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Showing 381 to 400 of 1469 Records
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2021 (7) TMI 1090
Levy of service tax - liquidated damages recovered by the appellant for acts of default - delayed or deficient supplies by various suppliers - consideration for tolerance of an act or not - penalties - HELD THAT:- There is substance in the submission advanced by the learned counsel for the appellant that no service tax is payable on the amount collected towards liquidated damages as this issue has been decided by the Tribunal in favour of the appellant in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [2020 (12) TMI 912 - CESTAT NEW DELHI] where it was held that It is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards “consideration” for “tolerating an act” leviable to service tax under section 66E(e) of the Finance Act.
In view of the aforesaid decisions of the Tribunal, it is not possible to sustain the view taken by the Commissioner that since BHEL did not complete the task within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax under section 66E(e) of the Finance Act.
Penalty - HELD THAT:- As service tax could not be levied, the imposition of interest and penalty also cannot be sustained.
Appeal allowed - decided in favor of appellant
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2021 (7) TMI 1089
100% EOU - CENVAT Credit - input services - Event Management services - Outdoor Catering services - Mandap or Shamiana Service - Rent-a-Cab service - denial on the account of nexus and also on the ground of absence of such services will not directly have an impact on the quality and efficiency of provisions of taxable services - HELD THAT:- The appellant is a 100% Export Oriented Unit registered under Software Technology Park of India (STPI) scheme and has been availing input services for rendering its output services. Appellant has been claiming refund of accumulated tax credit under Rule 5 of CENVAT Credit Rules, 2004.
The adjudicating authority does not dispute the usage of impugned input services for providing the output services but has disallowed the credit only on the ground that these are not connected with the business activity or not necessary for providing output service. In this regard, it is noted that once for the previous period such nexus has been accepted by the department than there is no basis for denial of such nexus for the subsequent period - also, it is a settled position of law that there cannot be two different yardsticks i.e., one for allowing refund and the other for deciding the eligibility of CENVAT credit.
In the case of CST, DELHI VERSUS CONVERGYS INDIA PVT. LTD. [2009 (5) TMI 50 - CESTAT, NEW DELHI], it has been held by the Division bench of the CESTAT, Delhi that there cannot be two different yardsticks, one for allowing refund and another for deciding eligibility of CENVAT credit.
The impugned order denying the CENVAT credit on impugned services is not sustainable in law more so when refund relating to the impugned services has already been granted to the appellant - Appeal allowed - decided in favor of appellant.
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2021 (7) TMI 1088
Levy of service tax - Customs House Agent Services - business of freight forwarding wherein various activities in relation to transportation of goods in the course of import/export by sea and air undertaken - non-taxable service - non-taxable territory - Circular of the Board No. 197/7/2016-S.T dated 12/08/2016 - extended period of limitation - HELD THAT:- The appellant is authorized to act as a CHA under Customs Housing Agent Licensing Regulations and has been granted a license. Further, it is found that the main revenue of the appellant comes from providing exclusive freight forwarding activity which accounts for substantial income of the appellant.
Perusal of the definition of ‘CHA’ as provided in the Finance Act as well as in Regulation, it is found that the scope of CHA service is restricted only to the licensed activities relating to either (a) entry or departure of conveyances at any Customs Station or (b) import or export of goods at any Customs Station. Further, it is found from the definition of ‘CHA’ Services that freight forwarding is an activity outside the scope of a CHA’s business, and freight forwarding is undertaken to get the goods transported from/to international boundaries to/from the Indian ports and the said activity is not in any way related to CHA’s business and CHA is not required to execute these services in the course of CHA’s business - further, as per Section 67 of the Finance Act, 1994 only ‘any amount’ that is ‘payable for the services provided or to be provided’ shall be included in consideration and any amount received is not related to the services provided cannot be included in Section 67.
There are force in the submissions of the learned counsel for the appellant that in case of export freight, no service tax is payable because the said service is non-taxable service and is provided in a non-taxable territory. It is also found that with regard to export freight, the Circular of the Board No. 197/7/2016-S.T dated 12/08/2016 amply clarifies this position.
Extended period of limitation - HELD THAT:- The ingredients mentioned in terms of proviso to Section 73(1) has not been fulfilled by the Department and moreover in the present case, the appellant has a bona fide belief that they are not liable to pay service tax on the differential freight amount collected - the issue involved relates to interpretation of provisions of a statute and in such a situation, extended period cannot be invoked.
Appeal allowed - decided in favor of appellant.
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2021 (7) TMI 1087
Penalty u/s. 271(1) (c) - difference between the figures of capital gain initially computed and capital gain lately computed, for taxation - HELD THAT:- Assessee after receiving the notice u/s. 143(2) filed revised computation after coming to the knowledge that the assessee has filed the calculation sheet of the capital gains and offered the same for taxation. Thus, the assessee has admitted the mistake before the Assessing Officer could detect such omission. Thus, it is not a case of furnishing of inaccurate particulars or concealment of income before the AO - Section 271 of the Act comes into picture when there is a failure to furnish returns or there is concealment of income or furnishing of inaccurate particulars before the Assessing Officer.
In the present case before the AO, all the relevant facts were already available and the mistake has been rectified by the assessee prior to the mistake pointed out by the Assessing Officer to the assessee during the assessment proceedings. Therefore, the order of the CIT(A) is not correct, as there is no concealment of income or furnishing of inaccurate particulars. The penalty levied u/s. 271(1)(c) of the Act is therefore quashed. The appeal of the assessee is allowed. Thus, it does not amount to inaccurate furnishing of particulars or concealment of income tax. - Decided in favour of assessee.
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2021 (7) TMI 1086
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - although the contingent liability was existing, the same was not shown in the Annual Return - documents concerned were public document - whether Appellant is justified to carry the appeal only because the Adjudicating Authority had given directions to produce the Balance Sheets? - HELD THAT:- The Application under Section 9 of IBC has been pending before the Adjudicating Authority since December, 2019. Keeping in view Section 9 of the IBC, it was required to be ordered upon in 14 days with Limited Notice to the Corporate Debtor. When above interim order was passed, the matter has been carried to this Tribunal and on 10th August, 2020 relying on the judgment of V. Padmakumar Vs. Stressed Assets Stabilisation Fund & Anr. [2020 (3) TMI 1244 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], the appeal was sought to be entertained. This Tribunal had then granted stay to the hearing before the Adjudicating Authority.
The Adjudicating Authority which is basically dealing with the matter in summary manner, is not bound by the procedure laid down by the Code of Civil Procedure but shall be guided by the principles of natural justice and can regulate its own procedure. Even if Order XI Rule 12 of CPC may be prescribing that any party may without filing affidavit apply to the Court for Discovery of Documents, the same does not stop the Adjudicating Authority from regulating own procedure reading sub-section (2) with sub-section (1) if the Adjudicating Authority in the course of arguments finds that it needs to peruse particular documents.
In the present matter the Adjudicating Authority was not dealing with any application filed or sought by the Operational Creditor but while hearing the arguments in the matter which was on pre-admission stage and not yet admitted, the Adjudicating Authority found it necessary to go through the Profit and Loss account and Balance Sheets of the Company. As such it passed the impugned order.
The Application under Section 9 of IBC has been pending for long and against the spirit of provisions of IBC. The delay must be affecting the maximization of value of assets. The merits of the application under Section 9 have yet not been adjudicated and decided and so we are not entering in the issue whether there was a pre-existing dispute - It is apparent that for hearing the matter, the Adjudicating Authority needed a particular document which is even otherwise admittedly a public document. If that was so, there was no good reason to file the present appeal and to raise a dispute as has been raised.
Appeal is dismissed.
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2021 (7) TMI 1085
Validity of approved Resolution Plan - challenge on the ground that in the Resolution Plan towards statutory dues and claims the approval was settled at Nil Value and the claims stood extinguished - HELD THAT:- The Reply of Respondent No. 2 refers to the approved Resolution Plan at Annexure R-1 page 63 and reference is made to Paragraph 3.5 which deals with proposal for Operational Creditors where the Resolution Applicant stated that Liquidation Value payable towards full and final extinguishment of statutory dues and claims is expected to be Nil and the Liquidation Value is insufficient to meet the dues of even secured Financial Creditors and thus the minimum statutory discharge payable is Nil and so Nil payment has been proposed towards statutory dues and claims.
Adjudicating Authority has considered the Revised Position of claims received as on 28th October, 2020 (Paragraph 4 of the Impugned Order) which showed that the amounts claimed by the Financial Creditors admitted were ₹ 20,904,644,307/- and that the dues of Operational Creditors (Workman and Employees) admitted were of ₹ 82,253,253/-. It is recorded that amounts claimed by Operational Creditors (Statutory Dues, Liabilities including outstanding government authority dues, taxes, etc.) were ₹ 4,827,297,551/- (which includes amounts admitted on provisional as well as contingent basis). Then there are dues which were admitted by Operational Creditors (Other than Workmen and Employees and statutory dues) which were of R. 213,192,038/- (including amount admitted on/contingent basis). Considering these amounts and the Liquidation Value, it is difficult to find fault with the Resolution Plan as has been approved. There is substance in the submissions made by the Resolution Professional that if the Corporate Debtor was to go in Liquidation, the Appellant would get Nil amount.
The claims made by the Appellant need not be accepted to find fault in the Resolution Plan - appeal dismissed.
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2021 (7) TMI 1084
Exemption u/s 11 - trust which was not registered u/s.12A - Addition of corpus donation - HELD THAT:- Income of any trust including voluntary contributions received with a specific direction is not includable in the total income of the trust, if such trust is registered u/s.12A / 12AA of the Income Tax Act, 1961 - conditions precedent for claiming exemption u/s.11 including for voluntary contributions is registration of trust u/s.12A
In this case, trust is not registered u/s.12A / 12AA of the Income Tax Act, 1961. Therefore, we are of the considered view that corpus donations received by the trust with a specific direction that they form part of corpus of the trust falls within ambit of income of a trust derived from property held under trust and hence, includable in total income of the trust.
In this view of the matter and considering facts and circumstances of the case, we are of the considered view that voluntary contribution received by the trust with a specific direction that they form part of corpus of the trust is income of the trust within the meaning of section 11 & 12 of the Income Tax Act, 1961. We are of the considered view that there is no error in the findings recorded by the learned CIT(A) to confirm additions made by the Assessing Officer towards disallowance of corpus donations - Decided against assessee.
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2021 (7) TMI 1083
Correct head of income - profit on sale of site - capital gain or business income - AO treated the amount received on sale of sites as income from business instead of capital gain and denied exemption u/s. 54F - HELD THAT:- In this case, the purpose and design of assessee in utilization of the land is pointed out towards carrying out adventure in the nature of trade so as to maximise profit from this transaction. As noted earlier, though assessee purchased agricultural land, no agricultural activity has been carried out - as converted into non-agricultural land within 3 months of purchase and later land was converted into small parts of residential units to realise optimum value on sale. The conversion of agricultural land into residential stock in trade of his business of selling the plots of land is for earning profit.
In this case, the assessee himself has developed residential plots and then sold it to individual buyers. Therefore, we affirm the findings of the AO that by such plotting of land, the agriculture land has been converted into stock-in-trade in the form of residential plots of assessee’s business. The said conversion and development of residential plots has happened by assessee’s own admission during and the intent of assessee has thus been demonstrated through his own actions. The fair market value of the asset on the date of conversion as reduced by the cost of acquisition is required to be assessed under the head “capital gain” in the year(s) the stock-in-trade is sold or transferred.
Sales realization of the stock-in-trade over such fair market value is required to be assessed as “business income”. Therefore, taxability arising on conversion agricultural land into stock-in-trade to the extent it has been sold during the year arises during the impugned assessment year. The matter is accordingly set aside to the file of Assessing Officer to determine the capital gains for fresh consideration in accordance with the provisions of section 45(2) of the Act as well as business income on sale of such plots, after providing opportunity of being heard to the assessee. This issue is accordingly disposed of with the above directions. Appeal of the assessee is partly allowed.
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2021 (7) TMI 1082
Penalty u/s 271(1)(c) - additions on account of notional interest earned from the Foreign Bank Account i.e., HSBC, Geneva - HELD THAT:-CIT(A) deleted the penalty levied by the A.O. u/s 271(1)(c) of the I.T. Act on the ground that the addition with regard to notional interest has been deleted and, therefore, the penalty does not survive. We do not find any infirmity in the Order of the Ld. CIT(A) in deleting the penalty levied by the A.O. on account of notional interest earned from HSBC, Geneva for all these years under consideration. Admittedly, in the quantum proceedings, the Tribunal has already decided the issue in favour of the assessee and the appeal filed by the Revenue has been dismissed [2019 (7) TMI 596 - ITAT DELHI]
Since the Tribunal has already upheld the Order of the Ld. CIT(A) in deleting the quantum addition and the Hon’ble Delhi High Court [2021 (2) TMI 1182 - DELHI HIGH COURT] has already dismissed the appeal filed by the Revenue, therefore, the very basis on which the penalty was levied by the A.O. does not survive. Accordingly, the order of the Ld. CIT(A) for all the five assessment years under appeal deleting the penalty on account of addition of notional interest is upheld. Accordingly, the grounds raised by the Revenue in all the five assessment years under appeal are dismissed.
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2021 (7) TMI 1081
Seeking setting aside of the rejection of claim of the Applicant by the Liquidator - Section 42 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Applicant charging 12% interest on the outstanding amount is not wrong. Moreover, the contention of the Respondent that the assignment of debt (if it can be so called) in the form of letters of ultimate suppliers, require stamp duty to be paid as mandated under law. However, the Respondent has admitted to the fact that ₹ 3,61,595/- was reflecting in the books of accounts of the Corporate Debtor, on the basis of which the Respondent admitted the said principal amount. Therefore, there are no reason in delving into the approval of the principal amount and the claim of the Applicant including interest is due and payable by the Corporate Debtor.
The claim of the Applicant in respect of M/s. Shyam Enterprises cannot be denied, to the extent of the principal amount. And the claim of the Applicant with respect to the interest charged is still unclear, as no proof/documents/evidence have been provided by the Applicant. In the circumstances, the Liquidator shall verify the veracity of the claims of the Applicant with respect to the interest amount and take a decision accordingly.
It is seen that the Corporate Debtor was maintaining a running account on ledger basis of both the Applicant as well as the ultimate suppliers. The Liquidator while accepted the claim of ₹ 3,61,595/- of the Applicant in respect of M/s. Sohan Lal & Sons, there is no reason why a different and a rather inconsistent logic/approach shall be adopted by the Liquidator in terms of the claim of the Applicant in respect of M/s. Shyam Enterprises, in particular when the Corporate Debtor remained under the shadows of BIFR and hence, isolated itself from any claims/recovery.
It is seen that the claim of the Applicant excluding interest amount of ₹ 7,86,276/- (M/s. Shyam Enterprises) is admissible - Liquidator is directed to act in accordance with the observations of this Adjudicating Authority.
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2021 (7) TMI 1080
Seeking approval/revision of Resolution Plan - claim of the applicant is that after the approval of the Resolution Plan, the applicant has approached the GNIDA for sanction of the plan which is still pending for approval by the Respondent - HELD THAT:- Section 60(5)(c) of IBC, 2016 says that any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code shall be considered by the Adjudicating Authority.
A bare perusal of the provision of Section 5 (14) of IBC, 2016, shows that the insolvency resolution process period means the period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day - this period of 180 days may be extended under Section 12 of IBC, 2016. In view of the amended provision of Section 12 of IBC, 2016, the total period of insolvency resolution process can be of 330 days. Which means, the period so referred to in Section 5(14) of IBC, 2016 is subject to the extension made under Section 12 of IBC, 2016 or till when the Resolution Plan is approved by the Adjudicating Authority.
Admittedly, the Resolution Plan has already been approved - the Resolution Plan has already been approved by the Adjudicating Authority on 20.02.2020. Therefore, no insolvency proceeding is pending before the Adjudicating Authority.
Section 60 (5) of IBC, 2016 is applicable only if any insolvency resolution or liquidation proceedings of the corporate debtor or corporate person is pending before the Adjudicating Authority and in the instant case, it is seen that no such proceeding is pending before this Authority, therefore, the application filed by the applicant under Section 60 (5) of IBC, 2016 is not maintainable - the prayer of the applicant to give direction of the Respondent/GNIDA for the sanction of the plan is hereby rejected - application dismissed.
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2021 (7) TMI 1079
Penalty u/s 271(1)(c) - disallowance on account of expenditure on construction of BQS as capital expenditure - HELD THAT:- If we note that identical issue had arisen before this Tribunal in Assessment Year 2007-08 and 2008-09 in assessee’s own case [2020 (1) TMI 1481 - ITAT DELHI] respectively and the Department’s appeals against the deletion of the penalty imposed in these two years to Assessment Years were dismissed by this Tribunal.
There is no case of the revenue that the assessee filed inaccurate particulars of income or concealed the income, as all the details in the original return as well as in the revised return was placed before the AO - Merely changing the stand as to how the trade income/expenditure as to be taken as capital or revenue, does not amount to furnishing of inaccurate of particulars or concealment of income. Therefore, the CIT(A) was right in deleting the penalty. There is no need to interfere with the findings of the CIT(A). The facts are identical in A.Y. 2008-09 as well. Therefore, both the appeals of the revenue are dismissed.
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2021 (7) TMI 1078
Liquidation of Corporate Debtor - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The reasons assigned in the application with respect to initiating liquidation of the corporate debtor appears to be genuine in the present market scenario and convincing. Apart from that the period of CIRP has already expired long back without any resolution plan and therefore, there is no option other than liquidation of the corporate debtor although there was no voting of the CoC for liquidation of the corporate debtor.
The liquidation is allowed - application allowed.
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2021 (7) TMI 1077
Income deemed to accrue or arise in India - receipts from sale of software products is taxable as royalty under Article 12(3) of the India- Sweden Double Taxation Avoidance Agreement (DTAA) and u/s 9(1)(vi) of the Income Tax Act, 1961 - HELD THAT:- As relying on assessee's own case [2019 (10) TMI 858 - ITAT DELHI] and [2020 (10) TMI 936 - ITAT DELHI] hold that consideration received by the assessee for sale of software cannot be treated as royalty under the provision of section 9(1)(vi) of the Act as well as Article 12 of the India-Sweden DTAA and that the sale of software products by the assessee to its Indian distributors for further sale to end users is not in the nature of transfer of "copyright" and therefore not taxable in the hands of the assessee as "royalty" under the provision of section 9 (1)(vi) of the Act as well as Article 12 of the India-Sweden DTAA
As rightly pointed out by the learned counsel for the assessee, those decisions of the Hon’ble Karnataka High Court, now stand overruled by the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd [2021 (3) TMI 138 - SUPREME COURT] as held that copyright is an exclusive right that restricts others from doing certain acts. A copyright is an intangible right, in the nature of a privilege, entirely independent of any material substance
Owning copyright in a work is different from owning the physical material in which the copyrighted work may be embodied. Computer programs are categorised as literary work under the Copyright Act. Section 14 of the Copyright Act states that a copyright is an exclusive right to do or authorise the doing of certain acts in respect of a work, including literary work. Hon’ble Court took the view that a transfer of copyright would occur only when the owner of the copyright parts with the right to do any of the acts mentioned in section 14 of the Copyright Act, 1957(Copyright Act).
The court said that by virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as a consideration for "the use of, or the right to use, any copyright "of a literary work includes a computer program or software. It was held that regarding the expression "use of or the right to use", the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a) (i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty.
The grounds raised by the assessee with regard to taxing receipts on sale of off-the-shelf software are allowed.
Treatment of receipts from shared services in India to be in the nature of 'fess for technical services' and therefore liable to tax in India - HELD THAT:- Going by the nature of services enumerated in the present case, we are of the view that the services were purely in the nature of back office services and nothing can be regarded as having been made available to the recipient of services. As per the terms of the Service Agreement, it is clear that the assessee only provides corporate back office services to QlikTech India and such services are not consultancy services and the same do not involve transfer of any technical knowledge or skill or experience to the recipient. The CIT(A) has erred in law and on facts in stating that, since the business model and the accounting and financial policies of the business remains the same, the consultancy services could be utilised by the Indian entity in its business year after year, thereby satisfying the 'make available' condition. On the contrary, the CIT(A) has failed to appreciate that the year on year rendition of services by the assessee to the Indian entity proves that technical knowledge is not transferred or made available to the Indian entity for independently function without the aid of the assessee. We therefore agree with the plea of the assessee and hold that the sum received towards shares services were not in the nature of FTS and cannot be brought to tax in India as “FTS”. The sum in question cannot be taxed as business profits also, as under Article 7(1) of DTAA, as the receipts in question cannot be attributed to the permanent establishment
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2021 (7) TMI 1076
Penalty order passed u/s 271AAA - disclosure of undisclosed jewellery and cash - HELD THAT:- We find that in the assesses case, the search was initiated u/s 132 of the Act on 07.10.2009 which was much before i.e 01.07.2012. At this juncture, it will be appropriate to refer to the provisions of Sec. 271AAA of the Act which are applicable for the cases were the search has been initiated or after 01.06.2007 but before 01.07.2012.
The levy of penalty in not automatic and not mandatory. In the quantum appeal, the Hon’ble Tribunal has considered the accumulation of jewellary and the rate of jewellary is raising and the assessee has taken into account the value of jewellary in the A.Y.2010-11 and filed the return of income. Further there is no material to suggest that it was purchased in the relevant assessment year. Therefore, considering the facts circumstances, provisions and the ratio of the decision of the Hon’ble Tribunal. We set aside the order of the CIT(A) and direct the assessing officer to delete the penalty and allow the grounds of the appeal in favour of the assessee.
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2021 (7) TMI 1075
Revision u/s 263 - scheme or demerger conceived - under assessment of the income for the year under consideration under the provisions of MAT under section 115 JB of the Act as the AO allowed the deduction by way of adjustment of brought forward losses - assessee has claimed business loss and unabsorbed depreciation pertaining to the assessment year 2006-07 and 2007-08 although the same (the assessee) came into existence with effect from the assessment year 2008-09 - As per the PCIT the unabsorbed depreciation and brought forward losses pertain to the assessment years 2006-07 and 2007-08 i.e. pre-existence period the assessee, therefore, the same was not to be allowed to be carried forward such unabsorbed depreciation and brought forward losses under normal as well as under the provisions of MAT under section 115 JB - HELD THAT:- The impugned losses in the year under consideration represents the brought forward amounts from the earlier years. This fact can be verified from the submission of the assessee before the ld. CIT-A in the proceedings of the assessment framed under section 143(3) r.w.s. 263 of the Act. This fact also remained undisputed by the Ld. DR appearing on behalf of the Revenue.
Answer to question whether the brought forward amount can be enquired in the year under consideration without disturbing the 1st year (the year of origin ) in which such amounts were incorporated in the books of accounts of the assessee certainly, stands in negative.
Whether the Revenue can disturb the impugned amount brought forward from the earlier years, but the learned DR cannot make any satisfactory reply? - in the absence of any provisions under the law for disturbing the brought forward balances in the year under consideration in the given facts and circumstances, we hold that the learned PCIT has held the assessment order under consideration as erroneous insofar prejudicial to the interest of revenue under the provisions of section 263 of the Act without having any valid jurisdiction. Accordingly, we hold that the order framed under section 263 of the Act is not sustainable and therefore we quash the same. Hence, the ground of appeal of the assessee is allowed.
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2021 (7) TMI 1074
Disallowance u/s 14A r.w.r. 8D - AO noticed that the assessee has earned share income from firms and claimed the same as exempt u/s 10(2A) and the assessee did not make any disallowance u/s 14A - A.R. submitted that the assessee did not incur any expenditure for earning the exempt income - HELD THAT:- Exempt income constitutes fraction of total revenue. With regard to the interest expenses, it is submitted that they have been incurred in respect of project specific loans and no part of the said loans have been diverted to partnership firms. It is in the common knowledge of everyone, the project specific loans can be used for the specific projects and further the usage of loans will also monitored by the bank. Accordingly, in the absence of any material to show that the project specific loan has been diverted for investment in partnership firms, the disallowance out of interest expenditure is not called for - we are of the view that there is no necessity to apply the provisions of rule 8D.
Addition of other expenses - Assessee has claimed other expenses of ₹ 14.13 crores, out of which only ₹ 48.52 lakhs alone can be said to be common expenses. A.R submitted that the services and facilities used by assessee from other concerns and also by the other concerns from the assessee have been quantified and cross charged. Hence, overall supervision of the activities of partnership firms by the assessee would be relevant for sec.14A of the Act.
Major income of the assessee is from property development, we are of the view that the disallowance u/s 14A of the Act can be made at an adhoc figure of ₹ 2.00 lakhs and the same, in our view, would meet the requirements of section 14A of the Act.
We set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to restrict the disallowance to two lakhs rupees u/s 14A of the Act. - Decided partly in favour of assessee.
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2021 (7) TMI 1073
Disallowance u/s 14A r.w.r 8D(2)(iii) - HELD THAT:- AO has applied the formula of disallowance without considering the facts of investment pattern, income and total expenses. A.O. has to determine and calculate administrative over heads and compute the total income including exempt income. A.O. has to calculate the percentage of allocating administrative overheads based on total income and exempted dividend income.
Further if the disallowance u/sec14A of the Act is worked out, the A.O. has to apply the ratio of special bench decision in the case of ACIT Vs. M/s. Vireet Investments Pvt Ltd. [2017 (6) TMI 1124 - ITAT DELHI] - Where the Coordinate Bench has made a distinctive observations on the investments and only dividend yielding investments has to be considered for the purpose of Average value of investments for disallowance u/s 8D(2)(iii).
We set aside the order of the CIT(A) on this disputed issue and for limited purpose remit the disputed issue to the file of the assessing officer to recomputed the disallowance under Rule 8D(2)(iii) of the IT Rules and compare with the allocation of expenses to exempted income earned and allow the claim which is beneficial to the assessee. The assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. We allow the grounds of appeal of the assessee for statistical purposes.
Disallowance computed applying Sec 14A and Rule 8D(2) of the I T Rules, the assessee is eligible to make adjustment of disallowance amount while claiming deduction U/sec80IA of the Act in computing the revised profits.
Unabsorbed depreciation and accumulated losses of the earlier years prior to initial year of claim u/sec 80IA of the Act have to be adjusted while computing profit of eligible business - HELD THAT:- We Find the Honble High Court Of Madras in the case of M/s Velayudhaswamy Spinning Mills (P) Ltd. [2010 (3) TMI 860 - MADRAS HIGH COURT] has observed “The Loss in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business, as no such mandate is provided in section 80-IA(5)of the Act. Subsequently the Revenue has challenged the decision before the Hon’ble Supreme Court and the SLP was dismissed [2016 (11) TMI 373 - SC ORDER] . Accordingly, We follow the ratio of the above judicial decisions and set aside the order of the CIT(A) on this issue and allow the ground of appeal in favour of the assessee.
Income tax refund order along with interest u/sec 244A - HELD THAT:- We consider the overall aspects and the ratio of decisions in respect of interest calculation. The assessee should not be deprived of its legitimate right for any further interest, due to the lapses on the part of the income tax department. Accordingly, we direct the assessing officer to grant the interest on refund to the date of refund order and allow this ground of appeal.
Voluntary Emission Reduction (VER) credits - Revenue or capital receipt - HELD THAT:- Receipts in connection with the Voluntary Emission Reduction (VER) credits are in the nature of capital receipts - See M/S. DODSON LINDBLOM HYDRO POWER PVT. LTD. [2019 (4) TMI 1034 - BOMBAY HIGH COURT] and M/S. MY HOME POWER LTD., [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT]
Capital gain on Sale of Non convertible debentures - assessee has claimed the cost of acquisition of debenture at ₹ 452/- as against as cost of ₹ 500/- while calculating the capital gains - HELD THAT:- As in the subsequent A.Y.2010-11, the assessee has written off in the financial statements, we are of opinion that this matter requires verification and examination of transactions as discussed above to be decided based on the final outcome of A.Y. 2010-11.Accordingly, we restore this disputed issue for verification and examination by the assessing officer and after satisfaction of facts, the assessing officer is directed to allow the claim of the assessee. The assesse should be provided adequate opportunity of hearing and shall co-operate in submitting the information and we allow this ground of appeal for statistical purpose.
Grant deduction of education cess on income tax paid during the year - HELD THAT:- As relying on decision of M/s Sesa Goa Ltd Vs JCIT Panaji [2020 (3) TMI 347 - BOMBAY HIGH COURT] were the Honble High court has observed that the Education cess and Higher Education cess are liable for deduction in computing income chargeable under head of profits and gains of business or profession. We considering the ratio of decision discussed above, direct the assessing officer to allow the deduction of cess and allow the ground of appeal of the assessee.
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2021 (7) TMI 1072
Addition of surveillance fee - Income recognition policy - effect of change in accounting policy - assessee company is following mercantile system of accounting - A.O has made addition of surveillance fee which was not offered in the current year but in the subsequent year i.e.A.Y.2013-14 - CIT(A) has accepted the system of accounting of surveillance fee which the assessee company for the first time has adopted in A.Y 2012-13 - HELD THAT:- Method of accounting employed by the assessee is acceptable and is followed by the similar credit rating agencies and the change is bonafide and has been recognized as standard industrial practice.
A.O has never doubted the income and has also not accepted the fact of change in accounting policy on revenue recognition as the assessee was following mercantile system of accounting till last financial year. Whereas, in this present assessment year the assessee has bifurcated 60% fees as income of the current year and remaining 40% was carry forwarded and offered in A.Y 2013-14 which cannot be disputed - AR mentioned that due to change in system of accounting policy, the bench mark as applicable to other credit rating agencies are fallowed. When the query was raised to the Ld. AR to explain the basis of offering of fee in 60% and 40% ratio or industry yardstick or standard.
AR reply/explanations are not supported by evidences.
DR also accepted the fact of offering of income in the A.Y 2013-14 based on the supporting evidences including assessment order u/sec143(3) of the Act filed by the Ld.AR. We find that the CIT(A) relied on the submissions and the accounting policies and has deleted the addition. Whereas, in respect of 100% TDS claim made by the assessee on the 60% income/fee offered for taxation needs to be modified. When the income is recognized, the TDS claim should be restricted to the extent of income offered.
In the income tax return filed electronically by the assessee, there is a Schedule of TDS, were there are columns earmarked for set apart/carry forward of income and TDS claim for the Subsequent assessment year, which needs to be opted.
CIT(A) has passed a reasoned order and we up hold the same to the extent of deletion of addition of surveillance fee made by the Assessing officer.
TDS claim - We modify the CIT(A) order and direct the A.O to restrict the claim of TDS to the extent of income offered in the A.Y.2012-13 and the balance of TDS shall be claimed against the income assessable in the assessment year A.Y.2013-14 and we partly allow the grounds of appeal of the revenue - Appeal filed by the revenue is partly allowed.
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2021 (7) TMI 1071
Proceedings u/s 201(1) - not deducting TDS on the year-end provision - Addition u/s 40(a)(ia) - “assessee in default” for non-deduction of tax at source - assessee contended that these were end provisions that were reserved in subsequent financial year and based on invoices raised by the vendors were accounted in the books of account after deducting TDS - HELD THAT:- The provision created at the end of the accounting year has not been credited to the relevant parties to whom the payments has to be made for the reason that it was unquantifiable. Further, assessee has suo moto disallowed the said sum under section 40(a)(ia) for non-deduction of TDS. See BIOCON BIOPHARMACEUTICALS PRIVATE LTD [2015 (3) TMI 684 - ITAT BANGALORE]
Therefore there is a sufficient and reasonable cause for not deducting TDS on the year-end provision. Assessee consistently follows this kind of accounting system for year-end provisions which is subsequently reversed in the subsequent year in the month of April, as and when the bills are received, and the payment is made to the payee by deducting TDS. Further, admittedly, assessee has paid interest under section 201(1A) which further demonstrates there was no malafide intention.
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