TMI Tax Updates - e-Newsletter
November 13, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Highlights / Catch Notes
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GST:
Grant of Bail - Fraudulent ITC transactions and by misuse of same - Taking note of the custody period of the applicant as also the fact that the applicant is a student pursuing his higher professional degree/diploma, and also note of the fact that there are no allegations of tampering of evidence or influencing the witnesses, the applicant has made out a fit case to grant regular bail - DSC
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Income Tax:
Late payments towards EPF and ESI under section 36(1)(va) - Contribution made prior to filing of the return of income u/s. 139(1) - Addition by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the delayed deposit of the employees's contribution towards ESI and PF though paid well before the due date of filing of return of income u/s. 139(1) is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) - AT
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Income Tax:
Exemption u/s 11 - grant of registration u/s12AA(1)(b)(ii) denied - Activities of the applicant are also evident from the applicant’s audited accounts for the years ended in 2016-17 and 2017-18 - It is also remarkable, as contended on behalf of the applicant, that during the proceedings before the ld. CIT (E), he did not show any dissatisfaction, nor expressed any doubt, nor raised any query to the applicant concerning the charitable nature of the objects of the applicant and the genuineness of its activities, and it was only in the order under appeal that such objection was raised unilaterally for the first time, to the prejudice of the applicant. - the ld. CIT (E) is directed to grant registration to the appellant-Trust under section 12A of the Act forthwith. - AT
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Income Tax:
Reopening of assessment u/s 147 - Validity of reasons to believe - No linkage of the assessee has been established with the information received from investigation wing and the reopening is based merely on borrowed satisfaction. The reasons were mere reasons to suspect and not the reasons to believe that the income had escaped assessment. This being the case, the reopening could not be held to be valid in the eyes of law - AT
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Income Tax:
Denying exemption u/s 11 - violation of Section 13(1)(c) - The breach of Section 13(1)(c) of the Act as alleged by the department is based on the remuneration paid to the two trustees treating that the amounts were diverted by the assessee-trust to the said trustees in the guise of commission and professional income of the trustees. - Order of CIT(A) and ITAT deleting the additions confirmed - HC
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Income Tax:
Applicability of provision of section 144C - breach to pass draft assessment order before issuing the final order - The interpretation of the Revenue inasmuch as the phrase ‘at the first instance’, is wholly misconceived. The mandatory requirement of passing draft order has to be strictly adhered to, irrespective of the remand order passed by the Tribunal. Having regard to the language employed by the legislature under Section 144C of the Act, it is mandatory to the Assessing Officer to pass draft assessment order before issuing the final order, breach of the same would result in violation of the principles of natural justice making the order itself void ab-initio. - HC
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Income Tax:
Disallowance u/s 14A - Assessee offered a suo-motto disallowance - By merely stating, that as the assessee was maintaining consolidated accounts, therefore, in the absence of separate accounts for exempt income yielding investments and its other business activities he was precluded from establishing a one-to-one nexus between the expenses and such exempt income yielding investments, in our considered view, by no means can be taken as discharge of the statutory obligation that was cast upon the A.O of recording a satisfaction that as to why the disallowance u/s 14A offered by the assessee was not to be accepted. - AT
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Income Tax:
Accrual of interest on NPA - it is revealed that the above provisions of section 45Q of the Act or the overriding provisions and therefore these should be given to the preference of the income tax Act. In other words, the assessee was bound to follow the directions issued by the RBI. Accordingly, in our considered view such income cannot be recognized in the books of accounts as alleged by the AO. - AT
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Income Tax:
Nature of income - Assessing u/s 22 of the Act the ALV of the flats/shops held by it as stock-in-trade of its business as that of a developer under the head “House Property”- whether or not the ALV of the flats/shops held by an assessee as its stock-in-trade is liable to be determined and therein assessed under the head “House Property”? - we vacate the addition towards notional lettable value made by the A.O under the head “House Property”. - AT
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Income Tax:
Reopening of assessment u/s 147 - There is no power granted to the AO under the statute to review the order in the garb of initiating the proceedings under section 147 of the Act. Accordingly we hold that, there will not be any difference whether the proceedings were initiated within 4 years or beyond the 4 years as far as change of opinion is concerned. - AT
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Customs:
Jurisdiction - power of DRI to issue SCN - proper officer under section 28 of the Customs Act or not - This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. - AT
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PMLA:
Grant of regular bail - Diversion of funds - Since the charge-sheet in the instant matter has already been filed, merely because ED is still further investigating the matter on some counts, the statutory right of bail u/s 167 CrPC is not available to the accused. The indefeasible right of the accused to claim statutory bail comes to an end once the charge-sheet is filed. - DSC
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Service Tax:
CENVAT Credit - input services - As the facts of the case are not in dispute that the appellant has provided taxable services and paid service tax thereon, therefore, any service used by the appellant for providing the above said taxable service the appellant is entitle to take Cenvat Credit of the service received - AT
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Service Tax:
Interest on delayed payment of service tax through Cenvat Credit account - Period of limitation - it can very well be said that the tax liability or its interest component can never be enforced and recovered from the assessee beyond the period from one year without any allegation of wilful non-payment on the ground of fraud, mis-statement, collusion etc. - AT
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (11) TMI 387
Time Limitation - seeking extension of the period of limitation in all proceedings before the Courts/Tribunals - HELD THAT:- The order dated 23.03.2020 was passed in view of the extraordinary health crisis. On 08.03.2021, the order dated 23.03.2020 was brought to an end, permitting the relaxation of period of limitation between 15.03.2020 and 14.03.2021. While doing so, it was made clear that the period of limitation would start from 15.03.2021. As the said order dated 08.03.2021 was only a one-time measure, in view of the pandemic, we are not inclined to modify the conditions contained in the order dated 08.03.2021. In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 02.10.2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15.03.2021, if any, shall become available with effect from 03.10.2021 - application disposed off.
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2021 (11) TMI 386
Seeking grant of Refund of accumulated Input Tax Credit - HELD THAT:- Issue notice. Mr.Dhruv Bhattarchaya, accepts notice on behalf of the respondents. He prays for and is permitted to file counter affidavit within four weeks. Rejoinder affidavit, if any, be filed before the next date of hearing. List on 18 th April, 2022.
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2021 (11) TMI 385
Issuance of directions to the respondents to allow one time filing of revised Form GST TRAN 1 and GST TRAN 2 by either reopening the GSTN Portal or accepting the revised physical Form GST TRAN 1 GST TRAN 2 - HELD THAT:- The respondent No.5 is directed to decide the representation dated 20.3.2020 (Annexure P-9) of the petitioner by passing a speaking order within a period of three months from the date of receipt of a certified copy of this order. This petition stand disposed of.
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2021 (11) TMI 384
Grant of Bail - Fraudulent ITC transactions and by misuse of same - Section 132 (1) (b) (c) (f) (I) of the CGST Act - HELD THAT:- Taking note of the custody period of the applicant as also the fact that the applicant is a student pursuing his higher professional degree/diploma, and also note of the fact that there are no allegations of tampering of evidence or influencing the witnesses, the applicant has made out a fit case to grant regular bail. Taking note of the custody period of the applicant as also the fact that the applicant is a student pursuing his higher professional degree/diploma, and also note of the fact that there are no allegations of tampering of evidence or influencing the witnesses, the applicant has made out a fit case to grant regular bail - application allowed.
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Income Tax
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2021 (11) TMI 383
Disallowance u/s 14A - Whether no disallowance is called for u/s 14A of the Act by following earlier order which has not reached finality even when all the ingredients of Section 14-A are satisfied in the case of Assessee? - HELD THAT:- As per case M/S. SYNDICATE BANK [ 2020 (1) TMI 1141 - KARNATAKA HIGH COURT] assessee had admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of section 14A. In view of the ruling of the co-ordinate bench as aforesaid, following the law enunciated in the case of Walfort Share and Stock Brokers (P.) Ltd. [ 2010 (7) TMI 15 - SUPREME COURT] as well as Maxop Investments Ltd [ 2018 (3) TMI 805 - SUPREME COURT] we have no reasons to differ from the same. Accordingly, the first substantial question of law is answered in favour of the assessee and against the revenue. Addition made of realization of assets of erstwhile Lakshmi Commercial Bank - Whether the excess of liabilities over assets is not allowed as deduction any subsequent realization out of assets should not be bought to tax by following its earlier orders even when excess of liabilities over assets was not allowed as deduction the question of taxing the realization out of assets of LCB does not arise? - HELD THAT:- It is well settled by law that if the disallowance is made at the time of merger of the LCB with the assesseebank during the assessment year 1988-1989, the assessee was entitled to deduction claimed in the assessment year in question. In other words, no addition could be made in the assessment year in question, if such disallowance of loss has attained finality relating to the assessment year 1988- 1989. Thus, this matter requires re-consideration by the Assessing Officer, in as much as the finality of the matter, which was said to have been pending before this Hon'ble Court on this issue relating to assessment year 1988-1989. Hence, it is appropriate for this Court to set-aside the order impugned and to restore the file to the Assessing Officer to re-examine whether the loss suffered by the assessee was disallowed in the assessment year 1988-1989 and if found in the affirmative, no addition could be made in the assessment order under consideration or in other words, it is the other way if the loss suffered by the assessee has been allowed in the year 1988-1989, addition shall be made in accordance with law. Deprecation on assets leased - HELD THAT:- As decided in CANARA BANK [ 2016 (4) TMI 429 - ITAT BANGALORE] the finding of the fact decided by the Tribunal cannot be interfered in exercise of the powers under Section 260-A of the Act and accordingly, answered the identical substantial question of law framed, against the revenue and in favour of the assessee. The co-ordinate bench has observed that, based on the material evidence, the CIT(A) and the Tribunal held that the transaction of the assessee with the Companies, M/s. Rajender Steels and M/s. Kedia Group of Companies were genuine and the assets which were leased out were in existence and the assessee - Canara bank was entitled to depreciation. This finding of fact could not be interfered with. - Decided against revenue.
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2021 (11) TMI 382
Denying exemption u/s 11 - violation of Section 13(1)(c) of the Act has been alleged is based mainly on the salary/remuneration paid to two trustees of the assessee trust, not in proportionate to service rendered by them but a device designed to divert the income of the assessee - HELD THAT:- It is well settled that the revenue cannot sit in the armchair of an assessee and decide the pattern of working, methodology to be adopted for whole administration of the educational trust including the payment structure of salary/remuneration to be paid to the professors/administrative staffs - department cannot manage or control the managerial affairs of the educational trust. These aspects would not come within the purview of the authorities to decide the income tax liability merely on suspicion that the assessee is claiming huge expenditures to get the corresponding benefits of allowable deductions. No grounds are raised by the revenue relating to the deletion of the additions made by the CIT (Appeals) before the Tribunal, whereas reference was made to the provisions of Section 13(1)(c) of the Act only to draw support for denying exemption under Section 11 of the Act. The Tribunal has rightly rejected the plea of the revenue as bereft of merit. The alleged breach of Section 13(1)(c) of the Act based on these factors is baseless, wholly untenable. Whether collection of capitation fees in the name of voluntary contribution and general of huge surplus would tantamount to commercialization of education by the assessee and, therefore, the assessee institution was rightly not considered by the Assessing Officer as existing solely for educational purposes within the meaning of Section 2(15) or Section 10(23)(c) ? - It is not in dispute that the assessee is imparting education, as such proviso to Section 2(15) of the Act introduced by the Finance Act, 2008 would not be applicable. At this juncture, it would be profitable to refer to the Circular No.11/2008 dated 19.12.2008 issued by CBDT. Having regard to the proviso inserted to Section 2(15) amended vide Finance Act, 2008 wherein, it has been clarified that the newly inserted proviso to Section 2(15) will not apply in respect of the first three limbs of Section 2(15) i.e., relief of the poor, education and medical relief. Consequently, where the object of trust or institution is, relief to the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves in carrying of commercial activities. The breach of Section 13(1)(c) of the Act as alleged by the department is based on the remuneration paid to the two trustees namely, Sri. Suresh Nagpal and Smt. Geetha Nagpal treating that the amounts were diverted by the assessee trust to the said trustees in the guise of commission and professional income of the trustees. Similarly, the assessing officer has regarded the income of the trust being diverted and the cash deposits in the bank accounts of the trustees namely, Sri. Suresh Nagpal and Smt. Geetha Nagpal have remained unexplained which has been deleted by the CIT (Appeals) relating to the assessment years in question which was the subject-matter of the appeals before the Tribunal filed by the Revenue. Tribunal has confirmed the finding of the CIT (Appeals) that the two trustees namely, Sri. Suresh Nagpal and Smt. Geetha Nagpal have filed the returns of income reflecting their salary etc., paid to them by the trusts and the same is in accordance with the pay-scale of a Professor and Administrative Officer respectively. As regards the cash deposits found in account of the two trustees, CIT(Appeals) has rightly held that no explanation could be expected from the assessee - trust to explain the source of its deposits and in case of Smt. Geetha Nagpal, it was satisfactorily explained. Merely to deny the exemption under Section 11 of the Act, reference made to Section 13(1)(c) of the Act by the Revenue is held to be unjustifiable. These factual aspects being considered by the CIT (Appeals) and the Tribunal, we are not inclined to sit in re-appreciation of factual aspects which is impermissible while exercising the power under Section 260A of the Act. We do not find any infirmity or irregularity in the order passed by the Tribunal. Assessee appeal allowed.
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2021 (11) TMI 381
Applicability of provision of section 144C - breach to pass draft assessment order before issuing the final order - HELD THAT:- It was mandatory for the Assessing Officer to have passed draft assessment order under Section 144C of the Act prior to issuing of the final assessment order, issuance of final assessment order sans the draft order is bad in law. In the light of these judgments and perusing the circular instructions, which has been relied upon by the learned counsel for the Revenue that the provisions of Section 144C of the Act would be applicable to any order which proposed to be variation in income or loss returned by the eligible assessee, irrespective of the Assessment Year to which it pertains, it is mandatory that the draft of the proposed order of assessment has to be passed by the Assessing Officer even after remand from the Tribunal. The interpretation of the Revenue inasmuch as the phrase at the first instance , is wholly misconceived. The mandatory requirement of passing draft order has to be strictly adhered to, irrespective of the remand order passed by the Tribunal. Having regard to the language employed by the legislature under Section 144C of the Act, it is mandatory to the Assessing Officer to pass draft assessment order before issuing the final order, breach of the same would result in violation of the principles of natural justice making the order itself void ab-initio. It is well settled law, if the order of the assessment itself is not valid then the further action of the Commissioner in initiating revision proceedings under Section 263 is not valid in the eye of law - substantial questions of law No.1 and 2 are answered in favour of the assessee and against the Revenue Revision u/s 263 - Whether Tribunal is right in law in dismissing Revenue s appeal by holding that assessment order itself has been quashed and as such order passed under section 263 of the Act does not arise? - HELD THAT:- Issue decided in favour of assessee as relying on M/S. CISCO SYSTEMS CAPITAL (INDIA) PVT. LTD., [ 2021 (7) TMI 121 - KARNATAKA HIGH COURT]
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2021 (11) TMI 380
Exemption u/s 11 - grant of registration u/s12AA(1)(b)(ii) denied - piece of land had been leased out to the applicant-Trust by a member of the Trust; that the said arrangement attracted the provisions of section 13(1)(c) read with 13(3) - HELD THAT:- As in the light of the terms of paragraph 3 of the Lease Deed, it is wrong to hold, as has been done by the ld. CIT (E) without going into the aforesaid contents of the Lease Deed, which was duly produced before him, that there is any possibility that on the termination of the lease, the applicant will have the option to transfer back the land and the construction existing thereat, to the lessor, or that the leased land along with the construction thereon would ultimately be handed over to one of the members of the applicant-Trust. Lease Deed is catagoric, when it provides that in case of termination or expiry of the lease, it would be the fair market value of the whole construction, as prevalent at that relevant time, which shall be receivable by the Trust, i.e., the second party to the Trust Deed, that is the lessee, from Dr. Ashok Kumar Agarwal, that is, the first party thereto, or, the lessor. This explicit recital and stipulation is a stark direct contrast in black and white, to the illegal surmisical and conjectural speculation of the ld. CIT (E) that there would be any option available to the applicant-Trust-lessee to transfer the land with the construction thereon, back to the lessor, at the termination of the lease. This observation of the ld. CIT (E) is, therefore, but a result of complete non-reading of the material evidence brought on record by the applicant before the ld. CIT (E), in the shape of the concerned Lease Deed. In item no.20 (APB:25), the Questionnaire states please produce the copy of the bank statement/passbook as on date . In response, vide item no.20 (APB:27) of its Reply dated 5.7.2018, the applicant stated that the Bank Statement is enclosed . CIT (E) has failed to take into consideration all the documentary evidences which are patent on his record, as confirmed by the ld. D.R., and has, therefore, arrived at an erroneous conclusion to the effect that no material was produced. CIT (E) has also observed that no evidence of any charitable activity could be showcased by the applicant. This observation of the ld. CIT (E) also gets negated in view of, firstly, the Note (relevant portion) on Activities (APB:18) filed by the applicant along with the application for registration. Activities of the applicant are also evident from the applicant s audited accounts for the years ended in 2016-17 and 2017-18 - It is also remarkable, as contended on behalf of the applicant, that during the proceedings before the ld. CIT (E), he did not show any dissatisfaction, nor expressed any doubt, nor raised any query to the applicant concerning the charitable nature of the objects of the applicant and the genuineness of its activities, and it was only in the order under appeal that such objection was raised unilaterally for the first time, to the prejudice of the applicant. CIT (E) has also erred, in observing that no material but for the Trust Deed was filed. CIT (E) has also gone wrong in holding that though the applicant s Memorandum contains several objects, the applicant has failed to corroborate them with satisfactory evidences. This, despite the fact that none of the voluminous documentary evidences, as discussed hereinabove, filed by the applicant, stand controverted by the ld. CIT (E). So much so, though a perusal of the ld. CIT (E) s record shows these evidences to actually have been filed before him, as fairly confirmed before us by the ld. CIT (DR), the ld. CIT (E) has illegally ignored them and has gone on to observe that no evidence was filed. It is thus clearly a case of non-reading of material documentary evidence brought on record, rendering the Order under challenge thus unsustainable in the eye of the law. We are satisfied that the applicant- Trust is entitled to registration, as claimed. Finding the grievance of the applicant to be justified, the same is accepted. The order under appeal is held to be a result of complete misreading and non-reading of material documentary evidence produced on record, as discussed in the preceding paragraphs. Therefore, the impugned order is unsustainable in the eye of the law. The same is, accordingly cancelled. Consequently, the ld. CIT (E) is directed to grant registration to the appellant-Trust under section 12A of the Act forthwith. - Decided in favour of assessee.
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2021 (11) TMI 379
Reopening of assessment u/s 147 - Validity of reasons to believe - Reliance on information received from investigation wing - HELD THAT:- Reasons have been recorded in a mechanical manner without ascertaining as to how the assessee has obtained fictitious losses through client code modification. The reasons are mere repetition of the information received from investigation wing without establishing the linkage of the assessee with the broker who manipulated the transactions. The details/nature of transactions which would, prima-facie, lead to reasonable belief of escapement of income has not been specified in the recorded reasons. No linkage of the assessee has been established with the information received from investigation wing and the reopening is based merely on borrowed satisfaction. The reasons were mere reasons to suspect and not the reasons to believe that the income had escaped assessment. This being the case, the reopening could not be held to be valid in the eyes of law since the jurisdictional requirements were not fulfilled. We order so. The assessment framed by Ld. AO is bad in law and accordingly, quashed.
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2021 (11) TMI 378
Delayed deposit of employees contribution to PF and ESI - amount was deposited before the due date of the filing of the return - HELD THAT:- As relying on HARENDRA NATH BISWAS [ 2021 (7) TMI 942 - ITAT KOLKATA] we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision of the Hon'ble High Court in Vijayshree Ltd.[ 2011 (4) TMI 63 - ITAT KOLKATA] u/s. 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.
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2021 (11) TMI 377
Disallowance u/s 14A - Assessee offered a suo-motto disallowance - Mandation of recording of satisfaction - whether or not the A.O had rightly assumed jurisdiction and dislodged the assessee s claim of disallowance u/s 14A ? - HELD THAT:- AO while dislodging the suo-motto disallowance that was offered by the assessee u/s 14A in its return of income, had failed to record his satisfaction that having regard to the accounts of the assessee, as placed before him, it was not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. By merely stating, that as the assessee was maintaining consolidated accounts, therefore, in the absence of separate accounts for exempt income yielding investments and its other business activities he was precluded from establishing a one-to-one nexus between the expenses and such exempt income yielding investments, in our considered view, by no means can be taken as discharge of the statutory obligation that was cast upon the A.O of recording a satisfaction that as to why the disallowance u/s 14A offered by the assessee was not to be accepted. In our considered view, the A.O by referring to the accounts of the assessee, as were there before him, ought to have pointed out the expenditure which were claimed by the assessee as a deduction against its non-exempt income, but the same as per him were attributable to earning of the exempt income As the A.O before taking recourse to the theory of apportionment and computing of the disallowance under Sec. 14A r.w. Rule 8D(2)(iii) had neither recorded his satisfaction that the suo-motto disallowance offered by the assessee under Sec. 14A was not correct, nor referring to the assessee's accounts whispered a word as to how the other expenditure claimed by the assessee with respect to its non-exempt income were related to its exempt income, therefore, had clearly exceeded his jurisdiction for re-computing the said disallowance in the hands of the assessee. We, thus, in the backdrop of the aforesaid invalid assumption of jurisdiction by the A.O, are unable to uphold the disallowance determined by him u/s 14A r.w Rule 8D. Accordingly, we herein set-aside the order of the CIT(A) and direct the A.O to restrict the disallowance to the extent suo-motto offered by the assessee in its return of income. As we have set-aside the order of the CIT(A), which finds its genesis in the determination of the disallowance by the A.O u/s 14A r.w Rule 8D, therefore, the remaining grounds raised by the assessee, wherein it has assailed the said disallowance to the extent sustained by the CIT(A) are rendered as academic in nature - Ground of appeal No. 1 is allowed in terms of our aforesaid observations. Disallowance u/s 36(1)(va) r.w.s 2(24)(x) - assessee had failed to deposit the employees contributions to Provident Fund and Employee State Insurance Corporation within the due dates (including the grace period) - HELD THAT:- As the employees contribution towards Provident Fund and Employees State Insurance were deposited by the assessee prior to the due date of filing of its return of income hence, the same was not liable to be disallowed under Sec. 36(1)(va) r.w.s 2(24)(x) of the Act. See GEEKAY SECURITY SERVICES PVT. LTD. [ 2018 (12) TMI 702 - BOMBAY HIGH COURT] - we vacate the disallowance made by the A.O under Sec. 36(1)(va) r.w.s 2(24)(x) - Decided in favour of assessee.
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2021 (11) TMI 376
Allowable business expenditure - Expenses related to project of NTPC which according to the A.O. was incurred prior to setting up of the business - HELD THAT:- We note that in the assessees's own case, the Tribunal upheld the view of the Ld. CIT(A) for A.Y. 2012-13 and A.Y. 2013-14, and held that assessee has set up its business. And further the Tribunal did not interfere with the partial confirmation of the disallowance made by AO regarding the claim of pre-operative expenses as revenue expenditure viz, legal and professional expenses, community welfare expenses, environmental expenses, project expenses, salaries which were directly attributable to the project of NTPC and the said expenses to be capitalized. And it is further noted that the Tribunal confirmed the action of Ld. CIT(A) allowing other expenditure claims as revenue expenditure which were exclusively related to the running of the business. Thus, we note that for A.Y. 2012-13 and A.Y. 2013-14, so far as the expenditure related to the NTPC project was concerned, the Ld. CIT(A) held it to be expenses related to pre-operative stage and disallowed it as revenue expenditure and directed it to be capitalized, which action of Ld. CIT(A) has been upheld by the Tribunal [ 2021 (11) TMI 363 - ITAT JODHPUR] - And we note that in those appeals, the assessee has not pressed the C.O. which was challenging the action of the Ld. CIT(A) directing the capitalization of expenditure related to expenditure incurred in respect of NTPC project. So the action of Ld. CIT(A) to that extend got crystallized. Appeal of the Revenue stands dismissed.
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2021 (11) TMI 375
Accrual of interest on non-performing assets (NPA) - Income Recognition - Accrual of income - correct system of accounting - AO disagreed with the contention of the assessee on the reasoning that the assessee is following mercantile system of accounting which requires to account for the income on accrual basis and under accrual system of accounting, the collection of the interest income is not necessary - whether the assessee was bound to recognize the income on the assets classified as NPA under the provisions of the income tax Act after ignoring the circular issued by the RBI? - HELD THAT:- The provisions of section 43D of the Act provides that the income by way of interest with respect to the bad or doubtful that s shall be recognized as income in the manner as prescribed, having regard guideline issued by RBI. Accordingly, the Rule 6EA of Income Tax Rule was formulated with respect to the recognition of income for bad and doubtful debts. The Rule 6EA of the Income Tax Rule, inter-alia, provides that the income on the bad and doubtful debts shall not be recognised as income if interest thereon is overdue for more than 6 months. On perusal of the above provisions, it is revealed that the above provisions of section 45Q of the Act or the overriding provisions and therefore these should be given to the preference of the income tax Act. In other words, the assessee was bound to follow the directions issued by the RBI. Accordingly, in our considered view such income cannot be recognized in the books of accounts as alleged by the AO. At the time of hearing, the ld. DR has not brought anything on record contrary suggesting the provisions of section 45Q of the RBI Act are not applicable to the present case. We also note that in the case of Pr. CIT vs. Shri Mahila Sewa Sahakari Bank Ltd. [ 2016 (8) TMI 377 - GUJARAT HIGH COURT] has held that the assessee being a Bank has to follow the guidelines issued by the RBI which has overriding effect over the provisions of Income Tax Act - though the income of the assessee has accrued under the mercantile system of accounting but the same cannot be charged to tax for the reason that the RBI being regulatory authority prohibits to recognize such income in the books of accounts. Hence, we do not find any reason to interfere in the finding of the learned CIT (A). Thus the ground of appeal of the revenue is dismissed. Disallowance of amortization of Government Securities expenses being an expenditure of capital in nature - whether such amount amortised over the lifetime of the investments/securities i.e. till maturity can be claimed as deduction in the profit and loss account? - HELD THAT:- As per CBDT bearing Instruction No. 17/2008 dated 26th November 2008 it is revealed that the assessee is entitled to amortise the amount paid over and above the face value of the investments in the manner as discussed above. See RAJKOT DIST. CO-OP BANK LTD. C/O. AD. VYAS AND CO. [ 2014 (3) TMI 110 - GUJARAT HIGH COURT] - Admittedly, the facts of the case on hand are not in dispute. The AO has only disallowed the amount of amortisation of the securities which were held to maturity. In view of the above, we do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the revenue is dismissed. Disallowance u/s 14A r.w.r. 8D - suo-moto disallowance made by assessee - HELD THAT:- No further disallowances required to be made under section 14A read with Rule 8D of Income Tax Rule as the assessee suo moto have made disallowances to the extent of exempt income. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the revenue is dismissed. Depreciation of safes and fire resistant filling cabinet - AO restricted depreciation to the tune of 10% and disallowed the excess amount of depreciation confirmed by the learned CIT (A) - In the present case the AO treated the fixed assets being Safes and the Fire Resistant Filing Cabinet as furniture and fixture whereas the assessee treated the same as plant and machinery - HELD THAT:- there remains no ambiguity to the fact that there was no benefit extended by the learned CIT (A) to the assessee. In other words the ground of appeal raised by the assessee before him was rejected. Thus there was no grievance to the revenue against the order of the learned CIT (A). Hence, the ground of appeal filed by the revenue before us is not maintainable. Accordingly we dismiss the same. Hence the ground raised by the revenue is dismissed.
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2021 (11) TMI 374
Deduction u/s 80IA - AO rejected the claim of the assessee u/s 80IA of the Act with the observation that generation of steam is not a form of power eligible for deduction, no separate undertaking was set up for production of instant dry seized and it is manufactured in an undertaking which already existing prior to 01.10.1994 and according to AO, the undertaking is established by stipulating the old existing business for the purpose of section 80IA - HELD THAT:- As decided in own case [ 2017 (11) TMI 1480 - ITAT MUMBAI ] allowed claim of deduction to assessee as held neither Section 80HH nor Section 80I of the Act statutorily obliged the assessee to maintain its accounts unit-wise and that it was open to maintain its accounts in a consolidated form and that unit-wise net profits could be prepared by the Auditors from the Consolidated Books of Accounts and on that basis compute deduction under Section 80HH / 80I - Decided against revenue. Disallowance u/s 43B - liability incurred during the previous year but not paid on or before due date of filing return of income - CIT(A) observed that it is evident that the claim of the assessee is not a fresh claim but a revised claim and he has also considered the judicial pronouncement relied by the assessee and in view of above discussions, he is of the considered view that claim of the assessee required consideration in impugned assessment order. Accordingly, he allowed the deduction claimed by the assessee - HELD THAT:- Claim of the assessee is legitimate claim and such revised claim can be entertained by the first appellate authority and accordingly Ld. CIT(A) has allowed the claim of the assessee by relying on decision of GOETZE (INDIA) LIMITED [ 2006 (3) TMI 75 - SUPREME COURT] and the claim of the assessee is legitimate. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A). Accordingly, ground raised by the Revenue is dismissed. Disallowance of expenses incurred by the employees of the assessee in the clubs - HELD THAT:- It is normal practice to allow the employees to use the facilities in the club and also it is part of the business to entertain the visitors as part of business promotion. The Courts have held that club membership fees for employees incurred by the assessee is business expenses allowable u/s 37 of the Act. Therefore, we are in agreement with the above propositions and accordingly, we set aside the order passed by the Ld. CIT(A) and direct the AO to allow the club membership fees claimed by the assessee.
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2021 (11) TMI 373
Disallowance u/s 14A - claim of the ld. A.R that the CIT(A) had gravely erred in not restricting the disallowance under section 14A to the extent of the exempt income - HELD THAT:- Disallowance under section 14A in the case of the assessee before us, as claimed by the ld. A.R, and rightly so, is liable to be restricted only to the extent of the exempt dividend income that was earned by it during the year under consideration. WE, thus, in terms of our aforesaid observations direct the A.O to restrict the disallowance u/s 14A to an amount of exempt income earned by the assessee during the year under consideration. The Ground of appeal no. 1 is thus allowed in terms of our aforesaid observations. Nature of income - Assessing u/s 22 of the Act the ALV of the flats/shops held by it as stock-in-trade of its business as that of a developer under the head House Property - whether or not the ALV of the flats/shops held by an assessee as its stock-in-trade is liable to be determined and therein assessed under the head House Property ? - HELD THAT:- As decided in M/S OSHO DEVELOPERS OSHO VERSUS ACIT-32, MUMBAI [ 2020 (11) TMI 218 - ITAT MUMBAI] Tribunal had directed the A.O to delete the addition made by him towards the ALV of the flats that were held by the assessee as stock- in-trade of its business as that of a builder and developer. -Thus we vacate the addition towards notional lettable value made by the A.O under the head House Property . The Ground of appeal no.2 is accordingly allowed. Correct head of income - income earned from letting out of buildings/developed spaces in Industrial Park/SEZ - HELD THAT:- Admittedly, the CBDT vide its Circular No. 16/2017 dated 25.04.2017 had after referring to certain judicial pronouncements observed, that the income from the Industrial Parks/SEZ established under various schemes framed and notified under section 80IA(4)(iii) of the Income Tax Act, 1961 is to be treated as the assessee s income from business, provided the conditions prescribed under the schemes are met. As the aforesaid CBDT Circular No. 16/2017 (supra) was issued subsequent to the filing of the revised return of income by the assessee on 30.03.2017, therefore, there was no occasion for the assessee to have offered the lease rental income for tax under the head Income from Business Profession . Be that as it may, as the Circulars issued by the CBDT are binding on the Income-tax department, therefore, we herein restore the issue to the file of the A.O with a direction to consider the aforesaid claim of the assessee in the backdrop of the aforementioned Circular No. 16/2017 - A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. The additional ground of appeal is allowed for statistical purpose. Addition of disallowance u/s 14A that was made to the Book Profit of the assessee company - HELD THAT:- The aforesaid issue is squarely covered by the order of ACIT Vs. Vireet Investments Pvt. Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] observed, that book profit under section 115JB is not to be enhanced by the disallowance made by the A.O under section 14A of the Act. We, thus, respectfully following the aforesaid view taken by the Tribunal, uphold the view taken by the CIT(A). The Grounds of appeal raised by the revenue are dismissed. Disallowance of commission /brokerage expenses - Principle of consistency - HELD THAT:- When the Department after duly scrutinizing the aforesaid claim of deduction of commission/brokerage expenses raised by the assessee in the preceding and the succeeding years, had accepted the same vide its respective assessment orders passed under section 143(3) of the Act, therefore, in the absence of any change in the circumstances, there was no justification on its part in taking a different view and declining the said claim for deduction of expenses during the year under consideration. Although the principle of res-judicata is not applicable to income-tax proceedings, however, we cannot remain oblivious of the fact that an inconsistent approach of the Department can also not be permitted. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of Radha Soami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] as observed that in the absence of any material change justifying the Revenue to take a different view of the matter, a different and contrary stand could not be taken. We, thus, in the backdrop of our aforesaid observations find favor with the claim of the assessee that in the absence of any shift qua the facts attending to the assessee s claim for deduction of commission/brokerage expenses during the year under consideration, as in comparison to the preceding and succeeding years, there was no justification on the part of the lower authorities in declining its claim for deduction of the said expenditure during the year under consideration.
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2021 (11) TMI 372
Reopening of assessment u/s 147 - disallowing the deduction under section 42 - Change of opinion - whether any opinion was formed by the AO during the assessment proceedings under section 143(3)? - HELD THAT:- The words and phrases 'Mere Change of Opinion' do not appear in the provision. As such Change of opinion' postulates formation of opinion and then change thereof. The formation of opinion is possible only after examining the facts and application of mind. If particular deduction claim by the assessee not examined by AO in original assessment under section 143(3), it is a case of 'no opinion. Thus question of 'change of opinion' does not arise. AO has applied his mind during the assessment proceedings under section 143(3) of the Act and thereafter reached to the conclusion by allowing the deduction to the assessee under section 42 of the Act. The question whether the AO has correctly or wrongly given the deduction under section 42 of the Act becomes irrelevant. It is for the reason that the AO being one of the authority under the Income Tax Act has examined the issue and allowed the deduction to the assessee. Thus the view was formed by the AO. Subsequently changing the opinion on the same issue by issuing a notice under section 147 of the Act will amount to review of the order passed under section 143(3). There is no power granted to the AO under the statute to review the order in the garb of initiating the proceedings under section 147 of the Act. Accordingly we hold that, there will not be any difference whether the proceedings were initiated within 4 years or beyond the 4 years as far as change of opinion is concerned. Admittedly, the production sharing contract was not available before the AO during the assessment proceedings under section 143(3) of the Act which was necessary to reach to the conclusion whether the assessee was entitled for the deduction under section 42 of the Act. But the AO without having such contract in his hands has allowed the deduction under section 42 of the Act after conducting the necessary verification which has already been discussed in the preceding paragraph. Now the reference to the production sharing contract becomes redundant in view of the fact that the AO has taken some view after the application of mind. That application of mind whether right or wrong cannot be subject matter of dispute in the proceedings initiated under section 147 of the Act. We are not impressed with the finding of the authorities below on this technical issue. Accordingly, we set aside the finding of the learned CIT (A) by holding that the assessment framed under section 147 read with section 143(3) of the Act is bad in law. Hence the ground of appeal of the assessee is allowed. Deduction u/s 80IB with respect to each oil well/cluster of wells treating them as separate undertaking - AO held that the assessee is not an industrial undertaking which is eligible for deduction - As per the assessee, each well is a separate undertaking - AO during the assessment proceedings observed that the assessee is not maintaining separate books of accounts with respect to each well - HELD THAT:- There being no change in the facts and circumstances viz a viz under the provisions of law, we set aside the issue to file of AO for fresh adjudication in the light of direction given in the order of this tribunal in the own case of the assessee - Hence the ground of appeal of the Revenue is allowed for statistical purposes. Depreciation @ 80% on oil wells treating the same as plant and machinery in pursuant to the entry 8(xii) of depreciation table of Income Tax Rule - HELD THAT:- Issue decided in favour of assessee as relying on own case reasoning which was adopted by the Tribunal holding that the well would not form a part of the plant and machinery for drilling of oil is not possible. In that view of the matter, the view taken by CIT (Appeals) is restored and the findings of the Tribunal are reversed. Hence, the issue raised in this Appeal is answered in favour of the assessee
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2021 (11) TMI 371
Late payments towards EPF and ESI under section 36(1)(va) - Contribution made prior to filing of the return of income u/s. 139(1) - HELD THAT:- As decided in Ridhi Sidhi Mills case [ 2021 (11) TMI 363 - ITAT JODHPUR] .where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va). Addition by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the delayed deposit of the employees's contribution towards ESI and PF though paid well before the due date of filing of return of income u/s. 139(1) is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) - Decided in favour of assessee.
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2021 (11) TMI 370
Late deposit of employees share of PF ESI which were deposited after the due date but before the due date of filing of return of income - AO made the additions of the impugned amounts for the reasons that the assessee did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - HELD THAT:- As relying on RIDHI SIDHI MILLS (INDIA) PVT. LTD. [ 2021 (11) TMI 363 - ITAT JODHPUR] it is not in dispute that the assessee deposited the contribution of PF ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1). As relying on HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA [ 2021 (7) TMI 942 - ITAT KOLKATA] and MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY [ 2021 (8) TMI 563 - ITAT JODHPUR] the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
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2021 (11) TMI 363
Late deposit of employees share of PF ESI which were deposited after the due date but before the due date of filing of return of income - AO made the additions of the impugned amounts for the reasons that the assessees did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - HELD THAT:- It is not in dispute that the assessees deposited the contribution of PF ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1) - As relying on HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA [ 2021 (7) TMI 942 - ITAT KOLKATA] and MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY [ 2021 (8) TMI 563 - ITAT JODHPUR] the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
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Customs
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2021 (11) TMI 369
Jurisdiction - power of DRI to issue SCN - proper officer under section 28 of the Customs Act or not - HELD THAT:- This precise issue was examined by the Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] . The Supreme Court observed that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import is a power that has been conferred to review the earlier decision for assessment. This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. The Punjab and Haryana High Court in M/S STEELMAN INDUSTRIES VERSUS UNION OF INDIA AND OTHERS [ 2021 (8) TMI 1236 - PUNJAB AND HARYANA HIGH COURT] also, in view of the decision of the Supreme Court in Canon India, allowed the Writ Petition and set aside the entire proceedings arising from the show cause notice as the Additional Director General, DRI was not the proper officer. The order passed by the Commissioner of Customs (Adjudication) cannot be sustained and is set aside - Appeal allowed - decided in favor of appellant.
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2021 (11) TMI 368
Jurisdiction - power of Additional Director General, DRI to issue SCN - section 28 of the Customs Act - HELD THAT:- The Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] observed that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import is a power that has been conferred to review the earlier decision for assessment. This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. It would thus be seen that the Supreme Court in Canon India held that the entire proceedings initiated by the Additional Director General, DRI by issuance of a show cause notice was without any authority of law and was, therefore, liable to be set aside - In BAKEMAN S HOME PRODUCTS PVT. LTD. VERSUS COLLECTOR OF CUS., BOMBAY [ 1997 (6) TMI 178 - CEGAT, NEW DELHI] , the Tribunal held that the proposal for confiscation and penalty cannot be segregated from duty demand and, therefore, the proceedings for confiscation and imposition of penalty cannot be sustained. The order passed by the Commissioner of Customs (Adjudication) cannot be sustained and is set aside - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2021 (11) TMI 367
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - NPA - Financial Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT:- In view of the fact the account of the Corporate Debtor was declared as NPA on 30th June, 2014. The Appellant submitted that the application under Section 7 of the IBC filed by Respondent No. 1 on 14.02.2019 was much after delay of 3 years, so application under Section 7 is hit by limitation. It is admitted fact that in the letter dated 04.01.2020 the Appellants stated that they are ready to settle the amount with both the Banks at the total value of 8.75 Crores, this OTS amounts to acceptance of the debt and in view of the law laid down in the judgment passed by Hon ble Supreme Court in Asset Reconstruction Company (India) Limited Vs. Bishal Jaiswal Anr. [ 2021 (4) TMI 753 - Supreme Court ] the application under Section 7 of the IBC is not barred by limitation. There is no illegality in the impugned order - Appeal dismissed.
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PMLA
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2021 (11) TMI 366
Grant of regular bail - Diversion of funds - rejection of bail application on the ground that investigation is not complete and applicant/accused may influence the fair course of investigation but now the circumstances have changed as complaint u/s 45 of PMLA has been filed by the investigating agency - HELD THAT:- The material available on record makes out a formidable case of money laundering against the applicant/accused. The submission that pre-trial detention is antithetic to the Presumption of Innocence is infact missing the woods for the trees. Pretrial detention is neither preventive nor punitive. Pre-trial detention is infact an incident of Fair Trial. There may be cases wherein releasing the accused would enable him to jeopardize the course of fair trial by attempting to wipe out the traces of crime. Therefore, in appropriate cases, pre-trial detention becomes indispensable to ensure a free and fair trial. All the material witnesses in the instant case are family members/relatives/friends/close acquaintance of the applicant/accused. They are apparently working under his direct influence. The applicant/accused being a qualified Chartered Accountant and an influential man in all likelihood would attempt to wipe off his footsteps to jeopardize not only the fair trial but the crucial aspects of pending investigations - Since the charge-sheet in the instant matter has already been filed, merely because ED is still further investigating the matter on some counts, the statutory right of bail u/s 167 CrPC is not available to the accused. The indefeasible right of the accused to claim statutory bail comes to an end once the charge-sheet is filed. Considering the nature of offence, seriousness of allegations and a strong possibility of applicant/accused attempting to influence the course of trial by influencing the witnesses and tampering with the evidence, the bail application is bereft of any merits - Application dismissed.
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Service Tax
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2021 (11) TMI 365
CENVAT Credit - input services - Renting of Immovable property Service - Consulting Engineers Service - Commercial Construction, Erection Commissioning Services - GTA Service - Works Contract Service - section 2(l) of the Cenvat Credit Rules, 2004 - HELD THAT:- The facts of the facts are not in dispute that appellant has provided the output service and paid service tax thereon. Therefore, any service received by the appellant is an input service and is entitle for Cenvat credit in terms of Rule 3 of Cenvat Credit Rules, 2004. The adjudicating authority fell in error by holding that as the project was derailed therefore, no service has been provided by the appellant. Although, during impugned period i.e. April-2009 to March-2010, the project was work in process therefore, it cannot be held that no taxable service has been provided by the appellant. As the facts of the case are not in dispute that the appellant has provided taxable services and paid service tax thereon, therefore, any service used by the appellant for providing the above said taxable service the appellant is entitle to take Cenvat Credit of the service received - the appellant is entitle to take Cenvat credit of ₹ 5,57,25,547/-, hence no demand is sustainable against the appellant, consequently, no penalty is imposable on the appellant. Appeal allowed - decided in favor of appellant.
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2021 (11) TMI 364
Interest on delayed payment of service tax through Cenvat Credit account - Period of limitation - suppression of facts - Rule 6 of Service Tax Rules, 1994 - HELD THAT:- The interest is proposed to be levied on the appellant for the period from October 2006 to September 2010 and the show cause was issued on 19.03.2012, during which period the respondent-department was only empowered to demand tax due for a period of one year unless, there is allegation of fraud, mis-representation, collusion, misstatement, suppression of fact or contravention to provisions of the Finance Act is made with proposal for penalty under Section 78 of the Finance Act, 1994. No such penalty was proposed in the show cause notice nor even there is any allegation of wilful withholding of payment of service tax on any of the above referred grounds was made. This being the facts on record there is no requirement to give a finding that under Section 75 of the Finance Act, interest is a natural corollary and consequence for any default of payment of service tax within the stipulated time. On the contrary, it can very well be said that the tax liability or its interest component can never be enforced and recovered from the assessee beyond the period from one year without any allegation of wilful non-payment on the ground of fraud, mis-statement, collusion etc. Appeal allowed - decided in favor of appellant.
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