TMI Tax Updates - e-Newsletter
December 24, 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

• GST:

  Levy of GST - payment of notice pay by an employee to the applicant employer in lieu of notice period, under clause 5(e) of Schedule II of CGST Act - GST is not applicable on payment of notice pay by an employee to the applicant-employer in lieu of notice period. - GST is not payable by the employer on the amount of premium paid towards Group Medical Insurance policy of non-dependent parents recovered from employees and from retired employees. - GST is not payable by the employer on recovery of nominal amount for availing the facility of canteen. - AAAR
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• Income Tax:

  Revision u/s 263 by CIT - payment of job work charges - The job work in the form of labour are done on the different locations and once the project is completed, the workers move out to different places or migrate back their homes and, therefore, it is impossible to get their current addresses so as to enable the Assessing Officer to issue notice under Section 133(6) of the Act, which actually would have been completely futile exercise. Mere saying that failure to issue notice under Section 133(6) by the Assessing Officer to the labourers, the assessment order is erroneous and prejudicial to the interest of revenue de-hors the nature of business activity carried out by the assessee cannot render the assessment order erroneous and prejudicial to the interest of revenue. - AT
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• Income Tax:

  Reopening of assessment u/s 147 - operation of Section 148A - Effect of COVID pandemic and lock down - Extension of provisions of Section 148 which was prevailing prior to the amendment of Finance Act, 2021 - the power to issue notice under Section 148 which was prior to the amendment was also saved and the time was extended. In a result, the notice issued on 30.03.2021 (Annexure P-1) would also be saved. - HC
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• Income Tax:

  Addition u/s 68 - the provision of 68 does not speak about mere belief of the Revenue in regard to the proof of the genuineness of the transaction as well as identity and creditworthiness of the creditors but must have a clear finding on this aspect - Main ingredients of the provision of Section 68 has not been satisfied - Additions confirmed - AT
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• Income Tax:

  Certificate u/s 197 - Deduction of TDS are low rate or NIL rate - India Switzerland DTAA read with the protocol and Most Favoured Nation (“MFN”) clause - no separate notification is required insofar as the applicability of the protocol is concerned and the same forms an integral part of the Convention - order of higher appellate authorities should be followed ‘unreservedly’ and mere fact that decision is not acceptable to the Revenue cannot be a ground for not following the decision of higher authority. - HC
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• Income Tax:

  Settlement Commission order - Commission should direct the Commissioner to submit a report which has never been done by the Commissioner - The assesee had stated that on 14th February 2014 and 24th February, 2014 they have filed their objection to the said letter which has not been dealt with by the Commission not even referred to by the Commission. - HC
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• Income Tax:

  Deduction of interest (premium) on Zero Coupon Convertible Bonds(ZCCB) - Disallowances being the proportionate claim of the premium on ZCCBs written off during the tenure of Zero Coupon Convertible Bonds - Assessee is following mercantile methods of accounting - different treatment in books of accounts and income tax computation - The assessee could have very well debited the amount to the profit and loss account, but it has chosen to debit the amount to share premium account in the books, which is also permitted as per Companies Act. No infraction of law in this regard was pointed out. - The amount of debenture redemption premium is accrued and liable to be deducted. - AT
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• Income Tax:

  Rejection of certification u/s 80G - Charitable object u/s 2(15) - Charitable purpose - We note that just because in the objects of the trust, it is mentioned that assessee-trust may celebrate Ganesh Utsav, Janmastami, Navaratri, Diwali, New Year, Holi does not mean that it is engaged in religious activities. These are the normal functions in the society and everybody celebrate them, hence it does not mean that the assessee-trust has established only to celebrate Ganesh, Janmastami, Jalaram Jayanti, Navratri, Diwali, New Year and Holi. - AT
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• Income Tax:

  Revision u/s 263 by CIT - The order u/s 263 of the IT Act, is valid even if one of the several items dealt with therein is found prejudicial to the interest of revenue. Further, it is also important to mention here that the provisions of Section 263 can be invoked even where full facts are disclosed but the AO has not examined these details as per correct provisions of law. - AT
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• Income Tax:

  Disallowance at 2% of total labour expenditure - CIT-A deleted the addition partly - The CIT(A) observed the claim of deleting entire disallowance is not acceptable in view of holistic view considering the facts on the issue also clearly demonstrate that there was no evidence or adverse material against the books of the assessee to hold that the payments made to all these four entities are not genuine. Therefore, we do not accept the findings of CIT(A) in confirming the addition on the basis of ad hoc estimation and restricting the disallowance at 2% as against the 4% as held by AO, in our opinion, is not justified. - AT
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• Income Tax:

  Income from house property - Deemed let out value of the closing stock - the unsold flats which are stock in trade when they were sold they are assessable under the head ‘income from business’ when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head ‘income from house property’. - AT
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• Income Tax:

  Levy of penalty u/s. 221 - default the payment of TDS to the government - assessee in default - the Assessing Officer levied penalty at very exorbitant rate that 5% pm for which there is no legal sanction when the department itself has paid interest at 6% pa to the assessee on the refund due to the assessee. Being so, in our opinion, it is reasonable and fair to levy penalty at 1% pm i.e. 12% pa instead of 5% pm levied by AO. - AT
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• Income Tax:

  Deduction u/s 80-IC in respect of the amount added back under Section 40(a)(ia) - even if the expenditure is disallowed u/s.40(a)(i) of the Act, the result will be that the disallowance will go to increase the profits of the business which is eligible for deduction u/s.80-IC of the Act and consequently the deduction u/s. 80-IC of the Act should be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. - AT
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• Customs:

  Valuation of imported goods - fuel on board aircraft returning to India on completion of international leg - inclusion of insurance, freight and landing charges in the assessable value - The demand in the impugned order has incorrectly taken recourse to rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, therefore, must be set aside - AT
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• Customs:

  Valuation of imported goods - aircraft engine - vehicle expressly imported for a limited period and for ‘stop gap’ fitment during the overhaul of the regular engines by the provider of the imported replacement - The impugned order has adopted a base value to which additions have been made and, in the process, utilized a notional price in the agreement that is neither price paid nor price payable which is a necessary qualification for ‘transaction value’ of ‘imported goods’, ‘identical goods’ or ‘similar goods’ in rule 3, 4 and 5 - Likewise rule 7 and 8 of the said Rules specify the circumstances that validate appraisal. - AT
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• Customs:

  Principles of natural justice - petitioners' request of cross-examination of certain witnesses refused - As of now, the petitioners have merely received show cause notice, adjudication of which is yet to be done. Whether the department will rely upon the statements of the concerned witnesses in the final adjudication and if so to what extent cannot be foreseen. Instead of interfering with the pending proceedings before the customs authorities, we keep the question open. We leave it open to the petitioners to raise this legal contention if ultimately so required. - Tri
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• Corporate Law:

  Sanction of Scheme of merger by absorption - when the ‘Transferor and Transferee Company’ involve a parent Company and a Wholly Owned Subsidiary the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors can be dispensed with as the facts of this case substantiate that the rights of the Equity Shareholders of the ‘Transferee Company’ are not being affected. Therefore, obtaining 90% consent Affidavits from its unsecured Creditors is not required keeping in view the facts of the attendant case. - AT
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• Service Tax:

  CENVAT Credit - capital goods - case of department is that since the appellant has transferred the credit from Mumbai to Surat the same is not eligible to them on the ground that they have not complied with the provision of Rule 10(2) of Cenvat Credit Rules, 2004 - In the present case even though the appellant have taken registration in Surat but there is no transfer of business on account of change in ownership the registration taken in Surat is by the appellant themselves. Therefore, Rule 10(2) clearly does not apply in the facts of the present case. - merely because a service provider transferred his business to a different location is operated under his own name, the rule 10(2) does not apply. - AT
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• Central Excise:

  Extended period of limitation - Clandestine Removal - excess production in respect of CPC over and above the ER 1/ER 4 return - The demand has been raised for the period 2013-14 in 2018 onwards whereas the spot memo was issued by the Department in 2016 itself. No explanation has been furthered by the Department in respect of such gross delay in proceeding with the matter. Therefore, invocation of the extended period of limitation is not justified. - AT
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• Central Excise:

  Entitlement to reduced penalty - total amount deposited at the time of investigation is much more than the confirmed duty demand, interest thereon and 25% penalty - there is no reason to deny the benefit of a reduced penalty of 25% to the appellant even though the appellant had not opted but the fact remains that the amount remains very much with the department - AT
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Articles

• Aadhaar authentication is compulsory under GST w.e.f. January 01, 2022
• RECENT DEVELOPMENTS IN GST
• ADJUDICATING AUTHORITY IS HAVING POWER TO DETERMINE THE AMOUNT PAYABLE TO REGISTERED VALUER

Notifications

• Customs

• 76/2021 - dated 22-12-2021 - ADD
  Seeks to levy anti-dumping duty on imports of 'Hydrofluorocarbon Blends (All blends other than 407 and 410 are excluded)' originating in or exported from China PR for a period of five years.

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• 102/2021 - dated 22-12-2021 - Cus (NT)
  Amendment in Notification No. 98/2021-CUSTOMS (N.T.), dated 16th December, 2021

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• GST - States

• S.O. 166 - dated 22-12-2021 - Bihar SGST
  Bihar Goods and Services Tax (Ninth Amendment) Rules, 2021

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• AE-I/DT&T/2021-22/04 - dated 26-10-2021 - Delhi SGST
  Commissioner, State Tax confer powers under section 69, section 70, section 71, section 73 & section 74 of the DGST Act 2017, Jurisdictional Officer

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• (4-H/2021) FD 02 CSL 2021 - dated 7-12-2021 - Karnataka SGST
  Karnataka Goods and Services Tax (Ninth Amendment) Rules, 2021

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• S. R. O. No. 975/2021 - dated 21-12-2021 - Kerala SGST
  Amendment in Notification No. 73/2017/TAXES, dated 30th June, 2017

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• S. R. O. No. 974/2021 - dated 21-12-2021 - Kerala SGST
  Amendment in Notification No. 72/2017/TAXES dated 30th June, 2017

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• S. R. O. No. 973/2021 - dated 21-12-2021 - Kerala SGST
  Amendment in Notification No. 62/2017/TAXES dated 30th June, 2017

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• G.O. Ms. No. 40 - dated 16-12-2021 - Puducherry SGST
  Puducherry Goods and Services Tax (Ninth Amendment) Rules, 2021.

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• 3240/CTD/GST/2021/3. - dated 15-12-2021 - Puducherry SGST
  Exempts the registered person, whose aggregate turnover in the financial year 2020-21 is up to two crore rupees

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• S.O. 127/P.A.5/2017/S.99/2021 - dated 28-11-2021 - Punjab SGST
  Supersession Notification No. S.O. 70/P.A. 5/2017/S.99/ 2018, dated the 14th May, 2018

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• S.O. 139/P.A.5/2017/S.128/2021 - dated 12-11-2021 - Punjab SGST
  Seeks to grant waiver / reduction in late fee in furnishing FORM GSTR-10, subject to the condition that the returns are filed between 22.09.2020 to 31.12.2020

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• S.O. 130/PGSTR/2017/R.48/Amd./2021 - dated 12-11-2021 - Punjab SGST
  Amendment in Notification No. S.O 19/PGSTR/2017/R.48/2021, dated the 28th January, 2021

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Circulars / Instructions / Orders

• FEMA - 21 - dated 23-12-2021
  Exim Bank Government of India supported Line of Credit (LoC) of USD 40 million to the Government of the Togolese Republic

News

• Mandatory Aadhaar authentication for registered person

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• Shri Piyush Goyal held talks with Australian Trade Minister to expedite the bilateral Comprehensive Economic Cooperation Agreement (CECA) negotiations

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Case Laws:

• GST

• 2021 (12) TMI 1002
  Seeking grant of regular bail - fake input tax credit invoices, without actual supply of goods - fraudulent and irregular input tax credit affecting collection of Goods and Services Tax - without assessment of amount involved, search and seizure conducted - Sections 16 132 (1) (b) (c) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Section 67 of the GST Act provides for power of inspection, search and seizure. For search and seizure, if Proper Officer only after recording reason to believe that a taxable person has suppressed any transaction relating to supply of goods or services or both or stock of goods or claimed input tax credit in excess of his entitlement to evade tax under the GST Act; or goods of a person engaged in business of transporting or operator of a warehouse have escaped payment of tax may authorize any other officer to inspect any place of business of taxable person. Except recording reason to believe, there is no other bar for the Proper Officer for inspection, search and seizure. It is not the case of applicant nor any argument to the effect has been advanced that no reason has been recorded. Hence, submission that prior assessment has not been made before invoking powers under Section 67 of the GST Act, does not stand and it is hereby repelled. Applicants are arrested for commission of offences punishable under Sections 16 132 (1) (b) (c) of the GST Act. Section 138 of the GST Act deals with compounding of offences. Offence registered against applicants under Section 132 (1) of the GST Act is made compoundable by the Commissioner on making payment to the Central Government or State Government either before or after institution of prosecution. In case at hand, case is instituted against applicants and they were arrested. The applicant are allowed to be enlarged on bail - application allowed.

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• 2021 (12) TMI 1001
  Provisional attachment of petitioner's bank account and immovable properties - taxable person as defined under Section 2(107) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- This Court in WATERMELON MANAGEMENT SERVICES PRIVATE LIMITED VERSUS THE COMMISSIONER, CENTRAL TAX, GST DELHI (EAST) ANR. [ 2020 (6) TMI 36 - DELHI HIGH COURT] has held that writs cannot be entertained as petitioner has efficacious alternative remedy before competent authority by filing objections under Rules 159(5) of the CGST Rules, 2017. The present writ petition is disposed of with liberty to the petitioner to file his objections under Section 159(5) of the CGST Rules, 2017 - Petition disposed off.

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• 2021 (12) TMI 1000
  Validity of impugned order of final intimation - non-compliance of the statutory formalities under Section 61 read with Rule 99 of the West Bengal GST Acts and Rules as well as Sections 73,74 and 75 of the West Bengal GST Act, 2017 - HELD THAT:- Learned Advocate appearing for the respondent is not in a position at present to contradict the aforesaid allegations of the petitioner, which is substantiated from record and which are part of this writ petition. The petitioner has been able to make out a prima facie case for interim order in the matter as well as issues involve in this writ petition require affidavit from the respondents for final adjudication. Matter to appear for final hearing on 15th January, 2022.

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• 2021 (12) TMI 999
  Levy of GST - payment of notice pay by an employee to the applicant employer in lieu of notice period, under clause 5(e) of Schedule II of CGST Act - amount of premium of Group Medical Insurance Policy of non-dependent parents recovered from the employees retired employees at actuals covered under the said Policy - recovery of nominal amount for availing the facility of Canteen at the Refinery at Bina when it is no supply as per clause 1 of Schedule III of CGST Act - recovery of telephone charges recovered from the employees over and above the fixed rental charges payable to BSNL - Canteen services to all the employees without charging any amount (Free of cost) will fall under para 1 of Schedule II of CGST Act. Whether GST is applicable on payment of notice pay by an employee to the applicant-employer in lieu of notice period under clause 5(e) of Schedule II of GST Act? - HELD THAT:- Services by an employee to the employer in the course of or in relation to his employment have been placed out of the purview of GST. In present case also the said compensation which accrues to the employer is in relation to the services provided by the employee. Such compensation is related to the services not provided by him to the employer during the course of employment. In other words, the employer is being compensated for the employee's sudden exit. Merely because the employer is being compensated does not mean that any services have been provided by him or that he has 'tolerated' any act of the employee for premature exit - the Ld. AAR had erred in concluding that such activity was leviable to GST. Whether the amount of premium paid towards Group Medical Insurance policy of non-dependent parents recovered from employees and recoveries from retired employees who were covered under the policy is taxable under GST or not? - HELD THAT:- Any activity done against consideration is treated as supply however, such an activity must be in the course of business or for the furtherance of business - the activity undertaken by the applicant like providing of mediclaim policy for the employees' non-dependent parents/ retired employees through insurance company neither satisfies conditions of Section 7 to be held as supply of service nor it is covered under the term business of Section 2(17) of CGST ACT 2017. Accordingly, facilitating medical insurance services to non dependent parents and retired employees upon recovery of premium amount on actuals cannot be considered as 'supply of service' under CGST Act or MPSGST Act. Whether GST is applicable on recovery of nominal amount for availing the facility of canteen at the Bina refinery? - HELD THAT:- MPAAR has ruled that the Goods and Services Tax is applicable on the amount recovered from employees, mainly on the premises that 'the appellant is supplying food to its employees', which would be covered under the definition of the term 'business' under Section 2(17) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017. However, the appellant has asserted before us that it is collecting the portion of employees' share and paying to Canteen Service Provider, a third party, which is nothing but the facility provided to employees, without making any profit and working as mediator between employees and the contractor / Canteen Service Provider. Under these circumstances, we hold that the Goods and Services Tax is not applicable on the activity of collection of employees' portion of amount by the appellant, without making any supply of goods or service by the appellant to its employees. The Goods and Services Tax is not applicable on the collection, by the appellant, of employees' portion of amount towards foodstuff supplied by the third party / Canteen Service Provider. Whether GST is applicable on recovery of telephone charges from the employees over and above the fixed rental charges payable to BSNL? - HELD THAT:- The activity undertaken by the applicant like providing of telephone facility to employees through BSNL neither satisfies conditions of Section 7 to be held as supply of service nor it is covered under the term business of Section 2(17) of CGST ACT 2017. Accordingly, facilitating telephone connection to employees upon recovery of usage charges on actuals cannot be considered as 'supply of service' under COST Act or MPSGST Act. Whether full ITC is applicable to the applicant or ITC will be restricted to the extent of GST borne by the applicant employer? - HELD THAT:- Input credit of GST paid to BSNL on usage charges recovered from employees would not be available to the appellant as they are not providing any outward supply of telephone services and the facility is also not attributable to the purposes of their business in terms of Section 17(1) of the CGST Act - Input credit of GST paid to the insurance provider would also not be available to the applicant- as health insurance is in the excluded category under Section 17 (5) of the CGST Act and as said insurance services are not any outward supply of the applicant - As regards provision of canteen facility, It is found that the appellant has submitted that the canteen facility was required to be provided by a company as per Section 46 of the Factories Act, 1948. Therefore applying the proviso under Section 17(5)(b) that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law, we are of the view that input credit of GST paid would be available to the appellant. Whether the provision of canteen services to all the employees without charging any amount (free of cost) will fall under Para 1 of Schedule III of GST Act and will not be subjected to GST? - HELD THAT:- Services by an employee to the employer in the course of or in relation to his employment have been placed out of the purview of GST. In this case canteen services are provided to employees by the employer. So this is not a case where some services have been provided by the employee to the employer. There is nothing on record to show that the said facility provided to employees is part of the wage structure - canteen services would not be leviable to GST at the hands of the employer because of findings that the employer was merely a facilitator between the canteen service provider and the employee and that the employer was mandated to run a canteen under the Factories Act.

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• Income Tax

• 2021 (12) TMI 998
  Reopening of assessment u/s 147 - increase of authorised share capital - HELD THAT:- By a letter dated 5th October 2015 the AO had called upon petitioner to produce the evidence in support of increase of authorised share capital, produce the evidence of share allotment and name and address of the parties from whom share premium was received, among other things. Petitioner by its letter dated 23rd December 2015 provided the details of share premium received including name of the party from whom it was received. After considering the same, the assessment order has been passed on 10th February 2016. Therefore, it is not permissible for an Assessing Officer to reopen the assessment based on the very same material with a view to take another view without consideration of material on record one view is conclusively taken by the Assessing Officer. It is also not permissible to reopen purely on change of opinion. A general statement that the escapement of income is by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him.

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• 2021 (12) TMI 997
  Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT:- All material facts had been disclosed by petitioner in the course of the regular assessment proceedings and the reasons recorded for initiation of reassessment too give reference only to the details already submitted by petitioner in the course of the original assessment proceedings and nothing more. It is a well settled judicial principle that the true test of income chargeable to tax escaping assessment is whether there exists fresh tangible material on the basis of which an appropriate conclusion can be reached. In the absence of such fresh material, the reassessment proceedings would be invalid. This Court has held that reassessment based on a reconsideration of material already available on record at the time of the original assessment proceedings tantamounts to a change of opinion and would be invalid. Since the relevant facts, which were already on record at the time of the original assessment proceedings, also form the basis for the initiation of the subject reassessment proceedings, it is amply clear that there was no fresh material that could have come to the notice of respondent no.1 to warrant reopening of assessment. Information received from DDIT (Inv.) regarding petitioner indulging in illegitimate activity of booking bogus profit/loss on scrip of M/s. Divine Multimedia (India) Ltd. would not by itself constitute any fresh material for reopening assessment. Information received from DDIT (Inv.) has already been examined and inquired into by respondent no.1 in the original assessment proceedings where after submitting various details with regard to details of investments, details of short term capital gains and long term capital gains the same had been satisfactorily explained and accepted by respondent no.1. The notice issued under Section 148 is issued without jurisdiction and requires to be set aside. - Decided in favour of assessee.

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• 2021 (12) TMI 996
  Assessment u/s 153A/153C - jurisdictional benchmark of belong to under Section 153C - Whether Tribunal has failed to appreciate that seized material indicated that certain portion of the transaction was conducted out of book? - HELD THAT:- This Court finds that the very same document seized from the residence of Mr.Lalit Modi, had been considered by the learned predecessor Division Bench in the case of Principal Commissioner of Income Tax (Central -2) v. Vinita Chaurasia [ 2017 (5) TMI 992 - DELHI HIGH COURT] . After considering the same, the learned predecessor Division Bench had concluded that the Assessing Officer appears to have proceeded purely on conjecture as regards what the document states without noticing the internal contradiction and inconsistencies. Since the learned predecessor Division Bench has, on merits, found that there was no error committed by the Tribunal in deleting the addition made by the Assessing Officer on the basis of the same seized material/ document, this Court is of the view that in the present facts of the case, no substantial question of law arises for consideration

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• 2021 (12) TMI 995
  Certificate u/s 197 - Deduction of TDS are low rate or NIL rate - India Switzerland DTAA read with the protocol and Most Favoured Nation ( MFN ) clause - application of the Petitioner u/s 197 had been disposed of prescribing a rate of 10% on the dividends distributed by Cotecna Inspection India Private Limited ( CIIPL ) to the Petitioner as opposed to the applicable rate of 5% under the India-Switzerland Double Taxation Avoidance Agreement ( DTAA ) read with the MFN clause and the Amending Protocol to the DTAA - HELD THAT:- The issues raised in the present writ petition are no longer res integra, as they are fully covered by the judgments of this Court in Concentrix Services Netherlands B.V. [ 2021 (4) TMI 1051 - DELHI HIGH COURT] as well as in Nestle SA [ 2021 (4) TMI 1267 - DELHI HIGH COURT] . In Concentrix Services Netherlands B.V. (Supra) it has been held that no separate notification is required insofar as the applicability of the protocol is concerned and the same forms an integral part of the Convention. It is well settled law that the Department cannot refuse to follow binding jurisdictional decision merely on the basis that the Department proposes to file an appeal. The Supreme Court in UOI v. Kamlakshi Finance Corpn Ltd. [ 1991 (9) TMI 72 - SUPREME COURT] has held that order of higher appellate authorities should be followed unreservedly and mere fact that decision is not acceptable to the Revenue cannot be a ground for not following the decision of higher authority. The impugned order and certificate are set aside and the respondent is directed to issue a certificate under Section 197 of the Act indicating therein that the rate of tax, on dividend, as applicable qua the Petitioner is 5% in India-Switzerland DTAA as held in Nestle SA (Supra) which was also under India-Switzerland DTAA.

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• 2021 (12) TMI 994
  Exemption u/s 11 - registration u/s 12AA cancelled - assessee claims to be a public charitable trust having been so registered vide a Trust deed on the file of Sub-Registrar, Peravurani, Thanjavur District - submission of assessee that registration being given to the writ petitioner-assessee for over thirty years has been cancelled without giving an opportunity to the writ petitioner-assessee and passed non speaking order - HELD THAT:- This Court is of the considered view that this is not a fit case for interfering with the impugned order in writ jurisdiction and that the prayer of the writ petition in the captioned main writ petition cannot be answered in affirmative i.e., cannot be acceded to the cancellation of registration underSection 12AA of said Act is not vide the impugned order but it only records the cancellation; There is nothing to demonstrate why the writ petitioner did not upload the registration certificate under Section 12AA of said Act in spite of adequate ample and multiple opportunities being given to the writ petitioner, all of which is captured in the aforementioned two paragraphs - On a demurrer, even if it is to be construed that the cancellation is vide impugned order cancellation of registration under Section 12AA of said Act is also revisable under Section 264 of said Act. Suffice to say that there is an effective and efficacious alternate remedy even against cancellation. To be noted, as mentioned in the opening part of this point this is on a demurrer - The submission that the writ petitioner-assessee being given the benefit of registration under Section 12AA of said Act for thirty years continuously falls flat on its face in the light of aforementioned assessment order dated 30.04.2021 made for the assessment year 2018-19 Non speaking order - The impugned order, in the considered view of this Court cannot be said to be a non-speaking order. Two critical paragraphs in the impugned order which has captured the crux and gravamen of the matter had been extracted and reproduced supra. Those two paragraphs by itself and of course the rest of the order make it clear that it is not a non-speaking order. It may at best be a terse order. An order can be tersely eloquent, it cannot be construed to be a non-speaking order unless it is laconic, not when it is epigrammatic or merely because it is terse. Therefore, this Court is of the considered view that the argument that the impugned order is a non-speaking order becomes a non-starter i.e., an argument which does not take off. Alternate remedy - As the stated case of the writ petitioner that the assessment order qua 2018-19 has been assailed by the writ petitioner by way of a statutory appeal. The arguments that vide assessment order 2018-19 there is cancellation of 12AA registration certificate, does not hold water and does not carry the writ petitioner any further for two reasons. One reason is as already alluded to supra, the impugned order is not the order by which the cancellation has been made and on a demurrer even if that be so, the same is revisable under Section 264 of said Act and more importantly the second reason is sauce for Goose is sauce for Gander too. If the writ petitioner can assail the assessment order for 2018-19 (where Section 12AA benefit have been negatived) by way of a statutory appeal under Section 246 of said Act, there is no reason as to why the writ petitioner cannot do it qua impugned assessment order. This by itself downs the curtains from all these arguments and it douses the writ petitioner's campaign against the writ petitioner. Notwithstanding the dismissal of the captioned writ petition, if the writ petitioner chooses to avail the alternate remedy either by way of an appeal under Section 246 of said Act or by way of a revision under Section 264 of said Act as the case may be, subject to limitation and subject to pre-deposit condition, the appellate authority/revisional authority can consider the appeal/revision on its own merits and in accordance with law untrammelled by observations made in this order as the observations made in this order are for the purpose of deciding the tenability of interference qua the impugned order in writ jurisdiction. In the light of the narrative, discussion and dispositive reasoning set out supra, the sequitur is the captioned writ petition fails and the same is dismissed.

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• 2021 (12) TMI 993
  Settlement Commission order - whether the communication dated 27/30th December, 2013 is a report which has to be construed as such in terms of Section 245D(3)? - HELD THAT:- On a perusal of the said letter we find that is not a report but is an internal communication sent by the assessing officer to his Commissioner of Income Tax and on reading of the communication it is clear that the assessing officer has requested his commissioner to allow him to enquire and investigate the whole case through principals/beneficiaries and obtain correct picture of the business activities and interest income and factual position of assets of transparency and find out the income accurately. Further the assessing officer qualifies the communication by stating that the submission furnished is in the form of a report based on records without cross-checking or verification. AO states that due to lack of fairness on the part of the assessee in disclosing income, the Settlement Commissioner may reject the application. Thus by reading the said communication dated 27/30th December, 2013 it is clear that is not a report in terms of sub Section 3 of Section 245D which mandates that Commission should direct the Commissioner to submit a report which has never been done by the Commissioner. All those which we have pointed out above would go to show that the order passed by the Commissioner flows from serious illegality and irregularity calling for interference. That apart the alleged report dated 27th December, 2013 as admittedly been filed only on 15th January, 2014, the date on which the application was finally been heard by the Commission and orders were reserved. The assesee had stated that on 14th February 2014 and 24th February, 2014 they have filed their objection to the said letter which has not been dealt with by the Commission not even referred to by the Commission. Thus we can safely hold that there has been serious violation of principles of natural justice. On all the above grounds we are fully satisfied that the order passed by the Commission calls for interference and consequently we are required to interfere with the order passed by the learned Single Judge dismissing the writ petition. In the result, the appeal is allowed. The order passed in the writ petition is set aside and the order passed by the Settlement Commission is quashed and the assessment is relegated back to the assessing officer to get assessment in accordance with law after effective opportunity to the assessee and not being influenced in any of the these observations made in any of the letters and in any of the reports and any observation made by the Settlement Commission which order has been set aside by this Judgment.

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• 2021 (12) TMI 992
  Maintainability of appeal - low tax effect - -HELD THAT:- It is not in dispute that the noted Circular No. 17/2019 is extension of Circular No. 3/2018 issued by the CBDT whereby certain modifications have been made in the original circular especially in respect of enhancement of revision of monetary limits for appeals/SLPs in income tax matters. Appellant-Department was duly represented at the time of hearing of appeal before the ITAT, Chandigarh. No such ground had been raised on behalf of the Appellant- Department before the ITAT, Chandigarh requiring the said Tribunal to decide the matter on merits in view of Clause 10 (c) of the Circular No. 3/2018. Once the Appellant-Department had not raised the plea of applicability of Clause 10 (c) of CBDT Circular No. 3/2018, it cannot be allowed to raise such plea in the present appeal.ITAT has correctly held the appeal before it to be not maintainable in view of clear mandate of Circular No. 17/2019. Same principle applies to the filing of present appeal. Hence, no substantial question of law arises for determination by this Court.

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• 2021 (12) TMI 991
  Reopening of assessment u/s 147 - operation of Section 148A - Effect of COVID pandemic and lock down - Extension of provisions of Section 148 which was prevailing prior to the amendment of Finance Act, 2021 - whether notice issued to the petitioner on 30.03.2021 under Section 148 without following the procedure under Section 148A without giving an opportunity of hearing would be illegal and contrary to the provisions of Section 148A and it cannot be sustained? - application of old provisions of Section 148 of the Income Tax Act was extended initially uptill 30th April, 2021 and thereafter was further extended uptill 30th day of June, 2021 - HELD THAT:- Under the circumstances by the notifications the operation of Section 148 of the Income Tax Act was extended, thereby deferment of Section 148A was done. It was done by the Ministry of Finance by way of conditional legislation in the peculiar circumstances which arose during the pandemic and lock down and Central Government can not be said to have encroached upon turf of Parliament. Notifications would show that they were issued in exercise of power conferred under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and time for issuance of notice under Section 148, the end date was initially extended uptill on 30th day of April 2021 and subsequently again by notification dated 27th April, 2021 the time limit of 30th day of April 2021 was further extended up till 30th day of June, 2021. By effect of such notification, the individual identity of Section 148, which was prevailing prior to amendment and insertion of section 148A was insulated and saved uptill 30.06.2021. The pandemic and lock down prevailed all over India. The people could not file their returns or comply with the various mandates of Income Tax Act. Considering such situation for the benefit of the assessee and to facilitate the individual to come out of woods the time limit framed under Income Tax Act was extended. Likewise certain right which was reserved in favour of the Income Tax Department was also preserved and was extended at parity. Consequently the provisions of Section 148 which was prevailing prior to the amendment of Finance Act, 2021 was also extended. Here in this case, the power to issue notice under Section 148 which was prior to the amendment was also saved and the time was extended. In a result, the notice issued on 30.03.2021 (Annexure P-1) would also be saved. Therefore, no interference is required to be made in the said issuance of notice and accordingly the petition is dismissed.

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• 2021 (12) TMI 990
  Deduction u/s 80HHC - quantification of deduction - HELD THAT:- It cannot be disputed by the Revenue that the decision of the Division Bench of this Court in the case of P.R.Prabhakar [ 2004 (5) TMI 26 - MADRAS HIGH COURT] was reversed by the Hon'ble Supreme Court in the case of P.R.Prabhakar v. Commissioner of Income Tax, Coimbatore [ 2006 (7) TMI 121 - SUPREME COURT] , wherein, the Court held that the Commission is also to be considered for determining the deduction under Section 80HHC Accordingly, this appeal filed by the assessee is allowed and the order passed by the Tribunal AND the order passed by the CIT(A), are set aside, insofar as it pertains to the issue under consideration, namely, the interpretation of Section 80HHC(3) and restricting the relief under the said provision. Assessing Officer is directed to afford an opportunity of personal hearing to the authorised representative of the assessee and apply the decision of the Hon'ble Supreme Court as mentioned above and re-do the assessment on the said aspect, in accordance with law.

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• 2021 (12) TMI 989
  Deduction of interest (premium) on Zero Coupon Convertible Bonds(ZCCB) - Disallowances being the proportionate claim of the premium on ZCCBs written off during the tenure of Zero Coupon Convertible Bonds - Assessee is following mercantile methods of accounting - different treatment in books of accounts and income tax computation - HELD THAT:- Accounting entries are not determinative of the true nature of the transaction. The accounting treatment has been given in compliance with the companies Act provisions. There is no claim of any violation in this regard. The claim in income tax Act has to be made as per mercantile system and consistent method accounting. A liability which has been accrued has to be provided and allowed. It is not that liability is allowed only on the payment basis. Adverse inference cannot be taken for non deduction of TDS as reasons submitted by the assessee are cogent. As submitted above, these bonds are listed on Singapore Stock Exchange and till redemption on maturity, the beneficiary of the premium is not known. In such circumstances in absence of the identification of recipient and TDS deduction cannot be given credit for. Further, though not directly on this issue the CBDT circular on deep discount bond referred above also provides that on similar issue, TDS has to be deducted on the point of redemption. Furthermore as submitted, at the time of redemption tax was deducted at source in accordance with the provisions of the Act. This submission has not been disputed. Hence, this reasoning for rejection is also not sustainable. The argument of revenue that the amount has not been debited in account is also not sustainable as the assessee has very much been debited in the account to the debit of share premium account. The Companies Act duly permits the same. Hence, the plea that amount is contingent and not debited is not correct, when revenue itself has accepted the debit in this regard of the amount to the share premium account. Revenue authorities cannot take a shifting stand that the amount is correctly accrued and debit to share premium account is correct, but the same is still a contingent amount. The assessee could have very well debited the amount to the profit and loss account, but it has chosen to debit the amount to share premium account in the books, which is also permitted as per Companies Act. No infraction of law in this regard was pointed out. Since revenue has accepted the debit of the premium to share premium account, it is clear that revenue has accepted that redemption premium amount has been accepted as accrued. In the present case there is nothing on record that the borrower had exercised any such discretion. In this view of the matter, the said case law SM HOLDING AND FINANCE P. LTD. [ 2003 (3) TMI 44 - BOMBAY HIGH COURT] is fully applicable on the facts of the case and the liability on account of debenture redemption premium is liable to be deducted from the income and cannot be treated as contingent liability. The amount of debenture redemption premium is accrued and liable to be deducted. Hence, in the background of aforesaid discussion and precedents, we set aside the orders of the authorities below, and decide the issue in favour of the assessee. Disallowance u/s. 14A - suo-moto disallowance made by assessee - HELD THAT:- We note that assessee has given the reasons for expenditure, which as per the assessee is disallowable u/s.14A. Assesee has provided the basis of working of disallowance, however, the same has been rejected by the authorities below without cogent reasoning. The AO and Ld.CIT(A) are mentioning that it is difficult to accept that assessee has incurred only that much of expenditure. This is no reason at all. It is settled law that proper satisfaction is necessary in this regard in rejecting assessee s contentions. See M/S. BOMBAY STOCK EXCHANGE LTD. [ 2019 (11) TMI 105 - BOMBAY HIGH COURT] wherein as come to the conclusion that nonsatisfaction as recorded by the Assessing Officer for rejecting the sou motu disallowances claimed by the assessee is not done as required under section 14A(2) . Corporate guarantee commission - TPO has calculated the ALP @ 6.67 - HELD THAT:- We note that Hon ble Bombay High Court in CIT vs.Everest Kento Cylinders Ltd. Kanto, [ 2015 (5) TMI 395 - BOMBAY HIGH COURT ] has confirmed the ITAT order of 0.5% corporate guarantee commission - Thus we direct that disallowance should be restricted @0.5%

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• 2021 (12) TMI 988
  Disallowing interest on delay in payment of rent to Bombay Port Trust u/s. 57(1)(iii) of the Act while assessing occupancy charges under the head income from other sources - HELD THAT:- This issue was very much before this tribunal and the tribunal had remanded the matter to examine all the expenses, which were raised in ground, which included this claim. The authorities below have clearly erred in holding that ITAT has not remanded this issue. The ITAT in concluding portion has clearly mention that various expenses claimed by the assessee require examination at the end of AO. As the amount involved is duly allowable as claimed. The plank of the authorities below in denying that this was not before ITAT is wrong and not sustainable. Hence, set aside the order of Ld. CIT(A) and decide the issue in favour of the assessee.

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• 2021 (12) TMI 987
  Disallowance deduction u/s.35AC - donation to Navjeevan Charitable Trust was not genuine and thereby disallowing the claim of deduction - HELD THAT:- The assessee has made donation in the year 2009-10, 2010-11 2011-12. At the time of donation to Navjeevan Charitable Trust, the Trust was operational and there was no investigation in those Assessment Years. The Revenue at no point of time pointed out that the donation made by the assessee to SHG and PH were returned back to the assessee in the form of cash. In fact, all the records were before the Assessing Officer which stated that the assessee has made those donations as per the approved terms of donation under the Income Tax Act. The assessee has made the donation as per the provisions of the Income Tax Act and no defect was pointed out by the Assessing Officer or by the CIT(A) regarding the donation to Navjeevan Charitable Trust. In fact, the Revenue authorities could not establish that the said amount was returned back to the assessee from any of the records as well. - Decided in favour of assessee.

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• 2021 (12) TMI 986
  Deduction u/s 80P(2)(d) denied - As argued appellant is an Cooperative housing society not carrying on the business of banking or credit facilities to its members - main contention of the assessee is that the interest income received from co-operative banks ought to be granted deduction u/s 80P(2(a)(i) - HELD THAT:- The instant case arises out of the order passed u/s 143(3) r.w.s. 263 - assessee has not raised the plea before the lower authorities that investments are made with co-operative banks out of statutory compulsion, and therefore, interest income arising from such investments are to be assessed as business income. The assessee before the Tribunal also has not furnished the details of investments. Therefore, we are not in a position to examine whether the investments are made to maintain the statutory liquidity reserve. The assessee without furnishing the necessary details cannot expect the Tribunal to restore the issue to the A.O. for de novo consideration, especially when this case as its origin from the order of the CIT passed u/s 263 - As mentioned earlier, the assessee s prayer before the Income Tax Authorities as well as the ground raised before the Tribunal is only regarding non-granting of deduction u/s 80P(2)(d) and not u/s 80P(2)(a)(i) - the main contention of the assessee (without raising any ground before the Tribunal) that it is entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act is rejected. If interest income is to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income ought to be allowed as deduction u/s 57 - We find an identical issue was considered by the Hon ble jurisdictional High Court in the case of Totagars Cooperative Sale Society Ltd. v. ITO [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] The assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the Act prescribes for taxing only the net income (i.e. total income minus the expenses incurred for earning such income), this plea of the assessee has to be necessarily entertained, especially in the light of case of Totagars Sale Co- operative Society [supra] Accordingly, the case is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57. Appeal filed by the assessee is allowed for statistical purposes.

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• 2021 (12) TMI 985
  Addition u/s 68 - no genuineness of the transaction and the identity and creditworthiness of the creditors not proved - HELD THAT:- Appellant had given adequate information in order to proof the genuineness of the transaction as well identity of the creditors whereas the condition of the provision of Section 68 is this that when any sum is found credited in the books of the assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the AO satisfactory, the same so credited to be charged to Income Tax as the income of the assessee. Where the assessee is a company where the public are not substantially interested and the sum so credited consists of Share Application Money, share capital, share premium or any such amount by whatever name called, the explanation offered by such assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded in the books of the company also offers and explanation about the nature and source of such sum so credited which has been found to be satisfactory the addition under Section 68 is maintainble. Thus, the provision of 68 does not speak about mere belief of the Revenue in regard to the proof of the genuineness of the transaction as well as identity and creditworthiness of the creditors but must have a clear finding on this aspect. Main ingredients of the provision of Section 68 has not been satisfied and taking into consideration this particular aspect of the matter we find that the Ld. AO rightly added the impugned amount in the hands of the assessee - Decided in favour of Revenue.

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• 2021 (12) TMI 984
  Rectification of mistake u/s 154 - deduction of interest expenses on loan - CIT (A) in his order under section 250 has disallowed the interest expenses on the reasoning that the assessee failed to produce any documentary evidence suggesting that the assessee has taken loan for the construction of the cinema hall building - HELD THAT:- Since the learned CIT (A) himself has admitted that the building for the cinema was constructed out of the loan which was also repaid by the assessee, then to our understanding, the learned CIT (A) cannot disallow the interest expenses by holding that that there was no document concerning the loan furnished by the assessee. In fact, we are of the view that the learned CIT (A) has given contradictory finding in his order dated 19th March 2019 under section 250 of the Act, which amounts to a mistake apparent from record and the same is liable to be corrected under the provisions of section 154 of the Act. We also note that the assessee before the learned CIT (A) in the proceedings under section 154 of the Act has submitted that, as evident from the statement of facts filed along with rectification application, the loan was taken by the assessee for the purpose of purchasing the equipment, plant, furniture and construction of the cinema building. But the learned CIT (A) in his order under section 154 of the Act without rejecting the contention of the assessee has reached to the conclusion that there is no mistake apparent in the order passed under section 250 of the Act dated 18-03-2019. Thus the order of the learned CIT (A) seems to be a non-speaking order. CIT (A) was under the obligation to reject the contentions of the assessee with reasoning. But he has not done so. Accordingly, in the interest of justice and fair play, we are setting aside the issue to the file of the CIT (A) for fresh adjudication as per the provisions of law after considering the documents of the assessee and after providing reasonable opportunity of being heard to the assessee. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. Appeal of the assessee is allowed for statistical purposes.

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• 2021 (12) TMI 983
  Deduction u/s 80P(2)(a)(i) - assessee is a co-operative society and engaged in the activity of providing credit facilities to the members - HELD THAT:- In the year under consideration there was the surplus fund available with the assessee which was deposited with the banks in order to generate the interest income as well as to maintain the liquidity for the repayment of the deposits accepted from the members. The assessee on such funds has earned gross amount of interest income only. As per the AO, the impugned amount of interest was not arising to the assessee from the activities of financing to the members. AO computed the proportionate amount of interest on the deposits from non-members which was not eligible for deduction under section 80P(2)(a)(i). Both the parties and perused the materials available on record including the case law cited the assessee. The provisions of section 80P(2)(a)(i) provides the deduction to a co-operative society engaged in the business of banking or providing credit facilities to its members. The provisions of the section are without any ambiguity. In other words, the income from the activity of financing from the members is only eligible for deduction under section 80P(2)(a)(i) of the Act. If there is any income arising to the co-operative society from the non-members that will not be subject to deduction under section 80P(2)(a)(i). It is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i) of the Act. There remains no ambiguity that income received by the assessee on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i). The profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under Section 80P(2)(a)(i) - No merits in the argument advanced by the learned counsel for the assessee - we hold that there is no infirmity in the order of the learned CIT (A), requiring any interference. Hence, we uphold the same. Hence, the ground of appeal of the assessee is dismissed.

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• 2021 (12) TMI 982
  Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - whether the penalty is on account of furnishing of inaccurate particulars of income or for concealment of income? - HELD THAT:- Assessment order dated 24/12/2011 clearly shows that the AO recorded satisfaction that the assessee was guilty of concealment of income/filing inaccurate particulars of income and therefore proceedings under section 271(1)(c) of the Act were to be initiated separately. A copy of notice dated 23/12/2011 is produced before us and it shows that the penalty was proposed for the assessee having concealed the particulars of income or furnishing inaccurate particulars of such income. Neither the assessment order, nor the notice issued under section 271(1)(c) read with section 274 of the Act specify the ground on which the penalty was proposed. It simply states that either for concealment of income or for furnishing of inaccurate particulars, such proceedings are initiated. It is therefore, clear that neither the assessment order nor the notice issued under section 274 of the Act give any reasonable grounds for the assessee to defend themselves. Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] wherein it was held that the notice issued by the learned Assessing Officer would be bad in law if it did not specify which limb of section 271(1)( c ) of the Act the penalty proceedings had been initiated under i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars thereof. - Decided in favour of assessee.

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• 2021 (12) TMI 981
  Revision u/s 263 by CIT - payment of job work charges - HELD THAT:- From the assessment record as placed in the paper book, it is seen that the Assessing Officer has raised specific query with regard to the job work payment and asked for the details including the bills as well as the TDS deducted on every payment. In response the assessee had filed party-wise details, bills and vouchers, details of payments which were made through account payee cheques and thereafter TDS certificate deducted under Section 194C with regard to every job work payment along with the confirmations given by the parties. This fact was brought specifically to the ld. PCIT in reply to the show cause notice filed before him and nowhere has he disputed that the details were not filed during the course of assessment proceedings or the AO has not verified before him Sole reason on which he has held that assessment order is erroneous and prejudicial to the interest of revenue is that the Assessing Officer should have conducted enquiry under Section 133(6) of the Act from these parties and since enquiry has not been conducted under Section 133(6) of the Act, therefore, he came to the conclusion that no enquiry has been done by the Assessing Officer. First of all, nowhere the ld. PCIT has disputed the details which were available on assessment record placed before him. If the job work payment is supported by bills and vouchers and has been made through banking channels, that is, the payments were made through account payee cheques and also confirmed by the parties, then where was the question that these are non genuine. Most importantly, the entire payment is reconciled with the TDS certificates as all the payments were subject to TDS u/s 194C. The job work in the form of labour are done on the different locations and once the project is completed, the workers move out to different places or migrate back their homes and, therefore, it is impossible to get their current addresses so as to enable the Assessing Officer to issue notice under Section 133(6) of the Act, which actually would have been completely futile exercise. Mere saying that failure to issue notice under Section 133(6) by the Assessing Officer to the labourers, the assessment order is erroneous and prejudicial to the interest of revenue de-hors the nature of business activity carried out by the assessee cannot render the assessment order erroneous and prejudicial to the interest of revenue. Nowhere Ld. CIT has, stated that how can notice under Section 133(6) can be served on the labour force who are mobile and having no permanent address. PCIT has not brought any record or himself conducted any enquiry that such a payment of job work charges are bogus and non-genuine, or are inflated expenditure debited in the profit and loss account. Accordingly, the reasons given by the ld. PCIT for setting aside the assessment order cannot be upheld - Decided in favour of assessee.

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• 2021 (12) TMI 980
  Rejection of certification u/s 80G - Charitable object u/s 2(15) - HELD THAT:- As gone through the objects of the assesse-trust and noted that these objects include the following to provide platform to the member of the association for educational activities, to remove wrong traditions and discrimination with women illiteracy etc., to promote bhajan and dharma, to promote education among new students to organize programme of national integrity, to organize programme of blood donation, eye donation camp to help every creature at the time of natural calamities or man-made calamities in the area of Union Territory of Daman Diu. We note that just because in the objects of the trust, it is mentioned that assessee-trust may celebrate Ganesh Utsav, Janmastami, Navaratri, Diwali, New Year, Holi does not mean that it is engaged in religious activities. These are the normal functions in the society and everybody celebrate them, hence it does not mean that the assessee-trust has established only to celebrate Ganesh, Janmastami, Jalaram Jayanti, Navratri, Diwali, New Year and Holi. For example, on the occasion when the new charitable activities are started by the trust, the peoples of the trust pray lord Ganeshji, and that does not mean that trust is engaged in religious activities. To pray lord Ganeshji and to celebrate these normal functions are kind of a routine activities of human being - these are not the main objects. We note that main objects of the trust are to promote education, sports, to promote national integrity, to organize blood donation, eye donation to help every creature at the time of natural calamities and man-made calamities. These are objects which are charitable purpose and hence the assessee-trust deserves certificate under section 80G(5) of the Act, therefore we direct the ld. CIT(E) to grant the certificate under section 80G(5) of the Act in accordance with law. - Decided in favour of assessee.

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• 2021 (12) TMI 979
  Revision u/s 263 by CIT - reopening of assessment u/s 147 - undisclosed income - Unexplained bank account deposits - HELD THAT:- As assessee has himself stated that deposits in the bank account no.07371000041778 are out of undisclosed source of income. Moreover, the assessee has not retracted his statement later on, and in fact he agreed to pay the due taxes on the said undisclosed income. No doubt, the assessing officer has raised this issue during the reassessment proceedings, however, he reached on a wrong conclusion,wherein the assessing officer has discussed the issue of cash deposit to the tune of ₹ 11,65,300/-. The AR of the assessee explained that said cash of ₹ 11,65,300/- were receipt from the business carried out under section 44AE of the Act and the same has been reflected in the return of income to the tune of ₹ 84,000/-. In fact, said bank account was never disclosed by the assessee in the return of income and never reflected in return of income, therefore, assessing officer has reached on wrong conclusion to the effect that cash deposit of ₹ 11,65,300/- has been reflected in return of income, which is not sustainable in law, hence order passed by the assessing officer is erroneous. AO has made addition of ₹ 18,989/-, (vide para 6 of assessment order) being opening balance in bank account no.36612082001, instead of making addition to the tune of ₹ 11,65,300/- being cash deposited by the assessee during the assessment year under consideration, thus, assessing officer framed the assessment order with incorrect assumption of facts and without application of mind, therefore, order passed by the assessing officer is prejudicial to the interest of revenue. Just to discuss the issue in the assessment order is not enough, it is to be seen whether assessing officer has applied his mind or not. The order u/s 263 of the IT Act, is valid even if one of the several items dealt with therein is found prejudicial to the interest of revenue. Further, it is also important to mention here that the provisions of Section 263 can be invoked even where full facts are disclosed but the AO has not examined these details as per correct provisions of law. In support of this proposition, Ld PCIT relied on the decision of the Hon'ble Rajasthan High Court, in the case of CIT vs. Emery Stone Manufacturing Company,[ 1994 (7) TMI 36 - RAJASTHAN HIGH COURT] - Based on the facts and circumstances narrated above, we note that ld PCIT has rightly exercised his jurisdiction under section 263 - Decided against assessee.

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• 2021 (12) TMI 978
  Disallowance at 2% of total labour expenditure - CIT-A deleted the addition partly - HELD THAT:- We find that the CIT(A) has correctly concluded in Para 5.3 at Page No. 15 that from the documents brought on record by holding that Shri Krishna Dayaram Bhoi has fabricated his statement in order to suppress his own income, in our opinion, requires no interference from us, it is justified. The CIT(A) also observed the claim of deleting entire disallowance is not acceptable in view of holistic view considering the facts on the issue also clearly demonstrate that there was no evidence or adverse material against the books of the assessee to hold that the payments made to all these four entities are not genuine. Therefore, we do not accept the findings of CIT(A) in confirming the addition on the basis of ad hoc estimation and restricting the disallowance at 2% as against the 4% as held by AO, in our opinion, is not justified. Thus, the ground raised in cross objection by the assessee is allowed. Disallowance of labour expenses paid to BVG India Limited without giving an opportunity to the AO - All requisite documents and evidences were submitted by the assessee before the AO on 02-03-2016. There is no dispute the AO completed the assessment proceedings considering all the details. Further, as noted by us all the relevant details like work order, ledger extracts of BVG India Limited in the books of the assessee along with invoices and also ledger extracts of BESCOM in the books of the assessee and the invoices raised by the assessee on BESCOM were before the AO and there is no dispute in this regard which are all filed before us by way of a paper book. CIT(A) also examined the return of income, computation of income, audit report and bank statements of BVG India Limited which are also available before the AO during the course of assessment proceedings. Therefore, the contention of the ld. DR that the CIT(A) ought to have given an opportunity to the AO in the remand proceedings does not arise at all for the reason that no evidence brought on record before us that these documents were not before the AO in assessment proceedings and also the CIT(A) considered any additional evidence which was not before the AO. Therefore, the submissions of ld. DR that there was no opportunity for AO for examination of relevant details are rejected and the order of CIT(A) is justified. Thus, the grounds raised by the Revenue are dismissed.

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• 2021 (12) TMI 977
  Addition u/s 68 - Bogus share transactions - onus upon the assessee to justify the cash credit received - HELD THAT:- The addition though has been made under the provisions of section 68 of the Act, but treating the same as sham transactions. Thus, the assessee cannot be given the benefit by taking the shelter that it has satisfied the conditions imposed under section 68 of the Act. It is equally not believable that a company whose fair market value stands at ₹47 but issuing the shares at a much higher premium. In simple words, no prudent businessman will acquire the shares more than its fair market value until and unless there are evidences suggesting/justify the higher value. For example, the assessee is in the process of expansion or it has been awarded some contract which will yield in future which can justify the value of the shares. But no such information is available on record. As such, the assessee has to satisfy based on the documentary evidence that the transactions involved in the given case is not a sham contract but to our understanding the assessee failed to do so. The contention of the assessee as raised in the ground of appeal that the statement furnished by Shri bagrecha was retracted on the later date cannot help the assessee. It is for the reason that there are many more circumstantial evidences, as discussed above, which are sufficient to hold that the transactions are sham business contracts. Accordingly, we don t find any reason to interfere in the order of learner CIT (A). Hence, the ground of appeal raised by the assessee is dismissed.

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• 2021 (12) TMI 976
  Income from house property - Deemed let out value of the closing stock under the head income from house property - AO adopted 8% of the cost as fair and reasonable ALV of the property - Assessee contended that the notional rent cannot be charged on the unsold flats which are closing stock of the assessee - HELD THAT:- As decided in M/S. RUNWAL CONSTRUCTIONS RUNWAL AND OMKAR ESQUARE [ 2018 (2) TMI 1707 - ITAT MUMBAI] in the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head income from business . Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head income from business when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head income from house property . Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property Thus allow the grounds raised by the assessee and direct the Assessing Officer to delete the notional rent assessed on the property held as stock in trade. Grounds raised by the assessee are allowed.

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• 2021 (12) TMI 975
  Revision u/s 263 by CIT - AO was erroneous and prejudicial to the interest of the revenue for the reason that the AO failed to obtain any reconciliation of the turnover as per Profit and Loss account with the total invoice value and whether the invoices were raised on cost plus method, which receiving the corresponding amount from the clients - HELD THAT:- The law is well settled that if there is a failure on the part of AO to make an enquiry on the issue which calls for an enquiry, that by itself will render the order of assessment erroneous and prejudicial to the interests of the revenue. It has been so held by the Hon ble Delhi High Court in the case of Gee Vee Enterprises Vs. DCIT [ 1974 (10) TMI 29 - DELHI HIGH COURT] We are of the view that the mere fact the Assessee gave a reconciliation of sales as per invoices and as per the profit and loss account and the fact that the very same AO made enquiries in AY 2013-14 and therefore he was well aware of the issue and accepted the reconciliation given by the Assessee cannot be the basis to hold that the AO made necessary enquires. Since there was a failure on the part of AO to make necessary enquiry, we are of the view that the CIT was justified in invoking jurisdiction u/s. 263 of the Act in the facts and circumstances of the present case. We are of the view that we need not examine the arguments of the learned counsel for the Assessee in this regard because Explnation-2 is only a deeming provision and if on facts it is found that the AO did not make any enquiries before concluding the assessment there is no need to take recourse to the deeming provisions. We are of the view that the scope of enquiry in the set aside proceedings will be restricted to the directions as set out above and to this extent the impugned order is modified. With these observations, we partly allow the appeal of the Assessee.

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• 2021 (12) TMI 974
  Levy of penalty u/s. 221 - AO passed, orders u/s 201(1) and 201(1A) treating the appellant as assessee in default - appellant's main arguments before the AO were that it was facing severe financial hardship and that the same constitutes a 'good and sufficient reason' for not levying the penalty - As contented AO levied exorbitant penalty for non-remitting of TDS within the stipulated time which requires to be deleted - HELD THAT:- The only reason now shown is financial difficulties which under these circumstances does not appeal to be sufficient. It is no doubt that a mere default is not sufficient for levy of penalty but as the lower authorities pointed out that the assessee has been using the deducted TDS amount for meeting various business commitments and assessee continuously default the payment of TDS to the government account which is very serious in nature. Being so, the assessee cannot escape its consequences, it had kept back the tax deducted at sources with it. One can understand the financial difficulties of assessee is facing, if it was in defaulter for a short period. But in the present case, conduct of the assessee is that it continuously defaulting the payment of TDS amount to the government account by one was other reasons without remitting the same to the government account and these action of defaulter cannot be condoned by deleting the penalty. Accordingly, levy of penalty is confirmed. However, the Assessing Officer levied penalty at very exorbitant rate that 5% pm for which there is no legal sanction when the department itself has paid interest at 6% pa to the assessee on the refund due to the assessee. Being so, in our opinion, it is reasonable and fair to levy penalty at 1% pm i.e. 12% pa instead of 5% pm levied by AO. Accordingly, we direct the AO to recompute the penalty for both Assessment Years at 1% pm or 12% pa. Accordingly, the appeal of the assessee is partly allowed.

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• 2021 (12) TMI 973
  Disallowing certain bad debts written off in respect of revenues pertaining to the financial year 2009-2010 - HELD THAT:- As deduction on account of bad debt as allowed u/s 36(l)(vii) read with section 36(2), after amendment by the Direct Tax Laws (Amendment) Act 1987, envisage merely wiring off the debt as irrecoverable in the accounts of the assessee as a condition for such an allowance. Before the amendment by the DTL (Amendment) Act 1987, of course, there was a condition to establish that the debt has become bad. The Hon'ble Supreme Court in the case of T.R.F. Limited vs C.I.T [ 2010 (2) TMI 211 - SUPREME COURT ] has clearly observed that after 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - we are of the view that the assessee is entitled to claim deduction on account of bad debts and the AO is directed to allow claim of assessee. Deduction u/s 80-IC in respect of the amount added back under Section 40(a)(ia) - HELD THAT:- There is no dispute regarding genuineness of the expenditure that was disallowed and the fact that the said expenditure is otherwise allowable as deduction in computing income from business. In such circumstances, even if the expenditure is disallowed u/s.40(a)(i) of the Act, the result will be that the disallowance will go to increase the profits of the business which is eligible for deduction u/s.80-IC of the Act and consequently the deduction u/s. 80-IC of the Act should be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. Hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. [ 2010 (6) TMI 65 - BOMBAY HIGH COURT ] and Hon'ble Gujarat High Court in the case of ITO vs. Kewal Construction, [ 2013 (7) TMI 291 - GUJARAT HIGH COURT ] have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Chapter VIA should be allowed on such increased profit. In view of the aforesaid decisions and the CBDT Circular No.37/2020, we hold that the revenue authorities erred in not allowing deduction u/s.80-IC. The claim of the assessee in this regard is accepted and the AO is directed the give necessary relief to the assessee in this regard. Deduction under section 80-IC on reversal of commission expenses - Finding of the AO and the CIT(A) is that the assessee failed to produce evidence or explanation as to how the amount of commission was disallowed towards the unit claiming deduction u/s.80-IC of the Act. This finding has not been rebutted by the assessee in the proceedings before the Tribunal also. Therefore Grd.No.1 b raised by the assessee is dismissed.

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• 2021 (12) TMI 972
  Additions in respect of employees contribution towards ESI/PF - assessee s failure to pay the employee s contribution of PF/ESI within the prescribed due dates as per Section 36(1)(va) - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case. See SHRI GOPALAKRISHNA ASWINI KUMAR VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU [ 2021 (10) TMI 952 - ITAT BANGALORE] - Decided in favour of assessee.

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• Customs

• 2021 (12) TMI 971
  Valuation of imported goods - fuel on board aircraft returning to India on completion of international leg - inclusion of insurance, freight and landing charges in the assessable value - benefit of notification no. 151/194-Cus dated 13th September 1994 - period from 1st April 2010 to 15th October 2014 - HELD THAT:- The appellant had discharged duty liability on the fuel available on board upon arrival in India after foreign run and the claim of eligibility to set off the fuel available on board upon conversion to foreign run before departure from India was raised for the first time in the course of proceedings for recovery of duties of customs over and above that discharged by the appellant herein. Neither has any claim for refund of this component of the duties been filed nor is there any demand of duty following denial of the benefit of the set off provided in notification no. 151/1994-Cus dated 13th July 1994. It would, therefore, appear that this was a plea for mitigation in the event of the enhancement of the assessable value of fuel on which duty had already been discharged in accordance with the extant instructions. The demand in the impugned order has incorrectly taken recourse to rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, therefore, must be set aside - Appeal allowed.

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• 2021 (12) TMI 970
  Valuation of imported goods - aircraft engine - vehicle expressly imported for a limited period and for stop gap fitment during the overhaul of the regular engines by the provider of the imported replacement - according to the importer, the amount actually paid to the overseas supplier at the time of import is the transaction value on which duty was to be levied while Revenue contends that the value is to be ascertained as for an engine brought into the country permanently - extended period of limitation - HELD THAT:- The replacement value denominated in the agreement is contingent upon occurrence of certain circumstances which are farthest from the intent of the two contracting parties; this is evident from the prompt dispatch of the replacement engine in terms of the agreement. For that to crystallize within the purview of transaction value , the contingent circumstances must arise - Owing to non-conformity with any method of valuing the transaction per se, the plea of Revenue for adoption as assessable value fails for lack of conformity with the scheme of valuation. The methodology of customs authorities in United States of America for valuing leased goods in terms of rental charges will not be consistent with the assessment under Customs Act, 1962 as elaborated supra with proportionate attribution afforded by notification no. 27/2002-Cus dated 1st March 2002 amended by 27/2008 dated 1st March 2008. In the context of declared value not being the transaction value envisaged in Customs Act, 1962 and the replacement value , sought to be validated in the appeal of Revenue, not being in conformity with the Rules, an assessable value is necessary. The impugned order has adopted a base value to which additions have been made and, in the process, utilized a notional price in the agreement that is neither price paid nor price payable which is a necessary qualification for transaction value of imported goods , identical goods or similar goods in rule 3, 4 and 5 of Customs Valuation (Determination of Value of Imported Goods Rules), 2007. Likewise rule 7 and 8 of the said Rules specify the circumstances that validate appraisal. Extended period of limitation - HELD THAT:- The show cause notice, issued on 4th November 2010 in relation to goods imported on 1st August 2009 and beyond the normal period of limitation in section 28 of Customs Act, 1962, vests jurisdictional competence only by recourse to extended period of upto five years from the relevant date. The demand has been crystallized by discarding the declared value and re-determination of assessable value by recourse to rules framed under the authority of section 14 of Customs Act, 1962. Such recourse may be, but is not always, consequent to one the taints enumerated in section 28 for invoking the extended period having been established - Customs authorities cannot, claim to have been hoodwinked by misrepresentation or suppression of facts as there is a statutory obligation on their part to determine the value in accordance with the Rules. Intention to retain goods only for a limited period on lease was not suppressed from customs authorities at the time of import and the invoice submitted along with the bill of entry made this abundantly clear. Furthermore, it was only at the time of export of the leased engine that customs authorities nudged themselves awake even though the two engines of the aircraft had been entered for export and import on separate occasions and assessment of the imports on repair value would have been permitted, and indeed tolerated, only upon production of the said agreement which incorporated the provision for temporary allocation of the impugned engine. The adjudicating authority has ignored these vital facts in deciding upon the validity of the demand traversing beyond the normal period of limitation. Delegation of that statutory responsibility upwards will only encourage irresponsible adjudication. As appellate authority, it devolves upon the Tribunal to enforce respect for the law and the restrictions that the law places upon executive authority. Such evaluated decision making is not a luxury appropriated by magnanimous appellate authorities but is the obligation to be internalized by adjudicating authorities without exception. It would, therefore, be appropriate to direct the original authority to arrive at its conclusion afresh by application of these facts to the law on empowerment in section 28 of Customs Act, 1962 for invoking the extended period of limitation. Appeal allowed by way of remand.

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• 2021 (12) TMI 969
  Principles of natural justice - petitioners' request of cross-examination of certain witnesses refused - reason for refusing the request by said communication was that the department had not recorded the statements of the persons mentioned in the petition - HELD THAT:- The legal trend is increasingly clear on the question of grant of cross-examination of the witnesses during departmental proceedings including under the statutes such as the Customs Act. If the department relies on any statement of a witness for its final conclusions, cross-examination must be granted. In other words, no part of statements of the witnesses can be relied upon without being tested through cross- examination if so demanded by the noticee. However, this court has always maintained a self-imposed discipline not to interfere with the departmental proceedings at an intermediary stage unless gross injustice or prejudice is demonstrated. As of now, the petitioners have merely received show cause notice, adjudication of which is yet to be done. Whether the department will rely upon the statements of the concerned witnesses in the final adjudication and if so to what extent cannot be foreseen - Petition disposed off.

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• Corporate Laws

• 2021 (12) TMI 968
  Seeking appointment of a Sole Arbitrator for adjudication of disputes pertaining to the Facility Agreement - HELD THAT:- Respondent No. 1, which an LLP, has signed the Facility Agreement through its partner Mr. Ajay Yadav. The constitution of Respondent as a limited liability partnership is not in dispute. Mr. Ajay Yadav also does not deny his signatures or the fact that he is a partner of Respondent No. 1. Thus, the execution of the Facility Agreement, his authority being implied, would prima facie bind Respondent No. 1. Respondent No. 1 and 3 cannot wriggle out of the arbitration agreement contained in the Facility Agreement by merely claiming that her partner Mr. Ajay Yadav has acted without consent or concurrence, particularly when the receipt of the sum of ₹ 1,46,00,00,000/- by Respondent No. l has not been denied by any of the Respondents. Further, mere absence of signature of Respondent No. 3 cannot render the agreement ex-facie invalid, since Respondent No. 1 is a limited liability partnership. Reference against her is based on her being a partner of Respondent No. 1 firm, which is not denied - the controversy regarding invalidity of the agreement, as raised by the Respondents can, at the highest, only cast a doubt in the mind of the Court. It is only in rare circumstances, where, the Court is of the opinion that an agreement is ex-facie invalid or non-est, should the Court decline referring the parties to the arbitration. This is certainly not such a case. Prima facie test regarding the existence of the arbitration agreement is met in the instant case. This brings the Court to the question of referring Respondent No. 4 who is undoubtedly a non-signatory to the Facility Agreement. There is no dispute on the proposition that the scope of an arbitration agreement is limited to the parties who entered into it and that those claiming under or through them. However, under exceptional circumstances, a non-signatory or third party can also be subjected to arbitration. Thus, the short question is whether the Petitioner is able to discharge this heavy onus for seeking reference against Respondent No. 4. The obligations under this Agreement also pertain to Respondent No. 4 and to the operation of its business and contractual commitments. The terms of the Facility Agreement, the conduct of the parties, the background leading to execution of the Facility Agreement all spell out the true intention of the parties, i.e., the successful implementation of the resolution plan which resulted in Respondent No. 1 acquiring Respondent No. 4. Undoubtedly, the performance of Facility Agreement is intrinsically interlinked with the assets of Respondent No. 4 and may not be feasible without its direct involvement. Pertinently, any order/ proceedings relating to the execution of the Facility Agreement would surely and directly impact Respondent No. 4, and therefore the adjudication of any disputes arising thereunder would necessarily require its presence. This Court is also guided by the group of companies doctrine as expounded in the case of MAHANAGAR TELEPHONE NIGAM LTD. VERSUS CANARA BANK ORS. [ 2019 (8) TMI 576 - SUPREME COURT] , where the group company of Canara Bank, being a non-signatory to the arbitration agreement, was also referred to arbitration after considering the composite nature of transaction, the commonality of subject matter, and the fact that final resolution of the disputes would not be feasible without joining of such party. There is no impediment for this Court to allow the petition qua all the Respondents - Petition allowed.

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• 2021 (12) TMI 967
  Sanction of Scheme of merger by absorption - dispensation of the meeting of the Equity Shareholders, Secured Creditors and Unsecured Creditors - Section 230-232 of the Act read with Companies (Compromise, Arrangement and Amalgamation) Rules, 2016 - HELD THAT:- The material on record establishes that the Transferee Company is a Wholly Owned Subsidiary of the Transferor Company and there is no issuance of any new shares and therefore there is no reorganization of share capital and consequently no arrangement wherein Shareholders have to compromise with Creditors of the Transferor Company . The rights and liabilities of Secured and Unsecured Creditors were not getting affected in any manner by way of the proposed scheme as no new shares are being issued by the Transferor Company and no compromise is offered to any Secured and Unsecured Creditors of the Transferee Company - when the Transferor and Transferee Company involve a parent Company and a Wholly Owned Subsidiary the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors can be dispensed with as the facts of this case substantiate that the rights of the Equity Shareholders of the Transferee Company are not being affected. Therefore, obtaining 90% consent Affidavits from its unsecured Creditors is not required keeping in view the facts of the attendant case. Appeal allowed.

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• Insolvency & Bankruptcy

• 2021 (12) TMI 966
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- In the present case, the occurrence of default is evidenced by the copy of sanction letter dated 05.08.2009 and 25.08.2015 wherein the credit facilities were sanctioned to the corporate debtor on certain terms and conditions as imposed by the petitioner. The account of the corporate debtor was classified as NPA on 30.06.2017 and the Petitioner has issued a demand notice dated 24.09.2018 under Section 13(2) of SARFAESI Act, 2002 which is attached as Annexure A/11 of the petition. The copy of CIBIL and CICS report is attached as Annexure A/10 of the petition. The Petitioner has also approached Debt Recovery Tribunal for the recovery of ₹ 16,68,88,936.38 along with pendente lite and future interest and the same is pending for adjudication. The copy of the application filed in DRT-II is attached as Annexure A/9 of the petition. Whether present application is filed within limitation? - HELD THAT:- In the present case, it is mentioned by the Petitioner that the corporate debtor has defaulted for the instalment of term loan on 01.04.2017. Further, it is settled proposition of law that as per Article 137 of the Limitation Act, the right to initiate action is three years from the date of default. Thus, its period of limitation of three years expired on 01.04.2020. However, the present application is filed on 26.07.2021 - Even if the date of default is taken as 01.04.2017, the present petition falls within limitation. Moreover, the application filed in the prescribed Form No.1 is found to be complete. The present petition being complete and having established the default in payment of the Financial Debt for the default amount being above threshold limit, the petition is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code - Petition admitted.

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• 2021 (12) TMI 965
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - existence of debt and dispute or not - time limitation - HELD THAT:- In the present case, the occurrence of default of debt is evidenced by the copy of the agreement of term loan, General Power of Attorney, letter of undertaking cum declaration, common deed of hypothecation and sanction letter dated 06.01.2015. The corporate debtor has defaulted in making the regular payments of the credit facilities sanctioned by the petitioner and a demand notice under Section 13(2) of the Sarfeasi Act, 2002 recalling debt. Whether the present application is filed within limitation? - HELD THAT:- The corporate debtor has acknowledged the debt for the cash credit as well as for the term loan on 05.12.2017 and the present petition has been filed for 15.01.2019. Therefore, the petition has been filed within the period of limitation. The application filed in the prescribed Form No. 1 is found to be complete - The present petition being complete and having established the default in payment of the Financial Debt for the default amount being above the threshold limit, the petition is admitted in terms of Section 7(5) of the IBC. Petition admitted - moratorium declared.

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• 2021 (12) TMI 964
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - whether the demand notice in Form No.3 was properly served? - HELD THAT:- The demand notice was sent by the post at the registered address of the Corporate Debtor. The original postal receipts are attached as Annexure A-14 of the petition. The tracking report which is attached as Annexure A-15 of the petition shows that the demand notice was duly served to the corporate debtor. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- There is no such evidence placed on record by the corporate debtor that there is some pre-existing dispute regarding the revised rent with respect to the lease deed in his reply. Also the corporate debtor has not approached any legal forum for redressal of his grievance with respect to unpaid operational debt - there is a total unpaid operational debt (in default) of ₹ 3,28,01,724/- (including ₹ 74,52,807/- as interest @ 18% per annum). Based on documents on record, it is held that the demand notice in Form No.3 was properly delivered by the petitioner and no pre-existing dispute is proved. It is noted that the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. Thus, the conditions under Section 9 of the Code stand satisfied. The petitioner states that from the facts, that it is clear that the liability of the corporate debtor is undisputed. Accordingly, the petitioner proved the debt and the default, which is more than ₹ 1 Crore by the respondent-corporate debtor. In the present petition all the requirements have been satisfied. It is seen that the petition preferred by petitioner is complete in all respect. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner - petition admitted - moratorium declared.

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• 2021 (12) TMI 963
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- In the present case, the occurrence of default is evidenced by the copy of Agreement to Sell dated 17.01.2018 executed between the corporate debtor and the petitioner no.1 along with copy of receipts and Agreement to Sell dated 10.12.2014, executed with the petitioner No.2 and the same are attached as Annexure-I/4 and Annexure-I/7 respectively of the petition - The respondent-corporate debtor has also filed a reply wherein it has been stated that the default mentioned in the petition is due towards the petitioner for not providing of the possession of the plots/flat. Whether present application is filed within limitation? - HELD THAT:- It can be seen from the records that corporate debtor had to deliver possession of the plots to petitioner no.1 on or before 16.04.2018. The petitioner no.1 has also got his presence marked before Sub- Registrar for the execution of sale deed - The petitioner no.2 has also issued various letters dated 09.12.2016, 16.05.2018 and 06.01.2020 for the construction of flat and assurance has been given to the petitioner no.2 that the possession of the completed flat will be given but Corporate Debtor failed to fulfil its commitment. Therefore, the present petition is filed within limitation. Whether the present petition is maintainable? - HELD THAT:- The petitioner has filed a compliance affidavit vide a diary no. 00462/2 dated 16.11.2021 wherein it has been stated that total number of plots in the project of corporate debtor is 12 plots which is further divided into 36 flats. The petitioner no.1 is having two whole plots bearing no. HPE-PEA106 HPEPEA105 and the petitioner no.2 is having a flat in the plot no. HPE-PEA103. Therefore, the requirement of having 10% of the allotment in the project is satisfied. The application filed in the prescribed Form No.1 is found to be complete. The present petition being complete and having established the default in payment of the Financial Debt for the default amount being above threshold limit, the petition is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code - Petition admitted - moratorium declared.

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• 2021 (12) TMI 962
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- This Bench notes that on 18.07.2018 a Letter of Intent was entered into by Ebix Inc with Miles expressing its intention to acquire 100% shareholding of Miles. Around the same time, Ebix Inc entered into a discussion with Indus Software Technology Pvt Ltd (Indus) with the intention of Ebix Inc acquiring Indus to expand their operations in India. The Ebix Inc acquired Indus on 20.07.2018 and thereafter changed its name on 23.10.2018 from Indus to Ebix Technologies Pvt Ltd after appropriate filing and approval from the RoC. It is, therefore, clear to the Bench that for acquisition of Miles by Ebix Inc on 18.07.2018 was prior to and around the same time the acquisition of Ebix Inc of Indus on 20.07.2018. Therefore, this Bench is of the view that in the acquisition of Miles by Ebix Technologies Pvt Ltd, there was no contribution of Indus and, therefore, no role for Atlanta Global Advisors Private Ltd in the acquisition of Miles. The Letter of Intent undertaken by Ebix Inc and shareholders of Mile was signed before acquisition of Indus by Ebix Inc. The Bench in this regard also notes that all negotiations with respect to acquisition of Miles were undertaken by Ebix Inc by its office in USA and not in any manner through Indus. Therefore, this Bench is of the view that the acquisition of Miles were undertaken not by Indus but independently by Ebix Inc. - The entire case of Atlanta is based on the Agreement dated 17.11.2016 with Indus to which Ebix Inc is not a party. Therefore, under no circumstance Atlanta has any cause of action or locus to seek any relief against Ebix Inc and its subsidiaries or its acquired Companies This Bench also notes that demand notice was issued by the Petitioner in Form 3 on 03.04.2019. The Respondent, on 16.04.2019 had sent a detailed reply rejecting the claims after giving due reasons for the same - the Bench is of the view that there are very pertinent and real disputes regarding the claims etc, therefore, the Petition, in addition to other things, deserves dismissal under Section 9 of the IBC, 2016. Petition dismissed.

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• 2021 (12) TMI 961
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - HELD THAT:- The Respondent has given a lot of stress on not providing minimum cargo belly space to the Respondent for loading cargo and as a result of which the Appellant was supposed to accept the debit notes termination of the agreement by the Appellant was nothing but a coercion to the Respondent being a petty business unit and thereby wriggle out of the liability which the Appellant was supposed to bear in respect of various elements of expenditure. Repeated internal circular dated 13.02.2017 and 15.02.2017 by the Appellant on the issue of cargo load to its employees itself reflect that they were violating the terms of the agreement for minimum belly space to the Respondent. Different emails and meetings between the parties cited by the Respondent to prove that the Appellant s claim is false or frivolous. The financial condition of the Corporate Debtor is not healthy. CIRP was already initiated against it and the same has been closed by the Adjudicating Authority on 23rd September, 2021 after settlement with the Union Bank of India who has entered into OTS Agreement for release of payments in different instalments till 31.03.2023 and the Corporate Debtor has already paid two instalments in terms of the Settlement Agreement. The Resolution Professional (RP) associated with the CIRP also confirmed that the Original Applicant- Operational Creditor under the Code also recommended for withdrawal of Application - The Adjudicating Authority has drawn the inference of pre-existence of dispute which cannot be ruled out. It is also very much clear that the Appellant is chasing for payments which is also not the purpose of the Code. There are no infirmity in the impugned order - appeal dismissed.

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• Service Tax

• 2021 (12) TMI 960
  CENVAT Credit - capital goods - case of department is that since the appellant has transferred the credit from Mumbai to Surat the same is not eligible to them on the ground that they have not complied with the provision of Rule 10(2) of Cenvat Credit Rules, 2004 - HELD THAT:- The appellant initially requested for amendment for the registration as except the change of address there was no change in the constitution of the company or nature of service however, the department has rejected their request therefore, they had no option except to obtain a fresh registration which they had obtained at Surat. As regard availment of credit of 50%, since the 50% of credit was due in the year 2014-15 they have availed this credit in the said year at Surat as their business activity was being carried out at Surat. Therefore, this cannot be treated as transfer of credit from Mumbai to Surat. From the reading of the aforesaid Rule 10(2) it is absolutely clear that the Rule 10(2) applies only when a provider of output service shifts or transfers his business on account of change in ownership or on account of sale, merger, amalgamation lease or transfer of the business to joint venture with specific provision for transfer of liabilities of such business. In the present case even though the appellant have taken registration in Surat but there is no transfer of business on account of change in ownership the registration taken in Surat is by the appellant themselves. Therefore, Rule 10(2) clearly does not apply in the facts of the present case. Moreover if we read rule 10(1), a manufacture of final product if shifts his factory to another site he has to apply for transfer of the credit but there is no similar provision for service provider in Rule 10(2) that merely because a service provider transferred his business to a different location is operated under his own name, the rule 10(2) does not apply. As regard the allegation that appellant instead of showing the credit shown opening balance, there are nothing wrong in that because whether it is shown as opening balance or shown as credit the same amount of credit will be available to the appellant - the appellant's taking credit of 50% on capital goods at Surat is absolutely legal and correct and the same cannot be denied. Appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 959
  Classification of services - supply of man power and recruitment services or not - independent contractor carrying out the manufacturing activity in the premises of the service recipient - HELD THAT:- The issue has already been decided by this Tribunal in G. RAMAKRISHNAN, K. BALAKRISHNAN, P. KANNUSAMY, M. ARULPRAKASAM, R. ATHINARAYANAN, S. SUBBURAYALU VERSUS CCE ST MADURAI [ 2019 (3) TMI 42 - CESTAT CHENNAI] where it was held that Merely taking such licence or abiding by such labour law, it cannot be said that the contract for executing works within the manufacturing activity would be supply of man power. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (12) TMI 958
  Clandestine removal - rolled products i.e. MS Angles, MS Channels, MS Plates, MS Rods etc. classifiable under Chapter 72 of the Central Excise Tariff Act - issue of question of fact - HELD THAT: In the instant case, the entire case of the Revenue is based on the Kaccha Chithas seized from the residence of the Director. The manner in which the said Kaccha Chithas is seized has been strongly agitated by the Appellant. The said Kaccha Chithas/documents should have been seized in the presence of the Director. There is considerable force in the contention of the Appellant that the Kacha Chithas relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue of fact i.e. in the present case the charge of clandestine clearance cannot be leveled against the assessee. In the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods hae been procured to manufacture goods for clandestine clearance. No efforts have been made by the investigating agencies to establish the existence of any unaccounted manufacturing activity in the form of unaccounted raw material, shortage of stock, shortage of raw material/finished goods, excess consumption of electricity, unaccounted labour payments, interrogation of buyers/transporters or any incriminating record/document to suggest any flow back of cash etc. The Revenue authorities in this case have failed to discharge the burden of proving the serious charge of clandestine clearance or undervaluation with cogent and clinching evidence. It has been consistently held that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the Revenue by direct, affirmative and incontrovertible evidence. The learned Commissioner made a fundamental error by making assumptions only just to confirm the demand on the allegation of clandestine clearance. It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld. Appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 957
  Clandestine Removal - excess production in respect of CPC over and above the ER 1/ER 4 return - It is the case of the Appellant that the duty can only be demanded in the present case if the basic allegation of clandestine removal is proved against them, which has not at all been discussed or touched upon by the Ld. Adjudicating Authority - time limitation - HELD THAT:- The Appellant has been able to produce the relevant reconciliations to explain the differences in clearance figures as per ER 1 and as per form 3CD which was on account of inclusion of 7031.42 MT twice by considering the conversion from CPC ROK to CPC Screen and CPC fines in captive consumption details and yield of finished products both in the annexure to the Tax Audit report. The demand has been raised for the period 2013-14 in 2018 onwards whereas the spot memo was issued by the Department in 2016 itself. No explanation has been furthered by the Department in respect of such gross delay in proceeding with the matter. Therefore, invocation of the extended period of limitation is not justified. Thus, demand of excise duty only on assumptions and presumptions in quantity of clearance of finished goods figures of Tax Audit form 3CD and ER 1 cannot be sustained both on merits and on limitation and is accordingly set aside - appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 956
  CENVAT Credit - Coal - CVD/excise duty at the rate of 1%/2% - Notice proceeds on the basis that if Cenvat credit of Central Excise Duty on coal cleared at the concessional rate of 1% under Notification No. 1/2011-CE dated 1 March 2011 as amended vide Notification No. 12/2011-CE dated 17 March 2012 was not available to the user then the credit of CVD on imported coal cleared at the rate of 1%/2% also should not be available as CVD is only aimed at counter balancing excise duty. HELD THAT:- There is no restriction in these notifications unlike Sl. No. 67 of Central Excise Notification No. 12/2012 dated 17 March 2012 in so far as the availment of Cenvat credit on coal is concerned. The credit of CVD is available under Rule 3(1)(vii) of the CCR and the proviso to Rule 3(1)(i) restricting credit in case of coal cleared under Excise Notification No. 12/2012 dated 17 March 2012 cannot impliedly be read into when the rate of CVD has not been borrowed from the excise notification but has a generally applied rate on its own. There is considerable merit in the contention of the Appellant that there is no room for any intendment in taxing statutes which deserves a strict interpretation. Even otherwise generally applied rate of CVD (1% upto 28 February 2013 and 2% thereafter under the Customs notification) and the concessional excise duty rate on domestically manufactured goods (1% all throughout without Cenvat under the excise notification) were not uniform and in any event, the expression equivalent appearing in Rule 3(1)(vii) of the CCR for quantification of CVD could not be restricted ignoring the tariff rate of excise duty of 6% on domestically manufactured coal. Identical issue decided in the case of JAYPEE SIDHI CEMENT PLANT VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, CUSTOMS AND EXCISE, JABALPUR [ 2019 (7) TMI 250 - CESTAT NEW DELHI] where it was held that the adjudicating authority has committed a legal error while denying the benefit of reduced CVD on imported coal while placing reliance upon the Excise notification for manufacture of coal. Appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 955
  CENVAT Credit - input - paint - erection, commissioning and installation was done by their Delhi office but tower and paints were supplied by the appellant at site - HELD THAT:- It is a fact on record that the paint which has been procured by the appellant have been supplied alongwith tower and the value of the paint has been included in the value of tower on which duty has been paid. In that circumstances, relying on the decision of AJRI ENGINEERING INDUSTRIES PVT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-II [ 2014 (3) TMI 833 - CESTAT MUMBAI] , where it was held that the appellant is entitled to take cenvat credit on the paint. Further, I hold that the paint is essential for safeguard of tower; therefore, it is an accessory which do qualify as input in terms of Rule 2(k) of Cenvat Credit Rules, 2004. CENVAT Credit allowed on paints - appeal allowed - decided in favor of appellant.

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• 2021 (12) TMI 954
  Entitlement to reduced penalty - total amount deposited at the time of investigation is much more than the confirmed duty demand, interest thereon and 25% penalty - Department's contention is that since the appellant have not opted for reduced penalty in writing therefore, 100% penalty will remain payable and accordingly the refund was supposed to be reduced by the amount of 100% penalty instead of 25% penalty - HELD THAT:- The Adjudicating authority while sanctioning the refund even though the appellant informed not to deduct the penalty as they are contesting the matter before the appellate authority, sanction the refund from the amount after deducting the confirmed duty, interest and 25% penalty. The amount deducted by the Assistant Commissioner was deposited and retained by the department right from the day it was deposited till the refund was sanctioned. Therefore, at the time of passing the adjudication order on demand case and even up to the 30 days from the date of such order the amount of confirmed duty, interest thereon and 25% penalty stands deposited with the department. Therefore, there is no reason to deny the benefit of a reduced penalty of 25% to the appellant even though the appellant had not opted but the fact remains that the amount remains very much with the department and the appellant s request of deducting 100% penalty was not exceeded by the department that itself shows that the department has retained the amount of confirmed duty, interest thereon and 25% penalty not only within a period of 30 days from the date of the said order but much before than therefore, the compliance of the Section 11AC(1) (e) stands complied with . Therefore, the appellant was entitled for a 25% reduced penalty. The Adjudicating authority s order granting refund after reducing the confirmed demand, interest thereon and 25% penalty out of total deposit of ₹ 2.35 Crores is absolutely correct and legal - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (12) TMI 953
  Principles of natural justice - pre-revisional notices - sheet-anchor submission of learned Senior Counsel is if one more opportunity is given to the writ petitioner dealer, the writ petitioner dealer would now produce the books of accounts and the matter can be given a quietus by passing revisional orders afresh - HELD THAT:- A careful perusal of the impugned orders reveal that it has not been referred to in all the impugned orders but in any event, the impugned orders deal with objections that have been raised by the dealer. The correctness or otherwise of the conclusions arrived at vide the impugned orders will have to be tested only in an appeal ie., in a statutory appeal under Section 51 of TN VAT Act. One of the reasons for this is, the matter turns heavily on facts and the appellate authority under Section 51 of TN VAT Act can also look at the books of accounts and come to a conclusion with regard to the points that are being urged. There is no disputation or disagreement that alternate remedy is available to the writ petitioner by way of a statutory appeal under Section 51 of TN VAT Act. The alternate remedy rule no doubt is not an absolute rule. In other words, the alternate remedy rule is a rule of discretion. It is not only a rule of discretion, it is a self restraint qua writ jurisdiction. The campaign of the writ petitioner qua the impugned orders in the captioned four writ petitions fail and the writ petitions are dismissed albeit making it clear that if the writ petitioner chooses the alternate remedy route and files statutory appeals, the same will be considered (subject of course to limitation and pre-deposit condition) by the appellate authority on its own merits and in accordance with law - this Court also makes it clear that this is the third round of litigation in the first tier of tax assessment and therefore, this Court is of the view that it is time that the dealer moves on to the appellate authority which is also an authority which can go into facts including examination of books of accounts. Writ Petitions are dismissed.

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• 2021 (12) TMI 952
  Evasion of tax - Broiler Chicken Birds - undervaluation - suppression of actual sale value of chicken - HELD THAT:- In the case on hand, we would like not to confer or deny the power of the Appellate Authority on general principles of law viz., the Appellate Authority has inherent power of remand etc. The appeal being a statutory remedy under the Act, we may endeavour to trace whether such power is available to the Appellate Authority or not under the scheme of subsection (5) of Section 55. In case on hand, the Appellate Authority once is convinced that the penalty order imposed needs to be annulled on the ground of violation of principles of natural justice, then instead of deciding the case on merits the Deputy Commissioner can certainly invoke the power under Clause (c), viz. pass such other orders he may think fit, and complete the adjudication of appeal filed before him. The argument of Revenue denies this functional proprietary conferred by clause (a) of subsection (5) of Section 55. The Deputy Commissioner, on a case-to-case basis, either does the assessment/decides the penalty himself or calls upon the Primary Authority to redo the procedure in accordance with law. In the case on hand, the table, read with the findings of the Deputy Commissioner shown in paragraph 8 supra, justify the remand to the Primary Authority. As matter of fact, there is violation of principles of natural justice and denial of reasonable opportunity to the dealer, thus warranting setting aside the penalty order in Annexure-A, and the Appellate Authority has rightly, within its powers and jurisdiction, remitted the matter to the Primary Authority for consideration and decision afresh. The power of remand is available and no exception to the findings recorded by the Tribunal and the Appellate Authority on the remand is warranted. Revision dismissed.

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• Indian Laws

• 2021 (12) TMI 951
  Termination from the post of Computer Operator in the office of Commissioner, Income Tax - II, Jodhpur - seeking direction for not replacing them by any other source except by way of regular appointment - claim of the petitioner is that when similarly situated persons in compliance of the order dated 29.10.2012 were permitted to join the office, denial of indulgence to him in joining duties is discriminatory, illegal and unwarranted - HELD THAT:- The petitioner has made an attempt to reagitate the issue which was concluded by the learned Tribunal with dismissal of his contempt petition in the year 2017. Not only that, the Tribunal has specifically stated that the conduct of the petitioner does not entitle him for grant of prayer requested by him on account of the fact that he never showed any willingness to resume duties in the office of respondent which is reflected from the fact that inspite of passing of favorable order by learned CAT on 29.10.2012, he has never appeared at the office nor did he file any execution application or raise any grievance. The act of petitioner in approaching the Tribunal after six years is time barred as per the provisions of Section 21 and 27 of Act of 1985. The application filed by the petitioner before the Tribunal was rightly dismissed and not entertained.

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