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TMI Tax Updates - e-Newsletter September 20, 2019 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Highlights / Catch Notes Income Tax: Central Government, specifies Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated Teller Machine Operators (WLATMO’s) after consultation with the Reserve Bank of India Visit to Get Source Income Tax: Section 69B of the Act does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to the tax contrary to the strict provisions of Article 265 of the Constitution of India which must be “taxes on income other than agricultural income”. - HC Visit to Get Source Income Tax: TDS u/s 194C - once conditions of proviso to Section 194(C)(7) are satisfied, liability of payer to deduct taxes at source would cease and consequently, disallowance of payment of sub-contractor under Section 40(a)(ia) could not be made on the ground that the assessee had not furnished form no.15J as required under Rule 29D. - HC Visit to Get Source Income Tax: Commission paid to HUF - meaning and import of the term “agent” - 'AO's action in disallowing the impugned expenses have been made on extremely thin and specious grounds that the buyers were not found or did not respond or disclaimed any knowledge of the agents or that the agents were not able to remember the buyers or were not able to furnish detailed particulars about them or for the reason that the Commission agents were HUFs. - AT Visit to Get Source Income Tax: Association of person (AOP) - assessment of trust - assessee cannot be taxed as an AOP and that the shares of each beneficiaries are determinate and known and accordingly the income shall be taxed only in the hands of such beneficiaries and not in the hands of the assessee trust. - AT Visit to Get Source Income Tax: Addition towards ‘Chilling Charge’ paid to milk producers - Apart from giving such vague and unsubstantiated excuses, the appellant has not brought any material on record to justify the increase. Assessee could not justify as why huge sums of cash payments have been made to the industrial units engaged in chilling process - Additions confirmed - AT Visit to Get Source Income Tax: Levying penalty / late filing fee u/s. 234E - No fee can be levied u/s 234E in terms of section 200A, as admittedly the date of filing of TDS statement and date of intimation are much prior to 1.6.2015. - AT Visit to Get Source Income Tax: Bogus purchases - the assessee has done some undisclosed purchases, or undisclosed sales, which it is attempting to cover up by the transactions with the said bogus entries. The actual picture is known only to the assessee - Additions confirmed - AT Visit to Get Source PMLA: Prevention of Money-laundering (Maintenance of Records) Fourth Amendment Rules, 2019. Visit to Get Source Service Tax: Taxability - reverse charge - Since the appellant are not receiving any service, on the contrary, they are providing services to overseas group companies, the provision of Section 66A and Rule made there under is absolutely not applicable, therefore, the demand is also not maintainable. - AT Visit to Get Source Articles ECONOMIC SLOWDOWN, BUSINESSES, REFORMS AND GST IMPLEADING A NON SIGNATORY TO THE AGREEMENT IN ARBITRATION PROCEEDINGS Notifications Companies Law F. No. 2/1/2018-CL-V - dated 18-9-2019 - Co. Law Constitution of the Company Law Committee Customs 66/2019 - dated 19-9-2019 - Cus (NT) Exchange Rates Notification No.66/2019-Custom(NT) dated 19.09.2019 GST - States G.O. Ms. No. 43 - dated 6-9-2019 - Puducherry SGST CORRIGENDUM - Notification No. 3/2019-Puducherry GST (Rate), dated the 31st March, 2019 G.O. Ms. No. 13/2019-Puducherry GST (Rate) - dated 6-9-2019 - Puducherry SGST Seeks to amend Notification No. 12/2017-Puducherry GST (Rate), dated the 29th June, 2017 G.O. Ms. No. 12/2019-Puducherry GST (Rate) - dated 6-9-2019 - Puducherry SGST Seeks to amend Notification No. 1/2017-Puducherry GST (Rate), dated the 29th June, 2017, G.O. Ms. No. 11/2019-Puducherry GST (Rate) - dated 6-9-2019 - Puducherry SGST Specifies retail outlets established in the departure area of an international airport, beyond the immigration counters, making tax free supply of goods G.O. Ms. No. 10/2019-Puducherry GST (Rate) - dated 6-9-2019 - Puducherry SGST Seeks to amend Notification No. 11/20I7-Puducherry GST (Rate), dated the 29th June, 2017 G.O. Ms. No. 41 - dated 7-8-2019 - Puducherry SGST Re-constitute the Puducherry Authority for Advance Ruling consisting of the Members G.O. Ms. No. 40 - dated 5-8-2019 - Puducherry SGST Puducherry Goods and Services Tax (Sixth Removal of Difficulties) Order, 2019 Income Tax 68/2019 - dated 18-9-2019 - IT Central Government, specifies Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated Teller Machine Operators (WLATMO’s) after consultation with the Reserve Bank of India Money Laundering G.S.R. 669(E) - dated 18-9-2019 - PMLA Prevention of Money-laundering (Maintenance of Records) Fourth Amendment Rules, 2019. News 15th Finance Commission to visit Sikkim 16th Session of the Joint Economic Commission between India and Belgium Luxembourg Economic Union Government constitutes Company Law Committee for examining and making recommendations on various provisions and issues pertaining to implementation of the Companies Act Case Laws: GST 2019 (9) TMI 783 Maintainability of appeal - service of order - appeal dismissed on the ground that certified copy of order in original has not been appended, whereas factually original order had been appended - HELD THAT:- The learned State counsel on instructions from Shri Vijay Kumar Singh, Addl. Excise and Taxation Commissioner, Panchkula submits that Revisional Authority exercising the powers under Section 108 of Haryana Goods and Services Tax Act, 2017 has annulled impugned order while remanding back to Appellate Authority for adjudication of appeal on merits. Petition disposed off. Income Tax 2019 (9) TMI 782 Deduction u/s 80P (2) - scope of introduction of sub-section (4) - provisions of this Section applicability in relation to any Co-operative Bank other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank - if the assessee is having a valid registration u/s 8 of the KCS Act, the authorities under the IT Act have to extend the benefit of deduction provided u/s 80P , by reason of sub-section (4) thereof, to such societies - HELD THAT :- Delay condoned. Leave granted. Issue notice on the prayer for stay. 2019 (9) TMI 781 Liability to capital gains tax - dissolution of the firm as on 31st March 2002 - partnership firm deed dated 03.08.2005, is a good piece of evidence to show that the assessee firm continued to be in existence after re-constitution, that is, even after 31.03.2002 without getting dissolved - HELD THAT:- SLP dismissed. 2019 (9) TMI 780 Addition u/s 14A - Applications for condonation of delay - HELD THAT:- Petitioner submits that though the specific questions of law with reference to Section 14A of the Income Tax Act 1961 were set out in the impugned order, no finding has been recorded by the High Court on the above questions. Moreover, it has been submitted that in M/S RELIANCE INDUSTRIES LTD [ 2019 (1) TMI 757 - SUPREME COURT] [together with connected cases], this Court, by its order dated 2 January 2019, has remanded the proceedings back to the High Court. Issue notice on the applications for condonation of delay and on the Special Leave Petitions returnable in six weeks. 2019 (9) TMI 779 Transfer u/s 127 - transferring assessment of the case of the assessee from DCIT, Sangrur to DCIT, Karnal - HELD THAT:- This petition must succeed. The notice did not contain any reason. The impugned order is cryptic and there was no earthly reason why the report of the DDIT could not having been put to the petitioner. On this limited ground, we set aside the impugned order and grant liberty to the Revenue to cure the illegality. For this purpose, the petitioners (who now have access to the copy of the letter dated 14.12.2018) may file further objections within three weeks from today and the respondent would be at liberty to pass a fresh order thereof, after giving them one more opportunity of hearing 2019 (9) TMI 778 Reopening of assessment u/s 147 - nexus between the material available on the record and the A.O.'s satisfaction about escapement of income of the year under consideration - HELD THAT:- This Court by the Income Tax Appellate Tribunal Amritsar Bench in its order u/s 256(1) of the Act regarding issuance of notice u/s 148 and initiating reassessment proceedings under Section 147, is answered against the revenue and in favour of the assessee and is further held that the ITAT was not right in law in holding that the proceedings under Section 147 were rightly initiated by the A.O. Addition based document was seized or the seized document - In the light of details filed, bank account statement produced and explanation given by the appellant right from the proceedings under Section 132 (5), 143 (3) and under Section 147/148 in response to queries raised by the authorities below the impugned amount of ₹ 1,35,000/- mentioned by the brother-in-law of the assessee having received on various dates as due for return by him cannot be construed to be relating to the year in which such document was seized as it does not mention any specific date but the appellant has been able to substantiate various dates with amounts sent from time to time in earlier years. Thus we answer this question also referred for our opinion in the negative i.e. against the revenue and in favour of the appellant and hold that in the light of discussions as above and on perusal of various replies and evidence is produced as discussed in various orders of the authorities below that the ITAT was not right in law in holding that though no date of advance of loan or date of investment is available in the said letter the impugned amount of ₹ 1,35,000/- will be the year in which such document was seized or the seized document is found to be in possession of the applicant. Thus, the impugned addition so made of ₹ 1,35,000/- in the year of reference i.e. A.Y. 1988-89 cannot be upheld and the same needs to be deleted. 2019 (9) TMI 777 Undisclosed investment - difference between the stamp duty valuation and the actual purchase price - section 50C applicability - whether a presumption could have been drawn about the excess amount alleged to have been made by the appellant-assessee at the time of the purchase of the land having regard to the fact why he thought fit to pay such a huge stamp duty on a total sale consideration of ₹ 45 Lakh and odd ? - HELD THAT:- Provisions of Section 50C of the Income Tax Act cannot be applied for the purpose of making addition under Section 69B of the Act. We fail to understand why Section 50C of the Act has been brought into play having regard to the facts of the present case. It is settled law that section 50C will apply to the seller of the property and not to the purchaser of the property. Section 50C of the Act does not seem to have been invoked by the authority below for the purpose of adding the income under Section 69B of the Act. At the most, the principle of law, as discernible from the provisions of Section 50C, could be said to have been indirectly applied for the purpose of taking the income under Section 69B of the Act. There is nothing on record to indicate as to what was the price of the land at the relevant time. Even otherwise, the same is a pure question of fact. Apart from the fact that the price of the land was different than the one, recited in the sale deed unless it is established on record by the department that as a matter of fact, the consideration as alleged by the department did pass to the seller from the purchaser, it cannot be said that the department had any right to make any additions. Section 69B of the Act does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to the tax contrary to the strict provisions of Article 265 of the Constitution of India which must be taxes on income other than agricultural income . There could not have been any presumption for the purpose of making addition under Section 69B of the Act. In the result, this appeal succeeds and is hereby allowed in favour of assessee 2019 (9) TMI 776 Addition on account of provision made for the short fall of Central Sales Tax payable - Tribunal restoring the deduction claimed on interest on account of excise duty paid during the year under assessment - HELD THAT:- These questions are already decided by this Court in Sirsa Industries [ 1988 (11) TMI 38 - PUNJAB AND HARYANA HIGH COURT] Addition on account of interest on F.D.Rs on accrual basis - HELD THAT:- Question No. 2 is decided in the same terms of the order in M/S KISHAN CHAND AND CO. OIL INDS. LTD. VERSUS THE COMMISSIONER OF INCOME TAX (CENTRAL) , LUDHIANA [ 2019 (8) TMI 302 - PUNJAB AND HARYANA HIGH COURT] 2019 (9) TMI 775 TDS u/s 194C - non-filing of a statement in terms of sub-Section 7 of Section 194C read with Rule 31A - whether the assessee had filed form No.26Q, though belatedly ? - HELD THAT:- We fail to understand as to what is the apprehension in the mind of the Revenue when the Tribunal has remanded the matter to the AO to consider whether the assessee has filed form no. 26(Q) belatedly and to examine as to whether the fee has to be collected. We find that there is no ground to interfere with the order passed by the Tribunal. In CIT Vs. Valibhai Khanbhai Mankad reported in [ 2012 (12) TMI 413 - GUJARAT HIGH COURT ] held that once conditions of proviso to Section 194(C)(7) are satisfied, liability of payer to deduct taxes at source would cease and consequently, disallowance of payment of sub-contractor under Section 40(a)(ia) could not be made on the ground that the assessee had not furnished form no.15J as required under Rule 29D. We find that the said decision is of no assistance to the case of the Revenue. Assessee referred to the decision of the ITAT Jaipur in the case of ACIT Vs. Arihant Trading Co. reported in [ 2019 (3) TMI 1251 - ITAT JAIPUR ] . In the said decision it has been held that Section 194C(6) (7) are independent of each other and cannot read together to attract disallowance under Section 40(a)(ia) read with Section 194C of the Act. No substantial question of law 2019 (9) TMI 774 Addition u/s 68 - unexplained cash credit - non-compliance of notice issued u/s. 133(6) - HELD THAT:- As decided in ORISSA CORPORATION PVT. LIMITED [ 1986 (3) TMI 3 - SUPREME COURT] it is for the department to pursue a creditor particularly once the assessee had duly furnished the complete particulars of the person from whom monies have been received by the assessee. In absence of such a burden having been discharged, the AO could not have mechanically proceeded to make impugned addition in the instant case. It is a settled law that non-compliance of notice issued u/s. 133(6) of the Act to all the entities giving unsecured loan cannot be a basis to make the addition u/s. 68 . The nature of income and source of income can be examined only by the AO of the lenders and not by the AO of the assessee. In this case there is lack of enquiry by the AO to rebut the burden discharged by the assessee as no enquiries were made either from corporate entity providing unsecured loan or enquiry from AO of such corporate entity or its banker or Registrar of Companies by issuing notice u/s. 131 of the Act - we delete the addition on account of sums received as unsecured loan and erroneously held as unexplained cash credit under section 68 - Decided in favour of assessee Addition on account of alleged excess remuneration paid to the partners and disallowed by invoking clause (v) of section 40(b) - HELD THAT:- Remuneration to the working partners are duly authorized by the Partnership deed dated 1.4.2013 and such payment has been made as per clause 7 and 8 of the deed of partnership, working partners and the amount of remuneration payable and the manner of quantifying such remuneration is to be decided mutually between them from time to time. We further note that this disallowance is contrary to the principle of consistency as no disallowance made in the preceding years i.e. from assessment year 2010-11 to 2014-15 and only from the instant assessment year i.e. AY 2015-16 the addition was made which action is not tenable. This view is fortified by the decision of the Hon ble Supreme Court of India in the case of CIT vs. Excel Industries Ltd. [ 2013 (10) TMI 324 - SUPREME COURT] TDS u/s 194C - addition invoking section 40(a)(ia) - HELD THAT:- We note that since assessee is not liable to deduct TDS on in interest payment on borrowed loan and the second proviso to section 40(a)(ia) of the Act is retrospective, therefore, the provisions u/s 40(a)(ia) of the Act read with section 194A of the Act were inapplicable and as such, disallowance so made is not in accordance with law. In any case since the payee had paid the taxes on the interest paid by the assessee, no disallowance was warranted in view of second proviso to section 40(a)(ia) of the Act. Accordingly, the addition confirmed by the Ld. CIT(A) is hereby deleted - Assessee appeal allowed. 2019 (9) TMI 773 Non granting deduction u/s 80-IA - admission of additional ground - HELD THAT:- The assessee filed the letter on 24.03.2014 but the AO passed the order dated on 28.03.2014 without discussing the claim of additional ground of assessee. Subsequently, the assessee filed an appeal before the CIT(A) who dismissed this ground on the basis of this fact the same was not originated from the assessment order. Anyhow in the interest of justice, this ground is liable to be adjudicated at the end of the AO. Accordingly, we set aside the finding of the CIT(A) on all the issues and restore the issue before the AO to examine afresh by giving an opportunity of being heard to the assessee in accordance with law. Accordingly, we decide this issue in favour of the assessee against the revenue. 2019 (9) TMI 772 Rejection of Registration u/s. 12AA - trust has not commenced its activities - whether CIT (E) has erred in not granting sufficient and reasonable opportunity to the appellant and grievously erred in rejecting application under section 12AA ? - HELD THAT:- CIT(E) has denied the registration under section 12AA before the Trust starts realizing its objects. It is undisputed fact that the assessee-trust filed an application for registration u/s. 12AA - Trust was constituted by indenture of Trust Deed and it was registered with the Charity Commissioner, Ahmedabad. It is also an undisputed fact that the Trust has at the commencement stage and no activities were carried on, however, the object of the Trust were clearly established. Thus, it is premature to decide or conclude the activities of the Trust. As such, it is settled law that the denial of registration u/s 12AA is not proper when the trust is yet to start its charitable activities. The Pr. CIT (E) cannot examine the objects of the trust, which is at premature stage. Registration of the trust does not involve enquiry into the actual activities or application of funds, etc. Therefore, at this stage, the only enquiry required to be conducted was with respect to the object of the trust alone. The details called for by the Pr.CIT (E) pertained to matters that may be examined at the stage of assessment. At that stage, if the assessee were to be found to have actually engaged in any noncharitable activity, the benefit of exemption may be denied at that stage in the manner provided by the Act. In the light of above, we are of the opinion that the matter of registration under section 12AA should be set-aside to file of the Pr. CIT(E) for examination the basic facts and pass fresh order - Pr. CIT (E) would give a proper opportunity of being heard and allow the assessee to furnish any material in support of its claim. Assessee's appeal allowed for statistical purposes. 2019 (9) TMI 771 Deduction u/s 80-IA(4)(ii) - HELD THAT:- Factual submissions made before us would require re-appreciation by lower authorities since it has been stressed by Ld. Sr. Counsel that trading in bandwidth like a commodity was not permissible / possible and the assessee was providing bandwidth / internet services only and therefore, eligible to claim the deduction u/s 80-IA(4)(ii). The lower authorities have primarily gone by the assessee s submissions made during assessment proceedings as well as financial statements and reached a conclusion that the assessee was trading in bandwidth, which the assessee has not contested before us. Therefore, the matter stand remitted back to the file of learned AO, for adjudication de novo, keeping all the issues open, with a direction to the assessee to substantiate his claim. Needless to add that reasonable opportunity of being heard shall be granted to the assessee. Undisputedly, the onus would be on assessee to establish that it fulfills the eligibility conditions of Section 80-IA(4)(ii). - Decided in favour of assessee for statistical purposes. 2019 (9) TMI 770 Bogus LTCG - AO on the basis of the report of investigations done by the Revenue in Kolkatta in which one of the brokers named the respective assessee as a beneficiary of bogus LTCG or named the shares held by the company as a paper/shell/bogus company - Disallowance of exemptions claimed u/s.10(38) - HELD THAT:- The issue is restored to the file of AO for re-adjudication on identical directions as given in the case of Heerachand Kanunga [ 2018 (6) TMI 1329 - ITAT CHENNAI] . AO shall also bring on record the role of the assessee in promoting the company and relationship of the assessee with other promoters, role of the assessee in inflating the price of shares, etc. Assessing Officer concerned shall require the assessees; to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessees shall comply to the concerned AO s requirements as per law. On appreciation of all the above aspects, the Assessing Officer concerned would decide the matter in accordance with law. - Decided in favour of assessee for statistical purposes. 2019 (9) TMI 769 Exemption income u/s.10(38) - denial of natural justice - AO on the basis of investigations done by the Revenue held that the purchase and sale of those shares as penny stock, the assessees have manipulated the transactions with the brokers to convert their unaccounted income etc and hence treated the entire sale consideration as an unexplained credit and refused each of the assessee s exemption claim under section 10(38) - HELD THAT:- Assessee has not been given a fair opportunity to prove the genuineness but the assessment has been made primarily, based on the evidences collected by the Revenue in the course of the investigation conducted by them on the brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the genuineness of the transactions require re-adjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion.Thus, the AO must keep in mind that the onus of proving the exemption rests on the assessee. If the AO does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. Further, perusal of assessee s case shows that it is similar to the facts in the case of Shri Heerachand Kanunga [ 2018 (6) TMI 1329 - ITAT CHENNAI] Respectfully following the above order, on the facts and circumstances of these cases, we deem it fit to remit the issue of exemption in these appeals back to the file of the respective Assessing Officer for re-adjudication on the lines indicated above. AO concerned shall require the assessees; to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessee shall comply to the concerned Assessing Officer s requirements as per law. - Assessee s appeal is treated as partly allowed for statistical purposes. 2019 (9) TMI 768 Disallowance u/s 40A(2)(b) - diversion of income to CCCPL and from CCCPL to CCCPL s director - HELD THAT:- It appears from the records that in spite of repeated direction issued by the authorities below the assessee has failed to justify its claim by supporting evidence so as to establish that actual research work was involved in the CCCPL. MOU further does not specify the type of research work it would undertake. Documentary proof that CCCPL is competent to carry out research work as specified by MOU has been failed to be submitted by the assessee. It was further found that no asset has been shown by the CCCPL in their balance sheet for research equipment though the MOU particularly envisaged that CCCPL would render and conduct all their health care and clinical research services and engagement at CIMS. Thus in the absence of necessary infrastructure facilities to carry out research work, the authority below has declined to accept such expenditure towards clinical research work rendered by CCCPL and, therefore, the Learned CIT(A) observed that the appellant has used this mode to reduce tax incidence in the appellant company by entering into MOU of CCCPL unequivocally. We cannot accept the submissions made by the Learned Senior Counsel appearing for the assessee. We find that the fact of the instant case is entirely different from the fact available in the judgment passed by the Jurisdictional High Court. Thus this has no manner of application to the case in hand before us. Taking into consideration the entire aspect of the matter, we find that in the absence of any expenses shown by CCCPL incurred for research work or any assets to justify services rendered as research work, the order passed by the CIT(A) is just and proper and without any ambiguity in disallowing the impugned expenditure debited by the assessee as research expenditure, paid to CCCPL, treating the same as paper entry and/or bogus. Hence, assessee s this ground of appeal is dismissed. Disallowance made u/s 14A - HELD THAT:- We find that the infirmity in calculating the suo moto disallowance as made by the assessee has not been pointed out by the Learned AO. Neither the same has been taken into consideration by the first appellate authority. It is a clear position of law that the provision of section 14A r.w.r. 8D requires that to make the disallowance the books of accounts are to be considered. In the instant case, the books of accounts has not been referred by the authorities below and therefore it can be inferred that no satisfaction was recorded in terms of section 14A r.w.r. 8D of the Act. Hence we reverse the addition made by the Revenue and further direct the Learned AO to delete the said disallowance. In the result, assessee s ground of appeal is allowed. Delayed PF/ESIC contribution - HELD THAT:- Since PF/ESIC contribution u/s 2(24)(x) of the Act has been paid by the assessee even beyond the grace time, prescribed by the concerned Act, the same has been disallowed by the authorities below. Disallowance of section 14A while computing book profit u/s 115JB - HELD THAT:- AO in the instant case has made the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules for ₹ 35825/- while determining the income under normal computation of income. AO while determining the income under Minimum Alternate Tax (MAT) as per the provisions of section 115JB of the Act, has added the disallowance made under the normal computation of Income under section 14A r.w.r. 8D of Income Tax Rule for ₹ 35825/- in pursuance to the clause (f) of explanation 1 to section 115JB of the Act. However, we note that in the recent judgment passed in the case of ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB Addition u/s 40A(2)(b) - HELD THAT:- If once the income is being charged in the hands of the directors in the highest tax bracket, taxing the same in the hands of the company would amount to double taxation. In the case in hand before us the employees and/or directors has paid their tax at the highest tax bracket of 30% and therefore entire issue is revenue neutral. No justification in disallowing the income in the hands of the appellant company when it was already been taxed in the hands of the directors and employees which would tantamount to double taxation. We have further carefully considered the judgment in the matter of ITO-vs-Hemato Oncology Clinic [ 2018 (5) TMI 1684 - ITAT AHMEDABAD] wherein it has been held that the Assessing Officer could not challenge payments made by assessee to doctors, who are admittedly seasoned and reputed professionals in their fields, on the basis of what other doctors are being paid in that area of expertise. We find that the explanation of the assessee are quite reasonable and worth being accepted and we do not find any infirmity in the order passed by the CIT(A) in the present facts and circumstances of the case in deleting the disallowance - Decided in favour of the assessee 2019 (9) TMI 767 Commission paid to HUF - meaning and import of the term agent - CIT-A deleted the addition - HELD THAT:- Issue is covered in favour of the assessee by the decision of the Tribunal in assessee s own case for the assessment year 2010-11 as held that AO has not correctly understood the meaning and import of the term agent . It is not necessary that an agent receiving Commission payments has to always be a physical go-between between the principal (the Appellant in the instant case) and his/her/its customers being buyers. An agent can carry out the business of prospecting for client-buyers which would mean that many of the intended targets may not transform into buyers or may decide to purchase the items directly from the principal instead of through the agent or even without informing the agent. An advertising agent, likewise, has only a generic target segment and no customers can be asked of such agent to be specifically identified. A procurement agent, on the contrary, may have a set of sellers from whom he/she routinely contracts for purchases. AO has not been able to show that the payments have not been made to the purported agents and that these payments are not relatable to the carrying out the business and for other business purposes. The AO has merely leaped to conclusions (in the cases of Categories II, III and IV) that the seeming absence of buyers (as ostensibly evidenced by letters addressed to them returning unserved), or the negations or disavowals by such buyers of any knowledge or nexus with the agents or the inability of the Commission agents to list the actual buyers would automatically disentitle the agents of their status and rights to receive Commission payments. In the scheme set in place by the Appellant, the buyers directly transacted with her; the agents did not enroll them and therefore in most cases would not know them AO s action in disallowing the impugned expenses have been made on extremely thin and specious grounds that the buyers were not found or did not respond or disclaimed any knowledge of the agents or that the agents were not able to remember the buyers or were not able to furnish detailed particulars about them or for the reason that the Commission agents were HUFs. All of them are reasons that do not show any clear understanding about the reasons for and the manner in which the agents have been employed and engaged by the Appellant. - Decided against revenue 2019 (9) TMI 766 Association of person (AOP) - assessment of trust - HELD THAT:- In an ideal condition Trusts are created by a Settlor and the Settlor ought to contribute its assets / property in the Trust called the Trust Property for the benefits of the persons, referred to as the beneficiaries. Here there is no trust property to which the trustee needs to manage. A trustee is appointed to manage the affairs of the trust. Thus in the case of a real trust, the Settlor, Trustee and the beneficiaries would never be the same persons. In the instant case, the settler and the beneficiaries are the same and identical. This so called trust has been created for the sole motive to the benefit of the settler / contributor. AO observed that the investors comprising of two or more persons had come together for contribution of sufficient funds into an entity in order to invest in the specific entities with a sole intention to earn profits and accordingly the said entity should be construed as an Association of Persons (AOP) and not Trust. Hence the AO observed that the assessee is not entitled for exemption from tax. AO observed that the trust created herein is a special purpose vehicle for doing commercial transactions and further observed that the trust is not a revocable trust within the meaning of sections 61 to 63 of the Income Tax Act. Accordingly, AO invoked the provisions of section 161(1A) of the Act by treating the assessee as an AOP as against the status of Trust claimed by the assessee. AO observed that merely because the contributors had paid taxes in their returns with regard to the subject mentioned transactions with the assessee trust cannot exonerate the assessee trust from its taxation. The ld AO further observed that the assessee had not shown that the income earned by the beneficiaries have been offered for taxation by each of the beneficiaries in their respective returns of income at the correct rates. We find from the details of income offered by ISARC (Security Receipt Holders) for taxation as detailed in the table hereinabove during the financial yea₹ 2012-13 to 2017-18, that those Security Receipt Holders had duly considered the gains arising from realisation of acquired NPAs as their income / gains in their respective returns in the year of redemption of Security Receipts. In view of the aforesaid observations, it could be safely concluded that the trust is revocable and hence the observations made by the lower authorities contrary to this is dismissed. In any case, we find that the AO had not even bothered to deduct the purchase consideration of acquired NPAs in the sum of ₹ 5,31,09,000/- while determining the income, which had been rightly granted relief by the ld CITA. We hold that the assessee cannot be taxed as an AOP and that the shares of each beneficiaries are determinate and known and accordingly the income shall be taxed only in the hands of such beneficiaries and not in the hands of the assessee trust. Accordingly, the grounds raised by the assessee in this regard are allowed and grounds raised by the revenue in this regard are dismissed. 2019 (9) TMI 765 Exemption u/s 11 - as alleged trust applied its income for purposes other than those admissible u/s 11(2)(b) read with section 11(5) by diverting to its trustees and other specified persons - the assessee has spent money in cash for non-specified purposes, the assessee has violated the provisions of sec.13(1)(c) of the Act and the assessee has collected capitation fee - HELD THAT:- AO has not brought on record any credible material to prove that the donations were not voluntary. The AO had placed his reliance on the statement given by two persons named Shri K J Pramod and Sri Shivarame Gowda. However, the AO has not allowed the opportunity of cross examining them. Further the statements so given by them is contrary to the books of accounts, i.e., no evidence was found to show that the assessee has collected money outside the books of accounts. It is stated that all the amounts collected by the assessee has been duly accounted for in the books of account. Hence the AO could not have placed his reliance on the statements so given by them. The Ld CIT(A) has observed that the prohibition to collect capitation fee has been implemented by the Government of Karnataka under Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984. AO has not brought any material on record that any action has been taken upon the assessee under the above Act. All these facts would show that it is the AO, who has taken the view that the development fee collected by the assessee is in the nature of Capitation fee and said view can only be held to be an inference drawn by the AO on the basis of surmises and conjectures. CIT(A) has also taken support of the decision rendered in the case of Balaji Educational and Charitable Public Trust [2015 (4) TMI 342 - MADRAS HIGH COURT] wherein under identical set of facts, the Hon'ble High Court held that there is no material to show that the donations were not voluntary CIT(A) had deleted additions made by the AO and also held that the development fees collected by the assessee cannot be considered as Capitation fee. In the foregoing paragraphs, we have upheld the view taken by the CIT(A) on all the above said issues. Hence, the very foundation, based on which the AO had denied exemption u/s 11 of the Act to the assessee, has been reversed, we have no hesitation in upholding the view of Ld CIT(A) in holding that the assessee cannot be denied exemption u/s 11 of the Act. - Decided in favour of assessee. Addition of construction of building and depreciation thereon - expenses by way of cash - HELD THAT:- As per the provisions of sec.11 of the Act, the methodology adopted for computing total income of charitable institution is different from that adopted for a business concern. Both capital expenses and revenue expenses incurred towards attainment of objects of the trust or institution are treated as application of income and deducted from the income derived from the property. We have also noticed that the provisions of sec.40A(3) and 40A(3A), which prohibits business concerns to incur expenses by way of cash over and above a prescribed amount, do not apply to the assessee during the years under consideration. Hence, merely because the assessee had incurred expenses by way of cash, should not be a ground for disbelieving the expenses incurred by the assessee towards construction of buildings. Assessee has submitted before the Ld CIT(A) that the said admission was given on wrong notion on fact and law. Before the AO also, the assessee has submitted that all the expenses have been duly accounted for in the books of accounts. Accordingly, we are of the view that the assessee has established that the admission made by it was incorrect. In any case, the admission was not related to Undisclosed income, which would warrant any addition, but it was only a plea to reduce the amount from the quantum of application of income, which in the present case was construction expenses incurred on buildings. The fact of construction of buildings by the assessee has been accepted by the tax authorities, in which case, they are not justified in accepting part of expenses and rejecting part thereof only for the reason that the same has been incurred in cash. Accordingly, CIT(A) was not justified in sustaining addition to the extent of ₹ 25.00 crores merely on the reason that the assessee has accepted the same. We have noticed that the assessee has established that the admission so made by it is incorrect. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of ₹ 25.00 crores in aggregate made in AY 2010-11 to 2013-14. CIT(A) has sustained the addition to the extent of ₹ 25.00 crores, he took the view that the same may also represent inflation of construction expenses and hence depreciation claimed thereon should be disallowed. Accordingly he has directed the AO to disallow depreciation on the above said amount of ₹ 25.00 crores. The above said inference drawn by Ld CIT(A) is misplaced, since it is not the case of assessing officer at all. The AO has taken the view that the amount of ₹ 58.02 crores was not spent for the objects of the Trust. Hence the question was not related to inflation of expenses, but related to whether the expenses were incurred for the objects of the trust or not. We have deleted the addition sustained by Ld CIT(A) in the previous paragraphs. Hence, the disallowance of depreciation, being consequential in nature, would not survive on its own - Decided in favour of assessee. 2019 (9) TMI 764 TDS u/s 195 - payment of selling commission, exhibition expenses and testing expenses to various non-resident entities, without deducting tax at source - PE in India - HELD THAT:- Section 195 (1) provides that any person responsible for paying to a non-resident, not being a company or to a foreign company, any interest or any other sum chargeable under the provisions of this Act shall deduct income tax thereon at the rates in force. Therefore, what needs to be examined in the instant case is whether the payment of commission and other charges are chargeable under the provisions of this Act. In Explanation 2, it has been clarified that the obligation to comply under sub-section (1) to make deduction applies to all person resident or non-resident whether or not the non-resident has a residence or place of business or business connection in India or any other presence in any manner whatsoever in India. We therefore find that the explanation 2 to section 195 talks about the person who is making/crediting the payment rather than the person who is receiving the payment as the obligation to comply with sub-section (1) is on the person who has to deduct tax at source while making or crediting the payment to the account of the payee. The explanation provides that the obligation to deduct tax at source applies to all persons but it doesn t and cannot take away the fundamental requirement under law which is that the sum has to be chargeable under the provisions of the Act and therefore, only in a scenario, the sum is chargeable under the Act, the obligation is cast on all persons to deduct tax at source irrespective of the residential status or business connection or presence in India. We therefore find that reading of the said explanation by the lower authorities is not correct and only in a scenario, the payment is chargeable to tax, the tax is required to be deducted at source. Coming to the provisions of section 40(a)(ia) of the Act, the said section also provides that any interest, royalty, fees for technical services or other sum chargeable under this Act on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or after deduction has not been paid on or before the due date specified in section 139(1). We therefore find that both the provisions of section 195(1) as well as 40(a)(ia) of the Act talks about deduction of tax at source where the sum is chargeable under this Act. In the present case, undisputed facts are that the commission has been paid to various non-resident entities in respect of sales affected by the assessee outside of India, the services have been rendered outside of India and the payments have been made outside of India. In light of these undisputed facts, the legal proposition laid down in the aforesaid decision equally applies in the instant case and such commission payment cannot be held chargeable to tax in India. Similarly the exhibition expenses have been paid in respect of participation in various exhibitions held outside of India and even the testing charges have been paid for testing services outside of India. Therefore, these payments will not fall in the category of income which has accrued or arisen or deemed to accrued or arise in India. Further, payments have been made outside of India. Accordingly, we are of the considered view that there was no liability to deduct tax at source u/s 195(1) as these payments are not chargeable to tax and the provisions of section 40(a)(ia) cannot be invoked in the instant case. Disallowance made by the Assessing officer is directed to be deleted - Decided in favour of assessee. 2019 (9) TMI 763 Maintainability of appeal - low tax effect - monetary limit - HELD THAT:- There is no dispute as to the applicability of the Circular No. 17 of 2019, on pending appeals and, thus, tax effect involved in the appeal being less than the prescribed monetary limit of ₹ 50 Lakhs, the Department was required to withdraw this appeal or not pressed if not falling under exclusion provided in para 10 of circular No. 3/2018 as amended on 20/08/2018. Accordingly, the appeal of the Revenue is dismissed as infructuous with liberty to file application for recall, if found to be covered by the exceptions provided in Circular No.3/2018 as amended on 20/08/2018. Addition towards Chilling Charge - assessee procured milk from villagers and before processing in its factory, the milk was sent for chilling process - whether expenses are genuine and incurred wholly and exclusively for the purpose of the business of the assessee? - HELD THAT:- Assessee neither could substantiate the variation in chilling charges from ₹ 0.10 to ₹ 0.25 along with any supporting evidences nor could rebut the finding of the CIT(A). Explanation furnished by the appellant appear to be lame excuses in order to somehow justify the increase. Apart from giving such vague and unsubstantiated excuses, the appellant has not brought any material on record to justify the increase. Assessee could not justify as why huge sums of cash payments have been made to the industrial units engaged in chilling process. - Decided against assessee Disallowance for depreciation on Tetra Pack machine - as per DR this machine was received on 03/10/2005 and, therefore, it was put to use by the assessee for less than 180 days and, thus, assessee was entitled for half of the depreciation admissible for the entire year - HELD THAT:- On being specifically asked by the Bench to the assessee to submit any evidence of machinery put to use or ready to put to use before 30th September, 2005, he expressed his inability in producing any such evidence. - Decided against assessee Disallowance on account of repair and maintenance of machinery, generator running and maintenance and miscellaneous expenses - HELD THAT:- Assessee failed to rebut the finding of the Ld. CIT(A) regarding the self made vouchers made by the assessee which were not found to be verifiable. In absence of any scope of verification by the Assessing Officer of the relevant expenses claimed, a lump sum disallowance made by the Assessing Officer cannot be treated as unreasonable. Accordingly, we uphold the finding of the CIT(A) on the issue confirming addition - Decided against assessee. 2019 (9) TMI 762 Validity of reopening u/s. 148 - non-filing of Report from the Accountant as required u/s. 92E - change of opinion - HELD THAT:- A perusal of reasons recorded for reopening reveal that the AO invoked the provisions of section 148 as the assessee has not filed requisite Report in Form No. 3CEB along with the return of income for the impugned assessment year. In the absence of such Report, the return was held as invalid. AO was of the view that assessment has been made on invalid return. The fact that the assessee has not filed Report from Accountant in Form No. 3CEB was in the knowledge of Assessing Officer even at the time of making original assessment. This fact is very much evident as the Assessing Officer passed order levying penalty u/s. 271BA of the Act for non-filing of Report from the Accountant as required u/s. 92E on 25-04-2011. The assessment order u/s. 143(3) is subsequent to the order levying penalty u/s. 271BA. Thus, no new incriminating material has come to the knowledge of Assessing Officer for reopening the assessment. It is a clear case of change of opinion. The Hon‟ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] has held that invoking the provisions of section 148 r.w.s. 147 by Assessing Officer on change of opinion is not permissible. Thus, we find merit in the grounds raised by the assessee by way of application under Rule 27. - Decided in favour of assessee. 2019 (9) TMI 761 Exemption u/s 11 - charitable activity u/s 2(15) - grant received from different organization including foreign grants - scope of proviso to section 2(15) of the Act inserted w.e.f. assessment year 2009-10 - AO noted the objects and activities of the assessee society and observed that the assessee is a research-based organization carrying on research on various issues and providing consultancy on the issues as desired by their clients and held that the assessee was engaged in activities being advancement of any other object of general public utility in the nature of commercial and consultancy - CIT(A) held that the activities of the assessee were falling under advancement of any other object of general public utility but the assessee was not engaged in the activity of trade or commerce or the business thus eligible for exemption u/s 11 - HELD THAT:- In the instant case, the Assessing Officer has not able to substantiate that activity of the assessee were carried out with any profit motive. The assessee is a social science research institution founded in the year 1963. The institution apart from handling individual and group projects operates programs of research and training, namely, The Institute of Chinese Studies , The Institute for Comparative Democracy , Sarai Program on Media and Urbanism , Program on Social and Political Theory . The assessee derives its faculties from Indian Council of social science and receives Grant from government organization, including Ministry of external affairs. The research data of the assessee are used by the Election Commission of India and media for dissemination on the subjects of politics and democracy and is meant for research purposes and for non-profit and non-commercial use - as submitted that more than 90% of activities are for research purposes and only small amount of activities i.e. less than 10% are for media uses. AO has not demonstrated anywhere that fee received by the assessee are exorbitant and excessive then the cost incurred by the assessee. No error in CIT-A as relying on ICAI Vs. DGIT [ 2011 (9) TMI 77 - DELHI HIGH COURT] case holding the assessee as engaged in the charitable activity. The rule of the consistency also demand that the Revenue should not agitate this appeal, if the appeal in subsequent years on the same issue in dispute have not been agitated by the Revenue. Advance or unspent amount received for ongoing research and project work as not chargeable to tax - CIT(A) deleted the addition to income - HELD THAT:- The assessee has treated the amount received against the project as and when it has accrued to the assessee, according to the project work carried out by the assessee, which in our opinion is in accordance with law. We do not find any error in the finding of the CIT(A) on the issue in dispute and accordingly, we uphold the same. 2019 (9) TMI 760 Maintainability of appeal - monetary limit - low tax effect - scope of minimum threshold limit - HELD THAT:- Revised / enhanced minimum threshold limit of tax effect of ₹ 50,00,000/- vide aforesaid recent CBDT Circular No. 17/2019 dated 08.08.2019 is applicable not only for appeals to be filed by Revenue in future; but also for appeals already filed by Revenue in ITAT. Accordingly, in view of the aforesaid recent CBDT Circular No. 17/2019 dated 08/08/2019; the direction in aforesaid earlier Circular dated 11.07.2018 to withdraw /not press Revenue s appeal with tax effect below ₹ 20,00,000/-; is now to be read as direction to withdraw / not press Revenue s appeal with tax effect below revised / enhanced limit of ₹ 50,00,000/-. By necessary implication, therefore, all existing appeals in ITAT, having tax effect below the revised / enhanced limit of ₹ 50,00,000/-, are to be treated as withdrawn / not pressed; and are, not maintainable. We also hold, in view of the foregoing, that the relaxation in monetary limits for filing of appeals by Revenue in ITAT, vide aforesaid CBDT Circular dated 08.08.2019 shall be applicable also to the pending appeals in ITAT already filed by Revenue. It is well settled that CBDT Circulars and Instructions, which are beneficial for assessee, are binding on the authorities below. Accordingly, this appeal filed by Revenue is treated as withdrawn / not pressed by Revenue. 2019 (9) TMI 759 Disallowance u/s. 14A r.w. Rule 8D - HELD THAT:- Contention of the assessee that the provisions of section 14A of the Act are not applicable to share of profit from partnership firm since the same is subject to tax in the hands of partnership firm is decided by the Special Bench of Ahmadabad Tribunal in the case of Shri Vishnu Anant Mahajan v. ACIT [ 2012 (6) TMI 297 - ITAT, AHMEDABAD ] in favour of the Revenue holding that provisions of section 14A applies to the share of profit earned from partnership firm, following the said decision reject the contentions of the assessee. Contention of the assessee that provisions of section 14A have no application to strategic investments is also now settled by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [ 2018 (3) TMI 805 - SUPREME COURT ]. Contention of the assessee that investments were made in the M/s. Minal International FZE Sharjha an overseas company, and therefore, the provisions of section 14A would not apply to such investments - Contention of the assessee has to be examined by the AO as to whether the dividends from M/s.Minal International FZE Sharjha are taxable or tax free and accordingly the provisions have to be applied. Assessing Officer shall also decide the issue keeping in the case of Maxopp Investment Ltd. v. CIT [ 2018 (3) TMI 805 - SUPREME COURT ] and ACIT v. Vireet Investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI ]. Thus, this issue of disallowance u/s. 14A r.w. Rule 8D is restored to the file of the Assessing Officer to decide in view of the above observations, after providing adequate opportunity of being heard to the assessee. Deduction u/s. 10AA by allocation of expenses between SEZ and non-SEZ units of the assessee - contention of the assessee that assessee maintains separate Books of Accounts and the expenditure have been recorded on actual basis for both SEZ unit and non-SEZ unit - HELD THAT:- Observation of the Assessing Officer was that the assessee could not produce any evidences to show that assessee has actually incurred expenses for the particular unit. It was also the submission of the assessee that in none of the Assessment Years later to this assessment year, even in scrutiny assessments no such allocation was made restricting the disallowance u/s. 10AA. Assessee and also the observations of the Assessing Officer in the Assessment Order this issue has to be examined afresh by the Assessing Officer especially when separate Books of Accounts were maintained by the assessee for both the units. Thus, this issue is restored to the file of the AO for denovo adjudication in accordance with law. 2019 (9) TMI 758 Validity of the proceedings u/s 147/148 - assessee failed to produce the copy of certificate under section 12AA - HELD THAT:- In the present case it is an admitted fact that the A.O. while framing the original assessment under section 143(3) of the Act, vide assessment order dt. 31/01/2013 accepted that the assessee was having registration under section 12A he observed in the said order that the assessee had submitted a copy of order of the ITAT in assessee s own case for the A.Y. 2006-07 wherein the ITAT had mentioned that the assessee was registered with the CIT under section 12AA of the Act. In the present case, during the course of original assessment proceedings, it was also stated before the A.O. that the original certificate of registration was misplaced and the assessee has applied for registration afresh Claim of the assessee was that the assessee had been registered u/s 12A with the Department, the register in which the names of the charitable institution are entered lies with the Department and as to whether the assessee had been registered u/s 12A of the Act or not, could have been easily verified by the Assessing Officer from the record of the Department / from the register containing the entries of registration and from other relevant record. Assessing Officer neither during the original assessment proceedings verified the said facts from the record nor the said record has been verified before reopening of the assessment. Thus, no tangible information had come into the possession of the Assessing Officer to substantiate that the assessee was not registered u/s 12A of the Act for the assessment year under consideration. Therefore, merely on this basis that the assessee has applied for registration afresh subsequently may arise a suspicion or doubt in the mind of the Assessing Officer that the assessee was not registered u/s 12A of the Act, however, on the basis of the mere suspicion or doubt, the reopening of the assessment cannot be held to be justified, especially when, the said doubt could have been clarified by the Assessing Officer by consulting/ verifying from the Department s record. Since the reopening of the assessment for the assessment year under consideration has been made merely on assumption and without verification of the relevant fact and without any tangible information coming into the possession of the Assessing Officer that the assessee was not registered u/s 12A of the Act, the reopening cannot be held to be valid - Decided in favour of assessee 2019 (9) TMI 757 Levying penalty / late filing fee u/s. 234E - order passed u/s 200A - assessee s contention has been that such a levy of fees cannot be made u/s 234E prior to 1.6.2015, since there was no enabling provision in section 200A for raising a demand in respect of levy of fees u/s 234E - HELD THAT:- Section 234E was brought in statute w.e.f. 1.7.2012 which provides for fee for default in furnishing statements where a person fails to deliver or cause to be delivered a statement within the time prescribed under section 200(3) or proviso to sub section (3) of section 206C. Section 234E cannot be read in isolation, because it only prescribes the mode of calculation of the fee and it has to be read with the mechanism and the mode provided for its enforcement, that is, the provision which imposes the fee. The amendment made u/s 200A for levying such fee u/s 234E had only come into effect in 1.6.2015 and it cannot be held to operate retrospective because prior to the amendment there was no computation of fee for demand for the payment of fee u/s 234E which could have been made for TDS deducted for any assessment year prior to 1.6.2015. It is trite law that the provision which imposes fees or tax and imposes any kind of liability cannot be given retrospective effect, especially when statute itself provides its operation from prospective date. No fee can be levied u/s 234E in terms of section 200A, as admittedly the date of filing of TDS statement and date of intimation are much prior to 1.6.2015. Thus, for all the years impugned before us the fee levied u/s 234E is cancelled/deleted. - Decided in favour of assessee. 2019 (9) TMI 756 Addition made towards unsecured loans u/s 68 - unexplained cash credit - HELD THAT:- The gross revenue from operations for the year ended 31.3.2013 itself proves the creditworthiness of all the loan creditors beyond doubt. Hence all the allegations leveled by the lower authorities with regard to creditworthiness is devoid of any merits and deserves to be dismissed. We find that all the parties are duly assessed to income tax and assessments are framed on them by the income tax department. Hence the identity of the loan creditors stood clearly established. All the transactions are routed through regular banking channels without having any cash deposits in their respective bank accounts. Infact the AO himself had stated in his order that the sale proceeds of diamond business were credited in the bank accounts of the loan creditors which were utilized for advancing loan to the assessee. This itself goes to prove the genuineness of transactions and creditworthiness of parties beyond doubt. Hence we hold that all the three necessary ingredients of section 68 of the Act had been duly established by the assessee in the instant case. Once the assessee has furnished the complete details about the loan creditors together with their latest addresses and affidavits from directors duly notarized and confirmation from them for the loans advanced to the assessee, the onus cast on the assessee u/s 68 had been duly discharged and no addition could be made in its hands merely because the lenders fail to appear before the AO or the assessee failing to produce them before the ld AO. We hold that no addition could be made on mere presumption that the assessee routed its own cash in the form of unsecured loans without any concrete evidence to this effect We find that the directors of the lending companies had filed affidavits confirming the loan transactions before the AO which had not been disputed. Once the averments made in an affidavit are not disputed or refuted, the same are to be construed as true and correct, as held by the Hon ble Supreme Court in the case of Mehta Parikh Co. vs CIT [ 1956 (5) TMI 4 - SUPREME COURT]. We hold that the ld CIT-A erred in confirming the addition made u/s 68 of the Act in the instant case. Gross revenue from operations for the year ended 31.3.2014 itself proves the creditworthiness of all the loan creditors beyond doubt. Hence all the allegations leveled by the lower authorities with regard to creditworthiness is devoid of any merits and deserves to be dismissed. 2019 (9) TMI 755 Bogus purchases - as alleged assessee failed to prove the genuineness of the Purchasers affected with the material evidence - HELD THAT:- AO has received information from Sales Tax Department(VAT), Investigation Division, Mumbai intimating that bogus sellers having specified TIN And PAN numbers were operating. The transactions in respect of the assessee has already been categorically identified and specified in respect of the three assessment years. The said documents had been given to the assessee for his rebuttal. The assessee has failed to prove the genuineness of the Purchasers affected with the material evidence. It is very much open to the assessee to produce the concerned persons, who it has dealt with and to prove its claim. Assessee has clearly not taken that opportunity to prove that the purchases had admittedly been made from the identified firms and companies. The claim of assessee that the purchases have gone into their stock and sales have also been effected would in fact show that all is not well with the books of the assessee, most specifically Stock Register. It could also mean that the assessee has done some undisclosed purchases, or undisclosed sales, which it is attempting to cover up by the transactions with the said bogus entries. The actual picture is known only to the assessee. It is for the assessee to substantiate its claim. The assessee admittedly has failed to prove its claim before the Assessing Officer and the ld.CIT(A). - Appeals filed by the assessee are dismissed. 2019 (9) TMI 754 Unexplained cash credit u/s 68 - notices issued under section 133(6) - HELD THAT:- All the details comprising financial statements, PAN, ITRs, bank statements and confirmation of loan transactions were duly filed and even responses were received to the notices issued under section 133(6) of the Act by the AO. In our opinion, the Ld. CIT(A) has correctly passed the order deleting the said addition by taking into account various decisions of various judicial forums. Though the notices could not be served under section 133(6) of the Act but assessee has filed the additional evidences pertaining to these parties during the course of appellate proceedings which were forwarded to the AO for verification and the AO filed remand report dated 21.06.2017. In the remand report, the AO only stated that these evidences should not be accepted primarily on the ground that these were not filed during the original assessment proceedings. CIT(A) has taken a very reasoned view after taking into account of the evidences on record and reply of the assessee filed in response to the remand report. Therefore, we do not find any reason to disturb the order of the Ld. CIT(A) on this issue Sum representing the loans raised from two parties Daksh Diamond and Naman Export who were related to M/s. Bhanwarlal group, we observe that the assessee has filed all the evidences before the AO and the transactions were duly confirmed. The AO has only relied on the statement recorded during the course of search of Shri Bhanwarlal Jain under section 132(4) of the Act which also stood retracted by the said person and has no evidentiary value. In our opinion the Ld. CIT(A) has passed a very reasoned order citing various justifications and reasons for deleting the addition. Therefore we are inclined to uphold the order of ld CIT(A) by dismissing the ground no. 1 raised by the revenue. Addition u/s 36(1)(iii) - HELD THAT:- The facts in brief are that during the course of assessment proceedings no addition of ₹ 2,90,96,145/- was made under section 36(1)(iii) of the Act by the AO to the income of the assessee and therefore this ground is not arising out of the assessment order as pointed out by the Ld. A.R. and candidly admitted by the Ld. A.R. and therefore the same is dismissed. Disallowance of interest on the unsecured loans - CIT(A) deleted the disallowance by holding that since the loans raised by the assessee on which the said interest was paid have been held to be genuine and consequently the interest on the said loan was admissible as expense - HELD THAT:- Since we have already upheld the order of Ld. CIT(A) deleting the additions on account of loans raised to which this interest pertained to and therefore we dismiss the ground raised by the Revenue challenging the allowance of interest on these loans as this ground is consequential to ground No.1. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- CIT(A) has passed a very reasoned order by following the special bench decision in the case of ACIT vs. Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] wherein special bench held that while calculating the disallowance under rule 8D only those investments which yielded exempt income during the year ought to be considered for the purpose of average investments. Accordingly, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground raised by the Revenue. - Decided against revenue 2019 (9) TMI 753 Registration u/s 12AA withdrawn - Reason for withdrawing the exemption is the amendment made to section 2(15) of the Act providing that the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on and activities in the nature of trade, commerce or business - HELD THAT:- The issue before us being identical to that in the case of Khar Gymkhana [ 2016 (6) TMI 489 - BOMBAY HIGH COURT] , therefore, we hold, had no jurisdiction to cancel registration granted u/s 12A of the Act, with no change in the object or activities carried out by the assessee trust so as to hold it in-genuine and considering the Circular No.20 of 2016 issued by the CBDT stating so in very clear terms. Considering the entire facts and circumstances of the case, the Ld.CIT had no jurisdiction to cancel the registration granted to the assessee trust u/s 12A - Decided in favour of assessee Customs 2019 (9) TMI 752 Imposition of penalty - validity of SCN - SCN challenged on the ground that penalty proposed to be issued under the impugned show cause notice has already been issued on 08.06.2017 by the Assistant Commissioner, Tuticorin - Suppression of material facts - HELD THAT:- It was incumbent on the part of the petitioner to have brought to the notice of the Court all the material events that have transpired in the matter, its letters dated 06.06.2017, 08.06.2017 and 14.06.2017 and the sequence of events leading to the issuance of the impugned show-cause notice. The fact that by letter dated 08.06.2017, the petitioner had accepted the levy of penalty and informed the assessing authority that it would remit the same, that it invited issuance of show cause notice, reiterating the request on 14.06.2017 constitute relevant material facts and ought to have been disclosed for appreciation by the Court. This has not been done and it was only when these factors were referred to by the revenue counsel that they came within the knowledge of the Court. Since the petitioner has suppressed material facts leading to the issuance of the show cause notice, it does not deserve the indulgence of the Court - Petition dismissed. Corporate Laws 2019 (9) TMI 751 Company under Liquidation process - Withdrawal of amount for making payment to employees - HELD THAT:- Submission made on behalf of the office is to act on precedent of several orders earlier passed coupled with good feeling for approaching festive season. Purely by reason of several orders having been passed earlier, this application is disposed of in terms directed by last order dated 31st August, 2018, in respect of the prayers allowed thereby. Application disposed off. Service Tax 2019 (9) TMI 750 Refund of service tax - time limitation - application of time limit of one year - N/N. 14/2016-CE(NT) dated 1.3.2016 - service tax was paid in 2014, project was completed in 2018, refund claim was filing in 2015 on the ground that amount was not fully received - case of appellant is that refund claim cannot be rejected on the ground of time-bar as the notification introducing the time limit was issued only on 1.3.2016 and that the provision of services where completed prior to this date - HELD THAT:- When we go by receipt of part payment by the appellant which are 10.11.2014 and 7.7.2015, the refund claim made on 25.11.2016 is beyond the period of one year as discussed by the authorities below. If the payment received by the appellant on 21.5.2018 is to be considered, as argued by the counsel, the refund claim would be premature. The appellant do not have a fit case for grant of refund - refund rightly rejected - appeal dismissed - decided against appellant. 2019 (9) TMI 749 Taxability - reverse charge - reimbursement received toward the services of the Manpower and other Miscellaneous cost incurred on behalf of the Overseas Group Companies in connection with the supply of goods by Indian Companies to their group companies - HELD THAT:- As per the facts of the present case there is no dispute that the appellant have received the reimbursement towards salary and other miscellaneous expenses from their group companies located outside. This reimbursement was received in connection with some support service provided by the appellant, in connection with supply of goods by Indian supplier to their overseas group companies. In this transaction, it is the appellant who are providing the service to the overseas group companies. From the reading of Section 66A and Rule 2 (1) (d) (iv) of service tax Rules 1994, it is absolutely clear that the service tax liability under the above provision is only on the recipient of service in those cases when the Indian person is receiving the service from abroad and the service provider is not having any office in India - Since the appellant are not receiving any service, on the contrary, they are providing services to overseas group companies, the provision of Section 66A and Rule made there under is absolutely not applicable, therefore, the demand is also not maintainable. Demand not sustainable - appeal allowed - decided in favor of appellant. Central Excise 2019 (9) TMI 748 Classification - assessee had classified the different varieties of MSP under Chapter Sub-Heading (CSH) 11.03.11 of the Central Excise Tariff and availed exemption applicable to such goods - HELD THAT:- The applications for early hearing stand disposed of accordingly. 2019 (9) TMI 747 CENVAT Credit - input services - outdoor catering services availed at the factory - HELD THAT:- On perusal of the Larger Bench decision in the case of M/S. WIPRO LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III. [ 2018 (4) TMI 149 - CESTAT BANGALORE] , it is observed that credit has been held to be not available on outdoor catering on the ground that food is always for personal consumption - In the present facts of case, it cannot be said that the facility obtained for catering services is for a particular employee or group of employees but for all the employees working in the factory which is located in a remote location, the fact which is not in dispute. Hon ble Madras High Court in its decision dated 31.08.2017 in the case of COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL, UNIT-I, COIMBATORE AND THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, CHENNAI [ 2017 (8) TMI 1467 - MADRAS HIGH COURT] while following the Hon ble Bombay High Court s decision in case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., [ 2010 (10) TMI 13 - BOMBAY HIGH COURT] has held that the use of outdoor catering services in the factory has a nexus and integrally connected with the manufacture of final products and hence eligible for credit. The appellant is entitled to avail Cenvat credit on outdoor catering - appeal allowed - decided in favor of appellant. 2019 (9) TMI 746 Valuation - whether the discount passed by the respondent @0.70 per kg to BEST during the relevant period June 2009 to April 2010 is admissible or be added to the value as an additional consideration for the CNG sold? - HELD THAT:- The revenue disputed the correctness of the said discount only after the agreement dated 12.05.2008 was executed allowing the respondent to sale CNG to outside vehicles - the second agreement dated 12th May 2008 is a separate transaction between the respondent and BEST for allowing outside vehicles to fill CNG at various filling stations installed by the respondent in the premises of BEST on payment of certain fees by the respondent to BEST. No investigation has been conducted by the revenue to establish the allegation that the discount offered by the respondent to BEST was in lieu of all infrastructural facilities extended by BEST to the respondent. There is no reason to interfere with the aforesaid finding of the Commissioner (Appeals) as in their appeal before this forum also, no contrary evidence has been placed by revenue - appeal dismissed - decided against Revenue. 2019 (9) TMI 745 Clandestine removal - Recovery of duty short paid - manufacture and clearance of MTs ingots - HELD THAT:- It is not in dispute that the quantity of ingots manufactured and cleared without payment of duty has been determined solely on the basis of technical report/opinion of Dr.N.K.Batra - The said issue need not detain us any longer as the issue of demand of duty based on electric consumption, taking note of Dr.N.K. Batra s report, is no more res integra being considered and settled by Hon ble Jharkhand High Court in the case of Balashri Metals Pvt. Ltd [ 2016 (10) TMI 872 - JHARKHAND HIGH COURT ] and later followed in Om Shanti Steel Castings Pvt. Ltd. [ 2016 (12) TMI 93 - JHARKHAND HIGH COURT ] . In the said judgment it is observed that merely on the basis of Dr.N.K. Batra s report, demand of duty alleging clandestine manufacture and clearance cannot be sustained, as it is calculated taking only on the basis of consumption of electricity without examination of further corroborative evidences like procurement of raw material, movement of finished goods, etc. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2019 (9) TMI 744 Principles of Natural Justice - ex parte order - KVAT Act - whether Ext.P3 order satisfies the requirement of providing personal hearing to petitioner while disposing of Ext.P2 appeal or not? HELD THAT:- The petitioner, referred to the date of cancellation i.e. 3.7.2015, cannot be presumed to be doing business at the address shown in Ext.P2 appeal. The reason that in spite of affording opportunity, the petitioner did not produce books of account is untenable is liable to be set aside. It is further contended by her that all other covers sent by the department to the address shown in the memorandum of appeal were received and only an excerption to the notice sent by the second respondent is disputed. She presses for dismissing the writ petition. The order in Ext.P3 could be set aside as violative of principles of natural justice. Hence Ext.P3 order is set aside - matter is remitted to the second respondent for consideration and disposal in accordance with law - petition allowed by way remand.
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