TMI Tax Updates - e-Newsletter
August 11, 2020

Case Laws in this Newsletter:

GST Income Tax Corporate Laws CST, VAT & Sales Tax

Articles

1. Transition Credit - Keep it simple

   By: Shailesh Bapat

2. Whether the Value of Goods gives conclusion that activity is Works Contract Service or Not?

   By: Rachit Agarwal

3. GST Portal - Help and Taxpayer facilities-reg.

   By: Ganeshan Kalyani

News

1. Auction for Sale (Re-issue) of ‘5.09 per cent Government Stock, 2022’, Auction for Sale (Re-issue) of ‘5.77 per cent GS, 2030’, Auction for Sale (Re-issue) of ‘GoI Floating Rate Bonds, 2033’, and Auction for Sale (Re-issue) of ‘7.19 per cent Government Stock, 2060’

2. Indian products deserve fair access to other countries on reciprocal basis

3. Finance Minister launches an Online Dashboard for the National Infrastructure Pipeline

4. Shri Piyush Goyal calls upon more buyers and sellers to join the GeM, which has proved to be a game-changer in government procurement;

5. Shri Piyush Goyal asks the traders to undertake customer awareness drive to promote Make In India Goods; Lauds their role during Lockdown;

Notifications

DGFT

1. 25/2015-20 - dated 10-8-2020 - FTP

Issue of Advance Authorisations where export item is Gold medallions and coins or Gold Jewellery/Articles manufactured by fully mechanised process

2. 24/2015-2020 - dated 10-8-2020 - FTP

Amendment in Policy Condition of Sl. No. 55 & 57, Chapter 10 Schedule-2, ITC(HS) Export Policy, 2018

GST - States

3. 01/2020-State Tax (Rate) - dated 5-8-2020 - Delhi SGST

Amendment in Notification No. 01/2017-State Tax (Rate), dated the 30th June, 2017

4. 793/XI-2-20-9(47)/17- U.P. Act-1-Order-(132)-2020 - dated 29-7-2020 - Uttar Pradesh SGST

Amendment in Notification No. KA.NI.-2-838/XI-9(47)/17-U.P. Act-1-2017-Order-(08)-2017 Dated 30 June, 2017

5. 792/XI-2-20-9(42)/17-2020 - dated 29-7-2020 - Uttar Pradesh SGST

Uttar Pradesh Goods and Services Tax (Fourteenth Removal of Difficulties) Order, 2020

6. 790/XI-2-20-9(42)/17-U.P. GST Rules-2017-Order-(131)- 2020 - dated 29-7-2020 - Uttar Pradesh SGST

Uttar Pradesh Goods and Services Tax (Fourty first Amendment) Rules, 2020

SEBI

7. SEBI/ LAD-NRO/GN/2020 /26 - dated 5-8-2020 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA (EMPLOYEES’ SERVICE)) (AMENDMENT) REGULATIONS, 2020

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DF4/CIR/P/2020/0000000151 - dated 10-8-2020

Resources for Trustees of Mutual Funds

Customs

2. 35/2020 - dated 10-8-2020

Revised procedure for Import of Pets / Live Animals

Highlights / Catch Notes

Income Tax

• Tax Implications of Share Transfer Under ITA Section 2(47): Substance Over Form in Amalgamated Company Transactions.

  Case-Laws - HC : Capital gain - Transfer of shares u/s 2(47) - assessee gets shares of Amalgamated Company in lieu of shares of amalgamating company - The taxable event is not just a matter of entries made in the account books of the assessee but is essentially one of substance and of the real nature of what transpired in the transaction. The income generated from the transaction has to be charged to Income tax as per provisions of law.The fundamental principle to be followed is that the basic substance for the transaction has to be separated from the form and the taxing statue has to be applied accordingly. - HC
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• Assessee's Vehicle and Telephone Expenses Partially Disallowed Due to Lack of Business Use Evidence; 10% Disallowance Upheld.

  Case-Laws - AT : Disallowance on account of Vehicle and Telephone expenses - the assessee could not adduce proper evidence in support of Vehicle and Telephone expenses having been incurred wholly and exclusively for the purpose of business inasmuch as no log books for vehicle etc., were produced despite the AO’s specific requisition. We are satisfied that sustenance of disallowance at 10% of the expenses is reasonable and does not require any interference. - AT
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• ERP and Software Costs Classified as Revenue Expenditures Due to Rapid Tech Changes, Not Capital Expenses.

  Case-Laws - AT : Nature of expenses - Expenses incurred on Enterprise Resource Planning (“ERP”) and software expenses - revenue or capital expenditure - in today’s fast changing technology where software becomes obsolete for smooth functioning of the business, the software needs to be replaced / upgraded by an assessee from time to time, the software, in any, case cannot also be said to result in any enduring benefit to the assessee to be considered and thus, it cannot be held as capital expenditure. - AT
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• Assessing Transaction Comparability: Focus on Functions, Assets, and Risks u/r 10B(2)(b) for Transfer Pricing.

  Case-Laws - AT : TP Adjustment - comparability - under Rule 10B(2)(b), the comparability of an international transaction with an uncontrolled transaction shall be judged, among other factors, with reference to the functions performed, taking into account assets employed or to be employed and risks assumed by the respective parties to the transactions. - AT
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• Trusts to be Assessed as Individuals for Capital Gains; Indexation Benefit Available Post Section 11 Exemption Withdrawal.

  Case-Laws - AT : Assessment of capital gains of trust after withdrawing exemption u/s 11 - while completing assessment under normal provisions of the Act, the assessee should be treated as individual. Since, benefit of section 13 has been withdrawn from the assessee, the benefit of indexation while computing capital gain/loss should be allowed. - AT
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• Taxpayer Avoids Penalty for Bona Fide Mistake in Claim u/s 80IB; Section 271(1)(c) Not Applicable.

  Case-Laws - AT : Penalty u/s 271(1) - addition of wrong claim u/s 80IB made by assessee in the return & surrendered during scrutiny proceedings - such claim is solely based on the report of auditor in Form No. 10CCB - Claim made by the assessee towards deduction u/s 80IB(4) is a bonafied mistakes, for which the penalty provisions provided u/s 271(1)(c) cannot be invited. - AT
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Corporate Law

• Property Purchase by Applicant Deemed Not Genuine; Thareja Committee Supports Findings on JVG Group's Financial Distress in 2002.

  Case-Laws - HC : Purchase of property - Genuineness of transaction - The transaction as alleged by the applicant is not a bona fide act. The conclusions of the Thareja Committee is concurred with - Further, in 2002 when the alleged transaction took place, the JVG Group of Companies was a sinking ship. The flagship company of the Group, namely, JVG Finance Ltd. had already been ordered to be provisionally wound up by order dated 05.06.1998. One cannot help coming to the conclusion that this transaction was carried out only to whisk away valuable assets of the JVG Group of Companies which at that time were likely to go under winding up proceedings. - HC
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Case Laws:

• GST

• 2020 (8) TMI 179
  Refund of electronic cash ledger along with interest as notified in Notification No. 13/2017- Central Tax dated 28th June, 2017 - Applicability of proviso to Section 54(1) of the Central Goods and Services Tax Act and proviso to Rule 89(1) of the Central Goods and Services Tax Rules. HELD THAT:- List on 12th October, 2020.

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• Income Tax

• 2020 (8) TMI 178
  Capital gain - Transfer of shares u/s 2(47) - assessee gets shares of Amalgamated Company in lieu of shares of amalgamating company - whether in the scheme of amalgamation, shares of amalgamated company received in lieu of amalgamating company which were held as stock-in-trade, would result in income chargeable to tax under the head Profits and gain of business or profession ? - HELD THAT:- Here under the scheme of amalgamation, the amalgamating company is getting extinguished in the sense that the surviving entity now is only the amalgamated company. However, we cannot ignore the fact that the shares that were with the assessee have undergone the amalgamation process whereby they are replaced with new shares which would be valued entirely on different fundamentals. Subsequent to the amalgamation it is not the same stock in the inventory of the assessee. Under the Companies Act, the shareholders who dissent to the scheme of the amalgamation [ dissenting shareholders ] are given the option of receiving cash or equivalent kind as the price for the shares on the basis of exchange ratio. The dissenting shareholders receive the value of their shareholding while the approving shareholders receive the same value in the form of shares of the amalgamated company. The process of amalgamation in its legal effect from the taxation viewpoint would apply equally, irrespective of the status of the shareholder. The taxable event is not just a matter of entries made in the account books of the assessee but is essentially one of substance and of the real nature of what transpired in the transaction. The income generated from the transaction has to be charged to Income tax as per provisions of law.The fundamental principle to be followed is that the basic substance for the transaction has to be separated from the form and the taxing statue has to be applied accordingly. In light of the above discussion, the findings of the Tribunal are plainly erroneous. Thus, question of law formulated before us is answered in favour of the Revenue and against the assessee. Having answered the question of law in the above terms, we are of the view that the matter needs to be remanded back to ITAT since the factual dispute between the parties has not been decided. Accordingly, we restore the matter back to the file of ITAT for fresh adjudication.

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• 2020 (8) TMI 177
  Penalty u/s. 271AAA - difference in the assessed income and returned on account - CIT(A) restricted the penalty being the addition finally sustained by him on account of valuation of the three ladies watches - HELD THAT:- We find that the order of the CIT(A) giving relief to the assessee on various addition except the addition on account of watches has attained finality in view of the dismissal of the appeal filed by the revenue in the quantum appeal. Therefore, the penalty deleted by the CIT(A) on account of the various additions made by the AO in the assessment order does not call for any interference and accordingly the appeal filed by the revenue is dismissed. Defective notice - notice issued u/s. 274 r.w.s 271 AAA shows that such notice does not mention the particular limb of explanation to section 271AAA defining undisclosed income for which penalty is proposed to be levied. Rather such notice reproduces the language under the scope of section 271 (1) (c) and not section 271AAA. Therefore, such notice in our opinion is vague and has to be treated as invalid. Since this notice clearly shows the non application of mind on the part of the AO and there is no specific ground on which penalty proceeding is initiated, therefore, following the decisions in the case of CIT Vs. Manjunath Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] the penalty notice issued u/s. 274 r.w.s 271 AAA is bad in law and, therefore, is invalid. - Decided in favour of assessee.

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• 2020 (8) TMI 176
  Sale of carbon credits - capital receipt OR revenue receipt - assessee is a company engaged in the business of generation of hydro and wind power. The assessee was entitled to claim deduction u/s. 80IA of the Income-tax Act, 1961 [the Act] in respect of business of generation of power - HELD THAT:- As decided in M/S. SHREE CEMENT LTD. [ 2015 (3) TMI 759 - ITAT JAIPUR] entitlement earned for carbon credits is a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued due to world concern . It has been made available assuming character of transferable right or entitlement only due to world concern. The source of carbon credit is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. In CIT Vs. Subhash Kabini Power Corporation Ltd. [ 2016 (5) TMI 793 - KARNATAKA HIGH COURT] upheld the view taken by the Tribunal that receipts on account of carbon credit are capital receipts not chargeable to tax. Disallowance u/s. 14A r.w. Rule 8D - Assessee submitted that since the issue of disallowance u/s. 14A of the Act has not been examined either by the AO or the CIT(A) on the basis of availability of own funds of the assessee which have been utilized for making investments which are likely to yield tax free income and other relevant considerations, the issue should be remanded to the AO - HELD THAT:- Prayer for remanding the issue to the AO as put forth by the ld. counsel for the assessee has to be accepted as neither the AO or the CIT(Appeals) has examined this issue. In this regard, the ld. counsel for the assessee submitted that a perusal of balance sheet would show availability of own funds. We are of the view that this aspect can be looked into by the AO in the set aside proceedings. We hold and direct accordingly.

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• 2020 (8) TMI 175
  Estimation of income - Bogus purchases from hawala operators - as per assessee excess gross profit element ought to have been added instead of full amount of purchase - HELD THAT:- As decided in M/S MOHOMMAD HAJI ADAM CO. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] no ad hoc addition for bogus purchases can be made. It laid down that the addition should be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases. Such case specific details were not readily available either with the ld. AR or the ld. DR for facilitating the calculation of gross profit rate of genuine and hawala purchases. Under these circumstances, we set-aside the impugned order and remit the matter to the file of the AO and recompute the amount of additions. Reopening of assessment u/s 147 - Disallowance on account of Vehicle and Telephone expenses - HELD THAT:- We find that the assessee claimed Vehicle and Telephone expenses in entirety without offering any suo motu disallowance on account of personal use by the partners, more so, when the vehicles and telephone were also admittedly used for non-business purpose as the assessee had not maintained any log books etc. to show their exclusive user for business purpose. Non-offering of such disallowance on account of personal use came to the notice of the AO during the course of proceedings u/s 147 - Once the position was such, we find no hesitation in holding that the test of such escaped income coming to the notice of the AO during the course of proceedings u/s 147, got fully satisfied inasmuch as the disallowance of the instant expenses duly answered the description of any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently, in the course of proceedings in this section . Ex consequenti, the submission of the ld. AR in this regard is jettisoned. Coming to the merits of the addition, it is seen that the assessee could not adduce proper evidence in support of Vehicle and Telephone expenses having been incurred wholly and exclusively for the purpose of business inasmuch as no log books for vehicle etc., were produced despite the AO s specific requisition. We are satisfied that sustenance of disallowance at 10% of the expenses is reasonable and does not require any interference. Disallowance on account of Membership and Subscription fees - HELD THAT:- Assessee is engaged in the real estate sector. In such circumstances, subscription to magicbricks.com is obviously for the advancement of the business purpose. A sum of Rs. 1,37,875/- included by the assessee in the overall expenditure of Rs. 1,97,430/- under the head Subscription fees is held as deductible. As regards the remaining amount, the assessee could not substantiate the claim of such expenditure passing the test of commercial expediency and having been incurred wholly and exclusively for the purpose of business. The finding of the ld. CIT(A) is ergo affirmed pro tanto and the disallowance is sustained at Rs. 59,555/-. Addition u/s. 36(1)(iii) - Interest paid on the capital borrowed which was used for non-business purpose - HELD THAT:- There should be some interest free funds available with the assessee, whether in the shape of capital or borrowings, which can then be presumed to have been utilized firstly towards Investments. If, on the other hand, there are no interest free funds, the presumption fails. Once the assessee paid interest on capital to partners, the capital no more remained interest free fund, notwithstanding the definition of interest u/s 2(28A) read in juxtaposition to section 40(b) of the Act. It is further noted that section 36(1)(iii) talks of allowing deduction towards interest on capital borrowed. The term capital here also refers to the amount borrowed and not the capital in strict sense as contributed by partners. Capital can never be borrowed as it is always contributed in contrast to a loan which is borrowed and not contributed. It becomes explicitly clear that the assessee did not have any interest free funds available at its disposal which could have been used for making investments for non-business purpose. To that extent, the disallowance of interest pertaining to the Investments made in relation to properties meant for non-business purpose, is rightly called for.

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• 2020 (8) TMI 174
  Nature of expenses - Expenses incurred on Enterprise Resource Planning ( ERP ) and software expenses - revenue or capital expenditure - HELD THAT:- From the perusal of the material on record it can be seen that no benefit of an enduring nature has been derived by the assessee as result of said expenditure. The said expenditure has been incurred only for smooth working and for improving the functioning of the organization. The Assessing Officer ignored the fact that in today s fast changing technology where software becomes obsolete for smooth functioning of the business, the software needs to be replaced / upgraded by an assessee from time to time, the software, in any, case cannot also be said to result in any enduring benefit to the assessee to be considered and thus, it cannot be held as capital expenditure. The case laws referred by the Ld. AR supports the contentions of the assessee as expenditure incurred on computer software does not constitute enduring benefit to term the same as capital in nature. - Decided in favour of assessee. Disallowance under Section 14A - HELD THAT:- Assessing Officer accepted the contention of the assessee that no expenditure has been incurred for earning the dividend income and therefore no disallowance under Section 14A was called for. Without appreciating this aspect, the Assessing Officer disallowed Rs. 3 lacs under section 14A of the Act on an ad-hoc basis, and while doing so the Assessing Officer has not established any nexus between the expenditure and earning of dividend income. The CIT(A) also failed to look into this aspect. Thus, Ground No. 2 is allowed.

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• 2020 (8) TMI 173
  Disallowance u/s 14A r.w.r 8D - HELD THAT:- As the investments from which the tax-free income is earned were made from the appellant s own surplus funds/accumulated profits, following the decision RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] AND HDFC BANK LTD. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] we delete the disallowance made under Rule 8D(2)(ii). Disallowance under Rule 8D(2)(iii) - In the instant case, the appellant has not maintained separate books of accounts in respect of exempt income. It is relevant to mention here that Rule 8D was notified by Central Board of Direct Taxes (CBDT) by the IT (5th Amdt) Rules, 2008 w.e.f. 24.03.2008.Thus it is applicable for the impugned assessment year. The reliance placed by the Ld. counsel for AY 2007-08 stands on a different pedestal from AY 2008- 09. Considerig the case of GODREJ AND BOYCE MFG. CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] addition confirmed - Decided partly in favour of assessee. Nature of expenditure - reduction of share capital of the company - revenue or capital expenditure - HELD THAT:- In the instant case, as recorded by the AO, the assessee incurred mainly of professional charges, legal charges, postage, printing etc. Herein there is a reduction of share capital which has resulted in decrease in fund. The appellant has neither acquired any benefit of enduring nature nor has such expenditure resulted into any asset. We are of the considered view that the ratio laid down in Selan Exploration Technology Ltd. [ 2009 (9) TMI 989 - DELHI HIGH COURT] after considering the decision in Brooke Bond India Ltd. [ 1997 (2) TMI 11 - SUPREME COURT] squarely applies to the present case. Following the same, we delete the disallowance. TP Adjustment - upward adjustment in respect of advertisement, marketing and sales promotion ( AMP ) expenses - HELD THAT:- In the absence of agreement between the assessee and its AE obliging the assessee to incur AMP expenditure on behalf of its AE, no international transaction can be presumed. Even if some indirect benefit has accrued to the AE by aforesaid expenditure, it could not be held that the same was incurred to promote the brand of foreign AE. - As relying on own case we delete the upward adjustment TP Adjustment - comparability - HELD THAT:- Under Rule 10C(2)(b) in selecting the most appropriate method, among other factors, the class or classes of associated enterprises entering into the transaction and the functions performed by them taking into account assets employed or to be employed and risks assumed by such enterprises, shall be taken into account. And under Rule 10B(2)(b), the comparability of an international transaction with an uncontrolled transaction shall be judged, among other factors, with reference to the functions performed, taking into account assets employed or to be employed and risks assumed by the respective parties to the transactions. Comparability of Dolphin Medical Services Ltd. and Medinova Diagnostic Services Ltd. need to be re-examined by the AO/TPO.

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• 2020 (8) TMI 172
  TP Adjustment - ALP of the payment has been determined by using CUP as a method for benchmarking and for this purpose, the price of a similar software module licensed by Oracle Corporation was used as a comparable uncontrolled price - HELD THAT:- We notice that the TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation. In view of the above factual scenario, we are of the considered view that the ratio laid down by the Hon ble Bombay High Court in Lever India Exports Ltd.; Merck Ltd. [ 2017 (2) TMI 120 - BOMBAY HIGH COURT], Johnson Johnson Ltd. and Kodak India Pvt .Ltd. [ 2017 (4) TMI 1281 - BOMBAY HIGH COURT] is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal. Adjustment on account of late recovery of expenses from AEs - HELD THAT:- We are of the considered view that there is merit in the above contentions of the Ld. counsel. Having considered the facts as apparent from record, we restore the matter to the file of the AO/TPO to decide the above issue as per the stand of the Department in subsequent years i.e. from AY 2009-10 onwards. Disallowance of foreign travel expenses - HELD THAT:- Admittedly, in the instant case, these expenses have been incurred in connection with the spouses of the employees who accompanied them to the Worldwide Officers Meet. As recorded by the AO, the appellant has failed to produce any supporting evidence to justify its claim of business expediency. As no supporting evidence has been filed before us, we confirm the disallowance.

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• 2020 (8) TMI 171
  Reopening of assessment u/s 147 - Validity of reasons to believe - HELD THAT:- Reasons recorded by the ld. AO should speak for itself and there cannot be any addition or alteration to the said reasons and the understanding of the AO at the time of recording reasons cannot be supplemented / strengthened by the subsequent investigations carried out by the department or by subsequent materials that were made available to the department. What is relevant at the time of recording the reasons by the ld. AO is that he should have fresh tangible material without any change of opinion , to enable him to have a live link to form a belief that income of the assessee had escaped assessment and if the reopening is made beyond a period of four years from the end of the relevant assessment year then, it is the incumbent duty on the part of the ld. AO to duly record the fact in the reasons recorded itself that there was a clear failure on the part of the assessee to make full and true disclosure on the facts that are necessary and material for the purpose of assessment before the ld. AO in the original assessment proceedings. In the instant case, that statutory condition has not been complied with by the ld. AO. Hence we deem it fit to quash the entire re-assessment proceedings as void ab initio. We hold that the assumption of jurisdiction in the instant case by reopening the case by the ld. AO is not sustainable in law. Accordingly, the cross objection preferred by the assessee in this regard are allowed. Since, re-assessment framed by the ld. AO is quashed, the adjudication of the various arguments made by the Counsels from both the sides on merits of case in the appeal of the revenue becomes academic.

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• 2020 (8) TMI 170
  TP Adjustment - comparable selection - HELD THAT:- The assessee provides back office support functions to its associated enterprises. The transactions of IT Enabled Support Services to its associated enterprises and the arms length price computed by the assessee was accepted by the revenue in A.Y. 2005 06 and A.Y. 2006-07. Companies functionally dissimilar with that of assessee need to be deselected from final list. Rejection of comparable who fails the export filter of 75% which has been adopted by the transfer pricing officer. Rejecting the persistent loss making companies - Though some of the companies have suffered loss in the current assessment year the average of two years showed the robust positive figure. Hence, it cannot be said that the companies are persistently loss making company. Furthermore, we note that these comparables have been duly accepted as comparable in earlier assessment year by the officer himself. Hence, taking a contrary stand by the transfer pricing officer without giving a specific reasoning is not sustainable. Accordingly, we direct for inclusion of these comparables - CG Vak Software Exports Ltd., R Systems International Ltd, and Allsec Technologies.

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• 2020 (8) TMI 169
  Addition u/s. 68 in respect of unsecured loans - addition solely made based on the statement said to have been recorded in the case of Shri Gautam Jain in the course of search proceedings against him, where he has said to have deposed that he is providing accommodation entries - assessment was reopened solely on the basis of the statements recorded from the third party - HELD THAT:- Assessee has discharged its onus by providing adequate evidences to prove that the transaction is genuine. Assessee has proved the genuineness, creditworthiness and identity by furnishing loan confirmations, financials, bank statements, copies of ITR of all the three creditors. Assessee has discharged her onus by furnishing all this information, however, the Assessing Officer except relying on the statement of third party and whose statements were also not provided to the assessee treated the creditors as non-genuine without making any sort of enquiries. Therefore, in the facts and circumstances we do not find any infirmity in the order passed by the Ld.CIT(A) in deleting the addition and holding that the assessee has proved the genuineness of the transactions, identity and creditworthiness of the creditors and in deleting the addition made u/s. 68 of the Act. Thus, the order of the Ld.CIT(A) is sustained. Grounds raised by the revenue are rejected.

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• 2020 (8) TMI 168
  Bogus LTCG - Benefit of exemption u/s 10(38) - long term capital gain arising from sale of shares - exemption as denied to and addition u/s 68 was made holding sale of shares as bogus and sham transaction - HELD THAT:- A perusal of the assessment order in the case of assessee reveal that the Assessing Officer has observed that 3000 shares were jointly held by the assessee and Narayan Ramachandra Rathi. The facts of present case are similar to the facts of case in the case of Narayan R. Rathi decided by the Co-ordinate Bench [ 2019 (8) TMI 1520 - ITAT MUMBAI] . No distinction in facts has been brought to our knowledge by the Department. Thus, for the parity of reasons, addition made under section 68 of the Act deserves to be deleted. Further, the Assessing Officer is directed to allow the benefit of section 10(38) of the Act to the assessee. - Decided in favour of assessee.

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• 2020 (8) TMI 167
  Assessment of capital gains of trust after withdrawing exemption u/s 11 - assessee is not eligible for the benefit of section 13 - assessee trust is registered under section 12A - assessee while computing capital gain/loss on sale of mutual funds claimed the benefit of indexation on the cost of acquisition - AO and the CIT (A) rejected assessee s computation of capital loss on sale of mutual funds on the premise that the assessee being charitable trust is not eligible for indexation on cost of acquisition - HELD THAT:- It is an admitted fact that the assessee in the impugned assessment year has sold mutual funds and had not applied funds of the trust in accordance with the provisions of section 11 of the Act. The authorities below have rightly denied the benefit of section 13 of the Act to the assessee. AO after withdrawing the benefit of Section 13 of the Act completed the assessment under normal provisions. The assessee while computing capital gain/loss on sale of mutual funds claimed the benefit of indexation on the cost of acquisition. AO and the CIT (A) rejected assessee s computation of capital loss on sale of mutual funds on the premise that the assessee being charitable trust is not eligible for indexation on cost of acquisition. The denial of indexation has caused double whammy to the assessee. The assessee loses the benefit of section 13 and is assessed under normal provisions of the Act. At the same time under normal provisions, the assessee is denied the benefit of indexation. In Director of Income Tax (Exemptions) vs. Shardaben Bhagubhai Mafatlal Public Charitable Trust [2000 (9) TMI 45 - BOMBAY HIGH COURT] in a somewhat similar case, where the trust had made investments in violation of the provisions of section 11(5) and was denied the benefit of section 13; the assessee s claim of deduction under section 80L was also denied by the Revenue. Hon ble High Court following the judgement rendered in the case of CIT v. Marsons Beneficiary Trust [ 1990 (7) TMI 37 - BOMBAY HIGH COURT] upheld the decision of Tribunal in directing the Revenue to make assessment by treating the assessee as an individual. Thus we hold that while completing assessment under normal provisions of the Act, the assessee should be treated as individual. Since, benefit of section 13 has been withdrawn from the assessee, the benefit of indexation while computing capital gain/loss should be allowed. Benefit of carry forward of earlier year deficit and set off against current year income - Since assessment is made under regular provisions, the assessee is allowed to carry forward deficit of earlier years and set off against current year income, in accordance with the provisions of the Act. The ground No.3 of the appeal is allowed.

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• 2020 (8) TMI 166
  Revision u/s 263 - HELD THAT:- We find that the order was passed by the Hon ble Bombay High Court for demerger on 14.11.2014 and appointed date was fixed as 01.01.2014. Accordingly, the income and expenses of pharma division of Jay Precision Products (India) Pvt. Ltd. for the period 01.01.2014 to 31.03.2014 was transferred to the assessee-company. From examination of the documents filed by the assessee before the AO during the course of assessment proceedings, we find that during the year the job work charges payable to pharma division of Jay Precision Products (India) Pvt. Ltd., upon merger of the pharma division of Jay Precision Products (India) Pvt. Ltd., the sales shown by them to the assessee were therefore adjusted and cancelled against expenses of same account debited to the P L account and accordingly the net amount was claimed and the said net amount was reported in the tax audit report and in Form 3CEB, the labour/processing charges and electricity and fuel charges as mentioned in the impugned order are related to and incurred by the pharma division of Jay Precision Products (India) Pvt. Ltd. for the period 01.01.2014 to. 31.03.2014. The expenses referred in the impugned order were incurred by the pharma division of Jay Precision Products (India) Pvt. Ltd. so acquired by the assessee pursuant to the order of the Hon ble High Court and the sale of pharma division of Jay Precision Products (India) Pvt. Ltd. for the period 01.01.2014 to 31.03.2014 were also transferred to the assessee-company due to the effective demerger, the amount reported in the tax audit report (Form 3CD) and Form 3CEB are the gross amount of the said purchases including duties, taxes and freight. All the above details were filed by the assessee before the AO during the course of assessment proceedings. In the case of Moil India Limited [ 2017 (5) TMI 258 - BOMBAY HIGH COURT] it is held that the Assessing Officer is not expected to raise more queries if he was satisfied about admissibility of claim on the basis of materials and details supplied and therefore, the order is not erroneous or prejudicial to the Revenue. In view of the above factual matrix and position of law, we cancel the order u/s 263 passed by the Pr. CIT. In the case of Nirav Modi [ 2016 (6) TMI 1004 - BOMBAY HIGH COURT] held satisfaction of the Assessing Officer on the basis of documents was not shown to be erroneous in the absence of making a further inquiry. This was a case where a view was taken by the Assessing Officer on inquiry. Even if this view, in the opinion of the Commissioner was not correct, it would not permit him to exercise power u/s 263 of the Act. The Tribunal was right in setting aside the order u/s 263 of the Act. - Decided in favour of assessee.

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• 2020 (8) TMI 165
  Penalty u/s 271(1) - addition of wrong claim u/s 80IB made by assessee in the return surrendered during scrutiny proceedings - whether the claim made by the assessee is a bonafied mistake or a deliberate attempt made to conceal the particulars of income within the meaning of section 271(1)(c) has to be examined? - HELD THAT:- On perusal of the reasons given by the assessee for making a claim of deduction u/s 80IB(4), we find that the assessee was prompted to go for making a claim as per the report of auditor given in Form 10CCB, which is in our considered view is a bonafied mistake and the same cannot be considered as a deliberate attempt made for concealment of particulars of income to levy penalty u/s 271(1)(c). We, further noted that in the case of CIT vs Reliance Petro chemicals products Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] has held that making a claim, which is not substantiated cannot be considered as deliberate attempt to concealment of particulars of income, which warrants levy of penalty u/s 271(1)(c) Similar view has been expressed of CIT vs Price Waterhouse Coopers [ 2012 (9) TMI 775 - SUPREME COURT] where the assessee has made a claim on the basis of tax audit report of auditor and the same has been found to be not allowed and the Ld. AO has made additions - mere making a claim, which is not substantiated that too on the basis of report of auditor cannot be considered as concealment of particulars of income. In this case, there is no doubt of whatsoever with regard to the claim of the assessee towards trading profit and such claim is solely based on the report of auditor in Form No. 10CCB. Claim made by the assessee towards deduction u/s 80IB(4) is a bonafied mistakes, for which the penalty provisions provided u/s 271(1)(c) cannot be invited. - Decided in favour of assessee.

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• 2020 (8) TMI 164
  Disallowance of annual maintenance charges for software out of total annual maintenance charges - addition on the ground that the same do not pertain to the assessment year under consideration - HELD THAT:- We have noted that the assessee has placed on record copy of submission with regard to the software expenses before assessing officer and the copy of written submission filed before ld CIT(A) on the issue of Software expenses. Assessee also filed application dated 24.01.2018, for admitting additional evidences on the impugned issue. On the admission of additional evidence the CIT(A) sought the remand report of the assessing officer, copy of such application is also on record. The copy of remand report dated 23.08.2018, furnished by assessing officer for objecting the admission of additional is also available on record. Despite sufficient material on record, including the copy of tax invoice with regard to annual maintenance of Software and written submission, the ld CIT(A) affirmed the action of assessing officer without examining the facts by holding that no submissions were made by assessee. Considering AO in his remand report has already accepted that the submissions of the assessee are in order, therefore, we direct the assessing officer to allow the expenses. Even otherwise, we have seen that on the tax invoice it is clearly mentioned that purchase order was placed on 10.02.2014, invoice was generated on 10.03.2014 and maintenance contract was valid till 31st December 2014. - Decided in favour of assessee.

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• Corporate Laws

• 2020 (8) TMI 162
  Purchase of property - Issuance of direction or order to the effect to set aside or not to accept the recommendation made by the learned Mr. G.P. Thareja - the Presiding Officer of the One Man Committee constituted by this Hon ble Court in its XIIIth Report dated 05.02.2007 - completion of process of registration/execution of the Sale Deeds of the land - providing of all necessary documents - violation of principles of natural justice - HELD THAT:- Both the reports, namely, the Thareja Committee Report and the SFIO Report have rejected the claim of the applicant. It is not in dispute that the agreement to sell and power of attorneys were executed. The Thareja Committee report however concludes that material evidence has not been produced and that the transaction is not genuine and bona fide. The report gravely doubts that any consideration was paid. SFIO in its report concludes that the resolution authorising Sh. V.K. Sharma to make the agreement to sell and GPA on behalf of the five stated companies of the JVG Group are fabricated. The conclusion is unequivocal that Sh. V.K. Sharma had no authority to execute the said documents and to receive any consideration for and on behalf of the said companies in cash. The report unequivocally concludes that Sh. V.K. Sharma has indulged in fraudulent conduct and has siphoned off the company s money. Based on these two reports, it is quite clear that the transaction which is claimed by the applicant company cannot be accepted. Regarding the objections taken to the Thareja Committee report by the applicant, the objections are misplaced. There is no dispute that the agreement to sell and power of attorney were duly executed and registered. The issue is as to whether the consideration was actually paid given the fact that it is claimed to have been paid in cash. The Thareja Committee report concludes that the relevant documents, namely, the cash book, ledger, etc. have not been placed on record and concludes that the transaction lacks bona fide. This conclusion is supported by so many other surrounding facts and circumstances which render the objections raised by the applicant to the Thareja Committee Report completely irrelevant and without merits. The transaction as alleged by the applicant is not a bona fide act. The conclusions of the Thareja Committee is concurred with - Further, in 2002 when the alleged transaction took place, the JVG Group of Companies was a sinking ship. The flagship company of the Group, namely, JVG Finance Ltd. had already been ordered to be provisionally wound up by order dated 05.06.1998. One cannot help coming to the conclusion that this transaction was carried out only to whisk away valuable assets of the JVG Group of Companies which at that time were likely to go under winding up proceedings. Application dismissed.

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• CST, VAT & Sales Tax

• 2020 (8) TMI 163
  Refund alongwith interest - petitioner states that the respondents have not issued the refund due to the petitioner although the assessments of the petitioner up to 30th June, 2017 under Central Sales Tax Act, 1956 have been finalised. HELD THAT:- The present writ petition is disposed of with a direction to the respondents to decide the petitioner s refund application along-with interest within ten days in accordance with law. Issue notice.

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• 2020 (8) TMI 161
  Principles of Natural Justice - violation was sought to be corrected by permitting the petitioner to approach the Assessing Officer within one week from date of receipt of a copy of that order - copy application made after a period of six months from the date passing of the order - mismatch between the turnover disclosed in the returns filed by the petitioner and those in the annexures of the selling/purchasing dealers - benefit of Circular No.3 of 2019 rejected - HELD THAT:- The learned Single Judge has opined that no opportunity was extended to the petitioner to substantiate the turnover reported by him in the revised returns to correct which, an opportunity was directed to be extended to the petitioner. Neither the petitioner nor the Department has availed of this opportunity as extended by the court, and there has been considerable delay on the part of both the parties - the impugned orders is set aside with a direction to the Assessing Officer to redo the assessments de novo and in accordance with law taking note of the revised returns filed by the petitioner under cover of letter dated 26.03.2015 and bearing in mind the directions of the Commissioner in Circular No.3 of 2019. Petition disposed off.

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• 2020 (8) TMI 160
  Maintainability of appeal - refusal to exercise discretion under Article 226 for reason of efficacious alternative statutory remedies - the original penalty order issued on the basis of an inspection was set aside in a statutory revision by the 3rd respondent and remanded for fresh consideration - HELD THAT:- The 3rd respondent Commissioner would, on an appeal being filed, immediately constitute another Deputy Commissioner as the appellate authority for consideration of this particular appeal, if the very same person who passed the impugned order is now the Appellate Commissioner - The appellant would be entitled to raise that contention before the First Appellate Authority or the recovery Officer if any such recovery is attempted. Appeal disposed off.

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