Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 15, 2024
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
News
Notifications
Circulars / Instructions / Orders
GST - States
- CCT/26-4/2024-25/G/3463 - dated
1-11-2024
Clarifications regarding applicability of GST on certain services
- CCT/26-4/2024-25/G/3464 - dated
1-11-2024
Clarification regarding GST rates & classification (goods) based on the recommendations of the GST Council in its 54th meeting held on 9th September, 2024, at New Delhi
- CCT/26-4/2024-25/G/3465 - dated
1-11-2024
Clarification regarding the scope of “as is/as is, where is basis” mentioned in the GST Circulars issued on the basis of recommendation of the GST Council in its meetings
- CCT/26-4/2024-25/G/3466 - dated
1-11-2024
Clarifying the issues regarding implementation of provisions of sub--section (5) and sub-section (6) in Section 16 of CGST Act, 2017
DGFT
- 33/2024-25 - dated
14-11-2024
Fixation of one new Standard Input Output Norms (SIONs) at SION A-3682 under 'Chemical and Allied Product' (Product Code ‘A’)
Customs
- 23/2024 - dated
14-11-2024
Classification of Clear Float Glass
- CAVR Review Order No. 02/2024 - dated
13-11-2024
Order for extension of validity of CAVR Order No. 02/2023-Customs under the Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023 in respect of Stainless Steel of J3 grade classified under HS Codes 72191200, 72191300, 72191400, 72192390, 72193290, 72193390, 72193490, 72193590, 72199012, 72199013, 72199090, 72202029, 72202090, 72209022, 72209029 & 72209090
Highlights / Catch Notes
GST
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GST registration cancellation quashed by HC due to lack of due process; matter remanded to Appellate Authority.
The High Court set aside the order cancelling the petitioner's GST registration effective July 31, 2021, on grounds of violation of principles of natural justice. Despite issuance of show cause notices on August 26, 2022 and December 1, 2022, the petitioner's registration had already been cancelled by that time. The petitioner claimed non-receipt of notices, and the service issue remained unclear. However, the petitioner's registration cancellation was reflected on the department's portal, indicating lack of opportunity to contest before the impugned order. Considering these factors cumulatively, the High Court remanded the matter to the Appellate Authority for fresh consideration of the appeal, following due process and disposing it on merits expeditiously by December 31, 2024.
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Registration cancelled for not filing returns; court follows previous TVL case, allows revocation with conditions.
The High Court addressed the issue of cancellation of registration due to non-filing of statutory returns. The court relied on its previous decision in TVL. Suguna Cutpiece Center v. The Appellate Deputy Commissioner (ST) (GST), where it had directed revocation of registration under similar circumstances, subject to certain conditions. Consequently, the court extended the same benefit to the petitioner in the present case. The petition was disposed of accordingly.
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CGST refund order stayed improperly; Court strikes down revisional authority's action.
The High Court held that the revisional authority's order placing the refund sanction order in abeyance u/s 108 of the Central Goods and Services Tax Act, 2017 was invalid. Section 54 prescribes the procedure for claiming refunds, and the proviso to Section 54(1) requires following the procedure u/s 49(6) for refunds from the Electronic Cash Ledger. While Section 54 lacks explicit restrictions on refunds from the Electronic Cash Ledger, similar restrictions apply. Section 108 empowers the revisional authority to stay orders deemed illegal, improper, or prejudicial to revenue interests. However, the revisional authority's doubts about the Input Tax Credit claimed by the petitioner were unrelated to the refund order's validity. Absent any finding rendering the refund order unsustainable, illegal, or invalid, invoking Section 108 was unjustified. The High Court allowed the petition, quashing the impugned order.
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Unlawful GST registration cancellation obstructed business rights; due process violated. Court orders fair hearing.
Cancellation of GST registration violated petitioner's constitutional right to carry on business. Respondent should have initiated legal action for alleged fraud instead of outright cancellation, depriving petitioner from conducting business. Suspension order passed without considering petitioner's reply, rendering proceedings liable to be set aside. High Court quashed impugned proceedings, directed respondent to consider petitioner's reply and pass appropriate orders on merits to revoke suspension of GST registration in accordance with law.
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Upholding tax provisions, Court grants opportunity to be heard.
The Karnataka High Court disposed of the petition challenging the constitutional validity of Section 16(4) of the CGST and KGST Act, 2017, which was alleged to be violative of Articles 14, 19(1)(g), and 300A of the Constitution. The Court relied on its previous judgment in M/s. Sadhana Enviro Engineering Services vs. Joint Commissioner of Central Tax & others, where it held that in view of the amendment inserting Section 16(5), the petitioner should be given a reasonable opportunity and heard by the original authority, which should then proceed in accordance with law. Consequently, the present petition was allowed and disposed of in terms of the earlier judgment, directing the authorities to implement the provisions after granting a reasonable opportunity to the petitioner.
Income Tax
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Viability gap funding by NHAI for infrastructure projects not taxable as payment for 'work' under Sec 194C.
The High Court held that the capital grant subsidy or viability gap funding provided by the National Highways Authority of India (NHAI) to its Concessionaires for infrastructure projects does not constitute payment for 'work' u/s 194C of the Income Tax Act, 1961, and hence, is not subject to tax deduction at source. The key points are: The Concessionaire's primary obligation is to raise funds and implement the project, while NHAI extends financial aid through viability gap funding. Section 194C requires tax deduction on sums paid to a contractor for carrying out 'work', which implies a physical or tangible activity involving labor. The capital grant subsidy is not payment for work per se but financial support from NHAI for creating a public utility asset. The Concessionaire owns and exploits the asset during the concession period to recoup investment. The viability gap funding is not credited to the Concessionaire's account but directly to the Escrow Account, hence not attracting Section 194C(2). The High Court correctly concluded that the viability gap funding cannot be construed as payment for work undertaken by the contractor u/s 194C.
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Limitation period for Transfer Pricing adjustment: Controversy rages on.
Time limitation for passing an order u/s 92CA is a contentious issue. The Tribunal followed the Madras High Court's decision in Pfizer Healthcare, but the Revenue has filed an SLP challenging it before the Supreme Court. Interpretation of Section 92CA's interplay with Section 153 regarding limitation is pending consideration by the Supreme Court. The Bombay High Court's order in PayPal Payments is also challenged before the Supreme Court. To avoid multiplicity of proceedings, the appeals are adjourned sine die, awaiting the Supreme Court's rulings on these issues. Proceeding otherwise would necessitate cross-appeals, adding to the multiplicity.
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Attempt to conceal undisclosed foreign assets by fabricating backdated documents alleging fiduciary role dismissed; complaint upheld.
The petitioner challenged the summoning order and sought quashing of the complaint u/ss 50 and 51 of the Black Money Act, 2015, alleging undisclosed foreign assets. The petitioner argued that the complaint couldn't be filed before completing the assessment. The complainant/Income-Tax Department contended that the petitioner claimed association with foreign assets only in the past as a trustee, resigning from all fiduciary positions before April 2015. However, during a search on the petitioner's Chartered Accountant, it was discovered that the petitioner attempted to fabricate and backdate documents showing foreign assets held in a fiduciary capacity as trustee of Alrahma Trust, UAE, purportedly settled in 2006, and transferring trusteeship in March 2015. The complainant alleged this was a premeditated scheme to dissociate the petitioner from offshore entities/foreign assets by backdating documents to evade Black Money Act proceedings. The court held that the complainant need not produce evidence proving guilt at this initial stage, and the petitioner's objections regarding assessment are irrelevant. The court considered the petitioner's alleged fabrication of documents and overt acts towards commission of the offence. The petitioner's application to challenge the assessment order was dismissed, as an efficacious statutory remedy of appeal u/s 16 of the Black Money Act is available.
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Royalties treated as revenue expense, fully deductible; bad debt also allowed. Capital expenditure test clarified.
Royalty payments treated as revenue expenditure, deductible in full; capital expenditure treatment rejected. Bad debt deduction allowed u/s 28, following Supreme Court precedent in Shriram Chits case; Revenue appeal rejected. Division Bench judgment of same Court cited, clarifying expenditure to acquire intangible asset not automatically capital expenditure; enduring nature of benefit key consideration. Appellate orders deleting disallowances upheld by High Court.
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Mandatory Reserve Fund Transfer Not Deductible for Tax Purposes, Rules Court.
The High Court held that the amount transferred by the assessee to the Statutory Reserve Fund in compliance with the mandatory provisions of Section 45IC read with Section 45Q of the Reserve Bank of India Act, 1934, is not an allowable deduction in computing the assessable income under the provisions of the Income Tax Act, 1961. This decision aligns with the Court's earlier ruling for the same assessee in other assessment years. The Court concluded that the reserve fund represents retained profits for business use and does not qualify as a deductible expense under regular income computation or book profit computation u/s 115JB. Consequently, the orders of the lower authorities were upheld, and the issue was decided in favor of the revenue department.
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Investing sale proceeds in mutual funds before bonds still qualifies for capital gains tax exemption.
The case deals with the applicability of Section 54EC of the Income Tax Act, which provides exemption from capital gains tax if the gains are invested in specified bonds within the prescribed time limit. The key points are: The assessee received advances from purchasers for a property sale and initially invested these advances in mutual funds. Subsequently, the maturity proceeds from the mutual funds were used to invest in bonds u/s 54EC. The Revenue contended that the investment in bonds should be made directly from the sale proceeds and not from funds derived from other sources like mutual funds. The Tribunal held that the source of investment in bonds was clearly traceable to the advances received from purchasers, establishing a direct nexus. The mere routing of funds through mutual funds does not negate the claim u/s 54EC, as no other funds were available with the assessee. The Tribunal relied on the Delhi High Court's judgment in Bhupendra Kumar Bhaumik's case and the Supreme Court's ratio in Malabar Industrial Co. Ltd., which supported the assessee's claim. The provisions of Section 54EC were interpreted in line with the erstwhile Section 54E, as the scheme of capital gains exemption envisaged a seamless continuation. Consequently, the Tribunal ruled in favor of the assessee, holding that there was no error in the Assessing Officer's order warranting intervention u/s.
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Sale value of old rubber trees to be included in book profit calculation.
The crux pertains to the inclusion of sale value of old rubber trees in computing book profit u/s 115JB. The Kerala High Court had previously ruled against the assessee in its own case for prior years, holding that the sale value should be included while computing book profit. Although the assessee challenged this before the Supreme Court, the High Court's decision remains binding until set aside. Consequently, the Assessing Officer rightly invoked Section 154 to rectify the mistake of non-inclusion, as non-consideration of judicial precedents constitutes a valid ground for rectification u/s 154. The Tribunal dismissed the assessee's appeal, upholding the Assessing Officer's action, rendering other grounds raised by the assessee redundant.
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Debtors' bad loans written off rightfully; tax deduction allowed.
Assessee wrote off provision for bad and doubtful debts by debiting profit and loss account and reducing corresponding amount from loans and advances to debtors in balance sheet. CIT(A) erred in holding assessee failed to demonstrate amounts were written off as irrecoverable. Records show amounts were written off by deducting them in P&L account and set off properly recorded in balance sheet. As per Supreme Court ruling in Vijaya Bank case, to claim deduction u/s 36(1)(vii), it's not necessary to close individual debtor accounts; writing off by debiting P&L and reducing corresponding asset side entry suffices. Hence, assessee is eligible for deduction and appeal allowed.
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Society promoting hydrocarbon industry's interests ruled non-commercial.
The assessee society's activities were initially considered commercial by the Commissioner of Income Tax (CIT) under the second proviso to Section 2(15) of the Income Tax Act. However, the Income Tax Appellate Tribunal (ITAT) held that the society's primary objective was to secure and promote the business interests of its members, which does not necessarily imply a commercial nature. The ITAT observed that the society was formed as an initiative of the Government of India to bring stakeholders together, ultimately benefiting consumers. Despite including private sector members, the society's role as a facilitator for the hydrocarbon industry does not make its activities commercial. The expenditure statements did not indicate any funds utilized for procuring business for members or promoting their financial interests. The ITAT concluded that the Revisional Authority's order lacked legal basis and was based on conjectures beyond the scope of Section 263, ruling in favor of the assessee.
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Advertisement business thin margins dispute: ITAT guided by equity deems 8% of gross receipts as fair income estimation.
Income estimation based on percentage of gross receipts - CIT(A) applied 12.5% net profit on gross receipts, assessee claimed thin margins in advertisement business. ITAT held some guesswork inevitable without financial data. CIT(A) lacked material for 12.5%, assessee failed to substantiate lower 1.5-2% claim. Section 44AD deems 8% of turnover as business income for eligible assessees based on empirical data. Guided by equity, ITAT considered 8% of gross receipts fair estimation, modifying CIT(A)'s 12.5% to 8%. Assessee's appeal partly allowed.
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Indian taxpayer wins case against denial of tax treaty benefits due to procedural delay in filing Form-67.
The Income Tax Appellate Tribunal (ITAT) held that denial of tax relief u/s 90/90A solely due to procedural delay in filing Form-67 is unjustified. Filing of Form-67 is a procedural formality and cannot be the basis for denying relief to the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] erred by merely stating disagreement with a binding superior court judgment without assigning any reasons, which is legally unjustifiable. An inferior court differing from a superior court's judgment must discuss and provide reasons for the divergence. The Assessing Officer should not have denied relief u/s 90 merely for the delay in filing Form-67. The assessee's appeal was allowed.
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Income Tax Tribunal Allows Unsecured Loans & Interest Deduction After Assessee Provides Sufficient Evidence.
The Appellate Tribunal held that the Assessing Officer erred in making additions u/s 68 for unsecured loans and disallowing interest component. The assessee demonstrated repayment of unsecured loans through bank statements and submitted relevant evidence, including audited financial statements, confirmations from lenders, and bank statements filed u/s 133(6). The Assessing Officer failed to conduct further inquiries and relied solely on a third party's unreliable statement, ignoring the evidence provided by the assessee. The Tribunal concluded that the assessee satisfied the requirements of Section 68 by substantiating the loan transactions, which were repaid through banking channels. Consequently, the Tribunal set aside the orders of the lower authorities and directed the Assessing Officer to delete the additions for unsecured loans and disallowance of interest, deciding in favor of the assessee.
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Jeweler's cash sales spike during festive season justified post-demonetization.
The assessee, engaged in trading gold, silver, and diamond jewelry, witnessed a substantial increase in cash sales during October and the first week of November 2016 due to Dussehra and Diwali festivals. After demonetization on November 8, 2016, jewelers opened shutters and made substantial sales from 8:30 PM to 12:00 AM. The assessee filed purchase and sale registers, stock summary, returns, and explained the cash deposit, discharging the onus of proving genuineness. The Appellate Tribunal observed that the increase in cash sales was due to festival occasions, and people chose to purchase jewelry with cash. Consequently, the addition u/s 69A was unjustified, and the decision favored the assessee.
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Reopening of tax assessment quashed due to procedural lapses - lax verification, lack of application of mind by tax officers.
Reopening of assessment u/s 147 was invalid due to procedural irregularities. The Assessing Officer initiated proceedings without verifying information and the Commissioner of Income Tax granted approval without applying mind. Approval by Commissioner was without recording independent satisfaction, rendering reopening unsustainable. Consequently, notice u/s 148 and subsequent proceedings were quashed. The Commissioner of Income Tax (Appeals) erroneously passed order regarding Vivad Se Vishwas Scheme despite assessee not applying for immunity, hence order quashed. The Assessing Officer made addition without invoking any provision of law or specifying head of income, violating principles of natural justice by denying assessee opportunity to defend. Supreme Court rulings mandate providing reasonable notice of charges and provisions violated. Absence of such notice vitiated proceedings. Therefore, addition made by authorities was deleted and appeal allowed.
Customs
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Delayed adjudication of tax notices breaches fair procedure, warrants quashing for violating natural justice principles.
Inordinate delay in adjudication of show cause notice by revenue authorities constitutes breach of fair procedure and violates principles of natural justice, causing prejudice to petitioners. Adjudicating authorities are obligated to adjudicate within reasonable time, failure of which warrants quashing of delayed adjudications lacking compelling justification. Unreasonable delay renders it impossible for petitioners to plan business or account for contingent liabilities, thereby breaching procedural fairness mandated in fiscal matters. Precedents establish that such egregious delays without cogent explanations necessitate quashing of impugned adjudications by High Court to uphold principles of natural justice.
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Seized gold ornaments to be released for non-compliance with notice requirement before confiscation.
The High Court held that seized gold ornaments must be returned forthwith as the Revenue failed to comply with Section 124 of the Act, which requires issuance of a show cause notice before confiscation. The petition was allowed, directing the Revenue to release the seized item to the petitioner immediately. The petitioner expressed desire to re-export the item, which shall be considered upon application in accordance with law.
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Tax dept appeals rejected due to duty amount below threshold.
The appeals filed by the department were dismissed as the duty amount involved in each appeal was below the prescribed threshold limit of Rs. 50 lakhs, as per the circular dated 02.11.2023 issued by the CBIC. The circular mandates that no appeal shall be filed before the CESTAT if the duty amount is less than Rs. 50 lakhs, and if already filed, the same shall be withdrawn. Consequently, the CESTAT dismissed all 19 appeals, leaving the question of law, if any, open, considering the present appeals as not maintainable in view of the Board's instructions.
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Allowing destruction of obsolete raw materials for export units after intimation to customs.
The appellants imported goods and procured goods from the Domestic Tariff Area (DTA) under exemption notifications, allowing import and procurement of raw materials and components for export production. Due to technological changes, some imported raw materials and components became obsolete and unfit for manufacturing. The notification was amended, permitting destruction of raw materials under intimation to customs. Although the period of dispute predated the amendment, a harmonious reading of the Foreign Trade Policy (FTP) and the customs notification implied destruction of obsolete raw materials was allowed after intimation to customs if destroyed within the unit, and with permission if destroyed outside. Such permission was granted previously. Technological advancements necessitate provisions for destruction of obsolete goods. The FTP allowed destruction, but the notification lacked this provision until amended. Precedent Tribunal decisions support allowing destruction, and the appeals are allowed.
Benami Property
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Crackdown on employee's undisclosed cash properties worth Rs. 1.4 crore.
Issue of benami property transactions and the appellant's failure to prove the source of income for acquiring properties worth Rs. 1,41,37,500/-. The Initiating Officer alleged that the appellant, an employee with a meagre salary, acquired benami properties. The Adjudicating Authority found that the appellant could not produce documents to substantiate the source of income for purchasing the properties. The appellant tried to rely on an income tax assessment order, but the Tribunal held that it cannot be used for adjudication under the Benami Transactions Act. The Adjudicating Authority's detailed findings revealed the benami nature of the properties acquired largely in cash without disclosing the source. The appellant failed to submit material proving the source of income before the authorities. The Tribunal dismissed the appeal, finding no favorable material for the appellant, and rejected the reliance on the Supreme Court's recalled judgment in Ganpati Dealcom case.
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Benami property transaction loophole exposed, gold & silver attachment upheld.
The appeal challenges the attachment order of gold and silver articles from lockers, questioning the identification of beneficial locker holders under the Prohibition of Benami Property Transactions Act. The court held that the conduct of the parties, particularly the Safe Vault Private Limited (SVPL), which failed to disclose the true ownership and delayed changing the name despite requests, speaks for itself. The SVPL's excuse of a bona fide mistake was unacceptable, and they were equally responsible for the benami transaction by not adhering to KYC norms. The appellant failed to disclose the source of acquisition of gold and silver, and the SVPL and appellant were hand in glove to mislead the respondent. The court found no violation of Section 24(1) of the Act, as notice was given to Shiv Daga, and the appellant had ample opportunity to present their case. Consequently, the appeal was dismissed.
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Agricultural land attached due to alleged benami transaction, but beneficial owner unidentified.
The case pertains to the prohibition of benami property transactions and the applicability of amended provisions introduced by the Amending Act of 2016 to the Benami Transactions (Prohibition) Act, 1988. The key points are: The Initiating Officer (I.O.) attached an agricultural land, alleging it to be a benami transaction, but could not identify the beneficial owner. The Adjudicating Authority treated the transaction as falling u/s 2(9A) of the amended Act, despite it being prior to the 2016 amendment. The Supreme Court has clarified that the amended provisions have prospective application. Transactions prior to November 1, 2016, not covered by Section 2(9A) of the amended Act, are governed by the judgment in Union of India & Anr. vs. M/s. Ganpati Dealcom Pvt. Ltd. An exception may apply if the case falls u/s 2(9A) of the amended definition, as per the Appellate Tribunal's judgment in M/s. Prism Scan Express Pvt. Ltd.
IBC
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Property Possession During Insolvency Restricted: Court Reaffirms Landlord's Claims Barred Despite RP's Consent.
The National Company Law Appellate Tribunal (NCLAT) has remanded the case back to the Adjudicating Authority (AA) to examine and decide the issues in a comprehensive manner, including the application of the appellant in I.A. No. 1412 of 2023, preferably within four weeks. The NCLAT held that there is an absolute bar on recovery of any property occupied or possessed by the Corporate Debtor u/s 14(1)(d) of the Insolvency and Bankruptcy Code. The AA had passed a non-speaking order merely based on the consent of the Resolution Professional (RP) to release the property, without examining the maintainability of such applications by the owner/lessor in view of Section 14(1)(d). The Committee of Creditors (CoC) did not appear to have taken a final decision with proper voting regarding the vacation of the registered office. The RP's decision to release the property was his own and not confirmed by the CoC. The NCLAT found that the AA should have first examined whether it is possible to allow such applications in view of the express provisions of Section 14(1)(d), even if supported by the CoC. The appeal was allowed.
Indian Laws
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Dishonored cheques - Failure to prove given as blank security for loan.
The petitioner contended that the dishonored cheques were not issued against any legally enforceable debt, claiming they were given as blank security cheques to one Vinod Tiwari for a loan. However, the petitioner failed to substantiate this claim through evidence or cross-examination of the respondent. Merely reiterating contentions without adducing material to show the loan existed with Vinod Tiwari was insufficient to dislodge the presumptions raised u/ss 118 and 139 of the Negotiable Instruments Act. The High Court found no infirmity in the impugned order, as the petitioner failed to rebut the presumptions, and dismissed the petition, exercising restraint from reappreciating evidence unless the order was wholly unreasonable or untenable.
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Company Official's Liability for Bounced Checks: Resignation Matters, Mere Designation Doesn't.
Interpretation of Section 141 of the Negotiable Instruments Act, which deals with vicarious liability for offenses committed by companies u/s 138 (dishonor of cheques). The key points are: Section 141 is a penal provision that must be strictly construed. Liability under this section depends on the role played by the person in the company's affairs, not merely their designation. To attract liability, the person must have been in charge of and responsible for the company's conduct at the time of the offense's commission. Merely being a director or having some association with the company is insufficient. The complaint must specify the accused's role and how they were responsible for the company's conduct. In this case, the petitioner had resigned as director before the relevant events (issuance, dishonor, and notice of dishonor of cheque) occurred. Therefore, the petitioner cannot be held vicariously liable u/s 141 as they were not in charge or responsible for the company's conduct during the commission of the offense.
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Tamil Nadu medical college project faces forum hurdle: Court slams petitioner for 'forum shopping' after withdrawing local pleas.
Construction of buildings for a proposed medical college located in Kanyakumari, Tamil Nadu - cause of action arises in Tamil Nadu - forum shopping by petitioner after withdrawing petitions from appropriate forum in Tamil Nadu - both parties and properties situated in Tamil Nadu - previous orders by District Court Nagercoil and Madras High Court pertaining to dispute - no justification for invoking jurisdiction of Delhi High Court when Tamil Nadu courts already seized of matter - coordinate bench ruling on jurisdiction of High Courts over pan-India Tribunals/authorities - present petitions dismissed solely on ground of territorial jurisdiction with costs of Rs. 50,000 to be deposited with Delhi High Court Staff Welfare Fund.
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Project completed before RERA enacted, no retrospective jurisdiction for completed projects.
The RERA lacks jurisdiction over projects completed before its enactment. The project obtained Occupation/Completion Certificate prior to RERA's commencement, rendering the complaint inadmissible. Entertaining such complaints would grant retrospective effect to RERA, contrary to legislative intent. No provision allows pursuit of remedies under RERA for completed projects previously addressed under Consumer Protection Act. Authorities correctly dismissed the complaint due to lack of jurisdiction, as the project predated RERA's enactment. Forum shopping by withdrawing from prior proceedings is impermissible.
SEBI
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Exec directors can't evade liability by claiming ignorance of daily ops or low pay. Courts uphold trial against board member.
An executive director, being a member of the board and responsible for overall management, cannot evade liability merely by claiming lack of involvement in day-to-day affairs or receiving nominal salary. The court found a prima facie case against the petitioner, an executive director during the alleged offense period. Interfering at this stage would be an abuse of process. The trial court rightly applied the law in rejecting the discharge plea. With the trial underway and evidence being recorded, the HC declined to interfere in the ongoing proceedings against the executive director.
Service Tax
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Brewery license transfer: Deemed sale, not service tax.
The CESTAT held that a "deemed sale" under Article 366(29A)(d) of the Constitution had occurred when the appellant granted the right to use the brewery license to Skol/Sab Miller through the License Agreement. The consideration received by the appellant under the License Agreement cannot be subjected to service tax or clubbed with the consideration under the Lease Deed for "renting of immovable property" service. The Commissioner's findings to the contrary were set aside. The License Agreement and Lease Deed were separate documents, and merely because the Lease Deed mentioned procuring an endorsement/sub-license, it did not make the License Agreement an integral part of the Lease Deed. The License Agreement gave complete freedom to Skol/Sab Miller to operate the brewery without hindrance. The Commissioner's reasoning that no "sale" took place due to restrictions was incorrect, as a "deemed sale" under Article 366(29A)(d) is distinct from a regular "sale." Consequently, the impugned order passed by the Commissioner adjudicating the show cause notices was set aside.
Case Laws:
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GST
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2024 (11) TMI 661
Cancellation of Petitioner s GST registration effective 31 July 2021 - violation of principles of natural justice - HELD THAT:- In the peculiar facts of the present case, the Petitioner should be granted an opportunity to contest the Appeal. Admittedly, the Show Cause Notices referred to in the impugned order were issued on 26 August 2022 and 1 December 2022. By this date, the Petitioner s registration had already been cancelled. The Petitioner claims not to have received the Show-Cause Notices, and the service issue is unclear. In any event, the Petitioner s registration has already been cancelled, and this position was reflected even on the department s portal and cannot be ignored. After the order dated 11 October 2021, the department entertained the Petitioner s request for cancellation and cancelled his registration. There is no dispute that factually, the petitioner was not heard before the impugned order was made. Therefore, upon a cumulative consideration of the above factors, we set aside the impugned order dated 24 March 2023 on the grounds of failure of natural justice. The matter is remanded to the Appellate Authority, i.e. the Deputy Commissioner of State Tax, for fresh consideration of the Appeal. The Appeal must now be disposed of following law and on its own merits as expeditiously as possible and in any event on or before 31 December 2024. Appeal disposed off.
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2024 (11) TMI 660
Cancellation of the registration of the petitioner on the premise that the statutory returns has not been filed - HELD THAT:- The issue stands covered by a series of judgments, commencing with the decision in TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR. [ 2022 (2) TMI 933 - MADRAS HIGH COURT] , wherein, under identical circumstances, this Court has directed the revocation of registration subject to conditions. In view thereof, the benefit extended by this Court vide its earlier order in Suguna Cutpiece Centre's case, may be extended to the petitioner. Petition disposed off.
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2024 (11) TMI 659
Validity of the order placing the refund sanction order in abeyance - Section 108 of the Central Goods Services Tax Act, 2017 - HELD THAT:- Section 54 prescribes the manner in which a person claiming refund may apply for disbursal of those amounts. Hereto, the Proviso to Section 54 (1) stipulates that a registered person claiming refund of sums standing in balance in the Electronic Cash Ledger would have to follow the procedure as prescribed. Of crucial significance is the usage of the phrase in accordance with the provisions of sub-section (6) of Section 49 as they appear in Section 54 (1). Undisputedly, there is no outstanding demand against the petitioner and which may have perhaps legitimately constituted one of the possible reasons to withhold the refund. While it is true that Section 54 while making specific provisions with respect to refund of unutilized ITC in terms of sub-sections (5) and (8) thereof, stops short of incorporating similar restrictions on utilization of the balance standing in the Electronic Cash Ledger in terms which may be described as explicit, the position, would be no different. Section 108 empowers the revisional authority to place in abeyance any order made under the CGST Act and which in its opinion could be said to be illegal, improper or prejudicial to the interest of the Revenue - the contention of the petitioner cannot be sustained, who had sought to canvass a position of distinction which should be recognised to exist and governing sums which stand in balance in the Electronic Cash and Electronic Credit Ledgers. The revisional authority appears to have doubted the ITC which was claimed by the writ petitioner in the tax period in question. While that conclusion and tentative view as expressed would be open to be tested under the CGST Act, the question which merits consideration is whether that conclusion would have justified the invocation of Section 108. Admittedly, the allegation of wrongful availment of ITC is based on intelligence inputs received subsequent to the passing of the order dated 09 December 2022. The allegation of improper utilization of ITC is one which is clearly distinct and unconnected with the order sanctioning refund. While that allegation, when tested and examined, may ultimately lead to the creation of prospective liabilities, it has no correlation with the question of whether the order sanctioning refund was rendered invalid or was liable to be corrected under Section 108. Absent any finding or conclusion having been rendered by the Commissioner in this respect, and which may have tended to indicate that the opinion expressed in the order dated 09 December 2022 was rendered unsustainable, illegal or invalid, the order impugned cannot be sustained - petition allowed.
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2024 (11) TMI 658
Dismissal of appeal due to failure to submit certified copy of order - interpretation of Rule 108 of GGST Rules, 2017 - HELD THAT:- It is noted that when the order which is appealed against is issued or uploaded on the common portal and the same can be viewed by the Appellate Authority, there could be no requirement whatsoever of submitting a certified copy of such uploaded order to test its authenticity. In today s day and age, insistence on certified copy of orders which can be obtained directly from the website of judicial and quasi judicial bodies is regressive in nature and puts a premium on needless archaism. For these reasons, the instant petition deserves to be allowed. It has been held by this Court in the case of OTSUKA PHARMACEUTICAL INDIA PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2024 (4) TMI 282 - GUJARAT HIGH COURT] , since the amendment which has come into effect from 26.12.2022 is clarificatory in nature, it would be applicable retrospectively and the impugned order passed by the Appellate Authority rejecting the appeal would not survive, in any case. The impugned order dated 28th February 2023 passed by the respondent No.3 is hereby quashed and set aside and the matter is remanded back to the appellant authority to pass a fresh de novo order on merits after giving an opportunity of hearing to the petitioner - Petition disposed off.
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2024 (11) TMI 657
Cancellation of GST number of the petitioner - violation of constitutional right - HELD THAT:- Admittedly, it is the right of the petitioner to carry on the business and it is the bounden duty of the respondent to provide the GST registration in the manner known to law. Even, if the petitioner company indulged in allegedly obtaining Section 29(2)(e) registration by means of fraud or not conducting the business from declared place in violation of provisions of the Act, the respondent can very well initiate legal action by invoking civil and penal provisions by way of civil and criminal cases. Instead of doing so, the respondent has outrightly cancelled the GST registration of the petitioner - in the present case, the respondent without resorting to take legal action invoking penal provisions, suspended the GST registration of the petitioner and deprived the petitioner from carrying on the business, which amounts to violation of fundamental right of the petitioner and prevented the petitioner, which, cannot be sustained. In the present case, the suspension order was passed on 05.09.2024, for which, admittedly, the petitioner has filed their reply on 12.09.2024. When the reply was filed by the petitioner pursuant to the impugned order, it is incumbent upon the respondent to consider the same and pass appropriate orders in accordance with law. It appears that the respondent has passed the impugned order without considering the reply submitted by the petitioner - the impugned proceedings dated 05.09.2024 are liable to be set aside. The impugned proceedings dated 05.09.2024 are set aside and the respondent is directed to consider the petitioner's reply dated 12.09.2024 and pass appropriate orders on merits and in accordance with law to revoke the suspension of GST registration - Petition disposed off.
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2024 (11) TMI 656
Constitutional Validity of Section 16 (4) of the CGST and KGST Act, 2017 - violative of Article 14, 19 (1) (g) and 300A of the Constitution of India or not - HELD THAT:- A perusal of the material on record will indicate that the issue in controversy involved in the present petition is directly and squarely covered by the judgment of this Court in the case of M/s. Sadhana Enviro Engineering Services vs. Joint Commissioner of Central Tax others [ 2024 (9) TMI 1648 - KARNATAKA HIGH COURT ] where it was held that 'In view of the amendment by inserting Section 16(5) to the CGST / KGST Act, the present petition deserves to be disposed of relegating the parties to the original authority to implement and give effect to the said provisions after providing sufficient and reasonable opportunity to the petitioner and hearing them and proceed further in accordance with law and by issuing certain directions in this regard.' In view of the aforesaid facts and circumstances and the judgment of this Court in M/s. Sadhana Enviro Engineering s case, the present petition also deserves to be allowed and disposed of in terms of the said judgment.
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2024 (11) TMI 655
Levy of GST and penalty - case of the petitioner is that they have executed the works for Railways and therefore, the tax for the works executed by them as contract services to the Railways have to be calculated in terms of Clause 3(v)(a) of the Notification No.11/2017, dated 28.06.2017 - HELD THAT:- The Principal Bench of this Court, in KEC INTERNATIONAL LIMITED VERSUS ASSISTANT COMMISSIONER OF STATE TAX, SALEM [ 2023 (2) TMI 1351 - MADRAS HIGH COURT] , has granted an interim order not to take any coercive steps pending the writ petition on the undertaking given by the learned Additional Advocate General. The same was followed in the subsequent writ petitions in KEC INTERNATIONAL LIMITED VERSUS ASSISTANT COMMISSIONER OF STATE TAX, SALEM UNION OF INDIA THROUGH ITS SECRETARY, NORTH BLOCK [ 2023 (6) TMI 1443 - MADRAS HIGH COURT] . There shall be an interim order not to take any coercive steps pending these writ petitions - Post the matters after four weeks.
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Income Tax
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2024 (11) TMI 654
Correct head of income - surplus arising from the transfer and assignment of right, title and interest in the agreements for acquisition of office premises - whether the office premises could be treated as stock-in-trade by the Appellant Assessee or its investment in fixed assets - delay filling SLP As decided by HC [ 2022 (7) TMI 288 - BOMBAY HIGH COURT] Tribunal is correct in holding that the surplus arising from the transfer and assignment of right, title and interest in the agreements for acquisition of office premises is an adventure in the nature of trade and therefore, assessable as business income. HELD THAT:- There is a delay of 752 days in filing the Special Leave Petition which has not been satisfactorily explained. Special Leave Petition is accordingly dismissed on the ground of limitation.
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2024 (11) TMI 653
TDS u/s 194C - capital grant subsidy given by the National Highways Authority of India (NHAI) to its Concessionaires - HELD THAT:- It is the primary obligation of the Concessionaire to raise funds for the purposes of implementation of the project. The project itself is handed over to the Concessionaire to be held and possessed during the concession period and it is only thereafter that the highway would revert to the NHAI at the end of the concession period or termination whichever be earlier. While, principally it is the obligation of the Concessionaire to endeavour to meet the economic targets, arrange for appropriate credit facilities from lenders, the NHAI bearing in mind the huge investment required to be made also extends financial aid and support in the shape of viability gap funding. Having noticed the salient provisions of the Concession Agreement, it becomes apparent that the work relating to the creation of infrastructure, and which in this case was concerned with the six-laning of an expressway, constituted the physical component of the contract. It becomes relevant to note that Section 194C requires a deduction of tax at source on any sum which may be paid to a contractor for carrying out any work. The expression work is further expanded in the principal provision with the statute ordaining that it would include supply of labour for carrying out any work. The word work also stands defined in the Explanation to Section 194C and which includes activities such as advertising, broadcasting and telecasting of programmes, carriage of goods or passengers, catering, manufacturing or supplying a product as some of the activities which could fall within the meaning of that expression. That the definition is not intended to be exhaustive is evident from clause (iv) of the Explanation using the phrase shall include . As we read Section 194C, it becomes evident that the same is principally concerned with the undertaking of a physical or tangible activity as opposed to the mere grant of subsidy or financial assistance. The provision creates a direct linkage between the sum paid and the carrying out of work. While equity support was undoubtedly a concomitant of the Concession Agreement, it would be wholly incorrect to view it as payment made for a work entrusted to the Concessionaire. In fact, the BOOT contract itself envisaged investment being primarily made by the Concessionaire for the purposes of creation of the targeted infrastructure. In terms of the contract model, the Concessionaire was upon completion of the physical elements of the project, enabled to own and operate the expressway, collect fee from users of the highway and exploit the expressway in accordance with the stipulations of the concession so as to recoup the investment made in its creation. Upon completion of the concession term, the highway was to revert to the NHAI. Concessionaire was thus, and in that sense, in possession of the contract assets and conferred the right to exploit the same as per the contractual stipulations. Quite apart from the BOOT model itself being a hybrid arrangement, the capital grant subsidy was not a payment made for work per se but representative of the obligation of NHAI to extend financial support in connection with the creation of an asset of public utility and importance. The capital grant subsidy was essentially aid and support that the NHAI extended to the Concessionaire as opposed to payment that it would have ordinarily made to a contractor and would be directly connected with or constitute recompense for physical work that was performed. As the precedents noticed hereinabove bid us to acknowledge, the word work in the context of Section 194C is liable to be understood as relating to labour that is expended, the undertaking of a task or operation which produces a result. The infusion of equity capital as a measure of financial support, while surely a contractual obligation, cannot consequently be understood to mean the payment for a work undertaken. Regard must also be had to the provisions contained in Section 194C (2) and which prescribes that any sum credited to any account of the contractor, irrespective of its nomenclature, and entered in its books of accounts would be deemed to a credit of such income to the account of the payee. However, and as was noticed hereinbefore, the capital grant subsidy was not an amount which was to be deposited in its account or be accounted for in its books of account as that expression is understood in common parlance. Those sums were credited directly to the Escrow Account. This would, therefore, also not be a case where sub-section (2) of Section 194C would be attracted. Tribunal has correctly come to conclude that the subsidy or financial support which was extended by NHAI to the Concessionaire and was only envisaged to work as viability gap funding could not possibly have been construed as payment made for a work undertaken by the contractor. While it is true that Section 194C does not stand confined to a works contracts alone, unless the appellant had established that the sum in question and represented by the viability gap funding were recompense for a physical activity undertaken or labour expended, those disbursements could not have formed subject matter of a withholding tax under Section 194C. Decided against revenue.
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2024 (11) TMI 652
Unconscionable addition as made on the petitioner, as against the returned income - primary grievance being that the case of the petitioner is based on several replies which according to the petitioner made out sufficient justification supporting the returned income as indicated in the return of income, was required to be considered/dealt with by the AO against such addition being proposed to be made by the AO. HELD THAT:- This being the primary grievance, we are of the opinon and it is appropriate that all these contentions be permitted to be raised by the petitioner in the proceedings of an appeal which is statutory appeal, which is a remedy available to the petitioner. For such reasons, we are not inclined to adjudicate this petition on merits as an effective statutory remedy to urge all his grievances against the assessment order as also to move an application on stay of the demand, as also the penalty proceedings. The petitioner is permitted to avail of the statutory remedy of filing an appeal against the impugned assessment order which be filed within three weeks from today.
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2024 (11) TMI 651
Period of limitation to pass an order under the provisions of Section 92CA - HELD THAT:- Tribunal has proceeded to follow the decision of M/s. Pfizer Healthcare India Pvt. Ltd [ 2022 (4) TMI 808 - MADRAS HIGH COURT] We are informed that a special leave petition has been filed by the Revenue assailing the said decision of the Madras High Court, which is pending before the Supreme Court. We are of the opinion that interpretation of the provisions of Section 92CA and the interplay between the said provision and Section 153, insofar as the limitation to pass an order is concerned, are issues which are subject matter of consideration before the Supreme Court, in the proceedings which we have referred hereinabove. Also, the order passed by this Court in PayPal Payments Private Ltd. [ 2024 (8) TMI 937 - BOMBAY HIGH COURT] is the subject matter of challenge before the Supreme Court. We accordingly adjourn these proceedings sine die with liberty to the parties to circulate the proceedings after appropriate orders are passed by the Supreme Court. Considering the conspectus as noted hereinabove, these appeals need to be taken up for admission after appropriate orders are passed by the Supreme Court. In the event we proceed otherwise, and hear these appeals on admission and assuming that we are required to admit the Revenue s appeal, a cross appeal would be required to be filed by the assessee, which would add into the multiplicity of the proceedings. For such reason also, it would be appropriate to await the orders of the Supreme Court.
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2024 (11) TMI 650
Reopening of the assessment against non existing entity - as per revenue assessee company was amalgamated with GPT Ventures Pvt. Ltd. was never disclosed to the assessing officer and they came to know only on 2024 - HELD THAT:- Revenue submission appears not to have been raised any such fact before the learned Tribunal. Nonetheless, we considered the said submission and we found the said submission to be factually incorrect as the assessing officer was aware of the amalgamation even at the time when proceedings were initiated under Section 147 of the Act pursuant to the notice dated 6.12.2018. Apart from that in the reasons to believe which was appended to the notice the assessing officer has specifically referred to the details regarding the amalgamation. Therefore, the submission of the revenue cannot be accepted as it is factually incorrect. Assessee had filed the return in the name of the company prior to its amalgamation - This issue was also considered by the learned Tribunal and after taking note of the decision of this Court in the case of I. K. Agencies (P) Ltd. [ 2011 (3) TMI 690 - CALCUTTA HIGH COURT ] the contention was rejected since the fact that the real assessee subsequently filed its return with objection that such notice is invalid cannot cure the defect which goes to the root of the jurisdiction to reopen the proceedings. Further it was held that the said provision cannot cure the defect of the nature involved in the case where no notice at all has been issued by the real assessee responsible for payment of its dues. As in the instant case as pointed out earlier the fact of amalgamation was well within the knowledge of the assessing officer as early as in the year 2018. So far as filing of return in the name of the assessee company prior to its amalgamation was an event which could not be avoided by the assessee and in any event mere filing of such return cannot be taken to be a ground to cure the inherent defect which goes to the root of the matter. Decided against revenue.
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2024 (11) TMI 649
Challenge to summoning order and seeking quashing of the complaint - Allegations of Undisclosed Foreign Assets - Applicability of Sections 50 and 51 of the Black Money Act, 2015 - petitioner has argued vehemently that the present complaint could not have been filed before completion of the assessment - Case of the complainant/Income-Tax Department is that the petitioner stated that his association with certain foreign assets was only in the past and that too in the capacity of a trustee, and that he had resigned from all such fiduciary positions in relation to such foreign assets prior to April 2015 HELD THAT:- Black Money Act came into force on 01.07.2015. Additionally, the case of the complainant is that on 07.02.2017, a search was conducted against one Sanjeev Kapur, who was the Chartered Accountant of the petitioner. During the course of the search, it was discovered that the petitioner had attempted to fabricate and back-date documents to show that the foreign assets/offshore entities were held by the petitioner not in his individual capacity but in a fiduciary capacity as a trustee of the Alrahma Trust, purportedly settled in the UAE in 2006 by one Mr. Hussain Darwish Saleh Alrahma. The documents were also made to show that the petitioner had transferred the sole trusteeship to one Mr. Sumit Chadha in March 2015. It is also pertinent to mention that as per complainant Mr. Sanjeev Kapur stated that the petitioner met him in June-July 2016 along with the petitioner s legal team, and it was decided that a trust structure of the nature described above would be set up, wherein the accused would be appointed as the sole trustee. Thereafter, Alrahma Trust was acquired in Dubai, UAE, and the accused was appointed as the sole trustee, effective from February 2006. Subsequently, it was decided that the accused would resign as the sole trustee effective from March 2015. The complainant alleges that the creation of the Alrahma Trust and changes in the structure of the trust were part of a premeditated scheme to dissociate the accused/petitioner from all his offshore entities/foreign assets by back-dating documents to evade the proceedings under the Black Money Act. The complainant is not required to bring the material on record that could prove the guilt of the accused or even be sufficient for framing the charge. This is a very initial stage where the Magistrate has to form an opinion that there are sufficient grounds for issuing the process. Such an opinion is to be formed based on the entire material on record. The objections of the petitioner regarding the assessment are not relevant, and the petitioner is required to seek the appropriate remedies to challenge the assessment order. In regard to the evidence to show that the petitioner owned foreign assets, the complainant shall be obliged to produce the same at an appropriate time. It is relevant to note that during the course of submissions, learned counsel for the respondent submitted that the petitioner prepared fabricated/back-dated documents to show him holding his foreign assets as a trustee of the Alrahma Trust effective from February 2006 and having resigned as trustee from March 2015. Furthermore, several documents, which form part of the scheme, including trust deeds, resignation letters, and correspondences, were signed by the accused/petitioner and his aides.It was submitted that this constitutes an overt act on the part ofthe Petitioner towards the commission of the offence. Case of the complainant is that in his reply to the notice under Section 10 of the Black Money Act dated 03.11.2016, the petitioner stated that the foreign assets were held by him the capacity of a trustee. It has been contended that this statement could be substantiated only by means of the fabricated/back dated documents. It has been submitted that petitioner has done everything which he could do to evade tax. However, the conspiracy unearthed as a result of the discovery made pursuant to the search conducted on 07.02.2017 at the premises of Mr. Sanjeev Kapur. It is also pertinent to mention here that whether act of the petitioner amounts to preparation or attempt is a matter of trial - also pointed out that there is wrong mentioning of the provisions in the summoning order. However, we consider that only on this ground, the summoning order cannot be set aside as the court has to see the entire record as a whole some and not in piece-mail. Petitioner had also moved an application for amendment of the present petition to challenge the assessment order dated 23.03.2020. Consider that has no substance as the petitioner has an efficacious statutory remedy against the assessment order dated 23.02.2020 by way of filing an appeal under Section 16 of the Black Money Act. It is a settled proposition that if there is an adequate efficacious alternative remedy is available and the jurisdiction of the High Court has been invoked without availing the same, except in the exceptional cases, such a writ petition is not required to be entertained. Reference can be made in Genpack India Pvt. Ltd. vs. Deputy Commissioner of Income Tax and Anr. [ 2019 (11) TMI 1118 - SUPREME COURT] . Finally, the respondent department has also pointed out towards the conduct of the petitioner. It has been pointed out that the petitioner s affidavit has not been property attested and even he has not disclosed his the address at United Kingdom. It has also been alleged that the petitioner is evading the process of law. The party who approaches the Court must come with clean hands. Petitioner in the present case as alleged has not disclosed his United Kingdom address. The petitioner is thus has not approached the Court with clean hand. In view of the discussions made herein above, the Court is of the considered view that the petition is liable to be dismissed.
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2024 (11) TMI 648
Exemption u/s 10B - Tribunal reducing the exemption - expenditures incurred in foreign currency which, according to the petitioner, are liable to be included in the ambit of 'export turnover' in the computation of such exemption - HELD THAT:-The issue in question is covered by a judgment of the Supreme Court in Commissioner of Income Tax Central-III V. HCL Technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from export turnover must also be excluded from total turnover , since one of the components of total turnover is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible.
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2024 (11) TMI 647
Undisclosed income u/s 68 - addition on basis of statements obtained from employees/ 3rd parties - denial of natural justice - Denial of a specific request having been made by the petitioner to furnish the complete sworn statement purported to have been recorded u/s 132 (4) and also an opportunity to cross-examine the persons whose statements were sought to be relied upon HELD THAT:- It is by now well-settled that taxing authorities entrusted with the powers to make assessment for taxes discharge quasi-judicial functions and they are bound to observe the principles of natural justice in reaching their conclusions. It is true that the assessing authority is not fettered by technical rules of evidence and pleadings and is entitled to act on material which may not be accepted as evidence in a court of law but that does not absolve it from the obligation to comply with the principles of natural justice. It is normally necessary that a copy of the incriminating statement of the witness must be given to the assessee in order to enable him to have an effective and useful cross-examination (State of Punjab vs. Bhagat Ram [ 1974 (10) TMI 105 - SUPREME COURT] It is also trite law where the assessee has clearly stated in his objections that he wanted an opportunity to cross-examine the witnesses who provided information to the Department, denying such opportunity to the assessee results in violation of the principles of natural justice (L.Abdulla Kunhi vs. State of Kerala [ 2000 (10) TMI 927 - KERALA HIGH COURT] Taking into account the above legal position, this Court is of the considered view that the impugned order suffers from the vice of violation of principles of natural justice. In view thereof, the impugned order is set aside and the Respondent is directed to furnish the sworn statements of the parties which were relied upon and also consider the request for an opportunity to cross-examine and pass orders in accordance with law after affording a reasonable opportunity of hearing to the petitioner.
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2024 (11) TMI 646
Royalty payments - treated as revenue expenditure or capital expenditure - HELD THAT:- Division Bench of this Court in the case of the very assessee before us [ 2022 (6) TMI 1428 - MADRAS HIGH COURT] in TCA.Nos.755 of 2009 and batch dated 30.06.2022 held every expenditure incurred to acquire some right over intangible asset, cannot be ipso facto termed as capital expenditure. The nature of the assets, right, information or technical know-how that is transferred, must be such that without which the transferee could never commence the business. As rightly contented by the learned senior counsel appearing for the assessees, the benefit granted by the licensor is not enduring in nature in the present cases. AO without appreciating the terms of the licence agreement and ascertaining the nature of the expenditure incurred by the assessee companies, disallowed the deduction of royalty payment and allowed the depreciation at 25% treating it as capital expenditure. However, the appellate authorities, while deleting the disallowances made by the assessing officer, have rightly treated the royalty payment as revenue expenditure. Once the payment of royalty is treated as revenue expenditure, automatically, it goes without saying that the assessees would be entitled to 100% deduction. Therefore, we need not interfere with the orders passed by appellate authorities. Accordingly, the substantial questions of law relating to royalty, are answered in favour of the assessees. Disallowance of bad debts - After a detailed discussion in regard to the the judgment of the Supreme Court in Shriram Chits and Investments Private Limited [ 1993 (7) TMI 338 - SUPREME COURT] which dealt with the vires of the Chit Funds Act, 1982, the issue of bad debts has been discussed and concluded as not denied by the Revenue that the payment made in the course of the business had resulted in a loss of the chit amount which is also allowable under Section 28. Given the above-said fact, we have no hesitation in rejecting the Revenue's appeal on this question. Decided in favour of assessee.
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2024 (11) TMI 645
Diversion of income by overriding charge in respect of amount transferred to Statutory Reserve Fund in compliance with the mandatory provisions of Sec.45IC read with Sec.45Q of RBI Act - Whether Tribunal was right in noticing that the amount transferred to Reserve Fund in compliance with the provisions of Reserve Bank of India Act, 1934, by the appellant from its income, is not an allowable deduction in computing the assessable income under the provisions of Indian Income Tax Act, 1961? HELD THAT:- The above substantial questions have been answered in the case of this very assessee for other assessment years by this Court [ 2022 (6) TMI 1428 - MADRAS HIGH COURT] the reserve is the amount of profit which is retained for use in business, when difficulty arises and on the basis of our earlier findings and from the very language of section 45 IC, this court comes to a conclusion that the amount transferred by the assessee s herein, to the statutory reserve as mandated under the provisions of the RBI Act, is not an allowable deduction in computing the assessable income under the provisions of the Act under the regular computation and computation of book profits under section 115JB, as the case may be and therefore, the orders of the authorities below, do not call for any interference. Accordingly, the consequential issue is also decided against the assessee s - Decided in favour of revenue.
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2024 (11) TMI 644
Revision u/s 263 - Tribunal confirmed the position that the assessing officer had failed to apply his mind to the assessment in regard to the first two issues i.e. the rental income and the consultancy charges paid to Ernst and Young confirmed the order of the CIT to that extent and as regards the deduction under Section 54EC, the Tribunal allowed the same - HELD THAT:- The date of receipt of advances is contemporaneous with the execution of the sale agreement that is dated 02.01.2003. The investments have been made only thereafter and hence it is clear that the source for the investments are the advances received from the purchasers. The respondent has also explained that the advances were initially deposited in mutual funds and the maturity amounts had been credited to its bank account from out of which the investment in bonds had been made. The mere fact that the advances had been deposited in mutual funds would not, in our view, militate against the claim under Section 54EC as the investments in bonds had been made from out of the proceeds of the mutual funds. There is no dispute, rather it is admitted, that there were no other funds available with the assessee from out of which the investment in bonds could have been made. The nexus between the advances and the amounts invested in bonds is clear, directly traceable to the advances received. In light of this admitted position, we return a finding based on the materials available on record that the source of the investment in bonds are the advances that has been received by the assessee in relation to the subject transaction. In fact, this aspect of the matter has not been lost sight of by the assessing authority. Under notice dated 01.12.2006, the assessee has been called upon to furnish various details prior to finalisation of assessments. A perusal of the above notice informs us that the claim of capital gains has not escaped the attention of the assessing officer. Necessary documents including the agreement have been called for and an explanation has been sought from the assessee that has been duly tendered. Argument of the revenue is that Section 54EC requires the investments to be made only subsequent to the date of transfer - Section 54 and the provisions thereafter, from Section 54A to Section 54 GB, provide for an exemption from the levy of capital gains in various stipulated circumstances. Section 54E states that the capital gain arising on the transfer of a capital asset prior to 01.04.1992, is not to be charged in certain cases. Similarly, Section EA and EB, applicable in the event of the transfer of a long-term capital asset before 01.04.2000, grants an exempts from capital gain if the gain is invested in specified securities in the manner provided under those sections. The exemption granted u/s 54EA and EB in respect of transfers prior to 01.04.2000, has been continued by Section 54EC, and is applicable to transfers post 01.04.2000. The scheme of capital gains exemption is thus seen to have envisaged a seamless sequence, from Section E dealing with transfers prior to 01.04.1992 to the present-day Section EC applicable to transfers post 01.04.2000, without interruption. There are, by and large, no major differences in the ingredients of the scheme itself. Hence, in our considered view, there should be no differences in the interpretation of those provisions, barring those areas where the provision itself makes a patent distinction. The Circular issued in the context of Section 54E is thus applicable in the context of Section 54EC as well as the scheme of exemption under erstwhile Section 54E continues in 54EC in one continuous progression. The Delhi High Court has, however, in the case of Bhupendra Kumar Bhaumik v. Union of India [ 2002 (10) TMI 67 - DELHI HIGH COURT] considered a similar case albeit in the context of Section 54E, holding in favour of the assessee. The ratio of the judgment of the Supreme Court in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] would also fully support us in our conclusion that there is no error in the order of the assessing officer warranting intervention under Section 263 of the Act. In light of the detailed discussion above, the substantial questions of law are answered in favour of the respondent-assessee
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2024 (11) TMI 643
MAT computation - inclusion of sale value of old rubber trees in computing book profit under section 115JB - HELD THAT:- There is no dispute that the claim of the assessee that the sale value of old rubber trees would not be treated as income while computing the book profit u/s. 115JB of the Act, was already decided by the Hon ble Kerala High Court in the appellant s own case for the A.Ys. 1997- 2001 [ 2011 (6) TMI 452 - KERALA HIGH COURT ] The assessee s contention that the said decision of the Hon ble Kerala High Court has not become final since the assessee had challenged the same before the Hon ble Supreme Court and the same are pending is in no way helps the assessee for allowing these appeals. In fact, in all the years, the dispute is with regard to, whether the sale of old rubber trees could be included while computing the book profit u/s. 115JB of the Act. It is also an admitted fact that the Hon ble Kerala High Court had negatived the contention of the assessee and therefore the law prevailing as on today is that the value of the sale of old rubber trees should be included while computing the book profit u/s. 115JB of the Act. Unless and until the said order has been set aside by the Hon ble Supreme Court, we have no other option except to confirm the order of the Ld.CIT(A). AO jurisdiction to pass an order u/s. 154 in which the AO had rectified the mistake and added the sale of old rubber trees while computing the book profit u/s. 115JB - We are of the view that the issue was already decided by the Hon ble Kerala High Court against the assessee and therefore the same is a mistake apparent on the face of the record and therefore the AO had rightly invoked section 154 of the Act to rectify the said mistake. The non-consideration of the judicial precedence by the AO would be a valid reason for invoking section 154 of the Act and therefore we are dismissing the present appeal filed by the assessee. The other grounds raised by the assessee does not require any adjudication in view of the dismissal of the appeal.
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2024 (11) TMI 642
Disallowance of provision for bad and doubtful debts and provision for doubtful advances - debtor s accounts are not closed and the debts are not written off as irrecoverable - HELD THAT:- As per the documents submitted by the assessee, it is very clear that the assessee had written off the entire provision for bad and doubtful debts and advances by closing the account of the debtors. Even though, the assessee has demonstrated that the amounts were written off as irrecoverable and therefore the assessee is eligible for the deduction as per section 36(1)(vii) of the Act, the Ld.CIT(A) had not considered the records properly and gave a finding that the assessee had failed to demonstrate. We found that the balance sheet as well as the other records produced by the assessee would demonstrate that the said amounts were written off by deducting the same in the P L account and thereafter the said set off was also properly recorded in the balance sheet and therefore the balance amounts after deducting the same of Rs. 94 Lakhs has been taken into consideration for the purpose of arriving the financial status of the assessee. he finding of the Ld.CIT(A) is without appreciating the facts properly and hence we are in agreement with the arguments advanced by the assessee We have also gone through the judgment of Hon ble Supreme Court in the case of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] wherein it was held that whether the assessee had written off the bad debts in its books by way of a debit to profit and loss account, simultaneously reducing the corresponding amount from loans and advances to debtors depicted on asset side in balance sheet at the close of the year, the assessee was entitled to deduction u/s. 36(1)(vii) of the Act and for that purpose, it was not necessary to close individual account of each of its debtors in its books. In the present case also, the assessee had written off the bad and doubtful debts and advances by debiting the P L account and also the balance sheet was prepared after considering the said written off and the debtors account has been closed by making necessary entries such as being debtors accounts set off against provision and therefore we allow the appeal filed by the assessee.
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2024 (11) TMI 641
Revision u/s 263 - as per CIT activities carried on by the assessee society falls in the category of commercial activity and not charitable activity, as such, the same is hit by second proviso to section 2(15) of the Act and the AO has failed to examine the same in the assessment proceedings - Revisionary Authority also was of the view that the membership has been received during the year and the same has been capitalized and treated as corpus donation in the books of account. HELD THAT:- We have gone through the order in the case of Petrotech [ 2017 (8) TMI 25 - ITAT DELHI ] and that was an appeal filed by the Revenue against the order of CIT(A)-21, New Delhi by which the activities of the said society were held to be charitable in nature and covered under the scope of education and not under advancement of any other object of general public utility. It appears that the ld. Revisional Authority was carried by the conclusion that the primary objective of the assessee is to secure and promote the business interest of its members and, therefore, it cannot be said to be a public charitable organization. We are of the considered view that any organization primarily formed to secure or promote the interest of its members who were themselves engaged in business activity does not lead to an inference that the objective of the society is also commercial in nature. It is unfair to label the assessee as lobbying agency. The fact that it came into existence as an initiative of the Government of India shows that the purpose was to bring all the stakeholders on one platform and ultimate beneficiary was to be the consumers only. Merely because the participants includes private sector members also, that will not make the nature of activities, as a facilitator, to the hydrocarbon industry, to be that of a commercial nature. The impugned order does not show if from the expenditure of the assessee company anything could be culled out to show that the funds were utilized for promoting the business or financial interest of any individual member or members collectively. As we go through the expenditure statement of the assessee available, we find that there is no head of expenditure which would show that any part of the fund was used for procurement of any business for the members. We further find that the incidental fee and annual subscriptions of the members is on the basis of their turnover, etc., for which no opinion can be formed that it was for the benefit of any specific member. Therefore, the order of the ld. Revisionary Authority, has no legal basis and seems to be on surmises and conjectures, which is beyond the scope of section 263 of the Act, and thus cannot be sustained. Decided in favour of assessee.
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2024 (11) TMI 640
Estimation of profit percentage @12.50% of gross receipts - assessment of assessee's income - CIT(A) applied estimated net profit of the assessee @ 12.5% on gross receipts assessed by the AO and consequently, restricted the additions - assessee pointed out that the advertisement business in which the assessee was engaged, operates on a wafer- thin margins and estimations @12.50% of gross receipts do not accord with ground realities - HELD THAT:- For determination of taxable income, involvement of some guesswork would be indispensable in the absence of requisite financial data. CIT(A) has not provided reference to any material to weigh 12.50% to be a fair estimate. The assessee on the other hand has given reference to profits derived by the other party in the same business. The profits declared in the range of 1.5% to 2% is thus claimed by the assessee to be a fair estimate. However, it is the duty of the assessee to support the claim of profits in such narrow and low range. The assessee itself is to blame for not doing so. The estimation in the vicinity of such profits of 2 % or thereabout proposed on behalf of the assessee thus cannot be accepted. Section 44AD of the Act provides for statutory presumptions whereby the sum equal to 8% of the total turnover or gross receipts of the assessee in a previous year on account of the business by the eligible assessee is deemed as profit and gains of such business chargeable to tax. Impliedly such statutory estimations at 8% of the total turnover are based on empirical studies and data gathered with the Legislature. Such statutory estimations of profits thus may serve as useful guide for the purposes of estimations. Guided by the rules of justice, equity and good conscience, we thus consider it just and expedient to adopt the rate of 8% of the gross turnover receipts as fair estimation of taxable income and more so in the light of comparable data placed for lower profit margin earned by other assessee in same business. We thus, modify the first appellate order towards estimation of profits from 12.5% to 8%. Appeal of the assessee is partly allowed.
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2024 (11) TMI 639
Disallowance of deduction claimed u/s 80IAB - appellant could not file form 10CCB in respect of deduction - HELD THAT:- As decided in Arunachalam [ 1994 (1) TMI 65 - MADRAS HIGH COURT] held that filing of audit report is directory in nature and if such audit report is filed on or before the AO passed the assessment order u/s 143(1) or u/s 143(3) then the AO should consider the audit report for the purpose of allowing the benefit of deduction under the provisions of the Act. In the present case, it is not a case of the AO that the appellant has not filed the relevant audit report in Form 10CCB for claiming deduction u/s 80IA and 80IAB of the Act. In fact, the assessee has promptly filed form 10CCB on or before the due date for filing return of income in respect of deduction claimed u/s 80IA of the Act. But, could not file Form 10CCB in respect of deduction claimed u/s 80IAB of the Act, and the reasons given by the appellant for not filing said form, there is some technical glitches in the IT Portal. In our considered view, it is a fact that in a time, there are lot of technical glitches in the IT Portal for filing return of income or any other document which has been reported to the concerned authorities by the taxpayers. Going by the conduct of the assessee in filing audit report in respect of deduction claimed u/s 80IA of the Act, and also considering the reasons given by the assessee, that there are certain technical glitches and because of this, it could not upload 2nd audit report in Form 10CCB, in our considered view, the AO ought to have considered the audit report filed by the assessee on 25/06/2022 for claiming deduction u/s 80IA of the Act, because the said audit report was very much available to the Assessing Officer, when he passed the order u/s 143(1) of the Act. In our considered view, as held that filing of audit report is directory in nature but not mandatory and further if such audit report is filed on or before the AO passed the assessment order, then the same needs to be considered for allowing deduction or exemption under the provisions of the Act. Since, the appellant has filed the audit report in Form 10CCB before the AO passed order u/s 143(1) of the Act, in our considered view, the claim by the assessee u/s 80IAB of the Act needs to be allowed. Thus, we set aside the order of the CIT (A) and direct the AO to allow deduction claimed u/s 80IAB of the Act. Decided in favour of assessee.
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2024 (11) TMI 638
Denial of tax relief u/s 90/90A - tax relief - procedural delay in filing of Form-67 - HELD THAT:- Filing of Form-67 is a procedural formality and could not be the basis for denial to the assessee. In the present case, we find that CIT(A) without assigning any reason has stated that he begged to differ from the above-mentioned judgment by SOBHAN LAL GANGOPADHYAY VERSUS ASSTT. DIRECTOR OF INCOME TAX, CPC, BENGALURU [ 2023 (5) TMI 1286 - ITAT KOLKATA] It is important to mention here that any judgment passed by superior Court is binding in nature to the Court which are inferior to them. If the inferior Court differs, he has to discuss and assign reason of the difference. But in the present case, we find that ld. CIT(A) without assigning any reason to take a different view has only stated that he begged to differ, that is erroneous and cannot be said to be legally justifiable. Thus, as held that the ld. AO ought not to deny the relief u/s 90 of the Act merely for delay in filing of Form-67. Appeal filed by the assessee is allowed.
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2024 (11) TMI 637
Addition u/s. 56(2)(x) - income from other sources on account of difference in the stamp duty value received on sale of immovable property - HELD THAT:-CIT(A), held that as the date of agreement to sell is 09.01.2012 and the allotment letter has also been furnished to the assessee on 24.02.2012, where the assessee has also paid the full and final consideration to the developer/builder, which fact was also not disputed by the AO, the impugned addition made by the ld. A.O. on the difference in the stamp duty value, was deleted on the ground that the proviso to section 56(2)(x)(b)(B) provides that where on the date of agreement the consideration has been fixed for transfer of immovable property and when the date of agreement and date of registration are not the same, then the stamp duty value as on the date of agreement may be taken for the purpose of determination of the stamp duty value. It is also not the case of the Revenue that the assessee has not paid the consideration or failed to establish the payment for the said property at the time of agreement to sell . Though the AR has extensively argued that it is the case of transfer of lease hold rights for which section 50C of the Act cannot be invoked, there is no specific finding on the same by the lower authorities nor was it raised as a ground of appeal. In the absence of the same, and on perusal of the relevant documentary evidence furnished by the assessee, we find no infirmity in the order of the ld. CIT(A) in deleting the impugned addition made by the ld. A.O. Ground no. 1 raised by the Revenue is hereby dismissed. Addition as income from other sources u/s. 56(x) on account of difference in the stamp duty value - The assessee had placed reliance on R. C. Cooper vs. Union of India [ 1970 (2) TMI 130 - SUPREME COURT] and the decision of Premier Automobiles [ 2003 (4) TMI 43 - BOMBAY HIGH COURT] which has held that the sale of the entire undertaking as a going concern will be a slum sale and not acquisition of individual assets. The assessee has also relied on the decision of jurisdictional co-ordinate bench in the case of DCIT vs. Sumit Securities Ltd. [ 2012 (3) TMI 176 - ITAT MUMBAI] wherein it was held that in a slum sale, the value of individual assets should not be considered for determining the value of consideration for such transfer. The ld. CIT(A) after duly considering the submission of the assessee has deleted the impugned addition that section 56(2)(x) will not be applicable to the said transaction. Upon perusal of the factual aspects and considering the documentary evidence relied upon by the assessee, we find no infirmity in the other of the ld. CIT(A) in deleting the impugned addition made by the ld. A.O. Ground no. 2 raised by the Revenue is hereby dismissed.
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2024 (11) TMI 636
Addition u/s 68 - gain accrued on the sale of shares as bogus - HELD THAT:- AO and CIT(A) has applied the concept of Human probabilities and held the above said scrips to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon ble Bombay High Court in the case of Ziauddin A Siddique [ 2022 (3) TMI 1437 - BOMBAY HIGH COURT ] Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to allow the ground raised by the assessee. Accordingly the grounds raised by the assessee are allowed.
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2024 (11) TMI 635
CIT(A) dismissal of appeal without giving a reasonable opportunity to the assessee to present it s case on merits - HELD THAT:- CIT(A) erred in facts and in law in not giving opportunity to the assessee to cure the defect, if any, in the filing of appeal form and dismissing the appeal of the assessee in limine, against the principles of natural justice. Accordingly, the appeal of the assessee is restored to the file of CIT(A) for de-novo consideration, after giving an opportunity to the assessee to cure defects in filing of appeal, if any, and thereafter, decide the appeal of the assessee on merits, in accordance with law.
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2024 (11) TMI 634
Exemption u/s 11 - return was filed using ITR-6 - argument of Ld. CIT(A) recording principle of consistency and applicability of res judicata - HELD THAT:- Material available on records indicate that the assessee has been granted exemption u/s 11 for immediately preceding AY-2014-15 as is evident from order u/s 143(3) dated 28.12.2016. Perusal of para-3 thereof also alludes that same situation qua filing of ITR-6 and treatment of assessee as a rested entity u/s 12AA existed in the said year as well. The perusal of order further shows that the assessee has been allowed exemption u/s 11. The argument of Ld. CIT(A) recording principle of consistency and applicability of res judicata have been found to be correct. It is trite law that principle of res judicata do not apply to direct tax however the revenue cannot take different positions in different years if there is no change in the material facts. The assessment orders for AY s 2014-15 2015-16 show that the same fact of filing of ROI in ITR 6 was existing therein. The Ld.AO in AY-2014-15 chose to grant the assessee deduction u/s 11. This decision has become final and rather accepted by the revenue as nothing has been brought on records to suggest that the same was agitated through available revisionary remedies like action u/s 263 etc. It is trite law that notwithstanding principle of res judicata not applicable to direct taxes, an AO is not permitted to take different stand on the same issue and same set of facts over different years. DR has not been able to point out any difference in the facts of the case as they existed in comparison to AY-2014-15. Accordingly, we are of the view that the Ld. CIT(A) has taken a correct decision in granting exemption u/s 11 and no interference is required to be made to his order at this stage. - Decided against revenue.
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2024 (11) TMI 633
Revision u/s 263 - directing the AO to verify the claim of assessee to MAT credit and if found credit not available, disallow the same - HELD THAT:-As ld.counsel explained before us that if the AO give appeal effect to the order of ITAT, then the MAT credit will be available to the assessee and in term of ITAT, a consequential order giving effect to the same has to be passed. Since in the present case, there is no error in the assessment order as per the returned income, MAT credit is available. Any adjustment arising out of assessment and appeal proceedings could be rectified while giving effect to the Appellate Order passed by ITAT or rectification order u/s. 154 of the Act can be passed. The ld.counsel for the assessee filed complete details before us but going through the fact that these needs verification, after going through the consequential order passed by AO and hence, although it cannot be a subject matter of revision u/s. 263 of the Act, there is no error in the assessment order or no prejudice is caused to the Revenue, the MAT credit can be verified by the AO and that can be done while giving appeal effect order of AO for the assessment year 2015-16 and consequent rectification can be done by the AO for assessment year 2018-19 also. Hence to that extent, we agree with the directions of PCIT but this cannot be a subject matter of revision u/s. 263 of the Act. Accordingly, this issue of assessee s appeal is allowed subject to above observation. PCIT directing the AO to verify the claim of deduction u/s. 36(1)(viia) of the Act on the loan advance by 11 branches, which are not classified as rural branches for the purpose of claiming deduction u/s. 36(1)(viia) - The assessee has filed complete details of 11 branches which are situated in various cities and also submitted addresses of branches in Annexure-2, which is made part of the revision order at pages 10-12. From the above, 11 branches located at various places, it is noticed that 10 branches are covered by 2011 census wherein population is less than 10,000 except one branch of Pongalur which can be excluded from rural branches since the population is more than 10,000 as per 2011 census. The claim of deduction in respect of Pongalur banch having aggregate average advanc can be excluded. We have gone through the factual details and noted that, error in the assessment order which has caused prejudice to the Revenue is only in respect of this amount of Rs. 1,25,13,362/- claimed as deduction u/s. 36(1)(viia) in regard to Pongalur branch. Hence, we direct the AO to amend the assessment order to that extent and to that extent, the assessment order is erroneous and prejudicial to the interest of Revenue. But in any case, we have adjudicated this issue on merits and directed the AO accordingly. Disallowance of expenses relatable to exempt income u/s. 14A r.w.rule 8D(2) - We noted from the facts of the case that the assessee has earned exempt income to the extent of Rs. 136 crores and the assessee suo-moto made disallowance of Rs. 2,56,403/-, the expenses incurred to earning exempt income by going through the provisions of section 14A of the Act. Now the PCIT want to invoke the prescribed formula as prescribed under Rule 8D(2)(ii) of the Rules and disallowance according to PCIT has to be worked out at 1% of the average value of investment on income earned or capable of earning exempt income which works out to Rs. 1.36 crore. We noted that the AO as well as PCIT during revision proceedings u/s. 263 of the Act noted that investments are treated by assessee bank as stock-in-trade and this issue is squarely covered by the decision of Hon ble Supreme Court in the case of South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] and hence, no disallowance can be resorted by invoking the provisions of section 14A of the Act r.w.rule 8D(2) of the Rules, wherever the investments are treated by bank as stock-in-trade. We find no error in the order of AO which is causing prejudice to the Revenue rather the AO has rightly not disallowed any expenses relatable to exempt income in respect of investments held by assessee bank as stock-in-trade. Hence, we find no error in the assessment order and hence on this issue, on merits, the order of PCIT is reversed.
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2024 (11) TMI 632
Addition u/s 68 - unsecured loan/unexplained cash credits - HELD THAT:- All the companies have responded to the notices issued u/s 133 (6) of the Act before the Assessing Officer and substantiated before him that they are earning substantial interest on loan which is evident from the audited profit loss account submitted before the AO. Assessee also recorded the abovesaid unsecured loan in its books of account and paid interest by duly deducting TDS as applicable on the payment of interest. CIT(A) observed that the above terms of lending unsecured loan to the assessee is real business transactions and cannot be treated as accommodation entries. Further, he observed that assessee also submitted year-wise profit loss account of the of the abovesaid companies i.e. lender companies before the authorities and further assessee has demonstrated that assessee has paid the relevant interest on the borrowed money which is close to the market rate and also duly deducted TDS. It is also observed by the CIT (A) that the assessee has repaid abovesaid borrowed loan in subsequent years. AO has conveniently ignored all these facts. It is also brought to our notice that all the above transactions were duly recorded in the books of account and there is no undisclosed cash credit involved in these transactions even though AO proceeded to disallow the same u/s 68 of the Act. After considering the overall facts on record, we do not see any reason to disturb the finding of the ld. CIT (A). Accordingly, ground no.1 raised by the Revenue is dismissed.
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2024 (11) TMI 631
CIT(A)-NFAC dismissed the appeal for default and not adjudicated or decided merits of the case - HELD THAT:- After going through the provisions of the Act particularly provision of section 250 we are of the view that the CIT(A) is a quasi judicial authority and in the statute of Income Tax Act, CIT(A) cannot dismiss the appeal for default expressly or by inevitable implication, but the appellate authority has to decide the appeal on merits. The appellate authority has no jurisdiction to dismiss the appeal for default but he is bound to decide the appeal on merits even in the absence of the assessee. We further noted that, this view has been taken in the case of Southern Steel Industries [ 1995 (10) TMI 209 - MADRAS HIGH COURT ] Hence, dismissal for default by CIT(A) is bad in law and accordingly, we set aside the order of CIT(A). The order of CIT(A) is set aside and matter remanded back to his file for fresh adjudication. Needles to say that CIT(A), after allowing reasonable opportunity of being heard to the assessee, will decide the issue of delay first and in case delay is condoned, he will decide merits of appeals.
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2024 (11) TMI 630
Taxability of Income in India - royalty or FTS - payments made by GIL and other Indian customers to the assessee - Equalization levy provisions enacted in the Finance Act, 2016 - exemption under section 10(50) - HELD THAT:- This issue was considered by the coordinate Bench of the Tribunal in assessee s own case for AY 2007-08 [ 2023 (3) TMI 1304 - ITAT BENGALURU ] and it was held that the payment made by the payer (GIPL) to the assessee (GIL) is not in the nature of royalty or FTS and consequently it cannot be brought to tax in the hands of the assessee. The relevant portion of the order is extracted in the order of the CIT(Appeals), hence we are not reproducing the same again. We hold that the payments made by GIL and other Indian customers to the assessee cannot be taxed in the hands of the assessee and find no infirmity in the order of the ld. CIT(Appeals). The grounds by the revenue in this regard are dismissed.
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2024 (11) TMI 629
Addition of unsecured loans u/sec. 68 and interest component - as argued A.O has ignored the information, evidences and audited financial statements and unilaterally made addition u/sec 68 - HELD THAT:- AR demonstrated the copy of bank statements reflecting the repayment of unsecured loans in the paper book which is not disputed by the revenue. A.O has failed to make further enquiries and relied on the statement recorded, overlooking the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. AR referred to the copy of details of unsecured loans provided by the lenders and subsequent repayment of loans along with the financial statements, confirmations and bank statements filed by the two unsecured loans creditors directly with the assessing officer in lieu of notice issued u/sec 133(6) of the Act in the assessment proceedings placed. Whereas the A.O has ignored the information, evidences and audited financial statements and unilaterally made addition u/sec 68 of the Act only on the basis of statement provided by third party without any iota of evidences discrediting the evidence furnished by the assessee and the statement of Shri Vipul Vidur Bhatt has been retreated which cannot use as reliable evidence. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 - loan transactions are not believed and alleged as non genuine and treated as unexplained cash credit u/sec 68 of the Act and these unsecured loans were repaid through account payee / banking channels in the subsequent years which is not disputed. AR submitted that the assessee has substantiated the stand by submitting the details before the A.O. and CIT(A) and discharged the burden. We considering the facts, circumstances and ratio of judicial decisions referred above, set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition of unsecured loans and disallowance of interest - Decided in favour of assessee.
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2024 (11) TMI 628
Addition u/s 69A - increase of the cash sale during the year under consideration - assessee is engaged in the business of trading of gold, silver and diamond jewelry - HELD THAT:- The cash sales made has been included in the sales in the month of October and first week of November was that, Dussehra and Diwali festivals which were celebrated from 30-10-2016 to 10.11.2016. Accordingly in the month of October, 2016 there was substantial increase in sales with regard to increase in sale during the above said period after the announcement of the demonetization on 08.11.2016 at 8 pm shutters of the jewellers were opened and during the period 8.30 pm to 12.00 am substantial sales were made by the jewellers. We find that during the assessment proceedings, copy of the purchase register and sale register item wise and value wise was filed. Further copy of the complete item wise and value wise stock summary of the FY 2016-17 was also filed before the AO and the assessee also filed the copy of the returns. Even the book of accounts has not been rejected by the AO. We observed that in support of the above, the assessee has filed the paper book in which he has filed details of the sale and purchase of the jewellery and the same was increased due to the festival occasion because the people may have chosen to purchase the jewellery in cash. Therefore, the assessee has explained the reason of the increase of the cash sale during the year under consideration. We observed that the assessee has deposited during the demonetization period in the bank account and explained the reason of the cash deposit, hence he has discharged the onus and prove the genuineness of the transaction. In view of the above, there is no justification for sustaining addition u/s. 69A - Decided in favour of assessee.
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2024 (11) TMI 627
Reopening of assessment u/s 147 - unexplained investment in purchase of property and assessee has also not filed her return of income - Eligibility of reasons to believe - HELD THAT:- The procedures and way of approval and satisfaction is not proper. Here, the AO initiated proceedings under section 147 read with section 148 on basis of borrowed information received from the Sub Registrar for valuation of the immovable property, without verifying the correctness of the information and CIT gave approval without applying his mind in slipshod manner. As approval/sanction given by CIT was without recording his own independent satisfaction as noted above, therefore, the reopening was not sustainable as per above judicial pronouncements and irregularities noted. Thus, in that eventuality, issuance of notice under section 148 of the IT Act and all the consequent proceedings and assessment order passed was not in accordance with law. Thus, quash the proceedings under section 147 of the Act. Procedural irregularities by the CIT(A) regarding the Vivad Se Vishwas Scheme - Order of the ld. CIT (A) is also dismissed as he has passed a wrong order in quantum appeal because the assessee has not applied for any immunity under Vivad Se Vishwas Scheme/Act, 2020 in quantum appeal - HELD THAT:- From the order of the ld. CIT (A), it is clear that the order relates to penalty under section 271(1)(b) and 271F. Therefore, the order passed by ld. CIT (A) is quashed. AO while making the addition has not invoked or applied any provisions of law. AO has not stated under what provision of law he has made the addition and under what head whether, under business or trading income, agriculture income, capital gain or under section 48, 56 or under section 68 or 69. Thus the addition so made without any provision of Act is also against the law and liable to be deleted on this ground alone. Without invoking the provision of Act/law, the AO cannot make the addition. For each and every offence, specific provisions are given in the law/Act to hold any person as victim defaulter, therefore, without applying any provision for that a person cannot be taxed and penalized. As the AO himself has not stated under what provision the assessee is liable to be taxed or penalized or under that provision his offence falls, therefore, addition cannot be made against the assessee. Hon ble Supreme Court in the case of Oryx Fisheries Pvt. Ltd. Vs. UOI [ 2010 (10) TMI 660 - SUPREME COURT ] as observed that the show cause notice should give the noticee a reasonable opportunity of making objections against proposed charges indicated in the notice and the person proceeded against must be told the charges against him so that he can make his defense and prove his innocence. In the entire course of the proceeding, at no stage the Petitioner is made aware of the provisions of law which have been contravened and/or under which the additions are sought to be made which is in gross violation of the principles of natural justice and the procedure adopted by the Department is not fair or proper. In the case of New Delhi Television Ltd. [ 2020 (4) TMI 133 - SUPREME COURT] it is held by the Hon'ble Apex Court that the Assessee must be put to notice of all the provisions on which the Department relies. As the recorded reason/impugned assessment order is silent under which provision of the Act the addition is sought to be made. It is well settled that the reasons cannot be supplemented by assessment order or affidavit. Unless the assessee is put to the notice as to the exact contravention or provisions of law under which assessment or additions are sought to be made, the assessee cannot defend his case. We, set aside the findings of the revenue authorities and the addition made and sustained by the lower authorities deserves to be deleted. Therefore, allow the present appeal.
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2024 (11) TMI 626
Failure to submit the form 15G/H to the Commissioner fo r TDS u/s 194A - Addition u/s 40(a)(ia) - branches had obtained Forms 15G/15H as applicable but assessee had not delivered the same to the prescribed authority under section 197A(2) - HELD THAT:- We find that it is not in dispute that the assessee has collected the Forms 15G/15H from the depositors, to whom it has paid interest. However, on account of the fact that the assessee had not deposited the same before the concerned CIT, AO and the ld. CIT(A) have refused to consider this and the ld. CIT(A) has gone on to hold that these forms may be manipulated. It is observed that the AO has not examined or verified any of the Forms 15G/15H and therefore, such a conclusion, without examination, is not warranted. In the case of The Karur Vysya Bank Limited, Bellary [ 2017 (9) TMI 829 - ITAT BANGALORE] referred to various judgments wherein it had been held that wherever there is any irregularity in the submission of forms for non-deduction of tax at source, the proper course of action is for the ld. Assessing Officer to verify the correctness of the forms and if the forms are found to be correct, the assessee cannot be held to be in default and no demand can be raised under section 201(1) and 201(1A). Thus we feel the failure to submit the form 15G/H to the Commissioner is a technical breach and the assessee cannot be saddled with a tax liability, only on this account. We observe that the basic purpose of submission of these forms to the Commissioner, is to enable verification of the same. Thus, we deem it appropriate, that the ld. Assessing Officer should verify the correctness of the Forms 15G/15H and if the forms are found to be correct, the assessee should be granted the relief under section 197A - restore the matter back to the file of the ld. Assessing Officer. Appeal of assessee is allowed for statistical purposes.
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Benami Property
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2024 (11) TMI 625
Benami Property Transactions - attachment and the reference made by the Initiating Officer (IO) - allegation against the appellant was for acquisition of benami properties while he was employee of Piyush Gupta, the defendant No.2 before the Adjudicating Authority. The appellant was getting meagre salary of Rs. 15,000/- per month. However, during the course of search and seizure, it was found that the appellant Mohd. Farooq made investment of Rs.1,41,37,500/- - HELD THAT:- We find that the appellant could not produce any document worth acceptance to prove the source of income for purchase of properties for the total value of Rs.1,41,37,500/- which includes the property at Item No.8 of Table `A but even for the properties mentioned at Item Nos. 1 to 7, the appellant failed to prove the source for its acquisition. Appellant has tried to make out a case for disclosure of source of income by submitting the documents along with the rejoinder but they have not been accepted in absence of application for taking additional documents on record at the appellate stage and otherwise it was not pressed by the appellant. We otherwise find that the assessment order for the block period 2011-12 to 2021-22 is subsequent to the impugned order and cannot support the appellant. The perusal of the assessment order otherwise shows the conduct of the appellant as he could not show source to acquire the properties while his statements were recorded under Section 19 of the Act but submitted I.T. return subsequent to it. The addition of income can be acceptable under the Income-Tax Act but it cannot be used for adjudication under the Act of 1988 and otherwise if the practice adopted by the appellant is accepted, every benamidaror beneficial owner get the assessment of block years by one order after paying the income tax and penalty without submission of proof of income before the IO or the Adjudicating Authority. We have made comment in reference to the assessment order though a serious objection of the document has been taken and as such we have not recorded our finding going deep in the assessment order but touching the legal background under which assessment of income by the Income-tax authority has been made vis- -vis the adjudication under the Act of 1988. The detailed finding recorded by the Adjudicating Authority rather disclosed as to how the benami properties came in the name of the appellant benamidar. The finding in regard to each benami property has been recorded. The payment to acquire the property said to have been made largely in cash without disclosing the source for acquiring the cash. The Adjudicating Authority has made detailed discussion for purchase of each property vis- -vis the source of income. Thus, finding that the appellant failed to submit the material to prove the source of income before the Adjudicating Authority and even while filing the appeal, no document was submitted to prove the source for acquisition of property. The documents submitted along with rejoinder were without permission of the appellate court and were not relied later on by the counsel. The learned counsel for the appellant referred to the judgment of the Apex Court in the case of GanpatiDealcom [ 2022 (8) TMI 1047 - SUPREME COURT ] and more specifically reference of Paras 67,68,124 and 125 has been given. The fact, however, remains that the Apex Court has recalled its judgment in the case of GanpatiDealcom (supra) by the order [ 2024 (10) TMI 1120 - SC ORDER (LB) ] Thus, argument raised by the appellant in reference to the aforesaid judgment no more holds field. We have otherwise analyzed the case to find out the source to acquire the property by the appellant and finding no material favourable to the appellant, the appeal would fail and is dismissed.
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2024 (11) TMI 624
Prohibition of Benami Property Transaction - attachment order of gold and silver articles from lockers - identification of beneficial locker holders - HELD THAT:- The conduct of the parties speaks for itself. If the things would have been bona fide, the SVPL should have disclosed that lockers in the name of Shiv Daga belongs to the appellant and could have produced the request letter for change of name at the time of investigation by the I.O. SVPL has shown it to be their bona fide mistake for non disclosure but, other than the aforesaid lame excuse, no other justification could be given. The excuse was not acceptable not only for the reason that when search and seizure was made in reference to few lockers, the onus was on the SVPL and also on the appellant to immediately submit the true facts if it was true and not to cook up the story subsequently. The facts on record show how the things changed when the SVPL try to come to rescue of the appellant. The Company is equally responsible for the benami transaction because they did not take KYC documents despite the fact that it became mandatory in the year 2016 and continued the locker in the name of Shiv Daga. This highlights the conduct of SVPL. The fact now remains about the request letter given by the appellant to change the name from Shiv Daga to Shiv Narayan Baheti starting from the year 2013. The reminder was given even in the year 2015. It ishowever a fact that name was changed subsequent to the search and seizure. The only reason for delaying the change of the name was in absence of the payment which is shown to have been paid in the year 2019 without putting any documents as to show what was the arrangement between appellant and the SVPL for operation of lockers and what was the rent decided amongst them. We have already highlighted the conduct of SVPL who is trying to support the appellant because their mis-doings are also highlighted for not taking KYC in the year 2016, otherwise the things would have been settled in the year 2016 itself. To cover up the defaults, they said to have accepted the payment. The appellant has not placed on record even the agreement between him and the SVPL to justify delay in change of the name. In fact the appellant and SVPL were hand in glove to mis-lead the respondent. In any case, the fact further remains that the appellant argued the case at length but failed to disclose the source of acquisition of gold and silver and in absence of it, the view cannot be taken in favour of the appellant. The appellant was under obligation not only to prove that lockers were belonging to him but to prove ownership of the gold and silver to disclose the means for acquisition of it, but there is total failure of the appellants to do so. Thus, we are unable to take a view favourable to the appellant on the facts. Whether no notice under section 24 (1) of the Act of 1988 was given to the appellant and thus the entire proceeding would vitiate? - As we have gone through the record and find that notice under section 24 (1) was given to Shiv Daga and 24 (2) was given to SVPL. On the service of show cause notice, the SVPL disclosed that lockers belong to the appellant. When information aforesaid given in the midstof the proceedings, the appellant was summoned who not only appeared but also made the written submission. No violation of section 24 (1) because purpose of issuance of the notice is to call upon the reply and in fact it was given to the appellant if he claims to be Shiv Daga by himself. It is not that respondent did not issue notice under section 24 (1) rather it was sent in the name of Shiv Dagaat the address of the appellant and if the name of the appellant is Shiv Narayan Baheti alias Shiv Daga then the compliance of section 24 (1) was made and otherwise the appellant made representation of his case before the IO. Thus, the attachment followed by reference cannot be held to be illegal. It is more so when the appellant was given full opportunity of hearing before the Adjudicating Authority to canvas his case but the order of the confirmation was made when appellant failed to make out a case. Thus, full opportunity of hearing was provided to the appellant and thereby the proceeding would not vitiate on the ground taken by him. Appeal dismissed.
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2024 (11) TMI 623
Prohibition of Benami Properties Transaction - attachment order - applicability of the amended provisions of the Act of 1988 by the Amending Act of 2016 - as argued property purchased by the appellant was not out of the benami transaction and otherwise the purchase of the property was much prior to the amendment in the Act of 1988 by the Amending Act of 2016 with effect from 01.11.2016. HELD THAT:- The facts on record shows attachment of one agricultural land having area of 0.610 hectare of khasra number 526/3 in village Girdava of Saharanpur, UP. said to have been effected by the benami transaction. It is not in dispute that the I.O. could not identify the beneficial owner and therefore the order has been passed against the benamidar. Adjudicating Authority has taken note of the fact that the transaction in question is prior to the amendment by the Amending Act, 2016 but finding has been recorded adverse to the appellant by treating amending provision to have retrospective application. Though, now the position is clear in the light of the judgement of Union of India Anr. Versus M/s. Ganpati Dealcom Pvt. Ltd. [ 2022 (8) TMI 1047 - SUPREME COURT ] that it has prospective application. Therefore, we need not to refer detailed facts of the case regarding the purchase of the property and source disclosed by the appellant being a transaction prior to 01.11.2016 and is not falling u/s 2 (9A) of the amended provision. We find that the impugned order has been passed while considering the facts of the case but treating it to be a case u/s 2 (9) (A) of the Amending Act though the person alleged to have provided the consideration for purchase of the property is not known. Adjudicating Authority in the discussion part recorded that transaction fall under section 2 (9) (A) in ignorance of the fact that beneficial owner has not been identified. In fact, it was through out considered to be a case falling u/s 2 (9B) of the Act of 1988 as amended by the Amending Act of 2016. The conclusions have not been specifically drawn in reference to section 2 (9 )(A) but it has been referred in discussion part. Amended provisions would not apply retrospectively rather it would have prospective application and thereby the transfer prior to 01.11.2016 not falling in the definition of the benami transaction under the section 2 (9) (A) of the Amending Act, 2016 would be squarely covered by the judgement of Union of India Anr. Versus M/s. Ganpati Dealcom Pvt. Ltd. . The exception may be if a case is falling under section 2 (9) (A) of the amended definition of benami transaction for which a detailed judgement has been given by the Tribunal in the case of M/s. Prism Scan Express Pvt. Ltd. [ 2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI ].
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Customs
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2024 (11) TMI 622
Delay in disposal/adjudication of the proceedings of SCN - HELD THAT:- Petitioners cannot be made to suffer for all this lethargy and callousness on the part of the revenue. If the sword of Damocles, in the form of the impugned SCN is kept hanging over the Petitioners for over 21 years, it would make it impossible for the Petitioners to plan their business or make provisions for any contingent liabilities. Such inordinate delay breaches fair procedures that should always inform the adjudication in fiscal matters. Prejudice, in the gross facts of this case, is evident. For the reasons recorded hereinabove, we are satisfied that the inordinate delay/delayed adjudication was in contravention of procedural fairness and, thus, violative of principles of natural justice. Adjudicating Authority should have adjudicated the impugned SCN within a reasonable time; failure to do so is bound to cause prejudice to the Petitioners. This Court has repeatedly quashed such inordinately delayed adjudications backed by no compelling explanations in the precedents referred to above.
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2024 (11) TMI 621
Bail application filed u/s 135 of the Customs Act, 1962 - Allegation of possession of smuggled golden bars - HELD THAT:- As keeping in view the fact that in the matter trial has not started even yet and the complicity of the accused applicant is yet to be determined in trial, the gold seized is in the possession of the Department, the offence appears to be compoundable by virtue of Section 137(3) of the Customs Act and there is nothing on record to demonstrate that the applicant, if enlarged on bail, would in any way adversely affect the trial, no criminal antecedent to the credit of the applicant, his willingness and readiness to deposit the adequate customs duty over the said gold, the applicant is in jail since 23.5.2024, without commenting upon the merits of the case, the applicant has made out a case for bail. Accordingly, the bail application of the accused-applicant is allowed. Let the applicant involved in case crime u/s 135 Customs Duty Act, 1962, Police Station D.R.I., District Varanasi be released on bail on furnishing a personal bond and two heavy sureties each in the like amount to the satisfaction of the court concerned subject to following conditions. Further, before issuing the release order, the sureties be verified. (i) The applicant will appear before the trial court on the date fixed, unless personal presence is exempted. (iii) The applicant shall not commit an offence similar to the offence of which he is accused, or suspected, of the commission of which he is suspected. (iv) The applicant shall not directly or indirectly make any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to any police officer or tamper with the evidence. (v) The applicant shall not indulge in any criminal and anti-social activity. (vi) The applicant shall surrender his passport, if any, to the concerned Trial Court forthwith and shall not leave the country without previous permission of the Court. In case of breach of any of the above conditions, the prosecution shall be at liberty to move bail cancellation application before this Court.
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2024 (11) TMI 620
Release of seized gold ornaments - Issue of show cause notice before confiscation of goods, etc - HELD THAT:- The item seized by the Revenue is required to be returned forthwith as the provisions of Section 124 of the Act have not been complied with. In view of the above, the present petition is allowed and the Revenue is directed to forthwith release the item in question to the petitioner. Before concluding, it is also necessary to note that it is the petitioner s case that she desires to re-export the item in question and to carry the same back. In this regard, the petitioner shall apply for re-export of the item, which shall be considered in accordance with law.
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2024 (11) TMI 619
Maintainability of appeal before CESTAT on low tax effect - HELD THAT:- The amount of duty involved in each of the appeal is below of the threshold limit prescribed in circular dated 02.11.2023 issued by the CBIC wherein it is provided that if the duty amount involved is less than Rs.50 lakhs, then no appeal shall be filed before the CESTAT, and if already filed, the same will be withdrawn by the department. We are of the considered opinion that the present appeals filed by the department are not maintainable in view of the instructions dated 02.11.2023 issued by the Board and consequently we dismiss all these 19 appeals leaving the question of law, if any, open.
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2024 (11) TMI 618
Permission to destroy the goods and clearance of the destroyed goods on payment of duty on the scrap value - appellant complied with the export obligation, however due to change of technology, some of the imported raw materials and components have become obsolete and unfit for manufacturing - HELD THAT:- We find that the appellants have imported goods and also procured goods from DTA in terms of exemption Notification No. 52/2003-Cus dated 21.03.2003 and Notification No.22/2003-CE dated 31.03.2003, respectively. The notification was amended and raw materials were also allowed to be destroyed under intimation to customs. The period of dispute in the present 4(four) appeals is prior to the substitution of condition (8) of Notification 52/2003 dated 31.03.2003. The appellant contends that the intent of the amendment was to address this particular situation, which was already provided in the Foreign Trade Policy (FTP) at Para 6.15(b) and was not provided in the Customs Notification No.52/2003 dated 31.03.2003 - We find that on a harmonious reading of the provisions of Para 6.15(b) of FTP and the Customs Notification No. 52/2003 prior to the substitution of condition (8) of the notification, it would tacitly imply that destruction of the obsolete raw materials may be allowed after intimation to customs authority, if destroyed within the unit, and with permission of the customs authority for destruction outside the unit. We also find that such permission for destruction was given in the past by the Department. As regards the other submissions of the learned AR that; the appellant cannot raise the point of substitution of condition (8) in Notification No. 52/2003 as it was not raised before the original authority nor the first appellate authority, we find that the substitution was made in 2015, which is much after the passing of the orders by both the authorities; as regards the submission of approval from BOA ( DGFT/JDGFT), we find that the learned AR has not adduced any such mandatory requirement; as regards the C.E. certificate certifying the obsolesce we find that their no such requirement, further there was no charge/finding that the destroyed goods are not obsolete. We also acknowledge that technological innovation and advancements would result in obsolesce of the earlier technology whereby the inputs, capital goods etc., used earlier for the production of final product would become obsolete and not fit for further use. Hence, the provision for destruction of the obsolete goods may have to be provided in the Policy/Notification. We find that the provision for destruction of capital goods, raw materials etc., was provided under the Foreign Trade Policy (FTP) in para 6.15(b), however, the provision for destroying the raw materials was not provided in the Notification No. 52/2003 dated 31.03.20003 and the provision has been bought in by the amending Notification No. 34/2015 dated 25.05.2015. We find that there is no plausible reason to interfere with the ratio of precedent decisions of this Tribunal mentioned at Para 7 supra, hence the 4(four) appeals are allowed.
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Securities / SEBI
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2024 (11) TMI 617
Proceedings against executive director for the alleged fraudulent activities of the company - as argued petitioner had tendered resignation and resigned from the said Amrit Projects Limited and all its group of companies in the year 2013 - HELD THAT:- An executive director is a senior-level executive responsible for the overall management and leadership of an organization. The executive director reports to the board of directors and is responsible for setting the strategic direction for the organization, overseeing day-to-day operations, and ensuring the organization s goals and objectives are met. Executive directors are appointed by the board and in this case as submitted by Mr. Ganguly, appearing for the SEBI, that the petitioner herein was also a member of the Board of Directors. As petitioner submits that the petitioner was only an executive director and received only a salary of Rs. 25,000/- and he was not involved in any of the day-to-day affairs of the company and he has, thus, prayed for quashing of the proceedings against him. It is not denied by the petitioner that he was an executive director of the company herein and a member of the Board of Directors as stated by the opposite party during the period of the alleged offence in the present case. A prima facie case has also been made out before the whole time member of the SEBI against the petitioner and others. Thus, the petitioner was prima facie a member of the Board of Directors (subject to being proved otherwise during trial), during the period of alleged offence and a prima facie case against him was also found, as held by the whole time member of the Securities and Exchange Board of India. Considering the fact that there is a prima facie case against the petitioner, it will be a clear abuse of the process of law, if this Court interferes in the proceedings before the trial Court against the petitioner herein. On perusal of the order of the learned Special Judge, the learned Judge has rightly applied the appropriate provisions of law in deciding the prayer for discharge and the said order being in accordance with law requires no interference by this Court. The trial before the Special Judge is at the stage of evidence and one witness has already been examined, wherein the petitioner has also participated.
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Insolvency & Bankruptcy
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2024 (11) TMI 616
Maintainability of eviction application - direction to CD to vacate two office spaces in the White House Property in Delhi - main contention of the appellant is that impugned order is completely unreasoned and non-speaking in nature and only a part of the application has been decided - principles of natural justice - whether CoC can take a decision to hand over the property in possession of CD to third parties and whether AA has powers to allow such advice of CoC? - HELD THAT:- There is an absolute bar on recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. It is seen from the extract of minutes of the 6th CoC that the CoC was seeking legal opinion from the advocate regarding vacation of the registered office, and till then the voting with respect to the same could not be done. It was further discussed that in view of applications filed by Nobel Dealcom and Sincere Securities before the AA, the RP should appear and take necessary steps. It is clear from the above, that there was no final decision of the CoC with proper voting, with regard to vacation of the registered office of the CD. The CoC does not appear to have taken a decision about vacation of registered office even in the 6th CoC meeting after which RP gave a statement in Court that the property is not required to be held based on which AA passed the impugned order. CoC at this stage also stated that they are in process of seeking legal opinion and till such time voting on the agenda could not be done. It is clear from the above that the decision to release the property by the RP was his own decision, which was not confirmed by CoC. The submission of CoC at this stage, that such decision was taken with 100% voting right does not seem to be based on records. The moratorium under Section 14 binds the AA also by the use of the word shall by order declare moratorium for prohibiting all of the following inter alia meaning that it is a mandatory action on the part of AA. The AA should have first examined, whether it is possible to allow such applications in view of express provisions in Section 14 (1) (d) even if such applications are supported by CoC. Prima facie the Code does not seem to provide such discretion to AA. In any case AA should have examined the issue in detail with regard to provision of Section 14 (1) (d) before passing a nonspeaking order merely on the basis of consent of RP to release of property based on application by owner/lessor. The order of AA in the I.A No. 1083 filed by Respondent No.2 and I.A. No. 1082 filed by Respondent No. 3 to 4 has been passed on the prayer of owner/lessor. The RP has only supported the contention of Respondents No. 2 to 4. The AA has not examined the maintainability of such application by owner/lessor in view of express provision under Section 14 (1) (d) of the Code - appellant has locus to file this appeal - the case remanded back to the AA to examine and decide the issues in a comprehensive manner including the application of the appellant in I.A. No. 1412 of 2023 preferably within four weeks - appeal allowed.
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Service Tax
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2024 (11) TMI 615
Service tax liability - deemed sale under article 366(29A)(d) of the Constitution had taken placed under the License Agreement - inclusion of amount paid to the appellant under the License Agreements in the assessable value of renting of immovable property service because without the license endorsement the plant and machinery leased to the appellant could not have been put to use by Skol for brewing beer HELD THAT:- A Lease Deed was executed between the appellant and Skol for renting of land, building plant and machinery by the appellant to Skol. The appellant has been described as the Lessor and the Skol has been described as the Lessee in the said Lease Deed. As clear from the terms of the License Agreement that it is not merely the use of the License that has been transferred to Skol/Sab Miller by the appellant. What has been transferred by the appellant is the right to use the License. As can be seen from the Agreement, Skol/Sab Miller have been transferred the right to use the brewery license and the permitted capacity for a period of 4 years free from any charges, encumbrances, liens or third party rights. Skol/Sab Miller shall also enjoy the freedom to utilize the brewery license and operate during the entire term without any hindrance, obstruction or limitation from the appellant. In fact, the appellant also agreed to indemnify, defend and hold Skol/Sab Miller harmless from any actions, causes of actions, claims, demands, costs, liabilities, expenses and damages arising out of or in connection with any claim that would constitute a breach of any of warranties and/ or obligations, relating to the period prior to the commencement of the License Agreement dated 30.01.2008. The agreement also provides that the promoters shall not do or cause to be done any act that will result in breach of the License Agreement. The appellant does not, with the transfer of the right to use by Skol/Sab Miller, have any right to itself use the brewery license. There is, therefore, no manner of doubt that a deemed sale under article 366(29A)(d) of the Constitution had taken place when the appellant granted the right to use the License to Skol/Sab Miller. The findings to the contrary recorded by the Commissioner cannot be sustained. Commissioner placed much emphasis on the Lease Deed executed between the appellant and Skol for renting of land, building, plant and machinery and in particular to clause 3 which provides that the appellant shall procure a valid endorsement/sub-license of the brewery license in favour of Skol. According to the Commissioner, the License Agreement that was subsequently executed was only to complete or validate the Lease Deed and, therefore, renting of the factory along with the brewery license is an integral part of the renting of immovable property services. Two documents, namely, the Lease Deed and the License Agreement have to be separately examined and merely because there is a recital in the Lease Deed that the appellant shall procure a valid endorsement/sub-license of the brewery license in favour of Skol does not mean that the subsequently executed License Agreement becomes an integral part of the Lease Deed. Contention of the appellant that a deemed sale had taken place has also been repelled by the Commissioner for the reason that leasing of brewery license was subject to certain restrictions. Only a bald statement had been made. In fact, the terms of the License Agreement give complete freedom to Skol/Sab Miller to operate the brewery and the License Agreement does not cause any hindrance. A finding had also been recorded by the Commissioner that no sale had taken place. The contention of the appellant was that a deemed sale contemplated under article 366(29A)(d) of the Constitution had taken place. There is a marked difference between sale and a deemed sale as was pointed out by the Supreme Court in Quick Heal Technologies [ 2022 (8) TMI 283 - SUPREME COURT] A deemed sale had taken place when the appellant transferred the right to use the brewery license issued to the appellant in favour of Skol/Sab Miller on execution of the License Agreement. The consideration received by the appellant on the execution of the License Agreement cannot, therefore, be subjected to service tax nor can such consideration be clubbed with the consideration received by the appellant under the Lease Deed so as to be subjected to service tax under renting of immovable property service. The impugned order passed by the Commissioner adjudicating the three show cause notices, therefore, deserves to be set aside. It will, therefore, not be necessary to examine the contention of the learned counsel for the appellant that the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not have been invoked. The impugned passed by the Commissioner is, accordingly, set aside and the appeal.
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2024 (11) TMI 614
Demand of service tax - upheld Order-in-Original including alleged wrong availment of Cenvat credit but dropped penalty u/s 76 of the Act - appellant is a commercial coaching and training centre providing the service of Computer Training and also Technology Based Training (TBT) for skill development, and training for medical transcription; insurance agents etc. to their clients - HELD THAT:- We consider it appropriate to reproduce the definition of vocational training institute as provided in the Notification No. 24/04-ST dated 10.09.2004 which provides exemption of services tax to commercial training or coaching services provided by vocational/recreational training institute. The definition of vocational training institute as given in explanation to notifications 09/2003-ST and 24/04 defines it as Commercial training or coaching centre which provides vocational coaching or training that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching. We find that the appellant in the present case is providing vocational courses pertaining to technology based, medical transcriptionists, and insurance agent which find mention in the category of non engineering trades which is elaborately mentioned in the case of Sadhana Educational People Dev Services Ltd. cited (Supra). We also find that the decisions relied upon the Ld. AR has been distinguished on facts by the Ld. Counsel for the appellant and after considering the ratio of the decisions relied upon by the appellant cited particularly Pasha Educational Training Institute [ 2008 (12) TMI 80 - CESTAT, BANGALORE] wherein the Tribunal has observed that vocational training means training that imparts skills to enable trainee to seek employment or undertake self employment directly after such training or coaching and goes on to hold that comprehensive training given by the appellant enables trainees to appear for examination conducted by IRDAI and hence would be entitled for exemption under Notification No. 09/03-ST therefore, we hold that the training provided by the appellant falls squarely in the definition as provided by the Notification No. 09/03-ST dated 20.06.2003 and Notification No. 24/04-ST dated 10.09.2004. Demand of cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 - We find that the appellant has correctly utilized the Cenvat credit of Rs. 81476/- as they were maintaining separate accounts for input and output services, the details of service tax taken and utilized by them for the relevant period has been given in annexure P-4 which has not been considered by both the authorities below. We find that perusal of material shows that the appellant has not taken cenvat credit on input services used in providing output services (exempted) during the relevant period, therefore, the question of wrong utilization of Cenvat credit does not arise and the provisions of Rule 6 of the the Cenvat credit Rules, restricting of 20% of credit are not attracted. Thus, the impugned order is not sustainable in law and therefore, we set aside the same by allowing the appeal of the appellant.
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2024 (11) TMI 613
Service tax on recovering liquidated damages for delay in execution of supply contract and service contract as per the agreement between the appellant with their clients - as submitted collection of liquidated damages cannot be considered as against a service as held by the Tribunal in their own case as reported in [ 2022 (9) TMI 1005 - CESTAT NEW DELHI] - HELD THAT:- We find that this Tribunal, in the appellant s other units for the same period [ 2024 (3) TMI 1282 - CESTAT BANGALORE] following the judgement of Tribunal in their own case allowed the appeal with consequential relief held that amount cannot be made liable to tax in the name of it being consideration for providing deemed service. Thus the impugned order is set aside and the appeal is allowed.
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Central Excise
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2024 (11) TMI 612
Abatement claim as stipulated in Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - less than 15 days continuous closure in each calendar month or otherwise - HELD THAT:- Rule 10, which provides for abatement, requires a continuous period of 15 days or more and there is no stipulation in the said Rule as to the period of 15 days or more being in one month or more than one month. The only stipulation being that the continuous period without a break has to be more than 15 days. In the instant case, there was no production of notified goods for a period of 41 days in the factory of the respondent. Similar issue arose before the High Court of Punjab and Haryana in COMMISSIONER CENTRAL EXCISE VERSUS M/S KAY FRAGRANCE P. LTD. [ 2013 (9) TMI 697 - PUNJAB HARYANA HIGH COURT ], wherein in similar circumstances, the Division Bench of Punjab and Haryana High Court held that the continuous period of 15 days or more prescribed under Rule 10 could not be read in isolation to raise an inference that if closure in a month, was less than 15 days, a party would not be entitled to abatement of duty. Consequently, the questions of law raised are thus answered by holding that closure of a continuous period of 15 days or more is not restricted to a calendar month and can be spread over in more than one month. Even in a particular month, if the closure is less than 15 days, the Assessee would still be entitled to abatement provided the continuous period of closure is more than 15 days and other stipulations of Rule 10 are satisfied by the Assessee. The questions of law are thus answered in favour of the Assessee and against the Revenue - the appeal of the Revenue is dismissed.
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2024 (11) TMI 611
CENVAT Credit on outward transportation when the sale of excisable goods is on FOR basis - denial of credit availed on the strength of the invoices after 6 months/ 1 year from the date of invoices, in terms of Rule 4(1) of Cenvat Credit Rules, 2004. CENVAT Credit on outward transportation when the sale of excisable goods is on FOR basis - HELD THAT:- Certain facts needs to be ascertained in order to allow the Cenvat Credit as prescribed under Board Circular No.1065/4/2018-CX dated 08.06.2018. Though, the appellant have vehemently submitted that the sale is on FOR basis and the price of goods is inclusive of excise duty, the same needs to be verified. The adjudicating authority has heavily relied upon the Hon ble Supreme Court judgment in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT] . However, after considering the said judgment, this Tribunal in the case of Ultratech Cement Limited itself has allowed the Cenvat Credit which was upheld by the Hon ble High Court of Gujarat in the judgment [ 2020 (3) TMI 1206 - GUJARAT HIGH COURT] . However, this subsequent development has not come in the light of the learned adjudicating authority. Therefore, the overall matter after considering the subsequent development and verification of facts needs to be reconsidered. Denial of credit availed on the strength of the invoices after 6 months/ 1 year from the date of invoices, in terms of Rule 4(1) of Cenvat Credit Rules, 2004 - HELD THAT:- The facts of date of invoices availment of the Cenvat Credit, the amended provision of Rule 4 of Cenvat Credit Rules needs to be verified and the judgment relied upon by the appellant which prima facie covers the issue herein also to be considered. The impugned order set aside - appeal allowed by way of remand.
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2024 (11) TMI 610
Eligibility for cenvat credit in respect of the input service received and used at the job-workers premises for the purpose of manufacture of goods of the appellant on job work basis - job work done under Rule 4(5)(a) of Cenvat Credit Rules, 2004 - HELD THAT:- The identical issue in the assessee s own case has been decided by this Tribunal in SHRI RAMNIWAS SAINI, INTERNATIONAL PACKAGING PRODUCTS PVT. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, DAMAN [ 2019 (10) TMI 1597 - CESTAT AHMEDABAD] , wherein this Tribunal has held that ' the very same issue has been considered by this Tribunal in the case of KKALPANA INDUSTRIES (INDIA) LTD., SHRI VISHAL RANKA, SHRI AJIJUL RAHAMAT KHAN VERSUS C.C.E. S.T., SILVASA [ 2019 (7) TMI 2044 - CESTAT AHMEDABAD] wherein, by interpreting Rule 3 of Cenvat Credit Rules, it was held that input service used for job work, the Cenvat credit thereof is admissible to the principal.' From the above decision in the assessee s own case, the issue is no longer res-integra. Accordingly, the impugned order in the assessee s appeal is not sustainable and impugned order in Revenue s appeal is liable to be upheld - appeal of assessee allowed.
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2024 (11) TMI 609
Confiscation of goods - imposition of penalty under Rule 25 of CER, 2002 - HELD THAT:- As far as the confiscation of goods and imposition of penalty under Rule 25 are concerned, following the decision of Gujarat High Court in COMMISSIONER OF C. EX. CUSTOMS VERSUS SAURASHTRA CEMENT LTD. [ 2010 (9) TMI 422 - GUJARAT HIGH COURT] , the Delhi High Court held in COMMISSIONER OF CENTRAL EXCISE DELHI-II VERSUS GANPATI ROLLINGS PVT. LTD. ANR. [ 2016 (6) TMI 157 - DELHI HIGH COURT] that Section 11AC is a condition precedent for taking action under Rule 25. Section 11AC provides for penalty for not paying or short paying duty by reason of fraud, collusion, wilful misstatement or suppression of facts. No demand of duty was confirmed in the impugned order nor was any penalty imposed under section 11AC. Therefore, confiscation of goods and imposition of penalty under Rule 25 need to be set aside. A plain reading of Rule 26 shows that it is a consequence of the confiscation. This penalty also needs to be set aside. The impugned order is set aside qua the appellants - appeal allowed.
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2024 (11) TMI 608
Refund of Education Cess/Secondary and Higher Education Cess - classification of Triacontanol - whether the case requires to be remanded back to the original authority to decide the classification and to requantify the amount of refund accordingly? Eligibility of refund of Education Cess/Secondary and Higher Education Cess - HELD THAT:- The issue is no long res integra. Hon ble Supreme Court of India held in the case of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS [ 2019 (12) TMI 286 - SUPREME COURT ] that the appellants, operating under area based exemption notification, are not eligible for refund of Education Cess/Secondary and Higher Education Cess. While the original dispute in the matter was the classification of Triacontanol and the dispute was whether the same was a plant growth regulator or a plant growth promotor. It is found that Commissioner (Appeals ) relied upon the decision of Tribunal in the case of BAHAR AGROCHEM FEEDS PVT LTD., VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2011 (2) TMI 600 - CESTAT, MUMBAI ]. The Tribunal held that ' it is clear that the product under consideration merits classification as an insecticide and not as a plant growth regulator'. The classification of Triacontanol has been settled by the Tribunal. Though, it is reported that the decision of the Tribunal has been challenged before the Apex Court, no stay has been granted and therefore there is no occasion to differ with the decision of the Tribunal. Therefore, no purpose will be served if the case is remanded back to the original authority for the classification of the impugned product i.e. Triacontanol as the original authority is bond by the decision of the Tribunal. Thus, the classification of the impugned product can be held to be under CETH 3808.10 as an insecticide - there is not reason to remand the matter back to the original authority for quantification also. The original authority can very well sanction the refund to the appellant as per the classification arrived at. The classification of Triacontanol shall be done under CETH 3808.10 - appellants are not eligible for refund of Education Cess/Secondary and Higher Education Cess - original authority shall calculate the amount of refund payable to the appellants - Appeal allowed in part by way of remand.
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2024 (11) TMI 607
CENVAT Credit - input service - Construction Service - Architect Service - Mandap Keeper and Outdoor Catering Service - Club or Association Service - Rent-a-Cab Service - Asset Management Service etc. Rent-a-Cab Service - HELD THAT:- The services in respect of Rent-a-Cab Service have been availed for use by the officers of the company to attend the office work; however, in respect of services availed after 01.04.2011, they have paid up the amount of Rs.1,08,463/- disputed in the SCNs and they are not in appeal against the same. Mandap Keeper and Outdoor Catering Services - HELD THAT:- It is the contention of the appellants that these services are availed for organizing conferences, field demonstrations, dealers meetings, sponsored programs and training etc. Therefore, these cannot be set to be used by the officers of the company for private purposes. Memberships of the clubs - HELD THAT:- Similarly, the memberships of the clubs are taken in respect of Golf Club where the company sponsors a tournament or memberships of various international professional clubs are taken. There is force in the argument of the appellant. The definition of Input Service is vast and encompasses all the activities that are required for the furtherance of the business. The exclusion that is put in place from 01.04.2011 appears to be in respect of services which are not primarily used for personal use of the officers or staff. It is found that no evidence to the effect that the disputed services are availed primarily for the personal use has been brought forth by the SCN and therefore, the submissions of the appellants cannot be brushed aside. Asset Management Services - HELD THAT:- Rule 2(l) includes services which are used in relation to Financing of the Company. The definition further provides that the input services can be directly or indirectly in or in relation to the manufacture of final product. Financing is an integral activity not only in the manufacture of any excisable goods but also in any business activity. Therefore, the services availed by the appellants in order to maximize the returns on the investments is for the purpose of furthering of the business. Thus, the appellants being a Public Limited Company has to take care of finances and such an activity includes proper investment. The impugned orders are modified to the extent that demands which are contested by the appellant are set aside and demands which have been paid up by the appellants and not contested in the appeals are upheld - Hence, all the appeals are partly allowed.
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CST, VAT & Sales Tax
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2024 (11) TMI 606
Levy of luxury tax under Kerala Building Tax Act, 1975 - transfer of ownership of a portion of a residential building - HELD THAT:- The petitioner has not made out any case for grant of relief. It is not disputed before me that the residential building of the petitioner as it originally stood had an area in excess of the limits specified in Section 5A of the 1975 Act, and thus it was liable to the levy of luxury tax under that provision. The building was also duly assessed to luxury tax. According to the petitioner, the petitioner has also discharged the liability towards luxury tax, and in the year 2018 he transferred/settled a portion of the building in favour of his wife, therefore, the petitioner is no longer liable to pay luxury tax. This contention of the petitioner cannot be accepted. As rightly pointed out by the learned Senior Government Pleader, if the contention of the learned counsel for the petitioner is accepted, any person who is liable to pay luxury tax under the provisions of Section 5A of the 1975 Act could escape from the liability by transferring a portion of the building to his/her spouse or a near relative. The fact remains that the entire building continues to be in the occupation and enjoyment of the petitioner, and such a device would amount to evasion of tax as distinguished from tax planning. The device adopted by the petitioner was not an effort at tax planning; it was clearly an attempt to evade tax. The petitioner is not entitled to the reliefs sought in the writ petition. The writ petition fails, and it is accordingly dismissed.
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Indian Laws
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2024 (11) TMI 605
Dishonour of Cheque - legally enforceable debt or not - principal defence taken by the petitioner in his statement under Section 313 of the CrPC, and his examination in chief, was that he did not know the respondent and had no transactions with him - HELD THAT:- Since the present revision petition has been filed under Section 397 of the CrPC, challenging the concurrent findings of both lower courts, this Court s role is limited to assessing the correctness, legality, and propriety of the impugned order. It is trite law that this Court is required to exercise restraint and should not interfere with the findings in the impugned orders or reappreciate evidence merely because another view is possible unless the impugned orders are wholly unreasonable or untenable in law. In the present case, the petitioner has sought to prove his case by controverting that the cheques in question were not issued in discharge of any legally enforceable debt. It has been contented that the subject cheques were in fact advanced to one Vinod Tiwari as blank signed security cheques since the petitioner had taken a loan for a sum of Rs. 1,00,000/- from Vinod Tiwari. It has further been contended that the petitioner did not know the respondent, and the respondent had misused the subject cheques. It is the petitioner s case that no liability was owed towards the respondent. On a perusal of the impugned order, it is seen that the petitioner had merely stated that he had not taken any loan from the respondent, and that the cheques were given as security to Vinod Kumar. Petitioner not only failed to lead any evidence to substantiate his claims but he also did not cross-examine the respondent to raise a probable defence. The petitioner did not adduce any material to suggest that there was no loan transaction between the petitioner and the respondent, or even summon any person to show that the loan existed between the petitioner and one Vinod Tiwari. Merely reiterating the contentions, and making bald assertions do not suffice to dislodge the presumptions raised against the petitioner. In the instant case, upon a consideration of the totality of circumstances, it is evident that the petitioner had failed to rebut the presumptions raised against him under Sections 118 and 139 of the NI Act. This Court finds no infirmity in the impugned order, and the same does not merit any interference - petition dismissed.
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2024 (11) TMI 604
Dishonour of Cheque - role of the petitioner (director of the accused company) in the transaction made - resignation from the accused company prior to the cheque dishonour - vicarious liability - Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - HELD THAT:- In accordance with Section 141 of the NI Act, in instances where the principal offender under Section 138 of the NI Act is a company, every person who at such time when the cheque was dishonoured, and no subsequent payment was made, was in charge of the business of the company, and was responsible for the conduct of business, is deemed to be guilty of the offence under Section 138 of the NI Act. It is trite law that a person cannot be arrayed as an accused person merely due to association with the accused company in capacity of a Director. In SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [ 2005 (9) TMI 304 - SUPREME COURT ], the Hon ble Apex Court analysed Section 141 of the NI Act and observed ' Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a Director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of every person the section would have said every Director, manager or secretary in a company is liable , etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.' It must be borne in mind that Section 141 of the NI Act is a penal provision that aims to create vicarious liability on the accused. For this reason, the provisions ought to be strictly construed. In the case of NATIONAL SMALL INDUSTRIES CORPN. LTD. VERSUS HARMEET SINGH PAINTAL [ 2010 (2) TMI 590 - SUPREME COURT ], the Hon ble Apex Court had emphasised the necessity to detail the role of the director accused on account of the penal nature of Section 141 of the NI Act and held ' Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.' From a perusal of the record, it is apparent that during each series of omission necessary to constitute an offence under Section 138 read with Section 141 of the NI Act, the petitioner had ceased to be a director of M/s Fresco Foods Pvt. Ltd. It is evident that at the date of issuance of the cheque on 26.09.2016, the date of the dishonour of the subject cheque on 04.10.2016 or at the date of the demand notice on 28.10.2016, the petitioner was not in charge of and responsible for the conduct of the accused company. Merely stating that the cheque was handed over way back in the year 2009 or that the petitioner signed as a witness to the agreement dated 12.03.2009 is not sufficient to attract liability when the petitioner was not a director of the accused company at any of the relevant stages necessary for the commission of the offence under Section 138 read with Section 141 of the NI Act. The proceedings emanating from Complaint Case for the offence under Section 138 read with Section 141 of the NI Act qua the petitioner is quashed - petition allowed.
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2024 (11) TMI 603
Dishonour of Cheque - rebuttal of presumption available to the complainant under Section 139 of the Negotiable Instruments Act - HELD THAT:- On careful scrutiny of the material on record in this regard, it clearly shows that P.W.3 is the official of the MCDCC bank. In his oral evidence, it has clearly admitted that accused has got two accounts in his bank. One in the individual capacity and another account in the name of Bhagiratha Fishermen Association. He also specifically stated that accused used to operate both the accounts by himself. Why accused has chosen to sign in two different languages is also a question that needs to be explained by the accused under what circumstances, he signed the cheque in question in a particular language is also to be explained by the accused. Absolutely, there is no explanation forthcoming from the accused in this regard - This Court, that too, in the revisional jurisdiction, cannot revisit into the factual aspects of the matter unless there is a patent factual defect in the case of the complainant or if there is a improper exercise of jurisdiction. This Court is of the considered opinion that the order of conviction passed by both the Courts is based on sound reasons and requires no interference in this revision petition - it is noticed that while imposing sentence, without assigning any special reasons, learned Trial Magistrate has imposed Rs.1,32,250/- as the fine amount as against cheque amount of Rs.75,000/-. Out of the which, sum of Rs.1,22,250/- was ordered to be paid as compensation to the complainant and balance sum of Rs.10,000/- towards the defraying expenses of the State. Since lis is privy to the parties and no State machinery is involved, awarding sum of Rs.10,000/- towards defraying expenses of the State needs interference by this Court. So also taking note of the fact that no special reasons are forthcoming, ordering sum of Rs.1,10,000/- as the compensation to the complainant as against cheque amount of Rs.75,000/- by reducing fine amount of Rs.1,10,000/- from Rs.1,32,250/- would meet the ends of justice. Revision petition is allowed in part.
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2024 (11) TMI 602
Construction of buildings for a proposed medical college located in Kanyakumari, Tamil Nadu - cause of action - Jurisdiction of High Court - forum shopping - Direction to the Respondents to refrain from granting any permission, recognition or approval to the proposed nursing college to be established by St. Alphonsa Trust on the Subject Properties - cancellation/revocation of any permission, recognition or approval already granted to the said proposed nursing college - conducting an independent inquiry into the circumstances surrounding the grant of Essentiality Certificate dated 14.06.2024 to St. Alphonsa Trust - taking any action on the Essentiality Certificate - HELD THAT:- Both the petitioner and the respondent Trust are situated in Tamil Nadu, and the properties in question are also located there. The cause of action, including the petitioner s claims for unpaid amounts and subsequent arbitration proceedings, arise out of events which took place in Tamil Nadu. Further, the orders relating to the property in dispute, including the attachment order and the arbitral award, have all been passed by the District Court in Nagercoil and the Madras High Court. The petitioner has previously approached these Courts for relief, and the orders passed by them directly pertain to the property in question and the execution of the arbitral award. Thus, there is no justification for invoking the jurisdiction of this High Court when the Courts in Tamil Nadu have already been seized of the matter and have issued relevant orders. A Coordinate Bench of this Court in the case of Chinteshwar Steel Pvt. Ltd. v. Union of India [ 2013 (11) TMI 1800 - DELHI HIGH COURT ], has held that in case of pan India Tribunals, or Tribunals/statutory authorities having jurisdiction over several States, the situs of the Tribunal would not necessarily be the marker for identifying the jurisdictional High Court. This Court is of the considered opinion that the ground on which the petitioner is seeking directions against the respondents, including Tamil Nadu Medical Council and Tamil Nadu Nurses and Midwives Council, to restrain them from granting any permission to St. Alphonsa Trust (situated in Tamil Nadu) to start nursing and medical college on the properties situated at Kanyakumari, Tamil Nadu, is the pendency of civil disputes in the courts of Tamil Nadu between the petitioner and the Trust. The petitioner previously has already invoked the jurisdiction of High Court of Madras for seeking similar reliefs - the petitioner herein has engaged in forum shopping by seeking to invoke the jurisdiction of this Court after having withdrawn petitions from the appropriate forum in Tamil Nadu. Such conduct, where the petitioner attempts to choose a forum favorable to them after having already approached the appropriate forum, cannot be condoned. The present petitions along with pending application stand dismissed solely on the ground of territorial jurisdiction, alongwith a total cost of Rs. 50,000/- (Rs. 25,000/- in each petition), to be deposited with Delhi High Court Staff Welfare Fund within two weeks.
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2024 (11) TMI 601
Maintainability of complaint - respondent had obtained Occupation/Completion Certificate for the project much before the RERA came into force - Jurisdiction of the Real Estate Regulatory Authority (RERA) concerning projects completed before its enactment - forum shopping/hunting - HELD THAT:- The learned Authority as also the learned Tribunal have dismissed the appellant s complaint and appeal by holding that once the project stood completed in the year 2007, the Authority under the RERA would have no jurisdiction to entertain any complaint qua such a project. The learned Tribunal also found that the appellant had vigorously pursued his initial complaint before the District Forum and it is only at the stage when his appeal before the State Commission was pending adjudication that he chose to withdraw. This, according to the learned Tribunal amounted to forum hunting. Further the learned Tribunal observed that it was an admitted position that the project had been completed in the year 2006 with the Completion Certificate by the DDA being issued on 08.03.2007, i.e., much prior to the RERA 2016 coming into force. In the light of this admitted position, the learned Tribunal was correct in holding that the RERA cannot be applied to projects, which stood completed before the enactment thereof. If complaints pertaining to projects, which were completed before the RERA was enacted were to be entertained, the same would amount to giving retrospective effect to the RERA, which the Legislature never intended. The complaint of the appellant was per se not maintainable under the RERA as the project of the respondent had been completed with the Completion Certificate having been issued by DDA on 08.03.2007 i.e., much prior to RERA coming into force. There are no such provision in the RERA, which grants liberty to a person, who had been pursuing any remedy under the Consumer Protection Act to file a complaint under RERA in respect of a project, which stood completed before the Act came into force. The Real Estate Regulatory Authority, the adjudicatory officer / authority and the learned Tribunal have rightly rejected / dismissed the complaint of the appellant on the ground of lack of jurisdiction as the RERA itself was not applicable to the project, which not only was completed but also had received the Completion Certificate much before the enactment of the RERA - Appeal dismissed.
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