Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 18, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of SCN - Assessment u/s 74 - audit u/s 65 was initiated / commenced by the audit team of GST - There is nothing to demonstrate that when the audit under Section 65 has been kick started by way of a notice, show cause notice under section 74 is impermissible. Therefore, it is not necessary to even dilate on the principles governing interference by a writ Court qua show cause notice - Petition dismissed. - HC
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Refund of accumulated ITC - inverted tax structure - Right to file an appeal - time limitation - It is deemed appropriate to direct the first respondent to take up the representations dated 14.11.2022 and consider the same on merits after eight weeks from today - HC
Income Tax
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Principle or the doctrine of mutuality - Tribunal for the earlier years, has held that even if there are non-permanent members, non-life members, temporary or honorary members, they are not entitled to vote or offer themselves as candidates for any elective office, or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principle of mutuality. - Tribunal was not justified in taking the view that the principle of mutuality would not apply with reference to transactions entered into by the appellant with the non-permanent and non life members. - HC
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Correct head of income - Profit or loss derived from sale of land - Assessee has computed profit or loss derived from sale of land under the head ‘capital gains’ to derive the benefit of indexation, otherwise, all evidences including accounting system clearly suggest that impugned land sold by the assessee was stock-in-trade and profit or loss derived from sale of said land is assessable under the head ‘income from business or profession’. - AO as well as the Ld.CIT(A) were right to assess profit or loss derived from sale of land under the head ‘income from business or profession’ - AT
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Addition u/s. 68 - on the amounts received as loan, assessee had paid interest and had also deducted TDS on the interest paid. The factum of lending the money through banking channels is not doubted by the Revenue. Further the identity and capacity of the lender is proved by the fact that the assessee has placed documents to show that lender is an Income Tax payer, is assessed to tax and for the year under consideration, the lender has disclosed gross total income which is more than the amount advanced. - Additions deleted - AT
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Assessment of income from house property - Co-ownership of property - the property has been purchased by husband and wife in co-ownership jointly. The assessee is not a housewife. Computation of income for AY 2015-16 appearing at page 2 of Paper Book shows that she is salary earner and earned salary of Rs. 24 lacs - Additions in the hands of wife confirmed - AT
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TDS u/s 195 - Payment of royalty under India – Netherlands Double Taxation Avoidance Agreement - aircraft maintenance cost - the entire repair work was carried out outside India, therefore, the assessee had no liability to deduct tax as the income was not taxable in India. Insofar as the expenses on Logo printing, the revenue has failed to demonstrate that the make available condition under Article 12(4B) of the Treaty is fulfilled. - AT
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Penalty u/s 271B - no tax audit conducted u/s 44AB - bonafide belief - When Gross profit is more than Rs.4 crores, it means the Gross Receipts were definitely more than Rs.1 crores - Assessee in the case has receipts more than Rs.1 crores. Therefore, the assessee was under obligation to audit the books of account as per section 44AB of the Act - any amount above Rs.1 crores will attract minimum penalty of Rs.1,50,000/- - AT
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Assessee is an AOP or cooperative society - The assessee has himself obtained PAN No. in the capacity of AOP and from the alphabets of PAN, it is clear that the assessee is an AOP, the arguments taken by the assessee does not survive. - Howeve, the assessee is a cooperative society for the purpose of Income-tax Act and assessee is eligible for claiming deduction as per sec. 80P(2)(a)(i) - AT
Corporate Law
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Rejection of scheme of arrangement - in the light of the violations, committed by the Appellants, under the Companies Act, keeping in mind that both the Companies had not given replies, to the Show Cause Notices, issued by the Registrar of Companies, Ernakulam, Kerala, and also taking note of the surrounding facts and circumstances of the present case, comes to an inevitable, inescapable and irresistible conclusion that the Appellants, had not made out a fit and proper case, for Sanctioning the Scheme of Amalgamation, in accordance with Law - AT
Indian Laws
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Scope of legislative powers - levy of tax or penalty - The Legislatures of the State have not only the power to make laws on the taxation to be imposed on motor vehicles as also the passengers and goods being transported by motor vehicles but also the power to lay down principles on which taxes on vehicles are to be levied. In the absence of any principles having been laid down by the Parliament, no fault could be found in the law enacted by Legislature of the State of Himachal Pradesh. - it cannot be said that levy of such an additional special road tax would be said to be manifestly unjust or glaringly unconstitutional. It was, in effect, to ensure payment of the chargeable taxes and use of the vehicles as per the terms of the permit. - SC
IBC
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Right of claim over the amount available - Avoidance of preferential transactions - The amount that is available after the transactions are avoided cannot go to the kitty of the resolution applicant - The purpose of the avoidance application as stated above is to enhance the asset pool available for the decision of creditors who are primarily financial institutions and have taken the haircut in agreeing to accept a much lesser amount than what was due and payable to them. This is public money, and, therefore, the amount that is received if and when transactions are avoided and receive the imprimatur of adjudicating authority must be distributed amongst the committee of creditors in a manner determined by the adjudicating authority. - HC
PMLA
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Validity of Search and seizure - In the instant case the record reveals that the Additional Director of Enforcement Directorate without recording the ‘reasons to believe’ as contemplated under Section 17 (1) of PML Act, issued Search Warrant/Authorisation to the Deputy Director to conduct search and seizure of the premises of the petitioners and thereafter the Deputy Director recorded ‘reasons to believe” without any date and time. - proceedings set aside - The respondents are directed to release all the jewellery, cash and other articles seized - HC
Central Excise
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Invocation of extended period of limitation - In the absence of any allegation made in the show cause notice that the appellant had suppressed facts with intent to evade payment of duty, the Department could not have invoked the extended period of limitation under section 11A(4) of the Act. This issue was raised by the appellant before the Commissioner (Appeals), but no finding has been recorded. - The extended period of limitation could not have been invoked. - AT
VAT
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Refund of Tax paid on beer - unsold stock due to Covid Pandemic - As such, the plea of the petitioner that non-removal of beer from the warehouse during the period of its shelf life on account of Covid lockdown would not make it liable for payment of countervailing duty in terms of proviso to section 28(1) of the Act, does not hold good in the eye of law since the taxable event occurs on the import of liquor into the territory of the State, as per the provisions of Section 27 (1) (a) of the Act. - HC
Case Laws:
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GST
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2023 (1) TMI 679
Constitutional Validity of Sr. No. 9(ii) of the N/N. 8/2017-Integrated Tax (Rate) dated 28.06.2017 - N/N. 10/2017 Integrated Tax (Rate) dated 28.06.2017 - Levy of IGST - services by way of transportation of goods by vessel from a place outside India - Scope of 'Importer' within meaning of Section 2(26) of the Custom Act, 1962 - recipient of service - HELD THAT:- In view of the decision of this Court in UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2022 (5) TMI 968 - SUPREME COURT] , where it was held that The impugned levy imposed on the service aspect of the transaction is in violation of the principle of composite supply enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the composite supply , comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the supply of services by the shipping line would be in violation of Section 8 of the CGST Act, the petition stands dismissed.
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2023 (1) TMI 678
Maintainability of appeal - Requirement to furnish acknowledgement of online filing of the appeal - whether due to the mistake of the department or the technical glitch in software when an appeal of assessee is not reflected on the portal, whether the authorities can deny to entertain the appeal filed offline on technical grounds? HELD THAT:- This is a case where the Taxing Authorities of the State are contesting tooth and nail up till this Court preventing the assessee from consideration of his appeal offline though, prima facie, it is clear that the appeal filed by the assessee is not being reflected on the web-portal of the department. The department is trying to justify its stand that an appeal will lie against a summary order passed in DRC-07 under Rule 142(5) of the Rules and not against the original order, which was passed under Section 74 of the Act - Section 107 of the Act of 2017, which provides for appeal against the adjudication order, clearly states that any person aggrieved by any decision or order passed under the Act or the State Goods and Services Tax Act or the Union Territory Goods and Service Tax Act by an adjudicating authority may appeal to such Appellate Authority. The legislature has not put any embargo upon filing of an appeal before the Appellate Authority by a person aggrieved, against any order. There is absolute clarity by the legislature as to the notification which has to be published by the State Government in the official gazette. Once no such notification has been issued, it would be presumed that other mode of filing the appeal would be offline - this Court finds that the taxing authorities cannot stop any assessee from claiming his statutory right, as provided under this Act in the garb of technicality. The correspondence dated 30.06.2022 issued by the respondent No.2 is hereby set-aside. The Additional Commissioner, Grade-II (Appeals)-1, Commercial Tax, Kanpur, is hereby directed to consider the appeal of the assessee filed offline strictly in accordance with law within a period of one month from the date of presentation of a certified copy of this order before him - Petition allowed in part.
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2023 (1) TMI 677
Validity of SCN - It is the specific case of writ petitioner that an audit under Section 65 of C-G ST and proceedings pursuant to a SCN under Section 74 read with Rule 142 (1) of CG ST Rules thereunder cannot proceed simultaneously - HELD THAT:- The inspection was on 16.03.2020 and the first impugned notice was issued on 30.08.2022 this being a notice qua audit under Section 65 of TN-G ST Act , the SCN dated 18.10.2022 was issued thereafter. Therefore, the SCN qua S ection 74 of C-G ST Act is post notice for audit under Section 65. This by itself douses the primary argument of the writ petitioner. It is well open to the writ petitioner to make it clear that the documents have already been submitted and that the same has been articulated/captured in the show cause notice itself. There is nothing to demonstrate that when the audit under Section 65 has been kick started by way of a notice, show cause notice under section 74 is impermissible. Therefore, it is not necessary to even dilate on the principles governing interference by a writ Court qua show cause notice - Petition dismissed.
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2023 (1) TMI 676
Refund of accumulated ITC - inverted tax structure - Right to file an appeal - time limitation - HELD THAT:- The 'three respondents' are collectively referred to as 'State' or 'Revenue'. Revenue certainly has a right to file an appeal under Section 112 of C-G ST Act as right of appeal is a statutory right. This writ Court is informed without any disputation or contestation by both sides that Tribunal qua Section 112 of C-G ST Act is yet to be constituted. This means that it is open to State to file a writ petition in this Court assailing aforementioned two orders of Appellate Authority. This Court is informed that the limitation i.e., prescribed period of limitation qua appeal to Tribunal under Section 112 of C-G ST Act is six months from the date of the order of Appellate Authority. That six months in the case on hand is yet to elapse but it is in the anvil - A careful perusal of this Order and more particularly paragraph 2 of this Order and to state with greater specificity paragraph 2(b) (i) (ii) of this Order shows that later of two dates can be taken into account for arriving at the reckoning date. As this Order is not under challenge before this Writ Court, the questions as to whether this Order will apply, whether it would pass muster qua Rule making powers under parent Statute and whether the Revenue has to file a writ petition within prescribed time (limitation). It is deemed appropriate to direct the first respondent to take up the representations dated 14.11.2022 and consider the same on merits after eight weeks from today i.e., after 10.03.2023 - Petition disposed off.
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2023 (1) TMI 675
Seeking grant of bail - alleged tax evasion already been deposited with the revenue by the recipient(s) - HELD THAT:- In present case, the petitioner is in custody since 08.11.2022, investigation as against him is complete, the amount of alleged tax evasion has already been deposited with the revenue by the recipient(s). The bail application is allowed and it is directed that accused-Vikas Bajoria S/o Shri Suresh Kumar Bajoria shall be released on bail under Section 439 Cr.P.C. in connection with afore-mentioned FIR registered at concerned Police Station, provided he furnishes a personal bond in the sum of Rs.1,00,000/-together with two sureties in the sum of Rs.50,000/- each to the satisfaction of the trial court with the stipulation that he shall comply with all the conditions laid down under Section 437(3) Cr.P.C.
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Income Tax
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2023 (1) TMI 674
Scope of alternative remedy - Reopening of assessment u/s 147 - notice under Section 148A(b) - High Court [ 2022 (6) TMI 417 - PUNJAB HARYANA HIGH COURT] held in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy - proceedings initiated are yet to be concluded by a statutory authority. HELD THAT:- We with the petitioner that the impugned judgment rejecting the writ petition on the ground of alternative remedy does not take into consideration several judgments of this Court, on the jurisdiction of High Court, as writ petitions have been entertained to be examined whether the jurisdiction preconditions for issue of notice under Section 148 of the Income Tax Act, 1961 is satisfied. The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in depth consideration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy, clarify that this issue would be examined in depth by the High Court if and when it arise for consideration. We do deem it open to examine this issue in the present case after having examined the notice under Section 148A (b) including the annexure thereto, the reply filed by the petitioner and the order under Section 148A (d) of the Income Tax Act, 1961.
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2023 (1) TMI 673
Allowable revenue expenditure u/s 37 - broken period interest paid on purchase of securities - securities constitute stock-in-trade - HELD THAT:- Question as to whether the Tribunal was justified in allowing the claim for deduction of interest paid for the broken period for acquisition of the securities till the date of such securities, Kerala High Court held that the said question was squarely covered by its earlier decision in Commissioner of Income Tax v. South Indian Bank Ltd. [ 1999 (3) TMI 43 - KERALA HIGH COURT] wherein it was held that interest paid for the broken period would constitute allowable outgo in the hands of the assessee and was an admissible deduction in the computation of total income of the assessee (bank) under the head profits and gains of business or profession . We find that it is the contention of the respondent that respondent had been holding its securities all along as stock-in-trade which is not in dispute. For successive assessment years, Revenue has accepted the fact that respondent had been holding the securities as stock-in-trade. Circular No.665 dated 05.10.1993 of the CBDT has clarified the decision of the Supreme Court in Vijaya Bank Ltd. ([ 1990 (9) TMI 5 - SUPREME COURT] . CBDT has clarified that where the banks are holding securities as stock-in-trade and not as investments, principles of law enunciated in Vijaya Bank Ltd. (supra 1) would not be applicable. Therefore, CBDT has clarified that assessing officer should determine on the facts and circumstances of each case as to whether any particular security constitute stock-in-trade or investment taking into account the guidelines issued by Reserve Bank of India from time to time. It is in the above back drop that Tribunal has held that the respondent had purchased securities to hold them as stock-in-trade. Therefore, interest paid on such securities would be an allowable deduction. We are in agreement with the finding returned by the Tribunal. That apart, this is a finding of fact rendered by the Tribunal and in an appeal under Section 260A of the Act, we are not inclined to disturb such a finding of fact, that too, when the legal position is very clear. Decided in favour of assessee.
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2023 (1) TMI 672
Principle or the doctrine of mutuality - transactions entered into by the assessee with the non-permanent and non-life members - whether principle of mutuality would apply with reference to transactions entered into by an assessee with non-permanent and non-life members in the context of a club, facilities of which are availed of by all members? - HELD THAT:- As it is not the case of the revenue that subscriptions and other receipts from non-permanent members and non-life members haven t gone to the common fund of the assessee-society or the assessee has earned any profit by trading it or the same has gone otherwise than the common fund of the Club. In the absence thereof, we respectfully following the decision of Bankipur Cub Ltd., [ 1997 (5) TMI 392 - SUPREME COURT] and the decision of Secunderabad Club [ 1975 (12) TMI 6 - ANDHRA PRADESH HIGH COURT] and also the recent decision in the case of CIT v. Willingdon Sports Club [ 2008 (3) TMI 134 - BOMBAY HIGH COURT] hold that even if there are non-permanent members, non-life members, temporary or honorary members who are not entitled to vote or offer themselves as candidates for any elective office or to the membership of the council or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principles of mutuality. Once the assessee is governed by the principles of mutuality its income would not be income which would be assessable to tax and accordingly the additions of admission fees, interest received from banks and News letter sponsorship made by the AO and sustained by the ld. CIT(A) for the above asst. years are deleted. The grounds taken by the assessee in all the asst. years are therefore, allowed. Tribunal has held that even if there are non-permanent members, non-life members, temporary or honorary members, they are not entitled to vote or offer themselves as candidates for any elective office, or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principle of mutuality. Once an assessee is governed by the principle of mutuality, its income would not be construed to be an income within the meaning of the Act and liable to be taxed. We are of the view that Tribunal was not justified in taking the view that the principle of mutuality would not apply with reference to transactions entered into by the appellant with the non-permanent and non life members. Decided in favour of the appellant/assessee
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2023 (1) TMI 671
Unexplained investment u/s 69B - survey operation u/s 133A - incriminating documents found and seized during the course of search proceedings in the case of the Director of the assessee company - identity as well as the genuineness of the transactions questioned - HELD THAT:- Initially, in inquiry under Section 133(6) of the IT Act, in the remand reports which have been tendered by the Assessing Officer pursuant to the directions issued by the CIT Appeals, he does not dispute the identity as well as the genuineness of the transactions. The only question was with regard to the creditworthiness. We are in agreement with both the authorities which have concurrently held that the initial burden, even if not discharged at the level of the assessing officer, but by production of documents before the CIT (Appeals) where two remand reports have been called for, every transaction having been made through banking channel, there was no reason to also question the creditworthiness. No question of law even otherwise arises for this Court to consider and hence the question (B) is not entertained. Question (C) being only the explanation to question (B), the same is also not entertained.
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2023 (1) TMI 670
Revision u/s 263 - PCIT found that AO has not disallowed an amount debited to the profit and loss account on account of loss on assets on disposal which is a capital expenditure AND AO has not called for any details of purchases and other expenses to verify the correctness of income declared by the assessee - HELD THAT:- On selection of the case for scrutiny, the learned assessing officer has made an addition under section 69A of the act with respect to cash deposit made by the assessee of specified banknotes with PMC bank Ltd AND examined the deduction claimed by the assessee under section 80 P - Except, above two items, the learned assessing officer did not inquire any other matter or issues in the assessment proceedings. The notice under section 142 (1) of the act dated 9/10/2019 mainly inquiring the deposit of cash in the bank account in various forms, details of sundry debtors, creditors et cetera. We further notice dated 12/12/2019 was also with respect to cash deposits. In the end the assessment proceedings resulted into a show cause notice dated 20/12/2019 with respect to the two issues on which the addition has been made by the learned assessing officer. The appeal pending before the CIT A is only with respect to the additions made by the learned assessing officer - none of the issue involved in the 263 proceedings are considered and decided by the learned CIT A. Therefore, it is evident that the learned assessing officer did not inquire about the loss on assets disposal claimed by the assessee as well as any of the expenditure debited in the profit and loss account. AO has not applied his mind to the claim of the assessee of capital loss or various expenditure. In the case of Mukand global finance limited, the issue was different whether assessee can claim set-off of short-term capital loss against business income or not. The issue before us is whether the assessee can be allowed the capital loss debited in the profit and loss account or not as revenue expenditure and that makes the assessment order unsustainable in law. Therefore, the decisions relied upon by the assessee are not applicable to the facts of present case. There is no iota of evidence that the learned assessing officer has asked details of any of the expenditure debited in the profit and loss account. Thus, the assessment records examined by the learned principal Commissioner of income tax clearly showed that the learned assessing officer has not made any enquiry on these two items. Thus he is correct in forming an opinion that failure of the learned assessing officer to make any enquiry which he should have made with respect to the capital loss claimed as revenue expenditure as well as several expenditure debited to the profit and loss account makes the order of assessment erroneous and prejudicial to the interest of revenue - Decided against assessee.
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2023 (1) TMI 669
Addition u/s. 56(2) (viib) - AO had rejected the valuation of shares as per discounted cash flow method applied by the assessee on the grounds of being unfounded and not supported by any substantive facts - CIT(A) while deleting the addition made by AO has given a finding that the reply of the assessee and the fair market value based on DCF valuation given by the assessee was rejected without any cogent material on record - HELD THAT:- As noted that as per the provision of section 56(2) (viib) the fair market value shall be as per value determined in accordance with the method prescribed or as substantiated by the company based on the value of share goodwill etc. whichever is higher. He has further noted that it is at the option of the assessee to choose between the value determined on the basis of formula prescribed for determining the fair market value of the unquoted share as per rule 11UA or the Fair Market Value worked out by the merchant banker as per discounted free cash flow method. He given a finding that the assessee has opted for working of fair market value of the shares which was duly supported by the report of Chartered Accountant/valuer. AO has not brought on record any material on record to counter the submissions made by the assessee - working of fair market value by AO at Rs. 340.22 per share on the basis of the book value disregarding the market value, to be not in accordance with law. Before us no fallacy in the findings of the CIT(A) has been pointed out by Revenue. In such a situation, we find no reason interfere with the order of CIT(A), and thus the ground of Revenue dismissed.
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2023 (1) TMI 668
Exemption u/s 54F - STCG or LTCG - date of transfer of asset u/s 2(47) - when did transfer took place? - HELD THAT:- The property in reference' (1st Floor) came into existence only after the Occupancy Certificate has been obtained. Before this, 'the first floor' was never in existence. Provision of Section 2(47) of the Act read with Section 53A of the Transfer of Properties Act, 1882, are not applicable to the facts of the present case as the appellant never obtained the possession of the 1st Floor on 26.05.2011 from which capital gain has accrued. Moreover, in order to comply with the provision of Section 53A of the Transfer of Properties Act, it is essential that the possession should combine with the part/ full payment also, which are not the facts of the present case. As the appellant has acquired 'the 1st floor of the immovable property situated at Section 15A, Faridabad' on 12.12.2012. It is, therefore, held that the AO was justified in treating the same as short-term capital asset and denying the benefit of deduction - Decided in favour of revenue.
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2023 (1) TMI 667
Deduction u/s 80-IA(4) - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development - HELD THAT:- Project 1: Executive Engineer Gandhinagar : 1, 2, 3 and 4 Road - Contract covers various liabilities in respect to the assessee for any damage done in or outside of work. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved four laning of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act. Project 2: Executive Engineer Gandhinagar : G Road - As per the terms of agreement, we observe that this is a project undertaken for converting existing highway road into a four lane road. Project 3: Executive Engineer R B Division Bhuj - We observe that this is a project undertaken for converting existing single lane highway road into a two lane highway road. In respect of projects 2 and 3 above, since the scope of work involves expansion of the existing roads from 3 to 4 lane (for project 2) and from 1 to 2 lane highway (for project 3), we are of the considered view that the assessee in respect of the projects 2 and 3 has brought into effect a new infrastructure facility. As per the terms of agreement, we observe that this is a project undertaken for converting existing highway road into a four lane road, our observations with respect to project 1 would apply to projects 2 and 3 as well and accordingly in view of the above observations, we are of the considered view that the assessee is eligible for claim of deduction /s 80- IA(4) of the Act in respect of projects 2 and 3. Project 4: MPRRDA P.I.U. No. 1 Pac 19114, Project 5: MPRRDA P.I.U. No. 1 Pac 1943, Project 6: MPRRDA P.I.U. No. 1 Pac 1951-A, Project 7:MPRRDA P.I.U. No. 1 Pac 1958 and Project 8: MPRRDA P.I.U. No. 1 Pac 1974 - The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years -the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project - we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 4 above. Project 9: R B Division Bhuj (Raper Dhovalia Road) - Relevant clause 17A provides for the defect liability period of one year from the certified date of completion of work. Further, the contract covers various liabilities in respect to the assessee for any damage done in or outside of work. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) - Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4) - simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved four laning of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project No. 9is eligible for deduction u/s 80-IA(4) of the Act. Project 10: NBCC (Package XXVV) - Assessee was required performance Bank guarantee equivalent to 5% of the contract value (page 263 of the paper book). In addition, the assessee was also required to get security deposit/retention money from each earning bill equivalent to 5% of the value of each running bill (page 275 of paper book). Further, as per the terms of the contract the responsibility of mobilisation of men, material and machinery was included in the price and no separate payment on this account was able to the assessee in respect of this project. In the instant facts, looking into the fact that the project involved construction of new road and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act. Project 11: Executive Engineer R B Division Bhuj (Deshlapar- Siracha Road) - Looking into the fact that the project involved both widening and strengthening of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act. Project 12: Executive Engineer R B Division Bhuj (Fatehgardh- ShivgadhRoad) - As in order to be eligible for claim of deductionunder section 80-IA(4) of the Act, the primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4) - Accordingly, in our considered view, the assessee is not eligible for claim of deduction under section 80-IA(4) of the Act in respect of revenues from project number 12. Project 13 - Executive Engineer R B Division Bhuj (Mundra PKG-3) - We are of the considered view that the assessee has not brought into existence/developed any new infrastructure facility and hence he is not eligible for claim of deduction under section 80-IA(4) of the Act. As discussed above, in order to be eligible for claim of deduction under section 80-IA(4) of the Act, the primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening / improvement of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4) - assessee is not eligible for claim of deduction under section 80-IA(4) of the Act in respect of revenues from project number 13. Project 14: Executive EngineerKutch Panchayat Division Bhuj (Akri- Thumbadi Road) - in respect of project number 14, we are of the considered view that the assessee has not brought into existence/developed any new infrastructure facility and hence he is not eligible for claim of deduction under section 80-IA(4) of the Act. As discussed above, in order to be eligible for claim of deduction under section 80-IA(4) of the Act, the primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening / improvement of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4). Appeal of assessee partly allowed.
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2023 (1) TMI 666
Revision u/s 263 - As per CIT, AO has not examined the purchase of land and its difference in cost - return filed by the assessee was selected for scrutiny under CASS limited scrutiny category in respect of cash deposited during demonetisation period - HELD THAT:- It is an admitted fact that the case of the assessee was selected for scrutiny under CASS LIMITED SCRUTINY category to examine the deposits made during demonetisation. The assessee purchased the agricultural land on 14.07.2016, which is much prior to the cash deposits during demonetisation. Therefore, the land purchased by the assessee has nothing to do with the cash deposits made during demonetisation and both are different. Therefore, AO has only examined cash deposited during demonetisation correctly. As per para 3 of the CBDT circular, referred hereinabove, the AO cannot proceed further to examine except what is provided in para 3 of the circular. Therefore, the order passed by the Assessing Officer cannot be said that it is erroneous and prejudicial to the interest of the Revenue. Thus we quash the revision order passed under section 263 of the Act and allow the appeal of the assessee.
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2023 (1) TMI 665
Correct head of income - Profit or loss derived from sale of land - capital gains OR income from business or profession - HELD THAT:- Assessee was in the business of construction and real estate development. It was also not in dispute that the assessee had held the impugned land sold for the AY 2003-04 as stockin- trade in the books of accounts for the earlier assessment years. Although, the assessee claims to have converted stock-in-trade into investment for the AY 2002-03, but no evidence has been furnished before us to justify its case in light of provisions of Sec.45(2) - assessee has held many lands and classified as stock-in-trade. Therefore it is very clear that the assessee was acquired the impugned land held for the AY 2003-04, for the purpose of commercial exploitation and further, the conduct of the assessee, including accounting in the books of accounts is also supports the case of the AO that the impugned land was held as stock-in-trade. Therefore, in our considered view, profit or loss derived from sale of land held as stock-in-trade is assessable under the head income from business or profession as assessed by the AO, but not assessable under the head capital gains as claimed by the assessee. Although, the assessee claims to have converted stock-in-trade into investment, but there is no evidence with the assessee to prove its case in light of provisions of Sec.45(2) because the assessee has not satisfied the conditions prescribed therein and also computed business profits towards conversion of stock-in-trade into capital assets. Assessee has computed profit or loss derived from sale of land under the head capital gains to derive the benefit of indexation, otherwise, all evidences including accounting system clearly suggest that impugned land sold by the assessee was stock-in-trade and profit or loss derived from sale of said land is assessable under the head income from business or profession . There is no error in the reasons given by the AO as well as the Ld.CIT(A) to assess profit or loss derived from sale of land under the head income from business or profession and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the assessee.
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2023 (1) TMI 664
Revision u/s 263 by CIT - Non deduction of TDS u/s 194C on account of freight charges as paid to Railway and to different parties - HELD THAT:- Though assessee has submitted that entire details were examined by the AO and that no further enquiry was needed, however, after going through the relevant part of the order of the PCIT, we find that the PCIT has rightly held that the relevant issue relating to non-deduction of TDS and corresponding declarations submitted by the payees have not been properly examined by the AO. PCIT has categorically found error/discrepancy relating to the non-furnishing of required declarations by certain parties - PCIT rightly restored the issue to the AO for examination of this factual aspect. It is pertinent to mention here that the PCIT thoroughly examined the issue and held that no deduction was required to be made in respect of payment made to railways, whereas, the issue relating to payment to private parties without deduction of TDS and corresponding declarations furnished by the respective parties, is required to be examined by the AO - No prejudice will be cause to the assessee if the AO will examine the aforesaid factual aspect and arrive at a correct conclusion. Appeal of the assessee stands dismissed.
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2023 (1) TMI 663
Validity of reassessment order - illegal and invalid order of the TPO without following the due procedure as laid down in the relevant provision of section 144C - HELD THAT:- As in the case of Nomura Research Institute Financial Technologies India (P) Ltd. [ 2020 (3) TMI 1420 - ITAT KOLKATA] wherein, the Tribunal in the almost exactly identical facts and circumstances, held that the Assessing Officer cannot pass final assessment order without making a valid reference to TPO and further that the TPO cannot initiate any proceedings against the assessee after passing of a final order by the AO as reference made by the AO to the TPO becomes infructuous after passing of final assessment order. Even the Dispute Resolution Panel, in this case, has also made the same observation. In view of this, the reassessment order, passed by the AO on the basis of illegal and invalid order of the TPO without following the due procedure as laid down in the relevant provision of section 144C of the Act, is not sustainable in the eyes of law and the same is, therefore, quashed.
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2023 (1) TMI 662
Jurisdiction of income- tax authorities - Jurisdiction of AO to pass the assessment order in question - DR has submitted that since the name of the assessee was lying in the PAN database of Income Tax Officer, Kolkata and the assessee never informed the AO regarding its change of address, therefore, the Income Tax Officer, Kolkata was having jurisdiction to frame the assessment - HELD THAT:- Since the assessee was incorporated at Siliguri and further carried on business at Siliguri only and there was never change of address, therefore, as notified by the CBDT, the jurisdiction in the case of the assessee lied with the Income Tax Officer at Siliguri. There is no explanation put forth by the Department as to why the name of the assessee was lying in the PAN database of the Income Tax Officer, Ward-10(2), Kolkata. The assessee has been continuously assessed at Siliguri only. Even, when the Income Tax Officer, Ward-10(2), Kolkata issued notice u/s 143(2) of the Act, the assessee objected to his jurisdiction. Hence, the jurisdictional Assessing Officer in this case was Income Tax Officer, Siliguri. The case in hand is not of change of the address of the assessee. The assessee right from the very incorporation has carried on its business at Siliguri only. Even the notice has been issued to the assessee at its Siliguri address. Even the address of the assessee in the assessment order has also been mentioned of Siliguri. Appeal of the Revenue is dismissed.
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2023 (1) TMI 661
Addition u/s 14A r.w.r.8D - assessee had disallowed the expenses to the extent of dividend income earned - HELD THAT:- AO however computed the gross disallowance u/s. 14A and after giving the credit of suo moto disallowance made by the assessee, disallowed the net amount - We find that various Courts have held the disallowance u/s. 14A r.w.r 8D can never exceed exempt income earned by the assessee during particular assessment year. A reference can be made to the decision of Hon ble Delhi High Court in the case of PCIT vs Caraf Builders Construction (P) Ltd [ 2018 (12) TMI 410 - DELHI HIGH COURT] and in the case of PCIT vs. Envestor Venture Pvt. Ltd.[ 2021 (1) TMI 922 - MADRAS HIGH COURT] . We therefore following the aforesaid decisions of Hon ble High Court direct the AO to delete the disallowance in excess of the suo moto amount of Rs. 65,932/- disallowed by the assessee. Thus the ground of the assessee is allowed. Addition u/s. 68 - assessee had received unsecured loans from Madan Mohan Sarda - HELD THAT:- To discharge the burden u/s. 68 the assessee is required to offer explanation which must be backed by some reliable evidence. In the light of the applicable provisions of S.68 when the facts of the present case are seen, it is evident that in the books of the lender, shows that the lender had advanced Rs. 5,14,800/- in earlier years and during the year under consideration, it had lent to assessee Rs. 7,80,000/- through banking channels. It is also a fact that on the amounts received as loan, assessee had paid interest and had also deducted TDS on the interest paid. The factum of lending the money through banking channels is not doubted by the Revenue. Further the identity and capacity of the lender is proved by the fact that the assessee has placed documents to show that lender is an Income Tax payer, is assessed to tax and for the year under consideration, the lender has disclosed gross total income which is more than the amount advanced. In such a situation, we are of the view that assessee has discharged the initial onus cast upon the assessee u/s. 68 of the Act. In the absence of any material to the contrary assessee has discharged the onus of proving the identity, the creditworthiness and genuineness of the transaction. AO was not justified in invoking the provision of section 68 of the Act. We therefore the direct the deletion of addition made by AO and thus the ground of the assessee is allowed.
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2023 (1) TMI 660
Assessment of income from house property - Co-ownership of property - Addition on account of Notional Rent of self-occupied house property fully assessed in the hands of her husband, in which the contribution of the appellant was only 5.4% of the total purchase consideration - ownership of the property would be considered 50-50 and taxed as per section 23(1)(a) - As assessee did not provide any expected reasonable rent of the property, he assessed the annual letting value at 8% of the cost of property as shown in the sale deed and computed income from house property - HELD THAT:- There is sale deed and the co-ownership is evidenced therein but there is no specification of shares of the husband and wife in the sale deed. Therefore, following the decision of Saiyad Abdulla s case [ 1922 (6) TMI 3 - ALLAHABAD HIGH COURT] it must be held that husband and wife purchased equal shares and therefore, the Revenue is justified in bringing to tax 50% of the income from house property in the hands of the assessee. The decision of Ajit Kumar Rao s case [ 2001 (6) TMI 41 - CALCUTTA HIGH COURT] relied upon by the Ld. AR also does not help the assessee. In that case, the assessee s wife had purchased a flat in her name but she being the housewife did not have independent source of income and the entire investment was made by the assessee (husband). It was in such a scenario that the Hon ble Calcutta High Court held that the income from property should be taxed in the hands of the assessee (husband) and not in the hands of his wife. In the case before us, the property has been purchased by husband and wife in co-ownership jointly. The assessee is not a housewife. Computation of income for AY 2015-16 appearing at page 2 of Paper Book shows that she is salary earner and earned salary of Rs. 24 lacs from Adam Smith Associates Pvt. Ltd. in AY 2015-16. Therefore, on facts the case of the assessee before us differs from the Ajit Kumar Rao s case (supra). - Decided against assessee.
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2023 (1) TMI 659
Reopening of assessment u/s 147 - bogus purchases - HELD THAT:- Initiation of reassessment proceedings as well as issuance of notice u/s 148 of the Act was not valid and the same was void ab initio and thus, liable to be quashed along with assessment order passed in pursuance thereto. Also following the decision of the Tribunal in the case of Unique Metal Industries [ 2015 (10) TMI 2753 - ITAT NEW DELHI] whereby the addition of 20% of the purchases sustained by the Id. CIT(A) has been deleted in the identical facts and circumstances of the case, are not inclined to sustain the similar addition in the instant case. Consequently, the grounds of the assessee on merits are also found covered in favour of assessee by the aforesaid decision. Appeal of assessee allowed.
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2023 (1) TMI 658
TP Adjustment - AMP expenditure - international transaction between the assessee and A.E. for brand promotion in India - whether the AMP expenditure incurred by the assessee can be regarded as an international transaction or not? - HELD THAT:- The identical issue came up for consideration before the Tribunal in assessee s own case for the Assessment Year 2008-09 [ 2019 (12) TMI 1483 - ITAT DELHI] the Co-ordinate Bench has held that AMP Expenses incurred by the assessee does not fall within the definition of International Transaction. Further, the Bench has disapproved the determination of ALP by applying BLT Method. Accordingly, the adjustment made on account of AMP expenses was deleted. The similar view has been expressed in Assessee s own case for the Assessment Year 2009-10, 2010-11 and 2011-12. By following the principles of consistency, since the facts being identical and by following the order made in Assessee s own case as discussed above, we delete the addition made by the AO by allowing the Ground No. 1 2. Addition made in respect of AMP expenditure incurred by the assessee by applying the of Bright Line Test - HELD THAT:- Since by following the Coordinate Bench decisions, we already held that there is no such International Transaction for brand promotion and by following Assesssee s own case mentioned supra, in our opinion, there is no basis available to the TPO for making such a comparability adjustment under TNMM. Accordingly, by following the principals of consistency, we restore the issue to the file of TPO for bench marking the analysis applying TNMM in accordance with law. In the result, Ground No. 3 of the assessee is allowed for statistical purpose.
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2023 (1) TMI 657
MAT credit of Surcharge and Education Cess - Adjustment while giving the MAT credit of earlier years - Credit of surcharge and education cess in the income of the Assessee - HELD THAT:- Commissioner not only considered the judgments referred but also perused the legal provisions of the relevant sections and the factual aspects of the case and then only decided the issue qua credit of surcharge and education cess in the income of the Assessee. Even otherwise, in the case of CIT vs. K. Srinivasan [ 1971 (11) TMI 2 - SUPREME COURT ] clearly held that income tax would include surcharge and additional surcharge. Even otherwise we do not find any reason and/or material to contradict the findings of the Commissioner and hence considering the spirit of the provisions of Act as applicable to the instant case, are inclined not to interfere in the impugned order. Appeal filed by the Revenue stands dismissed.
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2023 (1) TMI 656
Difference in contract receipt shown in books viz-a-viz in form 26AS - difference represents the amount received after filing of return of income - HELD THAT:- We note that there was mismatch in the gross income reported by the assessee viz a viz the income reflecting in form 26AS for an amount of Rs. 4,13,081.00 only. As such, the assessee has shown less income by the impugned amount, therefore concurrent view was taken by the lower authorities that the assessee has suppressed the income in the books of accounts. However, we find that the assessee before the CIT (A) has contended that the impugned income was received after filing of return of income. Thus a doubt arises whether the impugned amount was shown by the assessee in the income tax return in the later year, if that be so, then if any addition is made in the year under consideration, it shall certain lead to the double addition which is undesirable under the provisions of law. As equally important to note that the assessee under a mercantile system of accounting has to declare income based on the concept of accrual. Be that as it may be, in the interest of justice and fair play we are inclined to give one opportunity to the assessee to make the properly presentation of the facts so that the AO could adjudicate the issue of afresh as per the provisions of law. Hence, the ground of appeal is allowed for the statistical purposes.
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2023 (1) TMI 655
Bogus purchases - AO got information from Maharashtra Sales Tax Department about unearthing racket more than 1935 Hawala dealers and 33,700 beneficiaries - HELD THAT:- The assail is to the making of addition(s) on the basis of bogus purchase bills received by the assessee(s) as accommodation entries from hawala dealers. It is seen that the issue of bogus purchases has come up for consideration before in Mohommad Haji Adam Co. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT ] and others, the Hon ble jurisdictional High Court has held that no ad hoc addition for bogus purchases should be made. It laid down that the addition should be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases. Respectfully following the precedent, we set-aside the impugned orders and remit the matter to the file of the respective AOs for applying the ratio laid down by the Hon ble jurisdictional High Court in the above noted case and then recompute the amount of additions, if any, after allowing a reasonable opportunity of hearing to the assessee. All the appeals are allowed for statistical purposes.
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2023 (1) TMI 654
CIT(A) justification in holding that the appellant did not press ground no. 3 raised in the appeal - HELD THAT:- As stated that in the return processed u/s 143(1) such claim of brought forward loss and current year loss was not allowed and for the proposed adjustments Centralized Processing Centre did not provide any opportunity before making the said adjustments as provided under the proviso to Section 143(1)(a) of the Act. After hearing for the assessee and on perusal of the impugned order we find force in the contention of the ld. Counsel for the assessee that reasonable opportunity was not provided to the assessee before declining the claim and thus, restore this issue of claim of brought forward loss to be carried forward to future years as well as loss of current year to be carried forward for set off in the future years to CIT(A) for necessary adjudication and to pass a speaking order on this issue. The assessee is also directed to furnish all relevant details which it had mentioned in the written submission placed before CIT(A) agitating ground no. 3 relating to disallowance of losses. Needless to mention that proper opportunity of being heard should be provided to the assessee. Thus, ground no. 1 is allowed for statistical purposes.
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2023 (1) TMI 653
Addition u/s 68 - unexplained credit on accounts of sum credited in the books of accounts of the assessee who received share capital and share premium - whether the addition u/s. 68 can be made when the assessee has not received any amount from the alleged party in the year under consideration? - HELD THAT:- Once the amount is not received in the year under consideration, there cannot be any sum found credited in the year under consideration as required for the purpose of section 68 of the Act. Hence, the addition made by the AO u/s. 68 of the Act in respect of M/s. Jaycee Industries Ltd. deserves to be deleted and accordingly, the ground of appeal of the revenue is dismissed.
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2023 (1) TMI 652
Addition u/s 68 - Unexplained share capital - unexplained cash credit - HELD THAT:- though, before the departmental authorities the assessee furnished some documentary evidences to prove the genuineness of the share capital and the creditworthiness of the concerned persons contributing towards share capital, however, they were not to the satisfaction of the AO and Commissioner (Appeals). Before us, learned counsel appearing for the assessee has submitted that both the persons, namely, Mr. Sanjay Malhotra and Mr. Ajay Singh, who have invested in share capital of the assessee are again back on the Board of the assessee company and assessee is willing to produce them before AO not only to prove the identity and creditworthiness of the concerned persons but even the genuineness of the transaction. Considering the above submissions of the assessee, we are inclined to grant opportunity to the assessee to produce Mr. Sanjay Malhotra and Mr. Ajay Singh for examination before the AO to prove the creditworthiness of the concerned persons and the genuineness of the transaction. TDS u/s 195 - Payment of royalty under India Netherlands Double Taxation Avoidance Agreement - aircraft maintenance cost - payment made is in the nature of royalty, on which, assessee was required to withhold tax under section 195 Assessing Officer made disallowance under section 40(a)(i) - HELD THAT:- As per the definition of royalty under the new India Netherlands DTAA, issued vide notification No. SO-6 93[E], dated 30.08.1999, the expression royalty has been amended with retrospective effect from 01.04.1998, and would mean payment of any kind received as a consideration for the use of or the right to use any copyright of literary, artistic or scientific work, including, cinematograph film, any patent, trademark, design or model, plan, secret formula or process or for information concerned, inter alia, commercial, scientific experience. Thus, as against the definition of royalty before its amendment, wherein leasing/hiring of equipment etc. was included in the expression royalty , in the amended provision, amount received from leasing/hiring of equipment been specifically excluded. Therefore, as per the meaning of royalty under the Treaty applicable to the impugned assessment year, leasing/hiring of equipment will not constitute royalty. Though Commissioner (Appeals) has given a categorical finding to the effect that as per the new provision of the Treaty it is not taxable as royalty, however, since the AO has not examined the issue in the aforesaid perspective, he has directed the Assessing Officer to examine it and allow assessee s claim of exemption. We do not find any deficiency or irregularity in the aforesaid direction of Commissioner (Appeals). Accordingly, we dismiss the ground raised. Nature of expenditure - expenditure incurred on implementation of software system for booking tickets - allowable capital expenditure - HELD THAT:- Undisputedly, the expenditure incurred by the assessee is for purchasing a software for its ticket booking system. In case of Amway India Enterprises [ 2008 (2) TMI 454 - ITAT DELHI-C ] the Special Bench of the Tribunal has held that expenditure incurred in software which gives enduring benefit is of capital nature. In fact, in the depreciation schedule under the Statute, computer software is treated as an asset, on which, depreciation is allowable at the rate of 60%. In fact, the Assessing Officer has allowed depreciation at the prescribed rate. In view of the aforesaid, we do not find any reason to interfere with the decision of learned Commissioner (Appeals). Current repair and maintenance expenditure - Revenue or capital expenditure - HELD THAT:- On verifying the details of expenditure, it is observed that learned Commissioner (Appeals) has allowed 5% as revenue expenditure after taking note of certain items of expenditure, such as, DG set fuel etc. The details furnished do not provide any detail, nature of major expenditure, such as, office renovation and maintenance, repairs and maintenance of office furniture, office facility and maintenance. It has to be seen, whether by incurring such expenditure any asset of enduring benefit has been created by the assessee. Since, the nature and character of each of the expenditure is not verifiable from the material on record, we direct the Assessing Officer to verify each item of expenditure and thereafter decide the character of expenditure, whether revenue or capital, and accordingly allow deduction, either under section 37(1) or 32 of the Act. This, ground is allowed for statistical purposes. Nature of expenditure claimed on leased aircrafts - HELD THAT:- Reading of case of Goetz (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT ] would make it clear that the restriction in entertaining a fresh/new claim otherwise than through a revised return of income is only applicable to the proceeding before the Assessing Officer and not appellate authority. It is fairly well settled, there are no fetters on the appellate authority in entertaining a fresh claim/additional ground raised by the assessee, if it can be decided based on the facts available on record. In the facts of the present appeal, all necessary and relevant facts relating to assessee s revised claim of revenue expenditure is available on record. Commissioner (Appeals should have adjudicated the issue by admitting the additional ground raised by the assessee - we are inclined to restore it back to the Assessing Officer for examining assessee s claim and deciding it in accordance with law, after providing due and reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes. Addition of expenses on Foreign Currency Convertible Bonds (FCCBs) - AO Amortized the expenditure over the five year period of bonds assuming that the FCCBs cannot be redeemed, repurchased, cancelled etc., either at the option of the assessee or the company before the bond period of five years - CIT-A deleted the addition - HELD THAT:- In cases where the nature of revenue expenditure is such that the same can be clearly and unambiguously identified over the specified time period akin to prepaid expenses, the same would be allowable over a period to which these relate proportionally applying the matching principle. However, in other cases where same does not result in the creation of capital asset or where the same is not allocable over defined future time periods, there can be no case for amortizing it under the Act over the expected period over which the benefit is likely to arise there from, since, in such cases the expenditure is essentially revenue in nature but is amortized in the books only on account of some other considerations. Assessee s case stands on much stronger footing as the assessee has not amortized the expenses in its books. In fact, the Assessing Officer does not dispute the nature of expenditure as revenue. Deferred revenue expenses incurred on training and acquisition/endorsement of mandatory license of pilots - CIT-A deleted the addition - HELD THAT:- As far as the nature of expenditure incurred, there is no doubt that the expenditure was incurred towards training and license to fly of the pilots. The fact that the expenditure incurred is of revenue nature is not disputed. Only because, in its books of accounts the assessee had deferred it over a period of 5 years, AO has restricted the expenditure to 1/5th of the amount actually incurred. However, in case of Taparia Tools Ltd. [ 2015 (3) TMI 853 - SUPREME COURT ] has observed that the entries made in the books of account are not determinative of the nature of the expenditure. Commissioner (Appeals) has rightly observed that by incurring the expenses the assessee cannot be said to be deriving a benefit which can clearly and unambiguously be identified over specified future time period. Though, the benefit from the expenses is derived in future years also, however, the same cannot be allocable to a definite period of time. Once, it is held to be a revenue expenditure, it has to be allowed in the year wherein the expenditure is incurred. There is no doubt that the assessee has incurred the expenditure in the impugned assessment year. Therefore, the expenses have to be allowed fully. Addition u/s 40(a)(i) - Supplemental Rent/Maintenance Reserve - HELD THAT:- As per the agreement, responsibility of the assessee is only to carry out minor repair works which are required to be done in the normal course of operation. All major repairs like replacement, overhauling etc. are the responsibility of the lessor. It has been factually found that the cost incurred in respect of normal repairs and replacement of routine spares etc. is not included in the supplemental rent. Thus, as rightly observed by the first appellate authority, for payments which are covered in the exceptional clause of section 10(15A) of the Act, it is not the assessee who is making the payment. On the contrary, it is the lessor who is making such payment to the lessee. Supplemental rent was determined taking into consideration a number of flying hours and had character of basic rent, said payment would be exempt from tax in the hands of lessor in India as per section 10(15A) of the Act, hence, no disallowance under section 40(a)(i) can be made - no disallowance under section 40(a)(i) can be made in respect of supplemental rent. Payments made towards engine guarantee availability fee - the amount is not deductible to tax at the hands of the payee as it is in the nature of business receipts in case of the non-resident company and in absence of PE it is not taxable in India. Insofar as the payment made towards repair of rotables not only it can be taxed at the hands of the non-resident in India in absence of PE as per India UAE DTAA it cannot be treated as FTS in absence of any FTS clause in the Treaty. In any case of the matter, it is a fact on record that the entire repair work was carried out outside India, therefore, the assessee had no liability to deduct tax as the income was not taxable in India. Insofar as the expenses on Logo printing, the revenue has failed to demonstrate that the make available condition under Article 12(4B) of the Treaty is fulfilled. Therefore, the amount is not taxable at the hands of the non-resident company in India. That being the case, the assessee has no liability to deduct tax at source. Disallowance u/s 40A(2) - assessee has taken on rent a residential apartment with parking space from Mrs. Meghla Sharma - residential apartment was acquired by Mr. Siddhanta Sharma, husband of the landlady, who was in the Board of Directors and executive chairman of the company - HELD THAT:- On a reading of sections 40A(2) of the Act, it becomes clear that any payment made to a related party, if considered to be unreasonable and excessive, having regard to the market rate for such goods and services, then disallowance under section 40A(2) can be made. In the facts of the present appeal, the Assessing Officer has made the disallowance relying upon certain information obtained through a search in the internet. The source and authenticity of such information obtained by the Assessing Officer remains doubtful. Even, the Assessing Officer has not confronted the information received to the assessee to get a rebuttal. The information obtained by the Assessing Officer certainly cannot be said to be the prevailing market rate of rent as it is not from any authentic source. Disallowance u/s 14A - HELD THAT:- We find no deficiency in the order of learned Commissioner (Appeals) in directing the Assessing Officer to factually verify assessee s claim in the light of the ratio laid down in the decision referred to by him. However, since the issue has now been decided by Hon ble Supreme Court in case of Maxopp Investments Ltd. [ 2018 (3) TMI 805 - SUPREME COURT ] the Assessing Officer is directed to decide the issue keeping in view the ratio laid down by the Hon ble Supreme Court. Ground raised is dismissed. Delayed remittance of TDS is allowable under section 37(1) - HELD THAT:- As in case of Chennai Property Investment [ 1998 (4) TMI 89 - MADRAS HIGH COURT ] has held that the interest paid on delayed remittance of TDS is not allowable as deduction under section 37(1) of the Act. No contrary decision of any other High Court has been brought to our notice by learned counsel appearing for the assessee. Therefore, respectfully following the decision of the Hon ble Madras High Court, we uphold the disallowance.
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2023 (1) TMI 651
Deduction u/s. 80-IB(10) - sale of more than one flat to the members of a family - AO also held that the construction of the assessee s project was in such a way to facilitate the construction of staircase by having a large hole on the roof, which was unusual in such projects - only single kitchen was provided for two flats and also the fact that the investors Shri Vimal Kumar Poddar and Mrs. Chaula Vimal Poddar had taken two adjacent flats, shows that these flats were not meant for small and middle income groups - HELD THAT:- It is observed that the tribunal in own case 2014 (12) TMI 561 - ITAT MUMBAI] and [ 2015 (4) TMI 1351 - ITAT MUMBAI] have decided this issue in favour of the assessee. The Tribunal held that the assessee has constructed the flat well in accordance with the approved plan and has also sold the said flats to the buyers with the same specification. Tribunal held that mere provision of a hole for staircase to convert the flats to duplex was only a marketing strategy adopted by the assessee to enhance the sale. It was considered a minor deviation as per the approved plan. It also held that the sale of more than one flat to the members of a family is not a ground for rejecting the claim of deduction u/s. 80IB. Thus we are of the considered opinion that the assessee is entitled to its claim of deduction u/s.80IB(10) of the Act. - Decided against revenue.
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2023 (1) TMI 650
Penalty u/s 271B - no tax audit conducted u/s 44AB - bonafide belief - Appellant contends that, in absence of any Sale to customers , provisions of tax audit u/s 44AB of ITA, 1961 are not applicable for A.Y 2015-16 - HELD THAT:- It is an admitted fact that the assessee is in the business of builder and developer. The assessee has not got its books of account audited for the year under consideration. It is also admitted fact that the assessee was maintaining books. The only reason submitted by the assessee is that the assessee was under bonafide belief as according to the assessee ,there was no sale and assessee had only received advances from customers against the bookings. However, it is an admitted fact that the assessee follows Percentage completion method of accounting, accordingly in the Profit and Loss account. It is mandatory for an assessee whose Total Sales, Turnover, or Gross receipts exceeds Rs.1 crores to get books of accounts audited. Thus, as per the provision of the Act, either Turnover, Sales, or Gross receipts shall exceed Rs. 1 crores. The legislature has used three words, Sales, Turnover, Gross receipts. So while analyzing the business of the assessee the AO has to find out whether the Sale, Gross Receipt or turnover is more than Rs. 1 crores then provisions of Section 44AB will be applicable. Therefore, if any one of Sale, Turnover or gross receipts is more than prescribed limit the provision of Section 44AB will be applicable. When Gross profit is more than Rs.4 crores, it means the Gross Receipts were definitely more than Rs.1 crores - Assessee in the case has receipts more than Rs.1 crores. Therefore, the assessee was under obligation to audit the books of account as per section 44AB of the Act. Admittedly the assessee failed to do so. There is penalty prescribed in the Section 271B of the Act for failure to comply provisions of Section 44AB. In the case under consideration, the assessee has merely stated that it was under bonafide belief. This explanation is not acceptable as the assessee is a builder, having advice of professionals like CA. Therefore, the explanation seems to be mere eye wash. The assessee has got its Balance Sheet prepared, Profit and Loss Account prepared from professionals and these are duly signed by CA. Therefore, the explanation of the assessee is not acceptable. AO has levied minimum penalty of Rs.1,50,000/-. - any amount above Rs.1 crores will attract minimum penalty of Rs.1,50,000/-. Therefore, on the facts and circumstances of the case the penalty levied by the AO u/s 271B is upheld. Accordingly, grounds of appeal of the assessee are dismissed.
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2023 (1) TMI 649
Exemption from partnership firm u/s 10(2A) - HELD THAT:- On going through the financial statements of the partnership firm, the firm has earned income during the impugned assessment year, which has been divided by both the partners. In the computation of income of the partnership firm, there was no income under the head business and profession , since the partnership firm was showing loss in the earlier years, which has been brought forwarded and while computing tax of the partnership firm, the same profit has been set off. As per the income-tax Act, there was no distributable profits but in real theory in the impugned assessment year, partnership firm has earned profit. We also gone through the previous year s financial statements i.e assessment year 2016-17 and 2017-18. In the assessment year 2016-17, the partnership firm has suffered a loss, which has been divided by both the partners equally and the loss has been included in the financial statements and while computing taxable income of the assessee, the same has been added back under the head other additions , which is evident from the computation of income filed by the assessee as directed by the bench. Assessee has not got any undue benefits. Assessee is eligible to claim exemption as per sec. 10(2A) of the Act on the profit received from the partnership firm. In view of this, the computation of income filed by the assessee is correct. Accordingly, appeal of the assessee is allowed.
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2023 (1) TMI 648
Foreign tax credit - Form No.67 (statement of income from a country or a specified territory outside India and FTC) was not filed within the due date specified u/s 139(1) - HELD THAT:- We find on identical facts, case of Ms.Brinda Ramakrishna [ 2022 (2) TMI 752 - ITAT BANGALORE] had held that when assessee filed Form No.67 during the course of assessment proceedings, the assessee was entitled to FTC. It was held by the Tribunal that Rule 128(9) of the I.T.Rules, 1962, does not provide for disallowance of FTC in a case of delay in filing Form No.67. It was further held by the Tribunal that filing of Form No.67 is not mandatory but directory requirement. Since the facts of the instant case are identical to the facts considered by the Bangalore Bench orders, cited supra, we hold that the assessee cannot be denied the FTC for the reason that Form No.67 has not been filed within the due date specified u/s 139(1) - Also see M/S. 42 HERTZ SOFTWARE INDIA PVT. [ 2022 (3) TMI 834 - ITAT BANGALORE] - Appeals filed by the assessee are allowed.
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2023 (1) TMI 647
Deduction u/s 80P(2a)(i) - Assessee is a cooperative society - applicability of provisions of sec.80P(4) - HELD THAT:- As relying on case Baroda Uttar Pradesh Gramin Bank 2022 (3) TMI 848 - ALLAHABAD HIGH COURT we hold that the assessee is a cooperative society for the purpose of Income-tax Act and assessee is eligible for claiming deduction as per sec. 80P(2)(a)(i) of the Act. The provisions of sec.80P(4) will not apply in the case of the assessee. Accordingly, the additional ground Nos.1 and 2 raised by the assessee is allowed. Assessee is an AOP or cooperative society - The assessee has himself obtained PAN No. in the capacity of AOP and from the alphabets of PAN, it is clear that the assessee is an AOP, the arguments taken by the assessee does not survive. therefore, the issue raised by the assessee is dismissed. However, for the purpose of claiming deduction u/s 80P of the Act as per the Regional Rural Bank Act we have uphold that it is a cooperative society. therefore, the ground No.4 is premature.
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2023 (1) TMI 646
Ex-parte order by the learned CIT(A) - appeal of the assessee was dismissed for procedural requirement - assessee filed appeal offline mood i.e. in paper form whereas assessee was required to file appeal in electronic mode - HELD THAT:- The requirement of filing appeal before the learned CIT (A) in electronic form was new. The assessee being individual filed appeal before CIT(A) within time limit but in paper dated 18th April 2016 instead of filing online as required by the CBDT notification dated 1st March 2016. Filing of appeal in electronic mode is a procedural requirement and any failure to comply with procedural requirement cannot be made hindrance in affording justice. The assessee who filed appeal within the time limit in paper form in our considered cannot be deprived of justice merely for the reason to comply with newly brought procedural requirement. In holding so, we find support and guidance from the judgment of Hon ble Supreme Court in case of Rani Kusum vs. Kanchan Devi [ 2005 (8) TMI 709 - SUPREME COURT ] Appeal of the assessee was dismissed for procedural requirement in ex-parte order by the learned CIT(A), we set aside the finding of the learned CIT-A and restore the issue to the file of the ld. CIT-A for fresh adjudication as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.
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Customs
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2023 (1) TMI 645
Maintainability of petition - availability of alternative remedy of appeal - Smuggling of Gold - opportunity of personal hearing was provided or not - HELD THAT:- This writ Court after careful consideration in this matter is of the considered view that the captioned writ petition does not pass muster in the Admission Board and it deserves to be dismissed - this Court is of the considered view that it is for the Appellate Authority to examine the same if an appeal is preferred as the records would speak for itself. In the case on hand, several statements have been recorded including that of the writ petitioner and therefore, as the dates have been given with specificity seen in the light of a letter dated 28.07.2022 written by counsel for the writ petitioner to which the attention of this Court is drawn, this Court finds that personal hearing is a matter which turns on factual disputation and the same can be gone into by the Appellate Authority if the writ petitioner chooses to avail the alternate remedy of appeal. This answers NJP facet of the matter. If the writ petitioner chooses to avail alternate remedy by filing appeal to the Commissioner of Customs (appeals) under Section 128 of said Act, the Appellate Authority shall consider the appeal (subject of course to pre-deposit and limitation) on its own merits and in accordance with law uninfluenced / untrammeled by the observations made in this order as the observations made in this order is for the limited purpose of disposal of the captioned writ petition. The sequitur is captioned Writ Petition fails and the same is dismissed.
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Corporate Laws
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2023 (1) TMI 643
Rejection of scheme of arrangement - It is the forceful submission of the Appellants that, just because, there is an allegation of commission of an offence, against the provisions of the Companies Act, 2013, the Scheme of Arrangement, is not to be rejected - It is the version of the Respondent that the Companies are retaining the amount collected already from the Shareholders, before the Companies Act, 2013. HELD THAT:- Section 2 (31) of the Companies Act, 2013, defines deposit including any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India - As a matter of fact, only those deposits, loans or money receipts, which are repayable, and which are not in the category of exempted Deposits, will be treated as Deposits. Also that, Rule 2 (1) (c) of the Companies (Acceptance of Deposits), Rules, 2014, defines, Deposits, in an inclusive fashion. If a Company, had Defaulted in the repayment of the Fixed Deposit, which was already Matured, despite the fact that the Company was making Profits, it was obligated on the Company s part, that it should make arrangements in such a way that there could be no problem in the Repayment of Deposits. Payment of Penal Interest - HELD THAT:- Rule 17 of the Companies (Acceptance of Deposits) Rules, 2014, provides that a Company, shall be liable to Pay, Penal Interest at 18% per annum to a Depositor, if there is any failure to repay the Deposits - In fact, the Penal Interest, is payable, when payment was overdue, ofcourse, after Maturity of Deposit. Damages for Fraud - HELD THAT:- Section 75 of the Companies Act, 2013, relates to Damages for Fraud, due to failure to repay the Deposits, accepted by a Company. Further, the definition of Fraud, under Section 447 of the Companies Act, 2013, is an inclusive one and it concerns the Affairs of a Company or a Body Corporate. Disqualification for Appointment of Director - HELD THAT:- Section 164 of the Companies Act, 2013, pertains to the Disqualification of Directors, incurred during the Terms of Office, as Directors, and not with the Retirement of a Director. Compromises, Arrangements and Amalgamations, under the Companies Act, 2013 - HELD THAT:- Section 230 of the Companies Act, 2013, deals with Power to Compromise or make Arrangements with the Creditors and the Members, and the said Section is wide enough to include any reasonable Compromise or Arrangement. The word Arrangement, has wider meaning, than the term Compromise - If the Scheme, is unjust, unfair, unconscionable or an illegal one, the Court (now Tribunal), is justified in declining to Sanction the Scheme, in the considered opinion of this Tribunal. No wonder, a Tribunal / a Court of Law, is to bear in mind that the fairness and viability of the Scheme, qua the right of minority shareholders, before according an Approval. Assessment - HELD THAT:- The Tribunal, is to see that the Scheme is not a camouflage, for a purpose, other than ostensible reason(s). Also, the Tribunal, is to find out, whether a particular Scheme, is opposed to public policy or otherwise, by applying its judicial mind - As far as the present case is concerned, it cannot be forgotten that both the Company Directors, were deemed to be disqualified, in the teeth of ingredients of Section 164 (2) (b), read with Rule 14 (2) of the Companies Appointment and Qualification of Directors Rules 2014. There is a clear cut violation of Section 73 of the Companies Act, 2013, in regard to the Prohibition on acceptance of deposits from public, for acceptance of deposits, from the Directors of the 1st Appellant / Company, in respect of the years 2014-15 and 2015-16. On a careful and meticulous consideration of the contentions advanced on either side, in the light of the violations, committed by the Appellants, under the Companies Act, keeping in mind that both the Companies had not given replies, to the Show Cause Notices, issued by the Registrar of Companies, Ernakulam, Kerala, and also taking note of the surrounding facts and circumstances of the present case, comes to an inevitable, inescapable and irresistible conclusion that the Appellants, had not made out a fit and proper case, for Sanctioning the Scheme of Amalgamation, in accordance with Law - Appeal dismissed.
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Insolvency & Bankruptcy
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2023 (1) TMI 644
Avoidance of preferential transactions - Right of claim over the amount available - conclusion of corporate insolvency resolution process - RP can continue to act beyond the approval of the Resolution Plan or not - avoidance application can be heard and adjudicated after the approval of the Resolution Plan or not - benefit of an adjudication of the avoidance application after the Resolution Plan. Whether an application for avoidance of a preferential transaction, though filed prior to the Resolution Plan being approved, can be heard and adjudicated by the NCLT, at the instance of the RP, after the approval of the Resolution Plan? Alternate efficacious remedy before the NCLAT - HELD THAT:- The phrase arising out of and in relation to is to be given wide import. Therefore, the Ld. Single Judge erred in holding the writ petition was maintainable. An appeal ought to have been preferred by Respondent No. 1 before the NCLAT under Section 61 of the IBC and the NCLAT itself was the appropriate forum to decide the controversy posed before the Ld. Single Judge - There is no doubt that IBC is clearly special statute that seeks to be a single source guide for all issues relating the issue of insolvency. Avoidance of certain transactions such as preferential transactions or undervalued transactions are special remedies envisaged only under the IBC to benefit a special creature of the Code itself, i.e., the Committee of Creditors. In view of the purpose and policy behind enactment of the IBC, it is only befitting that any petition or application arising out of the insolvency resolution or liquidation of a corporate person includes proceedings under Part III of the IBC. Effect of Regulation 38(2)(d)of CIRP Regulations, 2016 - HELD THAT:- Respondent No. 1 s reliance upon this clause is misplaced. This clause has no bearing on the dispute in the present matter. Regulation 38 is titled Mandatory contents of the Resolution Plan . Regulation 38(2) requires that a resolution plan shall contain whatever is listed under sub-clauses (a) to (d). Therefore, the understanding is that Regulation 38(2)(d) necessitates a resolution plan to provide for the manner in which the resolution applicant seeks to deal with a pending avoidance application and the proviso sets a cut-off date for the applicability of the new regulation. Therefore, all resolution plans submitted before the NCLT for approval on or after 14.06.2022 must mandatorily provide for the manner in which they seek to deal with a sub-judice avoidance application and resolution plans submitted for approval before 14.06.2022 are not necessitated to provide for the manner in which the resolution applicant seeks to deal with such claims. Therefore, the provision only deals with what ought to be in resolution plans and cannot be interpreted to extinguish proceedings pertaining avoidable transactions in resolution plans submitted before 14.06.2022 altogether. Avoidance applications can be heard after conclusion of CIRP and benefits derived from adjudication will be appropriated by the creditors or not - HELD THAT:- There is no time limit prescribed for the NCLT to adjudicate these applications. Further, there is no express penalty clause for the RP s failure to follow the timelines provided in Regulation 35A. When the law itself does not envisage a limit for the NCLT to adjudicate such an application, the Ld. Single Judge could not have imposed such a condition. The provisions pertaining to avoidable transactions is to primarily benefit creditors. While the Corporate Debtor ceases to exist in its erstwhile avatar, in cases where the Resolution Plan is silent on the treatment of any pending applications because such information could not be made available to the applicant, the creditors of the corporate debtor can still be the beneficiaries of the sum or properties that may be recovered from adjudication of an avoidance application. The same is consistent with the scheme of the Code and in line with object sought to be achieved by it which inter-alia includes, increasing the availability of credit within the economy. RP will pursue the avoidance applications since he is only functus officio vis- -vis CIRP and not avoidance applications - HELD THAT:- Sections 43-51, 66 67 of the IBC lays down various transactions that may be avoided by the resolution professional and the actions that can be taken against erstwhile management for fraudulent transactions. These provisions are primarily aimed at swelling the asset pool available for distribution to creditors and preventing unjust enrichment of one party at the expense of other creditors. The scheme of the Act suggests that proceedings for unearthing such transactions are ancillary proceedings and the resolution of the corporate debtor need not be stalled due to pendency of such proceedings. The insolvency professional has to thoroughly examine the transactions which the corporate debtor has undertaken in the period prior to commencement of the period of insolvency proceedings. This is a very cumbersome process and more so in respect of companies whose books and records do not properly document all its past transactions - Since investigation and adjudication of these transactions are time consuming this cannot allow persons who were managing the corporate debtor to escape from reversal of these transactions. The time line given in the IBC cannot be used as a premium by the unscrupulous persons who have forced the corporate entity into insolvency process. The amount that is available after the transactions are avoided cannot go to the kitty of the resolution applicant, in this case the Appellant in LPA No. 37/2021. For the resolution applicant, it was purely a commercial contract, a commercial decision whereunder the resolution applicant knew the ground reality, the assets and the liabilities. The benefit arising out of the adjudication of avoidance applications is not for the corporate debtor in its new avatar since it does not continue as a debtor and has gone through the process of resolution - The purpose of the avoidance application as stated above is to enhance the asset pool available for the decision of creditors who are primarily financial institutions and have taken the haircut in agreeing to accept a much lesser amount than what was due and payable to them. This is public money, and, therefore, the amount that is received if and when transactions are avoided and receive the imprimatur of adjudicating authority must be distributed amongst the committee of creditors in a manner determined by the adjudicating authority. The impugned Judgment is set aside. The NCLT is directed to proceed ahead with the hearing of avoidance application. In accordance with Sections 44 to 51 of the IBC, 2016, the amount which is recovered can be distributed amongst the secure creditors in accordance with law as determined by the NCLT - Appeal disposed off.
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PMLA
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2023 (1) TMI 642
Search and seizure conducted on 17.10.2022 and consequential panchanamas contrary to the Section 17 of the Prevention of Money Laundering Act - Challenge on the ground that the reasons are to be recorded in writing before issuing search warrant and the reasons are to be communicated immediately after the search and seizure - reasons to believe - HELD THAT:- This Court is of considered view that the Additional Director of the Enforcement Directorate without recording the 'reasons to believe' issued search warrant/authorisation to his subordinates and the Deputy Director of the Enforcement recorded the reasons to believe without any date and time, which clearly shows that without following the requirements under Section 17 (1) of PML Act conducted search and seizure and seized jewellery, cash and other articles belonging to the petitioners. In the instant case the record reveals that the Additional Director of Enforcement Directorate without recording the reasons to believe as contemplated under Section 17 (1) of PML Act, issued Search Warrant/Authorisation to the Deputy Director to conduct search and seizure of the premises of the petitioners and thereafter the Deputy Director recorded reasons to believe without any date and time. The Hon ble Apex Court in OPTO CIRCUIT INDIA LTD. VERSUS AXIS BANK OTHERS [ 2021 (2) TMI 117 - SUPREME COURT] , held that the authorised Officer is vested with sufficient power and such power is circumscribed by a procedure laid down under the statute, as such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. Thus, the action of the respondents in conducting search and seizure at the premises of the petitioner No.1-company and the residences of petitioners 2 to 4 and seizing of all the cash, jewellery and other articles in pursuance to the search warrant/authorization dated 17.10.2022 is contrary to the Section 17 of Prevention of Money Laundering Act, 2002 and accordingly the same is hereby set aside. The respondents are directed to release all the jewellery, cash and other articles seized in pursuance to the search warrant/authorization dated 17.10.2022 - petition allowed.
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Service Tax
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2023 (1) TMI 641
Validity of refund sanctioned on the basis of debit notes - valid Service Tax payment document or not - whether the debit notes satisfy the condition of Rule 4A of the Rules or not - applicability of N/N. 41/2012-ST dated 29.03.2012 read with Rule 4A(1) of the Service Tax Rules, 1994 - HELD THAT:- Notification No.41/2012-ST dated 29.03.2012 stipulates the manner in which the rebate shall be claimed. On going through the Notification it is clear that nomenclature of the documents is not necessary but the said document should fulfill all the necessary details as required. In the present case, the debit notes duly fulfilled all the necessary conditions as are required to be provided, but the fact remains that the said documents are not invoices, bills or challans, but are debit notes. The issue is no more res integra and the Tribunal in the case of M/S SRF LTD. VERSUS C.C.E., JAIPUR-I [ 2015 (9) TMI 1281 - CESTAT NEW DELHI] where it was held that The purpose sought to be served by specifying the details that are to be contained in the document issued while rendering service is to provide information regarding the registration number and details of service provider details, details of service recipient, description and value of taxable service, and the service tax payable thereon. If the documents provide these necessary particulars, merely because the documents are debit notes the refund cannot be denied at the end of the service recipient. The facts of the present case are squarely covered by the above-mentioned decision of the Tribunal and therefore the impugned order cannot be sustained - appeal allowed.
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Central Excise
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2023 (1) TMI 640
100% EOU - Valuation - clearance of excisable goods to their sister concern units on payment of duty as DTA sale - related party transaction or not - present order has been passed without giving opportunity to file defence submission of SCN - violation of principles of natural justice - Time Limitation - HELD THAT:- The Learned Commissioner has gone only on the basis that the buyer and seller are related in terms of Rule 2(2) of CVR, and proceeded to judge transactions in terms of valuation rule ibid. However, in terms of Rule 3 (3)(a) of CVR, where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the goods indicate that the relationship did not influence the price. Neither the show cause notice issuing authority nor the adjudicating authority have given reasons to hold that how the relation has indeed affected the price. The declared prices cannot be reviewed without any evidence to the effect that the relation between the appellant and the related buyer which has influenced the declared price or to the effect that there was a flow back of money between the appellant and related buyers. The proviso under Rule 3 (3)(b) provided that in applying the values used for comparison, due account shall be taken to demonstrate a difference in commercial levels, quantity levels, adjustments in accordance to provision of Rule 10 and cost incurred by the seller in sales in which he and the buyer are not related - In the present matter the grievance of the Appellants is also that difference in commercial levels, quantity levels was totally ignored by the Learned Commissioner - Further submission made by the appellants and judicial decisions relied upon by the appellant before him was not considered. The case needs to go back to the adjudicating authority for a proper examination of all the facts of the case, the submissions of the appellants including case laws in this regard and to pass a speaking and reasoned order as per law - Appeal allowed by way of remand.
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2023 (1) TMI 639
Violation of principles of natural justice - Inordinate Delay in adjudicating the Show Cause notices - Compounded levy scheme - determination of annual capacity of the furnace, installed in the factory of appellant, as 9600 MT - it is alleged that the appellant during the period of dispute has paid excise duty on the actual production, which is less than the amount of INR 5 lakh - violation of legislative mandate provided under Section 11A(11) of the Excise Act or not. HELD THAT:- The impugned order is in gross violation of the mandate of limitation prescribed in Section 11A(11) of the Central Excise Act. Section 11 A(11), which was introduced vide Finance Act, 2011, provides that where a show cause notice is issued under sub-section (4) or sub-section (5) of Section 11 A, provides for determination of the amount of duty, etc. within one year from the date of the show cause notice. The impugned orders have been passed in violation of the provisions of Central Excise Act. As such, the appeals are allowed and the impugned orders are set aside.
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2023 (1) TMI 638
Invocation of extended period of limitation - it is alleged that the show cause notice was issued on December 09, 2015 without there being any reason for invoking the extended period of limitation contemplated under sub-section (4) of section 11A of the Excise Act - suppression of facts to evade duty or not. Whether for invoking the extended period of limitation under section 11A(4) of the Excise Act, facts had been suppressed by the appellant and even if they had been suppressed then whether suppression of facts is enough or it should be with an intent to evade payment of duty? HELD THAT:- The show cause notice only alleges that the appellant had suppressed facts. It does not allege that the appellant had suppressed facts with intent to evade payment of excise duty. In the absence of any allegation made in the show cause notice that the appellant had suppressed facts with intent to evade payment of duty, the Department could not have invoked the extended period of limitation under section 11A(4) of the Act. This issue was raised by the appellant before the Commissioner (Appeals), but no finding has been recorded. The provisions of section 11A(4) of the Excise Act came up for interpretation before the Supreme Court in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] . The Supreme Court observed that section 11A empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. Thus, the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. The extended period of limitation could not have been invoked. The demand, which covers only the extended period of limitation, therefore, could not have been confirmed - Appeal allowed.
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CST, VAT & Sales Tax
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2023 (1) TMI 637
Violation of principles of natural justice (audi alterem partem) - valid SCN not issued - service of notice at the address of the corporate office nor done - HELD THAT:- Since the petitioner had given intimation of closure of business by submitting VAT Form 121, it is incumbent on the part of the 1st respondent authority to effect service of notice at the address of the corporate office and not by resorting to sending show cause notice either by registered post as claimed or by affixture at the last known address. Thus, the claim of the respondents in the counter-affidavit as well as the findings recorded in the impugned order of revision as to service of show cause notice on the petitioner, cannot be accepted as valid service and is liable to be rejected. Since the impugned order has been passed by the 1 st respondent, without causing valid service of show cause notice, the impugned order of revision as also the consequential order passed by the 2nd respondent authority giving effect to the order of the 1st respondent, suffers from violation of principles of natural justice and is liable to be interdicted - the impugned order dated 13.03.2017 passed by the 1st respondent and the consequential order dated 14.03.2017 passed by the 2 nd respondent are hereby set aside - the matter is remitted back to the 1st respondent authority for fresh consideration - Petition allowed by way of remand.
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2023 (1) TMI 636
Validity of revisional order - time limitation - seeking stay of revisional order during pendency of appeal - HELD THAT:- Having regard to the fact that petitioner has already deposited 25% of the disputed tax and considering the fact that the larger issue is pending consideration before this Court, we are of the view that insisting on further payment by the petitioner during the pendency of the appeal would not be just and proper. The order dated 05.11.2022 is set aside. Further demand on the basis of the revisional order dated 23.03.2020 shall remain stayed and would be subject to outcome of the appeal - Petition disposed off.
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2023 (1) TMI 635
Refund of Tax paid on beer - unsold stock due to Covid Pandemic - Constitutional Validity of retention by the respondents, of the amount paid as import and countervailing duties on the stock whose shelf life has expired and which is not to undergo removal for retail-sale - vires of Articles 14, 19 (1)(g), 265 and 300A of the Constitution of India - refund of the amount paid as import and countervailing duties on the stock - HELD THAT:- The undisputed facts from the pleadings on record reveal that the petitioner supplied beer in the State of Jharkhand kept in the warehouse of the Respondent No. 3 from its factories situated outside the State. Substantial quantity of which said to be 1,84,725 cases of beer valued at Rs. 14.00 crores could not be removed for sale from warehouses due to restriction on sale imposed by the Government during the lockdown which started due to Covid in March 2020. The prescribed shelf life of beer of six months expired in the meantime. Petitioner claimed refund of excise duty paid by it on the stock of beer which could not be removed for sale. The sheet anchor of the petitioner is that the excise duty / countervailing duty (CVD) under the Jharkhand Excise Act, 1915 was paid in advance as no liquor can be brought into the State of Jharkhand without payment of duties as per the restrictions imposed under the provisions of Chapter III of the Act. In view of proviso to Section 28(1) of the Act, duty is levied only on issuance of the goods from the warehouse and as such, payment made prior to the date of issuance is only an advance liable to be refunded, if no duty is leviable at all due to non-removal of beer from the warehouse for sale - According to the petitioner, the amount collected from the Respondent No. 3 was only an advance paid, which is subject to the final determination of duties on the date of removal of the goods from the warehouse. Charging provision cannot be effectuated at all before the event of removal takes place. Therefore, State cannot unjustly enrich itself by claiming duties on products which are destroyed on account of their action. It is the case of the petitioner that since retention of the said amount by the State was in contravention of Article 265 of the Constitution of India, it is liable to refund the amount paid when there was no liability. Therefore, writ petition is also maintainable. There is no uncertainty or vagueness in defining the taxable event. Proviso to Section 28(1) only indicates the rate of tax which is to be levied at the time of removal for sale from the warehouse - The decision in the case of Sree Balaji Enterprises, Bangalore [ 2007 (1) TMI 645 - KARNATAKA HIGH COURT] does not fit into the case of the petitioner as the dispute was whether excise duty i.e. goods manufactured inside the State could be levied when the goods were destroyed. In the present case, as per the provisions of the Act, CVD is levied at the time of import itself and only a facility for postponement of collection is provided - it is apparent that a licence for distributorship in Form 19C can be issued only if the licence holder undertakes to make payment of countervailing duty in advance. Further, condition-8 of the said licence stipulate that such distributor, for import from outside the State shall also obtain an import permit for payment of countervailing duty and import fee. In Rule 8-A, liquor can only be imported by way of an import pass granted by the Collector on prepayment of duty as well as any import pass fee into the Treasury of the importing district. Under licence as also under Rule 7(3), import can be done only on payment of countervailing duty and on obtaining an import permit. As such, the plea of the petitioner that non-removal of beer from the warehouse during the period of its shelf life on account of Covid lockdown would not make it liable for payment of countervailing duty in terms of proviso to section 28(1) of the Act, does not hold good in the eye of law since the taxable event occurs on the import of liquor into the territory of the State, as per the provisions of Section 27 (1) (a) of the Act. The principles applicable on levy of countervailing duty upon import of liquor in the State under the Bihar and Orissa Excise Act, 1915 and the decisions on the point, the plea of the petitioner for refund of the amount to the tune of Rs. 1,53,68,480/- paid as import and countervailing duty on the stock, is not tenable in law and on facts - petition dismissed.
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Indian Laws
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2023 (1) TMI 634
Scope of legislative powers - levy of tax or penalty - additional special road tax levied on transport vehicle used without a valid permit - whether the imposition of additional special road tax levied on transport vehicle used without a valid permit is not a tax but a penalty and is ultra vires the legislative powers of the State Legislature under Entries 56 and 57 of List II (the State List) of the Seventh Schedule to the Constitution? HELD THAT:- Article 246 of the Constitution lays down the subject matters of the laws to be made by the Parliament and by the Legislatures of States. According to it, three lists of the Seventh Schedule would be determining the subjects over which the Parliament may have exclusive power to make laws (List I also referred to as the Union List), subjects over which the State would have exclusive power to make laws (List II also referred to as the State List) and also the subjects where the Parliament as also the Legislature of States would have power to make laws covered by List III (referred to as the Concurrent List). Additional power is given to the Parliament under sub-Article 4 to make laws with respect to any matter for any part of the territory of India not included in a State even though such matter is enumerated in the State List. Scope of Interference in Fiscal Statutes - HELD THAT:- It is by now well settled that any tax legislation may not be easily interfered with. The Courts must show judicial restraint to interfere with tax legislation unless it is shown and proved that such taxing statute is manifestly unjust or glaringly unconstitutional. Taxing statutes cannot be placed or tested or viewed on the same principles as laws affecting civil rights such as freedom of speech, religion, etc. The test of taxing statutes would be viewed on more stringent tests and the law makers should be given greater latitude - In the case of Indian Oil Corporation Limited vs. State of Bihar and another, [ 2017 (11) TMI 747 - SUPREME COURT ] , provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act 1993, was under challenge. Justice Nariman speaking for the Bench observed in paragraph 25 that when it comes to taxing statute, the law laid down by this Court is clear that it can be said to be breach only when there is perversity or gross disparity resulting in clear and hostile discrimination without any rational justification for the same. Special Road tax is regulatory or compensatory in nature - HELD THAT:- In the case of the State of U.P and others vs. Sukhpal Singh Bal, [ 2005 (9) TMI 633 - SUPREME COURT ] , Justice Kapadia speaking for the Bench held that section 10(3) of U.P. Motor Vehicles Taxation Act, 1997, which provided for charging of such tax or additional tax along with penalty where transport vehicles were found plying in Uttar Pradesh without payment of tax or additional tax under the said Act to be valid as being regulatory and compensatory. What is to be seen is whether the tax imposed will have identifiable object and a nexus between the subject and the object of the levy. The power has been given to the States to make its own legislations by imposing tax on motor vehicles as also the goods being transported in order to compensate itself for the services, benefits and facilities provided by it - This Court in B.A. Jayaram and Ors. vs. Union of India (UOI) and Ors. [ 1983 (8) TMI 305 - SUPREME COURT ] laid down the proposition that to uphold a tax claim to be compensatory tax, there must be existence of a specific identifiable object behind the levy. It further laid down that the levy must have a nexus between the subject and the object of levying. In the said case the challenge was to a notification issued by the State of Karnataka dated 31 May, 1981 withdrawing the exemption granted under Section 63(7) of the 1939 Act. The said exemption was granted to promote tourist traffic on an inter-state basis. This Court, after considering the object behind the compensatory and regulatory levy, held that such tax fell outside Article 301 of the Constitution of India and withdrawal of the exemption granted would neither be discriminatory nor arbitrary and, accordingly, upheld the withdrawal. The Legislatures of the State have not only the power to make laws on the taxation to be imposed on motor vehicles as also the passengers and goods being transported by motor vehicles but also the power to lay down principles on which taxes on vehicles are to be levied. In the absence of any principles having been laid down by the Parliament, no fault could be found in the law enacted by Legislature of the State of Himachal Pradesh. The offending provision is regulatory in nature and therefore within the competence of the Legislature of State of Himachal Pradesh. There is nothing on record to indict the offending provision as being manifestly unjust or glaringly unconstitutional. Imposition of such additional special road tax, is directory or mandatory? - HELD THAT:- Imposition of such additional special road tax was only to keep a check or a discipline on the transport vehicle operators to use their vehicles in accordance with the statutory provisions. This could work as a deterrent for the transport operators to not commit any breach and to follow the mandate of the law. Such additional special road tax could be termed as regulatory in nature so as to regulate other statutory provisions being implemented and strictly followed - it cannot be said that levy of such an additional special road tax would be said to be manifestly unjust or glaringly unconstitutional. It was, in effect, to ensure payment of the chargeable taxes and use of the vehicles as per the terms of the permit. Repugnancy, if any, with Central enactment - HELD THAT:- Under Section 192A a punishment of imprisonment along with fine is provided whereas under the offending section, an additional special road tax is being charged for such a violation of using vehicle without permit or in contravention of the terms of the permit. The offending section was incorporated with a view to augment more revenue in order to construct and maintain the roads of the state which uses a large chunk of its finances being a state having a completely hilly terrain. The additional special road tax chargeable under Section 3A(3) would be in addition to any sentence or fine imposed under Section 192A. Punishment for offence is with an object to create deterrence and curtailing such offences as it creates a fear in the mind of offender likely to commit the offence. The same is the object of the additional special road tax to make it work as a deterrent from the transport operators in plying vehicles without permit and in contravention of the terms of the permit. As such there is no repugnancy or any conflict caused by the offending provision with the central enactment. The validity of Section 3A(3), has been wrongly held to be ultra vires by the High Court. The tax imposed under Section 3A(3) is regulatory in character and is not a penalty. Lumpsum taxation - HELD THAT:- Levy of lumpsum tax has been upheld by a three Judge Bench of this Court in the case of THE STATE OF TAMIL NADU VERSUS M. KRISHNAPPAN ANOTHER ETC. [ 2005 (3) TMI 751 - SUPREME COURT ]. There are no reason to take a different view. It may also be noted that the learned Amicus Curiae has also not advanced any arguments on this point. It would not be a futile exercise to send the matters back to the regular Bench as it is held that said Section 3A(3) of the 1972 Act being within the legislative competence of the State Legislature, and lumpsum tax could be levied. Nothing further remains to be examined by the regular Bench in these appeals - appeals allowed.
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