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2024 (5) TMI 638 - ITAT KOLKATA
Set off of loss against income referred to in section 68 r/w.s115BBE - HELD THAT:- Issue is already held to be in favour of the assessee in the case of Vijaya Hospitality & Resorts Ltd. (2019 (11) TMI 1106 - KERALA HIGH COURT] wherein the amendment brought in section 115BBE(2) are effective from 01.04.2017. We also note that CBDT in its circular referred above has categorically allowed to claim the set off of loss against the income determined u/s. 115BBE after AY 2016-17.
In the present case before us, the year under consideration is AY 2011-12 and 2015-16 in which the claim of set off of loss is permissible. Accordingly, in terms of the CBDT Circular and respectfully following the decision of (supra) we allow ground taken by the assessee in this respect.
Addition made u/s. 40A(2)(b) for excess payment made to related party - HELD THAT:- AO has considered the purchase transaction of only one unrelated party to compare it with the purchases made by the assessee from the related party and arrived at the conclusion to make the disallowance. Contrary to this, assessee has furnished details of purchase transactions from several other unrelated parties which demonstrates that purchases have been made at higher rates from them as compared to the one from the related party. Also, it is undisputed that there is a loss scenario both, in the hands of the assessee and the one from whom purchases have been made which is a related party. Thus, from a tax advantage objective, there seems to be no incentive to inflate the purchase - We delete the addition made u/s. 40A(2)(b) - Decided in favour of assessee.
Disallowance made u/s. 14A - As per AO assessee has held investment in shares of bodies corporate which were capable of yielding exempt income - HELD THAT:- We find that this issue is settled as no addition can be made u/s. 14A where assessee has not earned any exempt income in the year - As decided in M/S. ERA INFRASTRUCTURE (INDIA) LTD. [2022 (7) TMI 1093 - DELHI HIGH COURT] no disallowance is required to be made in the case of the assessee because it has not earned any tax-free income and allowed the appeal of the assessee by deleting the addition so made. Considering this, the disallowance made in this respect is deleted. Decided in favour of assessee.
Addition for advance outstanding during the year under consideration - assessee contended that the amount received were returned back and out of the three parties, accounts of two parties were squared off during the year itself - HELD THAT:- The presumption made by the Ld. AO that advances have been booked for purchase of material and production thereof is not justified when the money received has been returned back within a year for two parties out of the three parties and even for the 3rd party the details are on record which show that only Rs. 32,89,807/- is outstanding out of total of Rs. 81,63,076/-, balance has been received through banking channel. Considering all these facts, we delete the addition made by the Ld. AO and allow this ground raised by the assessee.
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2024 (5) TMI 637 - ITAT CHANDIGARH
Addition u/s 69B r.w.s.115BBE - during the course of survey action discrepancies were found on account of physical verification of stock vis-a-vis regular books of account - assessee surrendered an amount on account of excess stock over and above its normal business income in order to buy peace - HELD THAT:- We find that the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as undeclared business income.
Following the said decision of Shri Ram Narayan Birla [2016 (9) TMI 1354 - ITAT JAIPUR] has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being carried on by the assessee.
There is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income.
Thus the income so surrendered on account of investment in excess stock during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head “business income”. Thus question of application of section 115BBE doesn’t arise and normal tax rate shall apply - Decided in favour of assessee.
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2024 (5) TMI 636 - ITAT KOLKATA
Revision u/s 263 by CIT - disallowance of provision for nonperforming assets (NPA) in computing books profits u/s 115JB - HELD THAT:- We find that the Tribunal in the assessee’s own case for Assessment Year 2008-09 and 2011-12 [2020 (1) TMI 490 - ITAT KOLKATA] as held that provision for Non-performing assets cannot be said to be provision for diminution in value of assets to attract disallowance as per clause (i) of Explanation 1 to sec. 115JB(2) of the Act. In other words, by making a provision for NPA, there will be no reduction in NPA. Hence, clause (i) of Explanation to Sec. 115JB(2) does not apply since there is no reduction in value of asset. Accordingly, this ground of the assessee is allowed and Assessing Officer is directed to delete addition in computing book profit u/s 115JB - Thus Pr. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue based on this issue raised in Ground No. 4.
Additional depreciation on windmill capitalized in Assessment Year 2012-13 - As decided in M/s. Rittal India Pvt. Ltd [2016 (1) TMI 81 - KARNATAKA HIGH COURT] only 10 per cent can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. Similar is the view taken in the case of Century Enka Ltd. vs. DCIT [2015 (5) TMI 647 - ITAT KOLKATA]. Thus Pr. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue.
Disallowance of short term capital loss claimed in the return for transfer of rights in land and building and in - exclusion of capital profits from computation of books profits u/s 115JB - need for referring the matter on account of short term capital loss to the file of the A.O. to verify the applicability of Sec. 50C - It is now settled law that if, while making the assessment, the AO examines the accounts and other details, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the ld. C.I.T., while exercising his power under sec. 263 of the Act, is not permitted to substitute his own view about the computation of income in place of the income assessed by the A.O., unless the order of the A.O. is patently unsustainable in law”. The ld. D/R, could not controvert these submissions of assessee.
CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue based on this issue raised - Assessee appeal allowed.
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2024 (5) TMI 635 - ITAT DELHI
Income Taxable in India or not - Royalty/FTS income - revenue received by the Appellant from provision of background screening and investigation services - scope of India - USA DTAA - HELD THAT:- As decided in HIRERIGHT LTD. [2023 (9) TMI 478 - ITAT DELHI] online access to background screening results cannot be construed as providing access to database maintained by the assessee. The consideration received by the assessee under the terms of its agreement with its client is purely towards provision of background screening services and does not include any consideration for use or right to use any copyright or a literary, artistic or scientific work, patent, trademark, design, model, plan, secret formula, or process or information. Thus, the impugned receipts of the assessee from its clients in India cannot be regarded as 'Royalties’ under the provisions of Article 13 of the India-UK DTAA
What is delivered to the client is validation report assuring its clients about the authenticity of information contained in the report on the basis the information collated in the process of validation. Hence it cannot tantamount to imparting of commercial experience. The screening report which is issued does not involve any transfer of commercial experience to the client or getting the right to use the experience. There is also no transfer of any skill or knowledge of assessee to the customers in the issuance of screening reports, as the client is only given access to findings of the assessee in the form of a report which contains factual information but nowhere the assessee imparts its experience, skill of carrying out background screening services to its client. It is thus clear that there is no imparting of information concerning industrial, commercial or scientific experience by assessee when it issues the reports to its clients.
15. As regards the characterisation of impugned receipts as FTS, in our view, the services rendered by the assessee do not involve any technical skill/knowledge or consultancy or make available any technical knowledge, experience, skill, know-how or processes to the clients. Assessee's role is restricted to the verification of information provided by various candidates proposed to be hired by its clients. It involves seeking information from various sources that is accessible on specific requests and no advice/guidance on the credentials of the candidate is provided by the Assessee to its client. The role of the assessee is limited to validation of data provided by the candidate and provide relevant facts captured during the course of validation. The clients make an independent decision to hire the candidate. Hence, in our view the services should not be considered as FTS under Article 13(4) of the India-UK DTAA
Hence, in the absence of any material change on the facts of the issue and the legal preposition, we hold that no addition on account “Royalty” is warranted in this case.
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2024 (5) TMI 634 - ITAT MUMBAI
LTCG - exemption claimed u/s 54F - fractional ownership - AO denied the benefit for the reason that the assessee is owning 16.67% of six flats in another house property and therefore does not fulfill the condition u/s 54F - whether the joint ownership of 16.67% in 6 flats amounts to owning more than one residential house in assessee's case and that the assessee is the "owner" of the 6 flats jointly? - HELD THAT:- It is an admitted fact that there is no clear demarcation with regard to the Flats jointly owned, though as per the submissions of the assessee each flat is occupied by each of the joint owners. Therefore it cannot be said that one of the joint owners i.e. the assessee in this case is the absolute owner of the 6 flats and no individual person on his own can sell the entire property of all 6 flats.
At best the joint owner can sell his share of interest in the property but the property would still continue to be owned by the rest of the co-owners. Joint ownership is therefore different from absolute ownership and in the case of residential unit which is jointly owned none of the co-owners can claim that he is the owner of residential house. Accordingly where a house is jointly owned by two or more persons, none of them can be said to be the absolute owner of the house. So, the word "own" would not include a case where a residential house is partly owned by one person or partly owned by other person(s).
As decided in Seth Banarsi Dass Gupta case [1987 (4) TMI 7 - SUPREME COURT] wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act and as a consequence to this decision the Legislature had to amend the provisions of section 32 with effect from 1-4-1997 by using the expression "owned wholly or partly". Since no such words are expressively mentioned in section 54F, in our considered view the word "own" in section 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house partly owned by the assessee along with other persons.
Thus we hold that the assessee cannot be denied the benefit of exemption u/s. 54F on the ground that he is jointly owning 16.67% in 6 flats since joint ownership/part ownership cannot be treated as absolute ownership in the absence of any specific words to that effect in section 54F - Appeal filed by the assessee is allowed.
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2024 (5) TMI 633 - ITAT CHANDIGARH
TDS u/s 194C - Tripartite agreement - Payment of freight charges w/o deducting TDS on behalf of third party - payment made to the Truck Operator Union (through the assessee company) - Assessee in default u/s 201(1) r.w.s 201(1A) - As per AO information furnished by the Truck Operator Union reveals that the Truck Operator Union has done the business of plying, hiring or leasing goods carriage having 892 trucks of its members and has not shown freight receipts received from the assessee in its books of account as well as not offered the same to tax in its return of income - HELD THAT:- We are in agreement with the contention advanced by the ld AR that in the instant case, the understanding has been that the Truck Operator Union will provide the requisite trucks for transport of goods belonging to M/s Pepsico India Holding Pvt. Ltd. and the assessee company will facilitate and provide the necessary coordination and the logistical support as well as raise necessary invoices on behalf of the Truck Operator Union and collect freight payment and disburse the same subsequently to the Truck Operator Union.
We are of the view that the person responsible for making the freight payment and the responsibility to deduct TDS u/s 194C for freight payment made to the Truck Operator Union (through the assessee company) is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. The provisions of Section 194C are not attracted where the assessee subsequently raises the invoices on behalf of the Truck Operator Union and collects and disburse the freight payment received from M/s Pepsico India Holding Pvt. Ltd to the Truck Operator Union. Appeal of the Revenue is dismissed.
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2024 (5) TMI 632 - CESTAT HYDERABAD
Levy of Social Welfare Surcharge (SWS) where basic Customs duty (BCD) is Nil - Exemption Notification No. 24/2015-Cus - appellants submitted that since EDI system was not allowing them to clear the goods without the payment of SWS they had to pay 10% of Basic Customs Duty as SWS to get their goods cleared - Revenue submitted that BCD is not nil or exempted but is payable and is debited in the MEIS scrip - HELD THAT:- We find that this issue was considered in very detailed manner in the case of Emami Agro Tech Ltd., Vs CC, Customs [2024 (3) TMI 86 - CESTAT HYDERABAD] The conditions 8 and 9 of Notification No. 24/2015 being cited, are also considered in this decision.
Therefore, we find that the decisions in La Tim Metal & Industries Ltd. [2022 (11) TMI 1099 - BOMBAY HIGH COURT] are squarely applicable to the facts of the present case. So far as the issued raised by the AR is concerned, the same have been addressed in detail vide this Bench’s decision in the case of Emami Agro Tech Ltd [2024 (3) TMI 86 - CESTAT HYDERABAD] For the sake of brevity, they are not being repeated here.
Accordingly, we set aside the impugned order and allow the appeal with consequential benefits, including recredit/refund of SWS paid along with the interest as per law.
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2024 (5) TMI 631 - CESTAT AHMEDABAD
Classification of ‘PVC resin Impact Modifier ‘Kane ACE B 22’ - change of classification from 3902 to 3906 - Interpretation of sub-heading note - exemption from basic custom duty under notification 46/2011-Cus - HELD THAT:- From the record, it is apparent that for choosing the heading within the chapter, the chapter note 4 is relevant and for choosing sub-heading within heading, has to be done in terms of sub-heading notes. From the composition of material mentioned in para 2 above, it is seen that the Butadiene content is almost 50% whereas Methyl Methylacrylate content is 15-20% only. Thus in terms of Chapter note 4, the goods will fall under the heading relevant to Butadiene which is heading 3902. Once the classification is decided under 3902, the sub heading notes becomes relevant for classification within the heading 3902. In these circumstances, question of change of classification from 3902 to 3906 on the strength of sub-heading note does not arise.
Thus, we do not find any merit in the impugned order, the same is set aside and appeals are allowed.
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2024 (5) TMI 630 - CESTAT AHMEDABAD
Penalty u/s 114(i) on CHA - Export of "Carbon Black" - Obligation of CHA for the unauthorized loading of the container without LEO (Let Export Order) - breach of prohibition laid down u/s 34, 40 read with 51 of the Customs Act, 1962 - HELD THAT:- Considered, it is well settled including by the decision of Hon’ble Gujarat High Court in Anchor Logistics v/s. C.C.[2013 (6) TMI 589 - GUJARAT HIGH COURT] that invoking section 114 and its various clauses prior knowledge about the offending goods, as well as mensrea is required. Penalty, therefore cannot be imposed.
Appeal is therefore liable to be accepted. Same is allowed with consequential relief.
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2024 (5) TMI 629 - CESTAT HYDERABAD
Valuation of Export of Iron Ore fines - payment of customs duty under protest - contemporaneous export - HELD THAT:- We find that the transaction value has not been rejected nor its correctness doubted, as is evident from the orders of the court below. We further find that resorting to the contemporaneous prices is vague and further, there is no consideration as to the quantity, etc. We also find that the copy of such material with regard to contemporaneous export prices was not made available to the assessee, which has been relied upon for making the final assessment. In this view of the matter, we find that reliance on such contemporaneous export data is hit by the ruling of Hon’ble Supreme Court in the case of Dhakeswari Cotton Mills vs Commissioner of Income Tax [1954 (10) TMI 12 - SUPREME COURT].
Accordingly , we hold that such contemporaneous prices cannot be adopted for the purpose of finalisation of assessment. Accordingly , we set aside the impugned order and remand the matter to the Original Adjudicating Authority, who is directed to hear the appellant and pass a reasoned order in accordance with law.
Accordingly , we allow this appeal by way of remand.
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2024 (5) TMI 628 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Violation of Principle of Natural Justice - denial of opportunity of hearing - grounds which were taken by the Adjudicating Authority were neither pleaded by the application filed by the Torrent Power Limited and Vantage Point Asset Management Pte. Ltd. nor they were addressed at the time of hearing of the application as pleaded by the RP and CoC - correctness of approved Resolution Plan - HELD THAT:- There are substance in the submission of the Counsel for the Appellant that process adopted by the Adjudicating Authority in proceeding to allow application has violated the Principles of Natural Justice. No notice was issued in the application, no reply was called on the applications and while allowing the said application the entire plan which was approved has been remitted for reconsideration - the impugned order deserves to be set aside on the ground of violation of Principles of Natural Justice.
The Hon’ble Supreme Court further in Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Profession of ACIL Limited & Anr., [2023 (11) TMI 910 - SUPREME COURT] again reiterated that Adjudicating Authority has jurisdiction only under Section 31(2) of the Code, which gives power not to approve the Plan, only when the Resolution Plan does not meet the requirements of the Code.
The observation that in absence of any discrimination or perverse decision, it is not open to the Adjudicating Authority or this Appellate Tribunal to modify the Plan was in reference of the claim of Operational Creditor, which was under consideration in the said Appeal. The expression discrimination has to be understood in the context of the Operational Creditor, who as per the provisions of Section 30, sub-section (2) is entitled to an amount. In event the amount offered to the Operational Creditor is not in accordance with Section 30, sub-section (2), there may be a ground for interference.
The concept of discrimination of payment to various creditors have been further explained and elaborated in by the Hon’ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT], where it has been held that there can be different payment to various classes of creditors. Another expression used in paragraph-6 by this Tribunal is perversity.
In the facts of the present case, there can be no allegation against the Appellant about the concealment of any fact from the Adjudicating Authority. The Appellant was only a Resolution Applicant, who has submitted a Resolution Plan, which after evaluation was placed before the CoC by the RP.
The CoC being led by two leading Banks, i.e., Bank of Baroda and State Bank of India, having vote share of 92.77% and 7.23% respectively was well aware of the financial intricacies and there has to be intrinsic assumption that the Financial Creditors were well aware of all financials of each Resolution Plan.
The findings of the Adjudicating Authority regarding incomplete financial data has been challenged in the Appeals both by Sarda as well as RP and CoC - the impugned order passed by Adjudicating Authority dated 06.10.2023 deserves to be set aside, on the violation of principles of natural justice, consequent to which order, the matter needs to go back to the Adjudicating Authority for fresh consideration.
Appeal disposed off.
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2024 (5) TMI 627 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Initiation of CIRP - NCLAT admitted the application u/s 7 - existence of debt and default - date of default was 14.02.2020, when the account was declared NPA - application barred by Section 10A of IBC or not - HELD THAT:- The Application under Section 7 clearly mentions that date of default was 14.02.2020, when the account was declared NPA. The Financial Creditor was fully entitled to file Section 7 Application, treating the date of default as 14.02.2020 - It is further relevant to notice that date of NPA mentioned was not for the first time mentioned in Section 7 Application. The Financial Creditor has initiated proceedings under the SARFAESI Act against the Corporate Debtor before the Debts Recovery Tribunal, referring to Notice under Section 13, sub-section (2) of SARFAESI Act and the date of NPA was mentioned as 14.02.2020. The sheet-anchor submission of learned Counsel for the Appellant is on renewal letter dated 26.07.2019 issued by the Syndicate Bank (now Canara Bank).
Renewal of sanction for one year is the renewal of working capital limit, as noted in the letter. Renewal of working capital limit is not relatable to the default committed by the Corporate Debtor in fulfilling the obligations under the Sanctioned Facilities. When on 14.02.2020, accounts of the Corporate Debtor were declared as NPA, it clearly means that default was committed by the Corporate Debtor in carrying out his financial obligations. Renewal of sanction has nothing to do with the date of default committed by the Corporate Debtor in fulfilling its financial obligations. Thus, the very basis of the submission of learned Counsel for the Appellant that since renewal of working capital limit was renewed for one year upto 25.07.2020, hence, the date of default is 25.07.2020, has no basis and is to be rejected.
The application under Section 7 filed by Canara Bank was not barred by Section 10A as contended by the Appellant. The Adjudicating Authority having found the debt and default, has rightly proceeded to admit Section 7 Application. In paragraph 16 of the order, the Adjudicating Authority has noted all relevant factors to be considered in Section 7 Application and has proceeded to answer the said issues in favour of the Financial Creditor.
The are no error in the impugned order passed by the Adjudicating Authority admitting Section 7 Application. There is no merit in the Appeal - appeal dismissed.
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2024 (5) TMI 626 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Rejection of prayer of Operational Creditor to initiate the CIRP against the Corporate Debtor/ Respondent - Respondent did not respond to the demand notice under Section 8 of the IBC - Operational Creditors or not - breach of terms and conditions of the contract leading to pre-existing dispute.
Whether the appellant is an Operational Creditor as per IBC? - HELD THAT:- In the present case, the appellant had placed an advance with the respondent for supply of goods, it does not matter who is the supplier or the receiver of goods and services as laid down in the M/s Consolidated Construction Consortium Ltd. [2022 (2) TMI 254 - SUPREME COURT] - The present case is squarely covered by the said judgment, as there is a clear nexus between payment made and supply of goods and services. Accordingly, the appellant is to be treated as Operational Creditor in the instant case.
Whether there has been a breach of terms and conditions of the contract leading to pre-existing dispute? - HELD THAT:- It is clear from all the documents on record that the delivery was to be made Ex-plant Rajkot and not at Hong Kong as submitted by the appellant before the Adjudicating Authority. The appellant had tried to mislead both the forums regarding the same - All the events reflect clearly that there was a pre-existing contractual dispute between both the parties, which the appellant is trying to settle through IBC mechanism.
In this regard reliance placed on Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. [2017 (9) TMI 1270 - SUPREME COURT], where the Hon’ble Supreme Court explained the process for an operational creditor initiating CIRP in respect of a corporate debtor. The Court held 'Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be.'
In the instant case, there was a pre-existing dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods and therefore the application for CIRP against Corporate Debtor cannot be allowed. The matter has been correctly decided by the Adjudicating Authority in this regard.
Appeal dismissed.
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2024 (5) TMI 625 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Initiation of CIRP - Rejection of Section 9 application - cyber fraud committed against the Respondent - pre-existing disputes or not - HELD THAT:- Since the fraud was perpetrated by unknown third parties, dragging the Operational Creditor into the dispute was a simple and deliberate ploy on the part of the Corporate Debtor to evade payment of liabilities. The pre-existing dispute was a fictional dispute and more of an after-thought. Moreover, it has been contended that even after having become a victim of cyber fraud, the fact that the Respondent had willing paid further sums of money to the Appellant in their Nordea Bank account shows that there was no dispute between the two parties with respect to the operational debt being due and payable.
When the Respondent in their police complaint had expressly admitted that the fraud was committed by an unknown third party and not by the Appellant and did not make the Appellant an accused party in their police complaint, the cyber fraud and the related police complaint cannot constitute evidence of a pre-existing dispute inter se between the Operational Creditor and Corporate Debtor - Since the matter is already under police investigations and there is no finality in the matter, attributing any culpability on the employees of the Operational Creditor based on surmise and conjecture of the Corporate Debtor would be pre-mature and highly presumptuous given the summary jurisdiction of the Adjudicating Authority and this Appellate Tribunal. It is not required to examine the above contention of the Respondent that the perpetrators of the cyber fraud were assisted by employees of the Operational Creditor.
There is force in the contention of the Appellant that since the Corporate Debtor and the Operational Creditor were in a long-standing business relationship, had the Corporate Debtor shown professional diligence and due rigour, they would have been able to easily detect the suspicious emails and averted the ensuing cyber fraud. This clearly shows the negligence and carelessness on the part of the Respondent which led to the cyber fraud - the Adjudicating Authority wrongly dismissed the Section 9 application, in complete disregard of evidence on record, by treating the cyber-fraud as a preexisting dispute between the parties while being singularly oblivious of the role of unknown third-party perpetrators which cast serious doubts on the plausibility of dispute inter se between the Appellant and the Respondent.
The very fact that much after the issue of the Demand Notice, an amount of Euro 49,664/- has been claimed to have been paid by the Corporate Debtor to the Appellant as stated in their Reply Affidavit as placed at pages 26-27 shows that they have acknowledged that outstanding operational debt qua the Appellant was payable by them. Furthermore, we find that in the said Reply affidavit of the Respondent, the Respondent has accepted and admitted that it owed the Appellant a sum of Euro 62,222/-. This acknowledgement in itself is sufficient to satisfy existence of undisputed operational debt exceeding the threshold level of Rs.1 lakh.
The Adjudicating Authority has erroneously rejected the application under Section 9 of IBC - To meet the ends of justice, the Corporate Debtor is given the liberty to release payment of outstanding operational debt as per terms mutually agreed between the two parties - the payment shall be released by the Corporate Debtor by way of Demand Draft in favour of the Operational Creditor within 30 days from the date of uploading of this order failing which the Corporate Debtor would come under the rigours of CIRP on the expiry of said 30 days period.
Appeal alowed.
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2024 (5) TMI 624 - CESTAT KOLKATA
Non-payment of service tax - C&F agent service - appellant had received commission from their principals on account of sale of their products as a 'Commission agent' - Commission of 2% received by the appellant on the goods sold on High Sea Sales basis - Invocation of Extended period of Limitation - HELD THAT:- The appellant has considered this service as a taxable service under the category of ‘business auxiliary service’ and paid Service Tax for the period 2008-09. No objection has been raised by the department when they paid service tax for the said service under the category of 'Business Auxiliary Service'. Having accepted service tax under the category of 'Business Auxiliary Service', the department cannot raise the demand for the period 2008 to 2011-12, by invoking extended period of limitation.
In the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [2006 (4) TMI 127 - SUPREME COURT], the Hon'ble Apex Court has held that extended period of limitation cannot be invoked when all the facts are already known to the Department - the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable.
The Show Cause Notice in this case has been issued on 16.04.2013, for the period from March 2008 to 2011-12. Thus, the demand for the period up to September 2011 is barred by limitation. The appellant submits that they have been paying service tax for the period from October 2011 to March 2012, under the category of 'Business Auxiliary Service'. If according to the Department the said service is liable to service tax under the category of 'Clearing and Forwarding Agency Service', then the service tax paid by them under the category of 'Business Auxiliary Service' may be appropriated/adjusted against the demand of service tax under the category of 'Clearing and Forwarding Agency Service' for the same period - it is found that the rate of service tax under both the categories are the same. Accordingly, the service tax paid by the appellant under 'Business Auxiliary Service' for the period October 2011 to March 2012 may be appropriated against the liability of service tax on the appellant for the same period under the category of 'Clearing and Forwarding Agency Service’.
Commission of 2% received by the appellant on the goods sold on High Sea Sales basis - HELD THAT:- The appellant purchases the goods from the overseas suppliers on their own account and thereafter, they sell these goods to the Indian customers by adding a mark-up. The commission/mark-up received by them has been included by the importers in the assessable value for the purpose of payment of Customs duty. Since the commission has already been included for the purpose of demanding customs duty, Service Tax cannot be demanded on the amount under the category of 'Business Auxiliary Service'.
The demand confirmed in the impugned order on the commission received on high sea sales of the goods is not sustainable and accordingly, the same is set aside.
Since the demand of service tax has not sustained in both the cases, the question of demanding interest and imposing penalty on the appellant does not arise.
Appeal allowed.
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2024 (5) TMI 623 - CESTAT AHMEDABAD
Refund claim - applicability of principle of unjust enrichment - CA has certified that amount of refund claim is not passed on to any third party, and that the said amount shown as receivable - refund on the ground of amalgamation of the appellant company with transferor company M/s. Intas Pharmaceuticals (a partnership firm) - service to self or not - HELD THAT:- The learned counsel is not completely agreed upon for the reason that as per the provision of Section 11 B, the incidence of the refund amount should not be passed on to any other person, therefore, even though the service is provided to self but if the incidence of service tax passed on in any form the same will be hit by unjust enrichment. However, in the present case it is not only the service provided to self but as per the chartered accountant certificate it was certified that the incidence of service tax has not been passed on and the same was shownreceivable in the books of account. However, on the query from the bench, the learned counsel was unable to show the books of account - the claim of the appellant that the amount is shown as receivable can be conclusively established only on the verification of books of account. Therefore, the appellant to produce the books of account before the adjudicating authority, the adjudicating authority on the basis of amount being shown as receivable must sanction the refund.
The contention of the learned Commissioner (Appeals) that the amount of service tax might have been included in the cost of goods of Dehradun Unit and by that way the same might have been passed on, cannot be agreed upon. It is clear that once the payment is shown as receivable, it is impossible to book the same amount as expenditure. It will not be acceptable even under the Income Tax Act, therefore, only on the basis of the fact that the amount of service tax shown as receivable it is sufficient proof that the incidence of service tax has not been passed on and the refund can be concluded on this basis.
The impugned order is set aside - appeal allowed by way of remand to the Adjudicating Authority to decide a fresh after verification of books of accounts and the entry of receivable shown therein.
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2024 (5) TMI 622 - CESTAT MUMBAI
Invocation of Extended period of Limitation - suppression of facts or not - short payment of service tax along with interest and penalties - difference between the service tax payable and the service tax paid in the ST-3 Returns for the period 2003-04 to 2006-07 leading to a conclusion of short payment of service tax by the appellants - disputed period of the transactions is from 2003-04 to 2006-07 - HELD THAT:- The appellants in this case is registered with the Department, paying service tax and filing periodically ST-3 returns and other declarations. It is also a fact on record that all these records are available to the Department and more so to the Audit team of the department who verified the records. In such a situation and that there being no positive act on the part of the appellants to suppress any fact or information from the department, and that there being no evidence for such allegation in the SCN, it is not proper and legal to invoke extended period. Thus, the SCN dated 20.10.2008 issued to the appellants is time barred.
The issue with respect to invocation of extended period in respect of fraud, collusion, willful mis-statement or suppression of facts under tax demands is no more open to dispute, as the Hon’ble Supreme Court in the case of Uniworth Textiles [2013 (1) TMI 616 - SUPREME COURT] had held that the onus is on the Revenue to prove the presence of such specific grounds - In the absence of any specific grounds invoked for suppression of facts or willful mis-statement on the part of the appellants, the impugned order confirming the adjudged demands for extended period is patently illegal and therefore not sustainable, on the grounds of limitation.
The impugned order relying on the judgement of the Hon’ble Supreme Court in MADRAS PETRO-CHEM. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, MADRAS [1999 (3) TMI 81 - SUPREME COURT] for invocation of extended period is not relevant in the present set of facts, inasmuch as the elements of obligation on the part of manufacturer under self-removal procedure to maintain the records of production, gate passes, clearance documents, stock registers etc., are not prescribed in the case of appellants - the ratio of the above case is not applicable to the present case, as the facts of the present case are entirely different.
It transpires that the effective date of increase in service tax at the rate of 8%, 10% and 12% is from 14.05.2003, 10.09.2004 and 18.04.2006, respectively with applicable cess. However, from the Annexure A and B to the SCN dated 20.10.2008, it is seen that the entire payments received during the whole month i.e., May, 2003 and April, 2006 have been applied with the service tax at the rate of 8% and 12.24%, without giving due recognition to the effective rate of service tax applicable prior to 14.05.2003 and after that day for the rest of the days in the month of May, 2003; and similarly the rate of service tax applicable prior to 18.04.2006 and after that day for the rest of the days in the month of April, 2006. Thus, it appears that the calculation of the short payment of service tax is improper on this count.
On perusal of the sample Certificate cum Policy Schedule produced by the appellants it is seen the period of insurance is specifically mentioned along with the date of receipt of premium thereof, with breakup details of the amount of premium and the service tax applicable thereon. Accordingly, the appellants have paid applicable service tax from the date of assumption of risk of all such contracts entered into by them, in terms of the legal provisions of the Insurance Act, 1938. There is no correlation made out either in the audit records/report or in the SCN, to state that the actual amounts received by the appellants in a particular month were of entire premium amount on which the agreements were entered into in that particular month or risks assumed in that particular month, and respective service tax was not paid - the demand for short payment of service tax, without firstly determining the grounds on which such short payment was liable to be recovered, were made out without any legal basis in the impugned order and therefore, on this ground itself the impugned order is not sustainable.
Service tax liability in respect of general insurance premium - HELD THAT:- The issue of service tax liability in respect of general insurance premium has already been dealt in elaborately by the Tribunal in the case of Bajaj Allianz General Insurance Co. Ltd. [2008 (10) TMI 72 - CESTAT MUMBAI] holding that the service tax liability is calculated on the basis of prevalent rate of service tax at the relevant period on the amount of premium received and that the enhanced rate of service tax is not applicable to the policies, which were issued prior to the enhancement of the rate.
As regards the payment of service tax belatedly after the due date in respect of five months, the appellants have paid the entire amount of Rs.31,22,455/- vide TR–challans No. 00359, No. 00364 both dated 11.06.2005 and No. 5758 dated 24.04.2007. Since, the appellants have accepted the liability for payment of interest for delay in payment of service tax and inasmuch as the entire amount was paid by them, the confirmation of the recovery of interest for delayed payment under Section 75 ibid in the impugned order is proper and accordingly, we uphold the same.
The impugned order dated 31.08.2020 with regard to confirmation of adjudged service tax demands along with interest and penalties are not sustainable.
The appeal is disposed off.
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2024 (5) TMI 621 - CESTAT KOLKATA
Levy of service tax on mining royalty - mining royalty paid by the appellant for mining to Government of Odisha in the month of April 2016 for the quantity of Ore extracted in the month of March 2016 - N/N. 22/2016-ST dated 13.04.2016 read with CBEC Circular No.192/02/2016 dated 13.06.2016 - HELD THAT:- The said issue has been examined by this Tribunal in the case of S.R. Traders [2023 (5) TMI 766 - CESTAT NEW DELHI], wherein this Tribunal has observed 'the appellant received services in relation to assignment of right to use natural resources from the State Government by virtue of the agreement dated 2-1-2016 and, therefore, the provisions of service tax, as were in force prior to 1-4-2016, would be applicable. Grant of natural resources was not excluded from the scope of negative list prior to 1-4-2016 and so no tax implication can be fastened on the appellant for such period.' - The said order has been affirmed by the Hon’ble Apex Court.
The appellant are not liable to pay service tax on the royalty paid for mining of Bauxite Ore in the month of March 2016, although the payment of royalty was made in the month of April 2016 - there are no merits in the impugned order and the same is set aside - appeal allowed.
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2024 (5) TMI 620 - CESTAT HYDERABAD
Short payment of service tax - exclusion of Ocean Freight, CWC charges/CONCOR charges and CFS charges from the gross amount charged for the purpose of discharging service tax liability - pure agent services or not - suppression of facts or not - penalties - HELD THAT:- The appellants have got both receipts in the freight account and also incurred expenditure under ocean freight as per their financial accounts. Claim of the appellant that they are trading in container space is found to be correct. Accordingly, on this ground alone demand of Rs. 60,56,570/- plus Rs. 21,12,773/- is set aside.
It is further found that the demand of Rs. 20,32,859/- is vague in its nature as no head of service has been identified by the Revenue under which the tax is short paid. Revenue is required to identify the head of service under which tax to be demanded. As the period under dispute is prior to 01.07.2012, this demand is set aside, being vague and uncertain.
There is no case of suppression, fraud or wilful mis-statement. Accordingly, penalties imposed under Section 77 and 78 are set aside.
The impugned order is set aside - Appeal allowed.
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2024 (5) TMI 619 - CESTAT HYDERABAD
Non-payment of service tax - mobilisation advance received - reconciliation of values shown in books of accounts with that declared in ST3 returns (this includes supplies made to SEZ) - deferred and unbilled revenue (under erection, commissioning or installation service) - additional revenue (under works contract service) - short payment of service tax on GTA (as service recipient).
Non-payment of service tax on mobilisation advance received - HELD THAT:- The Learned Commissioner have categorically recorded the finding that some of the invoices for mobilisation advance are towards material supplied only. Further recorded that from the sample invoices produced, evidently the assessee have deposited the service tax on the service portion. Further the Learned Commissioner took notice that the demand was only on the difference in the income received under the mobilisation advance and the ST3 returns and no investigation was made whether the said amounts pertains to material or services. Further took notice that the assessee have been able to segregated/identify the material portion and the service portion with respect to the receipts as mobilisation advance, and admittedly service tax is already discharged on the service portion, he was pleased to drop the demand - there are no error in the findings of the Learned Commissioner on this issue and accordingly this ground is rejected.
Short payment of service tax on the alleged difference between trial balance and ST3 returns - HELD THAT:- In the impugned order the Learned Commissioner observed that the assessee have already furnished the details of services rendered to SEZs developer/units along with the purchase order and the relevant documents and that the same have been perused. Further observed that the assessee produced the relevant forms and there is no dispute regarding the provision of service to SEZs units/developer. Further that denial of benefit of exemption by relying upon procedural requirement of notification would be against the provisions laid down in the SEZs act. Exemption cannot be denied on the ground that form A–1 and A–2 have not been produced - reliance is placed on the ruling of the Hon’ble High Court of Andhra Pradesh and Telangana in GMR AEROSPACE ENGINEERING LIMITED AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [2019 (8) TMI 748 - TELANGANA AND ANDHRA PRADESH HIGH COURT] wherein it has been held that denial of benefit of exemption by relying upon procedural requirement of notification would be against the provisions laid down in the SEZs Act.
Non-payment of GTA service tax as the recipient of service - HELD THAT:- The learned Commissioner found no error in accounts maintained by the appellant and was pleased to drop the demand conforming a small amount of Rs.63,161/- for the year 2009–10 and Rs. 42,538/- of the year 2010–11 respectively - the Learned Commissioner have after examining the accounts and the vouchers in details have dropped the substantial part of the proposed demand. Further such finding of fact is not disputed in the grounds of appeal. Accordingly, this ground also against the Revenue is also rejected.
Demand of service tax on deferred and unbilled revenue under ECIS and works contract service - HELD THAT:- The Learned Commissioner examined the issue in detail and observed that the respondent assessee is maintaining their books under SAP and as per AS–7 model/standard for construction activity-WCS as prescribed by ICAI. As per the accounting standard, respondent on the basis of percentage of work completed as per the agreement with the customer, have calculated the additional revenue. Thus basing on the volume of work done, as per terms of each individual contract, the assessee raised invoices and discharged service tax on the same. The difference in the bills raised to the volume of work done, was calculated as per the norms prescribed under the accounting standard prescribed. Learned Commissioner have categorically observed that the deferred revenue is recognised in the books of account as an accounting adjustment but there is no payment received against the same nor any invoice was raised on the customer. Hence no service tax was liable to be paid on such book adjustment - thus, no service tax was liable to be paid on such book adjustment - there is no error or impropriety in the findings recorded by the Learned Commissioner. Accordingly this ground raised by the Revenue is also rejected.
There are no merits in this appeal by Revenue - appeal dismissed.
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