TMI Tax Updates - e-Newsletter
January 14, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
Wealth tax
Indian Laws
Highlights / Catch Notes
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GST:
Seeks to amendment in Notification No. 2/2017-Central Tax, dated the 19th June, 2017 - Notification
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GST:
Nature of supply - Levy of GST - Transfer of an operational outlet - A branch of the same business vertical can be by no stretch of imagination considered as an independent part of the concern - the transfer of business assets is covered under the category of ‘supply of goods’ and in no way is covered by the clause ‘transfer of a going concern, as a whole or an independent part thereof’. Thus, the transaction becomes a taxable event in terms of the provisions of Sec. 7 read with Sec. 9 of the CGST Act, 2017. - AAR
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GST:
Classification of goods - rate of duty - Zip Roll (i.e. Slide Fasteners) - Finished Zippers - Sliders - the product, ‘Finished Zipper’ is liable to GST @ 18% till 26.07.2018, @ 12% from 27.07.2018 to 30.09.2018 and @ 12% from 01.10.2019 onwards. Whereas, the other products, viz. ‘Zip Roll’ and “Slider” are liable to GST @ 18% till 30.09.2018 and @ 12% from 01.10.2019 onwards. - AAR
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GST:
Eligibility to claim refund of IGST - The availing exemption under Notification No.79/2017-Cus dated 13.10.2017 in respect of additional duty of Customs under sub-Section (1), (3) and (5) of Section 3, anti-dumping duty under section 9A, but opting to pay IGST on the import of goods under Advance Authorization, would tantamount to availing the benefits of exemption under Notification No.79/2017-Cus dated 13.10.2017, as contemplated under Rule 96(10) of CGST Rules, 2017. Consequently, the applicant is not eligible to claim refund thereof under Rule 96(10) of CGST Rules, 2017, as amended. - AAR
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GST:
100% EOU - Levy of GST - recovery of Notice Pay from the employees who are leaving the company without completing the notice period - Service of notice for termination of contract - the applicant is liable to pay GST @ 18% under the entry of “services not elsewhere classified, on recovery of Notice Pay from the employees who are leaving the company without completing the notice period as specified in the Appointment Letter - AAR
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GST:
Classification of goods - rate of tax - Maize Bran - cattle feed - the inputs for animal feed are different from the animal feed. Said S. No. 102 covers the prepared aquatic/ poultry/cattle feed falling under headings 2301, 2302, 2308 and 2309. This entry does not apply to raw material/inputs like Maize bran falling under heading 2302- AAR
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GST:
Business Auxiliary Services - intermediary services - Sub-section(2) of Section 13 specifically provides that the place of supply of services except the services provided in sub-sections (3) to (13) shall be the location of the recipient of services provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. - AAR
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GST:
Levy of GST or Exempt service - services of providing Para-medical Administrative, Technical and other Staff on Outsource basis to Seth L.G. General Municipal Hospital - no evidence has been provided by applicant to establish that Seth L.G. General Hospital falls under definition of ‘Central Government’ or ‘State Government’ or ‘Local authority’ or ‘Governmental authority’ or ‘Government entity. - the exemption is not available to the applicant - AAR
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Income Tax:
Central Government makes the directions of Faceless Penalty Scheme, 2021 - Notification
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Income Tax:
Faceless Penalty Scheme, 2021 - Notification
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Income Tax:
Addition u/s 68 - investment made by the partners - AO has examined 79 unsecured creditors who appeared before the AO and given statements on oath. All of them have accepted that they have given the loans to the partners, however, as observed by the AO, all the statements were stereotyped answers, hence, the AO viewed that the creditors were tutored and the source is unbelievable. No specific defect with regard to source, credit worthiness and genuineness of the creditors was brought by the AO in his finding in the order. - CIT(A) rightly deleted the additions - AT
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Income Tax:
TP Adjustment - corporate guarantee - international transaction of not? - the issue of corporate guarantee were in the nature of share holder activity and the same could not be included in the provision for services under the definition of international transaction u/s. 92B of the Act. - when an assessee extends assistance to AE which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of normal business such an assistance or accommodation does not have any bearing on its profit, income, loses or asset and therefore it is outside the ambit of international transaction u/s. 92B of the Act. - AT
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Income Tax:
Unexplained income - Once, the assessee has admitted the additional income, the said income is available to the assessee in the form of cash or kind which the assessee is permitted to take as source for application of funds. Thus, the assessee explained the source for credits in the capital accounts and there is no unexplained investment required to be brought to tax. - AT
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Income Tax:
Penalty u/s. 271E - Cash paid towards repayment of finance obtain for purchase of trucks - as well as the Ld. CIT(A) have not doubted the genuineness of the transactions. It is also not clear whether the finance obtained is, a lease finance or hire purchase finance. The assessee has explained the urgency leading to payment of instalment in cash. The lender have confirmed this fact. It is a fact that CBIL ratings are efficiently resulting in effect on business. - No penalty - AT
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Income Tax:
Bogus purchases - on the basis of meticulous appreciation of material available on record, the Assessing Officer has recorded the conclusions, which has been reproduced above, however, the tribunal has not dealt with the conclusions of the Assessing Officer and in a cryptic and cavalier manner has allowed the appeal preferred by the assessee. The tribunal has also failed to appreciate that in fact, the burden was on the assessee to establish the genuineness of the transaction. - HC
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Income Tax:
MAT Computation - even if the provision for doubtful debt is added back to the net profits, the resultant book profit is still negative and even though the assessee was prevented from adding back the provision for bad and doubtful debts to the net profit due to reasons beyond its control, it has at the first opportunity demonstrated to the authorities that book profits are still negative on adding back the provision for bad and doubtful debts and therefore, no adverse inference could have been drawn against the assessee. - HC
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Income Tax:
Entitled to claim deduction u/s 10 (10 C) (viii) and also under Section 89 (1) - amounts received as part of VRS - claim came to be rejected on the basis of the instructions/letter issued by the CBDT - when the proceedings are found to be without jurisdiction the existence of an alternative remedy is not a bar for granting relief under Article 226 of the Constitution of India. It becomes our duty to grant relief when we are convinced that the proceedings are without jurisdiction.- HC
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Indian Laws:
CBDT launches e-portal for filing complaints regarding tax evasion/Benami Properties/Foreign Undisclosed Assets - News
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Wealth-tax:
When the AO rejects the revised return then the whole return is invalid. In case AO makes addition from the revised return then it means that he recognizes the revised return. Therefore, we reject the contention of the tax authorities to treat the additional wealth declared in revised return as undisclosed wealth. The AO has to reconcile the jewellery found during the search with the return filed u/s 17 and not from the revised return. - AT
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Service Tax:
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - SVLDRS - The two dates i.e. 14th September, 2018 in so far the intimation is concerned and 3rd December, 2018 in so far the notice under section 87(b) of the Finance Act, 1994 is concerned are prior to the cut off date of 30th June, 2019. Therefore, having regard to the above, it can safely be said that the respondents were not justified in rejecting the declaration of the petitioner on the ground of ineligibility. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (1) TMI 423
Principles of Natural Justice - opportunity of hearing not provided to applicant - Cancellation of GST registration - Section 29 of the GST Act - HELD THAT:- The impugned order passed by the authority under Section 29 of the GST Act cancelling the GST Registration was without giving any opportunity of hearing to the writapplicant. Primafacie the showcause notice itself reflects complete nonapplication of mind - Primafacie, we are of the view that we should remit this matter to the authority so as to give the writapplicant an opportunity of hearing. In such circumstances, we have asked Mr. Gandhi to speak to the authority concerned whether he would be willing to recall or withdraw the matter so as to give an opportunity of hearing to the writapplicant and thereafter pass a fresh reasoned order.
Matter on remand - Post this matter on 12.01.2021 as Item No.1 on the board.
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2021 (1) TMI 422
Refund of GST paid - reimbursement of the additional tax was delayed as a result of which appellant had to deposit tax from his own source - grievance of the applicant company is that despite deposit of GST from its own source, opposite parties failed to refund the applicant the tax component - HELD THAT:- It is not disputed that the tax liability has been deposited by the company but the company has not been reimbursed the sum due from the opposite party no. 2 despite the funds being released by the opposite party no. 1 -
Learned counsel for the opposite party no. 1 submits that the Nodal Agency, Chief Executive Officer, U.P. Rural Road Development Authority, had twice reimbursed the tax component, however, it has not been released by the opposite party no. 2. The matter is serious and calls for attention of the highest officer of the State. Accordingly, the Principal Secretary, Public Works Department, U.P. Lucknow, shall summon the officers and get the matter settled. It is expected that the meeting of the respondent officials (1 and 2) shall be convened forthwith and the matter be settled.
It is provided that in the event the Principal Secretary is of the opinion that the opposite party no. 2, Sri Niraj Singh, Executive Engineer, Construction Division-II, Hardoi, has been unnecessarily harassing and creating impediment in releasing the amount, it will be open for the Principal Secretary to initiate proceedings including the disciplinary proceedings against the opposite party no. 2. Affidavit of compliance to be filed on the date fixed.
List on 18.02.2021.
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2021 (1) TMI 421
Alleged violation of provision of sections 74, 75, and 79 of Jharkhand Goods and Services Tax Act, 2017 - whether requirement prescribed under section 6 of JGST Act, 2017 is being followed by the Department while initiating any proceeding under the Act under intimation to the jurisdictional officer of CGST, IGST and / or GST Compensation? - HELD THAT:- Matter be listed on 14th January 2021 for learned counsel for the State to apprise the Court. However, on merits, matter will be considered on 28th January 2021. Petitioner shall be at liberty to file their rejoinder to the counter affidavit well before the date.
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2021 (1) TMI 420
Detention of goods alongwith the conveyance - petitioner submits that as regards some of the materials relied by the respondent - authority for issuance of show cause notice, the petitioner is required to be afforded an opportunity to subject such material for strict scrutiny which would be part of right of defending the proceedings initiated by the respondent-authority - HELD THAT:- The present writ petitions could be disposed off in terms of the observations and directions made in W.P.No.10832/2020. The respondents to proceed further and consider the reply made by the petitioner insofar as notice under Section 129 and also with respect to the reply to be submitted to the show cause notice under Section 130. The respondents to also consider the further proceedings under Section 130 after reply is furnished by the petitioner in that regard.
Learned counsel for the respondents submits that an opportunity of personal hearing will also be afforded while considering the reply to the show cause. It is further submitted that the request for non-examination made by the petitioner would be considered as per law.
Petition disposed off.
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2021 (1) TMI 419
Refund of IGST - Rejection on the grounds that the appellant has filed a refund claim in other category and is premature as investigation in the matter is pending with DGGSTI, Jaipur Zonal unit, Jaipur - HELD THAT:- The appellant has deposited the said amount vide DRC-03 dated 02.03.2020 during the investigation and further he himself stated that matter is still under investigation with DGGSTI, Jaipur. Therefore, the refund claim filed by the appellant at this stage is premature and it has not attained its finality.
Accordingly. the appeal filed by the appellant is rejected - the Order in Original passed by the adjudicating authority is upheld - there are no infirmity in the impugned order - appeal disposed off.
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2021 (1) TMI 418
Profiteering - purchase of flat - allegation that Respondent had not passed on the benefit of input tax credit by way of commensurate reduction in price - violation of the provisions of Section 171 (1) of GST Act - penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of Input tax Credit (ITC) to the above Applicant as well as other buyers who had purchased flats from the Respondent during the period from 01.07.2017 to 31.12.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017.
Since, no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.12.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 10.02.2020 issued to the Respondent for imposition of penalty under Section 171 (3A) of the CGST Act is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
Application disposed off.
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2021 (1) TMI 417
Profiteering - purchase of flat - allegation that Respondent had not passed on the benefit of input tax credit by way of commensurate reduction in price - violation of the provisions of Section 171 (1) of GST Act - penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of reduction in IGST rate on the above products and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017.
Since, no penalty provisions were in existence when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) can not be imposed on the Respondent retrospectively. Accordingly, the notice dated 06.12.2018 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
Application disposed off.
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2021 (1) TMI 416
Profiteering - purchase of flat - allegation that Respondent had not passed on the benefit of input tax credit by way of commensurate reduction in price - violation of the provisions of Section 171 (1) of GST Act - penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of ITC to his buyers w.e.f 01.07.2017 to 31.08.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017.
Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.08.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 18.12.2020 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
Application disposed off.
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2021 (1) TMI 436
Benefit of exemption from GST - Pure service - services of providing Para-medical Administrative, Technical and other Staff on Outsource basis to Seth L.G. General Municipal Hospital - ‘Central Government’ or ‘State Government’ or ‘Local authority’ or ‘Governmental authority’ or ‘Government entity. - HELD THAT:- The applicant has provided Man Power Supply Agency Services to Seth L.G. General Municipal Hospital. The applicant regularly places their contract service bill with 9% CGST & 9% SGST. However, Seth L.G. General Municipal Hospital are not ready to pay GST and responded that they are not in category to pay GST. There is exemption to service to Municipality under Article 243W & Panchayat under Article 243G - as per Serial No 3 of the Notification No. 12/2017- Central Tax (Rate) dated 28/06/2017, GST is exempted for Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to central Government, state Government or Union Territory or Local Authority or a Governmental Authority or a Government entity by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution.
The conditions to be fulfilled to be eligible for taking the benefit of the exemption from GST for pure services are also fulfilled.
Thus, no evidence has been provided by applicant to establish that Seth L.G. General Hospital falls under definition of ‘Central Government’ or ‘State Government’ or ‘Local authority’ or ‘Governmental authority’ or ‘Government entity. Entry 3 of the Notification No. 12/2017- Central Tax (Rate) dated 28/06/2017 exempts the Pure services provided to Central Government, State Government or Union Territory or Local Authority. In absence of any evidence in support of above, the exemption provided under the Entry 3 of the said Notification cannot be extended to them - the exemption is not available to the applicant in respect of supply of manpower services viz. Para-medical Administrative, Technical and other Staff on Outsource basis made to Seth L.G. General Municipal Hospital in terms of Serial No 3 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.
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2021 (1) TMI 435
Classification of services - consultancy services - pure services or not - Scope of the terms used in the contract / agreement - service receiver i.e. Surat Municipal Corporation, Ahmedabad Urban Development Authority, Pune Municipal Corporation, Executive Engineer, Public Works Division, Pune and Rajkot Smart City Development ltd. - ‘Central Government’ or ‘State Government’ or ‘Union Territory’ or ‘Local Authority’ or a ‘Governmental Authority’ or a ‘Government Entity’? - relation to any function entrusted to a Municipality under Article 243W of the Constitution of India, read with twelfth schedule or not.
Whether the technical/consultancy services provided by the applicant to various entities such as Surat Municipal Corporation, Ahmedabad Urban Development Authority, Pune Municipal Corporation, Rajkot Smart City Development ltd., Executive Engineer, Public Works(East) Division, Pune, State of Maharashtra and Gujarat Technical University as per the various agreements is exempted under Entry No.3 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 or otherwise?
HELD THAT:- looking to the terminology and words used in the said clauses of the contract / agreement, it is very difficult to conclude that it pertains purely to services only. In fact, on going through the same, we get the impression that this does not appear to be a supply of pure service only but also includes supply of goods along with supply of services. Further, as reported by the concerned officer and as per the GST portal, the applicant supplies Works Contract Service also besides supplying design and consultancy services and few other services and looking to the aforementioned facts, it appears that Works Contract Service may also be involved in the said contract.
If a person provides only service to any person without involvement of supply of goods along with supply of services, then the same would be termed as supply of pure service - the Financial offer as per the contract/agreement includes the GST amount and that GST is to be paid to the Government as per the terms and conditions of the Contract/Agreement. This, itself, proves that the applicant is not eligible for the benefit of the provisions of Entry No.3 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 under which the rate of GST is NIL. In view of the above facts, it is concluded that the aforementioned services supplied by the applicant to Surat Municipal Corporation are not Pure services.
Since the applicant has failed to satisfy the very first condition in order to be eligible for the exemption, there is no need to discuss other conditions at all.
Regarding services provided by them to Ahmedabad Urban Development Authority - HELD that:- An agreement has materialised between the applicant and AUDA in respect to the above work which has not been submitted by the applicant even though this fact was brought to the notice of his representative during the course of personal hearing. In absence of the agreement/contract and without going through the terms and conditions of the contract, it would not be possible for us to analyse as to whether the services provided by the applicant are pure or otherwise since this involves the construction of a Town Hall and only after going through the agreement can it be confirmed whether the services supplied by the applicant are pure services or are services supplied along with supply of goods. It also appears that the applicant has deliberately not provided the copy of agreement for reasons best known to him - the services provided by the applicant to Ahmedabad Urban Development Authority are not Pure services. Since the applicant has failed to satisfy the very first condition in order to be eligible for the exemption, there is no need to discuss other conditions at all.
Further, analyzing of various other services being supplied under different contracts / agreement it is found that none is eligible for exemption from GSt.
The exemption under Entry No.3 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 is not available to the applicant in any of the aforementioned agreements/contracts entered into, by them.
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2021 (1) TMI 434
Levy of CGST and SGST or IGST - Business Auxiliary Services - intermediary services or not - applicant entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency - reverse charge mechanism.
What is the nature of the transaction carried out by the applicant? - HELD THAT:- As per the submission of the applicant, they have entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency. Based on the submission of the applicant as well as the arguments and discussions made by the representative of the applicant during the course of personal hearing, it appears that the services provided by the applicant are in the nature of services of commission agents or commodity brokers who negotiate between buyers and sellers as a facilitator for the supply of goods for which they are paid a fee or commission. The said service can also be called as ‘intermediary services’.
Sub-section(2) of Section 13 specifically provides that the place of supply of services except the services provided in sub-sections (3) to (13) shall be the location of the recipient of services provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. In the instant case, the supplier of service is the applicant and the service recipient is M/s. Tsudokoma Corporation, Japan. The services provided by the applicant i.e. ‘intermediary services’ appears at Sub-Section(8)(b) of Section 13. Also, sub-section (8) clearly mentions that the place of supply in respect of the services described under the said sub-section shall be the location of the supplier of services. Further, the supplier in the instant case is the applicant and the location of the said supplier is in Ahmedabad, Gujarat. Now, since the location of the applicant, who is supplier of services, is in Gujarat and both the supplier of service as well as the place of supply of service is in Gujarat, the supply of services would be considered akin to intra-state supply of services and would be liable to CGST and SGST (as per the provisions of Section 9(1) of the CGST Act, 2017). Therefore, the present procedure/course of GST payment followed by the applicant i.e. payment of CGST and SGST on the services provided by them, is correct. Further, the applicant would be liable to pay GST at the rate of 18% in terms of the provisions of Notification No:11/2017-Central Tax (Rate) dated 28.06.2017.
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2021 (1) TMI 433
Classification of goods - rate of tax - Maize Bran - To be classified as cattle feed or not - whether chargeable to CGST @2.5% under Sr.No.103A of Notification No.1/2017 or chargeable to NIL rate as per Sr.No.102 of the Notification No.2/2017?
HELD THAT:- Maize Bran is used as a major supplement for cattle feed. The word ‘supplement’ is defined in dictionary as “a thing added to something else in order to complete or enhance it.” Therefore, Maize Bran is a product, which is added to cattle feed to complete it or enhance it. This literally means that Maize Bran is not a cattle feed in itself but is added to cattle feed to enhance or improve its quality/nutritional value or to complete it. It is also seen from the submission of the applicant that they are time and again stressing on the fact that the maize bran produced by them is cattle feed and should be rightly classified on the basis of its use and be exempted under Sr.No.102 of the Notification No.2/2017-Central Tax (Rate) dated 28.06.2017. However, they have failed to clarify as to how the said product can be considered as ‘cattle feed’ when the definition itself says that “it is used as a major supplement for cattle feed. Further, they themselves have submitted that maize bran is usually a mixture of the bran fraction and other by-products and a very loosely defined product of highly variable composition usually sold as a major ingredient for cattle feed. They have also stated that they supply Maize Bran as feed commodities to local farmers and even manufacturers engaged in manufacturing cattle feed who often mix Maize Bran with other maize processing by-products. It can also be construed from the above that the maize bran supplied by them to the farmers would not be directly fed to cattle but be mixed with the cattle feed before feeding it to the cattle. In view of the above, it can be seen that Maize Bran in itself is not a cattle feed but is a major ingredient used in the manufacture of cattle feed as submitted by the applicant. Thus, the applicant by themselves have contradicted their contention through their submission.
The applicant has supplied Cattle Feed Bran Dry to M/s Dutt Industries, Visnagar, a manufacturer, who is engaged in the manufacture of cattle feed (as per the data available online). Thus, for the above manufacturer, maize bran is just an input/ingredient, which is used in the manufacture of their final product i.e. cattle feed. It can, therefore, be concluded that the maize bran sold by the applicant is used by the above company as an input in the manufacture of cattle feed but is not a cattle feed by itself. It is also seen that ‘Maize Bran’ is specifically mentioned in Sub-heading No.23021010 of the First Schedule to the Custom Tariff Act, 1975 (51 of 1975) and the word ‘Bran’ is specifically mentioned in Sr.No.103A of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 - the product ‘maize bran’ does not warrant classification under Sr.No.102 of Notification No.2/2017-Central Tax (Rate) as the product does not classify as ‘cattle feed’ and is correctly classifiable as ‘Bran’ under Sr.No.103A of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017.
Thus, the inputs for animal feed are different from the animal feed. Said S. No. 102 covers the prepared aquatic/ poultry/cattle feed falling under headings 2301, 2302, 2308 and 2309. This entry does not apply to raw material/inputs like Maize bran falling under heading 2302 - thus, the product in question i.e. Maize Bran is used to manufacture/formulation of animal feed, cattle feed, etc.. This raw material/input cannot be directly used for feeding animal and cattle. Hence, it cannot be construed as ‘cattle feed’ and, accordingly, Maize Bran will attract GST @ 5% under S. No. 103A of the Notification No.1/2017- Central Tax (Rate) dated 28.6.2017.
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2021 (1) TMI 432
Levy of GST - amount recovered from employee on account of third party canteen services which is obligatory under Section 46 of the Factories Act, provided by company - HELD THAT:- The applicant is a 100% EOU. More than 500 employees are working in the factory. They are providing canteen services through third party exclusively for their employees in the factory. They offered food to their employees on subsidized rate whereby the employee’s share of the cost is being deducted from their salary. The applicant has further submitted that the canteen service provided to the employees is not being carried out as a business activity. It is according to the provisions of the Factories Act, 1948 - From the plane reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its employees would definitely come under clause (b) of Section 2(17) as a transaction incidental or ancillary to the main business.
Even though, there is no profit as claimed by the applicant on the supply of food to its employees, there is a "supply", as provided in Section 7(1)(a) of the CGST Act, 2017. The applicant would definitely come under the definition of "Supplier", as provided in sub-section (105) of Section 2 of the CGST Act, 2017 - Since the applicant recovers the cost of food from its employees, there is ‘consideration’, as defined in Section 2(31) of the CGST Act, 2017.
Thus, recovery of amount from employee on account of third party canteen services provided by the Company, which is obligatory under Section 46 of the Factories Act, 1948 would come under the definition of 'outward supply' as defined in Section 2(83) of the CGST Act, 2017 and therefore, taxable as a supply under GST.
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2021 (1) TMI 431
100% EOU - Levy of GST - recovery of Notice Pay from the employees who are leaving the company without completing the notice period - Service of notice for termination of contract - three months’ notice mandatory for all employees/employer - as per contract, the company is entitled to recover the notice pay from the agreed portion of salary to compensate the loss to company, if notice not served correctly - HELD THAT:- Employees who resign from their job are expected to serve notice period as mentioned in the appointment letter i.e. three months. If the employee does not serve such notice period, the salary of the unserved portion of notice period is retained by the employer, which is called as “Notice Pay Recovery” - the said Notice Pay is nothing but the amount stipulated in the employment contract for breach in serving (not serving) the stipulated notice period. In other words, notice pay is a sum mutually agreed between the employer and the employee for breach of contract. It can be regarded as a consideration to the employer for “tolerating the act” of the employee to not serve the notice period, which was the employee’s agreed contractual obligation.
GST is applicable on supply of taxable goods or services. Section 7(1) of the CGST Act, 2017, includes activities referred to in Schedule II in the scope of supply. Clause 5(e) to Schedule II to CGST Act 2017, declares that 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act' shall be treated as supply of service. The condition to pay an amount as notice pay in lieu of notice period, for the employer to agree to let go an employee, normally forms part of the terms and conditions of employment. This would mean that the employee while accepting the offer of employment, has not only understood the intent on the part of the employer in prescribing this exit condition, but has also accepted it.
Thus, the applicant is liable to pay GST @ 18% under the entry of “services not elsewhere classified, on recovery of Notice Pay from the employees who are leaving the company without completing the notice period as specified in the Appointment Letter issued as per the contract entered between them.
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2021 (1) TMI 430
Eligibility to claim refund of IGST - Exemption under N/N. 79/2017-Cus dated 13.10.2017 - instead of additional duty of customs under sub-Section (1), (3) and (5) of Section 3, anti-dumping duty under section 9A, applicant opted to pay IGST on the import of goods under Advance Authorization - export of goods on payment of IGST - refund under Rule 96(10) of CGST Rules, 2017.
HELD THAT:- The applicant is a manufacturer of specialized pneumatic tires falling under HS Code 4011 for industrial, mining and agricultural applications of having a prestigious 4-Star Export House Status granted by the Ministry of Commerce. The applicant exports almost 85% of the production to various countries of the world. The applicant imports various raw materials under Advance Authorization scheme in which basic customs duty is exempted in terms of Notification No. 18/2015-Cus dated 01.04.2015 and additional duty of customs under Sub-sections (1), (3) and (5) of Section 3, Integrated GST under Sub-section (7) of Section 3 and anti-dumping duty under Section 9A are exempted under Notification No.79/2017-Cus dated 13.10.2017 - the applicant is opting to pay IGST on their imports, but avails exemption on other applicable customs duties in terms of the Notification No.79/2017-Cus dated 13.10.2017. Thus, the applicant has received (imported) the goods on which the tax (IGST) has been paid and, therefore, according to them, they cannot be held to have availed the ‘benefits of the Notification No.79/2017-Cus dated 13.10.2017’, as contemplated in Rule 96(10) of CGST Rules, 2017. Further, the exemption on additional duties of Customs and anti-dumping duty are governed by the Customs Act, 1962 as well as Customs Tariff Act, 1975 and cannot be denied by the GST Act, 2017 and the Rules made thereunder. Consequently, according to them, they can export the goods on payment of IGST and claim refund thereof under Rule 96(10) of the CGST Rules, 2017.
The availing exemption under Notification No.79/2017-Cus dated 13.10.2017 in respect of additional duty of Customs under sub-Section (1), (3) and (5) of Section 3, anti-dumping duty under section 9A, but opting to pay IGST on the import of goods under Advance Authorization, would tantamount to availing the benefits of exemption under Notification No.79/2017-Cus dated 13.10.2017, as contemplated under Rule 96(10) of CGST Rules, 2017. Consequently, the applicant is not eligible to claim refund thereof under Rule 96(10) of CGST Rules, 2017, as amended.
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2021 (1) TMI 429
Benefit of exemption under N/N. Sr. No. 27 of the Notification No.02/2017-Central Tax (Rate) dated 28th June, 2017 and N/N. 01/2017-Central Tax (Rate) date 28th June, 2017, as amended - invoices raised to the end use users in case of selling of paneer in loose form without sealing of packet/in loose carry bags and bearing details like name of manufacturer and branches or others as required by FSSAI or other relevant Acts - HELD THAT:- The supply paneer in loose form in plastic bags without sealing of packet containing different weight as required by the customers. It is not forthcoming from the facts stated by the applicant that whether such Packages are designed to hold a pre-determined quantity or not and such pre-determined quantity is indicatde on such package or not - If such package is containing different weight and no weight is mentioned on packages, then we can conclude that impugned supply would not satisfy the requirement of the definition of ‘unit container’ as found in both the notifications - In such a situation, the supply of paneer in loose form in plastic bags without sealing of packet, which do not indicate any information related to weight, would tantamount to being as a product not put up in a ‘unit container’ for the purpose of Notifications No. 1/2017 and 2/2017-Central Tax-(Rate) both dated 28th June, 2017.
Whether such supply is covered by the expression, ‘bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right in a court of law is available’, as per the notifications mentioned? - HELD THAT:- Admittedly, the brand name of the applicant is already registered under the specified Act, as they are regularly discharging tax on paneer supplied in aunit container and bearing a registered brand name of the applicant thereon, under GST - Even though, if their brand name is not registered but on such brand name on which an actionable claim or enforceable right in a court of law is available. In such situation, second condition of the notifications cited, also hold to be satisfied.
Whether the said package bearing the details like name of manufacturer and branches or others, as required by FSSAI or other relevant Acts thereon, can be considered as “not bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right in a court of law is available and, hence, eligible for exemption from payment of GST? - HELD THAT:- In terms of section 18 of the Food Safety and Standards Act, 2006, no person shall manufacture, distribute, sell or expose for sale or dispatch or deliver to any agent or broker for the purpose of sale, any packaged food products which are not marked and labelled in the manner as may be specified by regulations. Further, Rule 6 of the Food Safety and Standards (Packaging and Labelling) Regulations, 2011, in turn mandates provision of details of the manufacturer of the product on the food package - in case of brand names, which are not covered under definition of ‘registered brand name’, even a brand name on which an actionable claim or enforceable right in a court of law is available, shall be considered as ‘brand name’ for the purpose of taxability of product in question, in terms of Notification No. 01/2017-Central Tax (Rate) date 28th June, 2017, as amended - It is thus concluded that mentioning the name and registered address of the supplier as the manufacturer, as per the statutory requirement, is also to be considered as “bearing a brand name” and, hence, second condition is satisfied.
Thus, it can be concluded that the benefit of the exemption provided vide entry at Sr. No. 27 of the Notification No.02/2017-Central Tax (Rate) dated 28th June, 2017, as amended, can be extended to the applicant’s product subject to the fulfilment of two conditions viz. (i) ‘Paneer’ is not put up in unit container, means a package, whether large or small (for example, tin, can, box, jar, bottle, bag, or carton, drum, barrel, or canister) designed to hold a pre-determined quantity or number, which is indicated on such packages and (ii) said unit container is not bearing a registered brand name or a brand name on which an actionable claim or enforceable right in a court of law is available.
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2021 (1) TMI 428
Classification of goods - rate of duty - Zip Roll (i.e. Slide Fasteners) - Finished Zippers - Sliders- benefit of N/N. 01/2017-Central Tax (Rate) dated 28.06.2017 as amended by the Notification No.18/2018-Central Tax (Rate) dated 26.07.2018 - HELD THAT:- The classification of goods under GST regime has to be done in accordance with the Customs Tariff Act, 1975, which is in turn based on Harmonised System of Nomenclature popularly known as ‘HSN’. The rules of interpretation, section notes and chapter notes as specified under the Customs Tariff Act, 1975 are also applicable for classification of Goods under GST regime. However, once an item is classified in accordance with the Customs Tariff Act, 1975, the rate of tax applicable would be arrived at on the basis of notifications issued under GST by respective governments - In the instant case, products in question are Zip Roll, Sliders and Finished Zipper. The Customs Tariff classifies the products, Slide Fasteners and Parts of Slide Fasteners under two different sub-headings, viz. Slide Fasteners under chapter sub-heading 9607.11/9607.19 and Parts thereof under chapter sub-heading 9607.20. Further under GST, the rate of tax is also separately prescribed for Slide Fasteners and Parts thereof. Hence, it is necessary to decide first whether these products are ‘Slide Fasteners’ or ‘Parts of slide fasteners’.
It is found that the product, ‘Finished Zipper’ is supplied in cut length with sliders attached. The product “Finished Zipper” consists of two narrow strips of textile material. One edge of each strip is fitted with scoops of base metal (of metal, plastics etc.), which can be made to interlock by means of slider or runner. Thus, this a complete product, which can be construed as ‘Slide Fasteners’ - further, it is noted that the product ‘Zip Roll’ is supplied in continues length as per customer order or of normal length as per industrial specification. “Zip Rolls” are narrow strips of any length mounted with chain scoops and same are supplied without sliders/runners attached. Hence, this product falls under ‘Parts of slide fasteners” and cannot be classified as “Slide Fasteners”, as claimed by the applicant - slider shall be classified as ‘Parts of slide fasteners’ under Chapter heading 9607.20.
Thus, the product, ‘Finished Zipper’ is to be classified as “Slide Fasteners” under Chapter heading 9607.11 and other products, viz. ‘Zip Roll’ and “Slider” are to be classified as ‘Parts of slide fasteners’under chapter heading No. 9607.20.
Rate of GST leviable on “Slide Fasteners” and “Parts of slide fasteners” prevailing at different times - HELD THAT:- W.e.f. 01.10.2019, “Slide Fasteners” and “Parts of slide fasteners” will again attract single rate of GST i.e. 12% - the product, ‘Finished Zipper’ shall be classified as “Slide Fasteners” under Chapter heading 9607.11 and Other products, viz. ‘Zip Roll’ and “Slider” merit classification as ‘Parts of slide fasteners’ under chapter heading No. 9607.20. Accordingly, the product, ‘Finished Zipper’ is liable to GST @ 18% till 26.07.2018, @ 12% from 27.07.2018 to 30.09.2018 and @ 12% from 01.10.2019 onwards. Whereas, the other products, viz. ‘Zip Roll’ and “Slider” are liable to GST @ 18% till 30.09.2018 and @ 12% from 01.10.2019 onwards.
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2021 (1) TMI 427
Benefit of the exemption for legal services - applicant is established with the objectives of developing the knowledge of science and technology, dental, medial, paramedical, physiotherapy, pharmacy, commerce, management, education and humanities for the advancement of mankind - Sl. No.45 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 - procurement of legal services - Exemption under S. No. 4 of Notification No.12/2017-Central Tax (Rate)? - Whether Nirma is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act?
Whether Nirma would be eligible for claiming benefit of the exemption for legal services as provided in Sr. No.45 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017, as amended from time to time in respect of procurement of legal services? - HELD THAT:- The applicant is a private university set up with the objectives of teaching, research and training at the university, by an Act passed by the Gujarat State Legislature, in which Government is having zero percent participation by way of equity or control. Being the similar issue raised by the applicant concerning the legal interpretation as clarified in Circular No. 76/50/2018-GST dated 31st December, 2018, we can state that the applicant does not fall under the “governmental authority”, as defined under Section2(16) of the IGST Act, 2017. We, therefore, conclude that the condition of ‘with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243W of the Constitution’ would apply to both authorities whether set up by an Act of Parliament or a State Legislature; or established by any Government - thus, the applicant would not be eligible for claiming benefit of the exemption as provided in Sr. No.45 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017, as amended from time to time, in respect of procurement of legal services (as a recipient).
Whether services provided by Nirma are exempted under S. No. 4 of Notification No.12/2017-Central Tax (Rate)? - HELD THAT:- This entry exempts services by Central Government, State Government, Union Territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution. As already held in foregoing para, the applicant is not a Central Government, State Government, Union Territory, Local Authority or Governmental Authority. Further, we find that higher education is nowhere specified as an activity in relation to any function entrusted to a municipality under Article 243W of the Constitution - the higher education services provided by the applicant would not qualify for exemption provided under S. No. 4 of the exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.
Whether Nirma is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act? - HELD THAT:- The applicant entity was formed as a private university set up by the Nirma University Act passed by the Gujarat State Legislature, in which Government is having zero percent participation by way of equity or control - Further, admittedly, the applicant does not fall under (i) a department or establishment of Central Govt. or State Govt., or (ii) a local authority; or(iii) Govt. Agencies, or other specified persons viz. (iv) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); or (v) public sector undertakings (PSUs).
The CBEC vide aforesaid Circular clarified that the provisions of Section 51 of the CGST Act, are applicable to only such authority or board or any other body whether set up by an Act of Parliament or a State Legislature or established by any Government in which fifty one percent or more participation by way of equity or control, is with the Government. It is fact on record that the Nirma University is set up by the Nirma University Act passed by the Gujarat State Legislature, in which Government is having zero percent participation by way of equity or control. Hence, the applicant does not fall under this category of specified person for the purpose of Section 51 of the CGST Act, 2017 - the applicant is not liable to register themselves as a Deductor under GST.
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2021 (1) TMI 426
Service of providing/supplying Temporary live videography with LED & LCD Screen, Live Telecast equipment, Cameras, etc. - Service related to collection of Hire Charges for temporary transfer of right to use goods from “Central Govt., State Govt. or Union Territory or Local Authority or a Government Authority by way of any activity in relation to any Function entrusted to a Panchayat under Article 243-G of the Constitution or in relation to any function entrusted to a Municipality under Article 243-W of the Constitution” - exemption under clause 5 (f) of the Schedule II to the Central Goods and Service Tax Act, 2017.
Whether services provided by the applicant would fall under the scope of clause 5 (f) of the Schedule II to the Central Goods and Service Tax Act, 2017? - HELD THAT:- As per clause 5 (f) of the Schedule-II to the CGST Act, 2017, “transfer of the right to use any goods, for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable consideration”, shall be treated as ‘Supply of services’ - In the applicant case, none of the work orders cited above fulfil any of the condition mentioned above, in as much the applicant’s activity does not involve the sale of goods but it involves supply of services of live telecast, videography etc. by using their own instruments/equipment’s viz. LED & LCD Screen, Live Telecast equipment, Cameras, etc., at site for various events undertaken by them and after completion of the specific event, all the instruments/ equipment, which are deployed at site, are taken back by them and use for other event. The applicant during the course of supply might also transfer some goods/ undertake the construction activity, for which he recovers consideration for the same as hiring charges from them. Thus, said services are to be construed as supply of services/ goods/ works contract depending upon the nature of contract entered by them or Work Order received by them.
Thus, the services provided by the applicant would not fall under the scope of clause 5 (f) of the Schedule II to the Central Goods and Service Tax Act, 2017.
Whether or not, the Service related to collection of Hire Charges for temporary transfer of right to use goods from “Central Govt., State Govt. or Union Territory or Local Authority or a Government Authority by way of any activity in relation to any Function entrusted to a Panchayat under Article 243-G of the Constitution or in relation to any function entrusted to a Municipality under Article 243-W of the Constitution” are covered and exempted under the scope of Sr. No. 3 of the Notification No.12/2017 Central Tax (Rate) dated 28.06.2017? - HELD THAT:- The scope of work as defined in the Work Orders submitted by the applicant on sample basis do not get covered under any such activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India. Since the applicant, at various stages, enters into different agreements with various authorities for provision of services, it is not practical to examine at this stage, each contract, he has entered into with the recipients of services. Further, during the course of providing services, the applicant may also enter into further agreements with the service recipients. It is not possible to foresee the nature of all these agreements at present. Further, there could also be modifications/ amendments in the existing agreements and the nature of service could be subsequently altered. Therefore, the reply to the query raised by the applicant cannot be answered in plain ‘no’ or ‘yes’.
Thus, the nature of these agreements and the services provided by the applicant would determine whether the third condition as discussed above has been met or otherwise. The applicant shall be eligible for the exemption under the Notification No.12/2017-State Tax (Rate) dated 28.06.2017 only if all the conditions as specified are met in respect of supply of such services. Therefore, the exemption sought by the applicant will depend upon the nature of services provided by them in terms of specific contracts entered by them with respective service recipients - answered in negative.
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2021 (1) TMI 425
Rate of tax - applicability of clause 3(v)(a) of the Notification No.11/2017-Central Tax (Rates) dated 28.06.2017 - Works Contract - construction, erection, commissioning or installation of original works pertaining to railways - rate of GST@ 12% or 18%? - HELD THAT:- The applicant has been awarded the Contract by M/s Rites Limited, which is a Public Sector Undertaking. Said contract was awarded for execution of works of laying of track as per layout plan, pavement along the track, construction of Admin building, Warehouse, Electrical works and Fire-fighting works etc. at Khodiyar, Gandhinagar, Gujarat. Further, contract is involving both supply of goods and services and is a composite supply in the nature of Works Contract Supply - The work awarded to the applicant comprises of laying of track as per layout plan, pavement along the track, construction of Admin building, Warehouse, Electrical works and Fire-fighting works etc. at Khodiyar, Gandhinagar, Gujarat. These works are in the nature of new works to be executed. These also involve construction of “original works”. As such, same are covered under the definition of ‘original work’, as defined inclause (zs) of the Notification No.12/2017-Central Tax (Rates) dated 28.06.2017.
The Applicant has produced no evidence that the work was allotted to M/s RITES Ltd was pertaining to railways as defined at Section 2(31) of the Railway Act, 1989. There is also no evidence on record whether the work has been awarded in respect of “Government railway” or “Non-Governmental railway”. Although, the applicant has sought to infer that the said work was in respect of railways owned by Ministry of Railways, but he has not provided any supporting evidence in the form of agreement between M/s RITES Ltd and Ministry of Railways to establish the same. Therefore, in absence of any such conclusive proof that the work pertains to railways, the third condition is not satisfied.
The contract work is not covered under clause no. 3(v)(a) of the Notification No.11/2017-Central Tax (Rates) dated 28.06.2017, as amended by Notification No. 20/2017-Central Tax (Rate) dated 22.08.2017.
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2021 (1) TMI 424
Classification of goods and services or both - Franchisee Fees - Royalty - amounts received by the applicant under the franchise agreement from the franchisee for the right to use its trademark, brand name and other proprietary knowledge (Intellectual Property) - transfer of an operational outlet - Services by way of transfer of a going concern, as a whole or an independent part thereof - Exemption under Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 - Input Tax Credit of tax paid on the supplies received at the time of developing the outlet.
Classification of goods and services or both - Franchisee Fees - Royalty - HELD THAT:- The subject agreement is a Franchise agreement and not a License agreement - CBIC has issued the Explanatory Notes to the Scheme of Classification of Services on 12th June, 2018. The explanatory notes indicate the scope and coverage of the heading, groups and service codes of the Scheme of Classification of Services. As per the Explanatory Notes, the Service Code (Tariff) 997336-Licensing services for the right to use trademarks and franchises, includes licensing services for the right to use trademarks and to operate franchises. As per the statement of facts, the applicant has made a ‘Franchise Agreement’ and not the ‘License Agreement’, therefore, the services in question cannot be said to be “Licensing services”.
“Franchisee Fees” and “Royalty” received by the applicant under the franchise agreement from the franchisee for the right to use its trademark, brand name and other proprietary knowledge (Intellectual Property), fall under Chapter Heading 9983 as “Other professional, technical and business services” and Service Code (Tariff)- 998396-Trademarks and franchises, attracting GST @ 18%.
Transfer of an operational outlet - Services by way of transfer of a going concern, as a whole or an independent part thereof - HELD THAT:- The transfer of business assets is to be considered as supply of goods. The transfer of business assets implies that a part of the assets are transferred and not the whole business. In the applicant’s case, only one outlet of his business chain is being transferred/ sold to the recipient. Thus, it is not a case of transfer of an ongoing concern in whole. Further, the transaction is also not covered under the clause ‘transfer of a going concern as an independent part thereof’. Independent part of a firm would be a distinct business vertical and not the same vertical of which a certain portion has been transferred to other entity. The applicant is engaged in the business of running outlets in the name of ‘Teapost’ and the business activity is one and only one but is merely having more than one branches for the same business. A branch of the same business vertical can be by no stretch of imagination considered as an independent part of the concern - the transfer of business assets is covered under the category of ‘supply of goods’ and in no way is covered by the clause ‘transfer of a going concern, as a whole or an independent part thereof’. Thus, the transaction becomes a taxable event in terms of the provisions of Sec. 7 read with Sec. 9 of the CGST Act, 2017.
Exemption under Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 - HELD THAT:- It is pertinent to note that the exemption under Notification No. 12/2017 Central Tax (Rate) dated 28.6.2017 pertains to exemption granted to supply of services. As amply discussed hereinabove, the transaction is in the nature of ‘supply of goods’ and, therefore, the provisions of Notification No. 12/2017 Central Tax (Rate) would not be applicable in as much as the transaction does not tantamount to ‘supply of services’. Accordingly, the answer is in negative.
Input Tax Credit - tax paid on the supplies received at the time of developing the outlet - HELD THAT:- In the instant case, the equipment/ infrastructure of the running outlet is being sold to the recipient as a part of the business activity of the applicant, the same would be covered under Sec. 16(1) of the CGST Act, 2017 and accordingly, the applicant would be eligible for Input Tax Credit subject to fulfilment of all the conditions specified under the Act and the rules made thereunder for admissibility of Input Tax Credit.
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Income Tax
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2021 (1) TMI 411
Income from house property - Determination of gross annual value - rent realizable by the assessee - AO took adhock rate of 7% of value of property - CIT(A) directed to AO to compute the value, from December 14, 2012 to March 31, 2013 as from the date of the occupation certificate from Mumbai Metropolitan Region Development Authority (MMRDA) - HELD THAT:- Perusal of the assessment order goes to prove that the AO without bringing on record any evidence of the quantum of rent realizable by the assessee qua the property in question proceeded to take ad hoc rate of 7% of the value of property in question to be its annual value. So, we are of the considered view that GAV computed by the AO by ignoring the provisions contained u/s 23(1)(a) of the Act is not sustainable in the eyes of law.
Findings returned by the ld. CIT (A) are based upon the facts factually dealt with on record wherein the assessee contended that since he (assessee) has not received the permission to occupy the property before 30.03.2013, the provisions of section 22 and 23 (1) of the Act in regard to notional income was wrongly applied by the AO.
CIT(A) reached the conclusion on facts that though assessee was granted permission to occupy the building w.e.f. 30.03.2013 but he had obtained the occupation certificate from Mumbai Metropolitan Region Development Authority (MMRDA) till 17th floor of the building on 14.12.2012. - So, finding no illegality or perversity in the impugned order, appeal filed by the Revenue is hereby dismissed.
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2021 (1) TMI 410
TP Adjustment - ALP adjustment made to group service fees paid by the assessee to its Associate Enterprises (AEs) - HELD THAT:- The Tribunal in assessee’s own case for assessment year 2012-2013 had directed to do afresh transfer pricing analysis and determine the ALP of international transactions with regard to group service fees paid by the assessee to its AEs.
AO / TPO shall follow the same directions that are given by the ITAT in assessee’s own case for assessment year 2012- 2013 for determining the ALP of impugned international transaction the assessee had with its AE’s.. Appeal filed by the assessee is allowed for statistical purposes.
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2021 (1) TMI 409
Capital gain computation - taxability on transfer of land in pursuant to JDA - year of assessment - HELD THAT:- As relying on SHRI SHAFIQ MOHAMMED SHAH [2017 (5) TMI 1168 - ITAT CHENNAI] long term capital gain on transfer of land in pursuant to JDA dated 27.06.2006 accrues for the assessment year 2007-08, when the assessee has physically hand over the land to the developer, but not for the assessment year 2014-15 as considered by the ld.AO on the basis of subsequent sharing agreement dated 10.07.2013. Therefore, we direct the AO to delete additions made towards computation of long term capital gain on transfer of land in pursuant to JDA for the impugned assessment year. Appeal filed by the assessee is allowed.
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2021 (1) TMI 415
Exemption u/s 11 - Appeal admitted on the following substantial questions of law - whether the assessee is covered under the proviso to Section 2(15) of the Act i.e. the advancement of any other object of general public utility ? - Tribunal justification in holding that predominant object of the assessee Trust are to provide practical and theoretical training in the field of 'yoga, which would ultimately provide medical relief to the society' at large - whether Appellate Tribunal was justified in allowing the exemption under section 11 and 12 of the Act for remaining income which is not forfeited for exemption without appreciating that once the provisions of section 13(3) are applicable the assessee would not eligible for the benefit of exemption under section 11 and 12 of the Act? - ITAT allowing donation, corpus donation AND Loss on sale of asset as application of income
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2021 (1) TMI 408
Penalty u/s. 271E - Cash paid towards repayment of finance obtain for purchase of trucks - The payment was made in cash on due dates to avoid the default in repayment of loan, which would effect assessee's credibility in CIBIL and to avoid penalty for default, as on that date of such payments, signed cheque books were not available with the staff - For repayment of cash of L & T Finance Ltd. as submitted that the account had to be closed immediately, so as to clear the finance, obtain a NOC so as to sell a lorry - HELD THAT:- Penalty in this case has to be deleted, the assessee was prevented by the reasonable cause in making the repayment of finances otherwise than by way of cheque. Even otherwise the transactions are genuine. Both the Assessing Officer as well as the Ld. CIT(A) have not doubted the genuineness of the transactions. It is also not clear whether the finance obtained is, a lease finance or hire purchase finance. The assessee has explained the urgency leading to payment of instalment in cash. The lender have confirmed this fact. It is a fact that CBIL ratings are efficiently resulting in effect on business.
When the transactions were genuine, then the violation of question is only a technical and venial. The Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] (supra) held that no penalty can be levied when the violation is technical and venial. Penalty in question is to be deleted - Decided in favour of assessee.
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2021 (1) TMI 407
Assessment of capital gains - deduction of indexed cost of construction of the building and the rejection of assessee’s claim with regard to demolition charges - CIT(A) dismissed the appeal of the assessee and confirmed the addition made by the AO - HELD THAT:- The assessee has received the sum of ₹ 76,32,000/- towards the sale proceeds of her share of 212 sq.yds of site and therefrom claimed the indexed cost of acquisition of land and building which was constructed in the F.Y. 1994-95. Similarly, she also has admitted the sale proceeds of scrap of ₹ 3.00 lakhs and also claimed demolition charges of ₹ 3.00 lakhs which the AO has disallowed. It is accepted fact that when the assessee has admitted the sale of scrap naturally assessee has to demolish the building and has to incur certain expenditure. We find from the order of the AO that he has not given any reason for disallowing the demolition charges. The scrap would generate only when the existing building was demolished.
Having taxed the sale of scrap of demolished building, the AO also ought to have allowed the expenditure incurred on demolition, hence, we set aside the order of the ld. CIT(A) and allow the appeal of the assessee on this issue.
Cost of construction and indexed cost of acquisition for construction of the building - AO disallowed the indexed cost of construction merely because the assessee could not furnish the evidences - HELD THAT:- Since the construction of the building was completed in 1994-95 and sold in 2013-14, naturally assessee would not be in a position to furnish the evidences, because of longevity of time and therefore the issue needs to be considered on the basis of evidence available. In the instant case, for existence of building the assessee has furnished the municipal tax receipts and also admitted the sale of scrap of building which was taxed by the AO in the assessment. Thus, we do not find any justification for rejecting the claim of the assessee with regard to indexed cost of construction, hence, we set aside the orders of the lower authorities and allow the indexed cost of acquisition of the building. Accordingly, appeal of the assessee is allowed on this issue.
Capital gain on sale of land and flats - LTCG and STCG - Period of holding - HELD THAT:- There is no dispute that sale of land constitutes long term capital gain and sale of flats constitute short term capital gain. Since the flats were in possession of the assessee for less than 36 months, as the assessee constructed the building in the A.Y. 2014-15, for which agreement was entered on 12/02/2013. There was not much time gap between the construction of the building and sale of flats. Hence the AO rightly assessed the sale of flats under short term capital gains and the land under Long term capital gains.
Apportionment of sale consideration towards the land and flats - cost of construction was ₹ 3,25,80,000/- for 9 flats consisting of 2850 sq.ft. each flat - assessee has objected for adoption of SRO value as sale consideration - HELD THAT:- Once the assessee has objected the adoption of SRO value as sale consideration of the land, the AO need to refer the issue to the Departmental valuer for expert opinion. In the instant case, no such exercise was made by the AO. The registered valuer of the Income tax has valued the land at ₹ 60,000/- per sq.yard. and the department did not bring any evidence to controvert the valuation made by the registered valuer. The department also did not find any defect in the report of Registered Valuer. Registered Valuer is qualified engineer and approved by the Income Tax Department for valuing the properties and giving expert opinion. Since the department did not bring any material to show that the Registered Valuer’s report is defective, we do not find any reason to not to accept the valuation made by the Registered Valuer. Therefore, we direct the AO to consider the land cost as determined by the registered valuer for sale of land and recompute the long term capital gain.
The balance would be taken as short term capital gain for sale of flats. Accordingly, the appeal of the assessee is partly allowed.
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2021 (1) TMI 406
Unexplained income - case was selected for limited scrutiny and a notice u/s 142(1) was issued to the assessee calling for information to examine whether the share capital was genuine and from disclosed sources or not - survey u/s 133A was conducted in the business premises of the M/s Lucky Stores wherein assessee along with his wife are partners each of them having 1/6th share - HELD THAT:- During the course of survey, excess Stock was found, which was offered as additional income directly in the computation but not taken by the assessee in the books of accounts of the firm. The assessee also paid the VAT for sale of excess stock. The assessee has also paid the income tax in the hands of the firm. The admission made by the assessee in the firm was accepted by the AO.
All the partners of the firm had distributed the sales and taken to their personal balance sheets. In the same manner, the assessee also has taken the share of his income generated out of the excess stock found during the course of survey and brought to his capital account. The assessee filed paper book with regard to two other partners, wherein, the department has completed the assessment u/s 143(1) without making separate addition on account of excess stock distributed by the partners.
During the appeal hearing, the Ld.AR submitted that the department has not taken any action and not made any addition in respect of other partners. Since the assessee has admitted the additional income on account of excess stock and the said excess stock was not reverted back to the books of accounts of the firm, we are of the view that the assessee has rightly taken the sale proceeds to their individual capital accounts.
Once, the assessee has admitted the additional income, the said income is available to the assessee in the form of cash or kind which the assessee is permitted to take as source for application of funds. Thus, the assessee explained the source for credits in the capital accounts and there is no unexplained investment required to be brought to tax. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.
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2021 (1) TMI 414
Entitled to claim deduction u/s 10 (10 C) (viii) and also under Section 89 (1) - amounts received as part of VRS - appellant admittedly took voluntary retirement in the year 2001 - claim came to be rejected on the basis of the instructions/letter issued by the Central Board of Direct Taxes on 23-04-2001 - HELD THAT:- It is not disputed before us that the said instructions/letter of the Central Board of Direct Taxes has been quashed by this Court in State Bank of India [2005 (12) TMI 64 - KERALA HIGH COURT]. Still further this Court has, in the said decision, categorically declared that amounts received by an employee under a VRS Scheme were entitled to deduction under Section 10 (10C) (viii) and relief under Section 89 (1) of the Income Tax Act, simultaneously. That being the position the entire proceedings initiated against the petitioner becomes one without jurisdiction.
Therefore, when the proceedings are found to be without jurisdiction the existence of an alternative remedy is not a bar for granting relief under Article 226 of the Constitution of India. It becomes our duty to grant relief when we are convinced that the proceedings are without jurisdiction. We accordingly set aside the judgment of the learned Single Judge. Applying the principle in Calcutta Discount Company (supra), we quash Exts.P1, P4 & P6 and hold that the appellant was entitled to claim deduction under Section 10 (10C) (viii) of the Income Tax Act and relief under Section 89 (1) (as the provision stood at the relevant point of time) in respect of amounts received by him under the voluntary retirement scheme. We direct that if any amounts have been paid by the appellant pursuant to demands which arose on account of denial of deduction under Section 10 (10C) (viii) and relief under Section 89 (1) of the Income Tax Act, such amounts shall be refunded to the appellant .
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2021 (1) TMI 413
MAT Computation - Entitlement to the reduction of the amount credited to the profit & loss account on account of reversal of provision for bad and doubtful debts under section 115JB - HELD THAT:- The Supreme Court in 'CIT VS. HCL Comnet Systems and Services Ltd.' [2008 (9) TMI 18 - SUPREME COURT] held that provisions for bad and doubtful debts cannot be added under Explanation to Section 115JB. From perusal of para 40.2 of Circular dated 03.06.2010, it is evident that clause (i) in Explanation after Section 115JB(2) has been inserted so as to provide that if any provision for diminution in the value of any asset has been debited to the profit and loss account, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. It is well settled in law that law does not contemplate or require the performance of an impossible act. See LIFE INSURANCE CORPORATION OF INDIA VERSUS COMMISSIONER OF INCOME-TAX [1996 (2) TMI 5 - SUPREME COURT]
The assessee could not have added back the provision for doubtful debts to the net profit for the purpose of computation under Section 115JB of the Act in the years prior to insertion of clause (i) as those years had already elapsed and the assessee could not have given effect to the provision, which was inserted at a later point of time. The assessee therefore, could not have added back the provision for bad and doubtful debts to the net profit. It is also pertinent to note that even if the provision for doubtful debt is added back to the net profits, the resultant book profit is still negative and even though the assessee was prevented from adding back the provision for bad and doubtful debts to the net profit due to reasons beyond its control, it has at the first opportunity demonstrated to the authorities that book profits are still negative on adding back the provision for bad and doubtful debts and therefore, no adverse inference could have been drawn against the assessee. It is also pertinent to note that the assessee had added the provision for bad and doubtful debts for Assessment Years 1998-99 to 2000-01. Decided in favour of the assessee.
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2021 (1) TMI 412
Bogus purchases - Tribunal held that there is no credible evidence to suggest that assessee has not made any purchase of material at all and even though an inference can be drawn that the parties / sellers were bogus but not the entire purchase of materials - HELD THAT:- Findings recorded by the tribunal that the Assessing Officer has not made any independent enquiry is perverse. Therefore, the substantial questions of law framed in this appeal are answered in the affirmative and in favour of the revenue. However, on the basis of meticulous appreciation of material available on record, the Assessing Officer has recorded the conclusions, which has been reproduced above, however, the tribunal has not dealt with the conclusions of the Assessing Officer and in a cryptic and cavalier manner has allowed the appeal preferred by the assessee. The tribunal has also failed to appreciate that in fact, the burden was on the assessee to establish the genuineness of the transaction.
In view of preceding analysis, the impugned order passed by the tribunal is hereby quashed and the matter is remitted to the tribunal to decide the issue afresh.
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2021 (1) TMI 405
Accrual of income in India - Addition in respect of income from investment in free zone entity in Ajman Free Zone - international transaction with Vega UAE, FZE - Alternatively the said amount would have been added to income of assessee under the provision of transfer pricing - CIT - A deleted the addition - HELD THAT:- CIT(A) has granted relief to the assessee after following the decision of own case 2006-07 [2012 (4) TMI 354 - ITAT AHMEDABAD]. DR was fair enough not to controvert this undisputed facts and findings that the issue is covered in favour of the assessee by the aforesaid decision - the same issue has been adjudicated in favour of the assessee as per finding of the ITAT elaborated in the decision of ld. CIT(A) incorporated as above in this order following the decision of the Co-ordinate Bench for the A.Y. 2006-07 in the case of the assessee itself wherein it is held that Vega UAE was an independent corporate body, therefore, we do not find any infirmity in the decision of ld. CIT(A).
Accordingly, this ground of appeal of the revenue is dismissed. Also no merit in the alternative contention of the Revenue for adding under the TP adjustment following the decision of assessee itself for A.Y. 2006-07 as held Vega ME was a full-fledged distributor to the appellant and not marketing service provider during the year. Once if is held that the AE is a distributor, the ALP has is to be determined on the basis of profit on sale of goods rather than operating margin to value added expenses. Like earlier years, this year also appellant had margin of 20.3% as against average margin of comparable companies of 12.63%. Therefore the profit margin of the appellant is much higher than the average operating margin of comparable companies. In view of this, no TP adjustment can be made this year also.
Disallowance u/s. 35D - On query the assessee explained that it has incurred expenses in connection with the issue of public subscription of shares and under the provision of section 35D an amount of equal to 1/5 of said expenditure will be allowed as business expenditure for each of the five successive previous years - HELD THAT:- After going through the findings of ld. CIT(A) we consider that Assessing Officer has incorrectly computed the disallowance u/s. 35D - Assessee has claimed public issue expenses on the basis of 5% of the cost of the project to the amount of ₹ 7,20,05,356/- as against public issue expenses of ₹ 7,55,92,199/-. The Assessing Officer has worked out eligible public expenses to the total amount of ₹ 7,00,43,777/- after reducing the ineligible expenses of ₹ 55,48,422/- out of total public issue expenses of ₹ 7,55,92,199/-. In the light of the above facts and findings, we do not find any error in the findings of the ld. CIT(A) holding that difference of ₹ 7,20,05,356/- and ₹ 7,00,43,777/- is to be considered for the purpose of disallowance as against disallowance of ₹ 55,48,421/- made by the Assessing Officer. Therefore, we consider that ld. CIT(A) is justified in restricting the disallowance to the extent of ₹ 3,92,316/- as against disallowance of ₹ 11,09,684/- made by AO.
Disallowance towards burning loss - AO noticed assessee has shown loss of 3019 MT of raw materials in the manufacturing process and materials cannot be destroyed in the process of manufacturing and material changes only the form - CIT(A) has allowed the appeal of the assessee - HELD THAT:- CIT(A) in his finding has elaborated that the burning loss claimed by the assessee in various years was varied between 2.5% to 8.19% and the same was accepted by the department and the product of the assessee is subject to excise duty and the excise department has not disputed the burning loss of the assessee in any of the year. Even in the case of Reclamation Welding Ltd a subsidiary concern of the assessee now merged with the assessee company, the Co-ordinate Bench of the ITAT on similar facts has considered that burning loss in excess of even 10% is allowable and the Assessing Officer while passing order u/s. 143(3) r.w.s. 254 of the act in the case Reclamation Weilding Ltd. accepted the burning loss in excess of 10%. The action of the Assessing Officer in restricting the burning loss @ 2% in a general manner is not justified. In the light of the above facts and circumstances, we do not find any infirmity in the decision of ld. CIT(A). Therefore, the appeal of the revenue on this issue is dismissed.
MAT addition u/s. 115JB - adjustment on account of product warranty expenses treating the same as unascertained liabilities - assessee explained that there was no provision with respect to addition of warranty expenses as well as expenses disallowable u/s. 14A - CIT(A) has deleted the impugned addition - HELD THAT:- Hon’ble Supreme Court in the case of Rotark Controls India (P) Ltd. [2009 (5) TMI 16 - SUPREME COURT] held that provision of warranty is an allowable expenditure in the year of provision. The ld. CIT(A) has also considered the reliance made by the assessee on the decision of Himalaya Machinery P. Ltd.[2010 (2) TMI 682 - GUJARAT HIGH COURT] that when actual expenditure is more than provision made by an assessee it can be concluded that provision made by assessee is capable of being estimated with reasonable certainty. In the light of the above facts, we do not find any infirmity in the decision of ld. CIT(A) holding that assessee has claimed warranty expenses on the basis of actual claim and the same is not required to be added u/s. 115JB of the Act.
Disallowance u/s. 14A - AO observed that assessee had made substantial investment out of which it had earned substantial income claimed as exempt from tax - exempt income was constituted 11% of the total profit earned by the assessee company however the assessee has not disallowed any amount according to the provision of section 14A - HELD THAT:- AO has not specifically considered the nature of expenses reflected in the annual accounts of the assessee before invoking the provision of rule 8D in computing the disallowance for earning exempt income. In the light of the above facts and finding given in the judicial pronouncement as referred supra in this order, we consider that Assessing Officer is not justified in computing the disallowance without recording specific satisfaction and examination of the detailed account of the assessee company. In view of the facts and finding and considering the nature of the investment and the main activities carried out by the assessee company, we consider that it would be appropriate to restrict the disallowance of administrative expenditure towards earning exempt income to the amount of ₹ 15 lacs. Since the assessee has itself made disallowance to the extent of ₹ 9,32,487/-, therefore, we restrict the administrative expenditure disallowance to the extent of ₹ 5,67,513/- (15,00,000- 9,32,487). Accordingly, this ground of appeal of the assessee is partly allowed.
Addition of disallowance u/s. 14A for the purpose of computation of book profit u/s. 115JB - HELD THAT:- We consider that this issue has been adjudicated by the Special Bench of the ITAT Delhi in the case of the VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI]wherein it is held that disallowance u/s. 14A is not to be considered for computing book profit u/s. 115JB of the Act. Therefore, this ground of appeal of the assessee is allowed.
Disallowance of excess claim of depreciation - AO has not allowed the claim of the assessee of higher depreciation @ 50% stating that vehicle was not registered by the RTO as commercial vehicle - CIT-A allowed claim - HELD THAT:- As perused the decision of the Co-ordinate Bench in the case of Shree Balaji Product vs. ITO [2016 (11) TMI 443 - ITAT AHMEDABAD] wherein issue decided in favour of the assessee holding that there is no such condition that vehicle would qualify as commercial vehicle when licensed to be used as public transport. Decided against revenue.
TP Adjustment - corporate guarantee - international transaction of not? - HELD THAT:- As gone through the decision of Co-ordinate Bench of the ITAT in the case of Micro Ink Ltd. [2015 (12) TMI 143 - ITAT AHMEDABAD] holding that the issue of corporate guarantee were in the nature of share holder activity and the same could not be included in the provision for services under the definition of international transaction u/s. 92B of the Act.
The Co-ordinate Bench has also stated that when an assessee extends assistance to AE which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of normal business such an assistance or accommodation does not have any bearing on its profit, income, loses or asset and therefore it is outside the ambit of international transaction u/s. 92B of the Act. It is also held that these guarantee do not have any impact on profit, loses or assets of the company. It is further held that there can be a hypothetical situation in which a guarantee default takes place and therefore the enterprise may have to pay the guarantee amount but such a situation, even if that be so is only a hypothetical situation. Respectfully following the decision of the Co-ordinate Bench as supra, this ground of appeal of the Revenue is dismissed.
Unutilized CENVAT credit - AO stated that assessee has followed exclusive method for accounting of CENVAT as against inclusive method required u/s. 145A - CIT(A) deleted the said addition and the similar addition was also deleted in the earlier assessment year in the case of the assessee for assessment year 2006-07 - HELD THAT:- The assessee has followed exclusive method of accounting. The ld. counsel has also placed reliance on the decision of Hon’ble Supreme Court in the case of CIT vs. Indo Nippon Chemical Ltd.[2003 (1) TMI 8 - SUPREME COURT] decision of Hon’ble Gujarat High Court in the case of ACIT vs. Narmada Chemmatur Petrochemical [2010 (8) TMI 263 - GUJARAT HIGH COURT] and decision of ITAT Ahmedabad in the case of the assessee itself [2017 (9) TMI 1753 - ITAT AHMEDABAD]. With the assistance of ld. authorized representatives, we have gone through the decision of Hon’ble ITAT Ahmedabad in the case of the assessee itself for assessment year 2006-07 wherein similar issue on identical fact has been decided in favour of the assessee.
Additional depreciation on electric installation - assessee has shown addition under the head electric installation claiming depreciation @ 15% and additional depreciation @ 20% - HELD THAT:- From facts and finding of ld. CIT(A) it is noticed that during the year under consideration the assessee had installed new plant and machinery and also incurred electric installation expenditure. Since the electric fitting and installation was part and parcel of the plant and machinery without which the plant and machinery cannot be operated therefore we consider that decision of ld. CIT(A) is justified in holding that electric installation was part and parcel of plant and machinery and the same cannot be considered separately. Therefore, we do not find any error in the decision of ld. CIT(A). Accordingly, this ground of appeal of the Revenue stands dismissed.
Levy of interest u/s. 234B is mandatory according to provisions of law
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2021 (1) TMI 378
MAT Computation on Disallowance u/s 14A read with rule 8D(iii) - addition to the net profit in computation of book profit for MAT purposes under Section 115JB and thereby importing the provision of Section 14A read with rule 8D into the MAT provisions on the facts and circumstances of the case - HELD THAT:- Amounts mentioned in clauses (a) to (i) of explanation to Section 115JB(2) are debited to the statement of profit and loss account, then only the provisions of Section 115JB would apply. The disallowance under Section 14A is a notional disallowance and therefore, by taking recourse to Section 14A of the Act, the amount cannot be added back to book profit under clause (f) of Section 115JB.
In Rolta India Ltd. [2011 (1) TMI 5 - SUPREME COURT] was dealing with the issue of chargeability of interest under Section 234B and 234C of the ct on failure to pay advance tax in respect of tax payable under Section 115JA/ 115JB of the Act and therefore, the aforesaid decision has no impact on the issue involved in this appeal. Similarly, in MAXOPP Investment Ltd.[2018 (3) TMI 805 - SUPREME COURT] has dealt with Section 14A of the Act and has not dealt with Section 115JB of the Act. Therefore, the aforesaid decision also does not apply to the fact situation of the case.
Substantial questions of law framed by a bench of this court are answered in favour of the assessee and against the revenue.
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2021 (1) TMI 404
Treatment of long term capital gain as short term capital gain - assessee before the Assessing Officer claimed that possession of the asset was acquired on 29.09.2006 on payment of substantial amount - Assessing Officer held that Kabja Receipt/Sadakhat is nothing but afterthought and attempt to set right the wrong claim of long term capital gain of the assessee - HELD THAT:- Substantial payment of consideration was paid through banking channel on or before 29.09.2006. Thus, this fact is strengthening the contention of the assessee that substantial payment was made before execution of Sadakhat Kabja Receipt. So far as objection of Assessing Officer that the stamp paper on which Sadakhat Kabja Receipt was executed is in the name of D. M. Singhla. No further enquiry was made by Assessing Officer either from the stamp vendor agency or from D. M. Singhla, advocate. In absence of any adverse evidence against the documentary evidences furnished by the assessee, the suspicion of Assessing Officer that Sadakhat Kabja Receipt is entry dated is not sustainable.
Considering that substantial payment of consideration was paid on 29.09.2006 and that the property was ultimately transferred by agreement dated 29.09.2006. Thus, the property was clearly held for more than thirty six months.
As the assessee clearly held the property/asset from part of Block No.153B of Sarthana, Tal. Kamrej, Dist. Surat for more than thirty six months and clearly entitled for benefits of long term capital gain.
Deduction u/s 54F - HELD THAT:- Assessing Officer after treating the capital gain as short term capital gain against long term capital gain as claimed by assessee, not examined the claim of deduction under section 54F. Thus reverse the treatment of short term capital gain as long term capital gain, therefore, the ground no.2 is restored back to the file of the Assessing Officer to examine the claim of assessee and passed the order in accordance with law after giving opportunity of hearing to assessee.
Appeal of the assessee is partly allowed.
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2021 (1) TMI 403
Disallowance of expenditure on premium paid on investment amortized - HELD THAT:- As decided in own case [2019 (11) TMI 643 - ITAT AHMEDABAD] deduction of amortized expenditure on premium on Government Securities is allowable as expenditure. Amortization expenditure on government securities held as HTM are allowable as deduction. - Decided in favour of assessee.
Non deduction of TDS u/s 194J - Disallowance of processing charges for MICR paid to State Bank of India - HELD THAT:- Once the recipient has offered the amount for taxation, no disallowance at the hand of payee. Therefore, we direct the ld.AO to verify the fact if the SBI have paid the tax on MICR charges paid by the assessee, the disallowance is made in case of assessee be deleted. In the result, ground no.2 is allowed for statistical purposes.
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2021 (1) TMI 402
Assessment of trust - denial of carry forward of deficit - carrying forward of the losses for being set off against the income of the charitable trust - CIT-A allowed claim - as per revenue there is no express provision in the income tax act allowing such claim and Ld. CIT (A) granted double benefit to assessee 1st as accumulation of income or corpus donation in previous year/current year and exemption under section 10 (34) and then as application of income under section 11 (1) (a) - HELD THAT:- The issue stands covered by order of CIT vs Ohio University Christ College [2018 (11) TMI 1055 - KARNATAKA HIGH COURT] and decision CIT vs Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT] .These decision upholds the carry forward of losses for being set off against income of charitable trust for subsequent assessment years.
We note that an identical issue has been decided by coordinate bench of this Tribunal in case of ITO vs Shraddha trust [2017 (4) TMI 1289 - ITAT BANGALORE ] wherein, it was held that set-off of excess of expenditure incurred over the income of earlier years can be adjusted against income of subsequent years and such adjustment would not be application of income in subsequent years. - Decided against revenue.
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2021 (1) TMI 401
Addition u/s 68 - AO viewed that the investment made by the partners from own sources was not acceptable since no evidence was produced for investment - As per AO loan creditors appeared and explained the sources, all of them have given stereo typed answers, hence the AO did not believe the genuineness of the source - HELD THAT:- Without having specific defect or without specifying that the partners does not have source, the finding of the AO cannot be upheld. Similarly, the AO has examined 79 unsecured creditors who appeared before the AO and given statements on oath. All of them have accepted that they have given the loans to the partners, however, as observed by the AO, all the statements were stereotyped answers, hence, the AO viewed that the creditors were tutored and the source is unbelievable. No specific defect with regard to source, credit worthiness and genuineness of the creditors was brought by the AO in his finding in the order. Thus, we find from the order of the AO that the creditors and the partners have explained the sources to the satisfaction of the AO and the Ld.CIT(A). Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A).
Capital was introduced by the partners in the firm and the AO made the addition in the hands of the firm instead of partners - In the instant case the the partners have accepted that they have brought the capital and there is no dispute in this regard. The source of the partners also was explained, thus the source of introduction of capital stands explained and there is no case for making the addition in the hands of the firm as held by Hon’ble High court of Andhra Pradesh in M/s M.Venkateswara Rao & Others(2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT).
Thus addition made by the AO in the hands of the firm in respect of capital contributed by the partners cannot be sustained in law. Hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.
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2021 (1) TMI 400
Rectification u/s 254 - assessee has claimed deduction under section 80IB(10) however the Tribunal observed that deduction under section 80IB shall be calculated on the gains derived for such undertaking and same cannot exceed the profit derived for said undertaking - Tribunal, while adjudicating the assessee`s appeal, has not considered the decision in the case of Goldmine Shares & Stock Finance Pvt. Ltd. [2008 (4) TMI 405 - ITAT AHMEDABAD] hence this is a mistake apparent in the order of the Tribunal which needs rectification.
HELD THAT:- It is abundantly clear from the decision of Prem Colonisers Pvt. Ltd [2013 (1) TMI 371 - ITAT DELHI] that failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. Review proceedings imply proceedings where a party, as of right, can apply for reconsideration of the matter, already decided upon, after a fresh hearing on the merits of the controversy between the parties, such remedy is certainly not provided by section 254(2) .
In the garb of an application for rectification, the assessee cannot be permitted to reopen and re-argue the whole matter, which is beyond the scope of the section 254(2) of the Act. We note that in assessee`s case under consideration, the Tribunal has considered the decision of ACIT vs. Goldmine Shares & Stock Finance Pvt. Ltd(supra) cited by the assessee during the hearing and also considered the entire facts of the assessee`s case, and reached on the conclusion/decision. The said conclusion, that is, the ratio of the decision of the Tribunal, cannot be reviewed or rectified by the Tribunal under section 254(2) of the Act, therefore we dismiss all the miscellaneous application filed by the assessee.
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2021 (1) TMI 399
Rectification u/s 254 - Assessee is requesting the Tribunal to adopt the fair market value at ₹ 600 per square meter, instead of ₹ 900 per square meter - HELD THAT:- We note that Tribunal has considered the paper book of the assessee. It is not necessary that Tribunal should consider in its concluding para each and every judgment cited by the assessee. It is not a case of the assessee that Tribunal has not considered the paper book of the assessee, for instance, the Tribunal has given a passing reference of the judgment of GKN Driveshafts (India) Ltd,[2002 (11) TMI 7 - SUPREME COURT] it means the Tribunal was aware about the judgment cited by the assessee in its paper book, however it is not necessary that the said judgment should be used by the Tribunal in its conclusion(ratio).
This miscellaneous application, ld Counsel has argued the various legal issues which were already considered by the Tribunal in its order dated 12.02.2019. When an argument and debate is made by ld Counsel for a particular issue then it would not a mistake apparent in the order of the Tribunal. The Power to rectify an order, under section 254(2) of the Act is extremely limited and it does not extend to correcting errors of law, or re-appreciating factual findings. The plain meaning of the word 'apparent' is that it must be something which appears to be exfacie and incapable of argument and debate. The Recalling the entire order of the Tribunal would mean passing of a fresh order. That does not appear to be the legislative intent.
Therefore, taking into account the contents of the miscellaneous application (supra), we do not find mistake apparent in the order of the Tribunal .
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2021 (1) TMI 398
Rectification of mistake u/s 254 - penalty under section 271(1)(c) confirmed by Tribunal - HELD THAT:-Tribunal has considered that since in quantum proceedings the assessee`s appeal was dismissed and additions sustained by the ld CIT(A), has been confirmed. We note that ld Counsel submitted various case laws relating to penalty under section 271(1)(c) which relates to interpretation of legal issue vis-à-vis facts.
To examine the legal interpretation and to examine the finding of the Tribunal is nothing but review of its own order, which is not permitted under the Act. Power to rectify an order, under section 254(2) of the Act is extremely limited and it does not extend to correcting errors of law, or re-appreciating factual findings. The plain meaning of the word 'apparent' is that it must be something which appears to be ex-facie and incapable of argument and debate. Under section 254(2) the Tribunal has jurisdiction only to rectify mistakes apparent from record that are brought to its notice, it cannot go into the merits of the appeal again. Therefore, we dismiss the miscellaneous application of the assessee.
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2021 (1) TMI 397
Scope of rectification u/s 254 - unaccounted investment in Bungalow - cost of construction on investment in Bungalow - Revision under section 263 on receipt of report of value - HELD THAT:- As categorically recorded that the assessee was found to be in control and possession of a palatial Bungalow in the course of search, the assessee could not corroborate the cost of construction of Bungalow as recorded in the books of account with the supporting bills. The cost of construction on investment in Bungalow was purportedly recorded in the books of account; the true value thereof could not be established by the supporting documents.
Since the assessee failed to offer satisfactory cooperation toward the outlay of cost of Bungalow, the assessing officer accordingly made his endeavour to explore the true value of Bungalow. The legality of order passed under section 263 is also examined. In para-12 the order, it was noted that assessee raised some other connected grounds for leading the action of Commissioner of income tax; however, the representative of assessee not addressed those grounds.
As noted that before passing the order learned Commissioner of Income tax, granted opportunity to the assessee, the assessee itself has not availed those opportunity, no reasons were explained as to why the assessee did not availed the opportunity, therefore, the remaining other grounds, though were not argued, were also considered and adjudicated upon.
Under the garb of present application, the applicant cannot seek appreciation or reappreciation of the facts and evidence. In our considered view, none of the contention raised in the present application required further indulgence under the scope of provision of section 254(2) of the Act.
The assessee seeking review of the order which is beyond the scope of section 254(2) of the Act. Therefore, we do not find any merit or substance in the application filed by assessee for seeking rectification in the order dated 20th April 2017. In the result miscellaneous application filed by assessee is dismissed.
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2021 (1) TMI 396
Revision u/s 263 - interest payment to the foreign banks disallowed - similar show cause notice under section 263 was issued by learned PCIT for three subsequent assessment years - interest expenses have been incurred by assessee in the form of payment of interest on borrowings from foreign banks for the purpose of making investment in share capital of subsidiary companies outside India and assessee has wrongly claimed this amount as an item of expenditure under section 57(iii) and that assessing officer has wrongly allowed such interest expenditure - HELD THAT:- When the show cause notice under section 263 on similar ground for revising the assessment order for assessment year 2009-10 has been set aside by High Court and by accepting the order of High Court similar revision proceedings initiated on similar show cause notice for three subsequent assessment years, has already been dropped by revenue, therefore the issues raised in the present appeal is squarely covered in favour of assessee.
The contention of revenue that the decision of Directorate of Income tax (L& R), CBDT or Principal CIT is not binding on Tribunal is fair that the decisions of Directorate of Income tax (L& R), CBDT or Principal CIT is not binding on Tribunal, however, those decision are binding on Principal CIT and learned DR of revenue. Once, the order of High Court on identical issues for assessment year 2009-10 is accepted by higher authorities of revenue, now it is not open for learned DR for revenue or to learned PCIT to deviate from such decisions.
Thus, in our view the contention of learned DR is misplaced. - Decided in favour of assessee.
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2021 (1) TMI 395
Characterization of income - sales tax subsidy - revenue or capital receipt - as per AO it is revenue’s receipt and hence taxable - HELD THAT:- As decided in own case [2012 (7) TMI 406 - ITAT, DELHI] [2012 (7) TMI 406 - ITAT, DELHI] such subsidy has been treated as capital receipt - purpose of granting sales tax incentive is clearly only to provide an incentive for establishment of new industries in the underdeveloped regions or to expand its existing units of the State of Maharashta. That the intention is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in the region - Appeal by the revenue is accordingly dismissed.
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2021 (1) TMI 377
Entitled to claim deduction u/s 10 (10 C) (viii) and also under Section 89 (1) - amounts received as part of VRS - appellant admittedly took voluntary retirement - whether the amounts received by the petitioner under the Voluntary Retirement Scheme can be brought to tax under the Income Tax Act? - petitioner had filed return initially but he was issued with an intimation under Section 143(1) denying the relief under Section 89(1) - There was another intimation under Section 154 declining to revise the assessment - petitioner approached the Commissioner of Income Tax under Section 264 the said relief was declined - HELD THAT:- When the case is taken up today, learned counsel for the respondents reiterated the contention that Ext.P4 order cannot be found fault since the Officer has acted only in accordance with law when he rejected the rectification application, for the reason that it was filed after the decision of the jurisdictional High Court in favour of the assessee. At the same time, it is conceded that the intimations under Sections 143 and 154 were appealable under Section 246(A) of the Income Tax Act and appropriate remedy for the petitioner was to move an appeal.
The writ petition is hence disposed of permitting the petitioner to file an appeal against the intimation dated 20.12.2001 under Section 143(1) and intimation dated 31.12.2003 under Section 154 within a period of three weeks from today. If such an appeal is filed, the same shall be treated as an appeal filed within time and concerned authority shall dispose of the same on merits.
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2021 (1) TMI 394
Mismatch of turnover as per the return of income filed by the assessee vis-à-vis the turnover appearing in Form 26AS - HELD THAT:- AR submits that M/s.Bharat Silks has filed the revised TDS return disclosing the correct turnover. If the statement of the learned AR is true, the same would be reflected in Form 26AS. In the interest of justice and equity, matter should be examined by the AO. Accordingly, the issue is restored to the files of the A.O. A.O. is directed to examine whether Form AS26 discloses the correct turnover as that of the turnover disclosed in the return of income filed by the assessee.
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2021 (1) TMI 393
Disallowance under section 14A read with Rule 8D(iii) - actual claim of administrative expenses apportioned to the exempt income - quantum of indirect / administrative expenditure disallowance u/r 8D(2)(iii) - HELD THAT:- It is evident that the assessee is primarily aggrieved by indirect expenditure disallowance u/s 14A which has been computed as per Rule 8D(2)(iii). The issue of interest disallowance made by Ld. AO u/r 8D(2)(ii) has already attained finality and the same is not under dispute and not a subject matter of present appeal.
This is the second round of litigation since the matter in the first round was remanded back to the file of Assessing Officer [AO] by coordinate bench of this Tribunal [2016 (10) TMI 1253 - ITAT MUMBAI]
We find that the assessee has made adhoc disallowance of Telephone expenses, stationery expenses and salary expenses. The salaries component is based on estimated proportionate time spent by certain employees who could be said to have devoted time towards investment activity. The disallowance is in the range of 10% to 25% of salary cost of these personnel.AO was not satisfied with the aforesaid disallowance since the assessee would have incurred expenditure under other heads as well.
Assessee has identified the composite expenditure under each head and apportioned the composite expenditure in the ratio of exempt income vis-à-vis total receipts during the year. The employee cost has separately been apportioned on the basis of time devoted by certain employees which could be said to have been engaged in investment activities. Upon perusal of the same, we find that this method of computing the disallowance was very fair, reasonable and scientific and therefore, was to be accepted. As per the provisions of Sec.14A, disallowance has to be computed having regards to the accounts of the assessee and if the said method adopted by the assessee was found to be not satisfactory, only then the computation was to be done as per Rule 8D. Therefore, we are of the considered opinion that the computations made by assessee to identify the disallowance was quite fair and reasonable.
Disallowance u/r 8D(2)(iii) is accepted at ₹ 24.50 Lacs - Since the assessee has already disallowed a sum of ₹ 16,51,524/- in its computation of income, the net disallowance would work out to be ₹ 7,98,476/-. The Ld.AO is directed to recompute assessee’s income in terms of our above order.
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2021 (1) TMI 392
Assessment u/s 153A - HELD THAT:- AO can make assessment u/s. 153A only in the case, which is pending for regular assessment u/s. 143. In the appellant's case as stated in AR's letter order under section 143(1) stood completed. Therefore, appellant's case squarely falls outside the purview of section 153A. Further, no new materials were found or unearthed during the course of search.
As relying on MR. M.A. SIDDIQUE, MR. MOHAMMED SAFWAN case [2020 (8) TMI 835 - ITAT BANGALORE] we hold that in the present case also, the Assessment Order passed by the AO under section 153A for Assessment Years 2010-11 and 2011-12 are bad in law and therefore, other grounds regarding merits of various additions in these two years are academic and no adjudication is called for about those grounds in these two years.
Estimation of income - as argued CIT(A) was not justified in upholding the estimation of profits at 4% which is not backed by any evidence of comparable cases while in the case of supari business, profits are not above 2% - AO made addition @12% of the alleged undisclosed sales turnover based on data retrieved from the impounded materials - HELD THAT:- AO has taken the profit percentage at 12% but he has held that in such a business, the normal profit percentage is 2 - 3% and he held that the ends of justice would be met if profit percentage is computed at 4% as in unaccounted transaction, the profit would be more as government taxes and levies are not paid and on this basis, he sustained the profit to the extent of 4% instead of 12%.
In the case of Mr. M.A. Siddique Vs. DCIT [2020 (8) TMI 835 - ITAT BANGALORE] the facts are similar as noted by the Tribunal we hold that in the present case also, for Assessment Year 2012-13, profit from arecanut business should be computed by applying profit rate of 2% and this will meet the ends of justice in the facts of the present case. This ground is partly allowed.
Addition of cash deposits in bank accounts - HELD THAT:- In the present case this is not the allegation of the AO that any bank account is unaccounted or that any deposit entry of such declared bank account is not accounted for in the books of assessee. Learned DR of the Revenue also could not point out any difference in facts in present case and Mr. M.A. Siddique Vs. DCIT [2020 (8) TMI 835 - ITAT BANGALORE] and hence, respectfully following this Tribunal order, we hold that in the present case also, there is valid basis of this allegation of the AO that there is unaccounted cash income simply on this basis that deposits in bank account exceeds the declared turnover and therefore, we delete this addition. Ground of the assessee's appeal allowed.
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Customs
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2021 (1) TMI 379
Exotic species - Constitutional Validity of Section 108 of the Customs Act, 1962 - vires of Article 14 and 21 of the Constitution of India - issuance of suitable Circular/Instructions to enable the citizens in domestic possession of exotic species to make declaration under the voluntary disclosure scheme without any fear of actions under the customs Act, 1962 - HELD THAT:- There are no ground to interfere with the impugned order passed by the High Court - SLP dismissed.
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Corporate Laws
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2021 (1) TMI 391
Restoration of name of the Company in the Register of Companies, maintained by the Registrar of Companies, Kochi - Section 252 of the Companies Act, 2013 - HELD THAT:- This Tribunal is of the opinion that it would be just and equitable to order restoration of the name of the Company in the Register of Companies.
The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Appellant Company, as if the name of the Company has not been struck off from the Register of Companies and take all consequential actions like change of company’s status from ‘Strike off’ to ‘Active’ (for e-filing) and to intimate the bankers about the restoration of the name of the company so as to defreeze its accounts. The Registrar of Companies, Kochi is also directed to allow for filing of the Annual Returns and Financial Statements by the Company to restore the name of the Company - Application allowed.
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Securities / SEBI
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2021 (1) TMI 390
Violation of Equity Listing Agreement clauses - whether the information relating to signing of a Binding Implementation Agreement ('Binding Agreement' for short) by an Authorized Executive Director of the appellant with the dominant Shareholders of the Bank of Rajasthan was liable to be disclosed on an immediate basis under clause 36 of the Listing Agreement and Regulation 12(2) of the PIT Regulations, 1992? - Penalty imposed of ₹ 5 lakh each on the appellant - contentions of the appellant on the inordinate delay in issuing the show cause notice and in passing the impugned order by respondent SEBI - HELD THAT:- The signed Binding Agreement in question was price sensitive and admittedly material to the performance of the appellant and needed to be disclosed on an immediate basis which was not done.
On the basis of interpretation given in the impugned order itself the finding that signing of the Binding Agreement was a material and price sensitive information and hence there was a delay of a trading day in making the disclosure to the Stock Exchanges cannot be faulted. It was a PSI is also clear from the fact that the investigation revealed insider trading by entities connected with the dominant Shareholders in the shares of Bank of Rajasthan on the day of the Binding Agreement. Submission that insider trading did not happen in the shares of the Appellant does not dilute the issue since it is the same Binding Agreement which triggered the alleged violation of insider trading. Therefore, the appeal fails on merit.
We agree with the contentions of the learned Senior Counsel for the appellant on the inordinate delay in issuing the show cause notice and in passing the impugned order by respondent SEBI.
After all the charge against the appellant is one trading day's delay in disclosure, but the delay on the part of SEBI to show cause is 2955 days from the date of the event and about 2130 days from the date of the preliminary investigation report, which is too wide a gap to be ignored. Several years' delay in show-causing and concluding proceedings in such known incidence of violation/alleged violations is a failure in effectively performing the behavior modification function of a market regulator.
Laches is a mixed question of fact and law. The facts in the instant case indicate delay in issuing the show cause notice. However, the plea of laches though not raised before the AO was specifically raised in the appeal before this Tribunal. We however, find that undue delay in initiating the proceedings by the respondent by itself causes prejudice and would ultimately attach a stigma pursuant to any adverse order that may be passed.
Thus, in the instant case, though there are laches, that by itself in the peculiar circumstances of the case, will not vitiate the proceedings but definitely the penalty amount of ₹ 10 lakh imposed on the appellant cannot be sustained and deserves to be substituted by a lesser penalty.
In the result, while upholding the impugned order on merits, we modify the penalty imposed on the appellant to only a warning which will meet the ends of justice in the given facts and circumstances of the matter. Appeal is thereby partly allowed.
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Insolvency & Bankruptcy
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2021 (1) TMI 389
Liquidation of the Corporate Debtor - Liquidation order is challenged mainly because the Resolution Professional had not laid the Resolution Plans before the CoC for voting and based on discussion and deliberations Plans were rejected - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The CoC was empowered to decide to liquidate the Corporate Debtor at any time before confirmation of the Resolution Plan, including any time before the preparation of Information Memorandum.
It also appears that when CoC noticed that both the Resolution Plans were not feasible and viable, and are being non-compliant which Section 30 of the Code read with Regulation 37 of CIRP Regulation thus. The same could not be considered the Resolution Plans per se within the Code and Regulations' meaning framed thereunder. Consequently, the CoC decided to propose the liquidation of the Corporate Debtor and on voting the same was passed by a majority of 87.30% of voting share of the Members of CoC.
Both the Appeals sans merit hence dismissed-no order as to costs.
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2021 (1) TMI 388
Seeking direction for consideration of its Resolution Plan which is 12% more than the offer of the successful Resolution Applicant - power of Adjudicating Authority to judicial scrutiny and statutory provision to interfere with the commercial wisdom of the COC.
What are the powers of the Adjudicating Authority under Section 31 of the I&B Code? - HELD THAT:- The Adjudicating Authority has a very limited power of judicial scrutiny under Section 31 of the I&B Code and the statutory provision does not permit the Adjudicating Authority to interfere with the commercial wisdom of the COC. Even for maximization of value of assets of the Corporate Debtor. In the impugned order Ld. Adjudicating Authority erroneously assumed that it is the duty of the Adjudicating Authority to satisfy itself that the price offer is reasonable and adequate. For this purpose, considered the liquidation value and fair value of the Corporate Debtor and price offered by successful Resolution Applicant and reached a conclusion that the Respondent No. 1’s offer is around 12% more than the offer of successful Resolution Applicant - Thus, Ld. Adjudicating Authority has exceeded his jurisdiction and indulge in quantitative analysis which is not permissible under Section 31 of the I&B Code.
Whether the Adjudicating Authority can direct the COC to consider the Resolution Plan of a person who was not part of CIRP? - HELD THAT:- The Respondent No. 1 is not part of CIRP. The Respondent No. 1 has filed Application directly before the Adjudicating Authority. The Adjudicating Authority in the guise of maximization of the value of assets of the Corporate Debtor directed that the Respondent No. 1’s Application and Resolution Plan be put up before the COC for consideration. There is no provision in the code or regulation which provides that while exercising the power under Section 31 of the I&B Code the Adjudicating Authority can direct the COC to consider the Resolution Plan of such person who has not been part of CIRP. Otherwise also if such procedure is adopted then the CIRP will be frustrated. Once the Resolution Plan has been opened and fundamentals and financials of the Plan and offer made therein were disclosed to all the participants including RP. Then anyone can enhance its offer before the Adjudicating Authority in the guise of maximization of realisation. Therefore, no further fresh bid or offer could have been accepted or considered as held by this Appellate Tribunal in the case of KOTAK INVESTMENT ADVISORS LIMITED VERSUS MR KRISHNA CHAMADIA (RESOLUTION PROFESSIONAL IN THE MATTER OF RICOH INDIA LIMITED) MR KALPRAJ DHARAMSHI, MS REKHA JHUNJHUNWALA [2020 (8) TMI 389 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] - Thus, Ld. Adjudicating Authority has erroneously entertained the Application and Resolution Plan of the Respondent No. 1 and directed the RP to put up the same before the COC for consideration.
Whether the conduct of the Appellant during the pendency of the CIRP can be considered in this Appeal? - HELD THAT:- The order passed by the Adjudicating Authority on 22.10.2019 has no relevance with this Appeal. Therefore, there are no force in the objection raised by Learned Counsel for the Respondent No. 1.
Thus, when the Application for approval of Resolution Plan is pending before the Adjudicating Authority at that time the Adjudicating Authority cannot entertain an Application of a person who has not participated in CIRP even when such person is ready to pay more amount in comparison to the successful Resolution Applicant. If a Resolution Plan is considered beyond the time limit then it will make a never-ending process. Thus, impugned order is not sustainable in law as well as in fact. The impugned order is hereby set aside.
The Adjudicating Authority is directed to proceed with the Application filed by the RP for approval of Resolution Plan as per law - appeal allowed.
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2021 (1) TMI 387
Recovery of Arrears by Invocation of Bank Guarantee - non-repair of transformers, which were under warrantee - additional cost incurred due to non-supply of transformers as per work order - HELD THAT:- Admittedly, out of total claim of ₹ 26,63,344/-, the Liquidator has accepted ₹ 12,13,371/- i.e. for non-repair of transformers, which were under warrantee, as the same is legitimate claim of the Applicant, subject to the approval of Adjudicating Authority - As regard the claim of ₹ 14,49,973/- is claimed against non-supply of transformers as per work order, which is already recovered by invocation of Bank Guarantee, however, the Applicant is further claiming additional cost, which is incurred by DGVCL due to non-supply of transformers as per work order.
It is also admitted by the Applicant that he has already invoked the Bank Guarantee for ₹ 27,58,498/- for non-supply of transformers, therefore, another amount i.e. ₹ 14,49,973/- is unreasonable as the same is recovered from Bank Guarantee.
The instant application is not maintainable and stands dismissed.
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2021 (1) TMI 386
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor - debt and default existed or not - HELD THAT:- It is a fact borne on record that the Corporate Debtor is unable to repay the dues to the Financial Creditor and as such on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor. Further, a perusal of the record of proceedings dated 04.02.2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02.03.2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02.03.2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learned Counsel for the Financial Creditor submitted that even in the affidavit filed by the Corporate Debtor, the outstanding debt has been admitted which is owed to the Financial Creditor.
There is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor.
It has also been consistently held by the Hon'ble Supreme Court both in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT] as well as MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT] after going through the Scheme of I&B Code, 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor as compared to the one filed under Section 9 by an Operational Creditor, in relation to a Section 7 Application where there is an existence of a 'financial debt' and when there is a default, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence of set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute in relation to the Financial debt and default in relation to it - In the present case, it is clear that there is a default on the part of the Corporate Debtor.
This Application as filed by the Applicant - Financial Creditor is required to be admitted under Section 7(5) of the I&B Code, 2016 - Application admitted - moratorium declared.
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Service Tax
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2021 (1) TMI 384
Non-payment of service tax - service rendered to foreign customers - tax not paid under the belief that it amounted to export of services - Video Tape Production Service - HELD THAT:- Issue decided in the case of PRASAD CORPORATION LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [2017 (11) TMI 435 - CESTAT CHENNAI] where it was held that we are not able to fathom how the adjudicating authority, having stated that the appellants are not engaged in the recording of any programme etc. has concluded that services or restoration, giving special effects etc. on the old films would be a "Video Tape Production".
Appeal allowed - decided in favor of appellant.
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2021 (1) TMI 383
Refund of Service Tax - rejection of refund claim holding that the appellant has not contested the service tax liability, therefore, the refund claim of service tax paid is not admissible - HELD THAT:- The fact which is admitted by both the sides that in the earlier round of litigation, this Tribunal passed the order and dropping the demand of service tax for extended period of limitation alongwith interest and the said order is final. In that circumstances, the refund claim filed consequent that order is admissible in the eyes of law.
The refund claim alongwith interest to be paid by the department within one month from the date of receipt of this order is allowed - appeal allowed - decided in favor of appellant.
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2021 (1) TMI 385
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Eligibility of the petitioner or maintainability of its declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit - quantification of the service tax dues of the petitioner for the related period was not quantified on or before 30th June, 2019 - HELD THAT:- All that would be required for being eligible under the above category is a written communication which will mean a written communication of the amount of duty payable including a letter intimating duty demand or duty liability admitted by the person concerned during inquiry, investigation or audit.
It is evident hat petitioner had given details of its outstanding service tax liability upto June, 2018 vide its intimation dated 14th September, 2018 addressed to respondent No.5. The notice issued by the office of the Commissioner, CGST, Mumbai (W) under section 87(b) of the Finance Act, 1994 on 3rd December, 2018 also indicates that petitioner had failed to discharage its service tax liability due to the government amounting to ₹ 1,07,37,503.00 for the related period which amount is slightly lesser than the amount quantified by the petitioner in its intimation dated 14th September, 2018 -
The two dates i.e. 14th September, 2018 in so far the intimation is concerned and 3rd December, 2018 in so far the notice under section 87(b) of the Finance Act, 1994 is concerned are prior to the cut off date of 30th June, 2019. Therefore, having regard to the above, it can safely be said that the respondents were not justified in rejecting the declaration of the petitioner on the ground of ineligibility.
Matter remanded back to respondent No.6 to consider the declaration of the petitioner in terms of the scheme as a valid declaration under the category of investigation, enquiry and audit and thereafter grant the consequential reliefs to the petitioner - petition allowed. by way of remand.
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Central Excise
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2021 (1) TMI 382
CENVAT Credit - applicability of N/N. 02/14-CE (N.T.) dt.20.1.2014 - denial of credit on the ground that appellant was not entitled to credit prior to the Notification No.01/10-CE dt.6.2.2010 - extended period of limitation - HELD THAT:- It is found that similarly placed assessee in DHARMPAL SATYAPAL LTD. VERSUS COMMISSIONER OF C. EX., NOIDA [2016 (9) TMI 1389 - CESTAT ALLAHABAD] was allowed the credit although against those orders, the appeals have been filed by the Revenue before the Commissioner (Appeals), in that circumstance, when the Revenue is having divergent views on the issue, the extended period of limitation is not applicable - Admittedly, in this case, the show cause notice has been issued by invoking the extended period of limitation, therefore, the denial of credit is barred by limitation.
Appeal allowed - decided in favor of appellant.
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Wealth tax
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2021 (1) TMI 381
Exigibility of offshore assets of an offshore trust to wealth tax - HELD THAT:- Private discretionary trust was established by a non-resident with the offshore assets, which is irrevocable and the beneficiaries consist of lineal descendants of Late Shri Pratap Malpani and Late Ashokvardhan Birla together with charitable organizations.
The trust deed empowers the trustees to control the offshore assets and in case of distribution, it can be on the basis of trustees discretion. Even though the trust was established in Guernsey, the provision of trust is universally accepted and consistently followed worldwide. Even Indian Trust Act, 1882 is followed consistently and it is enacted in pre-independent era.
In this case, it was given to assessee’s father and mother. After their lifetime, it devolved on the assessee. Merely because, it is exercised by the assessee, it does not make the trust to lose its identity. The trust still will continue with the new trustees. The properties attached to the trust will continue to be the properties of the trust. It is wrong to presume that the properties governed by the trustee will be considered as the properties of the individual beneficiary who exercises the appointment of trustees.
In the given case, no doubt the assessee is vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent functioning.
Admittedly these trusts and the companies managed by the trustees were not declared by the assessee in the return of wealth. It is pertinent to note that the trusts were created in 1989 and the assessee was nominated as the beneficiary by the Late Shri Pratap Malpani. It is fact on record that there are no investments, which were made by the assessee or the investments were moved from India.
There was no obligation on the part of assessee to declare the wealth /assets in the ‘ROI’ upto AY 2012-13. The declaration of details of foreign bank account and trust were mandated only from AY 2013-14.
The offshore assets held by the offshore trust, which is irrevocable discretionary trust in which assessee is one of the beneficiary, who happens to be bestowed with right to appoint /re-appoint the trustees, it does not inherit the right or control over the trust. As per the declaration of the trust, the trust remains an independent entity and taxable entity outside India. The entities controlled by the trust are independent taxable entities outside India. Therefore, assessee can only be a beneficiary and remain a beneficiary.
We are in agreement with the submission of the assessee that the narrow remit of 'assets' under section 2(ea) of the Wealth Tax Act, held to be an exhaustive definition, does not permit exigibility of offshore assets of an offshore trust to wealth tax in the hands of the Assessee. We hold that there is no room for intendment in a taxing statute.
Addition towards deposits in foreign bank accounts - AO treated the above deposits in banks belongs to the assessee by observing that the assessee is the beneficial owner - HELD THAT:- CWT(A) has clearly indicated that the addition affirmed by Ld CWT(A) belongs to the offshore companies and offshore discretionary trusts. Since the ownership of these bank accounts are with the offshore entities, the tax authorities cannot treat the same to be part of wealth of the assessee and also the definition of the assets does not include the bank balance as part of the taxable assets as per the Wealth Tax Act. Even though, in the KYC compliance, the assessee is mentioned as the beneficiary, it does not alter the fact that assessee is one of the beneficiary, and it is fact on record that assessee is not the only beneficiary. Therefore, we have to consider the actual legal ownership rather than deemed ownership which is without any evidence on record, to show that assessee has the legal ownership on bank account and other assets held by Trust.
Addition made by the AO on account of bank balance of the offshore entities as part of wealth of the assessee is farfetched and without any evidence of ownership as well as the definition of assets does not include the offshore bank account as part of assets as per the Wealth Tax Act, 1957. Accordingly, the ground raised by the assessee in this regard is allowed.
Validity of reassessment on the ground that reasons recorded were not communicated to assessee - HELD THAT:- In the instant case, admittedly, the reasons recorded for reopening the assessments were never furnished to the assessee by the AO. This is a non-curable defect and vitiates the entire re-assessment proceedings. The entire re-assessment proceedings becomes null and void for non-supply of reasons recorded to the assessee.
Assessee challenged the rejection of filing of revised return of wealth which was filed revising the return filed in response to notice issued u/s 17 of the Act - We notice that the assessee filed the return u/s 17 on 13.03.2015 which was itself belated. As per the provision of section 17(1), AO has to serve the notice requiring the assessee to file the return within such period as may be specified in the notice. We notice that the assessee had filed the return only upon serving of show cause notice u/s 35B of the Act. Therefore, it is clear from the fact that the return filed u/s 17 is belated. The assessee can revise the return which was filed u/s 15 of the Act. Since the provision is very clear that the assessee has to file the return u/s 17 within the time prescribed in the notice and if belated, the assessee cannot revise the return treating the same as filed u/s 15. Therefore, we are in agreement with the findings of Ld CWT(A). Accordingly, the ground raised by the assessee in this regard is dismissed.
AO treated the additional jewellery declared in revised return as undisclosed jewellery - After considering the fact in this case, we notice that the jewellery found during the search belongs to assessee and other family members. The assessee has disclosed the additional jewellery only after reconciliation of jewelleries of various family members and it is not something which was unearthed by AO. AO has rejected the revised return filed by the assessee and the AO cannot once again take the figures from the revised return and treat the same as undisclosed wealth. When the AO rejects the revised return then the whole return is invalid. In case AO makes addition from the revised return then it means that he recognizes the revised return. Therefore, we reject the contention of the tax authorities to treat the additional wealth declared in revised return as undisclosed wealth. The AO has to reconcile the jewellery found during the search with the return filed u/s 17 and not from the revised return. Therefore, we allow the ground raised by the assessee.
Reconciliation of jewellery found during the search and jewellery declared by the assessee in his return filed in response to notice u/s 17 - There is substantial amount of jewellery found and it belongs to the assessee as well his late parents and other family members. It is also fact that for this purpose, the assesssee had to revise the belated return filed in response to notice u/s 17. After considering the facts in the submissions and assessment records, in our considered view, assessee should be given one more opportunity to reconcile the wealth and considering the complexities in this case, we direct the AO to redo the reconciliation of the jewelleries of all the family members and ascertain the correct jewellery belonging to the assessee and complete the assessment after giving proper opportunity to the assessee. Accordingly, we remit this issue back to the file of AO with the aforesaid direction. Accordingly, the ground raised by the assessee is allowed for statistical purpose.
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Indian Laws
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2021 (1) TMI 380
Dishonor of Cheque - acquittal of the accused - rebuttal of presumption - burden to prove - it is contended that the Trial Judge has committed an error in coming to the conclusion that the burden is on the complainant to establish the case against the accused beyond doubt - HELD THAT:- It is settled law that once the cheque is admitted and there is no dispute with regard to the signature and so also notice was issued, the Court has to draw mandatory presumption under Section 139 of the N.I. Act. No doubt, in the case on hand, the accused has given reply denying the issuance of the cheque. But in the cross-examination of D.W.1, he categorically admits that he issued the cheques and the contents of Ex.P1 cheques in both the cases are also written by him. It has to be noted that P.W.1 in the cross-examination admits that he filled up the contents of Ex.P1. It is also important to note that D.W.1 categorically admits that no ordinary prudent man would sign the cheque and keep it with him. It is the case of the accused that he lost bunch of papers and cheques and there is no any explanation as to why he singed the bunch of cheques and kept with him. It is also important to note that he relied upon Ex.D1, which does not specify the cheques that he lost. It appears that after the issuance of the cheques, he gave the letter to the police, which is not the complaint. He had only requested the police to inform him, if they find the documents and the cheques, which he had lost and to hand over.
It is specifically mentioned that as on the date of borrowing the loan amount and issuing of the cheques, accused Nos.2 and 3 were in charge and responsible for the conduct of the business of the Company and they are responsible for all financial transactions of the Company. Hence, they are liable to be prosecuted under Section 138 of the N.I. Act. When a specific pleading has been made in para Nos.6 and 8 of the complaint that these accused persons were looking after the affairs of the company, the Trial Court ought not to have come to the conclusion that Section 141 of the N.I. Act has not been complied. The cheque is also issued on behalf of the company.
It is also important to note that the Trial Judge failed to take note of the 'B' report filed by the police against the complaint-Ex.D2 and the very theory of the cheques having been stolen has not been proved by leading any probable evidence before the Trial Court. The cheque - Ex.P1 also bears the common seal of the Company. When such being the case, the Trial Judge ought not to have come to the conclusion that accused has rebutted the case of the complainant relying upon the documents Ex.D1 and Ex.D2 - The very conclusion of the Trial Court that the accused has rebutted the case of the complainant is perverse as the Trial Judge has not considered the admission elicited from the mouth of D.W.1 with regard to the issuance of the cheques and the signature on the said cheques and so also that an ordinary prudent man would not sign and keep the cheque with him. He claims that not only the complaint on the cheques Ex.P1 and Ex.P2 has been filed, but also several other complaints have been filed. But there is no explanation to the effect that if he has not issued the said cheques, why he had signed and kept the bunch of cheques. Under the circumstances, it requires interference of this Court.
The impugned judgment of acquittal passed, on the file of XIII Additional Chief Metropolitan Magistrate, Bengaluru, is hereby set aside - Appeal allowed.
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