Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 1, 2020
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Banks are advised to immediately refund the charges collected, if any, on or after 1st January 2020 on transactions carried out using the electronic modes prescribed u/s 269SU of the IT Act and not to impose charges on any future transactions carried through the said prescribed modes. - CBDT
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Income from House Property - Payment made to Mumbai Port Trust claimed by assessee u/s 23 - the term local authority cannot be rigidly interpreted to mean only a local government as has been interpreted by the AO in this case. As such the Mumbai Port Trust has to be treated as a local authority u/s 23 of the Act - Decision of CIT(A) allowing the deduction sustained - AT
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TDS u/s 195 - Disallowance of Project Specific Costs u/s 40(a)(i) - There cannot be a retrospective obligation to deduct tax at source and therefore as on the date when the assessee made payments to the non-resident for acquiring off-the-shelf software cannot be regarded as in the nature of royalty and therefore there was no obligation on the part of assessee to deduct tax at source. - AT
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Deduction of tax at Source (TDS) - any income derived by them is taxable only in their country of residence and not in India. Therefore, the Treaty provisions being more beneficial as per section 90(2) of the Act, will override the provisions of the Act. Therefore, there is no need for the assessee to deduct tax at source while reimbursing the salary expanses - AT
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Deemed dividend u/s 2(22)(e) - loan advanced by the company - Ultimate beneficiary of a part of loan advanced by M/s. Maplewood Trading Pvt. Ltd. is either the assessee himself or a concern wherein the assessee has substantial interest. - additions confirmed - AT
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MAT computation - Valuation of assets on amalgamation - determining book profit - Since, the capital reserve is out of purview of Section 115JB, and the “Revaluation Reserve” only is considered for upward adjustment of the profit as per the Act, the AO tried to being the capital reserve to the fold of Clause (j) [which rightly deals with revaluation reserve]. Such an action of the AO cannot be sustained. - AT
IBC
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Whether an advance amount for supply of goods can be considered as an Operational Debt under Section 5(20) of the I&B Code? - the advance amount paid by the Respondent No. 1 to Respondent No. 2 for supply of Sugar is not an Operational Debt, even if Respondent No. 2 failed to supply the Sugar to Respondent No. 1. - AT
Service Tax
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Valuation - Supply of tangible goods service - Supply of piped natural gas - inclusion of charges collected for supply of pipes and measuring equipment to its customers - the role of regulating pressure and ensuring the safety of supply of gas performed by the measurement equipment is an essential aspect for the ‘use’ of the consumer. The SKID equipment fulfils the description in Section 65(105)(zzzzj) of a taxable service: service in relation “tangible goods” where the recipient of the service has use (without possession or effective control) of the goods - Demand confirmed - SC
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Amnesty Scheme - SVLDRS - CENVAT Credit on input services - In fact, in order to ensure that the Designated Committee does not dispute the tax through input credit, a specific clarification was issued in the Circular. This clarification was obviously to alleviate any doubts regarding the tax paid through input credit. If a declarant, on the basis of the clarification, chose to take advantage of the scheme and availed of the scheme, he cannot be deprived of this benefit conferred by the scheme, by the Designated Committee by taking a decision that the petitioner was not entitled to input credit. - HC
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CENVAT Credit - input services, value of which not included in value of output services - As the receipts excluded from computation of assessable value are not consideration for exempt services or may even lie outside the scope of inclusion as consideration, by being returnable to the policy holder, the disputed ‘input services’ does not come within the ambit of rule 6 of CENVAT Credit Rules, 2004. - AT
VAT
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Once the appellate authority comes to the conclusion that there was a bona fide belief of the assessee then an absolute relief should have been granted. Granting a limited relief only in relation to certain articles, in our considered view, was not appropriate. - HC
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Levy of penalty u/s 10-A read with Section 10(b) of CST Act - The learned Appellate Tribunal was justified in holding that the Assessee was entitled to purchase the said fuel viz., diesel, for its generator set and even though the same was not separately included in the Registration Certificate of the Assessee, no mens rea can be attributed to the Assessee for purchase of the same at concessional rate against “C” Form - No penalty - HC
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Levy of penalty u/s 10A of the Central Sales Tax Act, 1956 - allegation of improper procurement of Low sulphur Heavy Stock Furnace Oil from oil companies against C - it is evident that petitioner was entitled to procure oil of every description as long as it was intended for generation of electricity and power along with, the other goods specified in the Certificate of Registration, oil would include Low Sulphur Heavy Stock Furnace Oil. IForm - HC
Case Laws:
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GST
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2020 (8) TMI 824
Short transition of input tax credit - transition to GST regime - HELD THAT:- The issue has been decided by various High Courts as well as by the Apex Court, this court deems it proper to direct the petitioner to file a fresh representation annexing all the judgments cited before this court within a period of seven days before the Jurisdictional Commissioner from the date of receipt of certified copy of the order - Reliance can be placed in the case of Adfert Technologies Pvt. Ltd. Vs. Union of India [ 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT ]. Petition disposed off.
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Income Tax
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2020 (8) TMI 823
Interest u/s 244-A - delayed payment of excess tax paid - Monetary limit to maintain appeal - Whether ITAT was right in law in directing the department to pay compensation in the shape of simple interest on the amount due at the rate at which the assessee otherwise would have been entitled to without appreciating the fact that assessee was duly paid interest u/s 244A on delayed refund upto the date of issue of refund? - HELD THAT:- As decided in M/S. HEG. LIMITED [ 2009 (12) TMI 35 - SUPREME COURT] the interest on the delayed refund becomes part of the principle amount and the delayed interest includes the interest for not refunding the principle amount. Accordingly, it also includes the interest on the delayed refund. Revenue Authorities have been directed vide Notification dated 08.08.2019 to file appeals in income tax cases before the High Court where the monetary limit is less than ₹ 1.00 crore and where it is above the said amount, that shall not be a subject matter of appeal before the High Court. But in the Notification dated 11th July, 2018, there is an exception to the effect that in certain circumstances, an appeal should be contested on merits notwithstanding the fact that the tax effect entailed is less than ₹ 1.00 crore. Monetary limit to prefer an appeal before High Court is less than ₹ 1.00 crore, but if there is a valid question, where an Order, Notification, Instruction or Circular is to be challenged as illegal or ultra vires, an appeal could be filed before the High Court. In the present case, no such exception is available to the appellant. Appeal dismissed.
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2020 (8) TMI 822
Overdue interest on non performing assets - Taxability on accrual basis - Revenue recognition - HELD THAT:- The earliest among the decisions on the said point in favour of the assessee is by the High Court of Karnataka in the case of CIT Vs. Canfin Homes Ltd [ 2011 (8) TMI 178 - KARNATAKA HIGH COURT] . Also see THE LUDHIANA CENTRAL CO-OP. BANK LTD., LUDHIANA [ 2018 (11) TMI 442 - PUNJAB AND HARYANA HIGH COURT] The Revenue, in the raised identical contentions as raised before us stating that the case of the assessee was to be dealt with for the purpose of taxability as per the provisions of the Act and not as per the provisions of the RBI Act, which was the accounting method that the assessee was supposed to follow. The contention was rejected on the ground that even under the Act, interest income had not accrued. The Court further noted that the submission of the Revenue was entirely based on the judgment of the Hon ble Supreme Court in the case of Southern Technologies Ltd., and proceeded to explain as to what was the decision and the effect of the said decision with regard to the assessee/cooperative bank in the paragraph quoted above. The above mentioned decision in the case of Vasisth Chay Vyapar Ltd [ 2010 (11) TMI 88 - DELHI HIGH COURT] was affirmed by the Hon ble Supreme Court in the [ 2018 (3) TMI 56 - SUPREME COURT]. In the light of the above discussion, the substantial question of law framed in this case has to be necessarily answered in favour of the assessee and against the Revenue.
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2020 (8) TMI 821
Rectification of mistake - Deemed dividend u/s 2(22)(e) - assessee company had taken a loan from another company - decision of Hon'ble Supreme Court was also not considered by the Tribunal while passing the order - HELD THAT:- We notice that the Tribunal has not examined applicability of the binding decision of Hon'ble jurisdictional High Court rendered in the case of Sarva Equity Pvt. Ltd [ 2014 (4) TMI 788 - KARNATAKA HIGH COURT] and also did not consider decision rendered by Hon'ble Supreme Court in the case of Madhur Housing and Development Co. [ 2017 (10) TMI 1279 - SUPREME COURT] . Hence non-consideration of both the above decisions would result in a mistake apparent from record as held by Hon'ble Supreme Court in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. [ 2008 (9) TMI 11 - SUPREME COURT] . The learned Authorised Representative has also pointed out that the Tribunal has misquoted the share holding pattern of the assessee company by observing that 2% of shares were held by M/s. Shree Hanuman Jute Mills Private Limited which is also a mistake apparent from record. We are of the opinion that there is merit in the petition filed by the assessee. Since the mistakes goes to the root of the matter, we are of the view that impugned order passed by the Tribunal deserves to be recalled. Misc. Petition filed by the assessee is allowed.
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2020 (8) TMI 820
Legality of the assessment made on non-existence entity - assessee bank got amalgamated with other bank - HELD THAT:- The issue in dispute in the instant case being squarely covered by the decision of the Hon ble Supreme Court in the case of Maruti Suzuki Ltd [ 2019 (7) TMI 1449 - SUPREME COURT] we set aside the order of the Ld. CIT(A) on the issue in dispute and hold that assessment made on non-existent entity is void ab initio and hence same is quashed. - Decided in favour of assessee.
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2020 (8) TMI 819
Assessment u/s 153C - HELD THAT:- Search was carried out in the case of M/s. Adarsh Developers and incriminating documents were found and seized in the course of search and those incriminating documents had a bearing on the assessee s total income and therefore, AO of the searched person has recorded his satisfaction and provided the seized material to the AO of the assessee. No infirmity in the order of CIT(A) in both years as per which it was held by CIT(A) that there is no merit in this claim of the assessee that there was lack of jurisdiction and that legal requirements were not complied with and the principles of law were not applied and hence, on this issue, we decline to interfere in the order of CIT(A) on this issue in both the years and accordingly, ground No.3 is rejected in both years. Set off of brought forward losses - addition made by the AO u/s 14A - HELD THAT:- Quantum of loss for the present year is dependent upon the decision of CIT(A) in the first appeal for AY 2010-11 in which the assessee has challenged the addition made by the AO u/s 14A. Similarly, the Assessment Order for Assessment Year 2011-12 is available and as per the same, the assessee claimed loss in this year but the AO made addition u/s 14A of the Act and determined the net loss for that year and hence, the quantum of loss for the present year year is also dependent upon the decision of CIT(A) in first appeal for Assessment Year 2011-12 which is still pending before learned CIT(A). Quantum of carry forward of loss in the present year is also depending upon the final decision of CIT(A) in Assessment Year 2012-13 which is still pending before CIT(A). Assessment Order for Assessment Year 2012-14 and as per the same, the assessee declared a positive income which is accepted by the AO as no addition was made in this year but as against the claim of the assessee for higher amount of brought forward losses for earlier three years as noted above, the AO set off the losses determined by him as carry forward in Assessment Year 2012-13 and determined the net taxable income for this year and therefore, the final amount of carry forward of losses for the present year is also depending upon the decision of CIT(A) in the first appeal for this year and earlier three years which are still pending before CIT(A). Not allowing MAT credit under section 115JAA - HELD THAT:- Decision of both lower authorities that no MAT credit is available but since the assessee has claimed brought forward losses in Assessment Year 2014-15 which is held to be Nil by the AO as per the AO, the amount of MAT credit available in the present year is also depending upon the result in the earlier years which are pending before learned CIT(A). Hence, we feel it proper to restore back for a fresh decision. Appeals of the assessee are partly allowed for statistical purposes.
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2020 (8) TMI 818
Expenditure on replacement of Jigs and fixtures - Revenue or capital expenditure - current repairs - HELD THAT:- We find that the issue in dispute is squarely covered in favour of the assessee as decided in TVS MOTORS LIMITED [ 2019 (7) TMI 750 - MADRAS HIGH COURT] claim being considered as current repairs, the same would fall under Section 31 of the Act as current repairs. Also see SUNBEAM AUTO LTD. [ 2012 (6) TMI 59 - DELHI HIGH COURT] - Decided against revenue. Computing deduction u/s.80HHC - whether the ld. CIT(A) was justified in treating certain receipts as not forming part of the total turnover - HELD THAT:- Receipts from Dividends, Income from Units, Interests and Profit on sale of investments are merely income from other sources and not business income of the assessee and hence, cannot form part of profits and gains of business of the assessee. We also find that the aforesaid four receipts do not have any link in any manner whatsoever with the export activities of the assessee. We find that the deduction u/s.80HHC of the Act is given in respect of export sale proceeds that were brought into India in convertible foreign exchange and the profit derived attributable thereon alone would be eligible for deduction u/s.80HHC of the Act. We also find that the CBDT vide its Circular in Para 32.10 explaining the amendments to the Finance (No.2) Act, 1991 had categorically clarified that the receipts like interest, commission etc., do not have any element of turnover. Accordingly, the amendment was made to remove the said items from the profits of the business w.e.f. 01/04/1992 pertaining to A.Y.1992-93 onwards. Hence, the intention of the legislature is very clear and it is without any ambiguity and it could be safely concluded that the aforesaid four receipts do not form part of total turnover. We also find that the ld. CIT(A) had placed reliance on the decision of the Hon ble Jurisdictional High Court to support its contention in the case of Kantilal Chhotalal [ 2000 (7) TMI 41 - BOMBAY HIGH COURT] - no infirmity in the order of the ld. CIT(A) granting relief to the assessee. - Decided against revenue.
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2020 (8) TMI 817
Assessment framed u/s.153A - Whether incriminating material found during the course of search? - addition on account of unaccounted purchases, undisclosed income from professional services and disallowances of preliminary expenses - HELD THAT:- There is no incriminating material found during the course of search for preliminary expenses or for payment of profession services or alleged bogus purchases. The Assessing Officer himself observed that all these issues were raised during the course of assessment proceedings and there is no specific material pertaining to Assessment Years 2006-07 and 2007-08. Only an inference has been drawn based on subsequent inquiries relevant for the Assessment Years 2009-10 and 2010-11 in the impugned Assessment Year, otherwise there is no whisper of any incriminating material qua these assessment years. It is a well settled within the jurisdiction of the Delhi High Court that where for any of the assessment years falling within 6 years preceding the year in which search took place, the assessments which are not pending or had attained finality before the date of search, the additions can be made only on the basis of incriminating material found during the course of search qua that assessment year, i.e., the material should pertained to that Assessment Year - see MEETA GUTGUTIA PROP. M/S. FERNS N PETALS [ 2017 (5) TMI 1224 - DELHI HIGH COURT] As none of the additions made by the Assessing Officer in the impugned Assessment Years 2006-07 and 2007-08 are based on any incriminating material found during the course of search pertaining to these assessment years, and therefore, we hold that these additions are beyond the scope of assessment framed u/s.153A/143(3). On this legal ground alone, the additions made by the Assessing Officer are deleted. - Decided in favour of assessee.
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2020 (8) TMI 816
Unexplained jewellery u/s 69A r.w.s. 115BBE - search proceedings - certain jewellery was found from the premises of the assessee and out of which part of the jewellery was seized by the Income-tax Department. - HELD THAT:- To support the availability of the jewellery, the assessee has filed a copy of the valuation report prepared during the course of the search in calendar year 2007, which is a document of the Department having evidential value akin to a copy wealth tax return or VDIS declaration. Not agreeing with DR that slight mismatch in the name of the jewellery articles, should not be allowed just because the jewellery weight found during search of 2007 is not supported by wealth tax returns. In the case of the assessee, the wealth of the assessee was less than the threshold amount of wealth liable to wealth tax and therefore the assessee did not file the wealth tax return. So if the wealth tax return is not filed by the assessee, then in our opinion the inventory of the jewellery found and seized during the course of the search in calendar year 2007 and valuation report of the same prepared by the Departmental Valuer, is one of the document prepared under statutory rules and regulations and cannot be brushed aside. Total weight of the jewellery found and seized during the course of the search in calendar year 2007 is more than the jewellery found during the current search, and therefore respectfully following the decision of the Tribunal in the case of Rajkumar B Agarwal [ 2019 (1) TMI 687 - ITAT PUNE] no addition of unexplained jewellery under section 69A of the Act is warranted in the case of the assessee just due to minor mismatch in the items of the jewellery found in the current search and the jewellery found during the search on 18/02/2007.- Decided in favour of assessee. Deduction for maintenance charges paid in respect of flat let out - HELD THAT:- Since the assessee has already added back the maintenance expenses under the head profit and gains of the business and profession and this amount has not been claimed under that income from house property, the contention of the Assessing Officer that the assessee has claimed flat maintenance expenses in the profit and loss account is factually incorrect and thus no addition can be made on this ground. Finding of CIT(A) of confirming the disallowance is against the factual record and therefore it is set aside. Addition upheld by the learned CIT(A) is accordingly deleted. - Decided in favour of assessee.
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2020 (8) TMI 815
TP Adjustment - re-computation of operating margin by the TPO - TPO excluded FOREX Fluctuation, Domestic Revenue and Prior period expenses - HELD THAT:- As relying on own case we direct the AO/ TPO to consider FOREX Fluctuation as income to be in operating in nature while working out the profit margin of the appellant. Prior period expenses - As decision of the Co-ordinate Bench in the case of Tupperware India Pvt. Ltd. [ 2014 (10) TMI 429 - ITAT DELHI ] wherein the Tribunal has held that prior period expenses are not to be considered as part of operating expenses for the purpose of calculating the operating margin. Domestic revenue - Same cannot be taken into account for computing the operating profit as under the TP adjustments. The transactions and revenue related to the associated enterprises are considered to determine the arm s length price of a transaction. In our considered view, if the domestic sale were to be taken into consideration, the bench marking analyses for determining the ALP of a transaction would be skewed. We accordingly confirmed the exclusion of domestic sales. TPA - Comparable selection - Re-characterised the business of the assessee as KPO service provider and has considered companies engaged in the business of providing KPO service in the final set of comparable companies - HELD THAT:- We have carefully considered the outsource service agreement dated 20.02.2010 entered into between the appellant with its AE. We find that the scope of work carried out by the appellant is merely data processing/ data feeding - We further find that in A.Y 2011-12, the Tribunal in assessee s own case has held that the appellant is not a KPO. Considering the past and the future history of the appellant, we hold that the assessee is an ITES company, therefore, comparable companies which pertain to KPO service provider are directed to be excluded. Comparable selection - Considering the appellant as ITES service provider companies functionally dissimilar with that of assessee need to e deselected from final list. TPO has adopted RPT filter @ 25% - RPT filter in excess of 25% company should be excluded from final set of comparables. Infosys BPO Ltd. need to be excluded as comparable Eclerx Services Ltd. a company engaged in the provision of KPO service and therefore cannot be regarded as an appropriate comparable for benchmarking the international transactions of provision of BPO services Exclusion of TCS E-Serve Ltd. - Brand value associated with TCS Consultancy reflected impacted TCS E-serve profitability in a very positive manner. This inference too in the opinion of Court, cannot be termed as unreasonable. The rationale for exclusion is therefore upheld. Depreciation on computer written off - AO proposed to disallow the same as it was not an eligible expense - HELD THAT:- We have carefully perused the assessment order, we do not find anywhere that the claim of depreciation was denied by the AO. The only observation is in respect of the denial of deduction on account of it being a capital loss. We further find that the AO s decision is pursuant to the directions of the DRP and it cannot be said that the AO has not followed the directions of the DRP. We therefore do not find any merit in this grievance of the assessee and the same is accordingly dismissed.
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2020 (8) TMI 814
Penalty u/s 271(1)(c) - defective notice - Capital gain computation - addition by invoking the provisions of section 50C - HELD THAT:- We find, the AO, in the instant case, made addition u/s 50C on account of difference between the stamp duty value and actual sales consideration received by the assessee on the sale of the property. A perusal of the notice issued u/s 274 r.w. section 271(1)(c), shows that the inappropriate words in the said notice has not been struck off and the said notice does not specify the limb under which the penalty was levied. Similar view has been taken in various other decisions relied on by the ld. Counsel placed in the paper book. Since the inappropriate words in the notice has not been struck off, therefore, following the decision of the Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and SSA's Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] where the SLP filed by the Revenue has been dismissed, we hold that the penalty proceedings initiated by the AO are not in accordance with the law and, therefore, has to be quashed. We accordingly quash the penalty proceedings and direct the AO to cancel the penalty. Since the assessee succeeds on this legal ground, the grounds challenging the penalty on merit are not being adjudicated. Medical expenses on director disallowed - AO noted that the assessee should have entered the perquisite in the hands of Shri Raman Kumra, the non-executive director which was not done in the instant case - HELD THAT:- CIT(A), in the instant case, has passed an ex parte order due to nonappearance of the assessee. A perusal of the paper book page 50 shows that the assessee has filed an adjournment application before the CIT(A) on 24th August, 2016 seeking adjournment of the case to 2nd September, 2016. However, the same was rejected by the CIT(A) and he passed the order on 26th August, 2016. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT(A) with a direction to grant one more opportunity to the assessee to substantiate its case and decide the issue as per fact and law.
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2020 (8) TMI 813
Disallowance u/s 14A r.w.r. 8D(2)(iii) - AO was not satisfied with this claim of the assessee and accordingly, he invoked rule 8D of the rules and made addition for 0.5% of the average value of the investment towards administrative expenses for earning exempt income in terms of rule 8D(2)(iii) of the rules - HELD THAT:- In the assessment year 2009-10, the AO recorded that the assessee made heavy investment for earning of the exempt income and expenses for running the exempt income like manpower, vehicle, telephone, use of Internet, computer and its depreciation, electricity etc. must have been incurred by the assessee. Tribunal found that the AO was not specific as to what exactly the probable expenditure in the matter. Tribunal also noted that the expenses in respect of the mutual funds were already deducted by the respective operators. Tribunal observed that the AO would have taken legal exercise to verify the correctness or otherwise of the certificate, that was issued by the asset management companies or Citibank. In the year under consideration also the AO has recorded similar dissatisfaction and not made any attempt to carry out the exercise which was proposed by the Tribunal in assessment year 2009-10. In view of the identical dissatisfaction recorded by the AO, which has been held as not proper by the Tribunal we respectfully following the finding of the Tribunal in assessment year 2009-10, delete disallowance in dispute in instant year. Disallowance on account of the personal expenses out of the vehicles, depreciation, telephone and telex and travelling expenses - AO has made disallowance at the rate of 1/10 of the expenses on estimate basis in view of the non-production of the logbook of the vehicles - HELD THAT:- AO has not pointed out any other defects in the vouchers under other heads of expenditure. We find that the assessee has already admitted 1/20th of the expenses against the disallowance made under the head vehicle maintenance, depreciation telephone and telex and travelling expenses, therefore we feel it appropriate to restrict the disallowance to 1/20th of the expenses under the heads corresponding to the disallowance which was made by the AO. - Appeal of the assessee is partly allowed.
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2020 (8) TMI 812
Income from House Property - Payment made to Mumbai Port Trust claimed by assessee u/s 23 - d eduction of taxes levied by the local authorities - assessee is the owner of the property in question and the rent received by assessee - HELD THAT:- CIT(A) has observed that, the term local authority cannot be rigidly interpreted to mean only a local government as has been interpreted by the AO in this case. As such the Mumbai Port Trust has to be treated as a local authority u/s 23 of the Act. It is specifically held that the payment made to the DPT is nothing to akin to the service tax levied by a local authority. CIT(A) has considered the decision of M/s Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay [ 1989 (4) TMI 315 - SUPREME COURT] in which it is specifically held that the ground rent paid to the BPT in the nature of service tax levied by local authority and therefore eligible for deduction u/s 23 r.w.s. 27(vi) of the Act. Moreover, the issue has been dealt by the revenue for previous year also relevant to the A.Y. 2010-11. The claim of the assessee was allowed specifically in the circumstances when the assessment order was passed u/s 143(3) of the Act. CIT(A) has examined number of aspects of the cases and by going through all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Decided in favour of the assessee against the revenue.
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2020 (8) TMI 811
Levy of penalty u/s 271(1)(c) - gain on sale of shares - capital gain or business income - HELD THAT:- Assessee has offered his income from the sale and purchase of the shares transaction under the head of long/short term capital gain. AO treated the same as business income on seeing the voluminous transactions of the shares. No doubt the said finding was confirmed by CIT(A) but in fact there is no concealment of income or furnishing the inaccurate particulars of income. The assessee showed his income from long/short term capital gain from his share purchase transaction. However, the same was not accepted and the income from the share transaction was treated as business income. These facts nowhere attract the penalty in view of the law settled in the case of Reliance Petroproduct . [ 2010 (3) TMI 80 - SUPREME COURT ]. Taking into account all the facts and circumstances, we are of the view that the penalty is not liable to be sustainable in the eyes of law - Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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2020 (8) TMI 810
Dismissal of appeal for non-prosecution by CIT-A - Addition being part of fees received from life members,Treating entrance fees received from the ordinary members as taxable receipt, Addition towards the entrance fees received from the corporate members, Considering redemption/switch-out of units of mutual fund as business income, Credit for self - assessment tax not granted, Non-granting of deductions under Chapter VI-A from Gross Total Income, Non granting set off of brought forward unabsorbed depreciation, Not quantifying the brought forward 'long term capital loss' and 'short term capital loss' to be carried forward to subsequent Assessment Years - HELD THAT:- We find that it is incumbent upon the Ld. CIT(A) to pass an order on the merits of the case and not to dismiss the appeal for non-prosecution. Accordingly in the interest of justice we remit the issue raised in the appeal the file of the Ld. CIT(A). Ld. CIT(A) is directed to consider the issue afresh and pass an order on the merits of the case after giving an opportunity of being heard to the assessee in accordance with law. Therefore, in the said circumstances, we are of the view that the order of the CIT(A) is not liable to be sustainable in the eyes of law, therefore, we set aside the finding of the CIT(A) on all the issues and restored the matter before the CIT(A) to decide the matter afresh by giving an opportunity of being heard to the assessee in accordance with law.
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2020 (8) TMI 809
Suppression of income - shifting of profit - Client code modification - fictitious profits/loss Addition made on account of transferring of fictitious profits/loss to other clients in the garb of client code modification - addition on basis the information received from ADIT Investigation and held that the assessee was involved in shifting out ascertained profits - HELD THAT:- AO has referred to the report of the Investigation Wing and general modus operandi - there is nothing on record in terms of any independent examination by the AO of the transactions undertaken by the assessee during the year wherein it has reported gross profits, summoning and examining the broker i.e, M/s C.M. Goenka Stock brokers Pvt Ltd and determining any involvement of assessee in such transactions. M/s C.M. Goenka Stock brokers Pvt Ltd has also confirmed that there are certain inadvertent genuine punching errors which were modified as per guidelines laid down by SEBI vide Circular dated 6.02.2003, therefore, the puching errors happened at the broker end and not at the end of the assessee and there is nothing on record which suggest any involvement of assessee or the fact that such punching errors were done at the behest of the assessee. Accordingly, in the facts and circumstances of the case and following the decision of the Coordinate Bench in assessee s own case [ 2019 (5) TMI 1794 - ITAT JAIPUR ] the addition made by the AO is hereby deleted. - Decided in favour of assessee.
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2020 (8) TMI 808
TP Adjustment - correctness of determination of ALP in respect of an international transaction between the assessee and its AE of rendering software development services [SWD services] u/s. 92 - Comparable selection - HELD THAT:- The assessee rendered Software Development Services (SWD services) and marketing support services. During the previous year relevant to AY 2010-11, the assessee rendered SWD services to its Associated Enterprise [AE] thus companies functionally dissimilar with that of assessee need to be deselected from final list. Working capital adjustment - not considering the advances received from AEs while computing the average trade payables - TPO is directed to consider the advance received from AE as trade payable and considered for working capital adjustment. It was held in the said decision that advances received from AE par take the character of trade payables which is to be adjusted against future invoice. The advance received from the AE dispenses with the necessity to borrow for working capital and has direct bearing on the profitability of the concerned. The grievance of the assessee is accordingly allowed. AO is directed to compute the working capital adjustment by considering the advances received from AE as part of the average trade payable. Computation of OP/OC of the assessee - plea of the assessee is that OP/OC should be computed as done by the assessee by considering the retirement provision written back as part of operating expenditure - HELD THAT:- The assessee s claim that for earlier AY its operating profit was considered after treating the provision for retirement benefit no longer required as part of operating expenses. This aspect was not verified either by the DRP/AO/TPO. Hence we deem it fit and appropriate to set aside the issue to TPO/AO for consideration of the claim of assessee with regard to past treatment of similar write back for computing its operating profit. The AO/TPO will afford opportunity of being heard to the assessee, before deciding the issue of determination of ALP in accordance with the directions contained in this order. TDS u/s 195 - Disallowance of Project Specific Costs u/s 40(a)(i) - AO held that the assessee is liable to deduct tax at source as there are plethora of judicial precedents supporting the fact that TDS compliance is mandatory even if the expenditure is incurred by the way of reimbursements and that the payment made for right to use computer software was in the nature of royalty and hence chargeable to tax in India in the hands of the recipient non-resident - HELD THAT:- There cannot be a retrospective obligation to deduct tax at source and therefore as on the date when the assessee made payments to the non-resident for acquiring off-the-shelf software cannot be regarded as in the nature of royalty and therefore there was no obligation on the part of assessee to deduct tax at source. The payment would be in the nature of business profits in the hands of non-resident and since admittedly the non-resident does not have a Permanent Establishment in India, the sum in question is not chargeable to tax in the hands of non-resident. Consequently, the disallowance made u/s. 40(a)(ia) of the Act has to be deleted.
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2020 (8) TMI 807
Peak credit addition - addition by way of applying higher net profit rate - undisclosed bank account held with ICICI Bank - HELD THAT:- Physical stock and cash in hand in the regular books have been utilised for making un accounted sales. It is noteworthy that the assessee is carrying out of books sales transactions in the past also and till the date of peak bank balance on 28.2.2014 the profits earned on unrecorded sales have been offered to tax and they form part of the peak bank balance. As against peak balance found in the bank account not disclosed in the regular books in the instant case three things have to be considered, firstly stock in hand available with the assessee, secondly cash in hand available in regular books and thirdly the undisclosed profit earned on the unaccounted sales till the date of peak balance which have been offered to tax. In the instant case the peak balance in the undisclosed ICICI bank account is much less than the total of stock in hand, cash in hand and unaccounted profits offered to tax. Considering judicial precedence find no inconsistency in the finding of Ld. CIT(A) deleting the peak credit addition. Rejection of books of accounts - Addition made by enhancing net profit - AO applying net profit @2.5% as against the net profit disclosed by the assessee @0.73% - CIT-A deleted the addition - HELD THAT:- Action of the A.O rejecting the book results thereby invoking provisions of section 145(3) was not justified and so was also not justified in estimating the net profit on the regular turnover in the books of accounts @2.5% as against 0.73% offered by the assessee. Application of 2.5% on undisclosed turnover cannot be equated to be applied on the regular turnover disclosed by the assessee. In the immediately preceding assessment year 2013-14 assessee has offered 0.91% as net profit rate which has been accepted by the revenue. No reason to interfere in the finding of Ld. CIT(A) deleting the addition of ₹ 67,76,734/- and we also find no justification in the action of the Ld. A.O rejecting the books of accounts u/s 145(3) of the Act. - Decided in favour of assessee.
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2020 (8) TMI 806
TP Adjustment - comparable selection - HELD THAT:- Appellant herein is engaged in the business of market development and dissemination of product information of speciality chemicals and polymers. It is also engaged in research and development activities and provides onsite technical and back-office support services. Companies functionally dissimilar with that of assessee need to be deselected from final list. TDS u/s 195 - disallowance u/s 40(a)(i) - global support service charges paid - HELD THAT:- Payment made by the assessee cannot be considered as fees for technical services as defined under Article 12(4)(b) of the India Singapore tax treaty and for this reason also we do not have to examine taxability of the same under section 9(1)(vii) of the Act. Moreover, it is a fact on record that the payment of global support service fee was made under the agreement which has continued from the year 2003. It is a matter of record that in the preceding assessment years though the assessee has paid global support service fees to EMCAP without deducting tax at source, no disallowance under section 40(a)(i) was ever made. There being no difference in facts in the impugned assessment year, considering that the payment was made under the same contract, even, applying the rule of consistency, no disallowance under section 40(a)(i) can be made in the impugned assessment year. Accordingly, we delete the disallowance made by the Assessing Officer - Decided in favour of assessee.
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2020 (8) TMI 805
Disallowances of expenses claimed in Raunak Agency (RA) - AO disallowed the total expenses claimed by the assessee with regard to Raunak agency by taking view that no business was carried out by Raunak agency during the year as it was discontinued in earlier years - HELD THAT:- CIT (A) while affirming the action of assessing officer also held that Raunak agency and Amber agency are two different and distinct business carried by assessee and therefore, they did not constitute the same business. As held that only stoppage of the business activities of Raunak agency no deduction was admissible for an expenditure including the bad debts. As held that merely recovering dues and discharging liability after discontinuance of business activity does not amount to carry on business. And that deeming provision of section 41 (1) cannot be extended merely income was offered to tax under section 41. The case law relied by ld. DR for the revenue in Karnataka Instrade Corporation Ltd. vs. ACIT [2009 (2) TMI 248 - ITAT, BANGALORE] is also not helpful to the revenue. In the said case it was held that in order to allow business loss under section 72(1)(i) condition is that assessee should carry on business in year under appeal and it is only against profits of such business that brought forward loss can be set off. Where assessee s profits were assessed under section 41(1) as business income, said profits did not represent profits and gains of any business carried on by assessee and therefore, brought forward business loss was not allowable against profits assessed under section 41(1). In the case in hand the assessee throughout the proceedings is claiming that he is carrying his lottery business under two limbs and is entitled for the deductions of bed debts and other expenses. In the result the Ground No. 1 of the appeal is allowed. Disallowance of Debit balances written off in M/s. Amber Agency - assessee submits that MLPL was acting as a sole stockist of Amber agency in Kolkata for marketing the lotteries through a network of its customer - HELD THAT:- We have noted that the alternative plea of the assessee was not accepted by ld CIT(A) by taking view that no cogent evidence is furnished by the assessee, the assessee not proved that loss occurred in the course of business or it was a trading loss and not capital. As also held that there is no evidence that advance given to MLPL was utilised for the purpose of business. The assessee has also filed various documentary evidences, which we have recorded in para -3 supra . The assessee has certified that all these evidences were furnished before the lower authorities. We have noted the alternative plea of business loss was raised for the first time before ld CIT(A) and it was rejected summarily without reference to the aforesaid evidence. Therefore, we deem it appropriate to restore the alternative claim of business loss to the file of assessing officer to consider it afresh. Needless to direct that before passing the order afresh the assessing officer shall grant reasonable opportunity of hearing to the assessee and will pass the order in accordance with law. In the result the ground No. 2 of the appeal is allowed for statistical purpose.
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2020 (8) TMI 804
Deduction of tax at Source - taxability of Non-residents employees - joint venture partners - Reimbursement of salary on actual basis to the non resident employees of the joint venture partners - deemed to have accrued or arisen in India or not? - clause (ii) of section 9(1) of IT Act - HELD THAT:- As per the provision of said section, the income falling under the head salary is deemed to accrue or arise in India if it is earned in India. Explanation to this provision further clarifies that the salary income referred to must be payable for services rendered in India and will also include the rest/leave period which is preceded and succeeded by service rendered in India - If we keep the facts of the present case in juxtaposition to the conditions enshrined in section 9(ii), it can be seen that the salary income earned by the non resident individuals were for the services rendered out side India and not in India. Therefore, such salary income cannot be deemed to have accrued or arisen in India as per section 9(ii) of the Act. The Assessing Officer in his anxiety to bring the salary income to tax in India has completely overlooked the impact of section 9(1)(ii) of the Act. The attempt on the part of the Assessing Officer to rope in the reimbursement of salary payment under section 9(1)(i) of the Act is completely misconceived. Having held so, taxability or otherwise of the income under the respective Tax Treaty provisions needs to be examined. We must hasten to add, neither the Assessing Officer nor learned Commissioner (Appeals) has examined the issue from the aforesaid angle.Thus, any income derived by them is taxable only in their country of residence and not in India. Therefore, the Treaty provisions being more beneficial as per section 90(2) of the Act, will override the provisions of the Act. Therefore, there is no need for the assessee to deduct tax at source while reimbursing the salary expanses - the decision of learned Commissioner (Appeals) upheld. Appeal dismissed.
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2020 (8) TMI 803
TP Adjustment - Comparability - HELD THAT:- Assessee is a financial outsourcing company rendering IT enabled accounting and financial services, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2020 (8) TMI 802
Rectification of mistake u/s 254 - Tribunal did not consider in its order the claim u/s 11(1) Explanation- 2 of the Act to hold on merits that it is not entitled to the benefit of Section 11(1) of the Act - HELD THAT:- In the instant case, the assessee has received ₹ 3,55,45,600/- during the financial year 2010-11 relevant to the impugned assessment year. This is crystal clear from the (i) Deed of Assignment dated 19.01.2011 and the Schedule (ii)Receipt of ₹ 3,55,45,600/- by the assessee through cheque No. 889388 dated 18.01.2011 drawn on UBI, Juhu, Tara Road and (iii) The Basis of Accounting Revenue Recognition followed by the assessee during the present assessment year. In the written submission dated 18.03.2014 filed before the AO, the assessee s main contention was Since there is no definite possibility that receipt will be received the consideration was not taxed in AY 2011-12 . A reading of the said written submission which we have extracted at para 6 of the impugned order, clearly indicates that the appellant has not exercised the option under clause (2) of the Explanation to section 11(1) of the Act. Thus we concluded that the grounds of appeal filed by the assessee can be seen through the lens of deductive inference, in which it is asserted that the conclusion is guaranteed to be true if the premises are true. In the present case, it is the contention of the assessee vide the 2nd ground of appeal that the Ld. CIT(A) failed to note that the amount of ₹ 3,55,45,600/- was not factually received during the year under appeal. This premise is not true as evident from the finding above that the assessee has received ₹ 3,55,45,600/- during the financial year 2010-11 relevant to the impugned assessment year. The inference drawn by the assessee is not a correct one as it is based on wrong premise. In view of the above facts and position of law, we upheld the order of the Ld. CIT(A). We find that the arguments of the assessee during the course of hearing in [ 2019 (7) TMI 429 - ITAT MUMBAI] 6 for the impugned assessment year have been examined at length and then the order has been passed. No fact has been lost sight of. No argument has been lost sight of. Applicant has not pointed out any mistake apparent from the record. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. See TS BALARAM, INCOME-TAX OFFICER, COMPANY CIRCLE IV, BOMBAY VERSUS VOLKART BROTHERS AND OTHERS [ 1971 (8) TMI 3 - SUPREME COURT] Not a single error in the impugned order has been pointed out by the applicant. What the applicant wants is a review of the order passed by the Tribunal. The Tribunal is a creature of the statute. The Tribunal cannot review its own decision unless it is permitted to do so by the statute. The Hon ble Supreme Court has held in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji [ 1970 (3) TMI 163 - SUPREME COURT] that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. It is a settled law that the Tribunal has no power to review its order in the garb of section 254(2) of the Act as held in CIT v. Globe Transport Corpn. [ 1991 (1) TMI 23 - RAJASTHAN HIGH COURT] - MA dismissed.
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2020 (8) TMI 801
Rectification of mistake - error apparent on the face of record - review of decision rendered by the Tribunal - section 254(2) of the I.T.Act, 1961 - HELD THAT:- Ongoing through the reasons given by the Tribunal for rejection of the claim of the assessee for condonation of delay and the pleadings taken by the assessee in its miscellaneous application, we find that although, the Tribunal has accepted the fact that delay in filing appeal was due to wrong advice of counsel, but proceeded to dismiss the appeal on the sole basis of finding that it is an afterthought of the assessee, after the Ld. AO has decided to make additions, in respect of issues questioned by the Ld.CIT(A), ignoring the pleading of the assessee, in light of affidavit of Shri Nilesh Y.Jagiwala, Chartered Accountant, who attended the proceedings u/s 263 of the Act, along with certain judicial precedents, including the decision of Hon ble Bombay High court - The said findings of the Tribunal constitute a mistake apparent on record, which can be rectified u/s 254(2) of the I.T.Act, 1961. The order of Tribunal recalled - the registry directed to refix the case for hearing in due course - application allowed.
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2020 (8) TMI 800
Deemed dividend u/s 2(22)(e) - loan advanced by the company - HELD THAT:- Ultimate beneficiary of a part of loan advanced by M/s. Maplewood Trading Pvt. Ltd. is either the assessee himself or a concern wherein the assessee has substantial interest. Therefore, to that extent, the decision of Commissioner (Appeals) deserves to be upheld. As regards the contention of that in Miramac Properties Pvt. Ltd. the assessee is having 50% shareholding, hence, only 50% of the amount advanced as loan should be treated as deemed dividend, we are unable to accept the same. In the facts of the present case it has been established beyond doubt that assessee has been benefitted by the loan advanced. As regards the contention of AR that an amount being securities premium reserve cannot form part of accumulated profit of M/s. Maplewood Trading Pvt. Ltd., to attract the provisions of section 2(22)(e) of the Act as well as the additional evidence filed to support such contention, we decline to accept the aforesaid plea of the assessee as well as the additional evidence at this stage considering the fact that the assessee had never raised this issue at any stage before the Departmental Authorities and it requires investigation into fresh facts which were never part of record. The decisions relied upon by learned Authorised Representative, on careful examination, were found to be inapplicable to the facts of the present appeal, hence, there is no need to discuss them in detail.
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2020 (8) TMI 799
Disallowance of fees paid to ROC - disallowance by the AO by holding that the same was of capital in nature - as alleged by the Ld. AR that out of the total amount part amounts pertains to fee for filing of annual return with the ROC - HELD THAT:- We agree with the contention of the Ld. AR that this amount cannot be disallowed. Therefore, we delete the amount of ₹ 5,500/- and since the remaining amount is not pressed, we confirm the remaining amount of ₹ 2,21,000/-. Thus, this ground stands partly allowed. Disallowance on account of expenditure claimed in the profit and loss account - Addition on ground that there was no business activity - as argued by the Ld. AR that out of this amount, amount of ₹ 2,26,500/- is a double disallowance which is covered by ground No. 1 and the business of the assessee was duly set up and merely because there was no expenditure earned by the assessee during the year under consideration, the expenditure could not be disallowed as the expenses were in the nature of administrative expenses - HELD THAT:- Having gone through the records, we are in agreement with the contention of the Ld. AR that the amount of ₹ 2,26,500/-, which was pertaining to expenses of ROC, was also a part of total expenditure at ₹ 26,22,677/- and, thus, double disallowance has been made on this account. We accordingly direct deletion of this double disallowance. As perused the profit and loss account and have also considered the submissions made in this regard - perusal of the audited financial statements that investments were made by the company during the year under consideration also as the assessee company is an investment company. Merely because no income/revenue resulted from such activity, it does not mean that the business was not set up or was not in a running condition. It has been held in the following judicial precedents that once the business is set up, the expenditure is allowable - See Western India Vegetable Products Ltd. [ 1954 (3) TMI 59 - BOMBAY HIGH COURT] , Sarabhai Management Corporation Ltd [ 1991 (8) TMI 6 - SUPREME COURT] Similarly, there are judicial precedents to the effect that even if there is no business, expenses incurred for retaining the status of the company are allowable. See GANGA PROPERTIES LIMITED [ 1989 (5) TMI 10 - CALCUTTA HIGH COURT] - Respectfully following the judicial precedents enumerated above we delete the disallowance. Addition as deemed dividend u/s 2(22)(e) - HELD THAT:- There are pleadings which were not made before the authorities below. It will be in fitness of things if this issue is restored to the file of the AO to examine and adjudicate this issue afresh after giving proper opportunity to the assessee. The assessee shall be at liberty to produce the documents and rely on pleadings as have been made before us in this respect. Accordingly, ground Nos. 3 4 stand allowed for statistical purposes. Addition being amount of loan taken as unexplained investment u/s 68 - HELD THAT:- It is undisputed that the loan was given by M/s. Mega Trading Corporation through banking channel. It is also undisputed that M/s. Mega Trading Corporation is duly assessed to tax. The loan amount is duly reflected in the bank statement of M/s. Mega Trading Corporation which was filed before the AO. It is also undisputed fact that the AO had issued notice u/s 133(6) of the Act to M/s. Mega Trading Corporation which was duly responded to by the said company and the advancing of the loan was confirmed directly by the lender company. It is also evidenced from record that this amount was subsequently refunded by the assessee company to the lender company. Thus, these factual evidences prove the bona fide of the assessee company in this regard and we are unable to subscribe to the view of the lower authorities that this amount remains unexplained. We set aside the order of the Ld. CIT (A) and direct the deletion of this addition. Decided in favour of assessee.
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2020 (8) TMI 798
Deemed dividend u/s 2(22)(e) - HELD THAT:- The amount was received by Visual from BPTP Ltd. during the course of business for making payment to Mr. Rishipal Sharma against purchase of land from him. The payment received from BPTP Ltd. by Visual was used to make payment to Mr. Rishpal Sharma from whom land was purchased by Visual. Documents produced before the AO establishes that amount was received by Visual Builders Pvt. Ltd. from BPTP Ltd. in ordinary course of business for purchase of land and against assignment of development rights in land and does not fall within purview of provision of Section 2(22)(e). These facts were not disputed by the Revenue at any point of time. AO observed in the Assessment Order that the assessee is having substantial interest in the above payer company as well as in recipient company. But the same was not elaborated or discussed by the AO in the Assessment Order. Nothing has been established against the assessee for application of Section 2(22)(e) on the ground that the amount advance is for purchase of suitable land and the said amount is shown in its Balance Sheet as current liability. Assessee has given all the details but the same was not at all taken into account in the context of applicability of Section 2(22)(e). Section 2(22)(e) will not be applicable in assessee s case as where loans and advaces are given in normal course of business and transaction in question benefits both payer and payee companies as held in case of CIT vs. Ankitech (P.) Ltd. [ 2011 (5) TMI 325 - DELHI HIGH COURT] . AO as well as the CIT(A) was not correct in applying Section 2(22)(e) in the present assessee s case - Appeal of the assessee is allowed.
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2020 (8) TMI 797
Reopening of assessment u/s 147 - non disposing of the objection raised by the appellant - non-compliance of procedure - Non application of independent application of mind - HELD THAT:- Objections raised by the assessee to the reasons recorded for re-opening and the re-opening itself were not disposed off by the AO. Thus the completion of assessment without disposal of these objections, makes the assessment bad in law as held in the case of Rabo India Finance Ltd. vs. DCIT [ 2012 (7) TMI 519 - BOMBAY HIGH COURT] and in the case of Vishwanath Engineers vs. ACIT [ 2012 (5) TMI 146 - GUJARAT HIGH COURT] . Even otherwise Section 151 of the Act mandates recording of satisfaction by the approving authority. In this case the satisfaction was mechanical and in fact a rubber stamp was used to state Yes I am satisfied . Thus the assessment is bad in law for want of recording proper sanction u/s 151 - Even otherwise we find that the AO has not applied his mind to the information received from the Investigation Wing of the Department. He re-opened based on borrowed satisfaction. Re-opening based on incorrect, incomplete and vague facts is bad in law - Appeal of the Revenue is dismissed.
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2020 (8) TMI 796
MAT computation - Valuation of assets on amalgamation - determining book profit under section 115JB as against book loss declared by the appellant - whether the increase in the value of investment is capital reserve or revaluation reserve? - whether the reserve created by the scheme of amalgamation on account of investing of assets is in the nature of Revaluation Reserve or Capital Reserve and the upward adjustment in terms of Clause (j) and Clause (f) of the Explanation 1 to Section 115JB by the revenue is correct or not? - HELD THAT:- AO failed to appreciate that a Revaluation Reserve is created when an enterprise revalues its own assets, already acquired and recorded in its books at certain values. When an entity makes reinstatement of the book value of its existing assets, it amounts to revaluation of assets. In the instant case, the assessee has not revalued its existing asset but as only recorded the fair values of various assets and liabilities acquired by the assessee from the transferor/ amalgamating companies pursuant to the scheme of amalgamation as its cost of acquisition in accordance with the terms of the court-approved scheme of amalgamation and the provisions of AS14. As per the accounting standard, upward revaluation of assets is permitted only in terms of AS 10 on Accounting for Fixed Assets . AS 13 which deals with Accounting for Investments , does not permit a company to revalue of its long-term investments at a value higher than the cost. For computing book profit, sub-section (2) of section 115JB of the Act mandates that every company shall prepare its Profit Loss Account in accordance with the provisions of Parts I and II of Schedule III of the Companies Act, 2013 (corresponding to Parts II and III of the erstwhile Companies Act further provides that for computing book profit under the said section, the same accounting policy and Accounting Standards as are adopted for preparing the accounts laid before the shareholders at the Annual General Meeting in accordance with the provisions of section 129 of the Companies Act, 2013 (corresponding to section 210 of the Companies Act; 1956) shall be adopted. Since, the capital reserve is out of purview of Section 115JB, and the Revaluation Reserve only is considered for upward adjustment of the profit as per the Act, the AO tried to being the capital reserve to the fold of Clause (j) [which rightly deals with revaluation reserve]. Such an action of the AO cannot be sustained. Based on the reading of Clause (j) of Explanation to section 115JB for calculation of book profit u/s. 115JB, provisions of Section 129 of the Companies Act, AS 14 of the recognized accounting standard, keeping in view the fact that the revenue has not brought any tangible material to prove that the scheme is a colourable device to avoid taxes, keeping in view the land holding which has been consolidated owing to the amalgamation of the companies and keeping view the accounting resorted by the group companies regarding the book value of investments in shares pre post amalgamation, we hereby hold that, the appeal of the assessee on this ground is allowed. Upward adjustment in terms of Clause (f) of Explanation 1 of Section 115JB on account of expenditure relatable to earning of exempt income - HELD THAT:- There is a clear distinction between a business expenditure and business loss. The former is an indicative of a volition but a loss comes to as ab extra without the role of the assessee. While expenditure is voluntarily, business loss is fortuitous [CIT Vs New India Assurance Co. Ltd. [ 1967 (10) TMI 16 - BOMBAY HIGH COURT] . Hence, the loss cannot be equated with expenditure. The provisions u/s 115JB doesn t envisage enhancement of taxable profits by adding the loss incurred in redemption of mutual fund for the purpose of Section 115JB. Reliance is placed on the judgment of Hon ble High Court of Gujarat in the case of CIT Vs JK Paper Ltd. [ 2012 (4) TMI 237 - GUJARAT HIGH COURT] wherein it was held that the loss incurred by the on account of dividend stripping dealt under sub-Section 7 of Section 97 cannot be applied for the purpose of computing business profit in terms of Section 115JB. Based on the conjoint reading of the provisions of the Act and the judgments of the Hon ble Apex Court, the appeal of the assessee on this ground is allowed.
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2020 (8) TMI 795
TP Adjustment - adjustment on account of advertisement and marketing expenses (AMP) - HELD THAT:- We have also gone through the orders of Tribunal for various earlier years. We have noted that the TPO while passing the order under section 92CA basically followed the order for AY 2014-15. We have further noted that in appeal for AY 2014-15 held that being of the considered view that as the revenue had failed to discharge the onus that was cast upon it as regards proving that there was any 'understanding' or an 'arrangement' or 'action in concert' as per which the assessee had agreed for incurring of AMP expenses for brand building of its AE, viz. L‟Oreal S.A., France, the TP adjustment of ₹ 354.73 crores in respect of AMP expenses cannot be sustained and is liable to be vacated. Adjustment on account of payment for packaging design, cost, training to Saloon customers and promotional goods - Admission of additional evidence - HELD THAT:- Considering the decision of Tribunal for earlier year on alternate adjustment and the fact that the assessee has filed the aforesaid additional evidence for the first time before the Tribunal and the fact that we have already held that the additional evidence furnished by the assessee has direct relevance qua the grounds of appeal, which required consideration and verification at the end of AO, therefore, we remit the issue to the file of AO for consideration and decision on the issue afresh. AO/TPO is also directed to follow the order of Tribunal for AY 2014-15 as well. Needless to order that before deciding the issue, the AO shall grant opportunity to the assessee. Depreciation of goodwill - assessee submits that he acquired goodwill pursuant to acquisition of business from Rahul Healthcare, the valuation of business and goodwill cannot be questioned by revenue authorities - HELD THAT:- A perusal of draft assessment order shows that the assessee failed to discharge the source of goodwill‟. The ld. DRP while considering the objections of the assessee though deleted disallowance of cost of acquisition of goodwill, however, the depreciation claimed on goodwill was upheld. In our view the AO as well as ld. DRP have not considered the aforesaid submission of the assessee that the assessee acquired not only tangible assets but also bundle of intangible assets collectively called goodwill, which includes various permits, employee, and contracts, though the assessee in Annexure-2 of its reply dated 21.12.2018 has specifically contended about its claim of goodwill‟ . Considering the facts that neither the AO nor the ld. DRP considered the aforesaid facts as placed before us, therefore, we remit these grounds of appeal to the file of AO to consider these issues afresh by considering the aforesaid submission of the assessee and the evidences and pass the order in accordance with law. The AO shall consider the decision of Hon‟ble Apex Court in Smifs Securities Ltd [ 2012 (8) TMI 713 - SUPREME COURT ] and Delhi High Court in Triune Energy Services (P.) Ltd. [ 2015 (11) TMI 1218 - DELHI HIGH COURT ] Income from other sources taxed twice - HELD THAT:- We remit these grounds of appeal to the file of AO, with the direction to verify the fact and rectify the order if the same income of ₹ 1.98 Crore is taxed twice in the assessment order. The assessee also directed to explain the fact and provide necessary information/document to the assessing officer for passing the order in accordance with law. Deduction in respect of Education Cess - As per DR this ground of appeal is raised belatedly - HELD THAT:-Considering the decision of Hon‟ble Bombay High Court in Sesa Goa [ 2020 (3) TMI 347 - BOMBAY HIGH COURT ] we admit the ground of appeal and direct the AO to consider the claim of assessee and allow appropriate relief in accordance with the decision of Hon‟ble Bombay High Court in Sesa Goa (supra) wherein it was held that Education Cess and Higher and Secondary Education Cess are liable for deduction in computing income chargeable under head of 'profits and gains of business or profession‟. In the result, this ground of appeal allowed for statistical purposegrant the credit of self-assessment tax and re-compute the interest under section 234A and 234B afresh in accordance with law. Needles to say that before re-computing the interest under section 234A and 234B, the AO shall grant opportunity of hearing to the assessee. Interest u/s 234A and 234B - HELD THAT:- We direct the AO to grant the credit of self-assessment tax and re-compute the interest under section 234A and 234B afresh in accordance with law.
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Corporate Laws
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2020 (8) TMI 794
Restoration of name of Petitioner in the Register of Companies - territorial jurisdiction of the Court - the cause of action arose due to the act of the ROC in Chennai and not the Central Government s act of directing the SFIO investigation. HELD THAT:- The impact of Sub-Rule 3(1) on the striking-off of the name of the Petitioner-Company would be a legal argument which the Petitioner would have to raise before the appropriate forum. The said forum would be entitled to consider the effect of Sub-Rule 3(1) and also to examine the legality of the order dated 25th October, 2019. The mere fact that the Central Government may have directed the SFIO investigation, would not vest jurisdiction in this Court, especially when the specific order impugned in this case has been passed by the ROC in Chennai. Accordingly, this Court is of the view that this Court lacks territorial jurisdiction to entertain the present writ petition. The present petition is dismissed, with liberty to the Petitioner to approach the appropriate forum in accordance with law.
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Insolvency & Bankruptcy
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2020 (8) TMI 793
Approval of Resolution Plan - rejection of Settlement Plan - allegation that the Promoter/ Director had failed to comply with the direction of this Appellate Tribunal and the Hon ble Apex Court - time limitation. Whether the appeal is barred by limitation? - HELD THAT:- The period of limitation for filing appeal has to be counted with effect from the date certified copy of the impugned order was received by the Appellant viz. 27th January, 2020 and not with effect from the date of impugned order viz. 20th January, 2020. Admittedly, the appeal was filed on 12th March, 2020. Therefore, excluding the date of receipt of certified copy of the impugned order by Appellant and the date of filing of appeal, it is unambiguously clear that only 44 days have been consumed in preferring the appeal - the appeal being filed beyond the extended period of limitation has no substance and the same is overruled. Availability of alternative remedy - HELD THAT:- Though an efficacious remedy was available in the form of statutory appeal under I B Code , it cannot be disputed that the substantive remedy in the form of Writ Petition filed on the very day of communication of the impugned order, followed by stay of proceedings and dismissal of the Writ Petition would bring the matter within the fold of remedy being pursued in exercise of legitimate right warranting its exclusion while computing the limitation and once it is recognised as a ground for extension of limitation within the ambit of Sections 14 and 15 of the Limitation Act, 1963, sufficient cause for condonation of delay can safely be said to have been made out for purposes of extension of time within the purview of Section 61(2) of the I B Code . Objection raised on this score is accordingly repelled and extension of 14 days in preferring the appeal is allowed. Whether the Settlement Plan of the Corporate Debtor has been improperly rejected and Resolution Plan of Respondent No.8 has been approved overlooking the illegalities/flaws? - HELD THAT:- The commercial wisdom of the Committee of Creditors in regard to viability and feasibility of the Resolution Plan is final and this Appellate Tribunal cannot substitute its view for the commercial wisdom of the Committee of Creditors. Evaluation of the financial matrix, feasibility of the plan and its viability are areas falling within the ambit of business decision based on commercial wisdom of the Committee of Creditors and inquiry in appeal before this Appellate Tribunal is limited to the grounds under Section 61(3) of the I B Code . In the instant case, it is not disputed that the Successful Resolution Plan, apart from disclosing the source of funds in the form of infusion by the Resolution Applicant and receivables from Government has passed the muster before the Committee of Creditors and has been found better than the Settlement Plan offered by the Appellant/ promoter which was found lacking on many material aspects. The Resolution Plan submitted by the Respondent No.8 had already been approved by the Committee of Creditors prior to same being subjected to comparison with the Settlement Plan emanating from the Appellant/ Promoter and upon comparison by the Committee of Creditors it has again emerged as being viable, feasible and acceptable in priority to the proposed Settlement Plan of Promoter. In our considered opinion no exceptional circumstances justifying review of decision of Committee of Creditors in regard to rejection of the Settlement Plan and the approved Resolution Plan being a better one do exist in the instant case. Appeal dismissed.
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2020 (8) TMI 792
Maintainability of application - initiation of CIRP - ex-parte order - service of notice - it is contended that application filed by the Financial Creditor is not served on the correct address and the notice has also been served upon him - HELD THAT:- The email ID [email protected] is printed on the letterhead of the Corporate Debtor, therefore, there is no force in the argument of appellant that the said Email ID was used by the staff. This is an after thought. Further it is the duty of the Corporate Debtor to access to his emails and can not take excuse that the same was not in use. Financial Creditor has duly served the Corporate Debtor. We also not e that the Notice dated 25th August, 2019 (Page 27 of Reply of Respondent No.1) was also sent to email ID [email protected] in addition to email ID [email protected] of appellant. The email [email protected] is the email of erstwhile Director of Grand Batteries Pvt Ltd . We also note notices were also pasted on the premises of Grand Batteries Pvt Ltd in which the appellant happened to be Director. The Notice under Section 13(2) of SARFEASI Act was served upon the Corporate Debtor and its sister concern, M/s Nihan Batteries Ltd, (Page 86 and 94 of Appeal Paper Book) at the common address. The IRP made a public announcement on 1.11.2019 as per Rule 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution for Corporate Persons) Regulations, 2016. In this Public Announcement the name of the Corporate Debtor, Insolvency commencement date in respect of corporate debtor, Corporate Identification No. of corporate debtor etc. is given. This public announcement is for public at large. Even if it is presumed that the appellant was not served at the correct address or at the correct email, this public announcement is made known to each and every citizen of country and the appellant cannot deny it. Therefore, the appellant should have filed the appeal within 45 days from the date of public announcement i.e. 1.11.2019. But the appellant has not done this and taking the irrelevant pleas that the email if not being used by them for the last three years or the email was for the staff etc. Thus, it is established that the Corporate Debtor was duly served, as also observed by the NCLT Jaipur, but did not appear before the NCLT Jaipur and also deliberately filed the appeal before this Appellate Tribunal after a delay of 110 days to delay the process of insolvency of corporation debtor. Further the appellant has also not disclosed that they have attended the 3rd, 4th and 5th COC Meeting. Appeal dismissed.
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2020 (8) TMI 791
Maintainability of application - initiation of CIRP - service of demand notice - advance amount for supply of goods - Operational Debt or not - Corporate Debtor resisted the Application mainly on the ground that there is no contractual relationship between them as Operational Creditor and Corporate Debtor. Whether the Adjudicating Authority can admit the Application under Section 9 of I B Code when the demand notice has not been served as prescribed under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016? - HELD THAT:- There are four Annexures with the demand notice (A) a copy of Agreement dated 04.01.2017, (B) a copy of invoice dated 08.02.2017, (C) a copy of Bank Statement, (D) a copy of particulars of claim. The Corporate Debtor has not filed the copy of Annexures to the demand notice and according to the Operational Creditor annexure (D) copy of particulars of claim is a notice in prescribed format. Therefore, we are unable to appreciate the objection raised by the Appellant (Corporate Debtor). This objection is not raised before Adjudicating Authority. Therefore, there is no finding of Adjudicating Authority on this issue. Whether an advance amount for supply of goods can be considered as an Operational Debt under Section 5(20) of the I B Code? - HELD THAT:- The Respondent No. 1 has not supplied any goods or provided any services to Respondent No. 2, but paid an advance amount to Respondent No. 2 for suppling Sugar. However, the Respondent No. 2 failed to supply the Sugar to Respondent No. 1. Thus, the advance amount in the hand of Respondent No. 2 cannot termed as Operational Debt. Consequently, the Respondent No. 1 does not come within the definition under Section 5(20) of I B Code, the Operational Creditor. The Respondent No. 2 (Corporate Debtor) is released from the rigour of CIRP and the action taken by IRP/RP and Committee of Creditors, if any, in view of the impugned order is set aside. IRP/RP will hand back the records and management of the Corporate Debtor to the Promotors/Directors of the Corporate Debtor - Appeal allowed.
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2020 (8) TMI 790
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute - whether the Corporate Debtor has raised a plausible dispute before Service of Notice dated 11.05.2018 under Section 8 of I B Code? HELD THAT:- Admittedly, the Corporate Debtor has not replied statutory notice dated 11.05.2018. Thus, from the correspondence it cannot be inferred that the Corporate Debtor has raised any plausible dispute. The Corporate Debtor has raised the dispute that the sum of ₹ 2,75,00,000/- has wrongly been adjusted towards the interest. There is no such dispute raised before statutory notice. The Dispute raised in reply to the Application does not require any investigation and such dispute is a patently feeble legal argument and not supported by any evidence. The impugned order does not require any interference by this Appellant Tribunal - Appeal dismissed.
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Service Tax
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2020 (8) TMI 789
Valuation - Supply of tangible goods service - Supply of piped natural gas - Interpretation of statute - charges collected by the respondent for supply of pipes and measuring equipment to its customers - period from 16 May 2008 to 31 March 2009 - applicability of the provisions of Section 65(105)(zzzzj) of the Finance Act, 1994 Whether Section 65(105)(zzzzj) of the Finance Act, 1994 is applicable in the present case, that is, whether the supply of pipes and measurement equipment (SKID equipment), charged under the head of gas connection charges by the respondent to its industrial, commercial, and domestic consumers, amounts to supply of tangible goods for their use? HELD THAT:- Section 65(105)(zzzzj) of the Finance Act 1994 was introduced by Notification No.18/2008-S.T. with effect from 16 May 2008. Section 65(105)(zzzzj) levies a service tax on the use of tangible goods. On the other hand, the transfer of the right to use any goods is treated as a deemed sale and is subject to sales tax under Article 366(29-A)(d) of the Constitution of India - The applicability of Article 366(29-A)(d) was discussed in a decision of this Court in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [ 2006 (3) TMI 1 - SUPREME COURT] . In BSNL, the Court held that the purpose of Article 366(29A)(d) was to levy tax on those transactions where there was a transfer of the right to use any goods to the purchaser, instead of passing the title or ownership of the goods. Thus, by a fiction of law, these transactions were now treated as sale - The test laid down in BSNL has been applied by courts to determine whether a transaction involves the transfer of the right to use any goods under Article 366(29-A)(d). In doing so, the courts have analysed the terms of the agreement underlying the transaction to ascertain whether effective control and possession has been transferred by the supplier to the recipient of the goods. Recently, this Court in THE GREAT EASTERN SHIPPING CO. LTD. VERSUS STATE OF KARNATAKA OTHERS [ 2019 (12) TMI 225 - SUPREME COURT] considered whether the transfer of a vessel under a charter party agreement was a deemed sale , subject to sales tax - the conclusion reaced was sales tax is levied in pursuance of Article 366(29-A)(d) on transactions which resemble a sale in substance as they result in a transfer of the right to use in goods, instead of the transfer of title in goods. The Finance Act, 1994, deriving authority from the residuary Entry 97 of the Union List, enabled the Central Government to levy tax on services. Service tax was introduced as a response to the advancement of the contemporary world where an indirect tax was necessary to capture consumption of services, which are economically similar to consumption of goods, in as much as they both satisfy human needs. The introduction of Section 65(105)(zzzzj) in the Finance Act, 1994, was with the intention of taxing such activities that enable the customer s use of the service provider s goods without transfer of the right of possession and effective control. This provision creates an element of taxation over a service, as opposed to a deemed sale under Article 366(29-A)(d). For the purpose of clarification, the Department of Revenue issued a Circular, D.O.F. No.334/1/2008-TRU, dated 29 February, 2008 - the circular clarified that Section 65(105)(zzzzj) is applicable only to those transactions where there is a supply of tangible goods for use, without the transfer of possession or effective control to the recipient. The crux of the dispute is whether the supply of tangible goods the SKID equipment - is for the use of the purchaser. In determining as to whether the provisions of Section 65(105)(zzzzj) are attracted, it is necessary to distinguish between the rights and obligations of the respondent (as the seller of gas) and of their purchasers, from the issue of whether the measurement equipment (SKID equipment) is supplied for the use of the purchaser of gas, without transferring the right of possession and effective control - The purchaser of gas has an interest in ensuring the accuracy of billing and regulation of supply. The respondent is interested in ensuring that it receives payment for the quantity of gas which is contracted to be supplied to the purchaser. The SKID consists of regulators, valves, filters and the metering equipment. The SKID equipment regulates and records supply. Under the terms of the GSA, the obligation of the seller is to deliver gas to the buyer at the Delivery Point. The gas pipeline from the nearest distribution main to the buyers metering station is constructed and maintained by the seller at the cost of the buyer. Section 65(105)(zzzze) of the Finance Act, 1994, seeks to tax services related to information technology and interprets the right to use to include the right to reproduce, distribute, sell, etc . This understanding of use differs from the supply of tangible goods under Section 65(105)(zzzzj) at hand, where effective control or possession is not ceded. Thus, physical operation is not the only or invariable feature of use. As a corollary to the same, technical expertise over the goods in question is not a sine qua non for determining the ability of the consumer to use the good. Therefore, the expression use also signifies the application of the goods for the purpose for which they have been supplied under the terms of a contract. Thus, the supply of the pipelines and the measurement equipment (SKID equipment) by the respondent, was of use to the customers and is taxable under Section 65(105)(zzzzj) of the Finance Act 1994. The Adjudicating Authority was correct in concluding that the buyer of gas is as interested as the seller in ensuring and verifying the correct quantity of the gas supplied through the instrumentality of the measurement equipment and the pipelines. Additionally, the role of regulating pressure and ensuring the safety of supply of gas performed by the measurement equipment is an essential aspect for the use of the consumer. The SKID equipment fulfils the description in Section 65(105)(zzzzj) of a taxable service: service in relation tangible goods where the recipient of the service has use (without possession or effective control) of the goods. Tribunal was in error in interfering with the findings and order of the Adjudicating Authority - Appeal allowed.
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2020 (8) TMI 788
Benefit of Amnesty Scheme - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - CENVAT Credit on input services - Revenue contended that since the returns were not filed within the prescribed time and since the entitlement to avail of the input credit had lapsed, the petitioner could not be permitted to take advantage of the Cenvat credit - whether the petitioner could contend that he was entitled to take advantage of Cenvat credit on input services amounting to ₹ 4,15,14,081/- and consider the same as a pre-deposit under the scheme? - Circular dated 27.08.2019. HELD THAT:- The Circular dated 27.08.2019 issued by the Department categorically states that one of the objectives of the Scheme was to give an opportunity to those who had failed to correctly pay the tax. The Circular states that to this extent the Scheme comprised of an Amnesty component. The Circular also clarified a few issues raised after the Scheme was notified - a reading of the said clause would clearly indicate that in certain matters when tax had been paid by utilizing the input credit and the matter was under dispute, the tax already paid through input credit should be adjusted by the Designated Committee at the time of determination of the final amount payable under the Scheme. Therefore, even if there was a dispute regarding the tax paid through input credit, the Circular mandated that the Designated Committee should adjust the tax already paid through input credit. It, therefore, follows that the Designated Committee cannot embark upon an exercise of adjudication and state that it was not permissible for the declarant to claim that he had paid the tax through input credit. It was not in dispute that the petitioner was entitled to avail of the input credit. However, the only contention of the Revenue was that the petitioner became disentitled to avail of the input credit because the requisite forms were not filed within the prescribed period and his right to claim input credit had lapsed. From a reading of the clarification issued in the Circular, it is clear that the tax paid by utilizing the input credit which was under dispute had to be taken into consideration by the Designated Committee while issuing Form No.SVLDRS-3. The Designated Committee, in fact, while issuing Form No.SVLDRS-2, has created a Remarks column which is not actually provided for in the prescribed statutory form. This, by itself, indicates that the Designated Committee wanted to express as to why it was disallowing the claim made by the declarant. The Designated Committee, under the Scheme, can only verify the correctness of the figures furnished by the declarant and it cannot decide whether the entitlement of a declarant was justified or not - The Revenue had issued a SCN stating that the petitioner was not entitled for availing of the input credit and in response the petitioner was contending that this view of the Revenue was incorrect and he was entitled to the input credit. Therefore, a dispute regarding entitlement was raised and was pending when the Scheme had been enacted. In fact, in order to ensure that the Designated Committee does not dispute the tax through input credit, a specific clarification was issued in the Circular. This clarification was obviously to alleviate any doubts regarding the tax paid through input credit. If a declarant, on the basis of the clarification, chose to take advantage of the scheme and availed of the scheme, he cannot be deprived of this benefit conferred by the scheme, by the Designated Committee by taking a decision that the petitioner was not entitled to input credit. It is, therefore, clear that the action of the Designated Committee in coming to the conclusion that the petitioner was disentitled to tax paid through input credit by inserting a remarks column in Form Nos.SVLDRS-2 and 3, was one which was totally without jurisdiction. Form No.SVLDRS-1 filed by the petitioner as per Annexure-F would have to be accepted as final. The Designated Committee is directed to accept the declaration filed by the petitioner in Form No.SVLDRS-1 (Annexure-F) as final and issue a modified Form No SVLDRS- 3 giving credit to the sum of ₹ 4,15,14,081/- as deposit and collect the remaining sum as tax dues and on payment of the said dues, issue the petitioner a Discharge Certificate that the petitioner is entitled to under the Scheme - Petition allowed.
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2020 (8) TMI 787
Classification of Service - composite contract (involving material part and labour part) - classified under Works Contract Service or under the other heads like Construction of Complex etc.? - abatement of material component involved in the work done. HELD THAT:- In every case of composite contract the same is classifiable under the head Works Contract Service . In the absence of proposal for classification under the Works Contract Service in the show-cause notice, said contracts cannot be taxed. Further, appellant is entitled for abatement of material component either on actual basis or as per the prescribed percentage, as per N/N. 01/2006-ST read with 18/2005-ST., as the case may be. This appeal by way of remand for a De novo calculation of the tax in view of the law laid down by Hon ble Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] . Appellant is also directed to appear before the original adjudicating authority with a fresh reply to the show-cause notice along with calculation of tax and seek opportunity of hearing.
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2020 (8) TMI 786
CENVAT Credit - input services or not - input services, value of which not included in value of output services - insurance service - negative list regime - endowment and unit linked investment plan policies - circular no. 334/1/2008-TRU dated 29th February 2008 - HELD THAT:- This issue came up before, and was decided by, the Tribunal in SBI LIFE INSURANCE COMPANY LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI II [ 2019 (12) TMI 1127 - CESTAT MUMBAI ]. In this decision, it has been held that the main part of the definition of exempted service in rule 2( e) of CENVAT Credit Rules, 2004 clearly refers only to such taxable service as are exempt from the whole of the tax and, being fenced in by the definition of taxable services enumerated, for the disputed period, within section 65(105) of Finance Act, 1994, is not amenable to coverage of any service that is yet to be taxable. In consequence, it has been held that the inclusive component, pertaining, as they are, to services which is without definition, can only be intended for such activities as cannot be taxed by recourse to List I of the Seventh Schedule in the Constitution of India. That was considered to be the only harmonious construct of the definition taken in totality. As the receipts excluded from computation of assessable value are not consideration for exempt services or may even lie outside the scope of inclusion as consideration, by being returnable to the policy holder, the disputed input services does not come within the ambit of rule 6 of CENVAT Credit Rules, 2004. Appeal allowed.
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Central Excise
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2020 (8) TMI 785
Cash Refund of unutilized CENVAT Credit - closure of factory - refund claim application was filed on 31.10.2017, more than one year after the date of surrender of the central excise registration - time limitation - applicability of Rule 10 of the Cenvat Credit Rules, 2004. HELD THAT:- A plain reading of Section 11B shows that it provides for refund of excise duty paid. It does not provide for the refund of unutilized Cenvat Credit. The entire Cenvat credit is governed by the Cenvat Credit Rules, 2004, which provide for availment/utilization of the Cenvat credit. In some specific cases, refund of unutilized Cenvat credit in cash has also been provided under Rule 5 of the Cenvat Credit Rules, 2004. The appellant s case is not under this rule. The appellant has applied for refund under Section 11B of the Central Excise Act, 1944 read with Rule 10 of the Cenvat Credit Rules, 2004. This rule only provides for transfer of unutilized Cenvat credit but not encashment. The fact that they have subsequently come under GST regime makes no difference and the appellant cannot claim the refund under a legal provision which does not exist. Hon ble High Court of Karnataka in the case of UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [ 2006 (7) TMI 9 - KARNATAKA HIGH COURT] has held that refund of the Cenvat credit is admissible under Rule 5 of the Cenvat Credit Rules, 2004 if the factory is closed. Subsequently, this rule has been amended and right now there is no scope of refund of the Cenvat credit which has not been utilized at the time of closer of the factory. At any rate, the appellant s application was not under Rule 5 of the Cenvat Credit Rules, 2004. The appellant s request for cash refund of unutilized Cenvat credit cannot be admitted under any legal provision - Appeal dismissed.
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CST, VAT & Sales Tax
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2020 (8) TMI 784
Principles of natural justice - enhancement of tax - opportunity of hearing was not given to the assessee before enhancing the tax - sub-section 6 of Section 53 of the Uttarakhand Value Added Tax, 2005 - HELD THAT:- The impugned order of the tribunal does not indicate that any opportunity was given to the assessee of being heard before enhancing the tax. Hence, on this point alone and without going into the merits, it would be just and necessary if the statutory requirement of law is complied with by granting an opportunity to the assessee. The order dated 13.09.2011 passed by learned Commercial Tax Tribunal in Second Appeal No. 76 of 2011 is set-aside only to the extent of enhancing the liability. The tribunal shall give an opportunity of hearing to the revisionist with regard to the proposal to increase the tax and thereafter pass an appropriate order, in accordance with law.
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2020 (8) TMI 783
Levy of penalty - misuse of form-C issued to the applicant-assessee - violation of Section 10A read with Section 10(b) of the Central Sales Tax Act - HELD THAT:- The show cause notice issued by the department indicated various items that did not form part of form-C. A reply was furnished by the assessee for each one of those items. It was narrated that the said items were used for the purposes of manufacturing of the goods in question. The various items that were referred to were explained by the assessee through his reply to the show cause notice. Once the appellate authority comes to the conclusion that there was a bona fide belief of the assessee then an absolute relief should have been granted. Granting a limited relief only in relation to certain articles, in our considered view, was not appropriate. Therefore, non consideration of the request of the assessee to completely waive the penalty in our considered view is inappropriate. The question is answered, against the revenue and in favour of the assessee.
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2020 (8) TMI 782
Levy of penalty under clause (vii) of sub-section (1) of Section 58 of the VAT ACT - Non-payment of CST - HELD THAT:- We do not find it appropriate to entertain these revisions. Even otherwise, we do take judicial notice that the pandemic that prevails in the country and the huge burden on respondent and others. We are also aware of the fact that the delayed payment made by the assessee also included the interest for the said period. Therefore, there is no financial loss that accrued to the revenue. It is only a penalty for belated payment that has been imposed. We find no good ground to entertain these revisions. We make it clear that this is purely on the facts and law of the present case and shall not act as a precedent - Revision dismissed.
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2020 (8) TMI 781
Restoration of assessment order - levy of purchase tax - Gold Jewellery - transfer of property or not - section 7 A of the TNGST Act 1959 - HELD THAT:- The writ petition filed by the assessee dealer deserves to be allowed and the order of the learned assessing authority as well as the tribunal uphelding the levy of purchase tax under section 7-A of the Act is liable to be set aside. There is no doubt that except in the case of purchase or sale made by unregistered dealers, in the circumstances, that on such sale, no tax is payable under section 3 or 4 of the Act, the liability of purchase tax is not attracted. Unless there is a basic contract of sale or purchase involved in the matter, mere loan, deposit, hypothecation of goods, cannot amount to sale or purchase, attracting levy of purchase tax under section 7A of the Act. From the Memorandum of Understanding or Agreements between the parties, we do not see even the use of the word 'sale' or 'purchase' in the same. On the contrary, the terms of the agreement clearly and explicitly bear out a deposit or borrowal of the gold jewellery between the parties - Neither any advance is taken by the depositors of gold jewellery, nor any price, as such, is shown to have been paid by the assessee to such depositors or relatives of such gold jewellery. Therefore, the elements of transfer of property and passing on of the consideration for the same are completely absent in the present case. Therefore the said transaction cannot amount to a sale or purchase of gold jewellery of such relatives of the assessee to him. The provisions of Section 7A of the Act, are not at all attracted in the present case. The learned tribunal with respects, seems to have hurried in arriving at a conclusion of purchase in the present case, but, no such case of actual user of goods or no such user of the gold jewellery by the dealer, has even been noted in the present case during the year in question. Petition allowed.
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2020 (8) TMI 780
Waiver of sales tax - validity of impugned G.O.(Ms).No.107 dated 02.08.2016 - It is the case of the petitioner that it has not collected tax for the period between 03.02.1983 and 31.01.1985, and therefore its case should be considered favourably - period between 03.02.1983 and 31.01.1985 covering the Assessment Years 1983-84 1984-85. HELD THAT:- The impugned G.O. has been passed merely based on records, but without any discussion on the representation of the petitioner and the communication of the principal secretary/Commissioner of Commercial tax in G.O.Ms.No.157, Commercial Taxes and Religious Endowment Department dated 22.04.1996 - The introduction of Entry 150 pre-dated the 46th amendment to the Constitution of India pursuant to which Sub-clause (29-A) was incorporated under Article 366 to the constitution of India, w.e.f. 02.02.1983. By virtue of the aforesaid amendment, the definition on tax of sale or purchase of goods was for first time introduced in the Constitution. Sub-Clause (f) to the Clause (29-A) to Article 366 introduced a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. The Entry 150 of the TNGST, 1959 was struck down. Later its validity was upheld by the Hon'ble Supreme Court. The Government of Tamilnadu also issued G.O.Ms.No.140 dated 11.06.1999 and granted waiver on the condition that the Hotelier/registered dealer had not collected the tax from the consumers. This was modified by the Tamil Nadu Taxation Special Tribunal. The fact that the petitioner had also been given the exemption for the between 01.02.1985 and 24.03.1989 during the period when Entry 150 was declared as ultravires, is a factor to be considered by the 1st respondent while passing orders if indeed the petitioner had not collected tax. Since the impugned G.O has been passed without considering the submission of the petitioner, the 1st respondent is directed to consider the plea of the petitioner and to pass a fresh order after hearing the petitioner, within a period of three months from the date of receipt of a copy of this order - petition disposed off.
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2020 (8) TMI 779
Inter-state sale or not - fulfilment of conditions of Section 3 and 6(2) of Central Sales Tax Act, 1956 or not - HELD THAT:- These writ petitions are disposed with the direction to the 2nd respondent to pass appropriate orders considering the above clarification dated 28.10.2016 of the Additional Chief Secretary/Commissioner of Commercial Taxes within a period of three months from the date of receipt of a copy of this order.
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2020 (8) TMI 778
Levy of penalty under Section 10-A read with Section 10(b) of CST Act - purchase of diesel and fuel for generator set against the C forms at concessional rates - misuse of such Declaration in C forms - honest/bonafide belief or not - HELD THAT:- Section 10(b) of the Act provides for an offence if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration. The expression falsely represents clearly shows that the element of mens rea is the necessary component of the offence. In the absence of mens rea, resort to penal provision would not be proper unless it is established that the conduct of the dealer was contumacious or that there was deliberate violation of the statutory provision or willful disregard thereof - If the registered dealer honestly believes that any particular goods are embraced by the certificate of registration and on that belief makes a representation, he cannot be held guilty of the offence under Section 10(b) of the Act and no penalty can be imposed under Section 10A of the Act. The question whether the assessee acted under the honest belief is a question of fact. The learned Appellate Tribunal was justified in holding that the Assessee was entitled to purchase the said fuel viz., diesel, for its generator set and even though the same was not separately included in the Registration Certificate of the Assessee, no mens rea can be attributed to the Assessee for purchase of the same at concessional rate against C Form and therefore, the question of imposition of penalty under Section 10(b) of the Act read with Section 10-A of the Act does not arise. Petition dismissed - decided against Revenue.
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2020 (8) TMI 777
Levy of penalty under Section 10A of the Central Sales Tax Act, 1956 - it was viewed by the respondent that procurement of Low sulphur Heavy Stock Furnace Oil from oil companies against C-Form was improper for the period in dispute namely the assessment years 2007-2008, 2009-2010 and 2011-2012 - HELD THAT:- There is no doubt that the petitioner is engaged in generation of electricity. For generation of electricity the petitioner is required to use Low Sulphur Heavy Stock Furnace Oil. Earlier when the petitioner had obtained certificate of registration on 06.06.2000, there was a specific reference to Furnace Oil - Later, the registration was altered as Power Generating and Distributions and Transmission and Oil. This amendment was made to the registration certificate with effect from 06.06.2000 vide amendment to the registration certificate issued on 24.07.2001. Thus, it is evident that petitioner was entitled to procure oil of every description as long as it was intended for generation of electricity and power along with, the other goods specified in the Certificate of Registration, oil would include Low Sulphur Heavy Stock Furnace Oil. It is also not the case of the respondent that Low Sulphur Heavy Stock Furnace Oil was not used for generating electricity and power - the conclusion arrived in the impugned orders that the petitioner had wrongly procured Low Sulphur Heavy Stock Furnace Oil against C-Form cannot be countenanced. Petition allowed.
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