Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 6, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Input Tax Credit was stated to be erroneously availed without filing form TRAN-1 - This Court finds that the show cause notice was issued on the premise that the transition of credit being invalid inasmuch as it was not made through form TRAN-1. However, form TRAN-1 has now been filed on the strength / basis of the direction of the Hon'ble Supreme Court of India. In the circumstances, it is appropriate that impugned show cause notice be kept in abeyance until orders are passed on the claim of transition credit under form TRAN-1 that is now filed. - HC
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Classification of services - The contract for construction of new railway siding at Jhanjra Area of ECL against order received from M/s. RITES Ltd is covered under the definition of works contract - Liable to GST @12% - AAR
Income Tax
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Reopening of assessment u/s 147 - sufficiency or inadequacy of reasons - There is no whisper in the impugned order as regards any failure on the part of petitioner to disclose fully and truly all material facts and as such it is not possible for this Court to infer any such failure on the part of the assessee from the reasons recorded. Petitioner had made adequate disclosures during assessment proceedings which is now sought to be reopened and particularly with reference to ground Nos.1 and 2 on which the respondent authority has proposed to reopen the assessment - change of opinion cannot be the basis for reopening the assessment. - HC
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Re-opening of the assessment / re-assessment u/s 147 - The borrowed opinion also being conspicuously absent in the instant case subsequent events also disclosing certain transactions attributable to the assessee having been unearthed during the course of search proceedings and the statement of the assessee himself disclosing the admission with regard to the said transaction, it cannot be gainsaid by the petitioner / assessee that such commencement of re-assessment proceeding is without jurisdiction or jurisdictional error having been committed by the authorities. - Petition dismissed - HC
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Revision u/s 263 by CIT - sale of shares - valuation - The facts of the present case reveal that the invocation of power u/s 263(3) was justified. Though the said company had closed down its business in the year 2002, it was endowed with sufficient valuable assets in the form of land. Therefore, the value of the shares ought to have been properly determined by the appellant and the Assessing Officer. - HC
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Revision u/s 263 - the ITAT was at fault while setting aside the revision order - It ought to have seen the mistakes committed by the Assessing Officer which resulted in an erroneous order being passed in favour of the respondent which was prejudicial to the interest of the revenue. In our view, the power was rightly exercised by the Commissioner of Income Tax while invoking Section 263- HC
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Capital gain computation - expenses incurred towards fees paid to KPMG, Khaitan & Co. Bank Charges and other miscellaneous expenses in relation to the transfer of capital asset u/s 48 - the engagement of the said firms has direct nexus with the transfer of shares. Hence, the expenditure incurred is deductible u/s 48(i) of the IT Act. - HC
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TDS provisions to be read along with DTAA for computing the tax liability - As per the DTAA, the maximum deduction shall not exceed 10% which the assessee has deducted. Any other interpretation to permit the taxing authority to raise a demand beyond 10% would be incongruous. - HC
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Addition u/s 28(iv) - Sweat equity shares - shares have been allotted to the appellant without any amount being paid as consideration in lieu of the appellant being an “expert” - no real income but only hypothetical income had accrued to the assessee and Section 28(iv) would be inapplicable to the facts and circumstances of the Essentially, the law evolved by the apex Court requires the Assessing Officer to be pragmatic and not pedantic. - AT
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Addition u/s 44DA - PE/Business Connection of the assessee - scope of phrase 'effectively connected with' - the assessee has offered the fee for technical services on gross basis and the activities conducted outside India are not effectively connected with PE in India, therefore, the addition made under Section 44DA of the I.T. Act is liable to be deleted - AT
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TDS u/s 192 - commission paid to partner - considering the provisions of Explanation 2 to Section 15 of the Act which includes salary, bonus, commission or remuneration received by partner under the head ‘salary’ and considering the provisions of section 192 of the Act which talks about the salary given u/s. 15 of the Act, thus, we are inclined to confirm the findings of the ld. CIT(A) that there is no requirement under the provisions of the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration etc or whatever name called given or credited to a partner of a firm. - AT
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Revision u/s 263 - The findings of ld Revisional Authority cannot be sustained as the enquiry in to the relevant issues is duly reflected in the assessment proceedings and only because the ld Pr. CIT being a higher authority and more wiser in experience considered that enquiry in some other aspects would have resulted in different opinion, does not give jurisdiction to exercise revisional power u/s 263. - AT
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Income deemed to accrue or arise in India - “Live” Feed or “modified” Feed - Allocation/apportionment of the Licensee Fee income - receipts from Set Setellite Singapore Pte. Ltd. (SET) - benefit of India Singapore Tax Treaty - 25% of Licensee Fee is fair estimation of the Licensee Fee attributable to the Non-Live Exhibitions and recorded content in “Live” Feed. There is no material placed on record by both the sides to arrive at the more precise or better estimation/apportionment. - AT
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Addition u/s 68 - Unexplained cash credits - share premium & security premium - source of alleged cash credit could not be explained - the provisions of section 68 have rightly been invoked by ld. AO and alleged sum is rightly treated as the unaccounted income of assessee, which has been routed in the books through bogus/accommodation entry in the form of share capital and security premium. - AT
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TDS u/s 195 - Royalty - import of software - The payments in question is made by the user of the Red Hat Subscriptions for the purpose of availing convenient installation, ongoing maintenance and support services provided by Red Hat engineers to the users of Red Hat Subscriptions and not towards Red Hat software. Thus, the payment does not towards sale of software which is freely available in the public domain. Therefore, in terms of Article 12(3) of India- Singapore DTAA it is not recognized royalty. - AT
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Reopening of assessment u/s 147 - There is no doubt in the mind of the Bench that at one end the Reasons cited in notice u/s 148 of the Act was erroneous with regard to calling for reassessment in regard to a factor which was already examined in the original assessment. On the other hand, in the assessment order an addition was made in regard to a head for which actually there was no show cause issued. - AO had error in invoking jurisdiction u/s 147 - AT
Customs
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Refund of amount with interest from the date of levy till final payment at the rate of 15% per annum - petitioners did not challenge the assessment order under three Bills of Entry - the assessment orders which are in form of bill of entries filed by the petitioners are not required to be modified or reassessed as the same are filed without inclusion of levy of anti dumping duty. The petitioners were compelled to pay such duty only after filling bill of entries so as to release the goods. - Refund allowed - HC
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Valuation of imported goods - undervaluation - deemed relationship between GOI, OMIFCO and the Appellants - related party or not - Department has not produced any evidence to show that the relationship between the parties has influenced the price. Therefore, the reasons for rejecting the transaction value is not in consonance with law and therefore liable to be set aside - Since the charges of misdeclaration & undervaluation are not sustainable in law, the differential duty demand along with interest and penalties imposed is liable to be set aside. - AT
Corporate Law
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Vicarious liability of Additional Director - Non-executive Independent Directors or not - Officer in default - non repayment of deposits by the Company to the depositors - The petitioner was Director in the Company and even if any doubt exists in respect of his status in the Company whether as Additional Director, Independent Director or Director then it can only be decided on the anvil of evidence to be led by the parties before the trial Court and not invoking the extra ordinary jurisdiction under Section 482 of Cr.P.C. - HC
IBC
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Seeking release of the corporate debtor from the rigours of CIRP - NCLT closed the CIRP proceedings despite the stay order by NCLAT against withdrawal Order - The Application for withdrawal of Section 9 Application filed is set aside and consequently the CIRP initiated as a result of admission of Section 9 Application vide Order dated 18.12.2020 is allowed to run its due course and be completed in accordance with the provisions of IBC, 2016 - AT
Service Tax
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Demand of service tax - appellant had received ‘supply of tangible goods for use’ (STGU) service from foreign suppliers - reverse charge mechanism - The supply of ISO Tankers on lease/rental basis by foreign suppliers to the appellant would amount to a deemed sale under article 366 (29A) of Constitution as the appellant throughout had effective control and possession over the ISO Tankers - No service tax liability - AT
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Refund of service tax - The appellant has paid the service tax during the period 2011 to 2014 and claimed the refund in the year 2018. The claim has been rejected on the ground of limitation invoking section 11B. The defence of the appellant is that any tax paid under mistake of law, the limitation under Section 11B does not apply. - AT
Central Excise
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Cenvat Credit - duty paying documents - self service tax paid challans - service tax paid on ocean freight services availed - It is apparent that the claim of the appellant to avail credit on the strength of Challan of Service Tax paid by them in the capacity of service recipient cannot be denied under Rule 9(1)(bb) - AT
VAT
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Disallowance of exemption under Section 5(2) of the CST - high sea sales - disallowance on the ground that same was not supported by documentary evidence - Bill of lading is not the only way of transfer of title and it can also be done by even handing over the Bill of Lading to the customers. - Claim of assessee allowed - HC
Case Laws:
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GST
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2023 (1) TMI 183
Levy of interest and penalty - Input Tax Credit was stated to be erroneously availed without filing form TRAN-1 on the basis of the GSTR 3B - HELD THAT:- Despite the fact that form TRAN-1 has been filed on the strength of the directions/ orders of the Hon'ble Supreme Court, the 2nd Respondent issued a communication on 23.09.2022, thereafter, there has been oral communication requesting the Petitioner to appear for the purpose of adjudicating the show cause notice. This Court finds that the show cause notice was issued on the premise that the transition of credit being invalid inasmuch as it was not made through form TRAN-1. However, form TRAN-1 has now been filed on the strength / basis of the direction of the Hon'ble Supreme Court of India. In the circumstances, it is appropriate that impugned show cause notice be kept in abeyance until orders are passed on the claim of transition credit under form TRAN-1 that is now filed. This Writ Petition is disposed of. This would not preclude the 2nd Respondent after deciding on the transition credit claimed in Form TRAN-1 to proceed with the show cause notice, if circumstances warrant and pass orders in compliance with the procedures contemplated / prescribed in law.
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2023 (1) TMI 182
Classification of services - works contract services - rate of tax - works being undertaken by the applicant for construction of new railway siding at Jhanjra Area, ECL Dist. Paschim Bardhaman, West Bengal against order received from M/s. RITES Ltd. - construction of rail infrastructure facilities - applicability of Sl. No. 3(v)(a) or Sl. No.3(xii) of Notification No 11/2017-Central Tax (Rate) dated 28/06/2017, as amended from time to time. Whether the work being executed by the applicant can be treated as works contract as defined u/s 2(119) of the GST Act? - HELD THAT:- In the case at hand, the letter of acceptance supra dated 02.03.2021 as furnished by the applicant refers the subject of work as e-Tender No. 07/OT/ECL-JHANJRA/Civil P. Way/PKG-III/20 dated 30.06.2020 for the work of Construction of Earthwork in Formation, Major Minor Bridge, ROB, Drain, P.Way Linking work including supply of Track Ballast, P. Way Fittings, Points Crossings, Derailing Switches etc., Construction of Service Building including Internal Electrification, Installation, Testing Commissioning of 140MT In-Motion Weigh Bridge and other allied works etc., (Pkg-III) in connection with construction of New Railway siding at Jhanjra Area, ECL, Dist. Paschim Bardhaman, West Bengal - On due consideration of the nature of works being undertaken by the applicant as detailed in the scope of work, we are of the opinion that the work is in relation to immovable property and certainly involves transfer of property in goods thereby qualifies to be a works contract as defined in clause (119) of section 2 of the GST Act. Whether the said work can be considered as original works ? - HELD THAT:- In the instant case the applicant executes construction work in connection of New Railway Sidings at Jhanjha Area of Eastern Coalfield Limited. Thus, we accept the contention of the applicant that the work can be considered as original works as defined in clause 2 (zs) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Whether the work can be considered as works contract pertaining to railways? - HELD THAT:- In the case of M/s Steadfast Corporation Ltd, Telengana [ 2016 (9) TMI 50 - AUTHORITY FOR ADVANCE RULINGS ], the applicant proposed to take up the activity of construction of Railway Works including sidings for private companies as well as Indian Railways. The Authority for Advance Rulings (Central Excise, Customs and Service Tax) vide order dated 15.07.2016 held that Construction of railway siding for private parties is exempt under Notification No. 25/2012-ST dated 20.06.2012, as amended vide entry No. 14(a) thereof - the work executed by the applicant in connection with construction of New Railway siding at Jhanjra Area, ECL pertains to railways.
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Income Tax
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2023 (1) TMI 181
Reopening of assessment u/s 147 - sufficiency or inadequacy of reasons - suppression or withholding of information by the assessee at the time of framing of the assessment or during the assessment proceedings - Whether the notice dated 29.03.2018 issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2011-12 is liable to be quashed or sustained? - HELD THAT:- There is no whisper in the impugned order as regards any failure on the part of petitioner to disclose fully and truly all material facts and as such it is not possible for this Court to infer any such failure on the part of the assessee from the reasons recorded. Petitioner had made adequate disclosures during assessment proceedings which is now sought to be reopened and particularly with reference to ground Nos.1 and 2 on which the respondent authority has proposed to reopen the assessment. The first three grounds on which the Assessing Officer has proposed to reopen the assessment as could be discerned from the assessment order, was part of the scrutiny during the assessment and Assessing Officer having consciously taken a particular decision, the change of opinion cannot form the basis for reopening the assessment that too based on same set of facts. In fact, it would be apt and appropriate to note at this juncture that during the course of the assessment proceedings, assessee has submitted three communications with reference to the first three issues based on which the assessment is sought to be reopened by highlighting the facts as more specifically stated therein which has gone into the decision making process at the time of passing assessment orders or in other words, the Assessing Officer took note of these facts and has formed an opinion, which opinion is now sought to be substituted and made as a ground for reopening of the assessment which is impermissible as change of opinion cannot be the basis for reopening the assessment. We are of the considered view that prayer sought for in the petition deserves to be granted by answering the point formulated hereinabove in favour of the assessee and against the Revenue.
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2023 (1) TMI 180
Re-opening of the assessment / re-assessment u/s 147 - Whether assessment proceedings could not be re-opened after 6 years and that too without any justification and sought for dropping of the proceedings? - HELD THAT:- Information received from the Investigating Wing cannot be denied and they are prepared after conducting search and seizure operation, inquiry, recording of the statements and collection of evidence. The expression reason to believe occurring in Section 147 would mean and include justification for such re-opening and when the AO has cause or justification to know or suppose that income had escaped assessment, it can be safely inferred that he is said to have reason to believe that income had escaped assessment. Finality to the ascertainment cannot be attached at this stage. When there is relevant material on which a person of reasonable prudence would have formed the belief of such escapement, it would suffice and in the instant case, the above material is sufficient enough to arrive at such a conclusion. The sufficiency of the material would be good enough for the authority to clutch the jurisdiction for commencement of reassessment proceedings. However, the sufficiency or correctness of the material would not be in the realm of consideration at this stage. Where the AO has reason to believe and there is prima facie material for commencement of re-assessment proceeding, sufficiency or correctness of the material is not a thing to be considered at that stage and the correctness or otherwise of the reasoning recorded for re-opening of the assessment would not be in the realm of adjudication by going into merits of the said reasoning. If such reasons are not perverse and there being not mere change of opinion and there being sufficient material or reason to believe there is escapement of income to tax it would suffice for the authorities to proceed to re-open the assessment subject to other prescribed criteria also being satisfied. The borrowed opinion also being conspicuously absent in the instant case subsequent events also disclosing certain transactions attributable to the assessee having been unearthed during the course of search proceedings and the statement of the assessee himself disclosing the admission with regard to the said transaction, it cannot be gainsaid by the petitioner / assessee that such commencement of re-assessment proceeding is without jurisdiction or jurisdictional error having been committed by the authorities. We are of the clear opinion that this is not a case in which we may exercise extraordinary jurisdiction nor a case is made out by the petitioner for this Court to exercise such extraordinary jurisdiction. Hence, we refrain to do so. Yet, another reason for us not to exercise the discretion is that under the scheme of the Act, petitioner has very much the remedy by way efficacious redressal mechanism under various provisions of the Act available and as such when petitioner is not left remediless, at this stage of proceedings, to invoke extraordinary jurisdiction would not be just and proper. At various stages, petitioner is permitted to avail alternative statutory remedies after ultimate analysis or conclusion being arrived at by an authority. At this stage, we may not assume anything and petitioner being not remediless, we are not inclined to exercise extraordinary jurisdiction. The judgment which have been relied upon by learned counsel for the petitioner are no-doubt projecting the salutary principles, but the background of this peculiar facts and the material and discussion which we have made in earlier paragraphs of this very order, we are of the opinion that no decision may be applied as a straitjacket formula as it reflects distinguishable circumstance as well and as such, based upon the sound principle of law on the precedent, we are of the view that decisions cited by learned counsel are of no assistance to their propositions. We are of the view that decisions in the case of Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] , in the case of Ami Ashish Shah [ 2021 (3) TMI 1174 - GUJARAT HIGH COURT] and decision [ 2017 (3) TMI 114 - GUJARAT HIGH COURT] d ated 15.2.2017 delivered in Special Civil Application No.21691 of 2016 with Special Civil Application No.21741 of 2016 relied upon would not be applicable, since facts on hand and the detailed analysis by the competent authority altogether project a different fact situation. We are of the considered view that there is no merit in these petitions and they are liable to be dismissed for the reasons aforestated and accordingly, they stand dismissed. Rule is discharged.
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2023 (1) TMI 179
Revision u/s 263 by CIT - sale of shares held by the respective appellants in Sri Solaiandavar Textile Mills Limited was sold to their father for a sum of Rs.4/- per share as against the nominal value of share at Rs.10/- per share was against the market value of Rs.19.33 per share - HELD THAT:- We are of the view that the order passed by the Assessing Officer while finalising the assessment under Section 143(3) of the Income Tax Act, 1961 has indeed resulted in erroneous order which were prejudicial to the interest of the revenue. The Supreme Court in the case of Malabar Industrial Co. Ltd [ 2000 (2) TMI 10 - SUPREME COURT ] held that an order can be said to be erroneous, if no inquiries or verification are made by the AO before passing an order; or if an order is passed without application of mind i.e. non application of mind to relevant material; or if an order is not in accordance with fact or law i.e. if there is an incorrect assumption of facts or an incorrect application of law. The facts of the present case reveal that the invocation of power under Section 263(3) was justified. Though the said company viz., M/s.Sri Solaiandaver Textile Mills Limited had closed down its business in the year 2002, it was endowed with sufficient valuable assets in the form of land. Therefore, the value of the shares ought to have been properly determined by the appellant and the Assessing Officer. The value of the share has been under valued by making it seem that the transfer to their father was only at Rs.4/- per share without any records. When the records were culled out by the Commissioner, the value of the share was re-determined at Rs.19.33 per share as against the nominal value of Rs.10/- per share. We therefore, find no reason to differ with the views expressed by the Tribunal the value of the shares were undervalued. We therefore answer the substantial questions of law against the appellant and in favour of the Income Tax Department. Appeal dismissed.
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2023 (1) TMI 178
Revision u/s 263 - Whether Tribunal was right in holding that the Commissioner of Income Tax did not have the power to revise the de novo order of the assessing officer, as there was no specific direction of the first appellate authority on the issue, even though the entire assessment had been set aside to be redone after making enquiries? - HELD THAT:- As the remand order of the Commissioner of Income Tax (Appeals) was not binding on the Appellate Tribunal in the appeal filed before it. The Appellate Tribunal was free to arrive at its own decision on the question of liability of the respondents. Impugned order of the Tribunal allowing the appeal of the respondent, in our view, is therefore unsustainable. The orders passed by the Assistant Commissioner both on 27.03.1997 before remand and after remand on 28.03.2000 pursuant to the remand order dated 26.03.1998 of the Commissioner of Income Tax (Appeals) have not only resulted in an order which is prejudicial to the interest of the revenue but also in an erroneous order. As an Appellate Commissioner, it was incumbent on the part of the Appellate Commissioner to have taken note of the latches and mistakes committed by the AO while passing the assessment order dated 27.03.1997 before remanding the case for passing a fresh assessment order. Equally, the Appellate Tribunal was at fault while passing the impugned order. It ought to have seen the mistakes committed by the Assessing Officer which resulted in an erroneous order being passed in favour of the respondent which was prejudicial to the interest of the revenue. In our view, the power was rightly exercised by the Commissioner of Income Tax while invoking Section 263 - Therefore, the Tribunal erred in allowing the respondent assessee's appeal. Allow this appeal and answer the substantial questions of law in favour of the appellant revenue.
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2023 (1) TMI 177
Provision for estimated loss on contracts - Allowable business expenditure under Section 37 - as per assessee provision for estimated loss on contracts is created on a scientific basis in accordance with the Accounting Standard (AS) 7 and as such it is an ascertained liability allowable as deduction under Section 37 - appellant had claimed the aforesaid estimated loss on the strength of Accounting Standards (AS) 7 of the Institute of Chartered Accountants - whether the provision made by the appellant in its books of account regarding the estimated loss on the ongoing project can be allowed or not by applying Paras 21 and 35 of the Accounting Standard (AS) 7? - HELD THAT:- The appellant has not explained how the total contract costs will exceed total contract revenue despite being specifically asked to explain. The appellant has neither explained the same before the lower authority nor before the first appellate authority nor before the Income Tax Appellate Tribunal. The only explanation that was given by the appellant before the Assessing Officer in its reply dated 24.02.2015 before the Assessment Order was passed u/s 143(3) of the Income Tax Act, 1961 on 24.03.2015, was a mere reiteration of the contents of paragraph 21 of Accounting Standard (AS) 7 which has been extracted above. No further explanation has been given by the appellant. A reading of paragraph 5 of the order passed by the Appellate Commissioner also indicates that the appellant has not demonstrated its case despite specific opportunity being given and has merely relied on the Judgments settling the substantial questions of law. Barring reference to Accounting Standard (AS) 7 for recognition of estimated loss there is no explanation on the facts by the appellant. Therefore, the decisions allowing deductions in the peculiar facts of the case cited by the Hon ble Supreme Court in Rotork Controls India (P) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] as held therein would not come to the rescue of the appellant. In the light of the above discussion, the substantial questions of law is answered against the appellant. We therefore, do not find any merits in the above appeal filed by the appellant. The appeal filed by the appellant therefore is liable to be dismissed.
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2023 (1) TMI 176
Assessment u/s 153A - incriminating material concerning such additions were found during the course of search or not? - HELD THAT:- Having regard to the decision rendered by not only the coordinate bench of this Court in CIT v. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] but also by the Orissa High Court in Smt. Jami Nirmala [ 2021 (8) TMI 594 - ORISSA HIGH COURT ], Rajasthan High Court Jai Steel (India), Jodhpur [ 2013 (6) TMI 161 - RAJASTHAN HIGH COURT ] and Jayaben Ratilal Sorathia [ 2013 (7) TMI 850 - GUJARAT HIGH COURT ], prima facie, the submission advanced by Mr Upadhayay, that incriminating material should relate to the AY in issue is correct. Since in this case, the incriminating material relates to AY 2021-2022, prima facie, the impugned order appears to be, at least at this stage, without jurisdiction. - Decided in favour of assessee.
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2023 (1) TMI 175
Capital gain computation - expenses incurred towards fees paid to KPMG, Khaitan Co. Bank Charges and other miscellaneous expenses in relation to the transfer of capital asset u/s 48 - Revenue s case is that expenditure incurred towards professional services rendered by KPMG and Khaitan Co. has no nexus with the transfer of shares - HELD THAT:- In the instant case, assessees have engaged the services of professional who have identified the investor, negotiated the value and structured the transaction. Therefore, in our considered view, the transaction has an inextricable nexus with the transfer of shares. The other ground that was urged on behalf of the Revenue is, KPMG had addressed the letter to the Managing Director of the Company and therefore, assessees had no obligation to make the payment. We have perused the engagement letter dated June 20, 2014. The letter is addressed to the Assessees. Thus, this contention is contrary to records and therefore liable to be rejected. In our considered view, the assessees, in accordance with the para 8 of the Articles of Association, have taken services of KPMG and Khaitan Co., and the engagement of the said firms has direct nexus with the transfer of shares. Hence, the expenditure incurred is deductible u/s 48(i) of the IT Act. Decided in favour of the assessees
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2023 (1) TMI 174
Income chargeable under the head Business and profession - ITAT noted that as per its observations, there was no business income in the present year, therefore, expenditure could not have been allowed in that year - HELD THAT:- In our view, the finding recorded by the ITAT is contrary to record and hence, perverse. So far as the deduction of 10% of expenditure is concerned, AO has recorded that authorized representative of the assessee was not able to establish all bills and vouchers. Accordingly, he has made adhoc deduction of 10% of the expenditure. The assessee's books of accounts have not been rejected and the deduction is made on adhoc basis. Questions of law is answered in favour of the assessee.
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2023 (1) TMI 173
TDS provisions to be read along with DTAA for computing the tax liability - scope for deduction of tax @ 20% under Section 206AA - Whether Tribunal is right in law holding that the TDS provisions in the Act has to be read along with DTAA for computing the tax liability on the sum in question and therefore when the recipient is eligible for benefit of DTAA then there is no scope for deduction of tax @ 20% under Section 206AA when the assessing authority has rightly invoked said provision as conditions set out in said provisions are satisfied in case of assessee? HELD THAT:- It is not in dispute that the assessee has made payment towards technical services to various recipients in different countries as per DTAA with different countries. In the case of Danisco, the Delhi High Court has held that Section 206AA cannot be understood to override the charging Sections 4 and 5 of the Act. It has further held that the provision in Section 206-AA has to be read down to mean that where the deductee i.e., the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. Thus, we are in respectful agreement with the view taken by the Delhi high Court. As per the DTAA, the maximum deduction shall not exceed 10% which the assessee has deducted. Any other interpretation to permit the taxing authority to raise a demand beyond 10% would be incongruous. Also contended that if the law laid down in Danisco is to be applied, Section 206-AA of the Act would be rendered redundant. Such contention is untenable in the facts of this case because there exists DTAA and tax deduction has been made at source as mandated by the said agreement. Decided in favour of the assessee
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2023 (1) TMI 172
Levy of penalty u/s 271(1)(c) - assessee had claimed excess long-term capital loss in the original return and thus wilfully attempt to defraud the Revenue by not disclosing the true and correct income - HELD THAT:- As is evident from the record, the assessee initially claimed long-term capital loss on the sale of residential property, wherein she is holding a 50% share. On pointing out the discrepancy during the assessment proceedings, the assessee filed a revised statement of income wherein the long-term capital loss was re-computed. It is not a case wherein due to incorrect computation of capital loss there was any impact on the taxable income for the year under consideration. However, only the loss claimed in the return, which was carried forward to future years for set-off was reduced. Further, it is also not a case wherein the assessee has disputed the computation of long-term capital loss without any substantial basis. Thus, once the discrepancy was pointed out, the assessee readily revised the statement of income and recomputed the long-term capital loss which has also been accepted by the Revenue without any variation in the assessment order. Therefore we are of the considered opinion that the assessee made a bona fide mistake in the computation of a long-term capital loss in its original return of income, which was corrected by the assessee by filing the revised computation during the assessment proceedings. We are of the considered view that this is not a fit case for the levy of penalty under section 271(1)(c) - Accordingly, the grounds raised in the present appeal are allowed and the AO is directed to delete the penalty, as affirmed by the learned CIT(A). Appeal by the assessee is allowed.
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2023 (1) TMI 171
Addition u/s 28(iv) - Sweat equity shares - shares have been allotted to the appellant without any amount being paid as consideration by the appellant, in lieu of the appellant being an expert having vast experience in a particular field, and supplying professional contribution, dedication and value addition to M/s RHL - shares are subject to a lock-in period of 3 years from the date of allotment of sweat equity - Whether no real income has accrued to the assessee despite the documentary evidence ? - As submitted that the appellant is not a professional and has no professional earning, nor has it received any professional fee and therefore the value of Sweat Equity is not chargeable under 28(iv) ? - HELD THAT:- Applying the three tests laid down by various decisions of the apex Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of M/s RHL to pass on the benefits of the high valuation of shares; and the probability or improbability of realization of the benefits by the appellant considered from a realistic and practical point of view (the reversal of entries in the books of M/s RHL having taken place subsequently), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) would be inapplicable to the facts and circumstances of the Essentially, the law evolved by the apex Court requires the Assessing Officer to be pragmatic and not pedantic. Section 28(iv) lays down that any benefit accruing to an assessee in the course of exercise of his profession shall be considered as his income. CIT(A) held that even assuming that a benefit could have said to have accrued, then also it has been held in the case of Helios Food Improvers Pvt. Ltd. [ 2007 (2) TMI 348 - ITAT MUMBAI] that the word benefit has to be interpreted that one party should give to the other an irretrievable benefit or advantage as an obligation or facility or concessions. It was further held that if only the seller had incurred an expense or liability or had provided facility to the purchaser, then the value of cash of such expense or benefit or perquisite shall be treated as income. The same was reiterated in Rupee Finance Management (P) Ltd. [ 2007 (2) TMI 240 - ITAT BOMBAY-J] . In the case of the appellant, the offer of sweat equity shares is conditional, and not irretrievable. Furthermore, it is seen that the entry of share premium liability and corresponding asset Intellectual Property Rights reflected in the books of M/s RHL have also been reversed subsequently. It thus follows that the appellant was never in receipt of any irretrievable benefit by way of share premium otherwise payable. Even this amount has no real basis of valuation. Therefore there is no irretrievable benefit that had accrued to the appellant, so as to bring the amount to tax in the hands of the appellant u/s 28(iv). Holding thus, the ld. CIT(A) deleted the addition in the hands of the assessee. Appeal of the Revenue is dismissed.
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2023 (1) TMI 170
Addition u/s 44DA - PE/Business Connection of the assessee - scope of phrase 'effectively connected with' - income disclosed by the assessee as Overseas Consultancy Income and offered on gross basis of FTS income is normal business and profession income u/s 44DA being effectively connect to the PE/ business collection of the assessee - HELD THAT:- As decided in assessee own case [ 2022 (10) TMI 905 - ITAT DELHI] effective connection comes into play if activities in. order to deliver contractual obligations stand performed through project office. Since in this Case, situs of performance of the activities is outside India, the effective connection is not there with the project office. In this case, the assessee has offered the fee for technical services on gross basis and the activities conducted outside India are not effectively connected with PE in India, therefore, the addition made under Section 44DA of the I.T. Act is liable to be deleted. In view of the discussion made above. On careful examination and consideration of the findings of the ld. CIT (Appeals), the evidences placed on record by the assessee, we do not see any infirmity in the order passed by the ld. CIT (Appeal) in holding that the assessee has rightly offered the OCI as fees for technical services under the provisions of section 115A of the Act and the addition made under section 44DA of the Act is liable to be deleted. Ground raised by the Revenue is rejected.
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2023 (1) TMI 169
Addition on account of bad debts claimed by the assessee - assessee submitted that it had given a loan of in earlier years to Shri Jayesh Mamoya, which was not recoverable and therefore was written back as bad debts and further submitted that the said loan was recovered in the next year and was offered as income - AO did not agree with the submissions of the assessee and held that the loan given is not in the nature of capital receipt or loss and therefore not in the nature of a revenue expenditure or income, thus, the expenses cannot be routed through the profit and loss account and since the conditions of section 36(2) are not satisfied, therefore, the claim of bad debts is not allowable - HELD THAT:- We find that during the assessment proceedings, in response to the query of the AO, the assessee submitted that Rs.4 lakh given as a loan was recovered in the subsequent assessment year and was also offered for taxation. However, the lower authorities despite the aforesaid fact proceeded to disallow the claim of bad debts and made the addition to the total income of the assessee. We find from the perusal of the profit and loss account for the year ended 31/03/2014, on page 15 of the paper book, that the amount of bad debts of Rs.4 lakh was received by the assessee and the same was declared as income in the subsequent assessment year. Thus, once the assessee has offered the income to tax in the subsequent assessment year, we find no basis in upholding the disallowance made by the lower authorities. Accordingly, we direct the AO to delete the addition - As a result, grounds no.3 (b) and 3(c) raised in assessee s appeal are allowed. Addition on account of bad debts claimed by the assessee - CIT(A) dismissed assessee s appeal by observing that the claim has no legs to stand upon, thus the disallowance is confirmed - assessee submitted that during the year the assessee had written off the amount due from the firm from the year 1994 95 AND that in the said firm 3 brothers and their mother was partner, which may have stopped doing the business - HELD THAT:- We find that the learned CIT(A) provided no reasons for coming to the aforesaid conclusion. Further, there is no basis whatsoever provided in the order dismissing the appeal filed by the assessee. As decided in SHIVSAGAR VEG. RESTAURANT [ 2008 (11) TMI 64 - HIGH COURT BOMBAY] Reasons provide live link between conclusion and evidence that vital link is a safe guard against arbitrariness, passion and prejudice. Reason is a manifestation of mind of adjudicator. It is a tool for judging the validity of the order under challenge. It gives opportunity to the higher court to see whether or not the adjudicator has proceeded on the relevant consideration, material and evidence. Therefore in view of the above, we deem it appropriate to remand this issue to the file of learned CIT(A) for de novo adjudication. Needless to mention that no order shall be passed without affording reasonable opportunity of being heard to both parties. Accordingly, ground No. 3(d) raised in assessee s appeal is allowed for statistical purposes.
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2023 (1) TMI 168
Ex parte assessment order u/s 144 - unexplained cash credits, share capital along with share premium - HELD THAT:- It is to be noted that on being asked the assessee to explain in this respect, neither anyone appeared on behalf of the assessee nor furnished any details. AO proceeded to frame the assessment considering that the assessee has not furnished any details, documents whatsoever in respect of aforesaid claim of share application and share premium. Assessing Officer, under the circumstances, treated the said amount as unexplained income of the assessee and made the impugned addition by framing ex parte assessment order u/s 144 of the Act. Assessee preferred appeal before the ld. CIT(A). Even before the ld. CIT(A), no one appeared on behalf of the assessee and since neither anyone appeared nor furnished any details, the ld. CIT(A), under the circumstances, upheld the order of the Assessing Officer. Before us, no power of attorney was filed by any counsel. However, as observed above, one Ms. Trisha Lahiri had appeared and sought adjournment. When she was directed to furnish the identity, details, address of the assessee etc., she disappeared and thereafter, no one has attended the hearing. As observed above, neither any document or details has been furnished before the Assessing Officer nor before the CIT(A) and even before us neither anyone has appeared nor any details furnished, we do not find any reason to interfere with the order of the Assessing Officer and the same is upheld. Appeal of the assessee is hereby dismissed.
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2023 (1) TMI 167
Addition u/s 68 - unexplained cash credits of share capital and share premium received during the year - HELD THAT:- The company having secured such huge magnitude of share capital and share premium must be having proper business set up. Statutory notice u/s. 143(2) of the Act duly served upon the assessee and when the case of the assessee was selected for scrutiny, there was no proper compliance. The assessee failed to produce the alleged parties who had subscribed to the equity shares of the assessee company and did not file any documentary evidence to explain the share capital and share premium of Rs. 11.72 cr. received by it during the year. Assessee failed to file necessary details to explain the source of alleged sum and also unable to prove identity and creditworthiness of the cash creditors as well as genuineness of the transaction. Assessee company has miserably failed to explain the source of alleged share capital and share premium. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details at any stage. Consistently escaping from appearing/producing the documents and alleged parties before the AO and the appellate authority( CIT-A) and non appearance before us indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium and, therefore, the provisions of section 68 have rightly been invoked by ld. AO treating the alleged sum as the unaccounted income of assessee, which seems to be routed in the books through bogus/accommodation entry in the form of share capital and security premium. Therefore, we find no infirmity in the finding of the ld. CIT(A) confirming the addition u/s. 68 - This ground of assessee s appeal is dismissed. Disallowance u/s. 14A - HELD THAT:- On perusal of order passed u/s.144 of the Act, we notice that said disallowance was made as there was no satisfactory submission/explanation. We thus fail to find any infirmity in the findings of the ld. CIT(A). Therefore, we dismiss raised by the assessee.
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2023 (1) TMI 166
Disallowance of excess commission paid u/s. 40(b)(v) - AO noted that the profit sharing ratio of the three partners is 38:1:1 but commission to the first partner was allowed @ 89.09%, which was excess by 51.08% - CIT-A deleted the addition - HELD THAT:- Considering the fact that since salary, bonus, remuneration or commission are collectively termed as remuneration and the remuneration paid during the year is within the permissible limit provided u/s.40(b)(v) of the Act, therefore, we fail to find any infirmity in the findings of the ld. CIT(A). Thus, ground no. 1 is dismissed. Non deduction of TDS on commission paid to partners - AO has alleged that the assessee failed to deduct tax at source on the commission paid to its partners - CIT-A deleted the addition - HELD THAT:- Finding of the ld.CIT(A) on fact and considering the judicial precedence remains uncontroverted by the ld. DR placing any other binding precedent in its favour. Therefore, considering the provisions of Explanation 2 to Section 15 of the Act which includes salary, bonus, commission or remuneration received by partner under the head salary and considering the provisions of section 192 of the Act which talks about the salary given u/s. 15 of the Act, thus, we are inclined to confirm the findings of the ld. CIT(A) that there is no requirement under the provisions of the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration etc or whatever name called given or credited to a partner of a firm. Thus, we fail to find any infirmity in the findings of the ld. CIT(A). Ground no. 2 is dismissed. Disallowance towards various expenses claimed by the assessee - AO made the said disallowance since the assessee failed to file necessary evidence in the course of the hearing - CIT(A) deleted the said disallowance observing that a high-pitched assessment has been concluded by the ld. AO in the present non-adversial tax regime - HELD THAT:- We, however, on facts of the case observe that no proper documents to support such claim were filed by the assessee before the ld. AO and looking to quantum of expenses and lack of sufficient evidence filed before the lower authorities, we sustain disallowance of expenses at Rs. 15,00,000/- as against of Rs.3,62,37,711/- made by the ld. AO under various heads of expenses. Thus, ground no. 3 raised by the revenue is partly allowed.
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2023 (1) TMI 165
Revision u/s 263 - whether interest income from his Saving Bank account was declared by him in his Return of income? - HELD THAT:- As observed that revenue cannot disputed the fact that while making assessment specific queries were raised by the ld AO questioning the deposit of amounts in the bank account and taking rescue of section 44AD the assessee had sought immunity of explanation and offered income to be tax @8% u/s 44AD. Office note referred by AR explicitly determines the issue in favour of the assessee. However, RA has gone into the questions of facts about the source of the deposits and giving his own reasons concluded that the deposits were unaccounted/ concealed income. RA has not only examined the deposits but also the manner of withdrawal. The copy of register showing the sale of milk and buffalos have been discredited to reach a finding that the ld AO failed to make enquiry. The findings of ld Revisional Authority cannot be sustained as the enquiry in to the relevant issues is duly reflected in the assessment proceedings and only because the ld Pr. CIT being a higher authority and more wiser in experience considered that enquiry in some other aspects would have resulted in different opinion, does not give jurisdiction to exercise revisional power u/s 263. That being so the grounds raised are allowed and the impugned order of revisional authority is set aside. The appeal is allowed.
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2023 (1) TMI 164
Unexplained money u/s.69A - amount received from his father - HELD THAT:- We noted that the CIT(A) has not doubted the source of maturity of assessee s father FDs of Rs.8 lakhs which was withdrawn on 01.11.2016. Admittedly, the assessee made deposit on 10.11.2016 in cash, this amount of Rs.8 lakhs. The only dispute is confirmation, which now the assessee confirmed by filing affidavit of assessee s father which states This money is received from two of my matured Fixed Deposits. I handed over the above mentioned sum to my son for his needs. From the above, it is clear that the source is explained and even the assessee s father confirmed having handed over the above sum of Rs.8 lakhs to his son, which ultimately got deposited in assessee s bank account on 10.11.2016. We find explanation of the assessee as reasonable and assessee could explain the source of this money and hence, the same cannot be treated as unexplained u/s.69A of the Act. Therefore, we delete this addition and allow the appeal of assessee.
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2023 (1) TMI 163
Disallowance u/s 14A r.w.r. 8D - expenses incurred for earning exempted income - HELD THAT:- CIT(A) has himself observed that the A.O. is justified in disallowing the expenses and despite such observation, in the later part he has deleted the disallowance - Thus, it is manifest that the Ld. CIT(A) has made a drafting mistake in the order and mistakenly deleted the disallowance, though the preceding observations made by him clearly demonstrate that he was of the view that the disallowance was required in the situation and that he agreed with the disallowance made by Ld. AO. Being so, we hardly need to mention anything further, suffice it to say that we too agree that the impugned expenses are incurred for normal functioning of the company and therefore incurred for entire business consisting of agricultural as well as nonagricultural activities. Therefore, the Ld. AO is quite justified in making 40% disallowance while framing assessment. Upholding the same, we dismiss the Ground No. 1. Unexplained income u/s 68 - bogus cash credit - HELD THAT:- There is a mis-match in the financial figures of RCSPL, which is the main basis to accept / reject the creditworthiness of RCSPL. Therefore, it is necessary to re-verify these material discrepancies in the orders of lower authorities. At this stage, finding no assistance from assessee, we are unable to rule out these discrepancies and ascertain the correct position. Therefore, in such circumstance, we are inclined to remit this ground to the file of Ld. CIT(A) who will take a call on these aspects and pass a reasoned order to settle the grievance of assessee involved in this ground. Needless to mention that the assessee shall be entitled to place before Ld. CIT(A) all evidences as may be in his possession for a proper adjudication of the issue involved in this ground. Thus, the Ground No. 2 is remanded back to Ld. CIT(A). Addition u/s 36(1) - disallowance of interest expenditure - HELD THAT:- We note that the Ld. AO has given adequate findings for making this disallowance. On the other hand, the Ld. CIT(A) has given very summary and cryptic order and given relief to the assessee. A bare reading to the paragraph of Ld. CIT(A) indicates that he has stated It is accepted principle that if there is interest free fund available to the appellant sufficient to meet its investment and at the same time the appellant raised the loan, it can be presumed that the investment is from the interest free fund available. Thus, the Ld. CIT(A) has proceeded on presumption basis, whereas the Ld. AO has given concrete findings in his order. In this scenario, we are in agreement with the Ld. DR that the disallowance ought to be upheld. We therefore reverse the action of Ld. CIT(A) and uphold the disallowance. Thus, the Ground No. 3 is hereby dismissed.
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2023 (1) TMI 162
Disallowance of interest expenses - AO disallowed interest expenses on the ground that assessee did not respond to the query raised by him as to why the proportionate interest income on advance to M/s. Musaddilal Holdings Pvt.Ltd. has not been offered to tax - CIT(A) partly sustained the action of the AO - HELD THAT:- It is the submission of assessee that when he has filed the requisite details before the completion of the assessment on 28.05.2021 and the assessment order was passed on 27.05.2021, therefore, the observation of the AO that assessee has not filed the requisite details is incorrect and the CIT(A) also is incorrect in stating that the assessee has not filed any reply before the AO. It is also the submission of the ld.counsel for the assessee that given an opportunity, the assessee is in a position to substantiate with evidence to the satisfaction of the AO that it has got sufficient funds to advance the amount for business exigency and therefore, no disallowance can be made under the provisions of law. We deem it proper to restore the issue to the file of the AO with a direction to examine the details already filed by the assessee vide letter and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Grounds raised by the assessee are accordingly allowed for statistical purposes.
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2023 (1) TMI 161
Income deemed to accrue or arise in India - receipts from Set Setellite Singapore Pte. Ltd. (SET) - benefit of India Singapore Tax Treaty - Global Cricket Corporation Pte Ltd (GCC), the Assessee in the present set of appeals, was incorporated as a private company limited by shares in Singapore - Eligibility of GCC to claim benefit of DTAA, and the characterization/taxability of income earned by GCC - HELD THAT:- On perusal of Section 10 of the Singapore Income Tax Act, 1947 reproduced by the CIT(A) in his order above it becomes clear that Section 10 creates a charge on income accruing in or derived from Singapore in addition to specified income received in Singapore from outside Singapore. CIT(A) has returned a finding that income under consideration has been offered to tax in Singapore as income accruing in or derived from Singapore. Thus, accepting the contention of GCC that the income under consideration is not taxable in Singapore on receipt/remittance basis, but on accrual basis. Nothing has been placed on record to controvert the findings of CIT(A). We have perused the documents/material relied upon by GCC in this regard including the income tax returns, financial statements, and confirmation from tax advisor. GCC has offered to tax its worldwide income in Singapore. Since Condition No.1, being one of the three conditions which are to be satisfied simultaneously for triggering the provisions of Article 24 of DTAA, is not satisfied, the CIT(A) was correct in holding that the provisions of Article 24 of DTAA would not get attracted and GCC would be entitled to claim benefit of the provisions of the DTAA. Since Condition No. 1 is not satisfied, the rival contentions in relating to the other two conditions (Condition No. 2 3 specified in paragraph 4.2 above) do not require adjudication having become academic in the context of applicability of Article 24 of DTAA. Thus, in view of our conclusion that provisions of Article 24 of DTAA would not be attracted in case of GCC, we hold that GCC would be entitled to avail the benefit of the provisions of DTAA. Ground No. 1, 2 and 3 raised by the Revenue are dismissed. Ground No.1 raised in the Cross Objection by GCC is disposed off as being infructuous. Payments of Licensee Fee made by SET to GCC in terms of the Heads Agreement are not taxable in India as royalties in terms of Article 12 of the DTAA since the same cannot be said to arise in India as the provisions Article 12(7) of DTAA - HELD THAT:- In the present case the contention of the Revenue is that the royalty income is liable to tax in India in terms of Article 12(2) of DTAA and that the applicability/non-applicability of Article 12(7) does not preclude the applicability of Article 12(2) of DTAA. The aforesaid contention was neither raised nor examined in the said cases. Thus, the decisions rendered in the context of Article 12(7) of DTAA are distinguishable on account of the aforesaid facts and therefore, not applicable to the issues raised by the Revenue in the present appeals. Accordingly, for the reason stated hereinabove we reject the contention advanced on behalf of GCC that Article 12(7) exhaustively defines where royalties arises. In view of the above, we hold that royalty income that accrues/arises in India as per Section 5 of the Act and the royalty income that is deemed to accrue/arise in India with the aid of Section 9 read with Section 5 of the Act would be considered as royalties that arises in India for the purpose of Article 12(1) and Article 12(2) of the DTAA. SET had the right to exhibit live/delayed coverage during the ICC-Event. After the ICC-Event, SET could exhibit full match recordings for the year of the ICC-Event and for subsequent year. SET also had the right to exhibit the highlights and programme featuring clips after the ICC-Event. SET could also exhibit/exploit coverage via Pay-Per-View during/after the event. Further, Clause 6 of Heads Agreement specifically provided that the rights granted to the Licensee shall include the rights to use the Feed and/or recording thereof on live, as live, delayed, deferred, highlights, clips, news, features, magazine and/or documentary basis. In view of above, it cannot be said that consideration paid by SET to GCC was simply for live broadcast/re-broadcast of the cricket match. The Heads Agreement, however, did not provide separate consideration or break-up of consideration for different rights forming part of bouquet of rights obtained by SET. Whether Live Feed delivered to SET by GCC or by the producer on behalf of GCC in terms of the Heads Agreement was Live Feed or modified Feed? - In view of the factual findings returned by us, after examining various agreements, to the effect that the consideration received by GCC from SET was (a) for live and non-live exhibitions and (b) the Live Feed was not simply live feed but the same was modified to include non-live content. At this point it would be pertinent to note that perusal of the decision cited on behalf of the GCC shows that the production agreement, which according to us provided the link between Recording and Feed , was not placed before the Tribunal/Court in any of the matters. Even before us, the production agreement has not been placed on record and has been referred to an relied upon by the parties and considered by us to the extent the same has been reproduced in the order passed by the CIT(A) for the Assessment Year 2003-04. Allocation/apportionment of the Licensee Fee income received by GCC from SET in terms of the Heads Agreement - As in the present case the Heads Agreement does not provide any break-up of the consideration. We note that the CIT(A) had, while deciding the appeal for the Assessment Year 2003-04, attributed 75% of the consideration for use of copyright in the live feed and balance 25% for use of copyright in non-live feed/transmission such as highlights, telecast of recorded matches etc. Keeping in view the overall facts and circumstances of the case, we hold that 25% of Licensee Fee is fair estimation of the Licensee Fee attributable to the Non-Live Exhibitions and recorded content in Live Feed. There is no material placed on record by both the sides to arrive at the more precise or better estimation/apportionment. Accordingly, in view of the above, we hold that 25% of the Licensee Fee paid by SET to GCC as fair estimate of income taxable in India as royalties in terms of Article 12(2) read with Article 12(3)(a) of the DTAA. Payments received by GCC from from LGEIL and HH which are in the nature of royalties is taxable at 10% of the gross amount in view of Article 12(2)(b) of the DTAA - We hold that payments made by LGEIL and HH to GCC for rights acquired in terms of GPA and SA, respectively, were for promotion, advertisement and publicity of their respective brands and products/services. We reject the contention of the Revenue that the aforesaid payments were made by LGEIL/HH for right to use equipment. It was also contended on behalf of GCC the advertising sites, scoreboards etc. do not constitute equipment. Since we have concluded as aforesaid, the examination of the said contention raised by GCC does not require adjudication as the issue raised therein has become academic. Levy and computation of interest under Section 234A and 234B - We note that this issue stand settled by the judgment of the Hon ble Supreme Court in the case of Director of Income Tax, New Delhi vs. Mitsubishi Corporation [ 2021 (9) TMI 875 - SUPREME COURT] wherein it has been held that prior to Assessment Year 2013-14, prior to the Financial Year 2012-13, an assessee was permitted to reduce the amount of income-tax which was deductible at source while computing the advance tax liability and therefore an assessee cannot be held to have defaulted in payment of its advance tax liability. Accordingly, no interest would be charged under Section 234B of the Act. Validity of reopenng of assessment u/s 147 - HELD THAT:- The return of income for the Assessment Year 2003-04 was merely process under Section 143(1) of the Act. The income tax return and/or accompanying documents were yet to be examined and therefore, no opinion was formed on the same. The return of income, the accompanying documents as well as the material/information gathered during the course of assessment for the Assessment Year 2002-03 (including Master Right Agreement, Head Agreement and Production Agreement which were relevant/operative for the Assessment Year 2003-04) and the findings returned in the Assessment Order for the Assessment Year 2002-03 constituted tangible material on the basis of which the Assessing Officer formed the belief that taxable income had escaped assessment. Explanation 2 to Section 147 of the Act specifically provides that income chargeable to tax shall be deemed to have escaped assessment where return of income has been furnished but no assessment has been made, and it is noticed by the Assessing Officer that the Assessee has understated the income or has claimed excessive deduction or relief in the return. Thus, there existed tangible material on the basis of which the Assessing Officer formed belief that income chargeable to tax for the Assessment Year 2003-04 has escaped assessment. Thus we hold that re-assessment proceedings for the Assessment Year 2003-04 were initiated in compliance with the provisions of Section 147/148 of the Act and the same cannot be regarded as bad in law. Accordingly, Ground No. 1 raised by GCC in Appeal is dismissed.
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2023 (1) TMI 160
Addition u/s 68 - Unexplained cash credits - AO was not satisfied with the genuineness of share capital and share premium security premium received by the assessee company - HELD THAT:- Assessee failed to produce the alleged parties who had subscribed to the equity shares of the assessee company. The assessee was asked to explain the cash credits received by it during the year. The assessee failed to file necessary details to explain the source of alleged cash credit and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction. The assessee company has miserably failed to explain the source of alleged cash credit. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details at any stage. Consistently escaping from appearing/producing the alleged parties before the ld. AO and the appellate authority(ld.CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium and, therefore, the provisions of section 68 have rightly been invoked by ld. AO and alleged sum is rightly treated as the unaccounted income of assessee, which has been routed in the books through bogus/accommodation entry in the form of share capital and security premium. Therefore, we find no infirmity in the finding of the CIT(A) confirming the addition u/s. 68 of the Act. Thus, all the grounds of appeal raised by the assessee are dismissed.
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2023 (1) TMI 159
TP adjustment made in the 'Trading segment - Selection of MAM - Application by the TPO of the TNMM as the most appropriate method as against the assessee choosing the RPM - This segment consisted of the international transaction of Purchase of traded goods at transacted value - HELD THAT:- As the assessee is admittedly engaged in purchase of products from its AE, which have been sold to the unrelated parties as such without carrying out any value addition. Doubtlessly, it is only the RPM which would govern the situation and will have to be applied as the most appropriate method. Simply because the ratio of employee cost and depreciation of the assessee to the revenue under the segment is more in comparison with some of its comparables, that would not thwart the application of the RPM. Such effect of individual higher or lower values of expenses gets ironed out when the gross profit margin is taken. We hold that the AO was not justified in applying the TNMM as the most appropriate method as against the RPM. The impugned order is set aside on this score and the matter is sent back to the file of the AO/TPO for re-determining the ALP of the `Trading segment under the RPM with the comparables and allocation of expenses as finally approved by the DRP. Needless to say, the assessee will be allowed reasonable opportunity of hearing in such fresh determination. TP adjustment in the `Manufacturing segment - Assembly/Manufacturing segment is determining the comparability of the companies selected - HELD THAT:- Mettler Toledo India Pvt. Ltd. - As percentage of the related party transactions of expenses of this company is more than 57% of the total expenses incurred by it, which fails the RPT filter notwithstanding the fact that the percentage of the RPTs of the revenue items is way below 25%. We, ergo, direct to exclude this company from the list of comparables. Avery India Ltd - Turning to the facts of this company, we find that it is into manufacturing weighing machines and has also undertaken contracts. 77% of its revenue is from manufacturing and 23% from contracts. The very fact that this company is engaged into manufacturing of weighing machines and not into any basic level assembly, we hold that it cannot be considered as comparable to the assessee. Essae Teraoka Private Ltd - As seen that the nature of business of this company is multi-dimensional ranging from design, manufacture of electronic weighing and POS system, self-service KIOSK and GPS synchronized clock. It is also into field of constructing and long term leasing of high quality built to suit industrial and commercial space to its clients. This company is also engaged in R D activity, which is apparent from its Annual report. In view of the clear difference in the nature of business carried by this company vis- -vis the assessee doing only the low end assembly activity, we hold that there is no comparison between the two. As such, this company is also directed to be excluded. Nitiraj Engineers Ltd. - As seen that it is in the business of wide range of production of electronic weighing scales, currency counting machine and electronic fare meters etc. It has its full-fledged R D department. It is also engaged in designing and developing electronic hardware and software. In addition, this company also holds intangible assets and has its full-fledged manufacturing facility. In this backdrop of facts, it is directed to be excluded from the list of comparables. Rice Lake Weighing Systems India Ltd. - As gone through the Annual report of this company, which shows that it is engaged in the business of manufacturing, marketing and servicing of road and rail weigh bridges, in-motion electronic weighing systems and other weighing systems mainly used in industrial activities, bulk material handling systems and batching systems. This company also earns royalty income which shows that it has developed its own technical know-how that has been provided to others on payment basis. In addition, this company is also engaged in Research Development for which it has spent substantial amount. The above distinguishing features make this company incomparable to the assessee company. We, therefore, order for its exclusion. Precia Molen India Pvt. Ltd. - After going through the Annual report of this company, it can be seen that it is engaged in the manufacturing and marketing of electronic weighing systems having huge intensity plant and machinery. This company is also paying royalty for use of technical know-how for the purpose of manufacturing. Since this company is into full-fledged manufacturing, we hold that it cannot be compared with the assessee engaged in low-end assembly function. We, therefore, order to exclude it from the list of comparables. TPO retained only one comparable, viz., Kusum Electrical Industries Ltd. from the assessee s list and included 9 more. The DRP squeezed the TPO s list of comparables from 10 to 7 by retaining the one which was chosen by the assessee and allowed by the TPO in his list We have seen supra that the six new comparables of the TPO, sustained by the DRP, are not comparable for the reasons assigned above, thereby leaving one company in the tally of comparables, being, Kusum Electrical Industries Ltd. having negative weighted working capital adjusted margin of (-) 10.26% as determined by the AO in his final order giving effect to the directions of the DRP. As against the ALP of (-) 10.26%, the PLI of the assessee from this segment has been computed by the AO in his final assessment order at (-) 7.23%, which discerns that the transaction is at ALP. The addition under this segment is directed to be deleted.
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2023 (1) TMI 158
Unearned revenue like subscription services - assessee has been following consistent method of percentage completion as per the AS-9-Revenue Recognition whereby income is recognized over a period of time following the matching concept of accounting - CIT (A) too has confirmed the reasoning of the AO and independently referred to the Reseller Agreement between assessee and Singapore entity - After referring to AS-9 observation, he held that assessee is selling the access code only, therefore it does not hold merit. Accordingly, the entire revenue recognized by the assessee in the year of sale and not deferred over the period of contract - HELD THAT:- Tribunal in AY 2016-17 [ 2022 (2) TMI 1283 - ITAT MUMBAI ] following the assessee s own case for AY 2012-13 order has accepted the assessee s contention and held when due taxes have been deducted and paid to the Income Tax Authorities while making such payment to Red Hat US in terms of the agreement entered into between the assessee and the Red Hat US in accordance with the consistent revenue recognition policy adopted by the assessee, upheld by Tribunal in assessee s own case for earlier years, addition made by the Ld. AO/DRP on account of unearned revenue qua subscription services is not sustainable in the eyes of law. TDS u/s 195 - assessee has made remittance to Red Hat Singapore for the import of software and according to him, the said payment is in the nature of Royalty‟ not only under the provisions of section 9(1)(vi) and also Fees for Technical Services‟ u/s 9(1)(vii); but as well as under Article 12 of India-Singapore DTAA - HELD THAT:- As already noted the facts as above. It is evident that the Red Hat Subscriptions is purely for support services and it is open source software which is freely available after downloading from variety of website and no licence fees for the use of right to such software is charged. In fact no where it is discernable from records whether there was any kind of licence agreement for open source use of software. It is also not the case of AO that there is some kind of license which subscriber has to agree. In fact the software is available for free. There is no subscription for the use of software by the subscribers either to the assessee or Red Hat Singapore. The payments in question is made by the user of the Red Hat Subscriptions for the purpose of availing convenient installation, ongoing maintenance and support services provided by Red Hat engineers to the users of Red Hat Subscriptions and not towards Red Hat software. Thus, the payment does not towards sale of software which is freely available in the public domain. Therefore, in terms of Article 12(3) of India- Singapore DTAA it is not recognized royalty. Payment cannot be brought under the purview of Article 12(4). Thus, we agree with the reasoning and findings of Ld. CIT(A) that the transaction involved is free sale and the amount paid to Red Hat Singapore for supply of Red Hat Subscriptions is the price of maintaining and support services and not the price of any kind of licence granted. Nowhere the Red Hat Singapore has granted the right or permiting to download the software and there is no licence is payable to use as subscription. Thus, the order of Ld. CIT (A) is confirmed and the ground raised by the revenue is dismissed.
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2023 (1) TMI 157
Reopening of assessment u/s 147 - reopening beyond a period of 4 years - addition on account of interest on advances - HELD THAT:- What can be observed is that as with regard to addition there was no notice to the assessee that the Ld. AO had considered it to be one which escaped assessment and the assessee was only made to explain the expenditure shown on account of loss on sale of repossessed assets and excess deduction. Certainly with regard to additions made on account of interest on inter-corporate deposits, there was no actual show cause notice. It can be further observed from matter on record that in original assessment the question of claim of loss of Rs. 2,95,61,000 /- on sale of vehicles are repossessed by the assessee company from defaulter parties was considered as is manifested by letter dated 23.10.2008 of the assessee addressed to the Ld. AO and the same being on paper book at page no. 7. There is no doubt in the mind of the Bench that at one end the Reasons cited in notice u/s 148 of the Act was erroneous with regard to calling for reassessment in regard to a factor which was already examined in the original assessment. On the other hand, in the assessment order an addition was made in regard to a head for which actually there was no show cause issued. Thus, the bench is of considered opinion that Ld. AO had error in invoking jurisdiction u/s 147 of the Act, therefore, these grounds no. 1 and 1.1 of the assessee are allowed.
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Customs
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2023 (1) TMI 156
Refund of amount with interest from the date of levy till final payment at the rate of 15% per annum - rejection of refund claim of the petitioners in the remand proceedings on the ground that the claim of the petitioners is not maintainable as the petitioners did not challenge the assessment order under three Bills of Entry and in absence of challenge to the assessment orders by which Anti Dumping Duty was levied - HELD THAT:- It appears that the petitioners paid the Anti Dumping Duty as per the directions of the respondent authorities to clear the goods imported on 21.05.2015. Admittedly on that date, Notification No.15/2014 dated 11.4.2014 levying Anti Dumping Duty for a period of six months was not applicable. The contention raised on behalf of the respondents that Notification No.21/2015 dated 22.5.2015 is issued with effect from 11.04.2014 is not tenable in law in view of decision of the Apex Court in case of G.M. Exports [ 2015 (9) TMI 1162 - SUPREME COURT] , wherein the Apex Court decided the question of law as to whether Anti Dumping Duty imposed with respect to imports made during the period between the expiry of the provisional Anti Dumping Duty and the imposition of the final Anti Dumping Duty is legal and valid or not and while deciding such a question of law. As the respondent authority has not carried out the directions issued by the appellate authority and has tried to justify the order which is set aside by filing the affidavit in reply on merits in this proceeding, it would be a futile exercise to direct the respondent n.2 for passing the order as per the directions of the appellate authority - the assessment orders which are in form of bill of entries filed by the petitioners are not required to be modified or reassessed as the same are filed without inclusion of levy of anti dumping duty. The petitioners were compelled to pay such duty only after filling bill of entries so as to release the goods. The respondent authorities are directed to refund amount of Rs.23,62,796.00 with interest at the rate of 6% per annum from the date of levy till final payment within eight weeks from the date of receipt of copy of this order - Petition allowed.
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2023 (1) TMI 155
Valuation of imported goods - undervaluation - Urea - Ammonia - rejection of declared value - huge difference between the prices of the same goods imported in terms of UOTA and AOTA and international price of said goods - relationship between GOI, OMIFCO and the Appellants - related party or not - HELD THAT:- Sub-clauses (i) to (viii) of Rule 2 (2) of CVR, 2007 indicates that each of these sub-clause deals with different means of establishing deemed relationship between two persons. In terms of Rule 2(2)(i) persons can be deemed to be related only if they are officers or directors of one another s business. In terms of Rule 2(2)(ii) persons can be deemed to be related only if they are legally recognized partner in business and in terms of rule 2(2)(iv) persons can be deemed to be related only if both of them are directly or indirectly controlled by the third person. In the present matter we find that department has failed to prove that as to how the Appellants on one hand and DOF, GOI on the other hand were officers or directors of one another s businesses. Thus, the condition prescribed in sub-rule 2(2)(i) is not satisfied in the instant case. The contention of the revenue also not correct in terms of Rule 2(2)(ii) on the ground that Appellants and OMIFCO are legally recognized partners in business, in as much as IFFCO/ KRIBHCO hold 50% of equity of OMIFCO and that there are two representatives of IFFCO/KRIBHCO on the Board of Directors of OMIFCO while another Director on the Board of OMIFCO represents the GOI - a company and shareholder cannot be termed as partner in the business carried on by the company. In partnership Act, 1932 partnership has been defined as relationship between two persons who have agreed to share profit of business carried on by all or any of them acting for all. Partnership is formed through an agreement. In the present matter there is no partnership agreement between the Appellants and OMIFCO, so they cannot be treated as legally recognized partners only because the Appellants hold 50% share in OMIFCO. It is a settled principle of law that the authority making the allegations has to prove with sufficient evidence. In the instant case, leaving alone the evidence, even reasons to entertain such a belief have not been properly brought forth or established - the declared prices cannot be reviewed without any evidence to the effect that the relation between the appellants and sellers has influenced the declared price or to the effect that there was a flow back of money from the importer to the related supplier. Therefore, we don t find any substance to sustain the impugned orders. The alleged relationship between the Appellants/ GOI and OMIFCO has not influenced the price of the imported goods. Urea- Off Take agreement and Ammonia- off Take agreement both are long term international contract finalized between two sovereign countries. From the MOUs and agreements it is also clear that rates were finalized for 15 years. Further it is evident that GOI had agreed to purchase 100% of rated production on the basis of fixed Long Term Pricing (LTP) for 15 years. These facts would evidence that there was a long term agreement as regards production and sale of goods by OMIFCO and purchase of the same by GOI/ Appellants. Government has issued Notification No. 4/2015 dated 16.02.2015 exempting Urea when imported into India from OMIFCO under the UOTA agreement dated 29.05.2002 from the customs duty and additional customs duty leviable under sub-section 1 of Section 3 of the Customs Tariff Act subject to condition that the importer produce the certificate to effect that the declared value is in the terms of agreed price under UOTA. The important aspect is not the exemption but the acceptance by the Government about the correctness of the price under UOTA. The goods imported in this matter have followed the said LTP price only. In the present matter impugned orders and department had not established that the price of the goods imported by the Appellants was influenced by the relationship between OMIFCO. Thus, it is clear that even if it is assumed that the buyer and seller are related in terms of Rule 2 (2) of valuation Rules, 2007 read with explanation II of said Rule, the price at which the goods were purchased from OMIFCO is the true transaction value and not influenced by their relationship. In the present matter Department has also not produced any evidence to show that the relationship between the parties has influenced the price. Therefore, the reasons for rejecting the transaction value is not in consonance with law and therefore liable to be set aside - Since the charges of misdeclaration undervaluation are not sustainable in law, the differential duty demand along with interest and penalties imposed is liable to be set aside. Appeal allowed.
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Corporate Laws
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2023 (1) TMI 154
Vicarious liability of Additional Director - Non-executive Independent Directors or not - Officer in default - non repayment of deposits by the Company to the depositors - alleged violation of section 74 of Companies Act - HELD THAT:- This is a case where raison d' etre of petitioner's submissions is his status in the Company as Non-executive Independent Director. According to the petitioner, he was appointed as Non-executive Independent Director in the Company since 29/11/2006 and worked till 31/3/2015 in same capacity, therefore, submission advanced on behalf of petitioner was that the petitioner was neither Key Managerial Personnel as per Section 2 (51) nor he was Officer in Default as per Section 2 (60) of the Companies Act, 2013. The petitioner was Director in the Company and even if any doubt exists in respect of his status in the Company whether as Additional Director, Independent Director or Director then it can only be decided on the anvil of evidence to be led by the parties before the trial Court and not invoking the extra ordinary jurisdiction under Section 482 of Cr.P.C. Even otherwise, Section 2(51) of the Companies Act, 2013 defines Key Ministerial Personnel in relation to Company and it provides an exhaustive list of Officers - Section 2 (60)(v) provides a broad mechanism under which any person related to the Company's affairs can be included. Here it is to be noted that in sub-section (iv) and (v) of Section 2 (60) word person has been used, ergo, it expands the spectrum / scope of Officer who is in default . Sub-section (iv) and (v) defines exhaustive list of participants in different manner. Therefore, on this count also, case of petitioner lacks merits. In the cumulative analysis, no error of law has been made by Court below while passing the impugned order and rightly taken cognizance against the petitioner. Petition dismissed.
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2023 (1) TMI 153
Non-compliance of Section 220 of the Act, 1956 for period in year 2008-2009 and 2009-2010 - non-submission of balance sheet and profit and loss account - case of petitioner is that he retired form post of Director prior to the alleged period and no liability can be fastened on him - HELD THAT:- This is a case where admittedly petitioner worked as Director of the Company between the period 30th September, 1992 till 13th March, 1995 and then resigned. In 2011, under the mistaken belief, complaint was filed against present petitioner also for alleged non-compliance of Section 220 of Act, 1956 for which penalty is provided under Section 162 of the Act, 1956. Admittedly, alleged non-compliance is for the period 2008-2009 and year 2009-2010 where some defaults on the part of the Company are made. Admittedly, petitioner resigned w.e.f. 13th March, 1995. Much thereafter, alleged defaults have been committed. From the facts, it appears that S.E.B.I. has already considered this aspect twice and exonerated the petitioner from the teeth of Section 162 of the Act and other related provisions. This stands true for all other cases also, particulars of which are given in table above. All provisions and respective penalty, if looked into, then it is clear that no case is made out against the petitioner. The petitioner made out his case for interference. Once, he resigned in the year 1995, then he cannot be fastened with any liability for a period of 2008-2009 and 2009-2010 - petition allowed.
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Insolvency & Bankruptcy
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2023 (1) TMI 152
Seeking release of the corporate debtor from the rigours of CIRP - NCLT closed the CIRP proceedings despite the stay order by NCLAT against withdrawal Order - initiation of the first CIRP on the basis of Section 9 Application filed by the Zielen Industry Pvt. Ltd., which was later permitted to be withdrawn - what should be the effective CIRP against the corporate debtor? HELD THAT:- It is noted that the Adjudicating Authority admitted Section 9 Application filed by the operational creditor Zielem Industries Pvt. Ltd. against the corporate debtor-Sintex BAPL Limited on 18.12.2020. It is also noted that the operational creditor-Zielem Industries Pvt. Ltd. and the corporate debtor entered into a settlement which led to the filing of an Application bearing I.A. No. 18/AHM/2021 seeking withdrawal of the Section 9 admission order and closure of the CIRP - the order to maintain status quo-ante with regard to the corporate debtor and its assets means that the withdrawal of Rs. 116.41 Crores by State Bank of India on 30.06.2021 was against this stay order and this amount should be put back in the account of the corporate debtor, and additionally the hold put by SBI on amount of Rs. 31.27 Crores which is in the the Trust and Retention Account should also be released so that the amount remains as an asset and under the control of the corporate debtor. Once the claim and interest of financial creditor-KKR India Financial Service Ltd. had been noticed by the Adjudicating Authority while considering the withdrawal application and protection was granted through stay of its own order on 30.06.2021, which was further reinforced by the order dated 12.07.2021 requesting restoration of status quo ante by this Tribunal, it would only be appropriate that the CIRP, which was initiated as a result of Section 9 Application vide Order dated 18.12.2020, be allowed to continue and run its due course as it would allow adequate and proper insolvency resolution of the corporate debtor. The Application for withdrawal of Section 9 Application filed is set aside and consequently the CIRP initiated as a result of admission of Section 9 Application vide Order dated 18.12.2020 is allowed to run its due course and be completed in accordance with the provisions of IBC, 2016 - Appeal disposed off.
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2023 (1) TMI 151
Locus standi to file the Company Petition - shareholding of petitioner is 70% or not - HELD THAT:- This Tribunal lucidly makes it quite clear that the Tentative Observations, made to the effect that the very Locus standi of the Petitioners to file Company Petition at stake, etc. shall not stand in the way of the Tribunal in deciding or rendering findings of the Locus of the Petitioners and the issues / points for determination, while adverting to the same and the Tentative Finding, so rendered in the impugned orders cannot be a decisive and governing factor for the Tribunal to decide the main Company Petition, in a final and conclusive manner of course, in a fair, just, dispassionate manner and to pass a reasoned speaking order, in a qualitative and quantitative terms by adverting to the points / issues raised and the documents were filed or produced and after weighing the pros and cons of the materials can arrive at a reasonable prudent conclusion, viz., in the manner known to Law and in accordance with Law, after providing due opportunities to the relevant parties, by adhering to the principles of Natural Justice in stricto senso of the term. This Tribunal points out that liberty is granted to the Appellants / Petitioners to raise all factual and legal issues before the Tribunal (National Company Law Tribunal, Hyderabad Bench, Hyderabad), including the aspect of the Locus standi of the Appellants/ Petitioners, in regard to the shares held by them and the Tribunal shall permit the Appellants / Petitioners to raise their defences in support of their claims strictly, in accordance with Law, if they so, desire / advised - Appeal disposed off.
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Service Tax
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2023 (1) TMI 150
Recovery of service tax alongwith tax and penalty - Non-payment of service tax - appellant had received supply of tangible goods for use (STGU) service from foreign suppliers - reverse charge mechanism - whether the transaction between the appellant and the foreign buyer would involve the transfer of right of possession and effective control or a transfer of right to use? - HELD THAT:- The Constitution empowers the State to levy Sales Tax/VAT on transactions in the nature of transfer of right to use goods, which were earlier not exigible to sales tax as such transactions were not covered by the definition of sale as given in the Sales of Goods Act, 1930 - the term transfer of right to use goods has neither been defined in the Constitution nor in any of the State VAT Acts or Central Sales Tax Act. The transaction between the appellant and the foreign buyer would qualify as a transfer of right to use goods with the control and possession over the ISO Tanker passing on to the appellant. The Andhra Pradesh High Court in RRASHTRIYA ISPAT NIGAM LTD. VERSUS COMMERCIAL TAX OFFICER, COMPANY CIRCLE, VISAKHAPATNAM [ 1989 (12) TMI 325 - ANDHRA PRADESH HIGH COURT ] observed that the transaction does not involve transfer of the right to use the machinery in favour of the contractor. As the fundamental requirement of section 5-E is absent, the hire charges collected by the petitioner from the contractor are not exigible to sales tax. The impugned order notices that the appellant had taken the ISO containers on lease/rental basis and it had paid an amount of Rs. 4,60,67,566/- to the foreign supplier who did not have any office in India for supply of the containers - The Commissioner fell in error in not appreciating the difference between a sale and a deemed sale contemplated under article 366 (29A) of Constitution. In a deemed sale it is necessary to examine who has the possession and effective control over the goods. Even the Circular dated 29.02.2008, on which reliance has been placed by the Commissioner, emphasises that in the case of a deemed sale under article 366 (29A) of Constitution, transfer of right to use involves both transfer of possession and control over the goods. The Commissioner also fell an error in holding that since sales tax/VAT was not paid by the appellant, it would not amount to a deemed sale . The Commissioner failed to appreciate that since the translation involved sale or purchase of goods in the course of import of goods into India, no sales tax/VAT was required to be paid even if the transaction qualified as a deemed sale . The supply of ISO Tankers on lease/rental basis by foreign suppliers to the appellant would amount to a deemed sale under article 366 (29A) of Constitution as the appellant throughout had effective control and possession over the ISO Tankers. The order dated 29.07.2016 passed by the Commissioner, therefore, cannot be sustained - Appeal allowed.
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2023 (1) TMI 149
Refund of service tax - liability to pay service tax was on SBI Life Insurance who had indeed paid the service tax - rejection on the ground of time limitation - Section 11B of CEA - HELD THAT:- It is not disputed that the service tax has been paid by the appellant in the capacity of service provider as well as by the service recipient, namely, SBI Life Insurance. The appellant has paid the service tax during the period 2011 to 2014 and claimed the refund in the year 2018. The claim has been rejected on the ground of limitation invoking section 11B. The defence of the appellant is that any tax paid under mistake of law, the limitation under Section 11B does not apply. The decision of hon ble High Court of Gujarat in the case of AJNI INTERIORS VERSUS UNION OF INDIA AND 1 OTHER (S) [ 2019 (9) TMI 529 - GUJARAT HIGH COURT ] where it was held that Once it is held that the payments made by the petitioner were in the nature of excise duty and were not deposits, the provisions of Section 11B of the Act would be attracted; and having regard to the fact that the amounts in question had not been deposited under protest, the petitioner would be liable to file the claim within the prescribed period of limitation and in the manner prescribed by the statute, viz. in the prescribed format. It is an admitted position that the petitioner has not filed the refund claim within the prescribed period of limitation and hence, the Tribunal was wholly justified in rejecting the claim as being time barred. Appeal dismissed.
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Central Excise
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2023 (1) TMI 148
CENVAT credit of additional excise duty in lieu of Sales tax [AED(GSI)] (Additional Excise Duty (Goods of Special Importance) paid on Nylon Tyre Chord Fabric used in the manufacture of tyres - HELD THAT:- Undisputed facts of the case are, pursuant to the first amendment of Rule 3(6) of CENVAT Credit Rules brought with effect from 01.03.2003, assessee utilized the credit for payment of duty on tyres by way of cross utilization of AED(GSI). With the subsequent amendment, the assessee re-credited the sum of Rs.9,51,11,316/-. In identical circumstances, in the case of THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III VERSUS M/S CEAT LTD. [ 2013 (7) TMI 568 - BOMBAY HIGH COURT] , the Bombay High Court has upheld the order passed by the Commissioner of Central Excise dropping the show cause notice. The CESTAT has extracted the relevant passage from the judgment of Bombay High Court in CEAT Ltd. and allowed the appeal. We are in respectful agreement with the view taken by the Bombay High Court. There are no legal infirmity in the order passed by the CESTAT as it is in consonance with the judgment of Bombay High Court in CEAT Ltd. - appeal dismissed.
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2023 (1) TMI 147
Input Tax Credit - input services or not - input services were used for providing output services - whether the term setting up has been specifically excluded from the definition of input service, with effect from 01.04.2011, vide Notification No.3/2011-CE (NT) dated 01.03.2011 - services used for setting up of New Technology Centre - HELD THAT:- Sri.Harish has categorically submitted that CENVAT credit on input services on any new constructions is not claimed. This aspect has been considered by the CESTAT in paragraph-5.1 in extenso. Having heard the learned Standing Counsel for the CESTAT and the learned Advocate for assessee, we find no error in the findings recorded by the CESTAT - Appeal dismissed.
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2023 (1) TMI 146
Eligibility for exemption notification provided for corrugated box - exemption was denied on the ground that the appellant have mentioned wrong Tariff Heading Number in their invoices but the fact that the goods were corrugated box is not under dispute which were eligible for exemption - matter not raised before lower authorities - principles of natural justice - HELD THAT:- We agree with the learned Counsel that the issue of classification being a question of law can be raised before this Tribunal. However, since this issue has not been raised before the lower authorities. The lower authorities had not occasion to deal with it. In this circumstance, we are of the view that it is in the interest of justice to remand the matter to the adjudicating authority to examine all the issues and pass a fresh order. The appeal is allowed by way of remand to the adjudicating authority.
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2023 (1) TMI 145
Seeking refund of service tax paid on ocean freight services availed - Cenvat Credit - duty paying documents - self service tax paid challans - denial of refund invoking Rule 9(1)(bb) of the Cenvat Credit Rules - HELD THAT:- The issue regarding admissibility of credit under Rule 9(1)(bb) has nothing to do with the CGST Act and therefore, the reference made to the larger bench in the case of M/S. BOSCH ELECTRICAL DRIVE INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF G.S.T. AND CENTRAL EXCISE, CHENNAI [ 2021 (10) TMI 1345 - CESTAT CHENNAI] has no relevance in the instant case. The instant case is solely based on the admissibility of credit under Rule 9(1)(bb). It is apparent that the claim of the appellant to avail credit on the strength of Challan of Service Tax paid by them in the capacity of service recipient cannot be denied under Rule 9(1)(bb). Moreover, there is no evidence on record to show that the appellants have engaged in any mis-declaration, suppression etc. especially in view of the fact that the levy of service tax on Ocean Freight itself was held ultravirus by Hon ble High Court of Gujarat in case of MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA [ 2019 (9) TMI 1315 - GUJARAT HIGH COURT] . It is held that the appellants are entitled to take credit of cenvat credit paid on ocean freight. The impugned order is set aside and matter is remanded to the original adjudicating authority for fresh consideration - Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2023 (1) TMI 144
Disallowance of exemption under Section 5(2) of the CST - high sea sales - disallowance on the ground that same was not supported by documentary evidence - whether exemption could be denied for want of assessee's endorsement on the Bill of Lading? - HELD THAT:- The exemption was denied on the premise that Bill of lading was not endorsed by the assessee. Further, it is held in para 31 that the settled position of law is, the Bill of Lading is only one of the ways to transfer the title and not the only way. It can be done either by handing over the Bill of Lading itself to the customers before the goods pass the customs barrier of India. However, having examined the documents available in the Intelligence Report, the Tribunal has concluded that the necessary documents were available only to the extent of the turnover of Rs.1,65,32,500/- and the learned Advocate had not filed the documentary evidence in respect of the remaining portion of the turnover. In RECKITT COLMAN OF INDIA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1996 (10) TMI 100 - SUPREME COURT] , the Apex Court has held that it is beyond the competence of the Tribunal to make out a case in favour of the Revenue, which the Revenue had never canvassed and which the appellants had never been required to meet. The KAT has rightly noted the correct position of law that Bill of lading is not the only way of transfer of title and it can also be done by even handing over the Bill of Lading to the customers. Further, on consideration of the Intelligence Report, KAT has satisfied itself that documents were available in respect of turnover of Rs.1,65,32,500/-. Denial of the exemption in respect of turnover of Rs.16,51,67,363/- being the remaining portion of the turnover was not the subject matter for consideration before the KAT - the order passed by the KAT is perverse and unsustainable in law. Appeal allowed.
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