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TMI Tax Updates - e-Newsletter January 9, 2023 Case Laws in this Newsletter: GST Income Tax Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles CPWD-GST COMPENSATION-MISLEADING CIRCULARS BY MIS READING THE LEGAL PROVISIONS APPROVED RESOLUTION PLAN CANNOT BE CHALLENGED BY A CREDTOR, NOT FILING A CLAIM WITHIN TIME CRP Test kit and HbA1c Test kit to be classified under HSN code 3002 and will attract 5% GST Foreign Tax Credit GST registration cancelled due to non-filing of returns to be restored on filing of returns along with the tax and penalty News Structural reforms taken in last 8 years will help India emerge among the top three economies in the world : Shri Goyal PM GatiShakti maps data layers related to social sector infrastructure Issuance Calendar for Marketable Sovereign Green Bonds: FY 2022-23 DPIIT to organize Startup India Innovation Week from 10th January 2023 to 16th January 2023 Notifications Customs 01/2023 - dated 6-1-2023 - ADD Anti-dumping duty on imports of “Fishing Net” - Seeks to extend levy of ADD on Fishing Net originating in or exported from China PR - Seeks to amend Notification No. 20/2018-Customs(ADD), dated 10th April, 2018 G.S.R. 11.(E) - dated 6-1-2023 - Cus Effect to the second tranche of tariff concessions under India Australia ECTA - Corrigendum notification No. 64/2022-Customs, dated the 29th December, 2022. Circulars / Instructions / Orders Income Tax 01/2023 - dated 6-1-2023 Extension of time limit for compliance to be made for claiming any exemption under Section 54 to 54GB of the Income-tax Act, 1961 ('Act') in view of the then-Covid-19 pandemic. FEMA 21 - dated 12-12-2022 Master Direction – Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022. Highlights / Catch Notes GST Supplementary refund of unutilized input tax credit pertaining to Compensatory Cess - Section 164 of the GST Act empowers the Government to frame rules. Refund of unutilized input tax credit has been provided under Section 54. Corresponding rules are found in Rule 89 of the GST Rules, which is in conformity with the powers conferred under Section 164 of the GST Act. - This Court does not find any merit in the nature of challenge made in the writ petitions and declines to read down Rule 89(4) of the Central Goods and Services Tax Rules, 2017/the Odisha Goods and Services Tax Rules, 2017 - HC Visit to Get Source Time limitation for filing appeal - Suffice to say that an appeal under Section 107 is subject to a 'prescribed period of limitation' and a 'condonable period of limitation' i.e., three months and one month respectively. It is also circumscribed by a pre-deposit condition. If the writ petitioner is able to satisfy the Appellate Authority qua limitation and pre-deposit, it is open to the Appellate Authority to consider the appeal on its own merits and in accordance with law. - HC Visit to Get Source Seeking grant of Bail - illegally claiming Input Tax Credit (ITC) on the basis of false invoices - It is a settled law which has been reiterated by the Apex Court in number of judicial pronouncements that the purpose of custody of an accused is only to aid investigation. The custodial detention is not to be used as a tool for pre-trial punishment. Since, the custody of the accused is no longer required for aiding the investigation, therefore, no ground is made out for keeping him further detained in custody. - DSC Visit to Get Source Income Tax Liability to pay tax under the Interest-Tax Act, 1974 - the High Court must frame a separate substantial question of law and only then interfere with the findings of fact by the ITAT, while applying the strict parameters. In the present case, the High Court did not frame a specific substantial question of law and thus, the interference with the findings of fact is unwarranted. This is not to say that the tax authorities are not entitled to examine the surrounding facts and circumstances to ascertain the true character and nature of the transaction, regardless of the nomenclature given by the parties. - the Act has ceased to operate with effect from 31st March 2000 - Additions deleted - SC Visit to Get Source Reopening of assessment u/s 147 - We are of the opinion that shorn of all other technical aspects which may have been raised before us, the very fact that the material referred to in the “reasons to believe” was not supplied to the petitioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law. - HC Visit to Get Source Reopening of assessment u/s 147 - reason to believe - No income appears to have escaped assessment as is visible from the explanation offered by assessee and consideration thereof by the authority in the present case on hand. Hence, an attempt has now been made to wriggle out from settled proposition of law by projecting that mistake might have been committed by the authority in not consciously considering the explanation. The said stand is not possible to be accepted by us - HC Visit to Get Source Computation of income and determination of rate of tax while processing the return at CPC - since the return of the appellant/assessee was processed under Section 143(1) of the 1961 Act, if there were any doubts, scrutiny should have been carried out and the necessary powers available under the 1961 Act should have been taken recourse to. - HC Visit to Get Source Set off and carry forward of loss under the head ‘income from house property’ - Since the assessee is entitled to claim the entire interest paid during the year on loan for acquiring the above property, therefore, the amount of loss under the head ‘income from house property’, which is not set off against the income under the other head of income be allowed to be carried forward as per provisions of section 71B - AT Visit to Get Source Deemed dividend income u/s. 2(22)(e) on ‘loans and advances’ - Though the assessee company has taken a plea that alleged loan has been taken for commercial expediency during the year and are in the nature of business transaction and interest paid thereon. However, the exception which the assessee has been referring provided under section 2(22)(e) applies in the case where lending of money is a substantial part of the business of the company. - since no enquiry has been conducted by the ld.AO on the issue raised in show cause notice u/s. 263, therefore, to this extent the assessment order is rightly held to be erroneous so far as it is prejudicial to the interest of the revenue. - AT Visit to Get Source Non-compliance of summons - inquiries are continued even after a decade - the assessee is not required to demonstrate the bona fides to the hilt and no infallible proof is required to be furnished to the satisfaction of the Revenue in every case. In the totality of circumstances so weighed cumulatively, the plea of the Assessee deserves to be accepted in the peculiar facts of the case. - AT Visit to Get Source Determination of remuneration paid to partner - working / retiring partner - the firm has incorporated the terms of section 40(b), providing for the maximum amount of remuneration payable to the working partners of a partnership firm with reference to it’s ‘book-profit’, as defined therein, in the partnership deed itself for quantifying the said remuneration. As the same is thus based on book-profit, the firm prepared two profit & loss accounts, i.e., for the period up to the date of retirement (P1), and thereafter (P2), computing the remuneration to the working partner separately for each period, i.e., for settling the accounts between the partners, even as it filed, as is required to by law one return of income for the entire year. - Revenue appeal dismissed - AT Visit to Get Source Allowability of duty drawback written-off post expiry of prescribed due date - when all procedural vis-à-vis legal recourse available to the appellant came to an end in the best judgement or estimation, in the evince of communication received from its sister concern EID-Perry, the claim for allowance in the P&L was made by creating a charge in terms of section 37(1) of the Act in the impugned year being the year of crystalized of loss of refund. - Claim of loss allowed - AT Visit to Get Source TP Adjustment - import of raw materials from AEs - international transaction - in case the AO / TPO on examination of benchmarking analysis made by the appellant company is found to be not acceptable, the AO / TPO shall examine the relevance of comparison of gross profits of appellant company with the comparable companies and proceed to benchmark the international transaction of import of raw materials. - AT Visit to Get Source Fees for technical services’ (‘FTS’) - The conclusion drawn by the AO is not proper because the training simply advances the skill of the recipient-employees but falls short of providing any technical knowledge, experience, skill that enables the employees “to apply the technology contained therein”. - decision of the AO in treating the amount as FTS, is not correct because such consideration does not fall within the purview of FTS under Article 12(4) of the DTAA read with Article 12(4) of the DTAA between India- Portuguese - AT Visit to Get Source TDS u/s 194A - TDS on subvention interest - A close reading of the provisions of section 2(28A) would make it clear that to call an amount received as interest at least one of the conditions should be satisfied that the amount has been received as due on account of any money either borrowed or debt incurred. In the given case money is borrowed by the buyer when IHFL extended to the housing loan to the buyer. Therefore there can be no dispute that the payments made are in the nature of income by way of interest and would attract the provisions of section 194A. - AT Visit to Get Source TP Adjustment - corporate guarantee provided on behalf of Associated Enterprises - These two kinds of guarantees are materially different, as has been held by a series of co-ordinate bench decisions. The right comparable, for application of CUP in this case, would have been the consideration for which corporate counter guarantees are issued, for the benefit of an associated enterprise, to a bank. In any event, once we come to the conclusion that the yield spread approach adopted by the assessee has been wrongly rejected, there is no need to deal with this clearly defective application of CUP method. No such inputs have been referred to, or relied upon, by the authorities below. - AT Visit to Get Source Corporate Law When Constitutional Courts are called upon to interpret provisions affecting the exercise of powers and jurisdictions of these regulatory bodies, it is the duty of such Courts to ensure that transactions falling within the province of the regulators are necessarily subjected to their scrutiny and regulation. This will ensure that the regulatory body, charged with the duty to protect the consumers has real time control over the sector, thus, realizing the purpose of their constitution. - The Appellant is not justified in invoking the jurisdiction of the CLB under Section 111A of the Act for violation of SEBI regulations. - SC Visit to Get Source Indian Laws Recovery proceedings - default in payment of loan / debt - Priority - in absence of any specific provision for priority of the dues under MSMED Act, if the submission on behalf of respondent No.1 for the dues under MSMED Act would prevail over the SARFAESI Act, then in that case, not only the object and purpose of special enactment / SARFAESI Act would be frustrated, even the later enactment by way of insertion of Section 26E of the SARFAESI Act would be frustrated. - SC Visit to Get Source IBC CIRP - default of the Corporate Debtor in paying the dues of Noida Authority - The Adjudicating Authority did not commit any error in allowing Section 65 Applications and rejecting the Section 10 Application. When Applications under Section 65 were allowed holding that initiation of proceedings under Section 10 was done fraudulently and maliciously for purpose other than resolution, rejection of Section 10 Application is consequent and inescapable - AT Visit to Get Source Initiation of CIRP against Guarantor of the Corporate Debtor to make payment - the case taken up by the Bank being categorical and clear that no steps have been taken by the Bank against the Appellant, there is no cause for the Appellant to pray for initiation of CIRP against the Appellant – the Personal Guarantor. - AT Visit to Get Source Service Tax CIRP - Successful resolution applicant - Demand of service tax - scheme Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - As the appellant was not in a position to deposit the settlement amount at the relevant time, more particularly on or before 30.06.2020 due to legal impediment and the bar to make the payment of settlement amount in view of the mortarium under the IBC, and as it is found that the appellant was otherwise entitled to the benefit under the Scheme as the Form No.1 submitted by the appellant has been accepted, the Form No.3 determining the settlement amount has been issued, the High Court has erred in refusing to grant any relief to the appellant as prayed. - SC Visit to Get Source Refund of Service Tax amount - Once it has been held that there is no service then by any stretch ‘Point of Taxation Rules, 2011’ can’t be roped in - amount returned/refunded to the buyer alongwith the advance amount paid, by the builder, upon the cancellation of the two flats booked by the said buyer - The net effect is that now the amount, which earlier has been deposited as tax, is merely a deposit with the department and the department has to return it to the concerned person i.e. the assessee. - AT Visit to Get Source Central Excise Refund claim - Unjust enrichment - CA certificate - Merely because the certificate is not as per the liking of the authorities below, it cannot be brushed aside as no specific format of certificate has been prescribed by the statute. If the department proves anything contrary to the statement mentioned in the certificate then certainly they have a valid ground to discard it, but this is not the case anywhere. - AT Visit to Get Source VAT Classification of goods - rate of tax - “tyres, tubes and flaps” being excluded from the purview of preceding words, namely “Tractors, Threshers, harvesters, and attachments and parts thereof” as contained in Entry 119 of Part-II of Schedule B appended to the OVAT Act, the subject-goods do not fall within ambit of said entry. No specific entry being available, “tyres, tubes and flaps” are, thus, subject to tax @ 12.5% up to tax period ending on 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B to the OVAT Act. - HC Visit to Get Source Case Laws: GST 2023 (1) TMI 289 Supplementary refund of unutilized input tax credit pertaining to Compensatory Cess on inputs used in relation to zero-rated supplies - periods February, 2018 to June, 2018 - refund application(s) being filed manually - Compliance with the provisions of Section 54 read with formula prescribed under Rule 89(4) with reference to claim made under Section 16 of the IGST Act. HELD THAT:- In the instant case, the authority concerned, having adjudicated the application for refund based on transactions of all the three units taken together as per the calculation made by the petitioner itself, had no scope for him to again entertain further claim made on the self-same transactions by computing such refund taking into consideration unit-wise figures, more so when the returns have been furnished by disclosing consolidated figures. Such fresh claim in the garb of supplementary refund would tantamount to review of decision already taken by the Assistant Commissioner-opposite party No.6 and the petitioner had already accepted such grant of refund based on claim set up on its own calculation. The claim for refund of unutilized input tax credit as found in the provisions of Section 16(3) of the IGST Act and Section 16(1) read with Section 54(1) of the GST Act is subject to manner, condition and restriction as prescribed . Section 2(87) of the GST Act defines the term prescribed to mean prescribed by rules made under this Act on the recommendations of the Council . Section 164 of the GST Act empowers the Government to frame rules. Refund of unutilized input tax credit has been provided under Section 54. Corresponding rules are found in Rule 89 of the GST Rules, which is in conformity with the powers conferred under Section 164 of the GST Act. The petitioner did not choose to avail the opportunity of personal hearing as instructed in the aforesaid notice/intimation, but challenged the same before this Court by way of writ petition. This Court is, therefore, of the opinion that the petitioner is not deprived of availing alternative remedy to question the legality of decision taken by the Assistant Commissioner-opposite party No.6 who returned the supplementary application(s) for refund. In the present case, it is not the sole reason to discard manual filing of supplementary refund application based on Circular No. 125/44/2019-GST dated 18.11.2019, but the authority concerned had returned such application assigning different reasons also. Such a decision of Assistant Commissioner, GST Central Excise, Jharsuguda Division could be challenged in appeal under Section 107 of the GST Act. This Court does not find any merit in the nature of challenge made in the writ petitions and declines to read down Rule 89(4) of the Central Goods and Services Tax Rules, 2017/the Odisha Goods and Services Tax Rules, 2017 - Petition dismissed. 2023 (1) TMI 288 Challenging the order of demand of GST - time limitation for filing appeal - it is alleged that the impugned order has not been served on the writ petitioner by resorting to the method of service set out in Section 169 (1)(b) of TNG ST Act - HELD THAT:- A careful perusal of language in which Section 169 is couched makes it clear that methods of service adumbrated therein are not conjunctive but are alternate methods of service. The reason is, the language in which sub-section (1) is couched makes it clear that service shall be by one of the methods adumbrated therein. To be noted as many as six methods (a) to (f) have been adumbrated therein. Be that as it may, though not averred in the writ affidavit, learned counsel for writ petitioner submits that writ petitioner attempted to prefer an appeal against the impugned order to the Appellate Authority by way of a statutory appeal under Section 107 of TN-G ST Act and the appeal is not being entertained. Absent averments and absent material in the case file before this Court, this Court does not want to make forays into these territories. Suffice to say that an appeal under Section 107 is subject to a 'prescribed period of limitation' and a 'condonable period of limitation' i.e., three months and one month respectively. It is also circumscribed by a pre-deposit condition. If the writ petitioner is able to satisfy the Appellate Authority qua limitation and pre-deposit, it is open to the Appellate Authority to consider the appeal on its own merits and in accordance with law. Petition dismissed. 2023 (1) TMI 287 Rate of GST - requirement of defining the terms Central Government , State Government'', Union Territory and Local Authority - N/N. 11/2017 Central Tax (Rate), on 28 th June 2017 - service recipient - Classification of the Agencies listed out being Corporation or Government Organizations into Central Government, State Government, Union Territory, local authority, Government Authority or a Government Entity - HELD THAT:- For availing the benefit as stipulated supra at S.no. 3(iii)(b), S.no. 3 (vi)(b) and S.no. 3 (vi)(c) ibid of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, all the conditions mentioned therein has to be necessarily fulfilled. As regards the request of seeking clarification as to whether corporations and departments working under various Ministries of Central Government, State Governments and Union Territory would form part of Central Government/ State Government/ Union territory or Local Authority, it is quite evident that various departments functioning directly under the Central / State Government /Union territory in their own capacity would form part of the respective Governments whereas corporations per se cannot be generalized as being Central / State Government, and they can be treated as other entities viz. Governmental authority, Government Entity etc. as defined in the statute, subject to fulfillment of conditions as mentioned in the definitions / statute. Service recipient - If an organization has awarded their company a contract but the said organization is entrusted by a Ministry/ Department of Government to float the tender and award the work to the eligible Contractor, then who will be deemed to be the services recipient, Government or the organization? - HELD THAT:- The definition under Section-2(93) of the CGST Act, 2017 stipulates regarding the service recipient viz. recipient of the supply of goods or services is someone who is liable for payment of consideration for the supply of goods or services. If no consideration is payable, the person to whom the goods are delivered or made available, or uses the goods or services shall qualify as the recipient. Classification of the Agencies listed out being Corporation or Government Organizations into Central Government, State Government, Union Territory, local authority, Government Authority or a Government Entity - HELD THAT:- As classification of entities, that too functional at a place outside the jurisdiction of the State of Chhattisgarh is not within the scope and purview of advance rulings under Section 98 ibid read with Section 97(2), this authority is not in a position to pass any ruling regarding the status of the said entities as being a Corporation or Government Organizations into Central Government, State Government, Union Territory, local authority, Government Authority or a Government Entity. Even otherwise, this authority is of the view that without having the incorporation details / certificate of incorporation and their financial / commercial and business details, it would not be possible to arrive at a conclusive decision regarding their status. 2023 (1) TMI 286 Seeking grant of Bail - illegally claiming Input Tax Credit (ITC) on the basis of false invoices, without there being any actual physical receipt of goods - bogus and fake invoices - HELD THAT:- No blanket ban can be put on bail merely because a person has been accused of an economic offence. In the present matter, applicant is in custody since 01.12.2022. The report submitted by the prosecution demonstrates that investigation qua the accused already stands concluded. Prosecution has already recorded the statement of the concerned persons including the transporters. The relevant documents have been collected. The fact that custodial interrogation of the accused is not warranted is evident from the fact that the prosecution never moved any application for the same. Prosecution has opposed the bail application on the ground that there is likelihood that accused would try to influence the transporters, whose statements have been recorded. The bail cannot be refused merely on the apprehension that accused would try to influence the transporters, more so, when no grounds for further custodial detention are made out. It is a settled law which has been reiterated by the Apex Court in number of judicial pronouncements that the purpose of custody of an accused is only to aid investigation. The custodial detention is not to be used as a tool for pre-trial punishment. Since, the custody of the accused is no longer required for aiding the investigation, therefore, no ground is made out for keeping him further detained in custody. Since, the custody of the accused is no longer required for aiding the investigation, therefore, no ground is made out for keeping him further detained in custody - the applicant/accused Jagdish Rai Bansal is admitted to bail subject to conditions stipulated. Bail application allowed. Income Tax 2023 (1) TMI 285 Liability to pay tax under the Interest-Tax Act, 1974 - interest component included in the hire-purchase instalments paid under the hire-purchase agreement - Assessees are non-banking finance and leasing companies registered with the Reserve Bank of India -Some of the appellants assessees have been reclassified as hire-purchase finance companies. It is not disputed that the appellants assessees are credit institutions within the meaning of Section 2(5-A) of the Act - contention of the appellants assessees is that under a hire-purchase agreement, they hire out a vehicle to the customer and receive hire-purchase instalments, and not interest on loans and advances - distinguish between financial lease and operating lease - HELD THAT:- We are dealing with and interpreting Section 2(7) of the Act, which has been interpreted in two decisions, that is, in the case of Sahara India Savings and Investment Corporation Limited [ 2009 (11) TMI 25 - SUPREME COURT ] and State Bank of Patiala Through General Manager [ 2015 (11) TMI 869 - SUPREME COURT] which have given a very limited and restricted meaning to Section 2(7) of the Act as interest directly arising on loans and advances, and not any other interest, be it interest earned on investment or interest payable on delayed payment of the discounted bill of exchange. Findings of fact generally recorded by the ITAT are treated as conclusive. The High Court can interfere with the findings of fact while deciding a substantial question of law when the findings are not supported by the material on record, so as to be treated as perverse. See Karnataka Board of Wakf v. Anjuman-E-Ismail Madris-Un-Niswan, [ 1999 (8) TMI 1018 - SUPREME COURT] and C. Doddanarayana Reddy (Dead) By Legal Representatives and Others v. C. Jayarama Reddy (Dead) By Legal Representatives and Others [ 2020 (2) TMI 1676 - SUPREME COURT] For this, however, the High Court must frame a separate substantial question of law and only then interfere with the findings of fact by the ITAT, while applying the strict parameters. In the present case, the High Court did not frame a specific substantial question of law and thus, the interference with the findings of fact is unwarranted. This is not to say that the tax authorities are not entitled to examine the surrounding facts and circumstances to ascertain the true character and nature of the transaction, regardless of the nomenclature given by the parties. Given the aforesaid legal position, we may have even remanded the matter to the assessing officer for fresh adjudication and to re-examine all the transactions in light of the aforesaid ratio and reasoning, keeping in mind the dictum laid in Sahara India Savings and Investment Corporation Limited (supra) and State Bank of Patiala Through General Manager (supra) to rule out cases where camouflage or subterfuge has been adopted to avoid payment of interest tax. This would have entailed not only looking at the documents but also several other factors, which would have meant getting information and ascertainment of facts in detail from the assessee and the hirer. However, at this distinct point of time, we do not think that it would be appropriate to pass an order of remand. It is to be also noted that the Act has ceased to operate with effect from 31st March 2000. We allow the present appeals and set aside the impugned judgments. The additions made by the assessing officer are set aside and the orders passed by the ITAT deleting the additions in the case of the appellant M/s. Muthoot Leasing and Finance Limited and other cases are upheld. 2023 (1) TMI 284 Manner in which the Tribunal had disposed of the appeal - Unutilized MODVAT credit - Whether Tribunal was justified in law in making the addition in respect of unutilized MODVAT credit for the relevant previous year without even considering that the treatment for accounting of MODVAT credit applied by the appellant was in accordance with the approved method of accounting duly approved by the ICAI and has been regularly followed by the appellant? - HELD THAT:- As on a closure scrutiny we find that the Tribunal has abrogated its responsibility in its entirety which is heavily cast upon the learned Tribunal being the last factfinding authority in the hierarchy of authorities. By way of illustration we can point out that in paragraph 11 of the order passed by the Tribunal, the findings rendered by the CIT(A) has been adopted by the Tribunal verbatim as its own findings and so much so, even the directions given by the CIT(A) to the Assessing Officer has been copied verbatim. We find that though the Tribunal has recorded that it had heard the submissions of the learned authorised representative of the assessee as well as the department representative, the submissions made by the authorised representative have not been noted or recorded. Tribunal has stated that the authorised representative has given detailed submission on behalf of the assessee which are all contained in detail in the order of the CIT(A) and, therefore, need not be repeated again. It is seen that all the grounds which have been canvassed before the Tribunal have been dealt with in the very same fashion. Also we note from the impugned order that the Tribunal has verbatim extracted the grounds raised by the parties and in paragraph 60 the Tribunal has held as follows: We have examined the rival submissions. We find no infirmity in the order of the CIT(A) which is confirmed. The appeal of the assessee is dismissed on the 10th ground. In a similar fashion the other grounds have also been dealt with as could be seen from paragraph 73 to 79. Thus, it is clear that the order passed by the Tribunal is without any application of mind and suffers from utter perversity. In fact, the order of the learned Tribunal is a classical example of as to how an order should not be drafted. We are informed that though the assessee had filed a miscellaneous application with a prayer to decide all issues by passing a reasoned order, such application was dismissed by the learned Tribunal on the ground that it would tantamount to review. Thus, we are fully satisfied that the order of the Tribunal has to be set aside in its entirety. In the result, the appeals filed by the revenue as well as the assessee are allowed and the order passed by the Tribunal is set aside and remanded to the Tribunal for fresh consideration. 2023 (1) TMI 283 Nature of expenditure - Depreciation on purchase of stock exchange membership card being the development fee paid for admission to the Calcutta Stock Exchange u/s 32 - whether the amount of expenditure incurred by the assessee to purchase stock exchange membership card is to be considered as a `tool to trade in the business of share trading and broking business and hence akin to `a plant and eligible for depreciation as Plant under section 32(1)(i) - AO held the expenditure to be of revenue expenditure. HELD THAT:- Tribunal has given a categorical finding that the claim for depreciation made by the assessee has to be considered and for such purpose the matter has been restored to the file of the Assessing Officer. Admittedly, before the Assessing Officer such a plea was not raised as the assessee contended that the expenditure was revenue in nature. No doubt, before the CIT(A) an alternative plea was raised which was considered and negatived but the order of the Special Bench enures in favour of the appellant which has held that the development fee paid to the Stock Exchange is capital in nature. Therefore, we are of the view that the issue has to be verified by the Assessing Officer in terms of the directions issued by the Tribunal and hence we find there is no substantial question of law arising for the consideration in this appeal. Accordingly, the appeal stands disposed of by affirming the order passed by the learned Tribunal with a further direction to the AO to afford an opportunity of personal hearing to the authorised representative of the appellant, who shall be entitled to place all the decisions which they seek to rely upon. Since the assessment is of the year 1995-96, the Assessing Officer is directed to give an early hearing in the matter and preferably, conclude the proceedings and pass an order within a period of 12(twelve) weeks from the date of receipt of the server copy of this order. 2023 (1) TMI 282 Reopening of assessment u/s 147 - Whether petitioner has a statutory remedy of appeal under the Act? - HELD THAT:- As we are of the firm opinion that the writ petition as filed by the petitioner cannot be thrown out on the ground that the petitioner has a statutory remedy against the re-assessment order ignoring the fact that against the notice issued u/s 148 of the Act and the order deciding objections to it, there is no remedy available to it other than the writ jurisdiction. Leaving aside the re-assessment order, as there is no remedy available to the petitioner against the notice under Section 148 of the Act or the order disposing of the objections thereto, the writ petition to the extent of challenging the same is maintainable. The successful challenge to the said notice and the order being germane to the re-assessment order would automatically result in nullifying the same. Accordingly, the preliminary objection as raised by the Revenue is not tenable and stand rejected. Reason to believe OR reason to suspect - reason to believe that income has escaped assessment is a mandatory condition for reopening the assessment by notice under Section 148 - Reason to believe supplied to the petitioner refers to information received from the Deputy Director of Income Tax, Investigation as also to the statement of Deepak Jain recorded u/s 132 (4) during the course of the investigation pursuant to the search and seizure carried out at his premises as also the entries in the form of bogus loan/purchase/sale appearing in the books of M/s Sanmatri Gems Pvt. Ltd. for the Assessment Year 2017-18. Neither of the above documents have allegedly been supplied to the petitioner. The petitioner in the grounds to the petition has taken a categorical stand that the respondents failed to furnish the information which formed the basis for reopening the assessment. It was not even provided with the statement of Deepak Jain, on which heavy reliance was being placed. There is no averment in the reply of the respondents anywhere that any such information or a copy of the statement was supplied to the petitioner along with the reasons to believe. The reasons to believe, as supplied to the petitioner, on the face of it are incomplete and do not afford the petitioner due and proper opportunity to file objections against such reassessment. The non-supply of the above material is within the teeth of the directions of the Division Bench of the Delhi [ 2017 (9) TMI 1589 - DELHI HIGH COURT] and Bombay High Courts [ 2022 (2) TMI 1093 - BOMBAY HIGH COURT] The submission of Shri Bissa that reasons to believe cannot be equated with the final conclusion and as long as the Assessing Officer has sufficient material to demonstrate that he had bonafidely formed the opinion that the income chargeable to tax has escaped assessment, the requirement of law stands satisfied is of no avail as there are no two opinions on the above aspect. Sufficiency of material is one thing and supply of the same is another, which is mandatory in nature. Therefore, the non-supply of the material referred to in the reasons to believe would be enough to render the proceedings bad, even though the material for forming the opinion may be sufficient. The argument of Shri Bissa is that information furnished by the Deputy Director of Income Tax, Investigation, by itself is sufficient for reopening the proceedings, more particularly when the said information was confirmed from other sources. Again the sufficiency of the information is not in question, nor its confirmation. What is questionable is the effect of its non-supply, to which there is no answer. The non-supply of the material, especially the documents of entry in the books of M/s Sanmatri Gems Pvt. Ltd. and the statement of Deepak Jain recorded under Section 132 (4) of the Act, is sufficient to vitiate the proceedings. As noted that the statement recorded under Section 132 (4) of the Act can be used in evidence for making the assessment only if such statement is made in context with other evidence, or material discovered during search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger the assessment. We are of the opinion that shorn of all other technical aspects which may have been raised before us, the very fact that the material referred to in the reasons to believe was not supplied to the petitioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law. Accordingly, the impugned notice and the order ismissing the objections of the petitioner are hereby quashed - Decided in favour of assesee. 2023 (1) TMI 281 Validity of the reopening proceedings - Tangible material available to initiate reopening - HELD THAT:- It is clear that on the date when the notice for reopening was issued i.e. on 31st March, 2016 there was no tangible material available in the hands of the assessing officer to justify reopening the assessment. Before us this factual position, as recorded by the Tribunal, could not be assailed by the revenue. Tribunal not stopping with the finding that the reopening of the assessment was bad in law has proceeded to consider the factual position in detail and affirmed the factual finding rendered by the CIT-A. No substantial question of law 2023 (1) TMI 280 Reopening of assessment u/s 147 - reason to believe - taxability u/s 56(2) (vii)(b) - assessee had issued 6,00,75,029 equity shares and received premium for which excess money received - HELD THAT:- No fresh tangible material distinct from what was made available by the petitioner during the assessment proceedings is emerging and specific queries which have been raised with regard to issues now raised have already been explained by the petitioner and the assessing authority having accepted the replies and explanation, no addition is made and as such, a case is made out by the petitioner calling for our interference, since reopening of assessment appears to be on the basis of change of opinion which is against the settled proposition of law as discussed herein-above. At the time of first assessment, there was no conscious consideration of material and no mistake can be said to have been committed by the AO permitting the Revenue to re-open the assessment. No income appears to have escaped assessment as is visible from the explanation offered by assessee and consideration thereof by the authority in the present case on hand. Hence, an attempt has now been made to wriggle out from settled proposition of law by projecting that mistake might have been committed by the authority in not consciously considering the explanation. The said stand is not possible to be accepted by us. Hence, we are of the clear opinion that a case is made out by the petitioner. Special Civil Application is allowed. 2023 (1) TMI 279 Return of income in paper form - Seeking permission to allow Petitioner to file the return of income in paper form and to treat the same as valid, subject to the final disposal of the petition and seeks further permission to file the return of income in electronic form as soon as the accounts of the Petitioner are audited and to treat the same as filed in accordance with law before 31st December, 2022 subject to the final disposal of the petition - HELD THAT:- As we are not inclined to go into the issue whether the Petitioner is justified in not fling electronic return of the income tax, for the reasons recorded in the body of the petition or not. This issue can be decided by this court at the stage of admission of the writ petition or thereafter. On similar averments, this Court has already permitted the Petitioner to file paper return for the assessment years 2019-20, 2020- 21 and 2021-22 subject to the further orders that may be passed by this Court in those petitions. The Petitioner is permitted to file paper return for the assessment year 2022-23 before 31st December, 2022, subject to the further orders that may be passed by this court at the stage of admission or thereafter till this writ petition is finally decided. All contentions of the parties are kept open. 2023 (1) TMI 278 Applicability of provision of Section 119(2)(b) - timeline for making deposits inter alia, under the DVSV Act - An application was, thus, preferred with the CBDT/respondent seeking extension of time for allowing the petitioner to deposit the balance tax as quantified in Form No. 3 - As communicated by CBDT/respondent no. 1 timeline prescribed under the DVSV Act having expired, it was not possible to grant any extension. HELD THAT:- The record shows that the petitioner did file an application with the respondent no.1/CBDT on 25.03.2022, followed by a reminder on 04.11.2022. The impugned order came to be passed on 25.08.2022, which was communicated to the petitioner only on 22.11.2022 via email sent by CBDT/respondent no.1. Therefore, had the CBDT/respondent no.1 immediately responded to the petitioner s application dated 25.03.2022 for extension of time, the intervening delay between March 2022 and today would not have occurred. If we were to take into account this aspect of the matter, one would have acknowledge that in certain circumstances, coordinate benches of this court have exercised powers under Article 226 of the Constitution and granted relief to those assessees who wanted to avail the beneficial provisions of DVSV Act. The overall conduct of the petitioner in this case, in the very least, shows that it had made substantial compliance, inasmuch as a major portion of the tax i.e., Rs 9 lakh was deposited even before the declarations were filed via Form Nos. 1 and 2. Thus, having regard to the overall facts and circumstances of the case, we are inclined to set aside the impugned order dated 25.08.2022 passed by CBDT/respondent no. 1, not on the ground that they were wrong in concluding that powers for extension of time cannot be exercised under Section 119(2)(b) of the Act, but for the reason that this court under Article 226 of the Constitution, as in the other cases, is inclined to exercise its powers to enable the petitioner to pay the balance tax. Therefore, paragraph 2 of the impugned order dated 25.08.2022 is set aside. This impediment having been removed, the consequential direction that needs to be passed is to direct the respondents to accept the balance amount payable by the petitioner, albeit, with interest at the rate of 9% on the amount shown in Form No.3 which is Rs 2,10,780/-, that is, the amount which was payable by the petitioner after 31.03.2021. This leeway will be available to the petitioner/assessee for four weeks from the date of receipt of a copy of the judgment. We are told that the designated portal is closed. The petitioner will pay Rs.2,10,780/-, along with interest at the rate of 9%, commencing from 01.04.2021 till the date of deposit. 2023 (1) TMI 277 Maximum marginal rate of tax to the appellant/assessee u/s 167B - Exclusion of the amount received towards building fund from the income of the appellant/assessee - whether the CPC was right in taxing gross receipts as against income? - Respondent relies upon the order of the CIT(A) as well as the Tribunal to highlight the fact that the entire case set up by the appellant/assessee was that it was entitled to claim exemption under Section 11 and 12 of the 1961 Act, having regard to the first proviso to Section 12A(2) of the Act? HELD THAT:- Respondent is right to the extent that the appellant/assessee is, perhaps, responsible for its own woes. The return filed by the appellant/assessee did indicate the appellant/assessee s status as AOP/BOI. However, having said that, the CIT(A) failed to exercise powers which were available with him and examine a specific ground of appeal raised by the appellant/assesseee. Clearly, the assertion made by the appellant/assessee in one of the grounds taken in the appeal was that it was constituted as a society. If this position is correct, [something which is not disputed before us by the revenue] then, as indicated hereinabove, the maximum marginal rate of tax could not have been applied to the appellant/assessee. Whether the CIT(A), having concluded that the provisions of Sections 11 and 12 of the Act were not applicable to the appellant/assessee in the AY in issue , he ought to have then gone on to rule on what was, really, an alternate ground, i.e., should gross receipts, simpliciter, be brought to tax . In other words, should gross receipts or the taxable income arrived at, after adjusting deductible expenses be subjected to tax? - Concerning this aspect as well, according to us, CIT(A) side-stepped the contention, although, a specific ground had been raised by the appellant/assessee in the appeal filed before the CIT(A). Respondent cannot but accept that in the succeeding AY i.e., AY 2015-16, CPC has brought to tax that amount which constitutes excess of income over expenditure i.e., from gross receipts, deductible expenses have been adjusted. We are also of the view that since the return of the appellant/assessee was processed under Section 143(1) of the 1961 Act, if there were any doubts, scrutiny should have been carried out and the necessary powers available under the 1961 Act should have been taken recourse to. Evidently, this was not done and therefore, the order was passed by the CPC and confirmed by the CIT(A) without delving into the specific grounds raised by the appellant/assessee, which remain unrebutted, cannot be sustained. It is also a matter of record that the Tribunal also failed to take into account similar grounds raised by the appellant/assessee consistent with what was averred in the appeal preferred before CIT(A). This is evident upon perusal of ground incorporated in the appeal instituted before the Tribunal. Thus, having regard to the aforesaid, the questions of law are decided in favour of the appellant/assessee and against the respondent/revenue. 2023 (1) TMI 276 Reopening of assessment us 147 - petition has been filed in the name of the dissolved partnership firm - petitioner has received an accommodation entry - notice issued u/s 148A(b) indicated that the petitioner firm had been dissolved way back on 21.01.2008, and that this information had been furnished to the respondent/revenue - HELD THAT:- There is a flaw in the manner in which the petition has been framed. The petition has been filed in the name of the dissolved partnership firm, whereas it should have been filed by the individuals, who are partners of the dissolved firm. The affidavit appended to the writ petition, however, has been filed by Mr Abhishek Sahai and Mr Ajit Sahai, who claim to be the ex-partners of the petitioner arrayed before us i.e., Empire Trading Company. Given the fact, that the affiants are the former partners of the petitioner, this defect, in our view, can be ignored. In view of what has been observed by us hereinabove, Mr Shailendra Singh cannot but accept, that the material in possession of the concerned assessing officer should have been furnished to the noticee. Thus, having regard to the foregoing, we are inclined to set aside the order passed under Section 148A(d) of the Act, and the notice of even date i.e., 30.07.2022 issued under Section 148 of the Act. The partners of the petitioner i.e., Mr Abhishek Sahai and Mr Ajit Sahai and/or their authorized representatives will appear before the concerned assessing officer on 09.01.2023, at 11:00 AM. The concerned assessing officer will furnish the material in his possession to the aforementioned partners, and afford them an opportunity to have their say placed before him. AO thereafter, will pass a speaking order, as per law. 2023 (1) TMI 275 Condonation of delay - delay of 1018 days in preferring the Tax Appeal - As averred that the time period coincided with the unprecedented situation of Covid-19 pandemic where the affairs in the society virtually at stand-still. It was stated that the Supreme Court by order [ 2022 (1) TMI 385 - SC ORDER] excluded the period from 15.3.2020 to 28.2.2022 in reckoning the limitation which may have been prescribed under any general or special law - HELD THAT:- There is no gainsaying that the applicant Revenue was pursuing bona fide a remedy. The delay occurred for that reasons and due to the pendamic period which were beyond the control of the applicant. Exclusion of the time as directed by the supreme court is also required to be taken into consideration. For the above reasons, it could be said that sufficient cause is made out. Therefore, delay is condoned. Application is allowed. Rule is made absolute. 2023 (1) TMI 274 Deduction u/s 35E - amount paid to the Commissioner of Geology and Mining department, Government of Gujarat - Assessee is a Government company doing the business of acting as a nodal agency for augmenting power generation in the State of Gujarat - HELD THAT:- Expenditure referred to in subsection( 1) has to be incurred by the assessee after the 31st Day of March, 1970 at any time during the year of commercial production and any one or more of the four years immediately preceding that year, wholly and exclusively on any operation relating to prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule or on the development of a mine or other natural deposit of any such mineral or group of associated minerals and therefore, as per sub-section(2) of section 35E when the commercial production of the appellantassessee has started in the year 2018-2019, the appellant is not entitled to deduction under section 35E of the Act, 1961. Clause(a) of subsection( 5) of section 35E defines operation relating to prospecting which means any operation undertaken for the purpose of exploring, locating or providing deposits of any mineral and includes any such operation which proves to be infructuous or abortive. It is not in dispute that the assessee has claimed expenditure in the nature of operation relating to prospecting and as per sub-section(4) of section 35E of the Act, 1961, the assessee has claimed 1/10th of the expenditure specified in sub-section(2). Therefore, in the facts of the case when the assessee has not started any commercial production for the year under consideration or any of the previous four years, the assessee is not entitled to deduction under section 35E of the Act, 1961. Insofar as proposed question no.1 is concerned, we are of the view that concurrent findings of fact arrived at by the CIT(Appeals) and the Tribunal warrants no interference in the impugned orders so as to give rise to any question of law muchless any substantial question of law as proposed or otherwise. Alternative claim of assessee to grant entire expenditure u/s 37 - CIT (Appeals) as well as the Tribunal have rejected the claim of the assessee for deduction under section 37(1) of the Act, 1961 on the ground that when the assessee has claimed expenditure under section 35E of the Act, it purports to be in nature of capital expenditure and therefore, deduction cannot be allowed under section 37(1) - HELD THAT:- The alternative claim of the appellant prima facie requires consideration under section 37(1) of the Act, 1961 and therefore, we admit proposed question no.2. Disallowing depreciation claimed in relation to leased assets - CIT(Appeals) as well as Tribunal confirmed the disallowance made by AO of the depreciation on leased assets on the ground that the transaction was considered as financial arrangement between the appellant and the Gujarat Electricity Board - HELD THAT:- As in view of concurrent findings of fact arrived at by both the authorities below that the transaction entered into by the assessee with that of GEB is in the nature of financial transaction and lease rent is also not taxed in the hands of the assessee while disallowing the depreciation claimed on the leased assets, the decision of Gujarat Gas Co. Ltd. [ 2008 (9) TMI 126 - GUJARAT HIGH COURT] relied upon by the assessee would not be applicable in the facts of the present case. This Court held that the corresponding lease rental was taxed as business income in the hands of Gujarat Gas Company Limited which was not disturbed by the Assessing Officer despite having initiated action under section 147 of the Act, 1961 for treating the transaction as a non-genuine transaction and as rental income was taxed in the hands of Gujarat Gas Company Ltd., depreciation was also granted by the Tribunal and therefore, it was held that no question of law much-less substantial question of law arises from the order passed by the Tribunal allowing the depreciation on the leased assets to Gujarat Gas Company Ltd. In the present case, facts are converse as both the authorities below on findings of fact as recorded here-in-above have come to the conclusion that the transaction entered into between the assessee and the GEB is in the nature of financial transaction and therefore, neither the rental income is taxed in the hands of the assessee and at the same time, depreciation is also not allowed on the leased assets. Insofar as question no.(3) is concerned, no legal infirmity exists in the order of the Tribunal so as to give rise to any question of law much-less substantial question of law as proposed or otherwise. 2023 (1) TMI 273 Income from house property - Denial of complete deduction of interest paid on the loan under section 24(b) - not allowing carry forward of loss under the head income from house property - HELD THAT:- Under section 24(b) of the Act interest paid on capital borrowed for the purpose of acquisition, construction, repair, renewal, or reconstruction of property is allowable as a deduction. The 2nd proviso to section 24(b) of the Act restricts such deduction to Rs.2 lakh, in case of the property referred to in the 1st proviso. Further, the 1st proviso to section 24(b) of the Act deals with the property as referred to in section 23(2) of the Act. From the reading of section 23(2) of the Act, it is evident that the property as referred to therein is only the residential property and the same cannot be the commercial property. In the present case, as per the agreement for the purchase of the property being Unit 3C, Cynergy, Prabhadevi, Mumbai 400028, we find from clause no. (mm) that the said property can only be used for the purpose of setting up the IT office as per the IT Park Policy of the Government of Maharashtra. Thus, it is evident that the property in respect of which the assessee claimed interest under section 24(b) of the Act is only a commercial property, and therefore the restriction on deduction as provided in 2nd proviso to section 24(b) of the Act shall not be applicable. Therefore, we are of the considered view that the AO has erred in restricting the deduction of interest paid on the loan to Rs.2 lakh vide intimation issued under section 143(1) of the Act. AO while computing the annual letting value of the aforesaid property had granted deduction of interest paid on loan under section 24(b) of the Act. Accordingly, we direct that the interest of Rs.1,31,39,560, paid on the loan for acquiring the above property be allowed as a deduction under section 24(b) of the Act. Since the assessee is entitled to claim the entire interest paid during the year on loan for acquiring the above property, therefore, the amount of loss under the head income from house property , which is not set off against the income under the other head of income be allowed to be carried forward as per provisions of section 71B - Assessee appeal allowed. 2023 (1) TMI 272 Penalty u/s 270A - deduction u/s 80P(2)(d) - Addition of a sum on the ground that the assessee was not entitled to deduction u/s 80P, since the receipt of income was not from the co-operative society - HELD THAT:- On perusal of the computation of statement of income filed along with the return, it is clear that the assessee has not claimed deduction u/s 80P(2)(d) of the I.T.Act with reference to the interest income received from RECL. Since the assessee has not claimed deduction u/s 80P(2)(d) of the I.T.Act with reference to the interest income earned on investments with RECL, we find penalty u/s 270A of the I.T.Act cannot be imposed. Appeal filed by the assessee is allowed. 2023 (1) TMI 271 Undisclosed cash deposits made in its bank account - cash deposited in the undisclosed bank account - deduction/set off of unrecorded expenses - undisclosed and unexplained receipts which were deemed to be the income of the assessee u/s 69A - HELD THAT:- CIT(A) while adjudicating appeal has already allowed deduction/set off of unrecorded expenses to the tune of 40% of undisclosed professional receipts , to be set off against undeclared professional receipt of Rs. 65,15,836/-which means that undisclosed/unrecorded expenses to the tune of Rs. 26,06,334/- were allowed by ld. CIT(A) to be set off against undisclosed professional receipt of Rs.65,15,836/- , while at the most the assessee has cash availability of Rs. 6,00,000/- during the year under consideration (being cash withdrawn from the undisclosed bank account) to meet unrecorded/undisclosed expenses to be set off against undisclosed professional receipts and for that too also no details/evidences for such expenses have been submitted by the assessee on which the onus lay.Thus, the ld. CIT(A) was more than reasonable/lenient in allowing 40% of undisclosed professional receipts as deduction towards undisclosed/unrecorded expenses , from undisclosed professional receipts. The assessee has also claimed that some of the expenses were paid in next year such as fee of juniors, although no evidence is brought on record by assessee , while the onus was squarely on the assessee to have brought evidence on record. Thus, in our considered view already an extremely liberal view has been taken by ld. CIT(A) in granting part relief to the assessee as above and no further relief can be granted to the assessee keeping in view the facts and circumstances of the case as there is no availability of funds/cash to meet any further unrecorded expenses, and hence the appeal filed by the assessee stands dismissed. Interest income credited by SBI In assessee s undisclosed bank account maintained with SBI, High Court Branch, Allahabad , which was not offered to tax by the assessee, while filing return of income - We do not find any error in the orders of authorities below in bringing to tax said interest income in the hands of the assessee , as the said bank account pertains to the assessee and the assessee never offered such bank interest to tax in the return of income filed with the department, thus, we uphold this additions as were confirmed by ld. CIT(A). While dismissing the appeal filed by the assessee, we note that the Revenue did not came in appeal before tribunal against the part relief granted by ld. CIT(A) nor any Cross objections were filed by Revenue. Thus, this appeal filed by the assessee fails 2023 (1) TMI 270 Penalty u/s 271D - transaction of loan or deposit to attract the penal consequences of Section 269SS - in assessment order, initiated penalty u/s 271(1)(c) - HELD THAT:- AO though, at the time of passing the assessment order, initiated penalty under Section 271(1)(c) of the Act. However, there is no whisper in the assessment order regrading initiation or satisfaction about the initiation of penalty under Section 271D - Add. CIT levied penalty vide order - We find that the Hon ble Apex Court in CIT Vs Jai Laxmi Rice Mills [ 2015 (11) TMI 1453 - SUPREME COURT] held that wherein no satisfaction was recorded for initiating penalty proceedings u/s 271E, the impugned penalty order passed under said Section deserve to be set aside. Considering the fact that there is no satisfaction about initiation of penalty under Section 271D, therefore, respectfully following Jai Laxmi Rice Mills (supra), the penalty levied by Addl. CIT vide his order dated 29/09/2019 is quashed/set aside. In the result, ground of appeal raised by the assessee is allowed. Considering the fact that we have quashed the penalty order u/s 271D on legal ground on the basis of decision of Hon ble Apex Court, therefore, consideration and adjudication of the various plea of assessee has become academic. In the result, the sole ground of appeal raised by the assessee is allowed. 2023 (1) TMI 269 Revision u/s 263 by CIT - deemed dividend income u/s. 2(22)(e) on loans and advances - HELD THAT:- We find that no enquiry whatsoever has been conducted by the AO on the issue raised in show cause notice u/s. 263 by the PCIT. When the case of the assessee has been selected for scrutiny and all the necessary details were placed before him, but still the AO has not conducted any enquiry on this issue. Even the assessee has been unable to place any detail/record/information or copy of notice u/s. 142(1) or replies thereof filed in compliance to the said notice. It indicates that the ld. AO has not conducted any enquiry on the issue nor asked the assessee to furnish necessary details. It is a purely case of not conducting any enquiry. As far as finding of the PCIT in the impugned order is concerned, we notice that he had conducted sufficient enquiry, which is not controverted by the ld. Counsel for the assessee to the extent of the fact that assessee company holds 12.32% equity share of M/s. RDPL, loans and advances has been received during the year and there is an opening balance of accumulated profits in the balance sheet of M/s. RDPL. Though the assessee company has taken a plea that alleged loan has been taken for commercial expediency during the year and are in the nature of business transaction and interest paid thereon. However, the exception which the assessee has been referring provided under section 2(22)(e) applies in the case where lending of money is a substantial part of the business of the company. Before us no document what so ever has been filed in relation to M/s. RDPL, which could indicate that lending of money is a substantial part of business of M/s. RDPL. We notice that the assessee has referred to the judgment of the Hon ble Jurisdictional Calcutta High Court in the case of Pradip Kumar Malhotra [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] . Perusal of the said judgment indicates that the same is not applicable on the facts of the instant case and is distinguishable. In the case o f Pradip Kumar Malhotra (supra) the facts were that the assessee was owner of a property, which was used as a collateral security by the company for taking a loan and assessee received credit/loan against the property held with the company. However, in the instant case the facts are not the same and it is purely a case where the assessee is holding 12.22% equity shares in a company having accumulated profits which has given loan to the assessee company. We are of the considered view that since no enquiry has been conducted by the ld.AO on the issue raised in show cause notice u/s. 263, therefore, to this extent the assessment order is rightly held to be erroneous so far as it is prejudicial to the interest of the revenue . Therefore, we fail to find any infirmity in the impugned order of the ld.PCIT. Thus, all the grounds raised by the assessee are dismissed. 2023 (1) TMI 268 Estimation of the agricultural income - when books of accounts are not maintained for a source of income, a reasonable estimate is made and the income is subjected to tax - AO treated part of the agricultural income as Income from Other Sources for the current year - Assessee argued by the ld AR that the estimated agricultural income is very well supported and accordingly there is no reason for the AO reject the estimate - HELD THAT:- No adverse finding has been reported by the inspector. During the course of hearing our attention was drawn to the statement of yield for various years by the Rubber Board of Kerala where it is mentioned that the average yield of rubber per hectare of Palakkad District is stated to be 2011-12 1940 kgs/ ha and 2012-13 1913 kgs/ha. The same report also has details of price per kg of rubber. It is therefore Assessee has estimated the income from rubber based on the average yield for different geographical locations as per Rubber Board data and the prices of rubber are collected by the Rubber Board - As noticed that the yield of coconut has been estimated, again on the average yield rate and the prices of coconut has been taken on the average rate for the year. We see merit in the contention that the estimation of the agricultural income is done on valid basis and not estimated on adhoc basis. It is also noticed that the assessee has been declaring the agricultural income on estimated basis in earlier years which has not been disputed by the revenue. AO has estimated the agricultural income of the assessee to Rs.36,00,000 and the basis on which this estimate is made is not coming out clearly in the order of the AO and this contention of the assessee has not been looked into by the CIT(A) except for stating that the said estimate is reasonable. When the assessee has submitted the possible evidence for estimating the income, the same cannot be brushed aside without recording any adverse finding. Revenue has not brought anything on record to show that the income estimated and the percentage of expense claimed by the assessee is not correct. AO has also not recorded any supporting to show how the agricultural income is estimated at Rs.36,00,000. Addition made by the AO is purely based on surmise without recording any contrary finding and therefore should be deleted. Accordingly we hold that the addition done both AY 2012-13 and 2013-14 to be deleted and the appeals are allowed in favour of the assessee. 2023 (1) TMI 267 Disallowance of towards claim of job work expenses - contractors did not respond to the notice issued in respect of job work transactions - AO draw adverse inference on the genuineness of expenses and disallowed job work expenses - As per DR mere production of documentary evidences in itself is not sufficient to exonerate the assessee of its burden of proof - HELD THAT:- The assessee has successfully demonstrated the incurring of job work expenses on the basis of clinching evidences, both direct and circumstantial. No adverse materials to controvert these tell-tale evidences are on record at present. Shorn off the non-compliance of summons served under Section 131 - Assessee has filed formidable evidences to identify the contractors as well as the factum of incurring job work expenses as demonstrated by the income tax returns of the service providers. TDS has been deducted on such expenses and reflected in the return of income of the contractors. The increase in turnover, addition of new line of business, i.e., processing of rice and substantial increase in the fixed asset are vital indicators of plausibility of the explanation offered by the assessee in this regard. In this factual matrix, in the absence of any culpable evidence in possession of revenue, the job work expenses deserves to allowed, on a standalone basis, as incurred in the ordinary course of business. Non-compliance of summons - Admittedly, the summons under Section 131 were duly served on the contractors but had remained unresponded. In this backdrop, the observations in S. Hastimal vs. CIT [ 1962 (12) TMI 60 - MADRAS HIGH COURT] are worth noting wherein an impetus was given on the difficulty on the part of any assessee to explain a transaction after a decade. Similar view has been recently expressed by the Hon ble Supreme Court in CITI Bank case [ 2022 (8) TMI 1107 - SUPREME COURT] This apart, we are alive to the concern of the assessee that owing to closure of business and in the absence of any support service available at the end of the assessee, it is not positioned to defend its stand on outcome of such inquiries after such a long gap and will cause onerous burden on the assessee if such inquiries are continued even after a decade. Having regard to these ground realities read with overwhelming tangible documents suggesting the state of affairs to true, we are not inclined to engage the department in futile exercise by second round of proceedings and rake up a stale cause. Needless to say, the assessee is not required to demonstrate the bona fides to the hilt and no infallible proof is required to be furnished to the satisfaction of the Revenue in every case. In the totality of circumstances so weighed cumulatively, the plea of the Assessee deserves to be accepted in the peculiar facts of the case. The action of the CIT(A) is thus set aside and the addition/ disallowance on account job-work charges are reversed and cancelled - Appeal of the Assessee is allowed. 2023 (1) TMI 266 Correct head of income - income from transfer of AMABAI HEP Project - 'income from business' or under the head 'short term capital gains - according to the A.O there is transfer of property as per section 2(47) of the Act and the gains from the transaction are liable to be assessed u/s 45 - As the assessee has held the capital asset for less than 36 months immediately preceding the date of its transfer, the gain was brought to tax as short term capital gains. CIT(A) has held that the gains are taxable under the head 'income from business' and not under the head 'short term capital gains . HELD THAT:- As per CIT-A the- profits and gains arising from such transfer of interest in the subject project is liable to be assessed under the head 'income from business' as the appellant is in the business of execution and development' of such projects and the interest in the project was transferred/assigned to RMMTL in the course of business of the appellant. Accordingly, the Assessing Officer is directed to assess the gains as income from business instead of short term capital gains The reasoning assigned by the ld. CIT (A) is cogent and we find no infirmity with the findings and the decisions rendered by the ld. CIT (A). Appeal of the assessee is dismissed. 2023 (1) TMI 265 Exemption claimed u/s. 11 - assessee is into mixed objects which consists of education, relief of the poor, medical and also some objects are in the nature of any other objects of general public utility - Charitable activity u/s 2(15) - The assessee is running the tuition centres for all these assessment years - according to the Ld. CIT(A) the activities carried out by the assessee neither comes under definition of education nor in the nature of relief to the poor - As argued by assessee running tuition centres comes under the definition of charitable purpose, because it is in the nature of imparting education - HELD THAT:- In this case, the appellant trust came into existence by way of trust deed dated 04.02.2008 and as per said trust deed, the main objects of the trust are mixed in nature which includes relief of the poor, medical relief, education and any other object of general public utility - to ascertain whether the assessee falls in any of specific clauses of the term charitable purpose, one has to see the activities conducted by the appellant trust for the relevant assessment years. In this case, the appellant trust is running a coaching/tuition centre under the name and style of Shiksha in various places. The assessee claims that conducting coaching classes comes under the term education as defined u/s. 2(15) of the Act. We do not find merit in the argument of assessee, because the term education has been defined by the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust [ 1975 (8) TMI 1 - SUPREME COURT] where it has been explained the term education as defined u/s. 2(15) of the Act and as per Hon ble Supreme Court, it is the systematic instruction, schooling or training given to the young in preparation for the work of life and further, when education connotes in that clause is the process of training and developing the knowledge, skill, mind and character and students by normal schooling. This legal position has been affirmed by the Hon ble Supreme Court in the case of New Noble Educational Society vs Chief Commissioner of Income-tax, [ 2022 (10) TMI 855 - SUPREME COURT] where it has been affirmed the definition of education as held in Sole Trustee, Loka Shikshana Trust vs CIT, (supra). In other words, the term education only includes a formal school education which provides education in the field of knowledge, skill and character of students to prepare for the work of life. Therefore, in our considered view, running tuition centres does not come under the definition of education as defined u/s. 2(15). Arguments of the counsel for the assessee that the objects and activities of the trust is in the nature of relief of the poor as defined u/s. 2(15) - Relief of the poor means providing essential needs to the poor, without charging any fees or by charging a nominal fee. Therefore, entities who have those objects will continue to be eligible for exemption in the category of relief of the poor. If at all, the activity of the assessee i.e., running tuition centres can be considered under relief of the poor, then the assessee should prove with necessary evidence that it is giving admission to poor and eligible students of weaker section and also not charged fees in commercial lines. However, fact remains that lower authorities have categorically held that neither the assessee proved admission given to poor and weaker section nor charging nominal fee without any profit motive. Although, the assessee claims that it has given admission to poor and needy students by charging nominal fees, the said claim was not substantiated. CIT(A) has recorded a categorical finding that no evidence have been placed on record to prove that the appellant had given admission to poor students and also charged nominal fee.The issue needs to go back to the file of the Assessing Officer for further verification with regard to activities of the assessee to ascertain correct facts that it has provided admission to poor and weaker section students and also not charged any fee in commercial lines. In case, the assessee is able to prove the claim with necessary evidences, then the AO may consider the case of the assessee under the head relief of the poor. Appeals filed for all three assessment years are allowed for statistical purposes. 2023 (1) TMI 264 Determination of remuneration paid to partner - working / retiring partner - CIT-A deleted the addition - whether CIT(A) erred in ignoring the provisions of section 40(b) as the partner has not worked for whole year? - HELD THAT:- The Revenue s grievance, as we understand, is that no remuneration is exigible to the working partner for P1 as he had not worked for the entire year. We find no merit in the Revenue s claim, by which logic, even no remuneration for P2, claimed at Rs. 2.10 lacs, also ought to have been allowed. It is thus clear that the firm has incorporated the terms of section 40(b), providing for the maximum amount of remuneration payable to the working partners of a partnership firm with reference to it s book-profit , as defined therein, in the partnership deed itself for quantifying the said remuneration. As the same is thus based on book-profit, the firm prepared two profit loss accounts, i.e., for the period up to the date of retirement (P1), and thereafter (P2), computing the remuneration to the working partner separately for each period, i.e., for settling the accounts between the partners, even as it filed, as is required to by law one return of income for the entire year. A consolidated profit loss account for the year was required to be prepared, which profit or loss is to be then appropriated amongst the partners, including remuneration as well as interest payable thereto, which is only their business income assessable u/s. 28(v), in terms of the partnership deed. Unless the right to profit comes into existence, there is no accrual of profit, and the destination of profits must be determined by the title thereto on the day on which they arise. The concept of accrual of the profits of a business involves their determination by the method of accounting at the end of the accounting year or any shorter period determined by law. The appropriation of profit between the partners is to be in the terms of the partnership deed which, in case of it being silent thereon, as appears to be case inasmuch as some of the clauses of the earlier deeds (not on record) have been incorporated, could be on any cogent basis. The allocation by the firm in the instant case for P1 is at 37.39% (of the total profit for the year), as against at 40.27% if the said profit is allocated on time (147/365) basis. The remuneration to the retiring partner, Sanjay Pathak, would therefore work to a still higher amount if such a method was adopted. Coming back to the Revenue s objection, the same is based on book-profit which, as afore-stated, is to be worked out for the entire year and, further, the remuneration allowed to the retiring partner is only up to the date of his retirement, i.e., with reference to profit relatable to the period for which he was a partner. Working, for which the partner is to be remunerated, being a function of time, we find the same as a valid basis. What, then, we wonder is the controversy about, to which no answer could be provided during hearing by Sh. Kumar? We accordingly find no substance in the Revenue s case. We consider it appropriate to state that no document evidencing the retirement of Shri Sanjay Pathak, i.e., in terms of section 32 read with section 72 of the Indian Partnership Act, 1932, which concern the need to, and the manner of, public notice, in case of retirement of a partner from a partnership firm, has been placed before us as also, as apparent, before the CIT(A); his order being sans any reference thereto. The same, however, would only impact the liability of the retiring partner vis-a-vis the obligations of the firm to third parties, and has no bearing on the instant case, which relates to the deductibility of the remuneration allowed to the retiring working partner up to the date of his retirement, and no further, and qua which the relevant facts are not in dispute.Revenue s appeal is dismissed. 2023 (1) TMI 263 Allowability of duty drawback written-off post expiry of prescribed due date within which claim for refund can be made, pursuant to business decision vis-a-vis irrecoverability - whether grounds raised in the present appeal are inconsonance with rule 8 of Income Tax Appellate Tribunal Rules, 1963 however for the purpose of adjudication, it shall suffice to articulate that, the sole substantive ground is directed against the disallowance of customs duty drawback written-off relating to preceding assessment years as prior period item ? - HELD THAT:- The term prior period items expressed by clause 13(e) of the Accounting Standard [for short AS ] refers only to material charges that is expenses or credits that is income which arise in the previous year as a result of errors or omissions in the preparation of the financial statements of one or more preceding previous years, however the expression does not include other adjustments necessitated by circumstances or contingencies, which though related to preceding previous years, and are determined in the previous year subsequently. Moreover, any such adjustments to P L circumstanced by contingencies are carved out of the expression of prior period items by a proviso appended thereto. This by necessary means, any material charges or credits to P L arising on the outcome of contingency falls out of the ambit of prior period item, consequently such material charges shall not be the subject matter of the disallowance within the purview of section 37(1) of the Act. Returning to the extant appeal, it s worthy to note first that, the balance of customs duty drawback written-off to P L was never an item of expenditure but was a receivable asset held as recoverable from the revenue authorities which was denied by the customs authorities in the respective year when the refund claim was made. The contingency over recovery of refund had not became conclusive on the aforesaid denial, but in the evince of written communication from its sister concern EID-Perry and pursuant to business decision arrived in the best judgement having exhausted all remedial boulevards available to it. Thus when all procedural vis- -vis legal recourse available to the appellant came to an end in the best judgement or estimation, in the evince of communication received from its sister concern EID-Perry, the claim for allowance in the P L was made by creating a charge in terms of section 37(1) of the Act in the impugned year being the year of crystalized of loss of refund. It is germane to note that, the denial of claim of refund of customs duty drawback by the customs authorities was the first instance of contingency in recovery which was finally culminated in the impugned year in evince of written communication from sister concern EID-Perry, hence such being the right year of crystallisation of loss of refund, is eligible for claim of allowance in terms of section 37(1) of the Act and this view finds force in the decision of Hon'ble Gujarat High Court in the case of Saurastra Cement Chemical Industry Ltd. 1994 (10) TMI 30 - GUJARAT HIGH COURT Further the present claim of allowance for loss when treated as irrecoverable in the books of accounts maintained by the appellant also finds force [though the decision was in context of bad debts] in the ratio laid by Hon ble Apex Court in CIT Vs Wackhardt International Ltd. 2009 (2) TMI 138 - BOMBAY HIGH COURT even if duty drawback was available for the previous assessment year, what will be relevant was when the same is treated as bad debt by the assessee in his books of account. Appeal of assessee allowed. 2023 (1) TMI 262 TP Adjustment - upward adjustment on account of A M expenditure - international transaction - TPO as well as the Hon ble DRP inferred the existence of international transactions on noticing that the appellant had incurred excess expenditure on A M expenses as compared to the expenses incurred by the comparables chosen by the TPO and then proceeded to make adjustments of difference in order to determine the value of such A M expenses incurred by the AE - HELD THAT:- Respectfully following the decision of this Tribunal [ 2021 (3) TMI 71 - ITAT PUNE] and [ 2021 (11) TMI 1124 - ITAT PUNE] , (wherein Hon ble AM is party), we allow grounds of appeal No.1 and 2 filed by the assessee. However, we make it clear that we are conscious of the fact that in the final assessment order passed by the AO, no addition on account of A M expenditure was made, as this addition was subsumed in the addition made on account of international transaction of import of raw materials. Therefore, the findings on A M expenditure shall become academic, in view of the addition made by TPO / AO on account of TP adjustment in respect of international transaction of import of raw materials is sustained. Thus, we do not find the direction of the Hon ble DRP to Assessing Officer to make alternative addition u/s 37(1) by disallowing the excesses A M expenditure runs contrary to the well settled legal position. Direction of the Hon ble DRP to make addition alternatively by disallowing the A M expenditure u/s 37(1) - It is settled position that expenditure incurred for the purpose of an assessee s business is allowable as deduction, even if it results an advantage of third party. It cannot be said that the expenditure is not incurred only and exclusively for the business purpose of the assessee. In view of the above well settled position of law, we vacate the direction of the Hon ble DRP to Assessing Officer consider the addition u/s 37 alternatively. TP adjustment on account of international transaction of import of raw materials with AEs - benchmarking of international transaction of import of raw materials - objection raised before the DRP is that the TPO was not justified in using TNMM as most appropriate method for the purpose of benchmarking the transaction of import of raw materials as against CUP method used by the assessee - HELD THAT:- The appellant company sought this transaction of import of raw materials to be justified at arm's length price by adopting benchmarking analysis by considering the AE as tested party taking the foreign companies as comparable entities by submitting the documents in the form of confirmation certificates from AE certifying the mark-up charged on supply of raw materials and certificate issued by Independent Cost Accountant certifying the mark-up charged by the AE to the appellant on supply of raw material. Deemed international transaction i.e. third party vendors - Tthe appellant company sought to justify that the transaction of import of raw materials at arm's length by submitting certificates from third party vendors demonstrating that the price charged to the appellant is lower than the market price. The benchmarking analysis carried out by the appellant was rejected by the TPO as well as the DRP. We find that the contention of assessee that the third party vendors are not the AEs of the appellant remained un-adverted. Therefore, the certificate issued by third party vendors, whereby, they confirmed that the discount of 10% to 20% had been given to the appellant on the raw materials supplied during the year and further confirmed that the price they have charged to the appellant company is lower than the price, it would have charged if the appellant had not purchased under global sourcing arrangement cannot be ignored by holding that these certificates were issued by AEs. Similarly, as regards to the import of raw materials from AEs, the contention of appellant company that the price charged by the AEs is lower than the prevailing market price remains uncontroverted. The lower authorities have failed to advert to this submission made by the appellant and therefore, we are of the considered opinion that the matter requires remission to the AO / TPO to examine the above benchmarking analysis furnished by the appellant and then proceed with the benchmarking of the transaction of import of raw materials in accordance with law. Appellant company made an alternate claim that for the purpose of benchmarking the transaction of import of raw materials, the gross margins of appellant company should be compared with the gross margins of comparable companies, as the competition faced by the appellant company effected the net margins of appellant company on account of lower volume and in support of this, he also placed reliance on the decisions of Kirloskar Toyota Textile Machinery Pvt. Ltd. [ 2016 (5) TMI 1595 - ITAT BANGALORE] and 3M India Ltd [ 2010 (7) TMI 520 - ITAT BANGALORE] We are of the considered opinion that, in case the AO / TPO on examination of benchmarking analysis made by the appellant company is found to be not acceptable, the AO / TPO shall examine the relevance of comparison of gross profits of appellant company with the comparable companies and proceed to benchmark the international transaction of import of raw materials. Thus, this ground of appeal stands partly allowed for statistical purposes. The other grounds of appeal become academic in view of above our decision. TP adjustment to international transaction alone - HELD THAT:- The direction of DRP is in consonance with the law laid down by Jurisdictional High Court in the case of (i) CIT vs. Hindustan Unilever Ltd., 2016 (7) TMI 1245 - BOMBAY HIGH COURT] and (ii) CIT vs. Ratilal Becharlal Sons [ 2015 (11) TMI 1524 - BOMBAY HIGH COURT] . Therefore, we do not find any reason to interfere with the directions of DRP and hence, we do not find any merit in the grounds of appeal filed by the Revenue. 2023 (1) TMI 261 Fees for technical services ( FTS ) - sum received from HR and Marketing Consultancy services and Employee Training services as chargeable to tax in India as fees for technical services - India-Sweden DTAA - assessee contended that since it rendered Managerial and Training services to its two Indian AEs, the amount did not fall within the ambit of FTS under the DTAA read with DTAA between India and Portuguese - HELD THAT:- Managerial services along with technical and consultancy services are also covered within the ambit of FTS. It is not the case of the assessee that the receipt is not taxable under the Act. The assessee has made out a case that the sum is not chargeable to tax in the hue of the DTAA, which is more beneficial than the provisions of the Act and section 90(1) of the Act permits choosing a more beneficial provision. If the amount in question also falls within the definition of the fees for included services under the DTAA - In order to `make available technical services, it is sine qua non that the recipient of the services must acquire such technical knowhow etc. which he himself can use in future without any assistance of the provider and the same should not be anything which vanishes or disappears with its provision by the payee itself. Adverting to the facts of the extant case, we find from the nature of services rendered by the assessee that these are primarily pertaining to Human Resources, Marketing Consultancy services and Training services etc. Obviously, managerial services are not part of Article 12(4) of the DTAA between India-Portuguese. As regards the other services, it can be seen that such services are albeit laced with some technical knowledge and lead to their sharing during the training etc., but do not make available any technical knowledge, know-how, experience, skill etc. to the Indian entities so as to apply it in future without any aid or assistance from the assessee. The conclusion drawn by the AO is not proper because the training simply advances the skill of the recipient-employees but falls short of providing any technical knowledge, experience, skill that enables the employees to apply the technology contained therein . As such, we hold that that decision of the AO in treating Rs.38.16 lakh as FTS, is not correct because such consideration does not fall within the purview of FTS under Article 12(4) of the DTAA read with Article 12(4) of the DTAA between India- Portuguese. This addition is directed to be deleted. Addition of claimed to be reimbursement of expenses - We find that though the assessee made out a case of reimbursement but could not successfully prove the same before the AO. AR submitted that the assessee has got all the relevant documents and can prove the same before the AO. Under the given circumstances, we set-aside the impugned order and remit the matter to the file of the AO for giving one more opportunity to the assessee to prove that sum was in the nature of reimbursement in the terms discussed above. Needless to say, the assessee will be allowed reasonable opportunity of hearing. Treating as income chargeable to tax, as against the assessee s contention of the same being recovery of expatriates salary cost - A perusal of the mandate of the above provision clearly ingrains that any amount paid as a consideration which is income of the recipient chargeable to tax under the head Salaries , cannot constitute FTS. Though the assessee has been arguing before the authorities below that the said amount of Rs.64.19 lakh was offered by the employees for taxation in India as their salary, but did not furnish any conclusive evidence to prove the same. It can be seen from the impugned order that the assessee filed certain details of the salaries paid by the employees but did not establish any correlation between the amount under consideration and the amount offered for taxation as `Salary by such employees - we are of the considered opinion that it would be in the fitness of the things if the impugned order on this score is set-aside and the matter is remitted to the file of the AO. We order accordingly and direct him to decide this issue afresh as per law after allowing reasonable opportunity of hearing to the assessee. Appeal is partly allowed. 2023 (1) TMI 260 Default with respect to non-remittance of TDS - A O initiated proceedings under section 201 and 201(1A) - AR prayed that an opportunity may be given to produce Form 26A to evidence that the payee to whom the amounts are credited have included the same in their return of income and the tax thereon have been duly paid - HELD THAT:- We are therefore of the considered view that the assessee cannot take shelter under the proviso to section 201(1). However we notice that the decision in the case of Hindustan CocaCola Beverage (P.) Ltd [ 2007 (8) TMI 12 - SUPREME COURT] is applicable to assessee s case. We are of the view that the assessee should be given an opportunity to prove whether the payees have paid the taxes due. We therefore remit this issue back to the AO to consider the evidences that the assessee produces in support of the claim that the payees have paid the taxes due with respect to the amount credited by the assessee and decide the case on merits in accordance with law. TDS u/s 194A - Non-deduction of TDS on subvention interest - Assessee has entered into a tripartite agreement with the potential buyers and IHFL as per the terms of which the assessee would pay the pre EMI interest to the lender under interest subvention scheme. The lender while disposing the loan withheld the pre EMI interest - whether the subvention charges, which is in the form of pre-EMI interest paid by the assessee to IHFL is liable for TDS u/s.194A - HELD THAT:- A person who is responsible for paying any income by way of interest is liable to deduct tax at source u/s.194A. When a payment is made which is treated as interest income then the person responsible for making such payment is liable to deduct tax at source. A close reading of the provisions of section 2(28A) would make it clear that to call an amount received as interest at least one of the conditions should be satisfied that the amount has been received as due on account of any money either borrowed or debt incurred. In the given case money is borrowed by the buyer when IHFL extended to the housing loan to the buyer. Therefore there can be no dispute that the payments made are in the nature of income by way of interest and would attract the provisions of section 194A. Who is the person responsible for paying the interest ? - The assessee has entered into a tripartite agreement with IHFL and the buyer i.e. borrower whereby the assessee assumes the liability of payment of pre-EMI interest on behalf of the buyer/borrower until the possession of the flat to the buyer/borrower. On perusal of following clauses of the agreement, it is clear that buyer of flat is primarily the person responsible for the payment of interest. Buyer/Borrower who has taken the loan is the person responsible for payment of interest. The assessee as a business strategy to attract customers agrees to bear the burden of pre-EMI interest payment. This does not absolve the primary liability of the borrower/buyer to make the EMI payment including interest and this is clearly stated in the Tripartite Agreement - The assessee in the given facts has acted as an agent of the buyer/borrower while meeting the liability on behalf of the buyer/borrower. As per section 194A, an individual and HUF are not liable to deduct tax at source on payments made by them by way of interest income. The buyer/borrower is therefore not liable to deduct tax at source on the interest payments made as part of EMI. When the buyer/borrower being the person responsible to making the interest payment is not liable to deduct tax at source, the assessee who is making the pre-EMI interest on behalf of the buyer/borrowe cannot be held to be liable to deduct tax at source. Thus we hold that the assessee is not to be treated as assessee in default u/s.201 of the Act and the demand raised u/s.201 and 201(1A) is hereby deleted. - Decided in favour of assessee. 2023 (1) TMI 259 TP Adjustment - AMP expenses incurred at the behest of the AE - HELD THAT:- We note that the assessee gave details of expenses incurred towards the advertisement and sales promotion that was debited to the profit loss account including the selling expenses, marketing expenses - assessee incurred expenses to enable it to sell its products, rather than, promoting the AE. We note that the facts and circumstances in respect of this issue is identical and similar to the preceding assessment years [ 2020 (2) TMI 1487 - ITAT BANGALORE ] considered by this Tribunal. Revenue has brought nothing on record to establish that assessee incurred the AMP expenses at the behest of the AE. Respectfully following the consistent view in identical facts, we direct the Ld.AO to delete the addition made on account of AMP expenses for year under consideration. Appeal of assessee allowed. 2023 (1) TMI 258 TP Adjustment - corporate guarantee provided on behalf of Associated Enterprises - TPO ascertained the ALP of corporate guarantee at 1.5%, accordingly, an ALP adjustment - CIT(A) who restricted the ALP adjustment to 0.5% - HELD THAT:- The stand of the authorities below on this point, is thus not legally sustainable. As for the riders placed in quote, which have been extracted above and which have been heavily relied upon by the learned TPO, these are usual features of legally guarded business quotations, and the presence of such rider do not vitiate the nature of quotation for indicating approximate prevailing rates. Nothing, therefore, turns on this cautious language which is quite common in the commercial documents anyway, either. In this view of the matter, we are unable to see any legally sustainable merits in the objections taken by the authorities below to the yield spread approach adopted by the assessee. The rejection of this method does not, therefore, meet our approval. As for the quotations obtained from HDFC Bank and State Bank of India, these quotations are for the bank guarantees simplicitor and not corporate guarantees given to bank to support the bank guarantees. These two kinds of guarantees are materially different, as has been held by a series of co-ordinate bench decisions. The right comparable, for application of CUP in this case, would have been the consideration for which corporate counter guarantees are issued, for the benefit of an associated enterprise, to a bank. In any event, once we come to the conclusion that the yield spread approach adopted by the assessee has been wrongly rejected, there is no need to deal with this clearly defective application of CUP method. No such inputs have been referred to, or relied upon, by the authorities below. We uphold the plea of the assessee. The benchmarking of corporate guarantee, on the peculiar facts of this case and in the light of yield spread method adopted by the assessee which has not been faulted by the authorities below for any legally sustainable reasons, is upheld at 0.35%. Accordingly, plea of the assessee is upheld and plea of the Assessing Officer is rejected as infructuous. 2023 (1) TMI 243 Unrealized gains on revaluation of forward contracts - bank accounts were admittedly prepared on accrual basis and revenue was recognized following mercantile method except for certain items which were accounted on cash basis? - Whether Tribunal is right in law in setting aside claim of assessee relating to unrealized gains on revaluation of forward contracts when assessing authority rightly denied the same by holding that as the bank accounts were admittedly prepared on accrual basis and revenue was recognized by following mercantile method except for certain items which were accounted on cash basis? - HELD THAT:- Issue decided in favour of assessee as relying on [ 2022 (9) TMI 1406 - KARNATAKA HIGH COURT] Value of investment in HTM Securities - Whether Tribunal is right in law in setting aside disallowances on account of AFS and HFT category of investments? - HELD THAT:- Issue decided in favour of assessee [ 2020 (11) TMI 1087 - KARNATAKA HIGH COURT] Disallowances u/s 36(1) - as submitted that the word used in the statute is aggregate average advances made by the rural branches - HELD THAT:- The manner in which the computation has been made has been given in the case of Vijaya Bank Case[ 2018 (1) TMI 1575 - ITAT BANGALORE] Order passed by the Tribunal in Canara Bank's case [ 2017 (11) TMI 1425 - ITAT BANGALORE] followed in Vijaya Bank case has attained finality and the Revenue has not challenged the said order. Further, the High Court of Calcutta, while considering an identical situation as recorded thus, Mr. Khaitan, learned senior Advocate appeared on behalf of the assessee and submitted that the computation to be made as prescribed by Rule 6ABA is for the purpose of fixing the limit of the deduction available under section 36(1)(viia). Clauses (a) and (b) in Rule 6ABA cannot be given the restricted interpretation. The amounts of advances as outstanding at the last day of each month would be a fluctuating figure depending on the outstanding as increased or reduced respectively by advances made and repayments received. The assessee might provided for bad and doubtful debts but the deduction would only be allowed at the percentage of aggregate average advance, computation of which is prescribed by Rule 6ABA. We find from the amended direction made by the Tribunal that such direction is in terms of Rule 6ABA. The ITO has made the computation of aggregate monthly advances taking loans and advances made during only the previous year relevant to assessment year 2009-10 as confirmed by CIT(A). The Tribunal amended such direction, in our view, correctly applying the rule. These appeals with regard to question No.4 must fail and it is also answered in favour of the assessee . Disallowance u/s 14A - whether conditions for invoking said provisions as fully satisfied in the case of the assessee? - HELD THAT:- Issue answered in favour of the assessee and against the Revenue in the decision of Supreme Court of India in South Indian Bank Ltd[ 2021 (9) TMI 566 - SUPREME COURT] Corporate Laws 2023 (1) TMI 257 Jurisdiction of NCLT over violation of SEBI law - Scope of the rectificatory jurisdiction of the National Company Law Tribunal under Section 59 of the Companies Act, 2013 - determination of appropriate forum for adjudication and determination of violations of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 - HELD THAT:- The scope and ambit of Section 155 of the Companies Act, 1956, as it then existed, fell for consideration in a decision of this Court in Ammonia Supplies [ 1998 (9) TMI 427 - SUPREME COURT] . The application for rectification in Ammonia s case was filed under Section 155, and it was submitted that the scope for rectification under Section 155 is enlarged in comparison with the position as it were under Section 38 of the 1913 Act. Rejecting the argument, this Court in Ammonia held that the jurisdiction exercised by the court for rectification of the register of members is essentially limited - It is evident from the above that while interpreting Section 155, this Court has held that the power of CLB is narrow and can only consider questions of rectification. If a petition seeks an adjudication under the garb of rectification, then the CLB would not have jurisdiction, and it would be duty-bound to re-direct the parties to approach the relevant forum. The Court also held that the words sufficient cause cannot be interpreted in a manner which would enlarge the scope of the provision. The company petition under Section 111A of the 1956 Act for a declaration that the acquisition of shares by the Respondents as null and void is misconceived. The Tribunal should have directed the Appellant to seek such a declaration before the appropriate forum. The Appellate Tribunal is, therefore, justified in allowing the appeal and setting aside the order of the Tribunal. Appropriate forum for enquiry and adjudication of violations of the SEBI Regulations - HELD THAT:- In the exercise of its adjudicatory powers under Section 15-I, the SEBI has the power to appoint officers for holding an inquiry, give a reasonable opportunity to the person concerned and determine if there is any transgression of the rules prescribed. The Board has the power to impose penalties for violations and also restitute the parties. The adjudicatory power also includes the power to settle administrative and civil proceedings under Section 15JB of the SEBI Act - The regulatory jurisdiction of the Board also includes ex-ante powers to predict a possible violation and take preventive measures. The exercise of ex-ante jurisdiction necessitates the calling of information as provided in Sections 11(2)(i), 11(2)(ia) and 11(2)(ib) of the SEBI Act. Where the Board has a reasonable ground to believe that a transaction in the securities market is going to take place in a manner detrimental to the interests of the stakeholders or that any intermediary has violated the provisions of the Act, it may investigate into the matter under Section 11(C) of the SEBI Act. In other words, being the real-time security market regulator, the Board is entitled to keep a watch, predict and even act before a violation occurs. It is in this context, that the SEBI (SAST) Regulations and the SEBI (PIT) Regulations, with which we are concerned in this case, are to be understood. The important role of the Regulator cannot be circumvented by simply asking for rectification under Section 111A of the 1956 Act. Such an approach is impermissible. The scrutiny and examination of a transaction allegedly in violation of the SEBI (PIT) Regulations will have to be processed through the regulations and remedies provided therein - When Constitutional Courts are called upon to interpret provisions affecting the exercise of powers and jurisdictions of these regulatory bodies, it is the duty of such Courts to ensure that transactions falling within the province of the regulators are necessarily subjected to their scrutiny and regulation. This will ensure that the regulatory body, charged with the duty to protect the consumers has real time control over the sector, thus, realizing the purpose of their constitution. The Appellant is not justified in invoking the jurisdiction of the CLB under Section 111A of the Act for violation of SEBI regulations. We are also of the opinion that the Tribunal committed an error in entertaining and allowing the company petition filed under Section 111A of the 1956 Act. Though we are not in agreement with the reasoning adopted by the Appellate Tribunal in the impugned order, we are in agreement with its conclusion that the Tribunal exceeded its jurisdiction and therefore, the Appellate Tribunal was correct in setting aside the judgment dated 05.07.2017. Appeal dismissed. Insolvency & Bankruptcy 2023 (1) TMI 255 Jurisdiction of Adjudicating Authority, while hearing any Application under Insolvency and Bankruptcy Code, 2016 - initiation of roving and fishing enquiry - It is submitted that the Adjudicating Authority had no jurisdiction to ask for materials and documents as has been enumerated in the Order impugned - Section 424(2) of the Companies Act, 2013 - HELD THAT:- The Adjudicating Authority had ample jurisdiction to ask for documents from Applicant/Appellant as well as the Resolution Professional for determination of the issues raised. The Order of the Adjudicating Authority indicate the doubts regarding the claim of the Applicant especially when claim totaled Rs. 12893,39,03,000/- arising out of three assignment deeds which were allegedly short-stamped. In the present case, we are not required to express any opinion with regard to the merits of the claim of the Appellant especially when I.A. No. 203/JPR/2022 filed by the Appellant is pending consideration and the Direction in the I.A. No. 203/JPR/2022 seeking various documents were with the object of examining the veracity of the claim. In so far as the direction of the personal appearance of the directors of the Appellant is concerned, which direction related to appearance on the next date of hearing and the next date having already over and Appellant having also appeared and participated in the proceeding, there is no necessity to examine the correctness of the direction for personal appearance. In pursuance of the Impugned Order, it appears that several documents have been provided for, we see no reason to keep this Appeal pending, we only observe that in event with regard to any particular documents, there is any difficulty faced by the Appellant/Applicant, it is always open for the Applicant/Appellant to file an appropriate application seeking exemption giving reasons for not producing the particular document which Application may be considered by the Adjudicating Authority and appropriate order be placed therein to prosecute the proceedings further. The Adjudicating Authority having jurisdiction to ask for documents and doubts having been expressed by the Adjudicating Authority with regard to the claim of the Appellant, and the Application I.A. No. 203/JPR/2022 being still pending for consideration, we see no reason to entertain this Appeal, at this stage where the proceeding has further proceeded, documents submitted, report filed. Appeal dismissed. 2023 (1) TMI 254 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - it is submitted that Adjudicating Authority committed error in rejecting Section 10 Application filed by the Corporate Debtor, which was filed on the ground of default of the Corporate Debtor in paying the dues of Noida Authority and the pre-conditions as mentioned in Section 10 of the Code, having been fulfilled, Section 10 Application ought to have been admitted. Whether there were sufficient ground for allowing Section 65 Applications by the Adjudicating Authority? HELD THAT:- In Section 65 Application, Applicants have brought on record Data from MCA, which indicate that one of the Director Manpreet Singh Chadha, who was the Director right from the inception of the Company, before filing Section 10 Application had resigned. Manpreet Singh Chaddha was with the Corporate Debtor with effect from 07.06.2011 and has resigned on 11.01.2021. Another Director Charanjeet Singh also resigned. The fact which needs to be noticed is that Manpreet Singh Chaddha, who was Director and has resigned before filing Section 10 Application has been transposed as Financial Creditor in Section 10 Application. It is also relevant to note that Harmandeep Singh Kandhari, who was also Director since 07.06.2011 is also shown as Financial Creditor. The financial debt of Manpreet Singh Chaddha has also been shown in Section 10 Application. The resignation of Directors few months before filing of Section 10 Application especially Manpreet Singh Chaddha, who was Director from day 1 and claiming dues as Financial Creditor in Section 10 Application fully proves the malicious intention of the Corporate Debtor. There is no doubt that 90% amount from the Homebuyers were received, which is claimed to be Rs.1400 crores and the Appellant has left most of the Project unfinished, depriving possession thereof to Homebuyers speaks for itself. The allegations made by the Homebuyers that amount has been siphoned by the Appellant finds credence by the sequence of events, which took place in the present case. When finding recorded by the Adjudicating Authority is that Section 10 Application has been initiated fraudulently and maliciously, even if there is debt and default, the Adjudicating Authority is not obliged to admit Section 10 Application. Section 10 and Section 65, which are part of the same statutory scheme needs to be read together to give effect to the legislative scheme of the Code - The present is a case where it has been held that Application under Section 10 has been maliciously and fraudulently initiated for the purpose other than for the resolution of insolvency. The Hon ble Supreme Court in RAMJAS FOUNDATION ANR. VERSUS U.O.I. ORS [ 2010 (11) TMI 936 - SUPREME COURT ] has held that a person is not entitled to any relief, if he has not come to the Court with clean hand, which principle is also applicable to the cases instituted in other Courts and judicial Forums. There are no error in rejection of Section 10 Application - the default committed by the Appellant was much before 25.03.2020. The Explanation to Section 10A clearly provides that provisions of Section 10A shall not apply to any default committed under the said Section before 25.03.2020. Thus, present is a case where Section 10A was not Applicable. The Adjudicating Authority did not commit any error in allowing Section 65 Applications and rejecting the Section 10 Application. When Applications under Section 65 were allowed holding that initiation of proceedings under Section 10 was done fraudulently and maliciously for purpose other than resolution, rejection of Section 10 Application is consequent and inescapable - appeal dismissed. 2023 (1) TMI 253 Maintainability of petition - Seeking initiation of CIRP against Guarantor of the Corporate Debtor to make payment - invocation of Bank Guarantee was done or not - Appellant s case was that he having committed default in making the payment in response to the notice dated 04.10.2013 issued by Punjab Sind Bank under Section 13, sub-section (2) of the SARFAESI Act, Section 10 Application deserved to be admitted - HELD THAT:- The notice dated 04.10.2013, which is the basis of the default as claimed by the Appellant has been filed along with Section 94 Application. The notice is addressed to M/s Gulati Retails India Ltd., the Corporate Debtor and 5 others persons - Notice under Section 13, sub-section (2) is issued by the Bank for enforcing the security interest. The definition of borrower given in SARFAESI Act under Section-2 (f) is wide enough to include a Guarantor also. Section 13 is for enforcement of security interest. The borrower within the meaning of Section 13, sub-section (2) shall obviously include the Guarantor also. The Bank has filed a reply in this Appeal and the Bank s categorical case in the Appeal is that Bank has not initiated any proceedings against the Appellant for recovery of its balance amount. The learned Counsel for the Appellant may be right in his submission that by virtue of notice issued under Section 13, sub-section (2) dated 04.10.2013, the Appellant was also asked to make the payment of dues, but the undisputed fact is that apart from notice dated 04.10.2013, no steps have been taken by the Bank to recover any dues from the Appellant. The default, if any, committed by the Appellant was in October 2013, when notice was received by the Appellant. When we come to the order passed by the Adjudicating Authority, it is relevant to notice that in the report submitted by the RP, applicability of the Limitation Act was also noticed. The RP came to the conclusion that the Bank has not invoked the guarantee - In its reply, the Bank has submitted that although after sale of the mortgaged asset, part of the facility was realized, but no steps have been taken by the Bank against the Appellant for recovery of any dues. The notice, which is the basis of the Application, was issued on 04.10.2013. Nine years have been passed from issuance of the notice and no steps have been taken by the Bank so far for recovery of any amount from the Appellant. Default, which is claimed by the Appellant, at best can be said to be a technical default and when substantially, no steps have been taken by the Bank and the Bank s categorical case is that guarantee of the Appellant has not been invoked, it is the Bank, who after invoking the guarantee shall proceed against the Appellant. The foundation which was laid down by the Appellant for initiating the CIRP against the Appellant, was not sufficient to admit Section 94 Application and initiate the CIRP against the Appellant - Section 10 Application against the Corporate Debtor has already been admitted and CIRP against the Corporate Debtor had been initiated. The case taken up by the Bank being categorical and clear that no steps have been taken by the Bank against the Appellant, there is no cause for the Appellant to pray for initiation of CIRP against the Appellant the Personal Guarantor. Appeal dismissed. Service Tax 2023 (1) TMI 256 CIRP - Successful resolution applicant - Demand of service tax - SVLDRS - Seeking direction to the respondents for consideration of the case of the petitioner under the scheme Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - seeking direction to respondents to appropriate the payment of Rs.1,24,28,500/- towards settlement dues under the Scheme 2019 and that discharge certificate be issued to the appellant accordingly - moratorium is under force. HELD THAT:- It is required to be noted and it is not in dispute that the appellant is entitled to the benefit of the settlement under the Scheme, 2019. The Scheme, 2019 came to be introduced on 01.09.2019 and the last date for making the application under the Scheme was 30.12.2019 and in fact, the appellant submitted the application in Form No.1 on 27.12.2019 i.e. before the last date specified for making an application. Under the Scheme, after the Form No.1 is processed the Designated Committee was to scrutinize the same and issue the Final Form No.3 determining the settlement amount which the applicant was required to deposit within a period of one month from the date of receipt of the final determination Form No.3. That the appellant was issued the Form No.3 on 25.02.2020 and was required to pay the settlement dues on or before 25.03.2020. However, in view of the COVID-19 Pandemic the Government extended the time upto 30.06.2020. Therefore, the appellant was required to deposit the settlement dues on or before 30.06.2020. However, even before the Scheme, 2019 came to be introduced, the appellant was subjected to proceedings under the IBC which commenced on 11.09.2018 when the NCLT admitted the application under Section 7 of the IBC. Thus, the moratorium under the IBC commenced on 11.09.2018. The CoC approved the Resolution Plan on 04.06.2019, and the same came to be approved by the NCLT by Order dated 24.07.2020. Therefore, the moratorium under the IBC continued upto 24.07.2020. Under the provisions of the IBC no payment could have been made during the period of moratorium. Therefore, the appellant was statutorily restrained/debarred from making any payment. Whether, when it was impossible for the appellant to deposit the settlement amount in view of the bar and/or the restrictions under the IBC, the appellant can be punished for no fault of the appellant? - HELD THAT:- In the case of GYANI CHAND VERSUS STATE OF A.P. [ 2016 (9) TMI 1491 - SUPREME COURT] it was observed by this Court that it would not be fair on the part of the Court to give a direction to do something which is impossible and if a person has been directed to do something which is impossible, and if he fails to do so, he cannot be held guilty - Applying the law laid down by this Court in the aforesaid decision to the facts of the case on hand, the appellant cannot be punished for not doing something which was impossible for it to do. There was a legal impediment in the way of the appellant to make any payment during the moratorium. Even if the appellant wanted to deposit settlement amount within the stipulated period, it could not do so in view of the bar under the IBC as, during the moratorium, no payment could have been made. In that view of the matter, the appellant cannot be rendered remediless and should not be made to suffer due to a legal impediment which was the reason for it and/or not doing the act within the prescribed time. As the appellant was not in a position to deposit the settlement amount at the relevant time, more particularly on or before 30.06.2020 due to legal impediment and the bar to make the payment of settlement amount in view of the mortarium under the IBC, and as it is found that the appellant was otherwise entitled to the benefit under the Scheme as the Form No.1 submitted by the appellant has been accepted, the Form No.3 determining the settlement amount has been issued, the High Court has erred in refusing to grant any relief to the appellant as prayed. The impugned judgment and order passed by the High Court is hereby quashed and set aside. It is directed that the payment of Rs.1,24,28,500/- already deposited by the appellant be appropriated towards settlement dues under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and the appellant be issued discharge certificate - Appeal allowed. 2023 (1) TMI 252 Refund of Service Tax amount - amount returned/refunded to the buyer alongwith the advance amount paid, by the builder, upon the cancellation of the two flats booked by the said buyer - Point of Taxation Rules - HELD THAT:- The first principle of service tax is that tax is to be paid on those services only which are taxable under the said statute. But for that purpose there has to have some service . Unless service is there no service tax can be imposed. For the applicability of the provisions as referred to in the deficiency memo or in the Adjudication order or appellate order, the pre-condition is service . If any service has been provided which is taxable as specified in the Finance Act, 1994 as amended from time to time then certainly the assessee is liable to pay, but when no such service has been provided then the assessee cannot be saddled with any such tax and in that case the amount deposited by the assessee with the exchequer will be considered as merely a deposit and keeping of the said amount by the department is violative of Article 265 of the Constitution of India which specifically provides that No tax shall be levied or collected except by authority of law. Since Service Tax, in issue, received by the concerned authority is not backed by any authority of law, the department has no authority to retain the same. Buyer booked the flat with the appellant and paid some consideration. The appellant as a law abiding citizen entered the same in their books of accounts and paid the applicable service tax on it after collecting it from the buyer. But when the buyer cancelled the said booking on which service tax has been paid and the appellant returned the booking amount along with service tax collected then where is the question of providing any service by the appellant to that customer. The cancellation of booking coupled with the fact of refunding the booking amount along with service tax paid would mean as if no booking was made and if that is so, then there was no service at all. The net effect is that now the amount, which earlier has been deposited as tax, is merely a deposit with the department and the department has to return it to the concerned person i.e. the assessee. In the fact of this case it can be safely concluded that no service has been provided by the Appellant as the service contract got terminated and the consideration for service has been returned. Once it has been held that there is no service then by any stretch Point of Taxation Rules, 2011 can t be roped in as for the applicability of the said Rules firstly providing of any service by the Appellant has to be established. Therefore, the authorities below were not justified in invoking the Provisions of Point of Taxation Rules, 2011 for denying the refund. The Appellant is entitled for refund and the appeal is accordingly allowed. 2023 (1) TMI 251 Rejection of refund claim - rejection only on the ground that the invoices were issued in the names of some other units and not addressed to the appellant a SEZ unit - HELD THAT:- Although I have gone through the same evidence which has been annexed from page 43 to 53 alongwith the appeal but it cannot be verified at this stage. If those were placed on record before the authorities below than the said authorities were under obligation to give finding on the said plea/evidence, one way or the other, but they failed to do so. Since the major portion of the rejected claim is pertains to this head only therefore, without going into the merits of the appeal, I am inclined to remand the matter back to the Adjudicating Authority to decide the issue afresh confining to refund claimed in this Appeal and also to record a finding about admissibility or otherwise of the evidence placed on record herein. The Appellant is directed to produce all the evidences before the Adjudicating Authority in support of their claim and the said Authority is also directed to decide the issues after giving proper opportunity to the Appellant - Appeal allowed by way of remand. 2023 (1) TMI 250 Valuation - mining services - inclusion of diesel and explosives were supplied free of cost, consumed during the mining process, in the assessable value - HELD THAT:- This precise issue came up for consideration before the Supreme Court in Bhayana Builders [ 2018 (2) TMI 1325 - SUPREME COURT] as the issue before the Supreme Court was also whether the value of goods/material supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex is to be included in the computation of gross amount for valuation of the taxable service under section 67 of the Finance Act. The Supreme Court observed that a plain reading of the expression the gross amount charged by the service provider for such service provided or to be provided by him‟ would lead to the conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be included while arriving at the gross amount‟ for the reason that no price is charged by the assessee/ service provider from the service recipient in respect of such goods/materials. It needs to be noticed that the appellant had also placed the decision of the larger bench of the Tribunal in Bhayana Builders [ 2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] before the Commissioner, which decision, was affirmed by the Supreme Court. The larger bench of the Tribunal had concluded that the value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration, would be outside the taxable value of the gross amount charged within the meaning of section 67 of the Finance Act - the decision of the larger bench of the Tribunal in Bhayana Builders and the decision of the Supreme Court in Bhayana Builders are clearly applicable to the facts of the present case inasmuch as the charge in the show cause notice is that the cost of material supplied free of cost should be included in the gross value of the taxable service provided by the appellant. The Commissioner was not justified in distinguishing the decision of the Larger Bench of the Tribunal in Bhayana Builders for the reason that it related to a different construction service and not mining service. The Commissioner should have followed the law laid down by the Supreme Court. Appeal allowed. Central Excise 2023 (1) TMI 249 Refund claim - rejection of refund claim of Rs.2,17,946/- on the ground of limitation - refund was sanctioned to the extent of Rs.8,32,383/- but was transferred to the a/c of Consumer Welfare Funds on the ground of non-production of evidence in order to establish that the incidence of duty has not been passed on to the buyers or otherwise - principles of natural justice. Rejection of refund claim of Rs.2,17,946/- on the ground of limitation - HELD THAT:- According to the appellant they have filed the aforesaid refund claim on 29.6.2017 and in support of their submission they produced on record the speed post receipt also alongwith its tracking but the aforesaid claim of the appellant about filing of refund claim in the year 2017 has been rejected by the authorities below merely on the ground that while filing the 2nd refund claim they lodged the claim for an amount of Rs.10,50,329/- on 26.2.2018 (although the correct date is 25.2.2019) without mentioning therein the fact of filing the claim earlier also in the year 2017 for part of the amount of total refund claim and also on the ground that in one of the speed post the pin code has been wrongly mentioned as 421310 in place of 421301. I have gone through the From-R [Application for consequential refund of amounts paid] which was filed by the appellant on 25.2.2019 and can be termed as 2nd refund claim. In the said refund application it has specifically been mentioned in Ground (vi)(b) that they had already filed the refund application regarding dropping demand of Rs.1,21,898/- plus interest and penalty as well as appeal before the Commissioner (Appeals) against the confirmation of the demand for the balance amount. Not only that, in the prayer of the said Form-R refund application a specific submission has been made that earlier consequential refund application is still pending with the department . The rejection of the speed post on the ground of incorrect mentioning of pin code seems to be filmsy as the Track Order Status placed on record by the appellant in support of its submissions establishes the delivery/receipt of the aforesaid speed post on 30.6.2017 at 09.03 am at Dandekarwadi S.O. which is the address of the Range Officer, Central Excise, Kalyan on which the speed post was sent on 29.6.2017. Another copy of the said Refund claim was sent by speed post on the same day addressed to the Asstt. Dy. Commr., Central Excise, Kalyan, which as per the Track Order Status was also delivered/received at the said address on 30.6.2017 at 2.41 pm - the appellant has successfully established that they have filed the refund claim of the amount of Rs.2,17,946/- within limitation in the year 2017 itself and accordingly the said issue is decided in favour of the appellant. Refund was sanctioned to the extent of Rs.8,32,383/- but was transferred to the a/c of Consumer Welfare Funds on the ground of non-production of evidence in order to establish that the incidence of duty has not been passed on to the buyers or otherwise - HELD THAT:- Both the authorities below rejected the plea of the appellant on the ground of unjust enrichment by invoking the provision of section 11B(2) Central Excise Act, 1944. But while invoking the aforesaid provision, the said authorities failed to take into consideration the proviso to Section 11B(2) ibid, despite the plea raised by the Appellant, which empowers the concerned Officer to pay the amount of excise duty and interest, if any paid on such duty, as may be determined, to the applicant, in the circumstances contemplated under clauses (a) to (f), instead of crediting the amount to the Fund. A bare perusal of this provision and particularly proviso to sub-section (2) would denote that instead of crediting the amount of refund to the fund, it can be paid to the applicant seeking refund, if such amount is relatable, inter alia, to refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made or any notification issued under this Act. In my opinion the issue herein is squarely covered by this proviso and therefore the appellant is entitled for refund of duty and interest on this ground also. Unjust enrichment - HELD THAT:- There is certificate of the Chartered Accountant as well as the affidavit of the appellant specifically mentioning therein that the burden towards Cenvat credit, interest and penalty was never passed on to the consumers. The Chartered accountant has issued the certificate on the basis of books of accounts and the other related relevant documents produced before them. Merely because the certificate is not as per the liking of the authorities below, it cannot be brushed aside as no specific format of certificate has been prescribed by the statute. If the department proves anything contrary to the statement mentioned in the certificate then certainly they have a valid ground to discard it, but this is not the case anywhere. 2023 (1) TMI 248 Recovery of wrongly availed cenvat credit - non-receipt of inputs - HELD THAT:- The issue, investigation/ allegation in the present case are prima facie common as appearing in the case decided by this Tribunal in SANTRAM METALS ALLOYS PVT LTD AND NAVRATANLAL SHARMA VERSUS C.C.E S.T., -AHMEDABAD-III [ 2022 (6) TMI 912 - CESTAT AHMEDABAD] where it was held that The allegation of the Revenue that the appellant have not received the inputs made against the appellant are not sustainable and thus, the impugned orders are liable to be set aside. Since the case involved facts as well as legal issue the entire matter needs to reconsidered taking cognizance of this Tribunal s order dated 20.06.2022. Accordingly, the impugned orders are set aside. Appeals are allowed by way of remand to the Adjudicating Authority for passing fresh after providing sufficient opportunity of personal hearing to the appellants. CST, VAT & Sales Tax 2023 (1) TMI 247 Validity of assessment order passed by the Additional Sales Tax Officer, Kendrapara Circle, Kendrapara under Section 42 of the OVAT Act - Assessing Officer (AO) did not calculate any VAT on sale of de-oiled cake because it was exempted from VAT - short levy of purchase tax - instead of quashing the reassessment order, the JCST choose to remit the matter to the AO for a fresh hearing and a decision - HELD THAT:- The factual finding by the JCST was that the reopening of the assessment was done by the AO by simply accepting the objection of the AG (Audit) without forming independent opinion on whether such objection by the AG (Audit) was correct or not. There was no recording by the Addl. STO about being satisfied independently then there was escapement of taxable turnover. The legal position in this regard has been explained by this Court in INDURE LIMITED VERSUS COMMISSIONER OF SALES TAX, CUTTACK, ORISSA AND OTHERS [ 2006 (7) TMI 572 - ORISSA HIGH COURT ] where it has been held that an objective opinion has to be formed by the STO and that he cannot totally abdicate or surrender his discretion to the objection of the audit party by mechanically reopening assessment under Section 12(A) as has been done in this case. It may be noticed here that the above observation was made in the context of Section 12(8) of the OST Act which corresponds to Section 43 of the OVAT Act. Thus, simply remanding the matter to the STO as has been done by the JCST would serve no purpose since in no way would that alter the factual position namely, that in the record sheet there would be no recording of the objective opinion of the STO about escapement of taxable turnover. This Court disposes of the revision petition by answering the question framed in the negative i.e. in favour of the Dealer and against the Department. 2023 (1) TMI 246 Classification of goods - rate of tax - whether tyres and tubes used in tractor-trolley manufactured by the petitioner is liable to be taxed separately @ 12.5% for the tax periods up to 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B or @ 4% in terms of Entry 119 of Part-II of Schedule B appended to the OVAT Act? - Penalty under Section 42(5) of the OVAT Act - applicability of cases of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [ 2009 (5) TMI 15 - SUPREME COURT] which has been relied on by the Hon ble Supreme Court in the case of CCE, CHANDIGARH VERSUS PEPSI FOODS LTD. [ 2010 (12) TMI 15 - SUPREME COURT] - HELD THAT:- It is not in dispute that Entry 119 of Part-II specifically carves out exception. The goods tyres, tubes and flaps are excluded from the words Tractors, threshers, harvesters and attachments and parts thereof used in the said entry. It is stated in M/S. DEEPAK AGRO SOLUTION LTD VERSUS COMMISSIONER OF CUSTOMS, MAHARASHTRA [ 2008 (5) TMI 8 - SUPREME COURT] that what is not excluded would be held to be included - In COMMISSIONER OF CENTRAL EXCISE VERSUS SHREE BAIDYANATH AYURVED BHAWAN LTD. AND VICE VERSA [ 2009 (4) TMI 6 - SUPREME COURT] it is laid down that specific entry must prevail over a general entry. This Court in STATE OF ORISSA VERSUS BHARAT STORE [ 2002 (2) TMI 1299 - ORISSA HIGH COURT] held that it is a settled position of law that a taxing statute is to be strictly construed and the words used are to be given their natural meaning. It is also the settled position that entries in the Schedule are to be interpreted in their popular sense unless they are expressly defined in the enactment. In RAJ BROTHERS AGENCIES AND OTHERS VERSUS THE STATE OF TAMIL NADU [ 1976 (2) TMI 174 - MADRAS HIGH COURT] it has been stated that a special entry overrides a general provision. If main article to which the item in question is accessory or component part is taken out of that item, its accessories and component parts could not be said to have been left untouched. Though batteries may be electrical goods and battery plates are accessories or component parts of such batteries, in view of the specific entry, batteries as such were excluded from general entry. This Court is of the considered opinion that tyres, tubes and flaps being excluded from the purview of preceding words, namely Tractors, Threshers, harvesters, and attachments and parts thereof as contained in Entry 119 of Part-II of Schedule B appended to the OVAT Act, the subject-goods do not fall within ambit of said entry. No specific entry being available, tyres, tubes and flaps are, thus, subject to tax @ 12.5% up to tax period ending on 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B to the OVAT Act. For the aforesaid reasons, the interpretation as suggested by the learned counsel for the petitioner cannot be acceded to. Penalty under Section 42(5) of the OVAT Act - applicability of cases of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [ 2009 (5) TMI 15 - SUPREME COURT] which has been relied on by the Hon ble Supreme Court in the case of CCE, CHANDIGARH VERSUS PEPSI FOODS LTD. [ 2010 (12) TMI 15 - SUPREME COURT] - HELD THAT:- With regard to applicability of ratio of decision in UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [ 2009 (5) TMI 15 - SUPREME COURT] , which has been relied on by the Hon ble Supreme Court in the case of CCE, CHANDIGARH VERSUS PEPSI FOODS LTD. [ 2010 (12) TMI 15 - SUPREME COURT] , needless to say that since they are rendered in different context and under different statutory setting of words, the reliance placed by the petitioner is misplaced. The questions of law are answered in favour of the Revenue and against the petitioner-dealer - Petition dismissed. 2023 (1) TMI 245 Seeking issuance of C-declaration forms - Grievance of the petitioner is that despite payment of taxes on regular basis and there being no arrear tax due, respondents did not issue the C declaration forms - HELD THAT:- The explanation given by respondent No.1 is not adequate to deny C forms to the petitioner. There is no allegation of short deposit of any taxes by the petitioner or suppression/misstatement of goods while availing concessional rate of tax. The issue raised in the writ petition is no longer res integra. A Division Bench of this Court in AP GAS POWER CORPORATION LTD. VERSUS ASSISTANT COMMERCIAL TAX OFFICER AND OTHERS [ 1997 (9) TMI 575 - ANDHRA PRADESH HIGH COURT] has held that at the stage of issuance of C declaration form, the notified authority is not required to conduct an enquiry into the nature of the transaction as to whether the petitioner needs the forms for use in the course of inter-state trade or for avoidance of payment of tax which he would be liable to pay. The authorities will, however, be at liberty to make such an enquiry as it is necessary to see whether the C forms have been properly issued and if not what is the liability of the parties under the erstwhile Andhra Pradesh General Sales Tax Act, 1957, or the Central Sales Tax Act, 1956, as the case may be. The aforesaid decision of this Court has been followed by various High Courts. Recently, the High Court of Jharkhand in M/S TATA STEEL LIMITED VERSUS THE STATE OF JHARKHAND, JOINT COMMISSIONER OF COMMERCIAL TAXES (I.T.) , JOINT COMMISSIONER OF COMMERCIAL TAXES (ADMINISTRATION) , DEPUTY COMMISSIONER OF COMMERCIAL TAXES AND ASSISTANT COMMISSIONER OF COMMERCIAL TAXES [ 2019 (1) TMI 894 - JHARKHAND HIGH COURT] has held that once a dealer satisfies the conditions that he is a registered dealer authorised to purchase goods mentioned in the certificate of registration and charges for obtaining C forms have been paid, the authorities are bound to issue him the C forms. Petition disposed off. Indian Laws 2023 (1) TMI 244 Recovery proceedings - default in payment of loan / debt - whether recovery proceedings / recoveries under the MSMED Act would prevail over the recoveries made / recovery proceedings under provisions of the SARFAESI Act? - HELD THAT:- Sections 15 to 23 of the MSMED Act are providing a special mechanism for adjudication of the disputes and to adjudicate and resolve the disputes between the supplier and buyer micro or small enterprise - it is observed that MSMED Act does not provide any priority over the debt dues of the secured creditor akin to Section 26E of the SARFAESI Act. At the most, the decree / order / award passed by the Facilitation Council shall be executed as such and the micro or small enterprise in whose favour the award or decree has been passed by the Facilitation Council shall be entitled to execute the same like other debts / creditors. Therefore, considering the provisions of Sections 15 to 23 read with Section 24 of the MSMED Act and the provisions of the SARFAESI Act, as such, there is no repugnancy between two enactments viz. SARFAESI Act and MSMED Act. As such, there is no conflict between two schemes, i.e. MSMED Act and SARFAESI Act as far as the specific subject of 'priority' is concerned. The object and purpose of the enactment of SARFAESI Act is required to be considered. SARFAESI Act has been enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and to provide for a central debts of security interest created on property rights, and for matters connected therewith or incidental thereto. Therefore, SARFAESI Act has been enacted providing specific mechanism / provision for the financial assets and security interest. It is a special legislation for enforcement of security interest which is created in favour of the secured creditor financial institution. Therefore, in absence of any specific provision for priority of the dues under MSMED Act, if the submission on behalf of respondent No.1 for the dues under MSMED Act would prevail over the SARFAESI Act, then in that case, not only the object and purpose of special enactment / SARFAESI Act would be frustrated, even the later enactment by way of insertion of Section 26E of the SARFAESI Act would be frustrated. Even otherwise the Naib Tehsildar was not at all justified in not taking possession of the secured assets / properties as per order dated 24.09.2014 passed by the District Magistrate under Section 14 of the SARFAESI Act. The order passed by the Naib Tehsildar refusing to take possession of the secured assets / properties despite the order passed under Section 14 of the SARFAESI Act on the ground that recovery certificates issued by respondent No.1 for recovery of the orders passed by the Facilitation Council are pending, is wholly without jurisdiction. The impugned judgment and order passed by the Division Bench of the High Court is unsustainable and the same deserves to be quashed and set aside - Appeal allowed.
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