TMI Tax Updates - e-Newsletter
December 17, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Highlights / Catch Notes
GST
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Expiry of E-way Bill - detention of truck - break down of the truck - Circular No.10/2019,Q1/17253/2019' - In the instant case, from the narrative thus far, it comes closest to Example 2. It is reiterated and clearly articulated in Example 2 that the expiry of E-way bill does not create any scope for evasion. Absent evasion, there can be no revenue loss. - the maximum penalty would be Rs.5,000/- qua paragraph 10 of said Circular. - HC
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Revocation of cancellation of GST registration - validity of assessment order - ex-parte order - Not only the order is nonspeaking, but cryptic in nature and the reason of cancellation not decipherable therefrom. Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences. - Registration restored. - HC
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Exparte assessment order u/s 73 - ex-parte demand order DRC 07 - order was passed even before the statutory notice period of 30 days as per section 73 (8) - Order quashed - Matter restored back. - HC
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Condonation of delay in filing appeal before appellate authority - Revocation of cancellation of 'GST' registration - non filing of GST returns - In the case on hand, computed from 01.03.2022, 90 days period elapsed on 30.05.2022 and further condonable period of one month elapsed on 30.06.2022. - no ground to interfere with the impugned order. - Before writing the sequitur and dropping the curtains on the captioned writ petition, it is deemed appropriate to record that this Writ Court is informed that it is open to writ petitioner to apply for GST registration afresh. - HC
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Validity of order passed u/s 73 of GST Act - Maintainability of Writ petition - Alternative remedy of appeal - Denial of Input Tax Credit (ITC) - The curtains are dropped qua the captioned writ petition but it is open to the writ petitioner to avail the statutory appeal remedy under Section 107 subject of course to Limitation and pre-deposit if any. - HC
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Refund of IGST - Difficulty at GSTN level - export of goods - Finding fault with the officer concerned also will not help as they are largely dependent on the network. It is good to be driven through the machines in this electronic age and this automatic grant of refund which is system driven rather then the officer driven at the same time unless there is a constant vigil on the part of the GSTN and also an endeavor to rectify the mismatch or the short comings of the software, the issues are bound to multiply. - HC
Income Tax
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Reassessment proceedings - during the pendency of the proceedings u/s 154 for rectification of error, it was not permissible on the part of the Revenue to initiate the proceedings u/s 147/148 of the Act - The High Court has erred in presuming and observing that the proceedings u/s 154 were invalid because the same were beyond the period of limitation. - SC
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Faceless Assessment u/s 144B - Personal opportunity of hearing was not granted to the petitioner, we do not find any good reason to grant any time to file response/counter affidavit. The impugned assessment order is, thus, found to be in violation of the principles of natural justice and against the procedure set in place for conducting reassessment proceeding. Being deficit in essential procedural compliances, the assessment order dated 30.3.2022 is hereby set aside. - HC
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PE in India - activities of Research and development activities do not constitute a PE of the assessee in India - A plain reading of the Article 7(1) would show, that the issue of taxability would arise qua the respondent/assessee only if profits accrue to the respondent/assessee, and that too only to the extent they can be attributed to its PE in India. - HC
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Continuation of prosecution proceedings when levy of penalty has been deleted - Offence u/s 276C (1), 277 and 278E of the Income Tax Act - Particularly the law point framed has been clearly held that once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under section 276C is automatic. - HC
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Addition u/s 56(2)(viia) - taking fair market value of buy back of shares by assessee from its holding company a company incorporated in USA - the provisions of section 2(22)(d) r.w.s.115O of the Act would not apply in the hands of the assessee, since the shareholders have received the money in lieu of buyback of shares by assessee of the parent company - we do not agree that on the issue of buyback of shares, assessee has acquired any share of any other company which would become property of the recipient company. - AT
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Addition u/s 56(2)(viia) - buy back of its own shares - The fact remains that the factum of extinguishment of the purchased shares by reducing the paid up capital of the assessee company has not been examined and verified at the level of the AO. Therefore, the issue is restored to the file of the AO for a limited purpose of examining and verifying the fact of extinguishment of shares by reducing the paid-up capital of the assessee in the accounts of the assessee - AO is directed to delete the addition in case the said fact is found to be correct - AT
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TDS u/s 194C or 194I - Short-deduction of taxes - payments towards maintenance charges - Addition u/s 201(1) / 201(1 A) - assessee-in-default’ - the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company. - Payments of rent and common area maintenance charges have been made to distinct entities/companies - AT
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LTCG - ownership of property - Liability of power of attorney holder (GPA) - we are unable to persuade ourselves to subscribe to the view taken by the lower authorities who had brought the income/gain arising on the transfer of the property in question to tax in the hands of the assessee, who had merely facilitated the sale transaction in question in the status as that of a power of attorney holder for and on behalf of the actual owners - AT
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Disallowance u/s 40A(3) read with Rule 6DD - expenses incurred in cash - payment through agent - There is no finding of the Ld.CIT(A) to the effect that the agent was not genuine .Further it is a fact on record that the agent had appeared before the AO and confirmed the said fact to him that he had acted as agent for the assessee - the situation envisaged in clause (k) of Rule 6DD is clearly satisfied - AT
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Addition u/s 68 - unexplained investment - CIT(A) looked into the matter from the angle of the provision of section 56(2)(viib) brought on the statute book by the Finance Act, 2012 w.e.f. 01.04.2013. He observed that the premium charged by the assessee has to be subjected to the provisions of section 56(2)(viib) read with Rule 11UA(1)(c)(b) and it is for the assessee to furnish reliable valuation determining such share premium from a qualified valuer. The same premium are to be brought to tax. The Ld. CIT(A) gave necessary direction to the Ld. AO in this regard. Nothing has been brought on record by the Revenue to enable us to take a different view. - AT
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Schemes of merger and demerger approved by NCLT - jurisdiction of AO - None of the decisions cited by the learned senior advocate held that the revenue does not have an authority to compute the tax liability of the assessee in pursuance to the scheme of corporate reorganization approved by the National Company Law Tribunal. Further, the object of the representation before the National Company Law Tribunal is only with respect to the scheme, if it is to defraud the revenue. Naturally, any scheme which is framed for with the object of defrauding the revenue cannot be approved by the NCLT. - AT
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Revision u/s 263 by CIT - Unexplained Cash deposited in the bank account - taxability of profit @ 8% u/s. 44AD - This action of the assessee was accepted by the AO without realising that provisions of section 44AD of the Act do not apply to a commission agent thereby making the assessment order erroneous in law and because of this error the AO did not examine the cash deposit making the assessment order pre judicial to the interest of the revenue. - AT
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Addition u/s 2(22)(e) - deemed dividend of income - the security premium reserve cannot be regarded as part of accumulated profits u/s 2(22)(e) and when such security premium is excluded, the General Reserve available for the purposes of addition under Section 2(22)(e) only and thus sustained the addition to the extent accumulated profit excluding share premium reserve. - AT
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Taxability of amount received by the assessee on the basis of the award by the Arbitration Court - the amount was already shown by the assessee in the balance sheet as receivable from Mr.Prabir Ghose and therefore, once the arbitrator gives the award for refund the same cannot be brought to tax in the hands of the assessee. - AT
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The decisions of the Hon’ble non-jurisdictional High Court have no relevance in the present context. It is also elementary in law that the mere pendency of the appeal, against a binding judicial precedent, in a higher judicial forum does not dilute, curtail or otherwise narrow down its binding nature. As long as the binding judicial precedent holds good in law, as it does unless it is upturned or reversed by a higher judicial forum, it binds the lower judicial forums. - AT
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TDS u/s 192 on the perquisite - underreporting of value of perquisite - FMV of shares to determine the value of perquisites in respect of exercising of option under ESOP granted to the employee of the company - department has accepted the quantum of perquisite in the hands of employee-director - revenue appeal dismissed - AT
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TP Adjustment - benchmarking of transaction - the margin shown by the assessee of gross profit is 15.35% compared to the comparable companies of 14.60% we direct the learned transfer pricing officer/AO to delete the consequent adjustment - AT
Customs
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Provisional release of seized goods - allegation import of second hand card in the guise of new car - violation of policy condition (II)(d)(iv) in chapter 87 of the ITC (HS) classification - the mandate to produce the certificate - The inclusion of this condition as necessary for provisional release is redundant and superfluous and we allow this appeal by expunging the said condition as requirement of provisional release. - AT
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Amendment to shipping bill - Period of limitation - non-availability of goods for examination - export of cold rolled non grain oriented silicon electrical steel sheet/coils in fully/semi-processed state - The determination of ineligibility, for want of the goods physically, to operate under the ‘duty free import authorization (DFIA)’ scheme in the Foreign Trade Policy (FTP) as ground to refuse the amendment traverses beyond the scope and intent of section 149 of Customs Act, 1962. - AT
Corporate Law
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Seeking issuance of summon the witness for examination - NCLT refused to issue summons - disputes of oppression and mismanagement of a company. - in the facts and circumstance of the case aforenoted, there is no illegality in the impugned order. Therefore, we do not find any merit in the instant Appeal. - AT
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Restoration of the name of the Company - going concern - default in statutory compliance and failure to file return since 31.03.2013. - the Appellant Company is having substantial movable as well as immovable assets. - the name of the Appellant Company be restored to the Register of Companies subject to the conditions. - AT
IBC
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Cancellation of approval of Resolution Plan - Breach of conditions of the Plan - forfeiture of amount of Rs. 20 Crore deposited by the Resolution Applicant - Information Memorandum is a comprehensive document containing all details and in view of the detailed information memorandum which is part of the record, it is not open for the Appellant to contend that certain information was not shared with the Appellant by the Resolution Professional which furnishes the basis for the Appellant not to implement the Resolution Plan. - AT
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Condonation of delay of 17 days in filing of appeal - last two days being public holidays - Power of Jurisdiction of NCLAT to condone delay - Applicability of provisions of limitation act - We are of the view that the Appeal was not filed beyond the delay of 15 days. Filing of the Appeal was within the delay of 15 days, this Court can very well consider the grounds for condonation of 15 days delay. - AT
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Initiation of CIRP - Assignment of debt during pendency of the proceeding u/s 7 - there is no prohibition in the IBC or any of the Regulations from continuing the proceeding by an assignee. Section 5(7) of the IBC which defines ‘Financial Creditor’ also includes a person to whom such debt has been legally assigned or transferred to. By virtue of assignment, Respondent No.1 become the Financial Creditor and having stepped in the shoes of ‘Housing Development Finance Corporation Limited’, it has every right to continue the proceeding which was initiated by Respondent No.2. - AT
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Possession of the property - Claim by third-party - Right of the corporate debtor over the leasehold property - the fact remains that on 01.12.2015, after the cancellation of the lease deed, the Corporate Debtor had no right or interest in the demised premises much less for the purpose of creating a third-party interest by entering into an agreement of management with the Appellant on 01.04.2017. - AT
Service Tax
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Claim of refund of service tax - work contract services - Section 102 of the Finance Act, 1994 - As per Section 102, the service provider is eligible for exemption of service tax only if contract is entered prior to 01.03.2015. The letter dt. 08.05.2015 reproduced above explaining the applicability of exemption from service tax issued by the Head office of the recipient (Contract Management) cannot override the provisions of law. - Since the contract has been entered on 19.03.2015, the appellant is not eligible for exemption of service tax. - AT
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Place of supply - intermediary service - Refund of Cenvat Credit - export of services - An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. - AT
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Refund of service tax - Period of limitation - Invoice Raised in service tax paid prior to introduction of GST - Service was not complete and GST was paid after completion of services post intorduction of GST w.e.f. 1.7.2017 - Section 11B of erstwhile Central Excise Act has wrongly been invoked by the Commissioner (Appeals) - Refund allowed - AT
Articles
Notifications
Central Excise-
43/2022 - dated
15-12-2022
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CE
Exemption to the excisable goods - Prescribe rates of SAED for exports of petrol and diesel Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022, to reduce the Special Additional Excise Duty on Diesel.
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42/2022 - dated
15-12-2022
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CE
Special Additional Excise Duty on production of Petroleum Crude and export of Aviation Turbine Fuel - Reduction of SAED - Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022.
GST - States-
S.O. 487 - dated
15-12-2022
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Bihar SGST
Bihar Goods and Services Tax (Third Amendment) Rules, 2022.
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(4-C/2022)FD 47 CSL 2022 - dated
6-12-2022
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Karnataka SGST
Karnataka Goods and Services Tax (Fifth Amendment) Rules, 2022.
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10/2022-TNGST - dated
23-11-2022
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Tamil Nadu SGST
Notification issued by Commissioner of State Tax, under TNGST Act, 2017 and TNGST Rules 2017, in exercise of the powers conferred under sub-section (3) of section 5 of the TNGST Act, 2017,the Commissioner hereby delegates the powers conferred on him to the officer
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (12) TMI 710
Expiry of E-way Bill - detention of truck - a) break down of the truck carrying consignment, repair and consequent delay; b) portal being blocked without access to renew E-way bill though four more hours to do so was available at the time of interception of truck. - HELD THAT:- A careful perusal of the facts and circumstances of the case, leaves this Court with no doubt that there would have been no revenue loss to the respondent / State if the truck had reached the destination without being intercepted. Circular No.10/2019,Q1/17253/2019' pertains to enforcement of G ST and what has been described as 'a new approach' to be followed with effect from 01.06.2019 In the instant case, from the narrative thus far, it comes closest to Example 2. It is reiterated and clearly articulated in Example 2 that the expiry of E-way bill does not create any scope for evasion. Absent evasion, there can be no revenue loss. In the light of the narrative, discussion and dispositive reasoning thus far, on a demurrer, assuming there was no breakdown and assuming the portal was active, the maximum penalty would be Rs.5,000/- qua paragraph 10 of said Circular. In view of the circular, goods and truck directed to be releases on payment of Rs. 5000 as penalty.
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2022 (12) TMI 709
Revocation of cancellation of GST registration - validity of assessment order - ex-parte order - nonspeaking and cryptic order - Attachment of bank account - HELD THAT:- It cannot be disputed that with the passing of the said order, petitioner is liable to both civil and penal consequences. To say the least, the authority ought to have at least referred to the contents of the show cause and the response thereto, which was not done. Not only the order is nonspeaking, but cryptic in nature and the reason of cancellation not decipherable therefrom. Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences. Impact of Covid-19 Pandemic - In the peculiar facts and circumstances, the authority ought to have condoned the delay which unfortunately was not done, despite the petitioner having made a fervent request for condonation of delay in accepting the return, preventing cancellation of registration. Registration restored. Matter restored back for finalizing the petitioner s assessment and/or pass appropriate orders.
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2022 (12) TMI 708
Seeking withdrawal of writ petition - goods were released which were seized u/s 129(3) - In the light of the narrative thus far, captioned Writ Petition is disposed of as closed / withdrawn albeit preserving all the rights and contentions of writ petitioner for being canvassed in a statutory appeal. There shall be no order as to costs.
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2022 (12) TMI 707
Reimbursement of GST Liability - Scope of the contract between the parties - HELD THAT:- Having regard to the fact that by the introduction of GST, the provision of Finance Act, 1994, under which service tax was levied, has been subsumed into the GST, it is not open for the petitioner to contend that demand of GST by the respondents is a new levy/imposition that has been fastened by the respondents. Under the terms of Deed of Licence, since the petitioner had agreed to pay service tax in addition to the monthly licence fee fixed thereunder and the GST being a levy which has been introduced in the place of service tax, the petitioner cannot absolve herself of the liability to pay GST in place of service tax. The claim of the petitioner of her non-liability to pay GST on the licence fee is devoid of merit
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2022 (12) TMI 706
Exparte assessment order u/s 73 - ex-parte demand order DRC 07 - order was passed even before the statutory notice period of 30 days as per section 73 (8) - HELD THAT:- Undisputedly, minimum statutory period of 30 days mandated under the provisions of Section 73(8) of CGST/BGST Act, 2017 was not afforded to the petitioner for making payment due and prior to the expiry of 30 days, the assessing officer proceeded to pass the order, ex parte in nature. The notice dated 15.02.2021 (Annexure-P/4 series) directed the petitioner to file reply on 21st of February, 2021 which was within the period of 30 days. It is the mandate of law that 30 days period has to be afforded to the parties, which was not done in the instant case. Order quashed - Matter restored back.
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2022 (12) TMI 705
Condonation of delay in filing appeal before appellate authority - Revocation of cancellation of 'GST' registration - non filing of GST returns - Status of the petitioner as firm or proprietary - HELD THAT:- A proprietary concern is obviously not a firm. - Though the array of parties has not been happily worded / correctly set out, the petitioner construed as sole proprietor as the petitioner. As the Appellate Authority has dismissed the matter on the ground of limitation, it will suffice to examine the chronicle. Before this Writ Court does that, it is necessary to notice that a combined reading of sub-sections (1) and (4) of Section 107 of TN-GST Act make it clear that the prescribed period of limitation is three months from the date of communication of order and condonable period is a further period of one month. It is therefore, to be noted that the unit of limitation qua prescribed period and condonable period have been set out in months and not in days. In the case on hand, computed from 01.03.2022, 90 days period elapsed on 30.05.2022 and further condonable period of one month elapsed on 30.06.2022. The appeal was filed only on 29.09.2022. Therefore, the order of Hon'ble Supreme Court [ 2022 (1) TMI 385 - SC ORDER ] does not enure to the benefit of the writ petitioner. In this view of the matter, this Writ Court finds no ground to interfere with the impugned order. Before writing the sequitur and dropping the curtains on the captioned writ petition, it is deemed appropriate to record that this Writ Court is informed that it is open to writ petitioner to apply for GST registration afresh.
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2022 (12) TMI 704
Validity of order passed u/s 73 of GST Act - Maintainability of Writ petition - Alternative remedy of appeal - Denial of Input Tax Credit (ITC) - Non-Issuance of Show Cause Notice - notice was issued as part of the scrutiny proceedings under Section 61 C-GST Act - personal hearing was granted and attended by the petitioner - HELD THAT:- To be noted, a statutory appeal against the impugned order is available to the writ petitioner under Section 107 of C-GST Act. There is no disputation about this obtaining position of law. To be noted, in Greatship case [ 2022 (9) TMI 896 - SUPREME COURT ], Hon'ble Supreme Court has traced many of the aforementioned case laws, more particularly Dunlop India [ 1984 (11) TMI 63 - SUPREME COURT ] , Satyawati Tandon case laws [ 2010 (7) TMI 829 - SUPREME COURT ], has returned its finding and reiterated the ratio regarding alternate remedy Rule in fiscal law statutes. To be noted, Greatship case is a matter arising under Maharashtra Value Added Tax, 2002, Central Sales Tax Act, 1956 and it is in that context that alternate remedy rule was considered. In the light of the narrative and dispositive reasoning set out thus far, both the points urged by learned counsel for writ petitioner does not find favour with this Court in the case on hand. This means curtains are dropped qua the captioned writ petition but it is open to the writ petitioner to avail the statutory appeal remedy under Section 107 subject of course to Limitation and pre-deposit if any.
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2022 (12) TMI 703
Refund of IGST - Difficulty at GSTN level - export of goods - shipping bills are deemed to be refund applications - change in the name of petitioner - failure to sanction 90% of the amount claimed in Form RFD-04 within a period of not exceeding 07 days from the date of acknowledgment received. - provision of Sections 16 and 54 of the IGST Act and Rule 96 of the CGST Rules HELD THAT:- Admittedly, in the present case, it appears to be the difficulty at the end of the GST network or some error in the software itself which would require a cure. When nothing is being disputed and for two of the tax invoices the refund has already been credited in the account of the petitioner, this appears to be a short coming of the software itself. Everything since is being done electronically and this automatically grant of refund after validating the shipping bill data available in ICS against the GST returns, data transmitted by GSTN, if there is any difficulty at the level of the mismatch or the processing of the claim of the refund, it becomes a duty of the GSTN to look into the same. Finding fault with the officer concerned also will not help as they are largely dependent on the network. It is good to be driven through the machines in this electronic age and this automatic grant of refund which is system driven rather then the officer driven at the same time unless there is a constant vigil on the part of the GSTN and also an endeavor to rectify the mismatch or the short comings of the software, the issues are bound to multiply. We are constrained to observe this as in many of the matters we notice that on one hand there is laudable objectives of making it all system driven and on the other hand the limitations of the system which are otherwise required to be addressed to at the level of the GSTN. There is some kind of apathy. We, would, therefore, also recommend that if the authority concerned deems it appropriate, let there be a direct communication also with the GSTN in the portal itself which could be also response based. Refund allowed with interest @6%.
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Income Tax
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2022 (12) TMI 712
TP adjustment towards interest on issue of NCD [Non-Convertible Debentures (NCD)] - HELD THAT:- In assessee s case the NCDs are issued in INR and the interest is also paid in INR and considering the ratio laid in M/s Praxair India Pvt. Ltd [ 2021 (12) TMI 1167 - ITAT BANGALORE] and the Master Directions issued by RBI, we are in agreement with the contention of the ld AR that the interest rate by the assessee is justified when benchmarked with the SBI Prime Lending Rate on the date of issue debenture. We therefore hold that the interest charged by the assessee on the unsecured non-convertible debentures issued to the AE is within arm s length and TP adjustment stands deleted. Protective and substantive disallowance of depreciation - HELD THAT:- With regard to the protective and the substantive disallowance made by the AO, on perusal of financial statements of the assessee we notice that the impugned amounts have not been capitalized and is accounted a capital work in progress for the year under consideration. We therefore agree with the contention of ld AR that when there is no capitalization of the impugned payment and any depreciation claim towards the same, the disallowance of depreciation is not tenable. Since there is no charge of depreciation during the year. AO has made the disallowance without examining the details submitted by the assessee in this regard and has done the disallowance merely based on the statement of Mr.Subramanya which according to ld AR is subsequently retracted. In the light of these discussions we delete the protective and substantive disallowance of depreciation. Disallowance of salary cost debited to the P L account u/s.40(a)(ia) - On perusal of materials on record it is clear that the amount paid by the assessee to VEPRPL is only a reimbursement of the salary cost and not to carry out any work as defined in section 194C of the Act or provide any technical / consultancy services to the Assessee as defined under section 194J of the Act. Further there is no element of income in the salary cost reimbursed by the assessee to VEPRPL. We notice that in the case of Kalyani Steels Ltd [ 2018 (5) TMI 152 - KARNATAKA HIGH COURT] has held that there cannot be a TDS on the reimbursement since there was no income element. The salary cost which is paid by VEPRPL to the employees has already been tax deducted and therefore the amount reimbursed by the assessee is only on a cost to cost basis cannot be subject to TDS under 194C / 194J. In view of the above discussion we hold that the salary cost paid by the assessee to VEPRPL cannot be disallowed u/s.40(a)(ia). Disallowance of depreciation on pre-operative expenses - HELD THAT:- We have considered the issue of disallowance of depreciation where the amount is not capitalized but is accounted as capital work in progress in para 25 of this order. Considering the fact that the preoperative expenses are not capitalized and no depreciation is claimed for the year under consideration we delete the disallowance of depreciation on pre-operative expenses.
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2022 (12) TMI 702
Validity of Reassessment proceedings - Earlier rectification of error proceedings initiated u/s 154 - notice u/s 154 was beyond the period of limitation - initiate the proceedings u/s 147/148 during the pendency of the proceedings u/s 154 - HELD THAT:- We are of the opinion that the High Court has committed serious error in observing and holding that the notice under Section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under Section 154(7) of the Act. It is required to be noted that the proceedings u/s 154 of the Act were not the subject-matter before the High Court. Nothing was on record that, in fact, the notice under Section 154 of the Act was withdrawn on the ground that the same was beyond the period of limitation prescribed under Section 154(7) of the Act. In the absence of any specific order of withdrawal of the proceedings u/s154 of the Act, the proceedings initiated under Section 154 of the Act can be said to have been pending. In that view of the matter, during the pendency of the proceedings u/s 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings u/s 147/148 of the Act - The High Court has erred in presuming and observing that the proceedings u/s 154 were invalid because the same were beyond the period of limitation. The impugned judgment and order passed by the High Court is unsustainable and the same deserves to be quashed and set aside. The impugned judgment and order passed by the High Court is hereby quashed and set aside. The order passed by the ITAT is hereby restored.
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2022 (12) TMI 701
Faceless Assessment u/s 144B - Comparative study of the pre-amendment Section 144B and post-amendment Section 144B - violation of principle of natural justice - not providing opportunity of hearing to the petitioner giving no response to the request made by the petitioner for grant of opportunity of hearing through video conferencing - HELD THAT:- Having noticed that the request was made by the petitioner for personal hearing in the matter on receipt of the show cause notice-cum-draft assessment order, the action of the respondent in not providing opportunity of hearing to the petitioner giving no response to the request made by the petitioner for grant of opportunity of hearing through video conferencing resulted in violation of the principles of natural justice. The assessment order records that the assessee had submitted a reply - The request for personal hearing appears to have been acknowledged on 29.3.2022. The assessment order, however, does not indicate that any personal hearing was granted to the petitioner on or before 30.3.2022. It also does not record any reason for denial of opportunity of hearing to the petitioner. In faceless assessment procedure set in place w.e.f. 1.4.2022 by amendment in Section 144B(7), the personal hearing through video conferencing has been made mandatory, in case of the request made by the assessee. Thus having noticed that the petitioner herein had participated at every stage of the proceeding and submitted reply to the notices issued to him from time to time, the reply to the show cause-cum-draft assessment order dated 28.3.2022 given by the assessee runs into about 20 pages. The petitioner had specifically asked for grant of opportunity of personal hearing through video conferencing by communication on the website and the said request had been acknowledged by the respondent authorities. We, however, do not find any good reason for denial of such an opportunity to the petitioner herein. Personal opportunity of hearing was not granted to the petitioner, we do not find any good reason to grant any time to file response/counter affidavit. The impugned assessment order is, thus, found to be in violation of the principles of natural justice and against the procedure set in place for conducting reassessment proceeding. Being deficit in essential procedural compliances, the assessment order dated 30.3.2022 is hereby set aside. The matter is remitted back to the competent authority/National Faceless Assessment Centre for passing fresh assessment order after providing due opportunity of hearing to the petitioner by fixing a date for personal hearing through video conferencing on receipt of the copy of this order.
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2022 (12) TMI 700
PE in India - activities of Research and development activities do not constitute a PE of the assessee in India - HELD THAT:- The question of law set out is covered by the decision Adobe Systems Incorporated [ 2016 (5) TMI 728 - DELHI HIGH COURT] Revenue from software supplies - taxable as Royalty under Article 12 of the India-Finland Double Taxation Avoidance Agreement - HELD THAT:- As it is admittedly covered by the decision of the Supreme Court rendered in Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] Permanent Establishment [PE] in India - profits attribution - HELD THAT:- The Tribunal has returned a finding of fact, that the respondent/assessee recorded a global net loss in the relevant assessment year, and therefore no profit could have possibly been attributed to it. Having regard to the following finding of fact returned by the Tribunal, we are of the view that the proposed questions of law i.e., A and B would not arise for consideration. A plain reading of the Article 7 of the Double Taxation Avoidance Agreement entered into between India and Finland also persuades us to take the same view as that which is taken by the Tribunal. A plain reading of the Article 7(1) would show, that the issue of taxability would arise qua the respondent/assessee only if profits accrue to the respondent/assessee, and that too only to the extent they can be attributed to its PE in India. Given this position, we are not inclined to entertain the appeal.
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2022 (12) TMI 699
Addition as value of explained jewellery - quantum of unexplained income in the form of jewels in the hands of the respective appellants as above - undisclosed income in the form of unaccounted jewelers - HELD THAT:- A reading of the impugned orders of the Appellate Tribunal and the grounds of appeals raised by the respective appellants reveals that no substantial question arises for consideration for being answered in these appeals. The dispute pertains to only quantum of unexplained income in the form of jewels in the hands of the respective appellants as above. Though the learned Standing Counsel for the respondent submitted that the matter can be remitted back to the Assessing Officer for determination, the learned counsel for the appellants insisted for a order on merits of the respective appeals. We find no merits in these appeals as no substantial question of law arises for consideration. Appellate Tribunal is the ultimate fact finding authority. In appeal, we cannot come to a different conclusion on facts. These appeals are therefore liable to be dismissed . Impugned order is set aside and the case is remitted back to the AO, i.e. Deputy Commissioner of Income Tax, Central Circle-II, to pass a fresh order on merits in accordance with law in line with the direction of the Tribunal. Entire exercise shall be completed by the AO in the respective cases, within a period of three months from the date of receipt of a copy of this order.
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2022 (12) TMI 698
Continuation of prosecution proceedings when levy of penalty has been deleted - Offence u/s 276C (1), 277 and 278E of the Income Tax Act - alleged that during course of search and seizure operation, it was found that the petitioner had claimed huge Bogus Long Term Capital Gain - petitioner is the Karta of Murari Lal Jalan HUF and search and seizure operation was conducted in the residence of the petitioner under section 132(1) - HELD THAT:- It is an admitted fact that the petitionerwas imposed penalty which was affirmed by the First Appellate Authority and the Second Appellate Authority by order has been pleased to set aside penalty imposed upon the petitioner. In the second case the penalty has not been imposed upon the petitioner. The question framed in the case of K.C. Builders [ 2004 (1) TMI 7 - SUPREME COURT] are the identical which is subject matter of these cases. Particularly the law point framed has been clearly held that once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under section 276C is automatic. The case of the petitioners is fully covered with the case of K.C. Builders (supra) In the case in hand the penalty was quashed on merit. Thus the entire criminal proceeding including order taking cognizance passed by the Special Sub-Judge-VII, Economic Offence, Ranchi are hereby quashed.
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2022 (12) TMI 697
Deduction u/s.80IB(10) - pro-rata basis in respect of the housing project Costa Blanca , Baner, Pune - HELD THAT:- In view of the fact that the Tribunal has decided this issue in the case of the assessee, based on the facts peculiar to it only, for the immediately two preceding years granting deduction u/s.80IB(10) on pro-rata basis, which view has, in principle, been approved by various Hon ble High courts, respectfully following the precedent, we uphold the impugned order without going into the details of the case relied by the ld. DR, which the ld. AR rightly distinguished. The impugned order is countenanced on this score. Addition towards deemed rent - Profits and Gains from business or profession OR Income from House Property - AO observed that certain units were unsold with the assessee at the end of the year - AO determined the Annual Letting Value (ALV) of the property and brought the amount to tax, which action was not approved in the first appeal - HELD THAT:- Prior to the amendment, the Tribunal considered this aspect in several cases including Cosmospolis Construction [ 2018 (9) TMI 1621 - ITAT PUNE] and held that no income from house property can result in respect of unsold flats held by a builder as stock in trade at the year-end. While disposing of the above referred case, the Tribunal observed that income from unsold flats could be considered only under the head Profits and Gains from business or profession and not Income from House Property . It is but natural that if a particular income is to be taxed under a specific head, the computational mechanism governing that head only can come into play. There is no provision under the head Profits and Gains from business or profession which deems the rental income from unsold flats held as stock as Business income . In the ultimate analysis, the Tribunal eventually deleted the addition. The order of the ld. CIT(A), in deleting the addition made by the AO, does not call for any interference. The same is upheld. Revenue appeal is dismissed.
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2022 (12) TMI 696
Addition of payment of commission and claiming the same as expenses - HELD THAT:- We noted that the assessee before CIT(A) submitted the complete details in regard to payment of commission and even TDS was deducted on the above said commission. Assessee also filed agreements, details of service rendered, payment made in regard to each sale i.e., calculation of commission based on invoices of sales. Even now before us, the ld. Senior DR could not controvert the above stated fact. Hence, we confirm the order of CIT(A) deleting the disallowance. Therefore, this issue of Revenue s appeal is dismissed. Addition u/s 56(2)(viia) - taking fair market value of buy back of shares by assessee from its holding company a company incorporated in USA, as valued by assessee at Rs.89/- per share as against fair market value adopted by AO at Rs.115.59 per share - HELD THAT:- As argued by DR, that by receiving the shares of its own i.e., buyback for a consideration less than the book value, the assessee has earned hidden asset from the parent company by giving up its right to obtain the true value of its shares transferred, we do not agree because the provisions of section 2(22)(d) r.w.s.115O of the Act would not apply in the hands of the assessee, since the shareholders have received the money in lieu of buyback of shares by assessee of the parent company. According to us, said provision would not apply in the hands of the assessee who has brought back this shares and in any eventuality, the very provision of section 2(22)(d) of the Act also craved out exception i.e., dividend . In our view, the assessee has not received any property being shares in a company and once, there is no property of recipient company it should be share of any other company and could not be its own share, because any share cannot become property of recipient company on buyback. In the given facts and as arguments made the assessee has earned hidden asset, we do not agree that on the issue of buyback of shares, assessee has acquired any share of any other company which would become property of the recipient company. Actually it will be reduction in capital and nothing more. Hence, we affirm the order of CIT(A) and this issue of Revenue s appeal is dismissed.
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2022 (12) TMI 695
Revision u/s 263 - Plant Machinery which were acquired and installed are eligible for deduction u/s. 32(1)(iia) for additional depreciation as the same being part of new EDC Plant (Ethylene Dichloride Plant) commissioned during the financial year - HELD THAT:- In the present case, AO has issued a detailed notice u/s. 142(1) calling for various details from the assessee and the assessee also had made detailed replies to the above notices with proper evidences and necessary records were being submitted before the AO for verification. AO having carried out such detailed inquiries satisfied with the explanation offered by the assessee, it was not open for the PCIT to thereafter revise the issues on mere apprehensions and surmises. Assessing Officer had made detailed inquiries and after applying his mind and satisfied genuineness of the transactions which is plausible view adopted by the AO. Thus, we find no error in the order passed by the AO so as to justify initiation of revision proceedings u/s. 263 by the Ld. PCIT. Therefore the Revision order dated 27-03-2015 is hereby quashed and the grounds of appeal raised by the Assessee are hereby allowed.
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2022 (12) TMI 694
Rectification u/s.154 adding prior years income as book profit u/s.115JB - HELD THAT:- As noted that the assessee could prove before us that this income has already been offered in assessment year 2007-08 and this cannot be added again in assessment year 2009-10. We noted that since the assessee has already offered this income in assessment year 2007-08 and issue is settled, only adjustment was made in the books of account of financial year 2008-09 relevant to assessment year 2009-10 and this fact was in the knowledge of AO at the time of making adjustment and even this was explained during the course of rectification proceedings by the assessee. In view of the above, first of all the assessee has offered this in assessment year 2007-08, it cannot be added again and moreover, this being highly contentious issue and debatable whether this is to be assessed in assessment year 2007- 08 or 2009-10, it cannot be rectified while acting u/s.154 of the Act. Hence, we allow the appeal of assessee.
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2022 (12) TMI 693
Addition u/s 56(2)(viia) - buy back of its own shares by the assessee company as property in the hand within the meaning of Section 56(2)(viia) - assessee company has bought back its own shares under buy back scheme and the same has to be extinguished by reducing the paid-up capital of the assessee company - HELD THAT:-Respectfully following the order of M/s Vohra Financial Services Pvt. Ltd. [ 2018 (7) TMI 64 - ITAT MUMBAI] . We hold that the provisions of section 56(2)(viia) of the Act are applicable only in the cases where the purchased share become property in the hands of the buyer company and, if the shares are of any other company. In the present case, the assessee purchased its own shares under buyback scheme, and, as per the submissions made by the ld. Counsel at the bar, the same has been extinguished by reducing the paid up capital of the assessee company. The fact remains that the factum of extinguishment of the purchased shares by reducing the paid up capital of the assessee company has not been examined and verified at the level of the AO. Therefore, the issue is restored to the file of the AO for a limited purpose of examining and verifying the fact of extinguishment of shares by reducing the paid-up capital of the assessee in the accounts of the assessee. AO is directed to delete the addition in case the said fact is found to be correct - Appeal filed by the Revenue is allowed for the limited purpose of verification.
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2022 (12) TMI 692
TDS u/s 194H - Addition on account of discount extended to prepaid distributors - assessee was required to confirm whether the figures have been shown after netting off the discount given to distributers/ franchisees and was further asked to explain whether tax at source in term of provisions of section 194H was deducted from the discount given and, if not, why the same should not be disallowed u/s 40 (a) (ia) - HELD THAT:- We find force in the contention of the Counsel. This Tribunal in A.Y.2009-10 has considered a similar quarrel [ 2017 (10) TMI 1093 - ITAT DELHI ] As in our considered opinion disallowance made u/s. 40 (a) (ia) is not sustainable and, therefore, the AO is directed to delete the impugned disallowance. This ground is accordingly allowed. Addition on account of IUC charges paid to foreign/ non-resident telecom operators - HELD THAT:- On finding parity of facts respectfully following the decision of the Coordinate Bench A.Y. 2009-10 [ 2017 (10) TMI 1093 - ITAT DELHI ] we direct the AO to delete the impugned disallowance. This ground is also allowed.
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2022 (12) TMI 691
Addition u/s 43B - non depositing of Service Tax as before the due date of filing of its return of income, as per Annexure-IV of the 3CD Report - The Service Tax collected from the clients but not paid to the Service Tax Deptt. is an income of the assessee irrespective of the fact whether or not the Service Tax is routed through P L Account of not - HELD THAT:- The amount of service tax has not been routed through P L account. Hence, ratio of the decision Planet Advertising Pvt. Ltd. [ 2013 (7) TMI 1205 - ITAT DELHI] that the provisions of section 43B are not applicable to the service tax liability, is applicable. Accordingly, we uphold the order of the ld. CIT (A) - Appeal filed by the Revenue stands dismissed.
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2022 (12) TMI 690
TDS u/s 194C or 194I - Short-deduction of taxes - payments towards maintenance charges - Addition u/s 201(1) / 201(1 A) - assessee-in-default - HELD THAT:- Payments received by Ambience group are split into two companies of same group on single contract one for rent and the other for maintenance charges. However, the AO noted that this arrangement has been made to avoid the higher deduction of TDS rate applicable to which we do not agree as when the receiver of rent and receiver of maintenance charges are different and distinct and the character of the payment is also different and distinct, then, the payments towards maintenance charges has to be made after TDS @ 2% u/s 194C of the Act and not @ 10% u/s 194I. From the material available on record, it is clearly discernible that the assessee company has paid rent to the owner after deduction u/s 194 of the Act @ 10% and the payment for operation/maintenance was made directly to the service provider company after deduction of tax u/s 194C - we are inclined to hold that in the present case the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company. Payments of rent and common area maintenance charges have been made to distinct entities/companies, therefore, the authorities below were not right in creating the impugned liability payable by the assessee firm under the provisions of subsections (1) and (1A) of section 201 - respectfully following the case of Nijhawan Travel Service (P) Ltd. [ 2022 (7) TMI 176 - ITAT DELHI] the grievance/grounds of the assessee are allowed and the AO is directed to delete the impugned liability u/s 201(1) and 201(1A) of the Act. Appeals filed by the assessee are allowed.
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2022 (12) TMI 689
LTCG OR STCG - Period of holding of asset - subsequent cancellation deed annulled or cancelled revoked the original registered sale deed - Whether cancellation deed were to be treated as a fresh sale/transfer deed by the daughter in favour of the assessee? - AO held that the gain earned by appellant on sale of alleged property is short term capital gain and not long term capital gain since property was reacquired by the appellant on the date when sale deed with daughter was cancelled i.e. 30.07.2015 - HELD THAT:- With respect to the first argument that the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled subsequently after nine years by way of cancellation deed dated 30-07-2015, the Ld. CIT(A) has dealt with this aspect in great detail and has also produced a large number of judicial precedents directly on the subject, which have held that duly registered sale deed cannot be cancelled/annulled/ revoked by way of a subsequent deed. No specific case law or statutory provision has been produced by the counsel for the assessee to controvert the findings of Ld. CIT(A) in the appellate order. There is no prescribed provision of law or any procedure which has been brought to our notice in support of the argument that the subsequent deal has effectively cancelled the original registered sale deed after nine years from when it was entered. There is no legal capacity for two parties to a transaction entered by way of registered deed to cancel the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty. This also clearly indicates of the fact that the subsequent cancellation deed is only a fresh transfer by the daughter in favour of the assessee by way of a fresh transfer/sale deed upon the payment of full stamp duty. Accordingly, in our view, the subsequent cancellation deed has not annulled or cancelled revoked the original registered sale deed, but it is effectively a fresh transfer/sale deed by the daughter of the assessee in favour of the assessee. A perusal of the document indicates that they are an identical reproduction of schedule A of the conveyance deed dated to 05-08-1986 and reading of the provisions does not seem to indicate that only a specific part relating only to the superstructure was sought to be transferred by the assessee to her daughter by the deed dated 16-03-2006, while the remaining land was to be retained by the assessee. Here, it would be pertinent to also analyse the submissions filed by the assessee before Ld. CIT(A) wherein the assessee has mentioned that upon knowledge of this fact, your appellant has approached the Gujarat Housing Board to clarify the ownership of such open land area of 235.94 m in favour of my daughter . Accordingly, the above submission of the assessee clearly indicates that by way of sale deed dated 16-03-2006, all rights in the property was sought to be transferred including that of the open land area and the sale deed was verbatim reproduction of the original conveyance deed dated 05-08-1986 in favour of the assessee. Another notable aspect is that it was only when the Gujarat Housing Board clarified that the correction in respect of open land area can be made in the name of the assessee only and not in the name of the daughter, that the said property was transferred back to the assessee for carrying out the necessary rectification in the property records. We find no infirmity in the order of Ld. CIT(A) when he has held that the entire transaction, looking into the instant set of facts, would qualify as short-term capital gains in the hands of assessee. Appeal of the assessee is dismissed.
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2022 (12) TMI 688
LTCG - ownership of property - Liability of power of attorney holder (GPA) - income/gain arising on the transfer of the property in the hands of the assessee, acting as a sales facilitator - HELD THAT:- As observed by the Hon ble Supreme Court in the case of ITO vs. Ch. Attchaiah [ 1995 (12) TMI 1 - SUPREME COURT] the income has to be assessed in the hands of the right person and the right person alone, and while giving effect to the said scheme of taxation the interest of the revenue cannot be allowed to come in the way. Thus, in the case before us, merely for the reason that the whereabouts of the real owners were either not to the knowledge of the department, or the bare minimum effort were not put in by the A.O to gather the whereabouts of the said persons who were the right persons in whose hands the LTCG on sale of the property was liable to be brought to tax, would by no means justify bringing the said income/gain to tax in the hands of a wrong person i.e the present assessee before us. We, thus, on the basis of our aforesaid observations are unable to persuade ourselves to subscribe to the view taken by the lower authorities who had brought the income/gain arising on the transfer of the property in question to tax in the hands of the assessee, who had merely facilitated the sale transaction in question in the status as that of a power of attorney holder for and on behalf of the actual owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain. We, thus, in terms of our aforesaid observations setaside the order of the CIT(Appeals) and vacate the addition of long-term capital gain made by the A.O in the hands of the present assessee. Appeal of the assessee is allowed.
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2022 (12) TMI 687
TP Adjustment - determining the Arm s Length Price (ALP) of the International Transaction pertaining to consideration received for the transfer of business undertaking to AE of the assessee - whether the assessee had transferred its entire business undertaking to its AE or whether the assessee has retained part of assets and liabilities pursuant to Business Transfer Agreement? - contention of the assessee that part of the assets and liabilities were retained and in support of its contention that assessee has placed various documents in the form of Addendum to BTA, etc. to demonstrate that part of the assets only were transferred to its AE - HELD THAT:- We noticed that the contention of the assessee was rejected as neither the Addendum to BTA nor the exhibits forming part of Business Transfer Agreement (BTA) were filed before the TPO. We also noticed that even though the Addendum to BTA and exhibits forming part of BTA were filed before the Ld. DRP the Ld. DRP finds no reason to interfere with the order of the TPO which in our view is not correct. The Addendum to BTA which was placed before us clearly show what all the assets and liabilities to be transferred by the assessee to its AE as per BTA. Since what all the assets and liabilities to be transferred by the assessee are clearly reflected in the Addendum to BTA the TPO/DRP are not justified in assuming that the assessee has transferred the entire assets and liabilities to its AE under BTA as slump sale completely ignoring the evidences on record and making some observations on assumptions. Assessee has clearly demonstrated with evidences that it has transferred only part of the assets to its AE under BTA read with Addendum to BTA and, therefore, there is no reason as to why the Addendum should not be considered and acted upon. Therefore, taking the totality of facts and circumstances into consideration, we direct the TPO to take cognizance of the Addendum the exhibits forming part of BTA and the other evidences and calculate the value of only those assets transferred by the assessee and exclude the assets which were retained, for the purpose of determining the ALP. TP Adjustment under the head Income from business or profession instead of income from capital gains - HELD THAT:- We are of the view that the consideration received by the assessee on transfer of assets shall be computed under the head Income from capital gains and not under the head Income from Business . AO is directed to compute the adjustment under the head Capital gains and not under the head Income from Business .
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2022 (12) TMI 686
Disallowance u/s 40A(3) read with Rule 6DD - expenses incurred in cash - payment through agent - cash purchase of old vehicles from unknown sellers for business of dealing of old vehicles, equipment s and machineries - HELD THAT:- It is not disputed that before the ld.CIT(A) the assessee had furnished all evidences to prove genuineness of the transaction by giving all details of the seller of the vehicles, their names, address, identity proof and also furnished their affidavits affirming on oath that they had received cash on selling vehicles to the assessee, besides also stating that they had no bank account. Assessee had explained that he had purchased these vehicles through an agent, Shri Mohansingh Rawat, who was produced before the AO in remand proceedings, and the AO had examined him, when the said person had confirmed having received cash from the assessee for making payment in cash for purchases made from these very persons. CIT(A) has upheld disallowance for the reason that circumstances in which the payment in cash was made by the assessee did not fall in any of the specified circumstances under Rule 6DD of IT Rules which notifies circumstances which are exempt from rigour of section 40A(3) of the Act. As far as the assessee s case falling under section 6DD(g) is concerned, which specifies that payment made in village or town which on the date of payment is not served by any bank to any person ordinarily resides or carries on business there, we find that the ld.CIT(A) has rightly held that such Rule is of no help to the assessee, since there was nothing on record to suggest existence of such circumstances. Even the ld.counsel for the assessee has been unable to demonstrate the same before us. Applicability of Rule 6DD(k) is concerned, we find that the ld.CIT(A) has clearly erred in holding that the same does not apply to the case of the assessee - In the present case, the Revenue does not dispute the fact that the assessee had made payment in cash not directly to the seller, but through his agent i.e. he had paid cash to the agent, who in turn paid to the seller for procuring vehicles from them. There is no finding of the Ld.CIT(A) to the effect that the agent was not genuine .Further it is a fact on record that the agent had appeared before the AO and confirmed the said fact to him that he had acted as agent for the assessee in the impugned transactions taking cash from him for making payment further to the sellers. The sellers on affidavits have stated that they did not have any bank account and had therefore insisted on receiving money in cash. It is amply clear that the situation envisaged in clause (k) of Rule 6DD is clearly satisfied in the present case, and therefore, the assessee is entitled to be exempt from the rigours of section 40A(3). CIT(A), we find has mis-appreciated/misunderstood clause (k) of Rule 6DD of the Rules. The ld.CIT(A) we find has stated inapplicability of clause (k) by stating that it has not been proved beyond doubt that the agent who received cash from the person selling vehicles was required to make payment in cash for goods or services on behalf of such person to third party, which means that the ld.CIT(A) has understood clause (k) to mean that the agent should be receiving cash from the sellers. But this cannot be the interpretation since sellers are not required to make any payment. It is the buyer who is required to make payment. - Decided in favour of assessee.
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2022 (12) TMI 685
Addition u/s 68 - unexplained investment - Addition on protective basis - assessee company invested in the shares / given loans and advances to companies of JP Minda group and in respect of amount so invested addition have been made in the hands of companies of JP Minda group u/s 68 of the Income Tax Act on substantive basis and the addition in the hands of appellant have been made on protective basis - HELD THAT:- For AY 2011-12 and 2012-13 we observe that the Ld. CIT(A) has recorded finding of fact and came to the conclusion that all the investments made by the assessee are genuine. DR could not controvert the above finding recorded by CIT(A) in both the years. We, therefore, decline to interfere with the order of the CIT(A) for both the years and reject the appeals of the Revenue for AY 2011-12 and 2012-13. AY 2013-14 perusal of the appellate order would reveal that it was contended by the assessee that the substantive addition is the amount credited to the bank account which have been realised by liquidation of investment/loans and advance. The amount so realised by liquidation of investment/loans and advance have been invested in the companies in respect of which addition have been made on protective basis. CIT(A) agreed with the above contention of the assessee and recorded the finding that the addition to the extent of Rs. 1,35,10,464/- cannot be made as it amounts to double taxation and the assessee deserved to be allowed the benefit of telescoping. Accordingly, the Ld. CIT(A) directed deletion of this addition. We agree with the approach of the Ld. CIT(A). Addition on account of equity on protective basis, the Ld. CIT(A) examined the issue in the light of the proviso to section 68 inserted by the Finance Act, 2012 w.e.f. 1.4.2013. He observed that the onus which lay upon the assessee has not been discharged as the assessee has neither produced the investors nor arranged to provide the requisite information and documents directly from it. He, therefore, sustained the addition of Rs. 1,44,00,000/- (made by the Ld. AO on protective basis) on substantive basis. CIT(A) looked into the matter from the angle of the provision of section 56(2)(viib) brought on the statute book by the Finance Act, 2012 w.e.f. 01.04.2013. He observed that the premium charged by the assessee has to be subjected to the provisions of section 56(2)(viib) read with Rule 11UA(1)(c)(b) and it is for the assessee to furnish reliable valuation determining such share premium from a qualified valuer. The same premium are to be brought to tax. The Ld. CIT(A) gave necessary direction to the Ld. AO in this regard. Nothing has been brought on record by the Revenue to enable us to take a different view.
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2022 (12) TMI 684
Schemes of merger and demerger approved by NCLT - AO exceeding his jurisdiction - Deemed dividend addition u/s 2(22)(e) - demerger of the financial services business ( FSB ) by the Appellant to the resulting company - Proceedings u/s 115O before LD Assessing officer - demerger of the assessee as in accordance with provision of section 2 (19AA) of the ACT - Whether approval of NCLT does not preclude revenue from examining the scheme for tax compliances? - Whether scheme can override the existing provision of the Act? - As per AO demerger of the assessee is not in accordance with provision of section 2 (19AA) of the ACT and therefore there is a distribution by assessee company of its accumulated profits, which entails the release by the company to its shareholders of all or any part of the assets of the company, so it has distributed dividend to its shareholder - HELD THAT:- We do not have any hesitation in upholding the finding of the learned dispute resolution panel that it is the duty of the learned assessing officer to examine the impact of the scheme for tax purposes. It is not the case of the AO and as confirmed by the learned Additional Solicitor General, that there is any attempt by revenue to rewriting the scheme of merger and demerger, but it merely doing an exercise of determining the true and correct taxliability of the assessee under the income tax act. The order of the National Company Law Tribunal has not examined the tax liability of the assessee pursuant to the above scheme but has merely approved the scheme. The determination of the tax liability on the basis of the scheme of composite merger and demerger approved by the learned national company law tribunal, looking at all the terms and conditions laid down therein, is the statutory duty of the assessing officer. The order of the National Company Law Tribunal does not says that if any tax liability arises in the hands of the assessee that cannot be examined by the assessing officer. The dispute between assessee and revenue is the claim of the assessee that the learned assessing officer is rewriting the scheme which is already approved by national company law tribunal. We do not agree with the contention of the assessee. No attempt by the learned AO to tinker with the scheme approved by NCLT. He is merely examining that according to the terms and condition of the scheme, the assessee fulfils the conditions of demerger for tax neutrality u/s 2 (19 AA) of the act as well as the chargeability of deemed dividend in the hands of the shareholders of the assessee company. According to us, he is duty-bound to do so. None of the decisions cited by the learned senior advocate held that the revenue does not have an authority to compute the tax liability of the assessee in pursuance to the scheme of corporate reorganization approved by the National Company Law Tribunal. Further, the object of the representation before the National Company Law Tribunal is only with respect to the scheme, if it is to defraud the revenue. Naturally, any scheme which is framed for with the object of defrauding the revenue cannot be approved by the NCLT. The circular of Ministry of corporate affairs as well as the instructions of central board of direct taxes are also conveying the same intent that if revenue has any objections to the scheme, it should make available its view before the NCLT. Both these above instructions and circular does not prevent the assessing officer in applying the provisions of the income tax act to the return of income of the assessee filed in compliance with the scheme approved by National Company Law Tribunal. The ld. Special Counsel has also placed before us decision of NCLT in Panasonic India Pvt Ltd V Panasonic Life Solutions India P Ltd. [ 2022 (5) TMI 1490 - NATIONAL COMPANY LAW TRIBUNAL] where in even NCLT has agreed that even if a proposal of a scheme of amalgamation is approved by the Adjudicating Authority, it is clarified that no provision of such a scheme can override the existing provision of the Act. In any case, the issues may come up before the ld. AO at time of the assessment of those companies, and the department can analyze the scheme and is entitled to take any decision as per the provisions of the Income Tax Act on issues including issues in NCLT order. That decision also noted that Transferee Company has deposited anundertaking before court/NCLT also to that effect. In commentary of Kanga , Palkhivala and Vyas in the Law and practice of income tax it has been observed that provisions relating to the taxation of the companies involved in the demerger and their shareholders are applicable only if the demerger fulfils the conditions provided u/s 2 (19 AA) of the act, 1961. Mere sanction of scheme is by High Court of demerger under the companies act 1956 is by itself not sufficient. Thus, in present case the ld. AO has not exceeded his jurisdiction and has also not ceded his jurisdiction. Accordingly, ground no 3 of the appeal of assessee is dismissed. Accordingly, appeal of assessee is partly allowed. Computation of deemed dividend - As in view of our finding in appeal of assessee, that there is no deemed dividend chargeable to tax in the impugned case, these grounds also do not survive, hence, are dismissed.
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2022 (12) TMI 683
TP Adjustment - Exclusion of Nile Ltd. as comparable in applying Transaction Net Margin Method (TNMM) - HELD THAT:- Though the Department has impliedly accepted Nile Ltd. as a comparable while computing TNMM, but since the issue of segmental accounts was not raised/examined at any earlier point in time by the Department, it is not possible to ascertain whether the facts in respect of Nile Ltd. as a comparable in the earlier years are same as compared to facts prevailing in the present year. Department has raised the issue of comparability of Nile Ltd. as a comparable with the assessee for the first time during the year under consideration and in any of the earlier years, this issue was not considered or analysed by the Department. Further, though the assessee made factual and legal submissions on this issue before CIT(Appeals) in support of the acceptability of Nile Ltd. as a comparable, however, he also inadvertently omitted to make any observation/given any findings in respect of the same in the appellate order. In our considered view, in the interests of justice, this ground is being restored to the file of Ld. CIT(Appeals) for adjudication on this aspect in light of the arguments put forward by the counsel for the assessee on this issue on whether it would be appropriate for Nile Ltd. to be excluded as comparable, since as per the assessee it is one of the eminent players in this line of business and exclusion thereof would render the entire exercise of computation of ALP meaningless in the instant set of facts. On this issue, the file is being restored to Ld. CIT(Appeals) for fresh adjudication after giving due opportunity of hearing to the assessee. ALP of loan given by the assessee to foreign subsidiary at the rate of interest Swiss Libor + 200 basis points - HELD THAT:- We observe that the assessee has itself charged the lesser interest by 25 basis points (bps) as compared to what was quoted by Citibank. This fact was also observed by Ld. CIT(Appeals) in the appellate order. In view of the above, in the interest of justice, we are restricting the addition to interest rate at Swiss Libor plus 150 basis points, equivalent to the quotation obtained by the assessee from Citibank in respect of the said loan. In the result, ground of the assessee's appeal is partly allowed. Disallowance being administrative expenses u/s 14A - HELD THAT:- As in the assessee's own case for the immediately preceding assessment year 2009-10, as against disallowance of 0.5% of the average investment, which works out to Rs. 3,22,431/-, in our view, the disallowance may be restricted to a lump-sum disallowance of Rs. 250,000/- towards administrative cost incurred on maintaining investments in tax free funds. Interest expenditure u/s 36(1)(iii) - AO made disallowance out of interest paid by the assessee on the ground that the assessee had made investment in various subsidiaries on which no interest has been charged - HELD THAT:- We observe that this issue has been decided in favour of the assessee in the assessee's own case before ITAT vide [ 2019 (3) TMI 2006 - ITAT AHMEDABAD] Addition on account of royalty payment - disallowance of royalty paid for the usage of trademarks to Pfaulder Inc. USA. - AO held that the assessee has not been able to explain the basis of royalty payment - HELD THAT:- As in the assessee's own case for assessment year 2010-11 [ 2019 (3) TMI 2006 - ITAT AHMEDABAD] thus following the decision in the assessee's own case, which are concurring with the observations made by Ld. CIT(Appeals) in the appellate order as well, we are hereby dismissing the Department's appeal on this issue. Disallowance of education expense - HELD THAT:- We observe that in the case of Mallige Medical Centre (P.) Ltd [ 2015 (4) TMI 547 - KARNATAKA HIGH COURT] the High Court held that where daughter of managing director of assessee-company which was running a hospital was sent abroad for acquiring specialised knowledge in medical field and after acquiring same, she was working with assessee, expenses incurred towards daughter's education were to be allowed under section 37(1) - In the case of Kostub Investment Ltd [ 2014 (2) TMI 1072 - DELHI HIGH COURT] , the High Court held that where expenditure on higher education of employee had an intimate and direct connection with assessee's business, it would be appropriately deductible, even though such an employee was son of a Director. In the case of Aswathanarayana Eswara [ 2018 (9) TMI 967 - MADRAS HIGH COURT] the High Court held that expenditure by firm on partner's foreign education was to be allowed when post graduate course underwent was directly related to profession carried on by firm. CIT(Appeals) has not erred in facts and in law in deleting the additions made by the AO, considering the facts of the present case.
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2022 (12) TMI 682
Revision u/s 263 by CIT - Unexplained Cash deposited in the bank account - HELD THAT:- It is not in dispute that prior to receiving the notice issued u/s. 148 the assessee had filed return of income declaring of Rs.159880/-. Only after receiving the notice u/s. 148 the assessee revised the return claiming that his income is subject to presumptive tax u/s. 44AD of the Act and treating the cash deposit as his business receipt he returned profit @ 8% u/s. 44AD of the Act. This action of the assessee was accepted by the AO without realising that provisions of section 44AD of the Act do not apply to a commission agent thereby making the assessment order erroneous in law and because of this error the AO did not examine the cash deposit making the assessment order pre judicial to the interest of the revenue. On finding these errors the CIT rightly assumed the jurisdiction cast upon him by the provisions of section 263, we do not find any error or infirmity in the findings of the Pr. CIT. The appeal of the assessee is accordingly dismissed.
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2022 (12) TMI 681
Penalty u/s 271F - belated filing of income tax return u/s 139(4) - HELD THAT:- From the facts noted the assessee s total income for the relevant Assessment Years was above the taxable limit in spite of the fact that he did not file his return of income within due date as specified under section 139(1) of the Act in any of the above assessment year. Therefore, he is liable for penalty under section 271F of the Act. The CIT(A) is justified in confirming the penalty as per section 271F of the Act. Assessee will not get the immunity as per section 273B of the Act. Therefore, we dismiss the appeals of the assessee.
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2022 (12) TMI 680
Penalty u/s 271(1)(c) - assessee failed to produce clinching evidence to justify claim of various expenditure - HELD THAT:- As observed, the assessee contested the additions/disallowance made by the Assessing Officer by filing an appeal before Commissioner (Appeals). However, the appeal was ultimately withdrawn. Essentially, assessee accepted the additions / disallowances made by the AO. Neither before AO nor before Commissioner (Appeals) the assessee was able to furnish any reasonable explanation to demonstrate that there is no deliberate attempt to either conceal the income or furnish inaccurate particulars of income. The aforesaid factual position remains unaltered before us. Keeping in view the concurrent finding of the Departmental Authorities in the assessment and penalty orders, which the assessee has failed to rebut by leading proper evidence before us, we are inclined to uphold the decision of learned Commissioner (Appeals). Grounds raised are dismissed.
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2022 (12) TMI 679
Disallowance of interest u/s. 36(i)(iii) - amount of interest on investment made in the assets not used for the business purpose is not allowable - AO estimated interest @12% p.a. attributable to such investment in land - AO held that the aforesaid amount of interest has been incurred towards purchase of capital asset being advance towards land and therefore the assessee is not entitled to deduction of such interest expenditure u/s 36(1)(iii) - HELD THAT:- It is the case of the Revenue that interest expenditure has been incurred on investment made in assets and is in the nature of capital expenditure wrongly claimed as Revenue expenditure by the assessee. The assessee is, on the other hand, claims that (a) the interest free funds to the extent of Rs.5,52,50,000/- was available to meet the advance towards land, (b) the ITAT in Assessment Year 2007-08 has observed that Assessee is engaged in real estate activity as one of its business activity. We notice that the CIT(A) took note of the decision of the Tribunal rendered in Assessment Year 2007-08 and observed that the assessee is indeed engaged in the business of real estate and not merely in coal trading. As a consequence, it was observed that the interest expenses incurred on acquisition of real estate has to be treated as ordinary business activity and therefore the interest incurred on acquisition of real estate partakes the character of Revenue expenses and thus cannot be disallowed. We find that the CIT(A) has taken note of the object clause in the MOA as well as past and present state of affairs to come to a conclusion that acquisition of land is ordinary business activity in the business of real estate and therefore attendant interest expenses cannot be disallowed by treating it for non business purposes with reference to Section 36(1)(iii) - We do not see any error committed by the CIT(A) for returning such finding. Hence, we decline to interfere. Addition u/s 2(22)(e) - deemed dividend of income - CIT-A restricted the addition to the extent of General Reserve after excluding the Security Premium Reserve which has been regarded to be outside the ambit of expression accumulated profits under Section 2(22)(e) - HELD THAT:- CIT(A) in essence, held that the security premium reserve cannot be regarded as part of accumulated profits u/s 2(22)(e) and when such security premium is excluded, the General Reserve available for the purposes of addition under Section 2(22)(e) only and thus sustained the addition to the extent accumulated profit excluding share premium reserve. We find the approach of the CIT(A) is in consonance with judicial precedent available in this regard as cited by the CIT(A). We thus see no infirmity in the action of the CIT(A). Hence, we decline to interfere.
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2022 (12) TMI 678
Revision u//s 263 by CIT - writing off of inventory in the form of non-convertible debentures - net realisable value of the debentures as on 31.03.2017 were ascertained as NIL and the un-recoupable cost of inventory i.e. the balance amount of cost of debentures was written off in the profit loss account - As per CIT debentures were still showing in the DEMAT statement of the assessee, such write off was not correct and ld. AO failed to consider these facts and did not conduct any enquiries or verifications - HELD THAT:- Details were placed before ld. AO who has thoroughly examined and after being satisfied that since M/s. Amtek Auto Ltd. has gone into liquidation and was unable to pay the balance sum of Rs. 4,54,00,000/- to the assessee, accepted the assessee s claim of write off of the said amount. It is also worth noting that Note no. 2.25 of the audited balance sheet states the said transaction and the writing off of Rs. 4.54 Cr. in the statement of profit loss account which was held as stock-in-trade by the assessee. During the course of assessment proceedings AO asked the assessee to specifically explain the basis of valuation of the debentures of M/s. Amtek Auto Ltd. to which the company replied on 20.12.2019 furnishing the complete details. Ld. AO after being satisfied with the details and explanations passed the order u/s 143 of the Act drawing no adverse inference in relation to claim of valuation loss arising on writing off of the debentures held as stock-in-trade. We find that the transaction referred in the show cause notice has been examined by ld. AO and one of the view permissible under the law has been taken. Even otherwise it has been stated before the lower authorities and before us that in case the assessee will be able to recover the alleged sum, the same will be offered to tax in the year when it will be received - we find that the assessment order dated 27.12.2019 is neither erroneous nor prejudicial to the interests of the Revenue and thus, ld. PCIT erred in invoking jurisdiction u/s 263 of the Act and therefore, the same deserves to be quashed. Appeal of assessee allowed.
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2022 (12) TMI 677
Revision u/s 263 by CIT - Taxation of income from shareholders account - main plea of the assessee is that only for presentation purposes, the assessee prepares policyholders account and shareholders account and that shareholders account cannot be treated as other regular business carried out by the assessee so as to make it liable for taxation @30% - whether the income from shareholders account is to be treated as part of life insurance business and get taxed @12.5% prescribed u/s.115B of the Act or not? - HELD THAT:- This issue is no longer res integra in view of the decision of ICICI Prudential Insurance Co. Ltd [ 2015 (7) TMI 1259 - BOMBAY HIGH COURT] Also we find that the AO had made adequate enquiries in this regard during the course of assessment proceedings in response to the notice issued u/s.142(1) - assessee had indeed made detailed submissions. Hence, the ld. PCIT seeking to invoke revision jurisdiction u/s.263 of the Act on the ground that no enquiries were made by the ld. AO by applying Explanation 2 to Section 263 of the Act is grossly incorrect and is hereby quashed. In any case, the issue sought to be revised by the ld. PCIT u/s.263 of the Act is also covered in favour of the assessee by the decision of the Hon ble Jurisdictional High Court on merits. Appeal of the assessee is allowed.
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2022 (12) TMI 676
Disallowance of bad debts written off - Addition of bad debt written off under the head other expenses on the ground that assessee does not fulfill the conditions prescribed u/s.36(2) - HELD THAT:- On a pointed query raised by the Bench as to whether the expenditure was incurred during the impugned financial year, the ld.cousnel for the assessee submitted that these were incurred in the past years and does not relate to this year. To another query raised by the Bench as to what is the date of the Arbitration Award, the ld.counsel for the assessee submitted that the arbitrator gave his award on 18.05.2016. Thus a perusal of the award given by the arbitrator shows that the arbitrator gave his award on 18.05.2015, which falls under FY 2015-16 i.e relevant to AY 2016-17. We, therefore, do not agree with the argument of the ld. counsel for the assessee that the same should have been allowed as business loss during this year. In our opinion, when the assessee is not entitled to claim the same as bad debt, the assessee cannot claim the same as business loss as per his sweet will. The law is well settled on this aspect and business loss, if any, can be claimed by the assessee in the year of incurring of the expenditure and not as per his sweet will. In this view of the matter, the order of the ld.CIT(A) sustaining the addition of Rs.29,30,000/- is upheld and the grounds raised by the assessee on this issue are dismissed. Direction of the ld.CIT(A) to bring to tax the amount received by the assessee on the basis of the award by the Arbitration Court - As we find first of all the same is not emanating from the assessment order. Further, the ld. DR could not bring on record any evidence to show that the ld.CIT(A) has given any enhancement notice, which is required as per law to be issued to the assessee before making an enhancement. Thirdly, the amount was already shown by the assessee in the balance sheet as receivable from Mr.Prabir Ghose and therefore, once the arbitrator gives the award for refund the same cannot be brought to tax in the hands of the assessee. We, therefore, set aside the order of the ld.CIT(A) on this issue and the grounds raised by the assessee on the second issue are allowed.
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2022 (12) TMI 675
Assessment u/s 153A - absence of any incriminating material, no addition can be made in the assessment proceedings u/s 153A r.w.s.143(3) - whether, in the absence of any incriminating material found during the course of the search operations, any addition can be made in an assessment u/s 143(3) read with Section 153A? - HELD THAT:- As in the case of CIT vs. Thana Electricity Supply Ltd. [ 1993 (4) TMI 37 - BOMBAY HIGH COURT] to the effect The decision of one High Court is neither binding precedent for another High Court nor for the Courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect . Unlike the decisions of the Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of the Hon'ble non-jurisdictional High Court are followed by the lower authorities, only in the absence of benefit of guidance by the Hon ble jurisdictional High Court on that issue, on account of the persuasive effect of these decisions and on account of the concept of judicial propriety-factors which are inherently subjective in nature. Quite clearly, therefore, the applicability of the non-jurisdictional High Court is never absolute, without exceptions and as a matter of course, and that too is limited only on the issues on which there is no guidance of the Hon ble jurisdictional High Court. In the present case, we have the benefit of guidance on the subject by the Hon ble jurisdictional High Court. There is thus no occasion for us to consider the judgments of the Hon ble non-jurisdictional High Courts. In view of these discussions, the decisions of the Hon ble non-jurisdictional High Court have no relevance in the present context. It is also elementary in law that the mere pendency of the appeal, against a binding judicial precedent, in a higher judicial forum does not dilute, curtail or otherwise narrow down its binding nature. As long as the binding judicial precedent holds good in law, as it does unless it is upturned or reversed by a higher judicial forum, it binds the lower judicial forums. As also bearing in mind the entirety of the case, we uphold the plea of the assessee, and respectfully following the coordinate bench in the case of LUXORA REALTORS PVT. LTD. [ 2022 (2) TMI 866 - ITAT MUMBAI] as also Hon ble jurisdictional High Court s judgments in the cases of Continental Warehousing and All Cargo Global Logistics [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] hold that the impugned additions, in respect of share capital subscriptions from the two Mauritius based entities, namely Access Investment India and Aanya Properties (2) Limited must be deleted for this short reason alone. We, therefore, delete the impugned additions. The assessee gets the relief accordingly.
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2022 (12) TMI 674
Initiation of proceedings u/s 153C - existence of incriminating material - HELD THAT:- A statement cannot be considered to be incriminating merely on the basis of questions posed. The questions posed and the reply given are to be considered together to examine whether the statement contains any incriminating material. We have perused the statement of the Assessee recorded u/s132(4) including Questions No. 16, 17, 48, 49, 50, 51 and 53 along with the reply given by the Assessee. We are of the considered view, that the aforesaid statement does not contain anything incriminating. We have also perused the assessment order and the same neither refers nor allude to any incriminating material. The assessment before us is concluded/un-abated assessment, and therefore, no additions could have been made in the absence of incriminating material. Therefore, respectfully following the judgment of the Hon ble Supreme Court in the case of Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] and the judgment Continental Warehousing Corporation (Nhava Sheva) Ltd.[ 2015 (5) TMI 656 - BOMBAY HIGH COURT] in absence of any incriminating material, we set aside the order passed by the CIT(A) and delete all the additions made by the Assessing Officer in the Assessment Order passed under Section 153C read with Section 143(3) of the Act for the Assessment Year 2010-11. Assessee appeal allowed.
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2022 (12) TMI 673
Assessment u/s 153A - unexplained opening capital and unexplained investment in shares - working of opening credit balance - AO did not consider the investment in shares in two companies in A.Ys. 1999-2000 and 2002- 03 - HELD THAT:- There is no dispute with regard to investment and share in two companies during A.Ys. 1999-2000 and 2002-03 which is evident from the submissions of assessee before the CIT(A). Further, as noted that the assessee provided the details of such acquisition and which was examined by the Investigation Wing before the completion of proceedings u/s. 153A - also observed copy of share holding of both the companies is also enclosed for the consideration and examination of CIT(A). CIT(A) neither disputed the said evidences filed on behalf of the assessee in support of its claim nor a reference made in the impugned order. The said details of investments filed before me and on perusal of the same at page 5 of the paper book, discloses that the assessee has share holding to an extent of Rs.2,15,500/- in Gupta Leasing Finance Ltd. during A.Y. 1999-2000 and Rs.60,000/- in Gupta Coalfields and Washeries Ltd. for A.Y. 2002-03. Therefore, the details investments of shares in two companies in A.Ys. 1999-2000 and 2002-03 were before the CIT(A) and the opening capital by way of a income for A.Ys. 2003-04 and 2004-05 were available to the assessee which were, in my opinion, properly explained and no addition is warranted. There is no dispute with regard to credit opening balance to an extent of Rs.4,30,000/- which is supported through assessment order for A.Y. 2005-06 which is placed before me at page 7 of the paper book and also which is not disputed by the ld. DR. Since, the investments and availability of opening capital to the extent of Rs.3,41,577/- is properly explained vide evidences, thus, the addition is confirmed to an extent of Rs.88,423/- as admitted by the ld. AR on account of unexplained opening capital. Therefore, the order of CIT(A) is modified to that extent. Thus, the grounds raised by the assessee are partly allowed.
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2022 (12) TMI 672
TDS u/s 192 on the perquisite - underreporting of value of perquisite - FMV of shares to determine the value of perquisites in respect of exercising of option under ESOP granted to the employee of the company - M/s Reliance capital had sold shares of the assessee company at the rate of ₹ 850 per share and therefore fair market value of the specified security (equity share of assessee company) should have been computed taking the market value at the rate of ₹850 per share - AO computed the quantum of perquisite and liability in terms of section 201(1) and interest under section 201(1A) - whether the fair market value of equity shares of the assessee as on the date of exercising of the option by the employee for converting the warrant into shares, as determined by the merchant banker should be adopted or fair market of equity shares should be adopted on the basis of a real-time transactions of sale of equity shares of the company? - HELD THAT:- We find that for the purpose of computing fair market value of the equity shares allotted to the employee Sh. Rajeev Samant, the assessee has followed the procedure laid down in Rule 3(8) of the Rules. Under the rules, in case of shares of unlisted company the fair market value shall be the value determined by a merchant banker. The merchant banker has also been defined in the Rules. The said rule has been reproduced by the Ld. Assessing Officer in the impugned order. It is evident that fair market value of the specified shares was to be taken as determined by the merchant banker. The assessee following above Rules, has adopted the fair market value of ₹194.15 as determined by the merchant banker. But the contention of the revenue in the grounds raised is that value as per the actual trade at the rate of ₹850 per share executed between the unrelated parties should have been adopted. No decision has been cited by DR, which could support the case of the Revenue and therefore we do not find any basis for adopting the fair market value as suggested by the DR based on an independent transaction of sale of shares of the assessee company between unrelated party. In the grounds raised before us, the Revenue has nowhere challenged correctness of fair market value determined by the merchant banker. Further, during the course of hearing, the Ld. counsel of the assessee filed a copy of the assessment order in the case of Sh. Rajeev Samant i.e. the employee director who received the said equity shares of the assessee company and submitted that no addition has been made on the issue of underreporting of value of perquisite in his hands, and thus department has accepted the quantum of perquisite in his hands. DR could not controvert this factual aspect pointed out by the Ld. counsel of the assessee, though in our opinion, any omission on the part of the Assessing Officer in the case of the recipient cannot give right to the assessee to take benefit of the said omission. - Decided against revenue.
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2022 (12) TMI 671
Delay in making the payment towards the employees contribution for the provident fund, under section 36(1)(va) r.w.s. 2(24)(x) - intimation u/s 143(1) - HELD THAT:- As decided in KALPESH SYNTHETICS PVT LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CPC BENGALURU. [ 2022 (5) TMI 461 - ITAT MUMBAI] when the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is indicative of the disallowance of expenditure in question.Tax audit report can not be reason enough to make the impugned disallowance. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. Assessee appeal allowed.
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2022 (12) TMI 670
TP Adjustment - benchmarking of transaction - whether the transactions being import of finished goods from associated enterprises benchmarked by the assessee adopting the resale price method where the profit level indicator is determined of gross profit ratio and the gross profit ratio of assessee was found to be at 15.35% whereas of the other comparable companies was 14.64% which is stated to be at arm s-length by the assessee, is proper or not? - HELD THAT:- When it is claimed undisputedly by the assessee that with respect to the trading of goods, assessee does not undertake any value addition, we failed to understand the reasoning given by the learned dispute resolution panel in rejecting the resale price method as most appropriate method and upholding transactional net margin method. According to rule 10 B (1) (b) resale price methods is the method where the normal gross profit margin earned by a tested party is required to be compared with comparable uncontrolled transactions. When undeniably assessee is selling the goods imported from associated enterprises to the third parties, the resale price method is the most appropriate method, where the segmental results to the gross profit level are available. Direction of the learned dispute resolution panel in rejecting reliance on the decision of L Oreal India private limited [ 2015 (2) TMI 407 - BOMBAY HIGH COURT] is also not proper. The finding of the learned dispute resolution panel that in that case that assessee was engaged only in trading activities is clearly an incorrect fact recorded by the learned dispute resolution panel, which can be gathered from the coordinate bench decision reported [ 2012 (4) TMI 752 - ITAT MUMBAI] which was challenged by the revenue before the honourable Bombay High Court. Thus, in that case honourable Bombay High Court [ 2015 (2) TMI 407 - BOMBAY HIGH COURT] in case of an assessee who was engaged in the business of manufacturing and trading in cosmetics held that for the trading activities in cosmetic segment, adoption of the resale price method by the assessee was upheld. In view of this, we do not have any hesitation in accepting submission of the assessee that for benchmarking of the international transaction of trading activities where assessee imports finished goods and sold it to third party without undertaking any value addition, resale price method should be adopted as most appropriate method. The submission of the assessee is also supported by the order of the honourable jurisdictional High Court. As we already noted that the margin shown by the assessee of gross profit is 15.35% compared to the comparable companies of 14.60% we direct the learned transfer pricing officer/AO to delete the consequent adjustment - Accordingly we reverse the order of the learned lower authorities and allow ground number 2 of the appeal.
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Customs
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2022 (12) TMI 669
Provisional release of seized goods - allegation import of second hand card in the guise of new car - violation of policy condition (II)(d)(iv) in chapter 87 of the ITC (HS) classification - the mandate to produce the certificate insisted upon as condition for provisional release from among the prescriptions in the licencing notes pertaining to imported vehicles. HELD THAT:- As the impugned vehicle has already been registered with the authorities concerned, it would appear that the vehicle complies with all the stipulations for operation and running on Indian roads. The type approval certificate is mainly required to ensure that the vehicle is safe and road worthy for public use and it is to be considered by the registering authority while registering the vehicle and not by the Customs authority when it is imported. Besides this, the assumption of the department that the importer has imported the vehicle which is unfit for use on road is also absurd. In fact, in a similar case, the High Court [ 2010 (5) TMI 654 - KERALA HIGH COURT] has upheld the view of the Tribunal because the importer cannot be expected to get what is not possible to obtain. We therefore do not find any merit in the appeal filed by the department. Consequently the appeal is dismissed. The inclusion of this condition as necessary for provisional release is redundant and superfluous and we allow this appeal by expunging the said condition as requirement of provisional release.
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2022 (12) TMI 668
Amendment to shipping bill - Period of limitation - non-availability of goods for examination - export of cold rolled non grain oriented silicon electrical steel sheet/coils in fully/semi-processed state - first proviso in section 149 of Customs Act, 1962 - appellant intends to seek the benefit afforded by zero duty export promotion capital goods cum duty free import authorization (EPCG cum DFIA) scheme instead of zero duty export promotion capital goods (EPCG) scheme in the Foreign Trade Policy (FTP) HELD THAT:- Though the issue has been portrayed as befitting ascertainment within the rigour of first proviso in section 149 of Customs Act, 1962 as shipping bills were sought to be amended, the distinction between the generality of the principal enactment and the particularity of the proviso has been enunciated in re Haldiram Foods International Pvt Ltd. [ 2020 (12) TMI 1229 - CESTAT MUMBAI ] Rejection of request for amendment in circumstances that are outrightly not in conformity with the literal phraseology of section 149 of Customs Act, 1962 may not be overturned for lack jurisdiction but can upon passing the test of conformity with either the principal enactment or the more rigourous in the proviso, as the case may be. From the nominal nature of the amendment sought without impacting any statutorily prescribed detail in the entry mandated by section 50 of Customs Act, 1962, the application does not fall within the sphere of the proviso that has been resorted to in the impugned order. The impugned order has been passed without issue of show cause notice. And yet, the proper officer did not hesitate to decide on the lack of wherewithal for ascertainment of value addition norms in the exports, of the raw materials and other inputs in the manufacture of the goods, of conformity of the utilized inputs with permissibility in the Standard Input Output Norms (SION) and, indeed, the classification of the exported goods within the said standard input output norms (SION) in the Foreign Trade Policy. The determination of ineligibility, for want of the goods physically, to operate under the duty free import authorization (DFIA) scheme in the Foreign Trade Policy (FTP) as ground to refuse the amendment traverses beyond the scope and intent of section 149 of Customs Act, 1962. Non-availability of goods for examination - there is no controverting of the submission of Learned Counsel for appellant that post-exportation processing of application under duty free import authorization (DFIA) scheme in the Foreign Trade Policy (FTP) by the Directorate General of Foreign Trade (DGFT) is not contingent upon any specific evaluation of the exported goods. Neither is the pivotal role of that agency contested in the submission of Learned Authorized Representative. To decide on eligibility of import at this stage is patently in excess of jurisdiction and peremptory. This premature filtration at the threshold not envisaged in section 149 of Customs Act, 1962 and arrogating of policing over statutory authority vested in another agency of the State is unacceptable. In the light of our findings supra, we find no reason to sustain the order impugned before us. Consequently, we set aside the rejection to allow the appeal and direct the respondent-Commissioner to effect the amendments in the shipping bills as sought for by the appellant.
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Corporate Laws
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2022 (12) TMI 667
Seeking issuance of summon the witness for examination - NCLT refused to issue summons - disputes of oppression and mismanagement of a company. - The Ld. Counsel for the Appellants during the course of argument and in his memo of Appeal submitted that the Tribunal has completely failed to appreciate that it possesses powers under Section 242 of the Companies Act, 2013 to issue summons to individuals and examine them on oath in appropriate cases. HELD THAT:- the Tribunal has examined those documents which have been filed by the parties and the main matter is ripe for arguments, therefore, in the facts and circumstance of the case aforenoted, there is no illegality in the impugned order. Therefore, we do not find any merit in the instant Appeal. Order of NCLT affirmed.
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2022 (12) TMI 666
Payment of Audit Fee to auditor of the company - fixation of audit fee - NCLT directed the administrator to pay Rs. 12 Lakh with GST - HELD THAT:- As far as the present case is concerned, this Tribunal , on going through the impugned order passed by the National Company Law Tribunal, Kochi Bench, Kochi comes to an inevitable , irresistible and inescapable conclusion, that the said Order , suffers from Legal infirmity , in that, the contents of letter dated 01.06.2022 of the Babu A. Kallivayalil Co., Chartered Accountants were not adverted to b y the Tribunal in detail, especially, touching upon, the aspect of Fees Matter restored back for re-adjudication.
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2022 (12) TMI 665
Restoration of the name of the Company - going concern - default in statutory compliance and failure to file return since 31.03.2013. - It submitted that, the Appellants Company is being continuously operative and the directors were administrating the functions of the business right since incorporation. - HELD THAT:- going through the pleadings made on behalf of the parties and in view of the fact that the Financial Statements for the year 2014-15, 2015-16, 2016-17 and Income Tax Return of the Appellant Company shows that the Appellant Company is having substantial movable as well as immovable assets. Therefore, it cannot be said that the Appellant Company is not carrying on any business or operations. The name of the Appellant Company be restored to the Register of Companies subject to the conditions.
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Insolvency & Bankruptcy
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2022 (12) TMI 711
Cancellation of approval of Resolution Plan - Breach of conditions of the Plan - forfeiture of amount of Rs. 20 Crore deposited by the Resolution Applicant - Appellant contended that, Appellant had come to know that there have been various transactions with regard to the 05th floor which was never communicated to the Appellant by the Resolution Professional. Appellant has further come to know that there are disputes with regard to second floor of the hotel. Resolution Professional having never mentioned about the transaction regarding the second floor in Information Memorandum, no breach of the Resolution Plan can be imputed to the Resolution Applicant. HELD THAT:- The Resolution Professional has brought on record the entire information memorandum running into 111 pages which contains all details regarding the assets, financial information, details of liabilities, details of certain litigation and ongoing investigations or proceedings were also mentioned in the Information Memorandum including provisional attachment order passed in the Enforcement Directorate. Information Memorandum is a comprehensive document containing all details and in view of the detailed information memorandum which is part of the record, it is not open for the Appellant to contend that certain information was not shared with the Appellant by the Resolution Professional which furnishes the basis for the Appellant not to implement the Resolution Plan. The Order passed in so far as it canceled the approval given to the Resolution Plan by Order dated 04.01.2022 as well as forfeiting Rs. 20 Crores deposited by the Resolution Applicant is affirmed. Wilful contravention of terms of the Resolution Plan - Referring Matter to IBBI for apapropriate action u/s 74(3) - direction No. III - HELD THAT:- there has to be a consideration by the Adjudicating Authority as to whether facts of the particular case require any reference under Section 74(3). There is no observation in the Order that Appellant has knowingly and willfully contravened any of the terms of the Resolution Plan. Without there being any observation even in prima facie basis that the Resolution Applicant has knowingly and willfully contravened any of the terms of the Resolution Plan, reference under Section 74(3) was not called for, in the facts of the present case. The Order dated 01st November, 2021 in so far as direction No. III is concerned, is set aside
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2022 (12) TMI 664
Condonation of delay of 17 days in filing of appeal - last two days being public holidays - Power of Jurisdiction of NCLAT to condone delay - Applicability of provisions of limitation act - HELD THAT:- The period of limitation is 30 days as per Section 61(1) of the Code. The power to condone the delay conferred to this Tribunal is only of 15 days. We thus have to find out in the facts of the present case, whether the delay in filing the Appeal is within 15 days or more than 15 days. What was held by this Tribunal in the above case is that the benefit of Section 4 of the Limitation Act is admissible with regard to 30 days period of limitation and the said benefit is not be extended when 45 days are computed. 15th Day is period which may be condoned but the benefit of Section 4 of the Limitation Act is not be extended if the 46th and 47th Day were holidays. - Present is not a case where Appellant is claiming benefit of Section 4 with regard to computation of 30 days period of limitation and not seeking benefit of 46th and 47th Day. We are of the view that the Appeal was not filed beyond the delay of 15 days. Filing of the Appeal was within the delay of 15 days, this Court can very well consider the grounds for condonation of 15 days delay. Appellant being not in possession of relevant documents for filing the Appeal, the delay was caused. We are satisfied that sufficient cause has been shown for condonation of the delay of 15 days in filing the Appeal. Delay Condonation Application is allowed.
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2022 (12) TMI 663
Initiation of CIRP - Assignment of debt during pendency of the proceeding u/s 7 - continuation of proceedings after acquisition of financial assets by assignee - Appellant submits that the assignee could not have been permitted to continue Section 7 proceedings although it is open for the assignee to file a fresh Application under Section 7 which was permissible on the strength of assignment. HELD THAT:- Learned Counsel for the Respondent has rightly referred to the provisions of Order XXII Rule 10 of CPC which contemplates continuance of proceeding on the basis of devolution of rights with the leave of the Court which is applied generally in civil proceeding and suit. As has been observed rightly by the Adjudicating Authority, there is no prohibition in the IBC or any of the Regulations from continuing the proceeding by an assignee. Section 5(7) of the IBC which defines Financial Creditor also includes a person to whom such debt has been legally assigned or transferred to. By virtue of assignment, Respondent No.1 become the Financial Creditor and having stepped in the shoes of Housing Development Finance Corporation Limited , it has every right to continue the proceeding which was initiated by Respondent No.2.
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2022 (12) TMI 662
Possession of the property - Claim by third-party - Right of the corporate debtor over the leasehold property - RIICO has taken a stand that the Appellant has no locus standi to file application because RIICO has never entered into an agreement with the Appellant and that the action taken by RIICO was against the Corporate Debtor for the breach of terms and conditions of the lease deed and if the Appellant was aggrieved of loss caused then it may register its claim with the RP but cannot claim its damages from a third party i.e. from RIICO for the breach of contract by the Corporate Debtor HELD THAT:- Although, Counsel for the Appellant has vehemently reiterated that the stand taken by the Appellant before the Adjudicating Authority but the fact remains that on 01.12.2015, after the cancellation of the lease deed, the Corporate Debtor had no right or interest in the demised premises much less for the purpose of creating a third-party interest by entering into an agreement of management with the Appellant on 01.04.2017. As a matter of fact, the Appellant is to sink or swim with the Corporate Debtor.
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Service Tax
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2022 (12) TMI 661
Claim of refund of service tax - work contract services - Section 102 of the Finance Act, 1994 which exempted services provided to Government for the period 01.04.2015 to 29.02.2016. - HELD THAT:- Undisputedly, the contract has been entered and signed on 19.03.2015. A contract comes into effect and binds the parties only when it is accepted. As per Section 2(b) of Indian Contract Act, 1872, acceptance is defined as when the person to whom the proposal has been made signifies his assent thereto, the offer is accepted . Thus acceptance refers to the act of one party agreeing to the terms of proposed by another party. Merely receiving a tender or opening a tender cannot be considered as acceptance. There should be communication or intimation of the acceptance. As per Section 102, the service provider is eligible for exemption of service tax only if contract is entered prior to 01.03.2015. The letter dt. 08.05.2015 reproduced above explaining the applicability of exemption from service tax issued by the Head office of the recipient (Contract Management) cannot override the provisions of law. Since the contract has been entered on 19.03.2015, the appellant is not eligible for exemption of service tax. Decided against the assessee.
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2022 (12) TMI 660
Place of supply - intermediary service - Refund of Cenvat Credit - export of services - Rejection of refund claim on the ground that appellant had acted as an intermediary between the service provider and the service recipient - rule 9 of the Place of Provision of Services Rule 2012 - HELD THAT:- The Commissioner (Appeals) observed that since the appellant had arranged for a provision of service between Blackberry Singapore and its customers without making any alteration it would be acting as an intermediary under rule 9(c) of the 2012 Rules and, therefore, the place of provision of service shall be the location of the service provider i.e. in India. According to the appellant, the place of provision of services shall be the location of the recipient of the service as provided under rule 3 of the 2012 Rules In the present case, what transpires from the Agreement is that the appellant, which is a service provider in India, performs various promotion and marketing services more particularly set out in Schedule A of the Agreement or as requested by Blackberry Singapore from time to time. The terms of the Agreement also per se do not create any relationship of principal and agent or employer and employee. An agent is a person employed to do any act for another or to represent another in dealing with third persons. The persons for whom such act is done, or who is so represented, is the principal. A broker is a middleman or an agent who, for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or a property. These two situations do not arise in the present case. An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. The refund claimed by the appellant under rule 5 of the Credit Rules could not have been rejected by the Commissioner (Appeals). Decided in favor of assessee.
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2022 (12) TMI 659
Refund / Reabte - specified services received and used by them for export of Iron Ore Fines - Notification No.41/2007-ST as amended - Refund rejected on the ground that, None of the Challan/Bill/Lorry Receipt submitted by the claimant contains the reference of the export invoice as stipulated in the Notification. - HELD THAT:- In para 6.2 of this Circular, C.B.E. C. has clarified that only a broad co-relation of input services and Service Tax paid is required to be made with respect to exports. This Circular was relied upon by the appellant before the Adjudicating Authority, as mentioned in submissions of the assessee. At the same time Ld. Authorized Representative appearing on behalf of the respondent Revenue could not produce the required documents before the Bench to ascertain as to what extent co-relation can be made and whether any liberal view can be taken in these proceedings in view of C.B.E. C. Circular No. 120/01/2010-S.T. dated 19-1-2010. So far as admissibility of Service tax paid on GTA Services is concerned, it is observed that similar refunds were allowed by the Tribunal in the case of Jumbo Mining Ltd. v. CCE Hyderabad [ 2012 (7) TMI 739 - CESTAT, BANGALORE] Refund allowed.
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2022 (12) TMI 658
Refund of service tax - Period of limitation - Invoice Raised in service tax paid prior to introduction of GST - Service was not complete and GST was paid after completion of services post intorduction of GST w.e.f. 1.7.2017 - HELD THAT:- In the present case the date of approval of invoice was agreed to be considered as date of invoice. The said approval was awaited till 01.07.2017 when CGST Act comes into effect. It is, hence, clear that the service was not completed till the new law was given effect to. In fact, the period of one year, even if, calculated from the date of the impugned unapproved invoice had not expired by 1st July, 2017 i.e. till coming into effect of GST Act. Section 11B of erstwhile Central Excise Act has wrongly been invoked by the Commissioner (Appeals). He is observed to have miserably failed to observe the transition provisions and the mandate of the new CGST law that the entitlement of the assessee have mandatorily to be returned/refunded to the assessee irrespective of any limitation of time, though in cash. Following the decision in the case of Punjab National Bank Vs. Commissioner of CGST and Central Excise, Jaipur [ 2022 (5) TMI 652 - CESTAT NEW DELHI] , refund allowed.
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2022 (12) TMI 657
Extended period of limitation - commercial or industrial construction service [ CICS ] - construction of STP, ETP and sewage systems (a) Whether onshore oil fields of ONGC Ahmedabad of the appellant, which have been registered under the Mines Act, 1952, wherein only extraction of crude oil is done, qualify as a factory in terms of section 2(e) of the Central Excise Act, 1944? And thus, activity of construction of Effluent Treatment Plants ( ETPs ) by appellant in such fields not eligible for exemption under Sl. 13(d) of the Notification No. 25/2012-ST dated 20.06.2012? (b) Whether extraction of crude oil amounts to manufacturing? HELD THAT:- This issue has already been decided by the Tribunal in the aforesaid decision rendered in UEM India Limited [ 2021 (8) TMI 801 - CESTAT NEW DELHI ]. Thus, for all the reasons stated in the aforesaid order of the Tribunal, it would not be possible to sustain the order. Decided in favor of assessee.
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