Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 22, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Articles
News
Notifications
Highlights / Catch Notes
GST
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Exemption from GST - education services to student's through its own online platform - Even though the activity; training and coaching undertaken by the applicant can be claimed to be education services in layman's understanding, those activities do not qualify to be classified under any of the Groups - Not eligible for exemption from GST - AAR
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Classification of services - rate of GST - works contract service provided to Malabar Cancer Centre - are eligible for the concessional rate of tax of 12% - AAR
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The services rendered by the applicant as per the concession agreement are classifiable as works contract services falling under SAC 995421 and the annuity received by the applicant including the bonus for early completion of construction is the consideration for the works contract services rendered and the applicant is liable to pay GST at the rate of 12% on the annuity including bonus - AAR
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Classification and applicable rate of GST - if the Outboard motors are supplied for use as part of a fishing vessel falling under Customs Tariff Heading 8902, then OBM as part of the fishing vessel will only attract GST at the rate of 5%. - AAR
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Scope of Advance Ruling application - the applicant has preferred this application on behalf of the members of the applicant and hence the application is not in respect of any matter specified in Section 97 (2) of the CGST Act in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Hence this authority has no jurisdiction to issue ruling on the above question. - AAR
Income Tax
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Exemption u/s 11 / 10(23C)(vi) - Charitable activity u/s 2(15) - trust seeking approval as existed ‘solely’ for educational purposes - It is held that the requirement of the charitable institution, society or trust etc., to ‘solely’ engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education. In other words, all objects of the society, trust etc., must relate to imparting education or be in relation to educational activities. - SC
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Agricultural income - In the computation of business income under Rule 7A of the Rule 1962, the assessee under Rule 7A(2) is entitled to an allowance in respect of the cost of replacement of dead and useless rubber trees in the rubber plantation in an area not abandoned, subject to Section 10(31) of Act 1961. The upkeep and maintenance expenses incurred by the assessee till the maturity of rubber trees are revenue expenditures eligible for deduction under Section 37 of Act 1961 - HC
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Short deduction of taxes - Credit to the assessee for TDS deducted denied - the assessee has deducted and deposited TDS within time, but due to a technical error in CPC site, the assessee has not been granted credit of TDS, for no default on behalf of the assessee. It is a fit case where the assessee should be granted necessary credit of TDS paid by AO and he may accordingly internally coordinate with CPC so that the assessee does not have to undergo any further difficulty / inconvenience for no default on his part. - AT
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Undisclosed income of the assessee - benami investment - benami transactions - It was for the AO to produce or investigate and find out some financial connection between the said Kolkata based corporate entities and the assessee herein. It must also be mentioned here that in the assessment order also though the AO refers to an investigation report by the Kolkata based Investigation Wing of the department, what is conspicuous by its absence is the connection between the said corporate entities, which are Kolkata based and the assessee. - CIT(A) rightly deleted the addition - AT
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Long term capital gain - adopting the circle rate of sale consideration - the benefit of the first proviso to Section 50C(1) of the Act has to be extended to the assessee and the rate prevailing as on the date of agreement should be considered for the purpose of computing the full value of consideration of such transfer. - AT
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Deduction of compensation cost of ESOP on account of Employee Stock Option Scheme (ESOP) - , an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act - AT
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Assessment of trust/AOP - trust to be assessed in the status of AOP - religious trusts / deity - Levying tax at the maximum marginal rate instead of rates applicable to individuals - there is no dispute with regard to the income of the assessee in the present case is used for deity i.e. assessee. Therefore, the income should be taxed at the rate applicable to the individual. - AT
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Penalty u/s 271FA - delay in filing of Form SFT as per Section 285 BFA - Since it was a statutory obligation on the part of the assessee bank to furnish AIR as a specified instruction u/s 285BA, therefore, any argument of the assessee with regard to ignorance of law or adopting casual and cavalier attitude is of no help to the assessee. - AT
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Revision u/s 263 by CIT - wrong claim of deduction u/s. 80JJA - the AO has not brought out anything explicitly and not recorded any finding with regard to the deduction claimed u/s.80JJAA and also there is nothing mentioned in the order that he has verified the eligibility and the correctness of the claim of deduction u/s. 80JJA. - Revision order sustained - AT
Customs
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Re-assessment of Bill of Entry - An importer has a right to make amendments in the Bills of Entry covering imported goods assessed and cleared for home consumption or deposit in a warehouse, if he satisfies the condition prescribed in the said Section that such amendments are sought on the basis of documentary evidence which was in existence at the time the goods had been cleared/deposited.- AT
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Rejection of entitlement for interest on delayed sanction of refund claim - benefit of section 27A of Customs Act, 1962 - It is on record that there has been delay beyond the stipulated period of three months - the first appellate authority (Commissioner appeals) rightly allowed the claim - AT
PMLA
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Attachment of property - eviction notice provides only ten days time to the petitioner to vacate the subject property - Even if there is a defect or omission in the Statute the Court cannot correct the defect or supply the omission. It is only in certain set of circumstances when the language of the Statute is not clear, ambiguous and throws up absurd results, the resort can be had to the principles of statutory interpretation to construe such statute. The domains of “reading into” and “reading down” the Statute may come into play. - HC
Service Tax
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Nature of transaction - service or deemed sale - the company (in liquidation) had given the containers to the lessee on rental basis and possession and control was always with the lessee - appropriate VAT at the rate of 12.5% was paid by the company - it is a deemed sale within the meaning of Article 336(29A)(d) of the Constitution of India and outside the purview of Finance Act, 1994. (service tax) - HC
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Benefit of Exemption - The mere fact that the AVETCS contains computer system does not make it Computers, Computer Systems or Computer Peripherals. In these circumstances, it is not that the appellant is entitled to the benefit of Notification No. 20/2003-ST - AT
Central Excise
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Remission of duty - Reversal of Cenvat Credit - There is no dispute that the appellant is duty bound to reverse the cenvat credit on the inputs contained in finished goods which were destroyed in fire incident. However, on going through the Rule 3(5)(c) of Cenvat Credit Rules, it is absolutely clear that the reversal of the cenvat credit statutorily to be made only after the competent authority grant the remission of duty - AT
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Seeking abatement of appeal - CIRP - from the date of approval of the resolution plan by the NCLT, the appeal filed by the applicant has abated and CESTAT has become functus officio in the matters relating to this appeal. Further it is also settled that the impugned order’s in the appeals have got merged in the order of the NCLT approving the Resolution Plan. - AT
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Levy of equal penalty u/s 11AC - There were conflicting views as to whether credit is eligible on input services used for generation of electricity that is sold outside, the appellant cannot be burdened with the guilt of suppression of facts with intent to evade payment of duty. - No penalty- AT
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Levy of excise duty - The medicaments cleared under the cover of non-returnable challans for testing and sampling purpose cannot be considered as manufactured goods as the same is not marketable in as much as the same has not attained any level of marketability as is clear from the facts that the same was sent outside the factory premises for testing and sampling purpose. Marketability is decisive test for dutiability - AT
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Refund of CENVAT Credit - pre-GST regime - It is an admitted fact of the parties that the said CENVAT Credit balance was not carried forward to the Appellant’s account on the appointed date since it was not due on the said day also. Therefore, in view of clear provision contain under Section 142(6)(a) of the CGST Act, Claimant/Appellant is eligible to get the refund of credit by cash except where unjust enrichment is alleged or established against the Appellant. - AT
Case Laws:
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GST
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2022 (10) TMI 870
Seeking release of the applicant on bail - wrongful availment of input tax credit through fictitious documents and transactions - Section 132 (1) (l) (II) of GST Act - HELD THAT:- The principal offence alleged against the applicant is of evasion of amounting to Rupees less than 500 lacs, which carries a maximum punishment of imprisonment for three years and which offence is bailable and also keeping in view the fact that the applicant has no criminal history, the applicant is entitled to be released on bail. Let the applicant Vishnu Pratap be released on bail in under Sections 420, 424, 467, 468, 120-B IPC and Sections 122 and 132 of the U.P. and Central Goods and Service Tax Act, 2017, Police Station Kwarsi, District Aligarh on furnishing a personal bond and two sureties each in the like amount to the satisfaction of the court below, subject to the conditions imposed - application allowed.
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2022 (10) TMI 869
Maintainability of petition - availability of alternative remedy - petitioner had an opportunity to comply with the provisions of the regulations/statute and petitioner failed to avail of remedy under Section 30 of the CGST Act - revocation of cancellation of the registration - HELD THAT:- The petition is disposed off by passing the following order: (a) In case the application is filed by petitioner within 15 days from today under Section 30 of the CGST Act before the Authority, the Authority shall construe the same within limitation and take decision upon the application on merits, expeditiously. (b) Petitioner may therefore, file an application either by E-mail or hand delivery within 15 days from today under Section 30 of the CGST Act before the Authority/proper officer who shall construe the same as within time and dispose the application on merits expeditiously and in any case within four weeks of receiving the application.
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2022 (10) TMI 868
Principles of natural justice - no opportunity of hearing has been provided to the petitioner before passing the order impugned - jurisdiction of respondent no. 2 namely- Commercial Tax Officer, Kaushambi to pass the order impugned - Section 74 of the SGST Act - Availability of alternative remedy - HELD THAT:- The date fixed in the said notice though was the holiday but opportunity of hearing was granted to the petitioner on the next working day. In view of this admission, contention of learned counsel for the petitioner is that the order dated 23.6.2020 was passed without furnishing opportunity of hearing, cannot be entertained. Availability of alternative remedy - HELD THAT:- As regards, the merits of the objections taken by the petitioner, remedy before the petitioner is to file an appeal under Section 107 of the U.P. State Goods and Service Tax Act, 2017. Jurisdiction of respondent no. 2 namely, Commerical Tax Officer, Kaushambi - HELD THAT:- A Circular dated 19.11.2018 addressed to Officers of the Trades Tax Department, U.P. issued by Commercial Tax Officer, U.P. Lucknow has been appended - A perusal thereof indicates that the Commercial Tax Officer has been authorized to deal with the cases of trading units whose taxable trade turnover is in between 15 lacs to 25 lacs - It is demonstrated by the learned counsel for the respondents from page '32' to the paperbook that in GSTR-3B of December, the petitioner had disclosed his taxable turnover of Rs. 2,20,240/-. Moreover, it is not in dispute that the taxable trade turnover of the petitioner is not more then Rs. 25 lacs. The plea of lack of jurisdiction, therefore, is found devoid of merits. The writ petition is dismissed accordingly.
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2022 (10) TMI 867
Cancellation of GST registration of the petitioner - petitioner had not filed all the GST returns - HELD THAT:- It would meet the ends of justice if the matter is remanded back to respondent No.1 for taking a fresh decision in accordance with law. Matter remanded back to the file of respondent No.1 to consider the case of the petitioner against cancellation of GST registration afresh and thereafter pass appropriate order in accordance with law - petition allowed by way of remand.
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2022 (10) TMI 866
Classification of supply - supply of goods or supply of services - activity of commercial vehicles body-building on a job-work basis, on the chassis supplied by the customer - applicable rate of GST - HELD THAT:- The applicant is fabricating the body on the chassis belonging to the customer. The ownership of the chassis remains with the customer and at no stage of the process of fabrication of the body, the title in the chassis is transferred to the applicant. Therefore, the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule II of the CGST Act, 2017 as a treatment or process which is applied to another person's goods and accordingly is a supply of services. Classification of the activity and the rate of GST applicable - HELD THAT:- As per the Scheme of Classification of Services notified as Annexure to Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 the Heading [Service Accounting Code] - 9988 pertains to manufacturing services on physical inputs (goods) owned by others. The Explanatory Notes to the Scheme of Classification of Services states that the services included in the Heading 9988 -Manufacturing services on physical inputs owned by others - are services performed on physical inputs owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process - the value of the services in this Heading is based on the service fee paid, not the value of the goods manufactured. SAC - 99888 under Heading 9988 pertains to Transport equipment manufacturing services and Sub - Heading 998881 pertains to Motor vehicle and trailer manufacturing services. Therefore, the activity of the applicant is appropriately classifiable under Service Accounting Code 998881.
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2022 (10) TMI 865
Exemption from GST - education services to student's through its own online platform - transaction between applicant and individual student on a one to one basis - providing education up to Higher Secondary School - exemption under SI.No.66(a) of Notification No.12/2017 - Central Tax (Rate). HELD THAT:- The first kind of educational institution defined in clause (y) of Para 2 of Notification. No. 12/2017 CT (Rate) dated 28.06.2017 is an institution providing services by way of pre-school education and education up to higher secondary school or equivalent. Education is not defined in the CGST Act but as per Apex Court decision in SOLE TRUSTEE, LOKA SHIKSHANA TRUST VERSUS COMMISSIONER OF INCOME-TAX, MYSORE [ 1975 (8) TMI 1 - SUPREME COURT] , education is process of training and developing knowledge, skill and character of students by normal schooling. The entry exempts educational institutions from pre-school to higher secondary school or an educational institution which is equivalent to a 'school'. Admittedly, the applicant is not a formal school, but an institution providing special training / coaching to students who are enrolled in formal schools for education up to higher secondary or equivalent. Even though the activity; training and coaching undertaken by the applicant can be claimed to be education services in layman's understanding, those activities do not qualify to be classified under any of the Groups; 99921 - Pre-primary education services; 99922 - Primary education services or 99923 - Secondary education services as core educational services provided by schools up to higher secondary or equivalent - institutions providing services by way of education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force and those engaged in providing education as a part of an approved vocational education course are covered by the definition of educational institution in sub-clauses (ii) and (iii) respectively of clause (y) of Para 2 of the said notification. The training provided by the applicant neither leads to grant of any qualification recognised by any law for the time being in force nor is part of an approved vocational education course. Therefore the applicant is not covered under the scope of definition of educational institution in Para 2 (y) of Notification No. 12/2017 CT (Rate) dated 28.06.2017. Accordingly, the applicant is not eligible for the exemption as per the entry at SI. No. 66 of the said notification.
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2022 (10) TMI 864
Territorial limit - What is the geographical limit of the city of Hyderabad, Telangana as per Notification No.3 of 2019 GST Rate? - HELD THAT:- It is to inform that under Section 97 of the CGST Act, 2017 the questions on which the advance ruling is sought shall be in respect of (7) specified items only - The applicant s question does not fall under any of the 7 category. Application rejected.
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2022 (10) TMI 863
Rate of GST - Affordable Residential Apartment in a Residential Real Estate Project - whether the rate of 0.75% under Item No. (i) of Entry No. 3 of Notification No. 03/2019 Central Tax (Rate) can be availed when the project consists of both Affordable Residential Apartments as well as apartments other than Affordable Residential Apartments? HELD THAT:- A new tax structure for the real estate sector was introduced with effect from 01.04.2019 onwards by amendment of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 by Notification No. 03/2019 - Central Tax (Rate) dated 29.03.2019. Admittedly, the services of construction of apartments are being rendered by the applicant after 01.04.2019 and hence the rate as notified under the new tax structure is applicable in respect of the construction services rendered by the applicant. The project to be undertaken by the applicant falls within the definition of a real estate project and the applicant falls within the definition of promoter . Further, on a conjoint reading of the provisions of law, the facts as stated in the application and the terms and conditions in the draft agreement produced as Annexure 1 it is seen that the services of construction of apartments provided by the applicant in the residential real estate project squarely fall within the description of services specified in Item (i) and (ia) of SI. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 and accordingly the tax rates as prescribed in the said entries shall apply to the said services supplied by the applicant. Accordingly, the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments as per entry at Item (i) and the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments in the project as per entry at Item No. (ia) of SI No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 subject to the conditions prescribed under the respective entries.
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2022 (10) TMI 862
Classification of supply - applicable rate of GST - supply of goods or supply of services - activity of commercial vehicle's body building on job work basis, on the chassis supplied by the customer - HELD THAT:- The applicant is collecting the charges for the activity which includes the cost of inputs / material used by the applicant and the labour charges for fabrication of the body. Thus it is evident that the applicant is fabricating body on the chassis belonging to the customer. The ownership of the chassis remains with the customer and at no stage of the process of fabrication of the body, the title of the chassis is transferred to the applicant. Therefore, the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule Il of the CGST Act, 2017 as a treatment or process which is applied to another person's goods and accordingly is a supply of services. The Explanatory Notes to the Scheme of Classification of Services states that the services included in the Heading 9988 - Manufacturing services on physical inputs owned by others are services performed physical inputs owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process. This Heading covers manufacturing services in which the output is not owned by the unit providing this service. Therefore, the value of the services in this Heading is based on the service fee paid, not the value of the goods manufactured. SAC - 99888 under Heading 9988 pertains to Transport equipment manufacturing services and Sub - Heading 998881 pertains to Motor vehicle and trailer manufacturing services. Therefore, the activity of the applicant as discussed above is appropriately classifiable under Service Accounting Code 998881. The activity is liable to GST at the rate of 18% as per entry at Sl No, 26 (iv) - 9988 - Manufacturing services on physical inputs (goods) owned by others - Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above of Notification No, 11/2017 Central Tax (Rate) dated 28.06.2017.
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2022 (10) TMI 861
Classification of services - rate of GST - works contract service provided to Malabar Cancer Centre - Government Entity or not - to be billed at 12% GST or to be billed at 18% GST? - HELD THAT:- The concessional rate of GST prescribed under the above entry is applicable to the supply of specified work contract services provided to Central Government or State Government or Local Authority or Governmental Authority or Government entity. The specified works contract services are supply by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of (i) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession or (ii) a structure meant predominantly for use as an educational, a clinical, or an art or cultural establishment or (iii) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the CGST Act - the conditions to be fulfilled for a supply to be eligible for the concessional rate under the above entry are; (i) the supply must be a composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017; (ii) the supply must satisfy any of the specified descriptions and (iii) the supply must be provided to the Central Government or State Government or Local Authority or Governmental Authority or Government entity. Whether the service rendered by the applicant falls under the category of works contract service as per the CGST Act? - HELD THAT:- The term works contract under GST is restricted to contract for construction, fabrication etc of any immovable property. The facts submitted by the applicant reveals that the applicant had entered into an agreement with Malabar Cancer Centre for the construction and extension of site and building. Hence the service rendered by the applicant falls under the ambit of definition of works contract under the CGST Act. Whether the supply of works contract services fall under any of the specified descriptions mentioned in the above entry? - HELD THAT:- The term clinical establishment is defined in Para 2 (s) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as clinical establishment means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases. Whether Malabar Cancer Centre is a governmental authority or a government entity? - HELD THAT:- Malabar Cancer Centre is a society established by the State Government with 100 per cent participation by way of equity or control, to carry out the function of public health a function entrusted to a municipality as well as a panchayat under Article 243W and Article 243G respectively of the Constitution and accordingly falls within the definition of governmental authority under Para 4 (ix) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. The services rendered by the applicant to Malabar Cancer Centre as detailed in the application are eligible for the concessional rate of tax of 12% prescribed in the entry at SI No. 3(vi) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as Malabar Cancer Centre is a governmental authority as per definition of governmental authority in Para 4 (ix) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.
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2022 (10) TMI 860
Classification of supply - pure service or work contract services - geotechnical investigation and preparation of foundation recommendation (soil report preparation) for civil works or infrastructure construction works - preparation of detailed project report (DPR) related to civil works/infrastructure construction works - architectural and engineering design for civil works/infrastructure works - project management services for civil works or infrastructure construction works - HELD THAT:- It is revealed that the services rendered by the applicant are geotechnical investigation and preparation of foundation recommendation (soil report preparation), architectural and engineering design, preparation of detailed project report (DPR), project management services for civil works or infrastructure construction works - the activity of geotechnical investigation and preparation of foundation recommendation (soil report preparation), preparation of detailed project report, architectural and engineering design and project management services for civil works or infrastructure construction works undertaken by the applicant are services that are appropriately classifiable under Heading 9983 - Other professional, technical and business services of the Scheme of Classification of Services notified as Annexure to Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and is liable to GST at the rate of 18% as per entry at SI No. 21 (ii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Whether the services rendered by the applicant to Rebuild Kerala, Kerala State Public Works Department and HLL Infratech Services Ltd are eligible for exemption under entry at SI. No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28-06-2017 as claimed by them? - HELD THAT:- The applicant is rendering services to Rebuild Kerala which is an initiative of the Government of Kerala to build sustainable and resilient roads and allied structures that are scientifically designed for efficiency of transport and accordingly the services rendered to Rebuild Kerala are to the Government of Kerala itself - As stated by the applicant the services rendered by them are in relation to the construction of bridges, roads, schools etc. and hence are activities in relation to any function entrusted to a Panchayat under Article 243 G of the Constitution or to a Municipality under Article 243 W of the Constitution. The services supplied by the applicant to Rebuild Kerala and Public Works Department are eligible for exemption as per the entry at SI. No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28-06-2017 being pure services provided to State Government by way of any activity in relation to any function entrusted to a Panchayat or Municipality under Article 243 G or Article 243 W of the Constitution. M/s HLL Infratech Services Ltd is a Public Sector Undertaking under the administrative control of the Ministry of Health and Family Welfare, Government of India and as such, they are neither Central Government nor a State Government. Hence the services supplied by the applicant to M/s HLL Infratech Services Ltd are not eligible for exemption under entry at SI. No. 3 of Notification No.12/2017 Central Tax (Rate) dated 28-06-2017 as exemption under the entry is available only for the specified services provided to the Central Government or State Government or Union territory or local authority - the services rendered by the applicant in respect of the projects in question Nos. 3.1 to 3.4 above to Rebuild Kerala and Public Works Department are covered under the exemption under SI No. 3 of the Notification No.12/2017 Central Tax (Rate) dated 28-06-2017 and the services rendered by the applicant to M/S HLL Infratech Services Ltd are not covered under the said exemption.
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2022 (10) TMI 859
Levy of GST - marine engines, being the part of a fishing vessel - applicability of Entry Serial No.252 of Schedule I of Notification No.1/2017 CT(R) dated 28.06.2017 State Notification No. S.R.O. 360/2017 - HELD THAT:- In order to classify the products, the provisions of Notification No 01/2017 Central Tax (Rate) dated 28.06.2017 are to be verified. As per entry at SI No. 114 of Schedule IV of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017, the marine engines imported by the applicant are classified under Customs Tariff Heading 8407 21 00 -Outboard motors - Marine Propulsion engines - Spark-ignition reciprocating or rotary internal combustion piston engines and attracts GST at the rate of 28%. Fishing vessels, factory ships and other vessels for processing or preserving fishery products fall under Customs Tariff Heading 8902 and are liable to GST at the rate of 5% as per SI No. 247 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. However, as per entry in SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 falling under any chapter of the Customs Tariff attracts GST at the rate of 5%. Therefore, if the Marine engines are supplied for use as part of a fishing vessel falling under Customs Tariff Heading 8902, then the marine engine as part of a fishing vessel will only attract GST at the rate of 5% as per the entry in SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. As per entry in SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 it is notified that parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 falling under any chapter of the Customs Tariff attracts GST at the rate of 5%. Therefore, if the marine engines are supplied for use as part of a fishing vessel falling under Customs Tariff Heading 8902, then the marine engine as part of a fishing vessel will only attract GST at the rate of 5%. as per entry at SI No. 252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. If it is supplied for use other than as parts of fishing vessels as stated, GST at the rate applicable under the respective Customs Tariff Headings in which they are classified will apply.
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2022 (10) TMI 858
Exemption from GST - Works contract - composite supply - annuity amount received is exempted or not as it contains both construction and maintenance parts (which are inseparable) as per entry No. 23A of the Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 - eligibility for an early completion bonus as the construction is completed before the scheduled date - Whether this bonus will also be exempted as it is the part and parcel of the principal project? HELD THAT:- As per the terms and conditions of the concession agreement, the applicant as the concessionaire is designing, constructing, operating and maintaining the roads under Phase 1 (A) of the KCRIP during the concession period and transferring it to the Government on completion of the concession period. The entire project is financed by the applicant and the cost of the construction, operation and maintenance is recovered by the applicant by way of bi-annual annuity payments as per the terms and conditions of the concession agreement for 15 years. On completion of the payment of the cost of construction and maintenance for 15 years through bi-annual annuity as fixed by the agreement, the road is transferred to the Government - it is evident that the services provided by the applicant as per the concession agreement are covered under the definition of works contract under Section 2 (119) of the CGST Act, 2019 and the bi-annual annuity received by the applicant as per the concession agreement can be considered as the consideration for the works contract services supplied by the applicant given the definition of consideration in Section 2 (31) of the CGST Act, 2017. The service rendered by the applicant as per the concession agreement is a continuous supply of works contract services and the annuity is in sum and substance the consideration for the works contract services rendered. Since the cost of construction is initially financed by the applicant the applicant is granted a concession to operate and maintain the roads for 15 years during which the entire consideration is paid to the applicant and on completion of the concession period the road is transferred to the Government. Therefore, the transfer of goods involved in the execution of the works contract happens at the time of transfer of the roads to the Government as per the concession agreement and accordingly the completion of the work contract service takes place on the date of transfer of the roads to the Government - the supply is deemed to have been made on each annuity payment date to the extent covered by the payment of annuity and the applicant is liable to raise tax invoice as per provisions of sub -section (5) of Section 31 and pay GST on the annuity received by them on each annuity payment date by the due date prescribed as per provisions of Section 39 of the CGST Act, 2017. Thus, the services rendered by the applicant as per the concession agreement are classifiable as works contract services falling under SAC 995421 and the annuity received by the applicant including the bonus for early completion of construction is the consideration for the works contract services rendered and the applicant is liable to pay GST at the rate of 12% on the annuity including bonus as per entry at S1 No. 3 (iv) of Notification No. 11/2017 - Central Tax Rate) dated 28.06.2017 as amended.
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2022 (10) TMI 857
Classification and applicable rate of GST - outboard motors pertaining to HS Code 8407 and its spare parts as per Entry in Schedule I, Sl. No. 252 of GST Act, 2017 dated 28.06.2017 - GST rate of 28% shown in Schedule IV Sl. No.114 is applicable for sales made by the applicant or not - applicability of clarification issued vide Circular No.52/26/2018-GST - HELD THAT:- The Outboard motors imported by the applicant are classified under Customs Tariff Heading 8407 21 00 - Outboard motors - Marine Propulsion engines - Spark-ignition reciprocating or rotary internal combustion piston engines and attract GST at the rate of 28% as per entry at Sl. No. 114 of Schedule IV of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. Fishing vessels, factory ships, and other vessels for processing or preserving fishery products fall under Customs Tariff Heading 8902 and are liable to GST at the rate of 5% as per entry at Sl. No. 247 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. However, as per entry in Sl. No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 falling under any chapter of the Customs Tariff attracts GST at the rate of 5 %. Therefore, if the Outboard motors are supplied for use as part of a fishing vessel falling under Customs Tariff Heading 8902, then OBM as part of the fishing vessel will only attract GST at the rate of 5% as per the entry at Sl. No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. Therefore, if the Outboard motors are supplied for use as part of a fishing vessel falling under Customs Tariff Heading 8902, then OBM as part of the fishing vessel will only attract GST at the rate of 5%. as per entry at Sl. No. 252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. If it is supplied for use other than as parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907, GST at the rate applicable under the respective Customs Tariff Headings in which they are classified will apply.
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2022 (10) TMI 856
Scope of Advance Ruling application - Application for AR filed by the association on behalf of its members - Supply or not - portion of apartments constructed by Developers and allotted to the Land Owners as part of a joint development arrangement between the Developers and the Land Owners - allotment of apartments of Land Owners by the Developers as part of a joint development arrangement - value to be adopted for the purpose of computing GST liability - time of supply - rate of GST - HELD THAT:- In the instant case the questions raised by the applicant pertains to the GST liability of the activity undertaken by the developers; who are the members of the applicant; i.e., the applicability of GST on the supplies made by third persons and not in respect of any supply undertaken or proposed to be undertaken by the applicant - the provisions of the CGST Act governing advance ruling does not provide for an applicant to seek a ruling regarding the applicability of the provisions of the Act or the notification issued there under to a third person other than the applicant. Admittedly, the applicant has preferred this application on behalf of the members of the applicant and hence the application is not in respect of any matter specified in Section 97 (2) of the CGST Act in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Hence this authority has no jurisdiction to issue ruling on the above question.
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Income Tax
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2022 (10) TMI 855
Exemption u/s 11 / 10(23C)(vi) - Charitable activity u/s 2(15) - trust seeking approval as existed solely for educational purposes - correct meaning of the term solely in Section 10 (23C) (vi) which exempts income of university or other educational institution existing solely for educational purposes and not for purposes of profit - appellants were denied registration on the ground that they were not registered under the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987 (hereinafter, A.P. Charities Act ) as condition precedent for grant of approval - HELD THAT:- Institutions existing solely for profit - This court is of the opinion that the interpretation adopted by the judgments in American Hotel [ 2008 (5) TMI 17 - SUPREME COURT] as well as Queens Education Society [ 2015 (3) TMI 619 - SUPREME COURT] as to the meaning of the expression solely are erroneous. The trust or educational institution, which seeks approval or exemption, should solely be concerned with education, or education related activities. If, incidentally, while carrying on those objectives, the trust earns profits, it has to maintain separate books of account. It is only in those circumstances that business income can be permitted- provided, as stated earlier, that the activity is education, or relating to education. The judgment in American Hotel (supra) as well as Queens Education Society (supra) do not state the correct law, and are accordingly overruled. Whether the PA (Commissioner or any other designated authority) is in any manner enjoined to confine the nature of inquiry to discern the object of a society, trust or other institution at the stage when it approaches the authority for approval under Section 10 (23C)? - Having regard to the plain terms of the second proviso to Section 10(23C), which refers to the procedure for approval of applications including those made by trusts and institutions imparting education, one can discern no such restrictions. From the pointed reference to audited annual accounts as one of the heads of information which can be legitimately called or requisitioned for consideration at the stage of approval of an application, the inference is clear: the Commissioner or the concerned authority s hands are not tied in any manner whatsoever. The observations to the contrary in American Hotel (supra) appear to have overlooked the discretion vested in the Commissioner or the relevant authority to look into past history of accounts, and to discern whether the applicant was engaged in fact, solely in education. American Hotel (supra) excluded altogether inquiry into the accounts by stating that such accounts may not be available. Those observations in the opinion of the court assume that only newly set up societies, trusts, or institutions may apply for exemption. Whilst the statute potentially applies to newly created organizations, institutions or trusts, it equally applies to existing institutions, societies or trust, which may seek exemption at a later point. This court is also of the opinion that the Commissioner or the concerned authority, while considering an application for approval and the further material called for (including audited statements), should confine the inquiry ordinarily to the nature of the income earned and whether it is for education or education related objects of the society (or trust). If the surplus or profits are generated in the hands of the assessee applicant in the imparting of education or related activities, disproportionate weight ought not be given to surpluses or profits, provided they are incidental. At the stage of registration or approval therefore focus is on the activity and not the proportion of income. If the income generating activity is intrinsically part of education, the Commissioner or other authority may not on that basis alone reject the application. Clearly, charitable objects defined by the A.P. Charities Act, are pari materia with the IT Act. Thus, establishments or associations or organizations (widely phrased terms) formed for charitable purpose fall within the meaning of charitable institutions. These include societies and trusts, set up for educational purposes. A.P. Charities Act provides a statutory regulatory framework in regard to activities of charitable institutions in the state. Sections 72-74 deal with surplus funds and their treatment; Sections 75-77 deal with properties of trusts and charitable institutions and restrictions on transfers. These and other provisions enable the State, which is concerned in the proper administration of such organizations, to ensure that they are managed efficiently without misfeasance. They also contain provisions to protect the interests of trusts, especially funds and properties. It is held that charitable institutions and societies, which may be regulated by other state laws, have to comply with them- just as in the case of laws regulating education (at all levels). Compliance with or registration under those laws, are also a relevant consideration which can legitimately weigh with the Commissioner or other concerned authority, while deciding applications for approval under Section 10 (23C). This reasoning equally applies especially in Section 11(4A) which speaks of profits incidental which specifies that exemption in relation to income or trust of an institution which are profits or means of business cannot be exempted unless the business is incidental, trust or as the case may be institution and separate books of accounts are maintained by such trusts or institution in respect of such business . Thus, the underlying objective of seventh proviso to Section 10(23C) and of Section 11(4A) are identical. These have to be read in the light of the main provision which spells out the conditions for exemption under Section 10(23C) - the same conditions would apply equally to the other sub-clauses of Section 10(23C) that deal with education, medical institution, hospitals etc. The conclusions of this court are summarized as follows: a. It is held that the requirement of the charitable institution, society or trust etc., to solely engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education. In other words, all objects of the society, trust etc., must relate to imparting education or be in relation to educational activities. b. Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval under Section 10(23C) of the IT Act. At the same time, where surplus accrues in a given year or set of years per se, it is not a bar, provided such surplus is generated in the course of providing education or educational activities. c. The seventh proviso to Section 10(23C), as well as Section 11(4A) refer to profits which may be incidentally generated or earned by the charitable institution. In the present case, the same is applicable only to those institutions which impart education or are engaged in activities connected to education. d. The reference to business and profits in the seventh proviso to Section 10(23C) and Section 11(4A) merely means that the profits of business which is incidental to educational activity as explained in the earlier part of the judgment i.e., relating to education such as sale of text books, providing school bus facilities, hostel facilities, etc. e. The reasoning and conclusions in American Hotel (supra) and Queen s Education Society (supra) so far as they pertain to the interpretation of expression solely are hereby disapproved. The judgments are accordingly overruled to that extent. f. While considering applications for approval under Section 10(23C), the Commissioner or the concerned authority as the case may be under the second proviso is not bound to examine only the objects of the institution. To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The observations made in American Hotel (supra) suggest that the Commissioner could not call for the records and that the examination of such accounts would be at the stage of assessment. Whilst that reasoning undoubtedly applies to newly set up charities, trusts etc. the proviso under Section 10(23C) is not confined to newly set up trusts it also applies to existing ones. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. g. It is held that wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under Section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the trust, society etc. This reasoning is reinforced by the recent insertion of another proviso of Section 10(23C) with effect from 01.04.2021. The interpretation of education being the sole object of every trust or organization which seeks to propagate it, through this decision, accords with the constitutional understanding and, what is more, maintains its pristine and unsullied nature. The assessees appeals fail. It is however clarified that their claim for approval or registration would have to be considered in the light of subsequent events, if any, disclosed in fresh applications made in that regard. This court is further of the opinion that since the present judgment has departed from the previous rulings regarding the meaning of the term solely , in order to avoid disruption, and to give time to institutions likely to be affected to make appropriate changes and adjustments, it would be in the larger interests of society that the present judgment operates hereafter. As a result, it is hereby directed that the law declared in the present judgment shall operate prospectively. The appeals are hereby dismissed, without order on costs.
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2022 (10) TMI 854
Reopening of assessment - validity of order passed u/s 148(A)(d) - as alleged that no reply had been furnished by the assessee pursuant to the notice issued under section 148A(b) - HELD THAT:- From the record, we do notice that there is acknowledgment of the fact that four documents were uploaded on the relevant portal on 6th April 2022, in regard to which no reference at all, had been made by the Assessing Officer in its order dated 16th April 2022. Without speculating as to what would be the result, if the AO had, in fact, considered the documents so uploaded, we are of the view that the documents in question ought to have been considered and its effect determined on the proceedings in question, which does not appear to have been done in the present case by the AO. We set aside the order dated 16th April 2022 passed under section 148A(d) as also notice under section 148 of the Act, dated 16th April 2022, and remand the matter to the AO for considering afresh the entire issue in the light of the documents submitted on 6th April 2022. Any further explanation which the petitioner might wish to render, may also be submitted within a period of two weeks. It would be open to the Assessing Officer then to pass the appropriate orders in accordance with law.
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2022 (10) TMI 853
Assessment u/s 153A - Incriminating documents or materials found and seized at the time of search or not? - ITAT held that the addition which was not based on incriminating material found during the search could not be made in assessment under Section 153A - HELD THAT:- This Court in Principal Commissioner of Income Tax vs. Bhadani Financiers Pvt. Ltd. [ 2021 (9) TMI 902 - DELHI HIGH COURT ] has held that where the assessment of the respondents had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search, no addition could be made under Section 153A of the Act as the cases of the respondents were of non-abated assessment. Though, the issue involved in Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another [ 2000 (7) TMI 67 - SUPREME COURT ] and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras [ 1992 (4) TMI 183 - SUPREME COURT ] the present appeal is covered by the judgment passed by this Court in Bhadani Financiers Pvt. Ltd. (supra) and Kabul Chawla (supra). No substantial question of law
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2022 (10) TMI 852
Assessment proceedings initiated u/s 153C - addition on account of undisclosed investment u/s 69 B - HELD THAT:- Upon perusal of entire record and after close scrutiny of the findings recorded by learned authorities, the findings recorded by learned ITAT with regard to disclosure of additional income on account of construction material, which was also shown while filing return of income for AY 2016-17, do not appear to be illegal or perverse. No substantial question of law as proposed by the Revenue arises in this appeal.
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2022 (10) TMI 851
Agricultural income - Allowance of deduction of the cost of replantation and the deduction towards upkeep and maintenance expenses - Assessee/Plantation Companies under Rule 7A(2) of the Rules - Scope of Income Tax Act 1961, the Income Tax Rules 1962 and the Kerala Agricultural Income Tax Act 1991 - allowance towards replanting expenses and a further deduction towards upkeep and maintenance expenses incurred by the assessee for the immature plants till the age of maturity in the computation of income under the Act and Rules. - allowance for the cost of replanting expenses incurred over an extent of 48 acres and a further deduction towards maintenance and upkeep expenses incurred by the assessee for the rubber plants replanted in an area of 182 acres HELD THAT:- Neither there is a controversy nor a debatable question on the applicable principles for computation of income of an assessee who is covered by the provisions of the AIT Act 1950 r/w KAIT Act, with effect from 01.04.2002 under Act 1961. In other words, up to 31.03.2002, the income from rubber plantations has been treated as agricultural income and the computation of agricultural income was by the allowances and deductions provided by Section 5 of the KAIT Act. With effect from 01.04.2002, the income derived from the manufacture of rubber is treated as income from business and 65% of the income is apportioned for agricultural income tax. Therefore, it is not a case of the Revenue, that while computing the income of an assessee under Rule 7A the provisions under the KAIT Act are also made applicable. Therefore, in the scheme of present things the assessment of income from rubber plantations is, in the first instance, made under Sections 28 to 44DB of Act 1961. Whether the rubber plantation companies, under Rule 7A(2) of Rules 1962, are entitled to an allowance towards replanting expenses? - The Revenue cannot disallow the upkeep and maintenance claim in the computation of income under Section 37 of Act 1961. The Revenue cannot compel capitalization of upkeep and maintenance expenses and claim depreciation on the capitalized asset. The assessee/plantation owners to continue the business must lay out these expenses as revenue expenses to protect the rubber plants till the yield period. The upkeep and maintenance expenses do not result in bringing into existence a new capital asset or substituting a capital asset. This expenditure upkeeps and maintains a capital asset and over years enables the capital asset to generate business income. Therefore, inversely and conversely in the application of Section 37 of Act 1961 the assessees are entitled to claim the deduction of upkeep and maintenance expenses in the computation of income for tax under Act 1961. Section 37 deals with what is known as residuary provision. The upkeep and maintenance expenses are incurred by the assessee till the rubber tree earns income. The test we would like to apply is whether the upkeep and maintenance expenditure is resulting in a new capital asset or an addition to the existing capital asset. The answer is no. The outlay brings into existence a new capital asset, then, from any point of view, such expenditure is nothing but capital expenditure. Take a case and examine where maintenance of a capital asset is necessary for deriving income from the asset, and whether such maintenance expenses of the asset would become capital expenditure. The expenditure is incurred by the assessee every year. The agricultural income is deemed as business income from the sale of rubber. Therefore, the available and allowable expenses are deducted in the computation of the business income of the assessee. The question paused for our consideration since is arising under Section 37, which, as already noted, is a residuary provision, we keep in our perspective that in determining whether a particular item of expenditure is, or is not, deductible in computing the business profits, it is necessary first to enquire whether the deduction is expressly prohibited under any other provision or an expenditure described in Sections 30 to 36 of Act 1961. Therefore, in tax parlance, the computation of income from rubber plantations is treated as business income. In computing business income, Sections 28 to 44DB are kept in view. We are convinced that the ratio in Rehabilitation Plantations Ltd.[ 2021 (10) TMI 1371 - KERALA HIGH COURT] case both on allowance and upkeep and maintenance expenses, is incorrect. The upkeep and maintenance expenses are revenue expenditures and the assesses are entitled to claim deduction under Section 37 of Act 1961. The answers to the two facets of the question referred to the Full Bench are that: In the computation of business income under Rule 7A of the Rule 1962, the assessee under Rule 7A(2) is entitled to an allowance in respect of the cost of replacement of dead and useless rubber trees in the rubber plantation in an area not abandoned, subject to Section 10(31) of Act 1961. The upkeep and maintenance expenses incurred by the assessee till the maturity of rubber trees are revenue expenditures eligible for deduction under Section 37 of Act 1961.
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2022 (10) TMI 850
Deduction u/s 80P(2)(a)(i) - AO denied the claim of the assessee on the ground that interest income earned by making investment of surplus funds has to be assessed under the head Income from Other Sources and not income from business and since interest income is not assessed as business income, the claim for deduction u/s 57 of the Act cannot be allowed - HELD THAT:- We find that co-operative society is a broad and larger umbrella under which the co-operative banks do perform. We also note that all co-operative societies may not be banks, but all co-operative banks are deemed to be cooperative societies. According to banking Regulations Act, a cooperative society bank as the same meaning of the co- operative society. On a plain reading of section 80P(2)(d), there is no such stipulation or prerequisite as to the nature of the funds. We also find that Section 80P(2)(d) of the Act, allows whole deduction of an income by way of interest or dividends derived by the cooperative society from its investment with any other co-operative society. Section 80P(2)(d) provides additional benefit of deduction under section 80P for those co-operative societies, which has surplus funds even unrelated to its main business activity, which are invested with other co-operative societies. Thus, Clause (d) of section 80P applies to all co-operative societies, whether or not, their main businesses banking and credit facilities to the members. Therefore, in our view, the section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. Thus we hold that the assessee is eligible for deduction under section 80P(2)(d) in respect of interest earned from deposits made on other Co-operative banks. However, we deem it appropriate on the facts of the instant case, to restore the issue of claim of deduction u/s 80P(2)(d) of the Act, to the files of the Ld.AO to allow the claim as indicated herein above, by granting proper opportunity of being heard to the assessee. We direct the Ld.AO to allow the expenditure incurred while computing income under the head, Income from Other Sources , in relation to earning of interest from the commercial banks. Unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money - Not granting sufficient time to the assessee for representing its case before the Ld.PCIT - HELD THAT:- The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim.
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2022 (10) TMI 849
Determination of capital gain - addition made towards the valuation as per DVOJs report u/s 50C - discrepancy between DVQ's valuation and declared value as per sale deed - HELD THAT:- We are of the considered view that if the difference between the value adopted by the DVO for estimating the sale price of the properties under consideration and the sale value declared by the assessee in its return of income is less than 15%, then the value adopted by the assessee may be taken into consideration. Accordingly, the matter is being restored to the file of the assessing officer to determine whether in the instant facts, the difference between the sale value adopted by the DVO and that by the assessee in respect of properties under consideration is less than 15% as submitted by the assessee. In the event, if such difference is less than 15%, then the sale value adopted by the assessee in its return of income may be taken into consideration, for the purpose of determining the capital gains tax. CIT(Appeals) not considering the ground of cost of improvement, stamp duty etc. - We observe that vide order sheet entry ITAT observed that assessee had not filed Form number 35, and accordingly it is not possible to decide whether this ground of appeal was raised before CIT(Appeals). We now observe that a perusal of Form 35 shows that the assessee has not raised any ground of appeal in connection with claim of cost of improvement before Ld. CIT(Appeals). Further, we have also perused the various written submissions filed by the assessee before CIT(Appeals) and from the same also it is apparent that the assessee has not filed any written submissions in respect of the claim of cost of improvement before Ld. CIT(Appeals) for his consideration. Though, apparently order of the CIT(Appeals), wherein the CIT has re-produced the relevant extracts of remand report received from the AO, there an indirect mention that in absence of evidence to the effect, cost of improvement could not be verified , however, besides the above, neither this ground is coming as per the grounds of appeal before CIT(Appeals), nor is it anywhere coming in written submissions filed before CIT(Appeals) during the course of appellate proceedings. Accordingly, in our considered, view ground of the assessee s appeal is infructious since this issue was never raised before CIT(Appeals) for his consideration. Disallowance of interest expenses - HELD THAT:- CIT(Appeals) in its order has specifically observed that the assessee has simply mentioned that interest has been paid on loans taken for its property business. However, no documentary evidences have been furnished by the assessee and no nexus between the loans taken and the property purchased has been shown. Accordingly in absence of any supporting documents filed by the assessee during the appellate proceedings, Ld. CIT(Appeals) dismissed this ground of appeal of the assessee. We find no infirmity in the order of Ld. CIT(Appeals) who, on appreciation of facts/supporting documents placed before him, dismissed assessee s appeal on this ground.
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2022 (10) TMI 848
Short deduction of taxes - credit to the assessee for TDS deducted denied - HELD THAT:- As it seems that the assessee has in fact deposited TDS and there is no short deduction of TDS (as evident from the Justification Report submitted by the Revenue). Accordingly, the matter is being restored to the file of the concerned Assessing Officer, who is directed to grant necessary credit to the assessee for TDS deducted and delete demand on account of short deduction of TDS and consequential interest. In our view, in the instant case, the assessee has deducted and deposited TDS within time, but due to a technical error in CPC site, the assessee has not been granted credit of TDS, for no default on behalf of the assessee. It is a fit case where the assessee should be granted necessary credit of TDS paid by AO and he may accordingly internally coordinate with CPC so that the assessee does not have to undergo any further difficulty / inconvenience for no default on his part.
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2022 (10) TMI 847
Unexplained income outside the books of accounts - Addition made to the returned income on account of Undisclosed net income - CIT-A deleted the addition - HELD THAT:- As observed that this amount has already been offered to tax by the assessee in the return of income under the head other receipts . Therefore, Ld. CIT(Appeals), in our view has correctly held that the said amount cannot be brought to tax as gross receipts in the hands of the assessee company again, since the same would amount to double taxation of the same receipts. Whether the expenses against the same are to be allowed, or whether it can be inferred from the statement of the Partner of the assessee firm that the said amount represents net income of the assessee firm, and accordingly no further expenses my be allowed against the same ? - CIT(Appeals) has correctly observed that from the statement recorded of the Partner of the firm, it cannot be inferred that the said amount of ₹ 11 crores represents net income of the assessee firm, and therefore, the assessee is not eligible to claim any expenses against the same. Once the position is admitted that the assessee has offered the undisclosed sum in the return of income, and during the course of detailed assessment, the assessing Officer has not doubted the genuineness of expenses claimed in the return of income, then such expenses should be allowed against the undisclosed income offered by the assessee in the return of income. Accordingly, in our considered view, Ld. CIT(Appeals) has not erred in facts and in law in granting relief to the assessee in respect of this addition referred to above. Addition towards interest expenditure incurred - Since the Ld. CIT(Appeals) in the immediately preceding year has accepted the deposits from five companies as genuine and further in the present year, Ld. CIT(Appeals) has also allowed the assessee s claim of expenditure under section 36(1)(iii) of the Act, with respect to the above interest expenditure, we find no infirmity in the order of the Ld. CIT(Appeals), while granting relief the assessee.
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2022 (10) TMI 846
Adjustment made u/s.143(1) - amount received on maturity of insurance policy as appearing in Form No.26AS - Adjustment by way of addition of income - HELD THAT:- Deduction of tax remains towards income albeit calculated on the gross sum. One of such examples is section 194DA, which provides for deducting tax at source on the gross sum paid but a lower rate of 1%. Thus deduction of tax at source on the sum paid under a life insurance policy does not convert the income portion embedded in such sum into non-income. When turn to section 143(1)(a)(vi) referring to addition of income appearing in Form No.26AS which have not been included by the assessee in the total income in the return, there remains no doubt whatsoever that it talks of making adjustment of income directly received as such; or as comprised in the gross sum on which tax has been deducted at source. Ergo, the contention that since section 194DA requires deduction of tax at source on the sum payable and not the income and hence section 143(1), talking of making adjustment as addition of income, cannot apply, is jettisoned. It is clear from Form No.26AS that net sum of Rs.11.76 lakh was credited to the assessee s account and deduction of tax at source was made - The assessee did not offer any income on this score in the income-tax return. Section 143(1) of the Act provides for processing of the return. Clause (a) states that the total income or loss shall be computed after making certain adjustments to the income returned. Sub-clause (vi) of clause (a) provides for such an adjustment on account of addition of income appearing in Form No.26AS which has not been included in computing the total income in the return . A bare perusal of the provision transpires that any income appearing in Form No.26AS which has not been included in the total income by the assessee will call for adjustment u/s.143(1) of the Act. Form No.26AS, in the present context, has its genesis to section 194DA with the heading `Payment in respect of life insurance policy . The interpretation of the provision makes it manifest that exemption under section 10(10D) does not apply if the conditions of clause (c) are satisfied, in which case the income becomes chargeable to tax. However, the quantum of taxable income, as explained in the Circular is: `the income accruing on such policies (not including the premium paid by the assessee) . In the hue of the above, it is patent that though deduction of tax at source u/s 194DA is contemplated on the gross amount paid under a life insurance policy, but the income is such sum received as reduced by the amount of premium paid. Section 143(1) provides for making adjustment by way of `addition of income appearing in Form no. 26AS and not the sum so appearing in the Form. Evidently, it is only the amount of income which can be added by means of adjustment u/s 143(1). Reverting to the facts, the assessee received a sum towards premature surrender of life insurance policy and the amount of premium paid was Rs.8.00 lakh. The resultant income is Rs.4,07,419/-, which calls for adjustment in the intimation u/s.143(1) of the Act. With another negative interest income of Rs.31,419 in Form No. 26AS, which was reduced by the AO himself, the further sustainable amount of the adjustment comes to Rs.3,76,000/-. Assessee appeal is partly allowed.
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2022 (10) TMI 845
Invocation of Reassessment Proceedings - assessee has shown unaccounted purchases and claimed depreciation on plant and machinery, which were found to be bogus - HELD THAT:- If there is relevant material on the basis of which reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording of reasons. From the reasons recorded for reopening the assessment in the case of assessee it is also evident that the assessee has not disclosed truly and fully all material facts. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act. Thus, the grounds raised by the assessee pertaining to this issue are dismissed. Notice u/s 143(2) was not served within the prescribed period - As per section 143(2) of the Act, notice under this section is required to be served on the assessee before the expiry of 6 months from the end of the financial year in which the return under section 139 or in response to notice under section 142(1) of the Act is furnished. Thus, the time period provided in the aforesaid section for issuance of notice is in respect of return filed under section 139 or in response to notice under section 142 (1) of the Act. However, in the present case, reassessment proceedings were initiated by the AO under section 147 and notice under section 143(2) was issued only pursuant there to. Thus, in view of the above, in absence of any other material available on record we are of the considered view that notice u/s 143(2) of the Act was served to the assessee within the prescribed time pursuant to initiation of reassessment proceedings in the present case. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Addition on account of alleged purchases out of books - We find that details/books of accounts were not produced by the assessee despite various opportunities - the assessee though claimed that all his record/books of accounts were destroyed in the fire, however, neither produced the parties from whom it has made the purchases nor filed any documentary evidence to justify its claim that purchases as shown in profit and loss account are the only purchases made by the assessee. Further, there is nothing available on record to dispute the adoption of enhanced GP rate @8% for assessment year 2009 10. Thus, in view of the above, in absence of any material to support the claim of the assessee, we find no infirmity in the impugned order passed by the CIT(A) on this issue. As a result, addition made by the AO on this issue is upheld. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Disallowance of depreciation on account of bogus purchases of plant and machinery - We find that regarding the process of verification, the valuers had submitted that machines were looking very old. Further the metallic plate on the machines which contains all the technical details of the particular machines i.e. machines serial No., model No., year of manufacturing, electrical ratings, operating diagram, make and various details of the machinery was missing. The valuers further submitted that there was no basis to ascertain the model and the year of manufacture and the year of installation of the machines. Further, the valuers submitted that ownership of the machines cannot be verified in absence of invoices and fixed assets register. In absence of details as sought by the lower authorities, the bills produced by the assessee were found to be bogus. Thus, in view of the above findings, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, addition made by the AO on this issue is upheld. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Disallowance of payment of interest expenses - Since, borrowed funds have been siphoned off the interest claimed by the assessee was disallowed by the AO. CIT(A) also dismissed the appeal filed by the assessee as held since borrowed funds have been siphoned off, the interest claimed on the same cannot be considered as used for business. The disallowance is warranted. The computation made by the assessing officer is fair and reasonable.As, findings of learned CIT(A) in respect of bogus purchases have been upheld, we find no infirmity in the aforesaid findings of learned CIT(A) on this issue. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Ad hoc disallowance of administrative expenses - We find that the assessee did not produce any details/evidence in support of its claim of admission to expenses. In absence of the details, the AO disallowed 10% of administrative expenses by the assessee and added the same to total income. During the appellate proceedings before the learned CIT(A), assessee submitted that administrative expenses constitute only minuscule portion of the total turnover. We find that apart from the aforesaid submission nothing has been brought on record to prove that the administrative expenses as claimed was incurred for purpose of business. Thus, in view of the above, we find no infirmity in the impugned order passed by the learned CIT(A) upholding the disallowance of 10% of administrative expenses claimed by the assessee. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Levy of interest under section 234A - We deem it appropriate to remand this aspect to the file of AO for de novo adjudication after necessary examination of the fact whether the return of income was filed by the assessee within the prescribed time under the Act. While, interest levied under section 234B and 234C of the Act are consequential in nature. Accordingly, same is allowed for statistical purpose.
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2022 (10) TMI 844
Deduction allowable u/s 35(2AB) - Necessity of approval to be granted by prescribed authority - Scope of amendment - HELD THAT:- ITAT Pune Tribunal in the recent case of DCIT v. Force Motors [ 2021 (9) TMI 244 - ITAT PUNE ] while dealing with identical issue held that prior to amendment in 2016, section 35(2AB) of the Act does not provide any methodology of approval to be granted by prescribed authority vis-a-vis expenditure from year to year and therefore, order of Assessing Officer in curtailing expenditure and consequent weighted deduction claimed under section 35(2AB) on ground that deduction cannot exceed claims approved by prescribed authority, had rightly been set aside. The Kolkota Tribunal in recent case of DCIT v. STP Ltd. [ 2021 (1) TMI 830 - ITAT KOLKATA ] held that prior to 1-6-2016, only requirement to claim deduction under section 35(2AB) was to receive recognition from prescribed authority since said recognition was obtained by assessee on 26-3-2013, deduction could not be denied merely because prescribed authority failed to send intimation in Form 3CL in respect of expenditure incurred by R D unit for relevant assessment year. Thus on a perusal of the various Rulings, the position is clear that prior to amendment introduced w.e.f. 01/07/2016, the deduction u/s 35(2AB) of the Act would be available to an assessee having an approved in-house R D facility by the prescribed Authority Act and there is no mention of approval of the quantum of expenditure in the law as it stood prior to that date. The mandate of quantification of expenditure has been put in place only w.e.f. 01.07.2016. In view of the above observations and judicial precedents on the subject, we allow the appeal of the assessee. Addition of PF/ESI expenses u/s. 36(1)(va) - assessee did not deposit employees' contribution to employees' account - HELD THAT:- We note that the issue is squarely covered against the assessee by case of Gujarat State Road Transportation Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B of the Act. Again, in the case of Pr. CIT v. Suzlon Energy Ltd. [ 2020 (2) TMI 792 - GUJARAT HIGH COURT ] held that where assessee had not deposited employees' contributions towards PF and ESI amounting Rs. 15.20 lakhs within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. - Decided against assessee.
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2022 (10) TMI 843
Reopening of assessment u/s 147 - absence of issuance of notice by the A.O. u/s 143(2) - Whether curable defect u/s 292BB? - HELD THAT:- From the careful perusal of the orders of the authorities below and the order sheet entries placed on record, as noticed that no notice under section 143(2) has been issued/served upon the assessee. Therefore, find force in the arguments of the assessee that in absence of statutory notice u/s 143(2) the consequent assessment framed under section 143(3)/147 cannot be sustained in the eye of law. As noticed on identical facts in the case of Flovel Energy Pvt. Ltd. [ 2020 (1) TMI 1046 - ITAT DELHI] has annulled the assessment order by following the Judgment of Alpine Electronics Asia Pvt. Ltd., [ 2012 (1) TMI 100 - DELHI HIGH COURT] wherein the Judgment of Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] has been referred. I find even provision of Section 292BB of the I.T. Act, 1961 does not cure non-issuance of notice as held by Hon ble jurisdictional Delhi High Court in the case of PCIT vs., Jai Shiv Shankar Traders [ 2015 (10) TMI 1765 - DELHI HIGH COURT] Assessment order passed by the A.O. is not sustainable in law and, therefore, the assessment order is quashed. - Decided in favour of assessee.
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2022 (10) TMI 842
Estimation of income - bogus purchases - HELD THAT:- As from the orders of the authorities below it nowhere appears that the Assessee has duly produced the stock records as claimed by the Assessee. It is a fact that in Item no. 35 of form no. 3CD, the Assessee instead of providing quantitative details of goods traded and raw-material etc. simply stated that Item no. 35 of Form 3CD is not applicable. Assessee failed to demonstrate before the authorities below as to how the Assessee was not required to provide quantitative details of goods traded and raw-material etc. in Item no. 35 of Form no. 3CD before the authorities below. Find no material and/or reason to controvert the findings of the authorities below. We further observe that for the ends of justice the ld. Commissioner has given substantial relief to the Assessee by reducing the disallowance from 20% to 10%. Hence in cumulative effects, no interference is warranted. Consequently, the decision of the learned Commissioner in affirming the disallowance @ 10% of the consumption on foods and beverages is affirmed. Nature of expenses - Disallowance of expenses incurred on repairs by treating the said expenditure as capital in nature - HELD THAT:- AO specifically held that the Assessee has incurred the expenses on purchase of Air Conditioners outdoor units which were stolen, pipes, cables and accessories, compressor, miscellaneous accessories, dryer, PVC Cable, wooden crate boat, kitchen equipments etc. which provides enduring benefits and not confined to the use of one year only and also not of the recurring nature . Commissioner though affirmed the addition on these items, however allowed the depreciation on the said expenditure before computing the income. We have given thoughtful consideration to the determination made by the Ld. Commissioner and the AO and do not find any infirmity in determination made by the Ld. Commissioner on the issue in hand. Even otherwise also we do not find any material/reason to controvert the findings of the ld. Commissioner. Hence, addition under challenge does not require any interference. Consequently ground nos. 5 6 are also dismissed.
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2022 (10) TMI 841
Undisclosed income of the assessee - benami investment - benami transaction of the assessee through 15 Kolkata based corporate entities - HELD THAT:- The original shareholding and the capital holding of Rohini Resorts Pvt. Ltd. remained proved and substantiated. The change that took place in the books of Rohini Resorts Pvt. Ltd. is only insofar as the shareholders register gets modified. This is not a case where the corporate entities have put the money into Rohini Resorts Pvt. Ltd. and the Rohini Resorts Pvt. Ltd. has in turn paid off their shareholders. Thus, the entries, if at all, are not in the books of the assessee herein nor in the books of any of the entities which are under the control of the assessee herein. Clearly when there are no entries in the books of the assessee, the assessee cannot be asked to explain the entries of other corporate entities in respect of whom no financial connection has been found even in the course of search on the assessee. It was for the AO to produce or investigate and find out some financial connection between the said Kolkata based corporate entities and the assessee herein. It must also be mentioned here that in the assessment order also though the AO refers to an investigation report by the Kolkata based Investigation Wing of the department, what is conspicuous by its absence is the connection between the said corporate entities, which are Kolkata based and the assessee. In the circumstances, we are of the view that the ld. CIT(A) is right in deleting the addition representing the alleged benami transaction of the assessee through 15 Kolkata based corporate entities. AO has used the term benami but the AO has not been able to prove that the said 15 Kolkata based corporate entities are under the control of the assessee herein much less there is any financial connection. It is also noticed that the ld. CIT(A) has followed the judicial discipline in following the decision of the coordinate bench of the Tribunal in assessee‟s own case for A.Ys.2005-2006 2006-2007 for the purpose of deleting the impugned addition. Appeal of the revenue and the cross objection of the assessee are dismissed.
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2022 (10) TMI 840
Assessment u/s 153A - assessment barred by limitation - HELD THAT:- We find that the Hon ble Delhi High Court in the case of RRJ Securities [ 2015 (11) TMI 19 - DELHI HIGH COURT] has held that by virtue of Section 153C(1) of the I.T. Act, 1961 proceedings would have to be in accordance with Section 153A of the I.T. Act, 1961 and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. Before us, D.R. has stated that the decision in the case of RRJ Securities [ 2015 (11) TMI 19 - DELHI HIGH COURT] would not be applicable for the reason that in the present case the A.O. of the searched person and the assessee are one and the same. We do not find merit in the aforesaid arguments of the Ld. D.R. for the reason that the Hon ble High Court at para-16 of the order has observed that the distinction made by Commissioner of Income Tax(A) by observing that the A.O. of the searched person who was to handover the documents and the A.O. of the assessee were one and same person was not relevant in terms of Section 153C of the I.T. Act, 1961 and that Ld. CIT(A) had erred in proceeding on the basis that period of 06 years was to be reckoned from the end of the financial year preceding the financial year in which the search was conducted. Revenue has not placed on record any contrary binding decision in its support nor has placed any material to demonstrate that the aforesaid decision rendered by Hon ble Delhi High Court in the case of RRJ Securities Ltd., (supra) has been set aside, overruled or stayed by any higher judicial forum. In view of the aforesaid facts, we find no reason to interfere with the order of the Ld. CIT(A) and thus, the grounds raised by the Revenue are dismissed.
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2022 (10) TMI 839
Revision u/s 263 by CIT - Addition u/s 68 - HELD THAT:- Assessee has disclosed the income earned from commodity trading in its audited profit and loss account and had offered it for taxation. This verifiable fact was placed before the Ld. AO in the assessment proceedings who treated the said income as unexplained cash credit under section 68 of the Act and disallowed the related expenses towards brokerage. Since this income was already disclosed in the audited profit and loss account of the assessee and formed part of the business loss reported in the return, AO did not make a separate addition while computing the assessed income of the assessee except for reducing the business loss by making the addition towards disallowance of brokerage expenses claimed in the audited profit and loss account. Assessee had reiterated these facts before the Ld. PCIT in the revisionary proceedings also. Before us also, Ld. Counsel demonstrated the factual position by corroborative documentary evidences placed on record in the paper book as referred in the discussion above. From the above factual matrix of the issue raised by the ld. PCIT, we find that he has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of the revenue, for passing the impugned order u/s 263 of the Act.We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issues raised through the show cause notice by the Ld. PCIT, supporting its contentions by corroborative documentary evidences. It is well settled law that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon'ble Courts. We find that the issue in the present case is purely on facts which are verifiable from the records of the assessee. Examination and verification of the audited financial statements i.e. Balance Sheet and Profit Loss account of the assessee reveals the correct state of its affairs in respect of the issue raised in the impugned revisionary proceedings for which both, ld. PCIT and the ld. CIT, DR could not bring any material on record to controvert the verifiable factual position - Decided in favour of assessee.
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2022 (10) TMI 838
Disallowance of brand promotion expenses - Allowable revenue or capital expenditure - HELD THAT:- As decided in own case[ 2017 (6) TMI 1374 - ITAT DELHI] we fully concur with the findings of the Id. CIT (Appeals) also because similar recurring expenses incurred in earlier years have been allowed as Revenue expenses. The decisions relied upon by the Id. CIT (Appeals) also strengthen the finding arrived at by him under the facts and circumstances of the present case on the issue. The Hon ble Supreme court in the case of Empire Jute Company [ 1980 (5) TMI 1 - SUPREME COURT ] has been pleased to hold that it is only when an enduring advantage is in the capital field that the expenditure would be disallowable. If advantage of enduring benefit is in the Revenue field it would be on the Revenue account - Decided in favour of assessee. Late deposit of employee provident fund - HELD THAT:- As The Co-ordinate Bench of Tribunal in the case of Innovision Ltd. [ 2022 (10) TMI 792 - ITAT DELHI] has decided the issue in favour of the assessee. In parity, we see that no error has been committed by the CIT(A) while granting relief to the assessee. We thus decline to interfere with the order of the CIT(A). Inadvertent mistake as assessee has wrongly offered exempt income received by way of dividend as short term capital gain which is otherwise not taxable in law - CIT-A held that income inadvertently offered as taxable income under the head Short Term Capital Gain is exempt income indeed and not susceptible to taxation - HELD THAT:- CIT(A), in our view, has rightly applied the underlying principles of CBDT Circular No.14 dated 11.04.1955 wherein it was observed that the Department should not take advantage of the ignorance of the assessee and collect more tax without the same being due. Article 265 of the Constitution of India provides that no tax shall be levied or collected except by the authority of law. Acquiescence cannot take away from a party, the relief that he is entitled to. Thus, where the CIT(A) found on facts that the redemption amount of investment also comprises of certain exempt dividend income which has been wrongly offered for capital gain tax, the action of the CIT(A) in granting suitable relief cannot be faulted. In the absence of any rebuttal on facts, we see no reason to interfere with the relief granted by the CIT(A) in accord with law. We thus see no merit in the Ground No.2 of the Revenue s Appeal.
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2022 (10) TMI 837
Interest income declared by the assessee is less than the amount of interest shown as per 26AS statement - Income which is claimed to be belong to sister concern - HELD THAT:- We find the ld.CIT(A) sustained the addition in absence of any satisfactory explanation given by the assessee. It is the submission of the ld.counsel for the assessee that the amount of interest received from Canara bank belongs to the sister concern of the assessee whose name is somewhat similar with that of the assessee and the assessee does not have any bank account with the Canara bank. It is also his submission that given an opportunity, assessee is in a position to substantiate with evidence to the satisfaction of the AO that such interest income which belongs to the sister concern of the assessee has in fact been offered by them to taxation. We deem it proper to restore this issue to the file of the AO with a direction go grant an opportunity to the assessee to substantiate its case and decide the issue as per fact and law. The first issue raised by the assessee in grounds of appeal is accordingly allowed for statistical purpose. Expenditure incurred towards land development - HELD THAT:- Although the assessee has claimed such land development expenditure for the AY 2014-15, no such disallowance has been made in the order passed/s. 143(3)/153A. Similarly for AY 2015-16, although the assessee has claimed such expenses however, the AO in the order passed u/s. 143(3) r.w.s 153A has not made any disallowance. Considering the totality of the facts of the case and following the decision of the Tribunal in assessees own case for AY 2013-14 [ 2020 (7) TMI 40 - ITAT HYDERABAD ] we direct the AO to restrict such disallowance to 10% of the expenses claimed. The grounds raised by the assessee on this issue is accordingly partly allowed.
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2022 (10) TMI 836
TP adjustment - treating the overseas associated enterprises as 'tested party' - HELD THAT:- Foreign AEs are least complex entities and therefore, should be treated as tested parties and thus, no interference is called for with the order of Ld. CIT(A) in treating foreign AEs as tested party. Accordingly, grounds raised by the revenue on this issue for both the assessment years are dismissed. Nature of expenses - treatment of expenses incurred on software as revenue or capital - HELD THAT:- Considering the factual matrix of the present case which are similar to the fact based findings given in the preceding assessment years by the Co-ordinate Bench of ITAT, Kolkata in assessee s own case [ 2020 (2) TMI 1222 - ITAT KOLKATA ] So, also by considering the critical analysis done by the Ld. CIT(A) who had figured out the software expenses as capital asset, we do not find any infirmity in the order of Ld. CIT(A) on this issue and accordingly, ground raised by the revenue on this issue for AY 2014-15 is dismissed. Segmental accounts for establishing arms length price - HELD THAT:- From the factual position of the present case, where the segmental data of I2A and I2B for transaction with the assessee are placed on record against which the margin of the assessee has been bench marked for its arms length price, respectfully following the findings given by the Co-ordinate Bench in assessee s own case [ 2020 (2) TMI 1222 - ITAT KOLKATA ], we do not find any infirmity with the findings given by the Ld. CIT(A) and accordingly, delete the additions made in this respect. Accordingly, grounds taken by the revenue on this issue for AY 2015-16 are dismissed. Transfer Pricing adjustments in respect of export of software services and receipt of account management charges - HELD THAT:- We find that the TPA are primarily on the basis of issues which have already been dealt in these two present appeals in the above paragraphs relating to selection of tested party as foreign AEs and acceptance of segmental accounting data vis- -vis entity level data of the foreign AEs. TPO has rejected the claim of the assessee of taking the tested party as foreign AEs and resorted to taking comparables from the domestic companies. TPO resorted to the entity level data of the domestic companies taken by him as comparables for the purpose of bench marking done by him in respect of the transfer pricing adjustments. Transfer Pricing adjustments on this issue has also been made in AY 2014-15. Revenue is in appeal before us for AY 2014-15, but not on this issue. Further, from the feasibility of appeal before ITAT report placed on record in AY 2014-15, we note that no such ground of appeal has been recommended/approved for the transfer pricing adjustment made towards export of software services and payment of account management charges. Further, we have already given our findings in respect of the two issues which formed the basis of adopting tested party as foreign AEs and acceptance of segmental accounting data for the purpose of bench marking, in favour of the assessee and against the revenue. Thus, the premise on which Ld. TPO has made the transfer pricing adjustment itself does not stand and the bench marking exercise adopted by the Ld. TPO cannot be upheld. We also note that Ld. CIT(A) has considered the factual matrix as well as the judicial precedents of the preceding years in assessee s own case which are also on same pattern as in the present case and thus, we do not find any reason to interfere with the findings arrived at by the ld. CIT(A) in deleting the transfer pricing adjustment made by the Ld. TPO. Accordingly, we uphold the findings of the Ld. CIT(A) and dismiss the ground raised by the revenue on this issue.
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2022 (10) TMI 835
Interest u/s 244A - claim declined on the ground that the delay in refund is attributed to the assessee - HELD THAT:- What is, essential for declining interest to the interest assessee under section 244A(2), is that the delay in refund must be on account of reasons attributable to the assessee, and when there is a dispute about the period for which interest is to be declined, Chief Commissioner or Commissioner must take a call, in favour of the Assessing Officer s stand, on the same. None of these conditions are satisfied on the facts of this case. Just because an assessee has raised a claim by way of an additional ground of appeal before the Tribunal, it does not necessarily mean that the delay is attributable to the assessee-this delayed claim could be on account of subsequent legislative or judicial developments, or on account of other factors beyond the control of the assessee. This exercise of ascertaining the reasons of delay is an inherently subjective exercise, and well beyond the limited scope of mistake apparent on record on which no two views are possible. In any case, there is not adjudication by the Chief Commissioner or the Commissioner on the period to be excluded-something hotly contested by the assessee. Unless that adjudication is done, the denial of interest under section 244A cannot reach finality, and, for this reasons also, the impugned order does not meet our approval. We uphold the plea of the assessee and vacate the impugned rectification order. The assessee gets the relief accordingly.
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2022 (10) TMI 834
Deduction allowable us 80P(2)(d) - deduction in respect of interest from Co-operative banks - As per AO interest income was earned from co-operative bank, which are not co-operative society - HELD THAT:- The co-operative banks in which assessee had invested are registered as co-operative societies and therefore we are of the considered view that these banks are co-operative society as per the provisions of section 2(19) of the Act. If Revenue‟s plea is accepted then section 80P(2)(d) of the Act would be rendered completely otiose. We uphold the plea of the assessee and direct the AO to allow deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with co-operative banks, which are registered as co-operative societies under the relevant statute. As a result, grounds raised by the assessee are allowed.
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2022 (10) TMI 833
Income taxable in India - Taxability of income earned from testing and other services - India- Finland DTAA - HELD THAT:- This issue is covered against the assessee by the order of coordinate bench in assessee s own case for the immediately preceding AY 2015-16 [ 2019 (6) TMI 777 - ITAT KOLKATA ] as quoted by the Ld. DRP in its order. Thus we find no reason to take a divergent view on the identical issue. Accordingly, this ground of the assessee is dismissed. Levy of surcharge and education cess on the tax computed at the special rate provided under the provisions of Article 12 of the India Finland DTAA - HELD THAT:- As relevant articles in the two treaties of India Singapore and India Finland bear similarity and the findings given as recorded by ITAT Kolkata in the case of DIC Asia-Pacific Pte Ltd [ 2012 (6) TMI 686 - ITAT, KOLKATA ] are applicable in the present case. Thus, for the reasons set out in the said decision, we are of the view that surcharge and education cess cannot be levied in respect of tax liability of the assessee under DTAA. Accordingly, groundno. 3 of the assessee is allowed.
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2022 (10) TMI 832
Long term capital gain - adopting the circle rate of sale consideration prevailing on the date of registry instead of date of agreement to sell - whether assessee is entitled to get benefit of the proviso to Section 50C(1) of the Act or not? - HELD THAT:-In implementation of Section 50C (1) of the Act the parties in many times faced undue hardship and difficulties when agreement to sell of a property was executed in earlier years and transferred took place in later years. During the intervening period price of the property has increased but the vendor is bound to perform agreement and can claim only the agreed consideration.The second proviso to Section 50C(1) of the Act also provided some safeguards and check and balances to ensure that only in genuine case of prior agreements. The assessee had entered into an agreement to sell on 17.01.2012 and received the maximum sale consideration on or before 20.07.2012 itself and also found that the first payment received i.e. on 17/01/2012 was by way of RTGS, thereby the conditions in second proviso of Section 50C(1) has been complied by the assessee. Therefore we have no hesitation to hold that the benefit of the first proviso to Section 50C(1) of the Act has to be extended to the assessee and the rate prevailing as on the date of agreement should be considered for the purpose of computing the full value of consideration of such transfer. The Ld. CIT(A) has committed error by not extending the benefit of the proviso to Section 50C (1) of the Act and sustained the addition, which deserves to be deleted. Appeal filed by the assessee is allowed.
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2022 (10) TMI 831
Deduction u/s 80-IA - income shown under the head Other Income of the projects is not eligible for deduction u/s 80IA - HELD THAT:- Before us, the Revenue has not placed any material on record to demonstrate that the decision of the Tribunal in assessee s own case for earlier years has been stayed, overruled or set aside by higher judicial forums. It has also not pointed to any distinguishing feature in the facts of the case for the year under consideration and that of earlier years. In such a situation, we following the same reasonings given in assessee s own case by the Coordinate Bench of Delhi Tribunal in [ 2022 (2) TMI 1135 - ITAT DELHI] hold that the A.O. was not justified in denying the claim of deduction under section 80IA of the I.T. Act, 1961. We, accordingly, direct the A.O. to allow the claim of deduction under section 80IA on such income. Thus, the grounds of appeal of the assessee are allowed.
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2022 (10) TMI 830
Rectification u/s 154 - disallowance u/s 14A r.w.Rule 8D in computing book profit u/s 115JB in a proceeding u/s 154 - HELD THAT:- In the case of PCIT v. J.J.Glastronics (P.) Ltd. [ 2022 (4) TMI 1187 - KARNATAKA HIGH COURT] had held that in a proceeding u/s 154 of the I.T.Act, no disallowance u/s 14A can be made while computing book profit u/s 115JB of the I.T.Act. We hold that the A.O. is not justified in making disallowance u/s 14A r.w.Rule 8D in computing book profit u/s 115JB of the I.T.Act in a proceeding u/s 154. Inclusion of surplus in PSF(SC) does not qualify in any of the clauses (a) to (k) to Explanation 1 to section 115JB - In terms of the order dated 09.05.2006, of Airport Authority of India (AAI), collection and payment of Passenger Service Fees (Security Component) is to be managed by the assessee in trustee capacity for and on behalf of Airport Authority of India. In case any surplus amount remains, the same has to be transferred to Airport Authority of India as per clause (vi) of the aforesaid order dated 09.05.2006. Since the PSF(SC) is held by the assessee in a fiduciary capacity on behalf of Government of India, the assessee had maintained separate books of account. Admittedly, the accounts of the assessee are prepared in accordance with the provisions of Schedule III to Companies Act, 2013 (18 of 2013). There is no qualification from the Statutory Auditor, Director or the Registrar of Companies in regard to the non-inclusion of the amount of surplus in PSF(SC). Hence, the inclusion of surplus in PSF(SC) does not fall in any of the clauses (a) to (k) of Explanation to section 115JB of the I.T.Act. Hence, the adjustment so made by the A.O. in section 154 proceedings is contrary to the provisions and the settled legal position. In this context, we rely on the judicial pronouncements cited by the assessee in support of his case.
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2022 (10) TMI 829
Deduction u/s 54 - new asset was not acquired within the prescribed time - AO restricted the deduction - contention of the assessee is that the lower authorities have erroneously taken the date of purchasing new asset as the date when the assessee had paid the last instalment i.e. 27.03.2012 - what is the date of purchasing of new asset? - HELD THAT:- Section 54 speaks about purchase of new asset within one year before the date on which transfer of the original asset took place. In our considered view the AO has misdirected himself by treating the date of initial payments made by the assessee as the date of purchase of the new asset. It is to be borne in mind that as per Section 2(47) of the Act, transfer in relation to a capital asset would also include any transaction allowing of any immovable property to be taken or retained in part performance of the contract of the nature referred to in Section 53A of the Transfer of property Act, 1882. Date of purchase would be when possession is offered by the builder in the present case. Since the payments made to builder would construe part performance by the assessee. However, without possession he would not be entitled for claiming transfer in terms of Section 2(47) - There is no quarrel so far the mandate of law that in terms of Section 54, the assessee is required to appropriate the capital gain towards the purchase of new asset made within year. It is the purchase which should be made within one year and in the absence of possession there would not be any transfer of capital asset, hence no purchase of new asset in terms of Section 54 of the Act. Undisputedly, the AO gave part relief by treating last instalment paid by the assessee as the capital gain appropriated within one year. In our view this act is not as per the intent of the provision. The possession of new asset was given by the builder within one year of sale of original asset. The date of handing over of possession would be date of purchase, since right over the property passed on the day of handing over of possession. Respectfully following in the case of CIT Vs. Smt Bina K. Jain [ 1993 (11) TMI 7 - BOMBAY HIGH COURT] , we hold that the assessee is entitled for deduction u/s 54 of the Act. We, therefore, direct the AO to grant deduction u/s 54 of the Act as claimed by the assessee and delete the impugned additions. The grounds raised in this appeal are allowed in terms indicated hereinabove. Appeal of assessee allowed.
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2022 (10) TMI 828
Estimation of income - Bogus purchases - quantification of the profit which the assessee would have made by procuring the goods in question not from the aforementioned seven parties, but at a discounted value from the open/grey market - HELD THAT:- As the assessee has not filed any appeal before us, therefore, despite our aforesaid observations we are constrained to sustain the addition as regards the bogus purchase of 51585 quintals of rice (valued at Rs.8,86,87,200/-) as had been upheld by the CIT(Appeals) i.e @ 2.62% of the value of the aforesaid impugned bogus purchases of rice. Broken Rice (4000 quintals of bogus/unproved purchase - We find substance in the claim of AR that as it is not a case that the assessee had made any purchases from his unaccounted money, therefore, the very basis for making the impugned addition of peak purchases cannot be sustained and had rightly been struck down. As observed by the CIT(Appeals) and, rightly so, the aforesaid addition has no legs to stand upon in the backdrop of the facts involved in the case before us. Admittedly, the payments towards the impugned purchases have been made by the assessee from his bank accounts which were duly disclosed in his books of accounts. In our considered view the concept of peak addition would come into play in a case where the assessee had made certain undisclosed purchases out of his unaccounted money lying in a bank account, wherein, after considering the withdrawals made from the said account the addition in all fairness has to be restricted to the extent of peak credit appearing in the said account. Now when the assessee had admittedly made the payments for making the impugned purchases from his duly disclosed sources i.e. bank accounts, therefore, there could have been no justification for the A.O to have made an addition of the amount of peak purchase - We, thus, concur with the view taken by the CIT(Appeals) and uphold his order to the said extent. Thus, the Ground of appeal No. 2 is dismissed in terms of our aforesaid observations. Addition on account of short yield of rice as in comparison to the percentage of yield as mentioned in contract executed by the assessee with Chhattisgarh State Government Authorit y - HELD THAT:- We find substance in the claim of the Ld. AR that as the addition was made by the A.O on the basis of misconceived and incorrect facts, thus, the same had rightly been vacated by the CIT(Appeals). On a perusal of the orders of the lower authorities, it transpires that the A.O while arriving at the assessee s yield of rice for the year under consideration at 65% had failed to consider 3% yield of Kanka(broken rice). In sum and substance, though the yield of rice of the assessee was 68% [65% (rice) + 3% (kanka)], but the same had wrongly been taken by the A.O at 65%. A.O had excluded the yield of broken rice (kanka) while working out the yield criteria. As the yield of rice alongwith yield of broken rice (kanka) works out at 68%, therefore, in our considered view the CIT(Appeals) had rightly vacated the adverse inferences drawn by the A.O. A perusal of the yield of rice of the assessee during the year under consideration as in comparison to that of the immediately preceding two years which had been accepted by the department in the course of respective scrutiny assessments for the said years, further fortifies its claim that no adverse inferences as regards its yield of rice for the year under consideration was liable to be drawn. We, thus, finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition of Rs.10,39,700/- made by the assessee on account of short yield of rice, uphold his order to the said extent. Thus, the Ground of appeal No.3 is dismissed in terms of our aforesaid observation. Addition on account of bogus sundry creditors - unaccounted income of the assessee - CIT-A deleted the addition - HELD THAT:- As authenticity of the aforesaid creditor, viz.M/s. Amira Pure Foods Pvt. Ltd. was duly substantiated by the assessee on the basis of supporting documentary evidence, therefore, there was no justification for the A.O to have drawn adverse inferences as regards the genuineness and veracity of the said party and treat the amounts shown against it as the unaccounted income of the assessee. We, thus, finding no infirmity in the view taken by the CIT(Appeals) in so far he had vacated the addition appearing in the name of the aforesaid party i.e. M/s. Amira Pure Foods Pvt. Ltd. Addition for the reason that Shri Mohanlal Agrawal, proprietor of the said concern had himself admitted on oath that the aforesaid concern was a bogus concern - On a perusal of the details of the seven parties (supra) purchases from whom have been held to be bogus in the hands of the assessee, we find that the same does not make any reference of the aforementioned concern i.e. M/s. Shyamji Rice Mill. Accordingly, we are unable to concur with the reasons given by the CIT(Appeals) for vacating the impugned addition that was made by the A.O w.r.t the amount shown against the aforesaid party, viz. M/s Shyamji Rice Mills (supra). Unaccounted sales of the assessee that had surfaced in the course of verification of the expenses that were claimed by the assessee to have been incurred on transportation of rice through railway rakes - Admittedly, it is a matter of fact borne from record that the assessee had over the year booked 16 railway rakes through which 405145.50 quintals of rice/broken rice was transported. As the assessee was able to substantiate his claim that the railway rakes booked by him were also used by certain parties for transporting their rice/broken rice only to the extent of 208222 quintals, therefore, the CIT(Appeals) had concluded that the balance 107127.50 quintals of rice/broken rice which was though claimed by the assessee to have been transported by third parties was in fact his unaccounted sales. Apropos the scaling down of the unaccounted sales to 107127.50 quintals of rice/broken rice as against that taken by the A.O at 303080 quintals of rice/broken rice, the same in our considered view being based on the confirmations provided by third parties who had clearly admitted on the basis of supporting documentary evidence/details that they had transported their rice/broken rice through railway rakes booked by the assessee merits acceptance Now when the assessee had duly substantiated that as a matter of trade practice certain duly identified third parties had transported/dispatched 208222 quintals of rice/broken rice in the railway rakes that were booked by him on 16 occasions during the year under consideration, therefore, no infirmity emerges from the order of the CIT(Appeals) who had rightly scaled down the quantum of unaccounted sales of the assessee as taken by the A.O at 303080 quintals to 107127.50 quintals. We, further, concur with the observation of the CIT(Appeals) that now when the assessee had himself during the year under consideration transported/dispatched 56876.75 quintals of rice (valued at Rs.10.09 crore) through wagons booked by a total of 18 third parties and 80131 quintals of broken rice (valued at Rs.11.52 crore) through wagons booked by certain third parties, therefore, the same in itself was a sufficient evidence of the trade practice wherein in the normal course the party who had intended and was allotted the railway rake on not being able to fully load the wagons would make available the unutilized space for transporting of rice/broken rice of third parties who would bear the transportation charges for the same. Qualification of profit element involved in the unaccounted sales - There appears to be no logical reasoning for the A.O to have quantified the profit element involved in the unaccounted sales @25% of the value of the impugned sales. As in the case before us the issue herein involved hinges around the quantification of the profit on the unaccounted sales, therefore, the same in our considered view could fairly be determined by applying the overall disclosed GP rate of the assessee on the quantum of the unaccounted sales as had rightly been done by the CIT(Appeals). We, thus, fining no infirmity either as regards the quantification of the unaccounted sales of the assessee; or the quantification of the profit element/income therein involved as had been worked out by the CIT(Appeals) @ 2.62% (i.e. the overall GP rate disclosed by the assessee during the year under consideration) on the amount of the unaccounted sales of Rs. 18,26,19,512/- (107127.50 quintals of rice/broken rice), therefore, uphold the same in terms of our aforesaid observations.
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2022 (10) TMI 827
Disallowance u/s 14A read with Rule 8D - suo moto disallowance by assessee - Necessity of recording satisfaction - HELD THAT:- We find that this issue has recently been decided by the coordinate bench of the Tribunal in assessee s own case in Reliance Industries Ltd [ 2022 (3) TMI 1433 - ITAT MUMBAI] as specifically observed that since the assessee has not correctly apportioned any expenses as having been incurred for earning this exempt income, we are not satisfied with regard to correctness of the claim of expenditure made by the assessee, and, accordingly, provisions of rule 8D of the Income Tax Rules are being invoked . It cannot, therefore, be said that the Assessing Officer has proceeded to make the disallowance under section 14A r.w.r 8D without recording satisfaction for rejection of the disallowance computed by the assessee - As a result, ground No. 1 raised in assessee s appeal is dismissed. Disallowance u/s 14A being higher of 0.5% of average value of investments which have yielded exempt income during the year or expenses disallowed by the assessee - HELD THAT:- As decided in own case [ 2020 (12) TMI 165 - ITAT MUMBAI] findings of the learned CIT(A) are upheld as CIT(A) referred to several judgements relied upon by the assessee and directed that disallowance should be computed @ 0.5% by taking average value of those investments which have yielded dividend during the year under consideration or the expenses disallowed by the assessee whichever is higher, both in normal provisions as well as book profit u/s. 115JB. Computation of book profit under section 115 JB by considering the disallowance under section 14A - HELD THAT:-Since, similar issue has already been decided in assessee s own case for preceding assessment years, therefore, we see no reason to deviate from the view so taken by the coordinate bench of the Tribunal, in absence of any allegation of change in facts and law. Thus, respectfully following aforesaid judicial precedent we direct the AO to delete the adjustment of disallowance under section 14A while computing book profit under section 115 JB of the Act. As a result, ground No. 3 raised in assessee s appeal is allowed. Disallowance of depreciation on the opening WDV of capitalised value of goods - HELD THAT:- We find that similar issue in respect of depreciation claimed on the opening WDV of capitalised value of goods purchased from P.K. Agarwal group concern has been decided against the assessee by the coordinate bench of the Tribunal in assessee s own case in preceding assessment years. Respectfully following judicial precedents in assessee s own case, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground raised in assessee s appeal is dismissed. Addition on account of interest on income tax refund to the book profit of the assessee u/s 115JB of the Act - Once assessee s accounts have been maintained in accordance with Companies Act and the same have also been scrutinised and audited by the statutory auditor, in absence of any material to negate these facts, the AO has limited power under section 115 JB of the Act to make adjustment to book profit only in respect of the items provided in Explanation 1 to section 115 JB (1). As regards the submission of DR that the information regarding interest on income tax refund being not included in the profit and loss account has not been disclosed by the assessee in its annual accounts and thus could not be said to be approved in the AGM or filed with the ROC and other statutory authorities, we find that no evidence has brought on record to the effect that because of such non-disclosure the accounts of the assessee were not maintained as per the provisions of Companies Act and other relevant rules and regulations. No such objection by the statutory auditor or ROC or other statutory authority has been brought to our notice. In the present case, there is no dispute on the fact that assessee has offered interest on income tax refund to tax while filing its return of income and same has also been assessed under the normal provisions of the Act. Accordingly, we find no merits in addition of interest on income tax refund for computing the book profit under section 115 JB of the Act and the AO is directed to delete the same. As a result, ground No. 5 raised in assessee s appeal is allowed. TP adjustment on account of notional interest charged on share application money returned by the associated enterprise ( AE ) - HELD THAT:- From the perusal of aforesaid Master Direction issued by RBI, it is evident that direct investments by residents in joint venture and wholly-owned subsidiary abroad are being allowed in terms of section 6(3)(a) of Foreign Exchange Management Act, 1999 read with Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004. As per the aforesaid Master Direction, share certificate or any other document as an evidence of investment in foreign entity is to be received by the Indian party within 6 months from the date of effective remittance. In the present case, in respect of last remittance on 21/03/2016, for the year under consideration, shares were allotted on 19/09/2016 and excess share application money amounting to Rs. 45,76,26,069 was refunded to the assessee. It is not the case of the Revenue that even after issuance of shares on 19/09/2016 excess share application money was withheld by the AE and was refunded subsequently. In this case, much before the issuance of shares on 19/09/2016, in respect of remittance made on 21/03/2016, excess share application money was refunded to the assessee in July 2016. These facts are also not disputed by the Revenue. Thus, in view of the above, when the transaction of subscribing to preference shares was itself not found to be bogus or sham, we do not find any merits in findings of learned CIT(A) in upholding levy of interest on excess share application money refunded, by treating the same as loan. Therefore, we direct the AO/TPO to delete the adjustment on account of levy of interest on excess share application money refunded. As a result, grounds raised in assessee s appeal are allowed. Disallowance of expenditure incurred by the assessee on aborted blocks of contract areas other than eligible unit - HELD THAT:- As decided in own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] deduction u/s 80IB(9) of the Act has to be computed in terms of sec. 80IB of the Act. Sec. 80IB(13) of the Act provides that the provisions of sec. 80IA(5) shall apply and under the provisions of sec. 80IA(5) of the Act, the profits and gains of eligible business, for the purposes of sec. 80IB, shall be computed as if such eligible business were the only source of income of the assessee. In view of these provisions, the deduction u/s 80IB(9) has to be computed after ascertaining profits and gains of eligible business in terms of sec. 80IA(5) of the Act. Hence there is no scope to adjust expenses relating to other undertaking while computing deduction u/s 80IB(9) of the Act. Ground raised in Revenue s appeal is dismissed. Deduction u/s 80 IB (9)(ii) in respect of natural gas and condensate - HELD THAT:- As relying on assessee own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] the term mineral oil , for the purpose of claiming deduction u/s 80-IB(9) of the Act includes natural gas and condensate and therefore the assessee claim for deduction us 80IB(9) of the Act in respect of both natural gas and condensate is accordingly allowed. Accordingly, this ground of appeal is accordingly allowed. Computation of deduction under section 10 AA - HELD THAT:- As relying on assessee own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] - Upheld the plea of the assessee in principle and directed the AO to grant the relief accordingly. Since, this is a recurring issue, therefore, we see no reason to deviate from the conclusion so reached by the coordinate bench of the Tribunal in assessee s own case in preceding assessment years, in absence of any allegation of change in facts and law. Thus, with similar directions, the plea of the assessee is accepted in principle. Accordingly grounds No. 4 5 raised in Revenue s appeal are dismissed. Deduction u/s 35(2AB) of the Act in respect of R D expenditure - HELD THAT:- It is pertinent to note that prior to the aforesaid amendment, no such authority was granted to DSIR for approving any expenditure for the purpose of claiming deduction under section 35(2AB) of the Act. The pre-amended rules do not prescribe any methodology of approval to be granted by the prescribed authority vis- -vis expenditure from year to year. Since the amendment has come into effect only from 01/07/2016, the same would only apply from assessment year 2017-18. Thus, respectfully following the aforesaid decision of coordinate bench of the Tribunal in M/s. Glenmark Pharmaceuticals Ltd. [ 2019 (8) TMI 1649 - ITAT MUMBAI] . we find no infirmity in the aforesaid findings of learned CIT(A). As a result, ground No. 6 raised in Revenue s appeal is dismissed. Disallowance of long term capital loss and short term capital loss on sale of non-cumulative compulsory convertible preferential shares - HELD THAT:- We find that in assessee s own case for preceding assessment years, investment in NCCPs have been held to be investment in the nature of capital asset and its re-characterisation as loan has been quashed. Accordingly, we find no infirmity in the findings of the learned CIT(A) on this issue. As a result, grounds raised in Revenue s appeal are dismissed. Transfer pricing adjustment on account of interest on delayed receipts of sale proceeds - HELD THAT:- As relying on own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] no case has been made out that the spread of 200 bps is lower than the arm s length price. As regards the cost-plus method on the cost of funds, we find it is fundamentally flawed inasmuch as it treats all the types of borrowing at par and proceeds on the erroneous assumption that the arm s length price of the debt has, at its basis, cost of funds available to the tested party- particularly when these funds are of significantly different tenures and different currencies. Thus, we find no infirmity in findings of learned CIT(A) on this issue. Accordingly, grounds raised in Revenue s appeal are dismissed. Adjustment on account of preference shares subscribed by assessee of its associated enterprise - HELD THAT:- As decided in own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] Many of the issues being raised in the grounds of appeal are neither on the specific findings of fact, nor even specific arguments on facts before us, and have not been raised in the TPO s order. Just because if the assessee was to give loans, rather than make investments in the compulsorily convertible shares, the Indian tax base would not have been eroded cannot be reason enough to disregard the reality of investment having been made in the compulsorily convertible preference shares, and proceed to benchmark the transaction as that of a loan. The BEPS action plan, unless it results in an appropriate amendment in law, and the change in the definition of international transaction, including capital financing in its ambit, has no impact on the stand of the CIT(A) because what has been held is that this transaction cannot be compared with a loan. In the light of these discussions, as also bearing in mind the entirety of the case, we approve the conclusions arrived at by the learned CIT(A) on this point as well, and decline to interfere in the matter. TP adjustment for drilling support services provided by the assessee to its AE pursuant to agreement with Kurdish government - HELD THAT:- As in assessee own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] undoubtedly, one of the critical factors in determining the ALP, as recognized by rule 10B(2)(d), is conditions prevailing in the market in which AEs operate, and once it s a legal condition precedent in entering the transaction in the respective PSC market is that the AE s affiliates are not allowed to have any mark up on a supply of services to the AE, the determination of ALP is required to be having regard to this condition. Viewed thus, the cost to cost rendition of services can be indeed be viewed as an arm s length transaction. - Decided against revenue. Determination of arm s length price for corporate guarantee given to its AE - HELD THAT:- As decided in own case [ 2022 (3) TMI 1433 - ITAT MUMBAI] 50:50 allocation is reasonable, and there is no change in the material facts, we see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee s own cases for the preceding assessment years. We, therefore, approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. Ground of Revenue s appeal are dismissed. Selection of comparables for benchmarking the international transaction pertaining to determination of arm s length price of business support services availed from the AE vis- -vis. - HELD THAT:- Companies different with functional profile of assessee is to be rejected as suitable comparable. Determination of arm s length price for inter-unit transfer of power - HELD THAT:- We are in considered agreement with the view taken by the coordinate bench in the assessee s own case for the immediately preceding assessment year [ 2022 (3) TMI 1433 - ITAT MUMBAI] and we are unable to see any legally sustainable basis for rejection of internal CUP on the facts of this case. Respectfully following the views so expressed by the coordinate bench, which, in turn, follows the views of other coordinate benches and Hon ble jurisdictional High Court in assessee s own case, we uphold the plea of the assessee.
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2022 (10) TMI 826
TDS u/s 194H - disallowance of discount given to prepaid distributors u/s.40(a)(ia) - HELD THAT:- We have no hesitation in holding that the relationship between assessee and distributor is only that of Principal to Principal and not that of Principal to Agent and accordingly there is no obligation for the assessee to deduct tax at source in terms of section 194H of the Act. We do not deem it fit to adjudicate other arguments advanced by the ld. AR on the applicability of second proviso to section 40(a)(ia) read with section 201 of the Act, as it would become academic in nature. This aspect of the issue is left open. In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the sale of prepaid sim cards / recharge vouchers by the assessee to distributors cannot be treated as commission / discount to attract the provisions of section 194H and hence there cannot be any obligation on the part of the assessee to deduct tax at source thereon and consequentially there cannot be any disallowance u/s 40(a)(ia) of the Act. Accordingly, the Ground No. II raised by the assessee is allowed. The Ground No. I raised by the assessee is only supporting the Ground No. II for furnishing of additional evidences, the adjudication of which becomes academic in nature. Hence Ground No. I is also allowed. Disallowance of compensation cost of ESOP on account of Employee Stock Option Scheme (ESOP) - HELD THAT:- As decided in M/S. BIOCON LIMITED [ 2013 (8) TMI 629 - ITAT BANGALORE] discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act. The question before the special bench is thus answered in affirmative by holding that discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head 'Profits and gains of business or profession - Also confirmed by HC M/S. BIOCON LTD. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] Decided in favour of assessee. Addition made on account of foreign exchange gain - cost of assets was not reduced with the aforesaid gain and thereby assessee had claimed excess depreciation - AO observed that in the computation of income, the assessee has reduced on account of gain of foreign exchange fluctuation relating to fixed assets - HELD THAT:- Primafacie on reading note No.3(a) to the income tax depreciation schedule enclosed we find that Rs.519.65 million representing foreign exchange gain relatable to acquisition of fixed assets seem to have been adjusted with the cost of fixed assets as per Section 43A of the Act. However, in order to avoid doubts, we deem it fit and appropriate to remand this issue to the file of the ld. AO for the limited purpose of verification of the fact as to whether this foreign exchange gain of Rs.519.65 million had been reduced from the cost of fixed assets or not. If it is found to be reduced, then the addition made by the ld. AO need to be deleted. With these directions, the ground No.IV is allowed for statistical purposes. Disallowance made u/s.14A - sufficiency of own funds - HELD THAT:- As in the absence of any exempt income there cannot be any disallowance u/s.14A of the Act. We direct the ld. AO to delete the disallowance made u/s.14A of the Act. Accordingly, the ground raised by the assessee is allowed. Disallowance of Revenue sharing license fees - HELD THAT:- We find that this is a recurring issue in the case of the assessee - The very same issue in the case of the assessee for A.Y.2003-04 in Income Tax Appeal [ 2016 (4) TMI 1410 - BOMBAY HIGH COURT] was decided in favour of the assessee by the Hon ble High Court by allowing it as Revenue expenditure u/s.37(1) of the Act. As in the interest of justice and fair play, we remand this issue to the file of the ld. AO for limited purpose on verification of the fact as to whether the assessee has claimed double deduction in respect of this expenditure for the same circle where the assessee is operating its telecom services. If it is found that there is no double deduction claimed by the assessee, the assessee would be eligible for deduction as revenue expenditure u/s.37(1) of the Act which would be in tune with the decisions rendered by the Hon ble Jurisdictional High Court in assessee s own case for A.Yrs. 2003-04, 2006-07 and 2007-08 referred to supra. With these observations, the ground raised by the assessee is allowed for statistical purposes. Disallowance on proportionate deduction u/s.35DD in respect of legal fees incurred on amalgamation - HELD THAT:- This claim is only remaining 1/5th of the total legal fees claimed by the assessee which was incurred in A.Y.2004-05 being the first year. The present assessment year i.e. A.Y.2008-09 would be the 5th year of claim and accordingly, we direct the ld. AO to grant deduction of the remaining 1/5th portion being the legal fees incurred on merger expenses u/s.35DD of the Act in tune with orders passed for the earlier years. Accordingly, the ground No.VIII raised by the assessee is allowed. Disallowance of compensation cost of ESOP while computing book profit u/s.115JB of the Act - HELD THAT:- The compensation cost of ESOP would be allowable as revenue expenditure for the assessee company on merits. Hence, the said expenditure is not be eligible to be added back for computing the book profit u/s.115JB of the Act, as we have already held that the said expenditure is not contingent or notional in nature. Accordingly, the ground IX raised by the assessee is allowed. Disallowance u/s.14A of the Act while computing book profits u/s.115JB - HELD THAT:- As already held no disallowance u/s.14A of the Act could be made in the instant case as there was no exempt income claimed by the assessee. The said decision would hold good for this ground also as admittedly Clause f of Explanation 1 to Section 115JB(2) of the Act would come into operation only if there is exempt income credited in the profit and loss account. Accordingly, the ground No.X raised by the assessee is allowed. Disallowance of interest paid on borrowed funds in respect of interest free loans / advances to subsidiary company - HELD THAT:- ABTL was having telecom circle license in Bihar and Jharkhand. They were also engaged in telecommunication business. Assessee is also engaged in telecommunication business. Hence, commercial expediency is proved beyond doubt. The other two advances are given to assessee own group companies which are engaged in the same business. In any case, decided in favour of the assessee by the Tribunal for A.Y.2007-08 [ 2016 (5) TMI 1592 - ITAT MUMBAI] wherein this interest disallowance was deleted by the Tribunal - Decided against revenue. Disallowance on account of club entrance fees - HELD THAT:- We find that these amounts were paid for membership of various clubs in order to enable the Senior Executives to socialise and develop contacts with various persons for promoting the assessee s business. The membership of any club, in our considered opinion, does not bring in any enduring benefit to the club member. We find that this Tribunal for A.Yrs. 2006-07 and 2007-08 [ 2016 (5) TMI 1592 - ITAT MUMBAI] in assessee s own case had deleted the disallowance. It is also pertinent to note that the Revenue though challenged the Tribunal order passed for A.Y.2006-07 and 2007-08 before the Hon ble Jurisdictional High Court, chose not to raise any question of law with regard to this issue of disallowance of club expenses. This goes to prove that the Tribunal order for A.Yrs.2006-07 and 2007-08 dated 27/05/2018 wherein the club expenses was allowed as Revenue expenditure had attained finality. Hence, the ground No.3 raised by the Revenue has no legs to stand and hence, dismissed. Claim of the assessee to allow further expenditure being the expenditure made by the assessee during the course of assessment proceedings and not in the return of income - HELD THAT:- As there is nothing wrong apparently in the claim made by the assessee with regard to liability of expenses and its business nexus thereon. As stated earlier, there is absolutely no grievance that could be present in the instant case for the Revenue as the ld. CIT(A) had only directed the ld.AO to examine the allowability of the expenses based on extensive verification with supporting documents. However, it is a fact that none of the ld. AO had not given any factual finding with regard to the allowability of these additional claim of expenses. This aspect requires factual verification by the ld. AO and hence we deem it fit and appropriate to remand this issue to the file of ld. AO for denovo adjudication in accordance with law. Accordingly, the ground No.4 raised by the Revenue is allowed for statistical purposes.
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2022 (10) TMI 825
Expenses under the head punitive charges - punitive charges was the charges levied by the East Coast Railway for transport of the excess material as prescribed by the railways - whether allowable expenditure u/s 37(1)? - CIT-A deleted the addition - HELD THAT:- The term prohibited by law as occurring to Explanation 1 to Section 37(1) of the Act has been explained by the Hon ble Supreme Court in the case of Apex Laboratories (P.) Ltd., [ 2022 (2) TMI 1114 - SUPREME COURT] as after considering the term prohibited by law came to the conclusion that such acts which would wholly undermine public policy and which would defeat the object of a statute or is an illegality which goes to the root of the matter, the expenditure in relation to the same is not allowable. If one is to understand the concept of punitive charges, clearly the punitive charges are plain and simple overloading charges. These charges are not levied on account of any act done by an assessee in violation of any law, nor it is a fine levied on the assessee for an infraction of the law much less the doing of a prohibited activity. This being so, we are of the view that the ld. CIT(A) was right in deleting the disallowance as made by the AO. Appeal of the revenue stands dismissed.
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2022 (10) TMI 824
Assessment of trust/AOP - trust to be assessed in the status of AOP - Levying tax at the maximum marginal rate instead of rates applicable to individuals - exemption u/s 11 denied on no registration u/s. 12A - HELD THAT:- On careful reading of sub-section (2) of section 164 we note that in the case of relevant income which derived from property held under trust wholly for charitable or religious purposes, the said income is not exempt u/s. 11 of the Act is to be treated the income of association of persons. Admittedly, for having no registration u/s. 12A of the Act, the CPC, Bangalore denied exemption u/s. 11 of the Act, but however, applied maximum marginal rate. Admittedly the exemption u/s. 11 was denied for not having registration u/s. 12A of the Act and there is no specific mention of that a violation u/s. 13(1)(c) and (d) of the Act. Therefore, find force in the arguments of ld. AR that there was no violation u/s. 13(1)(c) and (d) of the Act for denial of exemption u/s. 11 but exemption u/s. 11 denied only for not having registration u/s. 12A of the Act. Therefore, in my opinion, that proviso is not applicable as relied on by the ld. DR. Admittedly, the trustees are not entitled to any share in the income of the assessee as it is meant for charitable or religious purposes. Therefore, the tax rates in such cases are at the rate ordinarily applicable to an association of persons and not at the maximum marginal rate. In the light of above finding of Tribunal of Shri Hanuman Mandir Trust [ 2002 (2) TMI 357 - ITAT PUNE ] we note that the assessee is a religious trust and the income derived from property of the said trust utilized to the deity and there is not dispute with regard to the said fact as it was contended by the ld. AR that the entire income goes to the deity who is the assessee. Therefore, these findings are applicable to the facts on hand and hold that the assessee is assessable under the status of AOP, as per the rates applicable to an individual. Further, in the case of Vijaya Durga Devi Trust [ 2019 (6) TMI 1047 - ITAT PUNE ] which is also a religious trust assessed in the status of AOP which is evident from para 2 of the said decision. The Tribunal held the income of the said trust is to be computed on the basis of tax rates applicable to an individual if the entire income is utilized for the upkeep of deity. As discussed above, there is no dispute with regard to the income of the assessee in the present case is used for deity i.e. assessee. Therefore, the income should be taxed at the rate applicable to the individual. Therefore, the order of CIT(A) is not justified and it is set aside. Thus, the ground raised by the assessee is allowed.
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2022 (10) TMI 823
Revision u/s 263 by CIT - Addition u/s 69A - As per CIT AO did not enquire into all relevant issues involving the assessee s foregoing deposits and business turnover whilst framing the assessment and therefore, the same attract section 263 jurisdiction - HELD THAT:- Assessment nowhere indicates such detailed inquiry by the AO which renders the impugned regular assessment as erroneous as well as prejudicial one to the interest of revenue as held in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] - All these Revenue s arguments fail to evoke our concurrence. We make it clear that the sole issue therein is assessee s cash deposit in bank account out of which he could only explain the recorded sales turnover - It is in this factual backdrop that the Assessing Officer had accepted the source of foregoing cash deposit to the extent of recorded sales turnover and treated the remaining amount as unexplained u/s 69A - Meaning thereby that the Assessing Officer had already assessed the assessee u/s 69A. And there is nothing more left to conclude that the foregoing unaccounted sum deserves to be added in any other head of income. Faced with this situation, we hold that the Assessing Officer took one of the two possible views in invoking section 69A of the Act whilst dealing with assessee s cash deposit which could hardly be taken as an instance of the impugned assessment as erroneous causing prejudice to interest of revenue, simultaneously, as per their lordships landmark decision in Malabar Industrial Co. (supra). We thus reverse the PCIT s revisional directions in issue. Assessee appeal allowed.
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2022 (10) TMI 822
Penalty u/s 271FA - delay in filing of Form SFT as per Section 285 BFA - HELD THAT:- Going through the co-joint reading of Section 285BA and Section 271FA of the Income Tax Act, we are of the view that it was a statutory obligation on the part of the assessee to furnish AIR as has been specified in Section 285BA of the Act. However, the assessee bank i.e.Sawaimadhopur Urban Cooperative Bank Ltd falling within the ambit of Section 285BA of the Act failed to comply with the legal requirements for the period 2018-19. A Notice dated 20-12-2019 was issued by the AO which was received by the assessee on 30-12-2019 and the assessee complied with the requirement of Section 285BA of the Act by filing the Annual Information Return SFT-003 on 12-02-2020, SFT-004 on 18-02-2020, SFT-005 on 20-02-2020. However, while doing so, there was delay of 264 days in furnishing the AIR for the period under consideration. Since it was a statutory obligation on the part of the assessee bank to furnish AIR as a specified instruction u/s 285BA, therefore, any argument of the assessee with regard to ignorance of law or adopting casual and cavalier attitude is of no help to the assessee. CIT(A) has passed the well reasoned order by holding that the assessee bank has not given any reasonable cause of statutory non-compliance of filing of SFT within due time. Therefore, we find no reason to interfere with the order of the ld. CIT(A) which is sustained. Thus the appeal of the assessee is dismissed with no order as to costs.
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2022 (10) TMI 821
Revision u/s 263 by CIT - Addition u/s 68 - unaccounted gift received from own son - HELD THAT:- A prima facie finding has been recorded by the ld PCIT based on perusal of the assessment records that the Assessing officer has failed to verify the creditworthiness of the donor and the order so passed by the AO has been held to be erroneous in so far as prejudicial to the interest of the Revenue. In light of the same, merely the fact that the proposal was send by the AO on 20/02/2021 and the show-cause u/s 263 was issued on the same date doesn t in any way reflect non-application of mind on part of the PCIT in assumption of jurisdiction by the PCIT. We therefore do not find any infirminity in the assumption of the jurisdiction by the ld PCIT u/s 263 of the Act and the contention so raised by the ld AR in this regard cannot be accepted. It s a case of limited scrutiny to examine the increase in share capital and as per the assessee, the increase in share capital is on account of gift - received from his son who is based out of Melbourne, Australia. As per well established jurisprudence on the subject, the identity of the person giving the gift, relationship of such person with the assessee, financial capacity or creditworthiness of the person making the gift, the occasion to make such a gift or the circumstances to show natural love and affection and all these taken together to prove the genuineness of the gift transaction was required to be examined by the AO. In the instant case, we find that the AO has accepted the genuineness of the gift transaction on the basis of submission made by the assessee that an amount has been received as gift from his son who is in Melbourne, Australia through NEFT from Commonwealth Bank on 24/11/2015 and 04/12/2015 and in support, copy of the bank statement of the assessee, the copy of passport of his son and a confirmation from his son was also submitted. The passport do reflect the relationship of father and son, however, the question is what are the circumstances which necessitated such transaction of sending money by way of gift from Melbourne on two different occasions. The so called confirmation letter which is undated, handwritten and the contents thereof only talks about transfer of money by a son to his father from the Commonwealth Bank account on two different dates and the amount of transfer doesn t inspire much confidence and in any way doesn t establish the nature of such transfer as gift by son to his father. The fact that the AO has accepted the same on face value shows clearly non-application of mind by the AO. The limited queries which were raised by the AO and responded to by the assessee during the course of assessment proceedings nowhere demonstrate that the matter relating to creditworthiness were even intended to be examined by the AO. The AO having failed to examine the creditworthiness of the donor and the circumstances leading to such transfer of funds to the assessee shows that the AO has failed to act in accordance with the law and well-established judicial principles and jurisprudence laid down by the Courts from time to time. Where the ld PCIT is highlighting the said inaction on part of the AO, he is well within his right and jurisdiction and it is clearly not a question of arriving at a different conclusion by the ld PCIT than what has been arrived at by the AO. No doubt the AO has mentioned about this transaction in the assessment order, however, merely stating that he has examined the transaction and being satisfied, he didn t drawn any adverse inference, doesn t debar the ld PCIT from highlighting the fact that the order so passed by the AO is not in accordance with law having failed to examine one of the essential ingredients being the creditworthiness of the donor. It is not the mode and manner of examination by the AO which is being highlighted by the ld PCIT rather the ld PCIT is highlighting what is an essential attribute of the transaction which require examination as per established legal principles and the non-examination thereof leading to the passing of the erroneous order by the AO. Decided against the assessee.
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2022 (10) TMI 820
Methodology of fixing the final cane price by the appellant - determining the net surplus , the cane price as per FRP is deducted as cost of cane and the remaining surplus worked out - HELD THAT:- FRP of sugarcane determined by the Central Government through methodology adopted by factoring in a reasonable margin for the growers of sugarcane on account of risk and profit by introducing sub-clause (g) in clause 3(1) of the Sugar Control Order, 1966 and by simultaneously deleting clause 5A of the SCO, whereby profits of the SSK were earlier being distributed and simultaneously declaring under Explanation II of clause 3(3C) of the ECA that 'minimum price excludes additional payments under the clause 5A or any other payment made is the most appropriate cane purchase price and fits into the concept of purchase price as per ordinary commercial principles and is in accordance with the provision of section 37(1) of the Income-tax Act. Therefore, any amount paid over and above FRP on the basis of operational profits minus expenses and reserves is not business expenditure under section 37(1) of the Income-tax Act. Accordingly, it is held that the assessing officer was justified in treating the amount paid by the appellant over and above the FRP as distribution of surplus and therefore, such excess payments cannot be allowed as business expenditure while computing business profits under the provision of the Income-tax Act. Payment of alleged excess sugarcane price is no more res integra as the tribunal s latest co-ordinate bench order in Shree Chhatrapati SSK Ltd.. [ 2022 (7) TMI 1332 - ITAT PUNE] Disallowance representing assessee s sale of sugar to its members at concessional rates - There is hardly any issue that the very co-ordinate bench has restored the instant issue as well back to the Assessing Officer for his afresh appropriate adjudication. Learned CIT DR could not dispute both the lower authorities have adopted the identical reasoning as it was the issue before the tribunal hereinabove. We thus direct the assessing authority to re-decide the instant latter issue as well in very terms.
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2022 (10) TMI 819
Revision u/s 263 by CIT - lack of inquiry on the part of the AO - As per CIT, AO had completed the assessment without carrying out necessary and proper inquiries which he ought to have carried out and, therefore, the orders passed u/s 143(3) of the Act r.w.s. 147 were erroneous and prejudicial to the interest of the Revenue - Assessee received large amount of cash from the relatives on different dates but no cross-verification had been made by the AO in the case of the relatives to verify such cash receipts - HELD THAT:- Assessees had submitted the documents with a view to justify their claims of having sufficient cash for the purpose of making the advance. That the assessees had share in Joint Family Land as well as had agricultural lands in their own names is also not under dispute. The assessees have also filed cash flow statements to justify the availability of cash and we have gone through them and we find no reason to take a view different from the view taken by the AO in this regard. AO had an opportunity to consider these very voluminous documents that which were before him to consider and it was only after having examined these documents, he reached a conclusion that the returned income of both the assessee s was to be accepted. Of course, the AO might not have given an elaborate description of the inquires he had conducted during the course of assessment proceedings, all the same, we do not agree with the view taken by the Ld. PCIT that the AO had not carried out any inquiries. The documents on record very well prove that the AO had duly required the assessees to file the relevant details and the assessees also had filed the same and it was only after due consideration and examination of these documents before him that the AO had reached the conclusion that the assessments had to be completed without making any addition. Thus, in our considered view, the AO had exercised due dil igence and had duly applied his mind to the facts of the cases before him and, therefore, the observation of the Ld. PCIT that since there was lack of inquiry on the part of the AO, the same had rendered the assessment proceedings as being erroneous and prejudicial to the interest of Revenue does not hold good. AO took one of the possible views that the assesses had sufficient funds to make the impugned advance and the action of the AO cannot be faulted with by the Ld. PCIT only because he might have had a different view. PCIT has not carried out any enquiry himself, therefore PCIT had wrongly invoked the revisionary powers u/s 263 of the Act in the case of both the assessees and further the cancellation of the assessment orders in both the cases was also bad in law - Appeal of assessee allowed.
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2022 (10) TMI 818
Revision u/s 263 by CIT - wrong claim of deduction u/s. 80JJA - HELD THAT:- The phrase should have been done as provided in the newly inserted Explanation means the verification/ enquiry which ought to have been done. In the given case the assessee s case was selected for scrutiny and one of the reasons was examination of deduction from total income under Chapter VIA. The AO issued various notices calling for details including the details pertaining to section 80JJA deduction. However, in the assessment order as extracted below for AY 2017-18 the AO has not brought out anything explicitly and not recorded any finding with regard to the deduction claimed u/s.80JJAA and also there is nothing mentioned in the order that he has verified the eligibility and the correctness of the claim of deduction u/s. 80JJA. In the case under consideration the ld. PCIT has excised the revisionary powers u/s. 263 of the Act since he has noticed that during the survey u/s. 133A of the Act there were evidences regarding the wrong claim of deduction u/s. 80JJAA and that the AO has not brought out anything on record to show that he has examined the correctness of the claim for the year under consideration. It is noticed that the PCIT in the show cause notice has also listed out the discrepancies in the claim of deduction u/s.80JJAA which according to the PCIT should have been done by the AO and to that extent the PCIT has found the order of the AO to be erroneous and prejudicial to the interest of the revenue. In view of decision of Infosys Technologies Ltd. [ 2012 (1) TMI 76 - KARNATAKA HIGH COURT] and Gee Vee Enterprises [ 1974 (10) TMI 29 - DELHI HIGH COURT] we hold that the PCIT was justified in assuming the jurisdiction u/s 263 of the Act by setting aside the assessment order. Appeals of the assessee are dismissed.
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2022 (10) TMI 817
Revision u/s 263 by CIT - Addition u/s 68 - HELD THAT:- We can see that learned AO made proper enquiry and during assessment proceedings, all details such as, i. list of unsecured loan received during the years; ii. list of share holders; iii. Copy of ledger accounts of each share holder. Iv. Copy of ledger accounts of each lender in its books; v. copies of contra confirmation; vi. Copy of bank statement; vii. Copy of bank account; 8. Copy of income tax return alongwith computation of income ix. Copy of PAN were submitted. We have noticed that Company was formed in 2013 for vitrified files and stated commercial production in 2016. The co-ordinate bench in case of Hitendra A. Nanavati [ 2010 (10) TMI 1076 - ITAT AHMEDABAD] it has been held that where learned AO was satisfied with explanation of assessee, a change of opinion or view would not enable CIT to exercise jurisdiction u/s 263 of the Act Thus share capital, share application money and unsecured loan in the present case can never be regarded as undisclosed income of the assessee under S.68 of the Act. Thus, we hold that in present case the revision under S.263 of the Act is not permissible. Appeal filed by the Assessee is allowed.
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2022 (10) TMI 816
Unexplained investment u/s 69B - Addition made after thorough investigation - Search u/s 132 - statement of the assessee was recorded u/s 132(4) wherein he stated that cash had been given to him by chairman of DLH Group for investment - HELD THAT:- The assessee has corroborated with the evidences that his statement was given during the disturbed mental condition under coercible interrogation for several hours and there was supporting evidences to demonstrate that there was valid reason for retracting the said statement vide affidavit - It is noticed that without contrary disproving the material facts as discussed supra, the A.O had merely made the addition on the basis of retracted statement. The assessee has also explained that Karan/Shweta Dodani were running Ponzi scheme to defraud the investors by offering high rate of return on the investment and against them the complaint were filed before the Bombay police/economic offence wing and cases were also filed before the Hon ble Bombay High Court. The assessee has also referred the order of Session Court holding that the accused/person were running a systematic plan to cheat investors by inducing them to invest the amount by giving assurance to pay handsome return. The aforesaid facts and relevant supporting evidences demonstrate that the assessee was trapped by the Ponzi Scheme launched by Karan/Shweta with modus operandi to cheat the investors. The assessee had further substantiated such material facts with detail of investment of Rs.2.15 crores made through banking channel which fetched cumulatively compounding interest equivalent to Rs.3.61 crores and till date even the principal investment made by the assessee were not returned. A.O has neither disproved these material fact and supporting detail nor made any further investigation to prove contrary to the claim and submission of the assessee. A person making admission is at liberty to contradict them or show that they are untrue or mistaken, or made under misapprehension. Burden to prove that admission as incorrect is on the maker and in case there is failure on the part of maker to prove that earlier stated facts were wrong, his earlier statement was sufficient, if retraction is proved then A.O cannot conclude the case on the basis of such earlier statement. Here in the case of assessee he has filed the retraction immediately after recording of his statement by filing an affidavit along with other supporting evidences as discussed supra, however, without contrary disproving the material facts and relevant supporting material as discussed supra, the A.O had merely made the addition on the basis of retracted statement. In the light of the above facts and circumstances we don t find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the revenue stand dismissed.
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2022 (10) TMI 792
Disallowance of employee s contribution of PF/ESI on account of delay in deposits - HELD THAT:- We are of the view that the AO was not justified in denying the deduction claimed by the assessee on account of late deposit of PF/ESI/EPF, albeit before filing the return of income. Admittedly, in all the above-stated matters, the Revenue had not contended that the assessee has deposited the contribution after the filing of the return of income. Allowability of expenses attributable to employee provident fund and employee state insurance scheme on the assurance that the employee s contributions towards PF ESI have been deposited before the due date of filing of return of income. However, the Revenue shall be at liberty to seek restoration of the appeal where it is found as a matter of fact that the assessee has failed to deposit the employee s contribution before the due date of filing of return of income stipulated u/s 139(1) of the Act in accordance with law. In view of the above and respectfully following the decision Pro Interactive Service (India) Pvt.Ltd. [ 2018 (9) TMI 2009 - DELHI HIGH COURT] . we allow the appeals filed by the captioned assessees.
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Customs
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2022 (10) TMI 815
Seeking amendment and consequent re-assessment of Bill of Entry - clearance of imported goods viz. LDPE Innoplus LD 2420 - country of origin - benefit of Notification No. 46/2011 dtd. 01.06.2011 - HELD THAT:- It can be seen that as far as Section 149 is concerned, amendment is to be allowed on the basis of documentary evidence which was in existence at the time when the goods were cleared, deposited or exported. The only restriction is Sections 30 and 41 of Customs Act, 1962 which relates to export and import manifest which are not allowed to be amended of when there is a fraudulent intention. In the case of amended document under Section 149, the amendment has to be allowed when a request is based on documentary evidence, which was in existence at the time of clearance of the goods - In the case on hand, from the material on records, it is seen that apparently, there was an error, on the part of the CHA who inadvertently mentioned Notification No. 12/2012- Customs and accordingly discharged 7.5% customs duty., whereas, the benefit of Notification No. 46/2011 was available to the Appellant. Section 154 and 149 of the Customs Act, 1962, postulates the intention of the legislature, and any correction could be made. An importer has a right to make amendments in the Bills of Entry covering imported goods assessed and cleared for home consumption or deposit in a warehouse, if he satisfies the condition prescribed in the said Section that such amendments are sought on the basis of documentary evidence which was in existence at the time the goods had been cleared/deposited. In the instant case amendments to the Bills of Entry sought to be made are not on the strength of any new document. This right of the importer is not removed or whittled down by the judgments in the case of Priya Blue Industries Ltd. v. CC which is relied upon by the Ld. Commissioner (Appeals). The impugned order is not sustainable in law and is set aside by allowing the appeal of the appellant with the direction to the assessing officers / original authority that the request of the appellant for reassessment be considered for amendment of Bill of Entry and appropriate order be passed in accordance with law after giving an opportunity of hearing to the appellant - Appeal is allowed by way of remand to the original authority.
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2022 (10) TMI 814
Rejection of entitlement for interest on delayed sanction of refund claim - benefit of section 27A of Customs Act, 1962 - HELD THAT:- It is seen that the first appellate authority has interpreted the time limit in section 27A of Customs Act, 1962 according to the letter of the law which mandates liability of interest for any delay in sanction of refund beyond three months from date of claim. It is on record that there has been delay beyond the stipulated period of three months. There is no reason for interfering with the impugned order - the appeal of Revenue is dismissed.
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Corporate Laws
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2022 (10) TMI 813
Reduction of shares of only one shareholder - Seeking cancelling/ extinguishing fully paid up equity shares - Section 66 read with National Company Law Tribunal (Procedure for Reduction of Share Capital) Rules, 2016 - HELD THAT:- The Reduction of the Share Capital in present case is approved by the Shareholders of the Company unanimously by way of a Special Resolution. It is settled law that the question of reduction of Share Capital will be treated as a matter of domestic concern i.e., it is the decision of the majority which prevails. If majority by Special Resolution decides to reduce the Share Capital of the Company, it also has the right to decide as to how this reduction should be carried into effect. In the instant case, admittedly, the reduction of Share Capital is approved unanimously by the Shareholders by way of a Special Resolution. Perused documents on record, as there are no adverse observation made by the Regional Director, Registrar of Companies and the Income Tax Department and in view of all necessary compliances for making the proposed reduction, also no objections from creditors, shareholders or any other stakeholders received, this application deserves to be allowed. The reduction of equity share capital resolved on 25.02.2022 by the special resolution is hereby allowed - Application allowed.
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Insolvency & Bankruptcy
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2022 (10) TMI 812
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The fact remains that the Appellant filed an application before the Adjudicating Authority under Section 9 of the I B Code, 2016 initiation of CIRP against the Respondent / Corporate Debtor for the reason that the Corporate Debtor failed to pay the Operational Debt owed to it. The Appellant prior to filing of the Application before the Adjudicating Authority issued demand notice in Form-3 wherein the Appellant claimed a total amount of Rs.32,76,848/- including the interest. The basis for the claim is an agreement dated 01.07.2015 entered between the Appellant and the Respondent for supply of footwear under the brand name of SLAZENGER. The Appellant raised invoices on the Corporate Debtor for supply of goods. The Appellant vide its reply dated 18.04.2017 to the legal notice of the Respondents dated 23.03.2017 admitted the fact that there are some disputes between the group company under which the appellant obtained licence for supply of SLAZENGER. Thus, it is an admitted fact that the Appellant does not hold the licence and entered the agreement subsequent to termination of licence / agreement dated 19.01.2015 - there are several correspondences namely the Appellant vide its letter dated 08.08.2017 suggested appointment of arbitrator, however the respondent vide its reply dated 31.08.2017 categorically stated that the void agreement is not enforceable, therefore, the appointment of arbitrator is uncalled for and the respondent is not consented for any requests referring any dispute to arbitrator. This Bench comes to a resultant conclusion that there is pre-existence of disputes between the parties prior to issuance of demand notice dated 08.08.2019 with regard to the very claim of the Appellant and the Adjudicating Authority or this Tribunal cannot go into the disputed issues in a summary jurisdiction. Viewed in that perspective, the order passed by the Adjudicating Authority in rejecting the application filed by the Appellant need no interference. Appeal dismissed.
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2022 (10) TMI 811
Seeking approval of Resolution Plan - Appellant submitted that the Appellant is aggrieved by the impugned order on the ground that the claim of the Appellant has not been considered by the RP and the RP included the Appellant in Category L and has agreed to pay only 2% of admitted claim - Section 30(6) of the I B Code, 2016 - HELD THAT:- Admittedly, the application filed by the Resolution Professional under Section 30(6) of the I B Code, 2016 seeking approval of the Adjudicating Authority. The Adjudicating Authority after satisfying that the plan is incompliance of sub-section (2) of Section 30 and meets the requirement and as approved by the Committee of Creditors under sub-section (4) of Section 30. If the above, compliance is met, the Adjudicating Authority shall by order approve the Resolution Plan which shall be binding on the Corporate Debtor and its employees, members, creditors, (including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,) guarantors and other stakeholders involved in the Resolution Plan. Once the plan has been approved by the CoC and by the Adjudicating Authority it binds upon the creditors and other stakeholders as per Section 30(1) of the Code - From the documents, it is evident that the RP vide its letter dated 22.05.2020 requested the Appellant to submit the claim in Form-B and also sent a reminder dated 25.05.2020 to the Appellant whereby it is stated that the RP has not received the claim with documents for verification and acceptance of claim - The claim of the Appellant has been settled in the plan under the category L and the plan has been approved with 100% voting share of the CoC members and also approved by the Adjudicating Authority in compliance of Section 31 of the I B Code. Once the plan is approved it shall bind on the creditors and other stakeholders. This Tribunal comes to an irresistible and inescapable conclusion that the order passed by the Adjudicating Authority in approving the Resolution Plan vide order dated 16.04.2021 is in accordance with law and no interference is called for - Appeal dismissed.
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2022 (10) TMI 810
Condonation of delay in filing appeal - Appeal not filed within stipulated period of 30 days - Section 61 (2) of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- Section 421 (3) of the Companies Act, 2013 provides that Every Appeal under Sub-Section (1) shall be filed within a period of forty-five days from the date on which a copy of the Order of the Tribunal is made available to the person aggrieved and shall be in such form, and accompanied by such fees, as may be prescribed. However, a mere running of the eye of the ingredients of Section 61 (2) of the Insolvency Bankruptcy Code, 2016, unerringly exhibits that the said Section is conspicuously silent about the words, a copy of the order is made available to the person aggrieved, etc. Considering the fact that the instant appeal was filed by the Appellant before this Tribunal on 09.09.2022 and this Tribunal bearing in mind that the outer limit of 45 Days (30 + 15) came to an end on 05.09.2022 and admittedly, as such, the instant appeal is clearly barred by time. Appeal dismissed being not maintainable.
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2022 (10) TMI 809
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - service of demand notice - whether the demand notice dated 16.06.2019 was properly served? - HELD THAT:- The demand notice sent at registered address of the respondent/corporate debtor, as available on the master data of the corporate debtor, was delivered and tracking report showing its delivery has also been annexed with the petition. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The petitioner/operational creditor has filed an affidavit dated 16.08.2019 (Annexure A-7) under Section 9(3)(b) of the Code, wherein it has been deposed that till the filing of the present petition there is no dispute communicated by the respondent/corporate debtor for the unpaid debt and no payment has been received during this period. Further, it has been deposed that no reply has been received to the demand notice within the stipulated 10 days time from the receipt of demand notice and that there is no preexisting dispute between the parties at all with regard to the unpaid operational debt. Whether this application was filed within limitation? - HELD THAT:- A perusal of the case file shows that the application was filed vide Diary No. 4108 dated 16.08.2019, whereas the date of default is 09.12.2018 i.e. 7 days from the date of invoice as per the agreed terms, as is mentioned in Part-IV of Form 5. Therefore, this Adjudicating Authority finds that this application has been filed within limitation. There is a total unpaid operational debt of Rs. 7,54,509/-, as claimed in the petition. As noted above, the operational creditor has provided the details of the debt due and has also annexed with the petition copy of ledger account statement, and invoices. Accordingly, the petitioner/operational creditor has established the debt and the default, which is more than Rupees one lakh i.e. the threshold limit (pre-revised) - all the requirements have been satisfied. It is seen that the petition preferred by the petitioner is complete in all respects. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, the petition for initiation of the CIRP in the case of the corporate debtor, Vishal Rice Exports Private Limited is admitted. Petition admitted - moratorium declared.
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2022 (10) TMI 808
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantor of the Corporate Debtor - Section 95 of IBC, 2016 - HELD THAT:- Reading Rule 7(2) with Rule 3 shows that the application filed under sub-section (1) of Section 95 shall be submitted in Form - C and the Creditor will serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. Thus, what has to be served is the copy of application which has been submitted . What is contemplated is that the application in Form C should be submitted and then the Creditor should serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. The procedure thus prescribed will give the Personal Guarantor, notice of the application already filed before the Adjudicating Authority. Section 95(5) requires the Creditor to provide a copy of the application made under sub-section (1) , to the Debtor. Thus, serving advance copy is not contemplated. The arguments that Section 98 provides for replacement of the Resolution Professional and hence the Guarantor should have an opportunity to seek replacement of Resolution Professional and hence he should be heard before appointment of IRP was also considered and held that going through Section 98 of IBC, 2016, it is found that Section 98 is not stage specific. Section 98 itself shows that the section could be resorted to even at stages like implementation of repayment plan which would be a stage beyond Section 116, where implementation and supervision of repayment plan is provided for - Any amount of audience is provided to the debtor before the Resolution Professional submits a report. Section 99(2) of IBC gives an opportunity to the debtor to prove repayment of debt claimed as unpaid by the creditor. Section 99(4) of IBC, empowers the Resolution Professional to seek further information or explanation in connection with the application as may be required from the Debtor or the Creditor or any other person, who, in the opinion of the Resolution Professional, may provide such information. Hence it is not as if, the Debtor is not provided an audience before the submission of the report. This Tribunal is of the considered opinion that there is no hurdle to entertain this application under Section 95 of IBC, 2016, since the application is found to be complete - Petition admitted - moratorium declared.
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PMLA
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2022 (10) TMI 807
Attachment of property - eviction notice provides only ten days time to the petitioner to vacate the subject property - Entitlement to take possession of the property attached under Section 5 or frozen under Sub Section 1-A of Section 17 of PMLA - requirement of serving ten days notice under Rule 5(2) of the Rules of 2013 or should wait for ten days after the expiry of 45 days period prescribed for filing appeal before the Appellate Tribunal against the order of Adjudicating Authority confirming the attachment of the property made under Sub Section 1 of Section 5 or retention of property or record seized or frozen under Section 17 or 18? HELD THAT:- There are no absurdity or incongruity between Section 8 and Section 26 of the Act of 2002. Section 8(4) of the Act of 2002 clearly provides that the authorized officer can forthwith take over possession of the attached property once the order of provisional attachment is confirmed by the Adjudicating Authority. The expression forthwith used in Section 8(4) of the Act of 2002 denotes clear intention of the legislature not to wait for the period of limitation prescribed for filing of appeal under Section 26 of the Act of 2002. Rule 5(2) of the Rules of 2013, however, relaxes the mandate of word forthwith by providing for issuance of ten days notice to the owner/occupier of the attached property. The person aggrieved by the order of confirmation of provisional attachment made by the Adjudicating Authority is well within his/her right to file appeal under Section 26 of the Act of 2002 within this period of ten days and may persuade the Appellate Authority to intervene in the matter - One may not come across any legislation where the effect and operation of decree, judgment or order is deferred till the expiry of period of limitation prescribed for filing appeal or revision against such decree, order or judgment, as the case may be. One would rarely find a provision of automatic stay of decree, order or judgment appealable or revisable before higher forum or authority till the aggrieved person avails the remedy before such forum. It is true that in some circumstances or in a given case, ten days time available to the aggrieved person to approach the Appellate Tribunal by way of an appeal may seem to be a bit short of reasonable time, yet this Court cannot in the disguise of interpretative process substitute ten days time given under Rules 5(2) of the Rules of 2013 and the expression forthwith used in Section 8(4) of the Act of 2002 by forty five (45) days or (fifty five (55) days , as is contended by the learned counsel for the petitioner. Notwithstanding the fact that in some cases ten days time prescribed for taking possession of the attached property may result into harsh results but this Court cannot help, more particularly, when the Supreme Court has already upheld the vires of Section 8(4) of the Act of 2002 and has not found fault with any of the provisions of the Act of 2002 and the Rules framed thereunder. It is, thus, trite that principle of statutory interpretation that legislature is presumed to be careful in choice of language is well founded. First and primary Rule of construction, which is also known as literal rule of interpretation, is that the intention of the legislature must be found in the words used by the legislature itself. If the words used in the Statute are plain, clear, unambiguous and capable of only one construction then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction would make the Statute more consistent with its object and policy - Even if there is a defect or omission in the Statute the Court cannot correct the defect or supply the omission. It is only in certain set of circumstances when the language of the Statute is not clear, ambiguous and throws up absurd results, the resort can be had to the principles of statutory interpretation to construe such statute. The domains of reading into and reading down the Statute may come into play. It is not found that this Court is required to resort to the principles of statutory interpretation to construe and understand the otherwise plain, clear and unambiguous provisions of Section 8 of the Act of 2002 and the Rule 5(2) of the Rules of 2013 whatever be the difficulty and whatever be the consequences, the provisions of Section 8(4) of the Act of 2013 read with Rule 5(2) of the Rules of 2013 are required to be given effect to so long as these provisions exist on the Statute - petition dismissed.
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Service Tax
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2022 (10) TMI 806
Nature of transaction - service or deemed sale - transfer of the right to use the containers for valuable consideration - company (in liquidation) was engaged in providing Cargo Carrying Units (CCU or containers) on rental basis to its customers - containers were not owned by the company (in liquidation) but were taken on lease from one Monument Containers Limited, England - HELD THAT:- The relationship between the company (in liquidation) and the lessee cannot fall under the definition of taxable service under Section 65 (105)(zzzzj) of Finance Act, 1994. Section 65 (105)(zzzzj) will apply only where a service is provided in relation to supply of tangible goods without transferring right of possession and effective control, whereas factually in this case, there has been transfer of right of possession and effective control on the containers. The lease agreement, therefore, provides that the lessee would keep possession of the identified containers, the lessee will have legal right to use the containers, the lessee would have the liberty to even sub-lease the containers to third parties who have been approved in the agreement, it is the lessee s obligation to obtain and keep in full force at no cost to the company (in liquidation) all permissions, licenses, authorisations and repair or replace any lost or stolen or worn out containers and all risk of loss or damage to the containers shall pass immediately from the company (in liquidation) to the lessee on delivery. The lease agreement also provides that on the expiry of the term of the lease, the lessee shall, at its risk and expense, return the containers to the company (in liquidation) - The company (in liquidation) cannot hand over those containers to anyone else and the right to use the containers during the period of lease is effectively transferred. There shall be a deemed sale where there is a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Here from the documents, it is quite clear that there has been a transfer of the right to use the containers for valuable consideration. Clause (29A) of Article 366 of the Constitution does not distinguish between an owner or a lessor of the goods. Only requirement is there should be a transfer of the right to use the goods for valuable consideration - Admittedly, the company (in liquidation) had provided the containers to the lessee on lease basis and recovered lease rental on which appropriate VAT at the rate of 12.5% was paid by the company (in liquidation). In the present case, it is not in dispute that the company (in liquidation) had given the containers to the lessee on rental basis and possession and control was always with the lessee and the sole ground on which the demand is confirmed is that the company (in liquidation) was not owner of the containers - For a transaction to be deemed sale there is no requirement of transfer of ownership and once it is not disputed that the containers are given on lease and possession and control is transferred, it is a deemed sale within the meaning of Article 336(29A)(d) of the Constitution of India and outside the purview of Finance Act, 1994. The impugned order dated 31st January 2022 is hereby quashed and set aside - Petition disposed off.
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2022 (10) TMI 805
Benefit of Exemption - Notification No. 20/2003-ST - services under a contract with Transport Department Government of Gujarat for Repairs and Maintenance service of computerized system installed at the RTO check post from 03.12.2003 - HELD THAT:- It is seen that the Notification No. 20/2003-ST provides exemption only to maintenance or repair of computers, computer systems or computer peripherals. The AVETCS systems can by no means be called computers, computer systems or computer peripherals. The mere fact that the AVETCS contains computer system does not make it Computers, Computer Systems or Computer Peripherals. In these circumstances, it is not that the appellant is entitled to the benefit of Notification No. 20/2003-ST and consequently, the appeal on this ground is dismissed. Imposition of penalty - payments for the period September, 2006 to March, 2007 and April, 2007 to June, 2007 - HELD THAT:- The payments of service tax were made only after the initiation of preventive inquiry on 20.07.2007 and hence they cannot be treated as payments made during the normal course or prior to search conducted and therefore, the appellant s' contention in this regard does not merit consideration - penalty upheld. Appeal dismissed.
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2022 (10) TMI 804
Refund of service tax on input services used for export of services without payment of service tax - rejection on the ground of improper address in the invoice, non-mention of address in the invoice, etc. - whether just because of procedural error in the invoices for input services with regard to the address of the Appellant, can the substantive benefit of refund be denied to the Appellant? - HELD THAT:- It is found from the records that the error in address can at best be termed to be a clerical error for which the Appellant has also produced certificate from the Service provider clarifying the error in the floor number. Hence, when the receipt of services is not in dispute, the benefit of refund should not be denied to the Appellant as per the settled jurisprudence in this regard. Reliance placed in the judgment of SAMBHAJI VERSUS GANGABAI [ 2008 (11) TMI 393 - SUPREME COURT] wherein it has been held that A procedural law should not ordinarily be construed as mandatory, the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. A procedural prescription is the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. The department is directed to process the refund claim within 8 weeks from the submission of the order copy as per the process of law - appeal allowed.
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Central Excise
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2022 (10) TMI 803
Remission of duty - it is alleged that the appellant did not take adequate steps and precaution in storing their finished goods as it is established that thefire accident has taken place as result of negligence which can't be considered as natural cause or unavoidable accident in order to grant remission of duty of Excise - demand of interest and imposed penalty under rule 21 of Central Excise Rules 2002 - reversal of CENVAT Credit - HELD THAT:- There is no dispute that a fire has taken place in the factory of the appellant due to short circuit and the finished goods was destroyed along with other material like packing materials and consumables. It is observed that immediately when the fire took place the management of the appellant company has intimated to the concerned local authorities i.e. Police, fire brigade, excise department, insurance company etc., and these agencies have started their respective procedure immediately. Thereafter, the jurisdictional superintendent has visited the appellant s factory and recorded the punchnama. In the said punchnama the details were recorded about incident of fire and about the goods destroyed in fire. However, in the said punchnama, there is no mention about the allegation that the appellant have not taken any precaution to avoid the fire incident - the short circuit is a usual cause of fire in majority of cases, therefore, the fire due to short circuit cannot be attributed to any malafide on the part of the appellant or it cannot be said that the appellant have not taken abundant precaution to avoid the fire incident. Even as per the forensic report also, it has been concluded that the fire has taken place due to short circuit. In this fact, the contention of the adjudicating authority that the appellant have not taken the proper precaution to avoid the fire incident is baseless and without any support. Therefore, on this ground rejection of remission claim is unsustainable. Reversal of CENVAT credit - HELD THAT:- There is no dispute that the appellant is duty bound to reverse the cenvat credit on the inputs contained in finished goods which were destroyed in fire incident. However, on going through the Rule 3(5)(c) of Cenvat Credit Rules, it is absolutely clear that the reversal of the cenvat credit statutorily to be made only after the competent authority grant the remission of duty, therefore, the contention of the learned Commissioner that they have not reversed the credit before remission is without any basis. Thus, the appellant s case is clearly covered under the four corners of Rule 21 of Central Excise Rules, 2002 and the appellant is clearly eligible for remission of duty on the finished goods destroyed in fire incident - the order rejecting the remission of duty is set aside - appeal allowed.
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2022 (10) TMI 802
Benefit of Concessional rate of duty - Cement cleared in packed form i.e in Bags of 50 kgs. to customers - clearance to M/s GSCSCL, educational institutions, builders developers, organization and for self consumption - Retail sale or not - benefit of Notification No. 4/2006-C.E., dated 1-3-2006 - Corresponding penalty of equal amount imposed under Rule 25 - HELD THAT:- It is seen in the present that the assessee had sold cement in packs of 50 kgs. to customers/ buyers. From a combined reading of the above reproduced provisions of Rule 2A of the Rules, these genre of buyers would fall under the category of Institutional Consumer or Industrial Consumer. On this score itself, it is found that the provisions applicable to packages intended for retail sale in Chapter II of the said rules, will not apply to the clearances of cement by the appellant to its Industrial or Institutional consumers. In respect of the clearances it will necessarily have to be held as packages not intended for retail sale and to which the provisions of Chapter II of the Rules shall not apply. In view of Rule 2A thereof, duty demands in respect of these clearances will therefore not sustain - the issue is no longer res integra. It has been held in the various cases that cement cleared in packaged form (50 kg. bags) to charitable organizations, builders/developers/ready mix concrete (RMC) manufacturers, contractors and construction firms, infrastructural development projects, educational institutions, societies and hospitals, government bodies, captive consumption, manufacturers of finished goods will qualify as sale to industrial/institutional customers - reliance can be placed in CHETTINAD CEMENT CORPN. LTD. VERSUS CCE [ 2008 (12) TMI 684 - CESTAT CHENNAI ]. The argument of the revenue that these types of clearances fall foul of the Notification No. 4/2006-C.E. cannot be accepted - These clearances cannot be considered as retail sales and hence benefit of the said notification cannot be denied to them. Confirmation of demand of Rs. 3,11,188/- - HELD THAT:- The said demand was confirmed in respect of the clearance of the Cement in 50 Kgs bags to individual consumers. The submission of the appellant is that since the said clearance is made directly by the appellant to the individual consumers, there is no intermediary involved such as distributor/dealer etc. and the goods were not sold through a Retail Sale Shop Agency or any other instrumentality, therefore, such clearances is not covered under retail sale, accordingly, there is no need of a fixing retail sale price on the packages in terms of the legal metrology (Packaged Commodities) Rules, 2011 - Appellant would not be eligible for exemption Notification No. 4/2006-C.E. Accordingly, the demand of Rs. 3,11,188/- is upheld. Corresponding penalty of equal amount of Rs. 3,11,188/- imposed under Rule 25 - HELD THAT:- This is not a case of clandestine removal or even the malafied intention cannot be attributed to the appellant. As the appeal have cleared the goods on payment of concessional rate of duty by availing notification, the appellant had a bonafide belief that they are eligible for Notification No. 4/2006-C.E. Needless to say that the interpretation of Notification No. 4/2006-C.E has travelled through various forum and finally the issue was settled by the Hon ble Supreme Court in number of judgments, therefore, in the nature of this case it cannot be said that the appellant had any malafide intention in short payment of excise duty. Moreover, the appellant paid the duty of Rs. 3,11,188/- along with interest thereon of Rs. 30,218/-. For this reason also the penalty under Rule 25 of Central Excise Rules, 2002 is not impossible, accordingly, the penalty is set aside. Appeal allowed in part.
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2022 (10) TMI 801
Seeking abatement of appeal - CIRP proceedings under IBC - continuance of proceedings after death or adjudication as an insolvent of a party to the appeal or application - short payment of duty - reversal of CENVAT Credit - Case of Revenue is that subsequent to the order of the NCLT approving the resolution plan, the appeal stands abated and all the issues arising out of the order appealed against have acquired finality with the said order of NCLT approving the resolution plan - Rule 22 of the CESTAT Procedure Rules, 1982 - HELD THAT:- With the approval of the resolution plan the corporate debtor was managed by a monitoring committee (MC) which is comprised of the erstwhile resolution professional (as he will become after the Resolution Plan) and 4 representatives of the Financial Creditors. During the period following the approval of the CCI until the closing date, the corporate debtor will be managed by a reconstituted MC comprising of 4 representatives of the Financial Creditors, 2 representatives of the Resolution applicants and the erstwhile Resolution professional. After the closing date, a new board of Directors constituted by the Resolution Applicants will replace the MC and it will have adequate representation from the members of the Resolution Applicants and as requirements under applicable law. Further it is also quite evident that control and management of the corporate debtor has passed on to the resolution applicants who in turns are successor interest in the management of the corporate debtor and have been authorized specifically to approach any Competent Authorities/Courts/Legal Forums/offices-Govt, or Semi Govt./ State or Central Govt. for appropriate relief(s). Thus it is quite evident that on the date of approval of the resolution plan, the successor interest to the corporate debtor has been appointed who has been asked given the resolution authority to represent before the relevant authorities. However from the date of approval of the resolution plan by the NCLT, the appeal filed by the applicant has abated and CESTAT has become functus officio in the matters relating to this appeal. Further it is also settled that the impugned order s in the appeals have got merged in the order of the NCLT approving the Resolution Plan. The appeals filed abate as per the Rule 22 of the CESTAT Procedure Rules, 1982, with effect from the date of the approval of the resolution plan by the NCLT - Since the appeals have abated the miscellaneous application filed by the applicant/appellant does not survive.
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2022 (10) TMI 800
Levy of equal penalty imposed under Section 11AC of the Central Excise Act, 1944 - availment of wrong credit on input services used in the Co-generation plant for generation of electricity which was being wheeled out to T.N.E.B. - input services used for manufacture of Ethyl Alcohol - extended period of limitation - HELD THAT:- On perusal of records, it is seen that though audit was conducted in the year August 2008 the show cause notice has been issued much later after a delay of 4 years on 17.07.2012. It is seen that the appellant has paid up the duty immediately when the audit had pointed out the defect of availing wrong credit. Even then, the department has taken a period of 4 long years to issue the show cause notice. It is stated in the show cause notice that appellant has suppressed facts with intention to evade payment of duty. Apart from this allegation there is no positive act of suppression brought out by the Department. There were conflicting views as to whether credit is eligible on input services used for generation of electricity that is sold outside, the appellant cannot be burdened with the guilt of suppression of facts with intent to evade payment of duty. The issue being interpretational in nature and as the department had collected all the details of availment of credit from the accounts maintained by the appellant, the penalty imposed in this regard is unwarranted - the penalty imposed with regard to duty liability of the input tax credit availed in respect of electricity (Co-generation plant) requires to be set aside. CENVAT credit of input service availed for manufacture of exempted goods - Ethyl Alcohol - only argument put forward by the Ld. Counsel for appellant is that they had availed credit by inadvertent mistake - HELD THAT:- The said mistake would not have come to light but for the audit conducted by the Department. There are no sufficient grounds for setting aside penalty on input service tax credit in respect of Ethyl Alcohol. The impugned order is modified to the extent of setting aside the penalty imposed in regard to credit availed in respect of input services used in the co-generation plant for generation of Electricity sold outside - Penalty imposed in regard to input service tax credit on the services used in manufacture of Ethyl Alcohol is upheld. The appeal is partly allowed.
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2022 (10) TMI 799
Extended period of SCN - whether the show cause notice has been issued rightly by invoking the extended period of limitation? - if demand of Rs. 3,27,325/- is rightly made for use of E. Cess SHE Cess for payment of duty in December 2016 or not? - HELD THAT:- Division Bench of this Tribunal have held in the case of Bharat Heavy Electricals Ltd. Vs. Commissioner, CGST [ 2019 (4) TMI 1896 - CESTAT NEW DELHI ] that an assessee is entitled to refund of unutilized cess under the existing law, lying in credit as on 30/06/2017 - Following the ruling of the Division Bench of the Tribunal, Single Member Bench in KIRLOSKAR TOYOTA TEXTILE MACHINERY PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BENGALURU SOUTH GST COMMISSIONERATE [ 2021 (8) TMI 818 - CESTAT BANGALORE ], considered refund of unutilized credit of EC. SHEC on 30/06/2017, it was held that such refund be granted to the assessee as it neither lapses, nor the same was time barred. Revenue Neutrality - HELD THAT:- The appellant not utilized the Cenvat credit of EC SHEC for payment of output tax/duty in December 2016, the same would have become refundable as on 30/06/2017. If the appellant is required to deposit the said amount of Rs. 3,27,325/- in cash, it will become entitled to refund of the duty earlier paid by utilization of credit of EC SHEC, thus the situation is wholly revenue neutral. Appeal allowed.
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2022 (10) TMI 798
CENVAT Credit - input services - adjudication authority in respect of disputed input services denied the credit without discussing the nature and use of the services in the Appellant s factory - violation of principles of natural justice - HELD THAT:- The nature of use of the disputed services as explained by the appellant was not properly addressed by the adjudicating authority in the impugned order passed by him. Hence, the matter should be remanded to the original authority for a proper fact finding on issue of eligibility of Cenvat credit on the disputed services. The appeal is allowed by way of remand to the adjudicating authority to pass a de novo order after considering all the documents to be submitted by the appellant before him.
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2022 (10) TMI 797
Utilization of CENVAT Credit for payment of Excise duty - goods procured under Notification No. 43/2001-CE (NT) for the clearance of the same without putting to use for manufacture of exported goods - HELD THAT:- The identical issue has been considered by the tribunal in the matter of M/S. SHREE RAJASTHAN SYNTEX LTD., SHRI S.K. BHANDARI AND SHRI V.K. LADIA VERSUS CCE, JAIPUR-II [ 2016 (3) TMI 200 - CESTAT NEW DELHI] , M/S. SHREE RAJASTHAN TEXCHEM LTD. VERSUS CCE, JAIPUR [ 2015 (2) TMI 653 - CESTAT NEW DELHI] and GINGER CLOTHING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE [ 2014 (2) TMI 868 - CESTAT MUMBAI] and the payment of duty on the goods procured under Notification 43/2001-CE (NT) by utilization form cenvat credit for payment has been allowed - Therefore, following the said decisions it is held that the demand of duty can be paid by utilizing cenvat credit being no bar in law in this regard. CENVAT Credit - inputs and packing materials used in the manufacture of medicament (exhibit batches) and the same is tested for trial and quality purpose and were destroyed / disposed off within the factory thereafter - HELD THAT:- There is no dispute in the facts that packaging /raw materials on which Appellant has claimed Cenvat credit has been used in process of manufacturing of medicaments for trial and testing purpose and quality purpose under the Drugs and Cosmetic Act, which was subsequently destroyed. On the basis of such testing /quality control process only the marketability of the product is ascertained. Accordingly, the raw materials/ packaging materials which is used in manufacturing and which goes for testing /quality process are indeed the inputs which are used in or in relation to manufacturing of final products. The nature of products manufactured by the Appellant is such that it is a must/ necessity that it needs testing and hence, the same forms an integral part of manufacture and without which it is not possible to manufacture the final products. Thus, the Appellant is entitled for credit on input and packaging materials used for testing products (Exhibit batches) - reliance can be placed in the case of THERMAX CULLIGAN WATER TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2013 (12) TMI 977 - CESTAT MUMBAI] where it was held that In the present case, the Revenue has not adduced any evidence that the control samples have been removed from the factory and has not been consumed or lost or destroyed during the course of testing. In the absence of any corroborative evidence of removal of these samples from the factory, the demand of duty on such control samples cannot be sustained. Whether the Appellant is liable to pay duty on goods cleared from factory on non-returnable challans for testing and sampling purpose? - HELD THAT:- The pharmaceutical goods before being marketed should be sent for tests and sampling purpose in terms of the provisions of Drugs and Cosmetics Act, 1945. The medicaments cleared under the cover of non-returnable challans for testing and sampling purpose cannot be considered as manufactured goods as the same is not marketable in as much as the same has not attained any level of marketability as is clear from the facts that the same was sent outside the factory premises for testing and sampling purpose. Marketability is decisive test for dutiability - the samples cleared for testing and quality control test are not liable to any excise duty. No demand is sustainable - Appeal allowed - decided in favor of appellant.
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2022 (10) TMI 796
Refund of CENVAT Credit against CVD and SAD paid, in the pre-GST regime, in cash - Section 142(3) of the CGST Act - HELD THAT:- It is an admitted fact that Appellant had paid the CVD and SAD after the appointed date that is fixed for implementation of CGST Act. It is also not disputed by the Appellant that upon receipt of goods at his factory premises on 19.07.2017, there was window open for a considerable period of time to record the un-availed CENVAT Credit through Tran-I form but it is the only mistake committed by the Appellant in not availing the same within the stipulated time frame. It is apparent that Appellant s eligibility to take credit of the duties paid as CENVAT Credit is undisputable and only because of procedural aberration occurred during transition to GST period, Appellant could not take the credits in its electronic ledger in the GST regime, for which it sought for refund such a contingency is perhaps foreseen by the legislature for which contingent provision is well enumerated in Clause 6(a) of Section 142 of the CGST Act that deals with claim for CENVAT Credit after the appointed date under the existing law. It is an admitted fact of the parties that the said CENVAT Credit balance was not carried forward to the Appellant s account on the appointed date since it was not due on the said day also. Therefore, in view of clear provision contain under Section 142(6)(a) of the CGST Act, Claimant/Appellant is eligible to get the refund of credit by cash except where unjust enrichment is alleged or established against the Appellant. The Appellant is also otherwise eligible to go for availment of transitional credit through filing required forms in Tran-I as per the order passed by the Hon'ble Supreme Court in UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] but in view of the observation of this Tribunal read with Section 142(6)(a) of the CGST Act that such CENVAT Credit amount shall be paid to the Appellant in cash, it can t avail dual benefits once order of this Tribunal is duly complied by the Respondent- Department by the closing date of the window. The Appellant is eligible to get refund of Rs.11,04,057/- paid against CVD and SAD which applicable interest, if any, within a period of two months of communication of this order - Appeal allowed.
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2022 (10) TMI 795
CENVAT Credit - input service distribution - whether input service distributed by ISD have been rightly disallowed without invocation of Rule 14 of CCR, 2004? - HELD THAT:- Rule 14 of CCR have not been invoked in either of the show cause notices. In this view of the matter, there are no disallowance of the CENVAT credit can be made save and except by resorting to the provision of Rule 14 of CCR. Appeal allowed - decided in favor of appellant.
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2022 (10) TMI 794
Short payment of Central Excise Duty - SCN issued alleging that the appellant is manufacturer of auto parts, which are dutiable have charged and collected tax from their customer but did not pay to the Government - HELD THAT:- Both the parties are registered with the Central Excise Department and both are located at Rudrapur, thus, under the jurisdiction of the same Central Excise authority. Further, it is found that appellant have led sufficient evidence before this Tribunal, which needs to be verified for the ends of justice. Accordingly, the appeal is allowed by way of remand to the original Adjudicating Authority with direction to hear the appellant and verify the records, and if required, also verify the records of the buyer and thereafter pass reasoned order in accordance with law.
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2022 (10) TMI 793
Levy of penalty u/s 11AC of Central Excise Act - entire duty and interest was paid before the issuance of the Show Cause Notice itself - HELD THAT:- Reliance placed in the case of KUNNATH TEXTILES VERSUS THE COMMISSIONER OF CUSTOMS CENTRAL EXCISE COCHIN [ 2011 (11) TMI 154 - CESTAT, BANGALORE] wherein in a similar set of facts, the Tribunal held that an assessee shall not be penalized in a case where the demand on them depended on interpretation of the conditions of the exemption notification claimed by the assessee. The facts of the present case are squarely covered by the aforesaid decision of the Tribunal - the impugned orders are set aside to the extent of imposition of penalty and the appeal filed by the Appellant is allowed to the extent of setting aside of the penalty.
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