Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 27, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Seeking return of money recovered - Clearly, the petitioners had not handed over the cash to the concerned officers voluntarily. Undisputedly, the action taken by the officers was a coercive action. There are no provision in the GST Act that could support an action of forcibly taking over possession of currency from the premises of any person, without effecting the same. The powers of search and seizure are draconian powers and must be exercised strictly in terms of the statute and only if the necessary conditions are satisfied - HC
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E-way Bill - Period of limitation for expiry of E-way Bill - it can be gathered that there does not appear to be any ill-intent on the part of the petitioner to use the expired e-Way bill. The company is situated at Howrah, West Bengal and the place of delivery was Jamnagar, Gujarat and in transit, this e-Way bill has expired. - The petition deserves to be allowed and is allowed. - HC
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Refund along with interest - The respondents are directed to examine whether the form GSTR 2A, as visible at the petitioner’s end, reflects all relevant details. If it does, it would be apparent that there is a technical error is in the respondents’ system. - HC
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Migration of TDS Credit from VAT to GST - Transitional provisions - the stand of the Respondents is self-destructive, as if the Petitioners are not allowed to migrate the unadjusted TDS amount under the GST Regime, they would have become entitled for refund of the same with effect from 1st July, 2017 and would have certainly been entitled to statutory interest @ 9% on the said amount in terms of Section 52/53 of the JVAT Act. - - It is declared that the Petitioners are entitled for migration of the TDS amount in terms of Section 140(1) of the JGST Act - HC
Income Tax
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Special audit U/s. 142(2C) - time limit for submission of Special Audit Report - once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore in our considered opinion, the ratio laid down by the Hon’ble Supreme Court squarely applies to the instant case also. In the instant case on hand, the Ld. AO ought to have passed an order U/s. 142(2C) of the Act on or before 25/5/2019 ie., expiry of the first extension. - AT
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TP adjustment - Design Engineering Services - Selection of comparable - Since the assessee is not providing any Software services and the software services of this company constitute around 78% of its revenue and further that no segmental information is available, we hold that this company cannot be treated as comparable. We, therefore, order to exclude it from the list of comparables. - AT
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Capital gain computation - date of acquisition of the right over the property by the assessee - benefit of indexation on the cost - date of acquisition of the property was to be reckoned from the date of the allotment i.e in the F.Y. 1998-99. - AT
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Revision u/s 263 - The expression prejudicial to the interest of the revenue is of wide import and is not confined to merely loss of tax. - The term erroneous means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. Therefore, we hold that order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue - AT
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Revision u/s 263 - Interestingly, it is a case where the order u/s.143(3) dated 15.11.2019 had been held by the Pr. CIT as erroneous on the ground that he had wrongly allowed a claim of exemption which, in fact, had never been so allowed by the A.O. - AT
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LTCG - benefits of Section 54/54F - the nature and extent of construction or nomenclature like house, plot, cottage, farm house or villa are only indicative of the fact that property purchased is not a commercial property and is not an agricultural property. They all convey residential house property. How it is inhabited should not interest the revenue. - AT
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Premium paid in respect of hedging contracts - interest cost on ECBs - speculative transaction - the transactions relating to currency swap contracts entered by the assessee with BTMU cannot be considered to be in the nature of speculative transaction covered under Section 43(5) of the Act. In that view of the matter, the deduction claimed by the assessee is allowable under Section 36(1)(iii) of the Act. - AT
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Penalty levied u/s 271(1)(b) - undisclosed investment u/s 69A - ex parte assessment order - We have no hesitation in confirming the penalty levied under section 271(1)(b) for non-compliance of notices before the AO. - AT
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Unexplained Hawala Transactions - the various reasons cited in the beginning of this paragraph clearly reveal that all transactions were at par. Being so, we do not find any merit in the claim of revenue that the so-called “unexplained transactions” should be accorded a different treatment than the “explained transactions”. - AT
Customs
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Seeking quashment of proceedings against Managing Director of the Company, one of the vendors of RFID e-seals - Tampered e-seals - passing customs clearances even when it was not in a locked condition - The issue in the lis is shrouded with admissions and certain seriously disputed questions of fact, which will have to be thrashed out only in a full blown proceeding. It is rather surprising as to why the DRI has not proceeded further and filed its final report is a serious matter of the kind. It is for the DRI to conclude the investigation, if not already concluded and take the proceeding to its logical end. - HC
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Classification of goods - 0.1 percent natural brassinolide fertiliser - The Chapter Note excludes specially defined chemicals from Chapter 38, except when they are put up in forms described in 3808 viz., as retail packings, as preparations and as articles. Of these, there is no dispute that the imported brassinolide were not articles which leaves with retail packings and preparations. - Since the brassinolide is in the form indicated in CTH 3808 by being preparation, it is not excluded by Chapter Note 1 (a) (2). Therefore, it falls under CTH 3808. - AT
IBC
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Validity, Viability and Feasibility of Resolution Plan - keeping in mind the payment to all the Operational Creditors, is Nil, there is no aspect of discrimination between the Operational Creditors, in the considered opinion of this Tribunal. Further, when the ingredients of Section 30 (2) (b) of the I & B Code, 2016, are satisfied, the distribution is to be treated as Fair and Equitable one. After all, the Plea of the Fair and Equitable treatment is not between the different classes of Creditors, and the same is between the Operational Creditors, as a Class, as opined by this ‘Tribunal’. - AT
Service Tax
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Adjustment of excess service tax paid - ‘succeeding month or quarter’ used in Rule 6(4A) - There is no ambiguity in the wording of Rule 6(4A) ibid. - the filing of refund claim is not mandatory but then the adjustment under Rule 6(4A) ibid has to be done within a reasonable period if not in the immediate succeeding month or quarter - since no documentary evidence has been placed on record except the arithmetical calculation, therefore it cannot be concluded that any extra payment of tax has been made by the Appellant. - AT
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Denial of benefit of Notification No. 12/03-ST - it can be seen that as against the abatement of 67% available under Notification No. 15/04-ST and 01/06-ST - the appellant have taken the abatement ranging from 30% to 48%. Thus, despite the availability of abatement as per the above notification, the appellant have paid the service tax on much higher value, for this reason also the demand is absolutely unsustainable. - AT
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Levy of Service tax - Commercial Training or Coaching service - vocational training - imparting educational programmes in the areas of finance, banking, insurance, accounting, law, management, information technology, arts, commerce, education, science and technology, at bachelor's and master's level on full time campus and distance learning modes - Benefit of exemption allowed - AT
VAT
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Reversal of Input tax Credit - on purchase of R.E.P. license - the assessee-dealer had purchased import license from another person after paying the taxes as was applicable and the licence, which was in a intangible form was converted into a tangible form by the assessee importing chemical from outside the country. - The findings recorded by the Tribunal to the extent that I.T.C. can only be availed in case the assessee-dealer selling the licence itself and not importing the goods using the said import license and reselling the same in the market is not correct - HC
Case Laws:
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GST
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2023 (1) TMI 1028
Seeking return of money recovered / taken away during search - It is contended by the petitioner that the concerned officers could have no reason to believe that any goods liable for confiscation were lying in the premises of the petitioners - whether cash can be seized by the officers under Section 67(2) of the GST Act? - HELD THAT:- Prima facie, a plain reading of Section 67(2) of the GST Act indicates that the seizure is limited to goods liable for confiscation or any documents, books or things, which may be useful for or relevant to any proceedings under this Act . Clearly, cash does not fall within the definition of goods. And, prima facie, it is difficult to accept that cash could be termed as a thing useful or relevant for proceedings under the GST Act. The second proviso to Section 67(2) of the GST Act also provides that the books or things so seized would be retained by the officer only so long as may be necessary for their examination and for any inquiry or proceedings under the Act. Clearly, the petitioners had not handed over the cash to the concerned officers voluntarily. Undisputedly, the action taken by the officers was a coercive action. There are no provision in the GST Act that could support an action of forcibly taking over possession of currency from the premises of any person, without effecting the same. The powers of search and seizure are draconian powers and must be exercised strictly in terms of the statute and only if the necessary conditions are satisfied - In the present case, the GST officers have dispossessed the petitioners of the currency found in their premises during search operations conducted under Section 67(2) of the GST Act but have not seized the currency under the said provision. Plainly, their action in doing so is without authority of law. Insofar as the action of the officers of dispossessing the petitioners of their currency is concerned; it is clear that the said action of taking away currency was illegal and without any authority of law. The amount of ₹18,87,000/- has already been returned to petitioner no.1. The respondents are directed to forthwith return the balance amount along with the interest accrued thereon to the petitioners. The bank guarantee furnished by petitioner no.1 for release of currency is directed to be released forthwith. List on 20.02.2023.
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2023 (1) TMI 1027
Validity of impugned order passed without granting personal hearing - breach of principles of natural justice (audi alterem partem) - non-application of mind - HELD THAT:- From perusal of the impugned order dated 23/09/2022, it can be seen that it is one of those blatant cases of breach of principles of natural justice and total non-application of mind. The only reason assigned in the impugned order is that the reply filed by the petitioner is not acceptable and no tax has been deposited by the petitioner, therefore, the reply is rejected. Admittedly, as per Section 75(4) of the Act, personal hearing is mandatory before passing any adverse order against the assessee. In the circumstances, there are no reason why to wait for the respondents to file the reply and prolong the agony of the petitioner and also waste precious judicial time. If the Assessing Officer had only considered the file properly and dealt with the reply filed by the petitioner, then the need for the petitioner to approach this Court would not haven arisen. The order is set aside - petition disposed off.
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2023 (1) TMI 1026
E-way Bill - Period of limitation for expiry of E-way Bill - Constitutional validity of rule 138(10) of the Central Goods and Services Tax Rules, 2017 / Gujarat Goods and Services Tax Rules, 2017 - restriction imposed on validity period of the e- way bill in terms of distance to be travelled in a day - HELD THAT:- The respondent had challenged the authority of the respondent demanding the tax and penalty under Section 129(3) of the Central Goods Services Tax Act, 2017, where the goods, which were to be delivered on or before 17.10.2022, could not be delivered in time and on 19.10.2022 when inspected, some of the e-Way bill numbers had shown expired. The entire truck along with the goods had been seized on account of expiration of the e-Way bill. Therefore, the Court had, after a detailed consideration, held that e-Way bill had expired 41 hours before and the release of goods of conveyance and transit through the authority concerned. In the instant case also, the goods of the said vehicle has been detained at 6:05 p.m. at Amirgadh on 27.9.2018, after about expiry of 48 years. This case is squarely covered by the decision of this Court which has not been further challenged and even otherwise, from the facts which are robust in nature, it can be gathered that there does not appear to be any ill-intent on the part of the petitioner to use the expired e-Way bill. The company is situated at Howrah, West Bengal and the place of delivery was Jamnagar, Gujarat and in transit, this e-Way bill has expired. Petition allowed.
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2023 (1) TMI 1025
Refund along with interest - It is the petitioner s case that the refund due to it has not been processed by the respondents as its GSTN registration has been incorrectly reflected as suspended - HELD THAT:- It is submitted on behalf of the respondents that the form GSTR-2A is not in the correct format. Concededly, the counter affidavit does not indicate any specific deficiency in the form as uploaded by the petitioner. Admittedly, form GSTR 2A is a system generated form. It is stated that certain columns in the form GSTR 2A are blank and therefore, the application for refund has not been processed. According to the petitioner, the form GSTR 2A, as visible at its end, reflects all relevant particulars. The learned counsel appearing for the petitioner states that the scanned copy of the said form (GSTR-2A.pdf) was uploaded along with the application. The respondents are directed to examine whether the form GSTR 2A, as visible at the petitioner s end, reflects all relevant details. If it does, it would be apparent that there is a technical error is in the respondents system. List for compliance on 15.02.2023.
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2023 (1) TMI 1024
Unblocking of Input Tax Credit - seeking directions regarding refund claim - HELD THAT:- We have already discussed the implications of the order dated 13 September 2022 which has already been acted upon and there was no challenge to the said order, though the learned counsel for the Respondent No.1-State has sought to contend that State has not been given opportunity to contest the case, the Respondent-State has permitted to utilize the account. It is not possible for us to reverse the effect of the order dated 13 September 2022 as it has already been given effect to by the Respondents without challenging the said order. Though Petitioner states that amount more than what was prayed was allowed to be utilized, we do not find anything on record regarding the same nor the prayer is amended. Writ petition is disposed off.
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2023 (1) TMI 1023
Migration of TDS Credit from VAT to GST - Transitional provisions - whether the deduction is a credit of the amount of value added tax which a registered person is entitled to migrate in its electronic credit ledger? - HELD THAT:- The transitional provisions are made to make special provisions for the application of legislation to the circumstances which exist at the time when the legislation comes into force. In the case of UOI. VERSUS FILIP TIAGO DE GAMA OF VEDEM VASCO DE GAMA [ 1989 (11) TMI 307 - SUPREME COURT] , it has been held that transitional provisions are to be purposefully construed and the paramount object in statutory interpretation is to discover what the legislature intended and this intention is primarily to be ascertained from the text of the enactment in question. It is in the aforesaid background that the provisions of Section 140(1) of the JGST Act are required to be construed. The said provision unambiguously provides for migration of credit i.e. tax paid under the erstwhile tax regime and the words used in Section 140(1) of the JGST Act, namely, credit of amount of value added tax and entry tax is to be understood in the context in which it has been used - Admittedly, under the JVAT Act even entry tax was levied vide Section 11 and the said levy of entry tax was available as input tax credit for adjustment against output tax liability. TDS amount was also available for adjustment against output tax liability apart from the input tax credit which was available for adjustment against output tax liability. Proviso to Section 140(1) of the JGST Act provides that a registered person shall not be allowed to tax credit where the said amount of credit is not admissible as input take credit under the GST Act. It was contended by the Respondents that since TDS was in the nature of output tax, it was not admissible as input tax credit under the GST Act and, hence, cannot be allowed to be migrated. The Petitioners at the time of filing of their returns were left with no option but to forward the unadjusted TDS amount as excess input tax credit in the succeeding months and were not required or compelled to claim refund of unadjusted TDS amount. Thus, at this stage, the Respondents cannot contend that unadjusted TDS amount cannot be allowed to be migrated in terms of Section 140(1) of the JGST Act. Even otherwise, the stand of the Respondents is self-destructive, as if the Petitioners are not allowed to migrate the unadjusted TDS amount under the GST Regime, they would have become entitled for refund of the same with effect from 1st July, 2017 and would have certainly been entitled to statutory interest @ 9% on the said amount in terms of Section 52/53 of the JVAT Act. The action of the Respondent-authorities in passing the impugned orders denying migration of TDS amount and, consequently, levying interest and penalty thereupon is not sustainable in the eye of law and are liable to be quashed - It is declared that the Petitioners are entitled for migration of the TDS amount in terms of Section 140(1) of the JGST Act - Petition allowed.
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2023 (1) TMI 1022
Unblocking of Input Tax Credit Account - case of petitioner is that the proceedings under Section 73/74 of the Central Goods and Services Tax Act, 2017 (CGST) was the appropriate remedy and the account should not have been blocked - HELD THAT:- Since the order dated 13 September 2022 directing unblocking of the account was in the nature of final order and that thereafter the Petitioner has unblocked the account, it was put to learned counsel for the State that what is the implication thereof as to the course of action to be taken in the present petition, apart from question of law. Question would also be regarding returns for the next year to be filed. It is pointed out to us that action of blocking under Rule 86A(3) is for period of one year. As regards one of the suppliers, account was blocked on 21 October 2021 and other suppliers it was on 14 March 2022. Stand over to 20 December 2022 under the caption For Directions .
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Income Tax
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2023 (1) TMI 1034
Reopening of assessment u/s 147 - allocation of costs and the characterization thereafter has been deliberately camouflaged leading to a disclosure which is neither full nor true - characterization of the expenses to determine whether there has been a claim of ineligible pre-operative capital expenditures in respect of the years prior to 2015-16, when the Vizag unit of the petitioner commenced commercial production - HELD THAT:- Details in regard to the expenditures incurred in connection with the Vizag segment and the manner of characterization of the same have been provided before the officer and in my view, the assessee has made a full disclosure of primary as well as secondary materials before both the Assessing and the Transfer Pricing Officers. There are instances where re-assessments are initiated based on information obtained from different units/sources with the Income Tax Department including the Criminal Investigation Department or All India Information. Queries may have been raised by those Departments and material may have been placed by assessee for their consideration. In such cases a probable view is that such materials as produced before those Departments have not come into the notice of the Assessing Authority for the determination of full and true disclosure. However, in this case all materials have admittedly been placed before the TPO who is integral to the conduct of assessment proceedings. All materials filed by an assessee before the TPO are well available as part of the assessment records. There has been a full and true disclosure by the petitioner as a result that proceedings for re-assessment beyond a period of four years must fail. The impugned order rejecting the objections of the petitioner to assumption of jurisdiction under Section 147, has taken recourse to Explanation 1 to Section 147 of the Act. Reiterating the view in M/s.Asianet Star Communications Private Limited [ 2019 (6) TMI 356 - MADRAS HIGH COURT] hold that Explanation 1 cannot override the statutory condition under the proviso to Section 147. Explanation 1 would apply only in a situation where the materials filed by an assessee are so voluminous as make a proper verification nugatory, and the revenue establishes conscious intent on the part of the assessee to camouflage materials in the hope that such materials escape the attention of the authority. This is not the case of the revenue before me in the present matters. Thus the impugned orders and notices are set aside and these writ petitions are allowed.
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2023 (1) TMI 1033
Addition made u/s 56(2)(viib) - excess consideration received on allotment of shares - CIT(A) issued notice for enhancement u/s 251(2) as allotment of shares to the promoter director of the assessee company on which excess share consideration of Rs. 59 per share was also charged by the assessee was not considered while invoking the provisions of section 56(2)(viib) - fair market value of the shares arrived on the basis of the valuation report by using the DCF method was Rs.341 per share - HELD THAT:- Out of the 5 individuals to whom the shares were allotted by the assessee, one person viz. Mr. Mark Anthony De Boer, was a non-resident and therefore both the AO as well as CIT(A) accepted that provision of section 56(2)(viib) of the Act is not applicable in respect of shares allotted to a non-resident. In respect of the other 4 individuals to whom shares allotted by the assessee in excess of the price determined by the valuation report were held to be covered within the ambit of section 56(2)(viib) of the Act. As per the provisions of section 56(2)(viib) in the case of a company, in which the public is not substantially interested, receipts from any person being a resident as a consideration for the issue of shares in excess of the face market value of such shares is to be considered as the income of the assessee under the head income from other sources . Since there is no material available on record that the assessee has disputed the valuation of shares at Rs.341 per share vide valuation report dated 15/09/2012, therefore, we find no infirmity in the impugned order directing the disallowance being the excess consideration received by the assessee over and above the fair market value of the shares. As a result, grounds raised by the assessee are dismissed.
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2023 (1) TMI 1032
Revision u/s 263 - mandatory Form No. 10CCB not been electronically filed by the assessee along with the return of income - As per CIT assessee has failed to comply with the provisions of section 80IE(6) r/w section 80IA(7) of the Act and therefore the AO ought to have disallowed the assessee s claim of deduction under section 80IE - HELD THAT:- Assessee filed the audit report physically in Form No. 10CCB duly signed and verified by the Chartered Accountant along with the profit and loss account in respect of Assam undertaking before the jurisdictional AO on 27/10/2017. From the perusal of the submission dated 27/10/2017, forming part of the paper book it is evident that it is not the case wherein accounts of the undertaking, in respect of which deduction under section 80IE of the Act was claimed, were not audited by an accountant and audit report was not prepared in Form No. 10CCB. Only due to technical impediment, the said audit report in Form No. 10CCB could not be filed electronically, which was physically filed by the assessee on 27/10/2017 before filing the return of income on 28/10/2017. As per the assessee, only from the next year Form No.10CCB under section 80IE of the Act can be furnished electronically. Nothing has been brought on record to controvert the aforesaid claim of the assessee. Therefore, merely on a technical ground, it cannot be held that the assessment order allowing the claim of deduction under section 80IE of the Act is erroneous, particularly in view of the fact that the AO had raised queries regarding the said deduction, which were duly responded by the assessee. Thus, we find no basis in upholding the impugned order passed under section 263 of the Act on the basis of aforesaid allegations. As a result, ground No. 2 raised in assessee s appeal is allowed. Unexplained cash deposits - AO did not make any enquiry regarding the cash deposits by the assessee in SBN during the demonetisation period - HELD THAT:- From the perusal of relevant portions of ITR 6, filed by the assessee, for the year under consideration, we find that the assessee had duly made the disclosure regarding the cash deposited from 09/11/2016 to 30/12/2016. Further, in auditor s report we find that requisite disclosure was made in the financial statements regarding dealings in SBN during the period from 08/11/2016 to 30/12/2016 - Assessee has also provided the denomination of the cash deposited in SBN during the demonetisation period. It cannot be denied that the return of income along with audited financial statements was sought by the AO during the assessment proceedings and the same was also duly submitted by the assessee. Therefore, when the assessee had made all the disclosures in its income tax return as well as in its audited financials regarding the cash deposited in SBN during the demonetisation period, we do not find any merit in the allegation made in the impugned order passed under section 263 of the Act. As a result, ground No. 3 raised in assessee s appeal is allowed. Whether Assessment Order passed by the ACIT 9(2)(2), Mumbai u/s 143(3) is erroneous and prejudicial to the interest of the revenue? - Clauses (a) of Explanation 2 to section 263 of the Act is not applicable to the facts of the present case and thus the revision order passed by the learned PCIT under section 263 of the Act is set aside. As a result, ground No. 1 raised in assessee s appeal is allowed.
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2023 (1) TMI 1031
Special audit U/s. 142(2C) - time limit for submission of Special Audit Report as required u/s. 142(2C) - HELD THAT:- In the instant case, the Ld. AO failed to pass such order in both the circumstances to extend the time limit. AO merely communicated the decision of the Ld. Pr. CIT (Central), Visakhapatnam on 6/6/2019 which is beyond the limitation period of the second extended time. Even assuming a moment that it is a valid extension, we find that the extension as per the Limitation Act should have been granted before the expiry of the time limit permitted in the earlier extension ie., on 25/5/2019. We find force in the arguments of the Ld. AR that mere communication of extension by the Ld. AO instead of passing an order U/s. 142(2C) is not valid in law. The case law relied on by the Ld. AR, the judgment of the Hon ble Supreme Court in the case of State of Punjab Ors vs. M/s. Shreyans Indus Ltd i[ 2016 (3) TMI 331 - SUPREME COURT] is pertinent to mention here with respect to grant /order of extension of time limit should be given before the time for passing any order expires as prescribed under the Act or before the expiry of the original period of limitation prescribed in the original order. On this issue, the Hon ble Apex Court observed that once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore in our considered opinion, the ratio laid down by the Hon ble Supreme Court squarely applies to the instant case also. In the instant case on hand, the Ld. AO ought to have passed an order U/s. 142(2C) of the Act on or before 25/5/2019 ie., expiry of the first extension. Case law relied on by the Ld. AR in ACIT Vs Soul Space projects Limited [ 2020 (6) TMI 696 - ITAT DELHI] is also relevant to the issue which was also considered by the Ld. CIT(A) We find that the Ld. CIT(A) has discussed the issue at length and rightly concluded the matter and therefore we are of the considered view that no interference is required in the order of the Ld. CIT(A) on this issue.
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2023 (1) TMI 1030
Revision u/s 263 - Addition u/s 68 - unsecured loan received by the assessee firm from shell companies circulated by ITD/SEBI was to be treated as an unexplained cash credits u/s.68 - repayment of unsecured loans made by the assessee company during the year to 7 companies - HELD THAT:- A.O might have examined the loans transaction of the assessee with the aforementioned party, viz. M/s. Alipore Vinimay Private Limited, Kolkata, but in the backdrop of the very fact that the information circulated by the ITD/SEBI revealed that the name of the said lender party figured in the list of shell companies therefore, it was rightly observed by the Pr. CIT that the order of the A.O accepting the loan transaction under consideration had rendered his order passed u/s.143(3) as erroneous in so far as it was prejudicial to the interest of the revenue u/s.263 of the Act. Admittedly, there is no denying the fact that the A.O had looked into the loan transactions under consideration, but the same was to the extent of the material which was therefore before him. Also, it is not the case of the Ld. AR that the observation of the Pr. CIT that the name of the aforementioned investor company, viz. M/s. Alipore Vinimay Pvt. Ltd., Kolkata figured in the list of the shell companies as was circulated by the ITD/SEBI was ill-founded or incorrect. Pr. CIT had set-aside the matter to the file of the A.O with a direction to re-adjudicate the same after affording sufficient opportunity to the assessee, therefore, no infirmity could be attributed to his directions considering the totality of the facts and material as was there before him at the time of passing of the order u/s.263 No infirmity in the view taken by the Pr. CIT who had rightly set-aside the order passed by the A.O u/s.143(3) dated 27.12.2019, i.e., to the extent he had accepted the loan transaction received by the assessee from M/s. Alipore Vinimay Private Limited, for re-adjudication, i.e., after affording a reasonable opportunity of being heard to the assessee, therefore, uphold his order to the said extent. Appeal of the assessee is partly allowed in terms of our aforesaid observations.
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2023 (1) TMI 1029
TP adjustment with respect to the international transaction of 'Payment of Royalty' - segregation of Royalty transaction from the 'Manufacturing segment' - HELD THAT:- We note that the facts of the instant case are similar to those of Magneti Marelli ( 2016 (11) TMI 123 - DELHI HIGH COURT] inasmuch as the assessee therein also paid royalty to its AE for use of Technical support for the manufacture of its products, and the Hon'ble High Court did not approve clubbing of payment of technical fees with other transactions under the Manufacturing segment. In view of the foregoing discussion, it is held that the international transaction of payment of Royalty by the assessee for use of technical support cannot be clubbed with other international transactions under the Manufacturing segment. ALP determination of the Royalty transaction - Other method for determining the ALP - TPO has emphasized on the expression similar uncontrolled transaction used in Rule 10AB for considering these three companies as comparable despite the fact that the licensed products by them were quite different from that of the assessee. At this stage, we want to emphasize that Rule 10AB talks of considering the price paid or that would have been paid for the same or similar uncontrolled transaction . The words the same appear in the language of the rule prior to the word similar joined by the words uncontrolled transaction . It thus indicates that similar uncontrolled transactions are to be considered only if same uncontrolled transactions are not available. Preference in Rule 10AB has to be given to same uncontrolled transactions over similar uncontrolled transactions. As against the comparable uncontrolled transactions considered by the TPO, recognized as similar, the assessee brought on record same uncontrolled transactions, namely, the licensing of technical know-how by the assessee's same AE to two independent entities in Korea and China for the manufacture of same Diesel engines. Not only the assessee placed on record invoices issued by the assessee's AE to these independent entities in China and Korea, but Agreement for licensing of technical know-how to Korean party has also been produced. This Agreement, a copy placed at page 10 onwards of the additional paper book, is between MAN Diesel and Turbo Denmark (being same entity which licensed the technical know-how to the assessee also) and STX Engine Company Ltd., Republic of Korea (an independent unrelated party). Enclosure-1 to the Agreement shows that the technical know-how was given to the Korean party for manufacturing Diesel Engines, being, the same product for which the assessee was licensed with. This indicates that the technical know-how provided under this Agreement is of the same product in an uncontrolled transaction. Rates of Royalty charged by the assessee's AE from the assessee as well as the Korean party - The assessee's Agreement with its AE shows the rates of Royalty at 19.50 Euro per KW, which was charged for the year at 19.92 Euro per KW. The Agreement between the assessee's AE and Korean party gives the rate of Royalty at 23.80 Euro per KW. This explains that not only the product for which the assessee's AE charged Royalty from the assessee is similar to that for which technical know-how was supplied to a Korean independent third party, but the rate charged from the assessee is also relatively lower. Similarly, the invoices of the assessee's AE raised on another independent Chinese party also show that the rate charged for the similar product is higher than that charged from the assessee. When same uncontrolled transaction is pitted against the similar uncontrolled transaction, there is no prize for guessing that the preference has to be given to the same uncontrolled transaction. The ld. DR, after going through the Agreement between the assessee's AE and Korean party, could not point out any substantial difference between the terms of the Agreement with that of the assessee except for certain cosmetic changes. As the Royalty for same product charged by the assessee's AE from another Korean party in terms of Euro per KW is more than that charged from the assessee, we hold that the transaction of payment of Royalty is at ALP. The addition of Rs. 12.98 crore and odd is, therefore, directed to be deleted. Transfer pricing adjustment in the segment of Design Engineering Services - assessee in this segment is aggrieved only by the inclusion of Aabsys Information Technology Pvt. Ltd. in the list of comparables by the TPO - The principal business activities of this company include Database Services with Data processing and Tabulation Services, Online Information and Data Retrieval Services, Electronic Data Interchange Services, Web search Portal Content Services, Code and Protocol Conversion Services etc. Total revenue of this company, as appearing in its Profit and loss account, is Rs. 11,12,78,745/-, whose break up is given in Note No. 15 as consisting of 'GIS/CAD and Software Services'. As opposed to this, the assessee is not rendering any Software services to its AE. The only services rendered by it are Engineering. It is further observed from the Annual report of this company that no segmental information is available, which could throw light on the operating costs in respect of the revenues of this company from Engineering services de hors Software services. Since the assessee is not providing any Software services and the software services of this company constitute around 78% of its revenue and further that no segmental information is available, we hold that this company cannot be treated as comparable. We, therefore, order to exclude it from the list of comparables. The impugned order on this issue is set-aside and the matter is remitted to the file of the AO/TPO for re-determining the ALP of the international transaction of 'Design Engineering Services' by excluding Aabsys Information Technology Pvt. Ltd. from the list of comparables.
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2023 (1) TMI 1021
Payment of lease amount to its holding company in respect of certain assets taken on lease - According to the Assessing Officer this was a financial transaction - The Tribunal noted that GNFC Limited had shown lease rent as income under the head Business income and in case of the lessor, the issue had been consistently decided that the assets were owned by the GNFC, and therefore, the lease rent received by the assessee was to be assessed as business income - HC held that Tribunal, has committed no error in allowing the appeal of the assessee - as per Revenue that the respondent being the owner shall be entitled to depreciation. HELD THAT:- As once the lessors are held to be the owners and are entitled to depreciation, the Revenue thereafter cannot be permitted with respect to the same transaction, the Respondent being the lessee are the owners and are entitled to depreciation. We see no reason to interfere with the impugned judgment and order passed by the High Court. The Special Leave Petition stands dismissed.
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2023 (1) TMI 1020
Deduction u/s 80HHC be allowed without reducing therefrom deduction u/s 80IB - HC held that if an assessee has claimed deduction of profit or gains under Section 80IB, deduction to that extent is not to be allowed under Section 80HHC - AO has been rightly directed to recompute the total income of the assessee keeping in view provisions of Section 80IB(13) read with Section 80IA(9) - HELD THAT:- No interference of this Court is called for in exercise of powers under Article 136 of the Constitution of India. The Special Leave Petitions stand dismissed.
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2023 (1) TMI 1019
Disallowance of commission expenditure - Rule of consistency - HC held that method adopted by AO for completing the task, however, does not preclude in any manner the conducting of independent scrutiny of the material presented before the assessee in later years and rule of consistency in the opinion of the court does not preclude the AO from conducting inquiry which he is bound by law to do, for determining in law what are the true and correct amounts, to determine the amounts legally chargeable as tax - HELD THAT:- There are concurrent findings of fact recorded by all the authorities below under the Income Tax Act including the High Court that the petitioner has been unsuccessful in proving the commission of which the dis-allowance was claimed. No interference of this Court is called for in exercise of powers under Article 136 of the Constitution of India. The Special Leave Petition stands dismissed.
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2023 (1) TMI 1018
Compounding of an offence committed u/s 276B, r/w. Section 287B - Period of limitation for filing compounding application - Power of the CBDT (Board) u/s 119 r.w.s. 279(6) to restrict compounding where application is filed beyond stipulated period - company deducted income tax from the salaries of its employees, under the provisions of Section 192 but had failed to deposit the tax so deducted to the credit of the Central Government within the time prescribed under Section 200 r/w. Section 204 - As submitted petitioner no.1-company has deposited the TDS due, though beyond time-limit set down, but before any demand notice was raised HELD THAT:- The orders, instructions or directions issued by the CBDT under Section 119 of the Act or pursuant to the power given under the Explanation will not limit the powers of the authorities specified under Section 279(2) in considering such an application, much less place fetters on the powers of such authorities in the form of a period of limitation. We are, therefore, of the opinion that the guidelines contained in the CBDT Guidelines dated 14th June 2019 could not curtail the power vested in Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General under the provisions of Section 279(2) of the Income Tax Act. In our considered view, to the extent CBDT Guidelines dated 14th June 2019 creates a limitation on the time, within which application under Section 279(2) of the Income Tax Act is required to be filed, is of no consequence and does not take away jurisdiction of respondent no.3 or the other authorities, referred to in sub-section (2) of Section 279, from entertaining an application for compounding of offence at any time during the pendency of the proceedings, be they before the Magistrate or on conviction of the petitioners, in an appeal before the Sessions Court. We find that this is a classic case for consideration by respondent no.3 for compounding of offence, inasmuch as petitioner no.1-company has deposited the TDS due, though beyond time-limit set down, but before any demand notice was raised or any show cause notice was issued. The Tax Deducted at Source was deposited along with penal interest thereon. A reply setting out detailed reasons for not depositing the same within the time stipulated under the law had been filed in reply to the show cause notice issued earlier. Though the petitioners had been convicted, a proceeding in the form of an appeal is pending before the Sessions Court, which is yet to be disposed of, and in which there is an order of suspension of sentence imposed on petitioner no.2 is operating. Under these circumstances, we are of the view that the findings arrived at by respondent no.3 in the impugned order dated 1st June 2021, that the application for compounding of offence, under Section 279 of the Income Tax Act, was filed beyond twelve months, as prescribed under the CBDT Guidelines dated 14th June 2019, are contrary to the provisions of sub-section (2) of Section 279. The respondent no.3 has failed to exercise jurisdiction vested in it while deciding the application on merits and consideration of the grounds set out when the application for compounding of offence was filed before it. Matter restored back for consideration of application afresh.
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2023 (1) TMI 1017
Disallowance of 10% of office expenses - allowable business expenses or not? - HELD THAT:- We find that apart from claiming that the impugned expenditure has been incurred for the purpose of business, no material has been brought on record to substantiate the said claim. Thus, in absence of necessary details, we find no infirmity in the impugned order passed by the learned CIT(A) upholding the disallowance of 10% of the office expenses claimed by the assessee. As a result, ground No. 1 raised in assessee s appeal is dismissed. Addition of 20% of the drug analysis expenses - Vouchers are self made - HELD THAT:- From the perusal of said vouchers, we find that the said vouchers mention the volunteer centre ID, the amount paid, and the signature of the volunteer on the date of payment. AR submitted that the names of the volunteers are not mentioned to maintain anonymity regarding the identity of the volunteer and instead the ID No. is mentioned in the record -this manner also safeguards the interest of the pharmaceutical company, whose drugs are tested. On a careful perusal of these vouchers, it is evident that the same cannot be called self-made, since these vouchers also contain the signatures of different volunteers acknowledging the receipt of payment in cash on different dates. In absence of any other allegation, we find no basis for confirming the disallowance upheld by the learned CIT(A). Accordingly, we direct the AO to delete the disallowance in respect of drug analysis expenses. - Decided in favour of assessee.
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2023 (1) TMI 1016
Revision u/s 263 - absence of valid certificate under Rule 11U of the IT. Rule for the share premium received during the year was liable to be treated as income from the other sources under the provisions of section 56(2)(viib) - Assessee company issuing shares at a premium rate and company has adopted fair market value/book value of shares and premium on the basis the certificate issued under Rule 11UA of the IT and further noticed that Shri Chetan Joshi is the same CA who was appointed by the company as an auditor under section 44AB of the Act, which is a violation of the sub-Rule (a)(i) of the Rule 11UA of the I.T. Rule - HELD THAT:- We have also gone through the order passed by the Ld. PCIT and noted that no inquiry was made by the Assessing Officer. We have gone through the assessment order passed by the Assessing Officer u/s 143(3) and noted that assessing officer has not discussed the issue raised by ld PCIT. It is a case of no inquiry on the part of Assessing Officer, therefore Ld. PCIT has rightly exercised his jurisdiction under section 263 of the Act. We note that company has adopted fair market value/book value of shares and premium on the basis the certificate issued under Rule 11UA of the I.T. Rule dated 01.03.2016 by the Chartered Accountant Shri Chetan Joshi (M. No. 132207). It was further noticed that Shri Chetan Joshi is the same CA who was appointed by the company as an auditor under section 44AB of the Act, which is a violation of the sub-Rule (a)(i) of the Rule 11UA of the I.T. Rules. Thus, in absence of valid certificate under Rule 11U of the I.T. Rules for the share premium of Rs.1,49,60,000/- received during the year should be liable to be treated as income from the other sources under the provisions of section 56(2)(viib) - Assessing Officer has not examined this issue. The expression prejudicial to the interest of the revenue is of wide import and is not confined to merely loss of tax. The term erroneous means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. Therefore, we hold that order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue, hence we confirm the findings of ld PCIT. Appeal filed by the assessee is dismissed.
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2023 (1) TMI 1015
Revision u/s 263 - As per CIT AO wrongly allowed claim for exemption u/s.10(37) r.w. RECTLARR Act, 2013 - HELD THAT:- As the assessee had neither offered the surplus(net) on acquisition of its lands by NHAI as capital gain nor raised any claim for exemption in its return of income, therefore, there could have been no reason for the A.O to have allowed any such claim. Admittedly, it is also a fact that the assessee in the course of the assessment proceedings had sought for exemption of the surplus(net) on acquisition of its lands by NHAI u/s.10(37) r.w.s.96 of RECTLARR Act, 2013, but as stated by the Ld. AR the same was declined by A.O. Be that as it may, the assessee had neither disclosed income/surplus arising on acquisition of its lands by NHAI under the head capital gain or sought for any exemption of the said amount, nor any such exemption was allowed to him by the A.O vide his order passed u/s.143(3) dated 15.11.2019. We are of the considered view that now when neither any claim for exemption u/s.10(37) r.w. RECTLARR Act, 2013 had ever been raised by the assessee nor allowed by the A.O, therefore, there could be no justification on the part of the Pr. CIT to have held the order passed by the A.O u/s.143(3) dated 15.11.2022 as erroneous in so far as it was prejudicial to the interest of the revenue u/s.263 of the Act, for the reason that he had wrongly allowed it s claim for exemption u/s.10(37) r.w. RECTLARR Act, 2013. Interestingly, it is a case where the order u/s.143(3) dated 15.11.2019 had been held by the Pr. CIT as erroneous on the ground that he had wrongly allowed a claim of exemption which, in fact, had never been so allowed by the A.O. We, thus, in terms of our aforesaid observations finding no justification on the part of the Pr. CIT for having revised the order passed by the A.O u/s.143(3) dated 15.11.2019, set-aside his order and restore that passed by the A.O u/s.143(3) - Appeal of the assessee is allowed.
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2023 (1) TMI 1014
Revision u/s 263 - AO had failed to enquire into the applicability of the provisions of section 56(2)(viib) - initiate penalty proceedings u/s 271F - whether the Assessing Officer had examined the applicability of provisions of section 56(2)(viib) relates to the receipt of share premium in question? - HELD THAT:- Appellant filed an explanation stating that the provisions of section 56(2)(viib) have no application to the facts of the present case, not being the company in which the public are substantially interested. Whereas the fact is that the appellant is a company in which the public are not substantially interested. Thus, it is apparent that the Assessing Officer accepted the claim, on the wrong premises. Therefore, the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. To this extent, we confirm the power of revision exercised by the ld. PCIT u/s 263 of the Act. As regards to the direction of the PCIT to the AO to initiate the penalty proceedings u/s 271F of the Act, it is settled position of law that the penalty proceedings should be initiated based on the satisfaction reached by the Assessing Officer and the penalty proceedings cannot be initiated at the instance of the higher authorities. Moreover, we find that the penalty proceedings u/s 271F is independent of the assessment proceedings. Therefore, the ld. PCIT in exercise the power of revision vested with him u/s 263 cannot direct the Assessing Officer to initiate the penalty proceedings u/s 271F of the Act. On this score, the order of revision passed by the ld. PCIT is quashed. Appeal filed by the assessee is partly allowed.
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2023 (1) TMI 1013
Penalty u/s 271(1)(c) - Disallowance of interest, Addition u/s 56(2)(viib) and Interest on late deposit of TDS wrongly claimed - HELD THAT:- On the perusal of the submissions made by the CIT(A), it is noted that the assessee has failed to place cogent evidence that interest incurred on loan and advances given to its sister concern were incurred for the business purposes. The loan and allowances were given without charging any interest which has resulted in incurring burden on account of advances given to sister concern in violation of Section 36(1)(iii) of the Act. Likewise, before the CIT(A), the assessee has failed to defend inapplicability of Section 56(2)(viib) of the Act. It is not borne out from the records as to why Section 56(2)(viib) is not applicable or the alternative provisions of Section 271(1)(b) is not attracted in the facts of the case. Same is a case in respect of late deposit on TDS. Thus, in the absence of any material on record, it is difficult to conceive plausibility in the action of the assessee. We thus decline to interfere. As per its grounds, the assessee has also alleged that notice issued for imposition of penalty does not specify the nature of default and thus entire penalty proceedings is required to be quashed at the threshold. No penalty notice is available on record. No such objection was raised before lower authorities either. We thus are in no position to express our view on such contentions - Appeal of the assessee is dismissed exparte.
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2023 (1) TMI 1012
Rejection of books of accounts - estimation of profits consequent upon rejection of books - HELD THAT:- It is the case of the Revenue that the assessee has failed to produce original invoices/vouchers to prove the completeness of the books of account and therefore, books of account have been rightly rejected u/s 145(3) - In the factual set up, we straightaway take note of the assertions made on behalf of the assessee that net profit rate declared by the assessee is 6.15% as compared to 6.52% in the earlier year. Thus, there is no striking discrepancy in the net profit ratio. Incidentally, it is the case of the assessee that the gross profit declared during the year compares higher than the gross profit in the earlier year whereas some marginal drop in the net profit has happened on account of higher depreciation and interest on loan for acquisition of fixed assets. Hon ble Delhi High Court in the case of Paradise Holidays [ 2010 (4) TMI 111 - DELHI HIGH COURT] has enunciated the circumstances where invocation of Section 145(3) would not be justified. AO in the present case has not shown as to how audited the books of account maintained by the assessee are incorrect or otherwise incomplete which is likely to vitiate the true profits of the assessee. It is also not the case of the AO that entries in respect of certain transaction are altogether omitted or found incorrect. No inherent lacuna in the system of accounting is shown either. AO in our view is not justified in taking drastic action of rejection of books of account which are audited and are without any qualification solely on the basis of general remarks that photocopy of the bills have been produced instead of original bills. No specific instance has been provided in the order to appreciate as to how such delinquency on the part of the assessee has resulted in unreliability of books per se. Admittedly, the photocopies of bills and vouchers were duly produced, AO has not made any independent inquiry on the correctness of the bills from third parties. The profits declared in the instant case being in the vicinity of the profits declared in the earlier years, we see no apparent justification whatsoever in the action of the Revenue. We find traction in the plea of the assessee that no justifiable reasons are available to reject the books and embark upon estimations. We thus set aside the action of the CIT(A) and direct the AO to restore the position taken by the assessee in this regard. Appeal of the assessee is allowed.
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2023 (1) TMI 1011
Revision u/s 263 - benefits of Section 54/54F - PCIT was of the view that assessee has made a wrong calculation of the capital gains primarily for reason that he considered property to be not held for 36 months, accordingly, had directed Ld. AO to examine the issue afresh and withdraw the deduction claimed and granted to the assessee u/s 54F - HELD THAT:- It can be observed that the order u/s 263 dated 05.03.2018 was directory in nature and Ld. AO had complied the same and in this appeal the revenue cannot agitate that there was not substantial compliances of the order u/s 263. Remedy may be some where else. So, the ground no. 1 to 5 are superfluous and also as nothing specific were argued in regard to them they are decided against Revenue. Acquisition of the three properties by the assessee, otherwise then by the registered sale deeds fall in the ambit of word purchase used u/s 54/54F of the Act - The purchase of immovable property involves acquiring all those interests in the property. Same may be by some inchoate instruments in favour of the purchaser. Non execution of a registered document of transfer of title may have civil consequences in regard to his title, qua rights between the seller and purchaser but for the purpose of benefits of Section 54/54F, the assessee shall be deemed to have purchased the properties. As for the purpose of Section 54/54F of the Act, the important question is that money out of LTCG should be paid/spent by the assessee, before the end of statutory period, for claiming exemption. When the Ld. AO had not doubted the payments out of LTCG made by assessee for purchase of three properties with inchoate documents executed in favour of the assessee. Then for not having the sale deed executed in his favour, assessee cannot be said to have not Purchased the properties as a statutory compliance. Thus, the findings of Ld. CIT(A) in this regard require no interference. Residential nature of these three properties Ld. CIT(A) has thoroughly examined the issue. The 1st property situated lies in Tehsil Mehrauli, New Delhi. It is claimed by the assessee to be farm house and the house tax receipt issued by South Delhi Municipal Corporation mentioning that property is used for residential purpose was rightly relied by Ld. CIT(A) to hold that property purchased was residential property. Ld. CIT(A) has also examine expenditures made in cash and supported with cash withdrawals from the bank for the construction to make the property habitable. As with regard to 2nd property situated village Atmalpur in Haridwar. Ld. CIT(A) had rightly examined the fact of expenditure of Rs. 2,23,500/- on the construction raised for using it as a residence. As with regard to 3rd property at Atmal in Haridwar. Ld. CIT(A) has considered the fact that it is admitted to have a construction cottage. The bench is of considered opinion that the nature and extent of construction or nomenclature like house, plot, cottage, farm house or villa are only indicative of the fact that property purchased is not a commercial property and is not an agricultural property. They all convey residential house property. How it is inhabited should not interest the revenue. Ld. AR has also impressed this by citing a judgment of Om Prakash Gyal [ 2012 (8) TMI 547 - ITAT JAIPUR] where it has been held that only requirement for claiming exemption under Section 54F is construction of residential house and it does not matter that house constructed is on agricultural land. Thus Ld. CIT(A) has rightly taken into consideration all the aspects of the matter while partly allowing the appeal of assessee and no interference is called for in the same. The remaining grounds no. 6 to 13 are also decided against the revenue on the basis of aforesaid findings.
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2023 (1) TMI 1010
Unexplained cash deposits - cash deposited in the saving bank account by an agriculturist, without establishing any other source of Income - HELD THAT:- We concur with the view taken by the A.O that it is beyond preponderance of human probability that the assessee would have withdrawn cash from his bank account with Jila Sahakari Kendriya Bank, Baradwar Branch from 06.01.2010 onwards and thereafter, kept the same with him till 20.05.2011 i.e. for a period of more than 1 year and redeposited the said sum at the time of sale of agricultural land - as the aforesaid explanation of the assessee is nothing but a concocted story hatched by him to justify the source of cash deposits, thus, the same cannot be accepted and had rightly been rejected by the A.O. Cash deposits were sourced from his agriculture income - We find that as observed by the A.O, and, rightly so, as the assessee was in receipt of sale proceeds of agricultural produce i.e. paddy vide cheques from the samiti to whom the same were sold, therefore, his aforesaid explanation in absence of any supporting material does not merit acceptance. In case, the assessee would have sold any intermittent crop, then, the onus was cast upon him to establish the said fact by placing on record supporting documentary evidence, which,we find had not been done by him. On the basis of aforesaid observations, find no infirmity in the view taken by the A.O that the assessee s claim that cash deposits in his bank account was partly sourced out of his agriculture income did not merit acceptance. Claim of the assessee that the cash deposits in question were sourced out of his past savings - Though he had failed to place on record any material which would have evidenced the availability of any amount of cash in hand out of his past savings, but the A.O in all fairness had accepted his claim to the extent of Rs.1 lac, which thereafter had been raised by the CIT(Appeals) to an amount of Rs.3 lac. Considering the aforesaid fact, find no infirmity in the view taken by the A.O that the assessee had failed to substantiate his claim that the entire amount of cash deposits in his bank account were sourced out of his past savings. Invocation of section 69A - As the assessee at the time of making the cash deposits in the bank account i.e. on 20/25.05.2011 was the owner of cash i.e. money, and had failed to come forth with any explanation about the nature and source of the acquisition of the same, therefore, no infirmity can be attributed to the invocation of the provisions of Section 69A of the Act by the A.O. Thus, finding no merit in the claim of the Ld. AR that the A.O had wrongly triggered the provisions of Section 69A of the Act for making the addition in the hands of the assessee, reject the same. As the assessee in the course of the assessment proceedings had not come forward with any such explanation about the nature and source of the cash deposits, therefore, the A.O was constrained to make an addition of the said amount u/s.69A of the Act. My aforesaid view is fortified by the fact that an addition under section 69A in itself pre-supposes a condition that the assessee had either failed to offer any explanation; or the explanation offered by him is not, in the opinion of the A.O found to be satisfactory. Admittedly, in the present case, as the assessee had never come forth with any explanation that the cash deposit in question was the on money that was received by him on sale of agriculture land, therefore, the provisions of Section 69A in my considered view were rightly triggered by the A.O. - Decided against assessee.
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2023 (1) TMI 1009
Capital gain computation - assessee is seeking reduction of sale consideration by amount paid to Rajesh K Mehta as occupying the said land and to remove the encumbrances three acres of land was given to him to remove all his encumbrances - HELD THAT:- On careful perusal of bank statement of Rajesh K Mehta, find cheque drawn on Dena Bank was never encashed or realised either from bank account of Rajesh K Mehta or in the account of assessee. Thus, consideration shown in the sale deed was never passed/received by assessee. Shri Rajesh K Mehta has confirmed his fact in his affidavit. Thus, the said amount was not received by the assessee. It is settled position under law that income which has earned or accrued can only be taxed. In my considered view, once it is shown and proved on record that Rs. 9.00 lacs is not received by the assessee, so such income cannot be considered for taxation in the hands of assessee. So the assessee get relief to that extent. Amount as allegedly incurred by assessee for purchasing of land in the name of Nani Navla Patel as per the direction of Collector, Dadra Nagar Haveli, we are fully convinced with the order of ld. CIT(A) that there is no condition precedent in the sale deed dated 12/08/2011. Moreover, such condition was on the seller of land to maintain minimum standard of area of land to safeguard their interest. Therefore, no justification for allowing such expenses while calculation capital gain. Accordingly, we uphold the order of ld. CIT(A) qua this issue. In the result, grounds of appeal raised by assessee is partly allowed.
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2023 (1) TMI 1008
Premium paid in respect of hedging contracts - interest cost on ECBs - speculative transaction covered under Section 43(5) - amount paid to BTMU under currency swap contracts - HELD THAT:- As in so far as the assessee is concerned, the amount paid to BTMU under currency swap contracts is nothing but interest cost on foreign currency loans. Further, as discussed earlier, the underlying transactions in relation to the currency swap contracts are the loans availed from MELCO. It is a fact on record that on repayment of loan to MELCO after the expiry of three years, the currency swap contracts with BTMU were also terminated. Therefore, in our considered opinion, the currency swap contracts are nothing but to hedge the fluctuation in foreign currency rates for protecting the assessee from the risk of paying more interest on the foreign currency loans due to exchange rate fluctuations. Therefore, in our view, the transactions relating to currency swap contracts entered by the assessee with BTMU cannot be considered to be in the nature of speculative transaction covered under Section 43(5) of the Act. In that view of the matter, the deduction claimed by the assessee is allowable under Section 36(1)(iii) of the Act. In any case of the matter, even for the sake of argument assuming that the premium paid to BTMU in respect of currency swap contracts cannot be termed as interest covered under Section 36(1)(iii) of the Act, however, there cannot be any dispute that this is an expenditure incurred by the assessee wholly and exclusively for the purpose of its business, as, such expenditure is having a direct nexus with the finance cost on external borrowings. That being the case, it is otherwise allowable as deduction under Section 37(1) of the Act. Accordingly, we delete the disallowance. TDS u/s 195 - Disallowance u/s 40(i)(a) - amount paid towards installation charges - as per AO travelling and hotel expenses, since, are in connection with rendering of technical services, they also have to be regarded as fee for technical services (FTS) - HELD THAT:- From the sample copies of the bills/invoices raised on the assessee, it is observed that in so far as air-tickets and hotel bills are concerned, the payee has raised separate invoices which do not comprise of any amount charged towards installation of equipments. The perusal of invoices clearly indicates that they are towards reimbursement of cost on actual basis without any profit element embedded therein. Therefore, in our view, no part of such expenditure/cost incurred can be apportioned towards technical services. Therefore, in our view, the assessee was not required to withhold tax under Section 195 of the Act on such expenditure. Even otherwise also, the amount in dispute was not claimed as revenue expenditure by the assessee. Rather, the assessee had capitalized the amount in its accounts and has claimed depreciation. In such a scenario, the issue arising for consideration is whether section 40(a)(i) of the Act would be applicable. As we find from the decisions cited before us in this regard by learned counsel appearing for the assessee, the ratio laid down clearly says that section 40(a)(i) of the Act provides for disallowance only in respect of expenditure which are revenue in nature. Therefore, the provision does not apply to a case of the assessee whose claim is for depreciation. In this regard, we may specifically refer to the decision of Hon ble Karnataka High Court in PCIT vs. Tally Solution Pvt. Ltd. [ 2020 (12) TMI 1160 - KARNATAKA HIGH COURT ] - we delete the disallowance. Disallowance on account of difference in rent cost incurred by the assessee for providing accommodation to its employees and the respective perquisite value of such residential accommodation determined in the hands of the employees - HELD THAT:- There is no dispute that the assessee had actually incurred the expenditure. In fact, the Assessing Officer has allowed the deduction to the extent of the amount treated as perquisite value at the hands of the employees. He has disallowed the excess amount. This, in our view, is unjustified. The perquisite value to be taxed at the hands of the employees is determined by applying the methodology prescribed under the rules. Therefore, it has no relation to the actual cost incurred by the assessee. In any case of the matter, if the assessee has incurred certain expenditure for welfare of the employees to keep a contended and dedicated work force, keeping in view the commercial expediency, the expenditure can be allowed under Section 37(1) of the Act - we delete the disallowance made by the assessee.
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2023 (1) TMI 1007
Revision u/s 263 by CIT - cash deposits in saving bank account - as per CIT A.O. also has not made any enquiry as to how such huge amount of Rs. 12,00,000/- is deposited in the bank account of the assessee - HELD THAT:- It is seen from the assessment order passed by the Assessing Officer is without any details and no information about the claim of agricultural land. When the sale of two lands amounting to Rs. 31,55,000/- and Rs. 30,27,000/- respectively. The Assessing Officer has not raised any question about agricultural income derived from the above lands by the assessee. The assessing officer has also not verified the nature of cultivation from the above lands in the previous assessment years, population of the village and distance from the nearest Municipality. Thus in our considered opinion, the Assessing Officer has not made necessary enquiries before allowing the claim u/s. 2(14) of the Act. Similarly the cash deposits in Bank accounts is not verified by the A.O. with proper enquiry. PCIT has rightly invoked the provision of Section 263, wherein the assessment order passed by the Assessing Officer is on account of inadequate enquiry and non-application of mind to the facts of the case presented by the assessee. Therefore the Ld. PCIT set aside the erroneous assessment order passed by the Assessing Officer, with a direction to examine the issues afresh and determine the appropriate tax liability by giving adequate opportunity to the assessee. We do not find any infirmity in the order passed by the Ld. PCIT. - Decided against assessee.
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2023 (1) TMI 1006
Disallowance being 5% of various administrative expense claimed by the Appellant - expenses were not supported by the documentary evidences - Appellant submits that the above expenses are incurred wholly and exclusively for business purposes; hence, the disallowance thereof made by the AO shall be deleted - HELD THAT:- We note that for the AY 2009-10 and 2010-11 the Tribunal had declined to interfere in the order passed by the CIT(A) on this issue. The relevant extract of the decision of the Tribunal in the case of the assessee for the Assessment Year 2010-11 [ 2018 (1) TMI 1706 - ITAT MUMBAI] wherein as noticed that while deciding the issue of ad hoc disallowance of 5% out of various expenses, the Tribunal did not interfere in the matter and upheld the disallowance. Following the order of the Tribunal, we uphold the disallowance by dismissing the ground raised by the assessee. Disallowance u/s 14A - Appellant had offered suo moto disallowance u/s 14A - As contended on behalf of the Appellant that amount of interest paid to partners on capital should not be taken into consideration while computing disallowance u/s 14A - HELD THAT:- During the course of hearing the Ld. Authorised Representative for the Appellant had placed on record computation sheet showing disallowance computed as per the order passed by CIT(A) and had submitted that substantial relief would be granted in case the directions issued by the CIT(A) to include only income yielding investments is implemented. Accordingly, the Assessing Officer is directed to re-compute disallowance under Section 14A of the Act read with Rule 8D(2)(ii)/(iii) of the Rules by taking into account only the investments which yielded exempt income during the previous year relevant to the Assessment Year 2014-15. Accordingly, Ground raised by the Appellant are disposed off with the aforesaid directions. Disallowance of interest Expenses - According to AO interest pertained to non-business activity and was, therefore, not allowable as deduction u/s 37 - since interest amount was already disallowed under Section 14A read with Rule 8D(2)(ii) of the Rules, the Assessing Officer disallowed the balance - HELD THAT:- CIT(A) has returned the findings that the Appellant has not placed any evidence in support of its claim that the loans and advances were given for the purpose of business other than the general submission that the same were given to builders as advance for staff accommodation and future business. Appellant had filed before the AO/CIT(A) the details of society charged paid for accommodation of staff and for file storage as well as salary certificate of the employees wherein value of accommodation granted to the employees has been offered to tax as perquisite - Further, the Appellant had also filed details of depreciation claimed in respect of property allotted to office staff along with the reasons for providing such accommodation - The finding returned by the CIT(A), to this extent, are contrary to material on record. Therefore, we remand this issue back to the file of the AO for denovo adjudication keeping in view our findings hereinabove and after giving the Appellant a reasonable opportunity of being heard. In view of the aforesaid, Ground No. 3 raised by the Appellant is allowed for statistical purposes.
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2023 (1) TMI 1005
Revision u/s 263 - agricultural income - HELD THAT:- When the AO passed assessment order after due enquiries and it is pertinent to note in the order to exercise jurisdiction u/s. 263 of the Act, the twin conditions are to be satisfied, namely that A.Y. 2016-17 assessment order is erroneous as well as prejudicial to the interest of Revenue. On an examination of impugned order, PCIT held that the AO is failed to make proper enquiry and directed that the assessment order should be framed as per the provisions of law after considering proper facts and circumstances of the assessee without giving definite, as to how the assessment order is erroneous, prejudicial to the interest of Revenue as well. Lack of enquiry by the AO in the scrutiny proceedings - All the sale proceeds from the sale of agricultural produce were credited in the bank account of assessee and in support of which the assessee enclosed bank account in State Bank of India together with books of account. PCIT made no adverse remarks or reference to the reply submitted by the assessee in respect of transport expenses, proof of sale of agricultural produce and details of bank accounts. It is settled position that the PCIT mandated to give reasoning why the order of assessee is erroneous as well as prejudicial to the interest of Revenue. PCIT did not give any reasons for non-consideration of reply submitted by the assessee and we note the PCIT simply directed the AO to frame assessment as per provisions of law, in our opinion, the order of PCIT is not justified in holding the assessment order is erroneous and prejudicial to the interest of Revenue as no nowhere in the impugned order it was held on specific point the assessment order is erroneous and prejudicial to the interest of Revenue. In the absence of which initiation of revision proceedings u/s. 263 fails and is set aside. Thus, the grounds raised by the assessee are allowed.
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2023 (1) TMI 1004
Unexplained Hawala Transactions - commission income from hawala business - incriminating documents found and seized which divulged that the assessee was engaged courier/transfer of money from one place/person to another place/person which was termed by revenue-authorities as Hawala business - HELD THAT:- Firstly, the revenue-authorities have loudly and unambiguously identified, found and understood the nature of activity done by assessee which is just a courier/transfer of money for earning a commission of Rs. 100/- to Rs. 200/- per lac. This activity remains same in all transactions. Secondly, all transactions have been retrieved/decoded from the same set of evidences, namely the same mobile phones. Thirdly, the details of all transactions as retrieved/decoded, such as names/mobile numbers of senders/receivers, serial numbers of currency notes, amount of money transacted in code words like Kg , @ , P , Peti , etc. and in some cases the full amounts itself or in lacs or after omitting zeros, were exactly identical. Fourthly, the assessee had provided complete postal addresses, phone numbers and PANs of the persons of all transactions which is clearly evident from Para No. 10.2 and 10.3 of the assessment-order. However, the only difference is such that out of 79 transactions, the persons of 43 transactions did not turn up and persons of 36 transactions only responded. It is highly probable that those persons have actually availed services of assessee for courier/transfer of money but when it comes to enquiry by income-tax department, they did not respond to avoid hassles of tax authorities. Be that as it may, the activity of assessee in all transactions is clearly manifest from the details of transactions retrieved/decoded from the mobile phones seized during search-proceeding, which is one single activity i.e. courier/transfer of money on behalf of clients with an objective to earn commission. Therefore, there is no reason to distinguish the two categories of transactions merely on the basis of responsive/non-responsive attitude of those persons. We feel that the taxation-authorities must assess the income of assessee in a proper and judicious manner so as to charge a proper amount of tax, neither a penny less nor a penny more. We also observe that there is no evidence on record brought by revenue, despite search-proceeding, that the impugned unexplained transactions of 43 persons were different in any manner or structure than the explained transactions of 36 persons. We observe that the various reasons cited in the beginning of this paragraph clearly reveal that all transactions were at par. Being so, we do not find any merit in the claim of revenue that the so-called unexplained transactions should be accorded a different treatment than the explained transactions . We observe that the Ld. CIT(A) has given a careful thought to the facts of case and validly held that the assessee must have earned only commission of Rs. 36,71,832/- on all transactions of Rs. 15,29,93,132/-. Having said so, Ld. CIT(A) was justified in applying a commission-rate of Rs. 200/- per lac on 8,25,03,772/- which results in estimated commission-income of Rs. 1,65,007/- for 1 month and extrapolating the same for 12 months arriving at commission of Rs. 19,80,088/- for the whole year. Finally, Ld. CIT(A) has rightly ordered the Ld. AO to assess commission-income of Rs. 19,80,088/- and thereby granted a relief of Rs. 8,05,23,676/- (Rs. 8,25,03,764/- minus Rs. 19,80,088/-) to the assessee. Addition on account of explained-transactions - We find that the Ld. CIT(A) has allowed telescoping benefit of the whole addition of Rs. 36,71,872/- (which of course includes the alleged addition of Rs. 16,91,744/-) against the cash balance of Rs. 98,09,930/- seized during search and surrendered by assessee but that ground is neither raised before us nor pleaded/argued during the course of hearing. Therefore, we are not called upon to adjudicate the same. Thus, Revenue s Ground No. 2 is also devoid of merit.
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2023 (1) TMI 1003
Penalty levied u/s 271(1)(b) - undisclosed investment u/s 69A - ex parte assessment order - HELD THAT:- When the case was listed for hearing on 27/09/2022 and 10/10/2022, assessee filed a letter stating certain details have to be collected and complied and requested for one month adjournment. The same were being granted, however none appeared on behalf of the assessee even today. As pleaded in the Grounds of Appeal, the assessee has not filed any new materials before us. Assessee being a chronicle defaulter from the assessment stage by passing an ex parte order at Assessment state, Penalty stage and even before the CIT(A). None appeared on behalf of the assessee or any Authorized Representative on behalf of the assessee before us. Though the assessee pleaded in its Grounds to file additional evidences, in spite of 2 opportunities the same is not filed by the assessee. We have no hesitation in confirming the penalty levied under section 271(1)(b) for non-compliance of notices before the AO. Thus the Grounds raised by the assessee does not hold merits and the same is dismissed. Appeal filed by the Assessee is dismissed.
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2023 (1) TMI 1002
Capital gain computation - date of acquisition of the right over the property by the assessee - benefit of indexation on the cost - Whether NFAC erred in denying the Appellant the benefit of indexation on the cost by holding that the capital gains earned by the Appellant from the transfer was not long term capital gains but short term capital gains? - HELD THAT:- As per the record submitted before us from the books of Bharat Diamond Bourse clearly indicates that assessee has been allotted office space and subsequently made several payments commencing from 31.08.1999 as per ledger extract. It is brought to our notice in the similar facts and grounds of appeal raised in appeal before Coordinate Bench in M/s. Suresh Brothers [ 2019 (10) TMI 1544 - ITAT MUMBAI] Respectfully following the above said decision, since the issue is exactly similar and facts are also identical, we are of the view that date of acquisition of the property was to be reckoned from the date of the allotment i.e in the F.Y. 1998-99. Respectfully following the above decision, we allow the ground raised by the assessee.
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2023 (1) TMI 984
Validity of order passed by NFAC passed u/s 250 - Default u/s 201(1) - violation of principle of audi alteram partem for the reasons case deserves to be remanded back to the file of NFAC - HELD THAT:- As perused the material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue. We note that, the Ld. NFAC by service of notice dt. 26/05/2022 called upon the appellant to substantiate its claim by 06/06/2022, however before the expiry of said notice period accorded to make representation, the Ld. NFAC adjudicated the matter by an order dt. 02/05/2022 i.e. well before the expiry of time period allowed to the appellant to refute its case on the basis of evidentiary documents, which evidently is violative of basic principle natural justice and for the reason concurring with DR, we find merit in the ground number 3 raised by the appellant; consequently the matter deserves to be remanded back to the file of Ld. NFAC for de-nova adjudication with a direction to observe the principle of natural justice by effectively providing reasonable opportunity to the appellant to make representation in rebuttal, ergo ordered accordingly. Appeals of the appellant assessee is allowed for statistical purposes.
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Customs
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2023 (1) TMI 1001
Auction of goods - unpaid seller which had shipped Aluminium Scrap through shipping line - Seeking to permit the re-export of import container arrived at ICD Sabarmati as due to unavoidable circumstances - HELD THAT:- Considering the issue of right of the unpaid seller, we firstly need to direct the impleadment of the buyer Ghanshyan Metal Udyog, Survey No. 36/1, Kuha Road, Singarva, Ahmedabad 382430, Gujarat, India. Let the amendment be carried out in the cause title. Issue Notice to the respondents making returnable on 20th January, 2023.
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2023 (1) TMI 1000
Seeking quashment of proceedings against Managing Director of the Company, one of the vendors of RFID e-seals - Tampered e-seals - it is alleged that the e-seals supplied by the Company were passing customs clearances even when it was not in a locked condition - liability of Managing Director of the Company in the alleged offence - HELD THAT:- The Company was in-charge of manufacture of RFID e-seals and tampering alert was in the control of the Company in which the 2nd petitioner is the Director. It becomes germane to notice the Circulars issued by Government of India in the Department of Revenue of the Central Board of Excise and Customs with regard to the export procedure and sealing of containerized cargo from time to time. The communication was clear that the DRI has critically examined RFID e-seals supplied by M/s Leghorn Group, Italy and they have been found to be compromising in security requirements and was a serious issue and therefore, stopped all seals made by M/s Leghorn Group. Later, the crime come to be registered and a search is made in the office of the Company and at the time the seals are seized and were sent to their examination where it was found that since March 2018 the testing commenced and approximately 832 seals of the Company were faulty. The tamper status of the seals was covered up as the tamper alarm had been switched off. The petitioners are alleged of compromising security of the container which contains what ought to be known to the Department, if not known and would passes muster, even if it is a narcotic drug, the menace of the threat looms large in that sector or that facet. Therefore, finding no merit in the contention that nothing has happened for the last 3 years and a co-ordinate Bench obliterating the proceedings against accused No.3 are of no assistance to the learned counsel appearing for the petitioners. The issue in the lis is shrouded with admissions and certain seriously disputed questions of fact, which will have to be thrashed out only in a full blown proceeding. It is rather surprising as to why the DRI has not proceeded further and filed its final report is a serious matter of the kind. It is for the DRI to conclude the investigation, if not already concluded and take the proceeding to its logical end. Reference being made to the judgment of the Apex Court in the case of KAPTAN SINGH VERSUS THE STATE OF UTTAR PRADESH AND OTHERS [ 2021 (9) TMI 61 - SUPREME COURT] where it was held that the High Court has grossly erred in quashing the criminal proceedings by entering into the merits of the allegations as if the High Court was exercising the appellate jurisdiction and/or conducting the trial. The High Court has exceeded its jurisdiction in quashing the criminal proceedings in exercise of powers under Section 482 Cr.P.C. There are no merit to interfere or interdict the investigation, against the petitioners, as any interference would amount to putting a premium on the acts of the petitioners, for having compromised the security of the nation, which act sans countenance. Petition dismissed.
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2023 (1) TMI 999
Levy of Anti-Dumping Duty - effective date of the notification -import of two consignments of Propylene Glycol from USA falling under CTH 29053200 - N/N. 117/2009-Cus., dated 13-10-2009 extending the N/N. 105/2004-Cus., dated 8-10-2004 - HELD THAT:- The issue involved in the present matter is whether Anti-dumping duty on Propylene Glycol, which was imposed by Notification No. 105/2004 dtd. 08.10.2004 and which came to an end on 08.10.2009 by virtue of Section 9A(5) of the Customs Act, 1962, can be demanded in respect of goods imported after 08.10.2009, when the same had not been extended before the said expiry on 08.10.2009 and whether the extension after the said expiry by Notification No. 117/2009 dtd. 13.10.2009 is valid in law. The demand confirmed by the adjudicating authority is not sustainable - Appeal allowed.
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2023 (1) TMI 998
Classification of goods - 0.1 percent natural brassinolide fertiliser - Nature and scope of SCN under section 28 of Customs Act - power of proper officer to review the assessment under section 28 - Whether SCN under section 28 can be issued after the assessment is finalized (either through self assessment or through assessment by an officer) without first appealing against the assessment? - extended period of limitation - penalties. Scope of remand - HELD THAT:- There is nothing in the order of remand to show that the Commissioner was required to examine Chapter Note 1(a) (2) of Chapter heading 3808 partly only to the extent of the submissions by the learned counsel. The submission of the learned counsel that the scope of the Tribunal s order gets circumscribed by the appellant s submissions during the proceedings cannot be accepted. The Commissioner was correct in examining whether the goods were preparations and such an examination was within the scope of the remand order. Retail packages- scope - HELD THAT:- Both sides agree that retail packing is not defined in the tariff. Both sides refer to different Rules of the Legal Metrology Rules to interpret the term. According to the learned counsel for the appellant, the goods were not in packings meant for consumer and hence were not retail packings in terms of Rule 2(k) of the Legal Metrology Rules. According to the learned authorised representative for the Revenue, since only packages of more than 25 kg or 25 litres are excluded as per Rule 3 of the Legal Metrology Rules, the packages in question, being of up to 25 kg do qualify as consumer packings - while it is true that all packings over 25 kg are clearly excluded from the Legal Metrology Rules, it does not necessarily mean that all packings up to 25 kg are included from them and further that all such goods get covered by the definition of retail packings. There could be substances of much higher value, such as saffron or spices which will be sold even in wholesale in much smaller packings than 25 kg. Therefore, it needs to be seen if there is sufficient evidence on record to suggest that the goods which were imported were in retail packings - there are no sufficient evidence to hold so, if we exclude the survey on internet and e-commerce websites conducted by the Commissioner after concluding the hearing and before passing the impugned order which we already have found cannot be used against the appellant. It is undisputed that the imported goods were brassinolide. Its strength is only 0.1% and the rest is not made up of impurities but other inert material. It has been stated in the statement of Smt. Rashmi Jain, that it should be mixed in the proportion of 1 gram in 10 litres water and sprayed which makes it clearly a preparation of Brassinolide. Even if the submission of the learned counsel that it is sold to other companies which prepare further preparations is considered, the imported goods will be intermediate preparations which are also squarely covered by CTH 3808 as per the explanatory notes to HSN 3808. The imported good was clearly a preparation of Brassinolide and was not excluded from CTH 3808 by Chapter note 1(a)(2) to Chapter 38. Merits of classification - HELD THAT:- The brassinolide imported by the appellant is a plant growth regulator is no longer in dispute. Although it was described as fertilizer in the invoice and documents of the Chinese supplier and also in the Bills of Entry by the appellant, after importing, the appellant sold the goods as plant growth regulator . Evidently, it is understood as plant growth regulator even in the trade. This is consistent with the expert opinion from IARI and the CBEC s Circular based on which the SCN was issued. The appellant had not contested this fact before us or before this Tribunal in the earlier round of appeal. The Chapter Note excludes specially defined chemicals from Chapter 38, except when they are put up in forms described in 3808 viz., as retail packings, as preparations and as articles. Of these, there is no dispute that the imported brassinolide were not articles which leaves with retail packings and preparations. We have already found that the imported brassinolide was a preparation. Since the brassinolide is in the form indicated in CTH 3808 by being preparation, it is not excluded by Chapter Note 1 (a) (2). Therefore, it falls under CTH 3808. Extended period of limitation - HELD THAT:- As far as the description of the goods, quantity, etc. are concerned, the importer is bound to state the truth in the Bill of Entry. Thus, simply claiming a wrong classification or an ineligible exemption notification is not a mis-statement. Assessment, including self-assessment is a matter of considered judgment and remedies are available against them. While self-assessment may be modified by through re-assessment by the proper officer, both self-assessment and the assessment by the proper officer can be assailed in an appeal before the Commissioner (Appeals) or reviewed through an SCN under section 28. Therefore, any wrong classification or claim of an ineligible notification or wrong self-assessment of duty by an importer will not amount to mis-statement or suppression. Extended period of limitation can be invoked in case of collusion or any willful mis-statement or suppression of facts. According to the Revenue, the appellant had wrongly declared the imported goods as fertilizers and they were also declared so in the invoices, packing lists, etc. supplied by the Chinese suppliers. The appellants were fully aware that the imported goods were plant growth regulators and were also selling the goods as plant growth regulators. Therefore, according to the Revenue, the appellant has willfully mis-stated the nature of the imported goods in the Bills of Entry as fertilizers and hence extended period of limitation was correctly invoked. It is equally true that the assessing officers were also aware of the nature of the goods and had, on more than one occasion, called for the technical literature on the product which the appellants had provided. After studying the technical literature, the officers cleared the goods as fertilizers. Balancing these two facts on record, we do not find that sufficient grounds exist to invoke extended period of limitation in this case - the extended period of limitation could not have been invoked in the present case. Penalties - HELD THAT:- As may be seen the ingredients necessary for imposing a penalty under section 114A are identical to the ingredients necessary to invoke extended period of limitation. The extended period of limitation cannot be invoked in these cases. Logically, the penalty under section 114A imposed on the appellant importers also cannot be sustained for the same reason - As far as the penalty under section 112 is concerned, it is imposable on any person whose acts or omissions render the goods liable to confiscation under section 111 or who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111. In these cases, goods were held liable for confiscation under section 111 (d) and (m) and consequently penalty was imposed under section 112. As far as section 111(d) is concerned, there is nothing on record to show that there was any prohibition on import of the goods and so it does not apply to the present case. As far as 111(m) is concerned, there are no misdeclaration of the goods, although they deserved to be classified under CTH 3808 as plant growth regulators but all the documents including literature was made available to the officer during assessment. It is also found that section 111(m) does not apply. Consequently, penalties under section 112 cannot be sustained - The penalties under sections 114A and 112 imposed on the appellants are not sustainable and need to be set aside. Appeal disposed off.
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Insolvency & Bankruptcy
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2023 (1) TMI 997
Maintainability of application - Prohibitory period under Section 10A of the I B Code - principal submission pressed by the Appellant is that as per Annexure 3 to the Debenture Subscription Agreement, clause 6, the date of default for repayment occurs on 31.08.2020, which was during the prohibitory period under Section 10A of the I B Code - HELD THAT:- The submission of the learned counsel for the Appellant that as per Annexure-3 clause 6, the date of repayment of instalment is 31.08.2020 only is not acceptable. There being clear admission on behalf of the Appellant in default in payment of interest for the quarters ending September 2019 and December 2019, Appellant cannot be permitted to contend that default was committed only on 31.08.2020. Insofar as application being barred by 10A, benefit under Section 10A can be claimed by the application only when there is clear default during the prohibited period. The said benefit cannot be claimed by the Appellant by ignoring the admission of default which was prior to 25.03.2020. There being clear admission in the present case, in letter dated September 9, 2021 where the Corporate Debtor itself has admitted that he has failed to pay interest for the quarters ending September 2019 and December 2019 thus acknowledging that it has defaulted in servicing its obligations under the DSA. The Adjudicating Authority has after considering all relevant facts and after finding debt and default has admitted the application. The fact that before this Tribunal, the Appellant has taken four adjournments for proposing OTS and get settle with the Bank itself indicate that debt and default is not disputed - Appeal dismissed.
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2023 (1) TMI 996
Validity, Viability and Feasibility of Resolution Plan - Liquidation Value - Section 30 (6) (c) and 31 of the I B Code, 2016 - main grievance of the Appellant is that, the mere glance of the Resolution Plan, makes it clear that the Resolution Applicant, had hijacked the Substantial Assets of the Corporate Debtor, at a Price, substantially below the Liquidated Value of the Corporate Debtor, as defined in Regulation 2 (k) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. HELD THAT:- In the present case, it is quite evident that the 2nd Respondent through a Resolution Plan, had offered Rs.50.70 Crores as Full and Final Settlement of all the Liabilities of the 1st Respondent / Corporate Debtor, which was duly approved with requisite majority of the Committee of Creditors, in its commercial wisdom, ofcourse, after numerous rounds of discussions and negotiations. In this connection, this Tribunal, pertinently points out that in respect of the dues of the Workmen, initially only Rs.17 Lakhs was provided and at the behest of the Adjudicating Authority, the 2nd Respondent had revised the Resolution Plan and earmarked Rs. 34 Lakhs, towards the Workmen dues. Also that, a Sum of Rs.50.70 Crores was fully used in the payment of (a) CIRP Costs (b) the dues of the Financial Creditors and the Workmen. As such, no amount remains to be allotted in respect of the other Creditors. Therefore, the Liquidation Value, payable to the Operational Creditors, is Nil. Besides this, all the Creditors, had a significant haircut in the Corporate Insolvency Resolution Process of the 1st Respondent / Corporate Debtor. Thus, keeping in mind the payment to all the Operational Creditors, is Nil, there is no aspect of discrimination between the Operational Creditors, in the considered opinion of this Tribunal. Further, when the ingredients of Section 30 (2) (b) of the I B Code, 2016, are satisfied, the distribution is to be treated as Fair and Equitable one. After all, the Plea of the Fair and Equitable treatment is not between the different classes of Creditors, and the same is between the Operational Creditors, as a Class, as opined by this Tribunal . In the instant case on hand, the 2nd Respondent, had undertaken to infuse approximately a Sum of Rs.20 Crores in the 1st Respondent / Corporate Debtor, when required for its revival, through its Group Companies, Promoters, Investors and Associates. Suffice it, for this Tribunal, to make a relevant mention that whether a certain Resolution Plan, leads to the maximisation of Value of the Assets or not is within the subjective realm of assessment of the Committee of Creditors, and the same cannot be a matter of enquiry - One cannot brush aside a vital fact that a Resolution Plan, as approved by the Committee of Creditors, in exercise of its subjective commercial wisdom, cannot be tinkered and tampered with, when the Resolution Plan, was approved with a Requisite Majority of 69.04%, after indulging in due discussions / deliberations, as regards the feasibility and viability of the Resolution Plan. Be it noted, that the I B Code, 2016, is not a Debt Enforcement Procedure, and the same cannot be used as a mechanism for the Recovery of Dues, for the Creditors. It is an axiomatic principle in Law, there is not rule for substituting any commercial term(s) of the Resolution Plan, approved by the Committee of Creditors, especially, in the teeth of the Resolution Plan, satisfying the requirements of the ingredients of the I B Code, 2016. An Adjudicating Authority (NCLT) or an Appellate Tribunal (NCLAT), cannot sit in an Appeal, to find out the Viability and Feasibility of Financial Matrix of such Resolution Plan, as opined by this Tribunal. Thus, the Resolution Plan dated 07.01.2019, submitted by the 2nd Respondent / SPG Macrocosm Limited, through SPV Vision Textile (Resolution Applicant), was rightly approved by the Adjudicating Authority (Tribunal), which is free from any Legal Flaws, Resultantly, the instant Appeal sans merits and it fails. Appeal dismissed.
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Service Tax
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2023 (1) TMI 995
Business Support services - Branch Network Fee - whether the Branch Network Fee received by the appellant under the agreements is taxable under Business Support Service ? - time limitation - it was held by Tribunal that the proceedings are barred by limitation of time and hence, the appeal should succeed on the ground of limitation as well. HELD THAT:- There are no reason to interfere in this Civil Appeal. The Civil Appeal is dismissed accordingly.
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2023 (1) TMI 994
Levy of Service Tax - activity of renting/leasing - HELD THAT:- Having gone through the relevant provisions of the Finance Act, 1994 with respect to the Service Tax and Section 65 (105) (zzzz) and Section 66D and taking into consideration the decision of this Court in the case of KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ALWAR [ 2022 (2) TMI 1113 - SUPREME COURT] , the Tribunal has rightly held that the appellant-Marketing Committee is liable to pay the service tax on activity of renting/leasing, which was carried out at the relevant time. No interference of this Court is called for - Appeal dismissed.
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2023 (1) TMI 993
Sabka Vikas Legacy Dispute Resolution Scheme, 2019 - availability of rebate in arrears of tax - HELD THAT:- There is no challenge to the constitutionality of this Scheme. Reliance is placed by counsel for the Revenue on a decision of Apex court in the case of M/S. YASHI CONSTRUCTIONS VERSUS UNION OF INDIA ORS. [ 2022 (3) TMI 110 - SC ORDER ] where it was held that The High Court has rightly refused to grant relief to the petitioner for extension of the period to make the deposit under the Scheme. It is a settled proposition of law that a person, who wants to avail the benefit of a particular Scheme has to abide by the terms and conditions of the Scheme scrupulously. This Court sees no reason to take a different view than the one taken by Apex Court - Petition dismissed.
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2023 (1) TMI 992
Adjustment of excess service tax paid - succeeding month or quarter used in Rule 6(4A) of Service Tax Rules, 1994 - whether the said term means immediate succeeding month/quarter or it can be anytime even after couple of years? - whether the assessee can claim any adjustment without complying with the conditions contained in Rule 6(4B) ibid? - HELD THAT:- A perusal of the aforesaid Rule 6(4A) would make it clear that the word used is succeeding month or quarter as the case may be. Succeeding month denotes the month, which succeeds the current month, i.e., the next month and dictionary meaning of succeeding means immediately following. The aforesaid clause (4A) do not uses the word any before the words succeeding month or quarter as the case may be. Rule 6(4B) provides that the adjustment shall be subject to this condition that the excess amount paid was not on account of taxability. As per the law laid down by the Hon ble Supreme Court in catena of decisions, in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain, unambiguous and is capable of determining a defined meaning. Purposive interpretation can be given only when there is an ambiguity in the statutory provision, which is not found in the present case. It cannot be said that this interpretation lead to absurdity as the procedure is prescribed in the statute itself. While interpreting the taxing statute, the importance has to be given to the clear expression used therein and no intent can be examined in case of any unambiguity in the wordings of the Notification. There is no ambiguity in the wording of Rule 6(4A) ibid. It is not that the appellant is not aware about the filing of refund claim of excess payment as the learned Commissioner has observed that in the year 2011 the appellant has applied for the refund of the excess payment made which was sanctioned by the Adjudicating Authority - thus, the filing of refund claim is not mandatory but then the adjustment under Rule 6(4A) ibid has to be done within a reasonable period if not in the immediate succeeding month or quarter. Article 265 of the Constitution of India - HELD THAT:- The said Article provides that no tax shall be levied or collected except by authority of law. Here levy of tax is not disputed, what is disputed is the alleged excess payment by the Appellant in this era of self-assessment and since no documentary evidence has been placed on record except the arithmetical calculation, therefore it cannot be concluded that any extra payment of tax has been made by the Appellant. There are no infirmity in the impugned order - appeal dismissed.
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2023 (1) TMI 991
Denial of benefit of Notification No. 12/03-ST dated 20.06.2003 - composite contract service - Inclusion of cost of material and service provider or not - HELD THAT:- Since the appellant have declared a material cost and the same was accepted by the service recipient, no doubt can be raised that the material cost declared in the invoice is incorrect unless it is proved contrary by the department. It is also not in dispute that the appellant have provided the composite contract to the service recipient which includes service and material. Therefore, the appellant is entitled for Notification No. 12/03-ST. The appellant have also argued that since they have provided the composite contract i.e. with material and they have discharged the VAT, their service is classifiable under works contract service. Thus, it can be seen that as against the abatement of 67% available under Notification No. 15/04-ST and 01/06-ST, the appellant have taken the abatement ranging from 30% to 48%. Thus, despite the availability of abatement as per the above notification, the appellant have paid the service tax on much higher value, for this reason also the demand is absolutely unsustainable. Appeal allowed.
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2023 (1) TMI 990
Levy of Service tax - Commercial Training or Coaching service - imparting educational programmes in the areas of finance, banking, insurance, accounting, law, management, information technology, arts, commerce, education, science and technology, at bachelor's and master's level on full time campus and distance learning modes - HELD THAT:- The issue in hand has already been considered by this Tribunal at various benches namely, Hyderabad, Delhi and Ahmadabad. Reliance placed in the order of this Tribunal of Ahmadabad Bench in the appellant s own branch of Vadodara, ICFAI BRANCH VADODARA VERSUS CCE ST-VADODARA-I [ 2018 (8) TMI 556 - CESTAT AHMEDABAD ] where it was held that There can not be any doubt as to the fact that the students successfully completing the educational programmes of the appellants are being selected for employment by various organisations, whereas the explanation as to what is vocational training institute indicates that the said exemption can be extended to any vocational training institute which imparts skills to enable the trainee to seek employment or undertake self-employment directly after such training or coaching. Appeal allowed.
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2023 (1) TMI 989
Maintainability of appeal - non-compliance with Section 35F - Short payment of service tax - works contract service - HELD THAT:- There is controversy with regard to service of the show cause notice on the appellant-assessee. Further, as the Commissioner (Appeals) have dismissed the appeal for want of compliance of Section 35F, this ground could not be decided. Accordingly, this appeal is allowed by way of remand. The matter is remanded to the file of the Original Adjudicating Authority to pass a reasoned order, in accordance with law, after hearing the appellant-assessee. Appeal allowed by way of remand.
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Central Excise
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2023 (1) TMI 988
CENVAT Credit on inputs used in the manufacture of Sulphur Powder falling under sub-heading No. 2503 0090 of Central Excise Tariff Act-1985 - denial of credit on the ground that the Sulphur Powder is correctly classifiable under sub-heading No. 2503 0090 which attracts nil rate of duty - Revenue Neutrality - Applicability of Rule 16 of Central Excise Rules 2000 - HELD THAT:- The appellant is not disputing the classification however their contest is that once the duty on the finished goods was paid even though it attracts nil rate of duty, the cenvat credit cannot be denied - there is no dispute that the appellant have paid the excise duty on the finished goods which is more than the cenvat credit availed on the input used in the said finished goods, therefore, this is clear case of Revenue neutral, for this reason, demand cannot be sustained. This similar issue has been considered by the Hon ble Supreme Court in the case of COMMISSIONER OF C. EX., JAMSHEDPUR VERSUS JAMSHEDPUR BEVERAGES [ 2007 (4) TMI 264 - SC ORDER ], wherein the Hon ble Supreme Court held that excise duty paid and the Modvat credit availed were identical and therefore consequences of payment of excise duty after availing Modvat credit was revenue neutral. In view of the above apex court judgement, as per the facts of the present case also, it is clear case of Revenue Neutrality, therefore, demand is not sustainable on this ground. Applicability of Rule 16 of Central Excise Rules 2000 - HELD THAT:- Rule 16 clearly provides that an assessee can receive the duty paid goods in their factory and avail the cenvat credit and while clearing the same out of the factory, the same can be cleared on payment of excise duty. In this provision, the duty paid goods is deemed to be input in terms of Cenvat Credit Rules. The said goods can be cleared on payment of duty and the credit availed on the goods received by the assessee is allowed - In the present case also, the appellant have received the duty paid inputs, thereafter processed the same and cleared after processing on payment of duty on the transaction value. This would as permitted in terms of Rule 16 of Central Excise Rules 2000, therefore, the transaction in the present case is squarely covered by the Rule 16 of Rules. The demand is not sustainable - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2023 (1) TMI 987
Exemption from GST - sale of goods by the Canteen Stores Department to different Canteen Store Department situate outside the State of U.P. - Conditional nature of exemption or not - Eligibility for exemption Notification No.7037, dated 31.01.1985. HELD THAT:- From the reading of Notification dated 31.01.1985, benefit has been extended not only to the Canteen Stores Department/ Military Canteens, but also to U.P. Govt. Employees Welfare Corporation. The State Government found that there were certain contradictions to its earlier notifications which were issued in the years 1977 and 1981 in regard to Khadi Evam Gramodyog and Canteen Stores Department/ Military Canteens. The Circular dated 23rd July, 1987 has to be read in harmony with the Notification dated 31.01.1985, as the Notification of 1985 also provided exemptions of tax subject to certain conditions. Due to contradictions existing between the earlier notifications of the Government, Circular dated 23.07.1987 was issued on the direction of the State Government re-conciling the said fact. Though, the Circular of 23rd July, 1987 does not take note of the Notification dated 31.01.1985, but it mentions of the Notification dated 03.02.1981 which disallowed the exemptions under Section 8(2A) of CST. The Apex Court in Paper Products Ltd. [[ 1999 (8) TMI 70 - SUPREME COURT] ] and M/s Indra Industries [[ 2000 (1) TMI 44 - SUPREME COURT] ] has already clarified that circulars by Taxing Authorities are not binding on the Assessee, but the department could not take plea that they are not binding upon the department. The judgment and order passed by the Tribunal needs no interference of this Court and all the revisions stand dismissed.
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2023 (1) TMI 986
Reversal of Input tax Credit - on purchase of R.E.P. license which is goods, tax has been paid by the applicant - When a dealer after purchasing any import license from open market and after paying tax at the rate of 4% as per the notification and having used the license for import of chemical and thereafter selling the goods so imported by him in furtherance of his business is entitled for the benefit of I.T.C. or not? HELD THAT:- Section 13 of the Act of 2008 is charging section which deals for grant of Input Tax Credit to a dealer liable to pay tax subject to conditions given in Column (2), in respect of all taxable goods, where such taxable goods are purchased on or after date of commencement of the Act, are allowed credit of the amount, as Input Tax Credit, to the extent provided in Column (3) of the table - if goods purchased are used in manufacture of any goods and where such manufactured goods are sold in the course of export of goods outside the territory of India or any taxable goods manufactured are sold either inside the State or in the course of inter- State trade or commerce, a dealer is entitled to full amount of I.T.C. In the instant case, the claim of assessee-dealer was solely rejected on the ground that he had not dealt with the sale and purchase of license which he had purchased from open market and was thus not entitled to claim I.T.C. The authorities as well as the Tribunal recorded a finding that no manufacturing activity was carried out by the assessee after importing the goods from outside the country using the import license. In VIKAS SALES CORPORATION AND ANOTHER VERSUS COMMISSIONER OF COMMERCIAL TAXES AND ANOTHER (AND OTHER APPEALS AND WRIT PETITIONS) [ 1996 (5) TMI 363 - SUPREME COURT] , the Apex Court had already held that grant of license by Licensing Authority to the registered exporter is not a sale. The sale is when the registered exporter or purchaser sells it to another person for consideration - In the instant case, the assessee-dealer had purchased import license from another person after paying the taxes as was applicable and the licence, which was in a intangible form was converted into a tangible form by the assessee importing chemical from outside the country. The findings recorded by the Tribunal to the extent that I.T.C. can only be availed in case the assessee-dealer selling the licence itself and not importing the goods using the said import license and reselling the same in the market is not correct - revision allowed.
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2023 (1) TMI 985
Disciplinary proceedings against the assessing officer (AO) - Validity of assessment orders passed and subsequently cancelled - complaint given by the petitioner's predecessor was paid subsequently by the two contractors - HELD THAT:- It is clear that the petitioner has not committed any misconduct and no action can be taken against him in view of the fact that the assessment orders passed against the contractors have been once again quashed by an independent assessment made by another Assessing Officer. This Court will not interfere with a charge memo but no useful purpose will be achieved if a direction is issued to the respondents to complete the disciplinary proceedings initiated against the petitioner, within a time frame as the evidence placed on record before this Court as well as the statement made by the respondents before this Court through the learned Government Advocate makes it clear that the petitioner cannot be held guilty for the alleged charge, in view of the fact that his assessment order passed earlier in his official capacity has once again been re-affirmed in the subsequent assessment order passed pursuant to the directions given by this Court. Petition allowed.
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