TMI Tax Updates - e-Newsletter
September 29, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Service Tax CST, VAT & Sales Tax

Articles

1. SEBI must be more forward looking and real time facilitator for security market and not an authority to make un-necessary legislations and business difficult. Too much regulations are counterproductive – first part

   By: DEVKUMAR KOTHARI

2. DICGC-Lodging of claims by insured bank's CEOs-need to simplify the process

   By: shivaprasad chhatre

News

1. Responsible Digital Innovation (Speech by Shri T Rabi Sankar, Deputy Governor, Reserve Bank of India – Tuesday, September 28, 2021 - Addressed to the Global Fintech Festival)

2. Quarterly Report on Public Debt Management for the quarter ended June 2021

3. Regulatory Impact Assessment (RIA) for revision of existing Accounting Standards

4. More than 22000 compliances reduced in Government.

5. NFRA issues Financial Reporting Quality Review Report of KIOCL Ltd. for FY 2019-20

6. Rules of Business have to be same for all, says Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, Shri Piyush Goyal

7. Auction for Sale (Issue/Re-issue) of (i) ‘New GoI Floating Rate Bond 2028’, (ii) ‘6.10% GS 2031’, and (iii) ‘6.76% GS 2061’

8. Calendar for Auction of Government of India Treasury Bills (For the Quarter ending December 2021)

9. Government’s Borrowing Plan for Second Half (H2) of FY 2021-22

10. Issuance Calendar for Marketable Dated Securities for October 2021 - March 2022

Notifications

DGFT

1. 33/2015-2020 - dated 28-9-2021 - FTP

Extension of FTP 2015-2020

GST - States

2. S.O. 135 - dated 27-9-2021 - Bihar SGST

Extend timelines for filing of application for revocation of cancellation of registration to 30.09.2021, where due date for filing such application falls between 01.03.2020 to 31.08.2021, in cases where registration has been canceled under clause (b) or clause (c) of section 29(2) of the BGST Act

3. S.O. 134 - dated 27-9-2021 - Bihar SGST

Amendment in Notification No. S.O. 09 dated 03/01/2019

4. S.O. 133 - dated 27-9-2021 - Bihar SGST

Bihar Goods and Services Tax (Seventh Amendment) Rules, 2021.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2021/630 - dated 27-9-2021

Risk Management Framework (RMF) for Mutual Funds

FEMA

2. 13 - dated 28-9-2021

Use of any Alternative reference rate in place of LIBOR for interest payable in respect of export / import transactions

Companies Law

3. 15/2021 - dated 27-9-2021

Extension of last date of filing of Cost Audit Report to the Board of Directors under Rule 6(5) of the Companies (Cost Records and Audit) Rules, 2014

Highlights / Catch Notes

GST

• Court Rules Appellant Must Be Informed of Reasons for Input Tax Credit Block u/r 86-A for Effective Representation.

  Case-Laws - HC : Blocking of input tax credit - Since the appellant-assessee did not have the benefit of the reasons on what ground the order under Rule 86-A was passed, the representation is only general in nature. Therefore, for an effective representation to be made the Appellant is entitled to know the reasons, based on which the power under Rule 86-A was invoked by the second respondent. - HC
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• Court Upholds Penalty Order Validity; Assessee Received Mandatory Personal Hearing u/s 75(4) of the Act.

  Case-Laws - HC : Validity of order for levy of penalty - Principles of natural justice - The provision, that is, Section 75(4) of the Act, has mandated that, only an opportunity of hearing, that means one opportunity shall be given mandatorily to the Assessee for personal hearing - Such one opportunity had been given, and ultimately, the third opportunity also had been given to him on 30.12.2020, where he was permitted to file objection or reply and personal hearing was also given to him was utilised. - Petition dismissed. - HC
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Income Tax

• Appellate Court Overturns Order Due to Lack of Findings in Section 147 Income Tax Act Reassessment Case.

  Case-Laws - HC : Reopening of assessment u/s 147 - Unless these are decided and a finding is rendered, it cannot be held as to whether the reopening is valid or not. Since such an exercise has not been done by the learned Single Judge, we are inclined to interfere with the impugned order. This is more so unless and until such a finding is rendered, the Appellate Court cannot test the correctness of the findings. Therefore, in the absence of any such finding, the Appellate Court cannot be expected to convert itself into the Court of first instance and decide the writ petition on merits. - HC
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• Penalty u/s 271(1)(c) Not Applicable for Unsustainable Claims Without Inaccurate Income Details in Tax Returns.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition on account of addition under the head “Land Compensation and Rehabilitation Expenses” - mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income and where no information given in the Return is found to be incorrect or inaccurate, the Assessee cannot be held guilty of furnishing inaccurate particulars. - AT
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• Loss in Bardana Value Due to Wear and Tear Deemed Justified in Financial Assessments.

  Case-Laws - AT : Addition on account of loss in bardana - In such type of business the bardana is used to store goods like paddy, rice and rice bran etc. and again reused, the value of bardana deteriorate with passage of time and there is also wear and tear, therefore, the purchase price and the sale price of bardana cannot be the same. - the addition made on account of loss in bardana was not justified - AT
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• TPO and AO Must Align to Prevent Double Additions in Taxable Income Assessment.

  Case-Laws - AT : TP Adjustment - In our considered view the TPO and the AO are part of the income tax Department and therefore there has to be consistency in the approaches of both the authorities. As such the authorities should not take different stand while determining the taxable income of the assessee otherwise it would lead to the double addition which is not desirable under the provisions of the Act. - AT
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• Assessee Fails to Prove Fund Use and Availability; Interest Disallowance by Assessing Officer Justified.

  Case-Laws - AT : Allowability of financial charges including interest expenditure - The assessee failed to produce documentary evidences, the end use of funds invested in subsidiary, fellow subsidiary, ultimate holding company and to others. - Further, assessee failed to prove that assessee had sufficient own funds for giving loans and advances and invested in shares and further, could not produce the availability of own funds on the date investments in shares and giving loans and advances on the particular date of investments - Thus the disallowance of interest made by the AO is justified - AT
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• Assessment Reopening Valid u/s 147 Due to "Reason to Believe" on Hawala Transactions; Process Deemed Flawless.

  Case-Laws - AT : Validity of the reopening of the assessment u/s 147 - eligibility of reason to believe - hawala transactions - borrowed satisfaction - the A.O in the backdrop of the information that was received by him from the Investigation wing, Mumbai had after due application of mind validly reopened the case of the assessee. Accordingly, finding no infirmity in the validity of the reopening of the assessee’s case u/s 147 - AT
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VAT

• Appellate Authority's Power Limited: Cannot Alter Transaction Character u/s 52(3), Only Confirm, Cancel, or Vary Orders.

  Case-Laws - HC : Power of First Appellate Authority to change the character of the transaction - the correct interpretation to be given to clause (b) of Section 52(3) is to mean that the power is exercisable in the case of any other order which can be confirmed, canceled or varied, provided it does not change the character of the transaction nor the subject matter which was the issue before the Assessing Officer. - HC
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Case Laws:

• GST

• 2021 (9) TMI 1191
  Condonation of delay in filing appeal - petition appears to have been first presented before this Court more than two years after the impugned order came to be passed - Cancellation of registration of petitioner - violation of principles of natural justice - HELD THAT:- The present petition has been filed more than two years after the order dated 05.09.2019 came to be passed. In absence of any credible explanation as to the delay, we do not find any ground exists to entertain the present petition under Article 226 of the Constitution of India, filed belatedly. The writ petition is dismissed leaving it open to the petitioner to avail its remedy of appeal. It is thus provided that in the event, the petitioner files an appeal within a period of two weeks along with a copy of this order, that appeal may be dealt with and decided on its own merit, strictly in accordance with law.

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• 2021 (9) TMI 1190
  Applicable rate of tax under the GST Act on payment of royalty on the Government of Gujarat - HELD THAT:- The advance ruling authority on 19th May, 2020 held that amendment dated 31st December, 20218 was clarificatory and therefore applicable from 1st July, 2027. The statutory appeal preferred by the petitioner also resulted against him. On the basis of the entry no.29 of Notification no.11 of 2017 Central Tax (Rate) dated 28th June, 2017 concluded the royalty to be @ 18%. Issue urgent Notice returnable on 6th October, 2021. The request is made for the grant of interim relief, which has been sought. On the returnable date, the learned advocate for the petitioner is permitted to make a request for the same.

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• 2021 (9) TMI 1189
  Revocation of registration of petitioner - appeal was dismissed on the ground that appeal has not been filed within the time allowed for filing the appeal under Section 107 of the Act - registration was cancelled for the reason that the petitioner has not filed the returns of the GST for continuous six months - Principles of natural justice - HELD THAT:- Upon perusal of the appellate order, it is evident that the appeal was dismissed on the very first date on the ground of limitation without affording any opportunity of hearing to the petitioner to explain the delay in filing the appeal. In the facts and circumstances of the case, it is deemed proper to direct the Appellate Authority to decide the appeal of the petitioner on merits within a period of two months from the date of communication of the order without being influenced by the order dated 17.6.2021 passed by the Appellate Authority. The writ petition is disposed of.

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• 2021 (9) TMI 1187
  Blocking of input tax credit - Seeking direction upon the respondents to permit the petitioner to debit from its electronic credit ledger as shown in the ledger - Violation of principles of natural justice - HELD THAT:- Before invoking the power under Rule 86-A, the Authority should have reasons to believe that the credit of input tax available in the electronic credit ledger has been fraudulently availed or the assessee is ineligible, on account of anyone of the contingencies in clauses (a) to (d) of Rule 86-A(i). That apart, the Rule contemplates that the said authorities has to record the reasons in writing and not allowed to debit any amount equivalent to such credit in the credit ledger. It is not clear as to why the appellant-assessee has not been intimated in writing as to what are the reasons, which waved the mind of the authority to invoke the power under Rule 86-A. The respondent cannot be heard to say that they can invoke the power under Rule 86-A without having reasons to believe and without recording such reasons in writing. This is a pre-requisite and in the absence any reason, which has been recorded, the invocation of power under Rule 86-A should be held to be unauthorised, illegal and without jurisdiction. Courts have held as against such order passed by the Assessing Officer rejecting the objections to the reopening, the Act having not provided any remedy, Writ Petitions are entertained by the Court under Article 226 of the Constitution of India. The unrelying principles, which can be culled out from the decision of the Hon ble Supreme Court is that, the assessee should be afforded an opportunity of hearing and he is entitled to know as to why the assessment is sought to be reopened and he is also entitled to object to such reopening done by the Assessing Officer. The same analogy can be applied to the case on hand. The assessee is entitled to put forth his submission/objection requesting for lifting of such order and establishing a case that there has not been any fraudulent availment of credit or the assessee would not fall within anyone of the contingencies mentioned in clauses (a) to (d) of Rule 86-A(1) so as to make them ineligible for the credit - Since the appellant-assessee did not have the benefit of the reasons on what ground the order under Rule 86-A was passed, the representation is only general in nature. Therefore, for an effective representation to be made the Appellant is entitled to know the reasons, based on which the power under Rule 86-A was invoked by the second respondent. The writ petition is disposed of by directing the respondents or any other officers, who have been authorized by the first respondent to communicate the reasons recorded in writing before invoking the powers under Rule 86-A to the appellant, within a period of one week from the date of receipt of a copy of this order and on receipt of the same - appeal allowed.

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• 2021 (9) TMI 1180
  Validity of order for levy of penalty - Principles of natural justice - opportunity of personal hearing provided or not - assessment orders challenged on the only ground that the personal hearing, which is mandated under Section 75 (4) of the Act had not been given to the petitioner - HELD THAT:- Under Sub Section 4 of Section 75, it has been mandated that an opportunity of being heard shall be granted, where, if a request is received in writing from a person chargeable with tax or penalty or where any adverse decision is contemplated against such person. In order to meet out this mandatory requirements, whether such an opportunity was given to the petitioner by the respondent is the only question to be answered. As requested by the petitioner, a further time of 15 days was given to the petitioner and a notice was issued to the petitioner from the respondent office on 15.12.2020 inviting him to file objection on or before 29.12.2020 and a personal hearing was also provided to him on 29.12.2020 - even this opportunity was not utilised as he did not appear and file any objection till 29.12.2020. However, one day later, that is, on 30.12.2020, the petitioner appeared and filed objection, where he was given such opportunity of hearing, that was utilised by him and thereafter, the respondent seems to have proceeded to pass the impugned assessment order. The provision, that is, Section 75(4) of the Act, has mandated that, only an opportunity of hearing, that means one opportunity shall be given mandatorily to the Assessee for personal hearing - Such one opportunity had been given, and ultimately, the third opportunity also had been given to him on 30.12.2020, where he was permitted to file objection or reply and personal hearing was also given to him was utilised. This case cannot fall under the category of no opportunity of personal hearing was given, and hence this Court feel that, it cannot be treated that the respondent has violated the mandatory provisions contained in Section 75(4) of the Act - Petition dismissed.

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• Income Tax

• 2021 (9) TMI 1186
  Exemption u/s 11 - Whether the petitioner would be entitled to get benefit under Sections 11 and 12 of the Act or not, in view of the provisions of Section 13(1)(a), because of the amendment made in the year 1998 in the articles of the petitioner Society, is the question to be decided by the appellate authority, where admittedly, the appeal filed by the petitioner dated 29.04.2021, is pending? - HELD THAT:- Petitioner had been enjoying the benefit of Sections 11 and 12 of the Act, hitherto and such a benefit all of a sudden is withdrawn or taken back by citing Section 13(1)(a) of the Act, whether such a levy of Tax made on behalf of the revenue by the assessing officer is justifiable or not is the subject matter before the appellate authority and therefore, once the appellate authority takes up the appeal and decide the same and before which, if any demand is made, even as a condition under Section 220(6), that will be a case of prejudice to the petitioner, if ultimately the appeal is decided otherwise. Therefore, this Court feels that in a case of this nature, when a prima facie case is made in this regard by the assessee that shall be taken into account.

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• 2021 (9) TMI 1184
  Validity of faceless assessment u/s 144B - Violation of principles of natural justice - Petitioner states that the impugned assessment order has been passed without issuing a show cause notice and draft assessment order mandated under Section 144B(1)(xvi)(b) - HELD THAT:- Section 144B(1)(xvi)(b) mandatorily provides for issuance of a prior show cause notice and draft assessment order before issuing a final assessment order. Since in the present case the averment that no show cause notice as well as draft assessment order has been issued, has not been shown to be false, there is violation of mandatory procedure stipulated in Section 144B. The impugned assessment order, notice of demand dated 23rd April 2021 and notice of penalty under Section 270A of the Act, dated 11th June 2021, are set aside and the matter is remanded back to the Assessing Officer, who shall issue another copy of the draft assessment order and a show cause notice under Section 144B(xvi) within two working days.

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• 2021 (9) TMI 1183
  Validity of reopening of assessment u/s 147 - Consideration of objection raised against reopening notice - HELD THAT:- As the respondent has to now dispose of the objections by passing a speaking order before proceeding with assessment in respect of aforementioned assessment year. Learned Revenue counsel, on instructions, submits that the speaking order will be passed within a fortnight and the same will be served on the writ petitioner under due acknowledgment within three days from the date of making of the speaking order. This draws the curtains on the captioned writ petition. Captioned Writ Petition is disposed of as closed, recording the stated position of the parties leaving open all the rights and contentions of both sides when proceedings move on further and are carried to its logical end

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• 2021 (9) TMI 1182
  Reopening of assessment u/s 147 - whether the assumption of jurisdiction by the Assessing Officer invoking Section 147 of the Act is in accordance with law? - HELD THAT:- What is required to be seen in the said writ petition is as to whether the alleged ground, on which, the reopening was done, was based on a new material, was there a sale transaction and more particularly when the assessee was not the owner of the property. The so called material, which was unearthed during search proceedings conducted in the premises of the Finance Manager of a company, has also been furnished to the assessee and the notings therein need to be considered as to whether any on money was received by the assessee. Unless these are decided and a finding is rendered, it cannot be held as to whether the reopening is valid or not. Since such an exercise has not been done by the learned Single Judge, we are inclined to interfere with the impugned order. This is more so unless and until such a finding is rendered, the Appellate Court cannot test the correctness of the findings. Therefore, in the absence of any such finding, the Appellate Court cannot be expected to convert itself into the Court of first instance and decide the writ petition on merits. Hence, while setting aside the impugned order passed in the said writ petition, we are inclined to restore the said writ petition to the file of the learned Single Judge to be heard and decided on merits - Writ appeal is allowed.

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• 2021 (9) TMI 1179
  Penalty u/s 271(1)(c) - Non specification of charge - defective notice u/s 274 - HELD THAT:- The perusal of the assessment order passed u/s 143(3) of the Act reveals that AO has recorded the satisfaction that assessee has concealed the income. Thereafter, in the penalty order passed u/s 271(1)(c) of the Act, AO had levied penalty for furnishing of inaccurate particulars of income. It is a settled law that while levying penalty for furnishing of inaccurate particulars of income, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271 (1)(c) of the Act. First step is to record satisfaction while completing the assessment as to whether the assessee had concealed her income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 read with Section 271(l)(c) of the Act is to be issued to the assessee - Assessing Officer thereafter has to levy penalty under Section 271(l)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed her income or furnished inaccurate particulars of income. As in CIT vs Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT ] has held that where initiation of penalty is one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. - Decided in favour of assessee.

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• 2021 (9) TMI 1178
  Levy of penalty - Guest house maintenance expenses - CIT(A) deleted the penalty - HELD THAT:- Assessee continuously claimed the expenditure incurred on guest houses as allowable business deductions since A.Y. 2002-03 till A.Y. 2007-08, and no disallowance has ever been sustained by the ld. Commissioner. Even the finding of the ld. Commissioner in the instant case is very clear to the effect that neither the element of concealment of income nor any inaccurate particulars of income furnished in the return. Further observation of the ld. Commissioner to the effects that the AO has not brought out any falsity or bogus claim of expenditure incorporated under the above heads of expenses goes to show that the said finding of the ld. Commissioner is clinching in its right perspective. Even otherwise, nothing material is available on record to controvert the findings of the Ld. Commissioner, hence we are inclined not to interfere with the conclusion drawn by the ld. Commissioner as the same does not suffer from any perversity, impropriety or illegality. Resultantly, this ground of appeal raised by the Revenue Department stands dismissed. Penalty u/s 271(1)(c) on the head Repairs of the road not belonging to the Assessee - Commissioner deleted the said penalty on the ground that there is neither the element of concealment of income nor any inaccurate particulars of income furnished in the return - HELD THAT:- Considering the facts as the addition qua repairs and maintenance of assets not belonging to the company , has already been deleted by the Co-ordinate Bench, hence no penalty could survive and consequently the ground no. 2 is dismissed being infructuous. Penalty under the head payments made to the transporters - HELD THAT:- Co-ordinate Bench of the Tribunal vide its order [ 2019 (12) TMI 203 - ITAT RAIPUR ] allowed the ground raised by the Assessee in the said appeal before the Tribunal qua addition under the head payments made to the transporters against which penalty is under consideration and remitted the issue back for statistical purposes to the file of AO for determining the allowability of expenses, hence the penalty imposed by the AO cannot survive. The Ld. DR also did not controvert the said factual position. Penalty u/s 271(1)(c) - addition on account of addition under the head Land Compensation and Rehabilitation Expenses - Department did not find the claim of the Assessee as maintainable and treated the same as Capital in nature as against Revenue in nature claimed by the Assessee and made the addition - HELD THAT:- As for the previous years, the appeals against the said sustenance of expenses as capital in nature is pending before the Hon ble Chhattisgarh High Court, therefore, issue qua addition also become debatable issue and support the bonafide claim of the Assessee and therefore there is no base to entail the penalty under section 271(1)(C) of the Act, hence on the aforesaid considerations, deliberations and observations, while respectfully following the propositions laid down by the Hon ble Apex Court and High Courts to the effects that the assessment proceedings and penalty proceeding are altogether different and merely because amount was disallowed does not ipso facto lead to levy of penalty and the penalty can not be levied simply on the reason that addition has been sustained. Further mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income and where no information given in the Return is found to be incorrect or inaccurate, the Assessee cannot be held guilty of furnishing inaccurate particulars.

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• 2021 (9) TMI 1177
  Accrual of Income in India - Royalty - right to use the software - overriding effect to the DTAA - License fee for use of HR software treated as royalty under the Act / Article 12 of the India-Netherlands tax treaty - HELD THAT:- Issue is squarely covered in favour of the assessee by the decision of Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT ] is acceptable. Hon ble Supreme Court has elaborately examined the issue and has decided the issue in favour of the assessee. The Hon ble Supreme Court has set aside the decision of Hon ble Karnataka High Court in the case of Samsung Electronics Company Ltd. [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] , which has been relied upon by the AO. - Decided in favour of assessee.

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• 2021 (9) TMI 1175
  Income chargeable to tax in India - PE In India - shipping income received by the assessee - place of effective management may be a state other than India or Mauritius - Article 8 of the Double Taxation Avoidance Agreement between India and Mauritius ( DTAA) - Whether CIT(A) has legally erred in holding that the Appellant had a Permanent Establishment ( PE } in India in the form of Agents and thereby has erred in charging to tax the Business Profits of the Appellant in India under Article 7 of the ? - HELD THAT:- As in the first round of litigation, the Tribunal, while deciding assessee s appeal held that the assessee is not eligible for availing the benefit of Article 8 of the tax treaty. Having held so, the Tribunal did not decide assessee s alternative contention regarding applicability of Articles 5 and 7 of the tax treaty, as according to the Bench, such issue is of academic nature. However, the Tribunal opined that once Article 8 of the tax treaty is held inapplicable to the assessee, the consequence should be that income earned by the assessee in India from operation of ships in international traffic has to be taxed as per the provisions of the domestic law. The issue whether assessee has a PE in India so as to tax the business profit in terms of Article 7 is very much alive for adjudication before the Tribunal. No material has been brought to our notice by the revenue to demonstrate that the aforesaid order of the Tribunal while disposing of the miscellaneous application has either been challenged by the revenue in a higher court or has been reversed. In the aforesaid scenario, the order passed in M.A has attained finality. That being the case, revenue s objection to ground 2 raised by the assessee is unsustainable. Agency PE in India - Whether two entities M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd can be considered to be providing exclusive agency services to the assessee or they are of independent status and providing such services in the ordinary course of their business? - HELD THAT:- The very fact that the aforesaid entities are providing services to a number of shipping companies including the assessee demonstrates that they are not exclusively working for the assessee. Not only they are agents of independent status, but the services provided by them to various shipping companies including the assessee are in course of their ordinary business as per Article 5(5) of the Tax treaty. At this stage, we must observe, since the language used in Article 5(5) is simple and unambiguous, there is no necessity of interpreting it with external aid. See DCIT vs Overseas Transport Co Ltd[ 2020 (10) TMI 503 - ITAT MUMBAI] As specific clauses of the agreement referred to by the assessing officer and learned Commissioner (Appeals) for concluding that M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd are agency PE of the assessee were considered by the co-ordinate bench in case of ADIT vs Bay Lines Mauritius [ 2018 (2) TMI 1524 - ITAT MUMBAI ] However, even after taking note of such clauses available in the agreement, the co-ordinate bench held that agents in India are of independent status and providing services to the assessee in ordinary course of business. In our considered opinion, the aforesaid decisions of the Tribunal would squarely apply to the facts of assessee s case. Therefore, it has to be held that M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd do not constitute agency PE of assessee in India. Thus, in absence of a PE in India, the business profits of the assessee would not be taxable in view of Article 7 of the tax treaty. Accordingly, we delete the addition. This ground is allowed.

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• 2021 (9) TMI 1174
  Exemption u/s 11 - claim under the head objects of general public utility OR under the head preservation of environment - whether activities of the assessee do not fall within Preservation of environment (including watersheds, forest and wildlife) as inserted in Section 2(15) of the Act w.e.f. 01.04.2009? - HELD THAT:- As decided in the assessee s own case, [ 2019 (7) TMI 1865 - ITAT LUCKNOW] the position with regard to the activities of the assessee falling within Preservation of environment (including watersheds, forest and wildlife) as inserted in Section 2(15) of the Act w.e.f. 01.04.2009, has duly been taken into consideration and the matter has been decided in favour of the assessee on due appreciation of the same. Vide order dated 16/01/2009, the Tribunal had originally allowed. registration to the assessee. Tribunal held that the activities of the assessee pertaining to removal and disposal of trees was for the preservation of the environment. While holding so, the Assessing Officer s finding that the activities of the assessee do not fall within the expression Preservation of environment (including watersheds, forest and wildlife) as inserted in Section 2(15) of the Act w.e.f. 01.04.2009, was reversed. The said order dated 16/01/2009, passed by the Tribunal, was upheld by Allahabad Hon ble High Court [ 2010 (5) TMI 752 - ALLAHABAD HIGH COURT] and ultimately by Hon ble Supreme Court [ 2011 (5) TMI 1014 - SC ORDER] as submitted on behalf of the assessee and not rebutted by the Department. It was in keeping with these orders that the CIT(A) has held the activities of the assessee to be falling within the expression Preservation of environment (including watersheds, forest and wildlife) as inserted in Section 2(15) of the Act w.e.f. 01.04.2009. Thus there is no merit found in the grievance of the Department wherein it has been contended that the activities of the assessee do not fall within the expression Preservation of environment (including watersheds, forest and wildlife) as inserted in Section 2(15) of the Act w.e.f. 01.04.2009; and that the activities of the assessee are commercial and in the nature of trade, commerce or business, hit by the provisions of the first proviso to section 2(15) - Decided in favour of assessee.

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• 2021 (9) TMI 1172
  Addition on account of CCM [Client Code Modification] and commission earned for providing accommodation entry to the persons out of the Group - CIT-A deleted the addition - HELD THAT:- We find an identical issue had come up before the Tribunal in the case of Group Company namely Jaypee Financial Services Ltd [ 2019 (12) TMI 820 - ITAT DELHI] as held nothing on record to suggest that the CCM was done at the behest of the assessee. Further, there is no addition or adverse view taken in the case of the other person with whose accounts presumption is being made that transaction has been shifted.Admittedly there is nothing on record that the revenue has gone to the broker to find out as to who is the beneficiary of the CCM. Further the transactions have not been held to be non genuine.Client Code Modification is akin to penny stock is concerned, we do not find any merit in the said arguments. In case of the penny stocks shares are purchases at a very low price and were sold immediately after one year at astronomically high price just to claim the benefit of deduction u/s. 10 (38) or as the case may be. However, in case of CCM there is no such purchase at low price and sale at high price and it is on account of some punching error which has been rectified subsequently. So no infirmity in the order of the Ld. CIT(A) in deleting the addition made on account of Client Code Modification and commission earned for such accommodation entry. Addition u/s 36(1)(iii) - interest bearing funds have been diverted for interest free loans to Director of sister concern - assessee could not establish that the interest bearing funds borrowed by it is wholly and exclusively used for the purpose of business and there is no commercial expediency in giving interest free loan to its sister concerns - CIT(A) deleted the addition on the ground that the transactions with the 03 clients are business transactions and not loan transactions - HELD THAT:- As relying in own case [ 2020 (1) TMI 858 - ITAT DELHI] we find no infirmity in the order of the Ld. CIT(A) in deleting the addition made by the A.O. under section 36(1)(iii). Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted the disallowance - HELD THAT:- We find merit in the alternate contention of Learned Counsel for the Assessee that the disallowance under section 14A cannot exceed the actual dividend income received in view of the decision of Hon ble Delhi High Court in the case of Cheminvest Ltd [ 2015 (9) TMI 238 - DELHI HIGH COURT] - Since the assessee in the instant case has received dividend income of only Rs. 60,718/-, therefore, the disallowance under section 14A is restricted to Rs. 60,718/-. The order of Ld. CIT(A) is accordingly modified and the ground raised by the Revenue on this issue is partly allowed. Addition on account of sale of shares of United Stock Exchange - CIT(A) deleted the addition on the ground that the sale price of share on 17.09.2010 sold by USE to assessee and M/s Richa Global Exports Pvt. Ltd, @ Rs. 1/-, which is not a related party transaction - HELD THAT:- Sole motive behind selling the shares was to obtain permission from SEBI for online trading and the shares were sold in a haste, hence the same were sold at par. USE was to formally commence its operations on 20.09.2010 and till 19.09.2010 the assessee had no option but to reduce the shareholding to 5% since the operation of USE could not commence under the above circumstances as assessee was holding 22.50 Crore shares in excess of 5% before 19.09.2010. Thus assessee has no option but to sell entire excess shareholding of 22.50 Crore on or before 19.09.2010 at par. BSE has the right of first refusal i.e. if BSE can buy at the same price and further more BSE has the right to bring new buyer of their choice to buy shares at the offered price, then these could not be sold to other parties. Therefore, there cannot be any scope of understatement of selling price as the same was in knowledge of BSE and doubting this transaction would also raise questions on BSE. We find all the shares allotted/transferred were approved by the board of USE and BSE. That is, the shares are transferred with prior approval of board, hence there is no hidden transaction etc. We, therefore, find no infirmity in the order of the Ld. CIT(A) in deleting the addition made by the A.O. Addition on account of allotment of shares of NCDEX at concessional rate by invoking the provisions of Section 56(2)(viia) - Addition on the ground that provisions of Section 56(2)(viia) are applicable on the allotment of shares of NCDEX at concessional rates - CIT(A) deleted the addition on the ground that Rule 11U and 11UA of Income Tax Rules, have come into force by Notification no. 23/10 dated 08.04.2010, which came into effect from 01.10.2009 - HELD THAT- Shares issued to SRSL and shares issued to NCDEX, are on different footing and cannot be compared. The purchase of shares by the assessee is not from related party. The submission of the Learned Counsel for the Assessee that shares are issued to the assessee-company @ Rs. 59/- per share as against Fair Market Value of Rs. 42.12 as per Rule 11U and 11UA could not be controverted by Ld. D.R. Since, the Ld. CIT(A) while deleting the addition has passed a detailed order giving reasons which the Ld. D.R. could not controvert, therefore, we find no infirmity in the order of the Ld. CIT(A) in deleting the addition. We, therefore, uphold the order of the Ld. CIT(A). Addition being income under section 92 as interest on loan from A.E. - CIT-A deleted the addition - HELD THAT:- CIT(A) correctly deleted the addition on the ground that ALP of interest on foreign currency loan, is to be determined at US Dollar LIBOR, for the year under consideration since loan given to A.E. is in US Dollar, for which, assessee will determine the ALP, and file its claim before the A.O. If the A.O. finds that the claim as per US Dollar LIBOR, in terms of decision of Hon ble Delhi High Court in the case of Cotton Naturals (I) Pvt. Ltd. [ 2013 (6) TMI 174 - ITAT DELHI] , the addition to the extent will be made and the excess of interest now determined, will be deleted. Appeal of revenue dismissed.

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• 2021 (9) TMI 1171
  Addition u/s 36(1)(iii) - assessee had paid interest to the sundry creditors AND on the other hand no interest was charged from the sundry debtors - Assessee submitted that the purchaser of the rice from the assessee were having the loss in this year so it was not possible to charge interest when the payments were at risk and that there was no such agreement between the purchasers and the assessee to charge any interest - HELD THAT:- Nothing is brought on record to substantiate that there was any agreement between the assessee and the debtors for charging of interest on the trade debits which were on account of purchases of the Rice made from the assessee - assessee furnished the copies of the accounts from the debtors in the said accounts also no interest was charged and moreover the A.O. had not established any nexus between the interest bearing funds with the interest free advances. On the contrary the debtors were on account of purchases made from the assessee, therefore, the A.O. was not justified in invoking the provision of Section 36(1)(iii) of the Act and making the impugned addition which was wrongly sustained by the Ld. CIT(A). In the absence of any nexus proved between the interest bearing funds and the debtors the impugned addition deserves to be deleted, accordingly the same is deleted. Addition on account of loss in bardana - HELD THAT:- AO framed the assessment ex parte and the assessee furnished the documentary evidence in the form of purchase and sale bills of bardana before the Ld. CIT(A). In such type of business the bardana is used to store goods like paddy, rice and rice bran etc. and again reused, the value of bardana deteriorate with passage of time and there is also wear and tear, therefore, the purchase price and the sale price of bardana cannot be the same. Moreover nothing is brought on record that he assessee inflated the purchases or suppressed the sales, therefore, the addition made by the A.O. and sustained by the Ld. CIT(A) on account of loss in bardana was not justified, accordingly the same is deleted. Appeal of the Assessee is allowed.

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• 2021 (9) TMI 1170
  TDS u/s 194C - TDS on surrogacy payments made to the concerned payee(s) - HELD THAT:- This tribunal s co-ordinate bench decision in assessee s cases [ 2021 (4) TMI 454 - ITAT HYDERABAD] itself has upheld the learner lower appellate authorities action invoking Section 194C of the Act thereby treating the surrogacy payments as contractual in nature - We thus adopt judicial consistency and uphold the impugned TDS recovery demands in issue.

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• 2021 (9) TMI 1169
  Income accrued or deemed received in India - PE in India in terms of Article 5 of India US-DTAA - Proof of business connection in India - agency PE - whether the agents have the authority to conclude contracts (on behalf of the assessee)? - HELD THAT:- As decided in own case [ 2012 (3) TMI 27 - ITAT DELHI] though the assessee had a business connection in India, it had neither fixed placed PE nor agency PE in India and in absence of any PE in India the profits, if any, attributable to India operations could not be assessed as business profits under Article 7 of the India-US DTAA - the agents engaged by the assessee were independent agents under Article-5(4) of the India US-DTAA and they did not have the necessary authority to conclude the contracts of the assessee and, on that premise, it was held that there is no agency PE of the assessee in India. Under similar circumstances, the Co-ordinate Bench of the Tribunal held that though the assessee had business connection, it did not have any fixed placed PE nor agency placed PE in India, and, in the absence of any such PE in India, the profits, if any, attributable to India operations could not be assessed as business profits under Article-7 of the India US DTAA. - Decided against revenue.

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• 2021 (9) TMI 1168
  Allowability of ESOP compensation expenses - CIT-A allowed the claim - HELD THAT:- CIT-A had done well reasoned order and we do not find any infirmity in the order of the CIT(A). Ld. CIT(A) after considering submissions and case laws cited/relied on by the assessee, he has rightly allowed the appeal of the assessee on the issue of ESOP compensation expenses. We also notice from the above order of the CIT(A) that the disputed amount has already been considered as a perquisite in the hands of the employees while calculating income of the employees Therefore this ground of revenue is dismissed. Disallowance u/s 14A - Proof of receiving exempt income - HELD THAT:- We observe from the order of the CIT(A) and financial statements filed by the assessee before us that in the impugned AY the assessee has not received any exempt income, therefore, no disallowance can be made As relying on M/S MAHESWARI MEGA VENTURES LTD. [ 2017 (2) TMI 402 - ITAT HYDERABAD] there is no substance in the grounds raised by the revenue regarding disallowance u/s. 14A in the case of the assessee. Therefore, this ground of appeal of revenue is dismissed.

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• 2021 (9) TMI 1167
  Revision u/s 263 by CIT - short term capital loss from three scrips - As per PCIT, the AO has not enquired into this issue making the order passed by the AO erroneous as well as prejudicial to the revenue - HELD THAT:- The assessee an NBFC has shown revenue from sale of shares which has not been found fault by the Ld. PCIT, whereas the loss claimed from sale of shares have been found to be at fault for AO not conducting proper enquiry i.e. Ld. PCIT was aware that enquiry was conducted so it is a case of inadequate enquiry by the Ld. PCIT itself. In such a scenario, the Ld. PCIT ought to have conducted enquiry by himself and recorded his finding as to how the AO erred in his role as an investigator and also must be able to demonstrate how the view of AO on the facts of the case was unsustainable in law. We presume that the AO has discharged his duty as an investigator on the issue of loss on the scrips in question and after taking note of CBDT circular No. 287/30/2014-IT(Inv. II)-Vol-III dated 16.03.2016 on penny stock and thereafter conducted the enquiry. And after perusal of the reply of the assessee to the specific queries and details called for and after perusal of the supporting materials, the AO being satisfied has accepted the claim of assessee in respect of loss on these scrips. Therefore the AO s action of accepting loss on the three (3) scrips cannot be termed as a case of no-enquiry on the part of the AO. Pre-condition to invoke revisional jurisdiction u/s. 263 of the Act is absent and therefore the Ld. PCIT has invoked the jurisdiction without satisfying the condition precedent i.e. the AO s action should be validly held to be erroneous as well as prejudicial to the revenue. Therefore, the impugned action of Ld. PCIT is without jurisdiction and therefore the impugned order is nullify. - Decided in favour of assessee.

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• 2021 (9) TMI 1166
  Revision u/s 263 - order passed under Section 143(3) r.w.s. 147 was made without examining the provision of Section 57 - HELD THAT:- As once the issue has been examined in the order passed under Section 143(3) in the order passed u/s 143(3) r.w.s. 147 of the Act the Ld. AO is not further required to revisit the same issue and, thus, the Ld. PCIT has wrongly passed order setting aside the order passed under Section 143(3) r.w.s. 147 of the Act which is impugned before us - It appears from the order dated 13.03.2015 passed by the Ld. AO that the disallowance under Section 57 of the Act for interest has been made upon verification of the records and upon due application of mind. Revision barred by limitation - As impugned under Section 263 of the Act passed by the Ld. PCIT is barred by limitation in view of the particular fact that the original assessment order under Section 143 of the Act was passed on 13.03.2014 and the revision thereof could have been taken by 31.03.2016 within two years from the end of the Financial Year. However, the order impugned was passed much after that. The order is non-est in the eye of law and, thus, liable to be quashed - see JINDAL STEEL AND POWER LTD. VERSUS PR. CIT, GURGAON. [ 2020 (5) TMI 360 - ITAT DELHI] - Decided in favour of assessee.

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• 2021 (9) TMI 1165
  Exemption u/s 11 - Rejecting the application for registration u/s 12AA(1)(b)(ii) - HELD THAT:- CIT (Exemptions) had issued only one letter dated 22.10.2019 calling for certain queries. The assessee could not appear before the ld. CIT(E) on the date fixed for and the CIT (Exemptions) passed the order and rejected the application of the assessee for registration u/s. 12A(1) of the Act. The submission of assessee before us was that the notice dated 22.10.2019, fixing the date of hearing on 4.11.2019 has not been received by the assessee in time; and that all the relevant details as sought for by the ld. CIT(E) had already been filed along with the application for registration under section 12A - one more opportunity should be given to the assessee to explain its case before the ld. CIT (Exemptions). We are of the view from the facts of the case that the assessee has not been given proper and sufficient opportunity before disposing of the application of registration by the ld. CIT (Exemptions). Matter is remitted to the ld. CIT(E) to be decided afresh in accordance with law, within a period of two months from the date of receipt of this order. Appeal of the assessee stands allowed for statistical purposes.

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• 2021 (9) TMI 1164
  TP Adjustment - upward adjustment made on account of international transaction with AE s by treating it (the assessee) as a tested party - HELD THAT:- As t in the identical set of facts circumstances, the ITAT Delhi Bench, in the own case of the assessee, in the AY 2008-09 being [ 2016 (5) TMI 157 - ITAT DELHI ] has held that AE s should be accepted as tested party being the least complex for comparability analysis of international transaction with the assessee. We restore the issue to the file of the TPO for the determination of ALP of International Transactions with the AEs for fresh adjudication considering its AE s as the tested party. Hence, the ground of appeal of the assessee is allowed for statistical purposes Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance made by assessee - HELD THAT:- As decided in own case [ 2016 (5) TMI 157 - ITAT DELHI ] findings recorded by the CIT (A) and the Tribunal are appropriate and relevant. The clear findings are that the assessee had sufficient funds for making investments in shares and mutual funds. The said findings coupled with the failure of the Assessing Officer to hold and record his satisfaction clinches the issue in favour of the respondent assessee and against the Revenue. Adjustment while computing the book profit under section 115JB of the Act taking the amount of disallowance made u/s 14A r.w.r. 8D - HELD THAT:- As decided in own case [ 2016 (12) TMI 1539 - ITAT AHMEDABAD ] we set aside the finding of the ld. DRP and direct the AO to delete the adjustment made by him under section 115JB of the Act. Hence, the ground of appeal of the assessee is allowed. Disallowance u/s 35(2AB) of the Act on the ground that the assessee had not filed form 3CL issued by the DSIR - HELD THAT:- As decided in own case [ 2016 (12) TMI 1539 - ITAT AHMEDABAD ] expenses incurred before Form 3CM approval cannot be denied for the purpose of Section 35(2AB) weighted deduction. We follow the very reasoning to opine that facts of the instant case rather go a step further wherein the appellant has only claimed those expenses which relate to the time period as approved in the Form 3CM. We accordingly hold that the assessee is very much entitled for claiming the above capital and revenue expenses incurred on in house research and development Deduction for the contribution made to Ranbaxy community healthcare society (for short RCHS) and Ranbaxy Science Foundation (for short RCF) - HELD THAT:- As decided in own case [ 2016 (5) TMI 157 - ITAT DELHI ] we delete the disallowance of contribution made by appellant to Ranbaxy Community Healthcare Society and Ranbaxy Science Foundation - regarding failure to deduct tax on this sum, Ld. DR. could not point out particular section, which warrants deduction of tax at sources on this payment. Therefore, we also hold that in absence of specific section under which the tax is required to be deducted on such contribution without their being any service rendered by the recipient of the contribution disallowance u/s 40a(ia) also cannot be made. Deduction u/s 80IB/IC - plants located in Goa and Himachal Pradesh - AO in addition to the above also observed that the assessee had not provided the financial statements of the eligible undertakings separately as required under rule 18BBB(2) of Income Tax Rules - assessee has just provided the income and expenditure account which is nothing but self-serving document. - HELD THAT:- As relying on assessee own case [ 2016 (5) TMI 157 - ITAT DELHI ] the order of the ITAT Delhi where the deduction claimed by the assessee under section 80IB/80IC was allowed based on reasoning as discussed above. Hence the ground of appeal of the assessee is allowed. Addition for the payment made by the assessee to Teva Pharmaceuticals, Israel by treating the payment made by the assessee to Teva Pharmaceuticals as clandestine payment - HELD THAT:- The revised agreement was entered by the assessee with TEVA USA to avoid the manufacturing rights being conferred to the TEVA as per the original agreement dated 7-12-2010. As such the assessee wanted to manufacture the product at its own in order to build its goodwill in the US Market. We are also conscious to the fact that there was no clause in the original agreement dated 7th December 2010 under which the assessee could have opted to get out from such agreement. It was possible when the other party was not able to honour the conditions of the agreement whereas the other party has fulfilled all the conditions as prescribed in the agreement. Whether the assessee was authorized to make the payment to TEVA Israel whereas the original agreement as well as the amended agreement dated 7th December 2010 and 7th December 2011 respectively were made between the assessee, RPI and TEVA USA? - As revenue cannot accept part of the agreement favouring to it and reject part of the agreement without assigning any valid reasons. The Revenue either should have accepted the entire agreement or should have rejected the same in entirety. It is not expected from the revenue to accept part of the agreement and reject part of the agreement which is not a good practice. The settlement agreement which is giving rise to the compensation paid by the assessee was entered dated 7th of December 2011 i.e. within the financial year under consideration corresponding to the assessment year 2012-13. Therefore, it cannot be said that the liabilities incurred against such contracts/agreement by the assessee were contingent in nature. The learned DR at the time of hearing has relied on various judgments, but the same are distinguishable from the facts of the case on hand. In those judgments as well there was no denial for denying the deduction if the expenditure has been incurred for the purpose of the business. We hold that the payment to the TEVA Israel has been made by the assessee as a matter of commercial expediency which is wholly and exclusively for the purpose of the business. Thus the ground appeal of the assessee is allowed. Disallowance for settlement agreement AND Plea agreement under section 37 of the Act on account of payment made to US FDA for the settlement - HELD THAT:- There is no dispute to the fact that the assessee has been doing the business in the US market since many years. However, the business of the assessee came to halt once there was an Alert notice issued by the US FDA with regard to import of drugs/product manufactured at assessee certain facilities in India. In fact the assessee by making the impugned payment was able to resume its business. Therefore it cannot be said that the assessee has got any benefit of enduring nature. Therefore the impugned payment cannot be treated as capital in nature. We also agree with the contention of the learned AR that the TPO and the AO has taken different stand with respect to the amount paid in dispute as discussed above. TPO while working out the profit level indicator of the assessee has treated the said amount y as operating expenses whereas the AO has disallowed the same is not eligible for deduction under section 37 of the Act. In our considered view the TPO and the AO are part of the income tax Department and therefore there has to be consistency in the approaches of both the authorities. As such the authorities should not take different stand while determining the taxable income of the assessee otherwise it would lead to the double addition which is not desirable under the provisions of the Act. Assessee is entitled for the deduction for the payment made by it as a result of settlement agreements as discussed above under the provisions of section 37(1) of the Act. The impugned payment not be treated as penalty in the nature of provided under explanation 1 to section 37(1) of the Act. Hence the ground of appeal of the assessee is allowed. Disallowance while computing the profit u/s 115JB of the Act by treating the payment made by the assessee to US FDA as unascertained liabilities - lower authorities have disallowed the provision made by the assessee in the books of account under section 115JB of the Act on reasoning that such provision is not ascertained liability - HELD THAT:- We have allowed the claim of the assessee treating the provisions as the cost incurred in the course of the business in the year under consideration under normal computation of income. Thus there remains no ambiguity to the fact that the amount was crystalized in the year under consideration. The reasoning for holding the amount was crystalized in the year under consideration has already been discussed in preceding paragraph of this order while dealing with ground no. 10 of the assessee. Accordingly we set aside the order of the ld. DRP and direct the AO to delete the disallowance made under section 115JB of the Act for the eligible amount as per the law. Hence, the ground of appeal of the assessee is allowed. Addition of expenses incurred on doctors for promotion of business - HELD THAT:- Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation as discussed above. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any Allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is not applicable upon Pharma companies, then, in our considered view, there was no violation of the provisions of section 37(1) of the Act. As CBDT Circular No. 5/2012 dated 01.08.2012 is applicable for the assessment year 2013-14 whereas the year under consideration pertains to the assessment year 2012-13. Therefore the circular issued by the CBDT cannot be applied for the year under consideration -disallowance cannot be made in the year under consideration on account of freebies given to the medical practitioners being the AY 2012-13. Hence, the ground of appeal of the assessee is allowed. Disallowing the hedging charges on hedging contracts and interest swap expenditure claimed by way of note to protect the ECB loans by treating it capital expenditure - HELD THAT:- In the present case the question of claiming the depreciation does not arise for the reason that the issue relates to the investment made in the foreign subsidiaries. As such the investment in shares of foreign subsidiary does not attract the provisions of section 32 of the Act. We also note that the assessee in its submission before the AO has already made alternate contention to treat the hedging expenditure as capital expenditure which has been accepted by the Revenue. Thus it appears there is no grievance to the assessee. However, the interest swap requires reconsideration by the AO. Disallowance of compensation on ESOP - as per assessee ESOP is a revenue expenses and incurred wholly and exclusively for the purpose of business - HELD THAT:- As relying on own case [ 2016 (5) TMI 157 - ITAT DELHI ] we allow the deduction of the ESOP expenses

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• 2021 (9) TMI 1163
  Penalty u/s 271(1)(c) - Assessment u/s 153A/153C - HELD THAT:- Since ITAT has already granted relief to the assessee in quantum proceedings [ 2019 (4) TMI 700 - ITAT DELHI] , now there is no basis to hold penalty proceedings against the assessee. - Decided in favour of assessee.

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• 2021 (9) TMI 1162
  Allowability of financial charges including interest expenditure - interest free loans granted to subsidiary companies - AO has disallowed interest expenditure claimed by the assessee u/s.37(1) stating that the loan funds are utilized for the purpose of investment in equity shares, Interest free loans and advances and not for the purpose of assessee s business - HELD THAT:- We observe from the financial statements of the assessee that it has given loans and advances and invested in shares of the related parties and to others from its own funds as well as from the borrowed funds. From the entire arguments of assessee, we find that it was unable to quantify the amount of borrowed funds which have been utilized for other than the business purposes of the assessee. AR could not controvert the submissions/observations of the ld. DR in regard to both the issues i.e. commercial expediency and to meet the particular financial requirements of SPVs. Further, he was also unable to controvert the regarding revenue receipts, which are extraordinary receipts compared to the expenditure incurred by the assessee. Assessee has given interest free loans/advances from interest bearing account which was not a debit balance i.e. loan funds have been utilized for advancing to its subsidiary, fellow subsidiary ultimate holding co. and to others. Assessee was unable to establish the use of the funds for business purposes as per the decision relied on by the ld. AR of the assessee. He also unable to establish the commercial expediency as observed supra, in all the years the assessee has not received any dividend or interest income and has not produced any agreements between / amongst the companies to whom the loans and advances were made and what was the purpose for giving loans and advances. The assessee failed to produce documentary evidences, the end use of funds invested in subsidiary, fellow subsidiary, ultimate holding company and to others. We also do not find any weightage on the submission of the ld. AR of the assessee that assessee had sufficient own funds for giving loans and advances and invested in shares and further, could not produce the availability of own funds on the date investments in shares and giving loans and advances on the particular date of investments. Thus the disallowance of interest made by the AO is justified and accordingly, we set aside the order of the CIT(A) and restore the order of AO in all the appeals under consideration. Thus, the grounds raised by the revenue in all the appeals, on this issue are allowed.

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• 2021 (9) TMI 1161
  Estimation of income - Bogus purchases - GP rate determination - HELD THAT:- Addition in respect of the purchases made by the assessee from the open/grey market is backed by the reason that the goods in question would have been procured at a discounted value as against that accounted for on the basis of bogus purchase bills in the books of accounts. We, thus, in terms of our aforesaid deliberations herein direct the A.O to restrict the addition insofar the bogus/unproved purchases aggregating to Rs. 93,93,627/- in the case before us are concerned by bringing the G.P. rate on the amount of such bogus purchases at the same rate as that of the other similarly placed genuine purchases. Validity of the reopening of the assessment u/s 147 - eligibility of reason to believe - bogus purchases - HELD THAT:- A.O after referring to the material i.e the information that was received by him from the Investigation wing, Mumbai, had therein clearly applied his mind and had observed that as per the information as the assessee company was one of the beneficiary qua the purchases made from the hawala parties, therefore, he had a reason to believe that on account of claim of excessive expenses on account of purchases claimed by the assessee to have been made from the said hawala dealers, its income for the year under consideration had been under assessed. We are unable to persuade ourselves to subscribe to the claim of the ld. A.R that the concluded assessment of the assessee had been reopened on the basis of a borrowed satisfaction. As observed by us hereinabove, the A.O in the backdrop of the information that was received by him from the Investigation wing, Mumbai had after due application of mind validly reopened the case of the assessee. Accordingly, finding no infirmity in the validity of the reopening of the assessee s case u/s 147 - Decided against assessee.

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• Customs

• 2021 (9) TMI 1188
  Mis-declaration of imported goods - metal idol/statue - Confiscation - levy of redemption fine and penalty - metal idol/statue imported by the petitioner by not declaring it as an antique article - HELD THAT:- The Archeology Department had intimated to the respondents that the subject idol/statue was suspected to be an antique item. It is on such basis that the value of the said idol/statue is fixed at Rs. 5,00,000/- for the purposes of duty and penalty - the complexion of the proceedings however takes a different turn when Mr. Ankhad, on instructions from his client states before us that his client would like to donate the said idol/statue to the Customs Department as according to the petitioner it is not an antique item as claimed by the Revenue. In the peculiar facts of the case, it would be appropriate, that the Revenue auctions the subject idol/statue, by appointing an appropriate agency for such purpose and sell the idol/statue in a public auction. The petitioner does not have any objection to such course of action to be undertaken by the Revenue - the Revenue is permitted to take appropriate steps to auction the subject idol/statute. All the formalities in that regard be completed within a period of three months from today. Stand over for three months.

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• Corporate Laws

• 2021 (9) TMI 1160
  Sanction of scheme of Amalgamation - seeking to dispense with the meeting of Equity Shareholders of the Applicant Companies - seeking to direct for convene the meeting of Secured and Unsecured Creditors of the Applicant Companies etc. - section 230 to 232 of the Companies Act, 2013, and other Applicable provisions of the Companies Act, 2013 R/w. Companies (CAA) Rules, 2016 - HELD THAT:- Various directions with regard to various meetings issued - directions with regard to issuance of various notices also issued. The scheme is approved - application allowed.

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• Service Tax

• 2021 (9) TMI 1176
  Short payment of service tax - amount received towards construction of Educational Institutions - period from 01.04.2012 to 30.06.2012 - HELD THAT:- It needs to noted that for the period prior to April 2012, show cause notices were issued to the respondent on the same ground namely that construction for Educational Institutions would be taxable under CICS but the demand raised in the show cause notices were dropped. The Department filed appeals before the Tribunal which appeals were dismissed by the order dated 12.09.2018. When the contention advanced by the Department in the appeal decided on 12.09.2018 has not been accepted and that order has attained finality, the present appeal filed by the Department deserves to be dismissed - Decided against Revenue.

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• 2021 (9) TMI 1173
  Valuation - inclusion of cost of free supply diesel made by M/s. ONGC in the value of taxable service for running the drilling vessel - HELD THAT:- The issue is squarely covered in the case of Vantage International Management Company vs. CCGST, Mumbai East [ 2021 (2) TMI 564 - CESTAT MUMBAI] where it was held that Since, M/s. ONGC was not required to make payment of fuel to the appellant, its value cannot be added to the taxable value both under the un-amended and amended provisions of Section 67 ibid. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (9) TMI 1185
  Violation of principles of natural justice - petitioner is provided with an opportunity either to file material evidence or to pay the compounding fee or not - HELD THAT:- The allegation of mala fides raised against an Authority must be impleaded as a party respondent in the writ proceedings in his personal capacity. In the absence of any one of these grounds, no writ can be entertained as against the show cause notice - the violation of principles of natural justice has been raised in almost all the writ petitions. Even in such cases, where the jurisdiction point is raised, it is to be stated in the objections and the Authority Competent is bound to consider such objections. If an order is passed and the Assessee is not satisfied, then they are bound to prefer an appeal as contemplated under the Act. Entertaining a writ petition against the show cause notice is not preferable and the disputed facts between the parties cannot be adjudicated in the writ proceedings by the High Court under Article 226 of the Constitution of India. All such facts are to be adjudicated with reference to the documents and evidences made available and therefore, the contentions raised on merits cannot be considered at all. The petitioner is at liberty to submit any material evidence of appeal or submit explanations to the notice, enabling the Authorities to consider the same - the High Court cannot adjudicate such disputed facts in the writ proceedings - Petition dismissed.

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• 2021 (9) TMI 1181
  Jurisdiction - power of First Appellate Authority to change the character of the transaction - inter-state sale or local sale - freight charges can be added to the value of the sale or not - Section 52 of the TNVAT Act - HELD THAT:- In the instant case, the first respondent, the Appellate Authority has ignored the settled legal principle and issued directions to the Assessing Officer to treat the transaction as a legal sale, for which, he had no jurisdiction to do so. Thus, the correct interpretation to be given to clause (b) of Section 52(3) is to mean that the power is exercisable in the case of any other order which can be confirmed, canceled or varied, provided it does not change the character of the transaction nor the subject matter which was the issue before the Assessing Officer. Thus, the order passed by the first respondent / Appellate Authority dated 17.05.2013 in the writ petition is without jurisdiction. Appeal allowed.

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