TMI Tax Updates - e-Newsletter
June 27, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Highlights / Catch Notes
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GST:
Levy of GST - Supply of services or not - amount collected as membership subscription and admission fees from members - Once it has been established that the Appellant is not doing any business in terms of section 2(17) of the CGST Act, 2017, it can be deduced that activities carried out by the Appellant would not come under the scope of supply as envisaged under section 7(1) of the CGST Act, 2017
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GST:
Validity of order passed by the National Anti-Profiteering Authority - profiteering on the sale of its “food processor” product - Petitioner is directed to deposit ₹ 4,53,949/- with Central and State Consumer Welfare Boards within three months - Demand of Interest and penalty stayed.
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GST:
Profiteering - purchase of a flat in the Respondent’s project “Vedantam” - allegation that the Respondent had not passed on the benefit of Input Tax Credit which had accrued to him, by commensurate reduction in the price of the flat - The Concerned Commissioner GST shall ensure that the above benefit is passed on to the eligible buyers and report submitted to this Authority.
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Income Tax:
Deemed dividend under section 2(22)(e) - assessee has been taken the plea consistently that provisions of Section 2(22)(e) of the I.T. Act, 1961, would not apply in the case of the assessee company because assessee company is maintaining the running transactions with its subsidiary company - deeming provisions of Section 2(22)(e) of the I.T. Act, 1961, would not apply.
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Income Tax:
Reopening of assessment - addition in respect of receipt of share capital money as accommodation entry, the doubts of the A.O. have not been cleared by the assessee at any stage. The burden is upon assessee to prove the ingredients of Section 68
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Income Tax:
Penalty u/s 271(1)(c) - non specification of charge - defective notice - Merely because the assessee claimed the expenditure by virtue of a change of head of income and the claim was not acceptable to the Assessing Officer cannot per se attract penalty u/s 271(1)(c)
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Income Tax:
Reopening of assessment u/s 147 - Addition u/s 69/69C - Unexplained expenditure - assessee has paid fees/capitation fee and donation to a Medical College for admission of his daughter in MBBS Stream - Since the Revenue alleged that the amount in question is paid by assessee for admission of her daughter to the Medical Course, therefore, burden is very heavy upon Revenue to prove by positive evidence
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Income Tax:
Revision u/s 263 - The type, nature and extent of investigation is the prerogative of the Assessing Officer. Pr. CIT, cannot, in our view, invoke his power u/s 263 for revising an order passed u/s 143(3) of the Act for the reason that in his view, the investigation/enquiry should be conducted in a particular manner or to a particular extent. Inadequate enquiry cannot be a ground of revision.
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Income Tax:
Exemption u/s 11 - activity of the assessee of letting out gallery frequently for a price - Whether qualify as being called in the nature of charity - Proviso to Section 2(15) was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions.
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Service Tax:
Transfer of right to use goods - Hiring of Charter Vessel for dredging activity -Appellant enjoys full right to exclusion of others. During the period, neither the owner can use the vessel nor can the owner transfer the right to use of the vessel to another person - there exist no hesitation to hold that the appellant enjoys right to use the vessel to the exclusion of the owner.
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Service Tax:
Demand of Service Tax - Photography services - Extended period of Limitation - If the assessee was clearly aware that they had to pay service tax, they could have billed their clients for the Service Tax as well. By not paying the service tax, the assessee is not gaining anything. It is a Governmental organisation run by bureaucrats and scientists, none of whom have any personal interest in evading service tax - the extended period of limitation cannot be invoked in this case.
Articles
Notifications
Customs-
26/2020-Customs (N.T./CAA/DRI) - dated
21-5-2020
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Cus (NT)
Amendment in Notification No. 42/2019-Customs (N.T.) dated 06.09.2019
DGFT-
15/2015-20 - dated
25-6-2020
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FTP
Amendments to Foreign Trade Policy 2015-2020-Amendment in Para 4.44 of the Foreign Trade Policy.
GST-
ORDER No. 01/2020 - dated
25-6-2020
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CGST
Central Goods and Services Tax (Removal of Difficulties) Order, 2020
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G.S.R. 413(E) - dated
25-6-2020
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CGST
Corrigendum – Notification No. 53/2020-Central Tax, dated the 24th June,2020
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G.S.R. 412(E) - dated
25-6-2020
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CGST
Corrigendum – Notification No. 50/2020-Central Tax, dated the 24th June,2020
GST - States-
33/2019 - State Tax - dated
24-6-2020
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Delhi SGST
Delhi Goods and Services Tax (Fifth Amendment) Rules, 2019
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15/2020-State Tax - dated
23-6-2020
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Himachal Pradesh SGST
Seeks to extend the time limit for furnishing of the annual return specified under section 44 of HPGST Act, 2017 for the financial year 2018-2019 till 30.06.2020
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14/2020-State Tax - dated
23-6-2020
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Himachal Pradesh SGST
Seeks to exempt certain class of registered persons capturing dynamic QR code and the date for implementation of QR Code to be extended to 01.10.2020
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13/2020-State Tax - dated
23-6-2020
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Himachal Pradesh SGST
Supersession Notification No.70/2019 – State Tax, dated 31st December, 2019
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12/2020-State Tax - dated
23-6-2020
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Himachal Pradesh SGST
Seeks to amend Notification No.21/2019- State Tax, dated the 30th May, 2019
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11/2020-State Tax - dated
23-6-2020
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Himachal Pradesh SGST
Notifies registered persons (hereinafter referred to as the erstwhile registered person), who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)
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09/2020-State Tax - dated
23-6-2020
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Himachal Pradesh SGST
Seeks to exempt foreign airlines from furnishing reconciliation Statement in FORM GSTR-9C
Income Tax-
37/2020 - dated
25-6-2020
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IT
U/s 10(46) of IT Act 1961 - Central Government notifies ‘‘Real Estate Regulatory Authority’ constituted by the Government of India in respect of the specified income arising to that Authority
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36/2020 - dated
25-6-2020
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IT
U/s 10(46) of IT Act 1961 - Central Government notifies ‘‘Real Estate Regulatory Authority’ constituted by the Government of India in respect of the specified income arising to that Authority
SEZ-
S.O. 2034 (E) - dated
24-6-2020
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SEZ
Central Government notifies an additional area of 1.36 hectares,thereby making the total area of the Special Economic Zone as 11.88 hectares at Raidurga Village, Serilingampally Mandal, Ranga Reddy District in the State of Telangana
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (6) TMI 626
Validity of order passed by the National Anti-Profiteering Authority - profiteering on the sale of its food processor product - HELD THAT:- Issue notice to unserved respondent No.4 by all modes including dasti. Petitioner is directed to deposit ₹ 4,53,949/- with Central and State Consumer Welfare Boards within three months - The interest amount as well as penalty and further investigation with regard to other impacted products as well as the letter dated 11th June, 2020 issued by the Director General of Anti Profiteering are stayed till further orders. List the matter on 07th September, 2020.
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2020 (6) TMI 625
Vires of Rule 117 (4) of the CGST/SGST Rules, 2017 - violation of of Articles 14, 19(1) (g) and 265 of the Constitution of India - principles of natural justice - transitional credit of inputs held in stock - opportunity to file the declaration in CGST TRAN 2 - HELD THAT:- Transitory provisions, as the word indicates have to be given its due meaning. Transition from pre-GST Regime to GST Regime has not been smooth and therefore, what was reasonable in ideal circumstances is not in the current situation. In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit. The petitioner has attempted to file TRAN within the time limit framed under the Rule. In the context of what has been stated discussed above, this court directs the respondent authorities to reopen the form TRAN II or accept manual filing of GST TRAN II to allow the petitioner to claim transitional credit held in stock as on the appointed date after proper verification including the invoices submitted by the petitioner. It is made hereby clear that such exercise has to be completed within 30.06.2020 so as to enable the petitioner to submit his GST TRAN II. Application disposed off.
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2020 (6) TMI 624
Initiation of Contempt Proceedings - Refund of admissible amount of GST to petitioner - HELD THAT:- Prima facie a case of contempt has been made out. However, considering the facts and circumstances of the case, one more opportunity is afforded to the opposite parties to comply with the aforesaid order of the Court within two months from the date of production of a copy of this order - The applicant shall supply a duly stamped registered envelope addressed to the opposite parties and another self-addressed stamped envelope to the office within two weeks from today. This application is disposed of at this stage with liberty to the applicant to move a fresh application, if the order is not complied with by the opposite parties within the stipulated time.
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2020 (6) TMI 623
Release of detained goods alongwith conveyance - Section 130 of CGST Act - HELD THAT:- We do not propose to go into the merits of the matter as we are of the view that we should allow the authority concerned to continue with the adjudication of the show cause notice issued under Section 130 of the Act. However, we are of the view that as the goods being groundnuts are perishable in nature, we should order release of the same along with the conveyance subject to certain terms and conditions pending the confiscation proceedings before the concerned authority. The writ applicant is directed to deposit an amount of ₹ 54,000/towards tax and penalty and the balance amount of ₹ 5,67,000/shall be by way of a bank guarantee of any nationalized bank. On deposit of ₹ 54,000/and furnishing of the bank guarantee of the balance amount, the authority concerned shall immediately release the goods as well as the conveyance - application disposed off.
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2020 (6) TMI 622
Profiteering - purchase of a flat - allegation that the reduction in the rate of GST on the construction service, not passed on - contravention of section 171 of CGST Act - HELD THAT:- The provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has failed to pass on the benefit of additional ITC to his customers. Accordingly, he is directed to pass on an amount of ₹ 21,113/- to the Applicant No. 1 and an amount of ₹ 1,21,256/- (₹ 1,42,369 - ₹ 21,113/-) to the other flat buyers who are not Applicants in the present proceedings as per the details given by the DGAP in Annexure-45. The above amounts shall be paid within a period of 3 months from the date of issue of this Order to the Applicant No. 1 and the other eligible house buyers by the Respondent along with interest @ 18% from the date from which these amounts were realized by the Respondent from them, till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which the above amounts shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers. The Respondent has profiteered by an amount of ₹ 1,42,369/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 31.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. Penalty - HELD THAT:- The Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him.
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2020 (6) TMI 621
Profiteering - purchase of a flat in the Respondent s project Vedantam - allegation that the Respondent had not passed on the benefit of Input Tax Credit which had accrued to him, by commensurate reduction in the price of the flat - penalty - HELD THAT:- This Authority hereby determines the profiteered amount as ₹ 40,92,054/- in terms of Rule 133 (1) of the CGST Rules, 2017 and directs the Respondent to pass on the benefit of ₹ 6,982/-[21,496 - 14,514] to the Applicant No. 1 and an amount of ₹ 40,70,558/- to the other buyers as per the details given in Annexure-18 of the DGAP s Report dated 05.12.2018 along with interest @18% per annum to the flat buyers from the dates from which the above amount was collected by him from the buyers till the payment is made as per the provisions of Rule 133 (3) (b) of the above Rules. The Respondent is also directed to reduce the prices of his flats commensurately as per the details mentioned above in terms of Rule 133 (3) (a) of the above Rules - It is also clear from the facts of the case that the Respondent has been directed to pass on the benefit of ITC till 31.08.2018. Any benefit of ITC which may become available to the Respondent post 31.08.2018 would also be passed on by the Respondent to the eligible buyers. The Concerned Commissioner GST shall ensure that the above benefit is passed on to the eligible buyers and report submitted to this Authority. Penalty - HELD THAT:- The Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in his Project Vedantam in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. Therefore, he is apparently liable for imposition of penalty as per the provisions of Section 171 (3A) read with Rule 133 (3) (d) of the CGST Act, 2017. Therefore, notice be issued to him to explain why penalty should not be imposed on him. Accordingly, the notice dated 11.12.2018 whereby the Respondent was asked to explain why penalty should not be imposed on him under Section 29, 122-127 of the CGST Act, 2017 read with Rule 21 and 133 of the CGST Rules, 2017 should not be imposed, is partially withdrawn to that extent.
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2020 (6) TMI 627
Levy of GST - Supply of services or not - amount collected as membership subscription and admission fees from members - Input tax credit of the tax paid on the Banquet and Catering services for holding members meetings and various events. HELD THAT:- In the absence of any mechanism to treat the appellant and its members as separate persons the said service does not tantamount to supply u/s 7 of the CGST Act, 2017, GST is not leviable on membership fees collected by the appellant from its members. Whether the amount collected as membership subscription and admission fees from members is liable to GST? - HELD THAT:- It appears that the Club Association does not provide only Social Services as an NGO, but also have other functions relating to Personal Functions which clearly amounts to furtherance of business. In lieu of consideration received as membership fees, admission fees and subscriptions are taxable as supply of services under GST. So, prima facie there appears a levy of GST. If receipts are liable to GST, can the club claim input tax credit of the tax paid on banquet and catering services for holding members meetings and various events? - HELD THAT:- The Appellant is not providing any specific facility or benefits to its members against the membership subscription charged by it, as the entire subscription amount is spent towards meetings and administrative expenditures only. Thus, we conclude that the Appellant is not doing any business as envisaged under section 2(17) of the CGST Act, 2017. Once it has been established that the Appellant is not doing any business in terms of section 2(17) of the CGST Act, 2017, it can be deduced that activities carried out by the Appellant would not come under the scope of supply as envisaged under section 7(1) of the CGST Act, 2017 - Since, it has been held herein above that impugned activities of the Appellant will not be construed as supply, question regarding the availment of ITC on the input services like catering services, banquet services, etc. does not arise. The amount collected as membership subscription and admission fees from members is not liable to GST as supply of services.
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Income Tax
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2020 (6) TMI 614
Claim of deduction u/s 80P(2)(a)(i) - reasoning of the AO to disallow the claim of deduction u/s 80P(2)(a)(i) was that the assessee was essentially doing the business of banking, and therefore, in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P - HELD THAT:- In view of the dictum laid down by the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed to non-members of assessee-society, for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2). For the above said purpose, the issue raised in this appeal is restored to the files of the Assessing Officer. Assessing Officer shall examine the activities of the assessee-society by following the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) and shall take a decision in accordance with law - Appeal filed by the assessee is allowed for statistical purposes.
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2020 (6) TMI 613
Income from the House property at Tolichowki - assessee had 1/10th share of the property - fair rental value - assessee submitted that this property is an open land with a small shed and this was given to Hyderabad Gas company on rent as godown to keep their gas cylinders and, therefore, rent paid by the said company was towards the land - HELD THAT:- Property, which has been let out by the assessee is not just open land, but, with a shed thereon, which is treated as a godown. In the schedule of rental deed, it is mentioned that godown is built on a plot admeasuring 1000 sq. meters and therefore, income from such godown has rightly been treated as income from house property and even in the earlier years, the income received from the same godown has been offered / treated as income from house property. We agree with the contention of assessee that hike of 10% on rent should not have been adopted, but the rental paid by the said party prior to vacating the same should have been adopted as fair rental value for the period when the property was vacant. Therefore, I direct the AO to recompute the income from this property by adopting the rent paid by the party before the said property was vacated as fair rental value. Thus, Grounds No. 2 3 are partly allowed. Income from the property - assessee submitted that there was a dispute with the tenant with regard to the rent and the assessee has filed a suit for eviction and also recovery of rent from the tenant - HELD THAT:- Assessee has not received the rent from the property during the relevant AY and has also filed a suit in O.S.No.408 of 2009 in the Court of XI Addl. Chief Judge, City Civil Court, Hyderabad for eviction of the tenant and for recovery of rent. It is the case of the assessee that the assessee has paid taxes on the receipt of the arrears of rent in AY 2013-14. In this connection, the assessee has referred to the computation of income for the AY 2013-14 which is available in the paper book to demonstrate that the assessee has paid tax on the same. Direct the AO to verify the same and if it is found that the assessee has offered the income to tax in the subsequent AY 2013-14, then, no addition of the same shall be made during the relevant AY. The ground Nos. 4 to 9 are thus treated as allowed for statistical purposes Agricultural income - assessee submitted that the total land owned by the family was around 97 acres, in which, coffee bean was grown and also various other crops, such as, cardamom, pepper, paddy, etc. were grown - HELD THAT:- all the brothers of the assessee together held agricultural land to the extent of 97 acres and offered agricultural income accordingly in their returns of income which has been accepted by the AO except in the case of the assessees before the Tribunal. Thus, the disallowance was made only in the hands of two brothers relying on the statement of SM Lateefuddin. However, I find that SM Lateefuddin has clearly stated that there were other crops grown in the land and earned income from such other crops as well. The AO has relied upon the statement of SM Lateefuddin, but he cannot pick and choose and accept only part of the statement favourable to the revenue and disbelieve the other part, which is in favour of the assessee. Shri Lateefuddin in reply to Q.No.10, has clearly stated that coffee, was in 65 acres, Nilgiri trees in 10 acres and the balance area was paddy field. The AO has taken into consideration the income from coffee beans and minor income from pepper and cardamom only. He ignored the income from paddy and Nilgiri trees. AO has accepted the agricultural income from the same land in the hands of the other owners in proportion to their share of land. Therefore, entire agricultural income, which is as per the statement of SM Lateefuddin, should be accepted. The AO is directed accordingly. Addition as income as assets over liabilities - whether merely because the closing balances of State Bank of Hyderabad and Canara Bank were not reflected in the Statement of Affairs as assets cannot be added as income - whether AO has failed to appreciate the fact that the closing balances shown in the banks were duly explained? - HELD THAT:- There is opening balance and also rental income and other incomes which have been deposited into the bank account and are forming part of the closing balance . When the assessee has offered the rental income to tax, bringing the rental income again to tax as part of closing balance in the bank A/c is not permissible. Therefore, direct the AO to exclude the opening balance and also other income which has already been offered to tax, and only the balance is directed to be brought to tax. This ground is accordingly partly allowed.
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2020 (6) TMI 612
Deemed dividend under section 2(22)(e) - assessee company has received loans and advances from M/s Exotica Housing and Infra Projects Pvt. Ltd., which was squared off during the year - money in question was advanced by subsidiary company to the assessee company in the ordinary course of business and as per Memorandum and Articles of Association money lending is one of the main objectives of the subsidiary company - HELD THAT:- The ledger account of the subsidiary company in assessment year under appeal also clearly reveals that it is the assessee company who have given the amount mostly to the subsidiary company which have been returned to the subsidiary company by the assessee company. Therefore, on such facts when the Revenue did not dispute the transactions in the current account between the assessee company and the subsidiary company in earlier as well as in subsequent year and the assessee company on most of the occasions have made payment to the subsidiary company, which have been returned by assessee company for business purposes, there was no reason to apply provisions of Section 2(22)(e). It is clear from the Orders of the authorities below that assessee has been taken the plea consistently that provisions of Section 2(22)(e) of the I.T. Act, 1961, would not apply in the case of the assessee company because assessee company is maintaining the running transactions with its subsidiary company which are clear from PB-5 to 12 which are ledger account of this year as well as earlier year and subsequent year and the same are in the nature of mutual and current account. Therefore, deeming provisions of Section 2(22)(e) of the I.T. Act, 1961, would not apply. - Decided in favour of assessee.
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2020 (6) TMI 611
Reopening of assessment - addition in respect of receipt of share capital money as accommodation entry from M/s. Finage and Finance India Ltd. - HELD THAT:- Assessee has not pointed out any distinguishable facts, therefore, no infirmity is found with regard to reopening of the assessment. Further, the A.O. has recorded reasons for reopening of the assessment based on material collected during the course of search operation in the case of Shri S.K. Jain and Shri V.K. Jain. Therefore, reliable and cogent evidences were found during the course of search and such information was considered genuine on which A.O. formed his opinion for reopening of the assessment, therefore, reopening of the assessment is valid in the matter in issue. See AVIRAT STAR HOMES [ 2018 (12) TMI 1397 - BOMBAY HIGH COURT] - Decided against assessee. Addition u/s 68 - assessee failed to prove identity of the Investor, its creditworthiness of the and genuineness of the transaction in the matter. A.O. specifically found that on the basis of the documents filed by assessee before him that there were regular debit and credit entries of the equivalent amount within a span of 2-3 days and such phenomina is present in the case of entry providers - burden is upon assessee to prove through reliable and cogent evidence that it has received genuine money out of the genuine transaction. If A.O. had any doubt on the paper submitted by assessee before him, it is the duty of the assessee to produce the Principal Officer/Director of the Investor Company so that A.O. could record their statement and find-out the truth. However, assessee failed to do so. Therefore, the doubts of the A.O. have not been cleared by the assessee at any stage. The burden is upon assessee to prove the ingredients of Section 68 - in the present case assessee has failed to discharge the onus lay upon it to prove such ingredients. No justification to interfere with the Orders of the authorities below in making and confirming the addition - Decided against assessee.
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2020 (6) TMI 610
Penalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT:- Inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Although the Ld. DR submitted that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, the decision of SSA S Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] where the SLP filed by the Revenue has been dismissed [ 2016 (8) TMI 1145 - SC ORDER] is directly on the issue contested herein by the Assessee. Further, when the notice is not mentioning the concealment or the furnishing of inaccurate particulars, the ratio laid down in case of M/s. Sahara India Life Insurance Company Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] will be applicable in the present case wherein held notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. CIT(A) relying upon the decision of the Hon ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ld. [2010 (3) TMI 80 - SUPREME COURT] held that it is not the Assessing Officer s case that the details supplied in the return are inaccurate. Merely because the assessee claimed the expenditure by virtue of a change of head of income and the claim was not acceptable to the Assessing Officer cannot per se attract penalty u/s 271(1)(c) of the Act. Thus, the CIT(A) has rightly deleted the penalty - Decided in favour of assessee.
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2020 (6) TMI 609
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As decided in own case [ 2020 (6) TMI 135 - ITAT BANGALORE] Disallowance under section 14A cannot exceed the exempt income earned. Only those investments to be considered for the purpose of disallowance under section 14A which yield tax free income during the year. Where no separate books of accounts are maintained for earning tax free income and taxable income and value of own funds exceed the value of investments, then no disallowance under section 14A is called for. We direct the AO to take into consideration above said binding decision while examining this issue. Accordingly, we restore this issue to the file of the AO for examining it afresh in the light of discussions made supra. Appeal of the assessee is treated as allowed for statistical purposes.
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2020 (6) TMI 608
Rectification of mistake - disallowance u/s 14A - Computation of book profits u/s. 115JB - amount to be added to the profit as per P L account u/s. 115JB towards expenditure incurred in earning income exempt u/s. Chapter III of the Act - plea of the assessee was that the disallowance u/s. 14A of the Act made while computing total income under the normal provisions of the Act should not be automatically added while determining the book profits u/s. 115JB - HELD THAT:- The amount to be added while computing book profits u/s. 115JB AO cannot in terms of Explanation 1(f) to Sec.115JB(2) to the Act, add the sum determined as disallowance u/s. 14A of the Act while computing total income under the normal provisions of the Act and he has to adopt a basis as laid down by VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] viz., direct expenditure associated with earning of income. The grievance of the revenue in this appeal as projected in ground No.2 is that the CIT(A) ought to have followed the decision in the case of DCIT Vs. Sobha Developers [ 2015 (2) TMI 940 - ITAT BANGALORE] rendered by ITAT Bangalore Bench wherein it was held that the disallowance u/s.14A of the Act made while computing total income under the normal provisions of the Act can also be adopted while determining book profits u/s.115JB in terms of Explanation- 1(f) to Sec.115JB(2) of the Act. The ratio laid down in the said decision of the Bangalore Bench has not been approved in the case of Vireet Investments (supra), which decision was rendered after the decision rendered by the Bangalore Bench of ITAT. As far as the grievance of the revenue projected in Gr.No.3 is concerned, the subject matter of the impugned order is only as to, whether there was a mistake apparent from the record in the order of CIT(A) dated 2.4.2019 and not the issue whether not making addition of disallowance u/s.115JB(2) explanation-1(f) of expenses incurred to earn income which is exempt u/s.10 is a mistake apparent from the record or not. In other words, the issue sought to be raised by the revenue in ground No.3 can arise only in an appeal against the order dated 2.4.2019 and not in an appeal against the impugned order.
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2020 (6) TMI 607
Estimation of income - undisclosed stock - GP rate estimation - AR has contended that 1.25% declared by the assessee may be applied in the instant case - HELD THAT:- Admittedly and undisputedly, the excess stock not recorded in the books of accounts was found as on date of survey and surrendered by the assessee company. Therefore, the undisclosed income by way of investment in such excess stock was to be offered to tax in the return of income which the assessee has failed to do so. In the result, we affirm the findings of the lower authorities in this regard. Regarding short stock which has been sold out of books, the AO has estimated gross profit rate of 10% and the ld AR has contended that 1.25% declared by the assessee may be applied in the instant case. Before the AO and the ld CIT(A), the assessee has not contested the rate of gross profit rate on such out of books sale and hence, we are not inclined to examine the fresh plea raised before us and interfere in the findings of the lower authorities and the same is hereby confirmed. In the result, the ground of appeal is dismissed.
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2020 (6) TMI 606
Reopening of assessment u/s 147 - Addition u/s 69/69C - Unexplained expenditure - assessee has paid fees/capitation fee and donation to M/s Santosh Medical College for admission of his daughter in MBBS Stream - entire case is set-up on the basis of information received from DDIT (Inv.), New Delhi in respect of the search conducted and statement recorded of Shri P. Mahalingam, Chairman/Director of Santosh Medical College Group - HELD THAT:- The assessee since beginning of the re-assessment proceedings have denied to have paid any amount to the Medical College - assessee in his explanation in writing as well as affidavit has affirmed that he has not paid any amount for admission of his daughter to MBBS Course because of the losses suffered by him in the business - further explained that amount of admission fees was paid by his brothers on behalf of his daughter which is supported by documentary evidences, though the same were not accepted by the Revenue. The daughter of the assessee has also owned-up that amount in question have been paid through her uncle for admission to the Medical College. The receipt executed by the College is also affirmed this fact that daughter of the assessee has made the payment for MBBS Course. Thus, no material is available on record to prove that assessee made any payment on behalf of the daughter for admission to the MBBS Course. Since the Revenue alleged that the amount in question is paid by assessee for admission of her daughter to the Medical Course, therefore, burden is very heavy upon Revenue to prove by positive evidence that assessee has in fact made the payment to the Medical College for admission for her daughter. However, no evidence is available on record to prove such contention rather the evidences on record and initial denial of the assessee itself supports the explanation of assessee that no amount is paid by assessee for admission of her daughter in Medical Course. In the light of material on record as well as Order of the Tribunal in the case of Shri Naresh Pamnani, Delhi . [ 2019 (3) TMI 1787 - ITAT DELHI] we are of the view that no addition could be made against the assessee of the impugned amount. In view of the above, we set aside the Orders of the authorities below and delete the entire addition in the hands of the assessee. - Decided in favour of assessee.
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2020 (6) TMI 615
Stay of demand - petitioner was directed to pay 20% of the tax due, on or before 30.03.2020, while staying the demand of tax - petitioner plead for grant of some more time to pay 20% of the tax due in view of the unexpected financial crunch due to the lock down imposed - HELD THAT:- Writ petition is disposed of with the following directions : (a) The petitioner shall pay 10% of the tax due by 30.09.2020 and the remaining 10% shall be paid on or before 31.12.2020. (b) It is made clear that there will be no further extension.
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2020 (6) TMI 605
Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT:- In CIT vs Manjunatha Cotton and Ginning factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. As observed that the 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. 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. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. Imposition of penalty in the present case cannot be sustained - Decided in favour of assessee.
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2020 (6) TMI 604
Revision u/s 263 - Assessee failed to substantiate the necessity of payment of large amount of commission in a business of sale of Electric Goods, as well as failed to produce evidence of rendering service - also transpired from record that details of the parties to whom commission were paid were not produced by the assessee - AO Chose to disallow on adhoc basis @ 20% of the expenditure claimed as commission payments - HELD THAT:- A perusal of the assessment order and the details filed by the assessee before the AO, in reply to the queries raised by the Assessing Officer during the assessment proceedings demonstrate that this is not a case of lack of enquiry as stated by the ld. Pr. CIT in the last paragraph of his order. This statement is factually incorrect. AO has called for information on the claim of deduction of expenditure made by the assessee and in response thereto, the assessee has filed voluminous details. Payments were made on receipt of claim bills through banking channels. Tax was also deducted at source from these payments. The bills raised by the commission agents along with the list of electric items sold by them based on which the commission was claimed was placed before the AO as well as the ld. Pr. CIT. This is also a fact that the assessee has been paying and claiming as a deduction commission paid to agents, for all the previous Assessment Years as well as for the subsequent Assessment Years. It is common knowledge that in this segment of business, the competition is severe and requires special measures to boost sales. The payment of commission has been accepted as genuine by the revenue in the earlier years as well as in the subsequent Assessment Years. AO has taken a possible view that the expenditure in question claimed by the assessee as commission payment, is allowable in part. This cannot be a case of lack of enquiry or non-application of mind. The issue whether third party enquiries have to be made or not during the course of investigation, is the prerogative of the AO, as he is the investigator. The type, nature and extent of investigation is the prerogative of the Assessing Officer. Pr. CIT, cannot, in our view, invoke his power u/s 263 for revising an order passed u/s 143(3) of the Act for the reason that in his view, the investigation/enquiry should be conducted in a particular manner or to a particular extent. Inadequate enquiry cannot be a ground of revision. we have to necessarily hold that the exercise of revisionary power by the ld. Pr. CIT, u/s 263 of the Act, is bad in law. - Decided in favour of assessee.
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2020 (6) TMI 603
Exemption u/s 11 - activity of the assessee of letting out gallery frequently for a price - Whether qualify as being called in the nature of charity - AO, applying the amended provisions of section 2(15) of the Act and CBDT Circular No.11/2008, denied the exemption claimed u/s 11 of the Act to the society on the ground that the activities of the assessee society are not charitable - CIT(A) allowed the claim of exemption u/s 11 - HELD THAT:- As decided in own case [ 2019 (6) TMI 991 - ITAT DELHI] Proviso to Section 2(15) of the Act, which was inserted by Finance Act, 2008, was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity in the object of a general public utility but was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. Therefore, after duly considering the objects of the assessee society, the settled legal position with respect to interpretation of proviso of Section 2(15) of the Act and respectfully following the ratio of India Trade Promotion Organisation vs. DGIT (Exemption) [ 2015 (1) TMI 928 - DELHI HIGH COURT] we are unable to concur with the observations and findings of both the lower authorities and while setting aside the orders of the Ld. CIT (Appeals), we direct the AO to allow the assessee the benefit of exemption u/s 11 12 - Decided in favour of assessee.
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Customs
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2020 (6) TMI 616
Validity of investigation conducted by a investigating officer - It is the grievance of the petitioner that the respondent have been harassing him under the guise of an enquiry/investigation and hence, has invoked the inherent powers of this Court under Section 482 of Cr.P.C. - HELD THAT:- In the present case in hand, the petitioner has complained of harassment by the respondent based on a complaint and seek for this Court's intervention by way of a direction. The term 'harassment' by itself has a very wide meaning and hence, what could be harassment to the petitioner may not be the same to the investigating officer. While summoning any person named in the complaint or any witness to the incident complained of, the investigating officer shall summon such person through a written summon under Section 160 Cr.P.C., specifying a particular date and time for appearing before them for such an enquiry/investigation - The investigating officer shall refrain himself or herself from harassing persons called upon for enquiry/investigation. Petition disposed off.
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2020 (6) TMI 620
Refund of SAD - Chartered Accountant Certificate which was required to be submitted along with claim of refund in terms of Notification No. 102/2007-Cus. Dt. 14/09/2007 was issued after the death of the said Chartered Accountant - CBEC Circular No.06/2008-Cus. dt. 28/04/2008 - HELD THAT:- It is the request of the appellant that issue may be remanded to the Original Adjudicating Authority to examine the issue regarding non-availment of Cenvat Credit in terms of the Notification and Circular. It is also the fact that the refund was sanctioned by the Refund Sanctioned Authority which was not reviewed and fresh Show Cause Notice was issued for recovery of the refund sanctioned. However, since the request of ld. Advocate is only for remand. It is fair to the both appellant and Department to have a re-look of the Chartered Accountant Certificate and deal with the issue as per law - Appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2020 (6) TMI 617
Maintainability of petition - NCLT has entertained a petition against the Company M/s. VMA Enterprises Pvt Ltd. of which the Petitioner is one of the Promoter-Directors, under Section 9 of the Insolvency and Bankruptcy Code, 2016 - scope of Micro, Small and Medium Enterprise (MSME) - HELD THAT:- It is clear that the purpose of increasing the jurisdiction of the NCLT to ₹ 1 crore was to ensure that MSMEs are not inflicted with sudden insolvency proceedings, as they may have faced a set-back to their businesses during the lockdown period. The NCLT s order records that the default amount is to the tune of ₹ 1 lakh, and hence the petition under Section 9 is being entertained. The notification dated 24th March 2020 has changed the `minimum amount of default from one lakh rupees to one crore rupees in respect of `Insolvency Resolution and Liquidation for corporate persons in Part II of the Code. The proceedings in the present case have been commenced under Section 9 of the IBC which is in Part II of the Code. The purpose of the notification was to ensure that Small and Medium Enterprises viz., SMEs and MSMEs are not subjected to Insolvency proceedings during the lockdown or immediately thereafter. The present writ petition accordingly deserves consideration. This is an error by the NCLT, as the notification dated 24th March 2020 was clearly applicable. Subject to the Petitioner depositing an amount of ₹ 10 lakhs with the ld. Registrar General of this Court, the order of the NCLT dated 29th May, 2020 shall remain stayed till the next date of hearing. List on 13th August, 2020.
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Service Tax
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2020 (6) TMI 619
Transfer of right to use goods - Hiring of Charter Vessel for dredging activity - Reverse Charge Mechanism - consideration paid to foreign company for hiring the vessel - declared service or not - period November 2015 to January 2016 - HELD THAT:- As per sub-clause (f) transfer of goods by way of hiring, leasing or licensing or in any similar manner would be a taxable service. However, if the transfer involves right to use the goods, it would be outside the purview of taxability - In the present case, the question is whether the transfer of goods is by way of hiring of the vessel simplicitor or whether it involves transfer of right to use the vessel. For a transaction to be transfer of right to use the goods, there should be transfer of possession as well as transfer of effective control. In the present case, the department has mainly relied upon clause (6) of the agreement, to contend that there is no transfer of possession as well as effective control. Clause 6 which relates to maintenance and operation states that, it is the responsibility of the appellant to maintain the vessel in proper condition. Undisputedly the operations are fully under the control of the appellant. The appellant has obtained necessary license to use the vessel for dredging. This license is location specific. During the charter period the vessel can be used only in this location (port). The entire crew and staff is of the appellant. All this would go to show that the appellant has entire control for operating the vessel during charter period. It goes without saying that when there right is given to operate the vessel it also casts a responsibility to maintain the vessel in proper and good condition. Similar conditions were analyzed by the Tribunal in the case of PETRONET LNG LTD VERSUS COMMISSIONER OF SERVICE TAX [ 2013 (11) TMI 1011 - CESTAT NEW DELHI] and also M/S. INTERNATIONAL SEAPORT DREDGING LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2018 (3) TMI 633 - CESTAT CHENNAI] . The appellant has absolute discretion to use the vessel for dredging during the charter period. Such enjoyment of the vessel cannot be interrupted by the lessor unless there is a breach to do the repairs of the vessel. Further, this condition is subject to condition No.16 which is the clause for pretermination of the agreement. If there is breach on the side of the appellant to do periodical maintenance which may give rise to a right to the lessor to withdraw the vessel, then lessor has to abide by Clause 16 (Pre-termination notice) to put an end to agreement and then withdraw the vessel. Appellant thus enjoys full right to exclusion of others. During the period, neither the owner can use the vessel nor can the owner transfer the right to use of the vessel to another person - there exist no hesitation to hold that the appellant enjoys right to use the vessel to the exclusion of the owner. Time Limitation - Revenue Neutrality - HELD THAT:- Undisputedly, the demand has been raised on reverse charge basis and the appellant would be eligible for credit, if they paid the service tax. Thus it is a revenue-neutral situation - Moreover, the department has not been able to establish any positive act on the part of the appellant that they have suppressed facts with intention to evade payment of service tax. Taking note of these facts, we are of the considered opinion that the demand raised for the extended period cannot sustain. Appellant succeeds on the issue of limitation also. Appeal allowed - decided in favor of appellant.
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2020 (6) TMI 618
Demand of Service Tax - Photography services - Scientific and technical consultancy services - scope of SCN - Time Limitation - penalties - HELD THAT:- Although the appellant obtained registration under three categories of services the demand in this SCN is only under the heads of Photography services and Scientific and technical consultancy services . Photography Services - the assessee s contention is that the nature of the services does not fall in the definition of Photography services at all - HELD THAT:- The scope of this service has been enlarged to cover the service rendered by any person instead of services rendered only by a commercial concern only. The nature of the services rendered by the appellant are photo processing of aerial films, general photography, photography by low level flying aircrafts specially suited for the purpose etc. - all these services squarely fall under the definition of Photography service as per Chapter V of the Finance Act, 1994. Legal entity of NRSC - Nature of Organisation - Whether NRSC is a commercial concern or just another legal person? - HELD THAT:- It is found from the narration of the nature of the organisation in the SCN, impugned order and in the submissions made by both the parties that it is an autonomous organisation of the department of Space, Government of India. It is not primarily a commercial concern like any public sector undertaking. It is registered as a Society under the Societies Registration Act. Therefore, it is a legal entity and is a juridical person but is definitely not a commercial concern - Having said that, the services rendered by them, for other organisations are in the nature of services in return for a payment. To that extent the nature of the activity is certainly commercial but the organisation itself is not. Therefore, prior to 01.07.2012 the assessee cannot be charged service tax on photography services rendered by them. After this date, the service tax can be charged from the assessee. Scientific and technical consultancy Services - HELD THAT:- The supplier of such goods and the provider of such services is quite distinct from the person receiving the grants-in-aid. Such persons will not automatically get exempted from payment of service tax or excise duty unless there is a specific exemption notification in respect of such services. For instance, if a department receives grant-in-aid, say, to construct roads, the amount received is a grant-in-aid at the hands of the department. However, in order to build those roads, they will hire other contractors and pay them. At the hands of the contractors who provide necessary services, the amounts are commercial receipts for their services. Therefore, the same cannot be treated as grants-in-aid at the hands of the contractor - The nature of these services, as can be seen from the records available, clearly indicates that they are in the nature of scientific and technical consultancy provided by the expertise of the assessee. Extended period of Limitation - suppression of facts or not - HELD THAT:- The assessee in this case is an autonomous organisation under the department of Space, Government of India. It is not a private business entity. They have, of course, undertaken several research projects for a price and that is part of their revenue model. They generate funds from these projects which are used for running the organisation. For these projects, they get paid by other Governmental and non-Governmental organisations under various heads. If the assessee was clearly aware that they had to pay service tax, they could have billed their clients for the Service Tax as well. By not paying the service tax, the assessee is not gaining anything. It is a Governmental organisation run by bureaucrats and scientists, none of whom have any personal interest in evading service tax. In fact, by evading service tax nothing would be gained either by anyone individually or by their organisation - by no stretch of imagination can we hold that the assessee has committed fraud or collusion or wilful misstatement or suppression of facts with an intent to evade payment of service tax. Under these circumstances, the extended period of limitation cannot be invoked in this case. The demand, if any, within the normal period of limitation can only survive. Penalties - HELD THAT:- There is no evidence of wilful suppression of facts with intent to evade payment of service tax, no penalty is imposable under section 78 of the Finance Act, 1994. This a fit case to invoke section 80 of the Finance Act, 1994 and waive all the penalties imposed upon the appellant. Appeal allowed by way of remand.
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