Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 12, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Violation of principles of natural justice - ex-parte order - the first appellate authority was not justified in rejecting the application for recalling the ex-parte order, and thus, the order passed on the application rejecting the recall of the ex-parte order is hereby set aside - matter restored back - HC
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Allegation of suppression of sales - failure to maintain records - Non-compliance with three statutes - the CGST, TGST, IGST Acts - All the three points on which the order of Original Authority is predicated do not call for interference even if the grounds urged/raised by the writ petitioner before the second respondent-Appellate Authority are considered on merits - Petition dismissed. - HC
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Classification of goods - rate of GST - educational institution or not - Question was asked about CGST Act - AAR answered the same as per CGST and IGST act - The Ruling passed by the Advance Ruling Authority, on applicability of a Notification without discussing the jurisdiction of being the case, The Ruling passed by the Advance Ruling Authority, on applicability of a Notification without discussing the jurisdiction of the said Notification, appears to be stretched beyond the legal boundary. - AAAR
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Supply or not - pure services - The service rendered by the APMSIDC is in relation to a function entrusted to a Panchayat under Article 243G of the Constitution of India. (the appellant is providing Pure Service (supply / distribution of drugs, consumables and equipment for Hospitals) to State Government by way of an activity in relation to a function entrusted to a Panchayat - Benefit of exemption allowed - AAAR
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Classification of supply - administering of COVID-19 vaccination by hospitals - The outlet of supply or the supplier cannot decide whether a transaction can be classified as supply or not. There is transfer of medicine to the recipient when he approaches the Covid Vaccination Centre for vaccination, the recipient of vaccine makes a conscious choice of vaccine, and also pays a price for it as per the guidelines of the government - exemption is not allowed in the instant case against the claim of the applicant. - Taxable @5% of GST - AAAR
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Exemption from GST - amount received for leasing residential hostel rooms - If there is a conditional exemption in GST based on end-use, the end-use has to be determined with respect to facts and for the recipient of the services only from the supplier directly and it is not for the department to see how the services are finally put to use by the recipient in turn and so on. In the instant case there is no evidence to show that either the building was a residential dwelling or it is going to be put to use as residence for himself by the lessee - AAAR
Income Tax
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Reopening of assessment u/s 147 - change of opinion - The Assessing Officer simply has accorded a fresh consideration and come to a conclusion that the assessee ought to have claimed benefit of deduction under section 35ABB which would have resulted in reducing the allowance under section 32 - In the absence of any tangible material, the present case is nothing but a case of change of opinion and thus does not satisfy the jurisdictional foundation under section 147 of the Act. - HC
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Reopening of assessment u/s 147 - Jurisdiction to issue sanction - appropriate authority to grant approval for issuance of notice u/s. 148 - the approval for issuance of notice u/s. 148 ought not have been obtained from the Additional Commissioner of Income Tax but from the authority specifically mentioned u/s. 151(ii) of the Act - Notice quashed - HC
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Reopening of assessment u/s 147 - notice passed u/s.148 was not signed by the AO digitally or manually - not a curable defect u/s 292B - - The notice u/s.148 having no signature affixed on it, digitally or manually, the same is invalid and would not vest the Assessing Officer with any further jurisdiction to proceed to reassess the income of the petitioner. - HC
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Credit of TDS - income earned by Late assessee for services rendered by him to the two companies before his death - in the return of income filed by the legal representative of the deceased for AY 2013-14, the said commission income has not been declared - in the interest of justice, it would be fair and just if we direct the Ld. AO to re-open the assessment of the deceased (Individual) for AY 2013-14 to bring to tax the impugned commission income and allow the credit of TDS. - AT
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Provision for bad and doubtful debts u/s 36(1)(viia) against the advances of rural branches - The circular mentions that the provisions of new clause (viia) of section 36(1), relating to the deduction on account of provisions for bad and doubtful debts, is distinct and independent of the provisions of section 36(l)(vii) relating to allowance of deduction of the bad debts. Scheduled commercial banks would continue to get the benefit of the write off of the irrecoverable debts under section 36(1)(vii) in addition to the benefit of deduction of the provision for bad and doubtful debts under section 36(1)(viia) - AT
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Addition of interest attributable on the diversion of loan fund - Once own fund of the assessee exceeds the amount of interest free loans and advances, then a presumption can be drawn that the interest free loans and advances has been given by the assessee out of its own interest free fund available with it. Thus, in such a situation the disallowance of interest u/s 36(1)(iii) is not warranted. - AT
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Reopening of assessment u/s 147 - Reason to believe - the AO had disallowed some of the expenses which had been reflected in the break-up under the head “details of advertisement and sales promotion expenses” while passing the final order of assessment, which reflects that the AO had applied its mind to the appellant’s claim while passing the order under section 143(3) - reasons do not disclose as to what material or fact was not disclosed by the assessee. - HC
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Addition u/s 68 - unexplained cash credit - as during the course of search, certain documents were found - the presumption under section 292C of the Act is rebuttable presumption and the document has to be considered considering the totality of the facts of the case. The deeming provision cannot be applied mechanically ignoring the facts of the case and the surrounding circumstances. - AT
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Levy of penalty u/s. 271(1)(b) - Non compliance requirement in respect of special audit u/s. 142(2A) - Assessment proceedings furnished by the Ld. Counsel, it is evidently demonstrated that there exists a reasonable cause within the meaning of section 273B of the Act which prevented the assessee in meeting the compliance requirement in respect of special audit u/s. 142(2A) of the Act. - AT
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Exemption u/s 11 - Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. - HC
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Approval u/s 80G - recognition as a “Charitable Institution” or “Religious Institution” - The Vedic Scholars were identified and felicitated irrespective of their caste, creed or religion. The Trust has given financial assistance to various people, irrespective of caste, creed or religion, involved in Indian Heritage Education. During Covid, many were in financial difficulty and the Trust provided financial assistance and distributed food kit, clothes, medicines for the needy Vedic scholars irrespective of their caste, religion or gender. All the expenses were met out of voluntary contributions or donations. - Thus, the activities carried on by the assessee-Trust are CHARITABLE in the nature - AT
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Addition u/s 68 - the deposit in HSBC London - the assessee has not been able to provide any cogent evidence for the source of deposits. The submissions of the assessee have been without any reliable material. The explanation given by the assessee is only self-serving and has correctly been rejected by the lower authorities. - AT
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TP adjustment on account of payment of overseas support fee - The assessee has its head office outside India and the decision, on the basis of which the assessee gets its business viz. the decision to buy and sell securities on the Indian market are made by the head office situated outside India. The overseas sales and trading support fees are fees paid directly for such services which generate revenues for the assessee. - AO/TPO directed to delete the transfer pricing adjustment on account of the overseas support service fee. - AT
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Income deemed to accrue or arise in India - As undisputed factual position that ESPN India has been remunerated at arm’s length and there are no adjustments suggested by the TPO in any of the assessment years under dispute. That being the case, no further attribution of profit can be made to the PE. - the distribution revenue received by the assessee is not taxable in India. - AT
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Unexplained investment - The basis of addition made in the present case is the source of investment remaining unexplained. Now, the assessee having explained the source of investment - DR cannot make out a new case for confirming the addition by stating that though the source of investment stands explained by loan taken by the assessee from his ex-employer, but since this loan was not repaid by the assessee, therefore, it partakes the nature of income by way of salary. This definitely was not the case of the AO- AT
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TP Adjustment - Working capital adjustment for computing the margin of the comparables - in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore, the working capital adjustment as claimed by the Assessee should be allowed. We hold and direct accordingly. - AT
Customs
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Refund of SAD - refund claims filed without requisite documents - Undisputedly the necessary documents which were required for filing this refund application were under seizure, and the refund application would not have been acknowledged by the revenue authorities without these documents. The condition which is stated to be the reason for rejection of the refund claims is something which could not have been complied with. - Claim allowed - AT
IBC
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Jurisdiction of NCLT to Remove Resolution Professional - the Appellant was proceeding contrary to the statutory provisions as contained in the IBC and also delaying the smooth conclusion of CIRP - there is no defect in the impugned order warranting interference by this Tribunal. On the contrary the conduct of the appellant/RP which was observed by the Adjudicating Authority and reflected so in the impugned order is sufficient enough to direct IBBI to conduct an inquiry regarding the role played by the RP in this matter. - AT
Service Tax
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Levy of service tax - providing business support service to doctors by providing facilities and administrative support to them - the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits and, therefore, no service was provided by the hospital to the doctors. - AT
Central Excise
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Clandestine manufacture and removal - Special Boiling Point Spirit - The issue in the case on hand relates to classification of a product which requires to be done in a scientific manner and such classification cannot be determined and concluded based on statements given by either the Director of the company or their employees - HC
VAT
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Packing materials of the glass bottles - the appellant was manufacturing / producing “Spun Line Crown Cork” used for sealing the glass bottles. With the use of modern technologies, now the appellant is manufacturing “Double Lip Dry Blend Crowns”, which is also used for sealing the glass bottles. The earlier product being manufactured by the appellant was used for sealing glass bottles and subsequently the additional product produced with the use of modern technology is also being used for the same purpose namely, “sealing glass bottles”. Therefore, the same cannot be said to be manufacturing of goods different from being manufactured before such diversification. - SC
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Disallowance of branch transfer - Interstate sale - CST - Mere location of the dealer in Bangalore, Karnataka and appellants at Bangalore, ipso facto, would not justify a conclusion that there was a stock transfer first and thereafter a sale to the said dealer. Even then, a first sale would have taken place from a depot to the dealer in Karnataka, thereafter, a second sale from the dealer to its customer. - HC
Case Laws:
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GST
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2023 (1) TMI 441
Seeking release of seized goods alongwith conveyance - absence of E-way bill - HELD THAT:- This Court finds that the GST Council had already dispensed with the mandatory provision of carrying e-way bill till 31.03.2018. The matter was settled by Division Bench of this Court in case of M/S Godrej Boyce Manufacturing Co. Ltd. [ 2018 (9) TMI 1261 - ALLAHABAD HIGH COURT ] extending the benefit to all those assessee who during the relevant period had carried the goods without the eway bill and matter is no more res integra . A coordinate Bench of this Court in case of HBL Power Systems Ltd. [ 2022 (8) TMI 49 - ALLAHABAD HIGH COURT ] has also taken the similar view. Petition allowed.
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2023 (1) TMI 440
Violation of principles of natural justice - rejection of application of the petitioner for setting aside the ex-parte order - HELD THAT:- It is an accepted fact to both the parties that by order dated 24.02.2022, first appeal filed by petitioner was rejected ex-parte . The Division Bench of this Court on two earlier occasions held that where there is no provision under the Act for filing recall application, the Court exercising power under Article 226 of Constitution could intervene in the matter and direct the authorities to consider the recall application and pass appropriate order. This Court finds that the first appellate authority was not justified in rejecting the application for recalling the ex-parte order, and thus, the order dated 22.09.2022 passed on the application rejecting the recall of the ex-parte order is hereby set aside - The matter is remitted back to the first appellate authority providing an opportunity to the petitioner to appear before the first appellate authority on 25.01.2023 - Petition allowed by way of remand.
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2023 (1) TMI 439
Constitutional Validity of Rule 117 of Jharkhand Goods and Services Tax Rules, 2017 - time limitation for claiming of Input Tax Credit (ITC) in Form GST TRAN-1 - ultra vires to Section 140 of the Jharkhand Goods and Services Tax Act, 2017 or not - whether the said Section authorise the rule-making authority to prescribe a time limit within which such FORM GST TRAN-1 is to be filed in order to claim such input tax credit? - claiming of transitional credit - mandatory provision or not. The petitioner submits that the writ petition has become infructuous as the petitioner has already filed revised TRAN-I during window period granted by the Hon ble Supreme Court in the case of UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] . HELD THAT:- Having regard to the fact that the grievance of the petitioner has already been redressed in view of the judgment rendered by the Apex Court in the Filco Trade Centre Pvt. Ltd. and another, writ petition is disposed of.
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2023 (1) TMI 438
Default of tax or interest or both - Whether the writ petitioner having sent a reply the same should have culminated in some proceedings under Section 73 or Section 74 of TN-G ST Act? - HELD THAT:- Sub-section (12) of Section 75 of TN-G ST Act opens with a non obstante expression and is notwithstanding Section 73 and Section 74 of TN-G ST Act. Therefore, as regards the interest component qua Section 50(1) of TN-G ST Act, the argument that the notice dated 24.03.2022 should have culminated in proceedings under Sections 73 or 74 is a non-starter. This by itself draws the curtains on the captioned writ petition. This Court deems it appropriate to provide one window to the writ petitioner and that is to say that the first respondent shall consider the reply of the writ petitioner dated 25.04.2022 (scanned and reproduced supra) and take a call on the same as expeditiously as the official business of the first respondent would permit and in any event, within three weeks from today i.e., on or before 24.01.2023 - Petition disposed off.
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2023 (1) TMI 437
Allegation of suppression of sales - failure to maintain records - Non-compliance with three statutes - the CGST, TGST, IGST Acts - non-maintenance of particulars of name/complete address of suppliers qua goods and services chargeable to tax - non-maintenance of particulars of name/complete address qua entities to whom goods and services were supplied - monthly production accounts showing quantitative details of raw materials used in the manufacture and quantitative details of goods manufactured including the waste and by-products not maintained. HELD THAT:- A careful perusal of Section 74 makes it clear that 'suppression of facts to evade tax' is the expression used. As the writ petitioner has time till 31.03.2021 to reconcile, it may not really qualify as suppression but that does not take the writ petitioner away from the rigour of penalty as Section 73 is available. Section 73 talks about tax that has not been paid or short paid and it excludes 'suppression of facts to evade tax' - In the instant case, penalty as regards purported suppression is only Rs.3890/- and if Section 73(9) is applied, it would become Rs.10,000/-. Writ petitioner would be worse off by filing the writ petition. Therefore, this writ Court deems it appropriate to leave it at that and say that interference is refused but it is made clear that it cannot be put against the writ petitioner that there is 'suppression of facts to evade tax' within the meaning of Section 74(1) and it is only a case of tax not being paid within the meaning of Section 73(1). In the considered view of this Court, this by no means fits into Section 126 in the light of Explanation thereat. Explanation thereat makes it clear that the tax liability or the amount of tax involved should be less than Rs.5,000/- or it should be a omission or mistake in documentation which is easily rectifiable in the same as an error apparent on the face of record. Subsection (6) makes it clear that Section 126 will not be attracted, when the penalty is expressed as a fixed percentage - In the case on hand, Section 122(1)(iii) read with Section 122(1) makes it clear that it is expressed in both units namely a fixed sum as well as a fixed percentage. On this ground also Section 126 does not come to the aid of the writ petitioner. To be noted, interest under 50(1) is not subject matter of disputation or contestation. All the three points on which the order of Original Authority is predicated do not call for interference even if the grounds urged/raised by the writ petitioner before the second respondent-Appellate Authority are considered on merits - Petition dismissed.
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2023 (1) TMI 436
Cancellation of registration of petitioner - appeal dismissed on the ground of limitation - HELD THAT:- A careful perusal of the impugned order brings to light that the date of communication to the writ petitioner qua the cancellation order is 08.03.2022. Three months therefrom elapsed on 08.06.2022 i.e., the prescribed period qua Section 107 of CG ST Act elapsed on 08.06.2022. Condonable period of one month thereafter elapsed on 08.07.2022. The appeal was preferred by the writ petitioner only on 08.09.2022. Law is well settled that when there is a cap, Section 5 of the Limitation Act cannot be applied and going by Simplex Infrastructure Ltd. Vs. Union of India [ 2018 (12) TMI 388 - SUPREME COURT ], when there is a cap there cannot be any condonation beyond the cap or belated period. As the appellate authority has dismissed the appeal on the ground of limitation, this Court finds no ground to interfere with the impugned order however it is made clear that this writ Court is not expressing any view or opinion on the merits of the matter and it is also made clear that it is open to the writ petitioner to apply afresh for registration and if the writ petitioner chooses to apply afresh for registration, the application shall be processed on its own merits and in accordance with law. Appeal dismissed.
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2023 (1) TMI 435
Classification of goods - rate of GST - Jursdiction of AAR - Question was asked about CGST Act - AAR answered the same as per CGST and IGST act - educational institution or not - printing of Pre examination items like question papers, OMR sheets (Optical Mark Reading), Answer booklets for conducting of an examination by the educational boards - printing of Post examination items like marks card, grade card, certificates to educational boards (up to higher secondary) after scanning of OMR Sheets and processing of data in relation to conduct of an examination - scanning and processing of results of examinations be treated as exempted supply of service - Exempt supply as per Serial Number 66 of Notification No. 12/2017-CGST [Rate] dated 28-6-2017 as amended or not. HELD THAT:- The Intra-State supplies made by M/s. Universal Print Systems that is providing/intending to provide services of printing of examination material to the educational institutions are exempted vide entry 66 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended. Inter-State supplies made by M/ s. Universal Print Systems that is providing/intending to provide services of printing of examination material to the educational institutions are actually not covered under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended, as the said Notification is issued under CGST Act and is having limited jurisdiction over intra-state supplies only. However, a similar and equivalent exemption is available to Inter State Supplies vide entry 69 of Notification No.9/2017-Integrated Tax (Rate) dated 28.06.2017, as amended. It is observed from the original application for Advance Ruling made by the 'Appellant', that the appellant despite mentioning both Intra-state (supplies within the state of AP) and Inter-state (supplies to other side states than AP i.e. to Telangana and Kerala) supplies, sought Advance Ruling on 'availability of exemption benefit under Notification No.12/2017-CGST Dated 28.06.2017'. This being the case, The Ruling passed by the Advance Ruling Authority, on applicability of a Notification without discussing the jurisdiction of being the case, The Ruling passed by the Advance Ruling Authority, on applicability of a Notification without discussing the jurisdiction of the said Notification, appears to be stretched beyond the legal boundary.
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2023 (1) TMI 434
Supply or not - pure services - procurement and distribution of drugs, medicines and other surgical equipment by APMSIDC on behalf of government without any value addition, and without any profit or loss, without even the intent to do any business - establishment charges received from State Government as per G.O. RT 672 dated 20-05-1998 and G.O. RT 1357 dated 19-10-2009 by APMSIDC - eligibility for exemption as per Entry 3 or3A of Notification 12/2017 Central Tax (rate). HELD THAT:- Here in the instant case, the appellant is providing Pure Service (supply / distribution of drugs, consumables and equipment for Hospitals) to State Government by way of an activity in relation to a function entrusted to a Panchayat under Article 243G (Sl.No.23 of Eleventh Schedule of Article 243G of Constitution is - Health and sanitation, including hospitals, primary health centres and dispensaries) - the service provided by the appellant in the instant case is qualifying all the conditions stipulated at Sl.No.3 of Notification No. 12/2017CT (Rate) Dated 28.06.2017 and thereby GST 'Rate chargeable' to the said service is 'Nil'. The service rendered by the APMSIDC is in relation to a function entrusted to a Panchayat under Article 243G of the Constitution of India. (the appellant is providing Pure Service (supply / distribution of drugs, consumables and equipment for Hospitals) to State Government by way of an activity in relation to a function entrusted to a Panchayat under Article 243G (Sl.No.23 of Eleventh Schedule of Article 243G of Constitution is - Health and sanitation, including hospitals, primary health centres and dispensaries) - it is rightly eligible for exemption under Entry 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) dt:28.06.2017.
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2023 (1) TMI 433
Classification of supply - supply of goods or supply of services - administering of COVID-19 vaccination by hospitals - administering of COVID-19 Vaccine by clinical establishments (Hospitals) - Healthcare services or not - HELD THAT:- In the instant case, there is no doubt that the applicant qualifies to be a clinical establishment but, the supply transaction is predominantly of sale of goods and not the service component of healthcare. The dominant intention of the recipient is the receipt of the vaccine followed by its administration and hence the principal supply is supply of vaccine and not the process of vaccination. The appellant himself acknowledges that the vaccine vial consists of multiple doses and one such dose is injected to the body of the recipient, as a part of the vaccination process. On the other hand he claims that there is no transfer of goods as such, which is a contradiction. This understanding of the appellant regarding vaccination process is flawed and distorted. The individual goes to the covid vaccination Center for the receipt of vaccine, by following the government guidelines of registering himself/herself in the portal and gets an appointment on a scheduled date to receive the vaccine, etc. Once the individual is vaccinated, there is transfer of goods undoubtedly, as the recipient receives the stipulated amount of dosage of medicine. Health Care Services are defined under 'Definitions' at (zg) of Notification No.12/2017 Central Tax (Rate) dt.28.06.2017. As per the definition, only diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy qualifies as Health Care Services . Needless to say, that when a person approaches a clinical establishment (hospital) for health care service like diagnosis/treatment/care for illness, injury, deformity, abnormality or pregnancy qualify for exemption under Entry 74 of Notification No. 12/2017 Central Tax (Rate) dt.28.06.2017. It is to also note that diagnosis/treatment/cure are services which are rendered by clinical establishments after being affected by disease - In the present case, the service rendered by the appellant is administration of Covid-19 vaccine which is also called Vaccination or Immunization - vaccination produces protection against disease and it is administered before the advent of disease. The discussed service of administering a vaccine does not fit into the definition of Health Care Services as per Notification No. 12/2017 Central Tax (Rate) dt.28.06.2017. The service of administering the vaccine has all the necessary elements to classify it as supply of goods and this has already been discussed supra. The outlet of supply or the supplier cannot decide whether a transaction can be classified as supply or not. There is transfer of medicine to the recipient when he approaches the Covid Vaccination Centre for vaccination, the recipient of vaccine makes a conscious choice of vaccine, and also pays a price for it as per the guidelines of the government - exemption is not allowed in the instant case against the claim of the applicant. While validating the decision of the lower authority that taxability of the supply comes under 'composite supply', wherein the principal supply is the 'sale of vaccine' and the auxiliary supply is the service of 'administering the vaccine' and the total transaction is taxable at the rate of principal supply i.e. 5%.
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2023 (1) TMI 432
Exemption from GST - amount received for leasing residential hostel rooms - Exempt under sl. No.14 (Heading 9963) of Notification no 12/2017-Central Tax (Rate) dt:28.06.2017 as amended or sl. No.12 (Heading 9963) of Notification no 12/2017-Central Tax (Rate) dt:28.06.2017 as amended? - HELD THAT:- The lessee M/s. Nspira Management Services Private Limited has sub-leased the said premises to M/s. Narayana Educational Society to accommodate their students. Further, the said Narayana Educational Society are running / maintaining a 'MESS' to cater to the needs of their 'inmates' in a building adjacent to the said hostel building. Thus, it is clear that, the sub-lessee i.e. M/s. Narayana Educational Society is providing a 'bundled service' i.e. a bundle of 'Renting of accommodation' and 'supplying food and beverages service' to their 'inmates I students / clients'. In 'Guest House / Hotel / Inn etc.' the same services are provided. This is the basic difference between a 'place of Residence' and a 'Hotel / Guest House / Inn etc.'. The Place of residence, in common understanding is premises rented out / leased out to a person, where that person resides, cooks food, consumes it and 'LIVES'. Generally 'No provision for supply of Food' is existing with reference to a 'Place of Residence'. Therefore, in the instant case, the premises is put into use which is more akin to a 'Hotel / Guest House / Inn etc.' and definitely different from a 'Place of Residence' in common understanding. The exemption on services by way of renting of residential dwelling for use as residence envisaged under the said notification is conditional and restricted only the recipient of the services and NOT beyond. In other words, supply is the fulcrum of GST, the transaction of supply (with regard to appellant) ends with the recipient of services only, in so far as the GST is concerned. Now, from the lease document, it is clearly known that the lessee is not going to use the rented property as 'residence' by himself but only going to sub-lease or rent out to others like students of educational institutions, etc., for their use. Unless the twin conditions of 'renting of residential dwelling' for 'use as residence,' being inter-twined and inseparable, are not met, the exemption is not available. As per settled law, in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. If there is a conditional exemption in GST based on end-use, the end-use has to be determined with respect to facts and for the recipient of the services only from the supplier directly and it is not for the department to see how the services are finally put to use by the recipient in turn and so on. In the instant case there is no evidence to show that either the building was a residential dwelling or it is going to be put to use as residence for himself by the lessee - The lower authority has considered all the facts and details of the case and examined them in the light of the relevant provisions of the APGST Act and Rules 2017 along with relevant notifications while deciding the case.
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Income Tax
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2023 (1) TMI 431
Reopening of assessment u/s 147 - income exigible to tax for the said assessment year has escaped assessment - Reopening beyond the period of four years from the end of relevant assessment years - depreciation claim of the licence fee paid by the assessee - HELD THAT:- From a reading of the reasons for reopening, it can be stated that the petitioner was entitled to claim deduction u/s 35ABB of the Act but it has not been specifically stated in the reasons that the petitioner was not entitled to claim depreciation @ 25% in terms of section 32 on the amount capitalized as intangible assets . Even otherwise, it does appear to us that the issue with regard to claim of depreciation had been gone into by the AO and notwithstanding the fact that in the order of assessment, there was no specific discussion as regards this particular claim, yet, considering the ratio of the judgments referred it must be presumed that the claim was considered and only then allowed. In the backdrop of the facts and the law stated in Jindal Photo Films Ltd. [ 1998 (5) TMI 20 - DELHI HIGH COURT] even in the present case, between the date of the order of assessment sought to be reopened and the date of forming of opinion by the Assessing Officer, nothing new has happened. Neither is there any new information received nor is a reference made to any new material on record. The Assessing Officer simply has accorded a fresh consideration and come to a conclusion that the assessee ought to have claimed benefit of deduction under section 35ABB which would have resulted in reducing the allowance under section 32 - In the absence of any tangible material, the present case is nothing but a case of change of opinion and thus does not satisfy the jurisdictional foundation under section 147 of the Act. We have no hesitation in holding that the impugned notice under section 148 of the Act and the consequent order disposing off the objections raised for reopening of the assessment, are unsustainable and accordingly set aside the same.
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2023 (1) TMI 430
Reopening of assessment u/s 147 - Sanction for issue of notice u/s 151 - appropriate authority to grant approval for issuance of notice u/s. 148 - Specified authority for the purposes of section 148 and section 148A - HELD THAT:- As in the present case is squarely covered by the view taken by this Court in J.M. Financial Investment Consultancy Services (P) Ltd. ( 2022 (4) TMI 1446 - BOMBAY HIGH COURT] - We accordingly hold that the approval for issuance of notice u/s. 148 ought not have been obtained from the Additional Commissioner of Income Tax but from the authority specifically mentioned u/s. 151(ii) of the Act. Notwithstanding the fact that there were other grounds urged for challenging the notice impugned u/s. 148 of the Act, although feeble, since we are allowing the present petition on the issue of sanction, we do not feel it absolutely necessary to decide the same. Appeal of assessee allowed.
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2023 (1) TMI 429
Reopening of assessment u/s 147 - Container Freight Station (CFS) is not an eligible infrastructural facility as provided in Explanation to Section 80-IA(4) of the Act and that the claim of deduction of the assessee on this account was not in order which had resulted in under-assessment of income and the same has escaped assessment - HELD THAT:- Admittedly, since the notice u/s. 148 was being issued after the expiry of four years from the end of the relevant assessment year, no action could be taken u/s. 147, after expiry of the said period unless it could be shown that the income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee, inter-alia, to disclose fully and truly all material facts necessary for the assessment for that assessment year. In the present case, from the record, it is quite clear that when the return fled by the petitioner was taken up for scrutiny assessment, information was called for by the Assessing Officer. The petitioner, in response to the notices so received, had submitted a note in regard to the claim for deduction under Chapter VI-A which is on record. The reasons recorded by the AO do not at all elucidate as to what material was not disclosed fully and truly, failure of which had led to the income escaping assessment. This Court, in the case of Continental Warehousing Corporation Ltd. 2015 (5) TMI 656 - BOMBAY HIGH COURT was considering the order passed by the Tribunal which had held the assessee in that case entitled to the benefit under section 80-IA(4) of the Act based upon the earlier view expressed by a Special Bench of the Tribunal as also the Delhi High Court in Container Corporation of India Ltd. (Supra). The Special Bench had held that the case of Container Freight Station was similarly situate as that of an Inland Container Depot (ICD) inasmuch as both carried out similar functions of warehousing, customs clearance and transport of goods from its location to sea-ports and vice-versa. This Court in Continental Warehousing Ltd. (Supra) upheld the view of the Tribunal. In the present case, even the objections raised by the Director General of Audit (Central) Mumbai leading to the initiation of reassessment proceedings would not anymore furnish a sound basis for alleging that the income had escaped assessment on account of a claim having been wrongly allowed under the said section. Be that as it may, we have no hesitation in holding that the notice impugned as also the order rejecting the objections, are unsustainable in law and are accordingly quashed.
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2023 (1) TMI 428
Reopening of assessment u/s 147 - notice passed u/s.148 was not signed by the AO digitally or manually - curable defect u/s 292B - HELD THAT:- Applying the ratio of the judgment of B.K. Gooyee [ 1965 (2) TMI 101 - CALCUTTA HIGH COURT] and Aparna Agency (P.) Ltd. [ 2004 (3) TMI 51 - CALCUTTA HIGH COURT] to the facts of the present case, the signature of the Assessing Officer admittedly not having been affixed on the notice issued u/s.148 of the Act, the notice itself would be invalid and consequently, the Assessing Officer could not assume jurisdiction to proceed in the matter in terms of section 148 of the Act. As in Umashankar Mishra [ 1982 (4) TMI 60 - MADHYA PRADESH HIGH COURT] has dealt with a similar fact situation where the first substantial question of law dealt with in that case had considered the effect of whether an unsigned notice can be considered as an irregularity or clerical mistake. The Madhya Pradesh High Court after making reference to the conclusions drawn in B.K.Gooyee (supra) by the Calcutta High Court, has taken the view, that a notice without a signature affixed on it is an invalid notice and is effectively no notice in the eyes of law. The Madhya Pradesh High Court in Umashankar (supra) has further dealt with the second substantial question of law as to whether the Tribunal was right in holding that the absence of a signature on the notice constitutes a mistake or omission within the meaning of section 292B of the Act and while addressing itself to that question, has concluded that in the absence of a signature on the notice, the same would not constitute a mistake or omission and would not be curable under the provisions of section 292B of the Act. The notice u/s.148 having no signature affixed on it, digitally or manually, the same is invalid and would not vest the Assessing Officer with any further jurisdiction to proceed to reassess the income of the petitioner. Decided in favour of assessee.
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2023 (1) TMI 427
Credit of TDS - income earned by Late assessee for services rendered by him to the two companies before his death - such income includible in his return filed by the legal representative for AY 2013-14 which admittedly has not been done and thus escaped assessment? - Assessee has claimed TDS in respect of the impugned commission income which is not its income and not declared in its return for AY 2014-15 - credit for TDS should go the person in whose hands the income is rightfully and finally assessed to tax - HELD THAT:- AO/CIT(A) both held that the impugned commission income on which tax has been deducted at source is taxable in the hands of Late Shri Hari Shankar Singhania as represented by his legal heirs and that the legal heirs of Late Shri Hari Shankar Singhania are liable to furnish the return of income and are also liable to pay taxes in respect of the income of Late Shri Hari Shankar Singhania. We agree. However, as stated earlier, the impugned commission income has escaped assessment as in the return of income filed by the legal representative of Late Shri Hari Shankar Singhania on 27.09.2013 for AY 2013-14, the said commission income has not been declared. Thus we are of the opinion that in the interest of justice, it would be fair and just if we direct the Ld. AO to re-open the assessment of Late Shri Hari Shankar Singhania (Individual) for AY 2013-14 to bring to tax the impugned commission income and allow the credit of TDS. In so far as the assessee, Hari Shankar Singhania Estate is concerned, it shall abide by the procedure laid down under section 199 of the Act r.w. Rule 37BA(2)(i) of the Income Tax Rules, 1962 as amended by the Income Tax (Eight amendment) Rules, 2011 to enable the Ld. AO to give credit of TDS in the hands of Late Shri Hari Shankar Singhania (Individual) in AY 2013-14.
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2023 (1) TMI 426
Disallowance u/s 36(1)(viia) - Provision for bad and doubtful debts under Section 36(1)(viia) against the advances of rural branches - assessee raised ground of appeal raising the plea that the assessing officer not allowed additional deduction of 10% on advances made by rural branches of assessee-bank as prescribed under section 36(1)(viia) by holding that the assessee is a co-operative bank and the definition of non-schedule bank does not include co-operative bank for the purpose of deduction of 10% - assessee also raised ground of appeal that the assessing officer erred in not considering an amount of Rs.1.66 Crore for deduction under section 36(1)(viia) being bad and doubtful debts appropriated from the profit loss account as per the guidelines of Reserve Bank of India (RBI) towards statutory bad and doubtful debts reserve i.e. 15% of profit on the ground that no such provision is made in the profit loss account. HELD THAT:- All cooperative bank all over India follows such practice of appropriation from the net profit which they get approved by the members, only after approval of accounts and director s report, the return of income is filed. Thus, appropriation made by the assessee bank for bad and doubtful debts is nothing but providing for bad and doubtful debts from the profit and loss accounts. After introduction of section 36(1)(viia) by the finance Act, 1979, with effect from April 1,1980, Circular No. 258, dated June 14, 1979, was issued by the Central Board of Direct Taxes to clarify the application of the new provisions. The provisions were introduced in order to promote rural banking and assist scheduled commercial banks in making adequate provision from their current profits for risks in relation to their rural advances. The deductions were to be limited as specified in the section. The circular mentions that the provisions of new clause (viia) of section 36(1), relating to the deduction on account of provisions for bad and doubtful debts, is distinct and independent of the provisions of section 36(l)(vii) relating to allowance of deduction of the bad debts. Scheduled commercial banks would continue to get the benefit of the write off of the irrecoverable debts under section 36(1)(vii) in addition to the benefit of deduction of the provision for bad and doubtful debts under section 36(1)(viia) While considering the similar issues in assessee's own case for earlier year, which is followed by ld CIT(A) in the impugned order, we have followed the decision of Kannur District Co-operative Bank [ 2012 (3) TMI 691 - ITAT COCHIN] - It is settled position under the tax jurisprudence that where there is two divergent view of two different High Court on the same issue, the decision favourable to the assessee must be adopted. Similar principal was recognized in the case of CIT Vs Vegetable Products Ltd. [ 1973 (1) TMI 1 - SUPREME COURT] - Thus, in view of afforesaid factual and legal discussion, we affirm the order of ld CIT(A), with these additional observations. In the result, the grounds of appeal raised by the revenue is dismissed.
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2023 (1) TMI 425
Addition of interest attributable on the diversion of loan fund - AO computed being 14% of the interest free loans and advances and added to the total income of the assessee - CIT-A deleted the addition - HELD THAT:- Interest was disallowed by the AO on the reasoning that there was diversion of interest bearing fund for non-commercial purposes. Admittedly, the interest free fund available with the assessee exceeds the amount of interest free advances which can be verified from the submission of the assessee before the Ld.CIT(A). Once own fund of the assessee exceeds the amount of interest free loans and advances, then a presumption can be drawn that the interest free loans and advances has been given by the assessee out of its own interest free fund available with it. Thus, in such a situation the disallowance of interest u/s 36(1)(iii) is not warranted. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A). Hence, the ground of appeal of the revenue is hereby dismissed. Mismatch in the income reported in the profit and loss account vis- -vis form 26AS - CIT-A deleted the addition - HELD THAT:- From the preceding discussion, we note that the income of Rs. 49,63,600/- has been offered to tax in the Assessment Year 2013-14 and thus, if any addition is made in the year under consideration than it will lead to the double addition which is unwarranted under the provision of law. Thus, we are of the view that the Ld. CIT(A), has rightly directed the AO to delete the addition made by him after necessary verification. Thus, we hold that there is no infirmity in the order of the Ld. CIT(A) and accordingly ground of appeal of the Revenue is dismissed. Suppression of income - CIT-A deleted the addition - HELD THAT:- We note that the claim of the assesse was allowed by the Ld. CIT(A), after carrying out the necessary verification as discussed above. Admittedly, if the income has been offered to tax for Rs. 57,40,491/- then the assessee can claim the bad debts under the provision of section 36(1)(vi) of the Act. Likewise, if the income has been debited in the name of Larsen Turbo for Rs.35,53,900/-, then there is no un-reported of income as alleged by the AO. Nevertheless, the Ld.CIT(A), has given relief to the assessee subject to the necessary verification to be done by the AO. Thus, we do not find any infirmity in the order of the Ld.CIT(A), and uphold the same. Hence, the ground of appeal of the revenue is hereby dismissed. Cessation of liability - Addition under the provisions of section 28(iv) r.w.s. 41(1) - HELD THAT:- Assessee has not disputed for the same and therefore the same represent the cessation of liability and therefore the same is liable to be added. Difference in the opening balance pertaining to the earlier year - CIT(A) has allowed deduction to the assessee subject to the necessary verification to be done by the AO. We find no infirmity in the direction of the Ld. CIT(A). Revenue has challenged the deletion of addition in the ground of appeal which to our understanding is not correct. It is for the reason that the Ld. CIT(A), has not given any relief to the assessee with respect to the cessation of liability as the same has been confirmed. Thus, there should not be any grievance to the Revenue with respect to such addition. Thus, the ground of appeal of the Revenue is dismissed. Addition on account of cessation of liability under the provision of section 41(1) - HELD THAT:- From the submission of the assessee, we note that such liability has been settled in the subsequent year. Therefore, the Ld.CIT(A), allowed the ground of appeal subject to the verification by the AO about the payment made by the assessee to the party. We do not find any infirmity in the direction of the Ld.CIT(A), Hence, we uphold the same. Thus, the ground of appeal of the Revenue is hereby dismissed.
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2023 (1) TMI 424
Reopening of assessment u/s 147 - Reason to believe - as argued there was no failure to disclose fully and truly any material fact necessary for the assessment which was a condition precedent for reopening the assessment in terms of section 148 - HELD THAT:- As during the scrutiny assessment, the AO had sought from the petitioner the relevant details with regard to the advertisement and sales promotion expenses which details were furnished by the petitioner vide its response - It can also be seen that the AO had disallowed some of the expenses which had been reflected in the break-up under the head details of advertisement and sales promotion expenses while passing the final order of assessment, which reflects that the AO had applied its mind to the appellant s claim while passing the order under section 143(3) - reasons do not disclose as to what material or fact was not disclosed by the assessee. It, therefore, cannot be said that there was any failure on the part of the petitioner to disclose fully and truly facts which were material and necessary for assessment. Thus the notice impugned does not satisfy the jurisdictional requirement of section 147 of the Act and, therefore, is held to be unsustainable, and is accordingly quashed. Decided in favour of assessee.
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2023 (1) TMI 423
Exemption u/s 11 - Disallowance invoking of provision of Section 2(15) read with Section 13 (8) of the Income Tax Act - HELD THAT:- As decided in Apex Court [ 2022 (10) TMI 948 - SUPREME COURT ] the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be trade, commerce, or business or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of cess, or fee, or any other consideration towards trade, commerce or business . In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. The issue is squarely covered and no question of law, much less substantial question of law has arisen.
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2023 (1) TMI 422
Stay of demand - Necessity to deposit 20% of the disputed demand - HELD THAT:- Insofar as the reliefs sought for in prayer clauses (a) to (c) are concerned, liberty is given to the petitioner to move an application before the aforementioned authority within 10 days of receipt of a copy of the order. Upon an application being made, the concerned authority will deliberate on the same after hearing the authorized representative of the petitioner and pass an order within the next three weeks. A copy of the order will be furnished to the petitioner. The writ petition is disposed of in the aforesaid terms. Till such time as the aforementioned authority takes a decision on the petitioner s application, no precipitate action will be taken qua the petitioner. Needless to add, this direction will operate only if the petitioner moves an application within the time-frame set forth hereinabove. If the order is adverse to the interests of the petitioner, the same shall not be given effect to for a period of two weeks.Consequently, the pending application shall stand closed.
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2023 (1) TMI 421
Reopening of assessment u/s 147 - Period of limitation - HELD THAT:- Essentially, as the question raised is of limitation, issue Notice returnable on 03.01.2023. By way of interim relief, it is directed that the process of assessment shall continue with the cooperation of the petitioner, however, the final assessment order shall not be passed before the returnable date. Let affidavit-in-reply be filed by the other side. To be served at least 72 hours in advance. Affidavit-in-rejoinder, if any, shall be filed on or before 03.01.2023 with a copy to the other side. Over and above the regular mode of service, service of notice through e-mode on the official e-mail ID is permitted.
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2023 (1) TMI 420
Reopening of assessment - TDS u/s 195 - payments to the foreign entities without deducting tax - HELD THAT:- Both parties are ad idem that the judgment rendered by the coordinate bench of this Court titled Vedanta Ltd. (Successor of Sterlite Industries (India) Limited) [ 2019 (8) TMI 1067 - DELHI HIGH COURT] covers the said issue against the respondent. To be noted, the said judgment concerned Assessment Year (AY) 2010-2011, while the instant matter relates to AY 2011-2012. In these circumstances, we have queried the learned counsel for the parties, as to whether the aforementioned judgment was carried in appeal to the Supreme Court. Learned counsel for the parties say, that the judgment remains undisturbed. Write off interest and other liabilities - assessee entered into a One Time Settlement (OTS) with the Vijaya Bank, and in that process, an amount equivalent and interest accrued thereof, was written-off - HELD THAT:- As what emerges from a perusal of the Tribunal s judgment that the claim by Vijaya Bank for recovery against the petitioner [i.e., defendant no.1] in respect of the indemnity bond furnished was dismissed. There was, therefore, no loan, as alleged, taken by petitioner and thus, quite logically, no OTS could have been arrived at between the petitioner and Vijaya Bank. AO, in our view, also went wrong in observing that the petitioner may have claimed interest against the loan supposedly received by it in earlier years. Petitioner had only furnished an indemnity bond for possible misuse of dividend warrants. Dividends, as is well known, involve appropriation of profits and therefore, the petitioner could not have possibly claimed deduction against its profits. Given these circumstances, we are of the view, that there was no application of mind on behalf of the assessing officer in issuing the impugned notice even as regards the second issue. As noticed above, as far as the first issue is concerned, it is covered in favour of the petitioner i.e., the assessee, by the judgment referred to above, passed by the coordinate Bench of this Court. We are in agreement with the petitioner s stand, that the impugned notice issued under Section 148 of the Act, cannot be sustained.
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2023 (1) TMI 419
Reopening of assessment u/s 147 - allegation against Assessee involved in the issuance of fake/bogus invoices - bogus purchase transaction with FFPL - HELD THAT:- Interestingly, entities and companies which FFPL appears to have provided accommodation entries not only includes the petitioner but certain public limited companies/PSUs such as Bharat Heavy Electricals Ltd., Indian Oil Corporation Ltd., HMT Machine Tools Ltd., Hindustan Shipyard Ltd., Hindustan Aeronautics Ltd., Hindustan Petroleum Corporation Ltd., Godrej and Boyce Manufacturing Company Ltd. and Larsen and Toubro Ltd. There is no material to suggest, that accommodation entries were provided by FFPL to these companies. We may also note, that in this particular case, notice u/s 148A(b) was issued even without conducting an enquiry, as required u/s 148A(a) of the Act.The said provision requires approval of the specified authority for conducting an enquiry. In our view, had such an enquiry been conducted before issuance of the notice, then the kind of flaws that have emerged, to which we have made a reference above, would not have, possibly, occurred. Instead of conducting an independent enquiry, the respondents/revenue relied upon the information supplied by the CGST authorities. Thus we are inclined to quash the impugned order dated 26.03.2022 passed under Section 148A(d) of the Act, as also the consequential notice dated 26.03.2022 issued under Section 148 of the Act. Decided in favour of assessee.
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2023 (1) TMI 418
Reopening of assessment u/s 147 - Reason to believe - HELD THAT:- The jurisdictional ingredients for reopening assessment were not available with the concerned assessing officer. The conclusion reached by us is fortified by the view taken in the following judgments Kelvinator of India Limited [ 2010 (1) TMI 11 - SUPREME COURT ] Suren International (P.) Ltd. [ 2013 (5) TMI 414 - DELHI HIGH COURT ] and Wel Intertrade (P.) Ltd. [ 2008 (8) TMI 18 - HIGH COURT DELHI ] Thus, for the foregoing reasons, we are not inclined to interfere with the impugned judgment passed by the Tribunal. According to us, no substantial question of law arises, in the present appeal, for our consideration.
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2023 (1) TMI 417
Reopening of assessment u/s 147 - notice issued u/s 148A(b) states that the Petitioner had engaged in bogus sales transaction - allegation of non-application of mind while passing the order u/s 148 A (d) - HELD THAT:- A perusal of the order passed u/s 148A(d) shows that the Respondent/Revenue have completely ignored the response of the Petitioner and have instead simply stated that the evidences had not been filed. We are in agreement with the Counsel for the Petitioner. Clearly, there has been non-application of mind while passing the order under Section 148 A (d) of the Act. Having regard to the fact that the reply filed had not been considered, the impugned order and the notice issued under Section 148 of the Act of even date,i.e.,23.07.2022 are set aside. The matter is remitted to the Assessing Officer for a de novo hearing.
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2023 (1) TMI 416
Reopening of assessment u/s 147 - Denial of natural justice - As brought to the notice of this Court that the assessee had filed a reply to the show cause notice and the impugned order has been passed without considering the same and subsequent to passing of the impugned order, the notice u/s 148 to the writ petition has been issued to the petitioner - HELD THAT:- On the ground that the impugned order has been passed without considering the reply of the petitioner, the same is liable to be set aside and consequently, the notice issued under Section 148 of the Income Tax Act, 1961 also requires to be set aside. The order of the AO passed u/s 148A(d) to the writ petition is hereby set aside. Consequently, the notice issued under Section 148 to the writ petition is also set aside. The petitioner is permitted to resubmit his reply dated 23.03.2022 to the Assessing Authority within a period of 15 days from today.
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2023 (1) TMI 415
Addition u/s 68 - unexplained cash credit - as during the course of search, certain documents were found - Assessee furnished the explanations which were not found acceptable and, therefore, AO made the additions of the amounts reflected in those documents - HELD THAT:- AR has placed on record the explanations that were submitted by the assessee before the authorities explaining the contents. The perusal of the same would reveal that assessee has inter alia given the details of the amount received, the receipt number and the details of the amount which were refunded including the cheque number and date. The explanation and the details given by the assessee has not been shown to be untrue or contrary to the facts stated before the authorities. We are of the view that assessee has discharged the onus cast upon it. As far as the presumption u/s 292C is concerned, we are of the view that the provision of section 292C is only a deeming provision. The presumption under section 292C of the Act is rebuttable presumption and the document has to be considered considering the totality of the facts of the case. The deeming provision cannot be applied mechanically ignoring the facts of the case and the surrounding circumstances. No addition of the impugned amounts is called for. We, therefore, direct the deletion of the additions made by AO and upheld by CIT(A). Thus the grounds of the assessee is allowed.
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2023 (1) TMI 414
Exemption u/s 11 - Denial of exemption as assessee was not having registration u/s 12AA for the year under consideration - AO held that the assessee was granted registration u/s 12AA on 25/10/2018 effective from 24/04/2018 i.e. A.Y. 2019-20, hence, the assessee is not eligible for deduction u/s 11 and 12 for the year under consideration - HELD THAT:- Assessee while making submission vehemently relied upon the decision of Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsar 2020 (4) TMI 576 - ITAT SURAT wherein the Coordinate Bench of Tribunal while relying upon the decision of Punjab Educational Society 2017 (12) TMI 989 - ITAT AMRITSAR held that benefit of first proviso to Section 12A(2) of the Act would be applicable to the facts of the said case. Benefit of Section 11 is to be given if the registration is obtained even during the pendency of appeal before the ld. CIT(A). Again coming to the fact of the case,we find that the assessment in the present case was completed on 23/02/2021, before that date, the registration was granted vide order dated 25/10/2018. As in SNDP Yogum case 2016 (3) TMI 1110 - ITAT COCHIN held that proviso to section 12A(2) inserted from .01.10.2014 has retrospective effect thus, and there should be no denial of relief under section 11 to a trust if it had obtained registration during the pendency of appeal. Similar view was also taken in Shree Bahnushali Mitra Mandal Trust 2016 (4) TMI 578 - ITAT AHMEDABAD Thus, respectfully following the decisions of coordinate benches, find that the assessee is also eligible for first proviso to Section 12A(2) of the Act. Grounds of appeal raised by the assessee is allowed.
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2023 (1) TMI 413
Deduction u/s 54F - Disallowance towards long term capital gain - CIT(A) termed the sale of old property (long term capital asset) as short term capital asset and has directed the A.O. to assess the long term capital gain as short term capital gain vide order impugned - HELD THAT:- CIT(A) has not discussed the reasons and not made proper adjudication of the issues while disallowing the deduction u/s 54F claimed by the Assessee and not even dealt with the contention and the judicial decisions cited by the assessee. The order of the CIT(A) is non speaking one. CIT(A) has termed the sale of old property as short term capital asset and directed the A.O. to assess the long term capital gain as short capital gain without affording opportunity to the assessee which is in violation of natural justice. Therefore, we deem it fit to remand the matter to the file of Ld. CIT(A) for de-novo consideration after providing opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purpose.
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2023 (1) TMI 412
Approval u/s 80G - recognition as a Charitable Institution or Religious Institution - CIT(E) has held that the asessee is engaged in a religious activity of teaching Vedas, a Hindu religious scripture, to Hindu students and hence the whole purpose of the trust is of religious nature as per Explanation 3 to section 80G, therefore is not eligible for approval under section 80G - HELD THAT:- There is no merit in the impugned finding of the CIT(E) that teaching Vedas is a religious activity and therefore not eligible for approval under section 80G. In the present case, objects of the assessee-Trust are reproduced in the earlier part of this order. The assessee Trust does not have any object to establish, maintain and to grant and / or aid to public places of worship and prayer halls and hence the judgment of Upper Ganges Sugar Mills Ltd. [ 1997 (8) TMI 4 - SUPREME COURT ] is inapplicable to the facts of the present case. The impugned conclusion of the CIT(E) that teaching of Vedas involve offering worship and prayer to God is not correct and bereft of any reason. The assessee only teaches the students how to recite the Vedas. There is a particular method of pronunciation of Vedas with Swaras attached to it. The recitation and pronunciation of Vedas is what is taught by the assessee-Trust. It is like teaching any other Sanskrit literature. The teaching of Vedas does not involve offering worship and prayer to God as held by the CIT(E). There is no object or activity of worship or prayer to God as contended by the CIT(E). CIT(E) is also not an authority to conclude what teaching of Vedas involve. Assessee-trust has carried on other charitable activities in the nature of relief of poor. The Vedic Scholars were identified and felicitated irrespective of their caste, creed or religion. The Trust has given financial assistance to various people, irrespective of caste, creed or religion, involved in Indian Heritage Education. During Covid, many were in financial difficulty and the Trust provided financial assistance and distributed food kit, clothes, medicines for the needy Vedic scholars irrespective of their caste, religion or gender. All the expenses were met out of voluntary contributions or donations. Thus, the activities carried on by the assessee-Trust are CHARITABLE in the nature of education, relief of poor and not RELIGIOUS as concluded by the CIT(E). In view of the above, the impugned findings of the CIT(E) that the assessee-trust is registered as RELIGIOUS is quashed and the assessee is allowed registration under section 12A of the Act as charitable trust. Consequently, the approval under section 80G of the Act is to be granted. Appeals filed by the assessee-trust are allowed.
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2023 (1) TMI 411
Addition on account of cash loans - cash loans was less than that admitted by the assessee of having taken at 1.25 crores and addition upheld by the ld.CIT(A) of Rs.1.25 crores - HELD THAT:- Assessee had suitably demonstrated with evidence to the CIT(A) that the document represented details of interest paid on loans taken by the assessee and the rate of interest so paid was 2-2.5%. CIT(A), we have noted, found merit in the contentions of the assessee that figures mentioned in the said documents represented interest amount and not the cash loans, which finding has not been challenged by the Revenue before us. Since it is an admitted fact that Annexure II page 96 represented details of interest paid by assessee on various cash and cheque loans taken, which the assessee had suitably demonstrated as paid @ 2.5 %,the cash loans of Rs. 2.34 Crs worked out by the AO by taking interest rate of 1.5%, we hold, have been rightly rejected by the Ld.CIT(A). AO applied rate of 1.5% to arrive at the amount of cash loan for the month of Feb., 2003 worked out on the basis of page no.99-100 of Annexure-2. As is evident, the rate of interest of 1.5% pertained to the month of January 2004 i.e. relating to subsequent year. The assessee on the other hand demonstrated to the ld.CIT(A) and substantiated the same also that during the impugned year, he had paid interest at the rate of 2.5%. Therefore, we agree with the ld.counsel for the assessee that the CIT(A) was satisfied and convinced with this explanation of the assessee and had accepted rate of interest paid at 2.5%; that therefore, he had not considered cash loans computed by the AO for the month of February, 2003 at Rs.2.34 crores and instead had restricted the addition to the amount of cash loans admitted by the assessee of Rs.1.25 crores. We do not find any merit in the grounds of the appeal of the Revenue seeking restriction of addition on account of cash loan to Rs.2.34 crores as opposed to the ld.CIT(A) restricting to 1.25 crores. The Ground raised by the Revenue are accordingly dismissed.
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2023 (1) TMI 410
Undisclosed investment - documents seized at the time of search - violation Principles of natural justice - contentions raised before the tax authorities by the assessee was that the hand written note and it has been stated therein that Mr. Nuruddin Ajani has taken amount of Rs. 60 lakhs - As argued AO has not allowed the opportunity of cross examining Shri Nuruddin Ajani - HELD THAT:- We notice that the A.R stated that the revenue has not made any addition in the hands of Shri Nuruddin Ajani. The above submissions made by the assessee would show that the impugned rented premise, i.e., the tenancy right was held by M/s Empire Continental Exports P Ltd, a company owned by Shri Ajani. The said company has been acquired by the son and wife of the assessee on 18-09-2003. Accordingly, it was submitted that the tenancy right would form part of the company and hence there was no requirement to make separate payment for it. On a safer course, it was argued that the transaction, if at all is taxable, would be liable to be taxed in AY 2004-05 and not in AY 2005-06. The assessee, in whose hands, it is taxable is also a question at large. In the absence of providing opportunity to cross examine Mr Nuruddin Ajani, there is violation Principles of natural justice. Before us, the revenue has expressed its inability to produce the sworn statement recorded from Mr Nuruddin Ajani or Mr D N Israni. Hence, it is not clear as to whether the above said two parties have implicated the assessee in this deal, if any. Even if it is assumed for a moment that these parties have admitted to have received amount of Rs.60 lakhs from the assessee, it is not shown that the action taken by the revenue in the hands of the above said two persons in respect of the above said amount. Hence AO was not justified in making addition in the hands of the assessee, as other corroborative evidences militate against the impugned addition. Appeal filed by the assessee is allowed.
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2023 (1) TMI 409
Levy of penalty u/s. 271(1)(b) - Non compliance requirement in respect of special audit u/s. 142(2A) -reasonable cause within the meaning of section 273B - HELD THAT:- As decided in SHRI ASHESH AGARWAL case [ 2022 (12) TMI 1223 - ITAT LUCKNOW] relevant ledgers for all the years under consideration were impounded by the Ld. AO in the course of assessment itself which has prevented the assessee in making compliance to the requirements of the special auditors for getting the special audit u/s. 142A of the Act completed. Where the law creates a duty or charge and the party is disabled to perform it, without any default in him and has no remedy over it, there the law will, in general, excuse him. Therefore, when it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the person interested had no control, the circumstances will be taken as a valid excuse. Assessment proceedings furnished by the Ld. Counsel, it is evidently demonstrated that there exists a reasonable cause within the meaning of section 273B of the Act which prevented the assessee in meeting the compliance requirement in respect of special audit u/s. 142(2A) of the Act. - Levy of penalty directed to be deleted. Decided in favour of assessee.
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2023 (1) TMI 408
Addition u/s 68 - creditworthiness of the transactions not proved - summon issued u/s 131 to director in the assessee company as well as the 12 allottee companies - CIT-A deleted the addition - HELD THAT:- It is an admitted fact that Shri Sudhir Satnaliwala is a director common in the assessee company as well as the 12 allottee companies along with other family members. He appeared before the Ld. AO in response to summon issued u/s 131 of the Act and complied with all the required details and documentation. Assessment of Shri Sudhir Satnaliwala for AY 2012-13 has been completed without any adverse observation and addition, u/s 143(3) of the Act. Financial statements of Shri Sudhir Satnaliwala were on record which has been accepted in his assessment wherein transaction relating to taking of secured loans from HDFC Bank and Aditya Birla Finance Ltd and giving of security deposits to the 12 allottee companies for securing the lease arrangement in respect of 12 dwelling units from the 12 allottee companies, has been duly reported. We also note that in the paper book all the documents pertaining to share capital transaction with all the 12 allottee companies are placed on record. Thus investment made by the 12 allottee companies has been duly established with corroborative evidence is on record, more particularly when the concerned Assessing Officer in the assessment order of Shri Sudhir Satnaliwala (common director for all) passed under section 143(3) of the Act, has accepted the same, we do not find any reason to interfere with the facts-based finding given by the Ld. CIT(A). Appeal of the Revenue is dismissed.
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2023 (1) TMI 407
Addition u/s 68 - undisclosed income in respect of Suisse Bank Account with HSBC Bank Geneva to the returned income - possibility of introduction of unaccounted/undisclosed money in the books of account in the names of relations or third partied - HELD THAT:- Revenue had information that the assessee was having a bank account in HSBC Geneva. The bank account had balance of Rs.USD 4849 and the account also contained the name of the father and mother of the assessee - claim of the assessee that he does not know anything about the said bank account is totally unbelievable. It is beyond the preponderance of human probability that some unknown person will deposit USD 4849 in the name of the assessee in HSBC Geneva bank and the name of the father and mother also be given and the assessee will not have any information about it. This fully comes under the decision in the case of Sumati Dayal 1995 (3) TMI 3 - SUPREME COURT Hence, the addition in this regard is liable to be sustained. As regards, the deposit in HSBC London, the assessee has not been able to provide any cogent evidence for the source of deposits. The submissions of the assessee have been without any reliable material. The explanation given by the assessee is only self-serving and has correctly been rejected by the lower authorities. In these circumstances, we do not find any infirmity in the orders of the authorities below and confirm the same. This appeal by the assessee stands dismissed.
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2023 (1) TMI 406
Revision u/s 263 by CIT - lack of enquiry on part of the AO to verify the claim of deduction u/s. 54 - case was selected for limited scrutiny for examining the value of consideration for computation of capital gains and secondly, whether the deduction from capital gains has been claimed correctly by the assessee - HELD THAT:- The case of the assessee is that the matter has been thoroughly examined by the AO and thereafter, after considering the information/documentation submitted by the assessee during the course of assessment proceedings, the claim of deduction u/s. 54 has been allowed by the AO which is demonstrated by the fact that the quantum of claim of deduction has been restricted to Rs. 2,00,53,041/- by the AO as against claim of Rs. 2,05,93,405/- made by the assessee. As taken note of the various notices/questionnaires issued by the AO matter has been thoroughly examined by the AO during the course of assessment proceedings and thereby through a speaking order, the claim of deduction u/s. 54 has been allowed by the AO though with a restricted amount of Rs. 2,00,53,041 disallowing a sum of Rs. 5,40,364/- as evident from the assessment order. We are therefore, unable to agree with the findings of the ld. PCIT that it is a case of lack of enquiry on part of the AO to verify the claim of deduction u/s. 54 made by the assessee. How the order passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenue? - PCIT has merely referred to the show-cause notice and summarily recorded his findings stating that the AO has failed to conduct the enquiries and to bring on record the relevant evidences in respect to the issues raised in the show-cause notice and it has been held that it is a case where the AO had failed to apply his mind. In the instant case, it is an admitted fact that the assessee has purchased a residential house measuring 225 sq. yards at Aggar Nagar, Ludhiana on 15.11.2011. As per evidences placed on record and are part of the assessment records and available at the time of examination before the ld. PCIT, in terms of building plan of the said residential house, demolition of the residential structure thereon in May 2014 on the said plot of land, request for approval of the new building plan to Municipal Corporation on 10/06/2014, approval granted thereafter on 16/06/2014, subsequent construction of new structure measuring 6500 sq. feet in financial year 2017-18 as evident from the property tax receipts, we find that it is a case of construction of new house after demolition of old structure and well within the framework and having the necessary attributes and specification of a residential house eligible for deduction u/s. 54 - The preliminary findings of the ld. PCIT in the show-cause notice that it is a case of modification of an old house and which has been summarily turned into conclusive findings in the impugned order is therefore not borne out of records and is without appreciating the material and evidence on record and is hereby set-aside. Time period specified for construction of a residential house - In the instant case, the flat in Mumbai has been transferred on 01/06/2015 and the new residential house in Ludhiana has been constructed during the financial year 2017-18, well within the period of three years as so specified and the condition so specified has been duly complied with. The fact that the old house has been purchased on 15.11.2011 well before the transfer of the original asset on 01/06/2015 will not act as a disabling factor for claim of deduction as the emphasis has been on completion of construction of new house within the stipulated time period and the time period of three years for completion of construction of new house has to be considered from the date of transfer of the original asset and which has been complied in the instant case. We therefore do not find any infirmity in the order so passed by the AO where he has examined and taken on record all the evidences and documentation and has allowed the claim of deduction u/s. 54 of the Act. Examination of cost of construction and related documentation - AO has raised queries from time to time to examine the same and the assessee has in turn responded to these queries and filed necessary information/documentation in support of nature and cost of construction and the mode of discharge of such cost by way of cheque and cash payment and on detailed examination and due application of mind, the AO has allowed the claim of deduction u/s. 54 though with a restricted amount of Rs. 2,00,53,041/- and disallowing a sum of Rs. 5,40,364/- as evident from the assessment order. Here, it is relevant to note that the assessee has not claimed cost of purchase of the old house of Rs. 50 lacs and cost relating to demolition of the old structure and has only claimed the cost towards construction of the new house for the purposes of claiming deduction under section 54 of the Act, a fact which is not disputed by the ld. PCIT. It is also not the case of the PCIT that these costs of construction of new house have not been met out of sale proceeds of the original asset. We therefore do not find any infirmity in the order so passed by the AO. We are of the considered view that the matter relating to claim of deduction u/s. 54 has been thoroughly examined by the AO during the course of assessment proceedings as evident from material available on record and the findings of the ld. PCIT that it is a case of lack of enquiry on part of the AO and the impugned order passed u/s. 263 is hereby set-aside and the order of the AO is sustained. Appeal of assessee allowed.
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2023 (1) TMI 405
Validity of order by CIT(A) in accordance with law after providing reasonable opportunity to the assessee - HELD THAT:- As we are of the view that the learned CIT(A) did not provide reasonable opportunity to the assessee in respect of notice of hearing dated 17/07/2019, whereby hearing was fixed on 26/07/2019. Further, we have already noted earlier that learned CIT(A) has failed to establish that rejection of adjournment in respect of hearing fixed on 26/07/2019 by aforesaid notice dated 17/07/2019, was just and proper in the facts and circumstances of the case. As in view of the foregoing, that rejection of adjournment sought by the assessee, amounted to violation of principle of natural justice. Further, as discussed earlier in the foregoing paragraph (B.1) of this order, the requirement prescribed u/s 250(6) has not been fulfilled by the learned CIT(A). We set aside the impugned appellate order of the learned CIT(A) and we restore all the issues in dispute in the present appeal before us, to the file of the learned CIT(A) with the direction to pass denovo appellate order in accordance with law, after providing reasonable opportunity to the assessee; and further, in conformity with principles of natural justice; and furthermore, having due regard for requirements prescribed u/s 250(6) of IT Act.
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2023 (1) TMI 404
TP adjustment on account of brokerage commission - As submitted that for benchmarking the transactions by application of CUP, an adjustment of 40% has been granted by the coordinate bench of the Tribunal in assessee s own case for the preceding year - HELD THAT:- As respectfully following the order passed by the coordinate bench of the Tribunal in the assessee s own case [ 2022 (7) TMI 1210 - ITAT MUMBAI] we direct the AO/TPO to grant adjustment to the extent of 40% to the assessee while determining the arm s length price of international transaction of brokerage and commission. As a result, ground No. 1.3 raised in assessee s appeal is partly allowed. TP adjustment on account of payment of overseas support fee - HELD THAT:- Since the assessee is a stockbroker and its primary activity consists of institutional equities sales, therefore, it needs people who have relationships with the FIIs and can influence investments through the assessee thereby generating revenues for the assessee. The assessee has its head office outside India and the decision, on the basis of which the assessee gets its business viz. the decision to buy and sell securities on the Indian market are made by the head office situated outside India. The overseas sales and trading support fees are fees paid directly for such services which generate revenues for the assessee. Since this issue is recurring in nature and has been decided in favour of the assessee in preceding assessment years, therefore, respectfully following the judicial precedents in assessee s own case the AO/TPO is directed to delete the transfer pricing adjustment on account of the overseas support service fee. As a result, ground No. 2 raised in assessee s appeal is allowed. Disallowance of depreciation on BSE/NSE membership cards - HELD THAT:- In the present case, the assessee claimed depreciation on BSE and NSE membership cards on the basis that the same grant licence to the assessee to carry on broking business on the BSE and NSE, respectively, and thus the said membership is in the nature of licence‟ eligible for depreciation under section 32 of the Act. On a without prejudice basis, the assessee also submitted that they are clearly business commercial rights eligible for depreciation @25%. We find that in Techno Shares and Stocks Ltd [ 2010 (9) TMI 6 - SUPREME COURT] held that a non-defaulting continuing member of BSE is entitled to depreciation on BSE membership card, as the said right of membership is a licence or akin to licence in terms of section 32(1)(ii) of the Act. In the present case, the claim of the assessee was denied by placing reliance upon the decision of the Hon ble jurisdictional High Court, which decision has now been set aside by the Hon ble Supreme Court. Therefore we direct the AO to allow the depreciation on BSE and NSE membership cards to the assessee. As a result, ground No. 3 raised in assessee s appeal is allowed. Disallowance of depreciation on other intangible assets - HELD THAT:- We find no basis in upholding the disallowance of depreciation as claimed by the assessee on other intangible assets, which has been allowed to the assessee since the year of acquisition i.e. assessment year 2000 01, particularly in absence of any change in facts and law. Reliance in this regard is also placed on the decision of the Hon ble Supreme Court in Radhaswami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] . Hence, we direct the AO to grant the depreciation on other intangible assets under section 32 of the Act. Accordingly, ground No. 4 raised in assessee s appeal is allowed. Disallowance u/s 40A(2) in respect of payment made to Mr Ashith Kampani - HELD THAT:- We find that this issue is recurring in nature and has been decided in favour of the assessee in the preceding assessment years. We find that the coordinate bench of the Tribunal in assessee s own case [ 2022 (7) TMI 1210 - ITAT MUMBAI] we direct the AO to delete the disallowance made under section 40A(2) of the Act in respect of payment made to Mr Ashith Kampani. Accordingly, ground No. 5 raised in assessee s appeal is allowed. Disallowance u/s 14A - HELD THAT:- We find that in CIT vs Essar Teleholdings Ltd. [ 2018 (2) TMI 115 - SUPREME COURT] held that Rule 8D is prospective in operation and cannot be applied to any assessment year prior to the assessment year 2008-09. Thus, respectfully following the aforesaid decision, we are of the considered view that the AO has erred in applying Rule 8D of the Rules in the present case for the determination of disallowance under section 14A of the Act, as the said Rule does not apply to this year. Further, we find that in the preceding assessment years disallowance to an extent of Rs 1 lakh under section 14A of the Act has been upheld in assessee s own case - we direct the AO to restrict the disallowance under section 14A of the Act to an extent of Rs 1 lakh. Accordingly, ground No. 6 raised in assessee s appeal is partly allowed. Disallowance on account of transaction charges and lease line charges u/s 40(a)(ia) - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case for the assessment year 2005 06 following the decision of Hon ble Supreme Court in CIT vs Kotak Securities Ltd [ 2016 (3) TMI 1026 - SUPREME COURT] held that these charges are merely the recovery of the cost of infrastructure support and therefore, neither it falls under section 194J or section 194C - we direct the AO to delete the disallowance made under section 40(a)(ia) of the Act in respect of transaction charges and lease line charges. As a result, ground No. 7 raised in assessee s appeal is allowed. Disallowance on account of lease rental paid for the use of vehicles - claim of the assessee was denied by the Revenue on the basis that assessee s treatment of assets and liability in its accounts was as per the law and the principal amount for acquiring financial lease asset is a capital expenditure - HELD THAT:- Revenue has not brought anything on record to prove that the assessee is the owner of the leased assets. It is trite that entries in the books of account alone are not conclusive in determining the income of the assessee. Further, the Revenue has also not denied that such assets were acquired by way of lease and the same were not purchased by the assessee. Thus, we are of the considered view that the lease rental paid by the assessee is in Revenue nature. Before concluding it is also relevant to note that in the immediately preceding year the assessee has claimed lease rental paid in respect of the vehicles, which was allowed by the AO vide order dated 29/12/2008 passed under section 143(3) of the Act. Thus in absence of any change in facts and law, we find no merit in upholding the disallowance made by the AO on this issue. Accordingly, we direct the AO to delete the disallowance on account of the lease rental paid for the use of vehicles. As a result, ground No. 8 raised in assessee s appeal is allowed.
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2023 (1) TMI 403
Income deemed to accrue or arise in India - Subscription/distribution revenue received by the assessee - royalty under India - Mauritius Double Taxation Avoidance Agreement (DTAA) - nature and character of the distribution revenue received by the assessee - assessee is a non-resident partnership firm established under the laws of Mauritius and a Tax Resident of Mauritius - HELD THAT:- The distribution agreement between the assessee and ESPN Indian clearly stated that the transaction is on principal to principal basis. The agreement further allowed ESPN India to enter into agreement with sub-distributors/cable operators so that the channels can be distributed to end consumers in India. As per the terms of the agreement, the revenue earned from distribution of channels has to be shared between the assessee and ESPN India in certain ratio. The materials on record demonstrate that ESPN India is carrying on its distribution activity as well as other activities, such as, acquisition and allotment of air time for advertisement and sale/leasing of decoders. No material has been brought on record by the Revenue to suggest that the assessee has any kind of control over the business of ESPN India or the premises of ESPN India have been given at the disposal of the assessee or the assessee carries on any kind of business through the premises of ESPN India. It is ESPN India who has entered into contracts with cable operators for distribution of the channels in India and responsible for breach of contract with cable operators. The transaction between the assessee and ESPN India is limited to conferring of right to distribute the channels of ESPN Star Sports in India through cable operators. How, ESPN India does such distribution activity is not the concern of the assessee. Assessee is only concerned with share in distribution revenue depending on the total amount received by ESPN India from sub-distributors. We have also noted that in certain instances of alleged breach of contract between ESPN India and cable operators, it is ESPN India, which is liable and not the assessee. Other factors, such as, acquisition of air time and sale of decoders clearly indicate that ESPN India has its independent business and cannot be called as dependent agent of the assessee. Revenue has alleged that ESPN Indian is a DAPE, however, it has failed to demonstrate that in terms with Article 5(4) of India Mauritius Tax Treaty, ESPN India habitually exercises authority to conclude contracts on behalf of the assessee. That being the factual position emerging on record, in our view, ESPN India cannot even be considered to be a DAPE of the assessee. The decisions cited before us, particularly the decision of TAJ TV Ltd[ 2022 (3) TMI 1032 - ITAT MUMBAI] and Turner Broadcasting Systems Asia Pacific Inc [ 2020 (10) TMI 245 - ITAT DELHI] squarely apply to the facts of the present appeal. Therefore, following them, we hold that the assessee does not either had a fixed place PE or dependant agent PE in India under Article 5 of the India- Mauritius Tax Treaty. As undisputed factual position that ESPN India has been remunerated at arm s length and there are no adjustments suggested by the TPO in any of the assessment years under dispute. That being the case, no further attribution of profit can be made to the PE. In this regard, we rely upon the decisions cited by learned counsel for the assessee. Thus, we hold that the distribution revenue received by the assessee is not taxable in India. Withdrawal of interest entitlement u/s 244A by learned Commissioner (Appeals) - HELD THAT:- Before us, it is the contention of learned counsel for the assessee that since no refund has been granted to the assessee, question of withdrawal of interest under section 244A of the Act does not arise. Considering the aforesaid submission of the assessee, we restore the issue to the Assessing Officer for factually verifying assessee s claim and deciding it afresh in accordance with law after providing opportunity of being heard to the assessee. Short grant of credit of TDS - HELD THAT:- It is the claim of the assessee that TDS claimed in the revised return is reflected in form 26AS and appeal effect order passed by the AO. Therefore, complete credit of TDS should be given. We direct the Assessing Officer to factually verify assesee s claim with reference to From 26AS and TDS certificate and thereafter allow credit for TDS in accordance with law.
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2023 (1) TMI 402
Gain on sale of land - nature of land sold - capital asset or agricultural land - whether the agricultural land sold by the assessee on 30/03/2009, i.e., during the relevant year, is a capital asset under the Act or not, on the sale of which therefore capital gains shall, or as the case may be, shall not arise to the assessee? - HELD THAT:- The subject land in the instant case is neither located within the local limits of Panagar Municipality (Nagar Palika) nor within the specified distance of a notified municipality. We find no infirmity in the ld. CIT(A) regarding it as not a capital asset on that basis - He has for the purpose referred to the Notification dated 06/01/1994, also reproducing the same. He has however not stated if the said Notification is the latest such. We say so in view of the considerable time that has elapsed, with urban India expanding at a rapid pace since 1994, even as the law (s.2(14)(iii)), removing the requirement for the Notification by the CG, stood amended only w.e.f. 01/4/2014. There is also no basis on record for the stated distance of 18 km. of the subject land from the limits of the Jabalpur Municipal Corporation (MC), with reference to which, apparently the nearest notified municipal corporation, the agricultural land under reference has been found by him as an agricultural land u/s. 2(14)(iii) and, thus, not a capital asset. In fact, the said distance stands mentioned variously at 15 km.and 18 km. ( of his order. It is also not clear from his order if the said distance of 15 km/18 km from the local limits of the MC which change from time to time, is as obtaining as on the date of transfer and, further, if it is the shortest distance by road, an aspect of the matter which has, for years prior to AY 2014-15, attained finality with the Board Circular 17/2015, dated 06/10/2015. It is, in view of apparently two Villages, in fact even not clear if the land sold is a single, or more than one, piece of land. The matter is clearly factually indeterminate. Under the circumstances, we only consider it proper that the matter is restored back to the file of the AO to determine the issue with reference to the distance of the subject land from the extant local limits of the Jabalpur MC. If the same is more than 8 kms., i.e., the limit specified in the Notification for the Jabalpur MC, the subject land would be an agricultural land under the Act and, thus, not a capital asset, so that no capital gain shall arise on the sale thereof, else it shall. As we are remitting the matter, it would only be proper to require the AO to examine the aspect of the 1994 Notification as being the latest issued by CG in the matter, i.e., up to March, 2009, whereat the transfer in the instant case takes place. AO shall, accordingly, determine each of these aspects, of course upon confronting the relevant material to the assessee and hearing her thereon, i.e., where the same is/are contrary to her claim/s, adversely impacting the status of the subject land as held by the ld. CIT(A), and finally decide the issue of the status of the subject land u/s. 2(14)(iii) by rendering definite finding/s of fact. Revenue s appeal is allowed for statistical purposes.
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2023 (1) TMI 401
TP Adjustment - comparability of Assessee s Software Development Services segment - HELD THAT:- . Respectfully following the decision of the coordinate bench of the Tribunal in Sandisk India Device Design Centre P. Ltd. [ 2022 (6) TMI 1299 - ITAT BANGALORE] we exclude these companies viz., Persistent Systems Ltd., Infosys Ltd., Thirdware Solutions Ltd., L T Infotech Ltd., Nihilent Ltd., Aspire Systems India Pvt. Ltd. Infobeans Technologies Ltd., from the comparables. Companies functionally dissimilar with that of assessee need to be deselected. Interest on receivables - TPO treated the trade receivables beyond 60 days as an international transaction and adopted notional interest rate of 4.985% being LIBOR-6 months + 450 basis points, without providing the method of computation of such rate to the Assessee - HELD THAT:- As decided in M/s. Barracuda Networks India Private Limited [ 2022 (5) TMI 322 - ITAT BANGALORE] Determination of ALP in respect of the international transaction of giving extended credit period for receivables should be directed to be examined afresh by the AO/TPO on the guidelines laid down in the decision referred to in the earlier paragraph, after affording Assessee opportunity of being heard. As held in the aforesaid decision the prime lending rate should not be considered and this reasoning will apply to adopting short term deposit interest rate offered by State Bank of India (SBI) also. The rate of interest would be on the basis of the currency in which the loan is to be repaid. We hold and direct accordingly. Respectfully following the above decision of the coordinate bench we remit the issue back to the AO/TPO with a direction to examine the issue afresh after giving a reasonable opportunity of being heard to the assessee. The AO/TPO is also directed to consider the ratio laid down in the above decision while considering the issue afresh.
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2023 (1) TMI 400
Unexplained investment - investments in FDR in flat property remained unexplained - HELD THAT:- The assessee having explained the source in penalty proceedings, and the AO having accepted the same investments, there was no room to hold that the investment remained unexplained, therefore, there is no reason at all to confirm the two additions made on account of aforesaid two investments. As decided in BASIR AHMED SISODIYA VERSUS THE INCOME TAX OFFICER [ 2020 (4) TMI 793 - SUPREME COURT] held that factual basis on which the AO had formed his opinion in assessment order, having been dispelled by affidavits and statements of the concerned parties in penalty proceedings, there was no occasion for confirming the addition in quantum proceedings. The basis of addition made in the present case is the source of investment remaining unexplained. Now, the assessee having explained the source of investment, .DR cannot make out a new case for confirming the addition by stating that though the source of investment stands explained by loan taken by the assessee from his ex-employer, but since this loan was not repaid by the assessee, therefore, it partakes the nature of income by way of salary. This definitely was not the case of the AO and in an appellate proceedings, the Department is debarred from improving upon the case of the AO. We delete the additions made on account of investment made in FDR in flat. Assessee appeal allowed.
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2023 (1) TMI 399
TP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list. This Tribunal in Global Logic India Ltd. 2021 (11) TMI 1090 - ITAT DELHI , we direct Ld. AO/TPO to exclude Inteq Software Pvt.Ltd, L T Infotech Ltd., Infobean Technologies Ltd., Thirdware Solutions Ltd. from the final list of comparable for SWD segment. Companies functionally dissimilar with that of assessee need to be deselected. Notional interest on delayed receivables computed by the TPO - AR submitted that the amounts outstanding have been settled by the AE on an on-going basis in the normal course of business having regard to economic and commercial factors - HELD THAT:- This Bench referred to decision of Special Bench of Kolkotta Tribunal in case of in case of Instrumentation Corpn. Ltd. 2016 (7) TMI 760 - ITAT KOLKATA held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92B of the Act. We also perused decision relied upon by Ld.AR. In our considered opinion, these are factually distinguishable and thus, we reject argument advanced by Ld.AR. Alternatively, it has been argued that working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loan and advances to international transaction would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. 2018 (2) TMI 1151 - ITAT DELHI - we deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Working capital adjustment for computing the margin of the comparables - HELD THAT:- As decided in Huawei Technologies India P. Ltd. 2018 (10) TMI 1796 - ITAT BANGALORE there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore, in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore, the working capital adjustment as claimed by the Assessee should be allowed. We hold and direct accordingly. In view of the above, we remit the issue to the file of AO/TPO to compute the working capital adjustment after necessary examination in the light of the above observation and after allowing an opportunity of hearing to the assessee.
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2023 (1) TMI 398
Delayed Employee s contribution u/s 36(1)(va) - HELD THAT:- The Hon ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee s contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon ble Karnataka High Court. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1). The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made u/s 36(1)(va) of the Act, deserves to be deleted. Appeal of the assessee is allowed.
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2023 (1) TMI 397
Unearned revenue - Disallowance made by the AO towards unearned income shown by the assessee as current liability in the balance sheet - Assessee claimed that, the amount shown as unearned revenue is offered to tax in the subsequent year in which the services are rendered. The AO did not accept the contentions of the assessee and added the entire amount - HELD THAT:- Vide Notification No. 9949, dated 25-1-1996, Accounting Standard I relating to disclosure of accounting policies and Accounting Standard II relating to disclosure of prior period and extraordinary items and changes in accounting policies had alone been notified as Accounting Standards to be followed by an Assessee and no other accounting standard has been notified. In the present case, CIT(Appeals) has recorded a finding that the reconciliation substantiating the recognition of revenue in subsequent years was not produced by the assessee. Further, we agree with the argument of the ld. DR that the claim of the assessee requires to be factually verified in terms of the matching concept. We also notice that in the decision relied on by the AR in the case of Ericsson India Pvt. Ltd. 2022 (3) TMI 674 - DELHI HIGH COURT the decision was rendered in favour of the assessee by the Hon ble High Court after factual verification of the details pertaining to the advance payments. It is clear that the following facts are to be verified before coming to the conclusion on the treatment of unearned income in the hands of the assessee. (i) The financials of the assessee is to be verified to substantiate that the accounting practice is consistently followed. (ii) Revenue neutrality in terms of income deferred is offered to tax subsequently needs to be examined (iii) Whether the revenue earned is contingent upon the assessee performing its obligations and rendering services to the pre-paid customers. The additional evidence in the form of invoices and the party wise breakup of the unearned income that is produced before us requires verification by the lower authorities to decide the case on merits. In view of the above, we remit the issue back to the AO for de novo consideration of the issue afresh in accordance with law, after giving reasonable opportunity of being heard to the assessee. Assessee is directed to produce all the required documents in support of its claim and cooperate in the remand proceedings. This ground of the assessee is allowed for statistical purposes. Disallowance u/s. 40(a)(ia) - assessee in the computation of total income has deducted a sum on the reason that this amount was disallowed in the preceding previous year as TDS was not done and in the current year the expenses were reversed - HELD THAT:- This fact has not been properly presented before the lower authorities. The lower authorities have to examine whether the year-end provision made on 31st March 2012 is fully reversed on 1st April 2012 and the expenses against which the provision was created is debited to the profit and loss account on payment after deducting TDS. This verification need to be carried out based on the journal entries and ledger copies produced by the assessee for the year under consideration. If the accounting practice of the assessee to reverse the expenses on the 1st day of April of the year under consideration is substantiated by the evidences submitted by the assessee whereby it is demonstrated that there is no doubt allowance expenditure then the assessee would be entitled to claim the amount disallowed in the previous assessment year as otherwise it would amount to double disallowance. We therefore remit the issue back to the AO to verify the ledger and general entries of the assessee for the year under consideration and allow the expenditure in accordance with law. The assessee may be given a reasonable opportunity of being heard in this matter. The appeal is allowed in favour of the assessee for the statistical purposes. Treatment of unearned revenue - AR submitted the additional evidence of partywise breakup and the invoice details for these years also before us. Considering our decision we admit the additional evidence and remit the issue to the AO with similar directions as given for assessment 2013-14. Further for the assessment year 2015-16 the AO is directed to take into consideration the amendment made with effect from 1/4/2015 to section 145(2) while deciding the issue.Appeals of the assessee are allowed for statistical purposes.
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Customs
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2023 (1) TMI 396
Seeking provisional release of goods - import of consignment of mobile parts - difference in the description and quantity of consignment - HELD THAT:- On instructions learned Solicitor goes on to submit that Additional Commissioner of Customs, Air Cargo Complex, Meenambakkam, Chennai-600 027 is the 'Adjudicating Authority' for the purposes of Section 110A read with Section 2 (1) of said Act, he would pass orders afresh qua provisional release sought for by the writ petitioners under Section 110A and the orders would be served under due acknowledgement in an acceptable mode to writ petitioners within two working days from today i.e., on or before 06.01.2023. This submission is also recorded. Though obvious it is made clear that this Court has not expressed any view or opinion on the merits of the matter and as regards orders to be made by aforementioned officer i.e., 'Adjudicating Authority', all rights and contentions of both sides including the prayers made in the captioned writ petitions are preserved. Petition disposed off.
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2023 (1) TMI 395
Refund of SAD - original files/documents/Bills of Entries were seized by Superintendent(Preventive) - rejection of refund also on the ground of time limitation - HELD THAT:- In the present case there is no denial of the fact that the appellant was not in position to file the refund claims within the prescribed period of limitation for the reason that the documents on the basis of which these refund claims were to be filed were under seizure and were seized prior to the expiry of the period of limitation. Both the lower authorities have observed that the refund claims could have been filed without these documents on the basis of the book of accounts maintained by the appellant. There are no merits in this observation in view of the specific provisions of Section 27 (1A) reproduced above as per which refund claims are to be filed along with the required documents. Even if the refund claims would have been filed without these documents, the same could again have been rejected for the absence of these documents or returned along with the deficiency memo for being re-submitted. In any case the refund application would not have been acknowledged by the department till it was filed along with all the documents. Undisputedly the necessary documents which were required for filing this refund application were under seizure, and the refund application would not have been acknowledged by the revenue authorities without these documents. The condition which is stated to be the reason for rejection of the refund claims is something which could not have been complied with. Appeal allowed.
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Insolvency & Bankruptcy
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2023 (1) TMI 394
Completion of pleadings and filing of Counter - whether the pleadings were complete and whether this matter could be treated as a part heard matter and clubbed with the other connecting matters listed on 05.12.2022? - HELD THAT:- A perusal of all the Daily Orders relevant to this case and filed before us clearly shows that despite several opportunities given to the Appellant, from October, 2020 onwards till August, 2022 and despite imposition of Rs. 50,000/-, the Corporate Debtor failed to file the Reply for two long years and subsequently chose to file a Preliminary Counter. The Code is a Time Bound Proceeding which does not provide for filing a Preliminary Counter and subsequent Final Counter, which is nothing but delaying tactic adopted by the Appellant herein, in support of their submissions that the pleadings are not complete. The Orders dated 19.09.2022 25.11.2022 clearly show that all the pleadings have been completed and the Appellant/ Corporate Debtor has delayed the matter seeking several adjournments. The Hon ble Supreme Court in a catena of Judgments, has time and again laid down that the IBC is a time bound process, and any such delays, is deprecated. No wonder, Speed is the essence of the Code. There is absolutely no error whatsoever in the impugned order, dated 05.12.2022, passed by the Adjudicating Authority. Accordingly, this Appeal is devoid of merits and the same is dismissed, to secure ends of Justice.
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2023 (1) TMI 393
Jurisdiction of Adjudicating authority to Remove Resolution Professional - direction to hand over all records/documents to the newly appointed RP - HELD THAT:- In the present case the RP who was expected to convene the CoC Meeting was avoiding to convene the Meeting despite a request made by the applicant/respondent herein vide email dated 06.10.2021 for convening the Meeting with agenda to remove the RP. Accordingly the applicant was left with no option but to approach the Adjudicating Authority and the Adjudicating Authority has rightly exercised its inherent jurisdiction. Moreover it is settled law that one who appoints can also remove/dismiss the appointee. This position is further clarified on examination of Section 16 of The General Clauses Act, 1897. The Hon ble Supreme Court in M/s. Heckett Engineering Co. Vs. Their Workmen reported in [ 1977 (10) TMI 128 - SUPREME COURT] has held that the Appointing Authority can also dismiss the appointee. In the present case, the Adjudicating Authority being the appointing authority of IRP/RP was well within its jurisdiction to pass an order for removal of the RP particularly in a situation where the RP had not taken any steps to convene a meeting of the CoC for the purposes of removal of RP. The Adjudicating Authority with an object to implement the provisions of IBC in its letter and spirit has rightly exercised its inherent jurisdiction by way of passing order of removing the appellant as RP of the CD. This fact which is reflected on record is sufficient to draw an inference that the Appellant was proceeding contrary to the statutory provisions as contained in the IBC and also delaying the smooth conclusion of CIRP - there is no defect in the impugned order warranting interference by this Tribunal. On the contrary the conduct of the appellant/RP which was observed by the Adjudicating Authority and reflected so in the impugned order is sufficient enough to direct IBBI to conduct an inquiry regarding the role played by the RP in this matter. Appeal dismissed.
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Service Tax
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2023 (1) TMI 392
Rejection of refund claim - transitional provisions - rejection on the ground of time limitation and unjust enrichment - HELD THAT:- Under the transitional provision Section 142 of CGST Act, limitation have been done away with for the purpose of refund arising under the existing law. The appellant have demonstrated during the course of hearing by producing extracts from their accounts maintained on SAP system, wherein they have demonstrated that they have debited the invoices which were raised and no service was provided, and have also demonstrated the copies of credit notes issued to their customers. In the facts and circumstances, appellant have not taken any credit in their accounts, nor claiming transition refund by through Form TRAN-1 through GST regime. Further, it is found that appellant have passed the bar of unjust enrichment, as under the facts and circumstances they have not passed on any credit to their customers which is duly certified by their Chartered Accountant. Appeal allowed.
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2023 (1) TMI 391
Levy of service tax - providing business support service to doctors by providing facilities and administrative support to them - April 01, 2012 to March 31, 2013 - HELD THAT:- The patients will be billed according to the charges stipulated in the chargelist and out of the total fees (after the deduction of TDS) settled at the time of appointment, 78% would be paid to the doctors and the remaining 22% will be retained by the Hospital. The Commissioner has found that the amount retained by the Hospital is towards the services rendered by the Hospital to the doctors for providing all the necessary facilities which are necessary and without which the doctors cannot perform their activities and therefore, the said service would be classifiable under section 65 (104) (c) as support services of business and commerce and taxable under section 65 (105) (zzzq) of the Finance Act 1994. This precise issue had come up for consideration before two Benches of the Tribunal in Ganga Ram Hospital [ 2017 (12) TMI 509 - CESTAT NEW DELHI 2020 (11) TMI 536 - CESTAT NEW DELHI ]. The first decision rendered on December 06, 2017 [ 2017 (12) TMI 509 - CESTAT NEW DELHI ] was considered in the subsequent decision rendered on September 02, 2020 [ 2020 (11) TMI 536 - CESTAT NEW DELHI ] - The Tribunal, after a consideration of the conditions prescribed in the agreement held that the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits and, therefore, no service was provided by the hospital to the doctors. Thus, the Commissioner was not justified in confirming the demand of service tax under the head business support services - appeal allowed.
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2023 (1) TMI 390
Levy of Service tax - sharing of Revenue - unique deployment of constituents, that make up channel entities involved in exhibition of cinematographic films, in an arrangement by which several distributors participate in sharing of revenue - distinct entities rendering service in de-mutualized capacity on principal-to-principal basis - HELD THAT:- The issue in dispute stands resolved by the decision of the Tribunal in their own matter in M/S. RELIANCE MEDIAWORKS LIMITED VERSUS COMMISSIONER, SERVICE TAX-VI, MUMBAI [ 2022 (4) TMI 253 - CESTAT MUMBAI] where it was held that This issue had come up for consideration before a Division Bench of the Tribunal in M/S PVS MULTIPLEX INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT-I [ 2017 (11) TMI 156 - CESTAT ALLAHABAD] . The Bench observed that as the appellant was screening films on revenue sharing basis, the appellant was not liable to pay service tax on the payments made to the distributors for screening the films. Appeal allowed.
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Central Excise
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2023 (1) TMI 389
Clandestine manufacture and removal - Special Boiling Point Spirit classifiable under Central Excise Tariff Sub-heading 2710.1213 commercially known as EPC solvent - HELD THAT:- The issue has been dealt with in a very cursory manner without taking note of the objection raised by the appellant in their reply to the show cause notice. The adjudicating authority has stated that no doubt has been raised by the appellant with regard to the observations of the chemical examiner. This finding is factually incorrect as this was specifically raised in the reply to the show cause notice in Paragraph 21(c) therein. The learned senior standing counsel had referred to certain paragraphs of the adjudicating order and in particular paragraphs 3.2, 6.3, 6.5, 6.8 and 6.9. Paragraph 3.2 is the statement of the case which is partially culled out from the averments in the show cause notice and partially from the reply given by the appellant. Paragraph 6.5 deals with the chemical examiners report which we have also considered and held that the chemical examiner report is of little avail as the report does not address the queries which was raised apart from the fact that the report was submitted after seven months after the drawl of the samples. On a cursory reading of the paragraph 6.8 of the adjudicating order, one gets the impression that the adjudicating authority recorded a positive finding that the process done by the appellant is manufacture . But on a closer reading, we find it is only a discussion about certain decisions which was referred to by the adjudicating authority and nothing turns out on the facts of the case on hand. The issue in the case on hand relates to classification of a product which requires to be done in a scientific manner and such classification cannot be determined and concluded based on statements given by either the Director of the company or their employees. The adjudication order is thoroughly flawed more particularly on the ground of limitation - Petition allowed.
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2023 (1) TMI 388
CENVAT Credit - capital goods - availment of 100% credit on wooden dies, aluminum litho plates and rubber blanket under the category of inputs - Revenue is of the view that these are capital goods and therefore only 50% credit should have been taken in first year - Seeking reversal of Cenvat credit, interest and imposition of penalty - time limitation - HELD THAT:- The issue involved in the case GUARDIAN PLASTICOTE LTD. VERSUS COMMISSIONER OF C. EX., DAMAN [ 2008 (12) TMI 534 - CESTAT, AHMEDABAD] is similar to the issue involved in the instant case that using engraved printed cylinder is an inputs. It was held by the Tribunal that on the ground of limitation, the demand for the period beyond one year from the date of show cause notice fails. I also agree with the ld. Advocate s argument that the lower authorities have not considered as to whether the cylinder can be considered as an input. This aspect needs to be considered in detail. Therefore the matter has to go back to the Original Adjudicating Authority to consider whether cylinder can be considered as an input or it has to be treated as capital goods. It is noticed that in the instant case also, the nature of goods being capital goods or inputs, can be a matter of opinion - Relying on the decision of the Tribunal in the case of Guardian Plasticote Limited vs.CCE, Daman and the fact that the learned Counsel has admitted that they are ready to pay interest for the disputed period, the appeal is partly allowed. The matter is remanded to the Adjudicating Authority to calculate the amount of interest involved. In the facts of the case, the penalty is set-aside. The appeal is allowed by way of remand to the Adjudicating Authority.
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2023 (1) TMI 387
Denial of CENVAT Credit - Capital Goods - steel rack used for storage in the premises of the appellant s factory - HELD THAT:- The issue is squarely covered by the aforesaid decision of Tribunal in the case of C.C.E. S.T. -RAJKOT VERSUS SANGHI INDUSTRIES LTD (VICE-VERSA) [ 2022 (5) TMI 475 - CESTAT AHMEDABAD] where it was held that According to the definition of input as it existed during the relevant period, inputs used in the factory for any other purpose the credit is admissible. In this case there is no denial of the fact that furniture had been used within the factory. Appeal allowed.
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2023 (1) TMI 386
Denial of CENVAT Credit - premium paid for group insurance to cover employees opting for voluntary separation scheme (VSS) - HELD THAT:- The dispute stands resolved by response of the Larger Bench of the Tribunal in M/S. RELIANCE INDUSTRIES LTD., VADODRA VERSUS COMMISSIONER CENTRAL EXCISE SERVICE TAX (LTU) , MUMBAI [ 2022 (4) TMI 1357 - CESTAT MUMBAI (LB)] relating to denial of credit availed in March 2007, where it was held that the appellant would be entitled to avail CENVAT credit on the service tax paid on insurance premium for employees who had opted for the Voluntary Separation Scheme . Appeal allowed.
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CST, VAT & Sales Tax
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2023 (1) TMI 385
Seeking exemption under Section 4-A (5) of the U.P. Trade Tax Act - manufacture of Spun Line Crown Cork in the year 1986, used as one of the packing materials of the glass bottles - manufacture of double Lip Dry Blend Crown under the program of diversification - It was submitted that under the term modernization only those units fall, which by the modern technical produce the same goods and the scheme of modernization do not apply on the units which produce different goods. Whether for the goods, manufactured by use of modern technologies can be said to be diversification , and manufacturing of the goods of a nature different from the goods manufactured earlier entitle the appellant to claim the exemption from trade tax as provided under Section 4-A (5) of the U.P. Trade Tax Act? HELD THAT:- It is clear that in case of diversification the goods manufactured by diversification shall be different from the goods manufactured before such diversification [Section 4-A(2)(c)] - In the case of expansion or modernization , the exemption shall be available, if there is an additional production as a result of such modernization or expansion. In the present case, we are concerned with the case of diversification . Therefore, the goods manufactured after diversification must be different goods from the goods manufactured before such diversification. As per the settled position of law, in case of an exemption notification/exemption provision, the same is required to be construed literally and the person claiming the exemption must satisfy all the conditions of exemption provision. In the present case, the appellant was manufacturing / producing Spun Line Crown Cork used for sealing the glass bottles. With the use of modern technologies, now the appellant is manufacturing Double Lip Dry Blend Crowns , which is also used for sealing the glass bottles. The earlier product being manufactured by the appellant was used for sealing glass bottles and subsequently the additional product produced with the use of modern technology is also being used for the same purpose namely, sealing glass bottles . Therefore, the same cannot be said to be manufacturing of goods different from being manufactured before such diversification. With the passage of time, due to advancement in technology, if there is a replacement of the old machinery with the new machinery for improvement in quality and quantity of a product, at the most, it can be said to be expansion and/or modernization, but it cannot be said to be diversification , which is manufacturing of goods different from the goods manufactured before such diversification - the Statute and more particularly, the exemption provisions are to be read as they are and to be construed literally and should be given a literal meaning. Giving the literal meaning to the exemption provision namely, Section 4-A, it cannot be said that the appellant is entitled to the exemption as claimed. When the provisions of the Act unequivocally provides that the diversification can be considered only in a case where goods of different nature are produced, and only then the exemption shall be available. The goods manufactured on diversification must be a different , distinct and a separate good in nature. In the present case, the goods manufactured on use of advance and/or modern technology, cannot be said to be a different commercial activity at all. The High Court has not committed any error in refusing to grant exemption to the appellant. We are in complete agreement with the view taken by the High Court. Appeal dismissed.
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2023 (1) TMI 384
Initiation of re-assessment proceedings - escaped assessment - initiation on the ground that three Form-C issued by the purchasing dealer, which was situated in the State of Rajasthan had not entered the same in the books of accounts and the said three Form-C are not verified - HELD THAT:- On perusal of material on record and find that after the two round of remand of the matter by the first Appellate Authority, the Tribunal, after considering the material on record and calling for the records of the Assessing Authority, had found that the three Form-C, which were issued to the selling dealer, was issued by the Tax Department of State of Rajasthan and the assessment of purchasing dealer has already been done in his State. The Tribunal has further recorded a finding that the books of accounts of the assessee was already accepted and there was no ground for initiating proceedings under Section 21 of the Act for reassessment and there was no material on record to make out a case that any turn over has escaped assessment. The findings of fact has been recorded by the Tribunal which needs no interference by this Court. Revision dismissed.
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2023 (1) TMI 383
Disallowance of branch transfer - Penalty under Section 9(2) of the Central Sales Tax Act, 1956 - HELD THAT:- The facts on record indicate that despite, notice being issued prior to passing of order dated 21.04.1997, the first respondent assessee failed to reply to the same. Therefore, the Additional Appellate Assistant Commissioner vide order dated 27.01.1999, confirmed the revision order of the Assistant Commissioner dated 21.04.1997, vide order dated 27.01.1999, dismissed the appeal. Only in so far as levy of penalty, the matter was remanded back to the Assessing Officer to ascertain whether, penalty was to be levied under Section 12(3)(b) of the TNGST Act or under Section 16(2) of the TNGST Act. The Tribunal has however reversed the order of the Appellate Tribunal vide impugned order. Reading of the order of the Tribunal indicates that it is a common order passed for three Assessment Years. There is no discussion in so far as alleged branch transfer in Bangalore. The employee of the first respondent assessee was not only a Branch Manager of the first respondent assessee but also partner of M/s.Karthik Engineering to whom the invoices were raised from the Branch in Bangalore - Mere location of the dealer in Karnataka at Door.No.36, J.C.Bose Road, Bangalore and appellants at 16-B, G.N.Lalbagh Road, Bangalore, ipso facto , would not justify a conclusion that there was a stock transfer first and thereafter a sale to the said dealer. Even then, a first sale would have taken place from a depot to the dealer in Karnataka, thereafter, a second sale from the dealer i.e., M/s.Karthik Engineering to its customer. The order of the Appellate Tribunal allowing the appeal of first respondent assessee is un-sustainable - the case remanded back to the Assessing Officer to determine the penalty is correct and was wrongly interfered by the Appellate Tribunal.
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2023 (1) TMI 382
Levy of penalty under Section 58 (XIX) of VAT Act - existence of mens rea or not - suppression of value of goods - it is alleged that the declaration form produced by the assessee did not bear the seal and the original and duplicate copies of the declaration forms also bore different signatures of the seller - HELD THAT:- The submission of Mr. Maulekhi, learned counsel for the State, that the value of the goods being transported was declared to be only Rs. 05 lakhs, whereas the actual valuation of the goods was to the tune of Rs. 16.38 lakhs, is not borne out from the records. In fact, the order under Section 58(XIX), passed by the Deputy Commissioner itself records that the value of the consignment was declared at Rs. 16,38,324/-. The submission of Mr. Maulekhi founded upon the factual finding recorded by the Deputy Commissioner (Commercial Tax) in the order imposing penalty under Section 58(XIX) to the effect that declaration form produced by the revisionist-assessee did not bear the seal, and that the original and duplicate copies of the declaration form also bears different signatures of the seller, also does not appear to be correct. We may observe that the same finding was also returned by the First Appellate Authority. There is absolutely nothing to show that there is any discrepancy in the original and the duplicate copy of the Form 16 declaration, placed on record. The said declaration forms bear the same signature of Sri Ram Krishna for Brij Lal and sons, the revisionist. Even the signatures of the seller appear to be the same to the naked eye. Both the copies also bear the seal of Brij Lal and sons, as also the official seal. Counsel for the respondent has also not been able to point out any difference in the two copies of the form. There are merit in the submission of learned Senior Counsel for the revisionist that since the aspect of the trip sheet not disclosing goods covered by the three bills in question, namely, bill Nos. 863, 864 and 865 was not mentioned in the show cause notice, the same cannot be made basis for imposing penalty - Considering the fact that this was a first such instance, as also the fact that the revisionist had produced the declaration from in Form 16 without any delay along with its reply to the show cause notice, the revisionist had rebutted the statutory presumption raised by Section 65 of the Act. Petition allowed.
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