Sec 10(46) exemption applicable on Maharashtra Electricity Regulatory Commission
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 23rd June, 2020
S.O. 2015(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Maharashtra Electricity Regulatory Commission’, Mumbai (PAN AAAGM0004R), a commission established by the State Government of Maharashtra, in respect of the following specified income arising to that Commission, namely:-
(a) Grants from Government of Maharashtra;
(b) Fees for annual licence;
(c) Interest on Fixed Deposit and Savings Account;
(d) Fees for application/petition filed;
(e) Fees for Documents;
(f) Penalty for delayed payment of Annual Licence Fees;
(g) Fees for RTI;
(h) Sale of Scrap;
(i) Interest on Loans and Advances given to employees;
(j) Fees for annual performance review;
(k) Fees for determination of tariff; and
(l) Fees for initial licence.
2. This notification shall be effective subject to the conditions that Maharashtra Electricity Regulatory Commission, Mumbai,-
(a) shall not engage in any commercial activity;
(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and
(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.
(d) shall file the Audit report along with the Return, duly verified by the accountant as provided in explanation to section 288(2) of the Income-tax Act, 1961 along with a certificate from the chartered accountant that the above conditions are satisfied.
3. This notification shall apply with respect to the assessment years 2021-2022, 2022-2023, 2023-2024, 2024-2025 and 2025-2026.
[Notification. No. 34/2020/F.No.300196/53/2019-ITA-I]
PRAJNA PARAMITA, Director
Sec 10(46) exemption applicable on Real Estate Regulatory Authority
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS)
NOTIFICATION
New Delhi, the 25th June, 2020
S.O. 2041 (E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Real Estate Regulatory Authority’ as specified in the schedule to this notification, constituted by Government in exercise of powers conferred under sub-section (1) of Section 20 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) as a ‘class of Authority’ in respect of the following specified income arising to that Authority, namely:—
(a) Amount received as Grant-in-aid or loan/advance from Government;
(b) Fee/penalty received from builders/developers, agents or any other stakeholders as per the provisions of the Real Estate (Regulation and Development) Act, 2016;
(c) Interest earned on (a) & (b) above.
2. This notification shall be effective subject to the conditions that each of the Real Estate Regulatory Authority –
(a) shall not engage in any commercial activity;
(b) activities and the nature of the specified income shall remain unchanged throughout the financial years;
(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of Section 139 of the Income-tax Act, 1961; and
(d) shall file the audit report along with return, duly verified by the accountant as provided in explanation to section 288(2) of the Income-tax Act, 1961 along with a certificate from the chartered accountant that the above conditions are satisfied.
3. This notification shall apply to the Real Estate Regulatory Authority, mentioned at column (2) below, with respect to the assessment years mentioned in column (4) below.
Extension of time limits under the Income-tax Act 1961 and related Acts
Above notification deals with extension of due dates under Income Tax Act. You may also refer our YouTube Video on same.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 24th June, 2020
TAXATION AND OTHER LAWS
S.O. 2033(E).– In exercise of the powers conferred by sub-section (1) of section 3 of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (2 of 2020) (hereinafter referred to as the Ordinance), the Central Government hereby specifies , for the purposes of the said sub-section (1),-
(i) the 31st day of December, 2020 shall be the end date of the period during which the time limit specified in, or prescribed or notified under, the specified Act falls for the completion or compliance of such action as specified under the said sub-section; and
(ii) the 31st day of March, 2021 shall be the end date to which the time limit for completion or compliance of such action shall stand extended:
Provided that where the specified Act is the Income-tax Act, 1961 and the compliance relates to-
(i) furnishing of return under section 139 thereof, for the assessment year commencing on the –
(a) 1st day of April, 2019, the end date shall be extended to the 31st day of July, 2020;
(b) 1st day of April, 2020, the end date shall be extended to the 30th day of November, 2020;
(ii) delivering of statement of deduction of tax at source under sub-section (2A) of section 200 or statement of collection of tax at source under sub-section (3A) of section 206C thereof for the month of February or March, 2020, or for the quarter ending on the 31st day of March, 2020, as the case may be, the end date shall be extended to the 15th day of July, 2020;
(iii) delivering of statement of deduction of tax at source under sub-section (3) of section 200 or statement of collection of tax at source under proviso to sub-section (3) of section 206C thereof for the month of February or March, 2020, or for the quarter ending on the 31st day of March, 2020, as the case may be, the end date shall be extended to the 31st day of July, 2020;
(iv) furnishing of certificate under section 203 thereof in respect of deduction or payment of tax under section 192 of that Act for the financial year 2019-20, the end date shall be extended to the 15th day of August, 2020;
Extension of time limits under the Income-tax Act 1961 and related Acts
(v) section 54 or 54GB referred to in item (I) of sub-clause (i) of clause (c) of sub-section (1) of section 3 of the Ordinance or sub-clause (ii) of the said clause, the end date in respect of the time limit for the completion or compliance and the end date for making the said completion or compliance, shall be the 29th day of September, 2020 and the 30th day of September, 2020 respectively;
(vi) any provisions of Chapter VI-A under the heading “B.- Deductions in respect of certain payments” thereof, referred to in item (I) of sub-clause (i) of sub-section (1) of section 3 of the Ordinance, the end date in respect of the time limit for the completion or compliance and the end date for making the said completion or compliance, shall be the 30th day of July, 2020 and the 31st day of July, 2020 respectively; and
(vii) furnishing of report of audit under any provision thereof for the assessment year commencing on the 1st day of April, 2020, the end date shall be extended to the 31st day of October, 2020:
Provided further that the extension of the date as referred to in sub-clause (b) of clause (i) of the first proviso shall not apply to Explanation 1 to section 234A of the Income-tax Act, 1961 in cases where the amount of tax on the total income as reduced by the clauses (i) to (vi) of sub-section (1) of the said section exceeds one lakh rupees :
Provided also that where the specified Act is the Direct Tax Vivad se Vishwas Act, 2020, the 30th day of December, 2020 shall be the end date of the period during which the time limit specified in, or prescribed or notified thereunder falls for the completion or compliance of the action and the 31st day of December, 2020 shall be the end date to which the time limit for completion or compliance of such action shall stand extended.
2. This notification shall come into force from the 30th day of June, 2020.
[Notification No.35 /2020/ F. No. 370142/23/2020-TPL]
NEHA SAHAY, Under Secy. (Tax Policy and Legislation Division)
TDS is not applicable for exempted service provided under GST
THE AUTHORITY OF ADVANCE RULING IN KARNATAKA
The Question and Ruling as follows :
1. We are providing catering services to educational institutions sponsored by State/ Central / Union territory which is exempted services under Sl. No. 66 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. As per Circular 65/39/2018, TDS under GST is applicable only for taxable supply contracts and as we are the exempted service provider. TDS is not applicable for our services (HSN Code 9992).
RULING
1. The Supply of services made by the applicant in the form of supply of food and drinks to the educational institutions is covered under entry no.66 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and entry no.66 of Notification (12/2017) No. FD 48 CSL 2017 dated 29.06.207 and hence exempted from CGST and SGST.
2. The amount received for such exempted service as covered under para 1 above is not liable for tax deduction at source under section 51 of the CGST Act and sectin 51 of KGST Act.
Address the concerns of Students: Supreme Court to ICAI
SUPREME COURT OF INDIA
Date : 29-06-2020
The Text of the Order as follows :
After hearing learned counsel for the parties for sometime, Mr. Ramji Srinivasan, learned senior counsel appearing for the Institute of Chartered Accountants of India (ICAI) prayed for short adjournment for taking instructions and producing draft notification/circular, likely to be issued by the ICAI to address the stated concerns of the students/candidates.
List the matter on 02.07.2020.
Address the concerns of Students: Supreme Court to ICAI
SUPREME COURT OF INDIA
Date : 26-06-2020
The Text of the Order as follows :
Mr. Ramji Srinivasan, learned senior counsel, instructed by Mr. Pramod Dayal, appearing for respondent No.1 (Institute of Chartered Accountants of India), seeks the liberty to place certain facts on record by way of an affidavit, which he intends to file before 29th June, 2020 through e-mail.
Accordingly, list the matter on 29th June, 2020.
Advance copy of the said affidavit be also served on the concerned advocate(s) through e-mail.
Test Score after human intervention does not qualify as OIDAR
THE AUTHORITY OF ADVANCE RULING IN KARNATAKA
The Question and Ruling as follows :
a) Whether the service provided for type 2 test (the specified service) classifies as ‘Online Information and Database Retrieval Services’?
b) If the type 2 test provided by the applicant does not qualify as ‘Online Information and Database Retrieval Services’, whether the applicant is liable to pay integrated tax on the supply of said services to non-taxable online recipients in India?
c) Whether the service provided for type 3 test (the specified service) classifies as ‘Online Information and Database Retrieval Services’?
d) If the type 3 test provided by the applicant does not qualify as ‘Online Information and Database Retrieval Services’, whether the applicant is liable to pay integrated tax on the supply of said services to non-taxable online recipients in India?
Applicant is liable to pay integrated tax on the supply of said services (OIDAR) to non-taxable online recipients in India
RULING
a. The service provided for type 2 test classifies as OIDAR Services.
b. Nil in view of (a) above.
c. Service provided for type 3 test does not classify as OIDAR Services.
d. IGST is exempted by virtue of SI. No. 10 of Notification No. 09/2017- IGST (Rate) dated 28.06.2017.
Employees’ Provident Fund Organization (EPFO), India Ministry of Labour & Employment, Government of India has issued Instructions for transfer online EPF during this Pandemic situation (COVID-19)”
In case of change of Job, it is important to switch EPF account from previous employer to the new employer.
• Prerequisites:
i. must have active UAN (Universal Account Number)
ii. If UAN is inactive, kindly activate at https://unifiedportal-mem.epfindia.gov.in/memberinterface
iii. UAN Holders details should be updated which includes such as Aadhaar details, Bank details etc.
iv. details can be checked in the ‘KYC’ option under the ‘Manage’ tab after logging in to your account.
v. Mobile number should be active.
vi. at least one of the employer’s – previous / present – DSC must be registered on the portal
vii. PF number of both past and present employers are registered on the EPFO database
• Documents required for EPF transfer
– Valid ID proof (Aadhaar, PAN card, or driver’s licence)
– Revised Form 13
– UAN
– Mobile phone with registered SIM
– Current employer’s details
– Bank account number (salary account)
– Old and new PF account details
• How to transfer EPF Online:
1. Login to Member Interface of Unified Portal – LINK
2. Login with your UAN and Password
3. Click on “Online Services” and then click “One Member – One EPF Account (Transfer request)”
4. Verify “Personal information” and “PF Account” for present Employer
5. Click on “Get details” and view PF Account details of previous employment.
6. Click to select Employer (Previous / Current) for Attestation.
7. Click on “Get OTP” (OTP will be send on UAN Registered Mobile Number)
8. Enter the OTP and click “Submit”
Tracking ID will be reflected post successful submission.
Tracking Mechanism to check the status of online transfer of EPF account
1. UAN Holder will track the status through the Member e-SEWA portal.
2. Click option – ‘Track Claim Status’ under the ‘Online Services’ Tab.
Conclusion
This whole transfer process has to be done to reduce overall tax liability from the balance accumulated in two separate accounts (Account with Previous and New Organization). An EPF account becomes inactive after leaving a job. The status of the form is changed to ‘approved’ by the employer post Employer approval. The Process is simple and easy and generally, it took a period of two months to complete the whole transfer process.
Disclaimer:
IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.
Time limit of filing appeal/passing order falling extended to 31st Aug
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS)
NOTIFICATION
New Delhi, the 27th June, 2020
No. 55/2020–Central Tax
G.S.R. 416(E).—In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017), read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of the Union Territory Goods and Services Tax Act, 2017 (14 of 2017), the Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 35/2020-Central Tax, dated the 3rd April, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 235(E), dated the 3rd April, 2020, namely:-
In the said notification, in the first paragraph, in clause (i),–
(i) for the words, figures and letters ―29th day of June, 2020, the words, figures and letters ― 30th day of August, 2020 shall be substituted;
(ii) for the words, figures and letters ―30th day of June, 2020, the words, figures and letters ―31st day of August, 2020 shall be substituted.
[F. No. CBEC-20/06/08/2020-GST]
PRAMOD KUMAR, Director
Note : The principal notification No. 35/2020-Central Tax, dated the 3rd April, 2020 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 235(E), dated the 3rd April, 2020 and was last amended by notification No. 47/2020–Central Tax, dated the 9th June, 2020, published in the Gazette of India, Extraordinary vide number G.S.R. 362(E), dated the 9th June, 2020.
I’ll simplify the procedure for u to understand the entire law in just few steps…. In this we first understand how the companies are incorporated earlier through SPICe and now how the companies are formed through SPICe + the shift from SPICe to SPICe + is necessary to save cost , time and efforts and to simplify the whole procedure also… It is also introduced to interlink all the government departments to serve more effectively and efficiently…. SPICe+ aims to offer about 10 services by three Central Government Ministries and Departments (Ministry of Corporate Affairs, Ministry of Labour and the Department of Revenue in the Ministry of Finance) and one State Government (Maharashtra). The form is an integrated web form with a single-window for multiple services.
SPICe
Step 1 : First we have to apply for DSC (Digital Signature)
Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. … Likewise, a digital certificate can be presented electronically to prove one’s identity, to access information or services on the Internet or to sign certain documents digitally. This step is common for all i.e for foreign directors also..
Step 2 : Now we have to apply for DIN (Directors Identification Number)
DIN Number is a unique 8 digit number that is required for any existing or proposed Director of a Company Which can be obtained either applying from DIN3 or to directly apply in SPICe
Step 3 : Now in this step we have to go through Name Approval Procedure
For name approval you can applying in either RUN (Reserve Unique Name) form. Reserve Unique Name (RUN) is a web service used for reserving a name for a new company or for changing its existing name. … Before the RUN web-form was introduced, all applications concerning company names were to be made in the Form INC-1.
And another way is to directly applying in SPICe form. Firstly for name approval you name should be unique from others if it is closely matching any other name then your name approval request is rejected and if you are applying for a new name then it is advised to first register it for a trademark then it is almost sure for your name approval request. Now another point if a subsidiary of a foreign company wants a name similar to its parent company then they have to submit a NOC document from the parent company to the native country.
How to incorporate a company?
Step 4 : Form SPICe (Simplified Proforma for Incorporating Company Electronically)
SPICe (Simplified Proforma for Incorporating a Company Electronically) is a comprehensive form through which an application for:
Name reservation
Incorporation of a company
Allotment of DIN
Application for PAN/TAN
can be made on a fast track mode.
Now we can discuss the Procedure for such application
First, important thing is to obtained the approval from the registrar of companies for the name of the company. If the approval is already obtained details of SRN of RUN(Reserve Unique Name) have to be provided.
Second, In Field [1(a to f)] we have to provide details of the type of company shall be selected from the options given there i.e. Sec 8 company , new company , producer company , LLP to company , Firm to company , others .
Third, In Field [2(a & b)] we have to provide Main division of industrial activity has to be provided as per the Annexure A.
Forth, In Field [4(a, b & c)] Correspondence address shall be the mailing address of the company until the time the registered office is established. A valid email id should be entered as all important communication is sent through the mail. The option of whether the address of correspondence is the address of the registered office of the company has to be selected.
Fifth, In Field[(5(a)] Particulars of the proposed/approved name have to be entered. In case the name is already approved via RUN this field will be pre-filled on the basis of the SRN entered.
Sixth, In Field [6(a)] we have to fill details of first subscribers.
Seventh, In Field [ 7(a)] we have to fill complete details of directors of the company.
Eighth, In Field[8(a & b)] Details regarding State/Union Territory in respect of which stamp duty is paid will be pre-filled based on the address stated. The mode of payment of stamp duty shall be stated. The option “No” can be selected only if it is not mandatory for the particular state/union territory and option “not applicable” can be selected only if the stamp duty is Nil after taking into consideration all the documents. Further, details of stamp duty paid/to be paid shall be entered in detail.
Ninth, In Field [9] Information relating to PAN and TAN should be filled. The source of income should be selected. If the source of income selected is Income from business/profession the appropriate code shall be entered.
Tenth, In Field[10] If employer registration has to applied through e-biz service details of the type of unit, nature of work and the sub-category of work should be filled in.
Eleventh, In Field[11 to 15] Applicability of Employees Provident Fund and Miscellaneous Provisions Act 1952, number of employees to be covered under the Employee Provident Fund Act and number of employees earning less than INR 15000 employed directly/through a contractor covered under Employees State Insurance Act should be mentioned. If there is a need for Importer Exporter code the same should be mentioned. The proposed amount of the investments should be mentioned on a line to line basis.
Twelfth, MOA, AOA and Declaration by first subscribers and directors have to be attached to the form.
Thirteenth, The declaration section consists of a declaration to be made by the authorised director affirming the requirements of the Companies Act 2013 has been complied with. A professional in the capacity of a Chartered Accountant/Company Secretary/Cost Accountant/Advocate should digitally sign the form and mention the membership number and certificate of practice number.
Fourteenth, The Eform should be digitally signed by the proposed director and he/she shall mention the DIN/PAN number.
Fifteenth, Atlast pay the applicable fees.
The whole process is the same for Indians as well as foreign nationals.
But now we have to discuss documents required in case of Indian directors or in case of NRI director
Identity Proof
For Indian directors i.e. Applicant’s Passport, PAN Card, Driving Licence, Post office ID Card, Bank Account Passbook.
For NRI Directors i.e. Attested copy of Applicant Passport, Attested copy of VISA (If the applicant is out of the native country), Attested copy of Resident Permit certificate (If the applicant is in India)
Address Proof
For Indian Directors i.e. Aadhar Card, Voter ID Card, Driving Licence, Registration Certificate, Utility bills, Service Tax / VAT Tax / State Tax registration Certificate, Property Tax, Municipal Corporation Receipt.
For NRI Directors i.e. Attested copy of Applicant Passport, Attested copy of any other Government issued Address Proof
The identity and address proof of foreign nationals must be attested by the following authorities:
Embassy of Native Country (If applicant is out of native country)
Apostilized by Native Country, after Public Notary (if country is in Hague Convention)
Consularized by Native Country, after Public Notary (if country is not in Hague Convention)
SPICe +
is an integrated Web Form.
consists of two parts:
Part A: Name Reservation for New Companies
Part B: Offering bouquet of services which are as follows:
1. Incorporation
2. DIN allotment
3. Mandatory issue of PAN
4. Mandatory issue of TAN
5. Mandatory issue of EPFO registration
6. Mandatory issue of ESIC registration
7. Mandatory issue of Profession Tax registration (Maharashtra)
8. Mandatory Opening of Bank Account for the Company and
9. Allotment of GSTIN (if so applied for)
Features of SPICe +
1. User has flexibility to apply for Part A and Part B together at one go or first apply for Part A, Name Approval thereafter Part B, for Incorporation and other services.
2. If only SPICe+ Part A Submitted for Name Approval, the fees and resubmission is same as earlier.
3. Approved Name and related incorporation details as submitted in Part A would be automatically pre-filled in all linked forms such as AGILE-PRO, SPICE. MOA, SPICe AOA, URC-1, INC-9 (as per applicability).
4. Declaration by all Subscribers and first Directors in INC-9 shall be auto-generated in pdf format and would have to be submitted only in Electronic form in all cases, except where Total number of subscribers and/or directors is greater than 20 and/or any such subscribers and/or directors has neither DIN nor PAN.
5. All Check form and Pre-scrutiny validations (except DSC validation) will be on web form itself.
6. For ease of filing SPICe+, information once entered can be saved and modified before submission
7. Once the SPICe+ is filled completely with all relevant details, the same would then have to be converted into pdf format, for affixing DSC.
8. Changes/modifications to SPICe+(even after generating pdf and affixing DSC scan also be done by editing the same web form application which has been saved, only till five attempts, after that whole process to be restarted
9. DSC validation and other validations will be done at the time of uploading the form with all other linked forms.
10. Registration for EPFO, ESIC and Professional Tax (For state of Maharashtra) is mandatory for all 2020 new companies incorporated through SPICe wef 23 February
11. All new companies incorporated through SPICE+ w.e.f 23 February, 2020 would also be mandatorily required to apply for opening the company’s Bank account through the AGILE-PRO linked web form.
Procedure to incorporate under SPICe + w.r.f 23.02.2020
1. Login to MCA Portal, Click on MCA Services, under Company Services click on SPICE
2. Click on New Application in case of Fresh application.
3. On Clicking, Existing Application, user can view Application Number along with Proposed/approved Name.
4. On Clicking New Application, SPICe Part A gets enabled which contains fields relating to Name Reservation such as Type, Class, Category, Sub-Category, Main division of industrial activity of the Company along with description of main division and Particulars of the proposed or approved name.
5. Click on Auto-check button to enable the first level automatic scrutiny of the Proposed Name as per name rules.
6. On Successful Completion of Part A, User can click on submit for Name Reservation or Proceed for Incorporation or Cancel option.
7. If opted for Proceed for Incorporation, Part B gets enabled containing various sections with ‘Save and Continue’ button. Each Section contains separate Check Form validation
8. Enter the basis details related to the Proposed Company Incorporation
Anticipatory bail can be granted for GST offences – HC
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
The Text of the Order as follows :
This petition is filed by the petitioner under Section 438 of the Code of Criminal Procedure, 1973 (for short ‘the Cr.P.C.’) for granting anticipatory bail. The case of the petitioner is that the respondent had issued notice/summons to the petitioner as per Section 70 of the Central Goods and Service Tax Act, 2017 (for short ‘the CGST Act’) summoning him to appear before the Authorized Officer finally on 12.05.2020 (before filing the petition and after filing the petition, another summon has been issued). Further contention of the petitioner is that the petitioner is the proprietor of M/s. Sri Om Traders, registered dealer under the provisions of the CGST Act and the SGST at Shivamogga, dealing in both ferrous and non-ferrous scrap. During his regular course of business, he has purchased goods from various registered and unregistered dealers and issued tax invoices as per law. He has collected the taxes and remitted to the Government as per the CGST and the SGST Act.
2. Further, it is contended that on 08.02.2020, the respondent has issued a summon to appear before an Officer by name D. Bhaskar at 3:15 p.m., and prior to that on the same day, the respondent has conducted inspection of the business premises and drawn a mahazar. Another notice issued by the respondent to appear before K. Venumadhava Reddy on 10.02.2020. The petitioner is ready to appear before the respondent and co-operate with the investigation. However, the respondent has already collected all the documents and completed their investigation and the petitioner has apprehended his arrest in the hands of the respondent for the offence punishable under Section 132(5) of the CGST Act. In case, if he is arrested and sent to judicial custody, he will be put into hardship and irreparable loss as he is having a old age mother and also a daughter and due to COVID-19 lockdown situation, his heath may affect. Even though, he has not committed any offence, there is likelihood of his arrest for the non-bailable offence. He is ready to abide by any condition imposed by this Court. The offence is not punishable with death or imprisonment for life. He is ready to offer any surety. Hence, prayed for granting anticipatory bail.
3. Sri Jeevan Neeralgi, learned Special Public Prosecutor, has filed written objections contending that the petitioner is an assessee under the CGST Act. Intelligence has been developed by the Officers of the respondent that the petitioner was engaged in availment of fake input tax credit i.e., availing of credit on the invoices received from the persons without actual supply of goods. Based upon the authorization given by the Competent Authority, summons have been issued to the petitioner to appear before the Officer as per Section 70 of the CGST Act. The power conferred on the Officer under Section 70 of the CGST Act is to summon any person to appear and produce document or examine before him. The inquiry is deemed to be judicial proceedings within the meaning of Section 193 and Section 228 of the Indian Penal Code. In spite of issuing so many notices/summons, the petitioner has failed to appear before the Authority on various dates. The preliminary investigation revealed that the input tax credit is taken by the petitioner from the bogus entities. The petitioner is operating from rented premises and his whereabouts were not known to his neighbours. The respondent is authorized to conduct proceedings in terms of Section 67 of the CGST Act. Neither the petitioner nor his authorized person approached the respondent till 03.03.2020. The whereabouts of the petitioner is not known. The petitioner is a habitual offender, he may commit same offence and he is deliberately avoiding his appearance for the purpose of enquiry proceedings. His bail petition filed before the City Civil and Sessions Judge came to be dismissed. If the bail is granted to the petitioner, he will destroy the evidentiary material and other documents. The anticipatory bail is not maintainable and it is pre-matured. In similar cases, the Telangana High Court has dismissed the petitions in P.V.Ramana Reddy vs. Union of India in Writ Petition Nos.4764, 4769, 4892, 5074, 5130, 5329, 6952 and 7583 of 2019, dated 18.04.2019 which was upheld by the Hon’ble Supreme Court by dismissing the SLP and the Hon’ble Supreme Court has reaffirmed P.V.Ramana Reddy’s case in the case of Union of India vs. Sapna Jain and Others in SLP (CRL.)Nos.4322-4324/2019, dated 29.05.2019 and hence, prayed for dismissing the bail petition.
4. I have heard the arguments of the learned counsel for the petitioner as well as the learned State Public Prosecutor and perused the records.
5. Before adverting to the case of the petitioner, it is worth to consider the judgment of the Telangana High Court and the judgment of the Hon’ble Supreme Court which were relied by the respective learned counsel.
6. The main objection raised by the learned Special Public Prosecutor for the respondent is that the anticipatory bail is not maintainable. The petitioner is required to file only writ petition for seeking relief under the CGST Act. In support of his arguments, he has relied upon the judgment of the Telangana High Court in the case of P.V.Ramana Reddy stated supra and the Hon’ble Supreme Court has upheld the order of the Telangana High Court in the Special Leave Petition and the same was reaffirmed by the Hon’ble Supreme Court in Sapna Jain’s case stated supra.
7. Per contra, the learned counsel appearing for the petitioner has contended that in a similar case, the Co-ordinate Bench of this Court has granted anticipatory bail in Criminal Petition Nos.497/2019 connected with 498/2019 dated 18.02.2019 in the case of Sri Avinash Aradhya vs. The Commissioner of Central Tax and Sri Mallokaradhya I.P. vs. The Commissioner of Central Tax respectively. He further contended that in a similar case, the Bombay High Court has rejected the bail petition and in the appeal, the Hon’ble Supreme Court in the case of Meghraj Moolchand Burad (Jain) vs. Directorate General of GST Intelligence Pune and Another has granted bail vide order dated 13.12.2018. Learned counsel for the petitioner has contended that there is no speaking order passed by the Hon’ble Supreme Court in P.V.Ramana Reddy’s case in SLP, therefore, there is no law laid down by the Hon’ble Supreme Court in order to reject the bail petition in view of the law laid down by the Hon’ble Supreme Court in the case of Khoday D stilleries Limited and Others vs. Sri Mahadeshwara Sahakara Sakkare Karkhane Limited, Kollegal reported in (2019) 4 SCC 376.
8. Writ petitions were filed by P.V.Ramana Reddy before the Division Bench of the Telangana High Court challenging the issuance of summons/notice issued by the Authorities under Section 70 of the CGST Act. The Hon’ble Telangana High Court after considering various grounds urged by the learned counsel for the petitioner and the Additional Solicitor General has held at paragraph Nos. 47, 48 and 58 as under:
“47. Once it is found that Article 226 of the Constitution of India can be invoked even in cases where Section 438 Cr.P.C. has no application (in contrast to cases such as those under the SC/ST Act where it stands expressly excluded) and once it is found that the limited protection against arrest available under Sections 41 and 41A Cr.P.C. may be available even to a person sought to be arrested under Section 69(1) of the CGST Act, 2017 (though the necessity to record reasons in the authorization for arrest may not be there), it should follow as a coronary that the writ petitions cannot be said to be not maintainable.
48. That takes us to the next question as to whether the petitioners are entitled to protection against arrest, in the facts and circumstances of the case. We have already indicated on the basis of the ratio laid down by the Constitution Bench in Kartar Singh and the ratio laid down in Km. Hema Mishra that the jurisdiction under Article 226 of the Constitution of India to grant protection against arrest, should be sparingly used. Therefore, let us see prima facie, the nature of the allegations against the petitioners and the circumstances prevailing in the case, for deciding whether the petitioners are entitled to protection against the arrest. We have already extracted in brief, the contents of the counter affidavits. We have summarized the contents of the counter affidavits very cautiously with a view to avoid the colouring of our vision. Therefore, what we will now take into account on the facts, will only be a superficial examination of facts.
xxx xxx xxx
58. Therefore, all the technical objections raised by the petitioners, to the entitlement as well as the necessity for the respondents to arrest them are liable to be rejected. Once this is done, we will have to examine whether, in the facts and circumstances of these cases, the petitioners are entitled to protection against arrest. It must beremembered that the petitioners cannot be placed in a higher pedestal than those seeking anticipatory bail. On the other hand, the jurisdiction under Article 226 has to be sparingly used, as cautioned by the Supreme Court in Km. Hema Misra (cited supra).”
Anticipatory bail can be granted for GST offences – HC
9. On merits of the case, the Hon’ble Telangana High Court has dismissed the writ petitions, which were challenged by the assesees before the Hon’ble Supreme Court by filing SLP Crl.No.4430/2019. The Hon’ble Supreme Court has dismissed the said SLP vide order dated 29.05.2019. In the case of Sapna Jain (SLP Crl.Nos.4322-4324/2019), the Hon’ble Supreme Court has held as under:
“while entertaining any such request in future, the order of the Telangana High Court be kept in mind, wherein the court has taken a view contrary to that of the other High Courts.”
The Hon’ble Supreme Court has held that while dealing with any such cases under the CGST Act, the order passed by the Telangana High Court in P.V.Ramana Reddy’s case shall be kept in mind.
10. As already held above in P.V.Ramana Reddy’s case, the Telangana High Court has held that writ petition under Article 226 of the Constitution of India, the pre-arrest bail is maintainable, but on the merits, the writ petitions were dismissed as huge amount of tax evaluation was involved in the said case. It is also be noted that the then learned Additional Solicitor General Sri K.M. Nataraj has argued in the said case that writ petitions cannot be converted into bail petition under Section 438 of the Cr.P.C. for granting anticipatory bail. The said submission has been placed at paragraph No.16 of the said judgment and the Telangana High Court rejected the contention of the Additional Solicitor General and the writ petitions were dismissed. The Supreme Court has dismissed the SLP, however, no speaking order has been passed. In this regard, the learned counsel for the petitioner has relied upon the judgment of the Hon’ble Supreme Court in the case of Khoday Distilleries Limited stated supra, wherein various guidelines have been issued. The relevant guidelines are as follows:
“Held, (i) an order refusing special leave to appeal may be a non-speaking order or a speaking one-In either case it does not attract the doctrine of merger-An order refusing special leave to appeal does not stand substituted in place of the order under challenge-All that it means is that Supreme Court was not inclined to exercise its discretion so as to allow the appeal being filed
(ii) If the order refusing leave to appeal is a speaking order i.e. gives reasons for refusing the grant of leave, then the order has two implications- Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Art.141 of the Constitution- Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country-But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties.”
11. Further, the Hon’ble Supreme Court in the case of Sapna Jain stated supra has held as under:
“As different High Courts of the country have taken divergent views in the matter, we are of the view that the position in law should be clarified by this Court. Hence, the notice.
As the accused-respondents have been granted the privilege of pre-arrest bail by the High Court by the impugned orders, at this stage, we are not inclined to interfere with the same. However, we make it clear that the High Courts while entertaining such request in future, will keep in mind that this Court by Order dated 27.05.2019 passed in SLP(Crl.) No.4430/2019 had dismissed the special leave petition filed against the judgment and order of the Telangana High Court in a similar matter, wherein the High Court of Telangana had taken a view contrary to what has been held by the High Court in the present case.”
12. Further, the Union of India challenged the granting of relief of bail in favour of Sapna Jain by the Bombay High Court. The Hon’ble Supreme Court has not set aside the order of the Bombay High Court. Apart from that, in the case of Meghraj Moolchand Burad (Jain) stated supra in ABA No.2333 of 2018, the Bombay High Court has dismissed the bail petition filed under Section 438 of the Cr.P.C. and the assessee filed SLP before the Hon’ble Supreme Court in S.L.P (Crl.) No.244 of 2019. The Hon’ble Supreme Court granted anticipatory bail vide judgment dated 13.12.2018. The Co-ordinate Bench of this Court vide order dated 18.02.2019 in the case of Avinash Aradhya stated supra has granted anticipatory bail by imposing conditions. In another batch of case, on 15.04.2019, the Co-ordinate Bench of this Court has granted anticipatory bail to one Mahendra Kumar Singhi and Suman Mahendra Kumar Singhi. The said bail orders were not challenged by the respondent-State before the Hon’ble Supreme Court. The Co-ordinate Bench of this Court while granting anticipatory bail considered the provisions of Sections 132, 137 and 138 of the CGST Act and by considering the principal laid down by the Hon’ble Supreme Court in the case of Siddharam Satlingappa Mhetre vs. State of Maharashtra and others reported in (2011) 1 SCC 694 granted the relief by imposing conditions. Even otherwise, the Telangana High Court has not held that Section 438 of the Cr.P.C. bail application is not maintainable in the case of the offence which is punishable under the CGST Act.
13. That apart, the learned Special Public Prosecutor for the respondent fairly admits that there is no statutory bar in the CGST Act either expressly or impliedly for entertaining the bail petition under section 438 of the Cr.P.C. Unlike, the anticipatory bail has been prohibited in the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989, and there was bar for anticipatory bail in the State of Uttar Pradesh. It is relevant to mention that as per the provisions of Section 70 of the CGST Act, the Officer has power to summon any person whose attendance is considered as necessary either to give evidence or to produce document or any other thing in any inquiry in the same manner as provided in the case of Civil Court under the provisions of the Code of Civil Procedure, 1908, and every such inquiry referred to sub-section (1) shall deemed to be “judicial proceedings” within the meaning of Section 193 and Section 228 of the Indian Penal Code.
14. It is also relevant to mention that Section 69 of CGST Act empowers the Commissioner to authorize any Officer of central tax to arrest a person, if the Commissioner has reasons to believe that a person has committed any offence specified in Clause (a) or (b) or (c) or (d) of sub-section (1) of Section 132. Sub-section (2) of Section 69 of the CGST Act empowers that where a person is arrested under sub-section (1) for an offence specified under sub-section (5) of Section 132, the officer authorized to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within 24 hours. Sub-section (3)(a) of Section 69 of the CGST Act empowers that where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of Section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate. Sub-section 3(b) of Section 69 of the CGST Act empowers that in a case of non-cognizable and bailable offence, the DeputyCommissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same power and be subject to the same provisions as an Officer in-charge of a Police Station.
15. On bare reading of Section 69 of the CGST Act clearly empowers the Commissioner to authorize any Officer to arrest a person, if the Commissioner has reasons to believe that if a person committed the offence specified in Clause (a) or (b) or (c) or (d) of sub-section (1) of Section 132 and as per Section 132 (4) of the CGST Act, if any offence is committed, other than the offence, Clause (a) or (b) or (c) or (d) of sub-section 1 of Section 132 shall be non-cognizable and bailable. As per sub-section (5) of Section 132, the offences specified in Clause (a) or (b) or (c) or (d) of sub-section (1) of Section 132 shall be cognizable and non-bailable and punishable under Clause (i) up to 5 years and fine. Therefore, if the petitioner is arrested for the offences other than the offence stated under Section sub-section 4 of Section 132 of the CGST Act which are non-cognizable and bailable, wherein the Deputy Commissioner or Assistant Commissioner has power to release the petitioner on bail. If the Commissioner has reasoned to believe that the petitioner is arrested for the offence committed under Section 132(1)(a) or (b) or (c) or (d) which is punishable under sub-section 5 of Section 132 of the CGST Act, which is cognizable and non-bailable offence, the Officer authorized by the Commissioner after informing the grounds of arrest has to produce before the Magistrate within 24 hours. If the assessee is arrested and produced before the Magistrate, the petitioner/assessee is likely to be remanded to judicial custody. Therefore, when the offences punishable under sub-section 1 Clause (a) or (b) or (c) or (d) of Section 132 of the CGST Act which falls under the provisions of sub-section 5 of Section 132 of the CGST Act is a cognizable and non-bailable offence punishable with imprisonment up to 5 years and fine. Once a person apprehends his arrest in the hands of the Commissioner under Section 69 of the CGST Act, the assessee has statutory right to seek anticipatory bail under Section 438 of the Cr.P.C. At this juncture, it is relevant to mention Section 438 of the Cr.P.C. which is as under:
438 – Direction for grant of bail to person apprehending arrest
(1) Where any person has reason to believe that he may be arrested on accusation of having committed a non-bailable offence, he may apply to the High Court or the Court of Session for a direction under this section that in the event of such arrest he shall be released on bail; and that Court may, after taking into consideration, inter-alia, the following factors, namely:-
(i) the nature and gravity of the accusation;
(ii) the antecedents of the applicant including the fact as to whether he has previously undergone imprisonment on conviction by a Court in respect of any cognizable offence;
(iii) the possibility of the applicant to flee from justice; and.
(iv) where the accusation has been made with the object of injuring or humiliating the applicant by having him so arrested, either reject the application forthwith or issue an interim order for the grant of anticipatory bail.”
16. On bare reading of Section 69 (1) of the CGST Act, where the Commissioner has reasons to believe if a person committed the offence under Section 132 of the CGST Act, he may, by order, authorize any officer of central tax to arrest such person. Therefore, the petitioner has reasons to believe that he may be arrested on accusation for having committed non-bailable offence under sub-section 5 of Section 132 of the CGST Act. Therefore, the petition under Section 438 of the Cr.P.C. is maintainable for the offences committed under the CGST Act and there is no statutory bar for invoking or exercising power under section 438 of the Cr.P.C. for the offence committed under the provisions of the CGST Act. Therefore, the contention of the learned Special Public Prosecutor cannot be accepted.
17. On merits of the case, it is alleged by the prosecution that the petitioner is said to have involved fraudulent involvement of input tax credit on the basis of invoices without actual supply of goods in contravention of Section 16 of the CGST Act and caused loss to the ex- chequer for Rs.9.05 crore approximately. It is also stated that the preliminary stage of investigation has been completed and they found, the input tax credit taken by the petitioner from the bogus entities and said to be created fake invoices in order to avail input tax credit and to make enquiry under Section 70 of the CGST Act. Therefore, summons have been issued by the authorized officer under Section 70 of the CGST Act which clearly goes to show that the petitioner is reasoned to believe that he is apprehending his arrest in the hands of the respondent in case after his appearance before the authorizing officer as per Section 69 of the CGST Act. Therefore, in case the petitioner is arrested, he is likely to remand to the judicial custody, after his production before the Magistrate and by looking to the present COVID-19 situation, if he is remanded to the judicial custody, he will be put to hardship and definitely, his health would likely to affect. The offences are not punishable with death or imprisonment for life. There is no statutory bar in the CGST Act for granting anticipatory bail by exercising power under Section 438 of the Cr.P.C. Merely, there were number of notices/summons issued by the respondent during the lockdown for COVID-19 that itself is not a ground to reject the bail petition. Considering the fact and circumstances of the case, if an anticipatory bail is granted, no prejudice would be caused to the respondent. Accordingly, I proceed to pass the following
ORDER
Petition is allowed. The petitioner is ordered to be enlarged on bail in the event of his arrest under Section 69 of the CGST Act by the respondent-Authorised Officer, after enquiry under Section 70 of the CGST Act, in summon dated 12.05.2020 in No.CBIC-DIN-202005DSS000006QFF52 and corrigendum dated 18.05.2020 in No.CBIC-DIN-202005DSS000001W4CCE, subject to following conditions:
i. Petitioner shall execute a personal bond for Rs.10,00,000/- (Rupees Ten lakh) with two sureties to the Apprehending Authority or Authorized Officer;
ii. Petitioner shall appear before the Authorized Officer within one week, after receipt of this order, for the purpose of enquiry under Section 70 of the CGST Act;
iii. Petitioner shall not tamper with the prosecution evidence or any document directly or indirectly;
iv. Petitioner shall co-operate during the course of enquiry and shall not leave the country without prior permission of the Magistrate or the trial Court and he shall surrender his passport, if any, to the concerned Authorized Officer;
v. Petitioner shall appear as and when called for the purpose of any further investigation; and
vi. Petitioner shall not indulge in any similar offence.
In view of the disposal of the main petition, I.A. No.1 of 2020 does not survive for consideration. It is, accordingly, disposed of.
a). If taxable, what would be the rate of GST and HSN Code?
b). If exempted, the category of exempted goods and HSN Code?
RULING
1. The supply of books by the applicant to the religious schools are supply of printed books which is covered under HSN Code 4901 and is exempt from tax as they are covered under following entries.
a. Under the CGST Act, entry no.119 of Notification No.2/2017- Central Tax (Rate) dated 28.06.2017
b. Under the Karnataka Goods and Services Tax Act, entry no.119 of Notification (02/2017) No. FD 48 CSL 2017 dated 29.06.2017
c. Under the IGST Act, entry no.119 of Notification No.2/2017 – Integrated Tax (Rate) dated 28.06.2017
Limited scrutiny cannot become complete on mere suspicion
IN THE INCOME TAX APPELLATE TRIBUNAL
The Relevant Text of the Order as follows :
6.4 We have also through the original order sheet entries, as were present in the assessment records and which had been submitted for our perusal by the Ld. Sr. Departmental Representative under our directions and it shows that there is not an iota of any cogent material mentioned by the Assessing Officer which enabled him to have reached the conclusion that this case was a fit case for conversion from limited scrutiny to complete scrutiny. We have also gone through the statement of assessee’s Director Mr. Rohit Verma which was recorded on 18.07.2017 i.e., after the conversion of the case and even in his statement nothing adverse is coming out vis. a vis. the impugned transactions. If the proposal of the Assessing Officer dated 05.10.2017 and the approval of the Ld. Pr. Commissioner of Income Tax dated 10.10.2017 are examined on the anvil of paragraph 3 of CBDT Instruction No.5/2016, it is very much clear that no reasonable view is formed as mandated in the said CBDT Instruction No.5/2016 in an objective manner and secondly merely suspicion and inference is the foundation of the view of the Assessing Officer. We also note that there is no direct nexus brought on record by the Assessing Officer in the said proposal and, therefore, it is very much apparent that the proposal of converting the limited scrutiny to complete scrutiny was merely aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Income Tax has accorded the approval in a mere mechanical manner which is in clear violation of the CBDT Instructions No.20/2015.
6.5 The Hon’ble Calcutta High Court in the case of Amal Kumar Ghosh reported in 361 ITR 458 (Cal.) discussed the purpose behind the CBDT Circulars. The relevant observations of the Hon’ble Calcutta High Court are as under:
“…..Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act.”
Limited scrutiny cannot become complete on mere suspicion
6.6 The Co-ordinate bench of ITAT at Chandigarh in the case of Paya Kumari in ITA No.23/Chd/2011, vide order dated 24.02.2011, has held that even Section 292 BB of the Act cannot save the infirmity arising from infraction of CBDT Instructions dealing with the subject of scrutiny assessments where assessment has been framed in direct conflict with the guidelines issued by the CBDT.
6.7 Therefore, on an overall view of the factual matrix as well as settled judicial position, we are of the considered opinion that the instant conversion of the case from limited scrutiny to complete scrutiny cannot be upheld as the same is found to be in total violation of CBDT Instructions No.5/2016. Accordingly, it is our considered opinion that the entire assessment proceedings do not have any feet to stand on. Therefore, we hold the assessment order to be nullity and we quash the same.
6.8 Since, we have quashed the assessment order as being nullity, the other grounds raised by the assessee became academic in nature and are not being addressed to.
7.0 In the final result, the appeal of the assessee stands allowed.
No TDS applicable on reimbursement of expenses incurred by Foreign parent company
IN THE HIGH COURT OF DELHI AT NEW DELHI
The Relevant Text of the Order as follows :
5. The aforesaid contention of the appellant was refuted by Ms. Kapila, learned counsel appearing for the assessee submitting that core issue was as to whether nature of expenses is such that it attracts the provisions of TDS. Her submission was that the payment raised was towards reimbursement of the expenses incurred by the parent company, namely, global management expenses and other expenses. When such payment was not chargeable to tax at all, the collecting machinery provision, whether Section 194J or Section 195, would not get triggered. According to her, there must be component of income chargeable to tax and only then the question of deduction of tax at source would arise in as much as tax at source is to be deducted on income and not on expenses. Global management expenses were reimbursement of cost and as per the decision in the case of Van Oord ACZ India (P) Ltd. v. CIT, [2010] 323 ITR 130 (Delhi), tax was not deductible.
6. Prima facie, we find force in the argument of learned counsel for the assessee. In any case, this is the view already taken by this Court in the case of this very assessee affirming the earlier decision of the Tribunal in ITA Nos.475/2009 and 751/2010 and we see no reason to deviate from the same. Therefore, in our opinion, no substantial question of law arises and the appeal is dismissed.
Sec 14A – If Interest Free Funds available it presumed that Investments made from that
IN THE INCOME TAX APPELLATE TRIBUNAL
The Text of the Order as follows :
All the appeals by the Assessee are directed against the different Orders of the Ld. CIT(A)-4, Kanpur, Dated 31.03.2017, for the A.Y. 2012-2013 and 25.07.2018 for the A.Ys. 2013-2014 and 2014-2015.
2. We have heard the Learned Representatives of both the parties and perused the material on record. Since issues are common , therefore, all the appeals were heard together and we dispose of the same by this consolidated order. The appeals are decided year-wise as under : A .Y. 2012-2013 :
3. On Ground Nos. 1 and 2, assessee challenged the disallowance of Rs.1,51,65,269/- made on account of interest under section 36(1)(iii) of the I.T. Act, 1961. The A.O. noted that assessee-company has given interest free loans and advances to related party. The disallowance of interest expenses against these loans have been discussed in the assessment order passed for preceding A.Y. 2011- 2012. In the same manner, interest on loans/advances given to M/s. Prateek Resorts & Builders Pvt. Ltd., has been disallowed. The A.O, therefore, disallowed Rs.1,51,65,269/- under section 36(1)(iii) of the I.T. Act, 1961. The assessee made detailed written submissions before the Ld. CIT(A). However, the Ld. CIT(A) dismissed the appeal of assessee.
3.1. Learned Counsel for the Assessee submitted that addition has been made by the A.O. simply by relying on the Order passed in preceding A.Y. 2011-2012 in the case of the assessee. However, the said addition has been deleted by the Ld. CIT(A) and Department did not move any appeal against the said decision. Copy of the grounds of appeal for the A.Y. 2011-2012 is filed on record in support of this contention. The Order of the Ld. CIT(A) for the A.Y. 2011- 2012 is filed at Pages 186 and 187 of the paper book. In addition to the above submissions, the Learned Counsel for the Assessee further submitted that detailed break-up of advances given to M/s. Prateek Resorts & Builders Pvt. Ltd., relating to assessment year under appeal as on 31.03.2012 was Rs.12,13,22,153/-. The opening balance as on 01.04.2011 was Rs.5,70,72,153/- relevant to A.Y. 2011- 2012 which have been decided in favour of the assessee. Learned Counsel for the Assessee further submitted that advances were given for business purposes. The evidence for the same are filed at Pages 94, 95 and 98 of PB which is correspondence between the parties. He has, therefore, submitted that since the amount in question have been given for commercial expediency, therefore, no addition could be made. He has relied upon Judgment of Hon’ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC). Learned Counsel for the Assessee further submitted that during the year under consideration, the assessee-company has sufficient own funds as well as interest free borrowing funds which have been used to make these advances and these advances have been shown in the balance-sheet, copy of which is filed at page-10 of the PB to show that assessee has total own surplus funds of Rs.35,57,47,999/-. It was, therefore, submitted that no disallowance of interest should be made out of the same. He has relied upon Judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax vs., Reliance Industries Ltd., 410 ITR 466 (SC) in which the Hon’ble Supreme Court has noted findings of Tribunal that “the findings of the Tribunal that interest free funds available to the assessee were sufficient to him for its investment. Hence, it can be presumed that investments were made from the interest free funds available with the assessee”.
4. On the other hand, Ld. D.R. relied upon the Orders of the authorities below.
5. We have considered the rival submissions and perused the material on record. The A.O. on this issue made the addition by following his Order for the A.Y. 2011-2012 without giving any independent findings. In A.Y. 2011-2012 the Ld. CIT(A) has allowed the claim of assessee and deleted the addition, copy of the Order is placed in the paper book. Though the Department has filed an appeal before the Tribunal, but, no ground have been raised on this issue. Copy of the grounds of appeal is also filed on record. These facts itself are sufficient to delete the addition. We may further note that assessee has own sufficient funds to give advance to M/s. Prateek Resorts & Builders Pvt. Ltd., out of own funds. There was also an opening balance as contended by the Learned Counsel for the Assessee in preceding year, on which, addition has already been deleted. The assessee has also placed on record the correspondence between the parties to show that advance have been given for commercial expediency. It is well settled Law that when interest free funds are available to the assessee which were sufficient to made its investments, it would be presumed that the investments were made from the interest free funds available with the assessee. We rely upon the Judgment of the Hon’ble Bombay High Court in the case of Reliance Utility and Power Ltd., 313 ITR 340 (Bom.) (HC) and Judgment of Hon’ble Supreme Court in the case of Reliance Industries Ltd., 410 ITR 466 (SC) and Judgment of Hon’ble Supreme Court in the case of Munjal Sales Corporation 298 ITR 298 (SC). Considering the totality of the facts and circumstances of the case, we do not find any justification to sustain the addition. We, accordingly, set aside the Orders of the authorities below and delete the addition of Rs.1,51,65,269/-. Ground Nos. 1 and 2 of the appeal of assessee are allowed.
6. On Ground Nos.3 and 4, assessee challenged the disallowance of Rs.1,52,47,867/- under section 14A of the I.T. Act read with Rule 8D of the I.T. Rules, 1962.
6.1. The A.O. noted that assessee has received dividend income of Rs.64,59,304/- and has claimed the same to be exempted. Since the assessee has not made disallowance of expenditure against the exempted income, therefore, the A.O. disallowed Rs.1,52,47,867/- under section 14A read with Rule 8D of the I.T. Rules. The Ld. CIT(A) confirmed the addition.
Sec 14A – If Interest Free Funds available it presumed that Investments made from that
6.2. Learned Counsel for the Assessee submitted that the dividend earned by the assessee-company during the assessment year under appeal can be bifurcated that investment in M/s. ATS Town Ship Pvt. Ltd., yielded dividend of Rs.56,25,000/- and from the Reliance Mutual Funds dividend was earned of Rs.8,34,304/-. He has further submitted that value of investments from where dividend has been earned in the case of M/s. ATS Town Ship Pvt. Ltd., as on 31.03.2012 was Rs.9,000/-, which is supported by PB-17 which is the details of Note-12 Non- current investments and PB-60 which is balance-sheet of M/s. ATS Town Ship Pvt. Ltd. In the case of Reliance Mutual Fund, the investment was NIL in assessment year under appeal since purchase and sales were within the year. He has submitted that the average value of investments comes to Rs.9,500/- only. He has submitted that provisions of Section 14A read with Rule 8D provide for disallowance of expenses which are incurred only in relation to the exempt income earned. It is well settled Law that while computing the disallowance under Rule 8D (iii), rate of 0.5% has to be applied to only those investments which actually have resulted in exempted dividend income rather than 0.5% of the average of total investments. Thus, in assessee’s case also for the purpose of making disallowance under the above provision, only average value of investment as calculated at Rs.9,500/- shall be considered which would make disallowance of Rs.47.50 only. He has submitted that the issue is covered by the Judgment of Hon’ble Delhi High Court in the case of ACB India Ltd., vs., ACIT ITA.No.615/2014 Dated 24.03.2015 in which it was held that “the A.O. instead of adopting the average value of investment of which income is not part of total income i.e., the value of tax exempt investment, chose to factor in the total investment itself. Even though the Ld. CIT(A) noticed the exact value of the investment which yielded taxable income, he did not correct the error to chose to apply his own equity. Given the record that it be done so to substitute the figure of Rs.38,61,09,287/- with the figure of Rs.3,53,26,800/- and thereafter, arrive at the exact details of .05%. In view of the above reasoning, the findings of the ITAT and lower authorities are hereby set aside. The appeal is allowed and the matter is remitted to work-out the tax effect to the A.O. who shall do so after giving due notice to the party.” Learned Counsel for the Assessee on the same proposition also relied upon other decision of the Hon’ble Delhi High Court. Learned Counsel for the Assessee further submitted that the A.O. has merely made the impugned addition by stating that since the assessee has earned exempt income, therefore, provisions of Section 14A are applicable. It is evident that in the assessment order there is no satisfaction recorded by the A.O. before making any disallowance, therefore, no addition could be made. He has relied upon Judgment of Hon’ble Delhi High Court in the case of Max Opp Investment Ltd., vs., Commissioner of Income Tax 347 ITR 272 (Del.) (HC), which is confirmed by the Hon’ble Supreme Court. He has also relied upon Judgments of Hon’ble Delhi High Court on the same proposition in the case of Commissioner of Income Tax vs., Taikisha Engineering India Ltd., 370 ITR 338 (Del.) (HC).
7. On the other hand, Ld. D.R. relied upon the Orders of the authorities below.
8. We have considered the rival submissions and perused the material on record. The investments made by assessee as on 31.03.2012 as argued by the Learned Counsel for the Assessee is not in dispute that in case of M/s.ATS Township Pvt. Ltd., assessee made investment of Rs.9000/- only and in the case of Reliance Mutual Fund it was NIL because sales and purchases were within the year. Thus while computing the disallowance under the above provision, the rate of 0.5% has to be applied to only those investments which actually have resulted in exempt dividend income rather than .05% of the average of the total investments. The A.O. shall have to take average value of such investment. Further A.O. did not record any satisfaction before making the disallowance and merely made the addition because assessee has earned dividend income. Thus, these are not sufficient to make any addition against the assessee. The Hon’ble Delhi High Court in the case of I.P. Support Services India Ltd., 378 ITR 240 9Del.) (HC) held that “no disallowance be made in the absence of satisfaction as to why voluntary disclosure made by assessee was unreasonable and unsatisfactory.” Similar view have been taken by the Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs., Taikisha Engineering India Ltd., 370 ITR 338 (Del.) (HC). The Hon’ble Punjab & Haryana High Court in the case of Abhishek Industries Ltd., 380 ITR 652 (P & H) (HC) held that “onus is on A.O. to record satisfaction that interest bearing funds used for investment to earn tax free income.” Considering the facts and circumstances of the case in the light of submissions of the Learned Counsel for the Assessee and in the absence of any satisfaction recorded by the A.O. for making disallowance under section 14A read with Rule 8D of the I.T. Act, no disallowance could be made in the case of the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. In the result, Ground Nos.3 and 4 of the appeal of the Assessee are allowed.
9. In the result, ITA.No.3080/Del./2017 for the A.Y. 2012-2013 of the Assessee is allowed.
A .Y. 2013-2014 :
10. On Ground Nos.1 to 4, the assessee challenged the disallowance of Rs.2,04,97,971/- under section 14A read with Rule 8D of the I.T. Rules, 1962.
11. The A.O. noted that in the balance-sheet filed along with the return of income, an investment of Rs.414.96 crores have been shown as non-current investment. In view of this, disallowance is to be made as per Section 14A read with Rule 8D. The assessee was asked to submit as to why disallowance under section 14A should not be made. The assessee submitted that during the year under consideration the assessee has not earned any income by way of dividend and that no expenditure is incurred in relation to any exempted income. The A.O. however, did not accept the contention of assessee and made the disallowance of Rs.2,04,97,971/- under section 14A read with Rule 8D of I.T. Rules, 1962. On appeal, the Ld. CIT(A) dismissed the appeal of assessee.
12. Learned Counsel for the Assessee submitted that in assessment year under appeal assessee has not earned any exempt income. He has referred to PB-29 which is balance-sheet of the assessee to show that as on 31.03.2013 assessee has not earned any dividend income. He has submitted that the Hon’ble Supreme Court in the case of CIT vs., Chettinad Logistics (P.) Ltd., [2018] 95 taxmann.com 250 (SC) dismissed the SLP of the Revenue by confirming the Order of the Hon’ble Madras High Court holding that “Section 14A of the Act cannot be invoked where no exempt income is earned by the assessee”. He has relied upon Judgment of Hon’ble Delhi High Court in the case of Cheminvest Ltd., vs., CIT 378 ITR 33 (Del.) in which the Hon’ble High Court similarly held that “if assessee has not earned exempt income, no disallowance could be made.” He has, therefore, submitted that no disallowance could be made by the authorities below.
13. The Ld. D.R. relied upon the Orders of the authorities below.
14. We have considered the rival submissions. It is well settled Law that in the absence of any exempt income no addition can be made by the A.O. The above decisions squarely apply to the facts of the case. It is not in dispute that during the assessment year under appeal assessee has not earned any exempt income, therefore, no disallowance under section 14A read with Rule 8D could be made. Further no satisfaction as required under section 14A have been recorded by the A.O. in the assessment order. Therefore, the issue would also be squarely covered by reasoning given in A.Y. 2012-2013 (supra). In view of the above, we set aside the Orders of the authorities below and delete the addition. Ground Nos. 1 to 4 of the appeal of the Assessee are allowed.
15. On Ground Nos.5 and 6, assessee challenged disallowance of Rs.39,89,019/- made by A.O. on account of interest under section 36(1)(iii) of the I.T. Act, 1961.
16. The A.O. noted that in A.Y. 2011-2012 he has made disallowance of interest on loan and advances given to M/s. Prateek Resorts & Builders Pvt. Ltd., The A.O, therefore, disallowed the impugned amount.
17. After considering the rival submissions, we are of the view that the issue is same as have been considered inA.Y. 2012-2013 (supra). Both the parties have submitted that the Order in A.Y. 2012-2013 may be followed in this year. In this view of the matter, we set aside the Orders of the authorities below and delete the addition. In the result, Ground Nos.5 and 6 of the appeal of the Assessee are allowed.
18. In the result, ITA.No.5408/Del./2018 for the A.Y. 2013-2014 of the Assessee is allowed.
A .Y. 2014-2015 :
19. On Ground Nos. 1 to 6, the assessee challenged the disallowance of Rs.2,39,66,670/- made by A.O. invoking the provisions of section 14A read with Rule 8D of the I.T. Rules, 1962.
20. The A.O. noted that in assessment year under appeal assessee has shown investment of Rs.543.71 crores as non-current investment. The A.O. noted that disallowance have to be made under section 14A of the I.T. Act. The assessee submitted that in assessment year under appeal, assessee has earned dividend of Rs.1,97,449/- only for which no expenditure was incurred in relation to exempt income. The A.O. however under the above provisions disallowed the impugned amount. The Ld. CIT(A) confirmed the addition.
21. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that the assessee has received this dividend out of investment made in Reliance Mutual Funds whose opening and closing balance during the year were NIL (PB- 26). Thus, the average value of investment will be calculated as NIL as is evident from audited financial year statement of the assessee. Complete copies are placed at pages 7 to 43 of the PB. He has submitted that provisions of Section 14A read with Rule 8D provide for disallowance of expenses which are incurred only in relation to exempt income earned. He has relied upon the Judgment of Hon’ble Delhi High Court in the case of ACB India Ltd., (supra) and other decisions and submitted that the issue is same as has been considered in A.Y. 2012-2013. He has further submitted that no satisfaction have been recorded by A.O. in the assessment order before making any disallowance as required under section 14A of the I.T. act. In the alternate contention, he has submitted that since assessee earned only Rs.1,97,449/- as dividend income, therefore, impugned addition is unjustified and disallowance should restricted to the dividend income of Rs.1,97,499/- and relied upon Judgment of Hon’ble Delhi High Court in the case of Joint Investment Pvt. Ltd., [2015] 372 ITR 694 (Del.) (HC).
22. On the other hand, Ld. D.R. relied upon the Orders of the authorities below.
23. Considering the rival submissions, we are of the view that the issue is same as have been considered in A.Y. 2012-2013. Following the reasons for decision for the same and in the absence of any satisfaction recorded by the A.O. in the assessment order, we are of the view that no addition could be made in the matter. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. In the result, Ground Nos.1 to 6 of the appeal of the Assessee are allowed.
24. In the result, ITA.No.5601/Del./2018 for the A.Y. 2014-2015 of the Assessee is allowed.
25. To sum-up, all the appeals of the Assessee are allowed.
