TMI Tax Updates - e-Newsletter
October 27, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. MOBILISATION OF FUND – A FINANCIAL DEBT OR AN OPERATIONAL DEBT?

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Advisory on sequential filing of GSTR-1

2. CCI imposes a monetary penalty of Rs. 936.44 crore on Google for anti-competitive practices in relation to its Play Store policies

3. CBDT participates in the ‘RozgarMela’ drive

Notifications

Customs

1. 4/2022 - dated 21-10-2022 - CVD

Seeks to levy countervailing duty on imports of ‘Saccharine in all its forms’ originating in or exported from Thailand, to prevent the circumvention of countervailing duty levied on ‘Saccharine in all its forms’ originating in or exported from China PR vide notification No. 2/2019-Customs (CVD) dated 30 th August, 2019 .

GST - States

2. 13/2022 – State Tax - dated 30-9-2022 - Jharkhand SGST

Period of limitation for issue of Show cause notice (SCN) or passing order for raising Demand u/s 73 and claiming refund u/s 54 or 55 - Exclusion of certain period - Seeks to extend dates of specified compliances in exercise of powers under section 168A of JGST Act

3. 8/2022-TNGST PP1/GST-15/23/2022 - dated 18-10-2022 - Tamil Nadu SGST

TNGST Act, 2017 – Tvl. Mahindra & Mahindra ­Exemption from generation of e-way bill for the movement of vehicles for the purpose of testing under rule 138 (14) (d) of TNGST Rules, 2017 ­Notification issued.

Highlights / Catch Notes

GST

• Free Diesel Must Be Valued in Goods Transport Supply u/s 15 of CGST Act 2017; GST Applicable.

  Case-Laws - AAR : Levy of GST - valuation of Supply - transport of goods - inclusion of value of free diesel filled by service recipient under the accepted terms of contractual agreement in the fleet(s) placed by GTA service provider - The input i.e. fuel, to run and operate the vehicle, provided free of cost by the recipient of the service, for transportation of goods, shall form part of value of supply in view of Section 15 of the CGST Act, 2017 - AAR
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• GST Exemption Denied: Services by Uttarakhand Forest Department Not Charitable, Liable for Tax.

  Case-Laws - AAR : Levy of GST - The list of activities given in the above said notification are the activities which are eligible for exemption but for the exemption to come into picture the act of charity has to be fulfilled and in the instant case, the money is being charged and collected for specific purposes, which evidently does not constitute “charity' and hence services rendered through the Forest Department of State Government of Uttarakhand, is not covered under the exemption clause - Liable to GST - AAR
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• Bio-Mining Services in Kollarn Exempt from GST, Rules Authority for Advance Rulings (AAR.

  Case-Laws - AAR : Classification of services - Bio-Mining and Scientific Closure of Legacy wastes at the dumpsite in Kureepuzha, Kollarn - services to be provided by the Applicant to the Superintending Engineer, Kollarn Municipal Corporation - Benefit of exemption from GST available - AAR
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Income Tax

• Recovery of Bad Debts from Amalgamated Companies Taxable u/s 41, Appellant's Argument Rejected.

  Case-Laws - HC : Additions for recovery of bad debts u/s 41 - As per appellant as recovered the bad debts of the companies, which got amalgamated with the appellant company, and, therefore, they are not taxable in the hands of the appellant and that the appellant was not the assessee for the purpose u/s 41 - Contention rejected - Additions confirmed - HC
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• Post-Amalgamation: Adjust Business Losses Against Current Income, Set Off Capital Losses Permitted for Assessee.

  Case-Laws - AT : Assessment post amalgamation - brought forward losses post amalgamation - we allow the adjustment of brought forward business loss against the current year’s business income and also the set off of brought forward capital loss as claimed by the assessee - AT
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• UK LLP Eligible for India-UK DTAA Benefits Despite Non-Taxable Status; Article 4(1) Interpretation Key Factor.

  Case-Laws - AT : Income deemed to accrue or arise in India - Revenue’s suggestion is that assessee is a Limited Liability Partnership and is not liable for taxation in UK in its capacity as Limited Liability Partnership and its partners of an LLP in UK are taxable. That unless an entity is liable to taxation, it does not fall within the purview of a resident within the meaning of Article 4 (1) of the India-UK DTAA and is, therefore, not eligible for the benefit of India-UK DTAA. - Argument of the Revenue not accepted - AT
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• Assessee Fails to Prove Creditor Identity and Transaction Authenticity u/s 68; Credit Entries Added to Taxable Income.

  Case-Laws - AT : Addition u/s 68 - credit entries reflecting creditors for purchases of goods - The onus is on the assessee to prove the identity of these persons, the means of these persons to have allowed these credits to the assessee, and the genuineness of the transactions leading to these credits. On each of these counts, the assessee has miserably failed in discharging his onus. - AT
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• PCIT's Use of Section 263 Challenged for Ignoring Assessee's TDS Explanations on Non-Taxable Mobilization Advances.

  Case-Laws - AT : Revision u/s 263 by CIT - the assessee had duly explained as to why certain receipts though subjected to TDS, would not be liable to be offered to tax such as mobilization advance. This had been completely ignored by the ld. PCIT while exercising his revision jurisdiction u/s 263 of the Act. - the revision jurisdiction u/s 263 of the Act had been exercised by the ld. PCIT in a mechanical and cavalier manner - AT
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• Tax Exemption u/s 10(23C) Stands Without Incriminating Evidence Affecting Assessment (23C.

  Case-Laws - AT : Exemption u/s 10(23C) - unaccounted money - there is no incriminating material existing pursuant to search, which could have disturbed the concluded assessment in case of the assessee. Therefore, even on this ground, the exemption u/s 10(23C) cannot be denied to the assessee. - AT
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Customs

• Court Upholds Constitutionality of Section 129E: Mandatory Pre-Deposit of 7.5% and 10% Ruled Fair and Non-Discriminatory.

  Case-Laws - HC : Waiver of mandatory condition of pre-deposit - The court held that the Parliament had in its wisdom amended the provisions of Section 129E of providing deposit of 7.5% and 10%, respectively, as subclauses (i), (ii) and (iii), respectively, provide and it certainly cannot be held to be unreasonable, onerous, unfair or discriminatory. In fact, court upheld the constitutional validity of the amended Section 129E. - HC
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• Revalidation of Advance Authorization Possible for 6 Months Post-Expiry; Entitlement Changes Allowed Anytime Per Paragraphs 4.21, 4.23.

  Case-Laws - HC : Advance Authorization Scheme - Revalidation - Request for revalidation of an Advance Authorisation can be made once for 6 months from the expiry of date of its validity in terms of Paragraph 4.23 of the Handbook of Procedure and/or for enhancement/reduction in the entitlement in terms of Paragraph 4.21 of the Hand Book of procedure can be made only either before or after export. - HC
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Corporate Law

• Case Finds No Oppression or Mismanagement; EGM Convened Properly Under Companies Act, 2013 Without Board Meeting Requirement.

  Case-Laws - AT : Oppression and mismanagement - misappropriation of funds - as such no irregularities were found in convening an Extra-Ordinary General Meeting which was requisitioned at the instances of a shareholder and a Board Meeting is not a pre-requisite as settled principles under Companies Act, 2013 - There was no case of Oppression & Mismanagement - AT
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Indian Laws

• Supreme Court Overrules High Court: Chemical Report Suffices to Prove Origin from 'Papaver Somniferum L' u/s 15.

  Case-Laws - SC : Drug Trafficking - The High Court was not justified in holding that, even after the Chemical Examiner’s report establishes that the contraband contains ‘meconic acid’ and ‘morphine’, unless it was established that the same was derived from the species of ‘papaver somniferum L’, conviction under Section 15 of the 1985 Act could not be sustained - once it is established that the seized material contains ‘meconic acid’ and ‘morphine’, it will be sufficient to establish that it is derived from the plant ‘papaver somniferum L’ as defined in sub-clause (a) of Clause (xvii) of Section 2 of the 1985 Act. - SC
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• Supreme Court Confirms Odisha Civil Judge as Commercial Court for Arbitration Appeals under Arbitration and Conciliation Act, 1996.

  Case-Laws - SC : Arbitration - Jurisdiction and powers under the Commercial Courts Act, 2015 - The notification issued by the State of Odisha issued in consultation with the High Court of Orissa to confer jurisdiction upon the court of learned Civil Judge (Senior Division) designated as Commercial Court to decide the applications or appeals arising out of arbitration under the provisions of Act, 1996 cannot be said to be illegal and bad in law - SC
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IBC

• Transfer of Goods Title Hinges on Full Payment During CIRP; Seller Retains Ownership of Unpaid Equipment.

  Case-Laws - AT : CIRP - Transfer of title of goods or not - Unpaid seller - the intention of the parties to the contract of sale was to pass ownership of the goods only on full payment of sale consideration agreed by the parties. Admittedly, only 30% of the sale consideration was paid and 70% is balance - the Appellant still continues to be owner of the equipment and the equipment being not assets of the Corporate Debtor ought not to have been included in the assets of the Corporate Debtor. - AT
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• CIRP Initiation: Principal-Agent Relationship Between Corporate Debtor & Respondent, Claim Not Operational Debt.

  Case-Laws - AT : Initiation of CIRP - Operational Creditors - both the Corporate Debtor and Respondent No. 1 are like the principal as well as the agent of the other party. This spirit is not only captured in the body of the agreement but also demonstrated in the actions and conduct of both parties in their role as general profit sharing partners - the claim is not in the nature of Operational debt, - AT
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• Tax Authorities' Lien on Property Prioritized in Insolvency Cases Under IBC Section 238 for Unpaid Sales Tax or VAT.

  Case-Laws - AT : CIRP - recovery of arrear of sales tax / VAT - first charge in favor of revenue - removal of lien created over the factory premises and landed property - overriding effect covered under Section 238 of the IBC - the impugned order passed by the Adjudicating Authority removing the lien cannot be sustained in the eye of law - AT
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Service Tax

• Court Orders Recovery of Service Tax Arrears with Interest; Ensures Appellant's Business Operations Remain Unaffected.

  Case-Laws - HC : Recovery of past dues of service tax - Considering the fact that the appellant is in arrears of tax right from 2003 and has not paid the amount till date, the official respondents are directed to recover the amount by ensuring that the appellant's business is not stalled, by giving time for repaying the amount together with interest and penalty - HC
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• Appellant Entitled to Interest on Service Tax Refund from Date of Original Order Nullifying Tax Demand.

  Case-Laws - HC : Claim of interest on Refund - Demand of service tax was set aside in the appellate proceedings - The appellant is entitled for interest on the refund made only from the date on which the original order was passed declaring that the appellant is not liable to pay service tax - HC
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Central Excise

• Director Penalized for Role in Fraudulent Scheme to Evade Excise Duty and Illegally Remove Goods.

  Case-Laws - AT : Levy of penalty on Director of the company - The appellant being a Director of the Company involved in the entire Modus Operandi of fraudulent availment of credit and evasion of Excise Duty on the clandestine removal of finished goods. Without the knowledge of the director it could not have been possible to make such a huge evasion of duty. Therefore, the involvement of the director is clearly established. - AT
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• Revenue Fails to Prove Goods Were Illegally Removed Without Duty Payment; Market Assumes Goods Are Duty Paid.

  Case-Laws - AT : Clandestine manufacture and removal - The Revenue has not produced any evidence to reveal that the said goods found from the transport’s premises were cleared from the appellant’s factory without payment of duty. All the goods available in the market are deemed to be duty paid, unless proved otherwise. - AT
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Case Laws:

• GST

• 2022 (10) TMI 915
  Inactions in not initiating actions in demanding/recovering GST collected from the television subscribers/customers since the year 2017 till date - non-issuance of appropriate notices calling upon them to register under the provisions of GST Act to carry out business activities legally - violation of principles of natural justice - HELD THAT:- The Assistant Commissioner (ST) No.II, Khammam, being the proper officer under the Central Goods and Services Tax Act, 2017 as well as under the Telangana Goods and Services Tax Act, 2017 are directed to take an appropriate decision in the matter within a period of three months from the date of receipt of a copy of this order. Petition disposed off.

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• 2022 (10) TMI 914
  Maintainability of petition - availability of alternative remedy of appeal - Violation of principles of natural justice - validity of assessment order - validity of Section 4 of the IGST Act read with Section 5 of the Central Goods and Services Tax Act, 2017 - Circular No.31/05/2018-GST, dated 09.02.2018 - HELD THAT:- Without going into merits of the matter, this Court, in the interests of justice, felt it appropriate to dispose of the writ petition giving liberty to the petitioner to approach the appellate authority provided under Section 107 of the CGST Act. It is left open to the petitioner to raise all the grounds raised in the writ petition before the appellate authority. The Writ Petition is accordingly disposed of.

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• 2022 (10) TMI 913
  Refund alongwith interest - period April 2019 to September 2019 - period October 2020 to December 2020 - HELD THAT:- Mr. Mishra states that department has reviewed that order and has also filed an appeal under sub-Section (2) of Section 107 of Central Goods and Services Tax Act, 2017 (CGST Act). In effect, Mr. Mishra states that even department has not accepted the impugned order and, therefore, petitioner is entitled to refund of Rs.88,46,01,539/- together with interest, if any. The respondents shall process petitioner s original application for refund together with interest and pay the amount on or before 31st October 2022. At the same time, petitioner is at liberty to file such an application, should they wish to - the impugned order dated 29th July 2022 is hereby quashed and set aside - Petition disposed off.

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• 2022 (10) TMI 912
  Levy of penalty under Clause A of Sub Section 1 of 129 of the Central Goods and Services Tax Act - seeking release of detained goods - alleged discrepancy in the E-way bill generated by the petitioner for movement of its excavator from project site in Kerala to its branch office in Dhamra Port, Doshinga Village, Dist Bhadrak, Odisha - HELD THAT:- Prima facie, it appears invocation under Section 129(3) of the Act for imposing penalty under Section 129(1)(a) of the Act appears to be misplaced as there is no supply either within the meaning of Section 7 of the Central Goods and Services Tax Act, 2017 or within the meaning of provisions of the Integrated Goods and Services Tax Act 2017. Ultimately, the purpose of E-way bill is to ensure that there is no leakage of revenue when the goods are on the move. Prima facie it appears that there is no supply for attracting of levy either under the provisions of the Central Goods and Services Tax Act, 2017 or the Integrated Goods and Services Tax Act 2017. The petitioner is directed to pay a sum of Rs.2,50,000/- to the credit of the respondents and furnish a bond for the remaining amount to the satisfaction of the respondents. On such compliance being observed by the petitioner, the respondents shall release the excavator which was seized on 24.09.2022 together with the lorry on which the excavator was being transported - Once the petitioner complies with the requirements of this order, the respondents shall release the excavator and the lorry forthwith in which the excavator has been transported. Petition allowed.

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• 2022 (10) TMI 911
  Levy of GST - valuation of Supply - transport of goods - inclusion of value of free diesel filled by service recipient under the accepted terms of contractual agreement in the fleet(s) placed by GTA service provider - HELD THAT:- Section 15 of the CGST Act, 2017 provides that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply - Section 15 of the CGST Act, 2017 mandates that the value of supply shall include among other things, any other amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. In the instant case although the supplier i.e. the applicant in the course of normal business transaction was required to include the cost of fuel, but for the wordings (read terms and conditions which apparently suites themselves) inserted in the agreement that too between two private entities, are trying to circumvent the statute, which appears was not the intent of the Parliament - It is observed that without the fuel the vehicle does not operate (run) and without running i.e. moving from one place to another, the act of transportation of goods by road does not happen. The goods transport service has the integral component of moving of goods from one place to another and for this to undertake a vehicle in running condition, an operator etc. are required. The running condition of a vehicle cannot be achieved without the fuel, as in absence of fuel the vehicle cannot move from one place to another to transport the goods. The input i.e. fuel, to run and operate the vehicle, provided free of cost by the recipient of the service, for transportation of goods, shall form part of value of supply in view of Section 15 of the CGST Act, 2017, as the cost of this input has to be paid by supplier of services but incurred by the recipient (as per the terms and condition of the agreement) as for the purpose of levy of GST, cost of all the inputs, whether provided free of cost or not, has to be included in the value of supply - the value of free diesel filled by service recipient will be subjected to the charge of GST by adding the free value diesel in the value of GTA service, under the Central Goods and Services Tax Act, 2017 Uttarakhand Goods and Service Tax Act, 2017.

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• 2022 (10) TMI 910
  Levy of GST - payments made by PTCUL to UK CAMPA as Compensatory Afforestation Value - Net Present Value and recovery made towards dwarf species cost - payments made by PTCUL to Divisional Forest Officer (DFO) towards lease rent - scope of Government as laid under section 2(53) of the Central Goods Service Tax (CGST) Act, 2017 - supply of services or not - section 12AA registered entity of The Income Tax Act 1961 or not - reverse charge mechanism or not - GST on compensation paid by PTCUL to DFO, the Government of Uttarakhand - heading of the GST tariff. Whether UK CAMPA, falls under the ambit of the definition of Government as laid under section 2(53) of the Central Goods Service Tax (CGST) Act, 2017? - HELD THAT:- There is no doubt that Forest (Conservation) Act, 1980 in the state of Uttarakhand is also implement and regulated by the Forest Department of State Government of Uttarakhand and the UK CAMPA is under the aegis of Forest Department of State Government of Uttarakhand, as they administer, manage and regulate the said act - in the calculation sheet and on the body of the said letters, 18% GST has been calculated, this clearly and evidently shows that GST is leviable on such demands raised for UK CAMPA by the Forest Department of State Government of Uttarakhand and that the applicant has been sanctioning the requisite funds - UK CAMPA falls under the category of State Government as defined in Section 2(103) of the CGST Act, 2017 which specifies that State includes a Union Territory with Legislature. Whether services rendered by UK CAMPA for which compensation is paid by PTCUL, qualifies as a supply of services as per section 7 of CGST Act, 2017? - HELD THAT:- If grants are given freely in which the grantor does not receive any benefit in return, then they are not consideration for any supply and are therefore outside the scope of GST but if the grantor receives a benefit in return, then the grant is treated as a consideration for the supply and in the instant case the applicant has admitted that the amount paid is to compensate for loss of land by land and trees by trees , which imply that although the assignment of the value has to be calculated for loss of land by land and trees by trees , but the said assignment of the value also includes consideration for various other activities viz. assisted natural regeneration, conservation and protection of forests, infrastructure development, wildlife conservation and protection and other related activities and for matters connected therewith or incidental thereto - both of the two major elements i.e. Supply is done for a consideration and Supply is done in course of furtherance of business are fulfilled as the services rendered are through the Forest Department of State Government of Uttarakhand, for which compensation is paid by PTCUL, qualifies as a supply of services as per section 7 of CGST Act, 2017. Whether services supplied by UK CAMPA, which is a section 12AA registered entity of The Income Tax Act 1961, be covered under Serial No 1 (Chapter 99) of Notification No 12/2017-Central Tax (Rate) dated 28th June 2017 read with section 11 of the CGST Act 2017? - HELD THAT:- It is opined that charity means generosity and helpfulness especially toward the needy or suffering that is to say aid given to those in need. The list of activities given in the above said notification are the activities which are eligible for exemption but for the exemption to come into picture the act of charity has to be fulfilled and in the instant case, the money is being charged and collected for specific purposes, which evidently does not constitute charity and hence services rendered through the Forest Department of State Government of Uttarakhand, is not covered under Entry No 1 (Chapter 99) of Notification No 12/2017 - Central Tax (Rate) dated 28th June 2017 read with section 11 of the CGST Act 2017. Under which heading of the GST tariff shall the said supply of service be covered? - HELD THAT:- The services provided through the Forest Department of state Government of Uttarakhand falls under the Heading 999799 - Other services nowhere else classified in the Group 99979- other miscellaneous services and hence not covered under Serial No 6 of the Notification No 12/ 2017 and it is observed that the above services under Heading 999799 does not figure in the Notification No. 12/ 2017 and hence is liable to tax. Identification of person liable to deposit such GST with the Government authorities i.e. is such payment covered under the Reverse Charge mechanism or normal forward charge rules? - HELD THAT:- The applicant being a business entity is liable and mandated to follow the provisions of the Notification No. 13/2017-Central Tax (Rate) dated 28th June, 2017 and is liable to pay due tax under reverse charge mechanism on the total assigned value for which demand is raised by the Forest Department of State Government of Uttarakhand, as per the provisions of the CAMPA Act. Whether compensation paid by PTCUL to DFO, the Government of Uttarakhand, is subject to levy of GST? - HELD THAT:- In the Section 7 of the CGST Act, 2017 it has been mandated that the expression - supply includes - all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business , and the consideration (although termed as compensation by the applicant) is actually Premium or Annual Lease as evident from the demand letters of the DFO, submitted by the applicant on 08.08.2022 - both of the two major elements i.e. Supply is done for a consideration and Supply is done in course of furtherance of business are fulfilled by the DFO of the Forest Department of State Government of Uttarakhand and hence services rendered for which Premium or Annual Lease is paid by PTCUL, qualifies as a supply of services as per section 7 of CGST Act, 2017. Under which heading of the GST tariff shall the said supply of service be covered? - HELD THAT:- It is found that at Heading 997212 under the head of Description of Service , Rental or leasing services involving own land or leased non-residential property , have been kept, and it is opined that the services provided by the DFO of the Forest Department of State Government of Uttarakhand falls under the above Heading and hence not covered under Serial No 6 of the Notification No 12/ 2017 and it is observed that the above services under Heading 997212, does not figure in the Notification No. 12/ 2017 and hence is liable to tax.

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• 2022 (10) TMI 909
  Taxability - coal rejects whose invoice is raised by Applicant upon washery/job-workerInput Tax Credit (ITC) of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning - admissible proportion of Input Tax Credit. Whether the coal reject whose invoice is raised by Applicant upon washery job-worker, is taxable under GST Act and Compensation Act in the hands of Applicant? - HELD THAT:- The coal rejects generated during the process of Coal washing are nothing but Coal with higher percentage of Ash content. HSN 2701 covers Coal; briquettes, avoids and similar solid fuels manufactured from coal . Therefore. Coal rejects are rightly classifiable under HSN 2701 and as per Notification No. 01/2017- Central Tax (Rate) dated 28.06.2017. 2.5% Central GST is also leviable for the same heading i.e. 2701 under schedule-I, further, as per Notification No. 01/2017- compensation cess (Rate) dated 28.06.2017. Rs. 400 per tonne is leviable as compensation cess under Chapter Heading Sub-heading 2701 - Coal rejects are to be classified under HSN 2701 and are taxable at 5% GS T Rate + Rs. 400 PMT Compensation Cess. Whether Applicant is eligible to avail Input tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery job worker for cleaning? - HELD THAT:- Where the goods are being received in lots or installments. the registered person shall be entitled to take credit upon receipt of the last lot or installment. Thus, if the applicant fulfils the eligibility conditions as prescribed under Section 16 of CGST Act, 2017 PGST Act, 2017 and if the type of ITC do not fall under the categories prescribed under Section 17 of CGST Act, 2017 PGST Act, 2017. the applicant is eligible to avail Input Tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning. Further, the principal shall be entitled to avail ITC in relation to goods sent directly to the premises of job-worker. If the answer to above question is yes and ITC is admissible, what is the admissible proportion of Input Tax Credit? - HELD THAT:- The formula prescribed under Rule 42 of CGST PGST Rules, 2017 for manner of determination of input tax credit in respect of inputs or input services and reversal thereof will be applicable in both cases i.e. GST and Compensation Cess. Therefore, the provisions prescribed under Rule 42 of CGST PGST Rules, 2017 should be followed by the applicant and they have to make reversal in the proportion of exempt/taxable turnover.

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• 2022 (10) TMI 908
  Classification of services - Bio-Mining and Scientific Closure of Legacy wastes at the dumpsite in Kureepuzha, Kollarn - services to be provided by the Applicant to the Superintending Engineer, Kollarn Municipal Corporation - eligibility for exemption under SI.No.3 of Notification No. 12/2017 dated 28.06.2017 as amended - HELD THAT:- The activities undertaken by the applicant are containment of waste, temporary storage of hazardous and non-hazardous waste, treating and disposing of the waste by processing in a facility that meets the legal standards. The ultimate goal of the activity is the reclamation of the land after clearing the waste and the activity undertaken by the applicant is the removal of waste as per the norms of Solid Waste Management Rules 2016. The activity of the applicant merits classification under SAC 9994 - Sewage and waste collection, treatment and disposal and other environmental protection services - Group - 99943 - Waste treatment and disposal services as per Annexure to Notification No. 11/2017 CT (Rate) dated 28.6.2017. Whether the services rendered by the applicant are eligible for exemption as per entry at SL.No. 3 of the Notification No, 12/2017 CT (Rate) dated 28.6.2017? - HELD THAT:- In order to qualify for the exemption under the above entry, the following conditions are to be satisfied:- a. The services must be pure services b. It must be provided to the Central Government, State Government, Union Territory or local authority c. The pure services must be by way of any activity in relation to any function entrusted to a Panchayat under Article 243 G of the Constitution or in relation to any function entrusted to Municipality under article 243 W of the Constitution. As revealed from the records produced before this authority, the services rendered by the applicant are devoid of any incorporation of goods in the process of supply. Thereby the same is eligible to be classified as pure services excluding works contract service and other composite supplies involving the supply of any goods. Thereby the first condition is satisfied - the second condition is also satisfied - The Twelfth Schedule to the Constitution deals with the provisions that specify the powers, authority and responsibilities of Municipalities; it includes 18 matters. SI.No. 6 of the Twelfth Schedule to the Constitution under article 243W deals with Public health, sanitation conservancy and solid waste management. The services proposed to be extended by the applicant to the Kollam municipal corporation are Biomining and Scientific closure of existing waste at the dumpsite Kureepuzha, Kollam which is covered under this item. Thereby the 3rd condition is also satisfied. Thus, the services provided by the applicant are exempted under Si.No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as amended.

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• Income Tax

• 2022 (10) TMI 907
  Additions for recovery of bad debts u/s 41 - As per appellant as recovered the bad debts of the companies, which got amalgamated with the appellant company, and, therefore, they are not taxable in the hands of the appellant and that the appellant was not the assessee for the purpose under Section 41 - whether the bad debt recovered by the appellant, which was written off by the amalgamating company, which got amalgamated, can be taxed in the hands of the appellant or not ? - HELD THAT:- Section 41 has to be considered as a complete Code by itself, as far as profit is chargeable to tax. Section 41 (1) cannot be read in isolation with Section 41 (4). The assessment contemplated under Section 41 (1) is the same as the assessment contemplated under Section 41 (4). Therefore, merely because there is no corresponding amendment in sub-clause (4), it would not mean that the provisions of Section 41 (1) will not apply. The recovery of the debt is a right transferred along with the numerous other rights comprising the subject of the transfer. If the law permits the transferor to treat the whole or part of the debt as irrecoverable and to claim a deduction on that account, it is difficult to accept that the same right should not be recognised in the transferee. We are of the view that the order of the Appellate Tribunal, confirming the order of the lower authority, is well reasoned and it requires no interference. Decided against assessee.

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• 2022 (10) TMI 906
  Disallowance of employee s contribution u/s. 36(1)(va) - HELD THAT:- As the assessee submitted that all the ESI amounts have been paid within the statutory time limits under the ESI Act. The counsel for the assessee stated that it was owing to a software error in filing Audit Report that the columns got interchanged, leading to the present misunderstanding. Assessee drew our attention (copies of Challaans for payment of Employees State Insurance Corporation) of the paper book to point out that all ESI contributions have been paid before the due dates as per the relevant Act. Accordingly, it was submitted that the matter may kindly be restored to the file of AO to carry out the necessary verifications. DR also did not object to the matter being restored to the file of the AO for the same. Therefore, in the interests of justice, we are restoring the matter to the file of the AO to carry out the necessary verification to ascertain if the payments have been made within due date under the ESI/relevant Act. Appeal of the assessee is allowed for statistical purposes.

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• 2022 (10) TMI 905
  Addition u/s 44DA - activities connected to PO/PE in India - services rendered by the overseas employees of home office of the assessee from Hong Kong for the activities performed for the project CMRL/KMRL - HELD THAT:- On careful examination and consideration of the findings of the ld. CIT (Appeals), the evidences placed on record by the assessee, we do not see any infirmity in the order passed by the ld. CIT (Appeal) in holding that the assessee has rightly offered the OCI as fees for technical services under the provisions of section 115A of the Act and the addition made under section 44DA of the Act is liable to be deleted. Ground raised by the Revenue is rejected. Additional ground of appeal raised by the assessee in its cross objection with respect to allowability of deduction under section 37(1) of the Act pertaining to Education Cess, Senior Higher Education Cess is concerned, it is the submission of the ld. Counsel that this ground is not pressed.

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• 2022 (10) TMI 904
  Assessment post amalgamation - brought forward losses post amalgamation - scheme of merger/amalgamation was approved by the Hon ble High Court of Calcutta - accumulated losses of amalgamating companies comprising of unabsorbed short term capital loss, unabsorbed long term capital loss, unabsorbed business loss would belong to the amalgamated company - Whether the provision of Section 72 and 74 would come into play with respect to set off of such accumulated loss of amalgamating companies against respective incomes of the amalgamated company? - HELD THAT:- The scheme once approved is binding on the Income-tax authorities and cannot be disturbed/reconsidered. We also take note of the findings given by the Co-ordinate Bench of ITAT, Kolkata in one of the assessee s group companies in the case of Electrocast Sales India Ltd. [ 2018 (3) TMI 473 - ITAT KOLKATA] wherein also similar issue was dealt and held in favour of the assessee. We also concur with the reliance placed by case of Select Holiday Resorts Pvt. Ltd.[ 2013 (1) TMI 187 - DELHI HIGH COURT] which deals with the similar issue present before us in the appeal. Considering the facts and circumstances of the present case which are similar to those dealt with by the Co-ordinate bench of ITAT, Kolkata and by the Hon ble Delhi High Court (supra) and the detailed findings given by the Ld. CIT(A), we do not find any reason to interfere with the order of the Ld. CIT(A) on this issue. Accordingly, we allow the adjustment of brought forward business loss against the current year s business income and also the set off of brought forward capital loss as claimed by the assessee. Thus, the grounds raised by the revenue are dismissed. Accordingly, the appeal of the revenue is dismissed.

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• 2022 (10) TMI 903
  Income deemed to accrue or arise in India - taxation of entire revenue received by the Appellant from provision of legal services on Indian engagements as Fees for Technical Services under the provisions of section 9(1)(vii) of the Act for the subject assessment year - DTAA between India and the UK - HELD THAT:- We note that the claim of the assessee in this case is that the issue is squarely covered in favour of the assessee by the decision in the case of Linklaters LLP [ 2019 (6) TMI 1502 - ITAT MUMBAI] Further, this has been countered by the Revenue by suggesting that the decision did not have the benefit of implication of the protocol amendment which, according to the Revenue, came into force from 27.12.2013, hence this decision is not applicable. Per contra, ld. Counsel of the assessee stated that this claim of the Revenue is not correct inasmuch as in the case of Linklaters LLP on the same issue of tax treaty eligibility was dealing with AYs 2011-12, 2012-13 2013-14 and the ITAT pronounced the rulings in the year 2017and 2019 respectively. Hence it is the submission of the assessee s counsel that Departmental authorities as well as the Departmental Representative s submission that the Protocol, which provides for an extension of India-UK DTAA applicability to a UK based partnership, is effective only from AY 2015-16 and onwards and shall not apply to the year under consideration, is entirely incorrect and not in accordance with the judicial precedents. We find ourselves in agreement with the submission of assessee. We note that CIT DR has distinguished the decisions cited by suggesting that the decision was rendered prior to the protocol amendment and CIT DR is also suggesting that these decisions are not applicable. However, we find that no contrary decision has been produced by the Revenue. Hence, the canons of judicial discipline comes into play and the decision of ITAT on this issue cannot be ignored by mere claim of the Departmental Authorities and Representatives that these decisions are not applicable inasmuch as they have been rendered without considering the implication of the protocol amendment. We may recap that the assessee is a firm of solicitors having office in the United Kingdom and providing legal services to its clients worldwide i.e. non-residents and residents of India. Assessee is a UK based Limited Liability Partnership with a majority of its partners being tax residents of the UK. During the previous year under consideration, the assessee provided legal services to its clients in India/ Outside India relating to activities carried out by such clients in India. The Revenue s opinion was that assessee is not eligible for benefits of India-UK DTAA within the meaning of Article 4(1) of India-UK DTAA. Revenue s suggestion is that assessee is a Limited Liability Partnership and is not liable for taxation in UK in its capacity as Limited Liability Partnership and its partners of an LLP in UK are taxable. That unless an entity is liable to taxation, it does not fall within the purview of a resident within the meaning of Article 4 (1) of the India-UK DTAA and is, therefore, not eligible for the benefit of India-UK DTAA. We find that ITAT was considering the same issue in the case of Linklaters LLP [ 2019 (6) TMI 1502 - ITAT MUMBAI] and it has opined that assessee is entitled to the benefit of India-UK DTAA on the portion of its income from Indian engagements, which has been taxed in the UK in the hands of its UK tax resident partners. The case is supported by the case laws referred of the assessee in the following judicial pronouncements that the eligibility of a fiscally transparent partnership firm to avail of the tax treaty benefits is affirmed on the basis that the income of the partnership firm has been taxed in the foreign state in the hands of its partners. Thus benefit of Article 4.1 is to be granted to the assessee in identical facts and circumstances of the case. Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee.

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• 2022 (10) TMI 902
  Default u/s 201 - TDS was not reflected in Form 26AS available - As submitted assessee has already suffered TDS denying its credit will lead to double taxation - CIT(A) was aware of the fact that EIEL is under Corporate Insolvency Process wherein appellant was employed at designation of Senior Vice President (Finance) [Sr. VP (Finance)] - HELD THAT:- Section 31(1) of the Insolvency and Bankruptcy Code ( hereinafter referred as IBC) after the amendment of 2019, makes the Resolution plan binding on Central Government in respect of payment of dues arising under any law for the time being enforce. Further section 238 of the IBC specifically provides that the IBC overrides the provisions of any law that is inconsistent with the IBC. In the case in hand EIEL was an assessee in default u/s 201 of the Act and sub-section 2 of Section 201 provides that such tax along with interest thereupon as recoverable under sub-section (1A), shall be a charge upon all the assets of the assessee in default. It is admitted fact that order u/s 201/ 201(1A) of the Act for the relevant financial year stands passed against the assessee in default EIEL who was employer of the appellant. That being so, having taken recourse under law by raising a demand for non-deposition of TDS u/s 201 and interest u/s 201(1A) of the Act and which stands further determined and admitted under the Corporate Insolvency Resolution Process then there could have been no justification under law to deny the credit to the assessee because as such the Government s claim of TDS stands satisfied and cannot be said to be still outstanding. Even otherwise Section 205 of the Act is very crystal clear in its intention and clarifies that where tax stands deducted at source the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from the income. In the case in hand as noticed above, the deduction of tax from the salary of assessee is not disputed and Government s claim of TDS stands satisfied under CRP and cannot be said to be still outstanding so as to deny its credit to the assessee. CIT(A) has been carried away by irrelevant facts of assessee himself occupying the position of Vice President (Finance) of the assessee in default company. Ld. CIT(A) failed to appreciate that there is no provision under law for creating such a liability upon any individual by attributing malice upon him for being party to the default in deposit of TDS. Appellant was for all purposes merely an employee who was being paid salary by the company which has a distinct and independent identity to its employees. Assessee has also established by an admitted pay slip for the December, 2015 that in fact the assessee had left the services working for 30 days in December, 2015. Thus, at the time of end of relevant FY, the assessee was not even in position of any nature qua responsibility to deposit the TDS on behalf of the assessee in default. No justification with Ld. CIT(A) to merely create a tax liability on grounds of propriety involved when otherwise there was no legal foundation. Thus substantial ground raised along with ancillary grounds no. 1 to 6 stand decided in favour of the assessee/appellant.

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• 2022 (10) TMI 901
  Addition u/s 68 - credit entries reflecting creditors for purchases of goods - onus to prove - non discharge of burden placed upon assessee by revenue - HELD THAT:- The impugned credit entries reflecting creditors for purchases of goods, in our considered view, are not satisfactorily explained. As regards the claim that since sales are not being doubted, the purchases cannot be doubted either, as what is sold must have been purchased as well, this theory is relevant only when purchases are being sought to be disallowed as bogus, and profit on the sale is being thus computed without providing for the cost of purchases; that is not the case here. What is held to be unexplained is the bunch of entries showing credits in the names of certain vendors and the existence and means of these vendors is not proved and the genuineness of the transactions is not established. None of the three necessary ingredients of a credit, i.e. existence of the creditor, means of the creditor and genuineness of the transaction involved, are established on the facts of this case. In the case of CIT Vs Precision Finance Pvt Ltd [ 1993 (6) TMI 17 - CALCUTTA HIGH COURT] Hon ble Calcutta High Court has summed up this principle by observing that It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. In our view, on the facts of this case, the Tribunal did not take into account all these ingredients which have to be satisfied by the assessee. Mere furnishing of the particulars is not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. Referring to the judgment of Hon ble Patna High Court, [ 1985 (3) TMI 57 - PATNA HIGH COURT] . Their Lordships observed that The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessee, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. We agree. We further agree that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact-finding body. These observations are equally relevant in the context of explanations for the purpose of application of section 68. Viewed in this light, we reject the explanation of the assessee as an explanation unacceptable to this final fact finding body. As regards the learned CIT(A) s stand that the amount shown as outstanding for the credit purchases can never be covered by the scope of Section 68, in our considered view, that is a very superficial way of looking at the provisions of Section 68. The law is simple and unambiguous. When a sum is found credited in the books of accounts of the assessee, he has to explain the same, and in the event of the assessee s failure to do so, that amount is treated as unexplained credit under section 68. When an assessee purchases something from a vendor, obviously, the account of such a vendor is credited and the purchases are debited and, therefore, when the assessee does not have a reasonable explanation about the credit appearing in the account of the vendor- as in this case, the Assessing Officer is perfectly justified in making the addition under section 68. The assessee explains that these people keep changing their office and are not easily traceable, but could it be an acceptable explanation that someone owes huge amounts to the vendors and these vendors are untraceable? The answer, in our humble understanding, is emphatically in negative. Another explanation of the assessee is that the goods were found defective and, therefore, no payments were made but there is no evidence whatsoever of the goods having been returned; this explanation does not merit acceptance either. Yet another facet of the explanation is that entire supplies were found to be defective, and this explanation is also highly unlikely. There is no explanation for why did it take so long to discover that the goods were defective, and there is not even a whisper of evidence that there were any issues in this aspect. A lot of emphasis is then placed on the fact that section 68 is titled cash credit and, therefore, purchases on credits cannot be covered by this section. This plea is also ex-facie incorrect as wordings of Section 68, as we have noted above, are categorical, and these words cover any unexplained credit in the books of accounts. This matter has been under hearing before this Tribunal for almost a decade, and a lot of papers are placed on record, but there is not one confirmation from the purported vendors evidencing the transaction, evidencing the goods return or evidencing the payment. When we specifically asked the learned counsel to point out one confirmation filed by the assessee, he could not do so. We have carefully perused the submissions filed by the assessee before the CIT(A) there is not one averment on this aspect. Learned counsel for the assessee expressed inability to file any confirmation from the persons from whom such purchases were purportedly made. It was once again explained that these persons being small traders of limited means and operating from table space etc are no longer available for any verification, but then these persons were not available even at the stage of the assessment proceedings. There is a mention about some confirmations having been filed by these persons in the next year but even those confirmations could not be produced before us. There is nothing to establish identity of these persons; no payments have been made to them, and there is no evidence before us about the current status of amounts payable to them. All that is being reiterated are the self-serving statements, based on sweeping generalizations, unverified statements, and without any supporting evidence. The onus is on the assessee to prove the identity of these persons, the means of these persons to have allowed these credits to the assessee, and the genuineness of the transactions leading to these credits. On each of these counts, the assessee has miserably failed in discharging his onus. The factual foundation of the case of the assessee is devoid of any substance or merits. The credits appearing in the books of the assessee, with respect to the purported purchase of goods on credit, in our considered view, are, therefore, not at all reasonably explained, and the Assessing Officer was, therefore, fully justified in making the impugned addition under section 68. We must, therefore, restore the addition made by the Assessing Officer. - Decided in favour of revenue.

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• 2022 (10) TMI 900
  Revision u/s 263 by CIT - Period of limitation - as per PCIT there is difference in contract receipts as per 26AS and figures reflected in the profit and loss account - A.Y.2010-11 - HELD THAT:- The revision order passed by the ld. PCIT u/s.263 of the Act deserves to be quashed it is barred by limitation. A.Y.2009-10 being unabated assessment as on the date of search on 21/07/2017 and admittedly there was no incriminating material found during the course of search relatable to mismatch in gross receipts and mismatch in TDS credit. Hence, the ld. AO could not have disturbed the earlier concluded assessments in view of the decision of Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT ] Explanation 2 to Section 263 of the Act has been invoked only in the revision order passed in the 263 of the Act without giving show-cause notice to the assessee in that regard. Hence, by placing reliance on the decision of the Hon ble Gujarat High Court in the case of Shreeji Prints Pvt. Ltd. [ 2021 (9) TMI 108 - SUPREME COURT ] the order passed by the ld. PCIT u/s.263 of the Act becomes unsustainable in the eyes of law; Adequate enquiries with regard to the disputed issues were already carried out by the Assessing Officer in three independent proceedings; Even on merits, the assessee had furnished detailed reconciliation statement explaining the mismatch in receipts and mismatch in TDS credit before the ld. AO in three independent proceedings and before the ld. PCIT in Section 263 proceedings; PCIT had never pointed out by any error in the order of the ld. AO by making preliminary enquiries with regard to submissions made by the assessee before him. Reliance in this regard is placed on the decision of Jabalpur Tribunal in the case of Jashn Beneficiary Trust vs. ACIT [ 2017 (8) TMI 362 - ITAT JABALPUR ] We find that this is purely a legal issue raised by the assessee and it does not require examination of any fresh facts. Hence, the said additional ground is admitted herein. But in view of the decision rendered by us hereinabove wherein 263 order passed by the ld. PCIT is quashed the adjudication of additional ground becomes academic in nature and hence, it is left open. Direction given by the ld. PCIT to the ld. AO to verify with regard to taxability of share of profit from AOP in the sum of Rs.3.43 Crores while computing book profit u/s.115JB - A.Y.2011-12 - We find that the said sum has already been added by the ld. AO in the second search assessment completed on 19/06/2019. This goes to prove complete non-application of the mind on the part of the ld. PCIT. Hence, the revision order passed u/s 263 of the Act by the ld. PCIT in respect of these two issues i.e. (c) above is hereby quashed. Direction given by the ld. PCIT to the ld. AO to verify with regard to adding back the non-genuine purchases while computing book profit u/s 115JB we hold that the ld. AO could only add those list of items that had been stipulated in Explanation 1 to section 115JB(2) of the Act and he cannot tinker with the audited accounts of the assessee which had been approved by the shareholders in Annual General Meeting. Reliance in this regard is placed on the decision of Apollo Tyres Ltd [ 2002 (5) TMI 5 - SUPREME COURT ]. Hence we hold that the ld. AO had correctly followed the ratio decidendi of Hon ble Apex Court in Apollo Tyres Ltd referred supra. Hence there cannot be any addition to book profit u/s 115JB of the Act in respect of alleged non-genuine purchases. Accordingly, there cannot be any error in the order of the ld. AO in this regard. Hence the revision order u/s 263 of the Act passed by the ld. PCIT in this regard deserves to be quashed and is hereby quashed. Nature of transactions entered by the assessee with its Subsidiaries / Associates and consequently to verify whether the assessee company had failed to comply with the provisions of section 92E - A.Y.2015-16 - We find that the ld. AO in the original scrutiny assessment proceedings framed u/s 143(3) of the Act on 07/11/2016 had duly examined this aspect which is evident from the reply given by the assessee vide letter dated 11/07/2016 in response to notice u/s 142(1) of the Act letter dated 04/07/2016. In this letter, the assessee had duly furnished the complete details of related party transactions before the ld. AO. The ld. AO after examination of the same had come to a conscious conclusion that the domestic transfer pricing issues cannot be made applicable to the assessee in the instant case and hence there was no need to refer the case to Learned Transfer Pricing Officer. We hold that the ld. PCIT is only trying to substitute his view , which is patently illegal, in the place of view already taken by the ld. AO, which, in our considered opinion, cannot be done by invoking revision jurisdiction u/s 263 of the Act. Hence we have no hesitation in quashing the revision order passed u/s 263. Mismatch in gross receipts and mismatch in TDS credit for various assessment years - We find that the revenue declared by the assessee in its profit and loss account from Asst Years 2011-12 to 2017-18 is much more than the revenue reflected in Form 26AS. This goes to prove that there would always be mismatch in revenue with corresponding impact in TDS. Hence the revenue reconciliation statement and TDS reconciliation statement filed by the assessee assumes greater importance, which had been duly verified by the ld. AO in all the assessment years. We find that the assessee had duly explained as to why certain receipts though subjected to TDS, would not be liable to be offered to tax such as mobilization advance. This had been completely ignored by the ld. PCIT while exercising his revision jurisdiction u/s 263 of the Act. This goes to prove that the revision jurisdiction u/s 263 of the Act had been exercised by the ld. PCIT in a mechanical and cavalier manner for all the assessment years under consideration and hence they deserve to be quashed.

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• 2022 (10) TMI 899
  Unexplained cash deposits in the bank account - Addition being 30% of the addition of cash deposit - assessee has not been able to discharge his onus of providing confirmation from parties from whom he claims to have received Cash which was deposited in the Bank accounts owned and operated by him - HELD THAT:- Even though the assessee is doing the activity of Shroff without obtaining any license from Competent Authority but what is mandated under the provisions of the Income Tax Act is to tax income of the assessee, whether it was from legal or illegal source. Therefore the principles for determining the income will remain the same even the source of income is illegal in nature as held by the Hon ble High Court of Madras in the case of CIT vs. K. Thangamani [ 2008 (12) TMI 78 - MADRAS HIGH COURT ]. Thus the Co-ordinate Bench held that after considering the facts in totality it was held that the assessee was acting as money transfer agent on behalf of the parties engaged in ceramic manufactures. Accordingly allowed the assessee s appeal and dismissed the Revenue s appeal. Computation of income at 0.25 per lakh deposited in the bank account of the assessee - It is appropriate to follow the ruling of the Jurisdictional High Court in the case of Shree Sidhnath Enterprise [ 2016 (6) TMI 289 - GUJARAT HIGH COURT ] it is the business to receive cash and issue cheques in lieu thereof for which the assessee charges commission amount. In the absence of any material to show that the cash in respect of which the cheque had been issued travelled back to the assessee, one fails to understand as to how such amount may be said to be the undisclosed income of the assessee and the Assessing Officer could not have charged the same as escaped assessment under the provisions of Income Tax Act. The grounds raised by the assessee are hereby allowed and the grounds raised by the Revenue are devoid of merits. Thus we have no hesitation in deleting the additions made by the Ld. CIT(A) and confirming that the assessee is liable to be taxed his commission income at 0.25 per lakh deposited in the bank account.

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• 2022 (10) TMI 898
  Deduction u/s. 80P on interest income - HELD THAT:- The issue raised in the extant appeal is no more res integra by virtue of series of orders passed by the Pune Tribunal. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit [ 2019 (4) TMI 682 - ITAT PUNE] decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit [ 2015 (8) TMI 1085 - ITAT PUNE] has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed in Tumkur Merchants Souharda Credit Cooperative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] allowing deduction u/s. 80P on interest income and that of the Hon ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. [ 2014 (9) TMI 833 - DELHI HIGH COURT] not allowing deduction u/s.80P on interest income earned from banks. Both the Hon ble High Courts took into consideration the ratio laid down in the case of Totagar s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). I, therefore, overturn the impugned order on this score and allow the deduction - Assessee appeal is allowed.

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• 2022 (10) TMI 897
  Revision u/s 263 - As per CIT, AO not considered issues relating to interest and audit fee payments and also the claim of capital gains under section 45 - HELD THAT:- AO neither examined nor made any enquiry with regard to the issues relating to interest and audit fee payments and also the claim of capital gains under section 45 of the Act. Therefore, we find that the ld. PCIT has rightly issued notice by stating that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue and also directed the Assessing Officer to pass fresh order in accordance with law by considering the issues after making proper enquiry and the verifying the details. We find no infirmity in the order passed by the ld. PCIT dated 01.03.2018. Thus, the appeal filed by the assessee is dismissed. Allowability of expenses claimed in the profit and loss account being TIIC loan interest charges and audit fee resulting in loss - HELD THAT:- It is an admitted fact that the return of income was filed after due date prescribed under section 139(3) of the Act, thereby, the loss claimed in the return cannot be carry forwarded as per section 80 of the Act. Moreover, it is also an admitted fact that the assessee company was under lock-out by Tamilnadu Industrial Investment Corporation (TIIC) since 1998 and thereby, the authorities below have observed that there was no business activities carried during the previous year relevant to the assessment year under consideration and the assessee cannot compute income/loss from business under section 28 of the Act. Under the above facts and circumstances, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed. Capital gain on transfer of property to the GPA holder - case of AO is that the assessee has leased out a property through one of the Director - HELD THAT:- The assessee company has taken a land on lease from one of the directors Shri Sivasamy for 30 years. Subsequently, the company gave a general power of attorney in favour of Shri P. Parameswaran, who is the director of the company. The same property was sold through Shri P. Parameswaran, Tirupattur for a sale consideration of Rs..3,00,87,887/-. In the power attorney, the legal heirs of Shri Sivasamy also signed in the document. Therefore, the legal heirs along with Shri Sivasamy relinquished the rights on the property. We find that Shri Sivasamy, who was the land owner is no more land owner. The company has given general power of attorney to Shri P. Parameswaran and he sold the property and loans were cleared from TIIC. The argument of the assessee is rejected for the reason that simply because Shri Sivasamy who is the owner of the property lease out to the assessee and filed property tax receipt though that receipts are not conclusive proof to consider the ownership rights taken away. In this case, the company has given general power of attorney to Shri P. Parameswaran and in that Shri Sivasamy and his legal heirs are also signed. During the course of hearing, when we asked the ld. Counsel for the assessee what is the consideration received by Shri Sivasamy and his legal heirs for relinquishment of the very legal rights on the property, he could answer and the reason is best known to him. Under the above facts and circumstances, we are of the considered opinion that the capital gains has to be taxed in the hands of the assessee as has been held by the authorities below. Thus, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the assessee is dismissed.

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• 2022 (10) TMI 896
  Penalty passed u/s 271(1)(c) - Non specification of charge - premise of defective and undetermined allegation - HELD THAT:- In the light of judgement rendered in Dilip N Shroff [ 2007 (5) TMI 198 - SUPREME COURT] and CIT Vs Samson Pericherry [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] and recently in Mohd. Farhan A. Shaikh Vs DCIT [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] we are on the considered view that, since the provision of section 271(1)(c) is calamitous, albeit commercial, consequences, and mandatory, hence brooks no trifling or dilution therewith, as a result in the instant case the SCN dt 22/03/2013 issued u/s 274 r.w.s. 271(1)(c) of the Act without specifying any limb or charge, is invalid and untenable in the eyes of law, consequently we set aside the first appellate order and quashed the order of penalty passed u/s 271(1)(c) of the Act, being bad in law - Appeal of the appellant assessee is allowed in terms of aforestated observation.

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• 2022 (10) TMI 895
  Reopening of assessment u/s 147 - bogus long term capital gain in the scrip - HELD THAT:- AO has reopened the assessment of A.Y. 2013-14 on the basis of information relating to AY 2011-12. Admittedly the AO has not referred to any material relating to the AY 2013-14 for arriving at the belief that there was escapement of income in the hands of the assessee in A.Y. 2013-14. It is well settled principle of law that the material relied upon by the AO should have a live or proximate link with escapement of income. It was so held in the case of Amsa India Pvt. Ltd. [ 2017 (4) TMI 64 - DELHI HIGH COURT] and also in the case of Moser Bare India Ltd. [ 2012 (12) TMI 456 - DELHI HIGH COURT] .There was material in the hands of the AO relating to assessment year under consideration for arriving at the belief that the Capital gains declared by the assessee in the return of income filed for A.Y. 2013-14 is bogus in nature.There is no live link between the material in the hands of the assessee and the belief entertained y him. AO has entertained such a belief only on the suspicion and surmises and not on the basis of any material. Accordingly hold that the reopening of assessment is bad in law. Accordingly we quash the impugned orders passed by the tax authorities on the legal issue. Appeal filed by the assessee is allowed.

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• 2022 (10) TMI 894
  Exemption u/s 10(23C) - unaccounted money was generated in podar Group and same was rooted through sham companies - HELD THAT:- According to the provision of Section 10(23C)(vi) any University or any Educational Institutions solely existing for education purposes and not for purposes of profit will have its whole of the income exempt. The proviso to section 10(23C) of the Act provides that if an educational institute applies its income on other than objects of trust or for the purpose of profit, it may lose exemption. Admittedly Ramrao Adik Education Society is also an educational institute, therefore, donation to that society cannot be said to be utilized by assessee for non-educational purposes. This fact has not been denied by the AO at any time. Thus it is not the case of the assessee that Rs.1 crores given as a donation by the assessee is utilization of the fund for non-educational purposes. Even otherwise, the disallowance under Section 10(23C) made by the AO is pursuant to search dated 9 January 2018. The impugned assessment year before us is 2012-13. Only evidence based on which the ld AO held that Rs 1 Cr of Donation is not eligible for exemption u/s 10 (23C) are the statements of those persons. For this year, original assessment is already completed u/s 143(3) of the Act on 27 March 2014 therefore, it clearly shows that impugned assessment is a concluded assessment at the time of search. Such retracted statement also cannot be said to be incriminating material found during the course of search, which can be used to enhance the income of assessee u/s 153A of the Act. Thus , there is no incriminating material existing pursuant to search, which could have disturbed the concluded assessment in case of the assessee. Therefore, even on this ground, the exemption u/s 10(23C) cannot be denied to the assessee. Accordingly, ground of the appeal of the learned Assessing Officer is dismissed and order of the CIT (A) is confirmed. Gratuity and leave encashment provision - HELD THAT:- We find that assessee runs educational institute and makes provision for gratuity and leave encashment of the staff on actuarial basis, which is ascertained liability, and not merely a provision. Merely because it is stated to be a provision, it is not disallowable. Even otherwise, the issue is squarely covered in favour of the assessee by the decision of co-ordinate Bench in assessee s own case for A.Y. 2014-15. In the result, ground no. 6 of the appeal of the learned Assessing Officer is dismissed.

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• Customs

• 2022 (10) TMI 893
  Maintainability of petition - waiver of mandatory condition of pre-deposit - Section 129E - HELD THAT:- In HARESH NAGINDAS VORA, SACHIN LAXMICHAND SHAH VERSUS UNION OF INDIA, PRINCIPAL COMMISSIONER OF CUSTOMS (GENERAL) [ 2017 (6) TMI 964 - BOMBAY HIGH COURT] this court held that Section 129E of the Act was amended on 1st October 2014 and the mandatory requirement of pre-deposit incorporated in the Section and powers and discretion conferred with appellate authority to waive / dispense with the pre-deposit was taken away. The amendment was to curtail substantial time expended on adjudication of waiver / dispensation applications. The court held that the Parliament had in its wisdom amended the provisions of Section 129E of providing deposit of 7.5% and 10%, respectively, as subclauses (i), (ii) and (iii), respectively, provide and it certainly cannot be held to be unreasonable, onerous, unfair or discriminatory. In fact, court upheld the constitutional validity of the amended Section 129E. The petitioner should approach the CESTAT by filing an Appeal under Section 129 E of the Act since there are various disputed questions of facts involved that requires to be considered. Further, as pointed out by Mr. Jetly, petitioner s statements have been recorded under Section 108 of the Act, where petitioner has admitted his role and none of those statements are retracted. The petition requires to be dismissed. Petition dismissed.

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• 2022 (10) TMI 892
  Advance Authorization Scheme - Issuance of Revalidation and Enhancement of value of import entitlement - discharge of export obligation or not - non-utilisation of Advance Authorization scheme - eligibility to file necessary application for duty draw back in terms of 4.28 (iv) of Para Handbook of Procedures to 2004-09 - validity period of an Advance Authorization - HELD THAT:- The validity of an import licence/ certificate/ Authorisation/ permission is decided with reference to the date of shipment/ dispatch of the goods from the supplying country as given in Paragraph 9.11 A of the Handbook and not the date of arrival of the goods at an Indian port - The subject Advance Authorisation came with a validity period 24 months from the date of their issue. Unless, they were revalidated before their expiry for a period of 6 months, the rights cannot be claimed except in accordance with the provisions of the Foreign Trade Policy and the relevant Handbook of Procedure. Revalidation of import/export license/certificate/authorization/permission - HELD THAT:- As per the provisions for the Handbook of Procedures of Foreign Trade Policy 1992-97, the application for revalidation was required to be made within a month of the expiry of the license (for initial period) or before the expiry of license (later period). Subsequently, these time limits prescribed for filing application for Enhancement/Reduction in the value of Advance Authorization as well as for Revalidation of Advance Authorizations have been removed under Paras 4.21 and 4.23 respectively under the Handbook of Procedures issued under the respective respondent of Foreign Trade Policy. Enhancement/reduction in the value of authorization - HELD THAT:- As per para 4.21 of Handbook of Procedure, the concerned Regional Authority could consider the request for enhancement or reduction in the value of the authorization. As per para 4.21.1 of the Handbook of Procedure to Foreign Trade Policy 2004-09, request for pro rata enhancement in the value and quantity may be made either before or after exports. It further stipulates that in such cases where there is a change in standard input output norm SION prior to export of the product, pro rata enhancement shall be given after calculating entitlement on revised SION. Application after expiry of last date - HELD THAT:- Paragraph 9.13 of the HOP which states DGFT may, on his own or otherwise, call for records of any case pending with or decided by an officer subordinate to him or an officer of any EPC/FIEO including a Group/ Committee of officers nominated, appointed or authorised by him and pass such orders as he may deem fit is also not relevant. Claim for Exemption from the Policy / Procedure under 2.5 of 2009-14 Policy and later 2.58 of 2015-2020 is without merits - The application was filed on 16.02.2011 for the first time after the extension of two years. Thus, the application was beyond the limitation. Paragraph 9.3 of the Foreign Trade Policy therefore cannot come to the rescue of the petitioner. Period of discharging the export obligation - HELD THAT:- Period of export obligation (EO) under an Advance Authorisation commences from the date of issue of Authorisation, unless otherwise specified. Export obligation issued under FTP 2004-09, 2009-14 and 2015-20 were to be fulfilled within 18, 24 and 36 months respectively - As per Paragraph 4.22 of the Handbook of Procedure with effect from 27.8.2009 the normal period of discharge of export obligation to 18 months. No applications were filed within the time prescribed for extending the period of export obligation. Since, such a request was made for the first time on 16.2.2011, it was correctly rejected on 02.06.2011. Further, it is also not clear about the quantity imported and quantity that was lying unutilized on these dates when the period expired. The case of the petitioner does not fall within the above specified period. In any event no application was filed by the petitioner in time. Therefore, the petitioner has no case made on merits - Request for revalidation of an Advance Authorisation can be made once for 6 months from the expiry of date of its validity in terms of Paragraph 4.23 of the Handbook of Procedure and/or for enhancement/reduction in the entitlement in terms of Paragraph 4.21 of the Hand Book of procedure can be made only either before or after export. This writ petition is disposed of with the following directions:- (i) Fourth respondent Adjudicating Authority is directed to dispose the Show Cause Notice issued on 10.05.2013 within a period of twelve months from the date of receipt of a copy of this order. (ii) To the extent, the petitioner has utilized the Advance Authorisations, it shall file necessary documents for discharging its Export Obligation undertaken. iii) To the extent, the petitioner has not utilized the Advance Authorisations it shall file necessary application for duty draw back in terms of 4.28 (iv) of Para Handbook of Procedures to 2004-09.

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• Corporate Laws

• 2022 (10) TMI 891
  Oppression and mismanagement - misappropriation of funds - Section 421 of the Companies Act, 2013 read with Section 241-242 of the Companies Act, 2013 - HELD THAT:- In special audit carried out by Vikas Dahiya and Company, Chartered Accountants, New Delhi vide its Special Audit Report dated 24th May, 2017 has observed multiple irregularities during the Financial Year 2013-14 to 2016-17. The auditor has also observed that huge payments were released in cash without supporting vouchers, receipts and payment amounting to Rs. 3.62 Crore has been made for which no satisfactory explanation was given by the Appellant. Illegal encashment of cheques, direct transaction of the funds, non-compliance of statutory duties of the Respondent No.1 Company etc came to the light and the same had happened under instruction of the Appellant. There are irregularities and misappropriation of funds including non-payment of statutory dues and the special audit has also recommended to carry an extensive forensic audit to find out the magnitude of misappropriation of funds. There was no case of Oppression Mismanagement as alleged out by the Appellant in present Appeal as well as in the Application filed before the Hon ble NCLT, New Delhi vide CP-219/241-242/ND/2018 and the Adjudicating Authority rightly passed the detailed order dated 03.09.2021 after going through the entire materials placed on records and as such no irregularities were found in convening an Extra-Ordinary General Meeting which was requisitioned at the instances of a shareholder and a Board Meeting is not a pre-requisite as settled principles under Companies Act, 2013 - the Board Meetings were convened and suggested appropriate actions including convening of Extraordinary General Meeting (EGM) based on requisition of shareholder to remove the Appellant from the Directorship of the company vide Special Notice dated 16.05.2018 and the Board has intimated vide letter dated 23.05.2018 to the concerned Director to defend the various allegations raised in the special notice but no cognizant explanation was offered against the discrepancies in the accounts of the Respondent No.1 company. There are no irregularity in the impugned order - appeal dismissed.

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• Insolvency & Bankruptcy

• 2022 (10) TMI 890
  Transfer of title of goods or not - Unpaid seller - delivery of BoL to the Corporate Debtor - Appellant TLD MEAI FZE continued to be the owner in view of the terms and conditions of Purchase Orders and Invoices on account of alleged failure of the Respondent to pay the balance of price of Equipment or not? - appellant entitle to make a request to remove the Equipment from the list of fixed asset of Corporate Debtor in the CIRP and claim return of those Equipment under the provisions of IBC. HELD THAT:- The intention of the parties to the Agreement to sell goods is the basis to determine whether the property of goods passes to the buyer or not. More particularly when the sale is under Agreement to sell as defined under Section 4 of the Sale of Goods Act, 1930 - All the conditions in the Purchase Order and Invoices would show that till payment of the price of Equipment by the buyer, the ownership will remain with the seller. In the instant case, the Corporate Debtor paid only 30% on the date of contract of sale and later the balance of 70% of sale consideration was not paid. Therefore, strictly in terms of the Purchase Order and the conditions of Invoices the ownership will remain if the Appellant herein is seller of the Equipment to the buyer i.e., Corporate Debtor . If the intention of the parties is gathered from the terms and conditions incorporated both in Purchase Orders and Invoices, the title to the goods to the transferred only of sale consideration of the Equipment and therefore the delivery of BoL is only transfer of possession of the goods not ownership or title to the goods. Though, BoL is treated as document of title to goods under Section 2(4) of the Sale of Goods Act, 1930. In the present case, the 70% of the sale price of Equipment was not paid by the Corporate Debtor to the Appellant/Seller and the seller would fall within the definition of unpaid seller as defined under Section 45 of the Sale of Goods Act, 1930. The unpaid seller is entitle to claim lien when the goods for the price while he is in possession of them. In the present facts, the buyer i.e., the Corporate Debtor , became insolvent and CIRP is initiated against him. If Sections 46 50 of the Sale of Goods Act, 1930, are construed strictly and the buyer i.e., the Corporate Debtor became insolvent, the unpaid seller i.e., the Appellant herein is entitled to stop the Equipment in the transit in possession of the Corporate Debtor . Still the unpaid seller is entitled to recover the price by filing a suit for recovery of price under Section 55 or file a suit for specific performance under Section 58 of Sale of Goods Act, 1930 - If the terms and conditions of the Purchase Order or Invoices as mentioned in the earlier paras if construed strictly the title to the goods remained with the Appellant and mere delivery of BoL does not amount to transfer of ownership in the goods since the delivery of goods is based on contract of sale. As such, the intention of the parties to the contract of sale is to pass ownership in the goods only on full payment of sale consideration agreed by the parties. Thus, the intention of the parties to the contract of sale was to pass ownership of the goods only on full payment of sale consideration agreed by the parties. Admittedly, only 30% of the sale consideration was paid and 70% is balance - the Appellant still continues to be owner of the equipment and the equipment being not assets of the Corporate Debtor ought not to have been included in the assets of the Corporate Debtor. Appeal disposed off.

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• 2022 (10) TMI 889
  Seeking approval of the Resolution Plan - entitlement for the distribution under the Resolution Plan as per their admitted claim - HELD THAT:- From the facts brought on record in the Application and replies filed thereto, it is clear that Applicant did not file any claim in the CIRP of Corporate Debtor till the approval of Resolution Plan. It is submitted that neither any claim nor proof of filing in the proceedings has been filed and hence, at this stage there is no occasion to admit the claim, which is brought on record as Exhibit-C to the Application, in the CIRP of the Corporate Debtor. Now coming to Clause-12 of Part-V, on much reliance has been placed by learned Counsel for the Applicant, it is clear from the Resolution Plan brought on record that Clause-12 is part of Part-V of Scheme of Arrangement. The Appellant is entitled to the relief as prayed, it is not necessary to issue any direction for modifying the Resolution Plan or modifying the order of Adjudicating Authority approving the Resolution Plan. The interest of justice will be served in issuing direction to the Resolution Applicant to make distribution to the Appellant as per its admitted claim of Rs.956.21 crores , which however, shall be without affecting distribution of amounts to other Financial Creditors both Assenting and Dissenting Financial Creditors and other stake holders. Appeal allowed.

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• 2022 (10) TMI 888
  Forfeiture of entire Performance Bank Guarantee given by the Appellant - direction to exclude the time from the date of issuance of Form G till the date of passing of orders and issued certain further directions - HELD THAT:- The present is a case where Performance Bank Guarantee was given by the Appellant to implement the Resolution Plan approved as per the Code. The forfeiture of the Performance Bank Guarantee in the CIRP Regulations is statutory requirement. The Application filed by Respondent No.1, thus, was a composite application invoking various provisions of the Code including Rule 11 of the NCLT Rules, 2016. In the facts of present case, we are not persuaded to accept the submission of the learned Counsel for the Appellant that only option available to the Adjudicating Authority was to direct for liquidation. Liquidation could have been one of the orders, which is contemplated in the facts of the present case, but it cannot be held that liquidation is the only option in the facts of the present case. It is well settled and reiterated from time to time by the Hon ble Supreme Court that all steps shall be taken to revive the Corporate Debtor and the liquidation is always a last resort. The provision of the Code contemplates filing of a complaint by Board or the Central Government or any person authorized by the Government in this behalf. It is true that Adjudicating Authority while exercising jurisdiction under the Code is not required to return any finding of an offence within the meaning of Section 74, sub-section (3). It is a prerogative of the Special Court under Section 236 to try an office and award punishment if any - The observations made by the Adjudicating Authority has to be read only for the purpose of sending the copy of the order to the Board for consideration for filing a complaint and order of the Adjudicating Authority cannot be treated to any direction to initiate action under Section 74, sub-section (3), which is in the domain of the Board and Central Government as per the statutory Scheme of the Code. Appeal disposed off.

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• 2022 (10) TMI 887
  Condonation of delay in filing petition - sufficient cause for delay is shown or not - whether the section 9 petition was filed within limitation and therefore it concerns IA No. 3425/2021, which is an application for condonation of delay under section 5 of the Limitation Act? - HELD THAT:- A perusal of pleadings made in section 5 application under Limitation Act shows that the operational creditor has admitted that the last acknowledgment by the corporate debtor was on 21.11.2017 through an e-mail from corporate debtor to Mr. Bruno Claeys, former Commercial Director of the ex Orbest Airlines which was actually to check the authenticity of letter dated 11.3.2013 and also enquiring whether the said letter was signed by him in his capacity as Commercial Director of Orbit Airlines. Clearly this e-mail is checking on the authenticity of his signature in letter dated 11.3.2013 and cannot be considered as acknowledgment of the operational debt by the corporate debtor. The Orbest Airlines went into liquidation on 21.1.2014, and that in the event of Mr. Bruno Claeys refusing to accept that the signature on the letter dated 11.3.2013 was not in his hand-writing, it is not established that so-called operational debt is due and payable to the Appellant. We have also looked at the Charter Agreement between Air India and Orbest Airlines (attached at pp.148-159 of the appeal paperbook, Vol.II) wherein there is no mention of BKP Enterprise to act and collect payment on behalf of the original operational creditor Orbest Airlines. Significantly, vide a letter dated 28.11.2012, Mr. Sohil B. Zaveri and Mr. Bharat N. Zaveri of BKP Enterprise were authorized to reconcile the Orbest accounts with Air India in respect of the Haj operation undertaken in the year 2012. The e-mails that have been cited by the Appellant in his application IA No. 3425/2021 for condonation of delay do not provide clear and unequivocal acknowledgment of debt that is due to be paid to the Appellant. These e-mails only allude to the fact that there was no clarity between whether payment should be made to BKP Enterprise and moreover, Orbest airlines after liquidation certified that no payment was due to be received from Air India. The application for condonation of delay does not contain sufficient cause and has, therefore, been correctly dismissed by the Adjudicating Authority - Appeal dismissed.

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• 2022 (10) TMI 886
  Initiation of CIRP - Operational Creditors or not - existence of debt and dispute or not - whether claim raised by the Respondent No. 1 is actually an operational debt and whether the said operational debt exceeds an amount of Rs. 1 lakh? - HELD THAT:- Section 5(20) of the IBC lays down that unless the context otherwise requires operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred and Section 5(21) provides that operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority - a plain reading of the definition of operational debt, it is clear that it is a claim in respect of provisions of goods or services including dues on account of employment or a debt in respect of repayment of dues arising under any law for the time being in force payable to Centre or State Government or local authorities. It is, thus, confined to four categories viz. goods, services, employment and Government dues. From the material on record, facts and circumstances there arises no clear or unambiguous jural relationship between the two parties as one of Corporate Debtor and Operational Creditor. Rather both the Corporate Debtor and Respondent No. 1 are like the principal as well as the agent of the other party. This spirit is not only captured in the body of the agreement but also demonstrated in the actions and conduct of both parties in their role as general profit sharing partners - the claim is not in the nature of Operational debt, it need not be further examined whether there was any default in respect of a debt which had become due and payable and whether it was laced with pre-existing dispute. The Adjudicating Authority has erroneously admitted the application under Section 9 of the IBC - Appeal allowed.

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• 2022 (10) TMI 885
  CIRP - recovery of arrear of sales tax / VAT - first charge in favor of revenue - removal of lien created over the factory premises and landed property - overriding effect covered under Section 238 of the IBC - the Adjudicating Authority vacated the lien marked on the Corporate Debtor on 13.05.2019 for two reasons: i. It being subsequent to the admission of the company petition; and ii. This order will not have any primacy over the overriding effect covered under Section 238 of the IBC and allowed the application filed by the Liquidator vacating the lean marked on asset of the Corporate Debtor on 13.05.2019. HELD THAT:- The Adjudicating Authority while passing the impugned order dated 01.10.2020 has not considered the ratio of the latest judgment of the Hon ble Supreme Court in the case of State Tax Officer (1) Vs. Rainbow Papers Limited bearing Civil Appeal No. 1661 of 2020 [ 2022 (9) TMI 317 - SUPREME COURT ] - the impugned order passed by the Adjudicating Authority cannot be sustained in the eye of law, therefore, the impugned order dated 01.10.2020 passed by the Adjudicating Authority (National Company Law Tribunal, Principal Bench, New Delhi.) is hereby set aside. Appeal allowed.

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• 2022 (10) TMI 884
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - existence of debt and dispute or not - existence of loan agreement between the Financial Creditor and Corporate Debtor or not - Financial Creditor disburse any amount to the Corporate Debtor or not? - HELD THAT:- On perusal of the Balance Sheet for the Financial Year 2017-2018, the name of the Financial Creditor is written under the heading for term loans. Hence, there was an agreement for loan between the Corporate Debtor and the Financial Creditor and if there was no disbursal of any amount, the Corporate Debtor would not have sought for restructuring of the loan account on 04 February 2019 - there is a debt and there have been delays in payment of the debt. The other defenses raised by the Corporate Debtor such as filing a declaratory suit are clearly an afterthought and was done after two years from receiving the notice for this Company Petition. The present petition made by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time - petition admitted - moratorium declared.

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• 2022 (10) TMI 871
  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:- Whereas the payments made on the earlier dates except the payment reflected at Serial no.1 are adjusted against the invoice no. RV1927813879, the part-payments dated 03.11.2021 and 08.11.2021 made by the respondents as reflected at serial. no. 8 and 9 are adjusted towards the interest outstanding of the invoice bearing No. RV2027804572. Hence, there are no consistency or pattern in the treatment accorded to the part-payments, while adjusting the same towards the outstanding dues. Had the amounts mentioned at Serial No. 8 and 9 been adjusted towards the invoice RV1927813879, the principal amount would be less than the minimum stipulated threshold of Rs 1 (one) Crore. The invoice claimed in Part IV of the present application is only RV1927813879 and the other invoices as referred in table (produced) are neither produced nor are the subject matter of the present petition - further investigation and scrutiny of facts is required that as to why the subsequent payments made on 08.11 2021 are adjusted against the invoice no. RV2027804572, whereas the previous payments made on 24.03.2021 and 25.03.2021 are adjusted towards the Invoice under reference i.e., RV1927813879. The Applicant has failed to establish beyond doubt the quantum of the unpaid operational debt above the minimum threshold of Rs. 1 (one) Crore subsisting - Application dismissed.

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• Service Tax

• 2022 (10) TMI 883
  Rejection of form under Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019 - duty demanded, as mentioned in the Show Cause Notice, was incorrectly mentioned by petitioner while filing up the Form - HELD THAT:- As held by this court in Thought Blurb [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] , the scheme has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand. The primary focus being to is to unload the baggage of pending litigation in respect of service tax and central excise from pre-GST regime so that the businesses can move on. If this broad picture is kept in mind while considering not only the application under the SVLDRS scheme seeking amnesty, in the fact situation of this case, such a broad picture has to be kept in mind. Mr. Agashe prays that a direction be given to Respondent no.3 not to impose any penalty. This is something which Respondent no.3 will have to consider on the facts and circumstances of the case. The respondent no.3 are requested to keep in mind that petitioner had filed an application under the SVLDRS which came to be rejected not because petitioner was not eligible but due to certain incorrect entries being made. Petition disposed off.

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• 2022 (10) TMI 882
  Maintainability of appeal - appropriate forum - section 35L of the Excise Act - Classification of services - CHA service or not - revenue earned under the head Break Bulk Fee - revenue generated as airline/airline incentive - Business Auxiliary Service or not - penalty u/s 78 of the Finance Act, 1994 - HELD THAT:- Reliance placed upon the respondent s own case DHL LEMUIR LOGISTICS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE [ 2009 (3) TMI 158 - CESTAT, BANGALORE ] , wherein it had held that the Break Bulk Fee would not be includable in the computation of service tax towards CHA Services. Revenue earned as freight rebate - HELD THAT:- The Tribunal further held that the service tax under the head Business Auxiliary Service could not be charged on the revenue earned as freight rebate inasmuch as the freight rebate was the revenue stream generated out of trading of the space in the airlines incentives, and that unless the airline was booked specifically for a client, the components of Business Auxiliary Service did not come into play. It also held that the appellant (respondent herein) was booking the space for its own trading activities, and therefore, in those circumstances, held that demand of service tax under Business Auxiliary Service could not be sustained. Income under the head airlines commission and airline incentives - HELD THAT:- The Tribunal held that the same could not be considered as supply of Business Auxiliary Services, and therefore, set aside the demand in that regard. In view of the specific provisions of section 35L of the Excise Act, 1944, determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment would be a subject matter of appeal before the Hon ble Supreme Court - the appeal is disposed of as not maintainable before this Court.

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• 2022 (10) TMI 881
  Recovery of past dues of service tax - Classification of services - Business Auxiliary Services or not - supply of bed rolls to passengers travelling in A/c III Tiers and in other higher classes and charges thereof collected by appellant from railways - Customer Care Service provided to the railways or not - HELD THAT:- The reliance placed on Section 99 of the Finance Act, 2013 by the appellant in this appeal, at this stage, is of no relevance as it applies only to taxable service provided by the Indian Railways. The service provided by the appellant to the Railways cannot be construed as the service provided by the Railways. What is provided by the appellant is the service of supply of bed rolls alone for the passengers travelling in AC compartments. Therefore, the appellant cannot claim any exemption in terms of the aforesaid provisions of the Finance Act, 2013. Once the language in taxing statute is clear, there is no scope in interpreting the same as the tax provisions has to be read as it is and nothing is to be intended. Considering the fact that the appellant is in arrears of tax right from 2003 and has not paid the amount till date, the official respondents are directed to recover the amount by ensuring that the appellant s business is not stalled, by giving time for repaying the amount together with interest and penalty - Petition closed.

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• 2022 (10) TMI 880
  Claim of interest on Refund - Demand of service tax was set aside in the appellate proceedings - Calculation of interest for the period from the date the amounts were actually paid to the Government account, is correct or not - HELD THAT:- The Commissioner (Appeals) relying on the notification issued exempting payment of service tax allowed the appeal. It is on 21.11.2013 that the declaration is given that the appellant is not entitled to pay any service tax. Hence, any interest to be worked out on the refund has to be only from that day onwards. The appellant cannot contend that when a refund application is allowed, the interest has to be worked out from the date on which the service tax was actually paid into the Government. In fact Section 11BB and Section 11B of Central Excise Act 1944 deals with refund. It specifically states that the claim of interest on refund liability of the revenue to pay interest commences from the date of expiry of the 3 months from the date of receipt application for refund under Section 11B(1) of the Act and not on the expiry of the period from the date on which the order of refund is made. The Tribunal by the impugned order has held that the liability to pay interest on the amount of refund starts from the date on which the declaration was made that the appellant is not liable to pay service tax and declared that the appellant is entitled for interest from the date of order in original dated 21.11.2013 onwards. The appellant is entitled for interest on the refund made only from the date on which the original order was passed declaring that the appellant is not liable to pay service tax - Appeal disposed off.

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• 2022 (10) TMI 879
  Levy of service tax on Commission - Business Auxiliary Service - appellant have shown the income and booked in their profit and loss account as commission - exemption as per N/N. 13/2003-ST dated 20.06.2003 - HELD THAT:- The appellant have provided the service of Software Consultancy Service. As regard the mentioning in the profit and loss account as commission it clearly appears that there is a mistake occurred in mentioning the expenditure in the books of accounts. Therefore, the service provided by the appellant is of Software Consultancy Charges, accordingly, the demand under Commissioner in the head of Business Auxiliary Service is not sustainable - it is found that the service tax in the Commission Agent Service was clearly exempted unconditionally under Notification No.13/2003- ST dated 20.06.2003 up to the period of 08.07.2004. The entire demand for the period 2004-2005 is on the invoices issued on 15.04.2004 and 15.05.2004, therefore, these transactions are clearly under the exemption. Demand of Rs.73440/- for the period 2006-2007 - HELD THAT:- Even in the books of account, the appellant have booked the expenditure under the head of Software Consultancy Service, therefore, the demand treating the receipt as the commission under Business Auxiliary Service would not sustain. Demand of Rs.2363/- - Penalty - HELD THAT:- The appellant have not contested with the same as the same was related to Finance Consultancy Service and the same was discharged by the appellant. They are only contesting the penalty. Considering the meager amount and in the facts and circumstances of the present case, it is found that appellant have made a fit case for waiver of the penalty corresponding to Rs.2363/- demand, accordingly, the penalty is also not sustained. Appeal disposed off.

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• 2022 (10) TMI 878
  Refund of CENVAT Credit - Appellant and the service recipient are establishments of a distinct person or not - refund denied on the ground that the services rendered by the Appellant do not meet the criteria under Clause (f) of Rule 6A(1) of the STR inasmuch as it is an overseas branch office of Zaloni Inc. and are merely establishments of distinct persons in accordance with Explanation 3(b) of Section 65B(44) of the Finance Act, 1994 - HELD THAT:- The issue involved in the case at hand is no more res integra and has already been decided by the Hon ble Gujarat High Court in the case of LINDE ENGINEERING INDIA PVT. LTD. VERSUS UNION OF INDIA [ 2020 (8) TMI 181 - GUJARAT HIGH COURT] where it was held that the respondents would not have any jurisdiction to invoke the provisions of the Act, 1994 read with Rules, 1994 to bring the services rendered by the petitioner No.1 to its parent Company within the purview of levy of service tax under the provisions of the Act, 1994. The Hon ble Supreme Court in the case of VODAFONE INTERNATIONAL HOLDINGS BV. VERSUS UNION OF INDIA ANR. [ 2012 (1) TMI 52 - SUPREME COURT] has held that a subsidiary and its parent company located in different taxable territories are totally distinct taxpayer (s) or different entities. The Appellant received the charges for their services in convertible foreign exchange. Therefore by respectfully following the ratio as laid by the Hon ble Supreme Court and the judgement of Hon ble Gujarat High Court and considering the fact that the Appellant and the service recipient are two distinct persons, the service provided by the Appellant to Zaloni Inc., USA clearly falls under the category of export of service - Appeal allowed - decided in favor of appellant.

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• 2022 (10) TMI 877
  Levy of penalty u/s 77 and 78 of FA - Business Auxiliary Service - amount has been received by the appellant as commission from Amway and Britt - amount of tax already paid by the assessee - HELD THAT:- The proceedings should have been concluded before issuance of the show cause notice. The penalties imposed are set aside - Service Tax as confirmed in the Adjudication Order need not be confirmed - appeal allowed.

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• Central Excise

• 2022 (10) TMI 876
  Clandestine Removal - Availment of fraudulent Cenvat Credit - non-receipt of inputs - evasion of Central Excise Duty - penalty u/r 26 of Central Excise Rules, 2002 - HELD THAT:- As regard the demand of fraudulent Cenvat Credit of Rs. 18 Crores and evasion of Excise Duty for Rs. 94,99,291/- the same stand confirmed as the impugned order is in operation. The appellant being a Director of the Company involved in the entire Modus Operandi of fraudulent availment of credit and evasion of Excise Duty on the clandestine removal of finished goods. Without the knowledge of the director it could not have been possible to make such a huge evasion of duty. Therefore, the involvement of the director is clearly established. It is clear that the appellant was directly involved in evasion of huge amount of excise duty and fraudulent availment of Cenvat Credit. Therefore, there are no infirmity in the finding given by the Adjudicating Authority - the penalty imposed upon the appellant is upheld - appeal dismissed.

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• 2022 (10) TMI 875
  CENVAT Credit - input service distribution - whether issuance of Input Service Distributor (ISD) invoice by M/s Parle Biscuits Pvt. Limited to its contract manufacturing unit (M/s M.B. Industries Pvt. Ltd.,) is legal and correct when the contract manufacturing is carried in terms of N/N. 36/2001-CE (NT)? - HELD THAT:- The issue herein is squarely covered in favour of the appellant by the Larger Bench ruling of this Tribunal in the case of M/S. KRISHNA FOOD PRODUCTS, M/S. MARIAMMA R. IYER, M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX [ 2021 (5) TMI 906 - CESTAT NEW DELHI] where it was held if amended provisions of rule 2(m) and rule 7 of the CENVAT Rules, after the 01.04.2016, merely seek to rectify the lacuna in the unamended rules and, therefore, would have effect from the inception of the rules. Appeal allowed - decided in favor of appellant.

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• 2022 (10) TMI 874
  Clandestine manufacture and removal - Flavoured Tobacco - Gutkha under brand name Patidar - evasion of Central Excise Duty - reliability of statements on which reliance placed upon - not permitting cross-examination of the witnesses sought by the appellant - infraction of principles of natural justice - confiscation - penalty - HELD THAT:- A statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. Even mere recording of statement is not enough but it has to be with full conscious application of mind by the adjudicating authority that the statement is required to be admitted in the interest of justice. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, the statement recorded by the Investigation Officer would not constitute the relevant and admissible evidence/material at all and has to be ignored - there are no hesitation to view that in the present matter Ld. Pr. Commissioner committed illegality in placing reliance upon the statements of persons which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. It is well settled law that clandestine removals cannot be arrived at based upon the confessional statement of persons only. The statements itself are not sufficient for holding so. There is catena of judgments laying down that the inculpatory statements alone cannot be made the basis for arriving at a finding of clandestine removal - Mere doubts, howsoever strong cannot take the place of evidence required to be produced by the Revenue. The onus to establish such clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by production of sufficient evidences. In the instant case, the entire case of the Revenue is based on the Kaccha Chits seized from the residential premises of Shri Kirti Finava and Shri Anil Metaliya. There is considerable force in the contention of the Appellant that the Kacha Chits relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue of fact i.e. in the present case the charge of clandestine clearance cannot be levelled against the assessee - It has been consistently held that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the Revenue by direct, affirmative and incontrovertible evidence. There is no justification for confiscation of the seized goods from the premises of M/s Radheshyam Transport Co, Surat. The Revenue has not produced any evidence to reveal that the said goods found from the transport s premises were cleared from the appellant s factory without payment of duty. All the goods available in the market are deemed to be duty paid, unless proved otherwise. In the absence of any evidence to the contrary, the confiscation of the goods is set aside - the demands of duty, corresponding interest and penalty, the confiscation of seized goods and seized cash are not sustainable, consequently, the imposition of penalties on all the co-appellants are also not sustainable. Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2022 (10) TMI 873
  Drug Trafficking - Species of the contraband recovered - poppy husk - poppy straw - necessity for the prosecution to bring in materials to show as to what was the species of the contraband recovered - NDPS Act - whether it is sufficient for the prosecution to establish that the raw material contains morphine and meconic acid to bring it under sub-clause (a) of Clause (xvii) of Section 2 of the 1985 Act or is it necessary for the prosecution to further establish that, though the seized material contains morphine and meconic acid, the genus of the seized material is papaver somniferum L or any other species of papaver from which opium or any phenanthrene alkaloid can be extracted and which is notified in the Official Gazette by the Central Government to be opium poppy for the purposes of the 1985 Act? HELD THAT:- Since many deficiencies were found in the earlier enactments and the provisions therein were not found sufficient to deal with the problems of drug trafficking, it was found necessary to enact a new law since after passing of the earlier three Acts, there were tremendous developments on an international platform and a vast body of international law in the field of narcotics control had evolved through various international treaties and protocols. The Government of India had been a party to these treaties and conventions which entailed several obligations which were not covered or were only partly covered under the old Acts. It was well recognized under the earlier enactments, International Conventions and scientific studies that papaver somniferum L plant was the main source for the production of opium . The 1878 Act so also the 1930 Act had recognized this position. In the International Conventions also, this was recognized. Though for the first time in the 1953 Protocol, in addition to papaver somniferum L , any other species of papaver , which may be used for the production of opium was included in the definition of opium , the subsequent conventions of 1961 and 1988 again defined opium poppy as a plant of papaver somniferum L - If the construction as adopted in the impugned judgment is to be accepted, then, even if it is found that the Chemical Examiner s report establishes that the contraband article contains morphine and meconic acid , a person cannot be convicted unless it is further established that the contraband material has a genesis in papaver somniferum L . If the view as taken by the High Court is to be accepted, a person who has been found contravening the provisions of the 1985 Act and dealing with a contraband material which has been found in the Chemical Examiner s report to contain morphine and meconic acid , would escape the stringent provisions of the 1985 Act. The said could never have been the intention of the legislature. If the view as taken by the High Court is to be accepted, the same would frustrate the object of the Act and defeat its very purpose. The High Court was not justified in holding that, even after the Chemical Examiner s report establishes that the contraband contains meconic acid and morphine , unless it was established that the same was derived from the species of papaver somniferum L , conviction under Section 15 of the 1985 Act could not be sustained - once it is established that the seized material contains meconic acid and morphine , it will be sufficient to establish that it is derived from the plant papaver somniferum L as defined in sub-clause (a) of Clause (xvii) of Section 2 of the 1985 Act. Once a Chemical Examiner establishes that the seized poppy straw indicates a positive test for the contents of morphine and meconic acid , it is sufficient to establish that it is covered by sub-clause (a) of Clause (xvii) of Section 2 of the 1985 Act and no further test would be necessary for establishing that the seized material is a part of papaver somniferum L . In other words, once it is established that the seized poppy straw tests positive for the contents of morphine and meconic acid , no other test would be necessary for bringing home the guilt of the accused under the provisions of Section 15 of the 1985 Act. Appeal allowed.

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• 2022 (10) TMI 872
  Arbitration - Jurisdiction and powers under the Commercial Courts Act, 2015 - Validity of Notification dated 13.11.2020, issued by the State of Odisha through its Principal Secretary, Law Department - whether in exercise of powers under Section 3 of the Commercial Courts Act, 2015, the State Government can confer jurisdiction to hear applications under Sections 9, 14 and 34 of the Arbitration and Conciliation Act, 1996, upon Commercial Courts which are subordinate to the rank of the Principal Civil Judge in the District, contrary to the provisions of Section 2(1)(e) of the Arbitration Act? HELD THAT:- In the year 2003, the Law Commission of India suo moto took up the issue of constitution of Commercial Divisions in the High Courts with a view to facilitate fast disposal of high value commercial disputes. In its 188th Report, the Law Commission, after carrying out indepth study of Commercial Courts in United Kingdom, USA, Singapore etc. recommended setting up of Commercial Division in each of the High Courts to expedite commercial cases of high pecuniary value - the Objects and Reasons of Commercial Courts Act, 2015 is to provide for speedy disposal of the commercial disputes which includes the arbitration proceedings. To achieve the said Objects, the legislature in its wisdom has specifically conferred the jurisdiction in respect of arbitration matters as per Section 10 of the Act, 2015. At this stage, it is required to be noted that the Act, 2015 is the Act later in time and therefore when the Act, 2015 has been enacted, more particularly Sections 3 10, there was already a provision contained in Section 2(1)(e) of the Act, 1996. As per settled position of law, it is to be presumed that while enacting the subsequent law, the legislature is conscious of the provisions of the Act prior in time and therefore the later Act shall prevail. Considering the provisions of the Act, 2015 and the Objects and Reasons for which the Act, 2015 has been enacted and the Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts are established for speedy disposal of the commercial disputes including the arbitration disputes, Sections 3 10 of the Act, 2015 shall prevail and all applications or appeals arising out of arbitration under the provisions of Act, 1996, other than international commercial arbitration, shall be filed in and heard and disposed of by the Commercial Courts, exercising the territorial jurisdiction over such arbitration where such commercial courts have been constituted. The notification issued by the State of Odisha issued in consultation with the High Court of Orissa to confer jurisdiction upon the court of learned Civil Judge (Senior Division) designated as Commercial Court to decide the applications or appeals arising out of arbitration under the provisions of Act, 1996 cannot be said to be illegal and bad in law - appeal dismissed.

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