Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 5, 2020
Case Laws in this Newsletter:
GST
Income Tax
FEMA
Service Tax
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of supply - Works Contract or not - whether the applicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract? - there is a composite supply in the subject case but there is no works contract involved in the subject case - The items are in nature of machine/instruments/equipment and are all replaceable and hence cannot he said to be of ‘immovable’ nature - AAR
Income Tax
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Exemption u/s 11 - denying registration u/s. 12AA and denial of approval u/s. 80G - Charitable activity u/s 2(15) - the genuineness of the society stands established by the assessee which is running educational institutions, which imparts engineering courses and is recognised by the All India Council for Technical Education as well as established Polytechnic College, we are of the considered opinion that assessee society was eligible for grant of registration u/s. 12AA - AT
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Higher depreciation on UPS - assessee claimed depreciation on UPS @ 60% treating the same to be part of computer and peripherals - UPS is an essential part of computer system and is eligible for depreciation @ 60% - AT
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Disallowance u/s. 40A(3) - payments made through bearer cheques/in cash to the suppliers against supply of grits - AO estimated the GP/income after rejecting books of accounts - the said element of purchase in cash was subsumed in the income calculated by the AO - No further separate is required. - AT
Service Tax
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Duplication of demand by issuing two show cause notices (SCN) for the same period - Sabka Vishwas Legacy Disputes Resolution Scheme, 2019 (SVLDRS) - The Dispute Resolution Scheme is an attempt to close legacy tax disputes and a certain amount of fairness should be seen in the interpretation of the provisions of the Scheme. - there being no dispute on the position that the petitioner has, admittedly, remitted the aforesaid amount and the demand under SCN2/OinO2 is a duel demand, the computation of the petitioner is accepted and the impugned order set aside. - HC
VAT
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Assessment in the name of merged company - MAPL had been merged with the petitioner, MEPL - the 1st respondent, who is the Assessing Officer of the MAPL, ought to have dropped further proceedings since the assessee was no longer in existence. - HC
Case Laws:
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GST
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2020 (8) TMI 54
Classification of supply - Works Contract or not - supply of goods and service by Prasa Infocom Power Solutions Private Limited to Cray Inc. (Cray) - Section 2(19) of the Central Goods and Services Tax Act, 2017 - whether the applicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract? - HELD THAT:- As per the subject agreement and documents submitted by the applicant, the major part of the contract is supply of goods. These goods are sold to the client by the applicant and they receive separate payment for such goods sold. Further, the goods that are supplied are used by the applicant to provide services of installation, testing and commissioning of the Data Centre. Without these goods the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus there is a composite supply in the subject case but there is no building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract. Therefore there is no works contract involved in the subject case. The items are in nature of machine/instruments/equipment and are all replaceable and hence cannot he said to be of immovable nature - answered in negative.
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2020 (8) TMI 53
Profiteering - principles of natural justice - time limitation - HELD THAT:- List the matter on 24th August, 2020 along with other connected matters. Application disposed off.
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2020 (8) TMI 52
Restoration of registration certificate of the petitioner - permission to petitioner to file all its pending returns without any interest or late fees - HELD THAT:- Mr.Harpreet Singh, learned counsel for respondent no.4 states that the functionality of restoration is at the stage of User Acceptance/Testing and will be incorporated on the common portal within fifteen days. Consequently, according to him, after fifteen days, respondents 2 3 would be in a position to restore the petitioner s registration. In the interest of justice, re-notify on 18th August, 2020.
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2020 (8) TMI 51
Interest on refund - Refund of the amount wrongly forfeited from the pending refund application - levy of interest on available ITC - Section 50 of the CGST Act - HELD THAT:- Issue Notice. List on 20th October, 2020.
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Income Tax
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2020 (8) TMI 50
TP Adjustment - comparable selection - benefit of APA proceedings - HELD THAT:- We find that the additional ground of appeal raised by the assessee is to be admitted being a legal issue. Various Benches of the Tribunal have held that the conclusion reached in APA proceedings deserves to be applied in case facts and circumstances, FAR are similar to the subsequent years. Similar view has been applied in the case of Pune Bench of the Tribunal in M/S. Honeywell Automation India Ltd. vs ACIT [ 2018 (11) TMI 264 - ITAT PUNE] Once the APA has been concluded in the hands of the assessee then the same approach/basis is to be adopted for instant Assessment Year. Accordingly, the Assessing Officer/TPO is directed to follow the approach/basis of APA applied for the subsequent year to the instant Assessment Year. Disallowance of depreciation on Goodwill claimed by the assessee pursuant to the Business Transfer Agreement - HELD THAT:- The present Assessment Year being the year in which agreement was entered into i.e. dated 20.06.2008, it is considered fit to remit this issue of determining resultant amount of goodwill on which depreciation is allowable in the hands of the assessee, consequent to the terms and conditions of the Business Transfer Agreement, back to the file of AO. AO is directed to verify the claim of the assessee after allowing reasonable opportunity of hearing. The assessee is also directed to produce all the facts before the Assessing Officer, who shall decide the same in accordance with law. Disallowance of Mark to Market foreign exchange loss - HELD THAT:- We reverse the orders of Assessing Officer and direct the Assessing Officer to delete the disallowance made on account of mark to market foreign exchange loss. Disallowance of subscription charges - HELD THAT:- Amount was treated as donation by Assessing Officer and disallowed u/s 37(1) of the Act and the final assessment order was passed. We find no merit in the plea of the assessee where the amount is paid as donation to society. The assessee has enclosed the receipt and at best the assessee is entitled to claim deduction u/s 80G of the Act. The Assessing Officer may verify the same and allow the claim in accordance with law.
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2020 (8) TMI 49
Exemption u/s 11 - denying registration u/s. 12AA and denial of approval u/s. 80G - Charitable activity u/s 2(15) - assessee is a Society registered under the West- Bengal Societies Registration Act, 1961 - HELD THAT:- It is settled law that at the time of registration, the authority need to satisfy himself that the objects are charitable in nature and the activities being carried out are genuine, meaning thereby that the activities are in consonance for achieving the charitable objects and nothing else. Since we have seen from the objects of the assessee society that education one of the main objects which is a charitable object/activity as per the definition of charitable activity in section 2(15) and the genuineness of the society stands established by the assessee which is running educational institutions, which imparts engineering courses and is recognised by the All India Council for Technical Education as well as established Polytechnic College, we are of the considered opinion that assessee society was eligible for grant of registration u/s. 12AA Assessee society ought to have been granted the registration u/s 12AA of the Act, as per the settled position of law regarding grant of registration of section 12AA which the Ld. CIT, Durgapur erroneously has not given, therefore, his order is erroneous and also considering the fact that so many years have passed after the assessee has submitted the application/rejection of the application by the Ld. CIT, Durgapur and assessee is still running educational institution it would be a travesty of justice, if we remit the matter back to the Ld. CIT for fresh consideration. Direct the Ld. CIT/the competent authority to grant registration u/s. 12AA of the Act as per section 12A(2) of the Act, which states that where an application has been made on or after the 1st day of 1st June, 2007, the provisions of section 11 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. So, since the assessee filed application for registration u/s. 12AA of the Act on 17.08.2012, the provisions of section 11 and 12 shall apply in relation to the income of such assessee society from the assessment year 2013-14 (FY 2012-13). Grant of approval for registration u/s. 80G - CIT has not discussed anything about merits for denying the claim and has simply re-produced the order rejecting assessee s application for registration u/s. 12AA of the Act, so we are unable to ascertain whether the assessee satisfies the conditions stipulated u/s 80G (5) read with Rule 11AA of the Rules - We remand this issue back to Ld CIT/competent authority to examine whether the assessee satisfies the conditions stipulated u/s 80G (5) read with Rule 11AA and if the Ld CIT/competent authority is satisfied, then assessee to be granted approval u/s 80G of the Act from FY 2012-13 i.e. AY 2013-14 - Appeal of assessee is partly allowed and for statistical purpose.
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2020 (8) TMI 48
Disallowance u/s 14A r.w. Rule 8D - suo motu disallowance by the assessee - HELD THAT:- We deem it proper to restore the issue to the file of the AO with a direction to find out the investments which have yielded dividend income and to take into the same for considering the average value of investment. So far as the interest expenditure for the purpose of disallowance u/s 14A we find merit in the argument of the ld. Counsel that bank guarantee commission, interest on TDS, interest on service tax, interest on professional tax, interest paid to clients on advance brokerage, interest on clients margins money, etc. cannot be considered for the purpose of disallowance u/s 14A r.w. Rule 8D. We, therefore, deem it proper to restore the issue to the file of the AO with a direction to recompute the disallowance u/s 14A r.w. Rule 8D after taking into account the investments that have yielded dividend income and recompute interest expenditure on investments as per fact and law. AO, while doing so, shall keep in mind the total investment of the assessee, vis- -vis the own funds and free reserves for making any disallowance out of any interest expenditure. He shall keep in mind the decision in the case of CIT vs. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] and in the case of HT Media [ 2017 (8) TMI 962 - DELHI HIGH COURT] and Taikisha Engineering India Ltd. [ 2014 (12) TMI 482 - DELHI HIGH COURT]. - Decided in favour of assessee for statistical purposes. Disallowance on account of SAR expenses written off and advance of sale of shares written off - HELD THAT:- As decided in M/S. RELIGARE SECURITIES LTD. [ 2018 (3) TMI 1529 - DELHI HIGH COURT] assessee had to follow SEBI direction and by following such direction, the assessee claimed the ascertained amount as liability for deduction - the expenditure on issue of shares under the Employees Stock Option could be allowed as staff welfare expenditure - Decided in favour of assessee. Higher depreciation on UPS - assessee claimed depreciation on UPS @ 60% treating the same to be part of computer and peripherals - HELD THAT:- As in the case of BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [ 2010 (8) TMI 58 - DELHI HIGH COURT] has held that UPS is an essential part of computer system and is eligible for depreciation @ 60% - no infirmity in the order of the CIT(A) in directing the AO to allow depreciation @ 60% on UPS. Accordingly, the order of the CIT(A) is upheld and the ground raised by the Revenue is dismissed.
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2020 (8) TMI 47
Addition on account of rate of charging lease rentals and maintenance charges agreed earlier - as per revenue reduction of rate of charging lease rental and maintenance charges, the assessee was providing financial assistance to DDF and reducing the rate of lease rentals and maintenance charges was not for the purpose of business of the assessee - HELD THAT:- As decided in own case MAX MEDICAL SERVICES PVT. LTD. [ 2019 (5) TMI 1393 - DELHI HIGH COURT] issue decided in favour of assessee. Disallowance of expenditure attributable to goods sold on cost to cost basis - HELD THAT:- The issue being settled in favour of the assessee on identical ground in [ 2017 (10) TMI 580 - ITAT DELHI ] , thus needs to be allowed in favour of the assessee and we find no merit in the ground of appeal of the Revenue in this regard. It may be pointed out that the Revenue did not raise any issue before the Hon ble High Court with regard to the second issue raised by the assessee.. - Decided in favour of the assessee
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2020 (8) TMI 46
Reopening of assessment u/s 147 - Exemption u/s 11 - assessee is a Trust engaged in Urban Development activity as per the Government Regulations - HELD THAT:- In the original assessment orders, the AO has also allowed benefit of sections 11 and 12 to the assessee. These orders have been reopened by the AO by issuance notice under section 148 of the Act. We have noticed the above facts while dealing with the issues in the appeal of Revenue on the merit of reopening. The income of the assessee was determined at NIL in the original assessment orders for both the years. Considering the order of co-ordinate Bench in the Asstt.Year 2011-12 [ 2019 (7) TMI 1608 - ITAT AHMEDABAD] we are of the view that the assessee is entitled to benefit of sections 11 and 12, and therefore, the issue on merit also deserves to be decided in favour of the assessee.
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2020 (8) TMI 45
Disallowance u/s. 40A(3) - payments made through bearer cheques/in cash to the suppliers against supply of grits - AO estimated the GP/income after rejecting books of accounts - HELD THAT:- AO while computing the income of the assessee had taken into account, the purchases made in cash and thereafter had calculated the income of the assessee. The ld. CIT(A) had reproduced the decision in the case of Banwarilal Bansidhar [ 1997 (5) TMI 37 - ALLAHABAD HIGH COURT ] wherein the High Court has deleted the addition over and above the estimation of profit done by the Assessing Officer, as the High Court was of the opinion that the said element of purchase in cash was subsumed in the income calculated by the Assessing Officer. No distinguishable facts of the said decision with the present case, as reproduced in paragraph No. (f) of the impugned order (supra). In view of the above, we find substantial force in the grounds of appeal on this issue and the same are allowed and the disallowance made u/s. 40A(3) is deleted. - Decided in favour of assessee.
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FEMA
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2020 (8) TMI 44
Proceeding against a Director of a company for contravention of provisions of FERA, 1973 - Non-executive Director responsibility for the conduct of business of the Company - notice dated 19.02.2001 was issued by the Deputy Director, Enforcement Directorate to decide as to whether the adjudication proceedings as contemplated in Section 51 should be held against the Directors for contravention - HELD THAT:- The appellant had not submitted any reply to show cause notice dated 19.02.2001 which though was addressed to the Company and all Directors and the reply was sent only by the Company Secretary on 26.03.2001. The representation dated 29.10.2003 was the first representation submitted by the appellant before the adjudicating officer during course of personal hearing. What is said by a person who is called for personal hearing even though given in the form of written representation dated 29.10.2003 required to be considered by the adjudicating officer otherwise the personal hearing shall become an empty formality and meaningless, specially when what was said by the appellant in his representation dated 29.10.2003 in no manner contradicted the reply 26.03.2001 sent by the Company Secretary. We, thus, are of the considered opinion that written representation dated 29.10.2003 submitted by appellant required due consideration and the High Court erred in discarding it as an afterthought. Whether the appellant has not brought any material on record either before the Adjudicating Authority or the Appellate Tribunal to prove that he was only a part-time, non-executive Director not responsible for the conduct of business of the Company at the time of commission of the offence? - Affidavit of Company Secretary dated 04.07.2003 clearly stating that the appellant who was Director of the erstwhile MXL was only a part time Director of the said Company and was never in charge of the day to day business of the Company was very much on the record of the adjudicating officer and the High Court erred in holding that the said material was not filed before the Adjudging Authority or the Appellate Tribunal. High Court, thus, discarded the plea of the appellant that he was part-time, non-executive Director as afterthought and did not consider the same on the ground that the affidavit dated 04.07.2003 relied by the appellant was not filed which, as noted above, is not correct. There was nothing on record brought on behalf of the Department that the above plea of the appellant was incorrect and it was the appellant who was responsible for the conduct of business of the Company at the relevant time. Thus, material was brought by the appellant on the record that he was a part-time, non-executive Director not in charge of the affairs of the Company at the relevant time, which was erroneously refused to be considered. Contravention of provisions of Section 8(3), 8(4) and Section 68 of FERA, 1973 by the appellant - Plea of the appellant that he was part-time, non-executive Director not in charge of the conduct of business of the Company at the relevant time was erroneously discarded by the authorities and the High Court and there is no finding by any of the authorities after considering the material that it was the appellant who was responsible for the conduct of business of the Company at the relevant time. Thus, present is a case where the liability has been fastened on the appellant without there being necessary basis for any such conclusion. Order which was passed on 13.02.2004 by the Deputy Director in adjudication proceedings although with regard to different period, the plea of the appellant that he was only a part-time, nonexecutive Director and not responsible of the conduct of business of the Company was accepted and notice was discharged against the appellant. The order dated 13.02.2004 although related to different period but has categorically noticed the status of the appellant as part-time non-executive Director. There being decision of Adjudicating Authority, in the recent past, passed on 13.02.2004, that the appellant was only a part-time nonexecutive Director of MXL, there has to be some reasons for taking a contrary view by the adjudicating officer in order dated 31.03.2004 with regard to affairs of the same company, i.e., MXL. We are of the view that the adjudicating officer has erroneously imposed penalty on the appellant for the alleged offence under Section 8(3), 8(4) and 68 of the FERA, 1973 which order was erroneously affirmed both by the Appellate Tribunal and the High Court. Appeal deserves to be allowed, the judgments of the High Court as well as those of the adjudicating officer and the Appellate Tribunal are set aside.
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Service Tax
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2020 (8) TMI 43
Duplication of demand by issuing two show cause notices (SCN) for the same period - Sabka Vishwas Legacy Disputes Resolution Scheme, 2019 ( SVLDRS ) - remission of differential service tax - short payment of tax - periods December 2008 to January 2010 - whether there was a duplication of demand in the two SCNs dated 12.10.2011 and 09.02.2012? - HELD THAT:- There is an overlap between the period covered under SCN1 and SCN2, the former covering the period December 2008 to January 2010 and the latter the period April 2008 to March 2010. The periods December 2008 to January 2010 are thus common under both SCNs - revenue agrees in counter that the demand of ₹ 19,15,941/- is duplicated. Hence, according to them, the demand under OinO2 stands reduced to ₹ 10,00,775/-of which 30%, as per the Scheme, is a sum of ₹ 3,00,232.50. There is an excess of a sum of ₹ 15,18,561/- in regard to OinO1 that, by applicationof Section 130(2) shall neither be refunded nor utilised towards any other demand. This argument is also misconceived. The petitioner, as confirmed by the order of R2, is right about the double demands raised for Periods 1 and 2. Thus, as far as the demand of ₹ 19,18,375/- is concerned, it ought not to have been raised at all - The remaining demand of ₹ 9,98,350/- corresponding to Period 2 also stands covered/telescoped by the amount of ₹ 80,74,333/- already paid for the same period earlier. In stating this, I have taken note of the position that the total taxable value of the two projects under both SCN 1 and 2 is identical. The point of dispute revolves around the remittance or otherwise of the amount of ₹ 19,15,491/-. In the light of the detailed discussions, there being no dispute on the position that the petitioner has, admittedly, remitted the aforesaid amount and the demand under SCN2/OinO2 is a duel demand, the computation of the petitioner is accepted and the impugned order set aside. The Dispute Resolution Scheme is an attempt to close legacy tax disputes and a certain amount of fairness should be seen in the interpretation of the provisions of the Scheme. Learned counsel for the respondent would harp on the argument that a dispute raised under one SCN cannot be settled by utilising a deposit made under a different SCN. This argument does not arise in a case such as the present, since the two SCNs relate to identical transactions, time periods and demands and constitute a duplication of proceedings. Petition allowed.
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CST, VAT & Sales Tax
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2020 (8) TMI 42
Assessment in the name of merged company - Violation of Principles of Natural Justice - service of SCN - SCN was allegedly issued by the 1st respondent proposing to levy tax on turnover of ₹ 31,21,764/- allegedly for inter-State sales effected by MAPL, but the petitioner contends that it did not receive it - Levy of turnover tax - inter-State sales - HELD THAT:- The impugned assessment order has been passed by the 1st respondent on 23.09.2020 with respect to the assessee, MAPL. But, MAPL had been merged with the petitioner, MEPL vide order dt.03.05.2017 of the NCLT, Hyderabad w.e.f. 01.04.2015. This fact had been informed by the petitioner by e-mail dt.26.11.2019 to the 1st respondent enclosing copy of the order of the NCLT - the 1st respondent, who is the Assessing Officer of the MAPL, ought to have dropped further proceedings since the assessee was no longer in existence. Also, there is no date of the show-cause said to have been given to MAPL mentioned in the impugned order, and the petitioner denies having received it and also the reminder notice dt.06.03.2020 mentioned in the impugned order. Thus, there is also a violation of principles of natural justice. The turnover of MAPL, the amalgamated entity ought to be assessed in the name of the petitioner with whom it is merged. The assessment of the petitioner is admittedly alive before the 2nd respondent - the impugned Assessment Order passed by the 1st respondent in respect of MAPL is set aside - the 2nd respondent, who is the assessing authority of petitioner with whom MAPL has been merged is permitted to issue a show-cause notice to the petitioner in respect of turnover of the MAPL for the period April, 2015 to March, 2016 - petition allowed.
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