TMI Tax Updates - e-Newsletter
August 31, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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GST:
Classification of goods - applicable rate of tax - Printing and supply of Security Excise Adhesive Labels - the product in question is classified under the Heading 4911 and rate of tax/GST is 12% - AAR
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GST:
Profiteering - purchase of flat - whether there was any additional benefit of ITC with the introduction of GST availed by the Respondent or not. - This case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent had not availed benefit of additional ITC in the post-GST regime. - NAPA
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GST:
Profiteering - supply of “Services by way of admission to exhibition of cinematograph films” - allegation that the benefit of reduction in the rate of tax not passed on by way of commensurate reduction in price - The mathematical methodology employed by the DGAP to compute the profiteered amount is correct, appropriate, reasonable and in consonance with the provisions of Section 171(1) - NAPA
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Income Tax:
Jurisdiction of AAR to decide an issue because of non-existence of “Jurisdictional Fact” u/s 245R(2) - Issue was already pending - a question cannot be said to be pending under Clause (i) of proviso to Section 245R(2) upon issuance of a mere notice under Section 143(2) of the Act, especially when it has been issued in a standard pre-printed format and the questions raised before the authority for advance ruling do not appear to be forming the subject matter of the said notice. - HC
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Income Tax:
Provision for warranty - provision of warranty was made every year in accordance with accounting standards 29 and the provision is worked out scientifically every year merely because, the provision has come down to 59:100, the same cannot be disallowed. - HC
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Income Tax:
Nature of expenditure - manufacturing and administrative expenses incurred by the appellant for development of a product in the course of its manufacturing activity which was already carried on - Same cannot be treated as revenue expenditure. - HC
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Income Tax:
Corrected / revised computation of taxable total income filed before ITAT - pleading to admit the fresh claim / additions evidences - Tribunal has rightly held that there is no satisfactory evidence placed before it to substantiate the assessee's plea that they wrongly computed the admitted income. - HC
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Income Tax:
Reassessment proceeding under Section 147 was made to form change of opinion and therefore, it would clearly amount to reviewing the original order of assessment u/s 147 under the pretext of reassessment. We make it clear that in the reassessment proceedings u/s 147, the original assessment order cannot be reviewed. Proceedings also cannot be initiated merely because there is a possibility of change of opinion. - HC
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Income Tax:
Eligibility of deduction u/s 80ID - five year tax holiday to new hotels of two, three and four star categories and convention centers - The assessee has commenced already established business by way of transfer to a new business of a building previously used as a hotel. - assessee is not eligible for deduction - AT
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Income Tax:
Disallowance of interest - loan was used for the purpose of horse-trading and horse racing business - the finding of the CIT(A) rejecting the claim of the assessee on the basis of non-receipt of profit is not liable to be sustainable - claim of deduction allowed - AT
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Income Tax:
Validity of assessment u/s 153A/143(3) - wrong reference to a section under which an order is made - the aforesaid mistake cannot be stretched to the extent for rendering the assessment framed by the A.O under Sec. 143(3), as invalid and void ab-initio on the said count. - AT
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Customs:
Non-Service of notice - Section 153 of the Customs Act - Non-fulfilment of export obligation - Admittedly, in this case, the Authority has not served the notice on the petitioner's customs house agent. Section 153(3) of the Customs Act is not a conclusive presumption. It is rebuttable in nature. - HC
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Customs:
Change in classification of imported goods - Quick Lime - purity is less than 98% - in view of the Board s Circular as well as HSN Explanatory Note, the product manufactured by the respondent has to be classified under CTH 25.22 only. - AT
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IBC:
Initiation of CIRP - The payment received for shares, duly issued to a third party at the request of the payee as evident from official records, cannot be a debt, not to speak of financial debt. Shares of a company are transferable subject to restrictions, if any, in its Articles of Association and attract dividend when the company makes profits. - SC
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IBC:
Initiation of CIRP - Apart from the fact that the Joint Development Agreement entered into, is a contract of reciprocal rights and obligations, both parties are admittedly ‘Joint Development Partners’, who entered into a consortium of sorts for developing an Integrated Township and for any breach of terms of contract, Section 7 Application is not maintainable as the amount cannot be construed as ‘Financial Debt’ as defined under Section 5(8) of the Code. - AT
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Service Tax:
Classification of services - job of “metal spreading for supply uncoursed black Trap Rubble stone” - The overall work is of construction of bunds which falls under Industrial & Commercial Construction Service. The said construction is undisputedly of an immovable property. With this fulfilment of the criteria, the service is squarely covered under the category of Works Contract Service. - AT
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Central Excise:
Refusal to accept the surrender of Central Excise Registration Certificate - the demand, which was a subject matter in the CESTAT, before the Hon'ble Supreme Court, no longer exists - Department may not be justified in refusing the acceptance of the surrender of the petitioner's Central Excise Registration Certificate. - HC
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VAT:
Determination of sales turnover - When the assessing authorities could accept the explanation of the assessee for the subsequent years, there is no reason for them to take a different stand in the instant year. - The reason given by assessing authority cannot be upheld - If the assessing authority is of the view that this is a false statement, the onus is on the authority. The petitioner cannot be expected to prove the negative. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (8) TMI 776
Classification of goods - applicable rate of tax - Printing and supply of Security Excise Adhesive Labels - whether classifiable under HSN Code 4821 attracting GST @ 18% or under HSN Code 4911attracting 12%? - HELD THAT:- Hon ble Supreme Court in the case of M/S. HOLOSTICK INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA [ 2015 (4) TMI 357 - SUPREME COURT] dealt with an identical issue. In that case, the question was whether a coated metallised film (classified under Central Excise Tariff 39.20.36) undergoing embossing and applied with an adhesive coating resulting in a hologram would be classified under Heading 4901 or 3919. It was held by Apex Court that the primary use of the product is security and not the quality of being adhesive. The primary use of such tape is by virtue of its adhesiveness to bind and package containers in which goods are to be stored and transported. Obviously, in such an example, the printed monogram of such adhesive tape would be incidental to the primary use of the said goods - the adhesive tape. In the present case also, the primary use of the Security Excise labels is for security. Akin to Note No.2 to entry 49 in Central Excise Tariff, a similar Note No. 12 is existing in Chapter 48 of GST Tariff - Also, the sixth edition of volume III of Explanatory Notes of World Customs Organisation in relation to Chapter Heading 4911 also includes at item No. 10, Self-adhesive printed stickers designed to be used, for example, for publicity, advertising or mere decoration, e.g., comic stickers and window stickers . Thus, the judgment of the Hon ble Supreme Court in the case of M/S. HOLOSTICK INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA [ 2015 (4) TMI 357 - SUPREME COURT] wholly applies to the instant case and therefore the product in question is classified under the Heading 4911 and rate of tax is 12% as per Sr. No. 132 of schedule Il of Notification No. 01/2017-CT (R) dated 28.06.2017.
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2020 (8) TMI 775
Interest on ITC set off - petition has filed the returns for the financial year 2017-18, 20018-19 and 2019-20 at belated stage and availed Input Tax Credit at the time of filing GSTR-3B returns, as Works Contractor - HELD THAT:- This Court disposes of this Writ Petition with a direction to the Superintendent, Central GST and Central Excise, Berhampur opposite party No.3 to dispose of the representation filed by the petitioner on 06.05.2020 under Annexure:3 keeping in view the decision taken in the 39th meeting of GST Council, as expeditiously as possible, preferably within a period of eight weeks from the date of receipt of this order. The decision taken, if any, be communicated to the petitioner.
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2020 (8) TMI 774
Maintainability of petition - alternative remedy of appeal - Interest on delayed payment of GST - HELD THAT:- Although various contentions are raised in this writ petition in its challenge against the notice, the petitioner should be relegated to the alternate remedy of filing his objections to Ext.P3 notice, and getting the same adjudicated before the adjudicating authority, before approaching this Court in a challenge against any decision taken by the respondent. At this stage of the proceedings where all that is issued to the petitioner is a notice, and he has an opportunity to file objections to the same, I do not deem it necessary to admit this writ petition under Article 226 of the Constitution of India. Petition dismissed.
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2020 (8) TMI 773
Profiteering - purchase of flat - allegation that the Respondent was actually required to pass on the benefit of ITC for the construction done after the GST implementation which he had not passed on . - contravention of section 171 of CGST Act - HELD THAT:- It is revealed from the plain reading of Section 171 (1) that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any additional benefit of ITC with the introduction of GST availed by the Respondent or not. On this issue it has been revealed from the DGAP's Report that no ITC has been availed by the Respondent in the post-GST period and therefore, there was no additional benefit of ITC which had accrued to the Respondent post-GST as compared to pre-GST period. This case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent had not availed benefit of additional ITC in the post-GST regime. Hence, the allegation of not passing on the benefit of ITC is not established against the Respondent. Therefore, the Respondent is not liable to pass on the benefit of ITC to the Applicant No. 1 and the other recipients. Accordingly, the provisions of Section 171 (1) of the CGST Act. 2017 have not been contravened in the present case. The application filed by the Applicant No. 1 requesting action against the Respondent for alleged violation of the provisions of the Section 171 of the CGST Act is not maintainable and hence the same is dismissed.
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2020 (8) TMI 772
Profiteering - supply of Services by way of admission to exhibition of cinematograph films - allegation that the benefit of reduction in the rate of tax not passed on by way of commensurate reduction in price - contravention of section 171 of CGST Act - penalty - HELD THAT:- The Respondent is registered in the State of Telangana under GSTIN 36AAACP4526DIZR and is mainly engaged in the business of sale of cinema tickets, food and beverages and advertisement space. It is also revealed from the plain reading of Section 171 (1) of the CGST Act, 2017 that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate. it is apparent from the record that there has been a reduction in the rate of tax from 28% to 18% on Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees and from 18% to 12% on Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less w.e.f. 01.01.2019. vide Notification No. 27/2018- Central Tax (Rate) dated 31 12.2018. Therefore. the Respondent is liable to pass on the benefit of both the tax reductions to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the DGAP has carried out the present investigation w.e.f. 01.01.2019 to 31.07.2019. The mathematical methodology employed by the DGAP to compute the profiteered amount is correct, appropriate, reasonable and in consonance with the provisions of Section 171 (1) as the Respondent was selling tickets at various prices to his customers due to which the actual transaction value was required to be taken in to account to calculate the profiteered amount. The average base price computed by the DGAP was required to be compared with the actual base price of the ticket to ascertain whether the Respondent has passed on the benefit to each of his buyer or not. Therefore, it would not have been correct to compare the average base prices pre and post rate reductions. Hence, the mathematical methodology applied by the DGAP to compute the profiteered amount is justified and can be relied upon. Thus, the profiteered amount is determined as ₹ 13,51,519/- for the period from 01.01.2019 to 06.01.2019 as mentioned in Table-B of the DGAP s Report dated 31.01.2020 as per the provisions of Section 171 (1) read with Rule 133 (1) of the CGST Rules, 2017. The Respondent has reduced his prices commensurately w.e.f. 07.01.2019 in terms of Rule 133 (3) (a) of the above Rules therefore, no further direction is required to be passed on this account. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent has voluntarily deposited an amount of ₹ 13,72,181/-along with interest of ₹ 35,865/- in the CWFs in accordance with the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. Penalty - HELD THAT:- The Respondent has contravened the provisions of Section 171 (1) of the CGST Act, 2017. However, since, the penalty prescribed under Section 171 (3A) of the CGST Act, 2017 for violation of the above provisions has come in to force w.e.f. 01.01.2020 and the infringement pertains to the period from 01.01.2019 to 06.01.2019 and the Respondent has also deposited the profiteered amount alongwith the interest therefore, no penalty is proposed to be imposed on the Respondent.
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2020 (8) TMI 771
Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) by way of reduction in the price - violation of the provisions of Section 171 (1) of GST Act - HELD THAT:- It has been revealed that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicant as well as other homebuyers who had purchased them in his Project Eldeco County for the period from 01.07.2017 to 31.08.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- Since, no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.08.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively - Accordingly, the notice dated 11.03.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.
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Income Tax
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2020 (8) TMI 770
Jurisdiction of AAR to decide an issue because of non-existence of Jurisdictional Fact u/s 245R(2) - Issue was already pending - scrutiny proceedings - question on which notice under Section 143(2) of the Act was issued was taxable income shown in revised return is less than the taxable income shown in the original return and large refund has been claimed - whether the royalty is taxable in the hands of the petitioners at the time of actual receipt or otherwise? HELD THAT:- Two Division Benches of this Court in Hyosung Corporation vs. Authority for Advance Rulings Ors. [2016 (2) TMI 575 - DELHI HIGH COURT] and Sage Publication Ltd. Vs. Deputy Commissioner of Income-Tax (International Taxation) [ 2 016 (9) TMI 299 - DELHI HIGH COURT] have held that a question cannot be said to be pending under Clause (i) of proviso to Section 245R(2) upon issuance of a mere notice under Section 143(2) of the Act, especially when it has been issued in a standard pre-printed format and the questions raised before the authority for advance ruling do not appear to be forming the subject matter of the said notice. This is also more so when the notice fails to satisfy the particulars of claim of loss, exemption, deduction, allowance or relief as mandated by Section 143(2)(i) The AAR has followed the above-noted decisions and held notice under section 143(2) merely asks the applicant to produce any evidence on which it may like to rely in support of its return. It does not even remotely disclose any application of mind to the return filed by the applicant. For this reason, AAR has held that that question cannot be said to be pending to attract the bar under clause (i) of the proviso to Section 245R(2) of the Act. - the issues of law and fact raised by the learned counsel for petitioners are no longer res integra. We do not any infirmity in the approach adopted by the AAR. Judgement in the case of Sudhir Chandra Nawn [1968 (4) TMI 1 - SUPREME COURT] is clearly inapplicable to the facts of the present case as it only states that even if the formula for calculation of tax liability under two different statutes enacted under different entries in List III of Schedule VII of the Constitution is similar, that would not make the fields of legislation under the two entries overlapping. Decided against the revenue.
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2020 (8) TMI 769
Computation of deduction u/s 10B - Whether expenditure incurred in foreign currency reduced from export turnover has to be reduced from total turnover - Tribunal held that expenditure in foreign exchange reduced from export turnover has to be reduced from total turnover also - brought forward losses and unabsorbed depreciation cannot be set off against the profits for computing deduction under Section 10B - HELD THAT:- Revenue fairly submitted that first substantial question of law has been answered against the revenue in 'COMMISSIONER OF INCOME-TAX VS. HCL TECHNOLOGIES LTD.' 2018 (5) TMI 357 - SUPREME COURT whereas the second substantial question of law has also been answered against the revenue by Supreme Court in 'COMMISSIONER OF INCOME-TAX VS. YOKOGAWA INDIA LTD. 2016 (12) TMI 881 - SUPREME COURT Expenditure incurred towards acquisition of software - Whether expenditure incurred towards acquisition of software is only a right to use for a limited period and no property or right of permanent character is being acquired and hence expenditure incurred is capital in nature? - HELD THAT:- The expenses are incurred for application of software, the third substantial question of law is also answered against the revenue by a division bench of this court in 'COMMISSIONER OF INCOME-TAX, BANGALORE VS. ROBERT BOSCH INDIA LTD. 2014 (6) TMI 906 - KARNATAKA HIGH COURT
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2020 (8) TMI 768
Provision for warranty - whether allowable as deduction when the assessee has not made provision on a scientific basis? - whether the assessee is entitled for deduction when excess provision towards warranty made in the previous years is not offered to tax by reversing the entries? - whether the principles laid down by the Supreme Court in Rotork Controls India (P) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT ] have been taken note of while deciding the issue of estimation of provision for the Assessment year 2008-09? - Tribunal allowed deduction - HELD THAT:- Principles laid down by the Supreme Court in Rotork Controls India (P) Ltd. Supra had been taken into account by the Commissioner of Income Tax (Appeals) and the estimation of provision for the AY 2008-09 has been found to be unscientific and unreasonable. Tribunal has noted that admittedly, the CIT (Appeals) has considered the same working method of provision in previous two years and allowed the provision. CIT (Appeals) did not allow the provision for warranty for the Assessment year on the ground that the ration between the actual and the provision is less than 70:100 - ratio adopted by the CIT (Appeals) is imaginary and arbitrary and is without any basis. It was also held that provision of warranty was made every year in accordance with accounting standards 29 and the provision is worked out scientifically every year merely because, the provision has come down to 59:100, the same cannot be disallowed. Accordingly, the finding recorded by CIT (Appeals) that estimation of provision is unscientific and is unreasonable has been set aside. Thus, it is evident that the conditions laid down by the Supreme Court to assess a provision have been met in the instant case - submission made by learned counsel for the revenue that neither Commissioner of Income Tax (Appeals) nor Tribunal has examined the ratio laid down in Rotork Controls India (P) Ltd. Supra does not deserve acceptance. In view of preceding analysis, the substantial questions of law framed are answered against the revenue.
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2020 (8) TMI 767
Deductions u/s 10B and Section 10AA computation - excluding expenditure incurred in foreign currency from export turnover under Section 10B and Section 10AA of the IT Act when the Appellant is engaged in software development - HELD THAT:- CIT(Appeals) has recorded a categorical finding that assessee is engaged in the development of computer software, which is exported outside India. The aforesaid finding has not been set aside by the Tribunal. Therefore, in view of Explanation 2(iii) to Section 10B of the Act, the expression 'export turnover' does not include any expenses incurred in foreign exchange in providing technical services outside India. The assessee has incurred expenditure in foreign currency from export turnover for software development. Similarly, the telecommunication charges attributable to delivery of computer software outside India could not have been excluded from the export turnover in view of Explanation 1(i) to Section 10AA of the Act. It is also noteworthy that Explanation 2 to Section 10AA provides that profits and gains derived from; on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. In the case of assessee itself, for the Assessment year 2009-10, the expenditure incurred in foreign currency was not reduced from export turnover and total turnover, which is evident from the order dated 31.01.2017 passed by the Assistant Commissioner of Income Tax. A bench of this court in Tata Elxsi Limited [ 2016 (3) TMI 460 - KARNATAKA HIGH COURT ] has also taken a view that technical services rendered by the assessee's engineers in connection with export of computer software, cannot be excluded in computing the export turnover as it forms part of export turnover. - Decided in favour of assessee.
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2020 (8) TMI 766
Nature of expenditure - manufacturing and administrative expenses incurred by the appellant for development of a product in the course of its manufacturing activity which was already carried on - Revenue expenditure u/s 37(1) or capital expenditure - HELD THAT:- Assessee had started a new Unit at Hosur in financial year 2004-05 by taking over machineries and properties of M/s V.B.Medicare Pvt. Ltd., Hyderabad on lease. The work of development of 'SUCRALOSE' viz., a new product was started in financial year 2005-06 in Hosur Unit. The product was developed in the financial year 2006-07. Thus, the assessee had produced a new product from which enduring benefit was derived. Therefore, the same has to be treated as capital expenditure. An asset was brought into existence for enduring benefit of the business and therefore, the same has to be treated as capital expenditure. The expenditure has not been made for bringing into existence an asset for running of the business or working with it with a view to produce profits. Same cannot be treated as revenue expenditure. It is pertinent to mention here that the assessee himself in the Books of account had shown it as capital expenditure. Therefore, the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Tribunal have rightly treated the expenditure incurred by the assessee for development of a new asset as capital expenditure. - Decided against assessee.
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2020 (8) TMI 765
Corrected / revised computation of taxable total income filed before ITAT - pleading to admit the fresh claim and for restoring the first appeal for deciding the issues on merits? - appeal was not considered on merits and was dismissed by the CIT (A) by order dated 31.07.2017 on the ground that the assessee has not paid the self assessment tax which the assessee had admitted before the appellate authority - Whether CIT (A) ought to have granted time to the assessee to pay the self assessment tax? - HELD THAT:- When the appeal was heard, additional grounds were raised which we find to be entirely factual. On the first issue as to whether the CIT (A) ought to have granted time to the assessee to pay the self assessment tax, is concerned, if we look at Sub Section 4 of Section 249 of the Act, it is made clear that unless and until, the assessee has paid the income tax due on the income returned by him, no appeal under Chapter XX will be admitted. The Statute does not neither give any discretion to the appellate authority to entertain an appeal nor extend the time for paying the self assessment tax, except in respect of cases falling under Clause b of Section 249 (4) in terms of proviso under the said Section. Though such a ground raised in the appeal memorandum filed before the Tribunal, the assessee appears to have been more interested in canvassing the additional grounds with regard to offering a sum of ₹ 82.37 Crores relating to inbuilt revenue which according to the assessee was an inadvertent income. Tribunal has rightly held that there is no satisfactory evidence placed before it to substantiate the assessee's plea that they wrongly computed the admitted income. No Substantial Questions of Law
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2020 (8) TMI 764
Reopening of assessment u/s 147 - reassessment initiated after four years - Whether no fresh material on record for such reassessment proceedings? - product development expenses disallowance - HELD THAT:- It is to be noted that in the present case, the return was filed on 13.11.2007 for the assessment year 2007-08, for which reassessment proceedings under sections 147 and 148 ought to have been initiated within the period of four years, which was over by 31.03.2012. But, the notice for reassessment proceedings under Section 148 was issued on 11.06.2013, beyond the period of limitation. Therefore, we do not find any error in the finding of the Income Tax Appellate Tribunal in this aspect. Product development expenditure incurred to the extent of ₹ 3.39 crore by the assessee, is entitled to be amortized over the period of three years as per the accounting practice adopted by the Company and the assessee has rightly amortized the same. Re-assessment provisions under Section 147 of the Act do not provide for reassessment on a mere change of opinion. The re-assessment on a mere of change of opinion is not permissible under law. Such change of opinion amounts to review of the order of the assessment, which is not permissible under law. In support of our opinion, we would like to press into service the Judgment of Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ]. - Decided in favour of assessee.
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2020 (8) TMI 763
Reopening of assessment u/s 147 - failure on the part of the assessee to disclose fully and truly all material facts OR not ? - CIT (Appeals)15, Chennai came to the conclusion that in the original assessment proceedings, no opinion was formed by the Assessing Officer - Tribunal cancelling the reopening proceedings - HELD THAT:- A perusal of the order of the Commissioner of Income Tax (Appeals) would make it clear that he has been persuaded to pass the orders as if there was no change of opinion, as, according to him, no opinion was formed by the Assessing Officer. However, the fact remains that the original assessment order was passed by the Assessing Officer after forming the opinion. Reassessment proceeding under Section 147 was made to form change of opinion and therefore, it would clearly amount to reviewing the original order of assessment u/s147 under the pretext of reassessment. We make it clear that in the reassessment proceedings u/s 147, the original assessment order cannot be reviewed. Proceedings also cannot be initiated merely because there is a possibility of change of opinion. No review on the original assessment order is permissible in the reassessment proceedings initiated under Section 147. Therefore, we are of the view that the Tribunal had rightly set aside the impugned reassessment made under Section 147 - Decided in favour of assessee.
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2020 (8) TMI 762
Penalty u/s. 271G - assessee has entered into an international transactions with its AE and has failed to furnish documents or information as required under section 92D(3) - HELD THAT:- The fact of the present case are identical to the one dealt with by the tribunal in assessee group concern [ 2019 (9) TMI 1389 - ITAT MUMBAI] wherein factual aspects and case laws of Hon ble Delhi High Court in the case of Leroy Somer Controls (India) (P) Ltd [ 2013 (9) TMI 761 - DELHI HIGH COURT] we are of the view that the assessee has sufficiently complied with the requirement of Rule 10D(i) of the Rules and moreover the AO has not raised any specific issue which specific documents is not produced under section 92D(3), hence, we conclude that the assessee has furnished all the informations as asked for by the AO and unless and until a specific defect is pointed out in the submissions of documents, penalty under section 271G of the Act cannot be levied. We delete the penalty and allow the appeal of the assessee.
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2020 (8) TMI 761
Income from house property - Deemed ownership - Interest free securities received - Estimation of income / rent (ALV) - rent/licence fee, which was paid by the occupiers to the sub-licensees to whom the assessee had sub-licensed the premises - CIT-A deleted the addition ignoring the annual letting value of the property known as West Tower was taxable as income from house Property - HELD THAT:- As decided in own case [ 2010 (11) TMI 798 - DELHI HIGH COURT ], Tribunal examined the license agreement entered into between the NDMC and the assessee on the basis of which it has come to the conclusion that it is the NDMC, which is the owner of the premises and remains to be the owner of the premises in question . In view of the decision of the Hon ble Delhi High Court in the assessee s own case on the similar issue, the present appeal is also covered in favour of the assessee. - Decided against revenue.
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2020 (8) TMI 760
Bogus purchases - Unexplained expenditure - purchases have shown to be made are bogus and non-existent - HELD THAT:- Purchases were actually made and the same was not disputed by the Revenue Authorities at any point of time. From the perusal of the assessment order, these purchases were reflected in subsequent Assessment Year i.e. 2012-13, the purchases were shown by the assessee in subsequent year. In fact, during the search no incriminating documents were found. AO proceeded on the basis of mere assumption that purchases were bogus despite knowing the fact that the purchases were reflected in the books of accounts for A.Y. 2012-13. The Assessee established before the Assessing Officer that the purchases were genuine and the Assessing Officer has also accepted the same, therefore, Section 69C will not be applicable in the present case for making such additions. Hence, the CIT(A) correctly deleted the addition. - Decided in favour of assessee.
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2020 (8) TMI 759
TP Adjustment - payment of interest on fully and compulsorily convertible Indian Rupee denominated debentures ( FCCDs ) to the Associated Enterprises - LIBOR based interest rate to bench mark international transaction of payment of interest on FCCDs denominated in Indian Rupees - HELD THAT:- Decision in case of Cotton Naturals [ 2015 (3) TMI 1031 - DELHI HIGH COURT] categorically held that normally there would be a difference between the lending rate and borrowing rate in each country. Economic purpose and substance of the debt claim or debt for which the grant of credit goes for the lending rate would be determining. Thus, in case of capital investment the borrowing rate will apply where as in case of credit allow to a customer, the lending rate would apply. Thus, the decision of the Hon ble Delhi High Court supports the case of the assessee. It is an undisputed fact that the assessee entered into a transaction in domestic currency. The details filed with the RBI clearly set out that the payment was received in INR. The interest should be market determined interest rate applicable to the currency concerned in which the loan has be repaid. In the present case the lending rate is in SBI Prime Lending Rate + 300 basis point, which at the time of investment was 14.75% + 300 = 17.75%. In fact, the DRP in A.Y. 2014-15 allowed this claim of assessee. Thus, the AO/TPO and DRP were not correct in using LIBOR based interest rate to bench mark international transaction of payment of interest on FCCDs denominated in Indian Rupees. - Decided in favour of assessee.
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2020 (8) TMI 758
Deduction u/s 10A - Addition on the interest income and the miscellaneous income on the ground that the above income do not have a direct nexus with the business income of the assessee - HELD THAT:- Respectfully following the decision of the Tribunal in assessee s own case for the two immediately preceding assessment years, we hold that the assessee is entitled to deduction u/s 10A on the interest income and miscellaneous income. It is to be noted that the appeal filed by the Revenue challenging the allowability of deduction u/s 10A on interest income has not yet been reversed by the Hon ble High Court although it has admitted the substantial question of law. TP Adjustment - Comparable selection - HELD THAT:- Companies functionally different with that of assessee need to be deselected from final list. Forex income and bank charges as operating in nature - HELD THAT:- AO, following the safe harbor rules, treated the foreign exchange income, bank charges and provision for doubtful debts as non-operating income. The DRP held that foreign exchange fluctuations are indeed part of the revenue/expenses in so far as nexus with operations is established. Similarly, they held the bank charges and provision for doubtful debts as part of the operational revenue/expenses. Respectfully following the decision of the Tribunal in assessee s own case, we do not find any infirmity in the order of the DRP and, accordingly, the same is upheld. The ground raised by the Revenue on this issue is dismissed.
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2020 (8) TMI 757
Eligibility of deduction u/s 80ID - five year tax holiday to new hotels of two, three and four star categories and convention centers - AO has established that existing hotel building which was first given on rent for hotel business and then it was sold to the assessee thus the assessee had wrongly claimed deduction u/s 80ID - whether assessee commenced already established business by way of transfer to a new business of a building previously used as a hotel? - HELD THAT:- Construction of the Hotel Rai Mahal was prior to April, 2008 and the earlier Hotel Rani Mahal was functioning till 04.10.2008. The business (Hotel SIRIS 18 AGRA) is formed by the leased agreement between the assessee and Bharti Sehgal which was thereafter sold by Bharti Sehgal to the assessee 08.06.2009. The assessee claimed the deduction from A.Y. 2009-10 till 2012-13. The assessee thus has commenced already established business by way of transfer to a new business of a building previously used as a hotel. The case laws submitted by the assessee are not on the issue of Section 80ID eligibility as the conditions/criteria are different in Section 80IA, 80IB deductions. The case laws are on different factual aspects and hence not applicable in the present case. CIT(A) also reiterated the same facts and correctly confirmed the Assessment order. There is no need to interfere with the observations made by the CIT(A) as the CIT(A) has given a detail finding after going through the facts and applying the provisions of Section 80ID of the Act, in assessee s case for non-eligibility of the deduction. Thus, appeal of the assessee is dismissed.
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2020 (8) TMI 756
Unexplained Share Premium u/s 68 - CIT(A) deleted the said addition - HELD THAT:- Hon ble Mumbai High Court had sanctioned the scheme of demerger of investment division of Hemant Tools Pvt. Ltd. with Jayvik Foresight Innovation and Solution Pvt. Ltd. in view of Section 391 to 394 of the Companies Act, 1956. M/s. Hemant Tools Pvt. Ltd. was having reserve and surplus fund and on account of demerger the appellant has shown the receivable from Hemant Tools and received interest thereon which was offered for taxation under the head income from other sources. The assessee has also shown the income from sale of investment as capital gain. Identity and creditworthiness is not doubted. There is nothing on record to which it can be assumed that the own money has been introduced on account of demerger of the investment division of Hemant Tools Pvt. Ltd. The assessee was also receiving the funds continuously from the Hemant Tools. What was not explained by assessee is not on record. The transaction has been properly explained and there is no iota evidence on record to which it can be assumed that the own money has been introduced which liable to be addition u/s 68 Hemant Tools Pvt. Ltd. during the investing activity which was never treated as business activity. The investment was from other sources as well as from capital gain. The investment activity was not liable to be treated as business activity of M/s. Hemant Tools Pvt. Ltd. Accordingly, demerger of the Hemant Tools Pvt. Ltd. with the appellant cannot be held within the provisions of Section 2(19AA). The facts are not distinguishable at this stage. We nowhere found illegality and infirmity and the order passed by the CIT(A) in question. CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, all these issues are decided in favour of the assessee against the revenue.
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2020 (8) TMI 755
Disallowance of interest - loan was used for the purpose of horse-trading and horse racing business - HELD THAT:- Claim of the assessee was declined on the basis of this fact that the assessee did not earn any income from horse trading activity. It is not a sufficient reason to reject the claim of the assessee. It is not an always necessary to earn the profit from the said business or any other business. The assessee took loan for the said business so the interest disallowance is not justifiable. It is not in dispute that the loan was taken for horse trading activity on which the interest was claimed. Anyhow, the finding of the CIT(A) rejecting the claim of the assessee on the basis of non-receipt of profit is not liable to be sustainable, therefore, we set aside the finding of the CIT(A) and allowed the claim of the assessee.
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2020 (8) TMI 754
Addition u/s 41(1) - Failure to prove to genuineness of the claim of Sundry Creditors and advances - HELD THAT:- As required the assessee to furnish certain details with respect to sundry creditors and the Assessing Officer had not satisfied by the details filed by the assessee therefore the said amount was disallowed by the AO u/s 41(1) - We note that the onus is on the AO to establish that the liability has ceased or remitted. We note that assessee has not obtained any benefit as required under the provisions of section 41(1). Assessee submitted that the liability in balance sheet is a moving account and majority of the creditors are for current year and moreover many creditors were paid off in the subsequent year. No infirmity in the order passed by the CIT(A), hence we decline to interfere in the order passed by the CIT(A), his order on this issue is hereby upheld and the grounds of appeal raised by the Revenue is dismissed.
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2020 (8) TMI 753
Addition of unexplained bank deposits - protective addition on the ground that he has confirmed the substantive addition made in the hands of K. Mahesh Kumar - HELD THAT:- With regard to surrender of ₹ 4 crores made in the hands of the assessee, the letter dated 28.3.2011 written by Shri K. Mahesh Kumar makes it clear that the above said surrender was made, inter alia, to cover up shortcomings, if any till the assessment year 2011-12. We also notice that the surrender of ₹ 4 crores is less than the disallowance of ₹ 3.36 crores made by the A.O. and hence the said disallowance may be telescoped against the amount surrendered by the assessee. This is without prejudice to the quantum of disallowance made by the AO. In this view of the matter, we are of the view that there is no necessity to make separate disallowance of ₹ 3.36 crores out of the expenses. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the disallowance. Appeal filed by the revenue relating to deletion of protective addition relating to unexplained bank deposits - We find merit in the said submissions of Ld. A.R. Since the Ld. CIT(A) has deleted the protective addition on the ground that he has confirmed the substantive addition made in the hands of K. Mahesh Kumar and since the said issue has been restored back to his file by the Tribunal in the case of K. Mahesh Kumar, the present issue also needs to be set aside to his file for examining it afresh along with the appeals of Shri K Mahesh Kumar. Accordingly, we restore this issue to file of Ld. CIT(A).
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2020 (8) TMI 752
Disallowance u/s 10A - return of income is not filed within the due date prescribed u/s 139(1) of the Act for filing return of income - HELD THAT:- As per the proviso below sec.10(1A) the deduction u/s 10A is not allowable, if the return of income is not filed within the due date prescribed u/s 139(1) for filing return of income. We have noticed earlier that the due date for filing return of income for the year under consideration was 30-09-2008 and it came to be filed on 01- 10-2008 due to technical glitches in computer system. Hence the assessee has filed an application before CBDT requesting it to condone the delay of 1 day in filing return of income. Admittedly, the purpose of making the said application was to request the CBDT to authorize the A.O. to admit the claim for deduction u/s 10A since the return of income through which the claim was made was filed beyond the date prescribed for claiming the deduction. CBDT has expressly stated that the condonation of delay in filing the return will not amount to acceptance of claims made in the return of income and hence the said condonation will not absolve the assessee from complying with the condition prescribed under the proviso to section 10A(1A) of the Act, which mandates furnishing of return of income on or before the due date specified u/s 139(1) of the Act. We are of the view that the tax authorities have misunderstood the objective of sec.119(2)(b) of the Act as well as the order passed by CBDT. In our view, the order passed by the CBDT only states that the same should not be construed as automatic acceptance of claim for deduction u/s 10A of the Act. Hence, the order specifically makes it clear that the A.O. will be authorized to deal with the claims made in the return of income on merits. So, in our view, the CBDT has in fact relaxed the condition prescribed in the proviso to section 10A(1A) (referred above) by condoning the delay in filing return of income. Assessee shall be deemed to have been complied with the condition prescribed in the proviso to section 10(1A) of the Act with regard to the filing of return of income. Restore the matter to the file of the A.O. for examining the claim made by the assessee u/s 10A - Appeal filed by the assessee is allowed.
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2020 (8) TMI 751
Validity of assessment u/s 153A/143(3) - wrong reference to a section under which an order is made - Whether CIT(A) has grossly erred in law and on facts of the case in sustaining the assessment order under section 153A of the Act instead of section 153C made by ACIT when there was no search authorization under section 132 of the Act in the name of the assessee without verifying the record of the revenue? - HELD THAT:- A.O was duly vested with the jurisdiction to frame the assessment under Sec. 143(3) of the Act. We are in agreement with the view taken by the CIT(A), that as held in the case of Isha Beevi [ 1975 (9) TMI 2 - SUPREME COURT] a wrong reference to a section under which an order is made would not on such standalone basis vitiate the assessment order, but in order to see as to whether an order is valid or not has to be determined by verifying as to whether the A.O had any power at all to make such assessment. As observed by the Hon ble Supreme Court, if the power is otherwise available with the A.O, the fact that source of such power had been incorrectly described would not vitiate the order passed by him. Now, in the case before us, we find that the A.O who was duly vested with the jurisdiction to frame the assesement under Sec. 143(3), had inadvertently made a mention of Sec. 153A along with Sec. 143(3) of the Act. In our considered view, the aforesaid mistake cannot be stretched to the extent for rendering the assessment framed by the A.O under Sec. 143(3), as invalid and void ab-initio on the said count. Accordingly, finding no substance in the aforesaid claim of the assessee, we decline to accept the same and uphold the view taken by the CIT(A) who had rightly dismissed the same. Addition of value of the 450 grams of gold jewellery under Sec. 69B - unexplained investment - HELD THAT:- Entire value of the 450 grams of gold jewellery which have been held by the A.O as an unexplained investment within the meaning of Sec. 69B of the Act, had been added to the income of the assessee. In our considered view, the very basis for invoking the provisions of Sec. 69B in the case of the assessee before us are found to be seriously amiss viz. (i) that, as the assessee was not maintaining any books of account, therefore, the issue of recording of the investment in the 450 grams of gold jewellery cannot be comprehended; and (ii) that, in the absence of recording of the investment in 450 grams of gold jewellery in the books of account, there could have been no occasion for making of an addition of the excess unrecorded value of such investment under Sec. 69B of the Act. On the basis of our aforesaid deliberations, we are of a strong conviction that in the totality of the facts of the case the A.O could not have made the addition as regards the impugned value of the 450 grams of gold jewellery under Sec. 69B of the Act. As such, we are in agreement with the contention advanced by the Ld. A.R that the impugned addition could not have been made by the A.O under Sec. 69B of the Act. In the backdrop of our aforesaid observations, we herein conclude that the impugned addition of ₹ 13,95,900/- made by the A.O as regards the 450 grams of gold jewellery under Sec. 69B of the Act cannot also be sustained for want of jurisdiction. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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2020 (8) TMI 749
Reopening of assessment u/s 147 - deduction u/s 80IB denied - mandation of obtaining the approval of CIT under section 151 - case was re-opened after 4 year from the end of relevant Assessment Year - case was re-opened after 4 year from the end of relevant Assessment Year - plea of additional evidence - HELD THAT:-Considering the facts that we have already accepted the plea of assessee on application for allowing for filing additional evidence. We affirms the view of CIT(A) that while obtaining the approval of CIT u/s 151 the assessing officer has clearly held that there was failure on the part of the assessee in disclosing fully and truly all the material facts. Hence, the grounds No. 1 to 3 is decided against the assessee. Deduction of various components of income under section 80IB - assessee in its application for admission of additional evidence has accepted that the interest income as a part of profit and other income as a part of profit derived by eligible undertaking was not before lower authorities and that the assessee could not file details of other income because these were old record and on account of merger of assessee with other group companies, records were not easily traceable, which we have accepted. No documentary evidences except the details of the chart is furnished before us, therefore, these grounds of appeal are restored back to the file of assessing officer to decide the issue afresh after verification of facts and evidences in accordance with law. The assessee is also directed to furnish the evidence to substantiate its claim. In the result these grounds of appeal are allowed for statistical purpose.
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2020 (8) TMI 748
Assessment passed u/s 254 r.w.s 143(3) - Order in the name of Varian India Pvt. Ltd.- India Branch, an entity not in existence on the date of passing the order, on account of closure of the Branch and subsequent purchase of its assets and liabilities by Agilent Technologies India Private Limited - HELD THAT:- AO has made the assessment u/s 254 r.w.s. 143(3) in the name of M/s Varian India Pvt . Ltd.-India Branch . In the Form 35 filed before the CIT(A) dated 06.02.2015, the appellant has clearly stated the name of M/s Varian India Pvt. Ltd.-India Branch . In the grounds of appeal and statement of facts filed before the CIT(A), the assessee has clearly stated the name of M/s Varian India Pvt. Ltd.-India Branch . Therefore, there is no merit in the 1st ground of appeal and the same is dismissed . TP Adjsutment - Commission income on the reimbursement of expenses received by the Appellant from its Associated Enterprises - HELD THAT:- In the instant case, the appellant has credited in its financial statements towards reimbursement of expenses and offered the same to tax in the return of income filed for the year under consideration. Appellant has debited its financial accounts with expenses incurred on behalf of VGCs and subsequently, on receipt of the credit note from VGCs, it credited the same under the head Other Income in its financial accounts. There is merit in the treatment of the appellant that as the same was in the nature of reimbursement, the same was not included for the purpose of calculation of commission . Appellant has rightly computed its commission income as per the said DR agreements. Therefore, we set aside the order of the Ld. CIT(A) and delete the addition of commission income amounting on the reimbursement of expenses received by the appellant from its AEs. Thus the 2nd ground of appeal is allowed .
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2020 (8) TMI 747
Rectification of mistake u/s 254 - mistake apparent from the record - debatable issue - Department has not disturbed the figures of cost incurred by the assessee as well as net loss returned by the assessee over next four years and deciding an issue without putting it to the assessee and not considering facts available on record amounts to mistake apparent on the record - HELD THAT:- In the instant case, as mentioned above, the explanations given by the assessee have been duly considered. In the impugned order all the submissions and explanations by the assessee have been summarized and then a finding has been arrived at. The issue has been decided after considering the facts in entirety available on record. In fact full opportunity had been given to the assessee to make submissions. The arguments of the assessee during the course of hearing for the impugned assessment year have been examined at length and then the order has been passed. No fact has been lost sight of. No argument has been lost sight of. A perusal of the above facts clearly indicate that the applicant has not pointed out any mistake apparent from the record. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. See T.S. Balaram, ITO v. Volkart Bros.[ 1971 (8) TMI 3 - SUPREME COURT ]. In fact, not a single error in the impugned order has been pointed out by the applicant. What the applicant wants is a review of the order passed by the Tribunal. The Tribunal is a creature of the statute. The Tribunal cannot review its own decision unless it is permitted to do so by the statute. The Hon ble Supreme Court has held in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji [ 1970 (3) TMI 163 - SUPREME COURT ] that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. It is a settled law that the Tribunal has no power to review its order in the garb of section 254(2) of the Act as held in CIT v. Globe Transport Corpn. [ 1991 (1) TMI 23 - RAJASTHAN HIGH COURT ] - MA rejected.
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2020 (8) TMI 746
Penalty u/s. 271(1)(c) - disallowance on account of bogus purchases - AO allowed 12.5% of aggregate of total alleged bogus purchases - CIT(A) after considering the submission of assessee concluded that no penalty under section 271(1)(c) can be levied on adhoc addition and deleted the entire penalty levied - HELD THAT:- CIT(A) while passing the impugned order has followed the order of Tribunal in M/s Chempure vs. ITO [ 2010 (5) TMI 678 - ITAT MUMBAI] Earthmoving Equipment Service Corporation vs. Dy.CIT [ 2017 (5) TMI 474 - ITAT MUMBAI] . In our view, it is now settled position under the law that no penalty under section 271(1)(c) is leviable on adhoc addition. Therefore, we affirmed the order passed by ld. CIT(A). No contrary facts or law is brought to our notice to take other view. - Decided against revenue.
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Customs
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2020 (8) TMI 745
Non-Service of notice - Section 153 of the Customs Act - Non-fulfilment of export obligation - rebuttal of presumption - first respondent issued notices dated 12.11.2018 informing the petitioner that the export obligation period for the licence in question had already expired - demand of differential duty alongwith interest - HELD THAT:- Admittedly, the petitioner did not intimate the respondents about the shifting of their registered office. When I posed a specific question in this regard, the learned counsel appearing for the petitioner drew my attention to Section 153(1) of the Customs Act which enables the Authority to serve the notice not only on the petitioner but also on his customs broker. The imports in this case have been taken place only through an authorised customs house agent namely Zion Logistics. Admittedly, in this case, the Authority has not served the notice on the petitioner's customs house agent. Section 153(3) of the Customs Act is not a conclusive presumption. It is rebuttable in nature. The petitioner had clearly averred that they had not received the notices issued by the first respondent. They have also stated that they had shifted the registered office way back in May 2017. The notices in question came to be issued only in November 2019 - Before amendment, the statute contemplated tendering the order, decision, summons or notice or sending it by registered post. Post amendment, the statute speaks of sending the aforesaid communications through registered post or speed post or courier with acknowledgment due. In this case, it is not confirmed as to whether the notice was sent with acknowledgment due. If that be so, the first respondent ought to be in a position to produce the signed acknowledgment card. If the cover had returned, the returned cover should be produced. In this case, neither the returned cover nor the signed acknowledgment had been produced. The presumption set out in Section 153(3) of the Customs Act has been rebutted. The first respondent has assumed that there has been zero compliance of the export obligation - Since the impugned orders assume that the petitioner has not at all complied with the export obligations, if I do not interfere, there would certainly be miscarriage of justice. It is this impels me to interfere on the ground of violation of principles of natural justice. The orders impugned in these writ petitions stand quashed. The matters are remitted to the file of the first respondent.
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2020 (8) TMI 744
Suspension of CHA License - It was alleged that the appellant had abetted a syndicate in presenting false export invoices, packing list and related documents for showing exports on paper only without physically exporting the goods to gain export benefits - HELD THAT:- It is seen that Regulations 16 mandates that the hearing will be granted within 15 days of the order of suspension and Regulation 17 prescribes that the notice will be issued within 90 days of the receipt. In the instant case while the suspension order on 26/04/2019. The personal hearing was granted on 16/05/2019. The time limit prescribed in Regulation 16 was not followed. Similarly, while the offence report was received on 10.04.2019 but no SCN has been issued till 19.02.2020. Consequently, regulation 17(1) was also violated. The continuation of suspension order cannot be upheld - appeal allowed.
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2020 (8) TMI 743
Change in classification of imported goods - Quick Lime - purity is less than 98% - Adjudicating Authority has held that product imported by them is classifiable under heading 28 25 of customs Tariff Act as against heading 25 22 claimed by the appellant - HELD THAT:- The ratio of decisions of Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, HYDERABAD-III VERSUS M/S BHADRADRI MINERALS PVT. LTD. [ 2015 (10) TMI 1836 - CESTAT BANGALORE] is applicable to the facts of the instant case where it was held that the purity of the burnt lime is 70 to 75% only. Therefore, in view of the Board s Circular as well as HSN Explanatory Note, the product manufactured by the respondent has to be classified under CTH 25 only. The product is rightly classified under chapter 2 - Appeal allowed.
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2020 (8) TMI 742
Condonation of delay - Principles of Natural Justice - non-service of order - appellant states that the impugned order was never served upon them, and the appellant came to know about the order when they received the recovery notice - HELD THAT:- The appellant has annexed recovery notice dated 02.08.2018 as Annexure A-15 in the appeal paper book. Further, we find that Section 153(1b) of the Customs Act provides that where notice or order is despatched by registered post or speed post the same has to be under acknowledgement due. We find that Revenue has not produced the acknowledgement due as proof of delivery. Prima facie, it appears probable that the appellant did not receive the impugned order, and could know about the said order, only in August, 2018, when they received the recovery notice. In the interest of justice giving the benefit of doubt we allow this condonation of delay application subject to payment of cost of ₹ 50,000/-, which shall be payable in the Prime Minister Cares Fund . The compliance to be filed before the Tribunal within two months on receipt of this order or on or before 19.10. 2020 for reporting compliance.
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Insolvency & Bankruptcy
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2020 (8) TMI 750
Rejection of settlement proposal - reconsideration of the proposal - contention is that the Adjudicating Authority while passing the impugned orders, failed to consider whether the approved Resolution Plan conformed with Section 30 of I B Code and its objective i.e. maximization of value of assets of the Corporate Debtor - non-speaking order - principles of natural justice - HELD THAT:- The Committee of Creditors, Acting on the basis of evaluation of Proposed Resolution Plan and assessment made by their team of experts, expressed their opinion after due deliberations in CoC Meetings through voting as per voting share which is a collective business decision. The commercial wisdom of the Financial Creditors individually or their collective decision is beyond the pale of challenge before the Adjudicating Authority and the same has been made non-justiciable. Hon ble Apex Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [2019 (2) TMI 1043 - SUPREME COURT], d ealing with the scope of an appeal under Section 61(1) of the I B Code, the Hon ble Apex Court noticed that apart from other grounds the appeal could be instituted against an order approving a Resolution Plan limited to six grounds noticed therein including that the approved Resolution Plan is in the contravention in the provisions of any law for the time being in force or that there has been any material irregularity in exercise of powers by the Resolution Professional during the Corporate Insolvency Resolution Process. Thus, it is clear that the jurisdiction bestowed upon this Appellate Tribunal too is expressly circumscribed. Thus, it is the settled proposition of law that the commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan is essentially based on a business decision, which involves evaluation of the Resolution Plan based on its feasibility besides the Committee of Creditors being fully informed about the viability of the Corporate Debtor. Such commercial wisdom of the Committee of Creditors with requisite voting majority is non-justiciable and the discretion on Adjudicating Authority is circumscribed to scrutiny of Resolution Plan as approved by the requisite majority voting share of the Financial Creditors - Merely because the Adjudicating Authority has declined to direct reconsideration of the already rejected settlement proposal of Appellants does not impinge upon the legality and conformity of the approved Resolution Plan with the conditions stated in Section 32 of the I B Code. The impugned orders have been passed on proper application of mind - there are no merits in the appeal - Appeal dismissed.
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2020 (8) TMI 741
Maintainability of application - initiation of CIRP - Advance made to Proprietorship firm in 2003 and 2004 - the firm was taken over by the Company - conversion of loan into share - Corporate Debtor failed to make repayment of its dues - time limitation - Existence of financial debit - HELD THAT:- This Applicant, has not placed any material disclosing how this debt is still alive after lapse of three years from the date of disbursement. Whenever any claim is made, when it is beyond three years period as envisaged under Article 136 of the Limitation Act, the person making claim is bound to disclose and explain as to how the debt claim is not barred by limitation. No such effort has been made by these Applicants to prove that this is within limitation. Even if the Corporate Debtor statement is taken as true, the limitation would start running from the year 2007. Since the winding up petition was filed in the year 2013, even from the year 2007, these Applicants could have filed winding proceedings within three years from thereof, not in the year 2013, Conceding everything as stated by the applicants, then also the debt claim would remain barred by limitation. The NCLT rightly refused to admit the application under Section 7 of the IBC, holding the same to be barred by limitation. The Appellate Tribunal has erred in law in reversing the judgment and order of the earlier Adjudicating Authority. The Adjudicating Authority rightly rejected the application as barred by limitation. The Appellate Authority patently erred in law in reversing the decision of the adjudicating authority and admitting the application. Existence of financial debit - HELD THAT:- Explanation to Section 5(8) which relates to real estate projects is of no relevance in the facts and circumstances of this case. The payment received for shares, duly issued to a third party at the request of the payee as evident from official records, cannot be a debt, not to speak of financial debt. Shares of a company are transferable subject to restrictions, if any, in its Articles of Association and attract dividend when the company makes profits. Appeal allowed.
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2020 (8) TMI 740
Maintainability of application - initiation of CIRP - whether the amount claimed by the Appellant can be construed as a Financial debt as defined under Section 5 (8) of the IBC and if the Appellant falls within the ambit of the definition of Financial Creditor as defined under Section 5 (7) of the Code? - HELD THAT:- The demand notice dated 17.04.2018 issued by the Appellant is under Section 8 of the IBC, wherein the Appellant had addressed itself as an Operational Creditor and called upon the Respondent to pay the unpaid Operational debt . In the demand notice, it is stated that the Operational Creditor and Corporate Debtor have executed the JDA on 25.01.2006, inter-alia for conversion of Corporate Debtor allowed in project from ownership of FSI to write off ownership and collaboration to the extent of 25% in the project and in the project land. In the entire body of the notice the Appellant has addressed the principal amount as Operational debt . In such a kind of a Joint Venture Project, both the parties, if they are a Corporate should be jointly treated to be one for the purpose of initiation of CIRP and hence this Application under Section 7 is not maintainable. The Applicant had issued notice to the Respondent under Section 8, terming it as an Operational debt . Be that as it may, this Application seeking initiation of CIRP by one partner of JDA against the other, only jeopardizes the interests of the allottees. Apart from the fact that the Joint Development Agreement entered into, is a contract of reciprocal rights and obligations, both parties are admittedly Joint Development Partners , who entered into a consortium of sorts for developing an Integrated Township and for any breach of terms of contract, Section 7 Application is not maintainable as the amount cannot be construed as Financial Debt as defined under Section 5(8) of the Code. The Appellant cannot be termed to be a Financial Creditor as envisaged under Section 5(7) of the IBC, 2016 - Appeal dismissed.
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Service Tax
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2020 (8) TMI 739
Classification of services - job of metal spreading for supply uncoursed black Trap Rubble stone and its spreading/dressing along the outer edge of bund for formation of toe wall land filling the trenched with stones above ground level, constructing the pitching above toe line, using stones or filling at various cuts in bunds and dressing of entire bund slope, before metal spreading - whether classifiable as works contract, construction service formation service or as site formation and clearance and excavation, earthmoving services? - extended period of limitation. HELD THAT:- As per the facts of the case, the service provided by the appellant is the supply of various materials and construction of bunds. With the said material bunds were created by the appellant for the Service recipient viz. M/s. Archelean Chemical Private Limited. The said bunds are used for production of Salt from the sea water. It can be seen that the contacts is for the construction of bunds which includes various services such as supply of uncoursed black trap rubble stone and its spreading/dressing, worth filling at various trenches and bunds and dressing of entire bunds slope before metal spreading. As regard the rate of the job it is bifurcated into the labour work and metal spreading. This clearly shows that the appellant have not only provided the service of construction of bunds but also supplied the vital material such as un-course, black trap rubble stone and other material, therefore, it is a composite work of Works Contract which includes supply of material and construction of bunds. It is also undisputed that the service recipient is a commercial organization who are doing business trading of Salt which is produced in the bunds constructed by the appellant. Therefore, the service is clearly falling under the category of Industrial Commercial Construction Service. This service is specified under Works Contract Service. In the present case since the appellant have admittedly supplied the material there is a transfer of property of the said material. The overall construction job subjected to payment of VAT which was paid by their service recipient under Reverse Charge mechanism. The appellant in this regard submitted various documents which shows that the job undertaken by the appellant has suffered VAT liability. The overall work is of construction of bunds which falls under Industrial Commercial Construction Service. The said construction is undisputedly of an immovable property. With this fulfilment of the criteria, the service is squarely covered under the category of Works Contract Service. Time Limitation - HELD THAT:- There is no dispute in the fact that this is not a case where the appellant have not paid the Service tax at all. The appellant on the same services had been discharging the service tax regularly and they were filing the periodical returns in ST-3 form therefore, there is absolutely no suppression of facts on the part of the appellant - there is no suppression of facts on the part of the appellant. Hence, the demand for the longer period is not only liable to be set aside on merit but also on time bar. Thus, the services provided by the appellant merits classification under Works Contract Service and the claim of the revenue in classifying such service under Site Formation Clearance, Excavation and Earth Moving, demolition Service is rejected - appeal allowed.
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Central Excise
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2020 (8) TMI 738
Exemption on Education Cess and Secondary and Higher Education Cess - area based exemption availed - whether in view of the exemption granted to the excise duty the petitioner would also be entitled to an exemption to the payment of education cess secondary and higher education cess? - HELD THAT:- The said question was decided by the Supreme Court in its pronouncement in M/S. SRD NUTRIENTS PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE GUWAHATI [ 2017 (11) TMI 655 - SUPREME COURT] wherein in paragraph 27 it was held that the appellants therein were entitled to refund of education cess and higher education cess which was paid along with the excise duty once the excise duty itself was exempted from levy. The demand cum show-cause notice dated 02.06.2020 is assailed in this writ petition on the ground that the condition precedent to invoke the power under section 11(A-1) is that the refund made must be erroneous. It is contended when the refund was given effect during the period prior to the judgment of the Supreme Court in M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS [ 2019 (12) TMI 286 - SUPREME COURT] , at that point of time the proposition laid down in SRD Nutrients Private Limited was in force which had decided in favour of such refunds. Accordingly, it is contended that when the refunds were made the law in force was that such refunds were justified under law and therefore, the refunds made were not erroneous - It being so, condition precedent of section 11(A-1) of the Excise Central Act, 1944 is not satisfied. A question for determination would be as to whether the proposition of law laid down in Unicorn Industries (supra) would render the refunds made to the petitioners to be erroneous - until further orders we stay the operation of the demand cum show- cause notice dated 02.06.2020. List on 08.09.2020.
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2020 (8) TMI 737
Refusal to accept the surrender of the petitioner's Central Excise Registration Certificate - stand taken by the department is that since there is an enforceable demand against the petitioner's company and there is no provision in the Central Excise Act to accept the surrender, the petitioner's request should not be granted - HELD THAT:- It is admitted that there are no enforceable dues as against the petitioner herein and as such, the respondents may not be justified in refusing the acceptance of the surrender of the petitioner's Central Excise Registration Certificate on the ground that there were demands pending. Even otherwise, it is brought to the notice of this Court that the appeal before CESTAT was closed on 09.12.2017 and the further appeal before the Hon'ble Supreme Court was also disposed of on 08.07.2019. As such, the demand, which was a subject matter in the CESTAT before the Hon'ble Supreme Court, no longer exists. Even on this ground, the respondents may not be justified in refusing the acceptance of the surrender of the petitioner's Central Excise Registration Certificate. Petition allowed.
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CST, VAT & Sales Tax
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2020 (8) TMI 736
Rectification of mistake - section 84 of CST Act - petitioner has claimed that even though they had entered into certain sale transactions, some of them were reversed and they had erroneously shown the same in their sales return - variation in value as set out in the export documents and what was found in their books of account. HELD THAT:- When the assessing authorities could accept the explanation of the assessee for the subsequent years, there is no reason for them to take a different stand in the instant year. Therefore, the orders impugned in the writ petition warrant interference. As regards the aspect, namely, sales return, it is seen that the petitioner has enclosed the certificate issued by the Chartered Accountants along with their explanation. The Chartered Accountants have certified that the transactions in question were executed by the assessee and that they had been reversed in their books of account. In other words, the transactions became unfructified sales. It appears that for proving bona fides, the documents regarding reversal of export sales were produced before the assessing authority. The assessing authority has rejected this stand of the petitioner by stating that the relevant documents have not been submitted. The reason given by assessing authority cannot be upheld - If the assessing authority is of the view that this is a false statement, the onus is on the authority. The petitioner cannot be expected to prove the negative. Petition allowed - decided in favor of petitioner.
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