In Roshini Devi vs. Income Tax Officer, the Jaipur Bench of the Income Tax Appellate Tribunal ( ITAT ) held that penalty under Section 271B of the Income Tax Act, 1961 cannot be levied for non-audit of books of accounts under Section 44AB of the Income Tax Act.
In the Instant case, assessee was selected for scrutiny assessment to examine the source of cash deposit of Rs 1.13 crores in the bank account maintained by the assessee. During the course of assessment proceedings, the Assessing Officer (A.O) observed that the total receipt/turnover of the assessee business from both M/s Krishna Electronics and M/s Jharkhand Electric & Electronics, amounted to Rs.1,02,68,170/- as the assessee was having turnover exceeding Rs. 60 lacs during the year under consideration, accordingly, the provisions of Section 44AA of the Act were clearly held to be applicable and the assessee was liable to maintain her books of account, which she had failed to do so.
Accordingly, penalty amounting to Rs. 25,000/- was levied U/s 271A of the Act. The Assessing Officer further observed that since the turnover of the assessee’s business exceeds Rs. 60 lacs, the provisions of Section 44AB of the Act are clearly applicable and the assessee had failed to get her books of account audited. Accordingly, penalty at the rate of 0.5% of total turnover amounting to Rs. 51,341/- was levied on the assessee. The Commissioner of Income Tax (Appeals)) confirmed the said levy of penalty.
The Counsel for the assessee argued that there was a bona fide mistake by the assessee not to disclose the income from Jharkhand Electric & Electronics and that under those circumstances, there was no part of income concealed or understated. He contended that the assessee was under the bona fide belief that he was not required to obtain audit report only in respect of that business, the turnover of which crosses the limit of the assessment year It was clarified by ICAI that tax audit as such is conducted in respect of an assessee and not in respect of particular business. He further argued the assessee having acted in bona fide belief and had no dishonest intention in not obtaining audit report for all the two businesses carried on by her, no penalty under section 271B of the Income Tax Act, 1961 to be imposed. He prayed to delete the penalty. The Counsel for the Revenue supported the orders of the CIT(A) and the A.O.
The bench comprising of Judicial Member Vijay Pal Rao and Accountant Member Vikram Singh Yadav observed that the assessee had already been penalized under section 271A for non-maintenance of books of accounts. “Once the penalty has been levied for non-maintenance of books of accounts, there cannot be penalty again for non-audit of books of accounts which were not kept at first place. It is clearly a case of impossibility of performance where it is expected that the assessee should get her books of accounts audited when it is a known and admitted fact that there are no regular books of accounts which have been maintained at first place. Our view is fortified by the decision of the Hon’ble Gauhati High Court in case of Rajmal Parsuram Todi (supra) wherein it was held that when a person commits an offence by not maintaining the books of accounts as contemplated under section 44AA, the offence is complete and after that, there can be no possibility of any offence as contemplated under section 44AB and therefore, the imposition of penalty under section 271A is erroneous.” observed the bench.
Subscribe Taxscan Premium to view the JudgmentThe Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) Chandigarh last week ruled that Re Rollable material, which is not of prime quality should be categorized as Heavy Melting Scrap and thus made eligible for claim of Customs exemption under Notification No. 12/2012 dated 17.03.2012 (Serial No. 332), at the declared price as Rs. 380 per Metric Ton.
The Appellants Regal Alloy Pvt. Ltd imported Heavy Metal Scrap form M/s Padmashree Globe Tradelink Pvt. Ltd. on high sea sale basis. The Consignment was examined by the anti-smuggling Ludhiana unit and it was found that the same also contained re-rollable materials, apart from the Heavy Melting scrap.
The appellant filed appeals before Commissioner of Customs (Appeals) contending that the re-rollable materials are not of prime quality and they are imported as scrap only. But, the appeal with the above contention of the appellant was rejected.
The division bench Consisting of Technical Member Devender Singh and Judicial Member Wadhwa made Reference to the Tribunal decision in the case of Kuber Casting Pvt. Limited vs. CC, Amritsar – 2016 (339) ELT 264 (Tri. Chennai) and held, “the presence of re-rollable scrap will not convert the consignment into anything other than Heavy Melting scrap.”
The bench further relied on a decision of the Tribunal in a similar issue wherein the confiscation of the goods was set-aside by observing that the order was placed for Heavy Melting scrap only and the foreign supplier has sent Heavy Melting scrap only, the presence of re-rollable scrap will not convert the consignment into anything other than Heavy Melting scrap.
Subscribe Taxscan Premium to view the JudgmentIn Shree Raipur Cement Plant vs. State of Chhattisgarh Finance Department & Ors., the Chhattisgarh High Court held that the petitioner is entitled to be issued C Form under the Central Sales Tax Act, 1956 read with the Central Sales Tax (Registration and Turnover) Rules, 1957 in respect of high speed diesel purchased by it in the course of inter-State trade and used by it in the course of manufacturing of cement, after the promulgation of the Central Goods and Services Tax Act, 2017 with effect from 1-7-2017
In the instant case, the Petitioner is a registered company under the Central Sales Tax (CST) Act, 1956 read with the Central Sales Tax (Registration and Turnover) Rules, 1957. It manufactures cement from mining limestone. For using the mining equipments, the petitioner requires High Speed Diesel. The petitioner Company was permitted to purchase goods in the course of inter-State trade at the rates specified in Section 8(1) of the CST Act, 1956.
With the introduction of the Central Goods and Services Tax Act, 2017 (CGST), the petitioner has also been registered under the CGST Act, 2017 with effect from 1-7-2017. However, from the introduction of CGST, the Revenue stopped issuing C Form to the Petitioner. If the registered dealer fails to procure C Form from the State and thereafter, do not provide C Form to the supplier/seller of another State, then the registered dealer is being exposed to high tax rate imposable on inter-State goods purchases which is much higher as compared to the 2% rate of tax prescribed under the CST. If the declaration C Form is not provided to the sellers of other States, this will lead to increase in the cost of goods being purchased.
The Counsel for the Petitioner argued that the definition of Section 2(d) of the CST Act, 1956 has been amended and High-Speed Diesel has also been brought specifically within the definition of “goods” under the CST Act, 1956. He pointed out that Section 9(2) of the CGST Act, 2017 clearly provides that the GST on the supply of high speed diesel, including other five goods, shall be levied with effect from such date as may be notified on the recommendations of the Council. The GST Council till this date, has not notified high speed diesel bringing it under the purview of the CGST Act, 2017. Therefore, according to the Counsel, the petitioner was entitled for issuance of C-Form under the CST Act, 1956.
The Counsel for the respondents contended that the petitioner had concededly migrated into the GST regime from the CST regime by getting registration under the CGST Act, 2017 with effect from 1-7-2017, therefore, the petitioner’s registration under the CST Act, 1956 would automatically stand cancelled with effect from 1-7-2017 and as such, he was not entitled for issuance of C-Form. \
The bench comprising of Justice Sanjay K. Agrawal found that the CGST Act, 2017 has not by its repealing provision repealed the CST Act, 1956 which is vivid from the focused perusal of Section 174 of the CGST Act, 2017 and the provisions of the CST Act, 1956 are still applicable for its inter-State trade even after the roll-out of the GST Act confining to “goods” defined in Section 2(d) of the CST Act, 1956. The Judge also found that the Petitioner was having a valid registration certificate that enable him to avail the C-Form.
“The petitioner’s registration certificate under the CST Act, 1956 is still valid for the goods defined in Section 2(d) of the CST Act, 1956, including high speed diesel, and the petitioner is entitled for issuance of C-Form for inter-State purchase / sale of high speed diesel against the said C-Form. Accordingly, the respondents shall be liable and are directed to issue C-Form to the petitioner in respect of high speed diesel to be purchased by the petitioner and used in the course of manufacture of cement” observed the Court.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Direct Taxes ( CBDT ) has extended term to Task force for drafting a New Direct Tax Legislation.
A Task Force was constituted by the Government of India in November, 2017 to review the existing Income Tax Act, 1961 and to draft a New Direct Tax law in consonance with the economic needs of the country. It was required to submit its report to the Government within six months.
The Government has now extended the term of the said Task Force by a period of three months.
Subscribe Taxscan Premium to view the JudgmentIn Mehsana District Co-operative vs. DCIT, the Gujarat High Court held that the Assessing Officer (A.O.) doesn’t have the authority to make any reference to the Transfer Pricing Officer when an application for Safe Harbour was already deemed to be approved under sub rule (7) and (8) of Rule 10 THD of the Income Tax Rules, 1962.
The assessee-petitioner is a District Level Cooperative Milk Producers’ Union and is engaged in the collection and processing of milk from the member societies. The assessee had entered into specified domestic transactions and therefore applied for Safe Harbour. Safe Harbour means circumstances in which the income tax authorities shall accept the transfer price declared by the assessee. All required formalities specified under the Safe Harbour Rules were complied with. The A.O had neither made any objections to the application nor had he declared the application to be invalid. He took up the returns filed for assessment which should be completed by 31st December 2016.
The Petitioner wrote to the A.O and pre-empted any attempt on his part to make reference to the TPO. The petitioner even referred Central Board of Direct Taxes (CBDT) instructions which lists out the criteria for making valid reference. However, the A.O without informing the assessee-petitioner made reference to the TPO of the petitioner’s specified domestic transactions to ascertain the arm’s length price. The TPO passed an order without making any adjustments.
The Counsel for the Petitioner contended that the action of the A.O was wholly illegal and invalid when the petitioner had applied for safe harbour and when such application was deemed to have been accepted in terms of the relevant rules. He further contended that the A.O had made such a reference merely to ensure extended period of limitation for completing the assessment.
The Counsel for the Revenue argued that the A.O. had only acted as per the CBDT Circular under which he was required to make reference to the TPO when certain circumstances arise. He further submitted that TPO has not made any upward adjustment and that the order passed by the TPO was not averse to the Petitioner and that there is no need to quash it.
The bench comprising of Justice Akil Kureshi and Justice B.N. Karia observed that Section 92CB of the Income Tax Act,1961 was inserted to avoid number of transfer of pricing audits and prolonged disputes. They found that the Petitioner falls squarely in the criteria specified by Rule 10THA of the Safe Harbour Rules under Part DC to Chapter II of the Income Tax Rules, 1961. As per the said rule the eligible assessee would mean a person who has exercised a valid option for application of safe harbour rules and who is either a Government company engaged in the business of generation, supply, transmission or distribution of electricity or is a cooperative society engaged in the business of procuring and marketing milk and milk products. The Bench found that the petitioner exercised an option for safe harbour, the Assessing Officer passed no order under sub rule (4) of rule 10THD declaring that the exercising of option was invalid. They concluded that in terms of sub rule (7) and sub rule (8) of the said rule, the option exercised by the assessee would be treated as valid.
“Once this conclusion is reached, it follows as a natural and necessary corollary that the Transfer Pricing regime would not apply. That being the case, the Assessing Officer had no authority to make any reference to the TPO to ascertain the arm’s length price of the petitioner’s specified domestic transactions. Reference itself was therefore, invalid. CBDT’s circular dated 10.3.2006 could not have and does not lay down anything to the contrary. The circular merely prescribes the circumstances under which the Assessing Officer would make reference to the TPO. Nowhere does the circular provide that as soon as such circumstances exist, the Assessing Officer would make a reference to the TPO, irrespective of the fact that the assessee had opted for safe harbour and such option was treated or deemed to be treated as validly exercised. Legally speaking, CBDT could not have given any such directive. In the result, the petition is allowed. Reference made by the Assessing Officer to the TPO in the present case is quashed.” observed the bench.
Subscribe Taxscan Premium to view the JudgmentThe GST -Intelligence Unit has unearthed a racket which used fake bills to claim input tax credit worth Rs 450 crore, the Financial Express reported today. This is considered as the biggest GST scam so far.
The government has started issuing summons to those traders or business houses that produced counterfeit bills to claim tax credits asking them to provide evidence of transactions – sale/purchase – truthfully and produce the documents and record for the examination.
Reportedly, traders buy fake bills which enable them to claim input tax credit on the supply which never happened.
Earlier this year in February, the Haryana Excise and Taxation Department lodged a police case against a Gurugram-based firm for acquiring fraudulently an input tax credit of Rs 50.34 crore.
Providing the details of the case, Additional Director General, DGGI Jaipur, Rajendra Kumar said: “The accused generated bogus invoices through companies that existed on papers for availing input tax credit. The goods were not issued by the firms”.
Considering the frequency of input tax credit frauds, invoice matching mechanism will be launched from this July as per the recommendation of the GST Council.
According to the Finance Minister Arun Jaitley, the invoice matching mechanism will curb the possible tax evasion on account of fake invoice frauds.
Last year, the Government received transitional credit claims worth Rs 65,000 crore. Following this, the Central Board of Excise and Customs asked its officials to verify all transitional credit claims for more than Rs 1 crore.
In ACIT vs. M/s. Reliance Digital Retail Ltd., the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) held that the Project Development Expenditure is revenue in nature and hence is allowable under Section 37(1) of the Income Tax Act, 1961.
The assessee is in the business of organized retail, which is carried out through various retail stores. During the assessment year, the Assessing Officer (A.O.) noted that assessee had added some new stores/outlets in the same line of business and in the books of account he had debited such expenditure under the head ‘Project Development Expenditure ‘which was not debited in the Profit & Loss Account but considered as a part of Capital Work-in-Progress. While filing its return of income, assessee claimed that a part of such expenditure amounting to Rs.60,79,24,773/- debited under the head ‘Project Development Expenditure’ was revenue in nature, and since it has been incurred during the year under consideration for the purposes of a business already in existence, the same was an allowable expenditure within the meaning of Sec. 37(1) of the Income Tax Act.
However, the A.O. disallowed the claim on the ground that in the books of account assessee had shown it as a pre-operative expenditure and, therefore, for that reason also, it could not be treated as a revenue expenditure. As per the Assessing Officer, once the assessee treats an expenditure to be non-revenue or capital in nature in its books of account, the same could not be allowed as revenue expenditure while computing its taxable income. However, the Commissioner of Income Tax (Appeals) allowed the appeal of the assessee. Aggrieved the Revenue appealed to ITAT.
Relying on the decision of Supreme Court in the case of Empire Jute Co. Ltd, the Bench comprising of Judicial Member Amarjit Singh and Accountant Member G.S. Pannu observed “Notably, in the instant case, as we have inferred earlier, the business of retail is already set-up and the impugned expenditure, which is otherwise revenue in nature, relates to expansion of the existing line of business and not for a new line of business. Thus, even if such expenditure was to provide an enduring benefit to the business, the same is in revenue field and thus is liable to be treated as revenue expenditure. Furthermore, it is nobody’s case that the expenditure in question, which we have already enumerated above, results in creation of any fixed or an enduring asset so as to be capitalized. Thus, the objections raised by the Assessing Officer, in our view, have been rightly negated by the CIT(A).”
Subscribe Taxscan Premium to view the JudgmentIn spite of extending the last date of filing the FORM GSTR-3B, for the month of April, the Revenue has started issuing notices to the taxpayers for non-filing of FORM GSTR-3B. Today is the revised last date for filing the Form.
The Goods & Services Tax regime was implemented with an object to simplify the complex tax regime that existed in the country. Yet the taxpayers, have to file various forms in order to comply with the statutory duties under the GST. Of the many forms out there, FORM GSTR 3B must be filed by every person registered for GST.
Compliance is only possible when there is an opportunity to perform one’s obligation. The much-boasted GST Network (GSTN), the IT backbone of the entire nation has not yet become fully sufficient to cater the needs of the taxpayers. The taxpayers always encounter technical glitches while accessing the network. If the law requires you to file returns but doesn’t provide you with a fully functioning facility to register the returns, what can one do?
The last date for filing FORM GSTR 3B was on 20th May 2018. However, due to the above mentioned immature GST Network, there arose technical glitches. In order to resolve it, the Network was shut down for 30 minutes on 18th May.
The Central Government understanding the woes of the taxpayers, decided to extend the deadline to 22nd May. The Central Board of Indirect Taxes and Customs soon issued an official statement, notifying that the last date to file FORM GSTR 3B for the month April, has been extended to May 22nd. (Read the Notification). It may well have expected to give substantial relief to the taxpayer or that is what we all thought.
Despite such gracious act of extending the deadline, the Revenue started issuing notices to taxpayers even before the deadline. The subject of the notice read “GST-Non-Filing of return GSTR – 3B- Regarding”. Now, these notices were dated 18th May!!! i.e. even before the closure date, the Revenue issued notices to taxpayers.
The real question is, why did the Revenue issue notices to tax payers even before the revised deadline set by the Revenue. The best guess to the above question would be – “Miscommunication among the Officers of the Department” or another common “Technical Glitch!!!”.
The Madhya Pradesh Commissioner of State Tax has recently amended Commissioner of State Tax Office Order No. (5)/17 dated 12.10.2017. Serial No. 9, entry 54 contained in the schedule to the said order has been amended. Entry 54 specifies the total amount of refund claimed and the competent authority eligible for sanctioning said refund.
In case of total amount of refund claimed under all the Acts in the application:
Serial No. 10, 11, 12, 13 & 46 and all related entries have been omitted.
The amended order will be in effect from 21st May.
Subscribe Taxscan Premium to view the JudgmentThe Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently granted relief to Bollywood Film Actor Shah Rukh Khan by removing the penalty imposed by the Assessing Officer (A.O.) under Section 271(1)(c) of the Income Tax Act, 1961 as, the assessee had in bona fide belief didn’t offer tax on his Dubai Villa.
Shah Rukh Khan owned a Villa in UAE. It was gifted to him by Nakheel, a property developer based in Dubai. During the concerned assessment year, Shah Rukh Khan in his return of income had on his own estimated the ratable value of villa at Rs.20,00,000/- and offered an amount of Rs. 14,00,000/- towards notional income of the villa under the head house property. However, in the course of the assessment proceedings, the assessee taking support of the provisions of Article 6 of the India-UAE tax treaty and the protocol thereto, requested the assessing officer not to tax the notional income of the villa owned by him at Dubai.
According to the assessee, the provisions of the India-UAE tax treaty and especially sub-clause (ii) of the protocol, notwithstanding the provisions of Article 6 and Article 23 of the India-UAE tax treaty, the residential property owned by a national of a contracting state and occupied for self-residence in the other contracting state was exempt in the other contracting state from the taxes covered by the tax treaty. It was thus in the backdrop of his aforesaid conviction, that the assessee had claimed that the notional income of the villa owned by him at Dubai was not liable to be taxed in India. However, the A.O made additions and the order was upheld by all the appellate authorities. Thereafter, the A.O initiated penalty proceedings against Shah Rukh khan. CIT(A) deleted the penalty imposed. Aggrieved revenue appealed before the ITAT.
The bench comprising of Judicial Member Ravish Sood and Accountant Member N.K. Pradhan found that as per the advice his counsel, the assessee remained under a bona fide belief that the notional income of the villa owned by him at UAE could not be brought to tax in India. They noted that a perusal of Article 6 of the tax treaty between India-UAE dealing with the taxability of the income of a person from immovable property situated in the other contracting state, read along with the protocol on the one hand, and the Notifications issued by the CBDT on the other hand, revealed that the issue as regards the taxability in India of the notional income of the villa owned by the assessee at Dubai was not free from doubts and debates.
Upholding the decision of the CIT(A), the bench observed “We thus, in terms of our aforesaid observations conclude that no penalty under Sec. 27(1)(c) of the Act could have been imposed on the assessee in respect of the addition of an amount of Rs. 47,66,952/- made by the A.O towards notional income of the villa owned by the assessee at Dubai. The order of the CIT(A) deleting the penalty imposed by the A.O under Sec. 271(1)(c) is upheld.”
Subscribe Taxscan Premium to view the JudgmentIn a bid to reduce Government litigations, the Central Board of Indirect Taxes and Customs ( CBIC ), the apex body of indirect taxes in India has decided to introduce a monetary limit of Rs. 2,50,000 in case of litigations filed by the revenue before the Commissioner (Appeals) in matters relating to excise and service tax laws.
An instruction in this regard has been sent to the higher officials of the Board.
“This limit would apply for legacy matters only and would also be applicable to cases currently pending at the level of Commissioner (Appeals) as well,” a CBIC missive said.
The Budget proposed in February this year provided for effective actions for reducing the burden of litigations.
Withdrawal process in respect of pending cases in Commissioner (A), will follow the current practice that is being followed in the withdrawal of Departmental cases from the CESTAT and HC. The monetary limit shall be determined as per the Instruction dated 17.08.2011. All other terms and conditions of concerned earlier instructions apply.
The instruction also amends the earlier instructions dated 04.04.2018 by withdrawing the words “and Section 131BA of the Customs Act 1962”.
The Board also introduced a format in the MPR for reporting upon the action taken in this regard since withdrawal of Departmental Appeals is a long drawn activity requiring routine monitoring. Details of the said cases should also be available in a separate register for further perusal by the Board as and when required.
The Board has invited suggestion/comments from field formations on Reduction of Government litigations before 21st May.
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In ACIT vs. M/s. Sane & Doshi Enterprises, the Income Tax Appellate Tribunal ( ITAT ) held taxability of an item of income under a wrong particular head should not result in levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
The assessee had shown unsold stock of built up premises as ‘investment’ in its books of accounts from 01.04.2005. The Assessing Officer (A.O.) was of the view that since the premises sold by the assessee were out of ‘unsold stock in trade’, the profit from sales should have been treated as business income. Accordingly, he added the said profit from sales as business income.
On appeal, both the First Appellate Authority (FAA) as well as the ITAT confirmed the order of the AO. Thereafter, the A.O initiated penalty proceedings against the assessee and held that the assessee had evaded tax to the extent of Rs 41.00 lakhs by way of this change of head of income. The AO held that the assessee had concealed the particulars of its income and levied a penalty of Rs 41,02,084 u/s. 271(1)(c) of the Income Tax Act, 1961. Aggrieved, appeal was filed before FAA, who after hearing the contentions of the assessee deleted the penalty. Revenue appealed before ITAT.
The Counsel for the Revenue argued that there that FAA and the Tribunal had confirmed the addition made by the AO in quantum proceedings, that the AO had rightly levied the penalty. The Counsel for the assessee argued that the assessee had converted the stock in trade into investment, that in subsequent years it sold the assets and profit earned on sale of investment was offered to tax, that the assessee had disclosed all the necessary details about the transactions.
The issue before the ITAT was whether the treatment given by the assessee to the sale proceeds of unsold stock can be treated as furnishing of inaccurate particulars or not.
The Bench comprising of Judicial Member Ram Lal Negi & Accountant Member Rajendra observed that the facts of the case was never concealed and that there was a difference of opinion
between the AO and the assessee about the treatment to be given to the transaction.
“Any addition to the income of an assessee or disallowance of a claim cannot and should not lead to automatic levy of penalty. What has to be seen is that as to whether the explanation filed by the assessee during the penalty proceedings was a plausible explanation. In the case under consideration the assessee had claimed that it was under bona fide impression that profit arising to it was taxable under the head capital gains. Taxability of an item of income under a particular head should not result in levy of penalty. After considering the peculiar facts and circumstances of the case under consideration, and taking note of the judgment of the Hon’ble High Court in appeal 375 of 2013 along with the cases cited by the AR we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity” observed the Bench.
Subscribe Taxscan Premium to view the JudgmentThe Income Tax Appellate Tribunal (ITAT) New Delhi, in Green Delhi BQS Limited vs. ACIT, held that loss due to encashment of bank guarantee for non-fulfilment of the work awarded to the assessee is allowable expenditure.
The appellant engaged in the business of operating and running of bus shelter was awarded a contract by the Delhi Transport Corporation (DTC) for the construction and operation of 400 bus shelters. According to the Contract, the assessee had to finish the construction of the bus shelters in a pre-determined period and could operate it for 10 years after paying requisite fees. They in turn are allowed to earn revenue by displaying advertisements in the bus shelters. The Contract also contained a provision by which if the assessee failed to finish the project within the determined period, the bank guarantee security which is to be provided by the assessee would be encashed.
The assesses failed to perform the contract and thus after a legal battle, the High Court allowed the DTC to encash the bank guarantee with interest. The assessee filed returns declaring a loss of Rs.8.11 Crores. However, the Assessing Officer (A.O) disallowed loss of Rs.2.08 Crores incurred by the appellant as a result of encashment of bank guarantee furnished to Delhi transport Corporation as security for efficient and punctual discharge of obligations under the concession agreement. The Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the addition made. Aggrieved, the assessee filed appeal before the Tribunal.
The Counsel for the assessee argued that expenditure incurred towards a new project, which did not materialize, is not capital expenditure but revenue expenditure. He further stated that the crystallized liability is allowable as deduction even a final adjudication is pending in arbitration. He therefore submitted that above expenditure is allowable as revenue expenditure even though there is no commencement of the setting up of bus shelters as agreed upon.
The Counsel for the Revenue contended that the assessee’s claim was pending in the arbitration proceedings subject to arbitration claim which was not final and therefore the liability was not crystallized and therefore it was contingent in nature and hence not allowable.
The Bench comprising of Judicial Member Amit Shukla and Accountant Member Prashant Maharishi relying on the decision of the High Court in Neo Constructo Construction Ltd observed that encashment of the bank guarantee which was furnished by the assessee as a performance guarantee due to non-fulfillment of the contract by the assessee can be said to be compensatory in nature and therefore allowable as business expenditure under Section 37 (1) of the Income Tax Act, 1961.
Subscribe Taxscan Premium to view the JudgmentThe Supreme Court in Mahabir Industries vs. Principal Commissioner of Income Tax, held that the periods for which deductions were availed earlier by an assessee under Section 80-IA and Section 80-IB of the Income Tax Act would not be counted for the purpose of availing benefit of deduction under Section 80-IC of the Income Tax Act, 1961, provided the industry is not located in North Eastern State.
In the instant case, the assessee produces polythene from his factory in Himachal Pradesh. He claimed deduction under Section 80-IA of the Income Tax Act, 1961, which provides that for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, if it fulfills the conditions mentioned in subsection (4) thereof. those undertakings or enterprises, which fulfil the conditions mentioned in sub-section (4) of Section 80-IA of the Act do not need to pay tax for a period of 10 consecutive years. The assessee was received benefit under the section for 2 assessment years i.e. 1998-99 and 1999-2000.
Another provision 80-IB, including subsection (4) introduced in the year 2000 allows deduction of an amount equal to hundred per cent for a period of five years and thereafter twenty-five per cent, in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. First proviso thereto states that total period of deduction is not to exceed ten consecutive Assessment Years. Second proviso is a specific provision for industries in the North-Eastern Region which provides that the total period of deduction shall in such a case not exceed ten assessment years. Under this section also the assessee claimed deduction from 2000-2001 to 2005-06.
Section 80-IC was introduced from the year 2003. The provisions of Section 80-IC provided deduction to manufacturing units situated in the State of Sikkim, Himachal Pradesh and Uttaranchal and North-Eastern States. The deduction was provided to new units established in these States, and also to existing units in those States if substantial expansion was carried out. The deduction was available @100% for ten Assessment Years for the units located in North-Eastern and in the State of Sikkim and for the units located in Himachal Pradesh, the deduction was available @100% for five years and @25% for next five years. The assessee completed substantial expansion in 2005 and benefited the deduction under this provision for Assessment Years 2006-07 and 2007-08. Sub-section (3), as noted above, mentions the period of ten Assessment Years commencing with the initial Assessment Year.
Sub-section (6) of 80-IC provides that total deductions under Section 80-IC and Sub-section (4) of Section 80-IB cannot exceed the total period of ten years. On this ground the Assessing Officer rejected the claim of the assessee for the assessment year 2008-09 and 2009-10 stating that deduction could not be granted as this would become 11th and 12th year of deduction. The Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal (ITAT) and even the High Court upheld the A. O’s order. Appeal was filed before Supreme Court.
The bench comprising of Justice A.K. Sikri and Justice Ashok Bhushan noted that the High Court had failed to appreciate that the provisions of Section 80-IC (6) of the Act state that the total period of deduction under Section 80-IC and Section 80-IB couldn’t exceed ten assessment years only if the manufacturing unit was claiming deduction under second proviso to Section 80-IB (4) of the Act i.e. units located in the North-Eastern State. The bench explained that the term ‘initial year’ is referable to the year in which substantial expansion has been completed. The Court pointed out that the inclusion of period for the deduction is availed under Section 80-IA and Section 80-IB, for the purpose of counting ten years, is provided in sub-section (6) of Section 80-IC and it is limited to those industrial undertakings or enterprises which are set-up in the North-Eastern Region.
Setting aside the judgment of the High Court, the Bench observed “By making specific provision of this kind, the Legislature has shown its intent, namely, where the industry is not located in North- Eastern State, the period for which deduction is availed earlier by an assessee under Section 80-IA and Section 80-IB will not be reckoned for the purpose of availing benefit of deduction under Section 80-IC of the Act… Thus, we are of the opinion that it was wrong on the part of the AO not to allow deduction to the assessee under Section 80-IC for the Assessment Years 2008-09 and 2009-2010.”
Subscribe Taxscan Premium to view the JudgmentThe Mumbai Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) in Kagal Nagar Parishad vs. Commissioner of Central Excise held that onetime non-refundable deposit is not liable for service tax under the head of renting of immovable property.
The issue before the Tribunal was whether the onetime non-refundable deposit is liable for Service Tax under the head of renting of immovable property or not. The Counsel for the appellant argued that the issue was no longer res integra as the issue had been already decided that such non-refundable deposit could not be taxed towards the service of renting of immovable property. he placed reliance on some cases inter alia, Greater Noida Indl. Devp. Authority. The Authorized Representative (A.R.) of the Revenue reiterated the findings of the impugned order.
The CESTAT Bench comprising of Judicial Member Ramesh Nair and Technical Member Raju observed “We find that there is a separate charge for the rent, which alone is taxable, the onetime premium charges are non-refundable deposit, it is called as one-time premium and not part of the rent. Therefore, the same is not taxable.”
Subscribe Taxscan Premium to view the JudgmentThe Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) in Cromption Greaves Limited vs. CIT recalled an order of the Tribunal which was passed beyond the period of 90 days from the date of hearing.
The applicant had filed a Miscellaneous Application seeking to recall an order of the Tribunal on the ground that the tribunal passed the order beyond the period of 90 days from the hearing. The applicant pleaded before the Bench to recall the order and conduct fresh hearings before the Regular Bench in view of Rule 34(5) of the Income-Tax (Appellate Tribunal) Rules, 1963 read with section 254(2) of the Income Tax Act, 1961.
The Departmental Representative (D.R) submitted that the Tribunal had very limited powers under Section 254(2) of the Income Tax Act, 1961. He objected to the recalling of the order.
The bench comprising of Judicial Member Mahavir Singh & Accountant Member Ramit Kochar relied on the decision of the ITAT in the case of G. Shoe Exports vs. ACIT wherein it was held that unexplained delay in the pronouncement of the order renders it vulnerable. It was held that such judgments were bad in law and were to be set aside.
“We allow this MA filed by the assessee on this short ground of pronouncing of the order beyond a period of 90 days, keeping in view Rule 34(5) of Income Tax (Appellate Tribunal) Rule, 1963 read with Section 254(2) of the Act. The order of the tribunal in ITA no. 1994/Mum/2013 dated 01-02-2016 for AY 2007-08 stood recalled. The Registry is directed to place the appeal in ITA no. 1994/Mum/2013 before Regular Bench for a fresh hearing for which the date shall be notified to both the parties in advance by sending notices. We order accordingly.” observed the bench.
Subscribe Taxscan Premium to view the JudgmentThe Income Tax Appellate Tribunal ( ITAT ) in Income Tax Officer vs. Shaik Zameer, held that cash deposits can’t be assessed unexplained when cheque deposits were accepted as business turnover.
The assessee derive income from transport contracts. He declared the income as Rs. 3.32 Lacs. The Assessing Officer(A.O.) found that the assessee had lots of deposits in the bank accounts both cheques and cash. The cheque deposits were accepted as business turnover and income was estimated under Section 44AD of the Income Tax Act, 1961 at Rs. 6.13 Lacs but the cash deposits were brought to tax under Section 68 to an extent of Rs. 60.57 Lacs. On appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) treated cash deposits also as turnover and computed the total income. The Revenue appealed before the ITAT. Despite sending notices, no one appeared for the assessee. The assessee did not challenge the CIT(A)’s order.
The Bench comprising Vice President D. Manmohan and Accountant Member B. Ramakotaiah heard the appeal ex-Parte respondent. Confirming the decision of the CIT(A) the Bench observed “There is no reason why the cash deposits should be assessed U/s. 68 when cheque deposits were accepted as business turnover. We find the reason given by the Ld.CIT(A) in treating the entire amount as turnover is reasonable on the facts of the case. Moreover, income is also estimated as assessee has not co-operated in the proceedings. Since assessee is involved in transport business and income was determined at 10% as against 6% of the AO, we have no option than to confirm the order of CIT(A) in the appeal of Revenue.”
Subscribe Taxscan Premium to view the JudgmentTwo new functionalities have been added in the official GST portal including the facility to change return frequency for normal taxpayer and the payment of reduced penalty.
Taxpayers whose turnover is above rupees 1.5 crore and who have wrongly selected option as quarterly filing, now has been provided with facility to change the option to monthly, provided the taxpayer has not filed any return, as per the wrongly selected quarterly option of filing return.
Further, the GST Portal now allows reduced payment of penalty in case Demand ID is created under section 74 of the Central Goods and Services Tax (CGST) Act. a message is shown to the user, about the reduction in amount of penalty mentioned in the order, if he makes the payment within 30 days from the date of communication of the order and he is making full payment of tax and interest stated in the order. in such case, penalty amount can be paid up to 50% of the amount stated in the order and the balance 50% of the penalty is waived off.
In another milestone, the GST department announced that more than two crore E-Way Bills have been generated in the month of May so far. According to data revealed by the department, from 1st May to 21st May, 2,09,62,729 E-Way Bills have been generated in the portal. On 19th May, the number is 12,68,332.
The E-Way bill, rolled out on 1st April is now running smoothly without any glitches, department said.
The Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT ) in ACIT vs B. Sreeramulu held that Remuneration paid to HUF Members for the services rendered in the business is allowable under Section 37(1) of the Income Tax Act, 1961.
In the instant case, the assessee-HUF derived income from house property and trading of jewellery. During a survey operation and scrutiny assessment, total income of the assessee was computed to the tune of Rs. 37.96 Lacs. From that, the Assessing Officer (A.O.) allowed remuneration of Rs. 13 Lacs to the three members of the HUF for their services rendered in the business.
However, the Assessing Officer reopened the proceedings under Section 147 of the Income Tax Act, 1961 on the ground that remuneration to co-parceners is not allowable under section 184 or 40(b) of the Act. In the re-assessment, the remuneration paid to the members were disallowed. On appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) considered the objections raised by the parties and decided the issue by treating the re-assessment as void ab initio. Aggrieved, revenue appealed before ITAT.
The Bench comprising of Vice President D. Manmohan and Accountant Member B. Ramakotaiah observed that the assessment had been reopened after the end of four years from the relevant assessment year and that there was no failure on the part of the assessee in furnishing full and true disclosure of the information.
“In view of that, it cannot be stated that assessee has not disclosed any information. The remuneration to the members of the HUF were paid for the services rendered in the business which is allowable U/s. 37(1) and invoking the provisions of Section 184 and Section 40(b) does not arise on the facts of the case at all. In view of that, the action of AO in reopening assessment per se is bad in law.” said the bench.
Subscribe Taxscan Premium to view the JudgmentIn ITO vs. M/s. Maakali Enterprises, the Kolkata Bench of the Income Tax Appellate Tribunal ( ITAT ) held that TDS under Section 194C of the Income Tax Act, 1961 would not attract when labour charges were directly paid by the assessee without a contract or Sub-contract.
The assessee is a partnership firm engaged in the business of civil construction. During the scrutiny proceedings the assessee was asked to produce supporting evidence whether TDS has been deducted in respect of labour charges claimed. The Assessing Officer (A.O) had noted that assessee did not furnish any supporting evidence neither explained whether TDS was made on labour charges. Thus, the AO concluded that the assessee had not made any TDS on labour charges and thereby violated the provision of section 194C of the Income Tax Act read with section 40(a)(ia) of the Act and ultimately disallowed the said expenses claimed and added back to the total income of the assessee. On appeal, the Commissioner of Income Tax (Appeals), allowed the appeal of the assessee. He observed that it was the assessee who engages the labourers and that there was no contract. It noted that the labour payments were made respectively to the respective labours. Aggrieved, revenue appealed to ITAT.
The Counsel for the assessee argued that the AO had failed to establish that any sub-contract was engaged in the payment of labour charges. He further contended that the disallowance of his claim of expenses on labour charges for violation of section 40(a)(ia) of the Act by the AO was unlawful. According to him, since there was no contract or sub-contract, the case doesn’t fall under the purview of section 194C of the Act.
Upholding the decision of the CIT(A), the Bench comprising of Judicial Member S.S. Viswanethra Ravi & Accountant Member P.M. Jagtap observed “It appears from the register that the names and addresses of all 83 labourers are written serially in the register and all have received the money by putting thumb impression on the same. It is a fact that the labours are paid by the assessee directly and not through contract or sub-contract. Therefore, section 194C of the Act is not attracted. We have also perused the profit and loss account for the year ended 31.03.2008 and the amount of works bill is of Rs.1,37,60,588/- out of which labour charges are to the tune of Rs.71,81,150/-. Therefore, we do not find any infirmity in the order of CIT(A) and confirm the same.”
Subscribe Taxscan Premium to view the JudgmentThe Central Government has notified Aadhaar and Permanent Account Number ( PAN ) mandatory for Customs Broker License. In a notification issued by CBIC, Aadhaar and PAN mandatory for persons seeking a customs broker license.
‘Customs broker’ is a person licensed to act as an agent on behalf of importer/exporter for the transaction of business relating to entry or departure of conveyances or goods at any customs station, including audit. The licence issued under the regulations is valid for 10 years.
The Government also issued following conditions to be fulfilled by the applicants;
a. he is a citizen of India;
b. he is a person of sound mind;
c. he is not adjudicated as insolvent;
d. he holds an Aadhaar number;
e. he holds a valid PAN card;
f. he has not been penalised for any offence under the Act, the Central Excise Act, 1944 (1 of 1944), the Finance Act, 1994(32 of 1994), the Central Goods and Services Act, 2017 (12 of 2017) and Integrated Goods and Services Tax Act, 2017 (13 of 2017);
g. he has neither been convicted by a competent court for an offence nor any criminal proceeding is pending against him in any court of law;
h. an individual applicant or in case the applicant is a firm, its partner or in the case of a company, its director or an authorised employee who may handle the Customs work shall—
1. be a graduate from a recognized University; and
2. possess a professional degree such as Masters or equivalent degree in Accounting, Finance or Management, CA/CS/MBA/LLM/ACMA/FCMA or Diploma in Customs Clearance work from any Institutes or University recognised by the Government oris having at least two years’ experience in transacting Customs Broker work as G-Card holder;
(i) the applicant has financial viability as evidenced by a certificate issued by a Scheduled Bank or such other proof acceptable to the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, in terms of possession of assets of value of not less than five lakhs rupees.
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