TMI Tax Updates - e-Newsletter
March 24, 2020
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Condonation of delay in filing appeal - Time Limitation - To hold that this Appellate Authority could entertain this appeal beyond the extended period under the proviso would render the phrase “not exceeding thirty days” wholly otiose. No principle of interpretation would justify such a result - Delay not condoned - AAAR
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GST:
Input tax credit (ITC) - Blocked Credits - Section 17(5) of the CGST Act, 2017 - taxes paid on procurement of goods and/or services for installation of various parts of AC - The items such as Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system do not appear to be apparatus/equipment/machinery which are fixed to the earth. The appellant has also not submitted any information as to how these items are getting embedded to the earth since the criteria for terming such items as “Plant and Machinery” is that they have to be fixed to the earth either by foundation or structural support. - ITC not available - AAAR
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GST:
Denial of Input Tax Credit (ITC) - Tax paid u/s 129 after detention of goods alongwith the vehicle - part B of the e-way bill was not filled up - the matter requires serious reconsideration at the hands of the 1st respondent as vital aspects enumerated in paras 15 and 16 of the Writ Petition (Civil) have not been duly considered and adverted to by the 1st respondent. - HC
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Income Tax:
Transfer of case u/s 127 - proposal for centralization of assessment in a group of cases - Before transferring the case, reasons were not disclosed - Only after raising the objections, post-decisional hearing was provided which is not contemplated under the statute - the decision making process leading to passing of the two impugned orders has been vitiated for non-compliance to the statutory procedural requirements - orders set aside and quashed - HC
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Income Tax:
Interpretation of Section 44BB and 44DA - bifurcation between the supply of software as well as ancillary services such as maintenance and installation - It is question of fact - CIT directed to determine income on account of receipts from provision of software enabled solutions to the oil and gas industry along with providing annual maintenance services of the software - CIT to assess the Petitioner’s income and tax payable thereon by first determining the nature of the income/receipts in the hands of the assessee in light of the observations made in this judgment. - HC
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Income Tax:
Conversion of “Limited Scrutiny” into “Complete Scrutiny” - Expanding the scope of limited scrutiny assessment without necessary approval - Since the notice under section 143(2)(i ) was issued for limited scrutiny, the Assessing Officer was precluded from considering any other issue while making the assessment under section 143(3) under limited scrutiny. The decision of the Commissioner (Appeals) in considering the other claim of the assessee not covered in the notice issued under section 143(2)(i) for limited scrutiny was contrary to the provisions of the Act and, accordingly, was set aside - AT
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Income Tax:
TDS u/s 194C OR 192 - salary payment made to staff - amount is less than than taxable limit u/s 192 - demand of TDS u/s 194C - relationship between the management and teaching staff - the payment in question is not covered by the provisions of section 194C - AT
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Income Tax:
Capital gain u/s 45 - compensation received by a partner from another partner for relinquishing rights in the partnership firm - the compensation received by the assessee from existing partners for reduction in profit sharing ratio would not tantamount to Capital Gains chargeable to tax u/s 45(1) - AT
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Income Tax:
TDS u/s 195 - Intangible business connections - payment in respect of an appearance made by an Oscar award winning celebrity, for an appearance made by him at Dubai (UAE) - The income embedded in payment to the international celebrity, for participation in Dubai A8L launch event, was taxable in India. As a corollary to these findings, in our considered view, the assessee had the liability to withhold taxes from payment made for appearance made by the celebrity at Dubai A8L launch event - AT
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Income Tax:
Disallowance on account of deduction u/s 80IA - Computation of deduction - It is only when the loss have been incurred from the initial assessment year, then the assessee has adjust loss in subsequent assessment years and it has to be computed as if eligible business is the only source of income and then only deduction under section 80IA can be determined. This is the true import of section 80IA(5).- - AT
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Income Tax:
Validity of reopening of assessment u/s 147 - sale of immovable property - In the absence of any development during this intervening period of one year from the date of purchase and till the date of sale, the appreciation of value from ₹ 4.00 lacs to ₹ 38.50 lacs indicates the involvement of the parties in mischievous acts of showing the minimum amount of purchase consideration by the assessee in comparison to the sale consideration shown in the sale agreement. - AT
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Income Tax:
Addition u/s 40A - purchase by cash exceeding ₹ 20,000/- on various dates in one bill - merely accepting the purchase by the AO - it was duty of the assessee to prove as to whether particular payees have incorporated in their books for computing their profits on the respective sales or not and we also noted from the submission of the assessee that there are contradictory submissions before the authorities below - Additions confirmed - AT
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Income Tax:
Exemption u/s 11 - proof of charitable activities u/s 2(15) - The activities of the assessee's association cannot be termed either "trade" , "commerce" or "business" simply because the assessee association is receiving some charges or fees for rendering services on noncommercial principles to State Road Transport Undertakings and other concern members for a fee or charges - AT
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Income Tax:
Rejection of books of account - Correct method of accounting - following cash system of accounting instead of accrual method of accounting - He has not cared to discuss and examine any of the expenses claimed by the Assessee on accrual basis but has simply disallowed the said expenses and added back to the income of the assessee without carrying out the necessary enquiry and verification. In our considered view, it was the responsibility of the assessing officer to verify the expenditure individually head wise. - AT
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Income Tax:
TDS u/s 192 - Employees on Deputation - Reimbursement of salary cost which was on account of availing personnel services from its AE’s who were sent to India at secondment - The provision of TDS is not applicable on reimbursement of deputation expenses to foreign AE - AT
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Income Tax:
Penalty u/s 271AAB - A bare surrender of income not representing the money, bullion, jewellery or other valuable article or thing or any entry in the books of account will not be regarded as undisclosed income for the purpose of levy of penalty u/s 271AAB. - AT
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Income Tax:
Deduction u/s 35AD - Even if, arguendo, these facts were to be accepted, they do not detract from the settled position [as per 'Ceebros' (supra)], that once the conditions of section 35AD are fulfilled, the section, per se, not requiring any specific date of operation, the deduction thereunder cannot be disallowed. - AT
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Customs:
Misdeclaration of imported goods - Bitumen - Country of Origin - Redemption fine - Levy of penalty - The department was well within its right to seize the goods for such misdeclaration and impose penalties under Section 112 of Customs Act, 1962, notwithstanding the fact that the appellants had nothing to gain financially by such an action as there was no differential duty involved. We find that mens rea is not an essential prerequisite for action u/s 111(m) and Section 112(a) of the Customs Act, 1962. - AT
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Customs:
Entitlement for continuation of exemption from duties of customs - import of aircraft - Both scheduled and non-scheduled air transport services are clearly not intended for own use but to contend that the aircraft have been so used merely owing to evaluation of usage through the prism of revenue maximising would have consequences for all airlines and other air services operating in the country - AT
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Indian Laws:
Professional Misconduct - Applicability of Network guidelines to petitioner-firm of Chartered Accountants (CAs) - In absence of any “Information”, as contemplated under Rule 7 of the Rules 2007, the respondent no.2 has formed prima facie opinion only to do fishing inquiry and investigation. The intention of prima facie opinion is not for initiating disciplinary inquiry for the purpose of investigating further to establish whether the petitioner-firm in collaboration with the international entity, HLBI was involved in encouraging surrogate practice in India or not - the petitioner-firm which is in existence for more than 70 years cannot be put to rigors of disciplinary proceedings in absence of any specific allegation and in absence of any written information containing allegation as per Rule 7 of the Rule 2007. - HC
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Indian Laws:
Termination of tenancy - Section 3 of West Bengal Government Premises (Tenancy Regulation) Act, 1976 - When the eviction proceedings were initiated, admittedly, the land in question did not contain any structures. If the bare land is let out by the government undertaking and it continues to be a bare land as on the date of initiation of eviction proceedings, the incidence of such tenancy cannot be governed by the provisions of the Act and such a tenant cannot be evicted by taking aid of the provisions of the Act. - SC
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Service Tax:
Renting of immovable property service - appellant have received amounts as advances for construction of a terminal for bunkering - Merely because the appellant has received some amounts from their customers they do not have to automatically pay service tax unless such amounts are relatable to rendition of a taxable service. - AT
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Service Tax:
Business Auxiliary Services - promotion or marketing of goods produced or provided by or belonging to the client - transfer of right to use - The imposition of restrictions or conditions in respect of the usage and consumption of the concentrate, by the seller cannot alter that position. Hence there are no merit in the submission that this transaction was not a truncation of sale but only “transfer to use”. - AT
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Central Excise:
Valuation - crank cases - job-work activity or not - Any amount of supervision per se, may not be sufficient to treat the assessee-appellant as a job worker - there are no merit in the impugned orders on the merits as well as on the principles of consistency and consequently, the same are set aside. - AT
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Central Excise:
Clandestine removal - copper wires - demand based on various statements - retraction of statements - The counsel of Appellant before the appropriate forum, himself had agreed to proceed with the case without waiting further for cross examination of Panchas, and thus, once the adjudicatory authority had proceeded to adjudicate on such a premise, the Appellant, before us cannot invoke the ground of not cross examining the Panchas at such an appellate stage merely because the adjudication did not result in his favour - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (3) TMI 980
Filing of FORM GST TRANS 1 - Transitional credit - HELD THAT:- The issue decided in the case of JODHPUR TRUCK PVT. LTD. VERSUS UNION OF INDIA, CHAIRMAN, GSTIN, GST, COUNCIL, THE COMMISSIONER, CENTRAL GOODS AND SERVICE TAX COMMISSIONRATE, JODHPUR. [2019 (11) TMI 820 - RAJASTHAN HIGH COURT] where it was held that the petition is disposed of with the direction to the respondents to permit the petitioner to submit offline GST TRAN-1 form, subject to furnishing a proof that he had tried to upload GST TRAN-1 form prior to 27.12.2017 and such attempt failed due to technical fault/glitch on the common portal.
Application disposed off.
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2020 (3) TMI 979
Filing of Fomr GST TRAN-1 - transitional credit - transition to GST regime - HELD THAT:- It appears that if the petitioner could not upload the form GST TRAN-1 due to technical glitches and in spite of various representations made by the petitioner, he was not allowed to upload the form GST TRAN-1.
In view of the settled legal position, the petitioner is entitled to claim credit of CENVAT as well as service tax as on 30th June 2017 as per the provisions under section 140(1) of the Act, 2017 read with Rule 117 of the Rules 2017.
The respondent No. 4, who is the jurisdictional officer, is directed to verify the claim of credit of CENVAT and service tax of the petitioner so as to enable the petitioner to carry forward by filing/uploading form GST TRAN-1 on GST portal - respondent No. 4 shall complete the exercise of verification and permit the petitioner to upload the form GST TRAN-1 within a period of two seeks from the date of receipt of the writ of this order so that the petitioner can upload the form GST TRAN-1 on or before 31st March 2020.
Petition disposed off.
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2020 (3) TMI 978
Deposit of Interest - Section 50 of the Central Goods and Sales Tax Act, 2017 - HELD THAT:- Respondents submits that the impugned communications, in fact, afford the Petitioner an opportunity for voluntary compliance. In case this opportunity is not availed by the Petitioners, appropriate legal action for recovery of the interest due for the delay in filing of returns shall be initiated. She clarifies that this means that a show cause notice will be issued. Upon service of such show cause notice, the Petitioners will be given an opportunity to put-forth its case and in that sense, there will be compliance with the principles of nature justice.
The statements made by respondents is accepted on the basis of instructions. In view of such statements, it is not necessary to entertain the present Petition since, the apprehensions expressed by the Petitioner in this Petition, stand substantially redressed at the present stage.
By granting liberty to the Respondents to issue necessary show cause notice in accordance with law, the petition is disposed off.
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2020 (3) TMI 982
Condonation of delay in filing appeal - Time Limitation - Levy of GST - operation of “logging” - the operation is independent of the trees, whether planted by the Forest Department or which grew out of natural regeneration - intra-state supply or not - the goods are taken by the recipient after the supply is completed.
HELD THAT:- It is evident that this Appellate Authority being a creature of the statue is empowered to condone a delay of only a period of 30 days after the expiry of the initial period for filing appeal. As far as the language of Section 100 of the CGST Act is concerned, the crucial words are “not exceeding thirty days” used in the proviso to sub-section (2). To hold that this Appellate Authority could entertain this appeal beyond the extended period under the proviso would render the phrase “not exceeding thirty days” wholly otiose. No principle of interpretation would justify such a result. Therefore, we hold that we are not empowered to condone the delay of one day in filing this appeal.
Since the appeal cannot be allowed to be presented on account of time limitation, the question of discussing the merits of the issue in appeal does not arise - Appeal is dismissed on the ground of limitation.
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2020 (3) TMI 977
Filing of FORM GST TRAN-1 - transitional credit - HELD THAT:- In view of the Order No.1/2020-GST, dated 7th February, 2020 passed by the Central Board of Indirect Taxes and Customs with regard to the extension of the time limit for submitting the declaration in Form GST TRAN-1 under Rule 117 (1A) of the Central Goods and Services Tax Rules, 2017 in certain cases.
The respondents are directed to permit the petitioner to upload the Form GST TRAN-1, which is saved by the petitioner as per the Order No.1/2020-GST, dated 7th February, 2020 passed by the Central Board of Indirect Taxes and Customs. Such exercise shall be completed within a period of two weeks from the date of the receipt of the order.
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2020 (3) TMI 981
Input tax credit - Blocked Credits - Section 17(5) of the CGST Act, 2017 - taxes paid on procurement of goods and/or services for installation of various parts of AC - whether input tax credit against purchases of goods and services used for installation of the aforesaid items in the shopping mall under construction can be claimed and utilized to pay GST on the outward supply of services of renting of the shopping mall as retail shops, food courts, cinema theater, etc.? - challenge to AAR decision.
HELD THAT:- The word ‘or’ in clause (d) of Section 17(5) of the CGST Act can be read as ‘and’ since it appears to give effect to the intention of the legislature to allow input tax credit on the construction of plant and / or machinery.
The restriction contained in Section 17(5)(d) is applicable to goods and services received by a taxable person for construction of an immovable property. When goods and services are received by a taxable person for construction of plant or machinery, there is no bar on eligibility to input tax credit. The appellant has argued that all the installations mentioned in his application qualify as ‘Plant’ or ‘Machinery’.
The items such as Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system do not appear to be apparatus/equipment/machinery which are fixed to the earth. The appellant has also not submitted any information as to how these items are getting embedded to the earth since the criteria for terming such items as “Plant and Machinery” is that they have to be fixed to the earth either by foundation or structural support. In the absence of such information we hold that Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system do not qualify as plant or machinery but are items which are procured for the purpose of construction of the immovable property. Hence, the appellant is not eligible for the input tax credit of the tax paid on the procurement and installation of Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system.
In respect of the Water treatment Plant and Sewage Treatment Plant, as can be seen from the photographs, they form part of the civil structure of the immovable property. Civil structures are specifically excluded from the definition of “Plant and machinery”. So also, the DG Set and Transformer - they are procured as independent items and their installation becomes part of the civil structure of the immovable property - the appellant is not eligible of the credit of the taxes paid on the procurement of the Water Treatment Plant, Sewage Treatment Plant, DG Set and Transformer.
Ruling of AAR upheld.
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2020 (3) TMI 976
Denial of Input Tax Credit (ITC) - Tax paid u/s 129 after detention of goods alongwith the vehicle - part B of the e-way bill was not filled up - HELD THAT:- This Court is of the considered view that the matter requires serious reconsideration at the hands of the 1st respondent as vital aspects enumerated in paras 15 and 16 of the Writ Petition (Civil) have not been duly considered and adverted to by the 1st respondent. Accordingly, for effectuating such a remit, it is ordered that the impugned Ext.P-5 order dated 21.11.2019 refusing to credit the abovesaid amount towards the GST registration number of the petitioner will stand quashed and the matter in relation thereto will stand remitted to the 1st respondent for consideration afresh.
Petition disposed off.
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Income Tax
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2020 (3) TMI 966
Penalty u/s 271E - assessee had made repayment of unsecured loan to village welfare society in cash - contravention of provision of section 269T - HELD THAT:- We note that assessee made repayment of loan in five equal installments of ₹ 75,000/- each by way of Bank Transfer through Axis Bank Account No. 236010100020563 belonging to the lender. It is a recognized mode of payment recommended by Finance Bill, 2014, hence we delete the penalty of ₹ 3,75,000/-. - Decided in favour of assessee.
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2020 (3) TMI 965
Penalty u/s. 271(1)(c) - defective notice - unexplained receipt of cash since the assessee has not disclosed in the return of income the said amount - HELD THAT:- As decided in case of Jeetmal Choraria [2017 (12) TMI 883 - ITAT, KOLKATA] Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled.
We, therefore, sustain the deletion of penalty by the Ld. CIT(A) on the reason of invalid notice before imposing penalty and, therefore, the appeal of revenue is dismissed.
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2020 (3) TMI 964
Delayed PF & ESI contribution(s) - sum credited beyond the due date stipulated in the corresponding Acts - HELD THAT:- CIT-DR fails to dispute the clinching fact that the assessee had very well credited the impugned sum(s) before the due date of filing return u/s 139(1). That being the case, hon'ble jurisdictional high court’s decision in Commissioner of Income Tax vs. M/s Vijay Shree Ltd. [2011 (9) TMI 30 - CALCUTTA HIGH COURT] squarely covers the issue in assessee’s favour.
Assessment u/s 153A - Exclusion of Sales Tax Incentive from West Bengal State Government in computing taxable income under normal provisions of the Act - HELD THAT:- Nothing comes in the way of the concerned assessee in seeking original claim of deduction in proceedings involving search assessment u/s. 153A as well. We thus express our concurrence with the CIT(A)’s impugned action entertaining the assessee’s foregoing additional ground seeking to treat its sales tax incentive subsidy as capital and not revenue receipt which had been erroneously recorded under the latter head in the computation of income. We make it clear that purpose of an assessment framed under the provision of the Act is to determine the correct taxable income than that based on estopple only since the Income Tax Act does not involve adversarial proceedings as per in V.W. Narayen [1971 (8) TMI 91 - SUPREME COURT] , S.N. Swarnnamal vs. CED [1972 (4) TMI 13 - MADRAS HIGH COURT] & State of Tamil Nadu vs Arulmurya & Co [1982 (11) TMI 143 - MADRAS HIGH COURT]
Whether the impugned sales tax incentive subsidy sum(s) received under Notification No. 1460 dated 27.05.1994 issued by the West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme are in the nature of a capital or revenue subsidy? - We find this latter issue to be no more res integra since the CIT(A) has taken note of various judicial precedents; including that of hon'ble jurisdictional high court, that this subsidy gives rise to capital receipt only. We adopt the very reasoning mutatis mutandis and uphold the CIT(A)’s findings under challenge granting relief to assessee.
Sec 115JB MAT computation - CIT-DR fails to dispute that once the impugned subsidy scheme has been held as capital and not a revenue item, the same does not form part of impugned MAT computation as well going by the judicial precedents taken note of in the lower appellate discussion. We quote in Commissioner of Income Tax vs. K.Y. Pilliah & Sons [1966 (10) TMI 35 - SUPREME COURT] that when this tribunal expresses its concurrence with the lower authorities conclusion in entirety, it may not take recourse to a detailed reasoning on its own. We thus uphold the CIT(A)’s lower appellate findings on all these three aspects raised at Revenue’s behest.
Excessive interest payment disallowance u/s 40A(2)(b) - HELD THAT:- We find that the assessee had paid the interest sum(s) @ 12% and 11% in case of related and unrelated parties; respectively. Ld CIT-DR fails to dispute that there is no discussion at all in the assessment order indicating any comparison of market rate of interest vis-a- vis assessee’s interest @ 12% forming subject-matter of the impugned disallowance. We thus affirm the CIT(A)’s findings under challenge for this precise reason only.
Addition on account of stock discrepancy made in the course of assessment - HELD THAT:- CIT(A) has rightly granted relief to the assessee since finding no discrepancy in stock in principle. We thus affirm CIT(A)’s above findings under challenge deleting the impugned addition - Decided against revenue
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2020 (3) TMI 963
Revision u/s 263 - addition u/s 68 - HELD THAT:- We are of the view that the action/view taken by the AO after enquiry made by him as per the direction of the Pr. CIT in the set aside proceedings dated 12.05.2016 pursuant to which the AO has reassessed the assessee after inquiry and accepted the share capital and premium collected by assessee is a plausible view and cannot be held to be unsustainable view in facts or law, therefore, the impugned action of the Pr. CIT to interfere with the reassessment order of the AO, is without jurisdiction and liable to be quashed.
In the light of the discussion on fact as well as on law, we are of the considered opinion that AO’s action (reassessment) pursuant to the first revisional order of Ld. Pr. CIT dated 12.05.2016, to accept the share capital and premium as a possible view in facts and law as per the ratio laid by the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT [2000 (2) TMI 10 - SUPREME COURT] the AO’s action/reassessment order cannot be termed as erroneous and prejudicial to the interest of the Revenue. Therefore, the condition precedent for usurping revisional jurisdiction u/s. 263 of the Act is absent and, therefore, the Ld. Pr. CIT lacked jurisdiction to assume second time revisional jurisdiction u/s. 263 of the Act. Therefore, the assessee succeeds on the legal issue raised and, therefore, on the facts and circumstances discussed (supra), we are inclined to quash the impugned order of Ld. Pr. CIT dated 14.03.2019. - Decided in favour of assessee.
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2020 (3) TMI 962
Assessment u/s 153A - Addition u/s 68 and disallowance of consequential interest - HELD THAT:- As relying on KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT] no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceedings. However, it is seen that the Hon'ble Apex Court has not stayed or suspended the operation of the decision of the Hon'ble Bombay High Court in any manner and therefore, at the moment, the decision of jurisdictional High Court is binding on us and we are bound to follow it.
Therefore, respectfully following the binding judicial precedents as enumerated hereinabove, the impugned additions of ₹ 1107 Lacs as made by Ld. AO u/s 68 and interest disallowance of ₹ 104.95 Lacs and partly confirmed by Ld. CIT(A), could not be sustained under law - Decided in favour of assessee.
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2020 (3) TMI 961
Conversion of “Limited Scrutiny” into “Complete Scrutiny” - Expanding the scope of limited scrutiny assessment without necessary approval - expanding the scope to changing the head of income without taking necessary approvals of higher authority as required by the instructions given by CBDT - denying the deduction claimed under section 54 - HELD THAT:- On perusal of the notice for “Limited Scrutiny” we find that there was no mentioning/whisper about examination of the fact whether the assessee was engaged in the business of property development. Assessing Officer has exceeded his jurisdiction by denying the deduction claimed u/s 54 of the Act on the reasoning that the assessee is engaged in the business of property development as the same was not mandated under the ‘’Limited Scrutiny” notice issued under section 143(2) of the Act.
DR before us has not brought anything on record justifying that the “Limited Scrutiny” was converted by the Assessing Officer under normal scrutiny after obtaining necessary approval from the appropriate authority.
We are also not convinced with the argument of the DR that the issue raised by the AO is limited to the activity of the sale of the property only. It is because if we admit the contention of the learned DR then the head of income from capital gain will also get change to the business income despite the fact that there was no question raised in the notice issued for the limited scrutiny under section 143(2) of the Act. The right course of action for the AO was to take the approval from the competent authority for expanding the scope of Limited Scrutiny to the regular assessment but he failed to do so. Thus, in our considered view inaction of the AO should not cause any harassment to the assessee.
In holding so we draw support and guidance from the order of Rajesh Jain vs. ITO [2005 (4) TMI 629 - ITAT CHANDIGARH] held that CBDT Circular clarifies that the Assessing Officer does not have the powers to make the entire assessment of income in limited scrutiny cases. There is no doubt that the power of the Commissioner (Appeals) is co-terminus with the power of the AO
In the instant case, when the Assessing Officer did not have the power to make a full-fledged assessment in limited scrutiny cases, the Commissioner (Appeals)’s power could not be enlarged beyond the power of the Assessing Officer in limited scrutiny cases. So, it was considered appropriate to remit the issue relating to allowance of depreciation in respect of the plinth to the file of the Assessing Officer for the purpose of fresh decision in accordance with law. Since the notice under section 143(2)(i ) was issued for limited scrutiny, the Assessing Officer was precluded from considering any other issue while making the assessment under section 143(3) under limited scrutiny. The decision of the Commissioner (Appeals) in considering the other claim of the assessee not covered in the notice issued under section 143(2)(i) for limited scrutiny was contrary to the provisions of the Act and, accordingly, was set aside.
We are not convinced with the finding of the authorities below. As such the entire issue should have been limited to the extent of the dispute raised in the notice under section 143(2) of the Act for the limited scrutiny but the AO in the present case has exceeded his jurisdiction as discussed above. Thus the ground of appeal of the assessee is allowed
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2020 (3) TMI 960
Condonation of delay in filing rectification application - sufficient cause for the purpose of condonation of delay - HELD THAT:- So far as section 254(2) of the Act is concerned, there is no express power conferred on the Tribunal by the Legislature in the Statute where the Tribunal can condone the delay beyond the relevant period prescribed in the Statute therein.
In the case of Collector, Land Acquisition vs. MST.Katiji & Ors. [1987 (2) TMI 61 - SUPREME COURT] relied strongly by the assessee, the Hon’ble Apex Court has referred to sufficient cause for the purpose of condonation of delay. This sufficient cause needs to be established by the assessee through evidences and in this case, the assessee has failed to do so. In view of the above examination of facts and law, we are of the considered opinion that this inordinate delay in filing of MAs is not a fit case for condonation, more so, because there is no specific provision in the realm of section 254(2) of the Act to provide for such condonation of delay in case of MAs. Therefore, all the condonation of delay petitions are dismissed. Since at the threshold itself the condonation of delay petitions are dismissed, MAs become academic and therefore, they are also dismissed - All the condonation of delay petitions and MAs are dismissed.
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2020 (3) TMI 973
Stay petition - recovery proceedings - calling upon the Petitioner to pay 20% of the demand as a pre-condition for stay of the demand; failing which it was stated that the demand would be enforced and coercive measures would be taken to recover the demand - HELD THAT:- We find that Respondent No. 1 while passing the impugned order dated 31.01.2020 did not at all consider the various issues raised by the Petitioner in his stay application and merely called upon the Petitioner to pay 20% of the demand. This court in UTI Mutual Fund [2012 (3) TMI 333 - BOMBAY HIGH COURT] has made it abundantly clear that the assessing authority while considering the stay application has to act as a quasi judicial authority, which means that he has to apply his mind to all relevant factors and thereafter, take a decision which is just, fair and reasonable.
This court had highlighted that though the Assessing Officer had made the assessment, nonetheless at the time of deciding stay of the demand, he must objectively decide the application for stay considering that an appeal lies against the order which in fact has been filed in the present case.
Order dated 31.01.2020 is devoid of any reasons which reflects non-application of mind and therefore, cannot be sustained. Consequentially, the action of attaching the bank account of the Petitioner in the HDFC Bank, Chembur, Mumbai cannot also be justified.
Accordingly, the impugned order dated 31.01.2020 is hereby set aside and quashed. Further, the attachment of the bank account of the Petitioner being Account No. 4251570000839 in HDFC Bank, Chembur, Mumbai, is also set aside.
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2020 (3) TMI 959
Income accrued in India - Fixed Place Permanent Establishment (“PE”) in India as per Article 5 of the India-USA DTAA - Service PE in India - secondment agreement regarding secondment of the employees between the foreign company (i.e. the assessee) and the Indian entity (i.e. Teradata India) - secondment/assignment agreement between the foreign company (i.e. the assessee) and the expatriate, exist but no employment agreement between the expatriate and the Indian company (i.e. Teradata India) existed - HELD THAT:- In the instant case the employees of the assessee has been deputed to manage the affairs of the Indian entity and provide technical knowledge. The employees though worked at the premises of the Terdata India but for all practical purposes the remained employees of the assessee company. The employees continued to make their social security contributions in USA and their salaries were also distributed to their bank accounts in USA. In the case of Centrica [2014 (5) TMI 154 - DELHI HIGH COURT] there was agreement between the Indian entity and expatriate, but in this case, even there was no such agreement also. Respectfully following the finding of the Hon’ble High Court, we uphold the finding of the lower authorities on the issue of existence of PE of the assessee in India in terms of the DTAA. The ground No. 2.1 to 2.4 of the appeal accordingly dismissed.
Profit attribution - HELD THAT:- This issue was raised by the assessee before the Learned DRP and learned DRP directed to verify the claim of the assessee, however, in the final assessment order, the Learned Assessing Officer considered the same amount for cost base on the ground that no such details were provided by the assessee in assessment proceedings. In our opinion, this is issue of the verification and if on verification certain expenses are not found pertaining to the seconded employees, same need to be excluded for taking cost base for profit attribution. Accordingly, we restore this issue to the file of the learned Assessing Officer for deciding after verification of each and every item of expense of ₹ 4,10,60,108/- and include only the item of the expenses pertaining to the seconded employees. The ground No. 2.5 and 2.6 of the appeal are accordingly allowed for statistical purposes.
Non considering the global profit of the assessee for applying markup on the cost base and adopting an ad-hoc 25% as profit attributable to the PE - HELD THAT:- This is issue of verification by the Assessing Officer accordingly. We restore this issue to the Assessing Officer for deciding after verification of the documents along with audited statements filed by the assessee in support of its claim of the global profit and decide the attribution of profit in accordance with Article 7 of the Indian-USA DTAA. The ground No. 2.8 of the appeal is accordingly allowed for statistical purposes.
Salary by the TIPL to seconded employees in India has been accepted as the cost of the business of the TIPL, as hence salary payment made to the seconded employees by the assessee on behalf of the TIPL should also be considered as cost of business of the TIPL and should not be considered for attributing to the alleged PE - HELD THAT:- This contention of the assessee is not acceptable because in the instant case, revenue earned by the PE for providing services to the Indian entity is under consideration for profit attribution and the cost or expenditure incurred by the Indian entity is not an issue in dispute.
Assessee proposed that salary costs paid to seconded person is to be allowed as per Article 7 of the DTAA while making attribution to the alleged PE in India - The Article 7(2) prescribe that profit attributable to PE may be estimated on a reasonable basis, but the estimate adopted, however, should be in accordance with principle laid down in Article 7 of the treaty. The deduction of expenses are also to be allowed as per Article 7(3) of the Treaty. The Assessing Officer has considered markup at the rate of 25% on the cost base of the seconded employees in absence of details of global profit of the assessee. In our opinion, this action of the Assessing Officer was not totally arbitrary or in violation of rules of estimation, though we have already restored the issue of the estimation of the profit to the file of the Assessing Officer in accordance with Article 7 of the Indian USA DTAA.
Nothing is brought on record to show whether the services of the seconded employee has been utilized towards international transactions of the Indian entity or has been utilized in domestic market. Even the services has been utilized by Associated Enterprises and remunerated at arm’s length price to ‘Teradata India’, will not make any impact, as in the instant case the income taxable in the hands of the PE is under consideration and nothing has been brought on record that Arm’s Length Price of the service transaction between PE of assessee and Indian Entity has been determined. What is relevant here is that income has to be taxed in the hands of the correct person and in the instant case income from rendering services by the PE has to be taxed in the hands of the PE and remunerating the Teradata India by other AEs at arm’s-length price is not relevant. Accordingly, we reject this alternative argument of the assessee.
Credit of tax deducted at source - HELD THAT:- We restore this issue to the file of the learned Assessing Officer with the direction to the assessee to produce all the evidences in support before the Assessing Officer for verification and he will then after examination of the documents/evidence and data base of the department, allow the credit of TDS in accordance with law
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2020 (3) TMI 958
TDS u/s 194C OR 192 - salary payment made to staff - amount is less than than taxable limit u/s 192 - demand of TDS u/s 194C - relationship between the management and teaching staff - CIT(A) has confirmed the action of the Assessing Officer in holding the deductor/appellant to be an assessee in default, for non-deduction of tax on salary payment to the teachers, as required u/s 194C - HELD THAT:- The issue of relationship of master and servant stands dealt with by the Hon'ble Supreme Court in ‘M/s Dharangadhra Chemical Works Ltd. vs. State of Saurashtra’ [2019 (12) TMI 462 - KOLKATA HIGH COURT] wherein, it has been held that prima facie test for the determination of relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do, but also the manner in which he shall do his work; that the nature or extent of control which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature, incapable of precise definition; that the correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer; that a person can be a workman even though he is paid not per day, but by the job; that the fact that rules regarding hours of work, etc., applicable to other workmen may not be conveniently applied to them and the nature as well as the manner and method of their work would be such as cannot be regulated by any directions given by the Industrial Tribunal, is no deterrent against holding the persons to be workmen within the meaning of the definition if they fulfill its requirement.
‘M/s MCM D.A.V. College for Women’ [2014 (8) TMI 1186 - ITAT CHANDIGARH] has been followed by the Jaipur (SMC) Bench in ‘Principal Sri Sathya Sai College for Women, Jaipur vs. The ITO, Jaipur’ [2019 (9) TMI 41 - ITAT JAIPUR].
No decision contrary to ‘M/s MCM D.A.V. College for Women’ (supra) has been cited before us.
We hold that the payment in question is not covered by the provisions of section 194C of the Act. Rather, it comes under section 192 of the Act, due to which, the authorities below have erred in holding the deductor/appellant to be an assessee in default.
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2020 (3) TMI 957
Addition u/s 68 - amount received in the bank account of the assessee treating the same as unexplained credits - assessee to prove the identity and creditworthiness of the lenders as well as the genuineness of the transaction - HELD THAT:- Amount has been received through proper banking channels and for establishing the aforesaid fact, the assessee had also submitted the copy of bank statements. By submitting the aforesaid evidences and explanations, in my view, the assessee has discharged his initial onus for disclosing the identity of the loan provider by submitting the copy of the passport, confirmations, copy of resident identity card of Sh. Babu Jethani. Now the onus shifts on to the department to conduct further enquiries with respect to the unsecure loan and establish that why assessee's case cannot be accepted - where the assessee had led evidences in support of the identity of the third party and his capability the initial burden which lies upon him stand discharged. It will not before the assessee thereafter to explain further how or in what circumstances the third party obtained the money and how or why he came to make a deposit of the same with the assessee. In such a situation the burden will shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, for purporting to be in the name of a third party still represents the income of the assessee.
Thus where in a given case the assessee for his part produced the confirmations and identity proofs of Sh. Babu Jethani, which would be sufficient for the assessee to discharge his initial burden. Then it would be for the AO to bring material if he wants to negate the same. - Decided in favour of assessee.
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2020 (3) TMI 956
Valadity of Reopening of assessment u/s 147 - AO not applying his mind and without getting the approval of the competent authority - recording satisfaction in mechanical manner - HELD THAT:- CIT is required to apply his mind to the proposal put up to him for approval in the light to the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval.
CIT is required to apply his mind to the proposal put up to him for approval in the light to eh material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. - Decided in favour of assessee.
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2020 (3) TMI 955
Disallowance on account of expenditure claimed by the assessee u/s 57(iii) - loss that the expenses incurred for the purpose of investment is not substantiated by placing any material on record except the FDR/Saving from which he earned the interest income - nexus between the loan taken from NBFCs and the amount invested in FDR - Disallowance of interest expenditure have been incurred wholly and exclusively for the purpose of earning the interest income - HELD THAT:- It is a settled law that the deduction u/s. 57(iii) of the Act will be allowable even if no income is earned by the assessee u/s. 56 of the Act. The language of section 57(iii) of the act does not anywhere specifies that any income should have been earned as a result of the expenditure incurred. It only specified that the purpose of expenditure should be that of earning income, it is mandatory that income should have been earned by the assessee. Keeping in view the facts and circumstances of the present case, the addition in dispute is contrary to law and facts on the file and therefore, the same is hereby deleted
Revenue authority has not doubted the nexus between the loan taken from NBFCs and the amount invested in FDR is not doubted by the Assessing Officer. It is a settled law that the deduction u/s. 57(iii) of the Act will be allowable even if no income is earned by the assessee u/s. 56 of the Act. The language of section 57(iii) of the act does not anywhere specifies that any income should have been earned as a result of the expenditure incurred. It only specified that the purpose of expenditure should be that of earning income, it is mandatory that income should have been earned by the assessee. Addition in dispute is contrary to law and facts on the file and therefore, the same is hereby deleted - See RAJENDRA PRASAD MOODY [1978 (10) TMI 133 - SUPREME COURT], VODAFONE SOUTH LTD (FORMELY KNOWN AS M/S. VODAFONE SOUTH ESSAR AND HUTCHISON ESSAR SOUTH LTD) [2015 (10) TMI 22 - DELHI HIGH COURT] and RAJ KUMAR SHARMA VERSUS ACIT, CIRCLE 61 (1) , NEW DELHI [2019 (10) TMI 636 - ITAT DELHI] - Decided in favour of assessee.
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2020 (3) TMI 954
Long Term Capital Gain on Sale of Agriculture Land - whether Agriculture Land is not an asset u/s 2(14) - nature of land sold - agriculture land or capital asset - whether on a part of entire agriculture land the rice mill was installed and on remaining agriculture land, agriculture operations were carried out till the date of sale and it is incorrect that the land ceased to be agriculture land for I.T. purpose - HELD THAT:- The land is agricultural land, as depicted in the revenue records. No contrary decision has been cited before us. It is only the land beneath the rice mill, measuring 8800 sq. ft., on which long term capital gain is exigible. The contention of the assessee, regarding land of 700 sq. ft. covering his residence, has been brought up only at the present stage. It did not see the light of day at any earlier stage before any of the authorities below, nor is any evidence with regard thereto forthcoming. Therefore, this claim is not available to the assessee.
In view of the above, we accept the grievance of the assessee, to the above extent, to be justified. The long term capital gain is, therefore, directed to be calculated and levied accordingly.
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2020 (3) TMI 953
Capital gain u/s 45 - compensation received by a partner from another partner for relinquishing rights in the partnership firm - whether no transfer of asset within the meaning of Sec.45(4) ? - assessee reiterated that the rights of the existing partner was reduced in the firm and the right was created in favor of the existing partner of the firm but the ownership of the property did not change even with the change in the constitution of the firm - whether or not the compensation received by an existing partner from other partners for reduction in profit sharing ratio would be chargeable to tax as Capital Gain u/s 45(1)? - HELD THAT:- It cannot be said that, upon dissolution, the firm's rights in the partnership assets are extinguished. It is the partners who own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between partners and there is no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of sec.2(47).
There is no transfer of assets involved even in the sense of any extinguishment of the firm's rights in the partnership assets when distribution takes place upon dissolution. In order to attract S.34(3)(b) it is necessary that the sale or transfer of asset must be by the assessee to a person. Dissolution of a firm must, in point of time, be anterior to the actual distribution, division or allotment of the assets that takes place after making accounts and discharging the debts and liabilities due by the Firm. Upon dissolution the firm ceases to exist; then follows the making up of accounts, then the discharge of debts and liabilities and thereupon distribution, division or allotment of assets takes place inter se between the erstwhile partners by way of mutual adjustment of rights between them. The distribution, division, or allotment of assets of the erstwhile partners, it not done by the dissolved firm.
During the subsistence of a partnership, a partner does not possess an interest in specie in any particular asset of the partnership.
During the subsistence of a partnership, a partner has a right to obtain a share in profits. On a dissolution of a partnership or upon retirement, a partner is entitled to a valuation of his share in the net assets of the partnership which remain after meeting the debts and liabilities. An amount paid to a partner upon retirement, after taking accounts and upon deduction of liabilities, does not involve an element of transfer within the meaning of Section 2(47). See M/S RIYAZ A SHEIKH [2013 (12) TMI 248 - BOMBAY HIGH COURT]
We hold that the compensation received by the assessee from existing partners for reduction in profit sharing ratio would not tantamount to Capital Gains chargeable to tax u/s 45(1). Therefore, by deleting the impugned addition, we allow the appeal.
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2020 (3) TMI 952
TDS u/s 195 - Intangible business connections - payment in respect of an appearance made by Nicholas Cage, an Oscar award winning celebrity, for an appearance made by him at Dubai (UAE) in a product launch event for promoting business of the assessee in India - assessee is an Indian company - HELD THAT:- Explanation 3 to Section 9 (1)(i) further makes it clear that any income accruing or arising through a business connection will include an income accruing or arising ‘by means of’, ‘in consequence of’ or ‘by reason of’’ a business connection in India. In other words, therefore, when an income accrues or arises to a non-resident outside India, but by the reason of any business connection in India or in consequence of any business connection in India, such an income shall also be taxable in India under section 5(2)(b).
We find, as the assessee has admitted in so many words in the written note, that the event in Dubai was India centric, that the event was for the purpose of promoting business in India, that such promotional events generate enquires of potential customers in India who in turn would like to purchase Audi cars in India and finance the same from the assessee company, and that it was for this reason that the assessee company was a part of this event. It is also an admitted position that “the audio-visual clips were available for use exclusively for Audi India and VWFPL”. When these audio-visual clips were for exclusive use of the assessee and the Audi India, and both of these entities have operations only in India, the use of this event, as a tool of marketing, was only in India.
In the terms of MoU signed between the assessee and celebrity’s agent, predominant benefit to the assessee was “usage of all the event footage/ material/ films/ stills/ interviews etc of the above mentioned launch event capturing celebrity’s presence across all platform for below the line publicity on internet, in press releases, news reports, social media, Audi Magazine etc”. There is also no dispute about the position that all expenses are borne by the assessee, and its associate Audi India, and claimed as a deduction under section 37(1), which essentially implies that the expenses, even by assessee’s admission, has been incurred “wholly and exclusively for the purposes of business” of the assessee and the business of the assessee is only in India.
When we examine relation between Indian business and participation in an event by the celebrity at Dubai launch event, we have no doubt that it is because of this relationship between event in Dubai and business of the assessee in India that the income has accrued and arisen to the celebrity making appearance in Dubai launch event. There cannot be any justification for an assessee in India, doing business only in India, paying money to a celebrity to make an appearance in an event in Dubai unless such an appearance benefits the business of the assessee in India, and the fact that it did benefit the business interests of the assessee in India is not even in doubt or controversy.
As a matter of fact, there is an inherent dichotomy in the approach of the assessee inasmuch as, on one hand, he claims the expenses in the Dubai launch event as expenses incurred for the purposes of business in India, which is the only geographical location where the assessee does business, and yet he claims that the Dubai launch event does not have business connection in India.
Once the expenses for holding this event is in connection with business in India, it is only a natural corollary thereto that income from participation, in this event, to a non-resident has a business connection in India.
The business connection in India, on the facts of the present case, is intangible inasmuch as it is a relationship rather than an object, but it is a significant business connection which has resulted in income accruing and arising to the non-resident, but for which there would not have been any business expediency in making the impugned payment to the non-resident celebrity.
What essentially follows is that article 23(3) allows the country in which the income arises, to tax such income if its law so provides. The scheme of the treaty is thus unambiguous inasmuch as the treaty protection from source taxation is not available to an income which is not covered by the specific articles of the treaty in question. We, therefore, reject the claim of the assessee on treaty protection under article 23(1) against source taxation of income in question.
The income embedded in payment to the international celebrity, for participation in Dubai A8L launch event, was taxable in India. As a corollary to these findings, in our considered view, the assessee had the liability to withhold taxes from payment made for appearance made by the celebrity at Dubai A8L launch event, and the CIT(A) was justified in upholding impugned demands raised under section 201 r.w.s 195 of the Income Tax Act,1961. We, therefore, confirm the orders of the authorities below and decline to interfere in the matter. - Decided against assessee.
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2020 (3) TMI 951
Deduction u/s 10AA disallowed - allegation of diversion of profit from DTA unit to in its SEZ unit - HELD THAT:- Assessee has claimed deduction under section 10AA for the first time in the year 2009-10 which was allowed by the AO himself, but this order was set aside by the ld.CIT under section 263 of the Act. The order of the ld.CIT under section 263 passed in supervisory jurisdiction, did not meet approval of the Tribunal, and orders for the Asstt.Year 2009-10 and 2010-11 were set aside by the Tribunal. The next assessment year was A.Y.2011-12 wherein the ld.CIT(A) has allowed deduction and order of the ld.CIT(A) has been upheld by the Tribunal. Therefore, consistently, it is observed that the assessee has been allowed deduction under section 10AA on the profit derived by it in its SEZ unit including on the interest income which has been assessed as business income derived from SEZ. Therefore, respectfully following orders of the Co-ordinate Bench, we do not find any reason to interfere in order of the ld.CIT(A) in both these years. Ground No.1 to 3 of the Revenue’s appeal in both the years are rejected.
Disallowance u/s 14A - whether such disallowed amount be added back in the book profit for the purpose of section 115JB? - HELD THAT:- We find that the assessee has sufficient interest free funds, and no interest amount deserves to be disallowed. Thus, interest free fund available with the assessee was far more than the investment, and no interest expenditure could be disallowed.
Sometime investment could be of 100 crores, but exempt income is only few lakhs. Can the expenditure exceed the exempt income. This situation has been answered by the Hon’ble Gujarat High Court in the case of Corretech Energy P.Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] by propounding that if there is no tax free income, then there could not be any expenditure. This view was expressed by the Hon’ble Delhi High Court in the case of Cheminvest [2009 (8) TMI 126 - ITAT DELHI-B] while reversing the conclusion of the Special Bench of the Tribunal.
Ends of justice would be meet if we restrict the disallowance to rupees seven lakhs in the Asstt.Year 2012-13, and rupees twelve lakhs in the Asstt.Year 2013-14, which will be sufficient for taking care of administrative expenditure for making investment and earning exempt income. Accordingly, grounds raised by the assessee are partly allowed.
Disallowance u/s 14A in the book profit determined under section 115JB - HELD THAT:- As relying on VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] we reject this ground of appeal in both the years and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules
Disallowance on account of deduction u/s 80IA - Computation of deduction - HELD THAT:- We find that similar claim of the assessee was allowed in the Asstt.Year 2011-12 when the assessee exercise the option of choosing the initial assessment year as culled out in sub section (2) of section 80IA from which it choose its 10 years of deduction out of 15 years, then only the losses of the years starting from the initial assessment year alone are to be brought forwards as stipulated in section 80IA(5). The loss prior to the initial assessment year which was already been set off cannot be brought forward and adjusted into the period of 10 years from the initial assessment year as contemplated or chosen by the assessee. It is only when the loss have been incurred from the initial assessment year, then the assessee has adjust loss in subsequent assessment years and it has to be computed as if eligible business is the only source of income and then only deduction under section 80IA can be determined. This is the true import of section 80IA(5).- thus appellant is entitled to deduction U/S.80IA on the profits derived from wind mill unit
Disallowance in respect of employee’s contribution to PF/ESIC - HELD THAT:- Assessee fairly conceded that this issue is covered against the assessee by decision of Hon’ble jurisdictional High Court in the case of Gujarat State Road transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT].
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2020 (3) TMI 950
Penalty u/s. 271(1) (c) - Defective notice - whether the assessee has concealed its income or furnished any inaccurate particulars of income? - HELD THAT:- As decided in case of Jeetmal Choraria [2017 (12) TMI 883 - ITAT, KOLKATA] Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled.
We, therefore, sustain the deletion of penalty by the Ld. CIT(A) on the reason of invalid notice before imposing penalty and, therefore, the appeal of revenue is dismissed.
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2020 (3) TMI 949
Validity of reopening of assessment u/s 147 - assessee has sold an immovable property as not shown the above transaction in the AIR Schedule of his return of income - assessee has not shown capital gain under the head capital gain on sale of Plot which was sold through an agreement for a consideration of ₹ 38,50,000/- in his ROI - HELD THAT:- When the assessee has neither disclosed the transaction in question nor offered any capital gain from the said transaction then the information received by the AO based on these documents, to which the assessee is a party, constitutes the tangible material to form the belief that income assessable to tax has escaped assessment. As regards the objection of the ld.AR of the assessee that reassessment ought to have been made u/s 153C of the Act as against u/s 147 of the Act, we find in the reasons recorded by the AO nowhere it is mentioned that the said document was sent by the AO of the searched person after recording his satisfaction. Even otherwise, if the conditions as stipulated u/s 153C r.w.s. 153A of the Act are not satisfied then the AO can invoke the provisions of Section 147/148 of the Act. Hence the decision relied on by the ld.AR of the assessee in the case of Shri Navrattan Kothari vs ACIT (supra) cannot be applied in the facts of the present case. In the said case, the AO has stated in the reasons recorded that the documents were seized and forwarded by the AO of the searched person. Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the initiation of proceedings u/s 147/148 of the Act. Thus the Ground No. 1 of the assessee is dismissed.
Addition on account of the amount received for transfer of an immovable property - HELD THAT:- Where the assessee is also a party to the illegal transaction of purchase and sale of the land in question then the alleged stand of the assessee of subsequent cancellation of the agreement does not inspire confidence. It is pertinent to note that the assessee claimed to have purchased this property in question vide sale deed dated 29-10-2010 for a consideration of ₹ 4.00 lacs only whereas the said plot of land was sold by the assessee vide agreement dated 25-12-2011 for a consideration of ₹ 38.50 lacs. In the absence of any development during this intervening period of one year from the date of purchase and till the date of sale, the appreciation of value from ₹ 4.00 lacs to ₹ 38.50 lacs indicates the involvement of the parties in mischievous acts of showing the minimum amount of purchase consideration by the assessee in comparison to the sale consideration shown in the sale agreement. Accordingly, in the facts and circumstances of the case, we do not find any substance or merit in the appeal of the assessee. Thus Ground No. 2 and 3 of the assessee are dismissed.
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2020 (3) TMI 948
Assessment u/s 153A - absence of incriminating material/documents - HELD THAT:- In the present case, there is no dispute that the assessment was completed as on the date of search and we find the CIT(A) in his impugned order categorically held that no incriminating documents / papers relevant to the issue on hand were not seized during the course search and seizure operation. Further, the additions made by the AO in the assessment completed u/s 153A/143(3) are not based on any incriminating material documents / papers. Further the CIT(A) placed reliance in the case of Veerprabhu Marketing Ltd. [2016 (8) TMI 813 - CALCUTTA HIGH COURT] . While deciding the issue in the case of Veerprabhu Marketing Ltd. (supra), the Hon’ble High Court of Calcutta agreed with the view expressed by the Hon’ble High Court of Karnataka [ 2016 (5) TMI 372 - KARNATAKA HIGH COURT[ wherein it was held that incriminating material is a pre-requisite / power could have been exercised u/s 153C r.w.s. 153A of the Act.
We note that as rightly argued by the Ld.AR the Hon’ble High Court of Calcutta have been consistently held that the additions in the case of search assessment have to be made on the basis of incriminating material, supporting the same, the citation of which have been reproduced in the afore-mentioned paragraph. Therefore, considering the facts and circumstances of the case and submissions of ld. DR and AR along with the decisions relied on, we find no infirmity in the order of CIT(A) and it is justified. Thug ground nos. 1 to 6 raised by the revenue are dismissed.
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2020 (3) TMI 947
TP Adjustment - Determination of ALP in respect of an international transaction between the assessee and its Associate Enterprises (AE) u/s. 92 - application of PSM as the MAM or TNMM - comparable selection - HELD THAT:- It is clear from the OECD guidelines that in 'order to determine the profits to be split, the crux is to understand the functional profile of the entities under consideration. Although the comparability analysis is at the "heart of the application of the arm's length principle", likewise, a functional analysis has always been a cornerstone of the comparability analysis. In the present case the Assessee leverages on the use of technology from the AE and does not contribute any unique intangibles to the transaction. It may be true that the Assessee aggregated payment of royalty with the transaction of manufacturing as it was closely linked and adopted TNMM but that does not mean that the transactions are so interrelated that they cannot be evaluated separately for applying PSM.
Assessee does not make any unique contribution to the transaction, hence PSM in this case cannot be applied.
Therefore, we are of the view that TNMM is the Most Appropriate Method in the case of assessee.
Tribunal has upheld TNMM as MAM from AY 2007-08 to 2011-12. In those AYs the dispute was whether TNMM or CUP was the MAM. It is for the first time in AY 2013-14 that the revenue has sought to apply PSM as MAM. In the given facts and circumstances, we are of the view that TNM Method is the Most Appropriate Method and the AO is directed to apply the said method in determining the ALP, after affording opportunity of being heard to the assessee. The grounds of appeal of the assessee are treated as allowed.
Claim of depreciation of assets acquired from KSL on the basis of valuation report of the Assessee - slump sale - HELD THAT:- As far as AY 2013-14 is concerned, in the final assessment order dated July 7, 2017 passed for AY 2013-14, the AO disallowed excess depreciation of ₹ 9,762,694, being the difference between depreciation on value of assets as per valuation report and depreciation on WDV in the hands of KSL. This is because the issue of depreciation had not attained finality in AY 2003-04 the year of slump sale. Now that the issue has been resolved, the DRP has already given a direction on this issue by holding that the issue is consequential to the order for AY 2003-04 and the AO is directed to give consequential effect based on the decision rendered in AY 2003-04. Now that the Tribunal in AY 2003-04 has already approved the value at which the assets were capitalized in the books of account, the depreciation as claimed by the assessee has to be allowed - addition made in the present assessment year cannot be sustained and accordingly the same is directed to be deleted.
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2020 (3) TMI 898
Eligibility of benefit under the Direct Tax Vivad Se Vishwas Act, 2020 - grievance of the petitioner is that due to pendency of its application for restoration of the appeal, it is being deprived of the benefit that it expects to receive under the Direct Tax Vivad Se Vishwas Act, 2020, which provides scheme for waiving of certain amount of tax of the eligible assesees - HELD THAT:- All the applications of the petitioner including application for condonation of delay and application for restoration of appeal shall be heard as soon as possible and disposed of in accordance with law by respondent no.3 latest by 24/3/2020, if the petitioner deposits with respondent no.2 an amount of rupees twenty-five lakhs latest by 23/3/2020. If any amount is determined to be in excess of the amount liable to be assessed to the petitioner under the scheme, same shall be refunded to the petitioner. The auction sale shall stand deferred for a period of eight weeks from the date of order.
Rule is made absolute in the aforesaid terms.
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2020 (3) TMI 946
TP Adjustment - comparable selection - HELD THAT:- Assessee undertook to provide sales support services, software development services as a contract software development services provider, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Disallowance of depreciation under section 40 (a) (ia) - HELD THAT:- It is observed that this tribunal in many cases has analysed applicability of section 40(a)(i) of the act for disallowance of depreciation on such capitalised expenditure and has held that no section 40 (a) (i) of the Act, cannot be applied for claim of deduction under section 32 of the Act. However by way of abundant caution we direct Ld.AO to verify the fact whether assets in respect of which expenditure has been capitalised have been used for business of assessee for a period more than 180 days. AO shall verify all these details in light of arguments advanced by Ld.AR - Accordingly this ground raised by assessee stands allowed for statistical purposes.
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2020 (3) TMI 972
Disallowance u/s 50B - slump sale - Special provision for computation of capital gains in case of slump sale - HELD THAT:- Section 50B is a code in itself only for the determination of cost of acquisition and cost of improvement of the undertaking but not for the computation of capital gains in case of slump sale. The object of section 50B is to simply determine and supply the figure of cost of acquisition and cost of improvement of the undertaking or division, being its net worth along with the decision as to whether the undertaking is a long term or short term capital asset is decided and forwarded to section 48, the computation provision in the later section is activated for determining the income chargeable under the head “capital gains” in accordance with the mode of such computation as prescribed therein.
The modus operandi to compute capital gain from the transfer of undertaking thus provides for reducing the cost of acquisition and cost of improvement of the capital asset from the full value of consideration received or accruing as a result of the transfer of capital asset. Coming back to the nature of capital asset being undertaking, which comprises of “all assets minus all liabilities” of the undertaking, the amount of capital gain means reducing the net worth, being cost of acquisition and cost of improvement of “all assets minus all liabilities” of the undertaking from the full value of consideration of “all assets minus all liabilities” of the undertaking.
In computing the net worth of the undertaking or the division, as the case may be, the benefit of indexation as provided in the second proviso to section 48 has been withheld. The possible reason may be quid pro quo. By extending the benefit of lower rate of taxation on long term capital gain as provided under section 112 to the undertaking as a whole notwithstanding the fact that there may be several assets held by the assessee for a period of not more than 36 months, the Legislature though it to curtain the benefit of indexation to the cost of acquisition and cost of improvement.
Enhancement of slum sale consideration from ₹ 143.21 crores to ₹ 186.58 crores - HELD THAT:- Tribunal noticed that the assessee and Fortis Hospitals Ltd had entered into a business agreement and as per the agreement, excess liability arising during the transition period had to be adjusted from the lump-sum amount of ₹ 186.58 crores. It was further noted by the Tribunal that during the process of transaction, excess liability of ₹ 43.36 crores arose which had to be deducted from the lump-sum amount of ₹ 186.58 crores to arrive at the lump-sum consideration received by the assessee which was ₹ 143.21 crores. Accordingly, the order of the First Appellate Authority was affirmed.
On due consideration, we do not find any error or infirmity in the order passed by the Tribunal. Besides, this is a finding of fact, rather a concurrent finding of fact and revenue is unable to point out any perversity in the conclusion reached. In the circumstances, no question of law, much less any substantial question of law, arises from such finding of the Tribunal.
Treating the capital gain on slump sale as long term capital gain instead of short term capital gain initially held by the Assessing Officer - HELD THAT:- Referring to the decision of the Tribunal in Summit Securities Ltd. [2012 (3) TMI 176 - ITAT MUMBAI] CIT(A) held that if at least one asset was more than three years, then it was long term in nature. It was found that four of the assets were more than three years old. Therefore, capital gain accruing out of slum sale had to be assessed as long term capital gain.
In further appeal before the Tribunal, the above decision in Summit Securities Ltd. was again adverted to where after Tribunal held that there was no need to interfere with the order of the First Appellate Authority as four hospitals of the assessee were owned by it for a period of more than 36 months. Therefore, the capital gain accruing out of the slump sale was nothing but long term capital gain.
No reason to disturb such finding of the Tribunal. Rather we concur with the view taken by the Tribunal which affirmed the decision of CIT(A). The question framed by the revenue, therefore, does not arise for consideration.
Addition u/s 14A read with Rule 8D - HELD THAT:- Section 14A deals with expenditure incurred in relation to income not includible in total income. As per sub- section (1), for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act.
Rule 8D lays down the method for determining the amount of expenditure in relation to income not includible in total income. Tribunal held that assessee had not earned any exempt income during the assessment year under consideration, nor it had claimed any expenditure against any tax free income. Thus, the twin pre-conditions for invoking the provisions of Section 14A read with Rule 8D of the Rules i.e. earning of exempt income and claiming expenditure to earn the same were absent. Therefore, the order passed by the First Appellate Authority was affirmed.
We are in agreement with the view taken by the Tribunal. As rightly held by the Tribunal, assessee had neither earned any exempt income nor claimed any expenditure for earning such exempt income. That being the position, Assessing Officer was not justified in making the disallowance by invoking the aforesaid two provisions. The same was rightly deleted by the First Appellate Authority which order has been affirmed by the Tribunal. Therefore, this question proposed by the revenue also fails.
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2020 (3) TMI 945
Addition u/s 40A - purchase by cash exceeding ₹ 20,000/- on various dates in one bill - exceptional or unavoidable circumstances involved for purchasing the gold and silver - HELD THAT:- Assessee has made payment from April, 2011 to September, 2011 on different dates. Further the case laws relied on by the ld. AR of the assessee is also not applicable in the present case in hand because merely accepting the purchase by the AO, it was duty of the assessee to prove as to whether particular payees have incorporated in their books for computing their profits on the respective sales or not and we also noted from the submission of the assessee that there are contradictory submissions before the authorities below. Considering to the totality of facts and circumstances of the case, the CIT(A) has rightly dismissed the appeal of the assessee.
Assessee could not produce external vouchers and some of the entries were supported in the books of accounts of the assessee by way of internal vouchers - HELD THAT:- Assessee has inserted some entries in books of accounts with the support of some internal vouchers and complete bills and vouchers were not produced by the assessee before the revenue authorities. Therefore, we are in agreement with the findings recorded by the CIT(A).
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2020 (3) TMI 971
TDS u/s 195 - expenditure incurred for service procured for a future business to be carried on by the petitioner in Indonesia - amount which was paid by engaging services of the aforesaid law firm was for the purpose of “making or earning any income from any source outside India” within the meaning of Section 9(1)(vii)(b) - HELD THAT:- To attract exception under Section 9(1)(vii)(b) of the Income Tax Act, 1961, the service should be utilized in India. Any payment by way of fees and technical service to a non-resident by an resident is an income deemed to have accrued or arisen in India and is thus liable to tax. The expression “Fees” for “Technical Service” has been defined in Explanation 2 to Section 9(1)(vii)(b) of the Income Tax Act, 1961.
The expression “Technical Service” and “Consultancy Service” also have not been defined in the Act. The “Technical Service” would include any service in connection with the “engineering service” as it is associated with the service provided by the person technically qualified in the field of engineering. The “Consultancy Service” is again very wide, it can include the service of every nature.
From the scope of work undertaken, it is evident that the Indonesian law firm has provided consultancy services.
In this case, the Indonesian firm has provide “Consultancy Service”. Therefore, I am of the view that it is not open for the petitioner to state that the said service fell within exception provided in Section 9(1)(vii)(b) of the Income Tax Act, 1961 or outside the Explanation 2 to said Section.
If the service utilized by the petitioner abroad was for preexisting business in Indonesia, the petitioner could have legitimately stated that the service provided was utilized for a business of profession carried out outside India or for the purpose of making or earning any income from any source from outside India. There is no source that is existing in Indonesia.
In this case, there was a mere proposal for acquiring the insurance business in privately or Indonesian Insurance Policy. The service of the said law firm was sought for a range of service which are approval consultancy service.
Therefore, the issue as to whether the petitioner was entitled to the benefit of any Clause in the said Double Taxation Avoidance Agreement as notified in Notification No.GSR 77(E), dated 04.02.1988, is left open. It is for the petitioner to file appropriate application before the 2nd respondent within a period of thirty days from the date of receipt of a copy of this order. Writ Petition is dismissed with the above observations
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2020 (3) TMI 970
Transfer of case u/s 127 - whether procedure prescribed under Section 127(2) was not complied ? - transfer assessment jurisdiction from Mumbai to Kochi - agreement between the two designated higher authorities - proposal for centralization of assessment in a group of cases - HELD THAT:- There has to be a positive meeting of mind to the suggested proposed course of action. The dictionary meaning of the expression ‘agreement’ is harmony in opinion or feeling; a manifestation of mutual assent by two or more persons. Therefore, furnishing of a proposal, in our view, may not amount to an agreement of the designated higher authorities as contemplated under clause (a) to sub-section (2) of Section 127 of the Act. In Noorul Islam Educational Trust Vs. CIT [2016 (10) TMI 982 - SUPREME COURT] Supreme Court considered transfer of assessment jurisdiction under Section 127(2)(a). Supreme Court held that agreement between the two designated higher authorities was necessary. Revenue took the stand that there was no disagreement between the two Commissioners. Rejecting this stand, Supreme Court held that absence of disagreement cannot tantamount to agreement as visualized under Section 127(2)(a) of the Act which contemplates a positive state of mind of the two jurisdictional Commissioners.
Before passing the impugned order u/s 127(2) on 09.08.2019, no opportunity of hearing was granted to the petitioner. Hearing was granted after the said decision was taken culminating in the second order dated 09.12.2019. That apart, from the second order it is discernible that there was no agreement between the two jurisdictional Principal Commissioners to transfer assessment jurisdiction from Mumbai to Kochi. Evidently, the procedure prescribed under Section 127(2)(a) of the Act has not been complied with. It is trite that when a statute requires a thing to be done in a particular manner, then it has to be done in that particular manner.
In the light of the above discussions, we are of the view that the decision making process leading to passing of the two impugned orders has been vitiated for non-compliance to the statutory procedural requirements. Consequently, both the orders dated 09.08.2019 and 09.12.2019 passed by respondent No.1 cannot be sustained; those are hereby set aside and quashed.
Since we have set aside the above two orders, all consequential actions shall also stand interfered with.
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2020 (3) TMI 969
Interpretation of Section 44BB and 44DA - income on account of receipts from provision of software enabled solutions to the oil and gas industry along with providing annual maintenance services of the software - categorization of the income of the assessee - whether Royalty or FTS - whether the receipts from the activities rendered by the assessee fall under Section 44BB or fall within the purview of Section 44DA after the amendment introduced by the Finance Act, 2010? - HELD THAT:- If the nature of services rendered have a proximate nexus with the extraction of production of mineral oils, it would be outside the ambit of the definition of FTS. In the instant case, since the nature of services rendered by the Petitioner gets excluded from the definition of “FTS”, in light of what is discussed above, the next logical question that arises for consideration is whether the Petitioner can claim the benefit of Section 44BB. The answer to this question is contingent on factual determination, as the legal position has changed from April 01, 2011. It is now required to be considered whether the receipts in the hands of the assessee qualify to be “royalty” or not? If the answer to this question is in the affirmative, then in that event, the relevant provision would now be 44DA(1).
CIT has also made certain observations that the assessee is not transferring the ownership in the software to the purchaser and is only granting a license to use the same. It has been further held that under Clause (v) of Explanation 2 to Section 9 (1) (vi) of the Act, transfer of all or any rights in respect of any copyright is ‘Royalty’. It has been held that if the software continues to be owned by the licensor, the use thereof would amount to ‘Royalty’.
From the above it manifests that the contracts executed by the assessee are composite contracts and there is no bifurcation with respect to the nature of consideration relating to the services rendered. The assessee has not segregated its activities into supply of software and maintenance/support services. The entire income derived under the contracts was offered for taxation under section 44BB. Revenue in its note of arguments has contended that ‘supply of software’ is ‘royalty’ and ‘other services’ are ‘FTS’ and accordingly Petitioner is liable to pay tax under Section 44DA of the Act.
Whether the services of updating the software/renewal of license or warranty services or maintenance of software are inextricably and essentially linked to the supply of the software and are ancillary services is a question of fact that would require determination after examining the dominant purpose of such contracts. In our opinion, there is no factual clarity on this aspect. We do not find any such distinction/segregation that can be inferred with respect to the receipts in the hands of the assessee under the contracts executed by it, referred above. The CIT being a fact-finding body has failed to give a reasoned order with respect to the nature of income and its subsequent application.
In view of the afore-going discussion, we set aside the impugned order and the matter is remanded to the file of the Ld. CIT to assess the Petitioner’s income and tax payable thereon by first determining the nature of the income/receipts in the hands of the assessee in light of the observations made in this judgment. The CIT, would be required to give a finding of fact on the following aspect:
Whether the income from services provided by the Assessee including the supply of software as well as ancillary services such as maintenance and installation would be covered under the definition of Royalty under the Explanation 2 to section 9(vi) of the Income Tax Act?
If the answer to the above question is in the affirmative, the income would be taxable under section 44DA.
On the contrary, if the answer is in the negative, the income of the assessee would not be taxable under section 44DA but section 44BB [as held in ONGC [2015 (7) TMI 91 - SUPREME COURT] as well as CBDT Circular No. 1862 dated 22.10.1990] since it is excluded from the definition of Fees for Technical Services under the Explanation 2 to section 9(vii) of the Act, being covered under the exception relating to mining and like activities provided in the definition of FTS.
Lastly, though this ground has not been raised by the assessee, however, it is required to be examined whether the assessee’s case would be covered under the India-Australia DTAA. Article 12(3) of the said DTAA provides the definition of Royalty. The Petitioner is granted liberty to claim benefit under the said DTAA before the Ld. CIT if it wishes to do so. Besides, in the event the answer to the question is in the affirmative, the assessee shall also be at liberty to assail such findings on merit, as we have refrained ourselves from determining whether the income of royalty is excluded from the definition under the Act. The writ petition is allowed in the above terms.
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2020 (3) TMI 968
Refund withheld u/s 241A - procedure for refund and withholding of refund - without the conditions mentioned therein being fulfilled - HELD THAT:- We have perused the record, no reasons apart from one mentioned in the order are there. The note of approval of the Princial Commissioner was also perused by us, the only reason mentioned was that there was an amount outstanding of ₹ 5 crores odd against the petitioner and for the said reason, the refund is withheld. Petitioner disputed the fact and submitted that the said demand was set aside. Be that as it may, the pendency of demand of ₹ 5 crores cannot be a ground for withholding almost refund of ₹ 300 crores, as per Section 245, the due amount could be set off against the refund due.
In the absence of any material and reason for forming opinion that refund is likely to adversely affect the revenue withholding cannot be sustained.
Learned counsel for the petitioner relied upon various citations relating to Section 143(1D) but the same would have no direct application in the case in hand as the grievance is against order under Section 241A of the Act.
It would be further pertinent to note here that there is no dispute raised by the respondents that as on date refunds are due to the petitioner as per communication of processing of return under Section 143(1).
Respondents have not disputed that in the return filed by the petitioner for the assessment year 2019-20, the total income declared is more than ₹ 550 crores and refund of more than ₹ 183 crores has been claimed. It cannot be lost sight of that the revenue is not in a position to deny that the petitioner is running its business, the returns being filed are of almost more than ₹ 200 crores, there are no arrears of tax relating to any assessment year and the refund is being claimed every year. There is no allegation that the tax is not being paid or there is any irregularity in filing the returns.
The contention of the respondents to remit the matter back is not found worth acceptance as in the present case, there are no reasons even in the record to support the finding that refund would adversely affect the revenue and the note in approval file that there was demand of ₹ 5 crores pending has been found not good enough to withhold the refund of more than ₹ 300 crores. Even the officials present in Court were not in a position to cite any material or reason with regard to adverse affect of refund on revenue, it would be an exercise in futility to give another opportunity.
In view of the above, writ petition is allowed. The impugned order is quashed. The respondents are directed to issue refund for the assessment year 2017-18 and 2018-19 along with statutory interest not later than within four weeks from receipt of certified copy.
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2020 (3) TMI 967
Deduction u/s 10A - alternate remedy under Section 10A which says that if the assessee is not eligible for deduction u/s 10B then, deduction should be considered under Section 10A of the Act alternatively - HELD THAT:- It is seen that the appeal was admitted on 19.06.2018. When the matter is called today, the learned Counsel for the appellant as well as the learned Counsel for the respondent produced the order copy dated 26.07.2019 passed by the Tribunal in the original appeal by which the appeal itself has been disposed of holding that the claim of deduction under Section 10A for the assessment year 2006-07 is already remitted back. Since the order of the Tribunal has been acted upon, this Court confirms the order [2017 (8) TMI 1597 - ITAT CHENNAI] in [2019 (7) TMI 1587 - ITAT CHENNAI] - Questions of law framed is kept open.
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2020 (3) TMI 944
Denial of natural justice - assessee challenged the exparte order passed by the ld. CIT(A) without affording sufficient opportunity of being heard and without addressing the grounds of appeals on merits - assessee prayed for suitable directions by giving an opportunity of being heard to the assessee - HELD THAT:- Against various additions made in the assessment order passed under section 143(3) r.w.s. 92CA of the Act for the assessment years under consideration, the assessee preferred appeal before the ld. CIT(A). On perusal of the appellate order, we find that while concluding the appellate order, the ld. CIT(A) has not adjudicated the issues on merits based on the facts and circumstances. Accordingly, we set aside the order of the ld. CIT(A) and direct the ld. CIT(A) to adjudicate the issues on merits in accordance with law and to meet the ends of justice, the assessee may be given an opportunity of being heard to present its case. The assessee shall furnish detailed explanation/evidences, as the case may be, to substantiate its claim for adjudication. Further, the assessee is directed to appear before the ld. CIT(A) and cooperate to conclude the appellate proceedings, as has been committed before the Tribunal by its letter dated 25.02.2020. Thus, the ground raised by the assessee is allowed for statistical purposes.
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2020 (3) TMI 943
Exemption u/s 11 - proof of charitable activities u/s 2(15) - HELD THAT:- Objects of the assessee was found to be charitable in nature, for which it was granted registration u/s.12A and also recognized u/s. 10(23C)(vi) vide notification no. 1348 dated 31.10.2007
Assessing Officer without even pin pointing as to which of the activities and the receipt are in the nature of trade and commerce has blindly invoked the amended proviso to Section 2(15) to deny the benefit of Section 11. Nowhere he has pointed out that the motive of the assessee-society was to earn profit and even ignored the fact that assessee society was undertaking of Government of India and all the Trustees are Government Officials and it was constituted to discharge legal obligation set forth for the purpose set out in the memorandum.
In the present case, the activities of the assessee's association cannot be termed either "trade" , "commerce" or "business" simply because the assessee association is receiving some charges or fees for rendering services on noncommercial principles to State Road Transport Undertakings and other concern members for a fee or charges. first proviso to section 2(15) of the Act would have been to be read down and interpreted in the context of section 10 (23C) (iv) of the Act as the context requires such interpretation where assessee is not driving primarily by desired or motive to earn profit but to pursue activities in furtherance of its objects of general public utility then it must be recognized as an institution established for charitable purposes.
The Hon'ble Delhi High Court in the case of Institute of Chartered Accountant of India vs. DGI [2011 (9) TMI 77 - DELHI HIGH COURT] held that the object of the first proviso to section 2(15) of the Act is to include any transaction for a fee or money and the activity would be business if it is undertaken with the profit motive but in some cases this fact must be determinative and the profit motive test should be specified and viewed in the context of section 10 (23C) (iv) of the Act - Decided in favour of assessee.
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2020 (3) TMI 942
Disallowance u/s 14A r.w.r. 8D - as argued AO has not recorded satisfaction - HELD THAT:- AO after examining books of the assessee accepted disallowance made by assessee in respect of interest expenditure. The manner of recording satisfaction u/s 14A r.w.r.8D(2) is subjective. There is no specified method or performa for recording of satisfaction by the AO. If the Assessing Officer has recorded his express satisfaction in whatsoever manner in rejecting assessee’s suo motu disallowance, the condition as envisaged in Section 14A(2) is complied with. We do not concur with the contention of the ld. Authorized Representative for the assessee that the Assessing Officer has not recorded satisfaction before rejecting assessee’s method of computation of suo-motu disallowance. Hence, the first contention of the assessee fails.
No disallowance u/r.8D(2)(ii) is warranted as the assessee is having own interest free funds in the shape of share capital, reserves & surplus and profits more than the investments made - Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] has held that where the assessee is having borrowed funds and own interest free funds, presumption is that the investments are made by utilizing own interest free funds. The same view has been reiterated by the Hon’ble High Court in the case of HDFC vs. DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT] and PCIT vs. Shreno Ltd. [2018 (12) TMI 1145 - GUJARAT HIGH COURT] . Thus, in principle we hold that no disallowance under section 14A r.w.r. 8D(2)(ii) is warranted if, the assessee is having sufficient own interest free funds to cover the investments made. For the purpose of verification of this fact, we deem it appropriate to restore this issue back to the file of Assessing Officer. The Assessing Officer after examining the financial statements of the assessee, if satisfied, that own interest free funds of the assessee are more than the investments made, shall make no disallowance u/r.8D(2)(ii).
Purpose of computing disallowance u/r.8D(2)(iii) only those investments are to be considered which have yielded exempt income - We restore this issue to the file of Assessing Officer for recomputation of disallowance u/r.8D(2)(iii) in line with the decision of Special Bench in the case of DCIT vs. Vireet Investments Pvt. Ltd.[2017 (6) TMI 1124 - ITAT DELHI]
Disallowance u/s.14A vis-a-vis computation of Book Profits u/s.115JB - HELD THAT:- The Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd.(supra) reiterated the view by holding that computation under clause (f) of Explanation 1 to Section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A r.w.r. 8D.
Additional depreciation u/s 32 - 10% on the assets acquired and put to use for less than 180 days in earlier assessment year i.e AY 2009-10 - HELD THAT:- We observe that in the immediately preceding assessment year similar issue had come up before the Tribunal.
The Co-ordinate Bench of the Tribunal after placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of PCIT vs. Godrej Industries [2018 (12) TMI 64 - BOMBAY HIGH COURT] allowed the claim of the assessee. Departmental Representative has not been able to controvert the findings of Co-ordinate Bench of the Tribunal on this issue in assessee’s own case.
Expenditure on Corporate Advertisement - Revenue or capital expenditure - HELD THAT:- We find that similar disallowance of advertisement expenditure was made in assessment year 2009-10. The Co-ordinate Bench of the Tribunal, following the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Asian Paints (India) Ltd. [2016 (11) TMI 258 - BOMBAY HIGH COURT] held the expenditure as revenue in nature. The ld. Departmental Representative has not been able to controvert the findings of then Co-ordinate Bench of the Tribunal in assessee’s own case on the same issue. Following the same reasoning, we hold corporate advertisement expenditure as revenue expenditure
ESOP Expenses - allowable revenue expenses or not? - HELD THAT:- The Tribunal in turn following the order of Co-ordinate Bench in assessee’s own case in [2015 (12) TMI 1825 - ITAT MUMBAI] for assessment year 2008-09 decided on 09/12/2015 allowed assessee’s claim and held he expenditure in respect of ESOP as revenue in nature. No contrary decision has been placed by ld. Departmental Representative. Respectfully following the decisions of Coordinate Bench of the Tribunal in assessee’s own case for the preceding assessment years we hold ESOP expenditure as revenue in nature.
Corporate Guarantee to Subsidiaries - Treating the corporate guarantee given by the appellant for its overseas subsidiary as an international transaction u/s 92 - HELD THAT:- Respectfully following the decision of the Tribunal in assessee’s own case, we direct the AO to compute arm’s length price of transaction as per the direction given by the Tribunal in the above order for A.Y. 2007-08 as held charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the IGIGI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to be at arms length. The difference of 0.1% can be ignored as the rate of interest on which IGIGI Bank, Bahrain Branchhas given loan to AE (i.e. subsidiary company) is at 5.5%, whereas the assessee is paying interest rate of more than 10% on its loan taken with IGIGI Bank in India. Thus, such a minor difference can be on account of differential rate of interest.
Charging of interest under section. 234B,234C & 234D is mandatory and consequential. Accordingly, the ground No. 7 is dismissed sans-merit.
Disallowance of Education Cess and Secondary Higher Education Cess - HELD THAT:-R estore this issue back to the file of Assessing Officer for verification of the assessee’s claim and allow the same accordingly.
Addition on account of CENVAT credit - HELD THAT:- We do not find any infirmity in the findings of CIT(A) in deleting the addition by following the decision of Hon’ble Apex Court in INDO NIPPON CHEMICALS CO. LTD. [2003 (1) TMI 8 - SUPREME COURT] - The Co-ordinate Bench of the Tribunal in assessee’s own case for assessment year 2008-09 has affirmed the finding of CIT(A) in deleting the addition in the past. No material has been brought before us by the ld.Departmental Representative distinguishing facts or the findings of Tribunal on this issue in A.Y. 2008-09. We see no reason to interfere with the findings of CIT(A) on this issue. Accordingly, the same are confirmed and ground No.3 of appeal is dismissed.
Disallowance of provisions made for the leave salary u/s 43B - HELD THAT:- Co-ordinate Bench of the Tribunal while deciding the appeal of the assessee for assessment year 2008-09 decided the issue on merits in turn by placing reliance on Tribunal order for A.Y. 2008-09. The Tribunal allowed relief to the assessee by following the decision of the Hon’ble Apex Court in the case of Bharat Earth Movers vs. CIT [2000 (8) TMI 4 - SUPREME COURT] . Dehors the issue of constitutional validity of clause(f) to section 43B of the Act, the Co-ordinate Bench after considering the issue on merits has deleted the addition. Taking into consideration, entirety of facts we respectfully follow the decision of Tribunal in assessee’s own case for assessment year 2008-09 and confirm the findings of CIT(A) in deleting the disallowance. Consequently, ground No.4 of the appeal by the Revenue is dismissed.
Deduction u/s 10B - CIT(A) holding that the Head Office expenses cannot be allocated to profits derived from 100% export oriented units falling under section 10B and in directing to reduce interest income - HELD THAT:- We find that this issue is already covered in favour of the assessee by the orders of this Tribunal from A.Yrs 2003-04 to 2008-09. We also find that for A.Y.2006-07, the revenue had carried this matter to the Hon’ble Jurisdictional High Court and the Hon’ble Jurisdictional High Court had held that the question raised by the revenue does not give raise to any substantial question of law and accordingly, did not entertain the same. This goes to prove that the order passed by this Tribunal on the impugned issue had attained finality.
Depreciation on goodwill on account of acquisition of Madura Garments Division to be allowed.
Proceedings from sale of certified emission - HELD THAT:- CIT(A) in the impugned Assessment Year granted relief to the assessee by following the order of his predecessor for assessment year 2009-10, which has now been confirmed by the Tribunal. Since, there has been no change in the facts in the Assessment Year under consideration, this ground of appeal by Revenue is dismissed for similar reasons.
Provision for pension liability - HELD THAT:- Since, the assessee got benefit of deduction at the time when provision was created in the Assessment Year 2007-08, the reversal of provision would amount to income of the assessee. If the reversal of provision is not taxed, it would result in double deduction to the assessee. Thus, in view of undisputed facts, the findings of CIT(A) on this issue are reversed. The ground No. 8 of the appeal by Revenue is allowed.
ALP of the corporate guarantee/performance guarantee at 0.5% by following various decision - in the case of Everest Kanto Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] wherein the rate of guarantee commission @ 0.5% was accepted.
Subsidy received under TUF - Revenue or capital receipt - HELD THAT:- The assessee has received subsidy under TUF scheme. The assessee has claimed the subsidy as capital receipt, whereas, the Department treated the subsidy as Revenue in nature. We find that the Hon’ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd. [2019 (9) TMI 1154 - RAJASTHAN HIGH COURT] examined the scheme in the light of various decisions and held the subsidy under TUF scheme as capital in nature. Similar view has been taken by the Hon’ble Calcutta High Court in the case of CIT vs.Gloster Jute Mills Ltd. [2018 (8) TMI 1474 - CALCUTTA HIGH COURT] - Thus, in view of above judgements of Hon’ble High Courts, we see no infirmity in the findings of CIT(A)
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2020 (3) TMI 941
Revision u/s 263 - A.O. failed to take note of the provisions of section 11(2) & 11(3) - A.O. failed to take note of the provisions of section 11(2) & 11(3) and has not carried out the enquiries as per the provisions of section 263 - HELD THAT:- As per the records, it is evident that the show cause notice was issued on 16.3.2018 and the impugned order was passed on 21.3.2018. Therefore, the issue of initiation of the proceedings is concerned, we do not see any infirmity in to the same as the A.O. failed to take note of the provisions of section 11(2) & 11(3) of the Act.
The contention of the assessee is that the provisions of section 11(3) sub clause (d) of the Act speaks that “is credited or paid to any trust or institution registered u/s 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub clause (4) or sub clause (5) or sub clause (6) or sub clause (6A) of clause (23C) of section 10
In the present case, no such sum was credited or paid to any trust or institution. It is contended that amount was merely set apart but not in fact credited or paid to any trust or institution registered u/s 12AA of the Act. We find merit into this contention of the assessee. Therefore, set aside the impugned order and restore the same to the file of the Ld. CIT to decide it afresh after considering the submissions of the assessee and examining the records - Grounds raised by the assessee are allowed for statistical purposes.
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2020 (3) TMI 897
Addition u/s 36(1)(viia) - Provision for standard assets and the provision for country risk as provision for bad and doubtful debts - HELD THAT:- As decided in own case [2019 (2) TMI 1691 - ITAT CHENNAI] admittedly, no question was asked to the assessee during the course of assessment proceedings also with regard to the claim made by it under Section 36(1)(viia), insofar as it concerns the quantum of such claim. This obviously show that there was no application of mind by the Assessing Officer at the time of assessment. Assessing Officer had not come to any conclusion at all having not considered the claim in the light of the conditions set out in Section 36(1)viia of the Act. We cannot say that he had taken a view which was in accordance with law. It is not a case where the Assessing Officer had adopted one of the courses possible in law. Of course, a cryptic order of the Assessing Officer by itself may not show that there was no thought given: by him on a claim of the assessee.
Here there was no enquiry made during the course of assessment proceedings. Therefore, the order which was silent on the claim made by the assessee, and allowing such claim, without any discussion,: will definitely render it erroneous and prejudicial to the interests of Revenue. As held by Hon’ble Apex Court in the case of Malabar industrial Co. Ltd. v. lT [2000 (2) TMI 10 - SUPREME COURT] prejudicial to the interests of the Revenue” is a term of wide import and not confined to loss of tax. An order without application of mind is definitely prejudicial to the interests of the revenue. We are in agreement with Id. CIT that the order of Assessing Officer was insofar as it was prejudicial to the interests of Revenue.No interference is required. - Decided against assessee.
Restriction of relief u/s. 90 to the extent of tax paid in foreign country instead of tax charged on foreign income which is included in total income - HELD THAT:- Issue decided against the assessee by the co-ordinate Bench for the assessment year 2009-10 [2014 (6) TMI 954 - ITAT CHENNAI].
Depreciation on Goodwill - HELD THAT:- As decided in own case [2019 (2) TMI 1691 - ITAT CHENNAI] assessee did not have any goodwill in commercial terms as it has acquired more liabilities than the assets. The Ld.DR’s submission that when there is no goodwill as per the terms of the agreement as well as in reality. When the assessee has not paid any amount for the goodwill, it cannot claim existence of any goodwill. When there is no existence of goodwill, it is not entitled for any depreciation. Therefore, the assessee’s corresponding grounds fail.
Disallowance of contribution to staff welfare fund - HELD THAT:- As decided in own case [2019 (2) TMI 1691 - ITAT CHENNAI] respectfully following it, we reject the corresponding grounds of the assessee.
Recovery in respect of bad debts written off relating to rural branches - HELD THAT:- As decided in own case [2019 (2) TMI 1691 - ITAT CHENNAI] Revenue does not dispute that the assessee had raised its claim of deduction of bad debts relating to the very sums in preceding assessment years. The Assessing Officer did not allow this relief in relevant previous year, when it has recovered the aforesaid debts, the Revenue is again seeking to tax the same. There is no cogent evidence before us to dispute this factual position Moreover, the CIT(A) has cited section 41(4) of the Act whilst granting relief.The Revenue has failed to point out any legal or factual error in CIT(A)’s findings Therefore, the same are affirmed. However, as a matter of caution, we observe that the assessee’s claim of bad debts pertaining to those sums in preceding assessment years, if any, shall be deemed to have been dismissed. With these observations, the Revenue’s ground is rejected.
Depreciation on UPS allowed at 60% instead of 80% - HELD THAT:- As relying in own case [2019 (2) TMI 1691 - ITAT CHENNAI] we reject this ground raised by the assessee.
Depreciation on ATM - HELD THAT:- As relying in own case [2019 (2) TMI 1691 - ITAT CHENNAI] concluded that ATM cannot function without the help of computer and would be a part of the computer used in the banking industry. Reliance was placed by the Tribunal upon the decision of the Delhi Bench of Tribunal in the matter of DCIT v. Global Trust Bank [2011 (1) TMI 1430 - ITAT DELHI] wherein it has been held that ATM was a computer equipment and depreciation @ 60% was allowed. So far as the use of software is concerned, the Tribunal records a fact that the evidence of the use of the software on 31/3/2008 was produced before the Tribunal. Thus, the Tribunal held that depreciation @ 30% on software was rightly claimed.
Deduction u/s. 36(1)(viia) based on advances outstanding and not on incremental advances - HELD THAT:- As decided in own case [2017 (4) TMI 1424 - ITAT CHENNAI] Commissioner Tax (Appeals) has not erred in directing the Assessing Officer to the aggregate average advances outstanding at the end of each month and not the incremental advances granted during each month while computing deduction under section 36(i)(viia)
Allowability of loss on revaluation of trading derivatives - HELD THAT:- As decided in own case [2017 (4) TMI 1424 - ITAT CHENNAI] we uphold the orders of Commissioner of Income Tax (Appeals) on this issue and reject the grounds of Revenue
Disallowance u/s 14A - HELD THAT:- There Is no finding in the assessment order regarding treatment of exempted income yielding assets as stock-in-trade. Hence, in our opinion, if it is treated as stock-in-trade by the assessee, then the claim of assessee is to be allowed in terms of Order of Tribunal [2014 (9) TMI 1179 - ITAT CHENNAI] . Accordingly, this issue is remitted to the file of AO for fresh consideration.
Disallowance of provision for leave encashment - HELD THAT:- As decided in own case [2019 (2) TMI 1691 - ITAT CHENNAI] as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if section 43B(f) is on the statute Book but at the same it would be entitled to make a claim in its returns - thus the addition is sustained.
Depreciation on assets taken over by Bank of Tamilnadu - HELD THAT:- Since the LdCIT(A) has directed the AO to follow the directions of this tribunal decision in the assessee’s own case in [2013 (4) TMI 751 - ITAT CHENNAI] wherein, the ITAT had remitted the matter back to the AO to verify the scheme of take over and to determine whether the provisions of section 2(1B) were applicable, we do not find any error in the order of the Ld.CIT(A).
Applicability of provisions of section 115JB - HELD THAT:- Since, the Ld. CIT(A) has followed and applied the decision of Calcutta ITAT in the case of UCO Bank [2015 (12) TMI 300 - ITAT KOLKATA] and Damodar Valley Corporation [2018 (8) TMI 1363 - ITAT KOLKATA] we do not find any reason to interfere with the order of the Ld. CIT(A) and hence, the corresponding grounds of the Revenue on this ground as well as the other grounds raised by the Revenue with regard to the various additions made in computing book profits are dismissed.
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2020 (3) TMI 940
Rejection of books of account - Correct method of accounting - AO invoked the provisions of section 145(3) rejected the cash system of accounting and directed adoption of the accrual system of accounting - activities of the Assessee were not carried forward from one accounting year to the next and A.O. thus, held that the accounts should be in the nature of ‘venture account’ and the correct profitability could be arrived at by following the accrual method of accounting only - whether correct profit/s of the assessee can be deduced or not from the books of account which the assessee has maintained on cash basis of accounting? - HELD THAT:- As relying on own case [2019 (7) TMI 528 - ITAT DELHI] cash method of accounting, which is followed by the assessee consistently and also for the impugned assessment year, cannot be rejected and the income of the assessee should not be computed on mercantile method of accounting. Accordingly, ground number 2 of the appeal of the assessee is allowed.
Cash system of accounting of the Assessee and directed the assessee to follow the accrual system of accounting - The business of any company cannot be said to be defunct until and unless the company has been wound up or has surrendered the Certificate of Incorporation in accordance with law. The status of the assessee company as per the MCA website is, undisputedly, active till date. Therefore, the company cannot be considered as a defunct company. Since, the assessee company is active, it has to incur some expenditure to maintain its daily operations and accounts such as salary to staff, audit fees, legal and professional fees, rent, repairs and maintenance, bank charges, professional tax, interest on loan taken in earlier years, depreciation, etc. Such expenditure cannot be disallowed only on the ground that there was no business activity during the year especially in the case of companies. It is also seen that the AO has nowhere examined the expenses claimed by the assessee in the accrual system of accounting. He has not cared to discuss and examine any of the expenses claimed by the Assessee on accrual basis but has simply disallowed the said expenses and added back to the income of the assessee without carrying out the necessary enquiry and verification. In our considered view, it was the responsibility of the assessing officer to verify the expenditure individually head wise.
Instead of doing so the AO assessed income on an overall basis and disallowed the entire expenditure. The A.O., to our mind, has grossly erred in understanding the concept of rejection of the books of the Assessee, the concept of adoption of a particular method of accounting and also the concept of disallowance of expenses. The action of the A.O. in rejecting the Cash system of accounting, as followed by the Assessee, and his subsequent computation of the income is grossly incorrect and is, therefore, rejected. - Decided in favor of assessee.
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2020 (3) TMI 975
Grant of waiver of interest and/or penalty - company in liquidation - whether for the purpose of grant the Official Assignee should approach only the Central Board of Direct Taxes or whether the Official Assignee can get appropriate orders under Section 7 of the Presidency Towns Insolvency Act, 1909 or not? - HELD THAT:- Petitioner (s), on instructions issued by the Department of Revenue, Ministry of Finance vide F.No. 390/Misc./116/2017-JC dated 22.08.2019, seeks permission to withdraw these special leave petition(s) along with pending applications therein due to low tax effect.
Permission granted, subject to just exceptions.
The special leave petition(s) and pending applications are dismissed as withdrawn, leaving question(s) of law open.
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2020 (3) TMI 939
Maintainability of appeal - low tax effect - monetary limit - HELD THAT:- We find that CBDT vide circular No.17/2019 in F.No.279/Misc.142/2007- ITJ(Pt) dated 8th August, 2019, has further liberalized its policy for not filing appeals against the decisions of the appellate authorities in favour of the taxpayers, wherein tax involved is below certain threshold limits, and announced its policy decision not to file, or press, the appeals, before this Tribunal, against the appellate orders favourable to the assessee in the cases in which overall tax effect, excluding interest except when interest itself is in dispute, is ₹ 50,00,000/- or less.
This circular, only enhances the monetary limits and gives further relaxation. The old circular, beyond any dispute or controversy, categorically applied to the pending appeals as on the date of issuance of circular.
The circular dated 8th August 2019 is not a standalone circular. It is to be read in conjunction with the CBDT circular No. 3/2018 (subsequent amendment thereto), and all it does is to replace paragraph nos. 3 and 5 of the said circular.
The Hon'ble Supreme Court in the case of KESHAV POWER LTD. [2019 (8) TMI 811 - SC ORDER] has also applied the Circular No.17/2019 dated 08.08.2019 and has dismissed the appeal holding as since the tax effect involved in the matter is less than ₹ 2 crores, going by the latest circular issued by the CBDT, we see no reason to interfere in this matter. The Special Leave Petition is dismissed, leaving all the questions of law open" - Appeal filed by the Revenue is found to be non-maintainable and hence, dismissed.
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2020 (3) TMI 938
TDS u/s 195 - Disallowance of reimbursement of demurrage charges u/s 40(a)(ia) - whether the status of a person making the expenditure has to be a non-resident before the provision to section 172 of the Act can be invoked ? - HELD THAT:- On a perusal of the order of the Tribunal we find that this issue has been decided in favour of the assessee by the Coordinate Bench following the decision of the Hon'ble Bombay High Court in the case of the CIT v. Dempo and Co. Pvt Ltd. [2016 (2) TMI 308 - BOMBAY HIGH COURT] Once section 172 falls in Chapter XV titled as Liability in Special Cases – Profits of Non-residents, then section 172 is referable to section 44B. Both provisions open with a non-obstante clause and whereas section 44B enacts special provisions for computing profits and gains of shipping business in case of non-residents section 172 dealing with shipping business of non-residents is enacted for the purpose of levy and recovery of tax in the case of any ship belonging to or chartered by a non-resident operated from India. These sections and particularly section 172 devise a scheme for levy and recovery of tax. The sub-sections of section 44B denote as to how the amounts paid to or payable would include demurrage charges or handling charges or any other amount of similar nature. The sub-sections of section 172 read together and harmoniously would reveal as to how the tax should be levied, computed, assessed and recovered. Therefore, there is no warrant in applying the provisions in chapter XVII for collection and recovery of the tax and its deduction at source vide section 195. - Decided in favour of assessee.
TDS u/s 192 - Reimbursement of salary cost which was on account of availing personnel services from its AE’s who were sent to India at secondment - HELD THAT:- As perusing the orders of the authorities below and the decision of the Coordinate Bench in assessee's own case for the A.Y. 2010-11 [2019 (10) TMI 972 - ITAT MUMBAI] we find that the Coordinate Bench of the Tribunal dismissed appeal of the revenue and sustained the order of the Ld.CIT(A) in deleting the disallowance of expenses relating to reimbursement of salary cost as noticed that the employees who were serving in India or deputed in India had already deducted tax at source u/s 192 of the Act. The provision of TDS is not applicable on reimbursement of deputation expenses to foreign AE. The CIT(A) has relied upon the decision in the case of Burt Hill Design (P) Ltd. [2017 (3) TMI 1515 - ITAT AHMEDABAD] . The facts are not distinguishable at this stage. No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage - Decided against revenue.
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2020 (3) TMI 974
Privilege fee - whether is in the nature of revenue expenditure and deductible expenditure under Section 37(1)? - Excise duty addition to closing stock - applicably of provisions of section 145A - Addition on account of depositing the PF/ESI payment beyond the prescribed time - HELD THAT:- Petitioner on instructions issued by the Department of Revenue, Ministry of Finance vide F.No.390/Misc./116/20l7-JC dated 22.08.2019, seeks permission to withdraw these special leave petitions along with pending applications therein due to low tax effect.
Permission granted, subject to just exceptions.
The special leave petitions and pending applications are dismissed as withdrawn, leaving question(s) of law open.
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2020 (3) TMI 937
Penalty u/s 271AAB - Assessment u/s 153B - Addition u/s 69 r.w.s 115BBE - 30% of undisclosed income of ₹ 10.00 lacs due to the reason that return of income filed by the assessee was belated beyond the time prescribed provided u/s 139(1) - income surrendered by the assessee - HELD THAT:- There is nothing either in the proceedings u/s 132 or in the statement recorded u/s 132(4) of the Act regarding unaccounted expenditure incurred by the assessee on construction of house. There is no mention of the actual construction of the house by the assessee or the timing the construction period or completion of construction work. Even the alleged expenditure not recorded in the books of account is not based on any documentary evidence or even on physical verification of the Electrical items as well as furniture and fixture installed in the house of the assessee.
When the said income is not represented by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions then even if the assessee has surrendered a sum of ₹ 10.00 lacs as unaccounted expenditure, the same would not fall in the ambit of undisclosed income as defined in explanation to Section 271AAB . A bare surrender of income not representing the money, bullion, jewellery or other valuable article or thing or any entry in the books of account will not be regarded as undisclosed income for the purpose of levy of penalty u/s 271AAB.
In the case in hand, it is clear from the records that the assessee in his statement recorded u/s 132(4) of the Act has made a surrender of ₹ 10.00 lacs based on said seized materials marked as Annexure A-2 Page 60 to 62 which is Electric Plan and Site Map of the house. Therefore, in the absence of any undisclosed income revealed by said sized materials, the income surrendered by the assessee cannot be said to be undisclosed income for the purpose of Section 271AAB - Hence, when income surrendered by the assessee does not fall in the ambit of undisclosed income as defined in Section 271AAB the same would not attract the levy of penalty u/s 271AAB of the Act. - Decided in favour of assessee.
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2020 (3) TMI 936
Disallowance u/s 14A r.w.r. 8D - claim of the assessee is that when sufficient own funds were available for making investment in the shares, then there cannot be any disallowance towards expenditure - HELD THAT:- Details of the date of investments in the shares and availability of funds on the date of investments are not available on record. Therefore, as submitted for the assessee, the matter needs to be re-examined by the AO.
Orders of both the authorities below are set aside and the entire issue of disallowance made under Section 14A read with Rule 8D is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the actual dates of investments made in the shares, availability of the assessee’s own funds on the date of investments and the investment which earned the exempted income and thereafter decide the issue afresh in accordance with law, in the light of the judgment of Apex Court in Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] after giving a reasonable opportunity to the assessee.
Applicability of Section 14A and the expenditure for earning exempted income. The issue raised in the cross-objection is also remanded back to the Assessing Officer for reconsideration.
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2020 (3) TMI 935
Disallowance u/s 14A r.w.r. 8D - whether no tax- free income has been earned by the assessee, and also, there are no fresh advances - HELD THAT:- As both sides have agreed at the time of hearing before us, that all the relevant facts required for adjudicating the issues in dispute are presently not available on record and also; both as sides have submitted that the issues in dispute in both the appeals should be remanded to the file of the Assessing Officer for fresh order in accordance with law, having regard to the relevant facts and circumstance; after taking into consideration the aforesaid precedents. In view of the foregoing, and as both sides have agreed at the time of hearing before us, we set aside the impugned appellate orders dated 01.04.2014 and 20.01.2015 of the Ld. CIT(A) and restore the issues in both the appeals to the file of the Assessing Officer for passing fresh order as per law after considering the aforesaid precedents namely order dated 08.02.2016 of Co-ordinate Bench of ITAT, Delhi in assessee’s own case for Assessment Years 2007-08 & 2008-09 [2016 (3) TMI 365 - ITAT DELHI], Principal Commissioner Vs. DLF Home Developers Ltd. [2019 (1) TMI 1536 - DELHI HIGH COURT] , Principal Commissioner Vs. IL & FS Energy Development Company Ltd. [2017 (8) TMI 732 - DELHI HIGH COURT] and Maxopp Investment Ltd. vs. Commissioner of Income Tax [2018 (3) TMI 805 - SUPREME COURT] - Appeal allowed for statistical purposes.
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2020 (3) TMI 934
Deduction u/s 35AD disallowed - relevant certificate has been granted in accordance with the Guidelines issued by the Ministry of Tourism, on the assessee, obviously, having fulfilled the requisite conditions for the grant of classification as a four-star hotel, despite the fact that the certificate was issued in the subsequent assessment year and was for a specific period of five years from 29/1/2018 to 28/1/2023, as above - classification for three-star category having been obtained by that assessee only during the subsequent assessment year, i.e., assessment year 2012-13, the year under consideration being assessment year 2011-12 - HELD THAT:- Hon'ble Madras High Court, in 'Ceebros' [2018 (12) TMI 333 - MADRAS HIGH COURT] has held that section 35AD(5)(aa) of the Act does not mandate that the date of the certificate should be with effect from a particular date; that therefore, the provision, i.e., section 35AD, which is obviously to encourage establishment of hotels of a particular category, should be read as a beneficial provision.
No decision contrary to 'Ceebros' (supra), which is directly on the issue and on exactly similar facts as those doing the rounds in the case before us, has been cited before us.
The "specified business" has also not been disputed to be that of building and operating a new hotel of a two-star or above category, in keeping with the provisions of section 35AD(5)(aa) [which was the provision under consideration in 'Ceebros' (supra) too]. Then, the incurrence of expenditure for the construction of The Gateway Hotel by the assessee has also not been disputed as having been done prior io the commencement of the operations of the business. Further, neither of the authorities below has made out that the amount was not capitalized in the books of account of the assessee. Rather, the taxing authorities have accepted the income offered to tax by the assessee, it is the deduction claimed under section 35AD, which has been disallowed.
It is, thus, seen that none of the conditions of the provisions of section 35AD of the Act has been violated at the hands of the assessee.
The provisions of this section stand explained in the Memorandum explaining the provisions of Finance Bill, 2010, wherein, it has been noted that "In view of the high employment potential of this sector, it is proposed to provide investment linked incentive to the hotel sector, irrespective of location, under section 35AD - The investment-linked tax incentive allows 100 per cent deduction in respect of the whole of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the "specified business" during the previous year in which such expenditure is incurred." Therefore, it is quite evident that it is an incentive provision by way of section 35AD, which was introduced in the statute book.
(i) The ld. CIT (A) has erred in confirming the assessment order in refusing to allow the deduction claimed under section 35AD of the Act.
(ii) The certificate of classification issued in favour of the assessee has not been doubted.
(iii) The date of issuance of this certificate/the period for which the classification has been granted, is irrelevant for the grant of deduction under section 35AD of the Act.
(iv) 'Ceebros' (supra) is categorical in this regard.
(v) No decision contrary to 'Ceebros' (supra) has been cited before us.
(vi) The ld. CIT (A) did not have the benefit of 'Ceebros' (supra) while passing the order under consideration, 'Ceebros' (supra) having been rendered post-the passing of the ld. CIT (A)'s order.
(vii) The facts with regard to the certificate having been granted in the year subsequent to the year under consideration, are not of any detriment to the assessee, in keeping with 'Ceebros' (supra).
(viii) Even if, arguendo, these facts were to be accepted, they do not detract from the settled position [as per 'Ceebros' (supra)], that once the conditions of section 35AD are fulfilled, the section, per se, not requiring any specific date of operation, the deduction thereunder cannot be disallowed.
Finding the grievance of the assessee by way of Ground No.1, to be justified, we accept the same. The disallowance of deduction claimed under section 35AD of the Act, as upheld by the ld. CIT (A), is, therefore, deleted.
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2020 (3) TMI 933
Deduction u/s 80P(2)(a)(i) eligibility - Society has accepted deposits from non-members by opening savings bank account, FD Account and R.D. Account of non-members AND has staked surplus funds in the long-term deposits with Co-operative Bank, Sirhind and had earned interest on such deposits - HELD THAT:- In the facts of M/s Totgar Co-op Sale Society Ltd.[2010 (2) TMI 3 - SUPREME COURT] the assessee was a Co-operative Society engaged in providing credit facilities to its members and marketing the agricultural products of the members. The interest earned by the assessee-society by investing the surplus funds in short-term deposits and government securities was held to be taxable under the head "income from other sources" u/s 56 of the Income Tax Act and the Apex Court affirmed the principle that it cannot be said to be attributable to the activities of the society and hence did not qualify for deduction u/s 80P(2)(a)(i) of the Act.
The Apex Court affirmed the principle that income in respect of which deduction is sought, must constitute the operational income and not other income which accrues to the society. Accordingly, the arguments de hors facts that the decision of the Apex Court in the case of M/s Totgar Co-op Sale Society Ltd. is not applicable, we unambiguously hold is incorrect and of no relevance whatsoever. Its non-applicability to the facts of the case has to be established by the assessee.
The reasons for applying the said decision to the facts of the present case, in the light of the specific reasons are set out by the AO succinctly. On consideration of facts as available on record, we find that prima facie they do not appear to be incorrect, however since the parties argue that the by-laws are not discussed which shortcoming we also notice on record and the request for remand has been made. Thus, the said exercise has to be done by the assessee in terms of the by-laws of the assessee-society wherein the assessee has been required to explain its acts of collecting deposits from non-members on which interest is being paid and address its arguments on whether it is a banking co-operative society, licensed to do so which stand has not been clarified by the assessee-society since 29.04.2019, despite the fact that the appeal came up for hearing thereafter on 10.06.2019, 07.08.2019 and finally on 26.09.2019. In the circumstances, agreeing to the request of the parties, the matter is remanded back with the aforesaid directions. Appeals of the assessee are allowed for statistical purposes.
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Benami Property
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2020 (3) TMI 932
Prohibition of Benami Property Transaction - provisional attachment of the immovable property - Ld. Single judge observed that it is not a fit case to call for interference as the provisional attachment is only an arrangement to preserve the property until the authority completes the proceedings under the Act - HELD THAT:- No further proceedings have been filed from the part of the Appellant disputing the correctness or otherwise of Annexures R/4 and R/5. On going through the above documents, it is seen that the version of the Respondents that, the proceedings were pursued after getting approval in terms of sub-Section 3 of Section 24 is established by the Respondents and as such, this Court does not find any merit in the appeal. It stands dismissed.
Respondents referred to the wild allegations levelled against the authorities/department, particularly, under paragraph 9.6 of the writ petition alleging 'corruption', without producing any material to substantiate it - no materials have been produced from the part of the Appellant in support of the allegations levelled against the Respondents therein. Reckless allegations, when raised without testing the correctness, are liable to be acted upon seriously. However, because of the magnanimity expressed on the part of the learned Standing counsel, alerting the writ Petitioner/Appellant of the consequences and to be careful in future. We leave it there and no further order is being passed in this regard.
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2020 (3) TMI 931
Benami transaction - right of the plaintiff to sue - Whether a registered Kobala executed by one Kusum Kumari Gupta, original plaintiff No.3, since deceased in favour of one Maya Gupta is a Benami transaction or not? - even assuming that the said transaction was a Benami transaction, whether a suit for declaration to such effect is barred under Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 - HELD THAT:- In the instant case, it is specifically pleaded by the plaintiffs/appellants that the original defendant Smt. Maya Gupta made an application in the local Municipality in the year 1970 to mutate her name in respect of the suit property. The said application was rejected by the Municipality on 22nd January, 1970. Immediately thereafter, the plaintiffs filed the suit. Thus, the Trial Court correctly held that right of the plaintiff to sue accrued only when the defendant tried to infringe the plaintiffs’ title over the suit property on the basis of the said two deeds.
As already held that this Court cannot re-appreciate the evidence on the factual aspect of motive of the parties to execute such deeds, accumulation of consideration price and payment of the same and other relevant factors necessary to hold a transaction Benami or not. Suffice it to say that the learned Trial Judge in great detail held that though the purported deeds of sale were executed on 11th June, 1957, all along the said deeds were in custody of the vendor.
The suit property was recorded in the record of Kanchrapara Municipality in the name of the vendor. The vendor used to collect rent from the tenants. The electricity in the suit property stood in the name of the vendor. The vendor performed all acts incidental to ownership of the suit property in spite of execution of the said two deeds of sale dated 11th June, 1957. All such factual circumstances are recorded by me only to show that the learned Trial Judge had dealt with the issues of fact raised by the respondents and again such finding, the respondents have not filed any cross-objection before the learned First Appellate Court.
The plaintiffs filed the suit for declaration that the deeds of sale dated 11th June, 1957 are Benami transaction. They pleaded in the plaint that they are in possession of the suit property. The defendant No.1 Smt. Maya Gupta is in possession of one room of the suit property as a licensee. It is, of course, an executive decision of the appellants as to whether they would allow the respondents to occupy one room in the suit property as a licensee or they would recover possession of the suit property by revocation of license. Under such circumstances, the suit cannot be said to be barred under the Proviso of Section 34 of the Specific Relief Act. Moreover, no such question was raised as the substantial question of law by the respondents in the instant appeal. So this Court has no scope to decide such question in the instant appeal.
On the question of law formulated in the instant appeal, have no other alternative but to hold that the Hon’ble Supreme court in R. Rajagopal Reddy [1995 (1) TMI 67 - SUPREME COURT] held that Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 is not retrospective in operation and does not apply to pending suits already filed and entertained prior to coming into force in Section 4.
Substantial question of law is necessary in favour of the appellants. Accordingly, the appeal is allowed on contest without costs.
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2020 (3) TMI 899
Benami Transaction - acquired property - as alleged that the said property was benami under Section 2(8) of the said Act of 1988, as amended - alleged violation of Section 2(9)(D) thereof - alleged that the consideration for this transaction was provided by “non-traceable fictitious/shell entities having no real business”, rendering the transaction benami - HELD THAT:- Mr. Ankit Anandraj Shah, learned counsel accepts notice on behalf of respondent.
In the meantime, the operation of the impugned order insofar as it holds that 2016 amendment of the Benami Transactions Act, 1988 was prospective in nature, shall remain stayed.
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2020 (3) TMI 930
Benami transaction - suit for injunction simpliciter - only argument of the counsel for the defendant No.3/counter-claimant Ravinder Khanna is that on filing of the present suit, a fresh cause of action has accrued to the defendant No.3/counter-claimant Ravinder Khanna to file the Counter-Claim and that the suit in which recording of evidence stands concluded, be called to this Court - HELD THAT:- Benami transaction' in the Act, prior to its amendment, was described as 'any transaction in which property is transferred to one person for a consideration paid or provided by any another person'.
The amended Act defines 'benami property' as meaning any property which is the subject matter of a benami transaction and describes a 'benami transaction' as meaning a transaction or an arrangement "where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration.
Defendant No.3/counter-claimant Ravinder Khanna is prohibited by law from enforcing any right in respect of the subject property held benami, against defendant Nos. 1&2 in whose names the said property is held as well as against other parties who are the heirs of defendant No.1 Prem Prakash Khanna, who has since died.
As far as the plea, of the defendant Nos. 1&2 holding the property in trust or for the benefit of the defendant No.3/counter-claimant Ravinder Khanna is concerned, it has been held in that though the parent may be a trustee of a minor son but not of a major son and thus the question of the transaction being within the exception to benami does not arise. Even otherwise, no particulars of the defendant Nos. 1&2 standing in any fiduciary capacity to the defendant No.3/counter-claimant Ravinder Khanna are disclosed.
Counter-Claim, on the averments therein, does not disclose any cause of action or entitlement of the defendant No.3/counter-claimant Ravinder Khanna to obtain a declaration of being the real and/or benami owner of the property for partition of which the suit is filed.
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Customs
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2020 (3) TMI 926
Smuggling - Gold - discharge of onus under Section 123 of the Customs Act - HELD THAT:- The appellant, Mr. Dinesh Bansal, who was in possession of the 59 gold bars, from the very time of interception and seizure, in his statement recorded under Section 108, soon thereafter, he has stated that he has purchased the gold bars from M/s.Lawat Jewellers Pvt. Ltd., Jaipur on the same day. This fact has been corroborated by Shri Suresh Soni, Managing Director of M/s.Lawat Jewellers Pvt. Ltd., recorded on the very next day i.e. 11.09.2002 before S.I.O., DRI, wherein he affirmed having sold the 59 gold bars in question to the appellant, Shri Dinesh Bansal also produced the invoices. He also stated that the gold bars were delivered by their employee, Shri Parmeshwar in the premises of the bank itself (when M/s. Lawat Jewellers took delivery of 150 gold bars from the Corporation Bank, Jaipur at about 1.15 p.m.) on 10.09.2002.
Sofar, the issue of sale invoices in the name of Shri Pradeep Kumar (brother of Shri Deepak Bansal), cogent explanation was given by M/s. Lawat Jewelers, as they did not know the proper name of Shri Deepak Bansal and they only knew his nick name ‘Vicky’, they issued invoice in the name of his brother, who was also purchasing gold from them and the two brothers were operating their business from common premises at Kucha Mahajani, Chandani Chowk, Delhi. The driver of the Tata Sumo Vehicle has also corroborated the version of Deepak Bansal of purchase of gold bars from Jaipur.
So far further investigation done by the Department resulted into the receipt of purported letter dated 10.12.2002 by fax from CSFB, Zurich by Corporation Bank, Mumbai. We find that this letter on the one side states that the CSFB has been supplying South African Origin gold from Rand Refinery and Harmony Refinery and thereafter, have vaguely stated that CSFB did not have stock of South African gold from July, 2002 and has supplied ‘Credit SUISSE’ brand gold from their own mint in Switzerland. This letter only creates a presumption, but is not conclusiveit is evidently clear that the subsequent change of the statement of the bank officers is under undue influence exerted by the Revenue Officers. Further, the said letter dated 10.12.2002 issued by CSFB through fax, is not a reliable piece of evidence, as it does disclose the context under which it is issued. Further, the person issuing the said letter on behalf of the CSFB has not been examined nor the authenticity of the fax message is established, under known process of law.
The appellant, Shri Deepak Bansal has proved the source of acquisition and also the source of the source of acquisition. However, the mandate of Section under Section 123 (2) of the Customs Act requires a person in the possession of gold bars, having foreign markings, to only prima facie establish the proof of licit acquisition, and is not require to prove source of source - Also, Revenue has not been able to establish its allegation that the seized gold is different from the gold delivered by the Corporation Bank on 10.09.2002 to M/s. Lawat Jewelers.
Appeal allowed - decided in favor of appellant.
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2020 (3) TMI 929
Maintainability of appeal - availability of an alternate remedy - final assessment is yet to be completed - HELD THAT:- The Division Bench of this Court in the case of MERCEDES BENZ INDIA PVT. LTD. VERSUS UNION OF INDIA [2010 (3) TMI 300 - BOMBAY HIGH COURT] has stressed upon the Tribunal the need to give deference to the decisions of its co-ordinate benches - Since the Tribunal has dismissed the appeal as premature and that prima facie we find that in identical circumstances the Tribunal has taken a different view, we are inclined to entertain this petition, more particularly in the law laid down by this Court in the case of Mercedes India Ltd. However, before concluding finally on the issue, we find that it will be appropriate to let the Tribunal examine the above cited decisions rendered by the co-ordinate benches and then take an informed decision whether the appeal is premature or otherwise.
The appeal is restored to the file of the Tribunal. The Petitioner will place the compilation of the above decisions and any other decisions for consideration of the Tribunal on the question of maintainability of the appeal. The Tribunal after considering these decisions will take a decision regarding maintainability of the appeal.
Petition disposed off.
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2020 (3) TMI 925
Misdeclaration of imported goods - Bitumen - Country of Origin - It was alleged that the appellants misdeclared country of origin; GSEC (appellant) & Gulf Petrochem were related parties; appellants misdeclared value, to evade payment of Customs Duty and that Shri Anand Mathur, Shri Nikharv Hashmukh Shah, Shri S K Gowri Shankar and Shri Sachin Saxena abetted with GSEC Ltd. to undervalue the said goods - conduct of search and drawing of Panchnama have not been followed - cross-examination of Panch witnesses were not allowed - principles of natural justice.
Procedures to the conduct of search and drawing of Panchnama - HELD THAT:- The electronic evidence discussed relied upon in the show-cause notice were not obtained as per the procedure laid down under Section 65B of Indian Evidence Act, 1872 or Section 138C of Customs Act, 1962, as rightly submitted by the counsel for the appellants. However, this being a case of tax evasion, it would be beneficial to examine the evidence contained in the emails and to see if the Department has established the case of undervaluation by reliable evidence.
Valuation - rejection of transaction value - allegation is that the appellants and their overseas suppliers are related and therefore the transaction value declared requires to be rejected - HELD THAT:- The learned Commissioner has dealt the issue at length and came to the conclusion that the appellants and the overseas suppliers are not related. However, learned Commissioner sets out a case on the basis of the contents in the emails - the learned Commissioner has arrived at the conclusion that there was under valuation to the extent of USD 120 PMT. Learned Counsel submits that price shown at 625 USD PMT was an offer price; Shri Anand Mathur informed Gulf Petrochem, vide mail dated 9.5.11, that they did not agree to the price and the same was not commercially viable. She submits that as per prevailing practice 15-20% discount was given and they got 20% discount. Though Shri Rutul Shah in his statement dated 13.2.2012 stated that 625 USD was Proforma price and value declared to customs was USD 505; however he did not accept that there is undervaluation; Shri Nikharv Shah in his statement dated 16.2.2012 said he was unaware of difference of USD 120 in the transaction.
Redetermination of the assessable value - HELD THAT:- There is no evidence placed to show that there has been a flow-back of money from the importer to the overseas suppliers. Under these circumstances, we find that the prices declared by the appellants need to be considered as assessable value. We find that in the absence of evidence to effect that there is no flow-back, declared prices cannot be rejected.
Misdeclaration of country of origin - circular of RBI has been violated - HELD THAT:- On going through the records we find that at least in two instances, as observed in the OIO, COO was declared to be Iran. However, the OIO is silent on action, taken by the department in respect of those consignments, other than provisional assessment. The OIO is silent if any action, such as seizure or informing RBI etc, taken in respect of such consignments. The OIO doesn’t link the misdeclaration to the redetermination of value also. Therefore, the department, though established the misdeclaration, did not proceed further to discuss the consequences and penal action, thereby supporting the counsel’s contention that it has no bearing on the case.
The department was well within its right to seize the goods for such misdeclaration and impose penalties under Section 112 of Customs Act, 1962, notwithstanding the fact that the appellants had nothing to gain financially by such an action as there was no differential duty involved. We find that mens rea is not an essential prerequisite for action under Section 111(m) and Section 112(a) of the Customs Act, 1962.
Appeal allowed - decided in favor of appellant.
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2020 (3) TMI 928
Validity of Rule 2(vi)(a) made vide Notification dated 1st March, 2019 - vires of Section 1(2) of the Environment (Protection) Act, 1986 - HELD THAT:- The writ-applicant has to pay the ground rent, detention charges, demurrage charges etc. In such circumstances, a request is made that the writ-applicant may be permitted to atleast shift the 05 containers from the Mundra Port to his Industrial Unit of course subject to the condition that the writ-applicant shall not utilize the goods in any manner till the final adjudication of this litigation.
Let Notice be issued to the respondents, returnable on 30/01/2020.
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2020 (3) TMI 924
Maintainability of appeal - non-compliance with the direction of pre-deposit - Section 129E of the Customs Act, 1962 - HELD THAT:- The Commissioner (Appeals) has not decided the appeal on merit but dismissed the appeal for non-compliance with the provisions of Section 129E of the Customs Act, 1962. Before this Tribunal, the appellant has deposited the directed amount vide order of this Tribunal dated 08.04.2014. Since the issue has not been considered on merit by the learned Commissioner (Appeals), the matter is remanded to the learned Commissioner (Appeals) to decide the case on merit.
Appeal allowed by way of remand.
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2020 (3) TMI 923
Condonation of delay in filing appeal - sufficient ground for delay or not - HELD THAT:- The order as has been challenged vide the impugned appeal is acknowledged to have been received by the party within 10 days of the day it was announced. The officer, who is mentioned to have been responsible for the impugned matter, no doubt, had left appellant’s job on 9th July, 2019, but applicant is silent about the date of joining of the person, who succeeded him. Otherwise also after the day the person left there still was sufficient time with the appellant to make necessary arrangements and to avoid the impugned delay. Thus, we are of the opinion that there is absence of due diligence on part of the applicant.
The another ground taken about the death in a family is also opined to not to be the sufficient cause for explaining the impugned delay as the death was post expiry of the period of limitation. Admittedly the order was received on 21st June, 2019. The period of limitation to file the impugned appeal, therefore, stands expired on 20th September, 2019. Hence, the same ground is also not opined sufficient cause for the relief sought vide the impugned application.
Delay cannot be condoned - COD application dismissed.
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2020 (3) TMI 922
Entitlement for continuation of exemption from duties of customs - import of aircraft against undertaking to be compliant with the condition of operating ‘non-scheduled (passenger) service’ even though the equipment was deployed on charter hire - HELD THAT:- Though we concur with the Learned Authorised Representative that import of aircraft by corporate entities for their own use is not the intent of the exemption notification, we are not entirely convinced that peripheral circumstances such as the absence of published tariff, non-issue of tickets and carriage of employees of associated companies, can be construed as intention for own use. The respondent herein is a person recognised in law as distinct from the associated companies and we perceive no restriction in the notification on carriage of employees of importer, employees of connected undertakings or any other person as travelling public; there is no allegation of free passage to anyone or that the respondent herein was made to bear the cost of such travel. That alone would be amenable to the conclusion of the aircraft having been imported for own use.
Both scheduled and non-scheduled air transport services are clearly not intended for own use but to contend that the aircraft have been so used merely owing to evaluation of usage through the prism of revenue maximising would have consequences for all airlines and other air services operating in the country. It is the conditions of the exemption notification, and not a purported intent, that should be complied with and it is those conditions alone that can be tested for compliance. Our independent findings on merit are not controverted by the grounds of appeal or oral submissions, either on fact or by case law, and stand reinforced.
The harmonious construct of the finding on obligation of performance, the lack of acceptability of the sole decision relied upon by Revenue, the consistent stand adopted by the Tribunal in all other decisions, the renewal of the permit to operate as ‘non-scheduled passenger service’ by the competent statutory authority and the clarifications issued by that authority, in general as well as to the Commissioner of Customs, leaves us with no option but to dismiss the appeal of Revenue.
Appeal dismissed.
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2020 (3) TMI 927
Smuggling - Gold - confiscation of vehicle - HELD THAT:- It can very well be seen that it was based on the affidavit of the Commissioner of Customs that the respondent herein had withdrawn the writ petition and had approached the Learned Magistrate. There is no merits in the submission of the Learned standing counsel appearing for the petitioner that the order passed by the Learned Magistrate is illegal. The respondent cannot be made to run from pillar to post to get his vehicle released. The petitioner cannot be permitted to take vacillating stands before this Court to harass the respondent.
Petition dismissed.
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Corporate Laws
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2020 (3) TMI 921
Oppression and Mismanagement - Approval of voluntary revision of Financial Statements and Board reports - section 131 of the Companies Act, 2013 read with Rule 77 of the NCLT Rules, 2016 - HELD THAT:- The narrated sample of accounting deficiencies are culled out from the Reports and observations of qualified and expert Accounting /Auditing Firms, and cannot be factually questioned in the present proceedings. On an overview of the same we are in agreement that a case is clearly made out for revising the financial statements and Board's reports. Even if we disregard the opinion with regard to any misappropriation, fraud etc., these facts are clearly such as would distort the Final Accounts and not give a true and fair picture of the goings on in the Company, as required by section 129. We are, therefore, in agreement with the Petitioner, based on the Reports of the Auditors, that the financial statements and Board's reports for the Applicant Company need to be revised and recast.
While dealing with proceedings under section 131, we are not concerned here with the dispute, allegations and counter allegations between different parties, but rather only with the accounts as prepared by the Applicant Company for the years 2012-13 to 2014-15, and which have been found to be not giving a true and fair picture of the actual events and transactions, and whether the same require to be revised and re-drafted. Whatever the disputes, the same have been taken up before other concerned authorities/courts, and the resolution of such disputes is not the issue in the present proceedings. The same are referred to only for examining the intent of legislature and the applicability of section 131.
With regard to the wordings of section 131, which have been interpreted differently by the opposing sides, we have to assert that a provision of law cannot be applied in all circumstances or through ordinary principles of interpretation when the circumstances necessitating their interpretation are extraordinary, as is the case here. Any such interpretation must be in sync with the overall intent of the Act and unique facts of the case. Also, law has to be interpreted for righting a wrong and not for perpetuating a wrong. Grave financial misreporting/ misappropriation cannot be allowed to hide behind mere interpretation or minor technicalities.
The words "in respect of any of the three preceding financial years" have to be read as any three previous years as that is the scheme of things in the Act for cases of this kind and which are not cases of mere inadvertence, and which accounting wise also cannot be ignored - in view of the totality of facts and circumstances, all three years, i.e. FYs 2012-13, 2013-14 and 2014-15, would be covered for revision, not only because of the accounting compulsion, since FY 2014-15 is in any case covered, and the earlier years' accounts have a bearing on the same, but also per the provision contained in section 131 of the Act.
This is a fit case for granting approval under section 131 to prepare revised financial statements and/or revised reports in respect of the Financial Years 2012-13, 2013-14 and 2014-15 in the case of the Applicant Company - petition disposed off.
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Securities / SEBI
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2020 (3) TMI 920
Money mobilization - money collected by the Company for teak plantation scheme was in the nature of Collective Investment Scheme (CIS) as defined in section 11AA of the Securities and Exchange Board of India Act - scheme was being carried on without requisite registration under the SEBI Act - HELD THAT:- In Appeal No. 378 of 2017 were appointed as directors for a limited period between 2008 and 2009. During this period, no amount was collected under the CIS. There is no finding that the amount collected had matured during the period when these appellants were the directors. Consequently, in our opinion, these directors could not be fastened the liability to refund the amount as they had neither collected the money nor were responsible for disbursement of the money to the investors at that stage. Admittedly the said appellants after their resignations are not involved in the affairs of the company. Consequently, no direction could be issued to them to wind up the investment scheme or to restrain them from selling the assets of the company in which they are not the directors. The impugned order in so far as the appellants in Appeal is concerned cannot be sustained.
Appellants in Appeal No. 55 of 2018 and 56 of 2018 no interference is required in the impugned order. The investment made by the investors had matured in 2012 during the period when the appellants were the directors in the company and were responsible for the refund of the money. The appellants failed to refund the amount and therefore are liable to refund the amount alongwith interest as directed by the WTM. The contention that they were not responsible for the affairs of the company or that they had never participated in any Board's meeting is only an afterthought which has been raised without any cogent proof. In fact, the appellant did not file any reply and only sought time to collate the particulars and file a detailed reply which he failed to do so.
The appellant in Appeal No. 55 of 2018 only made a bald assertion that he was not responsible for the day to day operations and management of the company without filing any resolution of the Board of Directors to show the he did not participate in any meeting. In any case, the amounts had matured during the period they were directors and thus, were responsible for the refund of the money to the investors. The decisions relied upon them that they were only liable to the extent of collection made by them is not applicable to the instant case as they are liable for the refund of the money collected by the company which was liable to be refunded during the period when the said appellants were directors. Consequently, Appeal lacks merit.
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Insolvency & Bankruptcy
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2020 (3) TMI 919
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - scope of 'suit' and 'proceedings' - HELD THAT:- The provisions of section 69(2) of the Indian Partnership Act, 1932, applies to "suits" and therefore, cannot apply to "proceedings" under the IBC.
There is a trinity of entities which were dealing with the Corporate Debtor. All the three entities were being managed by the same set of individuals. There were inter se business transactions between the triad of entities controlled by the same set of individuals and the Corporate Debtor. There was a fallout between the partners of the Operational Creditor, and the remaining partner decided to use this position to advantage by issuing a Demand Notice to the Corporate Debtor even though he was fully aware of the assurances given by the other partner of the Operational Creditor to the Corporate Debtor in regard to set off/adjustment of accounts between the three entities on the one hand and the Corporate Debtor on the other.
Application rejected.
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2020 (3) TMI 918
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Financial Creditor has proved existence of debt and default. Moreover, the Corporate Debtor (Developer) admitted and acknowledged an advance payment of ₹ 6,65,184 received from the Financial Creditor (Purchaser) vide para 2(i) of the construction agreement. But, the Corporate Debtor (Developer) had not adhered to the terms and conditions as per construction agreement and failed to handover the constructed apartment at Appur Village within the prescribed time.
This Bench is inclined to admit this application - application admitted - moratorium declared.
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Service Tax
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2020 (3) TMI 916
Nature of activity - service or sale - appellant has made payment towards tanker hire charge to various foreign suppliers in foreign currency for hiring ISO tanker which was mostly used for export purpose - case of Department is that ISO tank owned in such a case does not transfer the right of possession and no VAT/Sales Tax has been paid, it is liable to classify under “supply of tangible goods service’ - reverse charge mechanism - HELD THAT:- The appellant have referred to a contract under which ISO tank was hired by them on lease from foreign supplier. The Adjudicating Authority as well as the appellate authority has held that the renting of ISO tank falls under the category of “supply of tangible goods service” only on the reasoning that there is no transfer of right of possession and effective control in respect of the leased ISO tank. However, no proper reasoning was given as how there is no transfer of right to possession and effective control. From the facts narrated by the learned counsel, it is found that after supply of ISO tank the same was under their control, was operated by them with their own employees, and repair and maintenance if any was also carried out by the appellant themselves.
Thus, the right to use and effective control was with appellant. However, both the lower authorities have not carefully gone through the contract and not given reasoning under the given facts on why there is no transfer of right and effective control by the foreign supplier to the appellant. Therefore, the matter needs to be reconsidered carefully by the Adjudicating Authority. Also, the Adjudicating Authority has contended that since there is no payment of VAT, the transaction is not a deemed sale.
Matter remanded to the Adjudicating Authority for passing a fresh order after providing sufficient opportunities to the appellant - appeal allowed by way of remand.
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2020 (3) TMI 917
Supply of Tangible Goods Services - non-payment of Service Tax - appellant had been collecting Service Tax from its customers since 2008, but had not deposited the same with the Government Exchequer - demand alongwith interest and penalty - extended period of limitation - HELD THAT:- The appeal is admitted on substantial questions of law.
Issue notice - List on 28.05.2020 in the category ‘After Notice Miscellaneous Matters’ for final disposal.
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2020 (3) TMI 915
Liability of service tax of sub-contractor - appellant’s contention was that the main contractor has discharged the entire service tax liability on the full amount including the service tax liable to be paid by the appellant as sub-contractor - HELD THAT:- Admittedly, prior to the declaration of law by the Larger Bench of the Tribunal, in favour of the Revenue, there were catena of judgements laying down that if the main contractor has paid the entire service tax liability in respect of a particular contract, the demand against the sub-contractor would not survive.
The lower authorities have expressed their doubt about the payment of the entire service tax by the principal contractor, which fact requires verification and examination by the lower authorities. As such, for the limited purpose of verifying the fact of payment of entire service tax by the main contractor, the matter is remanded to the lower authorities for doing the needful.
Appeal allowed by way of remand.
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2020 (3) TMI 914
Non-payment of service tax - Water supply / sale to customers in the port - Renting of immovable property - Transport of goods by road - demand of service tax alongwith interest and penalties - excessive adjustment of service tax - extended period of limitation.
Water supply / sale to customers in the port - HELD THAT:- It is evident from the records of the case as well as the submissions of the Ld. Counsel for the appellant that they had purchased water and sold it to ships at a higher price. Thus, this is in our considered view, a case of purchase and sale of goods. Sale of goods is a taxable event for Sales Tax or VAT levied by the State Government. It appears from the records, that the appellant had reported the sales in their VAT returns to the State Government claiming an exemption from VAT available on sale of water. The availability of the exemption for sale of water is in dispute with the VAT department. There is no dispute with the State Government that the transaction is one of sale of water. Sale is not a taxable event to levy service tax.
It would have been a different case if they had not bought or sold water but had only rendered some service in connection with the supply of water. For instance, if the users had purchased the water from someone else and if the appellant had only pumped or transported the water, etc., it would have definitely qualified as a service and if the service is rendered within the port, it would be exigible to Service Tax as Port Service. Selling goods on their on account to customers does not qualify as a service or else, every merchant in the country should be held to be rendering a service. Thus, sale of water is not exigible to Service Tax.
Renting of immovable property service - HELD THAT:- A plain reading of the show cause notice in this case itself shows that the appellant have received amounts as advances for construction of a terminal for bunkering. There is no evidence that they have collected any rent towards bunkers or any other immovable property. If indeed, they have received any amounts for renting immovable property, it is not reflected in the show cause notice. Merely because the appellant has received some amounts from their customers they do not have to automatically pay service tax unless such amounts are relatable to rendition of a taxable service.
GTA service - HELD THAT:- Learned Counsel concedes the demands GTA services and confirms that the tax has already been paid along with interest.
Alleged excess adjustment of service tax - HELD THAT:- All the documents presented by them have not been considered by the Learned Commissioner in deciding this matter and we are of the opinion that the Commissioner should be given an opportunity to examine them and pass the reasoned order after following principles of natural justice as far as this demand is concerned.
Demand of Interest - HELD THAT:- As the demands are set aside except on the GTA services on which the interest has already been paid along with the demand no further amounts need to be paid by way of interest.
Penalties - HELD THAT:- As majority of the demands have already been set aside, it is a fit case to invoke Section 80 and all the penalties imposed upon the appellant are set aside.
Appeal disposed off.
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2020 (3) TMI 913
Business Auxiliary Services - promotion or marketing of goods produced or provided by or belonging to the client - transfer of right to use - demand of interest and penalties - extended period of limitation - HELD THAT:- By stating that the goods namely concentrate was transferred for use by M/s Coca Cola India Pvt Ltd to the Appellant for consideration, a fact not in dispute, the sale of the goods in term of Central Excise Act, 1944 has occurred. The imposition of restrictions or conditions in respect of the usage and consumption of the concentrate, by the seller cannot alter that position. Hence there are no merit in the submission of the Authorized Representative that this transaction was not a truncation of sale but only “transfer to use”.
In any case if the arguments advanced by the Authorized Representative, were to be accepted then in every case, sale promotion activities undertaken by the manufacturer of finished product, shall amount to sale promotion of the raw material, and the service so rendered to the raw material supplier will be taxable as Business Auxiliary Service in this category. This is neither the intention nor the rationale of the scheme of taxable category defined as “Business Auxiliary Service”.
Appeal allowed - decided in favor of appellant.
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2020 (3) TMI 912
Refund of service tax - tax paid under protest - Club and Association service - rejection of claim on the ground that the appellant has not been able to prove that the burden of tax has not been passed on to another - HELD THAT:- The issue as to whether “Club” or “Association” Services is subject to levy of service tax is decided by the Hon’ble Apex Court in the case of STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT] in favour of the assessee. The Commissioner (Appeals) has observed that the issue whether the refund claim is hit by the bar of unjust enrichment is too premature to be considered. However, he has proceeded to reject the refund claim - the appellant has to be given a further opportunity to prove, whether the burden of tax has been passed on to another.
Matter remanded to the adjudicating who shall decide afresh as to whether the refund is hit by unjust enrichment - appeal allowed by way of remand.
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Central Excise
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2020 (3) TMI 910
CENVAT Credit - duty paying invoices - It is the case of the Revenue that no material was received by the appellant against these invoices and only invoices were received and CENVAT Credit has been taken - HELD THAT:- As far as the invoices issued by M/s Swastik Insulators are concerned, two of these pertain to the invoices issued against the materials supposed to have been received by them from M/s Rajeswari Metallurgicals Limited, Bhiwadi, Mumbai. In respect of these invoices, the evidences in favour of the Revenue are the statements of Shri R.S. Elanjeran, Proprietor of M/s Swastik Insulators given on 31.03.2008 in which he confirmed that they have not received any material nor sold it to the appellant and have only issued invoices and made entries in their records and registers. Shri Elanjeran has not been cross examined as he was unwell but he gave in writing a letter that he stood by whatever statement he had made before the Officers of DGCEI. Therefore, to this extent, the evidence is against the appellant and in favour of the Revenue.
Invoices at Sl.No. 3 to 7 issued by M/s Swastik Insulators on the basis of invoices received from M/s M.M. Enterprises, Chennai. The evidence adduced by the Revenue in respect of these consignments is the aforesaid statement of Shri R.S. Elanjeran, Proprietor of M/s Swastik Insulators who affirmed that he had neither received the goods nor supplied the same which he stood by in the form of a letter when called for cross examination. He was not cross examined as he was suffering from cancer. There is no dispute regarding the transporters or the truck numbers as far as these goods are concerned.
The invoice at Sl.No. 8 of the statement issued by M/s Sree Enterprises, the evidence which the department has in respect of these invoices is the statement of Shri Anil Goel recorded during the investigation which was negated by him when cross examined during hearing before the adjudicating authority. He was not re-examined by the Revenue to prove that his original statement was correct and his statement during cross examination was not correct - Shri Anil Goel in his statement asserts that all materials were received and sold out and the power consumption was enough to draw the wire. These issues were not contested by the Revenue during adjudication proceedings by re-examining Shri Anil Goel.
Thus, there is not sufficient evidence to deny CENVAT Credit to the appellant against any of the eight invoices or to hold that the goods have not been received against them. Therefore, the demands raised in the show cause notice and confirmed by the Order-in- Original and upheld by the impugned order need to be set aside. Consequently, the interest and penalties also need to be set aside against the assessee.
Appeal allowed - decided in favor of appellant.
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2020 (3) TMI 909
Clandestine removal - shortage of goods - wrong calculation of abatement during the period 2009-10 - Shortage of goods compared to RG-1 register - CENVAT Credit availed on capital goods which were received under the cover of invoices issued in the name of another company.
HELD THAT:- After recording that it was indeed a merger of the company as per the order of Hon’ble High Court as per which the assets and liabilities of the merged company were transferred to the transferee company i.e. the appellant and after recording that CENVAT Credit cannot be denied to them, the Ld. First appellate authority sought to deny it only on the ground that the appellant should have approached the authorities to obtain permission for availing the CENVAT Credit, in terms of the proviso to Rule 9(2) of CCR 2004. A perusal of this rule would show that if the invoice does not contain all the particulars but contains some particulars then the Dy. Commissioner or Asst. Commissioner may, if he is satisfied that the goods are covered by the said document have been received and accounted for, allow the credit. This is not the case in the present appeal. The name of the consignee is clearly given in the invoice and the consignee could have availed the CENVAT Credit. All assets and liabilities of the consignee have, by virtue of the order of the merger issued by Hon’ble High court, been transferred to the appellant. Therefore, there is no reason or requirement for the appellant to again approach the Asst. Commissioner or Dy. Commissioner to take permission to take credit of the goods which have been received.
There are no force in the observations of the first appellate authority with respect to this amount.
Imposition of penalties - HELD THAT:- There are no factual matrix any element necessary to invoke either the extended period of limitation for demanding under section 11A or imposing penalty under Section 11AC. The basis of the entire demand is the ER-1 returns and the invoices produced by the appellants themselves except to the extent of shortage noticed during physical verification of stock. The duty involved in such shortage is ₹ 6,647/- only and Ld. Counsel would submit that it is on account of damage caused by the rats - there are no reason to impose any penalty on account of this shortage. Therefore, all penalties need to be set aside.
Appeal allowed in part.
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2020 (3) TMI 901
Clandestine removal - copper wires - demand based on various statements - retraction of statements - HELD THAT:- There existed no evidence of threat or coercion on the proprietor of the Appellant firm in recording of the statement of 8th November 2011.Since, no cogent ground for the same has been adduced before us to buttress the same, a mere allegation of the same at this same is ill-conceived. Moreover, the proprietor in the subsequent statements has reiterated the same with minor retractions, and thus it would be far-fetched to hold that there had been gross duress on the proprietor of the Appellant at every instance of tendering his statements on various dates.
The counsel of Appellant before the appropriate forum, himself had agreed to proceed with the case without waiting further for cross examination of Panchas, and thus, once the adjudicatory authority had proceeded to adjudicate on such a premise, the Appellant, before us cannot invoke the ground of not cross examining the Panchas at such an appellate stage merely because the adjudication did not result in his favour - In light of the observations by CESTAT, the question as to whether the searches conducted on 8th November 2011 are illegal is purely a question of fact which has been sufficiently dealt with by the CESTAT. Thus the consequent question of whether the documents recovered during the searches can be relied upon to come to a conclusion, does not present itself.
In the matter of RELIANCE CABLE INDUSTRIES VERSUS COMMISSIONER OF GST (EAST) DELHI [2018 (11) TMI 1147 - DELHI HIGH COURT] which arises from the search and seizure conducted concurrently with search and seizure on premises of the Appellant therein, this court dismissed the Appeal filed, noting that the question of law raised by the Appellant were purely factual and no interreference was merited by this court.
Appeal dismissed - decided against appellant.
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2020 (3) TMI 911
Condonation of delay of 412 days in filing the present Letters Patent Appeal - HELD THAT:- The applicant has assigned sufficient cause for condonation of delay of 412 days. The application is accordingly allowed. Tax Appeal No. 499 of 2018 is ordered to be restored to its original file.
Tax Appeal shall now be notified before the appropriate Court taking up such matters.
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2020 (3) TMI 908
Mis-classification of goods - Plant Growth Regulators (Micronutrients) - Bio-fertilizers - Bio-pesticides - whether Plant Growth Regulators under Chapter Heading 3808of Chapter 38 to the First Schedule of the Central Excise Tariff Act? - HELD THAT:- The issue is no more res integra as this very Bench of the Tribunal has settled the issue in favour of the assessee in the case of DR K.R.K. REDDY, DIRECTOR, SRI BIO TECH LABORATORIES LTD VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, HYDERABAD – I (VICE-VERSA) [2019 (8) TMI 1251 - CESTAT HYDERABAD] where it was held that the demand raised by the department classifying them as Plant Growth Regulators under 3808 cannot sustain - demand set aside.
Bio-pesticides of microbial origin - Whether classified under Chapter Heading 3808 as against tariff item 3002of the Central Excise Tariff Act? - HELD THAT:- This Bench has followed the decision of T. STANES & CO. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE [2008 (10) TMI 109 - CESTAT, CHENNAI] to hold that the demand of duty classifying the said products under Chapter Headings 3105 and 3808 cannot sustain and consequently, the same were set aside. The Bench further held that the current classification of the products are under Chapter Heading 3002 attracting nil rate of duty.
Bio-fertilizers of plant and animal origin and Bio-pesticides of plant/vegetable origin - HELD THAT:- The re-classification on this having been accepted by the assessee under Chapter Headings 3105 1000 and 3808 9910 respectively, the duty demand on this is sustained.
Demand of interest and penalty - HELD THAT:- Since the issue is with respect to classification and interpretation of tariff headings, we are of the view that penalties may not be warranted and hence, the same are set aside. The interest, however, since mandatory, is also sustained.
Appeal allowed in part.
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2020 (3) TMI 907
Valuation - crank cases - job-work - captive consumption - applicability of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Rule 10A ibid - demand of short paid duty alongwith interest and penalty - extended period of limitation - HELD THAT:- There was no scope for treating the appellant as an agent of M/s. M & M in any respect and for any purpose whatsoever. It is also made clear that M/s. M & M has agreed to purchase the components from the appellant and further, it has also an insurance clause requiring insuring of premises as well as the equipment with premia being paid by the appellant - There is no dispute that the appellant has in fact discharged the duties before supplying the goods in question to M/s. M & M which is based on the purchase price, as given in the respective agreements. This indicates that the goods in question have been manufactured by the appellant at a cost and thereafter, cleared on payment of duty.
It is not the case here by the Revenue that the manufacturer, i.e., the appellant, is only getting the job work charges which should have been the case if it is a job work simpliciter; nor has the Revenue established that the goods manufactured by the appellant are supplied free of cost to M/s. M & M. Any amount of supervision per se, may not be sufficient to treat the assessee-appellant as a job worker - there are no merit in the impugned orders on the merits as well as on the principles of consistency and consequently, the same are set aside.
Extended period of limitation - HELD THAT:- Revenue was aware of the method adopted by the assessee since the Revenue itself had conducted periodical audits from 2011 onwards, documents evidencing which, are also part of the Paper Compilation - there is no scope at all for the Revenue to allege suppression, fraud, etc., to invoke the larger period of limitation.
Appeal allowed - decided in favor of appellant.
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Indian Laws
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2020 (3) TMI 906
Termination of tenancy - Section 3 of West Bengal Government Premises (Tenancy Regulation) Act, 1976 - HELD THAT:- Normally, the rights of the lessor and the lessee and the incidence of tenancy are governed by the Transfer of Property Act, 1882. The provision relating to termination of tenancy in case of breach of the conditions of the lease and recovery of possession from the lessee under the Transfer of Property Act is very time-consuming. Even, the execution of decree for possession is a complicated and time-consuming process. In order to avoid all these hurdles and to expedite the recovery of possession, the Legislature has enacted the Act. The preamble of the Act makes it clear that it has been enacted to provide for regulation of certain incidences of tenancy in relation to government premises in West Bengal and for matters connected therewith or incidental thereto - In the present case, the premises in question are not owned by the government. It is owned by the appellant-Corporation, which is a government company incorporated under the Companies Act, 1956.
Whether the Corporation can be regarded as a “Government undertaking” so as to attract the applicability of the provisions of the Act in respect of the premises held by it? - HELD THAT:- It is an admitted position that the Corporation is registered under the Companies Act, 1956. The Corporation is under the administrative control of the State Government and almost all the shares of the Corporation, are held by the State Government, apart from a few shares which are held by IAS officers in their official capacity. It owes its status as a body corporate to the Companies Act enacted by the Parliament - the Appellant company is a “Government undertaking” as defined in Section 2(b) of the Act.
Whether the premises owned by the Corporation and let out to respondent No.1 are government premises within the meaning of Section 2(a) of the Act? - HELD THAT:- When a seat in a room of a Government premises is let out to a tenant, certainly it will be a Government premises. Again, if a seat in a room is let out together with the gardens; grounds and outhouses, if any, appurtenant to a seat in a room, such tenancy will be of a “Government premises”.
When neither a building nor a part of the building nor a hut nor a part of the hut nor a seat in a room is let out to a tenant but only bare land is let out to a tenant, can such tenancy be regarded as relating to a “Government premises” to attract the provisions of the Act? - HELD THAT:- The expression “includes” is used in two places of the definition of “premises” in Section 2(c) and the expression “includes” which was used for the second time in the said definition without any doubt was included to expand the ambit of “Government premises” so as to attract the provisions of the said Act. The expression “appurtenant to it” carries special significance. We cannot read the definition of “premises” bereft of the expression “appurtenant to it”. The expression “appurtenant” in the context means ‘relating to’, ‘usually enjoyed’, ‘occupied with’ or ‘adjoining’. Therefore, if a garden, ground, or an outhouse is let out along with building or hut or a seat in a room, such a garden, ground or an outhouse becomes part of the “premises”. However, bare land has not been independently included in the definition of “premises” - there are no hesitation to hold that if bare land is let out by the government and/or the government undertaking to its tenant, the incidence of such tenancy cannot be governed by the provisions of the Act and as such a tenant cannot be evicted by taking aid of the provisions of the Act.
When the eviction proceedings were initiated, admittedly, the land in question did not contain any structures. If the bare land is let out by the government undertaking and it continues to be a bare land as on the date of initiation of eviction proceedings, the incidence of such tenancy cannot be governed by the provisions of the Act and such a tenant cannot be evicted by taking aid of the provisions of the Act. The material date is the date of initiation of the eviction proceedings. Had respondent No.1 put up the construction on the plots of land leased to it, and if the eviction is sought under Section 3 of the Act for violation of some other clauses of the lease deed or upon satisfaction of the conditions mentioned in subsections (1) and (2) of Section 3, the proceedings would have been maintainable.
The eviction proceedings initiated by the Corporation against respondent No.1 under the Act was without jurisdiction - Appeal dismissed.
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2020 (3) TMI 905
Recovery Proceedings - restraint on Tehsildar from pursuing the recovery proceedings - threat of fatal consequences of COVID-19 - HELD THAT:- Today, there is an extraordinary situation in the country due to pandemic Corona Virus and therefore, it calls for an extraordinary measure to be taken to contain COVID-19. It is a situation where 'self quarantine' should be encouraged amongst people in the society in particular and the country in general.
All the concerned competent authorities both administrative and nonadministrative under the State Government be issued directions restraining them from taking any coercive measures against any person or body of persons in the society so as to force him/them to approach the Court for the redressal of grievance.
All the recovery proceedings at the end of the district administration, financial institutions and other administrative bodies/authorities/agencies and otherwise at the end of the instrumentalities of the State shall be deferred for a period of two weeks i.e. till 6.4.2020 - All the auction proceedings, if any pending or initiated in the meanwhile, shall remain deferred for a period of two weeks i.e. till 6.4.2020.
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2020 (3) TMI 904
Smuggling - Charas - Contraband item - offence under Section 8(C)/20(B)(II) of NDPS Act, 1985 - presence of confessional statement or not - admissible evidences or not - corroboration of statements or not - possession of opium and sale of same or not - HELD THAT:- In the present case the appellant was neither arrested on the spot, nor any incriminating article was recovered from his house when a search was made. Even the prosecution wholly failed to establish that the said truck was in any way connected with the appellant or the same was at any time in real or constructive possession/control of the appellant. The prosecution failed to establish the ownership of the truck and no evidence was there pertaining to any connection of the said vehicle with the appellant. So, from the entire material on record, it is evident that except the statement of these two co-accused persons Rajesh Kumar Mishra and Raju Dubey, there is no other material on record against the appellant to show his complicity in the crime.
The submission of the learned counsel for the opposite party that the appellant should have summoned co-accused Rajesh Kumar Mishra and Raju Dubey for cross examination does not suit to the reasoning, as it was for the prosecution to establish its case against the appellant beyond all reasonable doubts - it would not be safe to rely upon the statement of these two persons recorded under Section 67 NDPS Act as the appellant was not afforded any opportunity of cross examination to these two co-accused persons.
Appellant is acquitted of all the charges leveled against him - Appeal allowed.
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2020 (3) TMI 903
Smuggling - Hashish - contraband item - retraction of statements - offence under Section 20(b)(ii)(C) of the Narcotic Drugs and Psychotropic Substance Act, 1985 - HELD THAT:- Undisputedly, according to the evidence, recovery of Hashish (Charas) found from the rucksack which was in possession of the accused person and which is evident from the inventory and seizure list as well as from the panchnama both were duly signed by independent witnesses and the employee of Modern Travels as also by the accused persons. PW3 being the Gazetted Officer in his crossexamination stated that he was present at the time of search and seizure, such being the evidence on record, possession of the said Hashish (charas) from the custody of the accused person is beyond doubt. That apart, there were no retraction of the said fact by the appellant during the trial including examination under Section 313 of the Code of Criminal Procedure when the accused was examined.
The allegation of non-seizure from the custody of the person of the accused/appellant is an afterthought and therefore, cannot be relied on.
According to Section 35 of the Act, the Court shall presume the existence of mental state for the commission of an offence and it is for the accused to prove contrary. The presumption though rebuttable but during examination under Section 313 neither any plea has been taken by the accused nor any prayer has been made to rebut the presumption under the said provision.
Conviction in the present case is not based only on the confessional statement made by the accused under Section 67. His confessional statement is coupled with too many other grounds on which conviction is based - The element of threat or coercion is totally absent in the present case even no such allegation has been made and this is partly evident that he never attempted to retract this statement made under Section 67 of the act.
In this case, there is no room for the appellant to advance an argument that he is an innocent person or that he has been falsely implicated in the instant proceeding. The recovered hashish (charas), from the rucksack apparently was in possession of the accused persons as evident from the inventory and seizure list and the Panchnama as well duly signed by the independent witnesses and employee of Modern Travels and after all signed by the accused persons - If this factum is taken into consideration the fact that the accused persons as well as the officers of the raiding team read with the voluntary statement of admission made by the accused persons under Section 67 of the NDPS Act together with the fact that there had been no retraction statement by them, the reasonable conclusion would be to hold the accused/appellant guilty.
The order of conviction and sentence under challenge are thus confirmed - Appeal dismissed.
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2020 (3) TMI 902
Professional Misconduct - Applicability of Network guidelines to petitioner-firm of Chartered Accountants (CAs) - It is the case of the petitioner that the petitioner-firm cannot be considered as having Network with the HLBI , as it never shared its profit, cost etc. It is, therefore, the case of the petitioner that the network guidelines would not be applicable to the petitioner-firm - HELD THAT:- It is relevant to note that prima facie opinion is silent with regard to applicability of Rule 7 of the Rules 2007 which provides that the information has to be in form of any written information containing allegation or allegations against the member or a firm, received in person or by post or courier - However, the report of operation of MNAF in India of the prima facie opinion, there is no reference to petitioner and therefore, question arises whether it would constitute the “Information” as per Rule 7 of the Rules 2007 or not. However, it appears from the material on the record that what is to be treated as “Information” within the meaning of Rule 7 of the Rules 2007 is missing because from the contents of the Paragraph No.3 of the prima facie opinion, which is extracted herein above, it does not reveal any written allegation or allegations against the petitioner so as to treat the same as “Information” within the meaning of Rule 7 of the Rules 2007.
The entire basis of formation of prima facie opinion is contrary to Rule 7 of the Rules 2007. The report of operation of MNAF in India of the prima-facie opinion, it cannot consider as “information” within the meaning of Rule 7 of the Rules 2007. Therefore, entire basis of formation of prima-facie opinion is contrary to Rule 7 of the Rules 2007.
On perusal of the contents of the letter dated 05.04.2018, it emerges that the very basis to treat the material available on record and observations of the Supreme Court as the “Information” within the meaning of Rule 7 of the Rules 2007 for alleged violation of Section 25 and Section 29 of the Act1949 cannot be considered as “Information” in absence of any written information containing allegation or allegations against the petitioner-firm as provided under Rule 7 of the Rules 2007. Therefore, merely on the basis of inference drawn by the respondent no.2, and thereby, analyzing various terms of the representation agreement between the petitioner and the HLBI to form prima facie opinion is without any basis in absence of information as contemplated in Rule 7 of the Rules 2007.
In absence of any “Information”, as contemplated under Rule 7 of the Rules 2007, the respondent no.2 has formed prima facie opinion only to do fishing inquiry and investigation. The intention of prima facie opinion is not for initiating disciplinary inquiry for the purpose of investigating further to establish whether the petitioner-firm in collaboration with the international entity, HLBI was involved in encouraging surrogate practice in India or not - the petitioner-firm which is in existence for more than 70 years cannot be put to rigors of disciplinary proceedings in absence of any specific allegation and in absence of any written information containing allegation as per Rule 7 of the Rule 2007.
The preliminary objection raised by the respondents with regard to maintainability of the petition is not tenable as there is no written information containing allegation against the petitioner-firm and no disciplinary proceedings could have been initiated against the petitioner-firm - Petition allowed.
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2020 (3) TMI 900
Maintainability of Complaint - authorised person to file the complaint - section 50(8) of Wild Life (Protection) Act. - whether officers of the Directorate of Revenue Intelligence are not empowered to file a complaint under the Wild Life (Protection) Act? - HELD THAT:- From the perusal of Section 2(d) of the Cr.P.C., it is evident that in a complaint if any allegation against any person is mentioned, with a view to take action against him, he will be deemed as an accused of the complaint. From the definition of ‘complaint’ it does not appear that only when the name of person is mentioned in the cause title of the complaint, then only that person shall be treated as accused of that complaint.
Where there are two distinct offences made up of different ingredients, embargo under Article 20(2) or Section 26 of General Clauses Act, 1897 has no application, though the offences may have some overlapping features. The doctrine of double jeopardy protects a person from being tried and punished twice for the same offence, but not from different offences arising out of violation of different laws by the same set of facts.
In the present case, in the complaint it is clearly mentioned that the complainant is duly authorised to file a complaint under Section 55 of the Act. At this stage the averment of the complaint is considered prima facie true. So at this stage it can not be ascertained whether the complainant is authorised by the Government to conduct the investigation of crime under the Act or she is competent to record the statement of the persons under Section 50(8) of the Act and for filing of complaint. It is a matter of fact, which requires evidence to decide - Applicant himself in his statement recorded by complainant Sushri Shraddha Pandre under Section 50(8) of the Act admitted that he was involved in smuggling of red crowned roof turtle, and he purchased the same from co-accused Ajay Singh, which is admissible in evidence against the applicant. Forest official also collected the statement of bank account of Ajay Singh showing that applicant transferred money in his account. So, at this stage it cannot be said that there is no evidence on record to connect the applicant with the crime.
The petition filed by the applicant is dismissed with the liberty that applicant is free to raise his objections at appropriate stage, which shall be decided by the trial Court according to law without being influenced by the order passed herein.
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