Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 20, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Refund of IGST paid - zero rated supply - non-compliance of the provisions of Circular No. 125/44/2019 -GST dated 18.11.2019 - rejection of refund solely on the ground that the refund application has been filed after two years from the relevant date - Matter restored back for consideration of refund application on merit - HC
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Cancellation of GST registration of the petitioner - non-speaking order - Not only the order is non-speaking, but cryptic in nature and the reason of cancellation not decipherable therefrom. Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences. - Registration directed to be restored - HC
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Detention of goods alongwith the vehicle - failure to have mentioned the unique Identiy Number/GSTN number of the recipient - Rule 46 has not taken into account the concept of a bill to-ship to consignment. - It would have been an entirely different matter, had the respondents suspected the transaction as being a method to avoid tax. However, what has transpired is that the respondents have simply lost sight of the bill to – ship to mode of doing business. - Order of detention set aside - Goods to be released forthwith - HC
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Classification of supply - rate of GST - the activities relating to supply of the transformers and the supervision of the erection, testing and commissioning of the transformers supplied by the appellant are inextricable and for the purpose of supply of transformer which would be used in initial setting up of the Solar Power Plant - the supply of goods is made alongwith the supply of services and it therefore fulfills the conditions laid down under the said explanation. - AAAR
Income Tax
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Orders/certificates u/s 197 - rate of withholding tax - he petitioner, who is a non-resident and does not have a PE in India, claims that the subject income is “business income.” It is because of these varying stands, that a dispute arose with regard to the rate at which withholding tax had to be pegged. - the rate of withholding tax, for the moment, will be pegged at 4%. The respondents/revenue will issue a certificate u/s 197 as expeditiously as possible - HC
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Reopening of asseessment u/s 147 - Reason to believe - When specific report has unearthed the modus operadi, the authority found it necessary to reopen the assessment and as such the proposition which has been canvassed by the learned advocate that it is borrowed satisfaction or the order passed is without application of mind are not worthy of acceptance. - petition stands dismissed. - HC
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Deemed dividend addition u/s 2(22)(e) - Liability of firm or individual directors - Since the plain reading of Section 2(22)(e) of the Act makes it clear that the deemed dividend is to be taxed in the hands of individual shareholder and not an entity which does not hold shares in OSL, the question of remanding the matter to the CIT(A) did not arise. - HC
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TDS obligation on year end provision - disallowance of the provision for legal and professional charges - the existence or absence of entries in the books of accounts is not decisive or conclusive factor in deciding the right of the assessee claiming deduction. - HC
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Assessment u/s 144B - The order sheet of the officer concerned shows that he has granted the time up to 10/05/2021 but, the same was never communicated to the petitioner. - The fact remains that the assessee would be totally in dark of the next date of hearing and therefore, if that has resulted into finalization of the assessment against the assessee, there is a clear violation of principles of natural justice and therefore, this Court needs to interfere by quashing and setting aside the order of assessment. - HC
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Revision u/s 263 - AO did not disallow the depreciation only on technical know-how but the building and plant and machinery completely. Even otherwise, the reason for the show cause notice was different then the conclusion arrived at by the learned PCIT. There is no notice/show cause/opportunity to the assessee to explain the depreciation on technical know-how. - the order of the learned assessing officer passed after due enquiry about such claim, cannot be held to be erroneous. - AT
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Addition u/s. 68 - satisfaction regarding the identity and creditworthiness of the 13 investors who have invested in the share capital of the assessee company and the genuineness of the transaction - none of the investors has filed his/her return of income which would have alerted the ld.CIT(A) before taking the decision by deleting the addition made by the AO u/s. 68. - Additions confirmed - AT
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Addition u/s. 41(1) - deeemed cessations of creditors - The conduct of both the parties clearly demonstrates the remission of the amounts. The amounts which were hitherto remained unpaid for more than a decade cannot be treated as an existing liability. Hence, the action of the revenue authorities subjecting that amount u/s. 41(1) cannot be faulted with. The appeal of the assessee on this ground is dismissed. - AT
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Unexplained jewellery - No doubt, the appellant could not furnish necessary bills, but fact remains that when the appellant claims that jewellery was purchased for many years, the AO cannot insist bills for purchase of jewellery. Further, the family members claimed that they did not file wealth tax returns because taxable wealth in their hands for all these assessment years is below taxable limit. - Additions deleted - AT
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Long Term Capital Gains - valuation u/s 50C - commercial property or residential property - the Assessing officer at most, can have referred the matter to the District Valuation Officer but the Assessing officer himself did not have any authority to apply the value of the Circle rate of commercial property, especially when the Stamp Duty Authority / Registering Authority had accepted this sale deed as per the Circle rate meant for residential property. - AT
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Approval granted u/s 10(23C)(iv) revoked - assessee has not maintained separate books of account for its business and charitable activities - the revenue must bring on record cogent material to demonstrate that the assessee has deviated from the core objects based on which approval under section 10(23C)(iv) was initially granted to the assessee. It is also a fact on record that the activities of the assessee are in the category of medical relief to the poor. Thus, if we interpret the provisions of section 2(15) of the Act strictly, the proviso would not apply.- AT
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Addition u/s 56 - allotment of shares cannot be equated with receipt of shares - receipt of share there should be shares in existence and a person holding such share transferring it to another person.There is no dispute that existing shareholders prior to fresh allotment was the assessee and his relatives and the provisionsof section 56(2)(viii)(c)(ii) shall not apply in case of money or any property received from any close relative - The transaction between the close relatives is not taxable under the head 'income from other sources u/s 56(2) of the Act. - Addition deleted - AT
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Deemed dividend addition u/s 2(22)(e) - based on the set of facts it is clear that since, the security deposits received by the assessee from a company wherein the public are substantially interested even though not considered as commercial transaction then even based on the above findings the provisions of section 2(22)(e) is not applicable - AT
Customs
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Scope of the Advance Ruling - Whether the matter (case) was pending - Merely because an officer of customs contemplates that a question may arise, does not mean that the question is pending consideration. For a question to be stated to be pending, the concerned officer must formally set forth the same for the assessee to contest the same. Any preliminary exercise done by an officer of customs, to consider whether any question for consideration arises, would not preclude the CAAR from giving its advance ruling on that question - HC
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Confiscation of goods - Violation of provisions of Import Policy since the Pre-Shipment Inspection (PSI) Certificate furnished was not as per Appendix-28 of the Foreign Trade Policy - the import is subject to fulfilment of stipulated condition, failing which the only consequence prescribed is the 100% inspection of the entire consignment. This, ipso facto, therefore, would not tantamount to improper import of goods within the meaning of Section 111(d) of the Act. - Demand of redemption fine is not proper / set aside - AT
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Smuggling - Seizure of mobile handsets of Chinese origin - In view of admitted town seizure, it was the onus on the Customs Department to lead evidence in support of allegation as to the smuggled nature of goods. It is also found from the record that no evidence has been brought on record in support of its allegation. - The respondent –Revenue is directed to release the goods forthwith to the appellant - AT
IBC
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Initiation of CIRP - existence of debt and dispute or not - Operational Creditors - NCLT admitted the application - The present is not a case where there is an undisputed debt for which insolvency can be initiated against the Corporate Debtor. The Adjudicating Authority having heard the matter ex-parte has failed to appreciate the facts of the case in its entirety and therefore committed an error in admitting the Section 9 application and we therefore hold that the impugned order passed is unsustainable. - AT
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Initiation of CIRP - Operational Debt or not - amount claimed by SDMC in connection with Toll Tax and ECC Agreement - Though the debt claimed by SDMC is an ‘operational debt’, there are clearly ‘pre-existing disputes’ raised by MEP Infrastructure regarding which litigations/dispute resolution mechanism have been pursued by both the parties in Hon’ble High Court and the internal forum of SDMC - Section 9 application has correctly been disallowed by the Adjudicating Authority. - AT
Service Tax
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Validity of adjudication of SCN after much delay - grant of centralized service tax registration - even after the Petitioner informed of the same on 8 May 2013, without any satisfactory explanation for this delay, adjudication of the Show Cause cum Demand Notice No.59 of 2009 dated 12 October 2009, which ought to have been culminated within a reasonable time has not been done and adjudicating the same now after an inordinate and unreasonable lapse of time would be detrimental and cause severe prejudice to the Petitioner. - SCN dated 12 October 2009 cannot be carried forward after such an inordinate delay - HC
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ENVAT Credit - credit availed prior taking the registration - the invoices of pre-registration phase shall also be considered for availment of Cenvat credit by the appellant - Commissioner (Appeals) has wrongly stuck to Rule 9(2) of Cenvat Credit Rules, 2004, the proviso thereof has wrongly been ignored by Commissioner (Appeals). Resultantly, the invoices issued from unregistered address and the invoice of pre-registration time have wrongly been held to be invalid documents while ordering denial of Cenvat credit to the appellant. - AT
Central Excise
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Irregular availment of CENVAT Credit - input services - transport service of Fly Ash - The removal of coal Fly Ash is one of the necessity for running of the captive power plant. Without such removal of the coal fly ash from the captive power plant, the same cannot operate and run, in which case, the power won’t be generated and the appellant would not be in a position to manufacture their final product - the appellants are entitled to service tax paid on the services used by them for removal of coal fly ash from the captive power plant. - AT
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CENVAT Credit - since the Motor Vehicle was held to be a capital goods, the eligibility of Cenvat credit on Rent-a-Cab service shall not be hit by the exclusion clause provided under Rules 2(l) of Cenvat Credit Rules, 2004 - In the present case also the vehicle taken on rent is defined as capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004, therefore, the exclusion clause is not applicable in the present case. - AT
VAT
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Levy of penalty - levy based on on conjectures and surmises - This Court further finds that the Tribunal itself has recorded a finding that it could not be ascertained whether the truck was unloaded at Mathura or not. Once the department has not shown whether the goods were being brought at Mathura from outside the State of U.P. no question of penalty proceedings can arise. - HC
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Recovery of dues (secured debt) - secured creditor has priority over the right claimed by the Revenue over secured debt or not - It is quite clear and evident from Section 26E of the SARFAESI Act 2002 that it creates only a priority in favour of the financial institutions in the matter of payment over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or the State Government or local authority. But the priority in payment is in no manner in conflict with the first charge created over the properties as per the provisions of the KGST Act, 1963, and the KVAT Act, 2003. - HC
Case Laws:
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GST
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2023 (1) TMI 792
Refund of IGST paid - zero rated supply - non-compliance of the provisions of Circular No. 125/44/2019 -GST dated 18.11.2019 - rejection of refund solely on the ground that the refund application has been filed after two years from the relevant date - Section 16(1) (d) of the Integrated Goods and Services Tax, 2017 - HELD THAT:- Hon'ble Apex Court in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER] in respect of the limitation where it was held that in cases where the limitation would have expired during the period between 15.03.2020 till 14.03.2021 notwithstanding the actual balance period of limitation remaining all persons shall have limitation period of 90 days from 15.03.2021. In the event the actual balance period of limitation remaining, with effect from 15.03.2021, is greater than 90 days, that longer period shall apply. The order passed by the respondent no.3 cannot be allowed to stand and the matter deserves to be relegated to the respondent no.2 to decide the appeal on merits - petition allowed in part and part matter on remand.
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2023 (1) TMI 791
Cancellation of GST registration of the petitioner - non-speaking order - violation of principles of natural justice - HELD THAT:- The least, the authority ought to have at least referred to the contents of the show cause and the response thereto, which was not done. Not only the order is non-speaking, but cryptic in nature and the reason of cancellation not decipherable therefrom. Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences. The order dated 12/09/2019 passed by the respondent no.2, namely the Joint Commissioner of State Tax, Madhubani, Bihar is quashed with the petitioner s registration restored, with a further direction to the respondent no.1, namely The State of Bihar through Commissioner of State GST, New Secretariat, Patna to finalize the petitioner s assessment and/or pass appropriate orders, in accordance with law. Petition allowed.
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2023 (1) TMI 790
Additional tax liability towards the payment of GST to the Respondents - reduction in the tax rate - requirement of reimbursement of amount to the State Government - HELD THAT:- The present Writ Petition as of now stands disposed of, directing the Respondent Authorities to consider and decide the representation filed by the Petitioner on 6.11.2022, at the earliest, preferably within a period of 90 days. While deciding the representation, the Respondent Authorities shall take into consideration the Order dated 30.9.2022 whereby Clause 2.17.1 stood amended. In addition, the Petitioner would also be at liberty to make a fresh representation along with the supporting documents showing the proof of the additional tax liability incurred by the Petitioner which would facilitate the Respondents in taking a decision. The Writ Petition stands disposed of.
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2023 (1) TMI 789
Reversal of transitioned tax deducted at source (TDS) under Section 140(1) of TNGST Act - HELD THAT:- The only ground re-argued is that transition is unavailable where credit is not admissible as ITC under this Act as per the proviso to Section 140(1)(i). This very argument has been considered by this Court in paragraph 4 5 of order dated 26.02.2021 [ 2021 (4) TMI 261 - MADRAS HIGH COURT] wherein the provisions of Section 140 along with the proviso have been extracted - That apart, reference has been made to the decision of the Telangana High Court in the case of Magma Fincorp Limited Vs State of Telangana [ 2019 (5) TMI 786 - TELANGANA AND ANDHRA PRADESH HIGH COURT] that dealt specifically on the interplay between Section 141 and the applicable provisions in the Telangana Goods and Service Tax Act, 2017 that are in para-materia with the relevant provisions under the Tamil Nadu GST Act. In the present case, it is quite evident that the attempt of the State is to re-agitate the same issue as was raised and considered in the original round of litigation. If at all the Department believes that the conclusion arrived at earlier was contrary to the legal position, then review is not the appropriate remedy - there are no merit in the applications for review and dismiss the same. Application dismissed.
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2023 (1) TMI 788
Detention of goods alongwith the vehicle - failure to have mentioned the unique Identiy Number/GSTN number of the recipient - HELD THAT:- It is true that Rule 46 require the tax invoice to reflect the GSTN/Unique Identity Number of the recipient. However the said Rule has not taken into account the concept of a bill to ship to consignment. The petitioner has made a full disclosure in regard to the purchaser, including the GST particulars, address and PAN number. The prescription under Rule 46 is thus fully satisfied. In addition, the particulars of the consignee are also set out and in my considered and categoric view, this limb of the transaction is not bound by the vigour of the procedure set out under the Act and Rules. It would have been an entirely different matter, had the respondents suspected the transaction as being a method to avoid tax. However, what has transpired is that the respondents have simply lost sight of the bill to ship to mode of doing business. The impugned order is set aside and the detained consignment along with cargo ordered to be released forthwith - Petition allowed.
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2023 (1) TMI 787
Validity of impugned assessment order - seeking direction to the respondent to decide on the rectification petition within a time frame to be fixed by this Court - HELD THAT:- In view of the consent view expressed by the learned counsel on either side, this court is inclined to give direction to the respondent to decide the rectification petition filed under Section 84 of the TNVAT Act, 2006 and pass appropriate order on merits and in accordance with law, within a period of twelve weeks from the date of receipt of a copy of this order. Further, this Court directs the respondent not to enforce the assessment order dated 22.08.2022, till the disposal of the rectification petition. The petition is closed.
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2023 (1) TMI 786
Classification of supply - rate of GST - solar project - supply of goods alongwith services - Aluminium Foil Type Winding Inverter Duty Transformer - parts of Transformer supplied/to be supplied for initial setting up of solar project - recipient of service - classifiable under Chapter Heading 8504 or not - falls under Sr. no. 234 in Schedule-I to Notification No. 01/2017-Central Tax (Rate) dated 28,th June, 2017 or not? - HELD THAT:- The name of M/s Adani Solar Energy Chitrakoot One Limited had never appeared before GAAR as the 'recipient of service' and therefore the contention of the appellant that GAAR has erred in its finding that there is only one recipient of supply, is misleading and far from truth. The appellant had solely relied and discussed the clauses mentioned in the Technical Specification issued by M/s AGEL in support of their arguments. Since no other documents were produced before GAAR, there are no error found in the findings given by GAAR that there was only one recipient of supply which was M/s AGEL. The Technical Specification issued by M/s. AGEL contains details relating to both supply of goods viz. Aluminium Winding Inverter Duty Transformers and supply of services viz. Supervision of Erection, Testing Commissioning of Aluminium Foil Type Winding Inverter Duty Transformers. The signature of the 'Authorized Signatory' appearing on the Purchase Order and Service Order appears to be the same for both M/s AGEL and M/s Adani Solar Energy Chitrakoot One Ltd. The supply in question is a one involving both supply of goods and associated services and are to be supplied by the appellant. From the above discussion, it is found that the supply of goods and the supply of services are single and connected and to be used for the same purpose viz. for supply and effective functioning of the IDT and trouble free operation of Solar Power Plant. The appellant has been harping on the fact that they had received two separate purchase orders from two distinct entity. It is seen that the purchase order PO No. 4500315135 for the supply of Aluminum Foil Type Winding Inverter duty Transformer along with their parts issued by M/s. AGEL to the appellant is dated 08.11.2019 and the PO No. 5700280769 for supervision of erection, testing and commissioning charges for the Transformer from M/s Adani Solar Energy Chitrakoot One Limited is dated 23.12.2019. Further it is seen that the 'Technical Specification for Aluminum Winding Inverter Duty Transformers bearing No. 5353-E-SEP-EES-TE-S-L 002' bears the date as 15.7.2019 and the same is issued by M/s. AGEL - the aforesaid artificial splitting of the contract into two separate orders being placed by two different entities is merely an afterthought so as to circumvent the explanation inserted in entry No 234 of Notification No 01/2017 CT according to which, of the value of gross consideration 70% shall be deemed to be on account of goods and 30% deemed to be on account of service. Thus, the activities relating to supply of the transformers and the supervision of the erection, testing and commissioning of the transformers supplied by the appellant are inextricable and for the purpose of supply of transformer which would be used in initial setting up of the Solar Power Plant - the explanation provided is supplier based and not recipient based. Here, on examination of the purchase orders of supply of goods and services and the technical specification for the said supply of goods and services it is found that the supply of goods is made alongwith the supply of services and it therefore fulfills the conditions laid down under the said explanation. The appellant is liable for payment of GST in terms of Explanation inserted in Entry No. 234, appearing under Schedule-I to Notification No.01/2017- Central Tax (Rate) dated 28.06.2017, vide Notification No. 24/2018-Central Tax (Rate) dated 31.12.2018 and in terms of Serial No. 38 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 in respect of services, considering the total value of both the orders i.e. order for supply of goods and order for related supply of services upto 30.09.2021. Thereafter the same will be covered in terms of Explanation inserted in entry Sr.No. 201A appearing under Schedule-II to the Notification No.01/2017-Cental Tax (Rate) dated 28.06.2017 amended vide Notification No. 08/2021-Central Tax (Rate) dated 30.09.2021 w.e.f. 01.10.2021.
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2023 (1) TMI 785
Exemption from GST - HealthCare services or not - Failure to furnish details and documents - lump-sum amount received for Health care Services to be provided for 20 years by the applicant as Diamond Plan - applicability of N/N. 74 of Notification No. 12/2017- Central Tax - HELD THAT:- Health care services provided by a clinical establishment, an authorized medical practitioner or para medics are exempted vide Sl. No. 74 of Notification No. 12/2017-C.T. (Rate), dated 28-6-2017. We find that the term clinical establishment' is defined under clause 2 of the Notification No. 12/2017-CT (Rate) dt.28.6.2017 means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnostics or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India or a place established as an independent entity or as a part of an establishment to carry out diagnostic or investigative services of diseases. Diamond Plan of the applicant covered more than 100 types of test, Sleep Study, Foot Scan and Naturopathy, Special health care treatments like Dental skin care treatment, Privilege card treatment, Priority OPD appointments in tie-up hospital, tele-medical guidance through application. All types of such service provided to the customer under Diamond Plan are required to be examined in detail to decide the nature and characteristic of the service to decide the taxability under GST. The applicant have also tie up with other hospital in pan India to provide the service mentioned under 'Diamond Plan' but have not submitted any documents in this regard so that we are not in position to know the Scope of Service, types of services to be provided by such Hospital and terms and conditions of the payment. Also the applicant have failed to submit the documents which contains the details of services to be provided under the 'Diamond Plan' to the potential customer. The applicant has not disclosed the correct fact/information in respect of this application therefore, in absence of such documents it is not possible to figure out the services which have mentioned in the application are covered under the Health Care Service or otherwise.
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2023 (1) TMI 784
Seeking grant of bail - Fraudulent availment of ITC - non-existent firms - bail application opposed on the ground of previous involvement and non-cooperative behaviour of the applicant/accused - HELD THAT:- Huge amount of passing of fraudulent ITC through non-existent firms has been alleged against the applicant who is not cooperating in the investigations also. The previous involvement of the accused in similar type of offences is also brought to the notice although which has not been denied by the applicant but submitted that the present case only deals with respect to the said period only for which he has already been granted bail. It has been contradicted by the department by saying that previous case qua the arrest and investigation was upto 2019 whereas investigation in the present case was carried out for subsequent period of time. Non filing of the complaint till date, as averred by the Ld. Defence counsel, is not tenable at this stage. The present case is not a fit case to grant anticipatory bail to the applicant - The application stands dismissed.
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Income Tax
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2023 (1) TMI 783
Revision u/s 263 - claim of deduction u/s 80P - Tribunal quashing the order passed u/s 263 - HELD THAT:-Tribunal took note of the decision of the high Court of Karnataka in the case of GUTTI GEDERARA COOPERATIVE SOCIETY LTD [ 2015 (7) TMI 874 - KARNATAKA HIGH COURT ] and held that when the amount which is deposited in the bank was not an amount due to members and it was not the liability of the society to the members then the interest earned from the deposits in the bank was held to be eligible for deduction under Section 80P (2)(a)(i) of the Act. Tribunal has also extensively gone into the manner in which the assessing officer completed the assessment by conducting inquiry after issuing a questionnaire on the deduction claimed by the assessee under Section 80P(2)(a)(i) and also taking note of the detailed report filed by the assessee. Tribunal noted that the documents placed by the assessee before it clearly demonstrates the nature of activity carried on by the assessee resulting in different business income which is covered by the Tribunal of 80P(2)(a)(i). In this regard reliance was placed on High Court of Bombay in the case of GABRIEL INDIA LTD [ 1993 (4) TMI 55 - BOMBAY HIGH COURT ] Further as to the justification on the part of the PCIT to invoke its power under Section 263 Tribunal took guidance from the decision of the High Court at Delhi in the case of ITO Vs.DG HOUSING PROJECTS LTD. [ 2012 (3) TMI 227 - DELHI HIGH COURT ] wherein it was held that in the case wrong opinion for finding on merit, the CIT has to come to the conclusion himself decided that the order is erroneous by conducting necessary inquiry. Further, it was pointed out that CIT while exercising jurisdiction under Section 263 of the Act should record a finding that the assessment order is erroneous and prejudicial to the interest of revenue and it is not sufficient to allege that the investigation was inadequate. On facts, the learned Tribunal formed that the PCIT has not carried out any enquiry of his own and merely set aside the assessment and remanded it to the Assessing Officer to pass a fresh assessment order on the issue of claim of deduction under Section 80B(2)(a)(i) of the Act and this being contrary to the decision rendered in the case of DG Housing Projects Limited, allowed the appeal and quashed the order passed under Section 263 of the Act. Thus, we find that the learned Tribunal had rightly taken note of the legal position and granted relief to the assessee. Hence, we are of the view that there is no error in the order passed by the Tribunal for us to interfere and much less, there is no substantial question of law arising for consideration.
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2023 (1) TMI 782
Orders/certificates u/s 197 - rate of withholding tax - although the petitioner had sought issuance of certificates u/s 197 of the Act at Nil rate for the aforementioned FYs, the certificates were issued pegging the withholding tax at 4% - HELD THAT:- We are of the view, that the best way forward will be that a certificate under Section 197 is issued, pegging the withholding tax rate at 4%, which was also the position that obtained in FYs 2019-2020, 2020-2021 and 2021-2022. Mr Jolly has informed us, that for FY 2019-2020 (AY 2020-2021) and FY 2020-2021 (AY 2021-2022), return has been filed, wherein subject income was offered for tax at 4%. Mr Jolly says, that intimation under Section 143(1) of the Act has been issued. What is, in substance, the issue, is: whether the subject income earned by the petitioner can be treated as Fees for Technical Services (FTS), as is contended by the respondents/revenue. Concededly, the Double Tax Avoidance Agreement obtaining between India and UAE does not contain any article concerning FTS. The petitioner, who is a non-resident and does not have a PE in India, claims that the subject income is business income. It is because of these varying stands, that a dispute arose with regard to the rate at which withholding tax had to be pegged. Thus, for the foregoing reasons, the rate of withholding tax, for the moment, will be pegged at 4%. The respondents/revenue will issue a certificate under Section 197 of the Act as expeditiously as possible, though not later than two weeks from today. The aforesaid direction has been issued without prejudice to the rights and contentions of both parties.
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2023 (1) TMI 781
Reopening of asseessment u/s 147 - Reason to believe - information received from the DDIT (Inv), Unit 2(3), Ahmedabad has inferred and formulated an opinion with regard to the trading transactions of the petitioner on NSEL platform - HELD THAT:- When specific report has unearthed the modus operadi, the authority found it necessary to reopen the assessment and as such the proposition which has been canvassed by the learned advocate that it is borrowed satisfaction or the order passed is without application of mind are not worthy of acceptance. In fact, petitioner has not truly and fully disclosed the material as has been demanded and as such it is always open for the respondent authority to reopen the assessment when the case is based upon a peculiar background or material unearthed subsequently. This is not even a case of change of opinion, but in fact, the detailed discussion undertaken herein before has led us to the situation where this Court is not finding safe to accept the stand of the petitioner in exercise of extraordinary jurisdiction and this Court is of the clear opinion that authority is specifically seized with the power and it is examining the process which would not call for interference and we have absolutely no reason to interfere and so no reason as to why authority would not apply its independent mind while examining the issue and scrutinise the stand of petitioner. Hence, this Court is not inclined to interfere with the discretion being exercised by respondent authority. We have gone through the judgments which have been relied upon by petitioner in detail. We are of the opinion that background of facts is quite distinct and peculiar in nature to the present case on hand which would not permit us to just apply in a routine manner or as a straightjacket formula and as such, the judgments cited are of no assistance of the petitioner. We are of the opinion that petitioner has not made out any case calling for interference. Accordingly, petition stands dismissed.
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2023 (1) TMI 780
Deemed dividend addition u/s 2(22)(e) - Liability of firm or individual directors - Validity of order of ITAT to Remand the matter back to CIT(A) - HELD THAT:- Mr. Mishra in his individual capacity who holds 36.95% of the paid-up share capital of the OSL. On the other hand, M/s. Mahimananda Mishra, the Firm, does not hold any shares in OSL. ITAT in the impugned order has, in the considered view of this Court, needlessly remanded the matter to the CIT (A) on the ground that it was not clear whether deemed dividend should be taxed in the hands of Assessee s partner or in the hands of the Assessee. Since the plain reading of Section 2(22)(e) of the Act makes it clear that the deemed dividend is to be taxed in the hands of individual shareholder and not an entity which does not hold shares in OSL, the question of remanding the matter to the CIT(A) did not arise. The question framed by this Court is answered in favour of the Assessee and against the Department by holding that the deemed dividend should be taxed in the hands of Mr. Mahimananda Mishra, the individual Director of OSL and not in the hands of the Appellant-Assessee, the Firm.
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2023 (1) TMI 779
Deduction under Section 37(1) - expenditure incurred by the respondent/assessee towards Corporate Social Responsibility - HELD THAT:- The conditions for allowing deduction under Section 37 of the Act are broadly the following: (a) That the expenditure is not in the nature of capital expenditure. (b) That the expenditure is laid out or expended wholly and exclusively for the purposes of the business or profession. (c) That the deduction qua the expenditure incurred is not of the nature as specified under Sections 30 to 36 of the Act. Insofar as the third criterion is concerned, there is no dispute, that the expenditure claimed does not fall under any of the sections referred to in 37(1) of the Act i.e., Sections 30 to 36. As far as the other aspects are concerned, as noted by the Tribunal, in the past, CSR expenses had been allowed as deductible expenditure under Section 37(1) of the Act. Therefore, the only aspect, which appears to have been agitated before the Tribunal, was that Explanation 2 appended to Section 37(1) of the Act was retrospective in nature. This Explanation was inserted, as noted above, by Finance Act, 2014 with effect from 01.04.2015. That the Explanation appended to Section 37(1) of the Act is prospective has been held by this Court in order dated 29.11.2022 passed in a bunch of appeals, the lead matter [ 2022 (12) TMI 759 - DELHI HIGH COURT ] - No substantial question of law arises for consideration.
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2023 (1) TMI 778
TDS obligation on year end provision - disallowance of the provision for legal and professional charges - identity of payee was not certain as the actual recipient of professional charges was not identified at the stage when the provision was made - HELD THAT:- It is not in dispute that the provisions made at the end of the accounting year were reversed in the beginning of the next year and no payees were identified nor the exact amount payable. In Karnataka Power Transmission Corporation Ltd. [ 2016 (2) TMI 412 - KARNATAKA HIGH COURT ] relied upon by the assessee, this Court has held that if no income is attributable to the payee there is no liability to deduct tax at source in the hands of the tax deductor. After quoting a passage from Kedarnath Jute Mfg. Co. Ltd. [ 1971 (8) TMI 10 - SUPREME COURT ] this Court has held that the existence or absence of entries in the books of accounts is not decisive or conclusive factor in deciding the right of the assessee claiming deduction. So far as the authority in Palam Gas Service [ 2017 (5) TMI 242 - SUPREME COURT ] it is relevant to note that the payees were identified in that case as recorded in para 5 of that judgment. In contradistinction, in the case on hand the payees were not identified. Therefore, the said authority does not lend any support in the contentions urged on behalf of the Revenue. In view of the law laid down in Karnataka Power Transmission Corporation Ltd. Volvo India Pvt. Ltd. [ 2016 (2) TMI 412 - KARNATAKA HIGH COURT ] we are of the considered opinion that the ITAT s order reversing DRP s Order and issuing further direction to AO is perverse - Decided in favour of assessee.
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2023 (1) TMI 777
Reopening of assessment u/s 147 - reassessment proceedings as commenced by issuing notice against a non-existent entity, i.e., the partnership firm which bears the same name as the petitioner - HELD THAT:- It is averred that the petitioner before us is a proprietorship concern. It is also averred that the proprietor of the petitioner concern is one Mr Deepak Dogra, who, along with Mr Himanshu Taneja, formed the partnership firm going by the same name, i.e., Bharat Agro Overseas (India). The petitioner also claims that communications were addressed on 31.03.2017, whereby the surrender and cancellation of the PAN allocated to the partnership firm was sought. This request, according to the petitioner, was made once again on 27.02.2020. Therefore, while dealing with the notice issued u/s 148A(b), these contentions, apart from other contentions that may be raised on behalf of the petitioner, will be dealt with by the AO. In order to hasten the proceedings, the AO is directed to furnish the relevant information/material to the petitioner within four weeks from the date of receipt of a copy of the order passed today.
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2023 (1) TMI 776
Assessment u/s 144B - adjournment application - Non communication of next date to the petitioner - As argued no effective opportunity had been given to furnish the documents and to reply to the show cause notice and draft assessment order - non response to the request of grant of 20 days or permitting filing of reply to the show cause notice - HELD THAT:- As in response to the request made by the assessee, nothing had been responded to in the National Faceless Assessment procedure. This is true, it has been brought into the effect for doing the things that makes the system very transparent. It has numerous advantages and at the same time, the authority is also required to be far more vigilant in responding to the request online here. The order sheet of the officer concerned shows that he has granted the time up to 10/05/2021 but, the same was never communicated to the petitioner. Although, he may not have intended that way, but due to either limitation of the system itself or operationalization of the system, on the part of the officer concerned, unquestionably this has happened. The fact remains that the assessee would be totally in dark of the next date of hearing and therefore, if that has resulted into finalization of the assessment against the assessee, there is a clear violation of principles of natural justice and therefore, this Court needs to interfere by quashing and setting aside the order of assessment. Let the opportunity be given to the petitioner. We hereby restore the matter from the stage at which it was. Respondent is directed to give an opportunity to the petitioner by granting time of two weeks to respond to the show cause notice from the date of receipt of copy of this order. Let there be a specific date given of two weeks to the petitioner within which, the petitioner shall file his reply without asking for further adjournment. Thereafter, after following the due procedure, necessary order shall be passed.
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2023 (1) TMI 775
Reopening of assessment u/s 147 - proceedings barred by limitation - HELD THAT:- According to Respondents in the normal course, the proceedings would have become time barred only on 31.03.2021, but because of the intercession of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, the same stood extended further. Petitioner in rejoinder, says that by virtue of Finance Act, 2021, the maximum timeframe under Section 149 of the Act has been reduced to ten years. This is a matter which would require examination qua both issues raised before us.Accordingly, issue notice. List the matter on 26.07.2023.
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2023 (1) TMI 774
CIT-A admitting additional evidence during the appellate proceedings - cash deposit in the bank account - Addition u/s 69A - unexplained sale proceeds and applying a GP rate of 24% - CIT(A) has restricted the addition made by the AO towards the credit in the current account to the GP rate at 24% which was declared by the assessee on the disclosed turnover - HELD THAT:- The assessee first time produced these evidences in support of the source of deposits in the current account and saving bank account. Though, the CIT(A) called for a remand report from the AO however, the AO in his report dated 13.8.2019 has objected to the admission of the additional evidence / documents, facts and grounds and consequently pleaded that the same should not be entertained. CIT(A) without asking the AO to submit a remand report based on the verification and examination of the said evidence has passed the impugned order. Therefore, we are of the considered opinion that the evidence produced by the assessee first time before the CIT(A) is required to be verified and examined at the level of AO. Hence, the impugned order of the CIT(A) is set aside and the matter is remanded to the record of the AO for adjudication of the same afresh after proper verification and examination of the evidence and details produced by the assessee before the CIT(A). Appeal of the Department is allowed for statistical purpose.
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2023 (1) TMI 773
Revision u/s 263 - CIT held that the reopening of the assessment is illegal and bad in law and liable to be quashed - HELD THAT:- Since, the re-assessment order itself has been quashed by the CIT(A) and the same is no more in existence in view of the order passed by the CIT(A) therefore, the revision order passed by the CIT(E) would not survive and liable to be quashed. We order accordingly. In case the Revenue succeed in the appeal, if any filed against the order of the CIT(A), the Revenue may seek to revive the present appeal to be decided on merits.
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2023 (1) TMI 772
Deduction u/s 54/54F - capital gain on sale of property in Bangalore - capital gain has not been invested within the time period Specified u/s 54 - new house at Gurgaon was purchased in June 2010, where as the Plot at Bangalore was sold in September 2013 and Flat at Dwarka was sold in March 2014, A.O. was of the opinion that the condition to claim u/s 54/54Fwas not satisfied since the purchase of property (Apartment in Gurgaon) was not within the period of one year before the date of transfer of plot at Bangalore and Flat at Dwarka HELD THAT:- It is not in dispute that the assessee has entered into an agreement with M/s IREO Victory Valley Pvt. Ltd. on 05/07/2011 to purchase house in Gurgaon. The agreement clearly highlights that as on the date of the agreement, the builder was in a possession of the land and construction was to be made in phases in future. The assessee made payments for the said property starting from Financial Year 2011-12 to 2014-15. Therefore, the decision of the A.O. to treat the investment in property at Gurgaon as an instance of purchase in June, 2010 is a debatable issue which cannot be decided u/s 154 of the Act. Therefore, the Ld. A.O. has committed an error in invoking Section 154. As admittedly the last payment for the apartment has been made on 21/05/2014 and the possession has been handed over upon receipt of occupation certificate dated 25/07/2016 and 28/09/2017. Thus, it is clear that even the possession has been handed over within three years of the date of transfer of property. Therefore, we do not find any error or legal infirmity in the order of the Ld.CIT(A). Appeal filed by the Revenue is dismissed.
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2023 (1) TMI 771
Revision u/s 263 - PCIT directed the AO to disallow catalysts expenditure which was claimed by the assessee as deferred revenue expenditure to the amortize over life of the catalyst as treated in its books of accounts - Whether catalyst expenditure is a revenue expenditure and is allowable in the year in which it is issued to production line? - HELD THAT:- No judicial precedent was shown to us that consumables are capital expenditure and those are not allowable in the year of use in production line. Thus, the view taken by the LD AO is a plausible and sustainable view. Further, the identical view has been taken by the learned assessing officer of the detailed examination in earlier years. In those years, the view taken by the learned assessing officer was not found to be erroneous. There is no reason demonstrated before us that for assessment year 2009 10 the order of the learned assessing officer is erroneous various for assessment year 2006 07 until 2008 09 that order is free of any error. However, we do not have any hesitation that when the judicial precedents are in favour of the assessee that consumables are revenue expenditure and are allowed to the assessee as deduction in the year in which those are put in line of production, Therefore, the order of the learned assessing officer passed after due enquiry about such claim, cannot be held to be erroneous. Allowability of depreciation on technical know-how - During the assessment year 2003 04 that entity amalgamated with the assessee company and the capital work in progress of that company was also taken over by the assessee. The above capital work in progress represented the expenses incurred on finance cost, operating expenses, excise duty, salaries et cetera which were not existing in the form of any tangible form. However, in September 2000, fire took place and the plant and machinery were damaged. The assessee claimed subsequently depreciation on that plant and machinery, therefore the learned and CIT was of the view that when the asset itself is not in existence, the assessee is not entitled to any depreciation. However the fact clearly shows that the above plants were rebuilt in 2001, based on technical feasibility it was held to be utilizable. The above plant was rebuilt in financial year 2005 06 and the same was capitalizing the books of accounts. Thereon, depreciation was allowed since then. From the above plant production was also made which was also disclosed from financial year 2005 06 to financial year 2008 09. In view of this, it was stated that the technical know-how has been used and is eligible for depreciation. Thus on the above basis the assessee is eligible for depreciation on the above technical know-how. All depreciation schedules for respective assessment years starting from financial year 2005 06 onwards are available on file itself. AO did not disallow the depreciation only on technical know-how but the building and plant and machinery completely. Even otherwise, the reason for the show cause notice was different then the conclusion arrived at by the learned PCIT. There is no notice/show cause/opportunity to the assessee to explain the depreciation on technical know-how. Even as such, the claim of the depreciation was directed to be disturbed on the basis of user test. The fact shows that capitalization of asset was in earlier years, depreciation is allowed in those years, production has been made from that plant, and the user test is satisfied. Thus, we do not find any error in allowing depreciation to the assessee on the above technical know-how. No error in the order of the learned assessing officer by allowing the claim of assessee of revenue expenditure of catalyst as well as depreciation on technical know-how for assessment year 2009 10. Accordingly, the revisionary order passed under section 263 by CIT (large taxpayer unit) is not sustainable and hence quashed. Appeals of the assessee are allowed.
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2023 (1) TMI 770
Addition u/s.40A(3) - expenditure incurred in cash - CIT(A) rejected the claim of the assessee that such expenditure was incurred in cash for purchase of Furnace oil in absence of any satisfactory evidence as to why the payments were made in cash which are not falling under the exceptional circumstances - HELD THAT:- As mentioned earlier, the assessee could not substantiate as to how the payments made in violation of provisions of section 40A(3) fall under exceptional circumstances allowing payment of cash in excess of Rs.20,000/- as specified in Rule 6DD of the I.T.Act. Since the assessee has failed before the AO as well as the ld.CIT(A) to substantiate the same and there is nothing before us to take a contrary view then the view taken by the AO and ld.CIT(A) on this issue, therefore, the ground raised by the assessee is dismissed. Addition not allowing 1/5th of subscription fee for increasing share capital which is capital in nature u/s. 35D - CIT(A) rejected the claim of the assessee to allow the same u/s.35D - HELD THAT:- We do not find any infirmity in the order of the ld.CIT(A) on this issue in absence of furnishing of any details or evidence in support of the claim that the expenditure falls under any of the categories mentioned in provisions of section 35D(2) of the I.T.Act. We, therefore, do not find any infirmity in the order of the ld.CIT(A) on this issue and accordingly, the same is upheld. The grounds raised by the assessee is accordingly dismissed. Addition u/s. 68 - assessee could not substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the 13 investors who have invested in the share capital of the assessee company and the genuineness of the transaction - HELD THAT:- We find during the remand proceeding, the assessee had given the list of the 13 shareholders with their source. However, it is seen from the source of investment that the investors themselves received loan from others to invest in the shares of the assessee company. It is also important to note that none of the shareholders are assessed to tax and all of them have borrowed money from others, who are again agriculturists and the agriculturists are again not assessed to tax. Further, none of the agriculturists from whom the so called investors have borrowed money are maintaining any bank account. While some of the agriculturists have put their thumb impression, however, the confirmations are in English. Under these circumstances and in view of the detailed reasoning given by the ld.CIT(A) while sustaining the addition made by the AO u/s. 68, we do not find any infirmity in the same. Accordingly, the order of the ld.CIT(A) on this issue is upheld and the grounds raised by the assessee on this issue are dismissed. Addition as unexplained share capital u/s. 68 - CIT-A deleted the addition - HELD THAT:- We find in the case of CIT vs. Titan Securities Pvt.Ltd. [ 2013 (5) TMI 329 - DELHI HIGH COURT] , after considering the decision of M/s. Lovely Exports Pvt.Ltd. [ 2008 (1) TMI 575 - SC ORDER] has held that where the company, which has subscribed to share capital is found to be hawala company providing accommodation entries, mere furnishing of income tax returns, balance sheet, statement of affairs and bank statement without any explanation for deposits in accounts may not meet the requirements of section 68 - it is necessary to note the business activities of share subscribers in order to ascertain whether they are financially sound and are able to purchase the shares for substantial amount. However, in the instant case, as mentioned earlier, none of the investors has filed his/her return of income which would have alerted the ld.CIT(A) before taking the decision by deleting the addition made by the AO u/s. 68. We are unable to uphold the order of the ld.CIT(A) deleting the addition made by the AO u/s. 68. Grounds raised by the revenue allowed.
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2023 (1) TMI 769
Addition of local conveyance and conveyance transport - non-business use of the above expenses - HELD THAT:- It is observed that the AO had made the disallowance out of Travelling Expenses on ad-hoc basis stating that pre-ponderance of probability indicates that non-business use cannot be ruled out. However, the AO has not specifically mentioned which vouchers were defective and what kind of nonbusiness use company indulged into. The assessee is a private limited company and the expenditure had been incurred for its business purposes. In the absence of any specific defect, the disallowance made by AO is merely on surmises. There is no basis for the disallowance. Therefore, the AO is directed to delete the addition, accordingly grounds of appeal of the assessee are allowed. Addition of Travelling and conveyance Expenses - lack of the supporting and probability of non business purpose involved in it, the disallowance of 5% of travelling expenses is made - HELD THAT:- As it is an admitted fact by the Ld.CIT(A) that no specific defect was pointed out by the AO. Thus, the disallowance is based on surmises. The AO has failed to prove that the expenditure was not incurred wholly and exclusively for business purpose. Hence, the AO is directed to delete the disallowance - Accordingly, grounds of appeal of the assessee are allowed.
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2023 (1) TMI 768
Unexplained investment u/s.69B - husband of the assessee was also part of the said transaction as per the contentions of the Revenue - addition deleted in assessee s husband s case is on technical ground and the same cannot be applied in the present case - HELD THAT:- The assessee has 50% share in the property with Anal N. Shah who is husband of the assessee. This fact was never discussed by the AO and, therefore, the assessee cannot be solely held responsible for the entire addition - Besides this, the Assessing Officer in the assessment order has solely relied upon the statement of builder M/s. Munishi Land Developer LLP made before the Hon ble Settlement Commission but nowhere it has been described that the assessee has paid on-money receipt and the AO also failed to show/demonstrate in the Assessment Order that REC-DIS is actually on-money payment in cash. Merely relying on the excel sheet and admission part of the builder which was never confronted to the assessee cannot make the addition. Hence, the addition made by the Assessing Officer is not justifiable. Thus, appeal filed by the assessee is allowed.
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2023 (1) TMI 767
Penalty u/s 271(1)(b) - non-compliance of the statutory notices u/s 142(1) - HELD THAT:- It is not disputed by the Revenue that the notice was sent on the address given in the income tax return filed by the assessee. Therefore, it cannot be inferred that the assessee had not provided the correct address to the Assessing Authority - we are of the considered view that the assessing authority ought to have served notice at the correct address as mentioned in income tax return. The statutory notice should not be issued in a casual and mechanical manner. Assessing Authority should verify the records placed before it and ensure the statutory notice is served on the current address of the assessee. Looking to the facts of the present case in our considered view, the AO was not justified in levying of the impugned penalty. We direct the AO to delete the penalty - Decided in favour of assessee.
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2023 (1) TMI 766
Addition u/s. 41(1) - cessations of creditors - HELD THAT:- Liability ceases when it has become barred by limitation and assessee has unequivocally expressed its intention not to honor the liability even when demanded. The liability has been shown to be paid for the last 15 years and the assessee has not made any payment and no demand from the lender could be proved by the assessee with regard to the outstanding payment. No business transactions have been made with these parties in the last 10 years and no confirmations have been filed before the revenue authorities. All these facts goes to prove that the amounts which have been debited to P L account once and taken as outstanding payable have ceased to exist. The argument of the ld. Counsel that if at all the amounts ceased to exist it could have been taxed in the last previous year or in the subsequent year, there is no reason to tax in the instant year cannot be held to be valid argument that such proposition would be devoid of any logic and revenue cannot be expected to wait for indefinite period to receive their dues as taxes with folded hands. There was no iota of proof to demonstrate that the amounts have liable to be paid in the instant year or in the near future. The conduct of both the parties clearly demonstrates the remission of the amounts. The amounts which were hitherto remained unpaid for more than a decade cannot be treated as an existing liability. Hence, the action of the revenue authorities subjecting that amount u/s. 41(1) cannot be faulted with. The appeal of the assessee on this ground is dismissed. Advances Received - As on 31.03.2016, there was credit balances appearing in the account of M/s. Gaurav International and Elite Sales (India) which was advanced from customers - HELD THAT:- With regard to addition it is submitted that advances received by the assessee in earlier assessment years could not be brought to tax as undisclosed income during the year under consideration. In the present case advances were continuing from earlier years and during the year under consideration no fresh advance was received. Hence, we hold that the Ld. CIT(A) has erred in sustaining the addition on account of advance from M/s. Gaurav International and M/s. Elite Sales(India) u/s. 41(1). Addition on account of outstanding credit balance - HELD THAT:- The statement of account of M/s. Swastika Enterprises for F.Y. 2013-14, 2014-15 and 2015-16 duly confirmed along with PAN was filed. And just because during the F.Y. 2014-15 and 2015-16 there is no purchase from this firm, although payments have been made in the F.Y. 2013-14 and 2015-16 against the purchases made in F.Y. 2013-14, there is no justification for making addition as undisclosed income. Hence, the action of the revenue authorities cannot be sustained.
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2023 (1) TMI 765
Reopening of assessment u/s 147 - undisclosed work in progress - HELD THAT:- As evident from the perusal of the case file that the assessee was found to have not disclosed fully and truly all the material facts once it is an admitted position that the work in progress had seen light of the day only as per his letter dated 04.01.2008 addressed to M/s. Samcon Infrastructure Corp. We thus reject the assessee s instant last legal argument, not raised before the CIT(A), in the Revenue s appeal. Addition of the assessee s work in progress - Also no merit in the assessee s instant arguments on merits as well. Suffice to say, it is an admitted fact that the assessee has nowhere declined the department s clinching stand all along that he had never disclosed the work in progress at all in his books through-out. AO foregoing detailed discussion has also not invoked the so-called accrual principle which could be held to have been rightly appreciated in the CIT(A)'s impugned order. This is thus a clearcut instance wherein the impugned addition ought had been assessed as unexplained work in progress only. Question as to whether such a change in the head of income, if at all, could be allowed to be made in sec.254 proceedings is concerned, we find that not only the hon'ble jurisdictional high court s landmark decision in Ahmedabad Electricity Co. Ltd. [ 1992 (4) TMI 29 - BOMBAY HIGH COURT] has settled the law long back that the clinching statutory expression may pass such orders thereon as it thinks fit has to be interpreted in wider than in narrower terms but also their lordships hold in CIT vs. Gilbert Barker Manufacturing [ 1976 (12) TMI 39 - BOMBAY HIGH COURT] indeed affirm our jurisdiction to change even head of income, as the case may be, after putting the parties to notice. Assessee s further contention that the impugned vouchers does not relate to F.Y. 2007-08 also fails to cut any ice as we can very well direct the Assessing Officer to assess the same in the concerned earlier assessment years u/s.153(6) of the Act. And also the impugned sum stood crystalised and became due on demand only in assessment year 2008-09 in issue. Faced with this situation, we restore the Assessing Officer s action adding the impugned sum in assessee s hands in above terms - Decided in favour of revenue.
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2023 (1) TMI 764
Revision u/s 263 by CIT - assessee is not eligible for claiming 80P deduction regarding its interest income derived from cooperative banks etc - Revenue for having accepted the assessee s claim involving interest amount derived from parking of funds in various cooperative banks involving varying sums, as eligible for the section 80P deduction - HELD THAT:- As decided in RENA SAHAKARI SAKHAR KARKHANA LTD. [ 2022 (1) TMI 419 - ITAT PUNE] A.O while framing the assessment had taken a possible view, and allowed the assessee s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same. Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec. 143(3). We adopt the foregoing detailed reasoning mutatis mutandis to reverse the ld. Pr.CIT s impugned revision directions. The Assessing Officer s corresponding regular assessment stands restored - Assessee appeal allowed.
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2023 (1) TMI 763
Unexplained jewellery - During the course of gold jewellery and Diamond were found in huge quantity - assessee could not file any evidence to justify the purchase of jewellery by the family members including wealth tax returns filed for the relevant assessment years - CIT-A deleted the addition - HELD THAT:- Once the appellant disowned jewellery found during the course of search, it does not belong to him and also the statement of the appellant has been accepted by the family members, then if at all the family members could not explain source for purchase of jewellery, the AO can make addition only in the hands of the family members, but not in the hands of the appellant. When the family members explained the mode and method of acquiring jewellery, the AO cannot disbelieve the statement of the assessee merely for the reason that the assessee could not furnish necessary evidence, because it is customary in Indian society, during marriages ladies will get substantial amount of jewellery from their parents as marriage gift. Family members had also claimed that they have purchased part of jewellery for many years. No doubt, the appellant could not furnish necessary bills, but fact remains that when the appellant claims that jewellery was purchased for many years, the AO cannot insist bills for purchase of jewellery. Further, the family members claimed that they did not file wealth tax returns because taxable wealth in their hands for all these assessment years is below taxable limit. Merely for the reason that there is no wealth tax returns filed by the family members no adverse inference could be drawn against the assessee. Appellant had admitted a sum of Rs. 35 lakhs towards unexplained jewellery. CIT(A) after considering relevant facts has rightly deleted addition towards unexplained jewellery and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the revenue. Unexplained expenditure u/s. 69C - AO made addition towards jotting found in loose sheet as unexplained expenditure on the ground that the assessee could not prove the source for repayment of loan - HELD THAT:- First of all addition cannot be made on the basis of jottings in loose sheet, unless other corroborative evidence to prove that whatever recorded in loose sheet are correct. Secondly, when the AO treated repayment of loan to his friend as unexplained, he ought to have accepted the explanation of the assessee that he had borrowed loan from his friend. He cannot reject loan borrowed from the friend and at the same time, cannot make addition towards source for repayment of loan. If there is no loan from the friend then the question of repayment of said loan does not arise. If you consider loan taken from his friend is true and correct, then the assessee is having source with him to explain repayment of said loan to his friend. CIT(A) after considering relevant facts had rightly held that the AO cannot ignore loan borrowed from his friend and make addition towards repayment of said loan. Therefore, we are of the considered view that there is no error in the reasons given by the CIT(A) to delete addition made towards unexplained expenditure towards repayment of loan to Shri Shanmugasundaram of Mysore and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the revenue. Unexplained investment u/s. 69B of the Act for purchase of property - HELD THAT:- Assessee and the ld. DR present for the revenue fairly agreed that, the assessee has settled the dispute with regard to addition on account of unexplained investment under the Direct Tax Vivad Se Vishwas Scheme, 2020 and paid relevant taxes and in this regard, he has filed Form no. 5 issued by the designated authority. Therefore, we are of the considered view that the ground taken by the revenue on this issue becomes infructuous
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2023 (1) TMI 762
Addition u/s 68 - unsecured loan - loan transaction as bogus - Whether creditworthiness of the creditor(s) be decided by the AO of the assessee? - HELD THAT:- It is an undisputed fact that the assessee during the assessment proceedings provided the copies of the Income Tax Returns, Confirmation Letters, Bank Statement of M/s. Rudra Enterprise and also produced copies of the interest payment on the unsecured loan with TDS for the subsequent Assessment Year 2017-18. CIT(A) has correctly followed the case of CIT vs. Ranchhod Jivabhai Nakhava [ 2012 (5) TMI 186 - GUJARAT HIGH COURT] wherein it was held that the primary onus had been discharged by the assessee by producing the copies of the Income Tax Returns, Bank Statements and Confirmation Letters of the creditors. The creditworthiness of the creditor(s) cannot be decided by the AO of the assessee. AO of assessee can get the matter investigated through the AO of the creditors. The AO of assessee cannot become AO of the creditors. It is not the case of AO that the impugned amount is assessee's own money generated out of books of account and the same is introduced in its books of accounts through bogus creditors. If that is so, what evidences AO has collected to place it on record. Once confirmations have been filed, further action, if any, is required to be taken in case of creditor and not in case of assessee. Explanation about 'source of source' or 'origins of origin' cannot be asked from the assessee while making inquiry under section 68 as per ratio laid down in the case of DCIT v. Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] . We have no hesitation in rejecting the grounds raised by the Revenue. Thus, we do not find any infirmity in the order passed by the Ld. CIT(A), therefore it does not require any interference. Appeal filed by the Revenue is hereby dismissed.
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2023 (1) TMI 761
Addition u/s 40A(3) - assessee was making cash payment in excess of Rs. 20,000/- in violation of provisions with respect to certain expenses such as salary, labour expenses, materials purchases and land purchases - HELD THAT:- The salary paid to the directors has nowhere been doubted by the authorities below. Furthermore, it is the directors who were managing the affairs of the company and they were acting as the custodian of the cash belonging to the assesse. As such the directors of the company closely connected with each other. Thus any salary paid to them by way of making any adjustment of the salary cannot be made subject to the disallowance under the provisions of section 40A(3) of the Act. Payment towards the purchase of bricks, we find that there was no argument advanced by the learned AR for the assesse at the time of hearing. Accordingly, we hold that such payment has been made inviolation of the provisions of section 40A(3) and therefore the same has to be disallowed. Hence the ground of appeal of the assesse is hereby partly allowed. Addition on account of interest not charged on the interest-free loans and advances given to the parties - assessee on one hand has incurred interest expenses on the borrowed fund and on the other hand, it has made interest-free loans and advances - Thus the AO computed the amount of interest being 14% on the interest-free loans and advances provided by the assessee and added to the total income of the assessee - HELD THAT:- There is no dispute to the fact that the own fund of the assessee including the interest-free loans and advances exceeds the amount of interest free loans and advances provided by the assessee and therefore a presumption can be drawn that owned fund which is interest-free available with the assessee has been utilized for making such advances - See R.L. KALTHIA ENGGINEERING AUTOMOBILES PVT. LTD. [ 2013 (2) TMI 754 - GUJARAT HIGH COURT] - thus disallowances of interest expenditure in the given facts circumstances where the assessee was having sufficient interest free fund is not justified. - Decided in favour of assessee.
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2023 (1) TMI 760
Addition under the head short term capital gains - assessee received some additional onmoney payments - CIT-A deleted the addition holding that the Department did not have corroborative evidence to back the narration found in the parallel tally account seized during search - HELD THAT:- Burden is now on the AO to prove that the assessee received some additional onmoney payments and considering the facts circumstances of the case we are of the view that the AO has not brought sufficient material on record against the assessee warranting the addition. Addition made by the AO is based on the assumption that Mr.Thampi has admitted transactions relating to other concerns, and therefore the impugned transaction should have taken place for what he found in the entry. This cannot be the right approach for making an addition when no other corroborative evidence is brought on record to show that the transaction happened for a higher amount and there were on-money transactions. In our view the CIT(A) has looked into the facts and circumstances of the case and has given a clear finding while deleting the additions. We therefore see no reason to interfere with the order of the CIT(A) with regard to this issue. Addition on account of loans taken from the Director Shri. C. C. Thampi on the ground that the source is not properly explained - AO has made the addition on the ground that the assessee had not furnish the relevant details to substantiate the source - HELD THAT:- AO has not considered the submissions of the assessee that all contributions are made through proper banking channel as a foreign remittance from abroad and that Mr.Thampi is working abroad for last 30 years having involved in many business ventures in middle east. We notice that the assessee had submitted the annual reports of various entities in which Mr.Thampi is involved and the AO has rejected these on the ground that the annual reports pertain year ended 31.03.2012 and cannot considered for contributions made during 2007. AO has also alleged that the assessee is producing irrelevant details to divert the issue. We are unable to appreciate this stand of the AO for the reason that the assessee has submitted evidences in the form of bank statements where the entries of receipt on various dates are reflected and the annual reports are submitted to substantiate the various business interest of Mr.Thampi. These evidences cannot be rejected without verification and without any adverse finding to the contrary. AO has not conducted any further enquiry but has made the addition by stating that the credit worthiness is not proved in the manner in which it ought to have been proved. CIT(A) in our view has considered the facts and circumstances of the case correctly while deleting impugned addition and therefore we see no reason to interfere with the decision of the CIT(A). - Decided against revenue.
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2023 (1) TMI 759
Disallowance of business loss - AO disallowed the said business loss on the ground of non-production of relevant supporting documents - HELD THAT:- We find that the expenditure claimed by the assessee are petty expenses, out of which, the major expenses are in respect of salary to staff - Once the assessee has furnished the relevant documents before the Ld. CIT(A) and after admitting the same, the Ld. CIT(A) has called for remand report from the AO therefore, the Ld. CIT(A), in our view, ought to have looked into these documents. Thus we do not find any justification on the part of the lower authorities for disallowing the business loss. Addition u/s 68 - amount credited in the capital account of the assessee - HELD THAT:- We find that the assessee has successfully proved the sale transaction of the land for Rs. 95 lacs out of which, the assessee received Rs. 47,50,000/-which were directly deposited interest eh firm s loan account. Therefore, the addition made into the capital account of the said amount cannot be doubted. Relating to the rest of the amount, the Ld. Counsel for the assessee has submitted that some of the amount was withdrawn from its firm M/s Akshit Enterprises and some of the amount was received from withdrawals of its Yes bank account. The copy of the bank account statement were furnished before the CIT(A), however, CIT(A) failed to look into the aforesaid bank statement etc. No justification on the part of the CIT(A) in sustaining the aforesaid additions, the same is accordingly ordered to be deleted. Unsecured loans received u/s 68 - loan received by the assessee from brother - HELD THAT:- From the perusal of the confirmed copy of the accounts, it was clear that one cheque amounting to Rs. 12,39,500 taken from Dyal Sarup (HUF) was wrongly issued / repaid to Dyal Sarup Instead of Dyal Sarup (HUF) and thus, it was paid back to the assessee subsequently. Thus, the same needs to be accepted. Regarding the balance amount,it is submitted that the said amount was not actually received from Dyal Sarup (HUF) but was merely a book entry made from M/s Dhruv Impex and the same has been submitted before the Ld. AO during the remand proceedings. Worthy CIT(A) have not even cared to look into the said facts and in a presumptive manner rejected the submissions of the assessee and upheld the additions. Thus, the assessee has filed confirmed copy of accounts to show that it was merely a book entry. The assessee has also filed his bank statement, wherein, no such amount has been received and no adverse inference with regard to the same has been drawn by the Department. Thus, the addition made with regard to the same also deserves to be deleted. Long Term Capital Gains - Nature of property sold - commercial property or residential property - AO not referred the matter to the DVO to get the market value of the property - HELD THAT:- Assessee initially had purchased the property as commercial property but while selling the property the assessee sold the property as residential property. The Stamp Duty Authority has accepted the said property as residential property. Apart from this, the assessee produced on file the Certificate issued by the Assistant Town Planner supporting that the property sold by the assessee falls within the Ludhiana Residential Town Planning Scheme and hence residential property. In this case, the assessee has claimed to have sold the property as per the Value assessed by the Stamp Valuation Authority. Apart from that, the assessee has also furnished a Certificate from the concerned authority i.e. Assistant Town Planner that the property in question falls in the residential area. However, it has not been explained as to why the assessee had purchased the said property as commercial property. May it be so, the Assessing officer at most, can have referred the matter to the District Valuation Officer but the Assessing officer himself did not have any authority to apply the value of the Circle rate of commercial property, especially when the Stamp Duty Authority / Registering Authority had accepted this sale deed as per the Circle rate meant for residential property. Since the value shown by the assessee has been accepted by the Stamp Duty Authority and further the Assessing officer has not referred the matter to the DVO to get the market value of the property, therefore, we do not find any justification on the part of the Assessing officer to himself made the additions by applying circle rate meant for commercial property. In view of this, the addition made by the Assessing officer relating to this amount is ordered to be deleted. Allowing the assessee the brought forward loss - assessee has submitted that the aforesaid brought forward losses of AY 2012-13 and AY 2013-14 inadvertently could not be claimed in the relevant column of the return. However, during the course of assessment proceedings, the same were very much claimed - HELD THAT:- We have considered the rival contentions. It has been time and again held that the Income Tax Authorities should charge legitimate taxes from the assessee. An assessee should not be punished for his/ her bonafide mistake. The Instructions in this respect have also been issued by the CBDT from time to time that the Income Tax Authorities should assist the assessee in correctly making their claim in the return. 19. In view of this, we direct the Assessing officer to verify the claim of the assessee regarding the brought forward losses of the previous years i.e. AYs 2012-13 and 2013-14 and if the claim of the assessee is found correct, then to give set off adjustments of the same in the current year under considerations
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2023 (1) TMI 758
Credit of TDS - DR mentioned that the amount was not credited in the 26AS, so, the assessee is not eligible for claim of TDS - HELD THAT:- As assessee is genuinely eligible for the claim of TDS amount which was deducted from his rental income. The income was also offered for tax. So, assessee is eligible for claim of TDS. It is duty of the party to deduct the tax and to submit before the government treasury u/s 205 of the Act. We set aside the matter to the ld.AO to verify the TDS from respective authority and allow the claim of the assessee after a proper verification. The assessee should also get a reasonable opportunity of hearing for substantiate its claim. Appeal of the assessee allowed for statistical purposes.
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2023 (1) TMI 757
Addition based upon the statement recorded u/s. 133(6) - HELD THAT:- It is pertinent to point out that the A.O. has considered the statement made by the partner of the assessee firm which was further corroborated by the diary found at the premises of the assessee during the survey operation, is justifiable to hold that the impugned addition was not merely based upon the statement recorded u/s. 133(6) of the Act but was also corroborated with material evidences. On this note, we find no merit in allowing ground raised by the assessee. Special provision for computing profits and gains of business on presumptive basis - income declared u/s. 44AD of the Act at a percentage of turnover which is higher than the percentage prescribed u/s. 44AD - HELD THAT:- Upon considering as per the said Explanation (2) to section 44AD, the assessee firm will be considered as an eligible business to come under the purview of section 44AD. The intention of the legislature in case of computing profit and gains of business on presumptive basis is to enhance the tax payers to declare income at the minimum rate prescribed u/s.44AD and also allows the assessee to offer income higher than the said prescribed rate, in case of business, whose total turnover or gross receipts in the previous year, does not exceed the amount prescribed under law. The lower authorities have not denied the fact that the assessee is an eligible assessee , carrying out eligible business under the provisions of section 44AD of the Act. On this observation, we hold that the assessee s declaration of income u/s. 44AD of the Act is justified and the A.O. s contention that the assessee has not maintained its books of account in such case, is not warranted. Hence, the assessee s declaration of income u/s. 44AD of the Act at a percentage of turnovers higher than the prescribed percentage u/s.44AD of the Act, is justified. Expenses paid towards Maharashtra Value Added Tax (Sales Tax) - Claim disallowed on the ground that the impugned amount was paid by the customers along with the bill issued to the customers - HELD THAT:- Assessee has failed to furnish documentary evidence to substantiate the fact that the impugned amount was not paid by the customers and was paid from the coffers of the assessee, was not supported by documentary evidence neither before the lower authorities nor before us. In order to deduct the said expenses as wholly incurred for the purpose of assessee s business from the income of the assessee, the assessee is given one more opportunity to produce documents in support of its claim before the A.O. For this limited purpose, this issue is remanded back to the file of the A.O. The A.O. is hereby directed to verify the documentary evidences which are to be filed by the assessee to prove the fact that the assessee has paid the VAT amount and has not collected it from the customers through bills, invoices, etc. and to decide this issue on merits.
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2023 (1) TMI 756
Deduction u/s 80IB - part of the manufacturing activity being done from outside unit - HELD THAT:- CIT(A) has passed valid order by taking the view that even if the part of manufacturing activities are being done from outside the unit, the deduction under section 80IB could not be disallowed. This view has also been affirmed by case of Penwalt India Ltd. [ 1991 (4) TMI 33 - BOMBAY HIGH COURT] and CIT vs. Oricon P. Ltd. [ 1983 (10) TMI 15 - BOMBAY HIGH COURT] So merely because of the fact that part of the manufacturing process resulting in N products was carried on by an outside agency the assessee would still be considered as manufacturer. The coordinate Bench of the Tribunal has also taken identical view in case of Sunrise Metal Industries [ 2002 (11) TMI 248 - ITAT BOMBAY-H] . The Ld. D.R. for the Revenue has failed to bring on record if this settled proposition of law has been overturned by any higher forum. Appeal filed by the Revenue is hereby dismissed.
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2023 (1) TMI 755
Approval granted u/s 10(23C)(iv) revoked - assessee is a society registered under the Societies Registration Act, 1860, w.e.f, 18.06.1980 - assessee has not maintained separate books of account for its business and charitable activities, thereby, has violated 7th proviso to section 10(23C)(iv) - difference in foreign contribution shown in the income and expenditure account and the FCRA return in Form FC-4 - HELD THAT:- On a perusal of the statutory audit report for the year ended 31st March, 2016, it is observed, in a note forming part of the financial statements, the auditor has specifically stated that donations/grants received, other than the grants for specific purposes, are regarded as income when it is reasonably expected that the ultimate collection will be made during the year - as observed that the income/fund shown in the income and expenditure account is on accrual basis, as, the assessee was reasonably certain that it will receive the grant/fund. From the details available on record, it is observed that in FCRA return filed in Form FC-4, the assessee has shown foreign contribution of Rs. 93,45,00,516/-, whereas, in the income and expenditure account, the assessee has shown such figure at Rs.107,61,69,730/-. Thus, the explanation of the assessee that the foreign contribution in FCRA return has to be shown on receipt basis is acceptable. Allegation of the Special Auditor that the assessee has not maintained separate books of account for the purpose of foreign contribution under the Foreign Contribution Regulation Act, 2010 , is equally unacceptable. The only requirement in law is, the assessee must maintain separate bank accounts for foreign contribution, which the assessee has complied. It is noteworthy, before the departmental authorities, the assessee has specifically submitted that its accounts are maintained in ERP software, viz., Lawson to record transaction. It is understood, ERP software can be used to compute figures of any segment of the entity. Further, we have noted, in case of Ranbaxy Laboratories Ltd. [ 2016 (5) TMI 157 - ITAT DELHI] while considering the issue whether separate books of account are required to be maintained where the accounts are maintained on SAP ERP System, has observed that SAP based ERP system of accounting tantamount to maintenance of separate books of account - we have to accept assessee s plea that there is no necessity of maintaining separate books of account, once the accounts are maintained in ERP system. Thus, in view of the aforesaid, the allegation of the CIT (Exemption) that due to non-maintenance of separate books of account the condition of 7th proviso to section 10(23C) of the Act is violated, deserves to be rejected. Whether it can be said that the assessee is not carrying out charitable activity as envisaged in section 2(15) read with section 10(23C)(iv)? - While alleging that the assessee earned profit from sale of these products, the departmental authorities have not taken note of the various costs incurred by the assessee, such as, distribution cost, advertisement cost, warehousing cost and other administrative cost. The departmental authorities have also ignored the fact that a substantial part of the contribution received was utilized for promotion and spreading awareness and increasing acceptance of an alternative method of family planning alien to the target population. Allegation made by the departmental authorities is unilateral. There is nothing on record to suggest that either the parent organization or the Government Authorities have made any allegation regarding the diversion of foreign contribution received for any other purpose, except the purpose for which it was given or it was utilized for the business gain of the assessee. Even, there is no violation, as alleged, under the Foreign Contribution Regulation Act. Thus, in absence of any contrary material brought on record by the Revenue, it cannot be said that the assessee has utilized the foreign contribution received in respect of Pehel Project for its own commercial gain. Assessee has earned profit by selling products, viz., Masti Brand of condoms in NACO project - No adverse material has been brought on record by the Revenue to demonstrate that the assessee has violated the pricing of the products, as per the Government mandate. Moreover, there is no allegation by any of the Government agencies, be it Central or State, regarding promotion of assessee s own brand at the cost of Government brand of condoms. That being the factual position emerging on record, it cannot be said that the assessee has derived any undue benefit by promoting its own brand. In any case of the matter, the assessee was granted approval under section 10(23C)(iv) of the Act for the first time in the year 1991. At the time of grant of approval under section 10(23C)(iv) of the Act, the competent authority was satisfied that the assessee has fulfilled the threshold conditions for approval under section 10(23C)(iv) of the Act. Once the assessee satisfies the threshold conditions of section 10(23C)(iv) of the Act, the approval granted cannot be withdrawn, that too, with retrospective effect, alleging violation of certain compliance conditions. The Departmental Authorities have failed to differentiate between the threshold conditions and compliance conditions. The compliance conditions have to be examined in each assessment year and, in case, there is any violation in compliance conditions in any assessment year, assessee s claim of exemption for the said assessment year can be rejected. However, that cannot be a reason to revoke the approval granted under section 10(23C)(iv) of the Act. One more factor which needs consideration is, till date, assessee s registration under section 12A of the Act as a charitable institution subsists. In fact, approval granted under section 80G of the Act is still continuing. These facts reflect the dichotomy in the stand of the revenue. For the purpose of section 12A and 80G of the Act the assessee is recognized as charitable institution, whereas, for the purpose of section 10(23C)(iv) assessee loses its charitable status. This approach of the revenue is unacceptable. Approval under section 10(23C) of the Act cannot be revoked, more so, when the objects of the assessee have remained same. We, for a moment, do not say that the competent authority under no circumstances can revoke the approval granted under section 10(23C)(iv) of the Act. However, for doing so, the revenue must bring on record cogent material to demonstrate that the assessee has deviated from the core objects based on which approval under section 10(23C)(iv) was initially granted to the assessee. It is also a fact on record that the activities of the assessee are in the category of medical relief to the poor. Thus, if we interpret the provisions of section 2(15) of the Act strictly, the proviso would not apply. Thus we hold that the impugned order passed by learned CIT (Exemption) withdrawing the approval granted under section 10(23C)(iv) of the Act is unsustainable. Decided in favour of assessee.
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2023 (1) TMI 754
Deemed dividend addition u/s 2(22)(e) - substantial amount of Reserve Surplus, has advanced its director having major shareholding, an amount as a Loan Advance, which was considered as covered under the ambit of Sec. 2(22)(e), as such - CIT(A) holds a view that the whole transaction was designed by the managing director(assessee in this case) of the company to enrich himself through advance of money without declaring Dividend the provision of section 2(22)(e) is brought into operation as anti abuse measure - HELD THAT:- Addition to the facts of the case the provision of section 2(22)(e) shall not apply but even otherwise on going through the provisions of above sections it is eventually clear that the assessee company is not a private limited company and the shares of the companies are not restricted for transfer, therefore, considering the decisions of National Bearing Com Ltd. [ 1993 (10) TMI 56 - RAJASTHAN HIGH COURT ] as held in the absence of evidence to show that the directors had been exercising their power under article 37 freely and virtually eliminated the element of free transferability of the shares as provided in the articles of the company and in the absence of restriction in any other articles of the company interfering with the free transfer of shares by one shareholder to another, the mere existence of an article like article 37 would not affect the free transferability of the shares within the meaning of the Explanation to section 23A(1) of the Indian Income-tax Act, 1922. The assessee-company was, therefore, regarded as one in which the public were substantially interested. It was held that article 37 did not confer any uncontrolled or unrestricted discretion upon the directors to refuse to register the transfer of shares in a given case; in other words, the directors could not act arbitrarily or capriciously. Provisions of Section 2(22)(e) is directly not applicable in this case, we do not concur with the view of the lower authorities and based on the set of facts it is clear that since, the security deposits received by the assessee from a company wherein the public are substantially interested even though not considered as commercial transaction then even based on the above findings the provisions of section 2(22)(e) is not applicable and therefore, we vacated the addition made by the Assessing Officer and thus the ground No. 1 of the assessee is allowed. Addition u/s 56 - deemed consideration received by assessee, over above of the face value of equity shares - HELD THAT:- As decided in assessee own case [ 2022 (4) TMI 805 - ITAT JAIPUR ] even if it is assumed that the shareholders to whom shares were not allotted have given up their right of allotment in shares to other shareholders, it is a case of transfer of right in shares by one relative to another relative and therefore also section 56(2)(vii)(c) would not get attracted. For receipt of share there should be shares in existence and a person holding such share transferring it to another person. As against this in case of allotment of shares, it comes into existence after it is allotted and there is no transfer of shares from one person to another person. Therefore allotment of shares cannot be equated with receipt of shares because in case of receipt of shares the property is already in existence whereas in case of allotment of shares the property comes into existence after it is allotted. The transaction between the close relatives is not taxable under the head 'income from other sources u/s 56(2) of the Act. We are of the opinion that the section 56(2)(vii)(c) has no application and the company is liable to be taxed . The opinion and well known facts that in a private limited company major percentage of shares are holded by the relatives only. For receipt of share there should be shares in existence and a person holding such share transferring it to another person.There is no dispute that existing shareholders prior to fresh allotment was the assessee and his relatives and the provisionsof section 56(2)(viii)(c)(ii) shall not apply in case of money or any property received from any close relative - In the present case it is fresh allotment of shares. Appeal of assessee allowed. Addition u/s 69 - assessee has purchased two properties - assessee has appreciated the value of these two properties by the amount mentioned as above and the cash in hand has been reduced by the same amount - HELD THAT:- It is not disputed by the lower authority that the assessee is having sufficient cash balance in the balance sheet already filed and placed on record this cash balance being not disputed the genuine error of not considering the cash paid for an amount if reduced then also there exist a cash balance this fact support the contention of the assessee that it is the genuine mistake of the accountant and the ld. DR did not controvert this availability of cash on hand with the assessee before and after recording the stamp duty expenses and in view of this non disputed fact we hold that the explanation given by the assessee is on account of the genuine error on the part of his accountant and same was disclosed before the assessing officer but the view of the ld. AO is against the fact that the assessee is having sufficient cash balance and therefore, the addition made is not survived and we vacate the addition therefore the ground no. 3 raised by the assessee is allowed. Addition u/s 68 - Unexplained cash credits - HELD THAT:- As assessee has filed all the four Loan creditor s confirmation and thereafter neither he has carried out further inquiry nor asked the assessee to submit any further details and considering the jurisdiction high court decision relied upon by the ld.AR of the assessee in the case of CIT Vs. Bhawani Oil Mills [ 2010 (10) TMI 796 - RAJASTHAN HIGH COURT ] assessee has filed the confirmation and thereafter he has not controverted these confirmation the addition cannot be made. In the result ground no. 4 raised by the assessee is allowed.
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2023 (1) TMI 753
Denial of exemption u/s. 54 - Assessee had not disclosed capital gain in the return filed u/s 139(1) - Assessee should deposit the proceeds in the special capital gains account before the due date of filling of the return of income u/s. 139(1) which Assessee has failed to do so and Assessee has to satisfy the condition prescribed u/s. 54(2) - HELD THAT:- There is no dispute that Assessee had earned capital gain on sale of flat and the same was invested in purchase of new house within the time provided u/s. 54. The entire purchase consideration was paid by 31st March, 2012 and possesion was obtained on 23.04.2012. However, in the return filed u/s 139(1) Assessee had not disclosed capital gain albeit had made a claim before the AO in the revised computation. We agree with the contention of that if a claim was not made in the return of income the same can be made during the course of assessment proceedings and the judgment of in case of GOETZE (India Ltd.) [ 2006 (3) TMI 75 - SUPREME COURT ] applies only to the power of the AO and not to the power of the appellate authorities to admit the claim. Whether the benefit or exemption from capital gain tax can be given, if the investment has been made in terms of section 54 within date specified u/s. 139(4); or can capital gain exemption be denied mearly because on account of failure on part of the Assessee to deposit the capital gains in the capital gains account scheme before the due date specified u/s 139 (1). Find that, this issue stands covered by the decision in the case of CIT vs. M/s. Jagriti Aggarwal [ 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT ] Thus hold that if the investment u/s 54 has been made within the time limit of date specified u/s. 139(4), exemption cannot be denied. Thus, the claim of exemption u/s. 54 is allowed to the Assessee.
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2023 (1) TMI 752
Denial of deduction u/s 80P - Intimation u/s 143(1) - return of income is not filed within time limit as provided u/s 139(1) of the Act but u/s 139(4) - HELD THAT:- The claim of deduction under section 80P of the Act cannot be allowed the assessee, if the assessee does not file its return of income within the due date stipulated under section 139(1) of the Act w.e.f. assessment year 2018-19 onwards. Amendment has been introduced in section 143(1)(a)(v) of the Act to provide that the claim of deduction under section 80P of the Act can be denied to the assessee, in case the assessee does not file its return of income within the time prescribed under section 139(1) of the Act with effect from 01-04-2021 and does not apply to the impugned assessment year i.e. assessment year 2019-20 relevant to financial year 2018-19. Accordingly, in our considered view, denial of claim under section 80P of the Act would not come within the purview of prima facie adjustment under section 143(1)(a)(v) of the Act, for the simple reason that the section was not in force during the period under consideration i.e. assessment year 2019-20. The case of the assessee would also not fall within the purview of prima facie adjustment under section 143(1)(a)(ii) (an incorrect claim, if such incorrect claim is apparent from any information in the return). We also observe that the counsel for the assessee has filed copies of orders passed by Commissioner (Appeals), NFAC in many other cases of cooperative societies having similar issues, in which it has been held that section 143(1)(a)(ii) of the Act does not deal with disallowance of deduction for deed filing of return of income and also the said adjustment is not permissible under section 143(1)(a)(v). Claim of deduction u/s 80P of the Act cannot be denied to the assessee only on the basis that the assessee did not file return of income its return of income within due date u/s 139(1) of the Act , in light of the discussion and judicial precedents highlighted above - Decided in favour of assessee.
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Customs
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2023 (1) TMI 751
Scope of the Advance Ruling - Whether the matter (case) was pending - Rejection of representations made by DRI for treating the CAAR s order dated 05.10.2021 as void ab initio - fraud and misrepresentation of facts - Section 28K(1) of the Customs Act - H ELD THAT:- The proviso to Sub-Section (2) of 28-I of the Customs Act proscribes the CAAR from allowing any application filed for advance ruling, where question raised in the application is pending in the applicant s case before any officer of customs, the Appellate Tribunal or any Court or if the said question has already been decided by the Appellate Tribunal or any Court. In the present case, DRI had not issued any pre-consultation notice or show cause notice which would indicate that the question regarding classification of any goods was pending before DRI. Thus, even if it is accepted that an officer of DRI is an officer of Customs, it cannot be accepted that the question raised by the respondent in its application under Section 28H of the Customs Act was pending in the applicant s case before DRI. In order for a question to be considered as pending before any officer of customs, it would be necessary for the question to be raised in any notice enabling the assessee to respond to the said issue. Merely because an officer of customs contemplates that a question may arise, does not mean that the question is pending consideration. For a question to be stated to be pending, the concerned officer must formally set forth the same for the assessee to contest the same. Any preliminary exercise done by an officer of customs, to consider whether any question for consideration arises, would not preclude the CAAR from giving its advance ruling on that question. The possibility that a question would arise for consideration of a customs officer, appellate tribunal or court, is not a ground contemplated under Clause (a) of the proviso to Section 28-I(2) of the Customs Act. Clearly, a distinction must be made between that question pending consideration and a possibility of a question arising consideration. There are no infirmity with the impugned order rejecting the representations made by DRI - appeal dismissed.
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2023 (1) TMI 750
Confiscation of goods - Violation of provisions of Import Policy since the Pre-Shipment Inspection (PSI) Certificate furnished was not as per Appendix-28 of the Foreign Trade Policy - redemption of the goods in lieu of confiscation was allowed on payment of redemption fine - penalty imposed under Section 112(a) of the Customs Act, 1962. Whether the PSI certificate submitted by the appellant-importer was sufficient compliance with Appendix-28 ibid. and that the authorities are justified in ordering confiscation and offering redemption fine in lieu of the same? HELD THAT:- In the first place, there should be an improper import of goods leading to confiscation of the same. Here, there is no dispute that the PSI certificate which was furnished was complete in all respects, except the fact that the same was issued by the Branch Office. This implies that the Revenue has recognized and accepted the Branch Office of the issuing agent, but does not want to accept the certificate issued by the Branch. For this alleged violation, the goods were subjected to 100% examination by the authority, but the same did not result in detection of remnants of arms and ammunition or of any banned or objectionable substances. Thus, the goods were found to be in order and as declared in the Bill-of-Entry. Despite this, the Adjudicating Authority proceeds to hold that the import was improper and orders for confiscation of the goods in question which, according to me, is not due to any violation as described under the statute. The authorities have found that the violation, if any, has not resulted in any specified categories of items being imported or that there was any reason to hold that there has been an improper importation of the goods in question, resulting in confiscation of the same. To put it in simple terms, the goods have not been imported contrary to any prohibition imposed by or under the Act or contrary to any prohibition imposed by any other law for the time being in force. This is because the import is subject to fulfilment of stipulated condition, failing which the only consequence prescribed is the 100% inspection of the entire consignment. This, ipso facto, therefore, would not tantamount to improper import of goods within the meaning of Section 111(d) of the Act. Consequently, the authorities below are not justified in demanding redemption fine and penalty under Section 112(a) of the Act. The impugned order cannot sustain and therefore, the same is set aside - Appeal allowed.
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2023 (1) TMI 749
Smuggling - Seizure of mobile handsets of Chinese origin - bogus or fake invoices submitted by the truck Driver and transport company in respect of the mobile handsets - It further appeared to the Customs Department that the owner of the mobile handsets was the appellant in view of the no objection certificate issued by the transporter in his favour - HELD THAT:- Admittedly the goods under dispute, Chinese mobile phones have been purchased by the appellant from open market in Delhi. Such contention is also supported by the statement and evidence led by the transporter. Appellant have also produced documents of transport before the Tribunal as well as the bilties that the goods were being transported from Delhi to Ahmedabad. Further, appellant had appeared before the Customs Department and had claimed the goods. Admittedly, no other person has claimed the goods in question. In view of admitted town seizure, it was the onus on the Customs Department to lead evidence in support of allegation as to the smuggled nature of goods. It is also found from the record that no evidence has been brought on record in support of its allegation. Further, sale-purchase of goods in India is supported by the levy of Sales Tax by the Sales Tax Department of Rajasthan. Accordingly, the order of Court below is vitiated in law and on facts. The respondent Revenue is directed to release the goods forthwith to the appellant within a period of 15 days from the date of receipt of copy of this order - appeal allowed.
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Corporate Laws
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2023 (1) TMI 748
Seeking sanction of scheme - seeking a direction to dispense a Meeting of the Secured Creditors of the Appellant and for directions to convene the Meetings of the Equity Shareholders, Preference Shareholders and Unsecured Creditors of the Appellant, for the purpose of consideration of the Scheme - Section 421 of the Companies Act, 2013 - HELD THAT:- This Tribunal do not find any irregularity or infirmity, in the directions passed by the Tribunal (National Company Law Tribunal). The Regional Director, is a Public Authority, looking after the interest of the Public/Shareholders/Investor at large, and if there are any observations, made by the Regional Director that there were irregularities and non-compliances that were present, it is imperative that the Company must comply with the provisions of Law, and not to violate, any Public Policy, failing which, the National Company Law Tribunal, is empowered to reject the Petition, seeking approval of the Scheme. Before the sanctioning of the Scheme, under Section 230 of the Companies Act, no action ought to be pending against the Company, by any Public Authority. The contention of the Learned Counsel for the Appellant that I.A. 2 / 2021, seeking change of date was kept pending, has also been addressed to by the Tribunal, in the impugned order and the same has not been approved or dealt with on account of the multiple objections, raised by the Regional Director and the Official Liquidator, which were not been complied with, to the subjective satisfaction of the respective Statutory Authorities. This Tribunal, does not find any ground(s), to interfere with the well-reasoned Order of the Tribunal (NCLT), especially, keeping in view that a Liberty was indeed granted to the Appellants herein, to file a Petition afresh rectifying the irregularities, pointed by the concerned Authorities - Appeal dismissed.
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Insolvency & Bankruptcy
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2023 (1) TMI 747
Maintainability of petition - availability of appellate remedy - whether the standard applied is reasonable and proportionate in evaluation of administrative or executive action in judicial review? - HELD THAT:- A hearing is not to be an empty formality. It must be an effective hearing and must result in a reasoned order that reflects a proper application of mind. This speaks to the decision-making process, not the resultant decision itself. Where these elements are found even prima facie to be lacking, a writ Court is not denuded of its powers, nor can it be told that its extraordinary jurisdiction is completely fettered - Where the petitioner is able to prima facie dispute the existence of an effective alternate appellate remedy, that is to say, where the petitioner points out that if the alternate appellate remedy invoked by the respondent is likely to result in a serious question of jurisdiction or maintainability of the appeal, a writ court can certainly exercise its discretionary and equitable powers under Article 226 of the Constitution of India. Anyone may set the criminal process in motion against anyone. There may be an FIR. There may even be a charge-sheet. But, except in certain specific statutes, the presumption in criminal jurisdiction in this country is still that a person is innocent until he is proved guilty. Today, even charges have not been framed. It is entirely possible that the court in question, when it takes up the charge-sheet, may not in fact frame charges against the Petitioner at all. Even that is not known. The Petitioner may apply for or may obtain a discharge or a quashing order at some appropriate stage. Even that is unknown. The impugned order seems to us to have completely overlooked the inherent absurdity that it creates. It proceeds on the basis that the mere pendency of a criminal proceeding robs a person such as the Petitioner of his fit and proper person status because it supposedly affects his integrity, reputation and character . We note that there is no case about the absence of a conviction, restraint orders, competence, or financial solvency. But if any of the eventualities that we have noted above occurs, i.e., no charges are framed, there is a discharge, quashing or an acquittal, we are asked to believe that the fit and proper person requirement, and the integrity, reputation and character of the Petitioner will suddenly get restored to some position anterior in time. Shortly stated, the submissions of Mr Parmar for the Petitioners is that an appeal is provided to the chairperson from the matters that have delegated to the Whole Time Member (Administrative Law or AL). This includes the disposal of a show cause notice under Rule 17 of the RV Rules. But suspension and cancellation of a registered valuer is within the jurisdictional remit of a Whole Time Member or WTM as per the table at Part C. There is no specific provision that provides for an appeal against an order or a WTM (as opposed to a WTM (AL)). The impugned order must be stayed.
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2023 (1) TMI 746
Initiation of CIRP - existence of debt and dispute or not - Operational Creditors - NCLT admitted the application - Ex-parte order - Corporate Debtor did not make any appearance before the Adjudicating Authority nor filed any submissions - HELD THAT:- It is a well settled proposition that for a pre-existing dispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application. The Operational Creditor neither having received any reply to the demand notice nor having received any further payments from the Corporate Debtor had proceeded to file Section 9 application and at this stage the Adjudicating Authority is only required to look into the substance of the pleadings to find out whether a real dispute is discernible from the stated facts - The relevant proof for late receipt of notice has been placed at page 322-323 of the Appeal Paper Book ( APB in short). Moreover, the poor health of the Appellant prevented him from following up the matter in the court and in substantiation thereof medical certificate has been placed at page 321 of APB which we find to be sufficient cause to explain their inability to agitate the matter before the Adjudicating Authority. In the interest of justice, we are of the considered view that the present appeal filed before this Tribunal deserves to be considered on merit. It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court - The present is not a case where there is an undisputed debt for which insolvency can be initiated against the Corporate Debtor. The Adjudicating Authority having heard the matter ex-parte has failed to appreciate the facts of the case in its entirety and therefore committed an error in admitting the Section 9 application and we therefore hold that the impugned order passed is unsustainable. The Adjudicating Authority has erroneously admitted the application under Section 9 of IBC - Appeal allowed.
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2023 (1) TMI 745
Initiation of CIRP - Operational Debt or not - amount claimed by SDMC in connection with Toll Tax and ECC Agreement - existence of pre-existing dispute between SDMC and the contractor MEP Infrastructure or not - Classification of debt that is claimed to be in default and payable to SDMC - HELD THAT:- An operational debt is a claim in respect of provisions of goods or services and the claim must bear some connection with the provision of goods or services, without specifying who is the supplier or receiver. Thus, the supplier in the present case of services is MEP Infrastructure and the receiver is SDMC, but in accordance with the clearly held position in the case of Consolidated Construction Consortium Ltd. [ 2022 (2) TMI 254 - SUPREME COURT] , the debt owed by MEP Infrastructure to SDMC falls in the definition of operational debt under the IBC and hence the debt owed by MEP Infrastructure to SDMC is an operational debt as defined in section 5(21) of the IBC. Whether the dispute is a pre-existing dispute or not? - HELD THAT:- The termination of the Toll Tax Agreement is also provided in clause 17 in case of default and it is provided in the agreement that even after termination of the agreement, the rights and obligations of any of the parties that arise before termination are protected - it is clear that from the total amount claimed by MEP Infrastructure, a major amount was disallowed by the Commissioner, SDMC, and as a result MEP Infrastructure filed writ petition being WP 2241/2020 before the Hon ble High Court of Delhi seeking the quashing of order dated 30.1.2020 of Commissioner, SDMC on addition to certain other reliefs. Thus ot becomes amply clear that there were disputes raised by the contractor MEP Infrastructure which were actively considered by the High Level Committee and Commissioner, SDMC and many disputes remained unresolved as the further litigation pursued by the contractor shows. The claims put forward by MEP Infrastructure, their consideration by High Level Committee of SDMC, then by Commissioner, SDMC upon order of Hon ble Delhi High Court were in the nature of disputes between SDMC and the contractor and these disputes were subsequently carried to the Hon ble Delhi High Court for resolution. Though the debt claimed by SDMC is an operational debt , there are clearly pre-existing disputes raised by MEP Infrastructure regarding which litigations/dispute resolution mechanism have been pursued by both the parties in Hon ble High Court and the internal forum of SDMC and the existence of these disputes has been brought to the notice of the operational creditor SDMC by MEP Infrastructure through its reply to demand notice under section 8. In such a situation, the section 9 application, which is clearly impacted by such pre-existing dispute , has correctly been disallowed by the Adjudicating Authority. Finding no error in the Impugned Order we refuse to interfere with it. Appeal rejected.
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PMLA
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2023 (1) TMI 744
Seeking grant of bail - Money Laundering - proceeds of crime - collection of funds under false promises of exorbitant high rate of interest on the deposits - HELD THAT:- Primarily delay in trial is attributable to the accused. Though the complaint was filed in the year 2018. The trial court could deliver the copies under Section 207 of the Cr.P.C only on 22nd March, 2022 to the accused. Prosecution cannot be blamed for causing delay in conducting ML Case No.2 of 2018. It is also not out of place to mention that the petitioner is involved in money laundering of huge sum of money amounting to Rs.1750 crores (approximately). He has already siphoned out a sum of Rs.6666 crores which are proceeds of crime. The Enforcement Directorate has also produced reports and documents as to how the petitioner tried to coerce the present director of M/s Chocolate Group of Hotels for extortion of money and wrongful gain. Repayment process by the High Court constituted Asset Disposal Committee has been going on. The benefit of Section 436A of the Code of Criminal Procedure cannot be granted - Prayer for bail of the accused Goutam Kundu is, thus, considered and rejected.
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Service Tax
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2023 (1) TMI 743
Validity of adjudication of SCN after much delay - inordinate delay - grant of centralized service tax registration - Divisional Officer was obliged to send intimation to the respective jurisdictional Service Tax office-in-charge of the erstwhile branch to transfer the relevant records to its office for taking further action and to update the records, but despite the same, the files pertaining to the said show cause cum demand notice were not transferred to the Respondent No.2 - notice of hearing was issued around eleven years after the date of the said show cause cum demand notice - HELD THAT:- The Respondents have not acted in the manner as required by law. True that, while the Respondents right in law to initiate proceedings for violation of the provisions of the Act can never by disputed, at the same time, they do not have the unfettered right to choose a time to conclude the said proceedings as per their own whims and fancies. Action on the part of a constituent of State has to be with responsibility and not caprice - The words reasonable period call for a flexible rather than a rigid construction having regard to the facts of each case, but the period in excess of eleven years as claimed by the Petitioner or even seven years, if we were to consider the period from 8 May 2013, when the Petitioner informed the Respondent Authority that it had obtained Centralized Registration, without the Respondents sufficiently explaining as to what prevented them from concluding the proceedings except their own delay, in our view is nothing but unreasonable and the reasons stated in the affidavit-in-reply cannot be accepted. Respondents having delayed the transfer of proceedings from Delhi to Mumbai and not even having bothered to themselves do the same upon the Centralized Registration by the Petitioner on 9 September 2010 and even after the Petitioner informed of the same on 8 May 2013, without any satisfactory explanation for this delay, adjudication of the Show Cause cum Demand Notice No.59 of 2009 dated 12 October 2009, which ought to have been culminated within a reasonable time has not been done and adjudicating the same now after an inordinate and unreasonable lapse of time would be detrimental and cause severe prejudice to the Petitioner. The impugned show cause cum demand notice dated 12 October 2009 cannot be carried forward after such an inordinate delay - Petition allowed.
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2023 (1) TMI 742
Refusal of refund claim - It is further urged that the refund was rejected by the Department on the flimsy grounds, inspite of having accepted the consolidated return - HELD THAT:- The appellant have admittedly filed consolidated return for the period April to September, 2010, and were advised not to consider this amount of Rs.39,09,130/- (by challan) towards adjustment of taxes. Further as advised they have applied for refund of this amount as wrongly deposited. Further, the return filed during adjudication proceedings for the Escrow account, where appellant has shown nil taxable receipt and nil tax liability, and the said amount was deposited through challan as excess payment, has not been rejected by the Department. The appellant is entitled to refund of Rs.39,09,130/-. The Adjudicating Authority is directed to grant refund with interest as per rules, within a period of 45 days from the date of receipt of copy of this order - Appeal allowed.
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2023 (1) TMI 741
Rejection of refund claim - hit by limitation of one year as prescribed under section 11 B of Central Excise Act, 1944 - HELD THAT:- The amount of Rs.19,34,552/- the refund whereof was claimed the entire amount irrespective it was above 7.5 % / 10% of Section 35 F of Central Excise Act but was not at all an amount of duty rather it was still an amount with the Department as a deposit made by the appellant. The Department has no authority to retain the said amount. Such retention is otherwise specifically barred in terms of article 265 of Constitution of India. Commissioner (Appeal) has wrongly invoked section 11 B of Central Excise Act for applying the time limitation prescribed under the said section while rejecting the impugned refund claim - Hon ble Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERSa [ 2006 (1) TMI 55 - SUPREME COURT ] had clarified that no time limit can be made applicable for the refunds with respect to the amount of deposits/ pre-deposits. Appeal allowed.
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2023 (1) TMI 740
Validity of SCN - Classification of services - erection, commissioning or installation service or works contract service or commercial or industrial construction service - HELD THAT:- In M/S. SHUBHAM ELECTRICALS VERSUS CST ST, ROHTAK [ 2015 (6) TMI 786 - CESTAT NEW DELHI ], a Division Bench of the Tribunal examined a similar controversy since the show cause notice also alleged that the services provided could either be classified under management, maintenance or repair service or erection, commissioning or installation service and set aside the impugned order for the reason that the show cause notice was vague and incoherent. The show cause notice issued by the Department in the present appeal is also vague and incoherent as it alleges that the appellant could have provided any of the three alternative services. Impugned order set aside - appeal allowed.
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2023 (1) TMI 739
Wrongful availment of CENVAT Credit - credit availed prior taking the registration - also credit availed on improper document i.e. on such invoices which were not in the name of registered address - violation of Rule 9 of Cenvat Credit Rules, 2004 and Rule 4(8) of Service Tax Rules, 1994 - extended period of limitation - penalty - HELD THAT:- There is no denial to the fact that the appellant started providing taxable service prior getting its registration. The service in question were admittedly taxable service which were provided against the invoices. However, few invoices were issued at the address at which the appellant was /is existing. There is no denial of the department that Plot No. SP 2/93 Neemrana, Alwar, Jaipur from where most of the invoices had been issued subsequently became the registered premises of service provider vide registration dated 18.4.2017 Few invoices have been issued at the address which till that date has not been registered, i.e. at 1052, Sector 40, Gurgaon, Haryana but the appellants had taken these premises on license basis for some time and an agreement was duly executed for the purpose - the premises to be mentioned in invoice should be such from where the services have been provided instead of these being the registered premises. Though no Cenvat is allowed if document lacks necessary particulars. But the proviso to Rule 9(2) says that even if there is no precise document but otherwise the requisite details given in the said proviso as noted above are available on record, the Cenvat Credit may be allowed. In the present case, it is rather apparent fact that service provider /appellant had during the period of providing service in question applied for registration and finally got itself registered with the service tax Commissionerate. This fact is sufficient to hold that the invoices of pre-registration phase shall also be considered for availment of Cenvat credit by the appellant - Commissioner (Appeals) has wrongly stuck to Rule 9(2) of Cenvat Credit Rules, 2004, the proviso thereof has wrongly been ignored by Commissioner (Appeals). Resultantly, the invoices issued from unregistered address and the invoice of pre-registration time have wrongly been held to be invalid documents while ordering denial of Cenvat credit to the appellant. Ineligible import service - HELD THAT:- The Commissioner (Appeals) has held that Cenvat credit of service tax paid by the appellant has otherwise been claimed on the ineligible import service. These findings are beyond the scope of impugned show cause notice. There is no allegation raised in the show cause notice about the services to be not eligible import service. The order under challenge is accordingly held to be beyond the scope of show cause notice. Hon ble Supreme Court in the case of COMMISSIONER OF C. EX., BANGALORE VERSUS BRINDAVAN BEVERAGES (P) LTD. [ 2007 (6) TMI 4 - SUPREME COURT] has held that the show cause notice is foundation on which the department must build up its case. Hence the show cause notice should contain all the relevant details and departmental authorities have to be stick to the allegation in the show cause notice. Extended period of limitation - levy of penalty - HELD THAT:- The show cause notice in this case is dated 12.12.2019. The Cenvat Credit availment has been denied for the period June, 2016 to June, 2017. Thus, it is clear that show cause notice is issued while invoking the extended period of limitation. From the above observed admitted facts, there does not appear any intention on the part of the appellant to evade service tax. Rather apparently and admittedly, the service tax stand already paid by the appellant. It is not the case of the department that service tax paid is a short payment. The extended period could have been invoked pursuant to proviso to section 73 of CGST Act and thus only in a situation where there has been apparent mis- representation, suppression of facts or collusion on part of the appellant that too with intention to evade the tax liability. Since the same is not the fact of the present case, the extended period has wrongly been invoked - Even the penalty on the appellant has wrongly been levied. Appeal allowed.
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2023 (1) TMI 738
Interest on account of delayed refund - Denial on the ground that there was no delay in sanctioning of refund amount as per Section 11BB of the Central Excise Act, 1944 - HELD THAT:- It is an amount paid by the appellant as service tax during the course of investigation. This fact is not in dispute. When any amount paid during the investigation, it is only a predeposit made by the appellant. On succeeding in the appeal, the predeposit made in connection to the said appeal is liable to be refunded with interest. The order of Tribunal has attained finality. In that circumstance, the appellant is entitled to claim interest from the date of deposit till its realization. The issue is no longer res integra as the Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] , following the ruling of the Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] have held that such amount deposited during investigation and/or pending litigation is ipso facto pre-deposit and interest is payable on such amount to the assessee being successful in appeal, from the date of deposit till the date of refund. The impugned order is not sustainable in the eyes of law - appeal allowed.
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Central Excise
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2023 (1) TMI 737
Irregular availment of CENVAT Credit - input services - transport service of Fly Ash - services obtained by the appellant for removal of coal fly ash from the captive power plant which is used for generation of power, which in turn, is captively consumed for manufacture of excisable goods - denial on the premise that it has no nexus directly or indirectly in or in relation to manufacture and clearance of the final products upto the place of removal - HELD THAT:- The removal of coal fly ash from captive power plant is a necessity and without such removal, the captive power plant cannot work. As such, removal of coal fly ash is admittedly connected with the production of power, which in turn, has nexus with the manufacturing of the Appellant s final product. Revenue s objection is that since the coal fly ash is non-excisable item, removal of the same cannot be held to be an input service, cannot be appreciated, inasmuch as the admissibility of the input service credit is not dependent upon the product, in respect of which services are availed, to be excisable or non-excisable. Admittedly the Appellant s final product was excisable and was cleared on payment of duty. In fact, the Appellant had been duly discharging appropriate Excise Duty on clearance of the Ash considering it as a finished product under the Central Excise Act, 1944. The impugned order clearly records that the Appellant has undertaken various activities of removal/disposal of Fly Ash in terms of mandate of Ministry of Environment and Forest. He also recorded that while process is to fulfil action being environment friendly, however, he proceeded to record removal of Fly Ash to protect environment is not on account of manufacture of finished goods - the removal and disposal of Fly Ash in a manner prescribed by the Government is a mandate requirement for continued production of electricity for activities used by the Appellant. In other words, without such due disposal of Fly Ash, generation of electricity cannot happen. The removal of coal Fly Ash is one of the necessity for running of the captive power plant. Without such removal of the coal fly ash from the captive power plant, the same cannot operate and run, in which case, the power won t be generated and the appellant would not be in a position to manufacture their final product - the appellants are entitled to service tax paid on the services used by them for removal of coal fly ash from the captive power plant. Denial of benefit of credit of input services used for removal and disposal of Fly Ash is not sustainable - Appeal allowed.
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2023 (1) TMI 736
CENVAT Credit - input services - Rent-a-Cab service - denial on the ground that the Rent-a-Cab service is excluded from the purview of definition of input service - Applicability of exclusion Clause given in Rule 2(l) of Cenvat credit Rules, 2004 - HELD THAT:- The exclusion is provided in respect of those Rent-a-Cab service where the vehicle taken on rent is not a capital goods. This very issue has been considered by this Tribunal in M/S. MARVEL VINYLS LTD. VERSUS C.C.E. INDORE [ 2016 (11) TMI 1126 - CESTAT NEW DELHI] where it was held that As such the interpretation of the lower authorities that motor vehicle are not capital goods for the services recipient cannot be appreciated in as much as motor vehicles are admittedly capital goods in terms of the Rule 2 (A) of Cenvat Credit Rules. Reliance also placed in the case of GUALA CLOSURES (INDIA) PVT. LTD. VERSUS C.C.E., AHMEDABAD-II [ 2018 (10) TMI 1411 - CESTAT AHMEDABAD] where it was held that The services of Rent a cab and Hotel Accommodation are services are used for overall business activities of the appellant. The only business carried out by the appellant is manufacturing of excisable goods and sale thereof. Therefore, these services are actually related to the manufacturing activities of the appellant. Thus, it can be seen that since the Motor Vehicle was held to be a capital goods, the eligibility of Cenvat credit on Rent-a-Cab service shall not be hit by the exclusion clause provided under Rules 2(l) of Cenvat Credit Rules, 2004 - In the present case also the vehicle taken on rent is defined as capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004, therefore, the exclusion clause is not applicable in the present case. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2023 (1) TMI 735
Levy of penalty - levy based on on conjectures and surmises - transaction was duly recorded in books of accounts and accompanied by Form C and payment were made through Banking channel - HELD THAT:- This Court finds that merely on the basis of presumption and statement of the truck driver which was carrying the goods, penalty proceedings have been initiated by the assessing officer. The taxing department did not have any material on record so as to hold that there was any violation by the dealer in bringing the goods from outside the State of U.P. The Form 38 which was accompanying the goods was filled and all the tax invoice alongwith the bilti and transporter's bill was there when the truck was intercepted by mobile squad on 04.08.2016. Moreover, the statement of a truck driver cannot be the basis for initiating the penalty proceedings. The statement of truck driver which has been recorded by the officer of the department is not corroborated by any proof and the said statement cannot be relied upon for initiating the penalty proceedings. This Court finds that the action of the taxing department was not justified in initiating penalty proceedings without any material on record - The statement of a driver cannot be sole basis for initiation of penalty proceedings and no intention to evade the tax can be established from the statement of driver when the entire documents are there on record. This Court further finds that the Tribunal itself has recorded a finding that it could not be ascertained whether the truck was unloaded at Mathura or not. Once the department has not shown whether the goods were being brought at Mathura from outside the State of U.P. no question of penalty proceedings can arise. The order of Tribunal is unsustainable in the eyes of law and same is hereby set-aside - Revision allowed.
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2023 (1) TMI 734
Doctrine of merger - Recovery of dues (secured debt) - secured creditor has priority over the right claimed by the Revenue over secured debt or not - Section 26E of the SARFAESI Act and Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act, 1993) - sum and substance of the contention therefore advanced by the learned Special Government Pleader is that the findings rendered by the Hon ble Apex Court in CENTRAL BANK OF INDIA VERSUS STATE OF KERALA AND OTHERS [ 2009 (2) TMI 451 - SUPREME COURT] is clearly applicable to the cases on hand. HELD THAT:- Hon ble Apex Court has held in Central Bank of India that in none of the judgments pointed out by the financial institutions in the said case, held that by virtue of the provisions contained in the DRT Act or the SARFAESI Act, 2002, first charge has been created in favour of Banks, financial institutions etc., and further that in none of the judgments, either called upon nor it decided competent priorities of statutory first charge created under Central Legislations (S) on the one hand and State Legislations (S) on the other, nor it proved that statutory first charge created under a State Legislation is subservient to the dues of Banks, financial institutions etc., even though statutory first charge has not been created in their favour - It was finally held therein that the High Court was right inholding that the Tahsildar was entitled to give effect to the primacy of statutory first charge created on the property of the dealer under Section 26B of the KGST Act, 1963; and therefore held that the State has got prior charge over the property of the dealer and there is no valid ground to interfere with the order passed by the Division Bench of this Court. In KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER [ 2000 (7) TMI 67 - SUPREME COURT ] a Three Judge Bench of the Hon ble Apex Court had occasion to consider the doctrine of merger, binding precedent under Article 141 vis-a-vis Articles 132 to 136 and the Supreme Court Rules. The issue with respect to dismissal of Special Leave Petition by speaking or reasoned order was considered by the Hon ble Apex Court in the said judgment - It was held therein that the law stated or declared by the Hon ble Apex Court in its order shall attract applicability of Article 141 of the Constitution. It was also held that the reasons assigned in the order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by the court because permitting to do so would be subversive of judicial discipline and an affront to the order of the court. If and when any amounts have fallen due as per the provisions of the KGST Act, 1963 and the KVAT Act, 2003 and the proceedings start, consequent to which a charge is created on the properties of the assessee and the said charge created would continue to run with the property even if the Banks / financial institutions conduct the sale to recover the amounts due under the mortgage - It is quite clear and evident from Section 26E of the SARFAESI Act 2002 that it creates only a priority in favour of the financial institutions in the matter of payment over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or the State Government or local authority. But the priority in payment is in no manner in conflict with the first charge created over the properties as per the provisions of the KGST Act, 1963, and the KVAT Act, 2003. Section 26E states only the nature of the priority for payment; whereas Rules 8 and 9 of Rules 2002 deals with the manner in which the sale of the secured assets to be carried out, and which makes it specific how a notice is to be issued; how an encumbrance is to be removed; how a delivery of the property is to be effected to the purchaser free from encumbrances known to the secured creditor; and how a sale certificate is to be issued free of encumbrances - there is no case for the Banks / financial institutions that the notices were given by the Bank after making due enquiries with respect to any encumbrance or that the purchasers have come forward to purchase the property after making due enquiries with respect to any encumbrance on the property. The statutory charge created as per the provisions of the KGST Act, 1963 and the KVAT Act, 2003, prior to any mortgage made, against the dealers would remain intact, even if the property is sold by the Bank, by the rights conferred under Section 26E of the SARFAESI Act, 2002, and Section 31B of the RDB Act 1993 read with the Rules to it, till such time the encumbrances are cleared as per the provisions of the said enactments and the rules thereto - Appeal allowed.
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