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2019 (2) TMI 1906 - CESTAT CHANDIGARH
Refund claim for the service tax paid - Reverse Charge Mechanism on Works Contract Service under Banking and Financial Institution Services - Rejection on two grounds that the appellant has failed to show that the said service tax paid under Works Contract Service and the appellant has failed to prove that they have paid service tax - HELD THAT:- In this case, it is a fact on record that whatever service tax was payable by the appellant under Banking and Financial Institution Services, the same has been paid by them and there is no dispute that in the case of the service tax payable by the appellant during the impugned period under Banking and Financial Services has not been paid. The service tax for which refund has been filed by the appellant was paid under wrong head as Banking and Financial Service instead of Works Contract Service under reverse charge mechanism for the services availed by L.G. Electronics Pvt. Ltd. If it is a fact on record, in that circumstances, the refund claim cannot be rejected on technical grounds that the appellant has not paid service tax under Works Contract Service when the appellant produced a certificate issued by the Chartered Accountant showing that the service tax in question of which refund claim filed is none other than works contract service.
Appeal allowed - decided n favor of appellant.
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2019 (2) TMI 1905 - AUTHORITY FOR ADVANCE RULING, HARYANA
Levy of GST - grant of Development rights - Valuation Modus Operandi to tax in GST - whole argument of the applicant regarding exemption of development rights from levy of GST hinges on its belief/ contention that the transfer of development rights amounts to sale of land - HELD THAT:- The term immovable property as defined in the CGST/SGST Act includes land, benefits to arise out of land, and things attached to the earth, or permanently fastened to the earth. Section 54 of Transfer of Property Act 1882 defines sale as transfer of ownership in exchange for a price paid or promised or part paid and part promised.
The application for seeking license from the Government for the development of developable land is to be made by RBIPL along with the applicant. EDPL is authorized to communicate with the Govt. on behalf of the RBIPL. The EDPL shall obtain the necessary governmental approval on behalf of RBIPL and associates. All municipal taxes, cesses and other public dues with respect to the developable land shall be paid and discharged by RBIPL. Further, the RBIPL has agreed to deposit the original titled documents of the developable land as guarantee for the performance of secured obligations, meaning thereby that RBIPL is the owner of the developable land - these terms of MOU make it crystal clear that the title of ownership of land vests with the RBIPL. Since RBIPL is the owner of the developable land, mere transfer of certain rights i.e. the development rights does not confer any title or ownership in the developable land upon the applicant.
Hence, the argument that the transfer of Development rights amounts to sale of land under Entry No. 5 of Schedule III appended to CGST Act (Activities or transaction which shall be treated neither as a supply of goods nor a supply of services) is outrightly rejected.
Value and time of supply - HELD THAT:- Notification 4/2018-CGST(Rate), dated 25.01.2018 notified that the liability to pay tax in case of transfer of development rights in exchange of constructed space shall be the date of allotment of constructed complex, i.e., the letter of allotment issued by the developer after the construction is complete. The notification clearly suggests the liability to pay tax on transfer of Development Rights - the value of supply has to be determined in accordance with Notification No. 11/2017 Central Tax (Rate), dated 28 June, 2017 read with notification No. 4/2018 Central Tax (Rate), dated 25 January 2018. The relevant entry for valuation is Sr. No. 3, Heading 9954 read with Para No. 2 of Notification No. 11/2017 Central Tax (Rate), dated 28 June, 2017.
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2019 (2) TMI 1904 - AUTHORITY FOR ADVANCE RULING, HARYANA
Classification of supply - Supply of goods or supply of services - electricity/ electrical energy is treated as supply of goods and intra-states supply thereof - supply of utilities/ leasing are separate supplies or composite supplies? - exemption from payment of CGST in terms of Serial Number 104 Notification No. 2/2017-CT(Rate), dated 28.06.2017 - eligibility of Input Tax Credit.
Electricity - goods or service? - HELD THAT:- The Notification No. 2/2017-Central Tax (rate), dated 28th June, 2017 pertains to goods, the intra-state supply of which is exempted under the GST Act. The Entry No. 104 of this notification is regarding Electrical Energy. This suggests that Electrical Energy is a goods and not a service. There is also no doubt that electricity and electrical energy are one and the same thing - It is therefore, clear that electricity is a goods and not a service.
Having ruled that electricity is goods, we come to the question whether supply of electricity via DG sets is a goods or service. The power backup provided by the Agilent Technologies i.e. the lessee is in the form of a service. The charges for this supply are determined by the lessee as per its convenience. The DG set belongs to the Agilent Technologies, the maintenance charges are also borne by the Agilent Technologies, the expenses record pertaining to the DG set is also maintained by Agilent Technologies. Therefore, the authority has no hesitation in concluding that the provision of electricity supply/power back-up via DG set is in the form of a service and not goods - the electrical supply is liable to GST to the extent it is supplied through DG set.
Whether the supply of electricity and supply of utilities / leasing are separate supplies or composite supplies? - HELD THAT:- In the instant case, the supply is made by a taxable person and the number of supplies are also multiple. But as discussed earlier, the supply of electricity to the extent of it being supplied through grid is exempt from GST and, therefore, the condition of two or more taxable supplies is not satisfied. Further, the supply of utilities and supply of electricity are neither naturally bundled together nor are they supplied in conjunction with each other. Also, neither of the two supplies i.e. utility services and electricity supply can be termed as a principal supply and the other one being a natural ancillary - the supply of utility services and electricity supply are separate supplies - The provision of electric supply by way of DG set forms part of the utility services taxable at 18% whereas the supply of electricity by way of grid is exempt from GST.
Input Tax Credit charged on renting services and electricity - HELD THAT:- It is understood that renting of business premises is indispensable for carrying any business, no matter how small the scale is. It is also admitted that renting of business premises is in the course and furtherance of business as space is required for carrying out the operations relating to business - it is observed that since the grid supplied electricity is exempt from GST, the issue of credit availability does not arise. As regards, the tax on supply of electricity through DG set, the Authority is of the opinion that the applicant is entitled to credit of input tax paid with respect to tax paid on availing the said service.
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2019 (2) TMI 1903 - AUTHORITY FOR ADVANCE RULING, HARYANA
Taxability - lien or mortgage charges and stock transfer fees received by the applicant from the service receiver - taxable under section 9 of Central Goods and Service Tax Act, 2017 and Section 9 of Haryana Goods and Service Tax Act, 2017 or exempt under section 11 of Central Goods and Service Tax Act, 2017 with respect to both agricultural and non-agricultural produce stored and warehoused in the warehouses of the applicant? - HELD THAT:- On perusal of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, the Advance Ruling Authority reaches to the conclusion that the services in question are taxable services. The Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 provides for Nil rate of tax with respect to loading, unloading, packing, storage or warehousing of agricultural produce. The notification nowhere exempts the charge/mortgage/lien fee and stock transfer fee charged by the applicant from the service recipient in case of agricultural goods from the Goods and Services Tax.
The scope of storage and warehousing services as defined in CBEC Circular No. B/II/1/2002-TRU dated 01.08.2002 does not encompass the mortgaging and stock transfer service - The charge/mortgage/lien fee and stock transfer fee with respect to non-agricultural goods stored and warehoused is liable to tax under the CGST/ HGST Act, 2017.
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2019 (2) TMI 1902 - AUTHORITY FOR ADVANCE RULING, HARYANA
Taxable services or not - provision of services (Manpower Supply) of tube well operator for operation of tube well and booster of drinking and irrigation water supply in various villages - HELD THAT:- As per perusal of the copy of contract, submitted by applicant along with his application, only manpower supply services are to be provided by the applicant and since, no supply of goods is involved, such services qualify as pure services. Further, the said services are being supplied by applicant to Union Territory of Chandigarh as the contract is awarded by Executive Engineer, Project P.H. Division No. 3, Chandigarh functioning under the Department of Engineering of Union Territory of Chandigarh. The functions entrusted to a panchayat under the Eleventh Schedule to Article 243G of the Constitution include Agriculture, Land Improvement, Minor irrigation, Water management, Drinking water, Rural housing, Fuel and Fodder etc and therefore the activities performed by applicant under the said contract are services supplied in relation to any function entrusted to a Panchayat under article 243G of the Constitution.
The provision of services (Manpower Supply) of tube well operator for operation of tube well and booster of drinking and irrigation water supply in various villages covered under Panchayat are exempt being covered under entry at Sr. No. 3 of CGST Notification No. 12/2017-Centra1 Tax (Rate), dated 28th June, 2017.
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2019 (2) TMI 1901 - ITAT MUMBAI
Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance by assessee - HELD THAT:- As the assessee itself had offered a disallowance under Sec.14A, therefore, the CIT(A) had in all fairness restricted the disallowance upto the said amount. We thus not finding any infirmity in the order of the CIT(A) who as observed by us hereinabove had restricted the addition to the extend as offered by the assessee in its return of income, uphold the same to the said extent.
Adjustment made by the A.O to the ‘book profit’ under Sec. 115JB on account of expenses relatable to exempt income under Sec.14A. - HELD THAT:- As relying on VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] the adjustment made under Sec. 14A is not to be considered for computing the ‘book profit’ under Sec. 115JB - We thus uphold the order of the CIT(A) to the said extent. Decided against revenue.
Additional depreciation u/s 32(iia) - A.O being of the view that as per the provisions of Sec.32(1)(iia) of the I.T. Act the additional depreciation was to be allowed @ 20% of the actual cost of machinery of plant in the year in which it had been acquired and installed and could not be spilled over to the subsequent years, thus declined to allow the additional claim of depreciation @ 10% - HELD THAT:- There is no restriction made available on the statute as per which the assessee who had put to use the new machinery for a period of less than 180 days during a year, would be divested of its entitlement to claim the balance 10% of the additional depreciation in the succeeding assessment year. Our aforesaid view is fortified by the judgment of CIT, Madurai , Vs. T.P. Textiles (P) Ltd [2017 (3) TMI 739 - MADRAS HIGH COURT] and Rittal India Pvt. ltd. [2016 (1) TMI 81 - KARNATAKA HIGH COURT]. We thus being of the considered view that no infirmity arises from the order of the CIT(A) who had rightly deleted the disallowance of additional depreciation.
Bad debts claim - assessee sought adjudication on its claim of ‘bad debt’ on the basis of the facts which were already available on record - HELD THAT:- As per the settled position of law as, we are of the considered view that no infirmity does emerge from the order of the CIT(A) who had directed the A.O to consider the said claim in the backdrop of the judgment of the Hon’ble Supreme Court in the case of TRF Ltd Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] and the CBDT Circular No. 12/2016, dated 30.05.2016. We thus finding ourselves to be in agreement with the view taken by the CIT(A), uphold his order to the said extent. The Grounds of appeal No. 5 and 6 raised by the revenue before us are dismissed.
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2019 (2) TMI 1900 - ITAT PUNE
Addition u/s. 41(1) - cessation of liability - AO observed from the schedule of sundry creditors that there were creditors whose outstanding balances as on 31/03/2012 & 31/03/2013 had remained the same - HELD THAT:- CIT(Appeals) observed that the assessee has not filed single submission to controvert the findings of the AO. In the statement of facts, the assessee has filed only the order of Assessing Officer without any new supporting documents to represent her case. This fact shows that the matter needs to be remanded to the file of Ld. CIT(Appeals) for adjudication on merits.
Accordingly, in the interest of justice, we set aside the order of Ld. CIT(Appeals) and restore this issue i.e. with regard to the addition made u/s.41(1) of the Act back to the file of the Ld. CIT(Appeals) to adjudicate on merits after providing reasonable opportunity of hearing to the assessee. At the same time, we direct the assessee to appear before the Ld. CIT(Appeals) with relevant documents and evidences in support of her case and to represent the case on merits, immediately on receipt of this order. Any service of notice is dispensable. Appeal of the assessee partly allowed for statistical purposes.
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2019 (2) TMI 1899 - ITAT SURAT
Reopening of assessment u/s 147 - capital gain computation - assessee had not shown any long term capital gain under the provision of section 45(2) r.w.s. 2(47) and section 55(2)(b)(i) - CIT(A) has assigned the rate for land at ₹ 900/- per sq. mt. on the date of transfer of the aforesaid land as to the firm - HELD THAT:- We observed there was no material on record which could have clarified the impugned discrepancy of incorrect reporting of income by the assessee. AO was having reasons of to believe that income chargeable to tax has escaped assessment for the year under consideration. After considering the above facts and circumstances as elaborated supra we justify the findings of the ld. CIT(A) that the assessing officer reopened the assessment with valid reason. Therefore, the appeal of the assessee on this issue is dismissed.
Capital gain computation - AO held that non-agricultural land of 4960 kg mtrs held as stock in trade by the assessee was brought as capital contribution to the firm M/s. C.N. Builders and Developer on 18-10-2003 - HELD THAT:- We observe that impugned land forming stock-in-trade of assessee was transferred as a capital contribution by assessee therefore profits or gains arising from transfer of this asset would be chargeable to tax as assessee's income of previous year in which such transfer has taken place. Lower authority has failed to make any reference to the Valuation Officer u/s 55A of the act to determine the fair market value of the asset we direct the assessing officer to adopt rate of ₹ 900/- per sq. mts for the value of the impugned land as determined by the Ld.CIT(A) in his order dated 21st July 2010.Accordingly this ground of appeal of the assessee is partly allowed.
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2019 (2) TMI 1898 - MADRAS HIGH COURT
Grant of Anticipatory Bail - fraudulent availment of input tax credit - fake invoices without actual supply of Goods/Services - According to Department the petitioners are adopting a modus operandi whereby they make payment to the suppliers of invoices without movement of goods/services through banking channel and get back such amount after payment of agreed commission to the supplier of fake invoices - Section 132 of the Central Goods and Services Act, 2017 - HELD THAT:- The enactment in question has come into force very recently with a laudable object of one country one tax. Therefore wherever the department finds that certain provisions in the Act is misused by creating fake invoices and input tax credit is being availed without any movement of goods, the same has to be curbed and nipped in the bud to ensure that it does not grow into another mega scam having a direct impact on the economy of this nation. Since the department has collected some prima facie materials , they want to act fast before it becomes a huge racket, failing which the entire economy of this country would weaken and collapse - If the petitioners are conducting genuine business through the above said companies, they can easily prove during the investigation the actual movement of goods, which will all be borne out by documents. If the department is satisfied regarding the same, the department will leave out the companies belonging to the petitioners and proceed further with the investigation.
In the considered view of this Court, in matters of this nature, the department must be given the complete independence to investigate the cases since it involves the national interest. This Court by entertaining an Anticipatory Bail Petition and by imposing certain conditions, should not tie the hands of the department in proceeding further with the investigation since what has been unearthed till now is only the tip of the iceberg and there is a long way to go for the department to find out how long this fake invoices have extended their tentacles.
As argued by the learned counsel for the petitioners, it is true that the entire issue is borne out by documents and once the petitioners co-operate for the investigation by submitting all the relevant documents, they should not be unnecessarily arrested. However, it is a settled proposition of law that this Court while considering a petition for Anticipatory Bail has to necessarily taking into consideration the nature and gravity of the accusation in a given case. When a case involves serious offences, grant of Anticipatory Bail by itself will cause prejudice to the investigation. Where the accused persons are charged of violation of CGST Act, involving colossal loss of revenue to the exchequer and the investigation is at a very nascent stage, prudence demands that this Court should lay of its hands from the investigation and allow complete independence to the prosecuting agency to proceed further with the investigation.
This Court is not inclined to entertain these Anticipatory Bail Petitions - Application dismissed.
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2019 (2) TMI 1897 - ITAT HYDERABAD
Disallowance u/s 14A r.w. Rule 8D(2)(iii) - HELD THAT:- This issue is covered in favour of the assessee in various decisions of the ITAT and one of such decisions is the decision of the Special Bench of Delhi ITAT in the case of Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that the disallowance under Rule 8D(2)(iii) can be only of the average of investments which have yielded exempt income. Respectfully following the same, the additional grounds of appeal are allowed.
Computation of income u/s 115JB - This issue is also covered in favour of the assessee by the Special Bench, ITAT Delhi decision in the case of Vireet Investments Private Limited (supra) wherein it was held that the computation u/s 115JB should be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of the IT Rules, 1962. Accordingly, grounds raised by the assessee are allowed.
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2019 (2) TMI 1896 - ALLAHABAD HIGH COURT
Grant of Bail - attachment of Bank accounts - schedule offences - principles of parity - Division Bench, with regard to co-accused pradeep Garg directed the Special Court to pass the bail order in the light of order of Supreme Court in OMPAL SINGH (PRADEEP GARG) VERSUS CENTRAL BUREAU OF INVESTIGATION (CBI) & ANR. [2018 (4) TMI 1845 - SC ORDER] granting or refusing bail to co-accused, Pradeep Garg in schedule offences - HELD THAT:- Hon’ble Supreme Court in Nikesh Tara Chandra’s case [2017 (11) TMI 1336 - SUPREME COURT] while granting bail to the applicant in schedule offences, has opined that the entire money of the State shall stand secured and in this regard bank accounts of the applicant to the tune of ₹ 5.11 Crore has also been attached by the E.D. The applicant is in jail in this matter since 16.01.2018 and Co Accused pradeep Garg standing on identical footing has been released on bail by trial Court in compliance of order passed by Division Bench of this Court. In view of above and on the principle of parity the applicant is also entitled to be released on bail.
In view the nature of the offence, evidence, complicity of the accused, severity of punishment, submissions of the learned counsel for the parties, the applicant has been released on bail by Honble Supreme Court in schedule offences, without expressing any opinion on the merits of the case, the applicant has made out a case for bail - Bail application allowed.
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2019 (2) TMI 1895 - ITAT DELHI
Correct head of income - service charges and furniture hire charges received by the assessee -“income from other sources” or “profit and gains of business and profession” - HELD THAT:- There is no error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold that no business activity was carried out by the assessee during the year under consideration and the income from service charges and hire charges is assessable under the head “income from other sources”. The ground No. 1 of the appeal is accordingly dismissed.
Disallowance of the various expenses claimed - in absence of any business activity same cannot be allowed to the assessee except expenses incurred relevant to the income assessed under the head “income from other sources”- HELD THAT:- CIT(A) has examined each and every expenses sustained by him. As regard the “watch and ward”, “water and electricity”, “telephone expense”, “Internet expense” and “office maintenance expenses” towards the premise at B-40, Maharani Bagh, he allowed 1/6th of the expenses in view of the part of the building was used as registered office and disallowed the balance as major part of the premise was used for residential purpose of the directors and their family.
Legal & professional charges, the Ld. CIT(A) has allowed payment of ₹ 2, 78, 700/-to m/s Vaish Associates against income from other sources. The expenses of ₹ 22,060/- have been found related to let out property and accordingly he has disallowed.
Expenses paid to two professionals namely Mr. Suren Singh Rasaily and Mr. Dilip Sudhakar Deshmukh, the Ld. CIT(A) himself summoned the persons and carried out the enquiries, and after detailed enquiry, he concluded that payment of professional charges were not incurred wholly and exclusively for the purpose of earning “income from other sources”. Similarly he has examined allowability of the depreciation allowance , office maintenance expenses and other expenses under the head “income from other sources”. We do not find any error in the above factual findings of the Ld. CIT(A).
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2019 (2) TMI 1894 - SUPREME COURT
Forgery and preparing false documents - dispute is of civil nature - the complainant alleged that the Respondents made themselves liable for being prosecuted Under Sections 420, 465, 467, 468, 471 read with Section 34 of the Indian Penal Code, 1860 - HELD THAT:- It is settled law that the Magistrate, at the stage of taking cognizance and summoning, is required to apply his judicial mind only with a view to taking cognizance of the offence, or in other words, to find out whether a prima facie case has been made out for summoning the Accused persons.
The High Court ought not to have set aside the order passed by the Trial Court issuing summons to the Respondents. A perusal of the complaint discloses that prima facie, offences that are alleged against the Respondents. The correctness or otherwise of the said allegations has to be decided only in the Trial. At the initial stage of issuance of process it is not open to the Courts to stifle the proceedings by entering into the merits of the contentions made on behalf of the Accused. Criminal complaints cannot be quashed only on the ground that the allegations made therein appear to be of a civil nature. If the ingredients of the offence alleged against the Accused are prima facie made out in the complaint, the criminal proceeding shall not be interdicted.
Appeal allowed.
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2019 (2) TMI 1893 - ITAT DELHI
Legality of the order being passed by AO on a non-existing entity - Cairn India Ltd is an amalgamated company, which has seized to exist in the eyes of law pursuant to amalgamation with Vedanta Ltd.- HELD THAT:- Assessment on a company, which has been dissolved/amalgamated u/s 391 and 394 of the Companies Act 1956 is invalid and further held that framing assessment on a non-existing entity is a jurisdictional defect which cannot be cured u/s 292B of the Act. See DIMENSION APPARELS PVT. LTD. [2014 (11) TMI 181 - DELHI HIGH COURT]
We have no hesitation in holding that the assessment order and the order of the TPO are non est. Since the foundation has been removed, the super structure must fall. See MARKETING SERVIEING PVT. LTD. [2009 (9) TMI 917 - DELHI HIGH COURT] - Decided in favour of assessee.
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2019 (2) TMI 1892 - SUPREME COURT
Contempt petition - whether the Magistrate was justified in taking cognizance of an offence punishable under Section 193 of the IPC on the basis of a private complaint? - HELD THAT:- The offences under Section 195(1)(b)(i) and Section 195(1)(b)(ii) are clearly distinct. The first category of offences refers to offences of false evidence and offences against public justice, whereas, the second category of offences relates to offences in respect of a document produced or given in evidence in a proceeding in any court.
Section 340 of Cr.P.C. makes it clear that a prosecution under this Section can be initiated only by the sanction of the court under whose proceedings an offence referred to in Section 195(1)(b) has allegedly been committed. The object of this Section is to ascertain whether any offence affecting administration of justice has been committed in relation to any document produced or given in evidence in court during the time when the document or evidence was in custodia legis and whether it is also expedient in the interest of justice to take such action. The court shall not only consider prima facie case but also see whether it is in or against public interest to allow a criminal proceeding to be instituted - clauses under Section 195(1)(b) of the Cr.P.C. i.e. sub-section 195(1)(b)(i) and sub¬section 195(1)(b)(ii) cater to separate offences. Though Section 340 of the Cr.P.C. is a generic section for offences committed under Section 195(1)(b), the same has different and exclusive application to clauses (i) and (ii) of Section 195(1)(b) of the Cr.P.C.
The case in hand squarely falls within the category of cases falling under Section 195(1)(b)(i) of the Cr.P.C. as the offence is punishable under Section 193 of the IPC. Therefore, the Magistrate has erred in taking cognizance of the offence on the basis of a private complaint - Thus, High Court has rightly set aside the order of the Magistrate.
Appeal disposed off.
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2019 (2) TMI 1891 - DELHI HIGH COURT
Withdrawal of appeal - rectification of mistake - HELD THAT:- As appellant seeks liberty to withdraw this appeal and approach this Court in the event his application for rectification is decided against him. He also states that, in that event, all grounds urged in the appeal may be kept open. Liberty granted. In case, the appellant so wishes, at a later stage, to approach this Court, all grounds urged in this appeal shall be kept open. This appeal is dismissed as withdrawn.
This appeal is dismissed as withdrawn in the above terms.
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2019 (2) TMI 1890 - ITAT BENGALURU
TP Adjustment - Determination of arm’s length price of international transactions - comparable selection - TPO applying arbitrary filters to arrive at a fresh set of companies as comparable to the Appellant - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list.
TP adjustment of charging mark up of recovery transaction with its AE - HELD THAT:- AR filed the details on this aspect which were overlooked by the TPO. Whereas the learned DR supported the orders of the lower authorities and could not controvert the submissions of the learned AR.
We, on perusal of the material filed and the arguments of the learned AR and learned DR , are of the opinion that on the principles of natural justice, when the decision is being taken by TPO on mark-up in respect of the assessee-company, the submissions filed cannot be ignored and accordingly, we restore this disputed issue of the assessee to the file of the AO/TPO to consider and pass a reasoned order.
Assessee is entitled for MAT credit u/s 115JAA which was not granted. Accordingly, we direct the AO to grant MAT credit as per provisions of law to the same.
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2019 (2) TMI 1889 - ITAT AHMEDABAD
Deduction u/s 10AA - Eligibility of deduction of interest on fixed deposit for the purposes of Section 10AA - AO took a view that interest on fixed deposits is not akin to ‘profits derived’ as laid down in section 10AA (7) of the Act and consequently such interest income do not form part of the business operation of the SEZ unit - CIT(A) accordingly held that the AO was not justified in excluding the interest income earned from fixed deposits but in the nature of business income for the purposes of computation of deduction under section 10AA - HELD THAT:- For determining the scope of section 10AA(7), the reference to the expression ‘derived from’ is not material. To expound further ‘profits of the business of the undertaking’ is wider than ‘profits and gains derived by an undertaking’ - profits derived from export have been equated with business profits of the undertaking as per the formula laid down by section 10AA(7) - the direct nexus or proximity of business income with the export activity is not necessary in view of section 10AA(7) - CIT(A), in our view, has rightly treated the interest income to be eligible for deduction under section 10AA of the Act as per the findings noted in earlier paragraphs.
Substantial merit in the action of the CIT(A) in holding the interest income from FDRs to be ‘business income’ of SEZ unit consistent with the position taken by the assessee in view of the purpose and utilization of FDRs for its business operation.
We profitably refer to the decision of Hewlett Packard [2017 (11) TMI 205 - KARNATAKA HIGH COURT] wherein it was held that interest income earned by the assessee on the deposits placed by it with banks in the ordinary goods of its business would not be taxable as ‘income from other source’ under section 56 of the Act and is required to be treated as business income of the assessee regardless of the fact that assessee is not engaged in any banking/financial activity. The interest income thus is eligible for deduction under section 10AA of the Act on such income once it falls in the ambit of the business income - Thus the CIT(A) in our considered view has rightly hold interest income from FDRs to be ‘business income’ and consequently eligible for deduction under section 10AA of the Act in terms of formula provided under section 10AA(7) - Decided against revenue.
Disallowance u/s 14A - Disallowance on the ground that the interest free funds at the disposal of the assessee is in excess of the corresponding investments yielding tax free income - HELD THAT:- On such facts, we do not see any reason to interfere with the aforesaid findings in view of the decision of the Hon’ble Gujarat High Court in CIT vs Suzlon Energy Ltd. [2013 (7) TMI 697 - GUJARAT HIGH COURT]and CIT vs GIDC [2013 (1) TMI 809 - GUJARAT HIGH COURT].
Disallowance of interest on advance given for purchase of immovable property - perusal of the order of the CIT(A) shows that the assessee had demonstrated before the first appellate authority that the advances given for purchases of immovable property is far in excess of the interest free funds - HELD THAT:- In view of the facts narrated by the CIT(A) towards availability of interest free funds in excess of interest bearing loans for towards advances immovable property, we do not see any reason to interfere with the order of the CIT(A) which is sync with the judicial precedence prevailing in this regard.
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2019 (2) TMI 1888 - ITAT AHMEDABAD
Disallowance u/s 14A r.w.r.8D - suo moto disallowance made by assessee - HELD THAT:- Reference to the financial statement that the own funds held by the assessee are nearly 100 times of the corresponding investment and therefore, in view of the decision in India Gelatine & Chemicals [2015 (11) TMI 392 - GUJARAT HIGH COURT] no disallowance towards proportionate interest is justified. We are in total agreement with the plea on behalf of the assessee in view of the long line of judicial precedents on the issue. We thus direct the AO to restrict the disallowance under s.14A to the extent of ₹ 3,65,416/- as per Rule 8D(2)(iii ) of the ITAT Rules, 1962. The issue accordingly stands allowed.
Maintainability of disallowance computed u/s 14A of the Act under normal provisions for the purposes of adjustments in book prof it as determined for the purposes of Section 115JB - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision in Alembic Ltd. [2017 (1) TMI 513 - GUJARAT HIGH COURT] as well as Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI]. In view of the express judicial fiat available in this regard, the disallowance computed under s.14A cannot be imported for the purposes of adjustment in book profit u/s1 15JB of the Act. The issue raised by the assessee in this regard thus stands allowed.
Additional depreciation in respect of air conditioner machines and finger recognition system - assessee submitted that the ai r conditioners were installed with the factory premises and the finger recognition system is for the supervision and control of the employees’ attendance - HELD THAT:- Both the assets are in the nature of plant and machinery and thus qualify for additional depreciation under s.32(1)(iia) of the Act. For this proposition, the learned AR for the assessee referred to the decision of Hon’ble Gujarat High Court in CIT vs. Nathubhai H Patel [2005 (11) TMI 49 - GUJARAT HIGH COURT] - We find force in the plea of the assessee noted above. The assessee cannot be denied additional depreciation in the facts narrated above. The aforesaid issue is thus settled in favour of the assessee.
Interest subsidy is required to be treated as capital receipt of non-taxable nature - we find ourselves in total agreement with the contentions on behalf of the assessee for non chargeability of such capital receipts regardless of its treatment in books as revenue receipts. We are however conscious in same vain that the issue has been raised for the first time before the Tribunal. The Revenue authorities had no occasion to look into the relevant facts. We accordingly consider it expedient to restore the issue to the file of the AO for verification of relevant factual aspects towards quantum of receipt of interest subsidy and relevant documentation in this regard, if so considered necessary in the opinion of the AO.
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2019 (2) TMI 1887 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI
Maintainability of application - initiation of CIRP - stand taken by the bank that since the FDR formed part of the security credits in favour of the bank towards repayment of the banks dues, the IRP is asking for the money to be used during the CIRP which is lying with the bank in the form of security credit by the corporate debtor - can the Financial Creditor who issued the Bank Guarantee against the FDR from current account of CD adjust FDR in the claim after discharge of the BG in midst of the Moratorium? - HELD THAT:- In the light of provisions Section 14 of the Insolvency and Bankruptcy Code more particularly 14(1)(c) clearly covers the same security as claimed by the bank. The financial creditor being the sole member of the COC though passing resolution by 100% for any of the agenda cannot be permitted to transgress the provisions of law.
Bank is directed not to adjust the FDR in the claim after discharge of bank guarantee and transfer the said amount of FDR to lie in the bank account of corporate debtor for the purpose of continuing the CIRP - Application allowed.
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