Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 7, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Provisional attachment of goods - whether the provisional attachment has ceased as one year from the date of the order had elapsed? - Held Yes - HC
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Confiscation of goods alongwith conveyance - auction of the goods which are of perishable in nature - Once willingness of making the bare minimum deposit as required under the law is shown, for release of goods, the authority concerned shall decide such interim release within a period of one week. Till then, no auction shall take place. Entire appeal shall be decided within a period of eight weeks by the respondent. - HC
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Exemption from GST - Treated Water obtained from CETP - Looking to the presence of small amount of metal and water obtained after treatment from CETP is covered under 'de-mineralize water'. Hence, we are of the view that the treated water obtained from CETP is not eligible for exemption under Sr. No. 99 of Notification No. 12/2017-CT (Rate) dated 28-6-2017. - AAR
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The advance ruling mechanism under GST does not envisage giving a ruling to a recipient of supply of goods or services or both about the said supply at supplier end. As per Section 103 of the CGST Act. The advance ruling pronounced by the Authority is binding only on the applicant who has sought for the ruling on any matter referred to in Section 97(2) as well as on the concerned officer, or jurisdictional officer of the applicant. The applicant in the Capacity of recipient of service is not eligible under law to seek a ruling on the taxability of a transaction at supplier's end, received by him. - AAR
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Classification of goods - rate of tax - construction of rail infrastructure for providing Railways siding - there is no stipulation in the said entry claimed for exemption supra, that this work must be executed to the Railways but it is sufficient that it must be “pertaining to Railways”, meaning therein that the supplier and the recipient is immaterial. Thus, we are of the considered opinion that the work intended to be undertaken by the applicant for RITES Limited pertains to railways and accordingly this pre-requisite stands fulfilled. - AAR
Income Tax
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Status of a beneficial owner - provisions of Article 12 of the DTAA - back-to-back arrangement of passing on the fee received to its holding company - To our minds, once it is held that there was no back-to-back arrangement and the respondent/assessee had dominion and control over the fees received by it and thus entitled to status of a beneficial owner, then, even according to the appellant/revenue, the provisions of Article 12 of the DTAA will kick in. - HC
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Recovery proceeding - priority of charge - void transactions U/s 281 - The Income Tax Department is also free to seek its remedy before the appropriate forum including DRT to establish by leading cogent evidence that the action had been initiated which constituted “proceedings” prior in time of creation of an equitable mortgage in favour of the Bank so as to seek a declaration of the mortgage being void or the attachment being prior in time so as to seek a priority of charge. - HC
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Disallowance of premium on Insurance Policy - Keyman Insurance Policy - Once the assets are sold, the Keyman policy for the Firm becomes redundant. At the same time, a portion of the Premium cannot be disallowed as expenses, because, discontinuance of the policy has occurred due to sale of assets. Therefore, in our considered view, the disallowance being 1/3rd of the premium amount, is not sustainable. - HC
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Exemption / deduction u/s 10A - The assessee was receiving the amount as rental income and in Hewlett Packard, the amount was received as interest on deposits and the staff loans. Therefore, in our considered view, the conditions such as location of unit in an STPI having been complied with, the benefit of Section 10A of the IT Act must be available to the assessee in this case also. - HC
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Transfer of case u/s 127 - Denial of natural justice - non providing any opportunity of hearing - t the impugned transfer order and the notices as a consequence thereof, do not stand to scrutiny and hence, the same are declared invalid and set aside. - The respondents are permitted to resume the proceedings from the stage former to the transfer order, was passed. - HC
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Long term capital gain (LTCG) - compulsory acquisition of land - the said land owned by the assessee is an agricultural land and was used for the purpose of agriculture in the past. Therefore, since all the conditions mentioned in section 10(37) of the Act are fulfilled, we are of the opinion that the alleged land for which compensation has been received by the assessee qualifies for exemption u/s. 10(37) - AT
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Computing the capital gain on sale of assets - WDV of depreciable assets - Exemption u/s 11 - the assessee has partly claimed the depreciation on this asset and when the asset was sold the remaining WDV which was determined by reducing the depreciation from the cost of acquisition claimed till date existed in the books of account. In our considered view to this extent we find merit in the contention of the A.R that whatever left in the books of account in the form of WDV has to be allowed while computing the capital gain till A.Y. 2015-16. - AT
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Eligibility for approval u/s 80G - some of the objects of the assessee-trust was to teach Veda and spread Vedic education - There is a particular method of pronunciation of Vedas with Swaras attached to it. The recitation and pronunciation of Vedas is what is taught by the assessee-Trust. It is like teaching any other Sanskrit literature. The teaching of Vedas does not involve offering worship and prayer to God as held by the CIT(E). - the approval u/s 80G of the I.T.Act is to be granted. - AT
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Bogus transaction in the scrip - bogus LTCG - Onus to prove - Income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and assumptions of certain facts. In order to hold income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/stock brokers for such an arrangements. - AT
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TDS u/s 195 - withhold tax on the payments made to the MRI company - assessee contended that it is acting as a collection agent on its behalf - Neither the assessee nor the lower authorities have been able to bring on record the correct facts as to the relationship between the assessee and the MRI company viz., whether it is a principal-agent or principal - principal relationship. Hence, the contentions raised by the assessee before us remains unsubstantiated and unverified. - Matter restored back - AT
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Revision u/s 263 by CIT - requirement of issuing show-cause notice - there is nothing in the Section 263 to raise the said notice to the status of a mandatory show-cause notice affecting the initiation of the exercise in the absence thereof or to require the Commissioner to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. - the revisional jurisdiction u/s 263 as exercised by Ld. Pr. CIT could not be faulted with - AT
Customs
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Rejection of refund claim - Period of limitation - These admitted facts are sufficient admission to the fact that the goods were never cleared for home consumption. There was no occasion for the appellant to actually pay the customs duty. Hence the amount in question cannot be called as the amount of duty to which section 27 applies - The duty which stand deposited since at the stage prior to scrutiny of the impugned Bill of Entry, hence remained as deposit made by the appellant for which the department has no authority to retain. - Refund allowed - AT
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Application for waiver of pre-deposit amount under Section 129E of the Customs Act, 1962 - The appellant has not made the pre-deposit. In view of the aforesaid decisions, it is not possible to permit the appellant to maintain the appeal without making the required pre-deposit - the application filed for waiver of pre-deposit is rejected - AT
IBC
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CIRP proceedings - Operational Creditors - Rejection of application u/s 9 by the NCLT and NCLAT - When the agreement entered into between the parties carries an arbitration clause and when the parties mutually consented and sought to proceed with arbitration before the High Court and further, when the arbitration proceedings are pending, we are of the view that the parties shall be left with the liberty to raise all contentions before the arbitrator, except the legal questions discussed and decided in this judgment. - SC
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Initiation of CIRP - existence of debt and dispute or not - Settlement of dispute between the parties or not - NCLT rejected the application - the Adjudicating Authority has correctly recorded the finding that there exist disputes between the two parties even prior to the date of demand notice both in respect of the terms and conditions of their business transactions and outstanding dues payable to the operational creditor. - AT
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Seeking refunds of amount to the liquidation account of the Corporate Debtor - Present is a case where for refund, to which the Corporate Debtor is entitled, whether the Application is required to be made by the Corporate Debtor in accordance with the Central Excise Act, 1944 or not. The statutory provision of the Central Excise Act, 1944 does not contemplate automatic refund of any duty to which company may be entitled - thus, there are no inconsistent or irreconcilable provision in Section 33 of the IBC in reference to Section 11B of the Central Excise Act, 1944. - AT
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Initiation of CIRP - FINANCIAL CREDITORS - Home buyers - NCLT admitted the application - Appellant has submitted that they are ready to deposit an amount of amount - by mere depositing the said amount, the CIRP cannot be set aside. We are quite conscious that in the real estate Projects, it is the Homebuyers, who are the major sufferer. - present is a case where order initiating CIRP need no interference. Consequently, the CoC has to be constituted to find out the ways and means to complete the Project, so that interest of the Homebuyers be firstly fulfilled. - AT
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Seeking recovery of dues - priority of charge over the project of the Corporate Debtor and the constructions raised thereon - Non-Performing assets -the home buyers have paid entire sale consideration, therefore, they would be at par with 17 such other home buyers to whom NOC was issued by the Appellant after receipt of the entire sale consideration and if the equities are to be balanced on the same scale, we find weight in the case of the home buyers. - AT
Service Tax
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Levy of service tax - Business Auxiliary Services or not - Software Activation Charges - The appellant did not receive any commission in this matter. The appellant is not a facilitator or a service provider to customers, but is a seller to customers. Hence, a pure and simple sale/purchase transaction has been misconstrued to be a service under Section 65(19) of Finance Act 1994 by the Department in this matter - there is force in the argument of the appellant that when there is sale there will be no service. - AT
VAT
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Rejection of central sale made by the assessee - once the Tribunal has recorded the finding that the documents, as required by it, was not placed by the assessee and no finding has been recorded by the Tribunal considering the documents of the assessee. It would not be appropriate for this Court to adjudicate the matter on merits. - Matter restored back to tribunal - HC
Case Laws:
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GST
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2023 (1) TMI 242
Detention of goods with vehicle - necessity of having TDS/e-way bill as the GST Council had exempted for carrying of e-way bill till 31.03.2018 - HELD THAT:- As far as requirement of eway bill/TDS is concerned, the matter is no more res integra and has already settled by Division Bench of this Court in case of M/S GODREJ AND BOYCE MANUFACTURING CO. LTD., L.G. ELECTRONICS INDIA PVT. LTD., BHARTI AIRTEL LIMITED, M/S GUALA CLOSURES (INDIA) PVT. LTD., M/S. RAS POLYTEX PVT. LIMITED, RIMJHIM ISPAT LIMITED, RIMJHIM ISPAT LIMITED, M/S. GAURANG PRODUCTS PVT. LTD., M/S. ADITYA BIRLA FASHION AND RETAIL LTD., M/S. NAVYUG AIRCONDITIONING AND M/S. PROACTIVE PLAST PVT. LTD. VERSUS STATE OF U.P. AND 02 OTHERS AND STATE OF U.P. AND 3 OTHERS [ 2018 (9) TMI 1261 - ALLAHABAD HIGH COURT] followed by coordinate Bench of this Court in M/S H.B.L. POWER SYSTEMS LTD THRU AUTHORISED SIGNATORY VERSUS STATE OF U.P. THRU PRIN. SECY. DEPT OF TAX AND REGISTRATION AND ORS [ 2022 (8) TMI 49 - ALLAHABAD HIGH COURT] . The Division Bench of this Court has held that on the basis of instructions of GST Council the requirement of having e-way bill till 31.03.2018 was dispensed with - the order passed by the first appellate authority requiring the petitioner to have e-way/TDS bill when the vehicle was detained on 03.03.2018 does not hold good and the order dated 10.12.2021 is set-aside to that extent. This Court finds that explanation furnished by the petitioner before the authorities as well as the first appellate authority was specific that it was used five to six times for transportation of raw material and it was not a finished product which was transported by the petitioner where requirement of new bags arises - the explanation afforded by the petitioner appeals to the Court and the finding recorded by the fist appellate authority does not hold any ground, in view of the said fact, the order passed by the first appellate authority in appeal is hereby set-aside. Petition allowed.
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2023 (1) TMI 241
Seizure of goods alongwith vehicle - case of the petitioner is that before the goods were being transported e-way bill was generated on 13.03.2018 which was valid upto 15.03.2018; the goods were transported from Mohali to Ghaziabad and same were intercepted at Shamli on 13.03.2018 and seizure order was passed on the same day i.e. 13.03.2018 under Section 129 (1) of U.P. GST Act read with Section 20 of IGST Act - HELD THAT:- The requirement of e-way bill till 31.03.2018 was postponed by GST Council noticing the hardship faced by the assessees. The coordinate Bench of this Court in M/S H.B.L. POWER SYSTEMS LTD THRU AUTHORISED SIGNATORY VERSUS STATE OF U.P. THRU PRIN. SECY. DEPT OF TAX AND REGISTRATION AND ORS [ 2022 (8) TMI 49 - ALLAHABAD HIGH COURT] relying upon the recommendation of GST Council had held that there was no requirement for e-way bill till 31.03.2018 - In the present case, as the goods were intercepted by the mobile squad on 13.03.2018, the recommendation of the GST Council is applicable and there is no requirement for e-way bill till 31.03.2018. Moreover, the judgment rendered by co-ordinate Bench is applicable and the petitioner is entitled to the benefit as given by the co-ordinate Bench in M/s H.B.L.Power Systems Ltd. Petition allowed.
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2023 (1) TMI 240
Seeking grant of bail - evasion of tax - compoundable offences or not - Section(s) 132(1)(B) (C) of the Rajasthan Goods and Services Tax Act, 2017 - HELD THAT:- In present case, the petitioner is in custody since 01.08.2022, charge-sheet has been filed on 30.09.2022 and he has already deposited about 10 per cent of the amount of alleged evaded tax duty. In view thereof; but, without expressing any opinion on the merits of the case, this Court deems it just and proper to enlarge the petitioner on bail. The bail application is allowed and it is directed that accused-petitioner Khem Chand Thathera S/o Shri Nanagram Thathera shall be released on bail under Section 439 Cr.P.C. in connection with afore-mentioned FIR registered at concerned Police Station, provided he furnishes a personal bond in the sum of Rs.1,00,000/- together with two sureties in the sum of Rs.50,000/- each to the satisfaction of the trial court with the stipulation that he shall comply with all the conditions laid down under Section 437(3) Cr.P.C. Petition disposed off.
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2023 (1) TMI 239
Seeking permission for withdrawal of petition - Initiation of proceeding for alleged, willful and deliberate non-compliance of the order - seeking a direction by issuing writ arising of the criminal proceeding - HELD THAT:- This Court has perused the order passed in W.P.(Cr.) No. 415 of 2018 and other analogous cases and Cont. Case (Cvl) No. 665 of 2019 and other analogous cases as also the order passed by the writ Court in W.P.(Cr.) No. 14 of 2019 which is the subject matter of the instant contempt case wherefrom it is evident as under paragraph-4 thereof that the writ petition was disposed of vide order dated 23.04.2019 and the writ petitioner was directed to appear before the Senior Intelligence Officer as and when called upon by him. The Senior Intelligence Officer was also directed not to arrest the writ petitioner on his first day of appearance and give him fair opportunity of hearing in the matter. This Court has posed a question upon the learned counsel for the petitioner that when there is a specific direction passed by the writ court to the effect that there shall be no arrest on the first day of appearance and if the writ petitioner, namely, Nikit Mittal has not appeared before the concerned Officer, what action has been taken by the Senior Intelligence Officer for securing his appearance in order to proceed further in the proceeding which was the subject matter of the writ petition. The instant case is dismissed as withdrawn. Accordingly, disposed of.
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2023 (1) TMI 238
Cancellation of registration of petitioner - failure to furnish returns for a continuous period of six months - HELD THAT:- Issue raised in this writ petition is no more res integra as identical challenge has been gone into by this Court in several writ petitions including in M/s. Chenna Krishnama Charyulu Karampudi v. Additional Commissioner (Appeals-1) [ 2022 (7) TMI 82 - TELANGANA HIGH COURT] , where it was held that Though the lower appellate authority may be right in holding that while it may allow filing of an appeal beyond the limitation of three months for a further period of one month, therefore, by extension of limitation beyond the extended period of one month delay beyond the extended period of one month cannot be condoned, we are of the view that such a stand taken by respondent No.1 may adversely affect the petitioner. It would be just and proper if respondent No.2 gives a fresh opportunity of hearing to the petitioner since the matter pertains to cancellation of GST registration adversely effecting its business operations. Matter remanded back to the 2nd respondent who shall pass a fresh order in accordance with law after giving an opportunity of hearing to the petitioner - petition disposed off.
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2023 (1) TMI 237
Cancellation of registration of petitioner - service of notice - violation of statutory requirement of according hearing to the person provided or not - breach of principles of natural justice - HELD THAT:- The show cause notice which has been given to the petitioner is not in prescribed format as it is conspicuous by absence of the date and time on which the noticee was to appear for personal hearing. It is also clear from the prescribed format that the noticee has to be afforded opportunity of personal hearing and for that purpose he has to be informed in advance, the date and time on which hearing will take place. Since in the instant case, the show cause notice does not mention the date and time appointed for personal hearing, therefore, in our opinion, the proceedings held in pursuance thereof are rendered illegal, void and a nullity in the eyes of law. Petition allowed.
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2023 (1) TMI 236
Lifting of provisional attachment of Bank Accounts of petitioner - section 83 of GST Act - HELD THAT:- Noticing the factum of attachment of the bank accounts during the search proceeding, without any subjective satisfaction and the issue of passing of provisional order under section 83 before even such proceedings were completed, without there being any pendency of the proceedings, this court in the final hearing can adjudicate all these issues, but the court needs to indulge at this stage. On filing an Undertaking before this Court of maintaining the balance of Rs.5,88,153/- in savings account No.919010045294509 and balance of Rs.88,843/- in current account No.918020097072117 of Axis Bank, Bapunagar, the petitioner is permitted to operate his current account No.918020097072117 of Axis Bank, Bapunagar, upon the attachment being lifted on his current account - Let the scrutiny be completed by 11/01/2023. The matter shall be heard on that day finally.
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2023 (1) TMI 235
Provisional attachment of goods - whether the provisional attachment has ceased as one year from the date of the order had elapsed? - HELD THAT:- There is no disputation or contestation that the provisional attachment is dated 04.11.2019 and one year therefrom elapsed on 04.11.2020. Therefore by operation of law i.e., sub-section (2) of Section 83 of C-GST Act, provisional attachment which has been assailed in the captioned writ petition has ceased to have effect. Therefore the impugned order which has been assailed has already perished by operation of Statute. This means that acceding to the prayer in captioned writ petition is only stating the obvious i.e., stating the obtaining legal consequence of operation of Statute. This position is reiterated and it is made clear that the impugned order has ceased to have effect on and from 04.11.2020 - Petition disposed off.
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2023 (1) TMI 234
Confiscation of goods alongwith conveyance - auction of the goods which are of perishable in nature - HELD THAT:- On noticing withdrawal of earlier petition in M/S. MEHTA ENTERPRISE THROUGH ITS PROP. NIRAV VIJAYKUMAR MEHTA VERUS STATE OF GUJARAT [ 2023 (1) TMI 50 - GUJARAT HIGH COURT] for taking legal recourse in accordance with law, this petition is ordinarily not to be entertained, however, a new cause has arisen of receipt of notice of auction and hence, when the approach of respondent is also equitious and balanced, we would avail an opportunity to both the sides with limited protection to the petitioner. Let an appeal be preferred within a period of three days from the date of receipt of copy of this order. Once willingness of making the bare minimum deposit as required under the law is shown, for release of goods, the authority concerned shall decide such interim release within a period of one week. Till then, no auction shall take place. Entire appeal shall be decided within a period of eight weeks by the respondent. Petition disposed off.
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2023 (1) TMI 233
Seeking grant of anticipatory bail - availment of input tax credits completely in breach of the provisions of Section 132(1)(b) and (c) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Considering that the matter is still under preliminary investigation and as the opinion has not been formed yet by the authorised officer whether to arrest the applicants or not, interest of justice would be subserved if a direction is issued to the applicants to cooperate - In case, if the Investigating Officer wants to effect the arrest if he feels that arrest is imperative in the wake of the reasons recorded by him, he may effect the arrest after giving 72 hours notice in advance to the applicants in the peculiar facts of this case. The Anticipatory Bail Application is disposed of with a direction to the applicants to co-operate.
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2023 (1) TMI 232
Confiscation of goods alongwith conveyance - sections 129 and 130 of the Goods and Services Tax Act, 2017 - HELD THAT:- As far as prayer for interim relief is concerned regarding release of the goods and vehicle of the petitioner, the same deserves to be considered on the same line and upon imposition of the similar conditions as done in SMIT DIPEN SHAH, M/S LIBERTY PRODUCTS VERSUS STATE OF GUJARAT [ 2022 (7) TMI 1364 - GUJARAT HIGH COURT] where it was held that While the question raised by the petitioner would require a detailed examination, it could be immediately noticed that the impugned order came to be passed in a quick succession as noticed above, that too without permitting the petitioner to file reply. The hot hurry on the part of the authorities sacrificed the right of the petitioner to reply and in the process, there was evident breach of principles of natural justice to the prejudice to the petitioner. As could be seen from the impugned order, the penalty amount is Rs. 3,21,230/-. The fine in lieu of confiscation of goods is demanded to the extent of Rs.64,24,600/- and the tax is demanded of Rs.3,21,230/- - By way of interim relief, it is directed that the respondents shall release the goods and conveyance of the petitioner, confiscated and detained pursuant to the order dated 13.09.2022 passed in FORM GST MOV-06, subject to the conditions imposed. Application allowed.
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2023 (1) TMI 231
Exemption from GST - Treated Water obtained from CETP (classifiable under Chapter 2201) - exemption from GST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017- Integrated Tax (Rate), dated 28-6-2017 (as amended) as Water (other than aerated, mineral, purified, distilled, medical, ionic, battery, demineralized and water sold in sealed container) or taxable at 18 per cent by virtue of SI. No. 24 of Schedule - III of Notification No. 01/2017- Integrated Tax (Rate), dated 28-6-2017 (as amended) as Waters, including natural or artificial mineral waters, and aerated waters, not containing added sugar or other sweetening matter nor flavoured (other than Drinking water packed in 20 liters bottles)? - HELD THAT:- The applicant is a company promoted by cluster of textile processing industries for setting up of Common Effluent Treatment Plant to treat and recycled the effluent for Conveyance, Treatment Disposal of waste water generated from the industries. The applicant received the effluent from such textile units for treatment and supply treated water obtained from ETP to the industries which required for their various processes - the effluent received from industries is passed through various processed in CETP and after carrying out due process treated water obtained from CETP which is suitable for Industrial use as per their requirements. The intention of the legislature to exempt the water was very clear that any type of water which is usually consumed/drink by the public at large of this country should not be taxed. To meet such objective GST Council has provided exemption under the Entry No.99 of Not. No. 2/2017-CT (Rate) to Water which is free from all types of impurities supplied in cities and villages across the country either through tap or tanker, water cooler and water tap installed at various places across the country. Whereas aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container is not eligible for exemption from payment of GST under the said entry. This clearly shows the intention of the legislature that any type of water which are being sold in terms of commercial purpose have been kept out of the purview of exemption as provided under entry No. 99 of the Notification. It can be concluded that after undergoing out all the process treated water obtained from CETP have micro amount of dissolved minerals and chemical and virtually free from all types of toxic materials. This treated water is used in the various industries viz. Pharmaceuticals, chemicals and leather industries for their manufacturing related process. Looking to the presence of small amount of metal and water obtained after treatment from CETP is covered under 'de-mineralize water'. Hence, we are of the view that the treated water obtained from CETP is not eligible for exemption under Sr. No. 99 of Notification No. 12/2017-CT (Rate) dated 28-6-2017. Thus, the Treated Water obtained from CETP (classifiable under Chapter 2201) is taxable at 18 per cent by virtue of SI. No. 24 of Schedule - III of Notification No. 01/2017- Integrated Tax (Rate), dated 28-6-2017 (as amended) as 'Waters, including natural or artificial mineral waters, and aerated waters, not containing added sugar or other sweetening matter nor flavoured (other than Drinking water packed in 20 liters bottles)'.
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2023 (1) TMI 230
Scope of advance ruling - service recipient - Exemption from GST - manpower supply services of (M/s. Call me services) provided to the government entities - Works Contract Service or composite supplies involving supply of goods - Applicability of N/N. 12/2017 Central Tax (Rate) dated 28.06.2017 - HELD THAT:- On a harmonious reading of the provisions of law, it gets abundantly clear that any person who is registered under GST or desirous of obtaining a registration under GST may apply for an advance ruling and that the question on which an advance ruling is sought for may be with respect to any of the issues referred to in Section 97(2) ibid which are in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. The advance ruling mechanism under GST does not envisage giving a ruling to a recipient of supply of goods or services or both about the said supply at supplier end. As per Section 103 of the CGST Act. The advance ruling pronounced by the Authority is binding only on the applicant who has sought for the ruling on any matter referred to in Section 97(2) as well as on the concerned officer, or jurisdictional officer of the applicant. The applicant in the Capacity of recipient of service is not eligible under law to seek a ruling on the taxability of a transaction at supplier's end, received by him. In fact, we as AAR does not have the authority to determine the classification or nature of service supplied by the service provider of the applicant at the supplier end who in this case happens to be M/s Call me services, on an application made by the applicant, the recipient of service. The said M/s Call me services, service provider of the applicant is well within its rights to seek an advance ruling from the jurisdictional authority, as to whether the services supplied by them to the applicant is exigible to tax.
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2023 (1) TMI 229
Classification of goods - rate of tax - civil works for the construction of Kusmunda S T work and other TMS Crew rest room at various five locations within 2.8Km length of siding area in connection with construction of rail infrastructure for providing Railways siding at SECL Kusmunda Project, District Korba, Chhattisgarh - S.No. 3 (v)(a) of Notification No. 11/2017 Central Tax(Rate) dated 28.06.2017 as amended, vide Notification 01/2018 Central Tax(Rate) dated 25.01.2018. HELD THAT:- In the instant case under consideration, the applicant has furnished a sample copy of letter of acceptance dated 17.1.2020 issued by RITES LIMITED issued to the said third party / firm, for and behalf of SECL in respect of technical offer opened on 11.7.2019. From the submissions as put forth by the applicant and from the said sample letter of acceptance that RITES LIMITED for and on behalf of South Eastern Coalfields Limited, (SECL), Gevra awarded to the said party / firm it is seen that the work being awarded by RITES is the work of Construction of Kusmunda S T block cabin, East and West Panel buildings for S T work and other TMS Crew rest room at various five locations within 2.8Km length of siding area in connection with construction of rail infrastructure for providing Railways siding at SECL Kusmunda Project, District Korba, Chhattisgarh for dispatch of washed and raw coal - SAC 995421 covers 'General Construction services of highways, streets, roads, railways, airfield runways, bridges and tunnels' which by their very nature relates to work of civil engineering and there exists all plausible reasons to link the same to the aforementioned work awarded by RITES LIMITED, intended to be undertaken by the applicant. Therefore, the instant supply in question gets aptly covered under SAC 9954 in general. Accordingly, in the case in hand the basic requirement for eligibility to the said exemption as provided under S.no. 3 (v)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, of getting covered under SAC 9954 stands fulfilled. Whether the instant supply is a Composite supply? - HELD THAT:- For the instant supply of Civil works to be undertaken by the applicant to be categorized as composite supply there needs to be supply of goods and services and the same should be natural bundle of supply of both and supplied in conjunction with each other in the ordinary course of business. No such details of supply of goods for the intended civil works is forthcoming from the sample letter of acceptance furnished by the applicant. Thus without substantial evidence of the works contracted/undertaken like materials/ goods to be supplied, related schedules/detailed write-up on the civil works, etc., it is practically impossible for this authority to conclude or for that matter to hold that the works as is forthcoming form the letter of acceptance, undertaken is composite supply per se. Accordingly, this authority on the basis of records furnished and available on record, is not in a position to conclusively hold that the works, as is forthcoming form the letter of acceptance issued by RITES LIMITED, intended to be undertaken by the applicant qualifies being treated as Composite supply as per Section 2 (30) of CGST Act, 2017. Exemption as provided under S.No. 3(v) (a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, vide Notification 01/2018 Central Tax (Rate) dated 25.01.2018 - HELD THAT:- It would be appropriate to conclude that the benefit of the entry at SI.no. 3(v)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 is amended, vide Notification 01/2018 Central Tax (Rate) dated 25.01.2018 and various other amendments from time to time, lastly amended vide Notification no. 22/2021-Central Tax (Rate) dated 31.12.2021 would be eligible to M/s Agrawal Buildcon, C/o Agrawal Traders, Main Road, Korba, Chhattisgarh, 495677 (GSTIN-22ASSPA1067D1Z7), the applicant, subject to the fact that the works undertaken by them are Composite supply and Works Contract as per Section 2 (119) of the Act and if so the applicable GST would be @ 12% effective from 25.01.2018. In cases other than above the same attracts GST @ 18% under the residual entry at Sr. no. 3 (xii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended. Change on the rate of tax since 1.1.2022 - HELD THAT:- It is seen that there is no change in the rate of GST in such composite supply of works contract as defined in clause (119) of the Central Goods and Services Tax Act, 2017 supplied by way of construction, erection, commissioning, or installation of original works pertaining to railways.
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Income Tax
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2023 (1) TMI 228
Exemption u/s 11 - registration u/s 12A Cancelled - HELD THAT:- We may note that suggestion of Mr Maratha that a fresh application may be filed, as the registration of the petitioner u/s 12A of the Act is still operable, in our view, would not be the most efficacious approach in the matter, given the fact that a detailed application is already available with the CIT (Exemption), Delhi. Therefore, in our opinion the best way forward would be to set aside the impugned order with a direction to the CIT (Exemption) Delhi to decide the application afresh after giving due opportunity to the petitioner and/or its authorized representatives to present the petitioner s case. For this purpose, the authorized representatives of the petitioner will appear before the CIT (Exemption) Delhi on 06.01.2023 at 11 AM. CIT (Exemption), Delhi will give due opportunity to the authorized representative of the petitioner to place on record the relevant document/material and thereafter, will pass a speaking order. In case the order passed by the CIT (Exemption) Delhi is adverse to the interests of the petitioner, the petitioner will have liberty to assail the same, albeit, as per law.
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2023 (1) TMI 227
Status of a beneficial owner - provisions of Article 12 of the DTAA - assessee, in terms of Article 12 of the DTAA, had offered the aforementioned amount for taxation @ 15% of gross receipts - assessee had a back-to-back arrangement of passing on the fee received to its holding company - AO denied the respondent/assessee the benefit it had sought to take by resorting to Article 12 of the India-USA Double Taxation Avoidance Agreement - assessee which is a company incorporated under the laws of United States of America, rendered branding and management services to an Indian entity going by the name Fujitsu - HELD THAT:- First, there was no back-to-back arrangement, according to him, between the respondent/assessee, as noticed above, and its holding company, FL. Second, in order to deny the respondent/assessee the status of a beneficial owner, the AO had to find that the assessee was either an agent or conduit for the holding company i.e., Fujitsu Limited, Japan. The second proposition, as a matter of fact, flows from the findings of fact returned by the CIT(A). CIT (A) has found as a matter of fact that the appellant was playing the role of a service provider after procuring the same from other group companies and that it had dominion over the fees received by it. We have also put to Mr Chandra as to whether there was any ground raised in the appeal preferred before the Tribunal that the finding returned by the CIT(A) was perverse. No specific ground in those terms was framed. It is Mr Chandra s submission though that the ground raised was that the CIT(A) had erred in concluding that the respondent/assessee was entitled to the status of a beneficial owner. To our minds, once it is held that there was no back-to-back arrangement and the respondent/assessee had dominion and control over the fees received by it and thus entitled to status of a beneficial owner, then, even according to the appellant/revenue, the provisions of Article 12 of the DTAA will kick in. Tribunal, as noted above, has sustained the orders passed by the CIT(A). According to us, no substantial question of law arises in the above-captioned appeal.
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2023 (1) TMI 226
Recovery proceeding - priority of charge - attachment by the Income Tax Department prior to their mortgage in favour of the Bank on 28.06.2016 and hence the mortgage is void in terms of the provisions U/s .281 of the Income Tax Act and the corresponding relevant rules - HELD THAT:- It cannot be disputed that the question whether the attachment of the mortgaged property by the Tax Department or any proceedings stood initiated by the Income Tax Department prior to the mortgage are serious questions of disputed facts, which cannot be decided in writ jurisdiction under Article 226. The Income Tax Department was well within its right to seek a declaration of transaction being void before the forum of appropriate jurisdiction before seeking its simple impleadment before this Court, which concededly has not been done till now. Therefore, relegating the parties to seek adjudication on this issue by our order cannot be faulted with by any stretch of reasoning. The Income Tax Department is also free to seek its remedy before the appropriate forum including DRT to establish by leading cogent evidence that the action had been initiated which constituted proceedings prior in time of creation of an equitable mortgage in favour of the Bank so as to seek a declaration of the mortgage being void or the attachment being prior in time so as to seek a priority of charge. The Secured Creditor/Bank would be equally free to stress the impact of Section 26(E) and Section 31(B) of the SARFAESI Act, 2002 qua the priority of the claim. Accordingly, the adjudication before this Court in view of Section 281 of the Income Tax Act is also rejected. However, we observe that the I.T. Department and the parties would be free to raise all these pleas before the DRT for adjudication in accordance with law.
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2023 (1) TMI 225
Disallowance u/s 14A r.w.r 8D - Necessity of recording of satisfaction by the Assessing Officer - HELD THAT:- AO has not recorded his satisfaction with regard to the suo moto deduction made by the assessee. Therefore, following the authority in Hindusthan Aeronautics Ltd [ 2020 (12) TMI 679 - KARNATAKA HIGH COURT] we are of the view that disallowance of Rs.53,367/- under Section 14A read with Rule 8D of the Rules is not sustainable. Addition u/s 45(4) - plot was purchased by one of the partners - HELD THAT:- It is not in dispute that the sale deed is executed in the name of Shri. Aeranpurwala. The assets of the Firm was sold to the Private Limited Company in which the partners of the firm were the Directors. Section 45A of the IT Act is applicable where any person receives any Capital Asset from a specified entity in connection was the reconstitution of such specified entity. It is not the case of the Revenue that there was reconstitution of the Firm. On the other hand, the assets of the Firm have been sold to the Private Limited Company. It is settled that title to an immovable property worth more than Rs.100/- can be trasferred only by way of a Deed of Conveyance duly executed and registered and not by Book entry In view of the settled position, Section 45(4) of the Act has no application in this case. Consequently, the addition made by the AO under Section 45(4) of the IT Act as long term Capital gains, is not sustainable. With regard to the plot, we hold that the addition made by the Assessing Officer on the ground of short-term Capital gains is also not sustainable. We may record that the building in question is situated on the plot in respect of which the Assessing Officer had added long term Capital gains Tax. We have held that the plot belonged to the Partner Shri. Aeranpurwala. By logical corollary, the building thereon, also must belong to him. Hence, the short term Capital gains added by the Assessing Officer is not sustainable. Disallowance of premium on Insurance Policy - Assessee Firm had taken a Insurance Policy on its Partner Shri. Aeranpurwala - HELD THAT:- Keyman Insurance Policy is taken to protect a Firm from a Financial loss due to the death of the insured person in charge of the affairs of the Firm. In this case, policy was taken in the name of Shri. Aeranpurwala and a premium of Rs.10 Lakhs was paid by the Firm. The assets of the Firm have been sold to the Private Limited Company and the Firm has discontinued the Policy. Whilst the Firm was doing business and Shri. Aeranpurwala was managing the affairs the Policy was taken by the Firm. Since the assets of the Firm were sold, the Firm in its wisdom has decided not to continue with the Policy. Therefore, in our view, the expenditure towards Insurance Policy cannot be disallowed because, the sale of assets is based on Commercial expediency and whenever such transactions take place, it would not be expedient for the Firm to continue the Keyman Insurance, but the Policy was necessary when the Firm was doing the business. Once the assets are sold, the Keyman policy for the Firm becomes redundant. At the same time, a portion of the Premium cannot be disallowed as expenses, because, discontinuance of the policy has occurred due to sale of assets. Therefore, in our considered view, the disallowance being 1/3 rd of the premium amount, is not sustainable. Addition of profit margin at 8% on transfer of stock - assessee has transferred the 'Stock in Trade' to M/s. Evergreen Seamless Pipes and Tubes Pvt. Ltd., under a BTA - whether the Revenue can decide the price at which the Stock-in-trade ought to have been transferred ? - HELD THAT:- In this case, the assessee - Firm has transferred the Stock-in-trade to the Private Limited Company at book value. The assessee, in its reply to the Assessing Officer, has stated that the end user of the products of the firm are Public Sector Units and other Companies. If the firm offered to sell its whole stock, none of those Companies would be interested to purchase the same if there was no requirement. The firm's products cannot be sold in open market like any other consumer goods or Industrial Hardware on account of its unique usage and specifications which are to be certified by various third party inspection agencies. No dealer would be interested to purchase them as these products can be purchased directly from the manufacturers. The stock could not be sold at a price more than the cost price and therefore, it has been sold at cost price. It is not in dispute that the Stock-in-trade are pipes and tubes made of carbon and alloy steel for Refineries, Boiler industries etc. Therefore, they cannot be sold in the open market as any other consumer goods. It is also not is dispute that the partners of the firm are the promoters of the Company. In the light of these facts, the firm has taken a decision to transfer the goods at book value. As held in S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] the Revenue cannot substitute its opinion with a business decision of an assessee. In our considered view, the gross profit estimated by the Assessing Officer and modified by the CIT(A) are notional and not traceable to any provision in the IT Act and therefore it is imaginary and perverse. Decided in favour of the assessee.
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2023 (1) TMI 224
Computation of deduction u/s 10A - Income derived from rental income from Infosys BPO Ltd and BSNL Chennai Ltd as profits derived under Section 10A - HELD THAT:- Undisputed facts of the case are, assessee is situated in the STPI and is a 100% EOU. A portion of the premises which was taken on lease has been given on sublease to the two units and the assessee has received certain sum of money as rental income. In the case of Hewlett Packard [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT] has held that the interest earned on the deposit and interest income of the staff loans are also eligible for deduction u/s 10A of the IT Act. Admittedly, the income earned as interest on the staff loans is not in any way connected with the business of Hewlett Packard, which was under consideration before the full Bench. In the case on hand, the assessee was receiving the amount as rental income and in Hewlett Packard, the amount was received as interest on deposits and the staff loans. Therefore, in our considered view, the conditions such as location of unit in an STPI having been complied with, the benefit of Section 10A of the IT Act must be available to the assessee in this case also. These appeals must fail and they are accordingly dismissed.
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2023 (1) TMI 223
Transfer of case u/s 127 - Denial of natural justice - non providing any opportunity of hearing - grievance of the petitioner is that by order Annexure-7, the assessment file of the petitioner has been transferred to the Deputy/ACIT, Central Circle-14, New Delhi, without providing any opportunity of hearing - HELD THAT:- Whenever it is proposed to transfer the case of assessee from one assessing authority to another, providing opportunity of hearing to the assessee is essential and can be circumvented only if the competent authority feels, for reasons to be recorded in writing, that it is not possible to do so. In the present case, the respondents have neither setup any such case that it was not possible to provide opportunity of hearing to the assessee, nor any reasons to do so were recorded before taking the decision to transfer the case from Circle Udaipur to Circle New Delhi. The assessment proceedings under the Income Tax Act, have now become faceless, it cannot be denied that the assessee would be entitled to engage Counsel/ Advisors of his choice to defend himself even in the faceless proceedings and thus, the requirement of following the principles of natural justice cannot be evaded in a casual manner. In the case of Advantage Strategic Consulting (P) Ltd. [ 2020 (12) TMI 1361 - MADRAS HIGH COURT] relied upon by counsel Shri Bissa, the factual situation was totally different because transfer had been made from one Circle to another in the same city. Furthermore, during pendency of the proceedings, the assessment order had been passed. In that situation, Hon ble Division Bench went on to hold that proceedings before the High court, had become infructuous. In the present case, the transfer order and the notices issued in furtherance thereof, have been stayed by this Court and as such, the facts of the case at hand are totally distinguishable. A Division Bench of this Court in the case of Smt. Jeewan Kumari [ 1979 (4) TMI 27 - RAJASTHAN HIGH COURT ] has held that as per Section 127(1) of the Income Tax Act, it was incumbent for the Board to have provided opportunity of hearing to the assessee before ordering transfer of her case. Similar view was taken by Hon ble the Supreme Court in the case of Noorul Islam Educational Trust [ 2016 (10) TMI 982 - SUPREME COURT ] Consequently, we are of the opinion that the impugned transfer order and the notices as a consequence thereof, do not stand to scrutiny and hence, the same are declared invalid and set aside. The respondents are permitted to resume the proceedings from the stage former to the transfer order (Annexure-7) dated 21.11.2019, was passed.
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2023 (1) TMI 222
Penalty u/s. 271(1)(c) - Defective notice u/s 274 - disallowance of sundry balances written off made by AO - As argued notices referred to above, issued u/s 274 read with 271(1)(c) by the AO are vague, having not specified any particular limb of the penalty and, therefore, the penalty is not leviable - HELD THAT:- In the instant case, the AO initiated the penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of Income and thereafter issued the notices u/s 274 r.w.s. 271(1)(c) of Act referred to above, for concealment of the particulars of income or filling of inaccurate particulars of income but without specifying any particular limb and finally vide penalty order dated 30.03.2019 imposed the penalty on furnishing of inaccurate particulars of income. Assessee by way of raising the plea which is legal in nature, challenged the Imposition of penalty mainly on the basis of notice itself, therefore we deem it appropriate to decide the legal issue involved in the instant case first, before dwelling into the merits of the case. Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed where AO proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind. The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him, so that he can respond accordingly. Having regard to the manner in which the AO has issued the notices referred to above, under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb, under which the penalty proceeding has been initiated and proceeded with, apparently goes to prove that notices in this case have been issued in a stereotyped manner without applying mind which is bad in law, hence cannot be considered valid notices sufficient to impose penalty u/s 271(1)(c) - Appeal filed by the Assessee stands allowed.
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2023 (1) TMI 221
Revision u/s 263 - whether exemption u/s 10(23C)(iiiad) can be granted to any trust, educational institution or university, if the source of income in such a trust is out of educational activity? - HELD THAT:- CIT misconstrued the provision. The source of income can have many springs whereas for eligibility of exemption, the institution should be involved in education only. We find that this aspect has been considered in the case of Swasthya Sewa Sanstha [ 2022 (2) TMI 868 - ITAT KOLKATA] relied upon for the assessee. In this case, the assessee claimed exemption u/s 10(23C)(iiiae) of the Act i.e., for running a hospital and other medical institution. Action u/s 263 was taken by the ld. Commissioner on the ground that there was no nexus between the income and the expenditure and assessee has not shown receipt from the dispensary. We examine the facts of the present appeal, then it would reveal that the only distinction in the issue involved is that in the case of Swasthya Sewa Sanstha (supra) the assessee had claimed deduction u/s 10(23C)(iiiae) which is meant for any hospital or other institution for treatment of persons suffering from illness or mental defectiveness whereas in the present case, the exemption has been claimed u/s 10(23C)(iiiad) i.e., where an assessee is engaged in education activities. The reasoning and thought process at the end of the Commissioner in taking action u/s 263 is identical. Therefore, the facts of this case are fully applicable upon the assessee and following the order of the ITAT in which one of us i.e. (AM) was a party, we allow the appeal of the assessee and quash the impugned order. Appeal of the assessee is allowed.
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2023 (1) TMI 220
Long term capital gain (LTCG) arising out of compensation against the land acquisition treating as exempt from tax - assessee has agricultural land which was ancestral and the only sources of income was cultivation of land - CIT(A) held in favour of the assessee, firstly observing that case of the assessee is covered by the provisions of section 10(37) of the Act and secondly, the alleged compensation is not taxable in view of section 96 of the RFCTLAAR Act. HELD THAT:- Regarding the observation of the ld. CIT(A) that the said sum is not taxable in view of the RFCTLAAR Act, we do not find any merit because the said Act i.e Right To Fair Compensation And Transparency in Land Acquisition, Rehabilitation and Settlement Act 2013 came into force w.e.f 1.1.2014 whereas alleged compensation was received by the appellant as mentioned in Form 16A showing deduction of tax at source on 24-10-2013 which clearly shows that alleged compensation was received prior to the effective date of RFCTLAAR Act and therefore, the relief granted by the ld.CIT(A) based on the application of section 96 of the RFCTLAAR Act has no merit and deserves to be set aside. Our view is further supported by the decision of the co-ordinate bench (ITAT Agra) in the case of Shri Krishna Kumar Sharma [ 2021 (3) TMI 561 - ITAT AGRA] which has been relied on by the ld. Departmental Representative. Compensation is an exempt income u/s. 10(37) - We find that the assessee in order to avail the exemption under the said section needs to fulfill the four ((i) to (iv) conditions. So far as (iii) (iv) conditions are concerned, which speaks about compulsory acquisition under any law as determined or approved by the Central Government or the Reserve Bank of India, if the consideration is received by such assessee on or after the 1st day of April, 2004, the same are duly fulfilled in the case of assessee as there is no dispute to this fact at the end of Revenue. Now as far as first two ( i ii ) conditions are concerned, which provides that the land in question is an agricultural land and it has been used for the purpose of agriculture for the immediately two years, we observe that during the course of assessment proceedings AO deputed an inspector to enquire as to whether the said land is agricultural land and cultivated before its acquisition. From the assessment order, we notice that the inspector s vide letter no. 2857 dt. 30-11-2006 stated that the land acquired by the Government measuring 3.845 acre was of the status of Dhanahar (pragatishil bhumi) . Before us the Ld. Counsel for the assessee has filed various documents explaining the meaning of Dhanahar land to be an agricultural land. Dhanhar land is said to be low land during rainy season. Reference was made to Bihar Visesh Survey page 5 in Chapter XVIi page 211 defining dhanhar fasal land having three categories, A,B C i.e Dhanhar I, Dhanhar II and Dhanhar III. Reference was further made to Bihar Tenancy Act, 1885, wherein Dhanhar has been defined as land cropped in winter. Reference also made through documents filed in paper book defining Dhanahar as irrigated land where rice is cultivated for kheti. Above discussion on Dhanhar land brings us to the conclusion that the said land owned by the assessee is an agricultural land and was used for the purpose of agriculture in the past. Therefore, since all the conditions mentioned in section 10(37) of the Act are fulfilled, we are of the opinion that the alleged land for which compensation has been received by the assessee qualifies for exemption u/s. 10(37) - Decided against revenue.
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2023 (1) TMI 219
Accumulation of Income as specified under section 11(1 )(a) of the Act on gross receipts of the Trust - CIT(A) has not given specific instruction to AO to compute the accumulation of income in accordance with provision of Section 11(1)(a) of the Act on gross receipts of the trust - HELD THAT:- We are of the view that in the case of trust there is no concept of net income but of gross receipts and application of funds. In our opinion, for the purpose of calculation of accumulation of income to the extent of 15% u/s 11(1)(a) the gross receipts are to be taken as basis and not the net income after deducting expenses which has been done by both the authorities below. The case of the assessee finds support from the decision of Bai Sonabai Hirji Agiary Trust [ 2004 (9) TMI 300 - ITAT BOMBAY-E] wherein the Co-ordinate Bench has taken a view for the purpose of accumulation of income, which is deemed to be derived for the purpose of charitable activities subject to the fulfillment of other condition in that section, is to be taken on the gross receipt of the trust before deducting any sum towards application of income. In other words, the application of income has to be taken into account from the said gross receipts for the purpose of accumulation u/s 11(1)(a) of the Act. The case of the assessee is squarely covered by the decision of Kanehialall Lohia Trust [ 2020 (1) TMI 501 - ITAT KOLKATA] . Accordingly we set aside the order of Ld. CIT(A) on this issue and direct the AO to compute the income to be accumulated u/s 11(1)(a) of the Act on the gross receipts. Accordingly ground no. 2 is allowed. Disallowing the provisions created for accrued and determined liability - CIT-A observing that the actual payment made by the assessee towards gratuity and leave encashment was rightly treated as application of income and dismissed the appeal of the assessee on this issue - HELD THAT:- In the present case, we note that the expenses charged to the income and expenditure account by the assessee trust has already crystallized and quantified but not paid and therefore we find merit in the arguments of assessee that once the expenses are charged to the income expenditure after being foreseen with certainly are not in the nature of contingent but certainly to be considered as application of income to be discharged in the subsequent year. We also note that these were, in fact, paid in the subsequent years. We also look at this issue from another angle where the assessee has not charged anything to the income expenditure account and resulting into surplus going up and the assessee availing the benefit of accumulation u/s 11(2) to be carried forwards for the subsequent years. But in the present case, the facts are quite different as the assessee has calculated and charged these expenses to Income and Expenditure account. We have also examined the explanation inserted after subsection As amendment by Finance Act, 2022 by inserting explanation is very clear and conspicuous that w.e.f AY 2023-24 any sum payable by any trust or institution shall be considered as application of income in the previous year in which sum is actually paid by it irrespective in which the liability to pay such sum was incurred by the trust/institution according to the method of accounting regularly employed by it. So we draw strength from the said explanation to section 11(7) that prior to AY 2023-24 the expenses were allowable to the trust as application of income even on accrual basis and thereafter specifically provided to be treated as application of income on the payment basis w.e.f. AY 2023-24. We have perused the provisions of section 11(1) of the Act which specifies only application of income and not the actual spending which has been amended to by Finance Act, 2022 w.e.f. 01.04.2023 as stated above. The case of the assessee finds support from the decision of Coordinate Bench of Kolkata in the case of Apeejay Education [ 2021 (7) TMI 906 - ITAT KOLKATA] - We are not in agreement with the Ld. CIT(A) on this issue and direct the AO to delete this disallowance. Computing the capital gain on sale of assets - According to the AO assessee was registered u/s 12AA and the entire expenditure incurred for acquisition of capital assets has been treated as application of income for charitable purposes in the year in which the acquisition was made , since the assessee has written off the cost of the capital asset fully in the year of acquisition and therefore there is no cost left to be taken as WDV or cost of acquisition as capital asset was fully written off in the year and accordingly the AO treated the entire sale consideration as capital gain - HELD THAT:- Once the trust or institution is registered u/s 12AA of the Act there is no dispute or controversy that whatever is purchased by the assesse even on capital account is treated as application of income. CIT(A) has observed that the assessee has been benefitted twice. Once by way of allowing cost of acquisition of application of income in the year of acquisition and secondly be allowing depreciation on the same. As perused the amendment brought in by Section 11 by inserting sub-section 6 by Finance (No. 2) Act, 2014 w.e.f. 1.4.2015 providing that the income of the trust is required to be applied or accumulated or set apart for application, then, for such purposes, the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. Keeping in view the various judicial decisions passed by various judicial forums on the issue that the assessee is entitled to claim the application of income as well as depreciation on the cost of acquisition of the capital assets . In the present case, we note that the assessee has partly claimed the depreciation on this asset and when the asset was sold the remaining WDV which was determined by reducing the depreciation from the cost of acquisition claimed till date existed in the books of account. In our considered view to this extent we find merit in the contention of the A.R that whatever left in the books of account in the form of WDV has to be allowed while computing the capital gain till A.Y. 2015-16. In our considered view this has to be allowed till the AY 2014- 15 and accordingly we set aside the order of CIT(A) and direct the AO to accept the capital gain as calculated above. Accordingly ground no. 4 is allowed.
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2023 (1) TMI 218
Short grant of TDS - no documentary evidences were produced in support of claim of TDS - HELD THAT:- It is the duty of AO to examine the issue on the basis of evidences filed and allow the credit to the assessee after doing necessary verification. We have also examined the TDS certificates which are placed before us and observe that the assessee is entitled to credit of Rs. 14,46,276/-. We also find support from the decision of Hon ble Delhi High Court in the case of Own Motion and Ors. Vs. CIT Ors. [ 2013 (3) TMI 316 - DELHI HIGH COURT ] We also note that CBDT has issued instruction from time to time to the AO s qua the manner of processing the return and giving TDS credit. The Hon ble Delhi High Court in its above judgment issued seven mandamuses for necessary action of Income Tax Department, one of which is regarding the issue of non-credit of TDS to the taxpayer due to TDS mismatch despite the assessee furnishing before the AO, TDS certificate issued by the deductor. CBDT in view of the order of Hon ble Delhi High Court issued instruction to the AO s to grant credit of TDS when the assessee furnished TDS certificate as evidence against any mismatch amount after verification. And if necessary AO may issue notice to the deductor to compel to file correction statement as per the procedure laid down. We are inclined to set aside the order of Ld. CIT(A) and direct the AO to give credit to the assessee of full amount as claimed by the assessee after examining the TDS certificates which may be furnished by the assessee. Needless to say once the TDS certificates are furnished by the assessee, AO is duty to give credit of TDS - Appeal of the assessee is allowed for statistical purpose.
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2023 (1) TMI 217
TDS u/s 194C - payment to sub-contractor - non deduction of TDS - disallowance u/s. 40(a)(ia) - HELD THAT:- Before us, AR has pointed to the breakup of labour and wages debited to the Profit and Loss account during the year under consideration. From the aforesaid table she pointed to the instances where the payments made to individual parties are below the limit prescribed u/s. 194C for deduction of TDS. We however find that there is no finding of the lower authorities on this issue. We are therefore of the view that the issue as to whether these payments are below the prescribed limits needs to be relooked by the A.O. We therefore restore the issue back to the file of A.O. and direct him to consider the submissions of the assessee and thereafter pass a speaking order on the issue and decide the issue in accordance with law. Assessee is also directed to co-operate by filing promptly the required details called for by the authorities. Thus the ground of the assessee is allowed for statistical purposes.
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2023 (1) TMI 216
Validity of assessment u/s 153C - no incriminating material for issuance of notice - HELD THAT:- Satisfaction which has been recorded is not based on incriminating assets/documents found as a result of search and that there does not exist any incriminating document which belongs to or pertains to or relates to the assessee. On identical facts in the case of one of the group concern of the assessee, on issuance of notice u/s. 153C arising out of the same search was held to be not legally sustainable and therefore assessment was annulled. Before us, Revenue has not pointed to any distinguishing feature in the facts of the present case and in the case of group concern nor has pointed to any fallacy in the findings of Ld. CIT(A). Further the decisions relied upon the Revenue are distinguishable on facts and are therefore not applicable to the facts of the present case. Considering the totality of the aforesaid facts we find no reason to interfere with the order of Ld. CIT(A) on this issue and thus the grounds of Revenue are dismissed.
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2023 (1) TMI 215
MAT computation u/s 115JB - provision for additional liability relating to prior as added back to normal income but the same was not added back u/s. 115JB - CIT(A) while deciding the issue in favour of the assessee noted that identical issue arose in assessee s case in A.Y. 2012-13 and deleted the addition made by A.O. - HELD THAT:- We find that Ld. CIT(A) while deciding the issue in favour of the assessee had followed the order of his predecessor for A.Y. 2012-13. We further find that against the order of Ld. CIT(A) for A.Y. 2012-13 Revenue had preferred appeal before the Tribunal. The Tribunal vide order [ 2018 (12) TMI 279 - ITAT DELHI] had dismissed the appeal of the Revenue. Before us, Revenue has not placed any distinguishing facts in the case of the assessee and that in the year under consideration and that for earlier years nor has placed any material to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2012-13 has been set aside/ stayed or overruled by higher judicial forum. In view of the aforesaid facts we find no reason to interfere with the order of Ld. CIT(A) and thus the grounds of Revenue dismissed.
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2023 (1) TMI 214
Admissible claim as envisaged u/s 10(1) u/s 10(10C) - excess relief claimed u/s 89 disallowed - CIT(A) by considering the relevant provision u/s 10(1) 10(10C) found that claim made by the assessee is genuine and based on bonafide ground even if the same could not be made in the return of income, further, directed the A.O. to allow the admissible claim as envisaged u/s 10(1) u/s 10(10C) of the Act. HELD THAT:- In so far as issue of relief u/s 89 CIT(A) restricted amount of Rs. 2,41,874/- as relief, considering amended provisions of Section 89 Section 10(10C) of the Act, the said claim of the assessee is held to be not allowable. The Ld. CIT(A) has considered the amended provision to Section 10(10C) and Section 89 and further also considered CBDT Circular No. 20/2015 which is w.e.f. 01/04/2010 with insertion of proviso to Section 89, wherein no exemption shall be allowed to the assessee if any relief has been allowed u/s 10(10C) of the |Act for any Assessment Year in respect of the amount received or receivable on voluntarily retirement or termination of service. Considering the above facts that the assessee could not claim relief u/s 10 (10B) at the time of filing of return which has been ultimately resulted in passing the order impugned, in our considered view, if the assessee be given the benefit of exemption u/s 10 (10B) of the Act and no other Exemption under Chapter III is allowed, the substantial justice would be rendered. Therefore, we direct the A.O. to give the exemption u/s 10 (10B) of the Act in accordance with law. Appeal of the assessee is allowed for statistical purpose.
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2023 (1) TMI 213
Eligibility for approval u/s 80G - some of the objects of the assessee-trust was to teach Veda and spread Vedic education - As concluded by the CIT(E) that the assessee was engaged in religious activities and in view of clause (iii) to section 80G(5), sub-section (5b) of section 80G and Explanation 3 to section 80G assessee s application filed in Form No.10AB for approval u/s 80G of the I.T.Act is to be rejected - CIT(E) granted the benefit of registration u/s 12A of the I.T.Act to the assessee as a religious trust (instead of charitable trust) - HELD THAT:- There is no merit in the impugned finding of the CIT(E) that teaching Vedas is a religious activity and therefore not eligible for approval under section 80G of the I.T.Act. In the present case, assessee Trust does not have any object to establish, maintain and to grant and / or aid to public places of worship and prayer halls and hence the judgment of the Hon ble Apex Court in the case of Upper Ganges Sugar Mills Ltd. [ 1997 (8) TMI 4 - SUPREME COURT] is inapplicable to the facts of the present case. The impugned conclusion of the learned CIT(E) that teaching of Vedas involve offering worship and prayer to God is not correct and bereft of any reason. The assessee only teaches the students how to recite the Vedas. There is a particular method of pronunciation of Vedas with Swaras attached to it. The recitation and pronunciation of Vedas is what is taught by the assessee-Trust. It is like teaching any other Sanskrit literature. The teaching of Vedas does not involve offering worship and prayer to God as held by the CIT(E). There is no object or activity of worship or prayer to God as contended by the CIT(E). The CIT(E) is also not an authority to conclude what teaching of Vedas involve. Hence, the decision of the Supreme Court in Upper Ganges Sugar Mills Ltd v CIT (supra) is not applicable to the facts of the present case. The assessee-trust has carried on other charitable activities in the nature of relief of poor. The Vedic Scholars were identified and felicitated irrespective of their caste, creed or religion. The Trust has given financial assistance to various people, irrespective of caste, creed or religion, involved in Indian Heritage Education. During Covid, many were in financial difficulty and the Trust provided financial assistance and distributed food kit, clothes, medicines for the needy Vedic scholars irrespective of their caste, religion or gender. All the expenses were met out of voluntary contributions or donations. The Income and expenditure account for AY 2021-22 are placed on record, and for AY 2022-23, ledger account for expenses incurred in achieving the objects like donation to veda pathashalas, veda pundits, medical assistance etc and invoices, vouchers, brochures and photos demonstrates the charitable activities carried on by the assessee Trust. Thus the activities carried on by the assessee- Trust are CHARITABLE in the nature of education, relief of poor and not RELIGIOUS as concluded by the CIT(E). In view of the above, the impugned findings of the CIT(E) that the assessee-trust is registered as RELIGIOUS is quashed and the assessee is allowed registration u/s 12A of the I.T.Act as charitable trust. Consequently, the approval u/s 80G of the I.T.Act is to be granted. Appeals filed by the assessee-trust are allowed.
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2023 (1) TMI 212
Income deemed to accrue or arise in India - business PE in India - receipts of the assessee from Indian customers constitute royalty u/s 9(1)(iv) - assessee derived revenues from its airline customers in India - Whether non-resident entities have fixed place business PE in India? - whether there is any PE of the assessee in India or not? - HELD THAT:- For the A.Y. 2014-15, the ld. DRP held that the assessee had PE in India the services provided by the assessee are software services covered under Explanation 2 to Section 9(1)(vi) of the Act. Having heard the arguments of both the parties who reiterated the similar arguments taken up before the authorities below, we decline to interfere with the reasoned order of the ld. CIT(A) resulting in dismissal of the appeal of the Revenue on the issue of PE in India. Royalty Receipt - AO taxed the entire receipts as income of the assessee to be taxed @ 40%, the ld. CIT(A) held that the gross income has to be taxed @ 10% in accordance with the provisions of Section 9(1)(vi) and Section 115A - HELD THAT:- We have gone through the entire arguments given by the assessee and the judgments quoted by the assessee which have been duly incorporated in the order of the ld. CIT(A). We have also been made aware that the receipts of the assessee for the subsequent A.Ys. 2015-16, 2016,-17, 2017-18 have also been taxed @ 10% which has been the ratio followed by the ld. CIT(A) for the A.Y. 2013-14. In view of the settled position, we hereby affirm the decision of the ld. CIT(A). Appeal of revenue dismissed.
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2023 (1) TMI 211
Bogus transaction in the scrip - bogus LTCG - Onus to prove - HELD THAT:- AO nowhere found any discrepancies in the documentary evidences. The dominant basis of treating the impugned transaction as bogus was based on assumption of the AO that the impugned scrip was found as penny stock by the DDIT(Inv.), unit-6(2) Mumbai. Thus, it was the onus upon the AO to bring such facts on record before making any allegations against the assessee. In the present case, the learned CIT-A after detailed verification has reached to the conclusion that the transaction carried out by the assessee was genuine and based on the documentary evidence. At the time of hearing, DR has not brought any iota of evidence against the finding of the learned CIT-A. At the same time, we also note that there was no allegation against the broker through whom the assessee has purchased and sold the impugned script. What has been adopted by the AO for making the addition/disallowances was the mere assumption. To our understanding, the mere assumption, surmises and conjecture cannot the basis of making the addition or treating the transaction in sale of share of impinged company as bogus until and unless it is supported by the material documents. Income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and assumptions of certain facts. In order to hold income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/stock brokers for such an arrangements. In absence of such finding, no adverse inference can be drawn against the assessee. Whether a person who genuinely entered into purchase and sale of particular shares at stock exchange which was rigged up by some other person or group of persons, therefore, he enjoyed the windfall from such action of other person, can he be disallowed the benefit of tax exemption or carry forward of loss ? - To our mind the Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s. Arya Global Shares Securities Ltd. and Vax Housing Finance Corp. Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. As relying on case Smt. Krishna Devi 2021 (1) TMI 1008 - DELHI HIGH COURT we hold that in absence of any specific finding against the assessee, the assessee cannot be held to be guilty or linked to the wrong acts merely on basis of surmises and assumptions. In view of the above discussion, we hold that the income earned by the assessee on the scrip of M/s. Arya Global Shares Securities Ltd. and loss incurred on the scrip of Vax Housing Finance Corp. limited cannot be held bogus merely on the basis of some assumption of the AO unless cogent materials are brought on record. Therefore, we don't find any reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition and disallowances made by him. Hence the grounds of Revenue's appeal is hereby dismissed. Decided against revenue.
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2023 (1) TMI 210
Revision u/s 263 - excess claim of agricultural income - in absence of any material evidence to reconcile the discrepancy of the agricultural land holding or to show that some agricultural land have been converted into horticultural land, the learned PCIT rejected the various explanations given by the assessee and set aside the order of the Assessing Officer with a direction to redo the assessment after examining the issues as discussed - HELD THAT:- A perusal of the office note of the AO, which was inadvertently supplied to the assessee shows that the AO has obtained the details from the Tehsildar, Chintalapudi Mandal of West Godavari Distt of Andhra Pradesh wherein the Tehsildar has certified that the assessee s landholding is 11.80 acres and during the financial year 2015-16, 13 acres of land was converted into horticultural land and that is why it is not appearing in the revenue record. Thus, during the financial year 2014-15, the assessee was having 24.80 acres of land. Therefore, it is a clear case of due application of mind by the Assessing Officer and therefore, the order cannot be stated to be erroneous although it may be prejudicial to the interest of the Revenue since according to the learned PCIT the agricultural income from 14.08 acres of land could not have exceeded Rs.10.00 lakhs. In the instant case, the office note of AO clearly shows that he has accepted the agricultural income declared by the assessee after due verification and due application of mind and therefore, it cannot be said that the order passed by the Assessing Officer is erroneous. Even if the order is prejudicial to the interest of the Revenue, however, the other condition that the order is erroneous is absent. Therefore, the learned PCIT, in our opinion, is not justified in assuming jurisdiction u/s 263 - it has been held in various decisions that merely because the PCIT does not agree with the view taken by the AO he cannot assume jurisdiction u/s 263 or thrust upon his view as against the view taken by the AO unless the view taken by the AO is perverse one or not a possible view. The view taken by the Assessing Officer in the instant case is a possible view. We, therefore, set aside the order passed by the learned PCIT and the grounds raised by the assessee are allowed.
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2023 (1) TMI 209
Addition of interest on free advances given by the appellant company - AO disallowed the total interest paid on the ground that the assessee had made various interest free advances - as per revenue Had the assessee charged interest from those parties, being an NBFC the interest income would have been more than whatever has been paid by the assessee and accordingly disallowed the whole of the interest paid by the assessee - HELD THAT:- It is a settled proposition of law as also held by various High Courts and the Hon ble Supreme Court from time to time that where an assessee is enjoying interest free funds more than interest free advances, then there is a presumption that the interest free advances have been made out of the interest free funds available with the assessee and in that situation no interest paid by the assessee can be disallowed. In the case of the appellant also, the ITAT [ 2020 (4) TMI 94 - ITAT DELHI] also held the same and deleted the disallowances made by the Assessing Officer out of the interest. Disallowance u/s 14A - HELD THAT:- PMS charges should not have been considered for the purpose of disallowance under Rule 8D(2)(i) of the Rules and consequently even if it is required to be made, though not admitted, it has to be made keeping in mind the quantum of investment dealt in the preceding year and this year as well as income from current investment shown by the assessee. As far as disallowances required to be made under Rule 8D(2)(ii), it has to be restricted to 0.5% of the average investment yielding exempt income and not whole investment and that too. In the case of dividend from Dabur India Ltd., the assessee has not incurred any expenses at all because the assessee is one of the holding companies of Dabur India Ltd. and only a dividend warrant has been issued and deposited. Hence no expenses should be said to have been incurred by the assessee. The AO is directed to re-compute the disallowance taking into consideration the dividend yielding investments and to exclude PMS charges for computation of disallowance u/s 14A. The appeal of the assessee on this ground is allowed. Allowbale business expenses - Subscription expenses - HELD THAT;- The incumbent student was neither an employee nor associated with the company for any commercial or business purpose. The expediency of sponsoring the student has not been brought on record. Neither the student had contributed in any manner for augmenting, contributing to the business of the assessee. At the most, the sponsorship can be treated as a charity or gratis by the assessee company. Hence, none of the provisions of Section 36 and Section 37 are applicable to the expenditure in question. Hence, the appeal of the assessee on this ground is dismissed. Service charges paid to Dabur Securities - Dabur Securities Pvt. Ltd. is one of the group companies and carries out all the accounting works, secretarial charges, taxation work - whether direct or indirect - TDS work as well as the voucher reconciliation for all the group companies involved in finance. Whatever the expenses Dabur Securities incur, the same are allocated amongst the group companies in the ratio of turnover. Such expenses have also been incurred in the preceding year and no disallowances have ever been made. Copy of the agreement between the assessee and Dabur Securities has been placed at page 102 of the paper book. In subsequent years also, no disallowances have been made even after enquiry. Having gone through the facts on record, we hereby hold that the services charges paid is an allowable expenditure.
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2023 (1) TMI 208
TDS u/s 195 - withhold tax on the payments made to the MRI company - assessee contended that it is acting as a collection agent on its behalf - HELD THAT:- This issue has thus not been examined by the CIT(A). Before us also, the assessee has only placed on record the MOU between the Hospital and the MRI company. No further details with regard to the collections made, corresponding payments to the MRI company, ledgers etc. has been provided which would substantiate their contention that these payments were collected/recovered on behalf of the MRI company and that the company did not retain any mark-up or profit therein (except their fixed fee of Rs.25 lacs). The assessee has also not placed copies of sample invoices and/or the copies of MRI reports issued to the patients which would substantiate its contention that the privity of contract was between the patients and the MRI company and not the patients and the assessee. For instance, whether the test reports are given by the MRI Centre directly to the patients referred to by the assessee hospital or are they issued to the assessee hospital by MRI Centre, who in turn issue the test results in their own letterheads. It is thus noted that none of these aspects have been looked into by the lower authorities. Neither the assessee nor the lower authorities have been able to bring on record the correct facts as to the relationship between the assessee and the MRI company viz., whether it is a principal-agent or principal - principal relationship. Hence, the contentions raised by the assessee before us remains unsubstantiated and unverified. Upon query from the Bench, the Ld. AR had claimed that the MRI company had deducted taxes on the fees of Rs.25 lacs paid to the Hospital for the collection supervisory services rendered by it, but no evidence in support thereof was placed before us. According to us, all these factors needs to be analyzed to decide about the nature of relationship and the relevant facts needs to be ascertained as to whether the payments were in the nature of reimbursements or not. The questions raised before us are mixed question of facts and law. Since none of the above aspects and the relevant facts have been properly looked into and examined by the lower authorities, in the fitness of the matters, we consider it fit to set aside the issue back to the file of the AO to examine this issue afresh. Accordingly, we set aside the order of Ld. CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the same in the light of discussions made supra as well as based on judicial precedents. The assessee is also directed to furnish all the relevant facts and explanation called for by AO and the assessee is at liberty to file relevant evidences/ documents/ written submission/ case laws relevant to this issue. Appeals of the assessee are allowed for statistical purposes.
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2023 (1) TMI 207
Addition u/s 56(2)(vii)(b) - assessee was selected for limited scrutiny for the reason of substantial increase in capital in a year - scope of converting the limited scrutiny into complete scrutiny with prior approval of PCIT/CIT - HELD THAT:- In explanation the assessee furnished all the necessary details in respect of scrutiny under CASS as called by the AO which were examined at length which is reflecting in the assessment order, but however, the AO made addition u/s. 56(2)(vii)(b) of the Act under the head Income from other sources which is evident from the computation made by the AO in respect of discussion made. Therefore, it is clear as rightly pointed by the ld. AR that the AO did not make addition on the reason selected for limited scrutiny i.e. substantial increase in capital in a year, but however, made addition under the head Income from other sources which is, admittedly, not the issue for selecting case under limited scrutiny. This position is not disputed by the CIT(A) nor by the ld. DR. I note that that the AO deviated from the limited scrutiny and made addition other than the reason selected for limited scrutiny which is in my opinion is complete scrutiny as pointed by the ld. AR violating of Instructions of CBDT. When there is a potential escapement of income exceeding Rs.5 lakhs a limited scrutiny cases that the AO required to take prior approval of PCIT/CIT concerned. No such approval brought on record by the ld. DR to show that the AO is well within its jurisdiction to convert limited scrutiny into complete scrutiny taken prior approval from PCIT/CIT concerned. In the absence of such approval I find force in the arguments of ld. AR that the assessment passed by the AO is invalid. Instruction No. 5/2016 dated 14-07- 2016 issued by the CBDT further clarified that the AO shall be required to form a reasonable view that there is possibility of under assessment of income while proposing to take up complete scrutiny in a case which was originally earmarked for limited scrutiny vide para 2 of the said Instruction dated 14-07-2016. There is no dispute with regard to binding nature of these two Instructions on the AO and no reasonable view brought on record to show that the AO formed an opinion to take up as complete scrutiny, in the absence of such reasonable view the assessment made by the AO is in my opinion is bad under law. AO has failed to follow the guidelines issued by the CBDT for converting the limited scrutiny into complete scrutiny without prior approval of PCIT/CIT concerned, therefore, in our opinion, the AO lacks jurisdiction to carry out the assessment and the addition made by the AO u/s. 56(2)(vii)(b) is not justified. Therefore, the order of CIT(A) in confirming the addition made by the AO on account of income from other sources fails and it is set aside. Thus, ground Nos. 1 and 2 raised by the assessee are allowed.
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2023 (1) TMI 206
Bogus LTCG - exemption u/s.10(38) in respect of long term capital gain earned on shares denied - HELD THAT:- Shares were sold on the same day shares were entered in the DEMAT. CIT(A) also noted that broker s name was prominently reflected in the investigation report of the Department, and further noted that shares were kept in pool holding of the broker. The ld.CIT(A) noted that as per SEBI rules, if full payment of shares purchased was made, then the broker had to transfer the shares to the client s DEMAT within 24 hours. In the case of the assessee shares were converted into DEMAT form only after seven days. He therefore rejected the assessee s pleading that the shares were kept in the pool account of the broker, since his explanation was not correct in accordance with the SEBI rules in this regard. CIT(A) held that there was no credible evidence to say that the assessee was having shares till 8.8.2014 and why the shares were with the broker till they were sold was not known. He accordingly held the entire evidences self-serving and stagemanaged, and therefore, upheld the addition made by the AO. The findings of the ld.CIT(A), we find are very detailed, who has made further inquiry with respect to the issue and found entire transaction to be bogus. Since the assessee has not come before me in support of his appeal, have no option but to confirm the concurrent finding of both the Revenue authorities on the issue. Accordingly, grounds of appeal of the assessee are rejected.
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2023 (1) TMI 205
TDS u/s 194C - non-deduction of TDS on certain payments made towards clearing and forwarding charges (CFS charges), plot rent and Dock charges - AR submited that no TDS is liable to be deducted in case of an amount paid on account of reimbursement of expenses - HELD THAT:- Assessee has submitted that the issue may be restored to the file of the Assessing Officer so that the assessee may produce the relevant evidences in this respect. The matter in this respect, is accordingly restored to the file of the AO for limited purpose of examining the above contention of assessee and if the assessee will be able to prove its above contention, then no disallowance be made in respect of such payments which have been taken into account by the respective payees and due taxes paid on their income. Assessee has further submitted that some of the payments were made to Kolkata Port Trust and that since the Kolkata Port Trust is under the Ministry of Surface Transport wherein the Government of India has full beneficial interest, therefore, any payment made to Kolkata Port Trust will be covered u/s 196 of the Act and, therefore, the income of the Kolkata Port Trust was not chargeable to tax. That, therefore, the assessee cannot be deemed to be an assessee in default for non-deduction of TDS out of payments made to Kolkata Port Trust because there was no tax payable on the income of the said payee Kolkata Port Trust. The ld. counsel, in this respect, has relied upon the decision of the Coordinate Bench of the Tribunal in the case of M/s Gourishankar Bihani [ 2014 (12) TMI 1323 - ITAT KOLKATA] . The matter in respect of above contention is also restored to the file of the AO. The Ld. AO shall adjudicate upon the above contention by way of a speaking order. Payment made towards shipping company charges - CIT(A) has not given any detailed or factual finding as to which of the payees were foreign shipping companies or their agents. CIT(A) has simply relied upon the list given by the assessee without discussing as to which of the payees were resident companies and which of the payees were non-resident companies and no basis has been given for his such conclusion. In view of this, we agree with the contention of the ld. DR that this issue is also required to be examined at the end of the Assessing Officer to give a factual finding as to which of the payee companies will be covered under the provisions of section 172 and to re-compute the disallowance on the payments made to shipping companies covered under the provisions of section 194C and 195. In view of this, the impugned order of the CIT(A) is set aside and the matter is restored to the file of the Assessing Officer on the limited issue as noted above. Appeal of the assessee is treated as partly allowed for statistical purposes
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2023 (1) TMI 204
Revision u/s 263 - increase in share premium - HELD THAT:- It is not disputed by both the parties that the case of the assessee was selected for limited scrutiny and issue to be examined was increase in share premium. In the assessment proceeding the ld. AO has examined the issue as it is evident form the submission made in the form of paper book filed by the assessee. As the case was for this limited purpose the same has been examined and verified by the ld. AO in that framework. CIT evidently did not place on record any apparent error on the part of the AO so as to substantiate that order passed by the ld. AO is prejudicial to the interest of revenue. He only mentioned that the detailed investigation was required to be conducted in order to verify the share premium. There is no further defect found from the record from the material that has been collected by the ld. AO to verify the point raised in the limited scrutiny. The contentions raised by ld. DR on aspects in detailed discussed in the arguments of the ld. AR of the assessee. Since, in this case ld. AO has clearly conducted the enquiry and revenue did not pin point the error on the part of the assessing officer the order passed after due application of mind cannot be subjected to proceeding u/s. 263. As the A.O while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. In the present case none of the condition laid down is fulfilled in the show cause notice for revision issued and also not specifically dealt with what are the reasons so as to make the revision of order u/s. 263. Therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 - Decided in favour of assessee.
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2023 (1) TMI 203
Revision u/s 263 by CIT - difference on account of fair value measurement of the operating financial assets (OFA) - HELD THAT:- We find that no such view has been formed by Ld. AO during the course of regular assessment proceedings. Regarding show-cause notice, Hon ble Court further held that the requirement is that a notice proposing the revisional exercise is to be given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the Section 263 to raise the said notice to the status of a mandatory show-cause notice affecting the initiation of the exercise in the absence thereof or to require the Commissioner to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the Commissioner is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the Commissioner prior to the finalization of the decision. We find that this requirement has duly been fulfilled by the revisional authority in the present case and adequate opportunity has been granted to the assessee to state its case. The decision of Hon ble High Court of Madras in Shri Ravi Kannan [ 2020 (7) TMI 818 - MADRAS HIGH COURT] as referred to by Ld. AR, is a case wherein it was a finding by Hon ble Court that the notice was a vague statement. PCIT agrees that the verifications were done, however, it was stated that proper verification was not done. In such a case, PCIT was bound to disclose in the show-cause notice as to why he considers the verification to be not proper. However, the case before us falls under the category wherein Ld. AO has not applied his mind to the issue. Further, the notice clearly states the reasons as to why the order is being subjected to revision u/s 263. In the replies to show-cause notice, it was nowhere the case of the assessee that the notice was vague or the same did not disclose the reasons for revision. The case law of CIT V/s PVP Ventures Ltd. [ 2012 (7) TMI 696 - MADRAS HIGH COURT ] is factually distinguishable since in para-26 of the decision, it is a fact that there was no proper initiation of proceedings u/s 263 and there was no ground for shifting in stand by the Commissioner which were different from the one which prompted him to initiate proceedings u/s 263. Therefore, this case law is also distinguishable. The decision of Mumbai Tribunal in M/s Tata Motors Ltd. [ 2021 (4) TMI 473 - ITAT MUMBAI ] is a case wherein the view formed by Ld. AO was one of the possible views while framing the assessment based on the laws prevailing at that relevant point of time (para 3.13) and therefore, revision was held to be unjustified. This is not the case here. Finally, considering the entirety of facts and circumstances of the case, the revisional jurisdiction u/s 263 as exercised by Ld. Pr. CIT could not be faulted with and the same could not be held to be bad-in-law as urged by Ld. AR. We order so. However, our aforesaid view would not be construed as any expression on the merits of the case, in any manner, which is left open for consideration of lower authorities. In this appeal, we have only examined the validity of revisional proceedings. Appeal stands dismissed.
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2023 (1) TMI 202
Long term capital gains arising from transfer of shares - Treaty protection under article 13(4) of the India Mauritius Double Taxation Avoidance Agreement - concept of beneficial ownership - Indo Mauritius tax treaty - assessee before us is a company incorporated in, and fiscally domiciled in, the Republic of Mauritius - as incorporated and it holds a global business licence (GBL) issued by the Financial Services Commission, Mauritius - assessee is also registered as a foreign venture capital investor (FVCI) with the Securities and Exchange Board of India as issued a tax residency certificate‟ by the Mauritian Revenue Authority - HELD THAT:- Fundamental assumption, underlying the proposition advanced by the Assessing Officer, cannot be taken as granted - as the AO has apparently taken it to be. Therefore, rather than putting the elaborate arguments in furtherance of the said proposition to test of judicial scrutiny, in our considered view, we must first put with this fundamental assumption, underlying the proposition, to the test of judicial scrutiny. If this fundamental assumption is found to be incorrect, we will not be required to deal with the question, which would be academic in that case, as to whether the detailed arguments in support of the reasoning adopted by the AO to hold the view that the assessee is not the actual or true beneficiary of the transactions leading to capital gains in question. AO has clearly fallen in error in proceeding on the basis that the concept of beneficial ownership is relevant in the context of article 13, without assigning any specific and cogent reasons in support of this inference. We are unable to approve this approach. We, therefore, deem it fit and proper to vacate the impugned assessment order and remit the matter to the file of the AO for deciding the fundamental issue as to whether the requirement of beneficial ownership can be read into the scheme of Article 13 of the Indo Mauritius tax treaty, and it is only in the event of the answer being in the affirmative that the question of the beneficial ownership of the assessee, in respect of the shares, can be examined. Of course, there is one more step in the process and which is equally critical and foundational, and that is giving a categorical finding on the connotations of beneficial ownership‟ in the treaty context. There is huge debate globally on the meanings of beneficial ownership‟ in the context of the treaties. As we have seen earlier in this order, the United Nations Committee International Tax Committee has commissioned a report on the use of the beneficial ownership concept in the tax treaty provisions, and this report, which is available in the public domain, has an enlightening discussion about what constitutes beneficial ownership and which meaning of this term, the domestic law meaning or the international fiscal meaning, is to be adopted. There is also OECD Conduit Companies Report 1986 on this issue, and there are several decisions, whatever their utility and relevance, from the judicial forums abroad. It is not at the whim or fancy of a tax authority to decide as to what constitutes beneficial ownership‟; it is absolutely fundamental that as what constitutes beneficial ownership‟ must also be examined and categorical findings are given as to how these requirements of beneficial ownership are satisfied in the present case. These reasons are also necessary so that, if necessary, we, as indeed the Hon‟ble Courts above, can take a call on the correctness of the stand of the AO. Both of these foundational issues, i.e. whether the concept of beneficial ownership‟ is inbuilt in the scheme of Article 13 and, if so, what are the connotations of beneficial ownership‟ in this context, need to be adjudicated upon by the AO. As these fundamental issues are being remitted to the file of the AO for adjudication by way of a speaking order, in accordance with the law and after giving a fair and reasonable opportunity of hearing to the assessee, all other issues raised in the appeal are rendered infructuous as on now. It will be premature, even if at all necessary, to deal with those issues, and very erudite arguments by both the parties on those issues, at this stage.
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2023 (1) TMI 201
Assessment u/s 153A/153C - Period of limitation - HELD THAT:- As per assessment order dated 30.03.2015 passed u/s. 143(3)/153C of the Act, satisfaction note was received by the Assessing Officer on 05.01.2015. Thus, assessment years 2009-10 to 2014-15 comes within the period six block years. The year under consideration is assessment year 2007-08, which is clearly barred by limitation as held by co-ordinate Bench of Tribunal in the case of DSL Properties (P) Ltd. 2013 (9) TMI 123 - ITAT DELHI Therefore, Assessing Officer in the present case did not assume valid jurisdiction to issue notice u/s. 153C of the Act for the assessment year 2007-08 on the basis of satisfaction recorded on 05.01.2015. Accordingly, the order of the Assessing Officer is liable to be quashed and the impugned order of ld. CIT(A) is not maintainable - Decided in favour of assessee.
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2023 (1) TMI 200
Disallowance u/s. 40A (3) - assessee could not reduce any compelling reason for making cash payment - HELD THAT:- The proviso to section 40A(3) states that for the purpose of making disallowance under the said section should be done having regard to the considerations of business expediency and other relevant factors. The assessee in the affidavit claims that the suppliers insisted for payments in cash which is a reason enough for making the payments in cash. The facts stated in the affidavit needs to be verified to confirm whether making the payment in cash is done for business expediency as claimed by the assessee. AR submission that the in the case M/s. Spectra Pipes Private Limited, the cash is directly deposited in the bank account of the supplier also needs to be verified on merits. Considering that the assessee s claims stated above needs verification basis which the allowability of the expenses need to be decided, we are remitting the case back to the AO. The AO is directed to look at the facts afresh in the light of the affidavit filed by the assessee after giving reasonable opportunity of being heard to the assessee. Appeal of the assessee is allowed for statistical purposes.
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Customs
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2023 (1) TMI 199
Rejection of refund claim - import of 54 sets of battery operated rickshaw in CKD condition without battery and charger - re-export of the goods as appellant did not have valid certificate of compliance in terms of Rule 126 of Central Motor Vehicle Rules (CMVR), 1989 - rejection of refund claim on the ground of time limitation - whether the time bar under section 27(1) of Customs Act, 1962 is invokable with respect to impugned refund claim? HELD THAT:- It is observed that the opening line for section 27 is claim of refund of duty . Reverting to the facts of this case admittedly, the amount in question Rs 7,76,205/- was paid at the time of presentation of Bill of Entry on 03.01.2014 as duty on the goods / vehicles imported by the appellant. It is also admitted fact on record that those goods since were not allowed to be imported without any requisite certificate. Since the Certificate was not available with the appellant that the appellant made a request for the goods to be re-exported. Admittedly the request was made at the time when the goods were still in the Customs area. The Bill of Entry as was filed for home consumption was allowed to be amended for warehouse and those were allowed to be re-exported vide order dated 14.10.2014. The let export order was passed with respect to the goods which were still lying in the customs area on 22.11.2014. These admitted facts are sufficient admission to the fact that the goods were never cleared for home consumption. There was no occasion for the appellant to actually pay the customs duty. Hence the amount in question cannot be called as the amount of duty to which section 27 applies - The duty of Rs.7,76,205/- which stand deposited since at the stage prior to scrutiny of the impugned Bill of Entry, hence remained as deposit made by the appellant for which the department has no authority to retain. Resultantly, same cannot be called as amount of duty. The Commissioner (Appeals) has wrongly invoked section 27(1) of the Customs Act, 1962 while rejecting the refund claim as barred by time. Section 26A(1) is otherwise not applicable to the facts of the present case. The order is accordingly set aside - Appellant is held entitled for the said refund along with interest at the rate of 6% from the date of payment till the sanction arrived. Appeal allowed.
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2023 (1) TMI 198
Application for waiver of pre-deposit amount under Section 129E of the Customs Act, 1962 - effect of amendment made in Section 129E of the Customs Act - HELD THAT:- It would be seen from a bare perusal of section 129E of the Customs Act that after 6.8.2014 neither the Tribunal nor the Commissioner (Appeals) have the power to waive the requirement of pre-deposit, unlike the situation which existed prior to the amendment made in section 129E on 06.08.2014 when the Tribunal, if it was of the opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship, could dispense the said deposit on such conditions as it deemed fit to impose so as to safeguard the interest of the Revenue. The Supreme Court in Narayan Chandra Ghosh vs. UCO Bank and Others [ 2011 (3) TMI 1478 - SUPREME COURT ], examined the provisions contained in section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 relating to pre deposit in order to avail the remedy of appeal. The provisions are similar to the provisions of section 129E of the Customs Act. The Supreme Court emphasised that when a Statue confers a right to appeal, conditions can be imposed for exercising of such a right and unless the condition precedent for filing appeal is fulfilled, the appeal cannot be entertained. The Supreme Court, therefore, held that deposit under the second proviso to section 18(1) of the Act, being a condition precedent for preferring an appeal, the Appellate Tribunal erred in law in entertaining the appeal. The Supreme Court also held that the Appellate Tribunal could not have granted waiver of pre-deposit beyond the provisions of the Act. It will also be appropriate to refer to a decision of the Delhi High Court in DISH TV INDIA LIMITED VERSUS UNION OF INDIA AND ORS. [ 2020 (8) TMI 183 - DELHI HIGH COURT ], wherein the requirement of pre-deposit under section 129E of the Customs Act, came up for consideration. The High Court held that when the Statue itself provided wavier of pre-deposit to the extent of 90% or 92.5% of the duty amount and made it mandatory to deposit 7.5% or 10% of duty amount, the Courts cannot waive this requirement of deposit. The appellant has not made the pre-deposit. In view of the aforesaid decisions, it is not possible to permit the appellant to maintain the appeal without making the required pre-deposit - the application filed for waiver of pre-deposit is rejected - Application dismissed.
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2023 (1) TMI 197
Confiscation with option of redemption fine and penalty - Potassium Humate First Grade Powder - Potassium Humate Granular - appellant has assailed the impugned order on the ground that remanding the matter back by learned Commissioner (Appeals) to the original authority is not proper and justified inasmuch as all facts involved in the appeal were pleaded before him - HELD THAT:- There are no infirmity therein, in so far as it has remanded the matter to the original authority for a fresh fact finding on the issue involved in this appeal. Needless to say that this being an old matter, the order dated 16.09.2022 passed by the Learned Commissioner (Appeals) should be implemented expeditiously, preferably within a period of 6 weeks from receipt of this order - appeal dismissed.
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Corporate Laws
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2023 (1) TMI 196
Anti-Competitive Acts - whether the warranty policy has (i) potentially resulted in denial of market access to parallel importers resellers of Boxed Micro-Processors for Desktop and Laptop PCs (ii) the risk of higher pricing for the said articles in India? - powers under Section 26(1) of the Competition Act, 2002 - HELD THAT:- The argument of learned Senior Advocate Dr. A.M.Singhvi that the investigation now ordered under section 26(1) of the 2002 Act may have a detrimental effect on the business reputation of the petitioners, may be arguably true, to some extent. He also contended that the investigation to be undertaken by the Director General in terms of order under section 26(1) of the 2002 Act, (which he termed draconian law ) involves an intrusive and free ranging inquiry into every aspect of his clients business. Hon ble Delhi High Court in GOOGLE vs. COMPETITION COMMISSION OF INDIA [ 2015 (4) TMI 1234 - DELHI HIGH COURT] although did not use the word draconian observed that the powers of Director General to investigate under section 26(2) are far wider than the powers of the police under the Code of Criminal Procedure, 1973, is also true. However, similar contentions taken up by the very same counsel in FLIPKART INTERNET PVT. LTD., AMAZON SELLER SERVICES PRIVATE LIMITED VERSUS COMPETITION COMMISSION OF INDIA AND ORS. [ 2021 (7) TMI 1398 - KARNATAKA HIGH COURT] were repelled by the Division Bench of this Court and the same has attained finality - It would once again be fruitful to advert to the foundational philosophy of competition law. The central concern is that firm or firms can harm competition and inflict harm on customers and ultimately end consumers where they possess some degree of market power. Even otherwise, there are several checks balances against the abuse of power vested in the Commission which comprises of experts and qualified persons as its constituent members. Commission s stature and track record as can be ascertained from several rulings of the Apex Court and various High Courts, is also a fair assurance against the abuse of power. An opportunity of hearing is also provided to the stakeholders at the stage of investigation and thereafter whilst punitive or corrective action are being considered. This apart, a right of appeal is provided under section 53 A of the Act, as amended in 2007, once the report of investigation is submitted by the Director General. The adverse consequences of proceedings taken in accordance with law ordinarily fall under the maxim, damnum sine injuria . It is not that in no case in which Commission directs investigation under section 26(1) of the Act arbitrarily and unreasonably, the aggrieved cannot invoke writ jurisdiction. Such cases warranting indulgence of Court ordinarily involve manifest arbitrariness as discussed in SHAYARA BANO vs. UNION OF INDIA [ 2017 (9) TMI 1302 - SUPREME COURT] and therefore, even in respect of proceedings at the preliminary stage, remedy can be had by the aggrieved. However, in this petition no such case is made out, despite lengthy arguments and bulky pleadings of the petitioners that justified indulgence of this Court. The petitioners hastily rushed to this Court and unjustifiably secured an interim order that interdicted an inquiry of preliminary nature, for all these years, to the enormous prejudice of public interest. This Writ Petition, besides being premature and absolutely devoid of merits, is an abortive attempt by the petitioners to scuttle the innocuous statutory proceedings of the Commission. Therefore, this is a fit case for dismissal with exemplary costs. This petition is liable to be dismissed and accordingly it is, with a cost of Rs.10,00,000/- only, payable to the 1 st respondent Competition Commission of India within six weeks.
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Insolvency & Bankruptcy
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2023 (1) TMI 195
CIRP proceedings - Operational Creditors - NCLT / NCLAT rejected the application - Scope of arbitration clause - computation of the period of limitation in regard to an application filed under Section 9 of IBC - existence of pre-existing dispute or not - whether the period during which the operational creditor s right to proceed against or sue the corporate debtor that remain suspended by virtue of Section 22 (1) of the Sick Industrial Companies (Special Provisions Act, 1985) (SICA) can be excluded, as provided under Section 22 (5) of SICA or not - HELD THAT:- Section 22 (1), SICA, would make it clear that there was a statutory bar to take to any proceeding for realisation of a right referred to in the said Section against an industrial company when once an enquiry under Section 16, SICA is pending against it or any scheme referred to under Section 17 thereof is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, except with the consent of the Board or the Appellate Authority, as the case may be. As noticed earlier, SICA came to be repealed and IBC came into force (Sections 7 to 9 and various other Sections), on the same day viz, on 01.12.2016. Section 6, IBC provides that where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate CIRP in respect of such corporate debtor in the manner provided under Chapter II of IBC. Section 8, which falls under Chapter II, deals with insolvency resolution by operational creditor. It provides that an operational creditor may, on the occurrence of default, deliver a demand notice of unpaid of operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. It is apposite to note that a seemingly printing error had occurred in Section 8 (1), IBC inasmuch as instead of a demand notice of unpaid operational debt it is printed as a demand notice of unpaid operational debtor. Evidently, this must have occurred as in the Gazette Notification also the word debtor is following the words unpaid operational . Section 238A, IBC makes the provisions of the Limitation Act, 1963 applicable to computation of the period of limitation in regard to proceedings before the Adjudicating Authority and the other forums. This position is made explicitly clear in the decision of this Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [ 2018 (10) TMI 777 - SUPREME COURT ] - The decision in B.K. Educational Services Private Limited would thus reveal that Articles 137 and 5 of the Limitation Act, 1963 are applicable to applications filed under Sections 7 and 9 of IBC. It be so, the position is that the period of limitation is three years from the right to apply accrues but the delay is condonable on sufficient grounds. It is to be noted that the third column in Article 137 of the Limitation Act posits that time runs when the right to apply accrues . When the limitation period for initiating CIRP under Section 9, IBC is to be reckoned from the date of default, as opposed to the date of commencement of IBC and the period prescribed therefor, is three years as provided by Section 137 of the Limitation Act, 1963 and the same would commence from the date of default and is extendable only by application of Section 5 of the Limitation Act, 1963 it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the period of limitation - In the case on hand, indubitably, the question whether the delay occurred in the matter of filing of application under Section 9, IBC is condonable or not, was not considered. A bare perusal of the impugned order would reveal that after taking into account the date of default and the date of filing of the application under Section 9, IBC the NCLAT held it as time barred. When once it is so found we would have remanded the matter for consideration of the question of limitation afresh, but for the fact that the application under Section 9, IBC was dismissed assigning reason of existence of pre-existing dispute as well. When the agreement entered into between the parties carries an arbitration clause and when the parties mutually consented and sought to proceed with arbitration before the High Court and further, when the arbitration proceedings are pending, we are of the view that the parties shall be left with the liberty to raise all contentions before the arbitrator, except the legal questions discussed and decided in this judgment. Appeal dismissed.
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2023 (1) TMI 194
Initiation of CIRP - existence of debt and dispute or not - Settlement of dispute between the parties or not - NCLT rejected the application - HELD THAT:- The alleged settlement deed which is a bone of contention between the two parties is in the nature of pre-existing dispute which needs thorough investigation and therefore beyond the scope of the Adjudicating Authority in terms of the judgement of the Hon ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT ]. It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court. From the available material on record in the APB and after hearing the rival contentions of both the parties as noted in the preceding paragraphs, we are of the view that the Adjudicating Authority has correctly recorded the finding that there exist disputes between the two parties even prior to the date of demand notice both in respect of the terms and conditions of their business transactions and outstanding dues payable to the operational creditor. It is clear that the defence was raised by the Corporate Debtor both in their reply to demand notice as well as in their detailed reply filed in Section 9 application and the nature of dispute raised was such that it required adjudication by competent court. The Adjudicating Authority has therefore correctly applied the ratio of the Mobilox judgement and rejected the Section 9 application on the ground of pre-existing disputes between the parties and that the matter requires thorough investigation. The Adjudicating Authority has rightly rejected the application of the Appellant filed under Section 9 of IBC - appeal dismissed.
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2023 (1) TMI 193
Seeking refunds of amount to the liquidation account of the Corporate Debtor - time limitation for filing refund claim - whether provisions of Section 11B of the Central Excise Act, 1944 are inconsistent with Section 33 of the IBC, 2016 and by virtue of Section 238 of the IBC, the provisions of IBC will have overriding effect? - HELD THAT:- Section 33(5) of the IBC on which reliance has been placed by the Learned Counsel for the Liquidator provides that when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor, provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority. There are no conflict with Section 33 (5) and Section 11B. Section 11B is enabling provision which entitles the Corporate Debtor to make an Application for refund of duty. The Moratorium which becomes operative after liquidation order has been passed is for the purpose for protecting the Corporate Debtor from any legal proceeding. Present is not a case where any legal proceeding has been initiated against the Corporate Debtor under the Central Excise Act, 1944. Present is a case where for refund, to which the Corporate Debtor is entitled, whether the Application is required to be made by the Corporate Debtor in accordance with the Central Excise Act, 1944 or not. The statutory provision of the Central Excise Act, 1944 does not contemplate automatic refund of any duty to which company may be entitled - thus, there are no inconsistent or irreconcilable provision in Section 33 of the IBC in reference to Section 11B of the Central Excise Act, 1944. Whether the Application filed by the Liquidator for refund of the amount of Rs.25,46,588/- was filed beyond time? - HELD THAT:- When we look into the provisions of Section 11B (1), the period of one year has been provided for filing Application for refund. Section 11B of the Central Excise Act, 1944 is a special statute which provides a particular period of limitation for making an Application for refund. The order passed by the Hon ble Supreme Court was passed in exercise of jurisdiction under Article 142 of the Constitution of India and the order specifically covered petitions /applications /suits /appeals /all other proceedings. The submission of the Counsel for the Appellant is that the expression all other proceedings should be interpreted ejusdem generis and application under Section 11B is not other proceeding - there are no substance in the submission when the order clearly mentions that Application for which limitation is prescribed in special statute the present case shall be obviously covered by the Hon ble Supreme Court s order. We, thus, are satisfied that the order of the Hon ble Supreme Court dated 23.03.2020 read with subsequent orders extend the benefit of limitation for liquidator to file an Application under Section 11B. Hence, the Application dated 31.12.2020 has to be treated within time. We, thus, are of the view that the Company was fully entitled for refund of the amount of Rs.25,46,588/- and for the above reason, we uphold the direction issued by the Adjudicating Authority for refund of the amount of Rs.25,46,588/-. Direction with regard to Rs.1,08,797/- - HELD THAT:- Admittedly, no Application has been filed by the Liquidator for refund of the said amount. There being no claim for the refund in accordance with law, the Central Excise department is not obliged to refund the said amount and the direction of the Adjudicating Authority to direct for refund of the said amount cannot be upheld. The direction of the Adjudicating Authority to the Respondent of the Application (Appellant herein) to refund the amount of Rs.25,46,588/- is upheld whereas the direction for payment of Rs.1,08,797/- is set aside - Appeal allowed in part.
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2023 (1) TMI 192
Initiation of CIRP - FINANCIAL CREDITORS - Home buyers - NCLT admitted the application - Appellant has submitted that they are ready to deposit an amount of amount - HELD THAT:- There is no material brought on record except to the letter of the Swamih Investment Fund dated 03.06.2021, which provided for approval of fund subject to several conditions. The Financial Creditor submits that one of the condition was that NOC of Financial Creditor was required to be obtained, whereas no NOC have been obtained from Financial Creditor for the said fund. Although, the Appellant has submitted that they are ready to deposit an amount of Rs.1,12,50,000/-, which was the amount of default admitted by the Adjudicating Authority, but we are of the view that by mere depositing the said amount, the CIRP cannot be set aside. We are quite conscious that in the real estate Projects, it is the Homebuyers, who are the major sufferer. Most of the Homebuyers belong to middle income group, who for funding their homes also takes loan from financial institutions and suffer due to non-handover of possession by the builders - present is a case where order initiating CIRP need no interference. Consequently, the CoC has to be constituted to find out the ways and means to complete the Project, so that interest of the Homebuyers be firstly fulfilled. The CIRP of the Corporate Debtor needs to be proceeded with. The CoC may be constituted immediately and CoC may take a call regarding finding out ways and means to complete the Projects. With the approval of CoC, the IRP may take steps to obtain interim finances to complete the Project, if any. It is also open for the CoC to take a decision to invite Resolution Plan in staggered manner, confined to Project wise/ building wise, as may be feasible and convenient, so that unfinished Project may be completed and Homebuyers be handed over the possession without paying any additional cost. The order impugned dated 16.06.2022 passed by the Adjudicating Authority, admitting Section 7 Application is upheld - appeal allowed.
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2023 (1) TMI 191
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - assignment of debt - due opportunity was granted to argue the matter or not - violation of principles of natural justice - HELD THAT:- As a matter of fact, the Appellant has challenged the locus of Respondent No. 1 to file the application under Section 7 of the Code on the ground that it is not a financial creditor to the Corporate Debtor. In this regard, it has been argued that a suit has been filed in the High Court of Bombay seeking declaration that the assignment deed dated 28.06.2019 is null and void in which ad-interim injunction was issued on 19.04.2022 before the impugned order could have been passed on 06.05.2022. Meaning thereby, the locus standi of the Appellant was not established - It is also submitted that mere pendency of the suit for declaration is thus not suffice to stall the proceedings for the initiation of CIRP when the debt and default has been proved. The issue regarding the NPA, decided in favour of the Appellant by the DRT, Pune on 28.02.2022 has been put to rest by way of stay by the DRAT, Mumbai on 03.06.2022, therefore, the Adjudicating Authority has not committed any error in passing the order of admission as there is a debt and default which is required to be looked into for the purpose of initiation of proceedings under Section 7 of the Code. Appeal dismissed.
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2023 (1) TMI 190
Seeking recovery of dues - priority of charge over the project of the Corporate Debtor and the constructions raised thereon - Non-Performing assets - HELD THAT:- The whole emphasis of the Appellant is on the issue that since the loan agreements categorically provides that the Appellant shall have a charge over the property together with building, superstructure, construction etc. both present and future owned and possessed by the borrower and prior approval of the Appellant is to be taken for the sale and entire sale proceeds are deposited with the Appellant for reduction of total amount of outstanding and that an escrow account was opened with a clear understanding with the borrower that all receipts accruing to the borrower from the project shall be deposited in the escrow account for which the loan has been sanctioned. 30. On the other hand, the case of Respondents (Homebuyers) is that since they have made the payments of the entire sale consideration, therefore, they are entitled to get the sale deed registered in their favour with the NOC to be issued by the Appellant as they are not at all at fault because they had no control over the escrow account and had discharged their liability as a prospective buyer in terms of the agreement to sell, to pay sale consideration which was either to be credited to the account of the Appellant by the borrower or agent of the escrow account. The Adjudicating Authority has also recorded its findings in para 3 of the impugned order that the home buyers have paid entire sale consideration, therefore, they would be at par with 17 such other home buyers to whom NOC was issued by the Appellant after receipt of the entire sale consideration and if the equities are to be balanced on the same scale, we find weight in the case of the home buyers. There are no error in the approach of the Adjudicating Authority which requires any kind of interference in this appeal - appeal dismissed.
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Service Tax
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2023 (1) TMI 189
Liability of appellant to pay service tax - M/s. Trinity Clearing and Shipping Agencies, Chennai had collected the service tax using the appellant s registration number and paid the service tax - it is contended that the appellant is liable to pay the tax - HELD THAT:- The appellant has been contending that M/s. Trinity Clearing and Shipping Agencies, Chennai had collected the tax from customers and discharged the service tax on behalf of the appellant. True that it may be, that the appellant cannot sublet their CHA license or allow M/s. Trinity Clearing and Shipping Agencies, Chennai to use their service provider registration number, the facts reveal that service tax in regard to the impugned service has been already paid to the Government. The department cannot collect service tax again on the impugned service. From the letter dated 3.1.2023 issued by Deputy Commissioner (Review and Tribunal), it has been categorically stated that an amount of Rs.3,86,829/- and Rs.3,70,308/- has been paid by M/s. Trinity Clearing and Shipping Agencies, Chennai towards service tax on impugned service. The liability of service tax on the impugned services having been discharged, the demand cannot be confirmed. The impugned order cannot sustain - Appeal allowed.
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2023 (1) TMI 188
Levy of service tax - Business Auxiliary Services or not - Software Activation Charges - whole case has been made by the Department on the basis of balance sheet which shows a separate income under head software activation charges - time limitation - HELD THAT:- In case of feature related software, we find that the customers were intimating their needs and specific requirements to Appellant for activation of features, accordingly activation of specific function is allowed by overseas suppliers on payment of charges. Appellant collected the said charges thru their Invoices/ bills and paid the CST/Sales Tax on entire amount. After retaining profit, remaining amount is transferred by appellant to overseas vendors. In the said transaction we observed that, there is no service obligation in whole transaction. The only commercial obligation is sale of goods by appellant to customers as and when required. The appellant did not receive any commission in this matter. The appellant is not a facilitator or a service provider to customers, but is a seller to customers. Hence, a pure and simple sale/purchase transaction has been misconstrued to be a service under Section 65(19) of Finance Act 1994 by the Department in this matter - there is force in the argument of the appellant that when there is sale there will be no service. The invoices raised for activation of software indicate that the Appellant has paid VAT /sales tax and as per the provisions of Section 2 (23)(d) of the Gujarat Value Added Tax Act and Section 2 (g) (iv) of the Central Sales Tax Act 1956, the said transaction of appellant covered in definition of sales of goods for the purpose of payment of VAT/CST. Further, Article 366(12) of the Constitution of India defines the expression goods , which include all materials, commodities and articles. It is an inclusive definition. Article 366(29A)(a) deals with a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration. On the other hand, Article 366(29A)(d) deals with a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. The law on definition of goods enunciated in Tata Consultancy case was quoted with approval by the Apex Court in the judgment in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [ 2006 (3) TMI 1 - SUPREME COURT] . The law as to whether the software is goods or not is no longer res integra in view of the above dictum of the Apex Court. Hence, in the impugned matter on software activation charges Appellant is not liable to pay service tax. Thus, the amount collected by the Appellant from their customers against as activation charges of equipment/ software features are covered under the activity of sales of goods and not covered under the provisions of Service as defined in the Act. Therefore, we don t find any merits in impugned order. Time Limitation - HELD THAT:- The appellant admittedly paid the Sales Tax/ VAT duty on the entire transaction and also issued invoice/bills to customer for the above disputed transactions. Therefore, the entire activity of appellant is very much on record. Appellant also disclosed the said transaction in their Balance Sheet. Accordingly, no suppression or mis-declaration can be attributed to the appellant for invoking extended period of demand. Accordingly, the demand for longer period is not sustainable on the ground of limitation also. Appeal allowed.
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Central Excise
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2023 (1) TMI 187
Benefit of captive consumption denied - exemption notification no.67/95-CE dated 16.03.1995 - whether the exemption can be denied to the quantity of Clinker which was used within the factory to manufacture of the part of the cement which was cleared against International competitive bidding with duty exemption under Serial No. 91 of Notification No.6/2006-CE dated 01.03.2006? HELD THAT:- The identical issue in the appellant s own case M/S SHREE DIGVIJAY CEMENT CO. LTD VERSUS C.C.E. S.T., - RAJKOT [ 2018 (11) TMI 300 - CESTAT AHMEDABAD] has been considered by this tribunal and by detailed order the appeal was allowed - it was held in the case that As facts of the case are not disputed that the appellant is manufacturing final products and clearing the same on payment of duty in the open market and to Mega Power Projects without payment of duty. In that circumstances, the appellant is entitled for benefit of notification No. 67/1995 ibid for intermediate product emerging during the course of manufacture of final product. Therefore, the impugned orders deserves no merits. From the above decision of this tribunal being the issue in the above case and in the present case is identical, the ratio of the above decision is directly applicable in the present case hence, the issue is no longer res-integra. Appeal allowed.
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2023 (1) TMI 186
CENVAT Credit - manufacture of taxable (trading) as well as exempt goods - It appeared to Revenue that credit of Service Tax attributable to service used in a Unit exclusively engaged in the manufacture of exempted goods was distributed by Input Service distributor, to Units which were manufacturing dutiable goods - availment of area based exemption - HELD THAT:- Reliance placed in the case of M/S DABUR INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GHAZIABAD [ 2017 (5) TMI 599 - CESTAT ALLAHABAD] where it was held that Clause (b) of Rule 7 of the CCR, 2004 that existed during material time provided that such Cenvat credit of Service Tax paid was not admissible to be distributed which was exclusively used in unit engaged in the manufacture of exempted goods. Reliance also placed upon the case of M/S DABUR INDIA LTD. VERSUS CCE, JAIPUR-I [ 2017 (9) TMI 344 - CESTAT NEW DELHI] where similar view was adopted. The issue in the present appeals is no longer res-integra. Though the learned AR mentioned that all those Tribunal orders are appealed against before the respective jurisdictional high court, however in absence of any stay order by any of the High Courts, the Tribunal orders shall prevail. Hence, following the precedent decision of Tribunal in the Appellant s own case and also following the judicial discipline as per which the decisions of the co-ordinate benches of the tribunal are binding on us, we do not find any merits in the impugned orders and the same are liable to be set aside. Appeal allowed.
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CST, VAT & Sales Tax
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2023 (1) TMI 185
Rejection of central sale made by the assessee - rejection of books of accounts - assessee had not filed the requisite documents before the Tribunal which was not in a position to decide the matter on merits - HELD THAT:- The Tribunal is last fact finding Court and has to adjudicate all the grounds which are taken by the assessee in its appeal. During the pendency of the revisions, this Court had required the revisionist to supply all the documents which were placed before the Tribunal through the supplementary affidavit and the same have been filed by the assessee. This Court finds that the disputed question of fact cannot be dealt with by this Court while exercising power under Section 58 of the U.P. VAT Act 2008 and it is for the Tribunal to adjudicate the matter on merits - once the Tribunal has recorded the finding that the documents, as required by it, was not placed by the assessee and no finding has been recorded by the Tribunal considering the documents of the assessee. It would not be appropriate for this Court to adjudicate the matter on merits. The matter is remitted to the Tribunal to reconsider and decide the matter afresh - appeal allowed by way of remand.
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2023 (1) TMI 184
Benefit of concessional rate of duty - automatic data processing machine - to be classified under CTH-8471 or not - HELD THAT:- It is not in dispute that EVM Machines are classified under 8471 and ADPM is described at Sl. No.4 in the Notification. It is also not in dispute that assessee has been clearing the EVMs under tariff item 8471. The Gujrat High Court in Samsung India [ 2020 (2) TMI 1247 - GUJARAT HIGH COURT] has held that the VAT authorities are bound by the classification accepted by the Central Excise Authorities. The Notification FD 116 CSL 2006(9) dated March 31, 2006 makes it clear that the goods specified under respective headings and sub-headings in the Central Excise Tariff Act, 1985 as IT Products. Admittedly, Central Excise has accepted clearance of EV Machines under Tariff Head 8471. Therefore, the principal contention of Revenue that an EVM does not process anything, is untenable because, the KVAT Authority is bound by the classification accepted by the Central Excise Authority. Petition dismissed.
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