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Showing 501 to 520 of 1548 Records
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2022 (7) TMI 1049
Addition u/s 40(b) - interest payment to partners - reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern - Expenditure on account of interest payment on statutory liabilities - reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern - HELD THAT:- It is not disputed that the assessee is regularly assessed to tax and the method of capitalizing interest in the cost of construction is not even not disputed in the earlier years. The assessee has supported his contention by filling the detailed calculation showing that excess claim is considered while computing the stock valuation and the same is confirmed by the ld. CIT(A). This fact is also confirmed by the ld. CIT(A).
CIT(A) has also confirmed that in the computation of income the interest of partner is added and deducted and thus, the effect while preparing the computation of income is nil and there is no loss of revenue as verified and contended by the ld. CIT(A). Thus, when the assessee has separately adjusted that excess interest while working out the closing inventory and this fact categorically confirmed in the findings of the ld. CIT(A) in his order, we do not find any merit for sustaining the addition merely the assessee has not given effect in the interest account. As rightly argued by the ld. AR of the assessee that if it is to be done so by the assessee then in that case it will result in double addition of that figure one in the interest account and another in inventory holding.
The contention of the assessee that the excess interest is adjusted while working out the closing inventory is confirmed by the ld. CIT(A) and is not disputed before us by ther revenue. The ld. AR of the assessee also cited the Annexure C (Page 47 & 48 of assessee paper book ) of the Tax Audit report annexure carried out as per provision of section 44AB of the act, where in the tax auditor has also confirmed this treatment that the excess interest claim has been corresponding reduction in cost of construction. This has not been challenged or discussed by the lower authorities. Merely the said adjustment not done in the profit & loss account the double disallowance cannot be made. Even the ld. CIT(A) has also confirmed that in the computation of income the same is disallowed and allowed giving it the effect as Nil. In terms of these observations the ground no. 1 raised by the assessee is allowed.
Addition u/s 43CA - As argued AO made addition without considering the reply of the assessee and without referring to the DVO - HELD THAT:- The assessee has to claim that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In the present case the ld. AR of the assessee not placed any evidence that the claim was placed before the ld. AO. All the decision relied upon are applicable where the assessee make a claim and not considered by the lower authority and in that the case the courts have held that the addition made without giving an opportunity to the assessee is not sustainable whereas in this case the assessee has chosen to remain silent on the issue.
Assessee reiterated the submissions raised before the lower authorities and has not countered the finding that this issue has never been raised before the assessing officer and assessee has given their reply on this very specific issue without contending the valuation as per their letter dated 19.12.2018 filed before the AO. In the absence of any cogent evidence placed before us we do not find any reasons to depart on the findings of the orders of the lower authorities and thus, this ground no. 2 of the assessee is dismissed.
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2022 (7) TMI 1048
TDS u/s 194A(3)(V) - Disallowance u/s 40(a)(ia) - deduction of TDS on interest paid by a cooperate society to a member thereof - as per AO assessee was not a cooperative society but a cooperative society engaged in the business of banking - CIT-A deleted the addition - HELD THAT:- As assessee is registered under Tamilnadu Cooperative Societies Act, 1983 and it has obtained license from RBI to carry out banking activities u/s. 22(1) read with Section 56(6) of Banking Regulation Act, 1949. It has paid interest and submits that there is no requirement of deduction of tax at source in this year. On the other hand, the case of Ld. AO is that the statutory provisions provide for different effect to co-operative society and central district co-operative society engaged in the business of banking. Therefore, the assessee was obligated to deduct TDS on Time/Term deposits and the failure to do so would attract disallowance u/s. 40(a)(ia). The amendment brought in by Finance Act, 2015 was only to clear the doubt regarding the applicability of provisions of Sec. 194A(3)(v) to cooperative banks.
As rightly held in the impugned order, this issue has been held in assessee's favor by Hon'ble High Court of Madras in the case of Coimbatore District Central Cooperative Bank Ltd.[2016 (1) TMI 370 - MADRAS HIGH COURT] none of the State or Central enactments such as the Tamil Nadu Co-operative Societies Act, 1983, the Multi-State Co-operative Societies Act, 2002, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and the National Bank for Agriculture and Rural Development Act, 1981 make any distinction between a co-operative society engaged in carrying on banking business and a co-operative bank. However, the amendment as brought in by Finance Act, 2015 was prospective in nature and applicable only from 01.06.2015. It is only on and from 01.06.2015, the assessee could be held liable for such TDS but not before that date. On the basis of this decision, it could be concluded that the co-operative banks have thus been taken out of the purview of beneficial exception only from 01.06.2015 and not before that. We order so. In the result, the impugned order could not be faulted with. - Decided against revenue.
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2022 (7) TMI 1047
Assessment u/s 153A - Addition of income earned by the assessee from cricket betting - addition as estimated by applying a net profit rate of 1% on the total transactions as found recorded in the laptops - HELD THAT:- As different explanation was offered by the assessee in respect of cash found and seized during the raid conducted by the Vigilance Squad of State Police, Gandhinagar, and although it was initially stated to be the income of the assessee relating to his cricket betting business, this stand was subsequently changed by the assessee by stating that the same was belonging to his brother-in-law Mr. Himanshu and even the affidavit of Mr. Himanshu was also filed owning the said cash.
As in the statement recorded assessee again changed this stand by stating that the cash found and seized was his income from dalali. Even though there was no mention of any real estate agency business in the said statement, there was a specific mention by the Assessing Officer that a letter as filed by the assessee during the course of assessment proceedings stating that he was doing dalali business of sale and purchase of land, flat & bungalows in the last two years.
Thus find no infirmity in the orders of the authorities below to treat the cash found and seized during the raid conducted by the Vigilance Squad of State Police, Gandhinagar at the residential premises of the assessee as his commission/dalali income from real estate agency business.
Addition of 1% of total transactions relating to cricket betting - The assessee also never offered any satisfactory explanation regarding the nature of the said transactions as well as the income earned by him from the said transactions despite sufficient and specific opportunity afforded by the Assessing Officer in this regard during the course of assessment proceedings. He also did not produce any books of account or other relevant details to show the exact amount of income earned by him from the said transactions.
Assessing Officer, therefore, was left with no option but to estimate the income of the assessee at 1% of the total transactions for both the years under consideration as found recorded in the laptops found from the possession of the assessee.
Whether the estimate so made by the Assessing Officer and confirmed by the learned CIT(A) is fair and reasonable in the facts and circumstances of the case? As noted that neither before the authorities below nor even before the Tribunal, the assessee has brought anything on record to show that the profit actually earned by him from the transactions of cricket betting was lower than 1% as estimated by the Assessing Officer and confirmed by the learned CIT(A).
Thus we are of the view that the estimate made by the Assessing Officer of the assessee’s income at 1% of the total transactions of cricket betting as found recorded in the laptops seized from the possession of the assessee is quite fair and reasonable and the learned CIT(A) was fully justified in confirming the same. In that view of the matter, we find no justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue and upholding the same, we dismiss both the appeals filed by the assessee.
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2022 (7) TMI 1046
Exemption u/s 11 - promotion and development of the game of Cricket - proviso to section 2(15) is invoked in the case of the assessee as the activities of the assessee are being run on commercial basis - registration granted u/s 12AA was withdrawn - HELD THAT:- Firstly, it is not in dispute that the registration of the assessee society u/s 12A has been restored by the Tribunal vide its order dated 09.06.2016 [2016 (6) TMI 499 - ITAT JAIPUR] and on appeal by the Revenue, the order so passed by the Tribunal has been affirmed by the Hon’ble Rajasthan High Court [2018 (8) TMI 196 - RAJASTHAN HIGH COURT] Therefore, the primary condition for availing exemption under section 11 and 12 of the Act that the assessee society should be registered u/s 12A is satisfied in the instant case.
Thus in the instant case, we are of the considered view that given that the assessee society is generating surplus year after year is not the deciding factor to determine whether it is eligible for exemption under section 11 of the Act. And on this ground alone, the exemption claimed by the assessee society under section 11 can not be denied.
Allowance of expenses towards grants to District Cricket Associations - HELD THAT:- We allow the expenditure incurred by the assessee by way of grants given to various District Cricket Association as claimed by the assessee. Accordingly ground no. 2 of the revenue is dismissed.
Adopting accrual system of accounting and not the payment system of accounting as the Trust/AOP/Society/Institution exempted under the IT Act is not employed to adopt accrual system of accounting - HELD THAT:- As perused the material available on record and it is noted that the method of accounting shall be cash or mercantile as per section 145(1) of the Income Tax Act 1961, as consistently followed is allowed. Regarding the provision of expenses, it is noted that the same is provided and adjusted from year to year and the amount shown in the Balance Sheet is the closing balance at the end of the year. Regarding the separate claim, if any, the ld. CIT (A) has already given opportunity to the AO in this matter. Accordingly, the Ground no. 3 of revenue is dismissed.
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2022 (7) TMI 1045
MAT computation u/s 115JB - Disallowing exclusion of Excise Duty Exemption as capital receipt availed during the year under consideration in computing book profit as per section 115JB - HELD THAT:- We find that the excise duty exemption has been admittedly the capital receipt and the finding of the CIT(Appeals) that the excise duty exemption is not liable to be taxed under the normal provisions of the Income Tax Act being not in dispute for us, the alleged capital receipt cannot be categorised as part of the book profit. In the case of assessee being covered by the excise duty notification, such sum collected on the goods manufactured and sold is in the nature of incentive subsidy given for establishing the units in backward areas and to generate employment opportunities.
As per Memorandum issued by the Ministry of Commerce & Industry, we find that the excise duty exemption is purely capital receipt and is neither chargeable to tax under the normal provisions of the Income Tax Act nor is to be included as part of the book profit for computing the minimum alternative tax as per the provisions of section 115JB of the Act. Thus Ground No. 2 raised by the assessee is allowed.
Claim of deduction of amortisation of leasehold land expenses - AO rejected the assessee’s claim on the ground that the amortisation of leasehold land does not specify the conditions laid down in section 35D(2) of the Act and is also not liable to deduction under section 37 - whether the alleged expense has been expended wholly and exclusively for the purposes of business? - HELD THAT:- As it is not in dispute that the leasehold lands taken by the assessee on lease are used for carrying out business operation and the lumpsum lease money was paid as per the agreement and was required to be paid at the beginning of the lease term but the said sum is spread over the entire lease term. Now what is the mechanism to quantify the amount and how to spread the amount across the lease period.
Assessee has taken guidance from the Accounting Standard 19 issued by the Institute of Chartered Accountants of India and in accordance with the procedure laid down therein and principal of accounting has debited the annual amount of lease in the profit & loss account and balance prepaid lease money is shown on the assets side in each year. The amount of amortisation debited to profit & loss account is reduced from the advance lease money paid. We find no error in this way of accounting treatment of the amortisation of the leasehold expenses and thus the same being spent exclusively for the business purposes has been rightly claimed as expenditure by the assessee under Section 37 of the Act. Our view is supported by the decision of the Coordinate Bench of Delhi in the case of NIIT Technologies Ltd [2020 (6) TMI 526 - ITAT DELHI] wherein it was held that the assessee would be entitled to claim 1/90th of amount of total lease rent every year till period of lease of 90 years as revenue expenditure and entire lease rent amount would not be allowed during the relevant year.
Thus amortization of leasehold land and land development charges deserves to be allowed as an expenditure under section 37 - Decided in favour of assessee.
Corporate Guarantee given by the assessee to its Associated Enterprises - HELD THAT:- Inter-corporate guarantees are a common business practice. Within an affiliated corporate group, some entities represent higher credit risks than others. The weaker entities may either be unable to obtain financing or may be able to obtain credit facilities only upon unfavourable terms. When a corporate borrowing group includes multiple businesses, it is common for lenders to look to guarantees of corporate affiliates to support the credit facility.
In the instant case, the corporate guarantee has been provided by the assessee on behalf of the Associated Enterprise and is in the nature of a downstream guarantee, where the guarantee is provided by the parent company for obligations of its subsidiary. So far as the issue that the present transaction of giving corporate guarantee falls under the category of international transaction, it is not under the dispute before us, as it was held against the assessee by the ld. CIT(Appeals) and against the said view, the assessee has not filed any appeal or Cross Objection.
Computation of quantum of Corporate Guarantee fee adjustment to be made in the hands of assessee - As respectfully following the decision of the Coordinate Bench, Mumbai in the case of Everest Kento Cylinder Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT] we confirm the view taken by the ld. CIT(Appeals), who has rightly held that the arm’s length guarantee commission charge should be restricted at 0.5% of the guaranteed amount. Thus no interference is called for in the order of ld. CIT(Appeals) and the grounds raised by the revenue on the issue of Corporate Guarantee Fees are dismissed.
Downward adjustment in respect of purchases made by eligible unit from non-eligible unit - assessee-company operates various units of which some units eligible for deduction u/s 80IA(10) (hereinafter called as “eligible units”) and some are non-eligible units - HELD THAT:- TPO had agreed with the TNMM method adopted by the assessee. The reasons given for TPO adjustment is very general in nature merely referring to the profit margin of the eligible units to the non-eligible units. Ld. TPO has not given any analysis to demonstrate that how the purchase of any material by eligible units from non-eligible units could have yielded extra profits. We, therefore, are in conformity with the finding of the ld. CIT(Appeals) that no downward adjustment of profit of eligible units be sustained.
As far as the ground raised by the Revenue on account of Rule 46A of the Act, ld. D.R. failed to file the necessary evidences to indicate as to what new documents were filed before the ld. CIT(Appeals) which were not placed before the ld. TPO and the ld. Assessing Officer. Therefore, all the grounds raised by the Revenue on account of issue of inter-corporate transactions deserve to be dismissed.
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2022 (7) TMI 1044
Addition on account of unaccounted cash payments u/s 69C - Addition on the basis of the statements given by four employees in the course of search u/s 132(4) - CIT-A deleted the addition - HELD THAT:- As these statements considered on their own did not in itself inspire confidence to justify the addition made by the AO u/s 69C of the Act, for the reason that not only were there apparent factual inconsistencies but also the averments made by these four employees were general in nature and none of them divulged any specific details regarding any project in relation to which these so-called gratuitous payments were being made. Even the Ld. CIT-DR was unable to rebut the inconsistencies pointed out by the Ld. AR (as outlined in the preceding paragraphs) in the statements of the four (4) employees.
It is also noted that each of the above four (4) employees had named Mr. Rajesh Sidhwani to be the person who was responsible for handling cash and that according to them, he would provide them with the cash for making the liaisoning expenses. We note that when Mr. Rajesh Sidhwani was confronted with the statements of these four employees, he had emphatically denied being involved in any such provision of cash for liaisoning work and gratifications.
Effect of the retraction affidavits - As noted that the retraction affidavits had been sworn before the Notary Public (within seven days of the original statement) and were submitted before the AO (albeit late). We note that after perusal of the retracted affidavits, the AO had summoned all the four employees and cross-examined them under oath. Copies of their statements recorded upon cross examination by the AO have been placed before us. Having perused the same, it is noted that each of the four employees withstood the cross examination. And each of them stood by their retraction and re-affirmed that their original statements were obtained under duress and coercion.
AO tried to but failed to extract any information or detail whatsoever in the cross-examination which would in any manner support his AO’s allegation that gratuitous payments in cash were being made by the assessee. On these facts, we are unable to agree with the Ld. CIT-DR that the retraction statements ought to be discarded when they had stood the ground when cross-examined by AO that the statements recorded earlier was obtained involuntarily, so it is unsafe to rely on the four persons earlier statements to take an adverse view against the assessee regarding the purported gratuitous payments.
Therefore, on conspectus of the aforesaid facts discussed, it is noted that not only were the original statements of the four (4) employees inconsistent, unreliable and suffers from contradiction and the admission made were not backed by any corroborative evidence and these statements had also been retracted and each of the four employees were able to withstand the cross-examination of the AO. Therefore, following the Board Instructions (supra), we find ourselves in agreement with the findings of the Ld. CIT(A), that it was improper for the AO to draw adverse inference on the basis of the retracted testimonies of the four employees.
Thus we therefore do not see any reason to interfere with order of the Ld. CIT(A) and accordingly dismiss the Ground Nos. 1 to 3 raised by the Revenue in AY 2018-19.
Disallowance u/s 14A of the Act read with Rule 8D - Scope of amendment brought in Section 14A - HELD THAT:- Absence of any exempt income, no disallowance u/s 14A of the Act is permissible.
Whether the following Explanation inserted by the Finance Act, 2022 in Section 14A of the Act is required to be retrospectively applied and fastened on the assessee or not? - the legislative intent is clear, the amendment brought in by the Finance Act, 2022 on this issue as discussed, will take effect from First April 2022 and not before as contended by the Ld DR. In our considered view, therefore, the new Explanation inserted in Section 14A of the Act with effect from 01-042022 cannot be applied in the assessment years under consideration for the present case as it is for AYs 2016-17 to 2018-19, and therefore according to us, the decisions cited in Paras 33 to 37 above continue to hold good and are binding upon us. - Decided against revenue.
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2022 (7) TMI 1043
Exemption u/s 11 - registration u/s 12A Cancelled - as submitted assessee had been carrying on charitable activities by running, schools, engineering colleges and medical colleges - evidences collected during search - Appeals were allowed by Tribunal, the order of ITAT is not accepted by the Income Tax Department and the appeals against the same is filed before Hon’ble High Court of Karnataka - HELD THAT:- The pending of the appeal before Hon’ble High Court cannot be reason to cancel the registration u/s 12A of the Act. The Tribunal is the higher forum, which has considered the entire issue and deleted various additions and decided issue in favour of assessee. The Ld. Principal CIT is bound to follow the order of the Tribunal being lower in hierarchy and he is not expected to pass such comments unless the order of the Tribunal is reversed by due process of law. The Ld. Principal CIT cannot sit in judgement over the order of Tribunal.
Principal CIT considered the seized material collected by search conducted on 10.10.2019 and assessment completed on 30.9.2021. In our opinion, second search is a different proceeding that materials cannot be imported for cancellation of the registration granted u/s 12A of the Act, when the issue was restored to him by order of the Tribunal - Being so, the Principal CIT is not expected to place reliance on material gathered in second search and he cannot be considered it so as to cancel registration at this point of time. Accordingly, we restore the registration granted to the assessee w.e.f. 20.1.1992. Appeal of assessee allowed.
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2022 (7) TMI 1042
Validity of reopening of assessment - main contention of the assessee is that the notice u/s 148 of the Act had been issued at the wrong address i.e. where the assessee had not been residing - HELD THAT:- Admittedly, the assessee had an address in Ludhiana and she also has an address in Mohali and another address in Chandigarh. From the records also, it is not coming out as to what is the correct address of the assessee as per the PAN records. In such a situation, we are of the considered view that the assessee cannot be allowed to take the benefit of plea of no service of notice u/s 148 of the Act when even as per the various documents filed before us, the assessee was having three addresses.
In such a situation, we would concur with the categorical findings of FAA that the notice u/s 148 of the Act had been served on the assessee through affixture. Moreover, it is not the case of the assessee that her case was dismissed ex-parte by the Ld. CIT(A) or her assessment was completed ex-parte by the Assessing officer as at both the Forums her case had been duly represented by some authorised representatives as is apparent from the assessment order as well as the First Appellate order. Here again, the veracity of the assessee’s contention that she had not authorised anybody to represent her, cannot be verified for want of adequate proof. The assessee’s contention that the signature on Form 35 is not hers, is a matter within the realm of Forensic Experts. Further, as per record, even notice u/s 142(1) had been received by the assessee and had been duly responded to. Therefore, we reject the assessee’s legal ground that the subject assessment is liable to be set aside for want of service of notice u/s 148 of the Act. We dismiss the grounds raised by the assessee in this regard.
For merits of addition assessee has made several averments in which she has denied that she had ever filed any appeal before the Ld. First Appellate Authority and it has also be averred that she had neither appeared nor engaged any counsel to appear on her behalf either before the Assessing officer or before the Ld. CIT(A). In this affidavit, she has also mentioned about an ongoing matrimonial dispute between her son and his wife and it has also averred that the combined order of the Ld. CIT(A) is in the name of Shri Raj Partap Singh and the assessee and that Shri Raj Paratap Singh is the brother-in-law of her son - As sympathetic view of the fact that the assessee is an elderly warwidow, who might have been put to disadvantage by some unscrupulous elements behind her back, and also keeping in mind the principle of natural justice, we are of the considered opinion that even though we have upheld the findings of the Ld. CIT(A) regarding service of notice u/s 148 of the Act, in the interest of substantial justice, the assessee should be given another opportunity to explain the entire transaction and establish with proof her contention regarding non-taxability of the same before the Ld. CIT(A). Appeal of the assessee stands partly allowed for statistical purposes.
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2022 (7) TMI 1041
Assessment u/s 153A - Addition based on the seized e-mail conversations - Unaccounted investment on transfer of RL shares by Anil R Patel - HELD THAT:- We hold that the ld. CIT(A) has correctly deleted the addition considering the decision of Hon’ble Gujarat High Court in the case of PCIT v. Saumya Construction [2016 (7) TMI 911 - GUJARAT HIGH COURT] wherein it has been held that no addition can be made in an assessment u/s 153A, if no incriminating material is found during the search. In the present case, the decision of the Hon’ble Gujarat High Court is squarely applicable as no incriminating material found during the course of the search. Hence, we hold that ld. CIT(A) has correctly deleted the addition made by relying on the decision of Hon’ble Gujarat High Court. - Decided against revenue.
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2022 (7) TMI 1040
Disallowance of loss - absence of any justification to support the incurring of any genuine loss by the appellant in any business carried on in the name and style of M/s.Dindayal Associates - proprietorship firm “DA” where the assessee purportedly was carrying on share trading business - claim of the Revenue is that this share trading business was the benami of “SG” and not of the assessee, and therefore denied claim of loss - HELD THAT:- We uphold the order of the ld.CIT(A) that the business of share trading transactions carried on in the proprietorship concern, “DA” was not that of the assessee, but of “SG” and denial of claim of business loss to the tune is accordingly upheld. Ground No.1 raised by the assessee is dismissed. The appeal of the assessee is dismissed.
Reopening of assessment u/s 147 - We fail to understand how the AO could now attribute escapement of income of the assessee on account of this same share trading business, which as per the AO himself ,does not belong to the assessee at all. As on the date of recording reasons for escapement of income i.e. on 4.10.2006, the assessment order passed, which was reopened under section 148 of the Act ,dated 30.3.2004 had categorically held that the assessee had not carried on the share trading business. Therefore, this very order passed u/s 143(3) wherein the assessee was held to have not carried out any share trading transactions, could not possibly have been reopened u/s 147 on account of escapement of income relating to this very share trading business only. Assumption of jurisdiction to frame reassessment u/s 147 is clearly invalid. Re-assessment framed, therefore, u/s 147 of the Act is set aside. The appeal of the assessee is allowed on this count.
Validity of assessment order passed u/s 158BD - satisfaction note recorded by the AO of the assessee on various grounds - HELD THAT:- The information against the assessee not emanating from search conducted on any person, the proceedings u/s 158BD to assess undisclosed income of the assessee for the block period could not have been conducted as per law. The order passed therefore u/s 158BD of the Act is, we hold, invalid.
The satisfaction note records confirmation of the assessment order passed in the case of “MRS” which event took place on 28/12/2004, which is much subsequent to the date of issuance of notice under section 158BD i.e. on 24.11.2003. This goes to show that in any case the satisfaction whatsoever was recorded by the AO after issuance of notice u/s 158BD.
Thus we hold that present proceedings conducted on the assessee under section 158BD of the Act and consequent assessment order passed under section 158BD of the Act is against the law and hence invalid. The order so passed under section 158BD is therefore set aside. This ground is allowed, and the appeal of the assessee is allowed.
Addition of withdrawal of cash from the benami accounts - CIT-A deleted the addition - HELD THAT:- Though the appeal of the Revenue is merely academic since we have already held the order passed by the AO under section 158BD in the present case in the appeal of the assessee, but even on merits, we find that the ld.CIT(A) thrashed the very basis of the AO for making addition of Rs.1.05 crores by noting that there was no cash withdrawal from the benami account of the proprietorship concern, “DA”, but in fact it was kept in fixed deposits in the name of proprietorship concern. The Department was unable to controvert this fact. Therefore, the very basis of the AO for making addition in the hands of the assessee of Rs.1.05 crores does not survive, since the Ld CIT(A) has noted the fact that no cash was actually withdrawn. In view of the same, we see no reason to interfere in the order of the CIT(A) in deleting the addition.
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2022 (7) TMI 1039
Seeking waiver of forfeiture of security as well as penalty imposed on CHA - time period for reporting the changes in Regulation 12 and 13 - case of appellant is that the registration with Ministry of Corporate Affairs was obtained on 01.09.2018 and the intimation to the Customs was given on 10.10.2018 - sufficient reasons for delay provided or not - compliance with Regulation 7 of the CBLR 2018 as well as Regulation 13 of CBLR, 2013 or not - HELD THAT:- Regulation 7 clearly lays down that the change of constitution of a Customs Broker needs to be communicated within 60 days from the date of such change for the grant of license under Regulation 7.
In the instant case, the change was made on 11.12.2014 but it was reported only on 10.10.2018 after a considerable delay. In view of above, there is a clear violation of CBLR, 2013 under which the appellant was licensed. As mere wrong mention of the relevant CBLR would not vitiate the order, the appellant has violated the provisions.
It is noticed that the appellant has claimed that the delay occurred largely due to the fact that one of his partner died and he was not in a right frame of mind. It is noticed that the impugned order has, taking a lenient view, not revoked the license of the appellant - Taking into account the circumstances and the facts of the case, further lenient view is adopted. The case is not of a significant violation but only that of a delay in reporting. Moreover, the appellant did not process any document during this period.
The forfeiture of security deposit of Rs. 5 lakhs and imposition of penalty of Rs. 50,000/- under Regulation 18 of CBLR, 2018 is excessive - the order of forfeiture of security deposit of Rs. 5 lakhs is set aside but the penalty of Rs. 50,000/- on the Customs Broker is sustained, for this lapse - appeal allowed in part.
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2022 (7) TMI 1038
Seeking appointment of one or more Independent Valuer(s) to valuate the fair price per equity share of the Respondent Company - low valuation of shares in the exit offer - Valuation ordered under section 247 of Companies Act, valid or not - scope under section 59 of Companies Act - HELD THAT:- The Respondent No. 1 Company in the first instance failed to act as per the obligatory requirement in terms of the SEBI Circular and it was only after repeated request by the Petitioner that the Respondent No. 1 Company provided its shareholders with an Exit Offer. Reluctance on the part of the Respondent company to provide copies of the annual returns and balance-sheet for the years 2014-17 to the Petitioner creates doubts about the bona fide intentions of the Respondent. The Respondents also refused to provide the Valuation Report of its shares to the Petitioner. This also does not reflect well on the bona fide intentions of the Respondent Company and its Directors with respect to justifying the share price it offered in the Exit Offer.
The Petitioner had already been made an offer of Rs. 125 per share and subsequently the Exit Offer was only of Rs. 18.42 per share are significant and sufficient enough grounds to cast doubts about the veracity of the valuation of shares got done by the Company for its Exit Offer. Therefore, in the interest of equity, justice and fair play for the Applicant and other public shareholder a revaluation of the shares by an independent valuer is necessitated and the independent valuer should also take into account under-valued transactions or bogus expenses if any, incurred, before the earlier valuation was done.
Whether the present petition comes within the ambit of Section 59 of the Companies Act? - HELD THAT:- The Petitioner has claimed that the promoters have purchased shares during the period of the Exit Offer and that for the purpose of Section 59, rectification is not limited only to 'public shareholders', but includes promoters and Members of the Company. Be that as it may, such rectification would only follow consequentially and be contingent upon the findings of a fresh valuation in respect of the fair price of the shares - the matter needs to be considered on the strength of the factual position apparent from the oral and written submissions of the parties.
It is also pertinent to mention that the Petitioner could not have approached this Tribunal under the Provisions of Chapter XVI of the Companies Act, 2013 as he did not have the requisite numbers. Also, since the Respondent No. 1 Company is now delisted, the Petitioner and other public shareholders are deprived of the benefit of getting the market/traded value of their shares and must perforce have to be content with value of shares in the Exit Offer - the Authorized representative of the Petitioner via Application under Right to Information Act, 2005 was informed by the Respondent No. 10 vide its letter dated 30.08.2019 that necessary Notices have been issued by it to the Respondent No. 1 company and its Directors; however it also informed the authorized representative of the Petitioner to approach this Tribunal for appropriate action in the matter.
Valuation ordered under section 247 of Companies Act - HELD THAT:- The Respondents have also contended that valuation cannot be ordered under Section 247 of the Companies Act, 2013 since valuation under Section 247 would be limited to valuation required to be done under the provisions of the Companies Act and the valuation prayed for by the Petitioner is a valuation to be done under the SEBI Circular (which has been issued under the provisions contained in the SEBI Act). It is noteworthy here that while Section 59(4) of Companies Act provides for rectification of Register if transfer of securities is in contravention of the provisions of the SEBI Act. Section 247 or other provisions of the Companies Act or Rules do not specifically provide for conducting valuation if it is required under the provisions of the SEBI Act. It therefore follows that if the Register contains entries in respect of valuation done in, contravention of the SEBI Act, then in order to rectify those entries fresh valuation should be permissible under the Companies Act since Section 59(4) of the Companies Act provides for such rectification.
This Tribunal therefore orders that an independent valuer be appointed forthwith from the list of approved valuers of IBBI by Respondent No. 1 Company, the services of whom will be compensated by the Respondent No. 1 Company. The independent valuer will submit his report on the valuation of shares of the Respondent No. 1 Company within a period of 3 months from the date of his appointment - The Respondent No. 1 Company will take all further necessary action on the basis of the valuation of shares arrived at by the independent valuer. The Applicant will be at liberty to approach the appropriate authority or legal forum for any grievance necessitated on the basis of the valuation report.
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2022 (7) TMI 1037
Initiation of CIRP - NCLT rejected the application - NPA - Period of limitation - NCLT that, a statement contained in the balance sheet cannot be treated as an acknowledgement of liability under Section 18 of the Limitation Act - Proposal of OTS is older than 3 months - HELD THAT:- The decisions in Sesh Nath Singh [2021 (3) TMI 1183 - SUPREME COURT], Laxmi Pat Surana [2021 (3) TMI 1179 - SUPREME COURT] and Asset Reconstruction Company [2021 (4) TMI 753 - SUPREME COURT] have subsequently been followed in numerous decisions of this Court delivered by two-Judge Benches, namely: Dena Bank v C. Shivakumar Reddy [2021 (8) TMI 315 - SUPREME COURT], STATE BANK OF INDIA VERSUS VIBHA AGRO TECH LIMITED [2021 (10) TMI 1348 - SUPREME COURT], Devas Multimedia Private Ltd. v Antrix Corporation Ltd. and Another [2022 (1) TMI 774 - SUPREME COURT] and SVG Fashions Pvt. Ltd. (Earlier Known As SVG Fashions Ltd.) v Ritu Murli Manohar Goyal and Another [2022 (4) TMI 16 - SUPREME COURT] - In all these decisions the principles emerged that An acknowledgement in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC.
In view of the above decisions, the position of law has been set at rest. Neither the NCLT nor the NCLAT had the benefit of adjudicating upon the factual controversy in the context of the decisions of this Court. The principles which emerge are that:
(i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and
(ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default.
It is also noted that Mr Niranjan Reddy has relied upon documentary material to indicate that the acknowledgements of liability were within a period of three years from the date of default and, hence, the applicant filed by the appellant under Section 7 of the IBC was within limitation. Reliance has also been placed on the letter of revival dated 26 April 2015 and the offer of OTS on 6 November 2015.
Since we are inclined to restore the proceedings back to the NCLT for fresh adjudication in view of the decisions of this Court noted above, we are not entering upon the factual dispute on whether the application filed under Section 7 of the IBC would result in an initiation of the CIRP in the present case. The appropriate course of action would be to keep open all rights and contentions of the parties on merits to be adjudicated upon before the NCLT.
The proceedings shall stand restored to the file of the NCLT for adjudication afresh, keeping all rights and contentions of the parties open on the factual aspects of the controversy.
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2022 (7) TMI 1036
Seeking approval of the Resolution Plan - section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The RP has certified that the Resolution Plan does not contravene any provisions of law for the time being in force. On examination of the Resolution Plan, we also find that the Resolution Plan does not contravene any provisions of law. We also hold that the Resolution Plan is in compliance with the provisions stated in Regulations 38 and 39 of the IBBI (CIRP of the Corporate Person) Regulations, 2016, and the interests of all stakeholders are taken care of. The term of the plan is also stated. Hence, there are no reason to reject this Resolution Plan on any grounds.
The Resolution Applicant cannot be saddled with any previous claim against the Corporate Debtor prior to initiation of its CIRP. For the permits, licenses, leases, or any other statutory right vested in the Corporate Debtor shall remain with the Corporate Debtor and for the continuation of such statutory rights, the Resolution Applicant has to approach the concerned statutory authorities under relevant laws.
Application allowed.
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2022 (7) TMI 1035
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - quantum of debt - HELD THAT:- A perusal of counter filed by Corporate Debtor shows that, the Corporate Debtor has not disputed the debt and only disputed the quantum of the debt.
As per Section 5(6) of IBC, dispute if any as to debt, shall be regarding existence of debt. In the case in hand, the existence of debt is not disputed, as according to corporate debtor, the quantum of debt alone is in dispute. Hence, the operational debt in this case remain undisputed stands admitted and established. Since, it is not the case of corporate debtor that it discharged the said debt, the default also stands established.
Petition admitted - moratorium declared.
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2022 (7) TMI 1034
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Whether the Corporate Applicant is able to prove that it is unable pay the Debt claimed in the Application, hence the present Application is filed for initiation of Corporate Insolvency Resolution Process against it? - HELD THAT:- This Application is filed by the Corporate Applicant namely M/s. Enaar Steel and Alloy Private Limited under Section 10 of the IBC, 2016 for initiation of Corporate Insolvency Resolution Process, as the Corporate Applicant is not in the position to meet its obligations and has further committed default in meeting its obligations.
The Corporate Applicant has filed along with its application its financial statements for the year ending on 31st March, 2020 which is showing loss, and has long term borrowings to the tune of Rs. 1,05,61,504 and other liabilities including short term provisions to the tune of Rs. 2,04,82,836. The Financial Statements further reflects that the asset base of the Corporate Applicant is so low as on 31.03.2020. The current assets show only Rs. 30,508.85 and non-current assets show Rs. 6,31,597. The Corporate Applicant has also enclosed along with its application the notice of Extra Ordinary General Meeting of the Company dated 10.10.2021 for approval of filing application under Section 10 of the IBC, 2016 which was held on 01.11.2021 and 05.11.2021, wherein the resolution was approved in the Extra Ordinary General Meeting authorising Mr. Devesh Kumar Agarwal/Mr. Jitesh Kumar Agarwal, Directors of the Company, to make, file an application before Adjudicating Authority for initiation of Corporate Insolvency Resolution Process and further proposed to appoint Mr. Pavan Kankani, Insolvency Professional to act as Interim Resolution Professional at a remuneration of 1,50,000/- per month plus applicable taxes and reimbursements.
One of the important Operational Creditors of Corporate Applicant, the Southern Power Distribution Company of Telangana Limited (TSSPDCL) have also filed their Affidavit conveying their No objection for initiation of Corporate Insolvency Resolution Process as pleaded - On going through the Resolutions passed by Corporate Applicant and latest Financial Statements filed by Corporate Applicant, it is clear that the poor financial health of the Corporate Applicant.
Application admitted - moratorium declared.
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2022 (7) TMI 1033
Seeking to maintain status quo and not to take no further actions as the Liquidator of the Corporate Debtor pending the disposal of this Application - seeking removal of Liquidator of the Corporate Debtor - requirement under Regulation 7A of the Insolvency and Bankruptcy Board of India (Resolution Professionals) Regulations, 2016 not met - suppression of material facts - HELD THAT:- On a conjoint reading of Section 33 of IBC, 2016 with Section 16 of the General Clauses Act, 1897 would show that the Authority which has the power to appoint a person, equally has the power to suspend or dismiss that person, in the absence of any specific powers conferred thereto. Thus, by virtue of Section 16 of the General Clauses Act, 1897 it clear that this Adjudicating Authority has the power to dismiss the Liquidator since this Authority is vested with the powers under Section 33 and 34 of IBC, 2016 to appoint a Liquidator.
Grounds on which the Liquidator can be changed - HELD THAT:- The provisions of IBC, 2016 does not explicitly state the grounds on which the Liquidator can be removed. In the absence of the specific provisions under the IBC, 2016 we may resort to Section 276 of the Companies Act, 2013 - In the present case, the Liquidator has stated in his reply that no stakeholder has the right to seek for replacement of Liquidator and that once the Liquidator is appointed, he cannot be removed unless there is a serious allegation of corruption. If we go by the contention as made by the Learned Liquidator then it should be construed that the Liquidator is infallible and this Adjudicating Authority has to simply close its eyes and let the Liquidator do whatever he wants. As to the present case of M/s. Jeypore Sugar Company Limited, it is to be seen that in the previous hearings serious allegations have been made against the Liquidator by the stakeholders that he has shared the valuation report with the prospective Scheme proponents and the Liquidator has also not denied the same.
It is an admitted fact that the Liquidator has shared the valuation Report of the Corporate Debtor with the prospective Scheme proponents which lead to the proponents quoting value on par with the valuation report. Such an act committed by the Liquidator is viewed seriously by this Tribunal. The said act of the Liquidator would amount to failure to exercise due care and diligence in performance of the powers and functions and as such, it is one of the grounds on which the Liquidator can be changed.
In so far as the appointment of Liquidator is concerned, it is an undisputed fact that the Respondent/Liquidator herein has accepted the assignment in respect of the Corporate Debtor without holding a valid AFA. Further, the Appellant viz. IDBI Bank was given the liberty to bring to the notice of the Adjudicating Authority to have a re-look at the appointment of the Liquidator so far as the Authorization is concerned - It is to be noted here that IIIPI and also the IBBI have issued show cause notice to the Respondent and has stated that the Respondent has accepted the assignment without holding a valid AFA and hence IIIPI imposed a penalty of Rs. 10,000/- upon the Respondent. The same is also reflecting the order passed by IBBI. Hence, it is crystal clear that the Respondent has accepted the assignment without holding a valid AFA, however as observed by the Hon'ble NCLAT, the non-holding of a valid AFA will not render the order of liquidation passed by the Adjudicating Authority illegal or invalid and moreover the Hon'ble NCLAT it has stated that if any irregularity is brought by the Appellant, then this Tribunal may have a re-look at the appointment of the Liquidator, in the present case.
The Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited has failed to exercise due care and diligence in performance of the powers and functions while discharging his functions as Liquidator in respect of the Corporate Debtor viz. M/s. Jeypore Sugar Company Limited and hence he is required to be replaced. Thus, under the provisions of Section 33 and 34 of IBC, 2016 read with Section 16 of the General Clauses Act, 1897 read with Section 276 of the Companies Act, 2013, from the latest list provided from IBBI, for the period from July 2022 to December 2022, we hereby appoint Mr. S. Hari Karthik as the Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited. The outgoing Liquidator/Respondent is directed to handover the charges to the newly appointed Liquidator within a period of 7 days from the date of this order.
Application allowed.
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2022 (7) TMI 1032
Extended period of limitation - evasion of service tax or not - service tax with interest paid on being pointed out (under Reverse Charge mechanism) - suppression of facts or not - scope of section 73(4) of Finance Act - Revenue Neutrality - HELD THAT:- It is undisputed that the appellant had, initially, not paid service tax on the services received under reverse charge mechanism for the relevant period and had, on being pointed out by DGCEI, immediately paid the same with interest and took Cenvat credit of the service tax paid. It is also undisputed that the Cenvat credit was available to it. Needless to say that the appellant could not have and has not taken Cenvat credit of the interest paid on the service tax because it is not available as Cenvat credit. It is also undisputed that it was paying service tax prior to the disputed period and was availing Cenvat credit of the service tax paid. After the changes in the Act in 2012, from a regime where only specified taxable services were chargeable to service tax to one where all services were taxable except those in the negative list, the appellant had not paid service tax but did so after being pointed out by DGCEI.
Whether the appellant is covered by Section 73(4)? - HELD THAT:- This sub-section applies to cases where service tax has not been paid by reasons of (a) fraud; or (b) collusion; or (c) willful misstatement; or (d) suppression of facts or contravention of the provisions with an intent to evade payment of service tax. According to the Revenue the appellant had suppressed the facts and contravened provisions with intent to evade paying service tax. It is a well settled law that fraud, collusion, willful misstatement and suppression all require the intent to be established - The notice can be issued within the normal period of limitation (which varied from time to time) OR extended period of limitation of five years if the elements of fraud, collusion, willful misstatement or suppression of facts or contraventions with an intent to evade are present. This power to issue the show cause notice is further limited by Section 73(3) which states that no show cause notice can be issued if the tax is paid before the notice is issued. However, Section 73(3) does not apply in cases covered by Section 73(4) which applies if there are elements of fraud, collusion, etc. which are identical to the elements required to invoke extended period of limitation.
Thus, the charge of service tax is not reduced or abated with efflux of time but only the remedy available to the Revenue goes if it is time barred. Further, the remedy available to the Revenue is also subject to the other limitations under Section 73(3) which is available in all cases where the tax is paid before the issue of show cause notice unless the elements of fraud, collusion, etc. indicated in Section 73(4) are present. As discussed, each of these elements require an intention.
Revenue Neutrality - HELD THAT:- Revenue neutrality becomes significant to determine if the appellant had an intention to evade or otherwise although it does not make any change to the charging section. The intention of any person can only be inferred from the circumstances of the case. The case of the Revenue is that the appellant had intention to evade service tax. No evidence of it, is found - All that happened in this case is by not paying the service tax when it is due but by paying it late, the appellant had to pay interest on it as well. The interest is not available as Cenvat credit. The appellant had, in fact, lost by not paying service tax in time and has not gained anything at all. It is thus found that there is no evidence of fraud or collusion of willful misstatement or suppression of facts or contraventions with an intent to evade service tax on the part of the appellant. In the absence of these elements, the appellant is not covered by Section 73(4) and is squarely covered by Section 73(3). The show cause notice should therefore not have been issued to the appellant.
The elements required to impose a penalty under Section 78 are identical to the elements required to invoke Section 73(4) and it is found that they are not present, the penalty under Section 78 should not have been imposed on the appellant. Further, Section 80 under which penalties could have not been imposed for reasonable cause for failure was also available to the appellant since the lis in the case began when the show cause notice was issued on 2 June 2014 and Section 80 was abolished only in 2015. The fact that the Commissioner adjudicated the matter after 2015 makes no difference as cases have to be decided as per the law when the lis began.
Appeal allowed - decided in favor of appellant.
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2022 (7) TMI 1031
Denial of refund of Service Tax - Revenue sought to change the classification of service from Erection Commissioning and Installation Service to Commercial Industrial Construction Service and adjustment of amount already paid under old head to new head - inclusion of value of free supply material in the assessable value - HELD THAT:- The appellant had classified the service provided by them under ‘Erection Commission and Installation Service’ and had paid service tax amounting to Rs. 20,22,971/-. Later on, Revenue initiated proceedings seeking to classify the service provided by them under ‘Commercial Industrial Service’ and also sought to include the value of free supply material in the assessable value for the purpose of tax. The issue was decided by original adjudicating authority in favour of appellant on the grounds of limitation and the demand was set aside.
It is apparent that while the Revenue’s attempt to classify the service provided by the appellant under the ‘Commercial Industrial Construction Service’ and to include the value of free supply material has failed in the Tribunal, the original self-assessment of the appellant made under the head of ‘Erection Commissioning Installation’ remained undisturbed.
The claim of refund is in respect of assessment under the head of ‘Erection Commissioning and Installation’ remains undisturbed. Thus the claim of refund can only be made in respect of original assessment under the head of ‘Erection Commissioning & Installation’. In this background, the limitation prescribed under Section 11B would be applicable and consequently, the refund claim filed much after the period of limitation would not be admissible - Appeal dismissed.
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2022 (7) TMI 1030
Levy of Service Tax - refundable security deposit collected by the Appellant from its customers - reimbursement of expenses from its customers on account of water, electricity and diesel expenses incurred for provision of services - termination charges collected from customers for early termination of lock in period of lease - Cenvat credit of works contract services and other services for construction of immovable property - Cenvat Credit on event management services for promotion of business of the Appellant.
Applicability of service tax on refundable security deposit collected by the Appellant from its customers - HELD THAT:- It is found from the case records that it is not in dispute that the said amounts are collected as a refundable security deposit by the Appellant and the same is returned to the customers at the end of the lease period with no interest as per section 5 of the Lease Deed as submitted by the Appellant - the said amounts are not collected towards any provision of service but as a refundable deposit and as such the amounts cannot be treated as consideration for renting/leasing of immovable property services.
Tribunal in the case of SAMIR RAJENDRA SHAH VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR [2014 (11) TMI 499 - CESTAT MUMBAI], it was held that As per the agreement, the Service Tax is payable separately by the lessee. As the appellant has not recovered Service Tax from the lessee, they may recover separately. Therefore, the contention of the appellant as they have not recovered the Service Tax from the lessee, the rent recovered by them be treated as cum-Service Tax is not acceptable.
Thus, the demand of service on security deposit cannot be sustained and is thus set aside.
Demand of service tax on reimbursement of expenses of diesel, water and electricity from the customers - HELD THAT:- The issue of inclusion of reimbursements in the consideration for value of services was dealt by Hon’ble Supreme Court in the case of Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT] and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 was held to be ultra vires the section 67 of the Finance Act, 1994.
In the case at hand, the fact that the expenses are mere reimbursement based on total cost incurred by the Appellant and the total floor area of the customers is not in dispute which goes to show that there is no profit element involved in the above reimbursements. The department has not been able to contradict the above fact either. Hence, having regard to the judgment of the Hon’ble Supreme Court, it is found that the Appellant cannot be saddled with the liability on such reimbursements on account of water, electricity and diesel charges and thus the demand of service tax on this ground cannot be sustained either and is thereby quashed.
Service tax on termination charges - HELD THAT:- There was no service rendered by the Appellant towards such charges and the same was in the nature of penalty for early termination than the agreed terms of lease. Thus, it is not a consideration for the service of renting of immovable property but a compensation or liquidated damages for reneging the contract of renting. Also, it is on record that the department has considered the above amounts for termination charges also in the demand under security deposit above as these charges were adjusted with the deposit lying with the Appellant and thus on this score also, the demand cannot be sustained as it will lead to taxing the same amount twice - the demand on account of termination charges is also liable to be quashed.
Eligibility of Cenvat credit on input services used for construction of immovable property - HELD THAT:- The period covered in the present appeals is June 2007 to March 2011 i.e. prior to the Cenvat credit Rules, 2004 which were amended w.e.f 01.04.2011 - Cenvat credit of input services as availed by the Appellant for construction of immovable property which was further let out to various customers is allowed.
Cenvat credit on event management services - HELD THAT:- Rule 2(l) of the Cenvat Credit Rules, 2004 doesn’t exclude any such service from the eligibility of availment of Cenvat credit as these expenses have been incurred in the course of furtherance of business and are thus business promotion expenses and the same is eligible as Cenvat credit.
Appeal allowed - decided in favor of appellant.
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