TMI Tax Updates - e-Newsletter
April 29, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Input Tax Credit (ITC) - bunds/ crystallizer which are constructed and used in the manufacture of salt and bromine chemicals - bunds/ crystallizer can be said to be covered under ‘any other civil structures’ - When the exclusion clause (i) excludes ‘land, building or any other civil structures’ from the purview of the definition of ‘plant and machinery’, the phrase ‘any other civil structures’ naturally refers to all other civil structures, other than foundation and structural supports used to fix the apparatus, equipment, and machinery to earth. - AAAR
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Income Tax:
Order under section 119 of the Income-tax Act, 1961 regarding reporting requirement under clause 30C and clause 44 of the Form 3CD - Circular
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Income Tax:
Income accrued in India - PE in India - liaison offices in India - since by a legal fiction it is deemed not to be a PE of the respondent in India, it is not amenable to tax liability in terms of Article 7 of the DTAA. - SC
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Income Tax:
Addition u/s 68 - Levy of penalty u/s 271(1)(c) - concealment of particulars - unexplained cash credit / bogus purchases - At the time of assessment, the appellant/assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer - Additions and penalty set aside - SC
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Income Tax:
Constitutional validity of clause (f) of Section 43B - The liability of leave encashment continues to be a present liability as per the mercantile system of accounting. Further, the insertion of clause (f) has not extinguished the autonomy of the assessee to follow the mercantile system. It merely defers the benefit of deduction to be availed by the assessee for the purpose of computing his taxable income and links it to the date of actual payment thereof to the employee concerned. Thus, the only effect of the insertion of clause (f) is to regulate the stated deduction by putting it in a special provision. - Provision is constitutionally valid - SC
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Income Tax:
Assessment u/s 144C - AO issued notice of demand at stage of draft assessment order - without following the procedure as contemplated u/s. 144C of the Act the AO issued demand notice and penalty notice. Thereby, in our opinion, the final assessment order 28-04-2014 passed u/s. 143(3) r.w.s. 144C(3) of the Act lacked validity and it is liable to be quashed
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Income Tax:
Addition u/s 43B - ED receivable from the DGFT - Whatever receivable from the DGFT, the amount is actually to be paid at the time of the purchases/imports. The appellant has only utilized the Cenvat credit for the payment of Excise duty and such the proposed action to disallow by applying the provisions of Section 43B is erroneous
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Income Tax:
Deduction u/s 54F - ssessee owned more than one residential property - the documents forming part of the APB clearly reveals beyond any scope of doubt that the assessee during the year under consideration was the owner of the residential house/Bungalow - Deduction was rightly denied.
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Income Tax:
Addition u/s 45(2) - conversion of capital asset into stock in trade - The computation of capital account would be based on the consideration being fair market price as on the date of conversion being in the year 2001 though the same will be assessed to tax in the year under consideration when the assessee has finally sold the stock in trade.
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Income Tax:
Addition on account of payment of undisclosed commission - addition cannot be made in the hands of the assessee for the reason that, firstly, the name of the assessee is not mentioned in the seized document; secondly, there is no corroborative evidence or any statement that the payment has been received by the assessee other than cheque amount as entered in the sale agreement; and lastly, on the bare perusal of the document it cannot be inferred or concluded that seized document belongs to or has any nexus with the assessee.
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Customs:
Guidelines for conduct of personal hearings in virtual mode under Customs Act, 1962 - Order-Instruction
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Customs:
Valuation of certain items imported under two contracts - inclusion of the price of drawings, design etc. - the stand of SAIL was consistent that the subject drawings and specifications did not relate to the equipments imported and was meant for post importation activities and there was no condition laid down that the import of the equipments were to be supplemented by post-importation work. - Value cannot be enhanced - SC
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FEMA:
Foreign Exchange Management (Nondebt Instruments) (Second Amendment) Rules, 2020 - Notification
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State GST:
Clarification in respect of various measures announced by the Government for providing relief to the taxpayers in view of spread of Novel Corona Virus (COVID-19) - Karnataka SGST
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State GST:
Seeks to clarify issues in respect of issues under GST law for companies under Insolvency and Bankruptcy Code, 2016 - Karnataka SGST
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Indian Laws:
Territorial Jurisdiction - transfer of subordinate officers from Shillong to Itanagar - power of judicial review - The Central Administrative Tribunal, while interfering with the order of transfer in the present case, has exceeded its jurisdiction, and erred in law in quashing the order of transfer - HC
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Central Excise:
Condonation of delay for more than seven years - we are unable to entertain the applications for condonation of delay filed by the appellant which are highly time barred, therefore, the applications for condonation of delay are dismissed. - AT
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VAT:
Time limitation for delivery of goods in case of inter-state sale - benefit of Section 6(2) of CST Act, 1956 - A legal fiction is created in first explanation to that Section. That fiction is that the movement of goods, from one State to another shall terminate, where the good have been delivered to a carrier for transmission, at the time of when delivery is taken from such carrier. There is no concept of constructive delivery either express or implied in the said provision - SC
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VAT:
Apprehension of misuse of provisions of an Act - In the event, the authorities felt any assessee or dealer was taking unintended benefit under the aforesaid provisions of the 1956 Act, then the proper course would be legislative amendment. The Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practise. This administrative exercise, in effect, would result in supplying words to legislative provisions, as if to cure omissions of the legislature. - SC
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VAT:
Maintainability of petition - efficacious remedy of filing an appeal - Validity of reassessment order - validity of rectification order passed by the prescribed authority - KVAT Act - the writ Court could not have entertained the matter in view of an alternative remedy available - HC
Articles
Notifications
FEMA-
S.O. 1374(E) - dated
27-4-2020
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FEMA
Foreign Exchange Management (Nondebt Instruments) (Second Amendment) Rules, 2020
GST - States-
F-A-3-42-2017-l-V(14) - dated
20-3-2020
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Madhya Pradesh SGST
Amendment in Notification No. F-A-3-42-2017-I-V (53), dated 30th June 2017
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F-A 3-03-2020-1-V (17) - dated
20-3-2020
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Madhya Pradesh SGST
Madhya Pradesh Goods and Services Tax (Amendment) Rules, 2019.
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F A-3-51-2019-l-V(13) - dated
20-3-2020
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Madhya Pradesh SGST
Notification of class of Registered persons, whose aggregate turnover in a financial year exceeds one hundred crore rupees, required to issue e-invoice as per sub Rule (4) of Rule 48
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F A-3-47-2017-1-V(16) - dated
20-3-2020
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Madhya Pradesh SGST
Amendment in Notification No. F A-3-47-2017-I-V(59), dated 30th June, 2019
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F A-3-03-2018-18-V(15) - dated
20-3-2020
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Madhya Pradesh SGST
Amendment in Notification No. F. A-3-03-2018-1-V-(4), dated the 23rd January, 2018
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F A-3-03-2018-1-V(19) - dated
20-3-2020
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Madhya Pradesh SGST
Amendment in Notification No. F. A-3-03-2018-1-V-(4), dated the 23rd January, 2018
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F A-3-02-2020-1-V(18) - dated
20-3-2020
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Madhya Pradesh SGST
Madhya Pradesh Goods and Services Tax (Tenth Removal of Difficulties) Order, 2019
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (4) TMI 798
Release of confiscated goods alongwith the vehicle - section 129(1) of the GST Act - HELD THAT:- The writ applicant availed the benefit of the interim-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law.
It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [2020 (2) TMI 1159 - GUJARAT HIGH COURT] - It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged.
Application disposed off.
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2020 (4) TMI 797
Release of confiscated goods alongwith the vehicle - section 129(1) of the GST Act - HELD THAT:- The writ applicant availed the benefit of the interim-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law.
It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [2020 (2) TMI 1159 - GUJARAT HIGH COURT] - It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged.
Application disposed off.
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2020 (4) TMI 796
Release of confiscated goods alongwith the vehicle - section 129(1) of the GST Act - HELD THAT:- The writ applicant availed the benefit of the interim-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law.
It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [2020 (2) TMI 1159 - GUJARAT HIGH COURT] - It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged.
Application disposed off.
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2020 (4) TMI 795
Input Tax Credit - bunds/ crystallizer which are constructed and used in the manufacture of salt and bromine chemicals - Zero Rated Supply or not - AAR held that Input tax credit of GST paid on goods and services used to construct the “bunds” is admissible to M/s. Satyesh Brinechem Private Limited, provided that the bunds are used for making zero rated supplies and fulfill the conditions which are necessary for treating the bunds as “plant and machinery” - challenge to AAR decision.
HELD THAT:- Since the salt would be exported, the same would be considered as ‘zero rated supply’ and object to the provisions of section 17(5) of the CGST Act, 2017, credit of input tax may be availed for making such zero rated supplies. In view of the provisions of section 16 of the IGST Act, 2017.
Sub-section (5) of section 17 of the GST Acts starts with non-obstane clause and will have overriding effect on the provisions of Section 16(1) of the GST Acts. Therefore,’ if the goods and/ or services are covered under sub-section (5) of Section 17 of the GST Acts, the input tax credit Shall not (sic) be available - Also, credit of input tax may be availed for making zero rated supplies in view of the provisions of sub-section (2) of section 16 of the IGST Act, 2017. However, this provision in also subject to the provision of of sub-section (5) of section 17 of the CGST Act, 2017 - thus, the input-tax credit shall not be available on goods or services covered by sub-section (5) of section 17 of the GST Acts, even if the same are indispensible in the process of manufacture.
Whether the goods and services used by the applicant for construction of “bunds” / “crystallizers” are covered under sub-section (5) of section 17 of the GST Acts or otherwise? - HELD THAT:- The ‘plant and machinery’ would be outside the purview of clauses (c) and (d) of Section 17(5) of the CGST Act, 2017 and would be eligible for input tax credit.
Whether ‘bunds’ are ‘plant and machinery’? - HELD THAT:- As held by Hon’ble Apex Court in the case of COLLECTOR OF C. EX., CALCUTTA VERSUS ALNOORI TOBACCO PRODUCTS [2004 (7) TMI 91 - SUPREME COURT] circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases; that disposal of cases by blindly placing reliance on a decision is not proper - thus, ‘bund’ / crystallizer’ are not covered within the definition of ‘plant and machinery’ given under Section 17 of the GST Acts.
Whether ‘bunds’ are ‘any other civil structure? - HELD THAT:- In the present case, the natural meaning of the phrase ‘any other civil structures’, as discussed herein above, is compatible with clauses (c) and (d) of Section 17(5) and definition of ‘plant and machinery’ given under Section 17 of the GST Acts. Even otherwise, the specific words ‘land’ and ‘building’ preceding general words ‘any other civil structures’ do not constitute a genus - Therefore, the bunds constructed by mixing chemical Terrazyme, GSB Metal, Water with dugged aud laying LDPE film wherever required, can be said to be covered under ‘any other civil structures’.
Thus, Bunds are not ‘plant-and machinery within the definition of the said term under Section 17 of the GST Acts, and therefore, in view of clauses (c) and (d) of. Section 19(5) read with explanation below Section 17 of the GST Acts, Input Tax Credit in respect of works contract service or goods or services used in construction of ‘bunds’ is not admissible.
Ruling of AAR modified.
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Income Tax
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2020 (4) TMI 794
Income accrued in India - liaison office engaged in remittance services - PE in India - liaison offices in India - India- UAE DTAA - second mode of remittance through the liaison offices in India on account of the activity undertaken in the liaison office in India of downloading the particulars of remittances through electronic media and printing cheques/drafts drawn on the banks in India, which, in turn, are couriered or dispatched to the beneficiaries in India, in accordance with the instructions of the NRI remitter - HELD THAT:- The expression “business connection” can be discerned from Section 9(1), as also, the meaning of expression “business activity”. We will advert to those provisions a little later and for the time being, assume that the stated activities of the respondent are business activities. However, since the stated activities of the liaison offices of the respondent in India are of preparatory or auxiliary character, the same would fall within the excepted category under Article 5(3)(e) of the DTAA. Resultantly, it cannot be regarded as a PE within the sweep of Article 7 of DTAA. The expression “preparatory” is not defined in the 1961 Act or the DTAA.
permitted activities are required to be carried out by the respondent subject to conditions specified in clause 3 of the permission, which includes not to render any consultancy or any other service, directly or indirectly, with or without any consideration and further that the liaison office in India shall not borrow or lend any money from or to any person in India without prior permission of RBI.
The conditions make it amply clear that the office in India will not undertake any other activity of trading, commercial or industrial, nor shall it enter into any business contracts in its own name without prior permission of the RBI. The liaison office of the respondent in India cannot even charge commission/fee or receive any remuneration or income in respect of the activities undertaken by the liaison office in India. From the onerous stipulations specified by the RBI, it could be safely concluded, as opined by the High Court [2009 (2) TMI 56 - DELHI HIGH COURT], that the activities in question of the liaison office(s) of the respondent in India are circumscribed by the permission given by the RBI and are in the nature of preparatory or auxiliary character. That finding reached by the High Court is unexceptionable.
We agree with the finding recorded by the High Court about the nature and character of stated activities carried on by the liaison offices of the respondent and in our view, the High Court justly reckoned the same as being of preparatory or auxiliary character, falling under Article 5(3)(e).
The meaning of expressions “business connection” and “business activity” has been articulated. However, even if the stated activity(ies) of the liaison office of the respondent in India is regarded as business activity, as noted earlier, the same being “of preparatory or auxiliary character”; by virtue of Article 5(3)(e) of the DTAA, the fixed place of business (liaison office) of the respondent in India otherwise a PE, is deemed to be expressly excluded from being so. And since by a legal fiction it is deemed not to be a PE of the respondent in India, it is not amenable to tax liability in terms of Article 7 of the DTAA. We uphold the conclusions reached by the High Court for the reasons stated hitherto.
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2020 (4) TMI 793
Addition u/s 68 - Levy of penalty u/s 271(1)(c) - concealment of particulars - unexplained cash credit / bogus purchases - At the time of assessment, the appellant/assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer.
HELD THAT:- The appellate authority vide order dated 13.1.2011, had not only accepted the explanation offered by the appellant/assessee but also recorded a clear finding of fact that there was no concealment of income or furnishing of any inaccurate particulars of income by the appellant/assessee for the assessment year 19981999. That now being the indisputable position, it must necessarily follow that the additions cannot be justified, much less, maintained.
Addition under Section 68 towards cash credit amount shown against the names of concerned unregistered dealers for the assessment year 1998-1999, is hereby set aside. - Decided in favour of assessee.
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2020 (4) TMI 792
Constitutional validity of clause (f) of Section 43B - Inconsistency of clause (f) and absence of nexus with Section 43B - actual payment of liability to the employees (leave encashment) as a condition precedent for extending the benefit of deduction under the 1961 Act - clause (f) was inserted in the already existing Section 43B vide Finance Act, 2001 with effect from 1.4.2002 - application of clause (f), the eligibility for deduction arises in the previous year in which the abovesaid payment is actually made and not in which provision was made in that regard, irrespective of the system of accounting followed by the assessee - High Court [2007 (6) TMI 175 - CALCUTTA HIGH COURT] has characterised clause (f) as “arbitrary” and “unconscionable” while imputing it with unconstitutionality
HELD THAT:- From 1983 onwards, Section 43B had taken within its fold diverse nature of deductions, ranging from tax, duty to bonus, commission, railway fee, interest on loans and general provisions for welfare of employees. An external examination of this journey of Section 43B reveals that the legislature never restricted it to a particular category of deduction and that intent cannot be read into the main Section by the Court, while sitting in judicial review. Concededly, it is a provision to attach conditionality on deductions otherwise allowable under the Act in respect of specified heads, in that previous year in which the sum is actually paid irrespective of method of accounting.
Broad objective of enacting Section 43B concerning specified deductions referred to therein was to protect larger public interest primarily of revenue including welfare of the employees. Clause (f) fits into that scheme and shares sufficient nexus with the broad objective, as already discussed hitherto.
In the very nature of taxing statutes, legislature holds the power to frame laws to plug in specific leakages. Such laws are always pinpointed in nature and are only meant to target a specific avenue of taxability depending upon the experiences of tax evasion and tax avoidance at the ground level. The general principles of exclusion and inclusion do not apply to taxing statutes with the same vigour unless the law reeks of constitutional infirmities. No doubt, fiscal statutes must comply with the tenets of Article 14.
A larger discretion is given to the legislature in taxing statutes than in other spheres. In Anant Mills Co. Ltd. vs. State of Gujarat & Ors.S [1975 (1) TMI 62 - SUPREME COURT] this Court noted in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the Legislature in the matter of classification so long as it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.
Reason weighed with the Division Bench of the High Court in the impugned judgment is untenable.
Defeating the dictum in Bharat Earth Movers case [2000 (8) TMI 4 - SUPREME COURT] - Decision in Bharat Earth Movers (supra) and note that the Court was sitting in appeal over the nature of liability under the leave encashment scheme and held such liability to be a present liability. Resultantly, it became deductible from the profit and loss account of the assessee in the same accounting year in which provision against the same is made. The Court rejected that leave encashment liability is a contingent one.
It is no doubt true that the legislature cannot sit over a judgment of this Court or so to speak overrule it. There cannot be any declaration of invalidating a judgment of the Court without altering the legal basis of the judgment as a judgment is delivered with strict regard to the enactment as applicable at the relevant time. However, once the enactment itself stands corrected, the basic cause of adjudication stands altered and necessary effect follows the same. Upon the law coming into force, it becomes operative in the public domain and opens itself to any review under Part III as and when it is found to be plagued with infirmities. Upon being invalidated by the Court, the legislature is free to diagnose such law and alter the invalid elements thereof. In doing so, the legislature is not declaring the opinion of the Court to be invalid.
Once the Finance Act, 2001 was duly passed by the Parliament inserting clause (f) in Section 43B with prospective effect, the deduction against the liability of leave encashment stood regulated in the manner so prescribed. Be it noted that the amendment does not reverse the nature of the liability nor has it taken away the deduction as such. The liability of leave encashment continues to be a present liability as per the mercantile system of accounting. Further, the insertion of clause (f) has not extinguished the autonomy of the assessee to follow the mercantile system. It merely defers the benefit of deduction to be availed by the assessee for the purpose of computing his taxable income and links it to the date of actual payment thereof to the employee concerned. Thus, the only effect of the insertion of clause (f) is to regulate the stated deduction by putting it in a special provision.
This regulatory measure is in sync with other deductions specified in Section 43B, which are also present and accrued liabilities - merely because a certain liability has been declared to be a present liability by the Court as per the prevailing enactment, it does not follow that legislature is denuded of its power to correct the mischief with prospective effect, including to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to new regulatory measures. Strictly speaking, the Court cannot venture into hypothetical spheres while adjudging constitutionality of a duly enacted provision and unfounded limitations cannot be read into the process of judicial review. A priori, the plea that clause (f) has been enacted with the sole purpose to defeat the judgment of this Court is misconceived.
The position of law discussed above leaves no manner of doubt as regards the legitimacy of enacting clause (f). The respondents have neither made a case of nonexistence of competence nor demonstrated any constitutional infirmity in clause (f).
In view of the clear legal position explicated above, this appeal deserves to be allowed. Accordingly, the impugned judgment of the Division Bench of the High Court is reversed and clause (f) in Section 43B of the 1961 Act is held to be constitutionally valid and operative for all purposes.
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2020 (4) TMI 791
Penalty u/s 271(1)(c) - disclosure of additional income in search under section 153A - HELD THAT:- Explanation could be invoked if during the course of search any incriminating material representing any money, bullion, jewellery other valuables articles or things or entry in any books of accounts found during the course of search, based on such material, addition is being made. This Explanation cannot be invoked simply for the reason that, had the search not been carried out, the assessee would not have disclosed this additional income.
Solely on the basis of declaration, addition is not possible. See SMT. LOPA PANKAJ DAVE [2019 (12) TMI 908 - ITAT AHMEDABAD] - Delete the penalty imposed - Decided in favour of assessee.
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2020 (4) TMI 790
Addition u/s 68 - gifts received from the assessee’s son - Suspicion on source of source - HELD THAT:- In the instant case, the AO did not doubt the genuineness of the gift received from his son. The AO’s suspicion was the source of source i.e. donor, Sri Adika Manohar Rao. Since the assessee has discharged his burden by placing evidence with regard to receipt of gift from his son, we do not find any reason to make addition in the hands of the assessee. The source was established by the assessee, the occasion of the gift received by the assessee’s son was also explained. Therefore, we do not find any reason to doubt the genuineness of the receipt of gift by his son, Sri Bhimana Sujit Raviteja. Hence, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.
Limited scrutiny for mismatch of sales turnover - addition u/s 68 or 69A without the prior approval of the Principal CIT, Vijayawada - as per the provisions of law, the case cannot be converted to full scrutiny as per the instructions of CBDT without the approval of the Ld.CIT - HELD THAT:- Since we have adjudicated the ground on merits and allowed the appeal of the assessee, we consider it is not necessary to adjudicate the additional ground raised by the assessee. Accordingly, the appeal is of the assessee is allowed.
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2020 (4) TMI 789
Depreciation on batteries and UPS - @15% OR 60% - HELD THAT:- Both sides agree that this issue is covered in favour of assessee by decision in case of CIT vs. BSES Yamuna Power Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT]. Respectfully following the same, we direct Ld. AO of grant depreciation on UPS at 60%.
TDS u/s 194J - expenditure incurred towards toll-free telephone charges under section 40(a)(ia) - non-deduction of taxes under section 194J on the basis that the payments would qualify as ‘royalty’ - HELD THAT:- Payments made by assessee is royalty, in terms of Section 9(1)(vi) of the Act, and is liable to deduct TDS under section 194J of the Act. We therefore are in agreement with the view taken by CIT (A).
Admittedly, assessee has not deducted TDS on payments made towards toll-free charges, and therefore, disallowance under section 40 (a) (ia) is warranted. However, we set aside this issue to Ld.AO for verification as to whether the payee paid taxes on such payments received from assessee during relevant period. Reliance is placed on decision in case of Hindustan Coca-Cola Beverages Pvt. Ltd vs CIT [2007 (8) TMI 12 - SUPREME COURT] wherein it has been observed that, where tax due has been paid by the deducted, demand under section 201 (1) of the Act cannot be enforced on assessee. In the event, assessee is able to establish that, due tax has been paid by Payee on such payments received, the disallowance made u/s 40 (a) (ia) shall be deleted. Needless to say that assessee shall be granted proper opportunity of being heard as per law. With the above directions we set aside this issue back to Ld. AO.
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2020 (4) TMI 788
Assessment u/s 144C - AO issued notice of demand at stage of draft assessment order - HELD THAT:- without following the procedure as contemplated u/s. 144C of the Act the AO issued demand notice and penalty notice. Thereby, in our opinion, the final assessment order 28-04-2014 passed u/s. 143(3) r.w.s. 144C(3) of the Act lacked validity and it is liable to be quashed
The assessee had participated in the proceedings and the provision u/s. 292BB is applicable. Nowhere in the provision u/s. 144C mentioned that the assessee has to approach DRP. The assessee itself approached CIT(A) admitting the fact that it is not approaching to DRP.
This Tribunal in the case of Atlas Copco (India) Limited [2019 (8) TMI 1415 - ITAT PUNE] held a detailed discussion in respect of provisions u/s. 144C of the Act, the decisions of Hon’ble Supreme Court in the case of Kalyan Kumar Ray [1991 (8) TMI 291 - SUPREME COURT] and Vijay Television (P) Ltd. [2014 (6) TMI 540 - MADRAS HIGH COURT] and held that the final assessment order is null and void for the reason the AO issued notice of demand at stage of draft assessment order which actually ought to have been done at the stage of passing the final assessment order. Therefore, in our opinion, the facts and circumstances in the case of Atlas Copco (India) Limited [2019 (8) TMI 1415 - ITAT PUNE] and the findings thereon by the Tribunal is applicable to the facts and circumstances in the present case and resulting to, the final assessment order dated 28-04-2014 passed u/s. 143(3) r.w.s. 144C(3) of the Act is set aside. Thus, additional ground raised by the assessee are allowed.
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2020 (4) TMI 787
Estimation of income - Rejection of books of accounts - Bogus purchases - not allowing the assessee to cross examine the witnesses - AO made the addition of 25% of these alleged bogus purchases - CIT (A) while sustaining the addition has applied 18% as Net Profit on such purchases - HELD THAT:- Disallowance made by the AO based on the 3rd party information gathered by the Investigation Wing of the Department which was not subjected to independent verification by the AO was deleted by the ld. CIT (A), confirmed by the Tribunal as well as by the Hon’ble High Court which was further upheld by the Hon’ble Supreme Court while dismissing the appeals filed by the revenue. Even otherwise, the assessment order solely based on the statements of the 3rd party is not sustainable in law when the opportunity of cross examination was not given to the assessee.
As decided in M/S ANDAMAN TIMBER INDUSTRIES LTD. [2005 (3) TMI 763 - SC ORDER] not allowing the assessee to cross examine the witnesses by the adjudicating authority with the statements of those witnesses were made the basis of impugned order is a serious flaw which makes the order nullity as well as it amounts to violation of principles of natural justice. In the case in hand, when the assessee has demanded the cross examination, the AO instead of giving the opportunity to the assessee to cross examine the witnesses has rather asked the assessee to produce those witnesses.
Purchases made by the assessee in the said case from M/s. Avi Exports were treated by the AO as bogus, however, the Tribunal after considering the voluminous documents filed by the assessee before the lower authorities has set aside the orders of the lower authorities and deleted the addition made on account of alleged bogus purchases. It is pertinent to note that the addition made by the AO in the said case of M/s. Haryana Jewellers Pvt. Ltd. vs. ITO (supra) was also on the basis of statement of Shri Rajendra Jain.
Where the assessee has produced all the relevant documentary evidences which prove the genuineness of the purchases as well as following the decisions as relied upon by the assessee, we delete the addition sustained by the ld. CIT (A) on account of bogus purchases. - Appeal of the assessee is allowed
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2020 (4) TMI 786
Estimation of income - Rejection of books of account u/s 145(3) - GP estimation - lump sum trading addition made by the AO - HELD THAT:- It is settled proposition of law that the past history of the assessee is a proper guidance for estimation of the income after rejection of books of account as held by the Hon’ble Jurisdictional High Court in a number of judgments including the decisions relied upon by the assessee in cases of CIT vs. Gupta K.N. Construction Co (supra) as well as CIT vs. M/s. Inani Marbles Pvt. Ltd. [2008 (8) TMI 126 - HIGH COURT RAJASTHAN]
Undisputedly, the GP rate declared by the assessee for the year under consideration is better than the past history and, therefore, after rejection of books of account no trading addition is called for. Hence the trading addition made by the AO which is adhoc and the lump sum addition of ₹ 1,00,000/- as well as disallowance of direct expenses which is part of the trading account are not sustainable in law and liable to be deleted. Hence the lump sum addition of ₹ 1,00,000/- made by the AO as well as direct expenses on account of freight charges disallowed by the AO and confirmed by the ld. CIT (A) are deleted.
Disallowance of direct expenses on account of freight charges - Addition restricted by the ld. CIT (A) to 50% - HELD THAT:- Except the car maintenance and telephone expenses, no other items of expenses could be attributed to personal use or element. Therefore, these small expenses of ₹ 29,848/- and ₹ 13,542/- are only in respect of telephone and car/scooter/mobile expenses. The rest of the expenses are only in respect of the Office and Administrative expenses as well as selling expenses and hence there cannot be any element of personal use in respect of those expenses. Hence taking the entire claim of expenses which includes salary, wages and other office expenses on rent, printing, insurance, computer as well as selling and marketing expenses, the AO has not applied his mind on the issue and just made an adhoc disallowance. CIT (A) has also not examined the nature of expenses so that the disallowance can be made on account of personal use or element. Accordingly, adhoc disallowance made by the AO and sustained by the ld. CIT (A) is deleted.
Addition made on account of Low Household expenses - AO found that having regarding to the joint family of the assessee and status as well as standing of the family of the assessee, the household expenses of ₹ 16,250/- as shown by assessee is very low and accordingly the AO has estimated the reasonable household expenses at ₹ 25,000/- per month - HELD THAT:- We find that the estimation of the AO of reasonable household expenses of the family of the assessee at ₹ 25,000/- per month is very reasonable and proper and does not require any interference. Even otherwise, if the status and standing of the assessee and his family is taken into account, the household expense of ₹ 25,000/- per month is even at the lower side. Accordingly, we do not find any error or illegality in the orders of the authorities below qua this issue. - Decided against assessee.
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2020 (4) TMI 785
Rectification u/s 254 - Levy of penalty u/s 271(1)(c) - whether the assessee is guilty of 'concealment of particulars of income' or 'furnishing of inaccurate particulars of such income' - HELD THAT:- In the penalty order, the AO has given a clear finding that the assessee is found guilty of furnishing inaccurate particulars of income to the extent of ₹ 17.80 lacs. Therefore, there is a clear and specific finding by the AO while passing the penalty and we thus see no mistake in the findings of the Tribunal in terms of incorrect appreciation of facts on record. Regarding suo-moto filing of revised computation, the matter has been duly dealt with by the Tribunal and relevant findings given at Para 11 of its order and we see no basis to interfere with the same as it would tantamount to review of the order of the Tribunal which is not permissible within the narrow compass of section 254(2) - Miscellaneous Application filed by the assessee is dismissed.
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2020 (4) TMI 784
Penalty u/s 271(1)(c) - Defective notice - addition on account of undisclosed purchases vis-à-vis the sales and corresponding profit - assessee’s pleadings is that the Assessing Officer’s show cause notice nowhere specified as to whether the same involved concealment of income or furnishing of inaccurate particulars of income - HELD THAT:- As decided in NISHITH KUMAR JAIN VERSUS ACIT, CENTRAL CIRCLE-XXVII, KOLKATA [2016 (3) TMI 642 - ITAT KOLKATA] on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the MANJUNATHA COTTON AND GINNING FACTORY & OTHS., M/S. V.S. LAD & SONS, [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled.
For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. - Decided in favour of assessee.
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2020 (4) TMI 783
Disallowance the deduction u/s 80ID - receipts of the assessee amounts to rental charges from the hotel but not the business income sine the entire hotel operations are conducted by M/s Peppermint Hotel with whom the assessee entered into an agreement for running of the hotel - HELD THAT:- Liquor license issued by the Collector-cum-Excise & Taxation Commissioner is in the name of the assessee and so as the NOC for bar license, sanitary certificate and public performance license. The copy of the bank statement reflects the receipts and payments out of the assessee account. The labour department registration is in the name of the assessee and all the employees are on the role of the assessee firm and PF liable to is also tagged to the assessee being the employee. All the TDS certificates are received in the name of the assessee firm wherever applicable.
See JAI MAHAL HOTEL (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [1997 (1) TMI 132 - ITAT DELHI-E] - The facts of the instant case that the entire material operations are being undertaken by the assessee and all the statutory requirements or complied by the assessee. All the receipts and payments pertaining to the operations of the hotel are being managed through the bank account of the assessee, we hereby hold that the assessee is in the business of running of hotel and accordingly, the provisions u/s 80ID of the Act are applicable to the case of the assessee in the instant year. - Appeal of the revenue is dismissed.
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2020 (4) TMI 782
Reopening of assessment u/s 147 - validity of reasons to believe - payment of Excise Duty on deemed export sales - HELD THAT:- CIT(A) correctly relied on the Hon’ble Bombay High Court’s judgement in the case of Cartini India Ltd. [2009 (3) TMI 28 - BOMBAY HIGH COURT] where it is held that the audit note/observation cannot constitute the opinion of the Assessing Officer when it comes to the applicability of the provisions of section 148 of the Act qua the ‘reason to belief’. The CIT(A), as per discussion given in para 5 onwards quashed the validity of the reassessment proceedings and allowed the appeal of the assessee.
Addition u/s 43B - Cenvat Credit and excise duty payment - HELD THAT:- The principle of consistency demands no addition is warranted on this issue of applicability of the provisions of section 43B of the Act in respect of the “ED receivable from the DGFT”. Whatever receivable from the DGFT, the amount is actually to be paid at the time of the purchases/imports. The appellant has only utilized the Cenvat credit for the payment of Excise duty and such the proposed action to disallow by applying the provisions of Section 43B is erroneous and the same is therefore directed to be deleted. - Decided against revenue.
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2020 (4) TMI 781
Deduction u/s 54F - Denial of deduction as on the date of sale of the ‘Original‘ asset the assessee owned more than one residential property viz. (i) residential house at Lonawala : and (ii) residential house at Kamothe - HELD THAT:- As the assessee had been shown beyond doubt to be the owner of the residential house/Bungalow situated at Lonawala, therefore, irrespective of the fact that the said property was not occupied by him due to its poor quality of construction, the same continued to be a residential house which was owned by the assessee. On the basis of our aforesaid observations, now when it stands proved that as on the date of transfer of the ‘Original‘ asset i.e land on 01.03.2013, the assessee in addition to the residential house at Kamothe also owned a Bungalow at Lonawala, therefore, being an owner of more than one residential house on the said relevant date, he was ineligible to claim deduction under Sec. 54F.
As regards the claim of the ld. A.R that the fact that the A.O while framing the assessment under Sec. 143(3) for the year under consideration had not assessed the ‘Annual Lettable Value‘ (ALV) of the aforesaid Bungalow at Lonawala under Sec. 23 of the Act, therein proved that the assessee was not the owner of the said residential property during the year under consideration, we are afraid does not find favour with us - the documents forming part of the APB clearly reveals beyond any scope of doubt that the assessee during the year under consideration was the owner of the residential house/Bungalow at Lonawala. Accordingly, finding no infirmity in the view taken by the CIT(A), who in our considered view had rightly affirmed the declining of the assesses claim for deduction under Sec. 54F by the A.O, we uphold the same.
Levy of interest under Sec. 234A and 234B - HELD THAT:- As the levy of interest under the aforesaid statutory provisions is mandatory as per the judgment of the Hon‘ble Supreme Court in the case of CIT Vs. Anjum M.H. Ghaswala [2001 (10) TMI 4 - SUPREME COURT] therefore, finding no infirmity in charging of the aforesaid interest by the A.O, we uphold the same.
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2020 (4) TMI 780
Entitlement for deduction of interest expenditure - deduction of the interest expenditure in respect of the amounts advanced by to 5 parties - HELD THAT:- As the amount that was recoverable by the assessee during the year under consideration from the party Aristo Shelters Pvt. Ltd.had no nexus with the interest bearing funds which were borrowed by the assessee from the banks, therefore, on the said count itself no disallowance of any interest expenditure pertaining to the said amount was called for under Sec. 36(1)(iii). Appeal of the assessee is allowed for statistical purposes.
As the assessee had advanced the loan to M/s Aristo Shelters Pvt. Ltd. on interest, therefore, no disallowance of any part of the interest expenditure in respect of the said interest bearing advance could have been validly made in the hands of the assessee. As such, we direct the A.O to vacate the disallowance of the interest expenditure.
Additional ground before the appellate authorities - Amounts advanced by the assessee to the remaining 4 parties - CIT(A) being of the view that the assessee had in its return of income as well as in the course of the the assessment proceedings claimed deduction of the interest expenditure under Sec.57 (iii) therefore, it was disentitled from raising the claim for deduction of the aforesaid amount under Sec. 36(1)(iii) - HELD THAT:- We are unable to persuade ourselves to subscribe to the same - assessee had raised a claim for deduction under Sec. 36(1)(iii), based on the facts which were already available on record, therefore, the CIT(A) was well within his jurisdiction to have adjudicated upon the same. CIT(A) had summarily scrapped the aforesaid claim of the assessee, for the reason, that the same was raised for the very first time before him. See Pruthvi Brokers and Shareholders Pvt. ltd [2012 (7) TMI 158 - BOMBAY HIGH COURT]observed that assesses is entitled to raise an additional ground before the appellate authorities not merely in terms of legal submissions, but also additional claims to wit claims which were not made in the return of income filed by it. Accordingly, we are of the considered view that the CIT(A) ought to have considered the assesse‟s claim for deduction of the interest expenditure under Sec.36(1)(iii) of the Act, specifically, when the same was being raised on the basis of the facts which were already available on record - No declining on the part of the CIT(A) to consider the assesse‟s claim for deduction under Sec. 36(1)(iii).
Entitlement for deduction of the interest expenditure under Sec. 36(1)(iii) - CIT(A) had summarily rejected the assesse‟s entitlement for claim of deduction under Sec.36(1)(iii), therefore, there was no occasion for him to adjudicate upon the maintainability of such claim on merits. Accordingly, we are of the considered view that in all fairness the matter requires to be restored to the CIT(A), with a direction to verify the assesses entitlement for claim of deduction under Sec. 36(1)(iii) for remaining 4 parties. Appeal of the assessee is allowed for statistical purposes.
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2020 (4) TMI 779
Capital gains on sale of rights to a flat - STCG or LTCG - period of holding - Transfer u/s 2(47) - letter issued by the builder which recognizes the right of the assessee in the said property and the builder agree to reserve the property for allotment subject to certain stipulations and conditions including payment terms - HELD THAT:- Upon perusal of the terms, we find that the said letter create right in favor of the assessee to get the allotment of the property in his name subject to certain terms and conditions as agreed upon between the assessee and the builder.
The assessee has acquired certain rights of allotment in a specific property. These rights were created in assessee’s favor, by the letter of builder issued on 14/10/2006. The subsequent letter dated 25/11/2006 as well as premises ownership agreement was nothing but improvement in the said rights of the assessee which were already created vide letter dated 14/10/2006. The assessee has sold these rights vide agreement dated 18/09/2010. Therefore, what was acquired by the assessee and what has ultimately been sold by the assessee is pari-materia the same.
This being the case, there would be no occasion to consider the date of acquisition of the said right as 22/06/2010. The assessee, in our opinion, acquired the right on 14/10/2006 which was ultimately sold on 18/09/2010. Therefore, since the holding period of the same is more than 36 months, the resultant gains would be long-term capital gains in nature.
Benefits of indexation would be available since financial year 2006-07.
Alternative claim as made by the assessee u/s 54F - AR submitted that the assessee’s deduction claim would fall u/s 54F and not u/s 54 since what has been sold is merely a certain right in the property. We find that the said facts were brought to the notice of Ld. CIT(A) also. Therefore, the alternative claim as made by the assessee u/s 54F would be admissible. The Ld. AO is directed to verify assessee’s claim u/s 54F and recompute the income in terms of this order.
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2020 (4) TMI 778
Reopening of assessment - assessment after 04 years - whether any new material or information so as to hold that the assessee has failed to disclose fully and truly all the facts necessary for assessment ? - audit objections - Transfer as per Section 2(47) of the Act while making treatment of its capital asset i.e. land of Cinema Hall into stock in trade of the business of selling of shops u/s 45(2) - HELD THAT:- Bare reading of the assessment order dated 3-12-2010 does not reveal that any enquiry was conducted by the AO on the issue of nature of income arising from the arrangement of development of commercial complex after demolition of Cinema Hall Building on the land in question.
CIT(A) has decided this issue by presuming the fact that reassessment proceedings were initiated on the basis of re-appreciation of the same set of facts available on record and is nothing but merely change of opinion whereas the facts regarding the audit objections pointing out certain facts based on the enquiry as well as the enquiry conducted by the AO by issuing notices u/s 133(6) of the Act were not considered by the ld. CIT(A). Therefore, ignoring the relevant facts which are necessary to arrive to the conclusion whether subsequent enquiry and audit objection would constitute a tangible material to form the belief that income assessable to tax has escaped assessment, would render the impugned order of the ld. CIT(A) as not sustainable. Accordingly we set aside this issue to the record of the ld. CIT(A) to re-adjudicate the same after considering the audit objection as well as enquiry conducted by the AO by issuing notices u/s 133(6) of the Act. Ground No. 1 and 2 of the Revenue are allowed for Statistical purposes.
Addition u/s 45(2) - conversion of capital asset into stock in trade - assessee was having the business assets in the form of Cinema Hall and was engaged in exhibiting the films then the decision taken by the assessee to discontinue the earlier business by dismantling the cinema hall building and converting the land use for development of commercial complex amounts to conversion of capital asset into stock in trade - Addition deleted by the ld. CIT(A) - HELD THAT:- It was a case of conversion of business asset into stock in trade and thereby the profit on sale of the said land and shops / offices contains two components of income i.e. one is capital gain on account of conversion of capital asset into stock in trade u/s 45(2) of the Act and another is business income on account of sale of stock in trade. The computation of capital account would be based on the consideration being fair market price as on the date of conversion being in the year 2001 though the same will be assessed to tax in the year under consideration when the assessee has finally sold the stock in trade. Therefore, the said finding of the ld. CIT(A) is contrary to the undisputed material facts of discontinue the existing business of exhibiting films in the cinema hall, demolition of cinema hall building and conversion of land use to commercial complex for sale constitute a positive act on the part of the assessee to establish the conversion of capital asset into stock in trade.
We find that even if it is presumed for the sake of argument that the assessee company has acquired the land on dissolution of the partnership firm, the same does not fall in the modes of acquisition as specified u/s 49(1) so as to deem the cost of acquisition of the asset in the hands of the previous owner of the property. However, without going into the merit of the issue, we note that this fact was not at all brought into the notice of the authorities below and therefore, for the purpose of computing the capital gain the actual date of acquisition is required to be determined by considering all these facts as well as claim of the assessee.
Indexed cost of acquisition - AO has not disturbed the indexed cost of acquisition as claimed by the assessee, however, it is a matter of fact that as per Development Agreement the assessee has claimed to have acquired the land in the year 1995. When this is part and parcel of subject matter of assessment of capital gains which is the subject matter of the appeal filed by the Revenue then the issue of computation of capital gains is required to be decided based on true and correct facts. Since we have already set aside the issue of reopening to the record of the ld. CIT(A), therefore, this issue is also set aside to the record of the ld. CIT(A) and consequently the ld. CIT(A) is directed to compute the capital gains by taking the correct indexed cost of acquisition. Ground No. 3 of the Revenue is partly allowed for Statistical purposes.
Non Service of notice issued u/s 148 - HELD THAT:- As far as the issuance of notice is concerned, the same is not in dispute when the AO has issued the said notice and sent the same through Regd.Post on 31-03-2015. Only dispute is regarding service of notice. Parties have taken their respective stands on this issue. However, there is no dispute that the assessee in response to said notice has filed the return of income and also participated in the reassessment proceedings, therefore, the issue has to be decided after considering the provisions of Section 292BB of the Act. Since the ld. CIT(A) has not adjudicated upon both these issues, therefore, the grounds raised by the assessee in the C.O. are set aside to the record of the ld. CIT(A) for adjudication after providing adequate opportunity of hearing to the assessee
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2020 (4) TMI 777
Condonation of delay - contention of the assessee is that the delay occurred due to negligence of the advocate - HELD THAT:- Delay deserves to be condoned as for the mistake of advocate, the justice should not be deprived of. Accordingly, we condone the delay subject of cost of ₹ 10,000/- to be deposited in the account of Central Government.
CIT-A not affording reasonable opportunity of being heard while adjudicating the appeal in an exparte manner - pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance - HELD THAT:- Commissioner of Income tax(A) did not afford reasonable opportunity and pass the order in an ex-parte manner. CIT(A) did not consider the facts and circumstances of the case viz. closure of Bhopal office and pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance.
CIT(A) did not consider the fact that business was closed due to losses and audited balance sheet and profit & loss account were placed on record along with certain details and relevant records such as purchase bills, stock registers showing quantitative details, bills and vouchers etc. could not be produced because they were shifted to Mumbai due to closure of office at Bhopal as there being no proper communication from the counsel of the assessee, such records could not be produced. In view of these facts and in the interest of justice, the present matter deserves to be reconsidered at the level of the Ld.
CIT(A) who will afford reasonable opportunity of being heard to the assessee and the assessee is also directed to cooperate with the Ld. CIT(A) by filing the relevant evidences and written submissions in support of the claim. Accordingly, we set aside the order of the Ld. CIT(A) and the grounds raised in the assessee’s appeal are allowed for statistical purposes only.
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2020 (4) TMI 776
TP Adjustment - selection of comparable - HELD THAT:- Assessee is into providing software development services, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Operating profit estimation - HELD THAT:- Directions of the DRP directing considering foreign exchange fluctuation gain as part of the operating profit of the Assessee is without merit as the law by now is well settled that foreign exchange gain has to be regarded as part of operating profit as held in the case of Electronics for imaging India Pvt.Ltd. Vs. DCIT [2017 (7) TMI 1335 - ITAT BANGALORE].
Deduction u/s.10A on the profits derived from its Software Technology Parks of India (STPI) - HELD THAT:- Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that the CIT(A) was justified in excluding expenses both from export turnover and total turnover. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. Moreover, the order of the Hon’ble Karnataka High Court has been upheld by the Hon’ble Supreme Court in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT]. The grounds are decided accordingly.
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2020 (4) TMI 775
Addition on account of payment of undisclosed commission - onus of explaining the seized document - addition based on some computer generated loose sheets which was seized and found from the computer - HELD THAT:- It is also an admitted fact that name of the assessee nowhere appeared in the said document albeit the name of Smt. Vineeta Chaurasia that she has entered into an agreement for sale of commercial property in Vasant Square Mall has been mentioned. Apart from that, the aforesaid finding of the Ld. CIT(A) that this addition cannot be made in the hands of the assessee for the reason that, firstly, the name of the assessee is not mentioned in the seized document; secondly, there is no corroborative evidence or any statement that the payment has been received by the assessee other than cheque amount as entered in the sale agreement; and lastly, on the bare perusal of the document it cannot be inferred or concluded that seized document belongs to or has any nexus with the assessee.
Once on exactly same seized document the Hon’ble High Court VINITA CHAURASIA [2017 (5) TMI 992 - DELHI HIGH COURT] has decided this issue that this document does not belong to Mrs. Vineet Chaurasia nor any adverse inference can be drawn, therefore, in the case of the assessee whose name is not even was mentioned in the seized documents, no addition can be made. Accordingly, the said addition is deleted and the order of the Ld. CIT(A) is confirmed. - Decided in favour of assessee.
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Customs
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2020 (4) TMI 774
Valuation of certain items imported under two contracts - inclusion of the price of drawings, design etc. - imports were made in connection with modernisation, expansion and modification for their plant at Durgapur in West Bengal - main case of the appellant is that these two cases involved importation of turnkey projects and the entire contract value have to be treated as the transaction value for the purpose of charging customs duty - appellant’s case in substance is that on a composite reading of Section 14 of the Act, Rules 4 and 9(1)(e) of the 1988 Rules, the price of drawings, design etc., should be added to the invoice value of the imported equipments, as those intangible items formed an integral part of the arrangement agreed upon between the two consortia and SAIL - Stand of the respondent, on the other hand is that those items related to post importation activities of SAIL in India for implementation of their project.
HELD THAT:- The provisions of Rule 9 (1) (e) cannot be automatically applied to every import which has surface features of a turnkey contract. Just because different components of a contract or multiple contracts give the shape of turnkey project to the imported items, without specific finding on existence of “condition” as contemplated in clause 9 (1) (e), value of all these components could not be added to arrive at the assessable value. Such an exercise would go against the provisions of Interpretative Note to Rule 4, which is part of the Valuation Rules in view of the provisions of Rule 12 thereof.
In the present appeal, involving two import consignments, the authorities of First Instance and the Appellate Authority proceeded on the basis that since all the scheduled items formed part of the same contract and were linked with activities at post-import stage with the imported equipments, the provisions of Section 9 (1) (e) could be invoked. Such reasoning infers subsistence of conditions for awarding post-importation work to the overseas consortia or makes import of both sets of items otherwise interdependent - the stand of SAIL was consistent that the subject drawings and specifications did not relate to the equipments imported and was meant for post importation activities and there was no condition laid down that the import of the equipments were to be supplemented by post-importation work.
Appeal dismissed - decided against appellant.
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Insolvency & Bankruptcy
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2020 (4) TMI 773
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - scope of the term NBFC - existence of debt and dispute or not - time limitation - HELD THAT:- The RBI, i.e. financial service regulator has granted the certificate of registration to carry on the business of Non-Banking Financial Institution in 1998 - the respondent has intentionally deceived the applicant while executing the KYC Form. Now he cannot escape from his liability by raising an objection of NBFC. It can be said that though the respondent is an NBFC, however, without ignoring the fact that the respondent himself entered into the transaction with the Applicant in the capacity of a Private Limited Company. Thus, in regard to the transaction under consideration the respondent falls under the definition of Corporate Debtor and cannot fall under the shell of the term 'NBFC.
Pre-existing dipsute or not - HELD THAT:- It is seen in the delivery report filed by the Applicant that the Demand notice under section 8 of IBC, 2016 was delivered on 16-3-2018 and the respondent has replied on 5-4-2018. Giving a notice of pendency of application under section 9 of the Arbitration and Conciliation Act, 1996 by the respondent after 10 days from receipt of demand notice, does not hit section 8(2) of IBC, 2016. Thus, the dispute raised by the respondent is patently feeble legal argument unsupported by evidence on the basis of pending application under section 9 of the Arbitration and Conciliation Act, 1996, for an interim measure without establishing that an amount of ₹ 63,31,706.09/- is due to the respondent.
Time limitation - HELD THAT:- In accordance with section 238 of the IBC, 2016, the provisions of the Code have overriding effect on the Arbitration and Conciliation Act, 1996. The Registered Office of the Corporate Debtor is situated in Jaipur and therefore this Tribunal has jurisdiction to entertain and try this Application. The matter is within the purview of Law of Limitation.
Application admitted - moratorium declared.
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2020 (4) TMI 772
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- In the instant case, there was no final, clear or crystallised debt or demand till the time of the notice and the same was disputed and subject to reconciliation/adjustment, as per the Agreement itself - In the instant case the Respondent has not only opposed the Demand Notice but raised a bona fide dispute which arises from the Agreement between the two parties and which requires to be adjudicated, which is in progress in an Italian Court, and for which this Tribunal is not the forum, apart from the fact that the amounts in question themselves remain to be reconciled.
Hence, since an undisputed clear debt at the time of sending the Demand Notice under the Code or alleging a default by the Petitioner is a sine qua non for initiating proceedings under section 9 of the Code, and whereas there was also a pre-existing dispute over the final amount payable, and also with part payment being made, which makes this a mere recovery proceeding, the Petition is liable to be dismissed on all these scores as well.
Petition dismissed.
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Central Excise
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2020 (4) TMI 770
Condonation of delay for more than seven years - HELD THAT:- As the impugned order has been passed by the learned Commissioner (Appeals) in 2011 and received by the appellant in 2011 itself and the same has not been brought in the knowledge of the Hon’ble High Court - As no appeal was pending against the impugned order, therefore, we are unable to entertain the applications for condonation of delay filed by the appellant which are highly time barred, therefore, the applications for condonation of delay are dismissed.
Application for condonation of delay is dismissed - appeal dismissed.
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CST, VAT & Sales Tax
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2020 (4) TMI 769
Time limitation for delivery of goods in case of inter-state sale - benefit of Section 6(2) of CST Act, 1956 - delivery of the respective goods from a carrier when the goods are delivered to a carrier for transmission in course of inter-state sale - validity of two circulars bearing S.No.115B dated 16th September, 1997 and S.No.1132A dated 15th April, 1998, which sought to impose a time limit on retention of goods in the carrier’s godown, beyond which time the revenue was to treat obtaining of constructive delivery of the goods involved - High Court quashed these Circulars.
HELD THAT:- The respondent in this case had taken benefit of sub-section (2) on the ground that this was a case involving inter-state sale and the sale took place by way of transfer of documents of title of such goods during their movement from one State to another. It is also the respondents’ case that the requisite forms and certificates were duly furnished pertaining to such sales. On the part of the State, barring retention of the goods in the transporters’ godown at the destination point for a long period of time, default on no other count by the assesses has been asserted - In the two appeals in which the respondent is Bombay Machinery Stores, sales pertained to financial years before the circulars came into subsistence. In these instances of sales, the Commercial Tax officer in the respective orders treated retention of goods beyond 30 days in the transporters’ godown as the cut-off period. After that date, the assessee was deemed to have had taken constructive delivery of goods and sale beyond that period within the State of Rajasthan was held to be local sales and subjected to sales tax under the State Law.
As per the aforesaid circulars, retention of goods by the transporter beyond the time stipulated therein (being 30 days as per the later circular) would imply that constructive delivery of the goods has been made by the transporter to the consignee. In such a situation, the transit status of the goods would stand terminated and the deeming provision in first explanation to Section 3 of the 1956 Act conceiving the time-point of delivery as termination of movement shall cease to operate.
Sub-clause (1) of the said provision specifies when the goods shall be deemed to be in course of transit and sub-clause (3) thereof lays down the conditions for termination of transit. That condition is an acknowledgment to the buyer or his agent by the carrier that he holds the goods on his behalf. There is no material to suggest such an acknowledgment was made by the independent transporter in these appeals. In such circumstances we do not think the decision of the High Court requires any interference.
In the case of Arjan Dass Gupta [1979 (8) TMI 194 - DELHI HIGH COURT] principle akin to constructive delivery was expounded and we have quoted the relevant passage from that decision earlier in this judgment. In our opinion, however, such construction would not be proper to interpret the provisions of Section 3 of the 1956 Act. A legal fiction is created in first explanation to that Section. That fiction is that the movement of goods, from one State to another shall terminate, where the good have been delivered to a carrier for transmission, at the time of when delivery is taken from such carrier. There is no concept of constructive delivery either express or implied in the said provision - the interpretation of the Division Bench of the Delhi High Court given in the case of Arjan Dass Gupta does not lays down correct position of law.
In the event, the authorities felt any assessee or dealer was taking unintended benefit under the aforesaid provisions of the 1956 Act, then the proper course would be legislative amendment. The Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practise. This administrative exercise, in effect, would result in supplying words to legislative provisions, as if to cure omissions of the legislature.
The judgements of High Court upheld - appeals dismissed.
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2020 (4) TMI 768
Maintainability of petition - efficacious remedy of filing an appeal - Validity of reassessment order - validity of rectification order passed by the prescribed authority - KVAT Act - HELD THAT:- When an alternative and efficacious remedy is provided under the Act, such a remedy requires to be exercised by the party first. However, that does not mean that the jurisdiction of the Writ Court is unavailable but while exercising the jurisdiction, the Writ Court would necessarily have to indicate as to why it is entertaining a writ petition, not withstanding, the availability of an alternative or efficacious remedy to a party. Unfortunately, even after having noticed the preliminary objection regarding maintainability of the writ petition, the court has proceeded to frame the question on merits. This aspect of the matter in the impugned order passed by the learned Single Judge, we find as being erroneous.
In order to enable the writ Court to exercise its jurisdiction, it would first have to answer the availability of an alternative and efficacious remedy and as to why it intends to exercise the writ jurisdiction - In the absence of the same, consideration of the matter on any other ground, would not be sustainable, since the preliminary objection of the State has not been answered. There are no hesitation to hold that the writ Court could not have entertained the matter in view of an alternative remedy available under Section 62 of the Karnataka Value Added Tax Act, 2003.
There are no good ground to interfere - appeal dismissed.
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2020 (4) TMI 767
Validity of proceedings - duplication of entire proceedings - KVAT Act, 2003 - HELD THAT:- The re-assessments have already been concluded for the period April to July 2009, it is only with respect to that time period, the proceedings are required to be quashed and not the remaining period also.
The order of the learned Single Judge is partly set aside. The proceedings are set aside only for the period between April to July 2009. The proceedings shall go on so far as the remaining period is concerned - appeal allowed.
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Indian Laws
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2020 (4) TMI 771
Territorial Jurisdiction - transfer of subordinate officers from Shillong to Itanagar - power of judicial review - case of respondent is that the impugned order of transfer has been issued in clear breach of the declared Transfer Policy and is mala fide - HELD THAT:- Transfer or posting of an employee is an incident of service. He cannot insist on his transfer at a place of his choice by raising the argument of discrimination by citing the example of others. Moreover, in the present case, the respondent has throughout his service career of 30 years remained in Shillong or nearby areas. Therefore, such argument of discrimination, even otherwise has no force. The Tribunal has quashed the order of transfer singularly on consideration of the fact that the petitioner was due to retire after a period of about 2 years. However, as per record, date of birth of the petitioner being 30.05.1962, he was due to retire on 30.05.2022. Counting from the date of the order of transfer dated 14.08.2019, the respondent was left with over 2 years and 9 months before retirement. The stipulation of the policy that employees who were left with 2 years or less service should normally be considered for being given a choice posting, would therefore not be attracted to the case of the respondent.
In view of the law enunciated by the Supreme Court by catena of judicial pronouncements, the power of judicial review even in the matter of transfer, can be exercised by the High Court or the Tribunal within the defined parameters. We may in this connection cite the decided case law of the Supreme Court as to what are the limitations on the scope of interference of the Supreme Court in the matters of transfer of a Government employee.
The Central Administrative Tribunal, while interfering with the order of transfer in the present case, has exceeded its jurisdiction, and erred in law in quashing the order of transfer - Petition allowed.
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2020 (4) TMI 766
Breach of trust - accusations against petitioners are that petitioners have floated a Company and have acted in violation of the terms of the employment - HELD THAT:- There is no dispute with regard to the fact that petitioners were employed by respondent No.2 and as on the date of tendering their resignation, accused No.1 was holding the position of Director – Solution and accused No.2 was holding the position of Director – Sales and Marketing. There is also no dispute that petitioners were bound by the undertaking given by them to respondent No.2 - The accusation against petitioners is that in violation of the aforesaid terms and conditions, they floated a Company by name M/s. Sun Telematics Private Limited and thereby committed breach of trust. The records produced along with charge-sheet indicate that the said Company was incorporated on 28.5.2013. But there is no material to show that during their service under respondent No.2, petitioners had commenced any operations in the name of the Company floated by them. The documents produced before this Court indicate that Form ‘C’ – Registration Certificate of Establishment was obtained on 26.2.2014 and Value Added Tax Registration Certificate was issued on 19.9.2013 indicating that the actual operations had commenced only after the resignation of petitioners from respondent No.2–Company.
It is only when a property entrusted to accused has been dishonestly misappropriated or converted to his own use, the accused can be held culpable for the offence under Section 405 of IPC. In the instant case, there are no allegations whatsoever that either at the time of employment or at the time of resignation, any property was entrusted to petitioners. Though in the complaint it was alleged that the software belonging to respondent No.2 was stolen and the same was made use of to procure rival business, but the material referred above clearly indicates that even the title or right to the said software vested with the Smart comm and not with respondent No.2. That apart, there is no allegation whatsoever in the charge-sheet that petitioners herein have committed any theft of such a software - in the absence of any material to show that either during the employment or any time subsequent thereto, any properties which has been entrusted to petitioners have been converted to their own use, provisions of Section 405 of IPC do not get attracted to the facts of this case.
Since the facts of the case do not make out the ingredients of the offences under Sections 406 and 408 of IPC, the prosecution of petitioners for the alleged offence is illegal and cannot be sustained. For the said reasons, the petition is allowed.
Petition allowed - decided in favor of petitioner.
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