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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter November 15, 2021 Case Laws in this Newsletter: GST Income Tax Service Tax Central Excise CST, VAT & Sales Tax News Health Sector Grant of ₹ 8,453.92 crore released to Local Bodies of 19 States Global Supply chains should not only be based only on cost but also on trust – Shri Piyush Goyal Auction for Sale (Issue/re-issue) of (i) ‘6.10% GS 2031’ (ii) ‘GoI Floating Rate Bond 2034’, and (iii) ‘New GS 2061’ Notifications Companies Law G.S.R. 791 (E) - dated 12-11-2021 - Co. Law Corrigendum - Notification No. G.S.R. 785(E), dated the 09th November, 2021 Customs 67/2021 - dated 12-11-2021 - ADD Seeks to impose ADD on "measuring tapes" originating in or exported from Singapore and Cambodia. GST - States 13/2021– State Tax (Rate) - dated 27-10-2021 - Bihar SGST Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June 2017 38/1/2017-Fin(R&C)(13/2021-Rate)/2012 - dated 27-10-2021 - Goa SGST Amendment in Notification No. 38/1/2017- Fin(R&C)(1/2017-Rate) dated the 30th June, 2017 63/GST-2 - dated 10-11-2021 - Haryana SGST Haryana Goods and Services Tax (Removal of Difficulties) Order, 2021 62/GST-2 - dated 10-11-2021 - Haryana SGST Notification under the first proviso to section 44 to exempt taxpayers having AATO upto ₹ 2 Crores from the requirement of furnishing annual return for FY 2020-21 under the HGST Act, 2017 16/2021-State Tax - dated 28-10-2021 - Himachal Pradesh SGST Seeks to bring in force section 6 of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2021 F-A-3-72-2017-1-V (78) - dated 10-11-2021 - Madhya Pradesh SGST Amendment in Notification No. F A-3-72-2017-1-V (135), dated the 18th October, 2017 F-A-3-37-2017-1-V (77) - dated 10-11-2021 - Madhya Pradesh SGST Amendment in Notification No. F A-3-37-2017-1- Five (65), dated the 30th June, 2017 F-A-3-35-2017-1-V (76) - dated 10-11-2021 - Madhya Pradesh SGST Amendment in Notification No. F A-3-35-2017-1-Five (63), dated the 30th June, 2017 13/2021 - dated 3-11-2021 - Puducherry SGST Amendment in Notification No. 1/2017- Puducherry GST (Rate), dated 29th June, 2017 Highlights / Catch Notes GST Classification of goods - rate of tax - Since the contract is an EPC contract, the activity carried out by the applicant is a composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017 i.e., transfer of Poultry farm including equipments, machineries and other items involved in the execution of the said works. Composite supply of works contract on immovable property for the construction of poultry farm is classified under HSN 9954 and rate of tax at the rate of tax @ 18% - AAR Visit to Get Source Classification of services - exempt services or not - pure services or not - services provided to the Government entities - supply of manpower services to various government and non-government organisations - these manpower services are not provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence provision of such manpower services are liable to tax at 18%. - AAR Visit to Get Source Exemption from GST - educational assessment examination (ASSET) with its variants provided by the applicant to school/educational organization - ASSET being held by the applicant cannot be said to be service provided to schools, much less services relating to conduct of examination by such schools. Therefore, exemption from payment of Goods and Services Tax, as provided under Entry at Sl. No. 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended and corresponding Notification No. 12/2017-State Tax (Rate) dated 30.06.2017, as amended, is not available to ASSET - AAAR Visit to Get Source Supply of service or not - The activity undertaken by the applicant like providing of mediclaim policy for the employees and their parents (parents of the employees) through the insurance company neither satisfies conditions of section 7 to be held as “supply of service” (in the instant case, insurance service) nor is it covered under the term “business” of section 2(17) of CGST ACT 2017. Hence, we find that the applicant is not rendering any services of health insurance to their employees' parent and; hence, there is no supply of insurance services in the instant case of transaction between employer and employee. - Thus, the recovery of the Top Up Insurance/Parental Insurance Premium from employees does not amounts to “supply of service” - AAR Visit to Get Source Charitable activities or not - GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government - the applicant does not satisfy the conditions mentioned at Sr.No. 1 of Notification No. 12/2017 dated 28-06-2017 which provides exemption from tax to Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities and hence the supply undertaken by the applicant is not exempt on this count - Since the activities undertaken by the applicant do not conform strictly to the definition of a ‘charitable activity, the applicant shall obtain registration under GST Act. - AAR Visit to Get Source Levy of GST - Whether the nominal charges received from patients (who is an essential clinical materials for education laboratory) towards an “Unparallel Health Insurance Scheme” to retain their flow at one end for the purpose of imparting medical education as a result to provide them the benefit of concessional rates for investigations and treatment at other end would fall within the meaning of “supply” eligible for exemption under the category of “educational and/or health care services.” - It is taxable at 18% under the residuary entry - AAR Visit to Get Source Levy of GST - reimbursement of expenses such as salaries, rent, training, staff welfare expenses etc. - Rate of GST - Government Entity or not - The consultancy services are in the nature of preparation of transport studies such as comprehensive mobility plan, transit oriented development plan, NMT plan and consultancy services of transaction advisors, etc. and as per the applicant's submissions, at present there is no supply of goods. Thus, the applicant is rendering Pure Services to MMRDA. - AAR Visit to Get Source Exemption under GST - pure services - Government entity or not - The applicant is providing services by way of producing documentary videos, picture of testimony to various State Government Departments, Local Authorities, Boards and Corporations. But these services are not provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence provision of such services is liable to tax at 18%. - AAR Visit to Get Source Requirement for registration - inter-state sales or not - Section 20 of the IGST Act, 2017 read with section 16 of the CGST Act, 2017 provides that IGST paid on import of goods can be utilized as the credit of the input tax if such imported goods are used in the course of furtherance of his business - the explanation to the said section provides that where the goods are directly delivered to a customer under bill to ship to model, then it would be deemed to have received the goods even though the goods are shipped to the end customer location directly. - AAR Visit to Get Source Classification of Supply of services - HSN Code - Rate of Tax - Pushti, a mixture of Ragi, Rice, Wheat, Green gram, Fried gram, Moong dal, and Soya in different proportion - Is to be classified under HSN code 1106. If unbranded, it attracts Nil GST and if branded and packed, it attracts 5% GST - Circular No.149/ 05/ 2021-GST dated 17.06.2021, does not apply to MSPC as the applicant is into supply of goods. - AAR Visit to Get Source Classification of goods - eggs / hatcheries - Since the applicant is involved in providing services of transportation of agricultural produces i.e. eggs, by rail from one place in India to another, those services are hence covered under the entry 20 of Notification No.12/2017-Central Tax (Rate) dated 28-06-2017 and hence such services are exempt by the said Notification from payment of taxes under the CGST Act. - AAR Visit to Get Source Income Tax Depreciation on machinery and equipments - Depreciation @ 25% or 100% - Even before this Court, learned counsel for the Assessee was unable to demonstrate why the depreciation on the equipments in question should be allowed @ 100% and in respect of ‘approach road, drainage, bore wells, reservoir etc.” it should be 25% and not 100%. - HC Visit to Get Source Scope of Black Money (Undisclosed Foreign Income & Assets) And Imposition of Tax Act 2015 - If we are to hold that definition of ‘beneficial owner’ as assigned by Explanation 4 to Section 139(1) is to equally apply, we will end up in a situation in which the BMA itself will become unworkable. Therefore, for both of these reasons- i.e. (a) the contextual requirements being otherwise, and (b) the adoption of this meaning rendering the provisions of BMA becoming unworkable, the definition under Explanation 4 to Section 139(1) cannot be adopted in the context of the BMA. We reject this plea of the learned counsel as well. - AT Visit to Get Source Exemption u/s 11 - Welfare of small and marginal farmers also comes under the category relief of the poor which in the aforesaid Circular has been included under the definition of charitable purposes u/s 2(15) - In the present case, it is not in dispute that the assessee society is implementing the various new projects launched by the State Government as Crop Cluster Development Programme for Horticulture Clusters, which is to be implemented through FPO and this programme is aimed on the backward and forward integration by creating farm infrastructures and the FPO in turn enables the farmers in enhancing the productivity through efficient cost effective and sustainable resources, it also remove hurdles in enabling farmers access to the market both is buyers and sellers. - CIT(E) was not justified in rejecting the application moved by the assessee for registration under section 12AA of the Act. - AT Visit to Get Source Addition u/s 68 - Unexplained accumulated cash in hand - cash received through Will - It is not expected to bring on record, the genuineness of source of source of a deceased person. The assessee can prove only the source for the credit in its books of account. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A) and accordingly grounds raised by the Revenue are dismissed. - AT Visit to Get Source Reopening of assessment u/s 147 - Transfer of case u/s 127 - There is no nexus between the material coming to the notice of the AO and the formation of his belief that there has been escapement of income. The amount in the bank account with HSBC Geneva is not relating to the assessment years under consideration. Hence, the very basis for assuming jurisdiction is not factually correct, no reasonable belief can be formed based on such incorrect facts. - AT Visit to Get Source Reopening of assessment u/s 147 - reasons recorded on incorrect assumption of facts and non application of mind - possession of ITS information that the assessee has received certain amount could be basis for making further enquiries and in absence of such enquiries being conducted prior to recording of the reasons, there is absence of tangible material in possession of the Assessing officer at the time of recording of reasons and subsequent enquiries after recording of the reasons could not be used to supplement the reasons so recorded by the AO. - AT Visit to Get Source TP Adjustment - Equipment would not have been imported at NIL price even in an independent scenario. Moreover, we do not find that the TPO has applied any method to benchmark the said transaction, which action of the TPO is in violation of Rule 10B of the Income Tax Rules. We find that while treating the purchase of capital goods as NIL, the TPO failed to provide any comparable data which would have suggested that the arm’s length price for the purchase of capital goods can be NIL. In our understanding, no third party would have sold such goods free of cost. In our considered opinion, arm’s length price could be lower or higher but cannot be NIL, as the goods have been imported. - AT Visit to Get Source Service Tax Levy of service tax - reverse charge mechanism - The impugned order does not discuss the ingredients necessary for invocation of extended period of limitation nor does it invoke the proviso to Section 73(1) in the operative part of the order. It is for this reason that we have to set aside the impugned order for the extended period of limitation. The demand within the normal limitation is not covered by the charging sections invoked - entire demand needs to be set aside and we do so. - AT Visit to Get Source Levy of service tax - tolerance of act of cancellation of coal blocks - the Government employee has tolerated the non-sanction of leave during his service as per an agreement and in consideration, received the leave encashment at the time of retirement and to charge service tax on the amount received as leave encashment. These, cannot be called taxable services of tolerating a situation by any stretch of imagination. No service tax can be levied on the amounts received by the appellant as compensation. - AT Visit to Get Source Central Excise CENVAT Credit - common input services for taxable as well as exempt goods - The demand of the duty amount calculated @ 5% or 10% of the exempted value cannot be made even though the assessee has not followed the prescribed procedures - there is no legal provision under which an amount equal to 5% or 10% of the value of the exempted goods can be recovered. The reason is that payment of an amount of 5% or 10% is one of the choices under Rule 6 and is not a mandatory payment. This choice cannot be foisted upon the appellant nor can such an amount be recovered under Rule 14. - AT Visit to Get Source VAT Valuation - To remove the anomaly, a level play mechanism has been adopted to levy tax on the inter-state purchases or the goods purchased from outside the territory of India at the regular rate of tax and to deduct the same from the total consideration of the works contract executed by the dealer to make the dealer eligible to opt for composition scheme, despite purchasing goods from outside the State or outside the territory of India. - By any stretch of imagination, it cannot be held that the levy of tax under Section 4 would be on the sale value of the goods transferred in the works contract executed by the dealer. - HC Visit to Get Source Case Laws: GST 2021 (11) TMI 438 Cancellation of registration under GST - minor defect in the sub-let agreement or not - non-existence of the petitioner at the registered place - HELD THAT:- In view of the facts and circumstances of the case that it is not a case of tax evasion or causing revenue loss to the Government rather petitioner s activity of carrying on the business which cannot be called illegal is creating revenue for the State as well as in helping the State to solve the problem of unemployment a little bit and such type of drastic action in the facts and circumstances of the case by canceling the registration of the petitioner on such hyper technical ground will not help the State rather it will cause revenue loss to the State as well as aggravate unemployment problem in the State which will be a social problem in the society. The order of the Appellate Authority dated 25th August, 2021 is set aside, confirming the cancellation of registration of the petitioner for revocation of cancellation of its registration, by directing the State respondent concerned to consider afresh - petition disposed off. 2021 (11) TMI 437 Maintainability of petition - availability of alternative remedy of appeal - reasons for the conclusions drawn, missing in the impugned order - principles of natural justice - HELD THAT:- It has to be accepted in law that the impugned order does not contain reasons. This conclusion is being drawn as unless the complete copy of the order containing the reasons is served on the petitioner/assessee, he may never have any right to challenge the same before any forum including the appellate forum. The fact that the Assessing Officer may have available to it another copy of the same order which may contain reasons therefor, may be of no help to the Revenue Authority as such copy of the order has not been served on the petitioner/assessee. Therefore, it cannot be relied upon to any extent. The order served on the petitioner and as has been impugned in the writ petition is wholly defective and lacking in vital aspect namely reasons for the conclusions drawn therein - matter remitted to the Assessing Officer who shall now issue a fresh notice to the petitioner and supply all adverse material (relied against the petitioner) alongwith such notice - Petition allowed by way of remand. 2021 (11) TMI 434 Rate of tax - service by way of grant of mining rights - GST on the same minerals on which royalty - HELD THAT:- Since the very issue as to whether GST would be chargeable on minerals on which already royalty has been paid is actively under consideration before a Nine Judges Bench of the Hon ble Supreme Court, in the present matter, the petitioner has made out a case for interim order. The matter be listed after disposal of Writ Petition. In the meantime, there shall be stay of the show cause notice dated 07.10.2021 issued to the petitioner, which is impugned in the present writ petition - pleadings be completed. 2021 (11) TMI 433 Classification of goods - rate of tax - various items and equipments which are used in the construction of Poultry Farm on immovable property - HSN code on transferred of poultry farm equipment and others involved execution of works on immovable property - Composite supply or not - input tax credit - HELD THAT:- On perusal of the definitions given for immovable property it has been noticed that prime property under the term of immovable property is land or earth. Further permanently fastened or attached to land or benefits to arise out of land are also treated as immovable properties - the applicant transferring all goods and service which are narrated in Para 9.1 falls under the purview of the definition of term composite supply as per section 2 (30) of the CGST/KGST Act 2017 means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Input tax credit - HELD THAT:- The applicant is constructing poultry farm on immovable property by using above stated input supplies is not eligible to claim Input Tax Credit. As per Section 17 (5) (d), Input Tax Credit shall not be available in respect of goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business - the claim of Input Tax Credit is restricted in terms of Section 17 (2) of the CGST/KGST Act 2017 on goods and service which are used for construction of farm on immovable property. Since the contract is an EPC contract, the activity carried out by the applicant is a composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017 i.e., transfer of Poultry farm including equipments, machineries and other items involved in the execution of the said works. Composite supply of works contract on immovable property for the construction of poultry farm is classified under HSN 9954 and rate of tax at the rate of tax @ 18%, as per serial number 3 of item number (ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. 2021 (11) TMI 432 Classification of services - exempt services or not - pure services or not - services provided to the Government entities - supply of manpower services to various government and non-government organisations - exemption under Sl.No.3 of N/N. 12/2017 dated 28th June 2017 - HELD THAT:- The applicant is providing manpower services like security guards, housekeeping staff and catering staff. But these manpower services are not provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence provision of such manpower services are liable to tax at 18%. 2021 (11) TMI 400 Exemption from GST - educational assessment examination (ASSET) with its variants provided by the applicant to school/educational organization - Sr. No. 66(b)(iv) of the Not. No. 12/2017-CT (rate) dated 28.06.2017 and entry No. 69(b)(iv) of Not. No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 as well as equivalent SGST Notification - HELD THAT:- As per Entry at Sl. No. 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate), services provided to an educational institution, by way of, services relating to admission to, or conduct of examination by, such institution is exempted from GST. The services being provided by the applicant are admittedly not relating to admission to educational institution. Therefore, it needs to be examined whether the services being provided by the applicant are services provided to an educational institution, by way of services relating to conduct of examination by such institution . It appears from the entire scheme of the ASSET that the schools have the minimal role in it. In the terms and conditions attached with the School Summary Form (EB / ARO) 2019 submitted by the applicant, one of the conditions is that, Fees from the students should be charged as per the offer availed by your school . It therefore appears that the schools are required to collect the fees for ASSET from the students, as determined by the applicant and remit the same to the applicant. As mentioned in the School Summary Form (EB / ARO) 2019, it appears that the schools are offered 10% Discount towards Administration cost - It is therefore evident that the schools are not conducting the ASSET, rather the schools are facilitating the applicant to conduct ASSET for which the schools get some amount towards administration cost. Whether the ASSET can be said to be conducted by schools, even if it is used to evaluate the performance of students for giving internal marks by the schools? - HELD THAT:- The schools may find ASSET to be a good tool to evaluate students level of understanding of different subjects and may also find the detailed reports given by the applicant to be useful for devising future course of action by the schools. Therefore, schools may enter into agreement with the applicant with a condition that all students in a class would take ASSET. The condition of the agreement only leads to a conclusion that unless the school agrees to take ASSET for all the students in a class, the applicant would not enter into a contract with that school to conduct ASSET. However, such condition in an agreement cannot change the nature of ASSET and it will not make ASSET an examination conducted by the schools. ASSET being held by the applicant cannot be said to be service provided to schools, much less services relating to conduct of examination by such schools. Therefore, exemption from payment of Goods and Services Tax, as provided under Entry at Sl. No. 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended and corresponding Notification No. 12/2017-State Tax (Rate) dated 30.06.2017, as amended, is not available to ASSET - Appeal allowed. 2021 (11) TMI 399 Supply of goods or services or both - Construction of building on the plot allotted by MHADA - co-operative housing society registered under the Maharashtra State Co-operative Societies Act, 1960 - ITC on input and inputs services for repairs, renovations rehabilitation works carried out by the Applicant - HELD THAT:- A housing society is a collective body of persons, who stay in a residential society and the collective body, supplies certain services to its members, like collecting statutory dues to be remitted to statutory authorities, or maintenance of the building, etc. As per section 2(17)(e) of the CGST Act, 2017 provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members is deemed to be a business. Thus, a housing society may be seen to be providing club and association services to its members but does not provide works contract service to its members. The housing society i.e. the applicant in the subject case, is making provisions of the facilities/benefits to its members and is not providing any works contract services to its members and therefore the applicant is debarred from taking Input Tax Credit under the provisions of Section 17 (5) (c) of the CGST Act, 2017. 2021 (11) TMI 398 Supply of service or not - recovery of an amount towards Top-up and parental insurance premium from the employees - Section 7 of the Central Goods Service Tax Act, 2017 - HELD THAT:- The term business broadly means any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefits. Any activity ancillary or incidental to these activities are also covered as business. It has also been provided that any activity or transaction falling in above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. As per the applicant, providing of Top Up Insurance/Parental Insurance is not mandatory under any law for the time being in force. Also, providing / not-providing of the Top Up Insurance/Parental Insurance is not going to affect the business of the Applicant in any way. Further, the applicant is not engaged in providing insurance service - The applicant is not taken input tax credit of the GST paid to the Insurance Company. Non-providing of Top Up Insurance/Parental Insurance coverage will not affect applicant's business by any way. Therefore, activity of recovery of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. The activity undertaken by the applicant like providing of mediclaim policy for the employees and their parents (parents of the employees) through the insurance company neither satisfies conditions of section 7 to be held as supply of service (in the instant case, insurance service) nor is it covered under the term business of section 2(17) of CGST ACT 2017. Hence, we find that the applicant is not rendering any services of health insurance to their employees' parent and; hence, there is no supply of insurance services in the instant case of transaction between employer and employee. Thus, the recovery of the Top Up Insurance/Parental Insurance Premium from employees does not amounts to supply of service under Section 7 of the Central Goods and Service Tax Act, 2017. 2021 (11) TMI 397 Requirement to obtain registration under the Maharashtra Goods and Service Tax Act, 2017 - charitable activities or not - GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government - whether the activities undertaken by the applicant are covered under the definition of charitable activities or not? - HELD THAT:- The applicant has nowhere mentioned that their activity particularly pertains to advancement of educational programmes or skill development only to abandoned, orphaned or homeless children. They also perform other activities for the homeless children such as shelter, guidance, clothing, food and health. We are bound by the definition of the term charitable activities as defined under the above said notification and are of the opinion that the applicant is not performing charitable activities , strictly according to the definition. Further the supply of services by the applicant to destitute women who are litigating divorce or are homeless or are victim of domestic violence also are not covered under the definition of charitable activities - the applicant does not satisfy the conditions mentioned at Sr.No. 1 of Notification No. 12/2017 dated 28-06-2017 which provides exemption from tax to Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities and hence the supply undertaken by the applicant is not exempt on this count - Since the activities undertaken by the applicant do not conform strictly to the definition of a charitable activity, the applicant shall obtain registration under GST Act. If the activity is held to be taxable then, whether the applicant is liable to pay GST on amounts received as Donation/Grants from various entities including Central Government and State Government? - HELD THAT:- It may be noticed that there is no reference or mention of any business activity of the donor which otherwise would have got advertised. Thus where all the three conditions are satisfied namely the gift or donation is made to a charitable organization, the payment has the character of gift or donation and the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement, GST is not leviable. If the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government, what will be the rate at which the GST would be charged? - HELD THAT:- The applicant provides shelter, food, and medical facilities, clothing etc., to such destitute women mentioned above and also to rape victims. The applicant represents them before legal forums, including lodging FIR at police stations against the culprits and also arranges for counselling them through expert counsellors to bring them out of the trauma and help them to lead normal life - SAC 9993 covers Human Health and Social Care Services. From the submissions made by the applicant, in respect of destitute women it is seen that the applicant provides social services along with provision of accommodation. These types of services provided by the applicant are covered under SAC 999334. The subject services supplied by the applicant are covered under SAC 9993 and attract GST @18% (CGST 9% and SGST/UTGST 9%/IGST 18%) as per Notification No. 11/2017 - C.T. (R) dated 28.06.2017 as amended. 2021 (11) TMI 396 Educational Institution or not - Charitable Society having the main object and factually engaged in imparting Medical Education - fees and other charges received from students and recoupment charges received from patients (who is an essential clinical material for education laboratory) would constitute as outward supply or not - cost of Medicines and Consumables recovered from OPD patients along with nominal charges collected for Diagnosing by the pathological investigations - nominal charges received from patients (who is an essential clinical materials for education laboratory) towards an Unparallel Health Insurance Scheme - nominal amount received for making space available for essential facilities needed by the students and staffs such as Banking, Parking, and Refreshment which are support activities for attainment of main activities. Whether the applicant, a Charitable Society having the main object and factually engaged in imparting Medical Education, satisfying all the criteria of Educational Institution', can be said to be engaged in the business so as to cast an obligation upon it to comply with the provisions of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017 in totality? - HELD THAT:- The activities of the applicant which includes medical education services are covered under the scope of the term business . In fact, Education Services are classified under Service and Accounting Code (SAC) 9992 and considered to be a supply of services. Since the applicant's supply of medical education services are also considered to be business there is definitely an obligation cast upon it to comply with the provisions of CGST Act, 2017 and the MGST Act, 2017 - with only respect to the medical education services, as is asked in the Question, the applicant may not comply with the provisions of CGST Act, 2017 and the MGST Act, 2017, since the applicant being an educational institution, is providing medical education services as a part of a curriculum for obtaining a qualification recognized by any law (in this case the qualification is recognized by the Nagpur University) for the time being in force the said supply would be exempt under the GST Laws (Sr. No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Whether the applicant, a Charitable Society having the main object and factually engaged in imparting Medical Education, satisfying all the criteria of Educational Institution is liable for registration under the provisions of section 22 of the Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017 or it can remain outside the preview of registration in view of the provisions of section 23 of the said act as there is no Taxable supply? - HELD THAT:- If the impugned supply of service by way of medical education made by the applicant are the only supplies undertaken by the applicant, in such a case, the applicant is not required to obtain registration under GST law, since the impugned supply is held to be exempt cited supra. However, if the applicant is undertaking or proposes to undertake any taxable supply of goods or services or both (other than described above) (such as renting of property, restaurant service or provision of any other taxable service), then in such a scenario the applicant will be required to obtain GST registration under Section 22 of the GST Act. Since, the applicant is also effecting certain taxable supplies (it is an admitted fact) as discussed in Question No. (iii) and since turnover exceeds the threshold limit, the applicant is liable for registration. Whether the fees and other charges received from students and recoupment charges received from patients would constitute as outward supply as defined in section 2 (83) of the CGST Act, 2017 and MGST Act, 2017 and if yes then whether it will fall in classification entry at Sr. No 66 or the portion of nominal amount received from patients at Sr. No. 74 in terms of Notification 12/2017 C.T.-dt. 28/6/2017? - HELD THAT:- It is noticed that, the first part of the question is whether the fees and other charges received from students and recoupment charges received from patients would constitute as outward supply as defined in section 2 (83) of the CGST Act, 2017 and MGST Act, 2017 - the fees and other charges received from students and recoupment charges received from patients would not constitute as outward supply as defined in section 2 (83) of the CGST Act, 2017 and MGST Act, 2017, rather, the fees /other charges would, at the most constitute as 'consideration' received against supply, taxable or non-taxable. Hence we do not discuss the classification entry of such fees and other charges received. The charges recovered from OPD patients are exempt from tax - it is noticed than the applicant has asked Whether the nominal charges received from patients (who is an essential clinical materials for education laboratory) towards an Unparallel Health Insurance Scheme to retain their flow at one end for the purpose of imparting medical education as a result to provide them the benefit of concessional rates for investigations and treatment at other end would fall within the meaning of supply eligible for exemption under the category of educational and/or health care' services . It is admitted fact that the applicant provides renting and other services as discussed in this question and collects certain amounts towards provision of said services. What is the object of provision of said service, would not alter the basic nature of provision of any service. Each service or group of services, provided has to be looked into separately with regard to schedule entries, as per the scheme of the act - The service of supply of food to non-in-house-patients and those who are not employees of the hospital, will be taxable as restaurant service at 5% (without ITC) provided the conditions of said schedule entry are fulfilled (entry no.7 of notification no 13/2018 dated 26/7/2018. The applicant did not provide any details regarding what sort of canteen, restaurant or mess they are running. The said service provided to staff and employees as well as to in-house-patients is only exempt service. Whether the cost of Medicines and Consumables recovered from OPD patients along with nominal charges collected for Diagnosing by the pathological investigations, other investigation such as CT-Scan, MRI, Colour Doppler, Angiography, Gastroscopy, Sonography during the course of diagnosis and treatment of disease would fall within the meaning of composite supply qualifying for exemption under the category of educational and/or health care services? - HELD THAT:- The charges recovered from OPD patients are exempt from tax. Whether the nominal charges received from patients (who is an essential clinical materials for education laboratory) towards an Unparallel Health Insurance Scheme to retain their flow at one end for the purpose of imparting medical education as a result to provide them the benefit of concessional rates for investigations and treatment at other end would fall within the meaning of supply eligible for exemption under the category of educational and/or health care services. ? - HELD THAT:- It is admitted fact that the applicant provides a sort of medical insurance service and collects very small amounts towards premium, what is the object of provision of said service, would not alter the nature of provision of any service, Each service or group of services, provided has to be looked into separately with regard to schedule entries, as per the scheme of the act. The applicant is not holding license from Insurance Regulator to provide the insurance service. So said service would not get covered by the scope of insurance service. Whether the nominal amount received for making space available for essential facilities needed by the students and staffs such as Banking, Parking, and Refreshment which are support activities for attainment of main activities and further amount received on account of disposal of wastage would fall within the meaning of supply qualifying for exemption under the category of educational and/or health care services? - HELD THAT:- The receipt on account of rent is taxable at 18% as discussed above. It is further clarified that the food supplied to the in-patients as advised by the doctor/nutritionists, as well as supply to employees and staff of the applicant; from such canteen, is a part of composite supply of healthcare and is not taxable. But the other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable at 5%. 2021 (11) TMI 395 Levy of GST - reimbursement of expenses such as salaries, rent, training, staff welfare expenses etc. - Rate of GST - Government Entity or not - HELD THAT:- The amounts received by the applicant may be against actual expenses incurred but appear to be given to the applicant in lieu of consultancy services rendered by the applicant to MMRDA. Thus in the subject case, consideration is received by the applicant for supply of services and such consideration is in the form of reimbursement of expenses. Hence, the applicant's claim to treat the amounts received from MMRDA, as 'grants', cannot be agreed upon. Thus the amounts received from MMRDA by the applicant are nothing but consideration received for providing consultancy services. The consultancy services are in the nature of preparation of transport studies such as comprehensive mobility plan, transit oriented development plan, NMT plan and consultancy services of transaction advisors, etc. and as per the applicant's submissions, at present there is no supply of goods. Thus, the applicant is rendering Pure Services to MMRDA. Whether 'MMRDA' would be covered under the definition of 'Government Entity' as given in Notification No. 31/2017 dated 13.10.2017? - HELD THAT:- MMRDA is a body established by the Government of Maharashtra under Mumbai Metropolitan Region Development Authority Act, 1974 ('MMRDA Act'). As per the preamble of the Act, the MMRDA has been established for the purpose of planning, coordinating and supervising the proper, orderly and rapid development of the Mumbai Metropolitan Region (MMR); to formulate and execute plans, projects and schemes for the development of the MMR and to provide for matters connected with the purposes - It is clarified that MMRDA is constituted and established by the State Government of Maharashtra with 100% participation by way of Equity or Control to carry out the function entrusted to it by the State Government viz. Preparation of Regional Development Plans , Providing financial assistance for significant regional projects, Providing help to local authorities and their infrastructure projects, coordinating execution of projects and/or schemes in MMR, etc. in the State of Maharashtra and therefore MMRDA is clearly covered under the definition of 'Government Entity' as can be seen from the definition of a 'Government Entity'. Further, Section 46A of the MMRDA Act provides for control by the State Government in regard to its powers and duties. The applicant is supplying pure services to a Government Entity in relation to any function entrusted to a Panchayat under article 243W of the Constitution and therefore, as per the provisions of Entry No. (3) Of Notification No. 12/2017-CT(R) dated 28.06.2017, the said amounts received by the applicant are not liable to tax. As per applicant's submissions the only activity being carried out is consultancy services and accordingly it is held that the provisions of Entry No. (3) Of Notification No. 12/2017-CT(R) dated 28.06.2017, is applicable to the present case - as and when the supply as mentioned in para 5.25.1 is undertaken by the applicant, the situation will change and this order will not be applicable in that particular situation/case. 2021 (11) TMI 394 Scope of Advance Ruling - Classification of goods or services or both - HSN or SAC - transporting the steel structures fabricated at their Noida premises, to the work site at Karwar, as the L T (main contractor) - composite supply or not - requirement of registration - HELD THAT:- In the instant case the applicant is neither seeks the classification of goods nor services but seeks whether the HSN or SAC that need to be mentioned in the invoice. Thus the question is not covered under the issues mention in Section 97 (2) of the CGST Act 2017. In view of the foregoing the authority refrain from answering this question at it is not within the jurisdiction of this authority - it is pertinent to note that the invoice is issued for the supply of goods or services or both and when it is mandated to mention the HSN in the invoice, the HSN covering the transaction, in this case the supply of services, needs to be mentioned. But in case of e-waybill, the movement is of goods and hence the delivery note causing the movement of goods needs to be raised and the HSN of the goods moved and the value of such goods moved needs to be recorded in such e-waybill. Whether the applicant is required to be registered in the state of Karnataka for execution of the work order which was issued by M/s L T, Karnataka, on the applicant's premises registered at Noida, UP, from where the applicant raises the invoice? - HELD THAT:- In the instant case, the applicant has obtained registration for the premises located at Noida, UP and hence the location of the supplier of services is the place of business of the applicant. It is also pertinent to note that the applicant has no fixed establishment in the State of Karnataka as on date. Section 12 of the IGST Act 2017 determines the place of supply and specifically Section 12 (3) of the IGST Act is relevant to the impugned transaction determines the place of supply of services directly in relation to immovable property in respect of any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work or any ancillary services shall be the location at which the immovable property is located or intended to be located and if the location of the immovable property is located or intended to be located outside India, the place of supply shall be the location of the recipient - in the instant case, the place of supply of services is the location at which the immovable property is located i.e. Karwar in Karnataka state. In the instant case, the applicant has only one principal place of business (Noida, UP) for which registration has been obtained and does not/intended to have any other fixed establishment other than the principal place of business, as admitted by the applicant. Therefore the location of the supplier itself is the principal place of business which is in Noida, Uttar Pradesh. Thus, there is no requirement for a separate registration in Karnataka for execution of the contract - the nature of supply is of inter-State supply and the applicant can supply the impugned services from the place of registration i.e. Noida, UP on raising the invoice from the said place by charging IGST. Whether the applicant obtain the ISD registration, avail the ITC of the tax paid on the services procured from the suppliers in Karnataka at the site i.e. Karwar, Karnataka and distribute the same to their registration at Noida, UP? - HELD THAT:- It could be seen from the definition under Section 2(61) of the CGST Act that the Input Service Distributor is an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit (ITC). Thus, to distribute the ITC, the supplier should obtain the Input Service Distributor registration for the premises from where they intend to distribute the credit. It is an admitted fact that the applicant neither have nor intend to have any establishment at the site at Karwar, Karnataka and hence cannot obtain the ISD registration. 2021 (11) TMI 393 Classification of services - rate of GST - providing job work services by carrying out the process such as anodizing, plating on the materials sent by its customers on job work basis i.e., manufacturing services on physical inputs (goods) owned by others - Whether the job work services provided by the applicant are covered under clause (id) or clause (iv) of entry number 26 of Notification No.11/2017-Central Tax(Rate) dated 28-06-2017 for the heading 9988 or not? - HELD THAT:- The applicant is engaged in providing job work services by carrying out the processes such as anodizing, plating on the materials sent by their customers and returns the said material back to the respective customers. In this regard the applicant sought advance ruling on the issue that whether their activity is covered under clause (id) or clause (iv) of the entry number 26 of Notification No. 11/2017-Central Tax (Rate), as amended, and consequential rate of GST applicable to their activity. Applicability of circular No.126/45/2019-GST dated 22-11-2019 - HELD THAT:- It could be inferred from the circular that the job works defined under Section 2 (68) of the CGST Act i.e. job work services by way of treatment or processing undertaken by a person on goods belonging to another registered person are covered under clause (id) of entry number 26 of the Notification 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, and clause (iv) of the notification supra covers only services which are excluded under clause (id) and also carried out on physical inputs (goods), owned by the unregistered person/s - In the instant case the applicant provides the job work services on the goods belonging to registered persons and hence are covered under clause (id) of entry number 26 of the Notification 11/2017-Central Tax (Rate) dated 28.06.2017, as amended and accordingly attract GST rate of 12%. 2021 (11) TMI 392 Valuation - subsidy from Government of Karnataka, to be reduced from the value of import of plant and machinery from China or not - levy of GST on imports of plant machinery after reducing Government subsidy from the CIF value of the imports - HELD THAT:- For the import of goods, the importer has to pay custom duty and IGST as per Customs Act, 1962 and Customs Tariff Act, 1975 on the value as determined under the Customs Tariff Act, 1975 at the point when the duties of customs are levied on the said goods. Thus it is evident that the value for levy of IGST on imports is governed by Customs Act, 1962 and Customs Tariff Act, 1975. The applicant is importing silk reeling machineries from China and is supposed to pay IGST on import of goods. The applicant wishes to know whether the subsidy given is to be reduced from the value of import of plant and machinery to pay IGST. Since the value for levy of IGST on imports is governed by Customs Act, 1962 and Customs Tariff Act, 1975 answering the questions of the applicant does not come under the purview of this authority. The application filed by the applicant for advance ruling is disposed off as rejected. 2021 (11) TMI 391 Exemption under GST - pure services - Government entity or not - documentary services including picture of the testimony / documentary videos provided to corporations and various boards including KHB - documentary services including picture of the testimony / documentary videos provided to various government departments including Zilla and Taluk Panchayat - documentary videos and /or pictures of testimony through CD or other storable devices to various Government Departments and Panchayats - entry No.3 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. HELD THAT:- The applicant has stated that they are providing services to various State/Central Government Departments, Local Authorities and various Boards and corporations. The applicant has not specified to which Boards and corporations they are providing the service of producing documentary videos. Since the applicant is providing the said services to various State/Central Government Departments, Local Authorities the first condition to claim exemption is satisfied subject to the condition that the Boards and/or Corporations to which the applicant is providing the above said services qualify to be a 'Governmental Authority' or 'Government Entity' in terms of the definitions at (zf) and (zfa) respectively of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, as amended. The applicant is providing services by way of producing documentary videos, picture of testimony to various State Government Departments, Local Authorities, Boards and Corporations. But these services are not provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence provision of such services is liable to tax at 18%. 2021 (11) TMI 390 Requirement for registration - inter-state sales or not - Tax Invoice from Bengaluru office (Registered Place of Business) for imports received at Chennai Sea Port and directly sold to a customer either in Andhra Pradesh, Tamil Nadu, etc., could be raised, or a separate registration is to be obtained at the place of Importation, i.e. Tamil Nadu - place of supply of goods - If we do not need separate registration in Tamil Nadu, can we do the transaction using Karnataka GSTIN? - availability of Input tax credit to the registration in Karnataka u/ s 16(2) even though the goods have not been physically received in the premises of the applicant but directly transported to the customer. HELD THAT:- As per the provisions of place of supply of Goods under section 11 (a) of IGST Act 2017, the place of supply of goods imported into India shall be the location of the importer . In case of the applicant, location of the importer is the state of Karnataka where the applicant has obtained the GST registration. Therefore, the applicant though imports the goods to the port of Chennai, imported goods are deemed to have been supplied to the location of the importer i.e., Karnataka and then further supplied to customer. Hence imported goods supplied directly from the port of import to the customer located in other states or Union territories other than state of Karnataka, such transaction shall be treated as a supply of goods in the course of inter-State trade or commerce in terms of section 7(1) of the IGST Act, 2017 and is liable to issue IGST tax invoice in terms of section 20 of the IGST Act 2017 read with section 31 of the COST Act 2017. Section 22 of the CGST Act 2017 provides that every supplier is required to take registration in the state from where such supplier makes taxable supply of goods or services or both. Section 24 (i) of the CGST Act 2017 states that, persons making any inter-State taxable supply shall be registered under CGST Act 2017 - Since the applicant has stated that he does not have any place of business in Tamil Nadu and does not maintain any office / fixed establishment in Tamil Nadu or any other state in India other than Karnataka, the applicant is not required to take any separate registration at the place of importation. Section 20 of the IGST Act, 2017 read with section 16 of the CGST Act, 2017 provides that IGST paid on import of goods can be utilized as the credit of the input tax if such imported goods are used in the course of furtherance of his business - the explanation to the said section provides that where the goods are directly delivered to a customer under bill to ship to model, then it would be deemed to have received the goods even though the goods are shipped to the end customer location directly. 2021 (11) TMI 389 Classification of Supply of services - HSN Code - Rate of Tax - Pushti, a mixture of Ragi, Rice, Wheat, Green gram, Fried gram, Moong dal, and Soya in different proportion - applicability of Circular No.149/05/2021-GST dated 17.06.2021 to MSPC - MSPC is supplying food to CDPO for which the end user is anganwadi centers - entry No. 66 of Notification No. 12/2017 Central Tax (Rate), dated 28.06.2017 - HELD THAT:- The applicant states that that they are supplying the goods to the CDPO and CDPO in turn supplies the same to Anganwadis. The applicant is purchasing and supplying only goods and not into supply of any service. Since Notification No. 12/2017 Central Tax (Rate), dated 28.06.2017 deals with supply of services which are exempted, the same cannot be applied to supply of goods as in the case of the applicant. Since the Notification No. 12/2017 Central Tax (Rate), dated 28.06.2017 is not applicable to the applicant's case, Circular No. 149/05/2021-GST, dated: 17.06.2021 also is not applicable to the applicant's case. Circular No.149/ 05/ 2021-GST dated 17.06.2021, does not apply to MSPC as the applicant is into supply of goods. 2021 (11) TMI 388 Classification of goods - eggs / hatcheries - classified under the Agricultural Produces/ Products or not - Applicability of GST on Transportation Services by Rail on Eggs/hatcheries under GST Act - HELD THAT:- Eggs, including hatching eggs are obtained by rearing of chicken (Poultry Farming) directly. They are either meant for food or as raw material (hatching eggs) for further propagation, and as per definition of Agricultural Produce, any produce out of rearing of all life forms of animals, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. Thus fresh eggs in shell on which no further processing is done are covered under the definition of Agricultural Produce. There is no condition in the definition that this has to be done by a certain type of person to qualify for the definition. Since the applicant is involved in providing services of transportation of agricultural produces i.e. eggs, by rail from one place in India to another, those services are hence covered under the entry 20 of Notification No.12/2017-Central Tax (Rate) dated 28-06-2017 and hence such services are exempt by the said Notification from payment of taxes under the CGST Act. Income Tax 2021 (11) TMI 439 Depreciation on machinery and equipments - Depreciation @ 25% or 100% - pollution control equipments used aqua culture purposes for providing healthy growth of prawn restricting pollution etc.-HELD THAT:- No evidence was led by the Assessee and no material was placed before the AO to indicate that it was using a specially designed natural pond for rearing prawns. Therefore, the Court is not persuaded that on the basis of the above decision Victory Aqua Farm Ltd.[ 2015 (9) TMI 758 - SUPREME COURT ] , the conclusion reached on factual basis by the AO and CIT(A) concurrently and latter affirmed by the ITAT is erroneous. Even before this Court, learned counsel for the Assessee was unable to demonstrate why the depreciation on the equipments in question should be allowed @ 100% and in respect of approach road, drainage, bore wells, reservoir etc. it should be 25% and not 100%. Question II framed by this Court is answered in the affirmative i.e. in favour of the Revenue and against the Assessee - As held that the ITAT was right in restricting the claim for depreciation on the equipments in question @ 25% as against 100% as claimed by the Assessee. Road, drainage, bore-well, reservoir etc on which claim for depreciation made @ 25% holding as per schedule holding them as plant etc. can it be reduced to 10% - Question III is again answered in favour of the Revenue and against the Assessee by holding that the claim for depreciation @25% on approach road, drainage, bore wells and reservoirs etc. is not admissible and that the ITAT has rightly limited it to 10%. 2021 (11) TMI 431 Validity of reopening of assessment u/s 147 - notice to non existing entity - Curable defect u/s 292B or not? - HELD THAT:- As per ALOK KNIT EXPORTS LIMITED (M/S. NIRAJ REALTORS SHARES PVT. LTD. [ 2021 (8) TMI 777 - BOMBAY HIGH COURT] when a company is merging into another company that merging company ceases to exist. Principal Commissioner of Income Tax, who is supposed to have approved the initiating of proceedings under Section 148 also should have brought to the notice of or guided respondent no.1 that the notice ought to be issued in the name of petitioner and not Company which ceased to exist. - Decided in favour of assesse. 2021 (11) TMI 424 Disallowance being expenses incurred by the assessee towards reclamation and rehabilitation of mine area - allowable revenue expenses u/s 37(1) or not? - HELD THAT:- All these documents are public documents and are in the public domain. These documents are necessary for us to adjudicate the issue in this appeal and therefore we admit the aforesaid documents are additional evidence. From a perusal of the sequence of events relating to mining operations and orders of the Hon ble Apex Court especially in the order dated 28.09.2012, it is clear that the Hon ble Supreme Court directed compensatory payment to be made by the lease holders of various mines for Restoration and Rehabilitation of damage to ecology owing to mining operations. This payment was made for the purpose of restoring the ecological balance consequent to damaged ecology owing to mining operations. It is pursuant to the aforesaid directions that the assessee had to make the aforesaid payment and this fact is not in dispute. In fact, in the decision rendered by this Tribunal in the case of Ramgadh Minerals and Mining Ltd [ 2020 (11) TMI 174 - ITAT BANGALORE] Payment in question cannot be regarded as the payment which is hit by explanation to section 37(1) of the Act. Revenue authorities proceeded on the basis that since the assessee did not have licence for mining and could undertake only prospecting operations, the assessee could not have incurred these expenses which are in relation to mining operations and by doing so, the assessee has violated the conditions imposed on them by the Government of Karnataka in their order dated 07.11.2012 permitting the assessee to undertake prospecting operations. The aforesaid conditions imposed in the order dated 07.11.2012 cannot be the basis to construe these expenses in question as the payment which is hit by the provisions of explanation to section 37(1) - these payments cannot be said to be the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law. As the sequence of event would go to show that the payment in question is for the purpose of reclamation and rehabilitation of mine area and paid consequent to the directions of Hon ble Supreme Court. The expenditure in question was the revenue expenditure and had to be allowed as a deduction under section 37(1) of the Act as expenditure incurred wholly and exclusively in connection with the business of the assessee. In this regard, that the AO has not doubted the claim of the assessee that the payment in question has been made towards reclamation and rehabilitation of mines. In these circumstances, we direct that the deduction claimed should be allowed. - Decided in favour of assessee. 2021 (11) TMI 422 Penalty levied u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT:- On identical set of facts as decided in AVEE MEDI SURGICALS PVT. LTD. VERSUS ACIT, CENTRAL CIRCLE-6 NEW DELHI [ 2021 (7) TMI 669 - ITAT DELHI] AO to assume jurisdiction u/s 271(1)(c), proper notice is necessary and the defect in notice u/s 274 of the Act vitiates the assumption of jurisdiction by the learned Assessing Officer to levy any penalty. In this case it clearly establish that the notice issued under section 274 read with 271 of the Act is defective and, therefore, we find it difficult to hold that the learned AO rightly assumed jurisdiction to pass the order levying the penalty. As a consequence of our findings above, we direct the Assessing Officer to delete the penalty in question - Decided in favour of assessee. 2021 (11) TMI 421 Delayed deduction of the employees contribution of PF and ESI - scope of amendment by Finance Act, 2021 to section 36[1][va] and 43B - HELD THAT:- As in view of judgment in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] , the employees contribution paid before the due date of filing of the return u/s 139(1) of the I.T.Act is to be allowed as deduction u/s 43B of the I.T.Act. Therefore, the only issue to be decided in the instant case is whether the amendment to section 36(1)(va) and 43B of the I.T.Act by the Finance Act, 2021 is prospective or not. Since as categorically held that the amendment is prospective and not retrospective in operation, the learned Standing Counsel s plea does not have any merit. In the instant case, the assessment year being 2019- 2020, the amendment by Finance Act, 2021 to section 36(1)(va) and 43B of the I.T.Act does not have application. Therefore, the A.O. is directed to delete the disallowance - Decided in favour of assessee. 2021 (11) TMI 420 Scope of Black Money (Undisclosed Foreign Income Assets) And Imposition of Tax Act 2015 - whether as per provisions of the BMA it covers undisclosed foreign assets that existed at the point of time when provisions of the Act came into force? - applicability of the definition of beneficial owner under the Income Tax Act - HELD THAT:- Provisions of the Black Money (Undisclosed Foreign Income Assets) and Imposition of Tax Act 2015 can indeed be pressed into service in respect of an undisclosed foreign asset or income even if it was already in the knowledge of any Governmental authorities, other than the jurisdictional Assessing Officer, as at the point when the said legislation came into force. This question is thus decided against the assessee. If we are to hold that definition of beneficial owner as assigned by Explanation 4 to Section 139(1) is to equally apply, we will end up in a situation in which the BMA itself will become unworkable. Therefore, for both of these reasons- i.e. (a) the contextual requirements being otherwise, and (b) the adoption of this meaning rendering the provisions of BMA becoming unworkable, the definition under Explanation 4 to Section 139(1) cannot be adopted in the context of the BMA. We reject this plea of the learned counsel as well. Levy of interest under sections 40(1) and (2) of the BMA, which, in turn, refers to interest under sections 234A, 234B and 234C - As submitted that the question of levy of interest under sections 40(1) and 40(2) is only with respect to tax on an undisclosed foreign income and not in respect of tax on an undisclosed foreign asset. Since, according to the learned senior counsel, it is a case of tax on the unaccounted foreign asset by way of bank account, the provisions of Section 40(1) and 40(2) will not come into play. While we agree with the learned senior counsel on legal principle, and to that extent, his plea is indeed well taken, we reject this plea on the short ground that, as held by us for the detailed reasons set out earlier in this order, what has been assessed in the impugned assessments is undisclosed foreign income. On account of this factual aspect, even though learned senior counsel is correct in his legal plea, the assessee gets no relief in respect of levy of interest under sections 40(1) and 40(2), referable to Section 234A, 234B and 234 C We uphold the action of the Assessing Officer in bringing to tax, in the hands of the assessee, the income reflected, to the extent information was available to him, in respect of undisclosed accounts with UBS AG, Singapore, under the Black Money (Undisclosed Income and Assets) Imposition of Tax Act, 2015. The order of the Assessing Officer is thus restored and the relief granted by the learned CIT(A) is vacated. - Decided against assessee. 2021 (11) TMI 419 Disallowance of depreciation on JCB Machine - @ 15% or 40% - Assessee claimed depreciation on block of asset of plant and machinery @ 40%. AO allowed the claim of depreciation at the normal rate of 15%, thereby, disallowed the alleged excess claim of depreciation on JCB Machine in the reassessment order. HELD THAT:- Hon ble High Court in CIT Vs Gloard [ 2009 (8) TMI 1156 - KERALA HIGH COURT] held that JCB is a motor vehicle within the meaning of the said term as it is registered a a motor vehicle under Motor Vehicle Act and it answers the description of Motor Lorry within the meaning of the relevant entry in Income tax Rules and therefore entities for higher rate of depreciation. Thus, respectfully following the order of Hon ble Kerala High Court, we direct the AO to delete the disallowance of depreciation, disallowed by him. - Decided in favour of assessee. 2021 (11) TMI 418 LTCG - As per CIT-A there was a slump sale within the meaning of section 2(42C) attracting the provisions of section 50B - HELD THAT:- We find that as per the agreement, the price consideration for the undertaking and assets to be bought and sold (business) is ₹ 14,00,00,000/- as set out in the schedule attached as annexure A quoted supra. Therefore, the case in hand is squarely covered by the judgment of the Hon ble Supreme Court in the case of Vatsala Shenoy[ 2017 (2) TMI 865 - SC ORDER] As per the definition of section 2(42C), sale in question could be treated as slump sale only if there was no value assigned to the individual assets and liabilities in such sale. This has obviously not happened. It is stated that at the cost of repetition the value was assigned to individual assets, as per Annexure A, which is placed and liabilities were taken over by the purchaser. Considering the facts of the present case, it is held that the sale in question is not slump sale, obviously, section 50B also does not get attracted as this section contains special provision for computation of capital gains in case of slump sale. Respectfully following the above judgement of the Hon ble Supreme Court, we set aside the order of the CIT(A) and direct the AO to delete the addition made by the AO treating the same as long term capital gains - Decided in favour of assessee. Disallowance of expenditure - AO found that the assessee could not furnish bills and vouchers towards administrative and selling expenses claimed in the return of income filed - HELD THAT:- As revenue authorities have made the disallowance on the ground that the AR of the assessee agreed for the same during the course of assessment proceedings. Whereas, the AR of the assessee submitted that the assessee has not authorized its AR for agreed addition. In view of the contrary submissions, we remit this issue to the file of the AO with a direction to redecide the issue after examining the material put-forth by the assessee before him in accordance with law after providing reasonable opportunity of hearing to the assessee in the matter. The assessee is directed to substantiate its claim by way of documentary evidence at his own risk and responsibilities with three effective opportunities of hearing. Therefore, the ground raised by the assessee on this issue is allowed for statistical purposes. 2021 (11) TMI 417 Exemption u/s 11 - Denying of registration u/s 12A - HELD THAT:- Assessee society was formed keeping in view the benefit of the small and marginal farmers. The main objective of the assessee society is involving in organizing small and marginal farmers as Farmers Interest Groups, Farmers Producers Organisation and Farmers Producers Company for endowing them with bargaining power and economies of scale. The assessee society s operation was for enhancing agriculture production and farmers profitability through agriculture undertaking and by establishing the effective connect between the farmers and the agriculture eco system developed by the Government of India. The objects of the assessee society are in the nature of advancement of any other object of the general public utility which fall in the definition of charitable purpose as defined u/s 2(15) - CBDT in Circular Number 11/2008 dt. 19/12/2008 clarify vide para 2.2 that the relief of the poor will include within its ambit the purposes such as relief to destitute orphas or the handicapped, disadvantaged women or children, small and marginal farmers etc. Welfare of small and marginal farmers also comes under the category relief of the poor which in the aforesaid Circular has been included under the definition of charitable purposes u/s 2(15) - In the present case, it is not in dispute that the assessee society is implementing the various new projects launched by the State Government as Crop Cluster Development Programme for Horticulture Clusters, which is to be implemented through FPO and this programme is aimed on the backward and forward integration by creating farm infrastructures and the FPO in turn enables the farmers in enhancing the productivity through efficient cost effective and sustainable resources, it also remove hurdles in enabling farmers access to the market both is buyers and sellers. Therefore the main object of the assessee society is to work for the benefit of the small and marginal farmers and to protect the interest of the farmers which comes under the definition of relief of the poor as clarified in Circular No. 11/2008 dt. 19/12/2008 issued by CBDT. Main object of the assessee society is to benefit the small farmers which comes under the category of relief to the poor and is a charitable activity therefore the assessee society fulfills the conditions laid down in Section 2(15). As per the Memorandum of Association and byelaws the assessee society was incorporated to carry out the objective which were essentially directed at protecting the interest of the farmers which comes under the category of relief to poor. In the present case, the Ld. CIT(E) while rejecting the application moved by the assessee for registration u/s 12AA commented on various expenses incurred by the assessee which he was not required to see at the time of granting the registration since the application of income by incurring the expenses has to be considered by the A.O. on year to year basis after the assessee files its return of income claiming exemption under section 11. CIT(E) was not justified in rejecting the application moved by the assessee for registration under section 12AA of the Act. Accordingly the impugned order is set aside and the Ld. CIT(E) is directed to grant the registration to the assessee society under section 12AA - Decided in favour of assessee. 2021 (11) TMI 416 Long term capital gain by adopting full value of consideration by invoking provisions of section 50C(1) - HELD THAT:- In the present case agreement was with one Mr. Mohamed Zabeer and sale deed was executed in favour of Mrs. Maryam Mahmood and Mrs.Thaika Sithi Aliya, sister and Mother of purchaser of property and hence, it does not in any way take away right of the assessee to get benefit of proviso to section 50C(1) - insofar as observations of the CIT(A) with regard to non-registration of sale agreement, it is very clear from the Registration (Tamil Nadu Amendment) Act, 2012, any instruments of agreement relating to sale of immovable property registration was made mandatory from October, 2012. Therefore, for non-registration of sale agreement, more particularly when the assessee has subsequently acted upon such sale agreement, benefit cannot be denied to the assessee. We are of the considered view that the Assessing Officer as well as learned CIT(A) has erred in recomputing long term capital gain by adopting full value of consideration by invoking provisions of section 50C(1) of the Act and further, adopting guideline value of property as on date of registration of property, even though the assessee has fixed consideration for transfer of property by entering into an agreement to sell. Hence, we direct the AO to adopt sale consideration for transfer of property as agreed between the parties in sale agreement dated 09.02.2012. - Decided in favour of assessee. 2021 (11) TMI 415 Reopening of assessment u/s 147 - Whether re-opening of assessment was done beyond the period of four years without establishing the assessee's failure to disclose fully and truly the material facts relating to the assessment? - Whether re-opening of assessment cannot be done without any new material on the basis of which the Assessing Officer shall form a belief of escapement of income chargeable to tax? - CIT-A quashing the reassessment proceedings - HELD THAT:- In the present case before us is with regard to Section 147/148 of the Act, the guiding principles still is that it is mandatory for the Assessing Officer to conduct independent enquiry and examination of facts to arrive at satisfaction justifying 'reason to believe' that income has escaped assessment . Considering the totality of facts and circumstances, We are, therefore, of the considered view that the findings of the Ld. CIT(Appeals) needs no interference and the same is upheld. AO passed a final assessment order without issuing a draft assessment order under Section 144C - As per DR mandatory element of Provisions to section 144C of the Act shall apply to eligible assessee only as contained therein but not in every case - DR submitted that on reference to TPO first examination has to be done based on parameters contained in the said provision whether, the assessee is an eligible assessee and only then the mandatory provisions of Section 144C of the Act would apply and not before that - HELD THAT:- It is in respect of each and every case which involves transfer pricing risk parameters and in respect of international transactions or specified domestic transaction or both, they have to be referred to the TPO by the Assessing Officer after obtaining approval of the jurisdictional PCIT or CIT. Therefore, if the reason of selection of case for scrutiny is transfer pricing risk parameters, then the case has to be mandatorily referred to the TPO by the Assessing Officer after obtaining such approval. Thus, the contention of the Ld. DR cannot be entertained since the Instruction No. 3/2016 (supra.) is clearly binding on the department and it is categorically mentioned therein that any case involving transfer pricing risk parameters in respect of either or both international or domestic transaction, the case mandatorily has to be referred to the TPO by the Assessing Officer after obtaining necessary approval. There is as such no distinction of treatment pertaining to the terms as eligible assessee. Considering the totality of facts and circumstances and on examination of facts on record and the judicial decisions, we hold, the re-assessment order passed u/s. 143(3) r.w.s. 147 of the Act as bad in law, void-ab-initio, hence, justified to be quashed 2021 (11) TMI 414 Validity of reopening of assessment u/s 147 - Non supply of reason to assessee - HELD THAT:- The reasons recorded for issuance of notice u/s. 148 of the I.T. Act for assessment years 1994-1995 and 1995-1996 has not been supplied to the assessee inspite of specific request by the assessee. Therefore, going by the dictum laid down in the case of Pr. CIT v. V. Ramaiah [ 2018 (12) TMI 1516 - KARNATAKA HIGH COURT] , we hold that the reopening of assessment is invalid. - Decided in favour of assessee. 2021 (11) TMI 413 Disallowance of interest u/s.36(1)(iii) - interest bearing funds had been utilised for acquiring the shares of subsidiary company - Proof of self owned funds - HELD THAT:- As the assessee had sufficient self-owned funds to make investments in the shares of its subsidiary company, viz. CCPL, therefore, as held in the case of HDFC Bank Ltd.[ 2014 (8) TMI 119 - BOMBAY HIGH COURT] that in case of mixed funds i.e interest bearing borrowed funds and the self-owned funds/interest free funds available with an assessee, the presumption would be that the investment was made by the assessee out of its self-owned funds. As pursuant to the availability of sufficient interest free funds with the assessee to justify the investment made towards purchase of shares of its subsidiary company, viz. CCPL, no part of the assessee s claim for deduction of the interest expenditure u/s 36(1)(iii) could have been disallowed - Decided in favour of assessee. Disallowance of the assessee s claim for deduction of brokerage commission expenses - no corresponding sales were recognized as revenue/income by the assessee company during the year under consideration - HELD THAT:- Admittedly, it is a matter of fact borne from the record that the assessee had shown the brokerage and commission expenses as prepaid expense in its audited accounts. However, the assessee had claimed the aforesaid expenses as a deduction while computing its income for the year under consideration. Insofar the claim of the revenue that the assessee s claim for deduction was liable to be rejected, for the reason, that it had itself reflected the same as prepaid expenses, the same does not find favor with us. Hon ble Supreme Court in the case of CIT Vs. British Paints Limited [ 1990 (12) TMI 2 - SUPREME COURT] has held, that it is not only the right but the duty of the Assessing Officer to act in exercise of his statutory power and reject the accounting system adopted by the assessee for determining what, in his opinion, is the correct taxable income - we are unable to persuade ourselves to accept the aforesaid claim of the revenue that as the assessee had reflected the aforesaid expenses as prepaid expenses and had not debited the same in its Profit and loss account for the year under consideration, thus, for the said standalone reason its claim for deduction of the same was not to be accepted. As decided in GOPAL DAS ESTATES AND HOUSING PVT. LTD. [ 2019 (3) TMI 1272 - DELHI HIGH COURT] in case of an assessee engaged in real estate business, the expenditure incurred on advertising and publicity being necessary for promotion of business was to be allowed as business expenditure. We, thus, in terms of our aforesaid observations are of the considered view that as the commission and brokerage expense incurred by the assessee company are in the nature of finance/selling expenses, therefore, the same were allowable as a revenue expenditure during the year under consideration. Accordingly, we herein vacate the disallowance of the assessee s claim for deduction of brokerage and commission expenses - Decided in favour of assessee Surplus earned on sale of Transferable Development Rights (TDR) - whether or not the surplus/profit on the sale of TDR s by the assessee was liable to be brought to tax in its hands, as claimed by the revenue; or was to be reduced from the project cost i.e WIP cost, as claimed by the assessee? - HELD THAT:- We find substantial force in the view taken by the lower authorities that as the transaction of sale of TDR s that were purchased by the assessee from market in prior years was nothing but sale of its stock-in-trade, therefore, the profit/surplus arising therefrom was liable to be brought to tax in its hands as its business income. Admittedly, the TDR s in question were purchased by the assessee for loading onto its residential project at Thane and the same formed part of its stock-in-trade. Also, it is an undisputed fact that the assessee was following mercantile system of accounting on project percentage completion method for its residential project at Thane. In a case where the TDR is earned by an assessee i.e a builder and developer in the course of execution of its project, then, undeniably the said TDR would be inextricably linked or in fact interwoven and intertwined with the project, and the sale of the same cannot be divorced and therein considered on a standalone basis i.e separately from the project. Alternative claim of the ld. A.R that if the profit/surplus from sale of TDR's is held to be taxable as business income of the assessee, then, the Closing WIP be increased by the amount of the sale proceeds of the TDR's - As the view taken by the lower authorities that the profit/surplus on the sale of TDR s is to be assessed as the business income of the assessee has been approved by us, therefore, we herein direct the A.O to increase the value of the Closing WIP to the extent of the cost of the TDR s whose corresponding sale consideration was reduced by the assessee from the WIP cost i.e the project cost. Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. Depreciation on office equipments, vehicles etc. - As assessee who was engaged in the business of a builder developer had not recognized any income from such development activity during the year under consideration, the A.O declined his claim for depreciation - HELD THAT:- As observed by the CIT(A), and rightly so, unlike the depreciation on assets which are directly linked to the project and are to be included in the project cost i.e WIP cost; depreciation on office equipments, computers, fixtures and furniture and vehicles which are used for administrative work will not form part of such project cost and would be separately allowed as a deduction. Accordingly, finding no infirmity in the view taken by the CIT(A) we uphold the same. - Decided against revenue. Disallowance of deduction of administrative expenses - as argued CIT-A deleted the addition simply relying on the guidance note of ICAI issued for real estate developers, failing to appreciate that there was no such activity to incur such expenses - HELD THAT:- We find substantial force in the claim of the ld. A.R that as the aforesaid expenses in question do not form part of the project cost i.e WIP cost, therefore, the same for the purpose of computing the income of the assessee are to be allowed as a deduction in the year in which they were incurred. We find no infirmity in the reliance placed by the CIT(A) on the Guidance Note for Accounting for Real Estate transactions (Revised 2012) , wherein Para 2.4 of the same, inter alia, provides that the general administrative costs, research and development costs, depreciation on idle plant equipment etc. are not to be considered as part of construction costs and development costs. Apart from that, we are of the considered view that the CIT(A) had rightly observed that the expenses which form part of the project cost i.e WIP cost are specifically listed in Para Nos. 2.3 Para No. 2.5 of the Guidance Note on Real Estate Transactions (Revised 2012) . - Decided against revenue. 2021 (11) TMI 412 Disallowance of expenses holding that the same were incurred for non-business purposes - HELD THAT:- CIT(A) separately discussed about each head of all expenses and held that the said expenditure was relating to the business activity and business purpose of the assessee. The assessee had duly explained that the assessee had undertaken a new project at Hinjawadi, Maharashtra jointly with MIDC [Maharashtra Industrial Development Corporation, a Govt. of Maharashtra undertaking]. As submitted that for better management of the J.V(joint venture) business, the assessee took a land for its offices at Mumbai/Bangalore and several expenditure were incurred for upkeeping and maintenance of office located at Mumbai Bangalore. The assessee had claimed this expenditure as business expenditure. The Ld. CIT(A) has also disallowed certain expenditure observing the same of capital nature and of enduring benefit of the assessee. The Ld. DR could not point out infirmity or defect in the above findings of the Ld. CIT(A) warranting our interference. Disallowance on account of interest on delayed payment and TDS written off - HELD THAT:- The assessee duly explained to the Ld. CIT(A) that the TDS deducted by other parties was shown receivable by the assessee. However, due to non-supply of the requisite documents- TDS certificates etc by the concerned deductor, the assessee could not claim the TDS refund. Therefore, said amount was written off in the books of assessee. The Ld. CIT(A) observed that since the assessee company could not recover the TDS refund, hence, the same was rightly written off in the books of accounts. He accordingly deleted the disallowance so made by the Ld. AO, The Ld. DR could not point out any infirmity in the Ld. CIT(A)'s findings on this issue, warranting our interference. Therefore, this issue is decided in favour of the assessee. Ground no. 2 of this revenue's appeal is dismissed. Disallowance of interest expenditure invoking the provisions of section 36(1)(iii) - interest on loans and advances given to its subsidiaries - HELD THAT:- As explained that in the F.Y relevant to A.Y 2004-05 i.e. year under consideration, the assessee had acquired 25,000 shares of said company out of commercial exigency as the said company was also in the line of real estate projects and the said company had entered into J.V(Joint Venture) with its subsidiary for the development of a commercial center namely ' World Trade Center'. Since the said company had made investments in the said project and considering huge potential for the development of the said company, the assessee company invested in the said company and the assessee ultimately acquired the said company in F.Y 2007-08. It was explained that the said advances were made/invested for business purpose of the assessee. Moreover, the assessee has used loans for income on investments. The assessee had shown an interest income of ₹ 2.68 crores. CIT(A) considering the overall facts and circumstances of the case deleted the disallowance so made by the Ld. AO. No reason to interfere in the above well-reasoned order of the Ld. CIT(A) on this issue. Allowable business expenses - addition of Expenditure incurred in setting up and maintenance of Mumbai Bangalore office - HELD THAT:- CIT(A) has categorically discussed that the above said expenditure was incurred by the assessee for up keeping and running of office of assessee at Mumbai/Bangalore, which was for business purpose. The Ld. CIT(A) has also disallowed certain expenditure, which was found to be capital in nature. We do not find any infirmity in the order of the Ld. CIT(A) on these issues. Undisclosed income added by the ld. AO on the basis of data base (AIR) information available in Form 26AS - assessee explained that the concerned deductor of TDS has wrongly mentioned the name of assessee whereas such income was never received by the assessee - HELD THAT:- CIT(A) considering the submissions of the assessee deleted the disallowance so made by the Ld. AO. Since the assessee has duly explained that the assessee has not received such commission and necessary evidences in this respect was also submitted such as the name of the party with whom said transactions were made by the concerned deductor. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) on this issue and the finding of the Ld. CIT(A) on this issue is hereby upheld. Disallowance u/s. 14A on account of expenditure incurred for earning of tax exempt income - CIT(A) while decided this issue has observed that own funds of the assessee were much more than the investments made, therefore, the presumption would be that the assessee used its own funds for making this investments - HELD THAT:- CIT(A) has rightly deleted the disallowance made by the AO on this issue applying settled proposition of law. In view of above, we do not find any merit in ground no. 3 of this revenue's appeal 2021 (11) TMI 411 Nature of receipt - Addition of amount received by the assessee from the contractors who delayed in execution of the work to make fit the rented premises for conducting business - case of the assessee before the authorities below that the contract shows that the amount of liquidated damages was fixed at ₹ 20,000/- per day irrespective of contract value and since the contract relates to bring the profit making apparatus into existence, any damage received on account of such delay amounts to capital receipt - HELD THAT:- Assessee reduced the cost of project by the amount of liquidated damages received and the cost of the project remained only at balance figure. It is also clear that until and unless the contractor carried out the desired modification, the premises was not fit to commence the business of the assessee and thereby related to bringing the profit making apparatus into existence. We, therefore, are of the opinion that inasmuch as the assessee credited the amounts received to the capital asset and treated it as capital receipts, the same cannot be brought to tax. Hence, this addition is directed to be deleted. Addition on assessee not producing the books of account - HELD THAT:- As submitted on behalf of the assessee that the operational revenue of the assessee is around ₹ 258 crores on all India basis and in so far as this particular expenditure this relates to the expenditure of giving gifts to the VIPs and Celebrities which would boost the business of the assessee. Having regard to the magnitude of the business of the assessee and the quantum of expenditure, we are of the considered opinion that such an expenditure could be allowed. Accordingly, the grounds raised by assessee are allowed. 2021 (11) TMI 410 Addition u/s 68 - Unexplained accumulated cash in hand - cash received through Will - assessee has not proved the genuineness of the Will - assessee could not furnish documentary evidence to prove the genuineness of the transaction and creditworthiness of Aunt of the Karta of the Assessee HUF - HELD THAT:- Sale agreement clearly indicates that there exists of cash to the extent of ₹5.06 crores with Late Mrs. Rekha K. Bhansali. This fact was brought to the notice of Ld. CIT(A) and also the AR of the assessee submitted in his written submission that this evidence was submitted before tax authorities and the tax authorities has not controverted the above existence of the sale agreement and we also noticed that even though the Assessing Officer expressed the non-genuinity of the Will based only on witness submission before him and we noticed that the Ld. CIT(A) rejected the submissions of the witness with the observation that the witness has admitted to frequent the house and office of the assessee from relevant period when the Will was executed. He identified the signature as his own but do not remember. CIT(A) observed that lameness of the witness cannot be the reasons to punish the assessee. It is fact on record that there exists Will agreement and the Will and the sale agreement confirming the existence of cash in hand with Late Mrs. Rekha K. Bhansali and subsequent distribution of the cash based on the Will to existing HUF and respective cash deposits in the bank account of the assessee clearly indicates that the assessee has proved the source of cash. It is not expected to bring on record, the genuineness of source of source of a deceased person. The assessee can prove only the source for the credit in its books of account. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A) and accordingly grounds raised by the Revenue are dismissed. 2021 (11) TMI 409 Disallowance on account of delay in deposit of employee share of ESI and EPF - assessee had deposited before due date of filing of ITR - disallowance made by CPC under section 143(1) on debatable issue - HELD THAT:- Since the facts involved in the present case are identical to the facts involved in the case of Raja Ram Vs. ITO, Yamunanagar [ 2021 (11) TMI 370 - ITAT CHANDIGARH] Addition by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the delayed deposit of the employees's contribution towards ESI and PF though paid well before the due date of filing of return of income u/s. 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va)So respectfully following the aforesaid referred to order of the Coordinate Bench of the Tribunal, the disallowances sustained by the Ld. CIT(A) are deleted.- Decided in favour of assessee. 2021 (11) TMI 408 Addition u/s 68 - unexplained deposit of cash in the bank account - addition made by the Assessing Officer on ad-hoc basis @50% of the sales - HELD THAT:- AO has passed an order based on surmises and conjecture. His order is bereft on cogent material on which addition is based - CIT(A) himself has further passed a contradictory order where he claimed that assessee and the Assessing Officer both are correct. The defect in Assessing Officer's approach pointed out by learned CIT(A) that books have not been rejected, would not warrant sustaining the addition. Further note that the assessee in grounds of appeal has also raised the issue of lack of opportunity. Accordingly in the facts and circumstances of the case I deem it appropriate to remit the issue to the file of the Assessing Officer. Assessing Officer should pass an order afresh after giving the assessee proper opportunity of being heard. Appeal is allowed for statistical purposes. 2021 (11) TMI 407 Addition of interest expenditure - Addition being 11% (SBI lending rate) holding it to be the interest attributable to the advance made by the assessee company to its director Sri B.S.Chadha - interest as disallowed out of the interest claimed alleging that the interest was not attributable to the business requirement and the borrowed funds had been diverted for non-business purposes - HELD THAT:- As rightly pointed out by the ld. DR, the interest expenditure to the tune of ₹ 17,26,100 is not subject matter for consideration before the AO through the directions of the Tribunal. The assessee has not agitated this ground before the Tribunal in the earlier occasion. As such, there was no direction on this issue by the Tribunal so as to be taken up by the AO in the second round in the proceedings u/s. 143(3) r.w.s. 254 of the Act. Hence there is no merit in the argument of the ld. AR for the assessee that there was disallowance of the said amount by the AO in his second round of order. Accordingly, this ground of the assessee is disallowed. Undisclosed scrap sale - HELD THAT:- Tribunal remanded this issue to the AO on the reason that the assessee did not furnish any evidence to substantiate its claim that income had already been offered to tax in earlier years and it was not clear as to whether earlier record available with the AO had been considered while arriving at the conclusion that no evidence was produced by the assessee - in the remand proceedings also, the assessee failed to produce relevant evidence in respect of its claim. Even after going through the documents available with the AO in the form of part ledger account and Profit Loss account submitted by the assessee during the assessment proceedings, it was found by the AO that only scrap sale to the extent of ₹ 31,45,974 out of total scrap sale of ₹ 57,22,227 was credited in the ledger account as scrap sale and the balance was not offered for taxation. Hence the lower authorities rightly brought to tax the balance amount of ₹ 25,76,253 which is based on material found during the course of survey and the assessee was not able to reconcile the same, even after providing opportunity of hearing before the lower authorities. Therefore, the addition is justified and this ground is dismissed. Addition of capital gain on transfer of property - HELD THAT:- Actually the CIT(Appeals) decided the issue in favour of assessee and observed that the assessee claimed the incurring expenditure as expenses towards levelling, boundary work and fencing, but failed to furnish any evidence supporting these expenses and hence upheld the disallowance. Even before us, there is no iota of evidence in support of the claim of the assessee. Hence, on this count, there is no error in the order of CIT(Appeals). Other contention of the ld. AR is that the sum of ₹ 3,30,29,479 should have been excluded from the computation of long term capital gain as it was offered as income from other sources. Admittedly, the CIT(Appeals) has given relief on this count by observing that the said amount cannot be taxed twice; once as capital gain and another as income from other sources and prima facie accepted the argument of the assessee. However, he directed the AO to take appropriate rectification action after due verification of the facts and after affording necessary opportunity to the assessee in this regard. Being so, the assessee cannot have any grievance on this count. However, we make it clear that the AO has to carry out the directions of the CIT(Appeals) in para 9.4 of his order. With these observations, this ground of the assessee is dismissed. Capital gain in respect of transfer of property to IDEB - HELD THAT:- As held in the case of Alapati Venkataramiah [ 1965 (3) TMI 21 - SUPREME COURT] to attract liability to tax u/s. 45, it is sufficient if in the accounting year profits have arisen out of transfer of capital asset. In other words, if the assessee had a right to receive the profit in the assessment year under consideration, the assessee is liable to pay capital gains tax on transfer of capital asset. Actual receipt of profit is not a relevant consideration. Once the profits have arisen in the accounting year out of the transfer of capital asset, it would be sufficient to attract liability u/s. 45 of the Act. The contention of the assessee is that there was no transfer in the assessment year under consideration as the possession of the property has not been given to the developer. In the present case, the assessee executed registered JDA along with registered GPA which authorizes the developer a provisional permission to enter into the land and authorizing them to develop, execute sale deed or other conveyance in respect of the impugned property and authorize to sell the constructed area of both the assessee as well as the developer. As such, there is a transfer in terms of section 45 r.w.s. 2(47) of the Act. Accordingly, we decide this ground against the assessee. 2021 (11) TMI 406 Reopening of assessment u/s 147 - Transfer of case u/s 127 - assumption of jurisdiction of AO for passing the impugned assessment order by the ACIT, Circle 1(2)(1) in AY 2006-07 - AR submitted that as per the territorial jurisdiction u/s. 124 of the Act, the assessee was assessable to income tax by Income tax Officer, Ward-10(1), Bangalore - HELD THAT:- Originally the assessee was assessed under ITO, Ward 10(1), Bangalore prior to 2.5.2013. Consequent to order u/s. 127 dated 2.5.2013, the jurisdiction of the assessee was changed to DCIT, Circle 2(1) / ACIT 4(2)(1), Bangalore. Subsequently, based on CBDT Notification dated 22.10.2014, the jurisdiction of the assessee was changed to be assessed u/s. PCIT-4, Bangalore. Afterwards, there was an order u/s. 127 of the Act dated 15.11.2014 wherein the CIT-4, Bangalore changed the jurisdiction from ACIT, Circle 4(2)(1) to Circle 1(2)(1). There are two notices u/s. 148 of the Act brought on record by the ld. AR. Once an order under u/s. 127 is passed on 15.11.2014 by CIT-4, Bangalore, the jurisdiction of the assessee was with DCIT, Circle (2)(1), Bangalore or ACIT, Circle 4(2)(1) ceased to have jurisdiction over the assessee. The jurisdiction enjoyed by Circle 2(1) in terms of section 127 stood abrogated. Accordingly, after 15.11.2014, ACIT, Circle 1(2)(1) could exercise power conferred on him for the purpose of proceedings against the assessee. Being so, when ACIT, Circle 1(2)(1) received the case records in terms of order u/s. 127 dated 15.11.2014, he is having right to issue notice u/s. 148 so as to frame assessment u/s. 143(3) of the Act. In the present case, jurisdiction over the assessee was conferred by law in terms of section 127 of the Act and the case has been rightly transferred from Circle 4(2)(1) to Circle 1(2)(1), Bangalore. There is no error in assuming jurisdiction over the assessee by the present AO i.e. ACIT, Circle 1(2)(1), Bangalore. This ground of the assessee is dismissed for AY 2006-07. Eligibility of reason to believe - Whether Reasons recorded were not actually Reason to Believe and that no speaking order was passed by the Assessing Officer on the objections filed on the reasons recorded? - The expression reason to believe cannot be a mere conjecture or surmise. The reason for formation of belief for initiating assessment u/s 147 must have a rational connection or relevant bearing on the formation of belief. The existence or otherwise of such a belief on the part of the AO, is the very foundation for him to assume jurisdiction u/s 147. In the present case, it is established that the AO did not have any reason to believe as judicially interpreted by various courts. So the initiation of proceedings u/s 147 is bad in law. There is no nexus between the material coming to the notice of the AO and the formation of his belief that there has been escapement of income. The amount in the bank account with HSBC Geneva is not relating to the assessment years under consideration. Hence, the very basis for assuming jurisdiction is not factually correct, no reasonable belief can be formed based on such incorrect facts. As observed that the AO should have reason to believe that income chargeable to tax has escaped assessment. Assessing Officer has to determine income chargeable to tax . This presupposes that the material based on which he forms reason to believe that income chargeable to tax which has escaped assessment should enable computation of income that has escaped assessment. The AO has not stated as to how the entries in the Bank account represent income in these assessment years. Under such circumstances, it cannot be alleged that income chargeable to tax has escaped assessment. In the present case the reasons disclose that the AO reached the belief that there was escapement of income after he accepted the return for the assessment years and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the AO, both strongly deprecated by the Supreme Court in Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] . The reasons recorded by the AO in the present case confirms the apprehension about the harm that a less strict interpretation of the words reason to believe vis-a-vis an assessment made can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the AO subsequent to the conclusion of assessment. It reflects an arbitrary exercise of the power conferred under section 147. AO reopened the assessment merely on suspicion and surmise, without there being any positive material in his possession to prove that the assessee is the owner of the bank account or having beneficial interest in this bank account in these two assessment years. Therefore, we are of the opinion that the reopening of assessments are bad in law, which cannot be sustained. Accordingly, we quash the reassessments. Addition u/s. 69 - addition made by AO is that there was an account in HSBC Bank, Geneva in the name of TIC and the assessee was one of the beneficiary / nominee of the account - HELD THAT:- It is clear that to hold that assessee is beneficial owner of bank account of TIC, the revenue must prove that assessee is owner of asset or value articles. Unless, the Revenue proves with necessary material that the bank account belongs to the assessee or assessee is beneficial owner of such account, the provisions of section cannot be applied against the assessee. This clear proposition is further supported by the judgment Ellis Bridge Gymkhana,[ 1997 (10) TMI 2 - SUPREME COURT] - the onus to prove fully lies on the department. The department cannot be asking the assessee to prove the negative. As per KP VARGHESE case [ 1981 (9) TMI 1 - SUPREME COURT] to throw the burden of showing that there is no understatement of the consideration on the respondent would be attached and almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond that declared by him. Therefore, the addition made by the AO u/s. 69 of the Act is only on suspicion and surmise manner, without there being any material to prove that assessee is the beneficial owner of TIC or having financial interest in that bank account. AO has not discharged the burden cast on him to prove that the appellant is the beneficial owner of TIC. The AO has merely acted on a suspicion and has not brought on record any legal evidence to prove that the appellant is the beneficial owner/shareholder of TIC. TIC is duly incorporated in respective legal jurisdiction and assessee has given proper explanation on this count. The AO has failed to carry out the necessary enquiries and investigation to prove the allegation made by him in the assessment order. - Decided against revenue. 2021 (11) TMI 405 Excess stock found during the course of search - difference the valuation of the jewellery to the total income of the appellant - HELD THAT:- Valuation of closing stock as taken by the DVO was at the prevailing market rate as on the date of search whereas the valuation of stock should have been calculated at cost as per books of accounts maintained by the assessee. In fact, the difference in the quantity was duly offered by the assessee and incorporated with the books of accounts. The case made out by the assessee that the difference as added to the total income of the appellant was on account of valuation of stock and not on the basis of difference in quantity of stock which is not the proper method and which rightly considered by the Ld. CIT(A) is also having substance. This is an undisputed fact of the case that the difference as proposed is on account of valuation only and there is no difference in quantity. The difference in quantity has duly been addressed by declaring additional income at the time of search. No justification for addition in the difference the valuation of the jewellery to the total income of the appellant. The addition made by the Ld. AO on account of excess stock found during the course of search those cannot be set to be justified in view of the observation made hereinabove and, thus, the deletion of addition made by the Ld. CIT(A) is according to us is just and proper so as to warrant interference. Hence, the grounds of appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Chargeability of tax as per normal rates instead of amended provisions of section 115BBE of the act applicable w.e.f. 01/04/2017 relevant to AY 2017-18 - appellant has challenged the chargeability of tax @ 77.25% by invoking the amended provision of Section 115BBE of the Act on account of additional income declared at the time of search, survey and also the addition made by the AO - HELD THAT:- Since the search in the case of the appellant was carried out before the amendment the addition ought to have been made in terms of the prevailing provision and therefore, the addition made by the AO invoking Section 115BBE provision of which came into force only on 01.04.2017 is not sustainable. Therefore, the order passed by the Ld. CIT(A) deleting the addition made on that premise is according to us just and proper so as to warrant interference. Hence, the appeal preferred by the Revenue found to be devoid of any merit and is dismissed. - Decided against revenue. 2021 (11) TMI 404 Reopening of assessment u/s 147 - issuance of notice u/s 148 by non-jurisdictional Assessing officer - HELD THAT:- In the instant case, the assessee has not filed any return of income earlier and even no return of income has been filed in response to notice u/s 148 of the Act forgot about filing the return of income prescribed in notice u/s 148 of the Act. Therefore, in such facts and circumstances of the case, where the assessee has not raised any objections as so provided in terms of section 124(3) thereby accepting and not objecting to the jurisdiction of the Assessing officer within the timelines as so prescribed in the statue, the assessee cannot plead and take a legal defence challenging the jurisdiction of the Assessing officer after completion of the assessment proceedings. Thus, we agree with contentions advanced by the ld DR and the contents so advanced by the ld AR in this regard cannot be accepted. Jurisdiction of AO in initiating the reassessment proceedings on the basis of reasons recorded on incorrect assumption of facts and non application of mind at the time of recording of the reasons and even the approval granted mechanically by the concerned sanctioning authority - On perusal of the reasons so recorded, it is noted that it talks about certain information available on record with the Assessing officer. What is the nature and the source of such information and what the contents of such information and more importantly, how the said information pertains to or connected with the assessee and whether such information forms a tangible material in possession of the Assessing officer for forming a reasonable belief that income has escaped assessment is not discernable from the reasons so recorded. We agree with the contentions of the ld AR that possession of ITS information that the assessee has received certain amount could be basis for making further enquiries and in absence of such enquiries being conducted prior to recording of the reasons, there is absence of tangible material in possession of the Assessing officer at the time of recording of reasons and subsequent enquiries after recording of the reasons could not be used to supplement the reasons so recorded by the AO. Reasons so recorded talks about the assessee receiving gross receipts of ₹ 21,60,840/- on which TDS of ₹ 2,17,807/- has been deducted. The assessee s PAN number is also mentioned while recording the said reasons and the PAN number carries the date of birth of the assessee and on perusal thereof, it is noted that the assessee was a minor during the financial year 2009-10 relevant to assessment year 2010-11. The nature of gross receipts is again not discernable from the reasons so recorded and in absence thereof, it would be taken and understood as any gross receipts which is received by the assessee, being a minor and on which there is deduction of tax at source. Whether receipts in hands of the minor can be brought to tax in her own hands or in the hands of either of her parents in terms of section 64(1A) and whether there is application of mind by the Assessing officer and whether there is a prima facie finding to this effect which is discernable from the reasons so recorded? - The applicability of section 64(1A) or the exclusion as so provided in the proviso to the said provisions have to be examined atleast prima facie at the time of recording of the reasons itself and not subsequent during the course of reassessment proceedings. Further, we find that the reasons so recorded were sent for recommendation to the Additional Commissioner of Income Tax, Range 6, Jaipur and then to the approving authority, the PCIT-II, Jaipur and we find that these two authorities have also recommended and approved the reasons so recorded by the Assessing officer without considering the fact that the AO while recording the reasons that income has escaped in the hands of the minor has not considered the impact and applicability of provisions of section 64(1A) - said act thus again reflect a mechanical approach on part of the sanctioning authority and non-application of mind before granting such approval and various authorities cited at the Bar regarding non-application of mind by the sanctioning authority at the time of granting the approval thus support the case of the assessee. The assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings are vitiated in the instant case and does not satisfy the requirement of law and such action on the part of the Assessing Officer cannot be accepted and the notice under section 148 and consequent proceedings are thus set-aside. Where the reassessment proceedings have been quashed and set-aside appeal of assessee allowed. 2021 (11) TMI 403 Exemption u/s 11 - registration application u/s 12AA is pending before the Registration Authority - status has been taken as AOP and the entire surplus along with corpus donations have been taxed - HELD THAT:- In the present case admittedly, the application of the assessee was pending since 1998, and no order was passed against the assessee for grant of registration, however, the Assessing Officer continues to treat the assessee as a charitable entity for the period ending up to the assessment year 2013-14. In our considered opinion, once the registration application is pending before the Registration Authority under the Income Tax Act, then the assessee has the right to know the reasons within reasonable time for not according to the registration. In the present case as mentioned hereinabove till date, no order had been passed by the lower authorities either accepting or rejecting the application of registration filed by the assessee on 12.05.1998; however it is undeniable that the assessee continues and imparts the education in the field of Homeopathic Medical College and Hospital and running Graduate, under Graduate and post Graduate courses under the name of M/s Mahavira Homeopathic Medical College and Hospital. Though there is a lapses on the part of the assessee for not pursuing the registered application after the insertion of the amendment whereby the record of the registration was transferred from ITO to CIT(E) and thereafter - negligence on the part of the assessee cannot legalize the action on the part of the Assessing Officer/CIT(E) for not passing appropriate order on the application of registration dated 12.05.1998. Admittedly, until the assessment year under consideration, the assessee continued to be treated as a charitable entity without any formal registration order by the lower authorities. Even in the assessment years under review, the Assessing Officer has not denied that the assessee is charitable and imparting education within the four corners of section 2(15) of the Income Tax Act. In any case, the assessee s registration application should have been decided expeditiously and more particularly within the period of 6 months after the insertion of the amendment capping the time limit for grant of registration. Then the authorities are obliged to decide the application within 6 months. Failure on the part of the CIT(E) / ITO to decide the application, gave rise to crystallize right in favour of the assessee for treating the assessee, as deemed charitable society. The registration should have been considered to have deemed to had been granted to the assessee u/s 12AA. As relying on SOCIETY FOR THE PROMN. OF EDN., ALLAHABAD [ 2016 (2) TMI 672 - SC ORDER] assessee is deemed to be registered u/s 12AA for all the assessment years 2014-15 to 2016-17 and till the registration is subsequently granted by the CIT(E) vide order dated 12.11.2020. As in view of the amended provisions inserted to Act u/s 12A by the Explanation, the registration can be granted retrospectively if the activities of the assessee continue that the same activities of the assessee - we held that the assessee is entitled to the registration u/s 12AA on the basis of deeming provision and also on account of Explanation to section 12A. 2021 (11) TMI 401 TP Adjustment - computing TNMM operating margin earned from provision of services to AEs - amortization of goodwill and non-compete fees as non-operating expenses - HELD THAT:- We find that in subsequent A.Ys, the TPO has considered amortization of goodwill and non-compete fees as non-operating expenses. Therefore, we do not find any merits in considering them as part of operating expenses for the year under consideration when the facts are same. We direct the Assessing Officer to treat amortization of goodwill and non-compete fees as abnormal and non recurring expense and exclude them while computing TNMM operating margin earned from provision of services to AEs. Adjustment on purchase of medical equipments - Assessee is also engaged in the business of trading of medical equipment i.e. blood gas analysers and consumables - HELD THAT:- We find that the assessee Appellant follows a unique business model wherein the assessee buys analysers and sells them to third parties i.e. hospitals, medical institutions etc, books the revenue under the trading segment. On the other hand, if the customer is not willing to buy the analysers, such instruments were installed at the customer s premises and the consumables required by the customer in using these instruments were provided by the assessee. We find that the cost of such analysers imported from the AEs, were capitalized in the books of accounts of the assessee and its related operating cost, i.e. depreciation, has been charged to the profit and loss account while computing the profitability of the trading segment. We find that the assessee has used TNMM analysis to bench mark arm s length nature of international transaction of purchase of medical equipment. TPO has accepted the purchase price of such analysers for the trading segment as arm s length, but surprisingly, determined the arm s length price of purchase of fixed assets at Nil. The Assessing Officer, while framing the final assessment order, even went ahead one step further and disallowed the claim of depreciation considering the arm s length price determined by the TPO as NIL. The documents referred to by assessee during the course of arguments were considered from which we find that the import of goods was substantiated by furnishing the custom documentation which includes sample invoices along with corresponding bill of entries. Interestingly, we find that the custom s duty paid and cost of transportation were considered as the arm s length price by the lower authorities for computing the allowable depreciation whereas the cost of equipment has been taken at NIL. Equipment would not have been imported at NIL price even in an independent scenario. Moreover, we do not find that the TPO has applied any method to benchmark the said transaction, which action of the TPO is in violation of Rule 10B of the Income Tax Rules. We find that while treating the purchase of capital goods as NIL, the TPO failed to provide any comparable data which would have suggested that the arm s length price for the purchase of capital goods can be NIL. In our understanding, no third party would have sold such goods free of cost. In our considered opinion, arm s length price could be lower or higher but cannot be NIL, as the goods have been imported. Incidentally, the same products purchased from the same AE, for the same price, in the same year, cannot be held to be at arm s length for trading goods and not at arm s length for capitalised goods at the same time and in the same breath - we direct the Assessing Officer to allow the claim of depreciation on the purchase of fixed assets. Service Tax 2021 (11) TMI 428 Levy of service tax - reverse charge mechanism - amount paid to the foreign agents as commission - It is the case of the Revenue that as per Section 66A of the Finance Act, if services are rendered by a person outside India and are received by a person in India, the recipient of the service has to pay service tax as if he is the one providing the service - period August 2010 to March 2012 - Levy of penalty u/r 173Q - CENVAT Credit - revenue neutrality - extended period of limitation - - HELD THAT:- It is undisputed that the charging section under which the Department sought to demand service tax under reverse charge mechanism post 1st July, 2012 in this case is Section 66A read with Section 65(105)(zzb). These sections did not exist after 1 July 2012 and, therefore, any reference to any other legal provisions which may have existed during the relevant period and which could have been invoked is irrelevant. It is a well-settled legal principle that the charging section in any taxing statute must be strictly construed and in case of any ambiguity it should be interpreted in favour of the assessee. In the present case, the charging section which has been invoked for the period post 2012 does not exist at all and, therefore, there is no question of any ambiguity. Even if there is an ambiguity, it should go in favour of the assessee. Levy of penalty u/r 173Q - HELD THAT:- The penalty was imposed in both the cases mentioning Rule 173Q clearly indicating the violation on the part of the assessee but without mentioning the clause under this Rule. What was held by the High Courts is that not mentioning a clause of the Rule 173Q does not vitiate the imposition of penalty, when the rule itself is clear and so also are the allegations made. The present case is on a completely different footing and the sections under which the charge is made did not exist at all during the relevant period. There were contrary judgments by the High Court of Punjab Haryana and thereafter the law was changed to make it explicit that credit of service tax paid on commission paid to commission agent is available. Therefore, they would have been eligible for Cenvat credit and could have claimed refund under Rule 5 of CCR, 2004. CENVAT Credit - revenue neutrality - extended period of limitation - HELD THAT:- All indirect taxes are essentially revenue neutral at the hands of the tax payer. The assessee pays tax and collects it from its customer. Further, if the customer is himself a tax payer he can take credit of the Cenvat credit paid. For instance, A pays tax on his final product which is supplied to B who immediately takes credit of the tax paid by A and uses it to discharge his own liability. B, in turn, pays tax on his final products and sells them to C who takes credit of the tax so paid. The cycle continues until the final consumer is reached or an exempted good is produced or a non-taxable service is rendered. At that stage, the entire burden of tax gets loaded on to the final consumer or on to the non-excisable good or the non-taxable service - revenue neutrality in itself does not extinguish the tax liability of any person. The impugned order does not discuss the ingredients necessary for invocation of extended period of limitation nor does it invoke the proviso to Section 73(1) in the operative part of the order. It is for this reason that we have to set aside the impugned order for the extended period of limitation. The demand within the normal limitation is not covered by the charging sections invoked - entire demand needs to be set aside and we do so. Since the penalty under Section 78 is linked to and equal to the demand confirmed, it needs to be set aside as well. Similarly interest under Section 75 also needs to be set aside. Appeal allowed - decided in favor of appellant. 2021 (11) TMI 427 Levy of service tax - tolerance of act of cancellation of coal blocks - operation of a statute or result of an agreement - case of the Revenue is that the appellant is tolerating the act of cancellation and has received this amount as consideration for such tolerance - HELD THAT:- The appellant had no choice of tolerating cancellation or not. The appellant has not chosen to tolerate the cancellation. The cancellation was in pursuance of the order of the Supreme Court and not as a result of a contract to tolerate cancellation. There was no consideration for tolerating the cancellation, only a compensation provided for statutorily for the investment made in the mines by the appellant. Even in cases where any amount is received under a contract as a compensation or liquidated or unliquidated damages, it cannot be termed Consideration . This case is not even a case of payment under a contract. Both the cancellation of the allocation of the blocks and the receipt of compensation are by operation of law. They are like the receipt of a compensation when one s land is acquired by the Government in public interest or the payment to a Government employee of an amount equal to the salary for unused leave at the time of his/her retirement - the Government employee has tolerated the non-sanction of leave during his service as per an agreement and in consideration, received the leave encashment at the time of retirement and to charge service tax on the amount received as leave encashment. These, cannot be called taxable services of tolerating a situation by any stretch of imagination. No service tax can be levied on the amounts received by the appellant as compensation. Time Limitation - HELD THAT:- It is not found necessary to examine the question of limitation - all the penalties need to be set aside as well. Appeal allowed - decided in favor of appellant. Central Excise 2021 (11) TMI 426 Reversal of CENVAT Credit - inputs and input services used in production of electricity to the extent it is wheeled out - Rule 6(5) of CCR - Can a show cause notice be issued demanding an amount under Rule 6(3A) of the CCR? - levy of penalty - HELD THAT:- Rule 6 of the CCR lays down Obligations of the assessee . These obligations are not in the form of a charging section demanding a duty but are obligations to avail CENVAT credit. Just as no assessee can be compelled to maintain separate records under Rule 6(2), no assessee can be compelled to pay an amount under Rule 6(3). The obligations under Rule 6 are in the form of various alternatives and the assessee is free to choose any option. There is no mechanism either in the CCR or in the Act to enforce any of the options or one of the options on the assessee. If the assessee does not choose any of the options and still avails CENVAT credit, such irregularly availed CENVAT credit can, of course, be recovered under Rule 14 of the CCR. Penalty u/r 15 - HELD THAT:- Rule 15 provides for imposition of penalty if CENVAT credit has been wrongly availed which allegation must be made in the show cause notice with a proposal to recover such wrongly availed CENVAT credit under Rule 14 but such a demand has not been made. Instead, a demand of an amount equal to 8%/ 10% of the exempted goods under Rule 6(3) has been made in the show cause notice, which is only an option to the assessee and cannot be demanded under Rule 14. Since the show cause notice itself has been issued without authority of law, any penalty imposed in the impugned order in pursuance of it needs to be set aside too. Appeal allowed - decided in favor of appellant. 2021 (11) TMI 425 CENVAT Credit - common input services for taxable as well as exempt goods - non-maintenance of separate records - allegation is that assessee has not opted for claiming credit on proportionate basis by filing the required declaration - non-observance of the procedure as prescribed in Rule 6 of the Credit Rules - HELD THAT:- The issue has been settled by the Hon ble Telangana High Court in favour of the assessee in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] wherein it has been held that in case the assessee has not chosen to maintain separate accounts, the Credit Rules do not authorize the departmental authorities to choose one of the options on behalf of the assessee so as to demand the amount of 5% or 10% as per Rule 6(3) of the Credit Rules. The demand of the duty amount calculated @ 5% or 10% of the exempted value cannot be made even though the assessee has not followed the prescribed procedures - there is no legal provision under which an amount equal to 5% or 10% of the value of the exempted goods can be recovered. The reason is that payment of an amount of 5% or 10% is one of the choices under Rule 6 and is not a mandatory payment. This choice cannot be foisted upon the appellant nor can such an amount be recovered under Rule 14. The Show Cause Notice demanding an amount equal to 5% or 10% of the value of the exempted products under Rule 14 is not supported by law. It is not possible to sustain the impugned demand based on such Show Cause Notice and therefore, the appeal filed by the assessee deserves to be allowed. Penalty imposed in the impugned order also needs to be set aside - Appeal allowed - decided in favor of assessee. 2021 (11) TMI 423 Refund claim of Education Cess (E-Cess) and Higher Secondary Education Cess (SHE Cess) as was in balance on 28.02.2015 and carried forward till 30.06.2017 - wrong interpretation to the N/N. 12/2015 - HELD THAT:- The E-cess and SHE-cess were Cenvatable, the credit whereof was allowed even for such inputs and capital goods which were received by the manufacturer even after 01.03.2015. The appellant had accumulated credit of E-cess and SHEcess. However, the same could not be utilized till 30.06.2017. The unutilized amount is the assessee s money and, accordingly, has to be refunded to the assessee - The right of credit becomes absolute when the input is used in the manufacture of the final product. In the present case since the E-cess and SHE-cess were no more leviable after 28.02.2015, that the credit on the imports received by the assessee post said date was permitted to be utilized for payment of duty of excise. It is observed that Commissioner (Appeals) and even the Original Adjudicating Authority has given the wrong interpretation to the said notification by specifically holding that the credit of E-Cess and SHE-cess could not be utilized for payment of excise duty by virtue of notification No. 12/2015. This reason itself is sufficient to set aside the order under challenge - It is further observed that with effect from 01/07/2017, the new Goods and Services Tax Act became operational, that the utilization of the said balance became impossible. However, in terms of section 142 of the said new Act, the amount is made refundable to the appellant in cash. Denial thereof by Commissioner (Appeal) is highly unaccepted and is held absolutely unreasonable - Appeal allowed - decided in favor of appellant. 2021 (11) TMI 402 CENVAT Credit - input services - Courier Service - Insurance Service - Port Services - Maintenance Service - Meal Services - Telecom Services - Business Support Service - Consulting Service - Interior Decorator Services - Designing Services - LP Services - Repair Maintenance Services - Tech. Inspection Services - place of removal - HELD THAT:- All the services in question are either used in or in relation to the final product or in relation to the overall business activity of the appellant. The contention of the department for denying the credit is that the service to be used not only in relation to the manufacture but also for clearance of goods from the place of removal. This is an absurd opinion of the revenue for the reason that all the services which are used for the business activity need not to be related to directly in manufacturing of the final product or clearance of the final product. The said services can be used either in the factory or even outside the factory but in relation to the business activity of the assessee. There is no dispute that all of these services in question were used for the business activity of the appellant. Reliance placed in the case of CHEMFAB ALKALIS LTD. VERSUS COMMISSIONER OF C. EX., PONDICHERRY [ 2009 (10) TMI 697 - CESTAT CHENNAI] and UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [ 2009 (5) TMI 15 - SUPREME COURT] . All the services are input services in terms of Rule 2 (l) of Cenvat credit Rules, 2004 - Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2021 (11) TMI 441 Penalty proceedings under section 54(1)(14) of the U.P. Value Added Tax Act - unfilled (blank) column of Form 38 - contravention of the provisions of Section 50 of the Act, 2008 - HELD THAT:- Admittedly, the goods were coming from outside the State of U.P. along with all requisite documents accompanying the vehicle in question, but only column no. 6 was left blank. On the said basis, the seizure and the penalty proceedings have been initiated against the opposite party on the inference of reuse of Form 38, but there was no allegation of any mis-match in the description of the goods or weight or otherwise. Therefore, there was no intention to evade payment of tax. Reliance placed in the case of THE COMMISSIONER COMMERCIAL TAX U.P. LUCKNOW VERSUS S/S DEEPAK TRADING CO. GHAZIABAD [ 2020 (1) TMI 751 - ALLAHABAD HIGH COURT ], where it was held that the vehicle was accompanied by Form 38 and all other documents were being carried along with other documents and only due to human error column would remain unfilled. It was the duty of the Officer managing the Check Post who after discovering that some column of Form 38 found unfilled should have filled the same himself in the light of Circular dated 03.02.2009 and should have allowed the vehicle to proceed alongwith the goods. Revision dismissed. 2021 (11) TMI 440 Imposition of VAT - validity of Ignoring of provisions of Section 8 of Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act, 2010 along with Section 2(y) of the Uttar Pradesh Value Added Tax Act, 2008 - entitlement to recover amount in perpetuity once the final demand note has been issued and settled by the appellant to the satisfaction of the respondent - HELD THAT:- It is submitted that liability to reimburse the respondent for payment of VAT charges has been imposed upon the appellant only on the ground that the said liability has been admitted by the appellant. However, it is submitted that there was no admission on part of the appellant for reimbursement of VAT charges and the alternative submission raised by the appellant before the Tribunal was taken out of context to record that it was an admission on his part - It is submitted that the Tribunal has also failed to appreciate the fact that once the final demand note dated 13.12.2016 was issued by the respondent without indicating any VAT charges and possession over the property in lieu thereof was handed over to the appellant, there was no question or provision of law under which a supplementary demand notice could have been issued in the year 2019. Submissions advanced by learned counsel for appellant have force and requires consideration for which the respondent is granted four weeks' time to file objections - Till the next date of listing, operation of impugned judgment and order dated 30.07.2021 so far it relates to reimbursement of VAT charges by appellant to respondent shall remain stayed. 2021 (11) TMI 436 Concessional rate of tax - acceptance of forms 3-B furnished before the assessing authority - said forms 3-B cannot be accepted as the same are filed after the period as indicated under Rule 25- B(3) of the U.P. Trade Tax Rules - entire documents including the record of trade tax have been seized by the CBI, New Delhi at the time of their raid conducted on 24.12.2005 and the same are returned to the revisionist only on 17.08.2007 - non-exclusion of period of seizure of documents by the CBI, New Delhi for the purposes of calculation of the period for submission of forms as provided under Rule 25-B(3) of the U.P. Trade Tax Rules - HELD THAT:- Admittedly, the assessment years pertain to 2003-04 2005-06. In view of the amendment in rule 25-B(3) of the U.P. Trade Tax Rules, the benefit was only extended for submission of form within two years of transaction. In the case in hand, forms were submitted after the prescribed period mentioned in the said Rules. The only stand taken by the revisionist is that its books of account were under the custody of CBI and was only handed over on 17.08.2007. Therefore, the revisionist could not comply with the said provision. On close scrutiny of the said submission, this Court, with due respect, finds that the judgement of the Single Judge in M/S NARBADA INDUSTRIES VERSUS C.C.T [ 2017 (4) TMI 134 - ALLAHABAD HIGH COURT] is per incurium as the Division Bench of this Court, in the case of M/S. ORIENTAL CARBON CHEMICALS LTD. VERSUS STATE OF UP. ANOTHER [ 2010 (12) TMI 1075 - ALLAHABAD HIGH COURT] , on an identical set of fact, has held that the period of limitation prescribed in Rule 25 cannot be extended. In view of the law laid down by the Division Bench of this Court in M/s Oriental Carbon, wherein, validity of the provisions of Rule - B(3) was upheld as well as the benefit of form cannot be extended beyond two years of the transaction, the Tribunal has rightly refused to grant the benefit of exemption to the assessee - revisionist. Both the revisions fail and are hereby dismissed. 2021 (11) TMI 435 Levy of tax on Bitumen - no authorisation was sought by the assessing authority and given by the Additional Commissioner, Allahabad Zone, Allahabad for initiation of proceeding as per provision to section 21(2) of the U.P. Trade Tax Act 1948 to tax Bitumen - material on record to form a reason to believe that the turnover thereof has escaped from assessment, or not - no exemption was given in the original assessment order - Tribunal was legally justified or not addressing itself on the application given under section 12-B, of the U.P. Trade Tax Act, 1948 - Bitumen was supplied by the department to the contractee for the construction of road in the civil work contract performed during the assessment year 2001-02. HELD THAT:- The record reveals that at the time of passing of the original assessment order the benefit of the same was given after due verification. Thereafter reassessment proceeding has been initiated . The permission was granted by the Additional Commissioner, Allahabad Zone, Allahabad by order dated 15.11.2006. The reassessment order dated 1.9.2006 reveals that two dealers from which tax paid purchases has been shown by the revisionist are namely; M/s Singh Stone Mill, Kabrai, Mahoba and M/s Mahashakti Stone Mill, Kabrai, Mahoba. There is no information whatsoever contrary to the material on record. So far as M/s Singh Stone Mill for disbelieving the purchases made by the dealer is concerned, the only information has been received that the selling dealer has neither produced bill book nor has given the details of sale list. From the perusal of the record it shows that there is no material which could be attributed that the wrong claim having been made by the revisionist. The revisionist had admittedly shown purchases of gitti against the cash memo which has not been disbelieved at any stage. The reassessment proceeding has only been initiated as the selling dealer has not shown the cash memo and the sale list. There is no finding of any material so far as M/s Mahashakti Stone Mills as no enquiry what soever has been brought on record. The initiation of reassessment proceeding is bad. Further once the revisionist has brought on record by means of an application under section 12-B of the Act before the Tribunal that the Bitumen has neither been used nor purchased by the revisionist but the same was given by the PWD department for its use for repairs of the road. In absence of any material on record the assessing authority was not justified in imposing tax on the use of Bitumen. The revision is allowed with cost of ₹ 5,000/- and the question of law is answered accordingly. 2021 (11) TMI 430 Interpretation of Statute - value of goods - section 15 (5) (a) of the Act - Levy of interest and penalty under Sections 36(1) and 72(2) of the KVAT Act - purchase value of goods bought from outside the State after adding a gross profit of 20% on the same - Section 4 of the KVAT Act - HELD THAT:- A harmonious reading of the various provisions would indicate that under Section 15 (1) of the Act, composition scheme would be opted by any dealer other than a dealer who purchases or obtains goods from outside the State or from outside the territory of India, subject to conditions and in such circumstances as may be prescribed. In other words, any dealer who had purchased or obtained goods from outside the State or from outside the territory of India was not entitled to opt for the composition scheme. Interpretation of value of such goods. - HELD THAT:- The language employed by the Legislature in Section 15[5][a] is plain and unambiguous. The expression value of such goods relates to purchases made on which liability of tax would be payable under Section 4, notwithstanding the rate of tax under the composition scheme at 4% during the relevant period on the total consideration for the works contract executed. However, this value of the goods which is subjected to the levy of tax under Section 4 has to be deducted from the total consideration of the works contract executed. Whether tax is leviable under Section 4, or under Section 15 (5) (a) of the Act with respect to the gross profit earned by the dealer in transferring the goods purchased inter-state or from outside the territory of India in the composition scheme? - HELD THAT:- A bare reading of Section 15 (5) (a) of the Act would indicate that the composition tax liability is on the total consideration for the works contracts executed at 4%, if applied to the inter-state purchases or the goods purchased from outside the territory of India and transferred in the execution of the works contract, the Revenue would suffer tax on the said sale which would have been collected if the said incidence of sale had taken place locally within the State - To remove this anomaly, a level play mechanism has been adopted to levy tax on the inter-state purchases or the goods purchased from outside the territory of India at the regular rate of tax and to deduct the same from the total consideration of the works contract executed by the dealer to make the dealer eligible to opt for composition scheme, despite purchasing goods from outside the State or outside the territory of India. By any stretch of imagination, it cannot be held that the levy of tax under Section 4 would be on the sale value of the goods transferred in the works contract executed by the dealer. The entire approach of the Revenue is fallacious and runs contrary to the intendment of the Legislature - Appeal dismissed - decided against Revenue. 2021 (11) TMI 429 Revisional powers under Section 15 (2) of the Karnataka Tax on Entry of Goods Act, 1979 - Additional Commissioner is empowered under Section 15 (2) of the Act to revise the orders passed by a Joint Commissioner of Commercial Taxes or an Appellate Authority of the rank of a Deputy Commissioner, or not - levy of Entry Taxes on the purchase turnover of RS Emulsion which was not the subject matter of the appeal - HELD THAT:- In the present case, the Revisional Authority has acted under the provisions of Section 15 (2) of the Act in setting aside the order of the Assessing Authority and remanding the matter to the said Authority to reconsider the matter. Under the provisions of Karnataka Value Added Tax Act, 2003, by virtue of the amendment which has come into effect from 01.04.2013, it was made clear that the revisional authority can cancel the order and direct a fresh assessment. The word and would make the difference. Both the limbs namely cancelling the assessment order and direct fresh assessment have to be read in conjunction as the word or was substituted by the word and But in the present case, under Section 15 (2) of the Act, the word or remains as it is in between the words cancelling the assessment and directing a fresh assessment. The Revisional Authority has not passed the reassessment order but only directed the Assessing Authority to recompute the Turnover and Tax liability regarding the RS Emulsion issue. Thus, the Additional Commissioner is empowered not only to revise the order but also to enhance or cancel an assessment, or modify an assessment or direct a fresh assessment under Section 15(2) of the Act - language employed in sub-sections (1) to (3) of Section 15 of the Act would indicate the intention of the Legislature. Everything short of a re-assessment is permissible in the circumstances of the case and if such re-assessment is warranted, the matter requires to be remanded to the Assessing Authority. There are no reason to hold that the impugned order passed by the Additional Commissioner of Commercial Taxes suffers from infirmity for lack of jurisdiction. Thus, the questions of law are answered in favour of the Revenue and against the assessee.
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