TMI Tax Updates - e-Newsletter
September 8, 2022

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. GUIDELINES FOR ARREST AND BAIL UNDER CENTRAL GOODS AND SERVICES TAX ACT, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

2. Refund on Extra Duty Deposit should be automatic under the Customs Act

   By: Bimal jain

News

1. Investor Education and Protection Fund Authority (IEPFA) and National Council of Applied Economic Research (NCAER) organise seminar to celebrate IEPFA’s 6th Foundation Day

2. Shri Piyush Goyal launches US Startup SETU - Supporting Entrepreneurs in Transformation and Upskilling programme in Sanfrancisco

3. Shri Goyal pays tributes to Mahatma Gandhi in San Francisco Visits Gadar Memorial Hall in San Francisco; recalls the sacrifice of our forefathers

4. India provides the best investment opportunity to the investors across the world- Shri Goyal

5. India means opportunities; this isn’t just India’s decade, it is India’s century, Shri Piyush Goyal tells Stanford students

6. Indian Diaspora in the US are true ambassadors of the philosophy of 'Vasudhaiva Kutumbakam' - Shri Goyal

7. Shri Piyush Goyal interacts with Venture Capitalists in San Francisco Bay Area.

Circulars / Instructions / Orders

Customs

1. Instruction No. 22/2022-Customs - dated 6-9-2022

Disposal of gold—Clarification on Instruction No. 27/2021-Customs dated 03.12.2021

Highlights / Catch Notes

GST

• Court Rules Against GST Department for Missing 7-Day Detention Order Deadline, Upholds Strict Compliance with Statutory Requirements.

  Case-Laws - HC : Failure to issue detention order within 7 days from the date of detention / seizure - the GST Department does not recognise the concept of ‘working day’ and ‘holiday’ and rightly so, since substantial civil rights of the parties are at stake by the aforesaid powers. - the procedure that has been followed by the respondents in this matter is contrary to statutory requirements as well as the instructions issued by the Commissioner. The submissions of the revenue, that the Circular has no statutory force and the instructions thereunder are to be taken as flexible, are rejected. - HC
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Income Tax

• Disallowance u/s 40(a)(ia) not applicable if fees for technical services aren't claimed as deduction.

  Case-Laws - HC : Non deduction of TDS - Additions u/s 40(a)(ia) - If an assessee has paid any amount on account of fees for technical services outside India or in India to a non-resident but has not debited such amount to the profit and loss account and has also not been claimed as deduction in computing the income chargeable under the head profits and gains of business or profession, this Court is of the considered view that, no disallowance in respect thereof can be made by invoking the provisions of Section 40(a)(ia). - HC
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• High Court: Reopening Tax Assessments Requires Substantial Information, Not Just a Pretext, u/s 147 of Income Tax Act.

  Case-Laws - HC : Reopening of assessment u/s 147 - The term “information” in Explanation-1 u/s 148 cannot be lightly resorted to so as to reopen assessment and this information cannot be a ground to give unbridled power to the revenue. - HC
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• High Court rules Section 69C inapplicable as assessee proves genuine purchases and AO didn't challenge export sales or GPR.

  Case-Laws - HC : Unexplained expenditure u/s 69C - genuineness of purchases - Assessee statedly had made purchases from the three parties - Payments made through banking channels - Assessee in our view has discharged his onus in respect of the subject purchases. AO has also not doubted the sales arising out of the said export activity and its GPR. This is not a case which falls within the ambit of Section 69C as held by the AO. - HC
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• High Court Rules Section 43B of Income Tax Act Inapplicable to Electricity Duty Collected by Assessee as Agent.

  Case-Laws - HC : Applicability of Section 43B - electricity duty collected by the assessee - The revenue is required to show that the duty, tax, cess or fee (in the present case electricity duty) is payable by the assessee - assessee is merely an agency assigned with a statutory function to collect electricity duty from the consumers and to pay the same to the State Government - we find that the question w.r.t. the applicability of Section 43B on the electricity duty, needs to be answered against the revenue - HC
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• Foreign Exchange Premium Amortization Allowed, Not Applicable u/s 43A for Domestic Asset Loans.

  Case-Laws - AT : Claim of expenditure towards premium paid on forward covers of foreign exchange rates - Section 43A is not applicable to the facts of the present case since it is not the case of the Revenue that the foreign exchange loan has been taken for purchasing any asset outside the country. - assessee is entitled to claim the amortization of premium paid on foreign exchange contracts - AT
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• Taxpayer Granted Exception u/s 271AAA for Voluntary Income Disclosure During Search and Seizure Operation.

  Case-Laws - AT : Penalty u/s 271AAA - in course of search and seizure operation when the assessee came forward and offered certain income to show his bona fide and ultimately followed it up by actually offering such income to tax, in our view, the assessee should be given the benefit of the exceptions provided under sub-section (2) of section 271AAA. - AT
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• Income Tax Case: A.O Reopens u/s 147, Profits Recharacterized as Unexplained Cash Credit u/s 68.

  Case-Laws - AT : Unexplained cash credit - Profit from commodity trading on NMCE - Though no infirmity either emerges as regards the assumption of jurisdiction by the A.O for reopening the case of the assessee u/s.147 of the Act or recharacterizing of the amount of the impugned profit claimed by the assessee to have been earned from commodity trading on NMCE platform as an unexplained cash credit u/s.68 of the Act, but the same would duly be entitled for set-off against the assessee’s claim of loss from commodity trading on MCX platform - AT
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• House Renovation Costs Eligible for Deduction u/s 54F of Income Tax Act, Subject to Verification by Assessing Officer.

  Case-Laws - AT : Deduction u/s 54F - LTCG - the expenditure incurred by her after purchase of the house for rendering it habitable would be considered as having been incurred for purchase of the said house and would be eligible for deduction u/s 54F, but restore the same to the file of the A.O for the limited purpose of verifying the veracity of the aforesaid claim of the assessee - AT
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• TDS Not Applicable on Gold Ornament Wastage u/s 194C; Additions Deleted Due to No Payment Involvement.

  Case-Laws - AT : TDS u/s 194C - wastage claimed in manufacturing of gold ornaments - in the present case the issue of wastage whether it is 0.5% to 1% as estimated by Revenue or it is 4.5% to 6% as claimed by assessee, it neither involves any payment or credit of such sum by way of cash, issue of cheque or draft or by any other mode and hence does not liable for TDS u/s 194C - Additions deleted - AT
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• CIT(A) approves using foreign associated enterprise as tested party; advises against aggregating transactions for benchmarking. Excludes certain services.

  Case-Laws - AT : TP Adjustment - tested party - No infirmity in the order of the learned CIT(A) in directing the assessee to adopt the foreign associated enterprise as tested party with respect to 1st set of transactions, not to aggregate the first set of transaction and second set of transactions for benchmarking, exclusion of e–clerk services limited and TCS e–serve international Limited for benchmarking second set of transactions. - AT
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• CIT Revises Capital Gains and Book Profits Computation; Not All AO Orders Prejudicial to Revenue u/s 263.

  Case-Laws - AT : Revision u/s 263 by CIT - capital gain computation - book profit computation u/s. 115JB - Every loss of Revenue as a consequence of an order by the AO cannot be treated as prejudicial to the interest of the Revenue. - AT
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Indian Laws

• Handwriting Expert's Report Irrelevant in Cheque Dishonor Cases; Drawer's Signature Presumes Validity Under Indian Law.

  Case-Laws - SC : Dishonor of Cheque - opinion of the hand-writing expert - The fact that the details in the cheque have been filled up not by the drawer, but by some other person would be immaterial. The presumption which arises on the signing of the cheque cannot be rebutted merely by the report of a hand-writing expert. Even if the details in the cheque have not been filled up by drawer but by another person, this is not relevant to the defense whether cheque was issued towards payment of a debt or in discharge of a liability - SC
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IBC

• IRP's Conduct Questioned for Inflating CIRP Costs; Section 12A IBC Withdrawal Highlights Mismanagement Issues.

  Case-Laws - AT : Duties and functions carried out by IRP. - Disallowing certain CIRP expenses claimed by the Appellant/IRP - Withdrawal of CIRP under Section 12A of the IBC - the IRP seems to have taken advantage of the fluid situation and unnecessarily added to the costs by carrying out activities which could have otherwise been put on hold and find the conduct of the IRP deprecatory. - AT
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• Court Rules Rs. 4 Crore Payment as Operational Debt, Qualifies for CIRP Under Insolvency and Bankruptcy Law.

  Case-Laws - AT : Initiation of CIRP - Operational Debt or not - Nature of transaction between the parties for taking over the Company - When the Operational Creditor acted in pursuance of the Proposed Development Agreement between the parties, the amount paid by the Operational Creditor of Rs. 3 Crores plus Rs. 1 Crore was towards providing services by the Operational Creditor, the same is clearly an “Operational Debt” - AT
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Service Tax

• Supreme Court dismisses revenue's appeal; hotels not classified as "Renting of Immovable Property" for service tax.

  Case-Laws - SC : Renting of Immovable Property Services or not - assignment of entire business of the hotel to IHCL - scope of definition - immovable property buildings used for the purpose of accommodation including hotels, whether comes within the scope of Renting of immovable property or not? - Revenue appeal against the CESTAT order dismissed - SC
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• Service Tax on Supplementary Invoices: Apply 10% Rate for Pre-April 2012 Services, Not 12% Post-Rate Change.

  Case-Laws - AT : Levy of service tax - supplementary invoice - cost escalation clause - to be taxed at 12% or at 10% - the taxable events in the present Appeal had admittedly occurred prior to 01.04.2012. At that point of time the rate of Service Tax applicable in respect of services in question was 10% and not 12% which came into effect only on or after 01.04.2012 - The issuance of supplementary invoices in the month of July 2012 would not make any difference because it is not receipt of payment which is taxable event, but the rendition of service. - AT
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• Interest Due on Delayed Refund of Pre-Deposit from Before Aug 6, 2014, Starts Post 3-Months After Final Order.

  Case-Laws - AT : Interest on refund - pre-deposited prior to 6.8.2014 - After the expiry of three months from the date of the final order dated 19.02.2020, the appellant is entitled for the interest on delayed refund till the date of refund of the pre-deposit amount - AT
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Central Excise

• Excise Duty Refund Denied: Returned Goods Valued Lower Than Paid Duty, Assessee's Argument u/s 173L Rejected.

  Case-Laws - SC : Refund of the excise duty on goods returned to factory - Valuation - the submission on behalf of the assessee that the returned goods may be treated as a raw material and therefore the “value” of the raw material can be considered for the purpose of “value” while determining the refund under Section 173L cannot be accepted - As the value of the returned goods determined by the Deputy Commissioner at Rs.8 to 10 per kg is found to be less than the amount of duty already paid, the appellant is rightly denied the refund of the excise duty paid. - SC
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• High Court Confirms Bill of Entry Valid for CENVAT Credit u/r 9(1)(c); Transfer Memos, Endorsements Questioned.

  Case-Laws - HC : CENVAT Credit - valid duty paying documents or not - Transfer Memos - Endorsed Bill of Entry - It is to be noted that the bill of entry is one of the approved documents in terms of Rule 9 (1)(c) of the Rules. The bill of entry being the basic document, the assessee was entitled to avail credit based upon the duty paid pursuant to the import effected which was established by producing bill of entry. - HC
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• Cenvat Credit Denial Clarified: No Malpractice if Credit Not Taken; Rebate or Refund Claims Allowed.

  Case-Laws - AT : Denial of re-credit of Cenvat credit - if the appellant does not take any credit then no such mal-practice can happen and no credit can be accumulated. Moreover, it also implies that the credit “available” would mean the Cenvat credit taken and available in the credit of Cenvat account and not the credit that the appellant could have possibly taken but did not avail. - Benefit of rebate / refund claim allowed - AT
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• Pharmaceutical Company Penalized for Misusing Exemption Notification via Slump Sale Agreement Beyond Ten-Year Limit.

  Case-Laws - AT : Area Based exemption - slump sale agreement - In essence, the slump sale agreement and the MOU are but a method employed to claim the benefit of the exemption notification for the pharmaceuticals manufactured by the assessee in its own plant beyond the maximum permissible period of ten years. Thus, paying about Rs. 25 lakhs under the slump sale agreement, the assessee has claimed exemption from duty beyond ten years of about Rs. 23 crores. - Demand with penalty confirmed - AT
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• Company Misses Deadline for Commercial Production, Denied Tax Exemption by Commissioner Under Notification Requirements.

  Case-Laws - AT : Area Based exemption - Balaji has not started the commercial production by March 31, 2010 and the condition of the Notification is “commencement of commercial production” and not “commencement of any production” - the order passed by the Commissioner is correct in denying the benefit of exemption - AT
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Case Laws:

• GST

• 2022 (9) TMI 315
  Detention of goods alongwith vehicle - Section 129(3) of the Tamil Nadu Goods and Services Tax Act, 2017 - HELD THAT:- The petitioner states that a reply has been submitted to the show cause notice and, in fact, the matter is fixed for hearing today. It is unknown as to whether the petitioner has appeared in the hearing before the authority. Hence, if there has been no appearnce today, the petitioner is permitted to appear before the authority on 01.09.2022 and after considering the reply, if any, filed and hearing the petitioner, an order shall be passed in terms of Section 129(3). The petitioner is also permitted to make its offer before the Assessing Authority in regard to the release of consignment in line with the provisions of Section 129(1) of the Act. The writ petition is disposed off.

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• 2022 (9) TMI 314
  Seeking release of consignment - Failure to issue detention order within 7 days from the date of detention / seizure - application of concept of working day and holiday - principles of natural justice - HELD THAT:- There are serious flaws in the procedure followed as neither order of detention nor SCN have been issued within time. A combined appreciation of the proviso under Section 129(1) and 129(3) makes it apparent that the order of detention is intended to be issued prior to the issuance of the SCN, which, in terms of Section 129(3), must be issued within 7 days from the date of detention/seizure. That apart, there are other lapses in the procedure as well, such as i) the officer not having obtained written permission in Form GST MOV-03 from his superiors for extension of time for completion of inspection proceedings, ii) service of a copy of order of extension upon the person in charge of conveyance and iii) non-adherence to the requirement for uploading of Part-B of Form GST EWB-03 on the portal - Incidentally, notice has, admittedly, not been issued on 22.08.2022, but only on 24.08.2022. That apart, Section 129(3), read with the proviso thereunder, requires a show cause notice to be issued within 7 days of detention or seizure. Vide an amendment brought to clause 2(e) of Circular dated 13.04.2018 vide Circular No.49/23/2018-GST dated 21.06.2018 in F.No.CBEC/20/16/03/2017-GST, the expression three working days in the April circular has been replaced by the expression three days . In such circumstances, neither the petitioner nor the respondents can have the luxury of reference to a holiday to delay or protract the proceedings. This is precisely what the respondents seek to do in the present case. This is made explicitly clear from the Circular and the amendment brought about on 21.06.2018 and the submission of learned Government Pleader runs directly contrary to the amendment under the Circular and the purpose it evidently seeks to advance. These submissions are thus found to be misconceived and hyper-technical, and are rejected. Since the order of detention is dated 22.08.2022, it is clearly beyond the date provided and in my view, is a serious flaw, one that vitiates the proceedings for interception in full and in entirety. In this context, learned Additional Government Pleader relies upon Section 10 of the General Clauses Act, 1897, as per which, if any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within the prescribed period and if the office or Court were closed on that day or the last day of prescribed period, that act or proceeding shall be considered as done or taken in due time if it done or taken on the next day afterwards when the Court or office were open. The procedure that has been followed by the respondents in this matter is contrary to statutory requirements as well as the instructions issued by the Commissioner - Petition allowed.

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• 2022 (9) TMI 313
  Profiteering - purchase of flat - it is alleged that Respondent had not passed on the benefit of the input tax credit by way of commensurate reduction in price to the Applicant - contravention of section 171 of CGST Act - HELD THAT:- It is noted that the Respondent is in the real-estate business and has developed his project Sai Partha Sreekar Residency , in Marripalem Vuda Layout, Visakhapatnam. It is also on record that the Applicant No.1 has filed a complaint alleging that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of the Flat No. 201 purchased from the Respondent in his project Sai Partha Sreekar Residency in terms of Section 171 of the CGST Rules, 2017. The DGAP, after a detailed investigation, has found that the Respondent has not contravened the provisions of Section 171 of the CGST Act, 2017 as the date of commencement of the instant project was after the inception of GST w.e.f. 01.07.2017. Further, the first booking in the instant project was made by the Respondent on 06.09.2018 and the Applicant had booked the Flat no. 201 on 15.10.2018 i.e. in post-GST period. Further, as per the registration details, the Respondent having Registration No. 336/2004 obtained Building Permission from 02.02.2018 which was also the Project starting date. There was no pre-GST tax rate/ details or ITC credit structure/details which could be compared with the post-GST tax rate and ITC - The Applicant No. 1 has not responded on the merit in respect of the DGAP report dated 27.01.2021. The contention of the Applicant No. 1 regarding denial of principles of natural justice is found to be unsustainable as enough opportunities were provided to him to put up in case before the Authority. This Order having been passed today falls within the limitation prescribed under Rule 133 (1) of the CGST Rules, 2017.

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• Income Tax

• 2022 (9) TMI 312
  TDS u/s 195 - Non deduction of TDS in terms of the provisions of Section 40(a)(ia) in respect of the advances for import of capital goods - assessee contended that the said advances was made towards import of capital goods on FOB basis at foreign sea ports, leading to transfer of title to the goods outside India and hence there is no income chargeable to tax in India and therefore the provisions of Section 195 are not attracted and such advances to suppliers have also not been charged to Profit and loss Account for the relevant assessment year - HELD THAT:- While computing the income chargeable to tax under the head profits and gains of business or profession an amount may be deducted from the profits and gains of business and profession in order to take away the said amount from the total chargeable amount under the said head. While preparing the profit and loss account of a business or profession an amount can be deducted from the professional and/or business income by debiting the profit and loss account prepared in connection with such profession or business with such amount. Such amount may also be deducted while computing the profits and gains of business or profession for the purpose of arriving at the business or professional income chargeable to tax. Therefore, if the disputed amount is neither debited from the profit and loss account of the business or profession nor has been deducted while computing the profits and gains of business or profession, Section 40 do not come into operation as such amount cannot be said to have been deducted in computing the income chargeable under such head. If an assessee has paid any amount on account of fees for technical services outside India or in India to a non-resident but has not debited such amount to the profit and loss account and has also not been claimed as deduction in computing the income chargeable under the head profits and gains of business or profession, this Court is of the considered view that, no disallowance in respect thereof can be made by invoking the provisions of Section 40a(ia). FAA observed that the total payment has not been charged to the profit and loss account which has been disallowed by the assessing officer by invoking the provisions of Section 40(a)(ia) - The first appellate authority held that since the aforesaid amount has not been debited in the profit and loss account and has also not been claimed as expenditure while computing the total taxable income under the head income from business or profession, the assessing officer was not justified in making the disallowance and accordingly directed deletion of the said disallowance. Tribunal affirmed the said finding of the first appellate authority. The first appellate authority and the Tribunal rightly interpreted the provisions of Section 40 of the said Act. In the case of Mark Auto Industries [ 2013 (1) TMI 448 - PUNJAB AND HARYANA HIGH COURT] did not interfere with the findings of the learned Tribunal holding that the provisions contained in Sections 40(a)(i) were not attracted in case the assesseee had not claimed deduction for the amount paid for technical knowhow - Karnataka High Court in Tally Solutions [ 2020 (12) TMI 1160 - KARNATAKA HIGH COURT] also held that when no amount was claimed as revenue expenditure, no disallowance u/s 40(a)(i) and (ia) of the Act would be made. This court is of the considered view that the first appellate authority was justified in deleting the disallowance made by the assessing officer by involving the provisions of Section 40(a)(i) and the Tribunal cannot be said to have faulted for not interfering with the finding of the first appellate court. Long term capital gain - Tribunal did not interfere with the guideline value rate determined by the DVO and directed the AO to rework the capital gains by adopting the said guideline value in the same manner in which the DVO had carried out the valuation. The Tribunal being the final fact finding authority was justified in scrutinising the materials on record and to arrive at a finding in respect thereof. Since the said finding is entirely factual no substantial question of law arises therefrom.

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• 2022 (9) TMI 311
  Income attributable to the assessee s PE in India - Deployment of assets in India - ITAT holding that only 15% of the revenue is attributable to the assessee s PE in India applying the ratio of Galileo International Inc [ 2009 (2) TMI 497 - DELHI HIGH COURT ] - HELD THAT:- ITAT and CIT(A) have held that out of several activities, the activities of Calleo Distribution Technologies Private Limited in India were only in respect of generating request and receiving end-result of the process. In other words, the computers at the desk of the travel agent in India were merely connected to the extent that they could perform a booking function but were not capable of processing the data of all the airlines together at once place. The ITAT also held that the Assessee has not deployed any assets in India. ITAT in the present case not only relied upon the judgment of this Court in Galileo International (Supra) but also relied on the judgment of its Coordinate Bench in Amadeus Global Travel I Distribution S.A. [ 2007 (11) TMI 330 - ITAT DELHI-B ] ITAT held that the present case was similar to that of Galileo International (Supra) and that the CIT(A) rightly attributed 15% of the revenue to the Respondent s PE in India. In fact, the Appellant has not brought on record anything which differentiates the facts of this case with that of Galileo International (Supra). No substantial question of law.

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• 2022 (9) TMI 310
  Reopening of assessment u/s 147 - issuance of notice u/s 148A(b) - Non verification was not done on the information which was available with the AO at the time of issuance of notice u/s 148A(b) - HELD THAT:- As come to the notice of CBDT that in several cases information made available/data uploaded by the reporting entries are not fully accurate due to error of human nature, technical nature etc.The department was advised to effect due verification and opportunity of being heard given to the tax payers before initiating proceedings u/s 148/147 - In the preceding paragraph we have pointed out the factual position in the case on hand and it appears that proper verification was not done on the information which was available with the AO at the time of issuance of notice u/s 148A(b) of the Act which has led to an erroneous order being passed. The term information in Explanation-1 u/s 148 cannot be lightly resorted to so as to reopen assessment and this information cannot be a ground to give unbridled power to the revenue. In the case on hand, the information has been lightly used which resulted in issuance of notice. As pointed out earlier, the assessee had submitted the explanation to the notice along with documents in support of their claim. AO has given up the said allegation which formed the basis of the notice and proceeded on a fresh ground for alleging that the transaction with some other company was an accommodation entry. Therefore, on that score also the order is liable to be set aside in its entirety without giving any opportunity to reopen the matter on a different issue. Assessee appeal allowed.

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• 2022 (9) TMI 309
  Assessment of income of trust - income of the Trust as taxable in the hands of the Trust or the beneficiaries - monies received by the assessee were perquisites under Section 17(3) or taxable under Section 56(2) - As contended that under Section 161 of the Act, the Income of the Trust could be taxed either in the hands of the Trust or in the hands of beneficiary under Section 166 - whether Appellate Tribunal erred in law in not appreciating that the income has been offered in the hands of the Beneficiary Trusts and applicable taxes have been paid by the respective Trusts and consequently taxing the amounts which has already been taxed again in the hands of the appellant amounts to double taxation on the facts and circumstances of the case? - HELD THAT:- Having considered the very Circular No.157 [F.No.228/8/73-IT (A-II)] dated 26.12.1974 the ITAT, New Delhi has recorded in para 9 of its order the contention of the assessee therein that the income of the Trust can be taxed only once. In the result, the ITAT has dismissed the appeal filed by the Revenue challenging the order passed by the CIT(A) in that case. As per Section 161 of the Act the Trust can be assessed in its own name. Section 166 of the Act provides for assessment of income in the hands of the beneficiary. In view of unambiguous language used in the Circular clarifying the question of law and the fact that individual Trusts have filed return of income and paid the taxes, the order of remand by the ITAT directing the Assessing Officer to pass fresh orders by classifying the tax under different heads, is unsustainable - Question of law is answered in favour of the assessee and against the Revenue.

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• 2022 (9) TMI 308
  Nature of land sold - capital asset or agricultural land - Deduction u/s 54F - Whether land sold by the appellant is not agricultural land and consequently the sale proceeds are not entitled for exemption? - Revenue, opposing the appeal submitted that the land in question is converted for Industrial purpose and the Assessing Officer has rightly held so HELD THAT:- Undisputed facts of the case are, the land in question has been converted for Industrial purpose. In the remand Report called for by the CIT(A), AO has stated undersigned visited the land in Ankanahalli village, bilikere hobli, Hunsur taluk. The land continues to be a mango orchard there is no sign of any development activity. ITAT has held that the land in question is situated beyond the prescribed limits of Mysore City - Thus, the Remand Report by the Assessing Officer clearly shows that the land continued to be a Mango Orchard and there was no sign of any development. Agricultural land is excluded from the definition of Capital Asset u/s 2(14)(iii) and land situated beyond 8 kms. is exempted from the definition of Capital Asset. Thus, there is a finding of fact by the ITAT that the land is situated beyond the prescribed limit. This Court, after considering the law on the point in various authorities, has held in M.R.Anandaram(HUF) supra that the actual condition and the intended view is a sina qua non while deciding whether a land in question is an agricultural land or not. In view of the Remand Report and the finding of fact recorded by the ITAT, the first question of law merits consideration and it is answered in favour of the assessee and against the Revenue.

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• 2022 (9) TMI 307
  Unexplained expenditure u/s 69C - genuineness of purchases - HELD THAT:- There is no evidence or material brought on record by the Assessing Officer that the purchases made were for cash or that the purchasers had returned the cash corresponding to the cheque payments received from the Assessee. CIT(A) has recorded that there is no evidence of money flowing back to the Assessee and that the AO had made the addition merely on the basis of presumption. AO had not made available copies of the documents relied upon by him for the purpose of making the addition. These are all findings of fact for which the Tribunal is the last fact finding authority. Assessee in our view has discharged his onus in respect of the subject purchases. AO has also not doubted the sales arising out of the said export activity and its GPR. This is not a case which falls within the ambit of Section 69C as held by the AO. In the case at hand, the Assessee statedly had made purchases from the three parties in respect of which it has been found by both the CIT(A) as well as the Tribunal that the sales in question have not been doubted, that the payments have been made by the Assessee through banking channels and that the AO has also accepted the book results shown by the Assessee. It is also finding of fact that the Assessee has produced before the AO delivery challans, purchase bills as well as evidence of payments through banking channels. Assessee has discharged the initial burden or onus of providing the details of the parties; and it was incumbent on the AO to rebut the evidence produced by the Assessee. We do not find anything on record controverting the findings of fact of the CIT(A) as well as the Tribunal. Despite uncontroverted findings of fact and keeping in mind that the AO had issued 133(6) notices to the three suppliers of goods and the parties had not attended and even though the AO did not take any further steps for investigation, in all fairness, CIT(A) as well as the Tribunal had upheld the dis-allowance in respect of the purchases for the year under consideration to the extent of 10% of such purchases against which admittedly no appeal has been filed by the Assessee. If the CIT(A) relying upon the various decisions including the decision in the case of CIT Vs. Bholenath Poly Fab (P) Ltd. [ 2013 (10) TMI 933 - GUJARAT HIGH COURT] has restricted the disallowance to 10% of the purchases, which decision has not been disturbed by the Tribunal, we find that The view taken by the Tribunal is a possible view and cannot be faulted with.

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• 2022 (9) TMI 306
  Applicability of Section 43B - electricity duty collected by the assessee as per the provisions of Punjab Electricity (Duty) Act, 1958 - revenue claims that since the assessee in the present case was following mercantile system of the accounting, thus provision of Section 43B will be applicable to the amounts covered under electricity duty - whether the amount towards electricity duty is payable by the assessee or it is merely a collection agency discharging its duty under a statutory arrangement? - HELD THAT:- Liability to pay electricity duty lies on the consumer. Further, the electricity duty is to be paid to the State Government. Section 4 casts duty on the licensee to collect the electricity duty from the consumers and to pay the same to the State Government. Licensee is only a collecting agency. It will be further apposite to notice here that exercising powers under Section 13 of the 1958 Act, rules have been framed. The rules called as Punjab Electricity (Duty) Rules, 1958 prescribes for collection and payment of duty. Thus, the amount collected by the licensee as electricity duty leviable under 1958 Act is required to be deposited in the Government treasury by the licensee. Section 43B is a non-obstente clause. As inserted by Finance Act, 1983 with an intent to curb the malpractice at the hands of certain tax payers, who claimed statutory liability as a deduction without discharging the same and pleaded mercantile system of accounting as defence. The argument raised by counsel for the appellant(s) that Section 43B will be attracted merely for the reason that the appellant(s) is following mercantile system of accounting deserves to be rejected. The revenue is required to show that the duty, tax, cess or fee (in the present case electricity duty) is payable by the assessee. The reliance placed on judgment passed by Gujarat High Court in Ahmedabad Electricity Co. Ltd. s case [ 2003 (1) TMI 43 - GUJARAT HIGH COURT] is misplaced. Rather Section 4 of the 1958 Act read with provisions contained in 1958 Rules makes it abundantly clear that assessee is merely an agency assigned with a statutory function to collect electricity duty from the consumers and to pay the same to the State Government - we find that the question w.r.t. the applicability of Section 43B on the electricity duty, needs to be answered against the revenue and in favour of the assessee.

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• 2022 (9) TMI 305
  Deduction u/s 57 - assessment was selected for limited scrutiny - assessee had declared as sales proceeds of land under the head income from other sources - HELD THAT:- The land which was purchased was an agricultural land extending to 2 acres (87,120 sq.ft.). It is claimed by the assessee that it had developed the said land and received only 41,947.19 sq.ft. as saleable area as per the approved plan of BIAAPA. The cost per square feet, according to the assessee, comes to Rs.172.21 per sq.ft. (i.e. 72,23,725 /41,947.19 sq.ft.). AO however, adopted the cost to be at Rs.82.91 per sq.ft.(i.e. 72,23,725 / 81,120). A.O. also has not granted expenses of Rs.3,41,133, which according to the assessee, is attributable to sale of developed sites. To the proposal issued by the A.O., the assessee did not respond, consequently, the claim of deduction u/s 57 of the I.T.Act was reduced by the A.O. to Rs.22,33,252 instead of Rs.49,79,511 claimed by the assessee. Even before the first appellate authority, the assessee has not been able to prove that it was in respect of only saleable area of 41,947.19 sq.ft. Consequently, the CIT(A) confirmed the views taken by the A.O. Assessee had produced approval plan issued by BIAAPA, wherein it is mentioned that the total saleable area is only 50.68%. It is not clear whether this approved plan issued by the BIAAPA was before the lower authorities. The assessee has to necessarily prove that she was only in receipt of total saleable area of 41,947 sq.ft. in exchange of undeveloped land of 87,120 sq.ft. This exercise needs to be done by the assessee before the A.O. Accordingly, the entire issue is restored to the files of the A.O. The assessee shall also produce the necessary evidence to prove that a sum are expenses attributable to the sale of developed sites. Claim of deduction u/s 57 was reduced by the A.O. to Rs.22,33,252 instead of Rs.49,79,511 claimed by the assessee. Even before the first appellate authority, the assessee has not been able to prove that it was in respect of only saleable area of 41,947.19 sq.ft. CIT(A) confirmed the views taken by the A.O. Before us, the assessee had produced approval plan issued by BIAAPA, wherein it is mentioned that the total saleable area is only 50.68%. It is not clear whether this approved plan issued by the BIAAPA was before the lower authorities. The assessee has to necessarily prove that she was only in receipt of total saleable area of 41,947 sq.ft. in exchange of undeveloped land of 87,120 sq.ft. This exercise needs to be done by the assessee before the A.O. Accordingly, the entire issue is restored to the files of the A.O. The assessee shall also produce the necessary evidence to prove that a sum of Rs.3,41,133 are expenses attributable to the sale of developed sites. The assessee shall cooperate with the Revenue and shall not seek unnecessary adjournment in the matter. A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in the matter - Appeal filed by the assessee is allowed for statistical purposes.

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• 2022 (9) TMI 304
  Assessment of trust - Disallowance on account of provision for gratuity expenditure - ascertained liability, provided in the books of accounts by the appellant - Scope of term applied v/s spent - HELD THAT:- As per provisions of section 11 (1) (a) the income derived from the property held under the trust shall not be included in total income of the previous year to the extent such income is applied for charitable purposes in India. While dealing with the issue whether provision for gratuity and leave encashment would tantamount to application of income in the case of a trust, the coordinate bench in Anandlal Ganesh Podar Society [ 2021 (8) TMI 287 - ITAT MUMBAI] held that i n case of trust, the meaning applied need not be construed as spent . It includes the necessary provisions required to be made as per statutory requirement. Therefore, we direct the AO to allow the provision for gratuity and leave encashment as applied for the object of the trust. Accordingly the ground raised by the assessee is hereby allowed. In the present case, it has not been disputed that assessee has paid gratuity to its employees in the year of their retirement. It is also not in dispute that the provision for gratuity complies with required statutory provisions and accounting standards. It is also the fact that assessee has consistently prepared its accounts following mercantile system of accounting and made provision for gratuity in the similar manner, as is made in the year under consideration. We direct the AO to delete the impugned addition by allowing the provision for gratuity made by the assessee in its books of account. Accordingly, grounds raised by the assessee in the present appeal are allowed.

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• 2022 (9) TMI 303
  Revision u/s 263 by CIT - development expenses, unsecured loan and the advances unexplained - HELD THAT:- Assessee failed to furnish the required documentary evidences to substantiate the issues identified by ld. PCIT. We find that Ld. PCIT has given sufficient adequate opportunities before passing his revisional assessment order. The assessee failed to provide without details of development expenses, unsecured loan and the advances despite repeated notice and reminder. We find that in absence of any details sought by PCIT, the order of Assessing Officer was revised by PCIT. Before us neither the representative have appeared despite service of notice nor filed any written submission. Therefore, in absence of any detailed requirement in support of various grounds of appeal raised by assessee, we do not find any reason to deviate from the finding of ld. PCIT. Accordingly, we confirm the order of PCIT that the assessment order is erroneous and in so far as prejudicial to the interest of revenue. In the result, the various grounds of appeal raised by the assessee are rejected.

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• 2022 (9) TMI 302
  Validity of assessment framed u/s.153C - certain disallowances and additions without the existence of incriminating material for the year under consideration received from the AO of the searched person - HELD THAT:- None of the additions that were made by the ld. AO were based on reliance placed on search materials received from the AO of the searched person. We hold that assessment for A.Y.2008-09 had originally been completed u/s.143(3) - Later, the first re-assessment was framed in the hands of the assessee for A.Y.2008-09 u/s.143(3) r.w.s. 147. Notice u/s.153C of the Act was issued to the assessee only on 26/11/2014. Hence, on the said date i.e. 26/11/2014, no proceedings of the assessee were pending. We hold that A.Y.2008-09 becomes an unabated / concluded assessment on the date of assumption of jurisdiction u/s.153C - The law is very well settled that in respect of concluded assessments, the earlier assessment completed should not be disturbed in the search assessments without existence of any incriminating material relatable to such assessment year. We direct the AO to re-compute the total income of the assessee by accepting the income declared in the return filed in response to notice u/s.153C of the Act without making any additions or disallowance thereon, both under ormal provisions of the Act as well as in the computation of book profits u/s 115JB - We categorically hold that no additions / disallowance could be made in the search assessment u/s.153C - Appeal of assessee allowed.

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• 2022 (9) TMI 301
  Disallowance of Service Tax claimed in the profit and loss account - payment was disallowed by AO on the ground that the assessee has neither shown collection of Service Tax and payment of Service Tax and there is no mention in the Notes to the Accounts - CIT-A deleted the addition - HELD THAT:- We find that the Assessing Officer has misdirected herself in understanding the Notes to the Accounts. Service Tax liability is liability of the assessee and it is not a case where Service Tax has been collected by the assessee from its customers. We, therefore, do not find any error or infirmity in the findings of the Ld. CIT(A). Ground No. 1 is dismissed. Disallowance on account of rejection of consumption of food and beverages claimed - assessee has not maintained/furnished quantitative details/stock register for goods traded/consumed - CIT-A allowed relief to assessee - HELD THAT:- Considering the nature of business of the assessee and considering the fact that items like liquor is sold on the basis of quantity. It cannot be ruled out that the assessee is maintaining stock register. Since the ld. CIT(A) confirmed the disallowance in our considered opinion, this should meet the ends of justice. We, therefore, decline to interfere with the findings of the ld. CIT(A). Ground No. 2 is also dismissed.

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• 2022 (9) TMI 300
  Delayed payment of Employee s share of EPF/ESI subject to 36(1)(va) - scope of amendment - HELD THAT:- As in the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case - See SHRI GOPALAKRISHNA ASWINI KUMAR VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU [ 2021 (10) TMI 952 - ITAT BANGALORE] Thus the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs. 2,19,330/- made by the CPC towards the deposit of the employee s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.

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• 2022 (9) TMI 299
  Claim of premium paid on forward covers of foreign exchange rates - capital expenditure or revenue expenditure claimed u/s 37(1) - AS-11 Applicability - premium paid was in relation to foreign currency loan taken for execution of projects - contention of the assessee is that the claim is in accordance with Accounting Standard AS-11 issued by the ICAI in this regard and in the absence of any bar in the Act regarding the applicability of the Accounting Standard, the treatment as per Accounting Standard is applicable - HELD THAT:- AS-11 prescribes how the effects of changes in foreign exchange rate is to be accounted for on transactions undertaken in foreign currency or in foreign country. One of the effects dealt with the standard relates to premium paid on foreign exchange cover. Thus with respect to the issue before us ,undoubtedly it is AS-11 which prescribes the method of accounting for the same and it recommends the premium paid on foreign exchange forward contracts to be amortized as expense or income over the life of the contracts. The term expense has been used in juxtaposition with income and its meaning has to be derived in conjunction and consonance with the term income , which undoubtedly is revenue receipts. There is no doubt therefore that the recommendation by AS-11 of writing off the premium on forward exchange contracts as expense means writing it off as revenue expenditure in the profit and loss account. The language of the Accounting Standard is very clear when it recommends amortizing the premium as expense or income. The manner of writing off recommended by the Standard, i.e expense or income itself makes it very clear that it is to be written off in the Profit and Loss account where all expenses and incomes are recorded. The claim of the assessee therefore clearly is in accordance with AS-11 of the ICAI. For allowability of the claim as per AS-11,it is pertinent to see whether there is any bar to the applicability of the same in the Act? - Apex Court in the case of Virtual Soft Systems Ltd. [ 2018 (4) TMI 1472 - SUPREME COURT ] has laid down the proposition that where there is no express bar in Act regarding the application of a Accounting Standard prescribed by ICAI, deductions /claims of assesses are to be determined on the basis of these accounting standards. The Act, under section 43A, prescribes the adjustments on account of foreign exchange fluctuations to be made to the cost of fixed assets purchased outside India which requires payment to be made in foreign exchange. Explanation 3 to the said section requires cost of such assets to be computed with reference to the rate agreed in the foreign exchange forward contracts if any entered. The said section, we find is not applicable to the facts of the present case since it is not the case of the Revenue that the foreign exchange loan has been taken for purchasing any asset outside the country. No other section dealing with the allowability of premium paid on forward contracts has been pointed out by the Ld.DR before us - Therefore as per the decision of the Hon ble apex court in the case of Virtual Soft [ 2018 (4) TMI 1472 - SUPREME COURT ] the accounting prescribed by AS-11 will apply, according to which the premium/discount on forward exchange contracts is to be amortized as expense/income. We hold that the assessee is entitled to claim the amortization of premium paid on foreign exchange contracts. Appeal of assessee allowed.

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• 2022 (9) TMI 298
  Penalty u/s 271AAA - money surrendered in search and seizure operation - assessee has offered the undisclosed income in the statement recorded under section 132(4) - HELD THAT:- Penalty under section 271AAA(1) cannot be imposed in a case where the assessee has offered the undisclosed income in the statement recorded under section 132(4) specifying the manner in which such income has been derived and if the assessee pays the tax along with interest of such income. In the facts of the present case, undisputedly, the assessee has offered the cash found as income in the statement recorded under section 132(4) - It is also a fact that the assessee has paid the tax on such income. Whether penalty under section 271AAA could be levied for the years under consideration ? - As we note that for the assessment year 2009-10 being the search year, the said assessment year falls out of the block period and therefore the necessary criteria to levy penalty under section 271AAA is not applicable. According to the department assessee has not specified the manner in which such income was derived - On a perusal of the statement recorded under section 132(4) of the Act, that forms part of the assessment order, we observe that, in response to a question asked by the authority concerned, the assessee came forward to offer the money found in the bank account as well as in cash as income. It is observed, the authority recording statement did not pose any specific query to the assessee to explain the mode and manner in which such undisclosed income was derived. Further during the penalty proceedings, we note that the reply filed by the assessee has not even been considered and has been rejected at the threshold. Thus, in course of search and seizure operation when the assessee came forward and offered certain income to show his bona fide and ultimately followed it up by actually offering such income to tax, in our view, the assessee should be given the benefit of the exceptions provided under sub-section (2) of section 271AAA. It is a fact on record that the assessee is no more and has been substituted by his legal heir, in course of proceeding before us. Thus, in our considered opinion, a liberal and compassionate view has to be taken qua the imposition of penalty under section 271AAA of the Act. Based on the above discussion we direct the Ld.AR you to delete the penalty levied for both the assessment years under consideration under section 271AAA of the act. - Decided in favour of assessee.

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• 2022 (9) TMI 297
  Revision u/s 263 by CIT - income on sale of the 7 vacant sites - Correct head of income - Deduction u/s 54F - As per CIT treated as income from business rather than income under the head capital gain - whether the assessee would be entitled to the deduction u/s 54F and in this context examine whether the assessee owned more than 2 properties and the nature of the property owned by the assessee? - HELD THAT:- The law is well settled that the limited scrutiny scope cannot be extended by the AO - decision in the cae of Balvinder Kumar [ 2021 (3) TMI 649 - ITAT DELHI] followed. - the Assessing Officer could not go beyond reason for selection of matter for limited scrutiny. Therefore it was not open to the PCIT to pass revisionary order and remit matter to AO on other aspects other than the reason for selection of case for scrutiny. Therefore, the directions of the PCIT in so far as it relates to the examination of whether the income on sale of plots would give rise to LTCG or income from business cannot be sustained and the said directions are directed to be deleted and are hereby quashed. Deduction u/s 54F - Assessee owning more than one house property or other property belongs to HUF - HELD THAT:- It appears that the PCIT has confused himself with the return of the individual and that of the HUF. - If the assessee owned only one house property and that was also a commercial property, then there is no necessity to examine the claim for deduction u/s.54F on the ground that the assessee owned more than one house property other than the new asset as on the date of transfer. - Matter restored back to CIT.

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• 2022 (9) TMI 296
  Deductions u/s 80P - interest earned on banking activities done by the assessee-society - HELD THAT:- Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors [ 2022 (3) TMI 75 - ITAT RAIPUR] had after drawing support from the judgment of Tumkur Merchants Souharda Cooperative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] on the basis of its exhaustive deliberations concluded, that interest income earned on the surplus funds which were parked as deposits by the co-operative society in the normal course of the business of providing credit facilities to its members, i.e., at a point of time when there were no takers for the said funds was duly entitled for deduction under Sec. 80P(2)(a)(i). We, thus, in terms of our aforesaid observations direct the AO to allow the assessee s claim for deduction under Sec. 80P(2)(a)(i). Disallowance of deduction of the income from paddy procurement business u/s 80P(2)(a)(iii) - HELD THAT:- As in the case of the present assessee, it is the claim of the ld. AR that no part of the procurement of paddy was made by the assessee-society in the course of its paddy procurement business from non-members, therefore, restricting of its claim for deduction u/s. 80P(2)(a)(iii) of the Act to 95.2% of the profits earned from the said business activity by the CIT(Appeals) was not justified. Considering the parity of the facts involved in the present case as against those which were involved in [ 2022 (3) TMI 75 - ITAT RAIPUR] we are of the considered view that the matter in all fairness on the same terms be restored to the file of the AO for fresh adjudication. In the course of the set-aside proceedings the AO shall read-judicate the assessee s claim for deduction under Sec. 80P(2)(a)(iii) i.e. after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, and thus, restrict the it s claim for deduction u/s. 80P(2)(a)(iii) only to the extent of the profit relatable thereto. Needless to say, the assessee shall in the course of the set-aside proceedings furnish the requisite details/documents that are called for by the A.O. Thus, the Ground of appeal No.1(iii) raised by the assessee is allowed for statistical purposes in terms of our aforesaid observations. Deduction u/s 80P(2)(c)(ii) of the profit from PDS activity i.e, distribution of essential commodities to the ration holders through fair price shop - HELD THAT:- As stated by the AR, and rightly so, the Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors [ 2022 (3) TMI 75 - ITAT RAIPUR] had after necessary deliberations on the issue in hand remanded the matter to the file of the A.O, with a specific direction i.e, to restrict its claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses - we on the same terms restore the matter to the file of the AO, with a direction to restrict the assessee s claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses. Thus, the Ground of appeal allowed for statistical purposes in terms of our aforesaid observations. Entitlement of a co-operative society for claim of deduction u/s 80P(2)(d) qua the dividend received on shares of a co-operative bank - HELD THAT:- As relying on case of Gramin Sewa Sahakari Samiti Maryadit Ors [ 2022 (3) TMI 75 - ITAT RAIPUR] we herein vacate the disallowance of the assessee s claim for deduction u/s 80P(2)(d) of the dividend received on shares of a co-operative bank, viz. Jila Sahakari Bank. Thus, the Ground of appeal raised in appeal by the assessee is allowed in terms of our aforesaid observations.

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• 2022 (9) TMI 295
  Reopening of assessment u/s 147 - validity of the jurisdiction that was assumed by the A.O u/s.147 - n on-application of mind by AO - Reopening initiated as assessee had not filed his return of income for the year under consideration - HELD THAT:- Considering the reasons on the basis of which the case of the assessee was reopened u/s.147 we find, that as stated by the Ld. AR, and rightly so, the same are based on a fallacious and misconceived fact that the assessee had not filed his return of income for the relevant A.Y.2012-13. The very basis for reopening of the case of the assessee by the A.O u/s.147 of the Act is clearly fallacious which proves beyond doubt a non-application of mind by him to the material available on record on the basis of which the impugned belief that the income of the assessee chargeable to tax had escaped assessment had been arrived at by him. Assessee had made cash deposits and purchased immovable property as stated in the reasons to believe , but the very observation that the assessee had not filed his return of income for the year under consideration i.e. A.Y.2012-13 irrefutably evidences a clear non-application of mind by the A.O who had in a mechanical manner without even doing the bare minimum i.e. referring to and consulting the assessment record of the assessee which was lying available with him had taken recourse to proceedings u/147. Thus a strong conviction that as the very basis for assumption of jurisdiction by the A.O for taking recourse to proceedings u/s.147 of the Act is found to be incorrect and fallacious, therefore, the consequential assessment so framed by him u/s.143(3)/147 cannot be sustained and is liable to be quashed on the said could itself - Grounds of appeal raised by the assessee are allowed.

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• 2022 (9) TMI 294
  Rejection of books of accounts - Estimation of income - addition @10% of the amount of gross contract receipts - HELD THAT:- We are unable to comprehend the observation of the AO, who had proceeded with the rejection of the assessee s books of accounts for the year under consideration and estimated his income from the contract business @10% of gross contract receipts, for the reason that as the assessee in his application filed before the ITSC, Kolkata for the preceding years i.e AYs. 2006-07 to 2012-13 had admitted certain defects and irregularities in his books of accounts, therefore, it was to be presumed that he would have continued with such malpractices and irregularities in the subsequent years too. A mere presumption of the AO that as the assessee was admittedly carrying out certain malpractices in the preceding years would mean that despite absence of any evidence, it is still to be taken that he would be continuing with the same malpractices in the succeeding years, in our considered view is such a broad and incomprehensible proposition which cannot be subscribed on our part. If the observations of the AO are to be accepted, then, it would mean that once an assessee is visited with search proceedings, and he after considering the incriminating documents unearthed during the course of such proceedings comes forth with a disclosure either regards his modus operandi or unaccounted income, then, in all the subsequent years despite there being no iota of evidence that the assessee had continued with his malpractices and modus operandi to generate unaccounted income, it is to be presumed otherwise and has to be made to suffer because of his chequered past. By no means such an incomprehensible and baseless observation of the AO can be accepted. Also, we concur with the view taken by the CIT(Appeals) that even otherwise as the net profit rate disclosed by the assessee during the year under consideration, as demonstrated by him, was better than those of other similarly placed assessee s of his trade line and was commensurate with that prevailing in the industry, therefore, no adverse inferences on the said count itself i.e as regards the profit disclosed by him was liable to be drawn. As regards the reference to the Standard Operating Rate (SoR) by the AO to support his conviction that the income of the assessee from his contract business was justifiably determined by applying a net profit rate @10% to the gross contract receipts for the year under consideration, we are unable to concur to the same. As claimed by the ld. AR, and rightly so, as the SoR for works contracts fixed by the Government departments merely indicates the estimated price of the inputs and expenses and also an estimate of the physical quantity that would be required for execution of the contract, the same, thus, considering manifold factors is too far from the ground realties to have justified earning of a profit margin @10% of the gross contract receipts by the assessee. We, thus, in terms of our aforesaid observations and concurring with the well-reasoned view taken by the CIT(Appeals) that there was no justification on the part of the AO in rejecting the books of accounts of the assessee and estimating his income from the contract business @10% of the gross contract receipts, uphold his order. There was no justification on the part of the AO in rejecting the books of accounts of the assessee and estimating his income from the contract business @10% of the gross contract receipts, uphold his order. Appeal of revenue dismissed.

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• 2022 (9) TMI 293
  Validity of Reassessment proceedings u/s 147 - receipt of information from the DDIT (Inv.), Kolkata about the systematic evasion of taxes by clients/members of NMCE - whether A.O. has erred in reopening of the case u/s 148 even after the case of the assessee was already assessed u/s 153A r.w.s 143(3)? - HELD THAT:- As observed by the A.O in the reasons to believe , although the assessee had a/w. her return of income filed the copy of Profit Loss account, balance sheet etc. where various information/material was disclosed, however, the requisite material facts were embedded in such a manner that the material evidence could not be discovered by the A.O with due diligence - we are of the considered view that the 1st proviso to section 147 of the Act as had been pressed into service by the Ld. AR would by any means assist the case of the assessee before us. Thus, the Ground of appeal No.3 raised by the assessee is dismissed in terms of our aforesaid observations. Claim of the AR that the case of the assessee had been reopened by the A.O on the basis of a borrowed satisfaction of the Investigation Wing i.e. in a mechanical manner and without application of any independent mind on his part - We are afraid that the said contention of his being devoid and bereft of any merit cannot be accepted. On a bare perusal of the reasons to believe , it transpires that the A.O had after referring to the information about systematic evasion of taxes by clients/members of the NMCE that was shared with him by the DDIT (Inv.), Kolkata, had after culling out the facts involved in the case of the assessee arrived at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. We, thus, finding no merit in the claim of the Ld. AR that reopening of the assessee s case was merely based on a change of opinion by the A.O, reject the same. Thus, the Ground of appeal No.1 raised by the assessee is dismissed in terms of our aforesaid observations. A.O despite specific requests by the assessee had failed to provide a copy of the information on the basis of which adverse inferences as regards the NMCE profit earned by the assessee during the year was sought to be drawn - We are afraid that the same too does not find favor with us. Nothing has been brought to our notice by the Ld. AR which would reveal that the assessee had in the course of the proceedings before the lower authorities requested for a copy of the information that was received by the A.O from the Investigation Wing. On the contrary, we find that a careful perusal of the reasons to believe reveals beyond doubt the details on the basis of which the A.O had reopened the case of the assessee and thereafter proceeded with and framed the assessment in her case. Accordingly, finding no merit in the aforesaid claim of the assessee, we herein reject the same. Thus, the Ground of appeal No.4 raised by the assessee is dismissed in terms of our aforesaid observations. Profit from commodity trading on NMCE had already been offered by the assessee for tax in the return of income after setting-off of loss - There could have been no reason for the AO to infer any escapement of income on her part, we are afraid that the said misconceived view had been arrived at on the basis of half baked facts. Admittedly, the impugned profit from commodity trading on the NMCE platform of Rs.16,70,927/-, which after setting-off against the loss suffered by trading on the platform of MCX exchange of (Rs.8,56,575/-) was scaled down to an amount of Rs.8,23,352/- was disclosed by the assesee in her return of income. As the A.O had reopened the case of the assessee for the reason that she had booked pre-arranged gain in the garb of commodity trading on NMCE platform, which, thus, was not entitled for set-off against the loss suffered on the platform of MCX exchange, therefore, there was clear material before the A.O for forming a view that the income of the assessee chargeable to tax for the year under consideration had escaped assessment within the meaning of section 147 of the Act. Accordingly, finding no merit in the aforesaid claim of the assessee, we reject the same. Even if the profit from commodity trading on NMCE was to be held as unexplained cash credit u/s.68 there was no justification on the part of the A.O to have declined the assessee s claim for set-off of the MCX loss against the same - Though no infirmity either emerges as regards the assumption of jurisdiction by the A.O for reopening the case of the assessee u/s.147 of the Act or recharacterizing of the amount of the impugned profit claimed by the assessee to have been earned from commodity trading on NMCE platform as an unexplained cash credit u/s.68 of the Act, but the same would duly be entitled for set-off against the assessee s claim of loss from commodity trading on MCX platform. We, thus, in terms of our aforesaid observations modify the order of the CIT(Appeals) and direct the A.O to allow the assessee s claim for setting-off of loss - Grounds of appeal No. 5 6 allowed in terms of our aforesaid observations. Addition u/s 69C - Recharacterizing of NMCE profit as an unexplained cash credit u/s.68 of the Act, therefore, the addition made by the A.O u/s.69C of the Act towards commission which the assessee would have paid to the entry operator for obtaining accommodation entries is herein sustained.

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• 2022 (9) TMI 292
  Addition u/s 68 - unexplained cash credits - loan transactions in question as bogus - HELD THAT:- Lender Shri Anil Gidwani had categorically admitted of having advanced a loan of Rs.1 lac to the assessee a/w. brief description as to from where it was sourced i.e. accumulated savings, we are of the considered view that there was no justification on the part of the A.O in holding the loan transaction in question as a bogus transaction. Lender, viz. Shri Shaiyad Abdul Mazid had in his statement that was recorded on oath in the course of the assessment proceedings by the A.O admitted of having advanced a loan of Rs. 2 lac vide A/c payee cheque to the assessee firm. Not only the aforesaid lender had admitted the loan transaction in question, but had also on being specifically queried by the A.O explained as to where the same was sourced from - as the assessee before us had duly discharged the onus that was cast upon him as regards proving the authenticity of the loan transaction in question, therefore, the same could not have been added as an unexplained cash credit u/s.68 of the Act in the hands of the assessee. Amount received vide A/c payee cheque from Smt. Rajkumari Gidwani - On the one hand it is stated by the AO that the loan amount of Rs.3 lac that was advanced by the aforementioned person was sourced out of the KCC proceeds of Rs.2,22,086/- while for, on the other hand contradicting his own observation he had drawn adverse inferences qua the credit worthiness of the lender and, had, inter alia, held that she could not have been in possession of a substantial amount of cash savings. As the facts narrated by the AO leading to the addition of Rs. 3 lac under Sec. 68 in the hands of the assessee are in clear contradiction of his observations recorded in the assessment order, therefore, we are of the considered view that the matter requires to be restored to the file of the A.O with a direction to re-adjudicate the same after making necessary verification qua the correct factual position and examining the lender in question Amount received from Smt. Sashikala Dubey an existing income-tax assessee who was deriving income from hiring of a vehicle (Tata sumo) to NTPC had categorically admitted of having advanced a loan of Rs. 2 lac vide A/c payee cheque to the assessee firm. Not only the said lender on being queried by the A.O had stated that the cash deposit in her bank account from where the loan was advanced was out of her accumulated savings, but had also referred to the source from where the cash deposit in her bank account was made. In our considered view, now when the lender had categorically admitted of having advance a loan of Rs. 2 lac a/w the source thereof, then, in case the A.O had any doubts as regards the source of the aforementioned lender, the remedy was to look into the said issue in the latters case. When the assessee had duly discharged the onus that was cast upon her as regards proving the identity and creditworthiness of the lender, and also the genuineness of the transaction in question, therefore, the same could not have been dubbed as a bogus loan and added as an unexplained cash credit under Sec. 68 in the hands of the assessee firm. Loan received from Shri Sudhakar Wankhed lender had in his statement recorded on oath in the course of assessment proceedings duly admitted the loan transaction a/w. source thereof, we are of the considered view that there was no justification on the part of the A.O in treating the said amount as unexplained cash credit u/s.68 of the Act. As observed by us hereinabove, the fact that the lender had immediately prior to advancing of the loan made cash deposits in his bank account would not justify dubbing the amount received by the assessee as unexplained cash credits is fortified by the order of the Tribunal in the case of Amit Kumar Bansal [ 2017 (5) TMI 205 - ITAT RAIPUR] ). The assessee had duly discharged the initial onus that was cast upon him, which we find had not been dislodged by the lower authorities by placing on record any irrefutable material which would prove to the contrary. We, thus, are of the considered view that the addition made by the AO u/s.68 of the Act cannot be sustained and is liable to be vacated. Appeal of assessee allowed.

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• 2022 (9) TMI 291
  Deduction u/s 54F - assessee had computed the LTCG on sale of the property - Expenditure incurred on sale - HELD THAT:- We concur with the claim of the AR that now when it is proved beyond doubt that the expenditure involved towards purchase of stamp duty papers and registration expenses had been incurred by the assessee i.e. the seller, therefore, the lower authorities had grossly erred in declining her aforesaid claim for deduction of the said expenses. We, thus, in terms of our aforesaid observations allow the assessee s claim for deduction of expenditure incurred towards stamp duty expenses - Although we have observed that the assessee s claim for deduction of registration expenses is also to be allowed, however, in the absence of the requisite details before us we restore the issue to the file of the A.O with a direction to him to allow the same after making necessary verifications. Cost of Transfer - Admittedly, it is a matter of fact borne from record that the respective payments to the aforementioned persons have been made through banking channel. However, as observed by the A.O, and rightly so, we too are unable to comprehend as to why services of four persons would have been required to facilitate transfer of the property in question by the assessee. Although the confirmations of the aforementioned persons had been made available on record but the same does not inspire much of confidence. As is discernible from the aforesaid stereotype confirmations, it transpires that the same have been prepared by the assessee and had simply been signed by the persons concerned without mentioning a word about the services which were rendered by them as regards the sale transaction under consideration. We though are not oblivious of the fact that the payments to the aforementioned persons have been made through banking channel, however, the said fact on a standalone basis would not irrefutably substantiate the authenticity of the transaction under consideration. Apart from that the fact that the payments have been made to the aforementioned persons on 20.07.2011 i.e. much prior to 6 months from the date of execution of the sale transaction on 31.03.2012 also raises serious doubts as regards the veracity of the aforesaid claim of the assessee. Considering the aforesaid facts a/w the fact that the department have not carried the aforesaid issue any further in appeal before us, we finding no merit in the claim of the assessee for allowing her claim of deduction of the balance amount of commission/brokerage expenses reject the same and uphold the order of the CIT(Appeals) to the said extent. Claim of deduction u/s.54F - We are of the considered view that the assessee s claim for deduction u/s.54F w.r.t investment made towards furnishing/additions/alteration of the new residential house for rendering the same habitable is in order and as per mandate of law. At the same time, we may herein observe that as the aforesaid claim of the assessee was principally rejected by the AO, therefore, he had no occasion to verify the genuineness and authenticity of the claim of expenditure that was incurred by the assessee. We, thus, in terms of our aforesaid observations though principally concur with the claim of the Ld. AR that that the expenditure incurred by her after purchase of the house for rendering it habitable would be considered as having been incurred for purchase of the said house and would be eligible for deduction u/s 54F, but restore the same to the file of the A.O for the limited purpose of verifying the veracity of the aforesaid claim of the assessee and limit her said claim of deduction to the extent the expenditure in question is incurred for rendering the new residential house habitable. Accordingly, the Ground of appeal No.2 is partly allowed for statistical purposes in terms of our aforesaid observations. Appeal of the assessee is partly allowed.

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• 2022 (9) TMI 290
  Nature of expenditure - replacement of spare parts - revenue expenditure or capital expenditure - HELD THAT:- This issue is considered in the case of Super Spinning Mills Ltd.[ 2013 (9) TMI 88 - MADRAS HIGH COURT] and considered the replacement of machinery as revenue in nature by holding that the basic test is to find out whether expenditure is incurred to preserve and maintain already existing asset and said expenditure must not be incurred to bring any new asset into existence to obtain a new advantage. The expenditure is to be treated as revenue in nature. In the present case before us also the fact is that the assessee has replaced the spare parts which are regular repairs and maintenance because it is a routine replacement of spare parts. Even the Revenue has not administered how the replacement will bring enduring benefit to the assessee. As in the case of Prabhu Spinning Mills[ 2013 (8) TMI 1165 - ITAT CHENNAI] and in the case of Super Spinning Mills Ltd. [ 2013 (9) TMI 88 - MADRAS HIGH COURT] we allow the claim of assessee and reverse the orders of lower authorities. Appeal of assessee allowed.

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• 2022 (9) TMI 289
  TDS u/s 194C - wastage claimed in manufacturing of gold ornaments - disallowance of wastage claimed in manufacturing of gold ornaments by invoking the provisions of section 40(a)(ia) of the Act for non-deduction of TDS - AO treated this deemed wastage paid as job charges - deemed wastage in the eyes of Revenue is payment to the ornament manufacturers or goldsmiths or in local language called pathars - HELD THAT:- TDS U/S. 194C of the Act has to be deducted wherever there is credit of such sum to the account of the contractor or payment thereof in cash, by cheque, by draft or by any other mode. But, in the present case before us the AO as well as CIT(A) has categorically noted that there is wastage charges and wastage to the extent of 4.5 to 6% varies in this trade as claimed by assessee. But, Revenue s contention is that the wastage is only 0.5% to 1%. Here only the issue is only claim of wastage and not any payment as envisaged in the provision of section 194C of the Act. Once, there is no payment there is no question of deduction of TDS U/S. 194C of the Act because there is no mandate in the Act for deduction of TDS without payment and that mode is also prescribed. The Tribunal i.e., the Co-ordinate Bench in the case of Siva Valli Vilas Jewellers Pvt. Ltd. [ 2021 (4) TMI 116 - ITAT CHENNAI ] has considered an identical issue and held that provisions of section 194C is applicable, when the assessee has paid or credited any charges covered thereunder. In case, no payment is debited or credited to respective parties account, then such payment cannot be considered within the ambit of section 194C or any other TDS provisions. In this case, the assessee has neither debited making charges into profit and loss account nor credit any amount to the respective parties account. Therefore, when no payment is made or amount is credited to respective parties account, then question of application of provisions of section 194C does not arise at all. Thus in the present case the issue of wastage whether it is 0.5% to 1% as estimated by Revenue or it is 4.5% to 6% as claimed by assessee, it neither involves any payment or credit of such sum by way of cash, issue of cheque or draft or by any other mode and hence does not liable for TDS u/s 194C of the Act. Hence, the disallowance made by AO and confirmed by CIT(A) is deleted. - Decided in favour of assessee.

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• 2022 (9) TMI 288
  TP Adjustment - most appropriate method - tested party - TPO disregarded the benchmarking of the appellant and held that with the first set of transaction stating that foreign AE cannot be taken as a tested party as Revenue has consistently over the past years having not accepted the stand of the assessee of benchmarking its international transactions using foreign Associated Enterprises as a tested parties - HELD THAT:- We find that with respect to the first set of transaction of provision of ITeS services where the assessee has adopted foreign AE as a tested party, same has been accepted by the coordinate bench in case of the assessee for assessment year 2004 05 to assessment year 2009 10 - In those orders the coordinate bench also held that both the set of transactions of provision of ITeS services should not be aggregated but should be benchmarked separately. The issue is squarely covered in favour of the assessee by the decision of the coordinate benches in case of assessee itself. Further, assessee has entered into advance transfer pricing agreement for FYs 2013 14 to 2017 18 where the Transfer Pricing approach of the assessee accepting the foreign AE as a tested party is also accepted. CIT A has directed TPO to exclude e clerx services limited and TCS e serve international Limite - Clerx services limited has been excluded by the co ordinate bench in assessee s own case for A.Y. 2008 09. Further, for A.Y. 2009 10, the learned CIT(A) rejected and excluded the above company which is accepted by the learned Assessing Officer by not agitating before the Tribunal further, therefore, we do not find any reason to not to follow the order of the co ordinate Bench in assessee s own case for earlier years on this count. Independently, With respect to the exclusion of TCS e clerk serve international limited, we find that the TCS e serve international is part of Tata group, enjoys the goodwill and brand value of the group and company is paying in expenses towards Tata equity. In view of this, we do not find any infirmity in the order of the learned CIT(A) in excluding TCS e serve international limited from the comparability analysis. No infirmity in the order of the learned CIT(A) in directing the assessee to adopt the foreign associated enterprise as tested party with respect to 1st set of transactions, not to aggregate the first set of transaction and second set of transactions for benchmarking, exclusion of e clerk services limited and TCS e serve international Limited for benchmarking second set of transactions. Disallowance of deduction u/s 10A - AO invoked the provision of Section 10A(9) of the Act and held that due to change in the shareholding the assessee is not entitled to the deduction - HELD THAT:- CIT(A) allowed the same following his own order for earlier years. We find that the identical issue arose in case of the assessee for A.Y. 2009 10 wherein the co ordinate bench allowed the claim of the assessee - We also confirm the order of the learned CIT(A) in deleting the disallowance of deduction under Section 10A of the Act with respect to Pune Unit no.2. Disallowance of deprecation of intangible assets of contracts - assessee claims that these contracts are long term contracts and are intangible assets eligible for depreciation at the rate of 25% and accordingly, the claimed depreciation - HELD THAT:- This issue also arose in the case of assessee in all the years from A.Y. 2005 06 [ 2019 (1) TMI 1128 - ITAT MUMBAI] and 2012 13 [ 2020 (3) TMI 1418 - ITAT MUMBAI] - The co ordinate bench for A.Y. 2005 06 to 2008 09 [ 2019 (1) TMI 1128 - ITAT MUMBAI] held that assessee is entitled to depreciation on these contracts as intangible assets . Therefore, respectfully following the same, we direct the learned Assessing Officer to delete disallowance of depreciation. Accordingly, ground is dismissed. Computing the deduction under Section 10A and 10AA of the Act without setting off of losses of eligible units against the profits of eligible units - Honourable Supreme Court in Commissioner of Income-tax vs YokogawaIndiaLtd. [ 2016 (12) TMI 881 - SUPREME COURT] held that From a reading of the relevant provisions of section 10A it is more than clear that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794, dated 9-8-2000. In view of this we uphold the action of the learned CIT A in directing the learned assessing officer to compute the deduction u/s 10 A of the act by including only the profits of eligible units ignoring the losses of another eligible units. Accordingly ground of the appeal is dismissed. Disallowance of depreciation - adjustment to the value of the transaction was made of the contract pursuant to which the disallowance of depreciation resulted in subsequent years - HELD THAT:- When the original addition itself is deleted, the consequential disallowance of depreciation in subsequent year cannot be sustained. On identical facts, coordinate bench for assessment year 2012 13 [ 2020 (3) TMI 1418 - ITAT MUMBAI] deleted the disallowance of depreciation, therefore, respectfully following the decision of coordinate bench in assessee s own case, we direct the AO to delete the disallowance of depreciation on the acquisition of Master service agreement from foreign AE. Disallowance of depreciation on intangible asset representing acquisition of business contracts - HELD THAT:- When the transfer pricing addition made in the case of the assessee for assessment year 2011 12 is already deleted with respect to the transfer price of the amount of acquisition of the share and when in subsequent years it is held to be an intangible asset, there is no reason to uphold the action of the learned AO. Accordingly ground of the appeal is allowed. Disallowance u/s 14A r.w.r. 8D - Necessity of recording satisfaction - HELD THAT:- We find that according to the provisions of Section 14 A (2) the learned assessing officer before invoking application of rule 8D is required to satisfy about the correctness of the claim of the assessee in respect of expenditure incurred in relation to the exempt income having regard to the accounts of the assessee. We find that in the present case the learned assessing officer did not consider at all that why the disallowance offered by the assessee is incorrect. In view of absence of any satisfaction made by the learned assessing officer about the correctness of the claim of the assessee, he is not empowered to invoke the provisions of rule 8D of income tax rules. Therefore, the disallowance made by the learned assessing officer deserves to be deleted. MAT computation u/s 115JB - Any addition made by the learned assessing officer to normal computation of the total income is deleted. Similarly the disallowance of such expenses as computed as per the provisions of Section 14 A with rule 8D cannot also be imputed while working out the book profit of the assessee u/s 115 JB of the act for the simple reason that there is no provision u/s 115 JB of the act to make any such adjustment. Further it is not denied before us that the assessee has already made an adjustment with respect to the provision of that Section where there is profit is required to be increased by the expenditure related to exempt income. Accordingly the addition to the book profit is also required to be deleted. This issue is also similar to the issue involved in assessee s own case for assessment year 2012 13 [ 2020 (3) TMI 1418 - ITAT MUMBAI] wherein identical view is taken. Ground of assessee allowed.

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• 2022 (9) TMI 287
  ALP determination - tested party for the purpose of determining the ALP - whether the AEs can be considered as a tested party as per Indian Transfer Pricing Regulation? - HELD THAT:- As respectfully following the ratio laid down by the Hon ble Court [ 2022 (2) TMI 1063 - CALCUTTA HIGH COURT] hold that AEs can be selected as tested party and, thus, reverse the finding of the ld. CIT(A) and allow the common ground raised by the assessee for AY 2014-15 2015-16. International Transaction of purchase of finished goods from AEs and receipt of commission from the AEs - HELD THAT:- As in assessee s own case HC [ 2022 (2) TMI 1063 - CALCUTTA HIGH COURT] as held DRP, on noting that such issue was raised by the assessee before it for the first time, forwarded the contention to the TPO for his consideration and submit a remand report. The TPO in his remand report held that the segmentation of profitability provided by the assessee has no basis and is far fetched and not audited. Upon consideration of the remand report submitted by the TPO, the DRP accepted the same and denied relief to the assessee for the assessment year 2012-13. However, for the assessment year 2013-14 and the subsequent assessment year 2014-15 the DRP has accepted the stand of the assessee with regard to the segmentation of the profitability. These factors were taken into consideration by the Tribunal and on facts it was noted that the adjustment can be made only on the basis of the transaction and not on aggregation and, accordingly, accepted the segmentation analysis of the assessee.- Decided in favour of assessee. Disallowance of administrative support services and IT support services which were held to be in the nature of stewardship services and other expenditure claimed - HELD THAT:- As administrative support services and IT support services being not in the nature of stewardship services and ld. D/R having failed to controvert this fact. We, therefore, respectfully following the ratio laid down by the Hon ble Court [ 2022 (2) TMI 1063 - CALCUTTA HIGH COURT] and observing that there is no change of facts in the instant case, reverse the finding of the ld. CIT(A) and allow the above stated ground raised by the assessee for AY 2015-16.

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• 2022 (9) TMI 286
  Disallowance u/s.14A r.w.r 8D - necessity of recording satisfaction - suo motu disallowance of expenses made relatable to exempt income u/s.14A - HELD THAT:- AO has recorded satisfaction as required under sub-section (2) of section 14A of the Income Tax Act, 1961, and thus, there is no merit in the arguments advanced by the learned counsel for the assessee on the issue of satisfaction and hence, ground raised by the assessee is rejected. Disallowance u/s 14A computed by the AO - AO has computed disallowances u/s.14A of the Act by invoking Rule 8D of the Income Tax Rules, 1962 for the assessment years 2008-09 to 2010-11, which is in excess of exempt income earned by the assessee for the relevant assessment years. It is well settled principle of law by decisions of various courts, including Hon ble High Court of Madras in the case of Marg Ltd. [ 2020 (10) TMI 102 - MADRAS HIGH COURT] has very clearly held that disallowance under section 14A w.r.Rule 8D can never exceed exempt income earned by the assessee during particular assessment year. In the case of Cheminvest [ 2015 (9) TMI 238 - DELHI HIGH COURT] had considered very similar issue and held that disallowance contemplated u/s.14A cannot swallow entire exempt income earned for the relevant assessment year. The sum substance of ratios laid down by various High Courts are that disallowance of expenditure u/s.14A of the Act cannot exceed exempt income earned for relevant assessment year. Assessee has earned exempt income of Rs.1,95,75,000/- for the assessment year 2008-09, whereas, the Assessing Officer had disallowed expenditure u/s.14A of the Act at Rs.75,07,26,240/-, which is in excess of exempt income earned for the relevant assessment year - disallowance computed by AO cannot exceed exempt income earned for the relevant assessment year and thus, by respectfully following decision in the case of Marg Ltd. [ 2020 (10) TMI 102 - MADRAS HIGH COURT] we direct the AO to restrict disallowances u/s.14A r.w.Rule 8D of the I.T. Rules, 1962, to the extent of exempt income earned for the relevant assessment years. TP adjustment made on account of corporate guarantee extended by the assessee to its AE - Assessee has challenged order of the Tribunal before the Hon ble High Court of Madras only on the issue of disallowances u/s.14A of the Income Tax Act, 1961, and the Hon ble High Court set aside order of the Tribunal for the assessment years 2008-09 to 2010-11 only on the issue of disallowance u/s.14A - However, while listing appeals for disposal in pursuant to direction of the Hon ble High Court, the Registry has listed appeals filed by the Revenue for very same assessment years, even though issues involved in those appeals are reached finality.Therefore, we are of the considered view that these appeals filed by the Revenue / the assessee and cross objection filed by the assessee for the assessment years 2009-10 2010-11 does not require any adjudication at this juncture and thus, these appeals and cross objection are disposed off without giving any finding on the issue as raised by both the parties. Whether extending corporate guarantee is not international transaction? - Tribunal has considered an identical issue in the case of Indian Public School Pvt. Ltd. [ 2022 (6) TMI 1300 - ITAT CHENNAI] and held that after amendment of section 92B of the Income Tax Act, 1961, corporate guarantee given by the assessee to its AE is an international transaction. Therefore, first argument of the assessee is hereby rejected. As regards, rate at which such guarantee is required to be benchmarked, the Tribunal in the very same decision, after considering judgement of the Hon ble Bombay High Court in the case of Everest Kento Cylinders Ltd . [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] had directed the TPO/A.O. to compute guarantee commission @ 0.5% on total corporate guarantee given by the assessee to its AE. By following decision of the co-ordinate Bench of the Tribunal in the case of Indian Public School Pvt. Ltd.[ 2022 (6) TMI 1300 - ITAT CHENNAI] we direct the Assessing Officer to impute guarantee commission @ 0.5% on total corporate guarantee given by the assessee to its AE.

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• 2022 (9) TMI 285
  Revision u/s 263 by CIT - As per CIT there was decrease in value of trade but there was no corresponding sale of trade items to this effect - HELD THAT:- During the course of proceeding u/s. 263 before the PCIT the assessee failed to file any evidence to support/substantiate the claim of reduced value of closing stock. Perusal of assessment order reveals that no such issue came for consideration before the AO. The assessee refrained from appearing and has not filed any details about the questionnaire issued by the ld.AO and whether any such information was called for by the AO regarding the issue raised/referred in show cause notice u/s. 263. We are unable to find any such documents on record, which could show that this issue of decrease in closing stock came up before ld.AO at any point of time. It is a matter of claiming loss towards trading business and without complete evidence such loss claimed by the assessee cannot be allowed. PCIT has rightly observed/held that the order of the AO u/s. 143(3) of the Act is erroneous and prejudicial to the interest of the revenue. No infirmity in the impugned order passed u/s. 263 of the Act setting aside the assessment order and directing the ld.AO to frame the assessment afresh after considering the observations/findings of the ld.PCIT. PCIT has rightly invoked jurisdiction u/s. 263 of the Act to setting aside the impugned assessment order passed u/s. 143(3) - Decided against assessee.

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• 2022 (9) TMI 284
  Addition u/s 68 - excess cash deposit and to tax the same u/s 115BBE - appellant deposited cash in her bank account during the demonetization period - case was selected for Limited scrutiny assessment under CASS - HELD THAT:- As during assessment proceeding, the assessee submitted that Rs. 10,00,000/- disclosed under IDs-2016 and remaining Rs. 3,00,000/- it was out of cash in hand from earlier savings withdrawals, but the AO was of the view that when appellant had Rs. 2,80,000/- in hand till 31.03.2016 that event why she would have withdrawn Rs. 95,000/- upto 08.11.2016. An addition made only on the sole ground of assumption cannot be sustained the explanation of assessee cannot be rejected and hence the addition confirmed by the ld. CIT(A) is not correct. AO has made the addition merely on surmises and conjectures without assigning any cogent reason to justify the addition. Since source of the alleged amount is from part savings and opening cash in hand, in our view addition was not warranted. Thus finding of ld. CIT(A) is reversed and the addition in question is deleted and appeal of the assessee is allowed.

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• 2022 (9) TMI 283
  Revision u/s 263 by CIT - capital gain computation - book profit computation u/s. 115JB - Scope of order prejudicial to the interest of Revenue - PCIT has revised the order of the AO for the reason that the AO has not examined the fact that the sale consideration has not been reflected in the books of account resulting in understatement of book profits and the resultant tax - whether the AO during the course of assessment has examined the details relating to the capital gains? - HELD THAT:- AO has called for the details pertaining to the long term capital gain along with supporting documents and proof and the assessee vide letter had furnished the computation, copy of purchase deed, communication from BMRCL and ledger abstract showing cost including stamp paper, registration charges etc. The assessee has also furnished the details of tax deducted along with reconciliation as per P L account and Form 26AS before the AO where the details of TDS done by BMRCL was furnished. The AO has verified these details and has passed the assessment order making a disallowance u/s. 14A of the Act r.w. Rule 8D. Though there is no mention specifically on the verification of capital gains by the AO, the same cannot be a reason for coming to the conclusion that the AO has not made any enquiry. Also the enquiry made by the AO need not be extended to the verification of the P L Account of the assessee based on which computation u/s. 115JB was prepared as the assessee being a public limited company has prepared the accounts as per the Companies Act and the same was approved by the share holders in the AGM of the company. The contention of the PCIT that the decision APOLLO TYRES LTD. [ 2002 (5) TMI 5 - SUPREME COURT] is not applicable in assessee s case as the accounts are not prepared as per Companies Act has no merits, since the accounts are audited and certified by the auditors in this regard. The Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] had observed that phrase prejudicial to the interest of Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of an order by the AO cannot be treated as prejudicial to the interest of the Revenue. In the given case the AO has perused the materials and have come to the conclusion accepting the book profit computation of the assessee. Further the assessee has also submitted before the AO/PCIT the fact that the compensation/ consideration is accounted in the FY 2015-16 and offered to tax in the year under consideration. We are of the considered view that the AO has correctly accepted the book profit computation u/s. 115JB - We therefore set aside the impugned order of the PCIT passed u/s. 263 and restore the assessment order. The issue is allowed in favour of the assessee.

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• 2022 (9) TMI 282
  Estimation of profit - Calculation with regard to profit loss earned by the assessee in respect of the transaction in shares - Addition on Share trading - AO noted that the appellant had undertaken transaction in shares and in absence of any details, he estimated the profit @ of 1% of the transaction - HELD THAT:- Appellant undertaken transaction in shares and assessee did not furnish any calculation with regard to profit or loss earned by it either before the AO or before the CIT(A) and thus ld. CIT(A) had no other alternative to uphold the addition on estimated the profit at the rate of 1% of the transaction and at the time of hearing before us also assessee did not file any calculation chart to show profit or loss earned by the assessee in respect of share transaction undertaken by assessee is less than estimated by AO and as such the material available on record it can be informed that the order passed by the ld. CIT(A) need not required to examine further and addition made on account of share transaction on estimated the profit at the rate of 1% - Appeal of the assessee is dismissed.

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• Corporate Laws

• 2022 (9) TMI 281
  Seeking directions to immediately release the pending payments - seeking directions to release payments against all future invoices which are raised in accordance with the provisions of the PPA without delay and in a timely manner - principles of natural justice - HELD THAT:- There is no dispute to the proposition that having regard to the jurisdiction exercised by the High Court under Article 226 of the Constitution of India, availability of alternative remedy is not really a bar to exercise such jurisdiction. Nonetheless as the jurisprudence has evolved over the years, Constitutional Courts have imposed upon themselves self-restraint in not exercising such jurisdiction barring in certain exceptional circumstances, such as, violation of principles of natural justice, when the vires of a Statute is challenged, etc. However, the same is not the position in the present case. The fact that the writ petitioners did not file appeal within the period of limitation or within the extended period of limitation cannot be a ground to entertain the writ petition under Article 226 of the Constitution of India. That being the position, we are not inclined to entertain the writ petition. However, writ petitioners would be at liberty to work out their remedies in terms of IBC. Petition dismissed.

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• 2022 (9) TMI 280
  Seeking repayment of loan - deposit by means of Clause 9 (iii) of the Private Trust Deed - conveyance subject to stamp duty or not - principles of natural justice - HELD THAT:- This Tribunal comes to a consequent conclusion that the impugned order dated 26.05.2022 bristles with legal infirmities, because of the fact that it had not taken into account of the contents of notes of the submissions furnished by the Appellants and the 1st Respondent/Trust in Comp. App (AT) (CH) Nos. 43 and 45 of 2022 in a Qualitative, Quantitative and Threadbare fashion, not discussed about the pros and cons of the submissions made in a detailed manner, in the absence of Adjudication / Determination of Controversies relating to the Movables owned by the Applicant (Deceased), in an appropriate proceedings by the Competent Forum, including the aspect of the plea of the Appellant that the 1st Respondent / Trust cannot Claim any Tangible or Intangible property, based on the Two Trust Deeds dated 09.02.2015 and 16.02.2015 respectively - not obtained the sanction of any Court of Law, and there being a conspicuous silence in regard to the applicability of Regulation 28 of the CLB Regulations 1991, permitting the Legal Heirs to prefer an Application for Substitution. Unless the pending Lis between the Parties are finally decided, no interest in the property can said to be that of them, so as to substitute / implead them, as Party / Parties, especially when the validity of the Will dated 18.02.2015, is yet to be established, in the manner known to Law and in accordance with Law. Viewed in that perspective, this Tribunal, is perforced to interfere with the impugned order and sets aside the same, to secure the ends of justice. The matter is remitted back to the National Company Law Tribunal, Division Bench-I, Chennai, for fresh consideration, and for passing a reasoned speaking order (ofcourse, un-influenced and untrammelled with any of the observations made by this Tribunal in these Appeals), granting liberties to the respective Parties to make a mention and to proceed further, in the subject matter in issue, soon after the adjudication of pending Testamentary Proceedings, between the Parties before the Hon ble High Court of Madras. Application disposed off.

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• Insolvency & Bankruptcy

• 2022 (9) TMI 279
  Seeking a direction to the Appellant herein to acknowledge and record the transfer of ownership in the name of the Auction Purchaser - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - whether the Successful Bidder in an Auction conducted on as is where is basis is liable to pay prior dues attached to such Auction property, when the Company is in Liquidation and the dues were claimed under Operational Debt before the Liquidator? HELD THAT:- The material on record establishes that the Appellant herein had filed their Form-C on 09.03.2020 which was defective and the Liquidator vide email dated 09.03.2020 pointed out the deficiency and sought clarifications on the information provided. A reminder was also sent on 12.03.2020 to consider the claim of the Appellant herein as an Operational Creditor . Subsequent to the e-Auction conducted and the receipt of the sale consideration, the Liquidator allocated the funds in accordance with Section 53 of the Code in a waterfall mechanism. Once the Liquidation sale has been completed and the Certificate of Sale has been executed followed by handing over possession to the Auction Purchaser, any claim relating to such property for dues prior to the Auction cannot be raised against the Auction Purchaser specifically when the Company is in Liquidation and the dues were already claimed by the said party as an Operational Creditor , during the CIRP process as the Company was in Liquidation and the Appellant had already approached the Liquidator by filing a Form-B and the Liquidator has intimated to the Appellant that there is no amount left for the payment to any Operational Creditor , the Auction Purchaser cannot be made liable for any dues arising on the property before the purchase of the said property in this case. There are no illegality or infirmity in the Order of the Adjudicating Authority - appeal dismissed.

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• 2022 (9) TMI 278
  Seeking extension of CIRP period by another 60 days beyond the period of 370 days - applicant through the COC has failed to consider the Resolution Plan pending for consideration within the extended period of 40 days and also could not provide the cogent reasons for not complying with the direction - HELD THAT:- The judgment passed by Hon ble supreme Court in the matter of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Ors. [ 2019 (11) TMI 731 - SUPREME COURT] has held that the third proviso added to the Section also mandates that where the period of 330 days is over on the date of commencement of the Amending Act of 2019, a further grace period of 90 days from such date is given, within which such process shall either be completed or the corporate debtor be sent into liquidation. The period of 60 days from today be excluded in the CIRP period and the CoC is directed to consider the Resolution Plan - Further, period spent from 19.02.2021 (date of filing of Application bearing I.A. No. 1005 of 2021) to 31.05.2021 (Impugned Order) is also excluded - Further, period spent from 14.06.2021 [date of filing of instant Appeal i.e. Company Appeal (AT) (Ins.) No. 439 of 2021] till the date of Judgment i.e. 06th September, 2022 is also excluded. Appeal allowed.

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• 2022 (9) TMI 277
  Duties and functions carried out by IRP. - Disallowing certain CIRP expenses claimed by the Appellant/IRP - the IRP himself filed the CIRP withdrawal application just within 12 days after commencement of the CIRP - whether it was justified on the part of the IRP to still continue with the CIRP proceedings - disallowing certain CIRP expenses claimed by the Appellant/IRP by treating them as non-essential ? - whether the remarks disapproving the conduct of the IRP in the present matter by the Adjudicating Authority stands to reason? - HELD THAT:- It is an undisputed fact that the Operational Creditor having entered into a settlement with the Corporate Debtor, he had informed the IRP on 12.10.2021 in the prescribed format, seeking withdrawal of CIRP. Within six days, on 18.10.2021, the IRP had also filed the CIRP withdrawal application before the Adjudicating Authority. The Corporate Debtor also had taken steps on his part before the Adjudicating Authority on 17.10.2021 for stay on the CIRP and also filed an application on 22.10.2021 for withdrawal of the CIRP. It is therefore amply clear that all the important stakeholders in the process were in unison in seeking closure of CIRP and awaiting final directions of the Adjudicating Authority. The Adjudicating Authority after categorizing the costs as essential and non-essential have allowed the CIRP costs to the extent of Rs. 8,36,001/- to be reimbursed by the Corporate Debtor. The Adjudicating Authority has also allowed certain amount as the expenses of the IRP and for payment towards his fees - since the Section 12A application was filed by the IRP before the Adjudicating Authority well before the constitution of CoC, the IRP s continuance with the CIRP process without making adequate efforts to seek pointed clarification from the Adjudicating Authority on whether to proceed with the CIRP or not, does not reflect well on his conduct. IRP cannot afford to be unmindful of the fact that he is the driving force and the nerve-center in the resolution process and is expected to assist in the CIRP process in a fair and objective manner in the best interest of all stakeholders. In the IBC framework, the IRP is the fulcrum of the CIRP process and is obligated to act as the bridge between the Adjudicating Authority, the CoC and other stakeholders including the Corporate Debtor. As an officer of the court vested with administrative powers, the IRP as the facilitator of the resolution process needs to conduct the process with fairness, diligence, forthrightness and highest sense of responsibility. This aspect squarely finds place in Section 208(2)(a) of the IBC which subjects the insolvency professionals to abide by a code of conduct which, inter-alia, obligates the IRP to take reasonable care and diligence while performing his duties. It is clear that what is reasonable, is not amenable to precise definition and therefore is context specific. Given that CIRP withdrawal application before the Adjudicating Authority was a known factor, it would only have been fair on the part of the IRP, if instead of pressing the accelerator on the CIRP process, he had pursued in serious earnest with the Adjudicating Authority for its clear directions and guidance on proceeding with the CIRP - the IRP seems to have taken advantage of the fluid situation and unnecessarily added to the costs by carrying out activities which could have otherwise been put on hold and find the conduct of the IRP deprecatory. There are no substance in the submission raised by the Learned Counsel for the Appellant to warrant any interference in the impugned order. The impugned order passed by the Adjudicating Authority, not suffering from any infirmities, is hereby affirmed - appeal dismissed.

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• 2022 (9) TMI 276
  Approved Resolution Plan - Rectification of mistake - error apparent on the face of record or not - Whether the Appellant is entitled to claim relief under Section 60(5) when the Resolution Plan was approved and attained finality? - HELD THAT:- Once the Resolution Plan was approved by CoC and thereafter by Adjudicating Authority, the same cannot be withdrawn or modified by inventing devise under Section 60(5) of IBC as held by Hon ble Apex Court in Committee Of Creditors Of Essar Steel India Limited vs Satish Kumar Gupta [ 2019 (11) TMI 731 - SUPREME COURT] since the proceedings under IBC are time bound. Admittedly, the Resolution Plan was approved by the CoC with a majority of 81.39 %, voting which is in compliance of Section 30(2) of IBC and later, the Resolution Plan was approved by the Adjudicating Authority, and attained finality, since, it was not challenged by the Appellant herein. Though the Appellant gave dissent during 20th Meeting of CoC and addressed letter dated 06.12.2018 and 12.12.2018, i.e., subsequent to approval of Resolution Plan by CoC, those letters are of no help to the Appellant. Those letters cannot be taken into consideration when the plan was approved by CoC and Adjudicating Authority. In case, any error or illegality is found, it is the duty of the Adjudicating Authority to send back Resolution Plan for reconsideration by CoC. But no illegality or contravention of provisions of IBC was found by Adjudicating Authority and as such approved the Resolution Plan. When the Resolution Plan is approved and attained finality, the same cannot be altered or modified or withdrawn - the Appellant is not entitled to claim any relief in the present Appeal as the Resolution Plan was already approved and attained finality. On this ground alone, the Appeal is liable to be dismissed. Whether the Appellant being dissenting secured Creditor is competent to challenge approval of Resolution Plan by filing the instant Appeal? - HELD THAT:- When the Appellant is dissenting Creditor, Appellant is not competent to challenge the approved Resolution Plan and file an Appeal under Section 61 of IBC before this Tribunal. Applying the principle laid down in the above judgments, it is held that the Appellant being a dissenting secured Financial Creditor is not entitled to challenge Resolution Plan on the ground of discrimination by filing separate Interlocutory Application without challenging the approved Resolution Plan. Accordingly, the point is held against the Appellant and in favour of the Respondent. Whether the alleged discrimination overrides the commercial wisdom of the CoC, if so, the order passed by the Adjudicating Authority is liable to be set aside? - HELD THAT:- This Tribunal does not have power of judicial review, when the decision taken by CoC in compliance of Section 30(2) and Regulations 37 38 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. Even this Tribunal is also not entitled to interfere with such decision, except where the approved Resolution Plan is contrary to the provision of IBC or any other law which would fall within Section 61(3) of IBC - there are no merit in the contentions of learned Senior Counsel for the Appellant and the appeal is devoid of merits. Consequently, the Appeal is liable to be dismissed. Appeal dismissed.

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• 2022 (9) TMI 275
  Initiation of CIRP - Operational Debt or not - Nature of transaction between the parties for taking over the Company - HELD THAT:- The payment which was made by the Operational Creditor was in contemplation of Development Agreement dated 01.10.2016 which ultimately could not fructify since the Corporate Debtor refused to sign the Agreement. It is clear that the transaction which was made by the Operational Creditor was towards the joint venture development agreement between the parties under which the Operational Creditor offered to provide necessary infrastructure and man-power to construct and market the Residential Flats/Apartments. When the Operational Creditor acted in pursuance of the Proposed Development Agreement between the parties, the amount paid by the Operational Creditor of Rs. 3 Crores plus Rs. 1 Crore was towards providing services by the Operational Creditor, the same is clearly an Operational Debt - there are no substance in the submissions of Learned Counsel for the Appellant that Corporate Debtor did not owe any Operational Debt . Tthe submissions of Learned Counsel for the Appellant that the Corporate Debtor did not owe any Operational Debt to the Operational Creditor, is rejected - appeal dismissed.

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• 2022 (9) TMI 274
  Recovery of outstanding amounts from Sundry Debtors under Section 60(5)(b) of the Insolvency and Bankruptcy Code, 2016 - Liquidator is duty bound to prefer Application for recovery of money due to the Corporate Debtor under Regulation 39 of the IBBI (Regulation Process), Regulations, 2016 or not - HELD THAT:- The Resolution Professional is required under Section 18 of the Code to take control and custody of the assets of the Corporate Debtor . The amounts stated to be due and payable to the Corporate Debtor by other Sundry Debtors are required to be included in the Information Memorandum and when included, the person/entity purchasing the assets of the Corporate Debtor would have knowledge of the value of the assets/Liquidation Value as stated in the Information Memorandum. The remedy for recovery of debts, disputed or not, cannot be determined in summary proceedings and the Code does not contemplate adjudication of any such nature. Any such steps taken under Section 60(5) of the Code before the Adjudicating Authority, would tantamount to bypassing/short-circuiting the Judicial Proceedings - The Appellant is well within its powers to take appropriate steps to file legal proceedings, if the circumstances so warrant. The Code expressly provides for the Liquidator to institute or defend any Suit, Prosecution or other Legal Proceedings, Civil or Criminal, in the name or on behalf of the Corporate Debtor . There is no illegality or infirmity in the direction given by the Adjudicating Authority - Appeal dismissed.

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• Service Tax

• 2022 (9) TMI 273
  Renting of Immovable Property Services or not - assignment of entire business of the hotel to IHCL - scope of definition - immovable property buildings used for the purpose of accommodation including hotels, whether comes within the scope of Renting of immovable property or not? - Nature of receipt of License fee. HELD THAT:- Having gone through the impugned judgment passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and the reasoning given, no interference of this Court is called for. The Civil Appeal stands dismissed.

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• 2022 (9) TMI 272
  Invocation of extended period of limitation - marketing and legal services obtained by the appellant from services providers located abroad - reverse charge mechanism - revenue neutrality - HELD THAT:- In the instant case, the appellant had shown service tax liability in their balance sheet and the same has not been disputed. Also it is seen in the case of Jayshree Impex [ 2018 (9) TMI 391 - CESTAT AHMEDABAD ] relied by revenue the issue of revenue neutrality has not been raised by the appellant. It is seen that the services of the sales commission are ordinarily admissible as cenvat credit to manufacturers and therefore the present situation would be revenue neutral. In these circumstances the intention to evade duty cannot be alleged against the appellant and consequently the extended period of limitation could not be invoked. Appeal allowed - decided in favor of appellant.

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• 2022 (9) TMI 271
  Levy of service tax - taxable event - supplementary invoice - cost escalation clause - It is the contention of the department that such invoices should have been taxed at 12% and not at 10% on account of Rule 4(a)(1) of the Point of Taxation Rules, 2011 - HELD THAT:- The Appellant was engaged in providing service in the categories of Goods Transport Agency and Survey and Exploration of Mineral Services . They were awarded with the work order dated 09.01.2009 by Central Mine Planning and Design Institute Limited (CMPDIL), Ranchi for coal exploration in Siyan, South Block and Chirra, North Block both at Mand, Raigarh Coalfield, Chhattisgarh. The Appellant submitted the Service Tax Returns showing payment of Service Tax. The work was completed during the financial year 2010-11 and 2011-12 and Bills for the same were also raised and payments were received. The Service Tax @ 10% was payable at that point of time and the said rate was changed from 01.04.2012 from 10% to 12% by Notification No.2/2012-ST dated 17.03.2012. Subsequently due to escalation of price for enhancement of labour costs and materials etc. price of the work order was enhanced for the job already completed. The escalation was nothing but continuation of the earlier Bills which were raised during the period from December 2010 to November 2011. It was also submitted on behalf of the Appellant that supplementary tax invoice is a invoice that a taxable person issues if deficiencies are found in a tax invoice already issued by the said taxable person. The escalation of price subsequently made and consequently supplementary invoices were raised. Applicability of rate of Service Tax in respect of the services provided to Central Mining Planning and Design Institute Limited (CMPDIL), Ranchi - case of the Appellant is that the said services were rendered prior to 01.04.2012 when the rate of Service Tax on the said service was increased from 10% to 12% vide Notification No.2/2012-ST - HELD THAT:- Hon ble Supreme Court in the case of ASSOCIATION OF LEASING FINANCIAL SERVICE COMPANIES VERSUS UNION OF INDIA AND OTHERS [ 2010 (10) TMI 4 - SUPREME COURT] has observed that The taxable event is rendition of service. Hence, the impugned tax is different and distinct from tax on sale of goods under Entry 54 List II of the VIIth Schedule to the Constitution . Therefore, the rate of tax applicable on the date on which the services were rendered would be the one that would be relevant and not the rate of tax on the date on which supplementary invoices were raised. Therefore, the taxable event in so far as Service Tax is concerned, is the rendition of service. That being the position, the taxable events in the present Appeal had admittedly occurred prior to 01.04.2012. At that point of time the rate of Service Tax applicable in respect of services in question was 10% and not 12% which came into effect only on or after 01.04.2012 - The issuance of supplementary invoices in the month of July 2012 would not make any difference because it is not receipt of payment which is taxable event, but the rendition of service. Further, in the Point of Taxation Rules, 2011, Section 2(e) defines Point of Taxation means the point of time when a service shall be deemed to have been provided. Appeal allowed - decided in favor of appellant.

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• 2022 (9) TMI 270
  Interpretation of statute - Interest on refund - whether the interest on any amount pre-deposited prior to 6.8.2014 continues to be covered by provisions of un-amended Section 35FF of Central Excise Act, 1944 or will it be governed by amended Section 35FF ibid entitling interest from the date of pre-deposit? HELD THAT:- A perusal of the provisions of Section 35FF would make it clear that earlier i.e. upto 6.8.2014, the interest was liable to be paid only in the case of delay beyond three months in granting the refund from the date of communication of order passed by the Commissioner (Appeals) or the Tribunal, whereas post 6.8.2014, this has been changed and an interest has been made payable at a rate not below 5% and not exceeding 36% p.a. as is for the time being fixed by the Central Government by notification in the official gazette on such amount from the date of payment of amount till the date of refund of such amount. Proviso has also been added to it that any amount deposited under this section prior to the amendment, shall continue to be covered by the provisions of S.35FF as it stood before the amendment. Admittedly, in the instant matter the amount was pre-deposited by the appellant on 25.6.2014 under Section 35F as per the direction of the Hon ble High Court and during that period un-amended section 35FF[which dealt with interest on delayed refund of amount deposited u/s.35F] mandates the payment of interest only if there was a delay of refund beyond three months from the date of the order of the Tribunal. Interest from the date of payment of the amount till the date of refund of such amount has been made applicable only for post-6.8.2014 deposits when section 35FF was amended. Admittedly in the instant matter the pre-deposit was made on 25.6.2014, which is prior to 6.8.2014 when section 35FF required an interest as specified in Section 11BB to be paid for any amount of pre-deposit which has been refunded after a period of three months from the date of communication of order of appellate authority till the date of refund of such amount - in the instant matter the interest on refund has to be dealt with in accordance with the erstwhile section 35FF which clearly mandates the payment of interest only if there was a delay beyond three months. The statutory period prescribed therein is 3 months from the date of communication of the order of the Appellate Authority. The statute uses the word communication of the order of appellate authority and that cannot be construed as receipt of the copy of the order . When any order is pronounced in Tribunal, Department is represented through Departmental Representative/Authorised Representative and therefore communication of order to them deemed to have been communicated to the concerned authority which has to sanction refund. After the expiry of three months from the date of the final order dated 19.02.2020, the appellant is entitled for the interest on delayed refund till the date of refund of the pre-deposit amount and to that extent only the impugned order is modified and the matter is remanded to the Adjudicating Authority for calculating the amount of interest on the above terms and to pay the same to the appellant within a period of two months from the date of this order - Appeal allowed in part.

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• Central Excise

• 2022 (9) TMI 269
  Refund of the excise duty on goods returned to factory - rejected goods, returned to it by its distributors, for which it had issued credit notes to the parties - Section 173L (v) of the Central Excise Act - HELD THAT:- At the outset, it is required to be noted that after giving an opportunity to the assessee on the value of the returned goods and considering the material on record including the market survey report the Department determined the value of returned goods at Rs. 8 to 10 per kg. No cogent evidence was led by the assessee on the value of the returned goods. The assessee only produced the invoices with respect to secondary market. However, it is required to be noted that the value of the returned goods depend on the defects found in the manufactured goods which are returned. It varies considering the defects. In some returned goods the defect might be 5% and in some goods the defect might be 80% to 90%. Therefore, the assessee has to lead the evidence with respect to each consignment of the returned goods, which the assessee failed to prove in the present case. The Department heavily relied upon the market survey report and thereafter determined the value of the returned goods as Scrap at the rate of Rs.8 to 10 per kg. The assessee participated in the proceedings before the Deputy Commissioner. The assessee neither asked for copy of the market survey report nor asked for any crossexamination on the market survey report and/or led any cogent evidence on the value of the returned goods. Considering the value for refund under Section 173L what is required to be considered is the value of the returned goods. As per explanation to clause (v) of Section 173L, value means the market value of the excisable goods and not the exduty value thereof. Therefore, the submission on behalf of the assessee that the returned goods may be treated as a raw material and therefore the value of the raw material can be considered for the purpose of value while determining the refund under Section 173L cannot be accepted - As the value of the returned goods determined by the Deputy Commissioner at Rs.8 to 10 per kg is found to be less than the amount of duty already paid, the appellant is rightly denied the refund of the excise duty paid. Denial of the refund is in consonance of Section 173L (v) of the Central Excise Act. There are concurrent findings recorded by the adjudicating authority, the Tribunal and the High Court on the value of the returned goods which are not required to be interfered with by this Court in the present proceeding more particularly when the same was determined by the Deputy Commissioner/Assessing Authority after giving opportunity to the assessee. The present Appeal fails and the same deserves to be dismissed and is accordingly dismissed.

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• 2022 (9) TMI 268
  CENVAT Credit - valid duty paying documents or not - Transfer Memos - Endorsed Bill of Entry - case of the revenue is that the credit has been availed based upon a transfer memo which shows only a quantity of Manganese ore was diverted to the Durgapur factory of the respondent/assessee - Rule 9 of the CENVAT Credit Rules, 2004. Whether merely because part of the goods which were imported and duty paid was transferred to one of the units of the assessee pursuant to a transfer memo can be the sole reason for denying credit? HELD THAT:- It is to be noted that the bill of entry is one of the approved documents in terms of Rule 9 (1)(c) of the Rules. The bill of entry being the basic document, the assessee was entitled to avail credit based upon the duty paid pursuant to the import effected which was established by producing bill of entry. The decision in the case of BSNL Limited [ 2017 (9) TMI 153 - ALLAHABAD HIGH COURT ] is clearly distinguishable on facts as in the said case no document was produced and, therefore, the Court thought fit to remand the matter for fresh consideration. There are no grounds to interfere with the order passed by the learned Tribunal. The appeal filed by the revenue is dismissed and the substantial questions are answered against the revenue.

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• 2022 (9) TMI 267
  Recovery of reducing the proportionate credit - CENVAT Credit - inputs /input services used by it for providing of electricity part of which it supplied its sister unit - HELD THAT:- The case of the appellant Revenue is that since part of the electricity is transferred to sister unit, the inputs used in generating it to that extent is an input for the sister unit as it is relatable to the goods manufactured by it and they are not inputs relatable to the final products of this respondent. Each unit is separately registered and is a separate assessee as far as central excise is concerned. To the extent the electricity is sold to outsiders, the respondent has reversed the CENVAT credit. On identical issue, High Court of Rajasthan had in COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED [ 2018 (9) TMI 822 - RAJASTHAN HIGH COURT] , allowed CENVAT credit on the inputs used in production of electricity which is supplied free of cost to the assessee s sister unit. The respondent is entitled to CENVAT credit to the extent the inputs are used for production of electricity which is transferred free of cost to its sister unit - Appeal dismissed - decided against Revenue.

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• 2022 (9) TMI 266
  Denial of re-credit of Cenvat credit under Notification No. 39/2001-CE dated 31.07.2001 - period April, 2008 to March, 2009 - HELD THAT:- It is apparent that since the appellant was not availing Cenvat Credit, it was held that the appellant had violated the condition given in para 2A of Notification No. 39/2001-CE which mandates that the manufacturer has to first utilize whole amount of Cenvat Credit available to him on the last day of the month under consideration for payment of duty of goods cleared during such month and pays only the balance amount in cash - In the instant case, since no amount of Cenvat Credit was availed, it was held that the appellant has not utilized the Cenvat Credit available to him for payment of duty first and since the appellant has paid the entire amount of duty under PLA the appellant has violated the condition prescribed under in para 2A of Notification No. 39/2001-CE dated 31.07.2001. The claim of the appellant is that if they by choice have not availed cenvat credit, then no credit is available to the appellant, and therefore, they have complied with the restriction imposed in para 2A of the Notification 39/2001-CE. The claim of the Revenue is that if the appellant could have availed credit and have chosen not to avail the credit then the credit that appellant could have availed is to be treated as credit available to the appellant and since the appellant failed to use the credit available to the appellant, they have violated the condition prescribed in para 2A of Notification 39/2001-CE. It is apparent that the reason for introducing the restriction of full utilization of credit available is that the assessee does not misuse the exemption by taking credit and not using the same. Thereby, accumulating the credit and using it on a letter date when they get out of the notification no.39/2001-CE. It is seen that if the appellant does not take any credit then no such mal-practice can happen and no credit can be accumulated. Moreover, it also implies that the credit available would mean the Cenvat credit taken and available in the credit of Cenvat account and not the credit that the appellant could have possibly taken but did not avail. Moreover, in the instant case, since by not taking the credit the quantum of refund admissible to the appellant remains as same as it would have had the appellant taken the credit and utilized the same. The rejection of rebate claim on this ground is without any basis - appeal allowed.

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• 2022 (9) TMI 265
  Area Based exemption - slump sale agreement - whether Balaji had commenced commercial production prior to 31.3.3010 at all which was the cut-off date for the benefit of the exemption notification? - N/N. 49/2003-CE dated June 10, 2003 - HELD THAT:- It is not disputed that the first invoice was issued to Balaji on 30.03.2010. The exemption notification was available to new industrial units which commenced commercial production on or before 7th day of January, 2003 but not later than 31st day of March, 2010. Therefore, the date of commencement of commercial production of the unit becomes relevant - Balaji had purchased machinery and raw material, rented the generator set for a short while and started setting up and conducted some trials. Meanwhile, it has received electricity connection on April 24, 2010 and started commercial production. Balaji has not started the commercial production by March 31, 2010 and the condition of the Notification is commencement of commercial production and not commencement of any production - appeal is answered in favour of the Revenue and against the assessee. Levy of penalty - HELD THAT:- Raghuveer Beti and C S Rao were the persons concerned who had abetted the wrong. Important documents in the form of Slump sale agreement and the MOU between the two Units which enables the assessee to obtain and transfer the benefit of exemption Notification No. 49/2003 from Balaji to the assessee were in their knowledge. There is, therefore, no reason to interfere with the penalties imposed on them. Appeal dismissed.

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• Indian Laws

• 2022 (9) TMI 264
  Dishonor of Cheque - permission to engage a hand-writing expert to seek an opinion on whether the authorship on the questioned writings - rebuttal of presumption - Section 139 of the NI Act - HELD THAT:- Section 139 of the NI Act raises a presumption that a drawer handing over a cheque signed by him is liable unless it is proved by adducing evidence at the trial that the cheque was not in discharge of a debt or liability. The evidence of a hand-writing expert on whether the respondent had filled in the details in the cheque would be immaterial to determining the purpose for which the cheque was handed over. Therefore, no purpose is served by allowing the application for adducing the evidence of the hand-writing expert. A drawer who signs a cheque and hands it over to the payee, is presumed to be liable unless the drawer adduces evidence to rebut the presumption that the cheque has been issued towards payment of a debt or in discharge of a liability. The presumption arises under Section 139. The fact that the details in the cheque have been filled up not by the drawer, but by some other person would be immaterial. The presumption which arises on the signing of the cheque cannot be rebutted merely by the report of a hand-writing expert. Even if the details in the cheque have not been filled up by drawer but by another person, this is not relevant to the defense whether cheque was issued towards payment of a debt or in discharge of a liability - Undoubtedly, it would be open to the respondents to raise all other defenses which they may legitimately be entitled to otherwise raise in support of their plea that the cheque was not issued in pursuance of a pre-existing debt or outstanding liability. Appeal allowed.

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