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2021 (12) TMI 1438 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI
Sanction of Scheme of Amalgamation - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and does not violate of any provisions of law and is not contrary to public policy.
Since all the requisite statutory compliances have been fulfilled, the CP(CAA) No.171/MB-V/2021 is made absolute in terms of prayer made in the Company Scheme Petition - Scheme is hereby sanctioned with the Appointed Date of 1st April 2021.
Application disposed off.
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2021 (12) TMI 1437 - ITAT CHANDIGARH
Loss in trading of cotton cloth - Classification of sale account of raw cotton - AO was of the view that the assessee had failed to explain the claim of wrongly classified sale of cotton cloth - assessee could not substantiate the wrong posting in the sale account so as to justify the loss in the sale of cotton cloth (as was computed by the AO) - HELD THAT:- It cannot be said that no documents or evidences were furnished by the assessee. We have also gone through the Certificate dated 27.3.2021 issued by M/s S. Karan Shama & Co. , C.As, Ludhiana placed at page 8 of the paper book in which certain quantitative details pertaining to the cotton cloth and raw cotton have been certified. Apparently this Certificate was neither before the Assessing officer and nor before the Ld. CIT(A) and the assessee has filed it in the paper book for the first time before us. We also note that there is no application on behalf of the assessee to admit this Certificate as additional evidence.
Thus in the absence of such application for admitting of additional evidence, the same cannot be admitted for consideration by us.
Thus although the assessee could not explain the claim of wrong posting at the time of assessment proceedings or first appellate proceedings but had duly furnished the relevant documents coupled with the settled principle that tax should be levied only on the correct amount of income, and also in the interest of substantial justice, we restore this appeal to the file of the Ld. CIT(A) with a direct ion to adjudicate the issue afresh - Appeal of the assessee stands allowed for statistical purposes.
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2021 (12) TMI 1436 - GOVERNMENT OF INDIA
Rejection of rebate claim - rejection on the grounds that the Applicants had not filed prior declaration in terms of para 3.1 of the notification dated 20.06.2012 - revision application claims that delay in filing of prior declaration is at best a procedural delay and, accordingly, rebate should not be denied - HELD THAT:- In terms of rule 6A, the rebate of service tax, paid on providing services that are exported shall be allowed subject to such “safeguards, conditions and limitations”, as may be specified. Further, on a plain reading, the provisions of para-3.1 of the notification no. 39/2012-ST relating to filing a prior declaration, i.e., a declaration prior to the date of export of service, read with para- 3.2, are in the nature of Safeguards in as much as filing of the prior declaration enables the department to cause necessary verification, so as to satisfy itself that there is no likelihood of evasion of duty, service tax and cess, as the case may be - In the present case, therefore, by not filing the prior declaration, the Applicant has circumvented the safeguards subject to which the rebate is to be allowed in terms of rule 6A. As the sanction of rebate is subject to observance of the safeguards in para 3.1 and as, in the present case, these safeguards have not been observed, the rebate is not admissible.
The Hon’ble Supreme Court, in the case of GOVERNMENT OF KERALA & ANR. VERSUS MOTHER SUPERIOR ADORATION CONVENT [2021 (3) TMI 93 - SUPREME COURT], has, after noting the judgment in COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY & ORS. [2018 (7) TMI 1826 - SUPREME COURT], clarified that in case any ambiguity arises in construction of a beneficial exemption, the benefit of such ambiguity should be granted in favour of what is exempted - In the present case, there is no ambiguity whatsoever regarding the provisions of para 3.1. Therefore, the judgment in Mother Superior case is of no assistance to the Applicants herein. The Applicants are clearly in default of the safeguards specified under notification no. 39/2012-ST and have failed to discharge the burden of proving applicability, as required in terms of Dilip Kumar & Company.
The revision application is rejected.
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2021 (12) TMI 1435 - ITAT DELHI
Addition on account of consumption debtors - HELD THAT:- This Tribunal in the [2019 (4) TMI 204 - ITAT DELHI] for Assessment Years 2008–09 and 2009–10 has considered a similar quarrel on identical set of facts and has decided the issue in favour of the assessee.
Disallowance u/s 14A - HELD THAT:- The undisputed fact is that the assessee has earned exempt dividend income of Rs.18, 521/– only. But when the assessee filed return of income, the decision of the Hon'ble Delhi High Court [2015 (3) TMI 155 - DELHI HIGH COURT] was not available with the assessee. The Hon'ble High Court has restricted the disallowance to the extent of exempt income.
Similar view was taken in the case of Caraf Builders and Construction [2018 (12) TMI 410 - DELHI HIGH COURT]. Since now we have the binding decision of the Hon'ble Jurisdictional High Court of Delhi we direct the Assessing Officer to restrict the disallowance to the extent of exempt income - Ground of the assessee is allowed.
Disallowance towards leave and encashment u/s 43B - assessee claimed that claim of leave encashment on accrual basis - HELD THAT:- We have carefully perused the orders of this Tribunal in [2021 (12) TMI 441 - ITAT DELHI] as relying on Apex Court in case of Exide Industries [2020 (4) TMI 792 - SUPREME COURT] held that the claim with regard to leave encashment has to be allowed on cash basis i.e. actual payment basis and not on accrual basis. we direct the Assessing Officer to verify and allow the deduction u/s 43B on actual payment basis as held in the decision of the Hon’ble Apex Court. Ground allowed for statistical purposes.
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2021 (12) TMI 1434 - ITAT AMRITSAR
Assessment u/s 153A - addition qua unabated assessment - incriminating material found during the course of search and seizure or not? - where no assessment proceeding for the year under consideration is pending, in that eventuality, in the absence of any incriminating material found during the course of search and seizure proceedings, whether the addition can be made qua unabated assessment for the said year? - HELD THAT:- Since, the facts of the instant case are exactly identical to the facts of the Smt. Sanjana Mittal Vs. DCIT [2019 (3) TMI 1757 - ITAT AMRITSAR] hence we hold that in the absence of incriminating material, in the case of the appellant assessee, no addition can be made qua unabated assessment for the year under consideration. Appeal of the assessee is allowed.
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2021 (12) TMI 1433 - ITAT AMRITSAR
Assessment u/s 153A - Valid approval accorded u/s. 153D or not? - HELD THAT:- The Co-ordinate Bench in the case of Sh. Madan Lal. [2021 (8) TMI 1336 - ITAT AMRITSAR] as held that approval which is granted in a mechanical, stereotype manner, without assigning any reasons and without considering the draft assessment order is not sustainable in the eyes of law.
Thus where approval u/s.153D has been given in a mechanical manner and without application of mind in such cases assessment proceedings are to be vitiated. Appeals of the Assessee are allowed.
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2021 (12) TMI 1432 - ITAT BANGALORE
Revision u/s 263 - AO had passed an “Order Giving Effect” (OGE) allowing full relief to the assessee - As per CIT allowing relief to the assessee in the OGE without conducting fresh examination as directed by AO and without passing fresh assessment order has rendered the OGE erroneous and prejudicial to the interests of revenue - HELD THAT:- We notice that the Tribunal, vide its order [2016 (10) TMI 1374 - ITAT BANGALORE] has restored following three issues to the file of AO for examining them afresh on Disallowance u/s 14A of the Act, Whether Royalty income is eligible for computing deduction u/s 10A/10AA of the Act and Whether foreign currency expenses should be reduced from export turnover for computing deduction u/s 10A/10AA.
As observed by the Ld PCIT, the AO has failed to pass a fresh assessment order u/s 143(3) r.w.s. 254 of the Act. Instead, the AO has passed an OGE and granted relief to the assessee in respect of all the three issues mentioned above without examining them at all. Thus, granting to relief to the assessee without examining the issues as directed by ITAT and also failure to pass a fresh assessment order u/s 143(3) r.w.s 254 of the Act would definitely render the OGE erroneous and prejudicial to the interests of revenue. Hence we do not find any infirmity in the impugned revision order passed by Ld PCIT.
We make it clear that while giving effect to the revision order passed u/s 263 of the Act by PCIT, the AO is duty bound to follow the binding decision rendered by the Hon’ble jurisdictional Karnataka High Court for AY 2010-11 - Appeal filed by the assessee is dismissed.
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2021 (12) TMI 1431 - DELHI HIGH COURT
Seeking Restitution of Conjugal Rights against the appellant - primary argument of the appellant was that the accumulated evidence supports the finding that the Respondent was/is suffering from “F-20– Hebephrenia” - disease of respondent concealed at the time of marriage - determination of truth - Section 9 of the Hindu Marriage Act - HELD THAT:- The outright refusal of the respondent to undergo any medical examination, prevents the court arriving at the truth. It has been held by the Supreme Court in Kollam Chandra Sekhar v. Kollam Padma Latha [[2013 (9) TMI 1298 - SUPREME COURT]] by relying on the testimony of a doctor that Schizophrenia “is a treatable, manageable disease, which can be put on a par with hypertension and diabetes.” However, the same requires determination by a doctor, and in Dharam Pal [[2003 (3) TMI 739 - SUPREME COURT]] the court has observed that "but it is another thing to say that a party may be asked to submit himself to a psychiatrist or a psychoanalyst so as to enable the Court to arrive at a just conclusion. Whether the party to the marriage requires a treatment or not can be found out only in the event, he is examined by a properly qualified Psychiatrist.” Therefore, in such circumstance determination of truth is an important step for us to enable making of a fair decision.
Marriage is not made of only happy memories and good times, and two people in a marriage have to face challenges and weather the storm together. It is not easy to live with a partner who has mental health issues, and such ailments come with their own challenges for the person facing the problem, and even more so for the spouse. There needs to be an understanding of the problems in a marriage, and communication between the partners– especially when one of the two partners in a marriage is facing challenges of their own. Treatment of any mental ailment requires acceptance of the same, not only by the family members but, most importantly, by the person suffering therefrom.
A combined reading of the evidence as well as the admission of the respondent, even though, may not conclusively prove that the respondent was suffering from Schizophrenia/Hebephrenia- F-20 prior to her marriage, at the time of her marriage, and; subsequent to her marriage, but definitely raises a serious doubt about the mental health of the respondent, and points to the possibility of the appellant‟s allegations in that regard being true.
The Family Court fell in error in rejecting the appellant‟s application. The approach of the Family Court – that the appellant had to fend for himself, and he could not seek a direction from the Court for medical examination of the respondent was erroneous. It is not that this direction was sought by the appellant without any foundation or basis. The appellant had raised a plea that the respondent was suffering from Schizophrenia from day one. The appellant had shown the respondent to several specialists, and the medications prescribed show that they were relevant for treatment of Schizophrenia. The appellant also produced the medical doctors/ specialists and exhibited their prescriptions. The parties lived together for hardly any period, as the respondent was taken away by her father after about nine weeks of marriage from the matrimonial home. The evidence with regard to the respondent‟s medical condition – which related to her mental health, could possibly not have been garnered by the appellant without co-operation of the respondent. Only upon medical examination of the respondent, it could be established, with definiteness whether, or not, she is suffering from Schizophrenia, even though, there were pointers in that direction.
Pertinently, the Respondent could not establish any reason as to why, so early in the marriage, the parties separated, when according to the respondent, there were no serious issues in the relationship. The fact that she sought Restitution of Conjugal Rights itself shows that so far as she was concerned, she had no serious complaints with the appellant; or the relationship - the Family Court was duty bound to direct the medical examination of the respondent. The appellant could not have been left to gather evidence of the respondent‟s mental condition on his own.
The fact that the parties could not live together beyond nine weeks itself shows that the mental disorder suffered by the respondent is of a kind, and to such an extent as to be unfit for marriage and the procreation of children. It is not the case of the respondent that either of the conditions enumerated in Section 12(2)(a)(i), or (ii) exists in the present case, which would have debarred the appellant from seeking annulment of marriage on the ground contained in Section 12(1)(b) of the Hindu Marriage Act. That is not the defence set up by her, or established by her. The failure on the part of the respondent to disclose her mental disorder before her marriage with the appellant – as alleged by him, constituted a fraud perpetrated upon the appellant - the marriage between the appellant and the respondent is annulled on the ground contained in Section 12(1)(b) of the Hindu Marriage Act.
Appeal allowed.
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2021 (12) TMI 1430 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI
Liquidation of Corporate Debtor - seeking directions in the Liquidation Process and Sale of the assets of the Corporate Debtor - Section 33 read with Regulation 32(b) & (e) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- There are no deficiency in the performance of functions of the Liquidator who has acted in accordance with the directions given by this Tribunal and as per the relevant regulations - A key benefit of selling the Corporate Debtor, as a going concern in Liquidation as against other manners of sale is, it can preserve employment while maximising the result of stakeholders. There are merit in admitting sale of the Corporate Debtor as a going concern in this Liquidation Process.
The timelines under Regulation 47 for Liquidation Process, are directory. Procedural law should not be construed as an obstruction but as an aid to Justice. Extension of time under Liquidation may be allowed only on the satisfaction that there exists exceptional circumstances - The Hon’ble Supreme Court in RANI KUSUM VERSUS KANCHAN DEVI & ORS. [2005 (8) TMI 709 - SUPREME COURT] concurring with the ratio laid down in KAILASH VERSUS NANHKU & ORS. [2005 (4) TMI 542 - SUPREME COURT], it was held that A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed.
Section 32(A)(4) should be read together with Section 35(1)(e) and Regulation 47. What is mandated in the Code in Section 35(1)(e) is to carry on business for its beneficial Liquidation. The Regulation therefore cannot override the objective of beneficial liquidation provided for in Section 35(1)(e) of the Code - thus, to achieve Beneficial Liquidation provided for under Section 35(1)(e) and maximisation of the value of assets under Section 53, and having regard to all reasons given below, it is found just & expedient to exercise the inherent powers under Rule 11 of the NCLAT Rules, 2016 to extend the period by six weeks to enable the Liquidator to attempt the Sale as a Going Concern at an appreciable value.
The Liquidator has adhered to the directions of the Tribunal and has acted as per the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. This extension of six weeks is being granted to achieve the objective of ‘Beneficial Liquidation’ and attempt to keep the business of the Company as a Going Concern - Appeal disposed off.
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2021 (12) TMI 1429 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI
Liquidation of Corporate Debtor - HELD THAT:- To achieve Beneficial Liquidation provided for under Section 35(1)(e) and maximisation of the value of assets under Section 53, and having regard to all reasons given below, it is found just & expedient to exercise the inherent powers under Rule 11 of the NCLAT Rules, 2016 to extend the period by six weeks to enable the Liquidator to attempt the Sale as a Going Concern at an appreciable value.
The Liquidator has adhered to the directions of the Tribunal and has acted as per the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. This extension of six weeks is being granted to achieve the objective of 'Beneficial Liquidation' and attempt to keep the business of the Company as a 'Going Concern'. - Appeal disposed off.
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2021 (12) TMI 1428 - ITAT DELHI
TP Adjustment - Corporate Guarantee Fee - assessee had charged guarantee fee of 0.25% - HELD THAT:- We find that identical issue arose in assessee’s own case in A.Y. 2010-11 [2018 (2) TMI 2030 - ITAT DELHI] and the Co-ordinate Bench of Tribunal decided the issue in favour of the assessee.
Transaction of corporate guarantee fee charged at 0.25% by the assessee from its AEs to be at Arm’s Length rate and accordingly deleted the addition made by TPO. Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the aforesaid decision of the Co-ordinate Bench of Tribunal in assessee’s own case for A.Y. 2010-11 & 2012-13 has been stayed/ set aside/ overruled by higher judicial forum. On relying on the decision of the Co-ordinate Bench of Tribunal for A.Y. 2010-11 in assessee’s own case, we hold that the AO was not justified in making adjustment.
Adjustment on account of interest on foreign currency loan u/s 92CA(3) - assessee had advanced loan to its AEs and had charged interest @LIBOR + 224 bps on the advance provided to the AEs - HELD THAT:- We find that identical issue arose in assessee’s own case in A.Y. 2010-11 [2018 (2) TMI 2030 - ITAT DELHI] and the Co-ordinate Bench of Tribunal in assessee’s own case decided the issue LIBOR rate should be used while undertaking the benchmarking analysis in respect of foreign currency loans extended to AE. Well the assessee has charged 250 basis points over an above such benchmark viz. LIBOR. No addition is justified and the entire addition.
Adjustment on account of reimbursement received by the assessee from its AEs - HELD THAT:- It is an assessee’s submissions that the expenses which were reimbursement of all expenditure which were inter alia incurred by the assessee on behalf of the AEs and the same have been reimbursed to the third parties and for which no value addition has been done by the assessee. It is further assessee’s submissions that the reimbursement are on cost to cost basis and transactions were undertaken for commercial expediency and not intended with the expectation of return.
The aforesaid contentions of the AR have not found to be false. We find that in the case of Vedanta Ltd. [2020 (9) TMI 1010 - ITAT DELHI] has held that no mark up is warranted on pass through costs which are inter alia incurred by the assessee and are reimbursement of primary third party expenses initially incurred by the assessee for which no value addition is done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. Before us no material has been placed by Revenue to demonstrate that value addition has been done by the assessee and is not in the nature of reimbursement of primary third party expenses which were initially incurred by the assessee. As in the case of Vedanta Ltd. [2020 (9) TMI 1010 - ITAT DELHI] we are of the view that no addition is called for in the present case. Thus the grounds of assessee is allowed.
Disallowance on brought forward Business Losses - HELD THAT:- The issue in the present ground is with respect to disallowance of brought forward business losses A.Y. 2013-14. Before us, AR has submitted that the appeal for A.Y. 2013-14 is listed before the Tribunal and the decision of the Tribunal is thus awaited. Considering the aforesaid facts, we direct the AO to allow the claim of the losses when the same is finally determined and in accordance with law. Thus the Ground of the assessee is allowed.
Disallowance of depreciation on Goodwill - HELD THAT:- We find that issue of depreciation on goodwill also arose in assessee’s own case in A.Y. 2012-13 [2020 (2) TMI 1485 - ITAT DELHI] and the Co-ordinate Bench of Tribunal by relying on the decision of Hon’ble Apex Court in the case of Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] held that assessee is eligible to claim depreciation on goodwill. However in that order since the claim of depreciation was made as an additional claim before the Tribunal, the matter was remitted to the AO for examination. In the year under consideration, we are of the view that since the claim was already made in the return of income and was denied by AO and DRP, we are of the view that ratio of the decision rendered by Hon’ble Apex Court in the case of Smifs Securities is squarely applicable to the facts of the case. We are therefore direct the AO to grant the depreciation of such goodwill. Thus the ground of assessee is allowed.
Incorrect computation of Book Profit under MAT - disallowance of depreciation on goodwill amounting to Rs.25,53,577/- to work out the adjusted Book Profit - HELD THAT:- We have herein while deciding the Ground have held the depreciation on goodwill as an allowable expenditure. Therefore in such a situation, we are of the view that once the depreciation is held to be an allowable expenditure, same cannot be added to the book profit more so as u/s 115JB the depreciation which is required to be added back to compute book profits is the depreciation as per the books of account and not as per the Income Tax Act. We are of the view that AO was not justified in making addition of depreciation on goodwill to compute the book profits. We accordingly direct the AO to delete the addition made to book profit u/s 115JB - Thus the ground of assessee is allowed.
Claim of deduction u/s 80-IA in respect to Wind Power Plant (WPP) and Captive Power Plant (CPP) - HELD THAT:- We are also find in the case of Mitesh Impex [2014 (4) TMI 484 - GUJARAT HIGH COURT] has held that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the Assessing Officer. It has further held that any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record.
We are of the view that the claim of the assessee of the deduction u/s 80IA merits consideration and adjudication by the AO. We therefore set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also be at liberty of file such documents, explanations and submissions as deemed fit in respect of its claim. Thus the ground of assessee is allowed for statistical purposes.
Additional depreciation u/s 32(1)(iia) - HELD THAT:- It is the case of the assessee that it did not claim the additional depreciation in the return of income but was claimed before the AO but however AO did not discuss the issue and when the matter was carried before the DRP, DRP also did not allow the claim of additional depreciation. We find that identical issue arose in assessee’s own case in A.Y. 2010-11, the claim was allowed in A.Y. 2012-13 - following the reasoning of the Co-ordinate Bench for A.Y. 2010-11 and for similar reasons set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee.
TDS and self assessment tax which was not claimed in the return of income - HELD THAT:- Before us, assessee is seeking the credit for TDS amounting to Rs.2,70,000/- deducted on sale of immovable property and the claim of self assessment amounting to Rs.47,61,334/- which was inadvertently claimed as TDS. Assessee has furnished the copy of the self assessment tax challan in the paper book and the copy of Form 26QB evidencing the deduction of TDS - We find merit in the prayer of Ld AR. We therefore considering the submissions of the Learned AR restore the matter to AO to examine the same as per record and if the claim of the assessee is found to be in order, to allow the claim. Thus the ground of assessee is allowed for statistical purposes.
Deduction of education cess - HELD THAT:- Since the issue being identical to the issue in the case of ExLServices.com (India) Pvt. Ltd [2021 (9) TMI 361 - ITAT DELHI] we therefore for similar reasons hold the expenses on education cess to be allowable and accordingly direct the AO to allow its deduction. Thus the ground of assessee is allowed.
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2021 (12) TMI 1427 - BOMBAY HIGH COURT
Characterization of receipts - entrance fees received from its member - capital receipts or revenue receipts - whether facilities that are made available to the members are done in normal course of its business as the assessee is engaged in the business of race course? - HELD THAT:- ITAT held that there is no dispute to the fact that right from practically the date of incorporation i.e., 1925 onwards, the entrance fee from the members was treated as capital in nature and majority of these orders were passed under Section 143(3) of the Income Tax Act, 1961 - ITAT also relied upon the judgment of this court in CIT vs. Diners Business Services Pvt. Ltd [2003 (4) TMI 56 - BOMBAY HIGH COURT] and held that any sum paid by a member to acquire the rights of a club is a capital receipt. The ITAT has relied upon various receipts and loopholes that the view of the Assessing Officer to treat the entrance fee as revenue receipt and not capital receipt was incorrect.
Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
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2021 (12) TMI 1426 - CESTAT MUMBAI
Availment of CENVAT credit without payment of service tax under reverse charge mechanism - Credit availed not utilised - interest also paid for availment of such irregular credit - penalty u/s 77 and 78 of FA - HELD THAT:- In some months, though the appellant had availed Cenvat credit without payment of service tax under reverse charge mechanism, but such irregularly availed credit was not utilized for payment of service tax and also the appellant had discharged the interest liability for availment of such irregular credit. Since, the appellant had compensated the government exchequer by way of payment of interest on the irregularly availed Cenvat credit for the disputed period, it cannot be said that they are liable for reversal of the entire Cenvat credit. Since the credit availed by the department had not been utilized for payment of service tax on the output service and the appellant had paid the interest amount to compensate the Government Revenue for taking of earlier Cenvat credit, the proceedings initiated for denial of the Cenvat benefit and the recovery of the same should not stand for judicial scrutiny.
Levy of penalty under Section 78 - HELD THAT:- The ingredients mentioned in the statute namely, fraud, collusion, willful misstatement etc. are absent in the present case. Taking on irregular cenvat credit, payment of interest thereon and available cenvat credit in the books of accounts were within the knowledge of the department. Hence, invocation of Section 78 will not hold good for imposition of penalty on the appellant.
Penalty imposed under Section 77 ibid - HELD THAT:- The penalty imposed under Section 77 ibid is justified in the circumstances of the present case. Further, the learned Advocate appearing for the appellant also fairly concedes that the case of the appellant is exposed to the penal consequences provided under Section 77 ibid.
The impugned order, to the extent it upheld the recovery of Cenvat demand along with interest and imposition of penalty under Section 78 ibid is set aside and appeal to such extent is allowed in favour of the appellant.
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2021 (12) TMI 1425 - ITAT CUTTACK
Bogus LTCG - Capital Gains Generated on Sale of Penny Stock - realince on third party information - A.O. has accepted the statements recorded by some other officers of the Department in some unconnected proceeding and believed it as a gospel truth against the Appellant and relying on it proceeded to draw inference against the Appellant - genuineness of claim of Long Term Capital Gain u/s 10(38) of the Act for sale of equity shares of listed companies denied - HELD THAT:- AO failed to perform his twin duties that of the investigator and adjudicator resulting in the additions being vitiated in the process.
The entire disallowances in this case is based on third party information gathered by the Investigation Wing of the Department which have not been independently subjected to further verification by the A.O., who has not provided the copy of such statement to the Appellant, thus denying opportunity of cross-examination to the Appellant, who has prima facie discharged the initial burden, the impugned addition made by the A.O. is not sustainable, thus is directed to be deleted.
In the fact of the present case, save and except relying on the statement of so called entry operators, the Revenue could not bring on record any credible evidence which could show that, the Appellant has routed his unaccounted money in the form of bogus capital gain. The A.O. never examined any one of these persons, whose statement relied upon by him in the Assessment order nor did he grant an opportunity for cross-examination except the bald references to the recorded statement. The Revenue could not bring on record any material which could link the Assessee with any wrong doing. When the learned CIT(A) found that, the A.O. has not followed the due procedure of law as stated in the above paragraph, he rightly deleted the impugned additions.
Assessee should be assessed for the correct income and ignorance if any made by the assessee in filing the return but brought to the notice of the Ld. AO before the conclusion of the assessment proceedings should be entertained and also as per the principle of natural justice if any addition is made on the basis of statement of 3rd party, a proper opportunity of cross examination should be given to the affected party and if the same is not done, action of the Ld. AO making additions cannot be held to be justified.
Exemption u/s 10(38) - As assessee has fulfilled necessary conditions to claim the exemption u/s 10(38) of the Act for the Long Term Capital Gain earned from sale of equity shares of M/s Kailash Auto Finance Ltd. and M/s Lifeline Drugs & Pharma Ltd. Therefore, we hold that the assessee has rightly claimed the exemption u/s 10(38) of the Act before the conclusion of assessment proceedings. We, therefore, find no reason to interfere in the finding of ld. CIT(A) and the same is confirmed.
Assessee appeal allowed.
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2021 (12) TMI 1424 - SUPREME COURT
Condonation of delay of 1011 days in preferring the Second Appeal - Suit for for permanent injunction against the respondents herein (original defendants) - It is submitted that as such no sufficient cause was shown by the respondents herein appellants before the High Court, explaining the huge delay of 1011 days in preferring the Second Appeal - violation of principles of natural justice - HELD THAT:- There is no sufficient explanation for the period from 15.03.2017 till the Second Appeal was preferred in the year 2021 - In the application seeking condonation of delay it was stated that she is aged 45 years and was looking after the entire litigation and that she was suffering from health issues and she had fallen sick from 01.01.2017 to 15.03.2017 and she was advised to take bed rest for the said period. However, there is no explanation for the period after 15.03.2017. Thus, the period of delay from 15.03.2017 till the Second Appeal was filed in the year 2021 has not at all been explained. Therefore, the High Court has not exercised the discretion judiciously.
In the case of P.K. Ramachandran [[1997 (9) TMI 598 - SUPREME COURT]], while refusing to condone the delay of 565 days, it is observed that in the absence of reasonable, satisfactory or even appropriate explanation for seeking condonation of delay, the same is not to be condoned lightly. It is further observed that the law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the statute so prescribes and the courts have no power to extend the period of limitation on equitable grounds. It is further observed that while exercising discretion for condoning the delay, the court has to exercise discretion judiciously.
Considering the averments in the application for condonation of delay, it is opined that as such no explanation much less a sufficient or a satisfactory explanation had been offered by respondent Nos.1 and 2 herein – appellants before the High Court for condonation of huge delay of 1011 days in preferring the Second Appeal. The High Court is not at all justified in exercising its discretion to condone such a huge delay. The High Court has not exercised the discretion judiciously. The reasoning given by the High Court while condoning huge delay of 1011 days is not germane. Therefore, the High Court has erred in condoning the huge delay of 1011 days in preferring the appeal by respondent Nos.1 and 2 herein – original defendants. Impugned order passed by the High Court is unsustainable both, on law as well as on facts.
The impugned order dated 16.09.2021 passed by the High Court condoning the delay of 1011 days in preferring the Second Appeal by respondent Nos.1 and 2 herein is hereby quashed and set aside - Appeal allowed.
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2021 (12) TMI 1423 - ITAT DELHI
TP Adjustment - exclude M/s. Karvy Consultants Limited from the final list of comparables - HELD THAT:- When the Tribunal had given a specific direction in the first round of litigation to exclude all comparables having annual turnover of less than Rs.5 crores in ITeS segment, in our view, the TPO has exceeded his brief in including M/s. Karvy Consultants Ltd. as comparable in spite of the fact that its turnover from ITeS segment is below the threshold limit of Rs.5 crores.
Pertinently, while deciding assesse’s appeal in assessment year 2002-03, the Tribunal [2012 (3) TMI 208 - ITAT DELHI] had excluded M/s. Karvy Consultants Ltd. as a comparable since its turnover from ITeS segment was less than Rs. 5 crores. Thus, in view of the aforesaid, we do not find any infirmity in the decision of the Commissioner (Appeals) in excluding M/s. Karvy Consultants Ltd. as a comparable. Ground raised is dismissed.
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2021 (12) TMI 1422 - ITAT PUNE
TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee as engaged in the business of providing Software Development Services, Provision of Technical Support Services and Provision of Sales and Marketing support services to its Associate Enterprises (AEs) need to be deselected.
Amortization of goodwill as operating expenses while computing the operating margin of provisions of sales and marketing - contention of the appellant before DRP that amortization of goodwill is treated as operating cost depreciation on the same should be allowed as a deduction u/s 32 - HELD THAT:- DRP rejected the claim by returning finding that the amortization of goodwill debited to P&L account was allowed as a deduction and no claim u/s 32 was made in the return of income. No fallacy in the findings of the Hon’ble DRP as the claim for deduction of depreciation only on AO being satisfied with the fulfillment of the condition laid down u/s 32 of the I.T. Act. Thus, we do not find any merit in the ground of appeal no.5 and 6. Accordingly, the ground of appeal no.5 and 6 stands dismissed.
Denying grant of risk adjustments - HELD THAT:- The assessee has not demonstrated as to how the difference in risk undertaken by a bank in advancing a loan to a borrower as compared to the risk involved in a loan advanced by RBI to a bank or by a bank to another bank is similar to the difference between the risk undertaken by the comparable company and the risk undertaken by the assessee. Hence, the difference between the Prime Lending Rate and the Bank Rate cannot be considered as a reliable and accurate measure of the Risk adjustment required to be made. In the absence of a reliable and accurate measure of the risk difference between the assessee and the comparables, no risk adjustment can be granted.
Deduction of education cess from computation of taxable income - HELD THAT:- we note that the assessee paid Education Cess while computing the taxable income under normal provision of the I.T. Act. The Hon’ble High Court of Bombay in the case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] was pleased to hold that the Education Cess is an allowable expenditure as per the provision of the I.T. Act.
Thus the issue of “education cess‟ is an allowable expenditure as per provisions of Section 40(a)(ii) of the Act and placing reliance on the decision (supra.), we direct the Assessing Officer to allow deduction in respect of Education Cess paid by the assessee. Accordingly, the additional ground of appeal no.1 raised by the assessee is allowed.
Levy of interest u/s 234C - HELD THAT:- This additional ground of appeal is consequential in nature. Once the default within the meaning of section 234C takes place, levy of interest is automatic and mandatory, is not open to challenge in the appeal proceedings. Hence, we do not find any merit in the said additional ground of appeal no.2 and the same is dismissed.
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2021 (12) TMI 1421 - ITAT BANGALORE
TP Adjustment - Comparable adjustment - application of turnover filter - HELD THAT:- We hold that the 8 companies listed in Sl.No.(a) to (i) in paragraph -13 of this order, which the assessee seeks exclusion and whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies. This Tribunal in the case of Barracuda Networks India Private Limited [2022 (5) TMI 322 - ITAT BANGALORE] has also reiterated the application of turnover filter on the same lines as indicated above.
This Tribunal in the case of Barracuda Networks India Private Limited [2022 (5) TMI 322 - ITAT BANGALORE] has excluded R.S.Software (India) Ltd., from the list of comparable companies on the ground that the related party transaction of this company was above 15%. Following the said decision, we direct exclusion of R.S.Software (India) Ltd. from the list of comparable companies.
Determining the ALP, the TPO did not allow proper adjustment towards Risk Adjustment, Capacity utilization adjustment and working capital adjustment - We find that identical reasons assigned by the TPO for not allowing working capital adjustment was a subject matter of consideration by this Tribunal in the case of Barracuda Networks India Private Limited [2022 (5) TMI 322 - ITAT BANGALORE] and this Tribunal following the decision in case of Huawei Technologies India Pvt. Ltd. [2018 (10) TMI 1796 - ITAT BANGALORE] held that working capital adjustment has to be allowed to the assessee and directed the TPO/AO to examine the claim of the assessee in the light of the details of working capital adjustment furnished by the assessee which is given as annexure to this order.
Grant of risk adjustment - Though the assessee has given a general note with regard to assessee’s right to claim risk adjustment while computing ALP, no specific details have been given with regard to allowing risk adjustment. In this scenario, we are of the view that it would be just and appropriate to remand the issue to AO/TPO with a direction to the assessee to furnish computation of risk adjustment and the basis of claim for deduction on account of risk adjustment. The TPO will consider the same after affording the assessee opportunity of being heard and allow adjustment on account of risk, in accordance with law. In this regard, we find that the DRP has not called for the computation of manner of risk adjustment and has merely proceeded to hold that the risk adjustment cannot be granted unless it is established that differences has a material effect on the margin of the comparable companies and computation can be made on reliable data without calling for working of risk adjustment. Such conclusions in our view cannot be sustained.
Adjustment towards capacity utilization - In case appropriate adjustments cannot be made to the uncontrolled transaction, due to lack of data, then in order to read the provisions of transfer pricing regulations in harmony, the adjustments should be made on the tested party. On the question of the data and method of computation of under utilization capacity adjustment, the tribunal held that the claim depends on acceptability of such adjustments being concerted, being reasonably accurate in mechanism for such adjustments, and as long as such an adjustment mechanism can be found, no objection can be taken to the adjustment. The tribunal held that once it is accepted that the assessee has underutilized capacity during the subject AY and is accordingly factually and legally eligible to an adjustment for the same, such a benefit cannot be denied to the assessee only for the reason that the data about comparable companies is not available. Requiring the assessee to produce such a data which is not available in public domain would tantamount to requiring the Appellant to perform an impossible task. The only way to get the data in the current case, would be where the TPO collates the same from the comparable companies by exercising his powers under section 133(6)
We are of the view that it would be just and appropriate to set aside this issue to the AO/TPO by directing the assessee to furnish required details and in the event of the assessee not being in a position to get the required details, request the TPO to exercise his powers under section 133(6) of the Act and call for the required details form the comparable companies and if he finds that the capacity utilization differs between the assessee and the comparable companies, to allow appropriate adjustment as per the relevant provisions of law and in accordance with the guidelines laid down above.
Selecting foreign AE as a tested party was an appropriate method of determining ALP and the Revenue authorities were not justified in rejecting the plea of the assessee - The facts of the Assessee’s case is similar to the case decided by the Hon’ble Madras High Court Virtusa Consulting Services Pvt. Ltd [2021 (2) TMI 378 - MADRAS HIGH COURT] in as much as the Assessee had in its Transfer Pricing Study chosen the foreign AE as a tested party and the TPO refused to examine the said claim. The decision of the Hon’ble Madras High Court being the only decision available on the issue of a High Court, judicial discipline requires us to follow the same in preference to the decisions of Tribunal to the contrary. Following the aforesaid decision of the Hon’ble Madras High Court, we remand the issue with regard to foreign AE being chosen as a tested party to the TPO for fresh consideration. The relevant ground of appeal of the assessee in this regard is treated as allowed for statistical purposes.
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2021 (12) TMI 1420 - ITAT BANGALORE
Validity of draft assessment order passed in violation section 144C - AO treating the draft order as final order by issuing the notice of demand under section 156 the Act and notice initiating penalty proceeding under section 271(1)(c) - HELD THAT:- As per section 144C of the Act, it is mandatory for the Ld.AO to pass Draft Assessment Order in accordance with the procedure laid down therein. We have noticed that the coordinate Bench in the case of Suretex Prohphylactics (India) Ltd., [2021 (4) TMI 120 - ITAT BANGALORE] considered similar issue.
In the present case, the AO passed the draft assessment order u/s. 143(3) r.w.s. 144C(13) of the Act on 21.12.2016 which is accompanied with demand notice issued u/s. 156 of the Act dated 21.12.2016 and it is also noticed that in the draft assessment order itself, the AO recorded the statement as stating that Demand notice issued accordingly. Penalty proceedings u/s. 271(1)(c) are initiated separately for the additions made.
Being so, it is observed that the draft assessment order passed by the AO is without following the due process of law as enumerated in the judgment in the case of Vijay Television [2014 (6) TMI 540 - MADRAS HIGH COURT]
Since the order passed by the AO is without following the due process of law and it cannot survive in the eyes of law, accordingly we quash the impugned assessment order before us. Appeal by the assessee is allowed.
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2021 (12) TMI 1419 - GUJARAT HIGH COURT
Rights to Constitutional Remedies - case for issuance of writ of prohibition to the Tribunal, exists or not - assignment of debt by the bank - it is argued that this is a fit case in which this Court should issue a writ of prohibition to the Tribunal not to proceed further with the original application as the Tribunal has no jurisdiction to adjudicate such application in the absence of any debt - Seeking direction on Respondent No.2 to not proceed with the final hearing and adjudication of Original Application No.648 of 2018, till such time that the Resolution Plan is finally approved / confirmed by the Appellate Authorities under the provisions of the Insolvency and Bankruptcy Code, 2016 - seeking adjournment of scheduled hearings of Original Application No.648 of 2018 pending before the Respondent No.2.
HELD THAT:- A writ of prohibition is issued only when a patent lack of jurisdiction is made out. It is true that a High Court acting under Article 226 is not bound by the technical rules applying to the issuance of prerogative writs like the Certiorari, Prohibition and Mandamus in the United Kingdom, yet the basic principles and norms apply to the writ must be kept in view.
In Thirumala Tirupathi Devasthanam and another vs. Thallappaka Ananthacharyulu and another [2003 (9) TMI 784 - SUPREME COURT], the Supreme Court has cautioned that unless there are some very cogent or strong reasons, the High Court should not prevent the competent Forum from deciding the various questions raised before it including the question of “want of jurisdiction”. It is also stated that allowing a Court of competent jurisdiction to proceed with the case and decide the same rightly or wrongly, would not result in violation of any Fundamental Rights.
The net result of the authorities discussed in this case, is as follows:
(a) The writs of mandamus, certiorari and' prohibition, and for the matter of that, all high prerogative writs, are ordinarily not issued where there exists an alternative remedy equally efficient and adequate.
(b) But there is no inflexible rule that such writs cannot be issued where the Court thinks it just and convenient to do so. The fact that it ordinarily does not do so is a question not of want of jurisdiction but of expediency.
(c) Whether the alternative remedy is equally efficacious or adequate is a question of fact to be decided in each case.
(d) Where a complaint is made against any act done or purported to be done under any statutory provision, the fact that there exists in the Statute itself a possible remedy, is an important fact, to be taken into consideration. Where such provisions exist the Court will be extremely reluctant to interfere by way of high prerogative writs and especially so if the applicant has actually taken recourse to his remedy under the Statute.
(e) But the fact that there exists a remedy under the Statute does not take away the jurisdiction of the Courts to issue the writs in appropriate cases.
(f) In the following cases it has been held that a writ of prohibition will be issued notwithstanding an alternative remedy, whether under a statutory provision or otherwise: -
(g) where an inferior tribunal assumes jurisdiction and the want of jurisdiction is patent on the face of it; (ii) where the proceedings complained of are against the principles of natural justice; and (iii) where the alternative remedy is too costly or ineffective or entails such delay that the applicant would be irreparably prejudiced or the remedy might prove valueless.
THE RECOVERY OF DEBTS AND BANKRUPTCY ACT, 1993 - HELD THAT:- The case on hand is not one in which it could be said that there is a patent lack of jurisdiction in the Debts Recovery Tribunal to look into all the issues discussed above. Had it been a case of patent lack of jurisdiction, this Court would have gone into the pivotal issue and answered the same. We are of the view that the Tribunal should be allowed to look into all the relevant aspects of the matter, more particularly, the pivotal issue as regards the assignment of debt vis-a-vis the liabilities of the guarantors under the guarantees deed. The pivotal point raised by the writ applicants is one for which detailed analysis has to be made by the Tribunal itself even to find out as to whether the facts on record would clothe the Tribunal with the necessary jurisdiction to decide the issues raised before it on merits.
When we pose a question to ourselves as to instead of issuing a writ of prohibition, as prayed for, by the writ applicants, if by permitting the Tribunal to proceed further, whether any serious prejudice would be caused? We find that by adopting the said course, while no prejudice would be caused to the writ applicants, by issuing a writ as asked for, there is likelihood of a serious injustice being caused to the Bank by preventing a statutory forum from exercising the powers conferred on it by law without there being a strong or convincing grounds for issuing such a prohibition. Therefore, it would be wholly inappropriate at this stage to interfere with the Original Applications preferred by the Bank before the Debts Recovery Tribunal by issuing a writ of prohibition.
The following conclusions have been arrived at:
[a] The writs of mandamus, certiorari and' prohibition, and for the matter of that, all high prerogative writs, are ordinarily not issued where there exists an alternative remedy equally efficient and adequate.
[b] But there is no inflexible rule that such writs cannot be issued where the Court thinks it just and convenient to do so. The fact that it ordinarily does not do so is a question not of want of jurisdiction but of expediency.
[c] Whether the alternative remedy is equally efficacious or adequate is a question of fact to be decided in each case.
[d] Where a complaint is made against any act done or purported to be done under any statutory provision, the fact that there exists in the Statute itself a possible remedy, is an important fact, to be taken into consideration. Where such provisions exist the Court will be extremely reluctant to interfere by way of high prerogative writs and especially so if the applicant has actually taken recourse to his remedy under the Statute.
[e] But the fact that there exists a remedy under the Statute does not take away the jurisdiction of the Courts to issue the writs in appropriate cases.
[f] In the following cases it has been held that a writ of prohibition will be issued notwithstanding an alternative remedy, whether under a statutory provision or otherwise: -
[g] Where an inferior tribunal assumes jurisdiction and the want of jurisdiction is patent on the face of it; (ii) where the proceedings complained of are against the principles of natural justice; and (iii) where the alternative remedy is too costly or ineffective or entails such delay that the applicant would be irreparably prejudiced or the remedy might prove valueless.
[h] Whether any debt within the meaning of Section 17 of the Act, 1993 exists as on date so as to confer jurisdiction upon the Debts Recovery Tribunal under Section 19 of the Act, 1993 to adjudicate the Original Applications, would come within the purview of the D.R.T. Act. The Tribunal will have to adjudicate and decide whether with the assignment of debt by the secured creditor (State Bank of India) to the Resolution Applicant (ArcelorMittal), all other liabilities and obligations of the writ applicants as guarantors stood discharged?
These writ applications are declined as no case for issue of a writ of prohibition has been made out - application dismissed.
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