95% of Appeals in relation to Share Application and Share Premium are filed by Shell Companies: ITAT Kolkata [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has recently observed that the appeals filed in relation to share application and share premium are done by Shell Companies, devoid of any business.

A shell company or corporation exists only on paper and has no office and no employees, but may have a bank account or may hold passive investments or be the registered owner of assets, such as intellectual property, or ships.

The assessee, in the present appeal to the Tribunal argued that the Commissioner of Income Tax (Appeals) [CIT(A)] has erred in confirming the addition of Rs. 9.67 Crores which was added by the Assessing Officer under Section 68 of the Income Tax Act, 1961 on account of bogus share capital including share premium raised by the assessee.

Since the matter before the Kolkata Bench of ITAT was a case of share application and share premium, the court refused to give more time, on the request of S K Thakur & Associates, who, as the court observed, did neither have the power of attorney issued by the assessee placed on record nor the letter requesting the letter of adjournment did bear the signature of the director of the company, M/s. Arham Packaging Goods Pvt. Ltd.

The tribunal also observed that some unknown person had put the signature for the director.

At this instance, the Kolkata Tribunal bench of Vice President Rajpal Yadav and Accountant Member Girish Agrawal made the observation that, “There are large number of appeals pending on this issue before the Tribunal and out of them, 95% are not being prosecuted or are not being filed by any genuine business concern. Basically, those appeals are filed by the shell companies and here and there, requests are being made to delay disposal of these appeals.”

The bench, thus declined the adjournment application of the assessee and proceeded to dispose of the appeal ex-parte.

Further observing that, “the assessee company evidently does not have any specific business. It

has filed a loss return of Rs.9,171/-” and being convinced that it is a paper company devoid of any business, the tribunal bench upheld the orders of the CIT(A) and AO, as no errors were to be found in the same.

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Maintainability of Writ Petition against Cancellation of GST Registration: Madras HC refers Matter to Division Bench [Read Order]

A Single Bench of the Madras High Court has recently referred a bunch of writ petitions challenging cancellation of Goods and Services Tax (GST) registrations to a Division Bench of the same court.

The respondent-revenue had refused to entertain the appeal filed by the respective petitioners aggrieved by the cancellation of their respective GST registrations under Section 107 of the Goods and Services Tax Act, 2017 on the ground that the said appeals were filed beyond the maximum time limit stipulated under Section 107 of the Goods and Services Tax Act.

The Bench of Justice Abdul Quddhose observed the conflict in decisions of Justice Anita Sumanth in Pandidorai Sethupathi Raja vs. The Superintendent of Central Tax and Justice M Sundar in Hemasri Enterprises vs. The Appellate Authority / The Deputy Commissioner (ST) and Ramunajan Venkatesan vs. The Joint Commissioner (Appeals-II).

Justice Anita Sumanth had held that the Court has the power to condone the delay in filing the appeal under Section 107 of the Goods and Services Tax Act under certain extraordinary circumstances mentioned in the said order.

Justice M Sundar, on the contrary, had held that, the Madras High Court, Court while exercising powers under Article 226 of the Constitution of India, does not have the power to condone the delay when the statutory appeal filed under Section 107 of the Goods and Services Tax Act is beyond the maximum time limit stipulated in the said section.

Since, there were two contradictory views expressed by two Judges of the Madras High Court, the High Court Justice Abdul Quddhose, for Judicial Discipline and Propriety, referred the matter to a Division Bench of the High Court.

Acknowledging the nature of the matter deserving an expeditious disposal, the Registry was directed to immediately place this matter before the Acting Chief Justice of the Court for getting suitable orders for posting the writ petitions before the appropriate Division Bench nominated by the ACJ for an early hearing.

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Chandigarh Transport Undertaking Officials might face action for Tax Blunder

Pursuant to a report tabled in the Parliament last year, the Comptroller and Auditor General (CAG) has recommended action to be taken against the Chhattisgarh Transport Undertaking (CTU) officials who failed to implement the relevant tax on the prescribed dates and did not collect service tax/GST from AC bus passengers. This resulted in an unnecessary…

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Union Budget 2023: Middle Class can expect these 5 Changes

The Union Finance Minister, Nirmala Sitaraman is all set to present the Union Budget on 1st February 2023.

The middle class expect the budget to be a stepping stone to better personal finances, especially savings, as the cost of living and tax liabilities are equally high. Notably, the gross savings of Indian Households fell to an amusing 10.8% in FY 2021-2022, a much lesser figure in comparison to the 15.9% recorded in FY 2020-2021.

The inflation and increasing fuel prices have also contributed to reduced savings allocation of salary and has had a big impact on the purchasing power of the middle class and salaried taxpayers.

Not many changes are expected in the tax slabs, as experts of the field point out, however, some beneficial measures are anticipated for the salaried class. As of now, no official confirmation is available on the changes.

As experts point out, the consumption-culture, powered by the middle class, is what will make India a developed economy. So it is only fair to give back their fair share of expected state involvement.

The following changes are anticipated by the salaried class and middle income earners: –

  1. Revision of Lower Tax Slabs: Increase of basic Exemption Limit from Rs. 2.5 Lakhs to Rs. 5 Lakhs.
  1. Updation of HRA Rules: Revision of definition of Metro Cities to include more cities from the existing four – Delhi, Kolkata, Chennai and Mumbai. Bangalore, for example, has comparable costs of living on par with the current cities.
  1. Increase in 24b Limit: Currently, a deduction of 2 Lakhs can be availed for interest paid on housing loans. Revision of this to 5 Lakhs would be a very welcome measure in light of the increased interest loan interest rates.
  1. Section 80C deduction increase: An increase on the deduction of principal amount paid on housing loan from Rupees 1.5 Lakhs to 3 Lakhs is also expected in the upcoming budget. It is notable that the same has not been increased in the past decade.
  1. Exemption for Personal Loan borrowers: Comprising 35% of all borrowings, personal loan borrowers definitely deserve an exemption in lieu of interest paid on personal loans, like the one that can be availed for educational loans under Section 80E of the Income Tax Act, 1961.

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Builder’s Fault might cost you Additional Capital Gains Tax Liability u/s 54 IT Act: Here’s What You Need to Know

Section 54 of the Income Tax Act allows for an exemption on long-term capital gains tax for individuals and HUF (Hindu Undivided Family) if the proceeds from the sale of a long-term capital asset, such as a residential property, are invested in the purchase or construction of another residential property within a specified time frame….

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Relief to Paytm: Allahabad HC stays ₹1081 Cr. GST Demand

The Allahabad High Court has recently stayed the GST Demand, granting an interim relief to Paytm (One97 Communications Limited) from the liability to furnish ₹1081 Crore in relation to the supply of DTH Recharge Vouchers and Mobile Recharge Coupons.

The bone of contention in the dispute is whether the supply of mobile recharge coupons and Direct To Home (DTH) recharge vouchers to recipients, who are located in other States, would be inter-state supply or intra-state supply.

The Assessee, Paytm contended that the supply of vouchers were inter-state. However, rejecting this, the department demanded the company to furnish the tax amount.

The petitioner Counsel contended that the tax amount has already been paid in Uttar Pradesh, being treated as inter-state supply. In addition to that, the petitioner counsel submitted that the issue was already referred to the Central Board of Indirect Taxes & Customs (CBIC) by a representation, of which the response is still awaited.

The Central Board of Indirect Taxes, through the counsel, submitted that the representation shall be considered and a reply shall be given within three months, with appropriate directions regarding the same.

It was observed that, “In view of the fact that the amount of tax due on the transaction has already been paid and only dispute is whether it is to be treated as intra-State sale or inter-State sale, recovery of the demand raised vide order dated December 3, 2022 shall remain stayed till the next date of hearing”.

The Division Bench that heard the case adjourned the matter, while giving the next date of hearing as April 27th and stayed the Goods and Services Tax (GST) Demand in lieu of supply of mobile recharge coupons and Direct To Home (DTH) recharge vouchers to recipients, who are located in other States.

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Expiry of Six Months period u/s 18 FERA alone does not invoke duty to get Sale Proceeds of Repatriated Exports: Calcutta HC [Read Order]

A Single Bench of Calcutta High Court has held that mere expiry of the time period of six months prescribed under Section 18 of the Foreign Exchange Regulation Act, 1973 while rejecting the argument of a resigned director of M/s Grapco Industries Limited, in the alleged contravention of provisions of Sections 18 (2) and 18…

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Alleged GST Evasion of ₹20.83 Crores: Rajasthan HC grants Bail to accused on deposit of 10 percent of Tax Amount [Read Order]

A Single Bench of Rajasthan High Court headed by Justice Mahendar Kumar Goyal has granted bail to Goods and Services Tax (GST) evasion accused, allegedly evading tax to the tune of ₹20.83 Crores.

The accused had been arrested and placed in custody on 01.08.2022.  After the conclusion of the investigation, a charge-sheet had been filed on 30.09.2022 and he had already deposited 10 percent of the alleged evaded tax amount.

Siddharth Ranka, assisted by M. Iqbal, Saurav Harsh, Apeksha Bapna and Rohan Chatter appeared for the petitioner and argued that, the maximum punishment which can be awarded is five years and that the offenses are compoundable.

It was further submitted that the accused has no criminal antecedents and prayed for his release on bail.

In addition, it was also submitted that, “till date, no notice for adjudication of the tax liability as stipulated under Section 73 & 74 of the Rajasthan GST Act of 2017 has been served upon him.”

The accused was charged for the offense under Section 132(1)(B)(C) of the Rajasthan Goods and Services Tax Act, 2017.

It was contended by the counsel for the petitioner that he has falsely been implicated in this case.The petitioner counsel also submitted that there has been violation of mandatory provisions while effecting his arrest and its continuation. He also relied on the judgment passed in Ratnambar Kaushik vs. Union of India[2022 TAXSCAN (SC) 209].

In rebuttal, the state submitted that there is grave allegation against the petitioner of evasion of tax amount to the tune of ₹20.83 Cr. He, therefore, prayed for dismissal of the bail application.

Observing that, “the petitioner is in custody since 01.08.2022, charge-sheet has been filed on 30.09.2022 and he has already deposited about 10 percent of the amount of alleged evaded tax duty”, the Single Bench of Rajasthan High Court granted bail to the petitioner, Khem Chand Thathera.

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ITAT Weekly Round-Up

This weekly round-up analytically summarizes the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from December 24 to December 30 ,2022

Income Tax Authorities should Charge Legitimate Taxes from Taxpayers [ 2022 TAXSCAN (ITAT) 1899 ]

In, Kkalpana Plastick Ltd Vs ITO, Ward-10(3), Kolkata], In a recent ruling while slamming the income tax department for ignoring the grievance of the assessee, the Income Tax Appellate Tribunal (ITAT), Kolkata bench has held that the income tax authorities should charge legitimate taxes from the taxpayers. On first appeal, the CIT(A) has dismissed the appeal observing that the assessee was aware of the second rectification order dated 30.07.2014. Whatever the case may be, it is apparent from the record that the assessee was neither served with earlier rectification order dated 11.06.2014 nor with the second rectification order dated 30.07.2014. A bench of Shri Sanjay Garg, Judicial Member and Shri Rajesh Kumar, Accountant Member held that “the facts show that it is not a case where the assessee-appellant had remained negligent in persuing its remedy before the competent authority, rather it is a case of official apathy where the genuine grievance of the assessee has been overlooked, ignored and rejected and uncalled for demand was raised from the assessee. It has been held time and against that the Income Tax Authorities should charge legitimate taxes from the taxpayers.”

Bank is ‘Agent’ of Income Tax Dept for Receiving TDS Deposits, No Interest for Delay in Payment by Bank due to Technical Glitches on Portal – [ 2022 TAXSCAN (ITAT) 1900 ]

In, National Insurance Co. Ltd Vs ACIT, CPC-TDS,Ghaziabad, The Income Tax Appellate Tribunal (ITAT), Kolkata has held that the assessee cannot be penalized for the fault of glitches on the income tax portal and therefore, deleted the interest for non-remittance of TDS amount by the bank to the Government since the same was deposited by the assessee within the due date.

Property transferred to Mother for Rs. 5 Lakhs not ‘Gift’, Taxable as ‘Capital Gain’ the ITAT Ordered to Apply RS. 50C  – [ 2022 TAXSCAN (ITAT) 1902 ]

In, Jay Atulbhai Mody, Vs I.T.O., Ward-2(2)(3), Rajkot, The Income Tax Appellate Tribunal (ITAT), Rajkot bench has held that the property transferred in the name of mother for a nominal consideration of Rs. 5 lakhs cannot be treated as a “gift” as the same is taxable as “capital gain” under section 45 of the Income Tax Act, 1961.

Deduction u/s 36(1)(va) not allowable When Assessee failed to Deposit Employee’s Contribution to PF within due date – [ 2022 TAXSCAN (ITAT) 1898 ]

In, CC Engineers Pvt. Ltd vs I.T.O,The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that deduction under section 36(1)(va) of the Income Tax Act,1961 is not allowable when the assessee failed to deposit employee’s contribution to PF within due date. A Coram Shri Inturi Rama Rao, Accountant Member and Shri Partha Sarathi Chaudhury, Judicial Member observed that the payment of employees’ contribution to the provident fund was made before the due date of filing of return of income u/s 139(1) of the Act but beyond the due date as provided in the respective Statutes.

Genuineness and Creditworthiness of Creditor proven with Bank Statement and Other Evidence, Income Addition u/s 68 not allowable – [ 2022 TAXSCAN (ITAT) 1896 ]

In, ACIT vs Ashrita Construction Pvt. Ltd, The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has held that income addition under section 68 of the Income Tax Act,1961 is not allowable when the genuineness and Creditworthiness of the creditor are proven with the Bank statement and other evidence. The Assessing Officer has not doubted the interest payment of Rs. 1,83,79,553/- as against the above loan, with appropriate TDS made by the Assessee. Therefore, the addition made by the Assessing Officer u/s. 68 of the Act is not sustainable in law.

Assessing Officer can’t invoke jurisdiction u/s 153C and Seize material belonging to a Third Party before 1-6-2015 – [ 2022 TAXSCAN (ITAT) 1896 ]

In, ACIT vs Ashrita Construction Pvt. Ltd, The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the Assessing Officer can’t invoke jurisdiction under section 153C of the Income Tax Act,1961 and seize material belonging to a third party before 1-6-2015. A Coram comprising of Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member observed that search action has been taken place on 10.03.2015 much before 01.06.2015 and the seized material does not belong to the assessee. The basic requirement to justify the assumption of jurisdiction u/s. 153C of the Income Tax Act does not exist, therefore the issuance of notice u/s. 153C is not valid.  The Cross objection filed by the assessee was allowed.

Commodity Transactions carried out during Regular course of Business cannot be treated as ‘Speculative Business’ – [ 2022 TAXSCAN (ITAT) 1890 ]

In, Asst. Commissioner of Income Tax vs M/s. Clothing Culture Ltd, The Mumbai Bench of Income Tax Appellate Tribunal has allowed the deduction holding that the commodity transactions carried out during the regular course of business could not be treated as speculative business. The Tribunal Bench of Vikas Aswathy (judicial Member) and M Balaganesh (Accountant Member) held that the commodity transactions could not be treated as a speculative business carried on by the assessee as it had been carried out in the regular course of the business. The Bench further held that the business expenditure would be allowable as deduction under Section 37 of the Income Tax Act 1961.

Brokerage not part of Income unless Received – [ 2022 TAXSCAN (ITAT) 1889 ]

In, Harmeet Singh vs ACIT, The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the addition holding that the brokerage would not be treated as income unless it was actually received by the assessee. The Bench of NK Billaiya (Accountant Member) and Kul Bharath (Judicial Member) held that the brokerage could not be treated as income as the evidence had not been produced on actual receival of the brokerage on the sale of the property. The bench further deleted the impugned addition.

Unsubstantiated Personal Expenses of Directors not allowable as Business Promotion Expenses – [ 2022 TAXSCAN (ITAT) 1886 ]

In, Gryphon Appliances Ltd vs DCIT, The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ), constituted of Anil Chaturvedi (Accountant Member) and Anubhav Sharma (Judicial Member) held unsubstantiated personal expenses of directors are not allowable as Business Promotion Expenses. The tribunal noted that in case of business promotion expenses, the assessee is expected to show that the expenses intended to achieve any specific or general business target or how it could have helped the promotion of business or business interest of the assessee.

No Evidence to prove Nature and Source of Property: ITAT upholds Income Addition u/s 69 A – [ 2022 TAXSCAN (ITAT) 1887 ]

In, The DCIT vs M/s. Shivram Consultants India Pvt. Ltd,The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has upheld the addition under section 69 of the Income Tax Act,1961 in the absence of evidence to prove the nature and source of property. A Coram Shri Anil Chaturvedi, Accountant Member and Shri Anubhav Sharma, Judicial Member observed that the AO noted that the Draft Deed retrieved from the hard disk showed that the major constituents like the Vendor, Vendee, the name of the shareholders and their shareholdings, the sale consideration was exactly similar in the Draft Deed and original Sale Deed executed by the assessee.

Transfer Pricing Order passed beyond the period of Limitation ITAT quashes order u/s 92CA(3) – [ 2022 TAXSCAN (ITAT) 1895 ]

In, Intrado EC India Private Ltd vs Deputy Commissioner of Income Tax, The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) quashed the order under section 92CA(3) of the Income Tax Act,1961 as the transfer pricing order was passed beyond the period of limitation. A Coram comprising of Smt. Beena Pillai, Judicial Member and Ms Padmavathy S, Accountant Member noticed that the DRP has held that the order dated 31.10.2019 which was issued without DIN is made good by the order dated 01.11.2019 which is issued without DIN since the contents of both the orders are same.

Non-Speaking Disallowance of Written off TDS on Unrealized Rental Income – [ 2022 TAXSCAN (ITAT) 1901

In, Idea Estate Pvt. Ltd, Vs DCIT, Circle-12(1),The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) directs the Commissioner of Income Tax (Appeals) [CIT(A)] to re-adjudicate and also orders to record the reasons for the disallowance of written off Tax Deduction Source (TDS) on unrealised rental income of the assessee. The bench observed that the Tax Authorities below have disallowed written off TDS on rental income it was earlier allowed in the assessment order under section 143(3) of the income Tax Act on the basis that since the expenses pertain to the income from house property and does not pertain to income under the head business and profession therefore, same is not allowable under the section 37 of the Act nor 36(1)(vii) of the Income Tax Act.

Income derived from Training Fee and related Course Material, not entitled to Deduction u/s.10B – [ 2022 TAXSCAN (ITAT) 1904 ]

In, Pentasoft Technologies Ltd vs The Income Tax Officer (OSD), In a recent ruling, the Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the rental income derived from the lease of plant & machinery or equipment is taxable under the head ‘income from other sources’.

Rental Income derived from Lease of Plant & Machinery or Equipment Taxable under Head ‘Income from Other Sources’ – [ 2022 TAXSCAN (ITAT) 1904 ]

In, Pentasoft Technologies Ltd vs The Income Tax Officer (OSD), the case of Penta soft technology, the Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the rental income derived from the lease of plant & machinery or equipment is taxable under the head ‘income from other sources’. A Coram comprising of Shri V Durga Rao, Judicial Member and Shri G Manjunatha, Accountant Member observed that there are no details as regards whether rental income is derived from leasing of land & building or any plant & machinery or equipment.  Further, even in the assessment order, there are no details about the nature of the rental receipt.

Claim of Writing Off old dues cannot allow in the Absence of Evidence, old due payable is Taxable – [ 2022 TAXSCAN (ITAT) 1903 ]

In, Shri Nirav Dilipkumar Desai vs ITO, The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that claim of writing off old dues cannot allow in the absence of evidence and old due payable are taxable. A single member Coram comprising of Ms Suchitra Kamble, Judicial Member observed that the assessee has shown in the return in respect of old dues not payable as income from other sources and was never shown the same as debts and liabilities by the assessee in the previous year. It was viewed that merely stating that it is wrongly treated under income from other sources cannot show the genuineness of the assessee related to old dues.  The assessee has not brought on record a particular instance where the assessee has the right to approach Shri Rasik C. Patel.

Provisions of Section 43CA of Income Tax Act can invoke only When Sale Value of Property price lesser than Stamp Value – [ 2022 TAXSCAN (ITAT) 1907 ]

In, Asstt. Commissioner of Income vs Shri Debashis Roy, The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) has held that provisions of Section 43CA of Income Tax Act,1961 can invoke only when sale value of property price lesser than stamp value. The Tribunal viewed that provisions of Section 43CA of the Income Tax Act do not apply to the purchase of property but section 43CA of the Income Tax Act deals with the case where the sale value of property held as stock-in-trade is sold during the year at a price lesser than stamp value. While dismissing the appeal of revenue upheld the order of the CIT(A) on this issue by dismissing the ground raised by the revenue.

Trading Liabilities incurred with Corresponding Purchases cannot be the subject matter of Addition u/s 68 – [ 2022 TAXSCAN (ITAT) 1907 ]

In, Asstt. Commissioner of Income vs Shri Debashis Roy, The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that trading liabilities incurred with corresponding purchases cannot be the subject matter of addition under section 68 of the Income Tax Act,1961. A Coram consisting of Shri Rajpal Yadav, Vice President & Shri Rajesh Kumar, Accountant Member observedthat these liabilities were incurred as trading liabilities with corresponding purchases and therefore can not be the subject matter of addition u/s 68 of the Act as the provisions of section 68 of the Act apply to the credits in the books of accounts of the assessee which could not be explained with respect to identity, creditworthiness and genuineness. The Tribunal dismissed the appeal of the revenue.

Income Tax Matters settled under DTVSV scheme cannot be Revised u/s 263 – [ 2022 TAXSCAN (ITAT) 1905 ]

In, Shri Pavan Kandkur vs Principle Commissioner of Income Tax, The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the revisional jurisdiction under section 263 of the Income Tax Act, 1961 cannot be invoked in respect of matters settled under the amnesty scheme, DTVSV.

Interest Income earned on FD kept as Security for Performance Guarantee is Taxable as Business Income Can be set off against Project Expenses – [ 2022 TAXSCAN (ITAT) 1906 ]

In, NCML Varanasi Private Limited vs ITO, The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that interest income earned on Fixed Deposit (FD) kept as security for performance guarantee is taxable as business income Can be set off against project expenses. It was observed that the interest income earned by the assessee has to be treated as income from business and can be set off against the cost of construction. There is no doubt that the interest income pertained to the impugned assessment year and the concerned banks have deducted tax at source while crediting the interest income to the account of the assessee. The departmental authorities have rejected to grant a refund of the TDS amount as the interest income has been adjusted against the construction expenses.

CIT(A) can’t disallow Deduction claimed u/s 80P(2)(d) When Assessee filed Independent Auditor’s Report under Maharashtra Co-operative Societies Act – [ 2022 TAXSCAN (ITAT) 1876 ]

In, Neptune Snowden Peak Co-op. Housing Society Ltd,vs ITO Ward 26(1)(1), The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that CIT(A) can’t disallow deduction claimed u/s 80P(2)(d) of the Income Tax Act,1961 when assessee filed an independent auditor’s report under Maharashtra Co-operative Societies Act.The Tribunal observed that the CIT(A) also has invoked the provisions contained under section 44AB of the Act that the assessee has not filed audited accounts under the Income-tax Act.  Since the assessee society is not required to file areport under section 44AB, the order passed by CIT(A) is not sustainable in the eyes of law.

Right to Personal Hearing is a Vested Right of Assessee under Income Tax Law – [ 2022 TAXSCAN (ITAT) 1908 ]

In, Parmjit Kaur Vs Income Tax Officer, Ward-2, Faridkot, In a significant ruling, the Amritsar bench of the Income Tax Appellate Tribunal (ITAT) has held that the right to personal hearing is a vested right of the assessee under section 144B(1)(xvi) of the Income Tax Act, 1961.

Non-Compete Agreement is an Intangible Asset, Depreciation allowable – [ 2022 TAXSCAN (ITAT) 1909 ]

In, Pentasoft Technologies Ltd. vs The Income Tax Officer (OSD), The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that a non-compete agreement is an intangible asset and depreciation is allowable on the same. A Coram comprising of Shri V Durga Rao, Judicial Member and Shri G Manjunatha, Accountant Member viewed that under the composite agreement, the transferor had transferred all its rights, copyrights, and trademarks in respect of the word ‘pentasoft’ as well as the training and development division exclusively to be exploited by the assessee.

MSME registered for Skill Development not eligible for Income Tax Exemption under Section 12AA of Income Tax Act – [ 2022 TAXSCAN (ITAT) 1911 ]

In, J.K. Council for Social Welfare And Information Technology vs CIT (Exemption), The Amritsar Bench of Income Tax Appellate Tribunal (ITAT) presided over by M.L.Meena (Accountant Member) and Anikesh Bnerjee (Judicial Member) upheld the decision of the Commissioner of Income Tax (Appeals). It was observed by the bench in the order of the CIT (A) that the objects in the case of the applicant are based merely on skill enhancement and no systematic education is involved. The aims of the applicant trust are to promote skill development among youth, school children in order to be eligible for suitable employment opportunities.

Development Expense and Exchange Fluctuation Loss deducted from Export Turnover must be deducted also from Total Turnover – [ 2022 TAXSCAN (ITAT) 1909 ]

In, Pentasoft Technologies Ltd. vs The Income Tax Officer (OSD), The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that Development expense and exchange fluctuation loss deducted from export turnover needs to be deducted from total turnover.The ITAT held that the AO & the CIT(A) erred in not excluding expenses deducted from export turnover from total turnover and further directedthe AO to exclude expenditure incurred towards software development and foreign exchange loss from total turnover also.

ITAT grants Opportunity to Assessee for Appearance before CIT(A) being Senior Citizen and not aware Digital Communication – [ 2022 TAXSCAN (ITAT) 1912 ]

In, Abdul Muqeet Mohammed vs The Asst. Commissioner of Income Tax, The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT), granted opportunity to assessee for appearance before Commissioner of Income Tax (Appeals) (CIT(A)) being Senior citizen and not aware digital communication.

Delay in filing TDS would attracts Late Fee u/s 243E of Income Tax Act – [ 2022 TAXSCAN (ITAT) 1913 ]

In, Reshma Devi vs CPC (TDS) Ghaziabad, Income Tax Appellate Tribunal (ITAT) of Amritsar bench, entertained by M.L. Meera (Accountant Member) and Anikesh Banerjee (Judicial Member) upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] National Faceless Appeal Centre (NFAC) that to levy the late fee on the assessee on filing Tax Deduction Source (TDS) late. The bench upheld the decision of the CIT(A) who justified in confirming the finding of the CPC (TDS) in levying late fee under section 234E of Income Tax Act amounting to Rs 30,600/- as per the law. Accordingly, the bench dismissed the appeal.

Depreciation can be allowed on Factual aspects under CBDT Instruction, even If the Value is not Recorded in Books of Account – [ 2022 TAXSCAN (ITAT) 1915 ]

In, Pathankot Hindu Urban Co-operative Bank Ltd vs Dy. CIT, The Amritsar bench of the Income Tax Appellate Tribunal ( ITAT ) has held that depreciation can be allowed on factual aspects under CBDT instruction, even if the value is not recorded in the books of account A Coram comprising of Dr M L Meena, Accountant Member and Sh. Anikesh Banerjee, Judicial Member observed that only the reflection in the books of account during the year cannot be the reason for the nonacceptance of the depreciation. The depreciation in stock or the selling investment has a clear effect on the net profit which is after all taken into the computation of the assessee. The provision of depreciation/diminution in the value of the investment is acted through an “investment fluctuation reserve account”.

Interest Paid is allowable u/s 36(1)(iii) of Income Tax Act When Funds are Borrowed for Construction Project – [ 2022 TAXSCAN (ITAT) 1916 ]

In, Keystone Realtors Pvt. Ltd. vs Dy. Commissioner of Income Tax Circle– (2)4, The Income Tax Appellate Tribunal( ITAT ), Mumbai Bench consisting of Prashant Maharshi, Accountant Member and Sandeep Singh Karhail, Judicial Member ruled that interest paid is allowable under Section 36(1)(iii) of the Income Tax Act when funds are borrowed for construction project. A Division Bench observed that “In the present case, since the funds were borrowed for the purpose ofprojects undertaken by the assessee, therefore, the interest paid on such borrowing is allowable under section 36(1)(iii) of the Income Tax Act. Accordingly, the AO is directed to grant the deduction under section 36(1)(iii) of the Income Tax Act in respect of the interest expenditure claimed by the assessee.”

Income Tax penalty levied u/s 271(1)(C) not attract as TDS already deducted under DTAA – [ 2022 TAXSCAN (ITAT) 1920 ]

In, Shri Karnail Singh vs Joint Commissioner of Income Tax, Income Tax Appellate Tribunal ( ITAT ) of Chandigarh bench ruled that the penalty under section 271(1)(c) does not attract as the Tax Deduction Source (TDS) already deducted under Double Taxation Avoidance Agreements ( DTAA ). Bench of Sudhanshu Srivatsava (Judicial Member) and Vikram Singh (Accountant Member) directed that the penalty levied and sustained by the Commissioner of Income Tax (Appeals) under section 271(1)(C) be deleted and the matter was decided in favour of the assessee.

Relief to CRI Group Royalty paid to Holding Company for Using Brand Name Deductible from Total Income, rules ITAT  -[ 2022 TAXSCAN (ITAT) 1919 ]

In, Assistant Commissioner of Incometax vs M/s. CRI Pumps Pvt. Ltd., The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the amount of royalty paid to the Holding Company for using the brand name, being a revenue expenditure, shall be deductible under the Income Tax Act, 1961. A bench of Shri Mahavir Singh, Vice President and Shri G. Manjunatha, Accountant Member held that “In this view of the matter and consistent with the view taken by the co-ordinate bench in assessee’s own case for earlier assessment years, we are of the considered view that the assessee is entitled for deduction towards royalty payment to holding company for using brand name CRI and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue.”

Brand Promotion Expenditure to Force India are Revenue in Nature, allowable as Deduction – [ 2022 TAXSCAN (ITAT) 1917 ]

In, United Breweries Limited vs Deputy Commissioner of Income-tax, In a significant ruling in favour of United Breweries, the Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) has held that advertisement expenses for brand promotion are revenue in nature and are allowable as deduction. It was observed that in the case of United Spirits Limited, the Tribunal held that “merely because the advantage may endure for an indefinite future would not mean that the expenditure would be on capital account and not revenue.”

Non-Submission of Documents due to Long Distance and Age, ITAT quashes Proceedings against Senior Citizen – [ 2022 TAXSCAN (ITAT) 1922 ]

In, ITO, Ward-(3) vs Sh. Subash Chander Saggi, Proceedings against a senior citizen on non-submission of the document were quashed by the Amritsar bench of the Income Tax Appellate Tribunal (ITAT) by considering the long distance and age. Further held that “the CIT(A) shall provide the proper and adequate opportunity of being heard to the assessee in set aside proceedings. The evidence/explanation submitted by the assessee in its defence shall be admitted by the CIT(A)and adjudicated by the  CIT(A) on merits by law.”

Commission Agent not obliged to get Account Audited, Penalty u/s 271 B not leviable  -[ 2022 TAXSCAN (ITAT) 1923 ]

In, Bablu Kumar Harinarayan Gupta vs ITO, The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the commission agent is not obliged to get the account audited and the penalty under section 271 B of the Income Tax Act,1961 is not leviable. Further observed that the appellant is only commission agent and there is no obligation on the part of the assessee to get the accounts audited as he was under the bonafide belief that it is only commission receipt, which can be considered as turnover for section 44AB of the Act.

Treating Share Subscription by One Party as Unexplained Cash Credit, ITAT deletes Income Tax Addition -[ 2022 TAXSCAN (ITAT) 1925 ]

In, A.G. Ferro Cast P Ltd vs ITO, The Income Tax Appellate Tribunal ( ITAT ), Kolkata Bench consisting of Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member deleted addition as there was treating share subscription by one party as unexplained cash credit. The Bench observed that “The Assessing Officer without pointing out any defect or infirmity in the evidences or details furnished by the assessee or any contradiction in the statement recorded u/s 131 of theAct has made the impugned addition only in the case of one party and having accepted the share subscription/share premium in the case of other parties. As observed above, the Assessing Officer even has not given any reasoning in the impugned assessment order for making the impugned addition.”

ICAI Guidelines for Calculating Turnover in Transactions related to Future and Options Reliable in the Absence of Statutory Provision -[ 2022 TAXSCAN (ITAT) 1926 ]

In, Shri Sanjay Marotrao Modak F-503 vs Dy. CIT, Circle 29(3), The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the ICAI ICAI Guidelines for calculating turnover in transactions related to future and options can be relied on in the absence of statutory provision under the Income Tax Act, 1961. Allowing relief to the assessee, the ITAT held that the validity of the ICAI guidance for calculating the turnover in case of derivatives has been reiterated by various judicial precedence.

Excess Claim of Expenditure not be proved by relevant Bills -[ 2022 TAXSCAN (ITAT) 1930 ]

In, Print Plus Private Limited 212 vs Income Tax Office 7(1)(4) Income Tax Office, The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), confirmed addition as the excess claim of expenditure not be proved by relevant bills. A Coram consisting of Aby T Varkey, Judicial Member and Om Prakash Kant, Accountant Member observed that “The assessee had already claimed expenses on various counts VIZ travelling, fuel expenditure and other expenses separately and the directors in their return of income has shown only remuneration at a total of Rs.23 lakhs and since the excess claim of expenditure on behalf of directors could not be provedby relevant bills, we agree with the impugned action of the CIT(A) on this issue and are inclined to confirm the same.”

NFAC bound to Follow CBDT Circular -[ 2022 TAXSCAN (ITAT) 1934 ]

In, Telangana Working Journalists Welfare Fund vs ITO, The Income Tax Appellate Tribunal ( ITAT ), Hyderabad bench has held that the National faceless Appeal Centre (NFAC) is bound to follow the circulars of the Central Board of Direct Taxes (CBDT). ITAT bench comprising Shri Rama Kanta Panda, Accountant Member and Shri K. Narasimha Chary, Judicial Member observed that “Since the above instruction dated 23.04.2019 and subsequent circular No.2/2020 vide F.No.197/55/2018-ITA-I dated 03.01.2020 were not considered by the CIT(A)/NFAC, although, these are instructions/circulars issued by the Board and are binding on the revenue authorities, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of CIT(A)/NFAC with the direction to adjudicate the issue afresh in the light of the circulars/instructions issued by the CBDT clarifying the time allowed for filing of return of income subsequent to the insertion of clause(ba) in sub-section (1) of section 12A of the Act. Needless to say, the CIT(A)/NFAC shall give due opportunity of being heard to the assessee and decide the issue as per fact and law.”

Relief to Doloo Tea Company – [ 2022 TAXSCAN (ITAT) 1932 ]

In, Doloo Tea Company (India) Ltd vs ACIT, Circle-4, The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), deletes addition made by taxing sale of tea bushes and shade trees, thereby granting relief Doloo Tea Company (India) Ltd, the assessee. A Coram comprising Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member observed that “The action of the lower authorities in taxing compensation received on account of sale of tea bushes and shade trees cannot be held to be justified. The addition made by the lower authorities by taxing the sale of tea bushes and shade trees is ordered to be deleted.”

‘Tax Authorities should stop functioning with the colonial mindset dispensing justice to the colonies’ -[ 2022 TAXSCAN (ITAT) 1936 ]

In, Shri Rajbir Singh vs Pr. CIT, The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ) has recently observed “Tax Authorities should stop functioning with the colonial mindset dispensing justice to the colonies” and held that, “An assessee who is in possession of a validly passed assessment order cannot be required to again face the AO to support the return filed.”

Payment of Rs. 22 Lakh in Cash to Wholesale Dealer attracts Disallowance u/s 40A(3) -[ 2022 TAXSCAN (ITAT) 1933 ]

In, Shri Kalimuthu Harichandran vs ACIT, The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) disallowed the tax deduction on grounds that an amount of 22 Lakhs payment to the whole sale dealer was made fully in cash which is contrary to the provision of Section 40A(3) of Income Tax Act, 1961. The bench noted that the assessee, is a trader i.e.,retail and wholesale trader of dhall and oil and he admitted that he is making payment in cash in excess of Rs.20,000/- for purchase of dhall and oil and for which, he has made total payments to the extent of Rs.22,58,09,550.

Sec 69 of Income Tax Act not applicable when amount represents Sale Proceeds realized by Company -[ 2022 TAXSCAN (ITAT) 1940 ]

In, N.K. Proteins Pvt. Ltd. vs DCIT, The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ), ruled that Sec 69 of the Income Tax Act, 1961 not applicable when amount represents sale proceeds realized by company. A Coram consisting of Pramod M Jagtap, Vice President and Suchitra Kamble, Judicial Member observed that “We find merit in this contention of the Counsel for the assessee and since the DR has not been able to dispute the position that the amount in question represented sale proceeds realized by the assessee-company, we accept the contention of the Counsel for the assessee that Section 68 of the Income Tax Act has no application and the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue by invoking Section 68 of the Income Tax Act cannot be sustained.”

Sale of CWO proved and recorded as Income in Books of Account  -[2022 TAXSCAN (ITAT) 1940]

In, N.K. Proteins Pvt. Ltd. vs DCIT, The Income Tax Appellate Tribunal ( ITAT ), Ahmedabad Bench deleted addition on the ground of alleged non-genuine purchase as the sale of Cotton Wash Oil (CWO) was proved and recorded as income in books of account. A Coram consisting of Pratap M Jagtap, Vice President and Suchita Kamble, Judicial Member observed that “The said sale recorded and recognized by the assessee-company in its books of account was accepted by the authorities below and we find merit in the contention raised by the learned Counsel for the assessee that the corresponding purchases cannot be disallowed when the sale was accepted.”

VAT collected Separately from Customer differ from Charges u/s 40 (a) (iib), Deduction allowable -[ 2022 TAXSCAN (ITAT) 1924 ]

In, Tamilnadu State Marketing Corporation Ltd vs The ACIT, The Chennai bench of the Income Tax Appellate Tribunal (ITAT) VAT collected separate from customers different from charges u/s 40 (a) (iib) of the Income Tax Act,1961 and deductionis allowable. It was observed that the power of the State Government to levy tax on the sale and purchase of liquor and the power to levy fees are two different powers and are derived from two different entries in the State list.  The fees levied under the power granted under Entry 69 cannot encompass tax levied by Entry 54. The appeal of the assessee was allowed.

 Owner Selling Property through GPA Holder -[ 2022 TAXSCAN (ITAT) 1941 ]

In, Dr. Sabesan Parameswaran vs The ACIT, The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), confirmed income as Long Term Capital Gain in the case of owner selling property through General Power of Attorney (GPA). The Tribunal also noted that the PoA and sale deed both are executed on the same day by assessee as well as the GPA. It means the PoA holder has no legal right or interest in the property and entire consideration belongs to assessee or other co-owner. Even otherwise, S. Ramaswamy has not accounted for this consideration in his return of income or no capital gain is declared either short term or long term by S. Ramaswamy, the PoA holder in his return of income.

Exemption u/s 11 allowable on Income derived from Property held under Trust wholly for Charitable Purpose -[ 2022 TAXSCAN (ITAT) 1935 ]

In, Ghaziabad Development Authority vs JCIT, Exemption Range, The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that Exemption u/s 11  of the Income Tax Act,1961 is allowable on income derived from property held under trust wholly for a charitable purpose. A Coram consisting of Sh. N. K. Choudhary, Judicial Member Dr B. R. R. Kumar, Accountant Member held thatthe assessee is found to be eligible for exemption u/s 11 for all the years pre and post-A.Y.2008-09, by the orders of the Tribunal and upheld the action of the Assessing Officer denying the exemption u/s 11 cannot be supported.

Concluded Assessment/ Reassessment cannot be disturbed in Absence of Incriminating Material during Search -[ 2022 TAXSCAN (ITAT) 1938 ]

In, Essel Mining & Industries Limited vs Deputy Commissioner of Income Tax, The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that concluded assessment/ reassessment cannot be disturbed in absence of incriminating material received during the search. The ITAT bench concluded that none of the additions that were made by the AO was based on reliance placed on search materials received from the Assessing Officer of the searched person and the assessment for A.Y.2010-11 had originally been completed u/s.143(3) of the Income Tax Act dated 28/03/2013.

Lack of Guidance by Tax Professionals in Filing Audit Report with Income Tax Return -[ 2022 TAXSCAN (ITAT) 1942 ]

In, Shardaben Education Trust vs Income Tax Officer, The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ), granted exemption under Section 11 of the Income Tax Act, 1961 to educational trust on lack of guidance by tax professionals. The Tribunal of Waseem Ahmed, Accountant Member observed that “Thus, the cumulative effect from the reading of the above facts reveals that there was lack of guidance on the part of the assessee by the tax professionals. Thus, in the event of any disallowance of the benefits available to the assessee, it will cause undue hardship to it in the given facts and circumstances.”

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ITAT upholds Penalty u/s 271(1) (c) When Assessee failed to make Full and True Disclosure of the facts in Income Tax Return [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) upheld the Penalty under section 271(1) (c) of the Income Tax Act, 1961 when the assessee failed to make full and true disclosure of the facts in the Income Tax Return.

Sabara Impex Ltd., the assessee filed its return of income on 0112-1997 declaring total income at Rs 22,40,430/-. A survey was conducted by DDIT in the case of M/s Geekay Exim India Ltd. During the course of the survey, it was found that various concerns of the group were engaged in fictitious trading of pharmaceutical goods without actual delivery. A statement u/s 131 was recorded of Shri Rais Ahmed, director of M/s Geekay Exim India Ltd. Shri Rais Ahmed is also a director in the assessee company. 

All the goods purchased by the assessee were sold to one single party M/s Ebers Pharmaceuticals Ltd. These purchases and sales were not supported by any delivery challans or proof of transportation. No payments had been made for these purchases and no confirmation was submitted for sundry creditors in respect of the above-mentioned parties.

There can be no dispute about the proposition that the penalty proceedings are different from assessment proceedings and mere addition in quantum proceedings would not ipso facto result in the imposition of a penalty.

It was viewed that as the assessee had not disclosed all details in the return of income and the claim of the assessee was not sustainable in law amounting to the furnishing of inaccurate particulars or concealment of income on the part of the assessee.

 The various explanations to section 271(1)( c) only explain the ambiguity in the provisions relating to imposition of penalty and merely because the case of the assessee was not covered by any particular explanation, it did not mean that penalty could not be imposed when there is no difficulty in determining the tax sought to be evaded.

Under the provisions of section 271(1) of the IT Act, the penalty is prescribed for concealing the particulars of income or for furnishing inaccurate particulars and the quantum of penalty is based on the tax sought to be evaded.

A Coram comprising of Shri Vikas Awasthy, Judicial Member and Shri Gagan Goyal, Accountant Member observed that the assessee has filed inaccurate particulars of income at the time of filing the return to conceal its income and the provisions of section 271(1)(c) is attracted in the assessee’s case While filing the return of income, the assessee failed to offer the said incomes for taxation with a dishonest intention to conceal its income.

Further, the assessee has failed to offer any plausible explanation in this regard thus the assessee has failed to make full and true disclosure of the facts while computing its income and filed a return of income with inaccurate particulars and thereby concealing its taxable income.

 The Tribunal held that the assessee has failed to make out a case for avoiding levy of penalty in its case as the primary onus in the case in terms of Explanations to section 271(1) (c) of the Income Tax Act has not been discharged by the assessee and upheld the imposition of penalty.

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18% GST payable on Royalty paid under RCM for Mining: AAR [Read Order]

The Authority of Advance Ruling (AAR) has ruled that, GST at the applicable rate is payable by the applicant on the royalty amount under Reverse charge mechanism.

The personal hearing was conducted through virtual mode and the authorized representative Mithiiesh Kumar, CA appeared before the authority to put forward the contentions.

The Authority Bench observed that, “Royalty amount is also includible while arriving at the transaction value for payment of applicable GST on the supply of aforesaid services rendered by the applicant to the main contractor, as stipulated under Section 15 of Central Goods and Services Tax Act, 2017.”

“The Government provides licenses to various companies including Public Sector Undertakings for exploration of natural resources like oil, hydrocarbons, iron ore, manganese, etc. For having assigned the rights to use the natural resources, the licensee companies are required to pay consideration in the form of annual license fee, lease charges, royalty, eic. to the Government. The activity of assignment of rights to use natural resources is treated as supply of services and the licensee is required to pay tax on the amount of consideration paid in the form of royalty or any other form under reverse charge mechanism.”, the Authority Bench of Member Rajesh Kumar Singh and Member Sonal K Mishra observed from the Sectoral FAQ published by CBEC.

Thus in this case, as the applicant is admittedly availing mining rights including it exploration and evaluation of soil used in earthwork on payment of a consideration to the Government of Chhattisgarh applicable with effect from 1.4.2018 GST is payable on reverse charge basis by the applicant on the consideration so paid to the Government, at the rate of supply of like goods being mined, on account of availing the said mining rights.

Accordingly the authority came to the considered conclusion that, GST was applicable as per the Notification No. 1 1/201 7-CT (Rate), dated 28.06.2017 as amended is included in subheading attracting GST rate @18 % [ 9%+9%].

It was thus ruled that, “GST at the applicable rate is payable by the applicant on the royalty amount under Reverse charge mechanism” and “Royalty amount is also includible while arriving at the transaction value for payment of applicable GST on the supply of services rendered by the applicant to the main contractor, as stipulated under Section 15 of CGST Act, 2017.”

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Procedural flaw in issue of SCN and Unnecessary Rebuttal of Assessee: Calcutta HC orders Fresh Adjudication [Read Order]

A division bench of the Calcutta High Court has recently quashed the Goods and Services Tax proceedings against the assessee, Joyous Blocks & Panels Private Limited for procedural flaws in issuance of Show Cause Notice and unnecessary rebuttal of assessee. The appellants had challenged a show cause notice issued by the authority dated 26th September,…

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CBIC Clarifies Eligibility for ITC where Place of Supply is Determined u/s 12(8) of IGST Act [Read Circular]

The Central Board of Indirect Taxes and Customs (CBIC) has clarified the entitlement of input tax credit where the place of supply is determined in terms of the proviso to sub-section (8) of section 12 of the Integrated Goods and Services Tax Act, 2017.

As per clause (a) of the aforesaid subsection, the place of supply of services by way of transportation of goods, including by mail or courier, to a registered person shall be the location of such registered person. However, the proviso to the aforesaid sub-section which was inserted vide the Integrated Goods and Services Tax (Amendment) Act, 2018 w.e.f. 01.02.2019 provides that where the transportation of goods is to a place outside India, the place of supply of the said service shall be the place of destination of such goods. In such cases, as the place of supply of services, as per the proviso to sub-section (8) of section 12 of IGST Act, is the concerned foreign destination and not the State where the recipient is registered under GST, doubts are being raised regarding the availability of input tax credit of the said services to the recipient located in India.

In order to clarify this issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017, the CBIC clarified that in case of supply of services by way of transportation of goods, including by mail or courier, where the transportation of goods is to a place outside India, and where the supplier and recipient of the said supply of services are located in India, the place of supply is the concerned foreign destination where the goods are being transported, in accordance with the proviso to the sub-section (8) of section 12 of IGST Act, which was inserted vide the Integrated Goods and Services Tax (Amendment) Act, 2018 w.e.f. 01.02.2019.

Section 16 of the CGST Act lays down the eligibility and conditions for taking input tax credit whereas, section 17 of the CGST Act provides for apportionment of credit and blocked credits under circumstances specified therein. The said provisions of law do not restrict availment of input tax credit by the recipient located in India if the place of supply of the said input service is outside India. Thus, the recipient of service of transportation of goods shall be eligible to avail input tax credit in respect of the IGST so charged by the supplier, subject to the fulfilment of other conditions laid down in section 16 and 17 of the CGST Act.

The circular further clarified that the supplier of service shall report place of supply of such service by selecting State code as ‘96- Foreign Country’ from the list of codes in the dropdown menu available on the portal in FORM GSTR-1.

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Property transferred to Mother for Rs. 5 Lakhs not ‘Gift’, Taxable as ‘Capital Gain’: ITAT Orders to Apply S. 50C [Read Order]

The Income Tax Appellate Tribunal (ITAT), Rajkot bench has held that the property transferred in the name of mother for a nominal consideration of Rs. 5 lakhs cannot be treated as a “gift” as the same is taxable as “capital gain” under section 45 of the Income Tax Act, 1961. Ms. Suchitra Kamble, Judicial Member…

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ITAT dismisses Plea for Restoration of Income Tax Registration of Popular Front of India Post Ban [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently upheld the order of  Commissioner of Income Tax (Exemptions) [CIT(E)], in verification of cancellation of the Income Tax registration of the assessee-Popular Front of India (PFI) under Section 12AA(3) of the Income Tax Act, 1961.

The assessee had contended in writing that, “order of CIT(E), Delhi dated 22.03.2021 under section 12AA(3)/section 12AA(4) rejecting appellant’s Application No. IT(EXEMPTION), DELHI/2020-21/12AA/11940 is perverse, bad in law and void ab-initio.”

The appeal was first listed before the tribunal on 10.08.2022, on which date none appeared on behalf of the assessee and the appeal was adjourned with a direction to issue fresh notice.

The matter was taken up for ex-parte hearing by the tribunal bench of Judicial Member Kul Bharat and Accountant Member N K Billaiya, in the absence of representation.

Section 12AA(3) states that, “where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under Section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing canceling the registration of such trust or institution.

Upon perusal of the objects of the Memorandum of Association of the assessee, the tribunal observed that the assessee society is created to promote national integration, communal amity and social harmony and uphold the democratic set up, secular order and rule of law in the country.

However, the  Ministry of Home Affairs, by Notification dated 27.09.2022 published in the Gazette of India dated 28.09.2022, notified that the the PFI is involved in several criminal and terror cases and shows sheer disrespect towards the constitutional authority of the country and with funds and ideological support from outside it has become a major threat to internal security of the country. The said notification was relied upon by the department representative, Commissioner of Income Tax, M Baranwal.

In the Gazette notification, it was stated that, “the sources of deposits on behalf of PFI with respect to its several bank accounts were not supported by the financial profiles of the account holders and the activities of PFI were not being carried out as per their declared objectives and therefore, the Income Tax Department canceled the registration granted to PFI under section 12A or 12AA of the Income Tax Act, 1961 (43 of 1961). The Income Tax Department also canceled the registration granted to Rehab India Foundation under section 12A or section 12AA of the Income Tax Act, 1961.” In view of the above Gazette notification, the appeal of the assessee-Popular Front of India to restore the Income Tax registration was dismissed by the Income Tax Appellate Tribunal.

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Demand Order passed ex-parte against Cement House without considering merits: Patna HC remands GST matter to Assessing Authority [Read Order]

The Patna High Court has recently set aside the ex-parte Goods and Services Tax (GST) demand order against M/s Cement House for the violation of natural justice principles in passing the order.

The Division Bench of Chief Justice Sanjay Karol and Justice Partha Sarthy observed that, “All issues of fact and law ought to have been dealt with, even if the proceedings were ex parte in nature.”

The petitioner seeked the Writ remedy for issuing directions to the respondent-department to hear the case and quash the demand order served on the petitioner without a fair chance of hearing.

In the absence of the GST tribunal, the High Court was forced to take up the matter on violation of natural justice principles of fair hearing and lack of adjudication on facts and circumstances.

The petitioner undertook to additionally deposit twenty percent of the amount of the demand raised before the Assessing Officer. This was directed to be done within eight weeks.

The revenue representative ASG K N Singh submitted that no coercive steps would be taken against the assessee and expressed the willingness to hear the matter on merits if remanded.

The High Court also directed to de-freeze and de-attach any bank accounts of the petitioner if attached/frozen. It was also directed that no coercive steps such as seizure or arrest be taken against the petitioner.

It was further clarified that no opinions were expressed in regard to the merits of the matter but only the violation of natural justice principles were addressed in the decision. The demand order and summary of the order issued in Form GST DRC-07 was thus set aside.

Remanding the matter to the assessing authority, the bench directed that there shall be due notice, chance of fair hearing and due consideration of the facts of the case.

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Difference of grounds between Order and SCN: Delhi HC quashes proceedings [Read Order]

In a recent ruling of the Delhi High Court, the division bench of Justices Manmohan and Manmeet Pritam Singh Arora, in a Writ Petition, quashed the proceedings of the department, the order passed and notice issued under Sections 148A(d) and 148A(b) of Income Tax Act, 1961 respectively on the distinct and separate grounds.

The writ petition was filed in challenging the two notices issued under Section 148 of Income Tax Act on different dates, another notice issued under Section 148A(b) of the act and an order passed under Section 148A(d) of the Income Tax Act for the A.Y. 2017-18.

Ved Jain with Nischay Kantoor, the Counsels on behalf of the petitioner (assessee)  contended that the order passed and the notice issued under Sections 148A(d) and 148A(b) of the Income Tax Act respectively are on distinct and separate grounds.

While comparing both the notice and the order, there was a difference found in the address, sale consideration and the circle rate. 

The counsels further stated that the impugned proceedings for the A.Y. 2017-18 are barred by the limitation in terms of Section 149(1)(b) of the Income Tax Act as the income alleged to have escaped the assessment is Rs.11,25,000/-, which is less than Rs. 50,00,000 despite the fact that in terms of said the section, proceedings can be initiated after expiry of three years from end of relevant assessment year only if it exceeds Rs. 50,00,000/-.

Zoheb Hossain asserted on behalf of the Respondent (revenue) that an error had occurred because the Income Tax Officer (ITO) had sent incomplete information to the Assessing Officer (AO) at the beginning.

Further, he pleaded before the bench to allow the AO to issue supplementary or amendatory notice under Section 148A(b) of the Income Tax Act incorporating the corrected details of the property.

The records also revealed that the information with the AO received from the ITO was with regard to violation of Section 269SS of the Income Tax Act and not with regard to non-declaration of long term capital gain, for which the notice had been issued. Consequently, the impugned show cause notice is contrary to the record.

In pursuance of the Section 269SS of the Income Tax Act, an individual may only transfer a specific sum via a bank draft, cheque, or electronic form through a bank or other mode. Thus according Section 269T of the Income Tax Act, Rs. 20,000 is the maximum amount that can be transferred in cash.

The Bench remarked that the assessee specifically replied to the allegation that was mentioned in the notice issued under Section 148A(b) of the Income Tax Act.

Furthermore, even when granting the order under Section 148A(d) of the Income Tax Act, the AO failed to acknowledge that he had issued the notice under Section 148A(b) of the Income Tax Act since he had included the wrong information.

The Bench set aside that the show cause notice issued and order passed under Sections 148A(b) and 148A(d) of the Income Tax Act.

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‘Security Premium Reserve’ cannot be Included in ‘Accumulated Profit’ for Computing Deemed Dividend: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), presided over by a Judicial Member Chandra Mohan Garg and and an Accountant Member Pradeep Kumar Khedla upheld the decision of the Commissioner of Income Tax (Appeal) [CIT(A)] that the security premium reserve cannot be regarded as part of accumulated profits while deciding the case of Bhagwati Coal Movers (P) Ltd.

The appeal was filed by the Revenue against the order of the CIT(A), Faridabad raised from an assessment order passed by the Assessing Officer (AO) for the A.Y. 2013-14. 

Ajmala Stationery Pvt. Ltd. (ASPL) loaned money to the assessee during the year is among the few facts that neither the assessee nor the revenue dispute. The sum of Rs. 5,52,50,000 has indeed been added by the AO as the deemed dividend pursuant to Section 2(22)(e) of Income Tax Act, 1961.

Due to the appellant company’s ownership of more than 10% of M/s ASPL, the loan receipt is regarded by the appellant company as a dividend reception under Section 2(22)(e) of the Income Tax Act.

The assessee’s representative asserted before the CIT(A) that M/s ASPL did not have enough reserves and surpluses and that the addition could only be made to the extent of reserves and surpluses. The reserves and surplus of M/s ASPL total 25 crores rupees, but only ₹ 2,86,084 of that amount is general reserve, and the remaining amount is share premium reserve.

However as per AO, the general reserves and surplus of M/s ASPL is to the tune of Rs. 25 Crore.

Before the CIT(A), the representative for the assessee submitted that not every gain constitutes as a commercial profit and that the deeming requirements of Section 2(22)(e) of Income Tax Act are not applicable where a profit cannot be distributed as a dividend.

The CIT(A) after analysing the facts of the both side held that “the addition under Section 2(22)(e) of Income Tax Act can only be made to the extent of general reserves available with M/s ASPL which amounts to Rs.2,86,084/- and thus the addition is restricted to this and balance addition is deleted. Thus this Ground of the appellant is partly allowed.” 

The CIT(A) thus reversed the additions made by the Assessing Officer and granted relief on the disallowance of interest under Section 36(1)(iii) of Income Tax Act as well as the loan amount deemed as income of the assessee under Section 2(22)(e) of the Income Tax Act. Thus the Revenue has challenged this relief granted by the CIT(A) to assessee before the Tribunal.

The Appellate Tribunal upheld the decision of the CIT(A) and observed that the CIT(A) has restricted the addition to the extent of ‘General Reserve’ after excluding the ‘Security Premium Reserve’ which has been regarded to be outside the ambit of expression ‘accumulated profits’ under Section 2(22)(e) of the Income Tax Act and held that the security premium reserve cannot be regarded as a part of accumulated profits.

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GST Chennai Introduces Whatsapp, E-mail Communication Facility For Facilitation for Traders

The Office of the Commissioner of GST and Central Excise (Appeals-II), Anna Nagar, Chennai, has launched a WhatsApp and/or email communication facility for the convenience of taxpayers.

The taxpayers may use the facility for resolving their requests, grievance, query, appeal status, etc., in a time-bound manner. The taxpayer can also send their questions via email. The taxpayer can WhatsApp at 9498343027 and send an email to ommrappl2.chn-rev@gov.in.

A circular issued by the department stated that “Attention of trade and general public is sought to the above subject. Chennai Appeals –II commissionerate has launched a Whatsapp communication facility for taxpayers’ facilitation. Tax payer / Appellant may use this facility for resolving their request / grievance / query / appeal status , etc., in a time bound manner. Tax payer / Appellant may also send their queries through E-mail,” the circular said.

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Why a Longer Repayment Personal Loan is a Must-Have Choice for Everyone?

While taking a personal loan, an individual must consider many factors. The interest on the loan, repayment tenure and documents to be submitted are a few of those factors. Personal loan lenders let the borrowers choose the repayment tenure of the loan. Few lenders provide a limited repayment time whereas some provide borrowers with a flexible loan tenure. One of the lenders that provide personal loans with flexible repayment option is Fullerton India. It is up to the borrower to opt for the most suitable repayment period as per his/her income, repayment capacity, and other financial obligations. Most people choose a short repayment time to save the interest amount and pay off debt quickly. But, a longer repayment period is more beneficial for numerous reasons. Why should you choose longer repayment tenure? Read further to understand in detail.

Benefits of Longer Repayment Tenure

The advantages of longer repayment tenure on a personal loan are as follows:

Lower EMI 

As the repayment tenure increases, the monthly EMI amount decreases. For example, an individual has taken a loan of ₹30,000 at an interest rate of 10%. If the repayment tenure is 3 years, the monthly repayment amount is ₹968. However, with a longer repayment period of 5 years, the monthly EMI reduces to ₹637. Easy personal loans with lower EMI mean that borrowers with lower monthly incomes can save money for other expenses without any budget or financial constraints.

Substantial Loan Amount

As the longer personal loan tenure reduces the monthly repayment amount, you can borrow a higher amount of loan. The amount of loan applied depends on the affordability and requirement of a borrower. The debt-to-income ratio must also be considered while choosing the loan amount.

Improves Credit Score

You can improve your credit score by repaying the loan as per schedule. It allows you to avail of higher loan amounts in the future. By borrowing a loan for a long period and making payments on time, your credit score will increase.

Lesser Chance of Defaults

A shorter repayment tenure means higher EMIs. It may financially strain the borrower which will result in missing out on monthly payments and increasing debt. By not repaying the EMI amount on time, the credit score will decrease and affect the financial record of the borrower. However, a longer tenure will have a low amount EMIs, reducing the chances of default.

Manage Other Expenses

Meeting monthly expenses while repaying a personal loan is not easy. There may be unplanned expenses that an individual has to pay. If the monthly EMI is low, an individual can free up cash to meet any other expenses. It also means that you can make savings after setting aside a fixed amount for EMI.

Features and Benefits of Fullerton India Personal Loan

Fullerton India is a reputed lending institution that provides personal loans online with 100% application and hassle-free loan procedure. They are one of the popular personal loan lenders because of the attractive features offered to the borrowers. The features and benefits of Fullerton India are:

Loan up to ₹25 Lakhs*

Unlike most lenders, Fullerton India has a higher limit of a personal loan of up to ₹25 lakhs* for borrowers who meet their eligibility criteria.

Flexible Tenure

As mentioned above, flexible and longer repayment tenure gives borrowers the freedom to save and make repayments on time. The repayment tenure of Fullerton India ranges between 12 to 60 months. The flexibility of repayment tenure offered reduces the monthly repayment amount substantially.

Attractive Interest Rate

Fullerton India offers an attractive interest rate starting at 11.99%* per annum that varies depending on the loan amount, tenure of the loan, your financial profile, repayment capacity, credit history and relationship with the lender.

Paperless Documentation

The required documents for a personal loan by Fullerton India are minimal. All the necessary documents for a personal loan can be uploaded online on the Fullerton India website or their mobile application. Paperless documentation makes the whole process of loan application convenient and time-saving.

Quick Disbursement

When there is an emergency need for funds, going through a tedious loan application process is difficult. Online personal loans have made the verification and disbursal of loans quick. By applying for a personal loan with Fullerton India, you can get the loan amount credited to your account shortly after approval.

Conclusion The tenure of a loan is one of many factors that affect the repayment process. If you are eligible for a personal loan, check the interest rate and the total amount of loan offered to arrive at the ideal repayment tenure. You can use the Fullerton India’s online EMI calculator to find the monthly repayment amount that will be applicable. Make sure that the period you choose makes the repayment easier and is within your monthly budget. Apply today.

GST Addition Solely Based on Facebook Posts: Kerala HC Directs Fresh Adjudication [Read Order]

A Single Bench of the Kerala High Court comprising Justice Gopinath directed fresh adjudication on the treating the product of the petitioner as a branded item, for determining the rate of tax as the additions thereby made were solely based on certain Facebook posts. The counsel appearing for the petitioner stated that the petitioner had…

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