TMI Tax Updates - e-Newsletter
March 13, 2019
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Detention - seizure - penalty - applicability of 129 - action can be taken not only against the goods, but also against the transporter. The non-obstante clause in Section 129 indicate that neither Section 126, nor the general provision of penalty under Section 125, or Section 122 would apply in cases where Section 129 is attracted.
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GST:
Classification of supply - Accounting, Sales Invoicing, Purchase Invoicing, Cash receipt posting, Bank Payment entries, other receipt entries, Credit Control work, Support Assignment work; Payroll assistance, storing and scanning of data to the data storage disk and any other work - Cannot be held as Intermediary services - Benefit of Zero Rated Supply (export of services) available.
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GST:
Maintainability of advance ruling application - applicant is recipient of services and he has not a paying the taxes under reverse charge mechanism on the impugned transaction in GST ACT - the application is not maintainable and liable for rejection.
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Income Tax:
TDS u/s 194C OR 194J - payment to the pest control agency - such a payment was not for any technical services provided by the agency.
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Income Tax:
Accrual of income in India - Provision of the software solutions for onward distribution to third party customers in India - since the appropriate ‘arm’s length principle’ has been satisfied in the present case, nothing more would be left to be taxable in India by attributing any further income to the PE of the assessee in India
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Income Tax:
Disallowance u/s. 37(1) - expenses incurred for purchase of gift items - assessee has failed to even disclose the identity of the recipient of gifts either during the assessment proceedings or during the appellate proceedings - additions confirmed.
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Income Tax:
Assessment u/s 153A - AO made addition on the ground that the assessee is having multiple PPF accounts and whereas, the assessee can claim benefit of deduction in respect of only one such PPF account - The addition has been made by the AO merely on change of opinion, hence deleted.
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Income Tax:
TDS u/s 194C or 194J - the contractor was meant to carry out maintenance and the repair work and therefore his services could not have been categorized as providing technical services.
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Income Tax:
Assessment u/s 153A - addition u/s 68 - Mere non production of share holder companies director is argued to be no valid reason for making addition u/s 68 of the Act dehors voluminous evidences filed which has not been objectively and lawfully controverted in manner known to law.
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Income Tax:
Addition u/s 69A - unexplained money deposited in the bank account - The stand of the assessee is that visa agent on behalf of the assessee’s son has arranged this amount is concerned, it can be a corroborative circumstances, but should be supported with evidence. - Additions confirmed.
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Income Tax:
Bogus purchases - The assessee has only produced certain self-serving evidences in a straight-jacket formula normally collected in this type of transaction - Additions confirmed.
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Income Tax:
Exemption u/s 11(1)(a) - the advance or investment in the said lease hold property by the Assessee's Charitable Trust in the year in question could be held to be 'application of income' within the meaning of Section 11(1)(a) of the Act and therefore, the Assessee was entitled to the exemption
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Income Tax:
Cancellation u/s 12AA - Charitable activity or not - The execution of the work awarded by the Railways, is not a public utility service carried on by the assessee and the mere fact that the poor are employed in such execution of contract awarded, would not make it a charitable purpose.
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Income Tax:
Settlement Commission Order - invalidation of application for settlement u/s 245D(2C) with retrospective effect - it acted wholly without jurisdiction.
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Income Tax:
Reopening of assessment u/s 147 - Assessing Officer acted on the satisfaction of the Deputy Collector of Income Tax (Investigation) - AO would have to examine the information received in the context of the facts on record. - Thus, hit by the proviso to section 147
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Income Tax:
Capital gain - liability to pay tax - The liability, if any, to pay the tax is on the partnership firm in view of Section 45(4) of the Act. Besides, the duration of a person being a partner in the firm does not decide the applicability of Section 45(4) of the Act, as it is not so provided therein
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Income Tax:
Suppressed production or not - loss of material - The assessee had itself produced voluminous evidence. This is not a case where the Assessing Officer had caught the assessee by surprise. There may be minor discrepancy or inaccurate recording of non-essential facts by the CIT(A) and the Tribunal. However, the same would not vitiate the very order or shake the foundation of their orders.
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Customs:
Scheme for Rebate of State and Central Taxes and Levies on export of garments and made-ups (RoSCTL)
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DGFT:
Discontinuation of physical copy of Advanced/EPCG Authorisation — Procurement from SEZs
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Corporate Law:
Clarification on filing of e-form RD-1 -Conversion of public company into private company and change in a Financial Year
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Corporate Law:
Extension of Tenure of High Level Committee on Corporate Social Responsibility - 2018
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Corporate Law:
Rule 48 of the NCLAT Rules clearly stipulates service of notice on the other side, pursuant to issuance of notice by the NCLAT in the appeal, regardless of supply of advance copy of appeal paperbook prior to the issuance of notice by NCLAT. 9. Further, Rule 52 of the NCLAT Rules categorically states that the judicial section of the registry of the NCLAT shall record, in the “Notes of the Registry” column in the order sheet, the details regarding completion of service of notice on the respondents
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State GST:
Applicability of GST on various programmes conducted by the Indian Institutes of Managements (IIMs)
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State GST:
Applicability of GST on Asian Development Bank (ADB) and International Finance Corporation (IFC).
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State GST:
Clarification on issue of classification of service of printing of pictures covered under 998386.
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State GST:
Clarification on GST rate applicable on supply of food and beverage services by educational institution.
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State GST:
GST on Services of Business Facilitator (BF) or a Business Correspondent(BC) to Banking Company.
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State GST:
Goods and Services Tax, 2017 - Claims of GST Refunds –Disbursement of sanctioned amounts- Request of the CCST for issuing certain instructions to the Treasury .
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Indian Laws:
Central Government appoints the 08th day of March, 2019, as the date on which the provisions of Part VI, Part X and Part XI of Chapter VII of the Finance Act 2018 shall come into force
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SEBI:
Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) (Amendment) Rules, 2019
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SEBI:
Depositories (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) (Amendment) Rules, 2019
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SEBI:
Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Amendment Rules, 2019
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Central Excise:
Method of Valuation - Job work - The adoption of this price for determining the duty liability in the hands of the principal manufacturer is not in any way prejudicial to Revenue and, therefore, cannot be a cause of grievance to the tax authorities.
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Central Excise:
Clandestine removal - Gutkha - The entire case of the Revenue is based on uncorroborated, untested, unexamined and in some case retracted statement which do not inspire confidence in the same - Demand set aside.
Articles
Notifications
GST - States-
LA/Bill-2/2019 - dated
22-2-2019
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Arunachal Pradesh SGST
THE ARUNACHAL PRADESH GOODS AND SERVICES TAX (AMENDMENT) BILL, 2019
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54/2018-State Tax - dated
31-12-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax, Excise and Narcotics, No. 32/2018- State Tax, dated the 10th September, 2018.
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53/2018-State Tax - dated
31-12-2018
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Arunachal Pradesh SGST
Amendments in the Notification No.28/2018 - State Tax, dated the 10th August, 2018.
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52/2018-State Tax - dated
31-12-2018
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Arunachal Pradesh SGST
Amendments in the Notification No. 32/2017-State Tax, dated the 20th September, 2017, and Notification No. 15/2018-State Tax, dated the 23rd March, 2018.
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51/2018-State Tax - dated
31-12-2018
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Arunachal Pradesh SGST
Amendment in the Notification No. 20/2017 - State Tax, dated the 31st August, 2017 and Notification No. 52/2017 - State Tax, dated16th November, 2017.
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50/2018-State Tax - dated
31-12-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh Department of Tax, Excise & Narcotics No.26/2018-State Tax, dated the 6th August, 2018.
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S.O. 52 - dated
7-3-2019
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Bihar SGST
Supersession of the Notification No S.O. 105 dated 29th June, 2017
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S.O. 51 - dated
7-3-2019
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Bihar SGST
Prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019 under the BGST Act, 2017
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S.O. 50 - dated
7-3-2019
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Bihar SGST
Prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019 under the BGST Act, 2017
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F-10-65/2018/CT/V(114) - 30/2018-State Tax (Rate) - dated
31-12-2018
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Chhattisgarh SGST
Seeks to insert explanation in Notification No. 11/2017-State Tax (Rate) dated the 28th June, 2017
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F-10-65/2018/CT/V(113) - 29/2018-State Tax (Rate) - dated
31-12-2018
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Chhattisgarh SGST
Seeks to amend Notification No. 13/2017-State Tax (Rate) dated the 28th June, 2017
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F-10-65/2018/CT/V(112) - 28/2018-State Tax (Rate) - dated
31-12-2018
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Chhattisgarh SGST
Seeks to amend Notification No. 12/2017-State Tax (Rate) dated the 28th June, 2017
Indian Laws-
S.O. 1314(E) - dated
8-3-2019
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Indian Law
Central Government appoints the 08th day of March, 2019, as the date on which the provisions of Part VI, Part X and Part XI of Chapter VII of the Finance Act 2018 shall come into force
SEBI-
G.S.R. 212(E) - dated
8-3-2019
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SEBI
Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) (Amendment) Rules, 2019
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G.S.R. 211(E) - dated
8-3-2019
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SEBI
Depositories (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) (Amendment) Rules, 2019
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G.S.R. 210(E) - dated
8-3-2019
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SEBI
Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Amendment Rules, 2019
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (3) TMI 596
Detention - seizure - penalty - applicability of 129 of the Central Goods and Services Tax Act, 2017 - liability of transporter - Held that:- Section 129(1) makes it adequately clear that any person who is interested in the goods shall be liable under Section 129(1)(b). Particularly, a reading of Section 129(6) would indicate that where a person transporting any goods or the owner of the goods, fails to pay the amount of tax and penalty as provided in sub-Section (1) within 14 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of Section 130. This would undoubtedly indicate action not only against the goods, but also against the transporter. The non-obstante clause in Section 129 indicate that neither Section 126, nor the general provision of penalty under Section 125, or Section 122 would apply in cases where Section 129 is attracted. The learned Single Judge had rightly dismissed the Writ Petition refusing to find any infirmity in Exts.P5 to P7 notices - petitions dismissed.
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2019 (3) TMI 595
Carry forward of input tax credit - request of filing GST Tran-I rejected - case of petitioner is that he may be allowed to withdraw the present petition with liberty to the petitioner to file fresh one on the same cause of action by challenging Annexure P-5 - Held that:- Petition dismissed as withdrawn.
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2019 (3) TMI 594
Classification of supply - Zero Rated Supply or a Normal Supply? - export of service or not - Intermediary services or not - Place of provision of services - Accounting, Sales Invoicing, Purchase Invoicing, Cash receipt posting, Bank Payment entries, other receipt entries, Credit Control work, Support Assignment work; Payroll assistance, storing and scanning of data to the data storage disk and any other work - Held that:- We find from the agreement that the services being provided to their client is in the form of Administrative and support services. It is further seen from the clause no.3.3 that NES India will provide general advice and assistance in relation to the Services, as required, from time to time and such services will be charged on a time and costs basis - thus, the applicant's transaction is in the nature of supply of services. Export of services or not - Held that:- The applicant located in India is supplying to their client located abroad - further, it is found that both the Applicant and their client are not establishments of the same person, even though they are group companies. The Shareholding pattern of both the companies proves that the Key management personal and Board of Directors are different and neither of them holds shares of each other and thus they do not control one another. The applicant is not a branch or an agency or a representational office of the client and both the companies are independent of each other - thus, clause no. (i),(ii), (iv),and ( v) of Section 2(6) of the IGST Act, are fulfilled by the applicant. Intermediary service or not - Held that:- The relationship between the parties is that of independent contractors meaning that the agreement does not intend to create relationship of principal and agent. Thus we find that applicant is not a person who arranges or facilitate supply of services between two or more persons and therefore the proposed service would not fall to be classified as 'intermediary service'. Place of provision of services - Held that:- The supplier of service i.e. applicant is located in India, the recipient of service i.e. AM is located outside India -Abu Dhabi; payment is received in convertible foreign exchange, the supplier of service and the recipient of service are not merely establishment of a distinct person and applicant not being an intermediary and services are not specified in sub-section (3) to (13) of section 13, the place of supply of service would be the location of the recipient of services i.e. NES Abu Dhabi, which is outside India. As the applicant satisfies all the ingredients of 'export of services' the service provided by the 'Marketing Services Agreement' would qualify as an export of Taxable service. Thus, the applicant is an exporter of services under GST Act and the supply of services in the subject case as covered by the MSA agreement submitted it is very clear that the said transactions are covered under Zero rated supply .
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2019 (3) TMI 593
Maintainability of Advance Ruling application - Levy of GST - Merchant Discount Rate received by the issuing Bank as 'Interchange Fee' - Held that:- Merchant Discount Rate is the rate charged by Acquiring bank from Merchant on every card transaction. This MDR is as per agreement between Acquiring Bank and Merchant Establishment. From a perusal of transaction it is clear that applicant is neither a supplier nor a recipient and the questions raised is not in relation to the supply of goods or services or both, being undertaken or proposed to be undertaken by the applicant and as such by virtue of section 95 the applicant cannot make an application before this authority. Why different practice prevails by the Network in the industry? - Held that:- The question is not on matters or questions specified in Section 97(2) of the Act and as such is inadmissible under section 97 (2) of the Act. The present application seeking ruling on questions stated hereinabove is not maintainable and liable for rejection.
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2019 (3) TMI 592
Maintainability of advance ruling application - Section 97 of GST Act - whether or not the additives undertaken by the applicant pertains to matters or questions specified in Section 97(2)? - Held that:- The applicant is not supplier of services . He is recipient of services from their supplier who leased circuit facility to the applicant and as such by virtue of section 95 is not an applicant who an obtain advance ruling unless the recipient is paying the taxes under reverse charge mechanism on the transaction of receipt of supply. In the present case applicant is recipient of services and he has not a paying the taxes under reverse charge mechanism on the impugned transaction in GST ACT. Hence, we find that the applicant has not satisfied the conditions of section 95 of CGST Act. The present application seeking ruling on questions stated hereinabove is not maintainable and liable for rejection.
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Income Tax
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2019 (3) TMI 597
TDS u/s 194C OR 194J - payment to the pest control agency - HELD THAT:- CIT (Appeals) and the Tribunal have concurrently held that such a payment was not for any technical services provided by the agency. We do not find any error. This question therefore not considered. TDS u/s 192 or 194J - payments made by the assessee to Full Time Consultant Doctors - existence of employer-employee relationship between the assessee company and consultant doctors - categories of doctors had a fixed remuneration and variable pay - categories of doctors had a fixed remuneration and variable paybilateral relationship between the hospital and the doctors - HELD THAT:- As decided in assessee's own case [2015 (2) TMI 457 - BOMBAY HIGH COURT] significant features of the contractual relationship between the doctors and the hospital in the present case were that the hospital would provide support service where a particular patient would be treated by a doctor. The sharing was in the proportion of 15% v/s. 85% between the hospital and the doctors. Contractual tenure of these doctors was for a period of one year which would be renewable depending on the performance of the doctor to be assessed by the Medical Advisory Council of the hospital. These doctors are not entitled to benefits of leave encashment, gratuity, provident fund, superannuation benefits etc. which regular employees of the hospital are. These doctors would on their own obtain indemnity insurance. These are clear indications that the relationship was not one of employer-employee. The Tribunal has correctly applied the decision of this Court in the case of Grant Medical Foundation's case [2015 (2) TMI 457 - BOMBAY HIGH COURT] wherein the Court has laid down the propositions and principles to be applied while testing such a bilateral relationship between the hospital and the doctors. No question of law
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2019 (3) TMI 590
Stay petition - violation of principle of natural justice - HELD THAT:- In the present case, even before the Petitioner could request Assessing Officer and, thereafter, the Principal Commissioner for hearing pending appeal, the Assessing Officer, apparently in consultation with the Principal Commissioner, has taken a view that, entire tax must be deposited. This would be wholly in violation of principle of natural justice. If the authorities were of the opinion that, the normal rule of stay upon depositing 20% of disputed tax demand, was not applicable in the present case, least that they had to do was to hear the Petitioner before taking final decision. The Petitioner shall apply to the Principal Commissioner of Income Tax for stay, pending appeal latest by 15th March, 2019.
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2019 (3) TMI 589
Reopening of assessment - notice issued beyond a period of four years from the end of the relevant Assessment Year - claim for allowing the deduction for interests on late deposit of TDS - addition u/s 37 or 40(a)(ii) - HELD THAT:- In the present case, we have recorded that, the assessee had raised the claim and also put-forth the grounds for justifying the same. Thus, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the reasons recorded, the Assessing Officer had neither alleged nor such reasons in any other manner demonstrate any such failure on the part of the assessee. Only on this ground, the impugned notice needs to be set aside. Also the impugned notice cannot be sustained. During the scrutiny assessment, this issue had came up for discussion before the Assessing Officer as can be gathered from documents on record. In a communication dated 14th January, 2014, assessee had supplied several details as called for by the Assessing Officer. In said letter, while justifying the claim for allowing the deduction for interests on late deposit of TDS, the assessee had asserted this amount is compensatory in nature and not penal in nature and accordingly is not covered by Explanation to section 37(1). Further, this amount is not in the nature of tax levied on profits of business or profession and so not covered by section 40(a)(ii). This amount cannot be disallowed under section 37(1) or section 40(a)(ii). Clearly, thus this claim of the assessee had came up for examination by the Assessing Officer during original assessment proceedings. Once, this much is established, as per settled law it is simply open for the AO to reopen assessment which would be based on mere change of opinion. Without their being any additional material outside of the assessment records, once a particular issue has been scrutinized during original assessment, reopening of assessment based on such issue, would be wholly impermissible. For such reasons, the impugned notice is set aside. - Decided in favour of assessee.
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2019 (3) TMI 588
Suppressed production - manufacturing processes leads to loss of material which depending upon the product is in the range of 3% to 10% - HELD THAT:- AO had carried out minute examination of the material on record. He had held and established that the sale of finished product was below what the assessee ought to have produced and sold even ignoring the production loss and loss of caustic soda and soda flakes during the chemical process. The entire issue was thus, purely factual in nature based on the evidence on record. CIT(A) and the Tribunal confirmed this view of the AO. When two Revenue Authorities and the Tribunal had concurrently decided the issue based on appreciation of evidence on record, we do not find any question of law arising. The assessee's contention of appropriate opportunity being not given by the AO was also considered and rejected by the CIT(A). Perusal of the order of the AO would demonstrate that sufficient opportunities were granted. The central issue was only one namely of the production loss viz. a viz. stock shown by the assessee in the books. The assessee had itself produced voluminous evidence. This is not a case where the Assessing Officer had caught the assessee by surprise. There may be minor discrepancy or inaccurate recording of non-essential facts by the CIT(A) and the Tribunal. However, the same would not vitiate the very order or shake the foundation of their orders. No question of law arises
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2019 (3) TMI 587
Disallowance u/s 14A - HELD THAT:- CIT(A) restricted such disallowance to ₹ 1.12 crore upon which the issue reached the Tribunal. The Tribunal confirmed the order of the CIT(A). This was inter alia on the ground that the Assessing Officer had not stated why he did not agree with the assessee's accounts for allocation of expenditure and further that the assessee had sufficient interest free funds to make such investments. This issue is squarely covered by the decision of this Court in the case of HDFC Bank Ltd Vs. Deputy CIT [2016 (3) TMI 755 - BOMBAY HIGH COURT]. No question of law, therefore, arises. Disallowance of foreign travelling expenses - expenditure of foreign travel of the wife of the chairman and claimed it as allowable expenditure - HELD THAT:- Revenue's objection to the respondent assessee company bearing the expenditure of foreign travel of the wife of the chairman and claimed it as allowable expenditure. The Tribunal, while confirming the deletion made by the CIT(A), noted that the chairman in question was aged about 80 years and that he needed to be accompanied by family member for his medical ground. It was also noted that the wife herself was a director of the assessee company. Such being the facts, we do not find any error in the view of the Tribunal. Non deposit of employee's contribution to provident fund before the due date - HELD THAT:- This issue is covered by the judgment of this Court in the case of CIT Vs. Ghatge Patil Transports Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT].
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2019 (3) TMI 586
Rectification of mistake - order of reassessment additions principally by disallowing certain expenditure and the Assessee's claim of depreciation - Tribunal allowed Respondent's appeal by holding that, proceedings for reassessment were not invalid but do not deal with the merits of the additions made by the AO which were deleted by the CIT(A) - whether the Income Tax Appellate Tribunal was right in law in allowing Revenue's Appeal and reversing the order of CIT(A) without examination of disputed additions? HELD THAT:- Whether the Assessee was correct in carrying such expression or not, is not important. What is important is that, with or without arguments, the Tribunal has not disposed of aspects of deletions by the CIT(A) on merits. In plain terms, without reversing CIT(A)'s order in this respect, the Tribunal could not have allowed the Revenue's appeal. The Assessee had not got any answer from the Tribunal, regarding the justification of the additions made by the Assessing Officer, on which, the Assessee had succeeded in Appeal before the CIT(A). Under the circumstances, the question is answered in favour of the Assessee. The Judgment of the Tribunal is set aside. Respondent's appeal is revived and restored to the Tribunal for consideration of the merits of the additions which were deleted by the CIT(A).
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2019 (3) TMI 585
Estimation of unaccounted income - entries contained in the diaries collected from the assessee during search - HELD THAT:- The assessee did not dispute the contents of that diary and in fact admitted that as shown in the diary he had made the payments to the colleges and sub-brokers to the tune of ₹ 2906.30 lakhs. In a further question asking him to disclose his immovable assets, the assessee had stated that he had purchased office at Navi Mumbai in 2007, a house in Goa in April 2008, a house at Pune in 2008, two flats and a shop at Pune in 2008, two flats at Goa in 2007, a house in his mother's name at Goa in 2007, a house in his father's name at Raypur in 2007 and a plot of four and half acres at Goa in 2005. When it is thus established that the assessee was engaged in the activity of ensuring admissions of students in educational institutions by paying illegal capitation fees and when it is further established that such payments made during two relevant assessment years came close to 2906.30 lakhs, the only question remains to be decided would be as to what would be the assessee's earning out of such dealings by way of his commission. In absence of the assessee bringing on record any material to enable the revenue authorities to estimate the same with any degree of accuracy, the revenue was left with no choice but to estimate the same on the basis of available material on record. What would be the calculation of percentage of amount that the assessee would have retained in himself, in such circumstances, would always be a matter of estimation. The conclusion of the Tribunal cannot be stated to be perverse. No question of law arises.
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2019 (3) TMI 584
Capital gain computation - taxability in the hands of retiring partner's - retirement from the partnership firm - HELD THAT:- We find that impugned order of the Tribunal placed reliance upon the decision of this Court in Prashant Joshi's case [2010 (2) TMI 271 - BOMBAY HIGH COURT] and Riyaz Sheikh's case [2013 (12) TMI 248 - BOMBAY HIGH COURT] to hold that amount received by a partner on his retirement and the partnership firm is not subjected to tax in the retiring partner's hands in view of Section 45(4) of the Act. The liability, if any, to pay the tax is on the partnership firm in view of Section 45(4) of the Act. Besides, the duration of a person being a partner in the firm does not decide the applicability of Section 45(4) of the Act, as it is not so provided therein.
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2019 (3) TMI 583
Penalty u/s 271(1)(c) - undisclosed capital gain - mismatch between the assessee's declared income and the claim of the refund of advance tax - HELD THAT:- We find that the Tribunal has given elaborate reasons for deleting the penalty. The record suggests that assessee had not offered certain receipts to tax under bonafide belief that the same was not taxable. Quite apart from the existence of the letter dated 20th September, 2010 not being disputed by the revenue either before the CIT (Appeals) or the Tribunal, during the assessment proceedings undoubtedly the assessee had made full representation why according to his belief the receipt was not chargeable to tax. Merely because the Assessing Officer did not accept such a stand of the assessee, would not automatically permit revenue to levy penalty. See COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - No question of law in this respect arises. Penalty for breach of Section 54EC - HELD THAT:- Amount involved is extremely small and we therefore, do not entertain the question without going into merits thereof. We however record the confession of Shri Joshi for the assessee that the question whether investment under section 54EC can be total of ₹ 50 lakhs in all or would be capped to ₹ 50 lakhs in a assessment year, permitting similar such investment in the next year was not free from doubt. The assessee had no intention to breach this ceiling.
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2019 (3) TMI 582
Reopening of assessment u/s 147 - eligible reasons for reopening u/s 148 - information received from DDIT (Inv) alleging that M/s Nivyah Infrastructure & Telecom Services Ltd is a penny stock listed on the Bombay Stock Exchange and that the petitioner had dealt with the same leading to escapement of income - borrowed satisfaction - non independent application of mind by AO - Held that:- Reopening of an assessment has to be done by an AO on his own satisfaction. It is not open to an Assessing Officer issue a reopening notice at the dictate and/or satisfaction of some other authority. Therefore, on receipt of any information which suggests escapement of income, the Assessing Officer must examine the information in the context of the facts of the case and only on satisfaction leading to a reasonable belief that income chargeable to tax has escaped assessment, that reopening notice is to be issued. On receipt of information, the least that is expected of the Assessing Officer is to examine the same in the context of the facts of this case and satisfy himself whether the information received does prima facie lead to a reasonable belief that income chargeable to tax has escaped assessment. In this case, the reasons indicate that the Assessing Officer has not carried out such exercise and accepted the report of the Deputy Collector of Income Tax (Investigation) Mumbai to conclude that the petitioner had dealt with Nivyah Infrastructure and Telecom Services Ltd during the previous year relevant to the assessment year 2011-12. Admittedly, there was no company by name “M/s Nivyah Infrastructure & Telecom Services Ltd” in existence during that year for consideration. This clearly shows that the Assessing Officer acted on the satisfaction of the Deputy Collector of Income Tax (Investigation) that income chargeable to tax has escaped assessment - the impugned notice is issued beyond the period of four years from the end of the relevant assessment year in a case, where the assessment was completed under section 143 (3) - AO would have to examine the information received in the context of the facts on record. If such an exercise were to be done, it is likely that the Assessing Officer would have come to the conclusion that there was no failure to disclose truly and fully all material facts necessary for assessment. Thus, hit by the proviso to section 147 - AO has not applied his mind to the information received in the context of the facts on record. The impugned notice is bad-in-law - Decided in favour of assessee.
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2019 (3) TMI 581
Settlement Commission Order - invalidation of application for settlement u/s 245D(2C) with retrospective effect - period of limitation - HELD THAT:- Under Section 245D(2C), thus the Settlement Commission could declare an application for settlement invalid, but such order has to be passed within prescribed time. In the present case, the Settlement Commission to overcome such time limit, passed an order giving it retrospective effect. If we recognize the powers of the Settlement Commission to pass such retrospective orders, the time limits envisaged by the legislature at various stages of settlement proceedings would be destroyed. In the present case, the order passed by the Settlement Commission left six days to the Assessing Office to complete the assessments. We wonder what would be the situation if the Settlement Commission had passed such an order six days later than it has done. Be that as it may, we are clearly of the opinion that the Settlement Commission, while giving retrospective effect to its order of invalidation, it acted wholly without jurisdiction. Mr. Mistri, may be justified in wondering if the Settlement Commission while passing order under Section 245D(4) of the Act, in the same order could have given the declaration of invalidity of the application. Two things are however, clear. One, the Settlement Commission has done it and we cannot undo it; uncalled for. Second, though it is a combined order of Settlement Commission, in relation to the concerned assessment year, the Settlement Commission has clearly exercised powers under Section 245D(2C) of the Act. Portion of the order of Settlement Commission giving retrospective effect to the declaration of invalidity of the settlement application is clearly severable from the main order of invalidity. While therefore, striking down this illegal, severable portion of the order, we need not disturb the principle declaration made by the Settlement Commission.
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2019 (3) TMI 580
Cancellation u/s 12AA - Charitable activity - no satisfaction entered into as to the objects of the assessee being not genuine or the assessee having not carried on the activities as declared in the Memorandum of Association (MoA) - appellant-trust obviously was engaged in executing contracts as awarded by the Indian Railways for cleaning train coaches and railway station - whether taking a contract from the Indian Railways and carrying out the contract work by employing poor people as claimed by the assessee would amount to a charitable purpose or not? - HELD THAT:- Mere employment of people from the weaker sections of Society would not absolve the contractor from the labour legislations and such work is one carried out with a clear intention at making profit. The assessee having bid in a competitive tender had been awarded the work for a consideration agreed upon between the parties and carrying on of such work cannot be categorised as a charitable work merely because the poor or persons from marginsalised sections are given employment. The execution of the work awarded by the Railways, is not a public utility service carried on by the assessee and the mere fact that the poor are employed in such execution of contract awarded, would not make it a charitable purpose. Further though the assessee is said to have provided employment to various people who are engaged in the actual cleaning work carried out in pursuance of the contract, there is absolutely no material placed as to the categories from which such employees were sourced. But for the mere assertion that the nature of the work would itself indicate that only poor people would come for the same, the assessee has not indicated anything about the source from which the assessee had employed such people. The Tribunal correctly found that for cancellation of registration, there are two conditions to be satisfied; one that there is a registration granted earlier and the other the satisfaction of the Commissioner that the trust or the institution is not genuine or the activity of the trust is not being carried on in accordance with the objects of the trust. The activity specifically carried on by the assessee is execution of contract awarded by the Indian Railways. This does not come within any of the objects as professed by the assessee in its MoA. The provision of employment is an incidental and necessary corollary to the execution of the contract awarded by the Indian Railways to the assessee. Various High Court judgments as proffered before the Tribunal were discussed by the Tribunal to distinguish them on facts. We would not further labour on the same, since the only argument was on the basis of the aforesaid judgment of the Division Bench of this Court itself. The Commissioner, according to us, has rightly found that the activities carried on by the assessee being in the nature of execution of a contract work as obtained from the Indian Railways, would not be a charitable purpose coming under the definition under the Act
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2019 (3) TMI 579
Exemption u/s 11(1)(a) - purchasing the leasehold rights in respect of the immovable property, an Auditorium - as per AO advance by the Assessee Trust did not crystalise in any 'application of income' by the Assessee during the year itself and was in 'suspended animation' and, therefore, the said expenditure or outgo of money would not amount to 'application of income' by the Assessee during the relevant year - denial of exemption on an assumed distinction between the 'application' and 'investment' - whether the 'investment' can also amount to 'application' or not? - HELD THAT:- Assessee in the present case while making the advance of ₹ 52.00 lakhs in question for purchase of immovable property in question even on lease basis, cannot be said to have not applied its income during the year in question for the charitable purposes within the meaning of Section 11(1)(a) of the Act and, therefore, the Assessee was clearly entitled to exemption under the said provision in respect of the said investment in immovable property. We cannot agree with the contention of the learned counsel for the Revenue that such advance did not crystalise in any 'application of income' and was in suspended animation as we have already indicated above that nothing contrary was brought on record by Revenue that this advance did not crystalise in any 'application of income' in favour of the assessee during the year or even subsequently. On the contrary, it was contended at the bar by the Assessee that the leasehold rights were secured by the Assessee with the said investment and building on the said leasehold land is under construction as of now. No hesitation in holding that the advance or investment in the said lease hold property by the Assessee's Charitable Trust in the year in question could be held to be 'application of income' within the meaning of Section 11(1)(a) of the Act and therefore, the Assessee was entitled to the exemption.- Decided in favour of assessee
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2019 (3) TMI 578
Eligible deduction u/s 10A - computation of claim - quantum of 'export turnover' has been taken to be the actual remittances of foreign exchange after excluding the unrealised foreign exchange - HELD THAT:- The components of the total turnover/denominator in the formula would be the quantum of export turnover/numerator plus proceeds from domestic sales. Thus what is 'export turnover' for the purpose of the numerator would have to be the 'export turnover' for the purpose of denominator as well and 'export turnover' cannot assume two different characteristics for two parts of the same formula. In the present case, the quantum of 'export turnover' has been taken to be the actual remittances of foreign exchange after excluding the unrealised foreign exchange. This then would be the same figure to be adopted so far as the denominator is concerned as well. In fine, 'total turnover' for purposes of the formula would be the actual sale receipts excluding unrealised foreign exchange as adopted for 'export turnover'. This conclusion is also supported by the reasoning that the provisions of Section 10A/10B are beneficial in nature and seek to encourage an assessee engaging in a prescribed activity. We answer the question of law in the negative, in favour of the assessee
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2019 (3) TMI 577
Claim of deduction u/s 54F - evidence of construction of a new house property - substantial question of law - Power of High Court to sit in appeal over the factual findings -HELD THAT:- The assessee had purchased 1 acre and 25 cents of nanja land. On 22.07.2011, she deposited ₹ 20,20,000/- in a capital gain scheme account, the total investment as on 22.07.2011 was ₹ 2.6 crores. Planning permission had been obtained on 04.07.2012 before the due date for filing return. The Tribunal, considering the report of the inspection, found that the assessee was entitled to deduction under Section 54F of the IT Act. The learned Tribunal, in effect and substance, found that the extent of land appurtenant to a building in a case involving sale of land and buildings was not a determining factor. Right of appeal is not automatic. Right of appeal is conferred by statute. When statute confers a limited right of appeal only in a case which involves substantial questions of law, it is not open to this Court to sit in appeal over the factual findings arrived at by the Appellate Tribunal. In this case, the learned Tribunal as also the Appellate Commissioner have concurred in their factual finding with which interference is not warranted under Section 260A of the Income Tax Act, 1961. The judgment relied upon by the learned counsel for the Revenue of the High Court of Punjab and Haryana in Jagwinder Singh vs. Commissioner of Income-tax, Appeals-II, Ludhiana [2014 (4) TMI 1177 - PUNJAB AND HARYANA HIGH COURT is distinguishable on facts. In the aforesaid case, there was no evidence of construction of a new house property. Appeal dismissed.
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2019 (3) TMI 576
Revision u/s 263 by CIT-A - addition u/s 68 - disallowance on account of cessation & remission of liability u/s 41(1) - HELD THAT:- Both sides agree that the aforesaid order of the Ld. Pr. CIT passed U/s 263 of I.T. Act having been quashed by ITAT vide aforesaid order [2018 (10) TMI 851 - ITAT DELHI] the impugned orders of the Ld. CIT(A) should be set aside with the direction to pass fresh orders on merits of the issues in dispute in the appeals filed by the assessee before CIT(A).
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2019 (3) TMI 575
Levy of penalty u/s 271(1)(c) - search and seizure operation conducted u/s 132 - short term capital gains shown in return filed u/s 153A as not shown in the original return of income u/s 139(1) - HELD THAT:- AO in the assessment order has mentioned that assessee was subjected to search and that assessment order was passed under section 153A - AO did not mention anything in the assessment order, if any, incriminating material was found against the assessee during the course of search, so as to make the impugned addition account of short term capital gain. AO on the basis of the return of income filed by the assessee under section 153A, found that assessee has declared short term capital gains - AO on further enquiry found that there is a difference in the purchase cost and the sale price as per circle rate, therefore, Section 50C was applied against the assessee. The assessing officer, however, accepted the return of income. It would, therefore, show that assessing officer accepted the return of income under section 153A and has not pointed-out, if any, material was recovered during the course of search in connection with income declared on account of short term capital gains. Therefore, there is no question of considering it to be a case of concealment of income or furnishing inaccurate particulars of income because the addition was made by applying deeming provision of Section 50C and that return of income have been accepted under section 153A. Defective notice - Also the assessment order has been passed on 30th March, 2016 under section 153A of the Income Tax Act, 1961. Assessee referred to the show cause notice issued before levy of the penalty Dated 30th March, 2016 i.e., on the same day on which assessment order have been passed. The said notice is reproduced above, in which, the assessing officer has not mentioned as to under which limb of Section 271(1)(c) whether for concealment of income or filing inaccurate particulars of income, such notice have been issued. AO in the assessment order has initiated penalty proceedings under both the limbs of Section 271(1)(c). The assessing officer in the penalty order has also mentioned that he has issued show cause notice dated 25th February, 2015 for compliance on 14th March, 2016. This show cause notice is prior to passing of the assessment order under section 153A on Dated 30th March, 2016 and as such, it would show that assessing officer, without any justification has issued show cause notice for levy of the penalty - Decided in favour of assessee.
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2019 (3) TMI 574
Bogus purchases - sufficient evidence to arrive at a conclusion that the assessee has made purchases from bogus concerns - HELD THAT:- Evidence possessed by the assessee is that payment to the alleged seller was made through banking channel. Payment through banking channel cannot be sacrosanct in all conditions. It has its own limitation to prove genuineness of the transaction. It is one of the basic conditions for making accommodation entries that payment should be made through banking channel. That does not mean that transaction has actually been taken place. Had the assessee able to produce any corroborative evidence in the shape of any agreement or correspondence, any evidence showing delivery of goods or dispatch of goods, probably to some extent, he could able to demonstrate the purchases made from these concerns. The assessee has only produced certain self-serving evidences in a straight-jacket formula normally collected in this type of transaction. If these evidences are tested in the background, how the shell entities used to function, discussed by the ITAT, in the case of Pavankumar Sanghvi [2017 (5) TMI 1159 - ITAT AHMEDABAD] then it would reveal that it is not sufficient evidence to arrive at a conclusion that the assessee has made purchases from these concerns. - Decided against assessee.
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2019 (3) TMI 573
Addition u/s 69A - unexplained money deposited in the bank account - HELD THAT:- As per section 68, the assessee should fulfill three ingredients viz. (a) identity of the lender, (b) genuineness of the transaction, and (c) credit-worthiness of the lender. Similarly, section 69 contemplates, what is unexplained investment. Here the assessee made deposits in the bank account which is unexplained investment unless its nature and source is being explained by the assessee to the satisfaction of the AO. The question before the AO was that, what is the source of deposit in the bank account, qua that the assessee has not produced any material. The stand of the assessee is that visa agent on behalf of the assessee’s son has arranged this amount is concerned, it can be a corroborative circumstances, but should be supported with evidence. He has to pin point from where money was obtained, how it was obtained, and then how it was deposited. No confirmation from the lender has been filed. Even name of lender has not been disclosed. As far as judgment in the case of Smt.P.K. Norrjahan [1997 (1) TMI 6 - SUPREME COURT) and other decision of Hon’ble Gujarat High Court are concerned, they are not applicable in the present case. Smt.P.K. Norrjahan is a lady from whom it could not be assumed that she has any source of income, and in that background explanation was accepted. Here, the assessee is labour contractor, filing return showing income. It was not alleged that the assessee was not an ablebodied person who could not earn income. - Decided against assessee.
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2019 (3) TMI 572
Disallowance u/s 14A r.w. Rule 8D - disallowance of interest u/s 14A and on account of other expenses under Rule 8D(2)(iii) - disallowance exceeding exempt income - HELD THAT:- We find in the case of PCIT Vs. State Bank of Patiala [2018 (4) TMI 23 - PUNJAB & HARYANA HIGH COURT] has held that the amount of disallowance u/s 14A of the Act has to be restricted to the amount of exempt income only and not at a higher figure. also confirmed by Hon’ble Apex Court. Also in the case of PCIT Vs Caraf Builders & Construction (P) Ltd. [2018 (12) TMI 410 - DELHI HIGH COURT] after considering the decisions of Maxopp Investment Ltd. Vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA], Cheminvest Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] and other decisions has held that disallowance u/s 14A cannot exceed exempt income of the relevant year. In the present case, since assessee has earned exempt income from dividends only to the extent of ₹ 3,705/-, we relying on the aforesaid decisions direct the disallowance u/s 14A of the Act be restricted to the extent of exempt income i.e., ₹ 3,705/-. - Decided partly in favour of assessee.
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2019 (3) TMI 571
Assessment u/s 153A - addition u/s 68 - non production of said shareholders - notice under section 143(2) have been issued on the date of filing of the return of income itself - HELD THAT:- As decided in BHIKHUBHAI VITHLABHAI PATEL & ORS. VERSUS STATE OF GUJARAT & ANR. [2008 (3) TMI 660 - SUPREME COURT OF INDIA] no hesitation in our mind in accepting the legal plea raised by Ld AR before us and thus holding that notice u/s 143(2) issued at same time and date of return filing u/s 148 ( vide order sheet entry dated 27/04/2016) vitiates the entire exercise and accordingly all subsequent proceedings are held to be invalid in eyes of law and therefore we quash the orders passed by AO and CIT(A) and allow additional ground raised by assessee. Even otherwise, on the merit of the case i.e. addition made u/s 68 that for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference u/s 68 of the Act where those share holders are found to be existing and identified in detail as summons have been duly served on them. Mere non production of share holder companies director is argued to be no valid reason for making addition u/s 68 of the Act dehors voluminous evidences filed which has not been objectively and lawfully controverted in manner known to law. For this Ld counsel for the assessee placed before us during the course of hearing a comprehensive chart of case laws from coordinate benches of ITAT where similar argument in identical circumstances of additions based on S.K.Jain group search has been deleted u/s 68 of the Act. - Decided in favour of assessee.
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2019 (3) TMI 570
Revision u/s 263 - AO passed the revised order restricting the claim u/s 80RR - treating the whole gross receipts of foreign income earned from foreign sources so as to grant deduction u/s. 80RR - HELD THAT:- There is no justification for treating the whole gross receipts of foreign income instead of gross total income earned from foreign sources so as to grant deduction u/s. 80RR. The gross foreign receipts were accounted by the assessee and from that, net foreign income is to be ascertained and thereafter, deduction u/s. 80RR is to be granted at specified rate. The expenses considered by the AO is to be deducted from the gross foreign receipts. The contention of the assessee that gross foreign receipts is to be considered so as to grant deduction u/s. 80RR of the Act is devoid of merit. The foreign income represented net income received and deposited into Bank account and it is not gross foreign receipts. Reliance is placed on the judgment of the Supreme Court in the case of CIT vs. P.K. Jhaveri [1989 (11) TMI 1 - SUPREME COURT] wherein it was held that deduction u/s. 80K of the Act was allowable to the assessee only on the amount after deduction of the interest paid on moneys borrowed specifically for investment in the shares and not on the gross amount received. We place reliance on the judgment in the case of Industrial Consulting Bureau Pvt. Ltd. vs. CIT [1991 (3) TMI 129 - BOMBAY HIGH COURT] wherein it was held that relief u/s. 80M has to be allowed on net income and not on gross income. The same view was taken by the Rajasthan High Court in the case of Mahavir Kumar Jain vs. CIT [2004 (9) TMI 72 - RAJASTHAN HIGH COURT] with regard to deduction u/s. 80TT. We find that there is no force in the argument of the Ld. AR and the case law relied on by him and it cannot be applied to the assessee’s case. Hence, this ground of appeal of the Revenue is allowed.
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2019 (3) TMI 569
Assessment u/s 153C - unexplained investments u/s.69 - no satisfaction recorded by the AO of the searched person - CIT-A quashed assessment as well as noticed issued u/s 153C - HELD THAT:- CIT Departmental Representative stated that despite his best efforts from last three months, the AO is not sending any report or any satisfaction recorded in the case of searched person. As there is total non-cooperation from the field office of the Income Tax Department, we presumed that the Revenue has nothing to say on this matter except the arguments made by the learned CIT Departmental Representative i.e. relying on the assessment order. We find that this issue is also squarely covered by the order of Tribunal for AYs 2007-08 and 2008-09 and that of the present AY 2006-07 of CIT(A), which is common [2018 (1) TMI 322 - ITAT MUMBAI]/ Taking a consistent view and respectfully following the Tribunals order of co-ordinate Bench in assessee’s own case, we of the view that there seems no satisfaction recorded by the AO of the searched person namely Shri Subhash Deshmukh in respect to this assessee - decided in favour of assessee.
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2019 (3) TMI 568
Assessment u/s 153A - Clubbing of income of minor son in the hands of the assessee as Short Term Capital Gain - whether case of non-abated assessment? - HELD THAT:- It is an undisputed fact that no incriminating material was found during the course of search that would have resulted in any addition in income returned by the assessee. It is also an uncontroverted fact that assessment consequent to the return of income filed u/s.139 of the Act for the assessment year 2006- 07 was completed. Thus, on the date of search, no assessment was pending which could have abated. In other words, it is a case of non-abated assessment. It is a well settled law that no addition can be made in respect of assessments which have become final if no incriminating material is found during search. Addition of interest on Public Provident Fund (PPF) accounts - AO made addition on the ground that the assessee is having multiple PPF accounts and whereas, the assessee can claim benefit of deduction in respect of only one such PPF account - HELD THAT:- The addition has been made by the Assessing Officer merely on change of opinion. The return of the assessee filed u/s.139 of the Act was subject to scrutiny assessment. The assessment order u/s.143(3) of the Act was passed on 29.12.2009 i.e. much prior to the date of search. Thus, it is a case of nonabated assessment. No incriminating material, whatsoever, was found during search and seizure action that could have resulted in addition during the impugned assessment year. Therefore, following the detailed reasons given while adjudicating appeal of Revenue assessment year 2006-07, the present appeal of the Revenue for assessment year 2007-08 is dismissed being devoid of any merit. Addition of investment in plot of land - undisclosed investment - HELD THAT:- We find that the plot in question has been disclosed in the list of immovable properties as on 31.03.2001. Since the purchase of asset has already been reflected in the Balance Sheet for the financial year ending in which the asset was purchased, mere seizure of some documents pertaining to the said property would not make the documents incriminating. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in deleting the addition. Accordingly, the impugned order is upheld and the appeal of Revenue for the assessment year 2008-09 is dismissed being devoid of any merit. Change of head of income - assessee disclosed gain from trading in shares under the head “capital gains” but AO changed the head of income to “Business Income” - Held that:- It is an undisputed fact that there was no pending assessment and no incriminating material was found during search. Thus, it is a case of non-abated assessment. The Assessing Officer cannot make addition by merely changing head of income in assessment proceeding u/s.153A of the Act, without there being any incriminating material in a case of closed assessment. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in deleting the addition. - Decided against revneue
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2019 (3) TMI 567
Assessment u/s 153A - all the returns before conducting the search and the time limit to issue notice u/s 143(2) already lapsed - non abated assessments - HELD THAT:- In the present case, the assessee has filed all the returns before conducting the search and the time limit to issue notice u/s 143(2) of the Act already lapsed and a search is conducted and no incriminating material is found. A.O. called for books of accounts and other relevant documents and assessment is completed u/s 153A r.w.s. 143(3). The search was initiated in the business premises of the assessee on 29.1.2014 and therefore the time limit for issue of notice u/s 143(2) is lapsed. All the assessment years from 2008-09 to 2012-13 are concluded and non abated assessments. A.O. cannot reopen the assessments u/s 153A. In so far as the above submission is concerned from the assessment order and even from the CIT(A)’s order, there is nothing on the record which says that the additions made by the A.O. are based on any incriminating material. Even when the same was pointed out to D.R., she is not able to establish the fact that additions are based on any incriminating material, therefore we find that the additions made by the A.O. for all the years are not based on any incriminating material found during the course of search. It is only based on subsequent search by issue of notice u/s 153A calling for the various documents from the assessee additions are made. The assessee in respect of concluded assessments cannot be reopened, we find that in all the assessment years from 2008-09 to 2012-13, there is no scope for the A.O to issue a notice u/s 143(2) of the Act for the reason that the time limit is already over before the date of search itself i.e. on 29.1.2014. Therefore, in our opinion, all the assessment years from 2008-09 to 2012-13 are concluded assessments and non abated assessments and any addition has to be made in respect of those assessment years, there must be an incriminating material. In the present case, there is no incriminating material and therefore, the additions made by the A.O. cannot survive. - Decided in favour of assessee
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2019 (3) TMI 566
Rectification of mistake u/s 254(2) - non-consideration of specific ground taken by the assessee challenging reopening of assessment and violation of principle of natural justice - estimation of income on bogus purchases - HELD THAT:- We find that the Tribunal has decided the appeal filed by the assessee on merit and scaled down profit estimated by the CIT(A) on alleged bogus purchases from 20% to 12.5% by considering arguments advanced by both sides and also by relied upon various decisions of Co-ordinate Bench, where ITAT, Mumbai Bench, in number of cases has taken consistent view to direct the AO to estimate 12.5% profit on alleged bogus purchases. However, the Tribunal has not adjudicated other grounds taken by the assessee challenging the reopening of assessment u/s 147 r.w.s. 148 even though the assessee has taken specific ground vide ground no.1 and 2 of grounds of appeal filed along with Form No.36. We further noticed that the assessee also challenged violation of principle of natural justice on the ground that addition has been made based on third party statement, without providing opportunity to the assessee to contradict statement of Hawala Operators. Therefore, we are of the considered view that constitutes mistake apparent on record which can be rectified u/s 254(2) of the Act.u/s 254(2) - Miscellaneous application filed by the assessee is allowed.
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2019 (3) TMI 565
TDS u/s 194A - non deduction of tds on time deposits - whether a co-operative bank as per the pre-amended Sec. 194A(3)(v) remained under a statutory obligation to deduct tax at source on the interest paid to its members? - scope of amendment - HELD THAT:- As per the preamended clause (v) to Sec. 194A(3) of the IT Act (i.e prior to its amendment vide the Finance Act, 2015 w.e.f 01.06.2015), a co-operative bank was under no obligation to deduct tax at source on the interest credited or paid to a member prior to 01.06.2015. We thus after considering the aforesaid CBDT Circular No.19/2015, dated 27.11.2015 and respectfully following the aforementioned judicial pronouncements which seizes the issue under consideration, therein conclude that as per the mandate of law as was available on the statute during the year under consideration viz. A.Y 2012- 13, no statutory obligation was cast upon the assessee co-operative society to deduct tax at source on the interest that was paid or credited by it on the time deposits of its members. On the basis of our aforesaid observations, the disallowance of the interest expenditure made by the A.O u/s 40(a)(ia) for the alleged failure on the part of the assessee to deduct tax at source on the said amount under Sec. 194A is vacated - Disallowance u/s 40(a)(ia) - decided in favour of assessee.
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2019 (3) TMI 564
Disallowance u/s 14A read with rule 8D - HELD THAT:- In the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that only those investments are to be considered for computing the average value of investment which yielded exempt income during the year. This is in the context of disallowance u/s 14A r.w. Rule 8D. We set aside the order of the CIT(A) and direct the AO to consider those investments for computing the average value of investments u/s 14A r.w. Rule 8D which yielded exempt income during the year. We direct the assessee to file the relevant documents/evidence before the AO. Thus the ground No. 1(e) is allowed for statistical purposes. MAT - adjustment to the book profit computation under section 115JB of the Act in respect of disallowance made under section 14A - HELD THAT:- In the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] it is held that the disallowance u/s 14A r.w. Rule 8D could not be added while computing the book profits in terms of section 115JB as the Explanation to that section did not specifically mention section 14A of the Act. Hence, the computation under clause (f) of Explanation 1 to section 115JB(2) was to be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of the Rules. Levy of interest under section 234D - HELD THAT:- AO is directed to compute the interest on excess refund, after examining the records. Depreciation at revalued cost of the machinery and not WDV - assessee continued to claim depreciation on the inflated cost of used assets - HELD THAT:- As mentioned by the Ld. CIT(A), the above issue has been decided in favour of the assessee by the Tribunal in AY 2007-08 and 2008-09. Also we find that similar view has been taken by the Tribunal in assessee’s own case in AY 2009-10 and AY 2011-12.
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2019 (3) TMI 563
Accrual of income in India - Provision of the software solutions for onward distribution to third party customers in India - Compensation remaining with the Indian subsidiary - characterisation of income - attribution of income - PE in India - Royalty’ or ‘Fee for Technical Services’ or even as ‘Business profits’ - AO has characterised such receipts as ‘Royalty’ in the draft assessment order, whereas the DRP treated the same as ‘business profits’ in terms of Article 7 of India-Israel Tax Treaty - Non-existence of a Dependent Agent Permanent Establishment (‘DAPE') - India-Israel Tax Treaty - HELD THAT:- The appellant before us is a tax resident of Israel and in terms of the arrangement with its subsidiary in India, i.e. Celltick India, it is engaged in providing software solutions for onward distribution to third party customers in India. In terms of such arrangement effective from March, 2011, a copy of which has been placed it emerges that the price realised from the ultimate customer is shared between the assessee and its Indian subsidiary, i.e. Celltick India, on 50-50 basis. For the present, the issue relating to characterisation of income is not being contested by the assessee as it has sought to challenge the untenability of the addition only on the basis of the proposition that once ‘arm’s length principle’ has been satisfied qua the relevant transactions, there can be no further profits attributable to the assessee in India even if it has a PE in India. While canvassing such proposition, assessee also does not bring into question the stand of the Revenue that there is a PE of the assessee in India. The point sought to be made by the assessee is that the compensation remaining with the Indian subsidiary, i.e. Celltick India, is adequate and justified on the basis of the Transfer Pricing analysis, and the same has been so accepted by the income-tax authorities in the case of Celltick India for the very same assessment year. According to the assessee, no further income could be attributable to it on account of its PE in India. In our considered opinion, the proposition sought to be canvassed by the assessee has the approval of the Hon'ble Supreme Court in the case of Morgan Stanley & Co. [2007 (7) TMI 201 - SUPREME COURT] In view of the aforesaid discussion, in our view, since the appropriate ‘arm’s length principle’ has been satisfied in the present case, nothing more would be left to be taxable in India by attributing any further income to the PE of the assessee in India. - Decided in favour of assessee. Charging of interest u/s 234B - HELD THAT:- This aspect of the matter, in our view, also loses its substantiveness since we have already deleted the addition. Nevertheless, in view of the judgment in the case of DIT (IT) vs NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] since the income of the assessee is liable for deduction of tax at source, no interest for default of payment of advance tax is exigible. Thus, on this count too, assessee has to succeed with regard to levy of interest under Section 234B of the Act.
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2019 (3) TMI 562
Penalty u/s 271(1)(c) - estimation of profit of business - jurisdiction of AO levying the penalty on both the limbs i.e. for concealment of particulars of income and furnishing of inaccurate particulars of income - non specification of charge - HELD THAT:- Penalty order passed by the AO under section 271(1)(c) of the Act is on the charge of inaccurate particulars of income in relation to estimation of business income whereas initiation is on the charge in the order of assessment is for concealment of particulars of income under section 271(1)(c) of the Act. The penalty cannot be levied under section 271(1)(c) of the Act on the charge which is different than the charge initiated i.e. charge initiated under section 271(1)(c) of the Act and penalty levied under different charge for filing of inaccurate particulars of income. See SHRI SAMSON PERINCHERY [2017 (1) TMI 1292 - BOMBAY HIGH COURT] Specific charge - AO while levying penalty under section 271(1)(c) of the Act in his discussion clearly stated that the expression used in section 271(1)(c) of the Act “furnishing of inaccurate particulars of income” and “concealing the particulars of income” are two distinct term but according to him both lead to the same effect. He acknowledged that making bogus claim of expenses/ expenditure/ deduction / excess claim of depreciation amounts to furnish of inaccurate particulars income and therefore false claim of expenditure would amount to concealing the particulars of income or deliberate in furnishing inaccurate particulars of such income. Hence, on the issue of specific charge penalty levied by the AO cannot be sustained. - Decided in favour of assessee.
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2019 (3) TMI 561
Unexplained cash credit u/s 68 - Disallowance of interest - assessee could neither furnish the loan confirmation nor offered any explanation about the nature and source of the loan - HELD THAT:- It is evident, assessee wanted to sell one of its property in Delhi to USG Buildwell Pvt. Ltd. since it needed finance for its business activities. It is also a fact on record that since the assessee could not hand over the possession of the property within the agreed period, it paid the interest on the advance received as per the terms of the agreement. Therefore, there is factually no dispute on the issue of payment of interest by the assessee. Therefore, once the nature and source of amount of ₹ 2 crore received by the assessee is accepted, the disallowance of interest made by the Assessing Officer by treating the advance received as unexplained cash credit has to be deleted. - Decided in favour of assessee Disallowance made on account of payment of club entry fee - allowable business expenditure - HELD THAT:- We find that the issue has been settled in favour of the assessee by the decision in United Glass Manufacturing Co. Ltd. [2012 (9) TMI 914 - SUPREME COURT] wherein held that club membership fee incurred by the assessee for its employees is purely a business expenditure, hence, allowable under section 37(1) of the Act. - Decided in favour of assessee Computation of deduction u/s 80HHD - AO relying upon the assessment order passed in assessee’s own case for assessment year 2002–03 has included the payment made to other hoteliers in the total receipts for computing deduction under section 80HHD - HELD THAT:- As decided in favour of assessee in assessment years 2002–03 held that for the amounts, the assessee has issued certificate in Form 10CCAC cannot be treated as a receipt for the purpose of total business and accordingly directed the AO to exclude the receipt passed on by the assessee to other hotel and travel agent. For second/other receipt it was held that the said amount of foreign currency realized after 30.09.2009 have not entered the numerator i.e. receipt earned by assessee from rendering service to foreign tourist which would not enter the denominator in the formula and directed the AO to exclude the same. We have noted that finding of ld. CIT(A) in accordance with Explanation 1 to sub-section (2), sub-section (2) and sub-section (3) of section 80HHD. - Decided in favour of assessee Claim of deduction u/s 80HHD in respect of foreign exchange fluctuation gain - addition as foreign exchange fluctuation holding that it does not emanate from the services provided by the assessee to foreign tourist- HELD THAT:- As decided in favour of assessee in assessment years 2002–03 as held foreign exchange gain forms part and partial of foreign exchange sale proceed and cannot be excluded while computing deduction under section 80HHD. Unexplained expenditure under section 69C - assessee’s claim alleging non–furnishing of supporting evidence / confirmations by the assessee - HELD THAT:- AR as submitted before us that the outstanding amount appearing in the books of account represent the amount payable to the Hotels at Goa on account of booking of books on behalf of customers and in this context he has drawn our attention to the statement of accounts of the Hotels, however, the assessee has to substantiate its claim through proper supporting documentary evidences. Considering the allegation of the departmental authorities that the assessee has not furnished any supporting evidence to substantiate its claim, we are inclined to restore the issue to the Assessing Officer for de novo adjudication for enabling the assessee to substantiate its claim through proper documentary evidences - Grounds of assessee allowed for statistical purposes.
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2019 (3) TMI 560
Disallowance of survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35 - above expenses were incurred before the commencement of the project - HELD THAT:- Findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has rightly deleted the addition by holding that assessee was already into business and therefore, disallowance was not warranted u/s 35D of the Act. The learned CIT(A) has rightly observed that expenses were incurred by assessee on its construction projects in which the assessee was already engaged. Excess expenditure claimed on project completed and handed over to client - Whether AO made addition in absence of documentary evidences to prove the justification of expenses claimed? - CIT(A) has deleted the same holding, that there is no dispute that the expenditure had been incurred, and in real estate there is always a possibility of project cost being over run out price escalation and delay in project - HELD THAT:- CIT(A) has dealt with the issue exhaustively and has rightly deleted the addition which the Assessing Officer had wrongly made. We agree with the findings of learned CIT(A) that the expenditure cannot be disallowed merely because the expenses incurred actually were more than the budgeted expenses when the expenditure has actually been incurred and recorded in the books of accounts which have been subjected to multiple audits. Addition on account of excess loss claimed on projects - absence of complete documentary evidence for claiming of loss - CIT-A deleted the addition and held that since the income has not been accrued to the assessee, it cannot be charged to tax in the hands of the assessee - HELD THAT:- Findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has rightly deleted the addition which the Assessing Officer had wrongly made. The learned CIT(A) has rightly relied on the case laws where the Hon'ble court had held that where the amount of interest on central grants has to be remitted back to Government for the same cannot be treated as income of the assessee Addition of interest income received from the FDR’s and SB accounts in the name of the assessee - assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 - CIT(A) has deleted the same holding, that the funds granted to the assessee corporation were to be utilized for a particular purpose and in absence of the same being utilized for specific purpose, the same is to be refunded back to the Government with interest accrued thereon - HELD THAT:- The addition made by the Assessing Officer has been wrongly deleted by the CIT(A). No doubt, the funds have to be returned back to the Government alongwith the interest accrued thereon, yet since the FDRs are in the name of the assessee corporation the interest would belong to the assesseee and the Assessing Officer has rightly taxed the same and therefore the same be upheld. Non deducting TDS on freight expenses, material supplied and labour charges - disallowance u/s 40(a)(ia) - CIT(A) has discussed the different heads of expenditure incurred by the assessee and has held, that out of the total disallowance of ₹ 54,15,933/- only disallowance of ₹ 4,08,525/- and ₹ 5,70,000/- having made without deduction of TDS, is to be disallowed under section 40(a)(ia) - HELD THAT:- CIT(A), while dealing with the additions made under different heads, has reproduced a chart and has dealt with each issue in detail and has rightly deleted the addition which the Assessing Officer had wrongly made. We find that relying on a number of case laws he has rightly held that for a shortfall in deduction of tax at source, an assessee cannot be said to assessee in default and therefore, cannot be subjected to disallowance u/s 40(a)(ia) of the Act. We find no infirmity in the findings of learned CIT(A). Addition of excess expenditure - AO made addition in absence of documentary evidence to prove the justification of expenses claimed - CIT(A) has held that these payments include payments which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was recorded in the books of accounts on estimate basis - revenue neutral - HELD THAT:- Findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has held that these payments include payments which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was recorded in the books of accounts on estimate basis. His findings, that in case the expenditure is disallowed, the proper course would be to reduce the work in progress by equivalent amount and therefore, would be revenue neutral are, correct. We find that learned CIT(A) has rightly deleted the addition which the Assessing Officer had wrongly made. Addition of short computation of WIP - CIT(A) has deleted the same holding, that the expenses are neither excess nor non-related to business. However, the CIT(A) has upheld the addition to the extent of ₹ 1,22,575/- as against ₹ 5,71,922/-. - HELD THAT:- CIT(A) has rightly restricted the addition to ₹ 4,49,347/- as against ₹ 5,71,922/- which the Assessing Officer had made. We find no infirmity in the findings arrived at by learned CIT(A). Nature of expenditure - expenditure on the renovation of building including civil work - revenue or capital expenditure - CIT-A deleted part addition holding, that the repair and maintenance to the building are in the nature of current repairs - HELD THAT:- CIT(A) has held that the expenditure of ₹ 3,48,062/- has been incurred on construction of a new guard room which gives rise to a capital asset of enduring nature and the addition of ₹ 18,58,061/- made by the Assessing Officer was restricted to ₹ 3,48,062/- giving relief of ₹ 15,09,999/- to the assessee. We find no infirmity in the findings arrived at by learned CIT(A). Addition u/s 43B of the Act in the absence of any documentary evidence of payment - CIT(A) has restricted the disallowance - HELD THAT:- CIT(A) has dealt with the issue exhaustively and by reproducing a chart of all the heads where the disallowance has been made u/s 43B, the learned CIT(A) has dealt with all the heads separately and given a detailed finding and wherever the addition was required to be upheld, he has upheld the same. Finding no infirmity in his order, we confirm the order of learned CIT(A) on this issue. Addition on account of prior period expenses not deductable in mercantile system of accounting - CIT(A) has deleted the same holding, that the nature of the work of the assessee is that of running of continuous work in progress - HELD THAT:- We agree with the findings of learned CIT(A) that the assessee had filed complete details of expenditure before the Assessing Officer and the impugned expenditure crystallized in the year under consideration. The expenditure accrues in the year in which it crystallizes. Moreover, corresponding income in the shape of Work-in-Progress and percentage of Centage has been charged in the assessment year under consideration. Disallowance of such expenditure in the current year will result in reducing the corresponding work-in-progress and centage and therefore, the effect is revenue neutral. As such we find that learned CIT(A) has rightly deleted the addition Non deducting TDS on POL of hired vehicles and TDS at the leser rate of 2% - disallowance u/s 40(a)(ia) - CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable and that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant - HELD THAT:- The assessee has deducted TDS @2% wherever the payment was in excess of specified limit of ₹ 20,000/- on payments made for hiring of vehicles. No deduction is required to be made on expenses incurred on petrol and diesel as these were borne by the assessee. While deleting the addition, learned CIT(A) has relied on the order of the Cochin Bench of the Tribunal in the case of M/s Three Star Granites (P) Ltd. Versus ACIT., Cir. 1 (1) Thrissur - [2014 (4) TMI 1058 - ITAT COCHIN - ITAT COCHIN.] Revenue recognition - addition for not following percentage completion method - AO made an addition of ₹ 21,20,09,287/- on account of Percentage Completion Method - AS-7 - HELD THAT:- CIT(A) has dealt with the issue exhaustively and has observed that as per system of accounting consistently being followed by the assessee while accounting for the income of a project as per requirements of AS-7(Revised), when the stage of completion of a project is more than 50% and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus, in respect of those works which were more than 50% completed in earlier years, 2/3 of the profit thereon or in respect of projects completed in subsequent years, the entire profit stands accounted for and has been offered for taxation or actually assessed by the assessing officer. Further, the statutory auditors have not taken exception or qualification to creation of reserve and the C&AG of India have also not given any adverse comment on this issue. We find ourselves in agreement with the findings of learned CIT(A) on this issue. Short deduction of tds - disallowance u/s 40(a)(ia) - CIT(A) has deleted the same holding, that no doubt there was short deduction of tax, but short deduction of tax itself would not be the cause for disallowance - HELD THAT:- CIT(A) has observed that the short deduction of tax cannot be a reason/basis for disallowance under section 40(a)(ia) of the Act. The learned CIT(A) has rightly relied on a number of case laws for the proposition that in case of short deduction of tax, disallowance u/s 40(a)(ia) cannot be made. Finding no infirmity in the order of learned CIT(A), we confirm the same on this issue. Non deduction of TDS on the payments covered u/s 194C - addition on account of labour charges - CIT(A) has deleted the same holding, that since no expenditure was incurred by the assessee on transportation of material, which was borne by the suppliers themselves, the assessee was under no obligation to deduct tax at source - HELD THAT:- CIT(A) has observed that no transportation charge is borne by the assessee and the assessee does not make any payment to the transporters and the payment is made to suppliers for purchase of goods. The question of any TDS being deducted by the assessee on the goods purchased thus does not arise. No such disallowance has been made by the Assessing Officer in earlier years also when payment for purchases was made without deduction of TDS. Finding no infirmity in the order of learned CIT(A), Addition on account of loss against disposal of stock - CIT-A deleted the addition as observed that the assessee had sold old unusable stock which were purchased in earlier years - HELD THAT:- The loss is the value of the stock as per the books of accounts and the amount realized of sale thereof which was disallowed by the AO. In the present case, the Assessing Officer determined whether the stock of old unusable items sold was rightly sold or not. We also find that the loss has been suffered on sale of old stock in the course of business of the assessee and is allowable under the Act. Addition u/s 68 - CIT-A deleted the addition - HELD THAT:- CIT(A) has observed that the assessee, during the course of assessment proceedings, had filed confirmation of balances of creditors to whom notices were issued under section 133(6) of the Act by the Assessing Officer. These creditors relate to normal business transactions and credit has been given to these trade creditors for contract work done by them and payments are being made to the parties by cheques. The transactions resulting in income from contract work done by them have been accepted by the Assessing Officer and therefore, there is no justification in addition of the closing balances appearing in their accounts in the books of accounts of the assessee particularly as the balances stand confirmed. Revenue appeal dismissed.
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2019 (3) TMI 559
Unexplained cash credits u/s 68 - Bogus Long Term Capital Gains (LTCG) / Long Term Capital Loss - Held that:- Revenue fails to indicate any specific evidence against the assessee in above terms qua his LTCG derived from transfer of share in Jackson Investments Ltd. Therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition Same order to follow in all remaining twelve cases as well since notice that there is no specific evidence co-relating these assessee with any kind of rigging of share price. All these impugned LTCG/losses addition(s) (supra) are reversed in these fact and circumstances.
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2019 (3) TMI 558
Adjournment on various occasions - denial of natural justice - copies of the third party documents which were gathered and acted upon by the A.O while framing the assessment not given to assessee - HELD THAT:- We find ourselves to be in agreement with her claim that her authorized representatives had remained under a bonafide belief that the hearing of the appeal was adjourned on the last occasion and a fresh notice would be issued by the CIT(A). Apart therefrom, the authorised representatives also held a conviction that pursuant to the request filed with the CIT(A), the various documents which were acted upon by the A.O for drawing of adverse inferences in the hands of the assessee would be made available. In our considered view in the backdrop of the aforesaid deposition of the assessee, it can safely be gathered that the adjournments on various occasions were not sought on flimsy grounds, but were backed by the reason that the copies of the third party documents which were gathered and acted upon by the A.O while framing the assessment, despite persistent requests by the assessee were not being made available by him. As observed by us hereinabove, we find that the assessee had also requested the CIT(A) for directing the A.O to supply the aforesaid documents as the same had a material bearing on the disposal of the appeal. We find that the reasons leading to seeking of adjournments by the assessee cannot be taken as a reflection of her lackadaisical approach that was adopted in the course of the appellate proceedings. We further find that as on 02.08.2018 the assessee had sought an adjournment and was informed by the office staff of the CIT(A)-37, Mumbai, that a fresh date of hearing will be issued. In the totality of the aforesaid facts, we are of the considered view that the adjournments sought by the assessee on different occasions before the CIT(A) could neither be held to be backed by flimsy grounds or unjustified. Assessee allowed for statistical purposes.
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2019 (3) TMI 557
Mistake rectifiable u/s. 154 - payment was made to the contractor without deduction of tax at source and therefore, held that it was not an allowable expenditure in view of the provisions of section 40(a)(ia) - In view of the notice u/s 154 assessee submitted that the contractor company had shown the entire receipt in its turnover and had paid taxes as per I.T. Act therefore, in view of amendment to proviso to section 40(a)(ia), the assessee was not an assessee in default and provisions of section 40(a)(ia) were not applicable - HELD THAT:- The proviso to section 40(a)(ia) has been held to be effective retrospectively and therefore, the findings of the Assessing Officer that it is to be held prospective from 01/04/2013 is not correct and therefore, also the disallowance was not warranted. Moreover, I find that the assessee has raised various arguments, such as not debiting the expenditure in the profit & loss account and taking the same in the stock figure and also nothing was payable as on 31/03/2012. These all are debatable issues for which the rectification u/s 154 cannot be allowed
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2019 (3) TMI 556
Revision u/s 263 - AO having recorded that the investments made by India Cements Ltd., are not in the nature of capital investment but are the payments made for certain benefits, has erred in not bringing the full amount to tax on receipt basis - HELD THAT:- Tribunal has directed the Assessing Officer to examine the acceptability of the share capital as well as share premium as ‘Income of assessee’. The order of CIT u/s. 263 is also to this effect only. On a query by us, both the parties submitted that the AO has already passed the order consequent to the CIT’s directions u/s. 263 and therefore the issue is no longer open before the AO and that the appeal against the same is pending before the CIT(A). Since the directions of the Tribunal to the Assessing Officer are on similar lines as given by the CIT u/s. 263 of the Act, we confirm the order of CIT and direct the CIT(A), before whom the appeal against the consequential order is pending, to examine the issue in line with our directions in assessee’s appeal for the AY. 2009-10 against the regular assessment made u/s. 143(3) of the Act. In view of the same, the appeal of assessee is dismissed.
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2019 (3) TMI 555
Reopening of assessment - undisclosed income of assessee under section 68 - lack of mind while recording the reasons for reopening of the assessment - non independent application of mind - borrowed knowledge - HELD THAT:- Non-application of mind on the part of the A.O. while recording the reasons for reopening of the assessment. He has recorded incorrect amount which escaped assessment. His conclusion was merely based on observations and information received from DIT (Inv.), New Delhi, which is not brought on record and his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The A.O. was not justified in assuming jurisdiction under section 147/148. Reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law - Decided in favour of assessee
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2019 (3) TMI 554
Transfer Pricing adjustments - Selection of comparable companies by assessee - functinal similarity - rejection based on product comparison - MAM selection - adopting the TNMM - HELD THAT:- The comparable companies demonstrated in table No. (1) manufactured and sold electronic components and hence, the said companies were functionally comparable to the assessee company. Unlike the CUP Method, the TNMM does not require that the comparable company has to manufacture exactly the same product as that manufactured by the tested party. Hence, the TPO, while adopting the TNMM, erroneously rejected the aforesaid seven companies mentioned in table no. (1) based on product comparison between the assessee company (tested party) and the aforesaid independent companies. In the TNMM, what is to be seen is functional comparability and not the product comparability. The learned TPO ignored the comparability criterion laid down for application of TNMM. For that we rely on the judgment of the Hon`ble High court of Mumbai in the case of Pr. CIT v. Watson Pharma (P.) Ltd. [2018 (8) TMI 199 - BOMBAY HIGH COURT] wherein it was held that TNMM requires only broad functional comparability between the tested party and comparable companies. Hence, we do not accept the contention of the ld DR for the revenue and we accept the nine comparable companies selected by the ld CIT(A). Selection of 'Cash Profit Margin' as net profit indicator (PLI) under the TNMM - HELD THAT:- We approve the use of cash profit margin by the assessee for placing the tested party and the comparable companies on equal footing. The assessee has demonstrated that the cash profit margin of the assessee was 8% (approximately), whereas the arithmetic mean of the cash profit margins of the aforesaid nine comparable companies stands at 12.41%. It is noted that the net profit margin of the tested party was (-)6.70%, whereas the cash profit margin of the tested party stood 8% thereby indicating that the loss was caused by a considerable increase in provision for depreciation. We are of the considered view that the assessee was justified in applying cash profit margin as more appropriate financial indicator than net profit margin. Computation of arm's length range of 5% based on OP/TC ratio (AY 2002-03) - HELD THAT:- We note that FAR (Function, Asset, Risk) analysis of the mentioned nine comparable companies selected by CIT(A)(i.e. CTR Manufacturing Inds Ltd, Deltron Ltd, Fine-line circuits Ltd, Incap Ltd, Pan Electronics (India) Ltd, Ruttonsha International Rectifier Ltd, SPEL Semiconductor Ltd, Continental Device India Ltd and Cosmo Ferrites Ltd). are comparable with the FAR of the assessee company for the relevant financial year. Therefore, considering the entirety of facts and circumstances we uphold the nine comparable companies selected by the ld CIT(A) and use of cash profit margin ratio in TNMM, we uphold the order of ld. CIT(A) to delete the ALP adjustment. Payment of gratuity u/s.40A(7) of the Act and contribution to superannuation fund u/s. 40A(9) - HELD THAT:- Assessee has claimed the deduction for the contribution made to Gratuity fund and Superannuation fund during the previous year relevant to the assessment year under consideration. The assessee was maintaining the said fund not on its own but managed and maintained through the Life Insurance Corporation of India. Therefore, the contribution made to Superannuation and Gratuity fund maintained by the LIC can be claimed by the assessee while computing the total income and would not be hit by the provision of sections 40A(7) 40A(9) of the Act. Therefore, we delete the above mentioned additions. Addition made on account of provision for tax - HELD THAT:- Since the assessee had computed its total income chargeable to tax by taking net profit before tax amounting to ₹ 1,72,46,000/- and the Ld. AO has also computed the assessed income taking profit before tax amounting to ₹ 1,72,46,000/-as starting point. Therefore, the provision for tax amounting to ₹ 7,50,000/- was not claimed by the assessee and as such the ld CIT(A) has rightly deleted the disallowance made on this account. Computation of deduction u/s 80HHC - CIT(A) directing the AO to consider foreign exchange gain as a part of export turnover, while such gains were not derived out of export activity and were not earned in convertible foreign exchange - HELD THAT:- We note that Ld. counsel cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of Ld. A.R. and have been duly considered to arrive at our conclusion. The Ld. DR could not bring to our notice any case laws to contradict the findings of the Ld. CIT (A), therefore, his order on these covered issues noted above are hereby upheld and grounds raised by the Revenue are dismissed TDS u/s 195 - payments made to non-resident associated enterprise on the ground that payments were made without deduction of tax at source - HELD THAT:- We note that during the course of hearing, both, that is, ld Counsel for the assessee as well as ld DR for the revenue have fairly agreed that this issue should be sent back to the file of the assessing officer for verification of TDS certificates with the challans indicating deposit of the amount to the government exchequer. Therefore, we set aside the order of the ld CIT(A), so far this issue is concerned, and remit the matter back to the file of the assessing officer for his examination. Statistical purposes, this ground of the Revenue is treated to be allowed. Addition of payment of interest on term loan under section 43B - payment details in respect of payment on interest on term loan after the due date of the filing of the return - HELD THAT:- Nothing contained in section 43B shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. We note that the assessee in the course of the appellate hearing submitted the payment details in respect of payment on interest on term loan after the due date of the filing of the return for the assessment year 2002-03 and disallowed by the Ld. AO in the assessment year 2002-03. We note that since the assessee had paid the interest on term loan amounting to ₹ 14,69,315/- as on 01-11-2002 i.e. after the due date of filing the return of income under section 139(1) of the Act for the assessment year 2002-03 therefore, the assessee would be entitled to avail the deduction amounting to ₹ 14,69,315/- in the assessment year 2003-04, in the year in which the actual payment has been made. Therefore, ld CIT(A) has rightly directed the AO to allow deduction under section 43B.
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2019 (3) TMI 553
Assessment u/s 153C - legality of the proceedings initiated u/s 153C - HELD THAT:- As perused the materials available on record and gone through the orders of the authorities below. We find that the submissions of the assessee are contrary to the records as the documents filed are the journal entries and some of the vouchers or debit notes which are belonging to the assessee. Therefore, under these facts, it cannot be construed that there was no incriminating material for initiating the proceedings u/s 153C. We therefore, reject the grounds raised by the assessee. Accordingly, the cross objection filed by the assessee is dismissed. Disallowance of cash payments u/s 40A(3) - payment in cash exceeding the monetary limit so prescribed - assessee has made payment in cash and the case of the assessee does not fall in any of the exception - CIT-A deleted the addition - business expediency - as per assessee sellers of the land insisted for making payments in cash - HELD THAT:- In view of the fact that the assessee had to make payment on the insistence of the sellers respectively and following the judgement in the case of Smt. Harishila Chordia Vs. ITO [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] and Anupam Teleservices Vs. ITO [2014 (2) TMI 30 - GUJARAT HIGH COURT], we do not see any reason to interfere in the finding of the Ld. CIT(A) and the same is hereby affirmed. - Decided against revenue.
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2019 (3) TMI 552
Penalty u/s 271(1)(c) - inadvertent and bona fide mistake while filing the return - non disclosure of capital gain - HELD THAT:- In the case of Price Waterhouse Coopers Pvt. Ltd vs. CIT [2012 (9) TMI 775 - SUPREME COURT] a provision for gratuity etc. was made for the regular and adhoc employees. In the audit report, it was pointed by the auditor that provision for adhoc employees was required to be written back. But somehow, while filing the return, accountant failed to add back that amount. An affidavit of the concerned person was filed and it was pointed out that more than thousands of employees were working in that concern. As construed as bona fide human error i.e. failure to add back a particular provision. In the present case, no such circumstances have been pointed out by the assessee either before the AO or before CIT(A). The only statement made is that it was a bona fide human error. This is a very general and sweeping statement. It should be demonstrated with circumstantial evidence as to how this error has happened; what is operating force in the mind of person who has prepared the return, and how he failed to comprehend a particular item. Even the affidavit of that person has not been filed. Therefore, we are of the view that this statement is just being made for giving an explanation - Decided against assessee.
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2019 (3) TMI 551
Disallowance u/s. 37(1) - expenses incurred for purchase of gift items - assessee has failed to even disclose the identity of the recipient of gifts either during the assessment proceedings or during the appellate proceedings - HELD THAT:- The assessee has also not furnished any substantial evidence as to the persons to whom such gifts given were actually fruitful towards promoting the business profits of the assessee. CIT(A) in the impugned order has categorically observed that the assessee has failed to even disclose the identity of the recipient of gifts either during the assessment proceedings or during the appellate proceedings. CIT(A) has also examined the records and found that the assessee also failed to establish the business exigencies of the appellant vis-a-vis the aforesaid gifts. AR could not be able to controvert these findings of the CIT(A) by submitting any evidences before us contrary to it. Therefore, in absence of any nexus between the gifts and the business of the appellant company, the findings reached by the CIT(A) cannot be said to be without any basis and as such, involvement of non-business use in the present case cannot be ruled out at all, as is evident from the nature of gifts noted by the AO in the assessment order. Bills and vouchers of the gifts purchased were mostly found in the name of the assessee and some of the bills, some names were written by hand, which nowhere suggest to place credence on the contention of the assessee that these gifts were given to its customers even. Disallowance have a history in assessee’s favour - We have gone through respective orders of the aforesaid years and we find that in A.Y. 2006-07, such expenses were allowed on the premise that those expenses had been subjected to Fringe Benefit Tax. So is the position with respect to A.Y. 2008-09. For A.Y. 2007-08, no scrutiny assessment was made u/s. 143(3) of the Act. In A.Y. 2008-09, the Tribunal while deciding this issue had disallowed substantial part of such expenditure and rest of the expenditure were remanded to AO for verification. In A.Y. 2010-11, the similar disallowances were deleted by Tribunal. Therefore, from the above series of facts, it is evident that the history of the assessee has not been so glorious as claimed by the assessee, but the disallowances have been dealt with by various authorities in view of the attending facts of each year, as noted above. Therefore, in our opinion, the previous history does not render any help to the assessee. The assessee has not been able to establish that the expenditure claimed as above were laid wholly or exclusively for the purpose of business or that the same were open for verification so as to ascertain that the impugned gifts were given for business promotion of assessee. Therefore, we find no infirmity in the order of the CIT(A) while disallowing the claim of the assessee made u/s. 37(1) - Decided against assessee.
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2019 (3) TMI 543
TDS u/s 192 or 194J - payments to the doctors - employer-employee relationship between the Assessee and Full Time Consultant Doctors - ITAT holding that there does not exist employer-employee relationship between the Assessee and Full Time Consultant Doctors and the payments made to them by the assessee come in the purview of Sec.194J - HELD THAT:- As recorded that the doctors were entitled to admit, investigate and provide treatment to the patients and that the doctors would be responsible for their clinical care. The doctors were responsible for supervising the subordinate staff whereas the facilities of the hospital staff, paramedical and nursing staff would be provided by the hospital along with the necessary equipment to render services to the patients. 15% of the fee collected by the doctors would be deducted by the hospital as its share and the balance 85% would be paid to the doctors after deduction of tax at source. In case of fees not being paid by patients, the same would be the liability of the concerned doctors. It was on this basis the Tribunal had come to the conclusion that the relationship between the hospital and the doctors cannot be treated as one of the employer-employee relationship. It was noted that the earnings of the doctors would be dependent upon the patients that the doctors would attract. We do not find that the Tribunal has committee any error. Significant features of the contractual relationship between the doctors and the hospital in the present case were that the hospital would provide support service where a particular patient would be treated by a doctor. The sharing was in the proportion of 15% v/s. 85% between the hospital and the doctors. Contractual tenure of these doctors was for a period of one year which would be renewable depending on the performance of the doctor to be assessed by the Medical Advisory Council of the hospital. These doctors are not entitled to benefits of leave encashment, gratuity, provident fund, superannuation benefits etc. which regular employees of the hospital are. These doctors would on their own obtain indemnity insurance. These are clear indications that the relationship was not one of employer-employee. The Tribunal has correctly applied the decision of this Court in the case of Grant Medical Foundation's case [2015 (2) TMI 457 - BOMBAY HIGH COURT] wherein the Court has laid down the propositions and principles to be applied while testing such a bilateral relationship between the hospital and the doctors. - Decided in favour of assessee. TDS u/s 194J OR 194C - Payment to a contractor providing maintenance and support services - HELD THAT:- CIT (Appeals) and the Tribunal have concurrently held that the contractor was meant to carry out maintenance and the repair work and therefore his services could not have been categorized as providing technical services. We do not find any error in such finding.
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Corporate Laws
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2019 (3) TMI 591
Principles of natural justice - case of appellant is that appellant’s right to be heard, audi alteram partem, one of the principles of natural justice, has been violated in as much as the appellant has neither been served with notice of appeal before the NCLAT nor been given a hearing before it - Held that:- In the instant case, the NCLAT, vide order dated 02.01.2019, issued notice both on the question of limitation as well as on the merit of the appeal. Subsequently, judgment was reserved vide order dated 08.01.2019 - It is to be noted that in the rejoinder affidavit before us the appellant has submitted that, pursuant to issuance of notice vide order dated 02.01.2019, neither did respondent no. 1 file process fee for issuance of summons in terms of the said order, nor was the same served upon the appellant. Thus the judgment which was reserved on 08.01.2019 by the NCLAT, and consequently pronounced, was done without hearing the appellant and the observation of the NCLAT that all the parties were heard is erroneous. In fact, even the impugned order does not note the appearance of the counsels on behalf of appellant herein. Rule 48 of the NCLAT Rules clearly stipulates service of notice on the other side, pursuant to issuance of notice by the NCLAT in the appeal, regardless of supply of advance copy of appeal paperbook prior to the issuance of notice by NCLAT. 9. Further, Rule 52 of the NCLAT Rules categorically states that the judicial section of the registry of the NCLAT shall record, in the “Notes of the Registry” column in the order sheet, the details regarding completion of service of notice on the respondents. The material placed before us do not indicate that the aforementioned stipulation has been complied with - the instant appeal can be disposed of by setting aside the order of NCLAT and remanding the matter back to the NCLAT for fresh consideration - appeal allowed by way of remand.
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FEMA
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2019 (3) TMI 550
Refund of amount deposited - FERA - Grievance of the applicant is that the department has not returned the seized cash of ₹ 6,000/, nor refunded ₹ 20,000/deposited by her as per interim directions of FERA Board not release her original title deeds - Held that:- Learned counsel for the department stated under instructions that the department has already initiated steps for refunding such amounts. This application is disposed of with certain directions.
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Service Tax
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2019 (3) TMI 549
Maintainability of appeal - No question of law involved in remand order - Refund of unutilized CENVAT Credit - Held that:- We are not inclined to interfere with the impugned judgment. However, we clarify that the remand proceedings before the adjudicating authority must proceed on their own merits in accordance with law.
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Central Excise
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2019 (3) TMI 548
Method of Valuation - clearance of the fully built vehicle by the appellant-assessee to M/s Tata Motors Ltd, the supplier of the inputs to appellant-assessee - job-worker-principal relationship - Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Held that:- It is not in dispute by either side that appellant-assessee is a job worker and the clearances are not at ‘arm’s length’ in the manner that clearances effected to their authorized dealers are. According to appellant-assessee, the adoption of the price at which goods are sold to authorized dealers is the most apt in terms of section 4 of Central Excise Act, 1944. The appellant-assessee, being a job worker, is liable to duty on the value of the goods transferred for the purposes of undertaking job-work and the job-work charges recovered from the principal. On the job-work charges, there is no dispute. The cycle of commercial activity in the impugned transaction involves transfer of the ‘chassis’ to the appellant-assessee, discharge of duty liability by the principal manufacturer, transfer of the finished goods to the depots of the principal manufacturer after discharge of duty liability by the job-worker and final clearance thereafter. Till the delivery of the goods to the ultimate buyer of ‘built-up vehicles’, the valuation for the purpose of determination of duties of central excise is the cost of manufacture. The price at which goods are cleared by M/s Tata Motors Ltd to their authorized dealers includes, other than the cost of manufacture, the cost of transportation and the profit component. The adoption of this price for determining the duty liability in the hands of the principal manufacturer is not in any way prejudicial to Revenue and, therefore, cannot be a cause of grievance to the tax authorities. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 547
Clandestine removal - Gutkha - 35 rolls of packaging material was found near the main gate of the factory premises, not entered in the records - shortages in stock - Held that:- ‘Gomti’ brand Gutkha was owned by M/s.HMC which is a proprietory unit of one Shri Rajesh Kr.Gupta. The said owner of the brand name was getting the goods manufactured from Shimla Food and Flavours as also from Shimla Chemicals and was buying their entire production himself. He was further selling the goods to various customers either directly from their premises, in which case the customers were booking the goods through the transporters on their own or the said goods were being booked by M/s.HMC through M/s.Lucknow Tulsipur Forwarding Agency for which various GRs/Challans were being issued by the said agency - the goods being transported through the said agency were Gutkha and not Zarda, which was being written in the GRs/invoices - also, such bookings at the Transport Agency were being done by M/s HMC and not by SC or SFF. As such, even if the statement of Shri Indra Bahadhur Singh is accepted to be true, the same would relate to M/s HMC, who was not the manufacturer of Gutka and can no way reflect upon the clearances from SC or SFF. The Revenue has further relied upon the statements of some of the buyers and the discrepancy of the stock at their premises found as a result of searches. However, as we have earlier observed that the entire production manufactured by the appellant was being sold by them to M/s.HMC who was doing trading in various products including the tobacco and Zarda. Though it is well settled law that the statements of the third parties cannot be made the basis for arriving at the conclusion of clandestine removal, without corroborative evidence, but even if presuming that the said statements were correct, it is the HMC who has sold the goods in cash to the buyers - The Revenue is expected to produce evidences showing the manufacture of goods by SC and SFF and its further clearances to HMC in a clandestine manner. The entire case of the Revenue is based on uncorroborated, untested, unexamined and in some case retracted statement which do not inspire confidence in the same. As such the said statements have to be kept out of consideration and cannot be considered to be relevant evidence. If the same are ignored nothing remains as evident to substantiate the Revenue’s allegation of clandestine removal. There is virtually no evidence on record to show that the two manufacturing units M/s Shimla Chemicals & M/s SFF were clearing their goods in a clandestine manner. As already observed the entire case of the Revenue is based upon the statement and if the same are not taken into consideration no other evidence is available on record. The evidence produced by the Revenue do not establish their case even on the principle of preponderance of probability. Demand set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (3) TMI 546
Maintainability of petition - statutory remedy of appeal - Classification of goods - water and sanitary equipment - whether classified under entry 3(2) of Schedule III, appended to the KVAT Act, 2003, attracting tax at 4 or 5 per cent or under entry 101 of SRO 82 of 2006, attracting 12.5 per cent? - Held that:- The petitioner may have a good case on merits. That does not mean that we should ignore the statutory remedies available before its knocking the doors of this Court. Despite my repeated queries, as I have already mentioned, the petitioner's counsel has simply persisted with the merits of the matter and has not supplied any valid reason why I should entertain this writ petition disregarding a statutory remedy. The writ petition raises issues that can be addressed eminently by the appellate authority, as set out in the KVAT Act. Petition closed leaving it open for the petitioner to exhaust the statutory remedy.
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2019 (3) TMI 545
Levy of tax - transfer of property in dyes and chemicals - inter-state trade or commerce - export of goods outside the territory of India - deduction contained in Sec.3-B(2)(a) of the TNGST Act, 1959 - Held that:- Nowhere it is found that the plea was raised by the petitioner, i.e. claiming deduction under Section 3B(2)(a) of the TNGST Act. The petitioner consciously restricted their claim for deduction only under Section 3B(2)(a) of the TNGST Act. Thus, in these tax case revisions, for the first time such a plea cannot be allowed to be raised. We support this conclusion by stating that Section 3B deals with levy of tax on transfer of goods involved in works contract - Sub-section (2) of Section 3B of the TNGST Act states that the taxable turnover of the dealer on transfer of property involved in the execution of works contract shall, on and from 26.06.1986, be arrived at after deducting the amounts from the total turnover of the dealer. The deduction requires to be claimed by the assessee and consciously the petitioner did not make any claim under Section 3B(2) of the TNGST Act and restricted the claim only under Section 3B(2)(e) of the TNGST Act at 50%. Hence, at this distance of time to raise such a plea which was never ever canvassed by the petitioner at any point of time cannot be permitted. Secondly, the assessee never even raised an alternate plea before the first appellate authority as raised by them in the appeals for the assessment years 1996-97 and 2001-02. Thus, the present attempt of the petitioner is to reopen settled matter on grounds which were never canvassed or in other words, on points which they were never aggrieved. Petition dismissed.
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Indian Laws
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2019 (3) TMI 544
Dishonor of Cheque - Proceedings under the Negotiable Instruments Act, 1881 - Interpretation of statute - Postponement of issue of process - Section 202 of the Code of Criminal Procedure - Whether the provisions in the said section is mandatory? - Held that:- As per the said section by way of amendment of 2005 it came to be provided that if the accused persons are residing at the place beyond the area in which the Magistrate exercises the jurisdiction, the Magistrate needs to postpone the issue process against the accused and follow the procedure given in section 202 of the Cr.P.C. In a matter like the present one, the Magistrate is expected to make inquiry into the case himself as per this provision. The object behind introducing the amendment shows that when in the past there was discretion with the Magistrate either to make inquiry as mentioned in section 202 to ascertain that there are sufficient grounds for proceeding against the accused, by amendment, the aforesaid portion came to be added in the provision and that procedure needs to be followed when the accused persons are not the residents of the area in which the Magistrate is expected to exercise the jurisdiction - Apparently the amended provision has added something in section 202 and that is the procedure which needs to be followed in such cases before 'issue process order' and that necessarily involves consumption of some time. After consideration of the material which is made available under section 200 if the Magistrate thinks it fit to go for further inquiry as provided under section 202 of the Cr.P.C. it was open to the Magistrate in the past also, to postpone issue of process even after giving of the material by the complainant for the purpose of section 200 of Cr.P.C. and ask the complainant to give material for inquiry as provided in section 202 of the Cr.P.C. For this stage also the complainant can file affidavits as provided in section 145 but the Magistrate has a power to ask the complainant and the witnesses to remain present before him and make query by asking questions with regard to the material produced during this inquiry. This power is necessarily there with the Magistrate in view of the scheme of that Chapter. It cannot be said that the Magistrate must act on the basis of the evidence on affidavit and other material produced by the complainant which can be done under sections 145 and 146 of the Negotiable Instruments Act. Petition allowed.
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