Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 13, 2022
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Condonation of delay of 65 days in filing appeal - It is evident that this Appellate Authority being a creature of the statute is empowered to condone a delay of only a period of 30 days after the expiry of the initial period for filing appeal. As far as the language of the proviso to Section 100 (2) of the CGST Act is concerned, the crucial words are "not exceeding thirty days". - AAAR
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Classification of supply - Construction of Roads and Services of TP-1 Area - The applicant service of construction of other Utility Service viz. Potable Water Supply system, Recycled Water Supply, Sewerage Collection System, Industrial Effluent Collection System, Storm Water Drainage Network involves components of goods and services, therefore covers under the category of Work Contract service and is liable to GST @18%. - AAR
Income Tax
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Income deemed or accrue or arise in India - liaison office - Permanent Establishment (PE) - Revenue though vehemently submitted that liaison office was negotiating price and doing sales activity in India, however, has not brought any sales agreement in support of the claim. It is highly doubtful that sales transaction of such a large scale can be conducted internationally without any written agreement. - the liaison office in Mumbai does not constitute PE of the assessee in India under the provisions of DTAA. - AT
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TP adjustment - Benchmarking of interest on interest free advances good to the subsidiary companies - In the present case, the cost borrowing of the assessee does not have any relevance. Associated Enterprises have made the borrowing in foreign jurisdiction, therefore, the cost of borrowing of the assessee in India cannot be held to be an internal CUP. - order of the ld. AO to charge interest on the advances given to foreign associate enterprise at Libor plus 200 basis point confirmed - AT
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TDS u/s 195 - Royalty - purchase of software - Considering the Assessee was granted a distributorship/license to sell the products manufactured by the MGI, with a condition not to make or assign any copyright therein and while reserving all rights including ownership of material with it, goes to show that the transaction between the Assessee and the MGI cannot be termed as ‘ROYALTY’ - AT
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Validity of Reopening of assessment u/s 147 - n transaction of layering of funds through the bank account - As is evident from the record the amount due from these entities pertains to the previous financial year and assessee being an Indian company has already paid the taxes thereon, since it follows the mercantile system of accounting. Therefore, we are of the considered view that conditions laid down in 1st proviso to section 147 of the Act are not satisfied in the present case. - AT
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Exemption u/s 11 - income from the trust was drawn by the trustee and evidences for the applications were not produced, the AO treated them as violation u/s. 13(1)(c) and hence denied the exemption - No merits in this Writ Petition. Therefore this writ petition is liable to be dismissed. - HC
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Deduction u/s. 54B - agricultural land which is purchased prior to the sale of agricultural land - the assessee is not entitled to claim deduction u/s. 54B of the Act for the agricultural land which is purchased prior to the sale of agricultural land. - AT
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Addition u/s 68 - receipt of share application money - reliance on statement of third parties - The statements of third parties i.e. two angadias relied upon by the ld. AO are totally unrelated to the assessee company and there is absolutely no linkage of the said parties with the assessee company. Hence we hold that no addition could be made in the hands of the assessee by placing reliance on the statements of third parties. - AT
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Revision u/s 263 by CIT - Merely on the basis of audit objection powers u/s 263 could not have been exercised. The impugned order u/s 263, does not indicate that the power was exercised on the basis of a finding of the assessment order being erroneous and prejudicial to the Revenue by examining facts and record by the ld. Revisional Authority beyond the audit objections - AT
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Rectification u/s 154 - Receipt of valuation report after the date of assessment order passed - re-computation of the long term capital gain - FMV / Cost of acquisition determination - It cannot be said that there is an error or mistake apparent on the face of the order - AT
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Rectification u/s 154 - set-off of unabsorbed depreciation against the income from other source in violation of Section 115BBE - amendment brought about by Finance Act, 2016 w.e.f 01.04.2017 - prior to AY 2017-18 the said set off of loss has to be allowed and so the unabsorbed depreciation. - AT
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Revision u/s 263 - Doctrine of merger - When the issue flagged by Ld. PCIT has never been ascertained/examined to compute the correct book profit qua the transfer of these shares there is no question of merger of the order. Moreover, when the assessment order is apparently erroneous so far as prejudicial to the interest of the Revenue having been decided by the AO in favour of the assessee without ascertaining or examining the same order passed by Ld. PCIT does not call for any interference by the Tribunal. - AT
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Addition u/s 69C - bogus purchase bills - AO was having complete information about those parties - The ld. AO himself made any enquiry with those parties further with respect to genuineness of purchase of material by the assessee. - The only allegation of the assessing officer is that assessee has failed to show receipt of goods as well as failed to produce those parties. Furthermore, looking to the nature of the business, assessee cannot be asked to produce more details then what is generally kept by an assessee in that line of the business. - AT
Customs
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Clarified issued for New Rules - Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 - Circular
IBC
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Initiation of CIRP - Financial Creditors - Financial Debt - There is a difference between the levy of liquidated damages or penal interest for default and the financial debt per se - interest per se in any business contract cannot be termed to make the “debt” as a “Financial Debt”, if it is in the nature of liquidated damages or in the nature of penal interest, which is a result of compensation for breach of contract which is stipulated for penalty. - AT
Service Tax
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Refund of CENVAT Credit - export of services - Since the issue of jurisdiction was not specifically taken in the show cause notice the adjudication on this point against the assessee is not sustainable. The appellant since admittedly has centralized registration in terms of sub clause (2) and (3) of Rule 4 is Noida unit was not required to be registered. Refund claim should not have been rejected on this ground. The services provided by the appellant amounts to export of service as were received by the company located outside the taxable territory irrespective those were the group companies of the appellant. - AT
Central Excise
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Area Based Exemption - North-East region - Merely because no limitation is prescribed and/or applicable cannot be a ground to consider their claims for exemption when they satisfy the prescriptions under the said notification. The assessee has failed to furnish adequate evidences in support of their claims that they had complied with the prescriptions under Notification No. 33/99-C.E - HC
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Quantum of transfer of CENVAT Credit to GST - transitional credit - It is obvious that as per first proviso to Section 140(1), only the credit which is admissible as input tax credit under the CGST Act can be availed as input tax credit. Obviously, the quantum of credit which relates to the items which continued to be covered under the Central Excise Act would not be admissible as input tax credit under CGST Act and therefore, the argument of the Revenue that the Respondent should have transferred the entire credit is incorrect. - AT
Case Laws:
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GST
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2022 (9) TMI 514
Seeking extension of opening the GST Common Portal - transitional credit - HELD THAT:- The time for opening the GST Common Portal is extended for a further period of four weeks from today. It is clarified that all questions of law decided by the respective High Courts concerning Section 140 of the Central Goods and Service Tax Act, 2017 read with the corresponding Rule/Notification or direction are kept open - Application seeking extension of time is accordingly allowed.
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2022 (9) TMI 513
Condonation of delay of 65 days in filing appeal - Power to condone the delay beyond 30 days - Classification of supply - taxable supply of services or not - income earned from conducting Guest Lectures - income earned from Research and Training Projects funded by Ministries of Government of India and State Government of Karnataka - taxable supply of service to be taxed at Nil rate under Heading 9992 or to be taxed at IGST 18% under Heading 9983? - HELD THAT:- The proviso to Section 100(2) empowers this Authority to condone a further delay of 30 days if it is satisfied that the Appellant was prevented by sufficient cause from filing the appeal within the prescribed period of 30 days. This grace period which is available to the Appellant for filing the appeal and which is condonable by us expires on 20-04-2022. The appeal in this case, has been filed on 26.05.2022 which is 36 days after the expiry of the grace period in the case of Situation 1 and 27 days after the expiry of the grace period in the case of Situation 2. In both situations the delay is beyond the condonable powers of the Appellate Authority. The question whether this Appellate Authority can entertain an appeal under Section 100 of the CGST Act beyond the condonable period does not require much debate and has been answered in the negative by the Supreme Court in the case of SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2007 (12) TMI 11 - SUPREME COURT] . The Supreme Court in the said case interpreted Section 35 of the Central Excise Act, 1944 which is similar to Section 100 of the CGST Act and examined the question whether the Commissioner (Appeals) has the power to condone the delay beyond the period of 30 days from the date of expiry of the period prescribed for filing the statutory appeal and also whether the High Court, in exercise of the power conferred under Article 226 of the Constitution of India, can condone the delay. It is evident that this Appellate Authority being a creature of the statute is empowered to condone a delay of only a period of 30 days after the expiry of the initial period for filing appeal. As far as the language of the proviso to Section 100 (2) of the CGST Act is concerned, the crucial words are not exceeding thirty days . To hold that this Appellate Authority could entertain this appeal beyond the extended period under the proviso would render the phrase not exceeding thirty days wholly otiose. No principle of interpretation would justify such a result. Therefore, we hold that we are not empowered to condone the delay of 27 days beyond the condonable period, in filing this appeal. Since the appeal cannot be allowed to be presented on account of time limitation, the question of discussing the merits of the issue in appeal does not arise - Appeal dismissed on the ground of limitation.
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2022 (9) TMI 512
Classification of supply - Composite Supply of Works Contract - supply of design and construction of Roads and Services of TP-1 Area Under Cluster-A of MBSIR on EPC Basis wherein both goods and services are supplied - Section 2(119) and section 2(30) of the CGST Act, 2017 - whether the Principal Supply in this case will be the Construction of Roads and attract rate of 6% as per Notification No. 11/2017-CT(Rate) dated 28.06.2017) as amended)? - HELD THAT:- The subject Service order is for supply of design and construction of roads and utility services on EPC Basis. The said supply includes construction of Roads and other utility service and not exclusively for construction of Road. The contract/ work order is for construction of Road and other utility services and not only for Road. The construction of road and other utility services involves goods and service, are covered under the definition of work contract service. In the instant case construction of road involves component of goods and services and therefore covers under the category of composite supply of work contract. Further, construction of TP-1 Road covers under this entry - under the entry No. 3(iv) of Notification only work contract service of construction of Road is covered and attracts concessional rate of GST @ 6%. The design and construction of utility service includes goods and service supply by the applicant is composite supply of work contract. Hence first condition is satisfied . The applicant has submitted that Mandal Becharaji Special Investment Regional Development Authority (MBSIRDA) is a local authority and in support of argument has submitted the screen shot of TAN wherein it is mentioned that Sub-category- local authority' also submitted another screen shot wherein mentioned Constitution of Business- local authority'. The applicant has not submitted any documents of State Govt. Authority by which it can be established that MBSIRDA is a local authority. Further even at the time of filing the Advance Ruling Application, the applicant itself was not aware that they are local authority as such applicant has put forth this argument during the Personal Hearing only. This facts shows that the applicant was aware that they do not fulfil the criteria of being local authority otherwise they should aware of this facts. MBSIRDA is constituted under Sub-section (1) of Section 8 and every Regional Development Authority constituted under sub-section (1) of Section 8 shall be a body corporate in terms of Sub-section (2) of Section 8. Thus, it is evident that MBSIRDA do not cover under the ambit of a local authority as defined under Section 2(69) of CGST Act, 2017. Hence Second condition is not satisfied. Therefore, the applicant supply of work contract services of utility do not cover entry No. 3 (iii) of Notification is not applicable in this case. The supply of construction of Road of TP-1 area is work contract service and covers under Entry No. 3(iv) of Notification and is liable to GST @ 6% from 1-7-2017 to 17-7-2022 - with effect from 18-7-22 supply of construction of roads under the present contract attracts GST @18% - The applicant service of construction of other Utility Service viz. Potable Water Supply system, Recycled Water Supply, Sewerage Collection System, Industrial Effluent Collection System, Storm Water Drainage Network involves components of goods and services, therefore covers under the category of Work Contract service and is liable to GST @18%.
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Income Tax
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2022 (9) TMI 528
Income deemed or accrue or arise in India - liaison office as Permanent Establishment ( PE ) of the assessee in India under Article 5 of India and Japan Double Taxation Avoidance Agreement ( DTAA ) - HELD THAT:- As per Article 7 of DTAA, profit of foreign enterprise shall be taxable in India only if such enterprise carries on business in India through a permanent establishment situated therein. Article 5 of the DTAA defines the term permanent establishment. Further, as per the provisions of Article 5(6)(e), maintenance of a fixed place of business solely for the purpose of carrying on, for the foreign enterprise, any other activity of a preparatory or auxiliary character shall not be considered as permanent establishment. Nothing has been brought on record to suggest that the RBI has found activities of the liaison office as being non-compliant with the terms and conditions of its permission and, therefore, the said aspect supports the assertion of the assessee that liaison office was performing activities as permitted by the RBI, which were preparatory and auxiliary in nature and not the core business activity independent of the Head Office. Apart from the aforesaid documents impounded during the course of survey action, neither statement of the employees of the liaison office or the agents/customers in India was recorded nor any information under section 133 (6) of the Act was sought by the AO in order to support its conclusion that the liaison office constitutes PE of the assessee in India. Revenue though vehemently submitted that liaison office was negotiating price and doing sales activity in India, however, has not brought any sales agreement in support of the claim. It is highly doubtful that sales transaction of such a large scale can be conducted internationally without any written agreement. Therefore we are of considered opinion that the liaison office in Mumbai does not constitute PE of the assessee in India under the provisions of DTAA. Accordingly, ground no. 1 raised in assessee s appeal is allowed. Levy of interest under section 234B - HELD THAT:- In view of decision of Hon ble Supreme Court in DIT v. Mitsubishi Corporation [ 2021 (9) TMI 875 - SUPREME COURT] ground No. 4, raised in assessee s appeal, is allowed.
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2022 (9) TMI 527
Validity of order u/s 143(3) r.w.s. 144C(13) - Reference to dispute resolution panel - Period of limitation - Whether timeline for completion of original assessment pursuant to directions of DRP shall not be governed by provision section 153 ? - HELD THAT:- In the recent case of CIT v Roca Bathroom Products (P.) Ltd. [ 2022 (6) TMI 848 - MADRAS HIGH COURT] the High Court held that sections 144C and 153 are mutually inclusive and not mutually exclusive as both contain provisions relating to section 92CA and are interdependent and overlapping and hence, period of limitation prescribed under section 153(2A) or 153(3) is applicable and when matters are remanded back irrespective of whether it is to Assessing Officer or TPO or DRP, duty is on Assessing Officer to pass orders. The High Court held that even in case of remand, TPO/DRP have to follow time limits as provided under Act and entire proceedings including hearing and directions have to be issued by DRP within 9 months as contemplated under section 144C(12) and thereafter, Assessing Officer is to pass orders within stipulated time. The assessing officer was required to pass order within 9 months from the end of the financial year in which the order was received by the Principal Commissioner of Income Tax i.e. 31st December 2018. Hence, the present order dated 15-03-2019 passed by Ld. DCIT is barred by limitation and hence liable to be set aside. Hence, the appeal of the assessee is allowed on the ground of jurisdiction.
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2022 (9) TMI 526
TP adjustment made in respect of goods sold to its associated enterprise - Selection of MAM - Application of CUP method - HELD THAT:- Assessee himself stated that CUP method may not be appropriate and adopted profit split method for the reason that the basket of product approach is not acceptable to the revenue. Even in those cases, the learned transfer-pricing officer is applied CUP method. Merely because invoices are prepared in a particular manner, they do not prove that goods sold in those products are inextricably linked with each other. We confirm the action of the lower authorities in making a transfer pricing adjustment with respect to sale of pharmaceutical products in Nigeria to associated enterprises - The ground number 1 of the appeal to that extent is dismissed. TP adjustments because of interest on interest free advances charged at 8.25% - Admittedly, in this case assessee states that it has not incurred the cost for borrowing the above funds, which have been lent to the associated enterprises. However, here the comparable rates are available. The argument of the assessee that it has not incurred any cost of borrowing does not have any relevance. The second argument of the assessee is that that the advances given to the two of the recipient subsidiaries have utilize the money advanced to them by the assessee for further investment in the shares of step down subsidiaries of the assessee company and therefore the advances are quasi equity and no interest is required to be charged. The advances given to the subsidiaries. The subsidiaries might have utilize the funds for any purpose but for the purpose of benchmarking of the interest the transaction is that assessee has given a loan to its associated enterprise. Further when we looked at the RBI permissions for overseas direct investment it is coupled with equity and loan. It cannot be said that it is a quasi equity. With respect to the rate of interest we find that AO charged the interest at the rate of 14.39% which is been reduced by the CIT- A to 8.25%. Loans are given in foreign jurisdiction. LIBOR +200 points is the correct benchmarking for the interest. Accordingly, we direct TPO to benchmark the interest as directed. Allowance of depreciation on account of foreign exchange Gain variance - claim of the AO is that the written down value (WDV) of the assets to the extent of foreign exchange gain should be reduced from the actual cost and consequent depreciation claim of the assessee is required to be reduced - HELD THAT:- Undisputedly, assessee has earned foreign exchange fluctuation gain at the time of actual payment of external commercial borrowing, which was taken for acquisition of capital assets in India. As there is no acquisition of capital assets from outside India, there is no application of the provision of Section 43A of the Act. Therefore, foreign exchange fluctuation gain cannot be reduced from the actual cost of assets purchase in India. Accordingly, there is no infirmity in the order of he learned Commissioner of Income tax (Appeals). Accordingly, ground no. 2 of the appeal is dismissed. Additional depreciation disallowed by the learned Assessing Officer but allowed by the learned Commissioner of Income tax (Appeals) - HELD THAT:- We have heard the rival parties; we find that the issue is squarely covered by the decision of the Hon'ble Madras High Court in CIT vs. Shri. TP Textiles Pvt. Ltd [ 2017 (3) TMI 739 - MADRAS HIGH COURT] - In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the disallowance. Accordingly, ground no. 3 of the appeal is dismissed. Employees Stock Option Scheme under Section 37(1) - HELD THAT:- We find that the issue is squarely covered in favour of the assessee by the decision of Hon'ble Karnataka High Court [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] wherein the decision of the Special Bench of ITAT in case of Biocon Limited [ 2013 (8) TMI 629 - ITAT BANGALORE] has been upheld. In view of this, we do not find any infirmity in the order of the learned CIT (A) in allowing the claim of the assessee on deduction of employees stock option scheme discount. Ground no.4 of the appeal is dismissed. Adjustment on account of interest free advances to hundred percent subsidiaries at the rate of 3.38% only - adjustment in respect of goods exported to National Drugs (Pty) Ltd - HELD THAT:- TP Officer rejected the CUP method but applied cost plus method and proposed the adjustment. The learned CIT (A) examined the transaction and upheld the CUP method. It is examined that assessee has sold Pacimol tablets to its Associated Enterprises as well as unrelated parties both are in South Africa, quantity sold as is more or less and some sales are also pertaining to the same period and the overall different between the average price charged to Associated Enterprises and non-Associated Enterprises is merely 1.74%. Therefore, benchmarking the analysis of the assessee was upheld. Further, the Associated Enterprises supplies the goods to the local Government on tender basis for which the price are fixed. Therefore, there is no reason to uphold that benchmarking analysis by the assessee adopting CUP method is not proper. We do not find any infirmity in the order of the learned CIT (A). Hence, ground of the appeal of the learned Assessing Officer is dismissed. Benchmarking of interest on interest free advances good to the subsidiary companies - HELD THAT:- CUP method is required to be applied where the services are supplied in similar conditions. In the present case, the cost borrowing of the assessee does not have any relevance. Associated Enterprises have made the borrowing in foreign jurisdiction, therefore, the cost of borrowing of the assessee in India cannot be held to be an internal CUP. TPO has adopted the Libor plus 300 basis points for working of interest. We find that several judicial precedents at the appropriate interest rate uphold Libor plus 200 basis points. In view of this we confirm the order of the learned AO to charge interest on the advances given to foreign associate enterprise at Libor plus 200 basis point and confirmed the finding of the learned CIT(A) that interest is required to be computed only for the period the money is advanced and not for the full year. Accordingly, ground no. 2 of the appeal of the learned AO is partly allowed and ground no. 1 of the appeal of the assessee is dismissed. Deduction under Section 80IB and 80IC - HELD THAT:- Identical to ground of appeal of the assessee for A.Y. 2008-09, wherein we have held that sale of empty containers is part of the profit derived from the business of the undertaking and therefore, is eligible for deduction under these respective sections. Accordingly, we allow of the appeal of the assessee and directing the learned Assessing Officer to grant deduction on account of sale of empty containers under Section 80IB and 80IC of the Act. Disallowance u/s 40A (3) - HELD THAT:- We find that lifetime road tax of ₹25,810/- is paid to the government and therefore, it cannot be considered for disallowance. Further, the various attestation charges paid to foreign embassy amounting to ₹1,08,755/- which is covered under Rule 6DD(b) of the Income Tax, Rules 1962. Accordingly, the disallowance to the extent of ₹21,800/- out of total disallowance of ₹1,56,365/- is upheld and Assessing Officer is directed to delete the balance disallowance. Accordingly, ground no.4 of the appeal is partly allowed. Adjustment in respect of interest free advances 200% subsidiaries - We find that the interest of 18% charged to the Nigerian associated enterprises by the assessee or the SBI prime lending rate of 11.75% cannot be said to be the comparable price for charging of interest on loans from Mexico, China and USA unit. The loans were advanced to the associated enterprise in foreign jurisdiction and therefore the rate of interest should be applied as applicable in that jurisdiction. Therefore, assessee has correctly applied the LIBOR +350 base points. Accordingly we direct the learned transfer pricing officer to delete the adjustment on account of interest on interest free advances to subsidiaries - Accordingly ground number one of the appeal is partly allowed.
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2022 (9) TMI 525
TDS u/s 195 - payment for purchase of software products was made without deduction of tax at source - royalty payment - International Distribution Agreement between Assessee and Foreign entity - Assessee claimed that the MGI has appointed the Assessee as distributor with non-exclusive rights to market its products and no transfer of rights in respect of any copyright (section 9(1)(vi)) is extended under the distribution agreement - HELD THAT:- From the clauses of agreement, it appears that the Assessee was appointed as a distributor/licensee only by the MGI for the sale of its products manufactured, while reserving all rights including ownership of material with it and without assigning or giving any copyright to the Assessee and without giving rights of modifications to the user agreements as well. Considering the Assessee was granted a distributorship/license to sell the products manufactured by the MGI, with a condition not to make or assign any copyright therein and while reserving all rights including ownership of material with it, goes to show that the transaction between the Assessee and the MGI cannot be termed as ROYALTY but in fact the same amounts to sale of goods only on the basis of distributorship/license. Applicability of provisions of the Act u/s 195 qua payments made by the Assessee to the MGI (foreign company) having no PE in India and therefore not assessable to income tax in India - In the instant case admittedly the Assessee dealt with the MGI which is admittedly a foreign company and having no PE in India and thus the case of the Assessee falls under 2nd category of cases which deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users and as per dictum of the Hon ble Apex Court, the Assessee was not liable to deduct any TD Sunder Section 195 of the Income Tax Act, hence respectfully following the dictum of the Hon ble Apex Court in Engineering Analysis Centre for Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] , we are inclined to delete the addition made by the Ld. AO and sustained by the Ld. Commissioner, hence the same stands deleted. Consequently appeal of the Assessee stands allowed.
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2022 (9) TMI 521
Deduction u/s 80IA - profits and gains of the eligible unit on a reasonable basis under the proviso to Section 80IA(8) - HELD THAT:- We find that the learned Tribunal has remanded the matter back to the assessing officer for fresh consideration and, therefore, we find that there is no substantial arising under this aspect for consideration. Nature of receipts - Sales Tax subsidy and Industrial Promotion Assistance - revenue or capital receipt - HELD THAT :- The question has to be answered in favour of the respondent/assessee in the light of the Decision of this Court in the case of Principal Commissioner of Income Tax Vs. M/s. Budge Budge Refineries[ 2022 (2) TMI 533 - CALCUTTA HIGH COURT] Hence, the said question is not admitted. Subsidy receipt by the assessee can not be deducted from the Written Down Value of the block of asset as per explanation 10 to Section 43(1) - HELD THAT:- Tribunal followed the decision in the case of Commissioner of Income Tax Vs. Ms. Birla Corporation Limited [ 2014 (12) TMI 436 - ITAT KOLKATA] for the assessment year 2007-2008. As against the said decision of the learned Tribunal the revenue had filed appeal before this Court [ 2019 (9) TMI 1668 - CALCUTTA HIGH COURT] - However, no such question has been raised in the said appeal. Therefore, the substantial question of law no. e is not admitted. Receipts on account of sale of CER (Certified Emission Reduction)/Carbon Credits - HELD THAT:- As it is not admitted as it is covered by the decision in the case of S.P. Spinning Mills Pvt. Ltd. [ 2021 (1) TMI 1081 - MADRAS HIGH COURT] which was rendered following various decisions and also taking note of Section 115 BBG of the Act, which has introduced by Finance Act 2017 with effect from April 1, 2018. Accordingly, question No. g is not admitted. Disallowance u/s 14A r.w.r 8D - disallowance on account of interest expenses as the assessee was having capital and reveue fund more than the amount of investment which has produced dividend income not forming part of total income - whether disallowance on account of other expenses could be made under Section 14A of Income Tax Act, 1961 read with Rule 8D(2)(iii) of Income Tax Rule, 1962 in respect of those investments only which has produced dividend income excluding strategic investments? - HELD THAT:- So far as substantial questions of law h i are concerned, those are admitted. Taxability of retention money -Tribunal holding that part of income being retention money is not chargeable to tax in the Assessment Year 2010-2011 - HELD THAT:- As it is not admitted as it is covered in the light of the decision in the case of Principal Commissioner of Income Tax Vs. Mc Nally Sayaji Engineering Ltd.[ 2022 (3) TMI 175 - CALCUTTA HIGH COURT] Capital receipt due to forfeiture of shares warrants - HELD THAT:- As on perusal of the order passed by the Tribunal we find that there is no factual position held to issue of convertible warrant and subsequent forfeiture were on capital gain ad the amount received was a capital receipt not liable to tax. Further the Tribunal held that there was no material on record to substantiate the allegation of tax evasion as recorded by the assessing officer. Thus we find that there is no substantial question of law arising for consideration on the said ground and hence question k is not admitted. Let the appellants file requisite number of informal paper book within a period of eight weeks from date prepared out of Court by serving advance copies on the respondent.
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2022 (9) TMI 520
Exemption u/s 11 - income from the trust was drawn by the trustee and evidences for the applications were not produced, the AO treated them as violation u/s. 13(1)(c) and hence denied the exemption - petitioner instructed to pass all contemporaneous, primary and secondary evidence in support of his claim before the Assessing Officer to pass Appropriate Orders after giving adequate opportunity to the assessee - HELD THAT:- The order[ 2020 (8) TMI 912 - ITAT CHENNAI] makes it clear that it is for the petitioner to file all the required documents. If such documents were filed by the petitioner in time, the respondent would have been required to consider the same and pass appropriate orders. Instead the petitioner has waited for the respondents to issue a Draft Assessment Order and the Show Cause Notice dated 17.09.2021. Though the Income Tax Web Portal was experiencing technical glitches and is stated to be the petitioner's inability to upload the information, there are no records to substantiate the same. The impugned order has been passed after the information called for by the respondent vide notice dated 20.02.2021 and the reminder notice dated 17.08.2021 were not fully complied. Though these notices were issued, nothing precluded the petitioner earlier from sending the information pursuant to the direction of the Tribunal [ 2020 (8) TMI 912 - ITAT CHENNAI] No merits in this Writ Petition. Therefore this writ petition is liable to be dismissed. Liberty is however given to the petitioner to file a Statutory Appeal before the Appellate Commissioner under Section 246 A of the Income Tax Act, 1961 within a period of thirty days(30) from the date of receipt of a copy of this order. If such appeal is filed by the petitioner, the Appellate Commissioner shall entertain and dispose the same in accordance with law and on merits within a period of three months from the date of receipt of a copy of this order. The petitioner is also given liberty to file appropriate application before the respondent under Section 220(6) of the Income Tax Act, 1961 for staying the recovery of the proceedings.
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2022 (9) TMI 519
Validity of Reopening of assessment u/s 147 - Reopening on the basis of information received from DDIT (Investigation), Kolkata - AO alleged that assessee is a beneficiary in transaction of layering of funds through the bank account and in this regard, the assessee has failed to disclose truly and fully all material facts - HELD THAT:- The details pertaining to the amount due from these entities were provided by the assessee during the course of scrutiny assessment proceedings and said details were accepted by the AO under section 143(3) - in view of the details available on record it cannot be said that assessee has failed to provide fully and truly all material facts necessary for his assessment in the present case. As is evident from the record the amount due from these entities pertains to the previous financial year and assessee being an Indian company has already paid the taxes thereon, since it follows the mercantile system of accounting. Therefore, we are of the considered view that conditions laid down in 1st proviso to section 147 of the Act are not satisfied in the present case. Thus, the reassessment proceedings under section 147 of the Act, in the present case, are set aside being bad in law. Accordingly, the impugned order passed by the learned CIT(A), inter-alia, upholding the order passed under section 143(3) r.w.s. 147 of the Act is set aside. As a result, ground No. 1 raised in assessee's appeal is allowed.
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2022 (9) TMI 518
Deduction u/s. 54B - agricultural land which is purchased prior to the sale of agricultural land - HELD THAT:- The assessee is entitled for the claim of deduction provided the agricultural land is purchased within two years after the date of sale of agricultural land. In assessee s case, the agricultural land is sold on 14.2.2014 (50% share) and the agricultural land against which deduction u/s. 54B is claimed was purchased on 23.5.2013 which is prior to the sale. Therefore, we are of the view that the assessee is not entitled to claim deduction u/s. 54B of the Act for the agricultural land which is purchased prior to the sale of agricultural land. We therefore see no reason to interfere with the order of the CIT(Appeals) in this regard. Disallowance made towards long term capital gains - Expenses at the time of purchases - AR submitted that the assessee had submitted confirmations from 3 persons which the CIT(Appeals) did not consider on the basis that the additional evidence are not furnished as per Rule 46A and no explanation was provided for additional evidence - CIT(Appeals) has power to admit the additional evidence before him which goes to the root of the issue and cannot reject the evidence merely on technicality of Rule 46A. In our considered view, there was sufficient and reasonable cause for the assessee in producing the confirmations before the AO. We therefore admit these additional evidence and remit the issue to the AO for verification of the confirmations from the 3 parties and decide the allowability of the claim in accordance with law, after providing opportunity of being heard to the assessee. Landscaping and other expenses claimed - Documents now produced in the form of additional evidence in support of the landscaping and other expenses requires verification by the AO and for this purpose, we remit this issue to the AO for consideration of the AO and decision in accordance with law, after reasonable opportunity of being heard to the assessee. Expenses at the time of purchase, landscaping and other expenses claimed in the computation of capital gains for the year under consideration, we notice that the assessee has claimed 100% of the above expenses. Since only 50% of the total sale proceeds is offered to income during the current year, the deduction claimed also should be restricted to 50%. Accordingly, we direct the AO to allow only 50% of eligible deduction of these expenses after due verification of the evidence. Unexplained cash deposits made into the Appellant's Bank Account - Assessee has prepared and submitted the cash book during the course of hearing before the AO. However, the same cannot be rejected by the revenue authorities stating that it is prepared to reflect only bank entries and does not represent any business transaction. Further, we notice that there is no description as narration of the entries in the cash book and hence it cannot be conclusively said that there is no transaction pertaining to business accounted. AO/CIT(A) have not done any reconciliation of entries in the cash book with that of bank entries as per bank statement. The summary of cash book transactions submitted by the AR before us also needs to be examined by the revenue authorities. In view of the above, we remit this issue back to the AO for verification of details afresh. Appeal of the assessee is partly allowed for statistical purposes.
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2022 (9) TMI 517
Addition u/s 68 - receipt of share application money - reliance on statement of third parties - retracted statements - HELD THAT:- Parties were cross examined by the assessee during the course of assessment proceedings in the presence of the ld. AO, all these parties confirmed the contents stated in their retraction affidavits. Subsequently all these parties were again re-examined by the ld. AO before the completion of assessment. Even in that re-examination proceedings, all the parties reiterated the contents stated in the retraction affidavits. Hence we categorically hold that no addition could be made in the hands of the assessee company by placing reliance on the statements recorded from aforesaid parties, which stood subsequently retracted. With regard to statement of Shirish Shah relied upon by the ld. AO, it is a fact on record that the said statement was never furnished to the assessee for its rebuttal. Hence it has resulted in gross violation of principles of natural justice as it strikes the very foundation of the assessment. The statements of third parties i.e. two angadias relied upon by the ld. AO are totally unrelated to the assessee company and there is absolutely no linkage of the said parties with the assessee company. Hence we hold that no addition could be made in the hands of the assessee by placing reliance on the statements of third parties. As decided in M/S HEMADARI MACHINE TOOLS PVT. LTD. [ 2021 (8) TMI 851 - ITAT MUMBAI] under similar circustances share premium received by the assessee during the year under consideration could not be held as an unexplained cash credit within the meaning of Sec. 68 - Decided in favour of assessee.
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2022 (9) TMI 516
Revision u/s 263 by CIT - Capital gain computation - Applicability of section 50C - as per CIT AO failed to make any enquiry on the applicability of section 50C as the ld AO failed to refer the matter to District Valuation Office (DVO) for determining the correct fair market value of the property - HELD THAT:- What transpires from the record is that when the ACIT Range-22, New Delhi directed AO to examine the facts in entirety and suggest remedial action in regard to audit objection. He observed, as is evident that there was on record a reply of the assessee wherein he had given explanation of the reasons why provisions of Section 50C are not applicable and why the fair market value which is less than the circle rates should be accepted. The assessee has placed these submissions on record on paper book along with copies of three registered sale deeds in the area in vicinity where property is situated to justify acceptance of fair market value instead of the circle rates. AO vide communication informed Pr.CIT-08, New Delhi in regard to audit objections that the assessee had filed reply along with copies of valuation report, copies of registry of nearby areas and that having considered the same during original assessment proceedings the assessment order was passed and at the same time a request was made that audit objection be considered as settled. AO made a proposal for initiating revision proceedings u/s 263 of the Act by a letter addressed to the Pr. Commission of Income Tax, Delhi-8. Thus, the findings of Ld. CIT(A) that Ld. AO had not considered the application of Section 50C of the Act by proper inquiries or verification is not sustainable. Indeed in the assessment order there is no discussion in respect of Section 50C but what transpires is that the case of assessee was selected for limited scrutiny for examining deduction u/s 54 of the Act and based upon the analysis an addition was made by making a disallowance u/s 54 - Thus, even if there is no specific mention of the examination of case u/s 50C of the Act. The fact that in limited scrutiny assessee s claim of deduction u./s 54 was examined in itself is comprehensive and would cover all other aspects which entitle not only the right to deduction but also quantum of deduction. Merely because the assessment order is silent on that aspect that cannot be a ground for invoking powers u/s 263. Clear distinction between inadequate inquiry and lack of inquiry has been examined by Hon ble Delhi High Court in case of Gee Vee Enterprises [ 1974 (10) TMI 29 - DELHI HIGH COURT] . There is substance in the argument of Ld. AR that merely on the basis of audit objection powers u/s 263 could not have been exercised. The impugned order u/s 263, does not indicate that the power was exercised on the basis of a finding of the assessment order being erroneous and prejudicial to the Revenue by examining facts and record by the ld. Revisional Authority beyond the audit objections rather it is obvious that in attempt to meet the audit objections and to take them to a reasonable end, the power u/s 263 was exercised and same cannot be sustained. Doctrine of merger - Whether powers u/s 263 could not be exercised as all facets of claim of deduction under capital gains on sale of capital assets, got merged in appeal order passed by Ld. CIT(A), as being First Appellate Authority it had power of enhancement on issues which was not considered by Ld. AO in assessment proceedings ? - HELD THAT:- As when at one hand, the matter on record suggests AO had gone into the question of applicability of Section 50C and on other hand ld, CIT(A) has heard the matter determining the issue deduction available u/s 50C, in favour of assessee by order dated 04.04.2019 then by virtue of doctrine merger the order of ld. AO stood merged in the order of Ld. First Appellate Authority dated 04.04.2019. Fact of decision of appeal before CIT(A) and pendency of appeal before Triunal, was mentioned by Ld. AO in its letter dated 25.06.2019 available at page no. 298 of the paper book for forwarding proposal for initiating revision proceedings u/s 263, then Ld. Revisional Authority was not justified in exercising powers u/s 263 in regard to assessment order dated 27.12.2017. As by then Revenue had approached the Tribunal against the order of ld. CIT(A) and the Revenue had availed alternate remedy of challenging the order of ld. CIT(A) wherein in regard to the present controversy also grounds were available, as to if the Tax authorities below had fallen in error in not considering applicability of section 50C of the Act or that reference to DVO was mandatory. Appeal of assessee allowed.
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2022 (9) TMI 515
Rectification u/s 154 - Receipt of valuation report after the date of assessment order passed - re-computation of the long term capital gain - FMV / Cost of acquisition determination - sale of immovable property - HELD THAT:- Assessing Officer has not stated any reasons for not accepting the valuation report submitted by the assessee anywhere in the Assessment Order passed u/s. 143(3) of the Act. Subsequently valuation report from DVO dated 08.10.2018 was received wherein the construction cost of the immovable property situated at Hyderabad is valued at Rs.2,51,500/. Accordingly, the value determined by the DVO is Rs.2,51,500/- by adopting estimated cost method. Whereas assessee submitted the value of Rs.8,00,000/- adopting the fair market value method. Accordingly, Assessing Officer passed the rectification order u/s. 154 of the Act. In the case of of Kirit Thakker [ 2011 (10) TMI 771 - ITAT MUMBAI] , it was held that, the issue of valuation/FMV accepted by the Assessing Officer while passing the assessment order u/s 143(3) cannot be disturbed and re-determined under the provisions of sec. 154, as the said issue, in our view, is not an error or mistake apparent on the face of the order, which can be rectified under the provisions of sec. 154. We are inclined to set-aside the order passed u/s. 154 and order of CIT(A). - Decided in favor of assessee.
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2022 (9) TMI 511
TP adjustment on account of payment of Management Fees to Associated Enterprise (AE) - assessee had failed to establish rendering of actual services commensurate with the payment made and also tangible beneft derived by the assessee from receipt of such services? - ITAT held that services were rendered by the AE and were also benefiting the assessee - HELD THAT:- A reading of the clauses of the agreement make it quite clear that the management services could be rendered by all or any of the Sandvik Companies such operations would be on behalf of Sandvik AB. In our opinion the Tribunal committed no error in deciding the issue in favour of the Respondent more so when the management service fees received by Sandvik AB had been taxed by the A.O. in charge of assessment of Sandvik AB Sweden, as provider of such services. Addition on account of closing stock of obsolete inventory - CIT(A) deleted the addition, which was upheld by the Tribunal by following its Order passed in the case of the Respondent, in the Revenue Appeal for the Assessment Year 2004-05 [ 2015 (12) TMI 1742 - ITAT PUNE ] We cannot persuade ourselves to take a different view on an issue arising between the same parties, which has already been raised and rejected by this Court, although for a different assessment year, more so when there is no change in the factual or legal matrix of the case. Losses sustained by hundred per cent EOU set off against the other business income of the assessee - This issue, however, is no longer res integra. In Hindustan Lever Ltd. [ 2010 (4) TMI 206 - BOMBAY HIGH COURT ] as held that AO was plainly in error in proceeding on the basis that because the income is exempted, the loss was not allowable. All the four units of the assessee were eligible under Section 10B. Three units had returned a profit during the course of the assessment year, while the Crab Stick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. Thus no substantial questions of law arise in the present appeal, which is, accordingly, dismissed.
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2022 (9) TMI 510
Faceless Assessment u/s 144B - Mandatory recording of draft assessment order - violation of the principles of natural justice - Reopening of assessment and the consequent notice of demand of even date u/s 156 and show cause notice u/s 274 r.w.s. 271(1)( c) - allegation of not following due process of law by not giving any reasonable opportunity of being heard - HELD THAT:- It it is only after taking into account all the relevant material available on record, that a draft assessment order is to be made, which, admittedly, has not been done as the order has been passed without considering the material uploaded on 5th March 2022. Having heard the learned counsel for Petitioner and the Revenue and having perused the material placed before us and having examined the provisions of Section 144B in relation to the aforesaid facts, we are of the view that this is a fit case for invoking our jurisdiction under Article 226 of the Constitution of India and setting aside the impugned assessment order and remanding the matter back for fresh consideration by the JAO in accordance with the provisions of Section 144B of the Act. Assessment order passed under Section 147 read with Section 144B and the consequent notice of demand of even date under Section 156 of the Act and show cause notice under Section 274 read with Section 271(1)(c) are hereby quashed and set aside and restored to the file of the JAO. The JAO is directed to pass a fresh assessment order in accordance with law within a period of fourteen weeks from the date hereof, after giving an opportunity of hearing to Petitioner.
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2022 (9) TMI 509
Unexplained addition to capital account - additional income surrendered by assessee - Assessee has failed to discharge the burden regarding the source from which the capital was introduced - ITAT concluded that the Assessee has duly explained the source of cash deposits in its bank account as well as the addition made to the capital account - since the surrender of income was made in the previous assessment year and tax was duly paid thereon, the said amount introduced in the accounts in the current assessment year would not be taxable. HELD THAT:- Appellant has not disputed the findings of the ITAT that in the remand report there was no adverse inference drawn by the AO with respect to the documentary evidence furnished by the assessee in respect of the unsecured loans. The learned counsel also does not dispute the finding of the CIT(A) that there was a surrender of income by the Assessee in the previous AY to the tune of Rs. 15.22 crores and tax was duly paid thereon. There is no challenge to the finding of the ITAT that in case of addition of Rs. 9.02 crores, the amounts were opening balances from the earlier years. ITAT has after perusing the evidences filed by the Assessee and the remand reports received from the AO, concluded that the addition against the Assessee cannot be sustained. The learned counsel for the Revenue has not been able to point out any error in the findings of fact by the learned ITAT. Admission of additional evidences - As in the facts of the present case, the additional evidences were admitted by the CIT (A) and remand reports were called for from the AO. There is nothing on record which evidences that the Revenue opposed the admission of additional evidence before the CIT (A). In fact, there was no cross objection filed by Revenue before the ITAT challenging the admission of the additional evidence by the CIT (A). The impugned order records that the AO perused the documents and submitted its remand reports which have been considered by the ITAT before deciding the matter. The learned counsel for the Appellant has not pointed out any error in the order of the ITAT in appreciating the remand reports. The objection to admission of additional evidence at this stage is belated and no ground for interference is made out. No substantial question of law.
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2022 (9) TMI 508
Addition u/s 41(1) - evidences of liability as ceased or has been remitted provided or not? - addition made relying upon the order passed by Commissioner, Central Excise Customs, Meerut-II wherein held that purchases made by the Assessee's firm from a sister concern were non-genuine, bogus and there was no real production or movement of goods - CIT(A) allowed the appeal and deleted the said addition of the AO after returning the finding that the books of accounts of the Assessee have not been rejected by the AO and Assessee had filed details of purchases vis-a-vis sales, which figures of sales and purchase were not doubted by the AO - HELD THAT:- The entire basis of the AO for doubting the balance was the order of the Commissioner, Central Excise Customs, Meerut-II, and since the very said order has been set aside by the CESTAT and has become final, there can be no doubt that the finding of the AO that the purchases were bogus has no legs to stand on. The finding of the CIT(A) and ITAT that the said liability which was converted into an unsecured loan and subsequently stood repaid has not been challenged by the Revenue in the present appeal. In the facts of the present case as well as SHRI VARDHMAN OVERSEAS LTD. [ 2011 (12) TMI 77 - DELHI HIGH COURT] noted above the unsecured loan had not been transferred to profit loss account by the assessee and it was infact repaid in the subsequent years. Revenue has also not challenged the findings of the CIT(A) that the two firms had been transacting for many years and had a running account which are fact findings. In light of concurrent findings of fact returned by ITAT and CIT(A), this Court, in view of the aforesaid facts, do not find that any substantial question of law arises in the present appeal and there is no infirmity in the order passed by the ITAT. No substantial question of law arises.
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2022 (9) TMI 507
Disallowance u/s 14A r.w.r. 8D - disallowance of depreciation u/s 32 - Tribunal deleted the addition made u/s 14A considering the fact for the assessment year 2006-07 - Tribunal also deleted the disallowance of depreciation recording the fact that the building was used for official-cum-residential purpose by the Managing Director with all office facilities and therefore, the assessee was entitled to depreciation @ 10% and directed AO to allow the same. HELD THAT:- In view of our order of even date passed in [ 2022 (9) TMI 376 - GUJARAT HIGH COURT] with regard to the issue of disallowance under section 14A and considering the finding of fact given by the Tribunal with regard to use of the building for office-cum-residential purpose by the Managing Director, we do not find any infirmity in the impugned order of the Tribunal as no question of law much less any substantial question of law proposed or otherwise arises therefrom. The appeal is accordingly dismissed.
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2022 (9) TMI 506
Addition u/s 68 - Bogus share capital received - unexplained cash credits - adition to be made in the hands of the subscriber company or recipient s hands? - HELD THAT:- DR before us could not dispute that since the addition has been made in the hands of the subscriber company, then the same amount cannot be added twice in recipient s hands u/s 68 - DR insisted that one to one transaction that is to say that the exactly same money has been received in the hands of the assessee has not been proved. No in the above contention of the ld. DR. It is not the case of the Revenue that the subscriber company has invested more than the amount it was added in its hands. In view of this, since the Revenue could not dispute the identity, creditworthiness of the subscriber as well as genuineness of the transaction, therefore, the addition made by the lower authorities is not sustainable and the same is accordingly ordered to be deleted. - Decided in favour of assessee.
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2022 (9) TMI 505
Rectification u/s 154 - set-off of unabsorbed depreciation against the income from other source in violation of Section 115BBE - Scope of CBDT circular No. 11/2019 dated 19.06.2019 - HELD THAT:- CBDT Circular No. 11/2019 dated 19.06.2019 which specifically issued in order to instruct the AOs to allow the set off of unabsorbed loss/depreciation in the assessment years prior to the amendment. We note that the circular was brought by Central Board of Direct Taxes to ensure the same treatment to be given to unabsorbed depreciation in the matter of set off of losses / depreciation against the addition made u/s 68 / 69/ 69A/ 69B / 69C/ 69D of the Act. This Circular was brought out in view of amendment brought about by Finance Act, 2016 w.e.f 01.04.2017 which provides that no set off of any loss shall be given to assessee under the any of provision of the Act against the income as referred to in Clause A and B of sub-section (1) of Section 115BBE of the Act. Prior to that there was no provision existed in the Act and therefore it is permissible to set off of unabsorbed depreciation/losses against the said income. So in order to set the controversy at rest , a Circular No. 11/2019 dated 19.06.2019 was brought as the AOS were not allowing the set off. A perusal of the Circular, abundantly makes it clear that prior to AY 2017-18 the said set off of loss has to be allowed and so the unabsorbed depreciation. Therefore, we do not find any merit in the conclusion drawn by the Ld. CIT(A) on this issue and accordingly we are inclined to reverse the same by directing the AO to allow the set off of unabsorbed depreciation to the assessee. We are not adjudicating the plea raised by the assessee that the withdrawal of set off in respect of unabsorbed depreciation allowed earlier by ways order u/s 154 is not permissible as the same is not apparent mistake. Resultantly, the appeal of the assessee is allowed.
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2022 (9) TMI 504
Deduction u/s 80-IB [10] - apartments purchased from landowners - HELD THAT:- We notice that this Tribunal in the assessee s own case for AYs 2007-08 2008-09 [ 2022 (7) TMI 1203 - ITAT BANGALORE] had dealt with similar issue of deduction u/s. 80IB(10) of the Act and decided the issue in favour of the assessee and held that a plain reading of section 80-IB(10) evidently makes it clear that deduction is available in a case where an undertaking develops and builds a housing project on the profits derived from such housing project. In the given case the profit from the sale of flats earmarked for the land owners is also derived by the assessee from the development and building of the housing project. In view of the above discussion we are of the considered view that the assessee is entitled claim deduction u/s.80IB(10) on the profits derived from sale 22 flats earmarked for the land owners. The appeal is allowed in favour of the assessee
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2022 (9) TMI 503
Addition u/s 68 - Unexplained share application money and premium thereon - HELD THAT:- Assessee sought for adjournment on various occasions and produced a piecemeal, not the relevant information as called for by the AO. In the first occasion, the assessee filed only the details of the shareholders name, address, number of shares and amount of investment, but without furnishing PAN number, copies of Return of Income, confirmation letters and bank statement of the share subscribers. In spite of seven opportunities given to the assessee, assessee could not produce the details before the AO - During the appellate proceedings, the assessee filed as additional documents namely the confirmation letters and cheque amount involved and PAN No. details. The confirmation letters are all dated November 2010. There is no details about the folio number of the shares allotted to the shareholders. Further study of the consent letters of 10 shareholders submitted before the A.O. shows that several of them were not having any d-mat account though they have been shown to have subscribed to huge amounts of shares. The very fact that these shares were not issued by means of public offer shows that the promoters and the directors of the assessee company must know the alleged shares subscribers personally. Despite thus the assessee failed to proof of identity, creditworthiness and genuineness of the transaction of the shareholders with the assessee company. Thus it clearly shows that the assessee has not produced the available documents with it before passing the assessment orders and the same is produced which is six years old before CIT(A) as additional documents which cannot be entertained. Perusal of the list of investors and their returned income was between the range of Rs. 1,65,764/- to Rs. 2,60,109/- but they invested ranging from Rs. 56 lakhs to Rs. 84 lakhs. Thus the creditworthiness of these investors are not proved beyond doubt. No hesitation in confirming the orders of the lower authorities and the ground and additional ground raised by the assessee has no merits and the same are dismissed.
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2022 (9) TMI 502
Exemption u/s 11 - assessment of trust - Nature of receipts - voluntary donations receive d - treating the voluntary donation received as business income of assessee society - AO has given a finding that the donations were given to the assessee by the publishers for promoting the books and have claimed as business promotion expenses - HELD THAT:- Since receipt of commission from publishers has been held to be a commercial activity which is not incidental to the attainment of the objectives of the appellant society, it is held that there is no infirmity in the order of the Assessing Officer in treating the income from commission from publishers as income from business by invoking the provisions of section 11(4A).The assessee has not brought any material to rebut the finding of the learned CIT(Appeals). Therefore, no reason to interfere in the finding of learned CIT(Appeals). The same is affirmed. Grounds raised in appeal are rejected.
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2022 (9) TMI 501
Exemption u/s 11 - assessee had committed violation within the meaning of provisions of section 13(1)( d) by making investment in equity shares and in Share Application Money for purchase of shares in contravention to the provisions of section ll(5) therefore, benefit of exemption of sections 11 and 12 were denied - HELD THAT:- Giving thoughtful consideration to the matter on record, it can be observed that in assessee s own case for the Assessment Year 2013-14 and 2014-15 [ 2020 (9) TMI 722 - ITAT DELHI] decided on merits in favour of the assessee and the Revenue has not been able to cite any distinction of fact or law justifying a different opinion, for the present assessment year. Accordingly, the grounds are not sustainable and the appeal of revenue is dismissed.
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2022 (9) TMI 500
Rejection of books of accounts - estimation of Net Profit - Reliance on profit returned in the preceding year - no explanation to low profit during the year - HELD THAT:- The assessee has at no point of time given any proper explanation for the huge loss returned by it in the impugned year more particularly when there were profits returned in the preceding year. The explanation furnished ,as reproduced above has been rightly found to be general in nature by the CIT(A) the assessee having only stated that there are several reasons for fluctuation in prices of goods and bought and sold and mentioning only general market condition variations etc. CIT(A) has also pointed out anomaly in the books of the assessee - CIT(A) has rightly upheld the order of the AO rejecting the books of accounts of the assessee and thereafter justifiably estimating net profit on the basis of that returned in the preceding year. Accordingly, all grounds of appeal of the assessee are dismissed.
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2022 (9) TMI 499
Revision u/s 263 - Doctrine of merger - As per CIT assessment order passed u/s. 143(3) r.w.s. 254 as erroneous and prejudicial to the interest of the Revenue - HELD THAT:- Hon ble Bombay High Court in case of Ballarpur Industries Ltd. [ 2017 (8) TMI 530 - BOMBAY HIGH COURT] and in case of Vedant Ltd.[ 2020 (12) TMI 89 - BOMBAY HIGH COURT] held that when the assessment was completed without proper enquiry the Commissioner was competent to invoke the jurisdiction and direct fresh assessment under section 263 of the Act. Identical issue has also been decided in case of Shri Arbuda Mills Ltd. [ 1996 (1) TMI 11 - SUPREME COURT] as discussed when Ld. PCIT exercises his power under section 263 of the Act in respect of claim relating to 3 items which was decided by the ITO in favour of the assessee and were not subject matter of the appeal by the assessee there is no question that order of ITO merged with that of Commissioner(Appeals) so as to exclude jurisdiction under section 263 because under the amended provisions contained under section 263 of the Act power of Commissioner under section 263 would extend and would be deemed to have been extended to three items because the same had not been considered and decided in appeal filed by the assessee. In the instant case also the issue flagged by Ld. CIT(A) as to not ascertaining and examining the correct book profit on transfer of 9033701 shares of Adani Enterprises at the rate of Rs.201 per share which comes to Rs.189.71 crore and not at the rate of Rs.864 per share which comes to Rs.780.51 crore, which the AO has accepted without ascertaining and examining the correct facts and without making necessary enquiries/verifications which made the assessment order erroneous so far as prejudicial to the interest of the Revenue, was never agitated or decided by CIT(A) or Tribunal in original assessment or assessment framed under section 143(3) read with section 254 of the Act. So in these circumstances the PCIT has the power under section 263 of the Act. So we are further of the view that in the case laws relied upon by the assessee referred are not applicable to the facts and circumstances of the case. When the issue flagged by Ld. PCIT has never been ascertained/examined to compute the correct book profit qua the transfer of these shares there is no question of merger of the order. Moreover, when the assessment order is apparently erroneous so far as prejudicial to the interest of the Revenue having been decided by the AO in favour of the assessee without ascertaining or examining the same order passed by Ld. PCIT does not call for any interference by the Tribunal. Consequently, appeal filed by the assessee is hereby dismissed.
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2022 (9) TMI 498
Reopening of Assessment u/s 147 - Reasons Recorded For Reopening Of Assessment - Addition under section 69C for failure to justify purchases and Disallowance of deduction u/s 80IB(10) - HELD THAT:- On careful perusal of the above reasons recorded by the learned assessing officer, we find that as he could not find any return of income filed by the assessee in ITD system, there was no question of making further inquiries. It is an admitted fact that assessee has not filed any return of income electronically. It was mandatory at that time. Therefore, AO was of a reasonable belief that assessee has booked bogus purchases during the year. As there was no information available about the details of the payment made by the assessee, recording of those transactions in the books of the assessee and any further information about the income of the assessee, no fault can be found in reopening of the assessment. Merely some difference in mentioning of the amount, when the name of the party is mentioned correctly does not make the reopening of the assessment invalid. Further with respect to the claim of the assessee that whether the goods have been purchased from Maruti enterprises or Apex Corporation, the learned assessing officer has mentioned both the names. Therefore, it does not invalidate the reopening of the assessment. We are of the view that the AO had valid reason to believe‟ that income of the assessee has escaped assessment when a specific information in the form of tangible material‟ received from DGIT investigation that assessee has obtained only bills without material from different parties - Therefore, we confirm the order of the learned CIT A in upholding the reopening of the assessment. Ground number 1 and 2 of the appeal of the assessee are dismissed. Addition u/s 69C - We find that the AO has recorded the reasons for reopening of the assessment on the basis of specific information that 5 different parties have provided bogus bills to the assessee, he has also the information that those parties have given their statement that they are non genuine suppliers, the information is also travelled to the DGIT investigation to the learned assessing officer, therefore, it is evident that assessing officer was having information about those parties such as their address and whereabouts. Therefore when the AO was having complete information about those parties and was so sure that those are the bogus parties and has merely provided the bills without supply of the material and also having information about making a statement before a government authority, not providing the correct address by the assessee, assessee was not having the same, is not fatal to the issue. The learned assessing officer himself made any enquiry with those parties further with respect to genuineness of purchase of material by the assessee. The only allegation of the assessing officer is that assessee has failed to show receipt of goods as well as failed to produce those parties. Furthermore, looking to the nature of the business, assessee cannot be asked to produce more details then what is generally kept by an assessee in that line of the business. In view of these facts, the addition made by the learned assessing officer and confirmed by the learned CIT A cannot be upheld. Accordingly assessing officer is directed to delete the addition made u/s 69C of the act with respect to purchases from five different parties. Deduction u/s 80IB - As the reasons recorded for reopening of the assessment with respect to disallowance/addition u/s 69C of the act has already been deleted no other disallowance, which are not part of the reasons recorded by the learned assessing officer, has any legs to stand, but fails. Therefore, without going into the merits of the disallowance u/s 80 IB of the act vis- -vis filing of the return by the assessee u/s 139 (1) of the act the deduction claimed by the assessee u/s 80 IB (10) cannot be disallowed. Even otherwise, the fact shows that assessee has consistently been allowed deduction u/s 80 IB (10) in earlier assessment years as well as subsequent assessment years. For peculiar reasons, assessee could not file electronic return of income but has filed manual return of income within time allowed u/s 139 (1) of the act. Therefore as relying on Prabhakar Damodar Gawade [ 2019 (5) TMI 844 - ITAT PUNE] we hold that the disallowance of deduction u/s 80IB (10) of the act made by the learned assessing officer and confirmed by the CIT - A is not sustainable in law. Accordingly, ground appeal are allowed.
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2022 (9) TMI 497
Disallowance u/s 36(1)(iii) - Working of interest cost on investments - assessee had not shown any figure of interest pertaining to investments or capital work-in-progress - as per AO assessee has not established or pointed to the nexus of interest free funds being used for investments, he was of the view that fair and reasonable method was debt equity ratio for the purpose of reallocating the interest under various heads of income - HELD THAT:- We find that CIT(A) while deciding the issue in favour of the assessee has followed the decision of Tribunal in assessee s own case for A.Y. 2010-11 [ 2016 (11) TMI 1360 - ITAT DELHI ] We further find that thereafter, Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2012-13 [ 2022 (3) TMI 1419 - ITAT DELHI] has decided the identical issue in assessee s favour as held assessee had sufficient interest free funds to meet the capital expenditure and to make investments, no disallowance u/s 36(1)(iii). Before us, no distinguishing feature in the facts of the case and that of earlier years which have been decided by ITAT in assessee s favour has been pointed out by Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.
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2022 (9) TMI 496
Maintainability of appeal u/s. 253 as against an order passed by the Director of Income Tax (I CI) levying penalty u/s. 271FA r.w.s. 274 - appeal against the order levying penalty u/s 274 r.w.s. 271FA against this tribunal - HELD THAT:- It is settled principle of law that nowhere in section 253 mentions the order passed by Director of Income-tax (Intelligence) or any other officer of the Income- tax Department levying penalty u/s 271 FA is appealable before this Tribunal. Income Tax Appellate Tribunal being a quasi judicial authority established under the provisions of the Income-tax Act cannot travel beyond the provisions of the Income Tax Act. Therefore, unless and until an appeal is specifically provided in section 253 of the Act, against the order levying penalty u/s 271FA, we are of the considered opinion that the present appeal is not maintainable before this Tribunal. Respectfully following the decision SRO, MEPPAYUR-KOZHIKODE VERSUS DIRECTOR OF INCOME-TAX (INTELLIGENCE), COCHI [ 2014 (1) TMI 102 - ITAT COCHIN] the present appeal filed by the assessee is not maintainable in law and therefore the same is dismissed in limine. The assessee is at liberty to file appropriate legal remedy against this impugned order, in the manner known to law. Appeal filed by the Assessee is dismissed.
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2022 (9) TMI 495
Revision u/s 263 by CIT - Erroneous order passed by the AO, allowing claim of dispensary expenses without conducting any inquiry - HELD THAT:- Assessee only referred to the notices before us without pointing out where exactly the queries regarding the claim of expenses relating to the dispensary expenses were raised in the said notices. Further, he has not pointed out any reply filed by the assessee in response to query, if any, with regard to the expenditure claimed relating to the dispensary run by the assessee. Therefore, this contention of assessee that issue was examined during the assessment proceedings, we find, it without any basis at all and is therefore rejected. As for the other contention of assessee that there was no illegality in the order of the AO since the assessee had been consistently returning such 28% of net profit from his medical profession including dispensary income, we find is neither here nor there. The ld.counsel for the assessee has made this claim for the first time before us. This claim was not made before the ld.CIT. Further, no evidence has been filed to support his contentions that the assessee had been returning profit at a consistent rate in all the years. Therefore, this claim of the assessee, we also find, is baseless and is also rejected. No infirmity in the order of the CIT holding the assessment order passed by the AO, allowing claim of dispensary expenses without conducting any inquiry despite the facts demonstrating no income being earned by the assessee from the same, as erroneous and prejudicial to the Revenue. - Decided against assessee.
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2022 (9) TMI 494
Assessment order u/s 153A/143(3) passed before receiving the approval of the higher authority - Sanctity of the approval u/s 153D of the Act related to completion of the assessment u/s 153A - Necessity of prior approval u/s 153D for passing the order u/s 153A - HELD THAT:- In the instant case, the issue involved is identical to the issue involved [ 2021 (8) TMI 1336 - ITAT AMRITSAR] - The assessing authority had passed without receiving the prior approval of the Addl.CIT. Ld. CIT DR was unable to show that the approval was received before or during passing of order on dated 27.07.2016. The appellate authority had also accepted the fact that the approval was duly received by the assessing authority on 28.07.2016. The direction of the statute for prior approval was ignored by the revenue authority before passing of the order U/s 153A/143(3) of the Act. The order is erroneous and liable to be quashed. Assessee appeal allowed.
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2022 (9) TMI 493
Nature of expenses - product registration expenses - revenue or capital expenditure - Claim denied by the AO holding that Marketing Intangible assets are created in favour of the assessee since the assessee would be entitled to enduring benefits on account of this expenditure - HELD THAT:- We have noted that the assessee had explained the nature of expenses so claimed relating to product registration as being mandatorily required as per the laws of the country to which the products were exported. CIT(A) however noted that identical expenses had been held to be revenue in nature by the Hon'ble Jurisdictional High Court in the case of Torrent Pharma [ 2013 (4) TMI 570 - GUJARAT HIGH COURT] and Cadila Healthcare Ltd. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] and following which decisions in the case of the assessee also, the claim in the preceding year was allowed Since the issue admittedly stands decided in favour of the assessee in the preceding year by the first appellate authority and the Revenue having not brought to our notice any decision of higher authorities reversing the order of the Ld. CIT(A) or any other contrary decision of higher authorities in similar facts, we see no reason to interfere in the order of the ld. CIT(A). Appeal of the Revenue is dismissed.
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2022 (9) TMI 492
Delayed employee contribution to PF/ESI - disallowance made under Section 36(1)(va) - assessee submitted that the contributions to PF and ESI were remitted to Govt. account before due dates for filing return of income by the assessee - HELD THAT:- We direct the Assessing Officer/CPC to delete the disallowance of employees contribution to EPF and ESI in this case as the contribution was remitted before the due date for filing of return of income. See AIMIL LIMITED [ 2009 (12) TMI 38 - DELHI HIGH COURT] , M/S. ALOM EXTRUSIONS LIMITED [ 2009 (11) TMI 27 - SUPREME COURT] - Decided in favour of assessee. Disallowance made by the CPC, Bangalore u/s 143(1) in respect of interest paid by the assessee on delayed remittance of TDS - Scope of debatable issue - HELD THAT:- As there are divergent views on the issue. In our opinion, whether interest paid by the assessee on delayed remittances of TDS is allowable expenditure or not is certainly a debatable issue and, therefore, is outside the scope of purview of the provisions of section 143(1) of the Act. Thus, the CPC, Bangalore/Assessing Officer is directed to delete the disallowance made in respect of interest paid on delayed remittances of TDS while passing the return under section 143(1) of the Act. Grounds raised by the assessee are allowed.
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2022 (9) TMI 491
Disallowance of business expenses - business of the assessee was not set up during the previous year - HELD THAT:- As fit out works related to building of Studio and production facilities was under progress during the relevant previous year and the premises area occupied only after completion of fit out work i.e. from 05/06/2009 which can be corroborated with the Leave and License Agreement with India Bulls. Thus, in any stretch of imagination the assessee was not in a position to procure business and delivery its service prior to June, 2009. The identical issue has come up for consideration before the coordinate bench of this Tribunal in the case of DCIT v. Akzo Nobel Car Refinishes India (P.) Ltd. [ 2008 (8) TMI 604 - ITAT DELHI] merely on the basis of incorporation of a company it cannot be concluded that business was set up. As observedearlier carrying on a business is a regular and systematic activity. Nothing that sort of facts or circumstances could be brought before us - assessee failed to demonstrate either with the direct evidence or with the circumstantial evidence that its business was set up in the accounting period. Whatever has been pointed out, i.e., incorporation of the assessee and appointment of the director are concerned, we are of the view that these two factors are not sufficient to record a finding that business has been set up. In the case in hand, it is emerging from the record that the assessee has merely carrying out the fit-out work during the relevant previous year - it is also clear that during the relevant previous year, the assessee is not ready for running the service of Studio and the assessee was not ready and, in a position, to commence its activities. The assessee had also not taken the premises on rent and had not completed the setting up of the facilities for running the studio. Therefore, the assessee was not in a position to solicit customers till the end of May 2009 before the start of Leave and License Agreement 05/06/2009. We have no hesitation to hold that the business had not been set up during the previous year relevant to Assessment Year 2009-10. Further, in our opinion, disallowance made by the A.O which has been confirmed by CIT(A) is in order and we do not find any error or legal infirmity the approach of the Lower Authorities. Accordingly, we dismiss the Assessee s ground of appeal. CIT-A directing the A.O to capitalize the expenditure and allow the benefit of depreciation allowances on the same - HELD THAT:- As per the balance sheet of the Assessee, it hadSuo-Moto capitalized the item of expenditure Rs. 6.25 crores as capital work in progress for bringing fixed assets into existence. The remaining expenses that were not capitalized by the Assessee were debited in the P L Account. Assessee has not filed any particular before the Authorities bellow to substantiate that the expense debited in the P L account are incurred for bringing fixed asset into existences. Therefore, the submission of assessee that CIT(A) has committed an error not directing the A.O to capitalize the expenditure and allow benefit of depreciation allowances on the same is not sustainable. For the above said discussions we do not find merit in the Assessee s Grounds of Appeal No.4.
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2022 (9) TMI 490
Delayed ESI/PF contribution - Assessee's plea that the same has been paid before the due date of filing of Income-tax return u/s. 139(1) and after the due date prescribed in the corresponding statutes - HELD THAT:- The legislature has not only incorporated necessary amendment in Sections 36(1)(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the foregoing legislative amendments have proposed employers' contribution/disallowance u/s. 43B of the Act as against employee's contribution u/s. 36(1)(va) of the Act; respectively. The similar issue has been decided by the Hyderabad Bench in the case of M/s. Chiphercloud India Pvt. Ltd [ 2021 (6) TMI 1118 - ITAT HYDERABAD] and also keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, we hold that the impugned disallowance is not sustainable in view of all these latest developments. The impugned ESI/PF disallowance is directed to be deleted therefore. Hence, we allow the appeal of the assessee.
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Benami Property
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2022 (9) TMI 524
Prohibition of Benami Property Transactions - Attachment order passed under Section 24(3) of the Benami Transactions (Prohibition) Amendment Act - petitioner is seeking for writ of certiorari to declare the provisions of Benami Transactions (Prohibition) Amendment Act, 2016 being prospective and consequently the notices issued to the petitioner and quashing of the orders passed pursuant to the same - HELD THAT:- As held by the Hon ble Apex Court [ 2022 (8) TMI 1047 - SUPREME COURT] that authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016 and as a consequence thereof, all such prosecutions and confiscation proceedings which had been initiated came to be quashed. We are of the considered view prosecution and initiation of proceedings in the instant case being pursuant to the Amendment Act the declaration made by the Hon ble Apex Court in paragraph 18(e) would squarely be applicable and as such, impugned attachment order stands quashed and all consequential proceedings initiated thereto. We also make it clear that question which has been kept open by the Hon ble Apex Court in paragraph 18.1(f), would squarely be applicable to the facts on hand also.
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Customs
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2022 (9) TMI 489
Revocation of Customs Broker License - forfeiture of whole amount of security deposited by the appellant - levy of fine - representation to the Inquiry Report not filed - HELD THAT:- The order dated 8.11.2021 does mention that despite 30 days having been granted to the appellant to file a representation, the appellant did not file the representation. The letter dated 25.8.2021 is at page 79 of the appeal memo. It merely encloses a copy of the Inquiry Report and requires the appellant to furnish a representation, if any, within 30 days of the issue of this letter - According to the appellant, the representation was submitted on 21.9.2021 but it has not been considered. The order passed by the Commissioner, therefore, deserves to be set aside on this ground alone. The matter is remitted to the Commissioner for passing a fresh order after taking into consideration the representation dated 20.9.2021 said to have been submitted by the appellant on 21.9.2021 - Appeal allowed.
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Securities / SEBI
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2022 (9) TMI 529
Offence under the SEBI Act - Illegal fund mobilization by the accused No.1/company - accused No.1 on an aggregate had allotted Non-Convertible Debentures to at least 14256 persons, thereby making it a public issue of securities and this was done without complying with the regulatory provisions applicable to public issue - Learned Judge issued warrant of arrest against the accused persons - complaint for prosecution for violation of Fraudulent and Unfair Trade Practices relating to Securities Market HELD THAT:- The petitioner himself has filed a document uploaded in the official portal of the Ministry of Corporate Affairs wherefrom it is ascertained that the petitioner was appointed as a director of accused No.1/company on 4th November, 2013 and he remained as director till 23rd August, 2014. Thus, the petitioner was one of the directors of accused No.1/company during the financial year 2012-13 and 2013-14. It is rightly observed by the learned Trial Judge that an offence under the SEBI Act is punishable for imprisonment which may extend to ten years. As submitted on behalf of the petitioner that in view of the decision of the Hon ble Supreme Court in Satender Kumar Antil vs. Central Bureau of Investigation Anr. [ 2021 (10) TMI 1296 - SUPREME COURT] the initial order passed by the learned Trial Judge issuing warrant of arrest against the petitioner and other accused persons after taking cognizance is bad in law because ordinarily summons ought to have been issued at the first instance against the petitioner permitting him to appear through his lawyer. If the petitioner failed to appear before the trial court the learned Judge was empowered to file bailable warrant. At the third stage, if the petitioner failed to surrender before the court in pursuance to bailable warrant, the trial court was empowered to pass an order issuing non-bailable warrant against the accused/petitioner. On the same analogy, it is submitted on behalf of the petitioner that the impugned order dated 6th May, 2022 is illegal, inoperative and the learned trial judge failed to act within his power vested under the law. Obligation to issue summons against the accused persons after filing of charge-sheet/complaint taking of cognizance arises in respect of the offences falling under Category-A mentioned hereinabove. In respect of the offences mentioned in Categories-B, C and D, the guideline made by the Hon ble Supreme Court in Satender Kumar Antil [ 2021 (10) TMI 1296 - SUPREME COURT] in respect of Category-A is not applicable. We find no illegality or material irregularity in the order dated 6th May, 2022 passed by the learned Special Judge, 5th Court at Calcutta. The instant criminal revision is devoid of any merit and accordingly dismissed on contest.
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2022 (9) TMI 523
SEBI Settlement Scheme, 2022 - opportunity for settlement has been provided to the entities who have executed reversal trades in the stock option segment of Bombay Stock Exchange Ltd. during the period April 1, 2014 to September 30, 2015 - HELD THAT:- We dispose of the appeal directing the appellant to file an appropriate application for settlement before the authority concerned within two weeks from today. If the same is filed, the authority will accept the settlement application in terms of proposed SEBI Settlement Scheme 2022 as an application filed in a pending proceeding and pass appropriate orders. The appeal is disposed of. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
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Insolvency & Bankruptcy
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2022 (9) TMI 488
CIRP - Financial Creditors - Financial Debt - Development Agreement with reciprocal promises - existence of debt and dispute or not - time limitation - Accretion of penal interest - HELD THAT:- From the perusal of the agreement, it is very much clear that these are all business agreements where each party has a role and there is a mechanism to release payment at various stages and the recoupment of such payments including the management of project land in consideration, failure of which will result into forfeiture of deposit, penal interest, liquidated damages etc. It is not in dispute that this is an inclusive definition of financial debt but certain conditions must be complied with to be a financial debt i.e the CD must have borrowed the money from the Creditor against the payment of interest /time value of money. It means, the transactions require to be purely in borrowing nature. This does not cover the business transaction between the Creditor and Debtor which is applicable in business organization where either sale or purchase involved or construction activities involved or in Real Estate Project, multiple agencies with multiple terms and conditions are involved and each is supposed to gain or lose based on the performance of the business. In order to meet the time schedule whether in purchase or sale or development agreement or in any Real Estate project, there is always a clause for liquidated damages and the same may be either in the percentage form or sometime even other form of penal interest. Accretion of penal interest emerging from clause 4 of the Agreement dated 20.03.2012 - HELD THAT:- There must be a disbursal of fund by the Creditor to the Debtor purely in the form of release of fund as a borrowing and must have a time value of money . The method may be different but the nature must be borrowing and in extended terminology even the liability in respect of guarantee is also covered. There must be a Financial Debt which is owed by the other side i.e. the Debtor. It should be amply clear that the CD owe the Financial Debt to the Creditor. There is a difference between the levy of liquidated damages or penal interest for default and the financial debt per se - interest per se in any business contract cannot be termed to make the debt as a Financial Debt , if it is in the nature of liquidated damages or in the nature of penal interest, which is a result of compensation for breach of contract which is stipulated for penalty. Hence, while examining the case, whether the Appellant is a Financial Creditor or not, a conclusion is now arrived at, based on above said discussions both on law on facts and the citations produced by the parties, some of which have been explicitly cited as above reveals that the Appellant is not a Financial Creditor and hence, the order of the Adjudicating Authority are upheld. Appeal dismissed.
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2022 (9) TMI 487
Seeking to set aside the decision of the RP partially rejecting the claim of the applicant and direct him to admit the claim of applicant in entirety - direction to follow the principles of fairness, impartiality and transparency in the conduct of Corporate Insolvency Resolution Process (CIRP) - seeking to restraint RP from creating any third party interest - HELD THAT:- It is evident, on examination of the impugned order, that there is no dispute regarding payment of amount which is Rs.10 crores which was claimed by the appellant. The said amount was already received on the date of the agreement i.e. 19.07.2018 and on the basis of the said agreement earlier petition filed by the appellant was withdrawn. So far as amount of Rs.1 crore is concerned, the impugned order categorically reflects that after deducting Rs.10 lakhs as TDS, Rs.90 lakhs was already paid to the appellant. Only for remaining amount of Rs.1 crore, two cheques of Rs.50 lakhs each were issued. Dispute is only to the said amount. On examination of the claim the RP has also accepted regarding claim of the appellant of Rs. 1 crore. In view of the fact that the amount of Rs.10 crore was received by the appellant on 19.07.2018 and thereafter Rs.90 lacs after deducting Rs.10 lacs as TDS, it is opined that the Adjudicating Authority has rightly approved the decision of Resolution Professional by reducing appellants claim to Rs.1 crore only. There was no reason for the Adjudicating Authority to pass a different order. Moreover there is no dispute on approval of Resolution Plan by the Adjudicating Authority. Appeal dismissed.
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Service Tax
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2022 (9) TMI 522
Refund of CENVAT Credit - export of services - denial of credit on the ground that the service provider is not registered with the department - Rule 4 of Service Tax Rules, 1994 - HELD THAT:- Mere perusal of Rule 5 of the 2004 Rules, would, inter alia, show that where a service provider, provides an output service, which is exported, without payment of service tax under a bond, he would be entitled to refund of Cenvat credit, as determined by the formula provided in the Rule. What is relevant to note is that Rule 5 of the 2004 Rules does not stipulate registration of premises as a necessary prerequisite for claiming a refund - if Notification No. 27/2012 dated 18.06.2012 is perused it shows that insofar as the provider of output service is concerned, for seeking refund of Cenvat credit, is required to file an application in prescribed form i.e. Form A (annexed to notification) before Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise as the case may be. Insofar as the jurisdiction of competent officer is concerned, the same is fixed, in consonance with the location of the registered premises of the service provider from which the output services are exported, clearly the notification does not prohibit the grant of Cenvat credit even if the premises are not registered. The fixation of jurisdiction of the competent officer, cannot be read in a manner that it obliterates the rights of the exporter of output services to claim refund of Cenvat credit. Whether the supply of service by a subsidiary/sister concern of a foreign company in India which is incorporated under the laws in India to a foreign company incorporated under laws of a country outside India will hit by condition (v) of sub- section 6A of Service Tax Rules, 1994? - HELD THAT:- The services rendered would be treated as Export of services when clause (a) to clause (d) refers to provider of service is located in the taxable territory and recipient of service is located outside India and the service is not a service specified in Section 66D of the Act and the place of the provision of the service is outside India and as per clause (e) the payment for such service has been received by the provider of service in convertible Foreign Exchange - Item (b) of the explanation 3 stipulates that an establishment of a person in taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Hence, by no stress of imagination, it can be said that the rendering of services by the petitioner No.1 to its parent Company located outside India was service rendered to its other establishment so as to deem it as a distinct person as per Item (b), explanation 3 of clause (44) of Section 65B of the Act, 1994 the petitioner No.1 which is an establishment in India, which is a taxable territory and its holding Company, which is the other company in non taxable territory cannot be considered as establishments so as to treat as distinct persons for the purpose of rendering service. In the present case there is no denial that services have been provided from India and have been used outside India and that the payment has been received in convertible foreign exchange. It stands clear that the services in the present case amounts to export of service - Regarding the allegation of absence of nexus between the export and service, in some of the input services he submits that Tribunal in the case of Apotex Research Pvt. Ltd. v. CC, Bangalore [ 2015 (3) TMI 346 - CESTAT BANGALORE ], held that there is no need to establish nexus between input services and output services at the time of filing of refund claim. Since the issue of jurisdiction was not specifically taken in the show cause notice the adjudication on this point against the assessee is not sustainable. The appellant since admittedly has centralized registration in terms of sub clause (2) and (3) of Rule 4 is Noida unit was not required to be registered. Refund claim should not have been rejected on this ground. The services provided by the appellant amounts to export of service as were received by the company located outside the taxable territory irrespective those were the group companies of the appellant. The order under challenge is held to be the result of wrong interpretation of the relevant provisions and notifications - Appeal allowed.
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Central Excise
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2022 (9) TMI 486
Area Based Exemption - North-East region - rejection of exemption claim under the Notification 33/99-CE, dated 08.07.1999 barred by the Principle of res judicata - Whether the Ld. Respondent Authorities have committed judicial indiscipline, while continuing revenue litigation, without taking recourse of judicial appeal against the Order of this Hon'ble Court, dated 26.04.2013, if were aggrieved? - entitlement to get interest for delayed refund under the exemption scheme in terms of Section11B of the Central Excise Act, 1944 - Time Limitation. HELD THAT:- A perusal of the pleadings including the reply dated 08.01.2009 filed by the appellant before the authority concerned reveals that such a procedure as prescribed in the Notification No. 33/99-CE dated 08.07.1999, had not been followed by the appellant/assessee. What instead has been urged is that since the provisions of Section 11B of the Central Excise Act, 1944 are not applicable, no limitation is applicable and therefore, the claims made by the appellant cannot be debarred on the ground of limitation. While there is no quarrel with the proposition that in view of the several clarificatory notifications issued by the Custom and Central Excise Board, that limitation provided under Section 11B of the Central Excise Act, 1944 are not applicable in case of exemptions allowable under the Notification No. 33/99-CE dated 08.07.1999, however unless suitably amended by the Central Government, the procedure prescribed thereunder including the requirement of filing statement of duty paid by the manufacturer by the 7th of next month as prescribed under Notification cannot be waived at the instance of the manufacturers/assessee unilaterally. The appellant even before this Court has not been able to substantiate its contentions that the increased installed capacity of their factory, in terms of the Notification No. 33/99-C.E. dated 08.07.1999 was brought to the notice of the Range Officer as had been claimed by the assessee before the Adjudicating Authority. Such statements of fact which could not be supported by the appellant before the adjudicating authority as well as the Appellate Authority and the CESTAT cannot give rise to any question of law let alone substantial question of law . It is well settled that the Tribunal is the final authority of facts. Where there is a finding of fact recorded by the Tribunal on the basis of records available, the High Court should be slow in interfering or upsetting such finding of fact arrived at by the CESTAT unless it can be shown that such findings of fact by the CESTAT are not supported by materials on record or the Tribunal has erroneously interpreted the materials which were available on record. Such is not the case in the present proceedings. There is no averment that the appellant had complied with the twin requirements prescribed under Notification No. 33/99-C.E. dated 08.07.1999 to make them eligible for the refunds claimed. Mere statement that they had undertaken substantial expansion would not make them eligible for the claims of refund. The twin condition prescribed under Notification 33/99-C.E. must be strictly complied with - A mere perusal of the Notification No. 33/99-C.E. dated 08.07.1999 reveals that the conditions prescribed for claiming any exemption are clear and specific and there is no ambiguity. The conditions required to be fulfilled by an assessee who seek to claim the benefit under the said notification will have to satisfy the conditions prescribed. The fact that no limitation prescribed under the said notification No. 33/99-C.E. will not make the answer eligible for the exemption/refund claim, unless they satisfy the procedure prescribed under the said notification. Merely because no limitation is prescribed and/or applicable cannot be a ground to consider their claims for exemption when they satisfy the prescriptions under the said notification. The assessee has failed to furnish adequate evidences in support of their claims that they had complied with the prescriptions under Notification No. 33/99-C.E. - the substantial question of law is answered against the appellant and in favour of the respondents. Appeal disposed off.
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2022 (9) TMI 485
Quantum of transfer of CENVAT Credit to GST - transitional credit - sole objection of Revenue is that the appellant should not have retained any part of the cenvat credit in their Central Excise records and should have transferred the entire balance into electronic credit ledger as per Chapter XX of Central Goods and Service Tax Act, 2017 - HELD THAT:- As perusal of section 140 of CGST Act, clearly indicates that there are numerous restrictions of transfer of credit from central excise cenvat credit to GST input tax credit. In these circumstances, it may not be possible in many circumstances to transfer the entire cenvat credit available in cenvat credit Rules, 2004 to the electronic credit register maintained under GST regime. The appellant has worked out a certain proportion and that has been examined by the Commissioner and found to be proper. The Revenue in its appeal has not pointed out as to why the said apportioning done by Commissioner is incorrect. It is obvious that as per first proviso to Section 140(1), only the credit which is admissible as input tax credit under the CGST Act can be availed as input tax credit. Obviously, the quantum of credit which relates to the items which continued to be covered under the Central Excise Act would not be admissible as input tax credit under CGST Act and therefore, the argument of the Revenue that the Respondent should have transferred the entire credit is incorrect. There are no grounds to interfere with the order of Commissioner - appeal dismissed - decided against Revenue.
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