TMI Tax Updates - e-Newsletter
February 18, 2021
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Central Excise
Highlights / Catch Notes
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Income Tax:
Exemption u/s 11 - The advance was given in the normal course of activity of the trust for purchase of uniforms and coats for which necessary evidences including bill for supply of uniforms was placed on record. Therefore, all 3 advances cannot be considered as income or property of the trust was directly or indirectly allowed to the benefit of any person referred to sub-section (3) of section 13 of the Act. - AT
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Income Tax:
Revision u/s 263 by CIT - Where the factual scenario of a case prima facie indicates claim of huge discount which is a matter of limited scrutiny and thus cry for looking deep into it, then a mere acceptance of an explanation without conducting any further verification and examination cannot be held as conducting an enquiry. - The order passed is clearly erroneous and prejudicial to the interest of the Revenue. - AT
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Income Tax:
Reopening of assessment u/s 147 - The tribunal has not considered the provisions of Explanation 2(b) to Section 153 of the Act, by which the Assessing Authority is empowered to include any income excluded from total income of a person and is treated to be income of another person, then such an assessment of the income on such other person shall be deemed to be made in consequence of or to give effect to any finding or direction contained in the said order. - Order of ITAT quashed - Decided in favor of revenue - HC
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Income Tax:
Deduction claimed u/s 80IA(4)(iv)(c) - expenditure required to be capitalized or not - nature of expenditure on renovation and modernization in the books of accounts - substantial renovation and modernization - The provision does not mandate that there has to be increase in the value of plant and machinery in the books of accounts. Therefore, such a requirement, which is not prescribed in the language of the provision cannot be read into it. - HC
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Income Tax:
Deduction claimed u/s 80IA(4)(iv)(c) - There is no requirement of capitalization of expenditure on renovation and modernization in the books of accounts is condition precedent for claiming deduction under section 80IA(4)(iv)(c) - Section 80IA(4)(iv)(c) of the Act does not mandate that there has to be increase in the value of plant and machinery in the books of accounts. Therefore, such a requirement, which is not prescribed in the language of the provision cannot be read into it. - HC
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Income Tax:
Maintainability of appeal - ITAT dismissed the appeal on the ground of low tax effect being less than 10 lakhs - Board Circular No.21/2015 - Determination of tax effect where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions - whether tax effect would include notional tax on disputed additions? - Held Yes - substantial question of law is answered in favour of the revenue - HC
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Income Tax:
Transfer of case u/s 127(2) - Jurisdiction in case of partners of partnership firm - the petitioner was required to disclose that its partners were residing at Faridabad and the same was a relevant fact. We do not agree with the counsel for the petitioner that the petitioner was not required to disclose the residence of its partners. The petition is supported by the affidavit of the Partner, where he has given his address of Delhi, when it is admitted that he is residing at Faridabad. Once the matter concerns territoriality, the place of residence cannot be said to be not relevant. - HC
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Income Tax:
Transfer of case u/s 127(2) - Jurisdiction in case of partners of partnership firm - Once we find the partners of the petitioner to be residents of Faridabad and assessed at Faridabad, we agree with the reasoning given in the impugned order, of administrative convenience for exercise of the power of transfer. It is not the case that the partners of the petitioner residing at Faridabad are assessed at Delhi. If the partners for their own assessment have to participate in the proceedings at Faridabad and Chandigarh, we see no prejudice from the firm of the said partners also being assessed at Faridabad. - HC
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Income Tax:
Penalty u/s 271(1)(c) - Exemption u/s 11 - CIT(A) has categorically observed that no evidence had been brought on record to adduce that furnishing of inaccurate details had been done by the Assessee wilfully, in order to avoid the payments of tax, or to conceal the particulars of income. - It is clear that the penalty proceedings are arising as an outcome of the assessment proceedings, which is still being debated upon. If the issue is debatable, penalty proceedings cannot lie. - HC
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Customs:
Sanction of pending IGST refund claims where the records have not been transmitted to ICEGATE due to GSTR-1 and GSTR- 3B mismatch error - Circular
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Central Excise:
SEZ unit - Eligibility of HSD/fuel for exemption from Central Excise Duty - The respondent has itself accepted this position as exemption is granted with demur to fuel/HSD used in running vehicles owned by the petitioner and denied only to leased equipment. - there is no justification in law to deny exemption to HSD/diesel, used as it is, in the running of the capital equipment deployed in the manufacturing process. - HC
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2021 (2) TMI 654
Assessment u/s 153A - incriminating material found and seized during the course of conduct of search or not? - Addition relating to agricultural income on lease hold lands - HELD THAT:- We find that no documents relating to agriculture land taken on lease were found during the course of search, therefore, no addition should have been made in absence of any incriminating material found during the course of search relating to agriculture income. In search assessment, any undisclosed income, which can ultimately be added, is only to the extent of any unrecorded assets / material found or any incriminating documents found as representing undisclosed income earned. Thus, it is evident that the A.O has not made any specific reference to the incriminating material found during the search in respect of additions made by him. Under these facts non reference to the incriminating material by the A.O is contrary to the settled position of law. Thus, the assessments, so framed, are bad in law. Therefore, we quash the assessment orders under consideration - Decided in favour of assessee.
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2021 (2) TMI 653
Unexplained cash credits u/s. 68 - assessee is in receipt of unsecured loans - HELD THAT:- We are inclined to remit this issue back to the file of AO to verify the documentary evidences filed by the assessee, which are placed on record; the AO is also directed to verify the company's master data from ROC of lenders companies regarding their authorised capital shown in the balance sheet as well as assessee's submissions and decide the issue in accordance with law after providing reasonable opportunity of being heard to the assessee. At the same time, we direct the assessee also to file all the relevant information before the AO and, if necessary, produce the loan creditors before the AO for verification, as per the directions of the AO, in order to verify in the light of the provisions of section 68 of the Act. Addition u/s. 69 towards unexplained investment - assessee reiterated the submissions as made in ground No. 2 that the lower authorities failed to consider the explanation offered by the assessee and, he requested to remit the issue back to the file of the AO to redecide the same - HELD THAT:- After considering the submissions of both the parties and perusing the material on record as well as the orders of the authorities below, we remit this issue also back to the file of the AO with a direction to redecide the issue after taking into consideration the submissions of the assessee. The assessee is directed to submit the documentary evidence in support of his case. This ground is allowed for statistical purpose. Disallowance of expenditure towards hamali expenses, hamali loading unloading and transport charges, from the perusal of P L account - AO has accepted the expenditure incurred by the assessee under the said heads, but, disallowed 10% on the ground of some of the vouchers were self-made and not supported by proper bills -HELD THAT:- To meet the ends of justice, we hereby restrict the disallowance to 5% of total expenditure, instead of 10% of total expenditure made by the AO and confirmed by the CIT(A). Accordingly, this ground is partly allowed.
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2021 (2) TMI 652
Addition of the credits received - AO treating the assessee's loans as his income in the course of the regular assessment framed - As per DR during the course of hearing that the AO had rightly added the impugned sum since the assessee had neither put in appearance in Section 142(2A) special audit proceedings nor he had sufficiently discharged onus of having received the sum in issue from one Shri B. Suryanarayana Raju - HELD THAT:- The case file indicates that the assessee just to file his additional evidence under rule 46A of the Income Tax Rules in the lower appellate proceedings. The CIT(A) sought for remand report(s) - no justification in Revenue's endeavour that the impugned addition of the credits received in F.Y. 2006-07 i.e., A.Y. 2007-08 are liable to be added in this A.Y. 2008-09. The necessary corollary that flows therefore is that the assessee's credits in A.Y. 2007-08 only formed source of the land transactions/investments executed in F.Y. 2007-08 i.e., A.Y. 2008-09 in issue before us. We thus find no reason to accept the Revenue's sole grievance raised in the instant case.
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2021 (2) TMI 651
Penalty u/s 271(1)(c) - Exemption u/s 11 - AO initiated penalty proceedings and held that the Assessee furnished inaccurate particulars of income by claiming exemption under Section 11 of the Act, in respect of the business which was not incidental to the objects of the Assessee trust, and that the said mistake could not have been said to be a bona fide one - CIT(A) deleted the penalty - ITAT confirmed the order of deletion of penalty - HELD THAT:- It is clear that the penalty proceedings are arising as an outcome of the assessment proceedings, which is still being debated upon. If the issue is debatable, penalty proceedings cannot lie. There is no finding that any details supplied by the Assessee in its return were found to be incorrect, erroneous or false. In fact, as noted in the impugned order dated 26th December, 2017, CIT(A) has categorically observed that no evidence had been brought on record to adduce that furnishing of inaccurate details had been done by the Assessee wilfully, in order to avoid the payments of tax, or to conceal the particulars of income. Dealing with a similar issue, the Supreme Court in Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] wherein held merely because the Assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). - Decided in favour of assessee.
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2021 (2) TMI 650
Transfer of case u/s 127(2) - Jurisdiction in case of partners of partnership firm - jurisdictional change from New Delhi to Faridabad - centralization of the case of the petitioner - As argued neither the notice preceding the impugned order nor the impugned order containing any reasons for transfer - HELD THAT:- Vide the notice dated 8th October, 2020, issued in exercise of power under Section 127(2) petitioner was informed of the proposal received from the Principal Commissioner of Income Tax (Central) Gurugram regarding the centralization of the case of the petitioner from ITO Ward 29(1), New Delhi to ACIT/DCIT, Central Circle-II, Faridabad and the petitioner asked to submit its objections, if any and to participate in the hearing granted. Undoubtedly, the said notice did not set out any reasons for transfer. However, a perusal of Section 127(2)(a) shows the same to be requiring only giving the assessee a reasonable opportunity of being heard in the matter, that too wherever it is possible to do so and only requires reasons to be recorded, if directing transfer. Though there is no specific requirement for the notice to set out the reasons but the principles of natural justice require reasons to be stated, to enable the assessee to make effective use of the opportunity granted of hearing. The present is however not a case where though no reasons were set out in the notice but the petitioner was unaware of the reasons for proposed transfer. The petitioner, in its reply dated 26th October, 2020 to the notice referred to an earlier reply (but which has not been produced) and contended that the petitioner firm had been searched under Section 132A by the Investigation Wing, Faridabad on 19th February, 2020 and the department was in the process of jurisdictional change from New Delhi to Faridabad for centralization of the cases belonging to it; that Devender Kumar Gupta who on behalf of the petitioner was replying to the notice, was also a Director in five other private limited companies all of which also had their registered office at Delhi, at the same address in Delhi which was the address of the petitioner and all the said companies were also being assessed at Delhi; that since the material collected during the raid had not been disclosed, the notice was void. The petitioner was thus aware of the reason for which notice had been issued. Principles of natural justice been violated - The impugned order thereafter proceeds to record the response of the Principal Commissioner of Income Tax, Gurugram to the objections of the petitioner, to the effect that (i) the petitioner is a key concern of the Chairman of the Group i.e. Devender Kumar Gupta; (ii) during the course of search proceedings, certain incriminating documents/materials found and seized, related to the petitioner; and, (iii) therefore for purposes of administrative convenience, better coordination, meaningful assessment, achieving uniformity of action and for effective and coordinated investigation, the case of the petitioner was required to be centralized in Central Circle-II Faridabad, wherein maximum number of cases related to this group had already been centralized at one place. Thereafter, the impugned order records that the objections of the petitioner had been duly addressed and there was no justifiable reason for not centralizing the assessment. The impugned order also reasons that Faridabad was within Delhi-NCR Region and in close proximity with Delhi and large number of people working in Delhi are residing in Faridabad or visa-versa. It thus cannot be said that the impugned order is without any reason. The counsel for the petitioner has also not contended, what prejudice has been suffered by the petitioner from the notice not setting out any reasons for transfer. There is thus no merit in the contention of the counsel for the petitioner, of the statutory requirement of giving opportunity and the principles of natural justice having been violated. Even otherwise, an order of transfer is more in the nature of an administrative exercise of power and the scope of interference wherein in any case is limited and unless the administrative power is shown to have been exercised without authority under the law and/or for mala fide reason, no case for interference is made out. Once we find the partners of the petitioner to be residents of Faridabad and assessed at Faridabad, we agree with the reasoning given in the impugned order, of administrative convenience for exercise of the power of transfer. It is not the case that the partners of the petitioner residing at Faridabad are assessed at Delhi. If the partners for their own assessment have to participate in the proceedings at Faridabad and Chandigarh, we see no prejudice from the firm of the said partners also being assessed at Faridabad. We are also of the view that the petitioner was required to disclose that its partners were residing at Faridabad and the same was a relevant fact. We do not agree with the counsel for the petitioner that the petitioner was not required to disclose the residence of its partners. The petition is supported by the affidavit of Devender Kumar Gupta, where he has given his address of Delhi, when it is admitted that he is residing at Faridabad. Once the matter concerns territoriality, the place of residence cannot be said to be not relevant. The petitioner, to that extent has indulged in suppression of material facts and for this reason alone is not entitled to any equitable relief from this Court. Suppression of material facts, in Kishore Samrite Vs. State of U.P. [ 2012 (10) TMI 1097 - SUPREME COURT] has been reiterated to be an abuse of the process of the Court. The petition is liable to be dismissed on this ground alone.
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2021 (2) TMI 649
Entitlement to the differential claim of interest u/s 244A on refund - Whether the Tribunal was right in law in not following the judgment of the Hon'ble Supreme Court in the case of CIT Vs. H.E.G. Ltd. [ 2009 (12) TMI 35 - SUPREME COURT ] holding that interest component will partake of the character of the amount due u/s 244A of the Act which becomes an integral part of the principal amount and assessee would be entitled to interest after the said amount becomes due and payable? - HELD THAT:- Following the judgment made by the Hon'ble Division Bench of this Court in [ 2012 (6) TMI 902 - ITAT CHENNAI ] the matter is remitted back to the Income Tax Appellate Tribunal to decide the matter afresh in accordance with law.
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2021 (2) TMI 648
Deemed approval of application u/s 12A - application u/s 12A not decided within a period of six months - HELD THAT:- Looking into the substantial question of law and after hearing of the learned counsel for the parties as the factum of submission of application has not been considered by the Tribunal, it is the assessee who has established that he has submitted an application under Section 12A of the Act and therefore, the Tribunal has erred in law and facts in accepting the genuineness of application. Resultantly, the matter is remanded back to the Tribunal and the parties shall be free to place all documents and shall be free to put forth their contentions in respect of the aforesaid issue. Parties shall appear before the Tribunal on 15.02.2021.
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2021 (2) TMI 647
Validity of reopening of assessment - Notice u/s 143(2) as barred by limitation - HELD THAT:- In the facts and circumstances of the case, it is not necessary for us to deal with the substantial questions of law framed in this appeal. The impugned order passed by the Tribunal dated 27.05.2016, is hereby quashed and the matter is remitted to the Tribunal to adjudicate the issue whether the notice issued under Section 143(2) of the Act dated 28.02.2013, to the assessee is barred by limitation and is contrary to provisions of the Act. Needless to state that the Tribunal itself shall decide the issue within a period of two months from the date of receipt of certified copy of the order passed today. The parties shall be at liberty to raise all legal contentions with regard to the aforesaid issue.
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2021 (2) TMI 646
Maintainability of appeal - ITAT dismissed the appeal on the ground of low tax effect being less than 10 lakhs - Board Circular No.21/2015 - Determination of tax effect where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions - whether tax effect would include notional tax on disputed additions? - THAT:- From perusal of para 4 of Circular No.21/2015, it is evident that where the returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions and the Assessing Authority had made disallowances with regard to the provisions of wage reversion to the extent as well as provision for audit frees and the notional tax effect on aforesaid contested issue was more than ₹ 10 Lakhs and therefore, the appeal before the tribunal was maintainable and the same ought to have been adjudicated on merits. For the aforementioned reasons, the substantial question of law is answered in favour of the revenue. However, the aforesaid aspect of the matter has not been appreciated by the tribunal. The impugned order of the tribunal is quashed and the matter is remitted to the tribunal for decision afresh in accordance with law.
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2021 (2) TMI 645
Deduction claimed u/s 80IA(4)(iv)(c) - expenditure required to be capitalized or not - nature of expenditure on renovation and modernization in the books of accounts - substantial renovation and modernization of existing network of transmission or distribution lines - HELD THAT:- In the instant case, the assessee had undertaking substantial renovation and modernization of existing lines which is more than 50% of the book value of assets as on 01.04.2004 as per explanation to Section 80IA(4)(iv)(c) of the Act. Thus, it can safely be inferred that the assessee has undertaken the works towards renovation and modernization of existing transmission or distribution lines. It is pertinent to note that there is no requirement of capitalization of the amount in the books of accounts mentioned in Section 80IA(4)(iv)(c) of the Act. It is pertinent also to note that Section 80IA(4)(iv)(c) of the Act does not mandate that there has to be increase in the value of plant and machinery in the books of accounts. Therefore, such a requirement, which is not prescribed in the language of the provision cannot be read into it. MAT Applicability section 115JB - Issue already been answered by this court in 'COMMISSIONER OF INCOME TAX VS. ING VYSYA BANK LTD.' [ 2020 (1) TMI 1116 - KARNATAKA HIGH COURT] Thus, in view of language employed in Section 80IA(4)(iv)(c) of the Act, the requirement contained therein is fulfilled if the assessee undertakes the substantial renovation and modernization of the existing or distribution lines and it is not necessary for the assessee to complete the same as the aforesaid provision does not contain the requirement of completion. The authorities have erred in law in adding the words 'capital work in progress' in the provision which is not mentioned and have also erred in holding that the renovation and modernization should be done in Previous Year. The aforesaid requirements are not contemplated by the provision in question. Assessee appeal allowed.
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2021 (2) TMI 644
Reopening of assessment u/s 147 - addition of undisclosed income in the hands of the assessee or HUF - assessee who worked as real estate agent filed return of income in individual capacity and not as HUF - During the course of the search it was stated by him that he had not declared / disclosed income from real estate transaction and the same would be declared in the return of income of HUF - tribunal set aside the order of assessment mainly on the ground that the Assessing Authority has not recorded independent findings to revoke re-assessment proceeding and the order of re-assessment has been passed on the directions of the Commissioner of Income Tax (Appeals) - Whether tribunal is right in law in holding that re-assessment order is bad in law ignoring Section 150 read with Section 153 and Explanation 2 to Section 153 of the Act ? - HELD THAT:- The tribunal has not considered the provisions of Explanation 2(b) to Section 153 of the Act, by which the Assessing Authority is empowered to include any income excluded from total income of a person and is treated to be income of another person, then such an assessment of the income on such other person shall be deemed to be made in consequence of or to give effect to any finding or direction contained in the said order. Therefore, since the order of assessment has been passed by the tribunal without taking note of Section 150 read with Section 153 as well as explanation 2 to Section 153 of the Act, we answer the additional substantial question of law in favour of the revenue and against the assessee. Therefore, we do not propose to deal with the rival contentions. In the result, the order passed by the tribunal dated 27.04.2016 is quashed and the tribunal is directed to decide the appeal by taking into account the provisions of Section 150 and Section 153 of the Act after affording an opportunity of hearing to the parties.
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2021 (2) TMI 643
Revision u/s 263 by CIT - case of assessee was selected for limited scrutiny - PCIT has observed that AO has not examined the expenditure claimed on account of discount on CT/MRI test whereas all relevant expenditure pertaining to such test has been claimed in the P L A/c - HELD THAT:- We find that the case of the assessee was selected for limited scrutiny for the reasons of large other expenses claimed in the Profit Loss account and mismatch of sales turnover reported in the audit report and ITR. In the show cause notice issued U/s 263 of the Act, the ld. Pr. CIT has stated that Form 26AS reveals that the licensor has paid an amount which is not included in the total turnover of the assessee - As stated that the assessee has claimed expenditure in its profit and loss account towards discount on CT test and MRI test which is not allowable as all the relevant expenditure pertaining to this tests have been claimed separately by the assessee in its profit and loss account. Thereafter, we refer to the findings of the ld. Pr.CIT which are again talking about non verification of receipts as reflecting in Form 26AS and non verification of discount claimed by the assessee as well as the connected issue relating to free services related to MRI and CT Scan test. Thereafter CIT has held that the order dated 29.09.2017 is set aside on the issue with the direction to the Assessing Officer to pass the same denovo in the case of the assessee in accordance with law after making the necessary examination and verification regarding the issues under discussion. We therefore, find that the directions by the ld. Pr. CIT to carry out the fresh assessment is limited to the issue mentioned relating to non-verification of receipts, discount claimed by the assessee and related free services provided by the assessee. These issues are clearly subject matter of limited scrutiny and therefore, the contention so advanced by the ld. AR cannot be accepted. AO has examined the expenses claimed in the profit and loss account and made certain disallowances and these disallowances were subject matter of appeal and since the Ld. CIT(A) has decided the appeal of assessee on the disallowances of expenses claimed in the P L A/c, therefore, with reference to the expenses, the order of AO has since merged with that of the CIT(A) and therefore, the ld Pr.CIT cannot invoke the revisionary jurisdiction U/s 263 of the Act. What has been disallowed by the Assessing Officer is 10% of expenses in the nature of advertisement expenses, Fuel Genset expenses, Legal expenses, maintenance expenses, misc. office expenses, sales promotion expenses, stationery and printing expenses and the expenses pertaining to discount which is subject matter of show cause by the ld. Pr. CIT was not at all examined and considered and for that matter, the subject matter of the assessment order, therefore, it cannot be said that by virtue of filing an appeal against disallowances so made by the Assessing Officer and the ld. CIT(A) has decided the appeal, the order of the AO has merged with that of the ld. CIT(A). In our considered view, the matter pertaining to discount claimed by the assessee in its profit/loss account was not subject matter of assessment order as well as that of the appellate order passed by the ld CIT(A) and therefore, where the matter was not considered and decided by the ld CIT(A), the theory of merger as canvassed by the ld A/R cannot be accepted and the ld Pr CIT is well within his jurisdiction to exercise his powers on such matters under section 263 of the Act. Mismatch of receipts as reflected in Form 26AS - merely because the reported receipts are more than what has been reflected in Form 26AS, it cannot be presumed that what has been reflected in Form 26AS has been included in the receipts as the question is not about the sum total of receipts rather the question is about the particular receipts pertaining to the financial year which are reflected in the Form 26AS are reported to tax or not. We find that it is only during the course of revisionary proceedings that such reconciliation has been submitted by the assessee for the first time and given the fact that the Assessing Officer has not examined the same, the ld. Pr. CIT has remitted the matter to the Assessing Officer for necessary verification. It is therefore, a case of complete lack of enquiry on the part of the Assessing Officer of the issue in respect of which the case has been selected for limited scrutiny and given such failure on the part of the Assessing Officer to carry out the necessary verification and examination, the orders so passed by him is clearly erroneous and prejudicial to the interest of the Revenue and finding of the ld. Pr CIT are hereby sustained. Expenditure claimed on account of discount offered by the assessee in relation to CT scan and MRI test and the related free services provided by the assessee to the patients - In the instant case, where there are discounts claimed to the extent of 19% and above of gross receipts so reported and there are no details available on record except the quantum of discount and an explanation that the discount has been given to the patients as per agreement with PBM Hospital and more so, when the matter was selected for the precise reason of examination of such huge commission payments, it is ordinarily expected that the Assessing officer examine these transactions thoroughly rather than just relying on the information submitted by the assessee company. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld Pr CIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions Where the factual scenario of a case prima facie indicates claim of huge discount which is a matter of limited scrutiny and thus cry for looking deep into it, then a mere acceptance of an explanation without conducting any further verification and examination cannot be held as conducting an enquiry. In our considered view, it is a clear case of no enquiry on part of the Assessing officer and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue. In light of same, where the AO shuts his eyes and the ld PCIT discovers the glaring discrepancies regarding claim of discount expenses during the course of his examination of records, we donot think there is any infirmity or illegality in ld Pr CIT exercising his revisionary jurisdiction u/s 263 - Appeal filed by the assessee is dismissed.
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2021 (2) TMI 642
Rectification of mistake - adoption of turnover - adopting the admitted turnover, as against that per the assessment order, since rectified u/s. 154, is that rejecting the books of account, the AO had estimated the turnover and net profit of the assessee s liquor business based on incriminating documents - grievance before us is only with regard to the turnover and not the net profit rate, estimated by the AO at 4% as against the returned 3.6% - HELD THAT:- Only issue qua turnover is whether the same stands estimated by the AO, and which, where so, would only be on the basis of some material, we find no reference to any material, or in fact any discussion qua the estimation of the turnover, in the assessment order, and toward which we have perused it in its entirety. CIT-DR, Ms. Neerja Pradhan, on being questioned in the matter by the Bench, fairly conceded that the incriminating material found during search was in respect of undisclosed investments and cash, for which separate additions and for other years, has been made by the AO per the impugned assessment order, which is a combined one for seven years. This is indeed the case. In fact, the show cause to the assessee by the AO, is only as to the estimation of the net profit rate, proposed by him at 8% of the turnover, and not qua turnover, even as stated at para 4.1 of the impugned order. CIT(A) is thus clearly in the wrong when he says that the AO had estimated the turnover based on seized documents/material. The adopted figures for these years by the AO (at para 14.2 of the assessment order) is in complete agreement with that as per the assessee s audited accounts, clarifying the basis on which the AO has taken the turnover figures for all the three years, i.e., the audited accounts furnished by the assessee. There is accordingly no manner of any doubt that the turnover for AY 2010-11, as stated at para 14.2 of the assessment order, has been mistakenly so, and rightly rectified by the AO on being moved u/s. 154. In fact, where not so, the sharp and quantum reduction in the turnover for the subsequent two years, i.e., vis-a-vis AY 2010-11, ought to have itself engaged the mind of the Revenue authorities, which is not the case. Clearly, the AO made no attempt to estimate the turnover for the relevant years and, as it appears, being also confirmed by the ld. CIT-DR, there was no material with him for the same. No hesitation in allowing the assessee s Gd. 3 before us for adoption of the turnover at ₹ 1,05,87,289 in estimating the assessee s liquor business income. We are, when we do so, conscious that the turnover as per the assessee s audited accounts is at ₹ 105.72 lacs. So, however, the admitted turnover for this year is at a marginally higher figure, which we find also stated in the same sum at Gd. 2 before the ld. CIT(A), so that the same is hereby directed to be adopted. We decide accordingly.
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2021 (2) TMI 641
Reopening of assessment u/s 147 - reopening of beyond four years from the end of the concerned assessment year - TP Adjustment - HELD THAT:- AO/TPO after applying his mind and considering the submissions of the assessee, had accepted the arms length price on reimbursement of expenses without making any TP adjustment towards the same. Thus, it is clear that the assessee had disclosed all the material facts during the regular assessment proceedings. Reopening of assessment proceedings has been initiated on the basis of ITAT s order pertaining to assessee s own case for assessment years 2005-2006 and 2006-2007. The reasons recorded for reopening the assessment for the relevant assessment year clearly spells that the reopening of assessment has been initiated only on the basis of the earlier Tribunal order in assessee s own case for assessment years 2005-2006 and 2006-2007. Therefore, it cannot be alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Hon ble Apex Court in the case of New Delhi Television v. DCIT [ 2020 (4) TMI 133 - SUPREME COURT ] had held that reopening of the assessment beyond four years is bad in law when the tax payer has disclosed the facts at the time of original assessment proceedings and the A.O. did not draw any adverse inference regarding the same. Hon ble Supreme Court in the case of L T Limited. [ 2020 (1) TMI 518 - SUPREME COURT ] observed that there was no element of lack of true and full disclosure on the part of the assessee, which resulted into any income chargeable to tax escaping assessment. The reasons clearly reveal that the Assessing Officer was proceeding on the material which was already on record. In the absence of the statutory requirement of income chargeable to tax have been escaped assessment due to the failure on the part of the assessee to disclose truly and fully all material facts been satisfied, the Tribunal correctly held that the notice of reopening of assessment was invalid . Hon ble Karnataka High Court in the case of CIT v. Karnataka Bank [ 2015 (7) TMI 535 - KARNATAKA HIGH COURT ] had held that when there is no case of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and further, where the Assessing Authority applied its mind and being satisfied with the claim, allowed the case of the assessee, the Assessing Authority could not have initiated proceedings u/s 147 of the Act, after the end of 4 years.We hold that the reassessment proceedings is bad in law and we quash the same - Decided in favour of assessee.
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2021 (2) TMI 640
Exemption u/s 11 - Denial of exemption as assessee has allowed benefit to the persons specified u/s.13 (1)(c) allowing various loans and advances to trustees or companies, in which trustees are interested, thereby violated provisions of section 13(1)(c) - HELD THAT:- Advance given to M/s. Star Educational Trust and Shri M.G. Bharathkumar, were ultimately used by M/s. Star Educational Trust for the purpose of imparting education and there was no finding of fact from the authorities that any part of income was directly or indirectly benefited to the persons specified u/s.13(3) - As regards, advance given to M/s. Mahaajay Spinners India Pvt. Ltd., the evidence brought on record clearly indicate that said advance was given in the normal course of activity of the trust for purchase of uniforms and coats for which necessary evidences including bill for supply of uniforms was placed on record. Therefore, all 3 advances cannot be considered as income or property of the trust was directly or indirectly allowed to the benefit of any person referred to sub-section (3) of section 13 of the Act. AO was erred in denying the benefit of exemption u/s.11 of the Act, to the trust for contravention of provisions of section 13(1)(c) of the Act. The ld.CIT(A) although has accepted the arguments of the assessee, in so far as advance given to M/s. Star Educational Trust and Shri M.G. Bharathkumar, but in so far as advance given to M/s. Mahaajay Spinners India Pvt. Ltd., held that said advance was violative of section 13(1)(c) of the Act, without assigning any reasons - in so far as three advances considered by the ld AO, there is no violation of section 13(1)(c) of the Income Tax Act, 1961 and accordingly, there is no reason to deny exemption u/s 11 of the Act, to income of the trust. Hence, we direct the ld. AO to allow the benefit of exemption u/s.11 of the Act, as claimed by the assessee. - Decided in favour of assessee.
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2021 (2) TMI 639
Denial of deduction u/s 80P - assessee is a Primary Agricultural Credit Co-operative Society registered under Kerala Cooperative Act - HELD THAT:- A perusal of the decision of the Hon'ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] clearly shows that the Hon'ble Supreme Court has set aside the decision of the Full Bench of the Hon'ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd [ 2019 (3) TMI 1580 - KERALA HIGH COURT] -The Hon'ble Supreme Court has also further explained the decision in the case of Citizen Co-operative Society Ltd. in so far as the deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. In the circumstances in respectful obedience to the principles laid down by the Hon'ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd. (supra) the AO is directed to grant the assessee the benefit of deduction under Section 80P as claimed.
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2021 (2) TMI 638
Unexplained bank credit entries - CIT(A) deleted the addition while admitting addition evidence in the form of confirmations, in violation of provisions of Rule - 46A(3) of Income Tax Rules, 1962 - AO argued CIT-A deleted addition on non examining the chargeability of the source of such entries to Income Tax and without giving opportunity to AO to examine the same - HELD THAT:- The entries considered by the Assessing Officer includes bank reversal entries too. The explanation of the credit entries has been examined which are received from Ansal Properties Ltd., The Seth Vihar, CGHS Ltd. and the remaining from flagship company of the assessee. There has been an unreconciled difference of ₹ 8,84,500 /- which has been already declared as business income of ₹ 20,00,000/- in the return filed in response to the notice u/s 153A of the Income Tax Act, 1961. Since, the balance amount stands offered to tax and the other credit entries have been duly explained. We decline to interfere with the order of the ld. CIT (A) on this issue. Undisclosed income on sale of flats - undisclosed income assessed in the hands of the assessee on protective basis - documents seized during search in GTM Group and impounded during survey u/s 133A showing payments to the assessee - HELD THAT:- The amounts were held to be received from sale of flats. The matter has already been dealt in the case of GTM Builders Promoters Pvt. Ltd. [ 2021 (2) TMI 597 - ITAT DELHI] A.Y. 2006-07 under the head unaccounted income from sale of flats in Cooperative Societies vide para no. 30 to 32 wherein it was held that the addition was unwarranted. Revenue appeal dismissed.
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2021 (2) TMI 637
Disallowance of development expenses - expenses paid to JDA for internal development charges, site plan charges, land cost under bsup, urban assessment and other charges levied by JDA - HELD THAT:- We find that the revenue has failed to pin-point specifically regarding the missing bills with regard to development expenses. In the absence of specific details or objections, no disallowance can be made out of the expenditures incurred by the assessee. The revenue has simply mentioned that some kachhi slips were maintained where name and complete address of payee is not mentioned has been placed on record. But at the same time, the AO and ld. CIT(A) has failed to point out as to which documents do not contain complete address of the payee. The AO has not issued any summon to the respective parties to whom the documents belonged. Even the AO has not recorded the statements of the persons who have issued the bills. In the absence of contrary details filed by the revenue, the ad hoc disallowance of expenses is not justified. Therefore, we delete the addition. Appeal of the assessee is allowed.
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2021 (2) TMI 636
Penalty 271(1)(c) - Assessment completed u/s. 144 - NP Determination - rejecting the books of accounts and subsequently the net profit of the assessee was assessed @ 1% of the turnover declared - HELD THAT:- The assessment was completed by estimating the profit. No penalty is leviable where the assessment was completed on the basis of the estimation of profit. In this regard, we find support of the decision of Hon'ble Gujarat High Court in the case of National Textiles [ 2000 (10) TMI 19 - GUJARAT HIGH COURT] in which it is specifically held that the no penalty is liable to be sustainable where the profit was estimated. Taking into account all the facts and circumstances mentioned above, we set aside the finding of the CIT(A) on this issue and delete the penalty. - Decided in favour of assessee.
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2021 (2) TMI 635
Exemption u/s. 54F denial - assessee has purchased the new residential house property in the name of her husband out of the sale proceeds of her erstwhile residential property - assessee is a non-resident Indian who had earned income from long term capital gains during the relevant assessment year - HELD THAT:- Even if the assessee purchases the new asset in the name of his or her immediate relatives such as spouse, own children, then the assessee will be entitled to claim the benefit of exemption U/s. 54 of the Act. Therefore hereby direct the Ld. AO to grant exemption to the assessee U/s. 54F of the Act and accordingly, delete the LTCG assessed in the hands of the assessee. See V. NATARAJAN. [ 2006 (2) TMI 136 - MADRAS HIGH COURT] , SHRI GURNAM SINGH [ 2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT] AND RAVINDER KUMAR ARORA [ 2011 (9) TMI 343 - DELHI HIGH COURT] - Decided in favour of assessee.
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2021 (2) TMI 634
Addition u/s. 36(i)(va) - employee's contribution to provident fund and ESI as deducted from the employee's salary and not remitted into the Government treasury within the period stipulated under the relevant Act. - AR submitted that the assessee had remitted the employee's contribution towards PF and ESI which was deducted from their salary within the due date of filing the return under the Income Tax Act, 1961 and therefore, the disallowance is not warranted - HELD THAT:- We do not find any merit in the submission of the assessee on this issue. Section 36(1)(va) of the Act specifically provides that if the assessee remits the employee's contribution to Provident Fund/ESI within the due date mentioned in the relevant Act P.F Act, then the deduction will be allowable - Section 43B of the Act, only provides that deduction will be allowed with respect to employer's contribution to provident fund if the same is remitted within the due date of filing the return of income. Section 36(1)(va) of the Act refers to employee's contribution to P.F/ESI while as Section 43B of the Act refers to employer's contribution to P.F. Hence Section 43B of the Act has no application with respect to employee's contribution to P.F./ESI. Accordingly Section 43B of the Act will not override the provisions of Section 36(1)(va) of the Act with respect to employee's contribution to provident fund. It is pertinent to mention that though employee's employer's contribution to P.F/ESI are remitted by the employer into the Government treasury, they are separate and distinct for which independent provisions have been cast under the Act. Employee's contribution to P.F./ESI, is nothing but appropriation of a portion of the salary which is legitimately due to the employee and remitted by the employer in the Government treasury on behalf of the employee in accordance with the provisions of the relevant P.F., Act. -We hereby confirm the Orders of the Revenue Authorities on these issues. Accordingly, Ground No. 1 is held against the assessee. Disallowance u/s. 40(a)(ia) - AO had disallowed 30% as allowable deduction because the assessee has not deducted tax at source as per the provisions of the Act towards audit fees and interest expenditure debited to P L Account - CIT(A) has deleted the addition made by the Ld. AO - HELD THAT:- This ground raised by the assessee does not survive.
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2021 (2) TMI 633
Correct head of income - Treating the income from license fees of canteen - rental income from license fees of canteen - taxable under the head income from house property OR Business income - HELD THAT:- As relying on assessee's own case [ 2019 (7) TMI 1743 - ITAT AHMEDABAD] we consider that rental income from license fees of canteen is taxable under the head income from house property. Therefore, this ground of appeal of the Revenue is allowed.
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2021 (2) TMI 632
Exemption u/s 54 - exemption in respect of long term capital gains earned on sale of property at 80 Shanti Vihar, Delhi was disallowed -Whether exemption under section 54 is allowable to the assessee on purchase of residential house within one year before the date on which transfer of capital asset took place? - physical possession of the property in question transfer stage - revised computation of income acceptable or not by Commissioner of Appeals - HELD THAT:- In the Supplementary Agreement it is specifically mentioned that the Seller [First Party] has taken back the physical possession of the property in question from the Assessee [Second Party] from Dated 19.02.2013 to 19.04.2013 for finishing and completion of the pending work of the above said property and after completion of the entire work First Party will handover the physical possession of the property to the assessee on or before 19.04.2013. It is also mentioned in the Supplementary Agreement that Sale Deed of the property was executed on 19.02.2013 because of the time binding of Sale Deed registration decided by the parties. Copy of the Sale Deed Dated 19.02.2013 is also filed with the photograph of the property in question is affixed which clearly reveal that property under sale was incomplete and renovation work was going on and as such it was not in habitable condition. Due to this fact, the Supplementary Agreement was executed for completion of the work by the Seller i.e., M/s. Mahalakshmi Buildcon. It would, therefore, strengthen the submissions of the Learned Counsel for the Assessee that physical possession of the property after completion of the entire work was handed-over to the assessee on 19.04.2013 and as such it would fall within one year before the date of transfer of property at 80, Shanti Vihar, Delhi. Thus, assessee would be entitled for deduction under section 54 of the I.T. Act, 1961. Since the assessee filed revised computation of income before A.O, therefore, there is no bar on the powers of the Commissioner of Appeals being the First Appellate Authority to consider the case of assessee. The assessee also filed copies of the bills to show renovation in the property. Considering the entire material on record in the light of above decisions of the Tribunal, we are of the view that assessee is entitled for deduction under section 54. In view of the above discussion, we set aside the Orders of the authorities below and delete the entire addition. Accordingly, appeal of the Assessee is allowed.
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2021 (2) TMI 631
Addition u/s 14A r.w.r. 8D - Disallowance made on the entire investments - HELD THAT:- We observe that Rule 8D(2)(iii) is clear that disallowance should be made under the said rule on those investments, on which the assessee earns exempt income, but, not on the entire investments. In this connection, we refer to the decision in the case of Transport Corporation of India Ltd. [ 2016 (11) TMI 245 - ITAT HYDERABAD ] wherein directed to calculate the disallowance of expenditure under rule 8D(2)(iii) taking the average investment from which the exempt income is received. Following the above decision, we direct the AO to calculate the disallowance under rule 8D(2)(iii) in line with the above decision. The assessee is directed not to take any unnecessary adjournments for early disposal of the appeal. Needless to say that reasonable opportunity may be given to the assessee Accordingly, the grounds raised by the assessee in this regard are treated as allowed for statistical purposes.
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2021 (2) TMI 630
Addition on account of Investments written off - HELD THAT:- In the earlier years, the matter further travelled to Hon ble High Court of Delhi wherein the Hon ble Court concurred with the view taken by the revenue. The ld. CIT DR explained in detail about the issue and the order of the Hon ble Jurisdictional High Court as held contention of the Revenue is that contradictory pleas have been taken by the Assessee before the ITAT in the appeal for the AY 1990-91 where, on the issue of write off of investments, it was contended that since Rule 5(b) had been omitted, no exemption has been provided in respect of the profits earned and that since they were chargeable to tax, the losses, if any, were required to be allowed as a deduction. In the written note of submissions filed on behalf of the Assessee, it is stated that: When the petitioner is availing the non-taxation of its profits from sale of investments it is also not claiming the loss suffered on these investments. The AO has not only taxed the profits on sale of investment but has also disallowed the losses. (emphasis supplied) Therefore, even the Assessee acknowledges that if it succeeds, as it has, in its plea that the profit from sale/redemption of investments must be exempt from tax, then it cannot seek deduction as a result of losses on the write off of such investments. Decided n favour of the Revenue. Addition on account of accrued interest on loans, bonds and debentures - assessee is a public sector undertaking of Government of India, conducting the business of non-life insurance for large projects, motor car, health, medi-claim and for other products and establishments - HELD THAT:- As decided in own case assessee company had rightly not recognised an amount as income for the years as per its accounting policy and as per policy issued by the Insurance Regulatory Development Authority (IRDA). So, finding no illegality or perversity in the findings returned by the ld. CIT (A), ground no.1 is determined against the Revenue. Addition on account Guest House - HELD THAT:- Following the decision rendered by the coordinate Bench of the Tribunal, we are of the considered view that when the expenditure incurred by the assessee company for maintenance of company s own guest houses, the same is covered u/s 30(a) of the Act and hence, we decline to interfere with the order of the ld. CIT (A).
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2021 (2) TMI 629
Ex-parte appeal decided by CIT-A - Validity of reassessment proceedings - No compliance to notice the AO issued notice u/s 142(1) - addition on the basis of AIR information that the assessee has sold immovable property - HELD THAT:- Appeal of the assessee is being decided on the basis of material available on record and after hearing the Ld. DR . A perusal of the order of the Ld. CIT(A) shows that the appeal has been decided ex parte. Although the assessee has filed written submission explaining the defect in mentioning the assessment year as an inadvertent error, find the Ld. CIT(A) without considering the same summarily rejected the appeal as defective and further observing that there is delay of more than four months in filing of the appeal. No opportunity whatsoever has been given by the Ld. CIT(A) to the assessee about the delay in filing of the appeal. Considering in the interest of justice we deem it appropriate to restore the issue to the file of the Ld. CIT(A) with a direction to grant one final opportunity to the assessee to substantiate its case - Appeal filed by the assessee is accordingly allowed for statistical purposes.
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Customs
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2021 (2) TMI 660
Grant of Anticipatory bail - import and trade of agricultural and other allied products including spices - mis-declaration of consignment as coconut expeller cake rendering the goods liable for confiscation - offence under Section 135 of Customs Act - HELD THAT:- The investigation of the case is still progressing and the applicants have not yet been made accused. Until a complaint is filed, the person against whom the enquiries commenced under the Customs Act does not stand in the character of a person accused of an offence under Section 135. In Padam Narain's [ 2008 (10) TMI 1 - SUPREME COURT ], it was held that the power to arrest a person by a Customs Officer is statutory in character and cannot be interfered with. Referring to Section 108 of the Customs Act, it was held that Section 108 does not contemplate magisterial intervention. The power is exercised by a Gazetted Officer of the Department. It obliges the person summoned to state truth upon any subject with respect to which he is examined. He is not absolved from speaking truth on the ground that such statement is admissible in evidence and could be used against him. The fact that the applicants have been summoned by the 2nd respondent a number of times under Section 108 and that their statements were recorded, by itself would not entail them to seek anticipatory bail. The application for anticipatory bail is still premature and the applicants are therefore not entitled to the relief of anticipatory bail. Bail application dismissed.
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2021 (2) TMI 659
Confiscation - Levy of Redemption Fine - Foreign currencies - Travellers Cheques - HELD THAT:- There are no hesitation to hold that the Tribunal has committed an error in permitting redemption of the offending goods - appeal allowed.
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2021 (2) TMI 658
Direction to release goods - Gold - HELD THAT:- No legal distinction is made out between the two reliefs sought. Elaborate submissions are put forth in regard to the conduct of the respondents in suppressing material order passed by this Court that I refrain from adverting to, convinced as I am, that the relief sought for by the petitioner cannot be granted. Petition dismissed.
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2021 (2) TMI 657
Release of detained goods - allegation is that the goods illegally held by the accused have not been released - HELD THAT:- There is no such order made by this Court about releasing the goods. Therefore, it cannot be held that there is a breach of the order passed by this Court on 16thOctober 2020. Hence, no case is made out to initiate proceedings under the Contempt of Courts Act, 1971. However, it will be open for the complainant to file appropriate proceedings seeking release of the goods.
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Corporate Laws
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2021 (2) TMI 656
Jurisdiction - Whether civil courts have jurisdiction to decide over the affairs of a company arise out of memo and articles of association of a company in terms of various provisions of Companies Act, 2013? - oppression and mismanagement - waiver of requisite condition - sections 241 and 242 of the Companies Act, 2013. Jurisdiction of civil court vis-a-vis this Tribunal - HELD THAT:- There cannot be any doubt that the issues raised in the suit mentioned supra, and in the instant main company petition, fell under the jurisdiction of this Tribunal, as those issues are admittedly affairs of the company - Therefore, undoubtedly, the Tribunal is empowered to deal with the issue raised in the main company petition, as same is filed under sections 241 and 242 of the Companies Act, 2013 by alleging various acts of oppression and mismanagement. Moreover, the issue raised in the said suit is only relating to acceptance of the resignation. It is nothing to do with the acts of oppression and mismanagement, which is subject-matter of the main company petition. Eligibility to maintain an application/petition - section 241 of Companies Act, 2013 - HELD THAT:- The Tribunal is empowered to waive all or any requirements specified under section 242(1), on an application made to the Tribunal in the matter. Accordingly, the applicant/petitioner has filed the instant application under section 244(1) read with sections 241 and 242 of the Companies Act, 2013, read with rules 11 and 34 of the National Company Law Tribunal Rules, 2016, seeking to waive requisite conditions to file the main company petition. Therefore, the instant application is maintainable. The main company petition is filed by the petitioner by questioning various acts of oppression and mismanagement, which are found to be prima facie meritorious so as to consider those allegations at the time of final hearing of the case, after waiving the requisite condition as sought for. A meritorious/disputed litigation cannot be thrown at threshold without looking into merits of the case by the Tribunal/court by depriving aggrieved party remediless. The contention of the respondent that civil court has already decided the issues and thus the present application and main company petition are not maintainable, are baseless on facts and on law, as detailed supra. Moreover, the civil court has decided only in respect of the alleged acceptance of resignation, and civil court do not have any jurisdiction to decide the acts of oppression and mismanagement of the Companies Act, 2013. It is clearly established that the applicant/petitioner has made out a prima facie case to entertain the main company petition for its final adjudication. Moreover, it is a settled position of law that a meritorious litigation cannot be thrown at threshold without examining the merits of the case. It is not in dispute that the applicant is admittedly, a shareholder of the company by holding 09 per cent. of its total shares. Therefore, the applicant/petitioner is entitled for waiver as prescribed, under section 244(1) of the Companies Act - petition allowed.
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Central Excise
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2021 (2) TMI 655
SEZ unit - Eligibility of HSD/fuel for exemption from Central Excise Duty - Rule 27 of Central Excise Rules - HELD THAT:- In the present case, Fuel/HSD is used to run the capital equipment deployed directly in the manufacturing process. No exemption is sought for fuel used in running of vehicles/other equipment not connected with the eligible activity. The capital equipment deployed have a direct nexus with the manufacturing process as, in their absence, the equipment cannot be run and there would, consequently, be no manufacture/eligible activity. HSD/fuel is thus consumed in the running of the capital equipment which is intrinsic to the process of manufacture itself. The respondent has itself accepted this position as exemption is granted with demur to fuel/HSD used in running vehicles owned by the petitioner and denied only to leased equipment. The argument of the revenue also ignores the fact that the exemption under Rule 27(1) is extended to all types of goods and the width of language employed would include diesel/HSD so long as the goods are used towards/in authorised operations and excepting where the goods are prohibited. Thus, there is no justification in law to deny exemption to HSD/diesel, used as it is, in the running of the capital equipment deployed in the manufacturing process. The preamble to the Act states that the SEZ Act provides for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto - The Supreme Court in the case of BAJAJ TEMPO LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1992 (4) TMI 4 - SUPREME COURT] considered the interpretation to be accorded to a provision granting exemption, concluding that where the exemption was intended for the encouragement of specified sectors, activities or areas, the interpretation of such provisions should be liberal and not narrow. The respondent has raised the plea of alternate remedy and states that the petitioner ought to have exhausted the remedy of approaching the Unit Approval Committee and Board of Approval for addressing its grievances rather than rushing to this Court by way of present writ petition. The petitioner has raised a question of interpretation of the SEZ Act and Rules and, there are, admittedly, no disputes on facts. Petition allowed.
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