TMI Tax Updates - e-Newsletter
July 20, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Highlights / Catch Notes

GST

• Classification of goods - rate of GST - classification based on process of manufacture (embedding coir yarn in to vinyl (PVC) compound and curing by heating / cooling) - “Tufting” or a process “other than those processes mentioned in Heading 5701 to 5704” of the Customs Tariff and HSN Explanatory Notes to Chapter 57? - The impugned goods viz. PVC tufted coir carpet/mat is classified under Tariff Heading 5703 90 90 and its liable to GST at the rate of 12% - AAAR
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• Classification of goods - PVC carpet mats manufactured by them - classifiable under Tariff Item 5705.00.49 of CTA or under Tariff Item 3918 as held by the SGST Member? - The impugned goods viz. PVC carpet Mat would fall in the Customs Tariff heading 3918 and applicable rate of GST would be 18%. - AAAR
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• Violation of principles of natural justice - Summary of Show cause notice in FORM GST DRC-01 passed in violation of procedure - Summary of order in FORM GST DRC-07, issued by respondent, without issuing the order under section 73(9) - We only caution the officer to be careful in future and not commit such mistake again, for such type of mistake not only causes harassment to the parties but also shatters faith of the people in the system. - HC
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Income Tax

• TP Adjustment - 'arranged' pricing' - TNMM method or CUP method - the superiority of any particular method to arrive at the ALP is ruled out.The TNMM (Transactional Net Margin Method) requires establishing comparability level at a broad functional level. It requires comparison between net margin derived from operation of the uncontrolled parties and net margin derived by an associated enterprise on similar operation. The net profit margin earned by an associate enterprise is compared with net profit margin of uncontrolled transactions to arrive at arm's length price. - Thus CUP method was found to be more appropriate - HC
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• Addition on account of discrepancy in stock and being estimated value of scrap - the Assessing Officer has not brought out any defects in maintenance of books of accounts and therefore, mere arithmetic calculation made is not suffice for making addition. It is true that the reasons given in impugned order passed by the Tribunal are not happily worded and the order could have been passed using better and accurate language, nonetheless the findings recorded by the ITAT being findings of fact, the appeal cannot be entertained in absence of any substantial question of law being involved in the same. - HC
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• Procedure for assessment - mandation for the National E-Assessment Centre - Absence of a provision akin to Section 144B (9) in the E-Assessment Scheme, 2019 would not make any difference to such legal outcome in as much as violation of principles of natural justice renders such decision void. Even otherwise, the Income Tax authorities have to remain bound by the Statutory Scheme of assessment. - HC
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• Addition on account of share application and share premium money u/s 68 - assessee has received share application and share premium money from eleven investor companies - the share application money and premium was not received in the current financial year, which is the subject matter under appeal. Therefore, the assessee succeed. - AT
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• Exemption u/s 54F - If the assessee has invested money in constructing the residential house, merely because the construction was not complete in all respects or such building is yet to be completed fully or the building not being in a fit condition for being occupied, would by itself not be a ground for the assessee to be denied the benefit u/s 54F - AT
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• Addition u/s 43CA - differential amount of consideration shown in the document and the Stamp Duty Valuation - The transfer under the provisions of section 43CA is recognized only when a registered document is executed and therefore, in view of the facts and circumstances of the case, since the transfer through sale deed is made during, the previous year relevant to the assessment year under consideration for which the provisions of Section 43CA are applicable, then merely because an agreement has taken placed prior to 01/4/2013 would not take away the transaction from the ambit of the provisions of Section 43CA of the Act. - AT
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• Penalty u/s 271(1)(c) - non-compliance on the part of the assessee of various notices issued - information which was required for completing the assessment was already filed by the assessee before the AO and non-attendance or non-filing of information by the AO in response to various notices is rendered merely a technical or venial breach when the addition has already been deleted by the CIT(A) in quantum appeal proceedings keeping in view the explanation regarding the source of cash deposits. - No penalty - AT
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• Addition u/s 69B - on-money transaction - the two evidence relied by the Ld. Revenue Authorities viz., the data retrieved from the Pen-drive and the admission by the vendors of the property though may have a persuasive value but will not have much substantive evidentiary value in order to make additions in the hands of the assessee. - AT
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• Adjustment towards foreign exchange fluctuation - non-consideration of impact of abnormal movement in the foreign exchange rates while computing the operating profit margin - the assessee treated foreign exchange fluctuation loss as non-operating and thus computed its operating margin accordingly. Such treatment has been accepted by the TPO also. Once the forex loss has itself been treated and accepted as non-operating for self and the comparables, the same become neutral qua the computation of operating margin, leaving no room for any further adjustment. - AT
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• Failure to service notice due to wrong email address - The assessee was not served notice due to wrong reference of email address, therefore, in our view the assessee was prevented by sufficient cause for not furnishing the required details about the genuineness of activities - AT
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Customs

• Requirement of pre-deposit at the stage of filing appeal before CESTAT (second appeal) - in the case of second appeal before CESTAT, the appellant is required to pay total 10% i.e. 7.5% at first appellate stage and remaining 2.5% at the stage of appeal before the CESTAT. Therefore, the view taken by the Learned Commissioner (Appeals) that appellant at tribunal stage is required to pay total 17.5% i.e. 7.5% at first appellate stage and 10% at tribunal stage was held to be illegal. - AT
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• Service of order - appeal rejected on the ground of time limitation - burden to prove - The word used in section 128 as well as 153 is communication of the decision, summons and notices. By merely sending a copy of the Order in Original by registered / speed post, the department cannot wash of their hands when they are duty bound to serve the same on the appellant. The department ought to have tracked the consignment and made sure that it has been delivered to the addressee. - AT
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SEBI

• SEBI powers to issue directions and levy penalty - trustee’s decision to wind up a scheme of the mutual fund - Interpretation of the term ‘consent’ in Regulation 18(15)(c) - The unit holders are investors who take the risk and, therefore, entitled to profits and gains. Having taken the calculated risk, they must also bear the losses, if any. Unitholders are not entitled to fixed return or even protection of the principal amount - The Regulations under challenge do not suffer from the vice of manifest arbitrariness. - SC
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Service Tax

• Valuation - life insurance business - treatment of surrender value’ exacted, on premature exit, from holders of ‘unit linked insurance policy (ULIP)’as consideration for provision of service - whether the ‘surrender charge’ is consideration for a service that comes within the ambit of the levies pertaining to the insurance sector during the period of dispute? - Not taxable under any head - AT
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Articles

• Export of Goods with or without payment of GST
• Answering Some burning Questions in GST with analysis of latest Judgements ( Part -2)
• Upcoming functionalities to be deployed on GST Portal for the Taxpayers in the month of July, 2021

Notifications

• Customs

• 37/2021 - dated 19-7-2021 - Cus
  Seeks to amend notification No. 46/2017-Customs dated 30th June, 2017, to clarify leviability of IGST, on recommendation of the GST Council.

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• 36/2021 - dated 19-7-2021 - Cus
  Seeks to amend notification No. 45/2017-Customs dated 30th June, 2017, to clarify leviability of IGST, on recommendation of the GST Council.

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• GST - States

• 46/2021-GST - dated 7-6-2021 - Assam SGST
  Seeks to extend the due date for furnishing of FORM ITC-04 for QE March, 2021 to 30.06.2021.

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• 45/2021-GST - dated 7-6-2021 - Assam SGST
  Seeks to extend the due date for FORM GSTR-1 for May, 2021 by 15 days.

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• 44/2021-GST - dated 6-5-2021 - Assam SGST
  Seeks to extend the due date of furnishing FORM GSTR-1 for April, 2021

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• 43/2021-GST - dated 6-5-2021 - Assam SGST
  Seeks to extend the due date for furnishing of FORM ITC-04 for the period Jan-March, 2021 till 31st May, 2021.

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• ERTS(T)65/2017/Pt.II/351 - dated 1-6-2021 - Meghalaya SGST
  Amendment in Notification No. 13/2020 -State Tax, dated the 21st March, 2020

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• ERTS(T)65/2017/Pt.II/350 - dated 1-6-2021 - Meghalaya SGST
  Seeks to rationalize late fee for delay in filing of return in FORM GSTR-7

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• ERTS(T)65/2017/Pt.II/349 - dated 1-6-2021 - Meghalaya SGST
  Amendment in Notification No. ERTS(T)65/2017/Pt/159, dated the 29th December, 2017

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• FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/68 - dated 1-6-2021 - Nagaland SGST
  Seeks to amend Notification No. FIN/REV-3/GST/1/08(Pt-1)(Vol.1)/123 dated the 23rd April 2019

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• FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/67 - dated 1-6-2021 - Nagaland SGST
  Seeks to amend Notification No. FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/53 dated the 1st May 2021

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• CT/LEG/GST-NT/12/17/358 - dated 1-6-2021 - Nagaland SGST
  Seeks to extend the due date for furnishing of FORM ITC-04 for QE March, 2021 to 30 June,2021

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Circulars / Instructions / Orders

• GST - States - F.3 (379)/Policy/GST/2021/610-616 - dated 16-7-2021
  Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)
• GST - States - CCT/26-4/2017-18/E/859 - dated 6-7-2021
  Clarification in respect of applicability of Dynamic Quick Response (QR) Code on B2C invoices and compliance of notification No. 38/1/2017-Fin(R&C)(134), dated 30th March, 2020
• DGFT - Trade Notice No. 10/2021-2022 - dated 19-7-2021
  Extension of Date for Mandatory electronic filing of Non-Preferential Certificate of Origin (CoO) through the Common Digital Platform to 01st Oct 2021

News

• APEDA with Basmati Export Development Foundation organizes awareness creation programme for the basmati rice growers

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• Government launches National Logistics Excellence Awards;

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• 104 startups from different sectors have currently on boarded on the Startup India Showcase Platform

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Case Laws:

• GST

• 2021 (7) TMI 753
  Classification of goods - rate of GST - classification based on process of manufacture (embedding coir yarn in to vinyl (PVC) compound and curing by heating / cooling) - Tufting or a process other than those processes mentioned in Heading 5701 to 5704 of the Customs Tariff and HSN Explanatory Notes to Chapter 57? - coir mats/ matting/ floor covering with vinyl (PVC) backing - covered under the description coir mats matting and floor covering ? - whether merit classification under the heading 5705 (more specifically under CTH 5705 00 49) of Chapter 57 of the 1 st Schedule to the Customs Tariff? - clarification issued by the CBEC drawback division. HELD THAT:- For the purpose of GST, Classification of goods under any tariff item/sub-heading /chapter shall be done using the General rules of interpretation of the First Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes to HSN of the First Schedule of the CTA, 1975 Rule 1 of the General Rules of interpretation of tariff states that the titles of section, chapter and sub-chapter are provided for case of reference for legal purpose, classification shall be determined according to the terms of the heading or Notes do not otherwise require according to the provisions of Rule 2 and Rule 3. As per description HSN 5701 classifies Carpets and other textile floor covering, knotted whether or not mad up HSN 5702 covers woven bit non-tufted floor covering of felt not tufted or flocked; and HSN 5705 covers other carpets or mats or rugs mainly made of cotton on handloom etc. Hence it is evident from the tariff entries of chapter 57 as well as the entries of the notification that the classification and rate of tax is predominantly base upon the process of manufacture of the impugned products. Classification of the product, which is based upon the manufacturing process employed by the appellant in this case - HELD THAT:- From the process and the video presentation of the manufacturing process made during hearing it is revealed that the process of manufacturing of the impugned products can correctly be termed as tufting and the products gets covered under heading 5703 in terms of the HSN explanatory note to heading 5703 as detailed above. Hence the plea of the appellant that they did not apply process if tufting is without any force and is accordingly rejected. The appellant has placed heavy reliance on the test report of Textile Committee laboratory and clarification given by Coir Board etc. it is noticed the Lab test report of the Textile committee only specifies about the identification of fibre as Pile of coir and backing with Rubber based polymer. The Lab has not considered the process of manufacture while giving their option and therefore its of no help to the appellant. Furter, the Coir Board certificate submitted by the appellant is relating to some other manufacturer. Moreover, it does not help the case of he appellant on as much as it does not give any clarification on classification with reference to Customs tariff or GST Tariff - The coir as well as PVC, chemicals fillers etc. have equal importance. Hence PVC tufted coir mats/ matting/ floor coverings cannot be classified as simple coir mats and matting as contended by the appellant. Thus, the impugned products is classifiable under heading 5703 9090 as tufted PVC backed coir carpet/mats. Applicable rate of GST - HELD THAT:- If any, PVC or rubber or any other materials are backing the textile of coir fibres/ yarn by way of tufting process, which is used as floor mats or matting, it will fall appropriately under Customs Tariff Head 5703 and is liable to GST at the rate of 12% as per Sl.No. 144 of Schedule II of Notification No. 01/2017-CT (rate) dated 28-06-2017 as amended - the impugned products being tufted carpet/mat is leviable to GST @ 12% as per Sl.No. 144 of Schedule II of the said notification.

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• 2021 (7) TMI 752
  Classification of goods - PVC carpet mats manufactured by them - classifiable under Tariff Item 5705.00.49 of CTA or under Tariff Item 3918 as held by the SGST Member? - taxable at a rate of 12% as per entry 146 of Schedule II of N/N. 1/2017-Integrated Tax Rate dated 28/6/2017? - HELD THAT:- For the purpose of GST, Classification of goods under any tariff item/sub-heading/heading/chapter shall be done using the General rules of interpretation of the First Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes to the HSN of the First Schedule of the CTA, 1975. The classification needs to be finalized only after deciding the nature of the material of which the impugned product is made up of. Once the same is found to be textile articles covered as goods of Section XI (Textiles Textiles articles) in terms of the tariff (Section XI), the same gets classifiable under Chapter 57 and if it is found to be made up of plastics covered under Chapter 39 (section VII), the same shall be covered under Tariff Item 3918 - the impugned product under discussion has non-woven material made up of PVC on surface, which is coated/laminated with plastics (PVC), which is not in dispute. Hence, by virtue of said Section 1(h) to Section XI (Textiles and Textile articles), same gets excluded from the scope of being Textile Textile articles under Section XI i.e. Chapters 50-63. There are no identifiable fibres, filaments or yarns in the exposed surface of their product but the web like structure made from 100% PVC, duly laminated/coated with PVC o the bottom. Therefore, the impugned goods do not qualify as textile materials as specified in Not 1 to Chapter 57 - the said Bill of Entry is of no help to the appellant - In the instant case, there is no fabric, woven or non-woven and no textile yarns. There is one PVC web obtained by moulding process which is then impregnated with PVC which acts as its base. Therefore, even in absence of relevant details about the product covered under the cited Bill of Entry, the goods in question cannot be claimed to be similar to that of the goods imported, based upon the explanatory notes to 5705 and the manufacturing process of the goods in question. The impugned goods viz. PVC carpet Mat would fall in the Customs Tariff heading 3918 and applicable rate of GST would be 18%.

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• 2021 (7) TMI 749
  Grant of Interim Bail - constitutional validity of provisions in terms of Sections 69 and 132 of the Central Goods and Service Tax, 2017 - the respondent submitted that the investigation is still going on and the petitioner has joined the investigation by providing full cooperation, but his presence is required in further investigation of the case - HELD THAT:- It would be just and appropriate to confirm the interim regular bail granted to the petitioner, subject to his furnishing fresh adequate bail bonds/surety bonds to the satisfaction of the trial Court/concerned Duty Magistrate. The petitioner shall keep on joining the investigation as and when required to do so by giving him notice in writing by the Investigation Officer. Petition disposed off.

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• 2021 (7) TMI 748
  Seeking cancellation of the bail granted - Irregular and fraudulent ITC - credit availed on the strength of bills of various suppliers which were non-existing and fictitious - HELD THAT:- On a query raised by this Court and as is evident from the impugned order as well, the petitioner appears to have availed ITC worth more than ₹ 212 crores in M/s Brilliant Metals Pvt. Ltd., more than ₹ 21 crores in M/s Progressive Alloys India Pvt. Ltd. and more than ₹ 27 crores in M/s JBN Impex Pvt. Ltd. totaling to ₹ 260 crores availment. Till date, the case of the respondent is that the petitioner has availed ineligible ITCs to the tune of ₹ 27.05 crores, thereby implying that at the moment there is no material before the respondent that ITC s worth around 233 crores are also fraudulent. This Court deems it fit to stay the impugned order till the next date of hearing. NBW issued against the petitioner are kept in abeyance - List on 21st September, 2021.

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• 2021 (7) TMI 746
  Seizure of goods - submission of the petitioner is that the goods were duly accounted for and accompanied by valid documents but in arbitrary manner the same were seized - HELD THAT:- All the respondents are granted four weeks' time to file counter affidavit. Petitioner shall have two weeks, thereafter, to file rejoinder affidavit - In the meanwhile, subject to the petitioner depositing tax and 50% of penalty as well as furnishing security of remaining amount of penalty other than cash and bank guarantee, after adjusting the 10% amount which has already been deposited, within a period of three weeks from today, in the prescribed manner and in terms of Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017, no coercive action shall be taken against the petitioner, pursuant to orders impugned. The concerned Court/Authority/Official shall verify the authenticity of such computerized copy of the order from the official website of High Court Allahabad and shall make a declaration of such verification in writing.

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• 2021 (7) TMI 744
  Seeking release of the goods and vehicle of the petitioner - tax evasion - section 20 of IGST Act read with Section 129 (3) of CGST Act, 2017 - HELD THAT:- Learned Standing Counsel has accepted notice on behalf of all respondents. He prays for and is granted four weeks' time to file counter affidavit. Petitioner shall have two weeks' thereafter to file rejoinder affidavit - List in the week commencing 1.9.2021. In the meanwhile, subject to the petitioner depositing tax and penalty within a period of two weeks from today, in the prescribed manner and in terms of Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017, on the valuation disclosed in the invoice, the goods and vehicle may be released in favour of the petitioner.

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• 2021 (7) TMI 743
  Increase in valuation of goods - error of law on the part of Revenue in artificially distinguishing the identity of the goods and their valuation - HELD THAT:- Learned Standing Counsel has accepted notice on behalf of all respondents. He prays for and is granted four weeks' time to file counter affidavit. Petitioners shall have two weeks' thereafter to file rejoinder affidavit - In the meanwhile, subject to the petitioner depositing tax and 50% of penalty as well as furnishing security of remaining 50% of penalty within a period of two weeks from today, in the prescribed manner and in terms of Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017, on the valuation disclosed in the invoice, the goods and vehicle may be released in favour of the petitioner. List thereafter.

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• 2021 (7) TMI 742
  Constitutional Validity of Sr. No. 9(ii) of the N/N. 8/2017-Integrated Tax (Rate) dated 28.06.2017 - N/N. 10/2017 Integrated Tax (Rate) dated 28.06.2017 - Levy of IGST - services by way of transportation of goods by vessel from a place outside India - Scope of 'Importer' within meaning of Section 2(26) of the Custom Act, 1962 - recipient of service - HELD THAT:- Reliance placed in the case of Mohit Minerals Private Limited vs. Union of India and Ors. [ 2020 (1) TMI 974 - GUJARAT HIGH COURT ] where it was held that impugned Notification No.8/2017 Integrated Tax (Rate) dated 28th June 2017 and the Entry 10 of the N/N.10/2017 Integrated Tax (Rate) dated 28th June 2017 are declared as ultra vires the Integrated Goods and Services Tax Act, 2017, as they lack legislative competency. Both the Notifications are hereby declared to be unconstitutional. Petition disposed off.

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• 2021 (7) TMI 741
  Violation of principles of natural justice - Summary of Show cause notice in FORM GST DRC-01 passed in violation of procedure as prescribed in Rule 142 of the Central Goods and Service Tax Rules 2017 (CGST Rules, 2017) and Bihar Goods and Service Tax Rules, 2017 - Summary of order in FORM GST DRC-07, issued by respondent, without issuing the order under section 73(9) of the CGST Act, 2017 - learned Government Pleader under instructions fairly states that the authority below i.e. Respondent No. 3 namely the Assistant Commissioner of State Tax, (Patliputra), Pant Bhawan, Bailey Road, Patna, Bihar committed mistake in passing the impugned order - HELD THAT:- Well, the stand taken by the officer is quite fair, but we only fail to understand as to why the officer did not apply his mind at the time of passing of the impugned order. It is only when this Court pointed out the difference, wide enough for anyone to notice in imposing the amount of penalty, did the officer realizing his mistake, agreed to rectify the same. We only caution the officer to be careful in future and not commit such mistake again, for such type of mistake not only causes harassment to the parties but also shatters faith of the people in the system. Under similar circumstances in Pinax Steel Industries Pvt. Ltd. Vs. The State of Bihar Anr. [ 2021 (2) TMI 748 - PATNA HIGH COURT] , we had quashed the order of assessment passed by the Assessing Officer. The order of assessment passed by the Assessing Officer is set aside - petition disposed off.

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• 2021 (7) TMI 740
  Violation of principles of natural justice - Summary of Show cause notice in FORM GST DRC-01 passed in violation of procedure as prescribed in Rule 142 of the Central Goods and Service Tax Rules 2017 (CGST Rules, 2017) and Bihar Goods and Service Tax Rules, 2017 - Summary of order in FORM GST DRC-07, issued by respondent, without issuing the order under section 73(9) of the CGST Act, 2017 - learned Government Pleader under instructions fairly states that the authority below i.e. Respondent No. 3 namely the Assistant Commissioner of State Tax, (Patliputra), Pant Bhawan, Bailey Road, Patna, Bihar committed mistake in passing the impugned order - HELD THAT:- Well, the stand taken by the officer is quite fair, but we only fail to understand as to why the officer did not apply his mind at the time of passing of the impugned order. It is only when this Court pointed out the difference, wide enough for anyone to notice in imposing the amount of penalty, did the officer realizing his mistake, agreed to rectify the same. We only caution the officer to be careful in future and not commit such mistake again, for such type of mistake not only causes harassment to the parties but also shatters faith of the people in the system. Reliance placed in the case of PINAX STEEL INDUSTRIES PVT. LTD. VERSUS THE STATE OF BIHAR THROUGH THE PRINCIPAL SECRETARY CUM COMMISSIONER, PATNA., THE JOINT COMMISSIONER OF STATE TAXES, DANAPUR CIRCLE, PATNA. DEPARTMENT OF STATE TAXES, [ 2021 (2) TMI 748 - PATNA HIGH COURT] where the order of assessment passed by the Assessing Officer was quashed. The order of assessment passed by the Assessing Officer is set aside - petition disposed off.

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• 2021 (7) TMI 703
  Refund of Input Tax Credit - rejection mainly on the ground that no reply to SCN has been received till now - assumption taken that claimant has nothing to submit reply in support of the claim - Time limitation - section 54(1) of the CGST Act, 2017 - HELD THAT:- The appellant in appeal memo as well as at the time of personal hearing conducted on 18.06.2021 submitted that he had wrongly filed refund application of ₹ 40,64,000/- by including the ITC of IGST on Capital Goods amounting to ₹ 15,02,542/-. However, he is agreed that the refund of ITC pertaining to Capital Goods are not admissible as per provisions of sub rule 4 of Rule 89 of the CGST Rules, 2017 accordingly, he has withdrawn the refund claim to the extent of ITC amount of Capital Goods and requested to pass an order of refund of ITC to the extent of ₹ 25,61,458/-. The appellant has submitted a letter dated 05.03.2020 which was acknowledged by the concerned divisional authority on 16.03.2020 in the instant matter of refund claim for the period April-2018 to March-2019 amounting to ₹ 40,64,000/- under which it has been clearly/explicitly stated by the appellant that they will not go for appeal against the refund rejection made by the adjudicating authority and requested to release the input in their credit ledger so that they may re-apply for the refund after removing deficiencies - the appellant has mis-conceived/mis-leaded the facts while filing of appeal to this office as he has not disclosed the vital facts that he had made a request vide written letter to the proper officer for re-credit of amount to their electronic credit ledger which were debited at the time of filing of refund application by the appellant. The appellant has himself forfeited his right to file the appeal before Appellate Authority by submitting an undertaking before the adjudicating authority/proper officer as per explanation given under Rule 93 (2) of CGST Rules, 2017 - the instant appeal is non maintainable - Appeal dismissed.

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• Income Tax

• 2021 (7) TMI 750
  TP Adjustment - 'arranged' pricing' - TNMM method or CUP method - eligible profits of the assessee - determination of excess export profit - AO restricting the deduction claimed under Section 10-B - deemed income under the head Other Sources - as per CIT-A two firms that is the exporter in India and the Importer in the USA were closely associated with common shareholder and substantial profits of the Indian Company were siphoned off by him - whether Tribunal was right in not considering the revenues appeal relating to the order of CIT(A) to exclude only 83.1% of the profit admitted by the assessee as against the stand of the revenue that the entire 100% of the profit admitted by the assessee had to be excluded from the exempt income.? HELD THAT:- As cursory glance into the two methods i.e. Comparable Uncontrolled Price method and Transactional Net Margin method reveals that Comparable Uncontrolled Price method (CUP) is applied when price is charged for a product or service. This is a comparison of prices charged for the property transferred or service provided in a controlled transaction to a price charged for property or services transferred in a Comparable Uncontrolled transaction. The TNMM (Transactional Net Margin Method) requires establishing comparability level at a broad functional level. It requires comparison between net margin derived from operation of the uncontrolled parties and net margin derived by an associated enterprise on similar operation. The net profit margin earned by an associate enterprise is compared with net profit margin of uncontrolled transactions to arrive at arm's length price. As already pointed out the superiority of any particular method to arrive at the ALP is ruled out.The TNMM (Transactional Net Margin Method) requires establishing comparability level at a broad functional level. It requires comparison between net margin derived from operation of the uncontrolled parties and net margin derived by an associated enterprise on similar operation. The net profit margin earned by an associate enterprise is compared with net profit margin of uncontrolled transactions to arrive at arm's length price. Thus CUP method was found to be more appropriate and it was the discretion of the revenue to accept it. Subsequently, the assessee company gave a revised calculation dated 28.12.2006 for a much lesser amount citing error in calculation eventhough initially they had admitted excess profit of ₹ 3.54 Crores. The revised calculation mentioned the excess profit as US $ 1,85,702. Strangely, the Income Tax Appellate Tribunal has not discussed this aspect also. Assessing Officer and the CIT(A) were right in observing that the two companies were closely associated and had common shareholder who was a foreigner - The revised calculation by the assessee company was clearly an 'after thought' after knowing very well that the Assessing Officer had accepted its earlier submission of ₹ 3.54 Crores excess profit.The contention that with a limited source of fund of just ₹ 5.57 Crores the assessee company was earning more than ₹ 12.50 cores in itself showed that the profit was overstated by pricing the products - The revised calculation submitted by the assessee company was not accepted as it had no actual error in it but contained two new European comparables to arrive at the ALP and therefore considered as an 'after thought' by the Assessing Officer. he assessee was accepted even though it was lower than the excess profit over ALP arrived at by the Transfer Pricing Officer (TPO) by another method. We also find that the CIT(A) in her order had suddenly deviated from her narration of her observation and concluded that he (Assessing Officer) ought to have excluded only 83.1% of ₹ 3.54 Crores for the purpose of recomputing the deduction under Section 10B . In the instant case the close association between the seller and the buyer and their 'arranged' pricing were adequately substantiated by the Transfer Pricing Officer (TPO) / Assessing Officer (AO) / CIT(A). We therefore uphold that part of the CIT(A)'s order which confirms in toto the Assessing Officer's order as regards the ALP and the resultant excess profit to be treated as deemed income under 'other sources'. The ITAT's order of deleting the disallowance of ₹ 3.54 Crores is set aside. However, as regards the value of scrap sales, the levy of interest and the 5% of interest income taken as expenditure, we find no infirmity in the ITAT's order. In both the appeals it was observed by the CIT(A) that the practical difficulty was of hitting upon correct comparables to arrive at the ALP for this particular product and therefore the submission of the assessee was accepted even though it was lower than the excess profit over ALP arrived at by the Transfer Pricing Officer (TPO) by another method. This observation of CIT(A) is acceptable and answers the substantial question of law No.2.

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• 2021 (7) TMI 747
  Addition on account of discrepancy in stock and being estimated value of scrap - HELD THAT:- A clear that on the basis of the findings recorded by the ITAT for the A.Y. 2005-06, in the earlier part of the impugned order, it has dismissed the appeal of the revenue for the A.Y. 2006-07. It has been observed by the ITAT that the addition with regard to the value of discrepancy of stock by the Assessing Officer was based on the arithmetic calculation and conversion of stock maintained in Metric tonne into sq. mtrs. and therefore there has to be variation in the working of the assessee, which was filed as the Assessing Officer wanted the same in a particular format. It has been further observed by the ITAT that the Assessing Officer has not brought out any defects in maintenance of books of accounts and therefore, mere arithmetic calculation made is not suffice for making addition. It is true that the reasons given in impugned order passed by the Tribunal are not happily worded and the order could have been passed using better and accurate language, nonetheless the findings recorded by the ITAT being findings of fact, the appeal cannot be entertained in absence of any substantial question of law being involved in the same. It may be noted that the Appeal under Section 260A could be admitted only on the High Court being satisfied that the case involves a substantial question of law.

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• 2021 (7) TMI 745
  Procedure for assessment - mandation for the National E-Assessment Centre - Draft Assessment Order held to be mandatory and failure to issue such order cannot be treated as fatal - passed u/s 143(3) read with Sections 143(3A) and 143(3B) against the petitioner under the E-Assessment Scheme, 2019 for the Assessment Year 2017-18 - HELD THAT:- A reading of the above provision would clearly show that it is mandatory for the National E-Assessment Centre to provide an opportunity to the assessee, by serving a notice calling upon him to show cause as to why the variation proposed in the Draft Assessment Order, which is prejudicial to the interest of the assessee, be not made.10. Absence of such notice would clearly be a violation of the principles of natural justice leading to the Assessment Order passed being declared void. Absence of a provision akin to Section 144B (9) in the E-Assessment Scheme, 2019 would not make any difference to such legal outcome in as much as violation of principles of natural justice renders such decision void. Even otherwise, the Income Tax authorities have to remain bound by the Statutory Scheme of assessment. In the present case as well, the impugned Assessment Order having been passed without complying with the procedure laid down in the Scheme and in violation of principles of natural justice, the writ petition would be maintainable. Consequently, the Impugned Assessment Order dated 31.03.2021 passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Act is set aside. However, the respondent/Revenue is given liberty to pass a fresh Assessment Order in accordance with law. The petitioner shall also have liberty to challenge any action of the respondent/Revenue in accordance with law, in the event that it is aggrieved by the same.

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• 2021 (7) TMI 733
  Revision u/s 263 - under-reporting of sales turnover in respect of yarn and said under-reporting has been worked out on the basis of closing stock declared by the assessee and quantitative details of goods produced and sold in Form 3CD - HELD THAT:- Principal CIT first arrived at average selling price of yarn on the basis of quantity of yarn declared in Form 3CD and value of closing stock in the profit loss account. Further, he has compared sales figure declared by the assessee to estimate sales worked out by himself on the basis of sale of quantity of yarn declared in Form 3CD. As the explanation of the assessee before the Principal CIT that quantity of sales of yarn declared in column no.35B(b) of tax audit report includes quantity of yarn transferred to clothing division. If we exclude quantity of yarn transferred to clothing division, then sales quantity of yarn declared in Form 3CD and value of sales declared in books of account does not have any difference. This fact has been explained before the Principal CIT by filing reconciliation of quantitative details of goods produced and sales declared in books of account. The Principal CIT, ignoring all evidences filed by the assessee has simply arrived at difference in sales purely by estimating sales figure without pointing out how sales declared in books of account is incorrect. Therefore, we are of the considered view that the Principal CIT has erred in revision of assessment order by making certain general observations based on suspicion and wrong working of sales and without specifying errors which are prejudicial to the interests of revenue, contrary to the settled principles of law that assessment order cannot be revised merely on suspicious and surmises grounds We are of the considered view that assessment order passed by the Assessing Officer is neither erroneous nor pre-judicial to the interests of revenue which can be subject matter of proceedings u/s.263 of the Income Tax Act, 1961. Hence, we quash revision order passed by the Pr.CIT and restore assessment order passed by the Assessing Officer u/s.143(3). - Decided in favour of assessee.

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• 2021 (7) TMI 732
  Addition on account of share application and share premium money u/s 68 - assessee has received share application and share premium money from eleven investor companies - HELD THAT:- We find that all money either on account of share application or share premium has been received during the financial year 2007-08, relevant to AY 2008-09. We further find that despite bringing this fact in the notice of lower authorities, the lower authorities treated this amount as unexplained cash credit and made the addition in the financial year 2008-09. Since no money either on account of share application or share premium is received in the current financial year, therefore the amount cannot be taxed in the financial year 2008-09 i.e,. relevant to AY 2009-10. We find that on similar set of facts and on similar contention the co-ordinate of this Tribunal in DCIT vs. Brijwasi Developers [ 2017 (5) TMI 1741 - ITAT SURAT] upheld the order of Ld. CIT(A) holding that the no amount can be taxed when no such amount were received during the current financial year. Further the Hon ble Bombay High Court in Ivan Singh Vs ACIT [ 2020 (2) TMI 850 - BOMBAY HIGH COURT] also held that when the credit in the account of the assessee was found in the books of account, so credit can be charged to the income of the assessee in that previous year and the said credit cannot be brought to tax in subsequent assessment year. Considering the aforesaid factual and legal discussions and respectfully following the order of Hon'ble High Court and coordinate bench of Tribunal, no addition can be made during the A.Y. 2009-10. The case laws relied by Ld. DR for the revenue is not helpful to the department as all the case laws relates the validity of reopening on the basis of information from investigation wing of the department. On the contrary, we held that the share application money and premium was not received in the current financial year, which is the subject matter under appeal. Therefore, the assessee succeed. Considering the fact that no addition on account of share application and share premium is sustainable in the year under consideration. Therefore, the addition on account of alleged commission payment is also not sustainable. - Decided in favour of assessee.

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• 2021 (7) TMI 730
  Assessment u/s 153A - incriminating material found in search or not? - HELD THAT:-Findings of learned CIT(A) clearly demonstrate that there was no incriminating material on the basis of which the Assessing Officer had made the additions. The existence of incriminating material for making additions u/s 153A is further strengthened from the decision of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT ] where Hon'ble Supreme Court in a case u/s 153C has again highlighted the importance of existence of incriminating material for making the additions. The Hon'ble Supreme Court went on to hold that the Assessing Officer, while relying on the incriminating material, has to make reference in the satisfaction note regarding year-wise existence of incriminating material. Since there is an interplay between section 153A and section 153C, the findings of Hon'ble Supreme Court in a case u/s 153C are applicable for making additions u/s 153A also.

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• 2021 (7) TMI 729
  Addition u/s 2(22)(e) - HELD THAT:- Apart from that the judgment passed in the case of CIT vs. Daisy Packers Pvt. Ltd. [ 2015 (7) TMI 253 - GUJARAT HIGH COURT] while deciding the issue in favour of the assessee the Hon ble Court has been pleased to hold that the provision of Section 2(22)(e) of the Act is applicable for the loan and advance transaction between a company and a registered shareholder and not beneficial shareholder. Thus, relying upon the ratio laid down in all the judgments discussed above passed by the different Judicial Forum, the Ld. CIT(A) in our considered opinion rightly deleted the addition made by the AO as unjustified under the provision of Section 2(22)(e) of the Act so as to warrant interference. Hence, the ground preferred by the Revenue is found to be devoid of any merit and hence, dismissed. Disallowance u/s 40(a)(ia) - payment of impugned amount made to five parties in respect of freight and forwarding expenses rejecting the appellant s contention that TDS is not applicable for the freight expenses to non-resident shipping agencies agent and added the same to the total income of the assessee which was, in turn, deleted by the Ld. CIT(A) - HELD THAT:- Except numerical differences in the absence of any changed circumstances we do not find any reason in interfering with the order passed by the Ld. CIT(A) in deciding the issue in favour of the assessee by holding the assessee is not in default under Section 201(1) of the Act and further that the provision of Section 40(a)(ia) of the Act will not be applicable in respect of the freight charges in the present facts and circumstances of the case. As passed in the case of DCIT Bharuch vs. Hasmukh J. Patel,[ 2011 (3) TMI 353 - ITAT, AHMEDABAD] wherein the identical facts, where the parties acted as agent of non-resident shipping companies and such payment in foreign currency to such non-resident shipping company duly permitted by RBI guide line in view of the special provision as provided under Section 172 of the Act we hold that in that case TDS deduction is not required under Section 194C of the Act and, thus, provision of Section 40(a)(ia) is not applicable to the facts and circumstances of the case in hand. Claim of depreciation on car, insurance on car and interest for the loan taken for purchase of the car, petrol expenses and repairing expenses related to the car - HELD THAT:- It is the case of the assessee that the car is reflected as an asset in the balance sheet of the company and the car loan also appears as a liability in the balance sheet of the company - the company has passed a resolution for registration of the said car in the name of the director but the company has domination over the said car and the same is used wholly and exclusively for the business of the company. This plea of the assessee has found to be confronted by the DR but he failed to bring any decision in his favour. Heard the parties and perused the records. It is the settled principle of law that though cars are brought by a company the name of its director, the company is eligible for claiming depreciation on the same. CIT(A) deleted additions made in respect of Interest and Insurance - addition in respect of Depreciation and car expense has been partly deleted to extent of 75% i.e. 25% which according to us is unambiguous taking into consideration of the assesses books of accounts maintained in regard to the said asset as it appears from the records and thus we uphold the same. Hence, this ground of appeal preferred by the Revenue is dismissed. Addition on account of under-invoicing of sales to sister concern - HELD THAT:- The assessee are duly audited all books of accounts. After taking into consideration the entire aspect of the matter, we find the CIT(A) has rightly deleted the impugned disallowance. Hence, in the absence of any merit, we dismiss the ground raised by the Revenue.

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• 2021 (7) TMI 728
  Reopening of assessment u/s 147 - reason to believe - HELD THAT:- AO should have reason to believe' that any income chargeable to tax has escaped assessment. The words reason to believe and escapement of income have been judicially interpreted by various courts to mean that the reason for the formation of belief must have a rational connection with the information received. Rational connection postulates that there must be some direct nexus or live link between the material coming to the notice of the income tax officer and the formation of the belief that there has been escapement of income of the assessee from assessment in the particular year. We agree with the contentions raised by the Ld. A.R. that the reason to believe that income chargeable to tax has escaped for the purposes of reopening assessment u/s 147 r/w 148 of the Act cannot be based on suspicion, surmises, conjectures but must be based on cogent and tangible material that establishes a causal nexus between the information available and inference drawn by the A.O. We are of the considered opinion that the A.O. had no specific information and/or material in his possession to even arrive at reason to believe that the share capital or share premium received by the assessees from any of the shareholders for the Assessment Years in question were not genuine and/or bogus and/or represented assessees own unaccounted funds. The A.O. s assumption of jurisdiction u/s 147/148 of the Act is therefore held to be illegal, erroneous and impermissible in law, rendering all subsequent proceedings to be non est . A.O.,by failing to confront the assessees with the evidence he had gathered u/s 142(2) Act, has, therefore, erroneously skipped the mandatory intermediary step prescribed u/s 142(3) of the Act. Thus, when the A.O. has directly gone on to pass the Assessment Orders u/s 147/143(3) of the Act to make the impugned additions u/s 68, the same is in direct violation of the procedure of enquiry prescribed in the Statute that inherently encompasses the Principle(s) of Natural Justice.There has been a violation of the Principle(s) of Natural Justice implied within Section142 (2) of the Act and such statutory non-compliance vitiates the entire assessment proceedings, therefore, rendering it to be null and void. Addition u/s 68 - HELD THAT:- As already observed that the assessees have discharged the initial burden of proof, wherein the documents submitted by the assessees have remained un-refuted by the A.O. CIT - D.R. has submitted that the documents were a fa ade since the Inspector Reports draw a very different picture and cast a shadow on the genuineness of the investors. Our views on the veracity of these Reports and why the same could have not been utilized by the A.O. behind the back of the assessee have already been expressed. Thus, in light of the aforesaid findings, the grounds taken by the Department in the aforesaid Appeals are dismissed in favour of the assessee.

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• 2021 (7) TMI 727
  Exemption u/s 54F - sale consideration of plots was not deposited in capital gains scheme on or before the due date of filing of the return u/s 139(1) - HELD THAT:- As per section 54F of the I.T.Act, exemption is to be granted if the stipulated conditions are fulfilled and the assessee s case does not fall under the exceptions to exemption specified in the proviso to section 54F(1). As per section 54F(4), the requirement of depositing the amount in Capital Gain Account Scheme (CGAS) arises only if the following conditions are not satisfied: (a) Net consideration invested in new asset within one year before the date on which the transfer of the original asset took place, or (b) Not utilized by the assessee for purchase or construction of the new asset before the date of furnishing of return of income u/s 139 of the I.T.Act. If above conditions are not satisfied, only then, such unutilized amount has to be deposited in CGAS before due date for filing return of income u/s 139 of the I.T.Act. Also, the section firstly referred in section 54F(4) of the I.T.Act is section 139 of the I.T.Act which also includes section 139(4) of the I.T.Act, which would be 31st March, 2016 in the given case. If the amount has been incurred before this date, 139(1) of the I.T.Act due date for depositing into CGAS scheme becomes applicable only when the amount has not been spent before the due date for filing return of income u/s 139(4). The words used in provisions of section 54F of the I.T.Act are `purchased or `constructed and the condition precedent for claiming benefit under such provision is the capital gain realized from sale of a long term capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If the assessee has invested money in constructing the residential house, merely because the construction was not complete in all respects or such building is yet to be completed fully or the building not being in a fit condition for being occupied, would by itself not be a ground for the assessee to be denied the benefit u/s 54F Assessee would be entitled to the benefit u/s 54F of the I.T.Act once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects.Thus we hold that the assessee is entitled to the benefit of section 54F of the I.T.Act in its entirety. Appeal filed by the assessee is allowed.

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• 2021 (7) TMI 725
  Addition u/s 43CA - differential amount of consideration shown in the document and the Stamp Duty Valuation - assessee firm had sold three flats for less than the value as per stamp valuation authority for which agreements and date of registration were not same - assessee contended that the provisions of section 43CA are not applicable when the assessee has already entered into the agreement - HELD THAT:- As per sub-section (3) and (4) of section 43CA, the benefit of prior agreement is granted if the consideration is received at the time of agreement other than cash. In the case in hand, the booking is claimed to have been made prior to 01/04/2013 whereas the sale deeds were executed after 01.04.2013 which falls in the previous year relevant to the assessment year under consideration, therefore, provisions of Section 43CA are applicable for the assessment year under consideration. Thus once the provisions itself has taken care of such a situation or difference in date of prior agreement, then the applicability of provisions cannot be questioned based on mere existence of prior agreement. The transfer under the provisions of section 43CA is recognized only when a registered document is executed and therefore, in view of the facts and circumstances of the case, since the transfer through sale deed is made during, the previous year relevant to the assessment year under consideration for which the provisions of Section 43CA are applicable, then merely because an agreement has taken placed prior to 01/4/2013 would not take away the transaction from the ambit of the provisions of Section 43CA of the Act. More particularly when the entire sale consideration was not made through account payee cheque at the time of entering into an agreement to sell. See M/S. SPYTECH REALTORS PVT. LTD. VERSUS THE ACIT, CIRCLE-6, JAIPUR [ 2020 (1) TMI 1475 - ITAT JAIPUR] - Decided against assessee.

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• 2021 (7) TMI 724
  Disallowance on account of payment of education fund - allowable business expenditure - HELD THAT:- The issue is covered against the Revenue by the decision of the Tribunal in the case of Surat National Co-operative Bank Ltd [ 2013 (8) TMI 1116 - ITAT AHMEDABAD] as held expenditure incurred for purchase of articles for presentation only to its members for keeping alive good image among members and for generating goodwill and ensuring continuity of business with member societies was geld to be expenditure incurred wholly and exclusively for the purpose of business . - Decided in favour of assessee. Disallowance of investment depreciation - HELD THAT:- As decided in own case as per the working filed, the assessee way back in AY 2012-13 had claimed investment depreciation loss (shown in schedule 17 of provisions contingencies). This market to make loss was reduced in AY 2013-14 and after reducing the outstanding loss from investment depreciation claimed in earlier year, the assessee was required to pay tax only being eligible profit for taxation and therefore, the assessee has rightly claimed the amount as investment depreciation loss instead of the entire amount CIT(A) has verified the working submitted by the assessee before him during appellate proceeding and after analyzing the same has allowed the claim. These facts are remained as uncontroverted before us by the Revenue. In view of this matter, we do not find any infirmity in the order of Ld. CIT(A), accordingly, same is upheld. Accordingly, this ground of Revenue is therefore, dismissed.

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• 2021 (7) TMI 723
  TP Adjustment in respect of provision of software development services - Comparable selection - HELD THAT:- We direct exclusion of Larsen Toubro Infotech Ltd. and CG VAK Software Exports Ltd. We also direct inclusion of M/s. R. systems International Ltd. and M/s. Akshay Software Technologies Ltd. Accordingly, we direct the AO/TPO to redetermine the ALP of the transactions. Addition made u/s. 28(iv) - AO noticed from the notes given under Fixed Asset Schedule of the Annual Report that the assessee has received tangible assets free of cost from its holding company (AE), i.e., ARM Limited, UK - AO proposed to assess the above said amount as income of the assessee u/s. 28(iv) of the Act as it was a benefit received in exercise of profession - HELD THAT:- We notice that the Ld. DRP has observed that the assets received free of cost has been capitalized in the books of account. Accordingly, the Ld. DRP has held that the same is liable to be taxed u/s. 28(iv) of the Act. In fact, the assessee has shown the assets received free of cost as note under Fixed Assets Schedule, meaning thereby, they have not been included as assessee's own fixed assets. Hence the above said observation of Ld. DRP is against the facts. Benefit liable to be taxed u/s. 28(iv) of the Act need not always be revenue in nature. Suppose a businessman receives a Car on achieving the sales target, the value of Car is liable to be assessed u/s. 28(iv) of the Act, even though it constitutes capital asset in the hands of that businessman. If the right of ownership of the products/assets have been transferred to the assessee, then their value is liable to be assessed as benefit u/s. 28(iv) of the Act. On the other hand, if the right of ownership has been retained by the AE and they have been sent to the assessee for utilizing them in the work executed by the assessee for AE, then the value of assets cannot be assessed as benefit u/s. 28(iv) of the Act. We notice that these factual aspects have not been brought on record either by the assessee or by the AO, without which it would not be possible to determine about applicability of provisions of sec. 28(iv) - this issue requires fresh examination at the end of AO in the light of principles discussed supra. Accordingly, we restore this issue to the file of the AO. We also direct the assessee to furnish relevant details to the AO and also clarify to the satisfaction of the AO as to whether the right of ownership of the assets/products received free of cost has been transferred to it or not. Non-granting of MAT credit - As this issue requires factual verification, we restore this issue to the file of the AO.Appeal of assessee is treated as allowed for statistical purposes.

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• 2021 (7) TMI 722
  Penalty u/s 271(1)(c) - non-compliance on the part of the assessee of various notices issued seeking explanation of the cash deposits in the bank accounts - HELD THAT:- From the observation of the Ld. first appellate authority in quantum appellate proceeding, we find that he has decided the appeal on the basis of the submission and explanation which were filed before the Assessing Officer without taking any additional evidence on record. This means that information which was required for completing the assessment was already filed by the assessee before the AO and non-attendance or non-filing of information by the AO in response to various notices is rendered merely a technical or venial breach when the addition has already been deleted by the CIT(A) in quantum appeal proceedings keeping in view the explanation regarding the source of cash deposits. In view of Section 273B of the Act, when the assessee has complied with the notice issued by the AO the penalty was not imposable as the explanation filed by the assessee was finally found to be correct and accepted in the quantum appeal. In view of the above facts and circumstances, we do not find any justification for sustaining the penalty levied by the Assessing Officer- Appeal filed by the assessee is allowed.

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• 2021 (7) TMI 721
  Penalty levied u/s. 271(1)(c) or 271(1)(b) - CIT(A) while deleting the penalty has given a finding that the notice issued for levy of penalty had not specified the Section for which the penalty was levied as to whether it was u/s. 271(1)(c) or 271(1)(b) of the Act? - HELD THAT:- We find that CIT(A) while deleting the penalty has given a finding that the notice issued for levy of penalty had not specified the Section for which the penalty was levied as to whether it was u/s. 271(1)(c) or 271(1)(b). As also given a finding that the notice issued was silent as to whether it was for concealment of particulars of income or was for furnishing inaccurate particulars of income. He has further given a finding that in the penalty order AO had initiated penalty for furnishing of inaccurate particulars of income but in the penalty order it was for concealment of income. The penalty imposed suffered from legal flaws and thus the imposition of penalty was untenable and thus deleted the penalty levied by AO. We for the reasons stated hereinabove while dismissing the appeal of the Revenue for A.Y. 2006-07 and for similar reasons dismiss the appeal of Revenue for A.Y. 2007-08 also. Thus appeal of Revenue is dismissed.

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• 2021 (7) TMI 720
  Exemption u/s 11 - Assessment of trust - AO not find certificate u/s. 12A for the year under consideration - additions made by the AO against surplus of income while the assessee was holding a valid certificate u/s. 12A - HELD THAT:- It is an undisputed fact that the certificates/documents were lost in the Uttarakhand floods. It is also not in dispute that the assessee trust has been granted the registration u/s. 12A since 1972. Since all the certificates/documents have been furnished and examined by the CIT(A). We do not find any reason to interfere with the findings of the CIT(A). The appeal filed by the revenue is dismissed.

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• 2021 (7) TMI 719
  Disallowance u/s 14A r.w.r.8D - HELD THAT:- For A.Y. 2012-12 addition u/r. 8D(2)(ii) detailed explanation being given in the foot notes according to which these loans are for various phases of power projects at Orissa; that such interest expenses is not allocable to the exempt income; and that there is no nexus between the interest paid and claimed as expenditure and the exempt income and therefore no disallowance u/r. 8D(2)(ii) of the Rules is called for. In respect of assessment years 2013-14 and 2014-15 as per detailed explanation given in the foot notes of the audited accounts these loans are for various phases of power projects at Orissa; that the interest expenses is not allocable to the exempt income; and that there is no nexus between the interest paid and claimed as expenditure and the exempt income and therefore no disallowance u/r. 8D(2)(ii) of the Rules is called for. While applying the law laid down by Hon'ble jurisdictional High Court in the case of CIT vs. Indian Sugar Exim Corporation Ltd [ 2012 (3) TMI 100 - DELHI HIGH COURT] , CIT vs. Taikisha Engineering India Ltd. . [ 2014 (12) TMI 482 - DELHI HIGH COURT] and CIT vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] CIT(A) directed the deletion of interest component u/r. 8D(2)(ii) of the Rules for all these three years. No illegality or irregularity in the findings of the ld. CIT(A) in deleting the interest component u/r. 8D(2)(ii) of the Rules. Though the CIT(A) confirmed the addition of disallowance under rule 8D(2)(iii), the assessee had already suo moto disallowed the same and it does not require any interference. MAT computation - Direction of the ld. CIT(A) to recompute the MAT payable by assessee after excluding the disallowance u/s. 14A of the Act, such a finding is fortified by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investment (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . We, therefore, confirm the same and dismiss the appeals of the Revenue

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• 2021 (7) TMI 718
  Addition on account of unaccounted commission paid for obtaining accommodation entry - addition u/s. 69C on the presumption that the assessee had paid commission in order to obtain accommodation entries - HELD THAT:- When the addition made for obtaining accommodation entries itself is deleted then there cannot be any scope for sustaining the addition made on the presumption that the assessee would have incurred commission expenditure for obtaining such accommodation entries.- we do not have any hesitation to delete the addition made by the Ld. AO on this issue which is omitted to be adjudicated by the Ld. CIT (A). Accordingly, addition made by the Ld. AO on the presumption that the assessee would have incurred commission expenditure for obtaining accommodation entries is hereby deleted. Addition u/s 69B - on-money transaction - assessee company has paid on-money to the sellers of the property and added to the income of the assessee invoking the provisions of section 69B - HELD THAT:- We cannot conclusively agree on the finding of the Ld. Revenue Authorities that the assessee has paid on-money to the sellers of the property because the two evidence relied by the Ld. Revenue Authorities viz., the data retrieved from the Pen-drive and the admission by the vendors of the property though may have a persuasive value but will not have much substantive evidentiary value in order to make additions in the hands of the assessee. Therefore, in the interest of justice, we hereby direct the Ld. AO to delete the addition made in the hands of the assessee towards on-money paid for the purchase of the residential property.

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• 2021 (7) TMI 717
  Additional depreciation claimed on new Plant and Machinery u/s 32(i)(iia) - AO'S view that additional depreciation was allowable for acquisition of new Plant and Machinery and not on replacement of parts of Plant and Machinery already in existence - HELD THAT:- As decided against assessee in own case [ 2019 (11) TMI 208 - ITAT DELHI] as held no infirmity in the order of the CIT(A) rejecting the claim of additional depreciation on the ground that the various items are not new machinery which has been purchased by the assessee, but, it is in the nature of repair and maintenance of the existing machinery. The grounds raised by the assessee on this issue are accordingly dismissed Disallowance of depreciation on account of re-classification of assets as 'building other than residential', eligible for depreciation @ 10%, which was originally classified by the assessee as 'Plant and Machinery', eligible for depreciation at 15% - HELD THAT:- As decided against assessee in own case [ 2019 (11) TMI 208 - ITAT DELHI] no merit in the logic given by the CIT(A) that the godowns, warehouses and other buildings which are utilized in an ordinary manner even for housing plant or machinery would not become plant or machinery by itself. Further, he has also given a finding that the GI sheets are such material which are utilized for the plant and by its nature this cannot be characterized as plant or machinery. Under these circumstances, we uphold the order of the CIT(A) and dismiss the grounds raised by the assessee on this issue. Addition of net of depreciation on account of capitalization of 25% of Technical Know-how fee - HELD THAT:- We hold that the ld. CIT(A) is not justified in upholding the action of the Assessing Officer in treating 25% of the technical know-how fees as capital in nature. We, therefore, set aside the order of the CIT(A) on this issue and direct the Assessing Officer to treat the entire amount as revenue in nature. The grounds raised by the assessee on this issue are accordingly allowed.

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• 2021 (7) TMI 716
  Addition on account of sundry creditors - HELD THAT:- No addition could be made under this Section because (i) there was Opening Balance and no New Credit had appeared in the Books of the assessee this year, and that (ii) it was the Debit Balance against M/ s Agrawal Coal Corp. P Ltd. (ACCL) and not the Credit Balance, and hence no addition could be made u/s 68. CIT (A) has gone through the reconciliation Statement for the difference between balance of assessee and M/s ACCL.As held that on perusal of the Reconciliation Statement reveals Nil balance of the assessee as per the accounts of ACCL on 31.03.10 and that of ₹ 4,86,531 /- as per the Books of the assessee. It is seen that such reconciliation includes an amount which has been shown as an amount Written Off by that party, i.e. ACCL, as per the ledger maintained by that party. There was actually a Debit of ₹ 4,86,531 /-, which was wrongly taken as a Credit from M/s ACCL by the Assessing Officer. In view of the entire facts of the case, we decline to interfere with the order of the ld. CIT (A).Since, the ld. CIT (A) observation with regard to the amount of ₹ 2,59,994/- is not a ground of appeal before us, no action is called for. Interest on the borrowed capital - Interest attributable from the period of the installation of the new Plant up to the date of start of commercial use of the Plant - HELD THAT:- Having gone through the entire factum of the case, owing to the similar determinative factum of put to use in ICDS IX, AS-16, the judicial pronouncements, provisions to Section 36 (1)(iii) and Explanation 8 to Section 43 (1), we hereby hold that the Interest has to be treated as Revenue Expenditure and need not be Capitalized. Accordingly, the disallowance is hereby directed to be deleted.

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• 2021 (7) TMI 713
  Disallowance u/s 24(a) on the property sub- letted - computation of income for the concerned year it was seen that the assessee is showing rental income from property - HELD THAT:- The assessee is the deemed owner of the property and also offered the rent to tax. The revenue having assessed the rent under the head income from house property cannot deny the statutory deduction u/s 24(a) unless it has been proved on record that the original owner has also claimed the benefit. The AO is directed to verify the claim of income from house property in view of the decision of Hon ble Supreme Court in the case of Raj Dadarkar[ 2017 (5) TMI 586 - SUPREME COURT] and take decision in accordance with the law. Appeal of the revenue is dismissed.

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• 2021 (7) TMI 711
  Adjustment towards foreign exchange fluctuation - non-consideration of impact of abnormal movement in the foreign exchange rates while computing the operating profit margin - HELD THAT:- The assessee is claiming reduction in the profit margin of the comparables on the ground that the foreign exchange fluctuation rate varied at 13.54% in this year in comparison with the preceding year. We fail to appreciate as to what is the rationale of comparing the foreign exchange rate for this year with the preceding year when the transactions of the assessee and those of the comparables relate only to the year in question. The foreign exchange rate fluctuation has impacted the assessee in the same way as the comparables. That can't be a reason for allowing any adjustment in the profit margin of the comparables. Adverting to the facts of the instant case, it is seen that the assessee treated foreign exchange fluctuation loss as non-operating and thus computed its operating margin accordingly. Such treatment has been accepted by the TPO also. Once the forex loss has itself been treated and accepted as non-operating for self and the comparables, the same become neutral qua the computation of operating margin, leaving no room for any further adjustment. We, therefore, reject the claim of the assessee. The ground fails. Adjustment towards excess Custom duty paid on imports by it vis- -vis the comparables - HELD THAT:- There is no merit in the contention of the assessee. Ordinarily, costly purchases are coupled with the increased sale price of final products, thereby leaving the ultimate profit margin at almost the same level as that with cheap purchases. There can be no adjustment just for the assessee making more imports and consequently paying higher custom duty vis- -vis the comparables making indigenous purchases and paying no custom duty. It has not been shown that the import price of the assessee when added with custom duty was higher than the indigenous purchase price of the comparables or that the goods manufactured by it with such costly purchases were sold at same prices as the comparables. As admittedly, there is no difference in custom duty rate paid by the assessee and its comparables, there can be no question of allowing any reduction in the profit margins of comparables on this score simply because the assessee's percentage of import to total materials purchased is higher than that of the comparables. This ground is therefore, dismissed. Comparable selection - HELD THAT:- Bharat Earth Movers Limited as functionally different and further it was a government company with fixed customer base thus be excluded as eligible comparable. JCB India Limited - We uphold the inclusion of JCB India Limited in the list of comparables. At the same time, the TPO is directed to carry out reasonably accurate adjustment to the margin of JCB India Ltd. so as to eliminate the effect of the amalgam of the a microscopic Trading sales and service income, after affording hearing opportunity to the assessee. AR argument stating that if, at all, JCB Ltd. was to be considered as comparable, then the assessee's Manufacturing and Trading activities should also be merged and only one ALP be determined on a consolidated basis - We are not convinced with this argument. The reason is that the assessee itself benchmarked both the segments separately by considering distinct comparables with varying margins. The TPO accepted the ALP under the Trading segment, thereby assigning finality to that. Now, the assessee cannot turn around at this juncture and claim clubbing of the two, which would entail the doing of the entire transfer pricing exercise all over again by the assessee (including preparing a new Transfer pricing study report with altogether new process of selecting comparables) and also the TPO doing everything ab initio. It is because of the difference in the precise nature of Manufacturing and Trading activities having different functions, assets and risks that we have directed hereinabove that suitable adjustment should be made to the profit margin of JCB Ltd. on account of the infusion of its proportionately infinitesimal Trading and Services activities in the Manufacturing activity. Inappropriate computation of working capital adjustment - HELD THAT:- We set-aside the impugned order on this aspect and remit the matter to the file of AO/TPO for re-computing the working capital adjustment by adopting the correct figures. Transfer pricing adjustment on entity level rather than restricting it to the AE transactions - TPO computed the transfer pricing addition by considering revenues from 'Manufacturing segment' in totality at the entity level - HELD THAT:- This issue is fairly settled by judgment of Hon'ble jurisdictional High court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd[ 2017 (6) TMI 1240 - BOMBAY HIGH COURT] holding that the transfer pricing adjustment made at entity level should be restricted to the international transactions only - We, therefore, direct the AO/TPO to restrict the transfer pricing addition to the extent of international transactions under the segment of 'Manufacturing activity'. Recomputation of losses to be carried forward in case resultant transfer pricing adjustment is less than voluntary adjustment offered in turn of income - Additional ground raised - HELD THAT:- The additional ground raised by the assessee is for allowing adjustment towards voluntary transfer pricing addition offered by the assessee in the computation of total income. In this regard, we direct the TPO to allow necessary relief qua the suo motu transfer pricing adjustment offered by the assessee, if the resultant transfer pricing addition turns out to be more than that. The transfer pricing addition made in the impugned order under the Manufacturing activity segment is set aside and the matter is restored to the file of the AO/TPO for recomputing the same in accordance with the directions and observations given hereinabove.

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• 2021 (7) TMI 710
  Disallowance of interest expenses by treating the same as prior period expenses - CIT(Appeals) by holding that the said interest expenses are not allowable as deduction even u/s 36(1)(iii) - HELD THAT:- We find no merit in the contention of the assessee that the interest-free advance given by the assessee-company to M/s. NRC Limited was for the purpose of its business. We, however, find merit in the alternative contention raised by the assessee that only part amount of fund borrowed from M/s. ISG Traders Limited having been advanced to M/s. NRC Limited interest-free, the ld. CIT(Appeals) was not justified in disallowing the entire interest expenses under section 36(1)(iii) and the said disallowance should be restricted to be interest expenses attributable to the interest-free advance given by the assessee-company to M/s. NRC Limited during period 01.04.2010 to 31.03.2011. We accordingly direct the Assessing officer to compute the interest expenses attributable to the interest-free advance given by the assessee to M/s. NRC Limited and restrict the disallowance to that extent. Ground No. 1 of the assessee's appeal is accordingly partly allowed. Disallowance on account of interest expenses under section 36(1)(iii) - HELD THAT:- Following the said conclusion drawn while deciding the issue involved in Ground No. 1, we uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of interest expenses to the extent the same was attributable to the interest-free advance given by the assessee-company to M/s. NRC Limited. Ground No. 2 of the assessee's appeal is accordingly dismissed.

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• 2021 (7) TMI 709
  Registration u/s 12AA and 80G - genuineness of activities is not established by the assessee and further that assessee has not been granted registration u/s 12AA - HELD THAT:- We find that the assessee filed application under section 80G 12AA of the Act on 03.09.2020 in prescribed form under relevant Rule of Income Tax Rules - we find that ld. CIT(E) dismissed/rejected both the application of assessee for the want of sufficient information about the genuineness of activities of the assessee - the assessee vehemently submitted that no notice was received from the office of ld. CIT(E) - assessee placed on record the copy of screenshot of ITBA portal, wherein the email address of assessee is not mentioned correctly. The assessee was not served notice due to wrong reference of email address, therefore, in our view the assessee was prevented by sufficient cause for not furnishing the required details about the genuineness of activities - we deem it appropriate to restore both the appeals to the file of ld. CIT(E) to consider the application(s) of assessee afresh. Both the appeals of assessee are allowed for statistical purpose.

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• 2021 (7) TMI 706
  Validity of reopening of assessment - non-provide of opportunity and also illegality of the reopening of assessment. - HELD THAT:- It is settled position of law that the formation of belief for escapement of income should be based on correct and true information. However, admittedly incorrect figure transfer of cash deposit in the assessee s account was mentioned in the information on the basis of which the Assessing Officer formed his belief of escapement of income - nothing is placed on record to suggest that the Ld. CIT by granting approval had examined the record and applied his mind as there is no justification regarding difference in the amount deposited in bank account and mentioned in the reason for reopening. When apparently there was a higher figure mentioned in the information supplied to the Assessing Officer. No material is available suggesting that bank had supplied wrong information to the Assessing Officer as the AIR information is not placed on record. Looking to the facts of the present case I am of the considered view that the reopening of assessment and approval thereof is not accordance with settled principle of law. Hence, the ground raised by the assessee is allowed. The reopening of the assessment is held to be bad in law on account of non-application of mind by the authorities below. Unexplained cash deposited in the bank account - gifts receipts - HELD THAT:- Assessing Officer drew his conclusion on the basis of the bank statement of the assessee and her father-in-law. It is correct that the assessee had deposited money at the different dates. This has caused suspicion, however, if the assessee had deposited in one go, the Assessing Officer would have not doubted. It is not the case where the donor was not a man of any means. Therefore, looking to totality of facts the action of the Assessing Officer cannot be upheld. Therefore, impugned addition is hereby deleted. - Decided in favour of assessee.

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• 2021 (7) TMI 701
  Assessment u/s 153A - additions made by the AO does not relate to any incriminating material found during search and rather the AO has made the additions on the basis of examination of books of account - whether the assessment years under question in these appeals stood completed or not it has to be seen as to whether the assessments in these years were completed u/s.143(3) and if not whether the time for issuing notices u/s. 143(2)? - HELD THAT:- It is seen that assessment in these years stood concluded and Assessing Officer has not made additions on the basis of any incriminating material and therefore the additions sustained by the ld. CIT(A) are not sustainable and therefore, Ground No.2 in all these appeals is allowed.

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• Customs

• 2021 (7) TMI 734
  Requirement of pre-deposit at the stage of filing appeal before CESTAT (second appeal) - whether appellant was required to pay 10% separately over and above 7.5% in terms of Section 129E of the Customs Act? - HELD THAT:- The issue, whether the appellant is required to pay total 10% i.e. 7.5% + 2.5% at the stage of filing appeal before CESTAT has been settled by the Hon ble Delhi High Court in the case of M/S SANTANI SALES ORGANISATION VERSUS CENTRAL EXCISE, CUSTOMS AND SERVICE TAX APPELLATE TRIUBNAL, DELHI AND OTHERS [ 2018 (6) TMI 249 - DELHI HIGH COURT] where it was held that It is directed that the petitioner and others on filing second appeal before the Tribunal are required to deposit 10% of the amount of duty/ penalty as confirmed by the first appellate authority inclusive of 7.5% pre-deposit made for the first appeal. 10% would not be in addition to and over and above 7.5% of pre deposit made for the first appeal. Thus, in the case of second appeal before CESTAT, the appellant is required to pay total 10% i.e. 7.5% at first appellate stage and remaining 2.5% at the stage of appeal before the CESTAT. Therefore, the view taken by the Learned Commissioner (Appeals) that appellant at tribunal stage is required to pay total 17.5% i.e. 7.5% at first appellate stage and 10% at tribunal stage was held to be illegal. Therefore, the impugned order is not sustainable hence the same is modified. Appeal No C/12124/2018 is allowed by way of remand for passing a fresh order in the light of above observation. The said appeals are allowed by way of remand to the Adjudicating Authority to decide a fresh only on the aspect of adjustment of sanctioned refund against drawback claim already sanctioned.

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• 2021 (7) TMI 726
  Service of order - appeal rejected on the ground of time limitation - burden to prove - power of DRI to issue SCN - HELD THAT:- From the facts, it is seen that the order-in-original was passed on 22.06.2016. From the dispatch register maintained by department, it is seen that the OIO was dispatched on 12.07.2016. However, there is no supporting evidence to show that the order has been served / communicated on the addressee. Dispatching a letter/consignment by registered post would raise a presumption that it is served upon the assessee. Such presumption is a rebuttal one - In the present case, the appellant has contended that they have not received the Order-in-Original. Then, the burden is on the department to establish that the order was communicated / served on the appellant. The word used in section 128 as well as 153 is communication of the decision, summons and notices. By merely sending a copy of the Order in Original by registered / speed post, the department cannot wash of their hands when they are duty bound to serve the same on the appellant. The department ought to have tracked the consignment and made sure that it has been delivered to the addressee. They can obtain a copy of the same from the website after tracking the consignment and keep the same in the file in the same manner they maintain dispatch register. This would be useful to prove that the Order in Original is served upon the addressee. Jurisdiction - power of DRI to issue SCN - HELD THAT:- The matters relating to power of DRI officers to issue SCN were taken up before the Hon ble Supreme Court and many of the adjudication of the cases were kept in abeyance. Taking note of all these facts, it is convincing that appellant has put forward sufficient reason to establish that they were not aware of the adjudication order passed by the original authority and that they were not served with the adjudication order, as contended by department. The impugned order passed by the commissioner (Appeals) holding that the appeal filed is time barred is set aside. The matter is remanded to the Commissioner (Appeals) who shall consider the same on merits - appeal allowed by way of remand.

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• 2021 (7) TMI 712
  Rectification of mistake - error apparent on the face of record - review order within the time limitation or not - seeking restoration of appeal - HELD THAT:- Section 129D (3) of the Customs Act, 1962 prescribes a period of three months for the Review Committee to pass its order, which fact was duly taken note of by me in the Final Order impugned herein. Even Higher Courts have held that month appearing in the statute, when applied to the case on hand, would commence from the date of communication i.e., 11.03.2019 and the said three month period would expire on 11.06.2019 - Hence, the Review Order passed here in the case on hand is clearly within the time limitation prescribed. This has given rise to an apparent mistake in the Final Order, which requires rectification. Accordingly, the Revenue has come up with this restoration application. There is no discussion or finding on merits and hence, the matter is required to be sent back to the file of the First Appellate Authority for passing a fresh order on meritsthe appeal is restored to the file of the First Appellate Authority. The Miscellaneous Application for Restoration of Appeal of the Revenue is allowed - On merits, the appeal of the Revenue is allowed by way of remand.

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• Corporate Laws

• 2021 (7) TMI 708
  Approval of scheme of Amalgamation - seeking dispensation of meeting of Equity Shareholders, secured creditors and unsecured creditors of all the applicant companies - seeking direction for holding and convening the meetings of unsecured creditors of applicant companies - HELD THAT:- The meetings of the Shareholders of all the applicant companies as well as meetings of Secured Creditors of Applicant Company No. 2 and Applicant Company No. 4 and the meeting of Unsecured Creditors of Applicant Company No. 3 are hereby dispensed with. Since there are no Secured Creditors and Unsecured Creditors in Applicant Company No. 1 and no Secured Creditor in Applicant Company 3, question for convening of meetings of Secured Creditors and Unsecured Creditors in Applicant Company 1 and meeting of Secured Creditor in Applicant Company 3 does not arise at all. The present application complies all the requisite criteria of section 230-232 of the companies Act, 2013 - the present application is allowed.

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• 2021 (7) TMI 707
  Approval of scheme of arrangement - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- The Regional Director has filed a Supplementary Report dated 16th December, 2020 with this Tribunal, accepting the response of the Petitioner Companies as satisfactory. The Transferee Company shall ensure compliance of Section 186(7) of the Companies Act 2013. The Petitioner Companies also undertake to comply with all the statutory requirements if any, as required under the Companies Act, 2013 and the Rules made thereunder, whichever is applicable. Accordingly, the clarifications and undertakings given by the Petitioner Companies are hereby accepted. The Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. Since all the requisite statutory compliances have been fulfilled, the Scheme of Arrangement is hereby sanctioned and declared the same to be binding on the Transferor sompanies and Transferee Company and their respective shareholders. Application allowed.

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• 2021 (7) TMI 704
  Winding of respondent company - Section 271 (c), (d) and 272(3) of the Companies Act, 2013 - HELD THAT:- The affairs of the company have been conducted in a fraudulent manner, the persons concerned in the formation or management of its affairs have been found guilty of fraud, misfeasance or misconduct in connection therewith and that the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years Hence it is found proper that the Company be wound up in the interest of justice and as prayed for by the Petitioner. The order is hereby passed for winding up of the Company, Bhasank Foods Pvt. Ltd., under the provisions of Section 271 (c) and (d) of the Companies Act, 2013 - Petition disposed off.

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• Securities / SEBI

• 2021 (7) TMI 751
  SEBI powers to issue directions and levy penalty - trustee s decision to wind up a scheme of the mutual fund - Interpretation of the term consent in Regulation 18(15)(c) - HELD THAT:- The quotation highlights that interpretation is sometimes a three-stage process. At first, the words being interpreted should be understood according to their grammatical meaning in their literal and popular sense. In the second stage, we consider whether in the given context the plain meaning is obscure as the text gives rise to choice of more than one interpretation, or the propositional interpretation fails to achieve the manifest purpose of the legislation, reduces it to futility, is practically unworkable or even illogical. In such cases at the third stage, the court applying interpretative tools selects or blue-pencils an interpretation advancing the legislative intent without rewriting the provision. The legislative intent is gathered not by restricting it to the language of the provision, rather in the light of the object and purpose of the provision and the legislation. The courts do lean towards a pragmatic and purposive interpretation as there is an assumption that the draftsmen legislate to bring about a functional and working result. Harmonious interpretation of Regulation 18(15)(c) with Regulations 39 to 42 - Held that:- Consent for the purpose of Regulation 18(15)(c) refers to the consent of the majority of the unitholders present and voting, and in case of a poll, the computation would be with reference to the number of units held by the unitholder. In fact, in the course of hearing, it was conceded that majority of the unitholders belong to provident fund trusts or pension funds. The voting pattern referred to in our earlier order reflects that voting under Regulation 18(15)(c) is possible and can work smoothly without much difficulty. The apprehensions expressed, therefore, do not carry much weight. It is obvious that where the unitholders vote against winding up, consequences would follow and accordingly the scheme would not be wound up. This is a natural and normal consequence which will have to be given effect to. It would, as stated above, happen rarely and that too would not happen without any genuine and good reason. The consent of the unitholders, as envisaged under clause (c) to Regulation 18(15), is not required before publication of the notices under Regulation 39(3). Consent of the unitholders should be sought post publication of the notice and disclosure of the reasons for winding up under Regulation 39(3). To complete interpretation of Regulation 18(15), we have to record that clause (a) applies and requires the trustees to obtain consent of the unitholders whenever required by SEBI in the interest of the unitholders. Clause (b) states that the trustees would obtain consent of the unitholders whenever required to do so on the requisition made by three-fourths of the unitholders of any scheme. Accordingly, clause (a) would apply whenever SEBI mandates and clause (b) applies whenever three-fourths of the unitholders of the scheme make a requisition. The High Court was right in observing that the trustees and the AMC have understood and accepted that the consent of unitholders of the scheme would be necessary if the majority of the directors of the trustee company decide to wind up a scheme. Challenge to the constitutional validity of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 - HELD THAT: - No doubt, clause (a) to Regulation 39(2) gives primacy to the opinion of the trustees and does not require prior approval of SEBI, yet SEBI is entitled to conduct an inquiry and investigation when justified and necessary to ascertain whether the trustees have acted in accordance with their fiduciary duty and also for reasons which would fall within the four corners of clause (a) to Regulation 39(2). If the trustees have acted for extraneous and irrelevant reasons and considerations, the action would be in violation of clause (a) to Regulation 39(2) and therefore amenable to action under the SEBI Act, including directions under Section 11B. The power of SEBI extends to regulating and monitoring the functioning and decisions taken by mutual funds, the trustees and the AMC. SEBI has the power to pass any direction if it deems fit in the interest of unitholders. It cannot be accepted that the trustees under clause (a) to Regulation 39(2) have been given absolute and unbridled power to wind up a scheme. Language of clause (a) to Regulation 39(2) states that the trustees must form an opinion on the happening of any event which requires the scheme to be wound up. Further, as per Regulation 39(3), the trustees are bound to give notice disclosing the circumstances leading to the winding up of the scheme. These notices along with the reasons have to be communicated to SEBI and made known to the unitholders by publication in two daily newspapers having circulation all over India and a vernacular newspaper having circulation at the place where the mutual fund is formed. We have agreed with the High Court that the opinion of the trustees under clause (a) to Regulation 39(2), therefore, must be consented to by the unitholders in terms of the mandate of Regulation 18(15)(c). In view of this interpretation, the argument challenging constitutional validity of the Regulations on the ground that they give unbridled and absolute power to the trustees loses much of its sting and force. There are, therefore, sufficient guidance and safeguards in the Regulations itself on the power of the trustees to decide on winding up of the fund. The Regulations, in our opinion, rightly draw the distinction between creditors and the unitholders. The unit holders are investors who take the risk and, therefore, entitled to profits and gains. Having taken the calculated risk, they must also bear the losses, if any. Unitholders are not entitled to fixed return or even protection of the principal amount The Regulations under challenge do not suffer from the vice of manifest arbitrariness.

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• Insolvency & Bankruptcy

• 2021 (7) TMI 715
  Operational Creditor or Financial Creditor - Seeking to declare applicant/GNIDA as Operational Creditor in the 6th CoC - seeking for issue of necessary directions for upholding and continuing the already declared position/status of the applicant/GNIDA as 'Financial Creditor' as per the earlier decision taken in the 4th meeting of CoC on 21.10.2019 - HELD THAT:- Similar issue decided in the case of VMS EQUIPMENT PVT. LTD. VERSUS PRIMOSE INFRATECH PVT. LTD. [ 2020 (10) TMI 385 - NATIONAL COMPANY LAW TRIBUNAL , NEW DELHI BENCH ] where the applicant had challenged the decision taken by the CoC in its 6th meeting dated 17.12.2019, by which the applicant i.e. Greater Noida Authority was declared as an Operational Creditor instead of Financial Creditor - this Adjudicating Authority, after considering the submissions of the applicant as well as RP and the decisions referred by the parties, passed a detailed order and confirmed the decision of the RP, to treat the applicant as an Operational Creditor instead of Financial Creditor. Since the similar issue raised earlier by the applicant has already been decided by this Bench, hence, the present application is not maintainable - application dismissed.

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• 2021 (7) TMI 714
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - issuance of demand notice in Form 3 annexed with invoices - query raised from the Operational Creditor as to how the Demand Notice based on invoices issued in Form 3 is in compliance of Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- Subject of the Form 3 is Demand Notice/invoice, which requires the Operational Creditor to give comprehensive details of the operational debt in columns from 1 to 7 like Total amount of debt, Date of Default, Calculation of reaching the amount of Default, Particulars of Security held, Record with Information Utility etc. However, in contrast, the Form 4 provides an escape route to the Operational Creditor from disclosing these important facts - Hence, one finds that no prejudice can ever be caused to any of the parties if the Demand Notice based on Invoices is sent in Form 3. The facts of the Neeraj Jain [ 2020 (3) TMI 99 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI ] decided by Hon'ble NCLAT were different from the facts of the present case inasmuch as no invoice was ever sent by the Operational Creditor in that case, whereas the Operational Creditor in the present case has annexed the invoices with its demand notice sent in Form 3. Hence, the conclusion made in the aforesaid Judgment is binding on this Adjudicating Authority only in a situation where invoice is not only generated but is also a relevant document to prove the existence of default but the same is not annexed with the Demand Notice sent in Form 3 or Form 4. In a situation where an Operational Debt arises out of the provision of goods and services and pursuant to that Invoices are raised, there is no illegality in choosing the Form 3 as provided in Rule 5(1)(a) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for sending the Demand Notice provided that the Unpaid Invoices forming part of the transaction are annexed therewith - issuance of Demand Notice in Form 3 annexed with invoices by the Operational Creditor in the present case would be in order in terms of the Rules. List this matter for hearing on 12.07.2021 on the point of delivery of Demand Notice to the Corporate Debtor, pecuniary jurisdiction, limitation etc.

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• Service Tax

• 2021 (7) TMI 735
  Valuation - life insurance business - treatment of surrender value exacted, on premature exit, from holders of unit linked insurance policy (ULIP) as consideration for provision of service - whether the surrender charge is consideration for a service that comes within the ambit of the levies pertaining to the insurance sector during the period of dispute? HELD THAT:- It is common ground that upon an insured ceasing to comply with the obligation to pay the premium at stipulated intervals, the policy is deemed to be surrendered and the holder entitled to surrender value representing the portion of the receipts that had been invested in the appropriate funds. There is also no dispute that the amount disbursed is lesser than the value of the funds on the date of surrender. The proposition of Learned Authorized Representative is that the amount so withheld is consideration for services rendered in connection with the fund during the period of investment. The recall order was actuated by the merit of the plea in rectification proceedings that taxability under one of the enumerations in section 65(105) of Finance Act, 1944 appeared to have been considered in the decision of the Tribunal that ruled in favour of the assessee. Rectification that calls for recall remains as under disposal and attains consummation with substitution of the recalled order. It would be presumption for Learned Authorised Representative to conceive that such recall must, inevitably, lead to a contrary opinion on the part of the Tribunal - Mere reference to the recalled decision does not, ipso facto, render the finding to be bereft of value as precedent. Reliance placed in the case of SHRIRAM LIFE INSURANCE COMPANY VERSUS CC, CE ST, HYDERABAD IV AND CC, CE ST, RANGAREDDY GST (VICE-VERSA) [ 2019 (2) TMI 868 - CESTAT HYDERABAD] where it was held that the transaction in question is not a service at all but the transaction in a actionable claim hence could not have been by any stretch of imagination covered under any of the specified taxable heads of service even for the period prior to 01.07.2012 - the demand of service tax on the surrender charges for the period in question is unsustainable. Appeal allowed - decided in favor of appellant.

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• 2021 (7) TMI 731
  Refund of Cenvat Credit - Air Travel Agency Services - Short-term Hotel Accommodation Services - Cleaning Services - Pest Control Services - Krishi Kalyan Cess - HELD THAT:- Though, the authority below has denied the credit availed on these services alleging that these services have no nexus with the output services, the department has no case that the services were not availed by the appellants for the purpose of providing output services. As also, there is no evidence to establish that these services were used for personal consumption - From the documents furnished, it is convincing that these services have been availed by the appellants for export of their output services - Further, this issue is covered by the decision of the Tribunal in the appellant s own case M/S. MAERSK GLOBAL SERVICE CENTRES (INDIA) PVT. LTD. VERSUS COMMISSIONER OF G.S.T C.C.E, (CHENNAI OUTER) [ 2018 (7) TMI 1838 - CESTAT CHENNAI] - the rejection or refund of credit on these services is unjustified. Short-term Hotel Accommodation Services are availed for the stay in hotel for attending workshop, seminars, meeting clients etc. - HELD THAT:- This is clear from documents in the nature of Hotel Invoice, e-mail etc. It is established that these are not used for personal consumption - appellant has relied on the decision in the case of M/S. GE MONEY FINANCIAL SERVICES P. LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2019 (5) TMI 1569 - CESTAT CHANDIGARH] to argue that the said decision has held that the credit availed on Hotel Accommodation Services is eligible - refund of credit is to be allowed. Cleaning Services - HELD THAT:- As these services are required to keep the premises of the appellants office in a clean and hygienic manner. So also, is the case with pest Control Services - the appellant is eligible for refund of credit on these two services. Krishi Kalyan Cess - HELD THAT:- The learned counsel has fairly stated that the credit availed on Krishi Kalyan Cess is not eligible and that they are not contesting the same. The refund denied under this head is upheld. Appeal allowed in part.

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• Central Excise

• 2021 (7) TMI 705
  CENVAT Credit - credit denied on the premise as per N/N. 02/14-CE (N.T.) dt.20.1.2014, the appellant was not entitled to credit prior to the N/N. 01/10-CE dt.6.2.2010 - extended period of limitation - HELD THAT:- Reliance placed in the case of DHARMPAL SATYAPAL LTD. VERSUS COMMISSIONER OF C. EX., NOIDA [ 2016 (9) TMI 1389 - CESTAT ALLAHABAD] , the appellant is entitled to take credit on the inputs. Similarly placed assessee was allowed the credit although against those orders, the appeals have been filed by the Revenue before the Commissioner (Appeals), in that circumstance, when the Revenue is having divergent views on the issue, the extended period of limitation is not applicable - Admittedly, in this case, the SCN has been issued by invoking the extended period of limitation, therefore, the denial of credit is barred by limitation. Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2021 (7) TMI 739
  Dishonor of Cheque - funds insufficient - presumption about the existence of legally enforceable debt - rebuttal presumption or not - preponderance of probability - material contradictions in the case of the complainant - HELD THAT:- The complainant in his complaint, as well in his examination-in-chief as PW-1 has stated that the loan was given by him to the accused in the month of July 2012. He has not given any specific day of the month as to the date on which the alleged loan was given. The month is also stated to be July of the year 2012. However, the very same witness in his cross-examination has stated that he lent the money to the accused on 06.08.2012. That means, the complainant was clearly aware the exact date on which the loan is said to have been given by him to the accused. However, for the reasons best known to him, neither in his complaint nor in his evidence as PW-1 in his examination-in-chief has mentioned the exact date of the alleged loan - regarding the date of alleged loan transaction, the complainant has shown a greater variation in his complaint and in his evidence. No doubt, a presumption regarding legally enforceable debt is formed in favour of the accused as observed above. However, the said presumption is rebuttable. For rebutting the said presumption, it is not necessary for the accused either to enter the witness box and to lead his evidence or examine any witness or even to produce any documentary proof in his support. Suffice for him to make a case of preponderance of probabilities in his favour to rebut the presumption formed in favour of the complainant under Section 139 of N.I. Act - The material contradiction that has been brought out in the case of the complainant would dilute the case of the complainant, at the same time, make out a preponderance of probabilities in favour of the accused. This aspect both the trial Court, as well as the Sessions Judge's Court have failed to observe. The impugned judgments to be considered as perverse and suffering with infirmity - Petition allowed.

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• 2021 (7) TMI 737
  Dishonor of Cheque - legality of signature on a money receipt which forms the basis of consideration behind the cheque in question - refusal to to send the document in question to a handwriting expert quite sometime ago - HELD THAT:- The learned revisional Court seems to have erred in holding that the application for seeking the handwriting expert's opinion was filed after the examination of the accused under Section 313 of the Code. In any event, even after examination of the accused under Section 313 of the Code, an accused can seek the opinion of a handwriting expert - If the purported money receipt is not sent to an expert for comparison, it would amount to denying a fair trial to the accused. The application of the petitioners shall appropriately be allowed to send the money receipt to a handwriting expert for comparing the signature of the accused with those in admitted documents - Trial Court are set aside and the learned Trial Court is directed to send the money receipt in question to a handwriting expert for comparison with the signature of the accused present in admitted documents - application disposed off.

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• 2021 (7) TMI 736
  Dishonor of Cheque - insufficiency of funds - interpretation of statute - Section 138 of the NI Act - imposition of punishment of imprisonment, which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both - whether the learned appellate Court has rightly interfered with the sentence and sentenced to fine only which the accused had already deposited? - HELD THAT:- Here in the instant case, in Section 138 of the NI Act the word or has been employed and discretion has been conferred to the Criminal Court sentencing the convicted person for offence under Section 138 of the NI Act. Thus, there is a discretion left with the Criminal Court dealing with complaint under Section 138 of the NI Act either to sentence the accused with imprisonment or to punish the accused with the sentence of fine upon considering the facts and circumstances of the case. From the provisions contained in Section 138 of the NI Act and following the principles of law laid down by their Lordships of the Supreme Court in the case of Somnath Sarkar v. Utpal Basu Mallick and another [ 2013 (10) TMI 949 - SUPREME COURT ], it is quite vivid that Criminal Court sentencing the accused for commission of offence under Section 138 of the NI Act is competent to impose sentence of fine only as imposition of jail sentence is not mandatory as it is the discretion vested with the Criminal Court dealing with complaint under Section 138 of the NI Act either to impose jail sentence or sentence of fine only depending on the facts and circumstances of particular case. Whether the trial Court as well as the Court of Session is justified in not imposing compensation upon the accused/respondent No. 1 under Section 357(1)(b) of the CrPC? - HELD THAT:- The law with regard to grant of compensation under Section 357(3) of the CrPC in cases arising from Section 138 of the NI Act is well settled. The object of Section 138 of the NI Act appears to be punitive as well as compensatory in nature as it provides a single forum and single proceeding for enforcement in criminal liability (for dishonouring the cheque) and for enforcement of civil liability (for realization of cheque amount). It is quite vivid that under Section 138 of the NI Act, Criminal Court is competent to levy fine up to twice the cheque amount and direct payment of such amount as compensation by way of restitution in regard to the loss on account of dishonour of cheque under Section 357(1)(b) of the CrPC and as such, the power under Section 357(3) of the CrPC cannot be exercised by Criminal Court in the cheque dishonour cases. It is quite vivid that the trial Magistrate has convicted the accused/respondent No. 1 under Section 138 of the NI Act and sentenced him to undergo RI for three months, but no fine was imposed, however, in appeal filed by the accused, the appellate Court maintained conviction, but reduced sentence to fine sentence only. Taking into consideration, the provisions contained in Section 138 of the NI Act in which punishment imposable is two years imprisonment or with fine which can be twice the amount of cheque - ends of justice would be served if fine awarded ₹ 5,000/- is enhanced to ₹ 2,67,011/- and an additional amount of ₹ 25,000/- towards interest on the said amount is imposed. Accordingly, the accused/respondent No. 1 is sentenced to pay fine of ₹ 2,67,011/- and ₹ 25,000/- which shall be paid as compensation to the complainant/petitioner under Section 357(1)(b) of the CrPC. It is stated at the Bar that respondent No. 1 has deposited fine of ₹ 5,000/- in compliance of the order passed by the appellate Court. The criminal revision is allowed in part.

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• 2021 (7) TMI 702
  Seeking an order to restrain the Respondent from encashing bank guarantees - HELD THAT:- In view of the statement made by Mr. Handoo and the fact that the parties are going to attempt a settlement, Mr. Parag Tripathi, learned Senior Counsel for the Petitioner states that he would not like to press the present petition at this stage and seeks liberty to approach this Court, at a later stage, in case the Respondent initiates steps for the invocation of the bank guarantees. The present petition is dismissed as withdrawn with liberty to the Petitioner as aforesaid.

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