Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 27, 2021
Case Laws in this Newsletter:
GST
Income Tax
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Provisional attachment of Bank Accounts - lack of application of mind - In the event, the Commissioner refuses to lift the orders of provisional attachment once again, appropriate reasons shall be assigned. - The grounds on which the judicial review is available are well established. Non-consideration of relevant materials and consideration of extraneous matters together with non-access of the part affected to materials relied on in reaching conclusions, if substantiated, would provide sufficient ground for judicial review. In the present case, the provisional order dated May 21, 2021 is unsustainable - the Commissioner is directed to de novo consider the objection of the petitioner - HC
Income Tax
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Validity of assessment order - Breach of the provisions of the Faceless Assessment Scheme, 2019 - As noted earlier no draft assessment order has been issued at all let alone on 1st February, 2021. The notice dated 1st February, 2021, as stated earlier, is seeking further documentary evidences and those evidences sought are for the first time. When respondent is seeking documentary evidences, that communication by no stretch of imagination can be even referred to as a draft assessment order. - Thus the assessment order has to be treated as non-est and shall be deemed to have never been passed. - HC
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Validity of draft assessment order passed under Section 143(3) read with Section 144C - Since the jurisdictional aspect is not a pure question of law as arisen in this case and also taking note of the conduct of the assessee in the manner in which they have approached the problem, than what is being now focused before this Court, we are of the view that the appellant-assessee should definitely avail the remedy provided under the Act. - HC
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Levy of late filing fee u/s 234E - Decisions relied by the Ld. AR of the assessee are on the point that the TDS return processed u/s 200A prior to 01.06.2015 would not attract the provisions of section 234E of the Act as the Assessing Officer was not having any power to make such adjustment prior to the amendment w.e.f. 01.06.2015. Accordingly, we modify the impugned orders of the Assessing Officer as well as of the Ld. CIT(A) and direct the Assessing Officer to compute the late filing fee u/s 234E of the Act for a delay w.e.f. 01.06.2015 till the filing of the TDS return. - AT
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Addition u/s. 56(2)(viib) in respect of share premium - The prime object of insertion of Sec. 56(2)(viib) was to tax excessive share premium received unjustifiably by private companies on issue of shares without carrying underlying value. The intent of the provision was to deter the generation and use of unaccounted money. However, there are no such allegations against the assessee since the assessee has demonstrated the fulfilment of primary ingredients of Section 68. - Additions deleted - AT
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Claim of depreciation - capitalisation being pre-commencement rent and other expenditure incurred - Section 32 of the Act allows depreciation on actual cost of the asset, which means the actual cost to the assessee. This cost should be construed in ordinarily commercial manner. AS-10 regarding "accounting for fixed assets" issued by the ICAI specifies the components of cost of a fixed asset. - the expenses incurred by the assessee are required to be capitalised - Claim allowed - AT
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Accrual of Income in India - Royalty - right to use the software - overriding effect to the DTAA - from reading of the terms of the agreements, it is clear that there was no right to use the computer software - income of the assessee which was brought to tax by the Revenue authorities cannot be brought to tax and the same is directed to be deleted. - AT
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TP Adjustment - AMP adjustment - Assessee has already been remunerated for the marketing expenses incurred on behalf of the AEs along with commission markup, and, therefore, there was no requirement of making separate AMP addition in the case of the assessee. - AT
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Revision u/s 263 by CIT - AO's omission to frame draft assessment order u/s 144C - An action made without jurisdiction and ergo the assessment order dated 25.09.2017 is null in the eyes of law and therefore, is non est. Therefore, when the foundation itself does not exist, i.e., assessment order dated 25.09.2017 is non-est, the Ld. PCIT could not have exercised his jurisdiction to interfere with void/null order which is not existing in the eyes of law and, therefore, the impugned order of Ld. PCIT is also a nullity. - AT
Service Tax
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Refund of service tax paid under protest - provisional assessment or not - The assessment cannot automatically turn provisional in absence following due procedures as prescribed under Rule 6 of Service Tax Rules. Since the assessment cannot be termed provisional in the instant case, the refund claimed by the respondent is clearly barred by limitation - AT
Central Excise
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100% EOU - Confirmation of demand and levy of penalty - The Tribunal was right in stating that the intention of the assessee was not as that of an honest tax payer as they failed to come forward to disclose that they have not paid the duty amount. - Precisely, for this reason the Tribunal has granted relief to the assessee by deleting the penalty which also in our considered view is a proper exercise of discretion by the Tribunal - the Tribunal has rightly re-appreciated the facts and rejected the appeal filed by the appellant/assessee. - HC
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CENVAT Credit - input services - Group Medical insurance Policy for its employees and their family members - scope of amended definition of ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004 - invocation of extended period of limitation - this relief can be granted to the appellants and accordingly the penalty is reduced to 25% - AT
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Functional based exemption from duty - Aquasure on Tap Water Purifier - The Notification in question only mandates that the water filters should function without electricity and pressurised tap water. We have gone through the user manual in respect of both the models which are placed on record, from which we do not see either of the models requiring any electricity or pressurised tap water for functioning. Other than mere suspecting, even the Revenue has not adduced any sought of evidence to dislodge the mode of functioning explained in the user manual. - AT
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CENVAT Credit - input services - Product recall insurance policy - it cannot be said that the Product Recall Policy Expenses is a post removal expenses, once it is pre-determined the goods can be supplied only after the Product Recall Policy is taken then it becomes part of cost of the final product, during the manufacturing of the same, and the credit is allowed. - AT
Case Laws:
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GST
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2021 (9) TMI 1111
Provisional attachment of Bank Accounts - lack of application of mind - violation of principles of natural justice - mis-classification of goods - HELD THAT:- The order of the Commissioner records that pursuant to initiation of investigation under section 67 read with section 74 of the CGST Act, provisional attachment of the petitioner s bank accounts has been made only with the intention to protect the large amount of revenue sought to be evaded by the petitioner on account of willful misclassification of goods - the evidence referred in the impugned order has not been annexed to the reply affidavit and, therefore, it is difficult to accept the version as recorded in such paragraph. Even otherwise, if at all it is a fact that the petitioner has not cooperated with the investigation, that by itself would not preclude the respondents from completing it with promptitude in accordance with law. However, this cannot constitute a valid reason for continuing the orders of provisional attachment. The Commissioner recorded a satisfaction that the present case was a fit case for invocation of section 83 of the CGST Act. It was found that as per the balance-sheet for the year 2019-20, the petitioner had declared the value of tangible assets or fixed assets as ₹ 8.53 Cr. approximately. Since the dues were far more than the value of the immoveable property, it was decided to continue attachment of the bank accounts. Mr. Raichandani has contended that the orders of provisional attachment ought to have been lifted bearing in mind the value of the assets and also in view of the law that pre-deposit of 10% is required if an appeal were preferred against the final order. We do not think that at this stage this issue ought to be considered, in view of the order proposed. The grounds on which the judicial review is available are well established. Non-consideration of relevant materials and consideration of extraneous matters together with non-access of the part affected to materials relied on in reaching conclusions, if substantiated, would provide sufficient ground for judicial review. In the present case, the provisional order dated May 21, 2021 is unsustainable - the Commissioner is directed to de novo consider the objection of the petitioner. In the event, the Commissioner refuses to lift the orders of provisional attachment once again, appropriate reasons shall be assigned. - petition allowed.
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2021 (9) TMI 1110
Filing of Form GST TRAN-1, electronically - HELD THAT:- The issue is decided in the case of M/S RATEK PHEON FRICTION TECHNOLOGIES PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER AND 2 OTHERS AND M/S MODERN PLYWOOD CENTRE, M/S ALLIED AGENCIES VERSUS UNION OF INDIA AND 5 OTHERS [ 2021 (9) TMI 1042 - ALLAHABAD HIGH COURT] where it was held that if the respondents had offered a functional system, the State could not have deprived the petitioners of transition credit of CENVAT and ITC (under the repealed laws). Petition allowed.
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Income Tax
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2021 (9) TMI 1109
Income accrued in India - income attributable to the assessee PE in India - business connection in India under Section 9(1)(i) - Article 5(1) 5(2) of DTAA between India and Indonesia - HELD THAT:- As decided in PT LP DISPLAY INDONESIA [ 2021 (9) TMI 1050 - DELHI HIGH COURT] also covers the case of the present Respondent-assessee wherein the CIT(A) in the 201 proceedings held that none of the AEs, apart from LG Korea, had PE in India. Given that the same issue arises in the present proceeding, no substantial question of law arises in the present appeal. Accordingly, the appeal alongwith application being bereft of merit is dismissed.
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2021 (9) TMI 1108
Validity of assessment order - Breach of the provisions of the Faceless Assessment Scheme, 2019 - non granting of personal hearing - non furnishing of draft assessment order - HELD THAT:- On the question of issue of non granting of personal hearing, the notices dated 18th January, 2021 and 1st February, 2021 both provided that petitioner may seek personal hearing so as to make oral submissions through video conferencing. Petitioner in his reply dated 26 th January, 2021, 27th January, 2021 and 5th February, 2021 has sought personal hearing. Notwithstanding this request respondent has neither granted personal hearing nor stated in the assessment order why the personal hearing was not granted. On this ground alone, in our view, the assessment order dated 2nd March, 2021 requires to be set aside. Non furnishing of draft assessment order , in the assessment order it is stated a show cause notice has been issued on 18/01/2021 for compliance on 22/01/2021 and again a final show cause notice with draft assessment order has been issued on 01/02/2021 for compliance on 05/02/2021. In response, the assessee has submitted the submission which has been perused . Though in the assessment order it is stated that draft assessment order was provided with show cause notice dated 1st February, 2021, from the affidavit in reply it appears that the draft assessment order was generated in ITBA system only on 25th February, 2021. As noted earlier no draft assessment order has been issued at all let alone on 1st February, 2021. The notice dated 1st February, 2021, as stated earlier, is seeking further documentary evidences and those evidences sought are for the first time. When respondent is seeking documentary evidences, that communication by no stretch of imagination can be even referred to as a draft assessment order. The Faceless Assessment Scheme, 2019 as per the circular dated 13th August, 2020, provides that where a modification is proposed, the National e-Assessment Centre shall provide an opportunity to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per draft assessment order. This has not been complied with. This is one more reason, in our view, for interfering. Thus the assessment order not having been passed in conformity with the requirements of the Faceless Assessment Scheme, 2019 has to be treated as non-est and shall be deemed to have never been passed.
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2021 (9) TMI 1104
Validity of draft assessment order passed under Section 143(3) read with Section 144C - Scope of alternate remedy - as argued in Writ Court ought not to have upheld the draft assessment order for the Assessment Year 2013-14, passed in the name of a non-existing transferor company/ amalgamating company, even though the assessee had intimated the fact of amalgamation to the Assessing Officer - HELD THAT:- Notice under Section 142(1) read with Section 129 dated 02.11.2016, was issued to the assessee in connection with the assessment for the assessment year under consideration, directing them to appear in person and furnish as many as 30 details, which include the date of incorporation along with the details of the merger/de-merger or amalgamation, since the year in which the company was incorporated; details of the share holding percentage of the company, etc. In response to the said notice, the assessee, by reply dated 15.12.2016, gave a brief background of the company - It would be difficult for us to read this sentence in the reply dated 15.12.2016 to mean that the assessee had questioned the jurisdiction of the Assessing Officer to exercise power as is canvassed before us, as well as what was canvassed before the learned Single Bench. Thus, the Assessing Officer appears to have been left with no other option, except to proceed with the draft assessment order. Since the jurisdictional aspect is not a pure question of law as arisen in this case and also taking note of the conduct of the assessee in the manner in which they have approached the problem, than what is being now focused before this Court, we are of the view that the appellant-assessee should definitely avail the remedy provided under the Act. The issue as to whether the assessment could have been completed by passing a draft assessment order on a non-existing entity is a matter to be decided before the authorities in the remedies provided to the assessee under the Act and not before a Writ Court. Writ Court, while dismissing the Writ petition, had made certain observations, some of which may affect the assessee when we relegate the assessee to avail the remedies under the Act. Therefore, we are of the view that all those observations and the findings should be vacated and the assessee should be free to raise all issues before the assessing authority, before whom they choose to approach, challenging the draft assessment order. Writ Appeal is dismissed and the findings rendered by the learned Writ Court while dismissing the Writ Petition are vacated in its entirety and the assessee is granted liberty to avail the alternative remedy provided under the provisions of the Income Tax Act, 1961.
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2021 (9) TMI 1102
TDS u/s 195 - payments made to companies non resident - Tribunal was right in deleting the disallowance made by the AO holding that the amendment to Section 9(1)(vi) introduced by Finance Act, 2012 with retrospective effect from 01.06.1976 is not applicable and therefore no TDS needs to be deducted? - Tribunal held that the amounts paid by the assessee company to the non resident company for use of the assessee customer in India of operating net work payments, ATMs is not Royalty as per the provisions of Section 9(1)(vi) - HELD THAT:- Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another [ 2021 (3) TMI 138 - SUPREME COURT] has held in favour of the assessee. Deduction u/s 10A - expenses incurred in relation to travel in foreign country and communication charges are to be allowed both from the Export turnover and Total turnover - HELD THAT:- Question answered against the Revenue in the case of Commissioner of Income-tax, Central-III v. HCL Technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] As held that the definition of 'total turnover' given under Sections 80HHC and 80HHE cannot be adopted for the purpose of Section 10A as technical meaning of total turnover, which does not envisage reduction of any expenses from total amount, is to be taken into consideration for computing deduction under Section 10A; when meaning is clear, there is no necessity of importing meaning of 'total turnover' from other provisions. - Decided against the Revenue.
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2021 (9) TMI 1101
Disallowance on account of bad debts written off u/s 36(2) - HELD THAT:- Ground raised in the present appeal has already been decided by the coordinate bench of the Tribunal in favour of the assessee company for AYs 2011-12 2012-13 [ 2021 (6) TMI 718 - ITAT DELHI ] AND [ 2021 (9) TMI 813 - ITAT DELHI ] respectively, which order has been followed by the AO/CIT(A). As Revenue though relied upon the order passed by the AO/ld. CIT (A) has failed to bring on record distinguishable facts and evidence, if any, or that the order passed by the Tribunal (supra) has been set aside or its operation has been stayed by the higher forum. Decided in favour of assessee. Nature of expenses - expenses incurred as a part of project cost by treating the same as capital expenditure for land acquisition of Border Out Post during the execution of Indo Bangladesh Border Fencing Work (IBBF) - HELD THAT:- As relying on assessee's own case [ 2021 (9) TMI 813 - ITAT DELHI ] we delete the addition made by the AO and confirmed by the ld. CIT (A) on the ground that expenses incurred by the assessee company for acquisition of land for IBBF Project has not created any assets in the hands of assessee as the assessee company has merely executed a contract for construction of Border Out Post on behalf of Ministry of Home Affairs. Consequently, addition made by the AO and sustained by the ld. CIT (A) is ordered to be deleted. Addition on account of provisions written back under MAT provisions - Disallowances on account of provision of written back - AO made the addition holding that assessee has failed to give the information - HELD THAT:- As relying on own case [ 2021 (6) TMI 718 - ITAT DELHI ] we are of the considered view that addition made by the AO and sustained by the ld. CIT (A) is not sustainable in the eyes of law because the provisions made by the assessee in earlier years were never claimed or allowed to the assessee, which fact however needs to be verified by the AO. Consequently, addition made by the AO and sustained by the ld. CIT (A) is ordered to be deleted subject to verification by the AO qua the computation of total income of the assessee for earlier years if these provisions have not been allowed to the assessee in earlier years.
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2021 (9) TMI 1100
Levy of late filing fee u/s 234E - intimation u/s 200A - Jurisdiction of AO - Assessee argued as AO had not power to make an adjustment while processing the TDS return u/s 200A of the Act prior to amendment in the statute w.e.f. 01.06.2015 enabling the Assessing Officer to make such adjustment - HELD THAT:- In the case, in hand, since the delay is continuous and beyond to the amendment w.e.f. 01.06.2015 and therefore, once the provisions of section 234E r.w.s 200A of the Act are applicable w.e.f. 01.06.2015, the delay from that date onwards will attract the levy of late filing fee. Undisputedly, the default in submitting the TDS return in Form No.26Q continued even after the amendment w.e.f. 01.06.2015 and therefore, the delay from the period 01.06.2015 till filing of fee TDS return on 27.06.2015 will attract the levy of late filing fee u/s 234E while processing TDS return u/s 200A. Decisions relied by the Ld. AR of the assessee are on the point that the TDS return processed u/s 200A prior to 01.06.2015 would not attract the provisions of section 234E of the Act as the Assessing Officer was not having any power to make such adjustment prior to the amendment w.e.f. 01.06.2015. Accordingly, we modify the impugned orders of the Assessing Officer as well as of the Ld. CIT(A) and direct the Assessing Officer to compute the late filing fee u/s 234E of the Act for a delay w.e.f. 01.06.2015 till the filing of the TDS return. Appeal of the assessee is partly allowed.
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2021 (9) TMI 1096
Exemption u/s 11 - denying for registration u/s 12AA - As per revenue assessee not furnished details of receipts and payments as reflected in the bank statement - activities of the assessee is not genuine as there is large cash deposits and the same is immediately transferred to one Mehul C Shah and Amee/ vesu Refrigeration and that the camp picture are not of HN Hospital - HELD THAT:- Assessee was filed application under section 12AA and furnished required details alongwith application. The assessee-trust again in response to show cause notice filed its reply on reply dated 23.05.2017. The reply of assessee is duly acknowledged by Ld. PCIT(E) in its order. We find that the assessee instead of filing detail explanatory submission relied on various documents furnished alongwith original application. PCIT(E) again issued final show cause notice dated 01.08.2017 seeking various details as mentioned therein. The assessee instead of giving para-wise reply filed as short and cryptic reply dated 26.08.2017, which was received by Ld. PCIT(E) on 29.08.2017. PCIT(E) rejected the application of assessee by taking view that assessee-trust failed to file documentary evidence about the genuineness of activities in consonance with object. Considering the fact that the assessee-trust has furnished almost or requisite detail vide reply dated 26.05.2017, the Ld. PCIT(E) instead of referring all those documentary evidence rejected the application of the assessee-trust - We set aside the impugned order of Ld. PCIT(E) and restore the mater back to the file of Ld. PCIT(E) for considering the application afresh - Appeal of assessee is allowed for statistical purpose.
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2021 (9) TMI 1095
Unexplained cash credit u/s 68 - case of the assessee that the surrender was made on account of receipt of share application/capital from three companies without the presence of any incriminating material - CIT-A deleted the addition - HELD THAT:- We find merit in the plea of the Assessee that charging tax on the disclosure made in the individual capacity and bringing the same amount to tax yet again in the hands of the assessee Company would clearly amount to double taxation. Secondly, the assessment of the assessee Company for A.Y. 2011-12 has remained undisturbed where similar subscription of ₹ 7.75 Crores has been obtained and declared by Shri Singhania. The source of share capital thus clearly stand proved on account of disclosure by Singhania - A.O. was patently unjustified in making separate additions in the hands of the assessee Company for the same very disclosure. The reasoning of the CIT(A) for reversal of the action of the A.O. is on sound rationale. Unexplained cash credit on account of trade advance u/s 68 - CIT(A) after obtaining the remand report from the A.O. affirmed the fact that the booking advances received by the assessee have been duly refunded which fact has also been accepted by the prospective buyers - HELD THAT:- AO has not made any attempt to rebut the claim of the assessee. The confirmations were filed by the assessee to support the factual position. The assessee has placed the facts which are apparent in nature for which no rebuttal has been done. The Hon ble Gujarat High Court in the case of CIT vs. Ayachi Chandrasekhar Narsangji, [ 2013 (12) TMI 372 - GUJARAT HIGH COURT] , CIT s. Mahavir Crimpers, [ 2018 (6) TMI 1058 - GUJARAT HIGH COURT] have held that when the Department has accepted the factum of repayment, the additions under section 68 is not sustainable in law. Similar view has been expressed in CIT vs. Karaj Singh [ 2011 (3) TMI 951 - PUNJAB AND HARYANA HIGH COURT] Panna Devi Chowdhary vs. CIT,[ 1994 (3) TMI 80 - BOMBAY HIGH COURT] Overwhelming fact of refund of booking advances which transcends all other considerations coupled with the confirmations from prospective buyers, the CIT(A), in our view, has rightly concluded the issue in favour of the assessee. The view of the CIT(A) is based on sound legal principle in the facts of the case and cannot be dislodged. Thus, we see no merit in the grievance of the revenue.
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2021 (9) TMI 1094
Exemption u/s 11 - whether any activity of rendering any service in relation to any trade, commerce or business for a cess or fee shall not be charitable if receipt from such activities is more than 25 lacs during the year? - assessee is a society registered u/s. 12A of the Act and is also notified u/s. 80G(5)(vi) - HELD THAT:- As on identical facts in A.Y. 2011-12 [ 2019 (11) TMI 1036 - ITAT DELHI] his predecessor allowed the appeal of the assessee and directed the AO to allow exemption u/s. 11 - it is held that the assessee is apparently not involved in any trade, commerce or business and as such the proviso to section 2(15) is not applicable. Exemption under section 11(1) is allowed to the assessee. Accordingly, the Assessing Officer is directed to allow exemption under section 11, with all the consequential benefits. Ground of the appeal are allowed.
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2021 (9) TMI 1093
Benefit of exemption claimed u/s 10(1) - Agricultural income - assessee is in the business of cultivation, production and marketing of hybrid seeds - HELD THAT:- As in assessee s own case for assessment year 1998-99 to 2004-05 [ 2011 (10) TMI 488 - KARNATAKA HIGH COURT] had held that contract farming done by assessee cannot be treated as agricultural income and that assessee is not eligible to claim exemption under section 10(1) of the Act in respect of revenue generated from contract farming. Authorities below in the present facts of the case made categorical observation that assessee has not provided any details regarding about the revenue generated out of each streams of land. Admittedly, assessee still carries out the activities under the same 3 categories, as has been considered in the preceding assessment years by Hon ble High Court. The only income upheld by Hon ble High Court to be in the nature of business income in the preceding years, is the revenue generated from contract farming. Issue needs to be remanded to the Ld. AO for years under consideration for categorising the income earned by assessee under the 3 categories. For that assessee is directed to file the bifurcation of income generated from growing, processing and sale of seeds from owned and leased lands as well as contract lands. AO is then directed to disallow of the deduction claimed under section 10 (1) in respect of the income earned from growing, processing and sale of seeds from contract lands as per the observations of Hon ble Karnataka High Court (supra)in assessee s own case. Disallowance made under section 14A read with Rule 8D(iii) - no suo moto disallowance was made by the assessee towards earning of exempt income - HELD THAT:- Disallowance under section 14A read with Rule 8D shall not exceed exempt income earned for the year. This principle is supported by the decision of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] where it was clearly held that disallowance of expenditure u/s 14A shall not exceed exempt income earned for the year. Respectfully following the same we direct the Ld. AO to restrict the disallowance under section 14A read with rule 8D to the extent of dividend income earned by assessee during the year under consideration. Accordingly, this issue raised by assessee stands partly allowed.
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2021 (9) TMI 1092
Exemption 11 - grant of registration under section 12AA rejected - charitable activity u/s 2(15) - per DIT assessee is only running hostel, which could not be construed as running an educational institution - HELD THAT:- As decided in SHREE AHMEDABAD LOHANA VIDYARTHI BHAVAN [ 2018 (7) TMI 1084 - ITAT AHMEDABAD] running a hostel is akin to a running educational institution which falls within the provision of section 2(15) of the Act - this activity is to be considered per se charitable as contemplated in section 2(15) of the Act. Therefore, the assessee is entitled for the registration under section 12AA - we reverse order of the ld.DIT(Exemption) and allow the application of the assessee for grant of registration under section 12AA - DIT is directed to issue registration certificate in favour of the assessee.
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2021 (9) TMI 1091
Addition u/s. 56(2)(viib) in respect of share premium - value the shares on the basis of intrinsic value per share or by adopting Discounted Cash Flow Method (DCF) - AO expressed dissatisfaction over the valuation on the plea that the assessee was having negative reserves surplus - The actual financial results of financial years 2014-15 2015-16 were not in accordance with the projections made by the assessee - discounting factor of 15.16% was very high - HELD THAT:- The valuation made by the assessee has been arrived at on the basis of DCF method of valuation and therefore, disturbing the same, without any cogent reasons, could not be held to be justified. The prime object of insertion of Sec. 56(2)(viib) was to tax excessive share premium received unjustifiably by private companies on issue of shares without carrying underlying value. The intent of the provision was to deter the generation and use of unaccounted money. However, there are no such allegations against the assessee since the assessee has demonstrated the fulfilment of primary ingredients of Section 68. Our aforesaid findings are duly supported by the binding judicial pronouncement of Hon ble Bombay High Court in the case of Vodafone M-Pesa Ltd. V/s PCIT[ 2018 (3) TMI 530 - BOMBAY HIGH COURT ] wherein it was held that there was no immunity from scrutiny of the valuation report and AO was entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee. Here is a case where the shares had been subscribed by unrelated independent parties, who were one of the leading industrialists and businessman of the country, and after considering the valuation report and future prospect of the company, had chosen to make investment as an equity partners in a 'start-up company' like assessee, then it cannot said that there is any kind of tax abuse tactics or laundering of any unaccounted money. It cannot be the unaccounted or black money of investors as it is their tax paid money invested, duly disclosed and confirmed by them; and nothing has been brought on record that it is unaccounted money of assessee company routed through circuitous channel or any other dubious manner through these accredited investors. As the facts and circumstances of the case do not convince us to confirm the impugned additions made u/s 56(2)(viib). By deleting the same, we allow the ground no.1
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2021 (9) TMI 1090
Deduction u/s 80-IC - CIT(A) allowing the allocation of common expenses on the basis of net profit ratio of the Units as against the ratio of turnover applied by the AO - HELD THAT:- As relying on case of Corning SAS-India vs. Dy. Director of Income Tax [ 2017 (6) TMI 287 - ITAT DELHI] allocation of expenses between the units 1, 2 3 for the purpose of determination of the allowable revenue expenses in order to compute the profits and gains of the eligible business units of the assessee. We are of the further view that Ld. CIT(A) has erred in allocating the common expense of unit 1, 2 3 of the assessee for determination of allowable deductions u/s 80IC on the basis of net profit, hence we reverse the findings returned by Ld. CIT(A) and uphold the findings returned by AO that for determination of the deductions u/s 80IC allocation of common expenses is to be done on the basis of turnover. Addition u/s 14A r.w.r. 8D - exempt income earned by the assessee - CIT-A deleted addition - HELD THAT:- Perusal of the assessment order passed by the AO shows that complete facts have not brought on record as to how much was the exempt income earned by the assessee during the year under assessment; as to whether any interest bearing funds have been used for the purpose of investment so as to apply the provisions contained u/s 14A read with Rule 8D. Even reply filed by the assessee has not been brought on record.CIT(A) has also returned cryptic findings - in view of the matter, we are of the considered view that when complete facts are not on record this issue can not be examined in entirety and as such is remitted back to the Ld. CIT(A) to decide afresh by providing an opportunity of being heard to the assessee. Consequently ground no. 2 is allowed in favour of the revenue for statistical purposes.
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2021 (9) TMI 1088
Reopening of assessment u/s.148 - Reassessment on the basis of audit objection - unexplained addition to the capital account of the partners - CIT(A) has confirmed the addition - HELD THAT:- Factual verification of the accounts is required to be done by the Ld. CIT(A) regarding the alleged unexplained addition to the books of the assessee's as claimed to be explained by the appellant that in case the inter branch balance is excluded from total capital of partners in the e-filed return the addition in the capital of partners will came to only ₹ 1450000 which is duly reflected in the capital accounts of the partners which is duly explained being withdrawals from the bank accounts and the other firms by the partners. In our view, this is a fit case, to be restored to the CIT(A) to pass a speaking order afresh, adjudicating all the grounds of appeal after granting adequate opportunity being heard to the assessee and considering the documentary evidences filed on record or to be filed in the course of proceedings before him. No doubt, the assessee shall cooperate in the proceedings before the CIT(A). Assessee appeal is allowed for statistical purpose.
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2021 (9) TMI 1087
Undisclosed sales - Difference in total sales shown in the VAT return filed and the total sales as per the trading account of the assessee - HELD THAT:- The assessee even before the Tribunal could not reconcile the difference as per the sales disclosed in the VAT return and as per the trading account maintained by the assessee. Since the assessee has not been able to dispel the finding of the A.O. and the CIT(A), the addition is upheld. Decided against assessee. Addition of toll charges by the IOC - Since the same was not offered to tax, the amount was added to the total income of the assessee - HELD THAT:- There is no dispute that the impugned amount received from IOC is not declared in the turnover of the assessee. The above amount whether it constitute income has not been disputed by the assessee before the Tribunal. Hence, the addition is confirmed. Enhancement of purchases by CIT-A - total purchases during the financial year 2014-2015 as per the IOC statement was more than trading account of the assessee showing purchases - HELD THAT:- As per the IOC statement, the total purchases made by the assessee was at ₹ 9,28,86,503. As per the assessee's trading account, the purchases from IOC is only a sum of ₹ 9,28,81,970. Therefore, the difference of ₹ 4,526 is sustained. As regards the enhancement, the CIT(A) relied on the purchases declared under the VAT return instead of statement of IOC. I noticed that there is no enhancement notice given by the CIT(A). Further the IOC had clearly stated that the assessee had made purchases only to the extent of ₹ 9,28,86,503. Therefore, the statement of IOC is to be taken as sacrosanct. Hence, the enhancement made by the CIT(A) is deleted. - Decided partly in favour of assessee.
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2021 (9) TMI 1086
Claim of depreciation - AO added a sum being depreciation claimed on capitalisation being pre-commencement rent and other expenditure incurred under various heads which were capitalized to the building as the same is incurred before the commencement of the operation of the Assessee - plea of the Assessee was that since the hotel work was still under construction, the same ought to be capitalized - HELD THAT:- Expenditure that was capitalized were incurred prior to commencement of business when the hotel was under construction - Assessee capitalized the costs incurred prior to commencement of business to the capital asset buildings as the expenses were incurred during the time of construction of building in the form of hotel which was yet to commence. Section 32 of the Act allows depreciation on actual cost of the asset, which means the actual cost to the assessee. This cost should be construed in ordinarily commercial manner. AS-10 regarding accounting for fixed assets issued by the ICAI specifies the components of cost of a fixed asset. Purchase price of an asset includes import duties, levies, non-refundable taxes and any other cost directly attributable to the asset for bringing it to the working condition. The examples given in AS-10 are site preparation, initially delivery and handling cost, installation cost, such as laying foundations, and professional fees for architects and engineers. Preliminary project expenditure, indirect expenditure relating to construction and other indirect expenditure not related to construction have been included in the cost of the asset - The expenses are required to be capitalised and that the allocation has been made by the assessee on a reasonable basis in the ratio of cost of the asset to the total cost. Section 43(1) of the Act defines actual cost to mean actual cost of the asset to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. We accordingly hold that the expenses incurred by the assessee are required to be capitalised in the light of the decision in the case of Food Specialities Limited and Lucas-TVS Limited [ 1981 (3) TMI 38 - DELHI HIGH COURT] . We hold and direct accordingly and allow the appeal of the Assessee.
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2021 (9) TMI 1085
Validity of reopening of assessment u/s 147 - non-service of notice u/s.148 - HELD THAT:- As the assessee's mother had appeared before the A.O. and notice was served to her. The assessee's mother had had participated in the assessment proceedings. Therefore, the ground taken in the appeal regarding non-service of notice u/s. 148 of the I.T. Act is dismissed. No notice u/s. 142(1) issued - CIT(A) had categorically held that notice u/s. 142(1) of the I.T. Act dated 18.01.2016 was issued to the assessee and in response to the above notice the assessee's mother appeared on behalf of the assessee and the case was discussed. The categorical finding of the CIT(A) has not disproved by the assessee. Therefore, the ground taken with regard to non-service of notice u/s. 142(1) of the I.T. Act is also rejected. Capital gain computation - fair market value of the property is less than the guidance value - whether has erred in invoking the provisions of section 50C ? - It is settled position of law that the CIT(A)'s powers are co-terminus with that of the Assessing Officer. The Hon'ble Calcutta High Court in the case of Sunil Kumar Agarwal v. CITI [ 2017 (6) TMI 542 - ITAT DELHI ] had held that the Assessing Officer has a bounden duty to educate the assessee regarding the possible reliefs available to him, and even in a case where no specific reference to the Valuation Officer was sought by the assessee, it was the duty of the Assessing Officer that such option was available to him. Thus restore the matter to the Assessing Officer to refer the issue to the DVO to arrive at the fair market value of the impugned property. It is ordered accordingly. Appeal filed by the assessee is partly allowed for statistical purposes.
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2021 (9) TMI 1084
Suppression of purchases - addition disregarding that the impugned amount was offered to tax by the assessee in assessment years 2007-2008 and 2008-2009, which tantamount to double taxation - HELD THAT:- We direct the A.O. to examine whether the impugned addition as shown as income in assessment years 2007-2008 and 2008-2009. If it is found by the A.O. that the assessee had disclosed the impugned income as income for the assessment years 2007-2008 and 2008-2009, the Assessing Officer shall delete the addition for assessment year 2006-2007. With these directions, restore this case to the files of the Assessing Officer. Appeal filed by the assessee is allowed for statistical purposes.
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2021 (9) TMI 1083
Accrual of Income in India - Royalty - right to use the software - overriding effect to the DTAA - whether the assessee who is a non-resident and tax resident of Singapore in terms of the India-Singapore Double Taxation Avoidance Agreement (DTAA) who acts as a distributor of computer software and providing ancillary services in the Asia Pacific region is taxable in respect of receipts on sale of computer software to Indian distributors/end users along with ancillary services? - HELD THAT:- The terms of licence agreement were already examined by the DRP and from reading of the terms of the agreements, it is clear that there was no right to use the computer software. In other words, the terms of agreement are identical to the case decided in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] The overriding effect to the DTAA vis- -vis provisions of the Act have also been discussed in the submissions of the Assessee before AO and DRP and in the order of the AO and the DRP - plea for remanding of the case to the AO/TPO cannot be accepted in the facts and circumstances of the present case. Accordingly, following the earlier orders of the Tribunal, we hold that income of the assessee which was brought to tax by the Revenue authorities cannot be brought to tax and the same is directed to be deleted. - Appeal of the assessee is allowed.
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2021 (9) TMI 1082
Addition u/s. 69A r.w.s. 115BBE - cash deposits in bank account - assessee argued that notice u/s. 143(2) was issued by the wrong Assessing Officer - HELD THAT:- As during the course of hearing, no contention with regard to the above said issue was raised, hence, the ground relating to the technical issue that no notice u/s. 143(2) was issued by the correct Assessing Officer is rejected. Addition u/s 69A - There was no unexplained asset or investment unearthed by the department. The assessee had filed cash flow statement and also cash book for the period 01.04.2013 to 13.11.2016 before the A.O. It is an admitted fact that the assessee's grandmother is suffering from cancer. Evidence for the cancer treatment for assessee's grandmother is placed on record - in all probabilities, some amount of cash would have been kept by the assessee to meet the medical emergencies. In facts of the case, the credit of ₹ 1,50,000 given by the CIT(A) is insufficient. I direct the Assessing Officer to grant a further credit for a sum of ₹ 3.5 lakh being cash deposit out of past withdrawals. In other words, the A.O. is directed to tax u/s. 69A r.w.s. 115BBE of the I.T. Act, a sum of ₹ 4 lakh. Therefore, the sum of ₹ 5 lakh is treated as explained being cash deposit out of withdrawals made in the past. Appeal filed by the assessee is partly allowed.
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2021 (9) TMI 1081
Penalty u/s 271(1)(c) - Defective notice u/s 274 - non striking of inappropriate/irrelevant potion in notice - HELD THAT:- Notice in this case is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. Hence following the aforesaid precedent from Mohammed Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law. Hence, the penalty levied under section 271(1)(c) of the Act is liable to be rightly deleted by Ld.CIT(A). We uphold the order of Ld.CIT(A). - Decided in favour of assessee.
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2021 (9) TMI 1080
Validity of assessment u/s 153A - No valid approval u/s 153D - whether mechanical approval under section 153D of the Income Tax Act, 1961 granted by the Joint Commissioner of Income Tax (Central Range) Kanpur? - JCIT passed combined order u/s 153D with respect to different assessee's/group/searches for different assessment years in 67 cases instead of separate order(s) as envisaged under the provisions of Section 153D - HELD THAT:- As relying on NAVIN JAIN, SHRIMATI JAIN, SMT. NEETU JAIN, SHRI NARESH KUMAR JAIN, [ 2021 (9) TMI 1068 - ITAT LUCKNOW] approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case - Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day. - Decided in favour of assessee.
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2021 (9) TMI 1079
TP Adjustment - AMP adjustment - CIT-A deleted the addition - HELD THAT:- The assessee has reported international transaction of purchase of trade goods and capital goods from its AEs for further sale in India and thus status of the assessee is in the nature of distributor of goods of AEs - CIT(A) has deleted the addition on two grounds. Firstly, the Assessing Officer has marked up expenses incurred by the assessee on advertisement and marketing on behalf of its Associated Enterprises (AEs) following the Bright Line Test (BLT) which was rejected by the Hon'ble Delhi High Court in the case of Sony Ericsson [ 2015 (3) TMI 580 - DELHI HIGH COURT] - CIT(A) following Hon'ble Delhi High Court, being a binding precedent has deleted the addition. Also CIT(A) has noted that in subsequent assessment years, i.e., 2012-13, 2013-14 and 2014-15, the Assessing Officer himself has not made any transfer pricing adjustment on account of AMP expenses in same set of circumstances and, therefore, keeping in view of the principle of the consistency, the Assessing Officer is not justified in making adjustment in the year under consideration. Assessee has already been remunerated for the marketing expenses incurred on behalf of the AEs along with commission markup, and, therefore, there was no requirement of making separate AMP addition in the case of the assessee. No infirmity in the order of the Ld. CIT(A) - Decided against revenue.
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2021 (9) TMI 1078
Allowable business expenditure - Disallowance of expenses debited under the head 'other expenses' - as per AO there is no nexus between expenditure debited into the profit loss account and business activity of the assessee - CIT-A allowed partial relief in respect of loan processing charges, where amount held to be pertains to loans/advances of lending activity and the balance amount was sustained - HELD THAT:- As we go through the nature of expenses like filing fees for ROC, office electricity, postage expenses, printing stationery and secretarial/other expenses, all expenses are in the nature of routine expenses required to be incurred by any corporate entity for maintaining corporate status of the assessee - these expenses cannot be disallowed merely for the reason that there is no revenue from operations - we direct the AO to delete additions made towards filing fees for ROC, office electricity, postage expenses, printing stationery and secretarial/other expenses. Processing charges - finding of the ld. CIT(A) that 2/3rd of processing charges relates to loans/advances of lending activity of the assessee and hence, apportioned said expenses between business activity of the assessee and non-business activity and thus, allowed relief of ₹ 75,327/-. Facts remain unchanged. The assessee has failed to bring on record any evidences to prove that said expenditure was wholly and exclusively incurred for the purpose of business of the assessee. Hence, we are inclined to uphold findings of the ld. CIT(A) and reject arguments taken by the assessee - out of total disallowance all expenses excluding processing charges is allowed and insofar as processing charges, findings of the CIT(A) is sustained. Appeal filed by the assessee is partly allowed.
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2021 (9) TMI 1077
Disallowance u/s.14A read with Rule 8D - Mandation of recording satisfaction - disallowance in respect of expenses incurred for earning the exempt income - Assessee argued AO not recording satisfaction before making addition - HELD THAT:- AO noted the assessee's explanation that the company had not incurred any expense in relation to earning exempt income and found the same to be unacceptable by finding that maintaining portfolios do require constant monitoring and control and incidental expenses are incurred. Thereafter, the AO observed that there was no one to one correlation with regard to the expenditure vis- -vis the exempt income, i.e. dividend . In view of the above overwhelming satisfaction recorded by the AO as to the correctness of the assessee's claim in this regard, we are not impressed with the ld. AR's submission that the AO did not record satisfaction in terms of section 14A(2) of the Act. As decided in own case [ 2018 (11) TMI 1869 - ITAT PUNE] ITAT has restored the matter of section 14A disallowance to the file of AO with certain directions. In reaching this conclusion, the Tribunal relied upon its order in the assessee's own case for the assessment years 2008-09 to 2011-12 - On merits, we set-aside the impugned order and remit the matter to the file of AO for computing the disallowance u/s. 14A in the hue of the directions given by the Tribunal in its order for the assessment years 2008-09 to 2011-12.
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2021 (9) TMI 1076
Addition u/s 14A r.w.r. 8D - whether the assessee was having sufficient own funds on the date of investments? - HELD THAT:- As assessee has submitted that the assessee has sufficient own funds for making investments and no part of the borrowed funds were used by the assessee for making investments and prayed for deleting the disallowance of expenditure for the assessment year 2013-14. Either in the assessment order or in the appellate order, the authorities below have not mentioned anything as to whether the assessee has sufficient own funds for making investments or borrowed funds were used by the assessee for making investments - we set aside the order of the ld. CIT(A) and remit the matter back to the file of the AO to verify as to whether the assessee was having sufficient own funds on the date of investments and decide the issue afresh relating to the disallowance under Rule 8D(2)(ii) - AO is directed to consider only those investments for computing average value of investment which yielded exempt income during the year under consideration as per Rule 8D(2)(iii) in view of case of ACIT v. Vireet Investment (P) Ltd..[ 2017 (6) TMI 1124 - ITAT DELHI] and to pass detailed order on both counts. Thus, the ground raised by the assessee is allowed for statistical purposes for the assessment year 2013-14. Disallowance u/s 14A of the Act vis- -vis computation of book profits u/s 115JB - As decided in Vireet Investment (P) Ltd..[ 2017 (6) TMI 1124 - ITAT DELHI] computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the 1962 Rules. It further held that the disallowance of actual expenditure incurred for earning exempt income is required to be made under clause (f) of section 115JB(2) of the Act. Accordingly, the matter is remitted back to the file of the Assessing Officer to compute the books profits under section 115JB of the Act on the direct expenditure incurred for earning exempt income under clause (f) of Explanation to section 115JB(2). Disallowance u/s 14A r.w. Rule 8D for the assessment year 2014-15 - HELD THAT:- AO cannot make disallowance under section 14A r.w. Rule 8D in any count. Accordingly, we direct the Assessing Officer to delete the addition made towards the disallowance under section 14A. Addition being the corporate sponsorship/fee paid to Tennis Academy - HELD THAT:- CIT(A) has observed that various judicial forums have held that as long as an expense is incurred, wholly and exclusively for the purpose of the business earned out by the assessee, it ought to be, ordinarily, allowed under section 37 of the Act. As the assessee has not demonstrated so, the ld. CIT(A) confirmed the addition. Before us also, the assessee could not able to demonstrate as to how the above expenditure incurred by the assessee was wholly and exclusively for the purpose of its business of real estate earned out. Thus, we find no infirmity in the order passed by the ld. CIT(A). Accordingly, the ground raised by the assessee stands dismissed.
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2021 (9) TMI 1075
Unexplained expenditure u/s. 69C - Addition of expenditure incurred for the development expenses as claimed - addition of credits in appellant's bank account - assessee could not explain satisfactorily about the transactions undertaken by him for the purchase of properties and the AO examined in detail the transactions done from the bank account of the assessee - AO has not doubted the source of funds received by the assessee through banking channels, but, the AO has added the entire amount as unexplained u/s. 69C - HELD THAT:- When the assessee incurred any expenditure and no explanation offered about the source of such expenditure or part thereof, then the amount can be treated as unexplained expenditure. In the impugned case, the assessee has established the source of the funds, which was accepted by the AO. Failing to furnish the details of expenditure could not be presumed that it was an unexplained expenditure. On going through the paper book filed by the assessee, the assessee has submitted sale deeds, confirmations from SPR Infrastructure Pvt. Ltd. and SPR Publications pvt. Ltd. and other financial statements, we find that the addition made by the AO is not correct and the ld. CIT(A) after considering the documentary evidence filed by the assessee has rightly deleted the disallowance made by the AO. Thus, We uphold the order of the CIT(A) in deleting the disallowance made by the AO and dismiss the grounds raised by the assessee on this issue.
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2021 (9) TMI 1074
Revision u/s 263 by CIT - AO's omission to frame draft assessment order u/s 144C - not framing the draft assessment order, after receipt of TPO order, the AO has acted arbitrarily without scant regard to the mandatory procedure to be followed as per section 144C - Whether assessment order passed by the Assessing Officer is void being passed without jurisdiction? - HELD THAT:- AO was bound to follow the mandatory provision of law scrupulously and therefore non-framing and issue of draft assessment order is not curable defect because it is a jurisdictional defect which cannot be subsequently corrected by the Ld. PCIT u/s. 263 of the Act, since the assessment order of AO dated 25.09.2017 is null in the eyes of law We hold that the AO's omission to frame draft assessment order breached the Rule of Law and consequently, his non-action to frame draft assessment order before passing the final assessment order was in contravention of mandatory provision of law as stipulated in section 144C of the Act, consequently his action is arbitrary whimsical exercise of power which offends Article 14 21 of the Constitution of India and therefore an action made without jurisdiction and ergo the assessment order dated 25.09.2017 is null in the eyes of law and therefore, is non est. Therefore, when the foundation itself does not exist, i.e., assessment order dated 25.09.2017 is non-est, the Ld. PCIT could not have exercised his jurisdiction to interfere with void/null order which is not existing in the eyes of law and, therefore, the impugned order of Ld. PCIT is also a nullity. The assessee succeeds on the legal issue.
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Service Tax
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2021 (9) TMI 1103
Refund of service tax paid under the mistaken understanding of law - Time limitation - Lack of evidences placed on record - HELD THAT:- The Adjudicating Authority while passing the order in original has categorically observed that no evidence was placed before the authority correlating that the service tax amount collected from the claimant has been remitted to the government account and there is no evidence to show that the service tax amount received from the claimant is actually remitted to the government account by M/s.Ranka International Pvt. Ltd., Bangalore. The same having been observed by the Appellate Authority without further examining on this factual aspect. In the absence of factual findings before the Court, in the writ petition proceedings, this Court cannot exercise the functions of the assessing authority or the fact finding authority to ascertain the genuineness of the claim, in the absence of material documents like original invoices raised by the service providers and the details of the service tax paid by the petitioners. Matter remanded to the Tribunal to reconsider the matter keeping in mind the decision of this Court in Commissioner of Central Excise (Appeals), Bangalore vs. KVR Construction, [ 2012 (7) TMI 22 - KARNATAKA HIGH COURT] vis-a-vis the factual aspects in as much as the claim made by the petitioners, who are not assessees - petition allowed by way of remand.
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2021 (9) TMI 1098
Refund of service tax paid under protest - provisional assessment or not - applicability of time limitation - short payment of duty and excess claim of refund - HELD THAT:- The refund of any excess duty paid by any person is determined under Section 11B of the Central Excise Act. Section 11B prescribes a period of limitation of one year, however the said period of limitation is not applicable if the assessment is provisional. In the instant case, the claim of the respondent is that the assessment should have been deemed to be provisional as the final price was not determined at the time of provision of service and they had specially indicated in export/import applications that the service tax was paid under protest. The assessment cannot automatically turn provisional in absence following due procedures as prescribed under Rule 6 of Service Tax Rules. Since the assessment cannot be termed provisional in the instant case, the refund of ₹ 1,52,54,149/- claimed by the respondent is clearly barred by limitation - the order of Commissioner(Appeals) in respect of the said amount is therefore set aside. Allegation that the total amount recovered by the appellant at the material time was much higher than that paid by the respondent - HELD THAT:- The issue regarding short payment of duty was also raised by corrigendum dt. 29/08/2007 issued by the Assistant Commissioner. As a result, it cannot be said that the show-cause notice did not raise any ground other than unjust enrichment. It is seen that the Order-in-Appeal did not examine the issue regarding the short payment of service tax during the month of February and March 2006 and has ignored the corrigendum to the show cause notice issued by the jurisdictional Assistant Commissioner - thus, the order of Commissioner(Appeals) is set aside on this count as well and the matter is remanded to the Commissioner(Appeals) for fresh adjudication after examining the corrigendum issued to the show-cause notice. The order of Commissioner(Appeals) is set aside in respect of the refund claim pertaining to ₹ 60 lakhs and the matter is remanded back to the Commissioner(Appeals) for examining the issue afresh and pass orders - appeal allowed by way of refund.
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Central Excise
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2021 (9) TMI 1107
Clandestine removal - shortage and excesses of stock - sufficient evidence to establish the clandestine removal or not - excess of the recorded balance in RG1 register - cross-examination of witnesses - Penalty u/r 26 of CER - HELD THAT:- The Apex Court in Andaman Timber Industries Vs. Commissioner of C.EX., Kolkata-II [2015 (10) TMI 442 - SUPREME COURT] held that not allowing a party to cross examine witnesses of the Adjudicating Authority whose statement was the basis of the show cause notice to demand duty is a serious flaw in as much as it amounted to violation of principles of natural justice. It is noted that the Commissioner refused permission to cross examine Thakkar notwithstanding the request made by respondent nos.1 and 2. The permission to cross examine Thakker should have been granted mainly in view of the fact that appellant was relying on the statement of Thakkar and documents which were seized from Thakkar - the majority view is agreed upon that rejection of the request for cross examination of Thakkar would mean that Thakkar's statement cannot be relied upon. The Member (Judicial) has held without discussion that there is also no justification for imposition of penalty of ₹ 40 lakhs on Thakkar. The Member (Technical) has held that the penalty on Thakkar will also depend on the ultimate determination of penalty on respondent nos. 1 and 2. Penalty on Thakkar was not the subject matter of reference to the third member. Thus, question no.4 also in the affirmative. Questions are answered in the affirmative - Appeal dismissed.
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2021 (9) TMI 1106
100% EOU - central excise duty arrived on the depreciated value of the indigenously procured capital goods - section 11A of the Central Excise Act, 1944 - fulfillment of export obligation to a higher limit or not - payment of duty already compensated by fixing export obligation demand of duty again - HELD THAT:- It is clear that the assessee did not contest the dutiability of the indigenously procured capital goods on merit or on the quantum. Therefore, their plea was that based on the letter of the Assistant Commissioner dated 18.05.2006 central excise duty liability stood discharged. Unfortunately the assessee who has been registered under the provisions of the Central Excise Act has failed to take note of rudimentary legal principles. If the assessee claims that he has discharged the duty liability, the same should be established in the manner known to law by producing the necessary challan or an order to the said effect passed by the competent Assessing Officer. The Tribunal rightly held that the letter dated 18.05.2006 by the Assistant Commissioner to the Development Commissioner, MEPZ is not an order. The Tribunal was right in stating that the intention of the assessee was not as that of an honest tax payer as they failed to come forward to disclose that they have not paid the duty amount. That apart, as observed earlier the letter dated 18.05.2006 cannot be regarded as an assessment order and it is merely an inter-departmental communication. Admittedly, there was no adjudication done prior to the letter dated 18.05.2006 for it to be considered as an adjudication order and at best, it can be taken to be an inadvertent mistake committed by the authority in addressing the Development Commissioner. Precisely, for this reason the Tribunal has granted relief to the assessee by deleting the penalty which also in our considered view is a proper exercise of discretion by the Tribunal - the Tribunal has rightly re-appreciated the facts and rejected the appeal filed by the appellant/assessee. There are no question of law much less the substantial question of law arising for consideration in this appeal - appeal dismissed.
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2021 (9) TMI 1105
Levy of penalty u/r 26 of CER - Validity of summon order and non-bailable order - evasion of Central Excise Duty - case of the department is entirely based upon statements obtained under official pressure and duress - cross-examination of various persons whose statements are being relied upon - HELD THAT:- Notice on behalf of opposite party-1 has been accepted by learned Additional Solicitor General of India. Sri Ramesh Chandra Shukla has accepted notice on behalf of opposite party no.2. List /put up this case as fresh in the week commencing 22.11.2021.
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2021 (9) TMI 1099
CENVAT Credit - input services - Group Medical insurance Policy for its employees and their family members - scope of amended definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - malafide intention on the part of the Appellant, or not - suppression of facts or not - invocation of extended period of limitation - Penalty - HELD THAT:- Rule 2(l), CCR, 2004 has been amended w.e.f. 1.4.2011 and from that date insurance has been brought under the exclusion clause and there is no ambiguity/confusion in understanding the said definition of input service after 1.4.2011 - Since w.e.f. 1.4.2011 the service in issue clearly falls in the excluded category, therefore the Cenvat credit availed on these services is inadmissible to the Appellant whether without any additional premium or even if it is attributable to the family members only. When the language of the rule is clear and unambiguous and despite that assessee is not doing his part of obligation then the malafide is apparent and it cannot be termed as bonafide mistake. Therefore the extended period has rightly been invoked by the authorities concerned. The issue to be considered is whether the relevant information was placed before the department earlier and if so in what form, whether in a manner from which the issue at hand was clearly discernible to the department. The provision in the rule relevant to the credit taken is very clear and simple and easy to understand. The very fact that the assessee has taken proportionate credit by adopting their own interpretation without intimation to department would justify to consider this as a case of mis-representation and suppression to invoke extended period for demanding the excess credit availed. Penalty - whether penalty can be reduced to 25% when credit admittedly was reversed before the issuance of show cause notice and interest and penalty was paid within 30 days from the date of the receipt of Adjudication Order? - HELD THAT:- It is not disputed that the demand confirmed in the adjudicating order amounting to ₹ 7,69,054/- was paid by the appellants on 18.1.2013 22.1.2013 respectively i.e. well before the issuance of the show cause notice and the interest thereon of ₹ 1,84,043/- alongwith 25% penalty amounting to ₹ 1,92,264/- was also paid by the appellants on 14.2.2017 i.e. within 30 days period from the date of communication of the Order-in-Original dated 30.12.2016 (issued on 13.1.2017), which was received by the appellants only on 15.1.2017 - this relief can be granted to the appellants and accordingly the penalty is reduced to 25% which, as submitted by learned counsel, has already been deposited by the appellant. Appeal allowed in part.
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2021 (9) TMI 1097
Functional based exemption from duty - Aquasure on Tap Water Purifier - Aquasure Storage Water Purifier-US Tech - benefit of N/N. 6/2007 dated 1.3.2007 availed - requirement of external pressure to water purifiers or not - demand of duty alongwith interest and penalty - HELD THAT:- The Revenue s doubt vide its show-cause notices have been effectively rebutted by the Analytical Report issued by a neutral party wherein it has been categorically clarified that the water purifiers in question do not use any kind of external pressure. It has also been clarified that the water purifiers in question work on gravity flow and do not require electricity, pump or pressurised vessel for purifying water to produce portable water. The Notification in question only mandates that the water filters should function without electricity and pressurised tap water. We have gone through the user manual in respect of both the models which are placed on record, from which we do not see either of the models requiring any electricity or pressurised tap water for functioning. Other than mere suspecting, even the Revenue has not adduced any sought of evidence to dislodge the mode of functioning explained in the user manual. The water purifiers in question function without electricity and pressurised tap water, they satisfy the conditions of the Notification in question - Appellant are entitled for the benefit of Notification in question - appeal allowed - decided in favor of appellant.
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2021 (9) TMI 1089
CENVAT Credit - input services - Product Liability - Product recall insurance policy - HELD THAT:- The issue that whether the appellant is entitle for the Cenvat Credit in respect of product liability and product recall insurance policy has already been decided by this tribunal, in the case of M/S BHAVANI INDUSTRIES VERSUS C.C.E. S.T. - RAJKOT [ 2018 (10) TMI 626 - CESTAT AHMEDABAD] where it was held that As per the facts of the case the Product Recall Insurance Policy is taken by the appellant, as per condition of sale of the goods, without the said condition the goods cannot be sold to customer, the Product Recall Policy is pre-decided before supply of the goods. Therefore, it cannot be said that the Product Recall Policy Expenses is a post removal expenses, once it is pre-determined the goods can be supplied only after the Product Recall Policy is taken then it becomes part of cost of the final product, during the manufacturing of the same, and the credit is allowed. Credit allowed - appeal allowed - decided in favor of appellant.
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