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TMI Tax Updates - e-Newsletter October 4, 2023 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles GRATUITY IS NOT A CHARITY GST Amendments w.e.f. 01.10.2023 No IGST on Ocean Freight in CIF Contracts – Changes Notified News ₹1,62,712 crore gross GST revenue collected during September 2023; records 10% Year-on-Year growth CBIC canvasses support for India’s candidature for TIR Executive Board (TIRExB), elections for which are to be held in Geneva on 11th October 2023 More than 30 lakh Audit Reports filed on Income Tax Department’s e-filing portal till 30th September, 2023 Notifications Customs 72/2023 - dated 30-9-2023 - Cus (NT) Amendment in the First Schedule to the Customs Tariff Act, 1975 GST - States 53/GST-2 - dated 30-9-2023 - Haryana SGST Amendment of Notification no. 35/ST-2, dated 30.06.2017 under the HGST Act, 2017 52/GST-2 - dated 30-9-2023 - Haryana SGST Amendment of Notification no. 132/ST-2, dated 22.11.2017 under the HGST Act, 2017 51/GST-2 - dated 30-9-2023 - Haryana SGST Notification to notify supply of online money gaming, supply of online gaming other than online money gaming and supply of actionable claims in casinos under section 15(5) of the HGST Act, 2017 50/GST-2 - dated 30-9-2023 - Haryana SGST Notification to notify the provisions of sections 2,7, clause (a) of section 26 and section 27 of the HGST (Amendment) Act, 2023 under the HGST Act, 2017 1657-F.T. - dated 20-9-2023 - West Bengal SGST West Bengal Goods and Services Tax (Amendment) Rules, 2023 Circulars / Instructions / Orders SEBI SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163 - dated 3-10-2023 Centralized mechanism for reporting the demise of an investor through KRAs SEBI/HO/CFD/CFD-PoD-1/P/CIR/2023/162 - dated 30-9-2023 Extension of timeline for verification of market rumours by listed entities Customs 23/2023 - dated 30-9-2023 Mandatory additional qualifiers in import/export declarations in respect of certain products 24/2023 - dated 30-9-2023 Implementation of Section 16(4) of IGST Act related to restriction on export of certain goods on payment of IGST and coverage under refund mechanism PUBLIC NOTICE NO. 18/2023 - dated 28-9-2023 Implementation of Ex-Bond Shipping Bill in ICES 1.5 –Functionality added in ICES 1.5 for filing Ex bond Shipping Bill – Reg. Highlights / Catch Notes Income Tax Rectification of mistake u/s 154 - Period of limitation - Rectification proposed on the ground that, benefit of 10A deduction should be given on the basis of individual eligible unit and not after clubbing the business profits and losses of all the units. - Notice quashed on the ground of period of limitation as well as that, a debatable issue cannot be rectified u/s 154 - HC Visit to Get Source Rejection of application for Lower TDS certificate u/s 197 - Rejection on the ground that the former had failed to file returns for the last 04 previous years to show the tax payable on the assessed or returned or estimated income for these years and in the absence of audited financial statements, thus, the turnover ratio of these years could not be ascertained to arrive at the rate of lower deduction - Writ petition dismissed - HC Visit to Get Source Reopening of assessment u/s 147 - Legality of assessment framed in the capacity of legal heir - notice u/s 148 was issued in individual capacity and the assessment was framed in the capacity of legal heir. - Since the notice does not meet the requirement of law, therefore, we are of the considered view that the re-opening of assessment is bad in law and the impugned assessment made by the AO cannot be sustained. - AT Visit to Get Source Penalty proceedings u/s. 270A for underreporting of income - claim of excessive loss - Since, the assessee has neither claimed any benefit of loss against any other income for the impugned assessment year, nor has taken set off of said loss against income from house property in subsequent assessment years, in our considered view, the Assessing Officer has completely erred in considering loss computed by the assessee as underreporting of income on account of mis reporting of income. - AT Visit to Get Source Revision u/s 263 - The fact that the vouchers were not found in the premises of the appellant trust at the time of survey proceedings, should have triggered the AO to enquire and verify the evidence of the expenditure incurred on those items such as “Bonus, Perks and Allowances, Office Expenses, Tours and Travelling Expenses, Building Repairs Expenses etc”, which the AO had failed to do so. Therefore, this fact clearly demonstrates that the AO had failed to conduct necessary enquiries - Revision order sustained - AT Visit to Get Source Income accrued in India - royalty and Fees for Technical Services - literary work - The grant of license to use the software cannot be construed as granting a right to utilize the copyright embedded in the software. Therefore we are of the considered view that the payments received by the assessee are towards the use of copy righted software and not towards acquisition of copy right or right to use the copy right. - Not taxable - AT Visit to Get Source Capital gain - unregistered agreement - transfer of capital asset u/s 2(47) - real owner - deemed owner - CIT(A) has diverted his mind to a wrong provision of law and diverted himself from the ratio decided in Balbir Singh Maini. In the present case, the controversy between parties is precisely for “Income from Business” head and that too whether or not M/s Govind can be said to be owner of land on the basis of unregistered agreement. - The answer is NO - AT Visit to Get Source Condonation of delay filing appeal before ITAT - delay of 3966 days - revenue appeals - As there is an explanation as regards the bonafide reasons/omission on the part of the departmental officers to file the appeal within the prescribed period, therefore, the said explanation cannot be dismissed at the threshold. Considering the fact that there is an inordinate delay of 3966 days involved in filing the present appeal before us, and the sustainability of a huge addition of Rs. 821.75 crores (approx.) based on multi-facet additions /disallowances is at stake - Delay condoned - AT Visit to Get Source Claim of exemption u/s 10(23EC) as well as exemption u/s 11 - contribution received from recognized stock exchange and the members - Prior to 1-4- 2024 there was no bar on assessee claiming exemption under section 10 (23EC) and under section 11 and 12 of the act. - AT Visit to Get Source Revision u/s 263 - The law is well settled that the assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry, unless there is an established case of total lack of enquiry. - AT Visit to Get Source Income accrued in India - Royalty - appellant company registered in Singapore - income from shipping activity are exempt in Singapore - revenue erred in treating the receipts from international traffic pertaining to voyage chartered as ‘Royalty’ - AT Visit to Get Source Exemption u/s 11 - Requirement of fresh registration u/s 12AB for existing trusts - the new registration provisions have no impact as far as registration of the assessee trust for the impugned assessment year 2020-21 and its existing registration u/s 12A continues to hold good. - AT Visit to Get Source Unexplained investment - Poof of source for the specified bank notes being the demonetised currency deposited in the bank account - if the assessee desires to take the stand that the SBNs were the currency received between 08.11.2016 to 12.11.2016, it would be incumbent upon the assessee to prove to the revenue as to from whom he has received the SBNs - Additions confirmed - AT Visit to Get Source Allegation of tax evasion / avoidance - Tax the surplus on sale of CCDs Company listed on stock exarchate of Singapore - While it is a fact that 35.5% of shares were primarily held by FHIL, the remaining 64% was raised from public and institutional investors. The place of effective managements of the assessee is situated in Singapore owing to the conducting of Board meetings and placing of the Directors at Singapore. - AT Visit to Get Source Customs Permission for clearance and loading of Non-Basmati Rice - Restriction on export - The respondent No. 2-authority ought to have permitted the petitioners to export the cargo of the remaining 13,500 metric tons of Non-Basmati Rice with regard to ten shipping bills which were already filed prior to issuance of notification no. 20 of 2023 dated 20.07.2023. - HC Visit to Get Source Amendment in the Shipping Bills - it is not incumbent upon the exporter to prove an “intention” to claim drawback or other benefits. Section 149 of the Act enables an exporter to claim amendments in the shipping bills for any reason that may be deemed expedient. However, that provision nowhere speaks of an obligation or duty cast upon the exporter to establish intendment. - Matter restored back for fresh consideration - HC Visit to Get Source Indian Laws Dishonour of Cheque - vicarious liability - It is settled that directors are vicariously liable for the acts committed on behalf of the company. In view of Sections 138, 139 and 141 of the NI Act, it is also clear position of law that under provisions of Section 14 of IBC, the proceedings cannot continue against corporate debtor but can be initiated or continued against natural persons including persons mentioned u/s 141(1) and 141(2) of the NI Act. - whether the cheques were issued as security or towards legally enforceable debt, are all matter of trial and this Court cannot conduct mini trial - HC Visit to Get Source Service Tax Violation of principle of natural justice - non-submission of reply to the SCN - no error has been committed by the adjudicating authority in passing the impugned Order-in-Original, inasmuch as, enough opportunities were provided to the petitioner by issuing SCN and also fixing date of personal hearing for four times; but the petitioner did not respond to either of them. - HC Visit to Get Source Case Laws: GST 2023 (10) TMI 44 Issuance of summons - State GST authorities have already initiated investigation - barred by Section 6 (2)(b) CGST Act - HELD THAT:- It is stated that the Deputy Excise Taxation Commissioner (GST) has informed the Deputy Excise and Taxation Commissioner (ST) Gurugram (South) that investigation against M/s Sanraj Metal Pvt. Ltd. be transferred to the office of Directorate General of Goods and Services Tax Intelligence, Meerut Zonal, Unit (Meerut). Pursuant to letter dated 04.01.2023, Annexure R3/1, this investigation has been transferred to Meerut Zonal Unit and pursuant to this letter, on 02.02.2023, the Deputy Excise Taxation Commissioner, Gurugram (South) has transferred the investigation to DGGI, Meerut Zonal Unit, Meerut - Since the investigation has already been transferred to DGGI, Meerut Zonal Unit, Meerut, no further direction is required to be given in this case. Petition disposed off. Income Tax 2023 (10) TMI 43 TP adjustment - international transactions made on account of import of paper, aluminium foil, K Film, purchase return of imported paper, etc. - TPO made certain adjustments to the operating profit by excluding certain items of income from the scope of operating profit of the Assessee - TPO held that out of the operating profits of the Assessee as declared in the books of accounts, six items should not constitute the operating profits and hence were excluded - CIT (A) held against the Assessee on interest on Fixed Deposit income tax, refund and profit on sale of assets etc., the Assessee had preferred an Appeal and to the extent CIT(A) accepted the submissions of the Assessee, the Revenue had preferred an Appeal. HELD THAT:- As regard the credit to profit and loss account on account of liabilities written back, the details of the liabilities written back were made available to CIT(A) as well as ITAT. Both, on facts, and having considered those details, have come to conclusion accepting the Assessee s contention that those liabilities belong to earlier years and are directly relatable to the regular business operations of the Assessee and since these liabilities were no longer payable to business creditors should be allowed to be written back in the Assessment Year under consideration and the same was rightly offered to tax as business income u/s 41(1) of the Act. Therefore, on facts it was accepted that these liabilities written back were arising out of normal business operations and hence form part of operating income of the Assessee. As regards the writing back of doubtful debts CIT(A) came to a factual finding which has also been accepted by the ITAT that those doubtful debts were inextricably linked with the business operations and hence should be considered as operating income. Therefore, there are factual findings to that effect and both CIT(A) and ITAT have accepted the details submitted by the Assessee. No substantial question of law arises. 2023 (10) TMI 42 Revision u/s 263 - settlement of dispute under the Direct Tax Vivad Se Vishwas Act - Whether opting the VSV Scheme and finalizing thereof is nothing but the closure of disputes in respect of tax arrears which cannot be subsequently reopened by issuing notice u/s 263 of the Act for revising the assessment order? - HELD THAT:- As decided in case of Gopalakrishnan [ 2022 (5) TMI 1388 - MADRAS HIGH COURT ] once the petitioners had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020, the proceedings initiated under Section 263 have to go. If on the other hand the respective petitioners had not filed Form 1 and 2 or not accepted with the issue of Form 3, the Impugned Notice seeking to re-open the assessment under Section 263 of the Income Tax Act, 1961 could be justified. Tribunal therefore cannot be faulted for allowing the appeal of the assessee as it was not open for the authorities to initiate proceedings under Section 263 of the Act, when they were barred. 2023 (10) TMI 41 Rectification of mistake u/s 154 - Period of limitation - Revenue issued notice u/s 154 to deny deduction u/s 10A - Rectification proposed on the ground that, benefit of 10A deduction should be given on the basis of individual eligible unit and not after clubbing the business profits and losses of all the units . - whether issue of deduction u/s 10A was not a subject matter of appeal before the CIT(A) for the said year and therefore there was no question of making any mistake while passing the OGE? - HELD THAT:- Considering the issue and disposing of the matter before it, only on the ground of limitation, the Division Bench of this Court in Poonjabhai Vanmalidas [ 1978 (2) TMI 73 - GUJARAT HIGH COURT ] held that even after an appeal from an order of assessment is decided, a mistake in that part of the order of assessment which was not the subject matter of review by the Appellate Authority and was left untouched can be rectified, however, that part of the order which is sought to be rectified is the untouched part of the original order. Applying it to the facts of the case, what is evident is that the assessment order was dated 02.02.2012. In an appeal to the CIT(A) there was no dispute regarding Section 10A. The relief was granted in appeal on 27.08.2014. There too there was no dispute regarding Section 10A provision. The order giving effect was date 31.03.2015. Here also since benefit of 10A was as per assessment order , as held in the case of Poonjabhai Vanmalidas [ 1978 (2) TMI 73 - GUJARAT HIGH COURT ] in relation to issues not appealable, the order of the appellate authority does not subsume the original order and the time for correcting the mistake in the original order has to relate back to passing of the original order and not the appellate order. In the case of Mettur Chemical Industrial Corpn. Ltd. [ 1976 (4) TMI 25 - MADRAS HIGH COURT ] has held that where proceedings are initiated under Section 147, period of limitation for rectification of mistake has to commence and computed from the date of original assessment and not from the date of reassessment order. In facts of the present case, the issue was with regard to the interpretation of the decision in the case of Yokogawa India Ltd. [ 2016 (12) TMI 881 - SUPREME COURT ] as settled the controversy on whether the provisions of Sections 10A/10B/10AA are deduction provisions or exemption provisions. A question of interpretation therefore would not make it an issue of a mistake apparent from record. Having held that the notice under Section 154 of the Act is barred by limitation, that it was a debatable issue not therefore within the parameters of Section 154 of the Act, the notices u/s 154 of the Act are bad. Even on the parameters of interpretation, notice u/s 263 in one of the petitions must also fail. Petition allowed. 2023 (10) TMI 40 Addition u/s 68 - unexplained cash credit - ITAT has held that the credit worthiness of the creditors and genuineness of transaction have been established - HELD THAT:- In view of the findings of CIT (A) on the facts of the case as well as the view taken by the Tribunal to give opportunity to the assessee to prove the identity of the lenders, the ingredients to be complied with for invoking section 68 of the Act as held by the Apex Court in case of NRA Iron and Steel Pvt Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] cannot be stated to have been violated or ignored because if the assessee would be able to prove identity of the lenders, then the creditworthiness and genuineness, as held by the CIT (A), are already proved. In such cases, there cannot be any addition under section 68 In view of the above facts emerging from the record as well as in view of the fact that the Tribunal has remanded the matter back to the Assessing Officer by partly allowing appeal of the Revenue, no question of law much less any substantial question arises. 2023 (10) TMI 39 Exemption u/s 11 - Cancellation of registration u/s 12A - whether or not there has been an infraction of well-established principles of natural justice and if at all, exercise of jurisdiction with material irregularity has occurred? - whether the balance of convenience is presently in favour of the petitioner, and would any irreparable harm be caused to the petitioner, if an interim order, as sought by the petitioner, is not granted. HELD THAT:- Prima facie, the petitioner has made out a case that the registration could not have been cancelled for years earlier than the period commencing from 28.05.2021. In the ordinary course, the registration granted to the petitioner on 28.05.2021, would have extended till Assessment Year (AY) 2006-07. The cancellation of registration would definitely entail a consequence, which would result in disabling the petitioner from accepting any contributions from domestic contributors. The petitioner is an organization which survives on contributions. The employees engaged by the petitioner and its work depend on the contributions that it receives. Therefore, the balance of convenience, as it stands, is in favour of the petitioner. Eligibility for interim relief - Insofar as this aspect is concerned, we can only say that the inability of the petitioner to accept donations may derail its programmes, which are in the pipeline. Thus, having an overall view of the matter, we are of the opinion that the petitioner has made a case for grant of interim stay and for further examination of the matter by the court. Accordingly, issue notice. List the matter on 30.11.2023. In the meanwhile, the operation of the impugned order shall remain stayed, subject to the petitioner maintaining a proper account of the contributions received by it, including the details of the contributors. 2023 (10) TMI 38 Lower tax deduction certificate u/s 197 read with Rules 28AA - Application for Lower TDS rejected - Non filing of ITR for last 4 years - assessee having challenged the order passed by the respondent by rejecting its prayer to issue Lower Tax Deduction Certificate u/a 226 of the Constitution of India and the Revenue having taken the objection as to maintainability of the writ petition - HELD THAT:- As per sub Rule 2 of Rule 28AA, the existing and estimated liability of such person shall be determined by the AO after taking into consideration the tax payable of estimated income of the previous or relevant of the assessment year; the tax payable on the assessed or returned [or estimated income, as the case may be, of last four] previous years. In the present case, the respondent had rejected the prayer of the petitioner to issue Lower Tax Deduction certificate on the ground that the former had failed to file returns for the last 04 previous years to show the tax payable on the assessed or returned or estimated income for these years and in the absence of audited financial statements, thus, the turnover ratio of these years could not be ascertained to arrive at the rate of lower deduction. The claim of the petitioner is that since it had been newly incorporated on 29.06.2022, it had started its business from that date only, therefore, it was obviously not in a position to file returns for the last 04 previous years. He has referred to the judgment of Manpowergroup Services India (P) Ltd [ 2020 (12) TMI 934 - DELHI HIGH COURT] to argue that since the order passed by the respondent could not be challenged by way of revision, therefore, this writ petition has been filed. In ManPowerGroup s case (supra), the assessee had filed an application for issuance of lower tax deduction certification under Section 197 of Act, 1961, which was rejected. It was held by Delhi High Court that since the impugned order was passed after seeking approval from the Commissioner, therefore, it could be challenged by way of revision before the Commissioner, therefore the writ petition was held to be maintainable despite the fact that the efficacious alternative remedy available to the petitioner to challenge the impugned order had not been availed. In the instant case, the position can be said to be different. The alternative efficacious remedy by way of filing an appeal challenging the impugned order was very much available with the petitioner but it has not chosen to avail the same. In Greatship India Ltd s case[ 2022 (9) TMI 896 - SUPREME COURT] has held that where the statutory remedy of appeal was available to the petitioner against the assessment order passed by the Assessing Officer, the High Court ought to have relegated the assessee to avail the alternative remedy, instead of exercising its jurisdiction under constitutional provisions. In Chhabil Dass Aggarwal s [ 2013 (8) TMI 458 - SUPREME COURT] had made similar observations. In the present case, the petitioner has not been able to plead or make out any case to show that there was any violation of principle of natural justice on the part of the respondent while passing the impugned order or there was lack of jurisdiction or procedure required for decision had not been adopted. As such, in our considered opinion, the petition cannot be entertained being not maintainable, as it has been filed by the petitioner without exhausting the alternative efficacious remedy of law, as available to it. WP dismissed. 2023 (10) TMI 37 Rectification of mistake - Deduction u/s 80P - interest earned on savings bank account is not taxable in terms of provisions of Section 80P - HELD THAT:- The objection of learned DR regarding the issue makes beyond scope of section 154 of the Act is not emanating from the impugned order. Moreover, the Revenue has not filed any cross-objection in this regard. Therefore, the objection of learned D.R. cannot be sustained. Regarding chargeability of interest on savings bank account, held by the assessee, the issue is covered by the judgment of Totagars Cooperative Sales Society ( 2010 (2) TMI 3 - SUPREME COURT] - Therefore, no reason to interfere in the finding of learned CIT(A). The ground raised by the assessee are dismissed. 2023 (10) TMI 36 Reopening of assessment u/s 147 - Legality of assessment framed in the capacity of legal heir - HELD THAT:- AO in the reasons recorded has categorically mentioned the assessee as Smt. Raj Rani L/H Late Sh. Ashok Kumar Jain . However, in the notice u/s 148 the same AO writes Raj Rani w/o Ashok Kumar Jain and the assessee in response to such notice filed her return of income in the individual capacity. This fact is not rebutted by the Revenue. Since the notice does not meet the requirement of law, therefore, we are of the considered view that the re-opening of assessment is bad in law and the impugned assessment made by the AO cannot be sustained. Accordingly, on facts and circumstances of the present case, we are constrained to quash the impugned assessment. 2023 (10) TMI 35 Penalty proceedings u/s. 270A for underreporting of income - misreported or suppressed facts with regard to income from house property which resulted in computation of excessive loss under the head income from house property - HELD THAT:- The concept of underreporting of income should be understood in the context of claiming any deduction or expenses, which is otherwise not allowable for computing loss, which is not otherwise as per law, which resulted in reduction in taxable income for relevant assessment year. Even if you want to apply sub-clause (a) of sub-section (9) of section 270A of the Act, same needs to be understood with the context of reduction in income or reduction in loss computed by the assessee for relevant assessment year. In the present case, parameters prescribed for levy of penalty u/s. 270A is not satisfied, because the assessee neither claimed excessive loss, which resulted in reduction in taxable income or reduction in loss to be adjusted against income either in the impugned assessment year or subsequent assessment years. Therefore, explanation offered by the assessee that he has computed excessive loss under the head income from house property in respect of self-occupied house property needs to be understood in the above context of underreporting of income. Since, the assessee has neither claimed any benefit of loss against any other income for the impugned assessment year, nor has taken set off of said loss against income from house property in subsequent assessment years, in our considered view, the Assessing Officer has completely erred in considering loss computed by the assessee as underreporting of income on account of mis reporting of income. Thus, we are of the considered view that the AO has completely erred in levying penalty u/s. 270A(8) in respect of loss computed under the head income from house property . The ld. CIT(A) without appreciating relevant facts has simply sustained penalty levied by the AO and thus, we set aside order passed by the Ld.CIT(A) and direct the Assessing Officer to delete penalty levied u/s. 270A - Appeal filed by the assessee is allowed. 2023 (10) TMI 34 Revision u/s 263 - incorrect allowance of claim of ESOP expenses - HELD THAT:- On careful consideration of all the above we hold that there was no error in the order of the AO allowing the assessee s claim of ESOP expenses; that the entire issue had been duly inquired into during the assessment proceedings; reply of the assessee duly considered by the AO and the AO had taken a plausible view on the issue based on the existing proposition of law with regard to the claim of ESOP expenses. Our reasoning follows. We find from the documents placed before us in PB that during the assessment proceedings the assessee was asked by the AO to justify its claim of ESOP expenses vide notice issued under section 142(1) of the Act dated 19.2.2021. The assessee was specifically asked to file copy of the ESOP proposal made by it to M/s.Edelweiss Financial Services Ltd., who had framed ESOP scheme for the benefit of employees of the group companies including the assessee s company. AO had also asked the assessee to file list of employees who had exercised this option under the scheme along with sample Form No.16, and also to furnish detailed working of the deduction claimed u/s 37. PCIT has not pointed out how and why the AO had erred in allowing assesses claim of ESOP expenses in accordance with the decision of the Special Bench of the ITAT and the Hon ble Karnataka High Court. Therefore, we do not find any merit in the Ld.Pr.CIT s finding of error in the assessment order on the allowance of claim of ESOP expenses. As noted by us above, the issue was thoroughly inquired during the assessment proceedings by the AO. His view in allowing the claim of ESOP expenses in accordance with judicial pronouncements has not been found to be at fault by the Ld.PCIT by pointing out in any way that the said decisions were not applicable to the facts of the case. Even before us Ld.DR was unable to point out how the allowance of claim of ESOP expenses in accordance with the authoritative judicial pronouncements on the issue was erroneous, or for that matter, how the case laws relied upon by the Ld.PCIT were applicable to the facts of the case overruling the Special Bench decision of the ITAT and the Hon ble Karnataka High Court decision. We hold therefore that the Ld.PCIT has failed to find any error in the order of the AO vis a vis the allowance of claim of ESOP expenses and his order on this issue is therefore directed to be set aside. Claim of loss in the return of income as reflected in the computation sheet attached to the assessment order - We have noted from the ld.Pr.CIT order that the assessee had explained that there was a mistake in the computation sheet, and the assessee had filed an application seeking rectification of the same. CIT taking note of the above facts, has directed verification of the said claim of the assessee. It is settled law that the power under section 263 of the Act cannot be exercised for verification of the issue. There has to be a finding of error causing prejudice to the Revenue, by the ld.Pr.CIT, for valid exercise of revisionary power under section 263 of the Act. Verification precedes finding of the error. Therefore, any direction for verification of the claim u/s. 263 of the Act is not in consonance with the requirement of law. Accordingly, the ld.Pr.CIT s order, directing verification of claim of carry forward of current year s business loss is also set aside. Order of the ld.Pr.CIT passed under section 263 of the Act, in entirety, is set aside - Assessee appeal allowed. 2023 (10) TMI 33 Exemption u/s 10(23C)(iv) and/or u/s 11 and 12 - Charitable activity u/s 2(15) - assessee is trust constituted by and under its own Trust Deed dated 28.09.1948 ( Deed ) whereby the partners of a business known as Hamdard Dawakhana dedicated the said business to charity - as per DR assessee has offered substantial concession in rent to persons specified under section 13(3) which violates the provision of section 13(2)(b) - HELD THAT:- The predecessor Ld. AO has observed that the assessee claimed exemption under section 10(23C)(iv) and that the objects of the Trust being charitable within the meaning of section 2(15) the benefit of section 11 and 12 is allowed. There is no change either in facts or in law in AY 2016-17 from those in preceding years as evidenced from the orders of assessment for AY 2013-14, 2014-15 and 2015-16. In CIT vs. Amit Jain [ 2015 (3) TMI 720 - DELHI HIGH COURT] and Denso India Ltd [ 2015 (1) TMI 824 - DELHI HIGH COURT] held that where the AO has been following a view for the past several years, he cannot depart from the same when there has been no change in law or facts. We may note the facts and decision of Hamdard National Foundation (India) [ 2022 (2) TMI 931 - DELHI HIGH COURT] In this case, the facts were that the assessee-foundation had let out its properties and received rental income from H in relevant assessment years. In addition, the assessee had also received corpus donation from 11 during assessment year 2007-08. The Assessing Officer after making enquiry from various websites held that in lieu of voluntary and corpus donation received from H, properties owned by assessee were let out to H at a much lower rate as compared to the market rate. He, thus, invoked section 13(2)(b) read with section 13(3) and held that assessee was not eligible for exemption under sections 11 and 12. The Tribunal decided in favour of the assessee. Appeal of the Revenue is dismissed. 2023 (10) TMI 32 Disallowance u/s 14A r.w.r. 8D - disallowance of expenditure incurred in relation to earning exempt income - mandation to record satisfaction so as to justify invoking Rule 8D of the Rules for computing disallowance - HELD THAT:- We are in complete agreement with the ld.counsel for the assessee that the AO had failed to comply with the conditions set out in law prior to invoking Rule 8D of IT Rules for computing disallowance of expenses u/s 14A - AO, we hold, has not recorded the requisite satisfaction about the incorrectness of the claim of the assessee. There is no dispute with regard to the interpretation of provision of section 14A(2) of the Act; that the AO can invoking rule 8D of the Rules for computing expenses disallowable u/s 14A only after rejecting assesses claim of expenses relating to exempt income. His dissatisfaction with the assesses claim being arrived at having regard to its accounts. The language of the section is also clear that the primary onus is on the AO to demonstrate that claim of the assessee was incorrect. In the present case, it is evident from the satisfaction recorded by the AO of the assesses claim of expenses relating to exempt income not being correct, that it is merely based on general observations with no reference to the accounts of the assessee. AO, we find, has expressed his dissatisfaction with the claim by giving general reasons stating that investment decisions were very complex in nature, they required substantial market research, day-to-day analysis of market trends and decisions etc. and also required huge investment in shares and consequential blocking of funds. He has not recorded any dissatisfaction having regard to the accounts of the assessee. The satisfaction of the AO, has to be an objective satisfaction, and it cannot be based on general statements made; statements which are not supported with any facts or figures. Therefore, we have no hesitation in holding, that the satisfaction recorded in the present case by the AO did not fulfill the requirements prescribed by the law u/s 14A(2) - Decided in favour of assessee. 2023 (10) TMI 31 Penalty u/s. 271D - AO found the assessee to have indulged in receipt of loans/deposits through modes other than banking channels as reflected in Sl.No.31(1) of Form 3CD, being, the Tax Audit Report of the assessee, violating the provisions of section 269SS - HELD THAT:- Since section 269SS is attracted when a person takes or accepts any loan or deposit in a mode otherwise than the banking channel etc,. it has no application in the instant case of the assessee when no loan was taken or accepted by the assessee from Ms. Ritu Sanghavi. The credit amount is a transfer entry from her account to that of her husband, which again does not call for imposition of any penalty. On an examination of the account of Mr. Deepak Sanghavi first amount is debited to his account. The assessee paid this amount on his behalf and debited his account. Similar is the position regarding the second and third amounts which have been debited to the account of Mr. Deepak Sanghavi. These amounts are in the nature of payments made by the assessee on behalf of Mr. Deepak Sanghavi. Thus, the provisions of section 269SS are not attracted, which apply only on taking or accepting loan and deposit. Also minor amounts items of crediting his account with rent etc., which do not violate section 269SS - We, therefore, hold that the assessee did not take or accept any loan either from Ms. Ritu Sanghavi or Mr. Deepak Sanghavi in violation of provisions of section 269SS of the Act, which could have magnetized penalty u/s. 271D of the Act. The impugned order is, therefore, overturned to this extent. Assessee appeal is allowed. 2023 (10) TMI 30 Revision u/s 263 - whether or not the AO had caused necessary enquiries in respect of the expenditure claimed by the appellant trust? - HELD THAT:- It is an admitted position that during the course of survey proceedings, the appellant could not produce the vouchers in support of the expenditure claimed by the appellant trust. This fact is also made clear by the submissions of the appellant trust that the vouchers in respect of the expenditure incurred by the assessee trust were in the different school premises. Now, the appellant trust worked out the surplus income after disallowing the expenditure, which is not supported by the vouchers, but there is no material on record to indicate that the income offered by the assessee trust represents the entire expenditure not supported by the vouchers. AO had recorded a finding that the disclosure of expenditure was verified on random basis goes to demonstrate that the AO had not verified in full the entire expenditure claimed by the assessee trust. The fact that the vouchers were not found in the premises of the appellant trust at the time of survey proceedings, should have triggered the AO to enquire and verify the evidence of the expenditure incurred on those items such as Bonus, Perks and Allowances, Office Expenses, Tours and Travelling Expenses, Building Repairs Expenses etc , which the AO had failed to do so. Therefore, this fact clearly demonstrates that the AO had failed to conduct necessary enquiries in respect of the above items of expenditure and, therefore, the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The facts of the case are hit by Explanation 2 inserted to section 263 of the Act. Therefore, we do not find any reasons to interfere with the order passed by the ld. PCIT. The ld. PCIT was justified in the facts of the present case in exercising the power of revision vested with him u/s 263 of the Act. Accordingly, the grounds of appeal raised by the assessee trust stand dismissed. 2023 (10) TMI 29 Exemption u/s 11 - As per AO from the balance sheet it can be seen that the assessee has made an investment in gold which is not an investment in the modes prescribed in Section 11(5) - HELD THAT:- CIT(Appeals) has correctly observed that the Assessing Officer has erred in facts and in law in disallowing the entire claim of exemption to the assessee trust on the ground that the assessee has not violated the provisions of Section 11(5) of the Act. Further, it is also observed that on similar set of facts, the assessee trust has been subject to scrutiny assessment for various years, as mentioned in the preceding paragraphs and no additions have been made in the hands of the assessee, and therefore in absence of any change in facts, the principle of res judicata should apply as held by the Hon ble Supreme Court in the case of Excel Industries [ 2013 (10) TMI 324 - SUPREME COURT ] - Accordingly, looking into the facts of the instant case, the appeal of the Department is dismissed. 2023 (10) TMI 28 Income accrued in India - royalty and Fees for Technical Services - assessee is a company incorporated in the Netherlands is in the business of selling networking equipments and providing maintenance service (AMS) and networking equipments are sold through the third party distributors or value added resellers (collectively referred to as channel partners - assessee is a licensed resale distributor for Juniper Networks equipments in 130 countries in Europe, the Middle East, African Region, Asia Pacific and Japan Region - taxability under India Netherlands DTAA - According to AO software program is a literary work or alternatively software is a property similar to', 'patent', 'invention',, design', 'process', 'trademark', 'secret formula'. While holding so the Assessing Officer stated that there is no material difference between the Act and DTAA when it comes to the definition of the term Royalty and accordingly the service fees received by the assessee is taxable in India as Royalty. HELD THAT:- Assessee retains exclusive ownership of all right, title, and interest of all intellectual property and all other legal rights in the software and that nothing in EULA constitutes a sale or other transfer or conveyance of any right, title, or interest in the software. Therefore we see merit in the contention that except the right to use the Software embedded on the hardware, there is no other rights being transferred to the SSS. Whether the payment for troubleshooting software would be royalty ? - As to be taxable as royalty income covered by article 12 of the DTAA the income of the assessee should have been generated by the use of or the right to use of any copyright . Merely authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or conferment of the right of using the copyright. In assessee's case from the perusal of the terms of EULA, it is clear that SSS is given the mere access to use the troubleshooting / licensed software without the right to own or reproduce and the right to do so continued to be retained by the assessee. The grant of license to use the software cannot be construed as granting a right to utilize the copyright embedded in the software. Therefore we are of the considered view that the payments received by the assessee are towards the use of copy righted software and not towards acquisition of copy right or right to use the copy right. Software is a 'literary work' and thus the same is taxable as per Article 12(4) of India-Netherlands DTAA - India while entering into DTAA with certain countries such as Morocco, Kazakhstan etc. has specifically included for 'software/computer software program' to be classified as Royalty. Therefore there is force in the argument that, where the intention of both the States was to include payment for 'software/ computer software within the ambit of the definition of 'Royalty' under the DTAA the same would have been specifically negotiated between the parties and stated within the definition of 'Royalty' in the DTAA, as the same has not been specifically mentioned under the India-Netherlands DTAA, it was never the intention of both the States to include it with the definition of 'Royalty'. Considering the above elaborated facts of the assessee's case and the ratio laid down by the Hon'ble High Court Infrasoft Ltd [ 2013 (11) TMI 1382 - DELHI HIGH COURT ] we hold that the payments received by the assessee towards Juniper Services are not in the nature of royalty under the DTAA between India and Netherlands and not liable to tax accordingly. AO holding the payments received by the assessee are in the nature of Royalty also held that the same would otherwise should be treated as Fees for Technical Services (FTS) and taxed in India accordingly - Online support (i.e. through the CSC) through which issues are resolved the software gets updated once the problem is resolved thereby the knowledge regarding that problem gets imparted to SSS - Online support provides access to product specifications, FAQs, status of service requests raised oh JTAC, operating manuals, software updates, blogs, discussion forums, troubleshoot tools for resolving general error messages, etc., but does not in anyway enable SSS to independently apply any knowledge without assessee's support or resolve or diagnose the issues / errors / bugs / problems on their own in future. The SSS engineers continue to approach JTAC in case of critical / priority / time sensitive issues which are eventually resolved by Juniper engineers on the phone or through release of software updates. From these facts it is clear that the Juniper Services provided by the assessee does not result in any enduring benefit to the SSS as the SSSA between the SSS and the assessee is renewed upon the expiry of its tenure similar to any maintenance contract. In view of this discussion in our considered view the services rendered by the assessee to SSS does not make available any technical knowledge that would enable to SSS to resolve the technical issues independently in future and therefore does not fall within the definition to FTS under the India Netherlands DTAA. Accordingly the payment received by the assessee towards rendering Juniper Services is not taxable in India. This appeal of the revenue is dismissed. 2023 (10) TMI 27 Acceptance of freebies by medical practitioners - Payment made to two doctors disallowed u/s 37(1) - commission paid treated as freebees in violation of provision of Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulation, 2002 - reliance on decisions rendered in assessee own case for prior period - HELD THAT:- Now this issue has been conclusively decided / adjudicated by the Hon ble Supreme Court and accordingly, any freebies given by the assessees to doctors for sales promotion etc. are liable to be disallowed. Accordingly, in light of the observations made by the Hon ble Supreme Court in the Apex laboratories decision [ 2022 (2) TMI 1114 - SUPREME COURT] any reliance on decisions rendered by ITAT in assessee s own case for prior years shall stand superseded, in case the assessee comes within the four corners of the provisions of Circular No. 5 of 2012 dated 01.08.2012. Whether the doctors had provided any professional advice to the pharmacy and hence the payments were falling outside the purview of Circular issued by the Central Board of Direct Taxes being Circular No. 5 of 2012 dated 01.08.2012? - The assessee has not been able to establish that the aforesaid payments were made by the assessee to the doctors for rendition of any professional / advisory services, and hence, in our considered view, the payments essentially qualify as commission payments made to doctors for promoting the sale of medicines. In the instant facts, the payments have been denied in the hands of the assessee on the ground that in view of Circular No. 5/2012 dated 01.08.2012 read with Explanation 1 to Section 37(1), the aforesaid payments are prohibited by law. In our respectful view, the principles of tax neutrality would not apply in cases the payments have been held to be illegal or are prohibited by law. Accordingly, we are of the considered view that decision of Gujarat Gas Financial Service Ltd. [ 2015 (7) TMI 743 - GUJARAT HIGH COURT] has been rendered on a different set of facts and would not apply to the assessee s facts. Whether it can be stated that the assessee being a pharmacy engaged in trading of medicines, is not covered by the provisions of the Circular, which is only applicable to pharmaceutical industry? - We observe that the CBDT has issued Circular No. 5/2012 dated 01.08.2012 in respect of inadmissibility of expenses incurred in providing freebies to medical practitioners by pharmaceutical and Allied health sector industry . In our considered view, the assessee is falling in the category of Allied health sector industry and hence covered within the scope of the Circular referred to above. Thus in our considered view, Ld. CIT (Appeals) has not erred in facts and in law in holding that the aforesaid payments made by the assessee to two doctors qualify as commission paid for promoting sale of medicines and hence are not allowable under Section 37(1) of the Act. Appeal of the assessee is dismissed. 2023 (10) TMI 26 Capital gain - unregistered agreement - transfer of capital asset u/s 2(47) - real owner - deemed owner - revenue claims that M/s Govind was not owner of land in view of decision of Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] because the agreement between assessee and M/s Govind was not registered - whether M/s Govind could be said to be owner of land on the basis of unregistered agreement with assessee? HELD THAT:- Dispute that the term capital asset is used in Income tax Act for taxation under Income from Capital Gain head and so the section 2(47) defining transfer is also relevant for that particular head; it is not at all relevant to Income from Business head. Therefore, in the present case, the CIT(A) has committed a serious error in placing reliance on section 2(47)(vi)/Explanation to section 2(47) and thereby hold M/s Govind as deemed owner. CIT(A) has diverted his mind to a wrong provision of law and diverted himself from the ratio decided in Balbir Singh Maini. In the present case, the controversy between parties is precisely for Income from Business head and that too whether or not M/s Govind can be said to be owner of land on the basis of unregistered agreement. In our considered view, the answer is a clear No as per decision of Hon ble Supreme Court decision in Balbir Singh Maini. Although we have confined to what has been wrongly adjudicated by CIT(A), we would like to add here that even for the purpose of Capital Gain head also, after decision of Hon ble apex court in Balbir Singh Maini, there is no sale or transfer of immovable property by an unregistered agreement. It is true that M/s Govind has declared the income but a simple glance of the financial statements of assessee and M/s Govind makes it clear to any person of common sense that the audited P L A/c of assessee shows a net profit of Rs. 37,02,451/- and the audited P L A/c of M/s Govind shows a net profit of Rs. 1,16,82,835/- [on gross receipts of Rs. 23,85,10,980/- including the shared amount of Rs. 3,50,06,136/-]. That means, had there been no sharing of Rs. 3,50,06,136/-, M/s Govind would have suffered a substantial loss but for the sharing of consideration, the income figures of both parties i.e. assessee as well as M/s Govind are balanced. In these circumstances, there is a prima facie merit in the conclusion taken by AO and emphasised by Ld. DR. The above discussion brings us to conclude that M/s Govind cannot be treated as owner of the land on the basis of impugned unregistered agreement dated 26.02.2011 as per Hon ble Supreme Court s decision in Balbir Singh Maini. Therefore, we are inclined to uphold the order of AO and reverse the order of first-appeal. Ordered accordingly. The revenue s appeal is allowed. Enhancement on account of interest income was an off-shoot of the acceptance of agreement by CIT(A) - While adjudicating Revenue s appeal in earlier part of this order, we have not accepted the transfer of ownership on the basis of said agreement to M/s Govind. Therefore, the necessary outcome shall be that the addition of interest made by CIT(A) cannot sustain. Hence, we are inclined to delete the enhancement made by CIT(A). The assessee s appeal is allowed. 2023 (10) TMI 25 Condonation of delay filing appeal before ITAT - delay of 3966 days in filing the present revenue appeal - HELD THAT:- As delay in filing the present appeal before us, as explained by the Ld. D.R had occasioned on the part of the A.O, initially due to bonafide misconstruing of law (to which the assessee had also contributed), which, thereafter, was followed by an inadvertent failure on his part to appreciate the implication of the observations recorded by the Tribunal in its order dated 13.09.2013 (supra) to the additions/disallowances made vide order of original assessment u/s 143(3), dated 29.11.2007 read along with the order passed by the CIT(Appeals), dated 22.01.2009 (supra). Admittedly, it is not a case where there is gross negligence or deliberate inaction or lack of bonafides but a case of bonafide misconstruing of law followed by unintentional inaction on the part of the A.O who had confined the application of the order of the Tribunal, dated 13.09.2013 only to the order of reassessment u/s 143(3) r.w.s 147, dated 30.12.2008, which was the subject matter of appeal before the Tribunal, and had due to a bonafide omission failed to stretch the application of the said order to the original assessment order u/s 143(3), dated 29.11.2007 r.w order of CIT(Appeals), dated 22.01.2009. Also, it is not a case where the department is trying to take shelter of an explanation that the delay had taken place because the file was kept pending for several months/years due to a considerable degree of procedural red tape in the process. As there is an explanation as regards the bonafide reasons/omission on the part of the departmental officers to file the appeal within the prescribed period, therefore, the said explanation cannot be dismissed at the threshold. Considering the fact that there is an inordinate delay of 3966 days involved in filing the present appeal before us, and the sustainability of a huge addition of Rs. 821.75 crores (approx.) based on multi-facet additions /disallowances is at stake, we, therefore, respectfully following the judgment of the Hon ble Apex Court in the case of CIT Vs. West Bengal Infrastructure Development Finance Corporation Ltd[ 2010 (12) TMI 675 - SC ORDER] condone the same subject to the imposition of a cost of Rs. 20,000/-(rupees twenty thousand) on the department. Validity of the jurisdiction of A.O framing the reassessment in the absence of a valid notice u/s 143(2) - claim for deduction u/s 80IA(4)(iv) was declined - HELD THAT:- Hon ble Apex Court, in its order passed in the case of CIT Vs. Sun Engineering Works[ 1992 (9) TMI 1 - SUPREME COURT] had observed that to read the judgment in V. Jaganmohan Rao s [ 1969 (7) TMI 4 - SUPREME COURT] case as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to escaped assessment or under-assessment but to the entire assessment for the year and starts the assessment proceedings de novo giving the right to an assessee to re-agitate matters which he had lost during the original assessment proceedings, which had acquired finality, is not only erroneous but also against the phraseology of section 147 and the object of reassessment proceedings. Accordingly, the support that impliedly is sought to be drawn by relying on the judgment of the Hon ble Apex Court in V. Jaganmohan Rao (supra) is found to be clearly misconceived. The view taken by the CIT(Appeals), that pursuant to the re-assessment order u/s 143(3) r.w.s 147, dated 30.12.2008, the original order of assessment passed u/s 143(3), dated 29.11.2007 did not exist anymore and was wiped off is found to be an incorrect view in light of the aforesaid judgments of the Hon ble Apex Court in CIT Vs. Sun Engineering Works and CIT Vs. Alagendran Finance Ltd.[ 2007 (7) TMI 304 - SUPREME COURT] As is discernible from the records, the CIT(Appeals), based on his conviction that pursuant to the reassessment order u/s 143(3) r.w.s 147, dated 30.12.2008, the original order of assessment u/s 143(3), dated 29.11.207 was no more in existence and was effaced, had, thus, dismissed the appeal in limine and not adverted to the issues raised before him. As we have disapproved and dislodged the aforesaid view of the CIT(Appeals), therefore, we restore the matter to his file with a direction to him to re-adjudicate the appeal. Grounds allowed for statistical purposes in terms of our aforesaid observations. 2023 (10) TMI 24 Claim of exemption u/s 10(23EC) as well as exemption u/s 11 - contribution received from recognized stock exchange and the members - HELD THAT:- We find that the income of the assessee with respect to contribution received from recognized stock exchange and the members thereof is eligible for exemption under section 10 (23EC) of the act. Central government for this exemption also notifies the assessee. Therefore, as far as the income of contribution is concerned, the learned CIT A has correctly granted the assessee under that section. Provisions of section 11 (7) provides that where a trust or institution has been granted registration under section 12 AA and the said registration is in force for any previous year then nothing contained in section 10 shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year. However, there is an exception to this rule with respect to income exempt under section 10 (23C) (1), (23EC), (46) and (46A). With effect from 1 April 2024 such is removed with respect to income u/s 10 (23EC), (46) (46A) of the act. Thus prior to 1-4- 2024 there was no bar on assessee claiming exemption under section 10 (23EC) and under section 11 and 12 of the act. The impugned assessment year before us is assessment year 2016 17, 2019 20 and 2020 21. We find no justification in the claim of the revenue that assessee can only claim exemption under section 11 and 12 even prior to 1/4/2024. Thus, we do not find any merit in the argument of the revenue. Assessment orders passed under section 143 (3) of the act for earlier years and subsequent years have granted assessee exemption on contribution income under section 10 (23EC) of the act and all other income under section 11 and 12 of the act. In view of this, the grounds of appeal raised by the learned assessing officer do not hold any merit. Therefore, dismissed. 2023 (10) TMI 23 Revision u/s 263 - As per CIT AO did not verify/examine the loan creditors as there is a lack of supporting evidences and no appropriate inquiry was made - HELD THAT:- AO was not obliged to ask the Assessee to provide source of source under the pretense of proper examination of the creditworthiness of the creditor and absence of further evidence showing the source of source was not an error. In the present case, the material show that the AO has made all possible enquires acting u/s 68 with reference to all the creditors. There is nothing in record to show that discretion conferred u/s 68 was not properly exercised. Therefore, the finding of the ld. PCIT that appropriate enquires/verifications of loans have not been made by the AO w.r.t cash Creditors is legally factually incorrect. We find that it was not the case of ld. PCIT that there was a complete/total lack of inquiry. He himself admits in the impugned order that the AO did make enquiry on the issues involved. The law is well settled that the assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry, unless there is an established case of total lack of enquiry. In this regard, we draw strength from the decisions in the cases of Sunbeam Auto Ltd. [ 2009 (9) TMI 633 - DELHI HIGH COURT] and Narain Singla[ 2015 (10) TMI 2371 - ITAT CHANDIGARH] and Chemsworth P Ltd. [ 2020 (9) TMI 875 - KARNATAKA HIGH COURT] all followed in Annu Agrotech. [ 2021 (9) TMI 856 - ITAT JAIPUR] by this bench. Assessee appeal allowed. 2023 (10) TMI 22 Disallowance u/s 14A - assessee is disputing the computation of disallowance under second and third limb - HELD THAT:- As regards the interest disallowance we notice that the assessee has given a breakup of the available interest-bearing funds received as unsecured loan and loans from Axis Bank which is stated to be Rs. 9.04 Cr and out of this application of the fund to the tune of Rs. 5.26 Cr are towards the business assets and Rs. 3.77 Cr approx towards non-business assets. During the course of hearing, assessee stated that the assessee is ready to admit the disallowance of interest expenditure of Rs. 47,08,373/- calculated at the rate of 12.5% of the funds applied for non-business assets at Rs. 3.77 Cr. Since the non-business assets inter-alia includes the investments in shares and other investments there remains no justification to make interest disallowance u/s 14A of the Act separately. We, therefore, delete the interest disallowance made under Rule 8D(2)(ii) of the I.T. Rules, 1962. Interest disallowance under the third limb calculated at the rate of 0.5% of the average investment assessee stated that only the investments fetching exempt income should be considered for the purpose of calculating 0.5% disallowance. The details of the same has been placed as per which the average investment fetching exempt income is shown at Rs. 3.66 Cr. Remaining investments are either in mutual funds or other investments which do not fetch exempt income. Thus, applying the rate of 0.5% on the average investment yielding exempt income of Rs. 3.66 Cr, the disallowance under third limb would work out to Rs. 1,83,000/-. Disallowance u/s 14A stands confirmed partly. Alternate claim made by the assessee wherein it has been contended that disallowance u/s 14A of the Act cannot exceed the exempt income - As we fail to find any merit in this ground because assessee has stated that exempt income during the year is only Rs. 6,70,100/- being the dividend earned on the exempt income but he failed to take note of the fact that exempt income also comprises of long term capital gain from sale of equity shares at Rs. 4,85,822/- exempt u/s 10(38) of the Act, dividend income at Rs. 12,96,867/- and PPF interest at Rs. 92,372/-. Therefore, this alternate ground no. 6 raised by the assessee is dismissed. Disallowance of interest expenditure u/s 36(1)(iii) - From perusal of the sheet, we notice that out of the interest-bearing funds of Rs. 9.04 Cr (approx.) assessee has applied Rs. 3.77 Cr for non-business assets. Even if we take the highest rate of interest which in this case has been charged by M/s. Morgan Stanley India Capital Pvt. Ltd. on the loan given to the assessee i.e. 12.5% and if applied on the annual basis on the funds employed for non-business assets purposes, the interest expenditure will work out to Rs. 47,08,373/-. The non-business assets include the investment in shares, ICICI Prudential Life Insurance, PPF, increase in interest free loans and advances and repayment of interest free unsecured loan. We, therefore under the given facts and circumstances of the case are of the considered view that against the interest disallowance of Rs. 1,58,99,942/- confirmed by ld. CIT(A), we, on the basis of the details available on records and the application of interest-bearing funds to non-business assets, sustain the disallowance of interest expenditure u/s 36(1)(iii) of the Act at Rs. 47,08,373/- and partly allow ground no. 2 raised by the assessee. 2023 (10) TMI 21 Deductible u/s 80P(2)(a)(i) - assessee is a Co-Operative Society - AO was of the view that other income earned by the assessee society is not eligible for deduction u/s 80(P)(2)(a)(i) as such income is not derived from the business of banking or providing credit facilities to its members - HELD THAT:- The fact shows that assessee is a member of credit co-operative society registered as Resource Society under the Maharashtra Co-operative Society Act and is specially classified as credit resource society. The lower authorities have also admitted that assessee is carrying on the business of banking or providing credit facilities to its members, therefore, the activity of the assessee is classified under Section 80(P)(2)(a)(i) of the Act and it is wholly amount of profits and gains attributable to such activity is deductible under Section 80P(2)(a)(i) ORDER:- Under 80(P)(2)(d) any income by way of interest or dividend derived by the co-operative society from its investment with any other co-operative society wholly of such income is deductible under 80(P)(2)(d) of the Act. Assessee has stated it has received interest and dividend from co-operative banks and therefore, the above deduction is available to the assessee under 80P(2)(d) of the Act. The deduction is correctly denied under Section 80P(2)(d) of the Act. ₹35,000/- is a reversal of provision of audit fees. The deduction of the audit fee expenditure is allowable to the assessee as profits and gains of business attributable to business of co-operative banking. The reversal of fees is also part of the business income of the assessee. Therefore, ₹35,000/- should be granted to the assessee as deduction under Section 80P(2)(a)(i) of the Act. With respect to electricity bill counter income and office rent and tax deposit are not at all related to the carrying on business of banking or providing credit facilities and therefore, both of this income are correctly treated by the lower authorities not as eligible business income u/s 80 P (2) (a) (i) of the Act . The electricity bill counter income is other business income of the co-operative society and office rent and tax deposit is a rental income which is required to be taxed at income from house property or other income. Accordingly, deduction under Section 80P is not allowable on both this income. Electricity bill counter income is required to be assessed as a separate business other than the business of banking to its members after granting deduction of expenditure incurred wholly and exclusively for that business. Similarly office rent and tax deposit is also required to be taxed as income from house property or income from other sources with applicable deductions allowable. However, while granting the deductions, the expenses which has already been included as profits and gains of business under Section 80(P)(2)(a) of the Act are not required to be disturbed. Assessee appeal partly allowed. 2023 (10) TMI 20 Addition u/s 68 - unexplained cash deposits in the bank account - HELD THAT:- AO has made addition towards unexplained cash deposits by ignoring explanation furnished by the assessee with regard to the source for cash deposits and capital introduction. Assessee is a partner in a partnership firm having 50% share of profit. The partnership firm was subjected to Search and Seizure by the Department. On appeal before the tribunal in [ 2022 (7) TMI 270 - ITAT CHENNAI] as directed AO to estimate 8% profit on total turnover and allow 90% of total expenditure claimed in the profit and loss account which results in net profit for assessment years 2015-16 and 2016- 17 to Rs. 1.20 crores, and assessee s share of profit works out to Rs. 59.95 lakhs. If you consider the assessee s share of profit out of income assessed in the hands of the partnership firm, then obviously the assessee can explain source for cash deposits, out of income from partnership firm and rental income. Therefore, considering the fact that the assessee is having source of income to explain unexplained cash deposits and capital introduction, we direct the Assessing Officer to delete addition towards unexplained cash deposit and capital introduction. Unexplained gold jewellery of 1480 gms found during the course of search - explanation of the assessee before the AO and CIT(A) that entire gold jewellery found during the course of search cannot be assessed in his hands, because gold jewellery is belongs to his entire family and was acquired over a period of time from its savings and income of family members - HELD THAT:- We find force in the arguments of assessee, for the simple reason when family members are residing in a common house, obviously the jewellery belongs to various family members cannot be assessed in the hands of one person, more particularly when family members includes ladies. It is also an admitted fact that it is customary in India that ladies acquire gold jewellery out of their savings over a period of time. It is also admitted fact that the CBDT itself has directed the Department not to seize jewellery to the extent of 500 gms for married women and 200 gms for unmarried women. If you go by the same, the assessee deserves relief towards jewellery belonging to his family members. Therefore, considering the fact that the jewellery found during the course of search does not belongs to assessee himself and also fact that the assessee is having sufficient source of income to explain source for jewellery found during the course of search, out of income assessed in the hands of his partnership firm, we deem it appropriate to allow relief to the extent of 1000 gms out of total jewellery of 1980 gms found during the course of search. Therefore, we direct the AO to sustain addition of 980 gms in the hands of the assessee and delete remaining 1000 gms of jewellery, which assessee claims to have been belongings of his family members. Addition towards unaccounted cash found during search - It was the explanation of the assessee that out of cash found during the course of search a sum of Rs. 6,66,450/- pertains to partnership firm - HELD THAT:- We find force in the arguments of the assessee in so far as arguments with regard to cash pertains to partnership firm, because the partnership firm is having huge turnover and 90% of the total turnover comes from cash sales. Therefore, it is not surprise to find cash to the tune of Rs. 6,66,450/- when search was conducted. Therefore, we are of the considered view that the Assessing Officer is erred in making addition towards cash found during the course of search, to the tune of Rs. 6,66,450/- belonging to partnership firm and thus, we direct the Assessing Officer to delete addition made towards unaccounted cash found during the course of search for Rs. 6,66,450/-. In so far as remaining cash balance, the assessee could not explain source with known source of income. Although, the assessee seeks for telescopic benefit out of income assessed in the hands of the partnership firm, but the benefit of telescopic cannot be given, because it was not the case of the assessee that cash found in the residential premises of the assessee is out of income of partnership firm. Therefore, we reject arguments of the assessee and sustain balance cash found during the course of search and added as unaccounted income of the assessee - out of total addition assessee gets relief to the extent of Rs. 6,66,450/- and balance amount is sustained. Appeal filed by the assessee is partly allowed. 2023 (10) TMI 19 Allowability of business expenses - Disallowance of interest of loan, commission paid, brokerage paid, professional charges paid, depreciation of car and 50% towards petrol and maintenance expenses of car - HELD THAT:- Except for disallowance made towards petrol and maintenance expenses on car, we find that assessee had substantiated the claim of its expense with corroborative documentary evidence which are justified taking into account the line of business in which it is engaged. We note from the order of AO that nothing specific has been pointed out to justify the disallowances/additions made except for a general statement that claim of the assessee is not tenable. We have gone through the documents referred by the learned counsel as stated above and find force in the submissions so made. The expenses claimed by the assessee as stated above are legitimate business expenses which are allowable u/s 37(1) (depreciation on car under Section 32 of the Act). The conditions prescribed under Section 37(1) and 32 of the Act have not been violated by the assessee, since, nothing is brought on record by the authorities below as well as by the learned Sr. DR to demonstrate otherwise. Accordingly, we delete the addition/disallowances made by AO for which the assessee is in appeal before the Tribunal except for expenses toward petrol and maintenance of car which have been disallowed by restricting it to 50% by the learned Commissioner of Income-tax(Appeals). For the disallowance made towards petrol and car maintenance expenses the addition is sustained. Accordingly, grounds taken by the assessee except for the one towards petrol and car expenses are allowed. Appeal of the assessee is partly allowed. 2023 (10) TMI 18 TP Adjustment - comparable selection - HELD THAT:- Exclude M/s. Hartron Communications Ltd. from the list of comparables company has extraordinary profits/ losses in subsequent years, thus we are of the substantive opinion that this company cannot be considered as comparable to the assessee's functional profile and accordingly, direct the AO/ TPO to exclude this this comparable for determining ALP. TPO adopting incorrect PLI of one comparable, namely Microland Limited, as' 17.83% as against 9.84% (before working capital adjustment and risk adjustment) resulting in computation of excessive TP adjustment - HELD THAT:- TPO considered the margin in respect of M/s. Microgenetic Systems Ltd. at 17.83%. Similarly, he has considered the margin in the case of Microland Ltd. at 17.83%. The contention of the ld. AR. is that this is a typographical mistake committed by TPO and on earlier occasion, in the first round the TPO considered the margin of Microland Ltd. at 9.84%. In our opinion, this is required to be re-examined by AO/TPO. Accordingly, the issue is remitted to the file of AO/TPO for fresh consideration and take the correct PLI on this comparable. Non-giving of risk adjustment - Since in present case computation of risk adjustment is not provided by the assessee, hence respectfully following the decision of the Bench in the matter of Mercedez [ 2018 (2) TMI 1975 - ITAT BANGALORE] we send back additional ground no.1, to the file of TPO. Non-giving of working capital adjustment - We are of the opinion that this issue came for consideration on earlier round in . [ 2019 (4) TMI 2125 - ITAT BENGALURU] remand this issue to the file of the TPO for the calculating the working capital adjustment, if any, in accordance with law and the TPO shall consider all the binding decisions of the High Court/coordinate bench. These grounds are allowed for statistical purpose. We direct the AO/TPO to pass consequential order in conformity with the above direction as Tribunal on earlier occasion as reproduced herein above. Computing tax on assessed income at the erroneous rate of 34.37% (before surcharge and education cess instead of the applicable tax rate of 30% - After hearing both the parties, we are of the opinion that this ground is consequential since we have remitted certain issue involved in this appeal to the file of AO/TPO for reconsideration, as such the computation of tax liability will change accordingly and the AO is directed to recompute all tax liability in accordance with law. Interest u/s 234D - We are of the opinion that this is required to be examined at the end of the AO/TPO passing consequential order. He should see whether any refund is granted to the assessee u/s 143(1) of the Act. If there is no refund granted to the assessee u/s 143(1) no interest u/s 234D of the Act is to be charged. 2023 (10) TMI 17 Income accrued in India - receipts from international traffic pertaining to voyage chartered as Royalty - treaty benefits under DTAA - HELD THAT:- As the assessee is entitled to treaty benefit after examination of the tax returns of the assessee filed before the tax authority of Singapore and also held that the assessee is to be considered as the tax resident of Singapore. The Tribunal has also held that the assessee has not entered into any back- to-back arrangement. The Tribunal has also held that the receipts cannot be treated as royalty. Hence, in the absence of any change in the business pattern or the judicial proposition, we hold that the revenue erred in treating the receipts from international traffic pertaining to voyage chartered as Royalty . Decided in favour of assessee. 2023 (10) TMI 16 Exemption u/s 11 - assessee Trust is registered u/s 12A of the Act and is running a Dharamshala at Shimla and Palampur besides carrying out other charitable activities - Reasons on denial of benefit of exemption u/s 11 to the assessee trust as during the appellate proceedings, the assessee trust could not submit copy of its registration u/s. 12A originally granted on basis of which the past assessment were completed allowing exemption u/s section 11 - HELD THAT:- As in the assessment order for assessment year 1984-85, there is a clear mention of the assessee Trust being granted registration u/s 12A vide ld. CIT, Patiala letter dated 30.01.1986 and following the same, the assessment orders for assessment year 2010-11, 2011-12, 2012-13 and 2015-16 have been passed wherein the exemption u/s 11 has been allowed by the AO. Being an old matter, the assessee trust may not have produced copy of the registration originally granted u/s 12A, however, the factum of the assessee s trust being duly registered u/s 12A and such a registration not being withdrawn is borne out of the assessment records for the earlier assessment years and in view of the same, mere non-furnishing of copy of registration u/s 12A cannot be held as a valid and justifiable reason for denial of exemption u/s 11 where such registration continues to exist and the assessee trust duly stand registered u/s 12A for the year under consideration. Requirement of fresh registration u/s 12AB for existing trusts - HELD THAT:- As per the provisions of sub-section (5) to section 12AA, the registration granted to the assessee trust continue to exist and in any case has not been withdrawn for the impugned assessment year 2020-21. Further, there are corresponding amendments/insertion of new provisions in section 12A(1)(ac) by the Taxation and other laws (Relaxation and Amendment of certain Provisions) Act, 2020 w.e.f 01/04/2021 which has again escaped the attention of the ld CIT(A). In view of the same, we agree with the contention of the ld AR that the new registration provisions have no impact as far as registration of the assessee trust for the impugned assessment year 2020-21 and its existing registration u/s 12A continues to hold good. In view of the same, we set-aside the order of the ld CIT(A) and direct the AO to allow the exemption u/s 11 as so claimed by the assessee trust while filing its return of income. Appeal of the Assessee allowed. 2023 (10) TMI 15 Unexplained investment - Poof of source for the specified bank notes being the demonetised currency which has been deposited in the bank provided - HELD THAT:- It is an accepted fact that as on the date of demonetisation except for specified persons no other persons were permitted to transact in the demonetised currency. The assessee does not fall within the exempted category of persons to deal with the demonetized currency. With this in mind, if it is seen, the sale alleged to have been made by the assessee between 08.11.2016 and 12.11.2016 though shows availability of funds along with recovery from the debtors, still it cannot be said that this is a source for the specified bank notes being the demonetised currency which has been deposited in the bank on 12.11.2016. We are unable to even consider a position that Rs. 28 lakhs SBNs could have been with the assessee before 08.11.2016 insofar as the cash book only shows cash availability of Rs. 252.40. Admittedly, if the assessee desires to take the stand that the SBNs were the currency received between 08.11.2016 to 12.11.2016, it would be incumbent upon the assessee to prove to the revenue as to from whom he has received the SBNs. In the absence of such prove, the deposit of SBN to the extent of Rs. 28 lakhs will have to be treated as the unexplained investment of the assessee. Appeal of the assessee is dismissed. 2023 (10) TMI 14 Tax the surplus on sale of CCDs as income under the head capital gains - tax levied thereon @10% u/s 112 - denying the benefit of the Tax Treaty but accepting the valuation adopted by the Assessee - invoking the rule of consistency, AR argued that the interest earned on CCDs have been offered to tax in India in the tax return filed in India @ 10% as provided under the Tax Treaty. HELD THAT:- Assessee is a tax resident of Singapore and TRC issued by the Singapore Tax Authorities is on record. The Hon ble Supreme Court in the judgment of Vodafone International Holdings B.V. vs. Union of India and Anr. [ 2012 (1) TMI 52 - SUPREME COURT] has held that Union of India vs. Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPREME COURT] is correct law and TRC is sufficient evidence to show residence of the contracting state. The valuation of CCDs is not in dispute. Hence, the only issue is according the benefits of India-Singapore Treaty pertaining to exemption under Article 13(4) of the Tax Treaty with regard to the capital gains earned on sale of CCDs. The revenue alleged that there is a scheme of tax avoidance as more than 30% of units in the RHT Trust are held through related parties. While it is a fact that 35.5% of shares were primarily held by FHIL, the remaining 64% was raised from public and institutional investors. The place of effective managements of the assessee is situated in Singapore owing to the conducting of Board meetings and placing of the Directors at Singapore. With regard to the contention of the revenue that there was no commercial rationale for FHL to incorporate wholly on subsidiary in Mauritius is of no relevance and commercial justification to establish the business trust in Singapore has been duly explained by the assessee. The applicant could demonstrate incurring the expenditure of more than $ 2,00,000 so as to come out of the allegation of being a shell entity. The circular of CBDT No. 789 dated 13.04.2000 and also the press release of 2013 mentioned above leaves no scope for the revenue to tax the amounts and deny the treaty benefits. It is also point for consideration that the interest on the CCDs has been rightly taxed by the revenue as per the treaty in the earlier years and now revenue cannot turn around and deny the benefits of the treaty in case of sale CCDs. Even considering the Limitations of benefit clause (LOB), the look through approach, doctrine of substance over form as relied by the revenue, the benefit to the assessee at this juncture cannot be denied. To conclude allegations of the revenue that: a. The scheme of arrangement employed by the assessee is a tax avoidance through treaty shopping mechanism- Not proved. b. The assessee company is not the real owner of the income so generated from the transaction. Accordingly, it lacks beneficial ownership- Not proved. c. The TRC is not sufficient to establish tax residency if the substance establishes otherwise- Sufficient. d. The control and management of the assessee company is also not present in Singapore but rather in India- Not proved. e. The assessee was listed on Singapore Stock Exchange in 2011 hence it shall not be deemed to be a shell/conduit company and hence the LOB clause of Article 3 (now deleted) 2005 Protocol to the DTAA is not applicable to the assessee. Appeal of the assessee is allowed. Customs 2023 (10) TMI 13 Permission for clearance and loading of the goods - Non-Basmati Rice for exportation on board vessel M.V. KEN COLON - notification no. 20 of 2023 - HELD THAT:- Condition no. (ii) of para no. 2 of the notification provides that where the shipping bill is filed and the vessels have already berthed or arrived and anchored in Indian ports and their rotation number has been allocated before the notification then the approval of loading in such vessel will be issued after confirmation by the concerned Port Authorities regarding anchoring/ berthing of the ship for loading of Non-Basmati Rice prior to the notification, whereas applying this condition to the facts of the case it is not in dispute that the vessel M.V.KEN COLON arrived Land Anchored in Indian Port (Kandla) on 11.07.2023 and it sailed to Bhavnagar Port on 14.07.2023 for unloading of coal and returned to the Kandla Port for loading of the export cargo of the petitioners on 26.07.2023. It is also not in dispute that the VCN Export Number as well as the rotation number was allotted by Port Authority on 18.07.2023. The condition no.(ii) of para 2 of the notification no. 20 of 2023 stands fulfilled and the interpretation of the respondent no. 2 authority that the vessel ought to have arrived in India for the purpose of export and ought to have berthed prior to 20.07.2023 is not the case as the vessel had arrived in India prior to 20.07.2023 and it has anchored in two Indian Ports namely at Kandla Port on 11.07.2023 and at Bhavnagar Port on 14.07.2023, it is not necessary that the vessel ought to have arrived at Indian Port for export of the cargo coupled with the fact that the Voyage Call Number as well as the rotation number was issued for berthing of the said vessel for export of the cargo on 18.07.2023 i.e. prior to issuance of prohibitory Notification No. 20 of 2023 dated 20.07.2023. The respondent No. 2-authority ought to have permitted the petitioners to export the cargo of the remaining 13,500 metric tons of Non-Basmati Rice with regard to ten shipping bills which were already filed prior to issuance of notification no. 20 of 2023 dated 20.07.2023. The respondent authorities are directed to finally assess ten shipping bills listed at Annexure B by making an order under Section 51 of the Customs Act permitting the clearance and loading of the goods covered under these shipping bills for export of 13,500 metric tons of Non-Basmati Rice on board of the vessel which now the petitioners may hire for export of the same - petition allowed. 2023 (10) TMI 12 Permission to amend 32 shipping bills from free shipping bills to drawback shipping bills under Section 149 of the Customs Act, 1962 - HELD THAT:- A reading of the impugned order indicates that the only reasoning assigned is that the importer was unable to satisfy the Deputy Commissioner that it had intended to file the shipping bills under the export work relating to drawback - the aforesaid reasoning cannot be sustained since it is not incumbent upon the exporter to prove an intention to claim drawback or other benefits. Section 149 of the Act enables an exporter to claim amendments in the shipping bills for any reason that may be deemed expedient. However, that provision nowhere speaks of an obligation or duty cast upon the exporter to establish intendment. In the present case, the impugned order does not rest on an impossibility to scrutinize or dispose of the application for amendment nor does it allude to any other practical difficulty or aspect of impossibility which would have hindered consideration of the request made by the petitioner. In Terra Films [ 2011 (4) TMI 13 - DELHI HIGH COURT] , the Division Bench had on facts noted that the respondents had taken the position that it would be impossible to accede to the request for amendment. In view of the aforesaid, we find ourselves unable to sustain the view as expressed by the Deputy Commissioner in the impugned order. The impugned order dated 06 September 2022 is hereby quashed and set aside - petition allowed. Insolvency & Bankruptcy 2023 (10) TMI 11 Maintainability of petition - availability of statutory remedy of appeal - Petitioner has not been availed of within the limitation period provided therefor - seeking vacation of attachment order - HELD THAT:- There is no doubt about the fact that the Petitioner was not a party to the resolution proceedings pending before the NCLT, Mumbai but we find that Petitioner was not a person who could have said to have remained in the dark all throughout about passing of the order by the NCLT. This is evident from the fact that one of the ex-directors of Respondent no. 1 had belatedly filed an appeal under section 61 of the IBC before NCLAT along with application for condonation of delay and the application for condonation of delay was dismissed by NCLAT by a speaking order passed on 14th July 2023. This order states that power vested with the Appellate Tribunal to condone the delay is only of 15 days as provided under proviso to section 61(2) of the IBC and beyond this period, no delay could be condoned by NCLAT. The NCLAT also noted the fact that delay occurred in filing of the Appeal filed by other ex-director of Respondent no. 1 was of 423 and 164 days which was beyond the power of condonation of delay vested in the appellate tribunal. In the present case, the order passed by NCLT, and in particular, the portion by which order of attachment of flats passed by PMLA authority has been vacated, has attained finality, as rightly submitted by the learned counsel for the Respondent no. 1. This is for the reason that no appeal has been preferred against it before NCLAT within the stipulated period of time or within the extended period of time as provided under section 61 of the IBC by anybody including the Petitioners. There are no merit in the submission as it is an admitted fact that the registered address of Respondent no. 1 company is of Mumbai and therefore, NCLT Mumbai would have had the jurisdiction in the matter. Even otherwise, if any such contention was to be made, it could have been made by the Petitioner by availing of statutory remedy of appeal, which remedy now has been forfeited by him on account of his own lethargy. There is no merit in the petition and it deserves to be summarily dismissed - Petition dismissed. Service Tax 2023 (10) TMI 10 Violation of principle of natural justice - non-submission of reply to the SCN - Levy of service tax in terms of Sl. No.13 of notification No. 25/2012-ST dated 20.06.2012 - HELD THAT:- It transpires that no reply to the SCN was ever submitted by the petitioner. Even the date of personal hearing was fixed four times i.e., on 27.10.2022, 25.11.2022, 07.12.2022 and 04.01.2023, however, the petitioner did not respond to the same. The petitioner referred Annexure-2, 2/1 and 2/2 that he has replied to the notice as such the same should have been considered as reply to SCN but after perusing the said Annexure it appears that the said reply was given at the stage of enquiry. From bare perusal it appears that the same was sent to the Superintendent, Range-1, Div-II, Bokaro; however, those were pre SCN queries made by the Range Officer but, admittedly; the petitioner did not reply to the SCN. It is further evident that the Assessee was given ample opportunity to appear before the adjudicating authority but he failed to do so. The letters of personal hearing were issued to him on the address M/s Rajeev Kumar, Lukiya Petarwar, Bokaro Steel City, 827001 provided by petitioner-assessee in their GST registration but the letters were returned undelivered - the contention of the Assessee that principle of natural justice has not been complied is misplaced and misconceived and without any basis. As a matter of fact, in para-9 and 10 of the impugned Order-in-Original, the adjudicating authority has clearly stated giving details of opportunity provided to the Assessee. As such the contention of non-fulfillment of natural justice is not sustainable in the background of this case. Thus, no error has been committed by the adjudicating authority in passing the impugned Order-in-Original, inasmuch as, enough opportunities were provided to the petitioner by issuing SCN and also fixing date of personal hearing for four times; but the petitioner did not respond to either of them. Application dismissed. 2023 (10) TMI 9 Individual levy or works contract service - composite contracts - materials along with the services were rendered by the appellant to various clients during the relevant period 16/06/2005 to 31/05/2007 - rendering services like false ceiling, glazing etc. by supplying materials along with services as per the individual work orders issued by various clients - HELD THAT:- To analyse in detail, it is necessary to remand the matter to the adjudicating authority to ascertain whether all contracts entered by the appellant with their clients are in the nature of works contract service or some contracts are only for supply of services. To ascertain the said position, the matter is remanded to the adjudicating authority. All issues are kept open. Needless to say that principles of natural justice be followed by affording opportunity of hearing to the appellant. The appeal is allowed by way remand. 2023 (10) TMI 8 100% EOU - Refund of accumulated cenvat credit - rejection of refund claim on the ground that the credit availed on input services, namely, outward freight from the place of factory to the place of export i.e. port is not admissible as the place of removal is only the factory gate not the port of export - HELD THAT:- The issue of admissibility of cenvat credit on outward freight from the place of manufacture to the place of export i.e. port by a manufacturer-exporter is no more res integra covered by the judgment of the Hon ble Himachal Pradesh High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS DRISH SHOES LTD. [ 2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT ]. Also the Board accepted the principles of law settled by the Courts and Tribunal in various cases circulated in the Circular dated 28/02/2015 where it was held that In the case of clearance of goods for export by manufacturer exporter, shipping bill is filed by the manufacturer exporter and goods are handed over to the shipping line. After Let Export Order is issued, it is the responsibility of the shipping line to ship the goods to the foreign buyer with the exporter having no control over the goods. In such a situation, transfer of property can be said to have taken place at the port where the shipping bills filed by the manufacturer exporter and place of removal would be this Port/ICD/CFS. There are no merit in the appeals filed by the Revenue - appeal dismissed. Central Excise 2023 (10) TMI 7 Clandestine removal - Undervaluation of goods - evasion of duty - it is alleged that the goods sold through Surya Rubbers Chemicals Pvt. Ltd. (SRCL) and Pyramid Rubber Company Pvt. Ltd. (PRCL) are not accounted in the books of RRPL - Non-existing/dummy units - HELD THAT:- There are strong force in the statements made by the appellants that when adjudicating authority has held that RRPL, SRC and PRC are related persons, it contradicts the finding in the impugned order that SRC and PRC are only dummy units created for procuring the tenders offered by KSRTC. In addition to that during hearing, the Learned counsel for the appellant draws our attention to large number of documents including registration, deed of partnership, VAT registration and proforma of registration issued by Central Excise authorities to SRC RRPL firms, books of accounts etc., to substantiate that the units are functioning independently and not dummy units as alleged. Considering the law laid down by the Apex Court in the matter of Commissioner of Central Excise, New Delhi Versus Superior Products and Goodyear South Asia Tyres Pvt. Ltd. [ 2015 (8) TMI 61 - SUPREME COURT] , wherein it is categorically held that all the three units even few of the directors or responsible persons are one and same, they cannot be considered as related persons since all the three were having separate legal entities. Undervaluation - HELD THAT:- The document relied on by the adjudicating authority to adopt the value of the rubber cannot be considered as admissible evidence. Moreover, appellant had produced documents issued by Rubber Board regarding the average value of rubber at the relevant time. If the Investigating authority had reason to believe that the cost of rubber at the relevant time was higher than the value shown in the books of accounts, they could have obtained authentic data from the Rubber Board or other agency than relying on unsigned/unauthenticated document allegedly recovered during investigation. Moreover, there is no evidence regarding place of recovery of said document, it is unsigned and it was not brought to the notice of concerned person during investigation - Considering the above fact, there is no reason to allege undervaluation regarding transactions carried out between the RRPL, SRC and PRC. Regarding the submission made by the learned AR relating to the payments made by PRC and SRC allegedly to the rawmaterial suppliers, to a specific question regarding the books of account related to manufacturing activities for the goods supplied by the SRC and PRC, the learned AR fairly admits that there are no such records available on record. Appeal allowed. 2023 (10) TMI 6 Process amounting to manufacture - process of galvanization undertaken by the appellant on job-work basis - Extended period of limitation - HELD THAT:- The appellants have been carrying out the process of galvanization on job-work basis for the raw-materials supplier which has been in dispute since 1992. The dispute was finally settled in their favour by the judgment of this Tribunal in 2001. By virtue of Chapter Note 4 to Chapter 73 of CETA in the Budget 2002, the process of galvanization was included in the scope of manufacture . Thereafter the audit carried out scrutiny of the records of the appellant in 2004 and recovered Rs. 24,746/- towards duty and Rs. 2,476/- as interest observing that the procedure prescribed under Notification No. 214/86 has not been observed undertaken in the said process of galvanization for unregistered manufacturers. Further in the audit conducted in November, 2006, the Department itself raised an objection holding the view that the process of galvanization since does not amount to manufacture, therefore service tax is applicable for carrying out the said process on job-work basis - Consequently, an amount of Rs. 9,32,846/- (Rupees Nine Lakhs Thirty Two Thousand Eight Hundred and Forty Six only) has been recovered as service tax from the appellant. Extended period of limitation - HELD THAT:- It is difficult to sustain the order of the lower authorities holding that the appellant had suppressed the activity of process of galvanization carried out on job-work basis in their factory but not disclosed to the Department. Hence, extended period of limitation cannot be applicable for recovery of the duty on the process of galvanization carried out on job-work basis holding the said process as manufacture . The impugned order is set aside on the ground of limitation and Appeal is allowed only on limitation without any consideration on merit being not contested by the Appellant. CST, VAT & Sales Tax 2023 (10) TMI 5 Classification of goods - installation cables, outlet or connection modules, patch cords, patch panels, network cards, fibre optic cables etc. - covered in Entry C. 20 (ii)(b) of the Second Schedule to the Karnataka Sales Tax Act, 1957 or not - HELD THAT:- Reliance placed in the case of Collector of Central Excise v. Grasim Industries [ 2005 (4) TMI 64 - SUPREME COURT ] and Castrol India Ltd. v. C.C.E. [ 2005 (2) TMI 847 - SUPREME COURT ], which had ruled that the phrase that is to say are to be given a restrictive meaning, rather than expanding the scope of the preceding words. In Castrol India, it was held the expression that is to say in sub-heading 2710.60 has to be interpreted to be words of limitation. The fact that sub-heading 2710.60 contains an exclusion clause goes to show that there may be other lubricating oils which may fall in the residuary heading others . Having regard to these facts, the Court is satisfied that the final decision classifying all the items in question, as falling in Part E of the Second Schedule to the Karnataka Sales Tax Act, 1957 is correct. Appeal dismissed. Indian Laws 2023 (10) TMI 4 Dishonour of Cheque - legally enforceable debt or legal dues - vicarious liability - signatory/director can take the benefit of discharge obtained by the corporate debtor or not - HELD THAT:- Considering the newly added provision of Section 32A of IBC, the corporate debtor can be exonerated from the liability if the company is dissolved, however, the natural person i.e. the partners or directors of the same cannot escape penal liability under the provisions of the NI Act. As per the provisions of Section 138 of the NI Act, if the cheque was dishonoured, statutory notice was issued, the amount is not paid within 15 days thereafter, the cause of action arises and if the complaint is filed within one month from the date of cause of action, the only question before the criminal court is whether the cheque was issued, it was bounced, and despite the service of notice, the amount is not paid. There is no bar contained in any of the provisions of the IBC restraining the complainant to approach the criminal court to seek penal action under Section 138 of the NI Act. The signatory/director cannot take the benefit of discharge obtained by the corporate debtor by operation of law under the IBC. Further, the facts of the cheques being issued, signature on the cheques, the cheques being issued in what capacity, the cheques being issued for legally enforceable debt or not, that the petitioners are/were directors of the company, what role the petitioners had in the day to day affairs of the company etc. are all facts which are required to be tested at the time of trial and the petitioner has failed to produce some impeachable and incontrovertible evidence beyond suspicion of doubt and all the contentions raised in these petitions are in the form of defence, which can be tested at the time of trial and not at the stage of quashing of the complaints. It is an undisputed fact that from bare reading of the complaint, the necessary averments are made regarding the liability of the accused persons (vicarious liability) under Section 138 read with Section 141 of the NI Act. It also transpires that Clause 9 of the MOU clearly refers to twelve cheques totalling to Rs.2,35,42,524/- of the personal bank account to be held as additional security. The petitioners have not disputed existence of MOU and cheques were issued in terms of the MOU. It is also now settled that directors are vicariously liable for the acts committed on behalf of the company. In view of Sections 138, 139 and 141 of the NI Act, it is also clear position of law that under provisions of Section 14 of IBC, the proceedings cannot continue against corporate debtor but can be initiated or continued against natural persons including persons mentioned under Sections 141(1) and 141(2) of the NI Act. It also transpires that MOU is executed between the parties, the contents of which are being interpreted differently by learned advocate for the parties, whether the cheques were issued as security or towards legally enforceable debt, are all matter of trial and this Court cannot conduct mini trial or roving inquiry at the stage of exercising the powers under Section 482 of of the Code, therefore, it is opined that this is not a fit case to exercise powers under Article 226/227 of the Constitution of India read with Section 482 of the Code, as all the points raised herein need a full fledged trial. Petition dismissed. 2023 (10) TMI 3 Dishonour of Cheque - insufficient funds - compounding of offence - Section 138 of the NI Act - HELD THAT:- Having settled the matter and the loan account of the petitioner-accused has been closed under the One Time Settlement (OTS) Scheme and the complainant-Bank has no objection in case the judgment of conviction, dated 17.05.2022, and the order of sentence dated 18.05.2022, passed by the learned Judicial Magistrate First Class, Barsar, District Hamirpur, H.P., in Complaint No. 16-I-2016, is quashed and set-aside, therefore, this Court sees no impediment in accepting the prayer made on behalf of the the parties for compounding of offence while exercising power under Section 147 of the Act as well as in terms of guidelines issued by the Hon ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], wherein the Hon ble Apex Court has held Section 147 of the Negotiable Instruments Act, 1881 is in the nature of an enabling provision which provides for the compounding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 of the CrPC which states that No offence shall be compounded except as provided by this Section . A bare reading of this provision would lead us to the inference that offences punishable under laws other than the Indian Penal Code also cannot be compounded. In K. SUBRAMANIAN VERSUS R. RAJATHI REP. BY P.O.A.P. KALIAPPAN [ 2009 (11) TMI 1013 - SUPREME COURT ], it has been held by the Hon ble Apex Court that in view of the provisions contained in Section 147 of the Act read with Section 320 of Cr.P.C., compromise arrived at can be accepted even after recording of the judgment of conviction. Since, in the instant case, the petitioner-accused after being convicted under Section 138 of the Act, has settled the matter with the complainant-Bank under the One Time Settlement scheme, prayer for compounding the offence can be accepted in terms of the aforesaid judgments passed by the Hon ble Apex Court - the parties are permitted to get the matter compounded in light of the fact that the parties have settled the dispute amicably under One Time Settlement scheme. The present matter is ordered to be compounded and the impugned judgment of conviction, dated 17.05.2022, and order of sentence, dated 18.05.2022, passed by the learned Judicial Magistrate First Class, Barsar, District Hamirpur, H.P., in Complaint No. 16-I-2016, are quashed and set-aside and the petitioner-accused is acquitted of the charge framed against her under Section 138 of the Act. Bail bonds, if any, stand discharged. Petition disposed off. 2023 (10) TMI 2 Dishonour of Cheque - insufficient funds - legally enforceable debt or not - scope and purport of the revisional jurisdiction under Secs.397 to 401 of the Cr.P.C. - quantum of sentence - HELD THAT:- There is a profusion of precedential authority that the revisional power of this Court is to be sparingly exercised and in exceptional rarity. The power is more in the nature of supervisory jurisdiction, to correct the miscarriage of justice, if any found. The revisional power cannot be equated with Appellate/Second Appellate power. Even if a different view is possible, the revisional Court shall not substitute the view taken by the Trial/Appellate Court, unless and until there is patent illegality, which is shocking to the conscience of the Court. The revision petitioner s pivotal defence was that he had not borrowed any amount from the first respondent. Instead, it was their common friend one Binukumar, who borrowed an amount of Rs.50,000/- from the first respondent, and in discharge of the said debt, the revision petitioner had issued Ext.P1 cheque. Ext.D1 agreement purportedly executed between the revision petitioner, first respondent and Binukumar, establishes this aspect. Hence, the prosecution initiated against the revision petitioner is bad - revision petitioner does not dispute the execution and the issuance of Ext.P1 cheque. His defence is that, as per Ext.D1 agreement, Binukumar was paid only Rs.50,000/- by the first respondent. There is no illegality or impropriety in the concurrent findings of the courts below, which establish that the revision petitioner had issued Ext.P1 cheque in discharge of a legally enforceable debt and has failed to shift the reverse onus of proof under Section 139 of the N.I.Act. Quantum of sentence - HELD THAT:- The Trial Court had sentenced the revision petitioner to undergo simple imprisonment for a period of three months and to pay a compensation of Rs.2,00,000/-. The Appellate Court modified the sentence by directing the revision petitioner to undergo simple imprisonment for a period of 15 days and to pay a compensation of Rs.2,75,000/- and on default to undergo simple imprisonment for a further period of 2 months. The Hon ble Supreme Court has in a plethora of precedents held that Section 138 of the N.I. Act is more civil in nature, and the intention of the legislature is to provide the drawer of the cheque an opportunity to pay the debt, rather than incarcerating the accused in prison because it would serve no fruitful purpose, especially to the complainant. Therefore, the substantive sentence can always be limited to a minimum period, with an order to pay fine, and out of which the complainant can be paid compensation. The sentence modified by reducing it from 15 days to one day (till the rising of the court) and directing the revision petitioner to pay a compensation of Rs.3,00,000/- to the first respondent and in default to undergo simple imprisonment for a period of six months - revision petition is allowed in part. 2023 (10) TMI 1 Dishonour of Cheque - section 143(A) Negotiable Instrument Act - HELD THAT:- From perusal of Section 143(A), it is evident that Court trying an offence under section 138 of the Negotiable Instruments Act may order the drawer of the cheque to pay interim compensation to the complainant (a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and (b) in any other case, upon framing of charge. (2) The interim compensation under sub-section (1) shall not exceed 20% of the amount of the cheque. (3) The interim compensation shall be paid within 60 days from the date of the order under sub-section (1), or within such further period not exceeding 30 days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque. From perusal of order dated 31.05.2023, the Court has assigned reasons for granting interim compensation to opposite party no.2 as application under section 138 Negotiable Instrument Act is pending since last two years and further observed that on account of dismissal of the complaint, complainant shall return the amount with 7% interest to applicant/accused - there are no illegality in the order dated 31.05.2023 passed by the prescribed authority. Present application dismissed.
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