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TMI Tax Updates - e-Newsletter
November 19, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Taxpayer wins case over GST demand orders hidden on portal.
Petitioner challenged order u/s 73 of GST Act creating demand, as notices were uploaded on GST portal's 'Additional Notices and Orders' tab, unbeknownst to petitioner who couldn't appear or question orders within limitation period. Referring to OLA FLEET case, where impugned order wasn't reflected under 'View Notices and Orders' tab and assessee's replies weren't considered, High Court quashed impugned orders dated 27.12.2023 and 02.02.2023 passed by Assistant Commissioner. Petitioner allowed to treat impugned order as final notice and submit reply within two weeks, as disputed amount deposited with government and no outstanding demand exists.
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Excessive tax liability determination in final order vs show cause notice allegations violates law.
The High Court held that the final assessment order passed by the authority exceeded the scope of the show cause notice by determining a higher tax liability than alleged in the notice. This violated Section 75(7) of the Act, which mandates that the final order cannot travel beyond the allegations in the show cause notice. Consequently, the High Court set aside the impugned assessment order and directed the competent authority to re-hear the matter, consider all objections, and pass a fresh order in accordance with law. The writ petition was disposed of without expressing any opinion on the merits of the case.
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Apex Court upholds validity of extension of GST annual return filing date & dismisses writ against Show Cause Notice.
Extension of time limits for filing annual returns under GST Acts was valid. Show Cause Notice issued within extended time limit u/s 73(9) of CGST/AGST Act for FY 2017-18 was upheld. Writ petition was dismissed as statutory appeal remedy u/s 107 of CGST/AGST Act was available against the Order-in-Original passed by the Adjudicating Authority. Principles of alternative statutory remedy, absence of violation of natural justice, jurisdiction and legislative vires were reiterated for declining writ jurisdiction under Article 226.
Income Tax
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Deductions, expense allocation & miscellaneous income eligibility under tax holiday scheme scrutinized.
Computation of deduction u/ss 80IB/80IC and 10B - AO allocated Head Office expenses to eligible units, reducing deduction. Tribunal consistently restores issue with directions to allocate common expenses and income to eligible units. Miscellaneous income from sale of scraps/by-products in eligible units held eligible for deduction. Adjustment for CENVAT credit u/s 145A - issue restored to AO to examine assessee's claim. Expenditure on relief materials for Tsunami victims disallowed as not wholly and exclusively for business u/s 37(1), not allowable as sales promotion or CSR expenses. Insurance claim amount to be added to WDV, not treated as capital receipt. Capital subsidy not to be reduced from WDV for depreciation. Rate of tax on dividend to non-residents decided against assessee by Special Bench. Transfer pricing adjustment at entity level under TNMM accepted following earlier year order.
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Redevelopment deal: Exchanging old flats for new qualifies for capital gains tax deduction.
The legal summary is as follows: The assessee received two flats in exchange for old properties under a redevelopment agreement. Section 2(47) of the Act defines 'transfer' to include various transactions, including the exchange of a capital asset. Since the assessee exchanged old flats for new flats as per the redevelopment agreement, it constitutes an exchange of capital assets. Therefore, the assessing officer is directed to allow the claim of deduction u/s 54 of the Act, as per the precedent set by the Income Tax Appellate Tribunal in the case of Shri Dilip P. Ahuja.
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Decoding Tax Disputes: Interest-free Funds, 14A Disallowance, and Goodwill Depreciation.
Disallowance u/s 14A read with Rule 8D - The assessing officer's reliance on CBDT Circular No. 5 of 2014 to make disallowance u/s 14A is legally untenable and liable to be deleted. The amendment to Section 14A by the Finance Act, 2022 is applicable prospectively only, as held by the Guwahati High Court. Where the assessee's interest-free own funds exceeded investments in tax-free securities, no proportionate disallowance is warranted u/s 14A, as per the Supreme Court's decision. Mandatory to record dissatisfaction u/s 14(2) - Disallowance invoking Rule 8 without recording dissatisfaction by the assessing officer is against Section 14(2), and the addition is liable to be deleted. MAT computation on Section 14A addition - Provisions of Section 14A cannot be applied for computing book profit u/s 115JB, and the addition made by the assessing officer is to be deleted. Depreciation on goodwill arising from amalgamation u/s 32 - Goodwill arising as a result of an amalgamation approved by NCLT is allowable for depreciation, contrary to the assessing officer's view that it was transferred from the amalgamating company.
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Foreign airline's code-sharing income from India exempt under tax treaty for operation of aircraft in international traffic.
The assessee, a foreign airline company and tax resident of the USA, engaged in the business of operating aircraft in international traffic, obtained approval from DGCA to undertake scheduled air services in India under the India-US Air Transport Agreement (ATA). It established a branch office in India for booking air passenger tickets and air freight, constituting a Permanent Establishment (PE) in India. The issue pertained to the taxability of income in India from code-sharing arrangements with third parties, where the assessee only booked tickets while the actual transportation was done by third parties. The coordinate bench had previously denied the benefit of exemption under Article 8 of the India-USA Tax Treaty for such receipts. However, the ITAT held that the profits derived from transporting passengers under code-sharing arrangements should be treated as profits from the operation of aircraft, exempt under Article 8, for the following reasons: (i) code-sharing falls within the ambit of "charterer" and "operation of aircraft" as defined in Article 8(2); (ii) passengers are transported on behalf of the assessee by third-party airlines on a principal-to-principal basis; and (iii) the transportation is inextricably linked. Accordingly, the receipts under code-sharing arrangements are covered under Article 8 and cannot be taxed in India.
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Reopening of assessment after 4 years and addition u/s 68 invalid due to full disclosure by assessee.
The Appellate Tribunal examined the reopening of assessment after four years and the addition u/s 68 of the Income Tax Act. It held that the original assessment was completed on 27.11.2018, and the notice u/s 148 for reopening was issued on 22.03.2019, after the expiry of the four-year period from the end of the assessment year 2011-12. The assessee had disclosed the information regarding the receipt of share capital in the return and financial statements during the original assessment. The Assessing Officer failed to substantiate any fault on the assessee's part in fully and truly disclosing material facts. Relying on the Bombay High Court's decisions in Everest Kanto Cylinder Ltd. and Ananta Landmark (P) Ltd., the Tribunal held that after four years, reassessment is not permissible unless the assessee failed to truly and fully disclose necessary facts. Since the assessee had disclosed the details of shareholders who subscribed to the share capital, and the Assessing Officer had already made an addition for one shareholder in the original reopening order, the reopening beyond four years without recording any lapses on the assessee's part for non-disclosure was invalid. The assessee's appeal was allowed.
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Penalty levied without specifying charge under income tax laws quashed by Tribunal.
Penalty imposed u/s 270A(9) for underreporting and misreporting of income was challenged due to non-specification of clear charge. The Tribunal held that underreporting and misreporting have different connotations and consequences. In the notices issued u/s 274 read with Section 270A, no specific charge or limb was specified. The Tribunal observed that the Delhi High Court in Schneider Electric South East Asia (HQ) had dealt with a case where the ingredients of sub-section 9 of Section 270A were not specified while imposing the penalty, ultimately affirming the deletion of the penalty. In the present case, the Assessing Officer initiated penalty proceedings u/s 270A without mentioning any sub-clause or specifying the limb for levying the proposed penalty. The notice was vague and did not mention "misreporting of income," whereas the penalty was ultimately levied for both underreporting and misreporting at 200% u/s 270A(9), for which no show cause notice was issued. The Tribunal decided in favor of the assessee.
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Lack of evidence leads to deletion of additions for unaccounted cash expenditure.
The assessee denied the entries representing unaccounted cash expenditure, stating they were merely MIS reports for discussion purposes, containing approximate project expenditure estimates. The statements were contradicted, losing evidentiary value. The assessee claimed all expenses were accounted for in regular books, making the addition unsustainable. The notings lacked details like payment dates, recipients, and sources, being mere bald notings without conveying much meaning. The figures were round estimates without supporting cash payments. The document lacked basic details to form an opinion on unaccounted cash payments. No corroborative evidence established unexplained expenditure u/s 69C, making the presumption arbitrary. No direct evidence of unaccounted cash expenditure was provided. The assessee admitted additional income during the search, and the AO made additions in earlier years, covering all unaccounted income. The Tribunal held that undated, unsigned seized papers with no acceptable narration were dumb documents lacking evidentiary value for determining undisclosed income without corroborating evidence. Based on these facts, the impugned additions made solely on loose sheets without corroboration were inadequate to draw adverse inferences of unexplained cash expenditure, warranting deletion.
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Tribunal rejects AO's sham LTCG claim on share deals, unexplained credits additions without evidence.
In this case, the Income Tax Appellate Tribunal (ITAT) examined the additions made by the Assessing Officer (AO) regarding long-term capital gains (LTCG) from share transactions treated as sham, additions u/ss 68 or 69A for unexplained credits, and addition u/s 69C for alleged unaccounted commission paid. The key points are: The claim for exemption on LTCG cannot be denied merely on suspicion or surmises regarding penny stocks, disregarding direct evidence like contract notes, banking channels, STT payment, and demat account. The AO must provide cogent corroborative material to establish unaccounted income routed back. Mere share value appreciation cannot justify treating transactions as fictitious. The shares were acquired through preferential allotment directly from the company, not brokers. Payment was through banking channels, delivery taken in demat account, held for over a year, contract notes issued, and sold on recognized stock exchange. SEBI did not declare the investee company bogus. Additions u/s 68 apply to credits in books of account, not bank statements. Section 69A addition was made solely on the presumption of redeploying undisclosed income as capital gains without independent tangible evidence of undisclosed income or bogus transactions. The 6.5% addition.
Customs
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EOUs face automated Import Rules from 17.09.2024 - Register IGCR bond, get IIN on ICEGATE for import duty concessions.
The notice outlines the implementation of automation in the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (IGCRS Rules, 2022) for Export Oriented Units (EOUs) effective from 17.09.2024. EOUs must obtain an IGCR Identification Number (IIN) at the ICEGATE portal, register their IGCR bond, and file a bill of entry with IGCR benefits. The submission process involves a prior intimation request, bond registration on ICEGATE, and mandatory declarations in the Bill of Entry, including IIN, Certificate Type "EI", Bond Code "EI", Bond Number, Notification No., and Serial Number. The system will automatically debit the IGCR bond and bank guarantee upon submission. Assistance is available through provided email IDs for any implementation difficulties.
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Mandatory Foreign Food Facility Registration for Exports to India from Sep 2024.
Registration of foreign food manufacturing facilities (FFMF) exporting certain food categories to India is mandatory from September 1, 2024. The categories include milk and milk products, meat and meat products (including poultry, fish), egg powder, infant food, and nutraceuticals. FSSAI has created an online 'ReFoM' portal containing registered FFMF details provided by exporting countries' competent authorities. Each registered facility receives a unique registration number (URN). Import clearance officials must verify FFMF registration on the ReFoM portal before allowing imports. FFMF registration is an ongoing process, with FSSAI updating the portal based on information from exporting countries. Customs officials are instructed to ensure compliance and sensitize stakeholders about this requirement effective September 1, 2024.
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Steel Extending validity of customs valuation rules for J3 grade stainless steel imports until Nov 2025.
This order extends the validity of CAVR Order No. 02/2023-Customs under the Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023 for Stainless Steel of J3 grade classified under specified HS Codes. The extension is granted for a period of 1 year, effective from 29th November 2024 until 28th November 2025. The order is issued by the Central Board of Indirect Taxes and Customs, Ministry of Finance, Government of India, exercising powers conferred by the Customs Act, 1962 and the relevant rules.
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Float glass with tin layer classified based on manufacturing process, not absorbent layers.
This circular clarifies the classification of clear float glass under the Customs Tariff Act, 1975. It addresses whether the presence of a tin layer on one side of float glass should be treated as an absorbent, reflective layer, impacting its classification. The circular refers to Chapter Note 2(c) of Chapter 70, defining "absorbent, reflecting or non-reflecting layer" as a microscopically thin coating of metal or chemical compound that absorbs infrared light, improves reflecting qualities, or prevents light reflection while retaining transparency/translucency. After consulting CSIR-Central Glass & Ceramic Research Institute, it concludes that the tin layer on float glass is inherent to the manufacturing process and does not satisfy the definition under Note 2(c). Consequently, clear float glass without wiring, coloring, reflective or tinted properties, and only a tin layer on one side without any other metal oxide layer, will be classified under tariff item 7005 29 90 as it lacks an absorbent layer.
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Phased rollout of quality standards for low-voltage electrical equipment like circuit breakers, switches, and control devices.
The document outlines the phased implementation plan for the Electrical Equipment Quality Control Order (EEQCO) issued by the Ministry of Heavy Industries for Low Voltage Switchgear and Controlgear. It specifies the Indian Standards, product categories, specific requirements, and implementation dates for various types of low-voltage switchgear and controlgear, including circuit breakers, switches, disconnectors, contactors, motor starters, control circuit devices, and emergency stop devices. The implementation is divided into multiple phases, with different product categories and specific requirements becoming mandatory on different dates ranging from 10th November 2024 to 10th May 2028. The document aims to ensure compliance with quality standards and facilitate the identification of products covered under the EEQCO during the phased implementation.
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Virtual Hearings Mandatory: CBIC Reinstates Video Conferencing for Tax Proceedings Except on Request.
The instruction mandates all departmental quasi-judicial/appellate authorities to conduct personal hearings for proceedings under CGST Act, 2017, IGST Act, 2017, Customs Act, 1962, Central Excise Act, 1944, and Chapter V of Finance Act, 1994 through Video Conferencing (VC), i.e., in the Virtual Mode. Exceptions to allow personal hearings in Physical mode may be granted upon specific request from the concerned party, with reasons recorded in writing. The instruction reinstates the original guidelines dated 21.08.2020, withdrawing the amendment dated 28.07.2022 that had made virtual mode optional.
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Trade officials wrongly denied export benefits due to tech limitations, court says they can't ignore human inputs.
The High Court held that the Directorate General of Foreign Trade (DGFT) and its officials were unjustified in refusing to consider manually corrected shipping bills for the Merchandise Exports from India Scheme (MEIS) benefit, especially after Customs allowed amendments u/s 149 of the Customs Act. The Court emphasized that artificial intelligence cannot override human intelligence, and officials cannot abdicate responsibility or deny legitimate relief due to technological limitations. Technology should serve people, not create obstacles. The DGFT should have aligned its systems with the CBIC's Advisory No. 7 of 2023. The Court directed the DGFT to process the petitioner's application for MEIS scrips and release them within 15 days if eligible, as the amended shipping bill was electronically transmitted to DGFT. The Court stressed that human and artificial intelligence must work together to achieve ease of business, and technological glitches cannot deny benefits granted by law or government schemes.
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Customs duty refund denied for filing delay - a case of inadvertent double payment.
Refund claim was rejected as time-barred, having been filed beyond the one-year limitation period stipulated u/s 27 of the Customs Act, 1962. The appellant had inadvertently paid customs duty twice due to an ICEGATE error, resulting in double payment. The refund sanctioning authority held the refund claim as time-barred since it was not filed within one year from the date of duty payment. The key issue was whether the excess amount paid constituted a duty or a deposit, determining the applicability of Section 27's limitation period. The CESTAT upheld the rejection, ruling that barring unconstitutional levies, all refund claims must comply with statutory provisions, including limitation periods. The excess payment, though inadvertent, was in the nature of duty, not a deposit or illegal levy, and thus subject to Section 27's limitation. Tribunals, being statutory creatures, must function within the legislative framework.
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License Revoked Without Proper Notice 's license revoked due to defective show cause notice lacking specific charges, violating.
Revocation of customs broker license challenged due to lack of specific allegations in show cause notice regarding violations of Regulations 11(n) and 17(9) of 2013 Customs Brokers Licensing Regulations. Show cause notice merely reproduced Additional Commissioner's order without detailing reasons for alleged violations. Commissioner's order found deficient as it did not consider broker's reply and based findings solely on Additional Commissioner's order. Tribunal held show cause notice defective for not spelling out specific charges, rendering Commissioner's order unsustainable on grounds of violation of principles of natural justice. Order set aside for lack of proper opportunity to broker to defend charges.
DGFT
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Indian DGFT Proposes Streamlined Export Policy Based on HS Codes for Enhanced Clarity.
This trade notice from the Directorate General of Foreign Trade (DGFT), Ministry of Commerce & Industry, Government of India, proposes to notify a harmonized Schedule-II (Export Policy) based on 8-digit ITC (HS) codes, replacing the description-based Export Policy. The aim is to streamline the export control and facilitation process, providing enhanced clarity for stakeholders. An initial draft for Chapters 40-98 was shared earlier, and comments received have been incorporated. The updated draft Schedule-II (Export Policy) for all Chapters 01 to 98 is enclosed, inviting comments/feedback from stakeholders by 27.11.2024. Subsequently, the draft will be finalized and duly notified after the consultation period.
FEMA
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Lax scrutiny by banks in FX transactions leads to penalties for violating forex regulations.
Banks failed to exercise due diligence by opening letters of credit and remitting foreign exchange despite non-submission of bills of entry and other mandatory documents by importers, amounting to contravention of foreign exchange regulations. Banks and their officers were held liable for abetment and negligence u/ss 8(3), 8(4), 64(2) and 68 of the Foreign Exchange Regulation Act, 1973 for processing transactions without proper scrutiny and documentation, even after repeated reminders and lack of justification from importers. The Appellate Tribunal upheld the findings of the Special Director, concluding that the banks and their employees were rightly penalized for their involvement in the contraventions.
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Export proceeds not realized, penalties imposed on directors for FEMA violation. Efforts to recover failed, suits withdrawn from Mumbai HC, refiled in London.
Penalty imposed on directors for contravening Export regulations under FEMA due to non-realization of export proceeds. No documentary evidence provided to support claims of efforts made to realize proceeds. Tribunal directed deposit of 10% penalty amount with bank guarantee for remaining 90% within 30 days. Legal suits withdrawn from Mumbai High Court and refiled in High Court of Justice, London. Company failed to realize export proceeds for US$ 9,03,000 negotiated through bank. RBI refused further extension and placed company under caution list restricting exports. No evidence of suit filed in London Court or direction from court to buyers to pay pending proceeds. Conduct of filing and withdrawing writ petition before Bombay High Court not considered reasonable step. Failure to show correspondence with Indian High Commission in London despite RBI directions. Appellants were directors responsible for company affairs during relevant period. Efforts to keep RBI informed and global recession faced by buyers noted. Contravention of FEMA provisions upheld, but penalty reduced to Rs. 2,00,000 each for appellants in the interest of justice.
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Heavy penalties for company & director for failing to report share issuance under FEMA regulations.
Penalty imposed under FEMA for non-compliance with Paragraph 9(1)(B) of Schedule 1 to FEMA Regulations, 2000. Section 13 FEMA does not require intention for penalizing contraventions. Maximum penalty can be three times the contravention amount. Penalty amount is discretionary, based on case facts and evidence. Respondent company failed to report in Form FC-GPR, depriving RBI of information about share issuance compliance. Director responsible for company operations. Appellate Tribunal enhanced penalties to Rs. 20 lakhs and Rs. 10 lakhs respectively on company and director.
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Charges of aiding accused in Bombay Blast case & violating forex laws dismissed due to lack of evidence & excessive delay.
The appeal pertains to a case registered under FEMA against the respondent, alleging support to the accused involved in the Bombay Blast Case and contravention of Sections 9(1)(b) and (d) of the Foreign Exchange Regulation Act, 1973. The appellant, the Directorate, failed to establish that the respondent received payment from any person residing outside India or that Tiger Memon, with whom the alleged hawala transaction took place, was a non-resident. The Directorate relied on statements discarded by the Supreme Court in the TADA case, where the respondent's statements were considered coerced. The Directorate did not provide other material to prove the case and failed to plead that Tiger Memon was a non-resident. The respondent controverted the facts, showing Tiger Memon's passport identified him as an Indian resident. The Appellate Tribunal found no merit in the case and the delay of over 800 days in filing the appeal, with no cogent reasons provided for condonation of delay.
Corporate Law
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Settling shareholder feud, ensuring company compliance through independent director with casting vote.
Shareholder/director dispute impacting company operations and statutory compliance. Parties agreed on appointing independent director to resolve deadlock, facilitate board meetings focused solely on legal/statutory obligations. Independent director granted statutory remuneration and casting vote. Appellate tribunal directed to appoint independent director within three days to urgently address non-compliance. Appeal disposed.
IBC
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Land rights of corporate debtor in insolvency process upheld; jurisdiction to determine assets affirmed.
The NCLAT held that the Adjudicating Authority had jurisdiction to determine whether the subject land is an asset of the corporate debtor, as such questions arise out of or relate to the insolvency resolution process. The proceedings conducted by the Sole Arbitrator and the orders passed did not amount to an arbitral award under the Arbitration & Conciliation Act, 1996, and thus were not binding on the parties. The IRP/RP could rightly include the subject land in the Information Memorandum/CIRP process by virtue of Section 18(1)(f) explanation, as the corporate debtor claimed development rights over the land. The Adjudicating Authority did not err in allowing the intervention petition filed by Art Construction Pvt. Ltd. Consequently, the appeal was dismissed.
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Financial debt admitted by corporate debtor, limitation extended by repayment promise. Section 10A inapplicable. Promise to allot property unenforceable.
Financial debt established through ledger entries and corporate debtor's admission. Section 7 application not time-barred due to corporate debtor's promise to repay u/s 25(3) of Contract Act, extending limitation period. Application not barred by Section 10A as default occurred prior to suspension period. Corporate debtor's promise to allot residential premises instead of repaying debt held unenforceable, not extinguishing financial debt. Adjudicating Authority's order admitting Section 7 application upheld, appeal dismissed.
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Bank must reverse post-insolvency fund transfers, maintain amounts in separate interest-bearing accounts until final decision.
Order directing reversal of actions taken after the insolvency commencement date (ICD) of 22.02.2023 until 01.06.2023. Respondents opposed interim relief, arguing appropriation of funds violated the moratorium effective 22.02.2023. Held: Notices issued, hearing date fixed; in the interests of justice, Axis Bank and other appellant lenders directed to maintain reversed amounts in separate interest-bearing accounts, protecting the corporate debtor's interests pending final decision. As banks/financial institutions, no apprehension of non-compliance. Interim arrangement safeguards parties' interests. Appeals listed for 03.12.2024 hearing and disposal.
Indian Laws
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Builders wrongly claimed before Appellate Tribunal they hadn't conceded interest liability before Regulator.
Respondents made a concession before the Regulatory Authority to accept interest only on amounts paid after RERA implementation. However, before the Appellate Authority, they insisted no such concession was made. Instead of filing an application with the Regulatory Authority to correct the erroneous recording of the concession, Respondents filed an appeal before the Appellate Tribunal. The Appellate Tribunal entertained the appeal without any pleading from Respondents regarding the erroneous recording of the concession. It erroneously concluded that no concession was made based on absence of certain points in the Regulatory Authority's order. The High Court held that the Appellate Tribunal committed a jurisdictional error by entertaining the appeal without Respondents first seeking clarification from the Regulatory Authority regarding the concession. It also erred by entertaining an oral plea about non-concession without any pleading in the appeal memo. The Appellate Tribunal's order was set aside as indefensible.
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Anticipatory Bail Application Maintainable While in Custody for Different Case.
The Supreme Court held that an application for anticipatory bail u/s 438 of the CrPC is maintainable even when the accused is in judicial custody in connection with a different case. The purpose of Section 438 is to safeguard personal liberty and the presumption of innocence. While there is no fundamental right to anticipatory bail, the court should not deprive the accused of exercising this statutory right until their release from custody in the first offense. Doing so may enable investigating agencies to arrest the accused immediately upon release, denying them the opportunity to seek anticipatory bail. The court clarified the procedure for arrest in such cases and emphasized that no restriction can be read into Section 438 to preclude an accused from applying for anticipatory bail while in custody for a different offense, as it would go against the provision's intent. The only restriction is under sub-section (4) of Section 438 or other statutes.
PMLA
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IPO Manipulation Saga: Unlawful Gains Scrutinized by SEBI, Divergent Treatment Upheld.
Proceeds of crime were considered regarding the refund amount from unsuccessful IPO applications due to malpractices and manipulations by certain entities. The SEBI determined unlawful gains by taking the difference between the sale and allotment amounts, while the FIR/ECIR recorded the entire amount as 'proceeds of crime' used for cheating the public. The SEBI order was within its provisions, distinct from the Act of 2002. There were no discrepancies or contradictions in the amount mentioned in the orders. The allegation of discrimination in treatment was unsubstantiated. The appeals failed as none of the arguments raised by the appellant had merit.
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Tribunal sets aside property attachment under Money Laundering Act for non-compliance with notice requirements.
The Appellate Tribunal set aside the impugned order of the Adjudicating Authority attaching immovable properties under the Prevention of Money Laundering Act, 2002 (PMLA) due to non-compliance with Section 8(1) requirements. The Tribunal held that the "reasons to believe" recorded in writing must be conveyed to the appellant along with the notice issued by the Adjudicating Authority u/s 8(1) of the Act. However, in this case, the appellant was not provided a copy of the "reasons to believe" while issuing the notice. The Tribunal remanded the matter back to the Adjudicating Authority to initiate de novo proceedings from the stage of submitting notice to the appellant along with the "reasons to believe" to enable the appellant to file a proper reply.
SEBI
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Relaxations for employee benefit trusts, aligned InvIT distribution timelines, new formats for reports & certificates.
This circular provides relaxation from certain provisions for units allotted to an employee benefit trust for unit-based employee benefit schemes, aligns timelines for making distributions by InvITs, and specifies the format for quarterly reports and compliance certificates. Specifically, it exempts employee benefit trusts from lock-in and allotment restrictions for preferential unit issuances. It mandates InvITs to follow the format for quarterly reports and compliance certificates specified by the Bharat InvITs Association in consultation with SEBI. Additionally, it modifies the Master Circular to align the timelines for making distributions by InvITs with the amended regulations.
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New SEBI circular relaxes rules for REITs, enables employee benefit schemes & aligns distribution timelines.
This circular provides relaxations and clarifications related to Real Estate Investment Trusts (REITs). It exempts units allotted to an employee benefit trust from lock-in and allotment restrictions for preferential issue, facilitating employee benefit schemes. The Indian REITs Association will specify formats for quarterly reports and compliance certificates managers must submit to trustees. Timelines for distribution by REITs are aligned with recent regulatory amendments. The circular invokes SEBI's powers under relevant REIT regulations and is applicable immediately.
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Streamlining Foreign Portfolio Investments: Simplified Registration for Select Entities.
This circular introduces a simplified registration process for certain categories of Foreign Portfolio Investors (FPIs). FPI applicants belonging to specified categories like funds operated by registered Investment Managers, sub-funds of registered master funds, segregated portfolio structures, and insurance company schemes can opt for an abridged Common Application Form (CAF). This abridged version only requires filling unique fields, while other fields are auto-populated or disabled based on existing information in depositories' CAF module. Applicants must provide consent for using available data and confirm unchanged details. Designated Depository Participants (DDPs) must update CAF with applicant information and ensure complete data reflection in depository CAF module. Implementation standards and auto-populated/disabled fields will be formulated by Custodians and DDPs Standards Setting Forum in consultation with SEBI. Depositories, Custodians, and DDPs must make necessary system changes. The circular aims to facilitate ease of onboarding and reduce duplication for certain FPI applicants.
Service Tax
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Tax Refund Interest Entitlement: Court Upholds Taxpayers' Right to Earn Interest on Seized Cash.
The appellants challenged the order of the Commissioner (Appeals) denying eligible interest on the refunded amount. The court held that interest accrued on the deposited amount is the property of the owner, and they cannot be deprived of it. Relying on judicial precedents, the court ruled that once confiscation is set aside, the department cannot deny interest merely due to lack of statutory provision. The Bombay High Court held that seized cash must be refunded with interest. The Kerala High Court, relying on the Supreme Court's decision, held that the interest rate for refunds should be 12%. Although Section 11B and 11BB of the Central Excise Act were inapplicable, the court determined that the appellants were entitled to interest on the refunded amount from the date of payment until disbursement. However, considering a recent notification fixing the interest rate at 6%, the court allowed the appeal, entitling the appellants to interest at 6% on the refunded amount from the date of payment till disbursement.
Central Excise
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Gold Dore Bars not exempted due to lower purity, differential duty payable for normal period.
The appellant manufactured 'Gold Dore Bars' having purity less than 95% from gold ore/concentrate and claimed exemption under Notification No. 12/2012-CE as 'Gold Bars'. The Tribunal held that 'Gold Dore Bars' with less than 95% purity cannot be equated with 'Gold Bars' as per the Notification's Explanation defining 'Gold Dore Bars' as raw material for manufacturing 'Gold Bars'. The appellant's argument of common parlance understanding was rejected, as the Notification treated them as distinct products. While upholding the demand for differential duty for the normal period, the extended period and penalty were set aside, as there was no suppression of facts, only an interpretation issue. The matter was remanded for determining differential duty and interest for the normal period.
Case Laws:
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GST
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2024 (11) TMI 826
Application for modification/relaxation of the condition of deposit of 50% of the tax component - it was held by High Court that 'A perusal of para 11 of the judgment dated 24.03.2023, makes it very clear that the petitioner was directed to deposit 50% of the tax component of Rs. 23,79,26,090/-. In the judgment, specific amount has been mentioned of which 50% was directed to be deposited, the order is very clear.' HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is accordingly dismissed.
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2024 (11) TMI 825
Service of notice - Challenge to order under Section 73 of the Goods and Service Tax Act, 2017 whereby demand has been created against the petitioner - notices issued under Section 73 of the Act, were uploaded on 'Additional Notices and Orders' Tab of the G.S.T. Portal - petitioner being unaware of issuance of the notices as well as passing of the orders, could neither appear before the authority nor question the validity of the impugned orders within the period of limitation - HELD THAT:- In the case of OLA FLEET TECHNOLOGIES PRIVATE LIMITED VERSUS STATE OF UP AND 2 OTHERS [ 2024 (7) TMI 1543 - ALLAHABAD HIGH COURT] a co-oridiante Bench of this Court inter alia observed ' No material exist to reject the contention being advanced that the impugned order was not reflecting under the tab view notices and orders . On merits, as noted in the earlier orders an other dispute exists whether all replies and annexures to the replies as filed by the assessee were displayed to the assessing officer and whether those have been considered. We find, no useful purpose may be served for keeping this petition pending or calling for a counter affidavit or even relegating the petitioner to the available statutory remedy. The entire disputed amount is lying in deposit with the State Government. Therefore, there is no outstanding demand. Accordingly, the writ petition is disposed of, with a direction, the assessee may treat the impugned order as the final notice and submit his written reply within a period of two weeks.' In view of the submissions made and the judgement in the case of Ola Fleet Technologies Pvt. Ltd the writ petition filed by the petitioner is allowed. The orders impugned dated 27.12.2023 and 02.02.2023 passed by the Assistant Commissioner, State Tax, Sector- 3, Bareilly (Annexures-2 3 to the writ petition) are quashed and set aside - Petition allowed.
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2024 (11) TMI 824
Scope of SCN - final order is passed beyond the allegations mentioned in the show cause notice - Revenue supported the impugned order but could not dispute that the amount shown in the impugned Assessment order is more than the amount shown in the show cause notice - HELD THAT:- It is deemed proper to set aside the impugned Assessment Order dated 29.08.2024, in the light of mandate engrained in Sub-section (7) of Section 75 of the Act. Accordingly, the impugned Assessment Order dated 29.08.2024 is set aside. The competent authority shall re-hear the petitioner, consider all its objections and pass a fresh order in accordance with law. The Writ Petition is disposed of without expressing any opinion on the merits of the case.
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2024 (11) TMI 823
Extension of time limits for filing annual returns under GST Acts - Validity of SCN - N/N. 56/2023-Central Tax dated 28.12.2023 - HELD THAT:- As the time limit for passing an Order under Section 73[9] of the CGST/AGST Act, 2017 for the Financial Year : 2017-2018, extended by the Notification no. 09/2023-Central Tax dated 31.03.2024, has been holding the field, this Court does not find any ground to interfere with the Order-in-Original dated 30.12.2023 passed by the Adjudicating Authority as the petitioner has an adequate, efficacious and statutory remedy of appeal under Section 107 of the CGST/AGST Act, 2017. It has been settled by a long line of decisions including the decision in PHR INVENT EDUCATIONAL SOCIETY VERSUS UCO BANK AND OTHERS [ 2024 (4) TMI 466 - SUPREME COURT (LB)] , to the effect that when an efficacious, alternative, adequate and statutory remedy of appeal is available, then a writ petition under Article 226 of the Constitution of India is not to be entertained, unless the petitioner has been able to make out any of the grounds :- [a] the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; [b] there has been a violation of the principles of natural justice; [c] the order or proceedings are wholly without jurisdiction; or [d] the vires of a legislation is challenged. The petitioner is at liberty to prefer an appeal against the Order-in-Original dated 30.12.2023 passed by the Adjudicating Authority for the Financial Year : 2017-2018 under Section 107 of the CGST/AGST Act, 2017. This writ petition stands disposed of.
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Income Tax
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2024 (11) TMI 822
Jurisdiction of DCIT Bengaluru to issue notice u/s 153C - transfer of case u/s 127 - assessee s case was transferred from ACIT, Circle 6(1), Bengaluru to DCIT, Central Circle, Bengaluru on 20.07.2009, as per the order passed under Section 127(2) - As decided by HC 2021 (10) TMI 1058 - KARNATAKA HIGH COURT] notice issued by the DCIT Circle 1(1), Bangalore, is without jurisdiction and as such, all further proceedings would render void ab initio. The arguments of the learned counsel for the revenue with respect to Sections 292B and 292BB do not merit any consideration. HELD THAT:- Special Leave Petitions are dismissed.
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2024 (11) TMI 821
Deduction of TDS on salary u/s 192 - Taxability of income received by Nuns, Sisters, Priests, or Fathers working as teachers in religious institutions - As decided by HC [ 2019 (3) TMI 1253 - MADRAS HIGH COURT] there is no exemption available even to the charitable or religious institutions themselves, who have to secure registration as such and then, their income and application of income for charitable or religious purposes only is regulated strictly in accordance with the provisions contained in Chapter III of the Act. These provisions have no application to the individual Nuns, Sisters or Missionaries so as to claim any exemption from income tax. As far as the provisions with which we are concerned, namely Sections 15 and 192 of the Act, we do not have an iota of doubt that these provisions have nothing to do with religion or any other special status of the person receiving the income described to be salary by the payer of the same. HELD THAT:- We are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution. Special Leave Petitions are accordingly dismissed.
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2024 (11) TMI 820
Unexplained cash credits u/s 68 - Addition invoking provisions of Section 115BBE (Enhanced Rate of Tax) - AO as well as Ld. CIT(A) doubted the source of cash deposits by taking view that assessee has not shown cash-in-hand in the ITR for assessment years 2015- 16 and 2016-17 - HELD THAT:- Considering the overall facts and circumstances of the case, and the facts that no independent investigation of fact was carried out about agricultural holding nor discarded / rejected the receipt of agricultural produce. Thus in order to avoid the possibility of revenue leakage at reasonable disallowance would be sufficient to avoid the possibility of revenue leakage. Thus, considering the various heads of income of assessee, find that ad hoc disallowance @ 10% of addition would be sufficient to avoid the possibility of revenue leakage. In the result, ground No.1 of appeal is partly allowed. Enhanced Rate of Tax u/s 115BBE - Divisions Bench as well as SMC Bench of this Tribunal in a series of case has held that enhance rate prescribed under section 115BBE is not applicable for AY 2017-18, reference is made in case of Samir Shantilal Mehta [ 2023 (5) TMI 1279 - ITAT SURAT] Arjunsinh Harisinh Thakor [ 2023 (6) TMI 770 - ITAT SURAT] and in Jitendra Nemichand Gupta [ 2023 (6) TMI 1338 - ITAT SURAT] and Punjab Retail Pvt. Ltd [ 2021 (11) TMI 405 - ITAT INDORE] and Sandesh Kumar Jain [ 2022 (11) TMI 126 - ITAT JABALPUR] In the result, ground of the appeal is partly allowed.
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2024 (11) TMI 819
Assessment u/s 153C - determination of six years prior to the relevant assessment year - HELD THAT:- We observed that the search in the case of Sunstar Group was carried on 19.12.2013 and as per records submitted before us, we observed that the notice u/s 153C was issued only on 20.01.2016. Therefore, the satisfaction in the case of the assessee was recorded by the jurisdictional Assessing Officer prior to issue of notice issued u/s 153C, therefore, the relevant searched assessment year pertains to AY 2016-17. Accordingly, six years prior to the relevant assessment year covers AYs 2010-11 to 2015-16. In the case of the assessee, notice u/s 153C was issued to the assessee covering AY 2009-10 which is beyond jurisdiction as per the judicial precedence as held in the case of CIT-14 vs. Shree Jasjit Singh [ 2015 (8) TMI 982 - DELHI HIGH COURT] We note that AY 2009-10 which was covered by the AO u/s 153C is beyond jurisdiction. Accordingly, we set aside the assessment made in this case. Assessee appeal allowed.
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2024 (11) TMI 818
Computation of deduction u/s 80IB/80IC and 10B - AO took the view that the assessee has increased the profits of eligible units by not allocating common expenses. Accordingly, he allocated Head office expenses to various units eligible for deduction and resultantly, the deduction u/s 80IB/80IC and 10B of the Act came to be allowed at a lower figure - HELD THAT:- We notice that the Tribunal is consistently restoring this issue to the file of the AO with certain directions. A.R invited our attention to the order passed in assessee s own case for AY 1993-94. In this order, the Co-ordinate Bench has followed the order passed for AY 2006-07 [ 2012 (12) TMI 458 - ITAT MUMBAI ] in respect of deductions claimed u/s 80HH and 80I of the Act and restored the issue to the file of AO with the instruction to follow the directions given in AY 2006-07 with regard to allocation of common expenses incurred at the Head Office. It is also pertinent to note that the Co-ordinate Bench has also accepted the plea of the assessee that certain common income should also be allocated to the eligible units. We notice that the CIT(A) has restored this issue to the file of the AO with the direction to follow the ITAT's order. Accordingly, we also direct the AO to allocate both common expenses and common income to the eligible units while computing deduction u/s 80IB/80IC and 10B of the Act as per the direction issued by the ITAT in the earlier years. Miscellaneous income earned on sale of scraps and by products in eligible units are eligible for deduction u/s 80IB/80IC - We notice that the AO did not allow deduction in respect of these kinds of receipts, without making any specific discussion. CIT(A) also did not adjudicate this issue specifically. As brought to our notice that the Mumbai Bench of Tribunal has examined an identical issue in the context of deduction u/s 80IC of the Act in the case of Addl.CIT vs. Sterlite Technologies Ltd. [ 2017 (1) TMI 1249 - ITAT MUMBAI ] wherein it was held that the income arising on sale of scraps is held to be eligible for deduction u/s 80IB/80IC. In the instant case, the amount received by the assessee is on account of sale of scraps and by products and they are generated out of manufacturing process. Hence, the scrap by-products are inextricably connected with the manufacturing activities carried on by the eligible units. Accordingly, we are of the view that there is merit in the submission of the assessee that the sale value of scraps/by-products, in fact, will go to reduce the cost of materials used in manufacturing and hence it should be considered as profits and gains derived from industrial undertaking. The decision rendered by the Co-ordinate Bench in the case of Sterlite Technologies Ltd [ 2017 (1) TMI 1249 - ITAT MUMBAI ] support the case of the assessee. We direct the AO to allow deduction u/s 80IB/80IC of the Act in respect of sales value of scraps/by-products generated in the eligible units. Adjustment on account of CENVAT credit - AO, following sec.145A of the Act, assessed the unutilized CENVAT amount as income of the assessee - HELD THAT:- Since, it is a case of method of accounting and since it is stated that there will be no impact on the profit under both Exclusive method and Inclusive method of accounting, following the decision rendered by the Co-ordinate Bench in AY 2006-07, we restore this issue to the file of the AO for examining the claim of the assessee. Deduction of cost of Relief materials given to Tsunami victims - allowable business expenditure u/s 37(1) or not? - HELD THAT:- When the dominant objective is philanthropic in nature, the same cannot be considered as an expenditure laid out or incurred wholly and exclusively for the purposes of business. It is pertinent to note that the assessee has not shown that there existed any business connection in incurring this expenditure. Assessee has also taken a plea that this expenditure should be considered as Sales promotion expenses. We are unable to accept the same. It is inconceivable that a business man would promote its products amongst the badly affected Tsunami victims, who have been rendered penny less. Hence, this plea of the assessee deserves rejection. Assessee has also taken a plea that this expenditure should be considered as CSR expenditure. It was not shown that this expenditure has been incurred as per the requirement of Companies Act as CSR expenditure. It may be akin to CSR expenses, but it would not qualify as CSR expenses. Hence, we are of the view that the assessee cannot take support of the decisions rendered in respect of CSR expenses. We are of the view that the Ld. CIT(A) was justified in confirming the disallowance of sum incurred on the relief materials given to the victims of Tsunami. Claim of enhancement of Written Down Value (WDV) of assets by the amount of Insurance claim not received - HELD THAT:- We do not find any merit in the contentions of the assessee that the insurance claim amount of Rs. 8.00 crores refunded to the assessee should be considered as refund of part of purchase consideration, since the insurance claim of Rs. 8.00 crores was received by the then parent company in connection with destruction of Salt Pans and the said amount only was refunded to the assessee. Hence, in our view, it would fall within the meaning of moneys payable . In this connection, we are of the view that the mode or manner of paying the insurance compensation by M/s Conopco Inc to the assessee is irrelevant. In Ground No.12, the assessee is contending that the above said amount should be treated as capital receipt, which is liable to be rejected for the reasons discussed above. We modify the order passed by Ld.CIT(A) on this issue and direct the AO to increase the WDV of AY 2005-06 in the following manner:- (a) Increase the WDV of AY 2001-02 of the relevant block by Rs. 14.44 crores. (b) Re-compute the WDV of AY 2005-06 of that block by reducing the depreciation amount of AY 2001-02 to 2004-05. (c) Allow depreciation in AY 2005-06 on the WDV so computed. We order accordingly. Reduction of Capital subsidy amount from the WDV of assets - HELD THAT:-Following the decision rendered by the co-ordinate bench of Kolkata in the case of Gloster Ltd. [ 2016 (2) TMI 700 - ITAT KOLKATA ] we hold that the amount of subsidy referred above is not required to be deducted from the WDV for the purpose of computing depreciation, since the objective of subsidy scheme is to promote industrialization of backward areas and not to fund part of cost of assets. We also notice that identical view has been expressed in the case of Harinagar Sugar Mills [ 2017 (1) TMI 853 - BOMBAY HIGH COURT ] Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO not to reduce the amount of subsidy from WDV while computing depreciation. Dispute of rate of tax applicable to the dividend distributed to Non-resident shareholders - HELD THAT:- We notice that this issue has been decided against the assessee by the Special Bench of ITAT in the case of Total Oil India P Ltd. [ 2023 (4) TMI 988 - ITAT MUMBAI (SB) ] TP adjustment made by TPO/AO on various items of international transactions - assessee had selected TNM Method as most appropriate method and bench marked the international transactions at entity level - HELD THAT:- Since the Ld.CIT(A) has followed the decision rendered by the Co-ordinate Bench in the assessee s own case in AY.2006-07 [ 2012 (12) TMI 458 - ITAT MUMBAI ] wherein entity level bench marking under TNM Method has been accepted by the Tribunal, we do not find any reason to interfere with the order passed by the Ld.CIT(A) on Transfer Pricing issues urged before us.
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2024 (11) TMI 817
LTCG - deduction u/s 54 - assessee received two flats in exchange for old properties under a redevelopment agreement - HELD THAT:- As perused the provision of section 2(47) of the Act which define the terms transfer to include various kinds of transactions. This section defines transfer as the transfer of capital asset including the sale, exchange relinquishment or extinguishment of the capital asset or extinguishment of any right therein or the compulsory acquisition thereof under any law . Since in the case of the assessee there is an exchange of capital asset (old flats no. 266 and 273) for another capital assets (new flats no. 23 and 23B) as discussed as per the re-development agreement entered with the developer therefore we direct the assessing officer to allow the claim of deduction u/s 54 of the Act as directed by the ITAT in the above referred case of Shri Dilip P. Ahuja [ 2014 (10) TMI 1078 - ITAT MUMBAI]
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2024 (11) TMI 816
Disallowance u/s 14A r.w.r.8D - suo-moto disallowance made by assessee - AO held that nowhere in the section 14A provides that disallowance is to be made only, if assessee has earned exempt income during the year - as argued AO without recording his dissatisfaction issue a Show Cause Notice to the assessee to explain as to why provisions of Rule 8D r/w section 14A should not be invoked - HELD THAT:- We hold that the reliance placed by the Ld AO of the CBDT Circular No.5 of 2014 to make disallowance u/s. 14A is legally not tenable and liable to be deleted. Scope of Amendment to Section 14A by the Finance Act, 2022 - Since very recently Hon ble Guwahati High Court reversed the decision of the ITAT Guwahati Bench in Williamson Financial Services Ltd [ 2024 (9) TMI 1571 - GAUHATI HIGH COURT] and others and held that the Amendment to Section 14A by the Finance Act, 2022 is to be applicable Prospective only. Own funds of the Assessee were much more than the investments made by the Assessee, hence no disallowance be made u/s. 14A of the Act on account of interest expenditure - Hon'ble Supreme Court in the case of CIT -Vs- UTI Bank Ltd [ 2022 (10) TMI 613 - SC ORDER] held that where interest free own funds available with assessee exceeded their investments in tax free securities, investments would be presumed to be made out of assessee s own funds and proportionate disallowance was not warranted u/s. 14A. Thus we hold that the disallowance made by the Ld AO u/s. 14A is legally not tenable and liable to be deleted. Mandatory for the AO to record dis-satisfaction as required u/s. 14(2) - Disallowance made invoking Rule 8 without recording dis-satisfaction by the Assessing Officer is against the provisions of section 14[2] and the addition is liable to be deleted. MAT computation on section 14A addition - Provisions of section 14A cannot be applied for computing the book profit u/s. 115JB of the Act and thereby delete the addition made by the AO. Depreciation on goodwill arising from amalgamation u/s. 32 - HELD THAT:- The basic fallacy in the approach of the Ld AO in this case is that he has proceeded further on the premise that the goodwill in question was transferred from amalgamating company to amalgamated company and hence depreciation on the same is not allowable in the eye of law. However, in the present case, as a matter of fact, goodwill in question is a result of amalgamation and has come into existence only pursuant to Scheme of Amalgamation duly approved by competent authority namely Hon ble NCLT. Thus all the provisions relied upon by the Ld AO (enlisted hereinabove) would apply only in a case where an asset is transferred in the course of amalgamation by transferor company to the transferee company and would not apply when a particular asset is a result of amalgamation. The reasoning given in the Memorandum explaining the Finance Bill, 2021 for excluding goodwill from the ambit of intangible assets is that the actual calculation of depreciation of goodwill is required to be carried out in accordance with various other provision of the IT Act. Once those provisions are applied, in some situations (like that of business re-organization) there could be no depreciation on account of actual cost being zero and the WDV of that asset in the hands of the predecessor/amalgamating company being zero. Goodwill, in general, is not a depreciable asset and it depends upon how the business runs, goodwill may see appreciation and in the alternative no depreciation to its value. Hence, for the said reasons assessee s have been barred from claiming depreciation on goodwill. These amendments are to take effect from 01st April 2021 and will accordingly apply to the assessment years 2021-22 and subsequent assessment years. Therefore the amendments in question will have no impact on the claim of the assessee company in this appeal which pertains to the Asst. Years 2016-17 and 2017-18. In view of the above findings depreciation on goodwill created as a result of amalgamation is allowable and directed the JAO to allow the same by passing appropriate orders. Decided in favour of assessee.
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2024 (11) TMI 815
Taxability of income in India - Receipts under code sharing arrangements - Denial of benefit of exemption under Article 8 of the India-USA Tax Treaty -receipts with the third parties where the assessee has only booked the tickets and the actual transportation has been done by third parties - Disregarding alternative methodology for computing taxable income submitted by the Appellant Assessee is a foreign airline company and a tax-resident of USA engaged in the business of operation of aircrafts in the international traffic. The assessee obtained an approval from the Director General of Civil Aviation ( DGCA ) to undertake scheduled air services in India on the routes specified under the India-US Air Transport Agreement ( ATA ) and established a branch office in India, to undertake activities related to the booking of air passenger tickets and air freight in India, with the approval of the Reserve Bank of India ( RBI ), which is an admitted Permanent Establishment ( PE ) in India. HELD THAT:- It is relevant to note that in assessee's own case for AY 2010-11 [ 2015 (5) TMI 681 - ITAT DELHI] , the coordinate bench has considered the same issue and held that the receipts under code sharing arrangements cannot avail the benefit of Article 8 of India-US DTAA and accordingly taxable in India.' Since the terms of Treaty are negotiated between the two countries it is clear that the terms agreed between India and US while entering into the agreement, that India-US DTAA, generally follows the pattern of the US model tax convention but is different in a number of respects to reflect India's status as a developing country. This is supported by the fact that a combined reading of the above Article 8 as per US Model and Article 8 of India US DTAA, and accordingly leads to us to see the merit in the argument that the OECD commentaries have to be read into Article 8 while considering the applicability of the same to code-sharing arrangement. One of the reasons for the coordinate bench to decide the issue against the assessee in AY 2010-11, is that there is no agreement to substantiate the terms under which code-sharing arrangement have been entered into by the assessee. For the year under consideration the assessee during the course of hearing provided a sample copy of the agreement entered into with Air France and submitted that similar agreements are available for all code-sharing arrangements with third party airlines. Therefore, the contention of the revenue that the receipts from code sharing agreement are not substantiated by any underlying agreements is not tenable for the year under consideration. On perusal of records we notice that the assessee had filed an application with the Competent Authority ( CA ) under Art.27 of the India-US DTAA requesting that the authorities invoke Mutual Agreement Procedures( MAP ) for resolving the impugned issue for the year under consideration along with the earlier years. US authorities have responded stating that despite prolonged efforts, a consensus could not be reached with the Indian authorities and that the US authorities are in agreement with the view that all of assessee's profits including revenue associated with interline and code sharing arrangement are to be exempt from Indian Taxation. Thus we hold that the profits derived from the transportation of passengers under code sharing arrangement by the assessee is to be treated as profits from operation of aircrafts for the reason that i. the transportation of passengers either fully or party in third party aircrafts in a specific journey by way of a code sharing arrangement, would fall within the ambit of the word charterer and, accordingly would be within the scope of operation of aircrafts as defined in Article-8(2) of the India US DTAA. ii. The passengers under code sharing arrangements are transported on behalf of the assessee by the third party airlines under the code sharing arrangement on a principal to principal basis where the ticket for the entire journey is issued by the assessee bearing specific code. Hence the same would fall within the scope of operation of aircrafts iii. The transportation of passengers by the assessee under code sharing arrangement either fully or partly in a third party aircrafts is inextricably linked which is established in assessee's case here Accordingly the receipts of the assessee under code sharing arrangement are covered under Article-8, of India US DTAA and cannot be taxed in India. The grounds including the additional ground raised by the assessee in this regard are allowed.
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2024 (11) TMI 814
Reopening of assessment after four years - Addition u/s 68 - independent application of mind v/s borrowed satisfaction - HELD THAT:- As undisputed fact that the original assessment in the case of the assessee u/s 147 was already completed on 27.11.2018. The notice u/s 148 for the second time for reopening of the case was issued on 22.03.2019 after the end of the four years period from the end of assessment year 2011-12. The four years period was expired as on 31.03.2017. We have perused the return of income filed by the assessee as referred supra in this order wherein the assessee has disclosed the information and facts relating to the receipt of share capital from the three entities in the ITR Form 6 and in the financial statements filed before the AO at the time of original assessment order passed u/s 147 of the Act on 27.11.2018. AO failed to substantiate that there was any fault on the part of the assessee to disclose fully and truly all material facts. As decided in case of Everest Kanto Cylinder Ltd. [ 2024 (2) TMI 163 - BOMBAY HIGH COURT] since the notice u/s 148 has been issued more than 4 years after the expiry of the relevant assessment year, proviso to section 147 shall apply in as much as re-assessment is not permissible unless there has been failure to truly and fully disclosed necessary facts required for the assessment. We have also perused the decision of Ananta Landmark (P) Ltd.[ 2021 (10) TMI 71 - BOMBAY HIGH COURT] wherein it is held that after a period of 4 years even if the assessing officer has some tangible material given to the conclusion that there is an escapement of income from assessment, he cannot exercise the power to reopen unless he discloses what was the material fact which was not truly and fully disclosed by the assessee. Thus as considered that the assessee had already disclosed the detail of all the shareholder who have subscribed to the share capital of the assessee in the case of the shareholders, the assessing officer has already made addition in the case of one shareholder in the original reopening assessment order passed in the case of the assessee as already discussed above in this order. It is categorically mentioned in the proviso to section 147 of the Act that condition of reopening of the assessment beyond the period of 4 years of the assessment year in which the return was filed is also applicable to the cases reopened u/s 147 of the Act. Therefore, we consider that reopening of the assessment in the case of the assessee made by the assessing officer beyond the period of 4 years without bringing on record any lapses on the part of the assessee for not disclosing fact of the case truly and fully is invalid. Appeal of the assessee is allowed.
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2024 (11) TMI 813
Stay the demand sought of assessment order passed u/s 143 (3) r.w.s. 144C - AR submitted that assessee is a wholly owned subsidiary of Multi-Accord Limited, a Hong Kong based company which holds 99.99% of share capital of the assessee - HELD THAT:- We observed that the issue under consideration is more or less covered by various decisions of Hon ble Delhi High Court and other High Courts. We also observed that assessee has already remitted 20% of the total outstanding demand and relevant bank challan is already filed in the form of paper book. Considering the above facts on record and balance of convenience is in favour of the assessee, we are inclined to grant stay for a period of 180 days from the date of this order or till the date of disposal of present appeal, whichever is earlier, subject to the rider that the assessee shall not take unnecessary adjournment to prolong the appeal otherwise stay order would cease to operate. The case of the assessee is also posted for hearing on 16.12.2024 along with other pending appeals which are posted on the same date. Since the date of hearing is announced in the open court, there is no requirement for issue of separate notice.
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2024 (11) TMI 812
TDS u/s 195 - addition u/s 40(a)(i) - assessee being resident corporate assessee is stated to be engaged in semi-conductor IC assembling and testing - Payment of marketing fees to entity without deducting tax at source - same was in pursuant to Marketing and Sale agreement as entered into by the assessee with that entity - income taxable in India u/s 9(1)(i) Article-7 of respective DTAAs or not? HELD THAT:- Upon perusal of clauses of the relevant agreements, it would appear that impugned payments are for marketing and sales services. The assessee has paid marketing fees to the payees. In such a case, in our opinion, the make available condition would not be applicable at all. The arguments of Ld. AR are multifold i.e., these services do not constitute Fees for Technical services since these are more of commission agent services which have been rendered in foreign territory. Since both the payees do not have any PE in India, the same would not be taxable in India in terms of cited judicial decisions. Another argument of Ld. AR is that the impugned payments would be business profits for the payees and therefore, the same, as per the terms of applicable DTAAs, would be taxable in Singapore and US only. The terms of DTAA or the provisions of the Act, whichever are more beneficial to the assessee, would apply. All these arguments as stated by Ld. AR need to be re-examined by lower authorities. The terms of the agreement, nature and place of services rendered would be decisive factors to ascertain the nature of payment. Beside this, the finding that whether the payees have PE in India or not, would also be vital to adjudicate the issue. Therefore, we set aside the impugned order and restore the impugned issue back to the file of Ld. AO for de novo adjudication in terms of various arguments as advanced by Ld. AR. All the issues are kept open. The assessee is directed to substantiate its case.
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2024 (11) TMI 811
Penalty imposed u/s 270A(9) - underreporting and misreporting of income - non specification of clear charge - HELD THAT:- Admittedly, in the notices issued u/s 274 r.w.s. 270A of the Act, no specific charge/limb is specified. Misreporting of income and under reporting of income, are having two different connotations and having its own different consequences. We observe that the identical issue was dealt in Jaina Marketing Associates [ 2024 (3) TMI 1007 - ITAT DELHI] wherein as relying on Schneider Electric South East Asia (HQ)[ 2022 (3) TMI 1295 - DELHI HIGH COURT] dealt with a cases wherein the ingredients of sub section 9 of section 270A of the Act, were not specified while imposing the penalty. The Hon ble High Court ultimately affirmed the deletion of the penalty imposed u/s 270A(9). Coming to the instant case, admittedly in the assessment order, the AO initiated the penalty proceedings u/s 270A of the Act without mentioning any sub clause of the section 270A of the Act or not specifying any limb of the penalty proposed to be levied. As the AO issued the vague notice without specifying any particular limb or sub clause for levying the proposed penalty. There is no whisper at all in the notice issued u/s 270A r.w.s. 274 of the Act about misreporting of income whereas the penalty has been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200% in terms of section 270A(9) of the Act, for which show cause notice was never issued to the Assessee. Decided in favour of assessee.
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2024 (11) TMI 810
Assessment u/s 153A - Disallowance of wages payable, Unexplained investment u/s 69 AND Addition u/s 69C - HELD THAT:- The assessee, thus, denied that the entries as mentioned therein represent unaccounted cash expenditure and the same was nothing but a MIS report for the purpose of discussion. The notings were approximate project expenditure of different sites of the assessee s projects. Thus, the statements have been contradicted and therefore, the same would loose its evidentiary value. Before lower authorities, the assessee has taken a stand that the aforesaid sheet has no evidentiary value since the same merely contain approximate project expenses only. It was the further submissions that whatever the expenses were incurred, the same was accounted for in the regular books of accounts and therefore, the impugned addition would not be sustainable in the eyes of law. Upon perusal of aforesaid notings, it could be seen that, on standalone basis, no inference of cash payment could be drawn against the assessee. The notings lack even the basis details i.e., date of payment, the persons to whom payments were made and the source of such payments. The notings are bald notings which do not convey much meaning. The figures as mentioned in the sheet are round figures without any more details which support the fact that these are mere estimations only. The sheet, in our considered opinion, is merely in the nature of dumb document having no evidentiary value. These sheets even lack basic details so as to form an opinion of cash payment by the assessee. The complete details of the transactions could not be deciphered from the same. Under these circumstances, not much credence could be given to this document to make impugned additions in the hands of the assessee in the absence of corroboration of entries as contained therein. Therefore, the presumption of unaccounted / unexplained expenditure in terms of Sec. 69C is arbitrary and without any corroborative evidence establishing the same. There is no direct evidence of any cash payment by the assessee. Not even a single concrete evidence has been brought on record to establish that the assessee, in fact, has incurred cash expenditure which was not accounted for in the regular books of accounts. It could be seen that the assessee was subjected to search proceedings and after considering every incriminating material as found therein, the assessee already admitted additional income and Ld. AO made further additions in earlier years. Therefore, even otherwise, each and every unaccounted income whatever has been earned by the assessee-firm in earlier years, the same has already been brought to tax and therefore, no further addition could be made in the hands of the assessee at the time of expansion thereof. All these facts lends credence to the arguments of Ld. AR. Similarly, Mumbai Tribunal, in the case of ITO vs. Kranti Impex Pvt. Ltd. [ 2018 (3) TMI 424 - ITAT MUMBAI] held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. The ratio of other decisions as cited by the assessee during first appeal also supports the case of the assessee. Upon cumulative consideration of aforesaid facts and reasoning, we would hold that impugned additions as made by Ld. AO merely on the basis of loose sheets without corroboration thereof, was not adequate enough to draw adverse inference of unexplained cash expenditure. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. The Ld. AO is directed to recompute the income of the assessee in terms of our adjudication.
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2024 (11) TMI 809
Bogus LTCG - Addition u/s 68 OR 69A - transactions of the assessee, in shares, leading to Long Term Capital Gain are sham transactions - HELD THAT:- Claim of exemption in respect of long term capital gains cannot be denied merely on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences filed by the assessee in support of such transaction viz., broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels, payment of STT and the demat account. AO is required to bring on record cogent corroborative material to establish that the appellant had unaccounted income which was routed back into the books and payments have actually been made to the brokers suspicion cannot take the place of proof. Mere appreciation in the value of shares cannot justify the transactions being treated as fictitious and the capital gains being assessed as undisclosed income. Merely on the basis of report received from Investigation Wing conducting certain enquiries, the assessing officer cannot treat the share transactions as sham on the basis of suspicion. No adverse inference can be drawn against the appellant merely on the basis of ex-parte statements of the third party(ies) which were not confronted to the assessee. The principle of law thus is that the AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. AO has to bring material on record tangible material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by contract notes and demat statements and account payee cheques cannot be treated as bogus. In the case of the appellant, shares were acquired by way of preferential allotment directly by the Company and not from any broker. Payment was made through banking channels. Deliveries were taken in the DEMAT account, where shares remained for more than one year. Contract notes were issued and shares were also sold on a recognized stock exchange. The SEBI has nowhere held the investee company to be a bogus or sham company. Additions u/s 69A OR 68 - CIT(A) held section 68 is only applicable in case when there are credits in the books of account of the appellant and that the bank statement of the appellant cannot be considered as books of account - In the present case, the CIT(A) had directed to make addition under section 69A of the Act merely on the basis of the presumption that the assessee had redeployed his undisclosed income in the form of capital gains. In concluding so, the CIT(A) had not placed on record any independent tangible material or evidence to both establish that the assessee had undisclosed income and further, that the share transactions undertaken by the assessee were bogus. In the present case, undisputedly, the transaction is duly accounted for and recorded in the books of the assessee and there is no doubt whatsoever as to disclosure of the transaction. All the relevant documentary evidence qua sale of shares, viz., contract notes, copy of demat account, bank statements, etc., was duly furnished. Thus, section 69A of the Act was not at all applicable and the addition made deserves to be deleted. Addition at the rate of 6.5% being unaccounted commission paid u/s 69C - AO presumed that the assessee had paid 6.5% commission to unidentified brokers, for providing accommodation entries in order to introduce the aforesaid bogus capital gains in the books of the assessee. The addition had been made merely on the basis of assumption, surmises and conjectures and accordingly calls for being deleted on this ground alone. Further, even otherwise, the addition made by the Assessing Officer, merely on the basis of presumption, without any corroborative evidence to substantiate that such payments were actually made, is wholly unjustified and calls for being deleted in view of the legal position, as discussed. The ld. CIT(A) has relied on the Hon ble Supreme Court s Judgement in the case of McDowell Co Ltd. [ 1985 (4) TMI 64 - SUPREME COURT] . In this regard, it has been held that the act of questioning the very basis of a transaction and branding it as illegitimate or a camouflage has to be based on substantial, concrete and cogent evidence, wherein the proof of wrong-doing has to be clear and succinct. Assessee appeal allowed.
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2024 (10) TMI 1614
Unexplained investment u/s.69 - cash deposits made in Specified Bank Notes(SBNs) during demonetization period - whether the demonetized currency received by assessee on account of sale of IMFS and beer to the customers and accepted demonetized currency in return is to be assessed u/s.69 of the Act or not as unexplained investment? HELD THAT:- The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31.12.2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31.12.2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31.12.2016. Therefore, under those circumstances, some persons continued to accept and transact the specified bank notes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the AO makes out a case that the assessee has deposited unaccounted cash into bank account in specified bank notes. Further noted that the Central Board of Direct Taxes had issued a circular for the guidance of the Revenue Officer to verify cash deposits during demonetization period in various categories of explanation offered by the assessee and as per the circular of the CBDT, examination of business cases, very important points needs to be considered is analysis of bank accounts, analysis of cash receipts and analysis of stock registers. From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the AO needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if we go by analysis furnished by the assessee in respect of total sales, cash sales including the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. When there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circular/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. For violation of any RBI notification, etc., can have any civil or criminal liability and can be dealt with under any other provision of law by the concerned authority but for the purpose of bringing the amount under Income-tax, the provisions are very clear i.e., 69 69A of the Act. In our considered view, to bring any amount u/s. 69 or 69A of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been created out of ordinary business sales which has been credited into books of accounts and profits has also been duly included in the return of income filed in relevant assessment year. Therefore, additions cannot be made u/s. 69 of the Act and taxed u/s. 115BBE of the Act towards cash deposits made to bank account of demonetized cash in SBNs. Appeal filed by the assessee stands allowed.
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Customs
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2024 (11) TMI 808
Eligibility to Merchandise Exports from India Scheme ( MEIS ) benefit due to error in shipping bills - inability to process amended shipping bills electronically - eligibility of manually corrected shipping bills - Petitioner s Customs brokers inadvertently declared the Petitioner did not intend to claim the Merchandise Exports from India Scheme ( MEIS ) benefit by indicating the letter N instead of Y in the relevant digital REWARD column - seeking amendment made in three shipping bills HELD THAT:- DGFT and its officials were not justified in refusing to consider the manually corrected shipping bills, particularly after the Customs Authorities allowed them to be amended by exercising their powers under Section 149 of the Customs Act. In any event, the DGFT and its officials were not justified in refusing to consider the amendments finally carried out electronically on the specious plea that the DGFT portal or the DGFT systems could not handle such situations. Artificial intelligence cannot be at the cost of mortgaging human intelligence entirely. Technology is to serve the people and not to place booby traps and make life extremely difficult for the people. It is otherwise. If there are some gaps in the existing handling systems, bona fide parties cannot be made to suffer. The human element endowed with discretion and reason must step in. The officials operating such systems, or the officials tasked with implementing the law and the Government schemes, cannot abdicate responsibility, raise their hands, deny legitimate relief or make parties run from pillar to post and ultimately the Courts to get their dues. The officials who handle technology must deal with matters with the sensitivity and intelligence that the situation requires. At no stage did we hear any argument that the Petitioner was disentitled to the MEIS scrips on merits or for any reason other than the DGFT s handling electronic systems not being tuned to accept amended shipping bills. At least after this Court s observations and directions in Technocraft Industries (India) Limited [ 2023 (2) TMI 74 - BOMBAY HIGH COURT ] the situation should have been corrected. At least after the Directorate General of Systems and Data Management (CBIC) issued Advisory No.7 of 2023, the DGFT should have aligned its systems with the advisory. This has not been done, and there is no grace to acknowledge this lacuna and sort out the matter as soon as possible. DGFT cannot adopt an attitude that its technological systems are not geared to deal with such situations and that its officials will not deal with such situations. Human and artificial intelligence must join to serve the people and achieve ease of business and not be at loggerheads. Suppose any party is entitled to any benefits under the law or under the schemes formulated by the Government to promote exports or trade. In that case, such benefits must not be denied or unduly delayed by citing technological glitches or the fact that the current electronic systems meant to assist the implementation of the law or operation of such schemes are inadequate or need revamping. What the law grants cannot be denied or unduly delayed by technology meant only to assist in implementing the law. If such an approach continues, the claims of leveraging technology to serve the people or ease of doing business will remain paper slogans. We direct the second and third Respondents to process Petitioner s application for the release of MEIS Scrips and, if the Petitioner is found eligible for the issue of such MEIS Scrips, to release the same within 15 days from today. The above exercise must be completed within 15 days from today, particularly since Customs, states that the amended shipping bill has already been electronically transmitted to the DGFT Authorities.
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2024 (11) TMI 807
Refund claim as appellant had paid the Duty twice due to ICEGATE error - double payment was made because the first payment on 10.01.2020 was not appropriated against the Bill of Entry No. 6415996 dt.10.01.2020, hence another payment made on 17.01.2020 - refund sanctioning authority held the refund claim as time barred as the same was not filed before the expiry of one year period from payment of Duty and interest - Whether the amount deposited is in the nature of duty or it is in the nature of deposit and if it is in the nature of deposit, whether Section 27 can be made applicable to the same or otherwise for the purpose of determining the limitation? HELD THAT:- Barring the situation where the refund is filed on account of unconstitutionality of the levy itself, all kinds of refund have to be dealt with the statutory provisions within the statute and its entire provisions would be applicable in full force including limitation. In the present appeal, it is not disputed that the amount has been paid twice because of some miscommunication or any other factor including what appellants are saying as malfunctioning of ICEGATE. It is not the case where it has been paid under the provision which has been held to be ultra vires of the constitution or it was paid due to incorrect appreciation of law. At best, it will fall within the category of clerical error or factual mistake or lack of information but by no stretch of imagination, such payment would fall under the nature of deposit or illegal levy. In this case there has been a mistake in making excess payment of Customs Duty, which is not being disputed by either sides, however, this excess payment, whether it is in the nature of duty or otherwise has been discussed in detail the foregoing paras and it is clear that in the given set of facts, it was in the nature of duty only and therefore, it would be required to be dealt with in accordance with the provisions under Section 27 of the Customs Act in view of various judgments cited in support of the submissions that refund of any amount under the Customs Act has to be dealt with in accordance with Section 27 only and not otherwise. Thus, following the various judgments cited by learned AR and especially the majority decision in the case of Mafatlal Industries Ltd [ 1996 (12) TMI 50 - SUPREME COURT] the provisions of Section 27 will be applicable in full force. The claim was filed before the customs authority, who is a creature of statute and therefore, he is bound by the provisions of the Act itself while considering the claim for refund unlike the Hon ble High Courts and Hon ble Supreme Court, who have wider jurisdiction and power under Article 226 and Article 32 of the Constitution respectively. It is also no longer res integra that the Tribunal is a creature of statute, which has to function within the four walls of statute itself. Therefore, in the facts of the case, no fault can be found with the rejection of the refund claim, which has admittedly been filed beyond the limitation period under the relevant statute i.e., Customs Act, 1962 and therefore, there is no ground for interfering with the order of the Commissioner (Appeals).
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2024 (11) TMI 806
Manner in which export consignments dealt with by the customs authorities during the period between in principle debonding and the final exit in terms of the Foreign Trade Policy (FTP) - appellant had sought formal approval for conversion of shipping bills from that of export oriented unit (EOU) scheme to that under claim for drawback appear to have been rejected on non-compliance with the stipulation in circular [no. 36/2010-Cus dated 23rd September 2010] of Central Board of Excise Customs (CBEC). HELD THAT:- As decided in M/S SECO TOOLS INDIA PVT LTD [ 2022 (9) TMI 1583 - CESTAT MUMBAI] in view of the settled position, elaborated in Haldiram Foods International Pvt Ltd, [ 2020 (12) TMI 1229 - CESTAT MUMBAI] on the irrelevance of the deadline stipulated in the circular of Central Board of Excise Customs (CBEC) relied upon in the impugned order, we set aside the rejection of the applications for amendment and direct the original authority to decide the matter afresh within the framework of section 149 of Customs Act, 1962 on the propriety of the changes sought for in the shipping bills. Appeal is, accordingly, disposed off. Furthermore, it has been brought to our notice that, on the same set of facts and circumstances, the competent authority had rejected these 155 bills pertaining to exports through Nhava Sheva while those effected through ICD Bhamboli and ICD Talegaon had been allowed. We set aside the impugned order and restore the application back to the original authority for disposal in accordance with law as prevailing at the relevant time.
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2024 (11) TMI 805
Revocation of Customs Broker License - show cause why duty drawback should not be denied and the goods already exported should not be confiscated and penalty should not be imposed u/s 114 (iii) and 114AA of the Customs Act, 1962 - HELD THAT:- It would be necessary to consider the charges that were leveled against the appellant in the show cause notice. It is seen that there is no specific allegation in the show cause notice, either with regard to violation of the provisions of Regulation 11 (n) or with regard to violation of Regulation 17 (9) of 2013 Regulations. Paragraphs 1 and 2 of the show cause notice, which have been reproduced above, merely talk of the Customs Broker License having been issued to the appellant and the order dated 07.02.2023 passed by the Additional Commissioner, which order has also been enclosed as a relied upon document no. 01. Paragraph 3 of the show cause notice is merely a reproduction of the order dated 07.02.2023 passed by the Additional Commissioner and continues from pages 135 to 173 of the appeal memo. After having reproduced the order passed by the Additional Commissioner in these many pages, the show cause notice, in paragraph 4 which has also been reproduced above, merely states that it appears that the Customs Broker violated these four Regulations and these four Regulations have been reproduced in the same paragraph. It clearly transpires that the show cause notice does not give any reason as to why the said four Regulations of the 2013 Regulations had been violated. The order impugned in this appeal is, therefore, liable to be set aside for this reason alone as the show cause notice is the very foundation of an order. The order that has been passed by the Commissioner of Customs can also been examined on merits. The Commissioner of Customs, after reproducing the reply filed by the appellant, merely observes that the Customs Broker had not obtained the KYC document directly from the exporter and secondly billing M/s Satyam Aviation Pvt Ltd. instead of the exporter would constitute a violation of Regulation 11 (n). Thus, it is not possible to sustain the finding recorded by the Commissioner of Customs that Regulation 11 (n) of the 2013 Regulations has been violated. In regard to violation of Regulation 17(9) of 2013 Regulations, it is to be noticed that apart from the fact that the show cause notice does not contain any specific allegation regarding violation of the Regulations, the Commissioner of Customs has merely reproduced the reply submitted by the appellant and, thereafter, the order passed by the Additional Commissioner and from those two facts has concluded that the Regulation 17 (9) of the 2013 Regulations had been violated. The show cause notice should have spelt out specific charges in regard to violation of Regulation 17(9) of the 2013 Regulations. Even the reply submitted by the appellant has not been considered at all and a finding is based on the order dated 07.02.2023 passed by the Additional Commissioner. Thus, the Commissioner of Customs was not justified in holding that the provisions of the Regulations 17 (9) of the 2013 Regulations have been violated.
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2024 (11) TMI 804
Valuation - import of Aluminium Scrap - re-determining the assessable value - assessee self-assessed the duty, but the Assessing Officer prima facie did not accept the value and put a query to the respondent that the value of the aluminium scrap did not match the contemporary import data available on NIDB - HELD THAT:- It clearly transpires from the speaking order passed by the Assessing Officer and the order passed by the Commissioner (Appeals) that the reasons given by the Assessing Officer for re-determining the assessable value have not been considered by the Commissioner (Appeals) at all. In fact, the Commissioner (Appeals) has addressed issues which were not even considered by the Assessing Officer in the speaking order. The Commissioner (Appeals), has not even examined the Bills of Entry referred to by the Assessing Officer which formed the basis for rejection of the transaction value and the re-determination of the assessable value. In this view of the matter, the order passed by the Commissioner (Appeals) cannot be sustained. The Commissioner (Appeals) shall pass a fresh order as expeditiously as is possible.
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Corporate Laws
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2024 (11) TMI 803
Oppression and Mismanagement - Dispute between two shareholders/directors affecting company operations - failure to make statutory compliances, legal authorization etc. - HELD THAT:- Apparently, the company is not able to complete the statutory and legal compliances due to differences between the Directors. The Learned Counsels for the Appellant and Respondent in their submissions are ad idem regarding differences between the Directors leading to non-compliances of statutory and legal requirements of the company. In the interest of the company, the Ld. NCLT is requested to nominate an independent Director to the Company for meeting of Board of Directors wherein only the Agenda for statutory and legal compliances be taken up. The Independent Director be given usual statutory remuneration and in case of deadlock, will have a casting vote. The Ld. NCLT is requested to appoint the independent Director within three days, considering the urgency of meeting the statutory compliances by the Company. Appeal disposed off.
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Insolvency & Bankruptcy
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2024 (11) TMI 802
Jurisdiction to enter into issue as to whether the subject land is asset of the corporate debtor - parties were required to be relegated to the Competent Civil Court having jurisdiction or not - proceedings conducted by Sole Arbitrator and the orders passed by the Sole Arbitrator amounts to arbitral award under the Arbitration Conciliation Act, 1996 determining the rights of both the parties so as to bind the parties in any subsequent proceedings - IRP/ RP could or could have been included the subject land in the Information Memorandum/ CIRP process of the corporate debtor by virtue of Section 18(1)(f) explanation. Whether the Adjudicating Authority had jurisdiction to enter into issue as to whether the subject land is asset of the corporate debtor or the parties were required to be relegated to the Competent Civil Court having jurisdiction? - HELD THAT:- Whether an asset is required to be reflected in the Information Memorandum or the asset belong to the Corporate Debtor are the question which arise out of or in relation to the insolvency resolution process. The present is a case where the Corporate Debtor has claimed development rights in the land. It is no more res-integra that the development rights are property within the meaning of Section 3(27) of the IBC. We may refer to the judgment of the Hon ble Supreme Court in Victory Iron Works Ltd. vs. Jitendra Lohia Anr. [ 2023 (3) TMI 699 - SUPREME COURT ] where the Hon ble Supreme Court had held that the development rights created in favour of the corporate debtor constitute property within the meaning of Section 3(27) of the IBC. The question as to whether the assets which are included in the Information Memorandum are the assets of the corporate debtor is foundation of entire CIRP process. When the inclusion of the said asset is questioned before the NCLT by the Appellant, Adjudicating Authority does not lack jurisdiction in entering into question and deciding as to whether assets are part of the CIRP or it should be excluded. We, thus, are of the view that the above question could be determined by the Adjudicating Authority and parties need not have to be relegated to the Civil Court having jurisdiction, the view of the NCLT to the contrary cannot be approved. Judgment of the Hon ble Supreme Court in Victory Iron [ 2023 (3) TMI 699 - SUPREME COURT ], clearly has held that the NCLT and NCLAT can exercise jurisdiction in the above facts. Whether proceedings conducted by Sole Arbitrator and the orders passed by the Sole Arbitrator dated 27.05.2014 and 15.07.2015 amounts to arbitral award under the Arbitration Conciliation Act, 1996 determining the rights of both the parties so as to bind the parties in any subsequent proceedings? - HELD THAT:- In view of the statutory scheme of the Arbitration Conciliation Act, 1996, and the fact that both City Civil Session Court Judge as well as High Court of Karnataka having held that the order dated 15.07.2015 passed by the Sole Arbitrator is an order under Section 33(2)(c), the order dated 15.07.2015 cannot be held to be arbitral award within the meaning of Arbitration Conciliation Act, 1996 so as to make it binding on the parties under Section 35 of the Act. Thus, in view of the fact that the Sole Arbitrator terminated the arbitration proceedings under Section 33(2)(c) by order dated 15.07.2015, the order dated 15.07.2015 cannot be held to be an award within the meaning of Arbitration Conciliation Act, 1996. Whether the IRP/ RP could or could not have included the subject land in the Information Memorandum/ CIRP process of the corporate debtor by virtue of Section 18(1)(f) explanation? - Whether Adjudicating Authority erred in not allowing the IA No.4648 of 2020 as prayed by the Appellant? - HELD THAT:- The present is a case where corporate debtor is not claiming any ownership rights over the subject land. Corporate debtor is claiming development rights and the ownership of the Appellants is not even denied by the Resolution Professional. Reply to the IA was filed by the Resolution Professional. In the reply, Resolution Professional has pleaded that the Resolution Professional has rightly included the project in the Information Memorandum as besides receiving the compensation due and payable by the Applicants in terms of clause 6, the Resolution Professional is also required to deal with the claims of Real Estate Allottee pertaining to said project. IRP/RP has rightly included the subject land in the Information Memorandum/ CIRP and he was not precluded by virtue of Section 18(1)(f) explanation from asserting development rights in the subject land - Adjudicating Authority did not commit any error in not allowing IA No.4648 of 2020 which prayed for exclusion of subject land from the Resolution Plan/CIRP of the corporate debtor. Whether the Adjudicating Authority committed error in allowing the IA No.58 of 2023 filed by the SRA? - HELD THAT:- The Adjudicating Authority did not commit any error in allowing Intervention Petition filed by Art Construction Pvt. Ltd. The order dated 30.04.2024 passed in IA No.58 of 2023 upheld - appeal dismissed.
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2024 (11) TMI 801
Admission of Section 7 application filed by the Financial Creditor through Interim Resolution Professional (IRP) - financial debt present in the case or not - Section 10A of the IBC Code - Section 7 application filed by the Financial Creditor dated 20.01.2023 was barred by time, loan having disbursed on 16.12.2016 or not - Section 7 application was barred by Section 10A since as per the letter dated 20.08.2020 issued by the Corporate Debtor and acknowledged by the Financial Creditor the amount was to be paid by the Corporate Debtor by 01.12.2020 and the default if any occurred on 01.12.2020 is hit by Section 10A or not. Whether Financial Creditor has been able to prove that there was financial debt? - HELD THAT:- It is relevant to notice that in Section 7 application, the financial creditor has filed its ledger with regard to corporate debtor which is part of Section 7 application and as per the ledger as on 31.03.2020 amount outstanding was Rs.4,74,48,109/-. The ledgers indicate that there was entry of payment of interest as on 31.03.2017, 31.03.2018, 31.03.2019 and 31.03.2020. Payment of TDS was also mentioned. A perusal of the ledger indicate that the closing balance of amount in the ledger of the corporate debtor as on 31.03.2020 towards the financial creditor was Rs.4,78,69,260/-. There were entries regarding interest on loan and TDS on interest in the ledger of both the corporate debtor and the financial creditor, hence, there is no doubt that the amount is a financial debt. Further in the letter dated 20.08.2020 which has been written by the corporate debtor to the financial creditor, there is a clear admission of loan - Financial Creditor has successfully proved that there is a financial debt. Whether Section 7 application filed by the Financial Creditor dated 20.01.2023 was barred by time, loan having disbursed on 16.12.2016? - HELD THAT:- In the present case, we have already noted the letter dated 20.08.2020 which was filed by the corporate debtor in the reply to Section 7 application. Reliance has been placed on the said letter by the Appellant also in the present Appeal. The letter dated 20.08.2020 contained a promise to repay the outstanding amount. Even for arguments sake, if we accept that three years period as per Article 21 came to end on 15.12.2019, the letter dated 20.08.2020 is clear promise by the corporate debtor to make the payment and as per Section 25 of the Indian Contract Act, 1872, the corporate debtor is bound by the said promise and fresh period of limitation shall commence from 20.08.2020 - Section 25(3) is attracted when a promise is made by letter to make the payment of a time barred debt. In view of Section 25(3), the said promise is enforceable and the promise in writing given by the corporate debtor in letter dated 20.08.2020 will make the said promise enforceable within a period of three years and the application which was filed by the financial creditor dated 20.01.2023 cannot be said to be barred by time. Hence the application under Section 7 cannot be held to be barred by time relying on Article 21 of the Limitation Act. Whether Section 7 application was barred by Section 10A since as per the letter dated 20.08.2020 issued by the Corporate Debtor and acknowledged by the Financial Creditor the amount was to be paid by the Corporate Debtor by 01.12.2020 and the default if any occurred on 01.12.2020 is hit by Section 10A? - HELD THAT:- It is well settled when default has been committed by the Corporate Debtor prior to commencement of Section 10A period, the application filed under Section 7 cannot be held to be barred by Section 10A. In the present case, as per the case of the Appellant, default took place since the loan was payable within three years from the date of grant of the loan i.e. from 16.12.2016 - Notice issued by the IRP was neither replied nor any amount was paid, hence, the financial creditor treated the date of default as 07.12.2022 i.e. 7 days from the notice - thus, the application filed by the financial creditor was not barred by Section 10A. One of the submissions also advanced by Counsel for the Appellant is that in the letter dated 20.08.2020 it was provided that in the event, the payment is not made by the corporate debtor prior to 01.12.2020, the financial creditor will be entitled to two residential premises in the project which is currently being developed by the Director of the company. The letter dated 20.08.2020 cannot extinguish the financial debt on a promise to allot two residential premises which is developed not by the corporate debtor but Director of the company. It is not satisfied that the financial debt shall extinguish by the promise made in the letter dated 20.08.2020. There are no error in the order of the Adjudicating Authority admitting Section 7 application. There is no merit in the Appeal. The Appeal is dismissed.
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2024 (11) TMI 800
Challenge to order directing for reversal of the directions which took place after 22.02.2023 till 01.06.2023 - determination of the Insolvency Commencement Date (ICD) and its implications - Respondents opposing the interim prayer contends that the amount having been appropriated, is clear violation of moratorium which commenced on 22.02.2023 - HELD THAT:- Notices are already issued in the Appeals and a date for hearing is fixed, thus, the ends of justice be served in directing the Axis Bank and other lenders, who are Appellants before us, to keep the amount which is to be reversed under the impugned order in a separate interest bearing account so that in the event amount is finally decided to be reversed the interests of the corporate debtor are protected. Appellant being themselves banks and financial institutions there can be no apprehension that the banks shall not reverse the amount in the account of the corporate debtor in event any final decision is taken in the appeal to that effect. The above interim management shall protect the interest of all the parties. List these Appeals on 03.12.2024 at 2.00 P.M. for hearing and disposal.
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FEMA
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2024 (11) TMI 799
Condonation of a delay of 138 days in filing an appeal - Order of Adjudicating Authority dropping the charges framed against the notice being Show Cause Notice issued u/s 6 (3)(a) and (h) of FEMA - HELD THAT:- Having heard the learned advocates for the respective parties and having perused the averments made in the application as well as the decisions relied upon, reading the proviso to Section 35 of the FEMA Act and in view of the judgment of the Hon ble Supreme Court in the case of Singh Enterprises [ 2007 (12) TMI 11 - SUPREME COURT] , this Court would have no jurisdiction to condone the delay in excess of 60 days . As can be noticed from the averments made in the application, what is sought to be challenged in the present appeal, is the order dated 27.09.2023 passed by the Appellate Authority, which is filed almost after delay of 138 days i.e. beyond the period of outer limit of 60 days. In view of the aforesaid expressive provision with regard to prescribed period curtailed for condonation of delay in the Act itself, the present application is held to be not maintainable.
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2024 (11) TMI 798
Failure to utilize the foreign exchange for the purpose for which it was acquired - Contravention for acquisition of foreign exchange and for remittance of the same through various Banks in Mumbai to their overseas suppliers for import of goods but failed to bring any goods into India - It was without any general or special permission of the Reserve Bank of India (RBI). - whether there was negligence on the part of the appellants/banks for opening of the LCs and remittance of the foreign exchange despite non-submission of bills of entry and reminders and a report to the RBI? HELD THAT:- The facts available on record shows receipt of the foreign currency against fake insurance claims which was never made by the Hamco Group of Companies with the Insurance Companies and was otherwise to be routed through the banks. The default by the appellants was realized and for that reason alone they subsequently wrote letters to insurance companies to find whether claims for insurance have been made. It was then informed that no claim was reported towards the insurance and specific reply of it has been given for Solo Industries Ltd. Al Sagar National Insurance Company, Dubai addressed the facts on 15.03.1999 that there was no claim reported by Solo Industries Ltd. or any of their consignees or settled by the said Company. The insurance company vide its letter dated 17.03.1999 also confirmed that the documents by Hamco Group of Companies were found to be forged and they were never issued by Al Sagar Insurance Company. They categorically denied receipt of claim or any settlement For the reason that the word abetment has not been defined under the Act of 1973, reference of Section 107 of IPC is given though it may not be relevant absolutely and in any case we find ingredients of the provisions are made out in this case. It cannot be pleaded that series of negligence and that too for years together would not lead to abetment. The appellants have pleaded that they were not under obligation to examine the documents, rather were under obligation to open the LCs and effect remittance. It has already been commented that they were not to act as post office to process documents for remittance but were under obligation to apply the mandate of Manual 1993 and the UCPDC. In the light of the aforesaid, we find that the case against the appellants was rightly taken up by the respondent and it is not only the financial institutions but its employees were found involved and for that penalized leaving others who were not found involved. Thus, we find that proper scrutiny of the facts has been made by the Special Director and we do not find any illegality therein in reference to the abetment of the financial institutions and its employees. In view of the above, this Tribunal may not cause interference in the order. State Bank of Patiala - The facts on the face of it would show that despite bill of entry not being submitted by Hamco for years together, the appellants continued to open LCs and made remittances and thus cause abetment by negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers concerned in the process of opening LCs and issuing remittances are liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. Canara Bank - The appellant bank has provided further details qua the transactions pertaining to the Hamco group of companies wherein advances against export performances have been adjusted by the bank. Further, the appellant bank in the case of Dravya received an inward remittance of Rs. 35,02,00,000 for which no purpose was explained rather the bank treated it just like an inward remittance without any explanation. In the case of Nariman Point, an inward remittance of Rs. 15610922 was received without any reason assigned to it. Thus, the appellants are liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers processed LCs and issued remittances are liable for abetment under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. Vijaya Bank - The appellant bank has opened 24 LCs on behalf of Hamco though bill of entry was not submitted in respect of 21 LCs and remittances involving a total amount of US $ 17605540.45. Thus, despite no bill of entry submitted by the Hamco group of companies and despite non-fulfillment of the mandatory obligation by the Hamco group of companies, the bank continued to open LCs and remitted the amount. Thus, the bank is liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers concerned processed LCs and issued remittances are liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. United Western Bank - Despite no bill of entry being submitted by the Hamco group of companies and despite non-fulfillment of the mandatory obligation on part of the Hamco group of companies, the bank continued to open LCs and remitted the amount. The appellant bank has also remitted US $ 34809212.77 to various parties against Merchanting Trade transactions. The bank has also opened 7 LCs in respect of Dravya involving 37 remittances totaling US $ 2138730.92. Thus, the bank is liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers processed LCs and issued remittances are also liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. Oman International Bank - The appellant bank remitted US $ 22496721.85 on behalf of Hamco and US $ 896135 on behalf of Dravya to various parties against Merchanting Trade transactions without following the mandate of the Manual of 1993 and direction of UCPDC. Thus, the bank is liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers processed the LCs and issued remittances are liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. Indusind Bank Ltd. - No bill of entry was submitted by the Hamco group of companies in continuity and despite therein fulfillment of the mandatory obligation on part of the Hamco group of companies, the bank continued to open LCs and remitted amount by way of collection bills. Thus, the bank is liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers concerned in the process of opening LCs and issuing remittances are liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. Federal Bank Ltd. - The appellant bank has opened 30 LCs on behalf of Hamco however, the bill of entry was not submitted in respect of 27 LCs and 66 remittances involving a total amount of US $ 20390900.42. Thus, despite non-submission of bill of entry by the Hamco group of companies in continuity and absence of fulfillment of the mandatory obligation under the Manual of 1993 and direction of UCPDC on the part of the Hamco group of companies, the bank continued to open LCs and remitted the amount. Thus, the bank is liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The appellant officers concerned processed LCs and issued remittances are liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973. SBI Commercial and International Bank - The appellant bank has opened 4 LCs on behalf of Hamcothough bill of entry was not submitted in respect of 3 LCs and 4 remittances involving a total amount of US $ 2033770/-. Thus, despite that no bill of entry was submitted by the Hamco group of companies and absence of fulfillment of the mandatory obligation given under the Manual of 1993 and UCPDC on part of the Hamco group of companies, the bank continued to open LCs and remitted the amount. Thus, the bank is liable for abetment and negligence in terms of Section 8(3) and Section 8(4) read with Section 64(2) of the Act of 1973. The officers concerned in the process of opening LCs and issuing remittances are liable under Section 8(3) read with Section 64(2) read with section 68 of the Act of 1973.
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2024 (11) TMI 797
Penalty on directors for contravening Export regulations under FEMA - non-realization of export proceeds - no documentary evidence in support of their contention of having made efforts to realize the export proceeds - Tribunal disposed of the applications for waiver of the pre-deposit of the penalty amounts with direction to deposit 10% of the amount of penalty imposed against each of them with Bank Guarantee for rest of the ninety per cent of the penalty within 30 days of the receipt of the Order - on legal advice they withdrew their suits before the Mumbai High Court and fresh legal suits were filed in the High Court of Justice, London. HELD THAT:- We find that with respect to these appeals the Company M/s Mrugank Investments Limited failed to realize the export proceeds in respect of G.R.No.AU701578 dated 10.08.2000 for US$ 9,03,000/- negotiated through the Global Trust Bank Limited. It is also a matter of record that the RBI had refused further extension of time to realize the proceeds and had put the Company under the caution list restricting its right to make further exports. There is nothing on record to show that a suit was filed in the London Court. In fact, the Appellants have failed to produce any evidence to corroborate any direction from the London Court to their buyers to pay pending export proceeds. The conduct of the Appellants in filing Writ Petition before the Hon ble Bombay High Court and thereafter having yet withdrawn does not reflect the same as reasonable step taken by the Appellants for realization of the pending export proceeds. The Appellants have also failed to show their correspondence with the High Commission of India in London, in-spite of directions to this effect by the RBI. We also find that the two appellants before us were the Directors of the Company who were responsible for the conduct of affairs of the Company at the relevant point in time. It is documented to the Show Cause Notice that the Appellant Shri Rais Ahmed was Director from 20.07.1993 to 29.03.2004 and the Appellant Shri Abdul Sagir Khan was Director from 01.06.2000 to 10.04.2001. This information was provided by Shri Rais Ahmed in his statement dated 03.08.2005. There is nothing to the contrary on record. We do take note of their efforts to keep the RBI informed and also to the fact that the buyers had to face global recession during the relevant time. No reason to intervene with the Impugned Order insofar as its findings that the two Appellant Directors have contravened Section 8 of the Foreign Exchange Management Act, 1999 r/w Regulation 9 13 of the Foreign Exchange Management (Export of Goods and Services) Regulation 2000 r/w Section 42 of FEMA 1999. However, the ends of justice will be met on reduction of the penalty amount on the two Appellant Directors to Rs. 2,00,000/- each.
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2024 (11) TMI 796
Penalty imposed under FEMA - contravention on the part of the Respondent company was the non-compliance to the provisions of Paragraph 9(1)(B) of the Schedule 1 to FEMA Regulations, 2000 - HELD THAT:- Reading of Section 13 of FEMA,1999 which is a Section under which penalty is imposed for contravention of any of the provisions of the Act or any Rule, Regulation, Notification, Direction, Order or any condition subject to which an authorization is issued by the RBI makes it obvious that the language of the Section does not require intention for penalizing of contravention. On reading of Section 13 (1) FEMA, 1999, it is also obvious that the maximum amount of penalty which can be imposed under the Section is three times the amount of contravention involved. From the language of the Section, it is clear that the Section has not prescribed either a fixed amount of penalty or minimum amount of penalty. it therefore, follows that the amount of the penalty which is to be imposed by the Adjudicating Authority is a matter of discretion which, of course, is necessarily required to be exercised judiciously after taking into account the facts of the case and the evidence placed before it. While the Respondents have met with the compliances required under Paragraph 9(1)(A), they have failed to meet with the compliances required under Paragraph 9(1)(B). It does appear that the failure to comply with the requirements of Paragraph 9(1)(B) was due to unawareness of such requirements. However, the satisfaction of the conditionalities imposed under Paragraph 9(1)(A) did bring the fact of inflow of foreign remittance for issuance of share by the Appellant Company, to the knowledge of the RBI. Failure to report in Form FC-GPR deprived the RBI of the information about the compliances required to be met while issuing the shares by the Company. It is also noted that there is no dispute about the Appellant individual being the Director of the Company at the relevant time, who was responsible for its day to day operations. Thus, penalties imposed by the Ld. Adjudicating Authority on the two Appellants deserves to be enhanced and made to Rs. 20 lakhs and Rs. 10 lakhs respectively. The Appeal is accordingly disposed of.
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2024 (11) TMI 795
Condonation of delay in filing appeal under FEMA - allegation against the Respondent No.1 was regarding his support to the accused involved in Bombay Blast Case and for which a case was registered under TADA - case for contravention of Section 9(1) (b) and (d) of Foreign Exchange Regulation Act, 1973 - prayer is made to dismiss the appeal filed beyond the period of limitation without proper explanation of delay of more than 800 days. HELD THAT:- In the instant case, the appellant Directorate have failed to show that there was receipt of payment from any person resident outside India and that Tiger Memon was resident out of India or for that any other person with whom alleged Hawala Transaction took place. In the light of the aforesaid, the appellant Directorate have failed to satisfy the ingredients of Section 9(1)(b)(d) to pass the order against the Respondent No.1. Further issue is in reference to the order of the Apex Court under TADA where Respondent No.1 has been extended benefit. It is mainly on the ground that his statements were recorded under coercion and with duress thus cannot be relied. The appellant Directorate have relied on the same statement despite being discarded by the Apex Court. In the light of the aforesaid, the appellant Directorate was required to show other material to prove the case. It is also when other statements were also discarded and in any case if the pleadings of the appeal are taken into consideration, the appellant Directorate have not pleaded that Tiger Memon was a resident out of India. What has been stated is that Tiger Memon has shifted his Mumbai base to Dubai after Bombay blast case. The facts have been otherwise controverted by the Respondent No.1 to show that a case was registered against Tiger Memon for Bombay Blast case where his passport was seized showing him to be the resident of India. Appellant Directorate could not make out a case to cause interference in the impugned order passed by the Adjudicating Authority not only in reference to the order of the Apex Court but on the facts of this case also. Finding no merit, we would now come to the application for condonation of delay. Delay in filing of the appeal is of more than 800 days i.e. nearly more than two years. The cogent reasons to condone the delay have not been given. At times delay occurs in taking a decision for filing the appeal where the Government or its machinery is involved. However, it would not mean that even if there is unexplained delay, it has to be condoned. We do not find a case on merit and even for condonation of delay.
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PMLA
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2024 (11) TMI 794
Money Laundering - proceeds of crime - Consideration of proceeds of crime regarding the refund amount from unsuccessful IPO applications - malpractices and manipulations indulged by certain individuals/entities for different Initial Public Offerings (IPOs) - forged documents - HELD THAT:- The SEBI has passed the order within the four corner of the provisions applicable therein. The reference of the order passed by the SEBI rather goes against the appellant and proves the allegation substantially. It is, however, only to the extent of determination of unlawful gains pursuant to the provision of Securities and Exchange Board of India Act, 1992(SEBI Act, 1992). The SEBI has determined the amount of unlawful gain by taking the difference of the amount out of sale of shares. Their area of determination was only to find out illegal gain out of the allotment. The provisions of the Act of 2002 are quite different and distinct to the provisions of the SEBI Act, 1992. The FIR followed by ECIR was recorded finding commissioning of scheduled offence and the proceeds of crime in the hands of the appellant. It is taking into consideration the amount involved and used for illegal purpose to cheat the public and, therefore, the entire amount therein was considered to be the proceeds of crime . The satisfaction of the amount determined by the SEBI would not absolve the appellant from commission of the scheduled offence, otherwise the appellant would have challenged the FIR or ECIR but no such challenge has been made. Thus, there are no substance even in the second argument. Discrepancies and contradictions in the orders qua the amount - HELD THAT:- There are no discrepancy or contradiction in the amount and otherwise the final amount has been referred and disclosed in the impugned order thus alleged issue of discrepancy no more remains. Thus there are no substance even in the third argument. Alleged discrimination in the action of the respondent - HELD THAT:- The counsel for the appellant was called upon to refer to the documents to prove allegation of discrimination in the treatment between the similarly placed. A reference of the Income Tax Return was given but then the counsel fairly admitted that it cannot substantiate the argument of discrimination. It could have been by producing an order of provisional attachment against others which has not been produced. Thus, even the last argument alleging discrimination of treatment is not made out. There are no substance in any of the argument raised by the appellant - The appeals would accordingly fail and are dismissed.
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2024 (11) TMI 793
Attachment of immovable properties under Prevention of Money Laundering Act, 2002 (PMLA) due to non-compliance with Section 8(1) requirements - reasons to believe - HELD THAT:- In the instant case, reasons to believe were not conveyed to the appellant along with the notice issued by the Adjudicating Authority despite judgment of the various High Courts and even by this Tribunal holding that whenever a notice is caused by the Adjudicating Authority under Section 8(1) of the Act of 2002, reasons to believe recorded in writing have to be given to the defendants. However, the appellant was not given copy of the reasons to believe while issuing notice. Thus, on the aforesaid ground, the impugned order deserves to be set aside. This Tribunal while holding that the reasons to believe recorded in writing may not be required to be served under Section 5(1) of the Act of 2002 but notice under Section 8(1) of the Act of 2002 should be with reasons to believe of the Adjudicating Authority. It is for the reason that after the attachment, if it is confirmed by the Adjudicating Authority, it may ultimately affect the party and that cannot be without an opportunity to know the reasons to believe of the Adjudicating Authority - the reason to cause interference in the impugned order passed by the Adjudicating Authority and it is accordingly set aside. The matter is remanded back to the Adjudicating Authority to take de novo proceedings and that too from the stage of submitting notice to the appellant along with the reasons to believe so that appellant may file a proper reply. Appeal disposed off.
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Service Tax
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2024 (11) TMI 792
Denial of eligible interest on the amount refunded - order of Commissioner (Appeals) has been challenged on the ground that the appellants were entitled to be paid interest at the rate of 12% per annum on the total amount of the refund from the date of its deposit till the date of its actual payment - HELD THAT:- As per the Article 300A of Constitution of India also, no person shall be deprived of his property, save by authority of law. They cannot be deprived of the same and is entitled for benefits arising out of said property. Hence interest accrued on the amount in question during the period it remained deposited with the department is the property of the owner of the amount i.e. the appellant herein. We draw our support from the decision of RHL Profiles Ltd [ 2017 (4) TMI 1252 - ALLAHABAD HIGH COURT] has held that once the confiscation has been set aside, confiscation of seized currency has been set aside and the fact is that the Department has earned interest during the period the currency was retained by it, it was held that payment of interest could not be denied merely for the reason that there is no express statutory provision. Bombay High Court also in the case of Union of India Vs. M P Desal [ 2019 (3) TMI 550 - BOMBAY HIGH COURT] has held that amount seized in cash by the authorities is to be refunded along with the interest. Though in this case the rate of interest was held to be simple at the rate of 8%. There already has been decisions of Sony Pictures Networks India Pvt. Ltd. [ 2017 (5) TMI 864 - KERALA HIGH COURT] wherein the decision of Hon'ble Apex Court in the case of Kuil Fireworks Inds [ 1997 (9) TMI 105 - SUPREME COURT] is relied and it was held that rate of interest while refunding the amounts has to be 12% of the amount refunded. We hold that the appellants are entitled to claim the interest on the amount as has been refunded in their favour that too to be paid from the date of payment of initial amount till the date of its refund. As the amount in question was not deposited under Section 35F, however is akin to predeposit for the reasons as discussed above. It is clear that Section 11B and 11BB of Central Excise Act will not be applicable to the amount in question, the denial of the interest on the appellant s amount is held to be unjustified. Resultantly, we hold that the said proviso is not applicable to the given set of circumstances. We therefore hold that the findings are liable to be set aside. Section 35FF itself prescribes the rate of interest in the range of 5% to 36% when these provisions is read in the light of the above provisions and the decisions with respect to the rate of interest. However, we observe that the Central Government vide Notification No. 12/2023- Central Tax (Rate) dated 19.10.2023 has fixed the rate of interest @ 6%. Resultantly, we hold appellant to be entitled for getting interest on the amount of refund from the date of payment till the date of its disbursement, however at the rate of 6%. Hence, we hereby set aside the order under challenge. Appeal allowed.
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2024 (11) TMI 791
Service tax under the category of Franchise Service or Declared service - invocation of the extended period of limitation - appellant challenged the show cause notice on the ground that it is vague and does not specify the taxability of the given transaction so as to make the DTMPL liable to pay service tax - as submitted that for the period 1.4.2012 to 31.3.2017, the activities undertaken by DTMPL is not liable to service tax under the category of declared service under Section 66E(e) of the Act, as DTMPL is not under any obligation to do an act or to tolerate an act. Allegation of the Revenue is that the activity undertaken by DTMPL of enrolling the members falls under the category of Franchise Service for the period during the Pre- Negative Era and as declared services under Section 66E(e) for the period Post-Negative Era - HELD THAT:- To bring within the ambit of service tax , it is necessary to analyse the specific factors or the principles, which would constitute that services. The basic principle for a service to be taxable is that it is necessary that there should exist a service provider and a service recipient relationship between the two parties, which, in the present case is missing. From the impugned order, we find that there is no mention of any services, which DTMPL was liable to perform having received the amount, which has been taken to be as a consideration and in absence thereof, DTMPL cannot be termed to be a Service Provider , providing any services to the members /agents. Though the receipt of membership fee by DTMPL can be regarded as income but it cannot be treated as a consideration for rendering any services. In other words, the amount of Rs.5,500/- received by DTMPL is not a consideration in lieu of any services. We are of the view that the impugned order does not show any consideration whether the activity performed by DTMPL satisfies the basic factors to be classified as Franchise Services or as declared services under Section 66E(e) of the Act. The findings as recorded by the Adjudicating Authority are insufficient to impose levy of service tax in the present case. We are afraid to say that the Adjudicating Authority have virtually copied the entire show cause notice and merely quoted the provisions of law but failed to apply its mind to the applicability of the provisions of the Act defining the two services with reference to the actual activity undertaken by DTMPL. In fact, it is not even evident as to who is the service provider or who is the service recipient and what is the nature of the services, for which the consideration is being paid, if any. Instead of repeating the show cause notice in extenso, the Adjudicating Authority being the Original Authority ought to have passed the order on a proper appreciation of the fundamentals of levying the service tax. We find that the proper course is to remand the matter back to the proper Adjudicating Authority to decide the matter afresh.The impugned order is, therefore, set aside and the appeals are allowed by way of remand.
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2024 (11) TMI 790
Refund claim - input services have been used in the export of output service - Assessee registered under Management Consultant, consulting Engineers, Manpower recruitment agency, maintenance or repair service. Towards un utilized CENVAT credit - Adjudicating authority rejected refund claim as held that the assessee had not produced any evidence in support of the utilization of the input services for the export service, there is no documentary evidence with regard to the use of the services, not submitted the rent agreement in respect of the input service provider, there is no correlation with the FIRC and export invoices ..etc. HELD THAT:- It is an admitted fact that Appellant has made claim the refund of CENVAT credit for the services rendered by them for export of goods. While considering the issue in the matter of M/s Eveready Industries India Ltd [ 2016 (4) TMI 688 - MADRAS HIGH COURT] as held once an application for refund is allowed under Section 11B, the expression erroneous refund appearing in sub-section (1) of Section 11A cannot be applied. If an order of refund is passed after adjudication, the amount refunded will not fall under the category of erroneous refund so as to enable the order of refund to be revoked under Section 11A(1). One authority cannot be allowed to say in a collateral proceeding that what was done by another authority was an erroneous thing. Therefore, the question of law has to be answered in favour of the appellant/assessee. Also in MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT] held in the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. Considering the facts and circumstances as stated above, the Commissioner appeals rightly passed impugned order considering the statutory provision and decisions of the appellate authorities. Appeal dismissed.
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Central Excise
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2024 (11) TMI 789
Concessional rate of duty - manufacture of Gold Dore Bars having purity less than 95% - Admissibility of the benefit of exemption under Sl. No.189 of the Notification No. 12/2012CE dated 17.03.2012 - HELD THAT:- We find that the Learned Commissioner, while analysing the dictionary/popular meaning of Gold Bar and applying common parlance test to it, has categorically made an observation that the claim of the appellant that Gold Bar includes Gold Dore Bar cannot be accepted since there is a marked difference between Gold Bar and Gold Dore Bar , when the meaning of Gold Dore Bar set out in the Explanation to the said exemption Notification No.12/2012-CE dated 17.03.2012 is considered. Rejecting the contention of the appellant that if the gold bar be understood as having purity content of more than 95%, it amounts to introducing a new condition under the said Notification, the learned Commissioner has observed that since the percentage of gold has been specifically prescribed to understand Gold Dore Bar , then meaning of gold bar be considered as the one other than Gold Dore Bar being a distinct products in the trade parlance. Argument of the appellant that even though the final product cleared from their factory is Gold Dore Bar having purity less than 95%, which are manufactured from gold ore/concentrate be considered as Gold Bar , in absence of a definition of Gold Bar , in the exemption Notification, in our view, cannot be accepted. On the contrary, we find there is merit in the reasoning of the Ld. Commissioner that once the Gold Dore Bar is given a meaning in the Explanation to the Notification being considered as raw material/input for the manufacture of gold bar , the said meaning cannot be ignored while understanding the meaning of Gold Bar even though both the items are classifiable under Chapter 71 of the CETA, 1985. The Gold Bars which are manufactured out of Gold Dore Bars having purity less than 95% cannot be equated with Gold Dore Bars . Thus, the argument of the Appellant that Gold Bars (i.e., Gold Dore Bar) manufactured from gold ore or concentrate as mentioned at Clause (a) of Sl. No.189 of the said Notification No.12/2012-CE dated 17.03.2012, cannot be acceptable for more than one reason. The final product emerged out of the process of manufacture narrated as above, is Gold Dore Bar having purity of 87% to 92% and not Gold Bar and the said Gold Dore Bar is cleared to refineries to make Gold Bar having purity of 999.99%. The argument of common parlance understanding of the 22-carat and 24-carat purity bar as Gold Bar only, in our view, not relevant to the present circumstances of the case to extend the benefit of Notification. If it is the intention of the Legislature to treat both Gold Bar and Gold Dore Bar as one and the same, then there is no necessity to mention both the expressions in the same exemption Notification, one as raw material and the other one as the as final product . The principles for interpretation of an exemption Notification have been laid down in Dilip Kumar and Company [ 2018 (7) TMI 1826 - SUPREME COURT] . Thus even if in common parlance purity may not be the criterion to use the expression Gold Bar , however, for the purpose of Notification No.12/2012-CE dated 17.03.2012, Gold Bar and Gold Dore Bar are two different commodities. Invoking extended period of limitation - We find that a proceeding was earlier initiated against the appellant in the year 2010. Analysing the process of manufacture and the final product manufactured and cleared from the factory at NIL rate of duty, claiming exemption under Notification No.5/2006-CE dated 01.03.2006, show-cause notice was issued to the appellant on 07.02.2012 demanding duty with interest denying the benefit of Notification No.5/2006-CE dated 01.03.2006. As a Government Policy, the Notifications are amended from time to time and the exemptions are provided depending on the process, source of inputs, resultant product, etc. The appellant consequent to the amendment to the Notification No.5/2006-CE dated 01.03.2006 discharged duty on clearance of Gold Dore Bar by availing concession as specified under Notification No.25/2011-CE dated 24.03.2011. Subsequently, also they commenced discharging duty by availing the exemption Notification No.2/2012-CE dated 16.01.2012 and Notification No.12/2012-CE dated 17.03.2012 from time to time. Also, they have filed periodical ER-1 Returns with the department indicating clearance of the Gold Dore Bar mentioned as Gold Bar claiming exemption available to them from time to time. In the said circumstances, the second show-cause notice issued to the appellant on 05.08.2017 invoking extended period, in our opinion, cannot stand the scrutiny of the law as there has been no change in the process of manufacture, marketing/sale of the final product i.e., Gold Dore Bar except availment of benefit of Notification issued from time to time. Thus, there is no mis-declaration nor suppression of facts with intent to evade payment. However, the appellants are required to discharge differential duty at the appropriate rate, if any, payable for the normal period of limitation, as benefit of Sl. No.189 of the Notification No.12/2012 dated 17.03.2012 as amended, being not admissible to the appellant. Since the issue relates to interpretation of law and there is no suppression of facts, we do not find justification in imposing penalty under Section 11AC of the Central Excise Act, 1944 on the appellant as held in the impugned order. Appeal is partially allowed upholding the demand of duty with interest for normal period and setting aside penalty imposed on the appellant. Consequently, the matter is remanded to the adjudicating authority for determination of differential duty and interest for the normal period of limitation. Appeal disposed of accordingly.
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Indian Laws
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2024 (11) TMI 788
Grant of Anticipatory bail - Whether an application for anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973 (CrPC) is maintainable at the instance of an accused while he is already in judicial custody in connection with his involvement in a different case? - HELD THAT:- The Statement of Objects and Reasons accompanying the bill for introducing Section 438 in the CrPC indicates that the legislature felt that it was imperative to evolve a device by which an alleged accused is not compelled to face ignominy and disgrace at the instance of influential people who try to implicate their rivals in false cases. The purpose behind incorporating Section 438 in the CrPC was to recognise the importance of personal liberty and freedom in a free and democratic country. A careful reading of this section reveals that the legislature was keen to ensure respect for the personal liberty of individuals by pressing in service the age-old principle that an individual is presumed to be innocent till he is found guilty by the court. In KARTAR SINGH VERSUS STATE OF PUNJAB [ 1994 (3) TMI 379 - SUPREME COURT] , a Constitution Bench of this Court held that there is no constitutional or fundamental right to seek anticipatory bail. In the said case, this Court was called upon to consider the constitutional validity of sub-section (7) of Section 20 of the Terrorists and Disruptive Activities (Prevention) Act, 1987. The Constitution Bench also looked into the validity of Section 9 of the Code of Criminal Procedure (U.P. Amendment) Act, 1976 which deleted the operation of Section 438 of the CrPC in the State of Uttar Pradesh with effect from 28.11.1975. In GURBAKSH SINGH SIBBIA VERSUS STATE OF PUNJAB [ 1980 (4) TMI 295 - SUPREME COURT] , this Court emphasized that the applicant must have a tangible reason to believe. Vague apprehension will not do. Secondly, it held that the High Court or the Court of Session should not ask an applicant to go before the Magistrate to try his luck under Section 437 of the CrPC. It was also observed that once the accused is arrested, Section 438 of the CrPC ceases to play any role with reference to the offence or offences for which he is arrested. This Court also cautioned against passing a blanket order for anticipatory bail. Thus, no useful purpose would be served by depriving the accused of exercising his statutory right to seek anticipatory bail till his release from custody in the first offence - there are force in the submission of the respondent that if the accused is not allowed to obtain a pre-arrest bail in relation to a different offence, while being in custody in one offence, then he may get arrested by the police immediately upon his release in the first case, even before he gets the opportunity to approach the competent court and file an application for the grant of anticipatory bail in relation to the said particular offence. This practical shortcoming in the approach taken by the Rajasthan High Court is prone to exploitation by investigating agencies for the purpose of putting the personal liberty of the accused in peril. The procedure for arrest of the accused in relation to an offence after he is released from custody in the first offence would be similar to the procedure of arrest which is required to be followed in any other cognizable offence. However, we think it is necessary to shed some light on the procedure to effect arrest in the second category of cases, that is, where the investigating agency arrests the accused in relation to an offence while he is in custody in relation to a different offence. An accused is entitled to seek anticipatory bail in connection with an offence so long as he is not arrested in relation to that offence. Once he is arrested, the only remedy available to him is to apply for regular bail either under Section 437 or Section 439 of the CrPC, as the case may be - There is no express or implied restriction in the CrPC or in any other statute that prohibits the Court of Session or the High Court from entertaining and deciding an anticipatory bail application in relation to an offence, while the applicant is in custody in relation to a different offence. No restriction can be read into Section 438 of the CrPC to preclude an accused from applying for anticipatory bail in relation to an offence while he is in custody in a different offence, as that would be against the purport of the provision and the intent of the legislature. The only restriction on the power of the court to grant anticipatory bail under Section 438 of the CrPC is the one prescribed under sub-section (4) of Section 438 of the CrPC, and in other statutes like the Act, 1989, etc. The present appeal must fail and the same is thereby dismissed.
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2024 (11) TMI 787
Levy of interest to the allottees on the amount paid by them at the rate of SBI s Highest Marginal Costs of Lending Rate (MCLR) plus 2% with effect from 1 January 2018 till the date of handing over possession of subject apartments to the Respondents. Petitioner is also directed to pay costs of Rs. 10,000/- to the Respondents - whether Respondents could have filed an Appeal challenging the order of the Regulatory Authority, which according to the Appellant, is obtained on concession? - permissibility for the Appellate Tribunal to grant relief over and above the alleged concession made by Respondents before the Regulatory Authority. HELD THAT:- Respondents clearly made a concession before the Regulatory Authority that they were willing to accept interest only on amounts paid after implementation of the RERA. However, before the Appellate Authority, Respondents insisted that no such concession was applied by them before the Regulatory Authority. If this was the position, proper course of action for the Respondents was to invite the attention of the Regulatory Authority by filing an application that their concession was erroneously recorded. However, admittedly no such application was filed by the Respondents. Instead, they were advised to challenge the order of the Regulatory Authority by filing the Appeal under section 44 of the Act before the Appellate Tribunal. The Appeal was apparently filed on 27 January 2021 before the Appellate Tribunal. During gap between 25 November 2020 and 27 January 2021, the Respondents did not complain before the Regulatory Authority that their concession was erroneously recorded in paragraph 9 of the order. Thus Respondents neither filed an application before the Regulatory Authority complaining about erroneous recording of the concession in paragraph 9 of the order nor they did raise any specific ground in the Appeal about erroneous recording of such concession. Thus, the Appellate Authority did not have before it any pleading to the effect that the order was not obtained by Respondents by consent. It therefore really became questionable as to how the Appellate Authority could have entertained the Appeal filed by the Respondents. It is only when the Appeal was argued before the Appellate Tribunal, that Respondents sought to retract from the concession made before the Regulatory Authority. The first reason recorded by the Appellate Tribunal for believing that Respondents did not make any concession is the absence of any whisper in para 6 of the Order about project facing any financial crisis. Since the plea of the Advocate of the Appellant about project facing financial crisis is not noticed by the Appellate Tribunal in paragraph 6 of the Regulatory Authority s order, it has held that the assumption on the part of the Regulatory Authority about liquidity crisis was erroneous. The second reason recorded by the Appellate Tribunal for believing the plea of Respondents about not making concession is nonaudibility of Appellant s advocate during the course of hearing due to technical glitches and she making her submissions subsequently vide email dated 24 November 2020. The Appellate Tribunal has therefore assumed that at the time when the Appeal was actually heard, the advocate of Appellant was not even audible and there was no occasion for the Authority to know any plea of project facing liquidity crisis. Appellate Tribunal has therefore held that since Regulatory Authority itself was not appraised about any liquidity crisis, there was no occasion for it to give any explanation to Respondents - even the second reason of the recording by the Appellate Authority for believing the plea of the Respondents about not making concession before the Regulatory Authority is totally perverse. The judgment and order passed by the Appellate Authority suffers from palpable error. It has committed a jurisdictional error in entertaining the Appeal filed by the Respondents without they first moving Regulatory Authority to seek a clarification in respect of the concession recorded in paragraph 9 of the order. The second error committed by the Appellate Tribunal is in entertaining oral plea of not making concession before Regulatory Authority in absence of the pleading in the Appeal Memo. The judgment and order passed by the Appellate Tribunal is indefensible and is liable to be set aside. The Appeal accordingly succeeds.
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9911796707
