TMI Tax Updates - e-Newsletter
July 24, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
PMLA
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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GST:
Rectification of TRAN-I - Petitioner's difficulty in filling up a correct credit amount in the TRAN-1 form is a genuine one which should not preclude him from having its claim examined by the authorities in accordance with law.
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GST:
Classification of services - intermediary service or not - benefit of exports - The applicant is providing intermediary service in the name of hand holding service and not 'support service' as being claimed by the applicant and the said service does not qualify to be an export of service.
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GST:
Levy of GST - Individuals who own flat/s in a society but have opted not to become the member of the society - eligibility for GST exemption of ₹ 7500/- Section 97(2), which encompasses the questions, for the ruling by the AAR does not cover the question raised by the applicant - answer denied
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GST:
Classification of supply - online and offline tendering - do not qualify as goods - both should be considered as Supply of Services under the residual Services Heading 9997
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GST:
Classification of goods - Instruments Cluster is a combination of instrumentation including Speedometer, Tachometer, Odometer, Fuel Gauge, Temp. Gauges, Buzzers & Clock Display etc. - ‘Cluster’ is purely a different manufactured product resulted by way of assembling and connecting various component on single electronic platform and which are solely used in vehicles - liable to tax@ 28 %
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Income Tax:
Deduction u/s 54F - amount not deposited within time limit u/s. 139(1) but purchase flat before the extended time of filing of return u/s. 139(4) - assessee is entitled deduction for utilization of sale consideration for investment in new residential property within due date as stipulated u/s 139 which cannot be meant only section 139(1) - deduction allowable
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Income Tax:
Reopening of assessment u/s 147 - reopening on the basis of retrospective amendment relating to diminution in the value of any asset is required to be added to the book profit for the purposes of Section 115-JB - the retrospective amendment to any provision cannot be a ground for making re-assessment
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Income Tax:
Interest u/s 234B - scope of amendment in section 209 - entire payment received by the assessee from India was subject to TDS hence no interest is chargeable - The amendment brought into the act by the FA 2012 is applicable with effect from 01.04.2012 and is applicable from assessment year 2013 – 14 and prospective in nature
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Income Tax:
Enhancement of income by CIT(A) u/s 251(2) - no notice of enhancement - the department did not place any evidence to show that the CIT(A) has issued notice for enhancement - the enhancement made by the Ld.CIT(A) is unsustainable
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Income Tax:
TDS u/s 194C - organisers purchase seeds from farmers on behalf of company - it is established that the company has not made any payment to the organizers for the services rendered and the company has also charged the interest for the advances and made only payment for the seed purchased from the organizers - no TDS
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Income Tax:
Disallowance of expenses u/s 37(1)and depreciation u/s 32 - commencement of business - it can be said that the business had been set up and that the only thing was that the assessee was not able to generate any income out of the same - the business would commence when the activity which is first in point of time and which must necessarily precede all other activities, is started - expenses/depreciation is allowable
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Income Tax:
TDS u/s 195 - disallowance u/s 40(a)(ia) of commission paid to foreign client - if a person paying interest or any other sum to a nonresident is not liable to deduct tax if such sum is not chargeable to tax under the Act
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Income Tax:
Employee's contribution to PF and ESI funds beyond the due dates - Addition u/s 36(va) read with Section 2(24)(x) - decision in supreme court VINAY CEMENT LTD. [2007 (3) TMI 346 - SC ORDER] is not applicable as it concerned with the law as it stood prior to the amendment of Section 43B - not allowable
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Income Tax:
Set-off of long term capital loss on sale of mutual funds - gain from sale of shares as well as property is available - Once the assessee has determined its lTCG income in a particular manner which has sanction of section 70, the AO cannot disturb such calculation merely because it is less remunerative from the angle of determination of tax
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Income Tax:
Disallowance of R & D units purchased as per Technical License Agreement - when the assessee has purchased a product in order to carry out improvements in its technology for future development and its sales thereafter, then such purchases cannot be said to be payment of royalty - the payment was not for use or use of any technology but for purchase of equipment for R&D purpose - no disallowance
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Income Tax:
Taxability of shares premiums u/s 56(2)(viib) r.w. Rule 11UA - contention that provisions of section 56(2)(viib) should be applicable only when there is investment of unaccounted money - not find any merit in the argument
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Income Tax:
Disallowance u/s 14A on ground of eligibility of deduction u/s. 80P(2)(d) - there is no application of section 14A as far as the deduction u/s 80A to 80U under Chapter VIA of the Act
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Income Tax:
Computation of ‘Cost of Sales’ and closing value of land - matching concept for determination of true profits - where the sale revenue has been recognized on the basis of FSI sold, the costs of FSI also needs to be determined on the same principles - The determination of ‘Cost of Sales’ in terms of geographical area would give totally distorted picture - not permitted
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Customs:
Re-export of goods - extension of time limit for re-export of goods - labeling defects - Learned Tribunal, in our opinion, was justified in finding that the defects in labeling, as pointed out by the adjudicating authority, were of non-rectifiable character and therefore, the goods in question could not be allowed to be imported into India and therefore re-export was directed.
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Customs:
Principles of Natural Justice - opportunity to cross examination - petitioner has sought for a request to cross examine, the same came to be denied then the petitioner had also raised this before the Appellate Authority, hence, this Court is of the affirmed view that the petitioner can be granted an opportunity to cross examine the three witnesses - remanded
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Indian Laws:
Date for filing of Income Tax Returns extended from 31.7.2019 to 31.8.2019
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Central Excise:
Classification of the imported machine - Cyclotron - power of the Commissioner (Appeals) to assess or reassess the demand - The Appellate Authority was not bound by the demand of lower rate of duty under CETH 30063000 by the Adjudicating Authority.
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Central Excise:
CENVAT Credit - invoices beyond six months - Rule 4(7) of CCR, 2004 - the time restriction of six months would not apply to the invoices issued prior to 01/09/2014
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (7) TMI 1108
Classification of goods - Instruments Cluster - whether Fall Under 8708 or 9026/9029? - applicable rate of GST - HELD THAT:- The applicant supply clusters in which several instruments are clustered. Thus, there is no supply of individual instrument - Electronic cluster is the distinct product having distinct name, use from its component. It is manufactured by using various component such as Speedometer, Fuel Gauge, Pointer, Illumination And Warning Indicators-lamps, Temperature Gauge, clock (12hr 24hr), Battery Voltage Level Indicator, Service or Maintenance Indication, Mean Maximum speed, Warning Indicators-LEDs; etc. Cluster is purely a different manufactured product resulted by way of assembling and connecting various component on single electronic platform and which are solely used in vehicles. The product sold by applicant is parts of motor vehicle. The same will be covered under excise chapter heading number 8708 and is liable to tax @ 28%.
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2019 (7) TMI 1107
Classification of supply - Supply of Goods or Supply of Services - online tendering - offline tendering - HSN classification - administrative service or specific service? Whether online tendering to be considered as Supply of Goods or Supply of Services? - HELD THAT:- Online Tendering does not satisfy the definition of goods . The definition of services as mentioned in the Business Dictionary: Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation. Sometimes services are difficult to identify because they are closely associated with a good; such as the combination of a diagnosis with the administration of a medicine. No transfer of possession or ownership takes place when services are sold, and they (1) cannot be stored or transported, (2) are instantly perishable, and (3) come into existence at the time they are bought and consumed. In the present case at hand, the provisions of e-tender, which is intangible is delivered through telecommunication network or internet. Thus, the intention of the legislature is very clear, to treat such activities as supply of services - Online tendering is a type of service which are rendered by NMMC to the various person who are willing to fulfill their requirement for procurement of goods or services which will be raised on their website (www.nmmc.gov.in) or on common portal of the Government of Maharashtra (www.mahatender.gov.in) or on any other authorized website. Whether offline tendering to be considered as Supply of Goods or Supply of Services? - HELD THAT:- Offline Tendering does not satisfy the definition of goods , in its entirety. The definition of services as mentioned in the Business Dictionary: Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation. Sometimes services are difficult to identify because they are closely associated with a good; such as the combination of a diagnosis with the administration of a medicine. No transfer of possession or ownership takes place when services are sold - Hence offline tendering will also be considered as rendering of services. Under which tariff head the Online Tendering should get taxed? - HELD THAT:- Since Online Tendering as a service is not specified anywhere, the same should get taxed under Service Heading 9997. Under which tariff head the Offline Tendering should get taxed? - HELD THAT:- Since Offline Tendering as a service is not specified anywhere, the same should get taxed under Service Heading 9997. If tendering is service then whether it will be considered as administrative service or specific Services? - HELD THAT:- The tendering will be covered under the residual Services Heading 9997.
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2019 (7) TMI 1106
Maintainability of Advance Ruling application - Levy of GST - Individuals who own flat/s in a society but have opted not to become the member of the society - eligibility for GST exemption of ₹ 7500/- - whether members of the society will be at par with the other individual flat owners who are not members. HELD THAT:- Section 97(2), which encompasses the questions, for the ruling by the AAR does not cover the question raised by the applicant. It is therefore felt that this authority does not have jurisdiction to pass any ruling on such matters/questions. The impugned application is not maintainable - No proceeding of Advance Ruling under the GST Act lies in the instant case
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2019 (7) TMI 1105
Classification of services - intermediary service or not - Marketing services to be supplied by the Applicant under the Foreign Immigration Advisor to the Consultant Manager - Handholding services to be supplied by the Applicant under the Foreign Immigration Advisor Agreement - export of services or not? Whether the Marketing services to be supplied by the Applicant under the Foreign Immigration Advisor to the Consultant Manager constitutes a supply of Support services classified under SAC 9985 or Intermediary service classifiable under SAC 9961/ 9962 or any other heading? - HELD THAT:- For the FB-5 programs there are various such Consultant Managers/ Attorney who specialize in this field in the USA and the applicant will be doing all the process in India on behalf of the Consultant Manager and effectively will be working on his behalf as an agent and hence the applicant's contention that he is providing marketing service on his own is not acceptable. The fact of the matter is that he is providing the intermediary service in the name of marketing service - The consideration for the services rendered by the applicant will be paid upon successful investment/ repatriation by the investor. The applicant does not provide any services on his own but is acting as an intermediary in the subject case. Whether the Marketing services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? - HELD THAT:- The services are provided to the Consultant Manager situated in foreign territory fall in Sections 13(8b) of Section 13 of the IGST Act, 2017. Hence the place of supply of service is within India and therefore the service rendered by the applicant is not export of service as condition (iii) of Section 2(6) of IGST Act is not fulfilled. Whether the Handholding services to be supplied by the Applicant under the Foreign Immigration Advisor Agreement constitute a supply of Support services falling under SAC 9985 or Intermediary service classifiable under SAC 9961 / 9962 or any other heading? - export of services or not - HELD THAT:- The applicant is providing intermediary service in the name of hand holding service and not 'support service' as being claimed by the applicant and the said service does not qualify to be an export of service.
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2019 (7) TMI 1102
Rectification of TRAN-I - Inadvertent error in filing of TRAN-1 Form - HELD THAT:- The Court is unable to find any distinguishing feature that should deny the Petitioner a relief similar to the one granted in those cases - In those cases also, there was some error committed by the Petitioners which they were unable to rectify in the TRAN-1 Form and as a result of which, they could not file the returns in TRAN 2 Form and avail of the credit which they were entitled to. In the present case also the Court is satisfied that the Petitioner's difficulty in filling up a correct credit amount in the TRAN-1 form is a genuine one which should not preclude him from having its claim examined by the authorities in accordance with law. A direction is accordingly issued to the Respondents to either open the portal so as to enable the Petitioner to again file TRAN-1 electronically or to accept a manually filed TRAN-1 on or before 31st May, 2019. The Petitioner's claims will thereafter be processed in accordance with law. This Court directs the Respondents to either open the online portal so as to enable the Petitioner to again file the rectified TRAN-I Form electronically or accept the manually filed TRAN-I Form with the correction on or before 31st July, 2019. Petition disposed off.
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Income Tax
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2019 (7) TMI 1098
Reopening of assessment u/s 147 - reopening on the basis of retrospective insertion of clause (i) to explanation 1 to Section 115-JB of the Act whereby provisions for diminution in the value of any asset is required to be added to the book profit for the purposes of Section 115-JB - following Jurisdiction High Court CIT(A) held that retrospective amendment in law does not give to any failure to disclose material facts as contemplated in the first proviso - HELD THAT:- The question of law as proposed by the Revenue is squarely covered by the two decisions which have been referred to by the Tribunal in its impugned order. The principle of law as explained in the two decisions of this Court is that the retrospective amendment to any provision cannot be a ground for making re-assessment. Thus, the proposed question is squarely covered by the decision of this Court in the case of Vodafone West Ltd. Vs. Assistant Commissioner of Income Tax [ 2013 (7) TMI 536 - GUJARAT HIGH COURT ] and Sadbhav Engineering Ltd. [ 2014 (6) TMI 296 - GUJARAT HIGH COURT ].
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2019 (7) TMI 1097
Unexplained cash credit u/s 68 - Addition of bogus expenses - identity, genuineness and creditworthiness of the unsecured loan lender parties not proved by the assessee to he satisfaction of the AO - HELD THAT:- Having gone through the materials on record, we are of the opinion that both the two questions as proposed by the Revenue cannot be termed as substantial questions of law involved in the present Tax Appeal. The Tribunal has concurred with the findings of fact recorded by the CIT (A). We do not find any perversity in the findings of fact recorded by the two Revenue authorities. - Appeal fails and is hereby dismissed
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2019 (7) TMI 1096
Addition u/s 195 - disallowance u/s 40(a)(ia) of commission paid to foreign client - HELD THAT:- The question as proposed by the Revenue is no longer res integra in view of the decision of this Court in the case of PR CIT vs. MGM Exports [ 2018 (5) TMI 1240 - GUJARAT HIGH COURT] . The ratio of the decision of this Court referred to above is that a person paying interest or any other sum to a nonresident is not liable to deduct tax if such sum is not chargeable to tax under the Act. Thus, the first question proposed by the Revenue is squarely covered. Addition in respect of estimation of Gross profit - HELD THAT:- Findings recorded by the Tribunal are that AO declines to meet the specific points raised by the assessee in first appellate proceedings, there is obviously no point in challenging the conclusions arrived at in the first appellate proceedings based on vague generalities. No specific issues are raised in appeal before us. Further also noted that the learned CIT(A) has granted impugned relief on the basis of specific explanations of the assessee which have remained uncontroverted. In the light of these discussions as also bearing in mind entirely of the case, ITAT approve well reasoned arrived at by the learned CIT(A) and decline to interfere in the matter. - We are not inclined to admit this appeal even so far as the second question as proposed by the Revenue is concerned.
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2019 (7) TMI 1095
Disallowance of expenses u/s 37(1) - disallowance of depreciation u/s 32 - proof of commencement of business - ITAT stated that the nature of business of the assessee company was to develop various common facilities and the material facts as elaborated in the order substantiate that the business of the assessee company was set up during the year under consideration - ITAT further held that assessee company was entitled to depreciation on plant and machinery which includes office equipment and vehicle, computer, computer software and furniture, fixture used for the purpose of business HELD THAT:- Tribunal, while concurring with the findings recorded by the CIT(A), has observed that having regard to the materials on record it can be said that the business of assessee had been set up and that the only thing was that the assessee was not able to generate any income out of the same. The CIT(A), as well as the Tribunal, have placed reliance on the decision of this Court in the case of CIT Vs Saurashtra Cement And Chemical [ 1972 (8) TMI 19 - GUJARAT HIGH COURT] this Court, explaining the meaning of business , held that business connotes a continuous course of activities, which go to make up the business, need not be started simultaneously in order that the business may commence. The business would commence when the activity which is first in point of time and which must necessarily precede all other activities, is started - Decided against revenue.
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2019 (7) TMI 1094
Disallowance u/s 14A on ground of eligibility of deduction u/s. 80P(2)(d) - as per AO Sec. 14A is applicable in such cases where part of the income is not included in the total income - alleged that borrowed funds were used for interest income and dividend income earned - share capital / reserve of the assessee are less than such investment to prove which assessee has used borrowed funds for such investment / FDs - HELD THAT:- The two questions proposed by the Revenue are no longer res integra in view of the two decisions of this Court in CIT vs. Surat District Co. Op. Milk Producer Union Ltd [ 2018 (8) TMI 1855 - ITAT SURAT ] wherein as in view of decision decision of the Hon'ble Supreme Court in the case of Distributors (Baroda) P. Ltd vs. Union of India [ 1985 (7) TMI 1 - SUPREME COURT] we are in complete agreement with the view taken by the learned Tribunal allowing the deduction to the assessee u/s 80P(2)(d) on the amount of interest and dividend earned on the investment / deposits with the other cooperative societies. Further it was held that held that there is no application of section 14A as far as the deduction under section 80A to 80U under Chapter VIA of the Act. In view of the aforesaid, no error, not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. No interference is warranted. This appeal, therefore, fails and is hereby dismissed.
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2019 (7) TMI 1092
Employee's contribution to PF and ESI funds beyond the due dates - Addition u/s 36(va) read with Section 2(24)(x) - HELD THAT:- A Division Bench of the Kerala High Court in the case of CIT Vs. M/s.Merchem Lt [ 2015 (9) TMI 560 - KERALA HIGH COURT] held in favour of the Revenue. Similarly, another Division Bench of the Kerala High Court in the case of Popular Vehicles Services Private Limited Vs. CIT, Ernakulam [ 2018 (8) TMI 133 - KERALA HIGH COURT] has recently taken note of all the earlier decisions including the decisions, which have been referred to by the Tribunal and the CIT(A) and held in favour of the Revenue. Judgment of Division Bench of this Court in KERALA STATE WAREHOUSING CORPORATION VERSUS CIT, [ 2009 (12) TMI 1010 - KERALA HIGH COURT] , allowing an appeal filed by the assessee on the same subject matter. In the said judgment, this Court had followed the decision in CIT VERSUS VINAY CEMENT LTD. [ 2007 (3) TMI 346 - SC ORDER] . Both the judgments mentioned are concerned with the law as it stood prior to the amendment of Section 43B.
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2019 (7) TMI 1086
TDS u/s 194C - purchase and sale transaction - AO observed that the activity given by the assessee company to the organizers was in the nature of work contract / job - organizers purchase seeds from farmers on behalf of company - HELD THAT:- It is established that the company has not made any payment to the organizers for the services rendered and the company has also charged the interest for the advances and made only payment for the seed purchased from the organizers. It appears that the organizers have made the profit out of the seeds procured from the farmers for the services rendered which required to be brought to tax. From the facts of the case, it is clear that it is purchase and sale transaction, hence the provisions of TDS has no application on purchases made by the assessee company. If at all TDS has to be deducted, the same should be deducted on component of commission but not on the entire payment made to the organizer / farmer. From the foregoing discussion, it is established that the department neither quantified the commission nor proved that the company has paid the commission. The department has neither taken any action u/s 201/201(1A) against the assessee nor for assessment of income in the hands of the organization. Therefore, we hold that there is no case for deduction of tax at source u/s 194C and the disallowance u/s 40(a)(ia), accordingly, we set aside the orders of the lower authorities and delete the addition made by the AO. - Decided in favour of assessee Addition relating to purchase of seeds from the growers made u/s 40(A)(3) - HELD THAT:- As per the information available on record, the assessee made payments in excess of ₹ 20,000 to the organizers, but not to the farmers. The assessee did not explain any reason for making the payment in cash. The payment stated to be made for the purpose of delinting, processing, platform, hand-grading and hamali, blower, ginning etc. In the preceding paragraphs we, have held that the transaction between the assessee and the company is purchase transaction. Having held the it was purchase transaction there is no case for making payment separately for delinting, processing, platform, hand-grading and hamali, blower, ginning etc.. by the company. As argued by the Ld.AR for non deduction of TDS that it was the obligation of the farmer/organizer to separate cotton and kappas and sell the hybrid seed to the company. Therefore there is no reason to make such payments by the assessee and the assessee did not make out a case that the payment is exempt from the provisions of section 40A(3). Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Enhancement of income by CIT(A) u/s 251(2) - no notice of enhancement - HELD THAT:- During the appeal hearing, the Ld.AR submitted that the Ld.CIT(A) enhanced the addition without giving notice and opportunity to the assessee. As per the Income Tax Act, if the CIT(A) intends to enhance the addition, he is bound to issue notice as per section 251(2) of the Act. CIT(A) is not permitted to enhance the addition without issue of notice and giving opportunity to the assessee. During the appeal hearing, the AR submitted that no notice of enhancement was issued by the CIT(A). The department did not place any evidence to show that the CIT(A) has issued notice for enhancement. Therefore, the enhancement made by the Ld.CIT(A) is unsustainable, accordingly, the enhancement made by the Ld.CIT(A) is deleted. Addition for purchase of foundation seeds - HELD THAT:- DR though the assessee did not purchase the foundation seed from the organizers, the do purchase the Hybrid seed from the organizers. Hence this issue require verification at the end of the AO. Therefore, we remit the matter back to the file of the AO the examine the issue in detail and decide the same on merits after giving opportunity to the assessee. The appeal of the assessee on this ground is allowed for statistical purposes. Addition relating to EPF contribution beyond due date as required under Provident Fund Act - AO disallowed the sum u/s/36(va) - HELD THAT:- The issue is related to the payment of PF belatedly. The assessee submitted that the payment was made before the due date for filing the return and the department did not controvert the submissions made by the assessee. The expenditure is allowable u/s 36(1)(va) of the Act r.w.s.43B of the Act. This Tribunal has taken the decision on identical facts in favour of the assessee in the case of M/s Eastern Power Distribution Company of AP Ltd [ 2017 (9) TMI 1803 - ITAT VISAKHAPATNAM] ITAT held that the payment made before the due date of filing the return required to be allowed as deduction. Respectfully following the view taken by this Tribunal, the appeal of the assessee is allowed.
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2019 (7) TMI 1085
Deduction u/sec. 80IB denied - no project completion certificate submitted - HELD THAT:- In the instant case, the assessee has filed the municipal tax assessment receipts in respect of flat buyers. The assessee has not furnished any evidence to establish that the project was completed in all respects as per the plan. The assessee not even made any effort to obtain the completion certificate from the GVMC for the reasons better known to him. The assessee has not made application before the GVMC with the check list as mentioned in the VUDA approval dated 07/11/2005 for the purpose of claiming deduction u/sec. 80IB(10). Without making application, without complying with the terms and conditions, it cannot be held that the project is completed in all respects. Therefore, we are of the considered view that unless the completion certificate is furnished project cannot be held to be completed in all respects and the project completion certificate is mandatory. Accordingly, we uphold the order of the ld. CIT(A) and dismiss the appeal of the assessee. Condonation of delay - delay of 92 days in filing the appeal and the CIT(A) dismissed the appeal in limine without giving opportunity to the assessee to explain the reasons - HELD THAT:- CIT(A) ought to have given opportunity to the assessee to explain the reasons for filing the appeal beyond the due date and decided the issue of condonation of delay. Therefore, we are of the considered opinion that it is against the principles of natural justice and hence, the issue should be remitted back to the file of the ld.CIT(A) to examine the reasons for delay in filing the appeal and to decide the issue of condonation of the delay and decide the appeal on merits depending on the outcome of condonation of delay. Thus, the appeal filed by the assessee is allowed for statistical purposes. Exparte appeal decided by CIT-A - HELD THAT:- In the instant case, appeal was decided exparte without giving opportunity of being heard to the assessee. AR stated that the said notice dated 10/03/2018 was not served on the assessee. For a query from the Bench, ld.DR did not place any evidence to show that the notice dated 10/03/2018 was served on the assessee. Therefore, in the interest of justice, we are of the considered opinion that the appeal is to be remitted back to the file of the ld. CIT(A) to give one more opportunity to the assessee and to pass the orders on merits. Accordingly, this appeal filed by the assessee is allowed for statistical purposes.
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2019 (7) TMI 1083
Income accrued in India - attribution of profit - PE in India - liability to tax in India in respect of fees received from Airlines relating to segments booked from India through the appellant computer reservation system - Indo-Spain DTAA - AO in alternatively holding that the fees received was taxable in India as royalty under the Indian Income Tax Act and Article 12 of the treaty - HELD THAT:- The issues are squarely covered by the decision in assessee‟s own case up to AY 2005-06. There is a continuous seamless process involved, at least part of which is in India and hence, there is a business connection in India. The computers at the subscriber's desk are not dumb or are in the nature of kiosk incapable of performing any function. The computers along with the configuration have been supplied either by the appellant or through its agent AIPL and the connectivity being provided by the appellant enables the subscribers to access the CRS and perform the ticketing and booking functions. Thus there is a direct business connection established in India and hence in terms of s. 9(1)(i) the income in respect of the booking which takes place from the equipment in India can be deemed to accrue or arise in India and hence taxable in India. In view of this respectfully following the decision of the coordinate bench [ 2010 (10) TMI 1178 - ITAT DELHI] we also hold that assessee has a permanent establishment in India. Attribution of profit where in the current year the CIT(A) has upheld the attribution of the profit @75% whereas, in earlier years the tribunal has upheld the attribution @15% of the revenue as income arising in India. In view of this respectfully following the decision of the coordinate bench in assessee‟s own case for earlier years, we also reverse the order of the ld CIT(A) in upholding the attribution of profit @75% and direct the ld AO to attribute the income @15%. Accordingly, the appeals of the assessee as per Ground Nos. 2 to 5, 6, 11, 12, 13, 14 and 15 of the appeal are partly allowed. Non-granting of credit of TDS - AR submitted that the assessee should be granted the credit of the tax deduction at source - HELD THAT:- DR also agreed to the issue that if the certificates issued to the assessee are proper and in order then same may be granted. Accordingly we direct the learned assessing officer to grant the credit of the tax deduction at source to the assessee if the proper certificates are placed before the assessing officer. The learned AO may verify the same and grant credit for the same if in order. Accordingly ground number 16 of the appeal of the assessee is allowed with above direction. Interest u/s 234B - entire payment received by the assessee from India was subject to TDS - scope of amendment in section 234B - HELD THAT:- As carefully considered the rival contention and perused the orders of the lower authorities the issue squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in case of the DIT vs GE packaged power incorporation [ 2015 (1) TMI 1168 - DELHI HIGH COURT] - The amendment brought into the act by the finance act 2012 is applicable with effect from the fund for 2012 and is applicable from assessment year 2013 14. In view of this we direct the learned assessing officer to not to charge interest u/s 234B for the above reasons. Accordingly ground number 17 of the appeal of the assessee is allowed. Appeal of the assessee is partly allowed.
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2019 (7) TMI 1082
Computation of long term capital gain - sale of controlling stake - deduction being payment made to DSP Merill Lynch Limited (DSPML), towards non-compete and non-solicitation payment - assess contend that part payment relaes to business income - HELD THAT:- This invoice dated 23-08-2002 clearly mentions that the said sum of ₹ 1.74 crore and odd is towards Advisory fee for controlling stake in REL along with the amount of service tax and offered for taxation. The assessee bifurcated ₹ 1.74 crore into two components. Whereas a sum of ₹ 74.92 lakh was considered as deduction in the computation of long term capital gain arising from the sale of shares, it considered a sum of ₹ 1.00 crore towards noncompete fee paid to DSPML, thereby reducing the business income to this extent. The invoice clearly demonstrates that a sum of ₹ 1.74 crore was entirely paid towards Advisory fees for sale of controlling stake in REL. The assessee tried to fortify its contention with the help of a letter dated 22-09-2011 received from DSPML. We are unable to give any weight to this letter since it is contrary to the own version given by DSPML in the year 2002 as the payment towards ₹ Advisory fee for sale of controlling stake . A letter coming into existence after about 9 years from the date of invoice, cannot be taken into consideration at this stage. The ld. AR was called upon to place on record a copy of the agreement under which said sum of ₹ 1.00 crore was paid. He fairly expressed his inability to produce such an agreement, which on specific requisition by the lower authorities also could not be adduced. CIT(A) was fully justified in treating the entire amount of ₹ 1.74 crore as deductible in the computation of long term capital gain and not accepting the assessee s claim of treating ₹ 1.00 crore as deductible from non-compete fee chargeable as business income. Deduction u/s.35DDA towards VRS on accrual basis - HELD THAT:- Tribunal in assessee s own case for the immediately preceding assessment, which has been discussed of the order. The Tribunal has held the assessee to be entitled to deduction u/s.35DDA on the basis of incurring of liability. A further direction has been given to ensure that the assessee is not allowed deduction on actual payment basis. The AO is directed to examine this aspect and allow deduction only towards incurring of liability, i.e. on accrual of liability towards VRS u/s.35DDA and no amount should be allowed as deduction on payment basis. This ground is, therefore, allowed for statistical purposes. Deduction towards provision for warranty - allowable revenue expenses u/s 37 - HELD THAT:- Actual expenses incurred by the assessee stand at ₹ 2.85 crore. There is a recovery of claim to the tune of ₹ 24.37 lakh. If claims recovered are reduced from the actual expenses incurred, we get net amount of ₹ 2.61 crore and odd towards expenses incurred for the year, as against that the amount of provision created by the assessee at ₹ 1,59,17,000/-. As the amount of provision is less than the amount of actual expenses, following the view taken by the Tribunal in its order for the A.Y. 2002-03 in the CP division, we direct to allow the deduction for the entire amount of provision for ₹ 1,59,17,000/-. However, it is made clear that no deduction for incurring of actual expenses should be separately allowed. The contrary view of the Revenue in its appeal is accordingly dismissed. Disallowance of certain expenses - Addition of warranty provision - HELD THAT:- We find that the first sum of ₹ 33,76,762/- is in the nature of actual expenses incurred during warranty period. Since a deduction has been separately allowed to the assessee on creation of provision for warranty, there can be no question of allowing any separate deduction for actual expenses incurred in accepting the claims under warranty. We, therefore, uphold the impugned order to the extent of disallowance. Expenditure on Gifts - Assessee could not produce any evidence to show whether the Gifts were given for the business purpose or were hit by Explanation 1 to section 37(1) of the Act. In the absence of furnishing any such details, we uphold the view taken by the ld.CIT(A) in sustaining this disallowance. Donations addition - Similar is the position regarding donations for which the assessee could not adduce any evidence. The impugned order is, therefore, upheld to this extent. Fee for handling share - the same is in respect of shares issued by the assessee company and not for handling any investments of the assessee. Such expenses incurred by the assessee are deductible in full. As regards the remaining expenses, the ld. CIT(A) restricted the addition to 25%. Considering the peculiar circumstances prevailing in the extant case, we are of the considered opinion that it would be just and fair if the disallowance is restricted to 15% of such expenses Computation of deduction u/s.80HHC - confirmation of inclusion of commission income as part of total turnover in the computation of deduction and towards confirmation of exclusion of 90% of Service charges and Miscellaneous income from profits of business for deduction u/s.80HHC - HELD THAT:- Similar issue came up for consideration before the Tribunal in assessee s own case for the immediately preceding assessment year. Following the view taken by the Tribunal in assessee s own case for still another year, the matter has been remitted to the AO for a fresh decision. Both the sides are in agreement that the facts and circumstances of the extant ground are similar to those for the A.Y. 2002-03. Following the view taken for the immediately preceding assessment year, we set aside the impugned order and remit the matter to the file of AO for deciding this issue in conformity with the directions given by the Tribunal in its earlier orders. Set-off of long term capital loss on sale of mutual funds - AO set off against the long term capital gain on sale of shares of REL instead of long term capital gain on sale of property as claimed by the assessee - whether loss from listed securities, being, on mutual fund investments should be reduced from gains from other listed securities, being, shares of Revathi? - HELD THAT:- Once the assessee has determined its long term capital gain income in a particular manner which has sanction of section 70, the AO cannot disturb such calculation merely because it is less remunerative from the angle of determination of tax. We find that the assessee set off its long term capital loss from the sale of mutual funds against the long term capital gain from transfer of Mulund property. This is absolutely permissible u/s 70(3) of the Act. We, therefore, hold that no exception can be taken to the action of the assessee and accordingly the amount of long term capital gain on Revathi CP shares at ₹ 7.09 crore should be taxed under proviso to section 112 of the Act. Ex consequenti, this ground of appeal is allowed. Disallowance of expenditure u/s.35DD - Disallowance of Dealer Commission - stamp duty for transfer of immovable assets - HELD THAT:- Similar issues came up for consideration before the Tribunal in the case of the assessee for the A.Y. 2002-03 [ 2019 (7) TMI 949 - ITAT PUNE] . Following the view taken for the immediately preceding year, we dismiss this ground of appeal by the Revenue TP adjustment on Royalty payment - HELD THAT:- It is found as an admitted position that the assessee paid Royalty to its AEs as per the rates approved by the RBI. The TPO determined NIL ALP simply on the ground that the AEs to whom the assessee paid Royalty had discontinued production of such products. In our considered opinion, this is no ground to determine NIL ALP of an international transaction. The TPO is required to determine the ALP of an international transaction under one of the methods mandated under rule 10B of the Income-tax Rules, 1962. Nothing of the sort has been done in the instant case. The TPO got influenced with extraneous reasons, which have no bearing on the determination of the ALP of an international transaction. It is further observed that similar issue came up for consideration before the Tribunal in assessee s own case for the immediately preceding assessment year [ 2019 (7) TMI 949 - ITAT PUNE] . The transfer pricing addition made in similar circumstances has been deleted. Considering the entire conspectus of the case, including the fact that the payment of Royalty to AEs was as per RBI norms, we are satisfied that the view taken by the ld. CIT(A) is unassailable. Interest u/s.234D - HELD THAT:- AR fairly conceded that in view of the retrospective amendment carried out to section 234D by insertion of Explanation 2 by the Finance Act, 2012 with retrospective effect from 01-04- 2003, the ground by the Revenue needs to be allowed. We, therefore, overturn the impugned order on this issue and uphold the charging of interest u/s.234D.
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2019 (7) TMI 1081
Disallowance u/s 14 A - non recording of dissatisfaction by AO - HELD THAT:- In the present case the learned assessing officer has failed to record his satisfaction u/s 14 A of the income tax act that assessee has incurred any expenditure for the purpose of earning of the exempt income. It is mandatory for learned assessing officer to first record his satisfaction with reference to the books of accounts of the assessee that explanation of the assessee, that it has not incurred any expenditure for the purpose of earning of the exempt income of the income or Quantified disallowance by assessee under the provisions of section 14 A of the income tax act is incorrect. - Decided in favour of assessee Loss on sale of securities - allowable business loss - HELD THAT:- It is interesting to note that in assessment year 2004 05 the assessee has earned profit on sale of the securities which has been assessed by the learned AO u/s 143 (3) as business income. However, during the year the learned assessing officer has changed his stand when assessee has incurred loss and tried to justify it as shortterm capital loss incurred by the assessee. The learned departmental representative could not point out any distinction between the transactions entered into by the assessee in assessment year 2004 05 and transactions entered into by the assessee in assessment year 2005 06. In view of the above facts, it is a clear-cut case of the change of opinion by the learned assessing officer only to extract the higher tax. The assessing officer is blowing hot and cold on the same set of facts in two different assessment years to cough up more taxes from the assessee. This tactic of the learned AO deserves to be condemned. The learned departmental representative also could not point out any infirmity in the order of CIT A in he stated that assessee has maintained two portfolios whereas the life insurance investment is held to be an investment portfolio and other securities are held to be the trading assets. In view of this, we dismiss ground number 3 of the appeal of AO. Disallowance u/s 35D in respect of preliminary expense - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of Shashun chemicals and drugs Ltd [ 2016 (9) TMI 1199 - SUPREME COURT] . Admittedly this is not the 1st year of the claim u/s 35D out of block of 5 years. The honourable Supreme Court in para number 13 of the decision has held that in any case, it warrants reputation that in the instant case under the very same provisions benefit is allowed for the first two assessment years and, therefore, it could not have been denied in the subsequent block period. The issue before the honourable Supreme Court was also with respect to the benefit of section 35D of the act. In view of this, we dismiss ground number 4 of the appeal of the learned assessing officer. Disallowance of prior period expenses - HELD THAT:- The above issue is also squarely covered against the assessee in the decision of Saurashtra cement and chemical industries Ltd vs Commissioner of income tax [ 1994 (10) TMI 30 - GUJARAT HIGH COURT] - In the present case also the bills for the expenditure was received in the current financial year relating to the earlier financial year and therefore such expenditure has crystallized during this year and therefore they are allowable. After considering the argument of the rival parties, we do not find any infirmity in the order of the learned CIT A in deleting the above disallowance. Therefore, ground number 5 is dismissed. Addition of interest expenditure - existence of business or not - HELD THAT:- CIT-A has examined the allowability of expenditure under the head profits and gains of business or profession as well as under the other head of income from other sources , and in both the heads, he held that the expenditure is allowable to the assessee. On analysis of the annual accounts of the assessee and further when deduction u/s 35D of the income tax act under the head profits and gains of the business has been allowed to the assessee as per the decision of the honourable Supreme Court, it cannot be said that assessee does not have any business, therefore, the interest expenditure incurred by the assessee is allowable as deduction under both the heads. In AY 2005-06, we have also held that assessee s loss of sales of securities is chargeable to tax under the head business income and ld AO himself has accepted in AY 2004-05 that profit earned by the assessee on sale of securities is business income of the appellant, now it cannot be said that assessee does not have any business in this year. The learned DR could not point out any infirmity in the order of the learned CIT(A) - dismiss ground of the appeal of revenue
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2019 (7) TMI 1080
Rectification u/s 254 - TPA - comparability selection - HELD THAT:- We notice that similar to assessee, Celestial Bio Labs also offers several services to its AEs and since we are determining with ALP based on TNMM, we consider the average margin of all the several activities carried on by the assessee. On a compartmentalizing two profit making companies with several activities, we can compare the end result, unless they are into product or highly diversified or some activities which will modify the profit making ability of the organization. In this case, we do not see any reason to interfere with the selection process. Therefore, the objection of the assessee to exclude the said company is hereby rejected. With regard to other submissions of the assessee, we have considered the decision of ITAT, Bengaluru Bench and other orders referred by the assessee and gave our findings considering the factual matrix. We are in agreement with the submissions of the DR that bench has already applied the mind and came to the conclusion in the order. He submitted that the comparative analysis is part of determining ALP and is final with a quietus at the hands of the final fact finding authorities, bench has given clear cut findings. Therefore, the Bench came to the conclusion after considering all the facts and not inclined to review our decision as the ITAT has no power to review its own order u/s 254(2) of the Act.
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2019 (7) TMI 1079
Chargeablity of corresponding receipts in 26AS as income to tax as per Sec. 199 - TDS deducted on advance subsequently returned due to cancellation of the agreement - TDS claimed - difference in gross receipt, as per Form 26AS and the profit loss account - HELD THAT:- AO did not verify the work order given by the company to ascertain the factual position. The assessee also did not keep the amount idle and spent the same, which shows that the assessee spent the amount for the work done. The AO did not examine M/s.Varsity Education Management Pvt. Ltd., and the works carried on to the company during the period of operation of the work order. Neither AO nor AR placed the cancellation agreement, date of cancellation, reasons for cancellation, if the work was not executed by the assessee who has executed the work to Varsity Education during the period of April 2012 to February 2013 i.e till the date of repayment of the advance etc. The assessee also did not place any correspondence with regard to cancellation of the work order. All these issues required to examine in detail to ascertain the factual position to arrive at the logical conclusion to ascertain whether the payment received from M/S Varsity Education was income or only the advance amount. During the appeal hearing also the Ld.A.R did not furnish the details such as the date of cancellation, reasons for cancellation, whether work order has been executed till the date of cancellation, the charges received, the compensation payable in case of unilateral cancellation etc. Thus issue is required thorough examination with the books of account of the assessee as well as the company. Therefore, we remit the matter back to the file of the AO with a direction to re-examine the issue in detail and decide the issue afresh on merits. Thus, the appeal filed by the Revenue is allowed for statistical purpose.
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2019 (7) TMI 1078
Revision u/s 263 - deduction u/s 80P - allegation that AO has allowed exemption without calling for any documentary evidence in support of the assessee s claim that the Trust is a member of the society - interest received from advance to trust - HELD THAT:-The assessee also furnished copy of the admission register, wherein, it is seen that the Trust is a member of the society. There is sufficient material available in paper book to show that the Trust became member of the society and the society is permitted to give loan to its members. The society had advanced the amounts to the Trust and collected the interest. Since the interest received was from the member of the society, the interest collected by the society is entitled for deduction u/s 80P. As seen from the assessment order, the assessment was completed u/s 143(3) and during the assessment proceedings, the AO called for the books of accounts, and the other details, in response to which the Ld.AR furnished the details. After examining the books of accounts and the other details, vouchers for expenses, the assessment was completed by the AO allowing deduction u/s 80P. Therefore, it is incorrect to say that the AO allowed exemption u/s 80P without examining the details. The sole issue involved in the assessment is deduction u/s 80P and hence we are not inclined to accept the contention of the revenue that the AO has allowed deduction u/s 80P without examining the details. From the above discussion, it is clear that there is no revenue loss which caused prejudice to the revenue and we do not see any error in the assessment. Therefore, we hold that there is no reason to take up the case for revision and we set aside the order of the Ld.Pr.CIT passed u/s 263 and restore the assessment order. Appeal of the assessee is allowed.
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2019 (7) TMI 1077
TP Adjustment - CIT(Appeals) had directed to include the company Maveric Systems Ltd in the final list of comparables with that of the assessee - TPO had rejected on account of extraordinary cost/events and also failed the filter export to sales filter of 75% - HELD THAT:- On perusal of the Director s Report of the said company, no categorical/specific finding is there that extra ordinary cost has been incurred by this company. The Ld. CIT(Appeals) also has given findings perusing all the relevant factors/criterias and we do not find any infirmity in his order. Therefore, relief provided to the assessee regarding the inclusion of Maveric Systems Ltd. in the final list of comparables is hereby sustained. With regard to the second part of the first ground raised by the Revenue regarding filter export to sales filter of 75% , we observe that no where it is coming from the order of the Transfer Pricing Officer or from Ld. CIT(Appeals). Therefore, we are of the considered view that this is not an issue for adjudication since no where it was considered by the Revenue Authorities in their respective orders and therefore, inclusion of this part in the ground of appeal is infructuous. Ground No.1 of Revenue s appeal is dismissed. Exclude of certain comparables - alleged that excluded only on the ground of higher turnover and without analyzing the FAR of the comparables - HELD THAT:- In our considered view on perusal of the relevant findings of the Ld. CIT(Appeals), apart from considering the turnover, has also looked into various other factors. He had considered that the size of the company makes difference in undertaking risks. Bigger sized company is in a position to undertake more risks in the business as compared to the smaller sized companies. The size of the company can be categorized either on the basis of the capital or asset or on the basis of turnover. CIT(Appeals) has also referred to Para 3.43 of the OECD Guidelines mentioning size in terms of sales as one of the comparability criteria. In this regard, reference was also made to Rule 10TD of the Income Tax Rules which provide higher profitability for the companies having turnover of more than ₹ 500 Cr. So while considering size of the company, its capacity of risk taking, capital, assets and turnover have been considered by the CIT(Appeals). We, therefore, do not find any infirmity with the findings of the Ld. CIT(Appeals) and uphold the relief provided to the assessee. Thus, ground No.2 raised in appeal by the Revenue is dismissed. Inclusion of E-infochips Limited - HELD THAT:- It is an undisputed fact that the said company i.e. E-infochips Limited is engaged in diversified activities. E-infochips Limited has earned abnormal profit for the year under consideration (i.e. 56.44%) which cannot be considered as comparable. In fact there was extra ordinary fluctuation in profit margins over years from loss of (-) 14.33% in 2008-09 to super profit of 56.44% in 2010-11. Furthermore, segmental information of the activities undertaken is not available. CIT(Appeals) therefore, held that in absence of such segmental information specially IT services, ITes, inclusion of E-infochips Limited in the final set of comparable companies is not justified with that of the assessee. We do not find any infirmity in the findings of the Ld. CIT(Appeals) which is therefore upheld. Thus, additional ground Nos. 1 to 5 raised in appeal by the Revenue are dismissed.
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2019 (7) TMI 1076
Applicable Rate of tax (including surcharge) - domestic companies and Co operative Societies OR foreign company - India France Double Taxation Avoidance Agreement (DTAA) - assessee is Indian Branch of foreign Bank - HELD THAT:- Tribunal has consistently decided the issue against the assessee in the preceding assessment years. In the latest order passed for the assessment year 2011 12 [ 2018 (8) TMI 1856 - ITAT MUMBAI] the Tribunal following its earlier decision decided the issue against the assessee. Of course, it is a fact that in some of the preceding assessment years, the Hon'ble Jurisdictional High Court has admitted the substantial question of law raised by the assessee on the disputed issue. However, there being no material difference in the facts of the present case, respectfully following the consistent view of the Tribunal on the disputed issue in assessee s own case for the preceding assessment years, we uphold the decision of learned Commissioner (Appeals) on this issue. Ground raised is dismissed. Amount received by the assessee from its Indian Branch towards data processing fee is not chargeable to tax in India due to principles of mutuality - HELD THAT:- As in Sumitomo Mitsui Banking Corporation v/s DDIT, [ 2012 (4) TMI 80 - ITAT MUMBAI] the payment of data processing fee being a payment to self, is governed by the principles of mutuality, hence, not taxable. Accordingly, the Tribunal deleted the addition. The same view has been expressed in the subsequent assessment years as well and the latest order of the Tribunal on the issue is for the assessment year 2010 11 [ 2017 (10) TMI 1467 - ITAT MUMBAI] . It is also relevant to observe, while deciding Revenue s appeal on the disputed issue in assessment year 2006 07 and 2007 08, the Hon'ble Jurisdictional High Court upheld the decision of the Tribunal. Moreover, while deciding the issue in the assessment year 2008 09 in assessee s own case in [ 2016 (3) TMI 1356 - ITAT MUMBAI ] , the Tribunal has also decided the issue in favour of the assessee though on different reasoning. Thus, it is evident, the Tribunal in assessee s own case for the preceding assessment years has consistently held that data processing fee is not chargeable to tax at the hands of the assessee in India Addition of interest income made at the hands of the Head Office - HELD THAT:- As per the relevant statutory provisions applicable to the impugned assessment year and as per the ratio laid down by the Tribunal, Special Bench in case of Sumitomo Mitsui Banking Corporation [ 2012 (4) TMI 80 - ITAT MUMBAI] which is applicable to the impugned assessment year, the interest income received by the assessee from its Indian Branch being a payment made to self, is not taxable at the hands of the assessee. Therefore, respectfully following the Special Bench decision of the Tribunal, Mumbai Bench, in Sumitomo Mitsui Banking Corporation (supra) and the decisions of the Co ordinate Bench in assessee s own case in the preceding assessment years, which we are bound to follow adhering to the norms of judicial discipline in the absence of any material difference in facts, we have no hesitation in upholding the decision of the learned Commissioner (Appeals) on the issue. Grounds are dismissed.
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2019 (7) TMI 1075
Computation of Cost of Sales and closing value of land - transfer of co-development rights - cost on the basis of FSI sold OR geographical area - allocation of AUDA charges for co-development, FCCD interest - HELD THAT:- FSI entitled to the assessee and attached to the global land that sold thereafter has to be assigned cost incurred in proportion to the quantity of FSI sold. The doctrine of matching concept for determination of true profits arising from a transaction is one of the rudimentary principles of accountancy. The Cost of Sales has to be determined in the same manner as applicable to the determination of the sale revenue. Where the sale revenue has been recognized on the basis of FSI sold, the costs of FSI also needs to be determined on the same principles. The determination of Cost of Sales in terms of geographical area would give totally distorted picture, if permitted. Viewed differently the assessee has successfully demonstrated that value of consideration of land would be worked out at an astronomically high figure of ₹ 3,04,136/- per sq. mtr. of land vis- -vis ₹ 2750/- per sq. mtr. assigned by the stamp authorities, if the method suggested by the Revenue for allocation of cost on the basis of land area is accepted. This crucial aspect also reinforces the claim of the assessee that the Cost of Sales requires to be determined on the basis of FSI allocated vis- -vis global FSI regardless of lesser area allocated for putting up construction. No hesitation to set aside the order of the CIT(A) and reverse the action of the AO. We find considerable merit in the plea raised by the assessee for computation of Cost of Sales of land and incidental costs towards AUDA charges etc. on the parameters of FSI sold as computed by the assessee. The additions made by the AO towards alleged suppression of profit arising from sale of land and excess claim of incidental expenses attributable to such sale are therefore reversed. Disallowance u/s 14A - utilization of interest free funds for investments yielding tax free income - HELD THAT:- CIT(A) has rightly approached the issue and deleted the proportionate disallowance of interest expenditure under Rule 8D(2)(ii) on the ground that investment in shares giving rise to exempt income is far lower than corresponding interest free funds available with the assessee by way of capital and reserves. Therefore, the presumption would naturally arise in favour of the assessee for deemed utilization of interest free funds for investments yielding tax free income in preference to the borrowed funds as laid down in plethora of judicial precedents. Therefore, we do not see any infirmity in the order of the CIT(A). The grievance of the Revenue on this score thus cannot be entertained. Disallowance of administrative expenditure U/R 8D(2)(iii) r.w. Section 14A - based on total investment OR investments which has actually yielded exempt income - HELD THAT:- Revenue authorities have rightly invoked formula under Rule 8D(2)(iii) for disallowance of management and general expenses deemed to be attributable to earn the tax free income. However, the disallowance is required to be computed having regard to the investments which has actually yielded exempt income instead of gross investments in consonance with the decision of the special bench in ACIT vs. Vireet Investments Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] as relied upon on behalf of the assessee. The issue is therefore remitted back to the file of the AO for re-computation of disallowance under Rule 8D(2)(iii) of the Rules with reference to average investments which have actually yielded exempt income to the assessee.
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2019 (7) TMI 1074
Taxability of shares premiums u/s 56(2)(viib) r.w. Rule 11UA - Income from other sources - computing fair market value of the shares - valuation not in accordance with the Rule11UA(2) - valuation based on balance sheet of which period is relevant - whether provisions of section 56(2)(viib) should be applicable only when there is investment of unaccounted money? - HELD THAT:- We do not find any merit in the argument of the ld. counsel for the assessee. A perusal of the Rule 11U(b) as reproduced by CIT(A) makes it clear that the balance sheet means the balance sheet as drawn up on the balance sheet date which has been audited by the auditor of the company and where the balance sheet on the valuation date has not been drawn up the balance sheet drawn up as on a date immediately preceding the valuation date which has been approved and adopted in the AGM of the shareholders of the company. We find in the instant case, on the date of receipt of the consideration the balance sheet of the assessee company was not drawn up as the same was drawn up only on 31st July, 2014 which is evident from the audited balance sheet filed. Clause (b) and clause (j) of Rule 11UA makes it clear that for computing fair market value of the shares the value of the assets and liabilities as stated in the audited balance sheet immediately prior to the receipt of consideration should be adopted. If, on the date of receipt of the consideration, the balance sheet was not drawn up, then, the balance sheet drawn up as on a date immediately preceding the valuation date should be adopted i.e., the balance sheet of the immediately preceding year should be adopted. We find, in the instant case, on the valuation date i.e., on 31.03.2004, the balance sheet was not drawn up by the auditor as audited financials were drawn up only on 31st July, 2014 and, therefore, we concur with the observation of the CIT(A) that the valuation of assets and liabilities in the balance sheet of the immediately preceding year i.e., 31.03.2013 should have been adopted. Since the valuation done by the assessee was not in accordance with the Rule framed for valuation of unquoted shares i.e., the assessee has not taken the value of assets before introduction of share capital received through fresh allotment and since the AO has correctly determined the valuation of the unquoted equity shares which has been upheld by the CIT(A), therefore, we do not find any infirmity in the order of the CIT(A). Accordingly, the same is upheld and the grounds raised by the assessee are dismissed.
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2019 (7) TMI 1073
Deduction u/s 54F on purchase of new flat - amount not deposited within time limit u/s. 139(1) but purchase flat before the extended time of filing of return u/s. 139(4) - HELD THAT:- According to the provisions of section 54 of the Act, an assessee has an option to claim deduction against long term capital gain on transfer of a residential flat, provided he/she invests within a period of one year before or two years after the date on which the transfer takes place to purchase or within a period of three years after that date to construct, one residential house in India. As per the facts, the assessee has duly acquired a new house property within 2 years from the date of the original transfer of flat and has accordingly rightly claimed deduction us/ 54. The entitlement of exemption u/s 54 relates to the cost of acquisition of a new estate in the nature of a house property for the purpose of his own residence within the specified period. If the assessee fulfils the condition for exemption u/s.54 within the extended time of filing of return u/s. 139(4), the assessee is entitled to exemption u/s.54. Accordingly, the assessee is entitled deduction u/s 54 of the Act for utilization of sale consideration for investment in new residential property within due date as stipulated u/s. 139. As already held that Section 139 cannot be meant only section 139(1), but it means all sub-sections of section 139. Thus, under su-section (4) of section 139 any person who has not furnished a return within the time allowed to him under sub-section (1) of section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier. Since the assessee has fulfilled the requirement u/s 54 for exemption of the capital gain, therefore the assessee is entitled for the same. Even before us, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons to interfere into or deviate from the findings recorded by the Ld.CIT(A). Resultantly, this ground raised by the revenue stands dismissed.
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Customs
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2019 (7) TMI 1104
Valuation of imported goods - inclusion of value of know-how license and rights in the assessable value of the goods imported under EPCG scheme - HELD THAT:- Issue notice on the civil appeal and on the application for stay.
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2019 (7) TMI 1093
Imposition of penalty - abetting and aiding in the smuggling of Gold - no opportunity of personal hearing was provided as per Section 122-A of Customs Act, 1962 - Principles of Natural Justice - HELD THAT:- No acknowledgment has been placed on record in support of the claim that the request of the petitioners for providing an opportunity of hearing was received by the respondent. The receipt of show-cause notice is not disputed by the petitioners. Except seeking for personal hearing, no further objections have been filed by the petitioners. It is ex-facie apparent that the petitioners have failed to avail the opportunity provided by the respondent to contest the matter. This Court is of the considered view that no writ petition is maintainable without exhausting the alternative statutory remedy available under the Act. Petition disposed off.
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2019 (7) TMI 1088
Re-export of goods - extension of time limit for re-export of goods - labeling defects - HELD THAT:- The defects in labeling, as pointed out by the adjudicating authority, were of non-rectifiable character and therefore, the goods in question could not be allowed to be imported into India and therefore re-export was directed. We also note that despite there being no interim order in the present appeal, which is pending since 2013, the directions of the Tribunal to re-export the goods in question before 31.10.2013, have not been complied with by the appellant Assessee. By the lapse of time, the uselessness and devaluation of these goods in terms of the labeling requirements, might have further gone up and therefore, the direction of re-export does not call for any interference in the present appeal filed by the Assessee. Appeal dismissed - decided against appellant.
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2019 (7) TMI 1087
Principles of Natural Justice - petitioner was denied of an opportunity to cross examine the witnesses from whom statements have been recorded by the authority - existence or not of conspiracy agreement with certain named and unknown persons for the purpose of procuring smuggled gold - HELD THAT:- The Court in case of DEEPAK KUMAR VERSUS THE PRINCIPAL COMMISSIONER OF CUSTOMS [ 2017 (7) TMI 882 - MADRAS HIGH COURT] had come to the conclusion that there was no violation of principles of natural justice, since the petitioner therein had not challenged the denial of the request to cross examine and in case when the request for such cross examination has been rejected, then it is for the next fact finding authority to go into the same as to whether such denial is justifiable or not. In the instant case, when the petitioner has sought for a request to cross examine, the same came to be denied. Thereafter, the petitioner had also raised this before the Appellate Authority, which was also rejected for the reasons already discussed. As such, the facts involved in the aforesaid case is totally in contra to the issue in the present writ petition and thereby the proposition laid down therein, may not be applicable to the present case. - this Court is of the affirmed view that the petitioner can be granted an opportunity to cross examine the three witnesses viz., Maheswaran, Dhamodharan, Abdul Azeez, which exercise should be completed within a stipulated time. Petition allowed by way of remand.
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PMLA
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2019 (7) TMI 1101
Supply of deficient/illegible documents - alleged contravention of Section 120-B r/w Section 420 IPC and Section 13(i)(d) of the Prevention of Corruption Act - HELD THAT:- The impugned order has come to be passed by the ld. Special Judge (PC Act) in the proceedings initiated under a special Act i.e. PMLA. The complaint made by the Directorate of Enforcement under Section 3/4 of the PMLA Act is the foundation thereof. On the complaint so made, the offence(s) are to be tried by the Special Court as provided for under subclause (d) of sub-Section (1) of Section 44 PMLA. Provision so made under the PMLA-a special enactment, is an exception created to the procedure to be followed for trial of the offences as provided for under the Code of Criminal Procedure. In that view of the matter neither Section 207 nor Section 208 Cr.P.C. can be applied mutatis mutandis to the proceedings under PMLA. Petition dismissed.
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Central Excise
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2019 (7) TMI 1103
Classification of goods - rice bucket elevator - rice conveyor - HELD THAT:- There is no legal infirmity in the impugned judgment and order warranting our interference under Section 35(L)(1)(b) of the Central Excise Act, 1944. Appeal dismissed.
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2019 (7) TMI 1100
Classification of the imported machine - Cyclotron - whether it falls under CETH 28444000 of the said Act attracting Excise Duty at a higher rate or whether it will fall under CETH 30063000 as 'diagnostic reagent' attracting a lower rate of duty? - HELD THAT:- We do not find any merit in the contention raised by the learned counsel for the appellant that the Commissioner (Appeals), while dealing with the first appeal of the appellant, had no power to assess the duty on the machine Cyclotron imported in terms of the Show Cause Notice issued by the Adjudicating Authority himself, but assessed the duty at a lesser rate while passing the original adjudicating order. The powers of the first Appellate Authority are clearly defined in Section 35A(3) of the Act, which clearly stipulates that the Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against. The determination of duty with relation to particular Entry of the Central Excise Act was well within the power of the first Appellate Authority as well and therefore, even if the appellant filed an appeal against the lower rate of duty than the one proposed in the Show Cause Notice, it does not prevent the Commissioner (Appeals) from restoring a higher demand of duty in terms of the Show Cause Notice issued to the Appellant by the Adjudicating Authority. The Commissioner (Appeals) has given his own reasons for assessing the duty under the particular Entry No.28444000. The Appellate Authority was not bound by the demand of lower rate of duty under CETH 30063000 by the Adjudicating Authority. Petition dismissed.
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2019 (7) TMI 1089
Effect of amendment/substitution in the Rule 6(6)(i) of CENVAT Credit Rules, 2004 - substitution/supersession of the rule - substitution of Rule 6(6)(i) of CENVAT Credit Rules, 2004 by the Notification No.50/2008-C.E.(N.T.) dated 31.12.2008 - retrospective effect or not - HELD THAT:- The present appeal filed by the Revenue is without any merit and is liable to be dismissed. Appeal dismissed - decided against Revenue.
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2019 (7) TMI 1084
CENVAT Credit - time limit - invoices beyond six months - Rule 4 (7) of Cenvat Credit Rules, 2004 - principles of natural justice - HELD THAT:- The appellant has referred to and relied upon various precedent decisions of the Tribunal laying down that the time restriction of six months would not apply to the invoices issued prior to 01/09/2014. The Appellate Authority, very religiously, mentioned all these decisions in the order but sad enough, did not refer to the same in the operative portion of his order - We really fail to appreciate the above conclusion drawn by Commissioner (Appeals) without even whispering about the applicability of various decisions referred to and relied upon by the appellant which clearly covers the issue in their favour. This attitude of Commissioner (Appeals) reflects on his pre-determined mind to reject the appeals in a mechanical manner, thus putting the litigant into difficulty, apart from the increasing the burden and pendency of litigation at the higher level. Reliance placed in the case of M/S INDIAN POTASH LTD. VERSUS COMMISSIONER OF CENTRAL GST, MEERUT [ 2018 (10) TMI 1367 - CESTAT ALLAHABAD] wherein it was clearly held that the six month limitation provided with effect from 01/09/2014 would not apply to the cenvatable invoices issued prior to said date. However, the fact that the invoices in question were prior to 01/09/2014 is required to be verified. The Original Adjudicating Authority is directed to do so, with the association of appellant to whom an opportunity would be given - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2019 (7) TMI 1099
Issuance of C-form - purchase of High Speed Diesel Oil for use in generation and distribution of electricity and other forms of power - concessional rate of tax - HELD THAT:- The issue decided in the case of M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where this Court allowed the writ petitions filed by the assessees and directed the Revenue to permit the petitioners assessees to download 'C' forms. It is not in dispute (as submitted by the learned counsel for Revenue) that though an intra Court appeal has been preferred against Ramco Cements matter with a delay of three days, the same remains unnumbered as of today. In other words, Ramco Cemets authored by a Hon'ble Judge of this Court is holding the field as of today. Petition allowed - decided in favor of petitioner.
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2019 (7) TMI 1091
Principles of natural justice - Validity of assessments - main contentions raised were that, the appellant was not actually heard on 06.06.2019, as stated in the impugned orders - condition for payment of 20% of the demands - HELD THAT:- The impugned order does not reflect any reasons for imposition of the condition. Nor it reflects any advertence to the contentions raised in the appeal - At any rate, we do not find that the insistence for payment of 20% of the demand, is in any manner unreasonable or arbitrary, especially in view of Section 55(4) of the Kerala Value Added Tax Act, 2003. But, it is only just and proper in the interest of justice that payments or recovery if any already effected out of the disputed liability, need to be given credit while fixing such condition. Matters remitted to the Appellate Authority for passing of fresh interim orders on taking note of the contention with respect to realisation of a part of the liability. Appeal allowed by way of remand.
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2019 (7) TMI 1090
Issuance of C-forms - purchase of High Speed Diesel Oil for use in generation and distribution of electricity and other forms of power - concessional rate of tax - HELD THAT:- The issue decided in the case of M/S. SOUTHERN COTSPINNERS COIMBATORE PRIVATE LIMITED REPRESENTED BY ITS MANAGING DIRECTOR, MR. S.V. DEVARAJAN VERSUS THE STATE OF TAMIL NADU, REPRESENTED BY THE SECRETARY TO GOVERNMENT COMMERCIAL TAXES DEPARTMENT, THE PRINCIPAL COMMISSIONER COMMISSIONER OF COMMERCIAL TAXES, THE ASSISTANT COMMISSIONER (ST) , THE JOINT COMMISSIONER (ST) , CHENNAI [ 2019 (6) TMI 490 - MADRAS HIGH COURT] where it was held that respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed - decided in favor of petitioner.
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