TMI Tax Updates - e-Newsletter
June 12, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Clarification in respect of levy of GST on Director’s remuneration - Reg. - CGST - Circular
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GST:
Clarification on refund related issues - CGST - Circular
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GST:
Profiteering - purchase of Flat - allegation that the benefit of reduction in the rate of tax or ITC had not been passed on - the Respondent had launched the subject project in the post-GST regime and there wasn't any demand raised by the Respondent in the pre-GST regime. - The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017
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Income Tax:
Validity of reopening of assessment - Information about huge cash deposit in the bank account - AO did not have any information about what kind of business assessee is doing, whether the bank account in which alleged is deposited, whether that appears in the balance sheet of the assessee. Whether the level of income shown by the assessee justifies the amount of cash deposited etc. In such a situation, it can be said that, the AO did not thought it “necessary’ but issued the notice in a mechanical manner.
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Income Tax:
Addition of unsecured loan from its employees as unexplained cash credit - employees’ identity cards were produced before the AO and the nominal amount collected from each employees was treated as a security money, therefore, it cannot be treated as unsecured loan and there is no violation of Section 68 of the Act, 1961
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Income Tax:
Unexplained investments - assessee had declared income u/s 44AD - AO has not considered the opening cash and bank balances and only the profits declared is considered as inflow in the cash flow prepared by him. The cash flow statement prepared by the A.O. is based on assumption and the same needs to be rejected.
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Income Tax:
Exemption u/s 11 - the immovable property was sold and the amount of the sale proceeds were donated to the corpus of the other charitable society/trust. Section 11(1)(a) clearly sets out that the assessee is entitled to claim the benefit as the sale proceeds of property cannot be included in the total income of the assessee.
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Customs:
Rejection of declared value - import of bitumen 60/70 packed in iron drums - Since the declared value matches with the already accepted assessable value of the goods at different ICDs, only because two consignments of JNCH, Nhava Sheva were imported at higher prices, same cannot be taken as the contemporary import value of the imported items
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DGFT:
Advisory on fake Email IDs/Websites/Persons claiming to be government officer/official responsible for DGFT/GSTN refunds or providing the services for issuance of IEC and other services of DGFT - Trade Notice
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IBC:
Initiation of CIRP or liquidation of company - there is hardly any possibility of any Resolution plan likely to be received during first stage of CIRP, if initiated, and thus it would be just and proper to put the Corporate Applicant Debtor under the liquidation process, in order to liquidate the Company, rather than to put it in CIRP in the first instance.
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IBC:
Initiation of CIRP - time limitation - In respect of the invoices raised in the year 2013 the prescribed period of limitation being three years in terms of Article 137 of the Limitation Act, 1963 expired in the year 2016 and the issuance of cheques by the 'Corporate Debtor' in the year 2017 being well beyond the prescribed period of three years would not be construed as an acknowledgment in writing within the prescribed period of limitation in terms of Section 18 of the Limitation Act, 1963.
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Service Tax:
Provision of service or not - Performing statutory functions - Development and maintenance of Industrial area - providing various taxable Services - The appellant is a statutory body discharging the statutory function as per the statute KIAD Act, 1966 and hence are not liable to pay service tax.
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Central Excise:
CENVAT Credit - it is absolutely clear that the appellant was not maintaining the separate accounts of inputs/input services despite manufacturing dutiable as well as exempted goods, however, were availing the cenvat credit on the common inputs, which definitely amounts violation of Rule 6 of CCR, 2004.
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Central Excise:
Clandestine removal - MS Flat - demand based on loose papers recovered during search, the physical verification of stock, its weighment and the admission of the director - To prove the allegation of clandestine sale, further corroborative evidence was also required but no investigation was conducted by the Department - there is no evidence to support the allegations against the appellants.
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2020 (6) TMI 247
Maintainability of appeal - appealable Order - time limitation for filing appeal - petition has been filed bye-passing the remedy of appeal under Section 112 of the Act on the ground that the appellate tribunal has not been constituted till date - HELD THAT:- It has been pointed out by learned standing counsel that the Government, having regard to the difficulty faced by the assessees in filing appeal on account of non-constitution of the Tribunal and its Benches in various States and Union Territories, has issued Central Goods and Service Tax (Ninth Removal of Difficulties) Order, 2019 notified in the Gazette of India dated 3rd December, 2019 stipulating that in such a situation, the three months' period shall be considered to be the date on which the President or the State President, as the case may be, of the Appellate Tribunal after its constitution under Section 109, enters office. The instant petition is disposed of by providing that the petitioner can invoke the remedy of filing appeal before the Tribunal in terms of the provisions of the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019.
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2020 (6) TMI 249
Principles of Natural Justice - predominant ground raised in the petition is that no opportunity of actual hearing was given - HELD THAT:- It is an admitted position that the impugned order dated 14.5.2020 is passed without hearing the petitioner and only on the short ground, the impugned order dated 14.5.2020 is hereby quashed and set aside and the authorities concerned shall pass a fresh order on merits without being influenced by the order impugned after giving an opportunity of hearing to the petitioner. The petitioner shall remain present for hearing on the date fixed by the authorities and the authorities shall inform the petitioner in advance. Petition allowed.
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2020 (6) TMI 246
Maintainability of appeal - appealable Order - time limitation for filing appeal - petition has been filed bye-passing the remedy of appeal under Section 112 of the Act on the ground that the appellate tribunal has not been constituted till date - HELD THAT:- It has been pointed out by learned standing counsel that the Government, having regard to the difficulty faced by the assessees in filing appeal on account of non-constitution of the Tribunal and its Benches in various States and Union Territories, has issued Central Goods and Service Tax (Ninth Removal of Difficulties) Order, 2019 notified in the Gazette of India dated 3rd December, 2019 stipulating that in such a situation, the three months' period shall be considered to be the date on which the President or the State President, as the case may be, of the Appellate Tribunal after its constitution under Section 109, enters office. The instant petition is disposed of by providing that the petitioner can invoke the remedy of filing appeal before the Tribunal in terms of the provisions of the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019.
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2020 (6) TMI 248
Profiteering - purchase of Flat in the Respondent's project Hero Homes - allegation that the benefit of reduction in the rate of tax or ITC had not been passed on - contravention of provisions of Section 171 of the CGST Act, 2017 - HELD THAT:- It is clear from the plain reading of Section 171 (1), that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period. It is clear from the DGAP Report that the Respondent had launched the subject project in the post-GST regime and there wasn't any demand raised by the Respondent in the pre-GST regime. The registration and approval of the project, launching of the project and receipt of the payments had taken place in the post-GST regime and hence, there was no pre-GST tax rate or ITC structure which could be compared with the post-GST tax rate and ITC. On this basis, the DGAP has reported that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it does not qualify to be a case of profiteering. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Therefore, the allegation that the Respondent has not passed on the benefit of ITC in this case is not found sustainable - Application dismissed being not maintainable.
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Income Tax
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2020 (6) TMI 244
Reopening of assessment u/s 147 - Addition u/s 68 - HELD THAT:- AO did not make any addition on account of reasons which led to initiation of re-assessment proceedings. In view of foregoing discussion and respectfully following the precedent [ 2020 (2) TMI 1305 - ITAT PUNE] set aside the impugned order and the assessment order in question. All other appeals admittedly involve similar issue. DR fairly admitted that no addition was made on account of reasons which led to initiation of re-assessment. Following the view taken hereinabove, set aside the impugned orders and quash the resultant assessment orders. - Decided in favour of assessee.
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2020 (6) TMI 243
Exemption u/s 11 - property sold/asset sold were donated to the other public charitable trust/institutions - Society had purchased land which is held by the assessee for several years and on account of financial problems the Society could not establish the educational institute as a result of which a decision was taken to wind up the Society and land was sold and donated to the corpus fund of the other trust engaged in running educational institutes as a charitable Society - AO made the addition under capital gain - as per assessee income donated resulted into application of income liable for exemption under Section 11 - HELD THAT:- Trust Deed of the assessee clearly explained that at the time of winding up what procedure has to be followed of the corpus fund and other funds including movable and immovable property. Sub Clause z of Clause 3 of the Trust Deed explains the process of winding up of the trust wherein it has been provided that at any point of time, the whole of corpus fund and other funds of movable and immovable properties belonging to the trust or the institution run by the trust shall only be transferred to any other public charitable trust or institution having the same aims and object for the public charitable purposes. The assessee at no point of time diverted any funds beyond the scope of its Trust Deed. In fact, the immovable property was sold and the amount of the sale proceeds were donated to the corpus of the other charitable society/trust. Section 11(1)(a) clearly sets out that the assessee is entitled to claim the benefit as the sale proceeds of property cannot be included in the total income of the assessee. The assessee has donated the sale proceeds to the corpus of another charitable society/trust. AR relied upon the decision of the Hon ble Delhi High Court in case of Bagri Foundations [ 2010 (7) TMI 85 - DELHI HIGH COURT] which is also apt in the present case. AO as well as CIT(A) both wrongly applied Section 11(1A) as there is no acquisition of another capital assets. In fact, the assessee society invoked the winding up clause of the Trust Deed. CIT(A) was not right in confirming the additions made under Section 11(1A) of the Act by the Assessing Officer. The appeal of the assessee is allowed.
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2020 (6) TMI 242
Unexplained investments - assessee had declared income u/s 44AD - HELD THAT:- On a careful perusal of the cash flow statement prepared by the Assessing Officer, except for investments in Multi Commodity Exchange, Cochin Stock Exchange and Household expenses respectively all other amounts considered as application, is directly or indirectly linked to the business of running houseboats. Therefore, the inclusion of the business transaction as unexplained investments / expenditure would go against the provisions of section 44AD - AO has also not considered the opening cash and bank balances as on 01.04.2010 and only the profits declared is considered as inflow in the cash flow prepared by him. The cash flow statement prepared by the A.O. is based on assumption and the same needs to be rejected. Assessing Officer is not considered opening of cash balance as on 01.04.2010 and only the profits declared is considered as inflow in the cash flow prepared. Moreover, most of the applications of income is directly linked to the business of the assessee declared u/s 44AD - Thus no addition is warranted. - Decided in favour of assessee.
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2020 (6) TMI 241
Addition of unsecured loan from its employees as unexplained cash credit - Unsecured loan accepted from employees is very nominal and that is treated as a security money kept with the employer and paid back when they left the service - HELD THAT:- If the AO had any doubt regarding their identity, creditworthiness and genuineness of the transactions, he could have at least issued any notice either u/s.131 or u/s.133(6) of the Act to any of the employees but merely stating that the assessee could not produce the identity card of the 21 employees and they had no PAN and not filing their income tax returns, cannot be accepted - unsecured loan accepted from employees is very nominal and that is treated as a security money kept with the employer and paid back when they left the service - employees identity cards were produced before the AO and the nominal amount collected from each employees was treated as a security money, therefore, it cannot be treated as unsecured loan and there is no violation of Section 68 of the Act, 1961. Looking to the facts and circumstances of the case as well as considering the submission of the assessee, we direct the AO to delete the addition made on account of unexplained cash credit. Addition on account of leave Encashment and gratuity - amount paid to employees in lieu of leave i.e. payment made for working on weekly off days and paid holidays - Whether this is a wrong head being reflected in the Profit Loss Accounts as leave encashment instead of salary in lieu of leave? - HELD THAT:- It is a small organization and some of the employees have left out the organisation after spending sometimes. Generally the employees engaged in the organisation have kept their money pending with the organisation and when they go to their villages, they collect all the money on account of their dues from the organisation at a time. We found substance on the arguments advanced by the ld.AR that it was not a leave encashment as per Section 43B of the Act as envisaged. In the small organization upto some extent they do not follow the strict rule for leave etc. In respect of gratuity it was the submission of ld. AR before us that it is in the nature of compensation paid to employees after leaving to the institution for some period and there is no complaint against the employees and these employees worked for goodwill of the assessee company, therefore, they are paid a lumpsum amount as a gratuity but due to mistake of the accountant the wrong nomenclature has been given in the books of accounts which has subsequently been paid to the employees. We allow both the grounds of appeal of the assessee and direct the AO to delete the additions made on account of leave encashment and gratuity to employees. Disallowance of employees contribution to provident fund - addition made on account of ESI contribution - assessee has not deposited the employees contribution within the due date as specified in that particular Act - HELD THAT:- The due date is defined under the Explanation to section 36(1)(va) of the Act by stating that the due date referred under the relevant Act and certainly not the due date for filing the return. We also found that this very similar issue has also been decided by this bench of the Tribunal in the case of Milind Gupta, [ 2019 (10) TMI 128 - ITAT CUTTACK] wherein the Tribunal has restored the issue to the file of AO to examine the contributions made with reference to the dates when they were actually made and grant relief to such of claim which qualified for such relief in terms of prevailing provisions of the Act - we restore this issue to the file of AO to decide the same as per the case laws quoted by both the sides. Thus, the ground of appeal of the assessee is allowed for statistical purposes. Non deduction of TDS - non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) - HELD THAT:- As reling on OM SRI NILAMADHAB BUILDERS PVT. LTD. VERSUS ITO, WARD-1 (3) , BHUBANESWAR [ 2019 (11) TMI 1373 - ITAT CUTTACK] we direct the AO to restrict the disallowance made u/s.40(a)(ia) of the Act on account of non-compliance of TDS to 30%. This ground of appeal of the assessee is partly allowed. Levy of penalty u/s.271(1)(c) - HELD THAT:- Penalties have levied by the AO on the addition made on account of leave encashment paid to the employees and addition made u/s.68 of the Act, which we have deleted the same while deciding the quantum appeal of the assessee. When the quantum addition upon which the AO has imposed the penalty have been deleted by us, therefore, the levy of penalty on the above two additions has no legs to stand and accordingly, we delete the same. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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2020 (6) TMI 245
Exemption u/s 11 denied - non-filing of the Return by the petitioner - delay in filing of Form 10B Audit Report - HELD THAT:- Once the circular provides the opportunity to assessees having issued a Registration under Section 12AA of the Income Tax Act, to seek to recall of the denied exemption in Form 10B and to seek condonation of delay which as noticed above has already been filed in January 2020 vide Ext.P1, but there is no adjudication so far and during its pendency, the impugned Demand Notice of March 2020, Ext.P4 has been issued. Without expressing anything on the merit of the matter, particularly contents of Ext.P3, I dispose of this Writ petition by issuing directions to the 1st respondent and take a call on the application, Ext.P3 filed under Form 10B of the Circular ibid in accordance with law, after affording an opportunity of hearing to the petitioner as expeditiously as possible within a period of 2 months. Until such time, the demand raised in Exts.P1, P2 and P4 is also to be kept in abeyance.
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2020 (6) TMI 240
Disallowing the interest cost incurred in connection with the acquisition of shares to be capitalized - whether interest incurred for the acquisition of shares is not the part of cost of capital asset? - AO in his order held that the impugned interest expenses can be allowed as revenue in nature - CIT (A) held that such interest expenses cannot be capitalized and further directed the AO not to allow such expenses as revenue in nature - HELD THAT:- Once the assessee has been held as Investment Company, then the interest expenses directly attributable to such investments required to be capitalized. In this regard we find support and guidance from the judgement of CIT versus Trishul Investments Ltd [ 2007 (7) TMI 252 - MADRAS HIGH COURT] held interest paid for acquisition of shares would partake character of cost of share and, therefore, the same was rightly capitalized along with the cost of acquisition of shares. Thus we are of the view that the impugned interest expenses needs to be capitalized. - Decided in favour of assessee Deduction u/s 35D - deduction of 1/5 of such expenditure - expenses incurred on the increase of authorized capital /stamp duty for allotment of shares - HELD THAT:- It is a fact on records that the expenditure in connection with the increase in authorized share capital was incurred before the commencement of the business. Therefore we hold that the assessee is eligible for deduction of the impugned expenditure under the provisions of section 35D of the Act. In view of the above, we set aside the finding of the learned CIT (A) and direct the AO to allow the claim of the assessee. Hence the ground of appeal of the assessee is allowed. Disallowance u/s 14A - Whether expenses relatable to earning exempt income cannot be allowed - HELD THAT:- Amount of disallowance of the expenditure cannot exceed the amount of exempted income in the case of CIT vs. Vision Finstock Stock Ltd. [ 2017 (7) TMI 1277 - GUJARAT HIGH COURT] - we hold that the disallowance of the expenses under section 14A read with rule 8D cannot exceed the amount of exempted income. Hence we do not find any reason to interfere in the order of the learned CIT (A). Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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2020 (6) TMI 239
Validity of reopening of assessment - Information about huge cash deposit in the bank account - as alleged assessment framed is without jurisdiction as statutory notice u/s 143 (2) of the act was issued on the date of filing of the return of income - case was transferred to the present AO ITO Ward-2,Hissar from ITO Ward 5, Hissar - on receipt of return of income in response to show cause notice u/s144 notice u/s 143 (2)/142 (1) along with questionnaire were issued and served upon the counsel of the assessee on the spot - assessee has raised unsecured loan from five different persons - whether AO could have applied his mind on the return of income furnished by the assessee and considered it necessary to issue notice on the spot? HELD THAT:- Available information in the return is already on record with the assessing officer. Such a situation, it is possible that AO may on looking at the notice itself find it necessary to issue the notice u/s 143(2) of the act. Thus imputing waiting time to the AO for issue of notice u/s143 (2) of the act is perhaps not justified. Because, in such cases the AO might have verified the original return of income at the time of issue of notice u/s148 of the act, if he does not find such information in the return, then only he issues notice u/s 148 of the act. Otherwise, why he would issue a notice if the information is available in the original return it. We do not agree with the proposition that even in such a situation as mentioned by us above, the notice issued u/s143 (2) of the act by the Ld. AO on the same date of the date of filing of the return can be found fault with. In the present case, the return of income filed by the assessee was accompanied with the competition of income, the trading and profit and loss account as well as the balance sheet of the assessee along with the fixed assets account and capital account. At the time of issue of notice, the AO was merely having information about cash deposit of ı 1297900 in his savings bank account maintained with Indusind Bank Limited. AO did not have any information about what kind of business assessee is doing, whether the bank account in which alleged is deposited, whether that appears in the balance sheet of the assessee. Whether the level of income shown by the assessee justifies the amount of cash deposited etc. In such a situation, it can be said that, the AO did not thought it necessary but issued the notice in a mechanical manner. If assessment order is read carefully, it shows that not only he issued the notice u/s143 (2)/142 (1) of the act but also issued questionnaire. In addition, that too along with the notices was served on the spot when he went to file the return to the counsel of the assessee. In such a situation the decision of SOCIETY FOR WORLDWIDE INTERBANK FINANCIAL, TELECOMMUNICATIONS [ 2010 (4) TMI 43 - DELHI HIGH COURT] , clearly says that before issue of notice, AO has to examine the return filed by the assessee. In the present case, not only that the AO issued the notice on the spot to the counsel of the assessee but also issued questionnaire along with that. In such a situation, we are unable to sustain the assessment order passed by the Ld. assessing officer. Thus, we quash the assessment order passed by the Ld. AO u/s143 (3) - Decided in favour of assessee.
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2020 (6) TMI 238
TDS u/s 194H - Commission paid to 6 parties w/o TDS deduction - Disallowance u/s 40(a)(ia) - contended on behalf of the assessee that the amount in question represented trade discount allowed by the assessee and since the same was not in the nature of commission as wrongly taken by the Assessing Officer, there was no requirement of deduction of TDS - HELD THAT:- Assessee has raised a new contention in support of his case that the amount in question represented management fees payable by Vodafone to the concerned parties as distributor and the role of the assessee was only to facilitate the disbursement /reimbursement of the said amount towards management fees to the concerned distributors - also filed the additional evidence in the form of relevant e-mails received from Vodafone and submitted that the matter may be sent back to the Assessing Office for verifying the new plea raised on behalf of the assessee in the light of the said additional evidence. Alternatively he has also submitted that the concerned recipients having already declared the amount in question as their income and having paid tax thereon, the assessee, therefore, cannot be treated as in default for non-deduction of tax at source on the said amount and no disallowance under section 40(a)(ia) can be made Both these contentions raised by the ld. Counsel for the assessee for the first time before the Tribunal require verification and even the ld. D.R. has not raised any objection for sending the matter back to the Assessing Officer for deciding the same afresh after proper verification. - Appeal of the assessee is treated as allowed for statistical purposes.
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2020 (6) TMI 237
TP Adjustment - comparable selection - Software Development Segment - HELD THAT:- Companies functionally dissimilar with that of assessee's software development segment involved in captive software service provider need to be deselected as comparable selection. ITES segment - Companies functionally dissimilar with that of assessee's ITES segment need to be deselected as comparable selection. Non granting of adjustment on account of risk profile - HELD THAT:- As submitted that assessee is a low risk bearing company and therefore while computing risk adjustment risks assumed by the comparables for earning revenue in the particular segment needs to be analysed. Assessee is directed to provide for necessary details in respect of all comparables finally selected. Ld.AO/TPO shall then compute the risk as adjustment in accordance with law. In the light of aforestated observations and directions, the transfer pricing issues raised by assessee is set aside to Ld.AO/TPO. Ld.AO/TPO is directed to pass a detailed order by considering all the submissions advanced by assessee. Erroneous computation of working capital adjusted mark-up of certain comparable - HELD THAT:- We direct Ld.AO/TPO to provide for correct working capital adjustment and to compute margines of comparables in accordance with law. Deduction u/s 10 A disallowance - HELD THAT:- Both parties submitted that, the issue now squarely covered with the decision of Hon ble Karnataka High Court in case of Tata Elxsi Ltd., vs CIT [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT ] wherein held that, what is reduced from export turnover should also be reduced from the total turnover. CIT(A) granted relief to assessee following the aforestated view expressed by Hon ble Karnataka High Court. No infirmity in the view taken by Ld. CIT(A) and same is upheld. Comparable deselected having huge turnovers more than 200 crores - HELD THAT:- Admittedly these comparables have huge turnover as compared to that of assessee. TPO while applying turnover filter, excluded comparables less than 1 crore turn over, without fixing upper limit. As this Tribunal in case of a whole new has been consistently following the turnover limit of 1 to 200 crores in our view these comparables do not satisfy the criteria. We also note that these comparables have been examined by this Tribunal in a series of decision and has been excluded for having huge turnovers, owning huge intangibles and brand which makes it not comparable with a captive service provider like that of assessee. Accordingly, we do not find any infirmity in exclusion of these comparables. Application of different range of filter - TPO applied RPT filter being less than 25% - HELD THAT:- There is no comparables left for computing margin under software development service segment. It is imperative under such circumstances to revisit remaining comparables excluded by Ld. CIT(A) by applying 0% RPT filter, under software development service segment. We direct Ld. AO/TPO to carry out functional comparability of remaining comparables in light of various decisions and also as decided in assessee s own case for immediately preceding and succeeding assessment years. We direct Ld. AO/TPO to keep threshold for related party transaction at 15%. Similarly, in regards to ITES segment, Ld.CIT(A) excluded 18 comparables, out of which few has been alleged for exclusion on functional dissimilarities which has been dealt with herein below. We direct Ld. AO/TPO to reconsider balance comparables in light of various decisions and also as decided in assessee s own case for immediately preceding and succeeding assessment years. We direct Ld. AO/TPO to keep threshold for related party transaction at 15%. Comparables for Software Development Service Segment - HELD THAT:- E infochips Ltd - As assessee is simply engaged in rendering software development services and there is no sale of any software products, this company, in our considered opinion, ceases to be comparable. It is obvious that from common pool of income from both streams of software products and software services, one cannot deduce revenue from software services and no one knows impact of revenue from Products on overall kitty of profit, which may be significant. Since no segmental data of this company is available indicating operating profit from software development services, we direct Ld.TPO to exclude this company from list. Celestial Labs Ltd - Discovery is in relation to software discovery of new drugs. Moreover, the company also owns IPR. As explained earlier it is a diversified company and therefore cannot be considered as comparable functionally with that of the Assessee. We therefore accept the plea of the Assessee in this regard. Further for assessment year immediately preceding the year under consideration this Tribunal excluded this company for very same reasons. Revenue has not brought anything contrary on record to show that there is any change in financials of this comparable for year under consideration vis-a-vis assessment year 2006-07. We therefore do not find any reason to deviate from the view taken by this Tribunal in assessee s own case. We direct Ld. AO/TPO to exclude this comparable from the finalist. Flextronics Software Systems Ltd. - This comparable has been selected by Ld.TPO in final list and excluded by Ld.CIT(A) for the reason that it fails 0% RPT filter - HELD THAT:- As we have already held that) % RPT is not an appropriate filter, we reject the reasoning by Ld. CIT(A) for its exclusion. We direct Ld. TPO to retain this company from final list. ITES segment - Comaparability - Eclerx Services Ltd company supports core and complex activities for its clients using proprietary processes and scalable offshore delivery model. It is also been observed therein that this company is engaged in diversified activity of providing services including analytic services etc and is not functionally comparable with a simple BPO service provider. Moldtech Technologies Ltd.company has underwent merger of Techmeant Tools Pvt.Ltd., and demerger of plastic packaging business. Undoubtedly, functions of this comparable involve high level of knowledge and skill which is not the case of assessee before us. As noted by Ld.TPO assessee is providing contract services to its associated enterprises that may require technical support however can be treated as a back-office support services not equivalent to KPO - this comparable is directed to be excluded from final list.
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2020 (6) TMI 236
Reopening of assessment - Bogus purchases - addition made by the AO towards alleged bogus purchases to 12.50% gross profit - HELD THAT:- In so far as legal ground challenging reopening of assessment, we find that the AO has reopened assessment on the basis of fresh materials in form of information from DGIT(Inv) which was further supported by report of MVAT, Department, Govt. of Maharastrha which constitutes fresh material to form reasonable belief of escapment of income. We, therefore are of the view that there is no merit in legal ground taken by the assessee challenging reopening assessment and hence, the same is rejected. Additions towards alleged bogus purchase - AO has made addition of 25% profit less gross profit declared on alleged bogus purchases on the ground that the assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers - CIT(A) has scaled down additions to 12.50% profit - HELD THAT:- Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. Therefore we are of the considered opinion that the ld. CIT(A) has taken a fair view and estimated 12.50% gross profit on alleged bogus purchases to settle dispute between the parties and hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the assessee.
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2020 (6) TMI 235
Addition on unexplained cash deposits by the assessee in Central Bank of India - HELD THAT:- Perusal of the remand report which is reproduced by the Ld.CIT(A) reveals that during the remand proceedings, Arjun Bhimrao, the father of the assessee stated that he owned agricultural land and had agricultural income of ₹ 4 to 5 lakhs per year. After considering the submission of assessee s father Arjun Bhimrao, AO has noted that the total cash availability for two years was about ₹ 8 lakhs. To the extent of ₹ 8 lakhs, the cash deposits in Central Bank of India by the assessee stands explained. Therefore, direct the deletion of addition to the extent of ₹ 8 lakhs. Before me for the balance addition of ₹ 2,17,000/- since no explanation has been offered by Ld.A.R. nor has he pointed to any error / fallacy in the findings of lower authorities, uphold the addition to the extent of ₹ 2,17,000/-. - Decided in favour of assessee partly.
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Customs
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2020 (6) TMI 232
Rejection of declared value - import of bitumen 60/70 packed in iron drums - misdeclaration of imported goods - demand based on NIBD data for the similar goods - HELD THAT:- The learned Commissioner (Appeals) has proceeded to decide the issue as per the directions of this Tribunal issuing a detailed show cause notice to the appellant. However, the grounds of rejection of impugned value i.e. the transaction value have not been delivered in the show cause notice. Though, the value given in two Bills of Entry which have been relied upon by the Commissioner (Appeals) showed a much higher value of the import consignment than declared by the appellant. Since the declared value matches with the already accepted assessable value of the goods at different ICDs, only because two consignments of JNCH, Nhava Sheva were imported at higher prices, same cannot be taken as the contemporary import value of the imported items namely, bitumen 60/70 for rejection of the transaction value of the imported consignments when similar value of the identical goods have been accepted by the Department. Since declared value match with the lower accepted contemporary value, there is no ground for rejection of the same - Appeal allowed - decided in favor of appellant.
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2020 (6) TMI 234
Detention of goods - overvaluation - case of petitioner is that role of the petitioner is only as a Customs Broker and have no role in declaring the value of the goods - HELD THAT:- This Court cannot while exercising power under Article 226 exercise judicial review in examining the veracity and genuinity of impugned documents Exts.P9 and P11 as they are subject to appeal in view of the provisions of the Regulations 2013, now amended 2018 and Section 129 of the Customs Act. Though Sri.Sreelal Warrier, informs this court that he would be verifying regarding the working of the Tribunal but, there is no closure of the system in preventing the affected party in filing the appeal particularly when the limitation is not still expired. The petitioner is relegated to avail the remedy of appeal if so advised and the appeal is directed to be disposed of by the Tribunal as expeditiously as possible within a period of two months as provided under the regulation. Petition disposed off.
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2020 (6) TMI 233
Grant of Bail - Smuggling - Gold - It has been pleaded in the affidavit filed in support of the bail application that the applicant is an innocent person and has been falsely implicated in the present case - HELD THAT:- The Court is of the opinion that the applicant is entitled to be admitted to bail. Applicant, namely, Sanjay Kumar Kushwaha is admitted to bail and considering the special circumstances of the lock-down prevailing in the district concerned presently and in the light of the directions of this Court in P.I.L. No. 564 of 2020 dated 06.04.2020, let the applicant Sanjay Kumar Kushwaha be enlarged on bail in the aforesaid case crime number on his furnishing a personal bond only to the satisfaction of the jail authorities, where the applicant is languishing. Bail Application allowed.
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Insolvency & Bankruptcy
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2020 (6) TMI 231
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - time limitation - HELD THAT:- The 'Operational Creditor' while placing these facts before the Adjudicating Authority has clearly described the date of default as 7th October, 2013 (Page 46 of the Appeal paper book). The 'Operational Creditor' cannot escape from the factual assertion incorporated in Demand Notice and the application filed before the Adjudicating Authority. A combined reading of the Demand Notice and the application filed for triggering of 'Corporate Insolvency Resolution Process' at the instance of 'Operational Creditor' clearly establishes that the default had occurred on 7th October, 2013 and the application for triggering of 'Corporate Insolvency Resolution Process' under Section 9 of the 'I B Code' was filed before the Adjudicating Authority on 20th April, 2018 i.e. well after the prescribed period of three years in terms of provisions of residuary clause engrafted under Article 137 of the Limitation Act, 1963 - there can be no hesitation in holding that the application filed by the 'Operational Creditor' under Section 9 of the 'I B Code' was barred by limitation. Whether issuance of six cheques by the 'Corporate Debtor' towards the part payments of the outstanding operational debt would amount to an acknowledgment of debt thereby giving fresh lease of life to the claim of 'Operational Creditor' qua such operational debt? - HELD THAT:- In respect of the invoices raised in the year 2013 the prescribed period of limitation being three years in terms of Article 137 of the Limitation Act, 1963 expired in the year 2016 and the issuance of cheques by the 'Corporate Debtor' in the year 2017 being well beyond the prescribed period of three years would not be construed as an acknowledgment in writing within the prescribed period of limitation in terms of Section 18 of the Limitation Act, 1963. The situation would have been different if such cheques issued by the 'Corporate Debtor' towards the part payment of the operational debt had been issued prior to 7th October, 2016 as the date of default occurred on 7th October, 2013 which fact is admitted by the 'Operational Creditor' in Form 5. In this factual background and on the very basis of what was placed by the 'Operational Creditor' before the Adjudicating Authority, issuance of six cheques dated 5th December, 2017 by the 'Corporate Debtor' towards part payment of the operational debt in respect of invoices with last one raised on 2nd September, 2013 cannot be termed as an acknowledgment of debt within the ambit of Section 18 of the Limitation Act, 1963 - The inescapable conclusion is that the operational debt in respect whereof the 'Operational Creditor' sought triggering of 'Corporate Insolvency Resolution Process', was neither due nor payable in law on the date when such 'Corporate Insolvency Resolution Process' was sought to be initiated by the 'Operational Creditor'. The application under Section 9 was hit by limitation - application admitted - appeal allowed.
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2020 (6) TMI 230
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Application has been filed on 16-7-2019 for unpaid operational debt due and defaulted of ₹ 12,21,200.00 as per the Invoices enclosed. Dates of invoice are 21-3-2018, 25-3-2018, 28-3-2018 - Date of first default is 21-3-2018. Respondent has admitted the default by filing an Affidavit dated:22-8-2019 by the Director of the Corporate Debtor Shri Gopal J. Shelani having office at New Sardar Marketing Yard, Shop no. A-174, 8B National Highway, Gondal Rajkot-360311, Gujarat. However, Copy of the Board Resolution of the Corporate Debtor in respect of admission of the default is not made available. Application is filed within the limitation period as the date of default is 21-3-2018 and the date of filing this petition under section 9 of IBC is 16-7-2019 - No pre-existing dispute before the filing of this application is observed. This Adjudicating Authority is satisfied that there is existence of debt and default has occurred on21-3-2018 - Petition has been filed within the limitation period as the date of default is 21-3-2018 and the petition has been filed on 16-7-2019. Petition admitted - moratorium declared.
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2020 (6) TMI 229
Initiation of CIRP or liquidation of company - Corporate Debtor failed to make repayment of its dues - existence of dispute or not - HELD THAT:- The current assets of the Company is only whereas it current liabilities are approximately INR 49.98 and there is no possibility to revive the Company as the Company sold its plant and machinery long time back and closed down its operations for more than 5 years back. Moreover, the Corporate Applicant owes the liability to its holding Company which supplies all the raw materials to the Corporate Debtor and the Holding Company was also not interested to revive the Company. Therefore, there is hardly any possibility of any Resolution plan likely to be received during first stage of CIRP, if initiated, and thus it would be just and proper to put the Corporate Applicant Debtor under the liquidation process, in order to liquidate the Company, rather than to put it in CIRP in the first instance. M/s. GNB Technologies India Private Limited, Petitioner/Corporate Applicant to be liquidated in the manner as laid down in Chapter III (Liquidation Process) of Part II of the Code - Post the case on 6-12-2019 for report of the Liquidator.
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2020 (6) TMI 228
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. This Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor - Petition admitted - moratorium declared.
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Service Tax
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2020 (6) TMI 227
Provision of service or not - Performing statutory functions - Development and maintenance of Industrial area - providing various taxable Services such as Renting of Immovable Property Services, Construction of Commercial and Residential Complexes, Business Support Services, Management, Maintenance or Repair Services, Manpower Recruitment and Supply Services, Works Contract Services, etc., to various clients. - whether at all the appellant, which is a statutory authority (KIADB) constituted under the KIAD Act for carrying out the purposes, is providing any service as defined in the Service Tax legislation (Finance Act, 1994)? HELD THAT:- The true character / scope and intent of the Act is to be ascertained with reference to the purposes and the provisions of the Act. The Act is one to make a special provision for securing orderly establishment of industrial areas and industrial estates in the State of Karnataka and for that purpose, to establish the board. A careful reading of the aforesaid provisions of KIADAct and KIADB Regulations would clearly go to show that the appellant is a State undertaking and creature of a statute to exercise the power of eminent domain . The appellant is engaged in discharging statutory functions under an act of Legislature viz. KIAD Act, 1966. It is a statutory body performing statutory functions and exercising statutory powers. Once carrying out the objectives of the Act, then it cannot be treated as a service provider under the Finance Act, 1994 - there is no service provider-client relationship so as to warrant the levy of service tax under the provisions of Finance Act, 1994. Appellant has undertaken various activities and functions in the State of Karnataka as per the directions of the State Government given from time to time under the provisions of the Act and hence their activities cannot be considered as taxable service and no service tax can be levied for these activities. The issue whether the statutory authority performing statutory functions as provided under a statute is liable to service tax or not has been considered and decided by catena of judgments rendered by various courts. In the case of COMMISSIONER OF CENTRAL EXCISE, NASHIK VERSUS MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION [ 2018 (2) TMI 1498 - BOMBAY HIGH COURT] , the Hon ble Bombay High Court has categorically held that no service tax could be demanded on the charges collected by the MIDC, in terms of MID Act, 1961 towards maintenance of industrial areas as the same is in the nature of statutory function performed in terms of the statute. The appellant is a statutory body discharging the statutory function as per the statute KIAD Act, 1966 and hence are not liable to pay service tax - Since the appellant is not liable to pay the service tax at all, it is not considered appropriate to discuss the demand of service tax on individual services allegedly rendered by the appellant on which the learned Commissioner has confirmed the demand. Appeal allowed - decided in favor of appellant.
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2020 (6) TMI 226
CENVAT Credit - service tax paid on the insurance cover obtained from the insurance companies - denial of credit on the ground that the service has no nexus with the manufacture of goods - HELD THAT:- During the course of adjudication, the appellant clarified that the said insurance cover was not in connection with the manufacturing activity or removal of the goods from their factory but was a separate identifiable service undertaken by them vide which they were providing insurance cover to their buyers - Inasmuch as they were paying service tax on the insurance cover given by them to their buyers, they were entitled to avail the service tax paid on the insurance cover obtained from the insurance companies. However, it is seen that the lower authorities have not adverted to the above facts, though the same were clearly placed before them and have given a finding that inasmuch as the insurance was beyond the place of removal, the same will not be cevatable input - the appellant s case is altogether different and is required to be adjudged from that angle - the matter needs to go back to the lower authorities. Appeal allowed by way of remand.
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2020 (6) TMI 225
Refund claim - time limitation - appellant filed refund claim on 31.03.2017 and the same was rejected by both the authorities below as time barred - Section 11B of the Central Excise Act, 1944 - HELD THAT:- It is an admitted fact that initially the refund claim was filed on 29.09.2008 and the same had been decided in favour of the appellant vide order dt. 16.03.2016 by the learned Commissioner (Appeals), therefore the appellant was not required to file the refund claim again. The understanding of the learned A.R. that the appellant was required to file the refund claim under Section 11B of the Central Excise Act, 1944 after the order passed by the learned Commissioner (Appeals) is against the provisions of law and both the authorities below are required to entertain the refund claim dt. 29.09.2008 and instead of considering the same, the adjudicating authority did not comply order dt. 16.03.2016 passed by the learned Commissioner (Appeals) and rejected the refund claim filed by the appellant inadvertently on 31.03.2017 as time barred, which is not permissible in law. There is no merit in the impugned order - appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (6) TMI 224
Clandestine removal - MS Flat - demand based on loose papers recovered during search, the physical verification of stock, its weighment and the admission of the director M/s Balajee - absence of corroborative evidences - HELD THAT:- The most important aspect of the whole case is that in the show cause notice there is no statement of any person, employee or director of the appellant company which can show that the impugned loose papers/ rough papers recovered from the factory of appellant are actually related to the clearance made by the Appellant. Moreover the revenue officer did not find the author of said loose paper/rough paper, there is no any other evidence available to corroborate the charge of the show cause noticee. The department did not verify the contents of the said loose papers with any alleged buyer of the said goods or recorded the statements of the said buyers or transporters who transported the said goods. In the absence of such corroborative evidence, no reliance can be placed on the said loose papers/rough papers. Further no evidence has been placed on record to show that excess raw materials were purchased or there was excess power consumption to corroborate the fact that there was clandestine removal. To prove the allegation of clandestine sale, further corroborative evidence was also required but no investigation was conducted by the Department - there is no evidence to support the allegations against the appellants. The adjudicating authority below has wrongly confirmed the demand despite there was no evidence to prove the alleged clandestine removal of goods by the appellants - appeal allowed - decided in favor of appellant.
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2020 (6) TMI 223
Interest on refund claim - rejection of interest on the ground that the amount of refund has already been granted within three months from the date of filing on 18.01.2018 - HELD THAT:- As facts of the case are not in dispute that the appellant initially filed refund claim on 05.10.2010. Although, the said amount has been adjusted against demand in separate proceedings against the appellant and the appellant have succeeded in those proceedings also, therefore, relying on the decision of Hon ble Supreme Court in RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. [ 2011 (10) TMI 16 - SUPREME COURT ], it is held that the appellant is entitled to claim interest after three months from 05.10.2010 till realisation of the said amount. Further, the appellant is entitled to claim interest on deposit of ₹ 3,50,00,000/- after three months from the order date d 14.11.2017 of this Tribunal when the appellant is succeeded in appeal till its realisation. Appeal allowed - decided in favor of appellant.
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2020 (6) TMI 222
CENVAT Credit - common input services for dutiable as well as exempt goods - Rule 6 of Cenvat Credit Rules, 2004 - HELD THAT:- The adjudicating authority has clearly recorded, that it is not a case of reversal of entire cenvat credit availed by them, irrespective of the fact whether it pertains to input services used in exempted goods or dutiable goods. Their claim that credit of only ₹ 80,006/- pertained to exempted goods is not substantiate by any evidence. The language of Rule 6(1) of CCR, 2004 is not to grant credit to an assesse except in circumstances mentioned in sub-rule(2) (3) thereof. In absence of any evidence about separate records to be maintained by appellant during the period of dispute it is absolutely clear that the appellant was not maintaining the separate accounts of inputs/input services despite manufacturing dutiable as well as exempted goods, however, were availing the cenvat credit on the common inputs, which definitely amounts violation of Rule 6 of CCR, 2004. Appeal dismissed.
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CST, VAT & Sales Tax
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2020 (6) TMI 221
Mistake in original assessment - It is claimed that the difference in the rate of tax has now been claimed in the order impugned before this Court - HELD THAT:- Since only a self assessment has been made and since the books of accounts have not been verified till this date, the order now impugned is set aside and a direction is issued to the petitioner to produce the books of accounts on or before 19.06.2020 for verification by the respondent. The respondent may then verify the entries in Part -B and Part-C in Form -WW. If the respondent requires any clarification, necessary notice may be issued to the petitioner and the petitioner is at liberty to clarify either by themselves or through their Auditor. At any rate, it will be in the interest of both the petitioner and the respondent that the assessment is completed as expeditiously as possible. Petition disposed off.
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Indian Laws
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2020 (6) TMI 220
Direction for refund of unused FAR - directions in respect of the sale of balance FAR available within the sanctioned plan, unused FAR up to the permissible limit of 2.75 or more and FAR beyond 2.75 up to 3.5 under the purchasable scheme and other FAR which may be available due to metro projects, etc. - HELD THAT:- The rates of SBI MCLR is reduced to 7.45 % in the year 2020 from 8.95% in the year 2016. It is clear that the Noida and Greater Noida Authorities, on the outstanding dues, are realizing the dues from all such projects, interest at exorbitant rate such as 15% per annum with half-yearly compounding and in addition are also realizing penal interest on the amount as fixed from time to time. The Noida and Greater Noida Authorities are not issuing completion certificates to such projects and they are not able to realize their outstanding dues. For various reasons, constructions have not been completed, including due to diversion of funds. There is a failure to comply with the obligation to the home buyers whose money has been invested in the partially constructed structure and partial dues have been paid to the Noida and Greater Noida Authorities. It cannot be disputed that the rate of interest, on which agreements were entered into, has gone down by now. The present lending rate is much below and the RBI has taken several steps to revive the economy. In such a scenario, it would never be possible to make payment of interest at the rate fixed by authorities and also a penal interest to be realized by concerned authorities. The home buyers are not able to obtain fruits of the investment and are deprived of legal title of the flats. Considering the current state of real estate, the projects are standstill, and in order to give impetus to such housing projects and mainly considering plight of home buyers and as pointed out by Noida and Greater Noida Authorities that 114 plots were allotted from 2005 onwards, most of projects are incomplete; we direct that rate of interest on the outstanding premium and other dues to be realized in all such cases at the rate of 8% per annum and let the Noida and Greater Noida Authorities do a restructuring of the repayment schedule so that amount is paid and Noida and Greater Noida Authorities are able to realize the same - In case of failure to pay, the concession granted shall stand withdrawn.
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2020 (6) TMI 219
Seeking Donations for the trust illegally - offence under Sections 13(2) r/w 13(1)(b) of the Prevention of Corruption Act, 1988 - acquittal of the accused - rebuttal of presumption - contention of the learned Special Public Prosecutor appearing for the appellant/state is that the trial Court failed to consider the oral evidence and also the documentary evidence let-in by the prosecution to substantiate the case - HELD THAT:- The respondent, is not connected with UPUS trust. Only for the reason that the Managing trustees was residing in village, the respondent s father who is Auditor of the CCCB Limited (Bank) was authorized to operate the trust account to facilitate the transaction. The amounts which have been properly accounted for the functioning of the trust is not in dispute. The house of the respondent was searched and no incriminating materials found. Further no case under disproportionate assets have been initiated against the respondent. The Investigating officer failed to show that there was any demand made by the respondent for donation to the trust. There is no material to connect the respondent with the trust and that he was benefited from the trust amount. It is well settled that the presumption to be drawn under Section 20 is not an inviolable one. The accused charged with the offence can rebut it either through the cross-examination of the witnesses cited against him or by adducing reliable evidence. If the accused fails to disprove the presumption the same would stick and then it can be held by the Court that the prosecution has proved that the accused received the amount towards gratification. It is equally well settled that the burden of proof placed upon the accused person against whom the presumption is made under Section 20 of the Act is not akin to the burden placed on the prosecution to prove the case beyond a reasonable doubt. The burden resting upon the accused is not so onerous, the respondent discharged the same by proof of balance of probabilities. Appeal dismissed.
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