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Showing 501 to 520 of 1430 Records
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2023 (12) TMI 930
Jurisdiction of ACIT to complete assessment - Allocation of cases based on monetary limit - Issuance of notice u/s 143(2) by non jurisdictional AO - Addition u/s 68 - HELD THAT:- The assessee being a corporate assessee and located in a mofussil area and the income of the assessee being less than Rs. 20 Lakhs, the jurisdiction for assessing the income of the assessee vested with the Income-tax Officer. However, the assessment order in the case of assessee has been framed by the ACIT, Circle-38, Midnapore. In absence of any specific order u/s 127 of the Act, further giving powers to the prescriber authorities for transferring of the case, prima facie it indicates that the assessment in the case of the assessee ought to have been framed by the Income-tax Officer and not by the ACIT as the income declared in the Income-tax return is less than Rs. 20 Lakhs.
As relying on Deepak Kedia [2023 (12) TMI 895 - ITAT KOLKATA] indicates that issuance of notice u/s 143(2) of the Act by the Assessing Officer not having jurisdiction over the assessee renders the assessment proceedings as a nullity. However, the case of the assessee before us is on a much stronger footing because leaving aside the issuance of notice u/s 143(2) of the Act, even the final assessment order has been framed by the Assessing Officer not having jurisdiction over the assessee.
We allow the additional ground raised by the assessee and hold that the assessment order framed in the case of the assessee for AY 2013-14 dt. 26/03/2016 is without jurisdiction and is a nullity and is hereby quashed as the AO framing the said assessment did not have jurisdiction over the assessee as mandated in the CBDT Instruction No. 1/2011 - Decided in favour of assessee.
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2023 (12) TMI 929
Addition u/s 68 - unsecured loans raised by the assessee from nine different entities - non-appearance by the lenders in response to summons - As per AO assessee has failed to produce these parties despite specifically called upon to do so by issuing various communications by the AO - HELD THAT:- Undisputedly the assessee has raised loans from eight parties aggregating to Rs. 3,95,00,000/-. As per the direction of the ld. AO, the assessee filed all the necessary evidences comprising addresses, names, PANs, Bank statements, loan confirmations, details of Directors, financials of the lenders etc. Besides we note that the notices issued under section 133(6) of the Act to all lenders were also responded by the parties confirming the transactions by filing the necessary evidences. In our opinion the failure of the loan creditors to make personal appearance is not a ground to hold that the transactions were not genuine and/or the creditworthiness of the loan creditors was not proved.
We have also examined the documents filed before us and find that these companies had sources to advance the money to the assessee. We take note of the DR argument that no interest has been given on these loans, which has been controverted by the ld. A.R. by placing necessary evidences before the Bench, which showed that interest has been given and TDS has duly been deducted therefrom. We also observe that these loans were repaid in the subsequent years.
We observe that the assessee had submitted the documents required to establish the genuineness of the transactions and in respect of creditworthiness submitted the copies of income tax return and their financial statements etc. AO has not brought any adverse finding based on such documents filed by the assessee. We are of the considered view that the order passed by the ld. CIT(Appeals) is well reasoned order which has been passed after taking into account all the aspects of the matter. Moreover, mere non-appearance by the lenders in response to summons would not make these transactions as non-genuine as has been held by the Hon’ble Apex Court in the case of CIT Vs Orissa Corporation Pvt. Limited [1986 (3) TMI 3 - SUPREME COURT]
As decided in Rohini Builders [2001 (3) TMI 9 - GUJARAT HIGH COURT] phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1997 (1) TMI 6 - SUPREME COURT] - Decided against revenue.
Cessation of liability u/s 41(1) addition was made u/s 68 - HELD THAT:- As we find that loan taken from M/S Knavsukh Trading Pvt. Ltd in the earlier year has been added u/s 68 of the Act which was rightly deleted by the ld CIT(A) on the ground that loan was not taken in the current year. We also note that the said lender’s name was struck off from MSC and AO simplicitor held that liability on account of loan has ceased but CIT(A) correctly adjudicated the issue by holding that mere removal of name of the lender from MCA would not absolve the assessee from the liability to repay the loan. It was also held by CIT(A) that provisions of section 41(1) were not applicable to the instant case. Considering these facts and circumstances we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue.
Addition of interest paid on the unsecured loans - Since we have already allowed the appeal of the assessee by holding that the unsecured loans were genuine and therefore consequentially, the interest paid on the said unsecured loans during the year is also allowable. Decided in favour of assesee.
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2023 (12) TMI 928
Issuance of assessment order without DIN - violation of CBDT Circular No.19/2019 requiring mandatory DIN - scope of subsequent issue of DIN - HELD THAT:- Issuance of assessment order without DIN as it is a matter of record that the impugned assessment order neither contain any DIN and nor any reason for non-mentioning of DIN thereof. Rather, we are in complete agreement with the above contentions of the assessee.
In our view, the subsequent communication issued by the Ld. AO generating DIN for the impugned assessment order cannot make good the deficiency in the assessment order issued without generating DIN. In taking this view we are supported by the ratio decidendi of the decision of Hon’ble Delhi High Court in CIT (International Taxation) vs. Brandix Mauritius Holdings [2023 (4) TMI 579 - DELHI HIGH COURT] - Thus we are inclined to quash the assessment order passed by the Ld. AO under section 153C/143(3) of the Act. Decided in favour of assessee.
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2023 (12) TMI 927
Disallowance u/s 14A - CIT (A) has made enhancement of disallowance u/s 14A after applying Rule 8D - HELD THAT:- As undisputed fact that Rule 8D is not applicable in A.Y.2007-08, as it has come into the statute in A.Y.2008-09 and now it is a settled issue that computation of disallowance under Rule 8D cannot be made prior to the A.Y.2008-09.
This Tribunal in A.Y. 2005-06 has restricted the disallowance under Section 14A 5% of the exempt income - assessee submitted the calculation of investments after reducing foreign investment and non-dividend yielding investment and other investments as per working given by him which has also been provided at page 101 of the paper book and has submitted that, based on this, the average of opening and closing of investment worked out and disallowance should be reduced substantially. However, his working is based on formula provided in Rule 8D (2)(iii), but once Rule 8D is not applicable in this year then we are not inclined to work out disallowance as Rule 8D.
Thus, in line with the earlier decisions of the Tribunal, we hold that 5% of exempt income will be taken as disallowance for the purpose of Section 14A and accordingly, assessee gets part-relief.
Disallowance of expenditure incurred on settlement claims - HELD THAT:- This issue is squarely covered by the decision of the Tribunal in assessee’s own case for A.Y. 2005-06 [2020 (3) TMI 799 - ITAT MUMBAI] wherein disallowance in respect of settlement of claims have been allowed. Decided in favour of assessee.
TP adjustment commission on letter of credit - international transaction or not? - AO has made addition in respect of non-recovery by the assessee from its AE and the issue of letter of credit holding that assessee has not charged any commission from the AE - HELD THAT:- We find that the Tribunal in A.Y.2005-06 [2020 (3) TMI 799 - ITAT MUMBAI] has decided this issue in favour of the assessee stating CIT(A) after appreciating the contention of assessee concluded that issuance of Letter of Comfort does not constitute an international transaction.
CIT (A) appreciated the difference between corporate guarantee and Letter of Comfort. AR further submits that there is a basic difference between corporate guarantee and Letter of Comfort. In a Letter of Comfort, the party issues only a letter that a subsidiary or group company would comply term of financial transaction and have no obligation to indemnify, however, in case of corporate guarantee, the party issuing guarantee is under obligation to the lender.
AR further submits that in fact this ground of appeal is also covered by the decision of Tribunal in case of The India Hotel Company Ltd [2019 (9) TMI 1340 - ITAT MUMBAI] wherein similar ground of appeal was considered and by following the decision of earlier years in that assessee and decision of Hon'ble Karnataka High Court in United Braveries Holding Ltd. Karnataka State Industrial Investment and Development Corporation Ltd. [2011 (8) TMI 1331 - KARNATAKA HIGH COURT] wherein it was held that Letter of Comfort merely indicates the parties assurance that respondent would comply with the term of financial transaction without guaranteeing performance in the event of default.
Since in the earlier year this precise issue has been decided in favour of the assessee, therefore, as precedence, following the aforesaid decision, we uphold the order of the ld. CIT (A) and consequently grounds raised by the Revenue are dismissed.
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2023 (12) TMI 926
Validity of reopening of assessment - Reason to believe - reopening beyond four years - assessee has not deducted TDS on interest payment - HELD THAT:- We noted that as the AO has not recorded in its reasons for reopening of assessment that there is any failure on the part of the assessee to disclose any material fact necessary for completion of assessment in the relevant assessment year, despite the fact that original assessment was completed u/s. 143(3) of the Act and time period of 4 years has expired from the end of the assessment year before reopening of assessment u/s. 147 r.w.s. 148 of the Act, we find no infirmity in the order of CIT(A) quashing the reopening.
we are of the view that reopening is beyond 4 years and as the original assessment was framed u/s. 143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose any material facts necessary for its assessment, the reopening in present case is bad in law. Decided against revenue.
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2023 (12) TMI 925
Unexplained money u/s. 69A - AO rubbished the entire transaction by dismissing the gift as the same was not evidenced by a registered gift deed - AO came to the conclusion that no portion of the property at Rani Jhansi Chowk, Delhi has been transferred to the assessee by way of gift, therefore, the assessee could not have sold and earned long term capital gains, therefore, the amount credited in her bank account was treated as income of the assessee u/s. 69A - HELD THAT:- It is true that the impugned property was purchased by the husband of the assessee and 1/3rd share in the said property was subsequently gifted by him to the assessee. No doubt the gift deed was not registered but the same cannot be rubbished as the sham transaction since the assessee was in full possession of the said property which was subsequently sold by her by way of a registered sale deed for a consideration of Rs. 12.50 crores which was credited to her bank account held with HDFC Bank.
By no stretch of imagination provisions of section 69A can be applied on such transactions as the credit is outcome of the sale of property. It is not a case of the revenue that the assessee has introduced her own unaccounted money by depositing the same in her bank account in the garb of sale of some immovable property. Decided against revenue.
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2023 (12) TMI 924
Deduction u/s 80P(2)(d) - interest received by the appellant from Baroda Gramin Bank Ltd. is not allowable deduction as this entity is not a cooperative society as provided u/s 80P(2)(d) - assessee is a registered cooperative society under the Rajasthan Cooperative Societies Act and engaged in the business of trading in milk and other milk products - HELD THAT:- In the present case, the appellant is a co-operative society whose primary object is to provide financial accommodation to its members who are all other cooperative societies and not member of the public.
Thus, the interest received by the appellant from Baroda Rajasthan Gramin Bank Ltd, a Regional Rural Bank and not a co-operative bank would not be allowable deduction u/s 80P(2)(d) of the Act as this entity is not a cooperative society as provided u/s 80P(2)(d) of the Act in the light of the latest judgment of the Apex Court in the case of “Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. v [2023 (9) TMI 761 - SUPREME COURT]
However, addition of interest received by the appellant from Central Cooperative Bank is held to rightly deleted by the CIT(A). Thus, addition made in the assessment order in respect of the interest received by the appellant from Baroda Rajasthan Gramin Bank Ltd., a Regional Rural Bank which is not a cooperative bank would be liable to be sustained.
We accept the grievance of the revenue as genuine in respect of the addition on account of interest received by the appellant from Baroda Rajasthan Gramin Bank Ltd and as such, it is sustained. Appeal of the Revenue is partly allowed.
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2023 (12) TMI 923
Validity of notice issued u/s 143(2) - validity of the assessment order in absence of any effective order passed u/s 127 - HELD THAT:- We notice that the present issues are covered against the assessee in view of the Hon’ble Supreme Court judgment in the case of Kalinga Institute of Industrial Technology [2023 (6) TMI 1076 - SC ORDER] wherein as held that when assessee had participated pursuance to the notice issued u/s 142(1) and had not questioned the jurisdiction of the assessing officer as per section 124(3)(a) of the I.T. Act precludes the assessee from questioning the jurisdiction of the assessing officer. While going through the present facts of the case and issue involved, we find that assessee has never raised any question before the AO challenging the jurisdiction of AO within 30 days of receipt of notice u/s 142(1) of the Act as well as transfer of jurisdiction u/s 127 of the Act. In such circumstances both the grounds taken by the assessee has no merit, therefore, the grounds taken by the assessee are hereby dismissed.
Applicability of section 43CA - valuation of impugned sold out units as determined by the AO in terms of value determined by the stamp duty authority - whether agreement of sale was entered prior to applicability of the provision itself by the Finance Act, 2013 w.e.f. A.Y. 2014-15? - HELD THAT:- When the impugned order was passed by the ld. CIT(A) did not consider the DVO’s report as available with him while passing the impugned order, we feel it necessary to remand back the instant issue to the file of AO with the direction to reconsider the valuation report furnished by DVO by applying proposition of law as laid down in the case of Maria Fernandes Cheryl vs ITO [2021 (1) TMI 620 - ITAT MUMBAI] and also considering the documents as well as necessary submission made by the assessee before him and it is also directed that while doing so the ld. AO should give opportunity of being heard to the assessee. In terms of above, the instant issue is hereby allowed for statistical purposes.
DVO’s report in the case of assessee was furnished beyond the limitation period as prescribed under the law, therefore, the DVO’s report cannot be considered for the purpose of assessing the income of the assessee - While going through the impugned order, we notice that DVO’s report was never taking into consideration for the purpose of assessing the income of the assessee by the authority below and while going to the facts and circumstances of the case, we find that present issue involved in this appeal is similar to the decision [supra] would apply mutantis mutandis. Accordingly, we set aside the matter to the file of AO with a direction to decide the issue afresh.
Both the appeals of the assessee are hereby allowed for statistical purposes.
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2023 (12) TMI 922
Deemed dividend u/s 2(22)(d) - Determination of accumulated profit - capital gains arising pursuant to capital reduction by the Indian company - migration from IGAAP to Ind-AS - opening balance as on 01.04.2016 for computation of the accumulated profit / (losses) as on date of capital reduction should be considered as per the amount taken up in accordance with the Indian Accounting Standard - AO recomputing the accumulated profit as against the actual accumulated loss of Novateur as on the date of capital reduction - whether treating the capital gains as dividend, the AO/ DRP erred in recomputing the accumulated profit as against the actual accumulated loss of Novateur as on the date of capital reduction? - HELD THAT:- The financial statement prepared and approved by the share holders prior to Ind-AS are based on policies and method of accounting adopted by the assessee's. As per the new Ind-AS, general accepted policies and method in line with the global acceptance are being adopted to present the financials of the company. In order to achieve the transition, Ind-AS 101 was introduced to facilitate the companies to prepare the first balance sheet.
This requires the companies to prepare the current (FY 2016-17) and previous year (FY 2015-16) balance sheet by adopting the new and accepted policies and method proposed in the Ind-AS. The argument that the figures reinstated is only comparative purpose is not proper considering the fact that the reinstated figures are based on the new accounting method and new policies as per the Ind-AS, which the company proposes to follow consistently in the future.
Reinstated figures are not for past performance but for the future adoption of the policies. The reinstated figures are the actual status and financial position of the company based on the accepted new method of accounting proposed in the Ind-AS. The balance sheet adopted by the share holders as on 31.03.2016 are based on the previous set of accounting method as per Indian GAAP and when the company adopts the new accounting standards as per Ind AS, the assets and liabilities in the balance sheet will certainly change. The changes in the assets and liabilities are reflected in the reinstatement of figures declared by the company in the current financial year.
The argument put forth by the assessee cannot be accepted. The figure declared by the assessee in the balance sheet in the retained earning opening balance sheet is the actual accumulated loss carried forward by the company Novateur India based on the adoption of new accounting policies. Hence, Ground Nos.1 and 2 are dismissed.
Assessment proceedings of Novateur India, the assessing officer has accepted the submissions of the company and it amounts to acceptance of the department that the figures declared by them are proper and same has to adopted in the case of the assessee -Both the assessments are independent and if there is any financial impact, we could consider the same in both the assessments. Merely because the AO has collected the information and not discussed anything in the assessment order, we cannot presume his acceptance. Therefore, we are inclined to follow the accumulated loss declared by the Novateur India in their reinstated balance sheet as the proper accumulated loss based on the new set of accounting method and policies adopted by them and it is not mere comparative figures. Hence, the accumulated profit determined by the tax authorities are proper and the determination of dividend as per section 2(22)(d) is proper, accordingly sustain their findings.
Exemption u/s 10(34) denied (which is available if the income is in the nature of dividend referred to in the section 115-O of the Act) - exemption was denied on the premise that Novateur India has not paid Dividend Distribution Tax (DDT) and that dividend on account of capital reduction does not fall u/s. 115O - Whether exemption under section 10(34) would be applicable only for the amount, which has suffered tax under section 115-O? - HELD THAT:- We observe from the record that the claim of the assessee that the deemed dividend u/s 2(22)(d) is also eligible to claim exemption u/s.10(34) of the Act- since the provisions of the section 115-O does cover the definition of dividend except specifically as mentioned in the proviso to section 115Q of the Act.
In Smt. Kayan Jamshid Pandole case [2018 (11) TMI 1340 - BOMBAY HIGH COURT] gave the decision in favour of the assessee considering the fact the share holder should not suffer on the failure of the company, the revenue can recover from the company with the other specific provisions for recovery. The ratio of the decision clearly shows that the individual share holders should not suffer because of gross failure on the part of the company.
We observe the fact in the present case is distinguishable to the fact in the above case. In the present case, the assessee is a holding company holding majority shares (By B Ticino SPA – Holding company and the assessee holding 99.999%) in the Novateur India. Basically, the management of the Novateur India is controlled by them and the failure of the Novateur India to pay additional tax in the form of DDT is nothing but failure of the assessee itself. They cannot claim the benefit both sides. In the case of Smt Kayan Jamshbid Pandole (supra), the group of individual share holders does not have any control over the company whereas in the given case, the situation is different. One hand, we cannot hold the Novateur India as defaulter and other hand, we cannot allow the same management to take the advantage of benefit u/s 10(34) of the Act for the failure of the same management. It is fact on record that Novateur India has not paid any DDT on the dividend, hence the benefit u/s. 10(34) cannot be claimed even though the definition of dividend u/s.2(22)(d) is covered u/s 115O of the Act.
Assessee has received the gross dividend including DDT. In the normal case, the company will deduct DDT at the applicable rate and remit the net dividend. Therefore, as per the provisions of section 10(34) r.w.s. 115O the dividend received by the shareholders are exempt. In this case, the assessee has received gross dividend. The option available to the assessee is two-fold, considering the fact that same management is responsible to deduct DDT. Either they should remit the DDT to the Novateur India and Novateur India will remit the DDT and thus assessee can claim exemption or other option is to pay the applicable tax under DTAA on the Gross dividend received by them which has lower rate of taxation. Therefore, we are inclined to reject the factual submissions of the assessee and accordingly, the plea raised by the assessee in the Ground No 3 is rejected.
MFN Clause - Whether if the alleged dividend is taxed in the hands of the assessee, the applicable tax rate should be considered as 5% in view of the Most Favoured Nation or MFN Clause of the tax treaty (read with the protocol to the Tax Treaty)? - HELD THAT:- Where tax has been levied at source at excess under the provisions of Article 10 to 12, applications for refund of the same have to be lodged with the competent authority of the state which levied the tax within a period of three years after the expiration of the calendar year in which the tax has been levied. In this case, the tax under DTAA rates were levied by the Assessing Officer. Now the assessee takes the plea that in case the dividend income is chargeable to tax then the applicable rate would be based on the MFN clause, which is lesser than the applicable treaty rate.
As discussed in this case, Assessing Officer has levied the applicable tax, the period of claiming the excess tax has already elapsed. Therefore, in this case, the assessee cannot claim any benefit under treaty or under MFN clause. Therefore, we are not inclined to entertain the claim of the assessee at this stage based on the above discussion. Accordingly, the ground raised by the assessee is dismissed even though they relied on the decision of Hon’ble High Court, in our view, the issue raised is time barred and even the CBDT has raised circular objecting to unilateral implementation of protocol by the Netherland. Unless it is notified by the Indian government under section 90(2) of the Act. Accordingly, Ground No. 4 is dismissed.
Capital gain claimed as not taxable in India as per the para 5 of Article 13 of the Tax Treaty - HELD THAT:- Capital reduction by way of an order of the NCLT cannot be reckoned as alienation of shares in the course of corporate organization, re-organization, amalgamation, division or similar transaction. What has been canvassed before us is that, the first exception is only applicable if the alienation takes place to the resident of that other state i.e. India, if it is sold to a resident of India, i.e., other than NOVATEUR INDIA. Such a plea in our opinion cannot be accepted, because exception for taxability of capital gains in the state of resident which has been carved out, clearly envisages that if alienation of shares are more than 10% of the Indian company and such an alienation takes place to an Indian resident, then resident based taxation cannot be applied if the Netherland company had more than 10% interest in the Indian Company.
Undisputedly, the alienation took place to resident of India and therefore, it cannot be held that only if some other Indian company or Indian resident could have bought shares, then only this exception would apply is too farfetched understanding of the Para No. 5. In any case, the alienation of shares is by way of capital reduction and in lieu of such capital reduction where Indian company has paid consideration for alienation of such shares which it has bought back and had paid a compensation, is nothing but a consideration of transfer of shares and therefore, it tantamount to gain on alienation of shares taxable under the head 'capital gain' in India. As stated above, second exception is not applicable.
Contention of the assessee before us is that it falls under the first limb which categorically provides that in case of alienation of shares, resident country had right to tax the capital gain i.e. Netherland - Though under Article 13(5), it is a resident based taxation, however, if the exception has been carved out if the threshold of alienation of shares which forms part of 10% interest in the capital stock of Indian Company is present, then resident based taxation is shifted to source based taxation and the source country i.e. India has right to tax under DTAA. Accordingly, this ground raised by the assessee is dismissed.
AO computed surcharge and cess on the rate of tax for dividend (ie, 10%) provided in the tax treaty in the computation sheet to final assessment order - HELD THAT:- As relying on SUNIL V. MOTIANI [2013 (12) TMI 1105 - ITAT MUMBAI] we direct the Assessing Officer to follow the ratio as laid down in the above judgment, accordingly, we direct the Assessing Officer to levy only the applicable rate of tax as per the treaty without additional surcharge or cess since the applicable tax is inclusive of surcharge and education cess. Accordingly, this ground of appeal is allowed.
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2023 (12) TMI 921
Rental income earned from lease of building - Denial of deduction claimed u/s 24(a) - "income from other sources" or "Business and profession" instead of "House Property" - As argued CIT(A) has not classified the stand of granting depreciation which will only enhance the deduction in favour of the appellant - HELD THAT:- DR submitted that while dismissing the grounds of assessee the ld. CIT(A) has followed order of ITAT Delhi [2017 (5) TMI 1102 - ITAT DELHI] AY 2008-09 & 2009-10 respectively wherein the Tribunal held that the rental income earned by the assessee from lease of building would be taxable under the head “income from business and profession and the AO was also directed to grant depreciation on the capital asset/building while computing the income from business. On being asked by the bench the ld. counsel of assessee, in all fairness, submitted that the issue has been decided against the assessee by the Tribunal. Since the ld. CIT(A) followed order of the Tribunal for AY 2008-09 & 2009-10 while upholding the action of the Assessing Officer treating the rental receipts as income from business or profession and also directed to grant deprecation on the building.
Therefore we are unable to see any valid reason to interfere with the findings recorded by the ld. CIT(A) on this issue based on order of Tribunal in assessee’s own appeals - Decided against assessee.
Addition u/s 40(a)(ia) - "cost of sales" as covered by the provision of section 194C(6) & 194C(7) - HELD THAT:- As we note that the Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (1) Pvt. Ltd [2015 (9) TMI 79 - DELHI HIGH COURT] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005.
Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act, the CIT(A) ought to have directed the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act ought to have been sustained by the CIT(A).
CIT(A) ought to have also directed the AO that in case the recipient parties are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the file of the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. Accordingly, ground of assessee is allowed for statistical purposes.
Allowable business expenditure - expenditure incurred on foreign travel by the employees and partners - HELD THAT:- Addition has been upheld by observing that since the assessee failed to prove the business expediency of foreign trip to Europe therefore the primary onus has not been discharged by the appellant either during the assessment or during appellate proceedings. CIT(A) also rightly concluded that the appellant has failed to prove that these expenses identified by the Assessing Officer, were incurred wholly and exclusively for the business purpose of assessee. We are unable to see any valid reason to interfere with the findings recorded by the ld. CIT(A) as the submissions of assessee does not hold merits. Accordingly, ground of assessee is dismissed upholding the addition.
Addition u/s 68 - capital contribution to the assessee firm by a partner - HELD THAT:- From the order of ITAT Delhi Bench in the case of Alliance Engineers and Construction [2019 (2) TMI 2095 - ITAT DELHI] is relevant to note that wherein the Tribunal held that when a partner introduces the money/capital in the firm either in the shape of capital or loan to the partnership firm, addition, if any, can be made only in the hands of partner and not in the hands of partnership firm as long as the partner confirms to have invested towards capital or as loan to the firm.
In the present case the assessee has filed documents but we are unable to see any confirmation from the contributing partner confirming the capital contribution to the firm. The Assessing Officer and the ld. CIT(A) has noted detailed findings while confirming the addition u/s. 68 of the Act but they have not show cause the assessee to file relevant documentary evidence including confirmation etc. substantiating the claim of capital contribution. Therefore in our consider view the assessee should be allowed to explain his case before the Assessing Officer with the support of all relevant material, documentary evidence etc. Hence the issue of capital contribution by the partner is restored to the file of the Assessing Officer for readjudication of issue after allowing due opportunity of hearing to the assessee.
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2023 (12) TMI 920
Smuggling - Betel Nuts - Violation of order dated 31 March 2017 passed by the Authority for Advance Rulings (AAR) under the Chapter V B of the Customs Act, 1962 (the Act) containing Sections 28E to 28M.
The only contention raised by the respondents is that because of change in law on account of dismissal of appeal by the Supreme Court against the order passed by CESTAT in case of other assessees, advance ruling is not binding.
HELD THAT:- It is a well settled in law that the assessee can invoke writ jurisdiction under Article 226 of the Constitution of India, despite an alternate statutory remedy of an appeal interalia on the ground that there is a breach of fundamental rights, breach of natural justice, order passed is without jurisdiction or there is a challenge to the vires of the statute. In these circumstances, the Court can exercise writ jurisdiction inspite of appeal remedy being available to the petitioner.
The decision of the CESTAT, Chennai Bench in case of S.T. Enterprises [2021 (3) TMI 27 - CESTAT CHENNAI] and Ayush Business Overseas [2021 (3) TMI 1285 - SC ORDER] certainly cannot be a binding precedent on High Court nor can it be binding on all the authorities/assessees throughout the country. The decision of the Chennai Bench of CESTAT is binding interse between the parties before the Tribunal and not the petitioner or the authorities having jurisdiction over the petitioner. The dismissal by the Supreme Court without going into merits of the case acts only as res judicata between the parties before the Court and same cannot be said that CESTAT bench decision amounts to a declaration of law. Therefore dismissal of appeal by the assessees before the Chennai Bench of CESTAT, by the Supreme Court does not attract provisions of Section 28 J(2) of the Act for not following decision of the advance ruling rendered in the petitioner’s own case.
In the instant case, the respondents have passed the O-I-O contrary to the provisions of Section 28J of the Act and, therefore, the same is without jurisdiction. In view of the above discussion that the impugned order is passed without jurisdiction, writ petition is maintainable. The petitioner hence ought not to be relegated to take recourse to an appellate remedy.
The impugned O-I-O dated 11th November 2022 is hereby quashed and set aside - Petition allowed.
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2023 (12) TMI 919
Prayer for direction upon the respondent customs authority concerned to pay to the petitioner value of goods in question as on the date of seizure - seizure was on the ground of foreign origin and that it was smuggled in nature - HELD THAT:- Considering the facts and circumstances of the case and submission of the parties and in view of the order of the appellate authority dated 1st March, 2021 holding that the adjudication order confiscating the goods in question and imposition of penalty not sustainable in law, action of respondents customs authority neither returning the seized goods in question to the petitioner nor paying the value of goods as on the date of the seizure is arbitrary and illegal and accordingly the respondent customs authority concerned is directed to pay to the petitioner the value of goods in question as on the date of seizure within a period of four weeks from the date of communication of this order.
Petition disposed off.
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2023 (12) TMI 918
Provisional release of goods - Valuation of goods - applicability of N/N. 5/2023 which imposes minimum cap of Rs. 50/- per kg. for import of Apples - HELD THAT:- The petitioner is entitled to provisional release of goods as prayed for for more than one reason. Notification No. 5/2023 which imposes minimum price of Rs. 50/- per kg for import of apples has been stayed by the Kerala High Court. Secondly, only issue is with respect of valuation and goods being perishable in nature and further the petitioner is willing to comply with the terms and conditions to be put forth by respondent no. 2 for provisional assessment of goods there does not seem to be justifiable release to detain the goods. In the light of these facts, it would be in the interest of justice that the petition be allowed.
The Respondents are directed to provisionally assess the Bill of Entry No. 8733339 within a period of four days from today and release the goods on the petitioner furnishing the bond - petition disposed off.
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2023 (12) TMI 917
Maintainability of appeal - non-prosecution of the case - HELD THAT:- There are no justification for adjourning the matter beyond three times which is the maximum number statutorily provided.
The Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.
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2023 (12) TMI 916
Provisional release of the seized goods - appellants were availing exemption from payment of customs duty on import of Gold bars under Advance Authorisation Scheme - HELD THAT:- From the perusal of the legal provisions of the Customs Act, 1962, it transpires that ‘the proper officer’ under Section 110(1) ibid, if he has reason to believe that any goods are liable to confiscation, then he may seize the goods. In terms of sub-section (2) to Section 110 ibid, a Show Cause Notice (SCN) in respect of the seized goods is required to be given within a period of 6 months to the person from whose position the goods were seized. For any reasons to be recorded in writing, such period of 6 months may be extended to another 6 months’ time by competent authority specified therein. It is also provided that this time limit does not apply in cases where the goods have already been released to the goods. However, CBIC in its instructions No.1/2017-Customs dated 08.02.3017 had required that the field formations shall adhere to the time limits prescribed under Section 110(2) ibid, irrespective of the fact that whether goods remain seized or are provisionally released.
For cases to be adjudicated within the competence of Principal Commissioner/ Commissioner of Customs or an Addl./ Joint Commissioner of Customs, one year from the date of service of the SCN has been fixed as the outer time limit; for the authorities below, namely Asst./Dy. Commissioners and other gazetted officers, the time limits have been fixed as 6 months and 3 months, respectively. Further, in cases where such time limits could not be adhered to by an adjudicating authority, due to circumstances that prevented from observing that time limits, then the supervisory officer has been asked to fix appropriate timeframe for disposal and monitoring of such cases.
On analysis of the legal provisions contained in Section 110 (A) ibid, and in view of the development in the pending show-cause proceedings before the Commissioner of Customs- IV (Export), the appeal for provisional release of goods has become infructuous on account of final orders having been passed on the show cause notices issued in respect of such seizure of goods.
The appeal filed by the appellants has become infructuous inasmuch as the SCNs issued by the department had already been adjudicated. Hence, the present appeal filed before the Tribunal for unconditional release of the seized goods cannot be considered - appeal dismissed.
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2023 (12) TMI 915
Determination of jurisdiction of High Court for SEBI violations - Violation of SEBI’s minimum public shareholding norms and violation of SEBI’s minimum public shareholding norms - Separate and independent settlement applications were also filed by respondent nos. 2 to 8 - Whether this court is the appropriate forum for deciding the present writ petitions and granting the reliefs as prayed for? - HELD THAT:- A perusal of Clause 2 of Article 226 indicates that the writ jurisdiction can be exercised by the High Court primarily in relation to the territories within which the cause of action, wholly or in part arises. However, the location of such Government or authority or residence of such person, outside the territories of the High Court will not deter the High Court from issuing the appropriate writ.
The introduction of Clause (2) in Article 226 of the Constitution of India widened the width of the area for issuance of writs by different High Courts, however, the same cannot be construed to completely dilute the original intent of the Constitution makers which is succinctly encapsulated in Clause (1) of Article 226. Rather, Clause (2) is an enabling provision, which supplements Clause (1) to empower the High Courts to ensure an effective enforcement of fundamental rights or any other legal right. Therefore, the power of judicial review cannot be circumscribed by the location of the authority against whom the writ is issued, however, the same does not mean that the constitutional mandate enshrined under Article 226 (1) can be completely neglected or whittled down.
The ‘cause of action’ means a bundle of facts, which is necessary for the plaintiff to prove in order to succeed in the proceedings. It does not completely depend upon the character of the relief prayed for by the plaintiff. It is rather the foundation upon which the plaintiff lays his/her claim before the court to arrive at a conclusion in his/her favour. It depends on the right which the plaintiff has and its infraction.
Section 20 of the Civil Procedure Code, 1908, provides a generic definition of the term ‘cause of action’ to mean fact, which is necessary to establish to support a right to obtain a judgment.
The question whether cause of action has arisen within the territorial jurisdiction of a court, has to be answered based on the facts and circumstances of the case. The cause of action, thus, does not comprise of all the pleaded facts; rather it has to be determined on the basis of the integral, essential and material facts which have a nexus with the lis.
It is also a settled proposition of the law that the location where the tribunal/appellate authority/revisional authority is situated would not be the sole consideration to determine the situs of the accrual of cause of action, ignoring the concept of forum conveniens in toto. Hence, even if a small part of the cause of action is established, and the same is found to be non-integral or non-material to the lis, the court may invoke the doctrine of forum non-conveniens and decline to exercise its writ jurisdiction, if an alternative, more efficacious forum for the same exists.
It is, thus, unequivocally clear that the petitioners participated before SEBI’s Internal Committee on different dates at Mumbai and thereupon, a settlement had arrived at. It is, thus, seen that it is not merely the location of the respondent-SEBI’s Head Office at Mumbai, but rather the entire genesis of the dispute lies in Mumbai itself. The settlement was finalized at Mumbai. The determination of the settlement not being fulfilled was made at Mumbai. The consideration to that effect has taken place at Mumbai and the decision to revoke the settlement has also been passed at Mumbai only.
Merely because some of the writ petitions were entertained by this court relating to certain violations of norms and regulations of respondent-SEBI by the respondent companies therein and issues arising out of consequential settlement application, that in itself would not determine the integral, essential and material part of the cause of action as the pendency of the writ petition before this court has no relation with the impugned revocation order which has taken place subsequent to the said writ petition. The law relating to the doctrine of forum conveniens, as discussed above, already makes it explicitly clear that the jurisdiction has to be determined on the facts and circumstances of each case.
With respect to the averment that this court is the most convenient forum for the petitioners, it would be inappropriate and myopic to assume that while determining the jurisdiction, only the convenience of the aggrieved party approaching the court has to be looked into. In fact, with the advent of technology in contemporary times, the courts have transcended the geographical barriers and are now accessible from remote corners of the country. Therefore, the convenience of the parties cannot be the sole criterion for the determination of jurisdiction considering the broader perspective of dynamism of technology and increased access to justice. The determination of cause of action and territorial jurisdiction has to be in line with the constitutional scheme envisaged under Article 226 of the Constitution of India.
Moreover, the litigation history of the present writ petitions reveals that the parties have, in fact, agitated their concerns before the Hon’ble High Court of Judicature at Bombay. Nothing has been put before this court, that shall allow the conclusion of the Hon’ble High Court of Judicature at Bombay being a non-convenient forum. The forum, in the considered opinion of this court, is available, convenient, as also approachable.
In all fairness, the petitioners herein ought to have disclosed the said fact before the Hon’ble High Court of Bombay regarding reserving the right to challenge the settlement order. Undoubtedly, they can challenge the same without prior intimation to the Hon’ble High Court of Bombay, but the recourse must have been taken before an appropriate forum/court. The burden of a fair demeanour on the part of litigants considerably amplifies when they approach the courts under the extraordinary jurisdiction. Therefore, at times, it is the constitutional courts upon which falls the burden to prevent the abuse of jurisdiction and eliminate any susceptibility of forum shopping.
It is, thus, seen that under the facts of the instant matters, the integral, essential and material part of the cause of action had arisen with the territorial jurisdiction of the Hon’ble High Court of Judicature at Bombay and even assuming that a slender part of cause of action has arisen within the jurisdiction of this court, applying the principles of forum conveniens as has been held by the Hon’ble Supreme Court in the case of State of Goa [2023 (3) TMI 683 - SUPREME COURT], this court does not deem it appropriate to entertain the instant writ petitions. The instant writ petitions are, therefore, dismissed.
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2023 (12) TMI 914
Adjudication made under FEMA Act - Non issuance of show cause notice as well as non giving of an opportunity of being heard within the meaning of Section 16 of the Act r/w Rule 4(1) and 4(3) of the Rules certainly would amount to violation of principles of natural justice - HELD THAT:- The mode of service of notice has been clearly demonstrated at Rule 14, i.e., 3 methods, namely 14(a), 14(b) and 14(c). At least Rule 14(b) and 14(c), the notices have been served on these noticees in their last known address or the address where they carried on business last.
Merely because at the time of serving the notice, these noticees were not available at the address at Bengaluru would not ipso facto entile them to claim immunity that the notices served on them at the Bengaluru address cannot be construed as a notice within the meaning of Section 16 r/w Rule 4(1) and Rule 14(b) or (c) of the Rules.
Therefore, this Court have no hesitation to hold that, notice as contemplated under the Act as well as the Rules as discussed herein above have been served on these noticees.
Under Section 42(1), if a person committing a contravention who is a company, every person who at the time of contravention was committed was incharge of and was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceed against and punished accordingly.
Insofar as the application of Section 42(1) against these noticees are concerned, it was the vehement contention of Mr.Shah, that the two Noticee namely Noticee No.17 and 20 were the nominee Directors, i.e., Non-executive Directors of the first Noticee company on behalf of the fourth Noticee company. When their very appointment as a Director itself is a mere nominee on behalf of the fourth noticee company as a Non-Executive Directors, therefore they are not incharge of and was responsible to the conduct of the business of the company as well as the company.
Therefore assuming that, any contravention that has been made by the first Noticee company, for which these noticees namely Noticee No.17 and 20 cannot be found fault with. Therefore u/s 42(1) no contravention cannot be attributable against these Noticees. Insofar as this contention of the learned counsel appearing for the petitioners are concerned, whether they were the Non-Executive Directors or nominee Directors and during the relevant point of time whether they were in the helm of affairs or the company or not, whether the contravention that has been made by the first Noticee company would amount to the contraventions of the persons like Noticee No.17 and 20 also, for which, they are also to be proceeded against and be punished by imposing penalty or not, are all the matters for adjudication which have been adjudicated and decided by the Adjudicating Authority through the impugned order.
As against the impugned order, an appeal has been provided before the Appellate Tribunal under Section 19 of the Act. Even if there is any failure before the Appellate Tribunal and it goes against the interest of these noticees, again a further appeal is provided under Section 35 of the FEMA Act, where Second Appeal can be preferred before this Court (High Court).
When such a hierarchy of appellate forum is provided under the Act itself, whether the jurisdiction that has been conferred under the Act, especially u/s 35 of the Act to the appellate side of this Court, whether can be taken away by entertaining these writ petition is a question, for which the answer is in the negative. The reason being that, the law which has been held by law courts with regard to the exhaustion of alternative remedy is well settled. Though it is not a hard and fast rule that each and every case, the exhaustion of alternative remedy shall stand in the way in entertaining the case under the extraordinary jurisdiction of this Court under Article 226 of the Constitution, still limitations are there for the High Courts who are empowered to issue prerogative writs under Article 226 of the Constitution of India.
While exercising such extraordinary jurisdiction under Article 226, the High Court on the one side cannot take away or absolve the appellate jurisdiction being exercised by the same High Court under the provisions of the statute which is special in nature.
Here in the case in hand, ultimately the aggrieved party can approach this Court by filing the Second Appeal under Section 35 of the Act, instead, if these writ petitions are entertained and the impugned order of adjudication is challenged and a decision is made on the merits of the issue, certainly that will amount to interfering or transgressing the appellate jurisdiction of this Court, which normally the court would not do in exercising the extraordinary jurisdiction under Article 226 of the Constitution.
We do hold that, absolutely there has been no quarrel on the said principle stated by the learned Judge in the said Judgment. However in the facts of the present case, what is the uncurable defect, that has been committed by the original authority in the present case is the question. As we held above, the notice, i.e., show cause notice had already been served properly under the mode as contemplated under the Act as well as the Rule. Therefore, first of all it cannot be construed that the principles of natural justice has been violated. Assuming that, because of the enquiry notice that has not been served on the noticees as claimed by them, whether any injury is caused by virtue of passing of adjudication order, certainly those issues can be canvassed before the Appellate Tribunal challenging the order of adjudication. Hence, we do not find that any uncurable defect or injustice caused to the noticees at the adjudication stage and therefore, that cannot be stated that such a defect, if any, cannot be cured by the appellate forum.
We have held that, as contemplated under Section 16 r/w Rule 4 and 14 of the Rules, show cause notice since have been served on all the petitioners herein, i.e., Noticee No.4,17 and 20, on the alleged ground of violation of principles of natural justice, these writ petitions cannot be entertained especially in applying the principle as laid down by the Hon’ble Supreme Court in the Radha Krishan Industries case cited supra.
Despite the above, it is open to the petitioners to raise these point of the violation of principles of natural justice before the Appellate Tribunal in case still the petitioners feel that the issue also can be adjudicated as one of the issue before the Appellate Tribunal. That apart, insofar as the merits of the case is concerned, as we held above, we do not want to hold anything on the merits of the case, because that will have a bearing on the cause of the petitioners, when they approach the Tribunal by filing the appeal. WP dismissed. However it is open to the petitioners to approach the Appellate Tribunal by filing appropriate appeal against the impugned order of adjudication u/s 19 of the FEMA Act.
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2023 (12) TMI 913
Illegal detention of the petitioners in Tihar Jail for want of judicial order remanding them to judicial custody - seeking for issuance of writ of habeas corpus or any other appropriate direction to the respondents, inasmuch as the fundamental rights of the petitioners as guaranteed under Articles 14, 21 and 22 of the Constitution of India have been violated - HELD THAT:- Pertinently, a writ of habeas corpus is an extraordinary remedy, when there is illegal confinement violating the personal liberty of a person. Ordinarily, an order of remand by a competent court is essentially a judicial function and cannot be challenged by way of writ of habeas corpus unless and until the remand order lacks jurisdiction or is absolutely illegal resulting in unlawful “custody”. It is true that an order of remand can be challenged in a Habeas Corpus petition if such an order is passed in an absolutely mechanical or casual manner. The contention of learned Senior Counsels for the petitioners cannot be brushed aside that a valid custody remand can be made in accordance with express provisions of law, when the custody of an arrested person is illegal, such a person is entitled to be released forthwith.
The power of remand is vested in the Court, firstly, at the stage of investigation, when the arrested person can be remanded initially either to police custody or judicial custody. Whereas, custody remand under Section 309 Cr.P.C operates only at post cognizance stage after conclusion of investigation when chargesheet is laid before the Court. In the present petitions, in fact, initially after being remanded to police custody, the petitioners were being remanded to judicial custody from time to time under Section 167(2) Cr.P.C by the court of learned ASJ-05 till 07.12.2003.
Nature of “custody” of the petitioners, whether legal or illegal - HELD THAT:- Two situations have emerged when the chargesheet/prosecution complaint is filed in the Court. One is, when remand under Section 167(2) Cr.P.C has not expired and in the meanwhile chargesheet/prosecution complaint is filed by the investigating agency and the competent court takes cognizance under Section 309 Cr.P.C on the said chargesheet/prosecution complaint. On the date of taking cognizance, the accused is not produced before the Court and is not remanded to the judicial custody under Section 309 Cr.P.C. However, the Court issues production warrant against the accused for production on the next date of hearing. The validity of such remand under Section 167 Cr.P.C was challenged before this Court in case of Sunil Kumar Sharma vs. State of NCT of Delhi ILR [2005 (6) TMI 576 - DELHI HIGH COURT]- In the said case, during the period of a valid order under Section 167 Cr.P.C, accused was placed under judicial custody, his remand was to continue till 26.04.2005, however, the chargesheet was filed on 25.04.2005 and the Magistrate took cognizance on the chargesheet on the same day as the accused was in judicial custody till 26.04.2005. Production warrants were issued against him for the same date. The objection raised on behalf of the accused contemplating illegal custody on 25.04.2005 was that no valid order for remand was passed under Section 167(2) Cr.P.C or under Section 309(2) Cr.P.C on 25.04.2005 or on 26.04.2005.
The second situation is, when the chargesheet/prosecution complaint is filed before the competent court and cognizance is not taken by the Court under Section 309 Cr.P.C. However, the remand of said accused continues under the orders of the Magistrate. The Hon’ble Supreme Court, in the case of Suresh Kumar Bhikamchand Jain [2013 (2) TMI 821 - SUPREME COURT] has observed that such remand granted by the Magistrate was valid and the accused remained in the custody of the Magistrate till cognizance is taken by the concerned court. It is also held that in such a situation the accused has to remain in custody for “some court”.
Assuming a competent court has taken cognizance of chargesheet/prosecution complaint and posts the case at a particular stage of proceedings/trial, however, on the said date of hearing, the accused in that case is not produced from judicial custody, due to some unavoidable reason. In such a situation, the court issues production warrant against the said accused and the case is posted for the next date of hearing. Can it be said, during the period, when the accused was produced on the last date of hearing and is to be produced before the court on the next date of hearing in execution of production warrants, his judicial custody is illegal - the answer is in negative, as in such a situation, the custody of accused is continuum and there is no “break” in the custody of such an accused. The position, however, will be different when, the accused is not produced before such a Court on the date of hearing and no production warrant is issued for the said accused on the same date of hearing but is issued subsequently. In such a situation, the custody of the accused will not be in continuum and for the break period, it may be illegal.
The submissions made on behalf of the petitioners that the petitioners are suffering illegal custody since 07.12.2023, cannot be sustained - the learned ASJ-04 has rightly issued production warrants against the petitioners on 07.12.2023 for production of the petitioners and the petitioners remain in lawful custody of learned ASJ-04 - petition dismissed.
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2023 (12) TMI 912
Jurisdiction which the petitioners allege against the respondents - Suppression of facts or not - invocation of extended period of limitation - HELD THAT:- It is a matter of how the agreement is to be construed as such and whether the State was contributing in any manner in the running of the hospital. This is a matter of fact which has to be analyzed by the statutory authorities in appeal and to be summarized. The right of the petitioner thereafter to challenge the order in case the same is decided against it would always be available. The issue of extended period of limitation whether it has been rightly invoked or not, is a matter which the Appellate Authority can go into and since the impugned order records the fact that the consideration was being received at 5% of the gross revenue and as per the provisions of the concessionaire agreement.
Apparently from the show cause notice, it would be clear that it was only when the revenue had started investigation against Max Super Speciality Hospital, Mohali regarding non-payment of service tax, it had come to their notice about the arrangement which has been made with the petitioner and thereafter the proceedings had been initiated and, therefore, the issue of jurisdiction is also based on a factual matrix.
It would also be a matter of fact which would be within the jurisdiction of the Appellate Authority as to whether the notices as such issued were within the prescribed period and whether the action of the Revenue in extending the period of limitation is justified or not in the facts and circumstances.
The writ petition is disposed of and the petitioners are relegated to the remedy of appeal. Needless to say that since the petitioners had approached this Court on 29.08.2023, if the appeal is filed within a period of 4 weeks from today.
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2023 (12) TMI 911
Non-payment of service tax - business auxiliary service - incentives received from the Central Reservation System Companies (CRS) Companies and Airlines on the sale of tickets - service charges received by the appellant from clients for visa consultation - incentives received from medi-claim insurance companies - incentives received from Foreign Exchange brokers - incentives received from Miscellaneous Receipts - Denial of CENVAT credit on the ground that invoices bear address as 1400, Modi Tower, 98, Nehru Place, New Delhi.
Non-payment of service tax under BAS on the incentives received from the CRS Companies and Airlines on sale of tickets - HELD THAT:- This issue has been decided in favour of the appellant by a Larger Bench of the Tribunal in KAFILA HOSPITALITY & TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI [2021 (3) TMI 773 - CESTAT NEW DELHI (LB)]. The Larger Bench held that by rendering services connected to travel by air, a travel agent would render ‘air travel agent’ services, which services cannot be said to be for ‘promotion or marketing’ for the airlines - in view of the aforesaid decision of the Larger Bench of the Tribunal in Kafila Hospitality, service tax could not have been demanded from the appellant under BAS on the incentives that were received from CRS Companies and Air Lines on sale of tickets.
Non-payment of service tax under BAS on the service charges received by the appellant from clients for visa consultation - HELD THAT:- The services rendered by the appellant are not covered under the definition of BAS as the appellant is not involved in promotion and marketing or sale of any goods or service nor is the appellant providing any customer care service on behalf of the client or procuring goods or services which are inputs for the client. While providing such services, the appellant does not act as an agent of the embassies or of the individuals who require the assistance in obtaining VISA and, therefore, such services are not provided on behalf of anyone. The activities of the appellant would not be covered under BAS - service tax could not have been demanded from the appellant under BAS on the service charges received by the appellant from clients for visa consultation.
Non-payment of service tax under BAS on the incentives received from Mediclaim Insurance Companies - HELD THAT:- The Insurance Companies provide the mediclaim insurance policies to the individuals. The Insurance Companies make payment of incentives on their own as per their policy on which the appellant has no control. The appellant merely receives incentives from the insurance companies and does not raise any invoice on the Insurance Company. The liability to pay service tax on commission paid to agents is on Insurance Company. The appellant is not involved in promotion or marketing or sale of any goods or service and the appellant is also not providing any customer care service on behalf of the client or procuring goods or services for the clients. The activities of the appellant would, therefore, not be covered under BAS.
Non-payment of service tax under BAS on the incentives received from Foreign Exchange brokers - HELD THAT:- The appellant is not an authorized money changer as per the Reserve Bank of India requirement. Thus, for the Foreign Exchange required by the passenger, the payment is made directly by the passenger in the name of authorized money changer. The authorized money changer makes payment of incentive on its own to the appellant as per their policy and market rates of Foreign Exchange from time to time. The appellant does not raise any invoice on the authorized money changer. The appellant is not involved in promotion or marketing or sale of any goods or services nor is the appellant providing any customer care service on behalf of the client or procuring goods or services for the client. The client or the service recipient are the Foreign Exchange brokers who pay for the service - The reasons given by the Commissioner (Appeals) for confirming the demand on the incentives received by the appellant from Foreign Exchange brokers is the same as that for confirmation of the demand on service charges received by the appellant from clients for Visa Consultation. The confirmation of this demand, therefore, would also have to be set aside.
Non-payment of service tax under the category BAS on the incentives received from Miscellaneous Receipts - HELD THAT:- According to the learned counsel for the appellant, the appellant is not involved in promotion or marketing or sale of any goods or service - There is force in the submission advanced by the learned counsel for the appellant. When the aforesaid services have already been taxed under ‘air travel agency’ service, the incentives received from Miscellaneous Receipts arising out of the same transaction cannot be taxed under BAS. The confirmation of demand, therefore, deserves to be set and is set aside.
Denial of CENVAT credit - Credit denied on the ground that invoices bare address as 1400, Modi Tower, 98 Nehru Place which is the address of the registered premises and not 110, Modi Tower, 98 Nehru Place which is the address of the travel agency division of the appellant specified in ST-2 form - HELD THAT:- There is no dispute on receipt of service and payment made. According to the appellant, the issue of PAN based registration has been decided in favour of the appellant meaning thereby that registration of the service provider is not in dispute. Thus, once registration of service provider and rendition of service and payment thereof is not in dispute, mere mention of the wrong address is a procedural defect and CENVAT credit cannot be denied for this reason - The appellant was, therefore, clearly entitled to CENVAT credit and it could not have been denied merely on the ground of procedural lapses.
The impugned order dated 28.11.2016 passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed.
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