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2022 (9) TMI 1555 - ITAT BANGALORE
Accrual of income in India - income deemed to accrue or arise in India - sales and marketing services rendered by the assessee to foreign marketing companies - whether it would not fall within the ambit of FTS as defined under section 9(1)(vii) or under Article 12 of DTAA? - AR submitted that the assessee is not providing any technical / managerial or consultancy services - HELD THAT:- In the instant case, the assessee is not providing any technical, managerial or consultancy services rather has been engaged to act as authorized business partner to market and promote the products or services of MSSPL outside India - in fact, the AO/DRP have not even concluded as to what is the nature of services rendered by the assessee. The decision regarding what are the products/services that are to be developed or provided, the price to be charged to the customer etc. are solely taken by MSSPL.
The assessee does not play any role in the decision-making process. Further, once the assessee procures the orders, it is at the discretion of MSSPL whether to sell the product or render services to identified customers.
As decided in Panalfa Autoelectrik Ltd [2014 (9) TMI 706 - DELHI HIGH COURT] held that commission paid by the assessee to its foreign Agent for arranging export sales and recovery of payments could not be regarded as fee for technical services under section 9(l)(vii) of the I.T. Act. The High Court held that the skill, business acumen and knowledge acquired by the non-resident were for his own benefit and use.
Also see Bangalore tribunal in the case of Deccan Creations (P.) Ltd [2021 (12) TMI 707 - ITAT BANGALORE] had held that services of foreign agents in the form of providing the data related to market trends and requirements of customers does not constitute as managerial services, as these services are usually provided by any agent. Thus, sales commission paid to foreign agents on the value of sales affected through them cannot be treated as technical services
Thus the income received towards sales commission does not satisfy the definition of "FTS" under the Act as it is not in the nature of Managerial, Technical or Consultancy Services.
Taxability as per DTAA - scope of 'made available' clause - As per Memorandum of Understanding ("MOU") on Article 12 of the Treaty, entered into by the Government of India and the Government of USA on May 15, 1989, the technology is considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service.
AO has stated that marketing services rendered by the assessee are technical in nature and which are used by MSSPL for development of business, which results in enduring benefit. Accordingly, the A.O. has concluded that make available is satisfied as there is transfer of skill and knowledge which falls within the ambit of technical services. DRP has also confirmed the view of the A.O. The AO and DRP has erred in not appreciating that what should be made available is technical knowledge, experience, skill etc. Making available service does not make available knowledge, experience, skill etc. MSSPL has to approach the assessee every time to get new customers and maintain relationship with existing customers. The test of make available as envisaged in the DTAA is therefore not satisfied in the instant case.
We hold that the sales and marketing services rendered by the assessee to MSSPL would not fall within the ambit of FTS as defined under section 9(1)(vii) or under Article 12 of DTAA.
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2022 (9) TMI 1554 - ITAT RAJKOT
Addition u/s 41(1) - cessation or remission of liability - DR before us contended that the liability has ceased to exist - Assessee contended that the impugned sundry creditors are arising against the purchases which were made in the earlier years and no doubt of whatsoever was raised about such purchases. Furthermore, the creditors have not been written back in the books of accounts
HELD THAT:- Condition precedent is that there should be an allowance or deduction in the assessment for any year in respect of allowance, expenses or trading liability incurred by the assessee and thereafter in any previous year if the creditor waives any such liability, then assessee is liable to tax under section 41(1)
The provisions of Section 41(1)(a) of the Act casts a burden on the assessee to establish remission and cessation of liability in relevant assessment year where benefit has been obtained earlier by the assessee.
Coming to the facts of the present case, we note that the assessee itself has admitted during the assessment proceedings that it is not approaching to the creditors namely M/s Khodiyar Enerprise, Krishna Enterprise, Karan Enterprise and SK Corporation as it is reluctant to make the payment.
The liabilities appearing in the books of accounts of the assessee against 3 parties[supra] are not actually payable if we see the facts in aggregation. Shri Kirit Kumar Jani, the alleged proprietor of Khodiyar Enterprise has appeared and admitted that he is not the proprietor of the concern namely Khodiyar Enterprise. Likewise, he also admitted that is not into any kind of business dealing of whatsoever with the assessee.
Parties namely M/s Krishna Enterprise and SK Corporation are also not genuine. It is for the reason that TIN/ VAT reflected on so called invoices raised were not belonging to them and were immediately cancelled after registration. Thus, it can be inferred that the liabilities shown by the assessee with respect to these parties were bogus. However, the assessee was allowed deduction on account of purchases from these bogus parties in earlier year.
Be that as it may be, we find the assessee before the lower authorities has claimed that, on the advice of auditor, the outstanding balance from the parties namely M/s Khodiyar Enerprise, Krishna Enterprise, and SK Corporation has been written back in the books in the F.Y. 2014-15 as liability no longer required. The assessee to this effect also furnished a working sheet of liability written back as no longer required in F.Y. 2014-15.
Thus no addition under section 41(1) of the Act on account of cessation of liability is required to be made in the year consideration, otherwise same will lead to double addition as the assessee has already offered the same in the F.Y. 2014-15 i.e. A.Y. 2015-16. However, before parting, we would like to give direction to the AO to delete the addition paid by him after necessary verification whether the impugned amount of sundry creditors has suffered to tax in the financial year 2014-15 corresponding to assessment year 2015-16.
Addition u/s 41(1) in respect of the party namely M/s Kabra Brothers, we note that the difference in the amount shown by the assessee as liability viz of viz the amount shown by the party M/s Kabra Brother is arising mainly on account of the entries recorded in the books of accounts. The assessee has issued letter of credit to the party - The assessee was liable to make the payment after the period of 90 days which was falling in the subsequent financial year. However, the other party got these letter of credit discounted and received the payment which was adjusted against the account of the assessee. This fact can also be verified from the certificate issued by the party placed on page 98 of the paper book.
Thus, the difference was arising only on account of book entries. The assessee actually made the payment in the later year whereas the party has accounted the receipt in the same financial year which has resulted the difference in the balance as discussed above. Thus to our understanding no addition is warranted under the provisions of section 41(1) of the Act. At the time of hearing the learned DR has also not brought anything on record contrary to the finding of the learned CIT-A. Thus, we do not find any infirmity in the order of the learned CIT-A and accordingly we uphold the same. Thus the AO is directed to delete the addition made by him.
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2022 (9) TMI 1553 - PUNJAB & HARYANA HIGH COURT
Maintainability of petition - alternative remedy available to petitioner to approach the Debt Recovery Tribunal under Section 17 of the Act - claim of refund - seeking quashing of the e-mail dt.15.12.2021 issued by respondent No. 2 forfeiting the said amount deposited towards the earnest money by him - suppression of factum by secured creditor like SBI of the pendency of litigation in respect of the secured asset being put to sale, from persons intending to participate in the e-auction - It is the contention of the petitioner that it was the duty of the Bank to disclose about the pending litigation in the e-auction notice, and suppression of the said fact by the Bank is contrary to law.
Maintainability of petition - alternative remedy available to petitioner to approach the Debt Recovery Tribunal under Section 17 of the Act - HELD THAT:- If there is a violation of the provisions of the Act by the respondent-Bank while taking steps to recover it's dues under the Act, the Writ Petition can be entertained by this Court, and it is not necessary to relegate the parties to avail alternative remedy.
Though counsel for respondents have placed reliance on the decision of the Supreme Court in the case of Aggarwal Tracom Pvt. Ltd. v. Punjab National Bank [2017 (11) TMI 1523 - SUPREME COURT] to contend that the Writ Petitions under Article 226 of the Constitution of India cannot be entertained when effective statutory remedy is available to the aggrieved person, in a later judgment rendered in the case of AUTHORIZED OFFICER, STATE BANK OF TRAVANCORE AND ANOTHER VERSUS MATHEW K.C. [2018 (2) TMI 25 - SUPREME COURT], the Supreme Court held that there are well defined exceptions to the rule of exhaustion of alternative remedy as laid down in decision of COMMISSIONER OF INCOME TAX & OTHERS VERSUS CHHABIL DASS AGARWAL [2013 (8) TMI 458 - SUPREME COURT] and one of such exceptions mentioned in Para 15 of the said judgment is “where the statutory authority has not acted in accordance with the provisions of the enactment in question.” - the plea of the respondent that the Writ Petition ought to be dismissed in view of existence of alternative remedy under Sec.17 of the Act is rejected.
Whether it was proper for a secured creditor like SBI to suppress from persons intending to participate in the e-auction being conducted by it under the SARFAESI Act, 2002, the factum of the pendency of litigation in respect of the secured asset being put to sale by it? - HELD THAT:- It is settled law that persons holding positions of trust have to act in a bonafide manner and transparently and cannot mislead persons sought to be affected by their actions by suppressing material facts and circumstances.
Rule 8(6)(f) of the Rules protects the interest of the intending purchaser to be put on notice as to encumbrance as otherwise, he or she would be purchasing property, and simultaneously buying litigation as well, and the intending purchaser may not bid in the event, if he or she came to know any encumbrance over the property. That is why the Rules specifically contemplate a provision for the Authorized Officer, while notifying the sale, to specifically state as to the encumbrance. Merely by mentioning in the e-auction notice that the sale is on as is where is basis, as is what is basis and whatever there is basis, the Bank is not absolved of its statutory obligation of disclosing the “encumbrances” attached to the property brought for sale by way of tender or any auction or sale by public auction.
In Joginder Singh [2022 (7) TMI 1505 - PUNJAB AND HARYANA HIGH COURT] also there was civil litigation pending in respect of the secured asset which was not disclosed in the tender/public notice issued the Bank, and this Court has held that if such a fact had been disclosed, the petitioner might not have participated in the tender issued by the Bank at all as no intending purchaser wants to buy a fresh litigation or take on other unknown liabilities against third parties, and the action of the Bank was arbitrary and contrary to the provisions of the Act of 2002.
It was not proper for a secured creditor like SBI to suppress from persons intending to participate in the e-auction being conducted by it under the SARFAESI Act, 2002, the factum of the pendency of litigation in respect of the secured asset being put to sale by it; and that it ought to have refunded the amount deposited by petitioner, instead of forfeiting it.
The email dt.15.12.2021 (Annexure P-16) issued by respondent No. 2 to the petitioner is set aside; and respondents 1 to 3 are directed to refund within 4 weeks Rs. 16,08,250/- to the petitioner with interest @ 7% per annum from the date such deposit(s) were made till the date of refund - petition allowed.
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2022 (9) TMI 1552 - SUPREME COURT
Non-calling of petitioners for recording their statements - HELD THAT:- The reasons have been penned down for issuing notice in order dated 30.03.2022. It is not disputed that the appellants have been cooperating with the investigation. The whole issue arises out of records and documents.
In view of the aforesaid facts and circumstances, the order dated 30.03.2022 is made absolute - appeal disposed off.
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2022 (9) TMI 1551 - TELANGANA HIGH COURT
Cancellation of GST Registration of petitioner - non-filing of returns for a continuous period of six months - HELD THAT:- It would be in the interest of justice to remand the matter back to respondent No. 1 to reconsider the entire matter regarding cancellation of registration as cancellation of GST registration would have an adverse Impact on the petitioner restraining him from carrying on his business activities.
Petition disposed of by way of remand.
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2022 (9) TMI 1550 - CALCUTTA HIGH COURT
Validity of reassessment proceedings - order u/s 148A(d) and subsequent notice u/s 148 challenged on the ground of violation of principle of natural justice by not affording any opportunity of personal hearing before passing the impugned order.
Let this matter appear on 7th November, 2022 under the same heading.
In the meantime status quo, as of today, on the aforesaid impugned order under Section 148A(d) of the Act shall be maintained.
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2022 (9) TMI 1549 - SUPREME COURT
Application for discharge filed by the Appellant under Section 227 of the Code of Criminal Procedure, 1973 - whether the Appellant is entitled to be discharged of the proceedings initiated against him under the PC Act?
Inclusion an amount of Rs. 55,000, recorded as the balance amount in the Appellant’s bank account during the check period - HELD THAT:- The difference in the figures was not explained by the Prosecution. Accordingly, the Special Judge (Vigilance) and the High Court failed to reconcile such a simple and straightforward inconsistency in the Prosecution’s evidence. It is opined that only an amount of Rs. 11,998, recorded in the Appellant’s Bank Passbook during the checkperiod as the balance amount, is validly admissible as expenditure under this head.
Inclusion of an amount of Rs. 53,467 as expenditure towards repayment of the loan from the BSFC - HELD THAT:- The amount repaid towards loan instalments was already deducted from Appellant’s gross salary, and the deducted figure was recorded as the total disposable income with the Appellant during the check period. Hence, the loan repayment cannot be separately counted as an expenditure yet again. This is a glaring mistake. The Special Judge (Vigilance) as well as the High Court did not consider this objection on the ground that a roving inquiry is not permissible the stage of discharge.
Inclusion of Rs. 1,58,562 as the value of the articles found during a search conducted in Appellant’s house on 21.02.2000, twelve years after the check period of 1974 to 1988 - HELD THAT:- There is nothing to indicate, even prima facie, that these articles found during the search in the year 2000 were acquired during the check period. In the absence of any material to link these articles as having been acquired during the check period, it is impermissible to include their value in the expenditure. It is opined that the Appellant’s objection about inclusion of this amount in the list of expenditure is fully justified. Unfortunately, even this objection, which did not require much scrutiny of the material on record, was not considered by the Special Judge (Vigilance) or the High Court.
The Special Judge (Vigilance) was bound to conduct a similar inquiry for coming to a conclusion that a prima facie case is made out for the Appellant to stand trial. Unfortunately, the High Court committed the same mistake as that of the Special Judge (Vigilance).
Appeal allowed.
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2022 (9) TMI 1548 - MADRAS HIGH COURT
Maintainability of petition - availability of alternative remedy of appeal - Petition filed only for the reason that the statutory time limit had expired by the time the petitioner came to be aware of the order - HELD THAT:- The order is stated to have uploaded on the website of the portal, but the petitioner has not been intimated about such uploading by any means. It is only when coercive recovery was taken to recover the demand under the order that the petitioner states that it came to be aware of the impugned order having come to be passed.
In such circumstances and in view of there being no objection to the request of the petitioner to file a statutory appeal, time of two (2) weeks from today is granted to the petitioner to file an appeal. Appeal, if filed within the time as granted, shall be taken on file without reference to limitation, but ensuring compliance with all other statutory conditions, including pre-deposit.
Petition dismissed.
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2022 (9) TMI 1547 - ITAT MUMBAI
Unaccounted cash receipt found in books impounded during survey - CIT(A) deleted addition - HELD THAT:- A sum Partly has been deleted for the reason that advances are received from the customer, is less than the total amount shown by the assessee as received advance in the books of accounts and therefore to that extent the addition also deserves to be deleted. Furthermore it is apparent that the impounded material did show the agreed value of the consideration as well as the amount received against that consideration.
The balance of this sum is naturally not received by the assessee and therefore it could not have been considered as income of the assessee as the same has not been received at all. Such is the case with respect to the sum with respect to annexure A – 8, pertaining to annexure A – 9 and pertaining to annexure A – 10 of Kandivali project.
Further sum as mentioned in the second remand report clearly shows that this amount is not appearing in any of the impounded material, same has been included by the learned assessing officer on the basis of the balancing figure of the amount receivable, and amount received. Therefore if the amount is not received and is merely a balancing figure, the same could not have been taxed as income of the assessee as it is not at all received.
Naturally, the sum pertains to assessment year 2007 – 08 and assessment year 2009 – 10 and therefore naturally they could not have been added in the hands of the assessee for assessment year 2008 – 09 and therefore same are deleted. Obviously, whether the same are taxable in the hands of the assessee or not in those years were required to be dealt with by deciding the appeal of the learned assessing officer for those respective years.
Duplicate entries have been deleted by the learned CIT – A . Therefore as the amount of addition sustained by the learned CIT – A is higher than the amount of the balance addition after removing [1] amounts not received, [2] duplicate entries,[3] amounts not appearing in the impounded material and [4] amount received against the advance is less than the amount appearing in the books and a[5] amount pertaining to different years, the learned CIT – A deleted those additions. There is no infirmity pointed out by the learned departmental representative in the order of the learned CIT – A. No evidence is produced before us with respect to the fact that either any of the amount is received or the amount stated to be pertaining to the different years is pertaining to this year and duplicate entry stated by the learned assessing officer and confirmed by the learned assessing officer in remand report is incorrect. Nothing has been shown before us from the impounded material that the advances received by the assessee against the sale of the property are not accounted for in the books of account.
In view of this, the learned CIT – A has taken the correct view after considering the two different remand report obtained from the learned assessing officer and the rejoinder of the assessee. It is further to be considered that in the second remand report the learned CIT – A has given a categorical direction to the learned assessing officer to examine particular aspect with respect to each of the items appearing in the impounded material.
AO on examination of the impounded material came with the finding that the total addition should have been of ₹ 751,981,580 – however out of which the sum of ₹ 748,451,911/– is required to be excluded for the respective reasons as stated above. Therefore, it is apparent from the order of the learned CIT – A that he has not gone by the addition made in the assessment order of ₹ 619,105,369/– but he has considered the amount of addition required to be made as per the learned assessing officer as per the first remand report amounting to ₹ 751,981,580/– . Out of this, he has given a detailed explanation for deleting the addition of sum of ₹ 748,451,911/– and he sustained the addition of ₹ 9,136,813/- which is higher than the balance amount of ₹ 35,29,669/- (75,19,81,580 -74,84,51,911). Therefore, we confirm the order of the learned CIT – A deleting the addition.
Validity of reopening of assessment - jurisdiction of AO to make the assessment - HELD THAT:- As the notice has been issued by the learned assessing officer who had no jurisdiction over the assessee, such notice has not been issued validly. If a valid notice is not issued u/s 143 (2) of the act for making an assessment, assessment order passed cannot be upheld. The honourable Supreme Court in case of Asst Commissioner of income tax versus Hotel Blue moon [2010 (2) TMI 1 - SUPREME COURT] categorically held that notice u/s 143 (2) is mandatory for completing assessment. Therefore, as in the present case the assumption of jurisdiction for making an assessment has not been validly assumed by issuing the notice by the assessing officer who was authorised to issue such notice, the assessment cannot be upheld.
Amount is received in cash by the assessee is only money which are not recorded in the books of account - Assessment year 2007 – 08 - CIT(A) deleted addition - HELD THAT:- On careful consideration we find that the assessee has shown advances in its books of accounts Under the head advance received from customers. Therefore, it is apparent that the amount has already been recorded in the books of accounts the addition has been correctly deleted by the learned CIT – A.
The amount was found to be the bank balances and is cash on hand. Both the items are related to regular books of accounts and therefore there could not have been added as undisclosed income of the assessee which is rightly deleted by the learned CIT – A. Secondly, a sum written in the seized material, have been extrapolated by the learned AO by adding 2 zeros in making at ₹ 11 lakhs. We find that such extrapolation is unwarranted unless it is mentioned in the impounded material. There is no mention of such extrapolation in the impounded material and therefore the addition to the extent of ₹ 11 lakhs could not have been made and therefore same is deleted by the learned CIT – A the addition to the extent of ₹ 11,000/– is sustained. Further a sum of ₹ 1,751,440/– is not reflected in the impounded troopers and therefore correctly deleted. We further find that amount of ₹ 121,001/– has been considered twice, therefore same also correctly deleted by the learned CIT – A.
Now we find that the learned CIT – A has deleted the addition holding that same is pertaining to assessment year 2008 – 09 and therefore same cannot be considered in assessment year 2007 – 08. This finding has been given by the learned CIT – A without first ensuring that the same has been added in the assessment year 2008 – 09 or not. Therefore, we direct the learned assessing officer to examine that if the amount of ₹ 2,862,000 has been already added in assessment year 2008 – 09 then same may be deleted in this year is there cannot be any addition of the same amount in two different assessment years.
Addition made by AO with respect to the own money is not in fact the receipt of the money but the payment for purchase of land and other brokerage expenses which are already accounted for in the books of accounts of the assessee and therefore they are not own money and cannot be added as income of the assessee. Those are correctly deleted by the learned CIT – A.
Coming to the addition wherein the learned CIT – capital has deleted the addition stating that it is not related to the appellant as it was not reflected anywhere in the impounded material. If the same amount is deleted, for the reason that it did not belong to the assessee or not pertaining to the business of the assessee, the learned CIT – A noted that to whom it belongs to.
We found that at serial number 8 the transaction with respect to bhakti trading Co is mentioned on 5/9/2006 amount in ₹ 20 lakhs. The explanation of the assessee that these transaction is not in cash but through bank. Similarly at serial number nine there is a transaction in the name of VSK enterprise dated 4/10/2006, this also stated by the assessee to be transaction through cheque. However no details of recording of these entries in the books of the assessee is shown. Thus merely because the assessee has mentioned it to be a bank transaction, it cannot be deleted. Therefore the learned CIT – A has deleted this addition only on the expression of the assessee. Accordingly, we direct the assessee to show before the learned assessing officer with respect to the above two entries whether they are recorded in the books of accounts through cheque in the books of the assessee on and if they are related to some other party, the assessee should give name and address of those parties to the learned assessing officer for examination determine that those are not unaccounted receipts of the assessee.
The solitary ground raised by the learned assessing officer with respect to the addition is partly allowed.
Undisclosed/unaccounted income during the survey conducted - Assessment year 2009 – 10 - CIT appeal held that the assessee has already included the above sum as an advance because the project is continuing an income would be offered on the basis of method of accounting, the relevant expenses are also shown, none of them are shown to be bogus or not genuine or unsupported by proper vouchers and bills. Therefore, the addition is not required to be made as assessee already accounted for the receipt. The findings of the learned CIT – A are supported by verification of the accounts as well as the explanation of the assessee and remand report is of the learned assessing officer which were part of appellate proceedings for assessment year 2008 – 09. In the result the solitary ground of the appeal of the learned AO deserves to be dismissed.
Audit u/s 44AB - As assessee does not have any turnover, there is no question of audit of accounts Under that Section. Therefore same is also deserves to be dismissed.
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2022 (9) TMI 1546 - DELHI HIGH COURT
Delhi High Court jurisdiction to decide the legality and validity of a notice issued u/s 148 - as argued there is no order passed u/s 127 transferring jurisdiction to Respondent No.1 in Mumbai - Respondents submits that this Court has no territorial jurisdiction to decide the legality and validity of a notice issued by Respondent No.1 under Section 148 of the Act, especially in view of the fact that the initial notice under Section 148 of the Act had been challenged by the Petitioner by way of writ petition before the Bombay High Court.
HELD THAT:- In the opinion of this Court, since the Petitioner had initially approached the Bombay High Court, the averments in the said writ petition would have a material bearing. Accordingly, the Petitioner is directed to place on record a copy of the writ petition filed by it in Mumbai High Court challenging the notice issued under Section 148 of the Act dated 30th June, 2021, within a week.
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2022 (9) TMI 1545 - ITAT SURAT
Disallowance on account of interest - disallowance of interest expenses, the assessee stated that they have not charged interest from Gharda Chemicals Ltd., against amount outstanding - HELD THAT:- We find that Ld. CIT(A) granted relief to assessee by following the decision of Tribunal in assessees own case in [2013 (8) TMI 518 - ITAT AHMEDABAD] for AY 2009-10 dated 19.07.2013. We find that similar set of fact, similar disallowance was made by Assessing Officer in AY 2009-10, on appeal before Ld. CIT(A) the disallowance was confirmed on account of interest free credit. On further appeal before Tribunal, the disallowance to holding Co. was deleted. Considering the decision of Tribunal on similar set of fact on similar ground of appeal in AY 2009-10, therefore respectfully following the binding precedent, we affirm the order of Ld. CIT(A).
Addition on account of closing stock and finished goods viz., MPB & Quinalphos - reply of assessee was not accepted by Assessing Officer by taking view that assessee has not furnished the used stock of work-in-progress of MPB as also Quinalphos have been valued, work-in progress of MPB has been furnished as on 31.03.2014 - AO on perusal of details in respect of opening stock and closing stock summary of work-in-progress of finished products, this finished stock was valued less than that of opening stock - HELD THAT:- We find that the assessee is consistently changing their stand with regard to valuation of opening and closing stock of finished goods viz; MPB and Quinalphos. While making submission before us, the ld AR for the assessee submits that the details given in her written submissions are final and she is ready to explain before the assessing officer that there is no inconsistency in the stand of the assessee on the opening and closing stock of finished goods viz; MPB and Quinalphos. We find that there is variation in the stand of the assessee, therefore, we restore this issue of opening and closing stock of finished goods i.e. MPB and Quinalphos to the file of assessing officer to consider the submissions of the assessee, as submitted before us and pass the order in accordance with law. Needless to direct that before passing the order, the assessing officer shall allow reasonable opportunity to the assessee of being heard. In the result, Ground No. 1 in assessees appeal is allowed for statistical purpose.
Undervaluation of closing stock of various finished goods - substantial increase of quantum of damaged goods - HELD THAT:- No doubt that certain percentage of product/ goods produce by the assessee is bound to damage or expired by efflux of time or by other factor effecting the chemical composition of such pesticides. It is also common feature that neither the expired chemical nor the damaged goods of assessee can secure the price in the market, moreover, most of the product of the assessee may prove hazardous to the environment, even if in the damaged position is not disposed in control manner. Thus, we are of the view that in such circumstances the assessee may be allow certain percentage of cost of damaged product. However, we find that the assessee has not provided the quantity of such damaged or unsaleable product and valued it without justifying with the comparable cases. Similarly, we also find that the assessing officer has also not brought any contrary evidence on record to disbelieve the contention of the assessee. Therefore, to avoid the possibility of revenue leakage, we are of the view that the disallowance to the extents of 25% (25% of 2.227 Crore), on account of undervaluation of closing stock would be sufficient to meet the end of justice. Thus, remaining disallowance is deleted. The assessing officer is directed accordingly.
Nature of expenses - repairs and maintenance charges - revenue or capital expenditure - HELD THAT:- We find that the assessing officer while treating the expenses as capital in nature has not given any basis of his observation if his observation is based on any material or evidence and is basically general in nature. We find that the ld. CIT(A) while deleting the addition clearly held that the assessing officer has not brought any material on record to prove that some of those items are independent machine or apparatus, which can be used independently for manufacturing activities. Further, the assessing officer has not explained the technical aspect of the items to prove that the replaced items are independent machine which could be used independently. The ld CIT(A) concluded that finding of the assessing officer is not based on any material or evidence and are general in nature, thus he is not correct in treating such expenditure as capital in place of revenue.
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2022 (9) TMI 1544 - NATIONAL COMPANY LAW TRIBUNAL CUTTACK BENCH
Preferential, fraudulent, and undervalued transactions under sections 43,45 and 66 of Insolvency and Bankruptcy Code 2016.
Preferential Transactions - HELD THAT:- The 4th respondent is not related party to the corporate debtor; this transaction had taken place in the financial year 2015-2016. The CIRP commenced against the corporate debtor on 26.04.2018. As per section 43(4)(b) any transaction made within a year prior to the date of commencement of insolvency termed as preferential transaction. In this case the disputed transaction happened in the financial year 2014-2015 three years prior to the date of commencement of insolvency date. Here the look back period exceeded one year as mentioned in section 43(4)(b) of IBC 2016, hence the transaction referred here is not a preferential transaction.
Fraudulent Transactions - HELD THAT:- The Section 66 (1) of Insolvency Bankruptcy Code, 2016 should read along with Section 35 (1) (n) of IBC, 2016. If the contention of the respondent is accepted then there will not be any avenue available to the Liquidator who found the fraudulent transactions of the corporate debtor during liquidation process, to proceed against them, this will not the intention of the statue, hence it is held that this petition filed by the liquidator alleging certain fraudulent transactions against the corporate debtor is maintainable.
Purchase of Rice husk from Related parties at a reasonably High Price - HELD THAT:- There is no material to show that the suspended directors of the corporate debtor reasonably knew that the commencement of insolvency proceeding against the corporate debtor was inevitable and the suspended directors failed to take due diligence to minimise the potential loss to the creditors. The purchase was made in the year 2015, the look back period exceeded three years from the date of commencement of CIRP. The Vendors who supplied rice husk are not arrayed as respondents. In the scenario it is answered that the fraudulent transaction alleged against the corporate debtor is not proved.
Interest free Advance to Ashirwad Trading Company, Kamal Associates and Parsa Kente Collieries Limited - HELD THAT:- As per section 66(1) of IBC 2016 if the Adjudicating Authority arrived to the conclusion that the transactions were carried out in fraudulent manner, it can order against persons who were knowingly parties to the such fraudulent business transactions to make such contribution to the corporate debtor. The applicant stated that the supra mentioned amounts are remains as an outstanding amount payable to the corporate debtor. The respondent 1 & 2 failed to take any steps to recover the same but the applicant has not whispered what steps he has taken to recover the amount. In this scenario the afore mentioned three companies are necessary parties to this application. In the absence, said companies no fruitful order can be passed. Further fails to recover the outstanding amounts will not amounts to fraud, at most it can be termed as negligence act. In these circumstances it is concluded that on the applicant side failed to establish these transactions are fraudulent transactions as alleged.
Fraudulent write off of Debtor from the Books of the Corporate Debtor - HELD THAT:- There is major difference exist between a loan is waived off and write off. If the loan is waived off thereafter no action can be taken to recover the said loans but if the loan is write off, the loan can be recovered through legal process. In short, write off will not extinguish the rights of the lender to recover the amount, it is only for audit purposes write of is made - the write off of debt will not amounts to fraudulent Transactions.
Advance Payment Made to Fatehpur East Coal Pvt. Ltd. A potentially Related Party and Later on adjustment of the said payment by way of purchase of shares - HELD THAT:- There is a difference between wrongful trading and fraudulent trading, the element of negligence exists in wrongful trading but element of deceit will not there. On the applicant side not explained how the above transaction is termed as fraudulent transaction. In the circumstances it is concluded that since the incident taken much before the commencement of corporate insolvency resolution process date and in the absence of elements of deceit, the applicant failed to prove this transaction is a fraudulent transaction.
Excess Payment made to various suppliers but Receipt of payment, Goods or services not booked - HELD THAT:- In the case of fraudulent transactions, the person or persons who were benefited because of the fraudulent acts of the suspended directors of corporate debtor also to be added as party to arrive just and correct conclusion and also if the guilt is proved to get back the benefit acquired by them. In this case five vendors of Rice husk are not arrayed as parties to this application, this amounts to non-joinder of necessary parties - the transactions under the caption of fraudulent transactions are not proved.
Undervalued Transactions - HELD THAT:- As per section 46(1)(ii) of IBC 2016, the transactions made with related party within period of two years preceding the insolvency commencement date is the under-value transaction. In this case look back period exceeded two years from the date of commencement of CIRP against the corporate debtor hence, the transactions referred in the application does not fall under value transactions.
Thus, the transactions styled as preferential, fraudulent, and undervalued in the petition are not proved hence the petition is liable to be dismissed.
Application dismissed.
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2022 (9) TMI 1543 - RAJASTHAN HIGH COURT
Territorial jurisdiction questioned - recourse to the remedy of appeal before the Tribunal or its bench having the territorial jurisdiction - HELD THAT:- Though number of grounds have been raised by the petitioner in these two writ petitions, taking into consideration that issues of jurisdiction were not raised when the proceedings were pending but are being raised after the assessment orders have been passed, in our opinion, all these issues can be taken up by taking recourse to the remedy of appeal before the Tribunal or its bench having the territorial jurisdiction.
Since we are not inclined to entertain the writ petitions and relegating the petitioner to take recourse of appeal before the Tribunal, the period during which these writ petitions remained pending shall be excluded for the purpose of counting limitation in filing the appeal before the Tribunal.
We also place on record the submission made by learned counsel for the Revenue that there is already a bench of Income Tax Appellate Tribunal in Jodhpur and in urgent matters, if sitting is not taking place at Jodhpur, the matters are taken up at Jaipur.
Be that as it may. Since objection of existence of alternative remedy has been raised by learned counsel for the Revenue, we direct that as soon as the appeal is filed by the petitioner before the jurisdictional bench of the Tribunal, the Tribunal shall ensure hearing of the said appeal within a period of seven days from the date of submission of the appeal along with the stay application.
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2022 (9) TMI 1542 - TELANGANA HIGH COURT
Validity of assessment order - imposition of tax on lease rentals under section 5-E of the APGST Act - constitutional validity of section 5E(b) of the APGST Act - HELD THAT:- As held by the honourable apex court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [1996 (12) TMI 50 - SUPREME COURT], the power under article 226 has to be exercised to effectuate the regime of law and not for abrogating it. Even while acting in exercise of the said constitutional power, the High Court cannot ignore the law, nor can it override it. The power under article 226 of the Constitution of India is conceived to serve the ends of law and not to transgress them.
In the instant case, since the clause (b) of section 5E of the A. P. Act 6 of 1957 was read down by the honourable apex court as indicated above holding that the situs of sale would be the place where the property in goods passes and not the place of location of the goods where they are put to use, the respondent are under obligation to review the assessment of tax for the years 1995-96 to 1997-98 of the petitioner and consequently, the petitioner is entitled for refund of tax paid by it for the said assessment years.
It is borne by record that the tax paid by the petitioner for the assessment years 1995-96, 1996-97 and 1997-98 was Rs. 2,20,880, Rs. 21,17,129 and Rs. 28,35,996 respectively. Therefore, the respondents are directed to refund the tax paid by the petitioner, i. e., Rs. 2,20,880, Rs. 21,17,129 and Rs. 28,35,996 for the assessment years 1995-96, 1996-97 and 1997-98 respectively, to the petitioner, within a period of sixty (60) days from the date of receipt of a copy of this order.
Petition allowed.
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2022 (9) TMI 1541 - CESTAT NEW DELHI
Rectification of mistake - imposition of 100% penalty under section 11AC readwith Rule 25 of Central Excise Rules, 2002 - extended period of limitation - HELD THAT:- Section 11AC prescribed a mandatory penalty for non-levy or short levy or non-payment or short payment or erroneous refund of duty by reason of fraud or collusion or any willful statement or suppression of facts or contravention of any provision of the Act or the Rules made thereunder with an intent to evade payment of duty. These are the same elements which are required to confirm duty invoking the extended period of limitation - the demand of duty upheld by invoking extended period of limitation in the final order and, therefore, penalty under section 11AC invariably follows and there is no discretion in the matter - there is no mistake in not giving a separate finding on the penalty under section 11AC.
Computation by adjusting the cenvat credit available on inputs used was not considered - HELD THAT:- There are no provision in the Act or Rules by which the duty can be determined after deducting the cenvat credit which may be available on the inputs as claimed by the assessee. Of course, if duty is payable, the assessee will be entitled to cenvat credit as per the Cenvat Credit Rules and may also able to use the cenvat credit to pay the duty. This, first, of course, will be subject to verification of the availability of cenvat credit as per the rules.
Thus, instead of reproducing the findings of the Adjudicating Authority, the final order of the Tribunal has endorsed his findings. Therefore, the assertion in the application by the Revenue that the Tribunal has set aside any demand in the concluding paragraph of the final order is factually incorrect and misconceived.
Application disposed off.
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2022 (9) TMI 1540 - SC ORDER
Withdrawal of exemption u/s 10B in the Revised Return and claim of carry forward of loss - As decided in [2022 (7) TMI 560 - SUPREME COURT] filing a revised return u/s139(5) of the IT Act claiming carrying forward of losses subsequently would not help the assessee - assessee filed its original return under section 139(1) and not under section 139(3). Therefore, the Revenue is right in submitting that the revised return filed by the assessee under section 139(5) can only substitute its original return under Section 139(1) and cannot transform it into a return under Section 139(3), in order to avail the benefit of carrying forward or set-off of any loss u/s 80 of the IT Act. The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under Section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or setoff of any loss - HELD THAT:- Application for listing Review Petition in open court is rejected.
Having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record, warranting reconsideration of the order impugned.
The Review Petition is, accordingly, dismissed.
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2022 (9) TMI 1539 - KARNATAKA HIGH COURT
Foreign exchange gain on restatement of external commercial borrowings - Whether liable to tax as it is on the capital account? - Assessee’s case is, it has borrowed funds for external commercial borrowing to avail capital assets. In the restatement of the account to be made every year, there is bound to be a change in the value of the borrowings in view of fluctuation in the foreign exchange - HELD THAT:- ITAT in its order has referred to CIT(A)'s order and rightly recorded that the fluctuation in the rates of foreign exchange can result in either a gain or a loss because of value of the currency which appreciates or depreciates on the date of computation namely 31st March of the relevant accounting year. Placing reliance on CIT vs. Woodward Governor India (P) Limited [2009 (4) TMI 4 - SUPREME COURT] ITAT has held that the adjustment on account of foreign exchange rate fluctuation is required to be made to actual cost at the end of every year after amendment of Section 43A with effect from 01.04.2003 and upheld CIT(A)'s order that the gain arising on account of exchange fluctuation are not liable to tax as it is on the capital account.
MAT computation - brought forward book loss in computation of income and Section 115JB - HELD THAT:- As perused the explanation to Section 115JB of the Act. Clause 2(iii) of Explanation 1 (i) of Section 115JB makes it clear that the amount of loss brought forward or unabsorbed depreciation whichever is less as per the books of accounts must be permitted to be set off. The CIT(A) and the ITAT placing reliance on CBDT Circular No.495 dated September 22, 1987, have rightly held that the cumulative brought forward losses or unabsorbed depreciation should be considered for set off.
In view of unambiguous language employed in the statute, no exception can be taken with ITAT’s order confirming the CIT(A)’s order holding that the assessee is entitled to claim set off. So far as the actual amount is concerned, the ITAT has remitted the matter to the Assessing Officer. However, on principle, the ITAT has rightly held that the assessee is entitled to claim set off.
Substantial questions of law are answered in favour of the assessee and against the Revenue.
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2022 (9) TMI 1538 - ITAT DELHI
Disallowance u/s 40(a)(i) - payment made for management services to non-resident AEs - assessee furnished that it had paid sum to its group entities outside India under the head management charges - CIT(A) held that the payments made towards management services to non-resident AEs by the assessee are not FTS and not liable for deduction of TDS u/s 195 - HELD THAT:- On perusal of the assessment order it is noticed that the AO gives a finding that the agreements show that the companies provided highly technical services and can be rendered only by a person who has high degree of expertise. It was also the observation of the Assessing Officer that the expertise which is available to the respective companies is made available to the assessee company for using the same in its managerial decision making process. While coming to such conclusion the AO failed to refer to any specific clause of the agreement where the non-resident AE companies provide highly technical services.
AO failed to list out what are the highly technical services the companies are providing to the assessee company. AO also failed to show that under which clause the expertise available with the companies is made available to the assessee company for using the expertise by the assessee in its managerial decision making process.
We also observe that the issue has been decided in favour of the assessee during the assessment years 2010-11 and 2014-15 by the ld. CIT (Appeals) and the Revenue has accepted these decisions by not filing further appeals to this Tribunal. It is also noticed that for the assessment year 2012-13 the Assessing Officer did not make any disallowance for non-deduction of TDS on management service charges paid by the assessee to its AEs.
No valid reason to interfere with the findings of the ld. CIT (Appeals) in holding that the managerial services charges paid by the assessee to its non-resident AEs is not liable to TDS under the provisions of section 195 of the act. Thus, we sustain the order of the ld. CIT (Appeals) and reject ground No. (a) of grounds of appeal of the Revenue.
Disallowance of management charges u/s 37 - CIT(A) deleted addition - HELD THAT:- CIT (Appeals) has examined the evidences furnished and came to the conclusion that the expenses incurred towards management services are for the purpose of business and such services are routine and recurring in nature and qualify as Revenue expenditure. It is also the submission of assessee that the Assessing Officer in any of the earlier assessment years or in subsequent assessment years these expenses were disallowed invoking the provisions of section 37(1) of the Act. No infirmity in the order passed by the ld. CIT (Appeals) in allowing these expenses as Revenue expenditure incurred by the assessee for its business purposes. Decided against revenue.
Disallowance made towards PF and ESI - CIT(A) deleted addition - HELD THAT:- On perusal of the order of the ld. CIT (Appeals) we observe that the payments towards PF and ESI were made within due date for filing return of income u/s 139 of the Act and the ld. CIT (Appeals) following the decision of the Hon’ble Delhi High Court in the case of CIT Vs. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] held that there was no justification in making disallowance towards PF and ESI contributions. We see no infirmity in the order passed by the ld. CIT (Appeals). This ground of appeal is dismissed.
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2022 (9) TMI 1537 - SC ORDER
Disposal of the uncleared cargo by way of auction - Right of Customs Department - it was held by NCLAT that No interference is called for against the impugned order dated 3rd July, 2018 passed by the Adjudicating Authority prohibiting the Customs Authority from selling the assets of the ‘Corporate Debtor’ - HELD THAT:- There are no ground to interfere with the impugned order passed by the National Company Law Appellate Tribunal. The civil appeal is, accordingly, dismissed.
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2022 (9) TMI 1536 - DELHI HIGH COURT
Income taxable in India - receipts earned from supply of software - whether taxable in India under Section 9(1)(vi) of the Income Tax Act, 1961, read with Article 12 of the India-USA Double Tax Avoidance Agreement (DTAA)? - As revenue says that the issue is covered against the revenue by the judgement titled Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT] and a review petition has been filed against the said judgement, which is pending consideration in the Supreme Court.
HELD THAT:- We may note that the issue which arises for consideration is: whether receipts earned from supply of software are taxable in India under Section 9(1)(vi) of the Income Tax Act, 1961, read with Article 12 of the India-USA Double Tax Avoidance Agreement (DTAA).
Accordingly, the appeals preferred by the revenue are closed. Liberty is, however, given to the appellant/revenue to revive the appeals in case the decision rendered by the Supreme Court in the aforementioned review petition favours the revenue.
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