TMI Tax Updates - e-Newsletter
August 9, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. VALUATION AND INPUT TAX CREDIT: ADVANCE RULING SET ASIDE BY AAAR

   By: Dr. Sanjiv Agarwal

2. Problems in new portal forcing tax payers to seek adjournment.

   By: DEVKUMAR KOTHARI

News

1. No Ban on Import of Toys

Notifications

GST - States

1. 26/2021-State Tax - dated 6-8-2021 - Delhi SGST

Amendment in Notification No. 11/2021- State Tax, dated the 20th July, 2021

2. 421/2021/01(120)/XXVII(8)/2021/CTR-03 - dated 19-7-2021 - Uttarakhand SGST

Amendment in Notification No. 424/2019/04(120)/XXVII(8)/2019/CTR-06 dated 31st May, 2019

3. 420/2021/01(120)/XXVII(8)/2021/CTR-02 - dated 19-7-2021 - Uttarakhand SGST

Amendment in Notification No. 525/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017

4. 419/2021/01(120)/XXVII(8)/2021/CTR-01 - dated 19-7-2021 - Uttarakhand SGST

Amendment in Notification No. 514/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017

5. 418/2021/01(120)/XXVII(8)/2021/CT-27 - dated 19-7-2021 - Uttarakhand SGST

Uttarakhand Goods and Services Tax (Sixth Amendment) Rules, 2021.

6. 417/2021/01(120)/XXVII(8)/2021/CT-25 - dated 19-7-2021 - Uttarakhand SGST

Amendments in the Notification No. 430/2019/3(120)/XXVII/ 8)2019/CT-21 dated 31/05/2019

7. 410/2021/01(120)/XXVII(8)/2021/CT-18 - dated 19-7-2021 - Uttarakhand SGST

Amendment in notification of the Government of Uttarakhand, No. 524/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017 (as amended from time to time).

Highlights / Catch Notes

GST

• Court Grants Bail Amid Tax Credit Fraud Investigation; Presumption of Innocence Upheld.

  Case-Laws - HC : Seeking for grant of regular bail - wrongful availment or utilization of input tax credit - It appears from the counter in both the bail applications filed by the respondent’s authorities that it will take considerable time to complete the investigation. It is settled principle of law that unless guilt of the accused is proved, it has to be presumed that the accused is an innocent. - Bail granted subject to conditions - HC
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Income Tax

• Gratuity and leave encashment in trusts should be seen as 'applied' for statutory compliance, not 'spent.'.

  Case-Laws - AT : Disallowance of provision for gratuity and leave encashment - in case of trust, the meaning ‘applied’ need not be construed as ‘spent’. It includes the necessary provisions required to be made as per statutory requirement. - AO directed to allow the provision for gratuity and leave encashment as applied for the object of the trust. - AT
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• Court Rules Depreciation on Goodwill Allowed Post-Amalgamation; 5th Proviso Not Applicable as No Prior Claim Made.

  Case-Laws - AT : Disallowance on account of depreciation on goodwill - Scheme of Amalagamation adopted - the 5th proviso was inserted in order to prevent double claim of the depreciation in respect of the same asset. But these are not the facts in the present case before us as the amalgamating company did not claim any depreciation on the goodwill and therefore the same can not be disallowed - assessee has rightly claimed the depreciation on goodwill. - AT
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• Appeal Validity Confirmed if Admitted Taxes Paid Later u/s 249(4); Appeal Can Proceed on Merits.

  Case-Laws - AT : Appeal before CIT(A) - Non deposit of admitted tax/advance tax as provided u/s 249(4) - Payment of tax is mandatory but the requirement of paying such tax before filing appeal is only directory and where the defect in the appeal, being the non-payment of such tax, is removed, the earlier defective appeal becomes valid, applies equally to clause (b) sub-section (4) of section 249 - where the admitted taxes are paid at a later point of time, then the appeal of the assessee should be considered as properly instituted and should be heard and decided by the CIT(Appeals) on merits. - AT
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• Assessee's Explanation for Unexplained Bank Deposits Accepted, Additions Deleted by Authorities.

  Case-Laws - AT : Unexplained money deposited in bank account - stand of the assessee was that the cash deposited in his bank accounts are from the prospective buyers of vehicles/agricultural implements from where, he is working as Exchange Manager. Later on the cash was withdrawn and handed over to the employer i.e., Automobile Company - Accepting the contention, additions deleted - AT
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• Business Loss Offset Allowed Against Surrendered Income in Property Dealings Case, Classified as Business Income.

  Case-Laws - AT : Disallowance of the set off of the business loss with surrendered income - the surrendered income, in respect of which the entries had already been made in the books of accounts of the assessee in relation to the property income from property dealing, amount to business income and it allows the set off of the business loss - AT
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• Tribunal Rules Section 43CA Amendments Apply Retroactively from April 1, 2014, Affecting Property Valuation for Tax Purposes.

  Case-Laws - AT : Addition u/s 43CA - difference between agreement value of the flats and market value determined by the DVO - in the light of reasoning given for insertion of the proviso and exposition by the Tribunal for retrospective application of the said proviso, have no hesitation in holding that the proviso to sub-section (1) to section 43CA and the subsequent amendment thereto relates back to the date on which the said section was made effective i.e. 01/4/2014. - AT
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• Court Rules 10% Tolerance Limit u/s 56 of Income Tax Act Applies Retroactively for Valuation Differences.

  Case-Laws - AT : Income from other sources u/s 56 - purchase was lower than the ready reckoner rate - difference between value declared and value as per stamp value authority is less than 10% - The enhancement of tolerance limit from 5% to 10% under Section 50C so as to 56(vii)(b) would be applicable retrospectively - AT
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Customs

• Customs Duty Rates: Tello Drones Under Heading 9503, AGRAS T 16 and Mavic 2 Under 8802.

  Case-Laws - AAR : Classification of imported goods - Drones - Tello drones with or without camera would merit classification under heading 9503 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @ 60% adv“ IGST @ 18%, Social Welfare Surcharge @ 6% - Both AGRAS T 16 and Mavic 2 drones would merit classification under heading 8802 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @ 10%, IGST @ 5%, and Social Welfare Cess @ 1%. However, if any import is made for personal use, the rate of IGST would be 28% and it would also attract a GST compensation cess. - AAR
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• Advance Ruling Denied: Reapply for Each Product Separately Under Tariff Chapter 23, Heading 23.09 for Compliance.

  Case-Laws - AAR : Scope of application for advance ruling - Seeking ruling on classification of various items - 16 items grouped under 4 categories - if advance rulings in respect of multiple goods/items/products are sought in one application, then it would be well high impossible to render a ruling within the time prescribed in the statute. I can appreciate that there would be instances where the items/products etc. are so similar that they can be combined in a single application. - Therefore, there is no doubt in my mind that the applicant needs to reapply separately in respect of each of these 16 products with sufficient details to justify compliance of the conditions laid down in the note to chapter 23 of the tariff in respect of the heading 23.09. - AAR
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• Court Orders Customs Duty Refund with Interest: 6% if Paid in 3 Months, 12% if Delayed.

  Case-Laws - HC : Refund claim towards excess custom duty paid - same amount paid twice through oversight and bonafide mistake - The petitioner is entitled to get refund along with interest @ 6 % per annum till the amount is paid. This rate of interest would be applicable, if the amount is paid within a period of three months. If the amount is not paid within a period of three months, the respondent is liable to pay interest @ 12% per annum subsequent thereof - HC
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• Commissioner's Delay in Issuing Show Cause Notice Due to Translation Needs Violates 90-Day Rule for Customs Brokers.

  Case-Laws - AT : Levy of penalty on Customs Broker - Period of limitation - The excuse pretended by the adjudicating authority that some of the documents required translation, is no ground to endorse inaction in the non-issuance of SCN within 90 days. The authorities are expected to adhere to the time limit and the Regulation in question does not carve out any exceptions and hence, the reasons given by the Commissioner cannot be accepted - AT
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• Gold Confiscated: Tribunal Upholds Seizure Due to Non-Compliance with Customs Rules and Notification No.12/2012.

  Case-Laws - AT : Smuggling - gold biscuits - Before this Tribunal, appellant has produced the original copy of the invoice issued by Malabar Gold and Diamonds and the said bill shows that the appellant is the owner of the gold which was purchased by him only 2-3 days before the start of the journey from Bahrain. But since he was not eligible to bring gold in terms of Notification No.12/2012 and the same was not declared, the impugned goods have rightly been confiscated. - AT
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Corporate Law

• Court Can Order Winding Up of Company Even if Struck Off Under Companies Act 1956, Sections 560(5) & (6.

  Case-Laws - HC : Seeking for an order of winding up of the respondent-company - As pointed out that striking of the name of the company should not come in the way of passing an order of winding up in light of consequences of an order of winding up and the power of the company court in proceedings subsequent to winding up - In fact, even under the provisions of the Companies Act of 1956 under section 560(5) and (6), the power of the court to order for winding up even when the company is struck off from the register was available. - HC
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IBC

• CIRP under IBC Section 7: Debt Acknowledgment Extends Limitation Beyond 3 Years Post NPA Declaration.

  Case-Laws - SC : Period of limitation for filing of Application for initiation of CIRP - an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. - SC
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• Interest-Free Loans Qualify as Financial Debt under IBC Section 5(8); Petition Dismissal Overturned and Reconsidered.

  Case-Laws - SC : Interpretation of statute - Financial creditor or not - The definition of ‘debt’ is also expansive and the same includes inter alia financial debt. The definition of ‘Financial Debt’ in Section 5(8) of IBC does not expressly exclude an interest free loan. ‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body. - The order of the Adjudicating Authority, dismissing the petition of the Appellant under Section 7 of the IBC is also set aside. The petition under Section 7 stands revived and may be decided afresh, in accordance with law and in the light of the findings above. - SC
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Service Tax

• Chit fund business denied service tax refund due to four-year delay in claim filing; no interest for late action.

  Case-Laws - AT : Refund of service tax paid - chit fund business - There is a clear four-year delay in filing the refund claim - the appellant cannot take advantage of its own mistake of filing a delayed refund claim and thus cannot claim the interest for that delayed period during which time it slept over its rights. - AT
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• Appellant Clears Tax Liability u/s 73(3) of Finance Act 1994, Avoids Penalty Due to Explanation 2.

  Case-Laws - AT : Levy of penalty - In the light of section 73(4) of Finance Act, 1994, which is the sole ground for denying recourse to section 73(3) of Finance Act, 1994, it is clear that the appellant herein has discharged tax liability in the manner contemplated by section 73(3) of Finance Act, 1994, upon intimation by the jurisdictional central excise officers. Consequently, in accordance with Explanation 2 therein, the assessee is not liable to any penalty under Finance Act, 1944. - AT
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Central Excise

• Court Overturns CENVAT Credit Fraud Order; Violated Natural Justice by Ignoring Appellant's Evidence and Relying on Third-Party Data.

  Case-Laws - AT : CENVAT Credit - Bogus firms - fraudulent Cenvat Credit passing chain to facilitate availment of Cenvat Credit without actual manufacture and supply of duty paid goods - validity of statements relied upon - The order under challenge is held to be passed in violation of statutory principles as that of principles of natural justice. The order is also held to be absolutely presumptive having been passed without appreciation of evidence produced by the appellant, but by relying upon the third party evidence - Demand set aside - AT
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Case Laws:

• GST

• 2021 (8) TMI 306
  Principles of natural justice - validity of assessment order - no notice of personal hearing was issued before resorting to the impugned action - non-adherence to the mandatory provisions of sub-section (4) of Section 75 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- In order to adjudicate the issue in the present Writ Petition, it may be appropriate to refer to Section 75 of the CGST Act, 2017, which deals with the general provisions relating to determination of tax. According to sub-section (4) of Section 75 of the Act, an opportunity of hearing should be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person - In the instant case, though the petitioner herein submitted his reply to the notice issued by 2nd respondent prior to passing the impugned order, the Assessing Authority, while referring to the objections raised therein, simply stated that they were not considered, and eventually, determined the liability as proposed in the show cause notice. In the considered opinion of this Court, 2nd respondent herein, before doing so, ought to have afforded an opportunity of hearing to the assessee, as mandated under sub-section (4) of Section 75 of the CGST Act, 2017. In the case on hand, 2nd respondent adhered to the said provision of law in breach. The said action is also a patent violation of principles of natural justice, as such, the contention of the learned Government Pleader as regards the availability of alternative remedy of appeal under Section 107 of the CGST Act, 2017, deserves to be rejected and is, accordingly, rejected. Matter remanded to 2 nd respondent for consideration of the issue afresh after affording opportunity of hearing to the petitioner - petition allowed by way of remand.

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• 2021 (8) TMI 304
  Seeking for grant of regular bail - wrongful availment or utilization of input tax credit - Section 132 (1) (i) read with Section 132 (1)(h)(c) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Admittedly, the petitioner herein was arrested on 02.11.2020 and since then he is jail. As discussed above, the respondent s authorities have to collect evidence and record statements of witnesses. It appears from the counter in both the bail applications filed by the respondent s authorities that it will take considerable time to complete the investigation. It is settled principle of law that unless guilt of the accused is proved, it has to be presumed that the accused is an innocent. This Court is inclined to grant regular bail to the petitioner herein on the conditions imposed - the petitioner - Accused shall execute a personal bond for Rs. 25,000/- with two (02) sureties for a like sum each to the satisfaction of the Special Judge for Economic Offences, Nampally, Hyderabad - application allowed.

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• Income Tax

• 2021 (8) TMI 310
  Reopening of assessment u/s 148 - validity of explanation A(a) of Notification 20/21 under the Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020 - Petitioners states that despite enforcement of the amended Income Tax Act, 1961 with effect from 01.04.2021, the Respondents purport to invoke repealed provisions of Section 148 of the Income Tax Act without following provisions of amended Act, issuing notice dated 07.06.2021 - HELD THAT:- Issue notices to the Respondents and Attorney General of India, returnable on 02.08.2021. Mr. Walve, Advocate waives service on behalf of the Respondents. Till the returnable date, no further action be taken based on the impugned notice dated 07.06.2021.

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• 2021 (8) TMI 301
  Disallowance of depreciation on cars for personal use - Addition of 20% of depreciation on the two cars - HELD THAT:- There is no dispute on the fact that the assessee did use the vehicles for personal purpose which is evident from the fact that a sum from travelling and conveyance expenses was voluntarily disallowed by the assessee. Section 38(2) which clearly provides for making disallowance, inter alia, of depreciation on account of non business use also. Thus hold, in principle, that the AO was justified in making disallowance of depreciation on motor cars purchased during the year. However, considering the entire facts and circumstances of the case prevailing in the instant case, we are satisfied that it would be reasonable to restrict the disallowance at 10% of depreciation instead of 20%, which will be in addition to the disallowance of Rs. 50,000/- offered by the assessee itself. This ground is, thus, partly allowed. Addition on account of construction cost of non-80IB project - AO observed that the assessee had shown huge profit in 80IB project at around 60% as against around 7% in non-80IB project - HELD THAT:- There can be several reasons for such a nominal increase in the cost of construction depending upon the quality of construction etc. AO has not pointed out any defect in the details furnished by the assessee showing the construction cost per sq.ft. computed in Gold Ember project at Rs. 1531/- per sq.ft. Neither the books of account have been rejected. A simple plus and minus mechanism has been followed for sustaining the addition of Rs. 21,15,552/-. In our considered opinion, this type of exercise for making and sustaining the addition cannot be countenanced in view of the fact that the assessee furnished all the necessary details towards costs incurred in the eligible as well as non-eligible projects, which were not faulted with and further the AO did not reject the books of account by pointing out any mistake therein. We are of the considered opinion that no addition is called for on this score. The addition is hereby deleted. Addition towards loss on account of embezzlement - HELD THAT:- The amounts so collected and embezzled by Shri Rahul Kulkarni have been credited to the respective parties accounts with the debit to loss on embezzlement account. Before such entries, the assessee debited full amount of sales including the amount embezzled to the accounts of respective parties accounts, which was credited to the Sales account. It means that the amount embezzled by Shri Rahul Kulkarni has been accounted for in the figure of Sales offered by the assessee and since the amount was embezzled, the assessee claimed a deduction for the same. On a specific query, the ld. AR submitted that whereabouts of Shri Rahul Kulkarni were not known as he left the place and there is no further information about him. On the question of status of the police complaint, the ld. AR submitted that nothing has transpired so far towards recovery of any amount. These facts indicate that the amount embezzled by Shri Rahul Kulkarni has become irrecoverable and the same should be allowed as deduction. We, therefore, overturn the impugned order and grant deduction for the amount embezzled. It is clarified that as and when the recovery is made from Shri Rahul Kulkarni, the same should be offered for taxation. Appeal is partly allowed.

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• 2021 (8) TMI 300
  Deduction u/s. 10AA - unclaimed balances written back, was treated to be a part of export turnover for the purpose of calculation of deduction - HELD THAT:- Assessee had not claimed any deduction u/s.10AA of the Act in the immediately preceding year and the write back of such expenses does not fall under the definition of export turnover given in Explanation to section 10AA of the Act. It remains an admitted fact that in the immediately preceding year, the assessee suffered losses and there is no reason not to believe the explanation on behalf of the assessee that due to such losses, the assessee did not claim any deduction u/s. 10AA of the Act in the immediately preceding year, i.e., F.Y. 2008-09. It is, therefore, clear that in computing the deduction u/s. 10AA for the current year, the write back of the expenses have to be considered as a part of income, inasmuch as, the income on account of write back of unclaimed expenses is accrued to the assessee only due to the export business and there is direct nexus of export business of assessee and the accrual of income, in respect of which, the expenses were shown in the preceding year and such unclaimed expenses were written back for this year. It is not the case of the Revenue that the expenses had no relation to export business of the assessee in the earlier year. We, therefore, conclude that the authorities below are not correct in reducing the deduction u/s.10AA of the Act by such an amount which was written back by the assessee on account of unclaimed balances written back. Set off of the brought forward business losses and unabsorbed depreciation of the eligible unit against profit of the business of eligible unit before allowing deduction u/s.10AA - HELD THAT:- The provisions of section 10A are pari materia with the provisions of section 10AA and therefore, the claim of the assessee for not reducing the brought forward losses from the profit of business of current year before allowing deduction u/s. 10AA is proper and has to be considered in favour of the assessee. For these reasons, we allow ground No. 1 to 3 of appeal. Grant of credit of tax deducted at source - Whether or not it arises from the assessment order, when once the assessee raised the issue, it cannot be brushed under the carpet? - HELD THAT:- DR fairly conceded the request of the assessee to allow the Assessing Officer to verify this fact pleaded by the assessee and, if it is true, to allow the claim of assessee. We, therefore, direct the Assessing Officer to verify the tax credit and allow the same to the assessee.

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• 2021 (8) TMI 295
  Addition on account of receipt of alleged on money consideration at the time of sale of the property - HELD THAT:- We find that the conclusions reached by the Assessing Officer are merely based on presumptions and assumptions without bringing corroborative material on record. It is settled position of law that no addition in the assessment can be made merely based on assumptions, suspicion, guess work and conjuncture or on irrelevant inadmissible material. CIT(A) had merely confirmed the assessment order without looking into the substance of the terms and conditions entered between the appellant and SPPL, confirmed addition merely based on the uncorroborated notings on assumptions and conjuctures. The lower authorities had failed to note that the notings does not clearly indicate that the amount was paid only to the appellant herein. The orders of both the Assessing Officer and ld.CIT(A) were set aside and directed the Assessing Officer to deleted the addition. - Decided in favour of assessee.

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• 2021 (8) TMI 291
  Exemption u/s 11 - registration u/s 12A denied - accounts of the assessee were defective as the assessee failed to incorporate receipts from Government grant account - expenditure against specified grants - HELD THAT:- CIT held that no amount of grant has been received by the Assessee and grant is still to be received as are certain enquiries pending against the Assessee the sanction of the grant has lot of conditions. This also evident from the letter shown by the ld AR. There is no certainty of the grant to be received by the Assessee in view of the pending enquiries against the Assessee which is also takes report of Controller and Auditor General of India. He also noted that legal income raised by the central account office and the branches of the Assessee has been correctly accounted for by the Assessee. He further held that the Assessee has incurred expenditure and therefore, in absence of any grant received by the Assessee during the year the grant income could not have been accounted for as it neither accrued nor received. This fact is shown by the letter of the Govt. of India as well as the utilization certificate issues by the Chartered Accountant - we do not find any infirmity in the order of the LD CIT (A) in holding that the disallowance made in the hands of the Assessee of the expenditure is not sustainable. - Decided against revenue.

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• 2021 (8) TMI 290
  Disallowance of deduction u/s 10AA - AO worked out the profit of the assessee @ 8% of the turnover without invoking provision of sub-section 9 of 10AA r.w.s. sub-section 80IA(10) - CIT-A deleted the addition - HELD THAT:- We find merit in the submission of ld. Senior counsel of the assessee that the assessee has shown substantial profit in all years and the revenue has not doubted such profit except in the year under consideration - similar profit almost consisted for about 80% had been accepted for assessment years 2009-10 to 2012-13 in the order passed under section 143(3) and the assessee has again shown similar profit for in assessment year 2015-16. The comparable instances of FMPPL is not applicable as the assessee is having 100% export oriented unit. The customer of assessee is in Europe or Germany. The FMPPL only manufacture soft mantles which are commonly used as pertexmax in lighting lamps only. Again there is no street gas light for use of such product. Neither the product of comparable nor end using of the comparable nor the turnover of the said company is comparable with the assessee as noted above, the profit of the assessee can only be incurred by invoking the provision to subsection 9 of 10AA r.w.s. 80(IA) only. Therefore, we do not find any infirmity in the order passed by Ld. CIT(A) which we affirm. In the result, ground No.1 of the Revenue s appeal is dismissed. Disallowance of interest of partner capital - AO held that non capital charge of interest and non-payment of remuneration for working partner has been done to enhance the profit of assessee-firm which is exempt from taxation and to reduce the taxable income of individual partner to that extent and worked out the interest of capital contribution of the partner @ 12% and thereby disallowed 1.79 crores and excluded from the deduction under section 10AA - HELD THAT:- In the present case, there is no such loss in the partnership deed for payments pertaining to interest and remuneration to the partners - The assessee has not charged any charge of remuneration to the partners and accordingly, assessee cannot be compared to charge / interest or remuneration to the partner. In view of the above discussion, we do find any infirmity in the order passed by Ld. CIT(A), which we affirm. In the result, this second ground of Revenue is also dismissed.

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• 2021 (8) TMI 289
  Jurisdiction of AO to complete the assessment u/s 143(3) - Validity of the assessment passed u/s 143(3) due to lack of jurisdiction of AO - absence of the jurisdiction from JCIT to Income Tax Officer, Ward 1(2), Allahabad - Whether order passed under section 127 for transferring by the Assessing Officer is invalid because no power is vested with the JCIT to transfer the case? - HELD THAT:- It is pertinent to note that the issue regarding the jurisdiction of the Assessing Officer was undisputedly not raised by the assessee either before the AO before the completion of the assessment or even before the CIT(A). It is also a matter of record that the assessee has not raised this issue in the Form No. 36 or even as an additional ground in writing. However, since the issue is purely legal in nature and goes to the root of the matter, therefore, the legal issue raised by the assessee first time before the Tribunal cannot be rejected on technical ground. Since the assessee has raised this issue first time before the Tribunal and that too in course of argument without prior leave of the Bench in writing therefore, having regard to the facts and circumstances and in the interest of justice, the assessee is allowed to raise this issue before the CIT(A) so that a view of the first appellate authority would be available based on the relevant facts on record- Appeal of the assessee is allowed for statistical purposes.

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• 2021 (8) TMI 288
  Disallowance u/s 80IA(4) - assessee is a contractor not an industrial undertaking or enterprises engaged in infrastructure development - HELD THAT:- The issue raised in the grounds of appeal under consideration is squarely covered in favour of the appellant by the decisions of Hon ble ITAT, Ahmedabad for the various assessment years,hence, in view of the above, facts the addition made by the AO by disallowance u/s 80IA(4) of the Act, is deleted and the grounds of appeals are allowed.

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• 2021 (8) TMI 287
  Disallowance of provision for gratuity and leave encashment - HELD THAT:- The provisions are necessary to be made for certain purposes like, provision for depreciation is to be made in respect of decrease in value of property through wear and tear, deterioration or obsolescence and allowance is made for this purpose in book-keeping, accountancy, etc. It is the provision made for the loss or expenses incurred through using the asset for earning profits, and should, therefore, be charged against those profits as they are earned. If depreciation is not provided for, the books will not contain a true record of revenue or capital. If the asset were hired instead of purchased, the hiring fee would be charged against the profits, having been purchased, the asset is, in effect, then hired by capital to revenue, and the true profit cannot be ascertained until a suitable charge for the use of the asset has been made. Likewise, the provision for gratuity and leave encashment also required to be provided as mandated by Law. Without being such provisions made, the balance sheet will not present a true and fair view of the state of affairs. In CIT v. Indian Jute Mills Association [ 1981 (2) TMI 34 - CALCUTTA HIGH COURT] held while constructing the expression expenditure incurred in section 44(A) of the Act observed: depreciation claim shall include the expenditure incurred. Thus, in case of trust, the meaning applied need not be construed as spent . It includes the necessary provisions required to be made as per statutory requirement. Therefore, we direct the AO to allow the provision for gratuity and leave encashment as applied for the object of the trust. Accordingly the ground raised by the assessee is hereby allowed.

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• 2021 (8) TMI 286
  Disallowance on account of depreciation on goodwill - Scheme of Amalagamation adopted - method of accounting for the amalgamation - merger method for accounting the amalgamation and net asset value method instead of discounted cash flow method to compute the goodwill by the AO - HELD THAT:- We note that in accounting for the assets of the amalgamating company in the books of the assessee the assessee followed the purchase method in pursuance of accounting standard-14 and accounted for the cost of acquisition at fair value resulting into goodwill of Rs. 251.50 Cr and then claimed depreciation thereon @25%. After taking into account the facts of the case and the provisions of section 32 of the Act , we are of the opinion that assessee has rightly claimed the depreciation on goodwill. We also find merit in the contentions of the ld AR that the scheme of amalgamation is approved by the High Court after giving notice to the stakeholders including the Revenue to state its objections, if any, to the proposed amalgamation scheme. However revenue has raised no objection to the scheme of amalgamation. Therefore the principle of estoppel prevents the revenue from challenging the validity of the scheme at the subsequent date - See ELECTROCAST SALES INDIA LTD. VERSUS DCIT, CC-XXI, KOLKATA [ 2018 (3) TMI 473 - ITAT KOLKATA] In view of the decision of United Breweries Ltd Vs ACIT [ 2016 (9) TMI 1527 - ITAT BANGALORE] is not a good law as the Hon ble High Court has held that 5th proviso to section 32(1) is only applicable in the circumstances where the predecessor and successor both claimed depreciation in respect of the same asset. We find that the 5th proviso was inserted in order to prevent double claim of the depreciation in respect of the same asset. But these are not the facts in the present case before us as the amalgamating company did not claim any depreciation on the goodwill and therefore the same can not be disallowed. - Decided in favour of assessee. Addition u/s 56(2)(viib) - excess issue price of shares over fair market value of the shares - Appeal of the assessee was allowed by Ld. CIT(A) by holding that the assessee is a subsidiary company of holding company which is a listed company and therefore the assessee is also a company in which the public are substantially interested and as a result, the provisions of section 56(2)viib) of the Act are not applicable - HELD THAT:- The undisputed facts are that the assessee is a subsidiary company of a company SHK which is listed on the stock exchange and therefore is a company in which public are substantially interested. Since the assessee is a subsidiary company of a company which is listed and therefore assessee is also a company in which public are substantially interested and therefore provisions of section 56(2)(viib) are not applicable to the assessee company as the said section is not applicable to the company in which public are substantially interested. We have perused the order of Ld. CIT(A) and observed that while allowing the appeal of the assessee on this issue, Ld. CIT(A) has also held that provisions of section 56(2)(viib) of the Act are not applicable to the assessee for the reason that assessee company is a subsidiary company of holding company which is listed and therefore the assessee also becomes a company in which public are substantially interested. We are of the view that Ld. CIT(A) has correctly allowed the appeal of the assessee. Benefit of brought forward losses denied - CIT(A) allowed the appeal of the assessee on this issue by observing that as per provisions of section 72A of the Act, even if amalgamation was done the other way around, benefit of brought forward losses would have been available to the amalgamated entity - HELD THAT:- As perused the provisions of section 72A of the Act minutely and observe that the section allows benefit of losses incurred by amalgamating company to the amalgamated company. Therefore, there is merit in the arguments of the ld. AR that even if the amalgamation was done the other way around, benefit of brought forward losses would have been available to the amalgamated company. Under these facts and circumstances we do not find any infirmity in the appellate order so far as this issue is concerned. The ld. CIT(A) rightly reversed the order of AO denying the benefit of brought forward losses and unabsorbed depreciation to the appellant assessee - Assessee appeal allowed.

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• 2021 (8) TMI 285
  Rectification u/s 154 - exemption u/s 11 denied - HELD THAT:- CIT(A) while passing the order has categorically held that there is no violation of Section 13(1) and exemption u/s 11 and 12 of the Act is allowed to the assessee which is also registered u/s 12AA - Therefore, when once this issue has already attained finality by passing of the order by the ITAT dismissing the appeal of the Revenue, therefore, in our view, no obvious mistake of law, if any, cannot be rectified u/s 154. Whereas the mistake of fact which is apparent from the record can only be rectified u/s 154 as has already been held in the case of Venkatachalam (M.K.) ITO vs Bombay Dying Mfg Co. Ltd. [ 1958 (4) TMI 4 - SUPREME COURT] and in the present case, the Revenue has failed to pinpoint the mistake of fact which is apparent from the record which needs invocation of the provisions of Section 154 of the Act. Therefore, in our considered view, under the above circumstances, CIT(A) has wrongly invoked provisions of Section 154 of the Act by passing the impugned order, thus the same is not sustainable in the eyes of law. With regard to development receipts, the said issue with regard to developments receipts was not decided by the ld. CIT(A) in the order. CIT(A) has allowed set off of carry forward losses against the development receipts - The issue was not decided on merits as according to the assessee, there was no taxable surplus after set off of carry forward losses - as pointed out before us that in the subsequent assessment order, the same issue was decided in favour of the assessee and the order has been placed on record - The findings regarding development receipts being capital receipts - In this way, this issue has already been decided in favour of the assessee and therefore, there was no question of raising this issue again in impugned rectification order passed by the ld. CIT(A). The income tax authorities have power of rectification u/s 154 but can only be exercised if there is mistake apparent from the record. However, exemption u/s 11 of the Act has already been allowed to the assessee continuously and the ld. CIT(A) has himself allowed the same to the assessee in his earlier orders. Provisions of Section 154 cannot be invoked. At the same time, CIT(A) cannot invoke provisions of Section 154 of the Act merely to deny the benefit to the assessee which otherwise has already been held to be allowable by the Revenue authorities in different years. In view of the above facts and circumstances, we set aside the order passed by the CIT(A) and allow this appeal of the assessee.

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• 2021 (8) TMI 284
  Appeal before CIT(A) - Non deposit of admitted tax/advance tax as provided u/s 249(4) - HELD THAT:- On perusal of the order of the ld CIT(A), we find that the ld CIT(A) has not admitted the appeal for want of payment of taxes equal to advance tax by the assessee. Apparently, there is nothing on record which suggests that the assessee has moved any application before the CIT(A) seeking exemption from payment of taxes. The assessee has moved an application seeking admission of additional evidence by way of tax challans disclosing payment of Rs. 13 lacs equal to advance tax as per section 249(4)(b) for the impugned assessment year. As noted that taxes have been deposited by the assessee before filing of appeal before the ld CIT(A), the taxes amounting to Rs. 2 lacs have been deposited after filing of appeal before the ld CIT(A) and Rs. 5 lacs have been deposited after passing of the impugned order by the ld CIT(A) which reasonably explains the financial hardship faced by the assessee and also its earnestness in taking the necessary steps to be in compliance with the provisions of section 249(4)(b) and to be heard on merits. As the assessee has deposited an amount of Rs. 13 lacs equal to advance tax as per section 249(4)(b) for the impugned assessment year, the additional evidence by way of tax challans towards payment of taxes are hereby admitted and consequent thereto, the appeal by the assessee against the order of assessment need to be admitted and adjudicated by the CIT(Appeals) on merits. Payment of tax is mandatory but the requirement of paying such tax before filing appeal is only directory and where the defect in the appeal, being the non-payment of such tax, is removed, the earlier defective appeal becomes valid, applies equally to clause (b) sub-section (4) of section 249 - where the admitted taxes are paid at a later point of time, then the appeal of the assessee should be considered as properly instituted and should be heard and decided by the CIT(Appeals) on merits. Considering the same, the matter is set- aside to the file of the ld. CIT(A) with the directions to verify and consider the payment of taxes towards due discharge of the assessee s liability as per provisions of section 249(4)(b) of the Act and decide the matter on merits after providing reasonable opportunity to the assessee.

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• 2021 (8) TMI 283
  Reopening of assessment u/s 147 - invalid notice - assessee died before notice was issued - HELD THAT:- It is undisputed fact that assessee had died on 01.07.2012 which fact is noted by the Assessing Officer himself at page 2 in para 2 of his order. The notice was issued on 26.03.2015 and which was served by affixture on 31.03.2015 - when the notice was issued, the assessee was not in existence and was already dead and therefore such notice cannot be said to be a legal and valid notice. Revenue was also not able to demonstrate that fresh notice was served u/s. 148 of the Act to the legal heir of the assessee and neither this fact of issuing fresh notice u/s. 148 of the Act is coming out from the material on record. The coordinate Bench of Chandigarh in the case of Shri Balbir Singh vs. ITO [ 2019 (6) TMI 913 - ITAT CHANDIGARH] has decided similar issue in favour of the assessee. Thus any notice issued in the name of dead person cannot empower the Assessing Officer to pass a valid assessment order - decided in favour of assessee.

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• 2021 (8) TMI 282
  Penalty u/s. 271(1)(c) - Non specification of fixed charge against assessee - whether the proceedings were initiated for concealing income or furnishing inaccurate particulars of income? - HELD THAT:- We have examined the notice under section 271(1)(c) of the Act and observed that assessing officer has not ticked any of the limbs, whether he has initiated the penalty on account of furnishing inaccurate particulars of income or concealment of particulars of income. From the notice for initiation of penalty under section 271(1)(c) of the Act, we see that there is no fix charge whether assessee has concealed the particulars of income or furnished inaccurate particulars of income. That is, assessing officer has not ticked any of the limbs for initiation of the penalty. It is by now well settled that while issuing a notice under section 271(1)(c) of the Act, the Assessing Officer is required to specify as to what is the default on the part of the assessee, as to whether the case is one of furnishing inaccurate particulars, or whether it is a case of concealment of income, or both. As no clear finding was given by the assessing officer regarding the invocation of the limb in the penalty notice. We note that Hon ble Supreme Court in the case of T. Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT ] held that concealment of income and furnishing of inaccurate particulars of income carry different connotations. From the facts of the present case, it is abundantly clear that Assessing Officer has not fixed the charge on the assessee. - AO has made addition and initiated penalty for violation of section 11(3)(d) of the Act (vide assessment order page No. 23), whereas the penalty is levied in penalty order for violation of section 11(3)(c) of the Act, as per para-3 of penalty order. Therefore, assessing officer is not aware as to what account he has initiated the penalty proceedings. The assessee s accounts are not rejected by the assessing officer and merely because the assessee could not file Form No. 10 before the Department does not mean that assessee has furnished inaccurate particulars of its income - Decided in favour of assessee.

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• 2021 (8) TMI 281
  Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT:- The reasons are to be examined only on the basis of reasons recorded alone, and these reasons cannot be supplemented by anything.There is no allegation to the effect that there has been any failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. Unless an allegation to this effect is made in the reasons recorded by the Assessing Officer, in a situation where the assessment is being sought to be reopened after four years from end of the relevant assessment year and when the original assessment was completed u/s.143(3), the jurisdiction to carry out the reassessment cannot be lawfully assumed. For this short reason alone, the impugned reassessment proceedings must be held to be vitiated in law. As we have come to a conclusion based on this reason itself that the reassessment proceeding are vitiated in law, we don t find it necessary to deal with other arguments raised by the learned counsel for the assessee, and to deal with the other grounds of appeal. All other grounds of appeal must therefore be held to be academic and infructuous at this stage. We uphold the plea of the assessee and reopening of the reassessment proceeding is quashed. We also see no need to address the other grounds of appeal, on merits, which have been, given our findings on the validity of reassessment proceedings, rendered academic and infructuous.

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• 2021 (8) TMI 279
  Disallowance u/s 14A - CIT (Appeals) upholding of the disallowance being 0.5% on the average value of investment - AR submitted that assessee has not earned any exempt income during the year - HELD THAT:- We find that the issue is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in the case of Cheminvest Limited [ 2015 (9) TMI 238 - DELHI HIGH COURT ] wherein it has been held that in absence of exempt income during the year no disallowance under Section 14A of the Act can be made. Thus, ground No. 1 is allowed. Disallowance on account of increase in net profit being 1% of the turnover made by AO by disallowing the expenditure - AO was of the view that though the provisions of Section 92BA relating to the related party domestic transactions are effective only from 1 April 2013 but he looked into the reasons for making hundred percent purchases from a related party and whether the transactions are at arm s-length or not and unreasonable profit has not been transferred to the other related party. This was also for the reason that assessee has very low gross profit and net profit margins - HELD THAT:- The turnover of the assessee is Rs. 52.99 crores whereas the turnover of the sister concern is Rs. 69.95 crores. Further assessee has stated that the sister concern is the manufacturing unit of the group whereas the assessee is a marketing unit of the group. Therefore comparison of the gross profit and net profit of a manufacturing unit with a marketing unit is not proper. If the revenue wanted to apply the provisions of Section 40A (2) of the act it has to prove that purchase price paid by the assessee are unreasonable and excessive looking to the market rate of such goods and further the needs of the business of the assessee. No such exercise has been carried out by the learned AO. In fact this exercise could have been carried out by the learned assessing officer by verifying the books of the sister concern where that sister concern sales to the assessee as well as to the other party. AO could have obtained the comparative prices of the similar goods supplied to the assessee by the sister concern and to the other parties. No such efforts have been made but merely a statistical analysis of the comparison of the profit was made by the learned assessing officer which is not warranted by the provisions of Section40A (2) of the act. Further the learned CIT - A has also casually dealt with the whole issue by comparing the tax arbitrage and confirming the party addition looking to the tax benefit derived by the group. In view of this the addition sustained by the learned CIT - A is devoid of any merit and not in accordance with the law. Therefore, ground No. 2 is allowed. Disallowance being 30% of business promotion and advertisement expenditure disallowed by AO restricted to the extent of 10% by the ld. CIT (Appeals) - HELD THAT:- The details of the expenditure incurred by the assessee were submitted before the Assessing Officer. This expenditure was incurred through the credit cards of the Directors, but that fact itself cannot result into the disallowance. It needs to be tested under parameters of section 37 (1) of the Act. The details of the expenditure show that these are for the purchase of various diaries, Diwali expenditure and entertainment and gifts to the customers. Naturally these expenditure are incurred by the Directors, but that does not mean that these are the personal expenditure and not incurred wholly and exclusively for the purposes of the business of the assessee. Even otherwise, in the case of the company assessee, there cannot be any personal expenditure. In view of this, Ground No. 3 of the appeal is allowed and the disallowance is directed to be deleted. Depreciation on Apple LCD monitor - assessee claimed depreciation @ 60% stating it to be computer and the Assessing Officer and CIT (Appeals) allowed it @ 15% holding it to be not a computer but general plant and machinery - HELD THAT:- The assessee has purchased Apple LED DIS which is in fact a monitor for Rs. 45,500/- which is required for display at the time of conferences and presentation and is required to be attached to a CPU. In fact, it is a computer Monitor. Therefore, we hold that it is a computer entitled to 60% of the depreciation, as it is a monitor attached to the computers. Thus, ground No. 4 is allowed. Disallowance of rent to the related parties - AO found that assessee has paid rent to specified persons under Section 40A (2) (b) - HELD THAT:- Merely the tax arbitrage cannot be the reason to make disallowance under Section 40A (2) (b) of the Act. Valuation of perquisite if shown properly by directors in their tax returns and if it is less than Rent paid by the assessee to the land lord in whose house the directors are residing, it is the duty of AO of the directors to see whether perquisites are correctly valued or not. It cannot straight away result in to disallowance u/s. 40A (2) of the Act unless it is shown that it is unreasonable and excessive having regard to the fair market value of such service or legitimate needs of the business of the assessee. All these ingredients are absent in the disallowance made by the revenue. In view of this, we direct the ld. Assessing Officer to delete the disallowance of rent paid to related parties as Revenue failed to show that it is excessive and un-reasonable compared to the market rate. Disallowance of the medical expenses of the Directors - HELD THAT:- The assessee has incurred total medical expenditure of Rs. 65,053/- out of which Rs. 29,506/- related to the Directors of the company. The ld. Assessing Officer disallowed as neither the appointment letter of the Directors nor the resolutions were filed. It were also not filed before the ld. CIT (Appeals), hence it was confirmed. Even before us, it was not shown that the Directors are employees of the company and they were entitled to reimbursement of medical expenditure as per their terms of appointment. In view of this, we do not find any infirmity in the orders of the lower authorities and ground No. 6 of appeal is dismissed. Disallowance of 10% of various expenditure such as Staff welfare, Repair, Telephone, Travelling, Vehicle running etc. - AO has disallowed 10% of such expenditure stating that the disallowance is in order to check leakage of profit under the guise of personal expenses debited under these heads - HELD THAT:- We find that before the Assessing Officer assessee has submitted the complete details of this expenditure - assessee before us is a Pvt. Ltd. company and a company cannot have personal expenditure. It is not the case of the Revenue that disallowance is made as expenses are not incurred wholly and exclusively for the purposes of the business. No such instances despite submission of the details by the assessee were pointed out by the Revenue. The disallowance is also made on ad-hoc basis. Therefore, we reverse the order of the lower authorities and direct the Assessing Officer to delete the disallowance.

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• 2021 (8) TMI 278
  Unexplained money deposited in bank account - stand of the assessee was that the cash deposited in his bank accounts are from the prospective buyers of vehicles/agricultural implements from where, he is working as Exchange Manager. Later on the cash was withdrawn and handed over to the employer i.e., Automobile Company - HELD THAT:- Here in this case, the material facts strongly indicate a probability that the buyers of vehicles/agricultural implements had deposited the cash in various places in the account of the assessee and it was the liability on the part of the assessee to withdraw the same and alternatively paid the same to his employer - this case falls into realm of preponderance of probability where there are many probable factors, some may go in favour of the assessee and some may go against the assessee but the probable factors have to be weighed on material facts so collected in the form of bank statements. Looking to the facts and circumstances of the case and especially the fact that the assessee is a salaried employee having a meager income and the transaction made through banking channels, thus observe that the assessee has used his bank account for the benefit of the prospective buyers of vehicles/implements, his employer only to earn some commission income. Accordingly, delete the addition and allow this ground of appeal. Unexplained investment u/s. 69 - total credit balance in bank account - HELD THAT:- On perusal of the bank statement, we observe before making FDR of Rs. 7,00,000/-, the credit balance in the bank account of the assessee was Rs. 7,29,627/-. Hence, the assessee has clearly established that he has credit balance to make the FD of Rs. 7,00,000/-. As regards the FD of Rs. 2,25,000/-, also observed that the father of the assessee has given Rs. 2,10,000/-, which is supported by the affidavit filed by the assessee itself alongwith the bank statement. Accordingly, we direct the AO to delete the addition of Rs. 7,00,000/- and Rs. 2,25,000/- and allow Ground No. 3 of the assessee. Unexplained expenditure - repayment against credit card purchases - HELD THAT:- There is no dispute to the fact that the assessee jointly with his wife has obtained a credit card to meet the immediate purchase of different materials in connection with marriage of sister-in-law of the assessee. Accordingly, the wife of the assessee has made purchases by using the credit card. In this connection, ld. A.R. of the assessee referred to marriage invitation card of the sister-in-law solemnized on 12.5.2013. The credit card payment has been made by the assessee after receiving small amount in part from the father -in-law. The Assessing Officer has not disbelieved the purchases and consequent payment in respect of credit card. It is the contention of ld. A.R. of the assessee that since the assessment has been reopened u/s. 147 in the year 2017 and the assessment relates to assessment year 2013-14, it was not possible to collect the details from the CITI Bank towards credit card payment in the year 2017 after pretty long time. It is well settled law that if all payments to credit card was made through bank, then such expenses shall not be treated as unexplained income of the assessee and, no addition shall be made under section 69

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• 2021 (8) TMI 277
  Addition u/s. 69 - Real owner of asset - explanation to source of investment or not - Benami transaction - transactions to avoid the Capital Gain Tax on the property sold and also to avoid enquiry in respect of this property by the department - HELD THAT:- As sale document were executed by Sh. Sulakhan Ram in favour of the assessee with a view to avoid long term capital gain of the property, therefore which is clear from the affidavit filled by him before the Executive magistrate and subsequent transfer of entire sale consideration into his account immediately after the sale of land by the assessee. This is a case and where innocent citizen seems to have been duped by Sulakhan Ram and therefore in dept inquiries were required to be made by the AO. However despite the above said facts were brought to the notice of the Assessing Officer/CIT(A). Nothing has been done and in a cryptic and stereotype manner, the additions are made by the Assessing Officer and confirmed by the Ld. CIT(A). In the light of the above, the case of the assessee is remanded back to the file of the assessing officer to consider the documents filed by the assessee during the assessment proceeding alleging that the transaction were benami and the legal owner of the property was Sh. Sulakhan Ram.AO is directed to conduct the inquiry against Sh. Sulakhan Ram and find out the real nature of the transaction/s and to initiate the proceedings u/s. 148 or any other proceedings as he may deem appropriate for bringing out the correct nature of the transactions and levying the due tax, if any arose on account of transfer of property in the name of assessee at the first instance and thereafter transferring the property by the assessee in the name of Sh. Gurmeet Chahal, as alleged Benamidar of the Sulakhan Ram - Appeal of the assessee is allowed for statistical purposes.

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• 2021 (8) TMI 276
  TP Adjustment - adjustment service tax and withholding tax paid additionally by the assessee over and above the payment to be made in terms of the agreement - HELD THAT:- Perusal of master services agreement between the assessee and AE we find the following clause any charges payable under this agreement are exclusive of value added tax or any equivalent which shall be paid by the client additionally in accordance with the prevailing legislation at the tax point date, if applicable as well as any bank charges as might be applicable . Thus, the crucial words which needs to be taken note of are value added tax or any equivalent . On specific query from the Bench as to whether withholding tax and service tax are equivalent to value added tax, learned counsel for the assessee fairly submitted that they cannot be equated. In our considered opinion, value added tax on one hand and withholding tax as well as service tax on the other, are of distinct and different genre, hence, cannot be equated. Therefore, the terms of the agreement do not provide for payment of withholding tax and service tax to the AE. That being the case, in our opinion, the TPO was justified in making the adjustment being the amount of service tax and withholding tax paid additionally by the assessee over and above the payment to be made in terms of the agreement. These grounds are dismissed. Disallowance of software lease payment u/s 37(1) - assessee has entered into a master services agreement with its AE, FIM Business Solution Ltd for taking on lease software viz. Kastle Factoring for a period of seven years - HELD THAT:- This is not the first time the assessee is making payment towards software lease expenses. On a reading of the master services agreement, it is evident, the assessee requires the software for its business activities. In fact, while examining the arm s length nature of software lease expenses paid to the AE, the TPO has gone through all the evidences including the master services agreement. However, except the additional amount paid on account of withholding tax and service tax, the TPO has not found any wrong doing by the assessee in respect of software lease expenses. Further, on perusing the materials placed before us in the paper book, we are also convinced that the allegation of the departmental authorities that the assessee failed to furnish details and documentary evidences to establish its claim is not borne out from record. In view of the aforesaid, we delete the disallowance. This ground is allowed. Disallowance of referral fee paid - Assessee failed to furnish supporting evidence to demonstrate that the expenditure incurred is wholly and exclusively for the purpose of business - HELD THAT:- Facts and evidences on record clearly demonstrate that the referral fees paid by the assessee is wholly and exclusively for the purpose of its business. In any case of the matter, it is for the assessee to decided how to conduct its business. So long as the expenditure incurred is for the purpose of the business, it has to be allowed as revenue expenditure irrespective of the fact, whether it ultimately translates into earning of income. Certainly, the departmental authorities cannot step into shoes of the assessee to question a prudent business decision. In any case of the matter, the allegation of the departmental authorities that the assessee failed to furnish supporting evidence to demonstrate that the expenditure incurred is wholly and exclusively for the purpose of business is contrary to the facts on record. In view of the aforesaid, we delete the disallowance. Disallowance being expenditure incurred towards improvement of the lease hold premises - allegation of the departmental authorities that the assessee did not furnish the details of expenditure - HELD THAT:- On a perusal of documents furnished before us and particularly the invoices, we find that the expenditure incurred are for variety of work, such as, demolishing and removing certain civil construction, installation of certain furniture and fixtures including chairs, tables, work station, plumbing, wooden partition, light fitting, civil construction etc. - though, major part of the expenditure may be of temporary nature, however, some of the work could be of enduring nature. Further, it can also be a fact that the assessee may not be having all supporting evidences to prove the expenditure. Thus, there is possibility of inflation of expenditure to some extent. - also at this late stage it would be difficult to examine the nature of each item of expenditure to find out whether it is capital or revenue.

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• 2021 (8) TMI 275
  Rejection of books of accounts - estimating G.P. on unproved purchases - HELD THAT:- Undisputedly, the assessee failed to discharge his onus in proving genuineness of suspicious dealers and purchases made from them. Assessing Officer has rejected the books of assessee and thereafter estimated G.P. on bogus purchases. It would be relevant to mention here that the Assessing Officer while estimating G.P. on unproved purchases has neither disturbed the G.P. declared by the assessee on regular purchases nor sales turnover declared by the assessee. Therefore, no prejudice is caused to the assessee in so far regular/undisputed purchases. The ground No. 3 of appeal is without any merit hence, dismissed. Estimation of income - Bogus purchases - HELD THAT:- The assessee has declared over all G.P. of 6.24%. The Assessing Officer has estimated G.P. on bogus purchases at 12.5%. The CIT(A) has upheld the same. In our considered opinion estimation of G.P. at 12.5% is on higher side. To meet the ends of justice suppressed profit margin on bogus purchases is restricted to 7%.

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• 2021 (8) TMI 274
  Disallowance of the set off of the business loss surrendered income - Entitlement to claim set off of loss against income determined under section 115 BV - HELD THAT:- In view of the fact that the assessee had already introduced the transactions in their books of accounts in the name of property income from property dealing, it would not be reasonable to say that such income does not fall under any of the head of income or that such deemed income does not allow any set off of business losses. We are inclined to accept the contention of the assessee that the surrendered income, in respect of which the entries had already been made in the books of accounts of the assessee in relation to the property income from property dealing, amount to business income and it allows the set off of the business loss - We, therefore, direct the assessing officer to delete the disallowance of the set off of the business loss. Disallowance of salary paid to partners under section 40 (b) of the Act has to be worked out keeping in view the consequences of the deleting the disallowance of the set off of the business loss - HELD THAT:- We set aside the impugned order on this aspect, and remand issue to the file of the learned Assessing Officer to work out the maximum allowable salary to partners.

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• 2021 (8) TMI 273
  Bogus expenses - Rejection of books of accounts - compliance have not been given by the transporter parties to whom notices u/s 133(6) of I.T. Act were issued - transportation expenses pertaining to parties as bogus only on the basis of non-compliance made by these parties to the summon issued by the Assessing Officer u/s. 131 - HELD THAT:- It is undisputed fact that as per the material on record these two parties were existed at the given addresses. In this regard, it is observed that Assessing Officer has neither taken any steps to enforce the attendance of these parties in view of non-compliance of the summons nor made any further investigation on the basis of bank account showing the payment made by the assessee to these two parties and also not asked any detail from the assessee pertaining to the particulars of trucks deployed for transportation by these two parties. AO has not taken any action u/s. 271A(1)(c) of the Act as per which if any person to whom summon is issued u/s. 131(1) either to attend to give evidence or produce books of account or other documents at a certain place and time, omit to comply, he can be penalized u/s. 272A(1)(c) of the act. Looking to the above facts and circumstances, we consider that the Assessing Officer has neither initiated any proceedings to enforce the attendance of thee two parties in compliance to the summon issued nor contradicting the other evidences i.e. copy of bank account, invoices etc., therefore, the decision of the ld. CIT(A) to sustain the impugned addition is not justified. - Decided in favour of assessee.

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• 2021 (8) TMI 272
  Addition u/s 68 or 41 - unexplained credits in the books of account of assessee - reopening of assessment initiated - credit entry in the name of M/s. Shiv Craft p HELD THAT:- Authorities did not make any adverse comment on the conclusion of sale in F.Y.2011-12 - CIT(A), as observed that it is inconceivable that any trade creditor will make payment of Rs. 3.45 lacs and would not confirm the transaction and this arises doubt as to the genuineness of the transaction. It is a mere doubt without any substance to conclude that there were any unsecured loans, much less from M/s. Shiv Craft. It is only because the Assessing Officer did not receive any confirmation, the Assessing Officer had taken stand that this particular entry of Rs. 3.45 lacs relates to unsecured loans whereas in respect of other similar transactions, the Assessing Officer believed those to be sale transactions and the receipt of advance amounts towards such sales. CIT(A), however, noted that copy of DVAT-31 was filed with the Sales Tax Department reflecting the names of the parties to whom sales were made during the quarter ended on 30.09.2011 during the F.Y. 2011-12, resulting in nil balance; and the copy of ledger account duly confirmed by M/s. Shiv Craft alongwith name, address and APN for the A.Y. 2009-10, 2010-11, 2011-12 and 2012-13 already submitted before the Assessing Officer. On the face of all these details furnished, there was ample opportunity for the Assessing Officer to verify whether this was a real sale transaction or a transaction of unsecured loan. Mere suspicion cannot be a basis to make addition when there are sufficient evidence on record to disprove such a suspicion or at least affording a ground for verification. In the circumstances, we find that the conclusion of facts reached by the authorities below have no factual basis to sustain. We, therefore, delete the addition. - Decided in favour of assessee.

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• 2021 (8) TMI 271
  Addition u/s 43CA - difference between agreement value of the flats and market value determined by the DVO - difference between agreement value and value determined by DVO - difference between the agreement value and the market value is less than 10% no addition should be made - HELD THAT:- Rational for holding newly inserted proviso to sub-section (1) to section 50C of the Act as curative in nature, hence, having retrospective application, the same analogy would apply to the provisions of Section 43CA of the Act. Both the sections are similarly worded except that both the sections have application on different sets of assessee. As has been pointed earlier, Section 43CA gets attracted where the consideration received or accrues as a result of transfer of an asset (other than a capital asset) being land or building or both. Provisions of section 50C operates where the consideration received or accrues as a result of transfer of a capital asset being land or building or both. Both the sections induce deeming fiction to substitute actual sale consideration with notional value of asset based on Stamp Duty valuation. A perusal of Circular 8 of 2018 (supra) would show that identical reasons have been given for Rationalization of Sections 43CA and 50C . The proviso has been inserted and subsequently tolerance band limit has been enhanced to mitigate hardship of genuine transactions in the real estate sector. Ergo, in the light of reasoning given for insertion of the proviso and exposition by the Tribunal for retrospective application of the said proviso, have no hesitation in holding that the proviso to sub-section (1) to section 43CA and the subsequent amendment thereto relates back to the date on which the said section was made effective i.e. 01/4/2014. Assessing Officer is directed to delete the addition u/s 43CA - Decided in favour of assessee.

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• 2021 (8) TMI 270
  Income from other sources u/s 56 - purchase was lower than the ready reckoner rate - tolerance limit 5% or 10% - Assessee had purchased a residential flat for a consideration less than the stamp duty value of the property -assessee. Assessee being a layman agreed with the consideration amount without knowing the implications of provisions of sec 50C - HELD THAT:- We note that the difference between value declared and value as per stamp value authority is less than 10%. This is within the tolerance limit specified in section 50C. The authorities below have rejected it on the premise that the tolerance limit was introduced by the Finance Act, 2018; hence it is not applicable for the year under consideration. We note the plea that the amendment was intended to cure a hardship and hence retrospective has been duly accepted in the ITAT decision referred in the assessee s submission above. Moreover, the speech of Hon ble Finance Minister while introducing the provisions duly support this premise. Moreover, in such situation curative provision to remove hardship should be retrospective is duly supported by decision in the case of Allied Moters (P) Ltd. [ 1997 (3) TMI 9 - SUPREME COURT] as held that proviso which is inserted to remedy unintended consequences and to make the proviso workable, a proviso which supplies an obvious omission in the section and is require to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation. Undoubtedly this amendment was done to obviate hardships arising out of minor variation in value of transaction qua 50C valuation. In this view of the matter assessee s plea succeeds. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee.

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• Customs

• 2021 (8) TMI 317
  Classification of imported goods - Drones - classifiable under the heading 88.02 of the first schedule to the Customs Tariff Act, 1975 or otherwise? - rate of duty applicable on the import of the drones - HELD THAT:- Classification, in terms of Rule l, is to be decided on the basis of the terms of the headings and any relative section or chapter notes. In this ease, the heading 8802 includes within its ambit helicopters, and according to the explanatory notes to the HSN such helicopters are used for aerial photography amongst other uses. It is settled law that the explanatory notes have considerable persuasive value. Under such circumstances, the need for resorting to the Rule 3(b) doesn t seem to arise at all. Therefore, notwithstanding the WCO classification advice to the contrary, it is my considered opinion that Mavie 2 drones merit classification under sub-heading 88021 100 of the first schedule to the Customs Tariff Act, 1975. This conclusion is consistent with the new chapter note I, which would come into force w.e.f. as it states that the expression unmanned aircraft means any aircraft, other than those of heading 8801, designed to be flown without a pilot on board. Tello drones with or without camera would merit classification under heading 9503 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @ 60% adv IGST @ 18%, Social Welfare Surcharge @ 6% - Both AGRAS T 16 and Mavic 2 drones would merit classification under heading 8802 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @ 10%, IGST @ 5%, and Social Welfare Cess @ 1%. However, if any import is made for personal use, the rate of IGST would be 28% and it would also attract a GST compensation cess. Application disposed off.

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• 2021 (8) TMI 316
  Correctness of Advance Ruling application - Effective date of Advance Ruling application - original date of filing would still remain valid or the fresh date of application has to be considered - permissible to mention multiple Principal Commissioners/Commissioners in one application for advance ruling. Effective date of Advance Ruling application - original date of filing would still remain valid or the fresh date of application has to be considered - HELD THAT:- the present proceedings would be deemed to be a continuation of the earlier proceedings and not a fresh application, as was initially held. The significance of this line of reasoning would be that the applicant would remain eligible for receiving advance rulings in respect of those products which have been imported after filing the advance ruling application on 03.06.2019. the definition of advance ruling as per clause (b) of the section 28E of the Act is that, it is a written decision on any of the questions referred to in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation. Therefore, a reasonable interpretation of the definition would lead one to the conclusion that once application for advance ruling has been filed, and there is a delay in rendering a decision, as has happened in this very instance, imports made after filing the advance ruling application would not take away the right of the applicant to receive a ruling. Whether the 16 items grouped under 4 categories would merit classification under heading 23.09 of the tariff as animal feed supplements or they are required to be classified separately, e.g., vitamins under heading 29.36, carotenoids under 32.04, organic acids under 29.15 etc.? - HELD THAT:- The import of reading all the legal provisions cited above together leads one to the inescapable conclusion that the scheme of advance rulings in customs, as contained in the Chapter VB of the Act, envisages that an applicant would indicate only one port/point of entry for their proposed activity. The use of the definite article the in all these legal provisions also point to the intention of the legislature to define a specific individual and not indulge in a generic description where a singular can be read as plural and vice versa. The statutory mandate to give a ruling within 3 months of filing an application would also be difficult to comply with if applicants cite multiple ports/points of import/export as corresponding with multiple principal commissioners/commissioners and conveying their comments to the applicant and take into account the rebuttals/rejoinders of the applicant would be time consuming and would make it difficult to render advance rulings within the time prescribed in the statute. There is no doubt, that the applicant needs to reapply separately in respect of each of these 16 products with sufficient details to justify compliance of the conditions laid down in the note to chapter 23 of the tariff in respect of the heading 23.09. The present application is defective and merits rejection - Application dismissed.

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• 2021 (8) TMI 312
  Refund claim towards excess custom duty paid - excess amount paid through oversight and bonafide mistake - section 27 of the Customs Act - HELD THAT:- The amount of Rs. 17,25,172/-, which was paid on second day i.e. on 12/04/2016 was not paid towards any custom duty but the amount again paid, which is already paid on earlier date i.e. on 11/04/2016 and therefore, it cannot be treated as duty and therefore, in our opinion, an excess amount paid by the petitioner, which the authority is not entitled to retain and needs to be refunded to the petitioner - The petitioner made an application within reasonable time and on that ground also, he would be entitled for refund of excess payment of customs duty. The petitioner is entitled to get refund of Rs. 17,25,172/- along with interest @ 6 % per annum from 01/05/2018 till the amount is paid. This rate of interest would be applicable, if the amount is paid within a period of three months. If the amount is not paid within a period of three months, the respondent is liable to pay interest @ 12% per annum subsequent thereof - Petition allowed.

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• 2021 (8) TMI 311
  Seeking for ad interim ex parte stay of Recovery Notice - HELD THAT:- Petitioner has made out a prima facie case for grant of interim relief in its favour and the Balance of Convenience is also in favour of the Petitioner. In case the recovery is not stayed, irreparable loss shall be caused to the Petitioner. The operation, implementation and execution of the impugned order No.35/2020 dated 04.09.2020 and impugned order No.34/2020 dated 07.09.2020 (Annexures P1 and P2 respectively to the memo of the writ petition), as well as the Recovery Notice dated 15.07.2021, is stayed. Application disposed off.

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• 2021 (8) TMI 307
  Application for listing the main case for an early date - HELD THAT:- On advance notice, Mr. Anshuman Chopra, Advocate appears for respondent-Union of India and states that though the Department has filed a review application before the Hon ble Supreme Court in the aforementioned case titled as M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] but fairly stated that no stay has been granted and has accepted that the Coordinate Bench had decided the same issue. Application allowed.

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• 2021 (8) TMI 303
  Levy of penalty on Customs Broker under Regulation 18 of Customs Broker Licensing Regulation (CBLR), 2018 - violation of Regulation 10 (d) (e) and (n) of CBLR, 2018 - time limitation for issuance of notices - HELD THAT:- The findings arrived at by the Commissioner-Adjudicating authority interalia reveal that offence report dated 28.05.2019 was sent by the Assistant Commissioner, Customs House, Cochin vide letter F. No. S9/13/2008-I B-Cus dated 07.06.2019, which was received on 12.06.2019. This would mean that the time limit provided under Regulation 17 of CBLR, 2018 would start ticking from 12.06.2019 and the Revenue has an upper limit of 90 days from the date of receipt to issue a notice in writing. There is no dispute here that the SCN was issued on 15.10.2019, which is clearly beyond the prescribed 90 days statutory period. The excuse pretended by the adjudicating authority that some of the documents required translation, is no ground to endorse inaction in the non-issuance of SCN within 90 days. The authorities are expected to adhere to the time limit and the Regulation in question does not carve out any exceptions and hence, the reasons given by the Commissioner cannot be accepted - the notice having been issued beyond the prescribed period which is itself irregular and therefore, penalty imposed on the appellant cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2021 (8) TMI 296
  Smuggling - gold biscuits - gold biscuits were concealed inside the inner garment worn by the appellant - undeclared goods - petitioner proved ownership of goods - Absolute Confiscation - penalty - HELD THAT:- As per N/N.12/2012-Cus dt. 17/03/2012, appellant was not entitled to bring the gold from abroad as his stay in foreign country was only 35 days. Though in the impugned order, Commissioner(Appeals) has noted that appellant has not been able to prove his ownership on the impugned goods as the appellant has produced a photocopy of the bill as proof of his purchase which is not sufficient. Before this Tribunal, appellant has produced the original copy of the invoice issued by Malabar Gold and Diamonds and the said bill shows that the appellant is the owner of the gold which was purchased by him only 2-3 days before the start of the journey from Bahrain. But since he was not eligible to bring gold in terms of Notification No.12/2012 and the same was not declared, the impugned goods have rightly been confiscated. Penalty - Section 112(a) and (b) of the Customs Act - HELD THAT:- Considering the facts and circumstances of the case specifically when the appellant has proved his ownership, the imposition of penalty is not justified - penalty set aside. Appeal allowed in part.

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• Corporate Laws

• 2021 (8) TMI 305
  Seeking for an order of winding up of the respondent-company - section 433(e) and (f) of the Companies Act, 1956 - HELD THAT:- It is to be noted that the claim as made by the petitioner-company as reflected at annexure G is not controverted. Annexure G is dated July 15, 2009 and the same is issued much earlier to the notice issued by the petitioner-company at annexure J dated April 22, 2010. Annexure G is self-explanatory and balance confirmation by the respondent-company is clear. The said document is not controverted by filing the statement of objections. It is also to be noticed that though the reply notice was made by the respondent-company as per annexure K , there is no reference to the contents of annexure G . Even after the present petition was filed, neither objections have been filed nor any assertions taking away the effect of admission in annexure G has been made. Clearly, the company is unable to pay its debts. The undertaking made before this court and recorded on March 28, 2014 also remains uncomplied. A case is made out for winding up of the company. Another matter to be taken note of is the statement made on behalf of the company that there is no substratum of the company in light of the settlement reached before the Debts Recovery Tribunal and assets have been utilised for such settlement. Such a stand by the company would also make it just and equitable to order for winding up. It is also settled position that demand for setting aside the striking of the company can be made under section 252 of the Companies Act. As pointed out that striking of the name of the company should not come in the way of passing an order of winding up in light of consequences of an order of winding up and the power of the company court in proceedings subsequent to winding up - In fact, even under the provisions of the Companies Act of 1956 under section 560(5) and (6), the power of the court to order for winding up even when the company is struck off from the register was available. Petition disposed off.

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• 2021 (8) TMI 280
  Seeking restoration of the Company s name in the Register of Companies maintained by RoC - Section 252(3) of the Companies Act, 2013 - HELD THAT:- A careful examination of the various documents filed on behalf of the petitioner and the averments made on his behalf reveals that the company was not in operation prior to the date of striking off its name. Various documents pertaining to the period subsequent to the striking off the name of the company filed alongwith the petition cannot be taken into consideration for the purpose of restoring the name of the company. On the other hand, 50% shareholder and the second and remaining Director of the company who is the third respondent in the CP categorically contended that the company was not in operation prior to the striking off its name. Petition dismissed.

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• Insolvency & Bankruptcy

• 2021 (8) TMI 315
  Period of limitation for filing of Application for initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - time limitation - petition was filed beyond a period of 3 years from the date of declaration of the loan account of the Corporate Debtor as NPA - subsequent acknowledgement by Corporate Debtor of liability to the Appellant Bank, within a period of three years prior to the date of filing of the Petition under Section 7 of the IBC, by making a proposal for a One Time Settlement, or by acknowledging the debt in its statutory Balance Sheets and Books of Accounts - fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the IBC - bar in law to the amendment of pleadings. HELD THAT:- Section 18 of the Limitation Act speaks of an Acknowledgment in writing of liability, signed by the party against whom such property or right is claimed. Even if the writing containing the acknowledgment is undated, evidence might be given of the time when it was signed. The explanation clarifies that an acknowledgment may be sufficient even though it is accompanied by refusal to pay, deliver, perform or permit to enjoy or is coupled with claim to set off, or is addressed to a person other than a person entitled to the property or right. Signed is to be construed to mean signed personally or by an authorised agent. In the instant case, Rs. 111 lakhs had been paid towards outstanding interest on 28th March, 2014 and the offer of One Time Settlement was within three years thereafter. In any case, NCLAT overlooked the fact that a Certificate of Recovery has been issued in favour of Appellant Bank on 25th May 2017. The Corporate Debtor did not pay dues in terms of the Certificate of Recovery. The Certificate of Recovery in itself gives a fresh cause of action to the Appellant Bank to institute a petition under Section 7 of IBC. The petition under Section 7 IBC was well within three years from 28th March 2014. A final judgment and order/decree is binding on the judgment debtor. Once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of Recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate - Appellant Bank was thus entitled to initiate proceedings under Section 7 of the IBC within three years from the date of issuance of the Recovery Certificate. The Petition of the Appellant Bank, would not be barred by limitation at least till 24th May, 2020. While it is true that default in payment of a debt triggers the right to initiate the Corporate Resolution Process, and a Petition under Section 7 or 9 of the IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238A of the IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a Petition in the NCLT is condonable under Section 5 of the Limitation Act unlike delay in filing a suit - Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. Thus, an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. Bar in law to the amendment of pleadings in an application under Section 7 of the IBC - HELD THAT:- There is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in Form-1. In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that the Adjudicating Authority committed any illegality or error in permitting the Appellant Bank to file additional documents. Needless however, to mention that depending on the facts and circumstances of the case, when there is inordinate delay, the Adjudicating Authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order. The decision of the Adjudicating Authority to entertain and/or to allow the request of the Appellant Bank for the filing of additional documents with supporting pleadings, and to consider such documents and pleadings did not call for interference in appeal. Appeal allowed - decided in favor of appellant.

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• 2021 (8) TMI 314
  Interpretation of statute - Financial creditor or not - Interest free loan - competent to initiate the Corporate Resolution Process under Section 7 of the IBC or not - person who gives a term loan to a Corporate Person, free of interest, on account of its working capital requirements - HELD THAT:- When a question arises as to the meaning of a certain provision in a statute, the provision has to be read in its context. The statute has to be read as a whole. The previous state of the law, the general scope and ambit of the statute and the mischief that it was intended to remedy are relevant factors. The definition of financial debt in Section 5(8) of the IBC cannot be read in isolation, without considering some other relevant definitions, particularly, the definition of claim in Section 3(6), corporate debtor in Section 3(8), creditor in Section 3(10), debt in section 3(11), default in Section 3(12), financial creditor in Section 5(7) as also the provisions, inter alia, of Sections 6 and 7 of the IBC - Under Section 6 of the IBC, a right accrues to a Financial Creditor, an Operational Creditor and the Corporate Debtor itself to initiate the Corporate Insolvency Resolution Process in respect of such Corporate Debtor, in the manner provided in Chapter II of the IBC - Section 7 of the IBC enables a Financial Creditor to file an application for initiating Corporate Insolvency Resolution Process against a Corporate Debtor either by itself, or jointly with other Financial Creditors or any other person on behalf of the Financial Creditor, as may be notified by the Central Government, when a default has occurred. Corporate Resolution Process gets triggered when a Corporate Debtor commits a default. A Financial Creditor may file an application for initiating a Corporate Insolvency Resolution Process against the Corporate Debtor, when a default has occurred - Default is defined in section 3(12) to mean non-payment of a debt when the whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor, as the case may be. Under Section 5(7) of the IBC financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has legally been assigned. The NCLT and NCLAT have overlooked the words if any which could not have been intended to be otiose. Financial debt means outstanding principal due in respect of a loan and would also include interest thereon, if any interest were payable thereon. If there is no interest payable on the loan, only the outstanding principal would qualify as a financial debt. Both NCLAT and NCLT have failed to notice clause(f) of Section 5(8), in terms whereof financial debt includes any amount raised under any other transaction, having the commercial effect of borrowing - Furthermore, sub-clauses (a) to (i) of Sub-section 8 of Section 5 of the IBC are apparently illustrative and not exhaustive. Legislature has the power to define a word in a statute. Such definition may either be restrictive or be extensive. Where the word is defined to include something, the definition is prima facie extensive. The trigger for initiation of the Corporate Insolvency Resolution Process by a Financial Creditor under Section 7 of the IBC is the occurrence of a default by the Corporate Debtor. Default means non-payment of debt in whole or part when the debt has become due and payable and debt means a liability or obligation in respect of a claim which is due from any person and includes financial debt and operational debt. The definition of debt is also expansive and the same includes inter alia financial debt. The definition of Financial Debt in Section 5(8) of IBC does not expressly exclude an interest free loan. Financial Debt would have to be construed to include interest free loans advanced to finance the business operations of a corporate body. Appeal allowed.

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• 2021 (8) TMI 292
  Supply of essential services during moratorium period - before CIRP started there were no outstanding bills of electricity - HELD THAT:- Under Section 14(2) the supply of essential goods or services to the Corporate Debtor should not be terminated or suspended or interrupted during moratorium period. However, if supply was used to keep Corporate Debtor a going concern, the service of electricity cannot be terminated provided the dues arising from such supply during Moratorium are paid. If they are not paid Section 14 (2-A) will not protect. Reading the Regulation 32, it is clear that the words essential goods or services as used in Section 14(2) have been given a particular meaning to which moratorium applies. The illustration under Regulation 32 makes the position clear. Use of electricity by the Corporate Debtor in CIRP would be essential supply to the extent it is not a direct input to the output produced or supplied by the Corporate Debtor. Like using of water to generate hydro-electricity is not essential supply similarly, use of electricity in the present matter for running the printing business of the Corporate Debtor cannot get protection as essential supply. Thus there are no fault with the impugned order. The Learned Counsel for the Appellant submits that even if the Corporate Debtor goes into liquidation, the machines to be sold would require to be demonstrated as functioning and this cannot be done without electricity. It is also stated that whatever are the bills of the Respondent with regard to electricity would be paid if the orders of liquidation gets passed and money is realised. Learned Counsel submits for Appellant that the electricity dues will be paid on priority. Considering the provisions as discussed above, we give liberty to the Appellant to specifically put on record particulars relating to the electricity supply required which would not be direct input to the output produced by the Corporate Debtor. With such particulars Appellant may move Adjudicating Authority for relief - the impugned order need not be interfered - appeal disposed off.

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• 2021 (8) TMI 269
  Seeking for the liquidation of the corporate debtor - section 33(2) of the Insolvency and Bankruptcy Code, 2016 read with rules 11 and 32 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- This Adjudicating Authority granted exclusion and extension of the CIRP period. However, it is placed that no viable resolution plan was voted at the CoC. Hence, this Adjudicating Authority has left with no option but to order liquidation. Taking into consideration, the written consent dated January 6, 2021 of the applicant IRP to act as a liquidator filed on January 28, 2021, Mr. Ramakrishnan Sadasivan, is appointed as the liquidator of the corporate debtor to carry out the liquidation process subject to the terms of the directions. The liquidation order passed - application allowed.

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• Service Tax

• 2021 (8) TMI 302
  Interest on delayed refund - relevant time for calculation of interest - application for refund was filed on 10.11.2017 but the same was incomplete due to which deficiency memo was issued to the appellant, deficiency removed by the appellant on 14.07.2018 - HELD THAT:- There is no denial on part of the appellant that the application filed by him under section 11B of Central Excise Act for claiming the refund was immediately returned along with the deficiency memo. The appellant could remove that deficiency not before 14.07.2018. The said application was complete and proper only on 14.07.2018, to be called as application under section 11B of Central Excise Act, 1944, hence can be considered as being filed only on 14.07.2018. Appeal dismissed.

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• 2021 (8) TMI 298
  Refund of service tax paid - chit fund business - tax on foreman charges collected for chit fund activities - whether such service was liable to be tax or not - delay of four days in filing refund claim - period from 01.07.2012 to 31.05.2013 - Time limitation - HELD THAT:- It is the settled position of law that any judgement of the Hon ble Supreme Court is the law of the land. Therefore, when the Hon ble Supreme Court holds that there was no question of liability to Service Tax, then, any amount collected under the guise of Service Tax becomes a collection of the said amount without the authority of law and the Revenue can never, therefore, claim any right over such amount; the same will have to be refunded forthwith to the concerned person. Hence, the collection of amount, which according to the appellant was out of compulsion, being a collection without any authority of law, will have to be refunded. There is no doubt that Section 11B ibid. prescribes the period of limitation for filing the refund claim, but admittedly here, the application for refund was filed on 19.01.2018; the date of the judgement of the Hon ble Supreme Court is 07.01.2014. There is a clear four-year delay in filing the refund claim - the appellant cannot take advantage of its own mistake of filing a delayed refund claim and thus cannot claim the interest for that delayed period during which time it slept over its rights. The matter is restored to the file of the Original Authority, who shall work out the refund - Appeal allowed.

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• 2021 (8) TMI 297
  Refund of unutilised CENVAT credit of service tax - inputs/input services - Information Technology Software Services said to have been exported during the period April 2017 to June 2017 - delay in debiting CENVAT Account - N/N. 27/2012-CE dated 18.6.2012 read with Rule 5 of CENVAT Credit Rules, 2004 - HELD THAT:- In the present case, the appellant has complied with the conditions prescribed under para 2(h) of the Notification No.27/2012 and debited the CENVAT account on 31.3.2018 though there was some delay in debiting the CENVAT account but the delay in debiting the CENVAT account is only a procedural delay and will not defeat the substantial right of the appellant to claim refund. Further, when the appellant filed the refund claim in February 2018, by that time, the erstwhile Service Tax Regime was repealed with GST Regime and the refund claim was filed under Rule 5 of CENVAT Credit Rules, 2004 and there was no occasion to debit the CENVAT credit account and reflect the same in ST-3 Returns as the company by that time was filing GST Returns under GST law. This Tribunal in the case of CHARIOT INTERNATIONAL PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BENGALURU EAST [ 2021 (6) TMI 711 - CESTAT BANGALORE] by relying upon the Division Bench decision of the CESTAT Mumbai in the case of SANDOZ PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR [ 2015 (10) TMI 882 - CESTAT MUMBAI] had held that when the assessee reverses the credit in the GSTR-3B but there was only a delay in debiting the same, then in that case, it is deemed to be procedural delay and will not disentitle the appellant from claiming the refund. Appellant is also entitle to claim refund of Rs. 761/- because Event Management Service falls within the definition of input service as provided in Rule 2(l) of CENVAT Credit Rules, 2004 - Appeal allowed - decided in favor of appellant.

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• 2021 (8) TMI 294
  Liability of service tax - appellant who has constructed houses for rehabilitation of poor people under JNNURM - services provided by the notice to Agra Development Authority (ADA) under Jawaharlal Nehru Renewal Mission (JNNURM) for construction of houses for weaker section of society - period from 2009-10 to 2010-11(up to 30.06.2010) before issuance of Notification No. 28/2010-ST dated 22.06.2010 (w.e.f. 01.07.2018) - services provided by the noticee to Rajya Krishi Utpadan Mandi Parishad during 2013-14 - construction work under Works Contract - Sl. No. 12(a) of N/N. 25/2012-ST dated 20.06.2012 - Taxability of services provided to M/s Uncle Builders - demand of interest and penal action against Noticee. Exemption claimed for services to ADA, JNNRUM during the financial year 2009-10 to 2010-11 (up to 30 June, 2010) i.e. before issuance of N/N. 28/2010-ST - HELD THAT:- The various construction works carried out for Mandi Parishad are not liable to service tax and are exempted in view of the Education Guide dated 20 June, 2012 by the Board, read with Circular No.89/7/2006 dated 18 December, 2006, read with the Mega Exemption Notification No.25/2012-ST. Tax liability for work done for Uncle Builders (from 2009-10 to 2010-11) - HELD THAT:- Admittedly the appellant have paid tax on 04 June, 2006 along with interest before the issuance of SCN (issued on 31 March, 2016). Further, the issue is wholly interpretational as per the findings of the Tribunal. There is no tax liability on the appellant in respect of various construction works done for government/statutory authority under JNNURM, canal work for water resources division, for construction done for Mandi Samiti etc. Extended period of limitation - HELD THAT:- Admittedly, appellant have maintained books of account and filed regular returns. Further, Revenue have erred in adopting Form 26AS for calculating tax liability, which is patently wrong, as Form 26AS is not a prescribed document in the service tax rules for ascertaining the gross turnover of the assessee. Further, neither the books of account nor the returns filed have been rejected. Appeal allowed - decided in favor of appellant.

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• 2021 (8) TMI 293
  Levy of penalty - Non-discharge of tax liability - business auxiliary service - the appellant, an authorized dealer and service centre for motor vehicles, had provided space for insurance companies to solicit customers of insurance contracts on the vehicles sold by them - HELD THAT:- The decision in M/S PAGARIYA AUTO CENTER VERSUS CCE, AURANGABAD [ 2014 (2) TMI 98 - CESTAT NEW DELHI (LB)] , followed in the several decisions of the Tribunal, has clearly determined, in general, the taxability of receipts from insurance companies operating at the premises of motor vehicle dealers. The exclusion enunciated in the decision of the Larger Bench is the latitude afforded should an assessee be able to establish that only table space was provided. On a perusal of the impugned order, as well as that of the original authority, and the grounds of appeal, we find no justification proffered for in support of the claim of the appellant that the exclusion applies to them. Therefore, taxability of the receipts in the hands of the appellant is no longer in dispute. In the light of section 73(4) of Finance Act, 1994, which is the sole ground for denying recourse to section 73(3) of Finance Act, 1994, it is clear that the appellant herein has discharged tax liability in the manner contemplated by section 73(3) of Finance Act, 1994, upon intimation by the jurisdictional central excise officers. Consequently, in accordance with Explanation 2 therein, the assessee is not liable to any penalty under Finance Act, 1944. The appeal is, therefore, allowed to the limited extent of setting aside the penalties imposed by the original authority and upheld in the impugned order. Appeal allowed in part.

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• Central Excise

• 2021 (8) TMI 299
  CENVAT Credit - Bogus firms - fraudulent Cenvat Credit passing chain to facilitate availment of Cenvat Credit without actual manufacture and supply of duty paid goods - validity of statements relied upon - cross-examination of witnesses - violation of principles of natural justice - HELD THAT:- The basic information as was received by the Department was against M/s. High Tides Infra Pvt. Ltd. Various other co-noticees have been served with the Show Cause Notice based upon the statements recorded during investigation. The most relied statement is that of Pradeep Aggarwal, Proprietor of M/s. Subh Multi Trade Co. Pvt. Ltd. as was initially recorded on 01.10.2015 and subsequently on 19.02.2016 which was recorded before DGCI. The data as was received from his premises vide Panchnama dated 09.05.2015 has also been heavily relied upon by the Department. Retraction of statements - HELD THAT:- The admitted fact remains is that these statements and the data amounts to a third party evidence. Another fact admittedly is that the appellant craved for leave to cross-examine these witnesses but the request was turned down on the ground that the statements of the witnesses were voluntary and have not been retracted - the reason for denying cross-examination is not justified. Cross-examination is a most relevant tool of justice delivery system so as to undo the bias, if any. It is otherwise a statutory mandate flowing from Section 9D of Central Excise Act, 1944. The document recovered from the appellant premises shows that the appellant had maintained a record about the invoices received from various companies whereupon the appellant has availed the Cenvat Credit. Merely because the company issuing invoice was found non-existent, the appellant could not be denied the availment of Cenvat Credit thereupon unless and until his involvement in terms of his knowledge about such non-existence and about the invoice to be bogus is not proved on record. Otherwise also there is no denial that the appellant has cleared his final product on payment of duty - In such circumstances and that the invoices were containing all the particulars as are required un Rule 9 of Cenvat Credit Rules and that the appellant was also making the record of all those details. The allegations based on the statements given by other manufacturers, first or second stage dealers or even by the transporters cannot be read against the appellant. The order under challenge is held to be passed in violation of statutory principles as that of principles of natural justice. The order is also held to be absolutely presumptive having been passed without appreciation of evidence produced by the appellant, but by relying upon the third party evidence - Appeal allowed.

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• CST, VAT & Sales Tax

• 2021 (8) TMI 309
  Principles of natural justice - without giving any opportunity for explaining the case, the respondent had passed the impugned order - rate of tax on restaurant services - HELD THAT:- Admittedly, the petitioner has not given reply to the notice issued by the respondent on 23.02.2020 and the impugned order came to be passed on 11.11.2020 which is an ex-parte order. The learned counsel for the petitioner has specifically contended that because of the pandemic situation, the petitioner s Restaurant was closed till May 2020. Section 27 of the Tamil Nadu Value Added Tax Act, 2006, provides for reasonable opportunity includes the personal hearing under Section 27(4) of the Act, which is mandatory. However, the petitioner had not responded to the notice and the respondent passed the impugned order without complying with Section 27(4) of the Act and without affording an opportunity of personal hearing. Considering the facts and circumstances of the case, this Court is of the considered view that the petitioner ought to have been given a personal hearing and therefore, the matter be remanded to the authorities for fresh consideration - Petition allowed by way of remand.

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• 2021 (8) TMI 308
  Validity of notices issued - Proposal to revice the accounts of the dealer - Assessment Years 2007-08 and 2008-09 - HELD THAT:- The learned counsel for the petitioner made a submission that there are judgments in favour of the petitioner to nullify the actions taken by the respondent. If so, the petitioner is at liberty to submit all those documents, evidences and objections, enabling the authorities to consider the same, take a decision and pass final orders - This being the factum established, the petitioner is at liberty to submit their objections, documents, evidences, etc., within a period of three weeks from the date of receipt of a coy of this order and on receipt of such objections, the respondent shall consider the same on merits and in accordance with law and pass orders, by affording opportunity to the writ petitioner, as contemplated under the act. Petition disposed off.

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• Indian Laws

• 2021 (8) TMI 313
  Seeking grant of Bail - Smuggling - Charas - contraband item - admissibility of statements - recovery of of commercial quantity - Section 37 of the NDPS Act - HELD THAT:- In the instant case, as per the Status Report, charges have already been framed on 25.03.2021 and the same has not been challenged till date by the petitioner. The testimonies of the public witnesses cannot be analyzed at this stage, as their veracity will only be tested during the course of the trial - In the present case, as per the NCB, the petitioner was found trafficking 2.7 Kgs. of Charas concealed in 3 Books and false cavity of base of Bag which were all found in the baggage and said trafficking of Charas from India to Bangkok was being done in conspiracy with his live-in partner co-passenger Ms. Nympha De Jesus (Philippines National) who was also arrested and charged with the said offences. As per the NCB (respondent) the documents pertaining to the present petitioner were also found from the registered baggage. Charges have already been framed and the same have not been challenged. Recovered quantity is a commercial quantity and rigours of Section 37 of NDPS Act applies. It cannot be said that there is no other material with the NCB except the statement U/s 67 of NDPS Act. There are two panch witnesses, baggage of the petitioner has been recovered and some documents relating to the petitioner have also been found in the baggage, therefore, in these circumstances, no ground for bail is made out. Bail application dismissed.

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• 2021 (8) TMI 268
  Permission for withdrawal of petition - also seeking that any observation made in the order dated 03.06.2021 should not influence the consideration of the bail application of the petitioner - HELD THAT:- There is no necessity of clarifying this aspect as the order dated 03.06.2021 and subsequent remand orders are merely to grant custody of the petitioner to the Enforcement Directorate, while the bail application is to be considered on its own merit. The present petition is disposed of as withdrawn.

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