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2021 (9) TMI 1410 - KERALA HIGH COURT
Validity of Confiscation proceedings - Perishable goods - Section 130 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The 1st respondent is bound to abide by the mandate of the Statute. The Statute provides an opportunity for the owner of every goods, to pay in lieu of confiscation the amounts as contemplated under the Statute.
Since the Statute is clear in its terms, there is no reason to doubt that the 1st respondent shall not abide by the terms of the Statute. Accordingly, if the petitioner offers to pay the amount as contemplated under Section 130(2) of the Act, it is needless to mention the 1st respondent shall release the goods in favour of the petitioner, on such payment being made.
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2021 (9) TMI 1409 - ITAT DELHI
Addition on account of revenue recognition from construction project as per Percentage of Completion Method (POCM) - AO has considered the addition on the basis of observation of Special Auditor in AY 2009-10 wherein it was pointed out that appellant company has changed the method for apportionment of internal development charges from FY 2008-09 - HELD THAT:- As the basis of addition in the year under reference is identical to that in preceding years. In fact, the assessing officer himself has followed the observation of Special Auditor in AY 2009-10 and finding recorded in the assessment order for AY 2011-12. As the issue of reworking of profit under POCM on the basis of re-apportionment of IDC has been decided by the Coordinate bench in preceding years, the same is decided as per the table given.
Disallowance of interest expenses on account of capitalization - AO capitalized part claim of interest on the reasoning that interest expenses on fixed period loans cannot be fully allowed and is allowable in proportion to revenue recognized from various projects - disallowance and capitalization of interest was computed as per formula suggested by Special Auditor in preceding years - HELD THAT:- It is noted that the issue of capitalization of interest is a recurring issue and has been extensively dealt with first appellate authority and Coordinate bench in favour of assessee in preceding years wherein it has been held that notional capitalization of interest is not permissible particularly when the assessee has already capitalized interest pertaining to projects under execution. There is nothing on record to show that facts and the basis of disallowance in the year under consideration is different from that in preceding years. As the issue of capitalization of interest has been decided by the Coordinate bench in preceding years.
Disallowance of brokerage expense - HELD THAT:- The action of assessing officer in treating brokerage as part of cost under POCM method has been deprecated by the Coordinate bench in orders passed for AY 2006-07 to 2011-12 wherein it has been held that brokerage expenses are allowable in the year of incurring and same cannot be associated with construction cost. It has been stated by Ld. AR that the deletion of disallowance in AY 2006-07 by Coordinate Bench has been accepted by the revenue and no further appeal has been filed before High Court on this issue. In fact, the assessing officer has accepted the claim in AY 2016-17.
Addition on account of net interest free maintenance security deposits - AO was of the opinion that maintenance charges collected by the assessee is in the nature of income - HELD THAT:- It is noted that the assessee is collecting interest free maintenance security deposit from customers for meeting out future liabilities such as insurance premium and maintenance charges of the buildings. The amount so collected is handed over to resident association/Condominium association upon formation and are shown as liability in the books of account. Further, it is noted that the issue of maintenance and security deposit is a recurring issue where the assessing officer is making addition year after year and the matter has travelled before Coordinate bench in successive preceding years wherein the addition stood deleted. It has been stated by Ld. AR that the deletion of identical disallowance in AY 2006-07 by Coordinate Bench has been accepted by the revenue and no further appeal has been filed before High Court on this issue. In fact, the assessing officer has accepted the claim in AY 2016-17. As this issue is covered in favour of assessee by orders of Coordinate bench, the same is decided as per the table given.
Disallowance of expenses towards allocation of overheads to other group entities - HELD THAT:- As we find that the basis adopted by the assessing office while making disallowance of expenses in the hands of the assessee on account of allocation of overheads to group concerns is static and borrowed from earlier years assessment orders. Further, as this issue has already been decided by Coordinate bench in AY 2006-07 to 2011-12 wherein the disallowance was deleted. On parity of facts, this ground is also decided as per table given
Reclassifying income offered to tax under the head Income from House Property to Income under head Business and Profession - HELD THAT:- We find that this issue has been dealt with by Coordinate bench in AY 2005-06 to 2011-12 wherein the addition was deleted by holding that lease income from asset lying under current asset is also assessable under the head Income from House Property.
Addition on account of rent on properties lying vacant during the year under reference - HELD THAT:- It is not in dispute that addition in the year under reference is based on assessment order for AY 2006-07 to 2011-12 and has come up for consideration before Coordinate bench. Further, the Ld. Counsel for the assessee has submitted that that the deletion of identical addition in AY 2006-07 by Coordinate Bench has been accepted by the revenue and no further appeal has been filed before High Court on this issue. In fact, the assessing officer has not made any addition on this issue in AY 2016-17.
Disallowance of depreciation of building DLF Centre - HELD THAT:- As the issue of depreciation is recurring issue based on recalculated WDV and same having been decided by Coordinate bench in preceding years, disallowance of depreciation was deleted as per finding recorded .
Disallowance of expense on ground of prior period expenses - HELD THAT:- On perusal of assessment order, it is observed that expenses disallowed are of routine nature for example advertisement, insurance, travelling and conveyance, legal & professional, sales promotion, repair and maintenance etc.. The genuineness of these expenses is not in dispute. Further, the CIT(A) has given a clear finding that liability to pay expenses has accrued/arose during the year and as such the same are allowable. Moreover, these expenses are settled in the year under consideration. In these circumstances, we find no convincing reasons to interfere with the order of CIT(A) setting-aside the disallowance. In fact, on similar facts, the coordinate bench has considered similar issue and deleted the disallowance in AY 2006-07 to 2011-12.
Expenses towards running and maintenance of Helicopter and aircraft - AO made disallowance on the ground that aircraft and helicopter have been used for personal purposes and accordingly estimated ad-hoc disallowance @ 66.67% of the total expenses relating to aircraft and helicopter including depreciation - HELD THAT:- We find that this issue came for up consideration before Coordinate bench in AY 2010-11 and 2011-12 wherein the disallowance of expenses relating to aircraft and helicopter on the ground of personal expense was deleted.
Addition of interest - interest short charged - rate of interest charged by the assessee company on loans advanced to group concerns is less than that paid to financial institutions and banks - AO worked out the interest short charged from the group concerns on proportionate basis and accordingly made addition in the hands of the assessee - HELD THAT:- We find that there is no provision in the Income tax Act which warrants addition of interest on notional basis and as such the order of CIT(A) deleting the addition is well reasoned. In fact, it is not the case of the assessing office that money borrowed from the banks and its subsequent utilization is not for the purpose of business and as such we see no rationale behind charging of additional interest on notional basis on money advanced to group concerns. Thus we uphold the order of CIT(A) deleting the addition.
Nature of receipts - addition on account of income from sale of carbon credits by treating the same is revenue receipt - HELD THAT: - CIT(A) deleted the addition coorectly by placing reliance on the decision of Hon’ble Andhra Pradesh High Court in the case of CIT v. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] wherein it was held the income from sale of carbon credits is a capital receipt.
Addition of notional rent in respect of kiosks let out to tenants - assessee is not recognizing the rental in its hand on the basis of mutual arrangement with maintenance company M/s. DLF Services ltd. which is providing maintenance and upkeep services in the Mall - HELD THAT:- We find that this very issue came up before the Coordinate bench while deciding the appeal for AY 2007-08 [2017 (11) TMI 381 - ITAT DELHI] wherein it was held that mutual arrangement created an overriding title resulting in diversion of rental income in favour of M/s. DLF Services Ltd. and as such the same cannot be taxed again in the hands of the assessee.
Disallowance u/s 14A r.w.r. 8D - assessee has made suo moto disallowance being salary to an employee looking after the work of investment which are mainly continuing from earlier years - HELD THAT:- As decided in own case [2020 (10) TMI 77 - ITAT DELHI] AO has nowhere recorded its dissatisfaction regarding suo moto disallowance made by the assessee and the entire discussion revolves around quantum of investment appearing in the balance sheet. Moreover, the assessing officer has overlooked the availability of interest free own funds and so-called observation regarding claim of interest expenses is unsubstantiated and not based on books of account of the assessee. The CIT(A) has given a specific finding that no part of interest bearing funds were used for making investment yielding exempt income. In these circumstances, we are constrained to observe the satisfaction recorded by the assessing officer fails to pass the test laid down by Supreme Court and does not provide valid basis for invocation of rule 8D.
Disallowance was deleted by observing that satisfaction recorded by the assessing officer is invalid. The satisfaction recorded in present case is ad-verbatim that in AY 2010-11 and 2011-12 - we find no reasons to interfere with order of CIT(A) deleting the disallowance u/s 14A r.w.r 8D .
Exemption u/s 80IA - Disallowance of expenditure on account of short/non-allocation of proportionate overhead expenditure to windmill unit in Gujarat and Karnataka - HELD THAT:- We find that assessing officer has not given any basis for making impugned disallowance and the only reasoning behind the allocation of expense is that windmill units have not claimed any expenses on account of finance, establishment or general admin cost. The Ld. AR has drawn our attention to form 10CCB which contained complete working of profit and claim of various expenses incurred for running these units. It is self evident that separate set of books of account are maintained for respective windmill unit at Gujarat and Karnataka. In these circumstances, unless there is some material or conclusive finding on record that books of account of these units are not correct or expenses pertaining to these units have not been claimed, there could be no case of any notional allocation of expenses in the ratio of income. The assessment order is silent on this aspect and merely contains working of disallowance by allocation expenses in the ratio of income which in our view is not sustainable. At this juncture, it is pertinent to make reference to decision of CIT v. Translam Ltd. [2014 (10) TMI 544 - ALLAHABAD HIGH COURT] wherein it was held that assessing officer is bound to point out defect in separate books of account of units before disputing the correctness of income/loss declared therein.
TP adjustment u/s 92C on account of Corporate Guarantee fee - HELD THAT:- As it is unclear whether the assessee has provide corporate guarantee or letter of comfort. Ostensible both the terms are used in the said letter issued by the bank which is creating doubt over the real nature of the transaction. In fact, the order of TPO is silent on this aspect and TPO has proceeded on the ground that assessee has provided corporate guarantee.
We are of the considered view that the issue requires reconsideration at the level of TPO. Accordingly the adjustment made by the assessing officer is set-aside and the matter is restored to the file of TPO with the direction to examine the nature is assistance given to AE i.e. letter of comfort or corporate guarantee. Also, as noted above, in case the arrangement is in the nature of corporate guarantee, ALP, if any should be determined on the basis of FAR analysis and employing CUP method. Needless to say, that assessee should be afforded opportunity to furnish necessary explanation/clarification.
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2021 (9) TMI 1408 - ITAT DELHI
Bogus job work expenses - HELD THAT:- Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O., are bald assertion. It would be enough for us to say that voluminous documentary evidences filed by the assessee as referred above and considered by us clearly establish the genuineness of the job work expenses covered by the grounds of appeal under consideration.
We have gone through the arguments of the assessee in respect of observations made by CIT(A) of the synopsis filed before us and we find that the evidences filed by the assessee to prove genuineness of the job work have not been found fault with by CIT(A) and there is no corroborative evidence produced against the assessee. We further find that CIT(A) misappreciated the nature of job work being done by this job worker and was not related to the assessee company or its directors. Statement of the wife of the proprietor cannot be used against the assessee. In the result grounds of appeal of the assessee in this regard are allowed & the addition is hereby deleted.
Addition of not-genuine purchases of fabric - HELD THAT:- The adverse observations made by the A.O. in the assessment order have been met by the assessee one by one and we have taken ourselves to these adverse observations and response of the assessee and we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT(A) too has mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O.
It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Jindal Fashion and M/s Akansha Fashion. We do not want to burden our order by repeating the whole hosts of documentary evidences filed in this case which establish that the purchases made by the assessee from the above said two suppliers are genuine purchases. We have gone through the observations made by CIT(A) in his appeal order and we do not agree with them. Opening of the bank account by the suppliers in the same bank in which assessee had bank account is not something which is unusual as it may be necessary for the smoothness of the banking and avoid the loss of time in collecting the cheques etc. We find that the burden to prove purchases was very well discharged by the assessee. We have deleted similar disallowance made in AY 2013-14 and 2014-15. Facts are identical in those years also. Assessee’s appeal of the assessee are allowed and the addition is deleted.
Bogus Purchases from vendors - HELD THAT:- we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT(A) too has mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O. It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Super Connection India P. Ltd. & other vendor companies. Other indicators such as percentage ratio of material to sale etc also establish the genuineness of the purchases. We do not agree with the observations made by the first appellate authority. In our considered opinion, assessee has been successful to discharge the burden of proving the purchase from M/s Super Connection India P Ltd. & other vendor companies.
Addition u/s 14A - HELD THAT:- It is seen that there is exempt income only to the extent of Rs. 72,740/- and for this reason also, disallowance under section 14A could not have exceeded this amount in view of the decision of Delhi High Court in the case of Joint Investment Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] and hence we uphold the order of CIT(A) to this extent. In the result, ground no. 11 of the assessee’s appeal is dismissed and grounds no. (iii) to (viii) of the departmental appeal are also dismissed.
Disallowance of treating the product development expense as deferred revenue expense - addition deleted by CIT-A - HELD THAT:- As decided in own case [2016 (9) TMI 1634 - DELHI HIGH COURT] appeal of assessee allowed.
Unexplained cash sales - HELD THAT:- It is seen that assessee has taken into account this sale in its profit and loss account and thus the sale of scrap has been considered while working out the result of this year. Separate addition of this very amount would lead to double addition. This was so held by CIT(A) also. We do not find any infirmity in the order of the first appellate authority in this regard and hence dismiss the ground of revenue’s appeal and uphold the deletion of the addition
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2021 (9) TMI 1407 - CALCUTTA HIGH COURT
Continuation of Provisional Attachment order beyond the period of 180 days - HELD THAT:- This Court is of the view that the Hon’ble Single Bench has expressed its desire to ultimately adjudicate the issue on the strength of affidavits directed to be exchanged by the parties - it is observed that the Hon’ble Single Bench has further directed that any decision taken by the adjudicating authority, if against the writ petitioner/the appellant, shall abide by the result of the writ petition.
Having regard to the interim directions, this Court find no reason to intervene in the order of the Hon’ble Single Bench except, to request the Hon’ble Single Bench, to expedite the hearing of the writ petition, subject to its convenience - application disposed off.
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2021 (9) TMI 1406 - SUPREME COURT
Appropriate Forum - Termination of services - High Court of Allahabad passed a conditional interim order staying the execution of award and on condition to deposit the entire back wages before the Labour Court, and appellant complied with the same - during the pendency of the writ petition, the State of Uttarakhand came to be created and the jurisdiction of the Labour Court, Dehradun came within the jurisdiction of the State of Uttarakhand - HELD THAT:- It cannot be disputed that after the creation of the State of Uttarakhand the jurisdiction over judgment and award passed by the Labour Court, Dehradun would vest with the High Court of Uttarakhand and not with the High Court of Allahabad. Therefore, the writ petition pending before the High Court of Allahabad challenging the judgment and award passed by the Labour Court, Dehradun was as such required to be transferred by the Chief Justice of the High Court of Allahabad to the High Court of Uttarakhand in exercise of power under Section 35 of the Act. For whatever reason the said writ petition was not transferred. That does not mean that despite the above, jurisdiction of the High Court of Allahabad against the judgment and award passed by the Labour Court, Dehradun would continue. Therefore subsequently when the writ petition came up before the High Court of Allahabad and having realized and observed that the jurisdiction against the judgment and award passed by the Labour Court, Dehradun would vest with the High Court of Uttarakhand, the High Court of Allahabad rightly permitted the appellants to withdraw the said writ petition pending before it with the liberty to the appellants to file fresh writ petition before the appropriate court.
In the present case, the appropriate court would be the High Court of Uttarakhand only. Therefore as such no error was committed by the High Court of Allahabad permitting the appellants to withdraw the writ petition pending before it with the liberty to file a fresh writ petition before the court having jurisdiction. The aforesaid cannot be said to be adoring himself with the powers of the Chief Justice of Allahabad High Court.
Once a judicial order was passed by the High Court of Allahabad permitting the appellants to withdraw the writ petition with liberty to file a writ petition before the appropriate court (the High Court of Uttarakhand) and thereafter when the appellants preferred the writ petition before the High Court of Uttarakhand, the learned Single Judge of the High Court of Uttarakhand is not at all justified in making comments upon the judicial order passed by the Coordinate Bench of the Allahabad High Court. The Single Judge of the High Court of Uttarakhand was not acting as an appellate court against the judicial order passed by the High Court of Allahabad permitting the appellants to withdraw the writ petition with liberty to file a writ petition before an appropriate court. Judicial discipline/propriety demand to respect the order passed by the Coordinate Bench and more particularly the judicial order passed by the Coordinate Bench of the High Court, in the present case the Allahabad High Court which as such was not under challenge before it.
The impugned judgment and order dated 26.11.2019 passed by the High Court of Uttarakhand at Nainital in Writ Petition No.1314 of 2014 (M/S) is hereby quashed and set aside. The writ petition is directed to be restored on the file of the High Court of Uttarakhand.
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2021 (9) TMI 1405 - ITAT DELHI
Corporate Social Responsibilities - nature of expenses - whether the same is allowable u/s 37(1)? - HELD THAT:- We find that there is no dispute that these CSR expenses which have been incurred for the purpose of business has not been disputed by the AO and Ld. CIT(A) except for that was treated it as capital expenditure. The amendment which has been brought in the Explanation 2 of section 37(1) is also not applicable either in the assessment year 2012-13 or 2013-14 as it has come with effect from assessment year 2015-16.
The allowability of expenditure section 37 (1) are otherwise fully applicable, once the Explanation 2 is not applicable for the impugned assessment year. Viewing from the nature of business activities of the assessee which is dealing in highly sensitive commodity i.e., currency, coins, security stationery, etc. Expenditure incurred is voluntarily as per board approval. Accordingly, such expenditure cannot be held to be capital as accepted by the authorities in the earlier years and it is not in the nature of personal expenditure or for any violation of law.
Disallowance u/s 14A - Mandation of recording satisfaction - HELD THAT:- As we find that while invoking the disallowance u/s 14A read with Rule 8D, nowhere the AO has recorded his satisfaction as to why the assessee ‘s explanation is not tenable - it is seen that nowhere AO has noticed the nature of expenditure debited nor he has examined the books of accounts as to what are the expenditure which can be said to be attributable for opening of the dividend income. The conditions laid down in u/s 14A (2) is not being satisfied and accordingly in view of the decision in the case of Godrej & Boyce Manufacturing [2010 (8) TMI 77 - BOMBAY HIGH COURT] disallowance made u/s 14A is allowed. Assessee appeal allowed.
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2021 (9) TMI 1404 - CESTAT CHENNAI
Refund claim under C.G.S.T. upon the introduction of the Central Goods and Services Tax Act, 2017 - Jurisdiction of CESTAT, having been constituted under the Customs Act, 1962, to look into and decide refund claims - difference of opinions - HELD THAT:- There are divergent views, which are required to be ironed out by a Larger Bench, in the interests of justice - thus, this is a fit case to be referred to the Larger Bench to decide the following question:
“Whether the CESTAT, having been constituted under the Customs Act, 1962, can look into and decide refund claims under C.G.S.T. upon the introduction of the Central Goods and Services Tax Act, 2017, which is a self-contained code having its own appellate mechanisms?”
Accordingly, the Registry is directed to place this file before the Hon’ble President to consider constitution of a Larger Bench to decide the above question of law.
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2021 (9) TMI 1403 - SC ORDER
Exemption u/s 10B - denial of exemption as Assessee Company has expanded its existing processing capacity with the new plant and machinery installed in the factory - Approval from an official amounted to approval from the Central-Government appointed Board under section 14 of the Industrial (Development and Regulation) Act 1951 and the Rules made thereunder - Disallowance u/s 14A r.w.r. 8D - whether the Assessee incurred any expenditure while earning that exempted income and whether he included that expenditure in the common indirect expenditure of its own? - HELD THAT:- Issue notice.
Respondent, waives service. Counter affidavit be filed within four weeks.
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2021 (9) TMI 1402 - MADRAS HIGH COURT
Dishonor of Cheque - direction to pay interim compensation under section 143 of the Negotiable Instruments Act - HELD THAT:- In this case, at the time of questioning, the trial court passed the interim order suo motu. The reasons stated by the trial court is not proper and it used the Discretionary Power without proper manner. Further, the respondent/de-facto complainant has not filed any petition for interim compensation. Hence, it is necessary to interfere into the findings of the trial court.
The impugned docket order, dated 15.04.2021 passed by the Judicial Magistrate Fast Track Court, Pattukkottai, is set aside - this Criminal Revision is allowed.
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2021 (9) TMI 1401 - CESTAT MUMBAI
Absolute Confiscation of Cigarettes - levy of penalty - non-notified goods or not - valid import or not - It has been alleged by the department that the appellant could not produce the documents, evidencing legal import of the cigarettes found in the said premises - HELD THAT:- Both the authorities below in their respective orders have held that the goods in question are not notified under Section 123 ibid and accordingly, discharging the burden of proof regarding licit acquisition of cigarettes were entirely lies with the appellants and since, no credible evidences were produced, confirmation of the adjudged demands are in conformity with the statutory provisions. However, it is found that the Central Government vide Notification No. 204/84-Customs dated 20.07.1984 had specified ‘cigarettes’ as the notified goods for the purpose of sub-section (2) of Section 123 ibid. Since, the disputed goods are notified in the official gazette way back in 1994 and such goods have not been deleted from the list of notified goods through any notification, the scenario of entire exercise undertaken by the department for investigation and confirmation of the adjudged demands will be different inasmuch as under the said statutory provisions, the burden of proving that the goods are not smuggled goods shall be cast on the person from whose possession the same were seized. It is an admitted fact that the adjudication as well as the impugned orders have not considered the notification dated 20.07.1984.
The matter should go back to the original authority for consideration of the notification dated 20.07.1984, proper application of the same to the facts of the present case and thereafter, to decide the cases afresh - Appeal allowed by way of remand.
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2021 (9) TMI 1400 - ITAT DELHI
Nature of receipts - Credits received by the assessee from International Aero Engines and others, i. e., nature of credits received by the assessee from International Aero Engines - whether the agreement/ transactions are separate or composite? - purpose and nature of credits received by the assessee and their taxability - HELD THAT:- The findings of the learned Commissioner of Income-tax (Appeals), in our opinion, are based on con-jectures and surmises when he wrongly views the agreements with Inter-national Aero Engines, Airbus and lessors as an amalgamation. When the Commissioner of Income-tax (Appeals) himself noted that right to acquire aircraft has been assigned to lessor at "par value" then, there is no consideration received for such assignment.
Although right to acquire air-craft from International Aero Engines is a "capital asset", however, for applicability of provisions of section 48 which deals with computation of capital gains, there has to be a "Full value of consideration received or accruing" as a result of the transfer of the capital asset. Therefore, there should be a sale consideration flowing to the assessee from the lessors for transfer of a "capital asset" which in this case is the right to acquire an air-craft from Airbus.
We find merit in the submissions of the learned senior counsel for the assessee that under the purchase agreement the assessee was under an obligation to only take delivery of aircrafts. There was no compulsion on the assessee to mandatorily purchase the aircraft. The learned special counsel for the Revenue, in our opinion, has erroneously presumed that "amount paid by the lessors represents a consideration as the taking-over of a liability amounts to a consideration". We find in the year under consideration the lease agreements are in the nature of operating lease.
Assessing Officer in the order has also mentioned that the lessors are the owners and are claiming depreciation. Therefore, consideration paid by lessors to Airbus is not on account of the assessee. The transaction of payment of purchase price by lessors to Airbus is a separate transaction, under which, no right to the aircraft is flowing to the assessee. There is, therefore, no "sale consideration" received by the assessee which could be held assessable to "capital gains tax". We, therefore, hold that credits received by the assessee are not taxable as capital gains.
Disallowance of proportionate lease rental under section 37(1) - HELD THAT:- We find there is no connection between credits received and the payment of lease rentals. We have already adjudicated in the preceding paragraphs that credits received under agreement dated October 19, 2005 and payment of lease rentals under lease agreements executed much after are separate transactions not related to each other. Therefore, there cannot be any disallowance of proportionate lease rentals.
Disallowance u/s 40(a)(ia) of supplementary rent (SR) - HELD THAT:- It was held that supplementary rent is not a payment made for use of spares, facilities or any services, whereas basic rent is a fixed amount. Supplementary rent is determined taking into consideration the number of flying hours. Supplementary rent, in our opinion, is a payment made for lease of aircraft. The lease agreement defines "rent" as "means collectively base rent and supplementary rent". Therefore, respectfully following the decision of Tribunal for the assessment year 2007-08 which has also been followed in subsequent years, we hold that payment of supplementary rent is exempt from tax in hands of lessors as per provisions of section 10(15A) and hence, disallowance under section 40(a)(i) is not called for. However, the above figure is subject to verification by the Assessing Officer.
For lease agreements executed after 1st April, 2007, a claim was made by the assessee before the lower authorities that the income is not chargeable to tax in hands of lessor under article 12 of the Double Taxation Avoidance Agreement between India and Ireland.
It is an undisputed fact that the basic lease rent of Rs. 673.42 crores paid under the lease agreement is an allowable expenditure and its nature is that of "Rent". In our opinion, the nature of supplementary lease rent cannot be treated otherwise as both these expenses are payments made under the same agreement for use of aircraft. The learned special counsel for the Revenue has filed copies of three lease agreements before us in his paper book. However, from none of these agreements he has been able to demonstrate that the nature of lease is financial lease and not operating lease. We have already held above in the preceding paragraph that the nature of lease in the year under consideration is operating lease. Moreover, both the lower authorities have also accepted this fact. We are, therefore, not convinced by the arguments of the learned special counsel for the Revenue that the present leases are financial merely because lease rent is determinable using LIBOR rate or that delivery of aircraft is taken by the assessee from Airbus. We find that in the present case the aircrafts were leased for a period of six years. Therefore, the lease rent paid cannot be characterised as "interest". We, therefore, find no merit in the above submissions raised by the Revenue.
Thus for failure to non-deduction of tax on supplementary lease rent Rs. 61,81,04,551 is sent back to the Assessing Officer for considering the allowability in the light of the directions and Rs. 276,28,59,861 is deleted.
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2021 (9) TMI 1399 - ITAT MUMBAI
TP Adjustment - time limit for TPO to pass the order - whether order passed under section 92CA(3) is barred by limitation as per section 153? - how the period of 60 days prior to the date of TP order computed? - HELD THAT:- As we find that as per sub-section 3 to section 92CA inserted with effect from 1.6.2007 time limit for TPO to pass the order is within the period of sixty days prior to the date of completion of the order as per section 153 of the Act. Since reference under section 92CA sub section (1) has been made to the TPO the time limit for passing the assessment order as per section 153(4) is extended by 12 months from the time limit as in section 153(1) - Hence, time limit to pass assessment order in this case is 31.12.2016. Since the TPO order is passed on 1.11.2016, on the touchstone of the aforesaid decisions it is clear that the TPO order passed is time barred as the due date in this case was 31.10.2016.
Following the same reasoning as Coordinate Bench decision [2021 (3) TMI 563 - ITAT DELHI] as above in which Hon'ble Madras High Court decision [2021 (2) TMI 1152 - MADRAS HIGH COURT] has been followed, we hold that the order passed by the TPO is time barred and hence, is not legally sustainable. We note that no contrary order of Hon'ble Jurisdictional High Court has been cited before us in this regard. - Decided in favour of assessee.
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2021 (9) TMI 1398 - BOMBAY HIGH COURT
Stay of demand - Respondent No.2 has rejected the prayer of petitioner for staying recovery of entire demand until final disposal of the appeal that petitioner has filed challenging the assessment order dated 23rd April, 2021 - Respondent No.2 has directed petitioner to deposit 20% of the amount payable under the assessment order - HELD THAT:- We see no reason to interfere in the order impugned.
Petitioner may make out their case in the appeal. Respondent No.3 is directed to dispose of the appeal expeditiously and in any event by 15th January, 2022.
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2021 (9) TMI 1397 - MADRAS HIGH COURT
Jurisdiction - proper officer to issue SCN - SCN issued by Additional Director General, DRI, Zonal Unit, Chennai - whether the principle laid down by the Hon'ble Supreme Court or the law declared by the Supreme Court in Canon India case dated 09.03.2021 can be made applicable to the petitioner's case? - HELD THAT:- The judgment of the Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [2021 (3) TMI 384 - SUPREME COURT] has already been considered by this Court two times - In earlier occasion, a learned Judge of this Court in QUANTUM COAL ENERGY (P) LTD. VERSUS THE COMMISSIONER, OFFICE OF THE COMMISSIONER OF CUSTOMS, CUSTOM HOUSE, TUTICORIN [2021 (3) TMI 1034 - MADRAS HIGH COURT] has considered the import of Canon India case, and allowed those writ petitions.
Thereafter, when similar writ petitions came up in DEEPAK GOPALDAS BAJAJ, M/S. TAHER IMPEX PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS, CUSTOM HOUSE, TUTICORIN, THE ADDITIONAL DIRECTOR GENERAL DIRECTORATE OF REVENUE INTELLIGENCE, CHENNAI, THE ASSISTANT COMMISSIONER OF CUSTOMS (ARC) [2021 (10) TMI 122 - MADRAS HIGH COURT], there was an occasion to consider all these aspects, including the import of the law declared by the Canon India case, where it was held that all the queries/objections raised by the learned Standing Counsel appearing for the respondent Customs herein, including that, as against Canon India judgment, review has been field and by virtue of the amendment made in Section 28 by inserting Sub Section (11) the Customs Authorities have every right to issue Show Cause Notice by any official, who can be treated as a proper officer, have been considered and answered.
Though a plea was raised by the Revenue side, that even in Deepak Gopaldas Bajaj batch case, as against the Canon India case, the Revenue has filed review, that aspect also has been considered by the learned Judge of the Karnataka High Court in the judgment which has been taken note of in Deepak Gopaldas Bajaj batch case - Also, it is to be noted that, subsequent to Canon India case dated 09.03.2021, a similar issue came up before the Hon'ble Supreme Court in the case of COMMISSIONER OF CUSTOMS, KANDLA VERSUS M/S. AGARWAL METALS AND ALLOYS [2021 (9) TMI 316 - SUPREME COURT], where the Hon'ble Supreme Court has held that In view of decision in CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [2021 (3) TMI 384 - SUPREME COURT] these appeals must fail as the show cause notice(s) in the present cases was also issued by Additional Director General (ADG), Directorate of Revenue Intelligence (DRI), who is not a proper officer within the meaning of Section 28(4) read with Section 2(34) of the Customs Act, 1962.
When that being so, merely because the Revenue had filed belated appeal as against the CESTAT order dated 03.01.2018, it would not preclude the petitioner to raise the point of want of jurisdiction, as it goes to the root of matter, when the jurisdiction itself is questioned and the said point is to be answered in favour of the noticee, the question of deciding the adjudicatory process on merits does not arise. Therefore, the said objection as projected by the learned Standing Counsel for the Customs stating that the appeal filed by it since is pending in SR stage, the petitioner cannot file these writ petitions, taking the ground of want of jurisdiction, cannot be countenanced.
This Court has no hesitation to hold that the petitioner is entitled to succeed in these writ petitions - Petition allowed.
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2021 (9) TMI 1396 - ITAT MUMBAI
Addition u/s 68 - unsecured loans from Bhanwarlal Jain group by treating the same as unexplained cash credit - AO made the addition by doubting the genuineness of the loan transactions by citing the reason that a search on Bhanwarlal Jain and related parties has revealed that the entire group was engaged in advancing tax accommodation entries without doing any real business which has affirmed by Ld. CIT(A) by observing that retraction of statement recorded during the course under section 132(4) of the Act can not be sole basis to treat the transaction as genuine - HELD THAT:- Undisputedly, the assessee during the course of assessment proceedings filed copy of ITRs, balance sheet, profit and loss account, confirmations and proof of receipt of payment through banking channel along with the evidence of payment of interest at the rate of 12% after deduction of TDS at source.
We observe from the records before us that AO has not carried out any further verification and relied on the report of the DGIT(Inv.), Mumbai that assessee is beneficiary of accommodation entries without carrying on any further investigation. We note that the statement taken during the course of search has been retracted in which it has been admitted that Bhanwarlal Jain and related entities were engaged in accommodation entries in the form of unsecured loans of short term and long term capital gain and share capital etc. We also observe from the facts before us that the assessee has filed various evidences before the lower authorities however no further enquiries have been conducted by the AO or ld CIT(A) to dig out the truth or t disapprove the evidences filed. Both the authorities below have heavily relied on the statements recorded during search of Shri Bhanwar lal Lain and other persons without any corroborating evidences. - Decided in favour of assessee.
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2021 (9) TMI 1395 - NATIONAL COMPANY LAW TRIBUNAL HYDERABAD
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - time limitation - Corporate Debtor contends that account of the Corporate Debtor was declared NPA on 15.04.2011, whereas the present application is filed on 25.11.2019, the limitation period ended in 2014 - application is beyond the limitation period and the application is barred by Article 137 of the Limitation Act or not - HELD THAT:- Corporate Debtor having submitted OTS proposals on 19.09.2018, 09.11.2018 and 15.07.2019, cannot afford to make such submission. Besides, the Corporate Debtor had entered into Restructuring Package Agreement dated 19.12.2015.
Unpaid interest converted into loan - HELD THAT:- Since the Corporate Debtor could not pay the interest and it was at the request of the Corporate Debtor enhanced credit facilities were granted while continuing restructuring scheme, the Corporate Debtor cannot raise such contention.
Existence of debt and Dispute or not - HELD THAT:- Existence of debt and default has duly been established by the above documents albeit the Corporate Debtor has opposed the same without substantial evidence - the Corporate Debtor tried to raise contentions like lack of cooperation from the Financial Creditor in assignment of debt and that the Financial Creditor has filed proceeding before the Debt Recovery Tribunal, Hyderabad, the amounts claimed before the Debt Recovery Tribunal and the amounts claimed before this Adjudicating Authority do not match. Such contentions have no bearing before this Adjudicating Authority in the matter of considering this application under section 7 of the I & B Code, 2016. At the time of admission of the petition filed under section 7 of the I & B Code, the Tribunal has to consider whether there is debt and default.
Petition admitted - moratorium declared.
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2021 (9) TMI 1394 - ITAT DELHI
Applicability of provisions Section 144C - draft of the proposed order of assessment forwarded or not? - HELD THAT:- As assessee’s contentions before the assessment proceedings were properly taken into account and there was no procedural lapse pointed out by the assessee or Ld. AR as prescribed u/s 144C as well as there was no lapse on substantive basis, as the assessee has availed the remedy prescribed under the Section before the Revenue Authorities. To clarify further, the Finance Act clearly mentions that the reference to Dispute Resolution Panel was inserted by the Finance(No.2) Act, 2009, w.r.e.f. 01.04.2009, Section 144C(1) clearly mentions that notwithstanding anything to the contrary contained in the Act, in the first instance, forward a draft of the proposed order of the assessment to the eligible assessee, if he proposes to make on or after 1st day of October 2009, any variation in the income or loss return which is prejudicial to the interest of such assessee.
In the instant case, the AO has rightly forwarded the draft of the proposed order of assessment on 03.01.2014 as per the provisions of Section 144C(1) and the assessee has also filed his objections to the variation with ld. DRP on 29.04.2014 in accordance with the Section 144C(2). The ld. DRP vide order dated 31.12.2014 has issued directions in accordance with the provisions of Section 144C(6). Subsequently, the assessee upon the receipt of the directions issued under sub-section (5) has completed the assessment on 08.01.2015. Thus, on going through the entire provisions of the law, the judgments quoted, the orders of the Tribunal, the procedure followed by the assessee, TPO, ld. DRP and the Assessing Officer has been found to be correct as per the provisions of the Act inserted by the Finance (No.2) Act, 2009, hence, the additional grounds filed on 8.7.2021 with regard to non-applicability of provisions Section 144C are hereby dismissed.
Jurisdiction of JCIT, Hisar Range - As argued that the Joint Commissioner is not competent to pass the order under the provisions of Section 143(3) - HELD THAT:- Board may assign the power to any Income Tax Authority to exercise powers of the A.O. having regard to territorial area etc., or the Board may authorise or empower Pr. Director General, Pr. Chief Commissioner etc., to issue order in writing to assign powers of the A.O. to other Authorities including Joint Commissioner of Income Tax as Assessing Officer.
Considering the provisions of Section 2(7A) of the I.T. Act, 1961, which defines the definition of the Assessing Officer would make it clear that Joint Commissioner of Income Tax could function as an Assessing Officer when jurisdiction have been assigned to him by virtue of the directions or orders issued under section 120(4)(b) of the I.T. Act, 1961.
On going through the entire events, we find that the order dated 29.07.2013 passed by the ld. CIT (A) invoking the powers conferred by Sub-Section (1), (2) and (5) of Section 120 would not confer any powers to the CIT to confer the concurrent exercise of powers to the Assessing Officers. Further, when concurrent powers are conferred both the officers namely Joint/Addl. Commissioner along with the ACIT or DCIT/ ITO would exercise the jurisdiction. Whereas the order dated 29.07.2013 of the CIT conferred concurrent exercise from ACIT, Hisar to JCIT, Hisar which effectively culminated in transfer of the assessment for the year 2011-12 from ACIT, Hisar to JCIT, Hisar. When the case is transferred from one Assessing Officer to the other Assessing Officer, JCIT in this case, it is legally mandated to pass order u/s 127 by the ld. CIT invoking the “power to transfer” u/s 127.
In the instant case, (1) there is no order by the ld. CIT invoking powers conferred u/s 120(4) wherein sub-Section (b) empowers the CIT to issue orders in writing that the powers and functions conferred on or as the case may be assigned to the Assessing Officer by or under the Act in respect of any specified areas or persons shall be exercised by the Joint Commissioner. In the absence of any order by the ld. CIT invoking the powers conferred by sub-Section (4) of Section 120, we hold that the order passed by the Assessing Officer lacks jurisdiction. (2) Further, we also find that the order of the ld. CIT in pursuance with the notification No.251/2001 also did not confer any jurisdiction to the CIT, Hisar. (3) In addition, no order has been issued by the Ld.CIT transferring the case from one AO to other AO u/s 127 is also wanting in the instant case.
We are of the view that JCIT, Hisar Range, do not have jurisdiction over the case of assessee and since he did not assume the jurisdiction legally and validly, therefore, the impugned assessment order framed by him is vitiated and illegal and without jurisdiction. In view of the above discussion, we set aside the order of the authorities below and quash the impugned order.
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2021 (9) TMI 1393 - ITAT HYDERABAD
Corporate guarantee adjustment @2% commission rate - AR contention before us is that the assessee has not derived any income since the corresponding corporate guarantee’s object was to help the overseas associated enterprise ‘AE’ which nowhere yielded any returns thereupon - HELD THAT:- We express our inability to accept the assessee’s instant former substantive grievance. We make it clear that we are dealing with Chapter-X of the Act which is in the nature of a “Special Provision” not dependent upon actually derived income component; whatsoever.
Coupled with this, hon'ble Madras high court’s decision PCIT Vs. M/s.Redington (India) Ltd., [2020 (12) TMI 516 - MADRAS HIGH COURT] holds that a corporate guarantee to be an international transaction u/s.92B, Explanation-(c) with retrospective effect from 01-04-2001. We thus, affirm the impugned corporate guarantee adjustment in principle.
Quantification of the impugned guarantee - We affirm the impugned adjustment @0.875% as against the assessee’s stand that the same ought to be taken as 0.5% only. We therefore partly accept both the learned representatives’ arguments against and in favour @2% commission in issue to this limited extent. The assessee’s instant former substantive ground succeeds in above terms.
ALP adjustment pertaining to interest on receivables emanating from the order of TPO’s and DRP’s directions going by interest rate @7.5% as per SBI domestic term deposits returns - As we need not delve much deeper qua the relevant facts pertaining to the instant issue. We find that assuming but not accepting that the ld.lower authorities have rightly found the assessee’s interest receivables as beyond the period involving uncontrolled transactions, the impugned adjustment is not liable to be sustained for the sole reason that the same has not only been made as per ‘LIBOR’ rate applicable in case of international transactions after taking State Bank of India’s term deposit(s) rate only but also no comparable to this effect in the very segment has been found so as to form the necessary benchmarking in uncontrolled circumstances. The impugned ALP adjustment is directed to be deleted therefore.
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2021 (9) TMI 1392 - SUPREME COURT
Fraud by the company - Liability of directors - Concealing and suppressing the material facts as in violation of the provisions of Section 12A of SEBI Act - Director guilty for violating Section 12A of the SEBI Act - scheme to defraud any shareholder or investor HELD THAT:- Appellate Tribunal was impressed by the view taken by it in another case decided around the same time viz., in the case of ‘Adi Cooper v. Securities and Exchange Board of India’ [2019 (11) TMI 1380 - SECURITIES APPELLATE TRIBUNAL, MUMBAI]
Placing reliance on the said decision, the Securities Appellate Tribunal allowed the appeal preferred by the respondent.
Be it noted, the decision of the Securities Appellate Trib[2019 (11) TMI 1380 - SECURITIES APPELLATE TRIBUNAL, MUMBAI]unal in the case of ‘Adi Cooper v. Securities and Exchange Board of India’ has been reversed by this Court in [2021 (9) TMI 1391 - SUPREME COURT] - As a result, it is not open to place reliance on the said decision.
Further, we have noticed that the SEBI in its order which has been set aside by the Securities Appellate Tribunal, had adverted to the specific role of the respondent as noticee No. 6. It is noticed that besides being party to the loosely worded resolution, which paved way to the company for resorting to fraudulent transaction, he had complete knowledge about the same. These aspects have not been squarely dealt with by the Securities Appellate Tribunal in the impugned judgment.
Taking any view of the matter, therefore, this appeal ought to succeed. The impugned judgment and order passed by the Appellate Tribunal is set aside. Instead, the parties are relegated before the Securities Appellate Tribunal for reconsideration of the appeal afresh.
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2021 (9) TMI 1391 - SUPREME COURT
Insider trading - whole-time director responsibility - direction issued by the SEBI restraining the respondent from accessing the securities market and further prohibiting him from buying, selling or otherwise dealing in securities, directly or indirectly for a period of two years from the date of the order - HELD THAT:- Although the respondent was party to the resolution, being a whole-time director and member of the Board of Directors of the Company, had only resolved that Company may open an account with the EURAM Bank for the purpose of deposit of GDR proceeds. The resolution does not stipulate that the proceeds would be used as security in connection with the loan taken by another entity. The latter part of this submission is not in consonance with the purport of the resolution passed by the Board on January 30, 2008.
Whereas, the SEBI had rightly noted that such resolution facilitated the transaction with Vintage and was a fraudulent transaction considering the fact that neither the arrangement nor the resolution was ever disclosed to the shareholders of the Company or the investors of the securities market through BSE. This aspect has not been reckoned by the Appellate Tribunal. This is a manifest error committed by the Appellate Tribunal.
We have no hesitation in taking the view that the Appellate Tribunal was unduly impressed by only one fact; but ought to have construed the resolution in the manner done by the SEBI and in particular, the inaction of the Board of not disclosing the arrangement to the shareholders or the investors of the securities market through BSE.
As a result, we set aside the impugned judgment and order and instead uphold the view taken by the SEBI vide its decision dated 28.02.2019.
As regards the debarment period specified in the said order, we accept the submission canvassed by the counsel for the respondent that the respondent having already undergone substantial part of the prohibition imposed by the SEBI vide order dated 28.02.2019, that period be treated as sufficient compliance of the final order passed by the SEBI.
Counsel for the appellant has left it to the Court to pass appropriate order on this submission.
Accordingly, we accept the submission made by the respondent and order that the prohibition imposed by the SEBI in terms of the order dated 28.02.2019 be treated as substantially complied by the respondent and nothing more needs to be done in that regard hereafter.
We are informed by the counsel for the respondent that there are other proceedings pending against the respondent, in which the respondent may be permitted to raise all permissible issues and contentions and those proceedings be decided in accordance with law. We have no difficulty in acceding to this submission. We order accordingly.
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