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2019 (12) TMI 1267
Maintainability of petition - alternate remedy of appeal - refund claim - detention of goods alongwith vehicle - e-way bill - It is the appellant-writ petitioner’s case that it is the Corporation which, instead of raising two separate e-way bills for two separate consignments, had raised one e-way bill for the total amount on both the consignments - HELD THAT:- Sub-Sections (1), (6) and (7) of Section 107 of the CGST Act, it is evident that, while an appeal can be filed against any order or decision of an adjudicating authority, the pre- condition, for such an appeal to be filed, is payment of the demanded tax or penalty and 10% of the disputed amount.
In the present case, there is no dispute regarding tax and it is the appellant-writ petitioner’s case that the tax in its entirety has been paid to the Corporation which, in turn, is obligated to remit the said amount to the State Tax Department. Since the appellant-writ petitioner disputes levy of penalty in its entirety, they would, in terms of Section 107(6) of the CGST Act, only be required to deposit 10% of such penalty and as a result, in terms of Sub-Section (7) of Section 107 of the CGST Act, the remaining penalty need not be paid. That does not, however, solve the problem which the appellant-writ petitioner faces i.e. for release of the goods detained by the respondent-authorities. If, on the other hand, he were to comply with the demand notice issued under Section 129(1) of the CGST Act then, in terms of Section 129(5) of the CGST Act, on payment of the amount referred to in Sub-Section (1), all proceedings in respect of the notice specified in Sub-Section (3) shall be deemed to be concluded, in which event the goods would be released.
In the facts and circumstances of the present case, to modify the order of the learned Single Judge and, instead, direct the appellant-writ petitioner to deposit the entire amount of penalty i.e. for a sum of ₹ 1,70,688/- with the concerned authorities, and furnish proof of deposit of the said amount along with the Appeal to be preferred under Section 107(1) of the CGST Act - On such deposit, and on an Appeal being preferred thereafter within the period of limitation prescribed under Section 107(1) of the CGST Act, the Appeal shall be entertained by the Appellate Authority, and shall be adjudicated on its merits. As soon as an Appeal is preferred by the appellant-writ petitioner, enclosing thereto proof of payment of total penalty amount of ₹ 1,70,688/-, the subject goods shall be released in their favour.
It is made clear that, in case the Appeal is decided in the appellant-writ petitioner’s favour, they shall then be entitled for refund of the amount deposited by them pursuant to the order - appeal disposed off.
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2019 (12) TMI 1266
Maintainability of appeal - alternative remedy of appeal - Imposition of penalty - HELD THAT:- Since the petitioner has an alternative remedy to file an appeal, no interference is being called for by this Court in the matter.
The writ petition stands dismissed on ground of alternative remedy.
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2019 (12) TMI 1265
Profiteering - purchase of flat - allegation that Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price - withdrawal of complaint - contravention of Section 171 of the Central Goods and Services Tax Act, 2017 - penalty - HELD THAT:- The Respondent had approached the above Applicant and won him over not to pursue the complaint as it would have made him liable for profiteering under Section 171 (1) of the above Act. It is also clear that the above Applicant had not mentioned in his above letter that he has received the benefit of ITC which was his main allegation against the Respondent. Therefore, the above withdrawal cannot be taken to be bonafide and genuine There is also no provisions in the CGST Act or the Rules for withdrawal of the complaint as there is possibility of coercion or undue influence on the complainants by the unscrupulous builders.
The DGAP is also bound to launch investigation on a complaint once he has received recommendation from the Standing Committee on Anti-Profiteering under Rule 129 (1) and he cannot stop such investigation on the withdrawal of the complaint once it discloses commission of an offence under Section 171 of the above Act. Since, the benefit of ITC has been given by the Central and the State Government out of the public exchequer in favour of the buyers it is also incumbent on the DGAP to find out whether the above benefit has been passed on by the Respondent or it has been misappropriated by him. Therefore, the above contention of the Respondent is frivolous and hence, the same cannot be accepted
The benefits of tax rate reduction and ITC have been given by the State and the Central Govt. from their own tax revenue to provide accommodation to the vulnerable sections of society under the Affordable Housing Schemes. The method of interpretation of this provision has been given in the text of Section 171 of the CGST Act 2017 itself. We also observe that the above provision clearly links profiteering with each supply of goods or services or both and hence, profiteering has to be computed at the level of both. Therefore, the Respondent is under legal obligation to pass on the benefit of ITC to his buyers and he cannot be allowed to appropriate the same - it is clear that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 4.76% and during the post-GST period from July, 2017 to December, 2018, it was 7.27% as per Table B supra and hence it is established that the Respondent has benefited from the benefit of additional ITC to the extent of 2.51% [7.27% (-) 4.76%] of the turnover. Since, the above computations shown in Table B have been made on the basis of the VAT, Service Tax and GST Returns filed by the Respondent as well as the information supplied by him therefore, the same can be taken to be correct and relied upon.
It is also clear from the record that the Central Government, on the recommendation of the GST Council, had levied 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. Accordingly, the DGAP has computed the profiteered amount by comparing the applicable tax rate and ITC available in the pre-GST period when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8%. Accordingly, the DGAP has calculated the profiteered amount or the benefit to be passed on for the period from 01.07.2017 to 24.01.2018, as ₹ 1,16,75,749/- for the residential flats and commercial shops, which includes 12% GST on the base profiteered amount of ₹ 1,04,24,775/- -
The total benefit of ITC which is required to be passed on during the period from 01.07.2017 to 31.12.2018, comes to ₹ 3,58,90,871/- which includes GST @ 12% or 8% on the base profiteered amount of ₹ 3,28,12,811/- as per Table C of the above Report. The home buyer and Unit No. wise break-up of this amount has been given by the DGAP vide Annexure-22 of his Report. This amount is inclusive of ₹ 40,606/- including GST on the base amount of ₹ 37,598/- which is the benefit of ITC which is required to be passed on to the Applicant No. 1, mentioned at Serial No. 187 of Annexure-22. Since, Table C has been prepared on the basis of the information reflected in the Returns filed by the above Respondent and the details submitted by him hence, the computations made in the above Table are taken to be correct and accordingly the profiteered amount is determined as ₹ 3,58,90,871/- as per the details mentioned in Annexure-22 above in terms of Rule 133 (1) of the CGST Rules, 2017.
This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been mentioned in detail in the preceding paras of this Order. As per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 it is further ordered that the Respondent shall refund the above profiteered amount to the buyers as per the details given by the DGAP in Annexure-22. The benefit of ₹ 40,606/- including GST on the base amount of ₹ 37,598/- will be required to be passed on to the Applicant No. 1 - Since, the DGAP has carried out the present investigation till 31.12.2018 only any further benefit of additional ITC which might accrue to the Respondent shall also be passed on by him to the eligible buyers. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on by the Respondent to his recipients as per the provisions of Section 171 of the CGST Act, 2017.
Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project ‘Grand IV A’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
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2019 (12) TMI 1264
Profiteering - purchase of flat - Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price - contravention of Section 171 of the Central Goods and Services Tax Act, 2017 - penalty - HELD THAT:- The provisions of Section 171 (1) of the CGST Act, 2017 are aimed at ensuring that the recipients get the commensurate benefit, in the form of reduction in prices, in case of any tax rate reduction and/or incremental benefit of ITC which has become available to them due to sacrifice made by the State and the Central Govt. from their own tax kitty to provide accommodation to the vulnerable section of society under the Affordable Housing Scheme. The method of interpretation of this provision has been given in the text of Section 171 of the CGST Act, 2017 itself - it is clear that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 4.75% and during the post-GST period from July, 2017 to December, 2018, it was 15.40% as per Table B supra and hence it is established that the Respondent has benefited from the additional ITC to the extent of 10.65% [15.40% (-) 4.75%] of the turnover. Since, the above computations made in Table B have been done on the basis of the records, information and returns furnished by the Respondent himself, the same can be relied upon.
It is also clear from the records that the Central Government, on the recommendation of the GST Council, had levied 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. Accordingly, the DGAP has computed the profiteering by comparing the applicable tax rate and ITC available in the pre-GST period when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8% - This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been mentioned in detail of the preceding paras of this Order. As per the provisions of Rule 133 (1) (b) of the CGST Rules, 2017 it is further ordered that the Respondent shall refund the above profiteered amount to the flat buyers as per the details given by the DGAP in Annexure-14 without taking in to account the benefit which he has claimed to have passed on.
Since, the DGAP has carried out the present investigation till 31.12.2018 only any further benefit of additional ITC which might accrue to the Respondent shall also be passed on by him to the eligible buyers. The Commissioner CGST/SGST shall ensure that the above benefit is passed on by the Respondent to his recipients as per the provisions of Section 171 of the CGST Act, 2017. In case if the above benefit is not passed in future the Applicant No. 1 or any other buyer shall be at liberty to approach the Haryana State Screening, Committee to launch fresh proceedings against the Respondent as per Section 171 of the CGST Act, 2017.
Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project ‘Andour Heights’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
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2019 (12) TMI 1263
Reopening of assessment u/s 147 - duplication of six entries, which are mentioned in the Form 26 AS generated by the respondents and filed with the petition at page 51 - HELD THAT:- AO has ducked the issues raised by the petitioner. The right to file objections to a proposed re-opening of assessment under Section 147 of the Income Tax Act is a meaningful right, and not a mere empty formality. While dealing with the objections, AO should apply his mind.
The whole purpose of this exercise is to examine whether – in the light of the objections raised, the notice under Section 148 of the Act should be dropped, or pursued, so as to prevent the assessee from facing unnecessary and avoidable harassment and expenditure in the process of re-assessment and also to save a wasteful exercise being undertaken by the Assessing Officer.
Assessing Officer has completely failed to apply his mind to the submissions of the petitioner and also to examine as to how the two different Form 26 AS have been generated by the system.
Set aside the impugned order dated 15.11.2019 since it suffers from complete non-application of mind. The Assessing Officer shall proceed to pass a fresh order after dealing with the submissions raised by the petitioner in its objections.
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2019 (12) TMI 1262
Reassessment on the basis of the retrospective amendment effected in Explanation-1 to Section 115JB - disallowance of “Provision for Bad and Doubtful Debt” for the purpose of computing Book Profits under section 115JB - HELD THAT:- “Provision for Bad and Doubtful Debt” was clearly a deductible amount for the purpose of Section 115JA of the Act. This position of law was undone only by the Finance Amendment Act, 2009 with retrospective effect from 1 April 2001. But the fact remains that the said amendment in law was effected in the year 2009 and it was not available on the date when the reassessment notice was issued in the present case on 31 March 2008.
Similar issue was dealt with by the Division Bench of the Bombay High Court in the case of Rallis India Ltd. [2019 (5) TMI 572 - ALLAHABAD HIGH COURT] held that subsequent to the decision of the Hon’ble Supreme Court in HCL Comnet Systems & Services Ltd. [2008 (9) TMI 18 - SUPREME COURT] the Parliament stepped in to amend Explanation (1) to Section 115JB by the Finance Act, 2009. But that amendment would not be available for the Assessing Authority to exercise the power to reopen the assessment. - Decided in favour of assessee.
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2019 (12) TMI 1261
Addition on account of forfeiture of advance - nature of expenses - HELD THAT:- In order to claim deduction, the assessee has to satisfy requirements of Section 37(1) of the Act, which lays down several conditions, such as-the expenditure should not be in the nature described under Section 30 to 36; it should not be in the nature of capital expenditure; it should be incurred in the previous year; it should be in respect of business carried by the assessee; and be expended wholly and exclusively for the purpose of such business.
The assessee is a company which is engaged in the business of real estate. The main object of the business of the company is development of real estate. It made a payment of ₹ 3.50 crores as advance to HDIL for purchase of land to construct commercial complex for the development of real estate. Since it did not make payment of the balance amount - for whatever reason, the advance given was forfeited. In this view of the matter, the advance given in the ordinary course of business has been rightly treated as loss incurred by the company.
We are unable to find any material on record to suggest to the contrary. In view of the aforesaid factual findings, the treatment given to the forfeiture of advance ₹ 3.50 crores could not be categorised as capital expenditure. Therefore, the question of law urged by the appellant does not arise for consideration, as the issue is factual.
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2019 (12) TMI 1260
Addition of provision for leave encashment for computing ‘book profit’ under Sec.115JB - HELD THAT:- As decided in BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX [2000 (8) TMI 4 - SUPREME COURT] provision for meeting the liability for encashment of earned leave by the employees is not a contingent liability and is admissible as a deduction. On the basis of our aforesaid observations, we are of the considered view, that as the provision for leave encashment had been made by the assessee on actuarial basis, therefore, the same being in the nature of an ascertained liability could not have been added by the A.O for the purpose of determining the ‘book profit’ under Sec. 115JB of the Act. As such, the Ground raised by the assessee is allowed.
Addition of the provision for Wealth Tax for computing the ‘Book Profit’ under Sec. 115JB - HELD THAT:- On a perusal of Sec. 115JB of the Act, we find, that an addition to the ‘book profit’ which during the period relevant to the year under consideration was computed as per Part II of Schedule VI of the companies Act, 1956 could be made only if the same was permissible as per Item No. (a) to (k) of the Explanation to Sec.115JB. As contemplated in clause (a) of the ‘Explanation’ to Sec. 115JB “the amount of Income tax paid or payable, and the provision therefor” was liable to be added for computing the ‘book profit’ under Sec.115JB of the Act. However, as there was no such provision for making the addition with regard to wealth tax, therefore, the A.O could not have added the same for computing the ‘book profit’ of the assessee company under Sec.115JB of the Act. Our aforesaid view is fortified by the order in the case of JCIT Vs. Usha Martin Industries Ltd. [2006 (12) TMI 171 - ITAT CALCUTTA] . As such, not being in agreement with the view taken by the lower authorities, we direct the A.O to rework the ‘book profit’ under Sec. 115JB after deleting the provision for wealth tax. The Ground of appeal No. 7 is allowed.
Addition of the difference between the payment of net present value as against the future liability relating to deferred Sales Tax - HELD THAT:- The obligation of the assessee to remit to the government the sales tax amount already recovered and collected from the customers was in no way wiped out or diluted. In fact, the obligation of the assessee remained as such. As observed by us hereinabove, as per the scheme introduced by the sales tax department all that had happened was that the assessee was given an option to make a premature payment and obtain a discharge of its liability by paying the amount at its net present value. As such, it can safely be concluded that the assessee had not benefitted within the meaning of Sec.41(1) of the Act.
In our considered view though the government may have received a higher sum after certain years, however, receipt of the said payment from the assessee prematurely can in no way be construed or characterized as a remission or cessation of the liability of the assessee towards the State Government. Our aforesaid view that the difference between the payment of ‘net present value’ as against the ‘future liability’ under the sales tax deferred scheme of the government cannot be brought to tax under Sec.41(1) of the Act, is supported by the judgement in the case of CIT Vs. Sulzer India Ltd. [2014 (12) TMI 267 - BOMBAY HIGH COURT] . Accordingly, on the basis of our aforesaid observations, we ‘set aside’ the order of the CIT(A) and vacate the addition - Decided in favour of assessee.
Addition made on account of compensation for land acquisition - HELD THAT:- As the A.O had overlooked the fact that the aforesaid compensation received by the assessee was duly accounted for and formed part of the sales of the assessee for the year under consideration, therefore, he had erroneously assessed the same as the undisclosed income/receipts in the hands of the assessee. Nothing has been brought to our notice by the ld. D.R, which could persuade us to conclude that the aforesaid observation of the CIT(A) suffered from any perversity. Accordingly, finding no infirmity in the view taken by the CIT(A), who in our considered view had rightly vacated the aforesaid addition
Addition of the amount collected by the assessee from the flat purchasers towards maintenance of the society - CIT-A deleted the addition - HELD THAT:- Assessee at the time of handing over the maintenance work of the building to the aforesaid housing society had parted with an amount of ₹ 1,96,224/-, while for the balance unutilised amount of ₹ 30,34,526/- that was still lying with it was acknowledged as an outstanding liability. In our considered view, part of the aforesaid amount which was collected by the assessee company from the flat owners was utilised for payment of taxes and maintenance of the building, while for the balance unutilised amount that was admittedly acknowledged by the assessee as an outstanding liability was ultimately to be handed over to the housing society at the time of final settlement of accounts. In fact, the assessee company had duly reflected the balance amount of ₹ 30,34,526/- i.e the amount outstanding towards the housing society as a liability in its ‘books of accounts’. In the backdrop of the aforesaid facts, we find ourselves to be in agreement with the view taken by the CIT(A) that the amount collected by the assessee company from the flat owners for the purpose of maintenance of the building and payment of taxes etc. could not have been assessed as its income for the year under consideration. Accordingly, finding no infirmity in the view taken by the CIT(A), we uphold the same.
Provision written back by the assessee - CIT-A deleted the addition - HELD THAT:- In sum and substance, the aforesaid provisions were not claimed as a deduction by the assessee in the preceding years. We find that the aforesaid factual position as had been canvassed by the assessee was verified by the CIT(A), and found to be correct. In fact, the said factual position has also not been disputed by the ld. D.R before us. We are in agreement with the view taken by the CIT(A) that now when the assessee had not claimed the provision made for doubtful debts and advances as a deduction in the preceding years, the same at the time of its being ‘written back' in the subsequent year i.e the year before us, could not have been added to its total income. Accordingly, finding no infirmity in the view taken by the CIT(A), we uphold the deletion of the addition
Addition of sum received by the assessee from M/s Durable Trading Company Pvt. Ltd. - HELD THAT:- Payment of 80% of the fees received by the assessee company to the flat owners association/housing society had also been accounted for in its ‘books of accounts’. Further, the expenditure incurred by the assessee out of the aforesaid amount is also borne out from its accounts. In our considered view, the CIT(A) has rightly observed that the A.O had overlooked the factual position and had on the basis of misconceived facts made the aforesaid addition in the hands of the assessee. Accordingly, finding no infirmity in the view taken by the CIT(A), who had rightly vacated the additionwe uphold his order to the said extent.
Deletion of the amount receivable by the assessee from Kalpataru Homes - HELD THAT:- We have given a thoughtful consideration to the aforesaid issue and are in agreement with the view taken by the CIT(A) that the amount could not have been held as the income of the assessee. As is discernible from the orders of the lower authorities, the aforesaid amount outstanding was on account of realisation of debtors.
Accordingly, we are persuaded to subscribe to the view taken by the CIT(A), that as the aforesaid amount which was to be realised was generated over the years by the assesee and had been offered to tax, therefore, no addition as regards the same was called for in its hands. Accordingly, finding no infirmity in the view taken by the CIT(A) we uphold the deletion of the addition. The Ground of appeal No. 5 is dismissed.
Provision of doubtful debts written back (for determining ‘book profit’ under Sec.115JB - HELD THAT: - . As can be gathered from the orders of the lower authorities, the A.O while computing the ‘book profit’ under Sec. 115JB had included the amount of provision for doubtful debts to the extent the same had been ‘written back’ by the assessee. As observed by the CIT(A), since the assessee had already added back the provision in the earlier years and credited the same in the year under consideration, therefore, the same could not have been added for the purpose of computing the ‘book profit’ under Sec. 115JB
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2019 (12) TMI 1259
Unexplained cash credit u/s 68 - Unexplained cash credit - Scope of primary onus - HELD THAT:- In the case of NRA Iron & Steel (P.) Ltd. [ 2019 (3) TMI 323 - SUPREME COURT ] the issue for consideration is where share capital/premium is credited in the books of account of the assessee-company, the onus of proof is on the assessee to establish by cogent and reliable evidence the identity of the investor companies, the creditworthiness of the investors and genuineness of the transaction to the satisfaction of the Assessing Officer.
As mentioned earlier, there are deposit and withdrawal of the same amounts, leaving meagre balance in the account of M/s Prime Properties Pvt. Ltd. and no balance in the accounts of the assessee-company. Therefore, relying on the ratio laid down by the Hon’ble Supreme Court in NRA Iron & Steel (P.) Ltd. (supra), we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make an order afresh, after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. - Decided in favour of assessee.
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2019 (12) TMI 1258
TP Adjustment - benchmarking the international transactions of the assessee by adopting the PLI of OP/VAE - TPO/DRP were in error in rejecting the PLI of OP/VAE adopted by the assessee and substituting the same by PLI of OP/TC - HELD THAT:- As in the case before us the costs pertaining to the services obtained by the assessee from the third parties viz. shippers/airliners, clearing and forwarding agents, transport service provider etc. neither involved any service element of the assessee nor the assessee had carried any risk or employed any of its assets with respect to the same, therefore, inclusion of the freight cost in the total cost base of the assessee by the TPO was not permissible. We thus are persuaded to subscribe to the claim of the assessee that the TPO/DRP were in error in rejecting the PLI of OP/VAE adopted by the assessee and substituting the same by PLI of OP/TC. As such, we herein restore the matter to the file of the A.O/TPO for the purpose of benchmarking the international transactions of the assessee by adopting the PLI of OP/VAE. Grounds of appeal Nos. 1, 3.1 and 3.2 are allowed in terms of our aforesaid observations.
Adoption of PLI of OP/TC by the TPO - As the segmental information was accepted by the TPO and the same was not the subject matter of dispute before the DRP, therefore, in the backdrop of the fact that the segmental accounts alongwith the accounts formed part of the submissions filed by the assessee with the TPO, the DRP was in error in not considering the said segmental information while passing the order. In fact, the DRP had absolutely proceeded with on the wrong premises that the aforesaid information was not provided by the assessee. As can be gathered from the records, not only the DRP had failed to consider the segmental information as was provided by the assessee with the TPO, but in fact had never raised the issue as regards the segmental accounts in the course of the proceedings before it. Rather, we are in agreement with the contentions advanced by the ld. A.R that now when the DRP as per the mandate of Sec. 144C(6)(e) while issuing the direction was obligated to consider the records relating to the ‘draft order’, therefore, it was incorrect on its part to have drawn adverse inferences as regards the segmental information of the assessee company bypassing the fact that the complete details as regards the same formed part of the record of the A.O. Be that as it may, in our considered view, as we have upheld the adoption of PLI of OP/VAE by the assessee, therefore, we refrain from adverting to and therein adjudicating upon the observations of the DRP which have been recorded while upholding the adoption of PLI of OP/TC by the TPO.
Inclusion/exclusion of comparables - Referring to Information technology related support services provided by the assessee to its AEs companies functionally dissimilar with that of assessee need to deselected.
Entitlement of the assesses towards claim of depreciation on intangible (i.e goodwill) is squarely covered by the orders of the coordinate benches of the Tribunal in the assesses own case for A.Y. 2008-09, A.Y. 2009-10 and A.Y 2012-13. Accordingly, finding no reason to take a different view, we respectfully follow the view taken by the Tribunal as regards the entitlement of the assessee towards claim for depreciation on intangibles (i.e goodwill) during the year under consideration i.e A.Y. 2010-11.
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2019 (12) TMI 1257
Addition on account of cash deposits in the personal saving bank account of the shareholder of the company - Addition u/s 2(22)(e) or 68 - HELD THAT: - We find that it is not the case of the AO that cash deposits in saving bank account with Axis Bank has been not made out of cash in hand balance available with M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. in which the assessee was director. We find that the cash book of the company is reflecting day to day cash receipts, out of said cash balance, the cash deposits were made in the impugned bank account. This view is also supported by the facts that the AO has without prejudice, also observed that the addition should be considered u/s. 2(22)(e) of the Act as the assessee has received cash loan from the company in which he had substantial interest and shareholding
CIT (A) was not justified in sustaining the addition, when the AO was not certain under which head the addition should be made. This means to the AO was some what agreed that cash deposits in said bank account are out of cash in hand available with the said company.
AO did accept that the bank opened in pertained to M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. On careful consideration of facts, we are of the view that cash deposits in bank account are out of cash in hand belonging to M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. hence, source of cash deposits are duly explained and same pertained to the company as as the source of cash deposits are from cash in hand of the impugned company.in such circumstances, we are of the view that the AO was not justified in making addition without bringing on record to establish that there was no cash in hand balance was available with said company. Therefore, having not done so the AO cannot added the sum belonging to company. Therefore, we hold that the addition made by the AO and sustained by the CIT (A) by invoking section 69 is not tenable in law, hence, same is deleted. - Decided in favour of assessee.
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2019 (12) TMI 1256
Benefit of exemptions u/s.11 denied - charitable activity u/s 2(15) - assessee is registered u/s.12A - whether the assessee trust is entitled to exemption u/s 11 & 12 of the Act on surplus arising from carrying out planned development of areas as defined and designed by the Government of Gujarat and for carrying out infrastructural activities relating thereto such as construction of roads, bridges, drainage systems, water connection etc. for the benefit of public at large? - HELD THAT:- The main object of the assessee is contribution towards planned and controlled development for the entire urban development area and such activity falls under the category of 'advancement of general public utility. When the activities of the assessee can be said to be in the nature of trade, commerce and business, considering the proviso to Section 2(15), the activities of the assessee cannot be said to be for charitable purpose.
We find that the issue is no longer res integra. The Hon’ble Gujarat High Court in the case of AUDA [2017 (5) TMI 1468 - GUJARAT HIGH COURT] itself has adjudicated the issue in favour of the assessee. The CIT(A) has taken cognizance of the binding decision of the Hon’ble Gujarat High Court in great length and has rightly reversed the action of the AO and held that the assessee is entitled to the relief claimed. We find no error in the order of the CIT(A) in view of the decision rendered in AUDA by the Hon’ble Gujarat High Court. We therefore decline to interfere with the order of CIT(A). - Decided against revenue
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2019 (12) TMI 1255
Revision u/s 263 - whether the AO has made enquiries about cash deposit capital gains bonds and land investment? - HELD THAT:- AO had not made detailed enquiries and with applying his mind accepted the claim cash deposit, capital gains bonds and investment. The perusal of the assessment order shows that it is very short and does not demonstrate or show that any enquiry were made and taken to logical end. Therefore, we find that twin conditions are satisfied for invoking the jurisdiction under section 263 of the Act. Therefore, in absence of the same the ld. CIT was correct in exercise the jurisdiction under section 263 of the Act and setting aside the assessment to be made afresh after giving proper due opportunity that the assessee. Accordingly, we upheld the order passed us 263 of the Act. Accordingly, the appeal of the assessee is dismissed.
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2019 (12) TMI 1254
Exemption u/s 54F for the investment made in the residential bungalow - builder has delayed the construction - HELD THAT:- Admittedly, the property was finally acquired by the assessee as evident from the copy of the sale deed which is available on record. Now the question arises whether the assessee can be denied the benefit of the provisions of section 54F of the Act in a situation where the builder has delayed the construction. It is also not in dispute that the payment for the purchase of the property was made well within the time specified under section 54F of the Act.
In our considered view, in a situation as in the case on hand the assessee cannot be denied the benefit of exemption merely on the ground that the construction was not completed within the time. In this regard we find support and guidance from the judgment of Hon’ble Karnataka High Court in the case of CIT versus Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT]
Revenue in the case of the co-owner as discussed above has accepted the claim made by the assessee in the assessment framed under section 147 read with section 143(3) of the Act. The courts have held that once the claim in the case of the co-owner has been accepted then such claim/benefit cannot be denied in the case of other coowner.
We hold that the impugned transaction cannot be treated as colourable device adopted by the assessee to escape from the income tax liability. Accordingly we are of the opinion that the principles laid down in the case of McDowells [1985 (4) TMI 64 - SUPREME COURT] cannot be applied in the case on hand. In view of the above, the ground of appeal of the assessee is allowed.
Addition on account of cash deposited in the bank - HELD THAT:- Cash withdrawal from the bank has not been doubted by the authorities below.
Similarly nothing has been brought on records suggesting that the cash withdrawn from the bank has been utilized for some other purposes other than the deposit of cash as alleged by the authorities below. The onus was of the Revenue to reject the contention of the assessee based on cogent reasons that the cash was not deposited out of the cash withdrawal from the bank. But the Revenue failed to do so. Thus in the absence of any documentary evidence, we can safely presume that the cash withdrawn from the bank was available with the assessee which was subsequently deposited with the bank. Therefore, we cannot treat the same as undisclosed income of the assessee.
We are of the opinion that there cannot be any addition on account of deposit of cash in the saving bank account of the assessee by treating the same as undisclosed income. Hence the ground of appeal of the assessee is allowed
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2019 (12) TMI 1253
Cessation of liability u/s 41(1) - A.O. has observed that assessee could not bring any confirmation from the creditors nor could it produce supporting evidences to prove the liability in respect of balance creditors - CIT-A deleted the addition - HELD THAT:- Assessee company was engaged in the business of manufacture of dyes, intermediates. But it became defunct and not carried out any business operations since March, 2005. There being no business activity, there was no income or expenditure, it was submitted to the A.O. also that the liability was on account of money payable to the creditors in respect of goods and services supplied by them prior to March, 2005 and that during the year under consideration, there has been no cessation or remission of any trade liability and that the appellant has not obtained any benefit either in cash or otherwise on account of cessation or remission of trading liability. Case followed DATTATRAY POULTRY BREEDING FARM PVT LTD. [2019 (4) TMI 1171 - GUJARAT HIGH COURT] and BHOGILAL RAMJIBHAI ATARA [2014 (2) TMI 794 - GUJARAT HIGH COURT] - Decided in favour of assessee.
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2019 (12) TMI 1252
Deemed dividend u/s 2(22)(e) - HELD THAT:- The requisite condition for invoking section 2(22)(e) of the Act is that the payment must be by way of loan or advance. “Loans/Advances carries different connotation than deposits in commercial parlance. And the ICD is ordinarily for an agreed period with an agreed interest. Hence there is a clear distinction between ICD vis a vis loans/advances and as the ICD does not fall within the purview of section 2(22)(e). In the present case, there is no case of deemed dividend.
To further support of its contention for non-applicability of Section 2(22)(e), ld. A.R. cited a judgment of Jurisdictional High Court in the matter of CIT vs. Daisy Packers (P.) Ltd. [2015 (7) TMI 253 - GUJARAT HIGH COURT] wherein held where assessee had received a deposit from a company but it did own any share of said company, said deposit was an inter-corporate deposit and could not be treated as deemed dividend.
More over assessee is neither a registered shareholder nor a beneficial shareholder of the lender company (JPIL).
A.R. cited an order in the matter of CIT vs. Impact Containers (P.) Ltd. 367 ITR 346 [2014] (Bombay) wherein it is held that the deemed dividend u/s. 2(22)(e) can only be assessed in the hands of a person other than the shareholder who is a shareholder of the lender company and not in the hands of a person other than shareholder.
CIT(A) has passed reasoned order and same does not require any kind of interference at our end. Appeal filed by the Revenue is dismissed.
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2019 (12) TMI 1251
Disallowance of Event Management Expenses - eligible for deduction u/s 37 - HELD THAT:- From the preceding discussion, there is no ambiguity in the genuineness of the expenses incurred by the assessee. As such, there was no evidence brought on record suggesting that the impugned expenses were in the nature of bogus expenses. Onus lies on the assessee to justify the expenses incurred by it by furnishing the details as desired by the authorities below.
CIT (A) we note that the learned CIT (A) agreed that such expenses were incurred in connection with the business of the assessee.
Assessee failed to furnish the following detail - Details of the invitees,The procedure adopted for selecting invitees, There is no evidence on record suggesting that there was no personal guest of the directors in such event/gathering.
CIT (A) made the disallowance to the tune of 50% of the total event management expenses. To our mind, it was the onus of the assessee to furnish at list of the invitees but the learned AR before us has not brought anything on record. In fact, in such kind of business gathering the companies keep a database of the parties who attended the function. This database is crucial for the company which can be utilized in connection with the activity carried on by it.
Assessee failed to furnish such details which creates suspicion in the mind so as to whether the impugned expenditure was incurred in connection with the business. Indeed, it appears that the assessee has earned handsome/attractive margin on the sale of shop/office but that is not the criteria laid down under the provisions of section 37 of the Act for the deductibility of the expenses. Thus in the absence of sufficient documentary evidence as discussed above, we are not inclined to reduce the disallowances to the extent of hundred percent but in the interest of justice and fair play, we limit the disallowance to the extent of 25% of the total expenses. Thus the assessee gets the relief in part. Hence the ground of appeal of the assessee is partly allowed.
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2019 (12) TMI 1250
Addition u/s 68 - Assessment of HUF - AO felt that the money of assessee is routed through assessee’s-HUF and the amount is concealed income - HELD THAT:- HUF has filed its return of income for the AY.2012-13 and the CPC, Bengaluru has processed the return also on 14-05-2013. It is not known under which provisions or proceedings, the AO has issued notice dt.13-10- 2014, requiring the assessee to explain the sources for the deposits in cash to the assessee in HUF status. Assessee has also filed reply and the acknowledgment of the ITO, Ward-I, Proddatur is also available on the said copy.
After that date, no action has been taken by the ITO, Proddatur and therefore it is to be deemed that the AO/ITO was satisfied with the explanation given by the assessee-HUF. Once the AO of the assessee-HUF has accepted the source for the deposits made into its accounts, the creditworthiness of the HUF has been accepted by the ITO and therefore, the same cannot be doubted in the hands of the individual. In view of the same, inclined to delete the addition - Decided in favour of assessee.
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2019 (12) TMI 1249
Bogus sale - allegations based on sales tax search / investigation proceedings - Sale price higher than the price recorded in the books on account - unaccounted sale to the petrol pump owners/other industries - rejection of books of accounts - CIT (A) restricted the addition made by the AO with respect to the sale of the product solvent as diversion of sale to the patrol pump owners - Whether the assessee was engaged in the activity of diverting the sale of its products to the patrol pump owners/ for non-industrial use in the garb of supplying the products to the parties ? - HELD THAT:- Assessee is involved in only solvent product for diverting the same to the petrol pump owner/ non-industrial use. The Ld. DR at the time of hearing has not controverted the finding of the Ld.CIT (A). Therefore we are of the view that the dispute revolves to the extent of the sale of the product namely solvent.
AO if the was to involve all the parties to whom the assessee has made sales, then he has to bring sufficient evidences justifying the diversion of the sale to the petrol pump owners. Indeed, the notices remained un-served but that cannot be conclusive evidence in the given facts and circumstances that the sales have been diverted. As such, if the sales had not been made to the concerned parties, then the onus shifts on the Revenue to prove based on cogent materials that the sales was made to the petrol pump owners/other industries. We also find that there was no mention of any petrol pump owner/other industry to which the sale was made. Even, there was not issued any notice to the petrol pump owners.
There was no information available from the authorities below that the assessee or its directors have made some unaccounted investments or has incurred some expenditure outside the books of accounts. The income of the assessee can be determined based on assets or the expenditure. There is no information about any undisclosed investments or unexplained expenditure. Thus, even if the real income theory test is applied in the case on hand, we note that the revenue has not brought anything on record about the investment made by the assessee/its directors or there was incurred any expenses by the assessee/its directors.
We note that there was no exercise carried out by the revenue to arrive at the conclusion that the assessee has diverted its product to the petrol pump owners/other industries despite having the information in hand. As such the entire addition was based on the investigation carried out by the district supply team/crime branch etc.
There was a search by the sales tax department dated 16 February 2000 wherein it was alleged that the assessee is making sales within the state of Gujarat in actuality but it was showing in the books of accounts as interstate sale in order to avoid the tax liability. As such the rate of tax for the interstate sale under CST Act is 2% on furnishing of form C by the party to the assessee whereas the rate of sales tax on local sale i.e. within the estate was ranging from 12 to 14% of the sale value. As such, we note that there was no allegation about the sale price charged by the assessee from the parties. Thus, the sale price declared by the assessee was accepted by the sales tax department except the ad hoc addition by the sales tax department for the assessment year 2000-01. Indeed, such ad hoc addition represents the enhanced value of sale price, but it was never compared with the price of the patrol.
It was the question of fact before the revenue to find out that the assessee has diverted the sales to the petrol pump owners/other industries which is possible to decide on the basis of documentary evidence. But the revenue has not brought necessary tangible materials in support of his claim. Thus in our considered view, the addition made by the authorities below is not sustainable in the absence of sufficient documentary evidence
We note that there is no iota of evidence available with the revenue that the assessee has charged any amount over and above the invoice value. Thus we decide the issue in favour of the assessee and against the revenue. Hence the ground of appeal of the assessee is allowed whereas the ground of appeal of the revenue is dismissed.
Addition on account of mismatch in the account of the parties (creditors) - difference in the amount of purchases shown by the assessee viz a viz the sales shown by the parties namely HPCL - HELD THAT:- In the absence of documentary evidence, we are of the view that the amount of gross profit will only be subject matter of addition with respect to such unaccounted transaction. It is undoubtedly a business transaction. Hon’ble Gujarat High Court in the case of CIT vs. President Industries . [1999 (4) TMI 8 - GUJARAT HIGH COURT] has directed to make the addition only to the extent of gross profit.
Addition of the gross profit to the total income of the assessee on account of such purchases will meet the end of justice. However, in the case on hand, we note that the assessee has already been alleged by the district supply department to have made sales at a higher price by diverting to the petrol pump owners/for non-industrial use as discussed in the ground No. 1. The matter is still pending before the competent court of law. Therefore we are of the view that, it will be difficult to find out the exact amount/date of gross profit embedded in such transaction of unaccounted purchase. However, to put a full stop on the ongoing dispute, we feel that an addition to the extent of 25% of such unaccounted purchases will meet the end of justice. In view of the above, we direct the AO to make the addition of the amount being 25% of such unaccounted purchases
Addition on account of preoperative expenses u/s 35D - HELD THAT:- A plain reading of the above order shows that the AO as already allowed the claim of the assessee on account of preoperative expenses by amortizing over a period of 10 years. Thus, the amount to the extent of ₹ 3,64,917/- is arising from the earlier year as discussed above. Therefore, we grant the relief to the assessee to the extent of ₹ 3,64,917/- being the amount brought forward from the earlier year. Accordingly, we reject the claim of the assessee for the balance amount of ₹ 6,11,284/- only. Hence the ground of appeal of the assessee is allowed in part.
Addition on account of foreign travelling expenses - HELD THAT:- As assessee conceded that the impugned issue can be decided against the assessee. Therefore, we reject the ground of appeal of the assessee
Disallowance of personal expenses - HELD THAT:- There is ambiguity to the fact that the onus lies on the assessee for claiming the deduction of any expense under section 37(1) of the Act. However, the assessee failed to furnish the supporting evidence for the expenses incurred by it. Therefore we decline to interfere in the finding of the authorities below. Hence the ground of appeal of the assessee is dismissed.
Non-inclusion of excise duty in the closing stock of finished goods - HELD THAT:- provision of section 145A of the Act requires the assessee to include the amount of excise duty while valuing the closing stock of the finished goods as on 31st March 1998. However, the deduction for the same is allowed if such excise duty was paid by the assessee on or before filing the income tax return before the due date as specified under section 139(1) of the Act. The Ld. CIT(A) has given very clear finding that the amount of excise duty was paid on or before the due date of filing the income tax return. Thus in other words even the amount of excise duty not included in the value of closing stock, then also the assessee was entitled for the deduction of such payment of excise duty under the provisions of section 43B of the Act. Accordingly there was no impact on the taxable income of the assessee. Accordingly we do not find any reason to interfere in the order of the Ld. CIT (A). Hence the ground of appeal of the Revenue is dismissed.
Disallowance on account of prior period expenses - assessee submitted that some of the expenses are allowable as deduction under section 43B - HELD THAT:- The impugned issue is covered in favour of the assessee by the order of Bombay High Court in the case of CIT v. Nagri Mills Co. Ltd. [1957 (9) TMI 30 - BOMBAY HIGH COURT] - there is no ambiguity that such expenses were incurred for the purpose of the business. Therefore in our considered view, applying the principles of Bombay High Court as discussed above, we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition made by him
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2019 (12) TMI 1248
Assessment of goodwill under the head capital gain - capital asset within the meaning of Section 2(14) - HELD THAT:- Assessee is an individual who was engaged in the business of mining in the state of Jharkhand for over 40 years. The assessee had therefore garnered substantial experience, reputation and credentials in the business of mining which was a valuable intangible asset. M/s GEMPL had sought to use the name and credentials of the assessee to pursue its object of conducting mining activities in Jharkhand. Although, the assessee continued to use his name in his personal business but he had transferred partial right to GEMPL permitting them to use his name and credentials as a part the company. In the circumstances the receipt of ₹ 75,00,000/- was towards transfer of goodwill which is a capital asset within the meaning of Section 2(14) of the Act and therefore transfer of such capital asset was rightly offered to tax u/s 45 of the Income Tax Act by the assessee.
Considering all we are of the view that the amount received by the assessee on account of goodwill is a capital asset and liable to tax under the head capital gain. Therefore, we direct the Assessing Officer to assess the goodwill under the head capital gain. - Decided in favour of assessee.
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