TMI Tax Updates - e-Newsletter
August 23, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Sabka Vishwas (Legacy Dispute Resolution)Scheme (SVLDRS), 2019 comes into force w.e.f. 1.9.2019

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• Third party cannot raise objection against Condonation of delay in filing the income tax returns by CBDT in the case of Member of Lok Sabha

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• Extensive renovation expenditure on leased premises - to be treated as capital expenditure - assessee is deemed owner of the building u/s 32

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• Initiation of CIRP is not allowed against the Builder where loan is given to Individual in respect of flat, for default by the individual

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Articles

1. High Pitched assessment in accordance with directions of DRP, appeal of assesse has been allowed by Tribunal. A case of continuing harassment of assesse and there seems no ease of doing business if you are in clutches of Tax authorities.

   By: DEVKUMAR KOTHARI

2. ARBITRATION COUNCIL OF INDIA

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. WTO reforms must be taken up by all member countries: Piyush Goyal

2. CBDT issues clarification on eligibility of small Start-ups to avail tax holiday

Notifications

Central Excise

1. 07/2019 - dated 22-8-2019 - CE

Seeks to extend the validity of 2% Basic Excise Duty on ATF drawn from RCS-UDAN airport or heliport or waterdrome

2. 05/2019 - dated 21-8-2019 - CE (NT)

Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019

3. 04/2019 - dated 21-8-2019 - CE (NT)

Implementation of Sabka Vishwas (Legacy Dispute Resolution)Scheme (SVLDRS), 2019

GST

4. S.O. 3009 (E). - dated 21-8-2019 - CGST

Creation of the State Benches of the Goods and Services Tax Appellate Tribunal (GSTAT)

5. G.S.R. 584(E) - dated 21-8-2019 - CGST

Goods and Services Tax Appellate Tribunal (Appointment and Conditions of Service of President and Members) Rules, 2019

6. 37/2019 - dated 21-8-2019 - CGST

Seeks to extend the due date for furnishing FORM GSTR-3B for the month of July, 2019.

GST - States

7. S.O. 353 - dated 21-8-2019 - Bihar SGST

Seeks to amend Notification No. S.O. No. 213, dated the 08th May, 2019

8. S.O. 352 - dated 21-8-2019 - Bihar SGST

Seeks to amend Notification No. .O. No. 173, dated the 21st September, 2017

9. 36/2019-State Tax - dated 20-8-2019 - Gujarat SGST

Extension for blocking and unblocking e-way bill facility under Rule 138E to 21.11.2019

10. F.17(131-pt-II)ACCT/GST/2017/4764 - dated 22-8-2019 - Rajasthan SGST

Notification issued by the Commissioner to extend date of filing of Form GSTR-3B

11. F.17(131)ACCT/GST/2017/4728 - dated 8-8-2019 - Rajasthan SGST

Regarding Appeal to the Appellate Authority under sub section 1 of section 107

Highlights / Catch Notes

GST

• The due date for submitting FORM GSTR-3B for July 2019 has been extended.

  Notifications : Seeks to extend the due date for furnishing FORM GSTR-3B for the month of July, 2019.
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• Assessee Seeks Seized Documents Under CGST Act; Department to Respond Within Two Weeks Per Section 67(5) Provisions.

  Case-Laws - HC : Seeking copies of documents seized u/s 67(2) of the CGST Act and copy of statement recorded - assessee made written request to provide copies - department directed to dispose of/respond to petitioner's request on its own merits and in accordance with law within a fortnight in light of provisions contained in Section 67(5) of the CGST Act
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• Power Banks Classified as Accumulators Under Chapter 85.07, Subject to 28% GST Rate, Not as Static Converters.

  Case-Laws - AAAR : Classification of goods - Power Bank - the battery combined with the charge management system and the voltage boost convertor constitute the Power Bank to perform the function of storing electrical energy and discharging it to the connected device when required - the mere fact that there is a converter in the Power Bank will not make it a Static Converter - it is classifiable as an accumulator under Chapter heading 85.07 - GST @ 28%
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Income Tax

• Assessing Officer's Adjustment Rejected: Valuation Report Deficiencies Lead to Decision in Favor of Assessee.

  Case-Laws - AT : Valuation by DVO - the adjustment made by the Assessing Officer basis the valuation report so submitted by the DVO cannot be accepted as the same suffer from serious infirmity - decided in favor of assessee by accepting the cross objections.
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• Court Confirms Genuine Short-Term Capital Loss Offset by LTCG; Revenue Fails to Prove Pricing Discrepancies in CCD Transactions.

  Case-Laws - AT : Genuineness of short term capital loss and set off with LTCG - on the basis of same documents neither purchase of CCDs nor sale of CCDs to related concerns are doubted but the pricing is doubted - If the same are to be treated as different, then the onus is on the revenue to prove it, which has not been proved by the revenue - STCG loss is genuine loss and cannot be construed as a colorable device
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• AO Finds Bogus Purchases; Taxes Profit Element at 12.50% Based on Sales Tax Department Data and Inquiries.

  Case-Laws - AT : Bogus purchases - AO has brought out clear facts in the light of information received from ST Department coupled with further enquiries that purchases from above two parties are bogus in nature which are not supported by necessary evidence and taxed profit element embedded in those purchases @12.50% - there is no reason to interfere
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• Renovation Costs on Leased Property Are Capital, Not Revenue, Says Explanation 1 to Section 32 of Income Tax Act.

  Case-Laws - HC : Extensive renovation expenditure on leased premises - capital or revenue - in view of Explanation 1 to Section 32, it has become immaterial as to whether the assessee is the owner of the building or the lessee and there is no scope left for any interpretation since the assessee is treated as the owner of the building for the period of their occupation - CIT(A) and ITAT wrongly allowed it as revenue expenditure - to be treated as capital expenditure
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• Certificates Revoked Under VDIS Section 68(2) for Misrepresentation; Prior Income Disclosure Violates Scheme Rules.

  Case-Laws - HC : Revocation of certificates issued u/s 68(2) of VDIS - misrepresentation of Facts - since there is prohibition under VDIS, that when the amount so declared is already disclosed in the return of income filed before the Scheme came into operation, specially when notice u/s 148 was also issued on 22.06.1997, which is prior to the notification of VDIS - revocation is valid
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• Ad Agency's Income Discrepancy Explained: No Adjustment Needed for Differences Between Form 26AS and Books of Accounts.

  Case-Laws - AT : Addition on account of non-reconciliation of Form 26AS - business of advertisement agency - the assessee reports only the commission portion as its income in its P & L account and not the gross receipts, hence, there is always bound to be difference with regard to the amounts reflected in the Form 26AS vis-à-vis books of accounts - the explanation is reasonable and it is highly impracticable for reconciling the same in this scenario - no addition
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• TPO can only determine ALP using prescribed methods u/s 92C, rule 10B; adhoc adjustments are unauthorized and deleted.

  Case-Laws - AT : TP Adjustment - adhoc adjustment - duty of the TPO is restricted only to the determination of the ALP of an international transaction between two related parties by applying any of the methods prescribed u/s.92C r.w. rule 10B and there is no provision made in the statute empowering TPO for determining the ALP on an estimation basis /adhoc basis - adjustment deleted
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• Debatable Issue on Setting Off Losses Against Profits u/s 80IA Not Rectifiable u/s 154.

  Case-Laws - AT : Rectification u/s 154 - setting off of losses while allowing deduction u/s 80IA - whether the loss from the eligible units can be set off from the profits of other eligible units is a debatable issue and therefore, it cannot be rectified as u/s 154 only glaring and apparent can be rectified
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• Appeal Maintainable Despite Non-Payment of Admitted Taxes Before Filing u/s 249(4)(a); Requirement is Directory.

  Case-Laws - AT : Maintainability of appeal before the CIT(A) - non payment of admitted taxes on the returned income before filing appeal u/s 249(4)(a) - stipulation as to the payment of such tax ante the filing of first appeal is only directory and not mandatory, it implies that once tax is paid the validity is attached to the appeal from the date when it was originally filed and not when the defect is removed - appeal is maintainable
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• Bank Account Not Considered 'Books of Account' u/s 68; Cash Deposits Can't Be Added as Income.

  Case-Laws - AT : Addition u/s 68 - treatment of bank passbook as a 'books of account' - the bank account or bank passbook of an assessee cannot be held as the latters 'books of account', hence no addition in respect of a cash deposit made in the said account could be validly made u/s 68
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• No Penalty for TP Addition if ALP Calculated in Good Faith u/s 271(1)(c); Mere ALP Differences Exempt.

  Case-Laws - AT : Penalty u/s 271(1)(c) - TP addition - if the assessee computed the ALP of the international transaction as per the manner prescribed in good faith and due diligence then simply because now there remains some difference in the manner of determination of the ALP, it cannot be held that the assessee either concealed the particulars of its income or furnished inaccurate particulars of income - no penalty
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• Reassessment Notice u/s 148 Quashed: Investment in Subsidiary Shares Not Income Escaping Assessment.

  Case-Laws - HC : Reassessment Notice u/s 148 - even assuming that at the time notice was issued the Respondent was not fully aware of all the relevant facts, once the Petitioner submitted its objections drawing his attention to the specific legal position, it was obligatory for the AO to have applied his mind to those points - the fundamental premise that the investment in the shares of its subsidiary amounted to ‘income’ which had escaped assessment was flawed - notice quashed
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• Penalty for Bogus Purchases u/s 271(1)(c) Challenged Due to Lack of Specific Justification by Assessing Officer.

  Case-Laws - AT : Levy of penalty u/s.271(1)(c) - bogus purchases - AO has not brought out any cogent specific reason for imposing penalty - Penalty cannot be levied on assumption, there has to be something more which can justify such levy of penalty
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• Court Rules Third Parties Cannot Challenge CBDT's Discretion on Delay Condonation u/s 119(2)(b) for Income Tax Returns.

  Case-Laws - HC : Raising objection by the third party against Condonation of delay in filing the income tax returns by CBDT- one voter(petitioner) objected condonation against Member of Lok Sabha - Once the discretion available u/s 119(2)(b) has been exercised, there is no scope for this Court to interfere with such discretion, especially at the instance of a third party who has no locus standi to challenge the impugned order
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• Infosys BPO vs. Assessee: Transfer Pricing Adjustment Case Highlights Incompatibility Due to Significant Operational Differences.

  Case-Laws - HC : TP Adjustment - detailed chart shows dissimilarities between the Infosys BPO and the Assessee on several counts such as Infosys provides business process management services to a wide range of industries whereas the Assessee is a captive service provider, turnover, size of organization, goodwill, selling and marketing expenses as well as risk undertaken - cannot be a suitable comparable
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Customs

• Petition for EPCG Authorization Extension Denied Due to Ignoring Grievance Redressal Process in FTP Sections 2.49 & 9.9.

  Case-Laws - HC : Extension of Export Obligation period - EPCG Authorization Scheme - Foreign Trade Policy - seeking prospective extension for a period of 2 years from the date of the extension order - the petitioner firm has not availed the option of approaching the Grievance Redressal Committee under 2.49 and 9.9 of FTP 2006-07. Under the circumstances, there is no merit in the present petition.
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Indian Laws

• Court Upholds Presumption of Liability u/ss 138 & 139; Respondent's Defense Deemed Implausible in Cheque Dishonor Case.

  Case-Laws - SC : Dishonor of Cheque - prosecution u/s 138 - With the evidence adduced by the complainant, the courts below ought to have raised the presumption u/s 139 - The defence of the respondent that though he made payment for the commodities/rice bags, the blank cheques were not returned by the appellant-complainant is quite unbelievable and unacceptable.
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IBC

• Workmen's Dues Prioritized in CIRP: Provident, Pension, and Gratuity Funds Excluded from Liquidation Estate u/s 53.

  Case-Laws - AT : Initiation of CIRP - Liquidation process - preference of workmen for payment of dues - the provident fund, the pension fund and the gratuity fund do not come within the meaning of ‘liquidation estate’ for the purpose of distribution of assets u/s 53.
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• Loan Disbursed to Individual Borrower, Not Builder; IHFL's Section 7 Insolvency Application Ruled Unmaintainable.

  Case-Laws - AT : Initiation of CIRP - financial creditor or not - Admittedly the appellant, IHFL, has disbursed the amount for consideration of time value of money in favour of borrower, Individual and not to the builder. Therefore, the builder is not the corporate debtor of the appellant and the application u/s 7 of I&B Code is not maintainable.
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• Courts Must Evaluate Counterclaims Under IBC Section 14 Moratorium, Avoid Automatic Stays for Broader Justice.

  Case-Laws - HC : Section 14 of the IBC - admission or stay of counter claim - the Court has to see whether the purpose and intent behind the imposition of moratorium is being satisfied or defeated. A blinkered approach cannot be followed and the Court cannot blindly stay the counter claim and refer the defendant to the NCLT/RP for filing its claims.
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Service Tax

• Land Acquisition for Power Plant Not a Service; No Service Element in Land Transfer to Joint Venture.

  Case-Laws - AT : The treatment of entire amount that has been spent towards the acquisition of land, by no stretch of imagination, can be treated as value towards the alleged service - There is no element of service involved in the transaction, undertaken by the appellant while acquiring the land and transferring the same to the JV company, for setting up of the power plant.
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• Ruling: 51% Equity Stake in Joint Venture Not Classified as 'Business Auxiliary Service' for Service Tax Purposes.

  Case-Laws - AT : Whether the 51% equity stake which has been granted to the appellant by the Implementation Agreement, in the JV company, could be treated as ‘Business Auxiliary Service’ - In the absence of specifying the category of classification, demand of service tax cannot sustain.
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• Penalty Under Finance Act Section 78 Overturned; Tax Due on Actual Sale, Not Invoice Issuance.

  Case-Laws - AT : Penalty u/s Section 78 of the Finance Act - the tax liability was discharged on receipt of consideration instead at the time of raising of the invoices - the appellant would be under a belief that he is required to deposit the service tax only on actual sale of the flats - penalty set aside
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Central Excise

• SVLDRS 2019: Scheme to Resolve Excise and Service Tax Disputes, Offers Relief on Interest, Penalties, and Fines.

  : Sabka Vishwas (Legacy Dispute Resolution)Scheme (SVLDRS), 2019 comes into force w.e.f. 1.9.2019
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• High Court Rules Reopening u/s 11A for Service Tax on Freight Time-Barred, No Mala Fide Intent Found.

  Case-Laws - HC : Reopening of proceedings u/s 11A of CEA - service tax on freight paid on outward transportation up to the place of removal - If the law was subsequently declared in favour of the Revenue by the High Court that would not relate back to the period of assessment to brand the assessee's action of availing credit as mala fide - there is no foundation for invoking the provision of Section 11A of the CE Act, 1944 r.w.s. 73 of the FA Act, 1994 as same being barred by limitation
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VAT

• Court Invalidates Six-Year Reassessment Under DVAT Act; Section 5 Bars Combining DVAT and CST Liabilities.

  Case-Laws - HC : Reopening of assessment - time limitation - DVAT Act - Revenue has sought to make no distinction between the liability under the DVAT and that under the CST Act. In terms of Section 5 of the DVAT Act these two could not be combined. - the reopening of the assessment by invoking the extended period of 6 years was bad in law.
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Case Laws:

• GST

• 2019 (8) TMI 943
  Classification of goods - Power Bank - classifiable under Heading 8504 40 90 as Static Converter-others or under Heading 8507 as Accumulator and not as Static Converter? - Challenge to AAR decision - HELD THAT:- With the technical report and the relied upon case laws not being of any assistance to advance the case of the Appellant, we turn to the HSN Explanatory Notes to decide the classification of the Power Bank - The Harmonised System of Nomenclature and the Chapter Notes and Explanatory Notes thereto, on which the Tariff Act has been modelled has been repeatedly acknowledged by Courts to be a safe guide for resolution of disputes with regard to classification under the Tariff Act - When we read the Explanatory Notes on Chapter Heading 85.04 and 85.07 (extracted above), we find that, in the case of Static Converters, there is a conversion of electrical energy in order to adapt it for further use. A characteristic feature of this class of apparatus (Static Converters) is that the flow of energy is one way, Electrical Static Converters operate on the principle that that the combination of certain products used as electrodes in combination with certain liquids used as electrolytes will only allow current to now in a single direction. In this case, we find that the Power Banks consists of not only the Lithium-ion Polymer battery but also the circuitry such as charge management system and voltage boost converter . All the components. together make up the Power Bank. Admittedly, it is not the battery alone which makes up a Power Bank. The battery combined with the charge management system and the voltage boost convertor constitute the Power Bank. All three components work in tandem to perform the function of storing electrical energy and discharging it to the connected device when required. The mere fact that there is a converter in the Power Bank will not make it a Static Converter. It is emphasised that the primary difference between the Static Converter and the Accumulator is the fact of storage of electrical energy. It is not the function of converting the direct current from its input supply to its output device by either stepping up the voltage which characterises an accumulator. Accumulation of electrical energy and the conversion of electrical energy from DC to DC that Step up the voltage from its input supply to its output load together characterise the function of a Power Bank. The critical aspect of storage of electrical energy is what distinguishes an accumulator from a static converter - thus, the Power Bank traded by the Appellant is classifiable as an accumulator under Chapter heading 85.07. Ruling of AAR upheld - appeal dismissed.

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• 2019 (8) TMI 942
  Extension of time period for filing of GST TRAN-1 and TRAN-2 - HELD THAT:- The respondents are directed to reopen the portal within two weeks from today. In the event they do not do so, they will entertain the GST TRAN-1 and TRAN-2 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. List this matter on 24.09.2019.

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• 2019 (8) TMI 941
  Validity of detention order - release of goods - Section 129 of CGST Act, 2017 - maintainability of petition - HELD THAT:- The issues raised are at preliminary stage and this Court is not convinced to entertain the writ petition and adjudicate upon merits at this stage. To conform to the scheme under the Act, the writ petition is disposed of by this order. The petitioner submits bank guarantee for the tax and penalty as shown in Ext.P4(c) and applies for release of goods by enclosing a copy of this order within two days from today. The 2nd respondent shall release the goods detained under Ext.P4(b) and subjected to enquiry in Ext.P4(c) within twelve hours from the date and time of receipt of bank guarantee. The bank guarantee shall be kept valid for six weeks from today. The 2nd respondent shall complete the enquiry, afford fair and reasonable opportunity as envisaged under the Act to petitioner and pass and communicate this order within four weeks from today. Petition disposed off.

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• 2019 (8) TMI 940
  Direction to provide the copies sought for - petitioner sought for a copy of the statement recorded from the petitioner and also made a request to provide copies of the documents that were seized from the premises of the petitioner - HELD THAT:- This Court finds that there is a provision regarding copies of documents seized and this is contained in sub-Section (5) of Section 67 of the CGST Act 2017 - this Court is of the view that it will be appropriate to direct the respondent to dispose of/respond to writ petitioner s request letter dated 02.07.2019, on its own merits and in accordance with law within a fortnight from the date of receipt of a copy of this order. Petition allowed.

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• Income Tax

• 2019 (8) TMI 939
  Block assessment - Initiation of proceedings u/s 158BD on the satisfaction of assessing officer - No Mandatory requirement of satisfaction of AO when AO who initiated proceedings and the assessing officer who made the assessment, is the same person - HELD THAT:- Special leave petition is dismissed as withdrawn.

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• 2019 (8) TMI 938
  Interest u/s 234B and 234C - Imposition of interest is justified under sections 234B and 234C, save and except on the income which arises from retrospective operation of any statute, decision etc. In those type of cases, the assessee is unable to know and assess his income and pay advance tax accordingly - HELD THAT:- Delay condoned. Leave granted.

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• 2019 (8) TMI 937
  Stay of recovery proceedings during the pendency of the appeal - HELD THAT:- The writ petition is disposed of directing the Commissioner of Income Tax (Appeals)/ 2nd respondent to consider and dispose of the subject statutory appeal filed by the petitioner herein at the earliest taking note of the Full Bench decision reported in The Mavilayi Service Co-operative Bank Ltd, v. The Commissioner of Income Tax, Calicut [ 2019 (3) TMI 1580 - KERALA HIGH COURT] and to keep in abeyance recovery proceedings and collection of tax assessed, pending disposal of such appeal.

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• 2019 (8) TMI 936
  Revocation of certificates issued u/s 68(2) of VDIS - misrepresentation of Facts - revoked after a long gap of 10 years - HELD THAT:- The scope of the Act will apply to any Central Act or Regulation and also to the Constitutions, as it is the Rule of interpretation which has been made applicable to the Constitution in the same manner as it applied to any Central Act or Regulation. No doubt, under the above Act, the power is vested with the authority to make an order which implies a power to revoke or modify or vary that order at any subsequent stages, unless there is a specific bar. On a conjoint reading of Section 68 of VDIS and Section 21 of General Clauses Act, it is clear that the Scheme does not provide for any enquiry or investigation prior to the issuance of certificates u/s 68(2) of VDIS, when that being so, the only remedy available for the respondents is to avail Section 21 of General Clauses Act, which is a General application and the Rule of construction that can be applied to statute does not provide any assistance for reasonable construction, so as to meet its object. This Court has no hesitation to reject the argument of the learned counsel appearing for the petitioner, as the authority has jurisdiction to invoke Section 21 of the General Clauses Act to withdraw or revoke the certificates issued Section 68(2) of VDIS. This Court is of the view that the petitioner cannot avail the benefits under VDIS, having contravened Section 64(2)(1), and as the notice u/s 148 was issued on 22.06.1997, which is prior to the notification of VDIS, wherein which the petitioner declared the gifts from NRI amounting to Rs. 6,00,000/- and since there is prohibition under VDIS, that when the amount so declared is already disclosed by the assessee in the return of income filed before the Scheme came into operation, the same cannot be stated once again by way of revised return of income. Order passed by the 1st respondent is well found and the petitioner has misrepresented before the authority to avail the benefits under the Scheme VDIS by suppressing the declaration made in the returns filed prior to the notification of VDIS. Hence the Writ Petition is dismissed.

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• 2019 (8) TMI 935
  TP Adjustment - excluding M/s Infosys BPO Ltd from the list of comparables - functional dissimilarity - HELD THAT:- Assessee has placed before the Court a detailed chart which shows dissimilarities between the Infosys BPO and the Assessee on several counts. Infosys provides business process management services to organisations over a wide range of industries whereas the Assessee is a routine captive service provider. The valuation of goodwill of Infosys BPO for AY 2009-10 and 2010-11 was INR 19.03 crores with no comparable value for the Assessee. The brand promotion expense for Infosys BPO for AY 2009-10 was INR 70.26 lacs and for 2010-11 INR 69.16 lacs. The corresponding figures for the Assessee are Nil. BPO Infosys incurred significant selling and marketing expenses for the two AYs in question whereas there is no such expense for the Assessee. Mainly the Assessee provides IT services only to its US based AEs whereas Infosys is among top 10 third party BPO companies in India. Even the risk profile is different while Infosys BPO is a full-fledged risk taking enterprise, the Assessee undertakes minimal risks of 100% services provided to its AEs. This Court has in several decisions held in similar circumstances as the present one that Infosys BPO Ltd. cannot be a suitable comparable. - Decided in favour of the Assessee

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• 2019 (8) TMI 934
  Reopening of assessment u/s 147 - non filing of return u/s 115A (5) - rejection of objections against notice - investment in shares to be a capital account transaction - HELD THAT:- Respondent failed to notice that u/s 115A (5) r.w.s. 115A (1) (a) there was no need for the Petitioner to file a return of income u/s 139(1). Respondent wrongly adverted to Clause (b) of Explanation 2 when this was a case of no return having been filed and the case if at all would fall under Clause (a). As decided in GKN DRIVESHAFTS (INDIA) LTD. VERSUS INCOME-TAX OFFICER AND OTHERS [ 2002 (11) TMI 7 - SUPREME COURT] when a notice u/s 148 is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. Merely because the notice issued to the Petitioner was a system generated notice since the NMS detected the Petitioner as a non-filer does not automatically mean that the Petitioner has to be issued a notice u/s 147. Even assuming that at the time notice was issued the Respondent was perhaps not fully aware of all the relevant facts, once the Petitioner submitted its objections drawing his attention to the specific legal position, it was obligatory for the Respondent to have applied his mind to those points. The order passed by the Respondent rejecting the objections on 23rd October, 2018 shows that there is no reference whatsoever to the specific objections of the Petitioner. Even a cursory examination of those objections would have dissuaded the Respondent from persisting with the proceedings consequent upon the impugned notice dated 26th March, 2018. Filing of the return by the Petitioner could not have been construed as an admission by it of a legal obligation to file a return. In the Petitioner s case, the admitted facts make it abundantly clear that there was no obligation on the Petitioner to file a return of income for the AY in question. The principal objection of the Petitioner that its investment in the shares of its subsidiary cannot be treated as income is well founded. The decision of the Bombay High Court in Vodafone India Services Pvt. Ltd. v. Union of India [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] holding such investment in shares to be a capital account transaction not giving rise to income was accepted by the CBDT. Therefore, the fundamental premise of the Respondent that the above investment by the Petitioner in the shares of its subsidiary amounted to income which had escaped assessment was flawed. The question of such a transaction forming a live link for reasons to believe that income had escaped assessment is entirely without basis and is rejected as such. This Court sets aside the impugned notice

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• 2019 (8) TMI 933
  Raising objection by the third party against Condonation of delay in filing the income tax returns by CBDT - 2nd respondent is stated to have been elected to the Lok Sabha from the Mandi Constituency in the election that concluded in May 2019 and just before the election, he filed the tax returns for the assessment year 2014-2015 to 2017-2018 along with an application u/s 119(2)(b) - HELD THAT:- All that is required for the 1st respondent is to consider whether it is desirable or expedient to allow the petitioner to file the returns for avoiding any genuine hardship. In the case on hand, the 1st respondent has considered whether there was a genuine hardship. Once the discretion available under Clause (b) of sub-section (2) of Section 119 has been exercised, there is no scope for this Court to interfere with such discretion, especially at the instance of a third party. Therefore, we find that the petitioner has no locus standi to challenge the impugned order. Hence, the writ petition is dismissed along with pending application(s), if any.

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• 2019 (8) TMI 932
  Nature of expenses - expenditure incurred in respect of renovation of leased premises - revenue or capital expenditure - HELD THAT:- the extensive repairs and renovations carried out by the assessee cannot be said to be incurred to preserve and maintain an already existing asset since many new objects have been brought into as could be seen from the list of construction made and thus, the object of expenditure made by the assessee is definitely to bring a new asset into existence to obtain new advantage further giving enduring benefit to the assessee. Tribunal committed an error by allowing the expenditure incurred on repairs of the rented building as taxable expenditure under Section 37(1) of the Act ignoring Explanation 1 to Section 32 - See MADURA COATS [ 2011 (12) TMI 293 - MADRAS HIGH COURT] Entire details of the expenditure incurred by the assessee for all the branch offices spread over the country were produced before the Assessing Officer. The expenses incurred were for providing furniture, interior decoration and office equipment and also consultation charges. These details were once again placed before the CIT(A), when the assessee filed appeal against the assessment order. The CIT(A) took note of the various categories of expenses incurred by the assessee and from the details given in paragraph 5 of the order passed by the CIT(A) dated 09.7.2007, it is clear that the assessee had spent substantial funds in creating office space with a particular design to suit their requirement. In fact, the assessee had also admitted that they were granted agency by M/s.Malaysian Airlines and that they had to design the showroom with a particular design as instructed by the said Airlines. The expenses, which were incurred, clearly show that they are fixed and are capital in nature and that the test applied by the CIT(A) to state that the assessee cannot remove the same at the time of vacating the premises is an incorrect test applied by the CIT(A) because the CIT(A) did not take note of Explanation 1 to Section 32 of the Act. In the light of the said Explanation, it has become immaterial as to whether the assessee is the owner of the building or the lessee and there is no scope left for any interpretation since, by legal fiction, the assessee is treated as the owner of the building for the period of their occupation. Assessee submits that the matter may be remanded to the Assessing Officer or the CIT(A) to enable the assessee to once again canvass the factual details. No such remand is warranted in the instant case as we have found that the entire details were made available by the assessee to the Assessing Officer as well as to the CIT(A) and that they examined all the factual details. Had the CIT(A) taken note of Explanation 1 to Section 32 of the Act in all probabilities, the result of the appeal would have been different. Thus, on account of not applying the correct legal principle to the facts, an erroneous order was passed by the CIT(A), which was affirmed by the Tribunal without assigning any reasons. - Decided in favour of revenue

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• 2019 (8) TMI 931
  Penalty u/s 271(1)(c) - transfer pricing addition - ALP determination - HELD THAT:- Tribunal in its order passed in quantum proceedings, it can be seen that the assessee computed the ALP of the international transaction as per the manner prescribed in the section. Such computation was done in good faith and due diligence. Simply because now there remains some difference in the manner of determination of the ALP, it cannot be held that the assessee either concealed the particulars of its income or furnished inaccurate particulars of income. CIT(A) was justified in deleting the penalty on this issue. Similar view has been taken by the Delhi Bench of the Tribunal in Mitsui Prime Advanced Composites India (P) Ltd. Vs. DCIT [ 2016 (6) TMI 588 - ITAT DELHI] . Respectfully following the precedent, we uphold the impugned order on this score. Penalty for disallowance u/s 35DD - expenses incurred for increase in share capital after amalgamation - quantum addition deleted by Tribunal - HELD THAT:- Since the very foundation for the imposition of penalty, being the addition made in the assessment, ceases to exist, there can be no question of imposition of any penalty thereon. We, therefore, accord our imprimatur to the view taken by the CIT(A) on the above issue. Penalty for disallowance of Miscellaneous Expenses - these expenses included Software development expenses, expenses on premises, warranty expenses, Gifts and Donation etc. - HELD THAT:- Tribunal allowed full deduction towards software expenses and fees for handling share record and made full disallowance for warranty expenses, Gifts and Donation and restricted the addition to 15% of the balance expenses. From the above narration of facts, it is clear that the authorities below have made disallowance primarily on ad hoc basis. Even in respect of certain specific expenses for which the CIT(A) and the Tribunal sustained the disallowances, the reason is not the concealment by the assessee or furnishing of any inaccurate particulars by the assessee, but non-availability of relevant evidence to substantiate the claims. In such circumstances, we are satisfied that no fault can be found with the CIT(A) in deleting the penalty on addition towards disallowance out of Miscellaneous expenses. Penalty for addition towards expenses on premises - addition made by AO and confirmed in the first appeal @40% of expenses on premises - HELD THAT:- Tribunal confirmed capitalization of expenses in relation to premises @ 40% but directed to allow depreciation on such capitalized account. It is observed that the addition has been made on estimate basis which again came to be reduced in the first appeal on estimate basis. Where income is estimated or disallowance of expenses is made on estimate basis, there can be no penalty. The reason for non-imposition of penalty in both the situations is that there is a lack of precision as to concealment of income or furnishing of inaccurate of particulars of income. It is only an estimation shorn of any certainty or accuracy. Reverting to the facts of the instant case, it is clearly established that sustenance of disallowance of expenses @ 40% is merely an estimation, which is devoid of any proper authentication. As such, it does not call for imposition of any penalty.

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• 2019 (8) TMI 930
  Transfer pricing addition - international transaction of Software Development services - Comparable selection - HELD THAT:- The assessee renders software development services with the help of intellectual property owned by its AE and further the intellectual property rights in the software developed by the assessee vest in the AE, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Bodhtree is following the model of booking expenses at the time of their incurring notwithstanding the raising of bills in next year. This shows that the revenue recognition model of Bodhtree Consulting Ltd. is quite different from the assessee in as much as unless the software is fully developed and billed, it will go on debiting expenses to the Profit and loss account but the invoice will be raised only in the year of completing the project. This leads to fluctuating margins from year to year. As relying on ALLSCRIPTS (INDIA) PRIVATE LTD [ 2016 (8) TMI 1187 - GUJARAT HIGH COURT] upheld the exclusion of this company from the list of comparables. E-Infochips Limited - No doubt Consultancy charges in relation to Software Development are part of Software Development, but the inclusion of ITES in the overall segment frustrates the comparability. We are currently dealing with the international transaction of `Provision of Software Development services and the international transaction of ITES by the assessee is a separate one which has also been benchmarked distinctly - e-Infochips Bangalore Ltd., having a pool of both software development and ITES segments into a common segment cannot be considered as comparable on entity level with the international transaction of `Software development of the assessee. We, therefore, order the exclusion of this company from the list of comparables. e-Zest Solutions Ltd - unlike Bodhtree, this company adopted a proper revenue recognition model by identifying income only on its earning and keeping the expenses as work in process to be taken over to the next year till the raising of the bill on the completion of the project. We, therefore, uphold the inclusion of this company in the list of comparables. Helios Matheson Information Technology Ltd - company is engaged into the business of software products as well. There is hardly any need to state difference between the software product company and a software development company. Whereas a software product company would develop a product and then earn revenue from its sale over a period, a simplicitor software development company would render software development services not leading to creation of any software product in its hands and earn revenue from such rendition of services only. The assessee is only a software development service provider, though such service may lead to creation of some product but the same is meant for its AE and not the assessee . Au contraire , Helios and Matheson is also engaged in software products, rendering it unfit for comparison. As the assessee is not engaged in any software product business and is confined only to rendering software development services, we, therefore, exclude this company from the list of comparables. KALS Infosystems Ltd - is engaged in selling of software products which is different from the activities undertaken by assessee, namely, rendering of software service only to its AEs, we hold the same to be incomparable and accordingly direct to exclude it from the final list of comparables. Maars Software International Ltd - Considering on site development impacting operating margins differently vis-a-vis a company providing offshore services, this company is liable to be excluded from the list of comparables. Rendering of sales support services - comparability of TSR Darashaw Limited - HELD THAT:- When we compare the nature of the functions carried out by this company with the marketing support services rendered by the assessee to its AEs, we find that both are a way apart from each other. There can be no logical comparison between a pay roll services rendered by a company to its clients along with Registrar and Transfer Agent activity and Records management activity (Records) with the marketing support services rendered by the assessee to its AEs. This company is, therefore, directed to be excluded from the final set of comparables. AR submitted that if TSR Darashaw Limited is excluded from the list of comparables, then he will not be pressing for the inclusion/exclusion of other companies as has been agitated in the instant appeal. In view of our decision on the exclusion of TSR Darashaw, we do not propose to consider other companies from the angle of comparability. We set aside the impugned order on the issue of transfer pricing addition in the international transactions of Rendering of software development services and Rendering of sales support services and remit the matter to the file of AO/TPO for the fresh determination of their ALPs in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. Computation of deduction u/s.10A - reducing foreign currency expenses from export turnover (without excluding the same from the total turnover of the STP unit) - HELD THAT:- Since the amount of foreign currency expenses has been held by the AO himself as not forming part of `export turnover , the sequitur is that the same would also not form part of `total turnover , as there cannot be two different figures of `export turnover , one as an independent numerator in the formula and the other constituting part of total turnover in the denominator. To put it simply, foreign currency expenses which have been excluded by the AO from the ambit of `export turnover would also require exclusion from `total turnover . The Hon ble Delhi High Court in CIT Vs. Genpact India [ 2011 (11) TMI 119 - DELHI HIGH COURT] has held that any exclusion from export turnover should also be reduced from total turnover for the purpose of deduction u/s.10A. We, therefore, overturn the impugned order on this score and allow the ground of appeal.

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• 2019 (8) TMI 929
  TP Adjustment - MAM selection - Adjustment to purchase and sale of raw materials from Associated Enterprises ( AEs ) (manufacturing segment) - which method is to be applied i.e. internal Cost Plus Method or internal TNMM method or external TNMM method? - as per assessee no opportunity was given by the TPO before rejecting internal TNMM method - HELD THAT:- Opportunities given to the assessee have been tabulated and the assessee s contentions have been considered. Even the last reply given on 10.10.2017 has been considered before passing the order on 20.10.2017. The TPO has also at pages 28 to 30 of its order dealt with the reply of assessee in this regard. Further in the absence of proper segmental being available, there was no basis on which internal TNMM method could be applied. In the totality of the above said facts and circumstances, we find no merit in the reliance placed upon by the assessee on internal TNMM method. Most appropriate method to be applied, which as per the TPO, in this case was external TNMM method - most appropriate method to be applied, which as per the TPO, in this case was external TNMM method. In the totality of the above said facts and circumstances, we find merit in the exercise carried on by the TPO in this regard, wherein proper show cause notice was issued to the assessee at the start of proceedings itself as to why this method should not be applied in view of the nature of business of assessee, wherein the assessee was engaged in importing of raw material and in some cases, manufacturing certain items and selling the same in domestic market or in some cases, importing then assembling and selling in the domestic market. The household appliances from the manufacturing unit at Pune included kitchen hoods, built in hobs, cooking ranges, cook-tops, etc. The most appropriate method which needs to be applied was the TNMM method. Selection of comparables - Acrysil Ltd. - There is no comparison between kitchen appliances manufactured by assessee and sinks manufactured by Acrysil Ltd. Accordingly, the said concern cannot be selected as comparable to the assessee and the same is rejected. JSL Lifestyle Ltd. - In the absence of segmental being available and the products being different, though some of them are comparable to the products dealt in by the assessee and where the concern was also engaged in R D activity as against the assessee which was not so engaged, then there is no merit in including the margins of said concern in the final list of comparables. Accordingly, we direct the Assessing Officer / TPO to exclude the same. Gorani Industries Ltd - he said concern was functionally comparable to the assessee as it was engaged in manufacturing and sale of glass, gas, cook tops, chimneys, etc. The said concern was functionally comparable to the assessee and for the instant assessment year had shown marginal profits though OP/OR was only 0.13%; but there is no merit in rejecting the said concern either on the ground it was persistent loss making, which it was not, and even on the ground that it had marginal profits. The assessee on the other hand, had shown margins of 1.94%. Accordingly, we direct the Assessing Officer to include Gorani Industries Ltd. as functionally comparable to the assessee. Where the margins shown by assessee are at 1.94%, then no adjustment needs to be made in the hands of assessee on account of arm s length price of international transactions of purchase of raw material to be made in the hands of assessee. In any case, the adjustment, if any, is to be restricted to the value of international transactions and not to the entity transaction. As in the case of Thyssen Krupp Industries India Pvt. Ltd. [ 2015 (12) TMI 1076 - BOMBAY HIGH COURT] has laid down the said proposition and merely because an appeal has been filed against one of the judgments of Hon ble Bombay High Court in CIT Vs. Firestone International Pvt. Ltd. (supra) has been dismissed does not mean that the proposition laid down by the Hon ble Bombay High Court does not stand. We find no merit in the order of DRP in this regard.

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• 2019 (8) TMI 928
  Disallowance u/s 14A r.w.r. 8D - assessee disallowed aforesaid expenses by applying 0.5% of the average investments - HELD THAT:- The onus is on the assessee to bring on record, the details of modus operandi adopted by it for making investments, arranging its affairs and managing investments which ought to be firstly brought by assessee before the AO in discharge of primary onus as is cast on the assessee. No such details are filed before us to prove that the assessee discharged its primary onus. The assessee rather made suo motu disallowance of expenditure u/s 14A, accepting and admitting applicability of Section 14A. It applied of its own 0.5% of average investments for making disallowance u/s 14A of the 1961 Act by invoking Rule 8D(2)(iii) of the 1962 Rules, towards administrative expenses. Now, to resile from its own admitted position at this stage is not warranted. AO on its part has duly recorded satisfaction albeit cryptic. AO is directed to make disallowance of expenditure u/s 14A in accordance with our aforesaid directions. The assessee is directed to file complete details and modus operandi for making and managing investments to that effect before the AO in denovo proceedings. AO shall grant proper and adequate opportunity of being heard to the assessee in denovo assessment proceedings and the evidences submitted by the assessee in its defence shall be admitted by the AO. We direct the AO make to disallowance of expenditure u/s. 14A in accordance with our aforesaid directions.

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• 2019 (8) TMI 927
  Rectification u/s 154 - AO adjusted the losses of two units against profit generated by four units thereby reducing the claim of deduction u/s 80IA - HELD THAT:- Only a mistake which is glaring and apparent can be rectified u/s 154. In the case before us, the AO had set off the loss of the eligible units from the profits of the eligible units to calculate the deduction u/s 80IA. Whether the loss from the eligible units cannot be set off from the profits of other eligible units is a debatable issue and therefore, it cannot be rectified u/s 154 of the Act. Therefore, we allow the ground of appeal of the assessee. On merits of the issue which is raised in Ground No.2, we find that the issue is covered in favour of the assessee by various decisions which are relied upon by the assessee. Sub-section 5 of Section 80IA provides that the deduction should be calculated in respect of an eligible unit on a standalone basis i.e. as if it is the only source of income to the assessee. This is for the reason that an assessee is eligible for deduction u/s 80IA for a period of 10 years and the first of these ten years can be selected by the assessee. We hold that the loss of the eligible units cannot be set off against the profits of other eligible units. It is only the business income of the eligible unit and not the gross total income eligible for deduction u/s 80IA of the Act, we find that the case law relied upon by the assessee and in support of ground No.2 are also applicable to this issue. Respectfully following the same, we delete the findings of the CIT (A).

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• 2019 (8) TMI 926
  Penalty u/s 271(1)(c) - addition made on account of disallowance towards the provision for standard assets as well as in respect of disallowance of capital loss - HELD THAT:- In view of the facts that the addition itself was deleted by the Tribunal in the quantum appeal the penalty levied by the AO u/s 271(1)(c) of the Act would not survive. - Decided in favour of assessee.

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• 2019 (8) TMI 925
  Penalty u/s 271(1)(c) read with Section 274 - claim for set off as set out of business expenses and depreciation against Income from House Property - as alleged no business being conducted by the assessee during the previous year relevant to impugned assessment year, still the assessee sought to set off business losses and depreciation against income from house property by invoking provisions of Section 71 - HELD THAT:- The assessee in statement of fact filed with tribunal has taken a feeble plea that letting out of this commercial office is business of the assessee wherein by which the assessee is itself contradicting its own stand of offering said income under the head Income from House Properties . The assessee owned only one property during the previous year under consideration as described above in this order situated at Laxmi Tower at BKC, Mumbai which was let out for 10 months from June 2009 to March 2010. There is no other activity of the assessee apart from letting out this commercial premises. The tribunal in quantum has also decided that the assessee has not done any business during the year under consideration and the said finding of fact has attained finality. Decision of Hon ble Supreme Court in the case of Raj Dadarkar Associates v. ACIT [ 2017 (5) TMI 586 - SUPREME COURT] which elaborately discussed the chargeability of income to tax under the head Income from House Property also rebut the aforesaid contention of the assessee that letting out of the commercial office is business of the assessee. The assessee was fully aware that there was no business conducted by it during the entire previous year and its expenses as well deprecation on assets can neither be allowed as business deduction nor it can be allowed as set off against other incomes. the claim for set off as set out by assessee by setting off business expenses and depreciation against Income from House Property was non-genuine act of the assessee which lacked bonafide which was undertaken to reduce tax-liability and was rightly held against assessee in quantum by all the three authorities upto ITAT , concurrently. Under these circumstances and factual matrix of the case , we are not inclined to interfere with the well reasoned appellate order passed by learned CIT(A), which we uphold/confirm. Thus, in nut-shell we confirm and uphold the penalty levied by the AO u/s 271(1)(c) of the 1961 Act which was later confirmed by learned CIT(A). The assessee fails in this appeal.

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• 2019 (8) TMI 924
  Unexplained cash credit addition u/s 68 - HELD THAT:- Assessee has failed to prove the identity, genuineness of transactions and creditworthiness of the parties with conclusive evidences. The Lower authorities further observed that although the assessee filed certain documents in order to prove the identity of the party but, mere furnishing certain documents including PAN number would not sufficient enough to discharge the onus cast upon the assessee u/s 68. The conduct of the parties in so far as allotment of preferential shares by accepting part amount and subsequent forfeiture of amount received from parties for non-payment of balance consideration for allotment of shares gives rise to suspicion. Assessee to discharge the onus cast upon it by filing necessary evidences. Since, the assessee has not offered any explanation for forfeiture of shares and also failed to prove identity, genuineness of transactions and creditworthiness of the parties, came to the conclusion that transaction between the parties are sham, which are not supported by necessary details. Facts remains unchanged, the assessee neither appeared nor filed any details before us to controvert findings of the facts recorded by the lower authorities. There is nothing to offer from the assessee side in order to prove the transactions of allotment of shares to two subscribers with any evidences and hence, we are inclined to uphold the findings of the CIT(A) and reject ground taken by the assessee. Additions made towards profit element embedded in alleged bogus purchases - AO has brought out clear facts in the light of information received from Sales Tax Department, Government of Maharashtra, coupled with further enquiries conducted during the course of assessment proceedings that purchases from above two parties are bogus in nature which are not supported by necessary evidence. Although, the assessee has filed primary evidences in from of purchase bills and payment proof to such purchases against banking channel, but failed to file further evidences in the back drop of clear findings from the Sales Tax Department that they are involved in providing accommodation entries without actual business activity. The assessee neither appeared nor filed any details to controvert the findings of fact recorded by the AO as well as the CIT(A). AO has taken support from the ratio in the case of CIT vs Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] where held that in case of alleged bogus purchases, only profit element embedded in those purchases needs to be taxed, but not entire alleged bogus purchases. The profit element required to be taxed needs to be ascertained depending upon facts of each case and accordingly considering the facts of case before the Court directed the Assessing Officer to estimate at 12.5% profit on alleged bogus purchases. Tribunal in number of cases has taken consistent view and directed the Assessing Officers to estimate 12.5% profit on alleged bogus purchases. In this case, the AO has estimated profit @12.5% on alleged bogus purchases. Therefore, we are of the considered view that the there is no reason to interfere with the findings of the Assessing Officer, hence, we are inclined to uphold the order of the Ld. CIT(A) and reject ground taken by the assessee. - Decided against assessee.

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• 2019 (8) TMI 923
  Genuineness of short term capital loss and set off with LTCG - set off of earlier year loss with LTCG - sale of compulsorily convertible debentures (CCD) on the ground that it is not bonafide in nature and is more of a colorable device, in the facts and circumstances of the case - related party transaction - brought forward LTCG and STCG aggregating to Rs. 938.04 - HELD THAT:- Documentary evidences for the purchase and sale of CCDs were not doubted by the revenue. The transactions of purchase of CCDs from related concern and sale of CCDs to related concerns are also not doubted by the revenue. Only the pricing is doubted by the revenue on the ground that it was carried out with related concerns and it had resulted in a loss. The professed intention and the real intention of the assessee is proved in the instant case in the various documents filed before the lower authorities. If the same are to be treated as different, then the onus is on the revenue to prove it, which in the instant case, in our considered opinion, has not been proved by the revenue. AR also made an oral submission that purchase transactions are not disbelieved for other assessee in the same flowchart and that the same is disbelieved only for the assessee herein. We find that the assessee had derived net long term capital gains on sale of equity shares and preference shares of Rs. 1007.40 crores. Out of this huge long term capital gains of Rs. 1007.40 crores, a meager amount of short term capital loss of Rs. 69.36 crores was sought to be set off by the assessee on sale of CCDs of ICSL. Even after this set off, there was substantial net taxable long term capital gains left with the assessee to the tune of Rs. 938.04 crores. This was however sought to be adjusted with the brought forward long term and short term capital losses of the assessee from the earlier years, which is totally different altogether and even after this set off of brought forward losses, there is substantial amount of long term and short term capital losses of earlier years available with the assessee which were also carried forward to subsequent years. Short term capital loss of Rs. 69.36 crores on sale of CCDs of ICSL to related concern is not available to the assessee , then also the net long term capital gains of Rs. 1007.40 crores would be set off with the brought forward long term and short term capital losses from earlier years. No arguments were advanced by the ld DR before us to rebut these facts with regard to the availability of brought forward capital losses of earlier years. It could be safely concluded that there is absolutely no intention on the part of the assessee to evade tax by booking bogus short term capital loss on sale of CCDs to related concern. Hence the transactions carried out by the assessee cannot be construed as a colorable device. Non-availability of brought forward losses from earlier years, we find that the appellate orders for earlier years were passed subsequent to carrying out of the transactions of purchase and sale of CCDs by the assessee, wherein the losses were allegedly converted into nil or into income. We hold that on the date of transaction of sale of CCDs by the assessee, there cannot be any colorable device or a malign intent to evade tax on the part of the assessee as these appellate orders for earlier years were passed subsequent to entering of impugned transactions of sale of CCDs by the assessee herein. We hold that the transactions carried out by the assessee in respect of sale of CCDs to related concern which had resulted in a short term capital loss of Rs. 69.36 crores is to be construed as a genuine loss and cannot be construed as a colorable device. Accordingly, the grounds raised by the assessee in this regard are allowed. Appeal of the assessee is allowed.

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• 2019 (8) TMI 922
  TP Adjustment to ALP in relation to Intra Group Services - as per assessee TPO had failed to apply any method while determining the ALP at nil for GIS services and on adhoc basis towards MSF services @ 20% and MNC services @ 50% - HELD THAT:- We find that provisions of Section 92C(1) mandates adoption of one of the prescribed method mentioned therein for determining the ALP of international transactions. It is not in dispute that the disallowances/ adjustments made by the ld. TPO to ALP were made without following any of the prescribed methods as per law. Once a reference is received by the TPO u/s.92CA(1) from the ld. AO, the ld. TPO is required to determine the ALP of the international transaction as per the provisions contained in Section 92C and 92CA read with relevant rules thereon. Duty of the TPO is restricted only to the determination of the arm s length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C of the Act read with rule 10B of the rules. Thus, there is no provision made in the statute empowering ld. TPO for determining the ALP on a particular international transaction on an estimation basis / adhoc basis. As relying on M/S. JOHNSON JOHNSON LTD. [ 2017 (3) TMI 1520 - BOMBAY HIGH COURT] we have no hesitation in directing the ld. TPO to delete adjustment made to ALP in respect of aforesaid three services viz., GIS services (Rs. 62,95,226/-), MSF Services (Rs. 7,88,90,157/-) and MNC Services (Rs. 19,29,008/-). Accordingly, grounds raised by the assessee are allowed on this technical aspect and grounds raised by the revenue are dismissed on this technical aspect. Addition on account of non-reconciliation of Form 26AS with the return of income - business of advertisement agency - HELD THAT:- We find that the details of reconciliation statement submitted by the assessee are enclosed in pages 1053,1055,1071 of the paper book wherein we find that assessee had reconciled certain specific client balances such as ITC Limited, Tata Global Beverages Limited etc., The ld. AR contended before us that assessee is an advertisement agency and is engaged in activities of releasing advertisements on behalf of clients and production of advertisement for clients. The assessee earns revenue either in the form of commission or fees. The income in the case of commission is only a specified percentage of the gross billing, accordingly, the assessee reports only the commission portion as its income in its P L account and not the gross receipts. Hence, there is always bound to be difference with regard to the amounts reflected in the Form 26AS vis- -vis books of accounts of the assessee with regard to this aspect of the transaction. Assessee had identified the difference in amounts with respect to various parties which are detailed in pages 84 85 of the appeal set. The assessee does not deny having transactions with these parties. It is only the amount which is reflected in Form 26AS against the names of said parties which the assessee was not able to reconcile. We find that the explanation given by the assessee is reasonable and it is highly impracticable for reconciling the same in this scenario. We are inclined to accept argument of the ld. AR that income offered by the assessee is much more than what is reflected in Form 26AS. Thus we direct the ld. AO to delete the addition made in the sum of Rs. 8,25,869/-. Accordingly, ground No.3 raised by the assessee is allowed. Chargeability of interest u/s.234D is consequential in nature. We also direct the ld. AO to verify whether at all any refund was actually granted to the assessee or adjusted with tax arrears with due intimation to the assessee before deciding the levy of interest u/s.234D of the Act. Accordingly, the ground No.4 raised by the assessee is allowed for statistical purpose.

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• 2019 (8) TMI 921
  Maintainability of appeal before the CIT(A) - non payment of admitted taxes on the returned income before filing appeal u/s 249(4)(a) - HELD THAT:- The Hon ble Mumbai ITAT in the case of Bhumiraj Constructions Vs. ACIT [ 2010 (4) TMI 754 - ITAT MUMBAI] has held that the stipulation as to the payment of such tax ante the filing of first appeal is only directory and not mandatory. Whereas the payment of such tax is mandatory but the requirement of paying such tax before filing appeal is only directory. When the defect in the appeal, being the non-payment of such tax, is removed, the earlier defective appeal becomes valid. Once we call an appeal as valid, it is implicit that it is not time-barred. It implies that all the consequences which follow on the removal of defect are that the validity is attached to the appeal from the date when it was originally filed and not when the defect is removed. The Tribunal ultimately held that if tax due on income returned is paid even after disposal of the appeal by the CIT(A), if such payment is made the defect in the appeal due to noncompliance of a directory requirement of paying such tax before the filing of the appeal, stood removed. Ex consequential the appeal should have been revived by the first appellate authority. In the present case, the taxes due on returned income is claimed to has been paid. Therefore the appeal by the Assessee against the order of assessment should be admitted and adjudicated by the CIT(Appeals) on merits. In the decision referred to above, it has been held that if the admitted taxes are paid at a later point of time, then the appeal of the assessee should be considered as properly instituted and should be heard and decided by the CIT(Appeals) on merits. Following the aforesaid decision, we set aside the order of CIT(Appeals) and direct the CIT(Appeals) to decide the appeal on merits, subject to verification of payment of taxes (excluding interest) due on the returned income. Appeal by the assessee is allowed for statistical purposes.

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• 2019 (8) TMI 902
  LTCG computation - adoption of the Stamp Duty Valuation for the purpose of determining the full value of consideration u/s 50C - HELD THAT:- Where the Assessing officer gives a finding that the assessee has not objected to the adoption of stamp duty value during the course of assessment proceedings, the AO is not required to refer the matter to the valuation officer and he is required to adopt the value so determined by stamp duty authority as specified in section 50C(1) We find that the reasoning behind acceptance of variation within the tolerable limits is that DLC rates are indicative rates of a particular locality and not of a particular property and depending upon various factors, the value of two properties in the same locality may vary. Therefore, we find that the concept of determining a tolerable range has to be appreciated more so in the context of deeming fiction where the liability is fastened on the assessee based on such stamp duty valuation and a fact which has lately been recognized by the legislature whereby tolerance range of 5% has been specified by way of third proviso to section 50C(1) has been inserted by the Finance Act, 2018, w.e.f. 1-4-2019 In the instant case, the variation is only Rs. 35,99,208/-, which is 1.49% of the value determined by the Stamp Valuation Authority which should thus be ignored and the value so declared by the assessee should be accepted. In the result, the value so declared by the assessee should be adopted as full value of consideration and the addition of Rs. 35,99,208 is hereby directed to be deleted. The ground of appeal taken by the assessee is thus decided in favour of the assessee and against the Revenue. Deduction under clause (i) to Section 48 in the computation of the Long Term Capital Gain - HELD THAT:- There is a direct and close linkage between the signing of the MOU dated 18.11.2010 and the sale deed executed on 06.12.2010 and the payment of Rs. 1 Cr is connected with the transfer of the impugned property in favour of M/s Triveni Kripa Enterprises Pvt. Ltd and the assessee should therefore be eligible to claim the same while computing the capital gains. We therefore, affirm the findings of the ld. CIT(A). The matter is thus decided in favour of the assessee and against the Revenue. Validity of reference to the DVO u/s 55A by the Assessing Officer - HELD THAT:- Where the valuation so adopted by the assessee firm is based on a registered valuer report and the Assessing officer has formed an opinion that the value estimated by the registered valuer is at variance with the fair market value of the asset having regard to the nature of the asset and its use at relevant time, the Assessing officer has invoked the provisions of section 55A(a) of the Act. In fact, as we have discussed above, the main argument of the Revenue is regarding the amendment brought in by the Finance Act 2012 in section 55A(a) and which has been claimed as applicable for the impugned assessment year. Further, the Hon ble High Courts referred supra have also held that where the issue is covered by Section 55A(a) of the Act, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. Therefore, the contention so advanced by the ld CIT DR cannot be accepted. Where the reference made to DVO is held as invalid, can the AO still rely on the valuation report issued by the DVO as a reliable and admissible piece of evidence? - Where the reference to DVO has been held as invalid in the eyes of law, the valuation report so submitted by the DVO can be considered by the Assessing officer as a reliable piece of evidence as the Assessing officer is not bound by strict rules of evidence and where the report is found to be relevant, the same can be considered by the Assessing officer. However, whether the valuation report issued by the DVO is found to be relevant in the facts and circumstances of the present case, we shall be dealing with the same in the subsequent paragraphs. Reference of the matter to DVO u/s 55A on the basis of incorrect assumption of facts - HELD THAT:- already decided earlier that the reference to DVO is invalid in the eyes of law, therefore, we don t deem it necessary to examine deeper into the issue around formation of opinion by the Assessing officer and what should be the ingredients or the basis/tangible material in possession of the Assessing officer before he refers the matter to the DVO though the ld AR has raised some relevant issues in this regard. Hence, in view of the same, the cross objection so raised is not adjudicated upon. Valuation by DVO - DVO s report on the basis of incorrect assumption of facts and against the established norms of the valuation and without following standard practice and procedures of the Revenue department for determination FMV - HELD THAT:- fundamental difference where the DVO has taken the status of the property as residential whereas the facts on record suggest that the assessee was carrying out commercial activities by itself put a big question mark on the value finally determined by the Valuation Officer. - the valuation report so issued by the Valuation Officer suffer from serious deficiencies and the same cannot be held as reliable piece of evidences which can be applied by the Assessing Officer. - the adjustment made by the Assessing Officer basis the valuation report so submitted by the DVO cannot be accepted as the same suffer from serious infirmity. In the result, the cross objection taken by the assessee is allowed. Action of ACIT in directing the AO to complete assessment on the basis of report submitted by DVO vide his order passed U/s 144A - HELD THAT:- Present proceedings are against the findings of the Assessing officer while passing the order u/s 143(3) where following the directions of the Add. CIT u/s 144A, he has completed the assessment proceedings. The Add. CIT u/s 144A has directed the AO to complete the assessment on the basis of the valuation report of the DVO on the issue of fair market value as on 1.4.1981 of the property discussed above which is in consonance with the provisions of Section 16A of the wealth tax Act which equally applies in the context of section 55A of the Act. Further, in respect of other issues dealt with by the Add. CIT, the same have already been dealt with and examined by us and doesn t require any separate adjudication.

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• Customs

• 2019 (8) TMI 920
  Jurisdiction - power of DRI to issue SCN - by virtue of the impugned order the Tribunal has remanded the case to the original adjudicating authority to decide the issue of jurisdiction after awaiting the judgment of the Supreme Court in Mangli Impex Limited vs. Union of India [ 2016 (5) TMI 225 - DELHI HIGH COURT ]. HELD THAT:- The impugned order is set aside with a direction to the Tribunal to decide the appeal on merits including the question of jurisdiction without being influenced by the decision of this Court in Mangli Impex - petition disposed off.

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• 2019 (8) TMI 919
  Extension of Export Obligation period - EPCG Authorization Scheme - Foreign Trade Policy - seeking prospective extension for a period of 2 years from the date of the extension order - extension was granted for 2 years but from 28.3.2015 instead of the date of the extension order and the respondent authority ought to have granted extension prospectively and from the date of the order - HELD THAT:- The petitioner neither fulfilled the export obligations nor applied for extension in time even for the First Block and even the application for second obligation has also been rejected. The prayer of the petitioner to grant the extension for a period of two years cannot be accepted. The respondent authority has power to grant extension for two years, which the respondent authority has granted and such extension has been granted by the respondent authority from the date of expiry of original export obligation period and not from the date of approval by the DGFT - Even for the sake of arguments it is presumed that such extension can be granted for a period of two years, then also when the extension for two years was granted vide order dated 2/1/2017, the extension would have expired on 2/1/2019. Today s date is 1/8/2019. Therefore, there is no substance in the submissions and prayer prayed for by the petitioner in the present petition. Further, the petitioner firm has not availed the option of approaching the Grievance Redressal Committee under 2.49 and 9.9 of FTP 2006-07. Under the circumstances, there is no merit in the present petition. Petition dismissed.

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• 2019 (8) TMI 918
  Condonation of delay of 105 days in filing the appeals - monetary amount involved in the appeal - HELD THAT:- The amount involved in these cases is below the monetary limit of Rs. 10 lakhs - The present appeals fall under the National Litigation Policy introduced vide Board s Instruction F. No. 390/Misc./163/2010-JC dated 17.12.2015. The appeals are dismissed under the Litigation Policy.

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• Corporate Laws

• 2019 (8) TMI 917
  Maintainability of writ petition - proceedings against an officer of President level and senior most permanent employee of the company, Petronet LNG Limited - ex-parte order- petitioner concluded his arguments on the maintainability and submitted that it is obvious that the words Any person or Authority , used in Article 226 of the Constitution of India, are, therefore, not to be confined only to statutory authorities and instrumentalities of the State - HELD THAT:- The respondent company is Public Limited Company as per section 4-Memorandum-(1) of Companies Act, 2003. The company was formed as a joint venture company by Government of India in 1998 in pursuance of Cabinet decision on 04.07.1997. Thus, it is an instrumentality of Government because it comes under purview of other authorities of State under Article 12 of the Constitution of India - It is admitted fact that the petitioner did not attend the committee proceedings inspite a number of chance given to him and, therefore, proceedings were concluded ex-parte. The case of the petitioner is that the entire disciplinary proceedings are unconstitutional, void, wrong and against the principles of natural Justice and in contravention of provision of Article 311 of the Constitution of India. Validity of ex-parte report of Inquiry Committee dated 18.12.2018 and charge-sheet dated 21.08.2018 issued to the petitioner - holding of CBI/CVC Inquiry against the respondent no.6 for financial corruption being committed by the said respondent - HELD THAT:- The present petition has been filed at the stage when the Inquiry report dated 18.12.2018 was sent to the petitioner vide letter dated 24.12.2018 and one weeks time was granted to him to make the representation. It is not in dispute that, at his request, vide letter dated 04.01.2019 he was granted further time to submit his representation by 11.01.2019 against the representation. However, instead of making the representation, the petitioner filed the present writ petition challenging the Inquiry report as well as charge-sheet - Further case of the petitioner is that the charge-sheet has been issued by an incompetent authority as it has been issued by the Senior Manager HR; under Section 178 of the Companies Act, 2013 the appointing authority of the petitioner is the Board of Directors. Since the approval of the Board of Directors was not obtained, the charge-sheet is liable to be quashed and finding of guilt by Inquiry committee on the allegedly incompetent charges is violative of principles of natural justices. The charge sheet dated 21.08.2018 was issued to the petitioner and the same was sent through his reporting officer i.e. Director (Technical) and was communicated by Senior Manager HR. It was duly approved by the MD CEO of PLL. The initiation of disciplinary proceedings is in accordance with the applicable rules of the company, including delegation of authority Manual, HR policy amended from time to time and is also not in variance with the Companies Act 2013 and rules thereof - Section 4 of the standard of conducts and performance of the HR Policy (PLL) which is duly approved by the Board of Directors and applicable on the employees including the petitioner clearly lays down the process to be followed by HR department in consultation with the functional head and the MD CEO for any action including disciplinary proceedings against a delinquent employee and powers of the MD CEO (respondent No. 6). Thus, MD and CEO is the competent authority and has full power for initiation of disciplinary action against any officer of PLL. It is pertinent to mention here that during the hearing of the present petition, on 02.07.2019, this court has perused the original file whereby it is established that the MD CEO has approved the issuance of the chargesheet - the arguments of the counsel for the petitioner has no help in the facts and circumstances of the present case. Petition disposed off.

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• Insolvency & Bankruptcy

• 2019 (8) TMI 916
  Interpretation of statute - Section 14 of the Insolvency and Bankruptcy Code, 2016 - whether the adjudication of the counter claim would be liable to be stayed in view of Section 14 of the Code? - HELD THAT:- The Court has considered the plaint and the written statement/counter claim. The adjudication of the plaint, defences in the written statement and the amounts claimed in the counter claim would have to be considered as a whole in order to determine as to whether the suit or the counter claim would be liable to be decreed. A counter claim would be in the nature of a suit against the Plaintiff which in this case is the corporate debtor . Under Section 14(1)(a) of the Code, strictly speaking, a counter claim would be covered by the moratorium which bars the institution of suits or continuation of pending suits or proceedings against the corporate debtor . A counter claim would be a proceeding against the corporate debtor. However, the counter claim raised in the present case against the corporate debtor ie., the Plaintiff, is integral to the recovery sought by the Plaintiff and is related to the same transaction. Section 14 has created a piquant situation i.e., that the corporate debtor undergoing insolvency proceedings can continue to pursue its claims but the counter claim would be barred under Section 14(1)(a). When such situations arise, the Court has to see whether the purpose and intent behind the imposition of moratorium is being satisfied or defeated. A blinkered approach cannot be followed and the Court cannot blindly stay the counter claim and refer the defendant to the NCLT/RP for filing its claims. Once the counter claims are adjudicated and the amount to be paid/recovered is determined, at that stage, or in execution proceedings, depending upon the situation prevalent, Section 14 could be triggered - the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court. List before the Joint Registrar on 4th September, 2019 for Plaintiff s evidence.

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• 2019 (8) TMI 915
  Initiation of CIRP - Liquidation process - preference of workmen for payment of dues - first charge or not - denial of payment of the gratuity fund, the provident fund and the pension fund preferentially and included the same for the payments under the waterfall mechanism - whether the provident fund, pension fund and gratuity fund come within the meaning of assets of the Corporate Debtor for distribution under Section 53 of the I B Code? HELD THAT:- From sub-section (4) (a) (iii) of Section 36, it is clear that all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund, shall not be included in the liquidation estate assets and cannot be used for recovery in the liquidation - From sub-section (1) of Section 53, it is clear that the proceeds from the sale of the liquidation assets of the Corporate Debtor , the distribution is to be made in order of priority and within such period and in such manner as provided thereunder. In terms of sub-section (4) (a) (iii) of Section 36, as all sums due to any workman or employees from the provident fund, the pension fund and the gratuity fund, do not form part of the liquidation estate/ liquidation assets of the Corporate Debtor , the question of distribution of the provident fund or the pension fund or the gratuity fund in order of priority and within such period as prescribed under Section 53(1), does not arise - The workmen s dues is mentioned in clause (b) (i) of Section 53(1), which are the dues for the period of twenty-four months preceding the liquidation commencement date. While applying Section 53 of the I B Code , Section 326 of the Companies Act, 2013 is relevant for the limited purpose of understanding workmen s dues which can be more than provident fund, pension fund and the gratuity fund kept aside and protected under Section 36(4) (iii) - This apart, as the provisions of the I B Code have overriding effect in case of consistency in any other law for the time being enforced, we hold that Section 53(1) (b) read with Section 36(4) will have overriding effect on Section 326(1) (a), including the Explanation (iv) mentioned below Section 326 of the Companies Act, 2013. Once the liquidation estate/ assets of the Corporate Debtor under Section 36(1) read with Section 36 (3), do not include all sum due to any workman and employees from the provident fund, the pension fund and the gratuity fund, for the purpose of distribution of assets under Section 53, the provident fund, the pension fund and the gratuity fund cannot be included - The Adjudicating Authority having come to such finding that the aforesaid funds i.e., the provident fund, the pension fund and the gratuity fund do not come within the meaning of liquidation estate for the purpose of distribution of assets under Section 53, no interference is required. Appeal dismissed.

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• 2019 (8) TMI 914
  Initiation of CIRP - financial creditor or not - disbursement made for consideration of time value of money - Tri-partite agreement - Section 7 of the Insolvency and Bankruptcy Code, 2016 - whether appellant, Indiabulls Housing Finance Ltd, can claim to be a Financial Creditor of Respondent, Rudra Buildwell Projects Pvt Ltd (Corporate Debtor)? HELD THAT:- In terms of Clause 5(8) of I B Code, if disbursement is made for consideration of time value of money, a person can claim to be a financial creditor with regard to amount paid - Admittedly the appellant, IHFL, has disbursed the amount for consideration of time value of money in favour of borrower, Mr. Davender Singh and not to the builder. Therefore, the Adjudicating Authority has rightly held that Rudra Buildwell Projects Pvt Ltd is not the corporate debtor of the appellant and the application under Section 7 of I B Code is not maintainable. Appeal dismissed.

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• Service Tax

• 2019 (8) TMI 913
  Business Auxiliary services - services to M/s Barmer Lignite Mining Company Limited - period 2008, 2009 to 2012-13 - acquisition of land made by the appellant for setting up of the thermal power plant - denial of permission of transfer of land - lease of mines - Point of taxation rules - deployment of officers in the JV company - time limitation. Whether the acquisition of land made by the appellant for setting up of the thermal power plant by the JV company as per the agreement entered with RWPL is to be considered as service after the denial of permission of transfer of land, acquired by the JV company? - HELD THAT:- The provisions of Mines and Minerals Act, clearly states that the element of surface right is not the main activity in the mining operation, but it is only incidental to that. In such a situation, the incidental activity cannot be treated as a main activity, which is mining and benefit arising out of law, to be an independent service under the category of renting of immovable property service. Even if it is presumed that surface right is activity which could be construed as renting of immovable property, the entire sale consideration could not be treated towards the value of service provided by the appellant. The Revenue has not taken pain to segregate as to what is the value of the service component involved in the transaction. The treatment of entire amount that has been spent towards the acquisition of land, by no stretch of imagination, can be treated as value towards the alleged service - There is no element of service involved in the transaction, undertaken by the appellant while acquiring the land and transferring the same to the JV company, for setting up of the power plant. Whether the 51% equity stake which has been granted to the appellant by the Implementation Agreement, in the JV company, could be treated as Business Auxiliary Service - HELD THAT:- The Commissioner has not given any category under this it is to be treated as service. We find that the activity of grant of 51% share in JV is not covered in any of the sub heading under the Business Auxiliary Service , as defined in Section 65(105) of the Finance Act. It is also not clear from the impugned order or from the submission made by the learned Authorised Representative as to whether this grant of equity to the appellant will be covered under definition of the BAS, under the Act. Even by assuming that the grant of 51% of equity is considered as consideration, for rending of service, the same was granted in year, 2008-09, while the notice has been issued on 18.03.2015, this is even beyond the limit of five years, therefore, the show cause notice could not have been issued on this count. The demand is, therefore, not sustainable. Whether deployment of officers in the JV company, would amount to rendition of service under the category of Business Auxiliary Service - HELD THAT:- Regarding the expenses recovered by the appellant on actual basis from BLMCL, the JV company, towards deputation of their employee and related expenses, cannot be categorised under the BAS. Even otherwise the deputation of employee in the JV company cannot be treated as BAS - the deputation of the employee to the JV company cannot be held to be service. Thus no service tax is to be charged. Time Limitation - HELD THAT:- The entire activity of acquiring of the land by the appellant, on behalf of the JV company, was known to the Department before issue of the show cause notice. Also the entire issue of non transfer of land by the appellant to the JV company, was taken by the Government of India and by the State of Rajasthan, subsequent to the acquisition of land, can be considered only as a change of opinion in the subsequent periods - there is no case of suppression of facts, so as to invoke larger period of limitation, for raising the demand, is not available to the Department and thus the demand is not sustainable - demand is time barred. Appeal allowed.

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• 2019 (8) TMI 912
  Construction of Residential Complex Services - tax liability was discharged, but, instead of depositing the said service tax at the time of raising of the invoices, the same was deposited subsequently on receipt of the consideration - HELD THAT:- The appellant was required to pay the said service tax at the time of raising of invoices. Subsequently payment of tax would result in interest confirmation against them - Accordingly, we uphold the same and direct the Lower Authorities to quantify the interest amount. Penalty - HELD THAT:- Inasmuch as for sale of the flats, there may not be first raising of the invoices prior to the actual sale and the appellant would be under a belief that he is required to deposit the service tax only on actual sale of the flats, we extend the benefit to the assessee and set aside the penalty imposed upon him under Section 77 and also under Section 78. Appeal disposed off.

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• Central Excise

• 2019 (8) TMI 911
  Time Limitation - reopening of proceedings - Section 11A of CEA or under Section 73 of the FA - period involved is April, 2009 to March, 2011 - service tax on freight paid on outward transportation up to the place of removal - HELD THAT:- On appeal by the Revenue the High Court of Karnataka set aside the order passed by the larger Bench of the CESTAT to hold that the manufacturer is not entitled to avail such transportation charges. If any assessee was under bona fide belief on account of law laid down by the larger Bench of the CESTAT, the converse is not true, meaning thereby that the assessee was not acting mala fidely nor had supressed any fact or mislead the department while availing the credit for an item which was held to be available as eligible to avail credit by the CESTAT itself. If the law was subsequently declared in favour of the Revenue by the High Court that would not relate back to the period of assessment to brand the assessee s action of availing credit as mala fide - Therefore, the present is not a case where the Revenue would be entitled to invoke the provisions of Section 11A of the Act, 1944 read with Section 73 of the Act, 1994 as there is no foundation for invoking the provision. The substantial question in favour of the assessee and against the Revenue to hold that Section 11A of the Act, 1944 read with Section 73 of the Act, 1994 was not invokable - the subject demand could not have been raised, as being barred by limitation.

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• CST, VAT & Sales Tax

• 2019 (8) TMI 910
  Validity of revised assessment order - amalgamation - sheetanchor submission of learned counsel for writ petitioner is that the impugned orders, which are revised assessment orders under respective statutes i.e., TNVAT Act and CST Act have been made by putting the dissolved Transferor company on notice i.e., revisional notices and the impugned orders themselves have been made in the name of the dissolved Transferor company (though factum of amalgamation has been informed to Department) and therefore, the same are liable to be interfered with. HELD THAT:- The submission made by learned Revenue counsel cannot be put against the writ petitioner for the simple reason that order of amalgamation itself came to be made only on 20.09.2012 though it took effect from 01.04.2011. Until the order of amalgamation is made and until the scheme of amalgamation is approved by this Court i.e., the Company Court in Madras High Court, the Transferor company could have filed returns and paid taxes in its name only. It is significant to note that even according to the counter affidavit filed by the Revenue, it has been stated with clarity and specificity that returns were filed and taxes were paid by the Transferor company up to October 2012. To be noted, date of order of amalgamation made by the Company Court is 20.09.2012. The discussion thus far, leaves this Court with the considered view that it is necessary to have the impugned revised assessments redone and completed by giving an opportunity to the Transferee entity i.e., Transferee company to make objections and show cause or in other words, reasonable opportunity. Impugned order set aside - petition disposed off.

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• 2019 (8) TMI 909
  Reopening of assessment - time limitation - DVAT Act - limitation on assessment and re-assessment - Section 34 of the DVAT Act - Default assessment of tax and penalty and interest - HELD THAT:- In the present case, the reopening of the assessment is sought to be done beyond the period of 4 years and before the expiry of 6 years of the assessment period. The jurisdictional requirement for invoking the extended period of 6 years is that the Commissioner should note the reasons to believe that the tax was not paid and that the failure to pay such tax should be on account of concealment, omission or failure by the Assessee to disclose full material particulars . The notings on file in the present case reveal that the trigger for the reopening of the assessment was the report of the DGCEI according to which Amit Gupta, Director of Progressive Alloys India Pvt. Ltd., along with associated registered dealers viz., M/s. Forward Minerals and Metals Pvt. Ltd., M/s. Unnati Alloys Pvt. Ltd., M/s. Moral Alloys Pvt. Ltd. and M/s. Brilliant Metals Pvt. Ltd. were passing on inadmissible CENVAT credit on the cenvatable invoice without physical delivery of goods. The report observed that the period for which the exercise was carried out by the DGCEI pertained to Financial Years 2011-12 and 2012-13 and that this period had become time barred. It was then noted that since the DGCEI had raised serious doubts over the working of the Assessee firm the possibility of evasion of tax by the firm cannot be ruled out. The twin requirements of (i) the Commissioner having to form the requisite reason to believe , and (ii) for such reasons to have a live nexus with the failure to pay tax as a result of the Assessee s concealment, omission or failure to disclose material particulars, is not fulfilled in the present case. It is trite that reason to believe is different from reason to suspect - The statutory requirement is that there must be reason to believe that there has been some omission, concealment or failure by the Assessee to disclose full material particulars. There is nothing in the file noting, much less in the notice dated 29th October, 2017, which suggests that the Commissioner had arrived at a subjective satisfaction that tax was not paid on account of the Petitioners concealment, omission or failure to disclose full material particulars. Admittedly, in the present case in the reassessment proceedings the Respondent has sought to make no distinction between the liability under the DVAT and that under the CST Act. In terms of Section 5 of the DVAT Act these two could not be combined. There is no question of treating this as a mere technical problem and permitting the Respondents to repeat the exercise by proceeding against the Petitioner separately. Apart from the facts that this is not merely a technical problem , such exercise would be clearly time barred at this stage - the Court holds that the reopening of the assessment in the present case by the Respondent by invoking the extended period of 6 years in terms of the proviso to Section 34 (1)(a) of the DVAT Act was bad in law. Impugned assessment order set aside - petition allowed.

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• 2019 (8) TMI 908
  Deemed assessment - Section 22(2) of TNVAT Act - statutory appeal under Section 51 of TNVAT Act against the impugned orders - merits of the matter not looked into - HELD THAT:- The impugned orders are set aside on the sole ground that it does not advert to the objections and give any reason whatsoever for not accepting the writ petitioner s reply to the revisional notice. In other words, it is made clear that this Court is not expressing any view or opinion on the merits of the matters. As revisional notices have already been given and as the writ petitioner has sent detailed objections, this Court is convinced that the statutorily imperative requirement under proviso to Section 27(2) of TNVAT Act viz., the requirement of giving reasonable opportunity to the writ petitioner to show cause against the impugned orders has been complied with. Therefore, without any further reference to the writ petitioner, based on the objections already filed, respondent shall pass the revised assessment orders afresh adverting to writ petitioner s reply/objections to revisional notices giving reasons qua the reply/objections of the writ petitioner. Petition disposed off.

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• 2019 (8) TMI 907
  Principles of natural justice - Stay of collection and recovery of the disputed amount of tax, pending disposal of the second appeals - condition imposed for deposit of part amount for grant of stay - case of petitioner is that that, the impugned orders are passed in a totally mechanical manner without adverting to the grounds raised in the appeals - HELD THAT:- Any advertance to the merits of the appeal is not reflected in the impugned orders. However, we are not proposing to remit the interim applications for fresh consideration and disposal, which will only lead to multiplicity of proceedings. We are of the opinion that the appeals itself can be directed to be heard and disposed of on an early basis. As an equitable relief, we think it appropriate to reduce the percentage of deposit insisted upon for granting the stay - the petition is disposed of by modifying Exts.P5 and P5(a) orders passed by the third respondent tribunal to the extent of directing deposit of only 20% of the disputed demand and to execute the simple bond for the balance amount, within thirty days from today.

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• 2019 (8) TMI 906
  Violation of the principles of natural justice - no response to the pre-assessment notice - HELD THAT:- The impugned order refers to a pre-assessment notice dated 24. 02. 2015. The Assessing Officer states that there was no response to the notice as a result the proposals contained stood confirmed, rejecting the claim of the petitioner for exemption. The records reveal that the petitioner had sent a reply on 11. 12. 2014 along with annexures, duly received and acknowledged by the Assessing Officer on 12. 12. 2014 - there has been a violation of the principles of natural justice and the impugned assessment order is thus liable to be set aside. Petition allowed.

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• Indian Laws

• 2019 (8) TMI 905
  Dishonor of Cheque - acquittal of the respondent-accused - existence of debt or not - issuance of cheque in discharge of debt or not - Section 138 of the Negotiable Instruments Act - whether the courts below were right in acquitting the respondent-accused by holding that the appellant-complainant has failed to prove that the respondent owed him debt and that the cheques were issued for the discharge of the said debt? HELD THAT:- Under Section 138 of the Negotiable Instruments Act, once the cheque is issued by the drawer, a presumption under Section 139 of the Negotiable Instruments Act in favour of the holder would be attracted. Section 139 creates a statutory presumption that a cheque received in the nature referred to under Section 138 of the Negotiable Instruments Act is for the discharge in whole or in part of any debt or other liability. The initial burden lies upon the complainant to prove the circumstances under which the cheque was issued in his favour and that the same was issued in discharge of a legally enforceable debt - It is for the accused to adduce evidence of such facts and circumstances to rebut the presumption that such debt does not exist or that the cheques are not supported by consideration. In the present case, by examining himself as PW-1, the complainant has discharged the initial burden cast upon him that the cheques were issued for the rice bags purchased on credit. With the examination of PW-1, the statutory presumption under Section 139 of the Act arises that the cheques were issued by the respondent-accused for the discharge of any debt or other liability in whole or in part. The courts below disbelieved the evidence of the complainant on the ground that there are no averments in the complaint that the commodities were sold for cash and that the rice bags were sold on credit and the cheques were issued for the goods sold on credit. Though the complaint contains no specific averments that the cheques were issued for the purchase made on credit, in his evidence, PW-1 clearly stated that the cheques were issued for the commodities purchased on credit. With the evidence adduced by the complainant, the courts below ought to have raised the presumption under Section 139 of the Act. The evidence adduced by the respondent-accused is not sufficient to rebut the presumption raised under Section 139 of the Act. The defence of the respondent that though he made payment for the commodities/rice bags, the blank cheques were not returned by the appellant-complainant is quite unbelievable and unacceptable. The impugned judgment of the High Court cannot be sustained and is liable to be set aside. Appeal allowed.

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• 2019 (8) TMI 904
  Sale of the subject property - Conduct of public auction - declaration of highest bidder - default in repayment of loan - Non-performing assets - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. HELD THAT:- The matter proceeded before the High Court for setting aside the entire auction process on the premise that the sale certificate was yet to be registered in favour of the highest bidder (respondent No.3); and the appellants had made (unsuccessful) attempts to exercise their right of redemption by offering the outstanding dues to the respondent bank. It was argued by the appellants that only upon registration of the sale certificate, the right of the borrower to redeem the mortgage would get extinguished and obliterated. There has been a paradigm shift in the rights of the parties upon registration of the sale certificate on 18th September, 2007 and also because of the registered sale deed in favour of third party on 5th October, 2007. The contention pursued before the High Court by the appellants, therefore, has now become unavailable. We find substance in the stand taken by the respondent bank that non-e of the above was a valid tender so as to extricate or discharge the appellants from their obligation to deposit the outstanding dues payable by them before the specified date. In that, the amount was allegedly deposited by them in the account of the father of appellant No.2 and not in their loan accounts as such. Unless the amount was transferred/deposited in the loan accounts of the appellants in relation to which the mortgage operated, it would not be a valid tender for paying the outstanding dues - The respondent bank, therefore, justly declined to accept the cheque(s), not being a valid tender. Even the third attempt made by the appellants was to offer demand drafts drawn in favour of or in the name of the Authorised Officer of the respondent bank and not in the name of the bank or authorising the bank to appropriate it towards the subject loan accounts. Hence, these demand drafts were rightly not accepted as a valid tender. It is not possible to countenance the stand of the appellants that they had made a valid tender to the respondent bank or that the respondent bank had mischievously or malafide rejected their offer to defeat their rights, to redeem the mortgage before registration of the sale certificate on 18th September, 2007. We do not deem it necessary to dilate further on the argument that registration of the sale certificate in relation to the auction conducted under the 2002 Act is essential. Similarly, it is not necessary to examine other grounds urged by the appellants, in light of our conclusion that the appellants have failed to make a valid and legal tender to the respondent bank before the issue of sale certificate on 6th January, 2006, muchless registration thereof on 18th September, 2007. Appeal dismissed.

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• 2019 (8) TMI 903
  Withdrawal of the Deposit of a sum, which was deposited to prove bonafides when revised order was made - deposit was not towards satisfaction of the debt in question - refund of the same is sought for - loan taken by Consortium Bank could not be repaid as the appellant was declared Non-Performing Asset (NPA) - HELD THAT:- In the present case the deposit of Rs. 40 crores in terms of the order of the High Court on 11.10.2017 was only to show the bona fides of the appellants when a revised offer was made by them. The deposit was not towards satisfaction of the debt in question and that is precisely why the High Court had directed that the deposit would be treated to be a deposit in the Registry of the High Court. In the case of AXIS BANK VERSUS SBS ORGANICS PRIVATE LIMITED AND ANOTHER [ 2016 (4) TMI 917 - SUPREME COURT] the questions that arose for consideration were whether the money deposited, in order to maintain an appeal under Section 18 of the SARFAESI Act before the Debts Recovery Appellate Tribunal (DRAT) could be adjusted towards the amount due to the concerned bank and whether the concerned bank had a lien over the money so deposited - Going by the law laid down by this Court in Axis Bank3 the secured creditor would be entitled to proceed only against the secured assets mentioned in the notice under Section 13(2) of the SARFAESI Act. In that case, the deposit was made to maintain an appeal before the DRAT and it was specifically held that the amount representing such deposit was neither a secured asset nor a secured debt which could be proceeded against and that the appellant before DRAT was entitled to refund of the amount so deposited. The submission that the bank had general lien over such deposit in terms of Section 171 of the Contract Act, 1872 was rejected as the money was not with the bank but with the DRAT - In the instant case also, the money was expressly to be treated to be with the Registry of the High Court. The appellants are entitled to withdraw the sum deposited by them in terms of said order dated 11.10.2017. Their entitlement having been established, the claim of the appellants cannot be negated by any direction that the money may continue to be in deposit with the Bank. Appeal allowed.

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