TMI Tax Updates - e-Newsletter
May 29, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. IS GST AUDIT IS APPLICABLE ON TURNOVER EXCEEDING RS. 2 CRORES

   By: Yogesh Narang

2. CANCELLATION OF CERTIFICATE OF INCORPORATION OF A COMPANY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Suggestion/comments are invited on draft circular on "Electronic sealing-Deposit of and removal of goods from a customs bonded warehouse"

2. Shri Piyush Goyal calls upon the Exporters to be more competitive and provide quality products to the world;

3. Smt. Nirmala Sitharaman chairs 22nd Meeting of the Financial Stability and Development Council (FSDC)

4. FM launches facility of Instant PAN through Aadhaar based e-KYC

5. ADB, India sign $177 million loan for state road improvements in Maharashtra

Notifications

Customs

1. 09/2020 - dated 27-5-2020 - ADD

Seeks to levy definitive anti-dumping duty on imports of 'Electronic Calculators of all types excluding calculators with attached printers, commonly referred to as printing calculators; calculators with ability to plot charts and graphs, commonly referred to as graphing calculators; programmable calculators',originating in, or exported from, People's Republic of China for a period of five years, in pursuance of final findings of sunset review investigations issued by DGTR and in supersession of the notification No. 24/2015- Customs (ADD), dated the 29th May, 2015.

2. F. No. 354/145/2019 –TRU - dated 27-5-2020 - Cus

Corrigendum - Notification No. 36/2019-Customs, dated the 30th December, 2019

Income Tax

3. 29/2020 - dated 27-5-2020 - IT

Income-tax (10th Amendment) Rules, 2020.

4. 28/2020 - dated 27-5-2020 - IT

U/s 10(46) of IT Act 1961 - Central Government notifies ‘Uttarakhand Environment Protection & Pollution Control Board’ a Board constituted by the Government of Uttarakhand in respect of the specified income arising to that Board

5. 27/2020 - dated 27-5-2020 - IT

U/s 10(46) of IT Act 1961 - Central Government notifies ‘Cochin Special Economic Zone Authority’ a Board constituted by the Government of India in respect of the specified income arising to that Authority

Indian Laws

6. F.No.4(28)-B(W&M)/2017 - dated 27-5-2020 - Indian Law

Cessation of 7.75 percent Savings (Taxable) Bonds, 2018

7. G.S.R. 311 (E) - dated 26-5-2020 - Indian Law

Chartered Accountants Procedure of Meetings of Quality Review Board, and Terms and Conditions of Service and allowances of the Chairperson and members of the Board (Amendment) Rules, 2020.

Highlights / Catch Notes

GST

• TDS Provisions Under GST Not Applicable for Payments to Exempt Catering Services by Educational Institutions.

  Case-Laws - AAR : Applicability of TDS under GST - catering services - The provision of tax deduction at source is applicable on the payment made to a supplier of taxable services and since the applicant is supplying exempt services, the said provisions are not applicable to the payments made to him by the educational institutions.
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• Die Not Exported Under IGST Act 2017 Due to Lack of Physical Movement Outside India; Invoice in Foreign Currency Insufficient.

  Case-Laws - AAR : Place of supply - manufacture and supply of die to the foreign customer - export or not - applicant raised the tax invoice for this die immediately after the manufacture in the name of overseas customer in foreign currency for receipt of payment though the die not physically moved out of India to the place outside India. Hence manufacture and supply of die to the foreign customer does not amounts to export as per section 2(5) of the IGST Act, 2017.
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• NCBS not classified as "Government Entity"; higher tax rates apply to hostel construction works contract in Bangalore.

  Case-Laws - AAR : Government Entity or not - Rate of tax - Works Contract - agreement with National Centre for Biological Sciences for construction of Hostel building at NCBS Campus in Bangalore - for all reasons, NCBS is not covered under the definition of a “Government Entity”
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• Real Estate Firm Violated Section 171 of CGST Act by Not Passing 11.90% ITC Benefit to Customers (July 2017-March 2019.

  Case-Laws - NAPA : Profiteering - purchase of Flat - The Respondent has benefited from the additional ITC to the extent of 11.90% of the turnover during the period from July, 2017 to March, 2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers.
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Income Tax

• Reassessment Initiated u/s 147 for Alleged Bogus Purchases: AO to Confirm 2% and 5% Additions.

  Case-Laws - AT : Reopening of assessment u/s 147 - Bogus purchases - AO directed to confirm the addition to the extent of 2% of the purchase amount involved in the alleged accommodation entry obtained by the assessee and further addition of 5 % to the extent of investment in goods procured by the assessee which has been sold.
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• Assessee Challenges Disallowance of Interest Expenses u/s 36(1)(iii) Due to Lack of Evidence on Property Mortgage.

  Case-Laws - AT : Disallowance u/s 36(1)(iii) - interest expenses - The only plea of the assessee is that the assessee had mortgaged its property to avail bank loans for the sister concerns and if the sister concerns failed in their business, it will effect the profitability of the assessee - assessee has not produced an iota of evidence to prove that it has mortgaged its property, and on its classification of funds as NPA, it would affect the assessee's profitability.
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• Renovation expenses on leased property not disallowed u/s 40(a)(ia) due to minimal labor payments and TDS rules.

  Case-Laws - AT : Addition on renovation expenses on lease hold property - Non deduction of TDS - Such an addition or disallowance cannot be made u/s 40(a)(ia), because the major expenses relates to purchase of material and labour payments are for petty amounts, on which TDS liability is not attracted
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• Revenue Recognition Variances in Construction Projects: Unfinished Sales Impact Under ICAI AS-9 Standards.

  Case-Laws - AT : Revenue recognition - The difference in revenue generating pattern. ‘NOP’ project already completed but certain portion of development remain unsold. It shows that revenue model is not same i.e. in construction contract, the whole revenue is already determined and only construction has to be completed. Revenue can be recognized significantly based on principle of AS-9 (Accounting Standard as per ICAI).
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• Unexplained Bank Deposit Suggests Unused Cash Withdrawal; Credit Should Be Given for Withdrawn Amount.

  Case-Laws - AT : Unexplained deposit in assessee’s bank account - it has to be presumed that the assessee has withdrawn the cash and the same remained to be unutilized for one reason or the other, and the cash remained with the assessee. In such circumstances, due credit has to be given for such withdrawal of cash by the assessee.
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• Income Tax Act Section 12AA: Broad Scope of Public Utility Includes Training Government Employees from Diverse Backgrounds.

  Case-Laws - AT : Registration u/s 12AA - education and advancement of general public utility - Object of general public utility is wider and larger object which encompasses the object like imparting the training to the Govt employees working in various Department and Revenue. The Govt. Employees working with state govt. belongs to various state of the society and they are not restricted to one religion, caste or creed.
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• Debate on License or Registration Fee as Commercial Right u/s 32(1)(ii) for Depreciation Claim.

  Case-Laws - AT : License/registration fee paid - whether is a commercial right and in the nature of an asset within the meaning of section 32(1)(ii) and the assessee is entitled to claim depreciation thereon? - the Revenue has been accepting the capitalization of special Dunnage and allowing depreciation @ 16% per annum over the period of life expectancy of such Dunnage.
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• Section 153A: Properly Allocate Work in Progress to Determine Taxpayer's Undisclosed Income for Each Assessment Year.

  Case-Laws - AT : Assessment u/s. 153A - Total work in progress shown by the assessee in its books of accounts in each assessment year is to be apportioned between accounted collections and unaccounted collections in their respective ratio so as to arrive at correct undisclosed income of assessee for each assessment year. The resultant figure would be the undisclosed income of the assessee for each assessment yea
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Customs

• Amendment u/s 149 of Customs Act Allowed as Evidence Existed at Export Time; Shipping Bills Adjusted for Rebate.

  Case-Laws - AT : Amendment in shipping bills - For applicability of section 149 of the Customs Act relating to amendment of documents, all that has to be seen is that documentary evidence should have been in existence at the time the goods were exported. There is no document which was not in existence at the time the goods were exported for the simple reason that all the Appellant was claiming by the amendment was incorporation of the declaration that the Appellant intended to avail the rebate under paragraph 2 of the notification.
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Central Excise

• Transaction Value of Physician Samples Upheld u/s 4 of Central Excise Act.

  Case-Laws - AT : Valuation - manufacture and clearance of physician samples - sale on principal to principal basis - whatever goods were sold by the appellant to their principal is correct transaction value in terms of Section 4.
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Case Laws:

• GST

• 2020 (5) TMI 604
  Place of supply - Levy of IGST - manufacture and supply of die to the foreign customer - export or not - location and time of supply - reverse charge mechanism (RCM) for import - HELD THAT:- The applicant manufactures the Die as per the requirement and specifications given by the foreign buyer and using this die applicant manufacture and export the Aluminium and Zinc die Castings to the foreign buyer by retaining the Die with them till the completion of the export order or completion of Die life. However, applicant raised the tax invoice for this die immediately after the manufacture in the name of overseas customer in foreign currency for receipt of payment though the die not physically moved out of India to the place outside India. Hence manufacture and supply of die to the foreign customer does not amounts to export as per section 2(5) of the IGST Act, 2017. It is rightly admitted by the applicant that the tax invoice is raised after the manufacture of the Die in the name of the foreign customer in foreign currency for receipt of payment. The date of issue of tax invoice by the applicant is the time of supply of Die to the foreign customer as per section 12 of the CGST Act,2017. Further, on date of issue of tax invoice the die is with the applicant and it is not moved either by the applicant or by the foreign customer. Hence the place of supply of goods, other than supply of goods imported into, or exported from India, shall be the location of such goods at the time of the delivery to the recipient as per clause (c) of sub section (1) of section 10 of the IGST Act 2017. Therefore, the place of supply of die in this case is the location of the applicant. The location of the supplier of die and place of supply of the die to the foreign customer are one and the same i.e., location of the applicant and such being the case said transaction shall be treated as infra-State transaction as per sub section (1) of section 8 of the IGST Act 2017 and the applicant has to issue the CGST and SGST tax invoice to the foreign customer and liable to collect and pay the CGST and SGST tax. The applicant is an importer of the Aluminium casting and pressure die Casting component of Aluminium from Thailand. The Thailand supplier first manufacture die as per the requirement and specifications given by the applicant, retained with them and used for the manufacture of the Aluminium casting and pressure die Casting component of Aluminium to the applicant. Thailand supplier raise the tax invoice in the name of the applicant though the die not physically imported by the applicant. Hence said transaction does not amounts to import as per section 2(10) of the IGST Act, 2017 - However, after the completion of the order or die life if applicant physically imports the Die from the place outside India to a place in India then the applicant liable to pay the IGST tax on reverse charge mechanism and claim the IGST tax paid as input tax credit, if eligible. Further if the steel die belonging to the applicant is scrapped at the location of the overseas supplier without die coming to India then such transaction is a transaction occurring outside the taxable territory, i.e. India and hence is not under the purview of GST.

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• 2020 (5) TMI 603
  Government Entity or not - Rate of tax - Works Contract - agreement with National Centre for Biological Sciences for construction of Hostel building at NCBS Campus in Bangalore - N/N. 24/2017 Central Tax (Rate) dated 21-09-2017 - HELD THAT:- On verification of the nature of the activity carried out by the applicant it was observed that applicant is providing works contract service to National Centre for Biological Science (NCBS), and there is no dispute whatsoever that it is a works contract service as per the clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017. Nature of the organisation covering NCBS - HELD THAT:- The NCBS has obtained registration under the GST Act as a Trust with GSTIN 29AAATT3951F1ZC and the Council managing this organisation has three members appointed by the Government of India, one member appointed by the Government of Maharashtra, two members appointed by the Trustees of Sir Dorabji Tata Trust, the Director of the Institute (NCBS) is an ex-officio member and one co-opted member appointed by the Council. Hence four members are from the Government. Whether NCBS is a Government Entity or not? - HELD THAT:- NCBS is neither set up by an Act of Parliament or State Legislature nor is established by any Government. Further the council which administers this institute has only four members appointed by the Government and hence the Government does not have more than 90% control over it. One more important point to note is that this institute is not established to carry out a function entrusted by the Government. Hence, for all these reasons, NCBS is not covered under the definition of a Government Entity as per the clause (x) of paragraph 4 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017. The service supplied by the applicant is not covered under clause (vi) of Serial No.3 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time and hence is not taxable at 6% CGST and 6% KGST. And it is taxable at 9% CGST and 9% KGST under the residual item no. (xii) of Serial No.3 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time.

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• 2020 (5) TMI 602
  Applicability of TDS under GST - catering services to educational institutions sponsored by State/ Central / Union territory - Sl. No. 66 of the Notification No.12/ 2017-Central Tax (Rate) dated 28.06.2017 - Circular 65/ 39/ 2018 - HELD THAT:- The agreements for the supply of services are entered between the Heads of the Residential Schools and the applicant and the recipient of service is hence, the Residential Schools. The nature of the contract is verified and found that the successful bidders have to prepare the food in the respective schools only and there is no provision of providing food cooked outside the premises or from one school to another. Hence the applicant has to prepare the food in the school premises and supply it to the students of the school for a monthly consideration. Further, it is seen that the students to whom the service is provided are from the Primary School category. Hence the service is a catering service provided to an educational institution which is a primary school and hence is covered under the Entry No.66 of Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time and is exempted from the payment of GST. The provision of tax deduction at source is applicable on the payment made to a supplier of taxable services and since the applicant is supplying exempt services, the said provisions are not applicable to the payments made to him by the educational institutions.

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• 2020 (5) TMI 601
  Grant of Regular Bail - fake firms - offences under Sections 132(1)(B), (C), (D), (F), (I), (L) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Keeping in view the order passed by the Hon ble Supreme Court in the case of SANDEEP GOYAL VERSUS UNION OF INDIA [ 2020 (5) TMI 240 - SC ORDER] , it is ordered that in case investigation is not completed in terms of aforesaid order passed by the Hon ble Supreme Court, i.e., within three months from 17.04.2020, petitioner be released on bail by the trial court, subject to its satisfaction. It is further ordered that in case investigation is completed within three moths from the date of the order passed by the Hon ble Supreme Court, it would be open for the petitioner to move the trial court for bail. In case, any such application is filed by the petitioner, the same be disposed of by the trial court on merits in accordance with law. Petition disposed off.

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• 2020 (5) TMI 583
  Profiteering - purchase of Flat No. EFP 24-0501 in Emerald Floors Premier project - allegation is that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the flat - contravention of provisions of section 171 of CGST Act - application forwarded to the DGAP to conduct detailed investigation in to the complaint according to Rule 129 (1) of the CGST Rules, 2017 - HELD THAT:- It is clear from the perusal of Sub-Section 171 (1) that both the benefits of tax reduction and ITC are required to be passed on by the suppliers to the buyers by commensurate reduction in the prices as they are the concessions which have been granted to them from the public exchequer in the interest of the consumers. Sub-Section 171 (2) provides that the Central Government may on the recommendations of the GST Council constitute an Authority to examine whether the input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the prices of the goods or services or both supplied by him. Therefore, this Authority has jurisdiction to examine all such cases in which the above benefits are required to be passed on suo moto or to get them investigated through the DGAP and its power to do so is not circumscribed by any restriction to the effect that it cannot examine those cases in respect of which no complaint has been made - It is also apparent from the provisions of Rule 129 (1) that the DGAP shall investigate and collect necessary evidence in all such cases in which rate of tax has been reduced or the benefit of ITC has been granted which is required to be passed on to the buyers and submit his Report to this Authority under Rule 129 (6) and hence he is bound to investigate all those cases where benefit of ITC or tax rate is required to be passed on. This Authority has not replaced or substituted any function which the Courts were performing hitherto. Though it performs quasi-judicial functions but it cannot be equated with a judicial tribunal. Also, it performs its functions in a fair and reasonable manner in accordance with the Act but does not have the trappings of a Court and therefore, absence of a Judicial Member does not render the constitution of this Authority unconstitutional or legally invalid - the Chairman and the Technical Members of the Authority are being appointed by the competent authority (Appointments Committee of the Cabinet) of the Union Cabinet keeping the requirements of the above mandate of the GST law in perspective. Moreover, the orders passed by this Authority are further subject to the judicial review and therefore, the Respondent should not have any grievance on this account. The Respondent has benefited from the additional ITC to the extent of 11.90% of the turnover during the period from July, 2017 to March, 2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers and thus he has profiteered an amount of Rs. 13,35,79,636/- inclusive of GST @ 12% on the base profiteered amount of Rs. 11,92,67,532/-. Further, the Respondent has realized an additional amount of Rs. 1,04,734/- which includes both the profiteered amount @ 11.90% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1 - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats of the above Project commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.03.2019 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence. he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

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• Income Tax

• 2020 (5) TMI 600
  Deduction u/s 10A - Tribunal directing the AO to exclude the expenditure both from the export turnover and the total turnover - Tribunal justification in holding that interest income is part of 10A deduction - HELD THAT:- When the matter is taken up today, learned counsel for the parties submitted that the first substantial question of law framed by this Court is squarely covered by the judgment of the Division Bench of this Court in the case of CIT VS. TATA ELXSI LIMITED [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] whereas, the second substantial question of law is covered by the decision of this Court in CIT VS. MOTOROLA INDIA ELECTRONICS PRIVATE LIMITED [ 2014 (1) TMI 1235 - KARNATAKA HIGH COURT] . - Decided against revenue.

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• 2020 (5) TMI 599
  Nature of expenditure - expenses incurred on projects pertaining to its website Rediff.com - revenue or capital expenditure - HELD THAT:- Order of the Tribunal allowed the respondent assessee s appeal by holding that amounts spent on improvement of website would be in the nature of revenue expenditure, even when the said project was abandoned. The impugned order inter alia also records the fact that the CIT (Appeals) placed reliance upon the decision of Tata Robin Fraser Ltd. [ 2012 (10) TMI 59 - JHARKHAND HIGH COURT] incorrectly while rejecting the respondent assessee s appeal. No issue of abandonment of a project either in the order of the Assessing Officer or the order of the CIT(A). We also do not find any reference to the decision of the Jharkhand High Court in Tata Robins Fraser Ltd. (supra) mentioned in the order of the CIT(A). Prima facie, it appears that there is some mix up in the impugned order by the Tribunal. We had directed the appellant to serve notice upon the respondent. We are informed that inspite of intimation, the respondents have not entered appearance. - Notice issued for admission.

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• 2020 (5) TMI 598
  Reopening of assessment u/s 147 - Bogus purchases - information received from the investigation wing - HELD THAT:- AO had nowhere abandoned reasons which were the foundation for issuance of the notice for re-opening. He had considered the objections of the petitioner and disposed them of on the basis of material on record. The sole ground of the petitioner therefore, must fail. See SIL GOLD, PRAKASH SACHIN CO VERSUS ITO, WARD-53 (4) , NEW DELHI [ 2018 (12) TMI 1128 - ITAT DELHI] In the present case, notice for re-opening having been issued in the case of assessment which was not framed after scrutiny. AO would have considerable latitude in issuing notice for re- opening if it is found that he had tangible material to form a belief that income chargeable to tax had escaped assessment, it would not be appropriate on our part to strike down the notice. For such reasons, the petition is dismissed On the issue of the sanctions/approval granted by the joint Commissioner of income tax, the issue is squarely covered against the assessee by the decision of SONIA GANDHI, OSCAR FERNANDES, RAHUL GANDHI [ 2018 (9) TMI 720 - DELHI HIGH COURT] where identical satisfaction was recorded by the approving authority, the honourable Delhi High Court held that there is no error/infirmity can be pointed out.Therefore we are of the view that sanctioned by the authority for reopening of the assessment is also proper. Assessee s argument that on the date of compliance with the notice of 148 issued AO has issued the notice u/S 143 (2) of the act on the same date find no force in the argument as according to the provisions of section 143 (2), AO on receipt of return, if considers it necessary or expedient, to ensure that assessee has not understated the income or has not computed the excessive loss or has not under paid the tax in any manner asks assessee to attend before him. In the present case the assessing officer was already having the original return of income filed by the assessee under section 139 of the act. Thus, there is no change in the facts contained in original return as well as the letter submitted by the assessee. It was merely reiteration of same facts as contained in that return. On receipt of notice under section 148 of the act the assessee has merely written a letter that original return may be considered as a return filed in response to the notice under section 148 of the act. Therefore, the original return was already available with the revenue/assessing officer Evidences were so clinching in the form of statement of the entry operator, statement of the supplier of the invoice and the inquiries conducted by the income tax department clearly proved that assessee has obtained an accommodation entry. It cannot be said that if the notice has been issued by the assessing officer on the same date on which return of income has been filed/or the return originally filed is intimated to be return in response to notice under section 148 of the act, the assessing officer cannot apply his mind immediately. According to us , he can. There is no minimum threshold or gap of time prescribed under section 143 (2) of the act. Therefore, putting an artificial time break between the time of intimation of the return filed by the assessee and notice to be issued by the assessing officer would be unreasonably putting a burden on the revenue. In view of this, we dismiss this argument of the AR. Bogus purchases assessee has merely procured bill without the goods supplied by the seller and booked in its purchase account. Sales made by the assessee are not disputed. The assessee has submitted the copies of the invoices, copies of the purchase register, copies of the balance sheet trading account and profit and loss account for the year ended on 31st of March for respective years. Identical issue arose in case of SIL gold [ 2018 (12) TMI 1128 - ITAT DELHI] wherein the addition was sustained only to the extent of 2% of the purchase being the commission paid to the entry operator. In the present case we direct the assessing officer to confirm the addition to the extent of 2% of the purchase amount involved in the alleged accommodation entry obtained by the assessee and further addition of 5 % to the extent of investment in goods procured by the assessee which has been sold. Accordingly, AO is directed to delete the balance addition. - Decided partly in favour of assessee.

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• 2020 (5) TMI 597
  Disallowance u/ s 14A r. w. Rule 8D - need for recording satisfaction - HELD THAT:- From the reading of the judgment of the Hon ble Apex Court in the case of Maxopp Investment Ltd. Vs CIT [ 2018 (3) TMI 805 - SUPREME COURT ] we find that having regard to the language of Section 14 A(2 ) of the Act, read with Rule 8D of the Rules, it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the accounts of the assessee suo moto disallowance under Section 14 A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment, in that eventuality, the Assessing Officer will have to record its satisfaction to this effect. In the instant case, we find that no such satisfaction has been recorded by the A. O to come to the conclusion to invoke the provisions of Section 14 A(2). Hence, we decline to interfere with the order of the ld. CIT (A) and the disallowance is directed to be deleted. Disallowance of excess depreciation - depreciation on software @25% against the 60 % depreciation claimed by the assessee - CIT (A) deleted the addition on the grounds that the AO has mislead himself treating the software as intangible asset - HELD THAT:- We find that the nature of the software acquired were licenses, which do not confer any enduring right and could be used for the duration as acquired for by the licensor. The taxpayer s objective was to use computer software to maximize its performance and streamline efficiency. The Hon ble Bombay High Court in the case of M/ s I- Flex Solutions Ltd. [ 2014 (3) TMI 1162 - BOMBAY HIGH COURT ] held that there is no reason to differentiate the computer and the software as the latter is an integral part of the former. The software cannot be seen in isolation delinked from the computers.The issue of depreciation @60% on the software is now a settled issue beyond any perplexity Disallowance of additional claim of deduction on account of Employee Compensation Expenses - HELD THAT:- From the details filed in the case Indiabulls Real Estate Ltd., we find that two schemes have been issued by the assessee namely, IBREL ESOP 2006 and IBREL ESOP 2007. The spread of ESOP 2006 was from FY 2006-07 to 2013-14 whereas ESOP 2008 spread from FY 2008-09 to FY 2009-10 . The assessee has also given the details of date of vesting, number of shares granted, number of shares vested, perk value, taxed in the hands of employees, period of vesting. The perk value of the share ranged from Rs. 635/- to Rs. 134 /- and Rs. 101 /-. The perk value of the share on the date of vesting i. e. 01.11 .2011 was Rs. 6158/-. The discount given in the ESOP 2008 scheme was Rs. 110 .50. Further, no material was placed as to what was the value of the shares as per the market at different years of vesting While laying down the principle that the discount offered on the shares under the ESOP of scheme is allowable deduction u/s 37 (1) of the Act, we hereby remand the matter to the file of the AO for the limited purpose of arithmetic calculation of apportioning the year wise discount over the period of vesting taking into consideration, the options granted to the employees, determination of the perk value, FBT levied and allow the same as per the provisions of the Income Tax Act, 1961. - Revenue appeal dismissed.

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• 2020 (5) TMI 596
  Disallowance u/s 36(1)(iii) - interest expenses incurred on advancement of loans to the sister concerns on account of commercial expediency - appellant s arguments that the advances were made out of own funds and the same was out of commercial expediency - HELD THAT:- Though the assessee made an oral plea that the money had been advanced to the sister concerns on account of commercial expediency, the assessee failed to place any evidence to suggest whether funds advanced by the assessee to the sister concerns was in the nature of interest free own funds or the funds were advanced on account of commercial expediency. Interest paid by the assessee on such account cannot be allowed. The only plea of the assessee is that the assessee had mortgaged its property to avail bank loans for the sister concerns and if the sister concerns failed in their business, it will effect the profitability of the assessee - assessee has not produced an iota of evidence to prove that it has mortgaged its property, and on its classification of funds as NPA, it would affect the assessee s profitability. We are not in a position to uphold the argument of the Ld. AR on this issue. Judgment as relied on by the Ld. AR in the case of Munjal Sales Corporation v. CIT [ 2008 (2) TMI 19 - SUPREME COURT] cannot be applied to the facts of the assessee s case. In that case, the issue was with regard to allowability of interest u/s. 36(1)(iii) subject to provisions of section 40(b)(iv) - Decided against assessee.

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• 2020 (5) TMI 595
  Addition on renovation expenses on lease hold property - Non deduction of TDS - CIT (A) has confirmed the disallowance holding it to be non genuine - Alternatively, the Ld. CIT (A) has stated the repair and renovation expenses are not allowable since TDS was not deducted - HELD THAT:- It is an undisputed fact that the assessee carried out repair and renovation expenses on a lease property which was taken on lease and any such repair and maintenance of lease property cannot be held to be giving any enduring benefit to the assessee, firstly for the reason that leased premises is for temporary period and nature of expenses are purely in nature of repairs. In fact such kind of repairs and renovation expenses on leased premises has been held as revenue expenditure by the various courts as relied upon by the ld. counsel. Accordingly, hold that expenditure incurred by the assessee is allowable and the additions made by the AO are deleted. Such an addition or disallowance cannot be made u/s 40(a)(ia), because the major expenses relates to purchase of material and labour payments are for petty amounts, on which TDS liability is not attracted. - Decided in favour of assessee.

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• 2020 (5) TMI 594
  Condonation of delay - Rectification order u/s.154 - alternative remedy by filing application u/s. 154 - Late fee u/s. 234E - delay in filing appeal against Section 200A of the Act is 1876 days - assessee aggrieved by the order of late fee u/s. 234E but not inadvertently filed appeal before the CIT(A) against the orders passed on the intimation passed u/s. 200A of the Act but filed appeals against the orders passed u/s. 154 - HELD THAT:- Assessee has taken steps to file all these appeals with the relevant appellate authority but was pursuing only alternative remedy by filing application u/s. 154 of the Act i.e., rectification proceedings were taken up to the Tribunal and consequently, the assessee was made aware by their Chartered Accountant about the consequences of these rectification proceedings, the assessee immediately prepared the appeals and filed with the CIT(A) against intimation u/s. 200A of the Act. Admitted facts are that the assessee was pursuing alternative remedy, even though the delay is very long, we feel that the assessee has reasonable and sufficient cause for not filing these appeals against intimation u/s. 200A of the Act passed by Assessing Officer u/s. 200A of the Act before CIT(A). Since, we noticed reasonable and sufficient cause in not filing these appeals before CIT(A), we reverse the orders of CIT(A) and condone the delay. We, set aside all these appeals to the file of CIT(A).

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• 2020 (5) TMI 593
  Revenue recognition - Percentage of completion method - Revenue recognized significantly based on principle of AS-9 (Accounting Standard as per ICAI) - HELD THAT:- Assessee has two main stream of revenues, one from NOP Project and from other project. Assessee is basically construction contractor and also indulged in developing and sale of project named NOP . On overall basis, assessee is following percentage completion method. Whether the method of percentage of completion method can be applied for construction contract as well as real estate development project with reference Guidance Note GN(A) 23 (R2012). Assessee has commenced this project in AY 2006-07 and completed the whole project. It developed the total saleable area of 56727 Sq. ft. and upto AY 2012-13, it sold 46006 Sq. ft, this assessment year, it sold 1032 Sq. ft. only and it carried unsold stock of 9689 Sq.ft. This indicates that assessee has divergent business module. As per guidance note, percentage completion method can be applied only when revenue, costs and profit from transactions and activities of real estate which have same economic substance as construction contracts. Though, it is clear that only when the economic substance in real estate development and construction contract has to be same. Project NOP does not have same economic substance as construction contract. The difference in revenue generating pattern. NOP project already completed but certain portion of development remain unsold. It shows that revenue model is not same i.e. in construction contract, the whole revenue is already determined and only construction has to be completed. Revenue can be recognized significantly based on principle of AS-9 (Accounting Standard as per ICAI). Where the sale of goods for recognizing revenue, cost and profits from transactions which are in substance similar to delivery of goods. Principle of AS-9 alone can be applied as far as revenue recognition is concern. We notice that percentage of margin recognized by assessee upto 31.03.12 at 13.94% and the revised estimate indicate that it is at 25.97% of the whole project. Short recognition of profit of past sales. As per prudent method of accounting, the revised estimate cost to be recognized immediately and as far as income is concerned, the construction is already completed and still 9689 Sq. ft pending for sale. The economic situation might change when the actual sales of stock in trade i.e. pending area of sale. We are in agreement with the proposed absorption of the profit during this year based on the revised estimation of profit of Rs. 5,391.88 per Sq. ft. Accordingly, we direct the AO to estimate the profit of the assessee to the extent of sales achieved by the assessee during this year i.e. 1032 Sq. ft. and to estimate the profit of Rs. 55,64,424/-. Assessee carries stock-in-trade for the next assessment year at 9,689 Sq. ft and we are not sure whether the cost of sales will remain same and there may be cost of holding the stock which might reduce the profit of the assessee, therefore it is prudent to absorb the profit based on the revenue not based on estimation which should have been earned by the assessee by the end of this year. Accordingly, enhancement proposed by the CIT(A) are reduced to Rs. 55,64,424/-. The method proposed by CIT(A) is not applicable to the present case as explained above. Accordingly, the grounds raised by the assessee are allowed.

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• 2020 (5) TMI 592
  Unexplained deposit in assessee s bank account - proof of spending earlier withdrawals made by the assessee - HELD THAT:- Department has no material to show that the earlier withdrawals made by the assessee has been spent for any specific purposes and not the said amount available with the assessee to redeposit into the bank account. There is also no evidence that the assessee has made withdrawals on various dates for any other purposes than the admission of assessee s son in a medical college. It cannot be said that the withdrawals have not been utilized to redeposit with the bank account. Therefore, it has to be presumed that the assessee has withdrawn the cash and the same remained to be unutilized for one reason or the other, and the cash remained with the assessee. In such circumstances, due credit has to be given for such withdrawal of cash by the assessee. See SHRI MATHEW PHILIP [ 2019 (11) TMI 1404 - ITAT COCHIN] wherein held cash deposits made by the assessee on various dates should be reasonably presumed that it is from earlier withdrawals made by the assessee on various dates. - Decided in favour of assessee.

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• 2020 (5) TMI 591
  Registration u/s 12AA - Trust exists solely for education and advancement of general public utility OR for profit - CIT(Exemption) rejected the registration merely on the ground of non furnishing of documents/information by the assessee to study the bona-fides of the objects of the assessee s Trust - HELD THAT:- Finding recorded by the Ld. CIT(Exemption) that the registration cannot be granted for the assessee as it is involved in imparting the training to the employees of the state govt, is incorrect and contrary to the law. For this purposes, we may rely upon the decision of CIT Vs. Andhra Pradesh Police Welfare Society [ 1983 (3) TMI 19 - ANDHRA PRADESH HIGH COURT] and Water and land Management Training Research Institute [ 2015 (6) TMI 248 - ITAT HYDERABAD] and DIT Vs. National Safely Counsel [ 2015 (6) TMI 248 - ITAT HYDERABAD]. Object of general public utility is wider and larger object which encompasses the object like imparting the training to the Govt employees working in various Department and Revenue. The Govt. Employees working with state govt. belongs to various state of the society and they are not restricted to one religion, caste or creed. If there is an improvement in their workmanship and the managerial skill then it will indirectly benefit the public and also to the Government. We are of the opinion that the assessee is entitled to get relief claimed before us and accordingly, we direct the Ld. CIT(Exemption) to issue the registration certificate from the date of application u/s.12AA of the Act. Thus, the grounds raised by the assessee in this appeal are allowed.

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• 2020 (5) TMI 590
  License/registration fee paid - whether is a commercial right and in the nature of an asset within the meaning of section 32(1)(ii) and the assessee is entitled to claim depreciation thereon ? - capitalization of expenditure for special Dunnage whereas debiting the expenditure for ordinary Dunnage to the profit and loss account and claimed the same to be revenue expenditure - HELD THAT:- Assessee has been using two types of Dunnage, though for the same purpose, but with two different life times, namely, the special Dunnage having life time of more than five years, whereas the ordinary Dunnage has to be used only for one year and un-usable thereafter - the assessee has capitalized the expenditure on the special Dunnage in their accounts and has been claiming depreciation @ 16% per annum over the useful period and on the same analogy in respect of ordinary Dunnage, they are treating the expenditure for one year and debiting the same to the profit and loss account to claim it as revenue expenditure. It is also not in dispute that the Revenue has been accepting the capitalization of special Dunnage and allowing depreciation @ 16% per annum over the period of life expectancy of such Dunnage. As life expectancy is taken as the determining factor for the separate treatment to the Dunnage, we do not find any illegality or irregularity in the view taken by the ld. CIT(A) that because of the single use within a year in respect of ordinary Dunnage, the expenditure thereon has to be taken as revenue expenditure and no addition on that score could be made. This finding of the ld. CIT(A) cannot be said to be illegal or irregular or perverse. We, therefore, find the ground No. 1 of appeal of the Revenue as devoid of merits. Depreciation in respect of license/registration fee paid to Indian Railways - CIT(A) based his finding on the observations of the Tribunal in the case of ONGC Videsh Ltd [2009 (10) TMI 76 - ITAT DELHI-F] wherein it was held that the right granted to the assessee by way of license whereunder the assessee had become owner of such right, such license enables the assessee to have an access to carry on their business and therefore, it falls within the category of an asset u/s. 32(1)(ii) - No decision is brought to our notice to the contrary to take a different view. We, therefore, while agreeing with the ld. CIT(A), find that the claim of depreciation in respect of license/registration fee paid by the assessee to the Indian Railways is an asset whereon depreciation u/s. 32(1) is allowable. We, therefore, dismiss ground No. 2.

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• 2020 (5) TMI 584
  Assessment u/s. 153A - survey action u/s. 133A - HELD THAT:- In view of the uncontroverted and admitted statement given on behalf of the assessee u/s. 133A and the documents impounded during the survey, which were also virtually admitted by the assessee, there was no error in the order of the Tribunal in accepting the materials on record in order to arrive at an assessment. We cannot say that there was no search action u/s. 132 of the Income Tax Act so as to frame assessments u/s. 153A of the I.T. Act. The assessments were also based on material gathered during the course of survey u/s. 133A - See HOTEL MERIYA [ 2010 (5) TMI 556 - KERALA HIGH COURT] - we are inclined to dismiss this ground of the assessee. Unaccounted sale receipts in the form of cash - Estimating the collection of cash outside the books - HELD THAT:- We direct the Assessing Officer to give due credit towards cost of construction relating to the unaccounted sale receipts collected by the assessee which was included in the work in progress that was shown by the assessee in its balance sheet. With this observation, we remit the issue in dispute to the file of the Assessing Officer for limited purpose of re-quantification of the addition in respect of unaccounted cash receipts unearthed by the Department during the course of search/survey action. The Assessing Officer is directed to compare the above cost of construction with the work in progress shown by the assessee in its balance sheet. Total work in progress shown by the assessee in its books of accounts in each assessment year is to be apportioned between accounted collections and unaccounted collections in their respective ratio so as to arrive at correct undisclosed income of assessee for each assessment year. The resultant figure would be the undisclosed income of the assessee for each assessment year and there is no question of taking any percentage of it as income of assessee as argued by ld. AR. assessee is only entitled for proportionate deduction towards cost of construction and accordingly AO has to recompute the unaccounted income for all three Assessment Years after giving an opportunity of hearing to the assessee. It is needless to say that the addition made by the Assessing Officer herein is not u/s. 69 or 69A of the I.T. Act. It is with reference to the unaccounted sale receipts which is part of the assessee s turnover. Being so, the restriction imposed u/s. 69 or 69A of the I.T. Act with regard to granting of deduction towards expenditure does not apply.

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• Customs

• 2020 (5) TMI 589
  Application for amendment of petition - petitioner seeks permission to amend the petition so as to include a challenge the notification bearing no. S.O. 1119(E) dated 17.03.2020 issued by the Joint Secretary to the Government of India - COFEPOSA Act - HELD THAT:- Perusal of Section 7 of COFEPOSA shows that the said provision enables the appropriate Government to take action in terms of the said provision in respect of a person against whom a detention order has been made. The pre-requisite for the Government to exercise the power under the said provision is that the proposed detenue has absconded or is concealing himself, as a result whereof the order cannot be executed. Besides, the appropriate Government should have a reason to believe that the situation meets the criteria for resorting to Section 7 of the Act. Merely because the aforesaid provision stipulates that failure to comply with directions issued by the Government would amount to a separate and distinct offence, it does not necessarily mean that the challenge to a notification under the said provision has to be categorically by way of a separate and a distinct petition. The detention order would be quashed and the consequential proceedings which have been initiated under Section 7 of the Act, on account of non-compliance, would continue to survive. Contravention of section 7 may be a separate offence contemplated under the Act, requiring independent consideration, but the substantive question before us at this stage is not whether the same deserves to be quashed or not - since the proceedings under Section 7 of the Act emanate from the detention order, the proper recourse is to allow the petitioner to impugn the same along with the main petition. Another crucial aspect of Section 7 flows from the verdict of the apex court dealing with the scope of jurisdiction of the Court while entertaining a petition challenging the detention order at a pre-execution/pre-arrest stage. In the case of ADDL. SECRETARY TO GOVT. OF INDIA VERSUS ALKA SUBHASH GADIA [ 1990 (12) TMI 216 - SUPREME COURT] the Supreme Court has emphasized that while the court has the power to interfere with the detention order even at the pre-execution stage, but they are not obliged to do so nor will it be proper for them to do, save in exceptional cases. The discretion of the Court has to be exercised judicially on well settled principles and the detenu cannot claim such exercise of power as a matter of right. In a situation where the proposed detenu is an absconder, the Court while entertaining a petition at the pre-execution stage, would have to exercise extra caution and take his conduct into consideration. At the same time, the petitioner can demonstrate that the respondents have failed to exhibit earnestness in taking an action under section 7 of the Act. Indeed, in the present case, the petitioner has alleged that the action of the respondents is an act of malice in law. Notification under Section 7 of the Act and the facts and circumstances leading to its issuance, would have a bearing on the petitioner s challenge to the detention order one way or the other. The proposed amendments would not entirely change the scope of the main petition. Even if it did, it is settled law that the principle of constructive res judicata does not apply to petitions alleging violation of Article 21 of the Constitution. The petitioner is directed to place the amended writ petition incorporating the grounds and the prayer within a period of three days from today with an advance copy to the respondents - application allowed.

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• 2020 (5) TMI 588
  Amendment in shipping bills - rejection of request made by the Appellant for making amendment in the shipping bills on the ground that the Appellant had failed to provide any documentary evidence, as was required under section 149 of the Customs Act - HELD THAT:- The Commissioner (Appeals) completely failed to distinguish the requirements of paragraph 2 of the notification and paragraph 3 of the notification. The documents which the Commissioner (Appeals) sought from the Appellant are in relation to the requirements of paragraph 3 of the notification and in fact even the information sought in the format is a format contemplated in paragraph 3 of the notification. Paragraph 2 of the notification required a declaration to be made in the shipping bills regarding the intention to claim rebate either under paragraph 2 or paragraph 3 of the notification. The appellant had not indicated the said declaration and it is this declaration that was sought to be submitted in the shipping bills through the amendment sought by the Appellant. Neither the Adjudicating Authority nor the Commissioner (Appeals) have mentioned about any requirement of paragraph 2 of the notification not having been met by the Appellant. For applicability of section 149 of the Customs Act relating to amendment of documents, all that has to be seen is that documentary evidence should have been in existence at the time the goods were exported. There is no document which was not in existence at the time the goods were exported for the simple reason that all the Appellant was claiming by the amendment was incorporation of the declaration that the Appellant intended to avail the rebate under paragraph 2 of the notification. Under paragraph 2 of the notification all that has to be seen for calculation of the rebate is the schedule. The documents mentioned in the order of the Commissioner (Appeals) were not required to be examined. It is, therefore, clear from the nature of the amendment that was sought by the Appellant in the Bills of entry and also from the provisions of section 149 of the Customs Act and the notification dated 29 June, 2012 that the amendment sought by the appellant in the shipping bills of entry was liable to be allowed since only a declaration was sought by the Appellant that rebate should be granted by refund of service tax paid on the specified services under paragraph 2 of the notification - Appellant shall be permitted to carry out the amendments in the shipping bills. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2020 (5) TMI 582
  Change of physical status of land - resume of possession of land - HELD THAT:- This Court is of the view that such a prayer cannot be granted at this stage, when there are no specific facts asserted on affidavit by the applicant as to when and by whom was the applicant informed about alleged construction activities on the subject land and the exact nature of such construction activities. Thus, there is no occasion for directing the Official Liquidator to file an affidavit to demonstrate that the physical condition of the subject land as was in existence in August, 2019 continues to be so on date. Application dismissed.

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• Central Excise

• 2020 (5) TMI 587
  Valuation - manufacture and clearance of physician samples - sale on principal to principal basis - applicability of Rule 4 of the Central Excise Valuation Rules, 2004 or Section 4(1)(a) of the Central Excise Act, 1944 - HELD THAT:- This Tribunal following the ratio laid down by Hon ble Supreme Court in COMMR. OF CENTRAL EXCISE CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. ORS. [ 2015 (12) TMI 670 - SUPREME COURT] , observed in the case of M/S MEDISPRAY LABORATORIES PVT. LTD., M/S MEDITAB SPECIALITIES PVT. LTD., AND M/S OKASA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA [ 2017 (2) TMI 309 - CESTAT MUMBAI] where it was held that the physician samples manufactured and sold by Okasa Pvt. Ltd. to their principal, the transaction is on principal to principal basis. Therefore, whatever goods were sold by the appellant to their principal is correct transaction value in terms of Section 4. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (5) TMI 586
  Deemed assessment order - challenge on the ground that there is no valid reason for the respondent to call for such records in the light of Pondicherry General Sales Tax (Assessment) Rules, 2007 which was implemented on the eve of Pondicherry VAT Act, 2007 w.e.f. 01.12.2007 - HELD THAT: The assessment order in question pertains to 2001 to 2002 for which the petitioner has also filed returns. Since PGST Act, 1967 was being replaced with Puducherry VAT Act, 2007, the Government of Puducherry issued the above Rules. The purpose of the aforesaid Rule was to bring finality to the assessment proceedings which had remained incomplete as on 01.05.2007. The respondents ought to have passed a deemed assessment order and thereafter, initiated fresh proceedings under the provisions of the newly inserted Pondicherry VAT Act, 2007 read with Pondicherry General Sales Tax (Assessment) Rules, 2007. Instead, they delayed in passing deemed assessment order in terms of the aforesaid Rules - there are no merits in the impugned order. The impugned notice is quashed and the respondent is directed to pass appropriate assessment orders in terms of the Pondicherry General Sales Tax (Assessment) Rules, 2007 - Petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2020 (5) TMI 585
  Waiver of GST dues - release of an amount of Rs. 500 Crores by way of loan under the scheme of the Government of India to revive the projects so that work may start and then on completion the money is generated and repaid - HELD THAT:- It was pointed out by the learned Receiver that UCO Bank is considering the proposal for financing of the unsold inventory part. Considering urgency, let them consider and take a decision within 15 days in consultation with the learned Receiver - A note has been submitted by Mr. M.L.Lahoty, learned counsel, with respect to sale of certain properties in Eden Park and Castle completed by NBCC. Let the learned Receiver respond to the Note submitted by Mr. Lahoty on the next date of hearing and to point out whether their flats already stand allotted. The DRT is directed to transmit the rent which they have received from property that has been attached to the Amrapali Account (being A/c No. 02070210002834) maintained by the Registry of this Court.

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