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TMI Tax Updates - e-Newsletter May 13, 2021 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST: TRAN-1 credit denied - permission to file revised Form GST TRAN-1 manually or otherwise to carry forward credit - Following the decision in the case of [2021 (3) TMI 953 - KARNATAKA HIGH COURT], the writ appeals preferred by the Union of India have been dismissed - HC Visit to Get Source Income Tax: Validity of Settlement order u/s 245(C) - the 2nd respondent failed to include this property in the return of wealth on the relevant valuation dates. Thus, omission of this property has also resulted in establishing that the disclosure made is neither true nor full. - to comply with the requirements of the provisions of Section 245(C), there is every reason to believe that the 2nd respondent / assessee has not approached the Settlement Commission with clean hands and thus, the Department is empowered to go for further adjudication. - HC Visit to Get Source Income Tax: Direct Tax Vivad Se Vishwas Act, 2020 - The order dated 11.05.2020 rectified the Tribunal’s earlier order dated 22.06.2018, as according to the Tribunal, a mistake, apparent on the face of the record, had occurred. The Tribunal, in its operative directions, while recalling the order dated 22.06.2018, not only restored the revenue's appeal but also posted it for a fresh hearing. Therefore, if the doctrine of "relation back" were to be applied, and given its logical application, it would have to be said that the revenue's appeal was pending on the specified date, i.e., 31.01.2020. - HC Visit to Get Source Income Tax: Order passed before the time prescribed for filing the reply - faceless assessment scheme - it is evident that the impugned order has been passed with pre-set mind. In any event, the order has been passed without considering the reply received from the petitioner. Therefore, this Court is inclined to grant the relief sought for by the petitioner as there is a manifest violation of business of justice while passing the impugned order. - Matter restored back - HC Visit to Get Source Income Tax: Stay of Recovery proceedings - Prayer quashing 226(3) notice - The prayer sought for by the petitioner, for a certiorarified mandamus quashing 226(3) notice, is thus not liable to be granted. Had an application for stay been filed, one could have considered the disposal of that application pending appeal. However, that has also not been done. Thus, the petitioner, at this juncture, can only be permitted to seek appropriate interim protection from the appellate/administrative authorities, pending appeal. - HC Visit to Get Source Income Tax: Disallowance made u/s.14A of the Act while computing book profit u/s.115JB - actual expenses debited to profit and loss account which are incurred for the purpose of earning exempt income need to be disallowed under Clause (f) of Explanation 1 to Section 115JB(2) of the Act. As stated supra, we find that assessee had already made disallowance voluntarily in the return of income which alone need to be considered for the purpose of computation of book profits u/s 115JB of the Act. Hence, no further disallowance need to be made thereon. - AT Visit to Get Source Income Tax: Clubbing of income - addition of portion of sales consideration related to wife and mother of assessee u/s 64(1) - Logically the sale consideration is to be distributed between four persons. In view of that, a portion of sale consideration is required to be assigned to the rights of membership etc which were not given to the firm. Therefore, there is no transfer from husband to wife of any right or any value. In view of that no value can be assigned under Section 64(1) of the Act by applying clubbing provisions thereon. Moreover, we find that the ld CITA grossly erred in applying the clubbing provisions u/s 64(1) of the Act even for mother. - AT Visit to Get Source Income Tax: Addition on account of share premium received by the assessee u/s 56(1) - income from other sources - the addition has been admittedly made by the ld. AO u/s.56(1) of the Act and no such enquiries doubting the genuineness of the transactions or the genuineness of the investors were doubted by the ld. AO in the instant case. - CIT(A) had rightly deleted the addition made u/s.56(1) of the Act on account of receipt of share premium - AT Visit to Get Source Income Tax: Validity of revision jurisdiction u/s. 263 - It is not in dispute that the borrowings and interest free advances to IHCL were made in earlier years and not during the year under consideration. In earlier orders we find that the borrowings made by the assessee and its utilisation thereof by way of interest free advance to IHCL has been accepted by the Revenue in scrutiny assessment proceedings, as meant for business purposes. - the reliance placed by the ld. PCIT on the provisions of Explanation-2 to Section 263 of the Act would not be relevant at all for the purpose of adjudication. - AT Visit to Get Source Income Tax: Unaccounted sales of car parking area - Nothing came into the notice that there is any change or variation in the order passed by the Ld.CIT(A) for the AY 2012-13. in which the claim of the assessee regarding sale of parking was allowed to the extent of 99%. Needless to say that in the present assessment year, the claim of 1% is only in question. The facts are not distinguishable at this stage. - AT Visit to Get Source Income Tax: Addition u/s 68 on account of unsecured loans received - Since the loan amount has been held by us as genuine, the corresponding interest payment made thereon after subjecting the same to TDS compliances, deserves to be allowed. It is not the case of the revenue that the inter corporate deposits received by the assessee from aforesaid 4 companies were not utilized for the purpose of business of the assessee company. Hence the interest paid on such borrowings are allowed as deduction. - AT Visit to Get Source Income Tax: Reopening of assessment u/s 147 - borrowed satisfaction v/s independent application of mind - addition u/s 68 - Action taken under section 147 on the basis of borrowed satisfaction is bad in law. Since the material for forming belief in the present case are similar to the material available in the aforesaid cases, and the coordinate Benches have decided the identical issue in favour of the assessee - AT Visit to Get Source Income Tax: Penalty u/s 271D and 271E - creation/ assignment of debt and liabilities vide journal entries - These entries arise in the normal course of day to day business activities. - no person would either receive or repay loans in such odd amounts. - these journal entries in the name of some parties were passed towards assignment of genuine and bonafide receivables / payables arising out of business expediencies and exigencies in the normal course of business. - Hence the same would certainly constitute reasonable cause within the meaning of section 273B of the Act and hence no penalty u/s 271D and 271E - AT Visit to Get Source Income Tax: Deduction claimed u/s.54F - LTCG - Clearly, therefore, the date relevant for determining the purchase of property is the date on which full consideration is paid and possession is taken. There is no dispute that this date is 22.07.2015 which falls within a period of two years from the date on which related property is sold. - AT Visit to Get Source Customs: Valuation of imported goods - In the facts and circumstances of this case there is failure on the part of the customs officer, by not following the laid down Customs procedure, particularly procedure of assessment as laid down. They have orally denied to pass an order of provisional assessment and have further used undue influence and have practically compelled the respondent importer to agree to dictates and agree for enhancement of the declared value, trying to giving total go by to the provisions of Section 17(4) read with 17(5) of the Act. - The respondent importer is entitled to consequential benefit - AT Visit to Get Source Central Excise: Input service distributor (ISD) - Void ab initio distributed credit - office or establishment of the said manufacturer or not - satisfaction of provisions of Rule 2(m) of Cenvat Credit Rules, 2004 - Since, the revenue has accepted the entitlement of the assessee to avail off the input credit for the assessment periods viz., November 2010 to July 2011 and for a period from August 2011 to December 2011, the revenue cannot be permitted to challenge its correctness. - HC Visit to Get Source VAT: Violation of the principles of natural justice - time granted to the petitioner to put forth its submissions were enough or not - The time granted to the petitioner to put forth its submissions pursuant to R1 taking charge is woefully insufficient. Moreover, the notices issued prior to framing of assessments call upon the petitioner to file its objections as well as appear, all in the space of a week, which, in my view, is also not sufficient. - HC Visit to Get Source Articles TONNAGE SCHEME FOR SHIPPING COMPANIES Notifications GST - States 06/2021-State Tax - dated 4-5-2021 - Gujarat SGST Amendment in Notification No. 89/2020-State Tax, dated the 17th December, 2020 GST/2021-22/F. No. 509/ 62/Commercial Tax - dated 12-5-2021 - Uttar Pradesh SGST Amendment in Notification No. GST/2020-21/F. No. 509/57/Commercial tax Dated 24.11.2020 GST/2021-22/F. No. 509/ 61/Commercial Tax - dated 12-5-2021 - Uttar Pradesh SGST Extend the due date for furnishing of FORM ITC-04 for the period Jan-March, 2021 till 31st May, 2021. 335/XI-2-21-9(47)/17-U.P. Act-1-2017-Order-(176)-2021 - dated 6-4-2021 - Uttar Pradesh SGST Supersession of the notification No. 436/XI-2-9(47)/17-U.P. Act-1-2017-Order-(110)-2020 dated 11th May, 2020 Income Tax 61/2021 - dated 11-5-2021 - IT U/s 280A(1) of IT Act 1961, Central Government, in consultation with the Chief Justice of the High Court of Tripura designates the courts of Magistrates of First Class as Special Courts 60/2021 - dated 11-5-2021 - IT U/s 280A(1) of IT Act 1961, Central Government, in consultation with the Chief Justice of the High Court of Gauhati designates the courts of Magistrates of First Class as Special Courts SEZ S.O. 1844 (E) - dated 10-5-2021 - SEZ Kandla Special Economic Zone Authority - Name of members notified - Amendment in Notification No. S.O. 1636(E) dated 13th April, 2018 Circulars / Instructions / Orders SEBI - SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/564 - dated 12-5-2021 Procedure for seeking prior approval for change in control of SEBI registered Portfolio Managers News Shri Piyush Goyal urges the countries to share Covid vaccines liberally with those who are in dire need of it, stating that Global solidarity is the need of the hour; Cabinet approves Memorandum of Understanding between Institute of Chartered Accountants of India and Qatar Financial Centre Authority 4th India-Swiss Financial Dialogue held virtually Case Laws: GST 2021 (5) TMI 363 TRAN-1 credit denied - permission to file revised Form GST TRAN-1 manually or otherwise to carry forward credit - HELD THAT:- Following the decision in the case of [ 2021 (3) TMI 953 - KARNATAKA HIGH COURT] , the writ appeals preferred by the Union of India have been dismissed. However, as the period to file TRAN-1 has been expired on 30.08.2020, the respondents-assessees were granted time to file/revise TRAN-1 up to 31.03.2021, meaning thereby more than six month s time was granted to the assessees therein. Resultantly, while dismissing the present writ appeal, 30 days time is granted to the assessees to submit their GST TRAN-1 from today - Appeal dismissed. Income Tax 2021 (5) TMI 373 Settlement application order u/s 245(C) - writ petitioner Commissioner of Wealth Tax said that there was no true and full disclosure by the 2nd respondent/assessee at the time of filing of an application under Section 245(C) - valuation of property under wealth tax assessment - as contended that the 2nd respondent had filed return of wealth taking into consideration the value of the property on various valuation dates and also taking into consideration several litigations and disputes, which were pending against the said property of their respective valuation dates - HELD THAT:- Without considering the additional wealth offered by the second respondent, which has been disclosed before the Assessing Officer, the Settlement Commission proceeded with the Settlement in violation of the provisions of the Income Tax Act and beyond the jurisdiction of the Settlement Commission. The revised statement of facts filed by the 2nd respondent on 22.02.2008 would be sufficient to arrive a conclusion that the 2nd respondent has not filed an application under Section 245(C) of the Act with true and full disclosure. The additional statement of facts given during the adjudication of the application before the Settlement Commission, raises a doubt regarding the true and full disclosure and further, the reasonings given by the petitioner/Income Tax Department in the matter of true and full disclosure were not considered by the 2nd respondent. The Settlement Commission without adhering to the provisions of the Income Tax Act and more specifically, in violation of the mandatory requirement for entertaining an application for settlement, passed the impugned order of settlement, knowing fully well that the 2nd respondent has not made true and full disclosure as mandated under Section 245(C) of the Income Tax Act. The petitioner / Commissioner of Income Tax in his written submission dated 20.02.2008, specifically made certain points, which would reveal that the non-disclosure of wealth by the 2nd respondent came to notice as soon as the application for NOC under Section 281 of the I.T.Act was made. Thus, there is nothing new disclosed by the 2nd respondent before the Settlement Commission. The 2nd respondent has come forward to offer additional wealth at the time of admission, which further reinforces the position that the disclosure made in the application is neither true nor full. The 2nd respondent has totally omitted to include another immovable property namely the plot at Royapettah in the statement of taxable wealth. Thus, the 2nd respondent failed to include this property in the return of wealth on the relevant valuation dates. Thus, omission of this property has also resulted in establishing that the disclosure made is neither true nor full. In view of the fact that the petitioner could able to establish that the 2nd respondent has not approached the 1st respondent / Settlement Commission with true and full disclosure of income and during the course of proceedings, offering additional income and findings of the Settlement Commission would also confirm the same, the said offerings of the additional income would be sufficient for the purpose of arriving a conclusion that the 2nd respondent filed an application under Section 245(C) of the Income Tax Act without disclosing true and full income. Thus, to comply with the requirements of the provisions of Section 245(C), there is every reason to believe that the 2nd respondent / assessee has not approached the Settlement Commission with clean hands and thus, the Department is empowered to go for further adjudication. This being the very purpose and object of the condition imposed under Section 245(C) of the Act, there is no reason for the Settlement Commission to get along with the application, which were not filed with true and full disclosure. Thus, the Settlement Commission has committed an error apparent and allowed the application filed by the 2nd respondent in violation of the provisions of the Income Tax Act. 2021 (5) TMI 368 Direct Tax Vivad Se Vishwas Act, 2020 - Rectification u/s 254 - Challenge to the orders whereby, Forms 1 and 2 filed under the Direct Tax Vivad Se Vishwas Act, 2020 were rejected by the designated authority - Whether, in the given facts and circumstances, it could be said that the revenue's appeal was pending on the specified date (i.e., 31.01.2020) as noticed under the 2020 Act? - Revenue says that there is no mention of an MA, in the 2020 Act - HELD THAT:- A careful perusal of the order dated 22.06.2018 would show that the revenue's appeal was dismissed, at the threshold, based on a mistaken impression, perhaps, given by the departmental representative, that the Tribunal had taken a view against the revenue. As noticed hereinabove by us, on 22.06.2018, on the date, the revenue's appeal was dismissed. the petitioner-assessee was not represented. This obvious error, which was apparent from the record, was corrected by the Tribunal, on 11.05.2020. Therefore, if we were to apply the response given to FAQ no. 61, as contained in the revenue's Circular No. 21 of 2020, dated 04.12.2020, in our opinion, the petitioner-assessee should succeed. A plain reading of the response to FAQ no. 61 would show that it requires fulfilment of two prerequisites for an appeal to be construed as pending on the specified date [i.e., 31.01.2020] as per the provisions of the 2020 Act. i. First, the MA should be pending on the specified date, i.e., 31.01.2020. ii. Second, the said MA should relate to an appeal, which had been dismissed in limine before 31.01.2020. Insofar as the first aspect is concerned, there is no dispute that the MA was filed, and was pending on the specified date, i.e., 31.01.2020. As regards the second aspect, in our view, the order of the Tribunal dated 22.06.2020 can only be construed as an order that dismissed the revenue s appeal in limine. In our opinion, the decision taken to dismiss the revenue s appeal was based on a preliminary assessment of the facts, i.e., the outcome of the revenue s appeal preferred with the Tribunal qua the same issues in earlier AYs. There was no discussion on the merits of the case. Therefore, in our view, the petitioner-assessee should succeed on this ground alone. In the given facts and circumstances, the order dated 11.05.2020 would have to be construed, metaphorically, as one breathing life into a dead appeal, in the light of the doctrine of relation back . [See: Commissioner of Income-Tax vs. Haryana Sheet Glass Ltd. [ 2009 (9) TMI 70 - DELHI HIGH COURT ] The order dated 11.05.2020 rectified the Tribunal s earlier order dated 22.06.2018, as according to the Tribunal, a mistake, apparent on the face of the record, had occurred. The Tribunal, in its operative directions, while recalling the order dated 22.06.2018, not only restored the revenue's appeal but also posted it for a fresh hearing. Therefore, if the doctrine of relation back were to be applied, and given its logical application, it would have to be said that the revenue's appeal was pending on the specified date, i.e., 31.01.2020. Conclusion: - We are inclined to allow the prayer made in the writ petition. The impugned orders are set aside. 2021 (5) TMI 365 Deduction under Section 80-IB(10) - denial of proportionate deduction - Whether the Tribunal was correct in holding that assessee was not entitled to deduction u/s 80-IB(10) when the assessee has constructed the building in accordance with the original plan and had sold six individual units each measuring below 1500 sq.ft. and each of the sale deed did not fall within the prohibition contained under Section 80- IB(10)(f) ? - HELD THAT:- For the reasons assigned by this Court in the judgment M/s. S.N. Builders and Developers [ 2021 (1) TMI 789 - KARNATAKA HIGH COURT] and taking into consideration the fact that the entire claim of the assessee has been disallowed by the Assessing Officer without adverting to the merits of the claim made by the assessee, the orders passed by the Tribunal, Commissioner of Income Tax (Appeals) and the Assessing Officer insofar it pertains to claim of the appellant under Section 80-IB(10) of the Act are hereby quashed and the matter is remitted to the Assessing Officer to adjudicate the claim of the assessee under Section 80-IB(10) of the Act afresh in accordance with law. 2021 (5) TMI 364 Computation of deduction u/s 10A - Tribunal not adjudicating on the Appellant's ground that communication expenses and expenses incurred in foreign currency ought not to be reduced from 'export turnover' while computing the deduction available under Section 10A, although the same were not required to be so reduced in terms of the said provision? - Whether Honourable DRP and the learned AO has erred in law and on facts in concluding that communication expenses and expenditure incurred in foreign currency are to be excluded from the export turnover for the purpose of computation of relief under the section 10A ? - HELD THAT:- From the order passed by the Tribunal, it is evident that the Tribunal has not adjudicated the ground No.9 independently and has decided the ground Nos.9 and 10 on the ground that the same is covered by CIT vs. Tata ElxsiTata Elxsi [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT ] Therefore, in the facts of the case, the impugned order dated 11.01.2017 passed by the Tribunal insofar as it pertains to ground No.9 is hereby quashed and the matter is remitted to the Tribunal for decision afresh on the ground No.9. It is, therefore, not necessary for us to answer the substantial question of law framed in this appeal. 2021 (5) TMI 362 Order passed before the time prescribed for filing the reply - faceless assessment scheme - HELD THAT:- Since the impugned order has been passed before the time prescribed for filing the reply, it is evident that the impugned order has been passed with pre-set mind. In any event, the order has been passed without considering the reply received from the petitioner. Therefore, this Court is inclined to grant the relief sought for by the petitioner as there is a manifest violation of business of justice while passing the impugned order. Under these circumstances, the impugned order stands quashed and the case is remitted back to the second respondent to pass a speaking order on merits in accordance with law after considering the reply filed by the petitioner on 15.03.2021. 2021 (5) TMI 361 Stay of Recovery proceedings - Other modes of recovery - Prayer quashing 226(3) notice - assessment passed u/s 144 bringing to tax the entirety of the bank balance as unexplained investment and income along with applicable penalty - HELD THAT:- On the basis of the information received from the Kumbakonam Central Co-operative Bank, the details of the bank accounts and deposits made during demonetization were obtained and reply was sought for from the assessee in regard to certain deposits made during the relevant financial year. Admittedly, the petitioner did not respond to notice issued under Section 142(1). A pre-assessment show cause notice was also issued on 27.08.2019, to which also there was no response - thus order of assessment has come to be passed under Section 144 records total non-co-operation on the part of the petitioner during the assessment proceedings. The petitioner has admittedly challenged the same by way of first appeal, which is pending disposal. No application for stay has been placed before this Court though the affidavit filed in support of the Writ Petition mentions the stay application filed before the Income Tax Officer. In such circumstances, I see no illegality in the coercive recovery proceedings that have been initiated, save, of course, that the Section 226 notice ought to have been issued on the petitioner simultaneous with service upon the bank manager. This has admittedly not been done. However, this is not fatal to the proceedings, seeing as the petitioner is aware of the coercive recovery proceedings initiated as early as in March, 2020, but has chosen to do nothing till date. The prayer sought for by the petitioner, for a certiorarified mandamus quashing 226(3) notice, is thus not liable to be granted. Had an application for stay been filed, one could have considered the disposal of that application pending appeal. However, that has also not been done. Thus, the petitioner, at this juncture, can only be permitted to seek appropriate interim protection from the appellate/administrative authorities, pending appeal. 2021 (5) TMI 358 Assessment of trust - disallowance of claim of depreciation - HELD THAT:- We find that the Ld. CIT(A) following the decision of DIT (Exemption) Vs Indraprastha Cancer Society [ 2014 (11) TMI 733 - DELHI HIGH COURT ] has allowed the claim of the assessee of the depreciation, despite claiming by assessee of capital expenditure corresponding to the depreciation as application of funds for charitable purposes while calculating excess of income over expenditure in terms of section 11 of the Act. We may also like to mention that Hon ble Supreme Court in the case of Rajasthan and Gujarati Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT ] has allowed benefit of the depreciation while claiming exemption under section 11. Claim of carry forward of losses - HELD THAT:- Income is to be computed in accordance with commercial principles and as such adjustment of brought forward loss/deficit and carry forward loss/deficit is to be allowed. See case of DIT Vs Raghuvanshi Charitable Trust [ 2010 (7) TMI 158 - DELHI HIGH COURT ] which is a binding precedent. In our opinion, there is no error in the order of Ld. CIT(A) on the issue in dispute, and accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed. 2021 (5) TMI 357 Grant of registration u/s. 12AA and 80-G denied - absence of any charitable activities - HELD THAT:- Commissioner failed to decide the application for registration u/s 12A the Act in its right perspective in the absence of proper pleadings, information, documents and satisfaction, whereas while deciding the Application u/s 80G of the Act correctly held that before granting approval u/s 80G, it is mandatory that the Assessee should have 12A registration. Appellant/Trust had reasonable and bonafide cause for not joining the proceedings before the ld. Commissioner due to Covid-19 pandemic in the months of May, July and September of 2020 when the Applications U/s 12A of the Act were filed and considered, because at that particular point of time, the entire nation was on hold and therefore the Appellant failed to avail the opportunities to satisfy the Ld. Commissioner qua objects and charitable activities of the Trust and further failed to plead and establish its case in proper manner. Considering the peculiar facts and circumstances, we deem it appropriate to set aside the impugned orders and to remand back the cases to the file of ld. Commissioner for decision afresh on merits - Appeals filed by the Appellant stands allowed for statistical purpose. 2021 (5) TMI 356 TP Adjustment - ALP Adjustment towards notional interest on receivables from Associated Enterprises - HELD THAT:- Since, the transactions are cross-border, it would be appropriate to adopt LIBOR rate of interest while computing the notional interest on receivables from the AEs. This Bench of the Tribunal has held so on various earlier occasions with respect to the same issue. Further, it will also be appropriate for netting off the notional interest with respect to the debit and credit transaction with the assessee's AEs because when notional interest is charged on receivables the same should also be charged on payables. Therefore, in the case of the assessee we hereby hold that LIBOR rate of interest shall be adopted while computing the notional interest on receivables and payables for the transaction with AEs. Further, on considering the nature of trade of the assessee, we find it appropriate to fix the grace period of 30 days while computing the notional interest towards the debit and credit transaction with the AEs. It is ordered accordingly. Disallowance of club expenditure - AO made the addition stating same was not justified as business expenditure by the assessee in the Form-3CD - HELD THAT:- As before us, the assessee has not substantiated that the expenditure was incurred for the purpose of the assessee's business. Hence, we hereby confirm the addition made by the ld. AO. Adhoc disallowance towards expenditure incurred on freight and towards expenditure incurred on repairs - HELD THAT:- AO observed that there were several self-made vouchers which were not accessible for verification. Therefore, the Ld. AO estimated the disallowance of freight/transport expenses and with respect to repairs and other expenditure. Considering the facts and circumstances of the case, we do not find it necessary to interfere with the order of the ld. AO on the issue because it is an admitted fact that several Bills and Vouchers were not verifiable. - Decided against assessee. 2021 (5) TMI 355 Addition on account of provision of after sales costs - HELD THAT:- The outstanding unpaid amount at the end of the year is at ₹ 38.12 lakhs. The assessee also submitted list of projects along with amount of provisions against each projects. However, in the assessment proceedings, the Assessing Officer found the same not acceptable and proceeded to disallow the claim of the assessee - from chart furnished by the Ld. AR, that, the same allowance has been granted in favour of the assessee from assessment year 1998-99 - appellant Revenue did not prefer an appeal before the Income Tax Appellate Tribunal for assessment year 2008-09 which clearly shows the appellant Revenue accepted the findings rendered by the Tribunal in earlier years. Further we note that the AO also has given effect by allowing the claim of the assessee for assessment year 2005-06. We also find order passed by the Assessing Officer for assessment year 2009-10 where no disallowance was made by the Assessing Officer under the head after sales costs. Thereby it clearly shows appellant Revenue has given effect of the order of the Tribunal in assessee‟s own case from assessment year 1998-99 and allowed the claim of the assessee. We find the latest order being passed by the Tribunal for the assessment year 2011-12 wherein we find similar grounds were raised by the Revenue against the order of the Ld. CIT(Appeals) and this Tribunal did not interfere with the findings of the Ld. CIT(Appeals) in allowing the claim of the assessee. - Decided against revenue. Disallowance u/s 14A - HELD THAT:- Admittedly the fact remains undisputed that there was no exempt income earned by the assessee. It is a settled principle that no disallowance could be made u/s.14A of the Act when there is no exempt income - we are of the considered view that since the assessee did not received any exempted income against the investment made; no disallowance u/s.14A is warranted. - Decided in favour of assessee. 2021 (5) TMI 354 Penalty proceedings u/s. 271B - not auditing the account of the assessee and not furnishing the same within the due date - Assessee argued that this penalty was imposed on the basis of assessment completed u/s. 144 of the Act, since the said assessment is no more in existence on record and the penalty imposed thereon is not maintainable but agreed to remand the issue to the file of Assessing Officer for its fresh adjudication in terms of the order of this Tribunal in relation to the original assessment proceedings passed u/s. 144 - HELD THAT:- As DR did not report any objection in remanding the matter to the file of Assessing Officer for its fresh adjudication. We find force in the argument of the Ld. AR in remanding the issue to the file of the Assessing Officer and accordingly, the issue is remanded to the file of the Assessing Officer for its fresh adjudication. The assessee is at liberty to file its evidences, if any, in support of its contentions. 2021 (5) TMI 353 Reopening of assessment u/s 147 - jurisdiction of competent authority - Validity of order passed by the Ld. DCIT (International Taxation) u/s. 144 read with section 147 - no info about transferring the case from ITO Phagwara to the Deputy Commissioner of Income Tax (International Taxation) Circle Chandigarh - HELD THAT:- We notice that in the present case notice u/s. 148 of the Act was issued by the ITO Phagwara after recording reasons for initiating proceedings u/s. 147 of the Act, whereas the assessment order u/s. 144 read with section 147 was passed by the DCIT (international Taxation), Circle Chandigarh. Further, the competent authority has not passed any order u/s. 127(2) of the Act for transferring the case from ITO Phagwara to the Deputy Commissioner of Income Tax (International Taxation) Circle Chandigarh. Since, the coordinate Bench has decided the identical issue in favour of the assessee in the case of Sh. Manjit Singh vs. DCIT International Taxation [ 2020 (9) TMI 84 - ITAT CHANDIGARH ] and since the facts and issues involved in the present case are identical to the facts of the of the present case, we find merit in the legal issues raised by the assessee in its appeal. Hence,we allow the legal grounds raised by the appellant/assessee in the present case and quash the order passed by the Ld. DCIT (International Taxation). - Decided in favour of assessee. 2021 (5) TMI 351 Disallowance u/s.14A - HELD THAT:- Assessee has sufficient interest free funds in the form of share capital and reserves and surplus as tabulated in the order of the ld. CIT(A), which is much more than the investments that had actually yielded exempt income to the assessee. Hence, following the ratio decidendi of the Hon ble Jurisdictional High Court, in the case of HDFC Bank [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] we hold that the ld. CIT(A) had rightly deleted disallowance of interest under second limb of Rule 8D(2) of the Rules. With regard to 8D(2)(iii) of the Rules, the ld. CIT(A) had only directed the AO to consider only investments which had actually yielded exempt income. This we find is in consonance with the decision of the Hon ble Special Bench decision of Delhi Tribunal in the case of Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] and hence, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, we direct the ld. AO to consider only those investments which had actually yielded exempt income for the purpose of making disallowance under Rule 8D(2)(iii) of the Rules and recompute the disallowance accordingly and thereafter reduce the voluntary disallowance made by the assessee in the return of income. Expenses incurred on replacement of electricity meters - HELD THAT:- We find that this issue has been decided in favour of the assessee for all the earlier assessment years by various orders of this Tribunal and various orders of the Hon ble Jurisdictional High Court on the similar facts and circumstances in assessee s own case. We find that ld. CIT(A) had relied on the decision of the Hon ble Jurisdictional High Court for A.Y₹ 1999-2000 to 2004-05 wherein the Hon ble Bombay High Court did not admit the departmental appeals in respect of this issue of expenditure on replacement of meters. We also find that this issue is also decided in favour of the assessee in assessee s own case in A.Y.2011-12 [ 2017 (12) TMI 1121 - ITAT MUMBAI] Hence, by respectfully following the said decisions, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, the ground No.4 raised by the Revenue is dismissed. Addition made on account of proportionate apportionment and allocation of head office expenses while calculating deduction u/s.80(IA) - HELD THAT:- We find that this issue is squarely covered in favour of the assessee in its own case for A.Y.2013-14 2014-15 [ 2019 (11) TMI 1357 - ITAT MUMBAI] we find that there is no dispute that these units are eligible for claiming deduction u/s 80IA. Whether the deduction u/s.80IA of the Act is allowable to the extent of gross total income or only to the extent of business income? - Since this issue is already covered in favour of the assessee by the decision of the Hon ble Jurisdictional High Court in assessee s own case, which has been followed by the ld. CIT(A), we do not find any infirmity in the order of the ld. CIT(A) in this regards. Accordingly, the ground No.6 raised by the Revenue is dismissed. Disallowance made u/s.14A of the Act while computing book profit u/s.115JB - HELD THAT:- We find that the Special bench of Delhi Tribunal in the case of Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] had categorically held that computation mechanism provided in Rule 8D(2) of the Rules cannot be applied for making disallowance of expenses under Clause (f) of Explanation 1 to Section 115JB(2) of the Act. We find that the Special Bench of Delhi Tribunal had held that actual expenses debited to profit and loss account which are incurred for the purpose of earning exempt income need to be disallowed under Clause (f) of Explanation 1 to Section 115JB(2) of the Act. As stated supra, we find that assessee had already made disallowance voluntarily in the return of income which alone need to be considered for the purpose of computation of book profits u/s 115JB of the Act. Hence, no further disallowance need to be made thereon. Accordingly, we find that the ld. CIT(A) had rightly deleted the disallowance made by the ld. AO in this regard. Ground raised by the Revenue is dismissed. 2021 (5) TMI 350 Clubbing of income - addition of portion of sales consideration related to wife and mother of assessee u/s 64(1) - Sale of property - whether sale consideration is to be divided only between two persons? - AO observed that the sale consideration was distributed among 4 persons , whereas the cost of purchase was borne by two persons only - CIT(A) confirmed the addition on a different ground by stating that the addition should have been made under Section 64(1) of the Act by applying clubbing provisions - HELD THAT:- There is no dispute that all the four persons had come forward to sign the agreement of sale dated 20.1.2015 pursuant to which , capital gains became assessable. There is no dispute that the flats were ultimately sold together with the rights in leasehold property , rights in membership etc which were owned by all the four persons and which remained with the individuals and were never transferred to the firm. Logically the sale consideration is to be distributed between four persons. In view of that, a portion of sale consideration is required to be assigned to the rights of membership etc which were not given to the firm. Therefore, there is no transfer from husband to wife of any right or any value. In view of that no value can be assigned under Section 64(1) of the Act by applying clubbing provisions thereon. Moreover, we find that the ld CITA grossly erred in applying the clubbing provisions u/s 64(1) of the Act even for mother. Admittedly, as per law, the same could be applied only for spouse and for son s wife. Hence the addition sustained by the ld CIT(A) deserves to be deleted on this count itself. We find from the income tax returns of Smt. Krishna Ved and Smt Krupa Ved for the Asst Year 2015-16, which are forming part of the paper books filed before us, they had duly disclosed the capital gains attributable to their share without claiming any deduction towards cost of acquisition. We find from the computation of income for the Asst Year 2015-16 of both the ladies, that they were conscious of their income tax obligations and had duly disclosed the share of their sale consideration as long term capital gains (without any cost) and had duly claimed deduction u/s 54EC of the Act by making reinvestment in eligible bonds. We find that the ld AR submitted that the returns filed by two ladies have been accepted by the department. Hence there is no need to bring to tax the very same sale consideration in the hands of assessee herein, inclusion of which , would only result in double taxation. Hence we hold that the entire addition made in the hands of the assessee is hereby directed to be deleted and grounds 1 2 raised by the assessee are allowed. 2021 (5) TMI 349 Addition on account of share premium received by the assessee u/s 56(1) - income from other sources - HELD THAT:- We hold that receipt of share premium per se cannot be treated as income or the revenue receipt. We hold that in order to bring a particular receipt to be taxable within the ambit of Section 56(1) of the Act, the receipt should be in the nature of income as defined in Section 2(24) of the Act. We find that the share premium received by the company admittedly forms part of share capital and shareholders funds of the assessee company. When receipt of share capital partakes the character of a capital receipt, the receipt of share premium also partakes the character of capital receipt only. Hence, at the threshold itself, the receipt in the form of share premium cannot be brought to tax as the revenue receipt and consequently treat the same as income u/s.56(1). With regard to yet another observation made by the ld. AO in his order that receipt of premium was akin to gift and hence taxable u/s.56(1) we find that receipt of share capital and share premium is normal in case of a limited company and the same at any stretch of imagination cannot be equated with gift. Moreover, gift can be received only by individuals or HUFs and cannot be received by a company. Hence, this observation made by the ld. AO is dismissed in limine. With regard to yet another observation made by the ld. AO that assessee had acquired certain intangible assets at the time of acquisition of business and those intangible assets were impaired in the same year and that this fact itself proves malafide intention of the assessee for allotment of shares at a premium. We are unable to persuade ourself to accept to this contention of the ld. AO in view of the fact that though the assessee had acquired certain intangible assets while acquiring business, and though the said intangible assets had been written off during the year due to impairment, we find that assessee company had not claimed the same as deduction. Hence, the relevant observation of the ld. AO in this regard is baseless and devoid of any merit. In the instant case, we find the addition has been admittedly made by the ld. AO u/s.56(1) of the Act and no such enquiries doubting the genuineness of the transactions or the genuineness of the investors were doubted by the ld. AO in the instant case. Hence, the decision relied by the ld. DR, in our considered opinion, would not advance the case of the revenue. We find that all the necessary documents relating to the allotment of shares with premium together with relevant documentary evidences were indeed submitted by the assessee before the ld. AO which are not doubted at all. CIT(A) had rightly deleted the addition made u/s.56(1) of the Act on account of receipt of share premium for the A.Y.2011-12. Ground raised by the Revenue are dismissed. 2021 (5) TMI 346 Validity of revision jurisdiction u/s. 263 - CIT directing the ld. AO to disallow the interest paid on borrowed funds u/s.36(1)(iii) - HELD THAT:- AO had made adequate enquiries in the original assessment proceedings itself with regard to the issue of interest on borrowed funds and respectfully following the aforesaid decision, we hold that the said assessment completed after due enquiries, cannot be the subject matter of revision proceedings u/s 263 of the Act by the ld PCIT. No hesitation in holding that revision order passed by the ld. PCIT u/s 263 of the Act deserves to be quashed and is hereby quashed on this count itself. It is not in dispute that the borrowings and interest free advances to IHCL were made in earlier years and not during the year under consideration. In earlier orders we find that the borrowings made by the assessee and its utilisation thereof by way of interest free advance to IHCL has been accepted by the Revenue in scrutiny assessment proceedings, as meant for business purposes. PCIT invoked revision jurisdiction u/s.263 of the Act for A.Y.2013-14 but did not initiate any action with reference to this issue of disallowance of interest u/s.36(1)(iii) of the Act though the borrowings and utilisation thereon by way of interest free advance to IHCL were made prior to A.Y.2013-14. All these assessment orders and order of ld. PCIT u/s.263 of the Act were indeed available before the ld. AO while framing the assessment for A.Y.2015-16 which drives home the principle of consistency as well as the stand taken by the department in assessee s own case for various years. While this is so, the ld. AO taking a consistent view thereof in A.Y.2015-16 i.e. the year under consideration, cannot be categorised as passing erroneous order. On the contrary the ld. PCIT has passed an erroneous order in the instant case. Hence, revision jurisdiction u/s.263 of the Act invoked by the ld. PCIT deserves to be quashed even on this count both on technicality as well as on merits. Since, we have already held that sufficient enquiries were indeed carried out by the ld. AO in the course of original assessment proceedings, the reliance placed by the ld. PCIT on the provisions of Explanation-2 to Section 263 of the Act would not be relevant at all for the purpose of adjudication. Accordingly, the grounds raised by the assessee are allowed. 2021 (5) TMI 345 Unaccounted sales of car parking area - addition on account of unaccounted sale of car parking area which was not included in the sale of agreements of the flats - CIT-A deleted the addition - HELD THAT:- CIT(A) has allowed the claim of the assessee on the basis of the finding given by his predecessor while completing the assessment for the AY 2012-13 by virtue of order dated 21/08/2017 in which 99% of the total estimated sale of parking area was added by the AO and only 1% added in the AY 2013-14 i.e in the present Assessment year. CIT(A) has reproduced the finding for the AY 2012-13 in his order in question which need not to be repeated again. Nothing came into the notice that there is any change or variation in the order passed by the Ld.CIT(A) for the AY 2012-13. in which the claim of the assessee regarding sale of parking was allowed to the extent of 99%. Needless to say that in the present assessment year, the claim of 1% is only in question. The facts are not distinguishable at this stage. Moreover, the claim of the assessee has been confirmed by the Hon ble ITAT, Mumbai [ 2019 (2) TMI 1411 - ITAT MUMBAI] for the AY 2012-13 vide order dated 19/12/2018. Taking into account all these facts and circumstances, we are of the view that the Ld.CIT(A) has decided the matter of controversy, judiciously and correctly, which is not liable to be interfere with at this appellate stage. Unaccounted income on FSI sale - CIT-A deleted the addition - Addition was raised on account of unsigned agreement - HELD THAT:- The claim of the assessee was for the sale consideration of ₹ 14 crores only. Seized material nowhere speaks that the cash transaction was of ₹ 7.5 crores. Comparison of documents nowhere speaks about the difference of ₹ 7.5 crores alleged to be paid in cash. The Appellant prepared the draft agreement with Jainam Developers to initiate the business deal which was not signed by the assessee as well as Jainam Developers. The sale amount was shown to the tune of ₹ 21.50 crores and the deal nowhere seems finalized being not corroborated by any other document on record. After a long time, the deal was finalized to the extent of ₹ 40 crores which was offered to tax. At this time authority determined the market value of the property to the tune of ₹ 13,08,92,000/-. The payment of ₹ 14 crores mentioned at page 150 -153 of the paper book. The Ld. AO issued notice to the Jainam Developers who confirmed the deal to the tune of ₹ 14 crores. The Ld. AO raised the addition of ₹ 7.5 crores on the basis of assumption as well as difference between signed and unsigned documents. Addition cannot be raised on the basis of unsigned agreement specifically when the transaction is not corroborated by any other evidence on record. Loose papers are also not liable to be taken into consideration to raise the addition except corroborated by any other piece of evidence on record and in this regard, we also find the support of decision of CIT vs Dharmdev Finance Pvt. Ltd [ 2014 (4) TMI 1005 - GUJARAT HIGH COURT] and Pradeep Amrutlal Runwal [ 2015 (12) TMI 958 - ITAT PUNE] - we are of the view that the Ld.CIT(A) ) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we affirm the finding of the CIT(A) on this issue and decided the issue in favour of the assessee and against the revenue. 2021 (5) TMI 344 Disallowance of business promotion expenses - HELD THAT:- Admittedly, the business promotion expenses have been incurred for the purpose of improving sales of the assessee. There is merit in the submission of Ld. A.R. that the question of applying bright line test does not arise in the facts of the present case. Every businessman would be incurring advertisement and business promotion expenses in anticipation of higher sales in accordance with his sales promotion strategy. To his bad luck, if the advertisement and business promotion expenses do not fructify, the same should not lead to disallowance of expenses, which have otherwise been genuinely incurred by the assessee, i.e. the said expenses would continue to be considered as expenses incurred wholly and exclusively for the purpose of business. In the instant case, the A.O. has not examined the details furnished by the assessee. Accordingly, we are of the view that this issue requires fresh examination at the end of the A.O. Accordingly, we set aside the order passed by the Ld. CIT(A) and restore this issue to the file of the A.O. for examining it afresh by duly considering the information and explanations furnished/that may be furnished by the assessee. After affording adequate opportunity of being heard to the assessee, the A.O. may take appropriate decision in accordance with law. - Appeal filed by the assessee is treated as allowed for statistical purposes. 2021 (5) TMI 343 Addition u/s 68 on account of unsecured loans received - disallowance of interest paid on such unsecured loans - HELD THAT:- AO had observed that the notice issued u/s 133(6) of the Act was returned unserved by the postal authorities in respect of two lenders. But it is not in dispute that the said fact was fully confronted by the AO before the authorized representative of the assessee company which fact is mentioned in the assessment order itself. Assessee company in order to comply with the due process of law, had filed all the details that were called for by the ld AO in respect of all the lenders by duly answering all the requisite questions thereon. No fault could be attributed on the part of the assessee. It is not in dispute that the assessee had repaid all the loans to the aforesaid 4 lenders in Feb 2016 relevant to Asst Year 2016-17 and that admittedly the enquiries were carried out by the AO in Asst Year 2017-18. The assessee cannot be expected to have all the latest address of all the lenders with whom the transactions have already been completed by the assessee. It is not the case of the revenue that the assessee has continuous transactions with those lenders even after Asst Year 2016-17. Hence merely because the ld AO was not able to serve the notice u/s 133(6) of the Act on those lenders at the last available address with given by the assessee, no fault could be attributed on the assessee for the same. It is not in dispute that all the transactions have been routed through regular banking channels. It is not in dispute that the said inter corporate deposits did carry interest and assessee had duly paid the same after deduction of due tax at source at the applicable rates thereon. It is not in dispute that the loans were fully repaid by the assessee company to all the lenders in Feb 2016. We find that the ld AO himself had admitted in his assessment order that all the 4 lender companies had disclosed huge turnover in their profit and loss account. Hence the creditworthiness of the lenders is proved beyond doubt in the instant case. We find that all the 4 lender companies have duly filed their income tax returns for the relevant assessment year. We find that the assessee had furnished their PAN, income tax return acknowledgements , copy of ROC returns, etc to prove their identity beyond doubt in the instant case. Receipt of loans from 4 lender companies, payment of interest thereon and repayment of loans were made through regular banking channels by account payee cheques which is evident from the bank statements enclosed in the paper book filed before us, which are already forming part of records. We also find that the lender companies had also duly disclosed the fact of advancing inter corporate deposits in their balance sheets and had also duly confirmed the loan transactions with the assessee company by signing the ledger copy of confirmation which is also enclosed in paper book filed before us. The replies to notice u/s 133(6) of the Act duly confirming the loan transactions were also duly submitted before the ld AO which is also acknowledged by the ld AO in his assessment order. Hence the genuineness of transactions had been duly proved by the assessee beyond doubt in the instant case. Addition was liable to be deleted. We find that the case of the assessee before us is even better in as much as the parties had directly responded to the summons issued u/s 131 of the Act before the ld AO by furnishing the requisite details. In the instant case, admittedly, the assessee had duly repaid the loans to 4 lender companies. If the loans received by assessee are its own income, then there is no need to make repayment of the same to lender companies. This clinching factual evidence had apparently missed the attention of the ld AO while framing the assessment. Hence it could be safely concluded that the assessee had duly discharged its onus by proving the three necessary ingredients of section 68 of the Act ie. Identity of the lenders, creditworthiness of the lenders and genuineness of transactions in the instant case. Hence in view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we hold that the addition made by the ld AO had been rightly deleted by the ld CIT-A u/s 68 of the Act. Since the loan amount has been held by us as genuine, the corresponding interest payment made thereon after subjecting the same to TDS compliances, deserves to be allowed. It is not the case of the revenue that the inter corporate deposits received by the assessee from aforesaid 4 companies were not utilized for the purpose of business of the assessee company. Hence the interest paid on such borrowings are allowed as deduction. Appeal of the revenue is dismissed. 2021 (5) TMI 342 Reopening of assessment u/s 147 - borrowed satisfaction v/s independent application of mind - addition u/s 68 - assessee has failed to discharge the onus of establishing the genuineness of the transaction of investment made by M/s. Real Time Consultants - HELD THAT:- Though the AO had issued notice u/s. 148 of the Act after obtaining sanction from the concerned authority, yet it is apparent that the AO has issued notice u/s 148 of the Act on the basis of the information received from the department. AO has not pointed out as to how the investment in question is the unexplained income of the assessee. Action taken under section 147 on the basis of borrowed satisfaction is bad in law. Since the material for forming belief in the present case are similar to the material available in the aforesaid cases, and the coordinate Benches have decided the identical issue in favour of the assessee, we find merit in the contention of the Ld. Counsel that the AO has initiated proceedings u/s. 147 read with section 148 of the Act on the basis of information received from the department without application of his mind. In our considered view, the assessee's case is covered by the decisions rendered by the coordinate Bench in the case of M/s. century Fiscal Services Ltd. Vs. ITO [ 2020 (11) TMI 766 - ITAT CHANDIGARH ] and M/s. Indo Global Techno Trade Limited vs. ITO [ 2020 (6) TMI 375 - ITAT CHANDIGARH ] Hence we hold that the AO has assumed the jurisdiction under section 147 of the Act in a mechanical manner, therefore the order passed by the AO is liable to be quashed. Allow the appeal of the assessee. 2021 (5) TMI 341 Penalty u/s 271D and 271E - creation/ assignment of debt and liabilities vide journal entries - reasonable cause u/s. 273B - HELD THAT:- We find that these are genuine business transactions entered in the normal course of business. Hence if the aforesaid transactions are looked into from the perspective of the object and intention behind introduction of provisions of section 269SS and 269T of the Act , then the provisions of section 269SS and 269T of the Act cannot be made applicable to the facts of the instant case. Moreover, from the detailed explanation of the aforesaid transactions together with the purpose for which those journal entries were passed, it could be safely concluded that these entries neither reflect any receipt of loan nor repayment of loan. At the cost of repetition, we find that the journal entries are passed towards amount receivable from BETL towards sale of flats which was adjusted against amount payable to LDPL and SNCML on an understanding that both these companies are liable to pay BETL towards advertisement expenses. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same. CIT-A had rightly held that no penalty u/s 271D and 271E of the Act could be levied in respect of transactions with BETL With regard to the other remaining entries where transactions have been passed through journal entries, these journal entries passed represent assignment/transfer of assets/debtors and liabilities/creditors having underlying transactions arising out of business expediencies and exigencies. These entries arise in the normal course of day to day business activities. We find that the argument of the ld AR deserves to be accepted on the bare perusal of the figures involved in the said journal entries as no person would either receive or repay loans in such odd amounts. Going by the frequency of the said transactions and the figures involved therein, it could be safely concluded that all those transactions were entered in the normal course of business of the assessee company by way of assignment of rights / liabilities and assignment of genuine receivables / payables. Moreover, the genuineness of those transactions reflected through journal entries have neither been disputed nor doubted by the revenue. These would certainly constitute reasonable cause within the meaning of section 273B. In the instant case, these journal entries in the name of some parties were passed towards assignment of genuine and bonafide receivables / payables arising out of business expediencies and exigencies in the normal course of business. Hence the same would certainly constitute reasonable cause within the meaning of section 273B of the Act and hence no penalty u/s 271D and 271E of the Act could be levied for the aforesaid sums. Reliance in this regard is placed on the decision of Hon ble Jurisdictional High Court in the case of Triumph International [ 2012 (6) TMI 358 - BOMBAY HIGH COURT] wherein the relevant operative portion is already reproduced hereinabove. No infirmity in the order of the ld CIT-A cancelling the levy of penalty in the aforesaid sums of various parties u/s 271D and 271E of the Act. - Decided in favour of assessee. 2021 (5) TMI 340 Unexplained purchases - disallowance on account of difference in the purchases (Imports) and on account of difference in the custom duty - CIT(A) observed that the assessee had not been able to reconcile the difference in the import value as declared in its ITR and the data available on the CBEC tab and that the onus to reconcile the difference in figure of purchase through import remained woefully un-discharged - HELD THAT:- In the present case, it appears that the additional evidence furnished by the assessee particularly this facts that the goods dispatched by the Chinese Firm were not according to the specification, the same were not received, therefore, there was no question of making the payment had not been considered in right perspective - not clear as to whether the assessee furnished the reconciliation statement either before the A.O. or before the Ld. CIT(A) and explained satisfactorily the difference in the purchase found entered in the books of account and as mentioned in the CBEC Export Import Summary tab. We deem it appropriate to set aside this issue back to the file of the A.O. to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Appeal of the assessee is allowed for statistical purposes. 2021 (5) TMI 338 TP Adjustment - holding foreign exchange fluctuation gain should not form part of operating income for comparative analysis - HELD THAT:- As clear from the findings of the authorities below that in case of the assessee, the amount of foreign exchange gain are arise out of the revenue transactions - when foreign exchange fluctuation income is an operating income then same has to be taken into consideration while determining ALP of international transactions entered into by assessee - we consider that the amount of foreign exchange gain/loss arising out of revenue transaction is required to be considered as an item operating revenue/cost, therefore, we restore this issue to the file of Assessing Officer/TPO to compute the assessee s margin as well as comparables by considering foreign exchange gain/loss as an item of operating revenue/cost - this ground of appeal of the assessee is allowed for statistical purposes. Including Accentia Technologies Ltd. in the set of comparables - HELD THAT:- We consider that there is functional dissimilarity in the case of M/s. Accentia Technology Ltd. as compared to the function performed by the assessee company that has not been specifically considered by the TPO and DRP. It is categorically demonstrated from the facts and findings of various judicial decisions as supra that M/s. Accentia Technology Ltd. has expertise in all the areas of transcription, coding, billing and collections, therefore, we direct the Assessing Officer/TPO to exclude M/s. Accentia Technology Ltd. in the set of comparables for determining arms length price of international transactions in the case of the assessee. Therefore, this ground of appeal of the assessee is allowed. Including Genesys International Corporation Ltd in set of comparables - As gone through the above referred decision in the case of Mercer Consulting (India) Ltd. [ 2016 (8) T MI 1163 - PUNJAB AND HARYANA HIGH COURT] wherein held in reference to Genesys Industrial Corporation Ltd. that it provides a full range of geospatial services to its clients. Geospatial services relate to the relative position of things on the earth s surface. This includes 3D mapping, navigation, maps, image processing and cadastral mapping etc. The two services are entirely different therefore cannot be compared for the purpose of determing the ALP - neither the TPO nor the DRP has specially considered the relevancy of the Genesys International Corporation Ltd as comparable in the case of the assessee - we restore this issue to the file of TPO/A.O. for deciding afresh for taking it as comparable after examination of functional differences as referred in the decision of the Hon ble High Court in the Punjab as supra. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. Upward adjustment in respect of interest on loan to Colwell and Saloman and not accepting the interest at 4% already charged by the assessee - TPO has adopted the rate as it was done in the last year by taking dollar dominated Libor (2.69%) + 2.5 margin + 4% risk rate and made upward adjustment - HELD THAT:- During the course of assessment the assessee has not objected to the benchmarking of interest rate by following the procedure as in the last year.The interest rate has been calculated on the same basis as it was done in the last year. Considering the above facts and circumstances, we do not find any merit in this ground of appeal of the assessee, therefore, the same stands dismissed. Disallowance u/s. 14A r.w.r. 8D - assessee has used interest bearing fund for earning exempt income - Suo moto disallowance of addition - HELD THAT:- As brought to our notice that assessee had already made suo moto disallowance of ₹ 1 lacs u/s. 14A of the Act. In the light of the above facts, we consider that the disallowance u/s. 14A cannot exceed the exempt income earned by the assessee as held in the case of Corrtech Energy Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] therefore, we direct the Assessing Officer to restrict the disallowance u/s. 14A to the extent of dividend income after reducing the suo moto disallowance of ₹ 1 lacs already made by the assessee. Exclusion of two entities identifies as comparable by TPO Coral Hub Ltd. Comic Global Ltd. - HELD THAT:- It is evident from the analysis of the annual account as per page 5-6 of the DRP order that Coral Hub Ltd s operating cost consists 90.57% as outsourcing charges and Cosmic Global Ltd s operating cost comprises 57.31% as outstanding charges - aforesaid two companies business model were quite different from the business model of the assessee. Because of significant dissimilarities it cannot be considered comparable services. After considering the facts and judicial finding as reported in the decision of DRP, we do not find any merit in the appeal of revenue and the same stands dismissed. Disallowance on claim of devolvement of guarantee against SBLCs provided by the assessee company to the IDBI Bank who in turn gave SBLCs to the Bank of India, Manchester and to seven vendors of Rosebys Operations Ltd., the subsidiary company of the assessee - Rejecting application of tests made by TPO/AO for determining nature of transaction related to devolvement of SBLCs - HELD THAT:- As assessee company had acquired its subsidiary company Rosebys Operations Ltd. to expand its textile business operations globally based on the study carried out by KSA Techno Pak, renowned global consultant. It is clear from the comprehensive written submission from the assessee and the detailed findings of the ld. DRP as elaborated supra in this order that assessee company had provided guarantee against SBLC issued by IDBI bank to BOI Manchester and directly to vendors of Roseby for the working capital of Rosebys as a temporary measure to tide over the financial difficulties and further expand the business of the assessee company and same was on account of commercial reasons due to occurrence of financial global crisis. Because of such unforeseen global financial crisis the Rosebys Operations Ltd went into liquidation consequently the assessee company has suffered loss - we consider no infirmity in the order of the ld. DRP holding that loss suffered on account of devolvement of guarantee as revenue loss for the assessee company. Upward adjustment in respect of IT enabled services rendered to AE in cryptic manner - AO noticed that assessee was having international transaction with associated enterprise and the TPO has made upward adjustment on the basis of capacity utilization adjustment and average of comparable value of services computed on ALP - HELD THAT:- After perusal of the finding of TPO, A.O. and CIT(A), it is observed that the detailed information furnished by the assessee has not been considered while rejecting the claim of the assessee of under utilization of capacity. In the light of the aforesaid facts and circumstances, we restore this issue of upward adjustment to the file of the A.O. for deciding afresh after excluding the two comparables as mentioned above and considering the capacity utilization of the employees and the profit margin after verification and examination of the details furnished by the assessee. Accordingly, this ground of appeal of the assessee is partly allowed for statistical purposes. Under utilization of capacity of its expenses - HELD THAT:- After perusal of the material on record, it is observed that the TPO/CIT(A) has not specifically considered these details while adjudicating this issue, therefore, we consider it appropriate to restore this issue to the file of TPO/Assessing Officer for deciding afresh after examination of the relevant details and supporting material to be produced by the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. TDS u/s 195 - Disallowance u/s. 40(a)(ia) - AO disallowed commission paid to foreign agents by holding that the income on account of commission paid to overseas agents was deemed to accrue or arise income and was taxable under the provision of section 5(2)(b) r.w.s. 9(1)(i) - HELD THAT:- Services have been rendered by the foreign agents outside India. The concerns were booked by them in their countries and none of the activities of procurement of orders was taken place in India. The agents have carried out all the activities on foreign soil and none of their activities was in India and therefore it cannot be said that the income has accrued or arised in India. CIT(A) has rightly held that there was no permanent establishment and business connection in India and the services were rendered outside India. It is clear from the finding of ld. CIT(A) that the commission agents have not carried out any activity in India. Non-residents commission agents were not having any permanent establishment in India. Therefore, commission paid to non-resident agents was not liable to tax under the provision of the act. Allowing long term capital loss as revenue loss claimed during the course of the appellate proceedings - AO has stated that since assessee has not filed the revised return of income therefore such loss could not be entertained - HELD THAT:- CIT(A) has discussed the submission of the assessee company stating that huge loss of subsidiary companies i.e. Indian Britain BV passed resolution to reduce its share capital of Euro 18564400 (185644 shares) to 18545835.60 (185644 Shares) out of 221586 shares so that such amount can be set off against the accumulated deposit. This has resulted in loss due to reduction in value of share of its subsidiary company. As demonstrated from the finding of the ld. CIT(A) that assessee company has made investment in the subsidiary company on account of business development out of commercial expediency and thus on reduction of capital of the said subsidiary company, the loss incurred in the value of shares were in the nature of business losses. In the light of the facts and finding reported in the decision of ld. CIT(A) as elaborated in this order, we do not find any infirmity in the decision of the ld. CIT(A) in allowing the losses on reduction in value of share on investment in subsidiary company as business losses in the hand of the assessee company. Therefore, this ground of the appeal of the revenue is dismissed. Claim of loss on invocation of guarantee of subsidiary company - CIT(A) has allowed the claim of assessee and treated the transaction as revenue in nature - assessee has claimed losses on account of invocation of corporate guarantee given to Exim Bank on behalf of its subsidiary and had written off the same in the books of account as losses incidental to the business u/s. 37 - AO has rejected the claim on the ground that assessee has not made this claim through revised return of income as per the provision of section 139(5) of the Act - HELD THAT:- he loan given by Exim Bank to subsidiary Wales N.V. was for the purpose of business and as per commercial expediency of the assessee company. CIT(A) has also stated that there was direct proximity and relationship of assessee s business to the subsidiaries business. The ld. CIT(A) has also stated that on identical issue in assessee s own case the dispute resolution panel vide its order u/s. 144C(5) held that the guarantee against SBLC was for its business purpose and was commercially expedient. Thus after considering the detailed facts and finding elaborated in the order of the ld. CIT(A) as cited in this order, we do not find any merit in this ground of appeal of the revenue, therefore, the same stands dismissed. Adjustment in book profit u/s. 115JB by disallowance u/s. 14A r.w.r. 8D - HELD THAT:- After considering the decision of Special Bench of ITAT Delhi in the case of VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] wherein it is held that disallowance made u/s. 14A r.w.r. 8D of the act is not required to be added u/s. 115JB for computing book profit. Considering the above facts and circumstances and finding of ld. CIT(A), we do not find any merit in the appeal of the revenue, therefore, the same stands dismissed. 2021 (5) TMI 337 Deduction claimed u/s.54F - investment in question should have been made, in terms of the provisions of section 54F within one year before the sale of property or two years after sale of property and this condition, according to the Assessing Officer, was not satisfied, and, accordingly, deduction under section 54F was inadmissible - HELD THAT:- We find that the issue in appeal is squarely covered in the case of CIT vs Beena K Jain [ 1993 (11) TMI 7 - BOMBAY HIGH COURT] wherein held the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day. Clearly, therefore, the date relevant for determining the purchase of property is the date on which full consideration is paid and possession is taken. There is no dispute that this date is 22.07.2015 which falls within a period of two years from the date on which related property is sold. The Assessing officer has, however, proceeded to adopt the date on which initial payment of ₹ 1,00,00,000/- is made. The approach so adopted by the Assessing Officer is ex facie incorrect and contrary to law and down by Hon ble jurisdictional High Court in the case of Beena K Jain (Supra). - Decided against revenue. 2021 (5) TMI 336 Sort term capital gains - transfer of property through Sale cum development agreement-cum-GPA - addition invoking the provisions of deemed transfer u/s 2(47)(v) of the IT Act - CIT(A) dismissed the appeal of the assessee observing that there was exchange of property, which amounted to transfer within the meaning of section 2(47(v) and the gain resulting from such transfer required to be taxed in the year in which the agreement was entered into coupled with by giving possession of the property to the developer - HELD THAT:- Assessee has entered into development agreement for construction of duplex houses and assessee was to receive the constructed area of 5000 sq.ft by virtue of development agreement. After entering into agreement, the developer has vanished and no real development took place till date as verified and confirmed by the AO through the Departmental Inspector. It appears that neither development has taken place nor developed area was received by the assessee. This fact was confirmed by the AO himself. There was no real income except notional income as per the development agreement, which has never been received by the assessee. In the light of the above facts, the question whether the possession is lying with the developer or taken over by the assessee is the issue, which decides the taxability of capital gains. It appears that till date development agreement was not cancelled and no public notice was issued by the assessee for cancellation of development agreement as stated by the Ld. AR during the course of appeal proceedings. Therefore, we are of the considered opinion that the issue is required to be remitted back to the file of the AO with a direction to decide the capital gains after verifying whether the possession is taken back by the assessee or not and the assessee cancelled the development agreement or not - Appeal of the assessee is allowed for statistical purposes. Customs 2021 (5) TMI 335 Valuation of imported goods - enhancement of value on the basis of NIDB data alone - HELD THAT:- The issue here is no longer res-integra. Under similar facts and circumstances on import of similar goods by the CC, ICD, NEW DELHI VERSUS M/S VSM IMPEX PVT LTD [ 2018 (12) TMI 389 - CESTAT CHANDIGARH] , this Tribunal referring to Section 17(5) read with Section 17(4), concluded that the adjudicating authority is required to pass a speaking order within fifteen days of the re-assessment of the Bills of Entry. Section 17(5) does not make any whisper that the assessee/ importer is required to make a request or to seek an order under Section 17(5) of the Act. Further, this Tribunal observed that the reliance placed by Revenue on the ruling of M/S. ADVANCED SCAN SUPPORT TECHNOLOGIES VERSUS C.C., JODHPUR [ 2015 (11) TMI 31 - CESTAT NEW DELHI] and VIKAS SPINNERS VERSUS COMMISSIONER OF CUSTOMS, LUCKNOW [ 2000 (11) TMI 196 - CEGAT, COURT NO. IV, NEW DELHI] , that in these decisions, there is no issue of passing an order under Section 17(5) of the Act, after passing of Bills of entry within fifteen days, hence these decisions are distinguishable and not applicable. In the facts and circumstances of this case there is failure on the part of the customs officer, by not following the laid down Customs procedure, particularly procedure of assessment as laid down. They have orally denied to pass an order of provisional assessment and have further used undue influence and have practically compelled the respondent importer to agree to dictates and agree for enhancement of the declared value, trying to giving total go by to the provisions of Section 17(4) read with 17(5) of the Act. The respondent importer is entitled to consequential benefit, if any, in accordance with law - Appeal dismissed. Corporate Laws 2021 (5) TMI 347 Seeking restoration of the name of the company in the Register of the ROC - Time Limitation - Section 252 of Companies Act - HELD THAT:- On perusal of the record it is found that the Company is Struck Off 09.06.2017 and the instant appeal is filed on 12.10.2020, which beyond stipulated time as per Section 252(1) of the Companies Act, 2013 i.e. 3 years. It is pertinent to mention herein that the Hon'ble Supreme Court has extended the period of limitation, who's limitation is getting expired in the lockdown period. The said order of the Hon'ble Supreme Court in IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [ 2020 (5) TMI 418 - SC ORDER ], wherein the Hon'ble Supreme Court observed that To obviate the difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. The Appellant is entitled for the benefit of extended period so provided by the Hon'ble Supreme Court - the instant Appeal is partially allowed and the Registrar of Companies, Gwalior, MP is directed to restore the name of the Company in the Register of Companies upon Appellant's complying with the conditions imposed. Insolvency & Bankruptcy 2021 (5) TMI 348 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Applicant failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The 'debt' and 'default' on the part of the Corporate Debtor is proved and under these circumstances, this Application as filed by the Applicant under Section 10 of IBC, 2016 is required to be admitted under Section 10(4) of the IBC, 2016. Application admitted - moratorium declared. 2021 (5) TMI 339 Maintainability of application - impleadment of respondent - approval of resolution plan - HELD THAT:- It is a matter of record that, the Applicant on approval of the Resolution Plan has failed to implement the Plan within the time frame as stipulated in the Resolution Plan. The order dated 27.02.2019 passed by this Adjudicating Authority has also been assailed before Hon'ble NCLAT, wherein Hon'ble NCLAT vide its order dated 19.12.2019 has partially modified the order. However, Resolution Applicant has preferred a Civil Appeal no. 1920 of 2020 before the Hon'ble Supreme Court against the impugned order dated 19.12.2019, so passed by Hon'ble NCLAT - by following the Doctrine of merger , the order passed by this Adjudicating Authority in IA 224 of 2018 stands finally merged with the common order of Hon'ble Supreme Court dated 20.05.2020. Hence, it reaches to the finality. In the case of State Bank of India vs. Moser Baer Karamchari Union [ 2019 (8) TMI 915 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] , the question whether the provident fund, pension fund, and gratuity fund come within the meaning of assets of 'corporate debtor' for distribution under Section 53 of the Insolvency and Bankruptcy Code, 2016, came for consideration and the Hon'ble NCLAT held that the appellant could not derive the meaning of 'workmen's dues' as assigned to it in section 326 of the Companies Act, 2013, which deals with the 'overriding preferential payments.' There is a difference between the distribution of assets and' priority of workmen's dues, as mentioned under Sec. 53(1)(b) of the I B Code and Sec. 326(1) (a) of the Companies At, 2013. The appellate Tribunal declined to interfere with the order of the NCLT holding that the provident funds do not come within the meaning of 'liquidation estate' for distribution of assets under Sec. 53 of the I B Code - the prayer so made by the Applicant is rejected as not maintainable. Service Tax 2021 (5) TMI 352 Maintainability of application - non-compliance with the requirement of pre-deposit - Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944 - HELD THAT:- As the appellant has made the compliance of the condition of pre-deposit as prescribed under Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944, therefore, the impugned order qua dismissal of appeal on the ground of non-compliance of the provisions of Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944 for non deposit of mandatory pre-deposit is set aside. The ld. AR also submitted that they want to file cross examination but as the impugned order is only discussed about the dismissal of appeal for non-compliance of mandatory pre-deposit, therefore, the cross examination shall not help the ld. AR to raise the issue of non-consideration of limitation by ld. Commissioner (Appeals) as Revenue has not challenged the impugned order. Therefore, the request of ld. AR to file the cross examination is rejected. Matter remanded back to the ld. Commissioner (Appeals) to decide the issue only on merits in view of various judicial pronouncements on the issue - appeal allowed by way of remand. Central Excise 2021 (5) TMI 366 Input service distributor (ISD) - Void ab initio distributed credit - office or establishment of the said manufacturer or not - satisfaction of provisions of Rule 2(m) of Cenvat Credit Rules, 2004 - HELD THAT:- The ILTD belongs to the assessee viz., ITC and is an integral division of the assessee. The aforesaid Division is not a separate legal entity and controls the supply chain of un-manufactured tobacco to the factories. The Company is registered as Input Service Distributor under the Cenvat Credit Rules, 2004 read with Service Tax Rules, 1994 for its Indian Leaf Tobacco Division in Guntur. The aforesaid registration enables distribution of service tax paid input credits to manufacturing activities carried on in the factories. A division bench of this court in COMMISSIONER OF C. EX., BANGALORE-I VERSUS ECOF INDUSTRIES PVT. LTD. [ 2011 (2) TMI 1130 - KARNATAKA HIGH COURT] has held that there are only two limitations imposed under Rule 7 of the Rules, for distribution of credit by a Input Service Distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. The manufacturer is therefore, required to register himself as Input Service Distributor and thereafter, is entitled to distribution of credit of such input in the manner prescribed under the law - No submission has been made before us as to how the aforesaid decision is not applicable to the case of the assessee. Since, the revenue has accepted the entitlement of the assessee to avail off the input credit for the assessment periods viz., November 2010 to July 2011 and for a period from August 2011 to December 2011, the revenue cannot be permitted to challenge its correctness. The substantial questions of law are answered against the revenue and in favor of the assessee. CST, VAT & Sales Tax 2021 (5) TMI 372 Quantification of arrears of tax - basis of the rejection is that the petitioner was not a 'dealer' as required under the Settlement Act and also that the amount paid did not satisfy the condition that 90% of the settlement amount has to be remitted along with the application - HELD THAT:- The learned revenue counsel was directed to serve copies of the assessment orders upon the petitioner in order that one may obtain clarity on the demands raised. This was specifically for the reason that the records of assessment were not available with the petitioner since he is not the original defaulting assessee and just the purchaser of the property in question. The revenue had also not also indicated clearly either in the impugned order or in the communications leading to the passing of the impugned orders the details and breakup of the original tax, interest and penalty. Thus, it was felt that furnishing of the assessment orders would provide clarity as required. On 25.01.2021, learned revenue counsel confirmed that orders of assessment were available only for two years i.e. 1994-95 and 1995-96 and efforts were ongoing to procure the remaining orders. Since the existence of valid orders of assessment passed under the provisions of the Act is a pre-condition for raising of a demand, time was granted to the Department to produce the other orders as well. On 18.03.2021, I have recorded that despite a final opportunity having been granted to the revenue to produce orders of assessment for the periods barring 1994-95 and 1995-96, no orders were produced and only more time had been sought for undertaking an extensive search. Costs were imposed and time as sought for was granted. The petitioner falls within Section 7(b) of the Settlement Act and the 90% payable would have to be computed in line therewith as has been done by the designated authority. The sum total of the demand thus is of a amount of ₹ 13,04,279/-. As against the amount of ₹ 13,04,279/-, the petitioner has admittedly remitted a sum of ₹ 27,46,034/-, which is more than double of the demand payable - petition allowed. 2021 (5) TMI 371 Principles of Natural Justice - case of petitioner is that the petitioner had not been heard in person, prior to the passing of the impugned order passed in terms of TNVAT Act - HELD THAT:- Admittedly, the impugned order has been passed without hearing the petitioner, since the Officer records in the concluding portion of the order that there was no appearance by the petitioner on 09.07.2019, when the matter had been listed for hearing. However, he also refers to a representation of the petitioner filed, the next day, on 10.07.2019, wherein, the petitioner has sought 20 days time to prepare itself. The impugned order of assessment is set aside. Let the petitioner appear before the Assessing Officer on Wednesday, the 5th of May, 2021 at 10.30 a.m along with materials in support of its contention without expecting any further notice in this regard - Petition disposed off. 2021 (5) TMI 370 Violation of the principles of natural justice - time granted to the petitioner to put forth its submissions were enough or not - Opportunity of hearing not provided - HELD THAT:- R1 extends an opportunity of personal hearing and calls upon the petitioner to appear and file necessary documents in support of its claim on 11.02.2021. In response therewith the petitioner has filed a reply on 10.02.2021 referring to all annexures duly filed before the erstwhile Assessing Officer/R2. The impugned orders have come to be passed on 22.02.2021 without hearing the petitioner and without reference to the objections filed earlier by the petitioner. The dates and events as noticed by me in the preceding paragraphs will serve to establish that the respondent Officer has not adhered to the principles of natural justice in framing the impugned assessments. The time granted to the petitioner to put forth its submissions pursuant to R1 taking charge is woefully insufficient. Moreover, the notices issued prior to framing of assessments call upon the petitioner to file its objections as well as appear, all in the space of a week, which, in my view, is also not sufficient. The petitioner will appear before the Assessing Officer on Monday, the 10th of May, 2021 at 10.30. a.m., without expecting any further notice in this regard, either virtually or by way of physical hearing - Petition disposed off. 2021 (5) TMI 369 Condition in regard to the furnishing of bank guarantee for the balance of the disputed tax and penalty - direction to furnish personal bond instead of bank guarantee - HELD THAT:- The petitioner has remitted 50% of the disputed tax, the petitioner is permitted to furnish a personal bond in respect of the balance of tax and penalty, to the tune of ₹ 2,34,351/- within a period of four (4) weeks from today. Subject to the furnishing of personal bond by the petitioner, there shall be an order of stay of balance of the disputed tax and penalty till the disposal of the appeal by the first appellate authority. It is made clear that impugned order dated 22.03.2021 stands modified to this limited extent alone. Petition disposed off. 2021 (5) TMI 367 Violation of principles of natural justice - opportunity of hearing provided or not - input tax credit - HELD THAT:- The Assessing Authority records specifically that the details culled out from the Departmental website on the basis of annexure I and II of the purchasing/selling dealers were furnished to the assessee/petitioner and thus the burden cast upon the Department to furnish the materials relied upon by it, stands discharged. Personal hearing is stated to have been afforded on 14.11.2016 and 13.06.2017 and on both dates the petitioner, the officer would state, did not appear and neither was there any appearance thereafter. There are no justification to interfere with the impugned orders under Article 226 of the Constitution of India. The petitioner may file appeals, if it is so inclined, before the first Appellate Authority in accordance with law within a period of two (2) weeks from today. Petition dismissed. 2021 (5) TMI 360 Demand of differential duty - variation in stock - Finalisation of deemed assessment - assessment years 2015-16 - Section 22(2) of TNVAT Act, 2006 - HELD THAT:- A mere look at the impugned order would indicate that stock difference was arrived at on the basis of the trading account method - It is true that the petitioner has not maintained the stock register. The matter is remitted to the file of the second respondent to pass orders afresh in accordance with law. As per Rule 6 of TNVAT Rules, the assessee is bound to maintain the accounts - Petition allowed - decided in favor of petitioner. Indian Laws 2021 (5) TMI 359 Validity of Master Circular dated 01.07.2015 - Issuance of both PNCPS and debt capital instruments/PDI for inclusion as AT1 capital - Jurisdiction of the Circular in view that the Basel III Capital Regulations have not been enacted as law as per Article 253 of the Constitution - Is the Circular ultra vires the Banking Regulation Act - Capital or Debt instruments. Whether the Master Circular was issued without jurisdiction? - HELD THAT:- All the conditions specified in the Basel III Report were introduced in the Master Circular and the AT 1 bonds were issued by Yes Bank Limited by incorporating all these conditions in the information memorandum. Although the Petitioners state that they purchased the AT 1 bonds in the secondary market, they cannot claim to be ignorant of the terms and conditions thereof. Significantly, the Petitioners contractually agreed to invest in an instrument which may be permanently written down, if a point of non-viability trigger is reached - there is no doubt that the point of non-viability trigger was reached. Indeed, this is not disputed by the Petitioners. Pursuant thereto, the draft scheme of reconstruction was recommended by the RBI and approved by the Central Government resulting in the Reconstruction Scheme 2020. The final Reconstruction Scheme does not contain the clause dealing with permanent write-down although the said clause was present in the draft scheme of reconstruction. Whether the AT 1 bonds constitute capital or debt instruments? - HELD THAT:- These instruments constitute regulatory capital but not share capital for purposes of CA 2013.Given the conclusion that it is not a part of share capital, we are of the view that Section 12 of the BR Act does not apply as regards AT 1 bonds. Consequently, the contention that Section 35 A of the BR Act cannot be relied upon to sustain the Master Circular by relying upon Dharani Sugars is untenable. Therefore, we conclude that the PDI do not constitute share capital for purposes of CA 2013. From the Master Circular, it is clear that both PNCPS and debt instruments/PDI may be issued as AT 1 instruments provided they fulfill the criteria specified therein. These features include a perpetual duration, the absence of a put option, the absence of security or guarantee and, most importantly, loss absorption at a pre-specific trigger point. From these features, it is clear that the only reason instruments such as the AT 1 bonds are permitted to be included in Tier I capital is because they are treated like and equated with equity share capital or CET 1 inasmuch as the holders of such AT 1 instruments cannot demand repayment of their investment in the same manner as the CET 1 shareholders cannot demand a buy-back - the AT 1 bonds do not constitute a debenture as defined in 2(30) and as dealt with in Section 71 of CA 2013. Whether the AT 1 bonds violate CA 2013? - HELD THAT:- The controversy centres on statutory directions under Section 35 A of the BR Act that enable the issuance of AT 1 instruments, which constitute a particular form of property. This form of property, by its terms, permits a permanent write-down upon the occurrence of specified contingencies. In private law, many forms of proprietorship are recognized. By way of illustration, a lease confers interest in property but the lessee can agree, by contract, to the unilateral termination of the lease by the lessor even on without cause and without fault basis. Even in the context of sale, as per the TP Act, only absolute restraints on the rights of a purchaser are void. Thus, in our view, the Master Circular is not a subordinate legislation that deals with compulsory acquisition or expropriation. On the contrary, it deals with a form of investment instrument with an inherent inability to demand repayment of the principal. Therefore, we conclude that Article 300 A of the Constitution is not violated. Whether the AT 1 bonds violate the Contract Act or any other legislation? - HELD THAT:- The AT 1 bonds do not violate CA 2013, the BR Act, the Contract Act or any other legislation. We further conclude that the RBI is authorized to issue the Master Circular in terms of the BR Act. Given the nature and characteristics of AT 1 bonds, which was disclosed to investors such as the Petitioners, these AT 1 bonds constitute a distinct class and therefore it is not tenable to contend that Article 14, 19, 21 and 300 A of the Constitution are violated. In the result, the Petitioners fail to make out a case to declare the Master Circular as unconstitutional or otherwise invalid. The validity of the Master Circular dated 1.7.2015 is upheld - petition dismissed. As per THE HON BLE CHIEF JUSTICE and SENTHILKUMAR RAMAMOORTHY J., Having gone through the exhaustive and point-wise analysis made by my esteemed colleague, Brother Justice Senthilkumar, there is no facet of the dispute that has remained untouched and, therefore, I find myself entirely in agreement with the views expressed therein, but since certain additional arguments have been advanced once again by Mr.Nithyaesh Natraj, learned counsel for the petitioners and replied to by Mr.P.Giridharan on behalf of the Reserve Bank of India, I have attempted a supplement to the conclusions drawn by my esteemed Brother. The Master Circular has a binding effect, as admittedly the petitioners are investors after the Circular had come into effect and they have with open eyes undertaken risks of making financial investments through instruments, the composition whereof is self-explanatory and would operate with binding force on the petitioners.22. The nature of the instrument did provide an opportunity of profitable venture, but at the same time, the terms and conditions of the risks involved substantially economize the rights of the investors in AI Tier Bonds. The potential nature of the instrument had its inherent risks. It was a composite package that simultaneously offered a substantial rate of interest, but at the same time a status of uncertainty of the principal capital in the event of non-viability. The instrument of offer itself contains clear recitals that the Reserve Bank of India would have the authority to write-off. This is evident from the extracts that have been quoted above. Thus, to raise the argument to the level of the Reserve Bank of India not being possessed of legal authority stands curtailed by the recitals contained in the offer of instrument itself that were accepted by the petitioners without demur. Whether the Master Circular is liable to be declared ultra vires, void and invalid? - HELD THAT:- The validity of the Master Circular, therefore, in the the fundamental rights of the petitioners. The action taken by the Reserve Bank of India on the strength of the circular dated 1.7.2015 cannot be crucified on any constitutional ground, so as to pulverize the Master Circular and thereby nullifying the impact of a prompt action that has been taken in larger public interest by the Reserve Bank of India. An action based on public policy for the good of public purpose on universally accepted principles should not be jettisoned at the instance of those who had not objected to the terms and conditions of the offer instrument and had rather proceeded to reap the dividends therefrom. None of the rights of the petitioners under Part III of the Constitution of India are impinged either violating their right to trade in business or their right to They, as investors in AI Tier Bonds, form a different class by themselves, who cannot be allowed to approbate and reprobate by finding fault with the Master Circular, may be they can question the correctness of the consequential action on grounds which are not subject matter of the present writ petition. The validity of the Master Circular dated 1.7.2015 is upheld - petition dismissed.
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