TMI Tax Updates - e-Newsletter
September 25, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Classification of goods - HSN Code - rate of GST - Crumb rubber/granule - Uhe used/ waste tyres, made of rubber are nothing but ‘rubber and rubber goods not usable as such because of cutting up, wear or other reasons’ from which the subject goods are produced. Thus the impugned goods are squarely covered under the Heading 40.04 of the GST Tariff Act, 2017. - It is clearly seen that Powders and granules obtained from waste, parings and scrap of rubber (other than hard rubber), in this case used tyres, are covered under Tariff Heading 4004 00 00 and attract 18% IGST - AAR
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GST:
Government entity or not - Maharashtra Jeevan Pradhikaran (MJP) - MJP is constituted and established by the State Government of Maharashtra with 100% participation by way of Equity or Control to carry out the function entrusted to it by the State Government viz. rapid development and proper regularization of water supply and sewerage services in the State of Maharashtra and therefore MJP is clearly covered under the definition of ‘Government Entity’ - It is not mandated to take GST registration based on the contract with MJP, since the services rendered are Exempt service - AAR
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GST:
Classification - E-Commerce Operator or not - intends to own, develop an electronic/digital platform for booking of cabs - Appellant is liable to be registered in view of Section 24(iv) of CGST Act, 2017 - appellant is liable to pay GST as if he is the supplier of service i.e. passenger transportation services. - Value of supply will be equal to Ride charge less Discount in view of Section 15(1) & (3)(a) of CGST Act, 2017 - the services supplied in terms of passenger transportation service will be taxable at the rate of 5% under Service Accounting Code 996412 as per Scheme of Classification. - AAR
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GST:
Supply or not - transfer of business by the AAI - The subject transfer is that of transfer of going concern as an independent part. In this context, there are no merit to examine Schedule II(4)(c) CGST Act as it is limited to the transfer of business assets activity. Such attempt to vivisect the Contract renders a myopic view and runs counter to the ‘Transfer of Going concern service’ envisaged in the substance of the Contract. - AAR
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GST:
Classification of goods - Partially Coated Polyester Fabric (Knitted or Woven) or any other partially coated Fabric - The subject goods have passed all the conditionality’s placed in the HSN 5903 Chapter Heading description and the Chapter Notes - the subject goods have satisfied the guidelines specified in the Explanatory Notes to HSN 5903.- AAR
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GST:
Seeking advance ruling by misrepresenting the facts - The applicant has mis-declared at said Sr No 17 of subject GST ARA-01 Application form and further suppressed this material fact, despite being specifically enquired by us during the hearing on 30-6-21 wherein the authorised representatives of the applicant submitted that no investigation has been initiated by the DGGI, Surat on the applicant - the Advance Ruling cannot be used as a mechanism to nullify and frustrate the inquiry proceedings already initiated vide section 70(1) of CGST Act. - AAR
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GST:
Input tax credit - spending mandatory amount on CSR activities in the form of donations - whether CSR activities are in the course of furtherance of business and will therefore be counted as eligible ITC in terms of Sections 16 and 17(5) of the CGST Act, 2017? - CSR activities, as per Companies (CSR Policy) Rules, 2014 are those activities excluded from normal course of business of the applicant and therefore not eligible for ITC, as per Section 16(1) of the CGST Act. - AAR
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GST:
Governmental authority or Government Entity? - Government of Gujarat has established GSRDC as its wholly owned company and entrusted it with the development of roads and bridges. Thus, GSRDC satisfies the definition of Government Entity - thus, roads and bridges are activities entrusted to a municipality under Article 243W of our Constitution and to a Panchayat under Article 243G of our Constitution. - AAR
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GST:
Classification of goods - ‘Ammonium Sulphate’ is classifiable at HSN 310221 - GST of 5% is leviable on Ammonium Sulphate supplied for direct use as fertilizers or used in the manufacturing of complex fertilizers for agricultural use (soil or crop fertilizers) - GST of 18% is leviable on Ammonium Sulphate supply for other than fertilizer use. - AAR
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GST:
Levy of service tax - Job-work - activity of providing service of regasification of LNG owned by its customers to convert to RLNG, from its Plant - Petronet's activity of re-gasification of LNG owned by its GST registered customers amounts to rendering of service by way of Job Work - Liable to GST @12% - AAR
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GST:
Transitional Credit - carry forward/transition of CENVAT and VAT Input Tax Credit - Form GST TRAN-1 - Taxing statute and equity considerations are not natural allies. At the same time, in the context of a purely procedural requirement and transition provision, we cannot act unmindful of that consequence - if the respondents had offered a functional system, the State could not have deprived the petitioners of transition credit of CENVAT and ITC (under the repealed laws) - thus, there is no hesitation in observing that a reasonable opportunity ought to have been granted to all “registered persons”/taxpayers to submit/revise/re-revise electronically their Form GST TRAN-1/TRAN-2. - HC
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GST:
Validity of assessment proceedings - opportunity of hearing not provided - applicability of Section 75 of TN Goods and ST Act - it is adverse to the writ petitioner as it proceeds on the basis that writ petitioner has suppressed transactions and more importantly, penalty has also been levied. Therefore, the argument that the opportunity of hearing was not given as the writ petitioner, who is the person chargeable with tax, has not chosen to make a written request, does not hold water. - HC
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GST:
Classification of services - original contract work - services provided by (sub-contractors) to the main contractor pertaining to the irrigation, construction and maintenance works to the irrigation department, State of Gujarat - We find that the applicant is not a sub contractor but a sub sub contractor. The person to whom the service is supplied is specific in the Notification. Either, the service shall be supplied by main contractor to Government or the service shall be supplied by a sub contractor to the main contractor providing services to Government. We observe that the applicant does not satisfy both the conditions. - GST rate on subject supply is 18% for services supplied by the sub-sub-contractor to sub-contractor - AAR
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Income Tax:
Validity of assessment u/s 153A - No valid approval u/s 153D - In the case before us the Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible. If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day.- Approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case - AT
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Income Tax:
Reopening of assessment u/s 147 - Income accrued in India - It is also not understood as to how the appellant-Revenue can contend that the respondent-assessee does not have PE in India for the purpose of 201 proceedings in the case of LGEIL but would have a PE as far as its own taxability is concerned for the same Assessment Year. - Moreover, in view of the decision of the Apex Court, the proceedings initiated by the appellant-Revenue has become infructuous and accordingly ex debito justitiae - HC
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Income Tax:
Allowable revenue expenditure u/s 37(1) - Writing off of advance given to the Director - waiver of excess remuneration paid to the Director - The provisions of Section 37(1) clearly set out that once the proper approval has been taken the writing off advance recoverable cannot be disallowed. It is a genuine business expenses, the additions made by the AO cannot be said to be in the nature of capital expenditure, since no enduring benefit accrues or arises to the assessee from advancing loan to the MD. Thus, the same accordingly acquires character of revenue expenditure. - AT
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Income Tax:
Unexplained cash credit u/s 68 - assessee has claimed to sell the share very high as compared to Bombay Stock Exchange quoted price - Prima facie there has to be some kind of benefit to the assessee in such dubious transaction or there is some information that any unaccounted money has been converted into sale transaction and is appearing as credit in the books of assessee where such allegations are made against the assessee. If at all there is any loss then it could be in case of purchaser in this case and not the assessee. - Additions deleted - AT
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Income Tax:
Disallowance on account of depreciation on the amount written back from Capital Reserve - Determination of Cost of capital assets u/s 43(6) - The waiver of loan in the earlier year has no impact either on the actual cost u/s 43(1) or the w.d.v. u/s 43(6) for the year under consideration and further section 2(24)(xviii) also does not envelope such waiver within the ambit of `income’ for the extant year. In that view of the matter, depreciation has to be allowed on the w.d.v. of the block of Machinery at the gross value without reducing the waiver of loan therefrom. Ex consequenti, disallowance of depreciation cannot stand and is hereby deleted. - AT
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Income Tax:
TDS u/s 194C - Addition u/s 40(a)(ia) - if assessee complies with the provision of section 194(6), no disallowance u/s. 40(a)(ia) is permissible even though there is violation of provision of section 194C(7) of the act - AO has not taken any step to disprove the genuineness of the transportation expenses by not conducting any inquiry therefore simply for technical lapse u/s. 194C(7) it is not appropriate to disallow the claim of transportation expenses - Additions deleted - AT
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Income Tax:
Unexplained cash credit - unsecured loan u/s 68 - The assessee has limited means to call for elaborate information required by AO. Looking to the list of documents filed by the assessee to explain the cash credit we find that nothing more could have been possible for assessee to explain the identity and creditworthiness of the cash creditors and genuineness of the transactions. - Additions deleted - AT
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Income Tax:
Penalty u/s 271(1)(b) - default of non-compliance of the statutory notice issued under section 142(1) r.w.s. 129 - where the assessment order was finally passed u/s 143(3) and not u/s 144 of the Act due to subsequent compliance during the assessment proceedings, that would be considered as good compliance and the defaults committed earlier should be ignored and by taking a lenient view the penalty u/s 271(1)(b) of the I.T. Act 1961 should not be levied - AT
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Customs:
Classification of goods and benefit of exemption - cellular telephones - it cannot be said that the learned Tribunal has committed any error in allowing the appeals preferred by the respondents and holding that the respondents shall be entitled to the benefit of exemption in terms of serial no. 264 of the table to the Notification No.6/2002-CE - SC
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Customs:
Criminal complaint for offence u/s 132, 35 (1)(i)(A) & 135(1)(i)(C) of Customs Act - Export of restricted goods by misdeclaring as different goods - Money Laundering - Since it is an accepted position that no offence has been found to be made out against the present petitioner until now and no material so as to make such arrest is available on record till date, therefore, the present stay petition is disposed of, with a direction to the petitioner to immediately appear in person before the respondents in pursuance of the summons issued to him by the respondents and cooperate with the investigation to his best. - HC
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Indian Laws:
Seeking grant of Bail - smuggling - contraband item - Heroin - The High Court has clearly overlooked crucial requirements and glossed over the circumstances which were material to the issue as to whether a case for the grant of bail was established. In failing to do so, the order of the High Court becomes unsustainable. Moreover, it has emerged, during the course of the hearing that after the respondent was enlarged on bail he has consistently remained away from the criminal trial resulting in the issuance of a non-bailable warrant against him. The High Court ought to have given due weight to the seriousness and gravity of the crime which it has failed to do. - SC
Notifications
News
Case Laws:
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GST
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2021 (9) TMI 1067
Classification of goods - HSN Code - rate of GST - Crumb rubber/granule - HELD THAT:- Headings 40.03 and 40.04 covers reclaimed rubber in primary forms or in plates, sheets or strip, and waste, parings and scrap of rubber (other than hard rubber) and powders and granules obtained therefrom. Further, the Notes to Heading 40.04 states that “Goods of rubber (other than hard rubber) definitely not usable as such because of cutting-up, wear or other reasons” includes worn-out rubber tyres not suitable for retreading and scrap obtained from such worn-out rubber tyres. Also notes to Heading 40.04 also states that Powders and granules, obtained from such goods of such rubber (other than hard rubber) definitely not usable as such because of cutting-up, wear or other reasons” which includes worn-out rubber tyres, are covered under Heading 40.04.
This applicant is producing crumb rubber/granules from used/waste tyres and has submitted during the course of the hearing that, the waste/used tyres are not usable because they are worn out tyres due to wear and tear - the used/ waste tyres, made of rubber are nothing but ‘rubber and rubber goods not usable as such because of cutting up, wear or other reasons’ from which the subject goods are produced. Thus the impugned goods are squarely covered under the Heading 40.04 of the GST Tariff Act, 2017.
It is clearly seen that Powders and granules obtained from waste, parings and scrap of rubber (other than hard rubber), in this case used tyres, are covered under Tariff Heading 4004 00 00 and attract 18% IGST or 9% each of CGST/SGST or UTGST - the subject product namely; crumb rubber/granules falls under Heading 4004 of the GST Tariff thus attracting GST @ 18%.
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2021 (9) TMI 1066
Government entity or not - Maharashtra Jeevan Pradhikaran (MJP) - Scope of service under the agreement between MDE and MJP - work intended to be carried out by MDE qualifies for exemption as per notification 12/2017-central Tax (Rate) dated 28.06.2017 or not - requirement on the part of MDE to obtain registration under GST law - HELD THAT:- Maharashtra Jeevan Pradhikaran (MJP) clearly cannot be considered as a Central Government, State Government or Union territory or local authority - Maharashtra Water Supply and Sewerage Board (MWSSB) was established as per MWSSB Act 1976 for Rapid development and proper regularization of water supply and sewerage services in the State of Maharashtra, by the Government of Maharashtra. MWSSB was subsequently named as Maharashtra Jeevan Pradhikaran in 1997 - the Maharashtra Jeevan Pradhikaran is also seen to be under the control of the Government of Maharashtra.
MJP is constituted and established by the State Government of Maharashtra with 100% participation by way of Equity or Control to carry out the function entrusted to it by the State Government viz. rapid development and proper regularization of water supply and sewerage services in the State of Maharashtra and therefore MJP is clearly covered under the definition of ‘Government Entity’ as can be seen from the definition of a `Government Entity’ - the applicant is supplying pure services to a Government Entity and therefore as per the provisions of Notification No. 12/2017, the said services supplied by the applicant are exempted from GST.
If it is concluded from the above that the supplies made or proposed to be made by MDE to MJP qualifies for exemption then the consequent question is whether MDE requires to obtain registration under GST law? - HELD THAT:- The applicant would be liable to obtain GST registration only if it supplies taxable good or services or both, in view of Section 22(1) and in view of Section 23 (1) (a), no registration is required to be obtained by the applicant when it exclusively supplies goods or services or both that are not liable to tax or wholly exempt from tax under the CGST Act, 2017 or under the IGST Act, 2017.
It is not mandated to take GST registration based on the contract with MJP, since the services rendered are Exempt service. However, there is nothing forthcoming in the application made by the applicant that they are only rendering services to MJP, under the impugned contract, which has been held to be exempt under the provisions of Notification 12/2017 mentioned above and not supplying any other taxable goods or services or both - However, other than the exempt services supplied under the impugned contract with MJP, if the applicant is engaged in supply of any taxable supply of goods or services or both, then the provisions of Section 22 of the CGST Act would come into play and it would be liable to obtain registration on attaining/crossing the threshold limit mentioned under Section 22 of the CGST Act, 2017.
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2021 (9) TMI 1051
Seeking direction to rectify the mistake in the GSTIN allocated to the petitioner by the GSTN - benefit of transition ITC - loss in availing ITC on purchase as also its purchasers are not getting consequential benefit - HELD THAT:- Once it is undisputed that the provisional GSTIN was to be generated by the GST Network upon verification of the Email and the mobile number submitted by the petitioner, the mistake in data collection with respect to the correct PAN remains attributable to the GST Network and not to the petitioner. The mistake is in the nature of a mistake apparent from the record, inasmuch if the petitioner had got his registration under the VAT Act corrected on 16.05.2017, as claimed. It was under no further obligation to inform GST Authority about the same.
The writ petition is disposed of with a positive direction upon the respondent no. 6 to make due verification of the aforesaid fact from the Assessing Authority / erstwhile Assessment Authority of the petitioner under the UP VAT Act, 2008.
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2021 (9) TMI 1057
Seeking transfer of Writ Petitions to the Supreme Court - constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Even though learned Solicitor General insisted for transfer of cases pending before various High Courts to this Court, we are not inclined to entertain these transfer petitions, for the reason that various High Courts are already seized of the matters. In particular, in the matter before the High Court of M.P., Indore Bench, counter affidavit is already stated to have been filed.
The High Court of Madhya Pradesh, Indore Bench is requested to dispose of the Writ Petition No.9443/2020, pending adjudication before it, as early as possible and preferably within a period of two months’ time from the date of communication of this Order.
The Transfer Petitions are disposed of.
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2021 (9) TMI 1047
Violation of principles of natural justice - Filing of Form Tran-1 regarding ITC - validity of SCN which preceded the impugned order - petitioner was not given an opportunity to meet/show cause what has been put against the writ petitioner - HELD THAT:- The impugned order does not mention the provision of law under which it has been made as a caption, but there is a mention about Section 73 of TN Goods ST Act in the body of the impugned order. However, this Court is informed without any disputation or disagreement that the impugned order has been made inter alia under Section 73 of TN Goods ST Act.
There is no disputation or disagreement before this Court that Section 75 of TN Goods ST Act which is captioned 'General provision relating to determination of tax' applies to case on hand more so as adverse decision qua writ petitioner has been made.
Impugned order is set aside solely on the ground that PH which is statutorily imperative under Section 75(4) of TN Goods ST Act has not been given though the order is adverse to writ petitioner - it is made clear that no opinion or view has been expressed in this order on the merits of the matter as the impugned order has been set aside solely on the ground that PH that is statutorily imperative has not been given - petition allowed.
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2021 (9) TMI 1042
Transitional Credit - Seeking to command the respondent authorities to allow the petitioners to submit/revise/re-revise electronically, their respective declarations on Form GST TRAN-1 and GST TRAN-2 - carry forward/transition of CENVAT and VAT Input Tax Credit - whether the ITC is a vested right under the GST regime? - HELD THAT:- The right to avail ITC did not get vested on the petitioners upon their filing returns under the pre-existing laws. The petitioners were obligated to perform further act under the new laws i.e., CGST Act and the UPGST Act - to submit electronically, Form GST TRAN-1 and/or TRAN-2, before they could carry that credit to their Electronic Credit Ledger - the exact nature of the CENVAT/ITC, would always depend upon the language of the provisions and scheme of the enactment whereunder that question may arise. Therefore, though the decisions relied upon by learned Additional Advocate General do appear to lay down, by way of a principle, that ITC is not a vested right but merely a concession, at the same time, we cannot overlook the fact that those decisions arose under different laws.
It may not be empirically correct to contend that CENVAT or ITC is a pure concession as concessions do not necessarily spring from a conceptual base to tax value addition. However, that principle may be relevant only to determine the ITC arising against transactions performed after enforcement of the GST regime i.e., post 01.07.2017. It may not be true of past/earlier transactions arising under the pre-existing/repealed laws, in the context of pure transition provision.
Section 164 of the CGST Act and the UPGST Act empowers the Union and the State Governments to make Rules on matters required to be or that may be prescribed or in respect of which provisions are to be or may be made. Therefore, Rule 117 of the CGST Rules clearly appears to be a rule made to give effect to the transition provisions of the Act. It provides for filing/revision electronically, of Form GST TRAN-1 and/or TRAN-2, to obtain credit of ITC - a detailed procedure has been prescribed to submit/revise/re-revise electronically, Form GST TRAN-1/TRAN-2 with respect to CENVAT/ITC carried forward for the period ending 30.06.2017. It is only upon such Form being submitted electronically, in the manner prescribed that the right to carry forward such credit to the Electronic Credit Ledger would arise. Unless this vital procedural step is taken, the petitioner can never claim a accrual of a vested right to transition ITC.
The time limit under Section 140(1) of the CGST Act read with Rule 117 of the CGST Rules 2017 and parallel provisions under the State law (to submit Form TRAN-1/TRAN-2 electronically, within 90 days from the appointed date), was the time limit specified in or prescribed by those enactments. Therefore, even if reference to Section 140 has not been specifically made in any of the orders and notifications issued under Rule 117(1), Rule 117(1)A or Section 140A or Section 168A still, undeniably, the time limit to submit electronically Form GST TRAN-1/TRAN-2 stood extended in accordance with law, up to 31.08.2020. No contrary provision of law, either statutory or delegated, has been shown to exist as may warrant a different construction to be made to the exercise of powers made by the Commissioner CGST or of the CBIC or the Central Government, acting either on their own or on the recommendation of the CBIC or the GST Council.
In Circular dated 3 April 2018, the CBIC further recognized, there were IT related glitches on the GST Portal resulting in compliances remaining from being made by a vast section of “registered persons”. Once that difficulty was recognized to have existed on a pan- India basis, over a long duration of time, the CBIC, in its own wisdom, created a mechanism to resolve the same. Chiefly, it provided for creation of Nodal agencies to examine all such grievances of IT related glitches and to allow for extension of time (to submit GST Form TRAN- 1/TRAN-2, electronically), only in those cases where a complaint had been received by the Nodal authority and where electronic trail etc. of such failed attempt was available - the CBIC itself recognized the existence of technical difficulties in working the GST Portal over a long period of time, that too, immediately upon introduction of the GST regime. A long and burdensome transition was attempted all over the country, by all indirect taxpayers.
Looked from another perspective, the clear intent of the legislature is to grant benefit of CENVAT and ITC under the pre-existing laws, as may have been carried forward on the appointed date 01.07.2017. In such circumstances, if the GST Portal had worked seamlessly, all petitioners would have submitted/revised/re-revised electronically, their Forms GST TRAN-1 and/or TRAN-2 within the time granted - Taxing statute and equity considerations are not natural allies. At the same time, in the context of a purely procedural requirement and transition provision, we cannot act unmindful of that consequence - if the respondents had offered a functional system, the State could not have deprived the petitioners of transition credit of CENVAT and ITC (under the repealed laws) - thus, there is no hesitation in observing that a reasonable opportunity ought to have been granted to all “registered persons”/taxpayers to submit/revise/re-revise electronically their Form GST TRAN-1/TRAN-2.
Petition allowed.
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2021 (9) TMI 1041
Maintainability of petition - alternative remedy of appeal - Wrongful availment of Input Tax Credit - HELD THAT:- In the case on hand, there is nothing to demonstrate that the matter falls within these exceptions which have come to the stay and have come to known as exceptions in this arena of jurisprudence as in the case of WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI & ORS. [1998 (10) TMI 510 - SUPREME COURT]. It is also not a case where the reply of writ petitioner has not been considered. The above mentioned extracted portion of impugned order will make it clear that the reply has been considered and personal hearing has been given to writ petitioner. Therefore, there is no violation of 'Natural Justice Principles' [NJP] more so as personal hearing also has been given.
This Court deems it appropriate to hold that the captioned writ petition does not deserve to be entertained and deserve to be dismissed primarily on the ground that the alternate remedy i.e., Statutory appeal is available to writ petitioner - If the writ petitioner is so advised and if the writ petitioner chooses to file Statutory appeal, the same shall be heard by the Appellate Authority on its own merits and in accordance with law - Petition dismissed.
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2021 (9) TMI 1040
Validity of assessment proceedings - applicability of Section 75 of TN Goods and ST Act - opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- A plain, but careful reading of the sub-section (4) of Section 75 and the language in which it is couched, makes it clear that opportunity of hearing to the person chargeable with tax is statutorily imperative not only when such person makes a specific request in writing, but also when an adverse decision is contemplated against such person and these two situations are put together in sub-section (4) by connecting the two by 'or'. In other words, these two are not conjunctive and they have not been put together by using the conjunction 'and'.
It follows as a sequitur that in cases where an adverse decision is contemplated, it is statutorily imperative to give an opportunity of hearing under Section 75(4) of TN Goods and ST Act. A perusal of the impugned order in the case on hand makes it clear that it is adverse to the writ petitioner as it proceeds on the basis that writ petitioner has suppressed transactions and more importantly, penalty has also been levied. Therefore, the argument that the opportunity of hearing was not given as the writ petitioner, who is the person chargeable with tax, has not chosen to make a written request, does not hold water.
Impugned order made by the first respondent is set aside solely on the ground that there is a breach of sub-section (4) of Section 75 of TN Goods and ST Act - petition disposed off.
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2021 (9) TMI 1065
Classification - E-Commerce Operator or not - intends to own, develop an electronic/digital platform for booking of cabs - Requirement of registration under GST - GST to be levied in accordance to Section 9(5) of the CGST Act, 2017 or not - valuation of supply for passenger transportation service on which Goods and Service Tax (GST) - Rate of Tax and Service Accounting Code for the services supplied in terms of passenger transportation service - HELD THAT:- The applicant has expounded the position of law and has arrived at its conclusions.
Appellant is liable to be registered in view of Section 24(iv) of CGST Act, 2017 - appellant is liable to pay GST as if he is the supplier of service i.e. passenger transportation services.
Value of supply will be equal to Ride charge less Discount in view of Section 15(1) & (3)(a) of CGST Act, 2017 - the services supplied in terms of passenger transportation service will be taxable at the rate of 5% under Service Accounting Code 996412 as per Scheme of Classification.
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2021 (9) TMI 1064
Supply or not - supply as going concern or not - transfer of business by the AAI to the M/s. Adani Ahmedabad International Airport Limited - covered in clause 4 of schedule II of CGST Act viz-a-viz GSGST or not - scope of Entry No. 2 of the exemption N/N. 12/2017 – Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017 - levy of GST on the transfer of Existing assets (RAB), Aeronautical Assets, non-aeronautical assets and Capital work in progress by AAI - transfer of asset be treated as services or not - concession fees paid by M/s. Adani Ahmedabad International Airport Limited to AAI be treated as consideration for transfer of business or not - levy of GST on Monthly/Annual concession fees charged by the AAI - levy of GST on invoice raised by AAI for reimbursement of the salary/ staff cost on M/s. Adani Ahmedabad International Airport Limited - levy of GST on reimbursement claimed of Municipal tax, Property Tax and Water Charges by the AAI - levy of GST on transfer of spares and consumables for consideration by the AAI - rate of GST.
Whether said business arrangement between AAI and SPV is a transfer of going concern or otherwise? - HELD THAT:- Transfer of a going concern means transfer of a running business which is capable of being carried on by the transferee as an independent business in continuity without any hindrance for a foreseeable period. Such transfer of business will comprise transfer of assets for running the business. Such transfer as going concern may involve transfer of employees as requisite to carry on the business without interruption. In effect, it implies that the business will continue in the new hands with regularity and a nature of permanency - subject business arrangement between AAI and SPV merits to be covered under transfer of going concern.
Whether the transfer of business by AAI to SPV be treated as Supply under Section 7 CGST? - HELD THAT:- From the construction of the wordings in sections 18(3); 22(3) and 85(1); Schedule II(4) of CGST Act and the Rule 41(1) CGST Rule, it is found that ‘transfer of Business’ is more of an event in pursuance to a business arrangement - subject business arrangement is ‘Transfer of business of an independent part with respect to SVP International Airport’ by AAI to SPV for a period of fifty years which is a foreseeable future - subject supply is Transfer of Going Concern as an independent part with respect to the said Airport.
Whether subject supply is made for a consideration in the course or furtherance of business or not - HELD THAT:- The consideration may be one time or in installments or as per the agreed terms between AAI and SPV. In this context, the payment made by the SPV to AAI includes the estimated deemed regulatory asset base, payment made by SPV towards the estimated initial non-aeronautical investments, Concession fees, all these payments are as per the terms and conditions of the contract and are the consideration to be paid by SPV to AAI for execution of the contract - thus, from Notification 12/2017 sr no. 2, it is clear that transfer of going concern is supply of service, we hold that subject business arrangement is Supply of Service as per section 7(1) CGST Act.
Whether the transfer of business by AAI to SPV is treated as supply as going concern and covered in clause 4 of schedule II of CGST Act? - HELD THAT:- The subject transfer of business by AAI to SPV is treated as supply of going concern - AAI has not ceased to be a Taxable person as AAI has only transferred its Ahmedabad Airport business to the SPV but its other business are not transferred and for such business the AAI is a taxable person and registered under GST.
The subject business arrangement is ‘transfer of going concern service’. There are no merit to vivisect the subject Contract and examine the treatment of aeronautical assets/ non aeronautical assets/ other business assets in the Contract entered between AAI and SPV. The substance of the Contract compels us, under GST scheme of law interpretation, to classify the Subject Business Arrangement as ‘Transfer of Going concern Service’.
The subject transfer is that of transfer of going concern as an independent part. In this context, there are no merit to examine Schedule II(4)(c) CGST Act as it is limited to the transfer of business assets activity. Such attempt to vivisect the Contract renders a myopic view and runs counter to the ‘Transfer of Going concern service’ envisaged in the substance of the Contract.
Also, GST on proposed supply of spares a.nd consumables by AAI to SPV, these supplies being outside the scope of subject contract, is leviable to tax as per law.
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2021 (9) TMI 1063
Classification of goods - Partially Coated Polyester Fabric (Knitted or Woven) or any other partially coated Fabric - whether covered under relevant chapter headings (50 to 55, 58 or 60) or under Tariff Heading 5903? - HELD THAT:- Classification of goods under GST is based on HSN. The customs Tariff is based on HSN. The general Interpretative Rules are to be sequentially followed as the way to classify the goods. We are to classify within the confines of law and procedure as laid down in GST scheme of law and procedure. The Chapter notes of Custom Tariff are part and parcel of the Custom Tariff Act, 1975 which is to say, part and parcel of law enacted by the Parliament and therefore, we are obliged to follow the classification based on Chapter Notes as per law. The Explanatory notes to HSN have guidance value to classify goods. As per Rule 1 of the General Rules for the Interpretation of CTA, 1975, for legal purposes, classification shall be determined according to the terms of the headings and any Section or Chapter Notes.
The subject goods have passed all the conditionality’s placed in the HSN 5903 Chapter Heading description and the Chapter Notes - the subject goods have satisfied the guidelines specified in the Explanatory Notes to HSN 5903.
Applicability of Board Circular dated 27-11-98 - HELD THAT:- The applicant cited Board Circular dated 27-11-98 and applicant submitted that said Board Circular cannot be applied in subject matter. It is made clear that even without taking the recourse to apply the said Circular dated 27-11-98 in subject matter, we have arrived at our findings for pronouncement of our Ruling. Thus, we do not delve into the cited Madras High Court order in MADURA COATS LTD. VERSUS CBE. & C., NEW DELHI [2003 (9) TMI 98 - MADRAS HIGH COURT] which centres around the cited Circular dated 27-11-98.
The subject goods are classified at HSN 5903.
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2021 (9) TMI 1062
Seeking advance ruling by misrepresenting the facts - Classification of goods - Rate of SGST and CGST - Papad of different shapes and sizes - HELD THAT:- The DGGI initiated the Summons proceedings under section 70(1) CGST Act against the applicant, prior to the subject GST-ARA 01 Application filed. Section 70(2) of CGST Act, 2017 has deeming provision that, every such inquiry referred to in sub-section (1) shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code. Thereby we hold that subject inquiry initiated under Section 70(1) of the CGST Act 2017 by the DGGI on the applicant is a judicial proceeding.
The applicant has mis-declared at said Sr No 17 of subject GST ARA-01 Application form and further suppressed this material fact, despite being specifically enquired by us during the hearing on 30-6-21 wherein the authorised representatives of the applicant submitted that no investigation has been initiated by the DGGI, Surat on the applicant - the Advance Ruling cannot be used as a mechanism to nullify and frustrate the inquiry proceedings already initiated vide section 70(1) of CGST Act.
The applicant should bear in mind that the CGST Act has deemed this Authority to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Authority shall be deemed to be judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code - no Ruling has been pronounced by the Authority with regard to the subject application but for the said interim Admission order.
The application is hereby rejected as non-maintainable and inadmissible.
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2021 (9) TMI 1061
Input tax credit - spending mandatory amount on CSR activities in the form of donations to the Government relief funds/educational societies, civil works or installation of plant and machinery items in schools or hospitals, distribution of food kits etc - whether CSR activities are in the course of furtherance of business and will therefore be counted as eligible ITC in terms of Sections 16 and 17(5) of the CGST Act, 2017? - HELD THAT:- As per Rule 4(1) above (for the period prior to 23-1-2021), the CSR activities undertaken by the company shall exclude activities undertaken in pursuance of it’s normal course of business. As per Section 2(d) above (w.e.f. 23-1-2021), ‘Corporate Social Responsibility’ does not include activities undertaken in pursuance of normal course of business of the company. We find that the CSR activities are not activities undertaken in pursuance of applicant’s normal course of business - Section 16(1) of the CGST Act, stipulates that a registered person is entitled to take credit of input tax charged on any supply of goods or services or both, which are used or intended to be used in the course or furtherance of his business. Thus, Section 16(1) of the CGST Act bars CSR activities from input/input service.
In pursuance to Companies CSR Rules framed by the Central Government and in pursuance to wordings of Section 16(1) CGST Act, we disagree with both the applicant’s and revenue’s stand for admissibility of ITC on CSR activities. In fact, it is noted that the applicant submitted that CSR activities being undertaken by the applicant can become eligible for ITC if only it is established that such activities are in the course and furtherance of business. As per law, Section 16(1) CGST Act bars CSR activities from ITC. There are thus no merit to discuss the item wise CSR activities of the applicant.
CSR activities, as per Companies (CSR Policy) Rules, 2014 are those activities excluded from normal course of business of the applicant and therefore not eligible for ITC, as per Section 16(1) of the CGST Act.
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2021 (9) TMI 1060
Governmental authority or Government Entity? - Service of construction and development of state highway roads provided by GSRDC - whether qualify as an activity in relation to function entrusted to Panchayat or Municipality under Article 243G or 243 W respectively, of the constitution of India? - HELD THAT:- With regard to the issue that activity in relation to function entrusted to Panchayat or Municipality, the applicant was informed that this question of their application is not covered under any clauses of Section 97 (2) of the CGST Act, therefore the question does not merit to be admitted and the Ruling will be pronounced with respect to other question. The applicant agreed with the same.
Government Entity or not - HELD THAT:- We have examined the Government of Gujarat Resolution dated 20-2-99, placed before us by the applicant, whereby GSRDC was established with objective to undertake the development of bridges and roads. We find that Government of Gujarat has established GSRDC as its wholly owned company and entrusted it with the development of roads and bridges. Thus, GSRDC satisfies the definition of Government Entity - thus, roads and bridges are activities entrusted to a municipality under Article 243W of our Constitution and to a Panchayat under Article 243G of our Constitution. Therefore in such specific cases where GSRDC constructs municipal roads/bridges or village roads/bridges, it satisfies the definition of Government Authority.
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2021 (9) TMI 1059
Classification of goods - Ammonium Sulphate - product having agricultural as well as non-agricultural use - eligibility to avail the benefit of charging concessional rate of GST of 5% - outward supply of product for the purpose of agriculture - Rate of GST on outward supply of product for the purpose of non-agriculture - to be charged @ 18% or otherwise? - maintainability of application - HELD THAT:- Revenue maintains that subject application cannot be admitted. However, there are no deficiency in the said application and find it fit to be admitted.
There is specific entry for ‘Ammonium sulphate’ at CTH 310221. As per HSN Explanatory Notes, Ammonium Sulphate, whether used as fertiliser or not, is to be classified at CTH 310221 - the applicant is a wholesale supplier, as per its submission.
Thus, ‘Ammonium Sulphate’ is classifiable at HSN 310221 - GST of 5% is leviable on Ammonium Sulphate supplied for direct use as fertilizers or used in the manufacturing of complex fertilizers for agricultural use (soil or crop fertilizers) - GST of 18% is leviable on Ammonium Sulphate supply for other than fertilizer use.
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2021 (9) TMI 1058
Levy of service tax - Job-work - activity of providing service of regasification of LNG owned by its customers to convert to RLNG, from its Plant at Dahej, Gujarat - classifiable under entry (id) of Heading No. 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended vide Notification No. 20/2019-CT (Rate) dated 30-09-2019 w.e.f. 01.12.2019 or not - HELD THAT:- The subject activity of conversion of LNG into RLNG is a process undertaken by Petronet on LNG belonging to another GST Registered persons, namely M/s. Bharat Petroleum Corporation Ltd., Dahej, Gujarat (GSTIN 24AAACB2902M1ZZ), M/s. Bharat Petroleum Corporation Ltd., Maharashtra (GSTIN 27AAACB2902M1ZT), Torrent Power Ltd., Surat, Gujarat (GSTIN 24AACCT0294J1C) and Torrent Power Ltd., Bharuch, Gujarat (GSTIN 24AACCT0294J2ZB) We note that LNG is goods classified at HSN 2711. Thereby, we hold that subject activity merits to be covered at entry 'id' of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended.
Petronet's activity of re-gasification of LNG owned by its GST registered customers amounts to rendering of service by way of Job Work and merits to be covered at entry 'id' of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended, liable to CGST at 6%.
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2021 (9) TMI 1038
Classification of services - original contract work - rate of GST - Composite supply of works contract - services provided by (sub-contractors) to the main contractor pertaining to the irrigation, construction and maintenance works to the irrigation department, State of Gujarat - taxable at the rate of 12% GST or 18% GST? - HELD THAT:- The applicant is not a sub contractor but a sub sub contractor. The person to whom the service is supplied is specific in the Notification. Either, the service shall be supplied by main contractor to Government or the service shall be supplied by a sub contractor to the main contractor providing services to Government.
M/s JSIW, M/s Radhe Construction and the applicant are all taxable persons. It is only the main contractor supplying subject service to Government and the sub contractor of the said main contractor who will merit entry at sr no 3(iii) and sr no 3(ix) of said NT 11/2017-CT(R) respectively. If condition of Notification was only that composite supply of works contract to be supplied by way of irrigation works, irrespective of the recipient being Government or not, then sub-sub contractor is also eligible for said entry in Notification. But the Notification lays down the condition that supply should be provided to Government by main contractor and only sub contractor to said main contractor enjoys the benefit of being covered under cited entries of said NT. As said applicant is sub-sub contractor and supplies service to M/s Radhe sub contractor and not to M/s JSIW main contractor, the conditions of said entry 3(iii)/ 3(ix) to said Notification is not satisfied.
GST rate on subject supply is 18% for services supplied by the sub-sub-contractor to sub-contractor M/s Radhe and supply merits entry at Heading 9954, Entry No 3(ii) of Notification No.11/2017-CT(R) dated 28-6-17.
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Income Tax
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2021 (9) TMI 1037
Disallowance u/s 14A r.w.r. 8D - whether any exempt income had been earned during the financial year or not? - HELD THAT:- Neither the Assessing Office nor the Ld. CIT(A) has disputed the claim of the assessee that no exempt income was earned by the assessee during the relevant previous year corresponding to Assessment Year 2014-15, to which this present appeal pertains. On perusal of the materials on record, we find nothing contrary to claim of the assessee that the assessee had not earned any exempt income during the year. It can therefore be inferred that the assessee had not earned any exempt income during the year.
No disallowance under Section 14A of I.T. Act is attracted if the assessee has not earned any exempt income during the year. Respectfully following the aforesaid orders of Hon’ble Delhi High Court in the cases of CIT vs. Holcim India Pvt. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] and Cheminvest Ltd. Vs. ACIT [2014 (9) TMI 434 - DELHI HIGH COURT]we set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the aforesaid disallowance - Decided in favour of assessee.
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2021 (9) TMI 1036
Allowable revenue expenditure u/s 37(1) - Writing off of advance given to the Director - waiver of excess remuneration paid to the Director - HELD THAT:- Remuneration paid to the Director was approved by the Board of Directors of the assessee and the Central Government as well. The resolution has been passed by the Board of Directors for writing off advance recoverable and necessary approvals have been taken from the Central Government for waiver of recovery of excess remuneration paid to Mr. Arun Dagar. These documents were produced before the AO as well as before the CIT(A).
The provisions of Section 37(1) clearly set out that once the proper approval has been taken the writing off advance recoverable cannot be disallowed. It is a genuine business expenses, the additions made by the AO cannot be said to be in the nature of capital expenditure, since no enduring benefit accrues or arises to the assessee from advancing loan to the MD. Thus, the same accordingly acquires character of revenue expenditure. The said expense are being incurred wholly and exclusively for the purpose of the business of the assessee and hence, is fully deductable u/s 37(1) - Decided in favour of assessee.
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2021 (9) TMI 1035
Exemption u/s 11/12 - exemption was claimed through a belatedly filed revised return - registration u/s 12AA stood restored to the assessee - HELD THAT:- It is pertinent to note that the Registration u/s 12AA was granted to the assessee vide Tribunals order and same was pointed out by the assessee before the CIT(A) which was not at all considered. Since, the Registration was granted w.e.f. 30/04/2008, the claim of the assessee for Assessment Year 2012-13 & 2013-14 are valid claim for exemption u/s 11. Therefore, the appeal of the assessee is allowed.
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2021 (9) TMI 1073
Addition u/s 69C - voluntarily disclosures during post search investigation proceedings which was not disclosed in the return of income filed u/s 139(1) - partner of the assessee firm in his statement made u/s 131(1A) had surrendered an amount on account of any other income/expenditure or investment of the firm and its partners not found recorded in the books of account for the period 01.04.2010 to 14th December, 2016 - AO while making the addition has also observed that the assessee had not disclosed the above amount in his return of income, the retraction letter filed vide affidavit dated 15th October, 2018 was at the fag end of the assessment proceedings and the assessee did not file any evidence to prove the bona fide on its part - HELD THAT:- It is an admitted fact that apart from the statement recorded u/s 131(1A) of the IT Act surrendering an amount of ₹ 25 lakhs for the period from 01.04.2010 to 14th December, 2016 on account of any other income/expenditure or investment in the firm and its partners not found recorded in the books of account no other investments, cash or any other material was found which is unexplained. A perusal of the assessment order as well as the order of the CIT(A) shows that no material pertaining to the assessee was found during the search on 15th December, 2016 showing the existence of any unexplained investment or income or expenditure pertaining to the period from 01.04.2010 to 14th December, 2016.
Hon’ble Supreme Court in the case of CIT vs. Mantri Share Brokers (P) Ltd.[2018 (7) TMI 200 - SC ORDER] has held that no addition u/s 69B can be made in the hands of an assessee where except statement of the Director of the assessee company offering additional income, there was no other material either in the form of cash, bullion, jewellery or document or in any other form to justify such additional income. Accordingly, the SLP filed by the Revenue against the decision of Hon’ble Rajasthan High Court was dismissed.
Similarly, the Hon’ble Allahabad High Court in the case of CIT vs. Dilbagh Rai Arora [2019 (3) TMI 1006 - ALLAHABAD HIGH COURT], has held that merely because during search the assessee surrendered an amount in stipulation that details of the same would be given in due course of time, but, no such assets were ever found/identified by the authorities, no addition could be made to assessee’s income.
Since, in the instant case, admittedly, other than the statement of the partner recorded u/s 131(1A) of the Act offering additional income there was no other material found in the form of cash, bullion, jewellery or document in any other form or asset or unexplained expenditure to justify the said additional income, no addition u/s 69C could have been made by the AO - Decided in favour of assessee.
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2021 (9) TMI 1072
Exemption u/s 11 & 12 - AO has taken the view that the “Gross receipts excluding corpus donation” shall constitute the income of trust or institution - HELD THAT:- The concept of “income” has to be understood in terms of sec.2(24) and other provisions of the Act. Hence, the view expressed by the AO that the “Gross receipts excluding corpus donation” shall constitute the income of trust or institution is contrary to the provisions of Income tax Act. The “total income” has to be computed in the hands of a charitable trust in accordance with the provisions of sec.11 to 13 of the Act and the same also satisfies the definition of “total income” given u/s 2(45) of the Act.
Assessed maturity proceeds of Fixed deposit as income of the assessee - A capital receipt cannot be subjected to tax except under the authority of law. In any case, what was received by the assessee on maturity of fixed deposit is the maturity proceeds of the amount deposited by it earlier. The interest earned on the said fixed deposit shall constitute income in the hands of the assessee. Accordingly, maturity proceeds of fixed deposit cannot constitute income in the hands of assessee under any count. Hence the Ld CIT(A) was not justified in confirming assessment of the maturity proceeds of fixed deposit as income of the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to maturity proceeds of fixed deposit.
Certain fixed assets as application of income - AO allowed an aggregate amount of investment in fixed assets as application of income - We do not find any infirmity in the decision rendered by Ld CIT(A) on this issue. The assessee has claimed the expenditure of ₹ 7,29,227/- referred above in the Income and Expenditure account. Hence it cannot again be allowed as application of income. With regard to remaining three items, the assessee has not furnished any detail before us also and further the assessee has not proved that they are in the nature of capital expenditure resulting in acquisition of any asset. Accordingly we confirm the order passed by Ld CIT(A) on this issue.
Rejection of Form no.10 filed by the assessee for accumulation of income u/s 11(2) - During the original assessment proceedings, it may be the case that the assessee has not filed Form no.10 before the AO. However, it cannot be said that the same situation/position prevailed during second round of proceedings also. We noticed that the assessee has applied for condonation of delay before Ld CIT and the same was rejected by Ld CIT. The said fact has been noticed by the AO in the original assessment order also. Hence the copy of petition filed by the assessee along with Form no.10 is very much available with the AO during second round.
The year under consideration in this appeal is AY 2005-06, i.e, prior to AY 2016-17. Accordingly, we are of the view that the Form No.10 already filed by the assessee should have been considered by the AO for the detailed reasons discussed above. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to consider Form No.10 filed by the assessee and examine the claim made u/s 11(2) in accordance with law.
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2021 (9) TMI 1034
Unexplained cash credit u/s 68 - assessee has claimed to sell the share very high as compared to Bombay Stock Exchange quoted price - as per revenue it is not a genuine share transaction; and merely because transaction was through banking channel does not prove the genuineness of the transaction and the address of the company who has remitted the amount could not be located by the postal authorities at the given address - HELD THAT:- The apparent transaction fully supported by documentary evidences cannot be disbelieved merely on some hypothetical premise that why someone will buy a share at such a low price. There is no gain which has accrued to the assessee nor there any big loss, except for minor cost of indexation in computation of capital gains. We agree with the contention of the Ld. Counsel that merely because the speed post sent by the AO to the purchaser company could not be served that does not mean said company is a non entity or nonexistent especially when under the statutory record and the records of Registrar of companies it was still active and was complying with all the statutory requirements under the Companies Act.
The bank statement clearly reveals that the money has been received through RTGS from the bank account of the purchaser and duly confirmed by the purchaser company who has given confirmation letter filed before the AO and also placed before us. Apart from that, the sale bill and the copy of share certificates clearly show that the shares which were possessed by the assessee had duly been sold to the said party and it is not the case of the AO that these shares are still lying with the assessee.
Without any adverse material or inquiry on record that purchaser is non genuine or purchaser has stated anything against the assessee or it has been found in any of the inquiry that the transaction is not genuine. Prima facie there has to be some kind of benefit to the assessee in such dubious transaction or there is some information that any unaccounted money has been converted into sale transaction and is appearing as credit in the books of assessee where such allegations are made against the assessee. If at all there is any loss then it could be in case of purchaser in this case and not the assessee. Accordingly, we do not find any justifiable reason for confirming the addition - Decided in favour of assessee.
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2021 (9) TMI 1033
Addition u/s 36(1)(iii) - assessee has diverted its interest bearing funds towards non-interest bearing advances to a related concern - CIT(A) upheld the action of the AO disregarding the argument of the assessee that loan had been advanced on account of commercial expediency - HELD THAT:- Hon’ble Bombay High Court in the case of CIT vs. Reliance Communications Infrastructure Ltd.[2012 (5) TMI 160 - BOMBAY HIGH COURT] has held that where the assessee, for furthering its business had utilized borrowed funds for making investments in its subsidiary company and for making interest free advances to a related company, no disallowance of interest paid on borrowed funds could be made
Also in the case of Hero Cycle [2015 (11) TMI 1314 - SUPREME COURT] has held that once it is established that there is nexus between expenditure and purpose of business, Revenue cannot justifiably claim to put itself in the arm chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case.
Where interest free advances made to a wholly owned subsidiary company, no disallowance of interest paid on borrowed fund could be made. Since, in the instant case, admittedly, the assessee has extended funds to its wholly owned subsidiary company for the purpose of business, therefore, in view of the decisions cited supra, I hold that no interest paid on borrowed funds could have been disallowed u/s 36(1)(iii) - Decided in favour of assessee.
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2021 (9) TMI 1032
Disallowance of depreciation - acquisition of the intellectual property asset and claimed depreciation @ 25% treating it as intangible capital asset - HELD THAT:- As informed that the revenue did not file any appeal against the order of Ld. CIT (A) in the first year i.e., in AY 2012-13. However, looking to the fact that since in this year the assessee is allowed for depreciation on WDV brought over, then an earlier position has been accepted and attained finality, then depreciation cannot be disallowed in the subsequent year. Once the depreciation has been allowed in the first year of capitalisation of expenditure, thereafter there is no basis for disallowing the consequential benefit on WDV. Accordingly, this ground raised by the revenue is dismissed.
Disallowance of 14A - Assessee argued AO without recording any satisfaction as to what was the exempt income and the computation of disallowance made by the assessee is not correct - CIT(A) had restricted the disallowance to the amount of exempt income following the decision of earlier years and the judgment of Hon’ble Delhi High Court - HELD THAT:- Since the aforesaid decision is based on the principle laid down by the Hon’ble Jurisdictional High Court, therefore, we do not find any infirmity in the finding of the Ld. CIT(A) and the same is confirmed.
Disallowance on account of club expenditure - HELD THAT:- AO has disallowed the club services and these expenses holding that it is not related to the business activities of the assessee. Ld. CIT (A) relied upon the judgment of Hon’ble Supreme Court in the case of CIT vs. United Glass Mfg. Co. Ltd. [2012 (9) TMI 914 - SUPREME COURT]. and the earlier year Ld. CIT(A) order has deleted the said disallowance. We find that this issue is decided in favour of the assessee company by the order of the Tribunal in the appeal for the assessment year 2011- 12. Accordingly this ground raised by the revenue is dismissed.
Disallowance on account of late payment of ESI and PF - CIT-A deleted the addition - HELD THAT:- Once the payments have been made on or due date of return of income then we do not find any infirmity in the aforesaid finding of the Ld. CIT(A). Accordingly this ground of the revenue is dismissed.
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2021 (9) TMI 1031
Addition u/s 14A r.w.s. 8D - assessee has deficit of own funds for application towards investments in income exempt from tax - HELD THAT:- Hon’ble jurisdictional High Court in the case of Biocon Limited [2021 (2) TMI 112 - KARNATAKA HIGH COURT] wherein it was held that when there is exempt income, there cannot be any disallowance u/s 14A of the Act - it means that disallowance u/s 14A of the Act should be limited to the exempt income - we direct the A.O. to disallow the amount made u/s 14A of the Act to the extent of exempted income only as decided by the Tribunal in assessment year 2014-2015.
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2021 (9) TMI 1071
Disallowance towards prior period expenditure u/s 37 - CIT(A) upheld the action of the AO by holding that the assessee had not submitted any clarification on this issue or submitted any evidence to prove that this expenditure should have been allowed - HELD THAT:- As decided in OCIMUM BIO SOLUTIONS INDIA LIMITED [2021 (6) TMI 526 - ITAT HYDERABAD] detailed discussions have been fair enough in not disputing this clinching crystalisation aspect. Coupled with this, the assessee has been assessed at the same rate all along - the impugned prior period expenditure disallowance in such a case ought not to be made as it is a revenue neutral instance only. We adopt the same reasoning herein as well and direct the Assessing Officer to delete the impugned disallowance. - Decided in favour of assessee.
Disallowance u/s 43B - assessee did not produce evidence for payment of statutory liabilities as per balance sheet before the due date of filing the return of income - CIT(A) confirmed the disallowance on the ground that even before him the assessee failed to produce the evidence for statutory of liabilities - HELD THAT:- The law is settled on this issue if the assessee has paid the statutory liabilities before the due date of filing of return income u/s 139(1) of the Act, no disallowance is warranted. Therefore, we remit this issue to the file of the AO with a direction to examine whether the assessee has paid the aforementioned statutory liabilities within due date for filling return of income U/s 139(1) , if it is found in order , allow the claim of the assessee. The assessee is directed to substantiate its claim by way of documentary evidence that the same are paid before the due date of filing of return of income. Accordingly, grounds raised allowed for statistical purposes.
Addition towards miscellaneous expenses - As assessee is following mercantile system of accounting, prior period expenditure cannot be allowed - AR submitted that it was a product development expenditure incurred earlier and allowable as per section 35D - HELD THAT:- We find that nowhere from the orders of revenue authorities that the earlier year expenditure has been disallowed. Once the deduction claimed by the assessee is accepted, in subsequent year it cannot be denied. See Handy Waterbase India (P.) Ltd [2021 (4) TMI 1017 - ITAT CHENNAI] - Decided in favour of assessee.
Addition u/s 40(a)(ia) - assessee failed to submit the proof of deduction of TDS - as argued the expenditure was not shown payable in the books of account by the Balance sheet date, the disallowance ujs.40(a)(ia) of the Act cannot be made applicable - HELD THAT:- As relying on case of Ramesh Gelli [2019 (4) TMI 2015 - ITAT HYDERABAD] we hold that without treating the assessee as ‘an assessee in default’ the disallowance u/s 40(a)(ia) should not be made. Therefore, we set aside the order of the CIT(A) and direct the AO to delete the additions made u/s 40(a)(ia) of the Act. Thus, the grounds raised on this issue are allowed.
Addition u/s 36(i)(va) - assessee had not paid the employee contribution to PF before the due date of the relevant Act - HELD THAT:- As it is a settled position of law that if the contributions are paid before the due date of filing return u/s 139(1) of the Act, no disallowance is warranted. The authorities below made the addition in the absence of proof of making payment by the assessee before the due date of filing of return - as in CIT VS. Aimil Ltd. & Ors. [2009 (12) TMI 38 - DELHI HIGH COURT] has held that if the employees’ share of contribution is paid before the due date of filing the return u/s 139(1) no disallowance can be made - we direct the assessee to furnish the proof of payment before the AO and the AO is directed to examine whether the assessee has paid before the due date of filing of return, If so, allow the assessee’s claim.
Addition towards investment written off debited to P&L Account - assessee has not furnished any evidence to substantiate its claim that the above Income was offered in earlier years - HELD THAT:- On perusal of the financial statement as per Note No. 12 under the account head “non-current investments, there is a closing balance as on 31/03/2012 is ₹ 26,11,26,524/- and as on 31/03/2013 the closing balance is ₹ 20,89,21,219/-, the net difference is ₹ 5,22,05,305/-, which has been written off during the year and it is an investment in subsidiary. As relying on own case [2015 (5) TMI 897 - ITAT HYDERABAD] in order to examine the issue and to give one more opportunity to assessee to substantiate the claim, matter is restored to the file of AO with a direction to examine the factual aspect of the contentions of assessee and then decide whether the amount can be allowed as revenue expenditure or not as per the provisions of Act. For this purpose, this issue is also restored to the file of AO and Grounds raised on this issue are accordingly considered allowed for statistical purposes.
Addition towards capital work in progress written off - CIT(A) confirmed the addition observing that the assessee failed to substantiate its claim by way of documentary evidence - HELD THAT:- In assssee’s own case for AY 2009-10 [2015 (5) TMI 897 - ITAT HYDERABAD]whether capital work in progress can be reduced or not was not an issue before the AO and this aspect was not examined at all. Since the AO put it to CIT(A), with reference to claim And capital work in progress reduced in the computation, which the Ld. CIT(A) directed to be enhanced by an amount of ₹ 6,75,96,165/- , that too without giving opportunity to assessee as contended, we are of the opinion that this capital work in progress issue also requires re-examination. AO is directed to take the revised computation filed by the assessee and determine the exact amount claimed by assessee and why this claim was made and whether the claim can be allowed as per the provisions of the Act - Thus following the above decision, we remit the issue to the file of the AO with a direction to decide the issue. - ground raised on this issue are treated as allowed for statistical purposes.
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2021 (9) TMI 1050
Reopening of assessment u/s 147 - Income accrued in India - all AEs of LG Korea had PE in India in the form of LGEIL - HELD THAT:- Admittedly, in one of the proceedings filed by the LGEIL challenging the order passed under Section 201(1) of the Act for Assessment Years 2005-06 to 2010-11, CIT(A) vide consolidated order dated 4th September, 2018 held that none of the AEs, apart from LG Korea, had PE in India. The said order has not been appealed against by the Department and hence the finding has become absolute.
It is also not understood as to how the appellant-Revenue can contend that the respondent-assessee does not have PE in India for the purpose of 201 proceedings in the case of LGEIL but would have a PE as far as its own taxability is concerned for the same Assessment Year.
This Court is of the opinion that if the present appeal is entertained, it would amount to sitting in an appeal over the judgment and order passed by the Supreme Court in [2018 (1) TMI 1610 - SUPREME COURT]
This Court is of the opinion that in view of subsequent events post issuance of re-assessment notice in the present case, namely, the Supreme Court judgment in [2018 (1) TMI 1610 - SUPREME COURT] the proceedings initiated by the appellant-Revenue has become infructuous and accordingly ex debito justitiae, it is the duty of the Court to take such action as is necessary in the interest of justice, which includes disposing of infructuous litigation [See: Shipping Corpn. of India Ltd. v. Machado Bros. and Ors., [2004 (3) TMI 799 - SUPREME COURT].
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2021 (9) TMI 1049
Stay of passing of final/draft assessment order pursuant to the AAR Ruling [2018 (6) TMI 618 - AUTHORITY FOR ADVANCE RULINGS, NEW DELHI] - HELD THAT:- This Court is of the view that till the present proceedings are disposed of it would not be appropriate to pass assessment orders pursuant to the impugned AAR Ruling dated 06th June, 2018 especially when the tax is being fully deposited by the petitioner.
Following the principle of consistency, this Court clarifies that the stay order dated 12th October, 2018 as made absolute on 5th August, 2019 applies to all assessments of the petitioner-applicant which will be consequent to the AAR Ruling [supra] till the disposal of the present writ petition. It is clarified that by virtue of the present interim order, the respondents shall be entitled to the benefit of Explanation 1(ii) of Section 153 of the Income Tax Act.
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2021 (9) TMI 1030
Rectification of mistake u/s 154 - CIT(A) has passed a combined order for AY 2013-14 and 2014-15 but has only dealt with AY 2013-14 and has failed to mention/adjudicate issues raised in AY 2014-15 - addition made on account of deemed rental income in respect of the vacant flat - HELD THAT:- As it is evident that Ld.CIT(A) has failed to adjudicate issues raised for AY 2014-15. Hence, in the interest of justice, we remit the issue to the file of Ld.CIT(A) to pass a speaking order on the issues related to this appeal, which were raised before him but have not been adjudicated by him. Needless to add, assessee should be granted adequate opportunity of being heard. Appeal by the assessee stands allowed for statistical purposes.
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2021 (9) TMI 1070
TP adjustment made towards brand development services - brand fees receivable from its AEs towards enhancement of brand value of assessee parent company - HELD THAT:- An identical issue has been considered by Tribunal in assessee’s own case for the assessment year 2013-14 [2021 (9) TMI 1013 - ITAT CHENNAI] wherein the Tribunal held that learned TPO as well as learned DRP were erred in making transfer pricing adjustments towards brand services by adopting Spearman’s Rank Correlation method and concluded that there is positive accretion between brand value and market capitalization of HMC Korea and hence, directed the AO/TPO to delete transfer pricing adjustment made towards brand development services - Thus we direct the AO/TPO to delete transfer pricing adjustment made towards brand development charges.
Disallowances u/s.14A r.w.r 8D - exempt income earned - HELD THAT:- An identical issue has been considered by Tribunal in assessee’s own case for the assessment year 2013-14[2021 (9) TMI 1013 - ITAT CHENNAI] wherein the Tribunal by following the decisions of Pr.CIT vs. State Bank of Patiala,[2018 (11) TMI 1565 - SC ORDER] And Marg Ltd., [2020 (10) TMI 102 - MADRAS HIGH COURT] directed the AO to restrict disallowances u/s.14A of the Act, to the extent of exempt income earned for the impugned assessment year - Thus we direct the AO to restrict disallowance u/s.14A to the extent of exempt income earned for the impugned assessment year.
Disallowance of depreciation on capital subsidy - assessee has treated subsidy received from SIPCOT as capital receipt and did not reduce the same from cost of assets, as it was not directly or indirectly used to purchase any asset - As per AO subsidy was directly or indirectly used to purchase of asset and as per explanation (10) to section 43 the same needs to be deducted from cost of assets and consequently, reworked depreciation by reducing amount of subsidiary and disallowed a sum - HELD THAT:- As decided in own case [2021 (9) TMI 1013 - ITAT CHENNAI] considering nature of subsidy has allowed claim of the assessee by observing that for earlier years, the CIT(A) has allowed claim of the assessee and the AO has accepted decision of the CIT(A) and deleted additions, while passing order giving effect to the order of the CIT(A). Therefore, consistent with the view taken by the coordinate Bench, we direct the AO to delete addition made towards disallowance of depreciation on capital subsidy received from SIPCOT.
Disallowance u/s.43B(c) in respect of performance incentive paid to employees - As argued said payment is neither bonus nor commission and thus, same cannot be brought within the ambit of provisions of section 36(1)(ii) r.w.s.43B(c) - HELD THAT:- As decided in own case [2021 (9) TMI 1013 - ITAT CHENNAI] tribunal has held that payment made to an employee which is in the nature of bonus or commission for services rendered is covered u/s. 36(1)(ii) of the Act, and thus, if such payment is not made on or before due date of filing of return of income u/s.139(1) of the Act, then same cannot be allowed as deduction, as per section 43B(c).
Addition towards VAT incentive received from Government of Tamil Nadu - assessee has treated above incentive as revenue receipt both for its books of account and its tax returns - during the course of assessment proceedings, the assessee has raised a fresh claim to treat incentive as capital receipts not chargeable to tax AND AO has not adjudicated fresh claim made by the assessee - HELD THAT:- We find that the Tribunal had considered an identical issue for assessment years 2011-12 & 2013-14 [2017 (4) TMI 1193 - ITAT CHENNAI], where the issue has been remanded back to the file of AO to consider the issue denovo on merits in accordance with law. Facts being identical for the year under consideration, by following the decision of Tribunal in assessee’s own case for assessment years 2011-12 & 2013-14, we set aside the issue to file of the AO and direct him to reconsider the issue in accordance with law.
Deduction towards education and secondary education cess u/s.37(1) - HELD THAT:- As in assessee’s own case for assessment year 2013-14 in [2021 (9) TMI 1013 - ITAT CHENNAI] wherein the Tribunal held that there is merit in the additional ground filed by the assessee requesting deduction for education cess & secondary and higher education cess as business expenditure deductible u/s.37(1) of the Act and had set-aside the issue to the file of the Assessing Officer - issue emanates from additional grounds of appeals filed by the assessee, we set-aside the issue to file of the AO to re-examine the issue as per the directions given by the Tribunal for the assessment year 2013-14 and also direct him to follow the ratio laid down in the case of CIT vs. Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT].
Characterization of Income - revenue or capital reciept - amount received from Focus Market Scheme to be treated as capital in nature and exclude from total income - HELD THAT:- Tribunal in assessee’s own case for assessment year 2013-14 [2021 (9) TMI 1013 - ITAT CHENNAI] wherein the Tribunal held that duty credit scrips received from Govt. of India under Focus Market Scheme is revenue in nature - we are of the considered view that subsidy received from Govt. of India under Focus Market scheme cannot be considered as capital in nature and hence, we reject ground taken by the assessee.
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2021 (9) TMI 1026
Disallowance on account of depreciation on the amount written back from Capital Reserve - Determination of Cost of capital assets u/s 43(6) - assessee submitted that write back of the capital creditor was made in the A.Y. 2006-07 and it had no relation with the year under consideration - Depreciation on the w.d.v. of the block of Machinery at the gross value with or without reducing the waiver of loan therefrom - AR contended that the `actual cost’ of an asset once determined in the year of purchase cannot be altered in a later year and hence even the Explanation 10 cannot be triggered in a later year so as to reduce the actual cost with any amount other than sale proceeds of the assets - HELD THAT:- A reading of the proviso to section 36(1)(iii) in juxtaposition to the Explanation 8 to section 43(1) makes it discernible that any interest paid on capital borrowed for acquisition of an asset till the date such asset is first put to use is not allowable as deduction but is to be treated as a part of its actual cost. Suppose an asset is purchased in the month of February and is actually put to use in May with the year ending on 31st March, interest on capital borrowed for the purchase of the asset from the date of purchase in February to the year ending in March and from the beginning of the next financial year in April up to the putting it to use in May is required to be taken as part of `actual cost’ of the asset. Thus, it is graphically clear that the interpretation suggested by the ld. AR for restricting the modification of the `actual cost’ of an asset only to the year of its purchase does not sound well.
One cannot reduce the amount of depreciation on a part of the value of the block of asset without correspondingly reducing the w.d.v. of the block of assets as per a manner known to law. Presently, we are confronted with a situation in which the waiver took place in the year ending 31.3.2006. AO did not reduce the amount of waiver from the value of block of asset for that year and allowed the gross value of the block to attain finality. The position continued as such in later years as well when the assessee kept on claiming depreciation on ₹ 40 after giving a similar Note in the Final accounts. In the year ending 31.3.2011 under consideration, no event activating either section 43(6) or the opening part of section 43(1) or the Explanation 10 has happened, which could have disturbed the w.d.v. or the actual cost so as to warrant reduction in the value of block of asset and the consequential depreciation thereon.
The logic behind section 2(24)(xviii) is simple and clear that if the assessee has received any subsidy or grant or waiver or concession or reimbursement etc. in respect of an asset, which is otherwise a capital receipt and further that the same cannot be reduced from the actual cost of the asset or the w.d.v., then it should be subjected to tax as an income of such a year. This provision runs on parity with section 41(1) of the Act, which provides for taxation of remission or cessation of a trading liability. One thing which is common to both – sections 2(24)(xviii) and 41(1) – is that the taxability takes place in the year of receipt of waiver or concession and not any other year. It is further relevant to accentuate that section 2(24)(xviii) has itself been introduced from the A.Y. 2016-17. As such, it can have no application either to the A.Y. 2003-04 when the Machinery was purchased or to the A.Y. 2006-07 when the waiver of loan was received or the year in appeal.
The waiver of loan in the earlier year has no impact either on the actual cost u/s 43(1) or the w.d.v. u/s 43(6) for the year under consideration and further section 2(24)(xviii) also does not envelope such waiver within the ambit of `income’ for the extant year. In that view of the matter, depreciation has to be allowed on the w.d.v. of the block of Machinery at the gross value without reducing the waiver of loan therefrom. Ex consequenti, disallowance of depreciation cannot stand and is hereby deleted. - Decided in favour of assessee.
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2021 (9) TMI 1025
TP Adjustment - determination of Arm's Length Price (ALP) in respect of an international transaction of rendering Information Technology enabled Services (ITeS) by the assessee to its Associated Enterprise (AE) - US AE transactions and non-US AE transactions - Appellant prays for the application of the mark-up agreed in the Mutual Agreement Procedure with respect to the international transaction of provision of Information Technology enabled Services ('ITeS') to the Associated Enterprises ('AEs') based in the United States of America ('US') to the international transaction of provision of ITeS to the AEs based outside the US, which amounts to less than 6% of the total revenue - HELD THAT:- In GLOBAL E-BUSINESS OPERATIONS P. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -11 (3) , BENGALURU [2017 (1) TMI 1618 - ITAT BANGALORE] remanded the issue to the TPO for considering afresh. The Tribunal reasoned that the percentage of transaction with the AE for which MAP proceedings were concluded and the transactions with the other AEs were not available and only if the percentage is less, the plea of the Assessee could be accepted.
In the light of the findings available with regard to percentage of US AE transactions and non-US AE transactions, it may not be necessary to remand the issue for fresh consideration as held in the case of Amazon Development Centre India Pvt. Ltd., [2018 (5) TMI 343 - ITAT BANGALORE] - The parties did not make any distinction between US AE transactions and non-US AE transactions. In such circumstances, we are of the view that the margins accepted in the MAP proceedings with the US AE will offer a valuable guide and can be adopted as the margin to non-US AE transactions also. We hold and direct accordingly. In view of the conclusions of the preliminary issue on the additional ground, we are of the view that the grounds raised by the assessee in this appeal may not require any consideration.
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2021 (9) TMI 1024
Penalty u/s 271(c) - Estimation of income for purchases purchases - CIT-A deleted the addition - HELD THAT:- Undisputedly, based on certain information received from Sales-tax authorities, the assessing officer has treated certain purchases as non genuine. However, he has accepted that the assessee has effected the corresponding sales, meaning thereby, the goods might have been purchased from unverified sources - AO instead of disallowing the entire purchases had restricted the disallowance to the profit element embedded in such purchases by estimating at 12.5%.
The doubt, if any, is with regard to the source of purchases. Inability of the assessee to prove the source of purchase could be due to various factors. However, that by itself, cannot lead to the conclusion that the assessee has furnished inaccurate particulars of income so as to visit him with penalty under section 271(c) of the Act. More so, when the additions have been made purely on estimate basis.- No infirmity in the decision of learned Commissioner (Appeals) in deleting the penalty imposed under section 271(1)(c) - Decided against revenue.
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2021 (9) TMI 1023
TDS u/s 194C - Addition u/s 40(a)(ia) - disallowance merely on technical basis that assessee has failed to make compliance with the provision of section 194C(7) - HELD THAT:- As gone through the judicial pronouncements referred by the ld. counsel in the case of the Soma Ghosh [2016 (10) TMI 55 - ITAT KOLKATA] holding that if assessee complies with the provision of section 194(6), no disallowance u/s. 40(a)(ia) is permissible even though there is violation of provision of section 194C(7) of the act.
In the case of CIT vs. Marikamba Transport Co. [2015 (6) TMI 181 - KARNATAKA HIGH COURT] held that in case of payment made to sub-contractor non-filing of form no. 15-I/J is only a technical defect and provision u/s. 40(a)(ia) should not attract in such a case. In the light of the above facts and findings, it is observed that in this case assessee has furnished the copies of PAN along with copies of invoices of transportation bill comprising complete address of the transporter, phone no and complete particulars of the goods loaded through the transportation.
AO has not taken any step to disprove the genuineness of the transportation expenses by not conducting any inquiry therefore simply for technical lapse u/s. 194C(7) it is not appropriate to disallow the claim of transportation expenses. Looking to the above facts and finding, we consider that the decision of ld. CIT(A) is not justified, therefore, this ground of appeal of the assessee is allowed.
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2021 (9) TMI 1022
Cessation of liability - contention of CIT(A) is that the assessee has not furnished any evidence to show that the amount was not transferred from appropriation account nor explained whether the appropriation account is created - HELD THAT:- The evidence regarding the appropriation account and the Resolution of Board of Directors were not before the AO and CIT(A) - we find force in the arguments of the ld. AR and in view of the same, we deem it proper to remand the matter to the file of AO for its fresh verification. The assessee is liberty to file all evidences, if any, in support of its claim. AO shall afford reasonable opportunity of hearing to the assessee and pass order, in accordance with law.
Demand drafts not paid more than three years - We note that from the record that pay orders and demand drafts were not claimed by the parties within relevant time as explained by the AO and in our opinion, it becomes the income of the assessee. There is no evidence to show that the amounts were paid or adjusted by the assessee which clearly shows the assessee recognized the said amounts as income of the assessee. Therefore, since, the said amount has been accepted by the assessee as income in its accounts again remanding the issue to the AO does not arise at all. We find no infirmity in the order of CIT(A). Accordingly, it is justified.
Cessation of liability on account of Gratuity - AR requested to remand this matter to the file of AO for its fresh adjudication. The ld. DR did not report any objection for remanding this issue to the file of AO. Accordingly, we direct the AO to examine the issue in detail and the assessee is liberty to file evidences, if any in support of its claim. Thus, ground Nos. 1 and 4 raised by the assessee are allowed for statistical purpose.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- It should be presumed that the investments were made from interest free funds i.e. capital funds held by the assessee. Thus, the interest expenditure as computed by the AO under Rule 8D(2)(ii) to an extent of ₹ 17,90,540/- is not permissible. Thereupon, the only disallowance remains for our consideration is the disallowance made under Rule 8D(2)(iii) to an extent of ₹ 2,25,000/-, in our opinion, is justified. Accordingly, we confirm the addition to that effect made under Rule 8D(2)(iii) of Rules and the order of CIT(A) is set aside. Thus, ground No. 2 raised by the assessee is partly allowed.
Addition u/s 36(1)(vii)(a) - AO and CIT(A) held when there was no provision made for bad and doubtful debts in the account of assessee the claim made therein is not allowable - HELD THAT:- There is no dispute with regard to provision made under standard assets, to claim a deduction u/s. 36(1)(vii a) of the Act requires creation of provision as a mandatory pre-condition for claiming deduction under statute. Therefore, when the assessee has not claimed separate deduction on standard assets, in our opinion, the assessee is entitled to claim deduction u/s. 36(1)(vii a) of the Act to the extent as the provision made under standard assets. Thus, the AO is directed to give deduction to the extent of ₹ 10 lakhs as against the deduction claimed ₹ 42,26,631/-. Ground raised by the assessee is allowed for statistical purpose.
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2021 (9) TMI 1021
Exemption u/s 11 - registration u/s.12A denied - Proof of Charitable purpose of objectives and genuineness of the activities of the assessee society - main objection of the CIT (Exemption) was that the Joseph's registered society/school are two different entities and in view of the Rules and Regulation of the society that the whole emphasis was given to running the Joseph's School, so the application u/s. 12AA of the Act filed was procedural not correct rather the application must have been filed as per the provision of section 10(23C) (vi) - HELD THAT:- The provisions of section 11 and 10(23C) (vi) are two parallel regimes and operate independently and the assessee is entitled to avail the benefit under one of them which is more beneficial to it. The counsel has argued that the CIT(E) has himself state ostensible aims and objects of the society were to manage the existing school as Joseph's School, Dugri Road Opposite Bhagat Singh Nagar, Ludhiana.
No adverse action would be required to be taken against the assessee, so far grant of registration u/s. 12AA of the Act is concerned. On the observation of different PAN, the counsel argued that the exact name of the Society was "Joseph's School, Management Society" and it is only at the time of making the PAN that part of the name was printed. Considering the name in the Income Tax Returns and the address are being same according to the same name as per PAN and therefore in our view, it would not be justified to conclude that the Society and the School are different entities. Mere mentioning of typing mistake in the name of society does not disentitle the assessee for getting registration u/s. 12AA of the Act.
As held by various courts including by Hon'ble Supreme Court of India that at the time of registration of a society u/s. 12AA of the Act, the only requirement is that Ld. CIT(E) should be satisfied about the objects of society and the genuineness of activities of the society with respect to objects of the society. In the present case the Ld. CIT(E) has neither doubted the objects of the society which undoubtedly are charitable in nature and genuineness of activities of the society - Assessee is entitled to registration under section 12AA - Decided in favour of assessee.
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2021 (9) TMI 1056
Benefit u/s 10 (23C) (via) - benefits in terms of the section are available to any hospital existing solely for philanthropic purposes and not for purposes of profit - Denial of benefit as remuneration has been paid from the earnings of the IPD to the doctors who may not be working in that department and, secondly, that the rates being charged by the appellant are at par with other hospitals which run on commercial basis - HELD THAT:- While referring to the remuneration payable to member doctors with regard to IPD patients receipts, the same is not confined to the doctors performing the task. Learned counsel for the appellant did seek to canvas, despite this, as if only doctors performing the task in the IPD are paid. However, that would run contrary to the own pleading of the appellant specially towards the end of paragraph (xi) extracted aforesaid which makes it clear that the receipts from IPD are distributed across the board for doctors.
We are, thus, of the view that the decision on facts made by the competent authority and as affirmed by the High Court cannot be said to be perverse or having complete absence of rationality for us to interfere in the same.
We make it clear that if the appellant wants to rectify the position, as emerging from aforesaid, that would not preclude the appellant from claiming exemptions for relevant subsequent years.
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2021 (9) TMI 1055
Notice u/s 153C against deceased person - liability of legal heir of late assessee - impugned notice being invalid - HELD THAT:- Special Leave Petition is, accordingly, dismissed. Pending application, if any, stands disposed of.
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2021 (9) TMI 1018
Unexplained cash credit - unsecured loan u/s 68 - HELD THAT:- The companies being Pvt. Ltd. Company have all the details of their identity including address and financial data’s on the portal of Ministry of Corporate Affairs available for the public. The assessee has also filed copies of bank invoices and the income tax return to prove the source. Prima facie in our view the assessee discharged its onus to prove the source of alleged cash credits before AO. Thereafter the burden shifts on to the revenue authorities to disprove such documents or to find any discrepancy in such documents, which has not been found by the revenue authorities in the instant appeal.
PAN No. of the alleged cash creditors was very much available with AO. No reports seem to have been called from the counterpart Ld. Assessing Officer having jurisdiction over the alleged cash creditors. The assessee has limited means to call for elaborate information required by AO. Looking to the list of documents filed by the assessee to explain the cash credit we find that nothing more could have been possible for assessee to explain the identity and creditworthiness of the cash creditors and genuineness of the transactions.
Thus the assessee has successfully discharged its onus by explaining source of cash credit of loan of ₹ 2.70 cr. received during the year by placing relevant documentary evidences to our satisfaction which have not been found to be untrue/incorrect by the revenue authorities. We, thus set aside the finding of Ld. CIT(A) and delete the addition of ₹ 2.70 cr. made u/s 68 - Decided in favour of assessee.
Disallowance of prior period interest - loan from HDFC bank was taken in the name of one of the partner - Interest payable on this loan from HDFC Bank was claimed as a business expenditure by the assessee as the loan was utilized for business purposes - HELD THAT:- CIT(A) has not doubted the utilization of loan for the business purpose. Ld. DR failed to controvert this fact that the loan taken from HDFC bank has been utilized for any other purpose other than for business of the firm. Audited balance sheet supports the contention made by the assessee and also there is no difference in the ultimate tax liability as it was subject to tax on the same rate in the preceding years as in the current year. Our view is supported by the judgment in the case of GLAXO SMITHKLINE ASIA (P) LTD. [2010 (10) TMI 21 - SUPREME COURT] - we are of the considered view that the claim of prior period interest needs to be allowed - Decided in favour of assessee.
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2021 (9) TMI 1013
Disallowances u/s.14A r.w.r 8D - assessee has earned dividend income from mutual funds, which is exempt from tax but did not made any suo-motu disallowance of expenditure relatable to exempt income - HELD THAT:- The Hon’ble Jurisdictional High Court of Madras in the case of Marg Ltd [2020 (10) TMI 102 - MADRAS HIGH COURT] has taken a similar view and held that disallowances under Rule 8D r.w.s 14A can never exceed exempt income earned by the assessee during particular assessment year. Also see STATE BANK OF PATIALA [2018 (11) TMI 1565 - SC ORDER] - In this case, admittedly, exempt income for impugned assessment year was ₹ 57,826/, whereas the Assessing Officer has determined disallowance u/s.14A at ₹ 86,54,491/- contrary to settled principle of law. Therefore we direct the Assessing Officer to restrict disallowances u/s.14A to the extent of exempt income earned for the impugned assessment year.
Depreciation on capital subsidy - HELD THAT:- An identical issue in assessee’s own case for assessment year 2006-07 [2019 (2) TMI 1962 - ITAT CHENNAI] and after considering nature of subsidy has allowed claim of the assessee by observing that for earlier years, the CIT(A) has allowed claim of the assessee and the Assessing Officer has accepted decision of the CIT(A) and deleted additions, while passing order giving effect to the order of the CIT(A). Therefore, consistent with the view taken by the coordinate Bench, we direct the Assessing Officer to delete additions made towards disallowance of depreciation on capital subsidy received from SIPCOT.
Addition towards VAT incentive received from Government of Tamil Nadu - assessee has treated above incentive as revenue receipt both for its books of account and its tax returns, but during the course of asessment proceedings, the assessee has raised a fresh claim to treat incentive as capital receipts not chargeable to tax - HELD THAT:- We find that the Tribunal had considered an identical issue for assessment year 2011-12 [2017 (4) TMI 1193 - ITAT CHENNAI] where the issue has been remanded back to the file of Assessing Officer to consider the issue denovo on merits in accordance with law. Facts being identical for the year under consideration by following the decision of Tribunal in assessee’s own case for assessment year 2011-12, we set aside the issue to file of the Assessing Officer and direct him to reconsider the issue in accordance with law.
Disallowance u/s.43B(c) in respect of performance incentive paid to employees - HELD THAT:- In this case, it is in the nature of bonus or commission and such payment is for services rendered by employees. Just because nomenclature was changed to some other name, a particular expenditure would not change its original character. In this case, sum was paid to employees for services rendered and further, this sum would not have been paid as profits or dividend had it not been paid as commission or performance reward. Therefore, we are of the considered view that provisions of section 36(1)(ii) of the Act is squarely applicable and consequently, mischief of section 43B(c) would come into play, if such payment is not made on or before due date of furnishing of return of income. In this case, admittedly, the assessee has paid performance incentive only after due date of filing of income-tax return. Insofar as case laws relied upon by the assessee, we find that facts those case laws are different from facts of present case and has no application to case of the assessee - there is no error in the reasons given by the Assessing Officer as well as learned DRP to disallow performance reward u/s.43B(c) of the Act. Hence, we are inclined to uphold the order of Assessing Officer as well as directions of learned DRP and reject ground taken by the assessee.
TP adjustment made towards brand development services - brand fees receivable from its AEs towards enhancement of brand value of assessee parent company - TPO used Spearman’s Rank Correlation method to conclude that there is positive correlation between the brand value of Hyundai Motor India Limited and market capitalization of Hyundai market Corporation, South Korea - HELD THAT:- For the purpose of definition of international transaction, in Indian context rendering of service is what needs to be considered and not benefits. Since, there is no formal agreement or arrangement between the assessee and its AEs for rendering of service in the alleged brand promotion activity, the accretion in global brand value of its parent company cannot be attributable to the assessee by adopting some theory. In this case, facts are identical and pari materia to the facts already considered by the Tribunal for earlier years. Therefore, consistent with a view taken by the coordinate Bench in assessee’s own case for earlier assessment years, we are of the considered view that the learned TPO as well as learned DRP were erred in making transfer pricing adjustments towards brand services by adopting Spearman’s Rank Correlation method and concluded that there is positive accretion between brand value and market capitalization of HMC Korea and hence, we direct the Assessing Officer/TPO to delete transfer pricing adjustment made towards brand development services.
Characterization of income - Revenue or capital receipt - Focus Market Scheme to be treated as capital in nature and exclude from total income - HELD THAT:- We are of the considered view that duty credit scrips received from Govt. of India under Focus Market scheme is revenue in nature and further, same was given to offset higher cost of freight and other disabilities of exporters to be more competitive in exports to certain regions. Thus, the same cannot at any stretch of imagination be considered as capital in nature. Hence, we reject the ground taken by the assessee.
Deduction towards education and secondary education cess u/s.37(1) - HELD THAT:- We find that the Hon’ble Bombay High Court has considered an identical issue in the case of Sesa Goa Ltd.[2020 (3) TMI 347 - BOMBAY HIGH COURT] and held that education cess & secondary and higher education cess are liable for deduction in computing income chargeable under head of ‘profits and gains of business or profession’. As in the case of Chambal Fertilizers & Chemicals Ltd.[2018 (10) TMI 589 - RAJASTHAN HIGH COURT] has taken a similar view and held that education cess is not disallowable expenditure under the provisions of section 40(a)(ii) of the Act. Therefore, we are of the considered view that there is merit in the additional grounds filed by the assessee requesting deduction for education cess & secondary and higher education cess, as business expenditure deductible u/s.37(1) of the Act. But, fact remains that assessee has taken up this issue for the first time by filing additional grounds and the Assessing Officer does not have any occasion to examine claim of the assessee. Therefore, we are of the considered view that issue needs to go back to file of the Assessing Officer.
TP adjustment made by the AO towards international transactions of the assessee with its Associated Enterprises - TPO rejected TP study conducted by the assessee and re-characterized TP study by segregating domestic car sale segment on a standalone basis and made TP adjustment - HELD THAT:- We find merit in the arguments of the ld.AR for the assessee for the simple reason that when the ld TPO is considering a particular segment on a standalone basis, then it is the duty of the TPO to benchmark relevant segment by selecting appropriate comparables, whose functions performed, asset employed and risk assumed are also similar to FAR analysis of the assessee’s segment. In this case, the TPO having segregated domestic car sale segment on a standalone basis, has failed to select appropriate comparables or to carved out domestic sale segment of comparables to compare margins of the assessee with comparable companies. Therefore, we are of the considered view that the approach of the TPO is inconsistent and needs to be reconsidered.
Re-computation of margin of the assessee by considering certain operating / non-operating incomes - We find that the AO has considered royalty income received from Mobis, commission / discount income and insurance claim received by the assessee as non-operating. The TPO has given his own reasons for reaching to a conclusion that all these incomes are non-operating in nature. The assessee has received royalty income from Mobis under similar agreement for sharing technology and know-how, but the same has been considered as non-operating by the TPO. When the TPO has considered royalty payment by the assessee to its parent company as operating in nature, then there is no reason for the TPO to consider royalty income received from Mobis as non-operating income. Therefore, we are of the considered view that the ld.TPO was erred in considering royalty received from Mobis as non-operating. Hence, we direct the ld. TPO to consider Royalty income as operating income for computing operating margin.
Commission / discount income, incentives and insurance claim income - We find that all these incomes are generated from main business activity of the assessee of manufacturing and sales of cars. The assessee has received commission / discount on procurement of raw materials and insurance claim is received towards damaged cars manufactured by the assessee. When the assessee is recognizing income from sale of cars as operating in nature, then insurance claim received towards damaged cars is also operating in nature and hence, we are of the considered view that the ld. TPO has erred in considering commission / discount income, incentives and insurance income as non-operating income. Hence, we direct the ld. TPO to consider commission / discount income, incentives and insurance claim as operating income for the purpose of computing operating margin.
Forex loss - Reason given by the assessee to treat forex gain / loss as non-operating in nature that most of the loss / gain is arised from repayment of External Commercial Borrowings, which is a finance activity and not related to business activity of the assessee -loss arised on account of fluctuation in foreign currency for payment made to suppliers of materials or receipts from buyers of assessee product is also arised out of main business activity of the assessee and thus, the same cannot be considered as non-operating in nature. As regards, the claim of the assessee in light of principle of consistency, we find that although the AO requires to follow principles of consistency in giving treatment of particular item of income or expenditure, but res judicata is not applicable to Income-tax proceedings. Moreover, the law is evolving day by day, based on various factors including amendment to the Act and judgments of various courts and tribunals, as per which it is difficult for the AO to give a particular treatment for any item of income or expenditure, when the law has been substantially changed in subsequent assessment years - it is a well settled principle of law that forex gain or loss is revenue in nature and operating income/expenditure - no merit in the arguments taken by assessee that forex loss should be considered as non-operating in nature. Hence, we reject arguments taken by the assessee.
Working capital adjustment - Since assessee has taken additional ground, the facts with regard to claim of the assessee was not before the TPO. Hence, this issue needs to go back to the file of the TPO to examine the claim of the assessee in light of facts related to working capital adjustment.
Proportionate adjustmentt - TPO has made TP adjustment in respect of international transactions pertains to domestic car sale segment, whereas the ld.DRP has enhanced said adjustment by adjusting the margins to entire transactions of the assessee, which predominantly consist of third party cost. We find that as per the provisions of Section 92 of the Act and Rule 10B(1)(e) of the Rules, it is very clear that any income arising from an international transaction shall be computed having regard to arm’s length price, that means, very purpose of said provisions is to establish arm’s length nature of the international transactions only. The transactions with non AE’s has to be presumed to be at arm’s length, because there is no relationship which is likely to influence pricing..DRP is erred in making TP adjustment at entity level and hence, we direct the TPO to restrict TP adjustment only to international transactions pertain to domestic car sales segment.
We are of the considered view that the whole issue of transfer pricing adjustment in respect of import of goods pertains to domestic car sales segment needs to go back to the file of the TPO to reconsider the issue in light of our discussions given herein above in preceding paragraphs.
Appeal filed by the assessee is treated as partly allowed for statistical purposes.
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2021 (9) TMI 1017
Addition u/s 68 - assessee received share application money from various entities - HELD THAT:- We concur with the findings of Ld. CIT(A) that the assessee has filed sufficient documentary evidences in terms of requirements of Sec.68 with respect to all the three share subscribers. The findings of Ld. CIT(A) remain uncontroverted before us. Further, nothing has been brought on record by Ld. AO in the assessment order to dislodge the assessee’s documentary evidences. Therefore, on the facts and circumstances of the case and respectfully following the cited decision of Tribunal in assessee’s own case in earlier year [2018 (12) TMI 1316 - ITAT MUMBAI], we confirm the impugned order and dismiss the appeal of the revenue.
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2021 (9) TMI 1069
Income from house property - Addition of estimated deemed rent on unsold flats of assessee's project - unsold flats that were held by the assessee as stock-in-trade of its business as that of a builder and a developer - HELD THAT:- As relying on assessee's ow case [2019 (4) TMI 2016 - ITAT MUMBAI] find no infirmity in the view taken by the CIT(A) who had rightly vacated the addition that was made by the A.O towards the deemed ALV of the unsold flats that were held by the assessee as stock-in-trade of its business of a builder and developer, we uphold the same. The Ground of appeal No.1 is dismissed.
Deduction of interest expenditure u/s 36(1)(iii) - HELD THAT:- As per order passed u/s 143(3) r.w.s 254, for A.Y 2012-13 that the assesse had sufficient interest free funds available with it to source the interest free advances of ₹ 13,32,13,440/- that were given by it in the previous assessment years i.e the year ended 31.03.2005, 31.03.2007, 31.03.2009 and 31.03.2010 and no interest free advances had thereafter been given by the assessee during the period 31.03.2013 to 31.03.2015, therefore, we find no justification to take a different view and sustain any part of the disallowance of the assessee‟s claim for deduction of interest expenditure u/s 36(1)(iii) of the Act - CIT(A) had rightly observed that no part of the assessee‟s claim for deduction u/s 36(1)(iii) of interest expenditure could have been disallowed - Decided in favour of assessee.
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2021 (9) TMI 1068
Validity of assessment u/s 153A - No valid approval u/s 153D - Whether mechanical approval under section 153D granted by the Joint Commissioner of Income Tax (Central Range) Kanpur? - JCIT passed combined order u/s 153D with respect to different assessee's/group/searches for different assessment years in 67 cases instead of separate order(s) as envisaged under the provisions of Section 153D - HELD THAT:- In this case, the Addl. Commissioner has showed his inability to analyze the issues of draft order clearly stating that no much time was left as the draft order was placed before him on 31/12/2010 and approval was granted on the same day. In the case before us the Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible. If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day.- Approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case
Hon'ble Supreme Court in the case of ‘Sahara India vs. CIT & Others’ [2008 (4) TMI 4 - SUPREME COURT] while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said highranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. - Decided in favour of assessee.
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2021 (9) TMI 1015
Penalty u/s 271(1)(b) - default of non-compliance of the statutory notice issued under section 142(1) r.w.s. 129 - proof of any deliberate attempt on the part of the assessee - non compliance of particular notice on technical grounds - HELD THAT:- There is no deliberate attempt on the part of the assessee, more so when the time given by the ld.AO to the assessee for compliance was very short. Further, assessment under section 143(3) was finalized by accepting the returned income filed by the assessee. The assessee might have missed to make compliance on those dates but ultimately due compliance was made and requisite details were filed by the assessee and had participated in the proceedings before the AO and the assessment has been completed u/s 143(3), and therefore, penalty should not be levied u/s 271(1(b) of the Act for non compliance of particular notice merely on technical grounds.
Various Benches of the Tribunal in a number of decisions have held that where the assessment order was finally passed u/s 143(3) and not u/s 144 of the Act due to subsequent compliance during the assessment proceedings, that would be considered as good compliance and the defaults committed earlier should be ignored and by taking a lenient view the penalty u/s 271(1)(b) of the I.T. Act 1961 should not be levied - Decided in favour of assessee.
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2021 (9) TMI 1014
Rectification u/s 254 - Disallowance of exemption u/s 54F -Tribunal denied the exemption under section 54F by following decision of Hon’ble Karnataka High Court in case of CIT vs MJ Siwani [2015 (2) TMI 729 - KARNATAKA HIGH COURT] - HELD THAT:- In case of CIT vs McDowell and Co Ltd. reported [2008 (3) TMI 301 - KARNATAKA HIGH COURT] following the decision of Hon’ble Supreme Court in case of Honda Siel Power Products Ltd. vs CIT [2007 (11) TMI 8 - SUPREME COURT] has held that the power under section 254 (2) of the Act cannot be exercised so as to review order passed by the Tribunal. Hon’ble court held that application of principles laid down by the superior courts to the facts of the case even on an erroneous understanding of such principles, on recording of an erroneous finding by the Tribunal based on facts on record or formation of a conclusion on erroneous application of provision of law to the facts of a case, etc., cannot be held to be a mistake apparent from record warranting rectification by the Tribunal in exercise of its power under section 254 (2) of the Act. The issues has been decided on merits by following the view of Hon’ble Karnataka High Court being the jurisdictional High Court. To reconsider this issue falls out of the purview of provisions u/s 254(2) of the Act and is beyond the scope of section 254(2).
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Customs
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2021 (9) TMI 1052
Classification of goods - cellular telephones - classified under Tariff Heading 8525-20-17 of the Customs Tariff Act or not? - telephone LSP 340 imported would be entitled to the benefit of the exemption granted by Notification No. 21/2002- Cus dated 1.3.2002? - HELD THAT:- The decision of this Court in the case of Tata Teleservices Limited [2005 (12) TMI 96 - SUPREME COURT], it cannot be said that the learned Tribunal has committed any error in allowing the appeals preferred by the respondents and holding that the respondents shall be entitled to the benefit of exemption in terms of serial no. 264 of the table to the Notification No.6/2002-CE dated 1.3.2002, Notification No. 21/2002-Cus dated 1.3.2002 as per serial no. 320 of the Table thereto and Notification No. 21/2005-Cus dated 1.3.2005.
All these appeals deserve to be dismissed and are accordingly dismissed.
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2021 (9) TMI 1048
Seeking direction to reassess the bills of entry within a fixed timeline - HELD THAT:- It appears that the Respondent has not passed any order under Section 17 of the Customs Act, 1962 for assessment of the goods with respect to goods imported by the Petitioner vide Bill of Entry No. 5043522 dated 13.08.2021. Meanwhile, the request of the Petitioner for warehousing of the goods has been accepted by the Respondent.
The Respondent is directed to pass an order under Section 17 of the Customs Act, 1962 for the Bill of Entry bearing No. 5043522 dated 13.08.2021 (Annexure P-2 to the memo of this Petition) in accordance with law and on the basis of evidences on record as expeditiously as possible and practicable.
The Petitioner shall co-operate with the Respondent while deciding the aforesaid Bill of Entry, under Section 17 of the Customs Act, 1962 - petition disposed off.
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2021 (9) TMI 1045
Seeking grant of Bail - Smuggling - Alprazolam - it is claimed that petitioner seeks parity with the co-accused, as co-accused Rohit Kumar has already been granted bail - section 22(C), 23(C) and 28 read with Section 29 of NDPS Act 1985 - HELD THAT:- In the present case, 21 corrugated boxes, 1810 strips comprising of 70 tablets of each i.e. 1,26,700 tablets of psychotropic substances “Alprazolam” was found concealed in box No. 11 in commercial quantity which is listed at S.No. 178 in the schedule of NDPS Act. 1985. It is also pertinent to note that the recovered substance falls under the commercial quantity and embargo of Section 37 of the NDPS Act is applicable - The scheme of Section 37 reveals that the exercise of power to grant bail is not only subject to the limitations contained under Section 439 of the CrPC, but is also subject to the limitation placed by Section 37 which commences with non-obstante clause.
The expression “reasonable grounds” means something more than prima facie grounds. It contemplates substantially probable causes for believing that the accused is not guilty of the alleged offence. The reasonable belief contemplated in the provision requires existence of such facts and circumstances as are sufficient in themselves to justify satisfaction that the accused is not guilty of the alleged offence.
Steps has been taken by the Customs (respondent) to challenge the grant of bail to the co-accused or not - HELD THAT:- Reliance placed in the case of State of Kerala Vs. Rajesh [2020 (1) TMI 1002 - SUPREME COURT] where it was held that the consideration prevailed upon the Court to grant bail to the other accused persons will not absolve the act of the accused respondent from the rigors of Section 37 of the NDPS Act - the contention of the Ld. counsel for the petitioner that no steps has been taken by the Customs (respondent) to challenge the grant of bail to the co-accused is of no consequence.
Bail application dismissed.
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2021 (9) TMI 1044
Criminal complaint for offence u/s 132, 35 (1)(i)(A) & 135(1)(i)(C) of Customs Act - Export of restricted goods by misdeclaring as different goods - Money Laundering - Scheduled Offence - ECIR was not given to the present petitioner - HELD THAT:- This Court finds that the proceedings in question are at a very nascent stage, and the learned Additional Solicitor General has categorically submitted that the present petition itself is premature at this stage, as it is only a stage of issuance of summons, and the petitioner do not qualify as a person aggrieved; but at the same time, when question was posed to the learned Additional Solicitor General that whether any chances of arrest are there, he fairly submitted that Section 19 of the Act of 2002 empowers them to make an arrest, and thus, there cannot be a denial of seeking invocation of the said provision of law.
Since it is an accepted position that no offence has been found to be made out against the present petitioner until now and no material so as to make such arrest is available on record till date, therefore, the present stay petition is disposed of, with a direction to the petitioner to immediately appear in person before the respondents in pursuance of the summons issued to him by the respondents and cooperate with the investigation to his best.
Let the criminal writ petition be listed after eight weeks, for final hearing.
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2021 (9) TMI 1043
Benefit under the MEIS scheme - Amendment in shipping bills - Benefit under Merchandise Exports from India Scheme (MEIS) - HELD THAT:- Captioned Writ Petition is disposed of, directing the respondent to dispose of writ petitioner's representation dated 20.03.2020 on its own merits and in accordance with law, as expeditiously as his business would permit and in any event, within five weeks from today i.e., on or before 22.10.2021. The disposal proceedings shall be communicated to the writ petitioner under due acknowledgment within five working days thereafter i.e., from the date of the proceedings.
This Court has not expressed any view or opinion on the merits of the matter. It is open to the respondent to give a personal hearing to writ petitioner but it is made clear that this is entirely at the discretion of the respondent i.e., if the respondent deems it necessary for disposal of the representation.
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Insolvency & Bankruptcy
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2021 (9) TMI 1028
Legality of action of the RP in including the claim under an expired bank guarantee by the financial creditor - seeking to declare that the claim of the financial creditor under the bank guarantee which is the subject matter of dispute pending, as inadmissible - seeking to declare the entire meeting conducted by the Committee of Creditors - validity of meetings conducted by the Resolution Professional - discharge of dues under the term loan - seeking to recall the order of liquidation - seeking release of refund of excess tax remitted - HELD THAT:- The Corporate Insolvency Resolution Process stood completed by the decision of CoC to liquidate the Corporate Debtor and the liquidation is in progress. Liquidator was promptly filing the progress reports in the Liquidation process before this Tribunal. At this stage, the applicant cannot turn around and question the process adopted by the IRP/RP or the Liquidator. From the verification of the earlier proceedings of this matter, it is seen that the Suspended Directors are not at all co-operating in the CIR Process and they were only on the lookout of creating hurdle to the continuation of CIR Process. Moreover, the applicant herein is a shareholder of the Company and as rightly pointed out by the Respondent No.2 he is not entitled to claim any relief against the CoC or the conduct of the CIRP.
Without attending the meeting conducted by the IRP/RP, they are making bald allegations against the conduct of the CoC meetings. Their challenge to the order of admission of the application before the Hon’ble NCLAT and the appeal against the order before the Hon’ble Supreme Court was failed.
Application dismissed.
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2021 (9) TMI 1027
Seeking removal of attachment order - Attachment of bank accounts - accounts of the Corporate Debtor attached was subsequent to the admission of Application under Section 7 and initiation of CIRP - Deputy Collector inspite of service of notice did not respond and remained ex parte - applicability of Section 32A of IBC - HELD THAT:- Although Section 14 of the MPID Act (which is an Act earlier to IBC) has effect notwithstanding anything inconsistent with any other law, the said Section 14 would be subject to the subsequent Code promulgated by the Government of India which has amended laws related to insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner - there are no force in the argument of the Appellants that the Resolution Professional and later Liquidator could not have moved the Adjudicating Authority for orders to tide over the attachment.
Applicability of Section 32A - HELD THAT:- In the present matter, the argument that unless liquidation takes place, protection of Section 32A cannot be invoked is not well founded. Unless property becomes available and is subjected to the Liquidation Process under Chapter III Part II of the IBC, the applicability or inapplicability of Section 32A cannot be claimed. As per Chapter III, the Liquidator is duty bound under Section 35 to take into custody or control all the assets, property, effects and actionable claims of the Corporate Debtor. Explanation below sub-section (2) of Section 32A makes it clear that no action shall be taken against the property of the Corporate Debtor in relation to an offence committed prior to the commencement of CIRP and the action includes the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the Corporate Debtor. If in liquidation, there is a change of control of Corporate Debtor to a person who was not a promoter or in management or in control of the Corporate Debtor or a related party of such person, the person will be protected. Thus, beforehand it cannot be claimed that protection of Section 32A is not available.
The seizure or attachment of accounts of Corporate Debtor cannot stand as obstruction when the Corporate Debtor is at the stage of liquidation under IBC - MPID aims to protect interest of Depositors. IBC is broader and aims to consolidate and amend laws relating to re-organisation and insolvency resolution of corporate persons and partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons. The scheme aims at balancing interest of all stakeholders. This will include interest of Depositors. Thus, IBC has broader contours. Letting one set of creditors march over others is not permissible.
In the present matter also, if the MPID Act is seen, Section 7(5) makes it clear that when dealing with the attachment of property, the procedure to be followed by the designated court is as per the Code of Civil Procedure. In the subsequent part of the Act while dealing with offence (as per Section 3 of the PMLA), the procedure for taking cognizance of offence is given in Section 13 and provisions of CrPC as applicable for warrant trial cases is applied. There is similarity on these broad aspects between PMLA and MPID. Thus, for attachment under the MPID Act, Section 14 of the IBC dealing with Moratorium would apply and the provisions dealing with powers of IRP, RP and duty to take into custody and control the assets of the Corporate Debtor would be enforceable.
In para 7 of the Application, the Resolution Professional had clearly mentioned that certain properties owned by the Directors/ promoters were also attached and filed the notification dated 31.03.2017. Action against personal properties of owners/ promoters may continue under MPID. In IBC concern is with property of Corporate Debtor. The correspondence impugned before the Adjudicating Authority was the letter dated 22.10.2018 (Annexure-7; Page 109) sent by the Deputy Collector ordering attachment of the Bank Accounts of the Corporate Debtor in the State Bank of India, Anantpura and Rania - Adjudicating Authority wrongly in the impugned order read this order dated 22.10.2018 with notification dated 31.03.2017.
Appeal allowed in part.
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2021 (9) TMI 1019
Liquidation of the Corporate Applicant - Section 33(2) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- This Tribunal in the circumstances taking into consideration the provisions of law as well as on facts is hereby orders for liquidation of the corporate debtor and in the circumstances the corporate debtor is put under Liquidation and the incidence of liquidation to follow, on and from the date of this order in terms of the provisions of IBC, 2016 and more particularly as given in Chapter - III of IBC, 2016 and also in terms of Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017.
Mr. Punit Handa, Resolution Professional, has given consent to act as the Liquidator vide written communication dated 18.08.2021 and is, therefore, appointed as Liquidator under section 34 of the Insolvency and Bankruptcy code, 2016 read with Regulation 3 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - the corporate debtor is ordered to be liquidated - application allowed.
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2021 (9) TMI 1016
Sanction of Scheme of Amalgamation - Sections 230-232 and other applicable provisions of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Taking into consideration the joint Application and the documents filed therewith showing compliance of various provisions of the Companies Act, 2013 and the Rules framed thereunder, this Tribunal issues the directions with respect to convening and holding of the meetings of the Equity and Preference Shareholders, Secured and Unsecured Creditors of the Applicant Companies or dispensing with the same.
The scheme is sanctioned - application allowed.
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Service Tax
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2021 (9) TMI 1020
Principles of natural justice - no Show Cause Notice was issued proposing to reject the refund - appellant was deprived of any opportunity to offer its rebuttal - HELD THAT:- The Commissioner (Appeals) having remanded the matter for fresh adjudication after expressing his satisfaction as to the non-following of the principles of audi alteram partem by the Adjudicating Authority, should not have expressed any findings on the issues.
The cases are remanded to the file of the Adjudicating Authority, who shall pass a de novo order after following the principles of natural justice and without being influenced by the impugned order of the Commissioner (Appeals). It goes without saying that the Adjudicating Authority shall afford reasonable opportunities to the appellant in passing the de novo order - Appeal allowed by way of remand.
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Central Excise
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2021 (9) TMI 1029
MODVAT Credit - inputs removed as such against CT-3 certificates to 100% EOU - benefit of N/N. 1/95-CE dated 4.1.1995 denied on the ground that assessees have not manufactured the inputs in their factory and therefore not entitled to the exemption as per the notification - HELD THAT:- The issue stands settled by the decision of the Hon'ble High Court of Karnataka in the case of THE COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II VERSUS M/S SOLECTRON CENTUM ELECTRONICS LTD. [2014 (10) TMI 596 - KARNATAKA HIGH COURT] where it was held that if the assessee had purchased those inputs for its EHTP unit by virtue of aforesaid Notification, there was no duty payable, as the said inputs were removed with the previous permission of the department as reflected in CT-3.
The said decision was applied by the Tribunal in the case of M/S. LAKSHMI AUTOMATIC LOOM WORKS LTD. VERSUS COMMISSIONER OF CGST & CENTRAL EXCISE, COIMBATORE [2021 (9) TMI 35 - CESTAT CHENNAI]. The Hon'ble High Court of Madras in the judgment by which the matter was remanded has referred the said decision in Solectron Centum Electronics Ltd. with approval and also directed the Tribunal to consider the applicability of the said judgment. The issue raised and analyzed in the case of Solectron Centum Electronics Ltd. is identical and squarely applicable to the issue for consideration.
The demand of duty on inputs removed as such to 100% EOU cannot sustain - Appeal allowed - decided in favor of assessee.
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2021 (9) TMI 1046
Area Based exemption - Requirement to refund 50% of amount that was refunded - exemption that was made available to the petitioner under the North Eastern Industrial Policy - validity and vires of N/N. 17/2008-CE dated 27.03.2008 and No.31/2008-CE dated 10.06.2008 - fixation of a special rate for the value addition on the manufactured goods - principle of constructive res-judicata - HELD THAT:- In the instant case, it is the case of the petitioner that the requirement of requesting for fixation of a special rate in respect of the value addition to the manufactured goods had arisen only after the final judgment of the Supreme Court in UNION OF INDIA & ANOTHER ETC. ETC. VERSUS M/S V.V.F LIMITED & ANOTHER ETC. ETC. [2020 (4) TMI 669 - SUPREME COURT], inasmuch, as long as the matter was pending before the Supreme Court and the interim order dated 07.12.2015 was in operation requiring a refund of 50% of the amount involved, no occasion had arisen for the assessee to claim for the fixation of a special rate in respect of the value addition to the manufactured goods. The dominant purpose of the two notifications i.e. amended notification No.32/99-CE dated 18.07.1999 and the notification No. 31/2008-CE dated 10.06.2008, is the bestowing of a legal right to the assessee to opt for the fixation of a special rate in respect of the value addition to a manufactured goods.
The requirement that such applications are to be made not later than 30th day of September of the given financial year is a provision for streamlining the procedure for making such application and to avoid the situation where the process of making such applications would be a never ending matter.
Without going into the aspect whether the requirement to submit such application within 30th September of the given financial year is a mandatory requirement or a directory requirement, what we take note of is that such a provision has been incorporated to streamline the process for submission of the application seeking for the fixation of a special rate to the value addition to manufactured goods - it cannot be wholly said that the petitioner would now be prevented from claiming their legal right for fixation of a special rate to the value addition to the manufactured goods merely because such application was not made within 30th September of that given financial year to which the claim for fixation of the said rate pertains to.
On the principle of constructive res-judicata, the ground for rejecting such application for the reason that it was not submitted within 30th September of the given financial year would perhaps be not available for the respondent authorities for rejecting the application - the Principal Commissioner, GST, Guwahati is directed to consider the application of the petitioner dated 28.09.2020 seeking for fixation of a special rate to the value addition to the manufactured goods of the given financial year and decide the same as per law.
Petition allowed.
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CST, VAT & Sales Tax
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2021 (9) TMI 1039
Validity of deemed assessment order - five adjournments in as many listings in the span of over 2 ½ years were made - HELD THAT:- A careful perusal of the impugned orders bring to light that the impugned orders, after setting out the deemed assessment under Section 22(2) of TNVAT Act, go to show that the business place of writ petitioner was inspected by Enforcement Officers on certain dates and they noticed certain defects. The defects noticed by Enforcement Officers have been adumbrated. After adumbration of defects noticed by the Enforcement Officers, the impugned order merely says that the turnover declared by the writ petitioner is incorrect and simply puts in place the proposed revision i.e, the revision proposed by the Enforcement Wing. Thereafter, the impugned order also makes an equal time addition by way of penalty under Section 27(3) of TNVAT Act.
The impugned orders are set aside solely for the prupose of enabling the respondent to redo the revisional assessment by following Narasus principle i.e, independent application of mind by the respondent qua the proposal given by the Enforcement Wing, in other words, without blindly and mechanically accepting the revised proposal made by the Enforcement Wing - before redoing the assessment, it is open to the respondent to call for documents in support of writ petitioner's request in response to the pre-revisional assessment notice.
Petition disposed off.
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Indian Laws
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2021 (9) TMI 1054
Seeking grant of Bail - smuggling - contraband item - Heroin - absence of recovery of the contraband from the possession of the respondent - wrong name in the endorsement of translation of the statement - Section 67 of the NDPS Act - HELD THAT:- The principles that guide this Court while assessing an order of the High Court granting bail have been succinctly laid down in PRASANTA KUMAR SARKAR VERSUS ASHIS CHATTERJEE AND ORS. [2010 (10) TMI 1199 - SUPREME COURT] - In Prasanta Kumar, while the trial court dismissed several bail applications that were filed by the accused who was charged for the commission of an offence punishable under Section 302 of the Indian Penal Code 1860, the High Court allowed the bail application - The decision in Prasanta Kumar was referred to in a judgment of this Court in MAHIPAL VERSUS RAJESH KUMAR @ POLIA & ANR. [2019 (12) TMI 1461 - SUPREME COURT], where the High Court had granted bail to an accused who was charged with the commission of an offence punishable under Section 302 of the IPC.
The respondent has been accused of an offence under Section 8 of the NDPS Act, which is punishable under Sections 21, 27A, 29, 60(3) of the said Act. Section 8 of the Act prohibits a person from possessing any narcotic drug or psychotropic substance. The concept of possession recurs in Sections 20 to 22, which provide for punishment for offences under the Act - What amounts to “conscious possession” was also considered in DHARAMPAL SINGH VERSUS STATE OF PUNJAB [2010 (9) TMI 1005 - SUPREME COURT], where it was held that the knowledge of possession of contraband has to be gleaned from the facts and circumstances of a case. The standard of conscious possession would be different in case of a public transport vehicle with several persons as opposed to a private vehicle with a few persons known to one another.
As regards the finding of the High Court regarding absence of recovery of the contraband from the possession of the respondent, it is noted that in UNION OF INDIA VERSUS RATTAN MALLIK @ HABUL [2009 (1) TMI 844 - SUPREME COURT], a two-judge Bench of this Court cancelled the bail of an accused and reversed the finding of the High Court, which had held that as the contraband (heroin) was recovered from a specially made cavity above the cabin of a truck, no contraband was found in the ‘possession’ of the accused. The Court observed that merely making a finding on the possession of the contraband did not fulfil the parameters of Section 37(1)(b) and there was non-application of mind by the High Court.
The High Court has clearly overlooked crucial requirements and glossed over the circumstances which were material to the issue as to whether a case for the grant of bail was established. In failing to do so, the order of the High Court becomes unsustainable. Moreover, it has emerged, during the course of the hearing that after the respondent was enlarged on bail he has consistently remained away from the criminal trial resulting in the issuance of a non-bailable warrant against him. The High Court ought to have given due weight to the seriousness and gravity of the crime which it has failed to do.
The application for bail filed by the respondent shall stand dismissed.
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2021 (9) TMI 1053
Seeking appointment of sole arbitrator to adjudicate the differences between the parties - Section 11(6) read with Section 11(12) of the Arbitration and Conciliation Act, 1996 - whether the nature of dispute sought to be referred for arbitration in these petitions fall under the Arbitration Clause(s) of RCMA and SCMA, governed by the Arbitration and Conciliation Act, 1996, with the seat and venue for arbitration at New Delhi or such disputes can be arbitrated only in terms of the dispute resolution mechanism specified in Clause 9 of the Rajapura SPA/Southern Homes SPA i.e. under the rules of the Singapore International Arbitration Centre and the seat and venue of the arbitration at Singapore?
HELD THAT:- The ‘Share Purchase Agreements’ as well as the ‘Construction Management Agreements’ are subsisting and have not been repudiated by the Parties. Both sets of agreements contain arbitration clauses that are not similar to one another - in order to determine the nature of arbitral proceedings, the two groups of agreements will have to be read in harmony and reconciled so as to avoid any head on collision, and thereafter a conclusion as to which of the clauses would be applicable in the present case, needs to be drawn.
Upon perusing the Share Purchase Agreements, it is clear that the primary purpose of these agreements is to effectuate the change of ownership of Respondent No.1 and the Begur Company from DHDL to Resimmo PCC. No doubt, the Rajapura SPA and the Southern Homes SPA as per their Clause 6.1 and 6.2, do provide for the completion of the respective residential projects as a postclosing obligation, however, these construction obligations had to be fulfilled in accordance with the terms of the ‘Construction Agreements’ - A prima facie reading of `Share Purchase Agreements’ and `Construction Management Agreements’, does suggest that notwithstanding certain overlaps between these agreements, their object and field of operation is different and distinct in nature. It is therefore difficult for us to accept it outrightly that the respective Share Purchase Agreements are the ‘principal agreements governing the transaction’ between the parties or that the present disputes can be resolved solely under the arbitration clause contained therein.
The dispute sought to be referred to arbitration by the Petitioner DHDL pertains to non-deposit of agreed amount by Respondent No.2 and resultant payment thereof as `Fee’ which the Petitioner claims in terms of clause 4 of RCMA/SCMA. Whether or not the Petitioner has complied with the ‘condition precedent’ under Rajapura SPA and thus has become entitled to `fee’ as per clause referred to above, is purely a question of fact to be determined by the Arbitral Tribunal.
The fact remains that the RCMA and SCMA, though interlinked and connected, are still two separate agreements - since the Fee Agreement provides that the “Fee” can only be calculated after taking into consideration various financial components of both the Rajapura Homes Projects and the Southern Homes Project, it would be necessary for the sake of avoiding wastage of time and resources, and to avoid any conflicting awards, that the disputes under Arbitration Petition No.17 and Arbitration Petition No.16 are referred to a sole Arbitrator.
This Court appoints Mr. Justice (Retd.) R.V. Raveendran, Former Judge, Supreme Court of India as the sole arbitrator to resolve all disputes/differences between the parties. The arbitrator will be paid fees in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996 as amended from time to time - Petition allowed.
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