TMI Tax Updates - e-Newsletter
May 20, 2022
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
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GST:
Seeking provisional release of goods and conveyance - suspicious transaction involving fake input tax credit - Power and jurisdiction u/s 129 versus u/s 130 - Delinking the two provisions - The respondent authorities are directed to provisionally release the goods and conveyance subject to the condition that the writ applicant shall deposit the total amount payable, including penalty, as determined by the respondent authority within period of one week from date of receipt of this order and upon realisation of such amount, the respondent authority shall forthwith release such goods and conveyance- HC
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GST:
Cancellation of registration of applicant-company - opportunity of personal hearing not provided - the reason assigned by the respondent authority is without any basis being found in the show cause notice. Even in the show cause notice, seeking revocation of cancellation of registration, the authorities have choose to proceed on the ground other than the reason given in the original show cause notice seeking cancellation of registration. - HC
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GST:
Rejection of refund claim on the ground that such claim has been put forward manually and not by way of online - it seems that the respondent No.4 has no idea about Rule 97A of the Rules which starts with the non-obstante clause. Rule 97A clarifies that notwithstanding anything contained in Chapter x of the Rules any reference to electronic filing of an application would include manual filing of the said application. - HC
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Income Tax:
Unexplained income - whether withdrawals in the name of the partners of the firm represents the unaccounted income of the firm? - The Tribunal first looked into Section 292C of the Act and thereafter, noticed from the materials on record that the note in question was duly signed not only by all the partners of the firm, but also by three witnesses. The names of the partnership firm also figured in it. The Tribunal also took notice of the fact that the withdrawal of the money was from the firm. - No substantial law against the Additions confirmed by the ITAT - HC
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Income Tax:
Disallowances of centenary celebration expenses, gift distribution and interest relief to society expenses - The expense incurred on account of relief fund to celebrate centenary year and are clearly for the purpose of business. There is no personal purpose in making of such expenses, gift items for distributed for valued customers, staff members, and token of appreciation of contribution in helping to boost the business of assessee-bank. Thus all the expenses were incurred wholly and exclusively for the purpose of assessee-bank. - AT
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Income Tax:
Income deemed to accrue or arise in India - fee for grant of software license cannot be taxed in India. Since we have held that the subject transaction of receipt of consideration for grant of software license is held not to be Royalty under the provisions of Income Tax Act, 1961, the question of consideration of the issue under the provisions as per DTAA between India and Netherland does not arise. Thus, ground of appeal No.1 filed by the assessee stands allowed. - AT
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Income Tax:
Unexplained cash credit - In fact, the loans are taken from close family members and friends. It is not a case of the AO that the assessee had taken loans from certain unknown people whose identity is in doubtful. AO is completely erred in making additions towards loan taken from above parties as unexplained credit u/s.68 - CIT(A) after considering relevant facts has rightly deleted the additions made by the AO. - AT
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Income Tax:
Denial of claim u/s 80IA - quantum of deductions - How and why the assessee has not debited any administrative expenses even no any salary expenditures have been shown in the profit and loss account. Therefore, it would be proper to send back the issue to the file of the AO for determining the actual profit computed in the above trading and profit and loss account without incurring of any expenditures. - AT
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Income Tax:
Assessment u/s 153A - Addition made without any incriminating document or not - Accommodation entry - the ld.CIT(A) has elaborately discussed the incriminating evidences found from the premises of the assessee at page 12 of his order which clearly demonstrate that the assessee had availed accommodation entries in respect of capital assets as well as raw material purchases. - Order of CIT(A) sustained - AT
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Income Tax:
Disallowance of Development/improvement expenses - payment to related parties - Considering the fact that neither the assessee could substantiate with documentary evidence about the genuineness of expenses nor the Assessing Officer brought comparable instances for similar improvement expenses on record, therefore, the order of ld. CIT(A) is modified and A.O. is directed to disallow 50% of improvement expenses out of total improvement expenses. - AT
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Income Tax:
TDS u/s 194C or 194I - car rent expenses incurred by assessee - variation in threshold limit - the assessee has deducted TDS u/s. 194I in respect of one of the lessor, from whom vehicle was taken on lease and that, the payment exceeded the threshold limit of ₹ 1,80,000/-. There is no malafide intention of assessee to evade tax. In respect of the remaining payments, the threshold limit did not exceed and therefore TDS need not have been deducted. We therefore direct the Ld.AO to delete the disallowance made in respect of the same. - AT
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Income Tax:
Capital gain computation - indexed cost of acquisition - correct date and year for the computing indexation - Power of Attorney holder - Assessee has proved his possession of the property which is evident from the installation of electricity connection in his name and house tax charged by the local tax authority. Therefore, the Ld.CIT(A) under these undisputed facts, ought to have taken a liberal approach for granting benefit of indexation as requested by the assessee. - AT
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Income Tax:
Addition us 68 - CIT-A deleted the addition - Considering the discrepancy shown by the Ld. CIT(A), we are of the opinion that the order passed by the Ld. CIT(A) in not in accordance with the principles of natural justice by not granting an opportunity to the Assessing Officer for explaining whether there was any typographical error in the balance sheet - Matter restored back - AT
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Income Tax:
Exemption u/s 11 - seeking benefit on the ground of mutuality in case of denial of benefit of section 11 by invoking section 13 - the assessee has clearly gave the details to the Assessing Officer that it has dealt only with the 140 non-members and details of their subscriptions, it shows that the assessee kept the record of dealing with the non-members. Therefore, we are inclined to remit this issue back to the file of Assessing Officer to evaluate the allowability of benefit under mutuality concept to the assessee.- AT
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Customs:
Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Rate of the Turkish Lira modified - Notification
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Customs:
MEIS scheme - denial of benefit of section 149 of the Customs Act, 1962 - Amendment to shipping bills - The argument on behalf of the Revenue is that once the goods are exported, it is very difficult thereafter to undertake proper verification or rather physical verification of the goods even for the purpose of amendment in the shipping bills. The argument is that almost after a period of 2 years from the date of export, the assesee has claimed amendment in the shipping bills. - HC
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Customs:
Revocation of Customs Broker License - On the same set of evidences, two different findings have been recorded by the Commissioners at Nagpur and Mumbai. Such a discrimination which leads to revocation of licence of one Customs Broker and permits them to operate without any hindrance is nothing but discrimination contrary to Article 14 of the Constitution - AT
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DGFT:
Amendment in import policy condition of Fresh Ginger under Chapter 09 of the ITC (HS) 2022, Schedule -I (Import Policy) - Import of Fresh ginger, wholly produced in Bhutan, is Free subject to Article-1 of Agreement on Trade, Commerce and Transit between India and Bhutan.
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IBC:
CIRP - Status of NOIDA authority - Financial Creditors or Operational Creditors - We must not be oblivious to the following prospect, should we find that the appellant is not an operational creditor, even under the IBC Regulations apart from claims by financial creditors and operational creditors, claims can be made by other creditors. However, there are, undoubtedly, certain advantages, which an operational creditor enjoys over the other creditors. We would proceed on the basis that, while the appellant is not a financial creditor, it would constitute an operational creditor. - SC
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IBC:
CIRP - Status of NOIDA authority - Financial Creditors or Operational Creditors - dues outstanding under the lease - , in the lease in question, there has been no disbursement of any debt (loan) or any sums by the appellant to the lessee. The appellant would, therefore, not be a financial creditor within the ambit of Section 5(8). - A lease, which is not a finance or a capital lease under Section 5(8)(d), may create a financial debt within the meaning of Section 5(8)(f), if, on its terms, the Court concludes that it is a transaction, under which, any amount is raised, having the commercial effect of the borrowing. All that we are finding, in the facts of this case, is that the lease in question does not fall within the ambit of Section 5(8)(f). - SC
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SEBI:
SEBI notifies the recognition granted to the Indian Commodity Exchange Limited stands withdrawn - Notification
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SEBI:
Renewal of recognition to Multi Commodity Exchange Clearing Corporation Limited for three years commencing on the 31st day of July, 2022 and ending on the 30th day of July, 2025 - Notification
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Service Tax:
Taxability - business auxiliary service - ‘build operate transfer’ (BOT) - TOLL- possession of the upgraded/constructed asset is transferred to the appellant for the stream of lumpsum payment guaranteed by the appellant while alienating risk of sub-optimal use and risk of asset deterioration - Oversight by agencies of the state is intended to assure proper maintenance of the asset and fixation of rates is retained by the government to prevent exploitative exaction both of which are mandated by public interest and not as a facet of principal-agent equation. Thus, tax liability does not arise by way of being ‘commission agent’ in section 65(19) of Finance Act, 1994 for the period prior to introduction of ‘negative list’ regime. - AT
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Service Tax:
Refund claim - credit of additional duty of customs (CVD) on inputs imported - It is clear that even as per the tripartite contracts, the appellants are a sort of middle-man in respect of the services rendered by the vendors. While TI, USA receives the services rendered by the vendors and pays for the same in USD, TI, India acts only as a facilitator in receiving the money in USD from TI, USA and making payments to the Indian vendors in INR. The appellants, therefore, cannot be held to be receivers of the input services rendered by the vendors - Neither credit is to be allowed nor refund is to be allowed - AT
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Central Excise:
Condonation of delay of 1433 days in filing appeal before the tribunal - Tribunal condoned the delay in revenue appeal - error of law or not - In view of the facts and circumstances and the law laid down by the Supreme Court and also the sufficient cause assigned in the applications for condonation of delay, the Revenue has assigned sufficient cause for the purpose of getting the delay condoned and the Tribunal was justified in allowing the applications - HC
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Central Excise:
Valuation of goods - method of valuation - sale of goods from depot / customer care center - It is found that the form in which the goods have been sold at depot are in package comprising of the goods cleared from the factory of appellant and other bought items packed together in a carton. Hence the sale price of the goods comprise of the sale price of the goods manufactured by the appellant and the sale price of the goods trade by the appellant. - Demand confirmed for normal period of limitation - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (5) TMI 863
Maintainability of petition - it is alleged that the petitioner did not deposit 20% amount as directed by the High Court within 15 days - workable proposal given by the petitioner was for a period of 5 years - Cancellation of the GST Registration of the petitioner - HELD THAT:- The Division Bench of this Court in M/S RAM SINGH WORK CONTRACTOR THRU PROPRIETOR RAM SINGH VERSUS ADDITIONAL COMMISSIONER GRADE- 2, COMMERCIAL TAX AYODHYA AND ANR. [2022 (1) TMI 1247 - ALLAHABAD HIGH COURT] has already interfered in the matter and admittedly the petitioner has also deposited the amount on 04.02.2022 as was required to be deposited which admittedly has been received by the Department on 19.02.2022 as per the statement given by the learned Additional Chief Standing Counsel on the basis of instructions and the fact that in terms of Section 80 of the GST Act the application for 24 installments was to be moved, present petition is disposed of leaving it open to the petitioner to file an application under the provisions of Section 80 of the GST Act and Rule 23 of the GST Rules within three days from today.
Petition disposed off.
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2022 (5) TMI 862
Seeking provisional release of goods and conveyance - suspicious transaction involving fake input tax credit - Power and jurisdiction u/s 129 versus u/s 130 - Delinking the two provisions - Whether the respondent authority is entitled to seize and detain the goods in transit and the conveyance, more particularly, when it is accompanied by a lawful e-way bill, invoices and without determining and offering the writ applicant opportunity to deposit tax, if any and penalty, the respondent authority were justified to distinctly proceed for confiscation proceedings by issuing notice under section 130 of the Act, 2017? - HELD THAT:- Both sides have raised substantial legal issues regarding amendment made in various section of the Act, 2017 which is required to be considered after hearing respective parties on length. However, on ensuing summer vacation, time is constrain. For the reasons aforesaid, we are inclined to admit these matters. Hence, rule returnable on 23.06.2022.
Seeking provisional release of goods - sub-clause (3) of section 129 of GST Act - HELD THAT:- If after adjudging proceedings under section 130 of the Act, ultimately if the proper officer finds any contravention with intention to evade tax, the question of Fine may also arose in addition to the tax payable, penalty and other charges, and if not realized then the proper officer will be required to proceed for confiscation and auction of the goods and conveyance so detained. The Court has to strike balance as against the prayer of provisional release of goods and conveyance vis-a-vis securing revenue interest pending adjudication of confiscation proceedings.
The respondent authorities are directed to provisionally release the goods and conveyance subject to the condition that the writ applicant shall deposit the total amount payable, including penalty, as determined by the respondent authority within period of one week from date of receipt of this order and upon realisation of such amount, the respondent authority shall forthwith release such goods and conveyance - petition disposed off.
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2022 (5) TMI 861
Cancellation of registration of applicant-company - opportunity of personal hearing not provided - violation of the basic principles of natural justice - powers conferred under Section 107 of the CGST Act, 2017 - HELD THAT:- Having examined the show cause notices as well as the orders impugned in this batch of writ applications, we notice that the show cause notice issued by the respondent authority is bereft of any material particulars. Not only that, no sufficient opportunity has been provided by the respondent authority while adjudicating such show cause notice. We could not overlook the fact that all the show cause notices seeking cancellation of registration in this batch of writ applications are issued during the surge of Covid-19 pandemic i.e. in the month of March, 2021. The reply was placed on record by the writ applicant specifically requesting for personal hearing through video conferencing. In fact in the reply, the attention of the respondent authorities has been drawn to the fact that no reason or details have been furnished to respond to such show cause notice. Even the order impugned lacks the reasons. Even otherwise, the reason assigned by the respondent authority is without any basis being found in the show cause notice. Even in the show cause notice, seeking revocation of cancellation of registration, the authorities have choose to proceed on the ground other than the reason given in the original show cause notice seeking cancellation of registration.
It appears from the reasons and findings recorded by the appellate authority that reliance is placed on the report dated 22.12.2021 submitted by the Joint Commissioner, CGST, Gandhinagar, having informed that the said tax payers did not hold any ground for revocation of cancellation of registration.
In AGGARWAL DYEING AND PRINTING WORKS VERSUS STATE OF GUJARAT & 2 OTHER (S) [2022 (4) TMI 864 - GUJARAT HIGH COURT], the show cause notices seeking cancellation of registration of dealers so issued lack material particulars and this Court further found that final orders of cancellation of registration so passed were bereft of any reasons. This Court allowed the aforesaid writ applications solely on the ground of violation of principles of natural justice and had further quashed and set aside the consequential final orders cancelling the registration with a liberty to the respondent authority to issue fresh Notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing and to pass speaking orders on merits. This Court had also directed the respondent authorities to cure the technical glitches and to issue a show cause notice in physical form containing all material particulars and information in order to enable the dealer to effectively respond to such show cause notice.
The order passed by the Additional Commissioner (Appeals) is set aside - application allowed.
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2022 (5) TMI 860
Refund of tax - rejection of claim on the ground that such claim has been put forward manually and not by way of online - HELD THAT:- Section 54 of the Act referred to above provides that any person claiming refund of any tax and interest, if any, paid on such tax or any amount paid by him, can make an application before the expiry of two years from the relevant date in any such form and manner as may be prescribed. There is a proviso to sub-section 1 which provides that a registered person claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section 6 of Section 49 may also claim such refund in the return furnished under Section 39 in the manner as may be prescribed.
Rule 89. Rule 89 lays down the procedure for filing of an application for refund of tax, interest, penalty, fees or any other amount. Rule provides that any person except the person covered under the Notification issued under Section 55 claiming refund of tax, interest, penalty, fees or other amount paid by him other than the refund of integrated tax paid on goods exported out of India, may file an application electronically in the form GST RFD 01 through the common portal - it seems that the respondent No.4 has no idea about Rule 97A of the Rules which starts with the non-obstante clause. Rule 97A clarifies that notwithstanding anything contained in Chapter x of the Rules any reference to electronic filing of an application would include manual filing of the said application.
The Deputy State Tax Commissioner, Circle-2, Ahmedabad are directed to treat the manual application dated 01.09.2020 as an application for refund. The respondents are further directed to permit the writ applicant to furnish it’s stance to any objections, before the same is relied upon by the respondent authority, by providing sufficient opportunity to produce supporting documents and also to provide opportunity of hearing to the writ applicant - petition disposed off.
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Income Tax
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2022 (5) TMI 857
Penalty u/s 271(1)(c) - Defective notice u/s 274 - as argued notice issued for concealment of income/ furnishing of particulars of Income, without specifying the particular limb of the penalty - HELD THAT:- The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind.
The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to specify the relevant limb so as to make the Assessee aware, what is the charge made against him so that he can respond accordingly.
In the present case having regard to the manner in which the Assessing Officer has issued notices dated 13-12-2016, 03-04-2017 and 12-06-2017 under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notices in this case have been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notices sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the levy of penalty is not justifiable.
On merits of this case AO did not find the claim of the Assessee as maintainable and made the addition and consequently imposed the penalty which stands affirmed by the ld. Commissioner. It is not the case of the Revenue that the Assessee has acted deliberately in defiance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation and therefore mere making of a claim, which is not sustainable in law, would not, ipso facto, amount to furnishing of inaccurate particulars regarding the income of the Assessee and would, therefore, not automatically result in a penalty order against the Assessee’ as held by the Hon’ble Apex Court in the case of Reliance Petro Products Pvt. [2010 (3) TMI 80 - SUPREME COURT] while dealing with the penalty imposed for claiming expenditure which was declined to be allowed u/s 14A of the Act, hence on merit as well the penalty under challenge is not sustainable - Decided in favour of assessee.
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2022 (5) TMI 856
Disallowance claimed u/s 36(1)(viia) - provision for non-performing asset - amount under four heads are not provision for bad and doubtful debts for reserve the amount provided as per Gujarat Co-Operative Society, Act, is not the provision, rather it is a reserve created only if the society makes profit and provision for standard assets, the Assessing Officer held that standard assets cannot be treated to have provided against bad and doubtful debts under the standard assets a performing assets - HELD THAT:- We find that Chennai Tribunal in Tamilnadu State Apex Cooperative Bank Vs ACIT [2014 (1) TMI 1737 - ITAT CHENNAI] while considering the provision for non-performing asset under section 36(1)(viia) held that where the assessee-bank had claimed deduction for 'Provision for Non- Performing Assets' under section 36(1)(viia), in view of fact that taxonomy of provision had been done by assessee to keep it in line with RBI and NABARD guidelines, but in pith and substance provision had been created for 'Bad and Doubtful Debts', deduction was claimed in accordance with section 36(1)(viia) and assessee was entitled to benefit of same.
Tribunal in DCIT Vs IGN Vysya Bank [2014 (9) TMI 44 - ITAT BANGALORE] also held that in order to allow assessee's claim under section 36(1)(viia), what has to be seen by Assessing Officer is as to whether provision for bad and doubtful debts is created irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent provision for bad and doubtful debts is so created, assessee is entitled to deduction subject to upper limit of deduction laid down in said section. In Nanded District Central Co-operative bank Vs DCIT [2014 (10) TMI 613 - ITAT PUNE] also held that deduction under section 36(1)(viia) is to be restricted to the actual amount of provision for bad and doubtful debts made in the books of account.
Ahmedabad Tribunal in DCIT Vs Sarvodaya Shakari Bank Ltd [2014 (5) TMI 1182 - ITAT AHMEDABAD] also held that that the provisions for bad and doubtful debts should be allowed u/s. 36(1)(viia), to the extent of provision made and available in the books of account, whether made in the current previous year. Thus, in view of the aforesaid factual discussion, we affirm the order of Ld. CIT(A) by adding our aforesaid observation. - Decided against revenue.
Disallowances of centenary celebration expenses, gift distribution and interest relief to society expenses - AO Disallowed the various claims under appeal by taking view that no details and bills/vouchers were not furnished by assessee despite claiming that they are ready to produce such bills/vouchers - CIT(A) deleted the expenses by considering the fact that assessee claimed all evidences were produced before Assessing Officer for verification - HELD THAT:- All the expenses were incurred to celebrate the centenary year. The expense incurred on account of relief fund to celebrate centenary year and are clearly for the purpose of business. There is no personal purpose in making of such expenses, gift items for distributed for valued customers, staff members, and token of appreciation of contribution in helping to boost the business of assessee-bank. Thus all the expenses were incurred wholly and exclusively for the purpose of assessee-bank. Before us Ld. AR for the assessee relied on various case law some of them relate to expense incurred by co-operative societies.
We find that in CIT Vs Mehsana Dist. Co-Op. Milk Producers Union Ltd. [1993 (6) TMI 24 - GUJARAT HIGH COURT] Hon’ble Gujarat High Court has allowed the expense incurred on silver jubilee celebration as business expenditure and was treated the expense incurred wholly and exclusively for the purpose of business
Further in Karjan Cooperative [1992 (1) TMI 39 - GUJARAT HIGH COURT] allowed the expenditure incurred by assessee- society on giving presents to members on the occasion of its silver jubilee celebration and held that it was incurred wholly and exclusively for the purpose of business. - Decided against revenue.
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2022 (5) TMI 855
Income deemed to accrue or arise in India - consideration received towards use of the software as taxable as Royalty u/s.9(1)(vi) of the Act as well as under Article 12 of the Double Taxation Avoidance Agreement (DTAA) between India and Netherland - appellant company granted the software license fee on non-exclusive non-transferable basis during the license term - contentions of the appellant that such payment cannot be characterized as Royalty as the payment is made for purchase of standard software, not for use of ‘copyright itself’ - HELD THAT:- The title, the ownership and all rights in patents, copyrights and trade secrets and other software contained does not get transferred to the customer. The Courts as well as OECD commentary on Article 12 of the DTAA recognized the distinction between “copyrighted article” and “copyright right” in the programme and software which incorporates a copy of the copyrighted programme. Any payment made for acquisition of copy of the software is held not to be Royalty. Even the Hon’ble Delhi High Court in the case of DIT Vs. Infrasoft Ltd.[2013 (11) TMI 1382 - DELHI HIGH COURT] held to the same effect. Whereas the Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. [2011 (10) TMI 195 - KARNATAKA HIGH COURT] and CIT Vs. Synopsis International Old Ltd. [2013 (2) TMI 448 - KARNATAKA HIGH COURT] held to the contrary. The reasoning given by the Hon’ble Karnataka High Court has been disapproved by the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT]
Thus fee for grant of software license cannot be taxed in India. Since we have held that the subject transaction of receipt of consideration for grant of software license is held not to be Royalty under the provisions of Income Tax Act, 1961, the question of consideration of the issue under the provisions as per DTAA between India and Netherland does not arise. Thus, ground of appeal No.1 filed by the assessee stands allowed.
Software maintenance fees, consultancy services fees and training services fees held to be “Fees for Technical services” - HELD THAT:- Software maintenance fees, consulting charges and training fees which are incidental to software license fee, assumes same character as that of software license fee. In relation to ground of appeal No.1 in the preceding paragraphs, we have held that the consideration received towards software license fee cannot be termed as “Royalty”. Hence, what follows from this, is that even the software maintenance, consulting charges and training fees which are incidental to software maintenance fee cannot come within the purview of FTS within clause 5 of Article 12 of the treaty. Our view is fortified by the judgment of Hon’ble Delhi High Court in the case of Datamine International Ltd. Vs. ADIT [2016 (3) TMI 540 - ITAT DELHI], BHARATI AXA GENERAL INSURANCE CO. LTD [2010 (8) TMI 8 - AUTHORITY FOR ADVANCE RULINGS] AND CITRIX SYSTEMS ASIA PACIFIC PTY. LIMITED, [2012 (2) TMI 258 - AUTHORITY FOR ADVANCE RULINGS] - We, therefore, hold that software maintenance fees, consultancy services fees and training services fees cannot be held to be “Fees for Technical services”. Thus, grounds of appeal no. 2 to 5 stands allowed.
Short credit of deduction of tax at source - HELD THAT:- This ground of appeal no.6 is restored to the file of AO with a direction to allow tax as per the information contained in Form No.26AS and in accordance with provisions of section 199 of the Income Tax Act, 1961. Thus, ground of appeal no.6 is allowed for statistical purposes.
Bringing to tax the difference between the receipts as per Form No.26AS and receipts credited to Profit & Loss Account rejecting the explanation of the appellant that the difference had arisen due to difference in rate applied for conversion - HELD THAT:- We find from reading of the orders of the lower authorities that the explanation rendered by the appellant is not supported by any material on record. In order to meet the ends of justice, we remand the matter to the file of the Assessing Officer with direction to produce the necessary evidence in support of the explanation offered by the appellant company reconciling the difference between the amount shown in Form No.26AS and the amount shown in the Profit & Loss Account. Thus, the ground of appeal no.6 stands partly allowed.
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2022 (5) TMI 854
Revision u/s 263 - PCIT assumed jurisdiction u/s.263 on the issue of unverified purchases claims to have made by the assessee - HELD THAT:- The assessee has made purchases of Rs.8.65 Crs. During the course of assessment proceedings, the assessee had furnished complete list of parties from whom he had made purchases. AO had issued notices to all the parties and out of 28 parties, 7 parties have replied with necessary evidences and remaining parties did not respond to the notice issued by the AO - AO in the absence of necessary information regarding total purchases has taken a view and has estimated net profit @ 7.5% on total sales.
PCIT on very same issue of unverified purchases assumed his jurisdiction and held that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. PCIT as erred in assuming jurisdiction u/s.263 of the Act, because assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue, because, the AO had examined the purchases claims to have made by the assessee, during the course of assessment proceedings and after considering necessary facts has taken one of the possible view and has estimated gross profit @ 7.5% on total sales. The view taken by the AO is a possible view and thus, we are of the considered view that the PCIT cannot assume jurisdiction to revise the assessment order on very same issue by holding that the AO ought to have made further enquiries on the issue.
Thus assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue and thus, we quashed the order passed by the PCIT u/s.263 - Decided in favour of assessee.
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2022 (5) TMI 853
Unexplained cash credit - loans are taken from close family members and friends - CIT(A) deleted the additions being loan taken from five parties and confirmed addition being amount of loan taken from M/s.Rich Gold Hardware - HELD THAT:- In this case, as regards loan taken from five parties, what we noticed from the order of the Ld.CIT(A) is that the assessee has proved identity of parties and genuineness of transactions. The assessee had also proved creditworthiness of the parties by filing their ITR copies for the relevant assessment years, which is part of assessment records. Once, the assessee has discharged his onus by filing all possible evidences, then the onus shifts to the AO to prove otherwise.
In this case, the AO only on the basis of minimum income declared by the creditors, has drawn an adverse inference against the assessee, even though, the assessee has discharged its onus cast upon him as per Sec.68 of the Act. This legal principle is supported by plethora of judicial precedents, including the decision of the Hon’ble Supreme Court in the case of CIT v. Lovely Exports Private Limited [2008 (1) TMI 575 - SC ORDER] wherein, it has been held that once names of creditors are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but some received from them cannot regard as undisclosed income of the assessee.
This legal position further supported by the decision of CIT v. Steller Investment Ltd. . [2000 (7) TMI 76 - SC ORDER]
The sum and substance of ratio laid down by various decisions of the Hon’ble Supreme Court and High Courts is that once assessee discharged its burden by filing various evidences including confirmation letters from the parties, their bank statements and ITR field for the relevant assessment years, onus cast upon the assessee shifts to the Revenue and the AO should bring some evidences to prove that sum credited in the books of accounts of the assessee is undisclosed income. Further, once name and address, PAN of creditors is furnished to the AO, then the Department is free to re-open the individual assessment of creditors, but some received from the parties cannot be regarded as unexplained credit u/s.68 of the Act.
In this case, the assessee has filed all details to prove identity of the loan creditors genuineness of transactions and creditworthiness of the parties. In fact, the loans are taken from close family members and friends. It is not a case of the AO that the assessee had taken loans from certain unknown people whose identity is in doubtful. AO is completely erred in making additions towards loan taken from above parties as unexplained credit u/s.68 - CIT(A) after considering relevant facts has rightly deleted the additions made by the AO. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.
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2022 (5) TMI 852
Denial of claim u/s 80IA for want of sec.10CCB - not filing Form NO.10CCB within the due date - quantum of deductions - Assessee revised return everytime receiving Form No.10CCB - HELD THAT:- Since the assessee had filed its return of income before the due date, as specified u/s 139(1) of the Act for the relevant asst. year and in the return of income he has also claimed deduction. The tax Auditor has also certified the deduction claimed as per Sl.No.33 of the Form No.3CD therefore, only for want of not filing Form NO.10CCB within the due date the claim of deduction should not be disallowed, to which, the assessee had filed revised return within the due date. In view of this, the assessee is eligible to claim deduction u/s 80IA. Whenever the assessee received Form No.10CCB, he revised his return of income.
On observation of the above trading profit and loss account, we notice that there is no any amount debited into the profit and loss account towards administrative expenditure whereas the administrative expenditures are necessary to keep and maintain for smooth running of the business. How and why the assessee has not debited any administrative expenses even no any salary expenditures have been shown in the profit and loss account. Therefore, it would be proper to send back the issue to the file of the AO for determining the actual profit computed in the above trading and profit and loss account without incurring of any expenditures. Needless to say that the reasonable opportunity of being heard to be given to the assessee and the assessee is directed not to seek unnecessary adjournments for early disposal of the case.Appeal of the assessee is allowed for statistical purposes.
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2022 (5) TMI 851
Assessment u/s 153A - Addition made without any incriminating document or not - Accommodation entry - HELD THAT:- As survey action which was commenced on 25.03.2014 at the premises of the assessee was converted into search action on 28.03.2014. During the course of search action several evidences were found which revealed that the assessee’s claim of acquiring and installing certain assets at its factories was found to be non-genuine considering that the inword registers of such factories did not have any such entries of having received/installed the said assets. The details of such incriminating evidences of the order of the CIT(A) and the same was also corroborated by the statements recorded of the relevant persons at the time of search action. Similarly, premises of Hasmukh Mehta who had acted as a broker for providing bogus accommodation entries to the assessee group was also covered in the search action and a diary was seized which had details of the various accommodation entries obtained by the assessee.
During the course of appellate proceedings before us, the ld.CIT(A) has elaborately discussed the incriminating evidences found from the premises of the assessee at page 12 of his order which clearly demonstrate that the assessee had availed accommodation entries in respect of capital assets as well as raw material purchases. Therefore, we don’t find any error in the decision of ld. CIT(A). Accordingly, these 3 grounds of appeal of the assessee stand dismissed.
Disallowance of interest u/s 36(1)(iii) - interest expenditure were related to bogus capital assets - HELD THAT:- During the course of appellate proceedings before the ld. CIT(A) the assessee was asked to furnish the detail of the funds actually utilized in acquiring bogus capital assets, however, the assessee had failed to furnish the required details. Considering the detailed finding of the ld. CIT(A) showing that claim of interest expenditure were related to bogus capital assets and assessee was failed to prove contrary in spite of giving opportunity, this ground of appeal of the assessee stand dismissed.
Addition made u/s 69C being commission paid @ 1% for obtaining accommodation bills - HELD THAT:- During the search action u/s 132(4) of the Act, Shri Sudeep Dutta has admitted in his statement reproduced of the assessment order that assessee had obtained accommodation entries from various purchase parties and most of these accommodation entries were merely accounting entries based in the books of account without actually movement of material/capital goods and in most of the cases without corresponding payment/cheques. The assessee has also admitted that cheques for accommodation entries were issued to the bogus concern and subsequently, the cheques were realized/converted by Shri Hasmukh G. Mehta into equivalent amount of cash after deducting his commission. In the light of the above facts and detailed finding of CIT(A), we don’t find any infirmity in the order of the CIT(A). Accordingly, this ground of appeal of the assessee stand dismissed.
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2022 (5) TMI 850
Deduction u/s 80-IA - AO denied the same on the allegation that the assessee did not fulfil the conditions of Sec.80-IA(3) as well as Sec.80-IA(5). Another issue that cropped up was claim of higher depreciation while computing Book Profit u/s 115JB - As submitted that the erstwhile firm Meenakshi Distribution Service got converted into a corporate entity and it was not a case of splitting-up or reconstruction of business as wrongly understood by lower authorities - HELD THAT:- CIT(A) has not rendered any independent findings and merely endorsed the view of Ld. AO. Keeping in view the submissions made before us, we deem it fit to set aside the impugned order and restore both the issues back to the file of Ld. AO for fresh consideration. The assessee is directed to demonstrate that it was entitled for deduction u/s 80-IA and also justify claim of higher depreciation u/s 115JB. Needless to add that adequate opportunity of hearing shall be granted to the assessee. Assessee appeal stand allowed for statistical purposes.
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2022 (5) TMI 849
Disallowance of Development/improvement expenses - expenditure was on account of contractual payment to four related parties - As contended payment of the labour expenses to the contractors were held up for three years of sale of land and payment was made in the calendar year 2015 only after the A.O. sought proof of payment - CIT- A deleted the addition taking view that the assessing officer made addition on presumption basis and the addition is not based on evidence - HELD THAT:- AO has not disputed the nature of work on which expenses on account of improvement was incurred. Though, the DCIT, Sabarkantha in his report submitted that some development work on the non-agricultural land was carried out 3-4 years back from the date of his visit, however, the items of works claimed by assessee and reported by DCIT is different. Therefore, instead of restoring the matter to the file of Assessing Officer, we deem it appropriate to disallow the part of cost of improvement expenses to avoid the possibility of revenue leakage. Considering the fact that neither the assessee could substantiate with documentary evidence about the genuineness of expenses nor the Assessing Officer brought comparable instances for similar improvement expenses on record, therefore, the order of ld. CIT(A) is modified and A.O. is directed to disallow 50% of improvement expenses out of total improvement expenses. Ground No. 1 .1 to 1.4 of the appeal is partly allowed.
Disallowance under section 14A r.w.r.8D - CIT-A deleted the addition - HELD THAT:- Assessee in reply to the show cause notice provided working of disallowance under Section 14A. The assessing office neither recorded the working of assessee nor disregarded it before making disallowance under section 14A. Before ld CIT(A) the assessee explained that the assessee has earned dividend income of Rs. 77,620/- from Gujarat Ambuja Cement Co-operative bank, which is taxable. We find that the other dividend of Rs. 14,522/-,which has been included by assessee in his total income for the year. We find that the ld CIT(A) after considering the submissions of the assessee held that as the assesse had offered the income for taxation therefore, the provisions of section 14A will be applicable. We find that when no exempt income is claimed by the assessee in its computation of income no disallowance under section 14A is warranted. Thus, we affirms the order of ld CIT(A) on this ground. In the result, ground No. 2 of appeal raised by the revenue is dismissed.
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2022 (5) TMI 891
Exemption u/s 11 - rejecting the applications filed by the assessee seeking registration u/s 12AA and u/s 80G(5)(vi) - HELD THAT:- There is no dispute that the assessee was already registered u/s 12AA by order dated 23.06.2009 effective from 19.12.2008 at the time of moving the present application on 28.09.2020, a fact duly mentioned in the said application filed in Form no. 10A and admittedly and undisputedly, the impugned order passed by the ld CIT(E) doesn’t any impact or consequences as far as the existing registration u/s 12AA which continues to remain valid as on date. There has however been amendment in the law by virtue of Finance Act 2020 where an assessee already registered u/s 12AA has to intimate/apply to the jurisdictional PCIT or CIT within the prescribed time period with requisite documentation and the implementation of which has been deferred initially by the Ministry of Finance as intimated through a press release dated 9.05.2020 and thereafter, there has been amendment in the Act by virtue of The Taxation And other laws (Relaxation and amendment of certain provisions) Act, 2020 where the earlier amended provisions have been replaced with new set of provisions and the said new provisions have been made effective from 1.04.2021.
Therefore, as far as the present application filed on 28.09.2020 is concerned, we find that there was no requirement at first place to move such an application by the assessee at the relevant point in time and secondly, for the ld CIT(E) to initiate any action on such application where there were no provisions to move such an application at first place by the assessee which is already registered u/s 12AA of the Act. We also note that during the course of proceedings before the ld CIT(E), the assessee has also moved an application stating that it wishes to withdraw its application seeking registration as it is already registered u/s 12AA of the Act as evident from assessee’s paperbook which has not been disputed by the Revenue. During the course of hearing as well, the ld AR has also submitted that the assessee has mistakenly moved the present application where there was no requirement at first place and has sought directions to the ld CIT(E) to allow the withdrawal of application wrongly filed u/s 12AA of the Act.
We hereby modify the directions of the ld CIT(E) where the application dated 28.09.2020 u/s 12AA is to be treated as withdrawn due to non-applicability of the relevant provisions of law at the relevant point in time for moving such an application and whose implementation has been deferred to a subsequent date, and the fact that the assessee has also requested for withdrawal of its application. The order of the ld CIT(A) thus stand modified and the application of the assessee stand withdrawn.
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2022 (5) TMI 890
Assessment u/s 153A - incriminating material found in search - HELD THAT:- As in the original assessment, the additions were made by the AO on this issue and the appeal on the issue is already pending before the Hon’ble High Court, as noted above. So in the fresh assessment proceedings carried out u/s 153A of the Act, since there is no reference of any incriminating material relating to the aforesaid issue, therefore, this issue in the light of the settled law cannot be read-judicated in the second appeal before this Tribunal, especially when this issue has already been considered and adjudicated in the first appeal and the matter is pending before the Hon’ble High Court. Whatever, the findings will be given by the Hon’ble High Court that will apply to the case of the assessee for the assessment year under consideration. There cannot be allowed two parallel proceedings running, one in the High Court and the other Tribunal on the same issue and relating to the same assessment year. This appeal of the Revenue, in view of this, is hereby dismissed subject to our observation that the finding arrived at in appeal before the High Court on this issue will accordingly apply to the case of the assessee for the assessment year under consideration.
Allocation of the expenditure relating to the R&D unit to the other units which are exempt u/s 80IC - HELD THAT:- The issue is clearly covered in favour of the assessee in the own case of the assessee for the earlier assessment year, wherein, the Tribunal, after considering the relevant facts, has held that the expenditure incurred in research and development activity at R&D Unit cannot be allocated to the other manufacturing units. No distinguishing facts have been brought on record. In view of this, respectfully following the order of the Tribunal for earlier assessment year in the own case of the assessee, this issue is accordingly decided in favour of the assessee. No other ground or issue raised or argued. The appeal filed by the assessee is accordingly stands allowed.
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2022 (5) TMI 889
Disallowing deduction claim u/s 80IA - non filling appeal in ROI - As per DR assessee had very well filed its books of account as well as computation but could not claim the impugned deduction in its return - HELD THAT:- This crucial fact itself forms the most clinching reason for us to affirm to impugned disallowance. We note with the able assistance of from revenue side that legislature has not only prescribed filing of a return within the “due date” prescribed u/s. 139(1) as a pre condition for claiming section 80IA by way of inserting a special provision i.e. 80AC vide Finance Act 2007 w.e.f. 2008 but also Section 80A(5) further stipulates that chapter VI deduction is not to be allowed if the assessee fails to make a claim to this effect in its return of income.
We therefore reject the assessee’s arguments quoting Goetze India Ltd.[2006 (3) TMI 75 - SUPREME COURT] and CIT V/s. Pruthvi Brokers & Shareholders Pvt. Ltd [2012 (7) TMI 158 - BOMBAY HIGH COURT] - We rather note that hon’ble jurisdictional high court’s decision in EBR Enterprises Vs. Union of India [2019 (6) TMI 484 - BOMBAY HIGH COURT] holds that such a failure on the assessee’s part is indeed very fatal to its deduction claim. We adopt stricter interpretation in light of Commissioner of customs V/s Dilip Kumar (2018) 9 SCC 1(SC)[2018 (7) TMI 1826 - SUPREME COURT] to affirm CIT(A)’s finding under challenge. Decided against assessee.
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2022 (5) TMI 888
Addition u/s 69 - Unexplained investment - Whether CIT(A) is right in allowing the appeal on merely technical ground of lack of enquiry by A.O., when the CIT Appeal himself has all the powers of the AO? - HELD THAT:- In the present case, the assessee had not filed return of income and in order to verify the transactions as intimated by the investigation wing, the summons was issued. However, the same was also not attended by the assessee, and reassessment proceeding u/s 148 was initiated. AO by referring to the statement of the Director of Consortium Capital Private Limited made the addition under section 69 - CIT(A) thought observed that various submissions, as filed by the assessee, were not considered by the Assessing Officer while making the addition, however, learned CIT(A) failed to make any enquiry nor called for any remand report from the Assessing Officer, even after noting various shortcomings in the assessment order. The learned CIT(A) merely on account of absence of material being brought on record deleted the addition made under section 69 of the Act.
We are of the considered opinion that, in the present case, CIT(A) has not discharged its obligation of ensuring effective enquiry and detailed scrutiny of all the aspects while deciding the appeal. Thus, we deem it appropriate to set aside the impugned order and remand the matter to the learned CIT(A) for de novo adjudication after conducting proper and effective enquiry. Appeal by the Revenue is allowed for statistical purpose.
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2022 (5) TMI 887
Capital gain computation - indexed cost of acquisition - correct date and year for the computing indexation - declining the benefit of indexation w.e.f 1997 - benefit of indexation for the purpose of computing Long Term Capital Gain arising from sale of a residential flat from the year of registration of the flat in 2003 and not from the year of execution of sale agreement and taking possession of the flat by the appellant in the year 1997- HELD THAT:- Benefit of indexation was declined on the ground that the possession was given to the original owner by Ghaziabad Development Authority (“GDA”) vide letter dated 25.12.1997. However, flat was registered in the name of the assessee in the year 2003 only, after making balance installments. The case of the assessee is that the house was allotted to the original owner and possession was given to the original owner by GDA.
The original owner by way of Agreement to Sale and registered Power of Attorney transferred the ownership in favour of the assessee, and handed over the possession to the assessee way back in the year 1997. After obtaining the possession, the assessee had installed electric connection provided by the Electricity Department and has been paying house tax to the Ghaziabad Municipal Committee.
Assessee has proved his possession of the property which is evident from the installation of electricity connection in his name and house tax charged by the local tax authority. Therefore, the Ld.CIT(A) under these undisputed facts, ought to have taken a liberal approach for granting benefit of indexation as requested by the assessee. I therefore, set aside the impugned order on this issue and direct the AO to give benefit of indexation to the assessee as per law treating him in the possession of the flat since 1997. Ground raised by the assessee is allowed for statistical purposes.
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2022 (5) TMI 886
Validity of reassessment proceedings - Excess claim of Work-in-Progress - HELD THAT:- As provisions of Sec.148 of the Act has to invoked only when the A.O. has reason to believe that the income has escaped assessment. where as in the present case on perusal of the various clauses which the Ld. AR has referred in the hearing, it is very clear that the reasons for sharing expenses and revenue are supported with the evidences and in most of the cases it is revenue sharing inter se between the assessee and developer and there is no cost/ expenditure sharing by the developer.
AR submissions are realistic and has referred to the clauses in the agreement in particular to show that no expenditure has been shared by the developer. We are of the opinion that the A.O. has ventured on a wrong assumption of facts though the agreement was available on hand with the A.O. in the original assessment proceedings. The AO has assumed that when the revenue is being shared, the cost/expenditure shall also be shared between the assessee and developer. Further there is no tangible material was brought to our knowledge by the Ld.DR to come to a conclusion that there is an income escaping the assessment.
Thus reopening on the wrong assumption of facts by the assessing officer cannot be sustained. Accordingly, we find the reassessment is bad in law and quash the assessment order passed u/s 143(3) r.w.s 147 - Decided in favour of the assessee.
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2022 (5) TMI 859
Reopening of assessment u/s 147 - notice in name of non-existing entity, which had merged with the Petitioner company - Responded as stated in the present case, the impugned assessment order has been passed in the name of ‘Jindal Dyechem Industries Pvt. Ltd. (successor to Lumax Caplease Private Limited)’ i.e., the amalgamated entity and the issue as to whether income has escaped assessment or not is a question of fact which the petitioner can agitate in appeal proceedings.
HELD THAT:- Having heard learned counsel for the parties, this Court is of the view that even if the submission of learned counsel for the Respondents is accepted, then also the impugned assessment order is liable to be set aside as the Petitioner had no opportunity to deal with or respond to the show cause notice dated 28th March, 2022 as it had been issued after the date and time of compliance had expired.
Consequently, the impugned assessment order is set aside on the short ground of being violative of principle of natural justice and the matter is remanded back to the Assessing Officer for fresh adjudication.
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2022 (5) TMI 885
Reopening of assessment u/s 147 - Tangible material available with the AO for forming the belief that income of the assessee has escaped assessment for the year under consideration - unexplained cash credit u/s 68 - whether cash deposits represent the income of the assessee and gives rise to the AO to believe that income has escaped assessment within the meaning of the provisions of section 147 ? - HELD THAT:- Mere deposit of cash itself does not represent income unless and until some tangible material available on record evidencing that such deposits is the income of the assessee. Therefore, mere information of cash deposit does not give any rise to form believe that the income of the assessee has been escaped assessment. In this regard we draw support and guidance from order of Delhi tribunal in case of Bir Bahadur Singh Sijwali [2015 (2) TMI 60 - ITAT DELHI].
Tangible material received by the AO from any other source for the year under consideration - Information received by the AO was pertaining to the financial year 2010-11 corresponding to assessment year 2011-12 based on which the proceedings u/s 153C of the Act were initiated against the assessee. Now the question arises the information pertaining to the assessment year 2011-12 can be used for the year under consideration being the financial year 2009-10 corresponding to assessment year 2010-11. In our considered view, such information cannot be used for forming believe that income in the year under consideration also escaped assessment unless and until fresh tangible material pertaining to the year under consideration brought on record. The information or material pertaining to different assessment year may give rise to suspicion but not the reason to believe.
We are of the view that reason to believe formed by the AO for reopening the assessment is not valid as the same is not based on any tangible material which prima facie suggest income has escaped assessment rather the AO form believe merely based on suspicion, surmise and conjecture.
Reason to be belief formed by the AO is not based on any fresh tangible material. Therefore we hereby quashed the proceeding under section 147 of the Act. Hence the ground of cross objection of the assessee is allowed.
Unexplained cash credit u/s 68 - There cannot be any addition to the total income of the assessee on account of cash deposited in the bank unless the AO demonstrate that the amount in question has been used by the assessee for any other purpose. Thus in our considered view the addition is made by the AO on inferences and presumptions which is bad in law. Accordingly, we do not find any infirmity in the order of the learned CIT(A). Thus we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is hereby dismissed.
Unexplained cash credit under section 68 - proof of identity - AO has held that the identity of the Kalpesh Patel was not proven by the assessee. However we note the AO in paragraph number 8.4 of his order has given the details of income declared by Shri Kalpesh Patel for the last 3 years. Thus, there is contradiction in the finding of AO. Further the learned CIT-A has given categorical finding that the AO while framing the assessment of Sarthav Infrastructure Pvt Ltd (SIPL) for the year under consideration has accepted the identity of Shri Kalpesh Patel. Therefore in these facts and circumstances, no doubt remains on the identity of the loan parties.
Now coming to the second and third condition, i.e. genuineness of the transaction and creditworthiness of the parties, regarding this we note that all the transactions were carried out through banking channel and the assessee has refunded the amount through banking channel to all the parties and in case of Kalpesh Patel within 2 days. The repayment of the loan amount by the assessee was duly accepted by the Revenue.
There remains no doubt that the transaction of the advance received by the assessee from the parties was not genuine. In our considered view, once the assessee is able to prove that the money received by it was returned during the year in the account of the same parties, then there remains no doubt to draw an inference that the advances received by the assessee were unexplained cash credit.
Similarly, we also note that in respect of all the parties as discussed above the AO had sufficient documentary pieces of evidence including the details of the income of the loan parties namely Saral Management Consultancy who were assessed by the same AO and showing healthy amount of taxable income. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 of the Act. In view of the above, we do not find any infirmity in the order of Ld. CIT (A). Hence the ground of appeal of the revenue is hereby dismissed.
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2022 (5) TMI 884
Unexplained cash credit u/s 68 - Bogus share transaction - as per AO shareholders’ complete identification reflects that such identity is managed for layering and plans for unaccounted money - CIT- A deleted the addition - HELD THAT:- As sufficient enquiry have been made by the Ld. AO in respect to the share applicant whereupon confirmation has duly been made. Physical existences of all the shareholders have been proved and the genuineness of the transaction as well. We, therefore, with the above observation find that addition made under Section 68 of the Act does not fulfill the criteria laid down by the statutory provision and hence, taking into consideration the entire aspect of the matter the order passed by the Ld. CIT(A) in deleting addition is found to be justified, without any ambiguity so as to warrant interference. The appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed.
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2022 (5) TMI 883
Exemption u/s 11 - assessee has paid a sum to Shaheed Baba Nihal Singh Charitable Hospital for medical relief and the AO has treated the said payment as the amount covered under section 13(1)(c) read with section 13(3) - funds of the society have been diverted and transferred to its sister society which is engaged in activities other than religious purposes. It has also been held by the AO that the income of the society has not therefore been applied towards religious purposes for which it was set up and, therefore, the utilization of funds of the assessee society have been held to be not for the purposes for which it was formed - HELD THAT:- Both the parties submitted that the similar issue had arisen earlier during the assessment year 2014-15 and the matter has travelled upto the Tribunal and the Coordinate Bench had an occasion to examine the said matter in [2019 (8) TMI 1819 - ITAT CHANDIGARH] and the matter has been set aside to the file of the Ld. CIT(A) to decide afresh after bringing all relevant facts on record.
Thus the matter is set aside to the file of the Ld. CIT(A) to adjudicate the issue afresh as per law after providing reasonable opportunity to the assessee. Appeal of the assessee is allowed for statistical purposes.
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2022 (5) TMI 848
Addition u/s 36((1)(va) - delayed payment of employees' contribution towards provident fund - adjustments u/s. 143(1) - HELD THAT:- In the instant case, there is no dispute that the return was processed u/s. 143(1) and there was no scrutiny assessment made u/s. 143(3) of the Act. It is settled issue that no debatable issues are permitted to be made adjustments u/s. 143(1) of the Act. In the instant case, what was added in the intimation u/s. 143(1) was the employees contribution to PF. Hon'ble Madras High Court in the case of Redington (India) Ltd. [2020 (12) TMI 516 - MADRAS HIGH COURT] held that employees contribution to PF and ESI is also allowable deduction, if, the same is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation [2021 (5) TMI 263 - ITAT VISAKHAPATNAM] held that debatable issues are not permitted to be made adjustments while processing the return of income u/s. 143(1) .
On merits also, this Tribunal has consistently viewed that the employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income - See M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD. AND VICA-VERSA [2016 (9) TMI 1040 - ITAT VISAKHAPATNAM] - Decided in favour of assessee.
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2022 (5) TMI 846
TDS u/s 195 - license fee in respect of the use of software - HELD THAT:- The said issue is no more res integra by the decision of Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd.[2021 (3) TMI 138 - SUPREME COURT] - It is not the case of revenue that there is a transfer of right to use in respect of these software is owned by Brand Union worldwide Ltd. It is also not disputed by the revenue that, these software are developed by the parent company. Instead we note that Brand Union worldwide Ltd., has been procured these software and has allotted to the group companies, against which, cost have been allocated. Such an allocation cannot be held to be ‘royalty’ in order to be subjected to TDS provisions.
As Brand Worldwide Ltd., procures these software from somewhere else and is shared to the assessee along with other group companies against a proportionate cost, without any markup, the reimbursement of such expenses by assessee cannot be held liable for TDS. Accordingly this ground raised by assessee stands allowed.
TDS u/s 194C or 194I - Disallowance under section 40(a)(ia) of the Act, in respect of car rent expenses incurred by assessee - disallowance is on account of hiring of vehicles by assessee with individuals - HELD THAT:- The revenue is not alleging that the payment made to person are contractors. It is a submission of the Ld.AR that there is no principal agent relationship and therefore provisions of section 194C are not applicable. In the present facts of the case the conditions do not satisfy to be covered under section 194C of the Act.
We note that, the assessee has deducted TDS u/s. 194I in respect of one of the lessor, from whom vehicle was taken on lease and that, the payment exceeded the threshold limit of ₹ 1,80,000/-. There is no malafide intention of assessee to evade tax. In respect of the remaining payments, the threshold limit did not exceed and therefore TDS need not have been deducted. We therefore direct the Ld.AO to delete the disallowance made in respect of the same.
TDS credit not granted to assessee - HELD THAT:- The submissions of the Ld.AR is that, in the event part of the corresponding income to the tax deducted at source of ₹ 8,45,868/-has been offered as income in the previous year, assessee must be granted credit of tax deducted at source for the year under consideration in accordance with form 26AS. Assessee is directed to file all relevant details in support of the scheme. The Ld.AO shall verify the evidence is filed by assessee and consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee.
Short deduction at source - DCIT filed the report dated 24/02/2020 mentioning the availability of credit as per e-TDS database - HELD THAT:- We direct Ld.AO to grant the TDS available to the assessee as per the remand report dated 24/02/2020.
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2022 (5) TMI 882
Addition us 68 - CIT-A deleted the addition - as argued CIT(A) has erred in not providing the opportunity to the Ld. AO to cross examine the additional information produced by the appellant as required by Rule 46A of the IT Rules, 1961 - HELD THAT:- CIT(A) in our opinion had decided the issue on the basis of the written submissions and the documents filed by the assessee at the time of hearing of the appeal before the first appellate authority. Based on this, the Ld. CIT(A) had formed an opinion that there was some typographical errors in the balance sheet of M/s. Anisha Estate and Finance Private Limited and it was duly explained by the assessee in their written submissions. In our considered opinion, whenever a quasi-judicial authority is deciding the issue, the authority should provide an opportunity to the assessee as well the Ld. Assessing Officer should also be given an opportunity and call for a remand report or call for the comments of the Ld. AO.
Considering the discrepancy shown by the Ld. CIT(A), we are of the opinion that the order passed by the Ld. CIT(A) in not in accordance with the principles of natural justice by not granting an opportunity to the Assessing Officer for explaining whether there was any typographical error in the balance sheet of M/s. Anisha Estate and Finance Private Limited. In the light of the above, we deem it fit to remand the matter to the file of the Ld. CIT(A) for denovo adjudication of the appeal in accordance with the principles of natural justice and after following the Rules framed by the Board in this regard for due adjudication of the Appeal filed by the Revenue is allowed for statistical purposes
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2022 (5) TMI 881
Revision u/s 263 - disallowance of interest - AR submitted that the assessee had filed the additional evidences/documents before the Ld. CIT(A) - On the basis of the remand report the Ld. CIT(A) decided the issue against the assessee but assessee was not provided the opportunity to confront the remand report - denial of natural justice - HELD THAT:- As there is no reference of filing response by the assessee as well as there was no mention about the supply of copy of the remand report to the assessee. Therefore, in our considered opinion once the lower authorities or any authority chooses to decide the issue on the basis of the remand report given by the Assessing Officer, a copy of the remand report should be provided to the assessee to rebut the same in accordance with the principles of natural justice.
It is a settled law that no person should leave unheard and it is the fundamental rule of the tax adjudication that while deciding any issue an opportunity of being heard should be provided to the assessee and the assessee be given access to the documents on which the Assessing Officer or the Ld. CIT(A) sought to rely upon so as to rebut the same by the assessee. In the present case, it is apparent from the CIT(A) order that the assessee was not supplied with the remand report before deciding the issues against the assessee. Therefore, considering these facts and circumstances of the case, we deem it fit and proper to remand the entire matter to the file of the Ld. AO for de novo assessment, following the principles of natural justice and in accordance with law. Appeal of the assessee is allowed for statistical purposes.
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2022 (5) TMI 880
Exemption u/s 11 - seeking benefit on the ground of mutuality in case of denial of benefit of section 11 by invoking section 13 - amount paid to HRG was more than the amount paid to unrelated entities - whether the payment made by the assessee to HRG was excessive? - AO observed that HRG falls under the related person category within the meaning of section 13(3) by lifting the corporate veil, considering the fact that the key director (Shri Shekar Swamy) of the assessee company, who held indirect substantial interest in the HRG through TIPL - HELD THAT:- As assessee shares the majority of the revenue with the other entity, whether related or unrelated, in that case the assessee has to conduct its affairs without violating any of the restrictions specified in section 13. On careful evaluation, we observe that the section 13 restrictions are very specific that the assessee cannot share the revenue or benefits with any of the persons specified in the section 13(3) directly or indirectly.
We observed that Shri Shekar Swamy is the key director who controlled the affairs of the assessee company as well as HRG and also held the controlling capacity in the Board of Governor, in such situation it is no doubt that he played very crucial role in controlling the whole operations. It is fact on record that Shri Shekar has not directly held substantial shares in the HRG but held substantial interest in TIPL. The restrictions specified in the section 13 has to be evaluated holistically, not just based on shareholding.
The controlling of the other unit plays important role, the controlling interest concept includes the controlling thru shareholding, it does include the controlling the other institution by indirect influence. In the given case, Shri Shekar controls the whole affairs in the assessee company, HRG and also plays a role in the Board of Governors. This shows that Shri Shekar has a say in the decision making process of all the units under his control or in the control of the family. Shri Shekar controls the assessee company and HRG thru indirect holding of shares in TIPL. Therefore, in our considered view, the assessee has shared the revenue with the related concern, the related concern which is indirectly related by applying the concept of controlling the affairs by exercising the control of management. When it is clear that Shri Shekar has management control, the corporate veil has to be lifted. Therefore, we are in agreement with the tax authorities in applying the provisions of section 13(3) in the present case.
AO has established that by removing the corporate veil, one of the director falls within the meaning of section 13(3) and 13(2)(e) of the Act. Whether the revenue sharing with the other concern are within the arm’s length is subjective, considering the fact that it is sharing 90% of the revenue and transaction with the unrelated party is not substantial and assignments in both the cases are totally different. Therefore, we reject the submissions of the assessee and grounds raised in this regard before us.
Whether the advances given against the pending research assignments, we do not agree with the Assessing Officer that it falls within the meaning of loan given to the related parties. AO has acknowledged that there exists the transaction between the assessee and HRG, the advances given during the year can be considered as the advance paid for the purpose of business. It cannot be considered for the purpose of section 13 in order to deny the benefit u/s 11.
We observe that the assessee has dealt with the 140 non-members and receipt of the total subscription from them which equal to 3.60% of gross subscription. We do not agree with the revenue authorities that it falls under “significant dealing” with the nonmembers. Therefore, whenever a mutual concern deals with the members they have to allow the facilities to non-members also due to various reasons for survival. When compared to their gross revenue, if it is within range, say less than 5% of their operation, still it will be regarded as mutual concern/entity. It is the responsibility of such mutual entity to maintain required books to establish the exclusiveness.
We observe that the assessee has clearly gave the details to the Assessing Officer that it has dealt only with the 140 non-members and details of their subscriptions, it shows that the assessee kept the record of dealing with the non-members. Therefore, we are inclined to remit this issue back to the file of Assessing Officer to evaluate the allowability of benefit under mutuality concept to the assessee. It is the duty of the assessing authority to assess the case of the assessee holistically, not restrict themselves to one aspect of assessment merely to complete the assessment, it is their duty to assist the assessee also in their affairs specially when there exist multiple benefits to the assessee. In this case, the assessee specifically placed their alternate plea which was rejected by the Assessing Officer, without properly evaluating the case, merely proceeded to reject the plea on focusing the rejection of benefit under section 11. We direct the Assessing Officer to redo the assessment under mutuality concept de novo.
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2022 (5) TMI 858
Unexplained income - withdrawal shown in the seized documents belonging to the partners in their personal capacity or firm - whether withdrawals in the name of the partners of the firm represents the unaccounted income of the firm? - HELD THAT:- The principal contention of the writ applicant assessee before the Tribunal was that the amount of withdrawal reflected in the seized document represented the amount of the partners in their personal capacity. The Tribunal first looked into Section 292C of the Act and thereafter, noticed from the materials on record that the note in question was duly signed not only by all the partners of the firm, but also by three witnesses. The names of the partnership firm also figured in it. The Tribunal also took notice of the fact that the withdrawal of the money was from the firm.
Thus, in view of the findings of fact recorded by the Tribunal as referred to above, no substantial question of law for the purpose of deciding this appeal under Section 260A.
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Customs
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2022 (5) TMI 878
Advance Authorization Scheme - import of duty-free goods (Raw Cashew Nuts) by the appellants under Advance Authorization licenses, diverted to other units which were not authorized by DGFT - sale of substantial quantity of processed cashew kernels - violation of condition of the Notification No. 18/2015-Cus. dated 1.4.2015 - jurisdiction to issue SCN - HELD THAT:- It has to be stated that the learned counsel for appellant did not put forward any arguments on the issue as to whether DRI is the proper officer to issue Show Cause Notice. Though the judgment of the Hon'ble Supreme Court in the case of M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [2021 (3) TMI 384 - SUPREME COURT] was brought to his notice, he submitted that he does not wish to contest on the said issue before the Tribunal or before any other forum.
Whether the diversion of RCN imported duty-free under Advance Authorization at the port of import to its unauthorized unit for processing is permissible under FTP 2015 – 20 and Handbook of Procedures 2015 – 2020? - Whether the quantity of 1149.59 MTs of RCN alleged to be diverted to unauthorized units is liable for confiscation? - HELD THAT:- Admittedly, the units to which the RCN are said to be diverted belong to the appellant. Though only the factory premises at Elamkulam, Kalluvathukkal Post, Kollam has been endorsed in Advance Authorization, all other units belong to the appellant. The department does not have a case that the other units to which the RCN was dispatched from the port belongs to any other person - clause (x) of Notification No. 18/2015 allows transfer of the imported materials to a job worker for processing subject to complying with the conditions of relevant Central Excise notifications. Again, in para 4.35 of Handbook of Procedures, it is stated that if the manufacturer / importer is not required to obtain central excise registration, it is not required to insist for endorsement of the name of supporting manufacturers in the Advance Authorization - It is stated that in such transfer of materials to the premises of job worker, whose premises are not endorsed in the license, the sole responsibility shall be of the importer. In the present case, the appellant has been issued export obligation discharge certificate. Such discharge certificate has been issued after perusing the shipping bills, whether foreign exchange was realized and also examining whether the appellant has fulfilled the conditions as per the Advance Authorization license and Customs Notification.
On similar set of facts, the Tribunal in M/S. REGIN EXPORTS, SHRI REGIN P. PROPRIETOR OF M/S. REGIN AGENCY, M/S. DANIEL AND SAMUEL LOGISTICS PVT. LTD., M/S. ZION LOGISTICS VERSUS COMMISSIONER OF CUSTOMS, TUTICORIN [2018 (9) TMI 1290 - CESTAT CHENNAI] had occasion to consider whether the transfer of materials to the premises of job worker whose names have not been endorsed in the license would be permissible or not. The Tribunal in the said case after noting condition (x) of Notification No. 18/2015 had observed that the allegation of diversion cannot sustain.
The allegation raised in the Show Cause Notice and the consequent confiscation of goods and duty demand cannot sustain - Appeal allowed - decided in favor of appellant.
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2022 (5) TMI 879
MEIS scheme - denial of benefit of section 149 of the Customs Act, 1962 - non-complisance with the mandatory requirement of specifically mentioning the intention to avail benefit under the MEIS Scheme as per the Foreign Trade Policy - whether amendment sought was in nature of change which may require evidence to prove or not? - correctness of amendment in shipping bills after a period of about 2-3 years from the export of the concerned goods - HELD THAT:- The Tribunal took the view that the amendment claimed in the shipping bills cannot be said to be in the nature of changing the shipping bills, for which evidence may have to be led. According to the Tribunal, the assessee is not intending to change the description of the goods or quantity of the goods. The argument on behalf of the Revenue is that once the goods are exported, it is very difficult thereafter to undertake proper verification or rather physical verification of the goods even for the purpose of amendment in the shipping bills. The argument is that almost after a period of 2 years from the date of export, the assesee has claimed amendment in the shipping bills.
The argument of the Revenue as regards the delay would not hold good in view of the decision of this very High Court in the case of MESSRS MAHALAXMI RUBTECH LTD. VERSUS UNION OF INDIA [2021 (3) TMI 240 - GUJARAT HIGH COURT], wherein this Court took the view that Section 149 of the Act does not prescribe any time period and in such circumstances, the Circular, which was issued by the CBEC providing for three months time period to make a request for conversion from the date of the LEO was declared to be ultra vires Articles 14 and 19(1)(g) of the Constitution.
Appeal dismissed.
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2022 (5) TMI 877
Revocation of Customs Broker License - forefeiture of security deposit - levy of penalty - applicability of Regulation 14 of the CBLR, 2018 - allegation of fraud by availing export finance by submission of export bills without making exports - HELD THAT:- It is an admitted fact that the appellant has issued the checklists to the exporters. Even investigation report recorded that ABCCPL owned and controlled by Shri Ashish Jobanputra was exporting cotton since the year 2009 mainly to China under Letter of Credit. Since ABCCPL was a regular exporter exporting goods since 2009, they did not find any difficulty in getting the export documents for availing the fraudulent export credits from the Banks. These documents have been issued by M/s. RSS Shipping Pvt. Ltd. who was operating the CHA licence in the name of M/s. Ramesh Transport Co. (the appellant herein) and M/s. Harin Transport.
In para 11 of the impugned order, the only ground on which the Commissioner proceeded against the appellant is that Shri Ramesh Mange had not met or contacted ABCCPL while filing the checklists for export in their name and has thus allowed his CB licence to be used by M/s. RSS Shipping Pvt. Ltd. which was involved in uploading the shipping bill data prepared by them on ICEGATE portal. On the basis of above, the Commissioner concluded that the evidence on record clearly indicated that the Customs Broker was working in a manner to facilitate fraud and had violated the obligation casted upon them under the CBLR,2018.
On the same set of evidences, two different findings have been recorded by the Commissioners at Nagpur and Mumbai. Such a discrimination which leads to revocation of licence of one Customs Broker and permits them to operate without any hindrance is nothing but discrimination contrary to Article 14 of the Constitution - Further the procedure for export starts with filing of checklists on ICEGATE portal. If the same is not backed by the proper shipping bill within 15 days, the checklist gets purged. It is not understood how the issuance of checklist by the Customs Broker was a fraud under the Customs Act. Even if the same was an offence under some other Acts, the appellant needs to be tried in terms of those Acts and should not have been inflicted with the punishment sought to be inflicted in terms of CBLR, 2018.
Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2022 (5) TMI 876
Sanction of Scheme of Amalgamation - Sections 230 - 232 of the Companies Act, 2013 and other applicable provisions of the Act and read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - various directions with regard to issuance of various notices also issued.
The scheme is approved - application allowed.
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Insolvency & Bankruptcy
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2022 (5) TMI 874
Admitting the petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - It is claimed that the transaction entered into between the parties is not covered under the definition of ‘financial debt’ under section 5(8) and any of the nine clauses of section 5(8) to be in the nature of financial debt - HELD THAT:- It is clear that in case the record of Information Utility shows that there is a debt which is in default, the Adjudicating Authority or the Appellate Authority are not required to further examine the record maintained by the Information Utility, moreso when the record of the Information Utility is deemed authenticated and no dispute or refutation of said record has been done by the corporate debtor earlier.
It is also noted that in the judgment of RUSHABH CIVIL CONTRACTORS PVT. LTD. VERSUS CENTRIO LIFESPACES LTD. [2022 (1) TMI 461 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], which has been cited by the Learned Counsel for Appellant, the record that formed the basis for financial debt and default was found to be forged and fabricated, which is not the case in the present appeal. Therefore, this judgment does not come to the rescue of the Appellant.
The Adjudicating Authority has not committed any error in admitting the section 7 application filed by the financial creditor M/s. Teco Industries - Appeal dismissed.
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2022 (5) TMI 875
CIRP - Status of NOIDA authority - Financial Creditors or Operational Creditors - dues outstanding under the lease - NCLAT finds that the lease deed does not have any clause of transfer of ownership of the underlying asset, which is land and not flat, as harped upon by the appellant - whether section 5(8) of IBC itself suffices to embrace the lease in question? - HELD THAT:- While, it may be true that the word ‘transaction’ includes transfer of assets, funds or goods and services from or to the corporate debtor, in the context of the principal provisions of Section 5(8) of the IBC, we are of the view that to import the definition of ‘transaction’ in Section 2(33), involving the need to expand the word ‘disbursement’, to include a promise to pay money by a debtor to the creditor, will be uncalled for straining of the provisions. ‘Disbursement’, within the meaning of Section 5(8), is the payment of money, which flows to the debtor. In the word ‘claim’, as defined in Section 3(6), right to payment is one of the components. The golden thread that runs through the word ‘claim’, is the right to payment. The right to payment may arise from a Judgement. It may or may not be fixed. It may be disputed or undisputed. It may be legal or equitable. It may be secured or unsecured, but what is indispensable is, there must be a right to payment. Similarly, in cases of breach of contract, under any law in force, if it gives rise to a right to payment, irrespective of whether it is reduced to a Judgment or fixed or matured or unmatured, disputed or undisputed, secured or unsecured, as long as there is a right to payment, a claim arises.
In the lease in question, there has been no disbursement of any debt (loan) or any sums by the appellant to the lessee. The appellant would, therefore, not be a financial creditor within the ambit of Section 5(8).
Whether appellant is a Financial Lessor? - HELD THAT:- In Asea Brown Boveri Ltd. v. Industrial Finance Corporation of India and Others [2004 (10) TMI 325 - SUPREME COURT] the appellant entered into a lease and finance agreement with the third respondent therein under which the subject matter of the lease was 57 cars. The third respondent became a notified party under a law under which the special court found that the transaction was only a lease and not a finance lease.
In Section 5(8)(d), it is necessary to notice the opening words of the provision, viz., ‘the amount of any liability in respect of’. The Law Giver, in other words, has contemplated that should there be any liability arising out of a lease or hire-purchase, which is deemed as a finance or a capital lease in terms of the Indian Accounting Standards, then, the person, who has incurred the liability, would become the debtor and the person, in respect of whom, the liability has been incurred, would become the financial creditor.
It is such property, viz., immovable property, in the case of a lease of an immovable property, which can be treated as the underlying asset, for the purpose of the Rules made under Section 133 of the Companies Act, 2013 - At any rate there is no right within the meaning of criteria with the Lessee to purchase the asset. This criterion is also not fulfilled as there is no option to purchase at all that is vested with the lessee.
Having made a survey of the various situations and examples under the Statutory Rules, which would persuade the Court to ‘deem’ a lease as a finance lease and, having found that none of the situations or indicators suit the case of the appellant, the case should rest and the point must be answered against the appellant. However, the time is now ripe to examine the contents of Rule 62 and Rule 65. They declare as to when a lease is to be classified as a financial lease. It provides that a lease may be so classified as a financial lease, if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. The converse position applies to an operating lease and a lease is to be classified as an operating lease, if the lease does not substantially transfer all the risks and the rewards incidental to the ownership of the underlying asset.
The lease in question, is a lease of the plot of land, as already found by us. The underlying asset is the plot of land. Therefore, we cannot treat the subject matter of the lease, as containing both land and building elements. - In fact, it is, no doubt, true that the lease actually contemplates that, as regards the build-up area/plot or land, the transfer to the allottee is to be made only by way of a sub-lease - The lease, therefore, contemplates a sub-lease, whereunder, the rights over the apartments, are regulated. Not unnaturally, therefore, the appellant cannot project the case that the flats/apartments, would constitute part of the underlying asset.
Therefore, we would find on the whole that the appellant is not the financial lessor under section 5(8)(d) of the IBC. No doubt we would observe that we have arrived at the findings based on the prevailing statutory regime. Needless to say there is always power to amend the provisions which essentially consist of the Indian Accounting Standards in the absence of any rules prescribed under Section 5(8)(d) of the IBC by the Central Government.
Scope of Section 5(8)(f) of IBC - HELD THAT:- In fact, a perusal of Part III of IBC which deals with Insolvency Resolution for individuals and partnership firms will show that it does not contain the concept of financial debt as indicated in Section 5(8). Section 5(8)(c) comprehensively refers to raising of any amount based on note purchase facility, issue of bonds, notes, debentures, loan stock or any similar instrument. Thus, what is contemplated is ordinarily the corporate debtor raises funds by issuing bonds, notes, debentures or loan stock which are well known instruments usually used by corporate bodies to generate funds for its needs. These instruments are ordinarily transferable.
We need not further explore the scope of the said clause 5(8)(c) except to notice that the word similar instrument would indicate instruments similar to the instruments which are specifically enumerated. - The words used in Section 5(8)(g) appear to suggest that the law giver has contemplated any derivative transaction, in connection with the protection of the benefit from fluctuation in the rate or price. There appears to be an intricate and complex web of transactions which can take place under a derivative transaction. The important aspect is, however, a debt in the context of its mention as a financial debt.
Section 5(8)(d) of the IBC provides for is, any liability in respect of any lease, inter alia, which is, however, confined to a finance or capital lease. We are not ruling out the possibility that, in a lease, not a finance or a capital lease, falling under Section 5(8)(d), if it otherwise fulfils the requirements of Section 5(8)(f), it would not fall under the definition of the word ‘financial debt’. In other words, Section 5(8)(d) includes only a finance or a capital lease, which is deemed, as such, under the Indian Accounting Standards. Section 5(8)(f) is a residuary and catch all provision. A lease, which is not a finance or a capital lease under Section 5(8)(d), may create a financial debt within the meaning of Section 5(8)(f), if, on its terms, the Court concludes that it is a transaction, under which, any amount is raised, having the commercial effect of the borrowing. All that we are finding, in the facts of this case, is that the lease in question does not fall within the ambit of Section 5(8)(f).
Whether the appellant is an Operational Creditor? - HELD THAT:- When questioned further, as to what her position is, if this Court found that the appellant is not a financial creditor, the appellant may be entitled, at least, to be treated as an operational creditor. We would think that, having regard to the fact that both the NCLT and NCLAT have proceeded on the basis that the appellant is an operational creditor, we need not stretch the exploration further and pronounce on the questions, which may otherwise arise. We must not be oblivious to the following prospect, should we find that the appellant is not an operational creditor, even under the IBC Regulations apart from claims by financial creditors and operational creditors, claims can be made by other creditors. However, there are, undoubtedly, certain advantages, which an operational creditor enjoys over the other creditors. We would proceed on the basis that, while the appellant is not a financial creditor, it would constitute an operational creditor.
Appeal dismissed.
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2022 (5) TMI 873
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It would be clear from the record that the Corporate Debtor did not respond to Section 8 Notice served on it, which was an opportunity provided to the Corporate Debtor to place its defence by informing the Operational Creditor about any payments as and when made, out of the outstanding operational debt being claimed by the Operational Creditor - The amount claimed is outstanding on account of the supplies made, and payable by the Corporate Debtor to the Operational Creditor. Section 8 Notice has been duly delivered but not responded to by the Corporate Debtor. The pleas taken by the Corporate Debtor as regards preexisting disputes are not convincing, and are therefore rejected.
The application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, is hereby admitted - moratorium declared.
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2022 (5) TMI 872
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing dispute in between the Operational Creditor and the Corporate Debtor pending about the quality of goods supplied or not - HELD THAT:- The dispute in between the directors/shareholders of the Operational Creditor cannot be a defense available for the Corporate Debtor for not paying the Operational Creditor its operational debt, which is otherwise payable under the Law.
Whether, one of the directors of the Operational Creditor; Mr. Mayer can file this application for and on behalf of the Operational Creditor? - HELD THAT:- The dispute in between directors/shareholders of the Operational Creditor is no defense available to the Corporate Debtor to request this authority to dismiss this application. Section 11 of the LB. Code, 2016 does not bar director of the Operational Creditor from initiating the CIRP against the Corporate Debtor under Section 9 of the LB. Code. In view of material and evidence on record, it is held that Mr. Andrew Mayer, being an authorized signatory of the Operational Creditor has rightly filed this application.
The Corporate Debtor in its e-mail dated 23.01.2020 has clearly stated that there was no dispute except agenda of paying money for the machinery and raw materials not ordered for. In short, dispute about quality of goods has never been raised by the Corporate Debtor at any point of time. The other emails produced on record do not pertain to the dispute of quality goods.
The Operational Creditor has successfully established that the operational debt of rupees one crore (as per the threshold limit provided under Section 4 of the LB. Code) is due and payable by the Corporate Debtor to the Operational Creditor and the Corporate Debtor, in-spite of receipt of demand notice did not pay the amount and has committed the default. There is no pre-existing dispute about the quality of goods or materials supplied. This application is free from defect. Hence, the application admitting the Corporate Debtor in CIRP is allowed.
Petition admitted - moratorium declared.
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2022 (5) TMI 871
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - HELD THAT:- It is noted that the Operational Creditor supplied the goods to the Corporate Debtor as per the purchase order placed by the Corporate Debtor, and raised the four invoices dated 15.04.2021 for the amount of Rs. 1,49,20,054/-. The Corporate Debtor acknowledged the aforesaid outstanding amount vide letter dated 18.08.2021. The demand notice dated 08.09.2021 was issued to the Corporate Debtor by the Operational Creditor and the same was delivered on 13.09.2021. However, the Corporate Debtor neither paid the outstanding amount nor replied to the said demand notice. Moreover, the Corporate Debtor has admitted the aforesaid outstanding amount in its reply to the application dated 24.12.2021.
Instant application is otherwise complete as per the provisions of section 9 (5) of the IB Code and meets the threshold limit as prescribed under Section 4 of the IB Code - The date of default is 25.04.2021 as per part IV of form V, and application is filed on 02.12.2021 hence the application is within limitation and not barred by law.
Petition admitted - moratorium declared.
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2022 (5) TMI 870
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- From the contents of the counter it is clear that there is an admission of debt and also the default. The reasons put forth for not being able to discharge the debt, unfortunately cannot be considered within the frame work of IBC. What Section 9 requires is only default on the part of the Corporate Debtor, for initiating CIRP. At the hearing, no argument was made against the default in discharging the debt. Hence, since there is acknowledgement of debt in clear terms and also default, there need not be any further discussion and demur to allow the Application.
Petition admitted - moratorium declared.
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2022 (5) TMI 869
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - Time Limitation - HELD THAT:- The Applicant has filed an Affidavit under Section 9 (3) (b) stating that after serving of demand notice, no notice of dispute is given by the Corporate Debtor - The Registered Office of the Corporate Debtor is situated in Rajkot and therefore this Tribunal has jurisdiction to entertain and try this Application - As per the Part IV of Form 5 of the Application the date of default is mentioned as 20.08.2017 & the present Application is filed in July 2019. Hence the debt is not time barred and the Application is filed within the period of limitation.
The claim of the operational creditor stands established and prima facie there is default in payment of the amount due to the Applicant without any dispute in existence. Moreover, the claim of applicant is not contested by corporate debtor inspite of various opportunities given, which amounts to admission of debt - the present application is complete u/s. 9(5)(i)(a) and Applicant is entitled to claim its dues, a fact which remained uncontroverted, establishing the default in payment of the operational debt. The present application is admitted in terms of Section 9 (5)(i) of the Code.
Petition admitted - moratorium declared.
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Service Tax
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2022 (5) TMI 868
Taxability - business auxiliary service - submission is that the agencies of the state government are ‘clients’ of the appellant on whose behalf maintenance of roads is undertaken appears to have overlooked the underlying scheme of the tender which brought the appellant in to the transaction - HELD THAT:- ‘Toll’ is a constitutionally authorized levy assigned to governments of constituent states of the Union and, unarguably, to be collected under the authority of the state government. It is not the case of the service tax officers that the mechanism erected for such collection compromises the characteristic of the levy into two – ‘toll’ and other – but that denomination of the latter as ‘commission’ in the contract constitutes two activities of which only one was taxable. Concatenating the deprivation of authority to determine the charges leviable from users and the monitorial oversight by the agencies of the state government, the adjudicating authority concluded that ‘principal and agent’ relationship existed.
The megatrends in infrastructure development of the country in recent decades have increasingly incorporated private sector participation, to a lesser or larger degree, in big projects requiring massive investment for transfer of risk to the private entity – whose core competency it is – and, in return for assured lumpsum payment, also the potential earnings through models such as ‘build operate transfer’ (BOT) and ‘build own operate transfer’ (BOOT). The terms of engagement is thus clear: possession of the upgraded/constructed asset is transferred to the appellant for the stream of lumpsum payment guaranteed by the appellant while alienating risk of sub-optimal use and risk of asset deterioration - Oversight by agencies of the state is intended to assure proper maintenance of the asset and fixation of rates is retained by the government to prevent exploitative exaction both of which are mandated by public interest and not as a facet of principal-agent equation. Thus, tax liability does not arise by way of being ‘commission agent’ in section 65(19) of Finance Act, 1994 for the period prior to introduction of ‘negative list’ regime.
Adjudication should have been limited to taxability arising from rendering ‘commission agent’ service without venturing also to emplace the activity of the appellant under other enumerations that fall within the definition of the said service. The impugned proceedings has not appreciated the nature of the contract and, having limited itself to superficial determination with reference to random phrases, has overlooked the substantive difference in risk assumption that is the key to ‘principal-principal’ transaction. The circular of Central Board of Excise & Customs has been assigned undeserved emphasis and the exclusion by way of ‘negative list’ has been improperly construed by the adjudicating authority.
Appeal allowed.
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2022 (5) TMI 867
Refund claim - credit of additional duty of customs (CVD) on inputs imported - credit of service tax on certain input services like renting of immovable property, of ITSS Services and Consulting Engineering services procured locally and Air passenger transport services - Reverse Charge Mechanism - Refund of services locally procured but billed in US Dollars is not admissible - Refund on defective invoices - rejection on the issue that there is no nexus of the input services with the services exported - HELD THAT:- As far as the issue of nexus is concerned, the same stands covered by various decisions which have been delivered subsequent to the passing of the impugned orders - In the case of TEXAS INSTRUMENTS (INDIA) PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX [2014 (9) TMI 1135 - CESTAT, BANGALORE], it was directed that the issue of nexus be determined in the light of the directions given in the Interim Order - This Bench has also decided the nexus in respect of various services in the case of SAMSUNG R&D INSTITUTE INDIA BANGALORE PVT. LTD. VERSUS C.C.E & C.S.T. -BANGALORE SERVICE TAX- I [2019 (7) TMI 1418 - CESTAT BANGALORE]. The issue of nexus in respect of the services, raised in the impugned orders are now settled. Therefore, on the issue of nexus, the appeals are allowed.
Refund of credit of service tax wherein invoices were raised in the USD, in respect of ITSS Services - HELD THAT:- It is seen that the refund relates to invoices raised by many companies (around twenty); though the services were procured in India, receipts were in foreign currency; the appellant’s claim that they have sub-contracted part of their activity to these vendors. It is a argument of the appellants that these services were utilised by them while rendering service to the overseas entity. However, it is found that as per the tripartite agreement between TI, USA, TI, India and the vendors payments are made in foreign currency by TI, USA, implying thereby that the service recipient is TI, USA and not the appellant. Therefore, the services of vendors can be at best treated as export by the vendors themselves and not the TI, India, the appellant.
It is clear that even as per the tripartite contracts, the appellants are a sort of middle-man in respect of the services rendered by the vendors. While TI, USA receives the services rendered by the vendors and pays for the same in USD, TI, India acts only as a facilitator in receiving the money in USD from TI, USA and making payments to the Indian vendors in INR. The appellants, therefore, cannot be held to be receivers of the input services rendered by the vendors and used in the export of services to TI, USA - the appellants take neither take the credit of service tax paid on the services rendered by the vendors nor claim the same as refund.
Thus the issue of nexus between various input services and the export services is settled in favour of the appellants - Appellants are not eligible to take the credit of service tax paid on the services rendered by the vendors, for which they received payment from TI, USA in USD, and consequentially, the appellants are not eligible to claim refund of the same - appeal allowed in part.
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Central Excise
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2022 (5) TMI 865
Valuation of goods - method of valuation - sale of goods from depot / customer care center - excisable goods cleared/stock transferred to their Unit No. 2/Customer Care Centre from where the goods are sold to unrelated buyers without carrying out any manufacturing activity - applicability of Rule 11 read with Rule 7 or Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000? - invocation of extended period of limitation - penalty - HELD THAT:- Issue whether the process of packing the excisable goods manufactured by the appellant along with the other bought out items in a carton and sold as “Cable Jointing Kit” was considered in case of XI TELECOM LIMITED VERSUS SUPERINTENDENT OF C. EX., HYDERABAD [1998 (2) TMI 137 - HIGH COURT OF JUDICATURE FOR ANDHRA PRADESH AT HYD] where it ws held that placing different articles in the kit does not amount to manufacture. If once the activity of placing the articles in the kit does not amount to manufacture, the provisions of the Act are not applicable as the levy of excise duty is on the production and manufacture of goods.
In the present case the counsel for the appellant urge, that the appellant have consumed the goods cleared by them from their manufactory to their depot and from their depot they have cleared these goods cleared from the factory along with other bought out items, packed together in a carton as “cable jointing kit”. It is evident from the order of the Hon’ble High Court of Andhra Pradesh, that the “cable jointing kit” is an excisable good classifiable under heading 85.47 of the First Schedule to Central Excise Tariff Act, 1985, however the same cannot be subjected to excise duty as the activities undertaken do not amount to manufacture and hence will be excluded from the purview of Section 3 of the Central Excise Act, 1944.
Since, the finding of the Commissioner in the impugned order that the goods cleared from the factory of the appellant were not consumed captively in production of the finished goods, is agreed upon, Rule 8 of valuation Rules will not be applicable.
Undisputedly the appellants have offered the goods for sale for the first time in normal course of trade at depot only, which are their fully owned service centers. The actual place of removal as per the definition of place of removal, as section 4, as have been interpreted by the Hon’ble Apex Court umpteen number of times has to be the depot only. Even if the arguments of the appellant are accepted, then also in view of the decisions of Hon’ble Apex Court specifically in case of SIDHARTHA TUBES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [1999 (11) TMI 69 - SUPREME COURT], the value will be determined only on the basis of sale price from depot. It is found that the form in which the goods have been sold at depot are in package comprising of the goods cleared from the factory of appellant and other bought items packed together in a carton. Hence the sale price of the goods comprise of the sale price of the goods manufactured by the appellant and the sale price of the goods trade by the appellant.
Time Limitation - HELD THAT:- Undisputedly all the facts were in the knowledge of the revenue and in fact have been corresponded between the revenue and appellant since 1993. For the clearance of the said goods either by adopting the value determined on the basis of cost construction method prior to 1994, appellants would have filed Price List as per Rule 173 C of the erstwhile Central excise Rules, 1944 and thereafter price declarations with the department. These price lists would have been considered and approved by the appropriate authorities throughout. Commissioner does not deny the correspondences between the appellant and the revenue since 1993 on the issue. When the entire issue was in knowledge of the revenue since 1993, invoking extended period of limitation in the present case is not correct.
Penalties - HELD THAT:- In the issues relating to interpretation of the provisions of the Central Excise Act, 1944 and the Rules made thereunder, consistently it has been held that a change of view in the interpretation of the provisions of the statue and adopting a view that is contrary to the view adopted earlier as a matter of long standing practice, the revenue the appellant cannot be faulted and penalties imposed under Rule 25 too cannot be sustained - Commissioner has imposed penalty on the appellant 2 under Rule 26, the same cannot be sustained.
Appeal allowed in part to the extent of setting aside the demands beyond the normal period of limitation and setting aside the penalties imposed on the appellants.
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2022 (5) TMI 866
Condonation of delay of 1433 days in filing appeal before the tribunal - Tribunal condoned the delay in revenue appeal - error of law - error apparent on the face of record or not - Revenue submitted that no error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order condoning the delay of 1433 days - HELD THAT:- In the case of Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam [1958 (2) TMI 37 - SUPREME COURT], the Supreme Court laid down what the expression "error apparent on the face of the record" connotes. The jurisdiction of the High Court on certiorari may be invoked if it is only an error of law apparent on the face of the record and not every error either of law or fact which can be corrected by a superior court in the exercise of its statutory powers as a court of appeal or revision. Where the errors cannot be said to be errors of law apparent on the face of the record but they are merely errors in appreciation of documentary evidence of affidavits, errors in drawing inferences or omission to draw inferences, or in other words, errors which a court sitting as a court of appeal only could have examined and, if necessary, corrected, there is no case for the exercise of jurisdiction under Article 226 of the Constitution. The principles underlying the jurisdiction to issue a writ or order of certiorari are no more in doubt, but the real difficulty arises in applying the principles to the particular facts of a given case.
In view of the facts and circumstances and the law laid down by the Supreme Court and also the sufficient cause assigned in the applications for condonation of delay, the Revenue has assigned sufficient cause for the purpose of getting the delay condoned and the Tribunal was justified in allowing the applications - application dismissed.
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CST, VAT & Sales Tax
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2022 (5) TMI 864
Concessional Rate of Tax - Seeking appropriate direction, commanding the Respondent Authorities to issue “C” Form to the petitioner - seeking to consider the application filed by the petitioner for issuance of “C” Form - Manufacture of foreign liquor-9 - HELD THAT:- Supreme Court in the matter of SYNTHETICS & CHEMICALS LTD., ETC. VERSUS STATE OF UP. [1989 (10) TMI 214 - SUPREME COURT], wherein it has been held that the Rectified Spirit and the ENA are not the alcoholic liquor for human consumption - thus, the ENA and the Malt Spirit in its original form are not the alcoholic liquor fit for human consumption and would therefore, not come within the amended definition of clause(d) of Section 2 of the CST Act and in view thereof, the petitioner would not be entitled to get the “C” Form, as claimed by the petitioner herein.
Based upon the principles laid down by the Constitutional Bench of the Supreme Court in the matter of Synthetics and Chemicals Ltd and others vs. State of U.P. and others, the ENA and Malt Spirit are not the alcoholic liquor, which is fit for human consumption in its original form. Therefore, the provision prescribed under sub-sections (1) & (2) of Section 9 of the GST Act as tried to be implemented herein by learned counsel for the petitioner, would, however not be applicable.
Sub-section(1) of Section 9 of the said GST Act states that subject to the provisions of sub-section(2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption. Since the ENA and Malt Spirit in its original form are not found to be fit for human consumption, as observed hereinabove, therefore, no reliance could be placed on it. In so far as the applicability of subsection( 2) of the aforesaid provision is concerned, the same is, however, also not applicable as the notification required to be issued under it, is only with regard to the supply of items mentioned in clauses (i) to (v) of the amended provision of clause(d) of Section 2 of the CST Act and as the ENA and Malt Spirit are not found to be alcoholic liquor fit for human consumption, therefore, it would not fall in any of the said categories and, no notification as such, is therefore, required to be issued, as contended by learned counsel for the petitioner.
Petition dismissed.
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Indian Laws
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2022 (5) TMI 847
Conspiracy - collection of money from individuals by misrepresenting that they would be given a job at the Company - opening of salary account with the Federal Bank without authorization and in conspiracy with the detenu collected an amount of Rs 85 lakhs from 450 job aspirants - HELD THAT:- In BANKA SNEHA SHEELA VERSUS THE STATE OF TELANGANA & ORS. [2021 (8) TMI 1303 - SUPREME COURT], a two-judge Bench of this Court examined a similar factual situation of an alleged offence of cheating gullible persons as a ground for preventive detention under the Telangana Act of 1986. The Court held that while such an apprehension may be a ground for considering the cancellation of bail to an accused, it cannot meet the standards prescribed for preventive detention unless there is a demonstrable threat to the maintenance of public order.
A mere apprehension of a breach of law and order is not sufficient to meet the standard of adversely affecting the “maintenance of public order”. In this case, the apprehension of a disturbance to public order owing to a crime that was reported over seven months prior to the detention order has no basis in fact. The apprehension of an adverse impact to public order is a mere surmise of the detaining authority, especially when there have been no reports of unrest since the detenu was released on bail on 8 January 2021 and detained with effect from 26 June 2021. The nature of the allegations against the detenu are grave. However, the personal liberty of an accused cannot be sacrificed on the altar of preventive detention merely because a person is implicated in a criminal proceeding - The case at hand is a clear example of non-application of mind to material circumstances having a bearing on the subjective satisfaction of the detaining authority. The two FIRs which were registered against the detenu are capable of being dealt by the ordinary course of criminal law.
The order of detention which has been passed against the detenu on 19 May 2021 shall accordingly stand quashed and set aside - Appeal allowed - decided in favor of appellant.
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