Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 7, 2020
Case Laws in this Newsletter:
GST
Income Tax
Securities / SEBI
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of services - EPC Contract in respect of power distribution and Transmission company - Since the works are used for commercial / business purpose the benefit of Concessional Rate of 12% or any other concessional rate is NOT available to the applicant - the services rendered by the applicant squarely falls under the works contract - liable to GST @18% - AAR
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Levy of GST - supply of food by the applicant to hospitals on outsource basis - the supply of food to hospitals by the applicant depends on the time period (during which they are supplied) and will be subjected to GST @5% - AAR
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Input Tax Credit - GST paid on payment of “lease premium charges (one-time charges) - land lease for business purpose - construction of property over land - The exclusion clause 17(5)(d) shows that the exclusion is applicable including when such services are used in the course or furtherance of business which is the claim of the applicant. Thus, the referred services in the instant case and in the given facts, squarely fall under the exclusion vide Sec. 17(5)(d) and hence ineligible to ITC. - AAR
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Classification of goods - HSN Code - rate of tax - poultry meal - fish meals or meat cum bone meal (MBM) - the product manufactured by the applicant is not a feed but raw materials for feed and therefore the same are not covered under the domain of the exemption entry - liable to GST @5% - AAR
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Profiteering - supply of “Duracell Battery AA/6” - allegation that benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in the price - the Respondent is required to deposit the profiteered amount along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited in terms of Rule 133 (3) (b) of the CGST Rules, 2017. - NAPA
Income Tax
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Assessment u/s 158BC - Unexplained investment - Tribunal further has erroneously and perversely held that as question was not asked to the assessee, the assessee cannot be faulted for not furnishing the details and the person to whom the land was sold and only because the assessee was a broker and he was not expected to make investment of his money. It appears that such findings are arrived at by the Tribunal only on the basis of the presumption and assumption - HC
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Revision u/s 263 - PCIT issued the above show cause notice u/s 263 in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act which was omitted with effect from 01.04.2017, and effect of such “omission” of clause (i) of section 92BA means that this provision never existed in the statute book, since clause (i) of section 92BA never existed in the statute book therefore, ld PCIT cannot exercise his jurisdiction under section 263 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. - AT
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Addition u/s 56(2)(vii) - As regards the contention of the CIT D/R this is only a paper transaction, we note that the AO has not doubted the transaction either during the course of assessment proceedings or during the course of remand proceedings. Therefore, such a plea cannot be considered or accepted which is contrary to the stand of the AO. Even otherwise, the LD. CIT D/R can only support the order of the AO and cannot improve the same. Further, if the transaction itself is not a genuine transaction, then the question of applying the provisions of section 56(2)(vii) does not arise. - AT
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Validity of reopening of assessment u/s 147 - beyond 4 years but within 6 years - Report of the investigation wing might constitute tangible material. The decision to reopen a case on the basis of report of the investigation wing cannot always be condemned or dubbed as fishing and roving inquiry. The expression reasons to believe appearing in section 147 suggest that if the Ld. AO acts as a reasonable and prudent man on the basis of information secured by him that there is a case of reopening, then section 147 can well be pressed into service and assessment can be reopen - AT
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Penalty u/s 271(1)(c) - Validity of notice - It is a well settled proposition of law that penalty cannot be initiated for the limb, which is different from the limb for which proposed penalty proceedings has been initiated. Further, if the penalty proceedings has been initiated for one limb and levied under different limb, then the whole penalty proceedings become vitiate. - AT
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Income from other sources u/s 56(2)(viib) - premium received from shareholders via-a-vis issue of equity shares and preference shares - AO cannot change the method of valuation adopted by the assessee by merely relying on the actual results in the subsequent years and arbitrarily coming to the conclusion that projections were not achieved. - AT
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Deduction u/s. 35D - Addition on the assumption that the shares may have been allotted only to selected Qualified Institutional Buyers ("QIBs") - QIBs, not being promoters, promoter group, subsidiaries and associates of the company would qualify as "public". - a section of public qualifies as public - Deductions allowed - AT
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Unexplained deposits - Genuineness of earnest money received against sale of agriculture land - Time lag of 11 months for getting the sale deed registered after the date of agreement to sale - What is normal for a person today may vary from what is contemplated to be normal in another day and time. So for the tax authorities to conclude that three months’ time lag was a normal time, no facts or reasoning has been brought on record. - AT
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Assessment of trust - Addition of capital gains - Capital gain addition on sale of land by the assessee, as per section 45 r.w.s 2(47) to the extent remaining unutilized for charitable purposes u/s 11(1A) - the amounts received under the tripartite agreement as being in the nature of grants from the government which did not accrue during the impugned year and not capital gain earned by the assessee - AT
SEBI
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Failure to close the trading window - the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015. - Board
Service Tax
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Rejection of declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - Since it is the petitioner’s case that she had admitted her liability to pay service tax on 18th May, 2018 itself, this Court is of the view that the respondents should have given an opportunity of hearing to the petitioner before rejecting the declaration - HC
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Reverse charge mechanism - Banking & other financial services - recipient of services or not - services provided by the Foreign Banks situated outside India - The Appellant Bank has not paid any consideration to the Foreign Bank - The Appellant Bank merely acts on behalf of the Indian exporter and facilitates the service. The Appellant Bank, therefore, would not be liable to pay service tax under the RCM - AT
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Franchisee Service - Representational right - receiving and distribution of communication signals. - Sharing of 20% revenue to Siti Cable - what is important to note is that the party should be granted a representational right to provide service or undertake any process identified with the franchisor. In other words, if the condition relating to “representational right” is not satisfied, there can be no “franchise” service. - AT
Central Excise
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CENVAT Credit - violation of Section 5A(1A) of the Act and Rules 3(1) and 6(1) of the Central Excise Rules, 2002 - There is no irregularity or wrong availment of Cenvat credit by the appellant. The appellant had the option to avail or not to avail the exemption under Notification No. 65/95-CE and since it paid duty on the goods manufactured without availing the exemption, the appellant was eligible to avail the Cenvat credit involved. - AT
VAT
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Service of notice - time limitation - Escaped assessment of tax - escaped turnover - Even according to the respondent, the inspection took place in the year 2015; nothing stopped the respondent from taking action for assessing the escaped turnover immediately thereafter. Even if the respondent had taken action in the year 2016-2017 that would have been within the limitation period. Not having done so, the issuance of notice on 28.08.2018 after the expiry of six years limitation period, is not justifiable. - HC
Case Laws:
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GST
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2020 (8) TMI 105
Classification of services - Works Contract Services - rate of GST - EPC Contract in respect of power distribution and Transmission company - Government Entity or not - GST notification number 1/2018 Central Tax(Rate) - HELD THAT:- It is evident from the website of OPTCL it is understood that with the enactment of the Electricity Act, 2003, the Government of Orissa through notification of a Transfer Scheme transferred the transmission business of GRIDCO and vested the same with OPTCL with effect from 01-04-2005. OPTCL, registered on 29th March, 2004 under the Companies Act, 1956, is a wholly owned Government Company. Under the Transfer Scheme, OPTCL has been notified as the State Transmission Utility (STU) and is also mandated to discharge the State Load Dispatch functions - Under the provisions of the Electricity Act, 2003, OPTCL is a deemed transmission licensee. It undertakes the activities of transmission of electricity in the State of Orissa under regulatory control of Orissa Electricity Regulatory Commission (OERC) and also in compliance of the provision of the Orissa Electricity Reform Act, 1995 and Electricity Act, 2003. Thus, M/s Odisha Power Transmission Corporation Limited falls under the domain of Government entity in terms of the provisions of Not. No. 11/2017-CT Dt. 28.06.2017 (as amended). Applicability of Tax rate prescribed under entry no. (vi) Sl. No. 3 of Not. No. 11/2017-CT Dt. 28.06.2017 - HELD THAT:- The applicant is engaged in execution of works awarded by M/s Odisha Power Transmission Corporation Limited, Janapath, Bhubaneswar as detailed in Para above. The works under discussion have been undertaken to execute/implement for Erection, Testing and Commissioning of 51 nos 33/11 kv Substation and Associated Lines on EPC contract basis with complete facilities within the jurisdiction of DISCOM SOUTH CO in the districts of Ganjam, Gajapati, Kandhamal, Koraput, Malkangiri, Rayagada, Boudh and Nabarangput under Package-2 of Phase-III, ODDSSP - As seen from the nature of the work stated by applicant in Contract agreement with M/s Odisha Power Transmission Corporation Limited, Janapath, Bhubaneswar, the works are of Industrial nature as those works are to be done to industrial feeders too. The contractee is not rendering any non-commercial services as the structure arising out of works contract services will be used by M/s OPTCL for the purpose of commerce, and even in situations where it appears that the structure is pre-dominantly meant for non-commercial purposes, it turns out that they get reimbursed for their activity on behalf of their customers from the State Government, which by no stretch of imagination can be called as Non-commercial . Since the works are used for commercial / business purpose the benefit of Concessional Rate of 12% or any other concessional rate is NOT available to the applicant - the services rendered by the applicant squarely falls under the works contract and fall under entry no. (ii) of S.No. 3 of the of Not. No. 11/2017 CT (R), Dt. 28-06-2017 (as amended) and corresponding notifications under TGST Act, 2017, and the applicable rate of tax is 18% for the period from 01.07.2017 to 31.03.2019.
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2020 (8) TMI 104
Levy of GST - supply of food by the applicant to hospitals on outsource basis - health care services provided by a clinical establishment and food supplied to the patients - Circular No.32/06/2018-GST, dt. 12-022018 at Si. No. 5(3) - HELD THAT:- In the case at hand, the Applicant is engaged in supplying food and beverages at the canteen of their customers. The Applicant himself does not get paid for by the consumers of the food and beverages. The Recipient of the services are hospitals who enter into contract with the applicant. The charges are received from the hospitals on monthly basis on the coupons collected. In short, it is deciphered that the Applicant is vested with management of the canteen facilities. Supply of food is classified under Service Code No. 9963. We have examined the relevant notifications providing exemption to services and found that the services rendered by the applicant are not taxable. The exemption is available as per the entry of the above notification only when the clinical establishment itself provides this service (supply of food) as a part of health care services to the in-patients and the same is not available, when such supply of food and beverages is made by a person other than clinical establishment based on a contractual arrangement with such establishment Circular No. 32/06/2018 dated 12-022018 supports this view - GST is payable on supply of the services by the applicant to Hospitals and no exemption is provided in r/o the same. In the instant case, as per the contract furnished by the applicant, it is seen that the applicant prepares food using his own labour at the premises of hospitals, who are the recipient of the service, and the applicant supply food to consumers who don t make payment to the applicant. The applicant is paid only by the hospitals. The above GST Council discussions and decisions clearly differentiate a restaurant/ canteen / mess run independently and the services extended by the applicant which fall under the category of outdoor catering. The very likely scenario of Outdoor Caterer trying to call himself as a 'restaurant' has been discussed and the decision to lower the tax rate only to restaurants has been taken by the council. Therefore, the supply of food by the applicant in the premises of client, whether prepared in that place or brought and served is more appropriately covered by the description at Sl.No. 7(v) of the Notification No. 11/2017- State Tax (Rate), issued in G.O.Ms No. 110, Revenue (CT-II) Department, Dt. 29-06-2017 and is liable to tax at 9% CGST and 9% SGST. Sl.No 7(v) now only covers supply at functions which are occasional and event based. The supply of food to institutions which were earlier covered under entry at Sl.No.7(v) has been included under Sl.No. 7(i) - In the instant case the applicant is making supply of services in the dining space of the hospitals which is squarely covered in the Explanation 1 to Sl.No 7(i) and thereupon is liable to tax at the rate of 5% subject to the condition that credit of input tax charged on goods and services used in supplying the services has not been taken. The above Notification No. 13/2018 - State Tax (Rate), issued in G.O.Ms No. 171, Revenue (CT-II) Department, Dt. 20-08-2018 was slightly amended vide Notification No. 27/2018 - In terms of the above amendment, from 01.10.2019, the supply of food by the applicant to hospitals fall under entry no. (ii) of S. No. 7 of Not. No. 11/2017 - State Tax (Rate), issued in G.O.Ms No. 110, Revenue (CT-II) Department, Dt. 29-06-2017 and is subject to 5% GST with the condition of non-availability of input tax credit - the supply of food to hospitals by the applicant depends on the time period (during which they are supplied) and will be subjected to tax as per the provisions of Not. No. 11/2017 - State Tax (Rate), issued in G.O.Ms No. 110, Revenue (CT-II) Department, Dt. 29-06-2017 amended from time to time.
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2020 (8) TMI 103
Input Tax Credit - GST paid on payment of lease premium charges (one-time charges) - land lease for business purpose - annual lease rentals (recurring) towards supply of land on lease for business purpose - maintenance charges collected by the lessor - HELD THAT:- Sections 16 to 19 of the CGST Act, 2017 contain the provisions relating to allowance of Input Tax Credit subject to the conditions stipulated there under. Sec. 16(1) allows every registered person to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business subject to such conditions and restrictions as may be prescribed - Sec. 17(5) of the Act lists the circumstances wherein input tax credit in r/o goods/services shall not be available. It is pertinent to note that Section 17(5) starts with the phrase notwithstanding anything contained in Section 16(1) which facilitates Sec. 17(5) to override the provisions of Sec. 16(1). Thus the pervasive domain of goods/services provided for under Sec. 16(1) was abridged by Sec 17(5)by specifying the situations wherein input tax credit in respect of certain goods/services has been restricted. It is not under dispute that the lease premium charges , annual lease rentals and maintenance charges are paid by the applicant to the lessor towards lease of land. It is manifest from the terms and conditions of the lease agreement dated 17.08.2017 that the applicant acquired land from M/s IKP Knowledge Park on lease for the purpose of construction of a building where their own laboratory would be accommodated. This is self evident from clause 5 of the agreement. It has been reported by the applicant that the lessor has paid GST on lease premium charges at the rate of 18% treating them as services. The applicant will also be required to pay GST on the annual lease charges and maintenance charges which are in the nature of services. All the referred services are received by applicant for construction of immovable property (other than plant machinery) on their own account. The exclusion clause 17(5)(d) shows that the exclusion is applicable including when such services are used in the course or furtherance of business which is the claim of the applicant. Thus, the referred services in the instant case and in the given facts, squarely fall under the exclusion vide Sec. 17(5)(d) and hence ineligible to ITC. The impugned services referred by the applicant have been received for construction of immovable property on their own account and therefore input tax credit on those services is barred under the provisions of clause (d) of Sec. 17(5).
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2020 (8) TMI 102
Classification of goods - HSN Code - rate of tax - poultry meal - poultry fat - whether classfiable under HSN Code 2309 9020 or under HSN code of 1501 9000? - N/N. 01/2017-CT (Rate) dated 28.06.2017 02/2017-CT (Rate) dated 28.06.2017 - HELD THAT:- The supply of animal feed, poultry feed and cattle feed including grass, hay straw, supplement husk of pulses, concentrates additives, wheat bran de-oiled cake are covered under the said entry. The aforesaid entry covers different types of products which are basically in the nature of feeds.This entry does not apply to raw material/inputs like fish meals or meat cum bone meal (MBM) falling under heading 2301 - the product manufactured by the applicant is not a feed but raw materials for feed and therefore the same are not covered under the domain of the above entry. Consequently we hold that the product manufactured by the applicant is not exempted from tax as opined by the applicant. This view is fortified by the CBIC Circular bearing No. 80/54/2018-GST, dated 31-12-2018. The disputed product (classifiable under chapter sub-heading number 2301.10.90) attracts GST rate of 5% (2.5 % CGST + 2.5% SGST) under sl. No. 103 of the Schedule-1 of the Not. No. 01/2017-CT (R), dated 28.06.2017 (as amended). Poultry fat - HELD THAT:- The said product emanates as a by-product during the process of chicken remnants for manufacture of the primary product viz., poultry meal . It is noticed that Schedule to the Customs Tariff has two entries covering the said product - Tariff Heading No. 0209 covers poultry fat not rendered/otherwise extracted and Tariff Heading No. 1501 covers poultry fat other than that of Tariff Heading No. 0209. In the case on hand, the applicant submitted that the poultry fat supplied by them is extracted as a by-product during the process of their main product poultry meal . As such we opine that the product poultry fat supplied by the applicant merits to be classified under Tariff item No. 1501 90 00. The product poultry meal manufactured and supplied by the applicant attracts GST rate of 5% in terms of Not. No. 01/2017-CT (R) dated 28.06.2017 (as amended).
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2020 (8) TMI 91
Profiteering - supply of Duracell Battery AA/6 - allegation that benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in the price - contravention of Section 171 of the CGST Act, 2017 - HELD THAT:- The Respondent did not reduce the selling price of the products when the GST rate was reduced from 28% to 18% w.e.f. 15.11.2017 and hence. the benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in the prices, in terms of Section 171 of the CGST Act, 2017 and therefore, he has contravened the provisions of Section 171 of the CGST Act, 2017 - the Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017, and has not passed on the benefit of reduction in the rate of tax to his recipients by commensurate reduction in the prices. Accordingly, the profiteered amount is determined as ₹ 1,57,200/- as per the provisions of Rule 133 (1) of the CGST Rules 2017. The Respondent is therefore directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. Accordingly, the Respondent is required to deposit the profiteered amount of ₹ 1,57,200/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited in terms of Rule 133 (3) (b) of the CGST Rules, 2017. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report furnished by the DGAP under Rule 129 (6) of the above Rules - This order is being passed today in terms of the Notification No. 55/2020-Central Tax dated 27.06.2020 issued by the Government of India Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes Customs under Section 168 A of the CGST Act, 2017.
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Income Tax
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2020 (8) TMI 101
Violation of principles of natural justice - ITO has issued a show cause notice BUT order has been passed on even prior to the date fixed for the hearing - HELD THAT:- Since the show cause notice issued clearly stipulates the date of hearing as 04.12.2019, the assessee/petitioner has a legitimate expectation that he would be heard on that date and that an order of assessment will be passed only thereafter. In the light of the aforesaid, this writ petition is allowed and the impugned order of assessment is set aside. The respondent officer will conduct personal hearing on 13.08.2020 at 10:30 a.m. by video conferencing.
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2020 (8) TMI 100
Assessment u/s 158BC - Unexplained investment computation u/s 69B - set off gross unaccounted payments on certain transactions against unaccounted receipts - HELD THAT:- The assessee failed to furnish the basic and primary facts. Moreover, it appears that the Tribunal has also not considered the fact that the amount of ₹ 2.53 crores pertaining to the land deals at near Ramdev-pirni-tekro between Leela Housing and Infrastructure Housing Pvt. Ltd. and the Saumya Construction has been protectively taxed in the ends of the assessee and substantive addition has already been made in the hands of the Companies. Thus, such funds were prima facie not available for any further investment made by the assessee in his individual land business. With regard to other investments, as per the seized papers most of the investments have been made during the F.Y.1994-95. On money receipts pertaining to the second land deal of Ramdev-pirni-Tekro were received during the F.Y. 1993-94 and the entire on money payment from RDIL at ₹ 12.80 crores was received only from April 1995 onwards till September, 1995. Undisclosed income determined for investment and profit in remaining two land deals were also determined falling in the F.Y.95-96 and the brokerage amount was also not received. AO on the basis of the facts available on record has held that the assessee is not entitled to any set off of unaccounted income against the unexplained investment made as there is no co-relation between the unexplained cash receipts and unexplained investment. AO has rightly not granted the claim of the assessee for set off on the basis of the facts of the case as there is no even prima facie evidence to show that the income received by way of on money receipts was available for investment in the land deals and was not otherwise invested. Tribunal emphasized on a presumption that a reasonable view demands that subsequent payment should be presumed to be made out of the cash available from the earlier receipts, if any. The Tribunal without adverting to the facts has allowed the claim of the petition only on the ground of such presumption by referring to the principles of peak credit without applying the same to the facts of the case. Tribunal has also erred in discarding the fact of absence of any material to show that the assessee proving nexus or corelation between unaccounted cash receipts and payments. Therefore, in such circumstances, it appears that the Assessing Officer has rightly held that the assessee is not entitled to any claim of set off and all income as well as investment determined are liable to be considered without any set off against each other. - Decided against assessee. Allowable expenditure under Section 37 or business loss under Section 28 - unexplained and unaccounted cash investment which did not result into tangible benefit - HELD THAT:- When the assessee claims that he has not received any benefit out of payment of unaccounted cash then onus would lie upon him to claim such payment as business loss. In the facts of the case, it appears that the Tribunal contrary to the evidence on record has made inferences on the basis of the assumption and presumption so as to remand the issue of the claim of the assessee of ₹ 2.93 Crore towards business loss. With regard to loss claimed by the assessee in respect of Jagatpur land deal, the Tribunal has arrived at the findings contrary to the material documentary evidence on record as the Tribunal misinterpreted the seized material so as to find error in the finding of the assessing officer which is based on the entries made in the seized papers at sr. No.21 and 105. Tribunal has considered irrelevant factors for holding that the assessing officer has considered twice the amount of ₹ 15 Lakhs by taking into consideration the entries in the seized papers observing that the assessing officer jumped from one seized paper to another, whereas on careful consideration of the assessment order, we are of the opinion that the Tribunal has arrived at a perverse finding contrary to the material on record. Question No.2 is also answer in negative i.e. in favour of the Revenue and against the assessee. Addition on two land deal - Tribunal has discarded the addition on the ground that furnishing the name in the area of farmers by the assessee would be enough to identify the person as Vejalpur is not such a big place that the person could not have been identified - HELD THAT:- Finding arrived at by the Tribunal is nothing but a perverse finding because it is not possible to find out to locate or identify person only because he belongs to a particular area in absence of any specific address. Tribunal has committed grave error by shifting the burden on the department on the basis of such vague information provided by the assessee. Thus the very basis and foundation of the Tribunal to delete the addition made by the Assessing Officer is erroneous and perverse as the Tribunal has considered the irrelevant factor to arrive at such conclusion. With regard to the Sangvilla land deal it is not possible to understand on what basis the Tribunal has drawn such inference in absence of any corroborative evidence in support of such findings when the assessee has admitted in his statement that he paid ₹ 70 Lakhs after receiving the same from the prospective buyer, but such statement was not believed by the Assessing Officer as the assessee failed to provide the name of the person to whom the land was sold as well as the rate at which such land was sold. Tribunal further has erroneously and perversely held that as question was not asked to the assessee, the assessee cannot be faulted for not furnishing the details and the person to whom the land was sold and only because the assessee was a broker and he was not expected to make investment of his money. It appears that such findings are arrived at by the Tribunal only on the basis of the presumption and assumption and the findings given in para 42 are perverse as the same are not based on the materials on record but are arrived at after taking into consideration the irrelevant factors that the broker only bring the parties together and the prospective buyers pay to the prospective sellers may be through the broker. The Tribunal has therefore; committed error in drawing inference that either from the seized papers or from the statement which constitute the only basis, the addition cannot be sustained. Tribunal has arrived at perverse findings contrary to the evidence on record in case of two land deals of Amrakadam and Sangvilla without there being any evidence on record to arrive at such findings to delete the addition made by the Assessing Officer, which is supported by the cogent evidence on record. Question No.3 is also answered in negative i.e. in favour of the Revenue and against the assessee.
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2020 (8) TMI 99
Addition u/s 14A - suo motu disallowance by assessee - as argrued absence of any cogent satisfaction for disregarding the voluntary disallowance made by the appellant - whether the disallowance made by AO was proper? - whether the assessee was right in contending that there were no cogent reasons recorded by AO with regard to his satisfaction as to the correctness of the voluntary disallowance made by the assessee? - HELD THAT:- Issuance of show cause notice calling upon the assessee to explain pre-supposes a prima facie opinion formed by the Assessing Officer with regard to the accounts of the assessee. Once a show cause notice is issued, the assessee is informed about the prima facie view of the Assessing Officer. However, the AO cannot have a closed mind while issuing a show cause notice. The assessee rightly understood the prima facie opinion formed by the Assessing Officer with regard to the expenses claimed by the assessee attributable for earning exempt income and precisely for such a reason, the assessee submitted a reply dated 18.12.2012. AO considered the explanation offered by the assessee vide letter dated 18.12.2012 and recorded his satisfaction as to how the disallowance voluntarily made by the assessee was not acceptable. Hence, we find that the Assessing Officer had rightly followed the procedure under Section 14A(2) of the Act and only thereafter, recorded his dis-satisfaction on the correctness of the claim made by the assessee and having regard to the accounts of the assessee, proceeded to follow the procedure under Rule 8D of the Rules. There is full compliance of what is required to be done by the Assessing Officer as pointed out in the case of Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT ] - For the above reasons, we hold that the assessee has not made out a case for interference in the order passed by the Tribunal. - Decided in favour of revenue.
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2020 (8) TMI 98
Levy of penalty u/s 271(1)(c) - assessee along with three other co-owners sold an inherited piece of land - AO invoking the provisions of Sec.50C of the Act, computed the amount of long term capital gains and made the addition - HELD THAT:- The assessee was under the bonafide belief that since he has not received any consideration during the relevant year, the sale is not complete and no profits accrued to him. The Revenue also could not place on record any evidence of actual receipt of any amount by the assessee during the year under consideration. The procedure of imposition of penalty u/s 271(1)(c) shall arise and only arise if there is any concealment of income or furnishing of inaccurate particulars of income. To determine these factors, the facts and circumstances are essential. In the present facts, when the charge is of the concealment of income, the facts does not suggest even on a remote basis that assessee has concealed his income rather the assessee has acted under bonafide belief and even the Revenue could not place on record any evidence of receipt of income regarding 1/4th share of the property by the assessee in the relevant year. Neither there is mens rea nor actus reus on the part of the assessee. We find that our view is fortified by the judgment of the Hon ble Supreme Court in the case of K.C.Builders [ 2004 (1) TMI 7 - SUPREME COURT] - this is not a fit case for imposition of penalty u/s 271(1)(c) . Also see MOHAN LAL SHARMA. [ 2005 (4) TMI 22 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.
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2020 (8) TMI 97
Addition being amount of sales tax advance paid - where such amount, which is not claimed as an expenditure by the assessee while preparing P L A/c, then can any addition be made on such an entry? - HELD THAT:- We find no merit in the orders of the authorities below as the amount has only been shown as an advance and not claimed as an expenditure. Now, coming to the second stand of the AO even if the said amount was contingent liability, but in view of the provision of section 43B of the Act, such amount are duly allowable as expenditure in the year of payment. However, the same is not the case of the assessee and accordingly, we direct the Assessing Officer to delete the addition - Decided in favour of assessee. Disallowance of interest being interest payable on loan advanced to subsidiary M/s. Sagar Power Ltd. - HELD THAT:- From entries passed by the assessee in its books of accounts and details furnished reflects that in the account of interest on unsecured loans with ICICI Bank , the assessee is debiting the interest quarter-wise which is due to ICICI Bank and simultaneously crediting the said account being interest on loan given to M/s. Sagar Power Ltd. Entry to entry amount is debited credited to the account. Assessee is not charging any interest due on the loan disbursed to the ICICI bank to the subsidiary company. The said interest is shown as recoverable from M/s. Sagar Power Ltd. in the final analysis, no amount has been claimed as a deduction. In these facts and circumstances, there is no merit in making the aforesaid addition in the hands of the assessee on account of interest attributable to the loan raised from ICICI Bank for the so called benefit of the subsidiary. Similarly, the loan which has been shown as due to ICICI Bank is in turn being treated as advance to the subsidiary. On such advancement of loan to the subsidiary, there is no merit in making any disallowance on account of notional interest. - Decided in favour of the assessee. Difference in gross receipt of interest - AO difference in gross receipt of interest - HELD THAT:- Issue relating to the availment of loan from ICICI bank and its advancement to subsidiary M/s. Sagar Power Ltd. in the paras above. The assessee on the other hand has not claimed the expenditure of interest due to ICICI bank and has also not shown the interest received from M/s. Sagar Power Ltd., as it had set off the interest account i.e. interest receipt from subsidiary with the interest due to ICICI bank. In these facts and circumstances, we find there is no merit in the exercise carried out by the Assessing Officer. In case the interest income is added in the hands of the assessee then, the interest expenditure which is equivalent to the interest income earned should be debited and NIL income is to be assessed in the hands of the assessee. Ground of appeal raised by the assessee is allowed.
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2020 (8) TMI 96
Revision u/s 263 - transactions referred to clause (i) of section 92BA - mandatory for AO to refer the specified domestic transaction to the Transfer Pricing officer as per section 92CA which he failed to do so - Solitary grievance of assessee as confined to the issue that since clause (i) of section 92BA has been omitted by Finance Act, 2017, w.e.f. 01.04.2017 and the effect of such omission without any saving clause of General Clauses Act, means that the above provisions was not in existence or never existed in the statute, therefore, the jurisdiction exercised by the ld PCIT under section 263 of the Act is void - HELD THAT:- As in respect of specified domestic transactions which is referred to clause (i) of section 92BA of the Act, which was omitted with effect from 01.04.2017 and the effect of such omission of clause (i) of section 92BA means that this provision never existed in the statute book, hence reference to TPO was bad in law. As the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench in the case of M/s Raipur Steel Casting India (P) Ltd [ 2020 (6) TMI 629 - ITAT KOLKATA] and there is no change in facts and law and the Revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. PCIT issued the above show cause notice u/s 263 in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act which was omitted with effect from 01.04.2017, and effect of such omission of clause (i) of section 92BA means that this provision never existed in the statute book, since clause (i) of section 92BA never existed in the statute book therefore, ld PCIT cannot exercise his jurisdiction under section 263 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. Therefore, the action of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue - Decided in favour of assessee
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2020 (8) TMI 95
Assessment u/s 153A - Addition made u/s 68 - whether in the absence of any incriminating material, can any addition be made in the hands of the assessee? - HELD THAT:- We have to see the discovery of incriminating material vis-a-vis two stages of assessment i.e. abated and non-abated assessment. It is not the dictate of KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] that in the absence of any incriminating material, in any of the years, no additions can be made. The Hon ble High Court is very clear in its findings. So, to apply the principle laid down by the Hon ble High Court (supra), it is the first step to find whether the proceedings had abated or non-abated and also to determine any incriminating material was found or not. AR before us has pointed out that no incriminating material was found and also that the proceedings are non-abated. In these facts and circumstances, following the dictate of Hon ble Delhi High Court in Kabul Chawla (supra), we hold that no addition u/s 68 of the Act is warranted. - Decided in favour of assessee.
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2020 (8) TMI 94
Addition u/s 56(2)(vii) - difference between the purchase price shown by the assessee and the DLC rate of the land in the area - HELD THAT:- When the properties in question are undisputedly shown in the books of account of the assessee as stock-in-trade and part of the closing stock, then the same would not fall in the ambit of the property as defined in explanation to section 56(2)(vii) and consequently the provisions of section 56(2)(vii) will not be applicable in the case of the assessee. Hence we do not find any error or illegality in the impugned order of the ld. LD. CIT (A). As regards the contention of the CIT D/R this is only a paper transaction, we note that the AO has not doubted the transaction either during the course of assessment proceedings or during the course of remand proceedings. Therefore, such a plea cannot be considered or accepted which is contrary to the stand of the AO. Even otherwise, the LD. CIT D/R can only support the order of the AO and cannot improve the same. Further, if the transaction itself is not a genuine transaction, then the question of applying the provisions of section 56(2)(vii) does not arise. Addition u/s 40A - disallowance of interest on account of diversion of interest bearing funds to the related party - HELD THAT:- Without going into the controversy of commercial transaction as well as the related party transaction, at the outset we note that the interest expenditure debited by the assessee in the Profit Loss account is towards the secured loans and, therefore, it is unlikely to use the secured loans other than the purposes for which the loan was taken. Further, as per the Balance Sheet, assessee is having ₹ 7.66 crores as interest free loans under the head Unsecured Loan from the Karta of the HUF and member of the HUF. Once the unsecured interest free loan amount is more than the alleged amount of advance given to these parties, then the disallowance of interest is not justified. Disallowance confirmed by the LD. CIT (A) on account of interest expenditure is deleted. - Decided in favour of assessee.
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2020 (8) TMI 93
Validity of reopening of assessment u/s 147 - nexus between reasons recorded for reopening of assessment and escapement of income - disallowance of expenditure incurred under the head business counseling charges - HELD THAT:- We find no merits in the arguments advanced by the assesee, because the Ld. AO has reopened the assessment on sound footing, which is based on fresh tangible material come to his possession in the form of information of investigation wing, which suggest escapement of income within the meaning of section 147 - there is a nexus between reasons recorded for reopening of assessment and escapement of income, which is clearly evident from reasons recorded for reopening of assessment, where the Ld. AO has brought out clear facts with reference to information received from investigation wing, the escapement of income on account of booking expenditure in the name of two non existing entities. Further, the assessment in this case was reopened beyond four years, but within six years from the end of the relevant assessment year. The original assessment has been completed u/s 143(1) of the Act. Further, when original assessment has been completed u/s 143(1) of the Act, then the assessment can be reopened within a period of six years from the end of the relevant assessment year, if escapement of income is within specified limit. In this case, there is no doubt with regard to escapement of income as per reasons recorded by the Ld. AO, which is beyond the prescribed limit provided under the Act. Once, original assessment was completed u/s 143(1) of the Act, then reopening of assessment can be made on the basis of reasons to believe that prima-facie there is escapement of income. This principle is supported by the decision of Hon ble Supreme Court, in the case of ACIT vs Rajesh Jhaveri Stock Brokers Pvt.Ltd [ 2007 (5) TMI 197 - SUPREME COURT] where it was clearly held that reasons to believe does not mean that the reasons for reopening should have been factually ascertained by legal evidence or conclusion before the reopening of assessment. Report of the investigation wing might constitute tangible material. The decision to reopen a case on the basis of report of the investigation wing cannot always be condemned or dubbed as fishing and roving inquiry. The expression reasons to believe appearing in section 147 suggest that if the Ld. AO acts as a reasonable and prudent man on the basis of information secured by him that there is a case of reopening, then section 147 can well be pressed into service and assessment can be reopen. - Reopening of assessment in this case is on valid grounds and hence, the grounds taken by the assessee is rejected. Bogus expenditure - So called expenditure incurred under the head business counseling charges and paid to M/s Sarvottam Advisory Pvt.Ltd. and M/s Avrons Consultancy Services Pvt.Ltd is non genuine expenditure booked in collusion with entry providers to reduce profit for the year, which is clearly evident from facts gathered during course of survey u/s 133A in the case of M/s Altius Finserve Pvt.Ltd and subsequent, investigation carried out during the course of assessment proceedings. Further, although, the assessee has filed affidavit of Dipen Patel to justify her case, but on perusal of affidavit filed by the Dipen Patel, we find that it is only an afterthought to circumvent the findings recorded by the Ld. AO, in light of facts gathered during the course of survey proceeding and only a self serving document. Further, the affidavit of Mr.Vishwas Joshi, dated 17/12/2018 is also a self serving document is of no help to the assesee, because Mr.Vishwas Joshi had try to contradict his earlier admissions. From the above, it is very clear that expenditure booked in the name of two entities is a bogus expenditure. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were completely right in disallowed expenditure incurred under the head business counseling charges - Decided against assessee.
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2020 (8) TMI 92
Penalty u/s 271(1)(c) - Validity of notice - additions towards unexplained cash credits - assessee has voluntarily surrendered additions, not for any of the reasons, but to buy peace and to end litigations - notice issued for one limb and penalty levied for another limb - HELD THAT:- AO has not arrived at clear satisfaction as to under which limb of provisions of section 271(1)(c) of the Act, the proposed penalty proceedings has been initiated, which is evident from the fact that there is no clear satisfaction in the assessment order and the notice is absolutely silent on this aspect. The said lapse is continued even in penalty order passed u/s 271(1)(c) which is evident from the fact that where the penalty has been levied on both limbs. It is a well settled proposition of law that penalty cannot be initiated for the limb, which is different from the limb for which proposed penalty proceedings has been initiated. Further, if the penalty proceedings has been initiated for one limb and levied under different limb, then the whole penalty proceedings become vitiate. AO has to arrived at clear satisfaction regarding the limb under which, he proposed to levy penalty before issue of notice u/s 274 r.w.s 271(1)(c) of the Act. This legal proposition is supported by the decision of Hon ble Karnataka High court in the case of CIT vs. Manjunatha cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and was upheld by the Hon'ble Supreme court, in the case of CIT vs M/s SSA's Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER]. CIT vs Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] has held that if notice issued for one limb and penalty levied for another limb then, the whole proceedings become void ab-inito and liable to be quashed. In this case, on perusal of facts, we find that the Ld. AO has failed to arrive at clear satisfaction - Decided in favour of assessee.
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2020 (8) TMI 90
Income from other sources u/s 56(2)(viib) - premium received from shareholders via-a-vis issue of equity shares and preference shares - AO has the power to change the method adopted by the assessee from one method to another method provided under Rule 11UA - HELD THAT:- In order to ascertain the market value of the shares, the assessee adopted DCF method, as prescribed under Rule 11UA r.w.s 56(2) of the Act and accordingly, the shares were issued at a premium. According to the Ld. AO, the valuation report furnished by the assessee is not realistic as the projections shown by the assessee in the valuation report were not realistic and were not achieved in actuality in the subsequent years. Whereas on the other hand the assessee has tried to justify the valuation with reference to orders book of ₹ 18.01 crores. We have perused the decisions relied upon by the assessee and are of the considered view that the issue is settled in the following cases, where it has been held that it is beyond the jurisdiction of the AO to change the method of valuation. Bombay High court, in the case of Vodafone M-Pesa Ltd. [2018 (3) TMI 530 - BOMBAY HIGH COURT] has held that the Ld. AO cannot change the method adopted by the assessee for valuing the market value of the shares from discounted cash flow method to net asset value method, which was violation of Rule 11UA and accordingly, the impugned order was to be set aside. Similarly, the co-ordinate bench in the case of Vodafone M-Pesa Ltd vs PCIT (supra) has held that the Ld. AO cannot change the method of valuation adopted by the assessee by merely relying on the actual results in the subsequent years and arbitrarily coming to the conclusion that projections were not achieved. We, therefore respectfully following the decisions as discussed above, set aside the order the Ld.CIT(A) and direct the Ld. AO to delete the additions. - Decided in favour of assessee.
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2020 (8) TMI 89
Rectification of mistake u/s 254 - disallowances of amount paid ex-employee for non deduction of tax at source u/s 194C - as per revenue payment made to Mr. Mohla, is in the nature of commission, and the assessee is required to deduct tax at source - HELD THAT:- Since, the assessee has failed to deduct tax at source on said payment, the Tribunal came to the conclusion that there is no error in disallowances of said amount u/s 40(a)(ia) of the Act. Tribunal has considered various case laws cited by the assesee, including the decision of CIT vs Kotak Securities Ltd [ 2011 (10) TMI 24 - BOMBAY HIGH COURT] while adjudicating the issue and find that the facts of those cases are not applicable to facts of present case and hence, are not specifically discussed If the bench was taken a view that the case laws cited by the parties are not relevent to the issue, then those case laws which are not relevent cannot be considered at all. Therefore, we are of the considered view that the assessee has failed to make out a case of prima-facie mistake apparent on record from the order of the Tribunal, which can be rectified u/s 254(2) of the I.T.Act, 1961. Disallowances of gifts and other expenses given to employees, dealers, customers and other business associates - Tribunal has recorded its categorical finding and discussed the issue in light of various averments made by the assesee and has also considered various case laws cited on this issue. Tribunal has recorded its categorical finding that expenditure incurred under the head gifts and other expenses given to employees etc, are in the nature of personal expenses and are not incurred wholly and exclusively for the purpose of business of the assessee. Further, if you go through the fact finding recorded by the Tribunal in light of averments made by the assesee in the miscellaneous application, we find that what is sought through the miscellaneous application is to review the decision rendered by the Tribunal in the given facts and circumstances of the case, which in our considered view is not permissible u/s 254(2) - miscellaneous application filed by the assessee on both grounds does not have merits - Decided against assessee.
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2020 (8) TMI 88
Disallowance of prior period expenses - HELD THAT:- We note that all such expenditure though relating to earlier year but having materialized during the year and in respect of which bills were received during the year therefore, the entire amount having been paid during the year, the whole of the amount is allowable during the assessment year 2011-12. Hence, we direct the assessing officer to allow on account of prior period expenses which has been crystallized during the assessment year 2011-12. Bogus purchases - HELD THAT:- AO has treated the purchases as bogus without rejecting the books of account u/s 145(3) and hence assessing officer s action is bad in law. We note that the Revenue has failed to furnish any evidence that the money has been recycled back to the assessee and in absence of such finding, the addition cannot be made by the assessing officer. No documentary evidences were furnished before the assessing officer i.e. the bill for purchases, the receipt of material, the payments by cheque, the entry made in the stock register production register and vis-a-vis all such documents, no adverse finding has been made by the assessing officer. When the sales figures shown by the assessee has been accepted in totality, the entire purchases made by the assessee cannot be held it to be bogus since it is common knowledge that sales of goods cannot taken place without purchase of goods in the first place. So, therefore, in the light of the evidences adduced to prove the genuineness of the transactions and when the fact remains that the sales has been accepted by the AO in totality, the action of the AO to disallow the entire purchases is not justifiable.We note that the assessee did purchases, manufactures the goods and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. Considering the facts narrated above and to cover the small misgivings we restrict the addition @4% of purchases. Belated payment of Employees Contribution to ESI without appreciating that the amendment to section 43B of I.T. Act is regarding Employer's Contribution and not Employee's Contribution - HELD THAT:- Employees` contribution has been paid/deposited by the assessee much before the due date of filing the return of income, thus the same is clearly allowable in view of the judgment of jurisdictional High Court in the case of CIT vs. Vijayshree Ltd [ 2011 (9) TMI 30 - CALCUTTA HIGH COURT] - Decided in favour of assessee. Addition on account of provision for wealth tax and provision for gratuity and leave encashment while computing book profit u/s 115JB - HELD THAT:- We note that Wealth-tax has not been mentioned under prohibited item in the Explanation Sec. 115JB of the Act, and only Income-tax has been prohibited and as such Wealth-tax is clearly allowable. Besides, the Provision for Gratuity and Leave Encashment are ascertained liability and hence cannot be added back in book profit.Therefore, we find no infirmity in the order passed by the ld. CIT(A). That being so, we decline to interfere in the order of ld. CIT(A), his order on this issue is hereby upheld and the ground no.3 raised by the revenue are dismissed. Accumulated losses including lapsed losses and unabsorbed depreciation of the merging company to be set off in the manner provided in section 72A - HELD THAT:- In assessee s own case [ 2018 (2) TMI 1691 - ITAT KOLKATA] therefore the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in assessee`s own case and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings.
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2020 (8) TMI 87
Exemption u/s 11 - appellant has been granted registration u/s 12AA - HELD THAT:- Similar/identical case of Shree Ramkrishna Samity [ 2015 (11) TMI 119 - ITAT KOLKATA ] had examined the issue on the retrospectivity operation of the 1st proviso to Sub-section (2) of Section 12A as hold that the insertion of the proviso to section 12A(2) of the Act has to be construed as retrospective in operation. As such the exemption claims in respect of the income for the assessment years 2003-04 to 2008-09, the assessments of which were pending on the date of registration under section 12AA of the Act on 29.10.2010 with effect from 01.04.2010, needs to be assessed under section 12A read with section 11 and 12 of the Act. As the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench in the assessee s own case and there is no change in facts and law and the Revenue is unable to produce any material to controvert the above said findings. Therefore, respectfully following the decision of Co-ordinate Bench we allow grounds of appeal raised by the assessee.
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2020 (8) TMI 86
Deduction u/s. 35D - Addition on the assumption that the shares may have been allotted only to selected Qualified Institutional Buyers ( QIBs ) - disallowing deduction claimed u/s 35D in respect of expenses incurred in connection with the QIP on the alleged ground that the issue of shares to QIP does not tantamount to public subscription and such capital expenses are not eligible for deduction u/s. 35D - whether CIT(A) erred in disallowing the expenses in connection with QIP on the ground that the expense may not be allowable in view of section 40(a)(i)/(ia) ? - HELD THAT:- As can be seen from the list of QIBs to whom shares are issued, the shares are not issued to any of the aforesaid category. Thus QIBs, not being promoters, promoter group, subsidiaries and associates of the company would qualify as public . As specified in clause 40A(ii) of the listing agreement, public shareholding can be increased by any of the modes specified therein to comply with Rule 19(2) and 19A of SCRR. One such note is the issue of IIP in accordance with Chapter VIIIA of the SEBI-ICDR. Chapter VIIIA has been included to provide for fresh issue of shares to comply with minimum shareholding requirement in Rule 19(2) and 19A of SCRR. Reg. 91B defines IPP as a further public offer made only to QIBs. These regulations provide that when a company has a public shareholding lower than the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. It thus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must be in compliance with the requirements of public shareholding. That a section of public qualifies as public has been clarified in Nitta Gelatine India Ltd. [ 2016 (10) TMI 406 - KERALA HIGH COURT] and Andhra Chamber of Commerce [ 1964 (10) TMI 19 - SUPREME COURT]. Facts being identical, we follow the order of the Tribunal in the case of Deccan Chronicle Holdings Ltd [ 2015 (8) TMI 914 - ITAT HYDERABAD and in view of the discussion hereinabove hold that the appellant is eligible for deduction u/s 35D - Decided in favour of assessee.
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2020 (8) TMI 85
Unexplained deposits - Genuineness of earnest money received against sale of agriculture land - Time lag of 11 months for getting the sale deed registered after the date of agreement to sale - Casting the onus upon the assessee for ensuring the filing of return by the purchasers - HELD THAT:- No good reason to accept the claim of the revenue based on suspicion, surmises and conjectures. What is normal for a person today may vary from what is contemplated to be normal in another day and time. So for the tax authorities to conclude that three months time lag was a normal time, no facts or reasoning has been brought on record. Further, no such discretion or authority has been given by the Statute to arbitrarily and randomly conclude what is a reasonable time without caring to refer to relevant facts. Accordingly, on a careful consideration of the orders of the tax authorities, the reasons set out therein, the consistent arguments on behalf of the assessee, extracted in the impugned order and canvassed in the present appeals alongwith the statements of the purchasers on record which I notice have remained largely ignored and the Compromise Deed entered with by the assessees and parties, find that the assessees have more than adequately explained the sources of deposits of ₹ 40 lacs each in their accounts. No contrary fact or evidence has been referred to by the tax authorities to justify the discarding of the evidences and the claims. The orders based on mere suspicions, conjectures and infact biases cannot be upheld. Satisfied by the explanation offered, the additions are directed to be deleted. - Decided in favour of assessee.
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2020 (8) TMI 84
Assessment of trust - Addition of capital gains - Capital gain addition on sale of land by the assessee, as per section 45 r.w.s 2(47) to the extent remaining unutilized for charitable purposes u/s 11(1A) - benefit of utilization for charitable purposes allowed u/s 11 being amount paid to the Government under the agreement - HELD THAT:- Role of the assessee in the Tripartite agreement, and the supplementary agreements, was receiving funds arranged for by the State government by getting its land sold through PUDA. The amount remitted to the assessee under the agreement, we have no doubt in holding therefore, was in the nature of grant received from the government Without dealing with the manner of taxation of the grants i.e on accrual or receipt basis, either ways nothing was taxable in the impugned year. As is evident from the facts narrated above, the initial agreement transferring possession of land to PUDA for development and sale and estimating revenue generation of ₹ 183 Crs ,was entered on 30-04-2002. The supplementary agreement, increasing the expected Revenue to be generated from the sale of land and remitted to the assessee, to ₹ 420 Crs was dt 01-07-2011. The second supplementary agreement did not effect any increase in the expected Revenue from sale of land. Even by the concept of taxability on accrual basis the grants did not accrue to the assessee in the impugned year. Further the facts demonstrate that except for an amount of ₹ 30 Crs .which was settled under the second supplementary tripartite agreement during the impugned year Dt.07-08-12,to be paid to the state government, all other amounts were received by the assessee in the preceding years. Therefore even by the concept of taxability on receipt of funds ,no amount was taxable in the impugned year except for ₹ 30 Crs. This amount ,we have noted from the agreement ,was stated to be paid to the state government in compliance with the amended and enlarged objectives of the assessee society for engaging with other institutions in the state for providing health care education and or facilities. The assessee had also provided a utilization certificate to this effect before the CIT(A),considering which he had treated the amount as applied for purposes of charity as per section 11 - DR has neither been able to controvert the aforestated facts nor has pointed any infirmity in the findings of the Ld.CIT(A).Therefore by any concept of taxation of income also, i.e accrual or receipt ,none of the amounts of funds due to or received by the assessee under the Tripartite agreement was taxable in the impugned year. Since we have held the amounts received under the tripartite agreement as being in the nature of grants from the government which did not accrue during the impugned year and not capital gain earned by the assessee, we do not find it relevant to adjudicate the issue raised in point no.(iv) of para 11 above relating to taxability of unutilized capital gains u/s 11 which capital gain was not received by the assessee at all. We hold that no capital gain was earned by the assessee under the tripartite agreement dt.30-04-2002 ,that in fact the assessee had received grants from the government under it, no portion of which was taxable in the impugned year either on receipt or accrual basis. - Decided against revenue.
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Securities / SEBI
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2020 (8) TMI 83
Failure to close the trading window - provisions of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders mentioned in Schedule B read with Regulation 9(1) of PIT Regulations, 2015 - As alleged that the acquisition of AIMIN by Ecap was a price sensitive information which had come into existence on January 25, 2017 upon signing of Term Sheet - HELD THAT:- Price movement of the scrip of EFSL at the relevant point of time. Corporate announcement was made on the platform of BSE at 18:56:48 hours on April 05, 2017 i.e. after the market had closed on the said day. The scrip of EFSL had closed at ₹ 167.90 on the said day. However, I note that the scrip had opened at ₹ 175.95 the next day. This shows that the price of the scrip of EFSL had registered a spike of 4.79% on April 06, 2017. EFSL had made another announcement on April 06, 2017 wherein it had informed BSE and NSE that the Insurance Regulatory Development Authority of India ( IRDAI ) had accepted the registration application form IRDA/R2 of Edelweiss General Insurance Company, a wholly owned subsidiary of EFSL, for carrying on business as a general insurance company in India ( IRDAI Approval ). The said information was disseminated on BSE at 13:40:34 on April 06, 2017. Therefore, the said information cannot be said to have had a role in price spike observed at the time the market opened. In light of this, I am of the view that the acquisition of AIMIN by Ecap was not only a price sensitive information but also was effective in pulling up the price of the scrip of EFSL. From this angle note that the announcement considered to be not UPSI is grossly misconceived. Term sheet has fructified and transformed into a final transaction by way of an SPA. Therefore, hold it not incorrect to take the view that the UPSI had come into existence on the day of signing of Term Sheet itself. In spite of the above, note that the allegation in the present matter is non closure of trading window which admittedly had not been closed, therefore, it seldom matters when the UPSI had actually begun. There was certainly a duty cast upon the Noticee to close the trading window in view of the existence of UPSI which the Noticee had admittedly failed to comply with. Therefore, hold that the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015. Whether the Noticee is liable for penalty? - As established in the pre-paragraphs, the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015.Therefore, the Noticee is liable for a penalty under Section 15HB of SEBI Act. In view of the contentions of the Noticee regarding technical violation and mitigating factors as prescribed in Section 15J of the SEBI Act, 1992, it became necessary to understand the repetition, if any, of the violation committed by the Noticee. To ascertain the same, the Noticee was advised to furnish information on past closure of trading window since the commencement of PIT Regulations, 2015 when the onus of compliance shifted to the Compliance Officer. The practice of merely making the relevant employees cognizant of their responsibilities does not tantamount to closure of trading window as has been expected in the law. If mere intimation of the people privy to the information is what is expected then the law would have been designed in such a fashion. Any short cut in the practices to a clearly laid down law is not acceptable - law casts a responsibility on the compliance officer to take a call on Closure of trading window and to disseminate the same to the stock exchanges. As incidentally note that the Noticee has admittedly begun intimating stock exchanges on trading window closure only from January 2019. From the replies of the Noticee, find non-compliance on the part of the Noticee by failing to close trading windows when necessary as per law. Therefore, there were repeated instances wherein the Noticee had failed to close the trading window. In view of the above the argument of the Noticee that there was no repetition of violation is not acceptable. A repetitive violation, in disregard to the applicable provisions of law, cannot be construed to be a technical violation. Material/facts on record, the reply submitted by the Noticee and also the factors mentioned in the preceding paragraphs, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, hereby impose a penalty of ₹ 5,00,000/- (Rupees Five Lakh only) on the Noticee. Said penalty is commensurate with the lapse/omission on the part of the Noticee. Noticee shall remit / pay the said amount of penalty within 45 days of receipt of this order through online payment facility available on the website of SEBI - In the event of failure to pay the said amount of penalty within 45 days of the receipt of this Order, recovery proceedings may be initiated under Section 28A of the SEBI Act for realization of the said amount of penalty along with interest thereon, inter alia , by attachment and sale of movable and immovable properties.
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Service Tax
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2020 (8) TMI 82
Direction to the respondent no.2 to consider the petitioner s representations dated 29th January, 2020, 31st January, 2020 and the email dated 24th June, 2020 - amendment/modification of the categorization of her application as litigation instead of voluntary in the statement filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- The petition is disposed of with a direction to the respondent no.2 to decide the petitioner s representations dated 29th January, 2020, 31st January, 2020 and the email dated 24th June, 2020, after giving an opportunity of hearing to the petitioner, within three weeks in accordance with law. Issue Notice.
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2020 (8) TMI 81
Rejection of declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejected on the sole ground that the demand was neither quantified nor communicated to the petitioner on or before 30th June, 2019 - HELD THAT:- In the opinion of this Court, a liberal interpretation has to be given to the Scheme as its intent is to unload the baggage relating to legacy disputes under the Central Excise and Service Tax and to allow the businesses to make a fresh beginning - Since it is the petitioner s case that she had admitted her liability to pay service tax on 18th May, 2018 itself, this Court is of the view that the respondents should have given an opportunity of hearing to the petitioner before rejecting the declaration dated 29th December, 2019 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The impugned order dated 26th February, 2020 is set aside and the designated committee is directed to decide the petitioner s application after giving an opportunity of hearing to the petitioner - list the matter before the designated committee on 13th August, 2020 at 11.00 A.M.
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2020 (8) TMI 80
Reverse charge mechanism - Banking other financial services - recipient of services or not - services provided by the Foreign Banks situated outside India - extended period of limitation - October, 2010 to March, 2015 - whether the Foreign Banks have provided any service of transfer/exchange of documents and transfer of money relating to exports made by the exporters in India, who receive money through the Appellant Bank against the said export? HELD THAT:- The nature of the transactions that take place when an exporter in India exports goods to an importer outside India has been described in the preceding paragraphs. The Appellant Bank provides service to the exporters by sending the export documents to the bank of the importer abroad and collects payment. Thus, the role of the Appellant Bank is to settle the payment relating to export/import of trade. For performance of such activity, the Appellant Bank charges service tax to the exporters and there is no dispute about the said charges in this Appeal. The Appellant Bank cannot be said to be the recipient of service for the activities undertaken by the Foreign Banks situated outside India, the charges for which are deducted at source on the export bill. The Appellant Bank merely acts on behalf of the Indian exporter and facilitates the service. The Appellant Bank, therefore, would not be liable to pay service tax under the reverse charge mechanism. It is, thus, clear that where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of sub-section (1) of section 67. What needs to be noted is that each of these refer to where the provision of service is for a consideration , whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a consideration for the provision of such service. Explanation to sub-section (1) of section 67 defines consideration to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or any amount retained by the lottery distributor or selling agent. It is clear from the aforesaid definition of consideration that only an amount that is payable for the taxable service will be considered as consideration - The Appellant Bank has not paid any consideration to the Foreign Bank as is clear from the factual position emerging out of the export trade and, therefore, also the Appellant Bank cannot be said to be the recipient of any service by the Foreign Bank. The Indian Bank is not the recipient of any service rendered by the Foreign Bank and, therefore, there is no liability to pay service tax on a reverse charge mechanism. Appeal allowed - decided in favor of appellant.
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2020 (8) TMI 79
Levy of service tax - Franchisee Service - Representational right - receiving and distribution of communication signals. - Sharing of 20% revenue to Siti Cable - amendment made in the definition of franchise under section 65(47) of the Finance Act with effect from June 16, 2005 - amendment is for the reason that has persuaded the Principal Commissioner to drop the demand of service tax for the period from July 1, 2003 up to June 16, 2005 - extended period of limitation. Whether the service contemplated under the agreements is a franchise service as contended by the Department or a service in the nature of supply of tangible goods for use w.e.f. May 16, 2008, as contended by Siti Cable? HELD THAT:- Franchise service has been defined under section 65(47) of the Finance Act to mean an agreement by which the franchisee is granted a representational right to provide service or undertake any process identified with the franchisor, whether or not a trademark, service mark, trade name or logo or such symbol, as the case may be, is involved - what is important to note is that the party should be granted a representational right to provide service or undertake any process identified with the franchisor. In other words, if the condition relating to representational right is not satisfied, there can be no franchise service. Representational right means a right that is available with the franchisee to represent the franchisor and in that case the franchisee loses its individual identity and is known only by the identity of the franchisor . It is not possible to hold that the service contemplated under the agreement is a franchise service. - Demand with interest and penalty set aside.
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2020 (8) TMI 78
Condonation of delay of 289 days in appeal before the tribunal and delay of 24 days before the commissioner (appeals) - The company were under liquidation proceedings - 100% EOU Software Technology Park Scheme - refund of input service tax credit used in the export of output services - October to December 2013 - HELD THAT:- the delay in filing the appeal has been satisfactorily explained. After going through the grounds of appeal, I find that there is no intentional and deliberate delay in filing the appeal and the delay occurred on account of the reasons stated in the application which is satisfactorily explained. In view of this, I condone the delay by allowing the COD application. Delay of 24 days before the commissioner (appeals) - Held that:- The Department has not brought any evidence on record to prove that the Order-in-Original No. 54/2016 dated 18/03/2016 passed by the Assistant Commissioner of Central Tax, Bangalore was received by the appellant but the respondent has only proved the dispatch of the Order-in-Original and has not proved the receipt of the same. Moreover, the company during the relevant period was passing through a difficult phase of their business and was suffering loss of business and many employees were left the service of the company and there was relocation of the company s premises and shifting of various assets and also the company was going through the voluntarily liquidation process. The rejection of the appeal by the learned Commissioner (Appeals) is not sustainable in law - the delay of 24 days in filing the appeal before the Commissioner (Appeals) is condoned and the matter remanded back to the Commissioner (Appeals) with a direction to decide the same on merit within one month after receipt of the certified copy of this order, after following the principles of natural justice and after affording adequate opportunity to the appellant.
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Central Excise
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2020 (8) TMI 77
CENVAT Credit - violation of Section 5A(1A) of the Act and Rules 3(1) and 6(1) of the Central Excise Rules, 2002 - applicability of N/N. 65/95 dated March 16, 1995 - whether Notification No. 65/95-CE is a notification which grants exemption absolutely as envisaged under Section 5A(1) of the Act and consequently sub-section (1A) of Section 5A is attracted and therefore the appellant was bound to avail exemption granted by the said notification and the Cenvat credit availed was irregular, being impermissible as per Rule 6(1) of the Cenvat Credit Rules? HELD THAT:- Section 5A (1) of the Act confers power upon the Central Government to exempt either absolutely or subject to such condition which are to be fulfilled before or after removal . Notification No. 65/95-CE comes under the second limb of Section 5A, i.e., subject to such condition which are to be fulfilled before removal - Section 5A(1A) applies only in cases covered by the first limb of Section 5A (1) of the Act, i.e., when an exemption notification issued thereunder grants exemption absolutely without laying down any condition for the same to be satisfied. Such being not the case in case of Notification No. 65/95-CE, the provisions of Section 5A(1A) cannot have application in case of the said notification. Hence, the reason contained in the impugned order that since the appellant had a workshop in the factory, the goods were manufactured therein and were used for maintenance and repair of machinery in the said factory, the exemption granted under Notification No. 65/95-CE was absolute and not conditional in the case of the appellant, is erroneous and not supported from Section 5A of the Act. It is settled by decisions of Courts and the Tribunal that in case of a conditional notification, an assessee has the option of either availing or not availing the benefit under the subject notification - reliance can be placed in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S FEDERAL MOGUL TPR INDIA LTD. [ 2015 (8) TMI 308 - KARNATAKA HIGH COURT] . In the premises, the finding in the impugned order that availment of Cenvat credit by the appellant during the material periods was by contravening the provisions of Rule 6(1) of the said Rules is incorrect and unsustainable. There is no irregularity or wrong availment of Cenvat credit by the appellant. The appellant had the option to avail or not to avail the exemption under Notification No. 65/95-CE and since it paid duty on the goods manufactured without availing the exemption, the appellant was eligible to avail the Cenvat credit involved - There is no material disclosed in the show cause notice to establish that the requirements laid down in either Section 11D(1) or Section 11D(1A) are satisfied in the instant case. There is no material to evidence that the appellant has collected any amount by way of duty than assessed/determined and paid by it in respect of the subject goods. Further, since Notification No. 65/95-CE is conditional and the appellant has chosen not to avail the exemption thereunder, it cannot also be said that the appellant has collected any amount as representing duty on goods which are wholly exempt from duty or are chargeable to nil rate of duty. Hence, there can be no application of Section 11D in the instant case. The appropriation of ₹ 24,66,98,505/- and ₹ 2,66,46,006/- respectively by the impugned order is also therefore erroneous and cannot be sustained - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (8) TMI 76
Service of notice - time limitation - Escaped assessment of tax - escaped turnover - stand of the respondent is that the surprise inspection held in the business premises of the petitioner revealed certain suppressions - Section 27 (1) (a) of the TNVAT Act, 2006 - HELD THAT:- The stand of the learned Special Government Pleader is that since the surprise inspection took place in the year 2016, this Court ought not to compute the limitation period from 30.06.2012. I am not able to agree. Even according to the respondent, the inspection took place in the year 2015; nothing stopped the respondent from taking action for assessing the escaped turnover immediately thereafter. Even if the respondent had taken action in the year 2016-2017 that would have been within the limitation period. Not having done so, the issuance of notice on 28.08.2018 after the expiry of six years limitation period, is not justifiable. The impugned proceedings in this Writ Petition stands quashed only on the ground of limitation - Petition allowed.
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