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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter November 23, 2022 Case Laws in this Newsletter: Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise Indian Laws Articles Final GST Audit Report to be issued after considering Assessee’s Reply S.68- cash credit – foreign gifts. Judgment popularly referred as case of P.Mohankala deserves a reconsideration in view of facts found by Tribunal which were analyzed in a reasonable manner by High Court. Cancelled GST Registration as a result of Non Filing of GST Returns due to sudden demise of Auditor to be Restored TRANSITIONAL CREDIT IN GST CAN BE CLAIMED TILL 30TH NOVEMBER, 2022 News Shri Goyal urges Steel Industry to make best use of India Australia ECTA Agreement and capture new opportunities in Australia Search and seizure action by Income Tax Department in Bihar Repayment of ‘6.84% GS 2022’-Issue of Press Communique Highlights / Catch Notes Income Tax Revision u/s 263 by CIT - Value Added Tax paid by assessee and claimed as deduction u/s.37 r.w.s. 43B or u/s 40(a)(iib) - scope of amended provisions of section 40(a)(iib) - royalty, licence fee, service fee, privilege fee, service charge or not - VAT collected and paid by TASMAC under the provisions of TamilNadu Tax Act, 2006 is an allowable expenditure and cannot be disallowed under the amended provisions of section 40(a)(iib) - AT Visit to Get Source Allowable business expenses - commission paid by assessee to his daughter-in-law - in the absence of any evidence to the effect of actual rendering of services and work done by daughter-in-law of the assessee as Marketing Executive of the assessee’s business, we are afraid the same cannot be allowed as business expenses. - AT Visit to Get Source Restoration of deemed withdrawal of appeal - Declaration filed by the assessee u/s. 4(1) of the Direct Tax Vivad Se Vishwas Act, 2020 found as false - the Revenue cannot take shelter under sub-section (7) of section 4 of the DTVSVS Act, 2020. - appeal filed by the assessee is deemed to have been revived - AT Visit to Get Source Corporate Social Responsibility (CSR) expenses - Allowable business expenses u/s 37 - it is clearly seen that there is an obligation on the respondent/assessee to fulfil such responsibility which is not only to take care of his employees but also to rehabilitate the entire area where operations are being carried on by the respective public sector undertaking. - ITAT rightly allowed the assessee’s appeal - HC Visit to Get Source TP Adjustment - adjustment on account of AMP expenditure - We are unable to accept the said contention of the learned counsel for the Revenue that since the Assessee herein is a ‘distributor’ for its AE, the corollary of this fact is that there exists an international transaction with respect to AMP expenditure, incurred by the Assessee. - HC Visit to Get Source Reopening of assessment u/s 147 - reason to believe at the stage of re-opening - there has been application of mind while granting the approval under Section 151 of the Act - Petition dismissed - HC Visit to Get Source Understatement of income on account of sale of energy - change in method of accounting of sales realization - if action of Ld. A.O and the Ld. CIT(A) in adding on alleged account of booking sale on accrual basis is accepted, it would amount to double taxation as the appellant company has changed the method from cash to accrual in following year and has offered to tax additional revenue - AT Visit to Get Source Revision u/s 263 - Since the two properties referred by Ld. PCIT belonged to the partnership firm, the profit on sale of those properties cannot be assessed in the hands of the assessee. When there is no revenue leakage in the hands of the assessee, the impugned assessment order cannot be termed as erroneous and prejudicial to the interests of revenue in respect of this issue. - AT Visit to Get Source Unexplained money u/s 69A - Reliance on dumb document found from the premise of third party - CIT(A) has rightly observed that the assessee cannot claim the seized material as dumb document when all other entries are recorded in the seized material are accepted by the assessee. - AT Visit to Get Source Deduction u/s. 80IE - Claim denied as the return of income filed by the assessee was belated - Since the assessee has filed belated return, the claim of deduction under section 80IC of the Act cannot be entertained/allowed as the assessee is directly hit by provisions of section 80AC - AT Visit to Get Source Rectification of mistake u/s 254 - the aspect of ownership of the property in joint names which was the subject matter for making the addition as per the stamp valuation had escaped attention of the Tribunal - the order is hereby recalled - AT Visit to Get Source Addition u/s.68 - unexplained gifts received - When the provisions of Section 68 of the Act per se could not be made applicable, as no receipt of money was available during the year under consideration and in view of the fact that gift has been received only from assessee‟s own blood brother (which would be exempt from tax), the decision relied upon by the Revenue does not come to the rescue of the Revenue. - AT Visit to Get Source TDS u/s 194A - Addition u/s 40(a(ia) - TDS on factoring charges - In the nature of interest or not - The transaction entered into by the assessee is with M/s SBI Global Factors Ltd is only a discounted sale consideration arising out of debts purchased by M/s SBI Global Factors Ltd from the assessee. This does not extend to the nature of debt thereby establishing that discounting / factoring charges are not in the nature of “interest” as defined in section 2(28A) - AT Visit to Get Source Addition u/s. 28(iv) - waiver of loan - value of benefit arising from business of the assessee - the assessee has received loan from certain parties for the purpose of using it in the business of lending of money. The lenders are not the customers of the assessee. There should not be any dispute that the loan transaction is a capital account trasaction. Hence waiver of loan cannot take the colour of trading transactions - No additions - AT Visit to Get Source Penalty u/s 271(1)(c) - income declared duty survey - voluntary delcaration or not - it is not a case wherein a disclosure was voluntarily made, indeed the assessee accepted the differential amount of business profit earned by him only after the same was brought to surface owing to survey action u/s 133A otherwise actual business profits would have remained un-assessed and untaxed, if survey action could not have taken place - Penalty sustained - AT Visit to Get Source Nature of expenses - Disallowance of software expenditure by treating it as capital in nature - The assessee renders software development services and therefore the use of these software was in its operations and not in the capital field and in that view of the matter, we are of the view that the expenditure in question deserves to be allowed in full. - AT Visit to Get Source Customs Classification of imported gold coins - restricted / prohibited goods - gold coins are such articles of gold which are in the form of coin, but being the coins of non legal tender, these cannot be covered under CTH 7018. These being articles of precious metals are therefore held to be covered under CTH 7114 - gold coins herein were not restricted / prohibited goods - AT Visit to Get Source Indian Laws Principles of res judicata - Whether the G.P.A. holder (also an advocate) of the plaintiff can be permitted to act like a counsel and cross-examine the witnesses? - Previous order of the HC had been clear and unambiguous that in these cases, wife of the appellant would be entitled to appear only as the GPA holder and not as an advocate - those orders, having been rendered between the same parties and on the same issue of appearance of the GPA holder in the same proceedings, indeed operate as res judicata. - SC Visit to Get Source IBC CIRP - Appointment of RP on suggestion of Creditor instead of nomination of RP by the Board - There are no substance in the submissions of Learned Counsel for the Appellant that Resolution Professional recommended by the Applicant is biased and appointment RP is bad in law - AT Visit to Get Source Institution of prosecution against the ex-directors of the Corporate Debtor u/s of IBC, 2016 - suspended board - allegation of non-cooperation - There is also no finding that this document at Sr. No. 27 is in the possession of either of the Appellants. - The direction for initiating prosecution was uncalled for - AT Visit to Get Source Approval of the Resolution Plan - discriminatory plan - Farmers were given 100% of the dues whereas the Appellant has given only 1% of the dues - there is no embargo for the classification of the ‘Operational Creditors’ into separate/different classes for deciding the way in which the money is to be distributed to them by the CoCs. - AT Visit to Get Source Initiation of CIRP - Decree Holder - Financial Creditor - the debt in this case arising out of a decree, is a Financial Debt. - Section 3(11) of the Code defines debt as a liability in respect of a claim, and Section 3(6) of the Code defines term claim to mean a right to payment, whether or not such right has been reduced to judgement. Therefore, if the submission on behalf of the ‘Corporate Debtor’ is accepted, it would mean that a claim is excluded from being a financial debt even if reduced to Judgement by way of a recovery certificate. - AT Visit to Get Source Initiation of CIRP - financial debt - interest of three quarters which accrued and became payable as a debt - the application filed under Section 7 of the Code could be maintained in respect of the component of interest which became due and payable, without asking for the principal amount which has not yet become due and payable. - AT Visit to Get Source Admission of claims by Liquidator - Respondent Nos. 2 to 6 are not getting any double benefit on the other hand they are loosing part of the claim even after admission of claim in the liquidation process of Hari Machines Ltd, thereby the reduction in the claim of the Petitioner/Appellant on account of admission of the claim of the Respondents is not sufficient ground to reject the claim of Respondent Nos. 2 to 6 - AT Visit to Get Source Seeking withdrawal of application u/s 12A of IBC - Commercial wisdom of COC - Appellant who was representing the Corporate Debtor and has submitted the Settlement Proposal is entitled to participate in deliberation and negotiation undertaken by the CoC. CoC can very well ask the Resolution Applicants to revise their plans similarly the Appellant can always be asked to revise his proposal to match the Resolution Applicants’ Offer. It goes without saying that ultimate decision is of the CoC. - AT Visit to Get Source Service Tax Extended period of limitation - scope of SCN - the appellant was to provide competent operating staff to operate the JCB. Further, the JCB was to be operated as per the guidance and instructions of the engineer of the service recipient. Further, the appellant have received the hire charges for JCB, through bank and have also maintained proper records. Also Clause (f) of Section 66D provides that services by way of carrying out any process amounting to manufacture or production of goods, falls under the negative list and is exempted from the levy of service tax. - Demand is bad in law - AT Visit to Get Source Extended period of limitation - As regards the remaining amount, the appellant had submitted that since the appellant is a big concern and receiving so many different services, the appellant being under a bona-fide impression took cenvat credit of such services and it was not because of any mala-fide intention, that the cenvat credit was availed. Therefore, for the remaining amount, the demand under the extended period of limitation would not be sustainable - AT Visit to Get Source Valuation of services - Authorized Service Station - inclusion of price of spare parts and lubricants where during the provision of Authorized Service Station Services, the spare parts and lubricants sold and VAT thereupon was paid the value of such spare parts and lubricants would not attract Service Tax. - AT Visit to Get Source Levy of service tax - declared service or not - to refrain from an act or tolerate an act - The element of service being provided was never a fact of the present case. Retaining the amount of advance deposit by the appellant is nothing but acting in furtherance of the contract by him with his buyer - Service recipient cannot be fastened with any liability to pay tax. - AT Visit to Get Source Central Excise Levy of penalty u/r 26 of Central Excise Rules, 2002 - fraudulent passing of cenvat Credit - it is clearly established that the appellant has facilitated by only issuing the invoice without supplying the goods for passing of the fraudulent cenvat credit - Therefore, the appellant was rightly liable for penalty under Rule 26. - AT Visit to Get Source Levy of penalty - The intimation was sent vide letter dated 31.12.2015 i.e. even prior the clearance of the goods. The question of evasion of duty does not at all arises that too with the malafide intent. Even penalty has wrongly been imposed by Commissioner (Appeals) on the appellants. - AT Visit to Get Source Case Laws: Income Tax 2022 (11) TMI 992 Recognition/identification of income liable to tax - accounting system adopted by the assessee - expenditure with reference to the sub-contract with Ircon Ltd.treated contract receipt or the right to contract receipt - obligation to follow mercantile system of accounting, record expenditure, contract receipt etc - whether bills certified as relating to the work completed during the year be brought to tax in the assessment year 1986-87? - HELD THAT:- For the view in the particular facts and circumstances of this case and upon considering the findings recorded by CIT(Appeals) and Tribunal, we are of the view that the argument of Revenue that mercantile system of accounting should have been adopted for the work executed in Iraq, does not arise and the assessee had rightly adopted completed contract system for the work under execution in Iraq in the contemporary period. The answer to second question is dependent on the findings we have recorded in the first question. Once this Court holds that the completed contract method adopted by the assessee in the current facts and circumstances is right, the bills certified as relating to work completed cannot be recognised as receipts and brought to tax in the Assessment Year 1986-87. The question that mercantile system of accounting should be directed would curtail the discretion available to the assessee - we answer the points in favour of assessee and against the Revenue. Work as executed or the progress bills were presented and approved - enforceable right in the assessee to receive payment - HELD THAT:- From the findings recorded, it is not brought to our notice that the bills certified are gone that far in getting approval from the Iraq Government and an enforceable right in the Assessment Year. The bills are stated as certified. It is definitely an enforceable right in the realm of contract. The assessee since is subjected to vagaries and uncertainties of fluctuation, preferred to have completed contract method for the entire project. The effect of these transaction, recognition of revenue etc would arise either upon completion of the contract and/or rescission of contract, other foreseen and unseen eventualities, that means, arising in the course of the execution of the contract. By keeping in view the finding of fact recorded by the Tribunal, we answer the issue by holding that the bills certified in the case on hand having regard to the deferred payment agreement entered by the assessee did not create an enforceable right even in the subsequent Assessment Year. The point is answered in favour of the assessee and against the Revenue. 2022 (11) TMI 991 Capital gain computation - addition on account of cost of improvement - actual consideration of the property - applicability of section 50C - indexed value of taxes paid to the MCD - assessee has not submitted any documentary evidence regarding cost of improvement relating to the expenses on boundary wall and gate and claimed index value - HELD THAT:- We note that there is no decision of Hon ble jurisdictional High Court on this subject but the decision of Hon ble Madras High Court [ 2020 (10) TMI 517 - MADRAS HIGH COURT ] is there which is in favour of the assessee which does provide that the said amendment should be read as clarificatory. The view is followed by the ITAT decisions. There is no dispute that agreement was entered much prior to the date of registration and the part payment has also duly been done at the time of agreement. Hence, the view of the authorities below that circle rate on the date of registration should be applicable is not correct. We hold that in accordance with the ratio of aforesaid case laws, the rate as on the date of agreement should be taken for the purpose of computation. As regards other two aspects of the cost of improvement, no cogent submissions have been made before us. Hence we do not find any infirmity in the order of the ld. CIT (A) where he has upheld the addition on account of cost of improvement. Appeal of the assessee is partly allowed. 2022 (11) TMI 990 Revision u/s 263 by CIT - Value Added Tax paid by assessee and claimed as deduction u/s.37 r.w.s. 43B or u/s 40(a)(iib) disallowed - scope of amended provisions of section 40(a)(iib) - assessee explained that the VAT expenditure was claimed and allowed in the assessment order passed by the AO and now, the PCIT want to disallow the claim, in term of the amended provisions of section 40(a)(iib) of the Act - HELD THAT:- PCIT has interpreted the word royalty, license fee, privilege fee, service charge or any other fee or charge by whatever name called, are wide enough to include sales tax i.e., VAT also. According to us, this interpretation is totally wrong because the VAT is levied by the State Government of TamilNadu by the power vested in it under the Entry No.54, List-II, Seventh Schedule, Constitution of India and the assessee pays the State Government VAT as per Section 3(5) of the TNVAT Act, 2006 read with the rate mentioned in Second Schedule to the TNVAT Act, 2006 and claims it as an expenditure u/s.37 r.w.s.43B of the Act, in its income-tax return, which has been disallowed by the Assessing Officer for AY 2017-18 u/s.40(a)(iib) As the list of areas which fall within the exclusive power of States are given in the List II of the Seventh Schedule. State has the exclusive power to levy taxes on sale and purchase of intoxicating liquor (Entry 54). But the power to levy fees in respect of matters in the List is given under a different entry (Entry No 66). Thus, the State derives power to levy sales tax (VAT) on liquor under entry 54 and power to levy fees in connection with production, manufacture, transportation etc. is derived under Entry no 69 of the List II of VII schedule the Constitution of India. So, the power of State Government to levy tax on sale and purchase of liquor and power to levy fees are two different powers and are derived from two different entries in the State list. Thus, fees levied by whatever name called under the power granted under Entry 69 cannot encompass tax levied by virtue of Entry 54. It is impossible to comprehend that when the legislature proposes to disallow taxes that the State Government has levied under its exclusive domain, such tax is not specifically mentioned in the section but allowed to be derived from the phrase charges by whatever name called particularly when the Apex Court has clearly laid down the distinction between taxes and fees and have held that Taxes cannot be levied under the guise of fees. As noted TASMAC cannot collect Privilege Fees/ Vend fees separately from the Purchasers. Value Added Tax is collected from the Customers. It is collected on behalf of the Government and passed on to the Government totality. A trader can collect Value Added Tax as per the provisions of the Act and nothing more. The entire amount so collected is passed on to the Government. In this manner also, Value Added Tax, which is separately collected from the Purchaser, is different and distinct from the charges mentioned in S.40(a)(iib) of the Act, which are borne by the TASMAC and cannot be collected from the purchaser. We are of the view that VAT collected and paid by TASMAC under the provisions of TamilNadu Tax Act, 2006 is an allowable expenditure and cannot be disallowed under the amended provisions of section 40(a)(iib) Value Added Tax is not exclusively on TASMAC, Value Added Tax is only the indirect tax collected from customers and remitted to Government on monthly basis after filing necessary monthly return as per the provisions of TamilNadu Value Added Tax Act, 2006 and rules framed thereunder. We find from records that the taxes collected at the rates specified in the VAT Act and passed on to the State Government. We also noted that even the provision of section 40(a)(iib) of the Act cannot be applied as the value added tax payment is not an appropriation so as to bring the sum within the ambit of provisions of section 40 (a)(iib) of the Act. In sum up, we state that the Value Added Tax payable by the assessee to the State Government is a. Neither in the nature of royalty, licence fee, service fee, privilege fee, service charge nor any other fee or charge, by whatever name called. b. Nor is it levied exclusively on the Assessee. c. Nor can it be considered as appropriation by the State Government. According to us, the VAT payment would not attract the provisions of section 40(a)(iib) of the Act and hence, is allowable u/s.37 r.w.s.43B of the Act, as claimed by the assessee. Hence, we quash the revision order passed by PCIT and allow the claim of assessee. 2022 (11) TMI 989 Deduction u/s 36(1)(viia) - Assessee calculated aggregate monthly average advances by taking into consideration the outstanding balances of the previous month, i.e., the opening balance for computing the amount of advance as outstanding at the end of each month as per the language of Rule 6 ABA of the Income Tax Rules, 1962 - AO rejected the computation of the assessee and held that only incremental advances made during the month can be considered while calculating the figure of aggregate monthly average advances and if the opening balance is also considered it would result in the assessee claiming deduction of more than actual advance especially where the advance has not been paid back - HELD THAT:- Hon ble Calcutta High Court in Uttarbanga Kshetriya Gramin Bank [ 2018 (5) TMI 903 - CALCUTTA HIGH COURT] has affirmed the findings rendered by the Division Bench of the Tribunal in Uttar Banga Kshetriya Gramin Bank [ 2015 (7) TMI 1280 - ITAT KOLKATA] wherein the Division Bench of the Tribunal held that for the purpose of section 36(1)(viia), to compute the aggregate monthly average advance made by the rural branch of scheduled Bank, the amount of advances by each rural branch as outstanding at the end of the last day of each month comprised in the previous year be taken into consideration. The Hon ble Madras High Court in M/s City Union Bank Ltd. [ 2022 (4) TMI 113 - MADRAS HIGH COURT] has concurred with the decision of the Hon ble Calcutta High Court. Thus, once two Hon ble High Courts of the country have expressed their opinion in respect of the issue which arose before us, in absence of contradictory view by any other Hon ble Court of equivalent or higher judicial hierarchy being brought to our notice, we as a matter of judicial propriety are bound to follow the view so expressed by the Hon ble High Courts in decisions cited supra. Thus as relying we decide the question referred for our adjudication in favour of the assessee and held that the deduction under section 36(1)(viia) r/w Rule 6 ABA is to be allowed on the total outstanding advances at the end of each month considering the opening balances. 2022 (11) TMI 988 Allowable business expenses - commission paid by assessee to his daughter-in-law - AO invoked Section 40A(2) AND CIT(A) invoked Section 37(1) - As per AO there is no evidence on record as to the qualification of the daughter-in-law as well there is no evidence on record to the effect of actual work being done by her for the business of the assessee - HELD THAT:- When Section 40A was inserted Section 37(1) was very much there in the statute, and if both are harmoniously read there is no dichotomy between both the Sections, rather at the first threshold level, the expenses which are covered by Section 37 should clear the hurdle/conditions as imposed by Section 37(1) that it should be incurred wholly and exclusively for the purposes and it should not be personal expenditure nor capital expenditure. To consider the expenses being allowable u/s 40A(2), it is precondition that all conditions as stipulated u/s 37 are met, if the expense falls u/s 37. Even before us, no evidence is filed by assessee to substantiate that she actually rendered services or did any work as Marketing Executive for the assessee s business, from 01.04.2013 to 30.09.2013. Merely stating that she included the said commission in her income-tax return is not sufficient. Further, merely because part of the expenses are allowed by authorities below(may be erroneously) will not create any vested right in favour of the assessee that the entire expenses should be allowed. The assessee has to first discharge its onus u/s 37(1) and then the burden shifts to Revenue to rebut the same with cogent/credible evidence. The assessee in the instant case , failed to discharge even its primary onus , as is required u/s 37(1) of the 1961 Act. Thus, in the absence of any evidence to the effect of actual rendering of services and work done by daughter-in-law of the assessee as Marketing Executive of the assessee s business, we are afraid the same cannot be allowed as business expenses. We are in agreement with the appellate order passed by ld. CIT(A) on this issue and decline to interfere with the same. We order accordingly. Disallowance of commission paid by assessee to middlemen of different gas agencies of different places - The authorities below partly allowed commission paid by assessee to middlemen of different gas agencies based on the past history of the earlier year. For us, to interfere with the decision of ld. CIT(A), the assessee was required to bring on record cogent/credible evidences to substantiate its claim, but no such cogent/credible evidences is filed, except ledger account wherein the entire commission is claimed to have been paid in cash to large number of persons , only on two days in the entire year, viz. 30.09.2013 and 31.03.2014, which is against preponderance of probabilities, and no reasons and justification of making payment to such a large number of persons in cash and that too only on two days in the year is explained by the assessee, with further lack of evidences as to the details and complete particular of the middlemen such as name , address, PAN etc. to whom commission is paid and with no computational details as to how these commission are worked out, make assessee case for claim of commission expenses as business expense worse, as the assessee failed to discharge its onus as is mandated u/s 37(1) that the aforesaid commission expenses were incurred wholly and exclusively for the purposes of business of assessee. Merely because part of the commission expenses were allowed by lower authorities will not create any vested right in favour of the assessee as to allowability of the entire claim of deductibility of commission expenses, unless the assessee discharges its onus as is mandated under the provisions of the 1961 Act, which in the instant case the assessee failed to discharge even its primary onus u/s 37(1) - Thus, the assessee fails on this issue also, and we decline to interfere with the appellate order passed by ld. CIT(A). We order accordingly. Decided against assessee. 2022 (11) TMI 987 Revision u/s 263 - Capital carried forward and the introduction of capital as income exempt u/s.10(26) - due opportunity was provided to the assessee by the AO before passing the order u/s. 144 - CIT(Appeals) was of the view that income from the State of Tripura earned by the assessee would also qualify for exemption under section 10(26 and whatever may be the brought forward capital, it will be treated at par with the regular income unless it is demonstrated by the Revenue that such income has been sourced outside of the specified area - Whether CIT(A) failed to appreciate the fact that the onus to prove otherwise by the AO does not hold good in the instant case since the assessee had failed to discharge his onus properly? - HELD THAT:- As far as the capital introduced in earlier years are concerned, the assessee has explained his position. Now the Department is unable to bring on record any material, which can demonstrate that such capital was introduced from an income earned outside of this specified area. The ld. 1st Appellate Authority has discussed both these issues in the concluding paragraph and after going through the last paragraph of the ld. CIT(Appeals)'s order, we do not find any error in it and accordingly we do not find any merit in the appeal of the Revenue. Jurisdiction of ACIT, Tezpur Circle - Whether CIT(Appeals) is wrong in observing that jurisdiction of the case was with the ACIT, Circle-Tezpur ? - Though with the assistance of ld. D.R., we have gone through the record carefully. The assessee has not placed on record the Notification vide which jurisdictions are being given. What we could gather from the record available before us is that there was certain classification of cases and for better management of the assessments, it was decided that cases of the assessee where income exceeded Rs. 5,00,000/- will be assessed by ACIT, Ward-Tezpur and below this monetary limit would remain with concerned ITO at Lakhimpur. The assessee is trying to demonstrate that last return available in that Notification is to be construed filed later on. He is relying upon the returned income filed in A.Y. 2007-08, which was NIL income. To our mind, it is misleading argument. The return of income ought to be considered either A.Y. 2003-04 or 2005-06, not A.Y. 2007-08. Hence, the jurisdiction over the assessee has rightly been taken by ACIT, Tezpur Circle. This finding is given on the basis of limited incomplete information and accordingly this ground of appeal is rejected. 2022 (11) TMI 986 Un-secured credits - non-production of the details of the source of source - Disallowance made Doubting creditworthiness and genuineness of transaction in respect of the source of source - authorities doubted the creditworthiness of this HICSPL, because of the opening balance of HICSPL, the worth of the fixed assets possessed by HICSPL and the details of shareholders and the nature of business not being discussed in the annual report - HELD THAT:- We are of the considered opinion that the non-production of the details of the source of source cannot be dubbed as negligence on the part of the assessee. According to the assessee, all the transactions relating to the creditworthiness of the creditors of HICSPL could be deciphered from the income tax returns and other financial statements furnished now. It is necessary to admit the additional evidence which has a bearing on the issue before us. Since a factual verification is necessary in this matter, which could conveniently be done by AO we set aside the impugned orders and restore the issue to the file to verify the evidence now produced and decide the issue afresh -Grounds are accordingly treated as allowed for statistical purposes. 2022 (11) TMI 985 Restoration of deemed withdrawal of appeal - Declaration filed by the assessee u/s. 4(1) of the Direct Tax Vivad Se Vishwas Act, 2020 found as false - Non payment of taxes as determined by the designated authority - HELD THAT:- If assessee violates any of the conditions including tax determined by the designated authority in Form No. 3 is not paid within the specified period, then it is nothing but violation of conditions referred to in this Act. Therefore, if assessee does not make payment of taxes as determined by the designated authority, then, even if appeal filed by the assessee is dismissed or deemed dismissal of the appeal, then as per sub-section (6) of section 4 of the DTVSVS Act, 2020, all the proceedings and claims which were withdrawn u/s. 4 and all the consequences under the Income-tax Act, 1961 against the declarant shall be deemed to have been revived. Therefore, in our considered view, if a conjoint reading of sub-section (2) and subsection (6) of section (4), it is clear that the moment designated authority issues Form no. 3, pending appeal shall be deemed to have been withdrawn and further, the moment declarant violates any of the conditions, the appeals which were withdrawn u/s. 4, shall be deemed to have been revived. In the present case, the assessee has violated conditions prescribed under DTVSVS Act, 2020 and thus, even if appeal filed by the assessee is dismissed or deemed dismissal of appeal, the same can be revived the moment the Department notices any of the conditions prescribed therein are violated. Designated authority determines sum payable by declarant under DTVSVS Act, 2020, then the same becomes final and which cannot be challenged by the declarant before any appellate forum. Therefore, we are of the considered view that the Revenue cannot take shelter under sub-section (7) of section 4 of the DTVSVS Act, 2020. In so far as FAQs referred to in Circular 09 of 2020 issued by CBDT, we find that CBDT in question no. 43 47 has clarified the position of the law as per DTVSVS Act, 2020, and in our considered view, said clarification is only on withdrawal of appeal by the declarant after receipt of Form no. 3 (certificate) and further, the legal position of section 4(7) of the DTVSVS Act, 2020. As per section 4(6) of DTVSVS Act, 2020, the law is very clear, in as much as in case the declarant violates any of the conditions, then all the proceedings and claims which were withdrawn u/s. 4 and all the consequences under the Income-tax Act, 1961 against declarant shall be deemed to have been revived. In the present case, the declarant has violated the conditions of payment of tax as determined by the designated authority in Form no. 3. Therefore, appeal filed by the assessee is deemed to have been revived and thus, we are of the considered view, that since the appeal filed by the assessee is pending before the Tribunal for adjudication, the same needs to be decided on the issues challenged in said appeal and thus, we reject application filed by the Revenue on maintainability of appeal filed by the assessee. 2022 (11) TMI 982 Corporate Social Responsibility (CSR) expenses - Allowable business expenses u/s 37 - allowability of only such expenditure laid out wholly and exclusively for the purpose of business or profession and not otherwise - HELD THAT:- Government of India has framed guidelines on Corporate Social Responsibility for Central Public Sector Enterprises and every public sector enterprise is bound to formulate a policy in terms of the said guidelines issued by the Government of India which has been down by the respondent/assessee by framing its policy, copy of which has been placed before us for consideration. Thus, it is clearly seen that there is an obligation on the respondent/assessee to fulfil such responsibility which is not only to take care of his employees but also to rehabilitate the entire area where operations are being carried on by the respective public sector undertaking. The decision rendered in the case of Commissioner of Income Tax vs. Tamil Nadu Tourism Development Corporation Ltd [ 2016 (8) TMI 229 - MADRAS HIGH COURT ] will aid the assessee s case, wherein the expenses incurred by the said assessee for maintenance of Thiruvalluvar statue at Kanyakumari was held to be allowable deduction under Section 37(1) of the Act. It would be immensely beneficial to refer to the decisions of the hon ble Supreme in the case of S.A. Builders Ltd. vs. Commissioner of Income Tax [ 2006 (12) TMI 82 - SUPREME COURT ] wherein it was held that an expenditure made may not have been incurred under any legal obligation, yet it is allowable as business expenditure if it is incurred on the ground of commercial expediency. The facts of the case on hand is much better as there was a legal obligation on the part of the respondent/assessee to incur such expenses. Thus, we find that the learned Tribunal rightly allowed the assessee s appeal and granted relief. 2022 (11) TMI 981 TP Adjustment - adjustment on account of AMP expenditure - international transaction - Assessee has incurred huge Advertising, Marketing and Promotion ( AMP ) expenditure with the objective of expanding the reach of the AE s brand in India, who is the legal owner of the brand - HELD THAT:- It is admitted on record that the contention of the Revenue that there exists an international transaction between the Assessee and its AE, is not based on any agreement executed between the said parties. The sole basis for making this adjustment was a presumption drawn by the TPO that huge AMP expenditure was incurred by the Assessee to expand the reach of its AE s brand in India. TPO has determined the existence of an international transaction on a matter of a presumption, which runs counter to the decision of this Court in Maruti Suzuki[ 2015 (12) TMI 634 - DELHI HIGH COURT] Revenue has not brought on record any material to assail the aforesaid finding of the ITAT as regards the absence of any international transaction - In similar facts, the Court in Maruti Suzuki (supra) set aside the order of the TPO/AO, which had determined the AMP expenditure as an international transaction, without any evidence on record and only on the basis of BLT. We are unable to agree with the contention of the learned counsel for the Revenue that in the facts of the present appeal(s), the matter should be remanded to TPO in terms of Sony Ericsson [ 2015 (3) TMI 580 - DELHI HIGH COURT] - He states that in the said decision this Court held that there exists an international transaction between the Assessee therein, who was a distributor , and its AE. We are unable to accept the said contention of the learned counsel for the Revenue that since the Assessee herein is a distributor for its AE, the corollary of this fact is that there exists an international transaction with respect to AMP expenditure, incurred by the Assessee. In the case of Sony Ericsson (Supra), the finding of this Court that the Assessee(s) therein may have an international transaction with their AE(s) for AMP expenditure was based on the terms of the agreement between the Assessee(s) and their AE(s) in the said case. The issue with respect to deletion of transfer pricing adjustment on account of AMP expenses, determined on BLT method, by the ITAT is squarely covered by the decisions of this Court in the case of Maruti Suzuki (Supra) and Bausch Lomb [ 2015 (12) TMI 1332 - DELHI HIGH COURT] - We are, therefore, not inclined to frame any substantial question of law on this issue. The facts and law have been correctly assessed by the ITAT and we therefore, do not find any merits in the appeal and the accordingly, the same are dismissed. 2022 (11) TMI 980 Reopening of assessment u/s 147 - objections were rejected on the next day - Reasonable time to respond to the final show cause notice - objections were raised since the objections were filed only on 21.03.2022, immediately the same was considered and rejected on 22.03.2022 - Period of limitation - HELD THAT:- Even though the stand now taken by the Revenue that, at the time of rejection of objections dated 22.03.2022, that point also had been considered, this Court do not want to go into that controversy. Instead, this Court feels that the point of limitation since can be raised at any point of time it can once again be raised by the petitioner/assessee before the Appellate Authority and if it is raised that can also be considered as one of the prime objection with regard to the Assessment under Section 147 r.w.s. 144B. Insofar as the impugned orders, which were passed on 31.03.2022 is concerned, the final show cause notice admittedly was uploaded on 30.03.2022 at 12.01 a.m hours and the SMS alert was made at 1.00 a.m hours at 31.03.2022. On the same day at 16.09 hours i.e., 31.03.2022 the final orders of assessments, which are impugned herein, were passed. Therefore, there was absolutely no reasonable time was given to the petitioner/assessee to respond even to the final show cause notice. Plea raised that in between the rejection of objections and issuance of a final show cause notice, no notice either under Section 142(1) or 143(2) of the Act as the case may be, has been issued - As this larger issue, which had been raised in some other cases, where also this Court prima facie found reasons and entertained those writ petitions, which are pending before this Court, cannot be gone into in these writ petitions. This Court feels that, the impugned orders are liable to be interfered with. Accordingly the following orders are passed: i. That the impugned orders are set aside and the matters are remitted back to the respondent for reconsideration. ii. While reconsidering the same, a reasonable time of two weeks shall be given to the petitioner/assessee to respond to the final show cause notice dated 30.03.2022, which need not be once again issued by the Revenue. iii. It is open to the petitioner to raise the point of limitation also along with reply submitted to the final show cause notice dated 30.03.2022. If such a plea of limitation is raised in the reply to be submitted by the petitioner/assessee, the same shall be considered and decided. 2022 (11) TMI 979 Reopening of assessment u/s 147 - reason to believe at the stage of re-opening - high volume/value transaction of scrip - necessity of application of mind while granting the approval under Section 151 - whether there was reason to believe that income had escaped assessment and whether the Assessing Officer has tangible material before him for the formation of that belief? - HELD THAT:- In view of the settled proposition of law, the submissions of Petitioner that in the reasons to believe it is stated that Odyssey Securities Private Ltd. is a scrip on which Petitioner has done high volume/value transaction, Odyssey Securities Private Ltd. was a broker and a Private Limited Company over which SEBI will have no jurisdiction and therefore, reliance of SEBI s order shows non-application of mind and on such reasons when approval has been granted that also indicates non-application of mind by the approving authority etc. will not hold water. We are not willing to accept the submissions of petitioner - We are satisfied, in the facts and circumstances of the case, that there has been application of mind while granting the approval under Section 151 of the Act. In the circumstances, Petition dismissed. 2022 (11) TMI 978 TCS as per section 206C - sale of scarp - Declarations beyond the time prescribed by law - scrap as generated by assesses during manufacturing process and not that dealt with as trader of scrap - HELD THAT:- No limitation is prescribed in the Act for filing of declaration as required under section 206C(1A) of the Act, and the assessee having filed delayed declaration under a bona fide belief, we are not in agreement with the ld.CIT(A) that these declarations could not have been entertained by the ld.CIT(A). As noted above even the Revenue has considerably delayed action on its end.The assessee alone therefore cannot be held accountable and made to suffer for the delay at its end in filing nthe requisite declarations for claiming exemption from TCS. These declarations, which have been acknowledged as received by the Department, ought to have been considered by the CIT(A) for adjudicating the issue. The assessee having filed declarations relating to substantial portion of the sale of scrap in the present case, and noting the fact that the issue now has become very old with almost 15 years have been elapsed since financial year to which the issue relates , we are of the view that the assessee be given benefit of declaration filed by it, and be not held as assessee-in-default for the tax not collected at source. Accordingly, interest charged on the same, is also directed to be deleted. Appeal of the assessee is allowed. 2022 (11) TMI 977 Reopening of assessment u/s 147 - Reasons to believe - notice beyond period period of four years - HELD THAT:- Once the factual position is clear and admittedly, the assessment year involved is 2013-14 and notice u/s.148 of the Act was issued on 22.03.2019, which is beyond 4 years from the end of the relevant year and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year, the issue is squarely covered in favour of the assessee by the decision of Foramer France,[ 2003 (1) TMI 101 - SC ORDER] . In view of the above, we find no infirmity in the order of CIT(A) and hence, we confirm the order of CIT(A) quashing the reassessment. Appeal filed by the Revenue is dismissed. 2022 (11) TMI 976 Revision u/s 263 by CIT - Validity of assessment order passed u/s.143(3) r.w.s 147 - LTCG computation - cost of improvement incurred - AO jurisdiction to assess any other income chargeable to tax which has escaped the assessment - belief of escapement of income in respect of cost of improvement - HELD THAT:- The only issue before the AO in the assessment framed u/s.143(3) r.w.s.147 of the Act was bank deposits i.e., holding in savings bank account with HSBC, Chennai wherein total credit transaction in this bank account during the period 01.04.2010 to 31.03.2011 aggregate to Rs.2.29 crores out of which a sum of Rs.26.15 lakhs was cash deposit, was the subject matter of examination. Now, the PCIT want to examine the issue of cost of improvement incurred during the financial year 2004-05 and claimed at Rs.34.34 lakhs. It transpires from the facts of the case that this issue raised by PCIT was never the subject matter of assessment / reassessment framed by AO u/s.143(3) r.w.s. 147 of the Act vide order dated 18.12.2018. Once this is the case, the proposition laid down in the case of Alagendran Finance Ltd., [ 2007 (7) TMI 304 - SUPREME COURT] is clearly applicable. Hence,we quash the revision order passed by PCIT u/s.263 of the Act and allow the appeal of assessee. 2022 (11) TMI 975 Understatement of income on account of sale of energy - difference in the sale of energy price - method of accounting of sales realization - amount realized during prior years - booking sale on accrual basis - sales of energy on realization basis - assessee submitted no understatement of the income as the assessee company has shown sales to this extent stands realized and the sales were in consistent with the method of accounting being followed by the appellant company - HELD THAT:- Special Auditor as well as Ld. A.O have failed to appreciate that even the amount realized during prior years have been offered to tax as in the year under consideration. Relevant para 11(a) of Form 3CD of statement of particulars required to be furnished under section 44AB of the I.T Act reveal about the method of accountingwhere the Special Auditor specified the system of accounting to be cash basis for sale of energy as per para 2 of Annexure 'A' to form 6B of Special Report. As evident that the CIT(A) has confirmed the finding of the AO, ignoring the very fact that Revenue has taxed the sales of energy in preceding assessment years on sales realization on cash basis only - As an undisputed fact that the cash system of accounting has been followed is duly disclosed by Tax Auditors as well as by Special Auditor. Consistency in booking of sales on cash basis should have been accepted by department as there was no loss of revenue, by this method of realization of sales. From the para 3, of the assessment order for Assessment Year 2008-09, the AO has admitted on record that During the year under consideration the company has changed the system of accounting from cash to mercantile resulting in increase in revenue of Rs.36,86,66,000 . Department has accepted the version of Special Auditors that bills of electricity have been raised for an amount without application its mind to the standard principles of accounting system, change of method of accounting sue moto by assesse company, the resultant revenue gains on the principle of consistency on the disputed issue of booking of sales of energy/electricity. As per accounting method, in order to change a method of accounting an exercise is required to be done from the very inception of business activity of sale of energy that these were the dues; these were the realizations and this much was the short fall. Once this exercise has been done, the excess or shortfall to be accounted for, to follow the change in accounting method is ignored by the authorities below. As per settled principle of rule of consistency, by the Hon'ble Apex Court in a Historical Judgement in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] the authorities below ought to have been accepted, the appellant company s sales of energy on realization basis right from inception to year under consideration on principal of consistency. Over and above, if action of Ld. A.O and the Ld. CIT(A) in adding on alleged account of booking sale on accrual basis is accepted, it would amount to double taxation as the appellant company has changed the method from cash to accrual in following year and has offered to tax additional revenue of Rs.36,86,66,000/- in addition to regular sales on accrual basis and further this exercise has to be done right from inception till the year under consideration subject to credit of the sum offered to tax in following year. Appeal of the assessee is allowed. 2022 (11) TMI 974 Addition on account of jewellery/bullion found during the course of survey proceedings - CIT-A deleted the addition - HELD THAT:- We find there is no infirmity in the order of the CIT(A). Assessee is covered his gold ornaments which was declared in return of income in the Schedule -AL . CIT-Dr was unable to bring any contrary fact against the submission of assessee. Assessee declared the gold in his return of income also covered by the departmental circular. So, the entire addition made by the AO amount is liable to be quashed. Unexplained money in the hands of the assessee and added as deemed income of the assessee u/s 69A - The assessee already declared the cash balance which is related to household savings in the return of income in Schedule AL which was filed u/s 139(1). Before the revenue authorities the assessee had explained the cash balance - CIT-Dr was unable to bring any contrary fact against the submission of assessee. We find no infirmity in the order of the CIT(A). Accordingly, the addition is deleted. Stock discrepancy of the valuation of the goods specially the laptop is duly un-reconciled and found excess during the physical verification in survey - As documents the assessee filed the reconciliation and the evidence related basis of valuation. The valuation of stock is based on cost market price whichever is lower. The stock of goods cannot be valued suo moto without any basis. The reconciliation was accepted by the ld. CIT(A), no discrepancy was found in the number of itemof the stock. CIT-Dr was unable to bring any contrary fact against the submission of assessee Accordingly, the addition made by the ld. AO is quashed and the balance addition which was up-held by the CIT(A) is also liable to be deleted. Addition u/s 69 - Deposit huge cash in the bank account of the assessee during the demonetisation period especially after 08.11.2016 - cash deposited in old currency in the bank account during the demonetisation period - HELD THAT:- The entire addition was made on basis of human probability and assumption. AO made a percentage on aggregate sale and cash sale from September 2015 in October 2016. The ratio in between aggregate sale and aggregate cash sale was 50% and in November 2016, 36.14%. On basis of that assumption the addition was made. During investigation the DDIT, Jammu as not found any discrepancies in the stock number and item. The huge difference of the cash can be generated only by sale of goods. But in factual matrix the AO was unable to proof the deposit of cash during demonetisation was from undeclared source. We do not find any infirmity in the order of the ld. CIT(A), accordingly, the addition made by the ld. AO amount is liable to be quashed. 2022 (11) TMI 973 Revision u/s 263 - as per CIT, assessee has not disclosed the sale transactions of two properties - HELD THAT:- It is also settled proposition of law that both the conditions should be satisfied in order to initiate revision proceedings, i.e., the order is not only erroneous, but it should also be prejudicial to the interests of revenue. Merely because, the Ld. PCIT has initiated revision proceedings, he cannot set aside the assessment order for doing assessment de-nova on the issues on which the revision proceeding was initiated. As relying on NAGESH KNITWEARS P. LTD. AND ORIENT CRAFTS LTD. AND VOGUE SETTERS [ 2012 (6) TMI 65 - DELHI HIGH COURT] it clear that the Ld. PCIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous and further the Ld. PCIT should have shown that the view taken by the AO is unsustainable in law. In the instant case as shown by the assessee that the properties belonged to a partnership firm, in which he is a partner. It was also shown that relevant sale transactions have been duly disclosed in the returns of income filed by the partnership firm, which has also been accepted by the assessing officer of the partnership firm. It is well settled proposition of law that the tax can be levied in right hands only as held by Hon'ble Supreme Court in the case of ITO vs. Ch Atchiah [ 1995 (12) TMI 1 - SUPREME COURT] as held tax the right person and the right person alone. Here right person means the person who is liable to be taxed according to law, which respect to a particular income. Since the two properties referred by Ld. PCIT belonged to the partnership firm, the profit on sale of those properties cannot be assessed in the hands of the assessee. When there is no revenue leakage in the hands of the assessee, the impugned assessment order cannot be termed as erroneous and prejudicial to the interests of revenue in respect of this issue. Unsecured loan - We notice that the impugned assessment order has been passed u/s. 143(3) r.w.s 153A of the Act and the instant assessment year falls under the category of unabated assessment. It has been held in the case of Kabul Chawla[ 2015 (9) TMI 80 - DELHI HIGH COURT] that the addition in case of unabated assessment years could be made only on the basis of incriminating material, if any, found during the course of search. When the AO is disabled to make any addition, in our view, the Ld. PCIT also cannot probe on that issue. On merits, the assessee has submitted that it has taken fresh loan from five parties only during the year under consideration. Other loans are brought forward from earlier year. It is submitted that the assessee has furnished the details of five parties along with their confirmation letters, which also contained PAN number. Leaving aside the question as to whether the enquiry so made by the AO on merits in respect of sundry creditors is adequate or not, we are of the view that the revision order passed by Ld. PCIT on this issue is liable to be quashed on the basis of legal proposition discussed above. Accordingly, we hold that the impugned revision order is not sustainable on this issue also. Deduction of cost of improvement made in the land sold by the assessee by way of construction of compound wall - assessee had sold a land and while computing capital gain, he claimed cost of improvement of land, which consisted of construction cost of compound wall - As per PCIT that the AO has not examined this claim - HELD THAT:- We notice that the Ld. PCIT could not state how the assessment order is erroneous and prejudicial to the interests of revenue with regard to the claim of compound wall expenses. In the absence of such a finding, the assessment order cannot be held to be erroneous and hence there is no scope for proceeding further with the proceeding initiated by Ld. PCIT u/s. 263 of the Act. However, we notice that the Ld. PCIT has proceeded further and directed the AO to verify the claim, which is not warranted at all. Accordingly, we are of the view that the impugned revision order passed by Ld. PCIT could not be sustained. Accordingly, we quash the impugned revision order passed by Ld. PCIT. Appeals filed by the assessee are allowed. 2022 (11) TMI 972 Undisclosed cash receipt as recorded in the seized material - unexplained money u/s 69A - search and seizure action u/s 132 - Reliance on dumb document found from the premise of third party - Assessee allegation that total amount received against the sale of property - HELD THAT:- We find that as per the ledger account produced by the assessee all other entries of sale consideration received from M/s Tulsiani Construction and Developers Pvt. Ltd. are matching with the entries recorded in the seized material except one entry of Rs. 15 Lac cash. Therefore, the seized document cannot either be accepted or rejected in part when the assessee has accepted the other entries. Once, the assessee has not disputed the other entries recorded in the seized material then a single entry of Rs. 15 Lac received in cash cannot be denied. CIT(A) has rightly observed that the assessee cannot claim the seized material as dumb document when all other entries are recorded in the seized material are accepted by the assessee. In view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A), the same is upheld. Appeal of the assessee is dismissed. 2022 (11) TMI 971 Unexplained cash credits u/s. 68 - Assessee failure to discharge the onus put upon - assessee has failed to supply any documents/evidences to prove the genuineness of the transaction, established the identity of the depositor and prove the capacity of the depositor - assessee submitted that so far as the creditor in respect of whom the additions were made by AO said company is very much traceable and has in fact gone into liquidation - HELD THAT:- As assessee submitted that the said creditor in respect of whom additions have been made by the AO and also confirmed by CIT(A) in the appellate order is both identifiable as well as traceable. Assessee submitted that the assessee has a good case on merits and in the instant set of facts the additions should not be confirmed on merits and if given an opportunity of being heard, the assessee is desirous to place on record additional evidences before ld. CIT(A) to prove the genuineness of the transaction and creditworthiness of the creditor in respect of the aforesaid unsecured loan. In view of the above in the interest of justice, we are setting aside the file to the ld. CIT(A) for hearing the case on merits after giving due opportunity of hearing to the assessee to place on record all additional documents/evidences. Appeal of the assessee is allowed statistical purposes. 2022 (11) TMI 970 Deduction u/s. 80IE - Claim denied as the return of income filed by the assessee was belated - Lower authorities have denied the claim of assessee applying the provisions of section 80AC - HELD THAT:- On going through the provisions of clause (b) and ( c) of sub-section (2) of section 119 window is open for the assessee to approach the Board under the above stated provisions of said section and if such delay is condoned even if the return is filed belated, the assessee would be entitled to claim the deduction u/s. 80IE of the Act. Before us no such order of the CBDT has been placed, which could show that such delay in filing the return has been condoned. Assessee should have moved an application to the Central Board of Direct Taxes ( short, the Board ), which may if considering desirable or expedient so to do for avoiding genuine hardship in any case or clause of cases either may authorize any Income-tax authority not being the Commissioner (Appeals), to admit such application and deal with the same in accordance with law or itself pass a general or special order and if the assessee s application is accepted in the manner provided above, then the deduction under Chapter IV/VIA may be allowed. In the instant case the assessee has failed to bring forth any such communication or any order condoning such delay in filing return of income before the due date specified u/s. 139(1). Since the assessee has filed belated return, the claim of deduction under section 80IC of the Act cannot be entertained/allowed as the assessee is directly hit by provisions of section 80AC of the Act. We, thus, fail to find any infirmity in the finding of the ld. CIT(A) denying assessee s claim of deduction u/s. 80IC of the Act. - Decided against assessee. 2022 (11) TMI 969 Rectification of mistake u/s 254 - Validity of re-assessment proceedings u/s 147/148 - investment/undisclosed income - as argued Tribunal failed to take note of the fact that the AO has made addition of the entire amount despite the fact that the assessee is owner of only half portion of the property - HELD THAT:- The assessee has placed on record sale-deed which was the basis for making addition by the AO. A bare reading of the sale-deed makes it clear that the property as per stamp valuation was purchased at Rs. 30,29,000/- against the actual sale consideration of Rs. 15 lakh and was jointly purchased by Smt. Shahjahan W/o Mohd. Tayyab Kureshi and Smt. Rukshana Begum W/o Shri Khalid. Therefore, the aspect of ownership of the property in joint names which was the subject matter for making the addition as per the stamp valuation had escaped attention of the Tribunal. Therefore, the order [ 2019 (6) TMI 826 - ITAT DELHI] passed by the ITAT Delhi Bench SMC is hereby recalled and the Registry is directed to fix the hearing of the appeal in due course by issuing notices to the parties. 2022 (11) TMI 968 Rectification of mistake u/s 254 - TDS u/s 195 - Interest paid by PE to head office on money lent by head office to PE - DTAA between India and UK - HELD THAT:- As decided in Reliance Telecom Ltd. [ 2021 (12) TMI 211 - SUPREME COURT] Appellate Tribunal is not required to re-visit its earlier order and to go into details on merits. As held that the powers under section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. It was also further held by the Apex court that even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers the Tribunal may pass order recalling its earlier order which is an erroneous order cannot be accepted. The Apex court further held that if the order passed by the Tribunal was erroneous on merits in that case the remedy available to the assessee was to prefer an appeal before the High Court. Thus there is no mistake on record in the order passed by the Tribunal - Misc. application is dismissed. 2022 (11) TMI 967 Addition on account of underwriting charges - allowable business expenditure - As per AO underwriting commission incurred by the assessee is not related to the business of the assessee in its normal course -CIT(A) had granted relief to the assessee by following the order of his predecessor for the very same issue in A.Y.2015-16 - HELD THAT:- There is neither any factual change nor any legal change with regard to the facts prevailing in A.Y.2015-16 and the facts prevailing during the year under consideration. It is pertinent to note that against the order passed by the predecessor the ld. CIT(A) for A.Y.2015-16, no appeal has been preferred by the Revenue before this Tribunal. Hence, that order of the ld. CIT(A) had attained finality. Addition u/s.68 - unexplained gifts received - assessee was asked to explain and furnish the occasion for which the gift was received creditworthiness of the donor, bank statement of the donor etc. - HELD THAT:- AO in the remand report had agreed that the creditworthiness of the donor is established in addition to identity and genuineness of the transaction. CIT(A) had categorically stated that there is nothing on record brought by the ld. AO to show that the transaction of gifts are of doubtful nature. In any case, this is nothing but gift received by the assessee from his own brother which would be exempt u/s.56(2) of the Act. On this count also no addition could be made in the hands of the assessee in respect of the gift. It is also a fact on record that gift has been duly confirmed by the brother that the money is payable to him by the proprietary concern is being converted into gift out of natural love and affection. When the provisions of Section 68 of the Act per se could not be made applicable, as no receipt of money was available during the year under consideration and in view of the fact that gift has been received only from assessee‟s own blood brother (which would be exempt from tax), the decision relied upon by the Revenue on case of CIT vs.Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] and Sumati Dayal [ 1995 (3) TMI 3 - SUPREME COURT] does not come to the rescue of the Revenue. The gift confirmation also says that the same is irrevocable. In view of these documents which remained uncontroverted before us and in view of the aforesaid observations, we have no hesitation in confirming the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, the ground No. (ii) raised by the Revenue is dismissed. Addition on account of advance received towards sale of shares - shares in FCPL were held in the form of investments of the assessee and not as stock in trade - HELD THAT:- We find that the Revenue had sought to apply provisions of Section 51 of the Act to treat the said advance as monies forfeited and thereby liable to tax in the hands of the assessee. In this regard, we find that this aspect has already been addressed by the ld.CIT(A) in para 11.2 of his order, wherein, it was held that there is no provision to treat the forfeited amount as income of the assessee and that even the amendment brought in by the Finance Act (No.2), 2014 effective from 01/04/2015 in Section 51 by way of insertion of proviso which is prospective in nature provided that the forfeited amount shall be deemed of income of the year in which forfeiture has been made. The shares of FCPL, as stated earlier is continued to be shown as investment in the balance sheet of the assessee and the same were not transferred at all. Hence, by no stretch of imagination, this advance receipt could be brought to tax under any provisions of the Act applicable to the year under consideration, Hence, we find no infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. - Decided against revenue. 2022 (11) TMI 966 MAT Computation of book profit u/s 115JB - Assessee was declared a sick company u/s 3 [1] [o] of the SICA - Whether company turning into positive net worth, the benefit of exemption of book profit tax should be provided to the assessee.? - HELD THAT:- Undisputedly, the net worth of the company has turned positive in the impugned assessment year. Naturally, therefore, for this year, assessee is not eligible for exclusion of its profit from the chargeability of book profit tax. There is no provision under the income tax act or under the sick industrial Companies act to exclude such profit from book profit tax u/s 115 JB of the act in these circumstances. Learned lower authorities have correctly interpreted the law and denied benefit to the assessee. Whenever, the provisions of law are clear and unambiguous they should be given full effect thereof and should be read as it is without adding or subtracting anything. No infirmity in the orders of the lower authorities. AO is correct in not excluding the book profit earned by the assessee from the provisions of 115 JB of the income tax act as the assessee s net worth turned positive during the year. There is no infirmity in the order of the learned CIT A in confirming the same. Solitary ground of appeal of the assessee is dismissed. 2022 (11) TMI 965 TDS u/s 194A - Addition u/s 40(a(ia) - TDS on factoring charges - assessee in default u/s 201(1) - HELD THAT:- As factoring charges incurred by the assessee company is not in the nature of interest and that the assessee was not under the obligation to deduct TDS as per the provisions of section 40(a)(ia) of the I.T. Act. For this, we would like to place our reliance on the decision in the case of Bombay Steam Navigation Co. P. Ltd[ 1964 (10) TMI 12 - SUPREME COURT] which held that interest on unpaid purchase price is not in the nature of interest on loan and for any amount which is to be categorised as interest it is essential that the same is payable in respect of money borrowed or debt incurred. Upon perusal of the definition of interest as per section 2(28A). Interest pertains only to monies borrowed or debt incurred or for any credit facility. In the present case in hand, there is no such classification of money involved which attracts the said interest . The transaction entered into by the assessee is with M/s SBI Global Factors Ltd is only a discounted sale consideration arising out of debts purchased by M/s SBI Global Factors Ltd from the assessee. This does not extend to the nature of debt thereby establishing that discounting / factoring charges are not in the nature of interest as defined in section 2(28A) - See M/S. MKJ. ENTERPRISES LTD. [ 2014 (1) TMI 1484 - ITAT KOLKATA] - Decided in favour of assessee. Applicability of Second Proviso to section 40(a)(ia) as inserted by the Finance Act, 2012 with effect from 01/04/2013 - We place our reliance on the decision of Perfect Circle India P. Ltd [ 2019 (1) TMI 1532 - BOMBAY HIGH COURT] as held that the Second Proviso to section 40(a)(ia) has retrospective effect from 01/04/2005, the date from when the impugned Proviso to section 40(a)(ia) was inserted. The Hon ble High Court also relied on the decision of Ansal Landmark Township P Ltd [ 2015 (9) TMI 79 - DELHI HIGH COURT] which held that section 40(a)(ia) is not a penalty and insertion of Second Proviso is declaratory and curative in nature and would have retrospective effect from 01/04/2005 and not with effect from 01/04/2013 - we accept the contention of the assessee. Since the payee has already paid the said tax the assessee cannot be treated as an assessee in default as per the provisions of section 201(1) of the Act, we thereby dismiss this ground of appeal filed by the Revenue. 2022 (11) TMI 964 Benefit of 44AD for non-maintaining the books of account - taxability of presumptive income - amount deposited in the bank account - Special provision for computing profits and gains of business on presumptive basis - HELD THAT:- Respectfully considered the judgment of the Hon ble High Court of P H in Surinder Pal Anand [ 2010 (6) TMI 404 - PUNJAB AND HARYANA HIGH COURT] the assessee had availed the presumptive scheme u/s 44AD during filing his return. The assessee has no liability to maintaining the books of account as per the provision of the Act. Also see Kanpurv.NitinSoni [ 2012 (5) TMI 121 - ALLAHABAD HIGH COURT] The assessee had properly submitted through his counsel that the said amount was paid from his business receipt. The benefit should be allowed the assessee for availing section 44AD for non-maintaining the books of account. Considering the ratio decidendi of the judgments we are setting aside the orders of revenue authorities. Accordingly, the addition made by the AO is quashed. - Decided in favour of assessee. 2022 (11) TMI 963 Addition u/s. 28(iv) - waiver of loan - value of benefit arising from business of the assessee - principal portion of loan waived of by the lenders - HELD THAT:- CIT(A) has followed the decision rendered in the case of Mahindra Mahindra [ 2018 (5) TMI 358 - SUPREME COURT] in arriving at the conclusion that the provisions of sec.28(iv) will not apply to waiver of loan. AR also placed reliance on the decision rendered in the case of ACIT Vs. Sunil B. Dalal [ 2022 (7) TMI 999 - ITAT MUMBAI] wherein the Tribunal has held that the provisions of section 28(iv) of the Act will not apply to waiver of loan and in this regard the Tribunal has also taken support of the decision rendered by Hon'ble Supreme Court in the case of Mahindra Mahindra Ltd. (supra). In the grounds of appeal, the Revenue has taken support of the decision rendered in the case of T.V.Sundaram Iyengar Sons Ltd. [ 1996 (9) TMI 1 - SUPREME COURT] in order to contend that the loan taken by the assessee was for the purpose of carrying on of the financing business and hence the decision rendered by Hon'ble Supreme Court in the case of Mahindra Mahindra Ltd. (supra) will not apply. We notice that the decision has been rendered by Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar Sons Ltd. (supra) on a different set of facts, i.e. in the case before Hon ble Supreme Court, the assessee had received deposits from its customers (Debtors) in the course of carrying on of its business and the said deposits was written off in the books of account on the reasoning that there was no claim from debtors. Since the deposits were received during the course of carrying on regular trading activities, the Hon ble Supreme court held that the write off amount available in the said debtors account is assessable as income. In the instant case, the assessee has received loan from certain parties for the purpose of using it in the business of lending of money. The lenders are not the customers of the assessee. There should not be any dispute that the loan transaction is a capital account trasaction. Hence waiver of loan cannot take the colour of trading transactions as per the decision rendered in the case of Mahindra Mahindra Ltd (supra). Accordingly in our view the decision rendered by Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar Sons Ltd. (supra) cannot be applied to the facts of the present case. Impugned amount should have been assessed an income of the assessee u/s 56(2)(x) - HELD THAT:- There is no dispute with regard to the fact that the assessee had received loans in the year 2014 i.e., the money has been received in the year relevant to AY 2015-16. There is no further receipt of any money from the lender during the year under consideration. The amount of Rs. 2.65 crores credited by the assessee to Capital Reserve account represents waiver of loan made during this year. The loan itself was received by the assessee in the earlier years - waiver of the loan cannot be equated with the actual receipt of money contemplated under section 56(2)(x) - Accordingly, we find merit in the contentions of the learned AR that the provisions of section 56(2)(x) of the Act are not attracted since there is no receipt of money during the year under consideration. Accordingly, we reject the ground urged by the Revenue. 2022 (11) TMI 962 Penalty u/s 271(1)(c) - allowability of club expenses - HELD THAT:- In the light of plethora of judicial precedents, the question of allowability of club expenses, in itself, is a debatable issue and varies from case to case. Under the circumstances imposition penalty on such contentious addition/disallowance on account of club expenses is not justified on the touchstone of law interpreted by the Hon ble Supreme Court in Reliance Petro Products Pvt . Ltd, [ 2010 (3) TMI 80 - SUPREME COURT] and other host of judgments. The penalty imposed on club expenses is thus reversed. Penalty on disallowances u/s 14A r.w. Rule 8D - assessee contends that Section 14A has many legal facets and disallowance under Section 14A is a highly debatable issue and considerable varies having regard to the facts of the case - HELD THAT:- The action of the AO imposing penalty under Section 271(1)(c) on disallowance made u/s 14A appears to be mechanical exercise and thus stands reversed. Donation claimed u/s 80G - As pointed out on behalf of the assessee, the amount of donation claimed under Section 80G is correct per se but however the quantum of deduction eligible under Section 80G is restricted to 10% of the total income in accordance with law. Thus, no allegation of furnishing of inaccurate particulars of income is justified. Coupled with this, AO has not applied his mind towards basis for imposing penalty on the issue. No satisfaction has been reached to invoke provisions of Section 271(1)(c) of the Act. In totality, we find merit in the plea of the assessee for reversal of penalty on this point. Appeals of the assessee are allowed. 2022 (11) TMI 961 Penalty u/s 271(1)(c) - income is assessed on the basis of material impounded in a survey action u/s 133A, in variation to original return filed - statements recorded on oath u/s 131(1) and declaration furnished with respect to re-computation of income, records etc . - disclosed additional business income or profit was estimated @25% on the business receipts for the purpose of assessment - As argued revised computation of income was accepted without variation - HELD THAT:- The appellant did not file any revised return during the course of scrutiny assessment proceedings, but mere a revised computation of income incorporating the business profit earned at certain percentage of business receipts deciphered out of bank account statements, bank receipts, cash receipts, development charges received and transaction of sales purchases of lands, etc., which formed absolute basis for assessment and consequential imposition of penalty u/s 271(1)(c) for concealing the particulars of income and when this fact was brought to the notice of the assessee during the course of penalty proceedings, the assessee offered to pay tax on the sum without answering the question posed to him. Therefore, it is not a case wherein a disclosure was voluntarily made, indeed the assessee accepted the differential amount of business profit earned by him only after the same was brought to surface owing to survey action u/s 133A otherwise actual business profits would have remained un-assessed and untaxed, if survey action could not have taken place and in any case, so-called voluntary disclosure of business profit by furnishing re-computation cannot alter the consequences in the light of decision of the Hon ble Apex Court in the similar facts and circumstances in MAK Data Pvt Ltd Vs CIT [ 2013 (11) TMI 14 - SUPREME COURT] Section 274 provides that, no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. In the present case, a penalty SCN was issued u/s 274 r.w.s. 271 and upon failure to respond to first SCN, the appellant was put to further notice which remained unattended, ad-idem, it clearly indicates that, the due sufficient opportunity of being heard was provided to the appellant before proceeding to actual levy, ergo, the requirement of section 274 stands complied with and penal provisions being a civil liability calling no act of or ingredient for wilful concealment as laid in the case of UOI Vs Dharmendra Textile Processors [ 2008 (9) TMI 52 - SUPREME COURT] Re-computation of business income upon the survey action in the light of impounded material spoke loudly about the conduct of the assessee, which could not be said to be anything else than disingenuous and thus filing of said recomputation of income did not obliterate the fact of the earlier act of concealment of particulars with a view to suppress the income and therefore was liable to penal action as contemplated in section 271(1)(c) of the Act, and we note that the tax authorities below ceased such finding adverse to the appellant, and is not shown to be perverse or arbitrary in any manner warranting interference, ergo we hold that, the Ld. AO was justified in levying the minimum penalty, and we see that, our view has been rightly fortified by the decision of Hon ble jurisdictional High Court of Bombay, in the case of Jyoti Laxman Konkar Vs CIT [ 2006 (7) TMI 165 - BOMBAY HIGH COURT] In the similar facts and circumstance, where the income of the appellant is assessed in variation to income returned in the case of MAK Data Pvt Ltd Vs CIT [ 2013 (11) TMI 14 - SUPREME COURT] observed that, the explanation to section 271(1) raises a presumption of concealment when income is finally assessed in variation of returned income, and it was in this factual scenario where the income reported by the assessee in the return filed was lower than the income finally assessed and brought to tax, it is held that the penalty was rightly leviable. Grounds appealed stands adjudicated against the appellant assessee and in favour of revenue. 2022 (11) TMI 960 TP Adjustment - Comparable selection - determination of Arm s Length Price (ALP) in respect of an international transaction of rendering Software Development Services (SWD services) by the assessee to its Associated Enterprises ( AEs ) - HELD THAT:- Selection of companies as functionally similar with that of assessee confirmed. Computation of interest on delayed receivables - non-charging or undercharging of interest on the excess period of credit allowed to the AE - HELD THAT:- Adopting the rate of LIBOR at 6 months + 400 basis points adopted by the TPO is without any basis. The rate should be adopted after a proper benchmarking analysis. Interest computation if at all should be based on the delay of individual invoices, which has not been done. Whether delayed realization of trade receivables from the AE constitutes an international transaction or not? - Having concluded that deferred trade receivables constitute international transaction, we come to the computation of the ALP of the international transaction of 'debt arising during the course of business.' This has two ingredients, viz., the amount on which interest should be charged and the arm's length rate at which the interest should be charged. On this aspect we can take useful guidance from the decision of the ITAT Delhi Bench in the case of Techbooks International (P.) Ltd [ 2015 (7) TMI 473 - ITAT DELHI] wherein the Tribunal laid down guidelines on the manner of determination of ALP. The issue with regard to determination of ALP in respect of the international transaction of giving extended credit period for receivables should be directed to be examined afresh by the AO/TPO on the guidelines laid down after affording assessee opportunity of being heard. As held in the aforesaid decision the prime lending rate should not be considered and this reasoning will apply to adopting short term deposit interest rate offered by State Bank of India (SBI) also. The rate of interest would be on the basis of the currency in which the loan is to be repaid. We hold and direct accordingly. All issues on determination of ALP of the transaction are kept open. Nature of expenses - Disallowance of software expenditure by treating it as capital in nature - AO and the DRP held that the software expenses claimed by the assessee was capital expenditure and cannot be allowed as deduction - HELD THAT:- The period of license cannot be the basis to decide whether the expenditure is capital or revenue expenditure. The test to be applied is as to whether the expenditure was incurred to facilitate conduct of business more efficiently in its operation and not in the capital field. The assessee renders software development services and therefore the use of these software was in its operations and not in the capital field and in that view of the matter, we are of the view that the expenditure in question deserves to be allowed in full. The addition sustained is therefore directed to be deleted and the expenditure in question should be allowed as deduction as the expenditure is revenue expenditure allowable as deduction. Appeal by the assessee is partly allowed. Customs 2022 (11) TMI 959 Constitutional Validity of Entry No.B-3140 of Schedule-VI of the Hazardous and Other wastes (Management and Transboundary Movement) Rules, 2016 and Office Memorandum dated 24.11.2014 - seeking clearance of old and used tyres imported by the petitioner - HELD THAT:- The directions issued in the present petitions have worked out for themselves. The interim order and the directions stand consumed by the petitioners as the goods involved in all the petitions have been indisputably released. The Court is not required to delve into further merits to consider the petitions any further as only surviving prayer regarding release of goods has been satisfied - Applications disposed off. 2022 (11) TMI 958 Classification of imported gold coins - fall under CTH 7114 1910 as claimed by the appellant or under CTH 7118 9000 as claimed by the department? - eligibility for exemption from payment of Customs duty in terms of Notification No. 152/2009-Customs dated 31.12.2009 as amended by Notification No. 66/2016 Cus dated 31.12.2016 - whether the goods are restricted category merely on the basis of letter issued by Reserve Bank of India? Whether the gold coins imported by the appellants fall under CTH 7114 1910 as claimed by the appellant or under CTH 7118 9000 as claimed by the department? - HELD THAT:- Coins of any metal including precious metal if are legal tender in the country of issue, those are classifiable under CTH 7118. Also all coins of non legal tender but not of gold are covered under CTH 7118. Had the impugned goods, the gold coins, would be the legal tender in the country the gold coins could be classified under CTH 7118. OR, had these coins though of non legal tender, but would not have been made of gold, these could have been classified under CTH 7118. CTH 7114 covers all goldsmiths silversmiths wares of precious metal and all such things as are mentioned under note 10, whereas CTH 7118 applies to the coins of any metal including precious metals but the coin should be such as shall be issued under Government control for use as legal tender. Though coins of non legal tender are also covered in CTH 7118 but these coins should not be of gold - Keeping in view the entire discussion about Chapter Notes, explanatory notes, the General Rules of Interpretation and the description of respective entries under CTH 7114 and 7118, it becomes clear that gold coins are such articles of gold which are in the form of coin, but being the coins of non legal tender, these cannot be covered under CTH 7018. These being articles of precious metals are therefore held to be covered under CTH 7114. Whether the exemption from payment of Customs duty is available to the appellant with respect to imported gold coins in terms of Notification No. 152/2009-Customs dated 31.12.2009 as amended by Notification No. 66/2016 Cus dated 31.12.2016? - Whether the imported gold coins can be called as the goods in restricted category merely on the basis of letter issued by Reserve Bank of India? - HELD THAT:- The gold coins in question were not restricted. Only such coins as are classified under CTH 7118 that were restricted. The impugned gold coins are classified under CTH 7114. The RBI can issue regulations under section 58 of the Reserve Bank of India Act, 1934 or section 47 of the foreign Exchange Management Act, 1999. Section 58 of RBI Act requires such Regulations to be issued only by way of Notification. Section 48 of FEMA requires Regulations issued under section 47 FEMA to prior be presented before the parliament. Non of such regulations have been placed by the Department except a reference has been made to a letter issued by the RBI dated 13.09.2017 or the DGFT Memorandum. None of these documents can be called as Regulations issued by RBI. The issue of prohibition has also been dealt with by this Tribunal in M/s. Abans Jewels [ 2022 (4) TMI 1370 - CESTAT NEW DELHI ] case. We do not find any reason to differ from those findings which have been already followed in the case of M/s. Credence Cmmodities Exports vs Principal Commissioner of Customs, ACC (Imports) in Customs Appeal No. 50467 of 2021. Thus the issue number 2 3 as formulated above also stand decided in favour of the importer holding that the gold coins herein were not restricted / prohibited goods. Accordingly, the exemption as availed by the appellant under Notification No. 152/2009-Customs dated 31.12.2009 as amended by Notification No. 66/2016 Cus dated 31.12.2016, is held to be very much available to the appellant. Appeal allowed. Insolvency & Bankruptcy 2022 (11) TMI 984 Difficulty in functioning of Corporate Debtor - Consequence and effect of the Order dated 07.11.2022 - whether the Corporate Debtor is entitled to be restored and be permitted to function as it was functioning prior to 28.10.2022? - HELD THAT:- The issue is no longer res integra. Hon ble Supreme Court has occasion to consider the effect and consequence of an Interim Order passed by a Court in Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association [ 1992 (4) TMI 183 - SUPREME COURT ] where it was held that While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order Quashing of an order result in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The question which needs to be considered in this Application is that how the day-to-day functioning of the Tea Gardens may be carried on when IRP is not entitled to discharge any function and the Corporate Debtor also cannot be restored as it was functioning prior to 28.10.2022. There are wages to be paid to the workers, Ration is also to be distributed by the Company to its workers, there are electricity dues and some other necessary expenses. The workers of the Corporate Debtor and its functioning can not be made to suffer in the facts of the present case - for the purposes of payment of wages to the workers and distribution of ration, payment of electricity dues and other necessary expenses, ways and means have to be found out so that Corporate Debtor may continue as a going concern - In the facts of the present case, we are of the view that difficulties in running the corporate debtor as a going concern, can be mitigated by directing the Chief Executive Officer (CEO)/Officers of the Corporate Debtor authorized to operate the Bank Accounts are permitted to make payment of wages of workers, workmen and employees as was being paid earlier to passing of the order dated 28.10.2022. The payment of Electricity Dues and other necessary expenses may also be carried out by the officials as mentioned above subject to submitting all details of expenditure on weekly basis to the IRP as well as to the Suspended Managing Director of the Corporate Debtor. Application allowed. 2022 (11) TMI 957 Initiation of CIRP - Personal Guarantor - Appointment of RP on suggestion of Creditor instead of nomination of RP by the Board - Application for Personal Insolvency was filed by the Creditor-State Bank of India and not by the Resolution Professional - Section 95 of IBC - HELD THAT:- On looking into the scheme of the IBC and Rules framed thereunder, Applications filed by Debtors and Creditors including Applications filed under Section 7, 9 and 10, the particulars of proposed Interim Resolution Professional are always provided which is apparent from Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority), Rules, 2016 where Form 5 and Form 6 provides for filing of the Application by Operational Creditor where the Applicants are required to mention the proposed Insolvency Resolution Professional. Form 1 deals with an Application to be filed by Financial Creditor where also particulars of the proposed Insolvency Resolution Professional are to be given by the Applicant himself. Thus the mere fact that Applicants in Applications under Section 7, 9 and 10 as well as in Section 94 and 95 provides details of Insolvency Resolution Professional/Resolution Professional by the Applicant himself, no bias can be read into the said procedure. The Scheme of IBC is such that IRP/RP plays a pivotal role in Insolvency Resolution Process. Thus we are not satisfied that the mere fact that Resolution Professional has been recommended by the Applicant, he shall have bias in favour of the Application filed by him and he shall always submit a report of admitting the Application any bias has to be read in the scheme. The RP is to perform his function and duties as per the IBC and the Rules which castes duty on the Resolution Professional to act in accordance with Insolvency and Bankruptcy Code, 2016, Rules and Regulations framed thereunder. There are no substance in the submissions of Learned Counsel for the Appellant that Resolution Professional recommended by the Applicant is biased and appointment of Mr. Sunil Kumar Kabra is bad in law - appeal dismissed. 2022 (11) TMI 956 Institution of prosecution against the ex-directors of the Corporate Debtor u/s of IBC, 2016 - suspended board - allegation of non-cooperation - HELD THAT:- It is true that the Adjudicating Authority while considering the proceedings under IBC has full jurisdiction to make a reference to the Board or the Central Government to file a complaint for initiating any prosecution. In the present case, there was no Application or Request made by RP or any party to initiate any prosecution. There has to be prima facie satisfaction that papers which have been sought for, are in his control or custody which is not being given by the Corporate Debtor, which may lead to a reference for institution of prosecution. From the facts, which has been brought on record, it is clear that total thirty-seven documents were asked for by the RP, which all were provided except Sr. No. 27. There is also no finding that this document at Sr. No. 27 is in the possession of either of the Appellants. The direction for initiating prosecution was uncalled for - appeal allowed. 2022 (11) TMI 955 Validity of Resolution Plan approved u/s 30 of the Insolvency and Bankruptcy Code, 2016 - It is the main argument of the Learned Counsel for the Appellant that the Farmers were given 100% of the dues whereas the Appellant has given only 1% of the dues and therefore the Resolution Plan is discriminatory and is in violation of Section 30(2) of the Code. HELD THAT:- It is seen from the record that the Corporate Debtor is a Sugar Industry and the Farmers are an integral part of the Sugar Industry. We find force in the contention of the Learned Sr. Counsel for the Respondent that more than 4500 Farmers and their families are dependent on the Corporate Debtor factory for their survival and the Plan would not be implementable without making payments to the Farmers as the dues have been pending for the last two years. The Minutes of the CoC Meeting shows that even the Secured Financial Creditors accepted that 100% payment should be made to the Farmers who are the backbone of the Sugar Industry. There is no evidence on record to substantiate that indeed the Applicants seeking to intervene had formed a group and given the representation to the RP at the appropriate time to consider them as one class. Their Claims were filed in an individual capacity and there is no Application on record seeking to treat all of them in one group, at that point of time and therefore their contention that they were not included in the Meeting of the CoC, is untenable. This Tribunal is of the considered opinion that there is no embargo for the classification of the Operational Creditors into separate/different classes for deciding the way in which the money is to be distributed to them by the CoCs. The Plan was approved by 100% Voting Share way back on 11.11.2019 almost three years ago and has also been implemented. This Tribunal is of the considered opinion that the Operational Creditors were paid as per Section 30(2)(b) of the Code and read together with Regulation 38 of the CIRP Regulations, the Operational Creditors are entitled to receive only such money that are payable to them as per Section 53 of the Code. It is the final discretion of the Collective Commercial Wisdom in relation to (1) The amount to be paid (2) The quantum of money to be paid, to a certain category or the incidental category of Creditors, balancing the interests of the Stakeholders and the Operational Creditors , as the case may be. The limited judicial review available to Adjudicating Authority lies within the four corners of Section 30(2) of the Code. Appeal dismissed. 2022 (11) TMI 954 Initiation of CIRP - financial debt or not - Decree Holder - no written contract and no consideration for time value of money - It is contended that there was no agreed rate of interest, and therefore there is no time value of money and further that seeking execution of decree does not define the first Respondent as a Financial Creditor and a Decree Holder can be defined as a Creditor, but not a Financial Creditor - it is also contended that suit was filed in the year 2001 and is time barred. HELD THAT:- The existence of Financial Debt and its default has been admitted and confirmed by the Corporate Debtor , and therefore the absence of any Written Agreement cannot be said to be an essential element to prove the Financial Debt , as the nature of transaction has been established that there was a debt and default thereof - In the facts of this case, we are of earnest view that a Decree in respect of a financial claim is an established proof of debt and default , and does not require any further Agreements in writing. Time Limitation - HELD THAT:- The Hon ble Supreme Court in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. [ 2021 (8) TMI 315 - SUPREME COURT ] while discussing at length Sections 14 18 of the Limitation Act, 1962 has also observed that the Judgement and/or decree for money in favour of the Financial Creditor, passed by DRT, or any other Tribunal or Court, or the issuance of a certificate of recovery in favour of the Financial Creditor, would gave rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the Code, if the dues of the Corporate Debtor under the Judgement/decree or any part thereof remained unpaid. Breach of Principles of Natural Justice - HELD THAT:- The matter was adjourned several times on request of the Corporate Debtor, on the ground that the matter would be settled. The record shows that on 24.01 2019, Corporate Debtor was directed to file the Reply on or before 31.01.2019. On 31.01.2019 the matter was adjourned on request of both parties on the ground of settlement. On 14.02.2019, the matter was again adjourned and the Corporate Debtor did not file their Reply. On 06.03.2019, one more request was made that they would settle the matter. On 25.03.2019, once again, the Corporate Debtor was directed to file their Reply. On 08.04.2019, once again liberty was given for settlement. On 15.04.2019, the Corporate Debtor was directed to file their Reply within a week. On 01.05.2019, the Corporate Debtor failed to file their Reply and the right to file their Reply was forfeited. These dates show that ample opportunities were given to the Corporate Debtor both to file their Reply and also to settle the matter. The Corporate Debtor has not adhered to any of the above, and therefore the argument that there was a breach of Principles of Natural Justice, is unsustainable. It is clear that the debt in this case arising out of a decree, is a Financial Debt. Section 5(10) of the Code provides that Creditor means any person to whom a debt is owed and includes a Financial Creditor, Operational Creditor, Secured Creditor, Unsecured Creditor and a Decree Holder. As the definition of the word Creditor in the Code includes a Decree Holder if a Petition is filed for realisation of the decretal amount, it cannot be dismissed on the ground that the Section 7 Application should have been taken steps for filing execution case in the Civil Court. Section 3(11) of the Code defines debt as a liability in respect of a claim, and Section 3(6) of the Code defines term claim to mean a right to payment, whether or not such right has been reduced to judgement. Therefore, if the submission on behalf of the Corporate Debtor is accepted, it would mean that a claim is excluded from being a financial debt even if reduced to Judgement by way of a recovery certificate. There is no illegality or infirmity in the Impugned Order, passed by the Adjudicating Authority in admitting the Section 7 Application - Appeal dismissed. 2022 (11) TMI 953 Maintainability of petition - initiation of CIRP - Financial Creditors - interest of three quarters which accrued and became payable as a debt - Application dismissed by Adjudicating Authority on the ground that only the interest amount would not fall within the definition of financial debt until and unless principal amount has also become due and payable - whether amount of interest only claimed by the Appellant is not covered by the definition of financial debt? - HELD THAT:- A Financial Creditor would be entitled to file an application for the initiation of CIRP against the Corporate Debtor before the Adjudicating Authority when the default has occurred. As per Section 7(5), if the Adjudicating Authority is satisfied that a default has occurred and the application filed under Section 7 is complete in so far as the conditions are provided in Section 7(2) are concerned and there is no disciplinary proceedings pending against the RP then it may order admission of the application. Whereas Section 7(5)(b) provides that if the Adjudicating Authority is satisfied that no default has occurred or the application filed under Section 7 is incomplete in so far as Section 7(2) is concerned or any disciplinary proceeding is pending againstthe proposed resolution professional then it may reject the application. In order to maintain the application under Section 7 of the Code the financial creditor has to show the default as a condition precedent - The debt has also been defined as a liability in respect of claim towards a financial debt or operational debt and the claim means the right to payment. There is no dispute, in so far as the facts of this case are concerned that the amount of interest became due and payable by the Corporate Debtor to the Appellant on 01.07.2021 to the tune of Rs. 71,80,274/- in view of the condition enumerated in the debenture which says that the debenture shall carry a coupon rate of 6% p.a. on the face value plus securities premium on quarterly rests and also in view of Section 71(8) of the Act. Reliance placed in the Judgment of the Hon ble Supreme Court, rendered in the Case of M/s Orator Marketing Pvt. Ltd. [ 2021 (8) TMI 314 - SUPREME COURT] , in which the question was raised by the Respondent therein that interest free loan would not come within the purview of financial debt, therefore, the application filed as a Financial Creditor would not be maintainable. The Hon ble Supreme Court held that The definition of Financial Debt in Section 5(8) of IBC does not expressly exclude an interest free loan. Financial Debt would have to be construed to include interest free loans advanced to finance the business operations of a corporate body. After referring to various definition appearing in Part I and Part II of the Code and explaining the scheme with the help of the decision in the case of Innovative Industries Ltd. and taking a cue from the decision of the Hon ble Supreme Court in the case of M/s Orator Marketing Pvt. Ltd, we are of the considered opinion that in the facts and circumstances of the present case the application filed under Section 7 of the Code could be maintained in respect of the component of interest which became due and payable, without asking for the principal amount which has not yet become due and payable. Appeal allowed. 2022 (11) TMI 952 Admission of claims by Liquidator - Validity of decision of the Liquidator of the Corporate Debtor admitting the claim of the Respondent Nos. 2 to 6 (Consortium of Banks) for Rs. 399.1 crores - loan taken by related entity of the Corporate Debtor - Whether the Appellants are deemed to have discharged their liability as a guarantor, on approval of claim of Respondent Nos. 2 to 6 in CIRP proceeding of PMPL? - HELD THAT:- The acceptance of Resolution Plan is such permitting the creditor i.e., Consortium of Banks, Respondent Nos. 2 to 6 to proceed against the sureties to recover un-discharged loan amount by the principal debtor. When there is a contract to the contrary, the Respondent Nos. 2 to 6 are entitled to proceed against the Guarantors since the clause specifically excluded the Guarantor provided by the Financial Creditor in terms of clause 2.9.5. In subsequent clause 2.9.6, the rights of the Financial Creditor are reserved. Therefore, the alleged discharge of principal debtor would not absolve the Guarantors from their liability to discharge the debt due to the Creditors i.e., Respondent Nos. 2 to 6. The IBC legislation is subsequent to the Indian Contract Act and as such it will prevail over the provision of Indian Contract Act. In view of the principle laid down in State Bank of India vs. V. Ramakrishnan [ 2018 (8) TMI 837 - SUPREME COURT ] and Lalit Kr. Jain vs. Union of India [ 2021 (5) TMI 743 - SUPREME COURT] , the Guarantors are not absolved from their liability since Consortium of Banks, i.e., Respondent Nos. 2 to 6 reserved their right in the Resolution Plan to proceed against the Guarantors for recovery of the balance amount of loan. The finding of the Adjudicating Authority is hereby affirmed by holding the point against the Appellants and in favour of the Respondents. Whether Respondent Nos. 2 to 6 are entitled to proceed against the guarantor i.e., Hari Machine Ltd. without proceeding against other guarantors, if not, whether the admission of claim of the Respondent No. 2 to 6 by Respondent No. 1 in the liquidation proceeding is liable to be set aside? - HELD THAT:- It is for the Creditors to decide the mode of recovery by proceeding either against one or other or all Guarantors of this choice. At best, the Appellants may recover the amount, if any, paid in excess of their share under the Agreement of Guarantee in absence of contract to the contrary, any such Creditor may proceed against other Guarantor for recovery of amount, if any, paid in excess of their share. Therefore, the contention that the Respondent Nos. 2 to 6 Consortium of Banks cannot proceed against the Appellants is not based on any law. Respondent Nos. 2 to 6 are not getting any double benefit on the other hand they are loosing part of the claim even after admission of claim in the liquidation process of Hari Machines Ltd, thereby the reduction in the claim of the Petitioner/Appellant on account of admission of the claim of the Respondents is not sufficient ground to reject the claim of Respondent Nos. 2 to 6 - there are no error in the order passed by the Adjudicating Authority, warranting interference by this Tribunal while exercising the power under Section 61 of IBC since the order is free any illegality. The Adjudicating Authority recorded its findings based on the material. Hence the finding of the Adjudicating Authority is hereby affirmed - appeal dismissed. 2022 (11) TMI 951 Seeking withdrawal of application u/s 12A of IBC - Commercial wisdom of COC - HELD THAT:- The 06th, 07th and 08th CoC Meetings which have been brought on record in the Contempt Application clearly indicate the substantial part of discussions in the minutes of the CoC where with regard to the interpretation of the Order of this Tribunal dated 04.07.2022, there was divergence in the views of the Resolution Professional and the CoC with regard to the interpretation of the Order dated 04.07.2022 - The proposal of Applicant under section 12A for Settlement has naturally to be weighed against the Resolution Plans received in the process unless the Resolution Plans are opened and deliberated side by side with the proposal of settlement submitted by the Appellant, the objective as contemplated in paragraph 14(iii) cannot be achieved - the Order dated 04.07.2022 clearly entitled that the CoC to weigh the Resolution Plans as well as Settlement Proposal together. It is well settled that it is the commercial decision of the CoC which is paramount in the CIRP. The Appellant who is suspended Director of the Corporate Debtor who has already submitted Settlement Proposal was permitted to participate in the meeting of the CoC which is apparent from the minutes of the CoC brought on record - Appellant who was representing the Corporate Debtor and has submitted the Settlement Proposal is entitled to participate in deliberation and negotiation undertaken by the CoC. CoC can very well ask the Resolution Applicants to revise their plans similarly the Appellant can always be asked to revise his proposal to match the Resolution Applicants Offer. It goes without saying that ultimate decision is of the CoC. Application disposed off. Service Tax 2022 (11) TMI 950 Demand beyond the scope of the Show Cause notice (SCN) - Extended period of limitation - wilful suppression of facts - non-payment of service tax - appellant preferred appeal before the Commissioner (Appeals) inter alia on the ground that the demand is not sustainable for want of classification of the service - eligibility for SSI exemption under Notification No. 6/2005-ST - HELD THAT:- The appellant had taken suo moto registration in November 2016 and had started making compliance by filing Return and depositing admitted tax w.e.f. 01/10/2016. Further, the appellant have maintained proper records of its transactions and turnover. They have also filed their IT-returns. Further, the appellant had admittedly taken suo moto registration under Service tax provision. In the circumstances, there is no suppression or failure on the part of the appellant to make compliance under the service tax provisions. Rather revenue have chosen to not make any enquiry for the period prior to 01/10/2016, soon after taking of registration in November 2016. Thus, allegation of revenue that appellant have concealed its particulars of turnover from service tax department, and revenue came to know upon receipt of information only in 2019 on the basis of data received from the Income Tax Department is vague and frivolous. Thus, the show cause notice is bad for invocation of extended period of limitation. Further, during the period under dispute, almost the whole turnover for providing service is in respect to work done in packing plant-maintenance job for Shree Cement Ltd- manufacturer of cement. Admittedly, service has been provided inside the factory premises by providing JCB - the appellant was to provide competent operating staff to operate the JCB. Further, the JCB was to be operated as per the guidance and instructions of the engineer of the service recipient. Further, the appellant have received the hire charges for JCB, through bank and have also maintained proper records. Also Clause (f) of Section 66D provides that services by way of carrying out any process amounting to manufacture or production of goods, falls under the negative list and is exempted from the levy of service tax. The classification of service under Works Contract Service by the Commissioner (Appeals) is beyond the scope of show cause notice, and is held to be bad. Appeal allowed - decided in favor of appellant. 2022 (11) TMI 949 Valuation of Services - inclusion of one time premium/salami in the assessable value - renting of immovable property service - applicability of Section 67 (1) of the Finance Act, 1994 - HELD THAT:- The issue regarding includability of the one time premium in the assessable value has been examined by the Tribunal in the case of M/S. GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY VERSUS CCE ST, NOIDA [ 2014 (9) TMI 306 - CESTAT NEW DELHI] where it was held that Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the premium or salami paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance. Thus, the payment on one time premium/ salami cannot be charge to service tax under renting of immovable property service. The demand on this count is set aside. Levy of service tax - scientific or technical consultancy service or not - signature bonus - appellant in respect of their contract with Torrent Power Ltd. received Rs. 10 Crore as signature bonus - HELD THAT:- The said signature bonus is given for what the appellant brings to table for the purpose of such agreement. It is not for any specific service given by the appellant to M/s Torrent Power Limited. It is seen from the Show Cause Notice, Revenue has not pointed out any specific example of any service in the nature of Scientific and Technical Consultancy extended by the appellant to M/s Torrent Power Limited. It is noticed that para 2.3 of the agreement between the appellant and M/s Torrent Power Limited uses the expression for its expertise and consultation services in Power Project . It is not necessary that the expertise and consultation services can only be scientific and technical in nature. To be classified under scientific and technical consultancy service, the services and the consultancy should be in the field of science and technology. No evidence has been produced by Revenue to substantiate the claim that the consultancy provided, if any, in the nature of scientific and technical consultancy. The scope of responsibilities of M/s GPCL is very wide. Only a small part of their services could possibly fall under the category of scientific and technical consultancy in terms of the abovementioned obligations of GPCL. Most of the services relates to formalities and clearances from the government - it is not found that the evidence produced by the Revenue to substantiate the claim that the services provided by the appellant was in the nature of scientific and technical consultancy is absolute. There are no merit in the argument of the Revenue that any service in the nature of Scientific and Technical Consultancy has been provided by the appellant to M/s Torrent Power Limited. Consequently, the demand on this count is therefore set aside. Demand of Rs. 1,29,71,525/- under works contract services is sustainable - valuation of the service tax provided by the appellant to M/s PGVCL for supply and erection of single point lighting action on turn key basis - proper valuation method as per Service Tax Valuation Rules 2006, followed or not - HELD THAT:- It is seen that the show cause notice seeks to appropriate the amounts already paid under the head of service tax and interest. Rule 2A of the Service Tax Valuation Rules 2006 is very clear and the appellant have also admitted their liability and paid the same. In these circumstances, there are no error in the impugned order appropriating the legally due service tax and interest paid by the appellant. The observations made by the Commissioner on the charge of suppression and imposition of penalty is agreed upon - the provisions of law in Rule 2A of Service Tax Valuation Rules 2006 is very clear and unambiguous. In these circumstances, the actions of the appellant can only be malafide - impugned order upheld. Levy of Service tax - consideration of Rs. 1,63,77,215/- received from M/s PGVCL being 2% of the value of the project as development charge - business auxiliary services or not - HELD THAT:- It has been pointed out that the demand is vague in nature without specifying under which category of Business Auxiliary Service the demand has been raised. We have seen para 5 and 5.1 of show cause notice where the charges of demand under this head has been mentioned. It is seen that there is absolutely no indication as to how the amount received by the appellant would qualify as Business Auxiliary Service. It is a bland allegation without any substantiation and therefore it cannot be upheld - demand under this head and the penalty imposed under this head is set aside. Rent income - short payment of service tax - Whether service tax of Rs. 97,335/- is payable on the income of Rs. 9,45,000/- during the year 2009-10? - HELD THAT:- This issue relates to demand of service tax of Rs. 97,335/- on an amount of Rs. 9,45,000/- received by the appellant in the year 2009-2010. The only ground on which the appellant has defended it is that it falls within the basic threshold limit of Rs. 10 Lakhs during the relevant time. We find that demand under head of signature bonus or one time payment have not been sustained in para 2 and 3 above. Consequently, the appellant succeeds in its argument that the value being threshold limit no tax can be charged. The appeal on this count is allowed. Levy of service tax - payments made to the foreign entities - reverse charge mechanism - extended period of limitation - HELD THAT:- The defence is mainly on the ground that the demand is barred by limitation as credit of the said service tax was admissible to the appellant. The appellant have made a bland statement that credit of these taxes paid would be admissible to them, they have not mentioned under what are the taxable output services in respect of which these input service could be availed as cenvat credit. In absence of the said evidences, the reliance on the aforesaid case law cannot be made. In the appeal memorandum, the appellants have argued that the Commissioner has failed to give any findings on the defence regarding non-taxability of services received from M/s Atlantis Resources Corporation Private Limited and M/s Solar Media Limited. The appellant have not raised any fresh grounds in their appeal memorandum. There are significant force in the argument in order-in-original - there are no merit in the defence of the appellant. The demand under this head along with penalties is upheld. Non-payment of service tax on gross amount of 'Development Charges' from their customers under Real Estate Agent Service - demand on the ground that the appellant was paying service fax on receipt basis, however, as per the service tax rules, with effect from 01.07.2011 the liability to pay service tax was as and when the invoices were being raised - HELD THAT:- The liability to pay service tax prior to 01.07.2011 was arising at the time of receipt of consideration. The appellant claimed that he was not aware of the change which came on 01.07.2011 and consequently in respect of 22 invoices, the appellant failed to pay service tax on time - It is seen that the appellant is not a small assessee and the claim of ignorance of law is not good enough to bypass their responsibilities. The appellant has however discharged the said liability along with interest. The law was not ambiguous but was very clear at the material time. In these circumstances, there are no merit in the arguments of the appellant. It is seen that the appellant was paying service tax on the receipt basis and could not have possibly avoided payment of these amounts of service tax. The appellant would have in normal course paid the service tax at the time of receipt of consideration. Invoking Section 80 of the Finance Act, 1994, it is opined that penalty imposed under Section 78 on this count needs to be set aside. Appeal on this count is partially allowed. The order is upheld except for penalty under Section 78, which is set aside. Levy of service tax of Rs. 13,43,547/- under Rule 6(3) of the Cenvat Credit Rules, 2004 - cenvat credit on Solar Power Project on the Plot developed by the appellant themselves - levy of interest - HELD THAT:- No evidence has been produced by the appellant that the credit of Rs. 13,473,547/-, relates to Wind Mills operated by the appellant. However, in many circumstances, credit of services availed in respect of Wind Mills located away from the factory is admissible. The exact nature of transaction in the instant case is not clear from the appeal memorandum or from arguments made by the appellant. Moreover, this argument was not raised before the lower authority. In these circumstances, we set aside the demand on this count and remit the matter back to the original adjudicating authority for fresh adjudication - Matter on remand. CENVAT Credit - input services or not - security service - housekeeping service - gardening services - advertisement services - maintenance of guest house services - HELD THAT:- The appellant has submitted that such services being in the nature of security service. housekeeping service, gardening services, advertisement services and maintenance of guest house services, were input services inasmuch as they had a direct nexus with the solar power project which was going on at Charanka. The Commissioner has not considered such submission made by the appellant and on a very flimsy ground has just held that the appellant is not in a position to prove how these are input services. He submitted that all the services mentioned in Annexure- X are services which are in the nature of input services and hence such services are admissible for the purpose of cenvat credit. Therefore, the order of the Commissioner rejecting cenvat credit to the tune of Rs.11,67,454/- is not sustainable. As regards the remaining amount, the appellant had submitted that since the appellant is a big concern and receiving so many different services, the appellant being under a bona-fide impression took cenvat credit of such services and it was not because of any mala-fide intention, that the cenvat credit was availed. Therefore, for the remaining amount, the demand under the extended period of limitation would not be sustainable inasmuch as availment of cenvat credit is a subject matter of interpretation and even the department has not alleged that the appellant had any ill-intention to avail wrongful credit. Therefore, such demand over and above Rs.11,67,454/-is time barred and liable to be set aside in the interest of justice. The impugned order observes that no credit on travelling expanses is available to the assessee under Rule 2(l) of the Cenvat Credit Rules -2004. In view of above, he has specifically denied the cenvat credit in respect of service tax paid for Hotel Expanses, Personal Accident Policy Premium, Air Ticket Charges, Personal Telephone Expanses, Servicing and Repairing of Car, Security Service provided at place other than registered premises and Outdoor Catering etc. No reasoning has been given by the Commissioner as to how and why these services are excluded from the term Input Service . In view of above, the demand on this count is set aside and matter is remanded to the Commissioner for fresh adjudication and for giving detailed reasoning after following the principles of natural justice. Appeal allowed in part and part matter on remand. 2022 (11) TMI 948 Valuation of services - Authorized Service Station - inclusion of price of spare parts and lubricants in the assessable value - discount allowed in price of vehicles depending upon the quantum of vehicles purchased by the appellant - such discount is in the nature of commission and chargeable to service tax under Business Auxiliary Service category or not - trading activity - credit on common input services or proportionate reversal of Cenvat attributable to trading business was substantial compliance of Rule 6(3) of Cenvat credit Rules - recovery of Cenvat credit for steel and cement used for construction of showrooms. Demand on value of spare parts and lubricants - HELD THAT:- Though the appellant have raised one invoice for service and sale of spare parts and lubricants, but both were clearly indicated separately in the invoice, and wherever there is service component, the Service Tax was charged and wherever there was sale of spare parts and lubricants the VAT was charged. It is clearly shows that during the provision of service of Authorized Services Station there are two components, one is service portion and other is sale of spare parts and lubricants. Since, the appellant admittedly paid the VAT on sale of spare parts and lubricants. It is clearly a sale purchase transaction and same cannot be part of the Gross value of the service of Authorized Service Station - the adjudicating authority ought not to have rejected the claim of the appellant regarding sale of spare parts and lubricants. From the judgments in CCE ST, MEERUT-II VERSUS SHRI KRISHNA SWAROOP AGARWAL [ 2014 (10) TMI 569 - CESTAT NEW DELHI] and AUTOMOTIVE MANUFACTURERS PRIVATE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, NAGPUR [ 2015 (2) TMI 972 - CESTAT MUMBAI] , it is seen that various Benches of this Tribunal have taken a consistent view in the identical facts of the present case that where during the provision of Authorized Service Station Services, the spare parts and lubricants sold and VAT thereupon was paid the value of such spare parts and lubricants would not attract Service Tax. Demand of Service Tax on sales incentives given by M/s. Toyota Kirloskar Motors Pvt Ltd. to the appellant in connection with sale of their vehicles to the appellant which were subsequently sold by the appellant to their customers - HELD THAT:- As per the facts available on record, it is clear that the appellant purchased the vehicles from M/s. Toyota Kirloskar Motors Pvt Ltd. on principal to principal basis and in turn the said vehicles were sold by the appellant to their customers on principle to principle basis, at both the stages from M/s Toyota Kirloskar Motors Pvt Ltd. to the appellant and from the appellant to the customers, the transaction is clearly of purchase and sell of the vehicles - the appellant in this transactions is not an agent of M/s. Toyota Kirloskar Motors Pvt Ltd but a buyer of goods. In the course of this trading activities the seller M/s Toyota Kirloskar Motors Pvt Ltd. gives incentive to the appellant on the basis of quantum vehicles purchased by them from M/s Toyota Kirloskar Motors Pvt Ltd. This incentive is nothing but trade/ quantity discount against the purchase of the vehicle by the appellant from M/s Toyota Kirloskar Motors Pvt Ltd. This fact is not under dispute. Thus, it is not in dispute about the transaction even in the present case being identical and sales incentive given by M/s Toyota Kirloskar Motors Pvt Ltd to the appellant is nothing but in connection with purchase and sale of the vehicles. Hence, the same can not be considered as commission against any service by any stretch of imagination - the incentive given by M/s Toyota Kirloskar Motors Pvt Ltd to the appellant is not an amount of commission but being a trade discount is not liable for Service Tax. Demand of an amount equal to 5%/6%/7% of the value of trading activity in terms of Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT:- The trading activity in respect of which the demand was raised under Rule 6(3) under a fiction of law made exempted service only with effect from 01.04.2011 by insertion of explanation under Rule 2(e) by notification No. 3/2011-CE(NT) dated 01.03.2011. In view of this amendment it is clear that the trading activity was not defined as exempted service prior to 01.04.2011. Therefore, the trading activity not being an exempted service during period 2007 to 2011, Rule 6(3) cannot be made applicable during such period. It is a settled law that any statutory amendment cannot be made applicable retrospectively unless the effect of retrospective is enacted by the parliament. Therefore, trading being exempted service is effective only from 01.04.2011. Hence, the demand under Rule 6(3) on trading activity for the period 2007-08 to 2010-11 is wholly illegal and without any support of law - it is settled that demand under Rule 6(3) in respect of trading activity for the period upto 31.03.2011 is not sustainable. The legal position that emerges is that when an assessee reverses or pays back the amount of credit taken on the inputs/input services used in relation to the manufacture of particular final products or rendering services, such reversal or paying back of credit would result in a situation where the assessee was deemed to have not taken the credit at all. The further legal position that emerges from the above referred case law is that such reversal may be at the time of clearance of the goods from the factory, may be at a time subsequent to such removal of final products from the factory, or such reversal may also be after the Revenue initiated investigation and enquiries against the assessee in the matter. The appellant has calculated the aggregate amount of cenvat credit in respect of input services used in relation to trading business for the entire period from April 2011 to March 2016. The value of trading is derived in accordance with the method prescribed under Clause-(c) of Explanation-I under Rule-6(3D) of the Cenvat Credit Rules - the appellant has already reversed an amount of Rs. 2,20,68,697/- to the credit of the Central Government; and the details of such reversal have been recorded also on page 12 of the impugned order. However documents viz. Journal Voucher and also a certificate by the appellants statutory CA confirming and certifying reversal were submitted by the appellant. Denial of Cenvat Credit of Rs. 78,41,493/- pertain to Cement and Steel used in construction of showrooms - HELD THAT:- The contention of the Adjudicating Authority in this regard is that the assessee in respect of this credit on Cement and Steel, have not disputed the demand on any legal ground. Therefore, the demand of Cenvat credit on Cement and Steel was confirmed. Time Limitation - HELD THAT:- In the decisions of COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. [ 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT ] and MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS [ 2015 (5) TMI 663 - GUJARAT HIGH COURT ] the credit on Cement and Steel was allowed which were used for construction of premises of output service provider. Considering the above settled legal position, we are of the view that the appellant are entitled for Cenvat credit availed on Cement and steel used for construction of their show rooms where from the output service of authorized service station has been provided. Denial of credit of Rs. 16,85,532/-out of Rs. 78,41,493/- the reason for denial is that this credit pertains to other premises i.e. Naroda, Himatnagar, Gandhidham which were not registered - HELD THAT:- It is observed that even though these premises were not registered but the output service provided for these services were admittedly suffered Service Tax payment. Therefore, merely because the premises are not registered the Cenvat credit cannot be denied on this ground, when the output service was provided on payment of Service Tax - In the present case also even though that said three premises were not registered but the service provided by the said premises was admittedly on payment of Service Tax. Therefore, the credit availed in respect of input/input services used in the said three premises is clearly admissible. Demand raised in the show caused notice dated 23.10.2012 which was issued for the period 2007-2008 to 2010-2011 on the ground of limitation in respect of all the issues - HELD THAT:- The demand raised in show caused notice dated 23.10.2012 by invoking extended period is also not sustainable on the ground of limitation, for the reason that it is not established in respect of the issues in hand that the appellant have ever suppressed any fact or involved in fraud, mis-statement Collusion, etc. with intent to evade payment of duty therefore, in respect of show cause notice dated 23.10.2012 the demand for the extended period is clearly not tenable on the ground of limitation also. Appeal allowed - decided in favor of appellant. 2022 (11) TMI 947 Levy of service tax - declared service or not - to refrain from an act or tolerate an act - forfeiture of amount of advance deposit for not lifting the ordered goods in terms of purchase order - Section 66E (e) of Finance Act, 1994 - extended period of limitation - HELD THAT:- The amount of consideration received for providing taxable service i.e. those services which are not mentioned in negative list of Section 66 D is being made liable, under Section 66 of Finance Act, 1994 to service tax at the rate specified therein. Section 67 of Finance Act, 1994 which deals with the valuation of taxable service. According to this Section where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of sub-section (1) of Section 67. What needs to be noted is that each of these refer to where the provision of service is for a consideration , whether it be in the form of money, or not wholly or patly consisting of money, or where it is not ascertainable. In the present case, the appellant is the manufacturer of specific machines. He was approached by a buyer for manufacturing a customized machine for him. Vide the purchase order the buyer agreed to make an advance payment accepting the terms and conditions of the purchase order including the condition of said advance to be forfeited in case of failure on part of the buyer to receive the manufactured goods. For this advanced deposit to become a consideration received by the appellant against a declared service being provided by him, it is necessary that there has to be some concurrence/assumption of an obligation to refrain from an act or to tolerate the same on the part of the appellant. But in the present case it was an agreement between the parties that in case any term of the purchase order gets breached which may cause some damage or loss to the appellant, the advance deposit made by the buyer to the appellant shall be forfeited by the appellant owing to the said breach. Larger Bench of this decision in M/s. South Eastern Coalfields Ltd. [ 2020 (12) TMI 912 - CESTAT NEW DELHI ] has dealt with the impugned issue with the clarity. It has been held that any amount received from the buyer in advance when forfeited for non-compliance of the contract, the same shall not be the consideration for tolerating an act and as such shall not be leviable to service tax under Section 66 E (e) of Finance Act, 1994 as declared services. Particularly, when contract nowhere provided obligation on assesse to refrain from an act or tolerate an act. Otherwise also when it was an agreed term and condition that in case of failure or non-compliance of any condition of contract the amount deposited shall be liable to be forfeited, the forfeiture thereof is actually an act in furtherance of the aforesaid terms and conditions, cannot be called as the tolerance on account of non-compliance of any condition of contract by the other party. The present case, apparently and admittedly is a case of supply of goods. The element of service being provided was never a fact of the present case. Retaining the amount of advance deposit by the appellant is nothing but acting in furtherance of the contract by him with his buyer - The Machine Availability clause in the present case, to my opinion when read with the entire agreement, there is an apparent intent that the terms of agreement shall not be violated and that the service provider shall not compromise with the quality of service else the commercial interest of the appellant shall remain safeguarded in the form of compensation to be paid by M/s. SGSL. Hence, it cannot, by any stretch of imagination, be stated that the recovery of sum by invoking the said clause is the reason behind the execution of agreement for an accrued consideration. The concept of declared services,in the impugned facts and circumstances, has wrongly been invoked by the department. The appellant therefore cannot be fasten with any liability to pay the tax. Service recipient cannot be fastened with any liability to pay tax. Extended period of limitation - HELD THAT:- The present case was purely a case of supply of goods - In the present case the entire show cause notice is silent about any such act on part of the appellant which may amount to suppression of a fact. The element of intent on the part of the appellant to evade the tax liability is miserably missing. Based on the facts herein, the above discussion has already held that, in fact, here is no service tax liability on the appellant. Resultantly, the extended period of limitation has wrongly been invoked by the appellant. Appeal allowed - decided in favor of appellant. Central Excise 2022 (11) TMI 946 Levy of penalty u/r 26 of Central Excise Rules, 2002 - fraudulent passing of cenvat Credit by the appellant to Shree Balaji Castings - demand based on confessional statements of the witnesses - HELD THAT:- As regard the invoice issued by the appellant the statements were recorded from Shri. Subhash Chaudhary, Authorized Representative of Shree Balaji Castings and also of Shri. Anshu Agrawal, Partner of Shree Balaji Castings. It is also observed that statement of Shri. Vijay Khurana of M/s Impex World also recorded. Shri Subhash Chaudhary and Shri. Anshu Agrawal clearly stated that they have received the invoice of M/s Impex world whereas they had not received the goods. It is also observed that details mentioned in the invoices were not capable of transporting the goods for which the cenvat credit was passed on. Therefore, from the discussion and finding which is based on the confessional statements of the witnesses, it is clearly established that the appellant has facilitated by only issuing the invoice without supplying the goods for passing of the fraudulent cenvat credit of Rs 3,93,715/-. Therefore, the appellant was rightly liable for penalty under Rule 26. However, looking to the amount of cenvat credit passed on by the appellant the penalty of 2 Lacs appears to be very harsh - the penalty is reduced from Rs 2 Lacs to Rs. 1 Lac. Appeal allowed in part. 2022 (11) TMI 945 Demand of Excise Duty - allegation of incorrect availment of the exemption Notification of 27.02.2010 - Galvanized Structure cleared by the appellant to solar power generating companies - whether mounting structures cleared by the appellant do not fall under any of the category mentioned in the Notification dated 27.02.2010? - levy of penalty - HELD THAT:- The bare perusal of these Notifications clarifies that it exhaustively covers all items which are required for the initial set up of a solar power generation project. The goods manufactured and cleared by appellant is admittedly module mounting structure for solar panels. No doubt, this word specifically is not mentioned in the Notification, but from the submissions of the appellants and the data provided about the solar roof top system, it is observed that these structures are meant to hold the power generating solar panels at a particular angle. This angle is important to ensure that for a maximum time in a day the sun rays are perpendicular to these panels. In absence of these structures, the solar panels would be laid on the ground that is at Zero Degree angle which will give the least output as the sunrays shall be perpendicular to the solar panel only at one point of time during the entire day i.e. at 12 P.M. Since viability of power plant depends upon the power output and the output directly depends on the angle at which the structure holds the panel, hence, these structures are the integral component of the solar power generation plant. The solar mounting structures are covered under Notification No.15/2010 dated 27.02.2010 as amended vide Notification No.26/2012 dated 08.05.2012 - the said Notification is a conditional notification. One of the important condition is that an officer not below the rank of Secretary to the Government of India in the Ministry of New and Renewable Energy recommends the grant of this exemption indicating the quantity, description and specification thereof and certifies that the goods are required for initial setting up of a solar power generation project or the facility. The said Certificate (MNRE Certificate) was provided by the appellant to the Department even prior making the impugned clearances. As per the impugned Notification, the duty liability, if any, shall be on the promoter and not on the manufacturer. It is apparent from the amended Notification No.26/2012 dated 08.05.2012 as reproduced above, that in case of non-compliance of condition under the Notification, it is the project developer who shall be liable to pay the duty which was not paid on account of exemption at the time of clearance and that too only in case when the project developer fails to use the goods for solar power project - Commissioner (Appeals) has wrongly confirmed the duty demand upon appellant as manufacturer, for such goods which are exempted from duty. Levy of penalty - HELD THAT:- It is observed that penalty has been confirmed under Section11 AC of Central Excise Act, 1944. Penalty under the said section can be levied if and only if there is an intent to evade the payment of duty. In the present case, it is apparent that appellant had intimated the Assistant Commissioner regarding the clearance of impugned excisable goods without payment of duty of the goods being the components required for solar power project eligible for exemption under Notification. The intimation was sent vide letter dated 31.12.2015 i.e. even prior the clearance of the goods. The question of evasion of duty does not at all arises that too with the malafide intent. Even penalty has wrongly been imposed by Commissioner (Appeals) on the appellants. Thus, it is held that Commissioner (Appeals) has failed to appreciate the settled position of law with respect to the issue involved. Several decisions of this Tribunal and even by the Department with respect to identical issue despite being quoted in the order have wrongly been differentiated - We are of the firm opinion that Commissioner (Appeals) has committed an indiscipline as far as judicial protocol is concerned. Appeal allowed. Indian Laws 2022 (11) TMI 983 Principles of res judicata - Whether the G.P.A. holder (also an advocate) of the plaintiff can be permitted to act like a counsel and cross-examine the witnesses? - Section 11 of the Code of Civil Procedure, 1908. HELD THAT:- Previous order of the HC had been clear and unambiguous that in these cases, wife of the appellant would be entitled to appear only as the GPA holder and not as an advocate. We are unable to accept the submissions made on behalf of the contesting respondent that the said orders by the High Court stand at conflict with any statutory bar or prohibition or they relate to any such mandatory provision of law which is going to be violated. Even if it be assumed for the sake of arguments that there had been any error in the previous orders dated 20.04.2018 and 14.12.2018, those orders, having been rendered between the same parties and on the same issue of appearance of the GPA holder in the same proceedings, indeed operate as res judicata. The doctrine of res judicata, having a very ancient history, embodies a rule of universal law and is a sum total of public policy reflected in various maxims like res judicata pro veritate occipitur , which means that a judicial decision must be accepted as correct; and nemo debet bis vexari pro una et eadem causa , which means that no man should be vexed twice for the same cause - It is also equally relevant to reiterate that Section 11 CPC is not the foundation of the doctrine of res judicata but is merely the statutory recognition thereof and, hence, is not considered exhaustive of the general principles of law. This doctrine, it is recognised, is conceived in larger public interest and is founded on equity, justice and good conscience. It hardly needs any over-emphasis that but for this doctrine of res judicata, the rights of the persons would remain entangled in endless confusion and the very foundation of maintaining the rule of law would be in jeopardy. Even if this doctrine carries some technical aspects, as explained by this Court in Daryao [ 1961 (3) TMI 91 - SUPREME COURT] , it is in the interest of public at large that a finality should attached to the binding decisions of the Courts of competent jurisdiction; and it is also in public interest that individual should not be vexed twice with the same kind of litigation. As noticed, the Constitution Bench has placed this doctrine on a high pedestal, treating it to be a part of rule of law. It is apparent that the High Court has viewed the entire case from an altogether wrong angle, i.e., by misdirecting itself on the real point for determination; by not taking into comprehension the meaning, purport and effect of the previous binding orders. The impugned order dated 28.06.2019 cannot sustain itself and is required to be set aside. Appeal allowed.
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