Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 2, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Power to effect seizure of cash from petitioner - Section 67(2) of CGST, 2017 - Thus, keeping in view the aforesaid interpretation of the word “thing” money has to be included and it cannot be excluded as prayed by the petitioner from Section 67(2). The present case is at the stage of search and seizure. A search has been carried out and proceedings are going on - the authorities have rightly seized the amount from the husband of the petitioner - HC
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Profiteering - purchase of flat - allegation proved that the Respondent had not passed on the benefit of Input Tax Credit by way of commensurate reduction of price - contravention of provisions of Section 171 (1) of the CGST Act, 2017 - No penalty - NAPA
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Profiteering - Sanitary Napkins - allegation proved that the reduction of rate of GST not passed on by way of commensurate reduction in prices - Contravention of section 171 of CGST Act - No Penalty - NAPA
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Profiteering - Maggi Noodles Pack having MRP ₹ 5/- - allegation that the benefit of reduction in the rate of GST not passed on by way of commensurate reduction in price - contravention of section 171 of CGST Act - Allegation proved, but no penalty - NAPA
Income Tax
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Disallowance of donation - Donation for scientific research u/s 35(1) - there is no evidence brought on record to show that the assessee has got back the donation money from the school on payment of commission, therefore, the donation cannot be treated as bogus. At the time of granting donation, the assessee was very much aware that the donee institution was enjoying the status of scientific research organiasation/insrtitution eligible for receiving donation u/s.35(1) - AT
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Disallowance of commission expenses - Non-service of letters to the buyers or non-compliance of the letters by the buyers does not show that the payment of commission was not genuine when the relative sale was considered genuine and accepted by the department. Further, non Smt. furnishing of the name of the buyers by agent in compliance to the notice does not necessarily mean that the agent is not aware of the buyers - Claim of expenses cannot be denied - AT
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Depreciation on vehicles - 50% for half year - Cars purchased by the assessee were ready to use as on the date of purchase i.e. prior to 28th September 2011. Accordingly, even if it is assumed that the vehicles were registered on 12th October 2011 then also the assessee is eligible for depreciation at the rate of 15% for the simple reason that the vehicles were ready to use. - AT
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Penalty u/s 271(1)(c) - There cannot be a penalty merely on the basis that the assessee has disclosed income after receiving the notice from the ADIT and the income was accepted during survey proceedings - No incriminating documents discovered during the course of survey at the premises of the assessee. Similarly, the additional income offered by the assessee in return filed in response to notice under section 148 of the Act admitted as it is by the AO. - No penalty - AT
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Disallowance of interest expenditure u/s 36 - interest expenditure incurred on the borrowed fund utilised for making the payment of share application money is deductible u/s 36(1)(iii) as claimed by the assessee. - AT
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Applicability of Sec.115JB(2), Expl.1(vii) vis-ŕ-vis BIFR orders - , the matter of applicability of Sec.115JB was delved into by CBDT and it was proposed to restrict the relief u/s 115JB as per the provisions contained therein. This being the case, the plea as raised by Ld. AR could not be accepted since the assessee’s claim was specifically examined by appropriate authorities and it was decided not to extend the benefit of provisions of Sec. 115JB after assessee’s net worth turned positive. Therefore, no relief could be granted to the assessee on this point. - AT
Corporate Law
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Disqualification of petitioners to act as Director - Section 164(2)(a) of the Companies Act, 2013 - the counsel for the petitioners has been unable to show as to what part of the cause of action arose within the territorial jurisdiction of this Court. - The writ petition deserves to be dismissed with exemplary costs. - HC
IBC
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Initiation of CIRP - existence of default and debt - time limitation - Section 22 of the Limitation Act, 1963 relates to ‘breaches and torts’, for the purpose of counting the fresh period of limitation. The said Section 22 of the Limitation Act, 1963 may be applicable to find out whether the claim is barred by limitation or not, but cannot be made applicable for counting the period of limitation for Application under Section 7 of the I&B Code, which is to be counted from the date of default/ NPA - AT
Service Tax
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Rejection of declaration filed under the amnesty scheme - SVLDRS - SVLDR is a beneficial scheme and purposive interpretation of its terms is desirable - The declarants are thus expected to come clean in order take its benefit. During investigation, Petitioner only admitted Service Tax liability and did not make any disclosure with respect to the other tax dues and as a result whereof, after investigation, Respondents have issued the demand-cum show cause notice - This SCN would have to be adjudicated in entirety and cannot be done in a piecemeal manner - Petitioner's declaration was rightly rejected - HC
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Classification of services - reverse charge mechanism - salary paid to employees deputed to the appellant by their parent company for assisting them in their business operations of software development and information technology and other related support service - Cannot be held as Manpower Recruitment or Supply Agency Service - AT
Central Excise
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Method of Valuation - section 4A or Section 4 of CEA - manufacturer of pesticides and insecticides of less than 10 gms/10 ml - the appellant is required to discharge duty in terms of Section 4A of the Act. Therefore, the appellant has correctly discharged the duty liability under section 4A of the Act. - AT
VAT
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Levy of penalty - non-filing of returns - the element of mensrea should be recorded to be present. In this case, no such finding can be discerned in the orders impugned in the writ petitions - We are living in pandemic times. But the respondent has shown considerable speed in concluding the entire proceedings. - Order quashed - HC
Case Laws:
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GST
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2020 (9) TMI 43
Legality of FAQ released in January, 2018 and the Guidance Note on CGST Transitional Credit dated 14th March, 2018 - legality and validity of Section 140 of the Central Goods and Services Tax Act, 2017 notified on 29th January, 2019 with effect from 1st July, 2017 - as well as the provisions of Circular dated 2nd January, 2019 issued by respondent no. 2 giving retrospective/retroactive effect to Section 28(a) (d) of the Central Goods and Services Tax (Amendment) Act, 2018 with effect from 1st July, 2017. HELD THAT:- Issue Notice. To await the judgment of the Division Bench of Madras High Court in SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER CGST AND CENTRAL EXCISE, COMMISSIONER OF CGST AND CENTRAL EXCISE, GOVERNMENT OF TAMIL NADU, UNION OF INDIA, CENTRAL BOARD OF EXCISE AND CUSTOMS, THE CHAIRMAN, GSTN [ 2019 (11) TMI 278 - MADRAS HIGH COURT ], list on 07th December, 2020.
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2020 (9) TMI 42
Jurisdiction - power to effect seizure of cash from petitioner - Section 67(2) of the Central Goods and Services Tax Act, 2017 - petitioner's contention is that the word money is not included in Section 67(2) of the CGST Act, 2017 and therefore, once the money is not included under Section 67(2) of the CGST Act, 2017 the Investigating Agency / Department is not competent to seize the same - illicit supply of Pan Masala of various brands without invoices and without payment of applicable GST. Whether expression things covers within its meaning the cash or not? - HELD THAT:- In the considered opinion of this Court, the CGST Act, 2017 has to be seen as a whole and the definition clauses are the keys to unlock the intent and purpose of the various sections and expressions used therein, where the said provisions are put to implementation. Section 2(17) defines business and Section 2(31) defines consideration . In the considered opinion of this Court a conjoint reading of Section 2(17), 2(31), 2(75) and 67(2) makes it clear that money can also be seized by authorized officer - The word things appears in Section 67(2) of the CGST Act, 2017 is to be given wide meaning and as per Black's Law Dictionary, 10th Edition, any subject matter of ownership within the spear of proprietary or valuable right, would come under the definition of thing (page No.1707). Thus, keeping in view the aforesaid interpretation of the word thing money has to be included and it cannot be excluded as prayed by the petitioner from Section 67(2). The present case is at the stage of search and seizure. A search has been carried out and proceedings are going on. Keeping in view the totality of the circumstances of the case, the material available in the case diary and also keeping in view Section 67(2) of the CGST Act, 2017, this Court is of the opinion that the authorities have rightly seized the amount from the husband of the petitioner and unless and until the investigation is carried out and the matter is finally adjudicated, the question of releasing the amount does not arise - Petition dismissed.
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2020 (9) TMI 41
Provisional claim of Refund - Section 54(6) of the CGST Act, 2017/SGST Act, 2017, read with Rule 91(2) of the CGST Rules, 2017 - HELD THAT:- Without any opinion on merits of the show cause notice dated 11.1.2020 issued by respondent authorities to the petitioner, at this stage, interest of justice would be served, if the concerned respondent authorities shall hear the petitioner on the issue of show cause notice and after hearing the petitioner, pass necessary orders. Such exercise may be preferably undertaken by the concerned authority as expeditiously as possible latest by 09.10.2020. The authority shall pass an appropriate order in accordance with law, without being any influenced by this order. Petition disposed off.
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2020 (9) TMI 40
Profiteering - purchase of flat - allegation that the Respondent had denied the benefit of input tax credit by way of reduction of price - contravention of section 171 of CGST Act - penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of input tax credit to his buyers w.e.f. 01.07.2017 to 31.10.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.10.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 26.11.2019 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
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2020 (9) TMI 39
Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of Input Tax Credit by way of commensurate reduction of price - contravention of provisions of Section 171 (1) of the CGST Act, 2017 - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of input tax credit to his buyers w.e.f. 01.07.2017 to 30.09.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 30.09.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 18.12.2019 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
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2020 (9) TMI 38
Profiteering - Sanitary Napkins - allegation that the reduction of rate of GST not passed on by way of commensurate reduction in prices - Contravention of section 171 of CGST Act - Penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of reduction in GST rate from 12% to Nil on the above product w.e.f. 27.07.2018 to 30.09.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- Since, no penalty provisions were in existence between the period w.e.f. 27.07.2018 to 31.03.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 03.07.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
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2020 (9) TMI 37
Profiteering - Maggi Noodles Pack having MRP ₹ 5/- - allegation that the benefit of reduction in the rate of GST not passed on by way of commensurate reduction in price - contravention of section 171 of CGST Act - penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of reduction in the GST rate from 18% to 12% on the above product w.e.f 15.11.2017 to 28.02.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- Since no penalty provisions were in existence between the period w.e.f. 15.11.2017 to 31.03.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 10.10.2018 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
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Income Tax
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2020 (9) TMI 36
Estimation of turnover - No order passed u/s 144 - non rejection of books of accounts - HELD THAT:- The assessee has produced all books of accounts, vouchers, bills and other documents but the Assessing Officer without pointing out any mistake and error in the bills/vouchers and in the books of accounts made addition @ 8% which was reduced by the ld CIT(A) to 5%. Assessee`s books of accounts were not rejected by the assessing officer although these were not audited under section 44AB of the Act by a Chartered Accountant. We note that the AO could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses and showing net profit ratio at a very low rate. Therefore in our opinion the ends of justice would be met, if a net profit rate of 2.50% is adopted. Thus, we direct the assessing officer to estimate the income @ 2.5% of the turnover - Decided in favour of assessee partly .
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2020 (9) TMI 35
Assessment u/s 153A - Validity of notice issued under section 153C - Whether the notice issued to the assessee on June 1, 2010 under section 153A of the Act would not invalidate the assessment by relying upon section 292B ? - no search warrant was issued in the name of the appellant-assessee - HELD THAT:- When the notice is perused it would establish though heading is under section 153A of the Act, the Deputy Commissioner of Income-tax has categorically stated in the said notice that he proposes to assess the appellant's income under section 153C of the Act. Juxtaposing the contents of the notice dated June 1, 2010 with the satisfaction note, it is clear that notice is not one under section 153A of the Act, but one under section 153C of the Act. The copy of the said notice has been received by the appellant and the appellant having full knowledge of the fact that the Deputy Commissioner of Income-tax has proposed to assess/reassess the appellant's income under section 153C. Appellant cannot now be allowed to contend by taking hyper-technical defence to state that the notice received is one under nomenclature of section 153A of the Act to invalidate the entire assessment proceedings and the said contention also cannot be entertained as the provisions of section 153C is specifically mentioned in the notice. Hence, we are of the view that the notice issued under section 153C is proper and valid. The mere fact that the heading indicates that it is one issued under section 153A of the Act cannot vitiate the assessment proceedings. Section 292B of the Act in terms whereof any minor defect or omission in the notice does not cause any prejudice to the parties and it cannot be invalidated on the basis of such minor defect or omission. See Sardar Harvinder Singh Sehgal v. Asst. CIT [ 1997 (5) TMI 45 - GAUHATI HIGH COURT ] Proceedings which have been initiated against the assessee by the Assessing Officer in the instant case by issuance of notice dated June 1, 2010 indicate that suitable and necessary particulars have been provided by the Assessing Officer to the appellant to answer all the queries and the appellant having replied to the said notice has been unable to establish the existence of oral contract for the payments received from M/s. Corporate Liesure and Property Development (P.) Ltd. Hence, the matter is required to be re-examined with regard to the merits of the addition made by the Assessing Officer and the order of remand made by the Appellate Tribunal is just and proper.
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2020 (9) TMI 34
Deduction u/s 80P(2)(d) - assessee has earned interest income from investment of idle funds with cooperative bank - HELD THAT:- Assessee is entitled for claim of deduction u/s 80P(2)(d) in respect of interest income on the investment made in the Co-operative bank. The CIT(A) has decided the matter of controversy judiciously and correctly which nowhere required any interference at this appellate stage. We also nowhere found illegality and infirmity in the finding of the CIT(A) in question, therefore, we affirm the finding of the CIT(A) in question and dismiss the appeal of the revenue.
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2020 (9) TMI 33
Penalty u/s. 271G - assessee has entered into an international transactions with its AE and has failed to furnish documents or information as required under section 92D(3) - HELD THAT:- As decided in own case [2019 (9) TMI 1389 - ITAT MUMBAI] relying on case of Leroy Somer Controls (India) (P) Ltd [ 2013 (9) TMI 761 - DELHI HIGH COURT] we are of the view that the assessee has sufficiently complied with the requirement of Rule 10D(i) of the Rules and moreover the AO has not raised any specific issue which specific documents is not produced under section 92D(3), hence, we conclude that the assessee has furnished all the informations as asked for by the AO and unless and until a specific defect is pointed out in the submissions of documents, penalty under section 271G of the Act cannot be levied. We delete the penalty and allow the appeal of the assessee.
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2020 (9) TMI 32
Disallowance of commission expenses - AO was of the opinion that the assessee has not made any commission expenses to arrange buyers for sale of iron ores - CIT(A) deleted the disallowance - HELD THAT:- DR could not point out any specific error, ambiguity or perversity in the findings of the CIT(A) that at times commission agent when approaches the purchasers, he does not identify himself as an agent of the seller and merely identifying himself as representative of the seller, the buyer cannot be aware that the person who has approached is employee of the seller or agent of the seller. CIT(A) observed that the commission may be paid to an agent for facilitating the trade even when the orders are directly given to the seller(assessee) by the purchaser - Non-service of letters to the buyers or non-compliance of the letters by the buyers does not show that the payment of commission was not genuine when the relative sale was considered genuine and accepted by the department. Further, non Smt. furnishing of the name of the buyers by agent in compliance to the notice does not necessarily mean that the agent is not aware of the buyers. In no situation commission can be earned by a person like HUF is also not tenable. We find that no material could be brought before us to show that the person to whom commission was paid were accommodation/entry provider and the money which was paid through banking channel to them came back to the assessee in cash or through any other mode. In the circumstances, in the absence of any specific defect being pointed out in the order of the CIT(A), we find no good reason to interfere with the findings recorded by the ld first appellate authority - Decided against revenue. Addition under the head punitive charges - AO required the assessee to furnish the details of such expenses with documentary evidence and same should not be disallowed being an expenditure not allowable u/s. 37 - CIT(A) deleted the addition - HELD THAT:- Punitive charges is against overloading charges in the rake.punitive charges for overloading were actually in the nature of additional freight for transporting goods beyond the permissible carrying capacity which cannot be categorized as an expenditure incurred for any purpose which is an office or infringement of law. We also find that after considering the detailed submissions, the CIT(A) took the view that payment in question was compensatory in nature and was made towards extra or overloading bringing extra benefit for assessee in the form of transportation of extra goods or material, which cannot be tagged as penal and therefore the provision to Explanation to Section 37(1) of the Act will not be applicable. - Decided against revenue. Addition of interest - AO noticed that the assessee has given interest free loans and advances to related parties - CIT(A) deleted the addition - HELD THAT:- When, the assessee has interest bearing funds as also other (i.e. interest free huge capital or own funds) then until unless it can be established by way of cogent material or facts that the assessee has advanced interest free loans out of interest bearing funds, the interest paid on the borrowed funds cannot be disallowed - mere fact that the assessee is paying interest on its borrowings and the assessee has also given interest free loans or advances , by itself, does not entitle the AO for making disallowance of interest so paid on the flimsy ground that the borrowed funds have been used for business purposes without any cogent adverse material or evidence proving the utilisation of interest bearing funds for the purpose of advancing interest free loans/advances. CIT(A) referred to the decision HDFC Bank [ 2014 (8) TMI 119 - [BOMBAY HIGH COURT ] held that where the assessee s capital, net profit, reserves, surplus and current account deposits are higher than the investment in tax free security, it would have to be presumed that the investment made by the assessee would be out of interest free funds available with the assessee. CIT DR could not controvert that the claim of the assessee that she has total capital of ₹ 441.11 crores as on 31.3.2012. Therefore, we uphold and confirm the findings of the ld CIT(A) dismissing the ground of revenue. Disallowance of peripheral development charges - AO made addition by observing that he is unable to verify as to whether periphery development charge is the expenditure incidental to the business and must have been necessitated or justified by commercial expediency or not in the case of the assessee - CIT-A deleted the addition - HELD THAT:-Assessee informed the name of contractor, who was paid the impugned amount for upgradation of roads in the periphery area i.e. M/s. Keonjhar Infrastructure Dev. Company Ltd. On receipt of above explanation, the AO without pointing out any defect in the quantum of expenses spent by the assessee and mode of payment adopted by the assessee for making payment and without verifying from the recipient contractor regarding receipt of payment and rendering of services towards upgradation of roads proceeded to make disallowance and addition. AO was duty bound to issue show cause notice to the assessee and if he was not satisfied with the reply, he could have issued notice to the recipient contractor who was paid the impugned the amount regarding the work of upgradation or construction of roads on the direction of the assessee in the periphery area of the mines owned by the assessee but no such exercise had been undertaken. Therefore, the allegation made by the AO that the assessee has failed to justify the expenses without evidences/documents has no legs to stand. - Decided in favour of assessee. Disallowance of donation - Donation for scientific research as per the provision of section 35(1) - as argued assessee has made donation out of her hard earned tax paid money with genuine benevolence to help the organisation doing yeomen service - HELD THAT:- Office bearers of school have stated during the course of survey operation u/s.133A of the Act on 27.1.2015 accepted that the donations are received through agents and refunded the donation to the respective donors in exchange of 7% to 8% commission. CIT(A) rightly observed that from the statement of office bearers of donee organisation/school, it is seen that they have given generalised statement and nowhere the donation given by the assessee was refunded back to the assessee in cash. At the same time, we also note that the assessee has submitted certain statement before the authorities below, which shows that the assessee has verified the genuineness of the approval obtained by the school for the purpose of section 35(1) from the competent authority and only thereafter has given the donation for scientific research. We are in agreement with the findings of the ld CIT(A) that there is no evidence brought on record to show that the assessee has got back the donation money from the school on payment of commission, therefore, the donation cannot be treated as bogus. At the time of granting donation, the assessee was very much aware that the donee institution was enjoying the status of scientific research organiasation/insrtitution eligible for receiving donation u/s.35(1) of the Act and, therefore, we are unable to see any ambiguity and perversity in the findings of the ld CIT(A). Disallowance u/s 14A - Non recording of satisfaction - HELD THAT:- While rejecting the claim of the assessee in regard to suo moto disallowed expenditure or no expenditure, as the case may be, in relation to exempt income, the AO has to indicate cogent reason for the same and for recording such cogent reasons, it is required that the AO has to examine the accounts of the assessee first and then if he is not satisfied with the correctness of such claim, only then he can invoke the provisions of section 14A of the Act r.w Rule 8D of the I.T.Rules. in the present case, as we have discussed above, that neither from the assessment order nor from the first appellate order, the authorities below have not considered the claim of the assessee that no expenditure has been incurred for earning exempt income as per mandate of section 14A From the relevant part of the assessment order, it is clearly discernible that the AO has not considered the claim of the assessee filed in response to the show cause notice that no expenditure has been incurred for earning exempt income and he straightforward embarked upon and jumped to compute the disallowance under Rule 8D of Rules on the presumption that there is every possibility that the investments made from which such exempt income is earned might have been made out of loan amount, for which the assessee has paid interest. The disallowance u/s.14A of the Act requires findings of the AO that the claim of the assessee pertaining to suo moto disallowance or no expenditure is not correct having regard to the accounts of the assessee and thereafter only the AO is validly entitled to compute disallowance under Rule 8D of the Rules. In absence of such exercise, the disallowance made by the AO cannot be held as valid and sustainable in view of mandate given by the legislature for invoking provisions of Section 14A. Expenses towards distribution of mosquito nets etc against malaria eradication - HELD THAT:- No positive ground that expenses towards distribution of mosquito nets etc against malaria eradication fulfil the criteria the test of commercial expediency - findings of the ld CIT (A) could not be controverted by ld A.R. except pointing out that mosquitos are distributed among the resident of mining areas for the eradication of malaria. We also find that there is no business connection of the assessee for donating ₹ 4 lakhs for water shed development to Social health Education Development Society, hence, we affirm the findings of the ld CIT(A) in confirming the addition.
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2020 (9) TMI 31
Nature of expenditure - Interest paid to Syndicate Bank - Revenue or capital expenditure - According to the assessee the money was used for repayment or to defray the capital cost already incurred and therefore it is not hit by the proviso of the section 36(1)(iii) - HELD THAT:- According to proviso to section 36(1)(iii) , interest is required to be capitalized if it is borrowed for acquisition of capital asset for the period from the date of borrowing till the date on which such asset was first put to use. Such expenditure is not allowable as deduction u/s 36(1)(iii). In the present case, the date of borrowing is after the date of asset first put to use. This fact has not been denied or disputed by the revenue. In view of this, we are of the view that the disallowances made by the ld AO and the balance interest of ₹ 2,80,276/- is not warranted. Accordingly, ground No. 1 of the appeal is allowed and the ld AO is directed to delete the disallowances of interest paid to Syndicate Bank. Non compete fees - Revenue or capital expenditure - HELD THAT:- As decided in SHARP BUSINESS SYSTEM [ 2012 (11) TMI 324 - DELHI HIGH COURT] on the identical facts and circumstances, holding that non- compete fees is not eligible for depreciation u/s 32 of the income tax act, further, the above decision has considered the decision of the honourable Delhi High Court in case of Pitney Bowse ( I) Pvt Ltd [ 2011 (11) TMI 372 - DELHI HIGH COURT] which is relied upon by the ld AR], we respectfully following that decision dismiss the alternative contentions of the assessee for the claim of depreciation. In view of this ground number [2] of the appeal of the assessee is dismissed. Deduction u/s 80HHC - Characterization of income - interest income earned treated as part of the business income - HELD THAT:- The explanation given by the assessee clearly shows that energy meters are supplied to various electricity boards throughout the country and the supplies are made against open tenders and bank guarantees furnished to buyers against earnest money/ performance guarantees. The letter of credits is opened to import the materials required for manufacturing. Therefore, such interest income is related to letter of credit for import of the material for which various bank guarantees are obtained against the placement of fixed deposits and the National savings certificates. This itself shows that such interest income does not have any relation with the export turnover or export of goods. In view of this, we do not find any infirmity in the orders of the lower authorities in excluding 90% of the interest income for calculating eligible deduction u/s 80 HHC. If interest income is not considered as a income derived from export of goods then at least net of the interest received of the interest paid by the assessee should be excluded at the rate of 90% for working out deduction u/s 80 HHC - Assessee has received interest on margin money deposit for the purpose of letter of credit from various banks. It cannot be said that there is no relationship with the business of the assessee with the interest earned by the assessee. Interest has been received on Fixed deposits placed for enjoying letter of credit against which the assessee has imported the goods and therefore it is inextricably linked with the business of the assessee. Therefore above interest is chargeable to tax as business income of the assessee. The moment the above interest is held to be chargeable Under the head business income, the issue of netting of interest paid with interest received is squarely covered in favour of the assessee by the decision of ACG Associated Capsules (P.) Ltd.[ 2012 (2) TMI 101 - SUPREME COURT] therefore we direct the learned assessing officer to consider 90 % of the interest after net of the interest received and paid for the purpose of working out of the deduction u/s 80 HHC. Deduction of ₹ 90% of the amount received towards common office and infrastructure facilities provided - CIT (A) has giving categorical finding that the above amount of receipt is rent from Crabtree by the assessee and the same finding has not been controverted by the appellant, we are not inclined to interfere with the finding of the lower authorities. Even otherwise, the assessee has neither produced the debit note issued to the Crabtree detailing what kinds of expenditures were reimbursed. The copy of the agreement is also entered into at the fag end of the accounting year. In absence of any detail of expenditure incurred, which was reimbursed by Crabtree to the assessee, the argument of reimbursement of expenses is also not tenable. Thus, we do not find any infirmity in the order of the lower authorities. Disallowance of sales incentive in respect of Shaenshah Scheme - HELD THAT:- As decided in own case for assessment year 2006 07 provision is created on scientific basis. We, therefore, do not find anything illegal or irregular in the findings of the id. CIT(A) and no interference is warranted. We, therefore, dismiss the second ground of appeal of the Revenue. TDS u/s 195 - disallowance u/s 40(a) (i) - payment to various foreign entities towards testing fees and certification charges outside India - whether no income has accrued or arisen to them in India? - HELD THAT:- As considered the order of the coordinate bench in Assessment Year 2005-06 in assessee s own case [ 2012 (5) TMI 449 - DELHI HIGH COURT] wherein, payment with respect to CSA International USAis not held to be a fees for technical services according to article 12(4)(b) of the Act. Accordingly, the payment to CSA International USA on identically facts and circumstances cannot be disallowed u/s 40(a)(i) of the Act. With respect to payment made Kema Quality BB Netherland it is also covered in favour of the assessee at para No. 9 of the order of the coordinate bench in assessee s own case for Assessment Year 2006-07. Payment to 3 different parties of China Article 12 (4) of India - if the services available the assessee from various testing agencies are examined, they would specifically provides that would be with respect to the specific country, specific product, specific manufactured lot of the assessee, which is exported in that particular country whether it conforms with the standard specified in that country, therefore, cannot be said to be a standard facility provided by that particular agency to the assessee. The honourable High Court in assessee s own case have also stated that it is a specialized facility provided to the assessee for testing of its goods exported in that particular country. In view of this, the argument of the assessee that these are standard facilities does not hold water and is rejected. if the services available the assessee from various testing agencies are examined, they would specifically provides that would be with respect to the specific country, specific product, specific manufactured lot of the assessee, which is exported in that particular country whether it conforms with the standard specified in that country, therefore, cannot be said to be a standard facility provided by that particular agency to the assessee. The honourable High Court in assessee s own case have also stated that it is a specialized facility provided to the assessee for testing of its goods exported in that particular country. In view of this, the argument of the assessee that these are standard facilities does not hold water and is rejected. As decided in ASHAPURA MINICHEM LTD. VERSUS ADIT (INT L TAXATION) [ 2010 (5) TMI 523 - ITAT, MUMBAI] China DTAA does not provide that services should be rendered in India to qualify as Fees for Technical services . Bona fide belief for non-deduction of tax at source on these testing charges paid to the foreign parties - in case of Kotak securities Ltd [ 2011 (10) TMI 24 - BOMBAY HIGH COURT] , wherein the honourable High Court held that since both the Revenue and the assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question and consequently disallowance made by the Assessing Officer under section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained. Before us, no evidences were produced before us that there was any bona fide belief for non-deduction of tax at source as revenue was constantly saying that the tax at sources are deductible on such payments. No evidences were produced before us that the assessee was under a bona fide belief that tax is not deductible on such testing charges - Not shown, even if there is a belief, whether the same was bona fide or not. The other decisions relied upon by the learned authorised representative all were related to the provisions of Section 201 of the income tax that where there is a specific exclusion for good and sufficient reasons for non-deduction of tax at source. Such provisions are absent under the provisions of Section 40 (a)(i) of the act. In view of this, this argument of the assessee is rejected. As we have refused to read the conditions prescribed u/s 40(a) (ia) of the act of disallowance at the rate of 30% in case the payment is made to a resident in Section 40(a) (i) of the act, the another argument of the assessee that it amounts to discrimination with respect to the payment made to non-resident compared to the payment made to a resident, also does not deserve any consideration. Even otherwise, both are different provisions to be applied in different situations. Undoubtedly, both the provisions are applicable with respect to the resident assessee only, who is the payer. Therefore, there are two different conditions one for payment made by a resident to a non-resident [u/s 40(a) (i) and another by a resident to a resident [ u/s 40 (a) (ia)] - No discriminatory treatment given to a non-resident entity. In fact a non resident assessee is not at all concerned with above payments and its disallowance in the hands of a resident payer. Therefore, there is no discrimation with respect to nationality. Decisions cited by ld AR does not support the contentions raised on this issue. Thus, this argument of the learned AR is also rejected. AR fairly agreed that in DTAA between India and China and India and Germany, in Article 12 of those treaties, there is no condition of make available for taxation of Fees For technical services . No other articles of DTAA were referred or pressed up on. In view of this with respect to the payment to China based agents and Germany based agents the disallowance is confirmed and the payment made to Kema and CSA International is deleted. Deduction u/s 80IC - exclusion of the loss of the eligible unit against the income of another eligible unit - Assessee did not filed revised return as hewanted to claim the share deduction - HELD THAT:- Assessee did not revise its return of income. The decision of the Hon ble Supreme Court in Goetz India Ltd [ 2006 (3) TMI 75 - SUPREME COURT] though applies to the ld AO but does not apply to the appellate authorities. The decisions cited by the ld AR are clearly support the above view. Thus, according to us the ld CIT (A) should have considered the claim of the assessee, though not made by the revised return. As it is a simple arithmetic calculation and there is no dispute about the sum involved, we direct the ld AO to allow the claim of the assessee u/s 80IC of the Act to the extent of profit earned by Unit No. 1 at Badi. The ld AO further directed to not to set off the loss incurred by Unit NO. 2, another eligible unit by reducing the deduction of section 80IC of the Act. Accordingly, ground No. 2 of the appeal is allowed.
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2020 (9) TMI 30
Periphery development expenses - As per AO these expenses were not bonafide business expenses therefore was added back to the total income of the assessee - HELD THAT:- Periphery Development Expenses are for the purposes of welfare of the peoples residing nearby mining activities and it is responsibility of the company which was carrying out the business of mining and it is mandatory for the mining industry to look after the development of the area in which the mines are operating.These expenses were wholly and exclusively for the business purpose. - Decided in favour of assessee. Addition on account of Exchange Rate Fluctuation - AO was of the view that the assessee company had not exported any raw materials to overseas country in which the exchange loss had accrued - HELD THAT:- We note that the exchange loss was incurred on account of purchase of spare parts of the Aircraft and the same had been capitalized during the relevant year. The assessee owned an Aircraft on which expenses were incurred every year to its maintenance and such expenses were revenue in nature and any loss incurred from such activity is also revenue in nature. As per policy of DGCA, certain internal spare parts of Aircraft are to be replaced. The exchange loss which arose on account of purchase of spare parts was capitalized and exchange loss arose on account of undertaking regular maintenance hence it is a revenue expenses. - Decided in favour of assessee. Disallowance of depreciation - AO was of the view that the assessee has not followed extraction of Iron Ore during the relevant year and had no activity of mining during the relevant year and was engaged only lifting of closing stock during the year - HELD THAT:- Mining company was a running company. It had stopped production for the time being in order to cater to the decision of the Hon ble Supreme Court. Importantly, when an asset is procured, it goes into the block of assets. The only aspect is the use. If an asset goes into the block of assets, the same goes into depreciation. There is no doubt that the assessee was also the owner of the machinery. The decision of the Calcutta High Court in CIT vs. Norplex Oak India [2011 (3) TMI 620 - CALCUTTA HIGH COURT] clearly decides the case in favour of the assessee. Delayed employees contribution to PF - AO examined the tax audit report and noticed that employee s contribution to PF was deposited to the respective accounts beyond the grace period of 5 days - HELD THAT:- Contribution towards PF was made by the assessee before the due date of filing Return of Income and before 31st March, 2008.We note that Hon ble Jurisdictional High Court of Calcutta in the case of CIT -vs.- Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] has held that if the PF contribution is made by the assessee before the due date of filing Return of Income then it would be sufficient compliance and no addition should be made. Suppression of sale - As per Balance Sheet and Tax Audit Report the assessee had shown shortage or wastage of 7863 M. T. Iron ore, while as per H-1 Form there was no entry of wastage or shortage of Iron Ore - HELD THAT:- Assessee stated that the difference was basically due to reconciliation of opening balance as shown in the Balance Sheet and Form H1. The latter is prepared in the month of May and stock taken in H1 is on the basis of volumetric analysis. We note that ld CIT(A) examined the reconciliation statement submitted by the assessee during the appellate proceedings and he found it correct.That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground no. 2 raised by the revenue is dismissed.
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2020 (9) TMI 29
Disallowance of interest expenses u/s 36(1)(iii) - HELD THAT:- Admittedly, the amount was borrowed dated 29th December 2010 in the immediate preceding year and the assessee claimed the interest expenses up to 31st March 2011 on such loan as revenue expenses in the FY 2010-11. But the same was disallowed by the AO on the reasoning that the asset was not put to use. On perusal of the order of the ITAT [ 2020 (1) TMI 953 - ITAT AHMEDABAD ] we note that the acquisition of the assets was not for extension of existing business and therefore the interest paid thereon was allowed as deduction. Respectfully following the same, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Depreciation of depreciation - asset put to use for less than 180 days - HELD THAT:- The provisions of section 32 of the Act provides that the asset put to use for less than 180 days, meaning thereby 179 days or less, then such asset will be eligible for depreciation at the rate 50% of the actual rate of depreciation. The above working for the number of days, the asset was put to use comes out 180 days which is outside the purview of the proviso to section 32 of the Act. The above working as shown by the assessee was not disputed by the learned DR appeared for the revenue. In view of the above, we hold that the assessee is entitled for depreciation at the rate prescribed under the provisions of law. Accordingly we set aside the finding of the CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance of depreciation on vehicles - vehicles ready to use - HELD THAT:- Cars purchased by the assessee were ready to use as on the date of purchase i.e. prior to 28th September 2011. Accordingly, even if it is assumed that the vehicles were registered on 12th October 2011 then also the assessee is eligible for depreciation at the rate of 15% for the simple reason that the vehicles were ready to use. We hold that the assessee was eligible for depreciation at the rate of 15% on the value of the vehicles purchased during the year. Accordingly we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
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2020 (9) TMI 28
Discrepancy in the stock and receivables - survey conducted under section 133A of the Act, at the business premises of the assessee - HELD THAT:- What is transpired from the findings of the authorities below that the assessee was engaged in the unaccounted business, meaning thereby, the income generated by the assessee from such activity has to be brought to tax. This fact can also be verified from the statement recorded by the survey team during the survey proceedings where the partner Shri Rahimbhai A. Chhedawala while replying to Question number 15 and 17 admitted that the assessee has made unaccounted sales and purchases. Determine the income from such unaccounted business - Can the entire amount of receivables and the value of excess stock be treated as income of the assessee from the unaccounted business? - HELD THAT:- We note that the amount of receivables represents the sales which cannot be treated as income in the entirety. In our considered view only a percentage of profit embedded in such amount of receivables can be brought to tax. In this regard we find support and guidance from the order in the case of CIT vs. President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] where it was directed to make the addition only to the extent of gross profit. Whether the excess stock found during the survey represents the unaccounted income in its entirety - It is the only profit percentage which needs to be brought to tax on account of such unaccounted purchases/excessive stock found during survey. In holding so, we draw support and guidance from the judgment of Hon ble Gujarat High Court in case of CIT vs. Sathyanarayn P. Rathi [ 2013 (6) TMI 257 - GUJARAT HIGH COURT] What rate of profit should be applied to determine the income on such unaccounted receivables and unaccounted stock? - We note that the assessee claimed its gross profit ratio at the rate of 4.57% of the sales which has not been disputed by the Revenue. Thus we are of the view that justice will be served to the revenue as well as to the assessee if the amount of receivables and excessive stock found during survey brought to tax at the rate of 5% of such amount put together. Hence the grounds of appeal of the assessee are partly allowed.
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2020 (9) TMI 27
Penalty u/s 271(1)(c) - income disclosed by the assessee for the investment made in the insurance policies under the charge concealment of income - undisclosed investment in the insurance policies - whether the summon issued under section 131(1A) can be equated as proceeding as envisaged u/s 271(1)(c)? - HELD THAT:- The answer certainly stand in negative. It is because, the summon was issued under section 131(1A) of the Act by the ADIT much before the initiation of the proceedings initiated under section 148. Similarly, the assessee disclosed the income much before the initiation of the proceedings initiated under section 148 of the Act. Admittedly, the income disclosed by the assessee in response to the notice issued under section 148 of the Act was accepted by the revenue without any further addition. As such the return income was accepted by the revenue. Accordingly, the revenue has to find out the concealment of income with reference to the income declared by the assessee in the return of income filed under section 148 viz a viz the income as assessed by the AO. As, there was no difference between the return and the assessed income, then in our considered view, the question of penalty does not arise merely on the basis of the income admitted during the survey proceedings. There cannot be a penalty merely on the basis that the assessee has disclosed income after receiving the notice from the ADIT and the income was accepted during survey proceedings as discussed above. No incriminating documents discovered during the course of survey at the premises of the assessee. Similarly, the additional income offered by the assessee in return filed in response to notice under section 148 of the Act admitted as it is by the AO. Accordingly, we conclude that the principles laid down in the case MAK Data [ 2013 (11) TMI 14 - SUPREME COURT] are not applicable on the case in hand. Hence, the penalty in the instant case cannot be attracted under the provisions of section 271(1)(c) in the present facts and circumstances. - Decided in favour of assessee.
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2020 (9) TMI 26
Levy of penalty u/s 271(1)(c) - investment in unaccounted purchases made by the AO pursuant to survey conducted at the premises of the assessee - HELD THAT:- On perusal of the order passed by the Tribunal, we find that there is a clear finding recorded that it is a case of unrecorded sales which has not been disclosed by the assessee at the time of filing of return of income and we therefore agree with the contention of the ld DR that the penalty has been rightly levied in this case invoking provisions of section 271(1)(c). Not agree with the contention AR that the Tribunal has restored the income as declared in the return of income in view of the clear finding of the Tribunal where the AO is directed to restrict the addition to the extent of profit on undisclosed sales. At the same time, where the very basis of levy of penalty, being the quantum addition, has been restricted by the Tribunal to ₹ 18,566/- in the quantum proceedings, the consequent levy of penalty u/s 271(1)(c) shall also be required to be computed on the said amount of ₹ 18,566/- as against the addition made by the AO. AO is directed to recompute the penalty u/s 271(1)(c) by taking the quantum addition of ₹ 18,566/- as the basis for such levy as confirmed by the Tribunal in the quantum proceedings and the remaining penalty is hereby directed to be deleted. - Decided partly in favour of assessee.
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2020 (9) TMI 25
TP Adjustment - adjustment as notional interest and charging it to tax - provisions of Article 11 of India Cyprus DTAA - matter being referred to a bench of three of more Members under section 255(3) - whether the expression paid is defined under the treaty, and, if not, why should the meanings of expression paid , as assigned under section 43(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) be considered under article 3(2) of Indo Cyprus tax treaty? - HELD THAT:- In all the coordinate bench decisions, there is no discussion whatsoever to the connotations of the expression paid and these decisions simply proceed on the basis that because the expression paid is used article 11(1) of Indo Cyprus tax treaty, the taxability of interest can only be on cash basis. The expression paid is admittedly not defined in the treaty but article 3(2) of Indo Cyprus tax treaty provides that As regards the application of the Agreement at any time by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies and any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State . What essentially follows is that unless the context otherwise requires, the definition of the undefined treaty term, under the domestic law of the source country i.e. India- and preferably under the domestic tax laws, is to be adopted. It is in this context, Section 43(2) of the Income Tax Act, 1961 may perhaps be relevant because it provides that paid means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head Profits and gains of business or profession (Emphasis, by underlining, supplied by us). While it is indeed true that this meaning cannot be imported in the tax treaty mechanically, without any application of mind and as a sort of automated process, undoubtedly a call is to be taken by the bench as to whether or not this domestic law meaning of the expression paid will be relevant. There could possibly be a school of thought that a decision rendered in this context, without specifically dealing with the implications of section 43(2) read with article 3(2), could possibly be per incuriam. A conscious call is required to be taken on these aspects.onnotations of the expression paid appearing in article 11 of Indo Cyprus tax treaty are required to be examined in some detail, and that exercise can at best be conducted by a bench of three or more members so that the decision is unfettered by the decisions of the division benches in this regard. The issue raised in these appeals needs to be decided in a holistic manner, unfettered by the decisions of the division benches, examining all the relevant facets, including the facets which are germane in the present context have remained to be examined by the coordinate benches. Once we realize that there was something lacking in our approach last time, there cannot be any justification in continuing to adopt the same approach yet again. It is, after all, one of the fundamental duties, under article 51A(h) of the Constitution of India, of every citizen to have, inter alia, the spirt of inquiry of reform . It is in this backdrop, and without making any observations on correctness or otherwise of the conclusions arrived at by the coordinate benches, we deem it fit and proper to refer the additional grounds of appeal raised before us to a special bench of three or more Members. Let the matter be placed before Hon ble President for his kind consideration, and appropriate orders. In the meantime, as also prayed for by the learned counsel, the matter stands adjourned, and, in the light of this special bench reference, it stands adjourned sine die.
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2020 (9) TMI 24
Disallowance of interest expenditure u/s 36 - interest was paid by the assessee on Short Term Borrowings used for paying share application money - nature of business activities undertaken by the assessee as a non-banking finance company - HELD THAT:- Share application money was paid by the assessee company in the ordinary course of its business of making investment in shares and, therefore, interest expenditure incurred on the borrowed fund utilised for making the payment of share application money is deductible u/s 36(1)(iii) as claimed by the assessee. We accordingly delete the disallowance made by the AO and confirmed the Ld. CIT(A) out of interest expenditure and allow this appeal of the assessee.
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2020 (9) TMI 23
Penalty u/s 271(1)(c) - Defective notice u/s 274 - whether the assessee is accused of concealment of particulars of any taxable income or it had furnished inaccurate particulars of such income? - HELD THAT:- As decided in Nishith Kumar Jain [ 2016 (3) TMI 642 - ITAT KOLKATA ] Show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision ofM/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.
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2020 (9) TMI 22
Determination of Arms Length Price for Intra Group Services (IGS) - HELD THAT:- We agree with the submissions of ld. Counsel for the assessee. Year after year, the Tribunal has been adjudicating this issue against the Revenue. Despite such findings, the Assessing Officer, the DRP chose to stick to their stand, on the ground that the issue is before the Hon'ble High Court. Under these circumstances, we reject this request of the ld. DR. Consistent with the view taken therein we uphold the contention of the assessee and allow this ground no. 2 of the assessee. Determination of ALP of Advertisement, Marketing and Promotion expenses - HELD THAT:- Issue adjudicated in favour of the assessee by the ITAT in the earlier assessment years. Disallowance of payments made for IT services - HELD THAT:- No hesitation in upholding these contentions of the assessee that rule of consistency has to be followed in income tax proceedings as held by the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT [1991 (11) TMI 2 - SUPREME COURT] - In the result, this ground is allowed. Disallowance of lease rent paid in respect of motor cars - HELD THAT:- This issue is also covered in favour of the assessee by the decision of the Tribunal for all the assessment years running from 2009-10 to 2014-15 . Depreciation on moulds - HELD THAT:- We set aside this ground of the assessee to the file of the AO for fresh adjudication. The assessee is at liberty to file fresh evidence in support of its claim. Thus, this ground is allowed for statistical purposes. Short grant of credit - HELD THAT:- Both parties agreed that the issue may be restored to the file of the Assessing Officer for fresh verification and disposal. Additional tax on interest on distributable profits - HELD THAT:- As agreed to by both parties issue is also set aside to the file of the Assessing Officer for fresh adjudication in accordance with law. Education cess and higher education cess is allowable as a deduction. In the result, this ground of the assessee is allowed.
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2020 (9) TMI 21
Addition u/s.69B - cash credit - no telescopic benefit out of amount surrendered during survey - addition to Building Account - Depreciation on hotel building - HELD THAT:- The impounded paper obtained during the course of survey proceedings, it is clear that some of the expenditure which are not related to the impugned assessment year and this objection was also taken before the CIT(A) but the CIT(A) has not properly dealt this matter while deciding the appeal of the assessee. This matter should go back to the file of AO for further verification regarding the addition made on the hotel building. The AO is also directed to give telescoping from the surrendered if the assessee has paid taxes on the entire surrendered amount. If it is found otherwise, then the AO is directed to consider the amount on which the assessee has paid taxes thereon. AO is also directed to grant depreciation if the assessee is eligible as per the Income Tax Act on the hotel building and if the depreciation was not claimed while calculating the taxable income of the assessee.
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2020 (9) TMI 20
Unexplained investment made by the assessee in bank deposits - assessee has submitted that the relevant bank account maintained by the assessee with Syndicate Bank, Asansol Branch was duly reflected in the books of account of his proprietary concern and the cash deposits made in the said account were from the receipts of the proprietary business of the assessee dealing in lottery tickets - if opportunity is given to assessee by sending the matter back to the AO, the assessee is in a position to explain the source of cash deposits - HELD THAT:- Keeping in view all the facts and circumstances of the case, I am inclined to accept this contention of the learned counsel for the assessee. Even the ld. DR has very fairly agreed that the matter can go back to the AO for proper verification of assessee s explanation. Ground No. 1 of the assessee s appeal is accordingly treated as allowed for statistical purpose. Unexplained investment made by the assessee in purchase of flat - assessee has submitted that the cash payments in question were also made by the assessee from the withdrawals made from his proprietary concern and since the said withdrawals were duly reflected in the audited books of account of the proprietary concern of the assessee, the same could not be treated as unexplained - as urged that this matter may also be sent back to the AO for giving the assessee an opportunity to explain the source of cash payments in question amounting to ₹ 1,69,000/- from the audited books of account of his proprietary concern - HELD THAT:- As DR has not raised any objection in this regard and has submitted that this matter can go back to the AO for proper verification, we set aside the impugned order passed by the Ld. CIT(A) confirming the addition made by the AO on this issue and restore the matter to the file of the AO for the limited purpose of verifying the explanation of the assessee regarding the cash payment in question from audited books of account of his proprietary concern wherein the same are claimed to be reflected as the withdrawals made by the assessee. Ground No. 2 of the assessee s appeal is treated as allowed for statistical purpose.
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2020 (9) TMI 19
Maintainability of appeal - low tax effect - bogus purchases Addition - Addition deleted by CIT-A partly - HELD THAT:- Tribunal has taken a consistent view that the information received from Investigation Wing of the Department does not fall in the category of the information received from external source being law enforcement agencies such as CBI/ED/DRI/SFIO/DGGI etc. as provided in the exception clause (e) of para 10 of the Circular No. 3/2018. Accordingly, the appeal of the revenue is not maintainable being the monetary limit is not exceeding as prescribed in the Circular No. 3/2018. Appeal of the revenue is dismissed.
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2020 (9) TMI 18
Applicability of Sec.115JB(2), Expl.1(vii) vis- -vis BIFR orders - deduction of profit earned during the year - HELD THAT:- Assessee s net worth has turned positive as on 31/03/2011. It is settled legal position that the manner of computation as provided in Sec.115JB would be complete code in itself and the computations were to be made strictly in the manner as provided therein. Explanation-1 (vii) envisages reduction of profit of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company u/s 17(1) of Sick Industrial Companies (Special Provisions) Act, 1985 and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Going by these provisions, the assessee is ineligible to claim the deduction of profit earned during the year while making computations u/s 115JB. So far as the arguments that the provisions of SICA would prevail over other statute ince the assessee was discharged by SICA on 16/08/2011 and its net worth turned positive by virtue of implementation of revival scheme, the assessee would be precluded from relief u/s 115JB in view of Explanation 1(vii) to Section 115JB (2) and therefore, no relief would be available from AY 2011-12 onwards. Therefore, the matter of applicability of Sec.115JB was delved into by CBDT and it was proposed to restrict the relief u/s 115JB as per the provisions contained therein. This being the case, the plea as raised by Ld. AR could not be accepted since the assessee s claim was specifically examined by appropriate authorities and it was decided not to extend the benefit of provisions of Sec. 115JB after assessee s net worth turned positive. Therefore, no relief could be granted to the assessee on this point. Reduction in Book Profits u/s 115JB - Amount credited to Profit Loss Account on account of waiver of loan would not partake the character of income and hence should not form part of Book Profits u/s 115JB and Adjustment in accumulated debit balance of Profit Loss Account through Restructuring Account - HELD THAT:- As per the express provisions of Explanation-1(iii) to S.115JB (2), the assessee would be entitled for deduction of amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. It is also evident that the assessee has claimed lower of depreciation and book loss while computing Book Profits u/s 115JB for AY 2012-13 which has not been disturbed by Ld. AO in the assessment order for AY 2012-13. Therefore, we find certain strength in these arguments. We find that the issue of aforesaid adjustments has not been delved upon either by Ld. AO or by Ld. CIT(A). Therefore, on the facts and circumstances, we deem it fit to remit the matter back to the file of Ld.CIT(A) to specifically adjudicate the issues raised under the appeal by way of a speaking order and bring on record correct factual matrix, in this respect.
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2020 (9) TMI 1
TP Adjustment - comparable selection - TPO re-characterized the business of the assessee and held the assessee to be a KPO service provider - HELD THAT:- We do not agree with the act of re-characterization of the assessee to be a KPO by the TPO in view of the fact that Hon ble Delhi High Court in the case of Rampgreen Solutions P Ltd [ 2015 (8) TMI 931 - DELHI HIGH COURT] has observed that the expression knowledge process outsourcing indicates the involvement of domain knowledge in providing ITeS. Typically, knowledge process outsourcing includes involvement of advance skills; the services provided may include analytical services, market research, legal research, engineering and design services, intellectual management, etc. We further find that Co-ordinate Bench of the Tribunal in assessee s own case for A.Y. 2010-11 has held the characterization of the nature of service rendered by the assessee to be high-end ITES services . Assessee is engaged in providing Information Technology Enabled Services (ITES) to its Associated Enterprises (AEs) and is a subsidiary of Smart Cube Ltd., UK. thus companies functionally dissimilar with that of assessee need to be deselected from final list. Computing of operating margins - HELD THAT:- We find that in the case of Fiserv India Pvt. Ltd. . [ 2016 (1) TMI 1276 - DELHI HIGH COURT] after considering that various decisions cited in the order has held the foreign exchange gain/loss to be an operating item and therefore could not be excluded from the computation of the operating margins. - we direct the TPO/ AO to consider foreign fluctuation income to be operating in nature while working out the profit margin of the assessee. Sundry balances written back as part of operating income - HELD THAT:- We find that the Co-ordinate Bench of the Tribunal in the case of Suessen Asia Pvt. Ltd. [ 2017 (10) TMI 1440 - ITAT PUNE] after relying on the various decisions cited in the order, has held that the sundry balances written back to the part of operational item. Before us, Revenue has not pointed out any contrary binding decision in its support. Further, Revenue has also not placed any material to demonstrate that the liabilities written back pertain to capital expenditure. We therefore hold that the income arising out of sundry balances written back needs to be considered an operating item. The AO/TOP is therefore directed to consider the same as part of operating income while working out the margins of the Assessee. G rant the adjustment on account of idle capacity - We thus direct the AO/TPO to compute the Arms Length price of the international transactions entered into by the Assessee with its AEs keeping in view the observations made by us in the preceding paragraphs. Thus the grounds of assessee are partly allowed. Deduction u/s 10A/10B - claim of deduction u/s 10B was denied to the assessee and alternate claim of deduction u/s 10A was also not allowed - HELD THAT:- Since the issue involved in the year under appeal is identical to that of AY 2010-11 [ 2018 (4) TMI 1621 - ITAT DELHI] we therefore for similar reasons and similar directions restore the issue back to the file of the AO to allow the claim of deduction u/s 10A after considering the submissions of the assessee and in accordance with law.
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Customs
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2020 (9) TMI 17
Permission to go abroad to their home town in Kyrgyz Republic - Smuggling - Gold - ill-health of son raised, to seek permission to go home - Calling for records to exercise powers of revision - Section 397(3) of the Cr.P.C., 1973 - HELD THAT:- The present petition is not maintainable, in as much as, a revision petition had been filed by the petitioners against the order dated 10.12.2019 of the Trial Court, it is essential to observe that the present petition has been filed under Section 482 of the Cr.P.C., 1973 whereunder the inherent power of this Court to make such orders as may be necessary to give effect to any order under the Code of Criminal Procedure, 1973 or to prevent abuse of the process of any Court or otherwise to secure the ends of justice has been saved. Though, undoubtedly, as laid down by the Hon ble Supreme Court in DR. MONICA KUMAR ANR VERSUS STATE OF U.P. ORS [ 2008 (5) TMI 687 - SUPREME COURT] , the inherent jurisdiction under Section 482 of the Cr.P.C., 1973 has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in the Section itself, nevertheless, the existence of the said inherent power to make such orders as to secure the ends of justice, cannot be held to be inexistent. Taking the said rationale into account, the petition is held to be maintainable. The verified documents as verified by the Customs Department and as verified by the Attach (Consul), Embassy of the Kyrgyz Republic in India, it is apparent that the child of the petitioner No.1 born in the year 2018 is unwell. The record also indicates vide document dated 06.03.2020 as issued by the Embassy of the Kyrgyz Republic in India that vide paragraph 5 of the same that there is no one in the family of the petitioner No.1 to take care of her critically ill son and that her presence is required to ensure her son s good health and surgery. The petitioner No.1 is allowed to travel to Kyrgyzstan for a period of 45 days to get her child operated with the direction to the petitioner No.1 to return to India on the 46th day of her leaving India with the request to the Embassy of Kyrgyz Republic in India in Delhi, to ensure that the petitioner no.1 Ms. Aida Askerbekova, holder of Kyrgyzstan Passport No. AC 3167256 returns back to India on the 46th day from the date when she leaves India to Kyrgyzstan for the operation of her son which she is permitted to go only after the deposit of the sum of ₹ 10,00,000/- in the form of an FDR as directed hereinabove, which on deposit is directed to be converted into an auto renewal mode. Furthermore, in the event of the petitioner no.1 not returning back on the 46th day of her leaving India to Kyrgyzstan, the said amount of ₹ 10,00,000/- deposited in the form of an FDR as directed, would stand forfeited. Petition disposed off.
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Corporate Laws
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2020 (9) TMI 16
Disqualification of petitioners to act as Director - Territorial Jurisdiction - Section 164(2)(a) of the Companies Act, 2013 - HELD THAT:- In the present case the counsel for the petitioners has been unable to show as to what part of the cause of action arose within the territorial jurisdiction of this Court. There is also no averment in the present writ petition as to how any part of the cause of action had arisen within the territorial jurisdiction of this Court. The present writ petition seems to have been filed only to gain benefit of the interim order (Annexure P-7) passed by this Court in GURDEEP SINGH AND OTHERS VERSUS THE UNION OF INDIA AND ANOTHER [ 2017 (11) TMI 1910 - PUNJAB AND HARYANA HIGH COURT] and other similar cases though the initiation of the writ proceedings before this High Court was clearly unsustainable and an abuse of jurisdiction. The filing of the present writ petition before this High Court was not bonafide. The writ petition deserves to be dismissed with exemplary costs. Dismissed with costs of ₹ 1,00,000/- to be deposited by the petitioners with the PM-CARES Fund.
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2020 (9) TMI 14
Sanction of amalgamation scheme - sections 230 to 232 of the Companies Act, 2013 - non-submission of chairman's report, admitted copy of the petition, and the minutes of order for admission of the petition - Change of name of the transferee company and change of registered office of the transferee company consequent upon sanction of the scheme of amalgamation - compliance with section 13 of the Companies Act, 2013 - HELD THAT:- This is a scheme involving multiple jurisdictions such as the National Company Law Tribunals Benches at Chennai, Hyderabad, Bengaluru and Mumbai. Each Bench looks at the scheme as an integrated whole, rather that segregate it into parts with which the particular Bench is concerned. Therefore, the arguments of learned counsel for the petitioner/transferor company No. 2 that the accounting treatment prescribed in the scheme is a matter that the National Company Law Tribunal Bengaluru alone should be concerned with, is untenable. The scheme cannot be contrary to any law in force, and the accounting standards issued by the Institute of Chartered Accountants of India (ICAI) have the effect of law under section 133 of the Companies Act, 2013. We are also acutely conscious of the fact that ultimately, upon the scheme being sanctioned, it is the transferee-company alone that will be concerned with the accounting entries to be made, which is not within our jurisdiction. The transferee-company being within the jurisdiction of the National Company Law Tribunal, Bengaluru Bench, we do not wish to express any opinion in the matter. Change of name of the transferee company and change of registered office of the transferee company consequent upon sanction of the scheme of amalgamation - compliance with section 13 of the Companies Act, 2013 - HELD THAT:- It is now settled law that the provisions to schemes of arrangement area complete code in themselves, and the separate procedures prescribed for change of name, change of registered office, reduction of capital, etc., under other provisions of the Companies Act are not required to be followed if they are effected as part of the scheme itself. It is also settled law that approval by the members to the scheme should be treated as approval also under other provisions of the Companies Act. Of course, there may be procedures required to be followed consistent with the requirements of the MCA-21 programme, so as to ensure that the changes are effected in the registry maintained by the Registrar of Companies. The petitioner/transferor company No. 2 has undertaken to abide by all procedural compliances required in this regard. This undertaking is recorded. From the materials on record, the scheme of amalgamation appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, application is made absolute in terms of prayer of the petition mentioned therein. The petitioner/transferor company No. 2 shall be dissolved without winding up, upon the scheme being finally sanctioned by the jurisdictional benches of the National Company Law Tribunal. The scheme is hereby sanctioned, and the appointed date of the scheme is fixed as April 1, 2017 - petitioner/transferor company No. 2 is directed to file a copy of this order along with a copy of the scheme with the concerned Registrar of Companies, electronically in e-Form INC-28, within 30 days from the date of receipt of order duly certified by the Deputy/Assistant Registrar, of this Tribunal.
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Insolvency & Bankruptcy
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2020 (9) TMI 15
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and default - Time Limitation - HELD THAT:- As per the record, the date of default date of (declaration) of NPA, i.e. 30.11.2013. Hence, the limitation in the present matter would start from as per the Article 137 of the Limitation Act from the date of default, i.e. the date of declaring NPA viz. 30.11.2013, while the present I.B. Petition was filed on 15.12.2017 before this court. Hence, it is filed beyond the limitation. The Hon'ble Supreme Court further in the matter of Vashdeo R. Bhojwani Vs. Abhyudaya Co-operative Bank Ltd. Ors. [ 2019 (9) TMI 711 - SUPREME COURT ] has pleased to hold that the limitation/cause of action starts from the date of default by declaring NPA and not from the date of issue of a recovery certificate if issued by the DRT and in such case, only Article 137 would apply. Thus, the Hon'ble Supreme Court pleased to dismiss the I.B. Petition being time barred. This Adjudicating Authority need not to examine merits or to go into the controversy in the present I.B. Petition -The matter can be simply disposed of on the ground of the limitation. As the present I.B. Petition is found to be filed beyond Limitation i.e., three years from the date of default, i.e. date of declaration of NPA and date of recalling of notice, i.e. 14.02.2014. Hence, it is held that it is hit by limitation and cannot be entertained - Petition dismissed.
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2020 (9) TMI 13
Liquidation of Corporate Debtor - section 33(1)(a) of the IB Code - difference of opinion - Hon'ble Member (Judicial), Mr. Harihar Prakash Chaturvedi passed order allowing the application filed by the RP under section 33(1)(a) with a specific observation that the RP shall continue as liquidator and shall take steps as provided in the provision of the Code. However, the Hon'ble Member (Technical), Mr. Prasanta Kumar Mohanty has not agreed with the order so passed by the Hon'ble Member (Judicial) and accordingly he has given his different observation/opinion with regard to the admission of the application filed under section 9 of the IB Code. HELD THAT:- The instant application i.e. IA 793/2019 deserves to be allowed in view of the decision passed by the Hon'ble Supreme Court in the matter of K. Sasidharan Vs. Indian Overseas Bank Ors. [ 2019 (2) TMI 1043 - SUPREME COURT ] where it was held that the commercial wisdom has been exercised by the COC after taking into count all the factors leading to maximisation of asset value of the Corporate Debtor, but the ultimate discretion of what to pay and how to pay each class or sub-class of creditors lies with the COC - The said decision is also relied upon by the Hon'ble Member (Judicial), Mr. Harihar Prakash Chaturvedi, while passing the order. I concur with the order so passed by the Hon'ble Member (Judicial) and accordingly the application so filed by the RP is allowed.
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2020 (9) TMI 12
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of default and debt - time limitation - HELD THAT:- The application of Article 137 of the Limitation Act, 1963 for moving application under Sections 7 or 9 of the I B Code, fell for consideration before the Hon ble Supreme Court and this Appellate Tribunal in number of cases. In B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [ 2018 (10) TMI 777 - SUPREME COURT ], the Hon ble Supreme Court held that the Limitation Act, 1963 has in fact been applied from the inception of the Code. Similar issue fell for consideration before the Hon ble Supreme Court in GAURAV HARGOVINDBHAI DAVE VERSUS ASSET RECONSTRUCTION COMPANY (INDIA) LTD. AND ANR. [ 2019 (9) TMI 1019 - SUPREME COURT ]. In the said case, the Hon ble Supreme Court has noticed that the Respondent was declared NPA on 21st July, 2011. The Bank had filed two OAs before the Debts Recovery Tribunal in 2012 to recover the total debt. Taking into consideration the facts, the Supreme Court held that the default having taken place and as the account was declared NPA on 21st July, 2011, the application under Section 7 was barred by limitation. As, the Corporate Debtor having committed default prior to 9th September, 2014, i.e. much before the assignment of debt to Phoenix ARC Private Limited, we hold that the Application under Section 7 of the I B Code was barred prior to 9th September, 2017 - The Application under Section 7 of the I B Code was filed on 29th September, 2017, i.e., much after three years of the cut-off period of default, which was prior to 9th September, 2017. Section 22 of the Limitation Act, 1963 relates to breaches and torts , for the purpose of counting the fresh period of limitation. The said Section 22 of the Limitation Act, 1963 may be applicable to find out whether the claim is barred by limitation or not, but cannot be made applicable for counting the period of limitation for Application under Section 7 of the I B Code, which is to be counted from the date of default/ NPA as held by the Hon ble Supreme Court in terms of Section 7(5) of the I B Code - The Corporate Debtor is released from all the rigors of Corporate Insolvency Resolution Process . The Interim Resolution Professional will handover the assets and records of the Corporate Debtor to the Promoters/ Board of Directors immediately. The case is remitted to the Adjudicating Authority (National Company Law Tribunal) for determination of fee and Corporate Insolvency Resolution cost payable to Interim Resolution Professional / Resolution Professional , which will be borne by Phoenix ARC Private Limited. Appeal allowed.
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2020 (9) TMI 11
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - HELD THAT:- By looking at the agreement entered into between the parties, this money has been shown as money paid towards fully and compulsorily convertible debentures for the value mentioned therein, it is not the case of the Corporate Debtor that this money has not come into the account, indeed it is the case of the Corporate Debtor until before this case is filed that this is a long term borrowings as per the balance sheet of the Company and it is also the case of the Corporate Debtor that TDS has been deducted on the interest accrued against the compulsorily convertible debentures held by the applicant - When a party admits a factual aspect stating that applicant is a creditor, debentures are lying in its name and the debt is shown as long term borrowing, then such party cannot take out diametrically opposite stand stating that the debt being shown as capital under FEMA or under some other Regulations, therefore it is not a debt. It is true that in the agreement, that after 15 years, these debentures would become equity, but until such time the Corporate Debtor shall pay fixed returns to this applicant. The RP merely by showing this, the RP Counsel cannot come with an argument to say that this is to be treated as equity for redemption of debentures has not been envisaged in the agreement. At the time of winding up or admission of a case under IBC, if the debentures are not matured and not convertible for the period for redemption is not complete, they shall be treated as debentures and the consequence is, it will remain as debt - Same is the case here, debentures are not matured for conversion, interest shall be paid through coupons periodically. That has also not complied with. This application is hereby allowed directing the Resolution Professional to admit the claim as Financial Debt as envisaged under Section 5(8) (c) of the Insolvency and Bankruptcy Code, 2016.
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2020 (9) TMI 10
Exclusion of certain period from Corporate Insolvency Resolution Process - Section 12 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- On perusal of the record it is found that CP (IB) 594 of 2018 was admitted by this Adjudicating Authority on 26.04.2019 and further, 90 days beyond 180 days was extended on 22.10.2019. The RP has moved this application for seeking exclusion for certain days as there is high probability of approval and/or acceptance of proposed Resolution Plan and thereby, the Corporate Debtor can be saved as a going concern. Looking to the very object of IB Code, CoC desires to get exclusion of certain period from the CIRP as there is every likelihood that some Resolution Plan will be accepted and/or approved by the CoC. In that event, a Corporate Debtor will be saved from Liquidation and more so, livelihood of number of employees' dependent on the Corporate Debtor will also be saved. A similar view is reiterated by the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. [ 2019 (11) TMI 731 - SUPREME COURT ] observed that even an extension beyond 330 days' timeline as specified in the IB Code can be granted by the Adjudicating Authority under exceptional circumstances. Under the given facts and circumstances as stated, if the time is extended within the outer limit of 330 days, there is every likelihood that some Resolution Applicant may succeed for its acceptance and approval - the application so filed by RP is allowed by excluding 41 i.e. 10 days from the date of admission of the Petition till the order being served upon the IRP, 17 days from stay on conducting CoC meeting and 15 days from the filing of the instant application till its pronouncement. Application allowed.
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Service Tax
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2020 (9) TMI 9
Rejection of declaration filed under the amnesty scheme- Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - settlement of Service tax dues - rejection of the declaration filed by the Petitioner on account of Petitioner s eligibility relates to quantification of tax dues prior to the relevant date - HELD THAT:- As per Section 123, in case of an enquiry or investigation or audit which is pending against the declarant, the amount of duty payable under any of the indirect tax enactments has to be quantified before 30th June, 2019. Section 125(1)(e) referred above, renders all such persons ineligible to make a declaration under the Scheme who have been subjected to an enquiry or investigation or audit and the amount involved has not been quantified on or before 30th June 2019. Thus, Section 125 (1)(e) in a way compliments Section 123 (c) of the Act and quantification of tax dues is imperative for a declarant to become eligible for applying under the scheme. The meaning of the word quantified has been extended and broadened, obviously keeping in view the objective of the Scheme by way of Circulars dated 12th December, 2019 and 27th August, 2019. By virtue of the circulars, the Respondents have clarified that the benefit of the Scheme can also be given to those cases where the duty involved is quantified by way of an admission made by the declarant in a statement made on or before 30th June, 2019. This admission can be during an enquiry, investigation or audit report etc. Now, let us examine whether the admission made by the Petitioner in the present case make it eligible under the scheme. Whether by virtue of the aforesaid admission, the tax dues can be said to quantified by the Investigating Authority before 30th June, 2019? - HELD THAT:- The demand-cum-show cause notice dated 13th March, 2020, on the face of it relates to tax dues which are much more than the amount admitted by the Petitioner. No doubt, in so far as the Service Tax liability is concerned, which is one of the components of the demand-cum-show cause notice dated 13th March, 2020, there is no dispute between the parties with respect to the quantum. However, the aforesaid admission of liability of Service Tax, to our understanding, cannot be held to be quantification of the entire tax dues . It is admission of Service tax liability only. Petitioner s contention that this should be treated as the quantified tax dues, is therefore, plainly incorrect. SVLDR is a beneficial scheme and purposive interpretation of its terms is desirable. However, we cannot give an interpretation that would run counter to its objective. The scheme is a one-time measure for liquidation of past disputes under the erstwhile regime and affords an opportunity of voluntary disclosure to non-compliant tax payers. The declarants are thus expected to come clean in order take its benefit. During investigation, Petitioner only admitted Service Tax liability and did not make any disclosure with respect to the other tax dues and as a result whereof, after investigation, Respondents have issued the demand-cum show cause notice for an amount of ₹ 13,77,13,890/-. This show cause notice would have to be adjudicated in entirety and cannot be done in a piecemeal manner - We cannot construe admitted tax liability to be matter and the remainder dues as per show-cause notice to be a separate matter , especially since the investigation was still ongoing on the relevant date. Application was rightly dismissed.
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2020 (9) TMI 8
Classification of services - activity of granting licence to third party-crane operators for providing their crane (wheel mounted) in the Port area for providing services of loading and unloading etc. with the help of the crane - period is September, 2006 to September, 2008 - extended period of limitation - HELD THAT:- The issue is no longer res integra and the same has been decided in favour of the assessee by Hon ble Kerala High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, ERNAKULAM VERSUS COCHIN PORT TRUST WILLINGDON ISLAND. [ 2019 (2) TMI 760 - KERALA HIGH COURT] where it was held that Definitely the Revenue earned by IGTPL will be taxed under the Finance Act, 1994 specifically under sub-clause (lxxxii) of Section 65. It is a percentage of that, which the IGTPL pays to CPT, in lieu of surrendering their rights to carry out and provide port services in the subject terminals. There is no port service by the CPT to IGTPL. We hence find the order of the Tribunal to be perfectly in order. Appeal allowed - decided in favor of appellant.
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2020 (9) TMI 7
Classification of services - Manpower Recruitment or Supply Agency Service or not - reverse charge mechanism - salary paid to employees deputed to the appellant by their parent company for assisting them in their business operations of software development and information technology and other related support service - HELD THAT:- In the ruling of Tribunal in M/S VOLKSWAGEN INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2013 (11) TMI 298 - CESTAT MUMBAI] was followed by the Delhi Bench in M/S NISSIN BRAKE INDIA PVT. LTD. VERSUS CCE, JAIPUR I [ 2018 (5) TMI 1223 - CESTAT NEW DELHI] upheld in C.C.E. AND S.T. JAIPUR -I VERSUS NISSIN BRAKE INDIA PVT. LTD. [ 2019 (2) TMI 1630 - SC ORDER] wherein under similar facts and circumstances, the issue was decided in favour of the appellant-assessee. Revenue preferred an appeal before the Hon ble Supreme Court against the order of Tribunal in Nissin Brake India Pvt. Ltd. and by order dated 22/02/2019, Hon ble Supreme court held that it finds no merit in the appeal and was accordingly pleased to dismiss the appeal. Thus, the principle of law laid down in the case of M/s. Volkswagen India (Pvt.) Ltd. and followed in Nissin Brake India Pvt. Ltd. have crystallized and attained finality. Appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (9) TMI 6
Exemption of education cess secondary and higher education cess - Area Based Exemption availed - whether in view of the exemption granted to the excise duty the petitioner would also be entitled to an exemption to the payment of education cess secondary and higher education cess? HELD THAT:- B y the order dated 13.02.2019 of the Assistant Commissioner, Excise, GST and Central Excise, certain amounts were sanctioned for being refunded to the petitioner and accordingly the refunds were given effect. Subsequent thereto, the Supreme Court in its pronouncement in Unicorn Industries vs. Union of India and others reports [ 2019 (12) TMI 286 - SUPREME COURT] has held that In view of the subsequent judgment of the Supreme Court in Unicorn Industries (supra) the respondent authorities had issued the demand cum show cause notice dated 09.06.2020 to the petitioner by which a question was raised that the earlier refund of the education cess secondary and higher education cess given to them has now become erroneous refunds and therefore, a recovery be made under section 11(A-1) of the Central Excise Act 1944 - The demand cum show-cause notice dated 09.06.2020 is assailed in this writ petition on the ground that the condition precedent to invoke the power under section 11(A-1) is that the refund made must be erroneous. Thus, a question for determination would be as to whether the proposition of law laid down in Unicorn Industries would render the refund made to the petitioner to be erroneous - until further orders we stay the operation of the demand cum- show-cause notice dated 09.06.2020.
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2020 (9) TMI 5
Method of Valuation - section 4A or Section 4 of CEA - manufacturer of pesticides and insecticides of less than 10 gms/10 ml - said packages were packed in bigger boxes of 15-20 packs and on the packages the appellant is putting MRP printed and paying duty - Extended period of limitation - HELD THAT:- Issue decided in appellant own case [ 2018 (5) TMI 1342 - CESTAT CHANDIGARH] where it was held that the appellant have made packages for retail sale, they are legally bound to affix MRP of the said goods. In the circumstances, the appellant is required to discharge duty in terms of Section 4A of the Act. Therefore, the appellant has correctly discharged the duty liability under section 4A of the Act. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (9) TMI 4
Validity of assessment order - principles of natural justice - request for cross-examination of the Customs Broker as well as bank officials denied - High value imports - bank accounts of petitioner or not - rectification order - section 84 of TNVAT Act - HELD THAT:- According to the petitioner, the other banks were also visited by the Deputy Director, who had come to the same conclusion with respect to those banks as well and thereafter, the proceedings were dropped by the Income Tax Department. This assumption is drawn from the fact that nothing transpired after 2015 in this regard - This assumption does not appear to be correct in the light of the report of the Assistant Director of Income Tax Department (Investigation) dated 16.08.2017 issued after the orders of this Court. Clearly, the proceedings before the Income Tax Department are still at large. The result of the same or any progress in that regard is unknown as the Income tax Department is not a party to the writ petitions and neither has the petitioner placed on record any other document in this regard post August 2017 - No counters have been filed by the respondents, despite sufficient opportunities having been extended to them. This matter cannot be adjourned but to be proceeded on the basis of the facts available on record. A perusal of the impugned orders indicates that the directions of this Court in the first round of litigation have not been taken into account in proper perspective in finalizing the assessments - This Court had specifically directed that a proper enquiry be made by the Assessing Officer, which would not only include examination of all materials procured from the Customs and the Income Tax Department, but also on an independent application of mind of those materials and a proper and effective opportunity being extended to the petitioner to substantiate his repeated contention that he is unconnected with the import transactions. The impugned assessments have not been framed in a proper manner - the impugned assessments are set aside and the Assessing Officer directed to redo the same denovo after hearing the petitioner, supplying the documents sought for by him and extending an opportunity of cross examination to him. This exercise shall be completed within a period of eight (8) weeks from date of uploading of this order. Petition allowed.
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2020 (9) TMI 3
Levy of penalty - non-filing of returns - invocation of Section 10 of the Tamil Nadu Tax on Entry of Goods Into Local Areas Act, 2001 r/w Section 12(3) of Tamil Nadu General Sales Tax Act 1959 - Opportunity of personal hearing not provided - principles of natural justice - HELD THAT:- It is not the case of the department that the petitioner is a regular importer of these goods or that the petitioner had been trading in them. Therefore, non-filing of returns may not really mutter much in a case of this nature. It is true that there was omission on the part of the petitioner in making a declaration at the relevant point of time. But then, the fact remains that immediately after it was pointed out, the petitioner had promptly remitted the entry tax in question. The petitioner had not even challenged the stand of the respondent. The core argument is that penalty can be levied only if non-payment of tax was willful - It is well settled that levy of penalty involves a penal element. Therefore, the element of mensrea should be recorded to be present. In this case, no such finding can be discerned in the orders impugned in the writ petitions - We are living in pandemic times. But the respondent has shown considerable speed in concluding the entire proceedings. The pre-assessment notice was issued on 12.06.2020. The reply was given on 24.06.2020. The impugned order came to be passed on 29.06.2020. Even personal hearing was not afforded to the petitioner. Petition allowed - decided in favor of petitioner.
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Indian Laws
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2020 (9) TMI 2
Quantum of punishment - offence under NDPS - enhancement of sentence imposed, is sought - It is contended by learned counsel for the appellant, though the respondent no.2 had committed murder of an innocent child, the Sessions Court, instead to award punishment of death penalty, has awarded only imprisonment for life - Section 372 of the Code of Criminal Procedure - HELD THAT:- Chapter XXIX of the Code of Criminal Procedure, 1973 deals with Appeals and Section 372 makes it clear that no appeal to lie unless otherwise provided by the Code or any other law for the time being in force. It is not in dispute that in the instant case appellant has preferred appeal only under Section 372, Cr.PC. The proviso is inserted to Section 372, Cr.PC by Act 5 of 2009. A reading of the proviso makes it clear that so far as victim s right of appeal is concerned, same is restricted to three eventualities, namely, acquittal of the accused; conviction of the accused for lesser offence; or for imposing inadequate compensation. While the victim is given opportunity to prefer appeal in the event of imposing inadequate compensation, but at the same time there is no provision for appeal by the victim for questioning the order of sentence as inadequate, whereas Section 377, Cr.PC gives the power to the State Government to prefer appeal for enhancement of sentence. While it is open for the State Government to prefer appeal for inadequate sentence under Section 377, Cr.PC but similarly no appeal can be maintained by victim under Section 372, Cr.PC on the ground of inadequate sentence - It is fairly well settled that the remedy of appeal is creature of the Statute. Unless same is provided either under Code of Criminal Procedure or by any other law for the time being in force no appeal, seeking enhancement of sentence at the instance of the victim, is maintainable. Appeal dismissed.
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