - First Appellate Authority, however has not taken into consideration the particular aspect of the matter. it appears from the penalty order that the Learned AO has not levied the penalty on the specific charge as mandated u/s 271 (1)(c) of the Act. In such facts and circumstances the Hon'ble Jurisdictional High Court in the case of Snita Transport Pvt. Ltd. [ 2012 (12) TMI 981 - HIGH COURT OF GUJARAT] has held that penalty cannot be imposed without mentioning the specific charge. Thus as AO has not mentioned the specific charge in its penalty order whether it was levied for concealment of income or for furnishing inaccurate particulars of income by the assessee we find that the penalty levied by the AO and confirmed by the learned CIT (A) is not sustainable - Decided in favour of assessee.
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2020 (8) TMI 16
Disallowance u/s. 14A on account of administrative expenses - HELD THAT:- As relying on M/S. MAZDA LIMITED [ 2020 (4) TMI 251 - ITAT AHMEDABAD] we find it justified in restricting the disallowance of administrative expenses on ad-hoc basis at 1% of the exempt income as per Clause (f) to Explanation-1 of Sec. 115JB of the Act. The order, is, passed accordingly. This ground of appeal is, thus, partly allowed. Addition to the book profit under Section 115JB on account of disallowance of the same amount u/s 14A - HELD THAT:- As relying on JAYSHREE TEA INDUSTRIES LTD. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] AND VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] ad-hoc disallowance at 1% of the exempt income under Clause (f) to Explanation 1 of Section 115JB of the Act would be justiciable. Hence, we limit the disallowance of ad-hoc basis at 1% of the exempt income as per Clause (f) to Explanation 1 of Section 115JB of the Act. This ground of appeal, thus, is partly allowed.
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2020 (8) TMI 15
Deduction u/s 80IA(4) - assessee is acting as a work contractor in the projects of housing development as per explanation attached below section 80-IA (13) - whether the assessee is acting as a developer or the works contractor? - HELD THAT:- Assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. The assessee in the tender documents as discussed above has clearly demonstrated the various risks undertaken by it. The assessee was to furnish a security deposit to the Government and indemnify at the same time of any losses/damage caused to any property/life in course of execution of works. Assessee was responsible for the correction of defects arising in the works at its own cost. For that purpose the Government retained the money payable to the assessee as a measure to ensure the quality of the work and to make liable the assessee in the event of the defect, if any. Thus, it cannot be said that the assessee had not undertaken any risk. Thus on perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor simplicitor but a developer and hence Explanation to section 80- IA(13) does not apply to the assessee. It may be concluded that even after the amendment by the Finance Act, 2007 and the Finance Act, 2009, the contractors performing the work in the nature of a developer-cum-contractor and assuming risks and responsibilities shall be eligible for deduction u/s 80-IA in respect of the eligible infrastructural facilities. Hence the ground of appeal of the assessee is allowed.
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2020 (8) TMI 14
Exemption u/s 11 - grant of registration under section 12AA - Assessee object is restricted to a mere class or a community the object of the Trust are for educational benefit and for providing assistance to Modh Vanik children - HELD THAT:- Income Tax Act, 1961 came into force with effect from 01.04.1962 i.e. after the registration of the Act and hence the trust was already in existence before the Act came into force. Even assuming it can be denied under section 12AA of the Act for the failing to satisfy the conditions not having the object restricted to a particular community, the Explanation 2 of Sec. 13 gives a free hand to the assessee to claim the benefit as sought for. The word Schedule Cast, backward classes, Schedule Tribe and women and children means if the Trust is established for the benefit of the women and children then it is eligible to get such grant of relief under section 12AA of the Act. Thus, we must note that the Ld. Advocate appearing for the AR argued this particular aspect of the matter which we found is having real substance on merit. Taking into consideration the entire aspect of the matter we find there cannot be any doubt relating to the claim of the assessee either on the count of date of registration or the object of the Trust which specifically provides benefit to the children though of a particular community is certainly entitled to get the relief under section 12AA of the Act. Hence, we direct the Ld. CIT to grant the registration under section 12AA of the Act as sought for on the basis of the observation made hereinabove. Appeal filed by the assessee is allowed.
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2020 (8) TMI 13
Disallowance on account of contract cancellation - Non deduction of TDS - HELD THAT:- Contract cancellation charges are in the nature of payment for failure to oblige contractual terms and conditions resulting in settlement of contracts at a price of lower than pre-determined price and thus the appellant had to make payment as per terms of contract. The cancellation of the contract was in respect of supply of goods in which the appellant deals. It is the appellant who knows his business and he knows when to enter into a contract and when to exit. Ld. CIT(A) justified such cancellation of contracts by the appellant which according to him a part and parcel of the regular export business. Disallowance of such contract cancellation payment holding it speculative in nature by the AO has, therefore, been directed to be deleted. Having regard to the entire aspect of the matter we find no ambiguity in the order passed by the Ld. CIT(A) who took into consideration of the order passed by the First Appellate Authority whereby and whereunder disallowance of cancellation charges for non-deduction of TDS in respect of the immediate preceding order was deleted which according to us is just and proper so as to warrant interference. We, thus, find no merit in the ground of appeal preferred by the Revenue and thus the same is hereby deleted. TDS u/s 195 - Disallowance being export commission paid to non-resident agents - Addition u/s. 40(a)(ia) on the ground of non-deduction of TDS - HELD THAT:- When the commission has been paid to foreign parties for rendering services admittedly abroad for soliciting customers for its export business activities, the appellant is not liable for short deduction of tax at source and therefore disallowance made on this score under Section 40(a)(ia) is not permissible. Hence, keeping in mind such judicial precedent we find no infirmity in the order passed by the Ld. CIT(A) in deleting the disallowance made by the Ld. AO under Section 40(a)(ia) of the Act holding that such commission is not fees for technical services under Section 9(1)(vii) of the act and the same being in nature of business income for recipient of income/payee/non-residents is not taxable in India in terms Sec. 9(1)(i) in the absence of business connection in India, so as to warrant interference. See MGM EXPORTS [ 2018 (5) TMI 1240 - GUJARAT HIGH COURT ] - Decided in favour of assessee. Disallowance of foreign exchange fluctuation - HELD THAT:- It is specific observation made by the Ld. CIT(A) that though the assessee is not a dealer in foreign exchange it had entered into forward contracts with banks for the purpose of hedging the loss due to fluctuation of foreign exchange while implementing the export contracts. Such transaction in foreign exchanges were truly identical to the assessee s regular course of business and hence the loss is not a speculative one under Section 43(5) same is incidental to the assessee s business and hence allowable. No infirmity in the order passed by the Ld. CIT(A) in deleting the addition made by the Ld. AO on the premise that hedging of currency is incidental to appellant s business and thus the same is allowable business expenditure, in the present facts and circumstances of the case so as to warrant interference - Decided in favour of the assessee. Disallowance u/s 14A - assessee made investments which are likely to generate exempt income which will not form part of the gross total income - HELD THAT:- In the absence of any material or basis to hold that interest expenditure directly or indirectly was attributable for earning dividend income, the decision of the Ld. CIT-A cannot be said to be incorrect particularly taking into consideration the fact of non-recording of satisfaction as envisaged under sub-section 1 of Sec. 14 of the Act. Hence, we do not find any merit in the issue raised by the Revenue and therefore the same is dismissed. Disallowance of bad debt/forfeiture of advance - HELD THAT:- Loss was incurred in the character of trader and during the ordinary course of business. If there is direct and proximate nexus between the business operation and the loss, or it is incidental to it, then the loss is deductible since without the business operation and doing all that is incidental to it, no profit can be earned - the same is business loss and not bad debts as provided in Sec. 36(1)(vii) and hence the loss is not hit by sub-section 2 of section 36 of the Act. Such forfeiture of advance is a business loss having a direct nexus with the operation of the business and is incidental to the business carried too and hence allowable. We, therefore, delete the addition made by the authorities below. This ground of appeal is, thus, allowed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - exclude the period of lockdown while computing the limitation provided under Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963
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2020 (8) TMI 12
TP Adjustment - benchmarking the transaction of Direct Sales Compensation ( DSC ) - Whether commission of 2 % of sales made by the associated enterprises ( AE') in India charged by the Appellant was consistent with the group pricing policy and practice followed globally by other group entities, and hence, the same is at arm's length? - HELD THAT:- We follow the order of the Co-ordinate Bench for the immediate previous assessment year 2009-10 and direct the AO to adopt rate of commission @ 3.93% in place of 8.61% done by him and pass consequential order after due verification. Needless to say, the AO would give reasonable opportunity of being heard to the appellant before passing the order. Bad debts written off - bad debts written-off were considered as operating expenses for the purposes of computing operating margin of the Centre of Excellence in Engineering ( COEE ) segment of the Appellant which was accepted to be at arm's length by the TPO - HELD THAT:- In the instant case, the amount of bad debts written off by the appellant has been considered as a part of operating expenses for the Engineering Segment , which has been benchmarked by the appellant using TNMM method. This is evident from the documents filed before the TPO. As per the benchmarking exercise undertaken in the transfer pricing study, four comparable companies were identified who have earned an arithmetic mean operating margin of 10.24% vis- -vis operating profit margin earned by the appellant under Engineering Services Segment . TPO has accepted the operating margin of Engineering Services Segment to meet the arm s length test, after considering the impact of bad debts written off. It is found that even if bad debts are considered as non-operating in FY 2009-10, the appellant s Engineering Segment would still meet the arm s length test. Further, we find that the TPO has not applied any method while disallowing the bad debts written off and has done the same on an ad-hoc basis - we delete the adjustment made by the AO towards bad debts written off. Adjustment of royalty payment - TPO held that since Earnings Before Interest and Tax ( EBIT ) of the Project Activity segment is negative, no royalty is required to be paid by the appellant - appellant has filed before the Tribunal certificate from the management stating that the Building Efficiency segment comprises of Project Activity segment as well as Engineering Segment and the appellant has filed additional evidence vide letter dated 03.07.2019 i.e. a certificate from Chartered Accountant supporting the contentions of the appellant that Building Efficiency segment (i.e. aggregate of Project Activity segment and Engineering Segment) had a positive EBIT and accordingly royalty is paid as per the Royalty Agreement - HELD THAT:- Documents filed on 11.12.2017 and 03.07.2019 are quite relevant for the purpose of deciding the issue arising before us. Therefore, we admit the above additional evidence. However, we find that in the instant case, the AO has passed the order u/s 143(3) r.w.s. 144C(13) for AY 2010-11 on 19.12.2014 and for AY 2011-12 on 30.11.2015. Therefore, we deem it fit to remit the matter to the file of the AO/TPO to pass an order after examining the above documents. Short grant of taxes deducted at source - HELD THAT:- We direct the AO to grant the credit for balance TDS amounting to ₹ 4,72,467/- to the appellant, after due verification. Non-grant of credit of advance tax - HELD THAT:- We direct the AO to grant the credit for advance tax paid by the appellant of ₹ 3,47,603/- for the impugned assessment year, after due verification. Set off available brought forward business loss and unabsorbed depreciation against the total income computed for the impugned assessment year, after due verification and as per the provisions of the Act.
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2020 (8) TMI 10
TP Adjustment - comparable selection - functional similarity - HELD THAT:- Assessee is engaged in providing IT services and solution that helps clients plan, build, support and manage their IT infrastructures, thus companies functionally dissimilar with that of assessee need to be deselected. Extraordinary event such as merger/amalgamation would have an impact/effect on the profitability. Since Accentia Technologies Ltd., Cosmic Global Ltd., Mold Tek Technologies Ltd., Acropetal Technologies Ltd. and M/s Datamatics Financial Services P. Ltd. are excluded by us, we direct the AO to compute the arithmetic mean margin of the remaining comparables and pass consequential order. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- In the instant case the AO has failed to record even elementary satisfaction that having record to the contentions of the appellant, suo motu disallowance of ₹ 6,00,000/- u/s 14A was not correct. Therefore, following the above decision of Maxopp Investment Ltd .[2018 (3) TMI 805 - SUPREME COURT] we delete the disallowance made by the AO.
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2020 (8) TMI 9
Applicability of section 167B - taxing at maximum marginal rate - assessee in the status of AOP - HELD THAT:- Section 167B(2) prescribe that in case of any Association of Person (not being a case falling under sub-section 1 of 167B) if total income of the any member of the Association of Person (excluding the share from such Association) exceeds the maximum amount, which is not chargeable to tax under the Finance Act of the relevant year, the tax shall be charged on the total income of the Association at maximum marginal rate. CIT(A) held that income of the members being in the slab of maximum rate of tax, the society is not entitled to the benefit of exemption from the minimum amount and liable to the incidence of maximum marginal rate income of section 167B(ii) of the Act. CIT(A) on the issue in dispute is well reasoned. A society registered under the Societies Registration Act, 1860, has been excluded from the provision of section 167B9(1). Thus, in case of any society, which though has been held as Association of Person and income of such Association is indeterminate; such society will be excluded from invoking of maximum marginal rate. But, the provision of section 167B(2) are applicable in case of Association of persons not being a case falling under sub-section 1. Unambiguous provisions of 167B(2), if income of any member (other than the share of such Association) is higher than the basic exemption limit of the relevant year, the income of the Association is chargeable at the maximum marginal rate. Assessee has not disputed the finding of the CIT(A) that income of its member during the year under consideration exceeds the basic exemption limit. - Decided against assessee.
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2020 (8) TMI 8
Validity of reopening of the assessment - appeal of the assessee was dismissed ex-parte due to non appearance - HELD THAT:- Once, the assessee has filed an appeal and raised this issue before the ld. CIT(A) then the matter ought to have been decided by the first appellate authority. Therefore, the non adjudication of this issue by the ld. CIT(A) due to non appearance of the assessee would not give an absolute right to the assessee to raise these issued before the Tribunal without having benefit of finding of the first appellate authority. This is a mixed question law and facts. The legal issue can be decided only after considering the factual aspect of the transactions. The assessee has not produced the relevant record and evidence to show that the transactions carried out by the assessee in the commodity exchange have no linked with the persons who were found to be indulged in providing commodity entries of bogus speculative profit and loss. AO given a finding that the transactions of the assessee has a nexus with those persons being counter party providing these transactions however, in the absence of the relevant record we cannot examine and give a conclusive finding on this issue which is factual in nature to the extent whether the finding of the AO is factual correct or not. Though the assessee claimed to have produced the relevant record before the AO however, in the absence of the same produce before us we cannot give a finding that the decision of the AO is perversed. Approval granted u/s 151 - Proforma proposal send by the AO for approval contains all the details as well as the reasons recorded by the AO which were also examined by the JCIT and recommended the proposal of the AO for issuing notice u/s 148 of the Act and thereafter the Ld. Pr.CIT has granted the approval. Therefore, we do not find any infirmity on the face of it however, the ld. CIT(A) has not decided this issue on merits and dismissed the appeal of the assessee summarily. Appeal of the assessee was dismissed ex-parte due to non appearance of the assessee we set aside this issue to the record of the ld. CIT(A) for granting one more opportunities to the assessee of hearing and then decide the same on merits. Appeal of the assessee is partly allowed for statistical purposes.
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2020 (8) TMI 7
Rejection of books of account u/s 145(3) - non maintenance of stock register and the incorrect method of valuation of stock adopted by the assessee - estimation of gross profit earned - CIT(A) who upheld the rejection of books of account but at the same time reduced the estimation of GPR from 18% to 16% - contention of Assessee that merely because stock registers were not maintained by the assessee it could not be the reason for rejecting the books of accounts and when the assessee had explained that since it was manufacturing large number of small items it was not feasible and was not in the practice of maintaining stock register for each items - HELD THAT:- As for the non maintenance of stock register the assessee has explained the non feasibility of maintaining it considering the fact that it was dealing in a large number of small items. It was also explained that the assessee was consistently following the method of physically verifying its stock at the end of the year. We are not in agreement with the Revenue that the non maintenance of stock register was sufficient for exercising the power of rejecting the books of the assessee. It is not unusual for businesses dealing in large number of small items and operating at a small or medium scale to do away with the maintenance of any stock register since it is not feasible maintaining movement of stock of every such item. Such businesses usually verify physically their stock at the end of the year and all wastages, pilferages and other losses therefore get automatically accounted for in the process, reflecting thus the true profits earned by the assesses. As assessee has been doing the same consistently, following the method of determining its stock at the end of the year by physically verifying the same and not maintaining any stock register since it was dealing in a large number of small items. We fail to understand how the non maintenance of stock register has affected the determination of true and correct profits of the assessee in the circumstance. The Revenue has found no other defect in the books of the assessee. Therefore in our opinion the mere fact of non maintenance of stock register cannot be the basis for rejection of books of accounts. Method of valuation adopted for determining the value of the stock - Merely because of adoption of an incorrect method of valuation or merely on account of non compliance with the prescribed accounting standard, the books of accounts cannot be rejected. In fact in such cases the correct accounting standard or the correct method of accounting should be applied by the Revenue and the true and correct profits determined. Such defects, relating to method of valuation of stock, do not render the books of accounts unreliable, incorrect or incomplete, in which circumstances alone the Books of accounts can be rejected. On the contrary such defects can be cured and the taxable profits determined by applying the correct method of accounting/valuation. We set aside the order of the Ld. CIT(A) upholding the rejection of books of accounts of the assessee under section 145(3) of the Act. We further direct the AO to determine the value of stock after applying the correct method of valuation and thereafter determine the taxable profits earned by the assessee. For this limited purpose the issue is restored back to the AO. - Decided in favour of assessee.
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2020 (8) TMI 6
Levy of penalty u/s 271(1)(b) - non-compliance to first notice issued u/s 142(1) - reasonable cause for non-compliance in terms of section 273B - HELD THAT:- Information/documents so sought by the AO necessarily have to be provided by the assessee to the authorized representative - There is nothing on record which demonstrate that such documents were either in the possession of the authorized representative at the time of initial hearing and he wanted time to go these documents before submitting to the AO or the assessee has subsequently submitted these documents to the authorized representative to be submitted to the AO which the authorized representative failed to submit before the AO. Though there is non-appearance on part of the authorized representative at the second scheduled date of hearing, at the same time, the possibility of non-availability of the requisite documents as so required by the Assessing officer cannot be ruled out. In absence of these facts and without confronting the authorized representative, we are unable to accede to the contention of the assessee that merely because she has authorized a Chartered accountant, the entire fault lies with the Chartered accountant and assessee cannot be faulted as the non-compliance is by way of non-filing of the information/documents so sought by the Assessing officer and not limited to attending to the proceedings before him. Penalty proceedings were not found acceptable to the Assessing officer, the assessee should have been allowed another opportunity to put worth her contentions on merits of levy of penalty. AO without providing any such opportunity to the assessee, passed the penalty order. Therefore, on this ground itself, where there is lack of opportunity before levy of penalty, the penalty so levied deserved to be set-aside. Further, we find that there is no independent finding recording by the AO while levying the penalty and merely referring to the findings in the assessment order, he has arrived at a conclusion that the assessee has willfully not complied with the notices and not co-operated in finalizing the assessment proceedings. It is a settled position that assessment and penalty proceedings are two separate and distinct proceedings and though reference can be drawn to the findings in the assessment order, the AO has to record independent findings as to why penalty may be levied in the given case which we find lacking in the instant case and penalty so levied therefore cannot be sustained. - Decided in favour of assessee.
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2020 (8) TMI 5
Undisclosed investment - assessee has given advance for the property which was taken over by assessee s sister concern - AO has made the addition only because assessee has not shown the same in its sister concern in their balance sheet - HELD THAT:- Assessee had given the amount as advance for the golf club road project, which is evidenced in the balance sheet of assessee as on 31.03.2005. Initially assessee wanted to take over the project from its sister concern which did not materialize, so the advance paid by assessee to landlord was adjusted with current account balance of sister concern M/s. Capital Construction Assessee in fact had shown the same under the head Loans and Advances and has included the amount in Advances recovered in cash or in kind in its balance sheet as on 31.03.2005 and the payment had been made by cheque for Golf Club Road Project. So, no addition was warranted u/s. 69B (undisclosed investment) of the Act. It is trite law that method of accounting cannot determine the true character of a transaction CIT Vs. MESSRS. SHOORJI VALLABHDAS AND CO [ 1962 (3) TMI 6 - SUPREME COURT ]. Assessee has given advance for the property which was taken over by assessee s sister concern and shown by assessee in its balance sheet and squared up in later year so no addition under section 69B of the Act is sustainable and therefore directed to be deleted. Addition u/s. 69C as undisclosed expenditure - assessee had to incur additional interest expenditure for buying property at Kalibari Lane - AO accepted the payment of interest to landlords given by cheque but according to AO, since the assessee failed to produce the parties he added the same u/s. 69C - HELD THAT:- AO made the addition since assessee failed to produce the landlords to whom payments were made and Ld. CIT(A) made the addition since assessee did not produce the parties creditworthiness from whom the assessee sourced the cash for making the payment. Since according to assessee, it had made the payment of ₹ 3,55,000/- to six parties on 3 (three) different dates which were routed through cash book, and the AO having not examined the cash book even to determine whether the assessee had the cash balance to make the payment on three different dates, which is necessary to adjudicate the issue, it is remanded back to AO for de novo adjudication.
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Service Tax
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2020 (8) TMI 4
Reverse Charge Mechanism - levy of service tax on Construction of Residential Complex Service for the period upto 30.06.2012 and same service after 01.07.2012 - Circular No.332/35/2006-TRU dated 01.08.2006 and No.19/7/2007-ST dated 23.08.2007 - HELD THAT:- There is no evidence on record to establish that the appellant had constructed a residential complex before 30.06.2012 or the appellant had constructed a complex with more than 2 residential units together after 01.07.2012. The appellant did not provide residential complex service prior to 01.07.2012 and appellant was eligible for exemption under Notification No.25/2012-ST dated 20.06.2012 at Serial No.14 for activity of construction undertaken by him for the period subsequent to 01.07.2012. Further, appellant was not liable to pay Service Tax under Reverse Charge Mechanism. Appeal allowed - decided in favor of appellant.
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2020 (8) TMI 3
Reverse Charge Mechanism - levy of service tax on Construction of Residential Complex Service for the period upto 30.06.2012 and same service after 01.07.2012 - Circular No.332/35/2006-TRU dated 01.08.2006 and No.19/7/2007-ST dated 23.08.2007 - HELD THAT:- There is no evidence on record to establish that the appellant had constructed a residential complex before 30.06.2012 or the appellant had constructed a complex with more than 2 residential units together after 01.07.2012. The appellant did not provide residential complex service prior to 01.07.2012 and appellant was eligible for exemption under Notification No.25/2012-ST dated 20.06.2012 at Serial No.14 for activity of construction undertaken by him for the period subsequent to 01.07.2012. Further, appellant was not liable to pay Service Tax under Reverse Charge Mechanism. Appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (8) TMI 2
CENVAT Credit - input services - repair and maintenance services utilised for dismantling steel structural works, fabrications erection of columns, trusses, monkey ladder, strengthening of existing structure, maintenance of tailing line, drilling and sand blasting, carried out in the factory premises of the appellant - manufacture of zinc lead which are taxable output - Board Circular No. 943/4/2011-CX dated 29.04.2011 HELD THAT:- The input services are not hit by the exclusion clause (A) in Rule 2(l) of Cenvat Credit Rules, 2004 in view of the inclusive part of the definition input service, read with the clarification given by the Board dated 29.04.2011. Appeal allowed - decided in favor of appellant.
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2020 (8) TMI 1
CENVAT Credit - input services - services utilised in the factory of production - Road work over jarofix yard site - De- sludging of sludge sand - Installation of speed breaker - Electrification work at Jarofix yard site canteen building in CISF colony - Installation of deep irrigation system - Drain repairing - Tree washing and washing of common area road - Watering of plant - Levelling and dressing of plantation - Monsoon shed for storage of chemicals and WIP during rainy season - AMC for plant machinery, security services at main gate, laying cable work at CISF colony, etc. HELD THAT:- The appellant is entitled to cenvat credit on all the items of input services in dispute, as the same has been received and utilised in the factory of production allowable under Rule 2(l) of Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.
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