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2021 (9) TMI 1484
Principle of res judicata - maintainability of three suits - suit barred by time limitation or not - owner in possession of the suit schedule property - suit property is a ‘Khazi Service Inam’ (Wakf property) - execution of sale deeds in respect of the property in favour of Defendants 1 to 4 - it is claimed that alienation by Defendants 5 to 9 is void since the Board did not approve the transaction with a two-thirds majority.
HELD THAT:- The findings are summarised as follows:
(i) Issues that arise in a subsequent suit may either be questions of fact or of law or mixed questions of law and fact. An alteration in the circumstances after the decision in the first suit, will require a trial for the determination of the plea of res judicata if there arises a new fact which has to be proved. However, the plea of res judicata may in an appropriate case be determined as a preliminary issue when neither a disputed question of fact nor a mixed question of law or fact has to be adjudicated for resolving it;
(ii) While deciding on a scheme for administration in a representative suit filed under Section 92 of the CPC the court may, if the title is contested, have to decide if the property in respect of which the scheme for administration and management is sought belongs to the Trust;
(iii) A suit under section 92 CPC is of a representative character and all persons interested in the Trust would be bound by the judgment in the suit, and persons interested would be barred by the principle of res judicata from instituting a subsequent suit on the same or substantially the same issue;
(iv) Since the first suit (OS 92 of 1950-51) was filed by members interested in the Jamia Masjid and the suit out of which the instant proceedings arise (OS 149 of 1998) was filed by the President of Jamia Masjid, the formulation in (iii) above is satisfied;
(v) There was no adjudication in the first suit (OS 92 of 1950-51) on whether Abdul Khuddus had absolute title to the suit property. There was only a prima facie determination that Items 2 and 3 of the schedule of properties to the first suit belonged to Abdul Khuddus. The matters substantially in issue in OS 92 of 1950-51, which was a suit for administration and management of trust properties and for accounts, are distinct from the issues in the suit out of which the instant proceedings arise. Therefore, OS 149 of 1998 is not barred by res judicata in view of the decision in the first suit;
(vi) While a compromise decree in a prior suit will not bar a subsequent suit by virtue of res judicata, the subsequent suit could be barred by estoppel by conduct. However, neither the compromise petition dated 27 October 1969 nor the final decree in the second suit dated 27 October 1969 indicate that a compromise on the title to the suit property was arrived at. The compromise was restricted to the issue of the erstwhile lessee handing over possession of the suit property at the end of the lease; and
(vii) The third suit (OS 100/1983) was a suit for an injunction simpliciter. The third suit was withdrawn after the suit out of which the instant proceeding arises was filed for seeking a substantive declaration and an injunction. No adjudication on the rights of the parties was made in the third suit.
The impugned judgment and order of the High Court of Karnataka set aside - appeal allowed.
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2021 (9) TMI 1483
Shifting of burden by CESTAT - petitioners has urged that the Customs Excise and Service Tax Appellate Tribunal (‘CESTAT’) could not have shifted his burden, for which he has relied on some of the authorities, one of which is of MG SHAHANI & CO. (DELHI) LTD. VERSUS COLLECTOR OF C. EXCISE, NEW DELHI [1994 (8) TMI 34 - SUPREME COURT] and other decisions.
HELD THAT:- Issue urgent NOTICE, returnable on 20.10.2021.
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2021 (9) TMI 1482
Exemption u/s 11 - refusing to grant registration u/s 12AA (1)(b)(ii) - utilization of the fund and receipt thereof from the agriculture activities - whether the activities of the assessee are genuine, and the object of the assessee are charitable in nature or not? - HELD THAT:- We have gone through the record from the record it is discernible that the ownership document per duly placed by the assessee before the CIT exemption and also before us which clearly shows that the ownership of the land vested in the assessee. Assessee had also placed on record the sale of agricultural produce by filing the form J - The documents clearly shows that the finding recorded by the CIT exemption was against the record. In any case at the time of grant of registration under section 12 AA of the of the Income Tax Act what is required to be seen is whether the activities of the assessee are genuine, and the object of the assessee are charitable in nature or not. No comments were made by the CIT exemption in respect of above said two aspect and the whole premise of rejection order of the registration was based on utilization of the fund and receipt thereof from the agriculture activities.
In our view the same is not permitted in view of the law laid down by the Hon’ble Supreme Court in the matter of Anand Social [2020 (2) TMI 1293 - SUPREME COURT], Dawoodi Bohara Jamat [2014 (3) TMI 652 - SUPREME COURT].
In the present case the finding recorded by the CIT exemption is not arising out of the record, rather it is contrary to the record. In our view the assessee was able to prove that the objects of the assessee are charitable, and the activities of the assessee are also genuine. Therefore, respectfully following our decision in the case of Saraswati Education [2021 (9) TMI 840 - ITAT AMRITSAR] we direct the CIT exemption to grant registration to the assessee society from the date of application. Decided in favour of assessee.
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2021 (9) TMI 1481
Applicability of the provisions of sections 148 and 148 A - constitutional validity and vires of the Explanation contained in Notification No.20/2021 dated 31.03.2021 as well as Notification No.38/2021 dated 27.04.2021, which extend, for the purpose of issuance of Notice under Section 148 , the time limit specified in Section 149 or sanction u/s 151 of the Act from 31.03.2021 to 30.04.2021 and from 30.04.2021 to 30.06.2021 respectively - HELD THAT:- According to the petitioner, the Financial Act has substituted the provision of section 147 with effect from 01.04.2021 and the time limit has been set to issue the notice under section 148 which is extended by Notification No.20 of 2021 and 38 of 2021, there cannot be two parallel provisions applicable simultaneously. The validity of the notice is challenged so also Notification No.20 of 21 issued by the CBDT by purportedly exercising the powers conferred by section 3 (1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
We have heard the learned senior advocate, Shri Tushar P. Hemani with learned advocates, Ms.Vaibhavi Parikh and Mr.Parimalsinh Parmar for the petitioner. It is urged fervently that even the Revenue Authorities could not have extended the operation of repealed provision of section 148 beyond 31.03.2021 under the guise of a clarificatory explanation in the notifications.
Issue NOTICE to the respondents returnable on 05.10.2021. Pleadings be completed and office of learned Additional Solicitor General shall be served through e-mail.
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2021 (9) TMI 1480
Validity of order passed u/s 92-CA(3) - Computation of limitation - HELD THAT:- Writ Court noting that as against the draft assessment order, the assessee has approached the Dispute Resolution Panel (DRP), the writ petitions were disposed of by permitting the respondents/writ petitioner to pursue the statutory remedy as opted by it and accordingly, the writ petition was closed.
In such circumstances, the Appellant cannot be aggrieved over the said order, and the Learned Writ Court did not apply the conclusion arrived at, by which in so far as the writ petition filed by the respondent herein.
With the observation, that the writ petition is unnecessary. Since the writ petition filed by the respondent writ petitioner in W.P. No. 35420 of 2019 was not disposed of on merits along with the other cases but has been closed as the respondent had availed the alternate remedy before the DRP.
Appellant submitted that the ratio laid down by the Learned Writ Court would not apply to the respondent-writ petitioner. This issue is obvious, because, the writ petition filed by the respondent-writ petitioner was not adjudicated on merits and was closed, as the respondent chose to avail the alternate remedy provided under the Act by approaching the DRP. It is made clear that the respondent-writ petitioner would be entitled to canvass all legal and factual issues before the Income Tax Appellate Tribunal, before which the appeal is now pending, including the point relating to limitation.
Accordingly, the writ appeal is disposed of.
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2021 (9) TMI 1479
Validity of Arbitral Award - validity of the termination notice dated 08.10.2012 - DMRC claimed that the termination notice issued by DAMEPL is illegal, as DMRC had taken various steps honouring its obligations under the Concession Agreement - curable defect or not - HELD THAT:- The defects pointed out by DAMEPL regarding gaps between the shear key and the girder being more than 25 mm and between 10 mm to 25 mm were not addressed and only gaps below 10 mm were addressed by some grinding, detailed methodology for which was not brought out by DMRC in its evidence, as per the findings of the Arbitral Tribunal. Therefore, the Tribunal concluded that these defects were neither cured nor effective steps taken by DMRC within the cure period up to 08.10.2012, constituting a material breach on the part of DMRC. On the basis of the above findings and findings in relation to other defects, deficiencies and constraints in the civil structure of the AMEL which are not referred to herein, the Arbitral Tribunal concluded that the defects had not been cured within the cure period of 90 days from 09.07.2012 nor had effective steps been taken to cure such defects. Ergo, the termination notice issued by DAMEPL on 08.10.2012 was valid.
Whether the issue of certificate by the Commissioner on 18.01.2013, giving clearance for resuming operations of the AMEL, showed that the defects were duly cured? - HELD THAT:- After examining the certificate issued by the Commissioner, the Arbitral Tribunal held that while the Commissioner had sanctioned resumption of services, certain conditions were imposed, essentially relating to the restriction of speed up to 50 km per hour, which had a material bearing on the prime purpose of the AMEL intended to serve as a high-speed connectivity line. Moreover, the Commissioner himself recognized that the operation of the Line had to be regularly monitored. The subsequent operation of the Line by DMRC was found to be not relevant for determining the validity of the termination notice dated 09.07.2012. The Arbitral Tribunal answered this issue in favour of DAMEPL.
We do not intend to re-examine the entire material on record for the purpose of deciding whether the High Court was right in reversing the conclusion of the Tribunal in relation to computation of the amount under Article 29.5.2 of the Concession Agreement. The opinion of the Tribunal is that the amount of Rs.611.95 crore was an amount advanced by DAMEPL’s promoter which was not disputed by DMRC. The contention advanced by DMRC, that it was only the equity share capital as is understood within the meaning of the Companies Act, 2013 which is liable to be paid by DMRC under Article 29.5.2, was rejected by the Tribunal. The view taken by the Tribunal that the amount contributed by a member of the consortium or by shareholders to meet the ‘Concessionaire’s Capital Costs’ in any form, including where such funds are classified as subordinated debt, cannot be treated as ‘Subordinated Debt’ in terms of its definition in the Concession Agreement, is a reasonable and possible view - After a detailed consideration of the relevant clauses of the Concession Agreement, the High Court held that the Tribunal had committed a serious error in its tabulation of ‘Adjusted Equity’ by completely ignoring the evidence on record.
There are no fault with the approach of the Tribunal that the understanding of the term equity as per the Companies Act, 2013 is not relevant for the purposes of determining ‘Adjusted Equity’ in light of the express definition of the term in the Concession Agreement - the findings of the High Court set aside - the award by the Tribunal in respect of the computation of Termination Payment under Clause 29.5.2 upheld.
The Tribunal awarded interest in accordance with the terms of the Concession Agreement on termination payment. DMRC contended before the High Court that the award in respect of interest had to be set aside on the ground that it would result in unjust enrichment. After a thorough consideration of Article 29.8 and Article 36.2.6.1 of the Concession Agreement, the High Court has rightly refused to interfere with the findings by the Tribunal relating to interest and there exists no cause for interference.
Appeal dismissed.
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2021 (9) TMI 1478
Refund of unutilised CENVAT credit on closer of factory in the form of cash, for which no provision exist in the CENVAT Credit Rules vis a vis Section 11 of the Central Excise Act - divergent judicial decisions are available in all hierarchy of Courts where tax disputes are decided including that of the Apex Court - applicability of binding judicial precedent that would govern the field than the statutory enactments - Difference of opinion.
HELD THAT:- On the point of application of binding precedent for the Tribunal vis-à-vis revisiting to the legality of the issue involved and applicability of stare decisis, there emerged certain difference of opinion between learned Member (Judicial) and learned Member (Technical). To settle the issues and give finality to the divergent opinion emerged, the Registry is directed to place the matter before the Hon’ble President. The following points are required to be settled to give a finality to the issue:-
i. Whether the decision of the Hon’ble High Court of Karnataka in case of Slovak India Trading Co Pvt, [2006 (7) TMI 9 - KARNATAKA HIGH COURT] and affirmed by the Hon’ble Supreme Court in [2007 (1) TMI 556 - SC Order], is applicable to the facts of the case in hand as held by Member (Judicial); or The decision of the Hon’ble Karnataka High Court is clearly distinguishable and not applicable to the facts of the case as held by Member (Technical)
ii. Whether the order passed by the Hon’ble Supreme Court is to be accepted as binding precedent in view of KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER [2000 (7) TMI 67 - SUPREME COURT] read with GANGADHARA PALO VERSUS REVENUE DIVISIONAL OFFICER [2011 (3) TMI 252 - SUPREME COURT] in view of operation of Article 141 of the Constitution of India irrespective of the merger or no merger of the judgment of Hon’ble High Court with the judgment of the Hon’ble Supreme Court; or CESTAT is bound to follow the decision of the larger Bench of CESTAT ( in the case of Steel Strips [2011 (5) TMI 111 - CESTAT, NEW DELHI] and larger Bench of the Hon’ble Bombay High Court (Jurisdictional High Court) in the case of Gouri Plastic Culture [2019 (6) TMI 820 - BOMBAY HIGH COURT] which has dealt with the findings of Kunhayammed.
iii. After the decision of the Hon’ble Supreme Court in case of Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT], and subsequent decisions, can CESTAT which is an authority created under the statute, decide any claim of the refund in terms of Rule 5 of CENVAT Credit Rules, 2004, filed for the reason beyond the reason of export of goods under bond. Member (Judicial) has held in favour of appellant and Member (Technical) has held in negative.
iv. Whether the decision of the Hon’ble Karnataka High Court will hold goods after amendments made in the Rule 5 of CENVAT Credit Rules, 2004 in the year 2012, Member (Judicial) has held in favour of the Appellant while Member (Technical) disagrees and holds that the refund claim needs to be filed and adjudged as per the provisions of Rule 5 as they existed when the refund claim was filed.
v. Whether the refund claim is barred by limitation, Member (Judicial) has not dealt with the issue as not in adjudication order whereas Member (Technical) has held the refund claim to be hit by limitation.
vi. Whether the larger Bench orders of the Tribunal passed in the case of Mira Silk Mills Vs. Commissioner of Central Excise, Mumbai [2003 (3) TMI 142 - CEGAT, NEW DELHI] and Atma Steel Private Limited and others Vs. Collector Central Excise, Chandigarh and others [1984 (6) TMI 60 - CEGAT, NEW DELHI] on the application of binding precedent is to be followed by the Tribunal to arrive at a conclusion as held by the Member (Judicial); or Observation of the larger Bench of the Hon’ble Bombay High Court upon non-application of Article 141 in the context of the findings of the Hon’ble Supreme Court is to be followed by this Tribunal, as held by the learned Member (Technical) though ratio of the judgment in Gangadhar Pal had not been brought to the knowledge of the Hon’ble Bombay High court.
vii. Whether legality of the issue involved in the present appeal concerning cash refund upon closer of factory can be revisited after the same is given a finality by the Hon’ble Supreme Court with a reason, may be meager, in confirming the order of the Hon’ble Karnataka High court, which is opined in the negative by the Member (Judicial) and
In the affirmative and in express analysis of the provisions of the relevant Act and rules by the Member (Technical).
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2021 (9) TMI 1477
TP Adjustment - not providing unabsorbed cost adjustment to the assessee on account of untilized capacity - HELD THAT:- We notice that this Tribunal has in assessee’s own case for AY 2014-15 set aside the issue to the TPO for consideration afresh and directed the TPO to grant an adjustment on account of capacity utilisation by calling for relevant information on capacity utilisation in the case of comparable company by exercising his power u/s 133(6) of the Act to collate the information on capacity details of the comparable companies such as actual capacity in units, installed capacity, break up of fixed and variable cost, product wise segmental profitability (if any) and provide the assessee an opportunity by sharing the details so obtained on the comparable companies, and accordingly grant the adjustment for capacity under-utilized. The Tribunal also held that if challenges on the lack of information / data are accepted than the adjustment should be made to the tested party. Thus set the order of the AO on this issue remand the same to the AO/TPO for consideration afresh as directed by the Tribunal in AY 2013-14.
Loss/gains arising from fluctuation and restatement of foreign currency ought to be treated as non-operating in nature - TPO has considered forex fluctuation as being operating in nature while computing the margin of the assessee as well as the comparable companies - HELD THAT:- In the context of transfer pricing, the Bangalore Bench of the Tribunal in SAP Labs India Pvt. Ltd. [2010 (8) TMI 676 - ITAT, BANGALORE] has held that foreign exchange fluctuation gain is part of operating profit of the company and should be included in the operating revenue. In the light of above judgement, which is being followed consistently by the various Benches of ITAT, we hold that the amount of foreign exchange gain/loss arising out of revenue transactions is required to be considered as an item of operating revenue/cost, both of the assessee as well as comparables. Hence, the AO was justified in considering forex loss as operating cost.
AO/TPO will compute the ALP of the international transaction in question in accordance with the directions given above after affording assessee opportunity of being heard.
Claim as loss incidental to the business in year of write off - HELD THAT:- It is not in dispute that the assessee wrote off the countervailing and excise duty by debiting its profit and loss account to the extent it was ineligible to claim the duty credit and consequently claimed the same as a deduction under Section 37(1) of the Act. Since the credit cannot be claimed by the assessee and the said amount was written off, the same ought to be allowable as business expenditure under Section 37(1) of the Act more so, when the conditions specified for claim for expenditure under Section 37 of the Act are satisfied.
Chandigarh Bench of ITAT in the case of Mohan Spinning Mill [2012 (4) TMI 781 - ITAT CHANDIGARH] allowed CENVAT credit written off by the assessee as a business expenditure under the provision of Section 37 - DRP held that cases cited by the learned counsel for the assessee were cases where either the registration certificate was surrendered or the business itself was closed. The DRP directed the AO to examine whether the credits were actually written off and if so allow the claim as bad debt.
In our view, the sum in question can be regarded as loss incidental to business. It is no doubt true that in the event of loss, the year in which the loss crystallized is important. The assessee’s claim that the original invoices were lost and hence the assessee could not claim credit for duty paid is not disputed. In such circumstances, to allow the claim as loss incidental to the business in year of write off ought to have been accepted. We therefore direct that the claim of the assessee should be allowed as deduction.
Allowable business expenditure - Admission fees paid to employee of the assessee for securing admission for the employees child in a school - HELD THAT:- The sum in question is personal expenditure of the employee. The employer having met those expenses, the employer should regard is as a perquisite in the hands of the employee. Admittedly, the sum in question has not been regarded as perquisite in the hands of the employee and therefore the sum in question was rightly disallowed by the AO. We find no grounds to interfere with the order of the DRP. Reliance placed by the learned counsel for the assessee on the decision of Gopalpur Tea Company Limited. [1985 (2) TMI 78 - ITAT CALCUTTA-C] is on payment of bonus over and above the statutory limit and that ratio cannot be applied to the facts of the present case. Hence, we dismiss Gr. raised by the assessee.
Disallowance of irrecoverable insurance claim - HELD THAT:- This Tribunal in assessee’s own case for AY 2014-15 remanded the issue to the AO with direction to the assessee to furnish the required details to show that claim made for recovery from the insurance company was rejected to the extent of sum claimed as deduction by the assessee and directed the AO to examine the claim of the assessee in the light of the details that may be filed. We are of the view identical order would meet the ends of justice in the present AY also.
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2021 (9) TMI 1476
Maintainability of petition - none appeared for the petitioner - HELD THAT:- None appeared for the petitioners and no accommodation was sought, when the matter was called on 16th September, 2021. Today also when the matter is called, none appears on behalf of the petitioners. No accommodation is sought. Learned advocate for the respondents are present.
Petition dismissed for default.
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2021 (9) TMI 1475
Seeking rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 - It is submitted by the appellant that the relevant suit was filed before the Commercial Division in this High Court came to be established and, upon the Commercial Division being established, the suit was transferred from the ordinary Original Side to the Commercial Division in accordance with the said Act.
HELD THAT:- It is possible that the source of the power is provided in a particular statute but the exercise thereof is under the general procedure in accordance with the Code. Again, the power to pass the order may be traced to the mandate in a particular statute though the manner of exercise of that power may not be stipulated in such statute. At any rate, even Order XLIII Rule 1 of the Code indicates the nature of the order which is appellable in certain cases and, in other cases, the order made in exercise of an authority conferred by the Code itself. The difference between the wording of, for example, subrules (a), (c) and (d) of Order XLIII Rule 1 of the Code, on the one hand, and sub-rules (f), (q), (r) and (s) of Order XLIII Rule 1 of the Code, on the other hand, is telling. While every order passed under the relevant provisions indicated in sub-rules (f), (q), (r) and (s) of Order XLIII Rule 1 of the Code is appellable, only those of a particular kind as indicated in sub-rules (a), (c) and (d) of Order XLIII Rule 1 of the Code are appellable. The obvious inference that is to be drawn is that it is the nature of the order that determines whether it would be appellable or not.
There is no doubt, as the plaintiff suggests, that the trial court completely failed to construe the nature of the suit that the plaintiff herein instituted before the Bombay High Court. It is also evident that the trial court misread Section 35 of the Act of 2013 in holding that a suit under such provision “should be filed against the company AND every other individual whom the plaintiff claims to be responsible for the reports made in the prospectus.” The finding in such regard is clearly exceptionable. On a plain reading of the provision, it is apparent that the liability of the company and the several other persons indicated in Section 35(1) of the Act of 2013 are joint and several - the fact that DHFL was not a party to this suit was of little consequence and the trial court erred in founding its opinion on such flawed and irrelevant consideration. Since insolvency proceedings had been commenced against DHFL by the time the suit was instituted, DHFL could not have been impleaded as a party by virtue of Section 14 of the Code of 2016 and the punishment attracted under Section 74(2) thereof for violation of such provision.
The perception by the trial court that it would be convenient for the two suits to be tried together betrays the failure to appreciate the nature of the two actions. The Bombay suit was filed under Order XXXVII of the Code as a summary action founded on the contract between the plaintiff and DHFL qua the repayment of the amount invested by way of debentures. It is trite law that a claim in damages founded on the fraudulent conduct of the defendant or defendants can scarcely be instituted under Order XXXVII of the Code.
There is an averment in the plaint to the effect that the quantum of damages that may be realised in course of the present action may be adjusted against any realisation pertaining to the debentures made by the plaintiff elsewhere. That, in essence, is a legal requirement, or else, the doctrine of unjust enrichment would apply. It does not appear that the nature of the plaintiff's claim in the present action may have been fully comprehended by the trial court. The plaintiff had made a substantial investment in debentures which the plaintiff later discovered that the plaintiff may have been induced into making on the basis of the false statements and dishonest representations contained in the prospectus relating to such issue.
As a consequence, the plaintiff initiated an action for recovery of the money from the concerned company itself and, subsequently, instituted the present suit for the loss and damage that the plaintiff suffered as a result of the perceived fraudulent and dishonest representations of the defendants herein. Surely, if the entire amount due to the plaintiff under the contract with DHFL was recovered by the plaintiff in the Bombay suit, the plaintiff would not be entitled to any penny in the present suit, notwithstanding the fraudulent conduct of the defendants, since the plaintiff would have recovered its investment and would not have suffered any loss or damage as a result.
The principle of comity of courts may not have been a relevant consideration since the natures of the two actions were completely different. There could also be no doubt that some of the defendants were within the jurisdiction of this court at the time of the institution of this suit and Clause 12 of the Letters Patent makes no distinction as to whether the place where the defendant carries on business has any nexus with the transaction which is subject-matter of the suit - On the basis of the averments made in the plaint, it cannot be said that no part of the plaintiff's cause of action had arisen within the jurisdiction of this court. Though Section 19 of the Code may not be applied to this court since the entirety of the jurisdiction of this court to receive a suit is found in Clause 12 of the Letters Patent, the place where the loss is suffered may be a part of the cause of action. For a company, as the plaintiff herein, the loss is ultimately suffered at the registered office which is within jurisdiction.
The judgment and order impugned dated April 29, 2021 cannot be sustained.
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2021 (9) TMI 1474
Notice u/s 153C against deceased person - liability of legal heir of late assessee - As per HC notice, be it under Section 148 of the Act or Section 153C of the Act, issued to a dead person, is unenforceable in law. If such is the legal position, the Revenue cannot contend that as they had no knowledge about the death of the assessee, they are entitled to plead that the notice is not defective - HELD THAT:- We are not inclined to interfere with the impugned order. The Special Leave Petition is accordingly, dismissed. Pending application, if any, stands disposed of.
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2021 (9) TMI 1473
TDS u/s 195 - Royalty - amounts paid by the concerned persons resident in India to non-resident, foreign software suppliers - Whether constitutes as taxable income - whether assessee had purchased only a right to use the copyright i.e. the software and not the entire copyright itself, the payment cannot be treated as Royalty as per the Double Taxation Avoidance Agreement and Treaties? - HELD THAT:- As assessee submits that the substantial questions of law raised herein are squarely covered by the ruling of the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited vs. The Commissioner of Income Tax and another [2021 (3) TMI 138 - SUPREME COURT]
As Revenue could not dispute the same, the substantial questions of law are answered in favour of the assessee and against the revenue.
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2021 (9) TMI 1472
Exemption u/s 11 - dummy face for diverting of receipts - huge fees collected under non educational heads - assessee was doing commercial activities by collecting huge amounts from students under various heads some of which were not incidental to its objectives and was earning huge profits which were ploughed back to create assets in the form of capital investments - huge fees collected under non educational heads, CIT(A) has found the heads to be incidental to the purpose for which the trust existed - HELD THAT:- Vis-à-vis the issue of huge fees collected under non educational heads, CIT(A) has found the heads to be incidental to the purpose for which the trust existed. On considering the facts relating to the issue, as out lined in the order of the AO in the table where various amounts collected by the assessee are tabulated, we see no reason to disagree with the CIT(A).
We find that the heads listed therein, which form major part of the fee collection, are by way of admission fees, art & crafts expenses, educom charges, transport charges, printing & stationary charges, etc. They are no doubt related to the educational activities of the assessee. Remaining collections in the form of discount & rebate, penal ty charges, insurance claim refunds, etc. are very minor collections and in any case are normal collections incidental to the carrying of the activity of imparting education. DR was also unable to point out how the heads under which the amounts were collected were not related or incidental to the activities of imparting education carried on by the assessee. Therefore, we do not find any infirmity in the findings of the Ld.CIT(A) vis-a-vis this aspect.
For the reasonableness of the amount collected CIT(A) has stated that to be beyond the ambit of taxation and drawn support from decisions in the case of St Peters Education Society [2016 (6) TMI 536 - SUPREME COURT] CBDT Circular No.14/2015 and the decision of the Jurisdictional High Court in the case of Pinegrove International Charitable Trust Vs. Union of India & Others, [2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT], all to the effect that mere generation of surplus would not lead to the conclusion that the assessee does not exist solely for educational purpose. Ld.DR was unable to controvert the same before us .we therefore do not find any infirmity in the findings of the Ld.CIT(A) in this regard also.
Payment of royalty - Perusal of the MOU signed by the assessee with M/s G.D. Goenka Pvt . Ltd reveals that as per the said agreement M/s G.D. Goenka Pvt . Ltd. was to only provide guidance to establish, manage and develop the school by way of providing preopening guidance & support, providing guidelines for documentation of records, supporting in marketing and advertisement of the school, providing manual for operations in alignment with the core standards, support in recruitment of Principal & staff, training & support for staff development and providing continuous support in all areas. These services, we find, are merely support services so as to ensure that the education being imparted in the assessee’s school is in consonance with the standard established by the brand M/s G.D. Goenka Pvt . Ltd as per the agreement entered into with them. The Ld.DR was unable to show as to how these services could be read as M/s G.D Goenka having control over the day- to-day activities of the running of assessee’s school.
No infirmity in the findings of the CIT(A) that there being no relationship between the assessee and M/s G.D. Goenka Pvt. Ltd. and the services being provided to maintain the brand name of M/s G.D. Goenka Pvt . Ltd. it cannot be said that the royalty paid by the assessee to M/s G.D. Goenka Pvt . Ltd. tantamounted to diversion of its profits.
As for the aspects of accumulation of profits the findings of the Ld.CIT(A) are to the effect that the assessee has complied with the provisions of law in this regard. DR was unable to controvert the same before us.
We do not find any reason to interfere in the order of the Ld.CIT(A) allowing assessee’s claim of exemption u/s 11 of the Act .
Disallowance of rent paid to one Smt .Suman Bansal - The factual findings of the CIT(A) that the ownership of Smt .Suman Bansal of the land leased to the assessee was established by documentary evidences, has not been controverted before us. Therefore, the findings of the AO that there was no evidence of ownership of land by Smt .Suman Bansal , meri ts no consideration. The findings of the CIT(A) to the effect that the land had been leased by the assessee consistently for educational purpose and the rental payments were consistent with the past history of the assessee had also remained uncontroverted before us. He has also stated that the rental payment , in his view, was reasonable payment for such a huge chunk of land in a capital city like Jammu. The assessee had justified the same by stating the market value of the land as assessed by the Revenue Authorities and, therefore, the rent paid was much less considering its huge market value. The Revenue has been unable to controvert this factual finding of the Ld.CIT(A).
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2021 (9) TMI 1471
Assessment u/s 153A - Assessee argued assessment was a completed assessment and not abated besides that no incriminating material was found during the course of search - HELD THAT:- We find that the assessee has filed original return of income on 29.09.2013 and search took place on 23.07.2015. Therefore, assessment for Assessment Year 2013-14 was concluded assessment as on the date of search. From order of the ld AO we do not find that addition has been made on the basis of the any incriminating material found during the course of search.
CIT(A) has also merely relied upon the statement of director and other person recorded during the course of search. Further, merely statement could not have been used in absence of any incriminating material found during the course of search corroborating such statement. Further, merely because the books of account was not available during the course of search such non availability of books of account also cannot be used against the assessee to make an addition in a concluded assessment. In view this, we find the issue is squarely covered by the decision of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT]. Even during the course of hearing also ld DR could not show us any incriminating material based on which the addition has been made. Accordingly, we direct the ld AO to delete the above addition made without any incriminating evidence and reverse the orders of the lower authorities. Appeal of assessee allowed.
Disallowances of expenses incurred for running the business of the assessee - Estimation of income - assessment u/s 153A was completed wherein, total income of the assessee was computed @ 1% total sales - CIT(A) who in fact reduced the net profit to 0.5% instead of 1% determined by the assessee - HELD THAT:- On reading of the assessment order it is apparent that the income of the assessee was arrived at by rejecting books of accounts of assessee in terms of provision of section 145(3) of the act. He has determined profit of the assessee at 1% of the total bogus sales issued by the assessee. Such determination of the profit at the rate of 1% which was reduced by the learned CIT – A 0.5% has resulted in deriving at the net profit of the assessee after deduction of all the expenses incurred by the assessee. Therefore, there is no room for allowance of any expenditure to the assessee where net profit is determined. Even otherwise the ld CIT(A) has reduced the quantum of percentage from 1% to 0.5% for allowing the expenditure to the assessee. In view of the above facts we do not find any infirmity in the order of the lower authorities.- Decided against assessee.
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2021 (9) TMI 1470
Denial of natural justice - CIT-A did not afford reasonable opportunity on the innocuous appellant to furnish documentary evidence and other details as desired necessary by him - HELD THAT:- A perusal of the record shows that there is nothing on record to show that any such opportunity was granted by the CIT(A) . It is well settled that in case an adjudicating authority finds the written submissions are not sufficient and complete then necessarily the First Appellate Authority should put this deficiency to the notice of the appellant. Without any specific communication to this effect, it cannot be said in all fairness that an effective opportunity of being heard has been granted to the assessee. Once it is seen that the submissions were without supporting documentary evidences then in an effective representation such an opportunity necessarily needs to be provided. No such effort appears to have been done.
Thus it of the view that since there is nothing available on record to show that the right to be heard was waived off by the assessee, let alone consciously waived off a fair opportunity of being heard effectively has not been made available - in the interests of substantial justice it is deemed appropriate to set aside the impugned order directing the assessee to place full facts, evidence alongwith supporting claims before the First Appellate Authority. It is made clear that the Ld. CIT(A) shall entertain the fresh evidences and pass an order in accordance the law - Appeal of the assessee is allowed for statistical purposes.
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2021 (9) TMI 1469
Money Laundering - provisional attachment order - property purchased in the name of the company was acquired out of the proceeds of crime as defined in Section 2(1) (u) of the PMLA, 2005 - HELD THAT:- On admission of the writ petition and granting an order of Interim stay, notice was given to the counsel for the Directorate of Enforcement and he entered appearance on 13.03.2012. Further, it is evident that the Directorate of Enforcement had knowledge about the interim order of stay. In spite of the stay order, the Deputy Director filed original complaint in O.C.No.129 of 2012 on the file of the Adjudicating Authority on 15.03.2012. Further, in the original complaint, the Deputy Director did not make the Indian bank as a party as interested party in the property.
The provision of Section 8(2) of the PMLA Act makes it obligatory on the part of the Adjudicating Authority to hear the interested party i.e., the Indian bank. Unfortunately, the Adjudicating Authority, without impleading and ordering notice to the Indian Bank, confirmed the attachment by an order 26.06.2012 during the pendency of the Writ Petitions and during the operation of the stay order.
The Hon'ble Apex Court has repeatedly held that any proceeding initiated, conducted or concluded in violation of an order of interim stay or injunction is non-est in the eye of law and the Adjudicating Authority should have waited till the disposal of the writ petitions or till the order of stay passed by this court is vacated. The action of the Adjudicating Authority despite having the knowledge of interim order of stay is clearly in defiance of the said interim order of stay. Therefore, the whole proceedings are vitiated and even the order dated 26.06.2012 passed during the pendency of the writ petitions shall be illegal and liable to be set aside as null and void.
Appeal dismissed.
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2021 (9) TMI 1468
Principles of natural justice - no proper enquiry - non speaking order - HELD THAT:- Appellant submitted that after the orders of the learned single Judge, the Government has sent a communication to the appellant to send a representation, based on which the representation has already been sent. Admittedly, no appeal has been preferred by the respondents/State.
In reply, the learned Government Advocate appearing for the respondents would submit that the representation of the appellant is pending before them and that they will take a decision within a period of three weeks from the date of receipt of a copy of the judgment and order shall be passed and decision shall be communicated to the appellant within a period of two weeks thereafter.
Appeal disposed off.
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2021 (9) TMI 1467
TP Adjustment - MAM selection - rejection of Comparable Uncontrolled Price (CUP) method adopted by the assessee Price and wrongly adopting Transaction Net Margin Method (TNMM) disregarding prices quoted by London Metal Exchange ("LME") which is a global benchmark for commodity pricing - HELD THAT:- As seen from the details of international transactions, the assessee is importing raw material from its AE and also making exports of products to the customers in accordance with the Purchase Order which is carried out by Wieland group. Thus, import as well as export transactions are interlinked and closely linked. The price of export is not free from the impact of the import price. Therefore, the international transactions in respect of import of raw material has direct bearing on export of goods.
TPO has applied TNMM by taking entire turnover of the assessee and then proposed an adjustment being the difference between the net margin of assessee as well as comparable price. Since these international transactions are closely linked and rather inter-dependent having a bearing on each other, therefore, for the purpose of determining the ALP it is appropriate to take composite transaction and apply TNMM as the most appropriate method. CUP is no doubt a preferable method of determining ALP as it leaves no scope of any possible variations in the process of computing ALP.
When transactions are relatable and interrelated, then if a particular transaction out of the composite transactions cannot be tested under CUP method, then it is not proper to apply separate methods for determining the ALP for each of the transaction, particularly when international transactions are closely linked and inter-depending having direct bearing on the price of each other. Therefore, we are of the considered opinion that in the given facts and circumstances of the case, the TNMM would be the most appropriate method for determining the ALP of international transactions entered into by the assessee with AE. We do not find any infirmity in the order of the DRP on this issue and the same is confirmed.
TPO not considered the underutilization of manufacturing capacities and the resulting idle costs while computing the assessee’s margins - AR submitted that assessee’s request for adjustment of capacity utilization while computing operating margins under TNMM has not been considered by the revenue authorities - HELD THAT:- The assessee has not furnished sufficient data pertaining to capacity utilisation of comparable companies so as to determine the material difference existing between the assessee and comparable. Hence, we remit this issue to the file of TPO with a direction to the assessee to furnish necessary data pertaining to capacity utilisation of comparable companies and for fresh adjudication of the issue by the TPO.
Selection of comparables by the TPO and application of filters - Manufacturing activities filter / Functional similarity filter - HELD THAT:- It is not necessary for the comparable company and the taxpayer to cater to the same industries in order to be functionally comparable. TNMM does not require strict product comparability such as the difference in thickness of the copper and copper alloy products produced.The import filter objection has been dealt with in detail.
Application of Foreign currency expenditure filter / Imports filter - HELD THAT:- It is noted that the consumption of raw materials is there in all of the comparable companies. The TPO has narrowed down to industries engaged in copper and its alloys. If copper and alloys are available in foreign markets much cheaper than the local markets, the comparables must have imported the raw materials from abroad. If the raw materials were much cheaper in India, the prudent assessee must have procured them locally instead of importing them. Hence, it goes to show that the cost of raw materials was not a differentiating factors whether one industry imports or not. Functional issues of each comparable are important here. The DRP compared each of the five companies with details and finally concurred with the findings of the TPO. Being so, we find no infirmity in the same and accordingly uphold the order of DRP.
Disallowance of IT Support and Maintenance charges as prior period expenses - AO disallowed the claim of expenditure relating to the earlier years - HELD THAT:- From the details furnished by the assessee, it is observed that all these expenses are from the related group concerns and assessee has not produced any evidence to show that these expenses actually crystallized during the current year, except invoices from its AE. No evidence for negotiations or finalization of terms is produced. We don't find any such negotiations are required for the sharing of expenditure as much of the expenses are in the nature of Information Technology services made available to the assessee in India. Apparently, no TDS was effected. There is no dispute that these expenses are related to earlier period and there is no substantiation that these are crystallised during the current AY except for the raising of invoices by the AE which is within the ambit of the assessee. Accordingly, the expenditure is not relatable to this year, as the same is crystallized this year. Hence we confirm the directions of the DRP.
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2021 (9) TMI 1466
Reopening of assessment u/s 147 - reason to believe on the basis of AIR information - Cash Deposits of the appellant bank accounts - addition was made on the basis of G.P. ratio - HELD THAT:- Addition has been made on the basis of net profit ratio to the turnover. The Hon'ble Bombay High Court in the case of Black & Veatch Prichard Inc. [2016 (4) TMI 1365 - BOMBAY HIGH COURT] following the judgment of Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] has decided the issue against the Revenue wherein held as agreeable with the submissions which has been urged on behalf of the assessee that s. 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the AO may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Expln. 3 to s. 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh [2008 (5) TMI 200 - RAJASTHAN HIGH COURT] Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of s. 147(1) as they stood after the amendment of 1st April, 1989 continue to hold the field.
However, Hon'ble Supreme Court has admitted the SLP filed by the Revenue. However, mere admission of SLP by the Hon'ble Supreme Court will not amount to overruling of its earlier judgment in the case of Jet Airways(Supra).Ground No.1 of the appeal of assesseeis allowed
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2021 (9) TMI 1465
TP adjustment in respect of royalty and commission - HELD THAT:- It is also not in dispute that the commission sales by the assessee constitutes only about 0.42% of the total revenue of the assessee whereas 99.58% of income is from trading of chemicals, as pleaded by the assessee - TPO compared the rate of commission charged by the assessee to one AE with the rate of commission charged by the assessee to other AEs. Such an exercise is not permissible under the provisions of section 92F(ii) read with section 92 of the Act, as has been held by the co-ordinate Bench in the case of assessee for the assessment year 2013-14 since the TPO was supposed to compare the controlled transaction with other uncontrolled transactions.
We are of the considered opinion that the orders of the authorities below do not stand the test of judicial scrutiny in so far as the adjustment on the aspect of royalty and commission are concerned and since there is no change in the facts and circumstances of the case from the assessment year 2013-14, while respectfully following the findings of the Tribunal in the order [2018 (5) TMI 946 - ITAT DELHI] we hold that the adjustment in respect of royalty and commission cannot be sustained and the same shall be deleted.
Interest on receivables - AO was of the opinion that any delay beyond the credit period shall be bench marked as an international transaction and by applying the same - AO calculated the interest chargeable on receivables by taking the credit period as 30 days and TPO suggested adjustment - HELD THAT:- It is not the case of the Revenue that even in respect of non-AEs also, the assessee is charging any interest. It is the policy of the assessee, as submitted that the assessee does not charge interest either from AEs or non-AEs and accordingly does not pay interest from AEs. Assessee demonstrated that as on 31.03.2016, a sum was receivable from AEs whereas the sum was payable by the assessee, resulting in net payable as per their books. There is nothing contrary to this averment made by the assessee with reference to the books. In Kusum Health Care Pvt. Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT]
We are of the considered opinion that the authorities below are not justified in making adjustment on account of interest receivable and therefore, impugned adjustment on account of interest receivable is directed to be deleted. Consequently, the appeal of the assessee deserves to be allowed.
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