TMI Tax Updates - e-Newsletter
October 7, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. VICARIOUS LIABILITY OF DIRECTOR OF A COMPANY IS NOT AUTOMATIC IN A CRIMINAL OFFENCE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. APEDA flags off first export consignment of value added products derived from Jackfruit, Passion fruit & Nutmeg (Jaiphal) from Kerala to Australia

Notifications

FEMA

1. S.O. 4091 (E) - dated 5-10-2021 - FEMA

Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2021

SEZ

2. S.O. 4090 (E) - dated 30-9-2021 - SEZ

Central Government notifies an additional area of 0.8903 hectares and de-notifies an area of 36.2703 hectares of above Special Economic Zone, thereby making the total area of the Special Economic Zone as 21.26 hectares at Village Sachin, Taluka- Choryashi, Distt. Surat, in the State of Gujarat

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/641 - dated 6-10-2021

Minimum percentage of trades carried out by mutual funds through RFQ platform

2. SEBI/HO/DDHS/DDHS_Div3/P/CIR/2021/639 - dated 5-10-2021

Amendments to manner and mechanism of providing exit option to dissenting unit holders pursuant to Regulation 22(5C) and Regulation 22(7) of SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“SEBI (InvIT) Regulations”)

GST

3. 164/20/2021 - dated 6-10-2021

Clarifications regarding applicable GST rates & exemptions on certain services

4. 163/19/2021 - dated 6-10-2021

Clarification regarding GST rates & classification (goods) based on the recommendations of the GST Council in its 45th meeting held on 17th September, 2021 at Lucknow

DGFT

5. Trade Notice No. 20/2021-22 - dated 5-10-2021

Procedure and Criteria for submission and approval of applications for export of Syringes (with or without Needles)

Highlights / Catch Notes

GST

• High Court Orders Restoration of Registration After LPO's Preventive Cancellation u/s 30(2) of OGST/GST Act.

  Case-Laws - HC : Revocation of cancellation of registration of petitioner - preventive measure has been taken by the LPO to prevent future fraud or to prevent from recurrence for such the regular claims of the ITC - Section 30(2) of the OGST / GST Act - The Department would have to show that somehow the purchasing dealer and selling dealer acted in connivance to defraud the revenue. This threshold has not been made in the present case. In other words, the Department has failed to show that the Petitioner as a purchasing dealer deliberately availed of the ITC in respect of the transactions with an entity knowing that such an entity was not in existence. - The Department is directed to restore the Petitioner’s registration - HC
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• High Court Denies Bail for Bogus Input Tax Credit Case Citing Severity of Economic Offenses and Petitioner's Role.

  Case-Laws - HC : Seeking grant of Bail - irregular availment and passing of bogus Input Tax Credit (ITC) on the strength of those fake invoices - The Petitioner is said to have been involved in the above specific economic offences of quite significant magnitude which are considered to be grave. Such dubious roles alleged to have been played by the Petitioner stand in the direction of making hefty unlawful and unimaginable financial gain - Bail application rejected - HC
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Income Tax

• Retrospective Tax Law Change Can't Impose TDS Liability for Non-Resident Payments Made u/s 195.

  Case-Laws - AT : TDS u/s 195 - addition u/s 40(a)(i) - Since, there was clear law by the decision of Hon'ble Supreme Court, the assessee has made payment without deducting tax at source. Therefore, liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because it was impossible on the part of assessee to deduct tax on income of non-resident because the assessee cannot foresee the amendment and deduct TDS on said payments. - AT
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• Exclusion of Prior Period Gratuity Provision Upheld in Book Profit Calculation u/s 115JB of Income Tax Act.

  Case-Laws - AT : Computation of book profit u/s. 115JB of the Act by excluding prior period item - difference in net profit/loss taken by the assessee and the AO on account of provision for gratuity relating to earlier years as prior period item - There is no error in reasons given by the AO to compute book profit u/s. 115JB of the Act by taking net profit as per profit & loss account before considering deduction claimed for prior period item being provision for gratuity relating to earlier years. - AT
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• Assessee Proves Identity, Creditworthiness, and Genuineness; Additions u/ss 68 and 69C Deemed Unsustainable.

  Case-Laws - AT : Unexplained cash credit u/s. 68 - Onus to prove - By observing that the assessee in the present case, has been able to discharge the initial burden to establish the identity, creditworthiness and genuineness as regards the transactions concerning the allotment of shares. - the impugned additions as made u/s 68 and consequential addition of estimated commission u/s 69C is not sustainable in law - AT
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• Section 179 of Income Tax Act: Tax Recovery from Directors Applies Only to Private, Not Public, Limited Companies. Invalid for Public Firms.

  Case-Laws - HC : Recovery of tax dues of the Company from Directors - Applicability of section 179 to public limited company - In the light of the language in which Section 179 of IT Act is couched, it follows as a indisputable sequitur that impugned proceedings are barred and they are liable to be set aside as the same has been made against Directors of a Public Limited Company, when Section 179 of IT Act applies only to Private Limited Companies and there is no other provision qua Public Limited Companies akin to Section 179 of IT Act. - HC
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• Assessment Order Invalid for Skipping Procedure in Section 144B(xvi)(b), No Show Cause Notice Given to Taxpayer.

  Case-Laws - HC : Faceless Assessment - procedure for making assessment - The final assessment order is not made in accordance with the procedure laid down u/s 144B (xvi)(b) of the Act as inspite of the variation being prejudicial to the interest of assessee, no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order calling upon him to show cause as to why the proposed variation should not be made. - Thus, the impugned assessment order is non est - HC
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• Tribunal Upholds Authority u/s 254, Validates Taxpayer's Claim on Expenditure as Non-New Claim in Assessment.

  Case-Laws - HC : Revised computation v/s revised return of income- Rectified computation of income submitted during the course of assessment proceedings - CBDT Circular states that department should freely advise the assessee, when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. Tribunal was convinced that the claim made by the assessee towards expenditure was not a fresh claim. Therefore, the Tribunal had exercised its powers conferred under Section 254 of the Act, which cannot be found fault with. - HC
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• Court Rules Against Reopening Assessment for Retention Money; Consistent Accounting Method for 25 Years Upheld u/s 147.

  Case-Laws - HC : Reopening of assessment u/s 147 - retention money for the completed projects - As pointed out that the assessee has been consistently following the same method of accounting for the last twenty five (25) years and there is no change in the method of accounting is warranted on a continuing job. Thus, it is clear that the Assessing Officer seeks to review the decision taken by its predecessor in office under the guise of exercise of power under Section 147/148, which is impermissible under law. - HC
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• ITAT Confirms Non-Compete Fees as Intangible Assets Eligible for Depreciation u/s 32(1)(ii), Supported by High Court.

  Case-Laws - HC : Claim of depreciation - Payment of non-compete fee - Whether non-compete fees is an intangible asset of any other business or commercial rights of similar nature as per section 32 (1) (ii)? - ITAT answered the question as Yes - The tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. - HC
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• High Court Invalidates CIT's Revisionary Order for Failing to Categorize Items Under Explanation A-K of Section 115JB.

  Case-Laws - HC : MAT Computation u/s 115JB - Revisions proceedings u/s 263 - CIT directed the AO to make certain additions to book profit u/s 115JB - What we find is in the order passed by CIT, there is no mention any where as to under which category of the explanation A to K below Sub Section 2 of Section 115 JB of the Act these four items mentioned above would fall. - Without identifying under which part of the list disputed four items form part of CIT could not have exercised its revisionary powers. - HC
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• Interim Stay Order Doesn't Block Authorities from Reiterating Position; March 2020 Notice Not a Violation.

  Case-Laws - HC : Validity of Notice of demand while stay order is in operation - differnt periods - This Court had taken only a prima facie view and passed an interim order of stay. That will not tie the hands of the authority in reiterating their stand in the rectification proceedings. - The issuance of notice of demand on 23.03.2020 has nothing to do with the interim order granted by this Court. There is no violation of the order passed by this Court, let alone willful violation - HC
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Customs

• Court Evaluates Faceless Assessment Violation; Petitioner Seeks Provisional Assessment and Re-export with 100% Bank Guarantee.

  Case-Laws - HC : Violation of principles of natural justice - Faceless assessment - reassessment of bill of entry - It is necessary to record that the learned counsel for writ petitioner submitted that provisional assessment and re-export may please be permitted and writ petitioner is willing to provide 100% security by way of bank guarantee. It is open to writ petitioner to make this plea before third respondent, if the writ petitioner chooses to do so and the third respondent shall consider the same on its own merits and in accordance with law - HC
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• High Court Lacks Authority to Grant Anticipatory Bail for Summons u/s 108 of Customs Act.

  Case-Laws - HC : Seeking grant of anticipatory bail - summons issued u/s 108 of the Customs Act - as per the law promulgated by the Apex Court the Summons under Section 108 of the Custom Act is only issued for recording the evidence and the High Court cannot direct the respondent authorities not to arrest such accused, as the anticipatory application would be premature at this stage. Even the direction issued by the High Court not to arrest such accused for limited period would be illegal and against the law. - HC
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• Zircon Sand Bulk Import: Cleaning and Drying Don't Make It Concentrate, Duty Demand Deemed Improper.

  Case-Laws - AT : Classification of imported goods - Zircon Sand Bulk (Zirconium Ore) - Only on the fact that the goods have undergone processes of cleaning, washing and drying, it cannot be concluded that the imported goods are Zirconium concentrate. The importer-appellant having furnished the chemical analysis report of the overseas supplier, the same cannot be totally disregarded unless there is a report of an expert contrary to this analysis report - The imported goods are Zirconium ore and not concentrates. - Demand of duty not proper - AT
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Indian Laws

• Supreme Court Upholds Rejection of Legal Heirs' Claim for Share in Partnership Due to Lack of Cause of Action.

  Case-Laws - SC : Claim of share from the partnership firm - Right of legal heirs after the demise of three original partners - rejection of the plaint on the ground that the plaint does not disclose any cause of action - We are in agreement with the Division Bench of the Calcutta High Court which, upon an elaborate scrutiny of the averments made in the plaint, the reliefs claimed therein, the provisions of the said Act and the clauses of the Partnership Deed, came to the conclusion that the reliefs as sought in the plaint, cannot be granted. - SC
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• Arbitrator can't grant pendente lite interest if contract prohibits it; High Court upholds Clause 17 under Indian Contract Act.

  Case-Laws - SC : Scope of the Arbitration - Denial of pendente lite interest on the award amount - if the contract contains a specific clause which expressly bars payment of interest, then it is not open for the arbitrator to grant pendente lite interest - the High Court was justified in rejecting the claim of the appellant seeking pendente lite interest on the award amount. - Clause 17 of the contract is not ultra vires in terms of Section 28 of the Indian Contract Act, 1872 - SC
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Service Tax

• Tribunal Decisions Challenge Service Tax on Cross-Border Transactions, Urging Clarity on Legislative Intent and Taxable Events.

  Case-Laws - AT : Demand of service tax on ross-border transactions - place of provision of services - The saddling of demand on the one manifest aspect of service transactions, viz., ‘consideration’, without contextual reference to the taxable event, though irresistibly attractive to tax authorities, may not always be consistent with legislative intent. That has been the thrust of decisions of the Tribunal in several disputes arising from the fastening of tax liability in cross-border transactions. - AT
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• High Court Reexamines Service Tax Settlement on Manpower Services Due to Double Taxation Concerns; Further Review Ordered.

  Case-Laws - HC : Validity of order of settlement commission whereas service tax liability has been settled at a certain sum with interest and penalty - petitioner discharged service tax liability @50% instead of @100% and balance 50% of the service tax paid by the service provider - manpower services - double taxation - matter restored back with observations - HC
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Central Excise

• Understanding Excise Classification: Autoclaves and Sterilizers under HSN Heading 8419 for Accurate Duty Application.

  Case-Laws - AT : Classification of goods - Autoclave - Glass bead Sterilizer - Steam Clave - Hot Air Sterilizer - While the Central Excise Tariff has only Rules of Interpretation, the Harmonized System of Nomenclature based on which the Tariff is drafted, also has detailed explanatory notes explaining the scope of each heading - The Harmonised System of Nomenclature explains that 8419 includes not only autoclaves for industrial purposes but also those used for installation and operation theatres, etc. - AT
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Case Laws:

• GST

• 2021 (10) TMI 256
  Revocation of cancellation of registration of petitioner - preventive measure has been taken by the LPO to prevent future fraud or to prevent from recurrence for such the regular claims of the ITC - Section 30(2) of the OGST Act - HELD THAT:- To attribute fraud in such circumstances to the Petitioner, as a purchasing dealer, the Department would have to satisfy a high threshold of showing that the purchaser indulged in the transactions with the full knowledge that the selling dealer was non-existent. The Department would have to show that somehow the purchasing dealer and selling dealer acted in connivance to defraud the revenue. This threshold has not been made in the present case. In other words, the Department has failed to show that the Petitioner as a purchasing dealer deliberately availed of the ITC in respect of the transactions with an entity knowing that such an entity was not in existence. The impugned order of the LPO rejecting the Petitioner s application for revocation of its cancellation of registration and the impugned appellate order dated 5th April, 2021 rejecting the Petitioner s appeal are hereby set aside. The Department is now directed to restore the Petitioner s registration forthwith by issuing appropriate orders/directions not later than one week from today - Petition allowed.

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• 2021 (10) TMI 255
  Determination of correct outstanding amount of GST - GST liability of petitioner alongwith interest which is due to be paid - HELD THAT:- Let proof of payment of Rs. 10 lacs be placed on record along with an affidavit within two weeks. The correct outstanding amount and the interest payable thereon shall be determined on the next date of hearing. However, in the meantime, the undertaking given by Mr.Navneet through learned senior counsel for the petitioner is accepted by this Court and petitioner is held bound by the same - List on 24th January, 2022.

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• 2021 (10) TMI 253
  Seeking grant of Bail - irregular availment and passing of bogus Input Tax Credit (ITC) on the strength of those fake invoices - offences punishable under section 132 (1)(b)(c) and (1) of OGST Act, 2017 - HELD THAT:- It is stated that the Petitioner as the proprietor of M/s. S.R. Enterprises has availed bogus ITC worth of Rs. 9.35 crores without physical receipt of goods on the strength of fake invoices obtained in the name of fake and non-existent firms and passed on bogus ITC worth Rs. 9.65 cores without the supply of goods in the reality and those are in favour of recipient firms inside and outside the State of Odisha. All those firm members have given their statements in the directions - In order to regularize the transactions, it is said that at the time of effecting sales, he was arranging purchase invoices against the goods purchased out of account from fake and non-existent firms and was taking adjustment of ITC in violation of law. In this way, it is said that the Petitioner was going on defrauding the State exchequer which so far stand at Rs. 19.04 crores (both passing and availment of ITC). The Petitioner is said to have been involved in the above specific economic offences of quite significant magnitude which are considered to be grave. Such dubious roles alleged to have been played by the Petitioner stand in the direction of making hefty unlawful and unimaginable financial gain by giving the show that for such sincere involvement in the business and carrying out the same, his entitlement to the huge sum as incentive in the form of Input Tax Credit (ITC) flowed which he received, but in reality as per the case laid, it is having the tendency of foiling the whole idea behind the introduction of the new Tax Regime so as to achieve the objective of speeding up the run of the Nation to stand at the forefront having a key position in the economic map of the globe. The BLAPL stands dismissed.

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• Income Tax

• 2021 (10) TMI 246
  Validity of Notice of demand while stay order is in operation - willful breach of the interim order granted - contempt petition - interim stay is still in operation and in the meanwhile ACIT a issued notice of demand u/s 156 calling upon the petitioner to pay a sum of Rs. 1,33,57,360/- - HELD THAT:- The interim order passed by this Court is in respect of the assessment years 2013-14, 2014-15 and 2015-16. The rectification petitions are in respect of the assessment years 2016-17 and 2017-18. There is contest between the petitioner and the assessing authority as regards the applicability of a particular provision. When the issue is yet to be decided, the authority can very well take a stand in the meanwhile. Grant of interim order of stay will not amount to handing out a final decision on the particular issue. This Court had taken only a prima facie view and passed an interim order of stay. That will not tie the hands of the authority in reiterating their stand in the rectification proceedings. Even while granting 100% deduction under Section 80-1B (11C) of the Act, the appellate authority had given a finding that the petitioner had accepted an undisclosed income at the time of search. He had also offered to pay tax for the same. The penalty to the tune of 10% on the said undisclosed income is also worked out under clause (a) of sub-section (1) of Section 271AAB. The issuance of notice of demand on 23.03.2020 has nothing to do with the interim order granted by this Court. There is no violation of the order passed by this Court, let alone willful violation. The contemnor is discharged.

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• 2021 (10) TMI 243
  MAT Computation u/s 115JB - Revisions proceedings u/s 263 - CIT directed the AO to make certain additions to book profit u/s 115JB - Earlier AO had issued notice under Section 154 of the Act wherein he had asked respondent as to why remedial action should not be taken for computing income under the MAT provisions, but dropped the proceedings - Whether Tribunal was right in holding that, the AO had applied his mind while passing the order u/s 143 (3) of the Act? - HELD THAT:- AO has applied his mind while passing the original order and dropping the rectification proceedings. It is settled law that no revisionary jurisdiction would lie on which issues are debatable. It is also settled law that once the Assessing Officer has taken one of its two possible views it cannot be regarded as being erroneous. What we find is in the order passed by CIT, there is no mention any where as to under which category of the explanation A to K below Sub Section 2 of Section 115 JB of the Act these four items mentioned above would fall. If the CIT felt that the Assessment Order passed by the Assessing Officer is erroneous, he ought to have identified under which category from A to K in the explanation below Sub Section 2 of Section 115 JB of the Act these four items would fall. This is mainly because the Assessing Officer took a view that these four items would not fall under the items mentioned in the explanation. ITAT has also observed that the disputed four items are not part of the list appearing in the section. Without identifying under which part of the list disputed four items form part of CIT could not have exercised its revisionary powers. Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

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• 2021 (10) TMI 242
  Claim of depreciation - Payment of non-compete fee - Whether non-compete fees is an intangible asset of any other business or commercial rights of similar nature as per section 32 (1) (ii)? - HELD THAT:- The Division Bench of this Court in Piramal Glass Limited, [ 2019 (6) TMI 891 - BOMBAY HIGH COURT] has held that the payment of non-compete fee would fall under the expression or any other business or commercial rights of similar nature used in explanation 3 to Sub Section 32 (1) (ii). Also decided in Ferromatice Milacron India (P.) Limited [ 2018 (10) TMI 615 - GUJARAT HIGH COURT] rights acquired by the assessee under the said agreement not only give enduring benefit, protected the assessee s business against competence, that too from a person who had closely worked with the assessee in the same business. The expression or any other business or commercial rights of similar nature used in Explanation 3 to subsection 32(1)(ii) is wide enough to include the present situation - Decided in favour of assessee.

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• 2021 (10) TMI 238
  Reopening of assessment u/s 147 - retention money for the completed projects - mercantile system of accounting - whether there was an allegation that the assessee failed to fully and truly disclose all material facts and particulars at the first instance, when the assessment was completed? - HELD THAT:- As after completion of the assessment u/s143(3) of the Act, the AO has issued notice seeking certain clarifications - no power vested with the AO to seek such clarifications, as the AO does not possess power under Section 154 - assessee has furnished the reply and the reply specifically stated that the retention money has already been offered to tax in the subsequent period. Hence, charging to tax will not be in compliance of the Accounting Standards and the provisions of the Act and the same income cannot be taxed twice. Concept as to why the retention money is retained by the assessee was explained by stating that the retention money accrues only after the defect liability period is over, which is generally one year after the execution of works contract and until the project is not completed, there is no right to receive the money. When there is no right to receive the money, the income does not accrue or arise to the assessee. Further, if this income has not been offered at the time of execution of the contract it is not possible, since the quantum of how much amount would be known only after the defect liability period. As pointed out that the assessee has been consistently following the same method of accounting for the last twenty five (25) years and there is no change in the method of accounting is warranted on a continuing job. Thus, it is clear that the Assessing Officer seeks to review the decision taken by its predecessor in office under the guise of exercise of power under Section 147/148, which is impermissible under law. On facts we have satisfied that there is no allegation against the assessee on any failure on his part to disclose full particulars at the time of original assessment, nor there is any fresh tangible material brought out by the assessee on record justifying his exercise of power under Section 147 of the Act. Therefore, we hold that the reopening proceedings is bad in law. - Decided in favour of assessee.

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• 2021 (10) TMI 237
  Rectification of mistake u/s 154 - Estimation of income tax 12.5% of the gross receipts and to grant depreciation - HELD THAT:- The legal position enunciated in Ramachandra Reddy [ 2014 (9) TMI 205 - ANDHRA PRADESH HIGH COURT] is that an assessee is not automatically disentitled to depreciation where the profit is determined on percentage basis. Hence, the issue of deduction on the score of depreciation from gross income which is computed on the basis of estimation is a debatable one and cannot be a palpable error on the face of the record. We are of the opinion deduction of depreciation from gross receipts of income estimated at the rate of 12.5% on main contractual receipts is a debatable question of law and fact. Since the issue is not a palpable mistake on record but involves interpretation of the ratio laid down in KNR Constructions [ 2012 (10) TMI 1046 - ITAT HYDERABAD] in the light of the law declared in Y.Ramachandra Reddy (supra), we are of the opinion that the invocation of jurisdiction under Section 154 of the Act was not justified. Hence, no case to admit the appeal on the proposed questions of law.

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• 2021 (10) TMI 236
  Revised computation v/s revised return of income- Rectified computation of income submitted during the course of assessment proceedings - Allowance of claim for deduction expenditure made through such revised computation and not through a revised return of income - claim of loss made by the assessee, as against the original loss claimed in the original return could have been entertained by the AO - HELD THAT:- Tribunal held that the assessee is only claiming expenditure, which was left out at the time of filing of original income tax return and in any event, the AO has power to make upward or downward adjustments in the income returned filed by the assessee and when the assessee had not claimed certain expenditures clearly evident from the records and it comes to the knowledge of the Assessing Officer at the time of assessment proceedings, the AO should grant relief to the assessee. Tribunal took note of the Circular issued by CBDT dated 11.04.1955, wherein the Board ordered that the officers of the Income Tax should not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist the taxpayers in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard, the officer should take the initiative in guiding a taxpayer, where proceedings or other particulars before them indicate that some refund or relief is due to him. Circular states that department should freely advise the assessee, when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. Tribunal was convinced that the claim made by the assessee towards expenditure was not a fresh claim. Therefore, the Tribunal had exercised its powers conferred under Section 254 of the Act, which cannot be found fault with. Order passed by the Tribunal dated 18.11.2013 that the assessee s appeal has been allowed and but no consequential direction was issued to the Assessing Officer, which was required to be done. This is because the Assessing Officer non suited the assessee on a technical ground that such a claim for expenditure cannot be entertained, without filing a revised return. Tribunal having held that the claim is not a fresh claim and the computation given by the assessee can be considered, necessarily the matter has to go back to the Assessing Officer to consider the claim on merits. Since the Tribunal has not issued consequential direction, we are inclined to do so. Tax Case Appeal is dismissed and the substantial questions of law are answered as against the Revenue and the matter is remanded to the Assessing Officer to consider the assessee s claim of expenditure on merits

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• 2021 (10) TMI 235
  Faceless Assessment - procedure for making assessment - As argued no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order - HELD THAT:- Sub-section (a) of Section 144B makes it amply clear that the Section 144B is a mandatory provision and non-compliance thereof would make the assessment order non-est. The notice issued on 9th April, 2021 under Section 142 sub-section (1) of the Act called upon Petitioner to submit by 6.54 p.m. on 13th April 2021 the accounts and documents specified in the annexure to the said notice. Petitioner had issued its response on 13th April, 2021 and in view of the short time given for filing of the response as well as prevailing Covid-19 situation, Petitioner had been able to provide only partial details and requested for further time. Petitioner thereafter filed additional submissions dated 17th April, 2021 giving details and explanation in relation to the points raised in the notice dated 9th April, 2021. Respondent No.2, however, in haste, passed the impugned assessment order dated 18th April, 2021, u/s 143 (3) read with Section 144B of the Act without granting Petitioner the opportunities as provided in Section 144B viz., issuance of show cause notice mandated under the said section for faceless assessment as well as serving the draft assessment order. Although, the relevant paragraph 24 of the Petition has adverted to the fact that Section 144B of the Act had not been complied with by Respondent No.2 not issuing any show cause notice to Petitioner inspite of the impugned assessment order containing additions / disallowances, the said Affidavit in Reply of the Respondents is silent in that respect. It only mentions that Petitioner had been given ample opportunities to respond to the notices issued and that Petitioner was unable to address four out of seven issues properly. The impugned assessment order that there are variations from the return filed by Petitioner by containing additions / disallowances. The final assessment order is not made in accordance with the procedure laid down u/s 144B (xvi)(b) of the Act as inspite of the variation being prejudicial to the interest of assessee, no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order calling upon him to show cause as to why the proposed variation should not be made. The impugned assessment order dated 18th April, 2021 is non est as the assessment is not made in accordance with procedure laid down under Section 144B.

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• 2021 (10) TMI 234
  Recovery of tax dues of the Company from the directors - Applicability of section 179 to public limited company - liability of Directors qua Public Limited Company as in the case of private limited company - HELD THAT:- This Court is informed without any disputation or disagreement that there is no other provision under IT Act akin to Section 179 of IT Act i.e., recovery tax arrears due to Company in the hands of Directors qua Public Limited Company. In the light of the language in which Section 179 of IT Act is couched, it follows as a indisputable sequitur that impugned proceedings are barred and they are liable to be set aside as the same has been made against Directors of a Public Limited Company, when Section 179 of IT Act applies only to Private Limited Companies and there is no other provision qua Public Limited Companies akin to Section 179 of IT Act. Section 179(1) of IT Act not being applicable to Public Limited Companies. There is a compromise decree in a suit filed against said Company by third parties and in this compromise decree, Income Tax Department is a party and it has been paid out certain sums of money - As no document has been placed before this Court as part of the case file to demonstrate any payment having been made to the Income Tax Department under the compromise decree and the decree also does not articulate anything directly in this regard. Therefore, second point urged by learned counsel for writ petitioner becomes a non-starter and that by itself draws the curtains on the second point.

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• 2021 (10) TMI 232
  Reopening of assessment u/s 147 - expenditure incurred towards sales commission - HELD THAT:- Assessment proceeding are based on the basis of same information which was available with the AO at the time of original order of assessment and inferences drawn by the AO on the same set of facts cannot be said to be tangible material. It is also noteworthy that mere fact that expenses were huge in the opinion of the AO cannot be a ground for re-opening the assessment and necessity of incurring expenditure cannot be gone into by the AO. No material was gathered in the survey proceeding to suggest that expenditure incurred towards sales commission is not an allowable expenditure and disallowance made in respect of the expenditure for the subsequent Assessment Year 2006-07 cannot be a ground for re-opening the assessment. Tribunal rightly recorded the findings of fact that there is no tangible material on the basis of which assessment for Assessment Year 2005-06 was re-opened and the assessment of the subsequent AY is based on the inferences drawn from certain facts which cannot be construed as tangible material. The reasons mentioned in the notice for re-assessment are based on mere change of opinion and therefore, the re-opening of the assessment proceeding is not permissible in the facts and circumstances of the case. The aforesaid finding cannot be said to be perverse - Decided in favour of assessee.

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• 2021 (10) TMI 230
  Reopening of assessment u/s 147 - Disallowance u/s 14A r.w.r. 8D - petition filed by the respondent-assessee under rule 27 of the Income Tax Appellate Tribunal Rules, 1963, wherein the respondent-assessee has raised a grievance against reopening of the assessment - CIT-A deleted by holding that the AO cannot go beyond the provisions of Section 44 and Schedule 1 of the Act - Assessee is a public sector undertaking engaged mainly in the business of providing life insurance - HELD THAT:- In a situation in which the respondent to an appeal has not filed a cross-appeal or a cross-objection, but has simply moved the petition under rule 27, one of the limitations of invoking rule 27 is that the appellant cannot be worse off vis- -vis the position he was in when he presented the present appeal. In the present case, if entire reassessment proceedings are to be quashed- as is sought by way of a petition under rule 27, the Assessing Officer will be in a worse position vis- -vis the position if he was not to come in appeal, in the sense that even admitted liability in respect of the incorrect foreign tax credits of Rs. 7.57 crores will stand nullified. What the respondent-assessee can at best seek is the position as on at the outcome of the first appellate order, and that is what he gets anyway when the appeal of the Assessing Officer is dismissed. The relief being sought by this petition rule 27 is thus much more than what is permissible in law. Be that as it may, the appeal of the Assessing Officer having been dismissed on merits, and, thus, the net position as at the time of the outcome of the first appeal having been allowed to be sustained, the present petition under rule 27 becomes wholly academic and infructuous, and it does not therefore call for any adjudication on merits. We, therefore, dismiss the petition as infructuous.

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• 2021 (10) TMI 228
  Penalty u/s 271(1)(c) - defective notice u/s 274 - non specification of charge - addition by invoking the provision u/s 43CA - Assessee argued as absence of any specific mention in the show-cause notice issued under section 274 of the Act for the year under consideration by the authorities below as to whether the assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income - HELD THAT:- Notice issued under section 271(1)(c) without specifying which of the two contraventions, the assessee is guilty of was defective and the penalty imposed in pursuance of such defective notice was not sustainable - See BIJOY KUMAR AGARWAL [ 2019 (6) TMI 721 - CALCUTTA HIGH COURT] and AMRIT FOODS VERSUS COMMISSIONER OF CENTRAL EXCISE, UP. [ 2005 (10) TMI 96 - SUPREME COURT] - Decided in favour of assessee.

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• 2021 (10) TMI 227
  Unexplained cash credit u/s. 68 - Onus to prove - amount received during the year as share capital and premium - HELD THAT:- Onus had shifted on Ld. AO to dislodge the assessee s documentary evidences and bring on record cogent material to establish that the assessee generated unaccounted money and routed the same through banking channels in the garb of share-application money. Unless such an investigation is shown to have been carried out, the additions would not be sustainable in law since it is trite law that no addition could be made on the basis of mere suspicion, conjectures and surmises. Nothing adverse could be borne out of the fact that most of the share-applicants had bank accounts in common bank / branch and the directors of corporate entities were running various other concerns. It could be seen that few of the investors belonged to common family and therefore, it would not be uncommon to operate the bank from same Bank and Branch. As per the provisions of Section 68 where any sum is found credited in the assessee s books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by Finance Act, 2012 w.e.f. 01/04/2013 to provide that where the assessee is a company and the sum so credited consists of share application money, share capital, share premium etc., the explanation furnished by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory. By observing that the assessee in the present case, has been able to discharge the initial burden to establish the identity, creditworthiness and genuineness as regards the transactions concerning the allotment of shares. We find that in the case before us, the initial burden has similarly been discharged by the assessee - on the facts and circumstances, we hold that the impugned additions as made u/s 68 and consequential addition of estimated commission u/s 69C is not sustainable in law. - Decided in favour of assessee.

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• 2021 (10) TMI 224
  Exemption u/s 11 - charitable activity u/s 2(15) - applicability of newly inserted proviso to section 2(15) - withdrawing the registration under section 12A of the Act on the ground that the assessee is not covered under the term charitable purpose as defined in section 2(15) - HELD THAT:- MOA provides that the income and property of the Association whensoever derived shall be applied solely towards the promotion of the objects of the Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise howsoever by way of profit to the persons who at any time are or have been members of the Association or to any person claiming through any of them - members of the assessee chamber do not stand to gain personally since no portion of the income or property is paid or transferred directly or indirectly by way of dividend or bonus or otherwise. Further, even on winding up, the members cannot claim any share in the surplus assets. These facts highlight the fundamental fact that the assessee by and large strives to promote and protect the trade, commerce and manufacturers of India without seeking to make profits for its members. Tribunal after considering the proviso to section 2(15) of the Act and the CBDT Circular No. 11/2008 dated 19.12.2008 (which was issued pursuant to the proviso being inserted in the Act) held that the definition of the term charitable purpose remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01.04.2009, though the restrictive first proviso was inserted therein. Hence, the assessee was not hit by newly inserted proviso to section 2(15) of the Act. The issue in present appeal is also covered in favour of assessee in the case of Indian Chamber of commerce [ 2014 (12) TMI 256 - ITAT KOLKATA] because of its income streams noted above. We also noted that the amounts received are not in nature of trade (since there is no exchange of goods either for goods in return or money) or commerce (since it is not engaged in purchase and sale of goods) or business (since we are a non-profit making body formed with the promotion of protecting the trade, commerce and manufacture of India and in particular the Bombay Presidency). In view thereof, we hold that the activities carried out by the assessee chamber continue to be charitable in nature even under the amended definition under section 2(15) of the Act and assessee is entitled for exemption under section 11 - Decided in favour of assessee.

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• 2021 (10) TMI 223
  Late deposit of provident fund and late deposit of ESI - Scope of amendment - due date for filing original return - HELD THAT:- As the return was filed on 26.10.2018 and for the year under consideration the extended due date for filing original return was 31.10.2018. This means that the PF and the ESI were not only deposited within the financial year itself but also before filing of the return As amended provisions of Section 43B as well as 36(1)(va) are not applicable for the assessment year under consideration. By following the binding decision of GUJARAT STATE ROAD TRANSPORT CORPORATION [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] , the employees contribution paid by the assessee before the due date of filing of return of income u/s.139(1) is an allowable deduction. Accordingly, we decide this issue in favour of the assessee.

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• 2021 (10) TMI 222
  Disallowance of interest expenditure - Re-shuffling of loan portfolio - Assessee taken loans from Yes Bank Ltd. in earlier years and the same was repaid by borrowing money from a related concern - CIT-A deleted the addition - HELD THAT:- The present loan taken from Standard Chartered Investment Loans India Ltd. has been used to repay the loan taken from Coffee Day Hotels Resorts Pvt. Ltd. These facts show that the assessee was only reshuffling its loan portfolio by changing the lenders, i.e., it is not a case, where the assessee has diverted interest bearing funds to its related concerns, as presumed by the A.O. If that be so, then the amount diverted to related concern should have found place in the assets side of the Balance Sheet. We notice that the Ld. CIT(A) has given a clear finding that the asset side of the balance sheet contains only business assets. - Decided against revenue.

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• 2021 (10) TMI 221
  Withdrawal of appeal - summary dismissal of its appeals inasmuch as these are claimed to have not been withdrawn, i.e., contrary to what stands stated in the impugned orders, and which forms the basis of the said summary dismissal - HELD THAT:- An actual withdrawal, where so, only implies that the assessee has misled this Tribunal. The affidavit dated 19/7/2021 furnished by the assessee during the course of hearing is non-committal and in vague terms. Also, the letter dated 20/6/2012 supra, having been furnished with the office of the ld. CIT(A) after the closure of the hearing and, in fact, the passing of the impugned orders on 26/6/2012, though included therein, cannot, strictly speaking, form part of the paper-book by the assessee. Sure, the Revenue ought to have presented its case before the Tribunal properly, but not doing so would not mean an abrogation of its rights or that a misrepresentation by the assessee would be allowed to prevail. Clearly, though, the withdrawal of an appeal on the basis that its Grounds be considered as part of the other appeal, not withdrawn, is no withdrawal at all. Ad hoc disallowance of the expenditure on Conveyance, Travelling, Boarding Lodging, Site Expenses, and Telephone - HELD THAT:- Disallowance of the said expenses is purely arbitrary and not preceded by or based on any finding by the AO in their respect. This is found correct, with the ld. Sr. DR failing to rebut the same. There is as such no factual basis for the said disallowances, i.e., other than of the conveyance expenditure, and are therefore directed to be deleted. As regards the disallowance of conveyance expenditure, the AO is clear and definite in his finding in the matter, based on an examination of the material before him, and which has not been rebutted in any manner, i.e., including as to its quantum and, at any stage, including before me. The same is accordingly upheld. The powers of the assessing authority in the matter of assessment are plenary and, two, estimation is integral to assessment. The same is accordingly upheld, and the assessee gets part relief. Initiation of the reassessment proceedings - Disallowance of commission expenditure - HELD THAT:- When Ms. Divya Shah, the stated proprietor of KTC, to whom commission, against services rendered, has been admittedly allowed by the assessee, states that she is not doing any business, it raises serious doubts as to the genuineness of the commission expenditure claimed by the assessee in respect of the said firm inasmuch as the proprietor denies being in business, so that there could be no provision of any services to the assessee, or to any other for that matter. However, when she later denies being the proprietor of KTC through a written reply furnished in the reassessment proceedings, her statement, which led to the reason to believe escapement of income in respect of the expenditure allowed by the assessee to her firm, is lost. Of what value, one may ask, is her statement when she, as it transpires subsequently, is not the proprietor of KTC? Her denying doing any business herself becomes consequential to her stating to be not the proprietor of KTC, also clarifying thus to be not engaged in any other business. The rationale and live nexus between her said statement, i.e., the tangible material and information with the AO, and the reason to believe under-assessment, obtains no longer. That is, there is no reason to believe so. Levy of penalty u/s. 271(1)(c) qua the disallowance of commission expenditure allowed by the assessee to KTC, is rendered consequential in view of the unmaintainability in law of the said disallowance and, in fact, of the assessment. The same is accordingly allowed

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• 2021 (10) TMI 220
  Violation of principles of natural justice - CIT-A passed ex parte order - Assessee s contention that no proper opportunity was given by the AO to explain the assessee s stand and he has used the material at the back of the assessee - HELD THAT:- The contents of the affidavit have not been controverted by the Revenue. Before us, Learned AR also given an undertaking that there will be representation before the authorities by the assessee and all the necessary documents called for shall also be filed - we are of the view that one more opportunity be granted to the assessee to substantiate its case. We therefore restore the issue back to the file of the AO and direct him to decide the issue afresh in accordance with law after considering the submissions of the assessee. Thus the ground of the assessee is allowed.

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• 2021 (10) TMI 219
  Assessment of trust - disallowance of depreciation treating the same as double deduction claimed by the Appellant - whether in case of the charitable trust that is assessee before us disallowance of depreciation is to be claimed as double deduction or not - HELD THAT:- Since all deduction and exemptions Trust is extending its services towards the betterment of the society by way of religious and other activities. Thus respectfully following the judgment of RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA [ 2017 (12) TMI 1067 - SUPREME COURT] and GUJARAT MARITIME BOARD [ 2020 (8) TMI 600 - GUJARAT HIGH COURT] AND GUJARAT CRICKET ASSOCIATION [ 2019 (1) TMI 1522 - ITAT AHMEDABAD we allow the appeal of the assessee.

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• 2021 (10) TMI 218
  Addition u/s 68 - addition towards sundry creditors as unexplained credit - non-furnishing of confirmation letter from the parties - HELD THAT:- Merely for non-furnishing of confirmation letter from the parties, genuine liability arised in normal trading activity cannot be considered as unexplained credit. But, fact remains that the assessee has put up new facts which are not available to the AO at the time of assessment proceedings, which is evident from the finding given by the ld. AO that he went on to make additions only for non-submission of confirmation letters.To ascertain the facts with regard to nature of liability and genuineness of such transactions, the matter needs to be re-examined by the AO. Addition towards liability in the name of M/s. Sridhar Co., it was the explanation of the assessee that there was a credit and debit balance in the same party account, if both balances are netted off, then there is no difference as claimed by the AO. The assessee has filed ledger accounts of debit and credit balances. The fact needs to be verified. Hence, we set aside the issue of addition towards sundry creditors as unexplained credit and direct the AO to verify evidences filed by the assessee and decide the issue in accordance with law. Addition towards inoperative account, although the AO has made addition assessee has recovered part of liability in the subsequent financial year relevant to assessment year 2016-17 and balance amount has been written off as irrecoverable and offered to tax. The assessee has filed necessary evidences to prove that part of liability has been recovered and remaining amount was written off and credited to profit loss account. But, fact remains that these facts were not examined by the AO and hence, this issue needs to be verified by the AO in light of evidences filed by the assessee - we set aside the issue to the file of the AO and direct him to reconsider the issue in light of various evidences filed by the assessee and decide the issue in accordance with law - Appeal filed by the assessee is treated as allowed for statistical purpose.

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• 2021 (10) TMI 217
  Computation of book profit u/s. 115JB of the Act by excluding prior period item - difference in net profit/loss taken by the assessee and the AO on account of provision for gratuity relating to earlier years as prior period item - HELD THAT:- For all practical purposes, the net profit as per books of account for the relevant period is net profit computed without making any adjustment by deducting prior period items or other appropriations made in the current financial year. If you go by this analogy then, provision for gratuity relating to earlier years claimed by the assessee under the head prior period items comes below the line in profit loss account. If you consider provision for gratuity relating to earlier years as item comes below the line of profit loss account, then for the purpose of computation of book profit, net profit as per books of accounts should be considered before allowing deduction for provision for gratuity relating to earlier years. There is no error in reasons given by the AO to compute book profit u/s. 115JB of the Act by taking net profit as per profit loss account before considering deduction claimed for prior period item being provision for gratuity relating to earlier years.

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• 2021 (10) TMI 216
  Bogus purchases - CIT(A) sustained the addition@5% of impugned purchases - In alternative conclusion No.2, the ld CIT(A) has worked out the addition to the tune of Rs. 14,99,663/- - why not the alternative addition worked out by ld CIT(A) should not be sustained, in the hands of the assessee? - HELD THAT:- It is settled legal position that where two views are available on an issue, the view favourable to the Assessee has to be followed. We note that Article 265 of the Constitution of India which says that no tax shall be levied or collected except by authority of law . The Constitution has conferred upon the right to collect the due taxes from the assessee to the Revenue Department. As per the aforesaid Article, it is the duty of the assessee to pay the tax what is rightfully due to the Government and it is the responsibility of the tax officials to collect the revenue what is rightfully due to the Government by following the due process of law. Since, the ld CIT(A) (Department) has worked out the alternative addition on which the assessee supposed to pay the taxes. In the instant case, the Ld. CIT(A) has himself worked out the alternative addition, which can be sustained in the hands of the assessee, therefore, we are of the view that said alternative addition, (which is a lesser addition), should be sustained in the hands of the assessee. We note that Hon ble Supreme Court in the case of Vegetable products Ltd. [ 1973 (1) TMI 1 - SUPREME COURT] held that if two reasonable constructions of a taxing provision are possible the construction which favours the assessee must be adopted. Therefore, we are of the view that Department may recover the taxes from the assessee on the addition which is less amount out of two alternatives, as worked out by ld CIT(A), by following the due process of law. In this scenario, we have no hesitation to prefer to follow the conclusion No. 2 reached by the ld CIT(A) and accordingly, we sustain the addition as made by CIT - Decided partly in favour of assessee.

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• 2021 (10) TMI 215
  Addition u/s 68 - Unexplained unsecured loan - failure to reply to summons - whether assessee company has satisfied the three ingredients of section 68 namely:(i) Identity; (ii) Genuineness; and (iii) Creditworthiness, in respect of Lenders/Creditors? - main plank on which the assessing officer made the addition was because the Lenders did not turn up before him - HELD THAT:- Merely because the summons could not be served on these lenders for want of complete addresses or that they failed to comply with the summons, the loans taken by the assessee from them cannot be treated as non-genuine mere particularly when from sufficient documentary evidences furnished by the assessee. Merely because the summons could not be served on these lenders for want of complete addresses or that they failed to comply with the summons, the loans taken by the assessee from them cannot be treated as non-genuine mere particularly when from sufficient documentary evidences furnished by the assessee. AO has not brought on record any finding or report of investigation agency to establish his allegation that impugned lenders were paper companies or found indulged in racket of providing accommodation entries . In absence of such material, we cannot take judicial notice about unfounded allegation in respect of these Lender Companies. Hence, reasons mentioned by the assessing officer in his assessment order, is not sufficient for making the addition under section 68. both the nature and source of the lenders were fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the Lenders. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments, subsequent repayment through banking channel, were placed on assessing officer s record. Accordingly all the three conditions as required u/s 68 of the Act i.e. the identity, creditworthiness and genuineness of the transactions were placed before the assessing officer and the onus shifted to assessing officer to disprove the materials placed before him. Without doing so, the addition made by the assessing officer is based on conjectures and surmises, hence cannot be justified. - Decided in favour of assessee.

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• 2021 (10) TMI 214
  Penalty levied u/s 271(1))(c) - Characterization of receipts - correct head of income - assessee had sought to evade taxes by offering the rental receipts in its original return of income under a wrong head of income i.e house property as against business income - HELD THAT:- As assessee had validly filed a revised return of income, therefore, there was no justification on the part of the A.O to have brushed aside the same and saddled the assessee with the rigors of penalty u/s 271(1)(c) of the Act. Be that as it may, in our considered view a mere dislodging of the assessee s claim and re-characterization of the head of income under which the rental receipts were to be brought to tax can by no means justify levy of penalty u/s 271(1)(c) - it is a matter of fact to which we cannot be oblivion i.e the assessee had duly disclosed the rental receipts in question in its original return of income. It is not even the case of the revenue that there is any suppression of the rental receipts by the assessee in its original return of income. Apropos, the claim of the revenue that the assessee had sought to suppress its true income by offering the rental receipts under the head house property as against business income , we are of a strong conviction that the said unsubstantiated allegation cannot justify levy of penalty u/s 271(1)(c) . Merely for the reason that a claim raised by an assessee, which is thereafter found by the revenue to be not sustainable in law, by itself cannot justify levy of penalty u/s 271(1)(c) of the Act. Our aforesaid view is supported by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] . - Decided in favour of assessee.

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• 2021 (10) TMI 213
  Denial of natural justice - addition of bogus purchases in ex-parte appeal - HELD THAT:- CIT(A) passed ex-parte order without recording his satisfaction, whether the notice sent to the assessee was duly served on not. Thus, in our view the assessee was not offered sufficient and reasonable opportunity of hearing at the stage of first appellate stage. Therefore, we restore the appeal back to the file of ld CIT(A) to decide all the issues afresh on merit and in accordance with law. Needless to order that before passing the order the ld. CIT(A) shall grant fair opportunity of hearing to the assessee. The assessee is also directed to appear before the ld.CIT(A) as and when the date of hearing and to provide all necessary evidence and information without any further delay and not to seek the adjournment without any valid reasons. The assessee is further directed to provide his e-mail address and telephone number to make communication with him or his representative - Appeal of the assessee is allowed for statistical purpose.

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• 2021 (10) TMI 212
  Addition u/s 68 - bogus agricultural claim - disallowance of 20% of the agriculture income - HELD THAT:- When the disallowance of 20% of the agriculture income that was sustained by the CIT(A) while disposing off the appeals of the assessee for A.Y 2011-12 and A.Y 2012-13 had been vacated by the Tribunal [ 2021 (3) TMI 1264 - ITAT MUMBAI] , therefore, there would be no justification much the less any basis to uphold the disallowance of 20% of the assessee s claim of agriculture income for the year under consideration i.e A.Y. 2015-16. We, thus, in terms of our aforesaid deliberations vacate the disallowance of 20% of the assessee s claim of agriculture income as was sustained by the CIT(A). - Decided in favour of assessee.

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• 2021 (10) TMI 211
  Sundry Credits from Undisclosed sources - details of sundry creditors have not been filed by the assessee as there is an increase in the sundry creditors during the year under assessment - HELD THAT:- When the entire detail was brought on record by the assessee during the first appellate proceedings, though assessee was negligent in appearing before the AO, adequate opportunity of being heard is required to be given to the assessee to decide the issue once for all. Since entire evidence brought on record by the assessee requires initial scrutiny, it would be in the interest of justice to remit this case to the AO. Consequently, this issue is remitted back to the AO to decide afresh after providing adequate opportunity of being heard to the assessee. So, ground is determined in favour of the assessee for statistical purposes. Interest income of the assessee - addition after noticing from 26AS details of Individual Transaction statement of the assessee company which shows that assessee received interest - assessee contended that he has brought on record the entire details viz. P L account with Form 3CD, audited balance sheet, bank statements, which is evident form assessment order, as well as before the ld. CIT(A), but no cognizance has been taken of the documents - HELD THAT:- Since all these documents are required to be examined by the AO, this issue is also remitted back to the AO to decide afresh after providing adequate opportunity of being heard to the assessee. So, Ground determined in favour of the assessee for statistical purposes.

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• 2021 (10) TMI 210
  TDS u/s 195 - addition u/s 40(a)(i) - non-deduction of tax at source on payment made to non-resident 40(a)(i) of the Act for non-deduction of tax at source on payment made to non-resident - India - Mauritius DTAA - HELD THAT:- India-Mauritius DTAA does not cover FTS. Once FTS is not covered under DTAA, then by virtue of residual clause 22 of DTAA between India and Mauritius, said sum can be considered under Article 7 as business profits. Further, as per Article 22, where any item of income of a resident of a contracting state, wherever arising, which are not expressly dealt with in the foregoing Articles of this Convention, shall be taxable only in that Contracting State. If you go by Article 22, then if anything not expressly provided in this convention, then same cannot be taxed in India, even if said sum comes under the definition of FTS as per Indian Tax laws. Insofar as, taxation of impugned pay As definition of FTS was amended by the Finance Act, 2010 with retrospective effect from 01.06.1976 but, the law prevailing at the time of making payment by the assessee to the non-resident was on the basis of judgment of Hon ble Supreme Court Ishikawajma-Harima Heavy Industries Ltd [ 2007 (1) TMI 91 - SUPREME COURT] which clearly held that payment made to a non-resident for services rendered outside India cannot be brought to tax in India as fees for technical services in absence of place of business/permanent establishment in India. Since, there was clear law by the decision of Hon ble Supreme Court, the assessee has made payment without deducting tax at source. Therefore, liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because it was impossible on the part of assessee to deduct tax on income of non-resident because the assessee cannot foresee the amendment and deduct TDS on said payments. AO as well as the ld. CIT(A) were erred in disallowing payment made to a non-resident u/s. 40(a)(i) of the Act for failure to deduct TDS u/s. 195 - Decided in favour of assessee.

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• 2021 (10) TMI 208
  Intimation u/s 143(1) - Delayed employees contribution towards P.F and ESI - HELD THAT:- There is no dispute that the return was processed u/s 143(1) and there was no scrutiny assessment made u/s 143(3) of the act. It is settled issue that no debatable issues are permitted to be made adjustments u/s 143(1) of the Act. In the instant case, what was added in the intimation u/s 143(1) was the employees contribution to PF and ESI. As in the case of Redington (India) Ltd.[ 2020 (12) TMI 516 - MADRAS HIGH COURT] held that employees contribution to PF and ESI is also allowable deduction if the same is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation [ 2021 (5) TMI 263 - ITAT VISAKHAPATNAM] held that debatable issues are not permitted to be made adjustments while processing the return of income u/s 143(1) - Thus we hold that the addition made by the CPC u/s 143(1) is unsustainable, accordingly deleted. The appeal of the assessee is allowed Addition u/s 43B - This Tribunal has consistently viewed that the employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income. See M/S ESSAE TERAOKA PVT LTD VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2021 (10) TMI 206
  Disallowance u/s 40(a)(ia) - treating the cost of purchase of milk and quality maintenance charges paid to the members society as the rent income u/s 194-I - assessee raised alternative plea that payee has included the impugned receive in their income and has furnished certificate of chartered accountant that impugned receipt is included in the total receipt of the Dudh Utpadak Sahakari Mandli and they have paid tax on it. - HELD THAT:- AO has not clarified in assessment order whether the information shared to him by ITO Ward-2 Bardoli or was a result or was a result of his investigation. We note that the contention of assessee throughout the proceedings that amount of Rs. 7,48,492/- is paid on account of cost of raw material and there is no contract or agreement between the assessee and the Dudh Utpadak Sahakari Mandli. Alternative plea of the assessee was rejected by Ld. CIT(A) at threshold limit without examining the fact. The Ld. CIT(A) noted that assessee has not made any claim before the Assessing Officer by filing relevant documents. It is settled law that no fresh relief can be raised before the Assessing Officer except by filing revised return of income as has been held in Goetze India Limited [ 2006 (3) TMI 75 - SUPREME COURT] . However, these restrictions are not applicable on appellate authority as held in case of CIT Vs Pruthvi Broker Shareholder Limited [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] - scope of application under section 154 is limited for rectification of mistake in the order which is apparent. In our view the Ld. CIT(A) was not justified in rejecting the alternative claim of the assessee. Considering the fact that appellate authority are entitled to examine and admit the additional ground of appeal. Therefore the additional / alternative plea made by assessee is admitted by way of additional ground. On merit of the additional / alternative claim, we find that assessee has field certificate of chartered accountant certifying that the recipient of the impugned receipt has included the said receipt in their gross income and had paid tax thereon. Therefore, prima facie we are of the opinion that no disallowance in such circumstances is warranted against the assessee, however, we direct the Assessing Officer to verify the fact that if the recipient has included the impugned receive in their gross total income and paid tax then no disallowance be made against the assessee. - Decided against revenue.

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• 2021 (10) TMI 205
  Additional income addition - cash component receipts - settlement deed wherein he had agreed to receive cash amount - addition based on a mere statement recorded u/s.131 - HELD THAT:- All the arguments duly stand submitted in the records since the learned lower authorities had duly brought the other co-director Sri Sreenivasulu for their mutual cross-examination. It is evident therefrom that this taxpayers had surrendered cheques in lieu of cash payment. And also that the corresponding cash receipt(s) and the twin settlement acknowledgment(s) dt.14th March and 11th April, 2008 (pages 32 33) duly contained his signatures. Coupled with this, the assessee had duly admitted during cross-examination that had had indeed issued the said receipts as well as corresponding acknowledgment; as the case may be. We conclude in these facts and circumstances that the impugned addition of Rs. 75 lakhs made in assessee s hands is liable to be affirmed. Ordered accordingly.

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• Customs

• 2021 (10) TMI 254
  Violation of principles of natural justice - Faceless assessment - reassessment of bill of entry - personal hearing in case of reassessment, provided or not - levy of Anti Dumping Duty - import of gear boxes for what is known as Wind Operated Electricity Generator - whether circular No.9/2020 dated 05.06.2020 is subsumed by circular No.55/2020 dated 17.12.2020? - HELD THAT:- This will fall under the case of THE ASSISTANT COMMISSIONER OF STATE TAX AND OTHERS VERSUS M/S COMMERCIAL STEEL LIMITED [ 2021 (9) TMI 480 - SUPREME COURT] , as it would be violation of principles of natural justice which is ingrained in reassessment proceedings vide the aforementioned circulars. In any event no elucidation is requied to say that alternate remedy rule is not an absolute rule, it is discretionay and it is a self-imposed rule qua writ jurisdiction. It is repeatedly held that alternate remey rule has to be applied with utmost rigour in fiscal law Statutes by following ASSISTANT COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR VERSUS DUNLOP INDIA LIMITED AND OTHER [ 1984 (11) TMI 63 - SUPREME COURT] case. It is necessary to record that the learned counsel for writ petitioner submitted that provisional assessment and re-export may please be permitted and writ petitioner is willing to provide 100% security by way of bank guarantee. It is open to writ petitioner to make this plea before third respondent, if the writ petitioner chooses to do so and the third respondent shall consider the same on its own merits and in accordance with law - Impugned speaking orders are set aside solely on the ground that personal hearing has not been granted to the importers/writ petitioners though importers/writ petitioners have sought for one qua re-assesment. Petition disposed off.

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• 2021 (10) TMI 252
  Seeking grant of anticipatory bail - summons issued under Section 108 of the Customs Act - applicant appeared on issuance of such summons or not - Section 438 of the Criminal Procedure Code, 1973 - HELD THAT:- It is pertinent to note that the co-accused i.e. Ravindra Chandrakantbhai Patel, who was issued summons under Section- 108 of the Customs Act, has approached this Court seeking anticipatory bail. The Coordinate Bench vide judgment in RAVINDRA CHANDRAKANTBHAI PATEL VERSUS STATE OF GUJARAT [ 2020 (9) TMI 1208 - GUJARAT HIGH COURT] has rejected the application as prematured, in light of the observations made by the Apex Court. Thus, as per the law promulgated by the Apex Court the Summons under Section 108 of the Custom Act is only issued for recording the evidence and the High Court cannot direct the respondent authorities not to arrest such accused, as the anticipatory application would be premature at this stage. Even the direction issued by the High Court not to arrest such accused for limited period would be illegal and against the law. Application rejected.

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• 2021 (10) TMI 251
  Classification of imported goods - Zircon Sand Bulk (Zirconium Ore) - to be treated as concentrate to deny exemption of CVD as per Sl. No. 56 of N/N. 12/2012-C.Ex. dated 17.03.2012 or otherwise? - HELD THAT:- In the Circular F.No. 332/1/2012-TRU dated 17.02.2012, clarification has been issued that processes in the nature of crushing, screening, sizing or washing will not result in concentrate, which is leviable to Central Excise Duty. That the term concentrate applies to ores which have had part or all of the foreign matter removed by special treatment. It can be seen that for previous import, the Department had sent samples for analysis and expert opinion to ascertain whether the imported goods are Zirconium ore or Zirconium concentrate. The percentage of Zirconium Oxide contained in the goods would help to ascertain the nature of the goods. However, in the present case, the Department has failed to draw samples and send for analysis - When the Department has sent the samples for test for the previous imports, we do not understand why they have failed to take such steps in respect of the present consignments. In the absence of such opinion by an expert, it is not possible to ascertain the nature of the goods as to whether they are ores or concentrates. Even in the Tariff, ores and concentrates fall under the same Chapter Heading. Similarly, the Customs Notification No. 12/2012-Cus. dated 17.03.2012 grants exemption from Basic Customs Duty of all goods under Chapter 26 (2601 to 2607) i.e., to both ores and concentrates, in terms of Sl. No. 117. The Department cannot decide that the nature of the goods to be concentrate merely by stating that certain processes were undertaken by the appellant. As per the HSN Explanatory notes to Chapter 26, the term concentrate applies to ores which have had part or all of the foreign matter removed by special treatment. In the present case, there is no evidence to show that the subject goods have undergone any special treatment. Mere washing, cleaning and drying cannot be considered as special treatment - There is no expert evidence adduced by the Department to rebut these chemical analysis reports furnished by the appellant. Only on the fact that the goods have undergone processes of cleaning, washing and drying, it cannot be concluded that the imported goods are Zirconium concentrate. The importer-appellant having furnished the chemical analysis report of the overseas supplier, the same cannot be totally disregarded unless there is a report of an expert contrary to this analysis report - On the basis of the analysis report of the overseas supplier as well as the clarification issued by the Board vide Circular F.No. 332/1/2012-TRU dated 17.02.2012 that when ores are only subjected to processes like crushing, sizing, screening and washing, the resultant product cannot be considered as concentrate , we have to hold that the imported goods are ore and not concentrate . The imported goods are Zirconium ore and not concentrates. The demand of Duty (CVD) by denying the benefit of exemption Notification No. 12/2012-C.Ex. dated 17.03.2012, is not legal and proper - Appeal allowed.

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• 2021 (10) TMI 247
  Jurisdiction - power of DRI authority to issue SCN - Section 124 read with Section 28 of the Customs Act, 1962 - HELD THAT:- There appears to be a prima facie case for staying the show cause notice following the judgment in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] . Accordingly, the impugned show-cause notice is stayed till 3rd January, 2022, or until further orders, whichever is earlier. Let affidavit-in-opposition be filed within four weeks after puja Vacation; reply, if any, be filed within two weeks thereafter - Let the matter appear in the list on 20 th December, 2021.

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• Corporate Laws

• 2021 (10) TMI 248
  Maintainability of Company Proceeding - issues raised in the Company Act proceeding is pending consideration of the suit bearing - HELD THAT:- From the provision at Section 241 of the Act, 2013, this Court finds, this provision of the Act, 2013 authorizes any member of the company to complain under the provision of oppression mismanagement. Similarly section 242 of the Act, 2013 gives power to the NCLT to opine that the company affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members and also on other aspect, which are of course not relevant here. Section 242(2) particularly deals with the matter involving regulation of conduct of affairs of the Company in future apart from also several other aspects included therein. This Court not only finds, both the proceedings are aimed with different directions, but keeping here in view the prohibition U/s.430 of the Act, 2013, this Court finds, subject involving the proceeding vide C.P.11/CTB/2021 cannot be undertaken by a Civil Court as the NCLT has the authority and competency to decide such aspect. The issues involving the C.P. proceeding are clearly barred for being undertaken in exercise of a suit before the Civil Court. This Court since finds, same are to be left for consideration of the NCLT dependent on the claim and counter of both the parties involved, touching these aspects at this stage of the matter will be amounting to encroaching upon the jurisdiction of the NCLT. In the circumstance, this Court is not inclined to enter into any other area and leaves all these open to the parties to agitate and get adjudicated by the NCLT concerned - Petition dismissed.

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• 2021 (10) TMI 226
  Seeking restoration of name of the company in the Register of Companies being maintained by the Registrar of Companies - section 252 of Companies Act - Maintainability of petition - HELD THAT:- As per the record, the Petitioners have preferred the present appeal under section 252(1) of the Companies Act as being the Promoter, Ex-Director Shareholder of the Struck off Company. They are eligible to file the present appeal for restoration of the company s name in the register of the ROC. Hence, the present appeal is found maintainable. It is considered just and equitable to revive the name of the company, DIHINGIA MOTORS PRIVATE LIMITED in the statutory register as being maintained by the Registrar of Companies, Guwahati. The Registrar of Companies, North Eastern Region, Guwahati, the Respondent herein, is directed to restore the original status of the petitioner company as if the name of the Company had not been struck off from the register of Companies with the resultant and consequential actions like changing status of petitioner company from struck off to Active - Petitioner company is directed to file all pending statutory documents(s) including Annual Accounts and Annual returns for the Financial YeaRs. 2015-16 to 2019-20 along with prescribed fees/additional fee/fine as decided by Registrar of Companies, Assam. Application allowed.

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• 2021 (10) TMI 207
  Restoration of name of the company in the Register of companies - Section 252(1) (3) of the Companies Act, 2013 - HELD THAT:- The Appellant has submitted sufficient evidence that it has been in operation during the period preceding strike off, therefore, it could not be termed as a defunct company as per Section 252 of the Act. Thus, taking into consideration the provisions of Section 252(1) of the Companies Act, 2013, which vests this Tribunal with a discretion where the Company, whose name has been struck off, and such Company is able to demonstrate that it is just to do so, can restore the name of the Company, in the Register and in the interest of all stakeholders, including the Appellant itself, who seeks restoration of the name of the Company in the register maintained by Registrar of Companies, the company deserve to be restored. The restoration of the Company s name to the Register of Registrar of Companies is ordered subject to its filing of all outstanding documents with proper filing fees along with additional fees required under law and completion of all formalities - appeal allowed.

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• Insolvency & Bankruptcy

• 2021 (10) TMI 241
  Maintainability of application - application was opposed by the petitioner on the ground that petitioner had already assigned the entire loan to J.M.Finance - petitioner contended that resolution professional has no power to decide the issue and therefore, before proceeding further Tribunal should decide on maintainability of the application to initiate insolvency resolution process - HELD THAT:- From an analysis of the provisions contained in sections 95 to 100 of IBC, it is found that a definite time-line has been provided at each stage of the proceeding. That apart, the interim moratorium in terms of section 96 which commences from the date of the application remains in force till the date of admission of such application under section 100. Though time-lines have been prescribed at each stage of the proceeding leading to acceptance or rejection of the application under section 100, it is found that no such time-line has been prescribed for submission of report by the resolution professional though section 100 provides that the adjudicating authority shall take a decision either admitting or rejecting the application within 14 days from the date of submission of the report. That apart on a careful examination of section 100, before the adjudicating authority takes a decision to either admit or reject the application upon receipt of report from the resolution professional, the parties to the insolvency resolution process are required to be heard. Though the legislature itself has provided in section 99(10) that a copy of the report of the resolution professional be furnished to the debtor or to the creditor thus complying with the requirement of the principles of natural justice, it would be in the fitness of things and in furtherance of the principles of natural justice that the parties are also heard before the decision is taken by the adjudicating authority one way or the other under section (1) of section 100. There are no good ground to interfere with the impugned orders save and except that the resolution professional should submit the report within a definite time period. This is because under sub-section (1) of section 96 the interim moratorium automatically commences from the date of the application and continues till the date of admission of such application (or rejection as the case may be). The legislative intent which is discernible is that such interim moratorium should be for a limited duration. Therefore, the resolution professional should expedite preparation and submission of report but at the same time complying with the requirements of section 99 of IBC. The resolution professional shall submit his report within a period of six weeks from the date of receipt of a copy of this order, whereafter the Tribunal shall decide the application within 14 days thereafter in terms of section 100 of IBC after giving due opportunity of hearing to the parties - Petition disposed off.

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• 2021 (10) TMI 225
  Seeking directions for the Respondent to accept the entire claim filed by the Applicant - partial rejection of claim dated as an Operational Creditor by the Resolution Professional - HELD THAT:- As per the Section 53(1) (c) of IBC 2016, the claims/ unpaid dues owed to employees other than workmen are distributed to the extent of wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date , therefore it is clear from Section 53, that the Applicant is not entitled to be paid any amount if any due on account of salary to the Suspended Managing Director prior to the period of twelve months. The R.P. has admitted the claim of Rs. 7,20,000.00 (Rupees Seven Lakhs Twenty Thousand Only), on the ground that it relates before the CIRP commencement date. RP has not committed any illegality or irregularity in not accepting the entire claim of Rs. 63,22,971.00 of the Applicant. The CIRP is in advanced stage. It is made clear that no one should make any attempt to delay the process of CIRP by filing irrelevant IAs. If further IAs are filed without any substance to delay the CIRP, the same may be dismissed with penalty/cost - RP is hereby directed to complete the CIRP in time and find out a Viable Resolution Plan for the MSME CD without further loss of time. Application dismissed.

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• 2021 (10) TMI 209
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - cheque was dishonored and inspite of repeated requests payment was not made - Operational Creditors - existence of debt and dispute or not - case of Corporate Debtor is that the application is a misuse of legal process as settlement had already been arrived between the parties - time limitation - HELD THAT:- The notice was sent to the corporate debtor on the registered address as per the master data which returned on 03.09.2019 with the remark no such person . The notice was also served via email on the mail id used for regular communication between the parties. The copies of proof of delivery and tracking report of the email have been annexed. The corporate debtor did not reply to the said demand notice. Consequently, the applicant filed the present application under section 9 of IBC, 2016 and served the copy of this application via speed post, which was returned with the remark no such person in the address , the applicant also served the corporate debtor via email on the registered email id as per master data, the applicant also served the corporate debtor by hand. The copy of acknowledgment of delivery via email and by hand is annexed along with the service affidavit. As per Form V, the total debt outstanding is Rs. 8,50,000/-. The date of default is 01.07.2019 as per Part IV form V and the present application is filed on 23.10.2019. Hence the application is not time barred and filed within the period of limitation - The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The Applicant has filed an affidavit in compliance of section 9(3)(b) affirming that no notice of dispute has been given by the corporate debtor relating to dispute of the unpaid operational debt. The present application is filed in Performa prescribed under Rule 6 of the Insolvency and Bankruptcy Code, 2016 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 r/w. Section 9 of the code and is complete - application admitted - moratorium declared.

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• PMLA

• 2021 (10) TMI 244
  Validity of Provisional Attachment of Bank Accounts - provisions for automatic or deemed extension of the Provisional Attachment Order under Section 5 (1) of PMLA Act present or not - HELD THAT:- The Adjudicating authority/Respondent No. 2 cannot be called a litigant or advocate or a quasi-judicial authority and cannot take the benefit of the order of the Hon ble Supreme court passed in Suo moto Writ Petition (Civil) No. 3 of 2020 [ 2020 (5) TMI 418 - SC ORDER] by taking the stand that on the expiry of validity of the said provisional attachment order after 180 days under Section 5 (3) of the aforesaid Act, the same would be deemed to have been extended automatically by virtue of the aforesaid order of the Hon ble Supreme Court when he was not required to pass any formal order of extension of the same under Section 8 (3) of the aforesaid Act. The impugned order of provisional attachment of bank accounts and postal accounts in question of the petitioner, which has expired its validity on 9th June, 2021, has no force after expiry of 180 days from the date of passing of such order in view of not passing any formal order under Section 8 (3) of the said Act extending the validity of the same by the Respondent No. 2 and the action of Respondent No. 3 in not allowing the petitioner to operate its bank and postal accounts in question after the expiry of the period validity of 180 days from the date of the order passed under Section 5 (1) of the aforesaid Act, such action of the Respondent Enforcement authority, is arbitrary and illegal. This Writ Petition is allowed by declaring that the impugned order of provisional attachment of Bank accounts and postal accounts in question dated 11th December, 2019 passed under Section 5 (1) of The Prevention of Money Laundering Act, 2002 after expiry of 180 days on 9th June, 2021 is ceased to have any effect or force as a consequence of failure on the part of the Respondent Enforcement authority/Adjudicating authority in passing further order under Section 8 (3) of The Prevention of Money Laundering Act, 2002 extending or confirming order dated 11th December, 2020 under Section 5 (1) of the said Act on or before 9th June, 2021 after expiry of its validity under Section 5 (3) of the said Act by taking the stand of automatic deemed extension/confirmation of the said order by virtue of the order of the Hon ble Supreme Court in Suo moto Writ Petition (Civil) No. 3 of 2020 (supra) by claiming itself as a litigant or advocate or quasi-judicial authority when it was not required to approach physically any quasi-judicial or judicial authority to initiate any proceeding or to file any application/suit/appeal for the purpose of extension or confirmation of the order under Section 5 (1) of The Prevention of Money Laundering Act, 2002. Petition allowed.

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• 2021 (10) TMI 239
  Seeking grant of Bail - money laundering - scheduled offences - enjoying proceeds of crime in personal benefits - Section 120-B/294/341/406/409/420/467/ 468/471/ 506/34 of the Indian Penal Code and Sections 3/4/5 of the Pries Cheat and Money Circulation Scheme (Banning) Act, 1976 - Section 45 of PML Act - HELD THAT:- In the instant case the Petitioner is inside custody since 16th October, 2017 which means he has already incarcerated more than three years and 10 months. Apart from this, admittedly, the Petitioner is languishing in custody from 30th May, 2013 in connection with Kharavela Nagar P.S. Case No.44 of 2013 and subsequent registration of the CBI case. The instant case is concerning offences under the PMLA Act. So keeping in view the restrictions contained in Section 45 of the PMLA Act for grant of bail as well as the nature of allegations and the amount involved in the commission of offence which is more than 300 crores, the Petitioner cannot be allowed to be released on bail. Accordingly, the prayer for bail is rejected - appeal dismissed.

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• Service Tax

• 2021 (10) TMI 233
  Validity of order of settlement commission whereas service tax liability has been settled at a certain sum with interest and penalty - petitioner discharged service tax liability @50% instead of @100% and balance 50% of the service tax paid by the service provider - manpower services - double taxation - HELD THAT:- RCM was changed to 100% qua the consumer w.e.f. 01.04.2015; however, inadvertently, the Assessee continued to pay 50% and the service provider paid the remaining 50%; thus, whatever is due to ceaser has reached his hands, is true; in fact, the CBEC vide Circular No. 341/18/2004 had clarified that the reverse charge mechanism should not lead to double taxation; in other words, once the tax liability is discharged regardless of the persons who discharge, the Assessee cannot be asked to pay the tax again. the Settlement Commission has to keep in mind the recommendation of The Wanchoo Committee that if the tax payer takes the initiative and voluntarily discloses the facts of his alleged deviations to their full extent, he should not be subjected to criminal proceedings and that pecuniary settlement should put the matter to rest. The High Courts of Bombay, Gujrat and Punjab Haryana have taken the view that when the duty paid character and receipt are not in doubt, the credit cannot be denied relying upon procedural rules - reliance can be placed in the case of COMMISSIONER OF C. EX. CUS., VADODARA-II VERSUS STEELCO GUJARAT LTD. [ 2010 (2) TMI 307 - GUJARAT HIGH COURT] . When there was no dispute as to receipt of the inputs/services or the genuineness of the claim, the Settlement Commission could not have refused to admit the photostat copies of the documents; petitioners are ready willing to produce the originals of the invoices and therefore, the matter requires remittance for fresh consideration. The matter is remitted to the Settlement Commission for consideration afresh - petition allowed by way of remand.

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• 2021 (10) TMI 229
  Demand of service tax on ross-border transactions - place of provision of services - remittances made to their branches and offices abroad - consideration for taxable service procured from outside the taxable territory - HELD THAT:- The controversy in taxing of intangibles, fraught with obvious handicap of lack of visibility, is compounded when it comes to the imperative of bestowing national treatment to services sourced from abroad owing to impossibility of ascertaining arrival at the territorial boundary. The saddling of demand on the one manifest aspect of service transactions, viz., consideration , without contextual reference to the taxable event, though irresistibly attractive to tax authorities, may not always be consistent with legislative intent. That has been the thrust of decisions of the Tribunal in several disputes arising from the fastening of tax liability in cross-border transactions. With the transition to the negative list regime, the substance of the transformation is reflected in the combination of section 65B, section 66B, section 66C, section 66D and section 66E of Finance Act, 1994 with the insertions having been crafted to accommodate the broadened and general description of taxable services , as defined in 65B(51) of Finance Act, 1944. Documentation of the circumstances surrounding this paradigm shift does not offer any scope to infer that the concept which birthed the levy of services provided within the country, as well as those brought into the country, was intended to be re-shaped beyond the significant departure from the delineated description of each of the enumerated services hitherto existing. Rule 2 of Place of Provision of Service Rules, 2012 may well bring the locus back to demutualised relationship between the establishment in India and its branches abroad in much the same as Explanation 1 in section 66A did. And just as the determination of rendering of taxable service in accordance with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 was essential for validation of any levy on consideration remitted by principal office before July 2012, the Rules, along with the parent provision in Finance Act, 1994 and the charging provision are applicable only to services , conforming to the description elaborated in section 65B(44) of Finance Act, 1994 therein, without exception after June 2012. There is no such ascertainment or finding in the impugned order. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (10) TMI 231
  Classification of goods - Autoclave - Glass bead Sterilizer - Steam Clave - Hot Air Sterilizer - Autoclaves classifiable under Central Excise Tariff Heading 841910 (up to February 2005) and 84192010 (from March 2005) as held in the impugned order or under 901800 (up to February, 2005) and 90184900 (from March, 2005) or not - Glass Bead Sterilizer, Steam Clave and Hot Air Sterilizer classifiable under 841910 (up to February, 2005) and 84192010 (from March, 2005); or under 9018 - extended period of limitation - penalty - HELD THAT:- Rule 2 deals with incomplete and unfinished articles and articles mixed with other articles and is not relevant to this case. Rule 3(a) states that a specific description prevails over the general description. According to the appellant, this Rule is in its favour because Dental equipment is a more specific description over autoclaves and sterilizing equipment . According to the Revenue, Sterilizing equipment is a more specific description of the nature of the goods and not Dental equipment . This Rule does not resolve the issue in favour of either side. Rule 3(b) deals with composite articles and hence is irrelevant to this case. Rule 3(c) states that if there are two or more equally valid classification, the last of such headings shall prevail. Rules 4 and 5 are not relevant to this case. None of the Rules of Interpretation satisfactorily resolve the dispute at hand. While the Central Excise Tariff has only Rules of Interpretation, the Harmonized System of Nomenclature based on which the Tariff is drafted, also has detailed explanatory notes explaining the scope of each heading - The Harmonised System of Nomenclature explains that 8419 includes not only autoclaves for industrial purposes but also those used for installation and operation theatres, etc. - the four goods manufactured by the appellant are classifiable under 8419 as asserted by the Revenue and are chargeable to appropriate duty. Therefore, on merits, the contention of the Revenue should be accepted. Extended period of limitation - HELD THAT:- The allegation of suppression of facts by the appellant in the show cause notice is completely unfounded. The other elements such as fraud, collusion and wilful mis-statement have not even been alleged in the show cause notice. Therefore, the demand cannot be raised by invoking the extended period of limitation - As far as the normal period of limitation is concerned, the appellant submits that although they have been contesting that classification on merits they have already paid the differential duty for the normal period of limitation from September 2006 to March 2007 along with interest. Imposition of penalty - HELD THAT:- The elements required for imposing penalty under Section 11AC is the same as those required for invoking the extended period of limitation under proviso to section 11A which is already found to be non-existent in this case. In view of the above, the penalty under Section 11AC needs to be set aside. The impugned order is modified to the extent it upholds the demand and interest as applicable within the normal period of limitation but set aside the demand for the extended period of limitation. The penalty imposed under section 11AC read with Rule 24 is also set aside - Appeal allowed in part.

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• CST, VAT & Sales Tax

• 2021 (10) TMI 245
  Calling upon the Petitioner to appear for the purposes of re-computation of tax for the year 2002- 03 - Orissa Sales Tax Act, 1947 - HELD THAT:- The present Assessee could not have been taken by surprise when it received notices for re-computation of tax following the judgment of the Supreme Court in COMMISSIONER OF COMMERCIAL TAXES OTHERS VERSUS M/S BAJAJ AUTO LTD. ANOTHER [ 2016 (11) TMI 31 - SUPREME COURT] . This is because the Petitioner was a party to that judgment. The decision in its writ petition by this Court in Bajaj Auto (HC-1) was common to the Petitioner and Bajaj Auto Ltd. and was the subject matter of the challenge before the Supreme Court - As regards interest on surcharge, the Petitioner is entitled to the same benefit that was granted to a similarly placed Assessee in Bajaj Auto (HC-2). This Court upholds the impugned re-computation orders of the Department as well as the notice dated 11th January, 2017 except to the extent of interest on surcharge. A direction is therefore issued to the DCST to issue fresh orders re-computing the amount payable on the basis of the limited modification as regards interest, not later than 1st November, 2021. It is made clear that it would not be open to the Petitioner to again challenge the said order as long there is in conformity with the directions issued in the present judgment of this Court. Petition disposed off.

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• Indian Laws

• 2021 (10) TMI 250
  Scope of the Arbitration - Denial of pendente lite interest on the award amount - Clause 17 of the Contract is ultra vires in terms of Section 28 of the Indian Contract Act, 1872 or not? - HELD THAT:- The law relating to award of pendente lite interest by Arbitrator under the 1996 Act is no longer res integra. The provisions of the 1996 Act give paramount importance to the contract entered into between the parties and categorically restricts the power of an arbitrator to award prereference and pendente lite interest when the parties themselves have agreed to the contrary - if the contract prohibits prereference and pendente lite interest, the arbitrator cannot award interest for the said period. In the present case, clause barring interest is very clear and categorical. It uses the expression any moneys due to the contractor by the employer which includes the amount awarded by the arbitrator. Therefore, if the contract contains a specific clause which expressly bars payment of interest, then it is not open for the arbitrator to grant pendente lite interest - the High Court was justified in rejecting the claim of the appellant seeking pendente lite interest on the award amount. Whether Clause 17 of the Contract is ultra vires in terms of Section 28 of the Indian Contract Act, 1872? - HELD THAT:- Exception I to Section 28 saves contracts where the right to move the Court for appropriate relief is restricted but where the parties have agreed to resolve their dispute through arbitration. Thus, a lawful agreement to refer the matter to arbitration can be made a condition precedent before going to courts and it does not violate Section 28. No cause of action then accrues until the Arbitrator has made the award and the only amount awarded in such arbitration is recoverable in respect of the dispute so referred. Section 31(7)(a) of the 1996 Act which allows parties to waive any claim to interest including pendente lite and the power of the Arbitrator to grant interest is subject to the agreement of the parties - when there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the Arbitrator to grant pendent lite interest. Clause 17 of the contract is not ultra vires in terms of Section 28 of the Indian Contract Act, 1872 - Appeal dismissed.

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• 2021 (10) TMI 249
  Claim of share from the partnership firm - Right of legal heirs after the demise of three original partners - rejection of the plaint on the ground that the plaint does not disclose any cause of action - Order VII Rule 13 of the Civil Procedure Code - It is their case that the accounts of the partnership firm have not been finalized and that the share of the profits of the partnership firm has not been paid to them. It is also the case of the plaintiffs that the defendants are seeking to represent the partnership firm to the exclusion of the plaintiffs and that the defendants are siphoning off funds of the partnership firm. HELD THAT:- From the perusal of the plaint, it could be gathered that the case of the plaintiffs is that in spite of demise of the three original partners of the partnership firm, through whom the plaintiffs were claiming, the defendants have been carrying on the business of the partnership firm. It is their case that the accounts of the partnership firm have not been finalized and that the share of the profits of the partnership firm has not been paid to them - it is rightly contended on behalf of the plaintiffs that, only on the basis of the averments made in the plaint, it could be ascertained as to whether a cause of action is made out or not. It is equally true that for finding out the same, the entire pleadings in the plaint will have to be read and that too, at their face value. At this stage, the defence taken by the defendants cannot be looked into. This Court has held that reading of the averments made in the plaint should not only be formal but also meaningful. It has been held that if clever drafting has created the illusion of a cause of action, and a meaningful reading thereof would show that the pleadings are manifestly vexatious and meritless, in the sense of not disclosing a clear right to sue, then the court should exercise its power under Order VII Rule 11 of CPC. It has been held that such a suit has to be nipped in the bud at the first hearing itself. This Court has held that the power conferred on the court to terminate a civil action is a drastic one, and the conditions enumerated under Order VII Rule 11 of CPC are required to be strictly adhered to. However, under Order VII Rule 11 of CPC, the duty is cast upon the court to determine whether the plaint discloses a cause of action, by scrutinizing the averments in the plaint, read in conjunction with the documents relied upon, or whether the suit is barred by any law - This Court has held that the underlying object of Order VII Rule 11 of CPC is that when a plaint does not disclose a cause of action, the court would not permit the plaintiff to unnecessarily protract the proceedings. It has been held that in such a case, it will be necessary to put an end to the sham litigation so that further judicial time is not wasted. We are in agreement with the Division Bench of the Calcutta High Court which, upon an elaborate scrutiny of the averments made in the plaint, the reliefs claimed therein, the provisions of the said Act and the clauses of the Partnership Deed, came to the conclusion that the reliefs as sought in the plaint, cannot be granted. Appeal dismissed.

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• 2021 (10) TMI 240
  Jurisdiction - power of the Government to include the game Online Rummy played for stakes within the purview of the Kerala Gaming Act, 1960 - validity of notification issued by the Government, amending the exemption notification issued on 30.09.1976 under Section 14A of the Act - only restriction in the notification is that no side betting shall be allowed - HELD THAT:- Section 14 deals with games of mere skill. The observation referred to by the State Attorney can hence only take in situations like side betting during a game of Rummy, which has been taken care of by Ext.P7 notification and to profit or gain made by the owner of the house or club from the game of rummy or any other game played for stakes. What matters is not the stakes but the profit or gain made by the owner of the house. Side betting is not a term that the law is not aware of. What is sought to be done in the case on hand is not a prohibition of Online Rummy as a trade of business which is dangerous to the community. Instead, the game Online Rummy is sought to be exempted from the provisions of the Kerala Act, to a limited extent when it is not played for stakes, as a game predominantly of skill. Such a notification is totally ill-conceived in my opinion since, the moment online rummy is recognised as a game predominantly involving skill, it will come within the purview of Section 14 of the Kerala Act and nothing more is required to take it out of the purview of the other provisions of the Kerala Act, which speak of penalty for gaming. So also, stakes cannot be the criterion for assessing whether a game is one involving skill or chance. On the question whether the power available to the State to issue a notification under Section 14A to exempt a game, clothe it with a power to notify a game which is a game of mere skill under Section 14, it is held that once a game comes within the purview of Section 14, any notification under Section 14A exempting it further as a game involving skill predominantly is only a superfluous, and even without such a notification, the game stands exempted. The question whether a prayer for a writ of certiorari to quash Ext.P6 notification is maintainable does not really arise for consideration, since one of the writ petitions already had a prayer seeking declaration and the other writ petitions have been amended including a prayer for declaration. On the question whether the petitioners are entitled to a declaration that Ext.P6 notification is arbitrary, illegal and in violation of Articles 14 and 19 (1) (g) of the Constitution of India, it is held in the affirmative. Ext.P6 notification is declared as arbitrary, illegal and violative of the fundamental rights guaranteed to the petitioners under Articles 14 and 19(1)(g) of the Constitution of India and hence not enforceable - petition allowed.

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