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2019 (4) TMI 1876
Jurisdiction - power of High Court to quash the complaint - whether the High Court was justified in quashing the complaint filed by the appellant (complainant) against respondent No. 2 holding that there was no prima facie case made out against respondent No. 2 for issuance of the process of the summons to him for commission of the offences punishable under Sections 323, 341, 379 and 504 IPC? - HELD THAT:- The High Court was not justified in quashing the aforementioned complaint filed by the appellant herein against respondent No. 2. It should have been tried on merits in accordance with law.
The High Court quashed the complaint essentially on two grounds; First, no sanction under Section 197 of the Cr.P.C was obtained by the prosecution for filing the complaint against respondent No. 2 and the second, there are contradictions in the statement of the complainant and the witnesses - both the grounds, which found favour with the High Court for quashing the complaint, are not well founded and hence legally unsustainable.
The complaint is restored to its original file for being proceeded with on merits in accordance with law - appeal allowed.
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2019 (4) TMI 1875
Recovery of duty along with interest and penalty - demand based on statements of various persons - Section 9D(1) of Central Excise Act, 1944 - diversion of duty free materials imported - violation of Notification No. 53/97-CUS dated 03.06.1997 - HELD THAT:- Section 9D has to be scrupulously followed whenever a statement recorded by an officer of Central Excise is to be relied upon in any adjudication proceedings as has been held by the Hon’ble High Court of Punjab & Haryana in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] which has not been done in this case - To be fair, the judgment of the Hon’ble High Court of Punjab & Haryana was not before the adjudicating authority and at that time Section 9D was not been followed although it was in the statute book.
Neverthless, Section 9D has to be followed and since it was not done in this case, this is a fit case to be remanded to the original authority for re-adjudication after following Section 9D and giving the appellant an opportunity of being heard again.
Appeal allowed by way of remand to the adjudicating authority with a direction to follow the procedure under Section 9D in respect of every statement he wished to rely upon.
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2019 (4) TMI 1874
Re-credit of duty reversed earlier under protest - Grant of production subsidy - fulfilment of export obligation - sugar factories to export minimum indicative quota - re-credit sought on the ground that the appellant was not having the requested papers - HELD THAT:- There was no objection by the Revenue at the time of availment of original credit, which objection cannot be raised at the time of re-credit. As such, there are no justifiable reasons to entertain the present appeal of the Revenue.
Otherwise also the Commissioner(Appeals) has discussed the merits of the case and has observed that Department of Food & Public Distribution (Govt. of India) vide Notification F.No.1(10)2015-SP-1 dated 18.09.2015, has stated that the quotas shall be tradable among sugar factories on mutually agreeable terms and condition and further states of a bi-partite/tri-partite agreement between/amongst quota holder sugar factory (which in this case is the appellant), Merchant Exporter (which in this case is ISEC) and the source sugar factory, i.e. from where the sugar had been sourced for export. Thus, the notification provided for sourcing of sugar from other sugar factories and therefore, such procurement was done to fulfil the export obligation.
Appeal dismissed - decided against Revenue.
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2019 (4) TMI 1873
Issuance of summons - direction issued to cause an inquiry into the matter - HELD THAT:- Summons dated 20.3.2019 issued by the respondents speaks about action taken in accordance with the Companies Act, 2013. Respondent Nos.1 to 4 to clarify the position within two weeks.
List on 17th July, 2019.
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2019 (4) TMI 1872
Stay proceedings - HELD THAT:- A perusal of the order reveals that the respondent has sought a report from the Assessing Officer since the petitioner has filed certain additional evidences at the stage of stay application before the Officer in order to determine the question prima facie case. Thereafter, the Commissioner has passed a speaking order directing the assessee to pay 20% of the outstanding payment on or before 20.03.2019.
No interference is called for in the present case and no grounds have been made raised warranting any interference whatsoever. This writ petition is thus dismissed.
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2019 (4) TMI 1871
Disallowance u/s 14A r.w.r. 8D - disallowances voluntarily made by the assessee - HELD THAT:- We are not inclined to admit the appeal. Firstly because the disputed amount itself is not very substantial and secondly, though not so clearly stated, the view of the Tribunal can as well be understood and interpreted as one holding that the facts necessary for applicability of rule 8D, did not arise in the present case. We may recall, sub-section (2) of section 14A provides that the AO would determine the amount of expenditure incurred in relation to income which does not form part of the total income if he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. If the expenditure already voluntarily disallowed by the assessee is found to be reasonable, the Assessing Officer in any case could not have resorted to rule 8D of the Rules.
Disallowance of deduction u/s 37(1) - compensation for premature termination of the lease agreement - HELD THAT:- Tribunal noted that the assessee had terminated lease and licence in respect of two warehouses from Paras Commercial Centre. The lessor deducted a sum towards compensation for premature termination of the lease agreement. The Tribunal in such facts held that the early termination of the lease was a business decision and the expenditure incurred in relation to the same was wholly and exclusively for the purpose of business. We find no error in the view of the Tribunal.
Writing off the bad debts and claiming deduction u/s 36(1)(vi) - assessee had purchased certain assets on slump sale basis - HELD THAT:- In the process, certain debts which were part of the current assets were reduced. The assessee wrote off a sum claiming the same to be admissible under section 36(1) - Tribunal while reversing the view of the AO and CIT(A) in which it was held that in the process, the assessee was claiming double benefit, held that the assessee had not claimed any double benefit and the bad debt was required to be allowed as an admissible deduction under section 36(1) of the Act. We see no error in the view of the Tribunal.
Disallowance u/s 40(a)(ia) - non-deduction of tax at source by the assessee while making payment to Videsh Sanchar Nigam Limited towards leased line charges -Tribunal held that the amount in question was below ₹ 10 lakhs which was a minimum monetary limit enabling the Revenue to prefer appeal against the Commissioner's appellate orders before the Tribunal - HELD THAT:- As Revenue argues before us that the Tribunal should have seen the monetary limit of the combined appeals of the assessee as well as the Revenue arising out of the common judgment of the Commissioner of Income-tax (Appeals) pertaining to the assessee for the same assessment year. In our opinion, this question is not required to be examined in view of the fact that the decision of this court in the case of Kotak Securities Limited . [2011 (10) TMI 24 - BOMBAY HIGH COURT] has been reversed by the Supreme Court in the case of CIT v. Kotak Securities Ltd.. [2016 (3) TMI 1026 - SUPREME COURT] - Resultantly, on the merits also, the Revenue would have no ground to succeed.
Revenue appeal dismissed.
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2019 (4) TMI 1870
Provisional release of detained goods - whether the Tribunal has jurisdiction to entertain an appeal under Section 129A(1) ibid against a communication allowing provisional release of goods under Section 110A ibid? - HELD THAT:- Since now the appellant themselves have sent the communication to the registry that the appeal has already been dismissed as withdrawn on 10-12-2012, it is clear that the appellant at that time also wanted to withdraw the appeal itself, for whatever reason.
We have also gone into the merit of the matter. Since none appeared on behalf of appellant, therefore we ourselves gone through the appeal paper books and after a careful reading of the appeal and of the relevant provision of Customs Act, 1962 viz. Sections 110A and 129A(1) ibid, we are of the considered view that the appeal against the communication dated 6-6-2012 of the Assistant Commissioner is not maintainable before this Tribunal in terms of Section 129A of the Customs Act, 1962, which specifically provides that appeal can be filed against the decision or order passed by the Commissioner of Customs “as an adjudicating authority”.
The appeal filed by the appellant before this Tribunal against the communication dated 6-6-2012 is not maintainable and is hereby dismissed.
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2019 (4) TMI 1869
Approval of Resolution Plan - section 30(6) of I&B Code - HELD THAT:- It is a peculiar situation in the present case where a resolution applicant is before this Adjudicating Authority offering better value to the Corporate Debtor, but this Adjudicating Authority cannot send the approved resolution plan back to the CoC for reconsideration along with apparently better Resolution Plan on two counts firstly, the resolution applicant has come after the submission of the approved resolution plan to the Adjudicating Authority, and secondly, the CoC or RP has not sought any relief to recall the approved resolution plan and for allowing them to reconsider the approved resolution plan along with the new resolution plan offering better value. The power of this bench to suo moto direct the CoC to consider the new resolution plan and reconsider the already approved resolution plan is confined by the scheme of the I&B Code.
The Resolution plan is approved - moratorium declared.
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2019 (4) TMI 1868
TP Adjustment - rejecting TNMM as most appropriate method for determining arm’s length price of international transaction being import of furnished goods for resale in India - whether, RPM or TNMM is the most appropriate method - assessee has applied resale price method on purchase of goods, enterprise purchases a property or services from associated enterprise and then resells property or services to an unrelated enterprises - HELD THAT:- A close scrutiny of above Clauses of rule 10B(1)(b) makes it clear that RPM is best suited for determining ALP of an international transaction in nature of purchase of goods from AE, which is resold. Ordinarily, this method pre-supposes, no or insignificant value addition to goods purchased from foreign AE. In case goods so purchased are used either as raw material for manufacturing finished products, or are further subjected to processing before resale, then RPM cannot be characterized as proper method for benchmarking international transaction of purchase of goods by assessee from its AE.
Further on facts of present case it is observed that assessee has used 6 comparables and the PLI chosen was gross profit margin being GP/sales. CIT(A) upon verification of accounts of comparables approved comparables being Falcon Tyres Ltd, Monotona Tyres Ltd and TVS Srichakra Ltd. Ld.CIT (A) compared accounts of comparables. He rejected Kesoram Industries Ltd. and India Tyres and Rubber Company Ltd., as quantitative details of sales were not available. From the order of Ld.TPO, it is observed that Ld.TPO has considered India Tyre and Rubber company, to be best comparable. Under such circumstances it is desirable to set aside this issue to Ld.AO/TPO, with a direction to determine ALP of subject transaction with RPM as most appropriate method. Assessee is directed to provide gross profit of comparables Kesoram Industries Ltd and India Tyres and Rubber Company Ltd. and then ALP should be determined by considering GP/sales of comparable companies as discussed above. - Decided against revenue.
Disallowance of advertising and publicity expenses stating that these expenses are revenue in nature - HELD THAT:- AO disallowed 50% of expenditure incurred for advertising and publicity expenses without any basis. There is nothing brought on record by Ld.AO or Ld.Sr.D.R. to show that the expenditure incurred are bogus. Further the disallowance has been made by Ld.AO for two reasons: (i) that these expenditure incurred by assessee is towards establishment and Promotion of the ‘International Brand’ which is not the property of assessee and (ii) that it has not been incurred wholly and exclusively for assessee’s business.
In our considered opinion, the reason given by ld.AO for making disallowance has already been considered by Ld.TPO while proposing djustment under the head ‘AMP expenditure’. Further such addition cannot be based on presumptions. We are therefore in conformity with the view taken by Ld. CIT (A).
Provision for impairment of stock - CIT-A deleted the addition - HELD THAT:- Assessee has valued at inventory based on accounting standard 2 after reducing recorded value of closing stock. The net value of closing stock was then taken to the balance sheet. In our considered opinion this is a recognised method of valuation prescribed under the Companies Act and also recognised under section 145 of the Income Tax Act.
Excess claim of depreciation on printer and UPS at 60% of computer peripheral - HELD THAT:- the issue now stands squarely covered by the decision of Hon’ble Delhi High Court in case of CIT vs BSESE Yamuna Power Ltd [2010 (8) TMI 58 - DELHI HIGH COURT].
Disallowance of management fee - HELD THAT:- From order passed by Ld.CIT(A) it is noticed that assessee placed before authorities below, e-mail, or online access to workshop/conference, records etc. which do not have any evidentiary value. In our considered opinion for considering expenses to be revenue in nature, one has to produce evidence to support and substantiate receipt of such services like copies of argument, bills, vouchers etc. for the payments made, kinds of managerial services received by assessee. In the present facts of case assessee has neither produced any such evidences before authorities below, nor before us to substantiate its claim. We therefore do not find any infirmity in view taken by Ld.CIT(A).
TDS u/s 195 - training expenses on account of non-deduction of TDS - HELD THAT:- It is observed that amount payable as on 19/09/2006 as per Invoice dated 20.06.2005 was ₹ 4,806,214/-. But assessee deposited ₹ 5,43,533.98 on 19/09/2006. It is also observed that assessee deducted 15% TDS on ₹ 56,54,369.07 which Ld.TPO accepted and did not deduct TDS on ₹ 5,43,533.98. There is nothing on record produced by assessee prove that ₹ 5,43,533.98 represent the foreign exchange loss, neither before authorities below nor before us. We therefore do not find any infirmity in the view taken by ld.CIT(A) and the same is upheld. - Decided against assessee.
AMP expenditure not being an international transaction - HELD THAT:- No merit in the argument advanced by Ld.Counsel regarding AMP spent not being an international transaction. However we do not agree with application of BCT by Ld.TPO for computing the ALP.
Alternate plea regarding the AMP reimbursement received during F.Y. 2010-11 being subjected to Tax and accordingly filed rectification application u/s 154 - HELD THAT:- n our considered opinion offering of reimbursement received during F.Y. 2010-11 cannot be a reason not to determine the ALP of the international transaction. In present facts conduct of assessee and AE has already established that AMP is an International Transaction. Once a transaction has been held to be an international transaction, ALP needs to be determined.
Whether comparables selected by TPO to arrive at a mark-up of 13.04% is inappropriate? - HELD THAT;- computation of ALP needs to be revisited by Ld.TPO. Ld.TPO is directed to compute ALP by not applying Bright Line Test. Further it is also directed that trade/sales discount given to sub distributors/retailers may be excluded as these cannot be linked to brand building of AE. Ld.TPO is also directed to exclude freight expenses on import of goods.
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2019 (4) TMI 1867
Disallowance of Capital Expenditure - expenditure incurred in acquiring entities which are engaged in similar business in India and overseas - HELD THAT:- Dispute Resolution Panel following the ITAT order for earlier years i.e., 2006-07 and 2007-08 [2012 (10) TMI 1200 - ITAT MUMBAI] has held that this expenditure is capital in nature and no intervention is required. On the issue of depreciation on those assets, the DRP had followed the order of DRP in A.Y.2008-09 [2013 (12) TMI 139 - ITAT MUMBAI] and has directed the assessee to suo-moto submit the details of capital assets that have come into existence on incurring the expenditure and the definite cost of acquisition of such capital asset, to the Assessing Officer within 7 days of the receipt of the directions so as to enable him to quantify the depreciation allowable correctly.
ITAT on similar issue in the assessment year 2006-07 and 2007-08 has decided the matter in the favour of revenue. Accordingly, we hold the expenditure to be capital and leave the allowability of depreciation to results of the verification by the Assessing Officer . Since, issue is covered in favour of the revenue, we do not find any infirmity in the action of the DRP, accordingly, we uphold the same.
Provision of Warranty - assessee has claimed the provision in respect of warranty made in certain products, the estimated cost of which accrued at the time of sale - HELD THAT:- We find that ITAT in assessee’s own case in earlier years remitted the issue to the file of the Assessing Officer and directed that the issue be decided in accordance with Hon’ble Supreme Court decision in the case of Rotork Controls Ltd. [2009 (5) TMI 16 - SUPREME COURT]. In our considered opinion, we should follow the principles of precedents and the earlier direction of ITAT in assessee’s own case. It is not at all the case that the decision of ITAT consistently in assessee’s own case has been reversed by the Hon’ble Supreme Court. That in earlier years, pursuant to the ITAT direction AO has passed perfunctory cannot be a ground for us to deviate from following precedents as above.
Disallowance u/s.40A(9) - Main contribution to Mahendra Academy - HELD THAT:- After hearing both the parties and in view of the order of the Tribunal in assessee's own case for earlier years, we set aside the impugned order passed by the Assessing Officer and restore this issue back to his file for denovo adjudication and in accordance with the law. Thus, ground is allowed for statistical purposes.
Disallowance as (ESOP) employee cost being the difference between the fair market value / the shares offered to employee on the date of the grant of option and the price at which they are offered to employee - HELD THAT:- We find that issue has been considered and decided by ITAT Special Bench in the case of Biocon Ltd., vs. Dy. CIT [2014 (12) TMI 838 - ITAT BANGALORE] . Accordingly, we remit the issue to the file of the Assessing Officer to consider the issue in light of the ITAT Special Bench in the case of Biocon Limited.
Disallowance u/s.14A - assessee has claimed that no expenses have been incurred for earning exempt income has been rejected by the AO has applied rule 8D and accordingly computed the disallowance and DRP has confirmed the same - HELD THAT:- We find that the request of the ld. Counsel of the assessee is cogent. The Assessing Officer is directed to make necessary factual verification and to consider the issue in this aspect afresh after considering the Hon’ble Jurisdictional High Court decision quoted as above and also the decision of Special Bench of ITAT in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] and assessee should be granted adequate opportunity of hearing.
Adjustment for fee of Corporate Guarantee - HELD THAT:- We decide on the basis of LIBOR rate prevailing at the relevant point of time. It was directed that in case LIBOR rate is less than 6% then charging of interest rate @ 6% by the assessee should be taken as arm’s length price (ALP). Following the above said order in assessee’s own case [2013 (12) TMI 139 - ITAT MUMBAI], we direct accordingly and restore the issue to the file of the Assessing Officer with similar direction.
Determination of Loss on transfer of capital assets used for R & D Activity - Assessee fairly accepted that ITAT has decided the issue against assessee in A.Y.2006-07 and A.Y.2007-08 [2012 (10) TMI 1200 - ITAT MUMBAI]
Addition u/s.40(a)(ia) in respect of year end provision - HELD THAT:- ITAT has allowed the assessee’s claim in [2013 (12) TMI 139 - ITAT MUMBAI] The DRP has also noted the same but has confirmed the AO’s order by observing that matter has not reached its finality. Respectfully following the order of ITAT in assessee’s own case, we set aside the order of the authorities below and decide in favour of the assessee.
Weighted deduction u/s 35(2AB) with reference to expenditure incurred on scientific expenditure - HELD THAT:- We note that in earlier year i.e., for A.Y.2008-09, Tribunal has noted the submission from assessee that once the R & D facilities are approved and DSIR has not rejected the application submitted by the assessee, it could be presumed that the application has been accepted. Further that failure on the part of DSIR to confirm the authorities in time cannot be reason for taking back deduction to the assessee. Noting the above and following judicial precedents from earlier year, the Tribunal had directed that assessee is entitled to grant of better deduction u/s.35(2AB). Referring to these case laws from ITAT and also from Cummins India Ltd. [2019 (11) TMI 1182 - ITAT PUNE] and Sri Biotech Laboratories India Ltd. [2015 (7) TMI 1340 - ITAT HYDERABAD] assessee has requested that AO be directed to allow the claim for deduction u/s.35(2AB) as non-receipt of form 3CL from DSIR is not determinative of the issue. Respectfully following the decision as above, we accede to the assessee’s request in the light of the above and directed accordingly.
Disallowance of Dealer incentive and service coupon u/s.40a(ia) - HELD THAT:- Following the precedents from ITAT in assessee’s own case, we decide the issue of dealer incentives in favour of the assessee and the issue of disallowance on service coupons is remitted to the file of the Assessing Officer in accordance with the direction of ITAT in earlier years.
Disallowance of Depreciation on intangible asset - HELD THAT:- Assessee fairly agreed that ITAT has disallowed assessee’s claim in A.Y.2007-08 and 2008-09. Respectfully following the decision referred as above, we uphold the order of the Assessing Officer on this issue.
Octroi Incentive treated as revenue receipt and not capital receipt - HELD THAT:- We note that ITAT has remitted the matter to the file of the Assessing Officer with directions to follow the Hon’ble Supreme Court decision in the case of Ponni Sugar and Chemicals Ltd [2008 (9) TMI 14 - SUPREME COURT] and Chaphalkar Brothers [2017 (8) TMI 1411 - BOMBAY HIGH COURT]. Now pursuant to said direction as claimed by the ld. Counsel of the assessee, if the AO decides perfunctorily the precedence from ITAT’s decision does not cease to be a precedent for us. Accordingly, following the aforesaid precedent from ITAT, we remit the issue to the file of the AO for deciding the issue afresh in accordance with the same directions as by the ITAT in A.Y.2008-09.
Addition to income on difference of rent received by Ridge Business Centre Ltd., from sub-letting of property - HELD THAT:- Income from letting out the property to Ridge Business Centre has been assessed as business income right from the earlier years and the same position has been accepted by the Department. Once the income which has been derived from stock-in-trade and has been accepted as business income, then the computation has to be made under section 28 and not under section 23. The assessee has duly shown the income received / accrued from Ridge Business Centre as business income, then any further rent realized by Ridge Business Centre form the third party cannot be said to have been earned / received or accrued to the assessee company. Thus, we are inclined to agree with the contention of assessee that no further income can be attributed to the assessee once the rental income has been assessed as business income and not from the income from house property.”
Deduction u/s.80IC in respect of Rudrapur Unit which was restricted to gross total income - HELD THA:- As regards the cost of inter unit transfers, the Dispute Resolution Panel is holding that proper detail has not been given to show that inter unit transfer has been properly done. The assessee’s contention in this regard is that the details are given in audited accounts and audit report under section 80IC. In our considered opinion, this issue needs to be examined at the level of the Assessing Officer from detail as claimed by the ld. Counsel of the assessee to be available on record.
DRP has found that assessee has incurred huge expenditure and claimed deduction also for Research and development expenditure. However, assessee has not allocated the same to this exempt unit. Assessee has not submitted the necessary details and has only submitted that these are mainly related to export models. We find that this general submission does not exonerate the assessee from submitting to the authorities below proper and cogent details of expenses to show that research and development expense not related with this unit. Further, the assessee submitted that employee cost of employee welfare expenditure need not be allocated to this unit is also not cogent. Whey these expenditure cannot relate to this unit need proper explanation. Further, other items of revenue expenditure in the profit and loss account which have not been allocated to the exempt unit also need to be examined by the Assessing Officer in light of the explanation being offered by the assessee’s Counsel.
Disallowance of difference in exchange loss claimed as revenue expenditure - AO has disallowed this expenditure stating that the same is a contingent liability - HELD THAT:- In opinion the action of the authorities below in holding that foreign exchange gain or loss incurred on acquisition of capital asset has to be adjusted with the cost of capital asset is correct.
Gain or loss of revenue account - From the perusal of CBDT Circular 10/2017 dated 23/03/2017, it is observed that ICDS shall be applicable with the transaction years held therein in relation to A.Y.2017-18 and subsequent assessment year. Admittedly, in the present assessment year the said ICDS is not applicable, hence, the exposition of Hon’ble Apex Court decision in the case of Sutlej Cotton Mills [1978 (9) TMI 1 - SUPREME COURT] as above duly holds the field. In these circumstances, we find that the observations of the DRP in this regards are in accordance with the above said expeditions. In this view of the matter, we do not find any infirmity in the order of DRP, hence, we are upholding the same.
Deduction u/s.80-IC in respect of manufacturing unit at Haridwar - HELD THAT:- As claimed that AO has erred in not assessing and quantifying the profits for the year and net loss suffered by the assessee in Haridwar Unit, profit for which are otherwise eligible for deduction u/s.80IC - assessee has submitted as ITAT has directed AO to quantify losses of the unit under section 80-IC in AY 2006-07 being the first year of the claim and followed in AY 2008-09. While giving effect to ITAT orders for AY 2006-07 & 2007-08 & 2008-09 AO has passed orders quantifying such losses. In accordance with the above, we direct the AO accordingly.
Adjustment to closing stock - Section 145A adjustment - HELD THAT:- It is claimed by the ld. Counsel of the assessee that A.Y₹ 2006-07, 2007-08 and 2008-09 [2013 (12) TMI 139 - ITAT MUMBAI] the AO has given effect to the order of the ITAT and has concluded that no addition is warranted u/s.145A. Furthermore, assessee’s Counsel placed reliance upon in the case of Diamond Dye Chem Ltd. [2017 (7) TMI 616 - BOMBAY HIGH COURT] - remit the issue to the file of the Assessing Officer with similar directions. Needless to add that the Assessing officer shall take into account the earlier orders passed in this regard
Interest income - Correct head of income - whether business income or income from other sources - HELD THAT:-: We find that the impugned income has been shown as business income. The Assessing Officer has not tinkered the classification, however, the DRP has directed to treat the same as income from other sources by referring to the case laws in the context of deduction under chapter VI where issue related to income attributable to or derived from business income. The reliance of the assessee on Hon’ble Bombay High Court decision in Lok Holding [2008 (1) TMI 365 - BOMBAY HIGH COURT] and Swiss Jewel [2005 (9) TMI 47 - BOMBAY HIGH COURT]duly support the case of assessee. Hence, in our considered opinion, the direction of the DRP is liable to be set aside
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2019 (4) TMI 1866
TP Adjustment - Selection of MAM - Selection of comparable Modi Care Ltd. - TNMM method v/s Resale price Method - HELD THAT:- Simply because Modicare Ltd. is also involved in direct selling, cannot be taken as a good comparable, especially in the light of the observation and finding of the Hon'ble High Court in Chryscapital Investor Advisors (India) Pvt. Ltd.[2015 (4) TMI 949 - DELHI HIGH COURT] - Apart from that, we agree with the contention of the learned counsel that, Modi Care Ltd. had a huge diversified product portfolio ranging from personal care, agriculture, Tea, Jewellery, Healthcare, cosmetics, etc. which had different profitability depending upon market factors. Different product items would involve different level of assets, risks and market which may affect gross margins.
Though it is not always necessary under resale price analysis that each product line distributed should be examined, but there should be broadly similar products so that gross compensation of the functions performed, that is, marketing and selling functions can be analysed. If reliable data for the various product and marketing strategy is not available, then accurate comparability adjustments would be very difficult to carry out.
Because of the difference in accounting treatment, there is a gap between gross profit margin and net profit margin disclosed by the Modicare Ltd., which can be seen from the annual account that the gross profit margin of Modicare Ltd has been shown at 76.47%, whereas the net profit margin is at only 2.25%. Thus, there is substantial variance in the gross and net profit margin levels, which indicates that Modicare Ltd. is incurring heavy operating expenses and also substantiates heavy functions at the operating level. Further, Modicare Ltd. has significant AMP expenses of 7.32% which in the case of the assessee is only 0.94%. If a distributor is incurring substantial AMP expenses then it cannot be compared with routine distributor under RPM as it tantamount to value addition. This also goes to show Modicare Ltd. has different functions as compared to the assessee. There is also difference in the case of goods sold ratio and value-added expenses which is apparent from the fact that in case of Modi Care Ltd. the cost of goods sold ranges from 22% to 28% of its total operating cost and value-added expenses/operating expenses are more than 70%. Modicare Ltd. has also recorded franchisee expenses and hence it cannot be inferred wholly as a direct seller.
Service fee earned by the assessee is on account of renewal fees and handling fees received from the individual consultants, engaged in distribution of assessee’s product and directly related to assessee’s business. Whereas, the service fee earned by Modi Care Ltd. is on account of annual maintenance contract (AMC). This factor also vitiates the comparability analysis.
We are thus in tandem with the contention raised by the learned counsel that due to non-comparable product profile and other differences and lack of data for various factors, reasonably accurate adjustment cannot be made. as was directed by the Hon'ble High Court. Hence Modi Care Ltd. cannot be taken as a comparable company under RPM.
Service fee earned by the assessee is on account of renewal fees and handling fees received from the individual consultants, engaged in distribution of assessee’s product and directly related to assessee’s business. Whereas, the service fee earned by Modi Care Ltd. is on account of annual maintenance contract (AMC). This factor also vitiates the comparability analysis.
We are thus in tandem with the contention raised by the learned counsel that due to non-comparable product profile and other differences and lack of data for various factors, reasonably accurate adjustment cannot be made. as was directed by the Hon'ble High Court. Hence Modi Care Ltd. cannot be taken as a comparable company under RPM.
The differences in the functions performed between the enterprises are often reflected in variations in operating expenses. Though this may lead to wide range of gross profit margin but still broadly similar levels of net operating profit indicators. Under the TNMM standard of comparability is relaxed relative to other methods with only broadly similarity of functions required. Thus, in our opinion as observed by the Hon’ble High Court, TNMM can be adopted as most appropriate method. Accordingly, we direct the TPO to apply TNMM on the comparable selected by the assessee with suitable working capital adjustment. Appeals of the assessee are allowed.
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2019 (4) TMI 1865
Valuation of imported goods - Aluminum Scrap ‘Talk’ - enhancement of declared value based on NIDB data - Rule 9 of the Customs Valuation (Determination of Value of imported goods) Rules, 2007 - HELD THAT:- For enhancing the value of the imported goods, Revenue is under an obligation to first reject the transaction value by production of evidences to the contrary.
The said issue was considered by the Tribunal in the case of M/S SANJIVANI NON FERROUS TRADING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, NOIDA [2017 (3) TMI 359 - CESTAT ALLAHABAD] which stands upheld by the Hon’ble Supreme Court when the appeal filed by the Commissioner was rejected - There is no evidence produced by the Revenue rejecting the transaction value. Otherwise also, the NIDB data has been held as non-reliable, for the purpose of enhancement of value of imported goods, by various decisions.
The Hon’ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX NOIDA VERSUS M/S SANJIVANI NON FERROUS TRADING PVT LTD [2018 (12) TMI 738 - SUPREME COURT] held that unless the value declared by the appellant is not rejected by the Revenue the same cannot be enhanced in terms of the Section 14 of the Customs Act, 1962.
The enhancement of the value of the goods is unsustainable - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 1864
Maintainability of application - CIRP process - Corporate Debtor failed to make repayment of its dues - whether the appellant comes within the meaning of ‘Financial Creditor’ as defined under Section 5(7) r/w (8) of the ‘I&B Code’? - HELD THAT:- In the present case, it is admitted that the appellant Mr. Ravinder Pal Singh Lamba has invested the money for running the business of ‘M/s. Satkar Air Cargo Services Pvt. Ltd.’ (‘Corporate Debtor’), as accepted in the pleadings of the respondent. The record also shows that it is a ‘long term borrowing’. Therefore, it is clear that the amount was disbursed by the appellant against the consideration for time value of money and the ‘Corporate Debtor’ is shown as ‘long-term borrowings’ for running the company. For the reason aforesaid, we hold that the appellant comes within the meaning of ‘Financial Creditor’, as the amount disbursed comes within the meaning of ‘Financial Debt’.
In the present case, it is not in dispute that the ‘Corporate Debtor’ has defaulted in making payment and record shows that the appellant has disbursed the amount and therefore has right to claim - Having held that the appellant comes within the definition of ‘Corporate Debtor’, we are of the view that the application filed by the appellant under Section 7 was required to be admitted by the Adjudicating Authority, but the Adjudicating Authority having failed to consider the matter in proper perspective, we set aside the impugned order dated 21st August, 2018 and remit the case to the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi to admit the application under Section 7 after notice to the ‘Corporate Debtor’, who in the meantime, may settle the claim.
Appeal allowed.
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2019 (4) TMI 1863
Supply of chassis of buses to be used by DMRC - exemption from payment of excise duty - HELD THAT:- It is clear that when the chassis component of the buses has already been granted exemption, the Plaintiff is not liable to pay the entire amount of ₹ 160,09,717/- which was imposed as excise duty. The Plaintiff is entitled to seek clarification from the CESTAT as to the exact duty payable by it, keeping in light the order dated 28th December, 2018.
Counsel for the Plaintiff submits that ₹ 20 lakhs has been deposited and according to him the entire duty would come to a total of ₹ 52 lakhs approximately. Since, this Court has not adjudicated the exact liability of the Plaintiff, the Plaintiff is permitted to approach the CESTAT by filing an appropriate application in Excise Appeal Nos. 1180/2010 and 1727/2010. In the said application, the Plaintiff shall ensure that DMRC, Tata Motors and the Commissioner Excise, Jaipur and Lucknow are also impleaded as parties - The interim relief granted on 10th January, 2019 shall continue for a period of four weeks from today i.e. till 25th May, 2019 subject to further orders passed by the CESTAT. The CESTAT, may also consider the prayer for interim relief sought by the Plaintiff in respect of coercive measures being taken by the Excise Department and impose such conditions as it deems appropriate in the said application for interim relief.
Suit disposed off.
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2019 (4) TMI 1862
Dishonor of Cheque - insufficiency of funds - Section 138 r/w 141 and 142 of Negotiable Instruments Act - initiation of CIRP - allegation that one of the Creditors initiated proceedings under Section 9 of the Insolvency and Bankruptcy Code against the respondent - whether there is statutory bar to initiate the proceedings under Section 138 of Negotiable Instruments Act against the petitioner when the petitioner was declared as insolvent? - HELD THAT:- The offence under the Negotiable Instruments Act is a statutory one and the proceedings under the Negotiable Instruments Act is completely different from the Corporate Insolvency Resolution process under the Insolvency and Bankruptcy Code, 2016. The Section 14 of Insolvency and Bankruptcy Code, 2016 prohibits the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor. It means only civil proceedings and not criminal proceedings as against the debtor.
This Court has held that there is no prohibition either in the Insolvency Act or in the Negotiable Instruments Act for the complainant to approach the criminal court to take penal action against the accused for the offence already committed under Section 138 of Negotiable Instruments Act either because the insolvency proceedings are pending or even he was declared as an insolvent. Therefore there is no bar to initiate proceedings under the criminal law against the debtor, though he was declared as an insolvent. The bar has been extended only in respect of civil detention and civil arrest. It would not cover the proceedings under Section 138 of Negotiable Instruments Act - The Section 138 of Negotiable Instruments Act is a penal provision which empowers the court of competent jurisdiction to pass the order of imprisonment or fine. It is not the civil proceedings and even fine imposed by the criminal court cannot held to be a money claim or recovery against Corporate Debtor.
The criminal proceedings is not covered under the prohibition and as such the petitioner cannot have a shelter under Section 14 of Insolvency and Bankruptcy Code. Therefore, the petition is devoid of merits and it is liable to be dismissed - Petition dismissed.
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2019 (4) TMI 1861
Winding up petition - appointment of whole-time Director - HELD THAT:- The Company Petition was filed by the respondent-Reserve Bank of India under Part VII of the Companies Act, 1956 in exercise of its power conferred under Section 45-MC of the RBI Act. The provisions of Section 45MC of the RBI Act itself make clear that whenever the Reserve Bank of India is satisfied with the grounds mentioned in Section 45 MC (1), it can file a petition under the provisions of Companies Act, 1956. The provisions with regard to winding-up of a company are governed by the provisions of Companies Act, 1956.
As per Sub-Section (2) of Section 536 of the Companies Act, 1956, after filing of winding-up proceedings, no alteration in the status of members of the company is permissible. If any alteration is made after commencement of the winding-up proceedings, the same shall be void - In the present case also, the winding-up petition has been filed on 1.9.2015, whereas the Appellant No.2/Satish Kumar Singh was inducted as Director on 1.1.2016 which is contrary to the provisions of Section (2) of Section 536 of the Companies Act, 1956 and therefore, we are of the view that after winding-up initiation of proceedings, the Appellant-Company had no power to pass a resolution on 27.3.2018 appointing the appellant No.2 as whole-time Director and authorizing him to sign and execute affidavits, applications, etc. before any Court/Authorities and also in pending matters by or against the company.
The authorization and induction of appellant No.2 as Director on 1.1.2016 and resolution dated 27.3.2018 passed by the appellant No.1/Company authorizing appellant No.2 as a Director of the Company and delegating its power and authorizing him to file Company Appeal is without permission of the Company Court as required under Section 536 (2) of the Companies Act. Such an authority is not recognized under law - appeal dismissed.
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2019 (4) TMI 1860
Classification of goods - rate of GST - parched / puffed gram (Hurigadale / Putani) - Circular No. 113/32/2019- GST dated 11.10.2019 - HELD THAT:- The clarificatory circular states very clearly that leguminous vegetables which are subjected to mere heat treatment for removing moisture, or for softening and puffing or removing the skin, and not subjecting to any other processing or addition of any other ingredients such as salt and oil, would be classified under HS code 0713. It is pertinent to note that as per the contention of the applicant that only heat is used to remove moisture and for softening and puffing and for removing the skin and the same is found acceptable. It is also seen that no oil or salt is used in the process and is only dry heat. Hence as per the Clarification issued in the above Circular, the commodity in question “Puffed Gram” commonly called “Fried Gram” or “Hurigadale” or “Putani” in Kannada would be covered under HSN Code 0713.
The goods in question are covered under serial no. 45 of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017, if the same are not branded and packed in unit containers. If the same goods are branded and packed in unit containers, they get covered under serial no. 25 of Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 and is liable to tax at 2.5% under the CGST Act - Similarly, the goods are exempt or liable to tax at 2.5% under the Karnataka Goods and Services Tax Act, 2017.
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2019 (4) TMI 1859
Recruitment Rules - Validity of Notifications issued for the purpose of filling up the available vacancies by way of direct recruitment and to direct the Chief Commissioner, Patna - whether, the absence of provision for ICT in the Recruitment Rules of 2016 would curtail the right of the respondents for ICT? - whether the executive orders leading up to Annexure A3 can exist independently and govern the field of ICT, de hors Annexure R4 Rules of 2016?
HELD THAT:- The contention urged, based on the principle laid down in the afore-mentioned decision is that, insofar as the Recruitment Rules of 2016 do not contain any provision regarding transfer, it is not an occupied field and therefore, Annexure A3, which is an Executive Order governing the issue of ICT is a valid order. The said contention regarding the absence of provision prohibiting ICT in the Recruitment Rules of 2016 and the validity of Annexure A3 order cannot be countenanced for the following reasons; it is not in dispute that Annexure R3 Recruitment Rules of 2002 contained a provision enabling ICT. It is an admitted fact that no such provision is included in the Recruitment Rules of 2016 and on the other hand, Rule 5 of Annexure R4 specifically stipulate that each Cadre Controlling Authority (CCA) shall have its own separate cadre, unless otherwise directed by the Central Board of Excise and Customs.
Any inter-commissionerate transfer would violate the unique identity of each cadre envisaged under Rule 5 of Annexure R4, the Recruitment Rules of 2016. In that view of the matter, ICT orders issued on the strength of Annexure A3 would definitely be a transgression into the field occupied by Annexure R4 Rules issued in exercise of the power under the proviso to Article 309 of the Constitution of India.
There are considerable force in the contention urged by the learned Additional Solicitor General that Annexure A1 having been issued without authority and in violation of the Recruitment Rules of 2016, was invalid and hence the cancellation of Annexure A1 by issuing Annexure A2 was perfectly in order.
Having held that transfer is a condition of service, we also hold that it is well within the power of the employer to take a policy decision either to grant or not to grant ICT to its employees. There cannot be a judicial review and interference on such policy decisions. In the absence of a provision for ICT in Annexure R4 Recruitment Rules of 2016, the Tribunal could not have found fault with the authorities in having issued Annexure A2 order cancelling Annexure A1 by which ICT was granted to the respondents and others.
Petition allowed.
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2019 (4) TMI 1858
Bogus purchases - profit percentage of 12.5% confirmed - HELD THAT:- The appellant has explained the consumption of the raw material purchase. The Gross Profit &. Net Profit ratios shown by it during the years under dispute are also normal. The profits have in fact improved in these two years. It is also noted from the copies of account furnished by the appellant that there have been regular purchases and payments in the accounts of above suppliers therefore, there is enough rotation of funds. Considering overall facts and circumstances of the case, it would be appropriate to apply a profit percentage of 12.5% its approved in BHOLANATH POLY FAB PVT LTD. [2013 (10) TMI 933 - GUJARAT HIGH COURT] on the bogus purchases made by the appellant during each year. - Order passed by CIT(A) confirmed.
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2019 (4) TMI 1857
Offence punishable u/s 278B(a) r/w 278 B - non deposit of TDS amount within the prescribed time - willful attempt to evade payment of TDS amount OR not - HELD THAT:- In the case on hand, the offence in question related to non deposit of TDS amount within the prescribed time. It amounts to the offence punishable under Section 276B(a) r/w 278B of the Income Tax Act 1961.
Though the Act provides for imposition of penalty for non payment of tax, it does not take away the power to prosecute accused persons if the offence has been committed by them.
Circular dated 07.02.2013, vide F.No.285/90/2013- IT(Inv.) issued for the procedure for prosecution in case of TDS default, in which where the tax deducted in between ₹ 25,000/- and ₹ 1,00,000/- and the same is not deposited by the due date prescribed under the Income Tax may be processed for prosecution depend upon the facts and circumstances of cases like repeated defaults and/or tax has not been deposited till detection. Thus, the petitioners have committed the offence punishable under Section 276B(a) r/w 278B of the Income Tax Act 1961. Therefore the grounds raised by the petitioners cannot be considered and the petition is liable to be dismissed. Considering the facts and circumstances of the case, the trial Court is directed to complete the trial proceeding within a period of six months from the date of the receipt of a copy of this Order.
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