TMI Tax Updates - e-Newsletter
October 11, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Reopening of assessment u/s 147 - power to review v/s power to reassess - Only material relied upon by the assessing officer, in this case, is the material supplied by the assessees themselves along with their return - A mere change in opinion cannot be a reason to reopen. This decision holds that there is a conceptual difference between power to review and power to reassess and that the assessing officer has no power to simply review - HC
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Income Tax:
Income in the hands of HUF or members - amount in the name of joint members of HUF - The assessee declaring his income by filing a revised income and offering to tax the amount utilized for the purpose of construction cannot be permitted to contend that the amount in the joint names of two members of the HUF cannot be considered to be the income of the HUF - HC
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Income Tax:
Addition u/s 68 - unexplained cash credit in the nature of unsecured loan received from three entities - tribunal deleted the addition - All the ingredients contemplated under Section 68 have been duly satisfied on the aspect of identity of the creditors, genuineness of the transactions and their creditworthiness - revenue appeal dismissed - HC
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Income Tax:
Rectification u/s 154 - incorrect carry forward of loss - We reserve liberty to the assessee to file an application under Section 119(2)(b) of the Act before the competent authority seeking for condonation of delay in filing returns and thereafter to seek for carry forward of loss to the subsequent assessment year which were incurred during the assessment year 2004-05. If such an application is filed by the assessee within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the competent authority in accordance with law - HC
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Income Tax:
Penalty order u/s 271AAA - disclosure of additions income pursuant to search u/s 132 - In the present case the assessee has disclosed the entire source of income and manner of undisclosed income earned - assessee has also paid the taxes and the details - The assessee has admitted the undisclosed income and voluntarily declared the same under section 132 (4) of the Act on the basis of accounting records consisting of its income from all the sources. It means that the assessee has complied with all the conditions mentioned in section 271AAA(2) - No penalty - AT
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Income Tax:
Revision u/s 263 - Explanation-2 to section 263 of the Act does not give a uncontrolled & unbridled power to the revisional Commissioner to reopen a completed assessment to conduct further enquiries to verify and find out whether order passed is in fact erroneous or not. The facts explained on behalf of the assessee gives an infallible impression that the course adopted by the assessee in treating the gains as capital gains chargeable under section 45 of the Act and endorsed by the A.O. to be plausible. - AT
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Income Tax:
Penalty u/s 271D - Default u/s 269SS - cash loan(s) availed form its Managing Director in current account - day-to-day emergency expenses - AO directed to examine that no unexplained funds are introduced in the business of the assessee Company as loan from the Managing Director and if it found that the source of fund obtained from the Managing Director of the assessee Company is explained then delete the penalty levied invoking the provisions of section 271D. - AT
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Income Tax:
Nature of expenditure - The expenditure is not capital in nature, because the assessee has not acquired any technical know-how or asset, but what was received from service provider was technology support services and professional services for managing day-to-day business affairs of the assessee. Therefore, said expenditure cannot be considered as capital in nature - AT
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Income Tax:
Assessment passed u/s.153A - Presumption in case of seized documents - Assessee’s son was also covered under the search in the same premises and the document found from the said premises has been categorically owned by his son who has given his explanation, then instead of drawing any inference in his assessment u/s.153A, no presumption has been made in the case of the assessee. Thus, once this document does not belong to the assessee nor there is any mention of any name of the seized document, presumption u/s. 132(4A) and Section 292C cannot be made against the assessee. - AT
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Income Tax:
Reopening of assessment u/s 147 - Addition on different ground - the Assessing Officer has accepted the objections of the assessee, and has not assessed or reassessed the income, which was the basis of the notice. - it would not be open to the Assessing Officer to assess income under some other issue independently - AT
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Customs:
Classification of the goods described in the Bills of Entry - eNodeB BTS/Micro Cell BTS/Femto Cells BTS/Pico Cells BTS - The goods deserve to be classified under CTH 8517 61 00 as contended by Reliance Jio and not under CTH 8517 62 90 as contended by the Department. - AT
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Customs:
Re-classification of imported goods - cut and polished diamonds - While the impugned goods may not be ‘rough diamonds’ as mined and may have undergone working before its import, the reports do not conclusively establish that these were ‘cut and polished diamonds’ on which duty liability was to be fastened - Coupled with the inadequate evidence of the goods conclusively being ‘cut and polished diamonds’, this strikes at the very foundation of the proceedings initiated against the appellant and the culmination thereof. - AT
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Indian Laws:
Dishonor of Cheque - on the basis of compromise deed relief granted to accused - violation of terms of settlement agreement - In the event that the compromise deed is found to be void ab initio on account of coercion, the very basis for quashing of the first complaint is removed since the settlement agreement is deemed to have never existed and hence it had no effect on the liability subsisting under the first complaint. The appellants may then approach the competent court for reinstatement of the original complaint and the trial can proceed on that basis. - SC
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IBC:
Seeking the ‘Expression of Interest’ be considered - Approval of Resolution Plan - Section 30(6) of IBC - The legislative intent of the statute together with the fact that in the instant case the Resolution Plan was accepted by 100% of voting share in the CoC Meeting dated 21.06.2021 and having regard to the fact that the Appellant had never participated in the EoI, we are of the view that any reliefs granted in contra to the timelines would be ultra vires to the scope and objective of the Code - AT
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Central Excise:
CENVAT Credit - input services - services availed for setting up of Coal Handling Plant - The services used for setting up of the factory even after 01.04.2011 would be eligible for credit. The Ld. Commissioner has allowed credit on certain invoices assuming the same to be pure services and disallowed the credit on remaining portion by considering the same to be in the nature of civil portion. - CENVAT Credit availed by the appellant for setting up of CHP, which is used for evacuation of coal by rapid loading process, cannot be legally denied - AT
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Central Excise:
Valuation - inclusion of amortised cost of patterns - The appellants have amortised the full value of patterns supplied to them by their client. It is neither legal nor proper to ask the appellants to continue the amortisation while clearing the additional castings using the same patterns whose value has been already amortised. It is not the case of the department that the appellants have received new set of patterns whose value remains to be amortised. - AT
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VAT:
Refund of sales tax - The right to seek the refund having been crystalised on September 30, 2011 and in any case as the order rejecting refund is passed on September 20, 2012, it was expected that the petitioner approaches this Court as early as possible and without undue delay. - if there has been unreasonable delay the court ought not ordinarily to lend its aid to a party by the extraordinary remedy of mandamus. - petition dismissed - HC
Articles
Notifications
GST - States-
54/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to exempt SGST on specified medicines used in COVID-19, upto 31st December, 2021 under the HGST Act, 2017
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53/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to amend notification no.111/ST-2, dated 18.10.2017 under the HGST Act, 2017
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52/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to amend notification no.38/ST-2, dated 30.06.2017 under the HGST Act, 2017
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51/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to amend notification no.36/ST-2, dated 30.06.2017 under the HGST Act, 2017
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50/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to amend notification no.35/ST-2, dated 30.06.2017 under the HGST Act, 2017
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49/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to amend notification no.47/ST-2, dated 30.06.2017 under the HGST Act, 2017
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48/GST-2 - dated
1-10-2021
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Haryana SGST
Notification to amend notification no.46/ST-2, dated 30.06.2017 under the HGST Act, 2017
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45/GST-2 - dated
21-9-2021
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Haryana SGST
Haryana Goods and Services Tax (Seventh Amendment) Rules, 2021.
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S. R. O. No. 727/2021 - dated
1-10-2021
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Kerala SGST
Amendment in Notification G.O.(P) No.72/2017/TAXES dated the 30th June, 2017
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36/2021- State Tax - dated
7-10-2021
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Maharashtra SGST
Seeks to amend Notification No. 03/2021-State Tax dated the 15th March, 2021
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (10) TMI 430
Transitional Input Tax Credit - seeking direction to respondent to accept the manually filed TRAN-1 - HELD THAT:- These cases are listed today under caption 'for dismissal'.
Today also when the cases are taken up for hearing, there is no representation for the petitioners. Hence, these writ petitions are dismissed for want of prosecution.
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2021 (10) TMI 429
Seizure of goods - Levy of penalty - goods being transported without e-way bill under U.P. GST Act, 2017 read with Rules framed thereunder - HELD THAT:- Division Bench of this Court in M/s Godrej and Boyce Manufacturing Co. Ltd vs State of U.P. and others [2018 (9) TMI 1261 - ALLAHABAD HIGH COURT], it has been submitted, during the period 01.02.2018 to 31.03.2018 the requirement of e-way bill under U.P. GST Act read with Rules framed thereunder was unenforceable. Therefore, neither seizure of goods was justified nor can the penalty be sustained.
Petition allowed.
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2021 (10) TMI 428
Seeking grant of Bail - offences compoundable and are triable by Magistrate or not - offences punishable under Sections 132(1)(C) (F)(h) and (1) of CGST Act, 2017 - HELD THAT:- Having regard to the fact that conclusion of the proceedings is likely to take some time and without expressing any opinion on the merits of the case, this Court deems it just and proper to grant bail to the accused petitioner under Section 439 Cr.P.C.
It is directed that petitioner Shailesh Chandra S/o Shri Om Prakash Chandra shall be released on bail - Bail application allowed.
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Income Tax
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2021 (10) TMI 419
Disallowance u/s 14A read with Rule 8D (2)(iii) on account of disallowance of expenditure incurred to earn tax exempt income - Suo moto disallowance made by assessee - HELD THAT:- Window for disallowance indicated in section 14A is only to the extent of disallowing the expenditure incurred by the assessee in relation to the tax-exempt income. This proportion or portion on the tax exempt income surely cannot swallow the entire amount of tax-exempt income. In the case, in hand, no disallowance is attracted on account of interest expenditure. The only disallowance attracted is in relation to the administrative expenses.
The assessee has suo-moto disallowed the sufficient on account of fees paid to the portfolio manager - we do not find justification on the part of CIT(A) in confirming the disallowance made by the AO by invoking the formula under Rule-8D(2)(iii), merely on assumption basis without recording the satisfaction as to how the suo-moto disallowance made by the assessee was not co-relating to the accounts of the assessee vis-à-vis other circumstances - the impugned order of the Ld. CIT(A) is set-aside and the disallowance u/s 14A is restricted to that has been suo-moto made by the assessee. Appeal of the assessee stands allowed.
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2021 (10) TMI 418
Reopening of assessment u/s 147 - reassessment proceedings were initiated on the basis of the explanation inserted to section 80 IA (4) - HELD THAT:- Admittedly, the reasons recorded for initiating the reassessment proceedings are not available on record. In this regard, the learned DR was also directed to produce the reasons recorded and for this purpose he was provided enough time at the time of hearing after treating the matter as part heard. However, the learned DR failed to provide the reasons recorded by the AO for initiating the reassessment proceedings.
The reopening of the reassessment under section 147 of the Act was challenged by the assessee on the reasoning that explanation inserted to section 80IA(4) of the Act with retrospective effect. Likewise, the objections were disposed of based on the explanation inserted under section 80IA (4) for of the year under consideration.
As the proceedings were also initiated under section 147 of the Act in the own case of the assessee for the assessment years 2005-06 and 2006-07 vide notice dated 15th March 2010 under section 148 of the Act. In the present case the notice under section 148 was also issued on the same date i.e. 15th March 2010. In the assessment year 2005-06 and 2006-07 the reassessment proceedings were held to be invalid. Therefore, the issue on technical ground was decided in favour of the assessee. The facts of the present case seems to be similar to the assessment year 2005-06 and 2006-07 as the notice under section 148 was issued on the same date. Accordingly, we can draw an inference that the proceedings were initiated merely on the change of opinion.
Thus proceedings in the year under consideration were initiated on account of the insertion of explanation to section 80 IA(4) of the Act which is nothing but change of opinion - Decided in favour of assessee,
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2021 (10) TMI 417
Proportionate deduction u/s.80IB(10) in respect of project of “Sapphire Park” - as in respect of some of the units, the built up area was more than 1500 sq. ft. - HELD THAT:- As agreed by the Ld. CIT(Appeal) that in respect of some units, the built up area exceeds 1500 square feet on account of terrace garden as discussed in his findings. However, therefore, the Assessing Officer was directed to allow proportionate deduction u/s.80IB (10) of the Act in respect of “Sapphire Park” project after excluding the units where built up area exceeds 1500 square feet on account of terrace garden. Therefore, it is in conformity with the decision of DEVASHRI NIRMAN LLP., DEVASHRI NIRMAN LTD. [2020 (12) TMI 59 - BOMBAY HIGH COURT] wherein such proportionate deduction u/s.80IB(10) of the Act would be allowed to those units which are having built up area less than or equal to 1500 square feet. It is also the settled position of law that principle of proportionality shall not be excluded while determining allowability of deduction u/s.80IB (10) (c) of the Act. - Decided against revenue.
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2021 (10) TMI 416
Characterization of income - income on such sale of carbon credit - revenue or capital receipt - HELD THAT:- As decided in M/s. Dodson Lindblom Hydro Power Pvt. Ltd. [2019 (4) TMI 1034 - BOMBAY HIGH COURT] the said carbon credits is outside the scope of the chargeability of tax as the same constitutes “capital receipts".
Additional depreciation u/s 32 - Addition of 50% of the claim of additional depreciation made by the assessee firm in respect of the plant and machinery acquired and installed by it after 30th September, 2012 - Department‟s view was that this additional depreciation could be claimed only in the year of purchase and the same was not available in the subsequent year - HELD THAT:- Hon‟ble Karnataka High Court in the case of Rittal India Pvt. Ltd. [2016 (1) TMI 81 - KARNATAKA HIGH COURT] had given the right to the assessee to claim the remaining unclaimed 50% depreciation in the subsequent assessment year and at that time the proviso to section 32 was also not there but right now with the insertion of such proviso, this right has been statutorily recognized. That as regards, whether such proviso would apply to past periods or not, the judgment of the Hon‟ble Madras High Court (supra.) which is still operational and it has been held that the said proviso was only clarificatory in nature and would thus apply to pending cases covering past periods also. Thus, Grounds raised in appeal by the assessee are allowed.
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2021 (10) TMI 415
Denying the registration u/s 12A vide order u/s 12AA(1)(b)(ii) - assessee is a university imparting education within its territorial jurisdiction and it is totally funded by the Government - HELD THAT:- We find that the assessee is also state funded university as in the case of Jawaharlal Nehru Technological University (JNTU) [2021 (4) TMI 1199 - ITAT HYDERABAD] and in the case of JNTU, the registration was denied to the assessee therein on similar points and after considering the issue in detail and also the fact that the JNTU was granted registration from the next year i.e., 2020-21, the issue was set aside to the file of CIT(E) for re-consideration.
We deem it fit and proper to remand the issue to the file of the CIT(E) for reconsideration of the issue and in accordance with the directions of the Tribunal in the case of JNTU - Assessee’s appeal is treated as allowed for statistical purposes.
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2021 (10) TMI 427
Reopening of assessment u/s 147 - power to review v/s power to reassess - reasons recorded by the assessment officer are based on the alleged receipt of sale consideration by the assessees in terms of the sale deed - HELD THAT:- There was no omission on the part of the assessees to disclose fully or truly all the material facts necessary for the assessment Year 2010-11. There is no dispute that the assessees had purchased the property in question for ₹ 1.36 crores or thereabouts in the year 2006. Even in terms of the reasons furnished by the assessing officer the indexed cost for the Assessment Year 2010-11 came to ₹ 1.66 crores or thereabouts. From the material relied upon by the respondents, only an amount of ₹ 1 crore was actually received by the assessees during the Assessment Year 2010-11. Thus, for the said assessment year, there was no question of any capital gains and consequently, no question of any income escaping assessment.
Only material relied upon by the assessing officer, in this case, is the material supplied by the assessees themselves along with their return for the Assessment Year 2015- 16. There is nothing in this material that could constitute a ground for a reason to believe that there was a failure to disclose a material fact and further, that an income had escaped assessment for the Assessment Year 2010-11. The reasons stated by the assessing officer speak about the receipt of ₹ 3 crores by the assessees during the Assessment Year 2010-11. However, based on the very material relied upon by the assessing officer, this contention was virtually given up and a new reason about “accrual” was sought to be put forward.
The decision in Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] assists the case of the petitioners because this decision holds that the assessing officer has the power to reopen the assessment provided there is tangible material to conclude that there is escapement of income from assessment and further, the reasons must have a live link with the formation of the belief. A mere change in opinion cannot be a reason to reopen. This decision holds that there is a conceptual difference between power to review and power to reassess and that the assessing officer has no power to simply review. - Decided in favour of assessee.
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2021 (10) TMI 414
Deduction u/s.80IA(4)(iv) - As per revenue allowing deduction u/s.80IA(4)(iv) on gross total income by the CIT(Appeal), which in assessee's case includes income from salary, Income from house property and income from other sources whereas as per Section 80IA(1) the said deduction is envisaged out of profit and gains from the eligible business only - HELD THAT:- As decided in CIT Vs. Tridoss Laboratories Ltd. [2010 (2) TMI 486 - BOMBAY HIGH COURT] wherein it has been held that “in computing the total income of the assessee, there is no basis in the provisions of section 80IA to restrict the expression to total income derived from an eligible business. Having regard to the provisions noted above, the submission urged on behalf of the revenue could not accepted.”
CIT(Appeal) has also referred the decision of V M Salgaocar & Brothers (P) Ltd [2015 (4) TMI 1108 - BOMBAY HIGH COURT] refereeing to question of deduction u/s.80HHC which is pari material with Section 80IA held that once income had been determined by applying the methodology as provided in Section 80HHC (3), the question of restricting the deduction in terms of Section 80AB would not arise. That Section 80AB(2) the restriction of deduction is on gross total income and in such circumstances, restriction on the total profit of business was not at all justified. This decision of the Hon‟ble Bombay High Court squarely covers the issue in favour of the assessee and in view thereof, the Ld. CIT(Appeal) has provided relief to the assessee. - Decided in favour of assessee.
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2021 (10) TMI 413
Exemption u/s 11 - Disallowance of depreciation claimed by the assessee stating that there is a double deduction - HELD THAT:- We find that this issue is covered squarely in favour of the assessee by the decision of Rajasthan and Gujarat the charitable foundation [2017 (12) TMI 1067 - SUPREME COURT].
Applicability of the provisions of Section 11 and 12 of the income tax act to the assessee trust - As relying on ADARSH PUBLIC SCHOOL VERSUS JOINT CIT, RANGE-1, NOIDA [2018 (2) TMI 1692 - ITAT DELHI] there is no allegation that the surplus and by the assessee has not been utilized by the assessee for the purpose of charitable activities. Therefore, it remains an uncontroverted fact that the surplus is ploughed back for educational purposes and the assessee exists solely for educational purposes and not for the purposes of the profit. Assessee is entitled to deduction u/s 11 and Section 12 of the income tax act as assessee exists for educational purposes covered as charitable purposes under the provisions of Section 2 (15).
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2021 (10) TMI 412
Rectification of mistake u/s 254 - non maintainability of appeal on low tax effect - apparent error in the order of the ITAT vide which the Tribunal has disposed a large number of cases by a combined order dated 14.8.2019 due to low tax effect relying on the CBDT Circular No.17 of 2019 dated 8.8.2019 - HELD THAT:- In the present case, the subsequent judgment of Hon’ble jurisdictional High Court in the case of Anand Natwarlal Sharda [2021 (6) TMI 1065 - GUJARAT HIGH COURT] laid down that on the day when the Tribunal has decided the appeal, circular no.23, guidance note etc. were not in the picture. In that case, even the appeals were decided on 14.8.2019 and the impugned circular came on 6.9.2019. In other words, appeals were decided by the Tribunal including that of the present assessee on 14.8.2019 i.e. prior to the circular issued by the Board on 6.9.2019, and 16.9.2019. Therefore, the judgment of Hon’ble High Court is fully applicable on the facts of the present case and accordingly, MA of the Revenue has no merit. It is dismissed.
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2021 (10) TMI 426
Revision u/s 264 - As argued impugned order is an ex parte order and is violative of principle of natural justice - HELD THAT:- A perusal of the impugned order dated 18.03.2021 reveals that the respondent no.1, while passing it, has not recorded any speaking reason for dismissing the revision filed by the petitioner and the impugned order dated 18.03.2021 has only been passed on the ground that the assessee/petitioner has failed to submit any reply in response to the office letter re-fixing the case.
It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding the issue, the Court is bound to give reasons for its conclusion and it is the duty and obligation on the part of the Court to record reasons while disposing of the case.
As particularly the fact that the impugned order dated 18.03.2021 is a non-speaking order, the order dated 18.03.2021 passed by the respondent no.1 is hereby set-aside. The petitioner is directed to file reply in the revision filed under Section 264 of the Income Tax Act within two weeks from today.
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2021 (10) TMI 411
Reopening of assessment u/s 147 - Reopening based on rectification notice - Whether A.O had wrongly assumed jurisdiction u/s 147 of the Act, for the reason, that he had reopened his concluded assessment on the very same reason on which notice u/s 154 of the Act was issued to him? - HELD THAT:- In the present case, it is a matter of fact borne from the record that the notice issued u/s 154 by the A.O had neither been dropped nor culminated in an order till date. Accordingly, the support drawn by the ld. A.R from the aforesaid proposition that having issued a notice u/s 154 which thereafter had been dropped/vacated by the A.O, the case of the assessee on the very same basis cannot be reopened u/s 147 of the Act would be of no avail in the backdrop of the facts involved in the case before us.
Unlike the case of the assessee before us in the case of Berger Paints India Ltd. [2009 (8) TMI 557 - CALCUTTA HIGH COURT] the rectification proceedings that were initiated by the A.O had thereafter been dropped. On a similar footing, in the case of M/s Nawany Corp (I) Ltd. [2012 (5) TMI 202 - ITAT MUMBAI] the proceedings u/s 154 are stated to have been concluded after the assessee had submitted its reply. Backed by the aforesaid facts, not being able to persuade ourselves to subscribe to the contention of the ld. A.R that the A.O having issued a notice u/s 154 of the Act could not have on the same basis validly reopened its case u/s 147 of the Act, we, thus, dismiss the same. The Grounds of appeal Nos. 2 & 3 are dismissed.
Disallowance u/s 14A r.w.r. 8D - non recording his satisfaction that as to why the claim of the assessee that no part of the expenses could be attributed to earning of the exempt income - HELD THAT:- A.O in the case before us had dislodged the aforesaid claim of the assessee that no part of the expenditure was attributable to earning of its exempt income without recording his satisfaction as to why the same was not to be accepted having regard to the accounts of the assessee which were placed before him - we are of a strong conviction that the A.O had wrongly assumed jurisdiction and worked out the disallowance in the hands of the assessee u/s 14A - We, thus, in terms of our aforesaid observations respectfully follow the judgments of Godrej & Boyce Manufacturing Company Ltd. [2017 (5) TMI 403 - SUPREME COURT] and Maxopp Investment Ltd.[2018 (3) TMI 805 - SUPREME COURT] and vacate the disallowance made by the A.O under Sec.14A of the Act. -Decided in favour of assessee.
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2021 (10) TMI 410
Addition on account of ‘income from house property’ - disallowance of the property tax and interest expenses as per provisions of section 24 - HELD THAT:- Once the assessee has paid the property tax of USD 2151.71 through banking channel which is reflected as property tax in the bank statement, therefore, merely because no evidence or proof from the concerned property tax authority for the said payment was obtained should not have been a ground for denying the same.
Interest on loan - on perusal of the paper book shows that the assessee has filed the mortgage interest statement in the paper book which gives the details of mortgage interest, mortgage principle, etc. Therefore, CIT(A) is not justified in denying the benefit of interest on bank loan to the assessee - We set aside the order of the CIT(A) and direct the AO to allow the claim of property tax and bank interest from the rental income of USD 16800. The ground of appeal No.2 raised by the assessee is accordingly allowed.
Addition u/s 68 - treating the loan taken from relatives as unexplained cash credit - HELD THAT:- Assessee is a resident and had stated to have received the loan from 2 persons namely Mr Naresh Aggarwal and Gaurav Aggarwal which are credited in the NRI account and there is no dispute to the above fact - assessee had furnished the copy of the confirmation of loan and also the passport of Shri Naresh Aggarwal as evidence. The assessee had also filed the copy of bank account of Naresh Aggarwal, affidavit of Shri Naresh Aggarwal, copy of bank account of Shri Gaurav Aggarwal giving loan of USD 5000 to Nitin Gupta, etc.- Since the assessee, in the instant case, has filed the bank statement of Shri Naresh Aggarwal along with his affidavit and confirmation along with his bank account substantiating the loan of 10000 USD, therefore, hold that the ld.CIT(A) was not justified in sustaining the addition.
Amount of USD 5000 taken from one Shri Gaurav Aggarwal although the assessee had filed the confirmation of Shri Gaurav Aggarwal along with his passport and affidavit, etc., however, no evidence to prove the credit worthiness of the said loan creditor was produced. The bank statement of Shri Gaurav Aggarwal was not produced. Therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one opportunity to the assessee to substantiate the loanreceived from Shri Gaurav Aggarwal. - Ground partly allowed for statistical purposes.
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2021 (10) TMI 409
Deduction u/s 80P(2)(a)(i) - HELD THAT:- CBDT vide its Circular No. 37/2016, dated 02.11.2016, we have no hesitation in observing that as the disallowance of the provision for expenses and the assessee's claim for donation had enhanced the resultant business income of the assessee, therefore, the consequential claim for deduction u/s 80P(2)(a)(i) would also have to be worked out on such enhanced income. We, thus, in terms of our aforesaid observations allow the aforesaid claim of the assessee and direct the A.O to recompute the assessee's claim for deduction u/s 80P(2)(a)(i) on the enhanced income.
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2021 (10) TMI 408
Deduction u/s 80P(2)(a)(i) - HELD THAT:- The entitlement of the assessee for claim of deduction u/s 80P(2)(a)(i) remains the same as were there before the Tribunal in the aforesaid case of the assessee for A.Y. 2010-11 [2015 (4) TMI 1055 - ITAT MUMBAI] therefore, finding no reason much the less any justification for taking a different view we respectfully follow the same. Accordingly, we herein finding no infirmity in the view taken by the CIT(A) uphold his order. The Grounds of appeal Nos. (i) and (ii) are dismissed.
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2021 (10) TMI 407
Rejection of books of accounts - estimation of profits - Assessment of gross profits of the assessee at 2% of gross sales - HELD THAT:- As in this case, the assessee has shown very less profit as against huge turnover. Notices were sent to the parties to verify the purchases/sales. Notices were also issued to the sundry debtors and creditors. None of the sundry debtors confirmed the transactions. Even, most of the notices were received with report of the postal authority “no such firm”. Even one of the party namely Vandana International Export (Jaipur) has categorically denied any kind of financial or trade transaction with the assessee. Under such circumstances, in our view, the action of the Assessing Officer in rejecting the books of accounts was justified.
As the assessee did not provide any comparative data in respect of wholesaler of the Tobacco products. Considering the profit rate of the manufacturers, the Assessing Officer estimated the gross profit rate of 2% on the gross sales declared. CIT(A) has also elaborately discussed and justified the action of the Assessing Officer for which we do not find any reason to interfere with. At this stage, the Ld. Counsel for the assessee has submitted that the assessee may be given the deduction of the statutory taxes paid /CST. No justification in this respect as while estimating the gross profits, all the expenditures including the taxes paid have been taken into consideration. There is no merit in the appeal of the assessee.
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2021 (10) TMI 406
Penalty order u/s 271AAA - disclosure of additions income pursuant to search u/s 132 - whether the assessee has complied with all the three conditions as prescribed under the provision of section 271AAA? - HELD THAT:- The three conditions mentioned in the provision of section 271AAA are (i) that the assessee should admit the undisclosed income in a statement made u/s 132(4) of the Act. (ii) The assessee specify the manner in which such income has been derived and substantiate the manner in which the undisclosed income was derived. (iii) The assessee should pay the taxes together with interest in respect of undisclosed income.
In the present case the assessee has disclosed the entire source of income and manner of undisclosed income earned - assessee has also paid the taxes and the details - The assessee has admitted the undisclosed income and voluntarily declared the same under section 132 (4) of the Act on the basis of accounting records consisting of its income from all the sources. It means that the assessee has complied with all the conditions mentioned in section 271AAA(2) of the Act and once the assessee has complied with all the conditions the assessee should not be called upon to pay a penalty under this section.
As assessee has complied with the conditions of section 271AAA(2) of the Act, the assessee is not liable for penalty under this provision. Appeal of the assessee is allowed.
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2021 (10) TMI 405
Revision u/s 263 - nature of income earned - characterisation of the income as 'capital gain' - assessee in treating the gains as capital gains chargeable u/s 45 - HELD THAT:- The law is well settled that where the A.O. has taken a view which is plausible in law, cannot be displaced and substituted by the subjective view of a superior authority. In the instant case, the PCIT has not shown as to how the A.O. has gone wrong while admitting the nature of income declared by the assessee. There is nothing on record to show that the A.O. acted arbitrarily in exercise of quasi judicial powers. A.O. had merely adopted one of the courses permissible in law and backed by a long line of judicial precedents holding such income to be capital gains. In contrast, the PCIT has adopted erroneous measurement of land giving the impression of large parcel of land which is not true.
The basic features of a capital asset were also overlooked. Secondly, it was open for the PCIT to examine the facts himself and come to a conclusion of un-debatable nature. We fail to understand what kind of enquiries is needed in such cases when the relevant facts are available on record both before the A.O. as well as the PCIT and only warrants a relook at the same.
Explanation-2 to section 263 of the Act does not give a uncontrolled & unbridled power to the revisional Commissioner to reopen a completed assessment to conduct further enquiries to verify and find out whether order passed is in fact erroneous or not. The facts explained on behalf of the assessee gives an infallible impression that the course adopted by the assessee in treating the gains as capital gains chargeable under section 45 of the Act and endorsed by the A.O. to be plausible.
The revisional power exercised in the facts of the case is plainly without authority of law. Consequently, the revisional order passed under section 263 is liable to be quashed and set aside. - Decided in favour of assessee.
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2021 (10) TMI 404
Revision u/s 263 - assessment order passed by AO u/s 153A/143(3) sought to be set aside for reframing the assessment in terms of supervisory jurisdiction - Bogus purchases - HELD THAT:- PCIT himself has not alleged a lack of inquiry in the matter; but has averred that adequate inquires were not carried out in the matter. We do not understand the purport of such observations.
PCIT has not spelt out as to what inquiry was lacking in the action of the AO. PCIT himself has not done any minimal inquiry to ascertain the alleged error of inadequacy in inquiries. It appears that the PCIT has merely directed the AO to make further inquiries to find out whether some error has been committed or not. In our view, before giving such general directions, it was incumbent upon the PCIT to show that the view taken by the AO is wholly unsustainable in law - revisional powers cannot be exercised in a perfunctory manner for directing some further and fuller inquiry made to merely find out if the earlier view taken is erroneous or not.
In the instant case, an inquiry has been carried out and defense of the assessee was affirmed by the Assessing Officer as well as the JCIT. We thus see no scope for review for the purposes of making some unspelt "inadequate inquiry". Thus, the ingredients for issuing show-cause notice under Section 263 of the Act are found absent - revisional order passed under Section 263 of the Act is bad in law - Decided in favour of assessee.
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2021 (10) TMI 403
TP adjustment - ALP Adjustment including Duty Entitlement Pass Book (DEPB) and Focus Products Scheme (FPS) on export of Ferro Alloys - HELD THAT:- Inclusion of assessee's Duty Entitlement Pass Book (DEPB) and Focus Products Scheme (FPS) on export of Ferro Alloys; as an adjustment in computing Arm's Length Price (ALP) adjustment as per Rule 10B(1)(a)(2) and (3) is found to be no more res integra as Revenue's appeal [2021 (7) TMI 948 - ITAT HYDERABAD] as held that assessee's argument seeking to include DEPB as an adjustment for "ALP" computation because it is in the nature of an operating income, ought not be accepted as it tends to have an overriding effect on application of chapter-X of the Act as per stricter interpretation rule.We thus adopt judicial consistency to adopt the above extracted reasoning mutatis mutandis to affirm the CIT(A)'s action affirming the impugned ALP adjustment in assessee's appeal.
Delayed employees contribution to ESI/PF - amount had been deposited beyond the due date prescribed under corresponding statute but before that of filing return u/s. 139(1) - HELD THAT:- Amount had been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. We notice in this factual backdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the foregoing legislative amendments have proposed employers contributions; disallowances u/s. 43B as against employee u/s. 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, we hold that the impugned disallowance is not sustainable - As relying on GUJARAT STATE ROAD TRANSPORT CORPORATION [2014 (1) TMI 502 - GUJARAT HIGH COURT] and M/S MERCHEM LIMITED [2015 (9) TMI 560 - KERALA HIGH COURT] the impugned ESI/PF disallowance is directed to be deleted
Transfer Pricing Adjustment - TPO making corporate guarantee adjustment @ 2% commission as against assessee's behest @ 0.875% - HELD THAT:- Tribunal's order has already upheld the CIT(A)'s action deleting similar ALP adjustment on assessee's corporate guarantee declared @ 0.875% in A.Y. 2013-14[2021 (7) TMI 948 - ITAT HYDERABAD] - No distinction on law and facts has emerged during the course of hearing. We thus affirm the CIT(A)'s lower appellate action under challenge deleting the impugned corporate guarantee adjustment. Revenue's appeal rejected.
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2021 (10) TMI 402
Penalty u/s 271D - Default u/s 269SS - cash loan(s) availed form its Managing Director in current account - HELD THAT:- As decided in own case [2021 (5) TMI 176 - ITAT HYDERABAD] the assessee company has received cash from its Managing Director for meeting its day-to-day emergency expenses. In this situation, the decision relied by the assessee will be relevant and the assessee Company shall be entitled to relief as per the provisions of section 273B - the assessee was not able to explain the genuineness of the source of funds obtained from its Managing Director - we hereby remit the matter back to the file of the Ld. AO to examine that no unexplained funds are introduced in the business of the assessee Company as loan from the Managing Director and if it found that the source of fund obtained from the Managing Director of the assessee Company is explained then delete the penalty levied invoking the provisions of section 271D. We thus adopt the above detailed discussion mutatis mutandis and restore the instant issue as well back to the Assessing Officer in the very terms - Assessee appeal allowed for statistical purposes.
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2021 (10) TMI 401
Validity of assessment u/s 153C - Non recording of valid satisfaction - HELD THAT:- As statutory provision i.e. sec. 153C [as on the date of search on 11.3.2010] as well as the satisfaction note dated 11.11.2011 and the corresponding material; found or seized during the course of search is "belongs or belong to a person other than the person referred to in sec.153A", whereas the Assessing Officer's satisfaction note herein had only recorded that the same "relates to" Sri Goruganti Damodar Rao" (the assessee). We make it clear that the legislative amendment vide the Finance Act, 2015 w.e.f. 1.6.2000 only stipulate that the impugned statutory provision comes into play even in case the specified material; found or seized "during the search" also "pertain or pertains to" or relates to". The Assessing Officer hereinabove clearly fell into error in not arriving at the impugned satisfaction in the prescribed manner therefore.
CIT-DR's next vehement contention during the course of hearing is that all the foregoing statutory expressions carry one and the same implication, although the grammatical expression employed herein may vary from case to case not acceptable as in light of judgment in CWT vs. B. Chatterjee [1976 (4) TMI 1 - SUPREME COURT] and Late Nawab Sir Mir Osman Ali Khan [1986 (10) TMI 2 - SUPREME COURT] that the clinching expression "belongs" carries the rightful sense of ownership. We therefore adopt stricter interpretation as per the Commissioner of Customs vs. Dilip Kumar & Co [2018 (7) TMI 1826 - SUPREME COURT] and hold that as the Assessing Officer's impugned assessment is not based on a valid satisfaction note and therefore, the CIT(A)'s order quashing the same deserves to be upheld. - Decided against revenue.
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2021 (10) TMI 400
Nature of expenditure - revenue or capital expenditure - professional and legal charges to various law firms for incorporation of company, purchase of share transfer stamps for acquisition of company professional fees paid for drafting investment agreement, structuring various documents, due diligence etc. for investment agreement, sharing of employee cost and provision for equity expenses - HELD THAT:- As all these expenses were incurred after commencement of business for expanding business operations of the assessee - expenses did not result in acquisition of any asset nor did they give any enduring benefit to the assessee - expenses incurred relating to carrying on of business more effectively in the ordinary course of business even if, expenses are incurred which are related to capital account cannot be considered as capital in nature, more particularly, when the assessee has incurred said expenditure after commencement of business in the ordinary course of its business activities. This legal position is clarified by CBDT vide Circular No.10 dated 18.06.1964, where it has been clarified that professional charges incurred for running business more effectively cannot be treated as capital in nature.
As regards website development expenses, we find that in the case of CIT Vs. India Visit Com Pvt. ltd. [2008 (9) TMI 8 - DELHI HIGH COURT] has held that website development expenses is revenue in nature.
In this case, if you go through nature of expenses incurred by the assessee including professional fees paid for incorporation of company, purchase of share transfer stamps, consultation fees paid for drafting investment agreement, professional fees paid for structuring various documents and due diligence for investment agreement are definitely in the nature of revenue expenses, which cannot be at any stretch of imagination be considered as capital in nature. The other expenses incurred by the assessee including website expenses and sharing of employee cost are incurred in ordinary course of business and thus, same are in the nature of revenue expenditure - we reverse finding of learned CIT(A) and direct the Assessing Officer to allow deduction claimed towards legal and professional charges.- Decided in favour of assessee.
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2021 (10) TMI 399
Nature of expenditure - expenditure incurred under the head 'technology services and research development fee' paid - Revenue or capital expenditure - HELD THAT:- In this case, expenditure incurred by the assessee towards payment made to group companies for technology and research & development fees is supported by an agreement between the parties, which clearly lays down nature of services and technology availed by the assessee. The assessee had also made payment by cheque after deducting applicable TDS as per law - there is no doubt about genuineness of payment and rendering of services by service provider - expenditure incurred by the assessee towards payment made to M/s. IFMR Rural Financial Services Pvt. Ltd. for availing services and using their trademark, including software 'PERDIX' etc. is in the nature of revenue expenditure, which was incurred wholly and exclusively for the purpose of business of the assessee.
Thus expenditure is not capital in nature, because the assessee has not acquired any technical know-how or asset, but what was received from service provider was technology support services and professional services for managing day-to-day business affairs of the assessee. Therefore, said expenditure cannot be considered as capital in nature - Decided against revenue
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2021 (10) TMI 398
Deduction u/s 80 HHC - reduction of 90% of rental income, insurance claim, cash subsidy, refund of sales tax, commission, income from profit on sale of fixed assets etc. - HELD THAT:- The coordinate bench of this Tribunal on identical facts in Assessee’s own case for AY 2001-2002[2021 (3) TMI 1230 - ITAT BANGALORE] considering the income, the AO shall take net income after setting off the expenditure incurred to earn that income. Thus, the ground by the assessee is allowed, while the grounds of the revenue on this issue are dismissed.
Deduction u/s 80 HHE - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] CIT(A) held that the excise duty and sales tax should not be included in total turnover and accordingly directed the A.O. to recompute deduction u/s 80HHE of the Act. Thus, we notice that there is no discussion about the other income by Ld. CIT(A). Similar is the case with AY 2003-04 also. Accordingly, we are of the view that the impugned ground of the assessee raised in assessment year 2002-03 as well as in 2003-04 does not emanate from the order passed by Ld. CIT(A). Accordingly, we reject the grounds raised by the assessee relating to deduction u/s 80HHE.
Allocation of head office expenses u/s 80I / 80IA - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] decision rests on the facts of that case, where it was found that common head office expenses were simple administrative expenses for running the business. - Decided against assessee.
Disallowance u/s 14A - Sufficiency of own funds - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] the own funds available with the assessee in both the years are in far excess of the value of investments. Accordingly, as per the decision rendered by Hon’ble Karnataka High Court in the case of Micro Labs Ltd. [2016 (4) TMI 219 - KARNATAKA HIGH COURT], no disallowance out of interest expenditure is called for. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in both the years under consideration and direct the A.O. to delete disallowance made u/s 14A.
Disallowance of sum being technical and professional fees paid to M/s Kotawala - no services has been received by the assessee - HELD THAT:- Even before us the Ld.Counsel could not counter the statement given by the Director of Kotawala. Further nothing was placed on record before us to establish that services have been rendered. We therefore do not find any infirmity in the view taken by Ld.CIT(A) and the same is upheld.
Deduction u/s 80 HHB - separate books of accounts were not maintained for the foreign projects - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] though separate books of accounts were not maintained separate accounts were maintained in respect of each foreign project and audit certificates in Form No.10CCAH have also been furnished in respect of each project. In these circumstances, we are of the view that the decision rendered by the Tribunal in assessee’s own case for the earlier Assessment Years on identical ground would apply and therefore the assessee cannot be denied the benefit of deduction under section 80HHA of the Act on the ground that separate books of accounts were not maintained for the foreign projects.
Allowable business expenditure - Entrance and subscription fees paid to the club - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] entrance fee and membership fees paid where the employees become members is allowable as a business expenditure and was allowed as deduction in Assessee’s own case in AY 1999-2000. Entrance fees paid towards corporate membership of the club is an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprises and accordingly CIT (A) was justified in deleting the disallowances - Decided in favour of assessee.
Expenses on the basis of purchase of packing material, loose tools etc., in the year of purchase - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] Assessing Officer rejected account books of assessee and made certain addition to his income. The Tribunal held that:- (i) it was not case of revenue that purchases as debited were not genuine, and (ii) assessee was following a consistent method of valuing closing stock by including packing material as consumed at time of purchase. Rejection of account books of assessee and addition to his income was held to be not justified. - Decided against revenue.
Excise duty and sales tax to be excluded from the total turnover for the purpose of deduction u/s 80HHC & 80HHE - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] sales tax and central excise duty should not be included as a part of the total turnover while computing deduction under section 80HHC.
Gross interest receipt or net interest income to be reduced for computing business profit under clause (baa) of Section 80HHC - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] principle of netting has been recognized by the various decisions of Hon’ble High Courts and has also been affirmed by the Hon’ble Supreme Court in the case of ACG Associated Capsules [2012 (2) TMI 101 - SUPREME COURT] The principle of netting is however applicable only on the assessee establishing nexus between the interest paid and the interest earned. If such nexus is proved, it is only the net interest that has to be excluded under explanation baa to section 80HHC.
Deduction u/s 80HHC in respect of cash discount, excise duty recovered, scrap sales and exchange rate variation - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] where assessee claimed deduction under section 35(2AB) pursuant to certificate issued by prescribed authority, i.e., Department of Scientific & Industrial Research (DSIR), approving such claim, Assessing Officer could not have denied weighted deduction under section 35(2AB) in respect of scientific expenditure. It was held that Assessing Officer cannot sit in judgment over report submitted by prescribed authority . It was held that where Assessing Officer does not accept claim of assessee made under section 35(2AB), he should refer the matter to Board, which will then refer question to the prescribed authority.
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2021 (10) TMI 425
Addition u/s 69C - Bogus purchases - HELD THAT:- AO having not disputed the used material or disputed the stock of the assessee, it did not find any illegality or infirmity in the order of CIT (A) - assessment order could not have been passed by the AO without granting an opportunity to respondent to defend his position or cross-examine the two persons on whose affidavits, the AO had relied upon to conclude that respondent had made certain purchases from those persons identified as Hawala Traders.
AO also should have investigated further or should have dealt with in his assessment order as to why he was not accepting the explanation of respondent that he had paid in excess through the Bank L.C. to one of the parties allegedly doing business of issuing bogus bills.
Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
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2021 (10) TMI 397
Deduction in respect of 'education cess on Income-tax' and 'secondary and higher education cess on Income-tax' - HELD THAT:- Hon'ble Bombay High Court in the case of Sesa Goa Limited v. JCIT [2020 (3) TMI 347 - BOMBAY HIGH COURT] had held education cess is an allowable expenditure as the word "cess" is conspicuously absent under the provisions of section 40(a)(ii) - we hold that education cess is to be allowed as deduction.
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2021 (10) TMI 396
Assessment passed u/s.153A - Presumption in case of seized documents - Addition based on the said seized document - joint search in the name of assessee and his son - HELD THAT:- There was a joint search warrant in the name of “Shri Rajinder Sharma and Shri Akash Sharma’ on the same premises in which the said document was found, then how the presumption has been drawn that it belongs to the assessee when the other person searched has himself owned up the document and has given his explanation. There is no reason as to why this document which has been denied by the assessee and accepted by the other searched person, adverse inference has been drawn in the case of the assessee and presumption is made in terms of Section 132(4A) and Section 292C.
As incorporated above the assessee’s son Shri Akash Sharma was also subjected to assessment u/s.153A, that means no adverse inference has been drawn despite Mr. Akash Sharma has owned up that these document belongs to him. Simply because the house is registered in the name of his father, i.e., assessee, it does not lead to inference that document which pertain to son residing in the same premises belongs to the assessee. Without going into the merits of the explanation given and also whether it is in nature of the dump document or not because the very premise of drawing an adverse presumption against the assessee is not tenable and we hold that addition is unsustainable in the hands of the assessee.
Assessee’s son was also covered under the search in the same premises and the document found from the said premises has been categorically owned by his son, Shri Akash Sharma who has given his explanation, then instead of drawing any inference in his assessment u/s.153A, no presumption has been made in the case of the assessee. Thus, once this document does not belong to the assessee nor there is any mention of any name of the seized document, presumption u/s. 132(4A) and Section 292C cannot be made against the assessee. Accordingly, no addition based on the said seized document can be made and same is directed to be deleted. - Decided in favour of assessee.
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2021 (10) TMI 395
TP Adjustment - comparable selection - functional dissimilarity - CAT Technologies Ltd. and Lucid Software Ltd. - HELD THAT:- Nothing has been brought on record to demonstrate that the company is not functionally similar to the assessee. Merely because the aforesaid two companies have reported negative margin in the impugned assessment year, they cannot be considered as incomparable. In fact, in assessee's own case in subsequent assessment years CAT Technologies Ltd. has been accepted as a comparable. Thus we direct the assessing officer to include CAT Technologies Ltd. and Lucid Software Ltd. as comparables.
Silverline Technologies Ltd. comparable has shown abnormally high negative margin in two consecutive assessment years. Therefore, in our considered opinion, it will not be safe to include this company as a comparable.
Infobean Technologies Ltd. cannot be considered as a comparable as it is into diversified activities including developing customized software, whereas, segmental details relating to various segments are not available in the annual report. Considering the aforesaid aspect, the co-ordinate bench in case of Skillnet Solutions Pvt. Ltd. vs. DCIT [2021 (2) TMI 1208 - ITAT MUMBAI] has rejected this company from being treated as a comparable to a software development service provider.
Thirdware Solutions Ltd. company cannot be considered as a comparable to a software development service provider.
Cyber Infrastructure Pvt. Ltd., on perusal of the annual report of the company placed in the paper book, we find that it has reported revenue from software development services as well as business process outsourcing (BPO) services. However, segmental details relating to the revenue earned are not discernible from the annual report.Thus, in absence of substantial details/data relating to various segments of the comparables, they cannot be included in the list of comparables.
Denial of working capital adjustment and risk adjustment - TPO alleging that the assessee neither claimed such adjustment in the TP study report nor furnished the detailed working justifying the adjustment - HELD THAT:- Though, in assessment year 2012-13, the DRP had rejected assessee's claim of working capital adjustment; however, the ground raised by the assessee before the Tribunal on the issue became academic as the assessee otherwise got the desired relief. Pertinently, while deciding allowability of working capital adjustment in assessee's own case in assessment year 2005-06, the Tribunal has held that such adjustment is allowable. In view of the aforesaid, we restore the issue to the AO for re-examining the working of working capital adjustment furnished by the assessee and decide the issue accordingly. Insofar as risk adjustment is concerned, both the TPO and learned DRP have rejected assessee's claim alleging that no working of such adjustment has been furnished - It is the case of the assessee that such working was furnished both, before the TPO and learned DRP - we direct the assessing officer to examine the working of risk adjustment furnished by the assessee and decide the issue as per law. Grounds allowed for statistical purpose.
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2021 (10) TMI 375
Condonation of delay - period of limitation prescribed under the Act - HELD THAT:- Date of filing of the appeals by the assessee has to be reckoned as 23.09.2013 for all purposes. This is so, because if we exercise discretion and condone the delay in representation, then the delay in filing is ranging only between 4 to 16 days, which has been calculated as per the period of limitation prescribed under the Act, reckoning the date of filing of appeal as 23.09.2013. Therefore, it goes without saying that the appeals were filed before the Registry on 23.09.2013.
As far as the delay in representation is concerned, the Revenue may be right in stating that the assessee cannot escape by blaming the erstwhile counsel. In many of the cases, we have noticed that, on account of change of jurisdiction, there is change of Standing Counsel for the Department and there would be delay in handing over the papers to the concerned Standing Counsel and these are all cumulative reasons, which will lead to delay in filing the appeal or representing the appeal or getting the appeal numbered or making submissions in the appeal which have been numbered. Thus, bearing in mind that we are required to decide the substantial questions of law in appeals filed under Section 260A of the Act, we exercise discretion and condone the delay in representing the appeals.
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2021 (10) TMI 424
Income in the hands of HUF or members - amount in the name of joint members of HUF - whether when the bank account does not pertain to the HUF and it is only a joint account of two individuals, the same ought not to have been considered as unexplained cash deposit in the hands of the HUF? - HELD THAT:- Contention of the appellant that the Assessing Officer ought not to have assessed to tax the amount of ₹ 71,169/- in the hands of the HUF found in the joint names of Subba Rama Gupta and his wife is totally misconceived as the fact finding authorities have given a categorical finding that the members of HUF had no independent source of income and moreover, the said factual aspect was admitted by the assessee before the Assessing Officer, as recorded by the CIT (Appeals) and the Tribunal.
The assessee declaring his income by filing a revised income and offering to tax the amount utilized for the purpose of construction cannot be permitted to contend that the amount in the joint names of two members of the HUF cannot be considered to be the income of the HUF -we do not find any merit in considering the issues which are purely fact related, in appeal proceedings under Section 260A - we answer the substantial questions of law in favour of the Revenue and against the assessee.
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2021 (10) TMI 423
Penalty levied u/s 271(1)(c) - net undisclosed income received as “on money” which was unearthed based on diary found in survey - addition as per Investigation wing during survey proceedings and also admitted by one of the partners in the statement recorded u/s. 131 (1A) and the said “on money” income was not accounted for in the regular books of account of the assessee on the date of survey? - HELD THAT:- As survey had taken place on 09.01.2013 as a part of search operation of the entire group and when it chose to disclose additional ₹ 20 Cr., ₹ 3.80 Cr. came to be attributable to the respondent firm. The return was filed under Section 139 of the Act by the respondent for the Assessment Year 20132014 on 29.09.2013, which is after about eight months of the survey which was conducted. The books of account also were not closed and it was not a case of any revised return being filed by the respondent Assessee. In such circumstances, Assessing Officer also had not added any other income for the amount of ₹ 3.80 Cr. had already been declared in the return itself.
Both the authorities concurrently have correctly held following the decision of PRINCIPAL COMMISSIONER OF INCOME TAX-3 vs. R UMEDBHAI JEWELLERS PVT. LTD [2016 (9) TMI 9 - GUJARAT HIGH COURT] that no penalty can be levied in such circumstances.
Adverting to the facts of the present appeal, return was filed after about eight (8) months of conducting of survey and books of accounts were not closed also - neither it is a case of filing of revised return disclosing undisclosed income nor the case of books of accounts having been closed. Therefore, as rightly held by both the CIT(Appeals) and ITAT, no penalty can be imposed. - Decided in favour of assessee.
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2021 (10) TMI 422
Addition u/s 68 - unexplained cash credit in the nature of unsecured loan received from three entities - tribunal deleted the addition - HELD THAT- As the entire material in case of each of these persons and entities and eventually held that the identity of the depositors had been proved as they had filed the return of income along with the PAN. Moreover, loans have been granted through banking channels and in respect of the same copy of the bank statement also has been provided and hence, genuineness also has been believed by the CIT(Appeals) and further the return of income had been filed by the said depositors and hence, the creditworthiness also has been proved.
The appellant provided a copy of audited balance sheet and profit and loss account for the year under consideration in respect of depositors to the Assessing Officer and after verification, the Assessing Officer has the only objection that the company was not having fresh funds in its books of accounts and negligible operational income was derived.
CIT(Appeals) has rightly opined that since the depositor company had duly recorded the deposits/loans given to the appellant in its books of accounts out of its own funds or borrowed funds, no addition in the hands of the appellant is permissible so far as the transactions are recorded in the books of depositor company
No reason for us to interfere as addition contemplation was under Section 68 of the IT Act which provides that any sum found credited in the books of account of an assessee maintained for any previous year and if the assessee does not offer any explanation about the nature and source thereof or even when explanation is given and the AO is dissatisfied, the sum shown credited in the accounts can be questioned by him. All the ingredients contemplated under Section 68 have been duly satisfied on the aspect of identity of the creditors, genuineness of the transactions and their creditworthiness. Appeal dismissed.
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2021 (10) TMI 421
Penalty u/s 271 - Defective notice u/s 274 - Non specification of charge - notice in printed form - HELD THAT:- As carefully examined the notices issued by the AO (Annexures-D and D1) to initiate proceedings u/s 274 read with 271 of the said Act of 1961. The notice issued in the said printed format, though specifies “delete the inappropriate words and paragraphs,” the tick mark is found with respect to the clause “have concealed the particulars of your income”. The next limb of the said clause remains undeleted as the penalty order deals with only the first limb of concealment of the particulars of income.
The validity of the order of penalty must be determined on the basis of the initiation of penalty proceedings. The defects being ex facie apparent in the notices issued, the initiation of proceedings being vitiated, the impugned order of the Tribunal confirming the order of the authorities cannot be sustained and is accordingly set aside. Decided in favour of the Assessee and against the Revenue.
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2021 (10) TMI 394
Reopening of assessment u/s 147 - Additions made on different ground - Addition u/s 68 - unsecured loans - HELD THAT:- We find that the Assessing Officer has accepted the objections of the assessee, and has not assessed or reassessed the income, which was the basis of the notice. Therefore, in light of the judgment of JET AIRWAYS (I) LTD. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] it would not be open to the Assessing Officer to assess income under some other issue independently. - Decided in favour of assessee.
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2021 (10) TMI 420
Rectification u/s 154 - incorrect carry forward of loss to be rectified relating to the assessment years 2003-04 and 2004-05, as return of income for the assessment years were not filed in time - CIT (Appeals) rejected the claim of carry forward of the loss, further observing that the assessee had not moved any application to CBDT for condonation of delay in filing the loss return - HELD THAT:- Admittedly, the return for the relevant assessment year herein was filed on 02.11.2004 instead of 31.10.2004. As per Section 139(1) and the explanation to thereto, ‘due date’ means, 31st day of October of the assessment year. As aforesaid, 139(3) makes it clear that the return has to be filed as per sub- Section (1) of Section 139 for carrying forward and setoff of losses. If any order was passed inadvertently u/s 143 sans considering the date of filing of the return for losses, the same certainly is an error apparent on the record, which do not require any further adjudication. Hence, the finding of the authorities on this issue cannot be faulted with. Accordingly, the questions of law raised are answered in favour of the assessee and against the revenue.
We reserve liberty to the assessee to file an application under Section 119(2)(b) of the Act before the competent authority seeking for condonation of delay in filing returns and thereafter to seek for carry forward of loss to the subsequent assessment year which were incurred during the assessment year 2004-05. If such an application is filed by the assessee within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the competent authority in accordance with law, in an expedite manner and the consequential reliefs shall be extended accordingly.
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2021 (10) TMI 393
Unverifiable sundry creditors - CIT-A deleted addition unconfirmed sundry creditors by admitting additional evidence - HELD THAT:- As evidences in the form of confirmation were forwarded to the Assessing Officer for his Remand Report, therefore, due opportunity was given to the Assessing Officer. Having perused the material available on record, we do not see any infirmity in the order of Ld.CIT(A) as the assessee has filed confirmation which has been verified by Ld.CIT(A) hence, Ground No.1 raised by the Revenue is dismissed.
Addition of expenses as treated as capital in nature - DR treated the expenditure as of capital nature since the assessee had obtained secured loan in the form of terms loans for the purpose of financing future assets - HELD THAT:- CIT(A) has pointed out that from the computation of interest disallowance, the AO had considered investment of ₹ 75,75,35,000/- against ₹ 83,17,32,000/-. This fact is not rebutted by the Revenue. It is seen that Ld.CIT(A) has computed the income at ₹ 28,76,084/- against computation made by the Assessing Officer at ₹ 1,49,86,193/-. The Revenue could not point out any error in the computation by Ld.CIT(A). Therefore, we do not see any infirmity into the finding of Ld.CIT(A), the same is hereby affirmed. Ground No.2 raised by the Revenue is, thus rejected.
Short payment of TDS - CIT-A allowed claim - HELD THAT:- CIT(A) while deleting the addition has relied upon the decision in the case of CIT vs S.K.Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] and the case of UE Trade Corporation (India) Ltd [2012 (8) TMI 700 - ITAT DELHI] -The Revenue has not pointed out any contrary binding precedents therefore, we do not see any infirmity in the finding of Ld.CIT(A) and the same is hereby affirmed.
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Customs
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2021 (10) TMI 392
Classification of the goods described in the Bills of Entry - eNodeB BTS/Micro Cell BTS/Femto Cells BTS/Pico Cells BTS - eNodeB, would be a Base Station in the 4G network? - Mis-declaration of goods or not - Whether the goods classifiable under CTH 8517 61 00, which is specific for ‘Base Stations’ or whether the goods are classifiable under the residuary CTH 8517 62 90 for ‘Other’? - extended period of limitation - HELD THAT:- It is seen that eNodeB is an evolved Base station of 4G Technology, which does not have the drawback of the Base Stations of 2G and 3G technology of having to communicate via a separate Controller owing to inability to communicate directly, which results in slowing down the speed of the connection. In that sense, the Base Stations of 4G Technology (digital signals) are at par with the Base Stations of 1G Technology (analog signals) in the sense that ‘Handover’ in both takes place at the Base Stations itself and not via a separate Controller.
Merely because the Base Stations of 4G LTE have overcome the aforesaid drawback of the Base Stations of 2G and 3G technology, it cannot mean that eNodeB is not a Base Station. It cannot, therefore, be said that ‘Base Stations’ of 4G technology cannot be called ‘Base Stations’ because unlike Base Stations of 2G technology and 3G technology, it does not require a separate Controller - it cannot be urged that the Base Station of 4G technology is not a Base Station and cannot be classified under CTH 8517 61 00, which is specifically for ‘Base Stations’.
The contention of the Department that the scope of CTH 8517 61 00 must be restricted and confined only to be Base Stations of the earlier 2G technology and 3G technology and that the said entry cannot cover an evolved Base Station of the new 4G technology cannot be accepted in view of the decision of the Supreme Court in COLLECTOR OF CUSTOMS & CENTRAL EX. VERSUS LEKHRAJ JESSUMAL & SONS [1996 (2) TMI 135 - SUPREME COURT]. The Supreme Court held that a Tariff entry cannot be given a static interpretation ignoring the evolution in technology.
A perusal of Serial No. 372 (i) of the Notification dated 17.03.2012 would show that it grants exemption from the whole of customs duty of goods specified in List 17 required inter alia for cellular mobile telephone service. The said exemption is subject to condition no. 52, which requires that the importer should be licensed by the Department of Telecommunications of the Government of India for providing cellular mobile telephone service. There is no dispute that Reliance Jio satisfies condition no. 52. List 17 mentions ‘Base Transceiver Stations’ at Serial No. 3(a) and ‘Base Station Controllers’ at Serial No. 1(b). The said Notification was amended on 01.03.2016, by which in Serial No. 372 an insertion was made to the effect that notwithstanding anything contained in List 17, exemption shall not apply to specified goods of Heading 85.17, which, amongst others, included Long Term Evolution Products.
Extended period of limitation - HELD THAT:- The assessment done by the importer under section 17(1) of the Customs Act is not conclusive but is subject to verification by the proper Officer under section 17(2) of the Central Act. If the proper Officer finds that self-assessment is incorrect, the proper Officer has to re-assess the goods under section 17(4) of the Customs Act. There is nothing on the record which may indicate that the proper Officer did not accept the self-assessment and carried out the re-assessment. Thus, also the benefit of the extended period of limitation could not have been invoked.
The goods deserve to be classified under CTH 8517 61 00 as contended by Reliance Jio and not under CTH 8517 62 90 as contended by the Department. The impugned order dated 14.06.2019 passed by the Commissioner, therefore, to the extent it classifies the goods under CTH 8517 62 90 and consequential demand of differential duty w.e.f. 01.03.2016, cannot be sustained and is set aside - appeal allowed - decided in favor of appellant.
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2021 (10) TMI 391
Re-classification of imported goods - cut and polished diamonds - enhancement of value by recourse to rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - confiscation - redemption fine - penalty - HELD THAT:- In terms of N/N. 12/2012-Cus dated 17th March 2012, both ‘rough diamonds’ and ‘diamonds including lab grown diamonds – semi processed, half cut or broken’ are exempted from duty on import. The goods were entered for import on the claim for classification against heading no. 7102 3100 of First Schedule to Customs Tariff Act, 1975 attracting ‘nil’ rate of duty but was ordered for re-classification against heading no. 7102 3910 of First Schedule to Customs Tariff Act, 1975 with duty liability of 2% for demanding differential duty.
The impugned order is categorical in its finding of reclassification that the reports of Gemological Institute of India and Trade Panel Members as well as that of GIA India Pvt Ltd were clear that the goods did not conform to the declaration. It is also seen that the circular no. 35/2009-Cus dated 29th December 2009 of Director General of Export Promotion was discarded.
While the impugned goods may not be ‘rough diamonds’ as mined and may have undergone working before its import, the reports do not conclusively establish that these were ‘cut and polished diamonds’ on which duty liability was to be fastened - It does not appeal to reason that intention of evading duty of mere ₹1,03,817 prompted misdescription in the bill of entry. Coupled with the inadequate evidence of the goods conclusively being ‘cut and polished diamonds’, this strikes at the very foundation of the proceedings initiated against the appellant and the culmination thereof.
Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2021 (10) TMI 390
Principles of Natural Justice and fairness - Appellant's request for the grant of sufficient time to file its reply/counter to the Company Petition, rejected - grant of only short span of less than two days of filing reply, correct or not - HELD THAT:- It is pertinent to mention that Section 98 of the Companies Act, does not prescribe any time limit or limitation on the Learned NCLT to pass order within that time limit. Engrafting the provisions of Section 100(4) in Section 98 would be wholly misconceived and untenable. Undisputedly, the reliefs sought in the Company Petition are specifically under Section 98 of the Companies Act. Given that Section 98 does not prescribe any time limit, the Learned NCLT ought to have granted reasonable time to the Appellant to file a reply.
It is clear that the Learned NCLT has committed an error in not granting reasonable and sufficient time for filing a reply, which is a complete violation of Rule 37 of NCLT Rules and Principles of Natural Justice - reasonable and sufficient opportunity should be given to the Appellants for filing a reply - Appeal disposed off.
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2021 (10) TMI 386
Seeking restoration of the name of the Appellant Company in the register maintained by the Registrar of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- It is seen that the appellant has failed to produce the audited balance sheet to show the company had revenue from operation for the immediate two preceding financial years when the name of the company was struck off by the RoC. It is further seen that the Appellants in the Memo of Appeal admit this fact that there is no revenue from operation from financial Year 2014-15 to 2019-2020. Therefore, the appellant company has failed to produce any document to show that the appellant company had revenue from operation or carrying on business at the time when the name of the company was struck off by the Registrar of Companies or even prior to that.
The action taken by the RoC under Section 560(5) of the Companies Act, 1956, to wind up the company is upheld - the name of the company could not be restored - appeal dismissed.
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Insolvency & Bankruptcy
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2021 (10) TMI 389
Seeking to allow the claim amount submitted by the Respondent in full - Section 60(5) of Insolvency and Bankruptcy Code - HELD THAT:- It is pertinent to mention that all the assessment orders were passed before the declaration of Moratorium. Therefore, it has attained finality in the absence of any challenge against the assessment orders before the Appellate Authority as provided under the statutes - the GST amount is an amount of tax levied under the assessment order as per the Goods and Service Act, 2017. It cannot be edited or reduced by the Resolution Professional himself. Even if the IRP/Resolution Professional was aggrieved by the said Order, they should have filed the Appeal under Section 107 of the CGST/SGST Act, 2017, read with Rule 108 of the GST Rules 2017. Any revision of assessment orders also cannot be made under the pretext of Section 238 of IBC. Section 238 of Insolvency and Bankruptcy Code cannot be read as conferring any appellate or adjudicatory jurisdiction in respect of issues arising under other statutes.
Scope of revision by the Resolution Professional - powers conferred under Regulation 14 of the CIRP regulations - HELD THAT:- After going through the Regulations 10 to 14 of the CIRP Regulations, it is clear that IRP/RP may, under Regulation 10, call clarifications from a creditor for substantiating the whole or part of its claim. Furthermore, under Regulation 12, the IRP/RP is entitled to updation of the creditor's claim based on the satisfaction of the claim. Finally, Regulation 13 mandates to verify every claim as on the insolvency commencement date within seven days from the last date of the receipt of the claims - Undisputedly, the IRP/RP has revised the admitted claim of the Respondent based on the circumstances. The exercise of revision of the GST assessment order was beyond the jurisdiction of the IRP/RP. It is pertinent to mention that the IRP/RP was not having the adjudicatory power given by the GST Act. Regulation 14 of the CIRP Regulations only authorises the IRP/RP to exercise power where the claim is not precise due to any contingency or other reasons.
In the instant case, the Adjudicating Authority has rightly considered the statutory provision and suggested filing an Appeal before the appropriate forum. But at the same time, the Resolution professionals, considering the CoC as an authority in law, had exercised the powers of GST authorities. Therefore, the said act of the Resolution Professional is without jurisdiction and not sustainable in law.
The Resolution professional committed an error in exercising their power and exercised the powers of GST Authorities under the pretext of Regulation 14 of the Code, which is not sustainable - Appeal dismissed.
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2021 (10) TMI 388
Seeking the ‘Expression of Interest’ be considered - Approval of Resolution Plan - Section 30(6) of IBC - HELD THAT:- It is not in dispute that the IRP issued the Public Announcement under Section 15 of the Code on 25.12.2020 in Form A in the ‘Financial Express’ (English) in Delhi and Chandigarh Editions apart from ‘Jansatta’ and ‘Dainik Jagran’, inviting claims from the Creditors of the ‘Corporate Debtor’. The record shows that after receiving the claims, the IRP collated the list of Creditors and constituted the CoC. In terms of the decision of the CoC in the 2nd Meeting held on 15.02.2021, the RP carried out publication of Form G inviting ‘Expression of Interest’ in ‘Economic Times’ and All India Edition on 19.02.2021, the ‘Business Standard’ on 20.02.2021 and in ‘Punjab Jagran’, Amritsar. Hence, the contention of the Learned Counsel appearing for the Appellant that vide publicity was not given while inviting EoI, is unsustainable.
It is seen from the record that the Appellant sought the indulgence of the RP to place its offer before the CoC for consideration vide emails dated 15.06.2020 and 16.06.2021, which were placed before the CoC by the Resolution Professional, but as the last date for submission of EoI has expired, the CoC rejected the same. Admittedly, the last date for submission of EoI’s was 06.03.2021 and the extended last date for submission of Resolution Plan was 10.05.2021 and it is pertinent to note that the email sent by the Appellant herein is dated 13.06.2021, which is much after the last date - Regulation 36A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, clearly stipulates that ‘the Expression of Interest received after the time specified in the limitation under clause (b) of sub-Regulation (3) shall be rejected’.
The legislative intent of the statute together with the fact that in the instant case the Resolution Plan was accepted by 100% of voting share in the CoC Meeting dated 21.06.2021 and having regard to the fact that the Appellant had never participated in the EoI, we are of the view that any reliefs granted in contra to the timelines would be ultra vires to the scope and objective of the Code - The ratio of the Hon’ble Supreme Court in ‘Ebix Singapore Pvt. Ltd.’ [2020 (8) TMI 338 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] is squarely applicable to the facts of this case wherein it was observed by the Hon’ble Apex Court that once the Plan is approved by majority of the CoC as provided for under Section 30 of the Code, then no fresh plans may come in intervention of an already approved Plan.
Appeal dismissed.
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2021 (10) TMI 387
Seeking direction to respondents/Suspended Directors to assist and cooperate with the IRP and completing the CIRP process under the Code - seeking to direct the Suspended Directors not to leave country for any purpose till completion of CIRP and assist and cooperate with the IRP and completing the CIRP process under the Code - seeking to direct the Transport Department of NCT of Delhi Government not to transfer Car BMW in any other person name without approval from NCLT as both card belong to Corporate Debtor - seeking to direct Ministry of External affairs to revoke passport issued in the name Gauarav Mahendru, suspended Director and not to issue any Visa to him - HELD THAT:- In the case in hand, admittedly, the possession of the property has never been taken up by the Oriental Bank (Punjab National Bank). Rather, the prayer of the applicant is based on the basis of an agreement executed in between the parties. It is seen the present application is filed with a prayer to direct the District Sub-Registrar, Respondent no. 1 to execute and register the sale deed, on the basis of an agreement dated 16.12.2016.
A bare perusal of the provisions of Section 54 of the Transfer of Property Act, shows that a contract for sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not of itself create any interest in or charge on such property and this has also been decided by the Hon'ble Supreme Court in MEGHMALA & ORS. VERSUS G. NARASIMHA REDDY & ORS. [2010 (8) TMI 922 - SUPREME COURT] that an agreement does not create any right or title in favor of intending buyer, therefore, in view of the aforesaid decisions and provision of law, it is concluded that merely there was an agreement to transfer the property, it does not create any right or any interest in favor of the Corporate Debtors. Therefore, merely this property is shown as an asset of the Corporate Debtor and it is included under the Resolution Plan submitted by the Resolution Applicant, on this ground alone, it cannot be directed that the District sub-Registrar, Respondent no. 1 to execute and register a sale deed in favor of the Corporate Debtor. The remedy available to the Resolution Professional is to file an application before Competent Court for the specific performance of contract.
The prayer of the applicant is hereby rejected.
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Service Tax
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2021 (10) TMI 385
Levy of service tax - Incentive received by service receiver from service provider, on appreciable performance - confirmation of demand without specifying the sub clause of BAS under which the activities are covered - confirmation of demand under the taxable category of BAS in absence of three parties – service provider, service receiver and targeted audience - where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received - fastening of service tax liability without specifying the consideration for service as provided under Section 67 of the Chapter V of Finance Act, 1994 - fastening of service tax liability in absence of the relationship of service provider and service receiver - Invocation of extended period of limitation - section 73(1) of the Finance Act, 1994.
HELD THAT:- The reference was answered by the Larger Bench of the Tribunal in KAFILA HOSPITALITY & TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI [2021 (3) TMI 773 - CESTAT NEW DELHI]. The issues are answered as below:
Whether the Incentive received by service receiver from service provider, on appreciable performance, can be subjected to service tax? - HELD THAT:- The incentives received by a service recipient from a service provider cannot be subjected to levy of service tax.
Whether a demand can be confirmed without specifying the sub clause of BAS under which the activities are covered? - HELD THAT:- This issue does not arise for consideration in this appeal as the show cause notice and the adjudicating order had confirmed the demand under section 65(19)(ii) of the Finance Act.
Whether demand of service tax can be confirmed under the taxable category of BAS in absence of three parties – service provider, service receiver and targeted audience? - HELD THAT:- A passenger cannot be deemed to be an audience for the promotion of the business of CRS Companies.
Whether in cases where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received, be taxed under another category? - Can service tax liability be fastened without specifying the consideration for service as provided under Section 67 of the Chapter V of Finance Act, 1994 as amended up to date? - Can service tax liability be fastened in absence of the relationship of service provider and service receiver? - HELD THAT:- In view of the discussion and findings these issues do not arise for consideration and are, therefore, not being answered.
The findings and the answers given by the Larger Bench on the six issues, the impugned order dated May 20, 2015 passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.
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Central Excise
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2021 (10) TMI 383
CENVAT Credit - input services - services availed for setting up of Coal Handling Plant - Coal Handing Plant (CHP) has been set up by the appellant for evacuation of coal from its mining premises - period from June 2013 to November 2015 - HELD THAT:- The purpose of setting up of the CHP is to load the coal into the railway wagons in an automated manner after the coal is crushed into the desired size. It is not in dispute that the services used by the appellant is for modernisation of the coal loading process. The definition of input service specifically include services received by a manufacturer for modernisation of a factory.
On perusal of decision of the Tribunal in the case of Pepsico India Holdings (P) Ltd [2021 (7) TMI 1094 - CESTAT HYDERABAD] relied upon by the appellant, the Tribunal has observed that without setting up of the factory, there cannot be any manufacture and the mere fact that the words ‘setting up of factory” has not been retained in the definition of input services post 01.04.2011, the same will not mean that the benefit of credit has been taken away by the legislature.
The services used for setting up of the factory even after 01.04.2011 would be eligible for credit. The Ld. Commissioner has allowed credit on certain invoices assuming the same to be pure services and disallowed the credit on remaining portion by considering the same to be in the nature of civil portion. We find that this Tribunal has been consistently applying the user test to decide the credit eligibility as laid down by the Hon’ble Supreme Court. The Tribunal in B S Sponge Pvt Ltd vs. CCE, Raipur [2019 (2) TMI 850 - CESTAT NEW DELHI].
Also, the mode of valuation adopted by the Contractor to discharge service tax on 40% of the contract value is in accordance with law contained in Service Tax Valuation Rules and cannot be disputed while deciding credit eligibility at the appellant’s end. When service tax has been levied only on 40% of the total value, it essentially means that service tax has been paid only on the service portion.
CENVAT Credit availed by the appellant for setting up of CHP, which is used for evacuation of coal by rapid loading process, cannot be legally denied - appeal allowed - decided in favor of appellant.
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2021 (10) TMI 382
Adjustment made from the sanctioned amount of rebate claim - rebate of duty paid on the goods, which were exported by the appellants - Rule 18 of Central Excise Rules, 2002 - HELD THAT:- On perusal of provisions of Section 11 of the Central Excise Act, it is evident that the adjustment in the present case has been made bona fide, as permissible under the provisions of the Act.
Appeal dismissed.
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2021 (10) TMI 381
Valuation - inclusion of amortised cost of patterns in respect of clearances to M/s.BEML - contravention of Rules 4, 6 and 8 of Central Excise (No.2) Rules, 2001 - whether the cost of patterns supplied by M/s.BEML are required to be amortised on all the castings cleared by the appellant even though the cost was amortised on the number of castings initially ordered by the customer?
HELD THAT:- The appellants manufacture 10 castings. They clear these 10 castings by amortising the value of the pattern of ₹ 100 equally on these 10 castings say ₹ 10 rupees on each casting. The value of the pattern i.e. ₹ 100 stands covered by 10 castings. However, because of the subsequent orders of the customer, the appellant manufactures 5 more castings. As the value of the pattern has already been amortised on 10 castings, nothing remains to be amortised while clearing the additional 5 castings which were manufactured using the same pattern. Therefore, the 5 castings were cleared without amortization. It would not make any material difference if the said hundred rupees was amortised for 10 pieces or 15 pieces. What is important is to see whether or not the cost of the pattern has been amortised and has suffered Central Excise duty or otherwise. It is not the case of the department that the cost of the pattern was not amortised in the initial number of castings supplied as per certification by BEML. It is also not the case of the department that they have received some other patterns for the manufacture of castings additionally to the initial order and certificate by the customer i.e. M/s. BEML.
The appellants have amortised the full value of patterns supplied to them by their client. It is neither legal nor proper to ask the appellants to continue the amortisation while clearing the additional castings using the same patterns whose value has been already amortised. It is not the case of the department that the appellants have received new set of patterns whose value remains to be amortised. It is also not the case of the department that the appellants received any additional consideration for the same patterns. Under the circumstances, it cannot be said that the appellants have evaded duty by not amortising the patterns received by them.
The demand confirmed cannot be upheld to be legal and proper. When the demand becomes not sustainable, interest and penalty etc. confirmed cannot be sustained - Appeal allowed - decided in favor of appellant.
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2021 (10) TMI 384
Evasion of duty or not - Process amounting to manufacture or not - goods specified in third Schedule involving packing and re-packing etc - scope of "Manufacturer" as contained in Section 2(f) of the Central Excise Act, 1944 - HELD THAT:- Whether the process undertaken by the revision petitioners resulted into emergency of manufactured goods will depend upon the test laid down by the Hon'ble Apex Court in the case of SOUTH BIHAR SUGAR MILLS LTD. VERSUS UNION OF INDIA [1968 (2) TMI 36 - SUPREME COURT] and in the case of UNION OF INDIA VERSUS DELHI CLOTH AND GENERAL MILLS CO. LTD. [1962 (10) TMI 1 - SUPREME COURT] - As to the interpretation of the said provision with the guidelines as prescribed by the Hon'ble Apex Court can be gone into only at the time of trial and hence, it is always open to the revision petitioners/accused to confront and challenge the department witness during the cross-examination.
The trial Court has rightly passed an order dismissing the discharge petition filed by the petitioners and the same does not suffer from any perversity in finding and hence, the point is that the revision petitioners are tax evaders or not depends upon the fact that they are the manufacturer or fabricator and hence, the factual position has to be determined by the accused during the cross-examination of department witness and hence, the same cannot be determined at this stage. Therefore, the order of dismissal of discharge petition is confirmed.
This Criminal Revision Case is dismissed.
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2021 (10) TMI 380
CENVAT Credit - input services - C & F Services received by the appellant for the sale of their goods - place of removal - HELD THAT:- Where the sale of goods is taken place through C & F Agent, the premises of the same C & F Agent is the place of removal in terms of definition of ‘place of removal’ provided in Section(4)(3)(c)(iii) of Central Excise Act, 1944.
As per the definition of Place of Removal, the C & F Agents premises clearly falls under sub-clause (iii) of clause © of Section 4(3) of Central Excise Act, 1944 is a place of removal. As per Rule 2(l) of Cenvat Credit Rules, 2004 services for clearance of goods up to the place of removal is an admissible input service - Since in the present case goods are cleared from the factory of the appellant and sold through C & F Agent, all the services even from factory gate up to the C & F Agent are used up to the place of removal therefore, the C & F Agent service is admissible input service.
As regard the judgment of Hon’ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD – II VERSUS M/S CADILA HEALTH CARE LTD. [2013 (1) TMI 304 - GUJARAT HIGH COURT] relied upon by the learned Authorized Representative it was categorically held that clearing and forwarding agent service provided by the agents of the principle manufacture of goods and any goods stored by them after clearance from the factory stored on behalf of the principle only the place of removal under Section(4)(3)(c)(iii) of Central Excise Act, 1944, it was held that the service of C & F Agent is within ambit of Rule 2(l) of Cenvat Credit Rules, 2004 - Even the said judgment of Hon’ble Gujarat High Court supports the case of the assessee.
The appellant is entitled for the Cenvat Credit in respect of C & F Agent Service - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2021 (10) TMI 379
Refund of sales tax - sales exempt under MVAT or not - order refusing refund was never served on the petitioner - no delay in filing the petition - HELD THAT:- The roznama records that as the dealer is not available at the place of business and not responding for the last 2 years, the case is closed for rejection. It is stated that many opportunities were given but the dealer was not available at the place of business and there was no response and hence application was rejected. The roznama dated March 25, 2014 records that the application made by the dealer for the year 2009-2010 is rejected on September 20, 2012 and served on September 26, 2012 by pasting. Hence, assessment/audit is not done in the case.
The right to seek the refund having been crystalised on September 30, 2011 and in any case as the order rejecting refund is passed on September 20, 2012, it was expected that the petitioner approaches this Court as early as possible and without undue delay. The petitioner slept over its rights - Among the several matters which the High Courts rightly take into consideration in the exercise of that discretion is the delay made by the aggrieved party in seeking this special remedy and what excuse there is for it. Their Lordships thus held that as a general rule that if there has been unreasonable delay the court ought not ordinarily to lend its aid to a party by the extraordinary remedy of mandamus. Their Lordships then considered the following submission made by learned counsel ‘that assuming that the remedy of recovery by action in a civil court stood barred on the date these applications were made that would be no reason to refuse relief under Article 226 of the Constitution’.
Not only, it is found that a stale claim is sought to be agitated by way of this writ petition but the petitioner also raises disputed questions of fact regarding service of the order rejecting the refund - the delay in moving the writ petition is unreasonable - petition dismissed.
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Indian Laws
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2021 (10) TMI 378
Dishonor of Cheque - on the basis of compromise deed relief granted to accused - violation of terms of settlement agreement - jurisdiction under Section 482 CrPC to quash the prosecution on the basis of the deed of compromise which has not been implemented due to the default of the accused - existence of liability or not - cheques were issued as and by way of security are matters for trial - legally enforceable debt or not - embargo under Section 138 of the NI Act on parallel proceedings for distinct offences involving the dishonor of cheques or not - whether parallel prosecutions arising from a single transaction under Section 138 of the NI Act can be sustained?
HELD THAT:- In this case, a set of cheques were dishonoured, leading to filing of the first complaint under Section 138 of the NI Act. The parties thereafter entered into a deed of compromise to settle the matter. While the first complaint was pending, the cheques issued pursuant to the compromise deed were dishonoured leading to the second complaint under Section 138 of the NI Act. Both proceedings are pending simultaneously and it is for this Court to decide whether the complainant can be allowed to pursue both the cases or whether one of them must be quashed and the consequences resulting from such quashing.
The nature of the offence under Section 138 of the NI Act is quasi-criminal in that, while it arises out of a civil wrong, the law, however, imposes a criminal penalty in the form of imprisonment or fine. The purpose of the enactment is to provide security to creditors and instil confidence in the banking system of the country - Given that the primary purpose of Section 138 of the NI Act is to ensure compensation to the complainant, the NI Act also allows for parties to enter into a compromise, both during the pendency of the complaint and even after the conviction of the accused.
Under the shadow of Section 138 of the NI Act, parties are encouraged to settle the dispute resulting in ultimate closure of the case rather than continuing with a protracted litigation before the court. This is beneficial for the complainant as it results in early recovery of money; alteration of the terms of the contract for higher compensation and avoidance of litigation. Equally, the accused is benefitted as it leads to avoidance of a conviction and sentence or payment of a fine.
Whether once the settlement has been entered into, the complainant can be allowed to pursue the original complaint under Section 138 of the NI Act? - HELD THAT:- Allowing prosecution under both sets of complaints would be contrary to the purpose of the enactment. As noted above, it is the compensatory aspect of the remedy that should be given priority as opposed to the punitive aspect. The complainant in such cases is primarily concerned with the recovery of money, the conviction of the accused serves little purpose. In fact, the threat of jail acts as a stick to ensure payment of money - a complainant cannot pursue two parallel prosecutions for the same underlying transaction. Once a settlement agreement has been entered into by the parties, the proceedings in the original complaint cannot be sustained and a fresh cause of action accrues to the complainant under the terms of the settlement deed.
Once the compromise deed dated 12 March 2013 was agreed, the original complaint must be quashed and parties must proceed with the remedies available in law under the settlement agreement.
Liability arising from the settlement agreement - HELD THAT:- Once a settlement agreement has been entered into between the parties, the parties are bound by the terms of the agreement and any violation of the same may result in consequential action in civil and criminal law - There was no basis for the learned Single Judge to conclude, particularly in the course of the hearing of a petition under Section 482 of the CrPC that the second set of cheques issued in pursuance of the deed of compromise cannot be construed as being towards the discharge of a liability. The question as to whether the liability exists or not is clearly a matter of trial. There was a serious error on the part of the Single Judge in allowing the petition under Section 482 to quash the prosecution on the basis that the deed of compromise would not constitute a legally enforceable liability. The mere fact that a suit is pending before the High Court challenging the validity of the compromise deed would furnish no cogent basis to quash the proceedings under Section 138.
The High Court has failed to notice the true meaning and import of the presumption under Section 139 which can only be displaced on the basis of evidence adduced at the trial - In the event that the compromise deed is found to be void ab initio on account of coercion, the very basis for quashing of the first complaint is removed since the settlement agreement is deemed to have never existed and hence it had no effect on the liability subsisting under the first complaint.
Application disposed off.
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2021 (10) TMI 377
Jurisdiction - order passed in the Lok Adalat as regards the merits of the case and dismissing the same without sending back to High Court - settlement not arrived at, between the parties - whether in the Lok Adalat held by the High Court, was it open for the members of the Lok Adalat to enter into the merits of the writ petition and to dismiss the same on merits, in absence of any settlement arrived at between the parties? - HELD THAT:- A fair reading of various provisions of the Legal Services Authorities Act, 1987 makes it clear that the jurisdiction of the Lok Adalat would be to determine and to arrive at a compromise or a settlement between the parties to a dispute and once the aforesaid settlement / compromise fails and no compromise or settlement could be arrived at between the parties, the Lok Adalat has to return the case to the Court from which the reference has been received for disposal in accordance with law and in any case, the Lok Adalat has no jurisdiction at all to decide the matter on merits once it is found that compromise or settlement could not be arrived at between the parties.
The submission made by the learned counsel appearing on behalf of the respondent that once the matter was placed before the Lok Adalat with consent, thereafter the entire matter is at large before the Lok Adalat and, therefore, the Lok Adalat is justified in disposing the matter on merits has no substance and the same is required to be rejected outright - The consent to place the matter before the Lok Adalat was to arrive at a settlement and or a compromise between the parties and not for placing the matter before the Lok Adalat for deciding the matter on merits - Once there is no compromise and/or a settlement between the parties before the Lok Adalat, as provided in sub-section (5) of Section 20, the matter has to be returned to the Court from where the matter was referred to Lok Adalat for deciding the matter on merits by the concerned court.
The impugned order passed by the Lok Adalat dismissing the writ petition on merits is unsustainable and deserves to be quashed and set aside - matter is remanded to the High Court to decide the petition on merits and in accordance with law - petition restored.
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2021 (10) TMI 376
Reserve forest - removal of sandalwood oil illegally, or without authorization from any reserve forest, or area - presumption of culpability in the event possession - rebuttable presumption - Section 27 of the Kerala Forest Act - HELD THAT:- In the present case, the appellant did not dispute ownership of the articles seized. Section 69 of the Act enacts presumption, that when possession of a forest produce is found with someone, that it is deemed to belong to the state (or central) government. Now, this presumption is a rebuttable one; several decisions of this court have said that the burden of proving the foundational facts, which will give rise to the presumption, is upon the prosecution - In the present case, there is no contest about the fact that the goods were seized from the premises of the appellant, and belonged to him. The goods seized from the airport, were to be shipped to overseas destinations. In these circumstances, this court is of the opinion that the foundational facts, i.e. possession of the forest produce, were proved by the State.
Whether the appellant proved that the produce was procured properly? - HELD THAT:- There can be no dispute that sandalwood oil is a forest product. However, Section 27 (1) (d)- which enacts the offence- and which has been applied in this case, points to the offender’s conscious mental state when it enacts that whoever “knowingly receives or has in possession any major forest produce illicitly removed from a Reserved Forest” would be subjected to the prescribed punishment. The presumption under Section 69 is with respect to not a conscious mental state, or a direction by the legislature that a certain state of affairs is deemed to exist, but with respect to ownership of the property i.e. that it “belongs to the state, unless the contrary is proved.”
In the present case, the State had to show, that the forest produce was illicitly removed, or was illicitly in the possession of the accused, and in either case, that the same was within his knowledge. This foundational fact has to be proved beyond reasonable doubt. Thereafter, the accused has to establish, a credible or reasonable explanation - The state no doubt has led evidence to show that the goods seized bore the labels of the appellant’s firm and further that no transport licence was available. However, this per se does not establish illicit possession of forest produce within his knowledge.
The High Court fell into error, in holding that the presumption that the seizure of forest produce belonging to the State, automatically can result in a presumption of culpable mental state of the accused- in other words, that seizure of the goods ipso facto meant that the appellant had conscious knowledge about their illicit nature or origin, or that the accused’s inability to account for a transit pass, implied that they procured the goods illegally, thus attracting Section 27 - the materials on the record show that the evidence in the possession of the defence and furnished to the state, was not even produced in court, nor was the primary evidence to substantiate the state’s contentions in that regard, proved.
Appeal allowed.
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