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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter January 25, 2024 Case Laws in this Newsletter: GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise TMI Short Notes 1. The Doctrine of Promissory Estoppel in Governmental Policy Decisions: Tax Incentives and Public Interest in State Industrial Policies VAT / Sales Tax: Summary: The Himachal Pradesh High Court addressed whether the State could withdraw tax incentives promised under the State Industrial Policy 2004 during the exemption period. The case involved multiple companies challenging the State's reclassification of certain areas, which affected the incentives they relied upon. The court examined the doctrine of promissory estoppel, which prevents the withdrawal of a promise when the other party has relied on it to their detriment. The court concluded that the State's withdrawal of incentives was inconsistent with legal principles, particularly promissory estoppel, and upheld the companies' entitlement to the incentives until the GST regime's implementation in 2017. 2. Maintaining the Sanctity of Search and Seizure Procedures: Emphasizing the rigorous compliance with procedural requirements to uphold the legitimacy of search and seizure operations Income Tax: Summary: The legal analysis focuses on two cases concerning the interpretation of the Income Tax Act's provisions, particularly Sections 132, 143(3), 153A, 153C, and 153D. In the Supreme Court case, a Special Leave Petition was dismissed based on a precedent, questioning whether the issues were already covered. The Karnataka High Court case involved quashed assessment orders due to the absence of a satisfaction note, a requirement under Section 153C. The ITAT's ruling emphasized the need for satisfaction to be recorded in the searched person's file. The debate also included the correct assessment period under Sections 153A and 153C, with judicial precedents guiding interpretations. 3. The Confluence of Insolvency and Limitation Laws: Insights from a NCLAT Decision IBC: Summary: The case between a financial institution and a corporate guarantor highlights key issues in corporate insolvency law, particularly the interplay between the Insolvency and Bankruptcy Code, 2016 (IBC), and the Limitation Act, 1963. The National Company Law Appellate Tribunal (NCLAT) addressed whether an insolvency application was time-barred. Initially dismissed by the Tribunal due to limitation issues, the NCLAT ultimately directed the Tribunal to admit the application, emphasizing that the application was within the limitation period. This decision underscores the importance of adhering to limitation periods in insolvency proceedings and clarifies the role of appellate tribunals in such matters. 4. Analyzing the Tax Implications of Cross-Border Payments: Recognizing the payments as either 'Royalty' or 'Fee for Included Services' u/s 9(1)(vii) Income Tax: Summary: The legal dispute involved the characterization of payments made by an Indian company to a non-resident US entity, questioning whether they were 'Royalty' or 'Fee for Included Services' under Section 9(1)(vii) of the Income Tax Act and the India-USA DTAA. The Karnataka High Court upheld the ITAT's decision, determining that the payments did not qualify as royalty or fees for technical services, thus not requiring TDS deduction. The services were rendered in the USA without a permanent establishment in India. The Supreme Court dismissed the Revenue's appeal, affirming the lower courts' rulings, emphasizing the significance of DTAAs in cross-border taxation. 5. A Judicial Perspective on Duty Assessment and Procedural Fairness in Customs Law: Validity of CBIC Circular Customs: Summary: The Delhi High Court judgment analyzed significant issues in customs law, focusing on the interpretation of the Customs Act, 1962, and the principles of natural justice. The case involved a dispute over the assessment and provisional release of goods, where the petitioner challenged a Customs Circular and order as contravening the Act and natural justice. The court examined procedural regularity, statutory discretion, and adherence to natural justice principles, ultimately setting aside the Circular and order. This decision emphasizes the necessity for customs authorities to operate within statutory limits and uphold fairness in administrative actions, impacting customs law enforcement and broader administrative practices. 6. Non-Delegability of Discretionary Powers in Income Tax Assessments: Administrative Discretion in Special Tax Audit Procedures u/s 142 Income Tax: Summary: The Delhi High Court examined the non-delegability of discretionary powers in income tax assessments under the Income Tax Act, 1961, focusing on the extension of time for submitting audit reports under Section 142(2A). The case involved Soul Space Projects Ltd. and concerned the validity of an assessment order for AYs 2007-08 and 2008-09. The court addressed whether the Commissioner of Income Tax (CIT) could grant an extension instead of the Assessing Officer (AO). It concluded that such power is vested solely with the AO, and any delegation to the CIT was invalid, impacting the legality of the assessment order. 7. Taxation of Domain Registration Services in Godaddy.Com LLC Case: Tax Implications for Digital Services Income Tax: Summary: The Delhi High Court case involving Godaddy.Com LLC and the Indian Income Tax authorities centered on whether income from domain name registration services should be classified as 'royalty' under Section 9(1)(vi) of the Income Tax Act, 1961. The court determined that Godaddy, acting as a registrar, does not transfer proprietary rights to use domain names, thus the income does not qualify as royalty. This decision clarifies the tax implications for foreign digital service providers in India, distinguishing between services that involve intellectual property rights and those that facilitate transactions without such transfers. 8. Reinforcing Fair Administrative Processes in GST Registration Cancellation: An In-Depth Case Study GST: Summary: The Bombay High Court addressed the cancellation of a petitioner's GST registration, emphasizing the importance of procedural fairness and natural justice. The petitioner contested the cancellation, arguing that the show cause notice was insufficiently detailed and their response was inadequately considered. The Court found procedural deficiencies, noting the notice lacked specific reasons and the decision-making process was flawed. It ordered the restoration of the GST registration and required the issuance of a new, detailed show cause notice. This decision underscores the necessity for clear and fair administrative processes in the GST framework, protecting taxpayer rights and ensuring judicial oversight of administrative errors. 9. The Arbitration Conundrum: Enforceability of Unstamped Agreements Indian Laws: Summary: The Supreme Court of India's 7-member Constitutional Bench addressed the enforceability of arbitration agreements within unstamped contracts, evaluating the interplay between the Arbitration and Conciliation Act 1996, the Indian Stamp Act 1899, and the Indian Contract Act 1872. The pivotal N N Global 2 judgment ruled that unstamped instruments containing arbitration agreements are void and unenforceable, aligning with earlier decisions. Petitioners argued for limited judicial intervention, while respondents emphasized statutory compliance. The Court clarified that non-stamping renders documents inadmissible but not void, highlighting the curable nature of such defects, thus shaping future arbitration-related legal discourse. 10. Reassessing Tax Penalties: HDFC Bank's Challenge under the DVAT Act VAT / Sales Tax: Summary: The Delhi High Court case involving HDFC Bank Limited and the Commissioner of Value Added Tax centered on the imposition of penalties under the Delhi Value Added Tax Act, 2004, related to the sale of repossessed vehicles. The legal debate focused on whether such sales were taxable, with the court examining the validity of penalties under Section 86 of the Act. The court highlighted the necessity of mens rea and the proportionality of penalties, ultimately setting aside the penalties due to misinterpretation of the statute. This decision underscores the importance of clear statutory interpretation and proportionality in tax penalties. 11. Input Tax Credit Eligibility under GST Legislation: Time-Bound Compliance in GST ITC Cases GST: Summary: An intra-court appeal addressed the eligibility for claiming Input Tax Credit (ITC) under the GST Act, focusing on statutory compliance and time-bound conditions outlined in Section 16. The appellant contested a decision denying ITC due to late tax return submissions, arguing that ITC is a right irrespective of time limits. The respondents emphasized strict adherence to statutory time constraints, highlighting legislative intent. The court upheld the mandatory nature of Section 16(4), dismissing the appeal and reinforcing the necessity for businesses to comply with statutory deadlines for ITC claims. This decision underscores the importance of strict statutory compliance in tax matters. 12. Navigating the Complexities of Section 80P Deductions for Cooperative Societies Income Tax: Summary: The document is an order from a tax appellate tribunal regarding the eligibility of primary agricultural credit cooperative societies (PACS) for deductions under section 80P of the Income Tax Act, 1961. The appellant-assessees, registered under the Kerala Co-operative Societies Act, claimed deductions which were initially denied. The tribunal examined issues such as the nature of advances, membership categories, and compliance with the Banking Regulation Act, 1949. It referenced several judicial precedents to interpret section 80P, ultimately concluding that the societies are entitled to deductions, subject to specific conditions. This order highlights the importance of aligning cooperative societies' activities and governance with statutory requirements to qualify for tax benefits. 13. Navigating Pecuniary Jurisdiction in Tax Assessments: Assessment Orders and Legal Jurisdiction Income Tax: Summary: The tribunal case involves a dispute over the jurisdiction of an Assessing Officer (AO) under the Income Tax Act, 1961. The assessee contested the validity of an assessment order issued by an AO who allegedly lacked jurisdiction, as per CBDT Instruction No. 1/2011, which delineates monetary limits for jurisdiction based on declared income. The order's legality was further questioned due to non-compliance with Section 143(2). The tribunal referenced Supreme Court precedents, emphasizing that orders issued by unauthorized AOs are void. The case underscores the importance of adhering to jurisdictional guidelines and procedural fairness in tax assessments. 14. "Sales Tax Subsidy and Its Classification in Income Tax: Revenue or Capital receipt Income Tax: Summary: The Calcutta High Court addressed the classification of sales tax subsidies under the UP Trade Tax Act as either capital or revenue receipts. The core issue was whether these subsidies, received post-production commencement, should be tax-exempt capital receipts or taxable revenue receipts. The assessee claimed them as capital receipts, a stance upheld by the Income Tax Appellate Tribunal but challenged by the Assessing Officer. The court examined statutory interpretation, particularly Section 4A, and compared relevant precedents. Ultimately, the decision clarified the distinction between capital and revenue receipts, emphasizing the subsidy's purpose in tax classification. This ruling impacts the interpretation of tax exemptions and subsidies in Indian tax law. 15. Trust Registration and Tax Exemptions in India: rejection of registration u/s 12AB for want of supporting evidences Income Tax: Summary: The case involves an appeal against the rejection of a trust's registration under Section 12AB of the Indian Income Tax Act by the Commissioner of Income Tax (Exemption) in Pune due to insufficient evidence of charitable activities. The absence of the assessee at the hearing led to a decision based on the Revenue's submissions. The appellate authority remitted the case for re-adjudication, emphasizing the principles of natural justice and the need for a fair opportunity to present the case. The decision highlights the judiciary's role in balancing legal compliance with welfare objectives, ensuring procedural lapses do not hinder societal welfare aims. 16. Condonation of Delay in Taxation in filing applications for registration u/s 12A/12AA: Income Tax: Summary: The Delhi High Court case examines the Income Tax Appellate Tribunal's decisions concerning the condonation of delay in filing applications for registration under Sections 12A/12AA and the setting aside of an order under Section 263 of the Income Tax Act, 1961. The Tribunal addressed whether delays in filing should be condoned based on judicial discretion and emphasized that justice should not be obstructed by procedural technicalities. It also evaluated the legitimacy of setting aside an order under Section 263, focusing on whether alleged irregularities were attributable to an individual rather than the entity. The Tribunal's decisions were found to be based on thorough factual and legal analysis, dismissing claims of perversity. 17. Navigating Procedural Timelines in Tax Exemption Applications Income Tax: Summary: Two appeals were filed against the Commissioner of Income Tax (Exemption) Ahmedabad's orders rejecting tax exemption applications under Section 80G(5)(iii) due to non-compliance with filing deadlines in Form No.10AB. The appellants argued for leniency due to extensions granted by Circular No.6/2023, while the respondents insisted on strict adherence to deadlines. The Tribunal acknowledged the ambiguity in time limits and practical difficulties for older trusts, deciding to condone the delay based on precedents like the Delhi High Court's decision in DCIT(Exemption) vs. Vishwa Jagriti Mission. This decision emphasizes balancing procedural compliance with practical justice. Articles 1. Revenue Department is not authorized to block ITC for more than one year By: Bimal jain Summary: The Karnataka High Court ruled that the Revenue Department cannot block a registered person's Input Tax Credit (ITC) under the Goods and Services Tax (GST) for more than one year, as per Rule 86A(3) of the Central Goods and Services Tax Rules, 2017. In the case involving S.P. Metals, the court found the continued blocking of ITC past the stipulated period to be illegal and arbitrary. Consequently, the court directed the authorities to unblock the ITC in the petitioner's Electronic Credit Ledger promptly. The decision highlights the importance of adhering to the one-year restriction on blocking ITC. 2. INSOLVENCY PROFESSIONAL IS NOT A PUBLIC SERVANT UNDER THE PREVENTION OF CORRUPTION ACT, 1988 By: DR.MARIAPPAN GOVINDARAJAN Summary: The Delhi High Court ruled that insolvency professionals, such as Interim Resolution Professionals (IRP) and Resolution Professionals (RP), do not qualify as "public servants" under the Prevention of Corruption Act, 1988, or the Indian Penal Code. This decision arose from a case where a financial creditor initiated a corporate insolvency resolution process, and the appointed RP was accused of demanding a bribe. The court determined that the duties of insolvency professionals, while potentially involving public duties, do not possess a "public character" essential to classify them as public servants. Consequently, the FIR filed by the CBI against the RP was quashed. 3. GST Registration Cancellation can take effect from the date of issuance of Show Cause Notice By: Bimal jain Summary: The Delhi High Court ruled that the cancellation of GST registration should be effective from the date of the Show Cause Notice issuance, not retrospectively. The case involved a business initially managed by the deceased, Mr. Varyam Dass Khurana, and later by his son, who applied for GST cancellation. The GST Commissioner issued an order canceling the registration retroactively, which was challenged in court. The court decided that the cancellation should be effective from the notice date, May 18, 2020, and allowed for potential tax recovery proceedings if necessary. The writ petition was subsequently disposed of. 4. Order liable to be set aside when no reasonable opportunity to submit reply is provided to Assessee after issuance of SCN By: Bimal jain Summary: The Madras High Court quashed an order against a company due to a lack of reasonable opportunity to respond to a Show Cause Notice (SCN). The SCN, related to blocking Input Tax Credit under GST rules, was emailed to the company on the same day as the scheduled personal hearing. The court held that the company was not given adequate time to submit necessary documents or explanations, thus allowing the writ petition. The court directed the authorities to provide a fair opportunity for the company to present its case, including a personal hearing. News 1. Advisory for furnishing bank account details by registered taxpayers under Rule 10A of the Central Goods and Services Tax Rules, 2017. Summary: Registered taxpayers under the Central Goods and Services Tax Rules, 2017, must submit their bank account details within 30 days of registration or before filing GSTR-1/IFF. Failure to comply will lead to suspension of GSTIN, barring further GSTR-1/IFF filings. A new system will notify taxpayers via FORM REG-31 if they fail to provide details, suspending their registration. Updating bank details will automatically lift the suspension. Continued non-compliance may result in registration cancellation. Taxpayers are urged to promptly update their information to avoid business disruptions. 2. Final stage of preparations for Interim Union Budget 2024 commences with Halwa Ceremony Summary: The final stage of preparations for the Interim Union Budget 2024 commenced with the traditional Halwa Ceremony at North Block, attended by key finance officials. This ceremony marks the beginning of the lock-in process for Budget preparation. The Interim Union Budget 2024, set to be presented on February 1, 2024, will be paperless, with all documents accessible via the Union Budget Mobile App in both English and Hindi. The app, available on Android and iOS, will host the Budget documents post the Union Finance Minister's speech in Parliament. The Finance Minister reviewed preparations and extended best wishes to the team. 3. Cabinet approves Protocol for establishment of joint Economic and Trade Committee between India and Dominican Republic Summary: The Union Cabinet of India has approved the establishment of a Joint Economic and Trade Committee (JETCO) with the Dominican Republic. This initiative aims to enhance bilateral trade relations, as there is currently no formal trade mechanism between the two nations. India imports gold from the Dominican Republic and exports pharmaceuticals, marine products, and vehicles. JETCO will serve as a platform for discussion and information exchange, promoting trade and industry. It is expected to facilitate access to Latin American and Caribbean markets, boost exports of Indian goods, and create employment opportunities, contributing to India's economic self-reliance. 4. Government allows direct listing of securities by public Indian companies on International Exchanges of GIFT IFSC Summary: The Indian government has approved the direct listing of securities by public Indian companies on international exchanges at GIFT IFSC, aiming to boost foreign investment and expand growth opportunities. The Department of Economic Affairs and the Ministry of Corporate Affairs have amended relevant rules to establish a regulatory framework for this initiative. This framework currently allows unlisted public companies to list shares internationally, with SEBI preparing guidelines for listed companies. This move is expected to enhance the valuation of Indian companies, particularly benefiting start-ups and technology firms, by providing access to global capital and expanding investor bases. 5. Delhi Customs Preventive seizes illegally imported 12.22 lakh foreign-origin cigarettes worth Rs. 2 crore Summary: Delhi Customs Preventive seized 12.22 lakh foreign-origin cigarettes worth approximately Rs. 2 crore, illegally imported and stored in Delhi. Brands such as ESSE, Mond, Dunhill, Davidoff, Gudang Garam, and Platinum Seven were confiscated. The operation involved searches of two shops and three godowns in Katra Bariyan, Nayabans. The cigarettes lacked statutory health warnings and were suspected to have been imported without paying Customs duty, violating the Cigarettes and Other Tobacco Products (Packaging and Labelling) Amendment Rules, 2022. Investigations are ongoing to identify the roles of suppliers, dealers, and other stakeholders involved. 6. CBDT releases key Direct Tax Statistics through Time-Series data Summary: The Central Board of Direct Taxes (CBDT) has released updated Time-Series data on Direct Tax collections and administration up to the fiscal year 2022-23. Key highlights include a 160.52% increase in Net Direct Tax Collections from Rs. 6,38,596 crore in 2013-14 to Rs. 16,63,686 crore in 2022-23, and a 173.31% rise in Gross Direct Tax Collections. The Direct Tax to GDP ratio grew from 5.62% to 6.11%, while the cost of collection dropped from 0.57% to 0.51%. Income tax returns filed increased by 104.91%, reaching 7.78 crore in 2022-23. This data aids in analyzing long-term trends in tax administration. Notifications Companies Law 1. F. No. 5/1/2021-CL-I - G.S.R. 61(E) - dated 24-1-2024 - Co. Law Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 Summary: The Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024, issued by the Ministry of Corporate Affairs, India, outline the regulations for listing equity shares of Indian companies on international stock exchanges. Applicable to both unlisted and listed public companies, these rules permit equity share issuance in specified jurisdictions, provided they comply with the Direct Listing Scheme and relevant securities regulations. Companies with certain disqualifications, such as negative net worth, outstanding public deposits, or pending insolvency proceedings, are ineligible. Compliance with Indian Accounting Standards is mandatory for companies listing internationally. Customs 2. G.S.R. 59(E) - dated 23-1-2024 - ADD Corrigendum - Notification No. 15/2023- Customs (ADD), dated the 22nd December, 2023 Summary: The corrigendum to Notification No. 15/2023-Customs (ADD) dated December 22, 2023, issued by the Ministry of Finance, Department of Revenue, addresses corrections in the notification regarding anti-dumping duties. It omits the code '84798199' from specific lines and tables, corrects the name of a company to "Jinan Oree Laser Equipment Co., Ltd.," and revises the explanation related to the rate of exchange and CIF value for anti-dumping duty calculations under the Customs Act, 1962. The changes ensure accurate application and interpretation of the anti-dumping duties. DGFT 3. 58/2023 - dated 23-1-2024 - FTP Amendment in import policy condition of Glufosinate Technical covered under HS Code 38089390 of Chapter 38 of Schedule –I (Import Policy) of ITC (HS) 2022 Summary: The import policy for Glufosinate Technical under HS Code 38089390 has been amended. Previously, the import was free if registered and not prohibited under the Insecticides Act, 1968. Now, the import is prohibited if the CIF value is below Rs. 1289 per kg, but remains free if the CIF value is Rs. 1289 or above per kg. This change is effective from January 25, 2024, and the policy will be reviewed after one year. The amendment is issued by the Directorate General of Foreign Trade with the approval of the Minister of Commerce & Industry. FEMA 4. S.O. 332(E) - dated 24-1-2024 - FEMA Foreign Exchange Management (Nondebt Instruments) Amendment Rules, 2024 Summary: The Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2024, introduced by the Ministry of Finance, amend the 2019 rules under the Foreign Exchange Management Act, 1999. Key changes include definitions for "International Exchange" and "permissible jurisdiction" and provisions for investment by permissible holders in equity shares of Indian public companies listed on international exchanges. The rules outline conditions for issuing and listing shares on international exchanges, eligibility criteria for companies and shareholders, compliance obligations, and pricing norms. They also specify voting rights and foreign holding limits, ensuring adherence to relevant laws and regulations. GST - States 5. S.O. 60 - dated 23-1-2024 - Bihar SGST Seeks to extend dates of specified compliances in exercise of powers under section 168A of Bihar Goods and Services Tax Act, 2017 Summary: The notification issued by the Commercial Tax Department of Bihar extends the deadlines for certain tax compliance actions under the Bihar Goods and Services Tax Act, 2017. Utilizing powers under section 168A, the Governor of Bihar, following the Council's recommendations, has extended the time limits for issuing orders related to tax recovery for the financial years 2018-19 and 2019-20. The new deadlines are April 30, 2024, for the 2018-19 fiscal year and August 31, 2024, for the 2019-20 fiscal year. This extension modifies previous notifications regarding tax compliance timelines. Income Tax 6. 15/2024 - dated 23-1-2024 - IT Exemption from specified income U/s 10(46) – 'State Legal Service Authority Union Territory Chandigarh', notified Summary: The Central Government has notified the 'State Legal Service Authority Union Territory Chandigarh' for exemption under section 10(46) of the Income-tax Act, 1961. This exemption applies to specified income, including grants from the Punjab and Haryana High Court, donations from government bodies, court-ordered amounts, recruitment fees, and interest on bank deposits. The Authority must not engage in commercial activities, maintain the nature of its income, and file returns per section 139(4C). The notification applies retrospectively to assessment years 2021-2022, 2022-2023, and 2023-2024, with no adverse effects on any person. 7. 14/2024 - dated 23-1-2024 - IT Amendment in various notifications issues U/s 10(46) of IT Act 1961 to extend the validy period. Summary: The Government of India's Ministry of Finance, through the Central Board of Direct Taxes, has amended several notifications under Section 10(46) of the Income Tax Act, 1961, to extend their validity. The amendments apply retrospectively from the financial year 2020-2021 to 2024-2025, covering assessment years 2021-2022 to 2025-2026. Additionally, a specific notification dated 1st April 2023 is amended to apply from the financial year 2020-2021 to 2022-2023, covering assessment years 2021-2022 to 2023-2024. It is confirmed that these changes do not adversely affect any individual. Circulars / Instructions / Orders SEBI 1. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/6 - dated 23-1-2024 Framework for Offer for Sale (OFS) of Shares to Employees through Stock Exchange Mechanism Summary: The Securities and Exchange Board of India (SEBI) has introduced a framework allowing promoters of eligible companies to offer shares to employees through the stock exchange mechanism as part of the Offer for Sale (OFS) process. This aims to enhance efficiency, reduce costs, and simplify compliance. The new procedure allows employees to bid under a designated "Employee" category on T+1 day, with specific guidelines on pricing, bidding limits, and allotment. The maximum bid amount is capped at INR 5,00,000, with allotment based on PAN details. The provisions will be effective 30 days post-circular issuance, requiring stock exchanges to implement necessary systems and amendments. Income Tax 2. 01/2024 - dated 23-1-2024 Finance Act, 2023 ─ Explanatory Notes to the Provisions of the Finance Act, 2023 Summary: The Finance Act, 2023 introduces several amendments to the Income Tax Act, 1961, impacting various tax provisions. Key changes include adjustments to income tax rates for different entities, with specific rates for individuals, Hindu Undivided Families, firms, and companies. The Act also revises provisions for deductions, capital gains, and presumptive taxation schemes, and introduces new tax incentives for International Financial Services Centres (IFSCs). Additionally, it addresses tax treatment for online gaming, market-linked debentures, and mutual funds. The Act further modifies procedures for tax assessments, appeals, and penalties, aiming to streamline tax administration and compliance. Highlights / Catch Notes GST Taxpayer's GST Registration Cancellation May Deny Customers Input Tax Credit if Consequences are Intended and Justified. Case-Laws - HC : Validity of Retrospective cancellation of GST registration of the petitioner - It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period - a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. - HC Visit to Get Source GST Demand on Infrastructure and Environment Cess Dismissed Due to Alternative Remedy Under GST Act Section 107. Case-Laws - HC : Maintainability of writ petition - Demand of GST on nfrastructure Development Cess and Environment Cess - availability of alternate efficacious remedy of appeal under Section 107 of the GST Act - The petitioner is taking specific stand that there is no nexus of imposing GST liability with regard to Cess. This is a legal issue which can very well be examined and determined by the appellate authority, as such the submission made by the learned counsel for the petitioner that the appellate authority is bound with the circular is not applicable in the present facts in view of specific stand taken by the petitioner in the reply submitted by them before the adjudicating authority. - Petition dismissed - HC Visit to Get Source Court Orders Refund with Interest for Coercive Tax Recovery; Criticizes Officer's High-Handed Actions in Tax Dispute. Case-Laws - HC : Refund amount recovered coercively - Despite paying 20% of the tax in dispute, the tax authorities issued a demand and forcibly recovered the full balance - GST Appellate Tribunal is not constituted - The Court found the tax officer's actions in forcibly recovering the full amount to be high-handed and against the legislative mandate. - The Court directed the refund of the entire amount recovered with 12% interest per annum if not refunded within two weeks. It also imposed costs on the responsible officer. - HC Visit to Get Source Appellate authority oversteps in GST registration case by misapplying Section 161, exceeding rectification limits. Case-Laws - HC : Power to review versus Power to rectify - cancellation of GST registration - the appellate authority erroneously exercised its power under Section 161 of the Act. The court emphasized that Section 161, akin to Order 47 Rule 1 of the Code of Civil Procedure, allows rectification of errors apparent on the record, not a comprehensive review or rewriting of the decision. The appellate authority, in this case, overstepped its bounds by effectively reviewing the entire decision under the guise of rectification, which is legally impermissible. - HC Visit to Get Source Petitioner Denied Hearing in Tax Dispute; Case Restored for Further Review Due to Natural Justice Violation. Case-Laws - HC : Violation of principles of natural justice - opportunity of hearing not provided - determination of the tax due or short paid or refunded erroneously or input tax credit was wrongly availed or utilised by the petitioner for the financial year 2017-2018 - The observation of the appellate authority that the appellant was given reasonable opportunity at the adjudicating level does not get support of the records inasmuch as at the adjudicating level - Matter restored back - HC Visit to Get Source Income Tax Court Rules Section 50C Applicable Only to Sellers; Quashes Notices Due to Lack of Due Diligence by Authorities. Case-Laws - HC : Validity of reopening of assessment - Validity of multiple notices issued under various sections of the Income Tax Act, particularly targeting the application of Section 50C to a buyer rather than a seller. - Section 50C applies only to sellers and not buyers. It was held that there was a non-application of mind in issuing the order under Section 148A(d), as the authorities failed to recognize this distinction. Furthermore, the court rejected the respondent's explanation of 'human error' and emphasized that issuing authorities must thoroughly apply their minds before sanctioning such notices. The petition was allowed, leading to the quashing of the impugned notices. - HC Visit to Get Source Live Feed Income Excluded from Royalty Definition Under Indian Tax Law, Impacting Tax Classification. Case-Laws - HC : Accrual of income in India - royalty receipt - transmission of ‘live feed’ - Income from the transmission of 'live feed' does not fall within the ambit of 'royalty' under Section 9(1)(vi) of the Income Tax Act, as per the interpretation of what constitutes 'work' under the Copyright Act. - HC Visit to Get Source Tax Evasion Charges Dropped: Corrections Made, No Guilty Intent Found in LTCG Case. Case-Laws - HC : Prosecution Proceedings initiated u/s 276C - Bogus LTCG - guilty mind i.e., mens rea - willful evasion of tax on claims made under the head LTCG/Short Term Capital Loss - The mere fact of not accurate tax, not exact tax or erroneous tax would not lead to the proceedings under Section 276 of the Act. - The petitioners revised their tax filings and paid the necessary taxes after the discrepancies were pointed out (post search and seizure), indicating a lack of mens rea. Consequently, the proceedings against them u/s 276C were quashed. - HC Visit to Get Source Payments to Non-Resident Not Subject to TDS Due to DTAA 'Make Available' Criteria; Not Disallowed u/s 40(a)(i. Case-Laws - AT : TDS u/s 195 - disallowance u/s. 40(a)(i) for non deduction of TDS on payment to non-resident which is in nature of FTS(Fee for Technical Service) - beneficial provisions of India-Netherland DTAA - The services in question did not meet the criteria of 'make available' under the India-Netherlands tax treaty. Hence, the payments for these services were not subject to TDS under section 195 and not disallowable under section 40(a)(i). - AT Visit to Get Source Presumptions in Income Tax Act don't limit to searched individual; irrelevant if no specific mention in seized documents. Case-Laws - AT : Legal presumption u/s. 132(4A) &s.292C - whether cannot be given restrictive interpretation so as to consider applicable only to the searched person and not to other person? - Even if it is considered for any reason that the provisions of Sec.132(4A) & s.292C of the Act are applicable to the assessee, the same has no bearing on the issue under consideration, because, in the said document there is no reference to the name of the assessee or the concerned property at Bangalore in the relevant entry in the seized cash book. - The rebuttal presumption cannot extend to the receipt of such cash by the assessee in absence of any reference to the name of the assessee or the concerned property at Bangalore in the relevant document. - AT Visit to Get Source Determining Capital Gains on Gifted Property: Acquisition Costs and Indexation Rules Explained for Tax Calculations. Case-Laws - AT : Capital Gain - property received by way of gift - Cost of acquisition of the asset shall be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee. Previous owner of the property has been explained in the Explanation. Accordingly, it is clear that the property was originally purchased before 01.04.1981 and the assessee is eligible to get the cost of acquisition of the land as on 01.04.1981 and cost of indexation shall also be considered from 01.04.1981 - AT Visit to Get Source Classify Property Sale Income: Capital Gains or Business Income? Conversion Impacts Tax Treatment. Case-Laws - AT : Correct head of income - income earned out of sale of property - business income or capital gains - when the asset was converted into stock-in-trade - the assessee has furnish the details, such as how long the asset was treated as long term capital gain and when the assessee has converted the property into stock-in-trade and accordingly up to conversion of the property, the AO has to treat it as capital asset and after conversion of the property, it has to be treated as business asset. - AT Visit to Get Source Assessment Order Invalid Without Required Notice; Section 292BB Protection Not Applicable for Validation. Case-Laws - AT : Validity of the assessment order issued in the absence of issuance of notice u/s 143(2) - protection u/s 292BB eligible or not? - It is now well settled law that if the notice u/s 143(2) of the Act is not issued to the assessee before completion of the assessment, then the assessment is not sustainable in the eyes of law and deserve to be cancelled - the protection under section 292BB of the Act is not available to the Department in the case on hand. - AT Visit to Get Source Retrospective Cancellation of Tax Registration u/s 12AB Not Allowed Without Explicit Provision. Case-Laws - AT : Exemption u/s 11 - cancelling registration granted u/s 12AA/12AB of the Act by invoking the provisions of section 12AB(4)(ii) of the Act with retrospective effect - no retrospective cancellation could be made u/s 12AB(4)(ii) of the Act as it has been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. - AT Visit to Get Source Tribunal mandates inclusion of all clients in Comparable Uncontrolled Price method for broking commission pricing. Case-Laws - AT : TP Adjustment - MAM - Considering brokerage rate of all Non-AEs for the comparability purposes - Arm's Length Price (ALP) of broking commissions - The Tribunal directed the Transfer Pricing Officer (TPO) to consider both overseas and domestic clients while applying the Comparable Uncontrolled Price (CUP) method. Adjustment of 40% was allowed on marketing and research costs. - AT Visit to Get Source Tax Surplus from Treasury Bill Redemption as Capital Gains, Not Business Profits, Says Ruling. Case-Laws - AT : Taxability of surplus on redemption of Treasury bills under the head ‘Profits and Gains of Business’ - treasury bills were sold by the Reserve Bank of India on behalf of the Central Government - Surplus on redemption of treasury bills is to be taxed under the head Capital Gains. - AT Visit to Get Source No Tax Deduction on Notional Income for Expatriate Salaries u/s 195, Deduction Done u/s 192. Case-Laws - AT : TDS u/s 195 - assessee has already deducted tax under section 192 of the Act in respect of salary cost of expatriate employees - where profit attribution to a PE is based on a notional calculation rather than actual payments (e.g., markup on salaries of expatriate employees), the assessee cannot be expected to deduct tax on such notional income, especially when tax has already been deducted on the actual payments under different sections of the Income-tax Act. - AT Visit to Get Source Tax Deducted at Source on Mobilization Advances: Credit in Deduction Year, Not Income Recognition Year. Case-Laws - AT : Credit for TDS - Whether the Tax Deducted at Source (TDS) on mobilization advance, which is a capital receipt, should be credited in the year of deduction - Mobilization advances, characterized as capital receipts and not revenue, are not subject to immediate taxation. - TDS deducted on such advances should be credited in the year of deduction, not necessarily aligned with the year of income recognition. - AT Visit to Get Source Pending Decision on Tax Deduction Approval by DSIR; Assessing Officer Awaits High Court Verdict for Re-computation. Case-Laws - AT : Deduction u/s 35(2AB) - approval by DSIR not taken - Since the related issue of approval by DSIR, is pending adjudication before the Hon’ble High Court, therefore, for maintaining judicial discipline, we are not expressing our view on the merit of issue, same is kept opened. The AO is hereby directed to re-compute the disallowance after the decision of Hon’ble High Court. - AT Visit to Get Source Extended Cash Holding Without Evidence Insufficient for Addition; Burden on Department to Prove Unexplained Cash. Case-Laws - AT : Addition u/s 69A - cash balance on account of withdrawal from different bank accounts - The mere fact of holding cash for a longer period was not a sufficient ground for the addition, especially in the absence of any evidence contradicting the Assessee's explanation. - The principle of human probability does not extend to making assumptions about unexplained cash without concrete evidence. The burden of proof lies with the department to show that the cash in hand is unexplained, especially when the source of the cash is substantiated. - AT Visit to Get Source Customs Tribunal Rules Re-classification of Imported Goods Unjustified Due to Lack of Notice, Upholds Appellate Decision. Case-Laws - AT : Violation of principles of natural justice - SCN different from impugned order - Re-classification of imported goods - The Tribunal found that the first appellate authority correctly set aside the orders of the original authority. The re-classification by the original authority was unjustified as it was not proposed in the Show Cause Notice, and the principles of natural justice were violated. - AT Visit to Get Source Import Duty Demand on Malaysian Cocoa Powder Invalid Without Verification. Case-Laws - AT : Concessional rate of Customs Duty - Import of Natural Cocoa Powder from Malaysia - - In the present case in the face of certificate of origin having been produced and no verification process having been conducted before issuance of show cause notice, the demand of duty cannot be sustained - in absence of burden having been discharged or even having been attempted till such belated stage, the show cause notice cannot be sustained. - AT Visit to Get Source Appellant wins demurrage waiver after flawed investigation into alleged overvaluation of goods, instructed to receive waiver certificate. Case-Laws - AT : Valuation - Demurrage charges - The goods were seized under the suspicion of being overvalued, and the appellant was coerced into accepting a lower value. - The entire investigation was flawed and faulty and therefore the appellant is also not liable for demurrage and the lower authority is directed to issue the demurrage waiver certificate to the appellant as contemplated under Regulation 6 (1) (L) of the Handling of Cargo in Customs Areas Regulations, 2009. - AT Visit to Get Source Confiscation of Cash in Smuggling Case Overturned Due to Lack of Evidence Linking to Sale Proceeds. Case-Laws - AT : Absolute confiscation of the cash - Smuggling - Red Sander Wood Logs - prohibited goods or not - The impugned order qua absolute confiscation of cash seized is contrary to law which shows that the Adjudicating Authority has not applied its mind for absolute confiscation of currency seized during the course of investigation. Therefore, it is held that the seized currency during the course of investigation cannot be confiscated without proving that the said seized currency is the sale proceeds of smuggled goods. - AT Visit to Get Source SEBI Delhi High Court Considers Forum Conveniens; Mumbai Deemed Suitable for Parties in SEBI Case. Case-Laws - HC : Forum Convenience - jurisdiction of Delhi High Court - The High Court while exercising its jurisdiction under Article 226 of the Constitution of India to entertain a writ petition, in addition to examining its territorial jurisdiction also examines if the said Court is the forum conveniens to the parties. The issue of forum conveniens is seen not only from the perspective of the writ petitioner but it is to be seen from the convenience of all the parties before the Court. In the facts of this case, as is evident from the record that the forum conveniens for the both the parties is Mumbai. The Appellants since the year 2020 have been appearing in Mumbai before SEBI. - HC Visit to Get Source Service Tax Service Tax Valuation: TDS and Payments to Foreign Service Providers Explained u/s 67 Rules. Case-Laws - AT : Demand of service tax - Valuation - TDS deposited to the Income Tax department in relation to the payment made to the Foreign Service Provider - It can be seen from Section 67 that it contemplates how the valuation of taxable service for charging Service Tax needs to be arrived and sub-section 1(1) provides for valuation wherein consideration paid in money, be the gross amount charged by the service provider. The phrase "gross amount charged also is explained in the said Section. Reading holistically, it is found that Section 67(1) very clear mandates for discharging the Service Tax liability amount which is charged by the service provider is the amount. - AT Visit to Get Source Service Tax Demand Upheld for Project Management Services Involving Contractors and Consultancy Activities. Case-Laws - AT : Classification of service - the claim of the appellant that they have been appointed to execute the project has been rightly rejected by the learned Commissioner as the activities/performance stipulated under the Agreement clearly discloses that the services rendered in the management of the project for its completion by engaging suitable contractors, subcontractors, team of professional, obtaining approvals etc.; thus, in the nature of advice, consultancy or technical assistance. - Demand of service tax with interest confirmed invoking the extended period of limitation - AT Visit to Get Source Central Excise Director Commission Part of Remuneration, Not Sales Commission; Eligible for Cenvat Credit Under Board Resolution. Case-Laws - AT : Input Tax Credit - Eligibility for Service Tax credit - commission paid to its directors, as per the company’s board resolution - it is clear that payment made to directors even under the nomenclature of commission, the same is not the commission classifiable under ‘Business Auxiliary Services’. Therefore, in our view the said commission is part of remuneration paid to the directors, hence not a sales commission. Accordingly, the same is eligible for Cenvat Credit to the appellant. - AT Visit to Get Source Duty Abatement Granted for Non-Operational Period; Revenue's Demand Unwarranted Due to Production Halt in November 2012. Case-Laws - AT : Eligibility for Abatement of duty - Notified Goods - Compounded levy scheme - The revenue has demanded duty for days for which the machine was not in operation - In the present case, appellant is eligible for abatement and under no circumstances duty can be demanded for the period of abatement from 16-11-2012 to 30-11-2012, when PPM [Machine] was not in operation and not produced any Notified Goods. - AT Visit to Get Source LED Bulbs Sold to EESL Exempt from Metrology Rules; Transaction Value Method Correctly Used for Valuation. Case-Laws - AT : Method of Valuation - section 4 (on the transaction value) or under section 4A (on the RSP minus abatement)? - bulbs sold by the appellant to EESL - How can a retail price be printed on the goods whose retail sale is banned?. It is therefore found that LED bulbs sold by the appellant to EESL were not covered by Metrology Rules and hence section 4A of the Act will not apply and self assessment has been correctly done by the appellant on the basis of transaction value as per section 4. - AT Visit to Get Source Case Laws: GST 2024 (1) TMI 1014 Validity of Retrospective cancellation of GST registration of the petitioner - non-filing of returns for a continuous period of six months - HELD THAT:- Since the very foundation of entire proceedings i.e. show cause notice and the order of cancellation are vitiated, no purpose would be served in relegating the petitioner to the stage of an appeal. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period - a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The show cause notice does not even state that the registration is liable to be cancelled from a retrospective date - The impugned show cause notice dated 07.04.2022, order of cancellation dated 13.07.2022 and the order in appeal dated 29.12.2023 are accordingly set aside - Petition allowed. 2024 (1) TMI 1013 Maintainability of writ petition - Demand of GST on nfrastructure Development Cess and Environment Cess - availability of alternate efficacious remedy of appeal under Section 107 of the GST Act - Petitioner contends that adherence to departmental circulars by appellate authorities may prejudice the appeal, violating the principles of natural justice. - HELD THAT:- From bare perusal of the Section it is quite vivid that the person aggrieved by any decision or order under this Act or the State GST Act or Union Territory Goods and Service Tax by an adjudicating authority may appeal to the Appellate Authority as may be prescribed within 3 months from the date on which the said decision or order is communicated to such person. The subclause of 4 also provides further period of 1 month within the aforesaid period of 3 months or 6 months as the case may be. The petitioner is taking specific stand that there is no nexus of imposing GST liability with regard to Cess. This is a legal issue which can very well be examined and determined by the appellate authority, as such the submission made by the learned counsel for the petitioner that the appellate authority is bound with the circular is not applicable in the present facts in view of specific stand taken by the petitioner in the reply submitted by them before the adjudicating authority. Hon ble Supreme Court in case of The State of Madhya Pradesh and Another vs M/s Commercial Engineers and Body Building Company Ltd {Civil Appeal No. 7170 of 2022 dated 14.10.2022} [ 2022 (10) TMI 576 - SUPREME COURT] has considered the alternate remedy of filing of appeal under the M.P. Value Added Tax, 2002 and has held If such an appeal is preferred within a period of four weeks from today, the same be entertained and decided and disposed of on merits without raising an issue with respect to limitation, however, subject to compliance of the statutory requirements, if any, for preferring an appeal under Section 46(1) of the MP VAT Act, 2002. Thus, it is quite vivid that the petitioner has alternate and efficacious remedy of appeal available as provided under Section 107 of the GST Act, the writ petition is not maintainable - Accordingly this writ petition is disposed off directing the petitioner to take appropriate remedies which are available in terms of Section 107 of the GST Act. 2024 (1) TMI 1012 Refund amount recovered coercively - Despite paying 20% of the tax in dispute, the tax authorities issued a demand and forcibly recovered the full balance - GST Appellate Tribunal is not constituted - HELD THAT:- In the case of Sita Pandey v. State of Bihar and Ors. [ 2023 (9) TMI 272 - PATNA HIGH COURT] , it was directed to refund the tax recovered and also a cost was imposed on the Assessing Officer, who acted peremptorily that too against the statutory provision. In the present case, it is also directed that the entire amounts recovered as on 07.01.2023, be refunded to the assessee within a period of two weeks from today, failing which interest shall run at the rate of 12 per cent per annum. If the amounts are satisfied within two weeks, as directed hereinabove, it is made clear that if eventually the demand is confirmed against the assessee, there shall not be any interest claimed under the statute between the date on which the amounts were credited by the bank and the date of refund as directed hereinabove; since the State had the benefit of the amounts in its coffers. A cost of Rs. 5000/- imposed on the Officer, who issued the demand produced as Annexure-16 and appropriated the money from the bank account of the assessee/petitioner. Petition allowed. 2024 (1) TMI 1011 Power of rectification of errors apparent on the face of record - Power to review versus Power to rectify - cancellation of GST registration - HELD THAT:- The Hon ble Supreme Court in SASI (D) THROUGH L. RS. VERSUS ARAVINDAKSHAN NAIR AND ORS. [ 2017 (3) TMI 1687 - SUPREME COURT ] has held that: mere erroneous decision is distinguished from decision which could be characterised as vitiated by error apparent. It was further held that: review of an order is permissible, if any, grounds mentioned under Order 41 Rule 1 is made out. Review is not appeal in disguise, where erroneous decision re-heard and corrected but lies for patent error. Error which is not self-evident and has to be detected by process of reasoning, can hardly be called as error apparent on the face of record. That apart, if the power of rectification as mentioned in Section 161 is to be construed as a power to review an earlier decision, then the statute mandates that the authority should be able to point out the error, which is apparent on the face of the record in a decision taken by him on November 9, 2022. Unfortunately, the order passed by the appellate authority dated 23rd August, 2023 digitally signed on 24th August, 2023 does not point out any error, which is apparent on the face of the record. The order suffers from illegality inasmuch as the appellate authority has rewritten its earlier order, which is impermissible in exercise of its powers under Section 161 of the Act - Petition allowed. 2024 (1) TMI 1010 Violation of principles of natural justice - opportunity of hearing not provided - determination of the tax due or short paid or refunded erroneously or input tax credit was wrongly availed or utilised by the petitioner for the financial year 2017-2018 - HELD THAT:- Section 75(4) of CGST Act 2017 mandates that an opportunity of hearing shall be given where a request is received in writing, to the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person, affording such opportunity at the appellate stage cannot substitute the said requirement at the adjudicating level. The observation of the appellate authority that the appellant was given reasonable opportunity at the adjudicating level does not get support of the records inasmuch as at the adjudicating level, only the case disclosed in the reply to the show-cause has been discussed which obviously is far short of the requirement of Section 75(4) of the said Act of 2017. The order impugned is not sustainable and is accordingly set aside - Petition allowed. 2024 (1) TMI 978 Maintainability of petition - appealable order before the Tribunal, but the said forum is not available at present - Validity of impugned order of rectification by the WBGST authority - HELD THAT:- Considering the facts and circumstances of the case that alternative remedy is not available to the petitioner at present, this writ petition is being entertained and will be heard on exchange of affidavits by the parties. Let the respondents file affidavit-in-opposition within four weeks - List this matter for final hearing in the monthly list of February, 2024. Income Tax 2024 (1) TMI 1009 Validity of reopening of assessment - allegation of violation of the provisions of section 50C of the Income Tax Act, 1961 and due to noncompliance, assessee also failed to explain the transaction - HELD THAT:- As petitioner states, and rightly so, that provisions of Section 50C of the Act would apply only to a seller and not the assessee in this case, who is the buyer of the property. Therefore, it is Mr. Basu s/petitioner case that there has been total nonapplication of mind while issuing this order under Section 148A(d) of the Act. Mr. Basu states that in the order also it is mentioned that the assessee is buyer of the property and if only the sanctioning authority had read the order, he would not have granted the sanction because Section 50C of the Act does not apply to buyers. We would agree with above Revenue relies on an affidavit-in-reply filed by one Manish - In our view, the said Manish is incompetent to make the statement because it is not the said Manish, who had passed the impugned order. There is also nothing to indicate in the affidavit that Manish made inquiries with the officer Abhishek Kumar Sinha, who passed the impugned order seeking an explanation for reliance on Section 50C of the Act. Therefore, we shall not accept this explanation of Respondents. Reason to believe - Assessing Officer before issuing a notice must have satisfied himself that what he writes makes sense. Even the Principal Commissioner, who granted sanction should have also applied his mind and satisfied himself that the order passed under Section 148A(d) of the Act was being issued correctly by applying mind. It cannot be a mechanical sanction. On these grounds alone, the petition should be allowed. We also should note that there is nothing in the notice to explain as to how, if the transaction amount is less than the stamp duty value, there can be escapement of any income particularly in the hands of a buyer. Decided in favour of assessee. . 2024 (1) TMI 1008 Accrual of income in India - royalty receipt - income as stated to have been earned from sublicensing of broadcasting non live content as per the Master Rights Agreement [ MRA ] - as per assessee submission essentially appears to have been that transmission of live feed through satellite would not fall within the ambit of Section 9(1)(vi) and the Explanations appended thereto. Insofar as the bifurcation of the royalty earned in the ratio of 95% and 5% was concerned, the respondent referring to the stipulations forming part of the Novation Agreement had contended that the latter alone was liable to be recognised as revenue generated from non live feed. Whether income derived from transmission of live feed would fall within the ambit of royalty? - As reliance appears to have been placed on the decision rendered by a Division Bench of our Court in Commissioner of Income Tax v. Delhi Race Club [ 2014 (12) TMI 265 - DELHI HIGH COURT] . The attention of the ITAT was additionally drawn to the decisions rendered by M/s Neo Sports Broadcast Private Limited [ 2011 (11) TMI 23 - ITAT MUMBAI] and Nimbus Communications Limited [ 2013 (9) TMI 795 - ITAT MUMBAI] wherein the issue had come to be decided and answered in favour of the assessee. Bifurcation of revenue - We find no merit in the contention of the appellants that the ratio adopted for the purposes of bifurcation of income was either unsubstantiated or arbitrary. Whether service from which income was generated would clearly fall within the ambit of Explanation 2 as placed in Section 9(1)(vi)? - In light of the unequivocal conclusions as expressed by the Division Bench in Delhi Race Club[ 2014 (12) TMI 265 - DELHI HIGH COURT] and with which we concur, we find that once the Court came to the conclusion that a live telecast would not fall within the ambit of the expression work , it would be wholly erroneous to hold that the income derived by the assessee in respect of live feed would fall within clause (v) of Explanation 2 to S.9(1)(vi) of the Act. As in the facts of the present case, it is admitted to the appellant that the actual transmission of content was undertaken by SIPL and not by the respondent. The Explanation, therefore in our considered opinion does not detract from the correctness of the view as ultimately expressed by the ITAT. ITAT did not commit any error in passing the impugned orders dated 20 March 2020 and 21 February 2023 and that it was completely justified in arriving at the finding that the fees received by the respondents towards live transmission could not be classified as royalty income under Section 9(1)(vi) of the Act. Consequently, no substantial question of law arises in the instant appeals and the appeals stand dismissed on the aforesaid terms. 2024 (1) TMI 1007 Prosecution Proceedings initiated u/s 276C - Bogus LTCG - guilty mind i.e., mens rea - willful evasion of tax on claims made under the head LTCG/Short Term Capital Loss - allegation of crime invoking Section 200 of the CrPC for offence punishable under Section 276C - infirmities pointed out in the complaints registered independently against all the members of the family and the Companies - defence of the petitioners is that they had sold certain shares of Tuni Textiles and earned long term capital gains amounting to certain amounts all through banking transactions with the stock brokers in relation to the advice the stock brokers had rendered HELD THAT:- The stocks vary from JMD Telefilm Industries, Splash Media, Essar India and Alpha. Trading is both by the individuals and by the companies. But, the moment it is brought to the notice of all these petitioners, retracing of steps immediately happen by filing of revised returns. Therefore, it is not a case where ipso facto evasion of tax can be laid against these petitioners. The facts in the case are akin to what is considered by the Apex Court and co-ordinate Benches of this Court in the aforesaid cases [SEE RELIANCE PETROPRODUCTS PVT. LTD. [ 2010 (3) TMI 80 - SUPREME COURT] , M/S CONFIDENT PROJECTS (INDIA) PRIVATE LIMITED[ 2021 (2) TMI 75 - KARNATAKA HIGH COURT] , M/S. VYALIKAVAL HOUSE BUILDING CO OPERATIVE SOCIETY LTD. [ 2019 (7) TMI 184 - KARNATAKA HIGH COURT] as held mens rea is an element that is to be present in a proceeding under Section 271 of the Act. The mere fact of not accurate tax, not exact tax or erroneous tax would not lead to the proceedings under Section 276 of the Act. These cases would become cases where it would amount to delayed payment of tax as revised returns are filed after the search is conducted on the petitioners. The judgments rendered by the co-ordinate Benches in the cases of M/s VYALIKAVAL HOUSE BUILDING CO- OPERATIVE SOCIETY LIMITED and M/s CONFIDENT PROJECTS (INDIA) PRIVATE LIMITED [supra] were tossed by the revenue before the Apex Court and both of which have been dismissed. These are admitted facts. Therefore, in the light of all the issues standing answered by plethora of judgments quoted hereinabove, the proceedings instituted against the petitioners cannot but be termed to be an error in law. Order of the learned Magistrate taking cognizance of the offence - All that the order reads is complainant present and perused complaint. Sufficient materials are placed to proceed against the accused for offence punishable u/s 276C(1) of the Act. Accordingly, cognizance is taken and a criminal case is directed to be registered. Whether this would be sufficient in law also need not detain this Court for long or delve deep into the matter. The order of cognizance is trite, that it sets the criminal law in motion and brings the accused under the umbrella of crime. The co-ordinate Bench in the case of M/s. CONFIDENT PROJECTS (INDIA) PVT LTD [ 2021 (2) TMI 75 - KARNATAKA HIGH COURT] as confirmed by SC [ 2021 (12) TMI 1461 - SUPREME COURT] has framed a specific issue on an identical order of taking of cognizance as held at the time of taking Cognisance, there must be a proper application of judicial mind to the materials before the said Court either oral or documentary, as well as any other information that might have been submitted or made available to the Court. The test that is required to be applied by the Court while taking Cognisance is as to whether on the basis of the allegations made in the Complaint or on a police report or on information furnished by a person other than a police officer, is there a case made out for initiation of criminal proceedings. For the above purpose, there is an assessment of the allegations required to be made applying the law to the facts and thereby arriving at a conclusion by a process of reasoning that Cognisance is required to be taken. An order of Cognisance cannot be abridged, formatted or formulaic. The said order has to make out that there is a judicial application of mind. Since without such application, the same may result in the initiation of criminal proceedings when it was not required to be so done. When there are multiple accused, the order is required to disclose the application of mind by the Court taking Cognisance as regards each accused. The Court taking Cognisance ought to have referred to and recorded the reasons why the said Court believes that an offence is made out so as to take Cognisance more so on account of the fact that it is on taking Cognisance that the criminal law is set in motion insofar as accused is concerned and there may be several cases and instances where if the Court taking Cognisance were to apply its mind, the Complaint may not even be considered by the said Court taking Cognisance let alone taking Cognisance and issuance of Summons. Thus the order taking Cognisance is not in compliance with applicable law and therefore is set aside. Proceedings pending before the Special Court (Economic Offences) Bengaluru in these cases stand quashed. 2024 (1) TMI 1006 Exemption u/s 11 - charitable activity u/s 2(15) or not? - rejection of the application of the assessee for registration u/s. 12AB - HELD THAT:- On perusal of the objects of the society it is apparent that the society has charitable objects and, therefore, the request of the society for grant of registration u/s.12AB cannot be denied on the basis of assessment of the activities, which has actually been carried out by the assessee society. Hon ble Apex Court in the case of Ananda Social Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT] has even held that the activities in the provision includes proposed activities . As decided in Shri Agrasen Jan Kalyan Trust [ 2024 (1) TMI 407 - ITAT RAIPUR] since the actual activities of the trust cannot be the deciding factor while granting the registration u/s. 12A but the object of the trust should have been looked into, the activities have to be looked into by the AO at the time of assessment proceedings. It is also a fact that the trust was formed with charitable objects eligible for approval u/s. 12AA of the Act, which is substantiated by the department itself by granting registration u/s. 12AA. In such circumstances we are of the considered opinion that the rejection of application for registration u/s. 12AA of the Act by Ld CIT(E) was an erroneous application of law - Thus we direct to grant registration u/s. 12AB in accordance with law - Decided in favour of assessee. 2024 (1) TMI 1005 TDS u/s 195 - disallowance u/s. 40(a)(i) for non deduction of TDS on payment to non-resident which is in nature of FTS(Fee for Technical Service) - beneficial provisions of India-Netherland DTAA - Scope of services the AO held that the nature of services contemplated under the Agreement was that of advisory and consultancy services which would be covered within the meaning of fee for technical services ( FTS ) both under the Income Tax Act as well as the treaty - CIT(A) deleted addition - HELD THAT:- CIT(A) held that the amount received by NTL Lemnis Holding BV for management and sales marketing support services as non-taxable in view of the beneficial provisions of India-Netherland tax treaty read with the MFN clause and the India Netherland treaty. It has also been submitted that since the subject matter income has been assessed to be non-taxable in the hands of the recipient, there is no question of deducting tax at source under section 195 by the remitter and disallowance under section 40(a)(i). Having heard the arguments of the ld. DR and the material on record, we hold that the MFN clause of India-Neitherland Tax Treaty has been rightly interpreted by the ld. CIT(A) and hence, we decline to interfere with order of the ld. CIT(A). Appeal of the Revenue is dismissed. 2024 (1) TMI 1004 Accrual of in Income in India - assessee is a company incorporated in Thailand rendered services to its group entities in India - taxability of FTS - whether Fees for Technical Services is taxable in India as per the India-Thailand Treaty or not? - taxability will be covered under article 5 read with article 7 of DTAA with Thailand or not? - HELD THAT:- It is an undisputed fact that the assessee is a non-resident and the amounts received fall under the Fee For Technical Services (FTS) and the India-Thailand DTAA do not have a provision of taxing of FTS under any of the Articles of the treaty and also cannot be treated as miscellaneous income under any residual clause. Hence, the assessee cannot be made liable tax in India. Similar, proposition laid down by the Hon ble High Court of Madras in the case of Bangkok Glass Industry Co. Ltd. [ 2015 (4) TMI 503 - MADRAS HIGH COURT] The Co-ordinate Bench of Tribunal in the case of Paradigm Geophysical Pvt. Ltd. [ 2008 (6) TMI 238 - ITAT DELHI-G] held that where the business profits of the non-resident include items of income for which specific or separate provisions have been made in other articles of the tax treaty, then those provisions would apply to the items. However, in case it is found that those provisions are not applicable then the items of income would have to be considered in Article 7. Co-ordinate Bench of Tribunal in the case of Bharti Airtel Ltd. [ 2016 (3) TMI 680 - ITAT DELHI] held that where there is no FTS clause available in the treaty with a country, then the income in question would be assessable as business income and it can be taxed in India only if there is a permanent establishment in India and the income is attributable to activities or functions performed by such permanent establishment. The aforesaid expositions are fully applicable here. The assessee company has no Permanent Establishment (PE) in India. The income which has been earned in this case in absence of FTS clause in DTAA would fall as business income. Their nature would not change to be that of other income. Hence the same cannot be taxed in India in absence of a PE. Hence, keeping in view, the provisions of the Act, Articles of India-Thailand DTAA and the history of the assessee, the appeal of the assessee is hereby allowed. 2024 (1) TMI 1003 Addition u/s 56(2)(x) - stamp duty valuation of the property - addition made as assessee has purchased one immovable property for a consideration less than value as assessed by the Stamp Valuation Authority - as per assessee flat was booked by the assessee in FY 2014-15 and all payments were made through banking channel - HELD THAT:- Section 56(2)(x) provides that if the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause. The value determined by the valuation authority for the purpose of charging stamp duty as the value of the property and after deducting the purchase consideration shown by the assessee the remaining part is being considered as a deemed gift within the meaning of this Section. But in this case it is hit by the proviso. Assessee has booked the flat in 2015 and the AO has not taken the stamp duty valuation on 11.05.2015 which is less than the value considered by the AO. Thus the orders of both the lower authorities are not sustainable because the assessee has demonstrated that it has made payment for purchase of this property through account payee cheque in instalments on different dates. Therefore, as far as Rs. 32,93,730/- is concerned, it cannot be added and this addition is deleted. What the AO can add with the help of Section 56(2)(x) of the Act is the amount which is the difference between Rs. 32,93,730/- vis- -vis stamp duty value for the purpose of charging stamp duty on 11.05.2015. We deem it appropriate to set aside this issue to the file of the AO with the following directions: a) The ld. AO first find out the stamp duty valuation of the property as on 11.05.2015 and if it is more than Rs. 32,93,730/- then that amount is to be worked out for the purpose of considering it as deemed fit. b) In case a positive difference is found which is required to be considered as deemed gift in the hands of the assessee then ld. AO shall call for the report of DVO for determining the fair market value of the flat as on 11.05.2015. c) The AO shall consider the fair market value determined by the DVO as well as the value of Stamp Valuation Authority and whichever is the lower is to be adopted for considering the value of the property as on 11.05.2015. From that amount sum of Rs. 32,93,730/- is to be debited and the balance could be considered as deemed gift in the hands of the assessee. 2024 (1) TMI 1002 Addition u/s. 69A - receipt of unaccounted money on sale of property based on the material seized in the search from third party - AO opined that the assessee itself agreed that the actual sale value is much more than the guideline value of the property, which indirectly confirms the possibility of receiving on-money payment - HELD THAT:- As sworn statement recorded during the course of search also do not reveal receipt of on-money of the assessee and they do not facilitate drawing any adverse inference against the assessee. Despite, absence of any incriminating evidences in the seized materials or any admission of on-money in the sworn statement, the AO arrived at his findings regarding receipt of on-money for sale of property only on the basis of proximity of 9 days between the date of registration of property and date of sending cash to Bangalore, without any other material/evidences to show that the said cash was utilized for the purpose of payment of on-money. In our considered view, the findings of the AO regarding payment of on-money based on a dumb document is purely on suspicion, conjecture and surmise manner, but not based on any evidences. In this regard, it is pertinent to refer to the decision CIT v. Daulatram Rawatmull [ 1964 (3) TMI 14 - SUPREME COURT] where it has been clearly held that suspicion however so strong, but suspicion cannot take the place of evidence. Therefore, we are of the considered view that the AO is erred in making additions towards on-money u/s. 69A of the Act, without reference to any material which suggest payment of on-money merely on the basis of suspicion and surmise. Legal presumption u/s. 132(4A) s.292C - whether cannot be given restrictive interpretation so as to consider applicable only to the searched person and not to other person? - As the impugned excel sheet representing cash book containing the entry regarding carrying of cash to Bangalore was found and seized during the course of search of a third party i.e. M/s.Polisetty Somasundaram. Further, said incriminating material was not seized during the course of search in the case of the assessee. Therefore, provisions of Sec.132(4A) s.292C of the Act, cannot be pressed into service in the case of the assessee with respect to the contents of the said seized material so as to draw a rebuttal presumption that the transaction of carrying of cash noted in the impugned documents is relating to the assessee and that the same is true and correct, since said provision operates only against the searched person in whose position the relevant materials were found . Even if it is considered for any reason that the provisions of Sec.132(4A) s.292C of the Act are applicable to the assessee, the same has no bearing on the issue under consideration, because, in the said document there is no reference to the name of the assessee or the concerned property at Bangalore in the relevant entry in the seized cash book. Therefore, we are of the considered view that provisions of Sec.132(4A) s.292C of the Act, at best lead to a rebuttal presumption that carrying of cash to the said extent by M/s.Polisetty Somasundaram is true and correct. But, the rebuttal presumption cannot extend to the receipt of such cash by the assessee in absence of any reference to the name of the assessee or the concerned property at Bangalore in the relevant document. Thus, we reject the ground taken by the Revenue. We are of the considered view that the AO is erred in making additions towards alleged on-money received by the assessee towards transfer of property as unexplained money u/s. 69A of the Act. The Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the AO - Decided against revenue. 2024 (1) TMI 1001 Reopening of assessment u/s 147 - incorrect declaration of capital gain by the assessee - as argued reopening was on the basis of audit objection only - as per AO property received by way of gift was not a capital asset within the meaning of section 2(14) of the Act and section 48 is applicable only to capital asset and indexed cost of acquisition has to be allowed from the previous year in which the land was converted to residential purpose - HELD THAT:- We have gone through the order of the AO u/s. 143(3) of the Act and the documents submitted as produced by the ld. AR and note that there was no specific query raised by the AO in the original assessment proceedings and there was no submission on the part of assessee. As decided in Subodh Agarwal v. State of U.P. [ 2023 (2) TMI 211 - ALLAHABAD HIGH COURT ] has held that Explanation 1, clause (ii) to second proviso of section 148 clearly provides that any audit objection to effect that assessment in case of assessee for relevant assessment year has not been made in accordance with provisions of Act is included in term information regarding escaped assessment . Therefore, it cannot be said that the reopening was on the basis of audit objection only. Legality of the property - As observed that the constructed property sold was different from the property received on gift in the opinion of the AO and the sale of the property did not arise out of the gifted property. The term reason to believe can be gathered and available from the information, leading the Assessing Officer to reopen the assessment. The term itself is suggestive of its prima facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer s prima facie belief, of course, derived from the some material/information, etc . leading him to reopen the assessment.. It is clear from the reasons recorded that the AO had the belief that there was escapement of income. Therefore, we reject the arguments advanced by the ld. AR on the legal issue and dismiss the same. Mode of computation of capital gain - As the donor of the gift obtained the property in the year 1960 before 01.04.1981 which is not in dispute and it was gifted to the assessee in the FY 2002-03 after converting it from agricultural to residential purpose in the year 1988-89. The assessee has claimed cost of acquisition of the said land as on 01.04.1981 of 1,073 sq.ft. @ Rs. 84 / sq.ft. and after cost indexation the value has been arrived at Rs. 8,46,339 and claimed as cost of acquisition by the assessee. Cost of acquisition of the asset shall be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee. Previous owner of the property has been explained in the Explanation. Accordingly, it is clear that the property was originally purchased before 01.04.1981 and the assessee is eligible to get the cost of acquisition of the land as on 01.04.1981 and cost of indexation shall also be considered from 01.04.1981. In support of our view, we rely on the judgment of the Hon ble jurisdictional High Court in the case of CIT v. Ramaiah Reddy, ( 1984 (12) TMI 56 - KARNATAKA HIGH COURT ) . Respectfully following the judgment of jurisdictional High Court, we delete the addition. Indexed cost of construction of penthouse for the reason that there was no proof of payment of cost of construction and the said apartment was outside the purview of sanctioned plan and holding that it is not a capital assets - It is clear from the confirmation of the developer that the penthouse P2 construction was completed in the year 2006 and this portion was additionally built which was outside the sanctioned plan and the assessee was required to pay for 2505 sq.ft. @ 750/sq.ft and the owner has paid the same to the M/s. BSR Developers. The developer has acknowledged receipt of the same. Nowhere the lower authorities have disputed this confirmation from BSR Developers. Accordingly, the assessee has paid for construction of the pent house. We note that on the date of sale, it was a capital asset and the assessee completed all the formalities and regularised it with BBMP and produced all the documents . Therefore, it cannot be said that the property is illegal on the date of sale. Accordingly the assessee is eligible for indexed cost of construction as claimed in the computation of income. The case law relied by the ld. DR in the case of ITO vs. Bhagwan T. Fatnani [ 2015 (7) TMI 173 - ITAT MUMBAI] is not applicable to the present facts of the case since on the date of sale the property was regularised in the municipal/Govt. records and is covered under the definition of capital asset as defined in section 2(14) of the Act which is evident from the documents submitted by the ld. AR of the assessee. We therefore delete the disallowance of indexed cost of construction. Appeal of assessee partly allowed. 2024 (1) TMI 1000 Correct head of income - income earned out of sale of property - business income or capital gains - DR has submitted that the assessee has not filed any details as to when the asset was converted into stock-in-trade, therefore, AO has treated income as business income - HELD THAT:- We find that the assessee has not filed any details before the Assessing Officer or ld. CIT(A) or even before the Tribunal as to when the asset was converted into stock-in-trade. Therefore, the assessee has furnish the details, such as how long the asset was treated as long term capital gain and when the assessee has converted the property into stock-in-trade and accordingly up to conversion of the property, the AO has to treat it as capital asset and after conversion of the property, it has to be treated as business asset. In this case, neither the assessee nor the AO properly computed the property of the assessee. Thus, we set aside the orders of the ld. CIT(A) on this issue and remit the matter back to the file of the Assessing Officer to examine and compute the property u/s 45(2) of the Act keeping in view of the above observation and decide the issue afresh in accordance with law after affording reasonable opportunity of being heard to the assessee. Thus, the ground raised by assessee is allowed for statistical purposes for all the assessment years under appeal. Disallowance u/s 14A - contention of the assessee is that the disallowance made u/s 14A should not be in excess of the exempted income of the relevant assessment years - HELD THAT:- By referring to various case law including the decision in the case of Joint Investments Private Ltd. [ 2015 (3) TMI 155 - DELHI HIGH COURT] , the decision in the case of Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT] the Hon ble Madras High Court has held that the disallowance u/s 14A of the Act should be restricted to the extent of exempt income earned during the previous year. Respectfully following the judgement of Envestor Venture Ltd. [ 2021 (1) TMI 922 - MADRAS HIGH COURT] we direct the Assessing Officer to restrict the disallowance to the extent of exempted income earned by the assessee. Thus, the ground raised by the assessee is allowed. Disallowance made u/s 14A of the Act when the assessee has not earned any dividend income from investments made in earlier years - In this circumstances, in the case of CIT v. Chettinad Logistics (P) Ltd. [ 2017 (4) TMI 298 - MADRAS HIGH COURT] the Hon ble Jurisdictional High Court has observed and held that when there was no dividend income earned in the relevant assessment year, the disallowance made by the Assessing Officer in view of the provisions of section 14A of the Act read with Rule 8D was completely contrary to the provisions of that section as Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of total income of the assessee. Against the decision of the Hon ble High Court, the Department preferred Special leave Petition, which was dismissed by the Hon ble Supreme Court M/S CHETTINAD LOGISTICS PVT. LTD. [ 2018 (7) TMI 567 - SC ORDER] . In view of the above decision in the case of CIT v. Chettinad Logistics (P) Ltd. (supra), the disallowance made by the Assessing Officer stands deleted. Nature of expenses - Disallowance of fee paid to ROC - whether the fees paid to Registrar of Companies for enhancing the working capital of the company should be treated as revenue expenditure or capital expenditure? - HELD THAT:- We have perused the order of Punjab State Industrial Development Corporation Limited [ 1996 (12) TMI 6 - SUPREME COURT] wherein, as held that the fee paid to the Registrar for expansion of the capital base of the company was directly related to capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure was directly related to the expansion of capital base of the company and thus it was not an expense in the nature of revenue . Respectfully following the above CIT(A) has rightly confirmed the disallowance made by the AO and dismissed the ground raised by the assessee. Thus, we find no infirmity in the order passed by the ld. CIT(A). The ground raised by the assessee is dismissed. 2024 (1) TMI 999 Validity of the assessment order issued in the absence of issuance of notice u/s 143(2) - protection u/s 292BB eligible or not? - HELD THAT:- It is imperative from the record that the assessee has not been issued with the notice u/s 143(2) of the Act. The said fact of non-issuance of notice u/s 143(2) of the Act has been admitted by CIT(A) in its order. We have also gone through the assessment order and other materials and found that no notice u/s 143(2) of the Act was issued to the assessee. It is now well settled law that if the notice u/s 143(2) of the Act is not issued to the assessee before completion of the assessment, then the assessment is not sustainable in the eyes of law and deserve to be cancelled - See Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] Society For Worldwide Interbank Financial Telecommunications [ 2010 (4) TMI 43 - DELHI HIGH COURT] , M/s Panorama Builders Pvt. Ltd [ 2012 (8) TMI 955 - GUJARAT HIGH COURT] . Eligibility of protection u/s 292BB - The said Section 292BB of the Act deals with (a) non service of notice (b) non service of notice in time (c) service of notice in an improper manner- but in the present case the issue is regarding non-issuance of notice itself and there is nothing on record to prove that the notice u/s 143(2) of the Act has been issued by the Assessing Officer. Therefore, in our considered opinion, the protection under section 292BB of the Act is not available to the Department in the case on hand. Thus as Department has not produced any evidence to show that the notice u/s 143(2) of the Act has been issued to the assessee, the assessment orders passed for the assessment years 2009-10 to 2012-13 are hereby quashed. 2024 (1) TMI 998 Exemption u/s 11 - cancelling registration granted u/s 12AA/12AB of the Act by invoking the provisions of section 12AB(4)(ii) of the Act with retrospective effect - main contention of the ld. A.R. is that the ld. PCIT has cancelled the registration granted to the assessee w.e.f. the previous year i.e. 2020-21 relevant to assessment year 2021-22 by applying the provisions as stood on 12.5.2023, which cannot be applied for the violations of the provisions of section 12AA or 12AB of the Act - HELD THAT:- In the present case, the ld. PCIT invoked the provisions of section 12AB(4)(a)(ii) of the Act as stood in the assessment year 2022-23. In the case of Isthmian Steamship Lines [ 1951 (11) TMI 1 - SUPREME COURT] wherein the Hon ble Supreme Court held that it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication . Being so, we find force in the argument of ld. A.R. that in income-tax matters, law to be applied is the law in force in the assessment year unless otherwise stated or implied. In the present case, ld. PCIT is cancelling the registration granted u/s 12AA/12AB of the Act w.e.f. previous year 2020-21 relevant to assessment year 2021-22. In our opinion, the law as stated in the assessment year 2021-22 is to be applied and not the law as stood in the assessment year 2022-23. Thus we are of the view that no retrospective cancellation could be made u/s 12AB(4)(ii) of the Act as it has been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previous year and all subsequent previous years, which makes it clear that the cancellation cannot be retrospective, therefore, in view of the above discussion, we are of the opinion that cancellation of registration with retrospective effect is invalid in these cases. Since the ld. PCIT invoked the provisions of section 12AB(4)(ii) of the Act, which has been introduced by the Finance Act, 2022 w.e.f. 1.4.2022 so as to cancel the registration with retrospective effect from assessment year 2021-22, which is bad in law. We also note that same view has been taken by Coordinate bench of Mumbai in the case of Heard Foundation of India in ITA No.1524/Mum/2023 vide order dated 27.7.2023, wherein held that registration granted u/s 12A of the Act dated 21.7.1989 cannot be cancelled by ld. PCIT (Central) vide order dated 6.3.2023 w.e.f. assessment year 2016-17, by invoking the provisions of section 12AB(4)(ii) of the Act. Accordingly, we allow the primary ground and order of ld. PCIT passed u/s 12AB(4)(ii) of the Act is quashed. Appeals of the assessee are allowed. 2024 (1) TMI 997 TP Adjustment - MAM - Considering brokerage rate of all Non-AEs for the comparability purposes - Arm s Length Price (ALP) of broking commissions - assessee has rendered broking services both to the associate enterprise and non-associate enterprises in different geographical locations and used TNMM as most appropriate method for benchmarking the broking services - TPO has rejected the TNMM method since the assesse has provided broking services to non- associate enterprise along with its associate enterprises, therefore, CUP method was selected to be the most appropriate method - HELD THAT:- We have perused the decision of ITAT for assessment year 2003-04 [ 2023 (6) TMI 1357 - ITAT MUMBAI] wherein the ITAT held that to consider both overseas and domestic independent clients while applying CUP method in the case the assessee. Accordingly we direct the TPO to consider both overseas and domestic clients while applying CUP method as directed in the above referred decision in the case of the assesse itself. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. No adjustment of marketing cost while applying CUP method not granting adjustment of research cost and 50% of volume while applying CUP method - We have perused the decision of ITAT in the case of the assessee itself for assessment year 2003-04 [ 2023 (6) TMI 1357 - ITAT MUMBAI] wherein the ITAT held that adjustment of 40% will be allowed on marketing cost adjustments and research cost. Thus we direct TPO to give adjustment of 40% to the assessee while determining the arm s length of international transactions of brokerage and commission as directed in the finding of the ITAT referred supra, therefore these ground of appeal the assessee are partly allowed. Computing upward adjustment by considering addition instead of rectified amount - HELD THAT:- The assessee submitted that TPO had suo moto rectified the addition vide Rectification order therefore, we restore this issue to the file of the assessing officer for giving effect to the claim of the assessee after verification as per the Rectification order passed by the TPO. This ground of appeal of the assessee is allowed for statistical purposes. Disallowance of net loss incurred on error trading transactions - HELD THAT:- Assessee had submitted the details like client name, reason for error trades, date of transactions, script name internal e-mail etc. The assessee also explained that error trades are the clerical other errors of the assessee in execution of the transactions for the clients. The error trades are basically trades generated by the clients, however, due to error inter alia in punching of the trade, etc. these trades are not executed as per the trading order of the clients. The error could be in the name of wrong punching of quantity, rate, security, system error and error in punching the type of order etc. As decided in CLSA India Pvt. Ltd. [ 2020 (12) TMI 815 - ITAT MUMBAI] certain client for whom the assessee was working as a broker had not owned up certain share transactions then the assessee had no other alternative but to accept those transactions as its own transactions because of its relation with the clients from whom it was accepting good earnings. After considering the volume of transactions undertaken by the assessee company as broker for various clients we observe that such marginal error in share trading is incidental to the business of the assessee, therefore, we don t find any reason to that assessee has wrongly claimed such loss, therefore, AO is directed to allow the claim of the assessee. Disallowance u/s 14A - expenditure incurred in relation to earning of exempt income - assessee has received dividend and also had made investment which yielded exempt income - HELD THAT:- With the assistance of ld. Representative we have perused the decision of ITAT, Mumbai in the case of the assessee itself for assessment year [ 2023 (6) TMI 1357 - ITAT MUMBAI] wherein on identical issue and similar facts the issue was remanded back to the file of the assessing officer to examine the disallowance u/s 14A and assessee was also direct to substantiate its claim as to why no disallowance should be made. Thus we restore this issue to the file of the AO for deciding afresh. 2024 (1) TMI 996 Taxability surplus on redemption of securities under the head Capital Gain - transfer u/s 2(47) - assessee claimed that the amount was not liable to tax on the ground that redemption does not amounting to transfer, resulting in capital gain - HELD THAT:- We find that similar issue on identical fact has been adjudicated by the coordinate bench of ITAT in the case of assessee itself in favour of the revenue for assessment year 1995-1996 and 1996-1997. We find that coordinate bench of the ITAT in the above referred decisions have decided the issue in favour of the revenue. Therefore, following the decisions of Co-ordinate Bench assessee as referred above, we do not find any merit in this appeal. This Ground of appeal of the assessee stand dismissed. Taxability of surplus on redemption of Treasury bills under the head Profits and Gains of Business - treasury bills were sold by the Reserve Bank of India on behalf of the Central Government and difference between the amount payable on maturity and the discounted value of the treasury bills at the time of issue was treated as interest on securities - HELD THAT:- We find that in the case of British Bank of Middle East v/s CIT [ 1998 (6) TMI 82 - BOMBAY HIGH COURT] held that the difference Between the amount payable on maturity and discounted value of the treasury bills at the time of issue is interest on securities. The ITAT, Mumbai in the case of the assessee itself for the A.Y. 1998-99 [ 2023 (8) TMI 1422 - ITAT MUMBAI] and A.Y. 1997-98 [ 2023 (4) TMI 1288 - ITAT MUMBAI] has decided the issue in favour of the assessee. The co-ordinate bench of the ITAT in the case of the assessee itself after following the decision of the Hon ble Supreme Court in the case of CIT v/s Grace Collis [ 2001 (2) TMI 9 - SUPREME COURT] that surplus on redemption of treasury bills is to be taxed under the head Capital Gains. Therefore, we direct the AO to assessee the same as capital gains. Therefore, this ground of appeal is allowed. Nature of expenses - Rejecting the claim of deduction of expenditure incurred with respect to Masala Grinder and toaster - HELD THAT:- The aforesaid amount was shown as capital expenditure in the tax audited report and same was also disallowed in the return of income. Therefore, we find that the disallowance of this expenditure is not justified, therefore, we direct the AO to delete addition made towards expenditure of Masala Grinder and Toaster after verification of the claim of the assessee. Disallowance of Fines and Penalties - HELD THAT:- As we find that similar claim of expenses was decided against the assessee by the co-ordinate bench of ITAT in the case of the assessee itself [ 2023 (8) TMI 1422 - ITAT MUMBAI] [ (A.Y. 1998-99), [ 2023 (4) TMI 1288 - ITAT MUMBAI] (A.Y. 1997-98). Following the decision of the co-ordinate benches this ground of appeal of the assessee stand dismissed. Deduction in respect of Wealth Tax paid - HELD THAT:- We have perused the decision of the ITAT in the case of the assessee for A.Y. 1998-99 [ 2023 (8) TMI 1422 - ITAT MUMBAI] after following the decision of the co-ordinate benches held that wealth tax paid by the assessee is not liable to the disallowed. After following the decisions of the co-ordinate benches the AO is directed to delete the disallowance. Allowing deduction u/s 80 IA on profits after deducting depreciation u/s 32 of the Act from the profit of eligible undertaking - HELD THAT:- We find that identical issue on similar fact in the cases of the assessee itself has been decided against the assessee by the co-ordinate benches of ITAT A.Y. 1998-99 [ 2023 (8) TMI 1422 - ITAT MUMBAI] and A.Y. 1997-98[ 2023 (4) TMI 1288 - ITAT MUMBAI] Following the decision of the co-ordinate bench as referred above, this ground of appeal of the assessee stand dismissed. Disallowing of deduction u/s 80-O in respect of royalty received - HELD THAT:- We find that identical issue on similar fact in the case of the assessee itself has been adjudicated by the co-ordinate bench of ITAT in the favour of the assessee for the A.Y. 1998-99 [ 2023 (8) TMI 1422 - ITAT MUMBAI] as noticed that in accordance with the agreement that assessee has given license to assemble its scooters models. The assessee permits the same and accordingly supplied the drawings relating to those parts and collects technical knowhow fee. The co- ordinate bench held that the technical knowhow fee received by the assessee would fall under the category of Royalty as defined in sec. 80-O of the Act and it is eligible for deduction u/s 80-O. Following the decision of ITAT as referred above, this ground of appeal of the assessee is allowed. The AO is directed to allow the claim of deduction u/s 80-O of the Act. Computation of deduction u/s 80HHC - While computing indirect cost attributable to export of trading goods for the purpose of computing deduction under section 80HHC, expenses attributable to other income and export incentive estimated at 10% thereof ought to be excluded - HELD THAT:- Identical issue on similar fact has been adjudicated in favour of the assessee by co-ordinate bench of ITAT [ 2023 (4) TMI 1288 - ITAT MUMBAI] A.Y 1997-98 wherein after examining the issue placed reliance on the decision of Hon ble Supreme Court of India in the case of Hero Exports [ 2007 (11) TMI 13 - SUPREME COURT] and the decision of Special Bench of the Tribunal in the case of Surendra Engineering Corporation vs. ACIT [ 2002 (12) TMI 199 - ITAT BOMBAY-H] and decided the issue in favour of assessee. Deduction u/s 80HH and 80-IA - Common Expenditure not specifically incurred towards the tax incentive unit ought not to be considered for computing the deduction - HELD THAT:- Following the decision of the co-ordinate bench [ 2023 (4) TMI 1288 - ITAT MUMBAI] A.Y 1997-98 as held expenses attributable to other unit or head office expenses which have no relevance to the Industrial undertaking cannot be deducted in respect of the said undertaking while computing profit and gains of the said undertaking for the purpose of computing deduction u/s 80HH, 80I and 80IA of the Act. - thus we restore this issue to the file AO for deciding afresh as per the direction of the co-ordinate bench. Therefore, this ground of appeal is allowed for statistical purpose. Deduction u/s 80HH and 80-IA - inclusion of Duty Drawback and interest received - HELD THAT:- As decied in own case.[ 2023 (4) TMI 1288 - ITAT MUMBAI] A.Y 1997-98 issue was decided in favour of the assessee after following the decision in favour of the assessee after following the decision of CIT v/s Meghalaya Steels Ltd [ 2016 (3) TMI 375 - SUPREME COURT] Following the decision of the co-ordinate bench, we direct the AO to allow deduction u/s 80 IA of the Act in respect duty draw back and interest income. Deduction u/s 35D in respect of GDR issue expenses is to be allowed. Depreciation in respect of sale and lease back transaction allowed as relying on the basis on own case in which held that the disallowance of depreciation made by the AO has already been reversed. The ld D.R has raised a new contention that the Explanation 4A should be applied to this lease transaction, which is not the case of the AO. Accordingly, we do not find it necessary to consider the new contention raised by Ld D.R. Accordingly, following the decision rendered by the co- ordinate benches in the assessee s own case, we confirm the order passed by Ld CIT(A) on this issue. Nature of expenses - Allowing deduction in respect of expenditure incurred on dies and mould - revenue or capital expenditure - HELD THAT:- As decided in own case A.Y. 1998-99 . [ 2023 (8) TMI 1422 - ITAT MUMBAI] the expenditure incurred in purchase of dies and moulds are allowable as revenue expenditure. Nature of receipt - Allowing penalty charges recovered from suppliers of capital goods as capital receipts and therefore not chargeable to tax - HELD THAT:- As decided in own case [ 2023 (8) TMI 1422 - ITAT MUMBAI] A.Y. 1998-99 held that the penalty charges received from machinery suppliers is capital in nature. In this regard, the Tribunal has followed the decision rendered in AY 1993-94, wherein it was decided in favour of the assessee following the decision rendered by Hon ble Andhra Pradesh High Court in the case of Barium and Chemicals Ltd [ 1987 (2) TMI 18 - ANDHRA PRADESH HIGH COURT] Deduction of expenditure incurred in respect of jigs and fixtures as revenue expenditure allowed. Allowing corresponding adjustment in the opening stock under section 145A - HELD THAT:- During the course of appellate proceedings before us the ld. Counsel has also referred the decision of Hon ble Bombay High Court in the case of CIT Vs. Mahalaxmi Glass Works (P) Ltd. [ 2009 (4) TMI 182 - BOMBAY HIGH COURT] After considering the judicial pronouncements referred by the ld. Counsel and the judicial pronouncements relied upon by the ld. CIT(A) in his finding we don t find any reason to interfere in the decision of ld. CIT(A) holding that while making addition of unused modvat credit corresponding adjustment in the opening stock should also be made. Therefore, this ground of appeal of the revenue is dismissed. Foreign travel expenses of wife of MD - allowable revenue expenditure or not? - HELD THAT:- We find that identical issue on similar fact has been adjudicated by the ITAT Mumbai, in the case of the assessee itself against the assessee for assessment year 1998-99 [ 2023 (8) TMI 1422 - ITAT MUMBAI] assessee has also not proved existence of any commercial or business expediency in incurring the foreign travel expenses of wife of M D except producing copy of Board resolution, in which also, no reason was given. There should not be any doubt that this is a factual aspect and the facts prevailing in each foreign trip has to be examined. We notice that the Ld CIT(A) has also not brought out the business or commercial expediency in incurring expenses on foreign trips of wife of M D, but deleted the addition on the basis of quantum of expenditure, status of the M D and approval by Board. These are not the proper reasons for allowing this type of expenditure - Decided against assessee. Disallowance of proportionate interest expense attributable to earning exempt income - CIT(A) has deleted the addition - HELD THAT:- Since, the assessee was having more interest free funds then the amount of investment made on which the exempt income was earned, therefore, no addition need to be confirmed - Decided against revenue. Allowing deduction for Prior period of expenses - HELD THAT:- We have perused the decision of ITAT or assessment year 1998-99 [ 2023 (8) TMI 1422 - ITAT MUMBAI] wherein the claim of such expenses pertaining to assessment year 1997-98 were allowed during the assessment year 1998-99 on the ground that same were crystallized during the assessment year 1998-99. Following the decision of ITAT and considering the fact that impugned expenses were crystallised during the year under consideration we don t find any infirmity in the decision of ld. CIT(A) on this issue, therefore, this ground of appeal of the revenue is dismissed. Reduction 90% of items from the profit of the business while computing the deduction u/s 80HHC - HELD THAT:- CIT(A) has correctly excluded the aforesaid items [Technical know-how, Insurance claims, Miscellaneous receipts, Sundry Credit Balance, Bill Discounting and Provision no longer required] while computing the profit of the business holding that these items have direct nexus with the business activity of the assessee and are not specifically mentioned in explanation (baa), after following his order for assessment year 1998-99. Penalty u/s 271(1)(c) - difference between the returned income and the assessed income on account of issue pertaining to reduction of deduction u/s 80HHC - HELD THAT:- As we find that assessee has claimed deduction u/s 80HHC of the Act on the basis of the separate audit report furnished u/s 80HHC(4) of the Act and certified by the auditor as per the tax audit report. CIT(A) has deleted the penalty on the reason that merely that the AO included or excluded certain items within the term indirect cost that should not be a basis for levying penalty u/s 271(1)(c) for concealing particulars of income or furnishing inaccurate of income thereof. As decided in the case of CIT Vs. Reliance Petro Products Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] held that a mere making a claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars in respect of income of the assesse. Considering the above facts and findings we find no infirmity in the decision of ld. CIT(A) in deleting the impugned penalty therefore this ground of appeal of the revenue is dismissed. Penalty for claiming deduction u/s 80-O - HELD THAT:- We find that in support of its claim of deduction u/s 80-O the assessee has furnished form no. 10HA certified by the tax auditor in the tax audit report. It was also pointed out that in the earlier assessment year i.e 1997-98 the similar claim of deduction has been granted to the assessee in respect of royalty received. In view of the above fact we consider that assessing officer has not brought any material to substantiate that assessee has concealed the particulars of income or furnished inaccurate particulars of income. As considering the similar facts and finding as given above for deleting the penalty levied of claim of deduction u/s 80HHC we don t find any merit in this appeal of the revenue, therefore, this ground of appeal of the revenue is dismissed. Exclusion of deduction u/s 80-IB for the purpose of computing deduction u/s 80HHC with respect to profit on traded goods - AO has reduced an amount on the ground that for similar amount deduction has been claimed u/s 80-IB of the Act, therefore, the same lead to double deduction - HELD THAT:- During the course of appellate proceedings before us the ld. Counsel referred the decision of Hon ble jurisdictional Bombay High Court in the case of Associated Capsules (P) Ltd. Vs. DCIT, Mumbai [ 2011 (1) TMI 787 - BOMBAY HIGH COURT] wherein it is held that after allowing of deduction computed under various provisions under heading C of chapter VI-A do not exceed 100% of profit of business of the assessee then deduction computed under other provisions under heading C of chapter VI-A has to be restricted the profit of business that remain after excluding profit allowed as deduction u/s 80IA, so that total deduction allowed under heading C of chapter VI-A does not exceed profit of business. In view of the above facts and finding we restore this issue to the file of the assessing officer for deciding afresh. Deduction u/s 80IA in respect of duty drawback and interest income allowed. TDS u/s 195 - Allowance of deduction u/s 40(a)(i) in respect of expenditure incurred in foreign currency - HELD THAT:- After perusal of the nature of expenditure and finding of the ld. CIT(A) given that the assessee has made payment for the various expenses as referred above to the non-residents who were having no business connection in India, therefore, no tax was deducted for such payments. During the course of appellate proceedings before us revenue has not brought any material contrary to the finding given by the ld. CIT(A), therefore, we don t find any merit in this ground of appeal of the revenue and the same stand dismissed. Interest u/s 234B - HELD THAT:- During the course of appellate proceedings before us the assessee submitted that it has paid the total advance tax of Rs. 204,00,00,000/- whereas assessed tax comes to Rs. 195,36,36,406/- and 90% of the assessed tax comes to Rs. 175,82,72,765/-, therefore, there was no shortfall in payment of advance tax. During the course of appellate proceedings before us revenue has not brought any material contrary to the submission and finding of the ld. CIT(A) therefore, this ground of appeal of the revenue also stand dismissed. 2024 (1) TMI 995 TDS u/s 195 - Validity of the orders passed u/s 201(1)/201(1A) - TDS default on the payments made to the parent company and other overseas AEs - PE in India - AO held that the payments made by the assessee towards purchase of raw-materials, finished goods, capital goods to LG Korea and other non-resident associated companies, are taxable in India, as, all those entities have PE in India, Therefore, the assessee was liable to deduct tax at source under section 195 - HELD THAT:- The basis of attribution of profit to the payee, LG Korea is purely notional as it is the specific case of the assessee that it has not paid any salary cost of expatriate employees to LG Korea. It is the case of the assessee that on the salary cost paid to the expatriate employees, the assessee has deducted tax at source under section 192 of the Act. The aforesaid claim of the assessee remains uncontroverted. Thus, when the assessee has not made any direct payment to the LG Korea towards the salary cost of expatriate employees, in our view, there was no liability on the assessee to deduct tax on such notional payment. Moreso, when the assessee has already deducted tax under section 192 of the Act in respect of salary cost of expatriate employees. Thus, when the basis of attribution of profit to the PE is a notional income, that too, based on a methodology adopted by DRP in case of payee, the assessee cannot be expected to perform an impossible act of computing TDS on a notional payment, a part of which, is to be attributed towards profit of PE of LG Korea. As decided in Samsung India Electronics Pvt. Ltd. [ 2014 (4) TMI 976 - DELHI HIGH COURT] payments made by the petitioner to SEC for the goods are not tax deductible under section 195(2) and hence they were rightly allowed as deduction in the original assessment of the petitioner and (ii) the assessee cannot be treated as one in default under section 201(1) and no interest can be charged under section 201(1A) as no income arose on account of sales in India since the petitioner cannot be held to be its PE in India. Thus we hold that, there being no obligation of the assessee to withhold tax under section 195 of the Act, the assessee cannot be treated as an assessee in default under section 201 of the Act. Therefore, we direct the Assessing Officer to delete the demands raised under section 201(1)/201(1A) of the Act for the impugned assessment years. Decided in favour of assessee. 2024 (1) TMI 994 Credit for TDS deducted on the mobilization advance extended to the assessee - grant of credit denied by AO and case was selected for scrutiny and the AO accepted the income returned by the assessee in the revised return - Assessee submitted that the mobilization advance is received from Ministry of Surface Transport as advance is in the nature of loan and therefore, is a capital receipt on which tax is deducted at source on which tax has been deduced u/s 194C - HELD THAT:- From the perusal of the above terms of the contract agreement, it is clear that the mobilization advance is in the nature of loan which bears interest @ 10% p.a. and the interest along with the advance payment should be recovered from the assessee. It is also noticed that the said advance is extended to the assessee against the bank guarantee given @ 110% of the amount of advance given. Therefore, we see merit in the contention that the amount received by the assessee is a capital receipt and does not bear the element of income i.e. to be offered to tax with regard to the claim of the assessee that the credit for TDS should be given to the assessee. As per table submitted by the ld AR that the mobilisation advance is recovered against the billed revenue in the subsequent years. We further notice that the assessee has offered income on gross basis and that the TDS is deducted on the net amount paid which would mean that the advance amount is not treated as revenue that goes to reduce the billed revenue. Therefore in our consider view the CIT(A) s contention that the amount adjusted goes to reduced the income of the assessee and accordingly is in nature of income is not correct. This fact is identical to the facts in Patel Engineering [ 2015 (11) TMI 1665 - ITAT MUMBAI] where the coordinate bench has directed the AO to allow credit for the TDS deducted on the advance. Thua assessee should be allowed credit for the TDS claimed which is deducted from the mobilization advance. Appeal of assessee allowed. 2024 (1) TMI 993 Deduction u/s 35(2AB) - approval by DSIR not taken - HELD THAT:- As per this section 35(2AB) , deduction is allowable if the assessee satisfied condition as stated in the aforementioned provision. The expenditure which is allowable on scientific research qua in-house, R D facility is approved by the prescribed authority. If the assessee fulfils the conditions as laid in section 35(2AB) of the Act, in that event, deduction of one and half times of such expenditure would be allowable. However, it is brought to our notice that the related issue to the disallowance of impugned expenditure is otherwise, under challenge before the Hon ble High Court of Delhi which is pending adjudication and now fixed for hearing on 06.02.2024. The subject matter pending before Hon ble High Court is also regarding exclusion of R D Centre at Gurgaon. It is observed that substantial disallowance is related to Gurgaon Centre. Since the related issue of approval by DSIR, is pending adjudication before the Hon ble High Court, therefore, for maintaining judicial discipline, we are not expressing our view on the merit of issue, same is kept opened. The AO is hereby directed to re-compute the disallowance after the decision of Hon ble High Court. Hence, this issue is restored to the AO. Accordingly, Ground No.3 raised by the assessee is allowed for statistical purposes. Disallowance of depreciation on goodwill under normal provisions - HELD THAT:- As per in assessee s own case in [ 2023 (2) TMI 1113 - ITAT DELHI] taking the consistent view, hereby direct the AO to delete the impugned addition and allow the depreciation on goodwill as claimed by the assessee. Non- allowance of claim of additional depreciation @ 10% made during assessment proceedings - AO did not discuss this claim and Ld.CIT(A) also did not entertain the claim - HELD THAT:- Tribunal was pleased to remit the matter back to the AO in the assessee s own case for AY 2014-15 [ 2021 (12) TMI 1428 - ITAT DELHI] as held no distinguishing features in the facts of the case in the year under consideration and that of the earlier years has been pointed out by Revenue. Revenue has also not placed any material on record to demonstrate that the ITAT orders in assessee s own case for earlier years has been stayed/ set aside/ overruled by higher judicial forum. We therefore, following the reasoning of the Co-ordinate Bench for A.Y. 2010-11 and for similar reasons set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. 2024 (1) TMI 992 Addition u/s 69A - cash balance on account of withdrawal from different bank accounts - lower authorities to disbelieve the theory of cash flow as to why the cash remained in hand for long period - Assessee submits source of cash withdrawal is mainly from the loan availed by assessee and once AO accepted that assessee has made withdrawal from his bank accounts and has not brought any evidence that withdrawal of amount was invested elsewhere or incurred on any expense, the cash balance available with the assessee was to be believed - HELD THAT:- From the documents filed before the lower authorities as well as before me the assessee has also proved the cash withdrawal, even such fact is accepted by assessing officer. The only reason for making addition is as to why such cash was kept by the assessee for a longer period. DR also opposed the submissions of the assessee that despite having bank account, as to why the assessee kept such huge cash in hand. As assessee argued that there is no limit or restriction of keeping the cash at home, we find merit in his submissions that there is no such restriction in law - cash in hand shown by the assessee is duly explained and recorded in his cash book and source of which is known, which is clearly seen form the withdrawal from the bank on various dates. AO has not brought any adverse material or evidence on record that the cash in hand was beyond the withdrawal from bank - once the assessee explained the source of cash in hand, the assessing officer was not justified in doubting the availability of such cash in hand for the sole ground of long period of holding, without brining rebutting such contention. Decided in favour of assessee. 2024 (1) TMI 991 Deduction u/s 80IA - main claim of the assessee is that it has started claiming deduction u/s 80IA of the Act from AY 2005-06 onwards. Hence it is eligible for 100% deduction for AYs 2005-06 to 2009-10 and 30% deduction thereafter - AO had rejected the claim for deduction u/s 80IA of the Act on other miscellaneous income - HELD THAT:- We notice that both the issues are covered by the decision rendered by co-ordinate bench in assessee s own case in AY 2008-09 [ 2023 (5) TMI 576 - ITAT MUMBAI ] held that the assessee started telecommunication services after 01/04/1995 and hence, the assessee is eligible to claim deduction u/s 80IA(4) of the Act. Deduction in respect of interest income, miscellaneous income, cell site sharing revenue and net foreign exchange gain - As for assessment year 2005-06 [ 2022 (12) TMI 28 - ITAT MUMBAI ] , the Tribunal has accepted assessee s claim of deduction u/s 80IA of the Act on other incomes, viz., interest income and miscellaneous income. Disallowance of depreciation claimed on Asset restoration cost obligation - HELD THAT:- In the earlier years, this issue has been restored back to the file of AO by the Tribunal for examining the assessee s method of determining provision, since it was not examined by the AO. Following the order so passed by co-ordinate bench in the earlier years, we restore this issue to the file of AO with similar directions. Disallowance made u/s 14A - AR submitted that the assessee did not earn any exempt income during this year and also in earlier years - HELD THAT:- Since the assessee did not earn any exempt income, the question of making disallowance u/s 14A of the Act will not arise as per the decision rendered by co-ordinate benches in the earlier years. The decision of Tribunal also gets support from the decision rendered in the case of IL FS Energy Development Company Ltd [ 2017 (8) TMI 732 - DELHI HIGH COURT ] Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance made u/s 14A of the Act. Disallowance of interest relatable to interest free loans given to subsidiaries - HELD THAT:- We notice that an identical disallowance made in AY 2006-07 [ 2023 (5) TMI 508 - ITAT MUMBAI ] has been deleted by the Tribunal as relying on S.A Builders Ltd. case [ 2006 (12) TMI 82 - SUPREME COURT ] as held that once it is established that interest free loans has been advanced to sister concerns on account of commercial expediency, the interest paid on such loans by assessee cannot be disallowed. In so far as the objection of Revenue regarding advancement of loans to a loss making group concern, we hold that it is the assessee who has the exclusive right to take a call regarding advancing of loans to the group concern, the Assessing Officer cannot sit in the arm chair of the assessee and decide to whom loan is to be extended or at what rate of interest loan is to be extended. Once the assessee has been able to establish commercial expediency for extending the loan, which in our considered view the assessee has been successful in the present case, the interest expenditure cannot be disallowed. Thus we set aside the order passed by Ld CIT(A) and direct the AO to delete this disallowance. Disallowance of interest on Capital Work in Progress - A disallowed a part of interest expenditure relatable to Capital work in progress on the reasoning that the proviso to sec.36(1)(iii) requires disallowance of interest expenses incurred on borrowed capital used to acquire fixed assets - HELD THAT:- We notice that an identical disallowance was made in AY 2006-07 and 2007-08 [ 2023 (5) TMI 508 - ITAT MUMBAI ] respectively) and the said disallowance was deleted as recognized the fact that the new assets have only improved the quality of service and there is no expansion of area of operation. Accordingly, it has accepted the contentions of the assessee that the proviso to sec.36(1)(iii) will not apply to the facts of the present case. It was submitted that there is no change in facts in the current year. We also notice that the above said decision was followed in the assessee s own case in AY 2008-09 also. Accordingly, following the decision rendered in the earlier years, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Disallowance of expenses incurred in connection with raising loans - HELD THAT:- We notice that an identical expenses incurred on raising loans were disallowed in AY 2006-07 and 2007- 08 and the co-ordinate bench has deleted the disallowance by following the decision rendered by Hon ble Supreme Court in the case of India Cements Ltd [ 1965 (12) TMI 22 - SUPREME COURT ] - Thus we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Disallowance of roaming charges u/s 40(a)(ia) of the Act for non-deduction of tax at source - HELD THAT:- As decided in own case [ 2022 (10) TMI 826 - ITAT MUMBAI ] in AY 2008-09 held that the payment of roaming charges does not fall under the ambit of TDS provision either u/s. 194C or 194J of the Act, hence, addition made u/s. 40(a)(ia) of the Act was deleted. Disallowance of discount extended on pre-paid cards/recharge vouchers u/s 40(a)(ia) for non-deduction of tax at source - HELD THAT:- As brought to our notice that an identical issue was examined by the co-ordinate bench [ 2023 (2) TMI 1250 - ITAT MUMBAI] relating to AY 2009-10 in the case of M/s Vodafone Idea Ltd (As successor to Spice Communications Ltd) and the Tribunal has held that the TDS is not deductible from the discount paid on prepaid cards. Thus we hold that the assessee is not liable to deduct tax at source from the discount paid on prepaid sim card/recharge vouchers. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance made u/s 40(a)(ia). TP adjustment on the payment made for technology support services - A.R submitted that the AO took the view that the assessee did not furnish any evidence to justify that the services have been rendered and also did not furnish the details of allocation keys - whether the TPO can determine the ALP of international transactions as NIL? - HELD THAT:- As decided in M/S. CUSHMAN AND WAKEFIELD (INDIA) PVT. LTD. [ 2014 (5) TMI 897 - DELHI HIGH COURT ] TPO is required to determine the ALP of international transactions under any of the methods prescribed under the Income tax Rules, i.e., the TPO is not correct in determining the ALP at Nil without establishing that a third party would not have paid any money under similar circumstances. The TPO is not empowered to disallow the expenses. Admittedly, in the instant case, the TPO did not examine the ALP of the impugned international transactions under any one of the methods prescribed under the Income tax Rules. Hence, he was not justified in determining the ALP of the impugned international transactions as NIL. We notice that the Ld DRP confirmed the same without proper reasoning. We notice that the Hon ble Delhi High Court in the above said case has restored the matter of determination of ALP of transactions to the file of AO/TPO. Accordingly, we set aside the order passed by Ld CIT(A) with regard to the determination of ALP of technology support charges to the file of AO/TPO with the direction to determine the ALP of both the transactions under any one of the methods prescribed under the Rules. The assessee is also directed to furnish all the information and explanations in support of the claim that the payments are at arms length. TP adjustment - reimbursement of salary and related costs on deputation of personnel to India - HELD THAT:- We notice that an identical issue was examined by the co-ordinate bench in the assessee s own case in 2008-09 [ 2023 (5) TMI 576 - ITAT MUMBAI ] and the matter was restored to the file of AO/TPO as held once it has been accepted that the five employees were seconded to India by overseas AEs, the relocation of those employees to India is a consequential step. There would be cost attached to relocation of such employees. The said cost has either to be borne by the AE or the assessee. This fact can be determined from the terms and conditions of secondment of employees. In case relocation costs/travel costs are borne by the assessee, the same deserves to be allowed if they are reimbursed on cost to cost or are paid directly to the seconded employees. Taking into consideration entire facts, we deem it appropriate to restore this issue back to the file of Assessing officer for re-examination. The assessee is directed to furnish relevant documents to substantiate that the costs disallowed by the DRP were in fact cost paid by the assessee towards relocation/travel of the seconded employees. Customs 2024 (1) TMI 990 Seeking a direction to the respondent to permit cross-examination of witnesses - HELD THAT:- The petition is disposed of enlarging the time for the petitioner to file final written submissions, as directed by order of the adjudicating authority dated 11.01.2024. Reply, if any, be filed within two weeks from today i.e. on or before 02.02.2024. Thereafter, the adjudicating authority shall fix a date of personal hearing not before one week of 02.02.2024. 2024 (1) TMI 989 Violation of principles of natural justice - SCN different from impugned order - Re-classification of imported goods - micronutrient fertilizers - to be classified under CTH 3105 or under CTH 2921 - HELD THAT:- In the impugned orders, the first appellate authority has relied on an order of this Bench of the Tribunal in the case of CIBA INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI [ 2008 (12) TMI 475 - CESTAT, CHENNAI] and the above order is almost identical to the facts of the present case. In the order of the Ahmedabad Bench i.e., M/S MEGHMANI ORGANICS LTD VERSUS C.C.E. -AHMEDABAD-II [ 2019 (9) TMI 278 - CESTAT AHMEDABAD] relied upon by the Ld. Assistant Commissioner, the Ld. Bench has distinguished the order in M/s. CIBA India Ltd., but however, it is found that at the threshold that the re-classification attempted by the original authority deserves to be set aside since what was proposed in the Show Cause Notice was under a different CTH, but what was confirmed in the Order-in-Original is under a totally different CTH. This approach of the original authority is not proper and correct since, very clearly, the principles of natural justice have been violated. The first appellate authority has correctly set aside the orders of the original authority impugned therein, which do not call for any interference - Appeal dismissed. 2024 (1) TMI 988 Concessional rate of Customs Duty - benefit of N/N. 46/2011-CUS dated 01.06.2011 read with N/N. 53/2011 - CUS dated 01.07.2011 - Import of Natural Cocoa Powder (CTH - 18050000) from Malaysia - Certificates of Origin - Onus to prove (shifting burden) - whole case has been made on assumption and presumptions without any evidence against the appellant that their imported Cocoa Powder did not fulfill the condition of 35% RVC - HELD THAT:- The certificate of origin in the present instance was issued by the designated authority i.e Ministry of International Trade and Industry (MITI) Malaysia which is competent authority to issue such certificate under ASEAN FTA (AIFTA) mentioning the Regional Value content (RVC) to be much higher than stipulated 35% i.e. 47%. The Free Trade Agreement stands incorporated in the Customs Tariff vide Notification No. 46/2011-Cust., dated 01.06.2011 available to impugned product i.e. Natural Cocoa Power originating from Malaysia. The differential duty of Rs. 6,44,233/- was demanded by the department, denying benefit on the ground that in another investigation taken up by DRI in respect of certificate of origin pertaining to another party in the year 2014, Cocoa Beans were suspected to be derived from Ghana and not Malaysia by that importer. The company did not provide cost data due to data privacy and since the Board was of the opinion that under AIFTA cost data cannot be denied, therefore, in the present case in the Year-2018, since impugned goods have been supplied by M/s. Guan Chong Cocoa as manufacturer, the proceedings for denial of exemption despite claim of 47% value addition have been initiated even without attempting to verify the documentary evidence by way of the Certificate of Origin by the designated authority issued under the agreement. It is found that this is nothing but attempt to make case on the basis of assumptions and presumptions even without as much as verification having been attempted to be made by the authorities. The same is therefore, not maintainable. Department has been provided a documentary evidence by way of a stipulated certificate from the designated authority under the agreement. On production of such agreement which is in the nature of the documentary evidence, the onus to prove fakeness of its content or otherwise clearly shifts on the department. Unlike, the course of action adopted in respect of other importers who made imports in the Year-2014, the department has not even attempted to do verification with Government of Malaysia and has proceeded in the instant case, on the basis of following assumptions and presumptions without rebuttal of the documentary evidence procured and produced by the appellant. In the present case in the face of certificate of origin having been produced and no verification process having been conducted before issuance of show cause notice, the demand of duty cannot be sustained - in absence of burden having been discharged or even having been attempted till such belated stage, the show cause notice cannot be sustained. The appeal is allowed with consequential relief as far as duty, penalty and interest are concerned. 2024 (1) TMI 987 Valuation of the goods for export - As per the appellant, its total value is Rs.2,51,40,678/- whereas as per the Revenue, the value comes to Rs.1,07,39,500/- - rejection of declared value - Confiscation under Section 113 (ja) of the Customs Act, 1962 - redemption fine - penalties - HELD THAT:- The impugned order passed by the learned Commissioner has mechanically confirmed the lower adjudicating authority s order by simply placing reliance on the statement of the Manager of the firm and the statement dated 30.09.2022 of the appellant. The lower appellate authority did not take into consideration the following facts and the legal grounds while passing the impugned order. It is found that the decision of the Tribunal in the case of R. Kishan Co. [ 2015 (11) TMI 1456 - CESTAT MUMBAI] is on identical facts wherein also there was allegation of overvaluation and claiming undue benefits by the assessee. The entire investigation was flawed and faulty and therefore the appellant is also not liable for demurrage and the lower authority is directed to issue the demurrage waiver certificate to the appellant as contemplated under Regulation 6 (1) (L) of the Handling of Cargo in Customs Areas Regulations, 2009. Appeal allowed. 2024 (1) TMI 986 Confiscation of seized logs - imposition of penalties - Smuggling - Red Sander Wood Logs - prohibited goods or not - reliance placed on confessional statements of the appellant - HELD THAT:- It is on record that appellant has disputed that the statements which the DRI officers used against him were obtained by practicing duress, torture and by way beaten up. When an objection is made that a statements is obtained unfairly, it is for the Adjudicating authority to first decide whether the statement was voluntary and this principle of law is quiet settled and well known now. Further Ld. Adjudicating authority totally ignored the retraction of the statement by the appellant through affidavit and denied their involvement in the offence which was totally overlooked by the Ld. Commissioner in impugned order. Further, it is found that no cross-examination of certain witnesses viz. Shri Rajesh Subramaniam and Shri Anwar Khan and the officers of the DRI asked for was extended to the appellant. Learned Adjudicating authority cannot brush aside the request for cross-examination of the relied upon witnesses/investigating officers. If for any reason the cross-examination of the witness cannot be extended then the adjudicating authority has to intimate the appellant about such rejection by a separate letter as is now settled legal position. It is well settled that a person cannot be penalized merely on the basis of a circumstantial evidence and assumption and presumption and ignoring the provisions of law. From the records of the cross-examination of Shri Mahendra Jain, Proprietor of M/s Nidhi Marble, Udaipur, Shri Naresh Bolya, Managing Director of M/s Parth Natural Stones Pvt. Ltd., Udaipur, Shri Sunil Kumar Agrawal, Manager Accounts of M/s Madhusudan Marbles Pvt. Ltd., Udaipur and Shri Mukesh Kabra, Director of M/s Madhusudan Marbles Pvt. Ltd., Udaipur, it is found that the appellant had absolutely no role to play in the alleged smuggling of red sander logs - there is no evidence to show that the appellant had actually assisted in loading red sanders or tampering the container or they were even aware that red sanders had been filled into the container somewhere on the way. Under these circumstances, in this case, apparently penalty has been imposed on the appellant on the ground that he has abetted in stuffing and attempted export of red sanders in the container - thus, penalties imposed on the appellant are not sustainable and the same is set aside. Absolute confiscation of the cash - HELD THAT:- In the case on hand, there is absolutely no evidence to show that the said sum was relating to the sale proceeds of smuggled goods, which were sold by the appellant, who was having knowledge or reason to believe that the goods are smuggled goods. On going through the observations made by the learned Adjudicating Authority, we are in disagreement with that as in the present case the Adjudicating Authority and revenue has failed to prove that the cash recovered is the sale proceeds of past consignment of smuggled goods. It is observed that appellant produce the records before the adjudicating authority to justify that the cash recovered from the residential premises. Appellant produced the banks statements evidencing withdrawal of cash from his bank accounts. Appellant produced the Bank statements. If the evidence produced by the appellant were not acceptable then the same could have been countered on the basis of some positive evidence and cannot be brushed aside on presumption. The impugned order qua absolute confiscation of cash seized is contrary to law which shows that the Adjudicating Authority has not applied its mind for absolute confiscation of currency seized during the course of investigation. Therefore, it is held that the seized currency during the course of investigation cannot be confiscated without proving that the said seized currency is the sale proceeds of smuggled goods. Therefore, it is held that absolute confiscation of the seized currency of Rs. 7,50,000/- is not sustainable accordingly, the confiscation is set aside and the Adjudicating Authority is directed to release the said amount to the appellant. The penalties are set aside - Appeal is allowed. Securities / SEBI 2024 (1) TMI 985 Writ petitions impugning the Revocation Order within the territorial jurisdiction of Delhi High Court - Violation of SEBI s Minimum Public Shareholding Norms ( MPS Norms ) and disclosure requirements - SCN provided an option for settlement mechanism under the SEBI (Settlement Proceedings) Regulation, 2018 - SEBI passed a common Settlement Order as stated that certain monetary and non-monetary terms were imposed on the Appellants in the Settlement Order, and steps have been taken by the Appellants to implement the said Settlement Order - Settlement Order stood revoked and withdrawn by SEBI in terms of Regulation 28 of the Regulations of 2018 on the ground of alleged failure of the Appellants to comply with the terms of the Settlement Order. HELD THAT:- The conclusion that the cause of the action of the Appellants to challenge the legality of the Impugned Revocation Order issued by SEBI at Mumbai has no nexus with the receipt of the said order at Delhi; as this is not the material or integral fact to the said cause of action. The Impugned Revocation Order was admittedly received by the Appellants in multiple jurisdictions and this fact if held to be determinative would enable Appellants to pick and choose jurisdictions which is the mischief that the Full Bench of Kerala High Court has opined should not be permitted and we agree with the same. Therefore, the receipt of the Impugned Revocation Order at Delhi cannot alone be held determinative of the jurisdiction of this Court. Effect of the Impugned Revocation Order felt at Mumbai - grievance of the Appellants in the writ petitions is that the issuance of the Impugned Revocation Order of SEBI has resulted in re-initiation of the proceedings and hearing at Mumbai pursuant to the SCN dated 28.10.2020; thereby exposing the Appellants to regulatory proceedings - It is the facts pleaded in the grounds, which constitute the material and integral facts, which the Appellants will have to prove, if traversed by SEBI, to seek a judgment of the Court. The challenge to the Impugned Revocation Order has been raised on the grounds of inter-alia non-adherence to the principles of natural justice by SEBI. It has been pleaded that the SEBI failed to provide the Appellants an opportunity of hearing prior to revocation and the order is unreasoned. It is further pleaded that the impugned order is contrary to the extant law. It is the facts pleaded in these grounds which would constitute the cause of action in favour of the Appellants herein. A bare perusal of the grounds would show that each one of them allege acts and omissions by SEBI at Mumbai. Therefore, in our considered opinion as per the grounds set out in the writ petition the cause of action for challenging the impugned order against SEBI has arisen at Mumbai. In the facts pleaded by the Appellants for invoking the writ jurisdiction of the Courts at Delhi, undoubtedly, it cannot be said that the High Court of Delhi had no territorial jurisdiction for admittedly, the Appellants reside within the jurisdiction of this Court. However, none of the facts pleaded by the Appellants for invoking the jurisdiction of this Court are integral and material fact for challenging the Impugned Revocation Order. The said facts are not sufficient for compelling this Court to hear the matter on merits. For the same reason, the contention of the situs of shares of BNL is not an integral fact. Forum Conveniens at Mumbai - In the facts of this case, admittedly the High Court of Judicature at Bombay has the jurisdiction as the decision of SEBI to revoke the Settlement Order took place at Mumbai and all events prior thereto with respect to issuing the SCN and passing of the Settlement Order also occurred at Mumbai. The High Court while exercising its jurisdiction under Article 226 of the Constitution of India to entertain a writ petition, in addition to examining its territorial jurisdiction also examines if the said Court is the forum conveniens to the parties. The issue of forum conveniens is seen not only from the perspective of the writ petitioner but it is to be seen from the convenience of all the parties before the Court. In the facts of this case, as is evident from the record that the forum conveniens for the both the parties is Mumbai. The Appellants since the year 2020 have been appearing in Mumbai before SEBI. This Court is of the view that the learned Single Judge has rightly concluded that applying the principles of forum conveniens, it would not be appropriate to entertain the writ petitions and the Appellants may approach the appropriate High Court. Summoning of the record of the SEBI would be necessary for examining the rival contentions of the parties in the writ petition. Insolvency & Bankruptcy 2024 (1) TMI 979 Seeking to withdraw the present appeal - HELD THAT:- In view the first statement, the appeal is dismissed as withdrawn. Thus, no comments or observations made concerning the second request. Service Tax 2024 (1) TMI 984 Demand of service tax - Valuation -TDS deposited to the Income Tax department in relation to the payment made to the Foreign Service Provider - the TDS is over and above the invoice value of service - Extended period of limitation - HELD THAT:- As per the un-disputed fact the appellant have paid the service tax on the total value of the invoice raised by the Foreign Service Provider under reverse charge mechanisms. As per the Income Tax Act, the appellant have discharged the TDS on the invoice value and the same was borne by the appellant. In this position, since the TDS is not a part and partial of gross value of the service, the same cannot be taxed under Finance Act, 1994. As per Section 67, it is clear provision that the only the gross value towards the service paid or payable shall be chargeable to Service Tax. In this case the gross value is the value of invoice on which service tax was discharged. It can be seen from Section 67 that it contemplates how the valuation of taxable service for charging Service Tax needs to be arrived and sub-section 1(1) provides for valuation wherein consideration paid in money, be the gross amount charged by the service provider. The phrase gross amount charged also is explained in the said Section. Reading holistically, it is found that Section 67(1) very clear mandates for discharging the Service Tax liability amount which is charged by the service provider is the amount. It can be seen that in M/S. HINDUSTAN OIL EXPLORATION CO. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE [ 2019 (2) TMI 1248 - CESTAT CHENNAI] in the identical facts it was held that the TDS deposited which is over and above the invoice value cannot be charged to service tax. Accordingly, the demand in the present case is not sustainable, hence the impugned order is set aside - appeal allowed. 2024 (1) TMI 983 Classification of service - service rendered by the appellant during the period 2004-05 to May 2007 to M/s. Manyata Promoters Pvt. Ltd. M/s. Golf Link Software Park Pvt. Ltd. - Management Consultancy Service or not - invocation of Extended period of limitation - penalty - CENVAT Credit - HELD THAT:- The fees for rendering the service prescribed under Clause 5.2.1 to be paid to the appellant is 5% of the expenditure incurred on the construction and development of the project; also the computation of the construction and development expenses are prescribed at Clause 5.2.3. of the agreement. Analysing the stipulations of the said Agreement dated 31.3.2005, it cannot be said that the arrangement between the appellant and M/s. Manyata Promoters Pvt. Ltd. for execution of the project as a whole; on the contrary, it reveals that appellant has been engaged to advise/assist M/s. Manyata Promoters Pvt. Ltd. in implementation and completion of the project. Therefore, the claim of the appellant that they have been appointed to execute the project has been rightly rejected by the learned Commissioner as the activities/performance stipulated under the Agreement clearly discloses that the services rendered in the management of the project for its completion by engaging suitable contractors, subcontractors, team of professional, obtaining approvals etc.; thus, in the nature of advice, consultancy or technical assistance. No contrary evidence has been placed by the Appellant to rebut the said finding of the Commissioner. In the present case, commencing from identification of the contractors, sub-contractors, professional team, day-to-day management of cash flow, completion of the project in accordance with plan, etc., with active participation and advice of the appellant from time-to-time rendered to M/s. Manyata Promoters Pvt. Ltd., fall within the scope of advice, consultancy or technical assistance - The claim of the Appellant that it becomes taxable only with effect from 01.06.2007 under the Management or Business Consultancy Service is not sustainable. Extended period of limitation - Penalty - HELD THAT:- The explanation furnished by the appellant to justify non-payment of service tax is not convincing and hence not acceptable. On the contrary, analysing the statements the learned Commissioner at para 44-45 of the impugned order held that there is mis-declaration and suppression of facts. In these circumstances, invocation of extended period of limitation is sustainable. Consequently, the penalty imposed on the appellant under Section 77 and 78 of the Finance Act, 1994 are also justified. However, penalty imposed under Section 76 along with Section 78 cannot be sustained. CENVAT credit of the service tax paid on various input services while rendering the taxable service - HELD THAT:- The appellants are eligible to avail CENVAT Credit of service tax paid on input services subject to production of necessary documents which would be scrutinised and CENVAT credit, if any, admissible be allowed. Similarly, the learned Commissioner also though accepted in principle that benefit of cum-tax value can be extended to the Appellant but did not consider the same, as necessary evidence has not been placed indicating the value charged has been inclusive of tax. Thus the impugned order is modified and the issue of classification of service under Management Consultancy service and confirmation of the demand of service tax with interest for the period in question and penalty under Section 77 and 78 of the Finance Act, 1994 is upheld; penalty imposed under Section 76 is set aside; cum-tax value and CENVAT credit be allowed subject to scrutiny of the documents - The matter is reamended accordingly to recompute the liability. Appeal allowed by way of remand. Central Excise 2024 (1) TMI 982 Input Tax Credit - Eligibility for Service Tax credit - commission paid to its directors, as per the company s board resolution - case of the Revenue is that the commission paid to directors is nothing but a commission paid to commission agent, hence the credit is not available to the appellant - HELD THAT:- From Circular No. 115/9/2009-ST dated 31.07.2009, it was categorically clarified that even if any amount paid to the director as a commission, the said amount paid by a company to their directors is not commission within the scope of Business Auxiliary Services . With this clarification also, it is clear that payment made to directors even under the nomenclature of commission, the same is not the commission classifiable under Business Auxiliary Services . Therefore, in our view the said commission is part of remuneration paid to the directors, hence not a sales commission. Accordingly, the same is eligible for Cenvat Credit to the appellant. This issue has been elaborately considered by this Tribunal in the case of M/S. RANE BRAKE LINING LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE [ 2018 (7) TMI 611 - CESTAT CHENNAI] , wherein the Tribunal has held that it is the duty of the director to attend the meetings and therefore the service tax paid on such fees is eligible for credit. Thus, the appellant is legally entitled for the Cenvat credit in respect of the Service Tax paid on commission paid to the directors - the impugned order is set aside - appeal allowed. 2024 (1) TMI 981 Eligibility for Abatement of duty - Notified Goods - Compounded levy scheme - Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - HELD THAT:- From Rule 10, it is clear that abatement is available to appellant on following condition laid therein. As per conditions appellant has to intimate jurisdictional officer in advance regarding sealing and de-sealing of machines. In the present case, there is no dispute that intimation was given well in advance and Jurisdiction Range Superintendent has de-sealed and re-sealed machine, which was operated only during the period 01-11-2012 to 15-11-2012. From the Rule 10 IBID, we do not find any provision for payment of duty for the whole month and then claim refund on account of abatement of duty. There is no dispute even by department that appellant is not liable to pay duty during period, when machine is not operated. The revenue has demanded duty for days for which the machine was not in operation - In the present case, appellant is eligible for abatement and under no circumstances duty can be demanded for the period of abatement from 16-11-2012 to 30-11-2012, when PPM [Machine] was not in operation and not produced any Notified Goods. This issue has been considered in various judgments - In the case of THE COMMISSIONER VERSUS M/S THAKKAR TOBACCO PRODUCTS P. LTD. [ 2015 (11) TMI 319 - GUJARAT HIGH COURT ], it was held that Assessee having complied with requirement, entitled to benefit claimed - The Assessee is entitled to abatement of duty, in event of closure of factory for continuous period of 15 days or more, without first depositing duty in terms of Rule 10 ibid. Question of law stand answered in favour of assessee in terms of Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rules, 2008. Penalty u/r 27 of CER - HELD THAT:- Appellant had cleared Notified Goods produced earlier vide Invoice Nos 3571 to 3608, which is a case for imposing penalty under Rule 27 of Central Excise Rules 2002 on Appellant. Such penalty u/r 27 ibid is imposed on Appellant by Adjudicating authority, which is sufficient in the interest of justice in the facts of this case. Hence, the penalty imposed under the Rule 27 of Central Excise Rules, 2002 in O-I-O by original adjudicating authority in this case is upheld. The Abatement in terms of Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rules, 2008 for non-production of notified goods is allowed for November 2012, consequently the duty demand with interest is set aside. However, the penalty imposed under the Rule 27 of Central Excise Rules 2002 is upheld - Appeal allowed in part. 2024 (1) TMI 980 Method of Valuation - section 4 (on the transaction value) or under section 4A (on the RSP minus abatement)? - bulbs sold by the appellant to EESL - what should be reckoned as the RSP- the price at which EESL sold the bulbs to the consumers or the price at which the appellant sold bulbs in the market? - invocation of extended period of limitation. Are the bulbs sold by the appellant to EESL liable to be charged to excise duty under section 4 (on the transaction value) or under section 4A (on the RSP minus abatement)? - HELD THAT:- If the Metrology Rules are interpreted to include the bulbs sold to EESL, it means that very conditions of the contract of the scheme implemented by the EESL which mandates that the RSP shall not be indicated on the bulbs supplied to it and further, the condition to be printed on the bulb and the packing that it was not meant for retail sale would be violating the requirement of the Metrology Rules which require the RSP to be printed on the goods. Evidently, the purpose of not printing the RSP and further prohibiting their retail sales by printing it on these bulbs is to prevent their diversion and sale in the market. If the retail sale price in the market of a bulb is about Rs. 225/- and it is being supplied by the EESL through its network for about Rs. 75/-, some checks are required to prevent the EESL bulbs from being diverted and sold in the market for profit. If it is interpreted that the Metrology Rules to cover these bulbs, it would mean that RSP should have been printed on them and the very condition of the contract issued by EESL is illegal. At any rate, it is not in dispute that these bulbs were not sold in the market and were only distributed through EESL (though after collecting some price). If that be the case, to say that the RSP should have been printed is incongruous. How can a retail price be printed on the goods whose retail sale is banned?. It is therefore found that LED bulbs sold by the appellant to EESL were not covered by Metrology Rules and hence section 4A of the Act will not apply and self assessment has been correctly done by the appellant on the basis of transaction value as per section 4. If the bulbs sold to EESL are liable to be charged to excise duty under section 4A, what should be reckoned as the RSP- the price at which EESL sold the bulbs to the consumers or the price at which the appellant sold bulbs in the market? - HELD THAT:- There is no retail sale but only supply of LED bulbs through EESL, there cannot be a retail sale price. Retail sale of these bulbs is explicitly prohibited. Therefore, these bulbs cannot fall under the same category as the bulbs which can be freely sold in the market and hence have a RSP. It is true that EESL was supplying these bulbs to consumers of electricity as per a scheme and was also collecting an amount from them but in our considered view that does not make it RSP as per Metrology Rules or as per section 4A. Was extended period of limitation correctly invoked in this case? - HELD THAT:- There can be two or more views on the same issue and the assessee will self-assess the duty as per its view and understanding and is not required to foresee what view the officers may take sometime in the future after consulting other departments. The Excise Rules provide not only for self-assessment of duty and filing of returns by the assessee in ER-1, but also scrutiny of the returns by the officers. Duty of excise is charged on excisable goods manufactured or produced in India but the duty becomes payable on removal (Rule 4). The assessee has to self- assess (Rule 6) the duty and pay it by the fifth day of the following month (Rule 8) and file Returns (Rule 12). The officers have to scrutinize the returns and can, for the purpose call for documents and records which the assessee is bound to produce. The officer scrutinising the returns can call for any documents and records from the assessee which is bound to provide them. Had the officer, who is an expert in taxation, scrutinised the returns as he was mandated to do and called for any records as he was authorised to call for, the fact that the appellant had paid duty for the bulbs supplied to EESL under section 4 and not under section 4A would have come to light and an SCN could have been issued under section 11A within the normal period of limitation. The issue is found in favour of the appellant and against the Revenue, both on merits and on limitation - appeal allowed.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter January 25, 2024

TMI Short Notes

1. The Doctrine of Promissory Estoppel in Governmental Policy Decisions: Tax Incentives and Public Interest in State Industrial Policies

2. Maintaining the Sanctity of Search and Seizure Procedures: Emphasizing the rigorous compliance with procedural requirements to uphold the legitimacy of search and seizure operations

3. The Confluence of Insolvency and Limitation Laws: Insights from a NCLAT Decision

4. Analyzing the Tax Implications of Cross-Border Payments: Recognizing the payments as either 'Royalty' or 'Fee for Included Services' u/s 9(1)(vii)

5. A Judicial Perspective on Duty Assessment and Procedural Fairness in Customs Law: Validity of CBIC Circular

6. Non-Delegability of Discretionary Powers in Income Tax Assessments: Administrative Discretion in Special Tax Audit Procedures u/s 142

7. Taxation of Domain Registration Services in Godaddy.Com LLC Case: Tax Implications for Digital Services

8. Reinforcing Fair Administrative Processes in GST Registration Cancellation: An In-Depth Case Study

9. The Arbitration Conundrum: Enforceability of Unstamped Agreements

10. Reassessing Tax Penalties: HDFC Bank's Challenge under the DVAT Act

11. Input Tax Credit Eligibility under GST Legislation: Time-Bound Compliance in GST ITC Cases

12. Navigating the Complexities of Section 80P Deductions for Cooperative Societies

13. Navigating Pecuniary Jurisdiction in Tax Assessments: Assessment Orders and Legal Jurisdiction

14. "Sales Tax Subsidy and Its Classification in Income Tax: Revenue or Capital receipt

15. Trust Registration and Tax Exemptions in India: rejection of registration u/s 12AB for want of supporting evidences

16. Condonation of Delay in Taxation in filing applications for registration u/s 12A/12AA:

17. Navigating Procedural Timelines in Tax Exemption Applications

Articles

1. Revenue Department is not authorized to block ITC for more than one year

2. INSOLVENCY PROFESSIONAL IS NOT A PUBLIC SERVANT UNDER THE PREVENTION OF CORRUPTION ACT, 1988

3. GST Registration Cancellation can take effect from the date of issuance of Show Cause Notice

4. Order liable to be set aside when no reasonable opportunity to submit reply is provided to Assessee after issuance of SCN

News

1. Advisory for furnishing bank account details by registered taxpayers under Rule 10A of the Central Goods and Services Tax Rules, 2017.

2. Final stage of preparations for Interim Union Budget 2024 commences with Halwa Ceremony

3. Cabinet approves Protocol for establishment of joint Economic and Trade Committee between India and Dominican Republic

4. Government allows direct listing of securities by public Indian companies on International Exchanges of GIFT IFSC

5. Delhi Customs Preventive seizes illegally imported 12.22 lakh foreign-origin cigarettes worth Rs. 2 crore

6. CBDT releases key Direct Tax Statistics through Time-Series data

Notifications

1. F. No. 5/1/2021-CL-I - G.S.R. 61(E) - dated 24-1-2024 - Co. Law

2. G.S.R. 59(E) - dated 23-1-2024 - ADD

3. 58/2023 - dated 23-1-2024 - FTP

4. S.O. 332(E) - dated 24-1-2024 - FEMA

5. S.O. 60 - dated 23-1-2024 - Bihar SGST

6. 15/2024 - dated 23-1-2024 - IT

7. 14/2024 - dated 23-1-2024 - IT

Circulars / Instructions / Orders

1. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/6 - dated 23-1-2024

2. 01/2024 - dated 23-1-2024

Highlights / Catch Notes

GST

Taxpayer's GST Registration Cancellation May Deny Customers Input Tax Credit if Consequences are Intended and Justified.

GST Demand on Infrastructure and Environment Cess Dismissed Due to Alternative Remedy Under GST Act Section 107.

Court Orders Refund with Interest for Coercive Tax Recovery; Criticizes Officer's High-Handed Actions in Tax Dispute.

Appellate authority oversteps in GST registration case by misapplying Section 161, exceeding rectification limits.

Petitioner Denied Hearing in Tax Dispute; Case Restored for Further Review Due to Natural Justice Violation.

Income Tax

Court Rules Section 50C Applicable Only to Sellers; Quashes Notices Due to Lack of Due Diligence by Authorities.

Live Feed Income Excluded from Royalty Definition Under Indian Tax Law, Impacting Tax Classification.

Tax Evasion Charges Dropped: Corrections Made, No Guilty Intent Found in LTCG Case.

Payments to Non-Resident Not Subject to TDS Due to DTAA 'Make Available' Criteria; Not Disallowed u/s 40(a)(i.

Presumptions in Income Tax Act don't limit to searched individual; irrelevant if no specific mention in seized documents.

Determining Capital Gains on Gifted Property: Acquisition Costs and Indexation Rules Explained for Tax Calculations.

Classify Property Sale Income: Capital Gains or Business Income? Conversion Impacts Tax Treatment.

Assessment Order Invalid Without Required Notice; Section 292BB Protection Not Applicable for Validation.

Retrospective Cancellation of Tax Registration u/s 12AB Not Allowed Without Explicit Provision.

Tribunal mandates inclusion of all clients in Comparable Uncontrolled Price method for broking commission pricing.

Tax Surplus from Treasury Bill Redemption as Capital Gains, Not Business Profits, Says Ruling.

No Tax Deduction on Notional Income for Expatriate Salaries u/s 195, Deduction Done u/s 192.

Tax Deducted at Source on Mobilization Advances: Credit in Deduction Year, Not Income Recognition Year.

Pending Decision on Tax Deduction Approval by DSIR; Assessing Officer Awaits High Court Verdict for Re-computation.

Extended Cash Holding Without Evidence Insufficient for Addition; Burden on Department to Prove Unexplained Cash.

Customs

Tribunal Rules Re-classification of Imported Goods Unjustified Due to Lack of Notice, Upholds Appellate Decision.

Import Duty Demand on Malaysian Cocoa Powder Invalid Without Verification.

Appellant wins demurrage waiver after flawed investigation into alleged overvaluation of goods, instructed to receive waiver certificate.

Confiscation of Cash in Smuggling Case Overturned Due to Lack of Evidence Linking to Sale Proceeds.

SEBI

Delhi High Court Considers Forum Conveniens; Mumbai Deemed Suitable for Parties in SEBI Case.

Service Tax

Service Tax Valuation: TDS and Payments to Foreign Service Providers Explained u/s 67 Rules.

Service Tax Demand Upheld for Project Management Services Involving Contractors and Consultancy Activities.

Central Excise

Director Commission Part of Remuneration, Not Sales Commission; Eligible for Cenvat Credit Under Board Resolution.

Duty Abatement Granted for Non-Operational Period; Revenue's Demand Unwarranted Due to Production Halt in November 2012.

LED Bulbs Sold to EESL Exempt from Metrology Rules; Transaction Value Method Correctly Used for Valuation.

TMI Tax Updates - e-Newsletter
January 25, 2024