TMI Tax Updates - e-Newsletter
June 16, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Highlights / Catch Notes
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GST:
Filing of form GST TRAN-1 - transitional credit - Delhi HC issued a direction to revenue that, either it should re-open the Portal to enable the Petitioner to file its TRAN-1 Form electronically failing which to permit it to file manually on or before 13th September, 2019 - SC refused to interfere.
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Income Tax:
Interest paid u/s 201(1A) on TDS on payment by assessee - CIT(A) allowed the deduction following the decision of Karnataka High Court - However, jurisdictional High Court of Bombay has decided the issue against the assessee - Additions confirmed.
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Income Tax:
Scrutiny assessment - conversion of the case from limited scrutiny to complete scrutiny - Bogus purchases - it is very much apparent that the proposal of converting the limited scrutiny to complete scrutiny was merely aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Income Tax has accorded the approval in a mere mechanical manner which is in clear violation of the CBDT Instructions.
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Income Tax:
Computation of lease rental - addition of notional rent on the plant and machinery leased to sister concerns - this is not the case of the AO that higher amount of lease rental was received by the assessee or it has accrued to the assessee - Additions deleted.
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Income Tax:
Benefit of exemption u/s 54F - To what extent the deduction is allowable to the assessee because the residential house was acquired by the assessee jointly with his daughter - quantum of deduction to be decided in the present case u/s 54F after finding out these facts as to what is the amount of investment made by the assessee in the new house.
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Income Tax:
Reopening of assessment u/s 147 - upon purchase of the flat, the purchaser certainly acquires a right or interest in the proportionate share of the land but its realisation is deferred till formation of the co-operative society by the flat owners and transfer of the entire property to the co-operative society - There was no basis or justification to form a belief that any income of the assesee chargeable to tax for the assessment years under consideration had escaped assessment
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Customs:
Revocation of Customs Broker license - The appellant has violated the Regulations as alleged in the show-cause notice and are guilty of gross negligence in performance of their duties as Customs Broker - the revocation of Customs Broker licence is a harsh punishment which will deprive the appellant from their livelihood along with livelihood of all those people working with them - revocation is set aside - forfeiture of security deposit upheld - penalty also upheld
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Customs:
Revocation of Customs Broker License - The allegation that the IEC was obtained by submitting forged documents has no effect on the appellant as they could only verify the correctness of the documents submitted before taking up of the work for any importer. There is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer before taking up the work for any importer.
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Customs:
Absolute Confiscation - Penalty - Smuggled Cigarettes - There is no dispute that the cigarettes were found concealed under the consignment of aluminum scrap therefore, the goods are liable for confiscation. For the purpose of confiscation of goods mens rea is not required.
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PMLA:
Money Laundering - allegation of depositing demonetized notes of more than ₹ 44 crores in accounts of various persons, including his own, and thereafter transferring it through RTGS into accounts of various other persons at Delhi and Kolkata, mostly in fictitious accounts - Bail application rejected
Articles
News
Case Laws:
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GST
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2020 (6) TMI 326
Filing of form GST TRAN-1 - transitional credit - transition to GST regime - Central Goods and Services Tax Act, 2017 - it was held by Delhi High Court that a direction is issued to the Respondent to either re-open the Portal to enable the Petitioner to file its TRAN-1 Form electronically failing which to permit it to file manually on or before 13th September, 2019. HELD THAT:- There are no reason to interfere with this SLP - SLP dismissed.
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Income Tax
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2020 (6) TMI 325
Reopening of assessment u/s 147 - stock-in-trade had to be valued at the present market value - HELD THAT:- The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there had been actual sales in the course of the year showing the profit or loss actually realised on the year s trading. While anticipated loss is taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account as no prudent trader would care to show increased profit before its actual realisation. This is the theory underlying the rule that the closing stock has to be valued at cost or market price whichever is lower and it is now generally accepted as an established rule of commercial practice and accountancy. Taking the view that profits for income tax purposes are to be computed in conformity with the ordinary principles of commercial accounting unless such principles have been superseded or modified by legislative enactments, it would be a misconception to think that any profit arises out of valuation of the closing stock. Computation of capital gains - stand of the assessee is that it had rightly deducted the cost incurred in acquiring the property from the fair market value of the land converted into stock-in-trade - HELD THAT:- For computing the income under the head capital gains , the full value of consideration received as a result of transfer of the capital asset shall be deducted by the expenditure incurred in connection with such transfer, cost of acquisition of the asset and the cost incurred in improvement of the asset. The expression the full value of the consideration would mean the fair market value of the asset on the date of such conversion. The meaning of the expressions cost of improvement and cost of acquisition are explained in Sections 55(1) and 55(2) of the Act respectively. In the case of Miss Piroja C. Patel [ 1999 (3) TMI 38 - BOMBAY HIGH COURT] the question before this Court was whether the Tribunal was justified in holding that the amount in question being compensation paid by the assessee to the hutment dwellers for vacating the land was an allowable expenditure within the meaning of Section 48 read with Section 55 of the Act. This Court held that on eviction of the hutment dwellers from the land in question, the value of the land increases and therefore, the expenditure incurred for having the land vacated would certainly amount to cost of improvement. Third ground is concerned, we do not find any rationale in the view taken by the Assessing Officer. The cost incurred on stamp duty etc. together with the cost incurred in carrying out eviction of the hutment dwellers would certainly add to the value of the asset and thus amount to cost of improvement which is an allowable deduction from the full value of consideration received as a result of the transfer of the capital asset for computing the income under the head capital gains . AO has taken the view that long term capital gains arising out of sale or transfer of land would be assessed to tax only in the year in which the land is sold or otherwise transferred by the assessee ? - What the partner gets upon dissolution of the partnership or upon retirement from the partnership is the realisation of a pre-existing right or interest - There was nothing strange in the law that a right or interest should exist in praesenti but its realisation or exercise should be postponed. Applying the above principle, it can certainly be said that upon purchase of the flat, the purchaser certainly acquires a right or interest in the proportionate share of the land but its realisation is deferred till formation of the co-operative society by the flat owners and transfer of the entire property to the co-operative society. There was no basis or justification for respondent No.1 to form a belief that any income of the assesee chargeable to tax for the assessment years under consideration had escaped assessment within the meaning of Section 147 - reasons rendered could not have led to formation of any belief that income had escaped assessment within the meaning of the aforesaid provision. Therefore impugned notices issued under Section 148 of the Act cannot be sustained. - Decided in favour of assessee.
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2020 (6) TMI 323
Bogus purchases - gp estimation @12.5% on non-genuine purchases - HELD THAT:- It is a well settled law that in case of bogus purchases only the profit embedded in non-genuine purchases should be brought to tax. In our considered opinion, estimation of GP @12.5% is on the higher side keeping in view assessee s nature of business - Ends of justice would meet if GP on bogus purchases is estimated at 5% over and above the GP declared by the assessee. 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 322
Disallowance u/s 14A r.w.r. 8D - assessee has earned dividend income - assessee made suo-motu disallowance under section 14A - HELD THAT:- For disallowance under Rule 8D(2)(i) and (ii), the disallowance made by AO was unwarranted. Demat charges were related to assessee s Share Broker business and were unrelated to earning of exempt income. As regards interest expenditure, the assessee has shown from the Balance Sheet as on 31/3/2012, that own funds of the assessee were much more than the investments made. It is a well settled legal proposition that were both, interest bearing and own interest free funds are available, it shall be presumed that investments are made from own funds. Disallowance made under rule 8D (2)(i) (ii) were uncalled for. In so far as disallowance under rule 8D (2)(iii) is concerned, the assessee has made suomotu disallowance of ₹ 10,000/- as against dividend income of ₹ 1,21,155/-. Apex Court in the case of PCIT v. State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] has approved that disallowance under section 14A r.w. Rule 8D(2)(iii) cannot exceed the exempt income earned. We find no merit in ground No.1 of the appeal, the same is dismissed, accordingly. Disallowance of Client referral fees - HELD THAT:- A perusal of the table furnished by the assessee clearly indicates that percentage of the fees paid in each year varies and there is no fixed pattern of payment of Client referral Fees. AO should have examined genuineness of the payments made rather than estimating by applying percentage of the earlier assessment year. In the facts of the case, we deem it appropriate to restore this issue back to the file of AO to verify genuineness of the payments made to the parties concerned. AO while verifying genuineness of the payments, shall grant reasonable opportunity of hearing to the assessee, in accordance with law. 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 320
Penalty u/s. 271(1)(c) - Defective notice - not spelt out the specific fault/charge as to whether assessee had concealed the particulars of his income or furnished inaccurate particulars of such income - HELD THAT:- Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. See JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, [ 2017 (12) TMI 883 - ITAT, KOLKATA] The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. Imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. We, therefore, hold that imposition of penalty and subsequently confirmed by the Ld. CIT(A) in the present case cannot be sustained and the same is hereby deleted. Appeal of assessee is allowed.
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2020 (6) TMI 319
Benefit of exemption u/s 54F - purchase of new residential house OR a case of construction of a new house - it is a case of revenue the construction of the property acquired by the assessee and since construction is required to be within prescribed time after the date of sale of the capital asset on which capital gain has arisen and in the present case, the construction is before the date of transfer, deduction is not allowable to the assessee under section 54F - HELD THAT:- It is a case of purchase of residential house property which was purchased on 16.07.2015 as noted by learned CIT(A) and the date of sale / transfer of the capital asset on which the capital gain has arisen is 28.08.2015 / 30.09.2015 and therefore, the purchase of residential house is within the period of one year before the date of transfer and therefore, deduction under section 54F is allowable. To what extent the deduction is allowable to the assessee because the residential house was acquired by the assessee jointly with his daughter - How much amount was invested by the assessee and how much amount was invested by his daughter for acquiring this new residential house property? - CIT(A) has held that even if deduction is allowed to the assessee under section 54F of the Income Tax Act, 1961, the deduction allowable cannot be more than 50% of investment in the new asset and he has also stated that since the entire exemption is already been disallowed in the present case, this issue is not being discussed further. Under these facts, we feel it proper to restore back this aspect of the matter to the file of learned CIT(A) for the purpose of deciding by way of speaking and reasoned order about the quantum of deduction allowable in the present case under section 54F after finding out these facts as to what is the amount of investment made by the assessee in the new house and what is the amount of investment made by his daughter in the said new house as the daughter of the assessee is a joint holder. Appeal of the assessee stands allowed for statistical purposes
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2020 (6) TMI 318
Computation of lease rental - addition of notional rent on the plant and machinery leased to sister concerns - Addition on this basis that fair market value (FMV) of lease rental is 8% of WDV plus interest expense and depreciation as per Income Tax Act - HELD THAT:- As decided in HIGHWAYS CONSTRUCTION CO. PVT. LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1992 (11) TMI 86 - GAUHATI HIGH COURT] it comes out that in a case where the income is not actually received by the assessee and it has not accrued to the assessee, then under no provisions of Income Tax Act, the income tax authorities are authorized to include such income which was neither due nor collected. In the present case also, this is not the case of the AO that higher amount of lease rental was received by the assessee or it has accrued to the assessee and therefore, in our considered opinion, this judgment of Hon ble Gauhati High Court is squarely applicable in the present case. - Additions deleted. Addition by invoking the provisions of section 56(2)(viib) - assessee has obtained valuation report of Shri. P. Chandrasekhar, Chartered Accountant, where the value of the shares of the assessee company was recommended at ₹ 527/- per share as per DCF method but the AO adopted FMV method and made this addition - HELD THAT:- In the present case we prefer to follow the judgment of Hon ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT [ 2018 (3) TMI 530 - BOMBAY HIGH COURT] in preference to the judgment of the Hon ble Kerala High Court cited by DR of the Revenue rendered in the case of Sunrise Academy of Medical Specialities (India) (P.) Ltd. Vs. ITO [ 2018 (8) TMI 203 - KERALA HIGH COURT] because this is settled position of law by now that if two views are possible then the view favourable to the assessee should be adopted and with regard to various Tribunal orders cited by learned DR of the Revenue which are against the assessee we hold that because we are following a judgment of Hon ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra), these tribunal orders are not relevant. In the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO [ 2019 (1) TMI 688 - ITAT BANGALORE] this judgment of Hon ble Bombay High Court was followed and the matter was restored back to the file of AO for a fresh decision with a direction that AO should follow DCF method only and he cannot change the method opted by the assessee as has been held by the Hon ble Bombay High Court. Disallowance u/s 14A - as per assessee there is no exempt income earned by the assessee - HELD THAT:- Computation of Income is not filed before us and the assessee has earned in the present year ₹ 58,88,121/- as profit on sale of investments (Net) and a part of it might have been claimed by the assessee as exempt income, we feel it proper to restore this matter back to CIT(A) for a fresh decision after finding out this as to whether the assessee has earned any exempt income in the present year and by restricting the disallowance u/s 14A to the extent of such exempt income earned by the assessee in the present year in line with the judgment of Hon ble Delhi High Court rendered in the case of Cheminvest Ltd., Vs. CIT [ 2015 (9) TMI 238 - DELHI HIGH COURT] - Ground No.4 of the assessee s appeal is allowed for statistical purposes. Disallowance of share issue expenses - revenue or capital expenditure - HELD THAT:- Even if the fresh share capital is to meet working capital needs, then also, the nature of expenses remains same and hence the entire amount of such expenses is to be considered as capital expenditure as has been held by Hon ble Apex Court in these two judgments having been rendered in the case of Brooke Bond India Limited Vs. CIT 1997 (2) TMI 11 - SUPREME COURT] and PSIDC Ltd. [ 1996 (12) TMI 6 - SUPREME COURT].
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2020 (6) TMI 317
Scrutiny assessment - conversion of the case from limited scrutiny to complete scrutiny - Bogus purchases - AO held that the purchase of shares did not take place and the transactions were sham in view of documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities - HELD THAT:- There is not an iota of any cogent material mentioned by the Assessing Officer which enabled him to have reached the conclusion that this case was a fit case for conversion from limited scrutiny to complete scrutiny. We have also gone through the statement of assessee s Director Mr. Rohit Verma which was recorded on 18.07.2017 i.e., after the conversion of the case and even in his statement nothing adverse is coming out vis. a vis. the impugned transactions. If the proposal of the AO dated 05.10.2017 and the approval of the Ld. Pr. Commissioner of Income Tax dated 10.10.2017 are examined on the anvil of paragraph 3 of CBDT Instruction No.5/2016, it is very much clear that no reasonable view is formed as mandated in the said CBDT Instruction No.5/2016 in an objective manner and secondly merely suspicion and inference is the foundation of the view of the AO. There is no direct nexus brought on record by the AO in the said proposal and, therefore, it is very much apparent that the proposal of converting the limited scrutiny to complete scrutiny was merely aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Income Tax has accorded the approval in a mere mechanical manner which is in clear violation of the CBDT Instructions No.20/2015. The Co-ordinate bench in PAYAL KUMARI [ 2011 (2) TMI 1578 - ITAT CHANDIGARH] , has held that even Section 292 BB of the Act cannot save the infirmity arising from infraction of CBDT Instructions dealing with the subject of scrutiny assessments where assessment has been framed in direct conflict with the guidelines issued by the CBDT. The instant conversion of the case from limited scrutiny to complete scrutiny cannot be upheld as the same is found to be in total violation of CBDT Instructions No.5/2016. - Decided in favour of assessee.
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2020 (6) TMI 314
Reassessment proceedings u/s. 147 - proceeding initiated on the basis of an audit objection - HELD THAT:- We have found cogent reasons for not appreciating such reopening as an abundant caution by the Revenue only on the basis of an internal audit objection particularly when the same officer himself has objected such reopening on merit; consideration whereof has already been done by him in the original proceeding. As enlightened by the ratio laid down by SHUBHLAXMI PETROHEMICALS [ 2016 (9) TMI 1571 - ITAT AHMEDABAD] in the same set of facts and relying upon the same we find no justification for approving the reassessment proceeding initiated by the Revenue. Hence, the same is found to be devoid of any merit and thus quashed. - Decided in favour of assessee. 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 312
Validity of re-assessment proceeding initiated u/s 147 - unexplained share application money - information received consequent to search and seizure operations carried out at the residential and business premises of accommodation entry providers - HELD THAT:- Applying the principle laid down in Jet Airways (I) Ltd. [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and in Ranbaxy Laboratories Ltd. [ 2011 (6) TMI 4 - DELHI HIGH COURT] we hold that in the facts and circumstances of the case where the basis for issuing the notice u/s 148 was, on account of reasons recorded for re-opening the reassessment u/s 147 i.e. share application money received from VPC Financial Services Ltd. of ₹ 10 Lakhs and no addition on this account has been made in the hands of the assessee, then any other addition made in the case of the assessee would not survive. Accordingly, we hold so. Thus, we decide the preliminary issue raised before us i.e. one of the aspect of the preliminary issue raised before us, where no addition has been made on account of the reasons recorded for re-opening the assessment under the provisions of section 147/148 of the Act, then no addition can be made in the hands of the assessee on any other account. Hence, the order passed u/s 147 r.w.s. 143(3) of the Act is invalid. - Decided in favour of assessee.
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2020 (6) TMI 311
TP Adjustment - comparable selection - functional similarity - HELD THAT:- Assessee company is engaged in supply of spare parts and other equipment used by engine based power plants and oil and gas pumping system and also provide technical services in relation thereto. The assessee company also renders market support services and project management services to its overseas Associated Enterprises (AEs) , thus companies functionally dissimilar with that of assessee need to be deselected from final list. Mahindra Auto Mobile distributor - On verification of the Annual Report of the Company M/s Mahindra Auto Mobile distributor, which was made available during the course of hearing, we find that in profit and loss account of the payment of the excise duty is reported. We find that no further detail in respect of the excise duty paid by the company is available in the Annual Report. The excise duty is primarily payable on the manufacturing activity and in absence of any detail, the company cannot be treated as pure trader of products. In such circumstances, the company become functionally different from the trading segment of assessee. The functional difference itself is sufficient to exclude the company from the set of the comparables, and we are not examining other grounds like RPT filter etc for rejection of the company. Accordingly, we direct the learned TPO/AO to exclude the company from the set of the comparables and re-compute the average PLI of the comparables and if the PLI of the assessee is found to be more than the average PLI of the comparables, no adjustment would be required in the trading segment of the assessee. Exclusion of comparables selected in technical service segment as being functionally different. Transfer pricing addition made under the MAT provisions - HELD THAT:- Transfer pricing addition is not included in the above list and, therefore, the Assessing Officer is not justified in considering the transfer pricing addition for the purpose of computation of the book profit under the provisions of section 115JB of the Act. Accordingly, we allow the ground of the assessee in this regard.
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2020 (6) TMI 310
Disallowance of depreciation in respect of assets given on lease - assets given on lease under its equipment leasing business - HELD THAT:- As relying on assessee's own case [ 2019 (6) TMI 1123 - ITAT MUMBAI] even in cases of financial leases , the depreciation allowance contemplated under Section 32(1) of the Act is allowable to the lessor. It has not been shown by the Ld. CIT-DR that any of such precedents in assessee s own case has been altered by any higher authority. Therefore, so far as this aspect of the matter is concerned, we do not find any hesitation in directing the Assessing Officer to allow the claim of depreciation on lease of assets where it involves financial lease . - Decided in favour of assessee. Disallowing the expenditure claimed under Section 36(1)(iii) - HELD THAT:- As relying on assessee's own case [ 2019 (6) TMI 1123 - ITAT MUMBAI] IDBI General Regulations, 1994 prescribe for making investments in securities of Central and State Governments, we do not find any reason to uphold the stand of the income-tax authorities that such investments are not in the course of assessee s business. In fact, there is an apparent contradiction in the stand of the assessing authority inasmuch as the interest yielded by such investments is assessed as business income whereas the interest expenditure attributable to such investments has been sought to be treated as a non-business expenditure. Considering the aforesaid, we deem it fit and proper to set-aside the order of CIT(A) on this aspect and direct the Assessing Officer to allow the claim made by the assessee. - Decided in favour of assessee. Correct head of income - Profit on sale of shares of joint stock companies - Business income or capital gain - HELD THAT:- Relying on assessee s own case [ 2019 (6) TMI 1123 - ITAT MUMBAI] we direct the Assessing Officer to treat the profit on sale of investment as capital gains. Thus, assessee succeeds on this ground. Exemption under Section 10(23G) of the Act in respect of income from infrastructure business - HELD THAT:- Relying on assessee s own case [ 2019 (6) TMI 1123 - ITAT MUMBAI] we direct the A.O. to allow the deduction on gross basis, of cource after deducting the direct expenses attributable to earning such income. In the result, the assessee also succeeded on this ground. Disallowance of staff welfare expenses u/s. 40A(9) - HELD THAT:- In the present case, we find merit in the arguments of the ld. AR that these were written back in the computation of income and actual expenses were claimed under Section 37(1) - As relying on M/S. STATE BANK OF INDIA [ 2019 (6) TMI 1183 - BOMBAY HIGH COURT] set aside the order of CIT(A) and direct the Assessing Officer to allow the expenditure. - Decided against revenue. Claim of exemption u/s 10(33) - HELD THAT:- In this case clearly the assessee s own funds are far more than the investments in shares and securities and, therefore, it can be presumed that the investments in shares and securities is made out of own and interest free funds available with the assessee. As relying on HDFC BANK LTD. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] set aside the order of CIT(A) on this issue and direct the Assessing Officer to delete the disallowance. Since we have allowed the relief to the assessee on the plea that own funds are more than amount of investments, therefore, the other pleas raised by the assessee need not be adjudicated. Taxing the interest on sticky loans as per Section 43D - HELD THAT:- In the present case, income has accrued in earlier year and, according to the assessee, since assessee was not liable for taxation in the earlier years, therefore, it was not offered to tax. Undisputedly, income has accrued in the earlier years and since the provisions of Section 43D of the Act does not have any retrospective application, hence income prior to 1.4.1991 cannot be taxed. We find merit in the contentions of the assessee on this issue. Moreover, the case of assessee is squarely covered by the decision of Hon'ble Supreme Court of India in the case of State Bank of Travancore [ 1986 (1) TMI 1 - SUPREME COURT] accordingly we direct the Assessing Officer to delete the addition on this count by setting aside the order of CIT(A). Disallowance of of dividend income under Section 80M - HELD THAT:- Respectfully following the decision of our co-ordinate bench in the assessee s own case [2019 (6) TMI 1123 - ITAT MUMBAI] the Assessing Officer is directed to restrict the disallowance under Section 80M of the Act to 1% of the dividend income. Thus, assessee succeeds on this ground of appeal as stated above. Disallowance of claim of bad debt by AO u/s 36(1)(vii) - as per AO said debt has not become bad and accordingly, he added the same to the income of assessee - HELD THAT:- Appellant s claim of bad debt was as per provisions of the Act, since the appellant was in the business of money lending. The appellant explained the circumstances for which the debts became unrecoverable and the debts were actually written off in the books of accounts. Moreover, whenever such written off debts were realized in future, the same were offered as income u/s. 41(4) of the Act. Therefore, the A.O was not justified in disallowing appellant s claim. Case followed TRF. LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 2010 (2) TMI 211 - SUPREME COURT]. MAT applicability u/s 115JB - HELD THAT:- Since the assessee is a banking company the provisions of section 115JB was not applicable to a banking company, hence no income is assessable u/s.115JB. Interest paid u/s 201(1A) on TDS on payment by assessee - HELD THAT:- Perusing the material on record, we find that the CIT(A) has allowed the appeal of assessee following the decision of Hon'ble Karnataka High Court in the case of CIT vs. Oriental Insurance Company Ltd. [ 2008 (10) TMI 230 - KARNATAKA HIGH COURT] wherein it has been treated as in the nature of interest and hence admissible. However, we find that the jurisdictional High Court in the case of Ferro Alloys Corporation Ltd. vs CIT [ 1991 (12) TMI 39 - BOMBAY HIGH COURT] has decided the issue against the assessee. We, therefore, respectfully following the decision of the jurisdictional High Court in the case of Ferro Alloys Corporation Ltd. (supra), reverse the order of CIT(A). Accordingly, the ground raised by the Revenue is allowed. Deduction u/s 36(1)(viii) of the Act on account of special reserve - CIT(A) allowed the deduction - HELD THAT:- After hearing both the parties and perusing the material on record, we observe that the CIT(A) has passed a very reasoned and speaking order by sending back the issue to the file of Assessing Officer with the direction to take into account the reserve of ₹ 50 crores created by the appellant as the Assessing Officer has committed mistake in this regard. Accordingly, we do n Grant deduction under Section 36(1)(viia) - HELD THAT:- Issue has cropped up following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. [ 2012 (2) TMI 262 - SUPREME COURT] that deduction under Section 36(1)(vii) and 36(1)(viia) of the Act are independent and assessee is entitled for both of them. Accordingly, we find merit in the legal contention of the assessee that assessee should be allowed deduction under Section 36(1)(viia) of the Act and are inclined to admit the additional ground raised by the assessee. However, the facts qua the said allowance needs to be examined at the level of the Assessing Officer as the Assessing Officer has not examined this issue in the assessment proceedings. Disallowance under Section 14A r.w.r. 8D - HELD THAT:- Since we have already decided this issue in para 26 of this order wherein we have held that assessee s own funds was far more than the investments in shares and securities and, therefore, the investments in shares and securities were made out of own funds available with the assessee and deleted the disallowance, our finding in the said para would apply to these three years also on the issue of disallowance under Section 14A of the Act. Accordingly, the Assessing Officer is directed to delete the addition and assessee succeeds on this ground of appeal.
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Customs
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2020 (6) TMI 321
Absolute Confiscation - Penalty - Smuggled Cigarettes - present and past consignments - aluminum scrap confiscated on the premise that the same had been camouflaged to cover up the smuggled cigarettes - whether the appellant have smuggled cigarettes by concealing in the consignment of aluminum scrap in the case of past consignment or otherwise? - HELD THAT:- In respect of all the consignments physical examination of the container was carried out and no discrepancy was found therefore, as per the physical examination of imported aluminum scrap there is no evidence that the cigarettes were concealed under the imported aluminum scrap. The revenue s sole reliance is on email retrieved from the email ID of Shri Bharat Patel. However, even if it is accepted that email was sent to Shri Bharat Patel but on the face of the examination order it is clear that cigarettes were not supplied along with the aluminum scrap in the past consignment. As regard import of Metal Scrap a circular No. 43/2001-Cus dated 06.08.2001 as amended from time to time was issued. In terms of such circular Metal Scraps imported in unshredded should be accompanied by pre shipment inspection certificate. The said consignment is required to be examined by 25% in respect of manufacturer importers and 50% in respect of traders - the custom officer has examined the goods as evident from the examination order and during examination the officers did not find the cigarette concealed under the said scrap. After examination the goods for past imports were allowed clearances for home consumption without any hindrances. This shows that the procedure as required under Section 47 which is mandatory has been complied with. In view of the examination of the goods, it is important to note that examining officers have not been questioned about the manner of examination of the past consignment. If this be so, the examination report cannot be discarded. If at all there is any lapse on the examination officer, some action should have been taken by the department. In this fact in one hand department accepted the examination of goods and on the other hand solely relying on an email held that appellants have smuggled cigarettes concealing under Aluminum scrap in past consignment, which cannot be accepted. In the present case, since the goods were physically examined and Custom officer did not find the cigarettes concealed with the consignment of aluminum scrap. Hence the statements given by the witnesses found to be incorrect. In these circumstances, the documentary evidences i.e. Examination Order will be the prevailing evidence over the statements recorded under Section 108 of the Customs Act. Therefore, as per the facts of the present case, the statements have no evidentiary value therefore, on that basis it cannot be concluded that the appellants have smuggled cigarettes concealed under the past consignment of aluminum scrap. It is further noticed that as regard the past import by M/s. Dwarkesh Recycling there is no reference made in the email retrieved from email ID of Shri Bharat Patel. Therefore, in any case in respect of past import made by M/s. Dwarkesh Recycling it cannot be disputed particularly on the basis of email. The identical issue has been considered by the Hon ble Andhra Pradesh High Court in the case of SYED IRFAN MOHAMMED AND ANOTHER PETITIONERS VERSUS THE UNION OF INDIA, REP. BY ITS SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE [ 2017 (2) TMI 961 - ANDHRA PRADESH HIGH COURT] wherein on the basis of the live consignment in respect of past consignment also demand of duty and penalty was made. In the live consignment. Custom Authority found cigarettes and on the basis of the Modus-Operandi in respect of live consignment the demands were raised on the premise that similar Modus-operandi was adopted in the past consignment. The Hon ble High Court held that when the goods were examined by the Custom officer and did not find any mis-declaration it cannot be held that what was found in the live container was carried out in the past container specifically when all the statutory formalities were carried and goods were cleared for home consumption. There is no dispute that the cigarettes were found concealed under the consignment of aluminum scrap therefore, the goods are liable for confiscation. For the purpose of confiscation of goods mens rea is not required. There is clearly a misdeclaration as per the physical examination of the goods, therefore, we agree with the Adjudicating Authority that the cigarettes concealed with aluminum scrap were rightly confiscated absolutely - The penalty was also imposed towards confiscation of aluminum scrap for which there was no fault of the appellant as there was no mis-declaration. As regard the aluminum scrap the import documents are also for import of aluminum scrap therefore, penalty with respect to aluminum scrap should not have been imposed. Penalty u/s 114AA and 112a of CA - HELD THAT:- The penalty under Section 114AA was imposed upon M/s. Shivanjali Corporation and Shri Bharat Patel is relating to past consignments and as we held that in the past consignment there is no case of smuggling of cigarettes, the penalty under Section 114 AA will not sustain - Keeping in view the smuggling of cigarettes in the past as well as live consignment since the demand of past consignment was set aside and in the live consignment the penalty was imposed under section 114A as well as Section 112a(i) there should not be further penalty under Section 114AA. Appeal allowed in part.
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2020 (6) TMI 316
Revocation of Customs Broker license - Forfeiture of Security Deposit - imposition of penalty - non-compliance with the Regulations 11(a), 11(d), 11(e) and 11(n) of CBLR 2013 - HELD THAT:- In the present case there are serious allegations against the appellant regarding the violation of various Regulations as to not properly authorized by the importer and not advised the importer regarding the compliance of Customs Act and also not verified the IE code, antecedents of the importer and the premises of the importer. In the impugned order, the Commissioner has considered each and every submission raised by the appellant and has dealt with the same. The appellant has admitted that they have not verified the identity of the importer. All the documents were received from Shri Dinesh Joshi of M/s. Alfa Exim who is neither the importer nor their authorized representative. Further, it is found that during the investigation, statement of Shri Sarfraz and Shri Majid were recorded and they have admitted that they have imported the goods and paid the duty by cash to Shri Dinesh Joshi which was paid by him. Also, appellant raised the bill of service charges on M/s. Alfa Exim and not on the actual importers. Also, the stand of the appellant that Shri Damodhar Moddiboina was not the authorized person by the appellant to handle the KYC verification and the same was done by Shri Bahusali, is not tenable because Shri Damodhar Moddiboina in his statement given before the Customs authority during the investigation never stated that Shri Bahusali is the KYC person. Moreover, all the documents were submitted by him. The appellant has violated the Regulations as alleged in the show-cause notice and are guilty of gross negligence in performance of their duties as Customs Broker - the revocation of Customs Broker licence is a harsh punishment which will deprive the appellant from their livelihood along with livelihood of all those people working with them - revocation is set aside - forfeiture of security deposit upheld - penalty also upheld - appeal allowed in part.
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2020 (6) TMI 315
Revocation of Customs Broker License - Forfeiture of Security Deposit - imposition of penalty - failure to verify the presence of the importers in the given address - HELD THAT:- It is an admitted fact that the partnership firm involved in the import of the auto parts is an existing concern, duly registered having a deed for partnership and two existing partners. The IEC copy, PAN Card, telephone bill of the firm, Voter ID of the partners, copy of the partnership deed have been seen and verified by the appellant. The allegation that the IEC was obtained by submitting forged documents has no effect on the appellant as they could only verify the correctness of the documents submitted before taking up of the work for any importer. There is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer before taking up the work for any importer. The ratio of the COMMISSIONER OF CUSTOMS VERSUS HIM LOGISTICS PVT. LTD. [ 2017 (1) TMI 747 - DELHI HIGH COURT] is squarely applicable in the present case and by following the said ratio, the appellant has not violated Regulation 11(n) in view of the evidence given by them before the Inquiry Officer. Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2020 (6) TMI 313
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- This Tribunal maintains that the existence of the Operational Debt due from Corporate Debtor to the Operational Creditor could not be proved to the satisfaction of this Tribunal by the Petitioner so as to enable him to move this application under Section 9 of the Insolvency and Bankruptcy Code in order to initiate CIRP against the Corporate Debtor. Petition dismissed.
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PMLA
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2020 (6) TMI 324
Money Laundering - allegation of depositing demonetized notes of more than ₹ 44 crores in accounts of various persons, including his own, and thereafter transferring it through RTGS into accounts of various other persons at Delhi and Kolkata, mostly in fictitious accounts - HELD THAT:- The petitioner is in fact the main player in the whole episode. It was submitted that he is the person who actually brought the demonetized cash to the Bank where it was allowed to be deposited in the accounts of others persons without their knowledge and subsequently, they were transferred through RTGS to other accounts. It was submitted that Shashi Kumar and Rajesh Kumar had given blank cheques to the Bank for being used in case they defaulted in the loan repayment and, having been given in good faith, were misused, in connivance with the Bank officials by using them for RTGS transfer from their accounts to various other accounts. It was submitted that under such circumstances, it was the petitioner who had laundered the demonetized illegal cash into legal cash through the mode of depositing it in connivance with the Bank officials and then getting the same transferred to various other accounts, most of which were fictitious. The petitioner should not be enlarged on bail - application dismissed.
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2020 (6) TMI 309
Money Laundering - proceeds of crime - alleged purchase of fleet of cars out of the ill-gotten money and received about ₹16 crores in one year from Shell companies for bribing/ fixing cases in income-tax department - Section 120B/420 IPC and Section 13(2) read with 13(1) PC Act - Grant of Regular Bail. HELD THAT:- Issue Notice.
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