TMI Tax Updates - e-Newsletter
February 15, 2023

Case Laws in this Newsletter:

Income Tax Corporate Laws Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. DOCTRINE OF RES JUDICATA IN TAXATION

   By: Dr. Sanjiv Agarwal

2. IGST refund claim cannot be withheld when ITC towards purchase from risky supplier had already been reversed

   By: Bimal jain

3. LLP receiving share of profit from other partnership firm is eligible for exemption under Income Tax

   By: Bimal jain

News

1. CCI approves acquisition of certain equity share capital of LT Foods Limited by SALIC International Investment Corporation

2. Seizure of black money

3. Customs field formations and DRI keep constant vigil to deter smuggling of gold and drugs

Notifications

Income Tax

1. 04/2023 - dated 10-2-2023 - IT

Income-tax (First Amendment) Rules, 2023

Circulars / Instructions / Orders

DGFT

1. 56/2015-2020 - dated 14-2-2023

Enlistment of PSIA under Para 2.55 of Handbook of Procedure 2015-2020

Highlights / Catch Notes

Income Tax

• High Court: Active PAN Doesn't Justify Reassessment of Non-Existent Entity Post-Amalgamation.

  Case-Laws - HC : Reassessment proceedings issued in the name of a non-existent entity - amalgamation of a company - The stand of the revenue that the reassessment was justified in view of the fact that the PAN in the name of the non-existent entity had remained active does not create an exception in favour of the revenue to dilute in any manner the principles enunciated hereinabove. - HC
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• Court Rules Freebie Expense Disallowance Inapplicable for AY 2008-09; Circular No. 5/2012 Not Retroactive.

  Case-Laws - HC : Disallowance on account of gift expenses - expenses incurred in providing freebees to Medical Practitioner by Pharmaceutical and allied Heath Sector Industry - Circular No.5/2012 referred to the position of the regulations of 2002 after its amendment in the year 2009 and, therefore, neither the circular nor regulation 6.8 incorporated w.e.f. 10 December 2009 would be applicable to the instant case pertaining to assessment year 2008-09. - HC
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• Court Invalidates Director Liability Order Due to Lack of Documentation and Subjective Satisfaction u/s 179.

  Case-Laws - HC : Liability of directors of private company in liquidation - steps taken against the delinquent Company - The order does not record any of the material which formed the basis for the Assessing Officer to conclude that all steps have been taken to recover the tax dues from the Company. Further, the impugned order does not refer to the Assessing Officer's subjective satisfaction based upon material before it, to conclude that all steps had been taken to proceed against the delinquent Company and such steps had failed. - The order issued u/s 179 are unsustainable - HC
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• Court Rules AO's Reopening of Assessment Invalid: No Failure to Disclose, No Existing Agreement u/s 147.

  Case-Laws - HC : Reopening of assessment u/s 147 - Non production of agreement before the AO - It is nobody’s case that there existed any such agreement, which ought to have been produced but was not produced. Rather AO intends to imply that in the absence of any such agreement, the benefit ought not to have been granted to the Petitioner in the scrutiny assessment. There cannot be any failure to disclose fully and truly, if there was no such document as such. This, in our opinion, is nothing but a change of opinion - HC
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• Building Costs on Leasehold Land Deemed Revenue Expenditure; Not a Capital Asset for Lessee.

  Case-Laws - AT : Nature of expenditure on construction of building on leasehold land - the lessor does not own the building and the assessee cannot own the same as capital asset since the land does not belong to the assessee and at the time of termination of lease agreement, the assessee has to either handover the building along with the land or remove the superstructure and handover the land to the lessor. Therefore, the said expenditure would be allowable as revenue expenditure in the hands of the assessee - AT
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• Interest u/s 28 of Land Acquisition Act is Non-Taxable as It's Part of Land Value Increase.

  Case-Laws - AT : Taxability of Interest income - interest received u/s. 28 of Land Acquisition Act, 1894 - the interest granted by the reference Court u/s. 28 of the Land Acquisition Act from the date of possession of land till the date of judgment of High Court is an accretion of the value of the land acquired, not chargeable to tax. Thus, we reject the arguments that the principle laid down in the context of motor accident claims is not applicable to the present facts of the case. - AT
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• Penalty u/s 271AAB(1)(a) Imposed; Section 115BBE Application Rejected for Violating Natural Justice Principles.

  Case-Laws - AT : Penalty u/s 271AAB(1)(a) - Charge of tax u/s. 115BBE - once the ld. AO has already decided based on the fact that this is the case of search addition and amount declared u/s. 132(4) accepted by the assessee and offered the same in the return of income filed the same will be in accordance with the penal provision of section 271AAB and invoking to provision of section 115BBE in this case is not in accordance with the law and is also against principles of nature justice as no such issue is raised, discussed and confronted with the assessee. - AT
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• Assessing Officer Failed to Verify MCX Trading Loss, Claims Remain Credible Without Broker Confirmation.

  Case-Laws - AT : Loss i.e. MCX trading loss - activities of derivative - AO before rejecting the contention of the assessee could have verified from the broker who is registered with the exchange. In the absence of any verification by the AO, genuineness of the loss claimed by the assessee cannot be doubted. - AT
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• Assessing Officer Can Re-compute Book Profits for MAT if Accounts Aren't as per Schedule VI, Companies Act.

  Case-Laws - AT : MAT - Computation of book profits for the purpose of MAT under the provisions of sec.115JB - Assessee has not prepared its accounts in accordance with Part-II & III of Schedule-VI of Companies Act, 1956, and thus, the AO is very well empowered to re-compute book profit for the purpose of Sec.115JB of the Act. - AT
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• No Capital Gains Tax on Goodwill Transfer When Converting Proprietary Concern to Private Limited Company: Sec.47A(3) Explained.

  Case-Laws - AT : Capital gains - Goodwill acquired by incurring cost - conversion of proprietory concern to company - revenue appeal - it is very clear that even if you invoke the provisions of Sec.47A(3) of the Act, to withdraw exemption granted u/s.47(xiv)(b) of the Act, but, in principle there cannot be any capital gains on transfer of goodwill, because, said goodwill is not self-generated or created on account of conversion of proprietary concern into a Pvt. Ltd. Co., but acquired by incurring cost. - AT
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• Rectification u/s 154: No Prejudice to Assessee as Original Order Remains Unchanged, No Cause of Action Arises.

  Case-Laws - AT : Rectifiction u/s 154 - Levy of late filing fees u/s 234E - Assessee must bring out from the record as to what prejudice has been caused to the assessee in the order passed u/s 154 of the Act when compared with the original order which has been amended or rectified. Neither any rectification has been done by the AO to the original order nor any cause of action has accrued to the assessee by getting up-to-date calculation of the demand. - AT
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IBC

• Court Upholds CoC Request to Reconsider Resolution Plan Clause, Ensuring Promoters' Liability on Personal Guarantees Remains Intact.

  Case-Laws - AT : Remission of Resolution Plan back to the CoC for reconsideration, at the request of Financial Creditors - The present is a case where CoC is not asking to withdraw from the Plan or asking for reviewing the entire Resolution Plan rather CoC has asked for leave of the Court for deleting clause in the plan which sought to release the promoters from personal guarantee given to the Financial Creditors. - Order cannot be held as invalid - AT
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SEBI

• Tribunal's Misinterpretation of Regulation 19(3) Leads to Reconsideration of Company Buyback Compliance Issues.

  Case-Laws - SC : Buyback offer made by the company in violation of regulatory provisions - role of the Company Secretary, compliance officer - The crucial point which has been missed by the Tribunal is that the compliance officer is also required to ensure compliance with the buyback regulations. Regulation 19(3) of the Regulations expressly so stipulates. Since the interpretation which has been placed by the Tribunal on the interpretation of 19(3) is contrary to the plain terms of Regulation 19(3), matter restored back - SC
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Central Excise

• Appellant Entitled to Interest on Delayed Refund as per Section 11BB; Authority Missed Three-Month Deadline.

  Case-Laws - AT : Entitlement to interest on refund which was deposited during investigation - When the application for refund has been filed by the appellant on 26.10.2018, three months period has started running from that date itself. Liability for payment of interest after the expiry of three months is statutory and therefore it was a bounden duty of the authority concerned to pay interest after the expiry of the aforesaid period at the rate as specified under section 11BB ibid. - AT
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Case Laws:

• Income Tax

• 2023 (2) TMI 470
  Valdity of reopening of assessment - notice u/s 148A(b) had been addressed in the name of the deceased - liability of legal heir of the deceased - HELD THAT:- From the facts as they emerge from the record, make it clear that initial notice u/s 148 was in the name of the deceased and so was the subsequent communication dated 20 May 2022 purporting to be a notice in terms of Section 148A(b), it is settled law that notice issued under Section 148 of the Act against a dead person would be invalid, unless the legal representatives submit to the jurisdiction of the Assessing Officer without raising any objection. Reference in this regard can be made in the case of Income Tax Ward 1(3)(7), Surat Vs. Durlabhbhai Kanubhai Rajpara [ 2019 (10) TMI 933 - SC ORDER] . Petition is allowed. Notices issued under Section 148 and the Order u/s 148A(d) are set aside.

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• 2023 (2) TMI 469
  Reassessment proceedings issued in the name of a non-existent entity - amalgamation of a company concluded - HELD THAT:- In the case of Spice Entertainment Ltd. [ 2011 (8) TMI 544 - DELHI HIGH COURT ] a Division Bench of the Delhi High Court held that once the factum of amalgamation of a company had been brought to the notice of the A.O.F despite which the proceedings are continued and an order of assessment passed in the name of non-existence company the order of assessment would not be merely be a procedural defect but would render it void. The stand of the revenue that the reassessment was justified in view of the fact that the PAN in the name of the non-existent entity had remained active does not create an exception in favour of the revenue to dilute in any manner the principles enunciated hereinabove. WP allowed in favour of assessee.

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• 2023 (2) TMI 468
  Reopening of assessment u/s 147 - notice issued beyond the period of four years from the end of the relevant assessment year - Disallowance on account of gift expenses - admissibility of expenses incurred in providing freebees to Medical Practitioner by Pharmaceutical and allied Heath Sector Industry - HELD THAT:- Although in the Order of assessment, the assessing officer had entertained a doubt regarding genuineness of the expenses, which as per him had not at all been established to have been incurred wholly and exclusively for the purpose of business, yet he had proceeded to disallow on an estimate basis expenses to the tune of 10 per cent and made an addition of Rs.2,31,82,889/- to the total income of the assessee. Therefore, it cannot be said that the Petitioner had not disclosed the relevant material facts during the assessment proceedings. The Petitioner was only obliged to disclose the material primary facts and was certainly not obliged to refer to the statutory provisions or the regulations of 2002 at the time of fling the return or during the course of the assessment proceedings. Circular No.5/2012 referred to the position of the regulations of 2002 after its amendment in the year 2009 and, therefore, neither the circular nor regulation 6.8 incorporated w.e.f. 10 December 2009 would be applicable to the instant case pertaining to assessment year 2008-09. It is settled that law to be applied is the one that is in force in the relevant assessment year, unless otherwise provided expressly or by necessary implication - CIT Vs. Insthmian Steamship Lines [ 1951 (11) TMI 1 - SUPREME COURT] and Reliance Jute Industries Ltd. Vs. Commissioner of Incometax [ 1979 (10) TMI 2 - SUPREME COURT] . Since the CBDT Circular No.5/12 as also Regulation 6.8 of 2002, were not applicable to the case of the Petitioner for the relevant assessment year 2008-09, there would be no tangible material or basis for the assessing officer to have reason to believe that income for the said assessment year 2008-09 had escaped assessment. Decided in favour of assessee.

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• 2023 (2) TMI 467
  Liability of directors of private company in liquidation - steps taken against the delinquent Company - lack of jurisdiction of the Assessing Officer to proceed with the show cause notices issued by it under Section 179 - According to the petitioner, as he was not the Director of the Company, he was not liable to receive any notice u/s 179 which provision can be invoked only against a Director of a private Company - HELD THAT:- Applying the ratio of the Judgments cited above, in Vanraj V. Shah [ 2019 (7) TMI 31 - BOMBAY HIGH COURT] , Rajendra R. Singh [ 2022 (7) TMI 1309 - BOMBAY HIGH COURT] and Mehul Jadavji Shah [ 2018 (4) TMI 646 - BOMBAY HIGH COURT] to the facts of the present case, that the impugned show cause notices disclose no facts regarding the steps taken by the Revenue to recover tax dues from the delinquent Company. In fact, the show cause notices are mere repetition of the contents of the show cause notice - An affidavit-in-reply filed before us by the Assessing Officer attempts to list out various steps taken by the Revenue to recover tax dues from the Company between the year 2016 until the year 2020. However, as held by this Court in Mehul Jadavji Shah (supra), giving particulars of steps taken against the delinquent Company in an affidavit-in-reply or even in the impugned orders does not meet the requirements of a proper notice to the Director. A perusal of the impugned order discloses that it does not record any of the material which formed the basis for the Assessing Officer to conclude that all steps have been taken to recover the tax dues from the Company. Further, the impugned order does not refer to the Assessing Officer s subjective satisfaction based upon material before it, to conclude that all steps had been taken to proceed against the delinquent Company and such steps had failed. This being a sine qua non for proceeding further, and for assuming jurisdiction under Section 179 failure to disclose this material and to record the satisfaction of the AO in the manner required by the provisions of Section 179 renders the impugned show cause notices and the impugned order dated 14/12/2020 unsustainable at law. We are therefore, of the considered opinion that the impugned show cause notices and the impugned order issued under Section 179 are unsustainable and contrary to the Act.

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• 2023 (2) TMI 466
  Reopening of assessment u/s 147 - Reopening beyond the period of four years - Reasons to believe - loans/advances made to a sister concern(s)(Form 3CD) - HELD THAT:- The Supreme Court in Commissioner of Income-tax, Delhi Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ] held that there was a difference between power to review and power to reassess under section 147 and that the AO had no power to review and that, if the concept of change of opinion was removed, then, in the garb of reopening of the assessment, a review would take place. The issue of Large Loans/Advances , was not only raised during the scrutiny assessment, but the same was responded to specifically by the assessee, as seen from the clarifications dated 5 June 2017 and 16 August 2017, which finally led to passing of the Order under Section 143(3) In the present case from the record, and specifically from the reasons recorded, it is not justifiable as to what information was received by the assessing Officer and what was that issue or material that had not been considered by the assessing Officer during the scrutiny assessment proceedings. As between the date of Order of assessment, which is sought to be reopened and the date of forming of the opinion, in the present case, nothing new had happened. It is clear that there is neither a new information received nor has reference been made to any new material on record. It is an absence of an agreement between the Petitioner, Goel Ganga Developers Pvt Ltd and M/s Nancy Builders and Developers Ltd that the assessing Officer formed a basis for reopening the assessment. It is nobody s case that there existed any such agreement, which ought to have been produced but was not produced. Rather AO intends to imply that in the absence of any such agreement, the benefit ought not to have been granted to the Petitioner in the scrutiny assessment. There cannot be any failure to disclose fully and truly, if there was no such document as such. This, in our opinion, is nothing but a change of opinion, which does not satisfy the jurisdictional foundation under Section 147 of the Act. - Decided in favour of assessee.

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• 2023 (2) TMI 465
  Maintainability of appeals on low tax effect - Maintainability of these appeals and specifically whether these appeals fall under the exception clause of Circular No. 3 of 2018 issued by the CBDT - HELD THAT:- From perusal of the entire record, it is crystal clear that though the revenue-Auditor has made objection, however, nowhere on record it transpires that the revenue objection was accepted. Also as per the revenue own circular No. 3/2018 CBDT has engrafted certain exceptions and at paragraph 10(c) it has been specifically provided that any appeal even below monetary limit can be entertained provided the audit objection has been accepted by the revenue - even after opportunities given to the learned standing counsel for revenue, he was unable to produce a single chit of paper to show that audit objection has been accepted by the revenue. Thus, since the tax effect in both the cases, the monetary limit is much below the ceiling as prescribed in the Circular No. 3/2018; both these appeals are not maintainable and deserves to be quashed in limine. Disallowance of claim of additional depreciation - disallowance made on the ground that additional depreciation under Section 32(1)(iia) of the Act can only be claimed in the first year of use of the new machinery and the additional depreciation cannot be taken in the subsequent year - ITAT deleted the disallowance - HELD THAT:- ITAT in the Impugned Judgment has correctly allowed the claim of additional depreciation of the respondent made in the subsequent year by relying on the judgment of M/s. Brakes India Limited [ 2017 (4) TMI 511 - MADRAS HIGH COURT ] to hold that the additional depreciation amount, claimed by Respondent in the subsequent year of first usage of new machinery, cannot be disallowed by the assessing officer -. As in Rittal India Pvt. Ltd. case [ 2016 (1) TMI 81 - KARNATAKA HIGH COURT ] wherein the High Court held in favour of the assessee that additional depreciation can be availed even in the subsequent year to the first year when the machinery was put to use. additional depreciation, in terms of Section 32 (1) (iia), can be availed in subsequent assessment year to the assessment year in which the machinery was first put to use. See Shri T.P. Textiles Private Limited [ 2017 (3) TMI 739 - MADRAS HIGH COURT ] Thus both questions of law is decided in favour of Assessee and both the appeals deserve to be dismissed on both counts. Firstly, on the question of maintainability; as the tax effect of both the cases are much below the monetary limit fixed by the CBDT and secondly, even on merit, in view of the judgment passed by the Madras High Court and upheld by the Hon ble Apex Court as discussed hereinabove.

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• 2023 (2) TMI 464
  Reopening of assessment u/s 147 - order passed u/s 148A(d) - petitioner had to be granted a minimum of seven days to respond to the notice issued under Section 148A(b) - HELD THAT:- Given the fact, that it is completely unclear, at this juncture, as to whether any information was received by the AO which was then furnished to the petitioner, the matter, according to us, would require reconsideration on both counts, based on which the petitioner has approached this Court. Accordingly, the best way forward, in our opinion, would be to set aside the order passed under Section 148A(d) of the Act and the consequent notice issued u/s 148 of the Act.

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• 2023 (2) TMI 463
  Reopening of assessment u/s 147 - jurisdiction for reopening and recording reasons without application of mind and without making proper enquiry etc - HELD THAT:- AO recorded the reasons for reopening the assessment and after seeking and being accorded approval by competent authority, issued and served the notice u/s 148 of the Act. Thus, it is found that there was failure on the part of the assessee to disclose fully and truly all material facts. On the basis of cogent and tangible information received and after ascertaining the fact that no scrutiny assessment had been made and the fact that the purchases had been made from the dummy companies of Rajendra Jain group who during the course of a search unequivocally admitted that he was an entry provider, the A.O. formed a prima facie belief that income - Thus, we do not find any error or infirmity in the approach of Ld. A.O. in reopening the case of the assessee for Assessment Year 2007-08 and also the order of the Ld. CIT(A) in affirming the approach of the Ld. A.O. Thus, we do not find any error committed by the Ld.CIT(A) in confirming the reopening of the case by the A.O. accordingly, Ground No. 1 is dismissed. Bogus purchases - Assessee was unable to establish the authenticity and genuineness of purchase made from M/s Avi Export and Mauli implex Pvt. Ltd. and M/s Vitraj Jewelers, the assessee was also unable to controvert the admission of one Sh. Rajender Jain made during the course of search, wherein it was admitted by Shri Rajendra Jain was engaged in providing accommodation entries to interested parties through a network of concerns including Vitrag Jewellers, Moulimani and Avi Export further the claim that the purchases were reflected in the purchase ledger was not established and the claim of the assessee that purchases were subsequently sold to parties also could not be proved before the Lower Authorities. Therefore, we do not find any error or infirmity in the assessment order and the order of the Ld.CIT(A) in confirming the assessment order. Accordingly, Ground No. 2 and its sub grounds are dismissed.

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• 2023 (2) TMI 462
  Exemption u/s 80P - return was filed beyond the due date of Section 139(1) - HELD THAT:- It is pertinent to note that the assessee though filed return of income not as per Section 139(1) of the Act due date, but prior to due date of Section 139(4) of the Act. This fact was not disputed by the Revenue at any juncture. In the light of the decision of Chirakkal Service Co-operative Bank Limited [ 2016 (4) TMI 826 - KERALA HIGH COURT] has observed that denying the exemption under Section 80P of the Act merely on the ground of belated filing of return by the assessee is not justifiable - Decided in favour of assessee.

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• 2023 (2) TMI 461
  Nature of receipt - Income from Sale of Scrips (Market Linked Focus Products Scheme (MLFPS) of Foreign Trade Policy 2009 -14 - Nature of Incentive received by the assessee during the year - This scheme is an incentive scheme under the Ministry of Commerce and intended to promote export trade in certain products and markets - assessee sold such scrips during the year and claimed the receipts to be capital receipts not taxable under any provisions of the Act - HELD THAT:- The purpose of the scheme was to offset infrastructure inefficiencies. There was no requirement to map the expenditure associated with the subsidy and in fact, the assessee was not required to furnish any utilization certificate. Therefore, the argument of Ld. CIT-DR that the related expenditure was also to be disallowed could not be accepted since there was no requirement to establish oneto- one correlation of the expenditure vis- -vis the quantum of subsidy received by the assessee. The decision of Delhi Tribunal in Narayan Industries [ 2022 (7) TMI 1134 - ITAT DELHI] as referred to by Ld. AR, has also been rendered in the context of Focus Product Scheme. In this decision, the bench held that the receipts would be capital in nature. While concluding so, the bench applied purpose test laid down by Hon ble Supreme Court in various decisions. It was finally held by the bench that receipts would be capital receipt not liable to tax under the provisions of Income Tax Act, 1961. This decision also supports the case of the assessee. Therefore, considering the facts of the case and respectfully following the earlier decisions of Tribunal in assessee s own case [ 2016 (7) TMI 951 - ITAT CHENNAI] we would hold that the receipts so earned by the assessee would be capital in nature and hence, not taxable. Decided in assessee s favour. Expenditure on construction of building on leasehold land - expenditure was capitalized in the books of accounts but claimed as revenue expenditure in the computation of income on the ground that the assessee did not have the ownership of building and it had to leave it as vacant when the lease of the land would be terminated - The amount so expanded would not be eligible for depreciation u/s 32 since the building is not owned by the assessee - HELD THAT:- As decided in assessee own case [ 2016 (9) TMI 1497 - ITAT CHENNAI] What constitutes a capital expenditure and what does not, to attract Explanation 1 to section 32(1) of the Act depends upon the construction of any structure or doing any work or in relation to and by way of renovation, extension or improvement to the building which is put up in a building taken on lease by him for carrying on his business and profession of the assessee, but not in a case of construction of any structure or doing any work or relation to where such building is put up/constructed for the purpose of business or the profession of the assessee in a land taken on lease by the assessee. Because the assessee did not acquire a capital asset, viz., the land in the instant case, but has put up a construction of the building only for the business advantage, with the result the entire construction cost is admissible as the revenue expenditure. As decided by Hon ble Apex Court in Mother Hospital Pvt. Ltd [ 2017 (3) TMI 944 - SUPREME COURT] the expenditure so incurred is not in the capital field, would mean that the expenditure is in the revenue field and therefore, the same, in fact, would support the case of the assessee. the assessee-lessee, upon termination of the lease, was to deliver the possession of the demised land to the lessor with or without removing the super structure, electrical and other installation thereon as may be mutually agreed upon by both the parties. The expenses in respect of the same would be borne by the lessee. Thus, the assessee has taken only the land on lease and upon termination of the lease period, the assessee was required to return the land with or without removing the super structure built by the assessee. Therefore, the lessor does not own the building and the assessee cannot own the same as capital asset since the land does not belong to the assessee and at the time of termination of lease agreement, the assessee has to either handover the building along with the land or remove the superstructure and handover the land to the lessor. Therefore, the said expenditure would be allowable as revenue expenditure in the hands of the assessee. - Decided in favour of assessee.

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• 2023 (2) TMI 460
  Addition u/s 68 - assessee has failed to bring on record any evidence to prove the credit worthiness and genuineness of the transaction of the creditors - CIT-A deleted the addition - HELD THAT:- CIT(A) has given a clear-cut findings that the AO did not examine the transaction, in question, independently rather solely relied upon the report of the Investigation Wing in making the impugned addition, whereas, the assessee has duly discharged its primary onus by furnishing the relevant details and evidences to prove the identity and creditworthiness of the creditor and genuineness of the transaction. A perusal of the impugned order of the CIT(A) reveals that the ld. CIT(A) has thoroughly discussed the facts of the case and relied upon various decisions of higher courts.Ground No.2 raised by the Revenue is hereby dismissed. Addition u/s 69C - payments made by the assessee company to two people for land development business in respect of property - only contention raised by the Assessing Officer was that the aforesaid amounts were not accounted in the books of account of the appellant although these were debited from the bank account of the appellant - CIT-A deleted addition - HELD THAT:- CIT(A), has rightly held that since the Assessing Officer himself has noted that the amount was debited from the bank account of the assessee itself, therefore, there was no doubt regarding the source of the said expenditure. Therefore, even if the assessee has not claimed the said expenditure in its books of account that itself cannot be the reason for further disallowance of the said expenditure. The addition u/s 69C of the Act could have been made only if the assessee could not have established the source of the expenditure. However, in this case, it was agreed by the Assessing Officer that the said amount was debited from the bank account of the assessee. We, therefore, do not find any reason to interfere in the impugned order of the CIT(A) and the same is upheld. Decided against revenue.

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• 2023 (2) TMI 459
  Taxability of Interest income - interest received u/s. 28 of Land Acquisition Act, 1894 - Income from other sources - addition u/s. 56(2)(viii) - whether the interest u/s. 28 of the Land Acquisition Act is taxable or not being part and parcel of compensation? - AO in the present case proceeded to allow 50% deduction u/s. 57(iv) and brought to tax remaining 50% u/s. 56(2)(viii) of the Act which is evident from the computation - HELD THAT:- AO simply proceeded on the premise that the amendments to provisions u/s. 145A which bears the heading method of accounting in certain cases, section 145A(b) provides that notwithstanding anything to the contrary contained in section 145, interest received by an assessee on compensation or on enhanced compensation shall be deemed to be the income of the year in which it is received read with section 56(2)(viii) of the Act which provides income by way of interest on compensation or on enhanced compensation referred to in sub-section (1) of section 145B of the Act shall be chargeable to income tax under the head Income from other sources . Therefore, we hold that the interest granted by the reference Court u/s. 28 of the Land Acquisition Act from the date of possession of land till the date of judgment of High Court is an accretion of the value of the land acquired, not chargeable to tax. Thus, we reject the arguments that the principle laid down in the context of motor accident claims is not applicable to the present facts of the case. Therefore, respectfully following the decision of Hon ble Jurisdictional High Court of Bombay in the case of Rupesh Rashmikant Shah [ 2019 (8) TMI 518 - BOMBAY HIGH COURT] we hold the interest received u/s. 28 of the Land Acquisition Act would not fall within the ambit of the expression interest as envisaged u/s. 145A(b) of the Act, further, hold that the amendment by way of substitution of section 145A by Finance (No. 2) Act, 2009 w.e.f. 01-04-2010 and amendment by way of insertion of clause (iii) in section 56(2) by Finance Act, 2009 would have no applicability to the facts of the present case and in view of the same the order of CIT(A) in confirming the order of AO is not justified. Thus, ground Nos. 1 and 2 raised by the assessee are allowed.

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• 2023 (2) TMI 458
  Reopening of assessment u/s 147 - Deduction u/s 80P(2)(a)(i) - interest on FD with the SK Dist Co. Op. Bank and other Nationalized Banks - HELD THAT:- Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited [ 2021 (1) TMI 488 - SUPREME COURT] has considered the investments and the income derived from the interest income in respect of Co-operative Banks as well as other Banks. As regards to reopening, the Assessing Officer, after taking proper approval has reopened the issue because the Assessing Officer has not taken the cognisance of the decisions of the Hon ble Apex Court. Therefore, the reopening is justifiable and the contentions of the assessee is rejected. As regards the decision of Mavilayi Service Co-operative Bank Limited (supra), the Hon ble Apex Court has clearly mentioned that deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding word agriculture into Section 80P(2)(a)(i) of the Act when it is not there. In the present case, the assessee society has invested business income with S.K. District Central Co-operative Bank Limited which is member of Co-operative Society and such investments and interest earned thereon is coming under the purview of deduction under Section 80P of the Act in consonance with the decision of Hon ble Apex Court in the case of Totgar s Co-operative Sales Society Limited [ 2010 (2) TMI 3 - SUPREME COURT] - Thus, the Assessing Officer as well as the CIT(A) has not taken cognisance of the decisions of Hon ble Apex Court in respect of Totgar s Co-operative Sales Society Limited as well as Mavilayi Service Co-operative Bank Limited. Assesse appeal allowed.

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• 2023 (2) TMI 457
  Unexplained investment in jewellery - search and seizure operation u/s 132(1) - HELD THAT:- Considering the fact that once the department officer during the search has considered this silver items as explained and the ld. AO without bringing any contrary finding merely based on the same fact that was before the search team cannot make a separate addition. We find force in the arguments of the ld. AR that once the search team has accepted that silver items were considered as explained and the same is explicitly evident from the question 15 ignoring that primary acceptance by the revenue at the time of search there is no reason by the ld. AO and ld. CIT(A) and in making and sustaining the addition and based on that primary finding the addition sustained by the ld. CIT(A) is vacated and the ground no. 1 raised by the assessee is allowed. Penalty u/s 271AAB(1)(a) - Charge of tax u/s. 115BBE - Whether charging of tax as per provision of section 115BBE is in accordance with the law and principles of nature justice? - HELD THAT:- On cogent reading of the amendment in both the sections of 115BBE and 271AAB with that of the press release, it is evidently clear that the intention of legislature is to segregate the taxation of income declared in search with that of the other amount found and disclosed by assessee in other then search cases. The search in this case is before the Taxation Laws (Second Amendment) Act, 2016 and it is clear from the press note that 16.12.2016 that the rate of penalty and rate of tax both are separately discussed and the penalty in this case proposed to be levied u/s. 271AAB and the were also amended and discussed in that press release and the amendment made in the Act. Based on the above intention of the legislature clearly evident we are of the considered view that once the ld. AO has already decided based on the fact that this is the case of search addition and amount declared u/s. 132(4) accepted by the assessee and offered the same in the return of income filed the same will be in accordance with the penal provision of section 271AAB and invoking to provision of section 115BBE in this case is not in accordance with the law and is also against principles of nature justice as no such issue is raised, discussed and confronted with the assessee. Thus, we direct the assessing officer to strict the calculation of tax in accordance with the provision of law as discussed here in above and give the relief in tax calculation accordingly. In terms of these observation, we allow the ground no 2 3 raised by the assessee.

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• 2023 (2) TMI 456
  Credit for Tax Collected at Source (TCS) - credit for TCS made in the hands of the partner - Assessee is a partnership firm - claim for credit of TCS was not granted because the TCS certificate was in the name of the partner Mr.Raju S.Shetty - liquor licence stands in the name of Shri. Raju S. Shetty, one of the partners of the firm and firm utilized the said licence in the business of selling liquor - purchase of liquor for sale was made from the Karnataka State Beverages Corporation Ltd., (KSBCL) - HELD THAT:- Identical issue with regard to claim of TCS in the hands of the partnership firm when the licence stands in the name of the partners came up for consideration. The Hon ble ITAT, Jaipur Bench in Jai Ambey Wines [ 2017 (1) TMI 986 - ITAT JAIPUR ] after referring to the statutory provisions viz., sections 190, 199, 206C of the Act and Rule 37BA(2)(i) of the Income Tax Rules, 1962 (hereinafter called the Rules ), held that the assessee firm should be given benefit of credit for TCS made in the hands of the partner. If the ultimate conclusion on an application u/s 154 of the Act can only be one particular conclusion, then even if in reaching that conclusion, analysis has to be done then it can be said that the issue is debatable which cannot be done in proceedings u/s 154 of the Act. Conclusion in the present case can only be one viz., that one person alone is entitled to claim credit for TCS and it is only the assessee who has claimed credit for TCS and not the licencee. In such circumstances, the application u/s 154 of the Act ought to have been entertained by the Revenue. DR also made submission that the decision of the ITAT, Jaipur Bench, was in relation to provisions of Rule 37BA of the Rules which is applicable to TDS and not to TCS and it is only Rule 37-I of the Rules which is applicable when credit for TCS is claimed. The very basis of the decision of in the case of Jai Ambey Wines [ 2017 (1) TMI 986 - ITAT JAIPUR ] is based on the facts that what is applicable for TDS should also be applicable for TCS and merely because there is no Rule identical to Rule 37BA(2)(i) of the Rules with reference to TCS provisions, it cannot be the basis for the Revenue to deny the legitimate claim for credit of TCS made by an assessee. The assessee should be given the benefit of credit for TCS. The AO is directed to give credit for TCS. Appeals of the assessee are accordingly allowed.

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• 2023 (2) TMI 455
  Scope of Limited scrutiny - Addition of short-term capital gain on the purchase and sale of shares - HELD THAT:- Transactions in dealing of shares/securities and derivatives are distinct and independent to each other. Therefore, it cannot be said that the short-term capital gain shown by the assessee is in the category of derivative transaction for which the proceedings under section 143(3) of the Act were initiated. The scope of the proceedings in the instant set of facts was limited to the examination of the investment and income thereon with respect to derivative transactions. Consequently, we hold that the authorities below have exceeded their jurisdiction by disturbing and making the addition of the short-term capital gain to the total income of the assessee as the same was not subject matter of dispute in the scope of Limited scrutiny. Claim of bad debt - As per the AO, the bad debts represent only the money transactions without having any business relation - We note that these bad debts were not connected with the activity of derivative and therefore the same cannot fall within the scope of limited scrutiny as discussed above. The Ld. DR before us has not brought anything on record justifying that the Limited Scrutiny was converted by the Assessing Officer under normal scrutiny after obtaining necessary approval from the appropriate authority. Loss i.e. MCX trading loss has been shown by the assessee just to avoid tax liability on the income and to match the amount of profits shown in the income tax return - we note that these items have direct connection with the activities of derivative and therefore the same fall within the scope of assessment proceedings in the given set of facts. As such the entire issue should have been limited to the extent of the dispute raised in the notice under section 143(2) of the Act for the limited scrutiny but the AO in the present case has exceeded his jurisdiction as discussed above. Thus, the issue raised by the assessee in the CO is partly allowed. Deduction on account of bad debts written off - observation of the learned CIT-A that the debtors pertains to the current period, therefore, the same cannot be allowed as deduction - HELD THAT:- We are not convinced with the finding of the learned CIT-A for the reason that there is no prohibition under the provisions of the Act to deny the deduction of the bad debts on the reasoning that it pertains to the current period. Admittedly, the bad debts has actually been written off in the books of accounts of the assessee and part recovery was made in the later year which was offered to tax. Furthermore, if any addition is made in the year under consideration then it would lead to the double addition which is not warranted under the provisions of law. Accordingly we hold that the order passed by the learned CIT-A is unsustainable. Thus the ground of appeal of the assessee is allowed. Disallowance of the expenses representing the indirect expenses - As it is transpired that the expenses were incurred in the course of the business of the assessee. However, we find that as per the ledger account furnished by the assessee, the expenses stand at Rs. 13,53,121.69 whereas as per the statement of Edelweiss Broking Ltd. stand at Rs. 13,22,308 leading to the difference of Rs. 30,813.00 only which is of negligible value. Thus it cannot be said that the expenses were not incurred for the purpose of the business. Accordingly we do not find any infirmity in the order of the learned CIT-A. Hence, the ground of appeal of the Revenue is dismissed. MCX loss - AO before rejecting the contention of the assessee could have verified from the broker who is registered with the exchange. In the absence of any verification by the AO, genuineness of the loss claimed by the assessee cannot be doubted. As such, the AO without pointing out any defect in the loss claimed by the assessee has rejected the same. Accordingly, we do not find any infirmity in the order of the learned CIT-A. Hence the ground of appeal of the revenue is hereby dismissed.

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• 2023 (2) TMI 454
  Undisclosed capital gain - As per DR addition have been made after discovery of incriminating material - CIT(A) deleted the addition by noting that in appellate proceedings, additions in the hands of the other parties have been deleted - HELD THAT:- CIT(A) has passed very short and laconic order. He has only mentioned about the CIT(A) s order in purchasers case without discussing any detail thereof and deleted the addition. These orders of Ld. CIT(A) of other parties were never before the AO. Assessee has furnished one of the purchaser s order, wherein, ITAT has deleted the addition on the ground that no corroborative material has been found. We note that we do not have benefit of the AO s order in the case of those sellers. In the present case, the AO has mentioned incriminating material referred in Investigation Wing report. In these circumstances, in our considered opinion these additional materials were never before the AO. We note that interest of justice demands that the matter may be remitted back to the file of the AO. The AO shall examine the case with reference to the additional material in the shape of appellate orders in purchaser s case and thereafter decide as per law. This appeal filed by the Revenue stands allowed for statistical purposes.

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• 2023 (2) TMI 453
  Addition u/s. 68 - Bogus share capital and premium - onus to prove - assessee failed to explain the identity, creditworthiness of shareholders and genuineness of the transactions and, therefore, added back the share capital and share premium as unexplained cash credit in the hands of assessee - HELD THAT:- The assessee having furnished all the details and documents before the AO and the Ld. AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transactions, the burden shifted upon the Ld. AO to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. In view of this, the aforesaid decision of the Hon ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] in our humble view, is not applicable to the facts and circumstances of the case in hand. Also observe that as per the proviso inserted in section 68 of the Act by Finance Act 2012 that the assessee company receiving share capital and share premium are required to prove the source of source to the satisfaction of the Ld. AO has been inserted w.e.f. 01.04.2013 and the same is not applicable in the case of assessee for assessment year 2012-13 and since the assessee has filed sufficient details to our satisfaction to prove the identity, genuineness and creditworthiness of the transaction, we are not in concurrence both the findings of the Ld. CIT(A). Thus no addition was called for u/s. 68 of the Act for the alleged sum of the share capital and premium - Decided in favour of assessee.

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• 2023 (2) TMI 452
  Condonation of delay - long delay of 2080 days - HELD THAT:- Before us, no explanation has been given by way of affidavit explaining the reasons of filing the appeal after such a long period. In view of the above when no explanation has been given by the assessee, the appeal is highly time barred and therefore, is required to be dismissed on this ground allowed. Deduction u/s 54F - assessee is having more than two houses - HELD THAT:- The perusal of the order clearly shows that the assessee had sold and purchased the plots only and has not acquired any residential house within the meaning of law. Further, as mentioned by the ld.CIT(A), the assessee is having more than two houses, therefore, the assessee is not entitled to any claim u/s. 54F of the I.T.Act. In the light of the above, the assessee has no case of merit, which is duly mentioned by the ld.CIT(A) in the order passed by him. Accordingly, this appeal is dismissed.

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• 2023 (2) TMI 451
  Capital gain computation - fair market value determined by the DVO in terms of provisions of section 50C(2) - sale of property by adopting fair market value determined by the DVO - assessee has requested for reference to DVO and the Assessing Officer has referred valuation of property to Departmental Valuation Cell - HELD THAT:- AO admitted fact that the DVO did not submit valuation report. Therefore, he has completed assessment by adopting guideline value fixed by the authorities for payment of stamp duty. In our considered view, the mandate of law as prescribed u/s. 50C(2) of the Act, is that the AO is bound to refer valuation of property to the DVO, in case the assessee seeks to refer valuation to the Departmental Valuation Cell and further, the AO is bound to consider value determined by the DVO for the purpose of provisions of section 50C(1) of the Act. Since, the AO has failed to comply with mandate of the law, even though he had referred valuation to the DVO, in our considered view, the issue needs to go back to the file of the AO to reconsider the issue in light of provisions of section 50C(2) of the Act. Hence, we set aside the issue to the file of the AO and direct the AO to obtain necessary valuation report from the DVO and re-compute the capital gain from sale of property by adopting fair market value determined by the DVO. AO is also directed to consider cost of acquisition of the property and exemption claimed u/s. 54F of the Act in accordance with law. Appeal filed by the assessee is treated as allowed for statistical purposes.

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• 2023 (2) TMI 450
  Rectification of mistake u/s 154 - clerical error of non-giving credit of TDS - AO athough, withdrew the addition which was made in the rectification order u/s 154 but made another addition by disallowing interest expenses - CIT(A) held that the TDS credit has been allowed as per claim of the assessee and observed that the Assessing Officer did not give any reason whatsoever for enhancing income from other sources - HELD THAT:- AO has misinterpreted the order of the CIT(A). CIT(A) has only directed to verify the record and adopt correct amount. However, since the above directions of the CIT(A) was not clear, therefore, the Assessing Officer proceeded to make a fresh assessment which was neither justified nor within the jurisdiction of the Assessing Officer. Firstly, in the rectification petition, AO was supposed to rectify the error apparent on record. The AO was not justified at all to enhance the income of the assessee from other sources without assigning any reason and without giving any opportunity to the assessee, that too in a rectification order. CIT(A) should have given a clear-cut direction of deleting the enhancement of income in the rectification order instead of directing the AO to verify the record. AO after verification, though, deleted the enhanced income but again proceeded to make certain other disallowance which action of the Assessing Officer has resulted due to inappropriate directions of the CIT(A). In view of this, the impugned order of the CIT(A) is set aside and thereby the enhancement of income made by the AO is also set aside. Any consequential order passed by the Assessing Officer, under the circumstances, of enhancement of income is also hereby set aside. In nutshell, the assessee will be given credit of the TDS as determined by the Assessing Officer in the rectification application u/s 154 of the Act and further enhancement of income, if any, is order to be deleted. Appeal of the assessee stands allowed.

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• 2023 (2) TMI 449
  Reopening of assessment u/s 147 - non-issuance of notice or non-service of notice within time or service of notice in improper manner - As argued no notice has been issued u/s. 143(2) - HELD THAT:- Issuance of notice u/s. 143(2) before passing an assessment order u/s. 143(3), is mandatory and if no notice has ever been issued u/s 143(2) of the Act, then as per legal fiction as enumerated u/s. 292BB of the Act as well, the participation in the assessment proceedings and/or not challenging the assessment proceedings before passing Assessment order or Appellate proceedings before Ld. Commissioner, on the ground of non-issuance of notice or non-service of notice within time or service of notice in improper manner u/s. 143(2) of the Act, would not validate the Assessment order and would also not curtail the rights of the Assessee to challenge the same on the point of notice u/s 143(2) of the Act, before the higher Court(s). Coming to the instant case, in the assessment order, in reply given by the Assessing Officer on dated 01.01.2015 to the application dated 29.12.2014, it has been mentioned that there is no notice issued u/s. 143(2) - we realize that it is just a reply but not the determination of the facts by which it can be presumed that no notice u/s. 143(2) of the Act has ever been issued to the Assessee in the assessment proceedings. Hence, we deem it appropriate to remit the additional grounds/issue raised by the Assessee before us, to the file of the ld. Commissioner for adjudication by examining the facts qua notice u/s 143(2) of the ACT.

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• 2023 (2) TMI 448
  Benefit of deduction u/s. 80P(2)(a)(iii) - interest received by Co-operative Society from Co-operative Bank - AO was of the opinion that the activities carried on by the assessee are neither incidental nor ancillary to the marketing of agricultural produce of its members - HELD THAT:- We note that by placing reliance on the orders of this Tribunal in the case of Rena Sahakari Sakhar Karkhana Ltd. [ 2022 (1) TMI 419 - ITAT PUNE] held that the interest received by Co-operative Society from Co-operative Bank is eligible for deduction u/s. 80P(2)(d) of the Act. We find no evidence whatsoever produced by the assessee before us that the assessee is entitled to get deduction on the interest received from Co-operative Bank is eligible for deduction u/s. 80P(2)(d) of the Act. Therefore, having no evidence before us, we find no infirmity in the order of CIT(A) and it is justified. Thus, ground No. 1 raised by the assessee is dismissed. Disallowance made on account of compound wall expenses - HELD THAT:- We note that the assessee did not submit any reply to the satisfaction of both the authorities below that a new compound wall erected at any place of the assessee s business premises. CIT(A) confirmed the order of AO in the absence of any evidence. Therefore, having no evidence before us, we find no infirmity in the order of CIT(A) and it is justified. Thus, ground No. 2 raised by the assessee is dismissed. Addition made on account of furniture repair maintenance expenses - test of enduring nature applied to the purpose for which a particular expenditure is incurred is not a conclusive test - HELD THAT:- CIT(A) considering the facts and circumstances of the case clearly observed that no material evidence or explanation offered by the assessee against the finding given by the AO. We find no evidence in support of the claim of assessee were filed and in the absence of which we have no hesitation to confirm the order passed by the CIT(A). Therefore the order of CIT(A) in confirming the addition made by the AO on account of furniture repair maintenance expenses is justified. Thus, ground No. 3 raised by the assessee is dismissed.

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• 2023 (2) TMI 447
  Assessment based on the admission/surrender made by the AR - survey u/s 133A - professional misconduct against the AR who has surrendered before the A.O. without the consent by the assessee - Whether assessee can retract the admission made by his representative before the A.O.? - As submitted assessee did not get proper opportunity of being heard wherein the Ld.CIT(A) has sustained the addition after being aware that the assessee had not agreed for addition made and as the case was being barred by limitation - HELD THAT:- As informed to the Bench by the Ld. Counsel for the assessee that, the assessee has not taken any action against the AR who claimed to have been surrendered before the A.O. without the consent of the assessee. Therefore, the said allegation made by the assessee against the AR who has represented the assessee before the Ld. A.O. cannot be believed merely based on an affidavit filed by the assessee, that too when nothing brought on record by the assessee regarding the action taken against the said AR for alleged professional misconduct. The fact remains that, the Ld. A.O. has not decided the issues involved before him on its merit and passed the assessment order only based on the admissions/surrender made by the AR, the Ld. A.O. ought to have decided the matter on merit in accordance with law, not based on the admission or refusal of the assessee. The principle of estoppels is not applicable to income tax proceedings and the authorities should bear in mind that the right income of the assessee to be taxed in the right assessment year and well within the limitation as prescribed in the Act. Therefore, we deem it fit to remand the matter to the file of the A.O. for de-novo consideration with a direction to ignore the surrender made during the assessment proceedings and decide the matter on merit. Grounds of Appeal filed by the Assessee are allowed for statistical purpose by remanding the matter to the file of Ld. A.O. for de-novo consideration to decide the matter on merit, subject to condition that the assessee shall pay a sum of Rs. 5,000/- to the Prime Minister s National Relief Fund.

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• 2023 (2) TMI 446
  Computation of book profits for the purpose of MAT under the provisions of sec.115JB - assessee has treated advances from customers as liability in the books of accounts pending recognition of income - HELD THAT:- If advances received by the assessee from customers on which TDS Credits has been claimed, has been offered as income of subsequent financial years, then the same needs to be recognized as income as and when such income accrues to the assessee. When the assessee has treated advances from customers as liability in the books of accounts pending recognition of income in subsequent financial years, it cannot be said that the assessee has not followed the provisions of Companies Act, 1956, more particularly, Part-II III of Schedule-VI of Companies Act, 1956 while preparing its accounts - AO cannot make any adjustments to re-compute book profit u/s.115JB of the Act, because said item does not come under any of the items of adjustments specified in Clause (a) to (f) of Explanation (1) to Sec.115JB of the Act and thus, we direct the AO to delete additions made towards income admitted to claim TDS Credits while computing book profit u/s.115JB of the Act. Prior period expenses excluded while computing book profit - As we find that as per Part-II III of Schedule-VI of Companies Act, 1956, the assessee is mandatorily shown separate items of prior period expenses and income to disclose the effects in the profits or loss for the current year. In this case, no doubt the assessee has shown prior period expenses in accordance with Part-II III of Schedule-VI of Companies Act, 1956 - while computing book profit u/s.115JB of the Act, the assessee has shown prior period expenses along with other items of expenses of the current financial year contrary to provisions of Part-II III of Schedule-VI of Companies Act, 1956. Assessee has taken profit before tax after deducting prior period expenses while computing book profit. However, for the purpose of computing profits gains of business and profession added back prior period expenses to arrive at income chargeable under the head profits gains of business . I Assessee has not prepared its accounts in accordance with Part-II III of Schedule-VI of Companies Act, 1956, and thus, we are of the considered view that the AO is very well empowered to re-compute book profit for the purpose of Sec.115JB of the Act. Therefore, we are of the considered view that there is no merit in the arguments of the assessee on this issue and thus, we reject the ground taken by the assessee and sustain the additions made by the AO towards prior period expenses items to be excluded while computing book profit u/s.115JB of the Act. Appeal filed by the assessee partly allowed.

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• 2023 (2) TMI 445
  TP Adjustment - International transaction - interest on delayed collection of receivables - assessee proposed adjustment in relation to interest on delayed collection of receivables by applying the 6 months LIBOR plus 400 basis points after granting credit period of 30 days - HELD THAT:- This Bench in case of Instrumentation Corpn. Ltd. v. Asstt. DIT [ 2016 (7) TMI 760 - ITAT KOLKATA] held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. Alternatively, it also argued by the Ld.AR that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables as loans and advances to associated enterprise would amount to double taxation. We deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in accordance with law. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must LIBOR + 300 basis points in accordance with the principles laid down in case of CIT vs. Cotton Naturals (I) Pvt. Ltd [ 2015 (3) TMI 1031 - DELHI HIGH COURT] by considering a credit of 90 days. Mistake in the computation of income - Computation of tax liability u/s 115JB - increase in book profit u/s 115JB and computation of tax liability - computational errors - adjustment on account of deferred tax - HELD THAT:- As per explanation to Section 115JB(2) of the Act, the amount of deferred tax, if any, credited to statement of profit and loss is to be reduced while calculating the amount of book profits as per MAT provisions.Accordingly, in the instant case, the deferred tax which has been credited to statement of profit and loss account was reduced while computing the book profits in the return of income filed by the Assessee. However, the same is not considered in the computation sheet annexed to the Order passed by the Ld. AO. AO was not justified and has erroneously computed interest u/s. 244A thereby resulting in short grant of interest. Where an appeal is filed against an order passed by the Ld.CIT(A), any mistake that arises in the computation of income could be rectified only in an order passed by this Tribunal as the principle merger would be applicable. We therefore reject the argument advanced by Ld.DR. We direct the Ld.AO to compute the taxable income in the hands of the assessee in accordance with law by considering the objections raised by the assessee hereinabove in Grounds 3-6.

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• 2023 (2) TMI 444
  Capital gains - Gains arising from transfer of proprietory concern to assessee company - Violation of the conditions of section 47(xiv) - Goodwill acquired by incurring cost - Whether the gains which were exempt should be brought to tax in the hands of the successor company which is the assessee company? - HELD THAT:- As per the details filed by the assessee, goodwill considered by the AO is not self-generated but created by the erstwhile proprietary concern before assets and liabilities have been transferred to Pvt. Ltd. Co., which is evident from the fact that the assessee has filed necessary details of expenditure incurred for generation/creation of goodwill in the books of accounts of proprietary concern. This fact is strengthened by the findings of the order of the Ld.CIT(A) in the case of Mr.D.Sathish Babu [ 2016 (2) TMI 348 - ITAT CHENNAI] for the AY 2006-07, where the Ld.CIT(A) had categorically find that the assessee has spent a sum of Rs.3.47 Crs. towards goodwill and on account of transfer of proprietary concern to a Pvt. Ltd. Co., there will not be any capital gains. The ITAT Chennai in [ 2016 (2) TMI 348 - ITAT CHENNAI] had upheld the findings of the Ld.CIT(A) in the case of Mr.Satish Babu and held that since the assessee has generated goodwill by paying consideration, on transfer of said goodwill, capital gains become nil . From the above, it is very clear that even if you invoke the provisions of Sec.47A(3) of the Act, to withdraw exemption granted u/s.47(xiv)(b) of the Act, but, in principle there cannot be any capital gains on transfer of goodwill, because, said goodwill is not self-generated or created on account of conversion of proprietary concern into a Pvt. Ltd. Co., but acquired by incurring cost. If you consider cost incurred by the assessee for acquiring goodwill, then, capital gains on transfer of said goodwill would come to nil amount. CIT(A) after considering the relevant facts has rightly deleted the additions made by the AO. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismissed the appeal filed by the Revenue.

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• 2023 (2) TMI 433
  Rectifiction u/s 154 - Levy of late filing fees u/s 234E - intimation issued u/s 200A - interest thereupon levied u/s 220(2) - HELD THAT:- Merely because, the Assessing Officer while accepting the request of the assessee in giving details of the up-to-date due late filing fee along with interest, that, in any way, cannot be said to be the rectification or amendment of the original order of 2015, nor any prejudiced can be said to have been caused to the assessee. Merely, giving the statement of the exact amount due to the assessee, that too, at the request of the assessee, is just the calculation provided by the AO and the assessee, in this respect, can agitate only if the assessee is aggrieved by the aforesaid calculation given by the AO. The assessee in the process of requesting and taking calculation of interest due cannot be said to have acquired any cause of action or right to challenge the original order passed u/s 200A - The assessee has not pointed out as to what mistake has occurred in the order passed u/s 154 of the Act as compared to the original order passed u/s 200A of the Act. In fact, no mistake apparent on record, has been alleged in the said order by the assessee itself in its correction statement/request. There is no dispute relating to the aforesaid proposition. If the assessee is aggrieved by an order passed u/s 154 of the Act he will be entitled to file appeal against the said order. Assessee must bring out from the record as to what prejudice has been caused to the assessee in the order passed u/s 154 of the Act when compared with the original order which has been amended or rectified. Neither any rectification has been done by the AO to the original order nor any cause of action has accrued to the assessee by getting up-to-date calculation of the demand. In view of this, there is no merit in the appeal of the assessee.

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• Corporate Laws

• 2023 (2) TMI 443
  Maintainability of appeal - time limitation - Direction to respondent to allot shares equivalent to 51% in the Company to the Petitioners - HELD THAT:- It is seen from the record that a Certified Copy of the Impugned Order dated 17.03.2019 was received by the Appellant on 26.03.2019 and therefore this Appeal is not barred by Limitation as the Appeal was filed on 09.05.2019. However, the Appellant had subsequently applied for Certified Copies again. However, it is the first date of receipt of Certified Copy is what is relevant for counting the period of Limitation and it is seen that the present Appeal is filed within 45 days from the date of receipt of Certified Copy of the Order. A perusal of the material on record establishes that there is no documentary evidence inasmuch as the relevant Minutes of the Board Meeting or any other significant documents establishing that any allotment or transfer of shares were made with the consent of the 1st Respondent or the legal heirs of Late Shri S.M. Mohan Lal. There is no Balance Sheet which has been filed by the 1st Appellant Company with the ROC and neither is there any record produced for having called any Annual General Meeting after issuance of notice to the Respondents about the purported sale - As per the Articles of Association of the Company, no person can become a shareholder in the 1st Appellant Company without the consent of the existing shareholders. A perusal of the documentary evidence on record establishes that the Respondents are entitled for Rs. 51% Shareholding, in the Company and the Memorandum of Understanding s in question, specifies that the above percentage, is to be maintained and the initial lease period of 11 years in question will not have any bearing. This Rs. 51% Shareholding, has to be maintained and without the Consent of the Respondent, who are holding Rs. 51% Shareholding, no Transaction, can be entered into by the Company, which would effectively dilute the Shareholding of the Respondents. At the cost of repetition, this Tribunal, is of the earnest view that the Appellants, had acted in Violation of the Articles of Association of the Company and have not approached the Tribunal with clean hands. This Tribunal, does not find any illegality or infirmity, in the well reasoned order of the Tribunal. Application dismissed.

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• Securities / SEBI

• 2023 (2) TMI 442
  Buyback offer made by the company in violation of regulatory provisions - role of the Company Secretary, compliance officer - WTM proceeded to hold the respondent liable on the ground that he was a Company Secretary during the Financial Year 2010-11 when a buyback offer worth Rupees 270 crores was made by the company in violation of regulatory provisions - Tribunal held that the role of the respondent, who was a Company Secretary, compliance officer, was limited to redressing the grievances of investors - HELD THAT:- Regulation 19(3) of the SEBI (Buyback of Securities) Regulations 1998 requires the company to nominate a compliance officer and an investors service centre. The purpose of the nomination is twofold, namely (i) to ensure compliance with the buyback Regulations; and (ii) to redress the grievances of investors. There is a patent error on the part of the Tribunal in interpreting the Regulations. The Tribunal held that the role of the respondent, who was a Company Secretary, compliance officer, was limited to redressing the grievances of investors. In arriving at the finding, the Tribunal has relied upon the latter part of Regulation 19(3) which deals with redressal of the grievances of investors. The crucial point which has been missed by the Tribunal is that the compliance officer is also required to ensure compliance with the buyback regulations. Regulation 19(3) of the Regulations expressly so stipulates. Since the interpretation which has been placed by the Tribunal on the interpretation of 19(3) is contrary to the plain terms of Regulation 19(3), we set aside the impugned decision and remit the proceedings back to the Tribunal for consideration of the facts afresh in the light of the interpretation which has been placed above on the provisions of Regulation 19(3). For the above reasons, the appeal is allowed and the impugned order of the Tribunal is set aside. Appeal shall stand restored to the file of the Tribunal for a decision afresh.

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• Insolvency & Bankruptcy

• 2023 (2) TMI 441
  Remission of Resolution Plan back to the CoC for reconsideration, at the request of Financial Creditors - appellant contends that Resolution Plan having been approved by the Adjudicating Authority, there is no jurisdiction in the Adjudicating Authority to send back the Resolution Plan for reconsideration at the request of Financial Creditor - whether the approved Resolution Plan is binding on the CoC which can neither be withdrawn nor sent back for modification? - HELD THAT:- The Judgement of the Hon ble Supreme Court in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED ORS. [ 2021 (9) TMI 672 - SUPREME COURT] categorically lays down that Resolution Plan approved by CoC is binding between the Successful Resolution Applicant and the CoC. The law is thus well settled that Resolution Plan is approved by the CoC is binding between the CoC and SRA. The question to be considered in this Appeal is as to whether, there are any circumstances and conditions, where Resolution Plan can be sent back for carrying out any changes - In this context, the Judgement of the Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT] is referred. The Hon ble Supreme Court in the above judgement had occasion to consider the scope of judicial review of the Adjudicating Authority in the context of Resolution Plan approved by the CoC. It was held by the Supreme Court that The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. Thus, in view of the Judgment of the Hon ble Supreme Court laid down above, the Adjudicating Authority if finds on given set of facts that parameters under Section 30(2)(e) have not been kept in view, the Resolution Plan can be sent back to the CoC to review such plan after satisfying the parameters. The above is the only situation provided by Hon ble Supreme Court where the plan can be sent back. The present is a case where Application was filed by the Financial Creditors where they prayed to delete the clause in the Resolution Plan which provided for release of the personal guarantee of the promoters. The submissions which were pressed before us by Learned Counsel for the Financial Creditors that said clause which violates the provision of Section 128 of Contract Act, has to be treated to be violation of Section 30(2)(e) of the Code - The present is a case where CoC is not asking to withdraw from the Plan or asking for reviewing the entire Resolution Plan rather CoC has asked for leave of the Court for deleting clause in the plan which sought to release the promoters from personal guarantee given to the Financial Creditors. Thus, no grounds have been made out to interfere with the Impugned Order. However, the CoC as per the Order dated 30th March, 2022 may expeditiously taka a decision and Resolution Professional may submit the modified Resolution Plan if any before the Adjudicating Authority - appeal disposed off.

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• Service Tax

• 2023 (2) TMI 440
  Quantum of penalty was reduced - Non-payment of service tax - non-filing of returns - HELD THAT:- The penalty imposed on the appellant Smt. Usha Mohan, Managing Director of Triumph India Software Services Pvt. Ltd. from Rs. 50,000/- to Rs.10,000/- - Appeal allowed in part.

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• 2023 (2) TMI 438
  Levy of service tax - repair and maintenance activity or not - year 2008 (i.e. prior to amendment from 1st March, 2011) - HELD THAT:- The Tribunal while taking note of the decision in the case of SAIL VERSUS COMMISSIONER OF C. EX., RANCHI [ 2007 (7) TMI 152 - CESTAT, KOLKATA ] took a view in favour of the assessee considering the decision of three High Courts wherein it has been held that credit is eligible on welding electrodes. It has also been observed therein that mere dismissal of SLP by the Supreme Court against the decision rendered by the Tribunal will not be considered to be law since not decided by the Apex Court. The facts of the present case are squarely covered by the aforesaid decision - Appeal allowed.

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• Central Excise

• 2023 (2) TMI 439
  Irregular availment of CENVAT Credit - input - it is alleged that the descriptions in invoices referred by the learned Counsel for the appellant are not showing very same goods since descriptions in each invoices varies and the impugned order is sustainable as per Section 11(A)(9) of Central Excise Act, 1944 - HELD THAT:- On going through the findings given by the Appellate Authority where it is highlighted that the invoices relied upon by the appellant is not reflecting same goods. But there is no dispute that the Bare Copper Strips with description Sample ED-192 if cut out into small pieces during the initial process of manufacture was rejected at very beginning of manufacturing. If so, same cannot be invoice as in the very same description. Though, there is a slight discrepancy in the description in invoices, it is an admitted fact that Copper of 1028.8 Kgs were supplied by suppliers, it was returned for Job work due to defect and on completion of Job work, it is sent back to the appellant for further processing vide Invoice dated 03.02.2017 by charging only the labour charges. Moreover, during investigation there is no discrepancy pointed out regarding the stock of raw material maintained by the appellant and the return submitted for the relevant period shows proper transaction of said material as claimed by the appellant. There are no reason to allege that the appellant had availed ineligible CENVAT credit - appeal allowed.

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• 2023 (2) TMI 437
  Entitlement to interest on refund which was deposited during investigation in the year 1995, before issuanc of SCN - pre-deposit or not - Section 11B and 11BB of Central Excise Act, 1944 - HELD THAT:- On identical facts, a co-ordinate bench of the Tribunal in the matter of M/S RATNAMAI METALS TUBES LTD VERSUS C.C.E. S.T. -AHMEDABAD-III [ 2018 (8) TMI 539 - CESTAT AHMEDABAD] has held that although the amount had been paid during the investigation but it shall be considered as payment of duty only. And when this be so, the refund of the duty amount is clearly governed by section 11B ibid and the interest is available under section 11BB and the interest is payable after completion of three months from the date of filing of refund application. From a bare reading of the section 11BB ibid it is clear that the legislature has casted a duty upon the adjudicating authority to decide the claim for refund immediately within three months, failing which the liability for interest starts running after expiry of three months from the date of the application - In the instant matter, if there is any deficiency in the application, the department could have rejected the said application as they are under obligation to decide the application one way or other during the statutory period of three months. When the application for refund has been filed by the appellant on 26.10.2018, three months period has started running from that date itself. Liability for payment of interest after the expiry of three months is statutory and therefore it was a bounden duty of the authority concerned to pay interest after the expiry of the aforesaid period at the rate as specified under section 11BB ibid. The appellant is entitled for the interest on refund after the expiry of three months from the date of application till the date the payment of refund has been made and the order impugned herein is modified to that extent - the authority concerned is directed to calculate and pay the interest on refund to the appellant after the expiry of three months from the date of the application upto the date of refund, within a period of two months from the date of this order - application allowed.

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• 2023 (2) TMI 436
  SSI exemption - use of brand name/ trade mark of other person - case of the Revenue is that since the name and logo of DRDO/DRDE is on the products and this name and logo do not belong to the appellant, it should be treated as if the goods are being sold under the trade mark of DRDO/DRDE - benefit of N/N. 8/2003-CE - HELD THAT:- It is undisputed that the goods were being sold under the brand name MosGuard on the basis of the technology provided by DRDO/DRDE since the technology was provided by DRDO/DRDE. As required under the MOU, it was indicated on the product that they were manufactured with the technology of DRDO/DRDE. The goods were not sold under the brand name of DRDO or DRDE. The name MosGuard is the brand name of the appellant and not of DRDO/DRDE. On the facts of this case, it is not correct to say that the goods were being sold under the brand name of DRDO. MosGuard is the brand name of the appellant and not that of DRDO/DRDE. However, the goods were manufactured with the help of technology transferred by DRDO under MOU and this fact is mentioned on the products along with the logo of DRDO. This cannot be considered as trade mark in any sense of the term - In this case, the indication of the logo with respect to trade is MosGuard which is owned by the appellant itself. The logo and name of DRDO on the product indicate relationship between the DRDO and the technology of the product. They do not indicate a relationship between DRDO and trade of the product. The trade of the product is indicated by the word MosGuard which is not owned by DRDO. The appellant was entitled to the benefit of exemption under Notification No. 8/2003-CE. The original authority was correct in dropping the proceedings in pursuance of the show cause notice and the Commissioner (Appeals) was not correct in confirming the demand along with interest and imposing penalties - Appeal allowed.

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• Indian Laws

• 2023 (2) TMI 435
  Valuation - Kerala Tax of Luxuries Act, 1976 (KTL) - inclusion of miscellaneous income received from the luxury provided in the banquet hall to the taxable turnover - application of Rule 3C of the KTL Rules - HELD THAT:- It is clear that the Tribunal has accepted the income from the luxury provided by the Dealer after verifying the financial statement and the banquet hall income ledger relied on by the Dealer. The Tribunal, thereafter, directed the Assessing Authority to ascertain the quantum of miscellaneous income received from the banquet hall. The finding of the Tribunal is more a remand to the Assessing Officer for assessment upon verification of the record. The direction issued while remitting the matter to the Assessing Officer is correct, and no ground against such consideration could successfully be laid or established. Application of Rule 3C of the KTL Rules - HELD THAT:- Similar point is considered in O.P.(Tax) No.6/2019 tagged with these two years. While expressing agreement with the finding recorded on the independent standing of Rule 3C after the amendment to Section 4(2)(b), the revision filed by the Department was dismissed. The same analogy applies to the finding recorded by the Tribunal in this behalf. Therefore, the said ground is not tenable, warranting interference. Petition dismissed.

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• 2023 (2) TMI 434
  Transfer in All India Serrvice - Seeking issuance of writ of certiorari (a writ or order by which a higher court reviews a case tried in a lower court) or any other appropriate writ for quashing the order passed by the Central Administrative Tribunal - repatriation of petitioner to her parent department i.e. CGST, Audit, Durgapur, Kolkata without serving any notice during her maternity leave - violation of principles of natural justice - HELD THAT:- It is quite apparent that the Court has made it abundantly clear in its decision that the transfer in All India Service is an incident of service where the employee should be posted are the matters which are governed by the exigencies of service and employee does not enjoy the fundamental right or the vested right to claim the transfer or posting of their choice. The executive instructions and directions for transfer and posting do not confer any indefeasible right to claim a transfer or posting. The 20.09.2018 instructions in respect of the inter-commissionerate transfer, in light of the new Recruitment Rules, 2016 issued by the Ministry of Finance Department of Revenue have been considered by the Apex Court. It also clarified that the office order for inter-commissionerate transfer with the grade of inspector issued on or before 26.12.2016 will be non-est and any officer who has joined another zone in pursuance of such order shall be treated as a deemed case on loan basis w.e.f. 26.12.2016. The maximum tenure since is three years, which can be extended with the specific approval of the board for further two years depending on the requirement of the administration, with no exceptional circumstances having been defined and each case to be considered on the merit of its facts, on the basis of the guidelines dated 27.10.2011 shall require the issuance of three months of notice. The Tribunal having noticed the noncompliance of such, had expressed its expectation that the respondent would look into the incident of not following the DOP T dated 17.06.2010 before repatriating her. Being conscious of the fact that the letter dated 03.07.2020 specifies the terms of deputation, extension of deputation and deputation allowances etc. are to be governed by the rules and instructions of DOP T and DGoV and it being the exclusive right of the administration to repatriate the deputationist in accordance with the exigencies of service, the Court cannot disregard the fact that, they have not mentioned about the applicability of DoP T instructions in the matter of repatriation. DoP T instruction dated 17.06.2010 stipulates for premature relieving of deputationists, advance notice of three months to the Ministry as well as to the employee concerned. The manner in which the order has been passed while she was on maternity leave without issuance of notice, as stipulated under the DoP T instructions dated 17.06.2010 by labeling it as an administrative exigency, it is quite obvious that this administrative exigency arise from the administrative warning dated 14.10.2021 which, without seeking any explanation, proceeded by a notice of repatriation and as per the instruction, she has been put to jeopardy of immediate transfer during her maternity leave when the baby was extremely young and no salary has been made available to her. This incident of non-issuance of notice before repatriation will obviously warrant interference to the extent of fixing the responsibility on the officer who has failed to so do it - This Court cannot be oblivious of the chronological events and the pre-determined step of the concerned officer to repatriate her to the parent department at the time when she deserved, if nothing else, humane treatment and legalized approach. The least that could have been done was to issue the notice before repatriation and make payment of her salary. If the petitioner remained protected by virtue of judicial orders, those in the authority have no right to gag her by not paying the salary because she did not join at her parent department. She has not remained unauthorizedly absent to deserve this approach. Even if the repatriation is the right of the employer, its exercise shall necessarily be in accordance with the prevalent rules. This petition is allowed partly interfering with the order of the Tribunal by directing the respondent to follow the prescribed procedure of issuance of notice before repatriating the petitioner.

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