Levy of Compensation Cess - three cars, S-Cross, Ertiga and Ciaz (collectively referred to as HEVs) - Sl. No. 48 of N/N. 01/2017-Compensation Cess (Rate) dated 28.06.2017 as amended by N/N. 05/2017-Compensation Cess (Rate) dated 11.09.2017 - whether the car models for which advance ruling has been sought by the applicant are “with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion”? - HELD THAT:- As per the instant application, this requirement stands fulfilled in all the models of the cars in respect of which the instant advance has been sought The other requirement is that of electric motor and the phrase “motors for propulsion” clearly means that both motors. should be capable of propulsion. Thus, in unambiguous terms the words used “motors for propulsion” makes it mandatory for the electric motor also to be capable or propelling the vehicle on its own. “Motors for propulsion” means that both motors should be capable of propelling the vehicle.
As per advance ruling application, this is a case of “Mild hybrids”,- also called micro hybrids-use a battery and electric motor to help power the vehicle and can allow the engine to shut off when the vehicle stops (such as at traffic lights or in stop-and-go traffic), further improving fuel economy, Mild hybrid systems cannot power the vehicle using electricity alone - Further, the application also says that HEVs manufactured and supplied by the Applicant have a compact electric motor (Ciaz, Ertiga and S-Cross have electric motor of 1.779 kW, 1.779 kW and 1.772 kW capacity, respectively); that this compact motor in such HEVs provides assistance to the IC engine for propelling the vehicle and in other instances such as start-stop etc. These HEVs supplied by the Applicant draws energy from the consumable fuel as well as electrical energy; that in such HEV's the degree of hybridization is to the extent that electric motor provides assistance to the IC engine; that the electric motor assists the IC engine mainly when driver demands acceleration (press accelerator pedal above certain threshold); that therefore, such HEVs are mild hybrid vehicles.
We have carefully gone through these certificates which certify the vehicles complying with the requirements of the Central Motor Vehicle Rules, 1989. However, from none of the contents of these certificates It is clear that the electric motor present in the vehicle is capable of “motor for propulsion”. Propulsion means to push forward or drive an object forward. A propulsion system consists of a source of mechanical power, and a propulsar (means of converting this power into propulsive force). The certificates relied upon by the applicant do not make it clear whether the electric motor present in these vehicles is capable of propelling the vehicle and under these circumstances, they cannot be relied upon to decide the eligibility of impugned vehicles for the purpose of any notification issued under GST law.
Thus, electric motor in the cars for which advance ruling, is being sought in the instant case, is not capable of propelling the vehicle. Accordingly, the impugned vehicles failed to fulfill the main condition enshrined in the Serial number 48(d) of Notification No. 1/2017-Compensation Cess (Rate) dt.28.06.17, as amended, that vehicles should have both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion.
Classification of goods - rate of GST - Telemedicine as individual service - Pulse Oximeter (device to measure O2 in blood) - weighing scale to measure human weight - blood pressure measurement machine - Glucometer to measure blood glucose - test strips to measure blood glucose - android based tablet device for data storage - Finger print sensor machine - bundled sale of Medical Kit (a box) containing medical equipments - medical Kit and Telemedicine - Telemedicine - Admissibility of ITC on combined sale of Medical.
Telemedicine as individual service - HELD THAT:- Telemedicine as individual service is classifiable under chapter heading 9993 as Human health and social care services (S.No.31) and the same is chargeable to CGST & SGST @9% each, under Notification No. 11/2017-Central Tax (Rate) dt.28.06.2017 and Notification No-46/5T-2, dated 30.06.2017.
Pulse Oximeter (device to measure O2 in blood) - HELD THAT:- This device is classifiable under chapter beading 9018, as instruments and appliances used in medical, surgical, dental or veterinary sciences, including scientigraphic apparatus, other electromedical apparatus and sight testing instruments. They are chargeable to CGST & SGST @ 6% each, under serial number 218 of Schedule it of Notification No. 01/2017-Central Tax (Rate) dt.28.06.2018, and Notification No. 35/ST-2, Dated 30.06.2017.
Weighing scale to measure human weight - HELD THAT:- This device is classifiable under chapter heading 8423 as “weighing machinery (excluding balances of a sensitivity of 5 centigrams or better), including weight operated counting or checking machines; weighing machine weights of all kinds”. They are chargeable to-CGST & SGST @ 9% each, under serial number 324 of schedule III of Notification No.01/2017-Central Tax (Rate) dt.23.06.2018, and Notification No. 35/ST-2, Dated 30.06.2017.
Blood pressure measurement machine - HELD THAT:- This device is classifiable under chapter heading 9018 as instruments and appliances used in medical, surgical, dental or veterinary sciences, including scientigraphic apparatus, other elecromedical apparatus and sight testing instruments. They are chargeable to CGST & SGST @ 6% each, under serial number 218 of schedule II of Notification No.01/2017-Central Tax (Rate) dt.28.06.2018, and Notification No. 35/ST-2, Dated 30.06.2017.
Glucometer to measure blood glucose - HELD THAT:- This device is classifiable under chapter heading 9018 as instruments and appliances used in medical, surgical, dental or veterinary sciences, including scientigraphic apparatus, other elecromedical apparatus and sight testing instruments. They are chargeable to CGST & SGST @ 6% each, under serial number 218 of schedule 11 Notification No.01/2017-Central Tax (Rate) dt.28.06.2018, and Notification No. 35/ST-2, Dated 30:06.2017.
Test strips to measure blood glucose - HELD THAT:- This device is classifiable under chapter heading 9018 as instruments and appliances used in medical, surgical, dental or veterinary sciences, including scientigraphic apparatus, other elecromedical apparatus and sight testing instruments. They are chargeable to CGST & SGST @ 6% each, under serial number 218 schedule II of Notification No.01/2017-Central Tax (Rate) dt.28.06.2018, and Notification No. 35/5T-2, Dated 30.06.2017.
Android based tablet device for data storage - HELD THAT:- This device is classifiable under chapter heading 8471 as “automatic data processing machines and units thereat magnetic or Optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included”. They are chargeable to CGST & SGST @ each, under serial number 360 of schedule III of Notification No.01/2017-Central Tax (Rate) dt.28.06.2018, and Notification No. 35/5T-2, Dated 30.06.2017.
Finger print sensor machine - HELD THAT:- This device is classifiable under chapter heading 8471 as “automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data. Media in coded form and machines for processing such data, not elsewhere specified or included”. They are chargeable to CGST & SGST @ 9% each, under serial number 360 of Schedule III of Notification No.01/2017-Central Tax (Rate) dt.28.06.2018, and Notification No 35/ST-2, Dated 30.06.2017.
Bundled sale of Medical Kit (a box) containing medical equipments - HELD THAT:- The said medical kit comprises of goods which attract GST @ 12%, as well GST @18%. Therefore, the said medical kit shall be chargeable to GST @18%
Medical Kit and Telemedicine - HELD THAT:- It cannot be said that telemedicine and the aforesaid medical kit are having conjunction with each other in the ordinary course of business. Therefore, supply of these two together does not constitute “composite supply”. Rather the same are more aptly are covered by the definition of “mixed supply”, as discussed in the preceding paras, being independent from each other, apparently constitutes “mixed supply”. Therefore, in terms of Section 8 (b) of the CGST/HGST Act, 2017, which provides that a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax, the said supply of telemedicine and aforesaid medical kit will attract GST @18%.
Telemedicine - HELD THAT:- When GST is held payable on telemedicine services, the benefit of “input tax credit” is admissible on telemedicine medicines in terms of Section 16(1) of the CGST/HGST Act, 2017, which provides that every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
Admissibility of ITC on combined sale of Medical - HELD THAT:- The “input tax credit” on combined sale of medical kit as well as telemedicine, shall be admissible.
Supply of tax free goods - requirement of registration - liability of tax under RCM u/s 9(3) of CGST Act,2017 for transportation services for transporting tax free goods - requirement of registration for interstate supply/sales of tax free goods - Whether GST registration can be surrendered if we are not liable to pay RCM us 9(3) of CGST Act 2017 and not liable to be registered under GST Act?
Whether registration is required in case of supply of tax free goods under GST Act? - HELD THAT:- As per Section 23 (1) (a) of CGST Act, 2017, any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Service Tax Act shall not be liable to registration subjected to requirement in other section of the Act - Therefore, when the person is engaged in supply of exempted goods or services or both, which are not liable to be taxed, then such person shall not be liable to be registered under Act.
Whether assessee is liable to pay tax under RCM U/S 9(3) of the CGST Act, 2017 for transporting tax free goods? - HELD THAT:- Agriculture produce has been defined under Para 2 (d) of Notification No.12/2017-Central Tax (Rate) dt.28.06.17, as any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market - As regards the goods supplied by the applicant, the same are seeds which are covered under chapter heading 1209 of the first schedule to the Customs Tariff Act, 1975. As per the list of activities undertaken by the applicant, the harvested raw seeds are dispatched to the processing unit with the Production advice to Gurgaon or Bangalore as per requirement, where the seeds are processed with machines, quality checks are done thereafter the seeds are chemically treated and packed. Such chemically processed and treated seeds can no more be regarded as agriculture produce in terms of Para 2 (d) of the Notification No.12/2017- Central Tax (Rate) dt.28.06.17 - therefore, the applicant is required to pay GST under reverse charge mechanism in case of transportation services received for transporting the aforesaid goods from a Goods Transport Agency (GTA) - registration not required under GST Act.
Whether registration is required under GST Act, 2017 for interstate supply/sales of tax free goods? - HELD THAT:- Section 23 of CGST Act, 2017 provides that any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act shall not be liable to registration. Therefore, in case the applicant is engaged exclusively in supply of exempted goods [and also not receiving any taxable services liable to RCM under GST provisions], registration is not required under the CGST Act, 2017.
Whether GST registration can be surrendered if we are not liable to pay RCM us 9(3) of CGST Act 2017 and not liable to be registered under GST Act? - HELD THAT:- The applicant is liable to pay GST under RCM, in terms of Section 9(3) of the CGST Act, 2017, they are liable to registered under the CGST Act, 2017.
Levy of GST - booking/selling of plots to be done by The Applicants and Land owners during the development (before completion of the development work of the township) of the township - share of licensed plotted area agreed to be provided by the land Owners to the Applicant (developer) - Taxable value - rate of tax.
Booking/sale of developed plots by the Applicant and the land owners - HELD THAT:- It amounts to sale of land and the understanding of the Applicant of the law regarding this aspect of the transaction is correct. From the conjoint reading of Section 7 and Paragraph 5 of Schedule III of SGST/CGST Act, any activity/transaction in the nature of “Sale of Land” is not covered with in the preview of GST, hence no GST is payable on the transaction resulting in the sale of lands.
Transaction of transferring 20% share of their plots by the landowners to the Applicant - HELD THAT:- The question is itself answered in the querry of the Applicant that it is consideration for the works contract services rendered by the Applicant and therefore, we do not agree with the understanding of law by the Applicant on this part of the transaction. The transfer value of the plots will be considered as consideration paid by the land owners for the services rendered by the Applicant for development of their land and will be regarded as 'works contract, services attracting 18% GST.
Capital gain - Year of assessment year - possession of the property in compliance with the JDA - taxability on transfer of land - HELD THAT:- Admittedly the possession of the property in compliance with the JDA had admittedly passed from the assessee to the developer during the assessment year 2007-08. This is not the case where the joint developer was barred from transferring its share in the immovable property or entering into agreements for the transfer of its share in the undivided interest and the super construction before completion of the project.
In fact, as per Clause-6 of the agreement, the assessee handed over the possession of the land on receipt of the security deposit. These facts, which have been brought out in the Tribunal’s order in the case of co-owner’s case referred to supra, have not been disputed or dislodged by the Revenue.
This being so, the principles laid down in the case of Commissioner of Income Tax Vs.Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT] clearly do not apply to this case in so far as the transaction has gone through and more than anything else possession of the immovable property has already got transferred in line with the provisions of Sec.2(47)(v) during the assessment year 2007-08 itself. This being so, respectfully following the decision of Co-ordinate Bench of this Tribunal in the case of co-owner’s case, The I.T.O Vs. Shri Shafiq Mohammed Shah vide [2017 (5) TMI 1168 - ITAT CHENNAI] it is directed that the long term capital gains is taxable only during the assessment year 2007-08 and not during the assessment year 2014-15. Consequently, the appeal of the Revenue stands dismissed.
Addition on account of sales of sugarcane as income from unexplained cash credit u/s 68 - HELD THAT:- We find that the agricultural land holding of 9.80 hectares is not in dispute. The assessee has filed copies of bills of agricultural produce during the course of assessment proceedings and copy of ledger account showing sale of sugarcane at ₹ 8,37,33 as given in para 3 of the table of assessment order. The assessee has also produced Shri Mahendrabhai Patel and Shri Krunalbhai Lad for examination through whom sale of sugarcane was effected. The learned counsel for the assessee has filed a chart-showing yield @ 637.50 per hectares during relevant period and rate of sale @ 130 per quintal.
Accordingly, the estimate of sugarcane sale comes to ₹ 8,12,175 [637.50 X 9.80 hectares = 8,12,175]. Beside, this the assessee has also earned income from sale of cotton etc., which is also supported by 7/12 extract and 8A. Therefore, considering the facts and the circumstances of the case and taking a holistic view, we are of the considered opinion that the assessee might have earned the Gross agricultural income at ₹ 8,12,175/-, therefore, considering the expenditure @ 40% of gross income the net income would be at ₹ 4,87,305/- (₹ 8,12,175/ - ₹ 3,24,870/- = ₹ 4,87,305/-). Further, the AO accepted ₹ 79,837/- agricultural income earned by the assessee as reasonable. Thus net agricultural income is considered at ₹ 5,67,142/- (₹ 4,87,305/- + ₹ 79,837/-) as against the agricultural income credited in the books of accounts of the assessee at ₹ 9,17,170/-, accordingly, the addition on account of agricultural income is restricted to ₹ 4,87,305/- and accordingly the assessee gets relief.
Penalty u/s 271(1)(c) - CIT(A) has treated the addition on account of sugarcane receipts, therefore, the AO levied a penalty treating the income from unexplained sources - HELD THAT:- We find that the assessee the AO has made addition on account of agricultural income treating the same as unexplained which the CIT (A) has further, reduced by ₹ 1 Lakh in appeal. As we have also reduced the quantum addition to ₹ 4,87,305/-. In such situation the penalty is also required to be recalculated. Therefore AO is directed to calculate penalty on unexplained income at Rs. ₹ 4,87,305/- only. This grounds of appeal is therefore, allowed partly allowed.
TDS u/s 194C - payment made by the assessee to M/s.Zen Chinese Foods for supply of chinese good was as per the terms of contract - “Contractor” and “Contractee” between the owner and the supplier as per terms of agreement in the name and style of “FOOD SUPPLY ARRANGEMENT” - HELD THAT:- Assessee had entered into an agreement viz., ‘Food Supply Arrangement’ with M/s. Zen Chinese Food, whereas assessee was the owner of the restaurant and M/s. Zen Chinese Food was a supplier. The relevant terms of the contract has already been incorporated above from which it can be seen that it mis purely a supply arrangement and there is nothing to interfere that there is any kind of works contract.
Here it is not disputed by the department that the supplier was procuring the equipments as well as raw materials and supplying Chinese food to the assessee. Once that is so, then such a supply agreement ostensibly will fall in the category of ‘works contract’ so as to invoke TDS provision u/s. 194C. Thus, the order of the ld. CIT(A) holding that it is a goods of supply and purchase of material on which VAT has been charged then such a payment for supply will not entail TDS provision u/s.194C and accordingly, no disallowance u/s.40(a)(ia) can be made.
We hold that no disallowance u/s 40(a)(ia) can be made because no TDS provision is applicable u/s 194C on a payment for supply and purchase of material on which VAT has been charged. - Decided against revenue.
TP Adjustment - Selection of MAM - TPO rejecting Transactional Net Margin Method and instead applying Cost Plus Method [“CPM”] as the most appropriate method - disregarding requirements of Rule 10B and 10C of the Income-tax Rules, 1962 [“the Rules”] - HELD THAT:- As relying on PINO BISAZZA GLASS PVT LTD [2015 (10) TMI 2793 - ITAT AHMEDABAD] we allow the appeal preferred by the assessee by remitting the matter to the file of the Ld. Assessing Officer for de novo assessment where the assessee will raise their contentions on merit on ascertainment of Arms Length Price under the Transactional Net Margin Method as the assessee may deem fit. The Ld. Assessing Officer is further directed to decide the issue afresh in the light of the directions given by the Co-ordinate Bench as mentioned hereinabove.
Upward adjustment on account of ALP interest that was required to be charged by the assessee company from the associated enterprise in view of delay in realization of sale invoices beyond the credit period extended by the assessee company - HELD THAT:- Issue decided in own case [2013 (8) TMI 332 - ITAT AHMEDABAD] The credit period for finished goods cannot be compared with credit period for unfinished goods and raw materials, and in any case, when products are not the same, there cannot be any question of prices being the same. Unless the prices of the product and the product are the same, and yet extra credit period is allowed, there cannot be any occasion for making ALP adjustment on the basis of the excess credit period. None of the authorities below have even disputed that the ingredients, raw materials and semi-finished goods sold to Micro USA are not sold to any other concern. The very foundation of impugned addition in arm's length price on account of excess credit period is thus devoid of any legally sustainable merits or factual basis. When all these factors were pointed out to the learned Departmental Representative, he did not have much to say except to place his bland but dutiful reliance on the orders of the authorities below. However, for the reasons set out above and in the absence of any comparative price and credit period figures on comparable product to support the case of the revenue, we uphold the grievance of the assessee and direct the Assessing Officer to delete this ALP adjustment. The assessee gets the relief accordingly.
interest is includible in operating income and the operating income itself has been accepted as reasonable under the TNMM, there cannot be an occasion to make adjustment for notional interest on delayed realization of debtors. One can understand separate adjustment for excess credit period when the arm's length price for exports has been benchmarked on the CUP basis but not in a case when the arm's length price of the exports has been benchmarked on the basis of TNMM. The very conceptual foundation, for separate adjustment for delayed realization of debtors and on the facts of this case, is thus devoid of legally sustainable merits. We delete the ALP adjustment as made by the TPO towards the notional interest on receivables outstanding against sales made to AEs by the assessee. - Decided in favour of assessee.
Addition u/s 40A - enhancement of lease rent given by the assessee company to the Trust - unusual increase in the rent was primarily for the purpose of reducing the tax incident on the profits earned by the assessee company and not for business purpose - Tribunal held that enhanced lease rent was in the nature of capital expenditure, and therefore, not allowable. Even the invoking of provision of Section 40A (2) was confirmed - HELD THAT:- It is lease of a commercial property; therefore, the annual escalation would normally be more than the residential property. The assessee has given a comparison of property taken on lease with HPMC to show that comparatively assessee is paying more HPMC, and therefore, keeping in that benchmark the escalation of 10% to 11% is reasonable. Though, both the parties have been unable to give annual rate prevailing in the market, however, on the facts and circumstances of the case and looking to the fact that assessee is paying percentage- wise more rent to the government undertaking on a similar lease of commercial property, therefore, we hold that 10% of annual escalation would be reasonable from Assessment Year 1992-93 onwards.
Enhancement which is attributed to improvement and modernization of plant and machinery carried out by Trust - 12% rate as taken by the Assessing Officer seems to be on a very lower side even though this could not be proper base. Since substantial investment was done by the Trust in various years, therefore, looking to quantum of investment made and escalation over the period of time the rate of 18% claimed by the assessee seems to be quite reasonable and accordingly, we direct the Assessing Officer to take rent attributable to improvement and modernization of plant and machinery, building, etc during the Assessment Yea₹ 1989-90 to 1995-96 @18%.
Depreciation should be allowed on such a capital expenditure, because it is in the nature of intangible asset - We find substance in such a contention because part of the lease rent has been held to be on account of payment made to the Trust for not indulging in competition, i.e., it is in the form of ‘non-compete fees’ and such a ‘non-compete fee’ ostensibly falls in the category of commercial rights as defined in Section 32(1)(i), therefore, assessee is liable for depreciation from 1st April, 1998. In so far as the claim for entire non compete fee should be treated as revenue expenditure because of amendment brought w.e.f. 01.04.2003 in Section 28(va), we direct the Assessing Officer to examine this aspect and what is allowable as per the statute in respect of certain payment then the same needs to be allowed.
Purchase of khair wood - Assessee has claimed that 15% of the average purchases can be taken for the purpose of compensation which Assessing Officer has held that it should be @ 10% of the average purchases - HELD THAT:- AO has applied rate of 10% of the average purchases on right to purchase of khair wood surrendered in favour of the assessee by the Trust. The Assessing Officer has not given any reason as to why allowance @10% of the average purchases should be given. On the contrary, the assessee before us has demonstrated that in the case of the Trust the gross profit rate on similar product was more than 17%. The assessee has claimed rate of 15% of the average purchases as its compensation for the purpose of allocation of enhanced rent towards capital expenditure. Such a rate of 15% is inconsonance with the average GP rate in the case of the Trust, therefore, allowance of 15% is held to be quite reasonable. Accordingly, we direct the Assessing Officer to treat part of the lease rent fee for surrendering the right to purchase @15% of average purchases of khair wood.
ORDER:-
i. Part of the enhanced lease rent paid for surrendering the rise to purchase the khair wood should be taken @15% of the average purchases price.
ii. The normal escalation on fixed rent should be taken @10% of the lease charges per year.
iii. The rent attributable to modernization and improvement plant and machinery should be taken @18%.
iv. The Assessing Officer should allow depreciation w.e.f. 01.04.1998 on the portion of the rent which is held to be capital in nature in accordance with law and also examine the assessee’s contention that whether the non compete fee can be allowed as an expenditure in terms of amendment in the statute w.e.f. 01.04.2003.
Gains on sale of residential flat - Short Term Capital Gain OR Long Term Capital Gains - Period of holding - HELD THAT:- Considering the decision of various High Courts and the CBDT Circulars No. 471 & 672, we find that the holding period should be computed from the date of issue of allotment letter. In case, the holding period is more than 36 month from the date of allotment till the date of transfer, the asset is to be treated as Long Term Capital Asset in the hand of assessee and on transfer of such asset; the assessee would be entitled for Long Term Capital Gain.
Assessee acquired the right in flat no. 302, 3rd Floor, Tower-C with car parking in Oberoi Spring, Oshiwara, Andheri vide allotment letter dated 25.04.2008, which is duly confirmed and acknowledge by M/s Oberoi Construction. The assessee sold the said flat on 05.10.2011. Therefore, the gain earned by assessee is taxable as Long Term Capital Gain. Hence, the ground no.1 of the appeal raised by assessee is allowed.
Exemption u/s 54 - reinvestment of sale proceed in new residential house within two year after the date of transfer of old asset (old house) - HELD THAT:- The Hon’ble Karnataka High Court in CIT vs. Jyothi K. Mehta Jyothi [2011 (1) TMI 551 - KARNATAKA HIGH COURT]held that in newly asset acquired after the sale of original asset can also be a building or lands appurtenant thereto, which also should be “a residential house”. Therefore, the letter 'a' in the context it was used should not be construed as meaning "singular". But being an indefinite article, the said expression should be read in consonance with the other words 'buildings' and 'lands' and, therefore, the singular 'a residential house' also permits use of plural by virtue of section 13(2) of the General Clauses Act. Therefore, merely because the assessee purchased two units, it could not be said that she was not entitled to the benefit of section 54.
Assessing Officer is directed to allow exemption to the assessee under section 54 - Appeal of the assessee is allowed.
Addition made on account of low household expenditure - HELD THAT:- We find that the authorities below made addition purely on estimation basis. Reasoning given by the authorities below are on the ground that the assessee has 3 school going children, therefore, it is not possible to maintain the expenditure as claimed by the assessee. As submitted by the assessee that school fee was shown separately in capital account. The total household expenses are shown at ₹ 6,00,601/-. The family is residing jointly.
Therefore, it is contended that no addition is called for. We have given our thoughtful consideration to the facts of the present case keeping in view of the facts that fee and other expenditure have been claimed separately. We, therefore, restrict the disallowance to the extent of ₹ 2 lakhs. Rest of the addition is deleted. Ground No.2 of the assessee’s appeal is partly allowed.
Addition made on account of disallowance of transfer expenses of agricultural land sold - As contended that 50% of the transfer charges was required to be borne by the assessee - HELD THAT:- A.O. in the remand report has stated that the signature on the confirmation of stamp vendor Shri Iqbal Khan as submitted do not match with the signature on last page of sale deed as submitted in the paper book. Therefore, confirmation is not established to be of Shri Iqbal Khan. In reply to this observation, the assessee has stated that the signatures of a person may differ at different times. A.O. did not choose to call Shri Iqbal Khan in order to verify the authenticity of the confirmation. It is also stated that Shri Iqbal Khan has given an affidavit which is enclosed in the paper book at page No.250. We have perused the contents of this affidavit. As per this, the deponent of the affidavit Shri Iqbal Khan had admitted to have received money in respect of purchase of stamp papers related to the transaction in question. A.O. ought to have summoned the deponent of the affidavit and examine him. This exercise is not done by the A.O. We therefore, set aside the order of the authorities below on this issue and restore this issue to the A.O. to decide afresh to verify the facts of the affidavit of Shri Iqbal Khan by summoning him and making such enquiry which is necessary for verification. This ground of the appeal is allowed for statistical purposes.
Disallowing the exemption claimed u/s 54B - HELD THAT:- Revenue authority has recorded growing of soyabean and paddy from financial year 2005-06 to 2009-10. This fact is not controverted by the revenue by placing any contrary material on record. Moreover, we notice that the Ld. CIT(A) has also observed that intention of the assessee was not for utilising the land for agricultural purposes. We are of the view that where the assessee has demonstrated that it has fulfilled the conditions for availing the benefit of section 54B of the Act, intention of the assessee behind purchase and sale is of no consequence. We therefore, direct the A.O. allow deduction u/s 54B of the Act as claimed by the assessee, and delete the addition.
Addition u/s 68 - assessee said that the amount was received from the minor children of ₹ 3,70,000/-. - HELD THAT:- We find that in the remand proceedings, the A.O. has categorically stated that these advances were received from the minor children and these amounts pertain to the past savings of the children. The Ld. CIT(A) has not brought on record any adverse material rebutting the finding of the A.O. We therefore, direct the A.O. to delete this addition.
Disallowance of interest paid to bank and enhancing the interest income on the term loan against fixed deposits - HELD THAT:- The assessee claimed interest there on and the same was disallowed by the A.O. on the ground that the assessee had not shown any business income in the computation of income. The Ld. CIT(A) did not adjudicate this ground, however, enhanced the income. It is stated that the A.O. has confirmed the fact in the remand report. It is also stated that the notice for enhancement was defective as in the notice it was stated that what was the basis of claiming interest expenses of ₹ 9,38,756/- and not the notice as to why the interest income from Dena Bank was not offered. We find force into the contention of the assessee. The interest income as offered and the expenditure incurred there on was a direct nexus with earning of such income which is allowable u/s 57 of the Act. The factum of offering of income of ₹ 9,31,084/- is duly admitted by the A.O. in his remand report. The assessee has proved nexus with the expenditure incurred and income earned. Therefore, the addition is hereby deleted. Ground No.6 of the assessee’s appeal is allowed.
Disallowance of agricultural income - HELD THAT:- It is prayed that the agricultural income may be estimated. After considering totality of the facts and material on record as the land was sold in Jan’16 and the Pustika of the another land is also placed on record, we therefore, estimate income at ₹ 1 lakh. The assessee gets relief of ₹ 1 lakh. A.O. to delete addition of ₹ 1 lakh. This ground of the assessee’s appeal is partly allowed.
Addition on account of not accepting the deposits received from the persons against booking of flat - HELD THAT:- We find that the assessee has furnished PAN No., Income tax Returns of the two persons namely Sunil Solanki and Dilip Solanki. The assessee has claimed that the amount so received as advance not as a loan. This fact requires verification by the A.O. We therefore, set aside the order of the Ld. CIT(A) on this issue and restore the issue to the file of the A.O. for verification from the persons who had advanced money to the assessee and decide the issue afresh.
Addition on non acceptance of gift from mother of the assessee Smt. Kanta Sojatia - HELD THAT:- A.O. has also accepted the factum of gift. It is stated that the Ld. CIT(A) has proceeded only on the ground of suspicion. It is stated that there is no evidence to demonstrate that the cash of ₹ 15 lakhs was deposited by the assessee. It is further stated that mother of the assessee is a regular income tax payee. The capital of ₹ 40,98,329/- is duly reflected and disclosed to the department. It is further pointed out that on 5.11.2009, a sum of ₹ 9 lakhs was withdrawn from the bank account. Therefore, it cannot be inferred that mother of the assessee was not having any source of income. Under these facts, we are unable to sustain the finding of the Ld. CIT(A). Further, the assessee has demonstrated that balance amount of ₹ 2,78,522/- standing on the credit balance was also gifted to the assessee and the same was reflected by capital account also. Since the donor is having sufficient source to donate duly assessed to income tax, thus, the finding of the Ld. CIT(A) is not sustained and the addition made is deleted.
Addition on account of interest received but not reflected in the return - HELD THAT:- Assessee fairly conceded that this amount was not reflected in the books of accounts. We therefore, dismiss this ground of the assessee’s appeal.
Unexplained cash deposits in bank - HELD THAT:- All the transactions of preceding year are recorded in the books of accounts. The books are duly audited. The cash on hand as on 31.3.2009 of ₹ 5,98,017/-. As per the audited accounts, none of the deposit was found to be unaccounted. Section 69 of the Act would apply only when the transaction is not recorded in the books. It is stated that the assessment of assessment year 2009-10 was completed u/s 143(3) of the Act, wherein the cash balance was duly accepted. It is also stated that the cash in hand in earlier years was accepted. Ld. D.R. could not rebut this contention of the assessee that in the earlier year cash balance was duly accepted in the assessment proceedings.Therefore, the addition as made is deleted. In respect of the addition of ₹ 2,35,000/- , it is pointed out by the assessee that this amount was out of withdrawal during April, 2009. Therefore, addition made cannot be sustained. Same is hereby deleted.
Addition on account of cash deposits in bank - HELD THAT:- From the cash flow statement as furnished by the assessee, it is clear that the assessee was having cash in hand and cash received from Dainik Prabhat Kiran on sale of agricultural crop and refund of loan, etc. to make deposits in the bank. The revenue has not placed any adverse material contradicting the submissions of the assessee. Under these facts, the addition cannot be sustained. Hence, this ground of assessee’s appeal is allowed.
Addition on account of agricultural income - HELD THAT:- We find that the authorities below made addition purely on estimation basis. We have given our thoughtful consideration to the facts of the present case, we restrict the disallowance to the extent of ₹ 2 lakhs.
Registration of transfer of Equity Shares - Section 111 of the Companies Act, 1956 R/ w Section 58 of the Companies Act, 2013 - HELD THAT:- Section 56 and 58 of the Companies Act, 2013, deals with transfer and transmission of securities, and the appeal to the Tribunal. As per Section 56(1), a Company shall not register transfer of securities of the Company unless proper instrument of transfer in such form as may be prescribed, stamped, dated and executed by or on behalf of the transferor and transferee specifying the name, address and occupation of the transferee has been delivered to the Company by the transferor and the transferee within a period of 60 days from the date of execution along with certificate relating to the securities.
The Company has rejected transfer of shares vide letter dated 30.10.2015 by citing two reasons for rejection. One is there are criminal/ civil cases being filed by the Petitioner and not attended the board meetings, and secondly original share certificates are not enclosed. As stated supra, it is not in dispute that the impugned shares were issued to respective Transferors and those shares were purchased by the petitioners for consideration by investing huge amount. The petitioner is admittedly shareholder and Director of the Company. And there are no rival claims by any party with regard to impugned transfer of shares. It is true that the Article 5 of the Articles of Association says that original share certificates has to be enclosed with Share Transfer Form. Since the Transferors themselves have furnished sworn affidavits/ indemnity bonds, as stated supra, by declaring that they have lost original share certificates and the Company was requested to issue Duplicate share certifies directly to the petitioner, as they have sold the shares in question, Company cannot again insist to produce original share certificates in question to effect impugned transfer of shares. The other contentions for refusal that there are several criminal/ civil cases filed by the petitioner and he is not attending the Board Meetings, he will create problems for smooth functioning of affairs of Company etc. are not all tenable, and they are liable to be rejected.
It is settled position of law that a Company represented by its Board of Directors, cannot exercise its powers arbitrarily and those actions are always subject to judicial review. In any case, the Tribunal is empowered to have judicial review of the impugned action of rejection - The action of respondents in refusing to effect impugned shares in favour of the petitioner is arbitrary and unjustifiable. Personal and family issues will not come in the way of law taking its own course. And all the grounds raised for such rejections are hereby rejected as not tenable. Therefore, the Company petition deserves to be allowed.
TDS u/s 195 - Addition u/s 40(a)(i) - disallowing the payment made by the Appellant to various non-resident television content aggregators ('channel companies') - plea of the assessee that disallowance of payment made to channel companies u/s.40(a)(ia) of the Act is based upon retrospective amendment in section 195 of the Act and cannot be made as no one can be expected to do the impossible - HELD THAT:- Since it is not disputed that the retrospective amendment in section 195 was made subsequently, the assessee cannot be expected to have deducted TDS u/s.40(a)(i) anticipating the amendment.
Honourable apex court in the case of Vodafone International Holdings B.V.[2012 (1) TMI 52 - SUPREME COURT]had held that withholding tax provisions under section 195 of the act would be applicable when payments are made by a resident to another non-resident and not between two non residents outside of India. Since the payments as one in the present case are between two non-residents, as per the ratio emanating from above said honourable apex court decision the provisions of withholding tax are not applicable. On the basis of the above said discussion and precedent's we are of the considered opinion that disallowance under section 40(a)(i) cannot be made in this case. - Decided in favor of assessee
Accrual of income - Holding SASBV (now known as IGNBV) as an alleged conduit of Star Ltd. and taxing the revenue in the hands of Star India Private Limited ('SIPL') on accrual basis - This issue has been decided in favour of the assessee by the Hon'ble jurisdictional High Court in the case of Director of Income Tax (IT) vs. Satellite Television Asian Region Ltd. [2015 (6) TMI 1211 - BOMBAY HIGH COURT]
Deduction of head office expenses u/s. 44C - AO has held that the deduction claimed in respect of allocated head office expenses have been disallowed pursuant to an adjustment made to the arms length price u/s. 92 - HELD THAT:- As assessee in this regard submitted that the Transfer Pricing Officer in his short order has mentioned that the assessee has not submitted anything and the assessee had provided all the necessary details which have not been referred by the TPO, thus issue needs to be remitted to the file of the A.O. to compute reasonable attribution on the basis of documents being submitted by the assessee. Accordingly, this issue is so remitted.
Disallowance of payments made to AsiaSat for transponder hire charges under Section 40(a) - HELD THAT:- As decided in own case [2011 (1) TMI 47 - DELHI HIGH COURT] this issue is now covered, in principle, in favour of the assessee held Tribunal was not justified in holding that the amount paid to the assessee by its customers represented income by way of royalty, as the said expression is defined in the Explanation 2 to section 9(1)(vi).
Levy of interest u/s. 234B and 234C - HELD THAT:- issue is covered in favour of the assessee while the Mumbai ITAT decision in assessee’s own case vide department’s appeal [2012 (7) TMI 221 - ITAT MUMBAI] and [2010 (5) TMI 682 - ITAT MUMBAI]. Further he submitted that this issue is also covered in favour of the assessee vide the Hon'ble Bombay High Court decision in the case of NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]
Estimation of income - bogus purchases - additions were restricted @ 12.5% by CIT-A - HELD THAT:- Payments were made through account payee cheques and the AO himself has not ruled out the possibility, that the assessee might have made these purchases from grey markets from some other parties by investing unaccounted cash. As per the factual position, the sale proceeds of said goods have been duly accounted for in the books and offered to tax. CIT(A) had correctly concluded that addition of entire purchase amount cannot be made in the present case, rather a reasonable percentage of such purchases in order to fulfill the gap of any revenue leakage was applied. Thus, the additions were restricted @ 12.5% of the alleged purchases.
No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld.CIT(A).
Payments to persons specified in section 40A(2)(b) - CIT(A) in deleting the addition made by the AO as unproved penalty and sustaining only 20% of the said expenditure - HELD THAT:- CIT(A) after correctly appreciating the facts of the present case had concluded that the assessee had made payments to M/s. Pancharatna Plastics. Even the auditors in their tax audit report had made an observation that the assessee had made payments to persons specified in section 40A(2)(b) which prompted the AO to call for the information/details in relation to this expenditure. Although the assessee had furnished the details of expenditure, however the AO disallowed the entire expenditure u/s 40A(2)(b) on the ground that no corroborative evidence was furnished. The Ld. CIT(A) correctly concluded that if no corroborative evidence in relation to this expenditure was coming forth from the assessee then, the AO ought to have disallowed this expenditure under section 37 and not under section 40A(2)(b).
CIT(A) also correctly appreciated that the question of disallowance would arises only where there is excessive payment of expenditure to such person who are referred in clause (b) of section 40A (2) of the Act and in the instant case, it is the father of the appellant. In this case, the transactions were between sister concerns in regular course and they have not paid any amount to each other towards expenses warranting the additions under section 40A(2)(b). As per the provisions, the additions can only be made if excessive or unreasonable was spent. But the AO had disallowed the entire expenditure without substantiating the quantum of unreasonable or excessiveness. Under section 40A(2)(b) only such excessive and unreasonable expenditure paid to specified person is disallowable. Therefore, Ld. CIT(A) correctly confirmed the additions to 20% of alleged disallowance. - Decided against revenue.
Addition u/s 69C - Unexplained purchases - discrepancy between the accounts of the assessee and the said M/s Lanscape Enterprise - HELD THAT:- CIT(A) after correctly appreciating the facts of the present case had concluded that as per the facts, the assessee made purchases from M/s Landscape Enterprises and since, there was a discrepancy between the accounts of the assessee and the said M/s Lanscape Enterprise, therefore additions u/s 69 C were made. Ld. CIT(A) after appreciating the factual position had rightly concluded that the assessee has on his part substantiated the details of purchases made by him from the said M/s. Landscape Developers and has also substantiated the payments made by cheques to the said M/s. Landscape Developers. The assessee had also reconciled the figures of purchases and payments with the said party and had arrived at negligible difference of ₹ 4,624/- as against the total purchase transaction of ₹ 43,25,579/-. Therefore, deleted the disallowance made by AO correctly. - Decided against revenue.
Unexplained Expenditure U/s 69 - survey at the residential premises of the assessee, Laptop belonging to assessee’s brother was found and impounded - HELD THAT:- CIT(A) after correctly appreciating the facts of the present case had concluded that during the survey at the residential premises of the assessee, Laptop belonging to assessee’s brother Mr. Kevin Rajendra Shah was found and impounded. On the basis of various print outs, the additions were made although, assessee had denied to have incurred such expenditure but AO rejected the stand of the assessee. The Ld. CIT(A) after considering the factual position and the submission made by the assessee, had rightly concluded that the survey team had exceeded their jurisdiction by entering the residential premises of the assessee and Kelvin R. Shah was in no way connected with the activities of the assessee
CIT(A) had correctly mentioned that AO had disregarded assessee’s own books of accounts which were regularly maintained and assessee is also regularly assessed to tax. It was correctly appreciated that AO had just taken the print-outs from the laptop Mac-book of one Mr. Kevin Rajendra Shah, the younger brother of the assessee who had nothing to do with the business activities of the assessee and had proceeded to make an add back to the appellant's returned income as Unexplained Expenditure U/s 69 of the Act. The income based on such guess work has no place in law and the same requires to be deleted. - Decided against revenue.
Addition based on survey proceedings - mention of expenses in Mac-book of Brother and found at Brother's place - HELD THAT:- AO had disregarded assessee’s own books of accounts which were regularly maintained and assessee is also regularly assessed to tax. As per the facts of the present, the AO had just taken the print outs from the laptop Mac book of one Mr. Kelvin R. Shah, younger brother of the assessee who had nothing to do with the business activity of the assessee. The addition made by the AO was based on guess work which has no place in law. The Ld. CIT(A) while reaching to the conclusion had correctly relied upon the judgment of Hon’ble Supreme Court in the case of CIT Vrs. S. Khader Khan [2013 (6) TMI 305 - SC ORDER]
Addition u/s 69C - during the course of survey operations under section 133A of the Act, a loose document was impounded which depicts expenditure purported to have been incurred by the assessee - HELD THAT:- When dumb document like the present loose sheet of paper is recovered and the Revenue wants to make use of it, then the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. Since in the present case, the Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized paper reveal the unaccounted expenditure incurred by the assessee. Thus the impugned addition was made by the AO on grossly inadequate material or rather no material at all and as such, deserves to be deleted.
Classification of imported goods - Optical Fiber Cable used in telecommunication - classifiable under Customs Tariff Heading 8549 and eligible to benefit of exemption under Notification No. 20/2005-Cus., dated 1-3-2005 or the classification of the said cable is under Tariff Heading 9001 of Customs Tariff Act, 1975? - HELD THAT:- As far as classification of the Optical Fibre Cables imported by the appellants, the Larger Bench of this Tribunal has decided the issue on merit against the assessee observing that the same is classifiable under Customs Tariff Heading 9001 of the Customs Tariff Act, 1975. Therefore, the appeals filed by the assessees are accordingly dismissed.
Levy of redemption fine and penalties - HELD THAT:- In addition to confirmation of the demand, the authorities below have imposed fine and penalty, which in our opinion cannot be sustained as the issue involved relates to classification of the imported Optical Fibre Cables and no facts have been suppressed nor misdeclared while claiming classification under Heading No. 8544 of Customs Tariff Act, 1975. Consequently, the fine and penalties imposed are set aside and orders are modified to this extent and appeals are partly allowed.
Enhancement of penalty - HELD THAT:- The filed by the Revenue, which relates to enhancement of penalty, the same is dismissed and the Appeal also of the Revenue, which relates to classification of the Optical Fibre Cables under Tariff Heading 9001, is hereby allowed.
Levy of penalty under Section 114AA of the Customs Act, 1962 - opening of fake bank accounts in the name of appellant - HELD THAT:- The appellant had already studied upto graduation, and was further pursuing hotel management courses. Thus, the appellant was an adult aged about 22 years. Thus, it cannot be said that the appellant was of tender age and innocent. Further, it is not coming from the facts on record that the appellant knowingly did the acts of omission and commission during his pleasure trip to Hong Kong. However, the appellant was paid about ₹ 20,000/- by Palta Brothers and thus, the appellant appears to have been lured in signing various documents for opening of bank account in connection with the company, without much understanding the consequences.
The penalty is rightly imposed on the appellant - But the penalty imposed is excessive, the penalty reduced from ₹ 1,00,000/- to ₹ 25,000/- - appeal allowed in part.
Application seeking comprehensive moratorium qua R1 Company and the group Companies of R1 for three months or such other period - protection against any action by any party to foreclose, recover or enforce any security interest created over the assets of R1 Company or any other group Company - HELD THAT:- It appears that Petitioner is seeking moratorium qua R1 Company and the group Companies, to protect the institution and continuation of any legal institution or continuation of any legal proceedings before any Court, Tribunal, Arbitral Panel or Authority. The reliefs sought by Petitioner resembles with the moratorium provided u/s 14 of the Insolvency & Bankruptcy Code which provides that if the petition is admitted u/s 14 of the IBC, then moratorium order shall come into effect.
Now applicant UOI is seeking moratorium order in this case on the basis that R1 Company is financial service provider and IBC do not apply for the financial service providers. Therefore, they have moved the application u/s 241(2) of the Companies Act, 2013 for seeking moratorium order. It is further stated in the Application that present legal framework does not facilitate making the necessary application under the IBC for resolution of R1 Company as the IBC does not address resolution relating to financial service providers. It has also stated that Central Government has the power u/s 227 of the IBC to notify certain categories of the financial service providers who may be subject to the provision of the IBC. Since no such notification has been issued by the Central Government till date, therefore, Petitioner has moved this application u/s 241 and 242 of the Companies Act, 2013 - the resolution of R1 Company and its group companies as a whole is inextricably linked to the resolution of each of these companies, and there is no power to wind up a company on account of it defaulting on its debt. Thus, the only recourse is to initiate the insolvency proceedings under IBC for this is not available in respect of financial service providers.
If the Petition is filed under IBC for initiating insolvency proceeding then after admission of the petition and on initiation of insolvency proceedings moratorium order under IBC becomes applicable. The Union of India's contention is that since it has not notified the financial service provider, therefore IBC is not applicable to the financial service providers for want of notification from Govt. of India. Thus they have no option except to approach this Tribunal for seeking declaration of moratorium for restructuring of debts of R1 and its group companies.
The moratorium orders which can be passed under the IBC cannot be extended under section 241-242 of the Companies Act, 2013. Powers under section 242 of the Companies Act, 2013 can be exercised by NCLT only in case the affairs of the company have been or being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in the manner prejudicial to the interests of the company. In such circumstances the Tribunal may, with a view to bringing to an end the matters complained of make such orders as it things fit - The provision of section 242 provides that it can be invoked when the matter is complained of u/s 241 of Companies Act, 2013. In this case, the remedy has already been granted after being satisfied that the affairs of the company are mismanaged. The suspension of the existing board was under the powers of section 242 of the Companies Act 2013.
The moratorium which has been sought by the Union of India by an application u/s 242 of the Companies act 2013 cannot be granted - Application disposed off.
Interim Order - CIRP Process - resolution of the problems faced by the Company in a time-bound manner for maximisation of value of assets of the Company - Section 241 read with Section 242 of the Companies Act, 2013 - HELD THAT:- The five largest creditors should be also impleaded as party Respondents to these appeals in the representative capacity of the Creditors. Learned counsel for the Appellant(s) will make necessary correction in the cause title and other pages of the appeals in course of the day. Defects, if pointed out by office, may be removed before the next date.
Issue notice on Respondents, including newly impleaded Respondents by speed post. Requisite along with process fee, if not filed, be filed in course of the day. If the Appellant(s) provides the e-mail address of Respondents, let notice be also issued through e-mail. Dasti service is permitted particularly in the newly impleaded Respondents - Post these appeals ‘for admission’ on 13th November, 2018 on the top of the list.
TP adjustment relating to difference in the interest paid on loan - assessee has given a loan in foreign currency to its AE and has charged interest @ EURIBOR Plus 0.25% - such an interest rate was benchmarked by applying CUP method whereby the ALP interest rate was considered at EURIBOR Plus 0.12% - HELD THAT:- Assessee has given loan to its AE in foreign currency only, therefore, to hold that such a foreign currency loan should be treated as loan given in India rupee, because it has gone from the accounts from India is not correct observation of the TPO.
DRP, therefore, has rightly held that AO did not have any rational basis for treating the foreign currency loan to be given in INR. Now is a well settled law that a loan given or taken in foreign currency loan, then same has to be benchmarked with reference to the market determined interest rate applicable to the currency loan has to be repaid. See M/S COTTON NATURALS (I) PVT. LTD. [2015 (3) TMI 1031 - DELHI HIGH COURT] - No transfer pricing adjustment can be made by the TPO by applying SBI base rate. Thus, the appeal of the revenue is dismissed.
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