TMI Tax Updates - e-Newsletter
April 28, 2020
Case Laws in this Newsletter:
Income Tax
Insolvency & Bankruptcy
PMLA
Service Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Agreement between the Government of the Republic of India and the Government of the Republic of Austria for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes - Notification
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Income Tax:
CORRIGENDA TO CIRCULAR NO. 9 OF 2020 - Clarification on provisions of the Direct Tax Vivad se Vishwas Act, 2020 - Circular
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Income Tax:
Addition u/s 68 - unexplained cash credit - onus to prove - Agriculture income shown by the Partners of the firm - onus on the assessee has to be understood with reference to the facts of each case and if the prima facie inference on the basis of facts is that the assessee's explanation is probable, the onus shifts to the Revenue. - HC
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Income Tax:
Stay petition - the order of attachment on the bank account of the petitioners therein are lifted as the revenue received the demanded amount - It is clarified that this order is an interim measure given the COVID-19 pandemic situation in the country. The appellate authority is at liberty to dispose of the appeal of the petitioner in accordance with law, as expeditiously as possible - HC
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Income Tax:
Recovery proceedings - stay applications - Addition u/s 68 - genuineness of the transaction and creditworthiness of the investors/loan depositors - as determined by the Assessing Officer, a prima facie case is not made out and such a relief is not warranted. - HC
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Income Tax:
Correct head of income - gain on sale of building - ‘long term capital gains’ or ‘business income’ - merely because the assessee is engaged in the construction business is not a ground that land and building should be treated as part of stock in trade. - HC
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Income Tax:
Failure to furnish returns of income - offences punishable u/s 276C - non-filing of Income Tax returns - Process and procedure and methodology followed by the Commissioner of Income Tax being not that as contemplated u/s 279 - sanction letter and proceedings quashed. - HC
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Income Tax:
Stay petition- recovery proceedings - lockdown due to COVID -19 - Given this situation, we are satisfied that this situation calls for our interference. In any case, even though we refrain from commenting upon merits of the case at this stage, we find that prima facie the assessee has an arguable case in appeal - Stay granted.
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Income Tax:
TDS u/s 194C - disallowance u/s 40(a)(ia) - Payments to contractors - Though the substitution in section 40 has been made effective with effect from 01.04.2015, in our view, the benefit of the amendment should be given to the assessee either by directing the Assessing Officer to confirm from the cab owners, as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of the disallowance. - AT
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Income Tax:
Exemption u/s 11 - Charitable activities u/s 2(15) - assessee is a regulatory body created by State Government u/s 22 of Gujarat Town Planning and Urban Development Act (GTPUDA), 1976 for proper development of specified area in the state as ensured by the State Government - the activities of assessee are for charitable purposes under s.2(15) of the Act and consequence eligible for benefits under s.11 & section 12 of the Act.
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Income Tax:
Genuineness of expenditure - It was not in the domain of the TPO to hold that in view of the warranty etc., the assessee was not required to incur expenditure on firewall charges. The contention of the assessee seems plausible that motors were required to checked for content of moisture acquired in transport from India to the USA, i.e., the destination point and it was the responsibility of the assessee to provide defect free motors to the end customers.
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Income Tax:
Depreciation on the let out property - deprecation u/s 32 of the 1961 Act under these circumstances can not be allowed on these two properties merely on the grounds that once these properties entered Block of Assets viz. Building many years back and continues to be part of Block of Asset viz. Building despite the fact that factual matrix surrounding these two properties had undergone substantial change over years which cannot be given complete go bye.
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Income Tax:
Cessation of liability u/s 41(1) - As per the explanation, the remission or cessation of any liability by a unilateral Act, is covered u/s.41(1) - additions confirmed - AT
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Income Tax:
Penalty u/s 271AAB - disclosure of additional income in the return of income filed under section 153A - there was no undisclosed income found during the course of search and no incriminating material was found - no case for imposing penalty u/s 271AAB - AT
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Income Tax:
Estimation of income - Addition on statement during the course of survey - CIT(Appeals) had wrongly read the statement of the assessee and have further failed to appreciate the accounts were duly admitted and acknowledged by the assessee as correct. Hence, the right course would be for the Ld. CIT(Appeals) to freeze the profit and loss account of the assessee upto the date of statement - AT
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Income Tax:
Penalty u/s. 271D and u/s. 271E - default u/s 269SS and 269T - acceptance and repayment of loans or deposits in cash - In case, if the veracity was doubted, then the additions would have been made u/s.68 of the Act. It is an undisputed facts that these credit societies function in villages/taluks etc., for farmers or related persons, as an alternative to banks - No penalty - AT
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Income Tax:
Allowable revenue expenditure u/s 37 - training charges incurred on non-executive director - Assessee has sponsored the education of son of the M.D. What is relevance, whether the person who was sponsored, is relevant for the existing business and whether the business benefitted. If it is yes, then it is valid business expenditure, to be allowed - AT
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Income Tax:
Exemption u/s 11 - Application of income does not change the character of receipt. If the receipt is not from the property held for charitable purposes, the same will not be eligible for exemption u/s 11, irrespective of its application for charitable purposes or otherwise. - AT
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Indian Laws:
Public Auction by Banks - recovery of outstanding dues - Right of e-auction purchaser - To get original documents - The guarantor cannot be allowed to approbate and reprobate from the commitment made in successive proceedings before the DRT and the High Court - Documents to be returned to the petitioner - SC
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SEBI:
Extension of implementation date of Circular on ‘Review of Margin Framework for Cash and Derivatives segments (except for Commodity Derivatives Segment)’ - Circular
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2020 (4) TMI 765
Addition u/s 68 - unexplained cash credit - onus to prove - HELD THAT:- Under Section 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account and where the assessee fails to prove to the satisfaction of the Assessing Officer, the source and nature of the amount of cash credits an inference may be drawn that the credit entries represent income taxable in the hands of the assessee. This does not however absolve the responsibility of the Assessing Officer to prove that the cash credits constitute the income of the assessee. The onus on the assessee has to be understood with reference to the facts of each case and if the prima facie inference on the basis of facts is that the assessee's explanation is probable, the onus shifts to the Revenue. Once the assessee has proved the identity of its creditors, the genuineness of the transactions and the creditworthiness of the creditors vis-a-vis the transactions which it had with the creditors, the burden stands discharged and the burden then shifts to the Revenue to show that the amount in question actually belong to, or was owned by the assessee himself. In a case where the integrity of the creditors is established and the entries are shown to be not fictitious, the burden would shift on the Revenue. In the case at hand, the partners have shown the agricultural income in their personal returns of the past years which had been accepted by the department as such. The partners are all identifiable and separately assessed to tax. The source of investment having been explained, in the event the Assessing Officer was not satisfied the addition could have been considered in the hands of the partners and not in the hands of the firm. The burden of proving the source of the credits having been sufficiently explained the addition could not have been made in the hands of the firm in the facts of the present case. - Decided in favour of assessee.
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2020 (4) TMI 764
Stay petition - given the present COVID-19 pandemic in the country, the Hon ble Supreme Court directed that, no recovery measures to be taken by revenue authorities including Income Tax authorities - petitioner submits that, the petitioner should be allowed to operate bank accounts as, the recovery notice issued by the Income Tax authorities directs blanket stay operation of such bank accounts - HELD THAT:- The petitioners suffered an order of assessment in the year 2019. The petitioners preferred an appeal against such order of assessment. There is a stay petition pending also. The revenue authorities issued recovery notice on March 5, 2020 - revenue authorities received the recovery amount from the concerned banks. All these measures took place prior to the order dated March 20, 2020 passed by the Hon ble Supreme Court. Therefore, the order of attachment on the bank account of the petitioners therein are lifted as the revenue received the demanded amount. It is clarified that this order is an interim measure given the COVID-19 pandemic situation in the country. The appellate authority is at liberty to dispose of the appeal of the petitioner in accordance with law, as expeditiously as possible. None of the observations made herein will prejudice any of the parties in the pending appeal.
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2020 (4) TMI 763
Stay petition - recovery proceedings - petitioners submits that, since the petitioners are retired, they are facing undue hardship by reason of the notice of recovery issued by the revenue authorities - revenue authorities have received a sum in excess of ₹ 2 lakhs already from the bank account of the petitioner while the amount of demand is ₹ 10 lakhs - HELD THAT:- The amount of demand of the revenue authorities therein is a sum in excess of ₹ 12 lakhs. There subsists an order dated March 20, 2020 passed by the Hon ble Supreme Court directing the revenue authorities not to initiate any recovery proceedings during the subsistence of the COVID-19 pandemic - interest of justice would be subserved by directing the banks of the petitioners to allow the petitioners to operate the bank accounts subject to the bankers of the petitioner setting apart a sum of ₹ 5 lakhs. Such sum of ₹ 5 lakhs, the Court is informed, is lying in one of the bank accounts of such petitioner. Such banker will keep a sum of ₹ 5 lakhs in a separate interest bearing fixed deposit account with it. Such deposit will abide by the result of the appeal of such petitioner. The bankers of the petitioner of such petition thereafter will permit the petitioner to operate his bank accounts in accordance with law. There will be stay of the order of attachment of the bank accounts subject to compliance of the aforementioned conditions. So far as the other writ petitioner a sum of ₹ 2 lakhs has already been paid by the banker of such petitioner to the revenue authorities, it would be appropriate to permit such petitioner to operate his bank account. The order of attachment issued by the revenue authorities against such bank account of the petitioner is stayed.
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2020 (4) TMI 762
Recovery proceedings - stay applications - Addition u/s 68 - genuineness of the transaction and creditworthiness of the investors/loan depositors - HELD THAT:- The present matter is not a case of mechanical reliance on circulars/office memorandums. It is a case where proof of identity of the loan depositors, capacity of the creditors to advance loans and genuineness of transaction is in serious dispute. Further, this Court finds that the stay application has been decided on merits and all the submissions made hereinabove by the petitioner have been considered by the statutory authorities below. Undoubtedly, as held by the Supreme Court in LG Electronics (India) Pvt. Ltd. [ 2018 (7) TMI 1905 - SC ORDER] it is open to the statutory authorities to grant relief to deposit an amount lesser than twenty per cent if the facts of the case so warrant. However, on the facts of the present case, as determined by the Assessing Officer, a prima facie case is not made out and such a relief is not warranted. Consequently, the present writ petition and application being bereft of merits are dismissed. However, respondent No. 3 is directed to decide the appeal filed by the petitioner within thirty days from the date the Lockdown ends.
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2020 (4) TMI 761
Correct head of income - gain on sale of building - long term capital gains or business income - HELD THAT:- Except last nine years, the property which comprises land and building was let out by the assessee for a long period. The assessee had earned income by way of rent and rental income so received by the assessee was offered for taxation as income from the house property. The assessee has shown the property in question as capital asset in its balance sheet - there is no material on record to hold that the aforesaid property was converted by the assessee as an item of stock in trade. On the other hand, the said property was treated as capital asset. It has further been held that merely because the assessee is engaged in the construction business is not a ground that land and building should be treated as part of stock in trade. It is also pertinent to note that the assessee has not claimed any depreciation in any of the Assessment Years while offering rental income as house property income. Thus, the income from the sale of property has been treated as long term capital gain. The aforesaid finding of fact is based on meticulous appreciation of evidence on record and in substance is a finding of fact. - Decided in favour of assessee.
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2020 (4) TMI 760
Failure to furnish returns of income - offences punishable under Section 276C - non-filing of Income Tax returns in terms of Sections 139(1), 142(1) or 153 of Act - sanction order being passed with prior approval for the Chief Commissioner of Income Tax - HELD THAT:- The satisfaction would be dependent on the approval of the Chief Commissioner of Income Tax is that only if the Chief Commissioner of Income Tax accorded approval for prosecution than the satisfaction of the Commissioner of Income Tax could be considered and acted upon by sanctioning prosecution. However, if the Chief Commissioner of Income Tax were to refuse permission then the Commissioner of Income Tax though satisfied could not initiate any proceedings due to the non approval by the Chief Commissioner of Income Tax. Contention of Sri Kiran Javali, that the prosecution has been initiated and sanction order came to be passed on 12.03.2014 being influenced by the Chief Commissioner of Income Tax, though may not be entirely correct but however does merit consideration since no sanction could be given and prosecution initiated if the Chief Commissioner of Income Tax refused permission, the order dated 12.03.2014, can therefore be said to be an order of the Chief Commissioner of Income Tax, rather than the Commissioner of Income Tax. The Chief Commissioner of Income Tax is not the sanctioning authority. Even the approval dated 10.02.2014 does not indicate any application of mind by the Chief Commissioner of Income Tax nor is it signed by the Chief Commissioner of Income Tax. Hence, even if it were to be assumed that Chief Commissioner of Income Tax was the sanctioning authority there is no subjective satisfaction by the Chief Commissioner of Income Tax for granting such sanction. Process and procedure and methodology followed by the Commissioner of Income Tax being not that as contemplated under Section 279 - The sanction order being passed with prior approval for the Chief Commissioner of Income Tax, the same is not tenable in law and the entire proceedings initiated thereafter including those in C.C.No.219/2014 cannot be countenanced in law. Therefore, the sanction letter dated 12.03.2014 and the proceedings in C.C.No.219/2014 pending on the file of the JMFC III Belagavi are hereby quashed.
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2020 (4) TMI 759
Stay petition- recovery proceedings - lockdown due to COVID -19 - All the bank accounts of the assessee have also been subjected to attached by garnishee proceedings under section 226(3) - AO has also attached all the debtor - Out of total demand assessee applicant has already paid little more than the tax component and the balance outstanding demand represent interest and penalty only. The assessee applicant seeks vacation of garnishee proceedings initiated against the assessee - HELD THAT:- We find that in view of the attachment of asessee s bank accounts and assessee s debtors, the assessee is stated to be not in a position to perform these obligations. Given this situation, we are satisfied that this situation calls for our interference. In any case, even though we refrain from commenting upon merits of the case at this stage, we find that prima facie the assessee has an arguable case in appeal. Assessee has already paid his entire tax liability, and in case the assessee is to opt for Vivad se Vishwas Scheme, he will have nothing further to pay. In these circumstances, the legitimate interests of the revenue cannot be prejudiced by our grant of stay on the remaining outstanding dues which are primarily on account of levy of interest, and consequential levies. In view of the above discussions, as also bearing in mind entirety of the case, we deem it fit and proper to grant a stay on collection/ recovery of the outstanding demands of ₹ 2,91,05,660 till the disposal of appeal or till the end of six months from the date of this order- whichever is earlier, subject to the following conditions: (a) Any amount available to the assessee, as a result of this stay order and as a result of garnishee proceedings being lifted, will be first used for making payments of overdue and current wages payable to the labourer working with the assessee, and for making payment of overdue and current salaries to its employees. The amount available, after this exercise, will be used for the purpose of carrying out construction activity as necessary for providing quarantine facilities, as directed by the Collector. Any surplus amount thereafter will be used for construction activities of the business. The assessee will give an undertaking to this effect in writing. (b) The assessee will file a statement showing utilization of funds, so available to the assessee on account of the garnishee proceedings being lifted, within 15 days from the date of this order. (c) The assessee will fully cooperate in expeditious disposal of this appeal on out of turn basis, on 8th June 2020, and will not seek any adjournment. All the requisite paper books etc will be filed sufficiently in advance.
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2020 (4) TMI 758
Deduction u/s 80P - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly.
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2020 (4) TMI 757
Disallowance of service expenditure - service charges were incurred by the assessee in order to attract the customers in India who are transacting in overseas capital market - HELD THAT:- Assessee has stopped utilizing the services of group entities and started employing its own staff and relevant services extended to its customers by utilizing its own staff. There is considerable increase in the employees cost shows that there is shift in the management decision. Even otherwise assessee has submitted the analysis of making payments to its sister concern and submitted the relevant documents treating this as international transaction. Since the transaction involved is only to the extent of ₹ 2.89 crores, therefore AO may not have referred this case to TPO, just because it is not coming under TP study and there is abnormal increase in the cost, does not mean that assessee has not incurred this expenditure for its business. Therefore, in our considered view, these transactions are revenue in nature and having direct relevance to its business and incurred to extend the services to its customers in the overseas market with the help of its group concerns are only a revenue expenditure and eligible to be claimed as deductible expenditure under section 37 of the Income Tax Act. Payment of membership and subscription charges disallowed - HELD THAT:- These expenses are renewable and recurring in nature and only in this assessment year, assessee has borne the above said expenditure for its business purposes. As per the submission of the assessee, for the subsequent assessment years, these costs were diverted to its clients. Since these expenditure was incurred in order to facilitate the clients in India and it has direct relevance to the business carried on by the assessee, but however there is no assets installed by the assessee except facilitating the installation to the clients. It may look capital in nature, but it is the cost incurred by the assessee to facilitate the transactions between the clients and group concerns. There is no direct enduring benefit to the assessee, it can be termed as incurred for the purpose of business and to set up a transaction meant for overseas capital market - this expenditure can be treated preliminary expenditure for the purpose of business and therefore this transaction may increase the business/ trade for the assessee in the subsequent year. Accordingly, we direct AO to allow one fifth (1/5th) of the expenditure in this assessment year and balance in the next 4 assessment years treating this similar to the treatment as preliminary expenditure. Accordingly, Ground no. 2 raised by the assessee is partly allowed.
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2020 (4) TMI 756
TDS u/s 194C - disallowance u/s 40(a)(ia) - Payments to contractors - HELD THAT:- Settled position in law is that if the deductee/payee has paid the tax, no recovery can be made from the person responsible for paying of income from which he failed to deduct tax at source. In a case where the deductee/payee has paid the tax on such income, the person responsible for paying the income is no longer required to deduct or deposit any tax at source. In the similar circumstances, we find that the first proviso to section 40(a)(ia) inserted by the Finance Act, 2010, which has been held to be curative and therefore, retrospective in its operation by CIT v Virgin Creations [ 2011 (11) TMI 348 - CALCUTTA HIGH COURT] provides for allowance of the expenditure in any subsequent year in which tax has been deducted and deposited. The intention of the legislature clearly is not to disallow legitimate business expenditure. The allowance of such expenditure is sought to be made subject to deduction and payment of tax at source. In a case where the deductee/payee has paid tax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of tax in a subsequent year would never come about. Such unintended consequence has been sought to be taken care of by the second proviso inserted in section 40(a)(ia) by the Finance Act, 2012. There can be no doubt that the second proviso was inserted to supply an obvious omission and make the section workable. No contrary decision was brought to our knowledge by the ld. D.R. We restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and tax es paid by them. AO shall carry out necessary verification in respect of the payments and taxes of such income and al so filing the return by the recipient. AO finds that the recipient has duly paid the tax es on the income, the addition made by the AO shall stand deleted. Thus this ground is allowed for statistical purposes. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No.2) Act, 2014 with effect from 01.04.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such shall be allowed as a deduction in computing the income of previous year, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of ₹ 6,18,73,785 by disallowing the whole amount. Though the substitution in section 40 has been made effective with effect from 01.04.2015, in our view, the benefit of the amendment should be given to the assessee either by directing the Assessing Officer to confirm from the cab owners, as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of the disallowance. In our view, it will be tied of justice if the disallowance is only restricted to 30% of the amount liable for TDS u/s 194C of the Act. Accordingly, this issue is partly allowed. Addition u/s 40(a)(ia) - reimbursement of petrol and diesel charges to the drivers - HELD THAT:- As observed that as agreed by and between the assessee and the cab owners, a vehicle was to be provided by the assessee to the parties and thus, the assessee was to bear the vehicle expenses actually incurred by the said cab owners and which will be reimbursed by the parties concerned. If bills for such expenses incurred by the said cab owners were separately raised by them on the assessee in addition to bills for hire charges and since the amount of bills so raised was towards the actual expenses incurred by them, there was no element of any profit involved in the said bills. It was thus a clear case of reimbursement of actual expenses incurred by the assessee and the same, therefore, was not of the nature of payment covered by section 194C of the Act requiring the assessee to deduct tax at source therefrom, where bills were raised separately by the cab owners for reimbursement of actual expenses incurred by them. As such, considering all the facts of the case, we are of the view that the provisions of section 194C of the Act were not applicable to the reimbursement of actual expenses and the assessee was not liable to deduct tax at source from such reimbursement. Accordingly, we set aside the orders of the Income tax authorities and direct the A.O. to verify the claim of the assessee. Addition incurred for the deficiency of services - HELD THAT:- The facts of this issue are that the Assessing Officer noted from the profit and loss account furnished by the assessee that the assessee has debited an amount of ₹ 5,22,346 for penalty paid, which according to the A.O. is not an allowable expenses. Since the assessee has not made any submission before the CIT(A), he confirmed the same. - Since assessee failed to substatiate the claim, additions confirmed.
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2020 (4) TMI 755
Exemption u/s 11 - Charitable activities u/s 2(15) - assessee is a regulatory body created by State Government u/s 22 of Gujarat Town Planning and Urban Development Act (GTPUDA), 1976 for proper development of specified area in the state as ensured by the State Government - HELD THAT:- As relying on GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION [ 2017 (7) TMI 811 - GUJARAT HIGH COURT] and GANDHINAGAR URBAN DEVELOPMENT AUTHORITY VERSUS THE DCIT, GANDHINAGAR CIRCLE, GANDHINAGAR [ 2019 (7) TMI 1608 - ITAT AHMEDABAD] we find merit in the plea raised on behalf of the assessee for holding the activities of assessee to be for charitable purposes under s.2(15) of the Act and consequence eligibility of benefits under s.11 section 12 of the Act. The order of the CIT(A) is thus set aside and the AO is directed to grant relief claimed under ss.11(2) and 11(1)(a) of the Act to the assessee in accordance with law. - Decided in favour of assessee.
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2020 (4) TMI 754
Bogus purchases - Profit estimation - HELD THAT:- As under oath on 18.12.2007 before the DGIT that M/s Khushi Enterprises, which he was controlling, was engaged in the issuing bogus bills. Further, he mentioned that M/s Moraj Building Concepts Pvt. Ltd. (the assessee) was one of the beneficiaries of such bogus bills. The notice u/s 133(6) issued by the AO dated 14.12.2010 to M/s Khushi Enterprises was not replied to - the enquiry by the Ward Inspector showed that no purchases were made by the assessee from M/s Khushi Enterprises. In such a factual scenario, the Ld. CIT(A) has rightly followed the decision in Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] ; Bholanath Polyfab [ 2013 (10) TMI 933 - GUJARAT HIGH COURT] and brought to tax the profit @ 12.5% of the disputed purchases of ₹ 3,62,881/- which comes to ₹ 45,360/-. As the order passed by the Ld. CIT(A) is based on proper appreciation of facts and position of law, we uphold it. TDS u/s 195 - Disallowance on account of Consultancy Charges paid to Modern Line distribution - amount remitted to non-resident - HELD THAT:- Submissions made by the assessee that no tax was liable to be deducted at source as per Article 14 of the DTAA with UAE on account of payment to non-resident for services rendered outside India need re-examination by the AO. Therefore, we set aside the order of the Ld. CIT(A) on the above issue and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes. Addition u/s. 69 on account of unexplained expenses - HELD THAT:- We find merit in the observation of the Ld. CIT(A) that when on the same set of papers, more than one entry is made and one such entry is recorded in the books of accounts, it was for the assessee to prove that the other entries were not in respect of unexplained expenditure/investment because the entire document as such has to be either taken as true or dumb. Expenditure confirmed by the Ld. CIT(A) need to be re-examined on the basis of evidence of such expenditure to be filed by the assessee. Therefore, we set aside the order of the CIT(A) on the above ground of appeal and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Disallowance on account of payment made to Shri Sai Prerna Charitable Trust - HELD THAT:- In the instant case, the assessee has made a donation of ₹ 55,00,000/- to Shree Sai Prerna Charitable Trust. As observed by the Ld. CIT(A), the assessee failed to explain the purpose of making the donation and as to how it was related to assessee s business. Moreover, it failed to explain that the said Trust was having tax exemption certificate based on which deduction could be claimed by the assessee-company. CIT(A) has rightly observed that as the assessee is following project completion method, the said disallowance would result in reduction of WIP to the extent of ₹ 55,00,000/- leading to a higher profit in the year in which the project is completed and offered to tax. Thus we uphold the order of the Ld. CIT(A) on the above ground of appeal. Addition u/s 69 of purchases - HELD THAT:- Goods amounting to ₹ 1,27,999/- were returned to Satya Narayan Marble for which no payment was made by the assessee. In fact it was not payable at all. In such a situation, the addition of ₹ 1,27,999/- confirmed by the Ld. CIT(A) cannot be sustained. Therefore, we delete the above addition of ₹ 1,27,999/- and allow the 5th ground of appeal. Addition being alleged discrepancy in cash in hand - HELD THAT:- Difference in cash was explained by way of cash lying at sites viz. Plot 448 (H.O.) : ₹ 25,517/-, Plot 448 Khare (H.O.) : ₹ 1,87,599/- and Plot : ₹ 53,709/-. A perusal of the above explanation which was furnished during the course of survey and also before the ADIT (Inv.) and the AO is further corroborated by the books of account. Addition u/s 68 on account of alleged untallied trial balance - HELD THAT:- Assessee has maintained regular books of accounts which have been duly audited. In the instant case, the AO has not rejected the books of accounts. There is nothing on record brought out by the AO to prove that the transactions were not accounted and included in the books of accounts. All the more the said excel sheet does not represent any income or expenditure and it was prepared by the accountant to record the results of trial run taken for the purposes of shifting from Foxpro accounting software to Tally. The assessee at the year-end has drawn final accounting on the basis of regular account which included the transactions in the said two rough trial balances.
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2020 (4) TMI 753
Disallowance u/s. 14A - Whether AO recorded the requisite satisfaction before proceeding to compute disallowance u/s 14A - HELD THAT:- No suo-moto disallowance was offered by the assessee despite earning exempt income in the form of dividend income and LTCG. AO specifically took note of the fact that most of the income earned by the assessee was in the form of dividend income and capital gains. The said analysis, in our opinion, was quite sufficient to establish that Ld. AO had recorded the requisite satisfaction before proceeding to compute disallowance u/s 14A. Therefore, this plea raised by Ld. Sr. Counsel could not be accepted. While computing the disallowance, only those investments were to be considered which yielded exempt income during the year - AO is directed to verify the computations and restrict the disallowance considering only those investments which have yielded exempt income during the year. The separate disallowance of Bank Charges for ₹ 1.38 Lacs would not be warranted since it could not be said that the bank was used only for the purpose of earning exempt income. Ground No. 1 stand partly allowed. MAT computation u/s 115JB - HELD THAT:- Unless the factum of debit of actual expenditure was brought on record, adjustment of disallowance u/s 14A while computing book profits u/s 115JB would not stand test of law. Similarly, disallowance u/s 40(a)(ia) was a statutory disallowance for want of TDS. Unless the same was specifically covered by manner of computations as provided u/s 115JB, the adjustment of the same would also not be justified. Disallowance u/s 41(1) - outstanding debt - HELD THAT:- Assessee has placed on record debt-confirmation dated 24/02/2016 issued by M/s Status Marketing Pvt. Ltd. The said confirmation letter acknowledges the fact that amount of ₹ 90.43 Lacs was receivable from the assessee as on 31/03/2014. It also acknowledges the fact that amount of ₹ 59.56 Lacs was due by the director of that entity to the assessee company against booking of flats in the Hill view park project. Upon perusal of the same, it could not be said that the amount payable by the assessee had ceased to exist or there was remission or cessation of trading liability. The factum of outstanding debt was duly acknowledged in the confirmation of M/s Status Marketing Pvt. Ltd. Therefore, the provisions of Sec. 41(1), in our considered opinion, could not be applied to the fact of the case.
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2020 (4) TMI 752
Treating the reimbursement of the expenses as income for the year - DRP treating the travel expenses reimbursed to the Appellant by 'GIA India Laboratory P. Ltd.' as the income of the Appellant - HELD THAT:- We find that the issue and facts are identical to this year and the Coordinate Bench for the immediately preceding assessment year i.e. A.Y. 2014-15 in [ 2018 (6) TMI 1107 - ITAT MUMBAI] held that the fee for technical services is different from the expenses incurred on third party cost and there is a clear bifurcation in the agreement between the internal cost incurred and external cost paid by the assessee on behalf of GIA India Laboratory Pvt. Ltd. The Tribunal applying the ratio of the decision of the Hon'ble Supreme Court in the case of DIT v. A.P. Moller Maersk [ 2017 (2) TMI 993 - SUPREME COURT] held that amount received towards reimbursement of cost cannot be taxed in the hands of the assessee. Levy of surcharge and education cess - whether once the DTAA rates are applied education cess and surcharge cannot be levied separately? - HELD THAT:- As relying on M/S. EPCOS ELECTRONIC COMPONENTS S.A [ 2019 (7) TMI 708 - DELHI HIGH COURT] and SUNIL V. MOTIANI [ 2013 (12) TMI 1105 - ITAT MUMBAI] direct the Assessing Officer to delete the education cess and surcharge levied on the assessee. This ground is allowed.
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2020 (4) TMI 751
Bogus purchases - onus to establish the genuineness of such purchases by providing documentary evidence - CIT-A deleted the addition - HELD THAT:- CIT(A) after considering the submissions of the assessee concluded that the assessing officer allowed purchases from both the parties in the assessment order passed under section 143/147 dated 29.01.2019 and 20.10.2016. Moreover the requirement of producing the proprietor of Girnar Sales Corporation and Jainam Enterprises is impossible, accordingly ld CIT(A) directed the assessing officer to allow the purchases from both the parties. CIT(A) has taken a correct view and directed the Assessing officer to allow the purchases. We are also of the view that the assessing officer must follow the consistency on same set of facts. - Decided against revenue.
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2020 (4) TMI 750
Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT:- In the instant appeal are similar to those adjudicated by us in the case of Varad Mehta [ 2018 (12) TMI 1091 - ITAT INDORE] we therefore respectfully following above referred judgments and in the given facts and circumstances of the case are of the considered view that the alleged notice issued u/s 271(1)(c) of the Act is invalid, untenable and suffers from the infirmity of non application of mind by the AO. Since we have held the notice u/s 274 of the Act as invalid, the subsequent proceeding u/s 271(1)(c) of the Act are thus held to be void ab initio. We accordingly allow the legal ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. - Decided in favour of assessee.
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2020 (4) TMI 749
Disallowance of deduction u/s 10B - HELD THAT:- Wherein in respect of the claim of deduction u/s 10B of the Act, a coordinate bench of this Tribunal found that by applying the decision of Textile Machinery Corporation Ltd. Vs. CIT [ 1977 (1) TMI 3 - SUPREME COURT] CIT(A) had rightly extended the relief to the assessee u/s 10B of the Act and, therefore, the revenue cannot have any grievance against the same. It is not the case of the revenue that any appeal was preferred against the order or that this position was disturbed. It is not the case of Revenue that there is any change of facts and circumstances involved in this case to taken a different view. Transfer Pricing Adjustment - international transaction - international transaction in respect of firewall charges reimbursement to AE - HELD THAT:- In the instant case, the assessee has incurred expenditure and not making payment of mark-up is not adverse to the entity in Indian Jurisdiction. The assessee has claimed the expenditure paid by the AE on its behalf. The contention of the TPO is that the assessee was not required to incur the said expenses. But it was under jurisdiction of the Assessing Officer whether particular expenditure was incurred wholly and exclusively for the purpose of business and not in the domain of the TPO to hold that in view of the warranty etc., the assessee was not required to incur expenditure on firewall charges. The contention of the assessee seems plausible that motors were required to checked for content of moisture acquired in transport from India to the USA, i.e., the destination point and it was the responsibility of the assessee to provide defect free motors to the end customers. Thus, respectfully following the finding of EKL APPLIANCES LTD [ 2012 (4) TMI 346 - DELHI HIGH COURT] we delete the transfer pricing adjustment.
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2020 (4) TMI 748
Admission of additional evidence by CIT-A - partial relief has been granted by CIT(A) to the assessee on the basis of additional evidences - failure to provide reasonable opportunity to the Assessing Officer - HELD THAT:- No specific mention in the impugned appellate order of the Ld. CIT(A) to the effect that the Additional Evidences had been admitted by him - CIT(A) has failed to record the reasons in accordance with Rule 46A(2) of Income Tax Rules, 1962. CIT(A) is duty bound, under Rule 46A(3) to allow a reasonable opportunity to the Assessing Officer (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant but he failed to provide such reasonable opportunity to the AO. CIT(A) had only provided a perfunctory opportunity, and a very short time to the Assessing Officer. The letter asking the AO to send report is dated 08.03.2016 whereas the time was allowed to the Assessing Officer up to an earlier date 16.03.2015. It is not understood how a letter dated 08.03.2016 can be responded to by the AO by an earlier date of 16.03.2015. CIT(A) had failed to provide reasonable opportunity to the Assessing Officer for which the Assessing Officer was entitled under Rule 46A(3) of Income Tax Rules. CIT(A) had failed in due compliance of Rule 46A(2) as well as Rule 46A(3) of Income Tax Rules; in granting partial relief to the assessee on the basis of Additional Evidences furnished by the Assessee during the appellate proceedings before Ld. CIT(A) - We set aside the impugned appellate order dated 30.03.2016 of the Ld. CIT(A), and direct him to pass a fresh order on merits after following due procedure prescribed under Rule 46A of Income Tax Rules. - Revenue Appeal is partly allowed for statistical purposes.
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2020 (4) TMI 747
TDS u/s 195 - software expenses u/s 40(a) (i) for non-deduction of TDS - payments towards purchase of 'off-the-shelf shrink-wrapped software' as 'Royalty' under the Act as well as under the India-Malaysia tax treaty - HELD THAT:- The issue is against assessee vide decision in CIT v Samsung Electronics Co. Ltd. [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] wherein it is held that payments towards purchase of software are in the nature of 'royalty' and liable for TDS. - Decided against assessee. Sales promotion and advertisement expenses u/s 37 (1) - HELD THAT:- In the present facts of the case the expenditure towards advertisement has been incurred by assessee for promoting sales and therefore, ratio laid down in the decisions relied upon by Ld. AR is squarely applicable i.e. SPICE DISTRIBUTION LTD. [ 2014 (9) TMI 732 - DELHI HIGH COURT] , M/S. ASIAN PAINTS (INDIA) LTD. [ 2016 (11) TMI 258 - BOMBAY HIGH COURT] and INDO NISSIN FOODS LTD. [ 2012 (11) TMI 1246 - KARNATAKA HIGH COURT] - Accordingly, we direct Ld. AO/TPO to delete addition made on account of advertisement expenses under section 37 (1). Disallowance of warranty expenses - HELD THAT:- Assessee's case dearly fans in line with the legal ratio set out by the various appellate decisions cited at Bar in so far as the provision for warranty stood crystallized as soon as the sate was made which a customer would like to be fulfilled within the warranty period and is at the cost of an assessee's goodwill. Therefore, the residual amount purported to have been held by the Assessing Officer as an excess provision cannot be considered as a contingent provision and not an ascertained liability. The warranty period continues beyond an year which fact was rightly considered by the Id. CIT(A). - Decided against revenue. Disallowance of foreign exchange loss - DR submitted that foreign exchange loss cannot be allowed, as the transactions are speculative in nature and contingent in character - HELD THAT:- Accounting treatment is to recognise exchange fluctuation gain or loss in the profit and loss account as on the valuation date. Hon ble Supreme Court in case of CIT vs Woodward Governor India (P) Ltd [ 2009 (4) TMI 4 - SUPREME COURT] held that, a transaction in which a legal liability has been incurred before it is actually disbursed would be regarded as revenue in nature. In the facts of present case assessee incurred foreign exchange loss far year under consideration towards trading activities, and therefore it is directly attributable to business of assessee, which is an allowable expenditure. TPA - AMP expenses addition - HELD THAT:- No adjustment needs to be done in respect of AMP expenses as relying on assessee's own case [ 2019 (5) TMI 1541 - ITAT BANGALORE]
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2020 (4) TMI 746
TP Adjustment - filters application - HELD THAT:- As observed that authorities below have cherry picked on using filters without understanding business model of assessee. It is observed that DRP applied on-site revenue filter suo moto, without being considered by TPO. We are of the opinion that transfer pricing adjustment made by AO/TPO needs to be re-looked in accordance with law. As observed that AO while passing final assessment order in computation of assessed income has not considered transfer pricing adjustment that has been made in para 3 of assessment order. This shows a sheer negligence on behalf of Ld. AO and non-application of mind. Provision for warranty disallowed - HELD THAT:- We direct Ld. AO to verify the claim of assessee in the light of decision by Hon ble Supreme Court in case of Rotork Controls India (P) Ltd., vs CIT [ 2009 (5) TMI 16 - SUPREME COURT] and Hon ble Delhi High Court in case of CIT vs Goetz India Ltd., [ 2010 (1) TMI 29 - DELHI HIGH COURT]
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2020 (4) TMI 745
Disallowance u/s 35 - bogus donations - assessee company had given donation to Matravaini Institute of Experimental Research Education, Kolkata - HELD THAT:- Assessee is entitled to deduction of section 35(1)(ii) of the Act as the said research institute was eligible to accept donation and on the date of giving donation by the assessee and that Notification was valid and it is only by way of subsequent letter it was cancelled from back date. The case of the assessee is squarely covered by a series of decisions as referred to and relied by the Ld. A.R. In the case of Borsad Tobacco Company Pvt. Ltd. vs. DCIT [ 2019 (6) TMI 1484 - ITAT MUMBAI] the co-ordinate bench of the Tribunal has held that donor is not affected due to subsequent withdrawal of recognition with retrospective effect Hon ble Bombay High Court in the case of Ram Das Maniklal Gandhi vs. UOI [ 1999 (9) TMI 64 - BOMBAY HIGH COURT] has held that the donation to an institution whose approval was withdrawn by the prescribed authority with retrospective effect would not affect the assessee who gave the donation. The assessee is entitled to rely upon the certificate granted to an institution under section 35CCA of the Act for claiming deduction under section 35CCA of the Act for claiming deduction under that section which was valid and subsisting when donation was made to it - We set aside the order of Ld. CIT(A) and direct the AO to allow the deduction as claimed under section 35 of the Act by the assessee. Addition towards depreciation on the let out property - HELD THAT:- As decided in own case 2019 (9) TMI 544 - ITAT MUMBAI] no deprecation u/s 32 of the 1961 Act can be allowed on the two properties which were acquired in earlier years and were let out throughout the year under consideration income thereof being offered for tax under the head income from house properties, as doctrine of supervening impossibility has set in as neither these properties were used for business purposes, nor ready to be used for business nor available for business user for the purposes of business of the assessee, for the entire year under consideration. Thus, deprecation u/s 32 of the 1961 Act under these circumstances can not be allowed on these two properties merely on the grounds that once these properties entered Block of Assets viz. Building many years back and continues to be part of Block of Asset viz. Building despite the fact that factual matrix surrounding these two properties had undergone substantial change over years which cannot be given complete go bye.
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2020 (4) TMI 744
Rectification u/s 154 - CIT (A) held that forex loss or gain arising on account of Foreign exchange fluctuation pertaining to Foreign currency convertible bonds (FCCB) utilized for general business purpose and not with respect to capital account is in the nature of Capital Loss - HELD THAT:- Assessee has been consistently following the same treatment for all the subsequent. During the course of original assessment proceedings, while responding the query on section 14A the assessee has specifically stated that foreign currency convertible bonds were used for capital account purposes. The revenue has not rebutted the fact that the assessee has followed the same treatment in earlier years. Paper book wherein the assessing officer has reproduced the assessee s submission in its order. We notice that the assessee has contended before the AO that as per the settled law foreign exchange gain on capital account transaction is not chargeable to tax, therefore, the case is covered in favour of the assessee. Hence, we find merit in the contention of the Ld. counsel that there is no infirmity in the findings of the Ld. CIT(A). Action of the AO in passing order u/s 154 coordinate Bench in the assessee s own case for the AY 1996-97 has upheld the findings of the Ld. CIT (A) holding that as per the settled law the only mistake apparent from record can be rectified u/s 154 of the Act and a debatable issues cannot be said to be a mistake apparent from record. - Decided against revenue.
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2020 (4) TMI 743
Rejection of books of accounts - profit estimation - assessment u/s 144 - profit rate determination - HELD THAT:- Assessee has explained the difference in the closing stock figure of the last year and the opening stock figure of the current year filed before the AO and the CIT(A). However, the same was rejected on the ground that the details of the expenditure and date of incurring such expenditure along with the purpose was not given. Books results were rejected u/s 145(3) and the AO has gone for estimation of profit. Considering the fact that there is difference of ₹ 77,08,967/- in the closing stock of preceding year and the opening stock of the current year, we are of the considered opinion that adoption of net profit rate of 3% on ₹ 2,16,78,967/- (i.e., the turnover of ₹ 1,39,70,000/- + ₹ 77,08,967/- being the difference in stocks) will meet the ends of justice - direct the AO to recompute the addition by considering the net profit at ₹ 6,50,369/- less net profit already disclosed by the assessee at ₹ 1,15,812/- (subject to verification). Grounds of appeal No.2 and 3 filed by the assessee are accordingly partly allowed. Addition u/s 68 - assessee could not substantiate the amount received from three different parties on account of share application money - HELD THAT:- Since the ld.CIT(A) has sustained the addition to the tune of ₹ 57 lakhs on the ground that no confirmation was filed by the assessee and considering the fact that there is a running account between the assessee and M/s Rama Ply Board Industries Ltd., therefore, considering the totality of the facts of the case, we deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate the nature of transaction to his satisfaction and decide the issue as per fact and law.
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2020 (4) TMI 742
Disallowance on advertising expenses and professional expenses including Branding expenses - allowable revenue - HELD THAT:- As decided in own case [ 2019 (10) TMI 828 - ITAT CHENNAI] AO is not expected to question the necessity of the expenditure. The brand expenditure is nothing but business promotion expenditure which is Revenue in nature and which is clearly allowed as deduction - Decided in favour of assessee. Delayed employees contribution towards PF - whether contribution remitted before the due date of filing of the return u/s.139(1) - HELD THAT:- This issue is covered by the order of the Hon ble Madras High Court in the case of Industrial Security Intelligence India Pvt. Ltd. [ 2015 (7) TMI 1063 - MADRAS HIGH COURT] in favour of assessee. Disallowance of depreciation on trade mark - HELD THAT:-This issue is covered in favour of the assessee in the assessee s own case [ 2019 (10) TMI 828 - ITAT CHENNAI] wherein held that law is settled to the extent that it is outside the domain of the ld. AO to question the necessity of incurring an expenditure. Thus the reasons assigned by the Assessing Officer that the transaction for purchase of trademark are not genuine cannot stand test of the law. Furthermore, it is an settled principle of law that intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates. We do not concur with the views of the lower authorities in disallowing the claim for depreciation on trademark. Cessation of liability u/s 41(1) - HELD THAT:- It is clear from the above that the very same AO allowed the write off of M/s.Rocky Marketing (Chennai) Pvt. Ltd., in its hands. Therefore, M/s.Rocky Marketing (Chennai) Pvt. Ltd., has waived off the liability from the assessee s hand. As per the explanation extracted, supra, the remission or cessation of any liability by a unilateral Act, is covered u/s.41(1) and hence, we do not find any reason to interfere with the order of the Ld.CIT(A). Therefore, corresponding grounds of the assessee fail.
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2020 (4) TMI 741
Penalty u/s 271AAB - disclosure of additional income in the return of income filed under section 153A - no undisclosed income or the inflation of expenditure during the search/ assessment proceedings - HELD THAT:- Unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure. An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee - Penalty u/s 158BFA (2) is not leviable. The facts of the assessee's case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we set aside the order of the lower authorities and cancel the penalty u/s 271AAB of the Act.- Decided in favour of assessee.
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2020 (4) TMI 740
Revision u/s 263 - depreciation on being Foreign Exchange Fluctuation u/s 43A - HELD THAT:- As inferred from the revisional order u/s.263 is different from the reasons set-out in the show-cause notice and therefore, we are of the considered view that when a ground of revision is not mentioned in the show-cause, then it cannot be made the basis of the order for the reason that assessee would have had no opportunity to meet the point. Considering the judgements relied upon by the ld.AR, we find that the ground mentioned by the CIT, while passing the order u/s.263 with regard to claiming of depreciation on account of Foreign Exchange Fluctuation was not mentioned in the show-cause notice u/s.263(1) of the Income Tax Act. Therefore, the assessee could not get opportunity to explain the point recorded at the time of passing final order. We hold that the order of ld.CIT u/s.263 qua directing the ld.AO to pass a fresh order denovo on account of claim of depreciation on account of Foreign Exchange Fluctuation is bad in law and is thus not sustainable in Law. Therefore, that portion of the order is quashed, and this ground raised by the assessee is allowed. Disallowance on account of repairs to Plant Machinery - HELD THAT:- It is not a proviso to proviso in other words. Learned Departmental Representative further fails to dispute that the question whether or not a port terminals Jetty / Trestle is to be treated as plant and machinery is no more res integra since this tribunal s co-ordinate bench decision in Kandla Port Trust case [ 2006 (4) TMI 243 - ITAT RAJKOT] has held such assets to be plant and machinery entitled for 25% rate of depreciation. Hon'ble jurisdictional high court has upheld the said view in Revenue s tax [2016 (8) TMI 111 - GUJARAT HIGH COURT] . We therefore find no reason to accept in Revenue s arguments seeking to treat assessee s Jetty Trestle as building block of assets instead of plant and machinery in all cases on merits as well. Depreciation on electric installation - HELD THAT:- We find that the issue is squarely covered in M/s.Gujarat Chemical Port Terminal Co.Ltd., Vs. DCIT, Circle-1(1)(1) [ 2019 (12) TMI 1294 - ITAT SURAT] opinion that assessee is eligible for depreciation @ 15% instead of 10% allowed by the ld.AO.
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2020 (4) TMI 739
Exemption u/s 11 - Registration u/s.80G(5) rejected as assessee failed to file documentary evidences to enable him to bring satisfaction about the genuineness of the Trust activities - HELD THAT:- After considering the rival submissions, we are of the view the matter requires reconsideration at the level of Learned CIT(Exemption). Since the assessee had already submitted all the required documents by email before the ld.CIT(Exemption) which do not find mention in the order, therefore it can be inferred that those were not considered. The principle of audi alteram partem is the basic concept of natural justice. The expression audi alteram partem implies that a person must be given an opportunity to defend himself. This principle is sine qua non of every civilized society. The right to notice, right to present case and evidence, right to rebut adverse evidence, right to cross examination, right to legal representation, disclosure of evidence to party, report of enquiry to be shown to the other party and reasoned decisions or speaking orders. We took this guidance for right of hearing, from the ratio as is laid down by the Hon'ble Supreme Court in the case of Maneka Gandhi v. Union of India, wherein Hon'ble Supreme Court has laid down that rule of fair hearing is necessary before passing any order. We find that it is pre-decision hearing standard of norm of rule of audi alteram partem. We, are therefore, of the view the matter requires reconsideration at the level of Learned CIT(Exemption). Thus, while setting aside the order of ld.CIT(E), we restore it back to Ld.CIT(Exemption) and direct that all the documents filed by assessee through E-mail be considered and the assessee be given one more opportunity of being heard and to file all the documents before the ld.CIT(Exemption), Ahmedabad as called-for - Appeal of the assessee is allowed for statistical purpose.
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2020 (4) TMI 738
Estimation of income - Addition on statement during the course of survey - CIT- A deleted the addition - As per revenue basis for making addition was not only the statement recorded by the Revenue during the course of survey but also the profit and loss account extracted from the computer system of the assessee on the basis of which the assessee has disclosed his income - HELD THAT:- CIT(Appeals) has failed to appreciate the statement of the assessee and further failed to examine the profit and loss account retrieved at the time of survey which was admitted to be correct by the assessee. On the basis of this extracted profit and loss account from the computer for the relevant assessment year upto 19.01.2010, the assessee has declared his income of ₹ 8.63 Crores . The assessee on his own in reply to Question No.25 had over and above the already agreed income of ₹ 8.63 Crores have also admitted that he would have an income of ₹ 9.5 Crores (inclusive of ₹ 8.63 Crores) upto 31.03.2010. Besides that the assessee had also declared the additional income of ₹ 2.60 Crores and ₹ 2.20 Crores for the assessment year 2008-09 and 2009-10 respectively. CIT(Appeals) had wrongly read the statement of the assessee and have further failed to appreciate the accounts as on 19.01.2010 were duly admitted and acknowledged by the assessee as correct. Hence, the right course would be for the Ld. CIT(Appeals) to freeze the profit and loss account of the assessee upto 19.01.2010 and thereafter, the profit and loss account for the remaining period was required to be re-casted and based on that profit of the assessee should have been calculated. Needful was not done by the Assessing Officer or by the Ld. CIT(Appeals) - remand the matter to the file of the Ld. CIT(Appeals) - Appeal of the Revenue is allowed for statistical purposes
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2020 (4) TMI 737
Penalty u/s. 271D and u/s. 271E - default u/s 269SS and 269T - acceptance and repayment of loans or deposits in cash - Co-operative Societies to be treated as credit societies as alternative to Bank - bonafide belief - HELD THAT:- Assessee has accepted and repaid deposit of loans above ₹ 20,000/- otherwise then by the account payee cheque or account payee draft on a bonafide belief that provisions of section 269SS and 269T are not applicable in its case. AO had also accepted that deposits made by the assessee are genuine and the breach of provisions of section 269SS and 269T was occurred due to bonafide belief. Even no addition was made on account of these impugned deposits in the Return of Income and thus the veracity of the creditors was not doubted by the Revenue. In case, if the veracity was doubted, then the additions would have been made u/s.68 of the Act. It is an undisputed facts that these credit societies function in villages/taluks etc., for farmers or related persons, as an alternative to banks and if the deposits were taken/repaid only in cheques, then it may loose all relevance. Even the Chartered Accountant who audited the books of accounts was not showing these as being in contravention of the Act in the relevant columns of Audit Report. Under bonafide belief assessee could accept and repaid loan or deposits in cash as is done by the Co-operative Banks, the assessee had accepted and repaid loans or deposits in cash. Provision of section 269SS are not applicable in the present case. - Decided against revenue.
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2020 (4) TMI 736
Allowable revenue expenditure u/s 37 - training charges incurred on non-executive director - HELD THAT:- Shri Jashan Bhumkar completed the higher education with the financial assistance of the assessee company and assessee company had incurred the education expenditure for the last year of graduation and Shri Jashan Bhumkar was working in the company as non-executive director at the time of availing the above benefit. The company has decided to approve the above expenditure by passing a resolution in this regard and entered into an education sponsorship agreement. As per the above agreement Shri Jashan Bhumkar has to work with the assessee company for a period of 3 years in return for the above said sponsorship. Assessee has sponsored the education of son of the M.D. What is relevance, whether the person who was sponsored, is relevant for the existing business and whether the business benefitted. If it is yes, then it is valid business expenditure and respectfully following the aforesaid decisions which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, we allow the grounds raised by the assessee.
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2020 (4) TMI 735
Exemption u/s 11 - corpus fund received - AO noted that all the persons denied having given any donation to the assessee thus addition proposed u/s 68 - HELD THAT:- Assessing Officer accepted the genuineness of the transactions in respect of seven persons out of the said 17 persons from whom loan was received - evidences produced in respect of 6 persons as detailed at S.Nos. 3,5,7, 8, 12 14 . The Ld. DR could not point out any discrepancy in the findings of the CIT(A) on this issue. The observations made by the Tribunal in the circumstances of the case of the assessee in respect of some of the unexplained corpus donations can not be applied in respect of unexplained loans. In a loan case, the assessee has to establish beyond reasonable doubt the identity and creditworthiness of the creditor and genuineness of the transaction. Application of income does not change the character of receipt. If the receipt is not from the property held for charitable purposes, the same will not be eligible for exemption u/s 11, irrespective of its application for charitable purposes or otherwise. In view of this, the addition made by the Assessing Officer in respect of alleged loans received from remaining four persons at Serial No. 2, 6, 10 and 16 as given on the chart forming part of the order of CIT(A) amounting to ₹ 85,88,616/- is confirmed. Revenue's Ground is partly allowed.
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2020 (4) TMI 734
Addition u/s 68 - Bogus LTCG - HELD THAT:- The contract note of showing sale of shares of M/s. NGFL and the bank statement reflecting the receipt on sale of shares of M/s. NGFL is found placed and the Demat statement reflecting sale on 17th September, 2013 has been furnished at the time of hearing which copy has been given to the ld. DR also. Thus it is noted that the assessee has purchased on-line scrips of M/s. NGFL and sold it also on-line after paying STT. The assessee has discharged its onus to prove the transactions to be bonafide transactions from which it claimed the LTCG and therefore this amount is an exempt income u/s 10(38) - We note that the AO has not found any fault with the aforesaid documents though he accepted that he has gone through the same. In such a scenario we are bound to follow the decision of this Tribunal in another case of an assessee wherein similar claim of LTCG on sale of M/s. NGFL was considered and granted. Respectfully following the Tribunal s order in Madhu Killa [ 2018 (11) TMI 261 - ITAT KOLKATA] and taking into consideration the documents filed by the assessee to prove the transaction which has taken place through on-line (both purchase and sale) after giving STT need to be allowed and therefore allow the claim and direct deletion of addition - Decided in favour of assessee.
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Insolvency & Bankruptcy
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2020 (4) TMI 733
Liquidation of Corporate Debtor - liquidation sought on the ground the Resolution Applicant failed to perform the Resolution Plan as stated in the Resolution Plan and for appointment of Mr. Chandramouli Ramasubramaniam as Liquidator of the Corporate Debtor - HELD THAT:- Looking at the attendance sheet file, it appears that these Respondents (Promoter-Directors) appeared on and off but have not come out with any concrete proposal or any promise to comply with the Resolution Plan approved by this Bench. For having already two months gone by after filing this application, we are constrained to pass orders to liquidate the Corporate Debtor under section 33(3) of the Code by directing the erstwhile Resolution Professional (RP) namely, Mr. Chandramouli Ramasubramaniam looking at the written consent given by him, to act as the Liquidator of the Corporate Debtor for the purpose of liquidation of this Corporate Debtor. The Liquidation of Corporate Debtor is ordered in the manner as laid down in the Chapter by issuing a public notice stating that the Corporate Debtor is in liquidation with a direction to the liquidator to send this order to ROC with which this company has been registered. The Registry is hereby directed to immediately communicate this order to the Liquidator, the Corporate Debtor, the IBBI and Concerned ROC by way of e-mail - application allowed.
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PMLA
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2020 (4) TMI 732
Money Laundering - investment of proceeds of crime - Acquiring of Liquor shops - allegation that the investment represent the process of integration of the proceeds of the crime with the main stream economy - Section 5(1) of the PMLA - It has been submitted on behalf of appellant that there is no material whatsoever on the basis of which the competent authority/adjudicating authority could have reasons to believe that movable and immovable properties purchased by the appellants were derived or obtained from proceeds of crime generated from criminal activity relating to schedule offence - right to appeal. HELD THAT:- The predicate offence and the offence of money-laundering are two distinct and separate set of offences. The offence of money laundering is independent of schedule offences. As per section 24 of PML Act, the burden of proof that proceeds are legitimate is on the accused - It is the date of laundering which would be relevant and not the date of schedule offence. The laundering as used in Section 3 comprises of involvement in any process or activity by which the illicit money is being projected as untainted. Date of occurrence of scheduled offence is not relevant, rather, date on which laundering of money is committed is the relevant date. Even if money was acquired prior to amending Act but accused has committed offence under Section 3 of act subsequent to coming of the Act he can be proceeded for offence of money laundering i.e. his involvement in projecting illicit money to be untainted. Attachment proceeding and criminal proceedings are two parallel and independent proceedings and are not dependent upon each other. Properties which are found liable for attachment after final adjudication can be confiscated after conviction of accused under Section of PML Act - Against the order passed by the appellate tribunal the aggrieved party under Section-42 of the PMLA has further right of appeal before the High Court, as such the order passed by the appellate tribunal by which instead of deciding the appeal and pass a final order, keeping the appeal pending till disposal of criminal prosecution lodged for offences punishable under Sections 3/4 of the PMLA pending before the PMLA Court, Patna is not sustainable and liable to be set aside. The appellate tribunal is directed to decide the pending appeal of appellant within three months from the date of receipt/production of a copy of the order passed by this Court - Appeal disposed off.
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Service Tax
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2020 (4) TMI 731
Nature of activity - deemed sale or service? - service of providing leasing of digital cinema equipments to theatres - supply of tangible goods service or not - HELD THAT:- Identical issue decided in the case of M/S. QUBE CINEMA TECHNOLOGIES PVT. LTD. VERSUS GST CCE, CHENNAI NORTH [ 2018 (5) TMI 887 - CESTAT CHENNAI] where it was held that activity does not fall within the definition of service under the Finance Act, 1994 as amended in 2012. The demand cannot sustain - Appeal allowed - decided in favor of appellant.
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Indian Laws
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2020 (4) TMI 730
Public Auction by Banks - recovery of outstanding dues - Right of e-auction purchaser - To get original documents - no existence of valid mortgage in respect of the secured assets - approbation and reprobation of commitment on the part of guarantor - thrust of the argument of the appellant is that it having purchased the property in a public auction conducted by the Bank and upon complying with necessary formalities and further, having received the sale certificate in that regard, in law, was entitled to get the original title documents in respect of the stated properties - HELD THAT:- The guarantor cannot be allowed to approbate and reprobate from the commitment made in successive proceedings before the DRT and the High Court. Suffice it to observe that the guarantor has successively raised the issue regarding the validity of subject mortgage in different proceedings unsuccessfully. The concerned forum/Court unambiguously rejected the same. More importantly, the guarantor through its Director(s) having offered to pay the entire outstanding dues and also admitting on affidavit the factum of existence of subject mortgage in favour of the Bank, the question of showing any indulgence to the guarantor (by the High Court) did not arise. The guarantor cannot be allowed to raise the same plea repeatedly on every occasion/in every proceeding. Notably, the auction sale stands concluded and followed by issuance of sale certificate in favour of the appellant. Resultantly, the Bank is under legal obligation to handover the title deeds or original documents being Exhibits A110 to A114 to the appellant for completion of the formalities of sale - the High Court should have been loath in entertaining the writ petition filed by the guarantor, raising the same plea ad nauseam. The reason weighed with the High Court, in our opinion, is flimsy and untenable. That cannot be countenanced at the instance of the guarantor. The inevitable effect of entertaining the stated plea of guarantor will entail encouraging vexatious plea and procrastination of the concluded auction sale by delaying handing over of title documents to the highest bidder, in whose favour sale certificate has already been issued. Whether despite the decree of a Court of competent jurisdiction in favour of respondent No. 11 (A.R. Sridharan) concerning land bearing Paimash No. 722/4 admeasuring 1.80 acres, can the documents pertaining to that land be still made over to the appellant/auction purchaser, merely because sale certificate has been issued by the Bank in that regard? - HELD THAT:- The sale certificate, as issued by the Bank, does make reference to land bearing survey No. 282, which inter alia, consists of old Paimash No. 722/4. Therefore, to the extent of land referred to in the decree dated 16.2.1990 passed by the Court of District Munsiff, Chengalpattu in O.S. No. 186/1976 in favour of the respondent No. 11 (A.R. Sridharan), despite the issuance of sale certificate, the title document in respect of old Paimash No. 722/4 ought not to be released until the final decision in O.A. No. 11/2008 - The fact that other proceedings, including about the title in respect of land admeasuring 1.80 acres bearing Paimash No. 722/4 are pending between the parties, cannot be the basis to overlook the claim of the respondent No. 11 (A.R. Sridharan) until a Court of competent jurisdiction declares that the respondent No. 11 (A.R. Sridharan) had no subsisting right, title or interest in that property. Admittedly, the appellant is party to the O.A., as well as, in the application filed by the Bank for return of documents. The Bank has supported the stand taken by the appellant. We find no infirmity in the appellant having approached this Court instead of the Bank, the applicant before the DRT. Even the appellant could have itself approached the DRT for this very relief. Taking any view of the matter, the objection under consideration is of no avail to the contesting respondents. Although we are inclined to reverse the impugned decision of the High Court, however, for the nature of controversy brought before us, it may be appropriate to modify the operative order of the DRAT to the effect that the application filed by the Bank being I.A. No. 995/2017 in O.A. No. 11/2008 is partly allowed by ordering return of the original documents, except in respect of the land bearing Paimash No. 722/4 admeasuring 1.80 acres being subject matter of decree in O.S. No. 186/1976. This arrangement will meet the ends of justice in the facts of the present case. Appeal allowed in part.
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