Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 10, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Refund of accumulated unutilised Input Tax Credit - Relevant date - Export of goods - The right for refund of the accumulated ITC stands crystalised on the date when the subject goods are exported. This is also reflected in Section 54 of the CGST Act. In terms of Section 54(1) of the CGST Act, the application for refund is required to be made “before the expiry of two years from the relevant date in such form and manner as may be prescribed”. - HC
Income Tax
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Addition u/s 56(2)(vii)(b) - additional income - assessee has suo motu declared this amount post survey proceedings u/s 133A on the assessee - the addition under section 56(2)(vii)(b) has to be adjusted and telescoped out of this suo motu voluntary disclosure of the assessee - AT
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Ad-hoc disallowance @ 20% of total site expenses - none of the authorities below as well as Ld. Sr. DR could bring on record any material to dislodge the claim of the assessee and substantiate the ad-hoc disallowance by adopting a rate of 20% for the same. - Additions deleted - AT
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Doctrine of constitutional priority - Certain transfers to be void u/s 281 - It is not in dispute that before filing of this Special Leave Petition, the auction sale has been completed. The documents produced on record show that the sale certificate has been issued and the auction purchasers have been placed in possession. Only on the basis of this factual aspect, we decline to entertain this SLP - Decided against revenue - SC
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Validity of reopening of assessment - notice beyond the period of four years - the very same material and the assessment records are sought to be revisited and therefore it is not the case of the authority that there was a failure to fully and truly disclose all facts that led to the escapement of income so as to warrant an exercise of reassessment u/s 148 of the Act. - HC
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Penalty u/s. 271(1)(c) - the assessee ought to have been visited with the penalty on the charge of furnishing of inaccurate particulars of income. As against that, the penalty order was passed with reference to both, namely, furnishing of inaccurate particulars of income and concealment as well. Under these circumstances, we are satisfied that the order passed by the ld. CIT(A) cannot be sustained. - No penalty - AT
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Additions against reduction in Gross Profit Rate (GP rate) - rejection of books of accounts - - The assessee has already advanced the reasons for low profit and has submitted the details - Since, there is no specific defects observed in the books of accounts the addition made by the ld. AO on account of the low G.P. we see no reason to sustain the same. - AT
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Addition u/s 68 - claim of exemption u/s 10(38) denied - Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus in the hands of all the investors. - Since assessee’s name does not even figure in the list of parties who were involved in manipulation of shares prices of MARL in the order of SEBI dated 30.8.2019 after its detailed investigations, the transaction carried out by the assessee cannot be termed as bogus. - AT
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Income accrued in India - Fee for Technical Services [FTS] - 'make available’ - the marketing and sales services, operations and standardization services do not satisfy the “make available” clause as per article 12(4)(b) of Indo Singapore DTAA and, therefore, the amounts are attributable for these services cannot be held to be fees for technical services. - AT
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Disallowance of interest on late payment of TDS u/s 37 - As the case of late payment of TDS is not in the nature of penalty, the same is allowable u/s 37 - AT
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Capital Gains or income from other sources - Nature of compensation received - Where such an asset is transferred by way of relinquishment, the compensation for such relinquishment so received is chargeable to tax under the head “Capital gains” and the amount initially paid shall be treated as cost of acquisition for acquiring such rights. - AT
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Additions against Cash deposits made during demonetization period in specified bank notes - assessee has been consistently holding huge cash balance which meets the entire cash deposits made - there is absolutely no case for the Revenue to make an addition for cash deposits made during the demonetization period as the entire cash deposits are totally explained by proper sources by the assessee. - Additions deleted - AT
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Genuineness of expenditure - CIT(A) deleted the additions - CIT(A) went into detail to evaluate the identity of commission recipient and genuineness of expenditure of all recipient entities and thereafter, drawn party wise conclusion and directed the AO to delete the entire addition made by the Assessing Officer on account of brokerage of commission paid to the various brokers. The conclusion drawn by the ld. CIT(A) is based on proper appreciation of facts. - AT
Customs
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Levy of penalty u/s 112(a) of Customs Act, 1962 - contention of appellant is that earlier similar goods were allowed for clearance has not been contested by Revenue - when the goods are allowed to be re-exported, neither redemption fine nor duty was required to be paid. At the same time, penalty is also not to be imposed on the importers. - AT
FEMA
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Stay of demand / pre-deposit - Levy of penalty - Contravention of Section 18(2) of FERA - failure to realize export proceeds - Appellant contended that the order of the Tribunal has not taken note of the undue hardship that faces the appellant, and ought to have waived the pre-deposit. - The Tribunal has, in waiving 60% of the penalty, and directing deposit of only 40%, taken note of all contentions of the Appellant, including the hardship projected. - Appeal dismissed - HC
Service Tax
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Services provided to 'Body Corporate' - Liability of discharge fully service tax liability on works contract or only 50% of tax - The Revenue has proceeded on an ex-facie erroneous premise that NOIDA is not a body corporate on the basis that NOIDA had explained that it was neither a company registered under the Companies Act, 1996 nor a business entity registered as a body corporate. NOIDA does not require to be registered under any Act as a body corporate - HC
Central Excise
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Clandestine removal - In the present case, the main evidence on which, Revenue has sought to establish the case of clandestine manufacture and removal of goods is in the form of the computer printouts taken out from the Computer and other electronic devices seized by the Income tax authorities and shared to the revenue in respect of which the requirement of Section 36B has not been satisfied. - Demand set aside - AT
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Option to avail benefit of exemption and Cenvat Credit - Scope of Section 5A - both the exemption entries are subject to certain conditions therefore both the entries have absolute exemption. In this position it is an option to the appellant to choose any one of the exemption entries. Therefore, in the present case the appellant has chosen to avail the exemption under Sr No. 91 is absolutely legal and correct. - AT
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CENVAT Credit - input services - setting up of plant and factory after 01.04.2011 - the input service namely erection, commissioning and installation for setting up of new plant have a direct nexus with the manufacturing activity of the appellant - Benefit of credit is available - AT
Case Laws:
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GST
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2023 (10) TMI 312
Maintainability of petition - availability of alternative remedy - calling for records - violation of principles of natural justice - HELD THAT:- It is on the basis of an inspection of the web portals that certain observations came to be made. The petitioner does not dispute that the aforesaid URLs are owned by it. It is also not the case of the petitioner that it was not confronted with the material so gathered. Since that material was, in any case, in the public domain, there are no merit in the submission that the principles of natural justice were violated. Petition dismissed.
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2023 (10) TMI 306
Refund of accumulated unutilised Input Tax Credit - Relevant date for filing refund claim - Export of goods - constitutional validity of Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017 - rejection of refund on the ground that petitioner had not produced the relevant Foreign Inward Remittance Certificates (FIRCs) and co-related them with the exports made - rejection also on the ground that computation of the eligible export turnover was not compliant with Rule 89(4)(C) of the Rules. The petitioner contends that Sub-rule (4)(C) of Rule 89 of the said Rules, which was substituted by the Central Goods and Services Tax Act (Third Amendment) Rules, 2020 with effect from 23.03.2020, has no application for refund in respect of exports made prior to the said date. HELD THAT:- The maximum amount of refund of ITC admissible is the fraction of the amount of ITC (as adjusted by ITC refundable under Sub-rules (4A) and (4B) of Rule 89 of the Rules) in proportion of the export turnover to the total turnover, as adjusted by excluding exempt supplies and supplies in respect of which the refund is claimed under Sub-rules (4A) and (4B) of Rule 89 of the Rules - Clause (C) of Sub-rule (4) of Rule 89 of the Rules, defines the expression turnover of zero rated supply of goods . There is no dispute that the amended Sub-rule (4) of Rule 89 of the Rules applies prospectively; that is, with effect from 23.03.2020, being the date when the Central Goods and Services Tax Act (Third Amendment) Rules, 2020 came into force. However, according to the Revenue, it has a retroactive operation for computing the refund of ITC in respect of exports made prior to the date of the amendment (23.03.2020) but applied for after the amendment. And, the applications filed after 23.03.2020 are required to be processed in accordance of the amended rules - The right for refund of the accumulated ITC stands crystalised on the date when the subject goods are exported. This is also reflected in Section 54 of the CGST Act. In terms of Section 54(1) of the CGST Act, the application for refund is required to be made before the expiry of two years from the relevant date in such form and manner as may be prescribed . It is important to note that in terms of Sub-clause (a) of Clause (2) of the Explanation to Section 54 (1) of the CGST Act, the limitation for applying for refund in respect of the export of goods and/or services is reckoned from the date when the goods and/services are exported - the appellate authority erred in applying Rule 89(4)(C) of the Rules as amended with effect from 23.03.2020 for computing the export turnover for the purposes of determining the refund as claimed by the petitioner The petitioner s claim for refund of the accumulated ITC in respect of its exports for the period of 01.10.2018 to 30.09.2019 is liable to succeed. The impugned refund rejection orders (dated 15.09.2020, 24.09.2020, 22.10.2020 and 05.11.2020) and the orders in appeal (Order-in-Appeal No. 106-108 dated 18.06.2021) are, accordingly, set aside - Petition disposed off.
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Income Tax
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2023 (10) TMI 311
Determination of income on presumptive basis - Income of the assessee as subjected to tax in terms of section 44BB - AO concluded that the services performed under both the contracts are in the nature of Fees For Technical Services (FTS) as defined u/s 9(1)(vii) of the Act as according to him, the services rendered are technical in nature - HELD THAT:- As evident that the services provided by the assessee are in connection with prospecting/ extraction/ production of mineral oil and hence, its activities would be squarely covered within the ambit of provision of section 44BB of the Act. We also find similar services were rendered by the assessee in the past and the same had been subject matter of adjudication of this Tribunal for AY 2007-08 to 2009-10 wherein, this tribunal had categorically observed that the services rendered by the assessee would be falling under the ambit of provision of section 44BB of the Act. As stated supra, the Tribunal in AY 2009-10 in assessee s own case had already held that income of the assessee would have to be determined in accordance with the provision of section 44BB of the Act and not section 44DA of the Act. Hence, the entire contract receipts derived by the assessee would have to be determined for the purpose of taxability only in accordance with the provisions of section 44BB of the Act. The assessee in the instant case has reported consolidated profit in its profit and loss account and business income under normal provisions of the Act in the income tax which works to 24.36% of gross receipts Whether the assessee though falling under the ambit of provisions of section 44BB of the Act, but earning income above the presumptive rate of 10% fixed u/s 44BB(1) of the Act, would be eligible for showing income in terms of section 44BB(1) of the Act / - In order to understand this issue, it would be pertinent to look at the same in the event of assessee s incurring losses. If the assessee is incurring losses, still it has to offer income at the presumptive rate of 10% on gross receipts as per section 44BB(1) of the Act. As a corollary, if an assessee earns income more than 10% on gross receipts actually, then still its income would be determined only in terms of section 44BB(1) of the Act. In view of non obstante clause of section 44BB(1) of the Act, all other disallowances made by the ld AO either u/s 37(1) of the Act or section 40(a)(i) of the Act would not survive. Similarly, the adjudication of additional ground for claim of income tax depreciation u/s 32 of the Act also would become academic. In our considered opinion, even though the assessee has offered more income in its return than the income u/s 44BB(1), still it is not estopped from pointing out a mistake in the assessment though such mistake is on account of submission by the taxpayer. It is trite law that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to prevail. Further, it is also settled law that there is no estoppel against the statute. In any case, the elaborate circular has been issued by the CBDT vide Circular No. 14 (SL-35) dated 11.04.1955 wherein, it has been specifically observed by CBDT that the purpose of this circular is merely to emphasis that Income Tax Officer should not take advantage of assessee s ignorance to collect more tax out of him than his legitimate due from him. We hold that income of the assessee should be determined on presumptive basis as per section 44BB(1) of the Act in the peculiar facts and circumstances of the case. Accordingly, the various disallowances made by the ld AO in the assessment would be liable for deletion. Accordingly, the ground nos. 2 to 11 raised by the assessee are allowed and additional ground raised by the assessee is allowed. Seeking correct credit for TDS , the same requires factual verification and hence Ld AO is directed to give credit for TDS in accordance with law.
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2023 (10) TMI 310
Disallowance of Public Relation Expenses, travelling and conveyance expenses and interest on car loans - Addition on ground of personal use and not incidental to the business - HELD THAT:- Assessee before the lower authorities has duly explained that the business of the assessee is of liaisoning and to procure, facilitate, provide logistics etc. to foreign manufacturer suppliers and to provide/facilitate the procuring of material for railways from the aforesaid foreign companies. Thus in can be gathered that the expenses incurred by the assessee on account of public relation expenses, travelling and conveyance expenses and motor car interest expenses owing to the nature of the business of the assessee, were business expenses only. We, therefore, do not find justification on the part of the lower authorities in making the impugned disallowance and the same is accordingly ordered to be deleted. Appeal of the assessee stands allowed.
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2023 (10) TMI 309
Exemption claimed u/s. 80P(2)(b), 80P(2)(d), 80P(2)(c) - Claim denied on the ground of return of income having been filed late without properly appreciating the facts - Considering the fact of Covid, Government Audit having been not done on time and the Suo-Moto extension for limitation allowed by the Apex Court. - HELD THAT:- There is no dispute that the assessee is entitled for deduction under Section 80P of the Act and the circumstances under which the assessee filed the belated return were beyond the control of the assessee. The Government Auditor has given its report belatedly and, therefore, the filing of the return of income was delayed due to the genuine reasons. The submissions of the ld. AR that the mandate of filing the return of income on due date will be applicable from A.Y. 2021-22 appears to be correct. Hence, the Assessing Officer as well as the CIT(A) was not right in disallowing the claim of deduction under Section 80P of the Act to the assessee only on the ground of delay in filing the return. Appeal of the assessee is allowed.
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2023 (10) TMI 308
Addition u/s 56(2)(vii)(b) - additional income - assessee has suo motu declared this amount post survey proceedings u/s 133A on the assessee - HED THAT:- We observe that the observation of the AO that the amount represented as additional income under section 57(2)(vii)(b) is untenable. Considering the overall scenario and facts that the assessee has disclosed sum without any basis and which was just a suo motu voluntary disclosure and the ld. AO has also not found any unexplained credit or source of money or asset to back such disclosure. We are of the view that the addition under section 56(2)(vii)(b) has to be adjusted and telescoped out of this suo motu voluntary disclosure of the assessee - Therefore, we are inclined to allow the Ground No. 1 of the assessee by setting aside the order of ld. CIT(Appeals) and directing the ld. Assessing Officer to give telescopic effect out of the suo motu disclosure. Ground No. 1 is allowed. Undisclosed income being the residue amount out of the disclosure mad e - HELD THAT:- Disclosure is made by the assessee without any basis in the form of undisclosed assets or undisclosed income or any unexplained credit in the books of the assessee. This addition has been made by the ld. AO on the ground that the assessee has surrendered Rs. 2,00,00,000/- in the instant assessment year vide letter dated 17.03.2014 filed after the survey operation was conducted on 11.12.2013. We are of the considered view and opinion that any disclosure made in the survey proceedings merely on the basis of statement recorded during survey is not enough to make the addition. There has to be corroborating material to make the addition. Accordingly, we are inclined to set aside the order of ld. CIT(Appeals) on this issue by allowing the ground no 2 of the appeal of the assessee.
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2023 (10) TMI 307
Ad-hoc disallowance @ 20% of total site expenses - AO by observing that assessee has not provided any documentary evidence in support of claim of site expenses, adopted an ad-hoc rate of 20% to disallow site expenses after reducing the component of sales tax from it - HED THAT:- We note that assessee is a company engaged in the business as railway contractor and supplier. Assessee has furnished the break-up of site expenses which it has claimed in its P L Account. AO has adopted ad-hoc percentage of 20% to make a disallowance towards site expenses without giving any rational basis for the same. AO while making a disallowance has reduced the component of sales tax from the total amount of the site expenses. Assessee has furnished a comparative analysis of the claim of site expenses in the preceding as well as subsequent years as tabulated above. Section 37(1) of the Act provides for allowing expenditure incurred by the assessee for the purpose of its business if they are not in the nature of capital expenditure or personal expenses and not being expenditure of the nature prescribed in section 30 to 36. In the present case before us, none of the authorities below as well as Ld. Sr. DR could bring on record any material to dislodge the claim of the assessee and substantiate the ad-hoc disallowance by adopting a rate of 20% for the same. As well as the provision of section 37(1), we delete the ad-hoc disallowance made by the Ld. AO and confirmed by the CIT(A). Accordingly, grounds taken by the assessee in this respect are allowed.
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2023 (10) TMI 305
Doctrine of constitutional priority - Certain transfers to be void u/s 281 - Supremecy of attachment passed by the Tax Recovery Officer / Income Tax Department or to the mortgage created in favour of the secured creditors Dues of the Income Tax Department precedence over the dues of the secured creditor - Scope and ambit of Section 281 of the Income Tax Act, 1961 and Section 26E of SARFAESI Act and Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 - Tax recovery proceedings - HELD THAT:- It is not in dispute that before filing of this Special Leave Petition, the auction sale has been completed. The documents produced on record show that the sale certificate has been issued and the auction purchasers have been placed in possession. Only on the basis of this factual aspect, we decline to entertain this Special Leave Petition. The same is, accordingly, dismissed.
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2023 (10) TMI 304
Validity of reopening of assessment - notice beyond the period of four years - Reason to believe - HELD THAT:- The reassessment has been done for the year 2013-14. The notice for such reassessment is dated 6.3.2020 i.e. beyond a period of four years. The law prescribes that in such cases, unless and until it is found that there was no full and true disclosure of material facts, the assessment cannot be reopened. On the facts of the present case, it has been found that the very same material and the assessment records are sought to be revisited and therefore it is not the case of the authority that there was a failure to fully and truly disclose all facts that led to the escapement of income so as to warrant an exercise of reassessment under Section 148 of the Act. In the case of Jivraj Tea [ 2020 (2) TMI 95 - GUJARAT HIGH COURT] this Court has held that in absence of any tangible material available, reopening beyond the period of four years is bad in law. - Therefore what is evident is that the notice dated 6.3.2020 and the order disposing off objections dated 31.08.2021 are bad in law and deserve to be quashed and set aside.
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2023 (10) TMI 303
Penalty u/s. 271(1)(c) - disallowance of expenses on the ground that they should have been capitalized, it is manifestly a case of furnishing of inaccurate particulars of income - HELD THAT:- Every furnishing of inaccurate particulars of income leading to addition ultimately results in enhancement of income. Similarly, every concealment of particulars of income leading to addition results in enhancement of income. Both the limbs (i) furnishing of inaccurate particulars of income and (ii) concealment of particulars of income - are separate and distinct from each other. Whereas the concealment limb refers to additions towards items of income not shown by the assessee; and the limb of furnishing of inaccurate particulars of income would, inter alia, refer to disallowance of expenses claimed by the assessee as deductible. Additions made under both the limbs eventually give a foundation for imposition of penalty u/s. 271(1)(c), subject to the fulfilment of requisite conditions of the section. One cannot say that disallowance of expenses has resulted into `concealment of income for furnishing of inaccurate particulars of income . The third category created by the ld. CIT(A) does not find its presence in any part of the provision. Qua one addition, it can either be a case of concealment of particulars of income or furnishing of inaccurate particulars of income. The action of the AO in initiating and passing the order on both the limbs together, can be justified if there are two or more additions made by him - some of them falling in realm of the first limb and others in the second. Howbeit, if there is only one item of addition, that can be either a case of concealment of particulars of income or furnishing of inaccurate particulars of income and cannot be a combination of the two. We are confronted with a situation in which only one addition was made by the AO, which is towards disallowance of expenses. This strictly falls within the ambit of furnishing of inaccurate particulars of income. Penalty ought to have been levied only with reference to furnishing of inaccurate particulars of income without having any reference to the second limb of concealment of particulars of income. It goes without saying that the foundation for any penalty is the charge on which the penalty is levied. It is this charge, as set out in the penalty notice, which the assessee has to meet with culminating into imposition or otherwise of the penalty. As Mohd. Farhan A. Shaikh Anr. [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] has held that if the charge in the notice u/s 274 is vague i.e. irrelevant charge has not been struck off, the penalty order u/s 271(1)(c) gets vitiated. Similar view as passed in PCIT vs. Golden Peace Hotels and Resorts (P.) Ltd. [ 2020 (2) TMI 333 - BOMBAY HIGH COURT] - The SLP of Department against this judgment has since been dismissed in PCIT vs. Golden Peace Hotels and Resorts (P.) Ltd. [ 2021 (3) TMI 195 - SC ORDER] . It is unambiguous from the above enunciation of law that the issuance of a lawful notice u/s 274, clearly setting out the charge for which the penalty is proposed to be levied, is sine qua non, for passing a valid penalty order. Where notice u/s 274 is vague, penalty order gets vitiated. Adverting to the facts of the instant case, we find that the assessee ought to have been visited with the penalty on the charge of furnishing of inaccurate particulars of income. As against that, the penalty order was passed with reference to both, namely, furnishing of inaccurate particulars of income and concealment as well. Under these circumstances, we are satisfied that the order passed by the ld. CIT(A) cannot be sustained. The same is, therefore, overturned and the penalty is directed to be deleted. Appeal is allowed.
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2023 (10) TMI 302
Additions against reduction in Gross Profit Rate (GP rate) - rejection of books of accounts - registered petroleum product dealer - AO asked for the books of account which the assessee could not furnish - HELD THAT:- As the assessee is a dealer of the petroleum company i.e. HPCL, as per the agreement placed on record all the purchases are to be made from the said company and the assessee purchases and thereby make sale of the petroleum product which are controlled at predetermined prices. As per the practice the payments are also to be made in advance before purchase of goods and the assessee is getting the predetermined rate of commission as the sale price is also fixed by the government, we see that there is no scope for the assessee declaring the higher GP or Lower GP. The assessee has no role to play in the purchase and sale price. We even find from the records that while submitting the explanation of the GP the assessee already submitted that the difference is on account of fluctuation in Diesel/Petrol Price and on which there is no adverse finding of the ld. AO. Therefore, since the GP is derived from the purchase and sale price difference and are frequent fluctuating, we see no reasons to reject the books merely on this observation. Not only that the bench also noted that the accounts of the assessee are audited and before estimating the GP the book result declared by the assessee is required to be found but the fault mentioned in the show cause notice is not a defect to be sufficient to invoke the provision of section 145(3) of the Act based on the set of facts made available on records. We find from the records that the assessee was given the specific shows cause notice for rejection of the books and even though the order is passed u/s. 143(3) of the Act and not u/s. 144 of the Act. The assessee has already advanced the reasons for low profit and has submitted the details called, ld. AO only requires the books of account which the assessee submitted that not requirement when the assessment is going on in ITBA and the books are audited. The assessment of the assessee completed u/s. 143(3) of the Act. No specific information was called for and ld. AO only insisted upon the producing of the books of accounts. Since, there is no specific defects observed in the books of accounts the addition made by the ld. AO on account of the low G.P. we see no reason to sustain the same. Hence, the addition made by the ld. AO for an amount of Rs. 4,60,052/- on account of the low G. P. is deleted and the finding of the ld. AO rejecting the book result is not correct. Based on these observations the ground no. 3 raised by the assessee is allowed. Unexplained cash credit u/s 68 - Since, the assessee was not called upon to file any specific information which the assessee contended before us. Once the sales is not disputed the consequential receipt also cannot be particularly when the assessee was permitted to accept the SBN for the specific period. The ld. AR submitted that assessee maintained the day to day stock register under the essential commodity Act. That records are periodically verified by the officials under that Act. Thus, considering the prayer of the assessee for giving a chance and grievance of the revenue to verify the claim of the assessee with the relevant documentary evidence to substantiate the source of the cash deposited. As the revenue did not dispute the sales made by the assessee in the same period, but contended that no explanation regarding these cash deposit with documentary evidences like stock register, sale details, details of SBN and non SBN, purchase bills were submitted. Hence, the bench feels since the sale is not under dispute the assessee should substantiate his version with the documents that has been demanded by the revenue to establish the source of cash deposited. In the light of these discussions, we feel that let ld. AO shall verify the sales vis a vis generation of the SBN with documentary evidence as deem fit to verify the claim of the assessee. Ground no. 2 raised by the assessee is allowed for statistical purposes.
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2023 (10) TMI 301
Assessment u/s 153A - Addition u/s 68 - claim of exemption u/s 10(38) denied - As per DR signature in the documents pertaining to preferential allotment of shares to the assessee and his family members was forged and accordingly, the entire transaction of purchase and sale of shares were pre-meditated - HELD THAT:- We find that independent enquiries were conducted by SEBI for the relevant period and SEBI had passed an order in the case of MARL after its final investigation, wherein only three persons were held to be involved in artificial rigging of share prices of MARL and hence they were prohibited from accessing the securities market for a period of 3 years. This SEBI order in the case of MARL did not even mention the name of the assessee or his broker through whom the shares were sold by the assessee in the open market. Hence this goes to prove that the assessee or his broker were not involved in artificial rigging of price of shares of MARL in connivance with any person. When even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices, how can the revenue herein state that long term capital gains derived by the assessee is merely an accommodation entry and is bogus. We are unable to persuade ourselves to accept to the contentions of the ld. DR that Kolkata Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus in the hands of all the investors. In this case only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee s name does not even figure in the list of parties who were involved in manipulation of shares prices of MARL in the order of SEBI dated 30.8.2019 after its detailed investigations, the transaction carried out by the assessee cannot be termed as bogus. In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of MARL within the meaning of section 68 of the Act. The sale proceeds have been received by the assessee from the stock exchange through the SEBI registered share broker by account payee cheques through regular banking channels. We find that the three ingredients of section 68 of the Act are duly fulfilled by the assessee in the instant case. Hence there is no question of making any addition as unexplained cash credit u/s 68 of the Act in the instant case. We hold that there is no case for the revenue to deny the claim of exemption u/s 10(38) of the Act and to sustain the disallowance of estimated commission expenditure thereon in the proceedings framed u/s 153A of the Act on the assessee. Decided in favour of assessee.
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2023 (10) TMI 300
TP Adjustment - Downward adjustment - raw materials and components purchased from the AEs which was not in accordance with the arm s length principles - HELD THAT:- No material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on its record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, we hereby set aside the finding of the DRP and direct the AO/TPO to delete the enhancement of income on account of TP adjustment in the transaction of import of Raw material and components. Hence the ground of appeal of the assessee is hereby allowed. Enhancing the income in relation to receipt of data management and other related service fees paid by the Appellant to its AEs by rejecting the TP documentation maintained by the Appellant and arbitrarily determining arm s length price as Nil by applying Comparable Uncontrolled Price Method( CUP ) Method - HELD THAT:- Before us, Revenue has not placed any material on its record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in the own case of assessee [ 2022 (12) TMI 542 - ITAT AHMEDABAD] we hereby set aside the finding of the DRP and direct the AO/TPO to delete the enhancement of income on account TP adjustment in the transaction as discussed above i.e. Data Management Fees. Hence, the ground of appeal of the assessee is hereby allowed. Purchase of fixed assets and payment of Trademark Fee by aggregating the same with the transaction of purchase of Raw Materials and components - Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby set aside the finding of the learned DRP and direct the AO/TPO to delete the enhancement of income on account TP adjustment in the transaction of import of Raw material and components. Hence the ground of appeal of the assessee is hereby allowed. Enhancing the income pertaining to reimbursement of expenses received from the AEs by recharacterizing reimbursement of expenses received as provision of support services thereby imputing a markup of 5% on the cost of the reimbursements without providing any detailed/cogent reason for the same - As no material has been placed on record by the learned AR for the assessee that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, AR has not placed any material on record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, we confirm the finding of the learned DRP. Hence the ground of appeal of the assessee is hereby dismissed.
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2023 (10) TMI 299
Income accrued in India - Fee for Technical Services [FTS] - 'make available clause satisfied or not? - AO treated the management fee received by the assessee under administrative support agreement as fee for technical services read with article 12(4) of Indo Singapore DTAA - whether services of the nature of Management Support, treasury Support, Legal Support, Information Communication and Human Resources are not of the nature of FTS as 'make available clause is not satisfied in case of these services? - as submitted employee of the assessee visited India in connection with rendering of these services and the recipient was enabled to derive benefit of enduring nature from receipt of these services thus satisfying the 'make available clause. Assessee is a company incorporated under the laws of Singapore and is engaged in the business of providing transportation, logistics and supply chain solutions. The principle activities of the assessee are in the nature of management and support activities to its subsidiaries and related corporation in the Asia Pacific region - HELD THAT:- Since in the instant case, the training was for intimating the employees employed by India affiliate regarding the standard steps to be followed in executing an order / trade / business. This improves customer satisfaction and helps in reducing overall cost for the Indian affiliate / organization. 25. We observe that training per se, would not result in make available of technology, experience, skill processes, etc., unless the training involves the transfer of technology, processes, skills, etc., to the recipient in a manner which enables the recipient to apply the technology and to derive benefit therefrom without recourse to the tutor, it would not fall within the expression technical services as defined in the Treaty. Such trainings do not make available' technical knowledge, experience, skill, know-how or processes. There was no transfer of technology. It merely facilitated the employees of the appellant to work in accordance with the expected standards. Thus, the training did not make available any technical knowledge, experience, skill, know-how or processes. In the case of Exxon Mobil Company India Pvt. Ltd. [ 2018 (3) TMI 938 - ITAT MUMBAI] considered the payment made by assessee to Singapore based Company for providing legal support services including management consulting functional advise, administrative, technical, professional and other support services and held that since foreign company had not made available any technical knowledge, expertise, skill, knowhow or process which enabled assessee to apply technology contained therein on its own payment made by assessee could not be considered as fees for technical services as defined under article 12(4)(b) of Indo Singapore DTAA while holding so the Tribunal considering the decision of De Bears India Mineral Pvt. Ltd [ 2012 (5) TMI 191 - KARNATAKA HIGH COURT] Thus we hold that the marketing and sales services, operations and standardization services do not satisfy the make available clause as per article 12(4)(b) of Indo Singapore DTAA and, therefore, the amounts are attributable for these services cannot be held to be fees for technical services. Decided in favour of assessee.
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2023 (10) TMI 298
Addition u/s 68 - Bogus share capital receipt by the appellant from two companies - addition on the basis of the statement made by the common Director - HELD THAT:- Upon perusal of the order impugned, we do not find any allegation of accommodation entry has been labelled against the assessee. Neither any involvement of any entry operator, on movement of cash or assessee s money is being involved has been alleged by the authorities below while making addition by the Ld. AO or confirming such addition by the Ld. CIT(A). Neither any cogent documents is forthcoming from the Revenue in order to establish the observation of having the device to reduce its tax liability. The other judgments relied upon by the assessee were duly considered by us where it has been repeatedly decided that the amount of forfeited share application money transferred to warrant forfeiture account is a capital receipt only and cannot be taxed as income of the assessee either under Section 28(iv) or Section 41(1). Since, the assessee had not credited forfeited amount in its P L account on the contrary credited the same in the capital reserve account, the same is to be treated as capital receipt and not to be taxed. In this particular case, after several reminders for payment of final call money, Mewad Tradelink Pvt. Ltd. and Jai Jeen Mata Marketing Pvt. Ltd. since not paid the final call money and the assessee company decided to forfeit the shares of Mewad Tradelink Pvt. Ltd. and Jai Jeen Mata Marketing Pvt. Ltd. which was decided by the Group of Members of assessee company mutually as the group of those investor group was not able to honour their commitment for funds. We further find from the observation made by the Ld. AO that the transaction entered into by the assessee company with those parties appears to be legally permissible but when seen in its entirety it becomes clear that the said transaction is merely a device to reduce its tax liability. Such observation, however, not found to be established by corroborative cogent evidence on the part of the Revenue. Source of documents as relied and furnished by the assessee before the authorities below are sufficient enough to come to a conclusion that the assessee has been able to prove the identity, creditworthiness and genuineness of the cash creditors. The three ingredients since being fulfilled, the addition under Section 68 of the Act is not found to be sustainable. Hence, with the above observation, we delete the addition made by the authorities below. Disallowance of interest on late payment of TDS u/s 37 - AO disallowed the same as expenses of TDS is not allowable in the Income Tax - The case of the assessee is as interest is not in the nature of penalty. Though penalty paid is not allowable under Section 37(1) of the Act, but interest paid for late payment prescribed under statute; on the other hand, the penalty is violation of any provision but paid the amount late but with interest, the same is allowable - HELD THAT:- As decided in Oriental Insurance Co. Ltd [ 2008 (10) TMI 230 - KARNATAKA HIGH COURT] herein it has been held that Section 201(1A) is a provision to levy interest for delayed remittance of the TDS. It is the practice of the revenue that for belated payment of tax for any reasonable cause, the assessee is liable to pay interest at the rate of 12 per cent per annum. Similarly, for refunds, the revenue pays interest to the assessee. Therefore, the levy of interest under section 201(1A) cannot, at any cost, be construed as penalty. We find that as the case of late payment of TDS is not in the nature of penalty, the same is allowable under Section 37 of the Act. In that view of the matter, the above disallowance made by the authorities below to the impugned amount of Rs. 2,19,170/- is hereby quashed. The addition is, therefore, deleted. Assessee appeal allowed.
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2023 (10) TMI 297
Disallowing the interest expenditure u/s 36(1)(iii) on account of interest not having been received - As per CIT interest income declared by the assessee in computation of income under the head income from other sources and declared that the assessee is not into money lending business - where the assessee was following mercantile system of accounting, why it has not accounted for such interest accrual in his profit/loss account and offered the same to tax for the financial year 2011-12 relevant to impugned assessment year 2012-13? - HED THAT:- As noted that the loan was advanced in financial 2010-11 and the year under consideration is financial year 2011-12, therefore, the case of the assessee is that in the second year itself, the loan has become bad, there is nothing on record to substantiate said claim and the explanation so offered by the assessee. The explanation in absence of any corroborative evidence/documentation which can provide beyond reasonable doubt that during the financial year 2011-12, the debt has become bad will remain mere an unsubstantiated claim or an assertion on part of the assessee. Infact, if we look at the confirmation so filed by M/s City Beautiful Engineering Company Pvt limited, it states that It is hereby confirmed that an amount was due to Mr Sukhwant Singh Ahluwalia resident of 205, Sector 36-A, Chandigarh as on 31 March 2012. The said amount was received on 31 December 2010 vide cheque no. 401687. This was an interest bearing borrowing, however, no interest has been paid/credited on the said dues The said confirmation infact shows not just the existence of the loan transaction entered into by the borrower company with the assessee but also an affirmation by the borrower company that the amount of loan is payable by them to the assessee as on the close of the financial year 2011-12. It nowhere reflects or makes any statement which in any way reflect that the loan transaction has become bad as on 31/03/2012. The fact that the interest has not been paid as so stated therein doesn t lead to any conclusion that the loan transaction itself has become bad. Therefore, in absence of any other document on record, this confirmation by M/s City Beautiful Engineering Company Pvt limited supports the case of the Revenue more than the assessee. Where the assessee was admittedly following mercantile system of accounting and is in the money lending business, he was required to account for such interest accrual in his profit/loss account and offered the same to tax for the financial year 2011-12 relevant to impugned assessment year 2012- 13. In terms of rate of interest, there is nothing on record in terms of agreed upon rate of interest between the parties, therefore, being a case of unsecured loan, the matter is set-aside to the file of the AO for the limited purposes of determining the appropriate rate of interest on the unsecured loan as prevailing in the relevant point in time and bringing the same to tax. The assessee is at liberty to provide relevant information/documentation to assist the AO in determining the appropriate rate of interest. Ground of appeal is disposed off in light of aforesaid directions. Correct head of income - Capital Gains or income from other sources - Nature of compensation received - HELD THAT:- As per the contents of the compromise agreement, in view of the fact that the seller is unable to get the sale deed of said land executed in favour of the assessee, both the parties have decided to settle their dispute without recourse to litigation and for that purposes, have decided to abandon their respective claims under the agreement to sell and in particular, the assessee shall forgo his right to get the land registered in his name and for the purposes, shall be entitled to a payment and consequently, the original agreement to sell dated 11/07/2005 shall become null and void and none of the parties will be entitled to any further claim thereunder. Therefore agree that the amount so received by the assessee is towards relinquishment of his rights to get the property registered in his name acquired originally in terms of the agreement to sell and the same will qualify as property of any kind and thus, a capital asset. Where such an asset is transferred by way of relinquishment, the compensation for such relinquishment so received is chargeable to tax under the head Capital gains and the amount initially paid shall be treated as cost of acquisition for acquiring such rights. The decisions of Vijay Flexible Containers [ 1989 (9) TMI 16 - BOMBAY HIGH COURT] and K.R. Srinath [ 2001 (8) TMI 299 - ITAT MADRAS-C] support the case of the assessee. Therefore, the income has been rightly offered to tax under the head Capital gains and the same cannot be brought to tax under the head Income from other sources . Thus, the ground of appeal is allowed.
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2023 (10) TMI 296
Exemption under Tonnage Tax Scheme - assessee company is engaged in the business of operation of ships for exploitation of mineral oil for ONGC and also for providing infrastructure facilities at New Mangalore Port - MAT computation - HELD THAT:- ITAT, in assessee s own case [ 2022 (11) TMI 1404 - ITAT DELHI] respectively had decided the very same issue in favour of the assessee. Respectfully following the same, the grounds No.2(1) raised by the Revenue is dismissed. Applicability of Tonnage Tax while computing the book profit u/s 115JB - We find that the provisions of section 115VO specifically provides that the book profit or loss derived from the activities of the Tonnage Tax Company referred to in section 115VI(1) shall be excluded from the book profit of the company for the purpose of section 115JB of the Act. Hence, ground No.2(2) raised by the Revenue is dismissed. Disallowance of interest - interest free advances made to subsidiary company is not for business purpose - HELD THAT:- We find that this issue is no longer res integra in view of the decision of this Tribunal in assessee s own case [ 2022 (11) TMI 1404 - ITAT DELHI] As held it was for the AO to establish such nexus between the borrowings and advances to prove that the expenditure was for non-business purposes, which the AO failed to do. In the present case also, it is found that the appellant has sufficient funds of its own which he could have advanced and therefore the interest liability on the borrowings made could not be disallowed, particularly when the AO failed to prove that the expenditure was for non-business purposes - Decided against revenue. Disallowance of employees contribution to PF and ESI - sum as remitted beyond the due date prescribed under the respective Acts, but, were remitted before the due date of filing of return of income u/s 139(1) of the Act - HELD THAT:- This issue is no longer res integra in view of the decision of the Hon ble Supreme court in the case of Checkmate Services Pvt. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] as decided against assessee. Since the assessee is paying presumptive tax on its income under Tonnage Tax Scheme, there is no need to make any separate disallowance towards employee s contribution to PF/ESI - HELD THAT:- We find that business income for qualifying ships under Tonnage Tax Scheme is calculated based on the Tonnage capacity of the ship and number of days the ship was on voyage. This income is computed on presumptive basis irrespective of actual profit or loss derived by the assessee from the operation of its qualifying ships. Hence, any disallowance made on account of employee s contribution to PF/ESI would have no relevance to the assessee herein as, ultimately, its business income is only determined based on tonnage capacity on presumptive basis and not on actual income basis. Hence, the contention raised by the assessee, vide revised ground No.2(a) is justified and is hereby allowed. Cash deposits made during demonetization period in specified bank notes - HELD THAT:- As the assessee has been consistently holding huge cash balance which meets the entire cash deposits made during the whole year including the cash deposits made during the demonetization period in specified bank notes. Hence, there is absolutely no case for the Revenue to make an addition for cash deposits made during the demonetization period as the entire cash deposits are totally explained by proper sources by the assessee. Accordingly, the ground raised by the assessee is allowed. Disallowance u/s 40(a)(ia) - payment made to non-resident M/s All Farida Worldwide Fze which is a resident of UAE - HELD THAT:- The basic purpose of the assessee making payment to the non-resident payee itself is to be examined. Hence, in these circumstances, in our considered opinion, the reliance placed on the decision of this Tribunal would not come to the rescue of the assessee for the year under consideration. Hence, in the interest of justice and fair play, we deem it fit and proper to restore this issue to the file of ld. AO for denovo adjudication in accordance with law. Accordingly, ground No.4 raised by the assessee is allowed for statistical purposes. Disallowance on account of amounts written off - HELD THAT:- It is not in dispute that the assessee renders service only to ONGC and earns business income from ONGC. Obviously, the assessee had to raise the bills on ONGC. As and when the bills are raised on ONGC, the assessee has offered income on accrual basis. Subsequently, as and when the bills are deducted on account of certain disputes by ONGC, the same remains outstanding as sundry debtor in the books of the assessee company. Since the said sums are not recoverable from ONGC, the assessee chose to write off the same in its books during he year under consideration. However, we find that the ld. AO, without appreciating these facts, had proceeded to treat the entire written off amount as not an allowable deduction. Similarly, for the remaining sum no findings has been recorded by the lower authorities. Hence, in the interest of justice and fair play, we deem it fit and appropriate to restore this issue to the file of the ld.AO for denovo adjudication in accordance with law, after considering the detailed break-up of the amounts written off submitted by the assessee which are enclosed in the paper book. The assessee is also at liberty to furnish fresh evidences, if any, in support of its contentions. With these directions, raised by the assessee is allowed for statistical purposes.
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2023 (10) TMI 295
Admission of additional evidences by CIT - Deemed dividend u/s 2(22)(e) - Genuineness of expenditure - CIT(A) deleted the additions - HELD THAT:- Assessee carried the matter before ld. CIT(A) and availed opportunity to file additional evidence under rule 46A of the Rules by stating that the assessee was not provided due opportunity to produce documentary evidences by the AO. Although the AO in the remand report objected to the admission of additional evidence but did not comment on the merits of the additional evidences and cause shown by the assessee which prevented the assessee from filing relevant documentary evidences before the AO. Therefore,CIT(A) has not flouted the provision of rule 46A of the Rules, rather he has properly followed the said rule before admitting and considering the additional evidence. Deemed dividend u/s 2(22)(e) - Whether trade deposit being a business/commercial transaction carried out of commercial expediency did not amount to a loan or advance to fall within the rigor of section 2(22)(e)? - HELD THAT:- In the present case the assessee was not a registered shareholder or beneficial shareholder in the lender company and despite specific reply by the assessee the AO has wrongly considered the share holding of M/s Amrit Polyplast P. Ltd. in the shares of M/s RBRL Agro Commodities Ltd. as the beneficial share holding of Shri Jai Prakash Singhal on propionate basis and the addition made by the Assessing Officer cannot be held as validly sustainable only on this count. In the case of DCIT vs. Amit Intertrade P. Ltd [ 2022 (2) TMI 1397 - ITAT AHMEDABAD] as relied by the ld. AR, it was held that the deemed dividend under section 2(22)(e) can only be assessed in hands of person who is a shareholder of lender company and not in hands of a person other than shareholder. In the present case undisputedly the assessee LLP is not a registered shareholder in the RBRL Agro Commodities Ltd. therefore provision of section 2(22)(e) cannot be applied to the loan or advance taken by it from other company. In view of foregoing observations we are unable to see any ambiguity perversity or any valid reason to interfere with the findings recorded by the ld. CIT(A) and thus, we uphold the same. Addition on account of brokerage and commission paid to various brokers - AO issued summons u/s 131 of the Act to the parties but none appeared and the figures appearing in the bills were not proportionate to the rates and the party name was not mentioned in the brokerage/ commission bills - HELD THAT:- assessee provided complete details of brokers, there addresses, PAN, TDS, Bills, confirmations and copies of ITR s etc. whereas the AO has disbelieved the impugned brokerage expenses on the basis of presumption and the successor AO in the remand report also adversely commented without rejecting or raising any doubt over the additional documentary evidence and explanation of the assessee. CIT(A) went into detail to evaluate the identity of commission recipient and genuineness of expenditure of all recipient entities and thereafter, drawn party wise conclusion and directed the AO to delete the entire addition made by the Assessing Officer on account of brokerage of commission paid to the various brokers. The conclusion drawn by the ld. CIT(A) is based on proper appreciation of facts. Appeal of the revenue is dismissed.
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Customs
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2023 (10) TMI 294
Levy of penalty u/s 112(a) of Customs Act, 1962 - contention of appellant is that earlier similar goods were allowed for clearance has not been contested by Revenue - re-export of goods - HELD THAT:- It is seen from the findings and order in the precedent decision of this Tribunal in the case of Siemens Public Communication Networks Ltd. [ 2001 (1) TMI 686 - CEGAT, KOLKATA ] when the goods are allowed to be re-exported, neither redemption fine nor duty was required to be paid. At the same time, penalty is also not to be imposed on the importers. The penalties imposed in these six appeals are not justified. All the penalties imposed under Section 112(a) of Customs Act, 1962 set aside - appeal allowed.
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Insolvency & Bankruptcy
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2023 (10) TMI 293
Liquidation proceedings - waterfall mechanism - rejection of claim of appellant - appellant is Financial Creditor or not - claim reflected in the Balance Sheet. It is submitted that even though the claim of the Appellant was rejected in the liquidation proceeding but since it was reflected in the balance sheet, Appellant is a Financial Creditor. HELD THAT:- The claims of all creditors are to be considered in the liquidation proceedings and examined by the Liquidator and in event of any dispute, matter is required to be adjudicated by the Adjudicating Authority. There is no dispute to the fact that the claim was filed by the Appellant as Financial Creditor which stood rejected by the Liquidator as well as the Adjudicating Authority. The rejection of the claim of the Appellant clearly lead to the conclusion that the claim cannot be accepted in the liquidation proceedings nor Appellant is entitled for any claim in the water fall mechanism. Present is a case where a scheme was submitted in the liquidation proceeding in which scheme also the payment to the Appellant has been shown as a nil and the scheme was approved by SIDBI who according to the Liquidator was a 100% Financial Creditor. When the Appellant s claim was rejected, he cannot claim that he is a Financial Creditor whose consent was required for approval of the scheme - It is after the reflection in the balance sheet that in the liquidation proceeding, the claim was filed by the Appellant and adjudicated rejecting the claim of the Appellant. The proceeding which undertook in the liquidation proceedings cannot be ignored nor can be washed out only on the ground that in the balance sheet of the Corporate Debtor the name of the Appellant was reflected. Proceeding in the adjudication which culminated in the rejection of the claim has to be given effect to in the liquidation proceeding. The scheme was also a part of the liquidation proceeding, hence no error has been committed by the Adjudicating Authority rejecting the application of the Appellant - Appeal dismissed.
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FEMA
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2023 (10) TMI 292
Stay of demand / waiver of pre-deposit - Levy of penalty - Contravention of Section 18(2) of FERA - failure to realize export proceeds to the tune of US $ 2,03,925/- - Penalties Levied - Tribunal has waived 60% of the total penalty calling upon the appellant to deposit only 40% thereof, for which a period of 30 days was granted - plea for full waiver of mandatory, statutory pre-deposit and non-compliance with an interim order of the Tribunal - HELD THAT:- Tribunal has, in waiving 60% of the penalty, and directing deposit of only 40%, taken note of all contentions of the Appellant, including the hardship projected. In fine, a balance has been struck and the Appellant directed to remit only 40% of the penalty, bearing in mind the interest of the State as well. Taking a cue from the order in the case of Monotosh Saha [ 2008 (8) TMI 9 - SUPREME COURT] we made a similar offer to the appellant to remit at least a portion of the amount in order that we may consider directing the Tribunal to hear the appeal. Learned counsel, upon instructions, is categoric that no amount of the penalty can be remitted, as the appellant has absolutely no available resources. In Nimesh Suchde Prop.Siddharth Polymers, the Delhi High Court [ 2009 (7) TMI 1328 - DELHI HIGH COURT ] on the facts of that case, and taking note of judgment in Monothosh Saha felt, prima facie, that the appellant had satisfied the condition of undue hardship. The question that arose related to the valuation of a consignment for the purpose of levy of import duty.The appellant had sought waiver of pre deposit and that request had been dismissed directing deposit within 30 days, premised upon the finding that the goods imported, were higher in value than disclosed. A Single Judge of the Delhi High Court confirmed the order of the Tribunal as against which, an appeal had been filed. The Division Bench considered the plea of waiver in light of Sections 8(3) and 8(4) of the FERA, that imposed restrictions on dealing with foreign exchange. The Adjudicating Officer while invoking Sections 8(3) and 8(4) of the FERA was expected to examine the matter independently and arrive at a conclusion in the matter. In that case, the Officer had merely relied on the order passed by the Customs Authority which, in turn, had been based on the premise that the import was without a valid import license. The Bench noted that no independent finding had been rendered by the Authority in regard to the finding of undervaluation rendered by the Customs Officer which was a pre-requisite while invoking Sections 8(3) and 8(4) of the FERA. Mere reference to an order passed by the Customs Authority would not suffice. It was on the above facts that the Bench concluded that the dismissal of request of dispensation of pre deposit had not been decided in proper light by the Tribunal. The facts of this case are not analogous to the case of Siddharth Polymers and hence do not advance the case of the Appellant. We do not find any extenuating circumstances warranting interference in the discretionary order passed by the Tribunal. In fact, the Tribunal has itself waived 60% of the penalty based on the plea of financial stringency put forth by the petitioner. We find very little justification to interfere in the discretion exercised by the Tribunal as it not shown to be perverse in any way. The order of the Tribunal is confirmed and this Civil Miscellaneous Appeal is dismissed. Since the appeal is stated to be listed on 05.10.2023, the appellant is permitted to remit the amount by then, to condition of which the Tribunal will proceed with the appeal.
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Service Tax
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2023 (10) TMI 291
Extended period of limitation - Petitioner s liability for payment of the service tax on works contracts executed during the period of 2014-15 to 2017-18 - It is the petitioner s case that in terms of Section 129 of the Finance (No. 2) Act, 2019, no proceedings can be initiated in respect of service tax for the period 2014-15 to 2017-18 and no further demands can be raised - HELD THAT:- The contention that the subject matter of the impugned show cause notice and the show cause notice dated 23.04.2019 is different, is also unpersuasive. There is no dispute that the subject matter of both the show cause notices is the petitioner s service tax liability during the period 2014-15 to 2017-18. The Revenue Authorities had commenced an investigation to ascertain the petitioner s correct tax liability for the said period by invoking the extended period of limitation as provided under Section 73 of the Finance Act. The show cause notice dated 23.04.2019 indicates that the investigation covered the extent of services rendered by the petitioner. Summons were also issued by the Revenue Authorities to various entities for whom the petitioner had executed the construction works. The Revenue Authorities had also collected bills and invoices from the said entities. Merely because one of the entities had not furnished the bills which would have enabled the Revenue Authorities to verify the petitioner s liability does not in any manner render the subject matter of the show cause notice dated 23.04.2019 any different from subject matter of the impugned show cause notice. There are merit in the petitioner s contention that the impugned show cause notice is not sustainable and is liable to be set aside. The Discharge Certificate issued to the petitioner is conclusive of the subject matter of the impugned show cause notice - impugned show cause notice is liable to be set aside. Clearly, the assumption that the petitioner is liable to pay tax on FOC material supplied by M/s Charms India Pvt Ltd. is ex facie erroneous. The said issue is covered by the decision of the Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT ]. The Supreme Court in the said judgment held that on first principle, the value of free supply items, which are not a part of the contract between the service provider and the service recipient has no relevance in determination of the value of taxable services. The Revenue has proceeded on an ex-facie erroneous premise that NOIDA is not a body corporate on the basis that NOIDA had explained that it was neither a company registered under the Companies Act, 1996 nor a business entity registered as a body corporate. NOIDA does not require to be registered under any Act as a body corporate, as it has been constituted by the Uttar Pradesh Industrial Area Development Act, 1976 as a body corporate. Thus, clearly the Revenue has misunderstood the response received from NOIDA as is reflected in the impugned show cause notice. The petition is allowed and the impugned show cause notice is set aside.
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2023 (10) TMI 290
Levy of service tax - liquidated damages received from their clients - HELD THAT:- This Bench in the case of Brahmaputra Crackers and Polymer Ltd. [ 2022 (5) TMI 255 - CESTAT KOLKATA] has gone through the issue in considerable details and has held that it is not possible to sustain the view taken by the Commissioner that since the delivery was not made within the time schedule, the Appellant agreed to tolerate the same for a consideration in the form of delay in delivery charges, which would be subjected to service tax under section 66E(e) of the Finance Act. As the issue in the present Appeal is identical, the impugned OIO set aside - appeal allowed.
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Central Excise
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2023 (10) TMI 289
Clandestine removal of manufactured goods - Penalty - corroborative evidences - evidence of excess procurement of raw material, additional consumption of power and manpower needs to be adduced - Department has not established the production capacity of the appellant to support their allegation - HELD THAT:- The entire case started with the information received by the Central Excise authorities from the Income Tax Department regarding the unaccounted sales, purchase and production of goods in form of soft copies of the data of Tally and Visual Udyog Software, the scan copies of the lose papers and diaries seized by the income tax department and photocopies of the Panchnama and the statements recorded by the Income Tax authorities of persons namely Shri Shankarbhai Mehta, M.D., Shri Vikram Mehta Supervisor, Shri Sachin Shah working in dispatch sections of the accounts department preparing the sales invoices and Shri Pravinchandra Shah. Further statements were recorded by the Central Excise authorities and on conclusion of the statements, a show-cause notice was issued to Appellant. Department has not brought out any independent facts or evidence such as who is the buyers of clandestine removed goods, whether the transactions shown in the Tally Data and Visual Udyog Software data pertaining to actual removal of goods or otherwise and no corroborative evidence produced in support of details mentioned in the said data. In the present matter clandestine removal of a huge quantity of 92,352.04 MT. valued at Rs. 5,10,02,81,112/- in respect of clandestine manufacture and removal of goods involved. However not a single rupee of unaccounted cash was found during the search conducted by the Income-tax. Sub-section (4) of Section 36B requires issue of a certificate in this behalf by a person occupying the responsible official position in relation to the operation of the relevant device or the management of the relevant activity (whichever is appropriate) shall be evidence in any matter stated in the certificate and for the purpose of the sub-section, which shall be sufficient for a matter to be stated to the best of the knowledge and the belief of the persons stating it - In the present case, firstly the Central Excise department has not taken the data from the computer, moreover revenue has not stated that how the income tax officers took the print out of data stored in the computer and hard disc. It is on records that the officers had not obtained any certificate as required under Section 36B of the said Act. It is also noted that none of the conditions under Section 36B(2) of the Act, 1944 was observed. In the case of PREMIER INSTRUMENTS CONTROLS LTD. VERSUS COMMR. OF C. EX., COIMBATORE [ 2004 (12) TMI 200 - CESTAT, CHENNAI ], the Tribunal has held that the printout of the personal computer of the company s officer, had not fulfilled the statutory condition laid down under Section 36B(2) of the Act and the demand is not sustainable. In the present matter undisputedly the above prescribed certain guidelines were not followed by the Revenue during the investigation of impugned matter before accepting electronic documents as an admissible piece of evidence - Upon perusal of the judgment of the Hon ble Supreme Court in the case of Anvar P.V. [ 2014 (9) TMI 1007 - SUPREME COURT] , it is noted that the Apex Court has categorically laid down the law that unless the requirement of Section 65B of the Evidence Act is satisfied, such evidence cannot be admitted in any proceeding. Section 36B of the Central Excise Act is pari materia to Section 65B of the Evidence Act. Consequently, the evidence in the form of computer printouts, etc., recovered during the course of investigation can be admitted as in the present proceedings only subject to the satisfaction of the condition of Section 36B - In the present case, the main evidence on which, Revenue has sought to establish the case of clandestine manufacture and removal of goods is in the form of the computer printouts taken out from the Computer and other electronic devices seized by the Income tax authorities and shared to the revenue in respect of which the requirement of Section 36B has not been satisfied. It is observed that the allegation of suppression of production and clandestine removal is a serious allegation and it has to be established by the investigation by affirmative and cogent evidence. CESTAT in the case of SOBER PLASTICS PVT. LTD. VERSUS COMMISSIONER OF C. EX., JAIPUR [ 2001 (10) TMI 420 - CEGAT, NEW DELHI ] has held that demand based on weighment slips, slips recovered from Dharamkanta etc. relied upon for raising demand not verified with reference to transactions is not sustainable. Further, it is settled position of law that proof and evidence of purchase of raw materials and sell of final product clandestinely is necessary in to establish the allegation of suppression of production and clandestine removal of goods and that the allegation are to be proved with affirmative evidences. Since the investigation has failed to adduce evidences to establish suppression of production and clandestine removal of the goods and failed to discharge the onus to prove the allegations, the allegations are not sustainable - the allegation of clandestine removal of 92,352.04 MTs of finished goods is not established. Hence, the impugned demand of central excise duty is liable to be dropped for lack of evidences. The charges of clandestine removal against M/s. Rajputana Stainless Ltd. are not sustainable - the impugned order is not sustainable - Appeal allowed.
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2023 (10) TMI 288
CENVAT Credit - inputs - Option to avail benefit of exemption and Cenvat Credit - Scope of Section 5A - N/N. 04/2006-CE under Sr. No. 91 which prescribes the concessional rate of duty of 4% with condition No. 11 - HELD THAT:- The exemption notification entries it is clear that both exemption entries carry conditions for allowing either nil rate of duty or 4 % of duty therefore there is no doubt that both the exemption entries are conditional. The contention of the Revenue is based on Section 5A (1A) which prescribes that in case of absolute exemption the asseessee has no option except to avail such exemption. In the present case, both the exemption entries are subject to certain conditions therefore both the entries have absolute exemption. In this position it is an option to the appellant to choose any one of the exemption entries. Therefore, in the present case the appellant has chosen to avail the exemption under Sr No. 91 is absolutely legal and correct. There is no doubt that the appellant has availed the exemption under Sr. No 91 correctly and legally - they are entitled for the cenvat credit under Cenvat Credit Rules, 2004. Appeal is allowed.
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2023 (10) TMI 287
CENVAT Credit - input services used for setting up of plant and factory after 01.04.2011 - denial on the ground that input service used for setting up of plant/factory is not entitled in terms of Rule 2(l) of the Cenvat Credit Rules, 2004. HELD THAT:- The said issue has been dealt by this Tribunal in the case of Aditya Aluminium [ 2023 (9) TMI 55 - CESTAT KOLKATA] , wherein this Tribunal has observed that the subject input services have a direct nexus with the manufacture of finished goods in the means clause of the definition of input services. Accordingly we hold that even if the word setting up of a factory has been specifically excluded from the definition w.e.f.01.04.2011, such services are covered within the ambit of main clause of the definition. Hence, it would still qualify as an input service as per Rule 1(I) of CCR, 2004. As the issue has already been decided and no more res integra, therefore, the input service namely erection, commissioning and installation for setting up of new plant have a direct nexus with the manufacturing activity of the appellant, therefore, the said service duly qualifies as input service in terms of Rule 2(l) of Cenvat Credit Rules, 2004, therefore, the appellant is entitled to take cenvat credit on the services in question for setting up of plant even after amendment w.e.f. 01.04.2011. There are no merit in the impugned order, the same is set aside - appeal allowed.
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