TMI Tax Updates - e-Newsletter
January 13, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. SC revived Limitation extension Order till February 28, 2022

   By: Bimal jain

2. Input Tax Credit (ITC) – New Year – New Method

   By: Ganeshan Kalyani

3. EOU not entitled to claim refund of TED on its own, may avail of the entitlements of DTA supplier specified in FTP

   By: Bimal jain

News

1. Shri Piyush Goyal appeals to the industry to prepay MSMEs for their services to boost employment and growth

2. Investor Education and Protection Fund Authority (IEPFA) signs MoU with Indira Gandhi National Open University (IGNOU) for promoting Investor Education and Financial literacy among youth through Gyan Darshan channel

3. Joint Press Communique India - Korea Trade Talks

Notifications

GST - States

1. 929/2021/16(120)/XXVII(8)/2021/CTR-12 - dated 10-12-2021 - Uttarakhand SGST

Seeks to exempt CGST on specified medicines used in COVID-19, up to 31st December, 2021

2. 928/2021/16(120)/XXVII(8)/2021/CTR-11 - dated 10-12-2021 - Uttarakhand SGST

Seeks to amend Notification No. 913/2017/9(120)/XXVII(8)/2017 dated the 10th November, 2017

3. 926/2021/16(120)/XXVII(8)/2021/CTR-09 - dated 10-12-2021 - Uttarakhand SGST

Amendment in Notification No. 518/2017/9(120)/XXVII(8)/2017 dated the 28th June, 2017

4. 925/2021/16(120)/XXVII(8)/2021/CTR-08 - dated 10-12-2021 - Uttarakhand SGST

Seeks to amend Notification No. 514/2017/9(120)/XXVII(8)/2017 dated the 29th June, 2017

5. 924/2021/16(120)/XXVII(8)/2021/CTR-07 - dated 10-12-2021 - Uttarakhand SGST

Amendment in Notification No. 530/2017/9(120)/XXVII(8)/2017 dated the 29th June, 2017

Income Tax

6. 03/2022 - dated 11-1-2022 - IT

U/s 10(46) of IT Act 1961 - Central Government notifies ‘International Financial Services Centres Authority’ in respect of the specified income arising to that Authority.

Circulars / Instructions / Orders

Customs

1. TRADE NOTICE: 01/2021 - dated 21-12-2021

Initiation of Trade outreach by Video Conference for Leh & Kargil

Highlights / Catch Notes

GST

• Court Urges Uttar Pradesh to Address Harassment of Traders Over E-Way Bill Requirements for Goods Under Rs. 50,000.

  Case-Laws - HC : Seeking release of goods without security - It was submitted that since the value of the goods was less than ₹ 50,000/-, therefore, e-way bill was not generated - the State Government have tried to create an atmosphere for free flow of trade and commerce so that a good business environment can be developed in the State of Uttar Pradesh which can be used for development purpose but the State Authorities in their whims and fencing are bend upon to harass the trading community of the State. The present case is a glaring example of the mischievous of the State Authorities which needs to be checked at the end of the State Government immediately. - HC
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• Principal Commissioner of CGST, Surat, faces contempt for attaching cash credit account against court orders u/s 83 GST Act.

  Case-Laws - HC : Provisional attachment of a cash credit account - Prima facie, we are of the view that the Principal Commissioner, CGST, Surat is in contempt. He owes an explaination as to on what basis he has distinguished all the orders passed by this Court over a period of time taking the view that a cash credit account could not be provisionally attached in exercise of powers under Section 83 of the Act, 2017. - HC
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• Court Orders Release of Seized Oxygen Cylinders Amid Omicron Surge; Petitioner to Pay Tax and Provide Bank Guarantee.

  Case-Laws - HC : Permission to allowed to take delivery of the seized oxygen cylinders - Considering the fact that the oxygen cylinders may be required urgently in view of threat by the out break of Omicron (variant of Covid-19), this Court is inclined to allow provisional release of the imported goods for being sent to Karnataka subject to the petitioner depositing a sum of ₹ 7,52,087/- towards CGST and SGST to the credit of the Government and furnishing Bank Guarantee for the equal amount of penalty imposed under the respective enactments. - HC
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Income Tax

• Reassessment u/s 147 Invalid if Original Assessment Had All Facts; Change of Opinion Not Enough.

  Case-Laws - HC : Reopening of assessment u/s 147 - Assessing Officer had in his possession all material facts when he made original assessment. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of the opinion to commence proceedings for re-assessment. - HC
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• Reassessment Notice u/s 147 Invalidated Due to Misinterpretation of Share Redemption as Sale.

  Case-Laws - HC : Validity of reopening of assessment u/s 147 - A capital loss can never arise on the acquisition of shares but only on the transfer or sale of shares. In the second set of reasons as reproduced in the order rejecting the objections, it is stated that petitioner has sold preference shares resulting into long term capital loss. As noted in the earlier part of this order, petitioner has not sold the preference shares but the shares were redeemed by Greatship India Ltd. and since on redemption there was a transfer of shares due to “extinguishment of rights therein” the capital loss was claimed in the return of income. In our view, without appreciating or understanding the correct facts notice has been issued under Section 148 of the Act and that itself is enough for us to conclude that the jurisdictional conditions are not satisfied before the issuance of notice under Section 148 - HC
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• Court Confirms Unabsorbed Depreciation Can Offset Capital Gains Without Limitation Period Constraints, Dismissing Revenue's Appeal.

  Case-Laws - HC : Unabsorbed depreciation set off against short term capital gain - Period of limitation for carrying forward of Unabsorbed depreciation loss - Period of limitation for carrying forward of Unabsorbed depreciation loss - Revenue appeal dismissed - HC
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• Taxpayer Wins: A.O.'s Interest Expenditure Disallowance Overturned Due to Lack of Approval for Full Scrutiny Conversion.

  Case-Laws - AT : Disallowance of an expenditure incurred representing the interest paid - case was selected for limited scrutiny on different issues - A.O. has not made any addition/disallowance on those two counts for which the case was selected for limited scrutiny, but he has made certain additions on an issue which was not the subject matter of limited scrutiny and there is nothing on record to suggest that the A.O. has taken necessary approval from the PCIT/CIT for converting the limited scrutiny to full scrutiny. Therefore, on this issue also the A.O. is not justified in making the disallowance of interest expenditure. - AT
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• Section 147: Reopening Income Tax Assessments Requires Legitimate Basis, Not Mere Claim Verification or Roving Inquiry.

  Case-Laws - AT : Reopening of assessment u/s 147 - assumption of jurisdiction u/s 148 - For a mere verification of the claim, the power of reopening of the assessment could not be exercised and it further observed that AO under the guise of power to re-open the assessment cannot seek to undertake an undertaking a fishing or roving inquiry or seek to verify the claim as if he is the scrutiny officer. - AT
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• Public Purpose Expenses Recognized as Allowable Business Expenditure for Enhancing Goodwill and Profitability.

  Case-Laws - AT : Allowable business expenditure - it is a prudent decision of the assessee to oblige to the appeal made by the local administration and incurred the expenses for public purposes. Hence the assessee has incurred expenses not only on account of social responsibility, but also keeping in mind the goodwill and benefit it would yield in the long run in earning profit. Hence this expenditure would be in the realm of “business expenditure”. A- AT
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• Foreign Exchange Loss on EEFC Account Not Income; AO Erred, and CIT(A) Unjustified in Sustaining Addition.

  Case-Laws - AT : Disallowance of foreign exchange loss on restatement of Export Earners Foreign Currency (EEFC) account - Since the transaction in EEFC account undertaken during the year are trading in nature in order to facilitate the regular business operation of the assessee-company, we hold that the AO has erred in making an addition to the income returned and the CIT(A) was not justified in sustaining the same. Therefore, we delete the addition. - AT
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• CIT Revises Assessment u/s 263: Assessee Fails to Prove Nexus Between Interest Income and Business Expenditure.

  Case-Laws - AT : Revision u/s 263 by CIT - Wrong claim of business expenditure - Since the assessee failed to prove the nexus between the interest income and expenditure incurred, the CIT set aside the order of AO, who allowed the same under the head “income from other sources”. Even before us, the ld. AR of the assessee failed ot prove the nexus between the interest income and expenditure incurred and, therefore, we uphold the order of CIT on this issue - AT
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• Upward adjustment u/s 92BA(i) of the Income Tax Act deemed void due to section's omission from statute since 2017.

  Case-Laws - AT : Transfer pricing - Specified Domestic Transaction (SDT) u/s 92BA(i) r.w.s. 40A(2)(b) - No justification in passing the impugned order by the TPO/AO in making upward adjustment invoking Section 92BA(i) of the Act in the present facts and circumstances of the case particularly when the said section stood omitted w.e.f. 01.04.2017 from the statute itself. Hence, we find the same is without any basis, void ab initio and without jurisdiction. - AT
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• Charitable Trust Gains Income Tax Exemption: Qualifies u/ss 11, 12, and 2(15) for Non-Profit Activities.

  Case-Laws - AT : Exemption u/s 11 & 12 - charitable activity u/s 2(15) - The assessee trust does not distribute its profits among members and it does not pay higher remuneration to its employees. It is abundantly clear that the income of the mutual concern falls outside the ambit of charging section 4 of the Income Tax Act and, therefore, outside the tax net. The net effect of applicability of exemption provision in section 11 is also just the same- AT
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• TDS on Common Area Maintenance Charges: 2% Deduction u/s 194C, Not Rent u/s 194I.

  Case-Laws - AT : TDS u/s 194C or 194I - short deduction of TDS - CAM charges Maintenance Charges along with Rent - the CAM charges paid by the assessee did not form part of the actual rent that was paid to the owner by the assessee company. - the CAM charges paid by it were liable for deduction of tax at source @2%, i.e., u/s. 194C - AT
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Indian Laws

• Supreme Court Extends Limitation Period for Court and Tribunal Cases in India Due to COVID-19 Impact.

  Case-Laws - SC : COVID - Seeking extension of the period of limitation in all proceedings before Courts/Tribunals including this Court w.e.f. 15.03.2020 till further orders - The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasijudicial proceedings. - Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. - SC
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• Cheque Dishonor Case Settled: Conviction Upheld, Offence Compounded u/s 138 & 147; Rs. 25,000 Accepted as Settlement.

  Case-Laws - HC : Dishonor of Cheque - compounding of offences - Even though the parties have arrived at a settlement after the Appellate Court had upheld the conviction of the petitioner, yet keeping in view the spirit of Section 147 of the NI Act, the offence under Section 138 of the Act can be compounded, as the respondent has clearly agreed that on account of precarious financial condition of the petitioner, he is ready to accept the amount of ₹ 25000/- which he has already received from the petitioner and the amount which is deposited with the Registry of this Court as full and final settlement of his claim. Therefore, this is a fit case where costs are required to be waived while compounding the offence. HC
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IBC

• CIRP Proceedings: Authority Must Avoid Treating Applications as Money Claims, Focus on Insolvency Process, Not Dispute Merits.

  Case-Laws - AT : CIRP proceedings - seeking payment of unpaid operational debt - Pre-existing dispute - The ‘Adjudicating Authority’ is not a Court of Law and the ‘CIRP’ is not an adversial litigation. The ‘Adjudicating Authority’ is not to decide the Application under I & BC like a ‘Money Claim’ under the I & B Code. Viewed in that perspective, the ‘Adjudicating Authority’ is not supposed to go into the aspect of dispute in a thread bare fashion or on merits. - AT
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Service Tax

• Court Rules in Favor of Assessee on CENVAT Credit Use for Reverse Charge Mechanism; Revenue's Petitions Dismissed.

  Case-Laws - HC : Utilization of CENVAT Credit - payment of service tax for the purpose other than the ones defined under Section 3(4)(e) of the Cenvat Credit Rules, 2004 - recipient of service who is liable to pay the service tax under RCM - The special leave petitions preferred by the Revenue against M/s Aravind Fashions and Godavari Sugar Mills, though have been dismissed for low tax effect, we cannot subscribe to the arguments advanced by the Revenue in view of the fiction created under Section 68(2) of the Finance Act, 1994 read with Rules 2(1)(d) of the Service Tax Rules, 1994 and Rule 3(4)(e) of the Cenvat Credit Rules, 2004 - the substantial questions of law are answered in favour of the assessee and against the Revenue - HC
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• Service Tax on Paryatak Bhavan: Supreme Court Says Composite Works Contracts Not Taxable as Construction Services Pre-June 2007.

  Case-Laws - AT : Levy of service tax - construction service or not - construction of Paryatak Bhavan - It is, therefore, clear from the aforesaid judgment of the Supreme Court in Larsen & Toubro that a composite works contract cannot be taxed under ‘construction services’ under section 65(30a) or under ‘commercial or industrial construction service’ under section 65(25b) of the Finance Act, prior to 01.06.2007 as the scope is limited to cover contract of service simplicitor only - Even post 01.06.2007 service tax could not have been confirmed under ‘works contract’ service. - AT
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Central Excise

• CENVAT Credit Denial Unjustified: Direct Goods Diversion Without Notification Violates Natural Justice Principles, Order Deemed Unsustainable.

  Case-Laws - HC : Principles of natural justice - credit denied - merely for the reason that the said diversion of goods directly to the Job Worker was not informed to the department is not a ground for denial of the CENVAT credit. - The cryptic order passed on this aspect making bald observations is not in accordance with law and the same cannot be sustained. - HC - HC
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• Appellant Cleared of Mis-declaration Allegations in Advance Licence Scheme; Demand Invalidated by Limitations. No Procedural Violations Found.

  Case-Laws - AT : Supporting manufacturer or not - Procurement of inputs under Advance licence Scheme - suppression of facts or Mis-declaration - The appellant vide letter 25.02.2010 again intimated that there is no violation of Para 4.16 of Handbook Procedure. From the above it is clear that the appellant have disclosed all the information as regard procurement of material under advance authorization from M/s Sterlite Industries (I) Ltd. Therefore, there is no suppression of facts or Mis-declaration on the part of the appellant. - The demand is clearly hit by limitations. - AT
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• Refund Denial Overturned: Section 11B Time Limit Not Applicable to Pre-Deposits, Per Board Circulars.

  Case-Laws - AT : Refund claim of the pre-deposit - Rejection on the ground of time bar - It is found from Board Circulars, Circular dated 02.01.2002 and Circular dated 16.09.2014, which are binding on the departmental Officer, the time limit of one year prescribed under Section 11B particularly in respect of pre-deposit which is by an order of the appellate forum, shall not apply. - AT
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Case Laws:

• GST

• 2022 (1) TMI 439
  Seeking release of goods without security - It was submitted that since the value of the goods was less than Rs. 50,000/-, therefore, e-way bill was not generated - with regard to three more bags no e-way bill was there and tax invoice was submitted along with the reply to the show cause notice - HELD THAT:- If the dealer has submitted the tax invoice along with the reply to the show cause notice, no adverse inference can be drawn. If before the seizure order, the documents were submitted and if the same is not accepted, mere issuance of show cause notice will be redundant. The Court is constrained to observe that the State Government have tried to create an atmosphere for free flow of trade and commerce so that a good business environment can be developed in the State of Uttar Pradesh which can be used for development purpose but the State Authorities in their whims and fencing are bend upon to harass the trading community of the State. The present case is a glaring example of the mischievous of the State Authorities which needs to be checked at the end of the State Government immediately. The writ petition is allowed with cost of Rs. 20,000/- (twenty thousand) payable to the petitioner. The cost shall be paid within a period of one month from today. The respondents are at liberty to recover the said cost from the erring officer.

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• 2022 (1) TMI 438
  Provisional attachment of a cash credit account - Section 83 of the CGST Act, 2017 - HELD THAT:- Prima facie, The Principal Commissioner, CGST, Surat is in contempt. He owes an explanation as to on what basis he has distinguished all the orders passed by this Court over a period of time taking the view that a cash credit account could not be provisionally attached in exercise of powers under Section 83 of the Act, 2017. Let Notice be issued to the respondents, returnable on 12.01.2022. Mr. Utkarsh Sharma, the learned Standing Counsel appearing for the department waives service of notice for and on behalf of the respondents Nos.1 and 2.

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• 2022 (1) TMI 437
  Permission to allowed to take delivery of the seized oxygen cylinders to be sent to Karnataka - seized oxygen cylinders are still in lying and are urgently required on account of the threat of Omicron (variant of Covid-19) - HELD THAT:- The petitioner has an alternate remedy as far as the levy of tax and penalty are concerned, by filing appropriate appeal under Section 107 of the respective enactments. Considering the fact that the oxygen cylinders may be required urgently in view of threat by the out break of Omicron (variant of Covid-19), this Court is inclined to allow provisional release of the imported goods for being sent to Karnataka subject to the petitioner depositing a sum of Rs. 7,52,087/- towards CGST and SGST to the credit of the Government and furnishing Bank Guarantee for the equal amount of penalty imposed under the respective enactments. Petition disposed off.

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• Income Tax

• 2022 (1) TMI 436
  Validity of Reopening of assessment u/s 147 - Eligibility of reasons to believe - change of opinion - HELD THAT:- Once a query is raised during the assessment proceeding and the assessee has replied to it, it follows that the query raised was a subject for consideration of the Assessment Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussions to disclose its satisfaction in respect of the query raised. There can be no doubt that in the present facts, the five points mentioned was a subject matter of consideration by the AO during the original assessment proceeding leading to an order dated 17th March, 2006. It would, therefore, follow that the reopening of the assessment by the impugned notice dated 26th March, 2008 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 17th March, 2006. This change of opinion does not constitute justification and/or reasons to believe that the income chargeable to tax has escaped assessment. We have to also add that item No. 5 in the reasons noted above includes item No. 3 mentioned earlier. Moreover, in the assessment order a sum of Rs. 57,16,601/- out of Rs. 31,40,96,154/- has already been added to petitioner s income. Therefore, to say in the reasons for reopening that the assessee s claim of bad debts of Rs. 31,40,96,154/- was not allowable and that has resulted in escapement of income of the said amount shows non application of mind. On this count alone, it can be held that the Assessment Officer should not have formed the reasons to believe that income chargeable to tax has escaped assessment. We set aside the undated order rejecting petitioner s objections. We also hold that there was no reason for the Assessing Officer to have a reasonable belief that income chargeable to tax has escaped assessment. - Decided in favour of assessee.

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• 2022 (1) TMI 435
  Reopening of assessment u/s 147 - scope of explanation 3 to Section 147 - unexplained cash deposits - HELD THAT:- As per explanation 3 it empowers the AO to assess or re-assess the income in respect of any issue that comes to his notice subsequently in the course of the proceedings under Section 147 of the Act but if the proceedings under Section 148 itself has been initiated wrongly, the question of any new issue that would come to his notice subsequently during the course of proceedings under Section 147 of the Act would not arise. The assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of which comes to his notice subsequently during the course of the any other income proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the AO to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. See JET AIRWAYS (I) LTD. [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY ] - we set aside the notice u/s 148 - Decided in favour of assessee.

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• 2022 (1) TMI 434
  Validity of Reopening of assessment u/s 147 - Reopening beyond period of four years - Proof of failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment - HELD THAT:- Two conditions were required to be satisfied, firstly, the AO must have reasons to believe that income, profits or gains chargeable to income tax has escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions has to be satisfied before the AO could assume jurisdiction for issue of notice u/s 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. If the Assessing Officer has reason to believe that income has escaped assessment, that was enough to confer jurisdiction to reopen the assessment. For this view of the AO, that for issuing notice to reopen assessment, the Assessing Officer must only be satisfied that he had reasons to believe that income, profits and gains chargeable to income tax has escaped assessment and the second condition that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment is not required, Mr. Suresh Kumar in fairness agreed that that view of the AO was incorrect. Mr. Suresh Kumar, as an Officer of the Court, agreed that both these are preconditions which are required to be fulfilled when assessment is sought to be reopened after four years. See SESA GOA LIMITED VERSUS JOINT COMMISSIONER OF INCOME-TAX AND OTHERS. [ 2004 (5) TMI 54 - BOMBAY HIGH COURT] . Therefore, it is quite obvious that there is nothing but change of opinion which is not permissible as held in Ananta Landmark Pvt. Ltd v/s. [ 2021 (10) TMI 71 - BOMBAY HIGH COURT] . In the circumstances, we are satisfied that the notice dated 15/03/2019 under section 148 of the Act is issued without jurisdiction and requires to be set-aside. Decided in favour of assessee.

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• 2022 (1) TMI 433
  Reopening of assessment u/s 147 - Eligibility of reasons to believe - Department received certain information from the Directorate of Income Tax, Intelligence Criminal Investigation that acquisition of Brands and Goodwill as claimed by Petitioner was incorrect and the said transfer has not been established - HELD THAT:- The factum of failure to disclose cannot be culled from the reasons in support of the notice seeking reopening of the assessment. No case of failure to disclose is made out. In our view, on consideration of material, the Assessing Officer has conclusively taken one view and hence based on the same material, it will not be open to reopen the assessment with a view to take another view. Assessing Officer after considering all these points passed the assessment order dated 23rd March, 2016, accepting the fact that transfer has been established and there was proper acquisition of the Brands and Goodwill, as claimed by Petitioner. It is true that there is no detail reference to the query raised by the Assessing Officer during the assessment proceedings and the reply provided by the Assessee alongwith documentary evidence. But, once the query raised was subject to the consideration of the Assessing Officer, while completing the assessment, it is not necessary that the assessment order should contain reference and/ or discussion to disclose his satisfaction in respect of each of the query raised. If the Assessing Officer has to record the consideration bestowed by him on all issues raised during the assessment proceedings even where he is satisfied, then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under section 143 (3). Assessing Officer had in his possession all material facts when he made original assessment. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of the opinion to commence proceedings for re-assessment. Where on consideration of the material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the very same material with a view to take another view. See Ananta Landmark (P.) Ltd.[ 2021 (10) TMI 71 - BOMBAY HIGH COURT] - reopening notice quashed - Decided in favour of assessee.

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• 2022 (1) TMI 432
  Validity of reopening of assessment u/s 147 - reasons as furnished to assess can be looked into for testing the validity of reassessment proceedings - long term capital loss disallowed as transaction was not regarded as transfer within the meaning of Section 47(iv) and (v) - as argued reasons as furnished do not bear the date, signature and approval of the authority specified u/s 151 - HELD THAT:- In this case, one set of reasons was provided to petitioner and when objected to by petitioner, respondents justify the reopening by producing an undated and unsigned reasons which was never furnished to petitioner at any point of time prior thereto. We have considered both the reasons and we do observe that the reasons as furnished to petitioner vide letter dated 28th September 2020 and the reasons as reproduced in the order dated 17th May 2021 rejecting petitioner s objections, are different. In the first set of reasons as furnished with letter dated 28th September 2020, it is stated that the long term capital loss cannot be disallowed as the transaction is not regarded as transfer within the meaning of Section 47(iv) and 47(v) since preference shares were acquired from Greatship India Ltd. Of course, the reasons also does not record that any income has escaped the assessment because it does not state the loss has arisen because of redemption of preference capital but indicate that the loss has arisen since preference shares were acquired from the flagship company. A capital loss can never arise on the acquisition of shares but only on the transfer or sale of shares. In the second set of reasons as reproduced in the order rejecting the objections, it is stated that petitioner has sold preference shares resulting into long term capital loss. As noted in the earlier part of this order, petitioner has not sold the preference shares but the shares were redeemed by Greatship India Ltd. and since on redemption there was a transfer of shares due to extinguishment of rights therein the capital loss was claimed in the return of income. In our view, without appreciating or understanding the correct facts notice has been issued under Section 148 of the Act and that itself is enough for us to conclude that the jurisdictional conditions are not satisfied before the issuance of notice under Section 148 - impugned notice and the order have to be quashed and set aside. Petition is, therefore, allowed

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• 2022 (1) TMI 431
  Reopening of assessment u/s 147 - Mandation of recording of satisfaction - HELD THAT:- Additional Commissioner of Income Tax and Principal Commissioner of Income Tax have also endorsed and expressed they are satisfied that it was a fit case for issuance of notice under Section 148 - The recommendations made by the Additional Commissioner and the approval granted by the Principal Commissioner in our view are without application of mind that the same appears to have been granted in a routine and perfunctory manner. It is settled law as held by the Division Bench of this court in German Remedies Ltd. [ 2005 (10) TMI 76 - BOMBAY HIGH COURT] that while granting approval it was obligatory on the part of the Principal Commissioner of Income Tax to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment order. If the PCIT had only read the reasons and also the form for recording the reasons together and referred to other documents in the file, none of which seems to have been done, he would have sent the file back to the person who has filled the form for recording the reasons. We are not certain it is Dhivya Ruth J who recorded the reasons or Jaya Lakhwani because now we find there are three sets of reasons instead of earlier two. Petitioner is justified in raising a contention that the approval granted itself suffered from non application of mind. In view of the above, the impugned notice and consequential order justifying reasons recorded are unsustainable. - Decided in favour of assessee.

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• 2022 (1) TMI 430
  Stay of demand - amounts to be pre-deposited - HELD THAT:- We are inclined to dispose this writ petition by directing the petitioner to pay a sum of Rs. 30,00,000/- per month till the amount is paid. The amounts shall be paid by the petitioner by 5th of every month. In case there is failure to pay the amounts by the due date, the protection under this order shall come to an end sine die and the respondent will be at liberty to attach the bank accounts of the petitioner. In other words, the impugned Assessment Order shall stand revived without any reference. Appeal of the petitioner which is pending before the Commissioner of Income Tax (Appeals) shall be taken up for a final hearing only after the petitioner pays the entire amount of Rs. 2,98,81,885/- in terms of this order.

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• 2022 (1) TMI 429
  Validity of assessment u/s 144B - Non issuance of a show cause notice and draft assessment order as is contemplated u/s 144B - HELD THAT:- The petitioner is an octogenarian aged about 80 years. The petitioner had suffered personal bereavement on account of death of her Power Holder who was taking care of the petitioner s requirements as the petitioner is a NRI. Considering the fact that the impugned order has been passed without issuance of a show cause notice and mandatory draft assessment order, the impugned order passed by the first respondent cannot be sustained. Writ Petition is allowed by quashing the impugned order. The case is remitted back to the first respondent to pass a speaking order within a period of 60 days from the date of receipt of a copy of this order. The impugned order which stands quashed by this order shall be treated as a show cause notice and draft assessment order. The respondents are also given liberty to issue corrigendum, if any within a period of 15 days from the date of receipt of a copy of this order. The petitioner shall give appropriate reply within a period of 30 days thereafter.

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• 2022 (1) TMI 428
  Demand order based on the information gathered by the Income Tax Department from the import-export data received from Central Board of Excise and Customs (CBEC) - No appropriate notice as is contemplated under Section 144B - HELD THAT:- Though according to the petitioner, the petitioner has received only a sum of Rs. 28,96,112/- as income from duty drawback before concluding that the petitioner had received a total duty drawback amounting to Rs. 1,03,73,667/- for the Assessment Year 2018-2019 (Financial Year 2017-2018), the petitioner should have been put to notice as it is the categorical stand of the petitioner that the petitioner has received an income of Rs. 28,96,112/- only as duty drawback on the export goods. Therefore, the impugned order is set aside and the case is remitted back to the respondents to pass a speaking order on merits and in accordance with law within a period of forty five days from the date of receipt of copy of this order. Since the matter is remitted back to the respondents, the respondents are directed to issue appropriate notice as is contemplated under Section 144B of the Income Tax Act, 1961 within a period of thirty days from the date of receipt of a copy of this order. The petitioner shall thereafter file a reply within a period of fifteen days from the date of receipt of the Show Cause Notice whichever is earlier.

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• 2022 (1) TMI 427
  Unabsorbed depreciation set off against short term capital gain - Period of limitation for carrying forward of Unabsorbed depreciation loss - Period of limitation for carrying forward of Unabsorbed depreciation loss - set off from other income relating to unabsorbed depreciation for the assessment year 1996- 97 upto 8 years only as per Section 32(2) - HELD THAT:- Issue decided against revenue in M/S. BEST CROMPTON ENGINEERING LTD. [ 2021 (8) TMI 515 - MADRAS HIGH COURT] once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. - Decided against the Revenue.

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• 2022 (1) TMI 426
  Assessment u/s 153A - Incriminating material found in search or not? - documents of relevant assessment year - CIT-A deleted the addition - HELD THAT:- List of transfer of shares, which according to the ld. DR. is an incriminating material and which is exhibited at page 9 of the paper book title of which reads as List of Transfer of Shares since 10.04.2010 till 31.03.2011 . This nomenclature itself shows that the so-called incriminating material relates to F.Y. 2010-11 relevant to Assessment Year 2011-12 whereas the appeal before us is for Assessment Year 2010-11. Therefore, we do not find any merit in the submissions of the ld. DR. Coming to the facts of the case, we find that there is no reference of any incriminating evidence found at the time of search which makes the ratio laid down in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] squarely apply. Since the addition made by the Assessing Officer is not based on any incriminating material found as a result of search on the assessee we do not find any error or infirmity in the findings of the ld. CIT(A). - Decided in favour of assessee.

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• 2022 (1) TMI 425
  Gain on sale immovable property - property jointly hold - correct head of income - capital gain or business income - HELD THAT:- There is no evidence to show that the purchase and sale of the property was with an intention of Investment.CIT(A) has treated the transaction to be an adventure in the nature of trade. The facts and circumstances, as obtaining in this case, do show the intention of assessee to resell the land and not to hold the same. It was just within a period of four months from the date of purchase that the assessee sold the land. Considering the intention of the assessee as emanating from the above circumstances, we uphold the action of the ld. CIT(A) in treating the sale transaction as an adventure in the nature of trade. The impugned order is therefore, confirmed on this score. Unexplained cash deposits into bank account - HELD THAT:- Having regard to the facts of the case and considering the quantum of amount involved with reference to other attending circumstances, we are satisfied that the deposit of Rs. 3 lakhs cannot be considered as emanating from any undisclosed sources, for which the ld. CIT(A) has accepted the explanation only to the extent of Rs. 75,000. There is no reason as to how this magical figure of Rs. 75,000 came into being. As such, we order to delete the remaining addition . Penalty imposed u/s 271(1)(c) - HELD THAT:- While disposing of the quantum appeal, we have deleted the addition sustained in the appeal on account of cash deposit in the bank account. In so far as the sustenance of addition by the ld. CIT(A) amounting to Rs. 21,25,000 is concerned, we find that the assessee has not been provided an adequate opportunity of hearing to show cause as to why the penalty should not be imposed. A case was made out before the ld. CIT(A) that some dispute was going on between the assessee and his counsel representing the matter before the AO, as a result of which proper representation could not be made before the AO. Considering the entirety of the facts of the case, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the AO. We order accordingly and direct him to provide an opportunity to the assessee for putting forth his point of view before imposing the penalty.

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• 2022 (1) TMI 424
  Allowability of depreciation on goodwill - As per AO goodwill is not covered within the meaning of intangible assets which means only know-how, patent, copyrights, trademarks, license, franchisee on any other business or commercial rights of similar nature - HELD THAT:- As decided in own case [ 2021 (3) TMI 683 - ITAT DELHI] DRP has not at all considered the aspect of depreciation on goodwill in correct context as there is a finding identical to that of earlier years, assessee entered into a world-wide multi-year outsourcing agreement with IBM India Pvt. Ltd., Network Solutions Pvt. Ltd. and IBM Daksh Business Process Services Pvt. Ltd. as well as Acquisition Agreement and this is not an initial year of claim of depreciation on goodwill. Hence, in light of the decision of the earlier years by the Tribunal the appeal of the assessee is allowed. Allowability of education cess and higher secondary education cess as an expenditure - HELD THAT:- We find the Hon ble Bombay High Court in the case of Sesa Goa Limited vs., JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] has held that since the term Cess is not included in clause (ii) of section 40(a)of the I.T. Act, 1961, there is no prohibition in claiming the same as a deduction in computing income chargeable under head of profits and gains of business or profession. Similar view has been taken by the Hon ble Rajasthan High Court in the case PCIT vs., Chambal Fertilizers and Chemicals Ltd.[ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] wherein it has been held that education cess is not a disallowable expenditure under section 40(a)(ii) - we are of the considered opinion that education cess and secondary education cess paid on income tax is an allowable expenditure. Accordingly, the additional ground raised by the assessee is allowed.

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• 2022 (1) TMI 423
  Disallowance of an expenditure incurred representing the interest paid - disallowance of deduction claimed by the assessee under section 57 out of the interest income and deduction of interest expenses - case was selected for limited scrutiny - Expansion of scope of scrutiny to other income - addition on the ground that assessee has paid interest @ 18% on the borrowed capital which was invested for acquisition of agricultural land and repayment of earlier loans and advances and the assessee is receiving lower rate of interest - HELD THAT:- A perusal of the chart filed before the A.O. as well as the Ld. CIT(A) show that assessee has not raised any loan during the impugned assessment year. A.O. in the order passed under section 143(3) for the A.Y. 2013-14 and in the order passed under section 143(3) for the A.Y. 2016-17 has not made any disallowance of interest, a statement made by the Learned Counsel for the Assessee at the Bar and not controverted by the Ld. D.R. Hon ble Calcutta High Court in the case of Indian Explosives Ltd., vs., CIT [ 1982 (8) TMI 10 - CALCUTTA HIGH COURT] has held that where interest paid on overdraft account maintained with bank for purpose of business and all receipts are deposited in the overdraft account and all payments including taxes made from that account, the entire interest paid would be allowable deduction. Hon ble Supreme Court recently in the case of South India Bank Ltd.[ 2021 (9) TMI 566 - SUPREME COURT] has held that where interest free own funds available with assessee-banks exceeded their investments in tax-free securities; investments would be presumed to be made out of assessee s own funds and proportionate disallowance was not warranted under section 14A on the ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income. Similar view has been taken by the Coordinate Benches of the Tribunal in the decisions relied on by the Learned Counsel for the Assessee. Under these circumstances, since in the instant case the A.O. in the past and subsequent assessment years has not made any disallowance of such interest expenditure and the assessee has not raised any fresh loans during the impugned assessment year, we are of the considered opinion that no disallowance of interest is called for during the impugned assessment year. Accordingly, the order of the Ld. CIT(A) is set aside and A.O. is directed to delete the addition. As mentioned earlier the case was selected for limited scrutiny for two reasons - A.O. has not made any addition/disallowance on those two counts for which the case was selected for limited scrutiny, but he has made certain additions on an issue which was not the subject matter of limited scrutiny and there is nothing on record to suggest that the A.O. has taken necessary approval from the PCIT/CIT for converting the limited scrutiny to full scrutiny. Therefore, on this issue also the A.O. is not justified in making the disallowance of interest expenditure. In this view of the matter, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition. Grounds raised by the assessee are allowed.

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• 2022 (1) TMI 422
  Addition of peek cash credits in the bank accounts - unexplained deposits in the assessee s bank accounts - HELD THAT:- CIT(A) has given specific finding that there had been constant deposits and withdrawals (from the bank accounts), which took a cyclical pattern - the CIT(A) did not give any consideration to the plea urged by the assessee that profit on the peak amount should be treated as income instead of treating the entire peak amount as income. If the cyclical pattern of the deposits and withdrawals of the bank account were in the nature of business activity, then CIT(A) should have considered the aforesaid plea urged by the assessee. However, this plea has not been examined or considered at all by the Ld. CIT(A). CIT(A) has not given any finding on the assessee s plea that the agricultural income of aforesaid agricultural income should be given credit. We are of the view that these issues deserved to be considered more comprehensively by the Ld. CIT(A), which she failed to do; and instead she proceeded to pass a cryptic appellate order without proper analysis and without due consideration of the relevant facts - we set aside the impugned appellate order of the Ld. CIT(A) with the direction to pass a fresh appellate order in accordance with law, after providing reasonable opportunity to the assessee - Appeal of the assessee is partly allowed for statistical purposes.

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• 2022 (1) TMI 421
  Reopening of assessment u/s 147 - assumption of jurisdiction u/s 148 - reopening beyond the period of four years from the end of relevant assessment year - eligible reason to believe - verification of claim - assessee having rental income from various properties and the income from such properties was not disclosed by the Assessee - HELD THAT:- It is a settled position that even where an assessment has been only processed under Section 143(1) of the Act, the reopening notice must satisfy the test of having reason to believe that the income chargeable to tax has escaped assessment. The reason to believe has to be arrived at after applying one s mind to the material available and to reach a prima facie view that income chargeable to tax has escaped assessment. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessment - AR has submitted that the property from which the deemed rental income the Revenue proposes to add does not belong to the assessee. When the property does not belong to the assessee, the question of taxing the deemed rental income does not arise. Revenue has not placed any material on record to demonstrate that the submission of the assessee of it not being the owner of the aforesaid properties is false/ incorrect. In the present case the AO prima facie has not done the bare necessary enquiry into the material received before he concluded that income chargeable to tax has escaped assessment. As in case ANKITA A. CHOKSEY VERSUS INCOME TAX OFFICER-19 (1) (1) OTHERS [ 2019 (1) TMI 862 - BOMBAY HIGH COURT] reasons to believe that income chargeable to tax has escaped Assessment must be on correct facts. If the facts, as recorded in the reasons are not correct and the assessee points out the same in its objections, then the order on objection must deal with it and prima facie, establish that the facts stated by it in its reasons as recorded are correct. Verification of source of commodity transactions and its income - As per the reasons recorded, the AO wants to verify it. In view of the settled position of law that for a mere verification of the claim, the power of reopening of assessment cannot be exercised - As decided in INDUCTOTHERM (INDIA) PVT. LTD. [ 2012 (9) TMI 16 - GUJARAT HIGH COURT] For a mere verification of the claim, the power of reopening of the assessment could not be exercised and it further observed that AO under the guise of power to re-open the assessment cannot seek to undertake an undertaking a fishing or roving inquiry or seek to verify the claim as if he is the scrutiny officer. In the present case, notice for re-opening of the assessment u/s 147 of the Act is not as per the mandate of Sec.147 of the Act and therefore the re-opening is not permissible - therefore of the view that the notice issued for reopening has to be set aside and the same deserves to be quashed. - Decided in favour of assessee.

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• 2022 (1) TMI 420
  Exemption u/s 11 - registration u/s 12AA rejected - assessee is stated to be a religious-cum- charitable trust - As absence of the requisite details the genuineness of the charitable nature of the activities of the assessee-trust could not be verified, thus, rejected the application filed by the assessee trust for grant of registration u/s 12AA(1)(b)(ii) - applicant in form No. 10A assessee had not uploaded the requisite documents, viz. declaration u/s 13(1)(c) of the Act; NOC from the owner of the premises; identity details of the trustees/directors; note on the activities conducted in the last three years or since inception, details of donations made, details of donations received, undertaking for non-infringement of the 1st Proviso to sec. 2(15) - HELD THAT:- Failure on the part of the assessee to furnish the requisite information, was for the reason, that there was an outburst of Covid-19 pandemic across the country which had brought the normal functioning of day to day activities to a standstill. In our considered view, on the basis of the order of the Hon ble Supreme Court [ 2021 (11) TMI 387 - SC ORDER] wherein the period of limitation prescribed under the general law of limitation or under any special law (both Central and/or State) qua all the proceedings before the Courts and the Tribunals had been extended from time to time, it can safely be concluded that there were justifiable reasons for the assessee in not complying with the letters/notices that were issued by the ld. CIT(Exemption), therein calling upon it to furnish certain information/clarifications. We, thus, are of the considered view, that in all fairness the issue in hand requires to be restored to the file of the ld. CIT (Exemption) with a direction to re-visit the same and dispose off the application filed by the assessee trust Form No. 10A afresh. - Decided in favour of assessee for statistical purposes.

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• 2022 (1) TMI 419
  Revision u/s 263 by CIT - claim of deduction u/s 80P on the interest income received on the investments/deposits lying with the co-operative banks - scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007 - HELD THAT:- On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank - we are unable to subscribe to his view that the aforesaid amendment would jeopardize the claim of deduction of a co-operative society u/s 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. Though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d). As the A.O while framing the assessment had taken a possible view, and allowed the assessee s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same. Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec. 143(3) - Decided in favour of assessee.

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• 2022 (1) TMI 418
  Revision u/s 263 by CIT - Unexplained transaction of receipt of advance and subsequent repayment - CIT-A seeking to revise the assessment order passed u/s 143(3)/147 - HELD THAT:- Chronological events which led to the Assessing Officer to pass assessment order u/s.143(3)/147 of the Act accepting the cash deposits we are of the considered opinion that the Assessing Officer in the instant case has verified all the aspects and therefore, the view taken by the CIT is only a second view which is not permissible under Section 263 of the Act. It is the settled proposition of law that for invoking jurisdiction under Section 263, the twin conditions, namely, the order is erroneous and the order is prejudicial to the interest of the Revenue must be satisfied. In the instant case, since the Assessing Officer has called for various details and after verification of the same has passed the order, therefore, the same cannot be treated as erroneous, as held by Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] We also get support from the decisions of Mumbai Bench in the case of Narayan Tatu Rane, [ 2016 (5) TMI 1162 - ITAT MUMBAI] and Delhi bench in the case of Amira Enterprises Ltd [ 2017 (12) TMI 188 - ITAT DELHI] and Co-ordinate Bench in the case of P.Narasihma Reddy [ 2018 (7) TMI 1865 - ITAT HYDERABAD] . Accordingly, we set aside the order passed by the ld.CIT u/s. 263 of the Act and decide the issue in favour of the assessee.

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• 2022 (1) TMI 417
  Belated remittance of Employee s provident fund and ESI Contribution - assessee did not remit the employees contribution to PF and ESI within the due date specified under the respective Acts -Scope of amendment - HELD THAT:- We hold that the amendment to section 36(1)(va) and 43B of the Act will not have application for the relevant assessment year, namely assessment year 2018-2019. Accordingly, we direct the A.O. to grant deduction in respect of employees contribution to PF and ESI since the assessee made the payment before the due date of filing of return u/s 139(1) on 30.11.2018 of the Act. Accordingly, grounds raised by assessee stands allowed.

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• 2022 (1) TMI 416
  Allowable business expenditure - expenditure pursuant to a letter addressed by the Deputy Commissioner, Bellary wherein assessee participated in the State Government Programme ( Bhagyalakshmi Scheme ) by contributing sum which is acknowledged by the Deputy Commissioner as donation - AO disallowed the same only for the reason that certificate u/s. 80G was not obtained - HELD THAT:- Admittedly, the entire payment has gone for social development of an area wherein mining activities were undertaken and assessee was one of the licensee to the mines allotted by the Indian Bureau of Mines. See M/S VEERABHADRAPPA SANGAPPA CO. VERSUS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, BELLARY. [ 2020 (12) TMI 1145 - ITAT BANGALORE] In the present case assessee has contributed funds at the specific request of local administration, which is meant to be used for the benefit of public. As observed in the above said case, the assessee would also be required to approach the appropriate Government and its authorities for grant of permits, licenses. Hence it is a prudent decision of the assessee to oblige to the appeal made by the local administration and incurred the expenses for public purposes. Hence the assessee has incurred expenses not only on account of social responsibility, but also keeping in mind the goodwill and benefit it would yield in the long run in earning profit. Hence this expenditure would be in the realm of business expenditure . Accordingly, we hold this expenditure is allowable as deduction. Accordingly, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to delete this disallowance - See MADRAS REFINERIES LTD. [ 2003 (11) TMI 47 - MADRAS HIGH COURT] , KAMAL AND CO. [ 1992 (12) TMI 19 - RAJASTHAN HIGH COURT] and DEVELOPMENT TRUST PVT. LIMITED [ 1991 (9) TMI 43 - ALLAHABAD HIGH COURT] - we direct the Ld.AO to delete the disallowance made - Decided in favour of assessee.

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• 2022 (1) TMI 415
  Disallowance of foreign exchange loss on restatement of Export Earners Foreign Currency (EEFC) account - CIT(A)/ AO treating the foreign exchange loss on account of restatement of EEFC account as capital in nature - CIT(A) by relying on section 43A of the I.T. Act as amended by Finance Act, 2002 held that the loss on account of fluctuation in foreign exchange can be adjusted at the time of making payment but not on notional basis - HELD THAT:- Section 43A of the I.T. Act applies where an assessee acquires an asset in a previous year. The EEFC account was maintained by the assessee to facilitate regular business operation and not for acquiring any asset. Since the transaction in EEFC account undertaken during the year are trading in nature in order to facilitate the regular business operation of the assessee-company, we hold that the AO has erred in making an addition to the income returned and the CIT(A) was not justified in sustaining the same. Therefore, we delete the addition. It is ordered accordingly. TDS u/s 194I - Disallowance u/s 40(a)(ia) - whether the assessee had claimed depreciation on the leased asset and if so, add back the same to the total income? - HELD THAT:- Lessee shall reimburse all the cost to the lessor for replacing, missing components and repairing of non working components. From reading of the agreement between the assessee and First Leasing, it is clear that the actual owner of the leased asset is the lessor and First Leasing, the lessor, is entitled to claim depreciation The assessee-company has merely taken the assets on lease from the owner and it is accordingly eligible to claim actual rental expenses in the return of income. In the case of Rajshree Roadways v. Union of India [ 2003 (3) TMI 50 - RAJASTHAN HIGH COURT] had held that the lessor being the owner of the trucks, would be eligible for the benefit of depreciation. Further, it was held by the Hon ble Court that the lessee having not the right to transfer or alienate the vehicle to other parties in any form, the lease rent paid by the assessee in that case (lessee) would be revenue expenditure. In the case of Banashankari Medical Oncology Research Centre Ltd. [ 2008 (8) TMI 346 - KARNATAKA HIGH COURT] had held that when equipments are not owned by the assessee, hire charges paid for leasing of the equipment is a revenue expenditure and is to be allowed as a deduction. As regards the CIT(A) s directions to the A.O. to verify whether there was TDS made by the assessee while making payment for lease rentals and adding back the depreciation claim, the directions are to protect the interest of revenue. Therefore, the order of the CIT(A) is in accordance with law and we uphold the same.

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• 2022 (1) TMI 414
  Revision u/s 263 by CIT - Wrong claim of business expenditure under the head Income from Other sources - expenditure claimed on account of interest payments is not an allowable deduction u/s.57(iii) from out of the Income from other sources, even though, the same can be allowed under the head Income from business - HELD THAT:- Since the assessee failed to prove the nexus between the interest income and expenditure incurred, the CIT set aside the order of AO, who allowed the same under the head income from other sources . Even before us, the ld. AR of the assessee failed ot prove the nexus between the interest income and expenditure incurred and, therefore, we uphold the order of CIT on this issue and dismiss the grounds raised by the assessee on this issue. Disallowance u/s 14A should also be added to the profits compute du/s 115JB - As relying on VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] we hold that the disallowance made u/s 14A should not be added to the book profits computed under section 115JB. Therefore, we set aside the order of CIT on this issue and allow the ground raised by the assessee.

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• 2022 (1) TMI 413
  TP Adjustment - MAM Selection - RPM OR TNMM - adoption of the Most Appropriate Method (MAM) for determination of Arm s Length Price (ALP) in respect of an international transaction of sale of reagents by the Assessee to its Associated Enterprise (AE) - TPO concluded that the Assessee is not a mere distributor and rejected the usage of RPM which the Assessee had considered as the Most Appropriate Method (MAM) and instead chose Transactional Net Margin Method (TNMM) as the MAM - HELD THAT:- It is undisputed before us that identical issue had come up for consideration before the ITAT Mumbai Bench in Assessee s own case in AY 2010-11[ 2019 (6) TMI 601 - ITAT MUMBAI] held that RPM was the MAM and directed the TPO to determine ALP applying RPM as the MAM. Following the aforesaid decision of the tribunal we hold that RPM is the MAM for determining ALP and the AO/TPO is directed to compute the ALP as directed by the Tribunal after affording Assessee opportunity of being heard. Addition u/s.43B towards Bonus and Leave encashment as amount was not paid within the due date of filing the return - assessee argued amount reversed in the subsequent periods and which are already considered in the income of AY 2016-17 upon such reversal - HELD THAT:- Since as per the provisions of Sec. 43B(f) of the Act, provision on account of bonus or leave encashment is not allowable as deduction except on the basis of actual payment irrespective of the method of accounting followed by an Assessee, the disallowance u/s. 43B of the Act for AY 2015-16 is proper. However, since the same amount was offered to tax in AY 2016-17 and taxed in that year, there would be double addition and therefore the proper course would be to direct that the income offered in subsequent year 2016-17 and taxed to that extent should not be taxed. The AO will give necessary consequential relief to the Assessee. Appeal by the Assessee is partly allowed for statistical purpose.

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• 2022 (1) TMI 412
  Disallowance made u/s 14A for computing book profit u/s 115JB - HELD THAT:- As perused the decision of ACIT Vs. Vireet Investments Pvt. Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] wherein held that disallowance made u/s 14A cannot be added for computing the book profit u/s 115JB of the Act. Since the issue on hand being squarely covered following the decision supra, do not find any force in the ground of appeal of the revenue, therefore the same stands dismissed. Computation of depreciation as per the written down value of the assets - HELD THAT:- During the course of assessment proceedings the A.O has neither granted the depreciation after taking into consideration of the actual written down value of the assets nor disprove the working of computation of depreciation claimed by the assessee in its submission. CIT(A) has also not issued specific direction to the A.O for allowing correct amount of admissible depreciation to the assessee. In the light of the above facts, we are of considered view that the A.O should provide depreciation on the basis of actual written down value of the assets, therefore we restore this issue to the file of the A.O for providing depreciation on the basis of written own value after verification and examination of the supporting details and information submitted by the assessee. Therefore this ground of appeal raised by the assessee is allowed for statistical purposes. Nature of income - subsidy amount received - revenue or capital receipt - assessee received subsidy from Government of Maharashtra which was claimed as exempt on the ground that the same was capital in nature - HELD THAT:- The object of the subsidy scheme was to enable the assessee to set up a new unit which was clearly in the nature of capital receipt. Had it been object of the assessee to run the business more profitably then the receipt was to be revenue in nature In the case of the assessee the project for various plastic product with large capacities was set up in notified backward area of Maharashtra in accordance with the package Scheme of Incentives-2001 of Maharashtra Government. The main object of the scheme was to intensifying and accelerate the process of dispersal of industries in the less developed region, coupled with the object of generating employment opportunities in backward areas. Therefore, we consider that the decision of the Ld. CIT(A) is not justified. Accordingly, this ground of appeal is allowed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Under the circumstances when the assessee has earned huge dividend income but not shown any expenditure for managing the investment the A.O after examination of the return of income in para 5.1 of the assessment order has categorically stated that he was not satisfied with regard to the correctness of claim of expenditure made by the A.O and provision of Rule 8D of the IT Rules was invoked - we consider that Ld. CIT(A) has rightly restricted the disallowance to the extent of Rs. 16,83,942/- under Rule 8D(2)(iii) towards administrative expenditure for managing the different kind of investment and administrative support required for such investment etc. In the light of the above facts and findings we do not find any merit in the appeal of the revenue and appeal of the assessee therefore both the grounds i.e. assessee and revenue are dismissed. Disallowance of commission u/s 40(a)(ia) - HELD THAT:- Since the A.O has not specifically asked the assessee to produce the additional evidences of rendering of services by other 8 persons, therefore to decide the issue on merit we have admitted the additional evidences filed by the assessee as placed in paper book. In the light of the above facts and findings we restore this issue to the file of the A.O for deciding the same denovo after verification and examination of the additional evidences filed by the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. Nature of expenditure - disallowance of expenditure incurred for concretization of road as capital expenditure - HELD THAT:- It is undisputed fact that the assessee has not constructed any new road during the year and it has incurred the expenditure for concretization of the existing road for its maintenance. Therefore no new asset was brought into existence by the assessee and object of the said expenses was for proper maintenance of the existing road. In the case of CHEMAUX LTD. [ 1993 (9) TMI 348 - BOMBAY HIGH COURT] has held that the assessee company incurred expenses on repairs of approach road and resurfacing of katcha roads inside its factory premises and the same was allowable as revenue expenditure - Decided in favour of assessee. Bogus purchases - HELD THAT:- A.O has also not proved that there was no sales made against the aforesaid purchases. We are of the considered view that without disproving the aforesaid material evidences provided by the assessee it is not justified to disallow the entire purchases. In the light of the above fact and findings to meet the ends of justice. We consider it would be appropriate to restrict the addition @ 12.5% of such purchases.Therefore, this ground of appeal of the assessee is partly allowed.

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• 2022 (1) TMI 411
  Transfer pricing - Specified Domestic Transaction (SDT) u/s 92BA(i) r.w.s. 40A(2)(b) - whether under the present facts and circumstances of the case Section 92BA(i) would be applicable particularly when the said section was omitted from the statute by the Finance Act, 2017 w.e.f. 01.04.2017? - HELD THAT:- It is a settled principle of law that when a particular provision is repealed from the statue the normal effect would be to obliterate it from the statute book as completely as if it had never been passed and the statute must be considered as a law that never existed - in a case where a particular provision in a statute is unconditionally omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but fresh proceedings for the same purpose may be initiated under the new provision. If that be so, then since the Clause (i) of Section 92BA was omitted by Finance Act, 2017 w.e.f. 01.04.2017 from the statute the same cannot be made applicable in the pending proceeding. It is, therefore, to be considered non-est in the concerned statute as if it had never been passed. In that view of the matter once the said Clause being omitted w.e.f. 01.04.2017 the decision made by AO/TPO and DRP invoking such Section 91BA is without any basis, and/or jurisdiction, invalid and bad in law and, thus, the same is liable to be quashed. No justification in passing the impugned order by the TPO/AO in making upward adjustment invoking Section 92BA(i) of the Act in the present facts and circumstances of the case particularly when the said section stood omitted w.e.f. 01.04.2017 from the statute itself. Hence, we find the same is without any basis, void ab initio and without jurisdiction. In our considered opinion the impugned order is, thus, bad in law and hence the same is hereby quashed. - Decided in favour of assessee.

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• 2022 (1) TMI 410
  Exemption u/s 11 12 - charitable activity u/s 2(15) - AO disallowed the claim as capital expenditure and accumulation by taking view that the main objective of the assessee was the development of Gem and Jewellery Parks, which has not been completed in a decade s time - AO invoked the provision of section 13(a) r.w.s.2 (15) and denied exemption under section 11 and 12 - HELD THAT:- As decided in owncase [ 2021 (7) TMI 555 - ITAT SURAT] the object of the assessee is of general public utility and does not hit by first proviso to section 2(15) of the Act. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. The bye laws of assessee`s organization restrict the allotment of plots and receiving contributions from anyone other than members. It is also established that all the contributors as well as beneficiaries of the assessee are its members only and there is complete identity between the contributors and participants. It is further shown from the records that the assessee trust is not providing any services to the persons other than its registered members. The assessee trust does not distribute its profits among members and it does not pay higher remuneration to its employees. It is abundantly clear that the income of the mutual concern falls outside the ambit of charging section 4 of the Income Tax Act and, therefore, outside the tax net. The net effect of applicability of exemption provision in section 11 is also just the same - order on these addition are, therefore, upheld and the grounds of appeal of the Revenue are dismissed.

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• 2022 (1) TMI 409
  TDS u/s 194C or 194I - short deduction of TDS - CAM charges Maintenance Charges along with Rent - period of limitation - assessee-in-default u/s. 201(1) for having short deducted the amount of tax at source - HELD THAT:- As the time limitation for passing an order under sub-section (1) to Section 201 i.e. deeming the present assessee before us, as an assessee-in-default under sub-section (1) to Section 201 could have validly been done within a period of 2 years from the end of the financial year in which the statement u/s. 200 was filed by the assessee, i.e., latest by 31.03.2014, as per the law as was then available on the statute, therefore, the order passed by the AO u/ss. 201(1) /201(1A) dated 29.03.2018 is clearly barred by limitation. We, thus, in terms of our aforesaid observations quash the order passed by the AO u/s. 201(1)/201(1A), dated 29.03.2018 as barred by limitation. The Grounds of appeal Nos. 1 to 3 are allowed in terms of our aforesaid observations. TDS on CAM charges paid by the assessee - liable for deduction of tax at source @10% u/s. 194-I OR @2% u/s. 194C - HELD THAT:- As the CAM charges are completely independent and separate from rental payments, and are fundamentally for availing common area maintenance services which may be provided by the landlord or any other agency, therefore, the same cannot be brought within the scope and gamut of the definition of terminology rent . On the other hand, we are of the considered view, that as the CAM charges are in the nature of a contractual payment made to a person for carrying out the work in lieu of a contract, therefore, the same would clearly fall within the meaning of work as defined in Section 194C of the Act. In our considered view, as the CAM charges are not paid for use of land/building but are paid for carrying out the work for maintenance of the common area/facilities that are available along with the lease premises, therefore, the same could not be characterized and/or brought within the meaning of rent as defined in Section 194-I. On the basis of the facts that had emerged in the course of the proceedings, it was gathered by the Department that the owners of the malls in addition to the rent had been collecting CAM charges from the lessees on which TDS was deducted @2% i.e. u/s. 194C of the Act. Observing, that payment of CAM charges were essentially a part of the rent, the AO treated the assessee as an assessee-in-default for short deduction of tax at source u/ss. 201(1)/201(1A) - On appeal, it was observed by the Tribunal that the CAM charges paid by the assessee did not form part of the actual rent that was paid to the owner by the assessee company. As the facts involved in the case of the assessee before us remains the same as were therein involved in the aforesaid case, therefore, in the backdrop of our aforesaid deliberations, and respectfully following the aforesaid order of the Tribunal, we herein conclude, that as claimed by the assessee, and rightly so, the CAM charges paid by it were liable for deduction of tax at source @2%, i.e., u/s. 194C of the Act. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(A) who had approved the order passed by the AO treating the assessee company as an assessee-in-default u/s. 201(1).

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• 2022 (1) TMI 408
  Addition u/s. 68 - unexplained cash credit - assessee has failed to prove identity and creditworthiness of the alleged lenders, as well as genuineness of the transaction - HELD THAT:- As stated by the Ld. CIT(A) that the assessee has submitted all documents, all the notices issued u/s. 133(6) of the Act were duly served and replied were also filed. Further, it is stated that the correct address of M/s. Rose Mary Commercial Pvt. Ltd. was supplied and the enquiry was made at the old address. It is stated by the Ld. CIT(A) that the loan amount was taken from this party through bank route of Rs. 43,50,000/-. The turnover of these company and net worth in the opinion of the Ld. CIT(A) this party has credit worthiness for giving such loan. CIT(A) has observed that the AO failed to make any independent enquiry regarding these parties. Ld. Counsel for the assessee during the course of hearing placed reliance in the case of Kamlesh Gupta [ 2021 (8) TMI 1268 - DELHI HIGH COURT] - We are in agreement with finding of the CIT(A) as the assessee has provided evidences in support of its claim but no independent enquiry was made by the Assessing Officer to verify the veracity of the same. A.O. ought to have caused necessary investigation before drawing adverse inference against the assessee. Therefore, in our considered view, the Ld. CIT(A) was justified in deleting the addition. The ground by the Revenue is dismissed.

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• 2022 (1) TMI 407
  Disallowance of Repair and maintenance expenditure claim to the extent of 20% - addition due to lack of sufficient cogent evidence - HELD THAT:- The very factual position has continued before the tribunal as well wherein neither this taxpayer has filed all necessary evidence are the repair maintenance heads nor there is any justification in the impugned estimated disallowance at much higher rate of 20%. We thus conclude that a lumpsum estimation of 10% of the impugned claim would be just and proper with a rider that the same shall not be treated as a precedent. The assessee gets 50% relief. Necessary computation shall follow as per law. Appeal partly allowed in forgoing terms. Capital gain computation - Disallowing its development expenditure - HELD THAT:- Learned Counsel vehemently reiterated the assessee s pleadings that it had executed the corresponding development/improvement work regarding its land held as a capital asset and therefore, both the lower authorities ought to have allowed the same. We find no merit in the assessee s instant sole substantive ground as it is noticed that there is hardly any supportive evidence apart from self serving expenditure vouchers which are in the nature of payee s outstanding adjustments only. There is not even a photograph of the works executed attached along with the necessary details as to what was the alleged improvement carried out in the corresponding capital asset so as to be eligible for deduction u/s. 48 r.w.s. 49 of the Act. We thus hold that the assessee s instant arguments do not deserve to be accepted since supported by self-serving vouchers turning out be adjustment entries only. Undisclosed income - survey operation conducted u/s. 133A - HELD THAT:- CIT(A) has gone by the Assessing Officer s remand report which indicates that the DCIT, Circle 16(2) had clarified before the CIT(A) that its office was not having the corresponding documents impounded during the course of survey. The CIT(A) termed the said alleged remand report to have supported the assessee s case which totally appears perverse conclusion therefore. We next notice from assessee s as well as department s detailed paper books respectively that not only the former had entered into various MOUs/agreement with M/s. Radha Reality Corp. India (P) Ltd.; as per the impounded documents forming subject matter of addition, but also there were civil suit proceedings before the learned Civil Court at LB Nagar between the vendor and the vendee parties. The said pleadings finally culminated in a compromise petition prima facie revealing that the assessee had indeed received the impugned undisclosed income amount from the vendee party by way of multiple development agreements. And also that the corresponding impounded documents onwards prima facie contain not only the assessee s seal but also signature of the authorized person which the Revenue claims to be covered u/s. 292C(1)(iii) of the Act having presumption of correctness. Be that as it may, the fact remains that the CIT(A) has brushed aside allay of the foregoing materials forming part of the case file merely on the basis of a non-existent supportive remand report in above terms. Faced with this factual situation, we deem it appropriate to restore the Revenue s instant grievance back to the CIT(A) for afresh adjudication

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• 2022 (1) TMI 406
  Exemption u/s 54B - sale of agricultural land and chargeability of capital gains on sale of freshly acquired land - new asset i.e. land parcel at Sachana (new asset) acquired - As contended before the CIT(A) that the agricultural land giving rise to capital gain is situated in rural area and is not a capital asset as per definition of Section 2(14)(iii) at the first instance and hence, the chargeability u/s 45 on such gains do not arise in any manner. and consequently, in the absence of any chargeable capital gains, Section 54B would not apply - AO had disputed the eligibility of claim of deduction u/s 54B of the Act in the earlier year on the ground that the assessee had sold the land parcels at Sachana (new asset) without holding it for three years from the date of purchase in violation of the conditions of Section 54B HELD THAT:- The assessee has reiterated and demonstrated with documentary evidences before us that the land parcels at Sarkhej as well as Sachana (new asset) were used for agricultural purposes. It was further demonstrated that the agricultural land situated at Village Sachana is about 15 km away for Viramgam Taluka Panchayat and 40 kms away from Ahmedabad Municipal Corporation limits. Coupled with this, the population of Sachana Village located at Viramgam Taluka is 3844 as per Census 2011. The extract of google map showing the distance of Sachana village from Viramgam Taluka Panchayat and Ahmedabad Municipal Corporation was also placed on record. The assessee has also pointed out on facts that the land was used for agriculture of crops, namely, Bajri and Jowar etc. The factual matrix demonstrated by the assessee could not be successfully rebutted on behalf of the Revenue. Having regard to the aforesaid facts, the CIT(A), in our view, has rightly concluded that the agricultural land parcels being situated in the rural area is outside the purview of expression capital asset defined in Section 2(14) of the Act. Consequently, the rural agricultural land in question not being a capital asset is not susceptible to tax under s.45 r.w.s. 48 of the Act. The capital gains arising on sale of rural agricultural land (new asset) is thus outside the purview of taxation at the threshold. We thus see no error in the conclusion drawn by the CIT(A) in favour of the assessee.

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• Customs

• 2022 (1) TMI 405
  Seeking release of detained goods - it is contended that the relief is to be extended for the purpose of directing the respondents 1 and 2 to initiate action against the respondents 3 and 4 - HELD THAT:- This Court is of the considered opinion that disputed facts can never be adjudicated in a writ proceedings under Article 226 of the Constitution of India. Such disputed issues are to be adjudicated with reference to the original documents and evidences which all are to be scrutinized by the authorities competent and by the parties concerned. This apart, the terms and conditions of the contract, if any violations thereon, are to be adjudicated by conducting a trial before the appropriate forum and such an exercise is impermissible in writ proceedings. The High Court cannot conduct a rowing enquiry based on the affidavits filed by the parties in a Writ Petition. This being the principles to be followed, the extended prayer sought for by the petitioner by filing an amendment petition deserves no merit consideration and further relief, if any requires, the petitioner has to approach the competent forum for adjudication. However, the fact remains that the original relief sought for in the Writ Petition had been granted in favour of the writ petitioner and 100% goods were released and the detention certificate was also issued. This Court is of the considered opinion that the cause arose for filing of the present Writ Petition did not exist and the amendment sought for is beyond the scope of the original relief sought for in the Writ Petition, as admittedly, the original relief sought for had been granted by the respondents - the writ petitioner is at liberty to pursue his remedy before the appropriate forum in the manner known to law, if any grievances exist. Petition dismissed.

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• Insolvency & Bankruptcy

• 2022 (1) TMI 404
  Seeking exclusion of 17 days time from the CIRP - HELD THAT:- In view of the amendment in Section 16 sub-Section 1 of IBC, which has been enforced with effect from 28th December, 2019 now there cannot be two date for appointment of IRP. The IRP has to be appointed on the date of Insolvency Commencement Date. Appeal allowed.

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• 2022 (1) TMI 403
  CIRP proceedings - seeking payment of unpaid operational debt - Pre-existing dispute - grievance of the Appellant is that the First Respondent had clearly failed to make refunds even after accepting each liability, which had resulted in filing of the Application under Section 9 of the I B Code for initiating CIRP - scope and ambit of dispute - HELD THAT:- In the instant case, the First Respondent/Operational Debtor has come out with the plea that 1476.36 MT of coal was supplied to the Appellant/Operational Creditor [based on the Invoices and Ledger of the Appellant] though the Agreement was towards the supply of 10000 MT of coal. Hence, the balance quantity is equal to 8523. 64 MT as claimed by the First Respondent. Therefore, the First Respondent/Operational Debtor rebuts the stand of the Appellant in the instant Appeal and in rejoinder that balance 7600 MT of Coal was sold by the First Respond without the approval of the First Respondent and in this regard, there is enough force, in the stand taken on behalf of the First Respondent. Dispute - HELD THAT:- The dispute as defined in Section 5 (6) of the I BC is not to be restricted to the pending lis or proceedings within the limited purview of Suit or Arbitration proceedings and the term includes should be read as means and includes including the proceedings initiated or pending before Consumer Court, Tribunal, Labour Court or Mediation, Conciliation etc. Ambit of dispute - HELD THAT:- The Adjudicating Authority under the I B Code is required to examine prior to the admission or rejection of an Application as per Section 9 of the Code as to whether the Dispute projected by the Corporate Debtor qualifies as a Dispute as per Section 5(6) of the Code and whether Notice of Dispute given by the Corporate Debtor satisfies the conditions enumerated in Section 8 (2) of the Code. Pre-existing dispute - HELD THAT:- It is the duty of the Adjudicating Authority to find out whether there is a plausible plea which necessitates more investigation and the dispute is not weak one or an assertion of facts unsupported by materials/evidence. If the Dispute truly exists in fact and not an imaginary or an illusory or spurious one, then, the Adjudicating Authority is bound to turn down the Application. Violation of agreement/contract - HELD THAT:- In the instant case, between Appellant/First Respondent, there are Pre-Existing Disputes and they are quite tangible/substantial one and as such, the plausible contentions projected/raised by the parties to the present Appeal require further investigation and in short, the dispute is not to be determined by the Adjudicating Authority /Appellate Tribunal in a Summary Jurisdiction under I B Code. The Adjudicating Authority is not a Court of Law and the CIRP is not an adversial litigation. The Adjudicating Authority is not to decide the Application under I BC like a Money Claim under the I B Code. Viewed in that perspective, the Adjudicating Authority is not supposed to go into the aspect of dispute in a thread bare fashion or on merits. Appeal dismissed.

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• 2022 (1) TMI 402
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Whether a Financial Creditor, despite being a Member of Consortium can individually maintain an application under section 7 of the I B Code, 2016, seeking initiation of CIR Process against the corporate debtor? - HELD THAT:- A perusal of provisions of section 7(1) of the I B Code, 2016, makes it amply clear that a Financial Creditor either by itself or jointly with other Financial Creditors or any other person on behalf of the Financial Creditor as may be notified by the Central Government may file an application for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor when a default has occurred - there is no bar for the Financial Creditor to initiate proceedings individually despite being a Member of Consortium of Lenders. Hence the contention of the learned counsel for the Corporate Debtor that the application filed by individual Financial Creditor is not maintainable is devoid of any force or substance. Hence the same is liable to be rejected and accordingly the same is hereby rejected. Whether the applicant herein has made out a case for initiation of Corporate Insolvency Resolution Process (CIRP) against the respondent/Corporate Debtor? - HELD THAT:- When admission of debt in this case being as clear as crystal and as the applicant by placing the undisputed demand notice dated 22.05.2018 issued under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), has also established default on the part of the Corporate Debtor this application of the financial creditor has fully satisfied the requirements viz, existence of debt and default in repayment of the said debt on the part of the respondent corporate debtor, as such this application is liable to be admitted and initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor is bound to be ordered. The respondent Corporate Debtor, M/s. Ind Barath Thermal Power Ltd, is admitted into Corporate Insolvency Resolution Process under section 7 of the Insolvency Bankruptcy Code, 2016 - moratorium declared.

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• 2022 (1) TMI 401
  Maintainability of application - initiation of CIRP - Existence of dispute between parties - absence of grant of leave by this Tribunal while disposing of IA 1162/2019 - HELD THAT:- Execution of this MOU besides part compliance of the terms of this MOU since not in dispute, the MOU indisputably binds both the parties. When the Corporate Debtor under the above MOU had categorically agreed that in the event of any default in payment of any instalment by the Corporate Debtor, the Operational Creditor is entitled to initiate both civil and criminal proceedings against the Corporate Debtor including the reopening of the CP(IB) No. 463/9/HDB/2018 before the NCLT or filing of the fresh CP as the case may be , the Corporate Debtor is precluded under law from contending that as under the order in IA 1162/2019 this Tribunal did not expressly grant leave to the Operational Creditor, the present application is not maintainable. It may be stated that once the MOU is made a part of the Order it does not matter whether leave, if any, is expressly granted or not. Since the Operational Creditor has satisfied this Tribunal as to the existence of default and has been ensured that the present application is complete and no disciplinary proceedings are pending against the Proposed Interim Resolution Professional (IRP), the application is liable to be admitted. Application admitted - moratorium declared.

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• 2022 (1) TMI 400
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing dispute or not - HELD THAT:- In view of the law laid down by the Apex Court in the case of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT], it is very clear that we are not here to determine the merits of the dispute. We are only to see, whether there is a plausible contention which is not patiently feeble legal argument or an assertion of facts unsupported by evidence. It has been further observed that the Hon ble Supreme Court the defense should not spurious, mere bluster, plainly frivolous or vexatious. A dispute should truly exist between the parties which may or may not ultimately succeed. It is also settled law the term dispute as defined in sub-section (6) of section 5 of IBC cannot be limited to proceeding within the limited ambit of a suit or an arbitration and the term. Considering the material on record particularly the communications reproduced, admittedly in existence before the receipt of the demand notice, its our foregone conclusion that the plea raised by Corporate Debtor of pre-existing dispute has merit and do not appear to be patiently feeble legal argument/assertion unsupported by evidence. And as a consequence thereof present application under Section 9 of IBC is hereby rejected. Application dismissed.

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• 2022 (1) TMI 399
  Withdrawal of CIRP application - section 12A of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT Rules, 2016 - HELD THAT:- As such, as on date, there are no claims that have been pending before the Liquidator. The fees and expenses of the Resolution Professional and the Liquidator have also been duly paid by the ex-directors of the Corporate Debtor. Copies of the relevant documents evidencing such payments are also annexed to the application and marked as Annexure D . Liquidation process initiated against the Corporate Debtor vide order dated 17/05/2019 is hereby closed. Board of Directors of the Corporate Debtor is restored to its original position. Liquidator is discharged from his responsibility. Application allowed.

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• 2022 (1) TMI 398
  Seeking exclusion of 165 days and for extension of CIRP period by another 15 days constituting a total of 180 days - HELD THAT:- This Tribunal without going into the merits of the applications and it is not desirable to decide the aspect of who filed the plan before the cut-off date, etc., which is not subject matter before this Bench. However, in both the applications the common object and the stand taken by the applicants, i. e., to consider all the prospective resolution applications by the committee of creditors on par along with other applications. Therefore, this Tribunal is not going into dwelt the issue which is not before this Tribunal. It is unequivocal that the appellants have shown exceptional circumstances, i. e., pendency of judicial proceedings before the hon ble courts, imposition of nationwide lockdown, change of RP, calling fresh expression of interest and the nature of business of the corporate debtor which admittedly spread over to many parts of the country. It is also an admitted fact that many interested prospective resolution applicants have submitted their plans evincing their interest in the bid process of the corporate debtor. This Tribunal is of the view that the corporate debtor cannot be pushed into liquidation. This Tribunal comes to a resultant conclusion that based on the facts and keeping in view of exceptional circumstances existed, viewing in that perspective and to avoid liquidation as a last resort and to comply with the object of the Code, i. e., maximization of value of asset of the corporate debtor and the law laid down by the hon ble Supreme Court in the matter of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT] and COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT] , that the outer limit of 330 days can be extended in an exceptional circumstances. Application allowed.

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• 2022 (1) TMI 397
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - dishonour of the cheques, which were issued for repayment of dues - recovery of damages - HELD THAT:- Taking into consideration of the fact that the cheques which were given as part of the memorandum of understanding were also not honoured by the corporate debtor, the contention of the corporate debtor does not hold any water that the memorandum of understanding was taken under coercion. Further, the cheques were given as a security is also not convincing. It clearly demonstrates that there exists a debt which was substantiated by the memorandum of understanding as well as the cheques issued as per the memorandum of understanding for repayment of the debt. The default of debt was also amply proved by the operational creditor. In addition, the operational creditor has also mentioned in his form 3 demand notice that he has filed the details of debt with the information utility as provided under the IBC. However, the same was not refuted by the corporate debtor which clearly demonstrates that the corporate debtor has not denied the details of debt filed by the operational creditor within the information utility which also further weakens the case of the corporate debtor. The operational creditor has a strong case and the corporate debtor has to be admitted to CIRP as prayed for by the operational creditor. Accordingly, the instant application filed under section 9 of the I and B Code, 2016 is hereby admitted - Application admitted - moratorium declared.

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• Service Tax

• 2022 (1) TMI 396
  Utilization of CENVAT Credit - payment of service tax for the purpose other than the ones defined under Section 3(4)(e) of the Cenvat Credit Rules, 2004 - recipient of service who is liable to pay the service tax under Section 68(2) of the Finance Act, 1994 - Rule 3(4)(e) of the Cenvat Credit Rules, 2004 - HELD THAT:- In the case of COMMISSIONER OF SERVICE TAX VERSUS M/S ARAVIND FASHIONS LIMITED [ 2011 (9) TMI 852 - KARNATAKA HIGH COURT] , the Coordinate Bench of this Court has considered the Cenvat Credit of input services utilized by the assessee towards the payment of service tax, it has been observed that the assessee therein was the recipient of service tax, the service provider was outside the country, in law he has been treated as a service provider and is levied tax, the liability to pay tax on the service which he has received was foisted on such assessee under law. In order to discharge the said liability, he is entitled to use the cenvat credit which was available with him. The special leave petitions preferred by the Revenue against M/s Aravind Fashions and Godavari Sugar Mills, though have been dismissed for low tax effect, we cannot subscribe to the arguments advanced by the Revenue in view of the fiction created under Section 68(2) of the Finance Act, 1994 read with Rules 2(1)(d) of the Service Tax Rules, 1994 and Rule 3(4)(e) of the Cenvat Credit Rules, 2004 - the substantial questions of law are answered in favour of the assessee and against the Revenue - appeal dismissed.

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• 2022 (1) TMI 394
  Export of service or not - Technical Testing and Analysis Services have been delivered outside India used outside India - fulfilment of all the condition under Rule 3[1] of the Export rules or not - clinical tests were performed on volunteers in India - credit on Catering Services when the same do not have any nexus with the output services provided by them, viz., Technical Testing and Analysis Service - rent received by them for the period July 2007 to May 2008 - HELD THAT:- The adjudication of the dispute, whether the services provided by the volunteers [human beings] in India could be treated as export of services and is liable to tax on consideration received for providing such services would not come within the jurisdiction of this High Court. The appeal is dismissed as not maintainable.

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• 2022 (1) TMI 393
  Levy of service tax - construction service or not - commercial service rendered by the appellant for construction of Paryatak Bhavan of the Andhra Pradesh Tourism Development Corporation Ltd. - suppression of facts or not - penalty - whether service tax could be levied for the period prior to 01.06.2007? - HELD THAT:- Service tax could only have been demanded on works contract services after introduction of a charge on a works contract service and not under any other head. This is what was observed by the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] . The Supreme Court examined as to whether works contract service can be classified under section 65(105)(zzzh) as construction of complex service and held that the scope of section 65(105) (zzzh) is limited to cover contract of service simplicitor only and not a composite works contract . The Supreme Court noticed that a works contract is different from a contract for service simpliciter and that it is only w.e.f 01.06.2007 that section 65(105)(zzzza) was introduced to cover composite works contract and so works contract cannot be covered under any other category of services prior to 01.06.2007. It is, therefore, clear from the aforesaid judgment of the Supreme Court in Larsen Toubro that a composite works contract cannot be taxed under construction services under section 65(30a) or under commercial or industrial construction service under section 65(25b) of the Finance Act, prior to 01.06.2007 as the scope is limited to cover contract of service simplicitor only - Even post 01.06.2007 service tax could not have been confirmed under works contract service. The show cause notice alleged that the appellant was providing construction services or commerical or industrial construction service and the demand has also been confirmed under this category by the adjudicating authority. The impugned order, therefore, deserves to be set aside for post 01.06.2007 period also since the demand made under a particular category of service found to be incorrect in a subsequent proceeding, cannot be sustained. It is not necessary to examine the contention raised by learned counsel for the appellant relating to the demand being barred by limitation - Appeal allowed - decided in favor of appellant.

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• 2022 (1) TMI 383
  Levy of service tax - Construction of multi-level car parking adjacent to Airport - forming part of the Airport or not - HELD THAT:- The appeal stands dismissed as not maintainable with liberty to present the appeal before the Hon ble Apex Court under Section 35L of the Central Excise Act, 1944.

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• 2022 (1) TMI 382
  Levy of service tax - Toll Plaza - Lay-bys - Pedestrian/Cattle Crossing - Highway traffic management Systems - Administrative, operation and maintenance of Base camp - Highway lighting, landscaping road furniture and facility road side, as part of the road construction having no separate existence and are meant only for the purpose of road - extended period of limitation - works contract service - construction service - penalties - HELD THAT:- In COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, MYSORE PRESENTLY COMMISSIONER OF CUSTOMS NEW CUSTOMS MANGALORE VERSUS M/S. SUCH SILK INTERNATIONAL LTD., [ 2021 (10) TMI 1134 - KARNATAKA HIGH COURT] , the Co-ordinate Bench of this Court (where one of us, the Hon ble SSJ was a member) having considered this ruling of the Hon ble Apex Court as well as the other judgments holding the field held that the subject matter of the appeal which certainly goes beyond the inter-se dispute between the parties and would partake the character of general public importance as enunciated by the Hon ble Apex Court in COMMISSIONER OF CUSTOMS, BANGALORE-1 VERSUS M/S MOTOROLA INDIA LTD. [ 2019 (9) TMI 229 - SUPREME COURT] , would not be maintainable before the High Court in an appeal under Section 130 of the Customs Act, 1962. The substantial questions of law raised by the Revenue ultimately goes to the root of the matter inasmuch as liability to service tax and classification of service, finally resulting in the determination of rate of tax - the appeal is not maintainable before this Court under Section 35G of the Act - Appeal dismissed.

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• Central Excise

• 2022 (1) TMI 395
  Principles of natural justice - credit denied without following the precedential decision passed by it in the Appellant s own case - denial of substantial benefit of credit on the basis of appreciation of incorrect facts which were never set up by the Department in the impugned proceedings - denial of credit even after holding that the Job Worker had no facility to manufacture Crown Corks by using Tin Sheets which were in fact received by the Job Worker for printing and sent back to the Appellant after printing - denial of credit without appreciating the fact that denial of substantial benefit to the Appellant amounts to doubt taxation - invocation of longer period of limitation - HELD THAT:- The dispute is relating to the MODVAT credit availed on 88.637 metric tons of Tin Sheets during the period 1991-92 to 1993-94 by the appellant herein. The appellant M/s. ECPL has claimed the MODVAT credit on these inputs. It is not in dispute that these inputs were directly sent to the Job Worker, M/s MCPL for printing and cutting. The Hon ble Apex Court in the case of JAYPEE REWA CEMENT VERSUS COMMISSIONER OF CENTRAL EXCISE, MP [ 2001 (8) TMI 1332 - SUPREME COURT] has held that Rule 57A(1) did not requires inputs to be utilized in factory premises, that the credit is permissible in respect of intermediate goods received from Job Worker. The credit can be allowed only if the intermediate products received by the manufacturer of the said final products are accompanied by any of the documents and it is evidenced that the payment of duty on such inputs of capital goods has been paid. It is significant to note that in the assessee s own case in M/S. EMCEE CROWNS (P) LTD, SHRI MAHESH HEGDE, ACCOUNTS ASSISTANT, SHRI K.S. DILIP, DIRECTOR, SHRI PRASHANTH HEGDE, CHAIRMAN, M/S. METAL CLOSURES (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE C.C.E. -BANGALORE-III [ 2018 (10) TMI 16 - CESTAT BANGALORE] , the Tribunal has already decided the issue in favour of the assessee. However, the Tribunal failed to consider the same or to distinguish the said decision of the Tribunal. - in the present case, M/s ECPL no doubt has sent the inputs directly to the Job Worker M/s MCPL, it is an admitted fact that M/s MCPL has no infrastructure availability for manufacture of Crown Corks and the said Tin Sheets after printing and cutting have reached M/s ECPL. If so, merely for the reason that the said diversion of goods directly to the Job Worker was not informed to the department is not a ground for denial of the CENVAT credit. The cryptic order passed on this aspect making bald observations is not in accordance with law and the same cannot be sustained. In the circumstances, denial of credit to the assessee amounts to double taxation. Appeal allowed - decided in favor of assessee.

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• 2022 (1) TMI 392
  Supporting manufacturer or not - Procurement of inputs under Advance licence Scheme - appellant has not disclosed the facts to the department - suppression of facts or Mis-declaration - extended period of limitation - Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 - HELD THAT:- The present case can be decided on limitation itself therefore, the issue on merit is not decided. In the present case demand involved is for the year 2008 whereas Show cause notice has been issued in June 2013 therefore, the entire demand is under extended period. The Show cause notice as well as the Order-In- Original alleged that the appellant has not disclosed the facts to the department that they have procured the duty free material from the M/s Sterlite Industries (I) Ltd against invalidation of advance licence. On this basis the larger period was invoked. The appellant vide letter 25.02.2010 again intimated that there is no violation of Para 4.16 of Handbook Procedure. From the above it is clear that the appellant have disclosed all the information as regard procurement of material under advance authorization from M/s Sterlite Industries (I) Ltd. Therefore, there is no suppression of facts or Mis-declaration on the part of the appellant. The demand is clearly hit by limitations. Since the entire demand is under extended period the same is not sustainable on limitation - Appeal allowed - decided in favor of appellant.

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• 2022 (1) TMI 391
  Refund claim of the pre-deposit - Rejection on the ground of time bar in as much as the appellant has filed the refund claim on 25.05.2018 after the final order was passed by the Commissioner (Appeals) on 24.04.2009 - HELD THAT:- The amount paid by the appellant is clearly a pre-deposit, as per the stay order passed by the Commissioner (Appeals) dated 20.06.2008. It is found from Board Circulars, Circular dated 02.01.2002 and Circular dated 16.09.2014, which are binding on the departmental Officer, the time limit of one year prescribed under Section 11B particularly in respect of pre-deposit which is by an order of the appellate forum, shall not apply. Moreover there is a reason for filing appeal on 25.05.2018 by the appellant that the departments appeal before the CESTAT was pending and appellant had filed the refund claim immediately after the Tribunal s order dismissing the departments appeal on 26.04.2018 for this reason also the refund cannot be rejected on time bar. Appeal allowed - decided in favor of appellant.

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• 2022 (1) TMI 390
  CENVAT Credit - input service or not - commission paid to an overseas agent - reverse charge mechanism - HELD THAT:- Since there were conflicting judgments of various High Courts on the admissibility of CENVAT credit on the commission paid, a Notification No 2/2016-ST dated 03/02/2016 was issued inserting an explanation allowing CENVAT credit of such commission. In the matter of M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I [ 2016 (4) TMI 232 - CESTAT AHMEDABAD] , a Division Bench of the Tribunal has held that this explanation has retrospective effect and applies even to cases prior to the insertion of this explanation. Relying on this order of the Tribunal, the Assistant Commissioner has dropped the show-cause notice and allowed CENVAT credit to the appellant. The Commissioner (Appeals) has not given any reason as to why the order of the Tribunal Ahmedabad in the case of Essar Steels does not apply to this case. In fact, he did not discuss the order of the Essar steels India Ltd at all. In other words while the Assistant Commissioner has followed the ratio of the law laid down in the case of Essar Steel by a Division Bench of the Tribunal, Learned Commissioner (Appeals) has simply ignored it and gave his own reasoning. The ratio of the order of the Tribunal is binding on all the lower authorities. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2022 (1) TMI 389
  Defreezing of current bank accounts - Entry No.58 A of the Schedule II of the VAT Act - HELD THAT:- Noticing the fact that the petitioner is already before the statutory authority filing two Revision Application Nos.54 55 of 2021, let the same be decided within a period of two weeks from the date of receipt of a copy of this order. In the event of the petitioner making a request of defreezing the Bank Accounts and the authority acceding to such request, the final adjudication also can come thereafter within a period of eight weeks. The present petition stands disposed off.

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• 2022 (1) TMI 388
  Principles of natural justice - opportunity of hearing was provided or not - petitioner by a letter requested the respondent to give further time for personal hearing - HELD THAT:- Considering the fact that the order has been passed without hearing the petitioner in respect of the issue which has been pending considerably for a long period of time, the respondent should have awaited and given an opportunity to the petitioner to appear and make submissions. The case is remitted back to the respondent to pass a fresh order by 17.01.2022. The petitioner is therefore directed to appear before the respondent for a personal hearing on 23.12.2021 at 11.30 AM. - Petition allowed by way of remand.

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• 2022 (1) TMI 387
  Classification of goods - Whip Topping - taxable under the residuary provision when Sl. No.4 of the Notification dated 30.04.2005 or not - industrial inputs or not - HELD THAT:- It is discernable that in identical circumstances in the assessee s own case in STA No.118/2013 and allied matters referred to above, the coordinate bench of this Court having considered the applicability of the clarification issued by the Commissioner, has set aside the order of the Tribunal as to whether it is prospective or retrospective in nature and restored the matter to the file of the assessing authority to examine this aspect keeping open the rights and contentions of the parties. The matter is restored to the file of the assessing authority for examining the matter - revision petition is allowed in part.

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• 2022 (1) TMI 386
  Validity of assessment order - Tamil Nadu Value Added Tax Act, 2006 - HELD THAT:- The issue decided in the case of M/S. ALL INDIA METAL AND ALLOYS VERSUS THE ASSISTANT COMMISSIONER HARBOUR-IV ASSESSMENT CIRCLE CHENNAI. [ 2021 (9) TMI 1144 - MADRAS HIGH COURT] were it was held that there have been gross violation of principles of natural justice, which would justify that the Appellant is entitled to invoke the extraordinary jurisdiction of this Court. The matter is remitted to the Assessing Officer and the Assessing Officer is directed to issue notice to the Appellant to appear in-person - Petition allowed by way of remand.

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• Indian Laws

• 2022 (1) TMI 385
  COVID - Seeking extension of the period of limitation in all proceedings before Courts/Tribunals including this Court w.e.f. 15.03.2020 till further orders - drastic surge in the number of COVID cases across the country - HELD THAT:- The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasijudicial proceedings - Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. Application disposed off.

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• 2022 (1) TMI 384
  Dishonor of Cheque - compounding of offences - Acquittal of the accused - whether at this stage of the proceedings i.e. when the petitioner has already been convicted by the trial Magistrate and his conviction has been upheld by the Appellate Court, the offence under Section 138 of NI Act can be compounded? - HELD THAT:- The issue is no longer res integra. In DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT] , the Supreme Court while laying down guidelines as to the levy of costs depending upon stage of the compromise arrived at between the parties, held that conviction of an accused in proceedings under Section 138 of NI Act can be set aside even at appellate stage and the accused can be acquitted on the basis of a compromise with the complainant. Even though the parties have arrived at a settlement after the Appellate Court had upheld the conviction of the petitioner, yet keeping in view the spirit of Section 147 of the NI Act, the offence under Section 138 of the Act can be compounded, as the respondent has clearly agreed that on account of precarious financial condition of the petitioner, he is ready to accept the amount of Rs. 25000/- which he has already received from the petitioner and the amount which is deposited with the Registry of this Court as full and final settlement of his claim. Therefore, this is a fit case where costs are required to be waived while compounding the offence. The settlement arrived at between the parties is accepted and the parties are permitted to compound the offence. The judgments of both the courts below are set aside and the petitioner is acquitted of the charges - Petition allowed.

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