Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 23, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Disclosure of information respecting assessees - U/s 138(1) of IT Act 1961 - Central Government specifies Deputy Director General (Tech Development Division), Unique Identification Authority of India (UIDAI) - Notification
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Validity of Assessment order against the Company dissolved u/s 560(5) of the Companies Act - appellant-company was struck off from the Register of Companies and stood dissolved - Once a company is dissolved under Section 560(5) of the Companies Act, it ceases to exist and, therefore, no order of assessment could be validly passed against it under the Income Tax Act and if it is passed, it would be a nullity. - HC
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Interest liability u/s 234A, 234B, 234C - Cash seized during the search - To be treated as Advance Tax or not - In this case, as ROI was filed, though after the search. The seized cash was offered by the assessee, under the regime which was prevailing then, to be treated as the advance tax and thus there was no default in payment of advance; although its payment /adjustment was triggered due to a search action. Lastly, for the same reason, it cannot be said there was a deferment of payment of advance tax. - HC
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Credit of TDS/ TAX deducted but not deposited with the Government by the diductor - Rectification application concerning the Return of Income (ROI) - Credit of TAS deducted by borrower - Credit allowed - Government may initiate the recovery proceedings from the deductor - HC
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Disallowance of interest paid on loan u/s.40A(2)(b) - excessive or unreasonable expenditure - Neither the AO nor the Ld.CIT(A) have demonstrated as to how the rate of interest applied by them was the fair rate , nor have they demonstrated as to how the rate applied by the assessee was unreasonable. - Additions deleted - AT
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Capital loss on account of destruction of capital assets where insurance claim is filed - Asset/ building destroyed in an earthquake - Taxable Year - For year in which the capital gain/loss is to be deemed to relate to as per the section we hold that it pertains to the year in which the claim of the assessee was initially rejected by the insurance company. - AT
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Eligibility of exemption u/s 10(1) - Agriculture income - income earned from the sale of hybrid seeds - Agriculture process - license holder of the land - Since the manner in which the agricultural process as undertaken by the assessee in the year under consideration is similar to the preceding years, respectfully following the judicial precedents in assessee’s own case, benefit of exemption allowed - AT
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Validity of penalty levied u/s 271(1)(c) where the validity of assessment order itself is in doubt - Assessment u/s 153A questioned on approval Granted u/s 153D - whether the assessment order can be challenged in the penalty proceedings? - The penalty levied by the AO in the penalty order framed under section 271(1)(c) of the Act is not sustainable. - AT
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Revision u/s 263 - The use of the word `and’ between the two expressions amply demonstrates that the calling for and examining the record by the CIT should precede and his such examination should culminate in getting satisfied that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. - AT
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Revision u/s 263 - claim of exemption u/s. 11 & 12 - Simply on the judgment of Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority, supra, the revision is not possible. - The CIT(Exemption) has not at all deliberated how the assessee has violated the proviso to the provision of section 2(15) of the Act and how the AO has not examined the issue. - Revision order quashed - AT
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Loss of immunity from Penalty u/s. 271AAA - Delay in payment full tax as per the order of Settlement Commission (ITSC) - DR in argument mentioned that the assessee had lost the immunity, so penalty is justified. But remained silent about the application of Section 271AAA(2)(i) - In our considered view, the assessee is eligible for granting immunity for application of penalty u/s 271AAA - AT
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Addition u/s 68 - unexplained unsecured loan - capacity/creditworthiness of creditor - The creditor has given loan to assessee out of proceeds held in Bank A/c from clearing of cheque and not from his income. Therefore, it is prima facie wrong to judge the capacity/creditworthiness of creditor with his income. - AT
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Nature of land sold - agricultural land or capital asset - the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, and also it is not the transfer of any share in the right in the development of such land through any joint development agreement - land in question cannot be treated as non-agricultural land - AT
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Revision u/s 263 - nature of income surrendered in survey proceedings - deeming provision r.w.s 115BBE - Higher Rate of Tax - assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee’s business has been established - Provision of Section 115BBE not applicable - Revision set aside - AT
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Depreciation on Hotel Building including the cost of land - hotel building complex was purchased at consolidated value - Merely because the parties have not specified the separate value of the land and building in the conveyance deed for the reasons based known to them, the same would not enable an Assessee to claim the depreciation on the land on which the assessee is not eligible to claim the depreciation. - AT
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Penalty u/s 270A - misreporting of income - Claim of donation u/s 80G was disallowed - Assessee in the assessment proceeding submitted that “Regarding Donation-I don’t any document slip so request you to cancel the same and offer my apology and promise to not put any kind of non-documentary submission in future. - No penalty - AT
Customs
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Levy of anti-dumping duty on "Synthetic Grade Zeolite 4A (Detergent Grade) from China PR for 5 years pursuant to First Sunset Review Final Findings issued by DGTR." - Notification
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Valuation - Aviation Turbine Fuel (ATF) remained on board - conversion into domestic flight - Methodology adopted in computing assessable value on fuels - loading of the prices with 1% landing charges - 20% transportation cost - 1.125% of insurance - none of these charges can become part of transaction value as per Rule 10(2) - AT
IBC
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Initiation of CIRP - Maintainability of joint application u/s 7 - The three appellants being part of one Common Real Estate Project and the Applicants of Section 7 Application being part of the said project they had every right to initiate Section 7 Application against all the three appellants together - the decision of the Adjudicating Authority upheld holding that application under Section 7 is maintainable. - AT
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Initiation of CIRP - NCLT admitted the application u/s 7 - period of limitation - The application filed by the Respondent No. 1 was not barred by time there being continuous acknowledgment in their respective balance sheets of the Corporate Debtor which acknowledgment was within the meaning of Section 18 of the Limitation Act extending the period of limitation by fresh period of limitation by each acknowledgment. - AT
Case Laws:
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GST
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2023 (11) TMI 813
Levy of penalty - goods being transported without e-way bill under U.P. G.S.T. Act, 2017 read with Rules framed thereunder - HELD THAT:- Learned Division Bench of this Court in M/s Varun Beverages [ 2021 (10) TMI 429 - ALLAHABAD HIGH COURT] held Having heard the learned counsel for the parties and perused the record, so far as the matter is squarely covered by a decision of Division Bench of this Court in M/s Godrej and Boyce Manufacturing Co. Ltd [ 2018 (9) TMI 1261 - ALLAHABAD HIGH COURT] , with which we are in agreement, the present writ petition is allowed. The petitioner is entitled to the benefit of the judgment rendered in M/s Varun Beverages - the impugned orders dated 22.12.2020 and 12.02.2018 are quashed - petition allowed.
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Income Tax
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2023 (11) TMI 812
Validity of Assessment order against the Company dissolved u/s 560(5) of the Companies Act - appellant-company was struck off from the Register of Companies and stood dissolved - HELD THAT:- From a reading of Sub-section (7) along with Subsection 31 of Section 2 of the Income Tax Act, it becomes abundantly clear that the assessee to be assessed for income tax under Section 143 of the Income Tax Act must be a person in existence. Indisputably, a company is a juridical person but the moment it is struck off from the Register of Companies and is dissolved, it ceases to exist. Making of an assessment order against a non-existent company would be like passing a decree by a civil court against a dead person. Such order of assessment made against a non-existent entity would be nullity and would not give rise to any right or liability under such assessment order. Thus Once a company is dissolved under Section 560(5) of the Companies Act, it ceases to exist and, therefore, no order of assessment could be validly passed against it under the Income Tax Act and if it is passed, it would be a nullity.
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2023 (11) TMI 811
Denial of natural justice - no opportunity to deal with the decision as relied to make Addition u/s 68 - addition was made on account of purported unexplained credit entry concerning share capital/share premium - HELD THAT:- As fairly stated that the appellant/assessee was not represented before the Tribunal. Clearly, in view of this circumstance, the appellant/assessee had no opportunity to deal with the decision on which the Tribunal has relied while passing the impugned order. Concededly, no hearing was held between 13.12.2022 and the date on which impugned order was passed. In these circumstances, the impugned order is set aside and the matter is remanded to the Tribunal for a fresh hearing. Needless to add that, we have not examined the merits of the matter. The Tribunal will, thus, be free to arrive at its own conclusion while deciding the matter on merits.
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2023 (11) TMI 810
Interest liability u/s 234A, 234B, and 234C - Treatment to amount seized during the search - as argued that amount seized has not been treated as advance tax and have treated as having been paid towards self-assessment tax - HELD THAT:- The record which is available to the court clearly shows that the petitioner had offered Rs. 50 lakhs seized in search to be treated as advance tax. This endorsement is found both in the ROI as well as in the computation sheet accompanying the ROI. The respondents/revenue cannot but accept that at the relevant point in time i.e., before 01.06.2013, Section 132B of the Act did allow for the person from whom cash was seized to offer the same for adjustment of tax liability. It is important to note that the expression existing liability on which stress was laid by Mr Singh, finds mention in Explanation 2 appended to Section 132B. Explanation 2 which was inserted in the Act via FA 2013 albeit w.e.f. 01.06.2013 is a clear indicator that the expression existing liability did include advance before its insertion. Therefore, this argument of Mr Singh/respondent does not find favour with us. As decided in in Latika Datt Abbott case [ 2017 (8) TMI 1297 - DELHI HIGH COURT] the court in no uncertain terms held that the assessees in the said case were entitled to the benefit of Circular No.20 of 2017 and that their request for adjustment of tax liability would have to be allowed w.e.f. from the date when the request was first made. Therefore, in our view, the stand taken on behalf of the petitioner by Mr Sharma/petitioner would have to be accepted for the reasons given above. The respondents/revenue ought to have treated the cash seized as advance tax and accordingly passed the assessment order. Section 234A of the Act imposes a liability on the assessee for payment of interest where there is default in filing the ROI. Likewise, Section 234B of the Act imposes a liability on the assessee for payment of interest where there is default in payment of advance tax. As far as Section 234C is concerned, it adverts to the liability of the assessee to pay interest where there is a deferment of advance tax. In this case, as ROI was filed, though after the search. The seized cash was offered by the assessee, under the regime which was prevailing then, to be treated as the advance tax and thus there was no default in payment of advance; although its payment /adjustment was triggered due to a search action. Lastly, for the same reason, it cannot be said there was a deferment of payment of advance tax. Thus, in sum, the liability imposed on the petitioner while framing the assessment order dated 29.12.2010 with regard to interest under the aforesaid provision was wrong. The respondents/revenue would be required to excise the imposition of interest made under the aforesaid provisions and thereafter calculate what would have been the refund payable to the petitioner. Once the respondents/revenue arrived at that figure, the same would be adjusted from the refund already paid to the petitioner, which, as noted above, is Rs. 20,73,340/-. The respondents/revenue would, after making the adjustment, pay interest @ 6% from the date of filing the return i.e., 15.03.2010. Besides this, interest will also have to be paid on Rs. 32,65,210/-, which is the refund amount shown in the ROI filed by the petitioner after adjusting the aggregate tax liability amounting to Rs. 31,58,127/-, the advance tax of Rs. 50 lakhs and tax deducted at source amounting to Rs. 14,23,332/-. Thereto, interest will also be paid on the interest wrongly imposed under Sections 234A, 234B, and 234C of the Act.
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2023 (11) TMI 809
Validity of proceedings u/s 153C - incriminating material was found against assessee or not? - HELD THAT:- As no incriminating material was found, the proceedings taken out against the assessees u/s 153C of the Act were not valid in the eyes of law, was the correct view. We may note that the Tribunal in this behalf relied upon the judgment rendered in PCIT v. Kabul Chawla, [ 2015 (9) TMI 80 - DELHI HIGH COURT] . The said judgment has been affirmed by the Supreme Court in Principal Commissioner of Income Tax vs. Abhisar Buildwell Pvt. Ltd., [ 2023 (4) TMI 1056 - SUPREME COURT] . Question of law as framed have to be answered against the appellant/revenue and in favour of the respondents/assessee.
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2023 (11) TMI 808
Rectification application concerning the Return of Income (ROI) - credit of TAS deducted by borrower - Tax Deducted at Source (TDS) was not deposited with the Government - petitioner sought to stake a claim with respect to the tax which had been deducted at source on the interest paid by its borrower [undergoing CIRP and a Resolution Professional (RP) has been appointed] - whether any recovery towards TAS can be made against the petitioner? HELD THAT:- Issues stand covered by the judgment rendered by this court in Sanjay Sudan [ 2023 (2) TMI 1079 - DELHI HIGH COURT ] No recovery towards TAS can be made towards the petitioner i.e., the deductee, in view of the provisions of Section 205 of the Act. Whether the petitioner can obtain the credit of TAS? - submission is that unless the tax deducted at source is paid to the Central Government, no credit can be given to the deductee, i.e., the petitioner in this case - The argument that credit for TAS deducted in the present case by Ninex should not be given to the petitioner, fails to recognize the fact that the amount retained against remittance made by the payer is nothing but tax which the assessee/deductee has offered for tax by grossing up the remittance. If credit is not given, the respondents would end up doing indirectly what they cannot do directly i.e., that recover tax directly from the assessee i.e., the deductee. There is, in our view, another reason why the submission advanced on behalf of the respondents/revenue is untenable, that the deductee (i.e., the petitioner in this case) followed the regime put in place in the Act for collecting tax albeit, through an agent of the government. The agent for collecting the tax under the Act is the deductor i.e., Ninex in the present case. Since the agent/Ninex failed to deposit the tax with the government, recovery proceedings can only be initiated against the agent/Ninex. We may once again emphasize that payment of TAS to the government can only be construed as payment in accordance with the law. Thus, given the factual and legal position, the relief sought for by the petitioner would have to be granted. The petitioner will be given credit for TAS amounting to Rs. 29,16,674/-, notwithstanding the fact that it is not reflected in Form 26AS. The order dated 25.06.2020 passed under Section 154 of the Act, given the relief granted above, cannot survive, as, according to learned counsel for the parties, the only rectification that was sought was with regard to the aforementioned TAS deducted by Ninex. The order is, accordingly, set aside. Since the petitioner has evidently lodged a claim with the RP, if it were to receive any amount, it will deposit the amount not exceeding TAS deducted at source by Ninex with the revenue forthwith. Petitioner will ensure that, for whatever its worth, its claim with regard to TAS deducted by Ninex is pressed before the RP. The deductee, i.e., the petitioner followed the regime framed in the Act, for collecting TAS albeit through an agent of the government, i.e., the deductor. It was the agent, i.e., Ninex who was required to deposit the tax with the government. In this case, the agent is, as noticed hereinabove, undergoing CIRP, therefore, possibly the ability of the Central Government to recover the amount from the agent may seem remote. However, where the agent does not suffer from any such disability, it is always open to the Central Government to proceed against the agent, i.e., the deductor. In our view, Section 199 of the Act cannot come in the way of granting the deductee being granted credit of TAS deducted by Ninex[borrower].
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2023 (11) TMI 807
Validity of block assessment - whether or not a satisfaction note had been generated by AO of the searched person before issuing notice u/s 158BD r.w.s. 158BC - HELD THAT:- Concededly, despite the order dated 02.08.2016 passed by the coordinate bench nearly seven (07) years ago, the revenue has not been able to produce the original files, which could have disclosed as to whether or not a satisfaction note was generated by the AO of the searched person. This being the position, we can only draw an adverse inference qua the revenue that no satisfaction note was generated by the AO of the searched person. During the course of arguments, counsel for the revenue sought to highlight the fact that the issue concerning the purported failure of the AO to generate a satisfaction note was not raised before the Tribunal. Our perusal of the record shows that this submission is incorrect. But even if we were to assume that this aspect was not pressed before the Tribunal, since it, otherwise, has a bearing on the jurisdiction of the AO of the assessee to deal with the matter, it can be raised, in our opinion, before the High Court for the first time. We have no reason to conclude that ground with regard to the AO wrongly assuming jurisdiction was not raised before the Tribunal. This being the factual situation, the issue is no longer res integra and stands concluded by the judgments rendered by the Supreme Court in the cases referred to hereafter. See cases Manish Maheswari vs. ACIT [ 2007 (2) TMI 148 - SUPREME COURT] , Tapan Kumar Dutta [ 2018 (4) TMI 1375 - SUPREME COURT] as held very object of the section 158BD is to give jurisdiction to the Assessing Officer to proceed against any person other than the person against whom a search warrant is issued. Although section 158BD does not speak of recording to [of] reasons as postulated in section 148, but since proceedings under section 158BD may have monetary implications, such satisfaction must reveal mental and dispassionate though process of the Assessing Officer in arriving at a conclusion and must contain reasons which should be the basis of initiating the proceedings under section 158BD - Decided in favour of assessee.
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2023 (11) TMI 806
TP Adjustment - comparable selection - rejecting M/s. Accentia Technologies Limited M/s. Eclerx Services Ltd., and M/s. TCS E-Serve as comparables - HELD THAT:- Accentia being KPO as held in Rampgreen Solutions (P.) Ltd. vs. CIT [ 2015 (8) TMI 931 - DELHI HIGH COURT ] and quite different from the BPO profile of the assessee, we see no error in the conclusion drawn by the CIT(A) for rejecting this comparable. Eclerx Services Limited - As business model of the assessee is quite different from Eclerx which provides data analytics and processing solutions to some of the largest brands in the world and is recognized as experts in chosen markets financial services, retail and manufacturing and is a KPO. In view of different functioned profile, we thus see no justification in the action of the Revenue to introduce such company in the final set of comparables as rightly held by the CIT(A). We thus decline to interfere. TCS E Serve Ltd is mainly involved in transaction processing and technology services. It carries on business of providing technology services such as software testing, verification and validation. TCS has also develop a software such as Transport Management Software and therefore, functionally this company is dissimilar to assessee company. Besides, TCS also owns huge intangible and use of Tata brand which definitely benefited this comparable and is in a different league. Furthermore, relevant segmental data not being available, such comparable cannot be used for determination of ALP. Appeal of Revenue is dismissed.
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2023 (11) TMI 805
Assessment u/s 153A - Addition u/s 68 - incriminating material found in search or not? - HELD THAT:- We do not find any substance in the contention of the Revenue that the Ld. CIT(A) has erred in law by holding that addition under section 153A cannot be made without incriminating material gathered during course of search. There has to be incriminating material recovered during search qua the assessee in each of years for purpose of framing an assessment under section 153A. There are umpteen number of decisions in support of the above proposition - See Kabul Chawla [ 2014 (7) TMI 714 - ITAT DELHI] affirmed by HC [ 2015 (9) TMI 80 - DELHI HIGH COURT] , MS. LATA JAIN [ 2016 (5) TMI 1273 - DELHI HIGH COURT] ,MEETA GUTGUTIA [ 2018 (7) TMI 569 - SC ORDER] , M/S JAYPEE FINANCIAL SERVICES LTD [ 2021 (8) TMI 200 - DELHI HIGH COURT] - Appeal of the Revenue is dismissed.
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2023 (11) TMI 804
TP adjustment - payment made towards intra-group services - Segregation of two transaction for different MAM application - TPO determined the ALP at nil under CUP method - assessee s aggregate approach under TNMM has been accepted by the TPO in respect of other transactions, such as, import of finished goods, import of capital goods, payment for royalty, payment for technical services, payment for application cost, payment of training fees, cost allocation from group companies, is there any necessity to segregate these two transactions including payment towards intra-group services ? - HELD THAT:- TPO was not justified in selectively picking of only a couple of transactions for different treatment. Assessee has entered into 12 transactions with AE. Except one transaction, rest eleven transactions have been benchmarked by the assessee under TNMM by adopting the aggregate approach. While the TPO has accepted assessee s approach in respect of nine transactions, he has segregated two transactions including the transaction relating to intragroup services. Thus, it is not a case where the TPO has entirely disbelieved assessee s claim that the transactions are closely linked transactions. Therefore, in our view, the approach adopted by the TPO to segregate this payment made towards intra-group services is unsustainable. In the present case, the assessee has clubbed all the transactions together and adopted TNMM for benchmarking. Even otherwise also, assuming that the payment made towards intra-group services has to be benchmarked separately, it needs to be examined whether the approach of TPO in determining the ALP at nil by apply CUP method is acceptable. The main reasoning of the TPO to discard assessee s benchmarking under TNMM is, the assessee has failed to prove the need test and the benefit test. As could be seen from the materials placed on record, there is an agreement between the group entities for intra-group services. Further, in course of proceedings before the TPO, the assessee has furnished voluminous evidences, which demonstrate that the assessee has received various services such as planning services, safety and environment services, information system, procurement services, human resource services. Under the planning services, the assessee has received services relating to business planning so as to strengthen and improve regional management system and to organize and run meetings and try to resolve the common issue among group companies. Under human resource service, the assessee received help to establish system for local management, plan and run management training programs for expatriates and local management, promote global HR program, support on training at each group company regarding improvement facilities, preparation of training material, selection of internal instructor and selection of employees to attend each training and run globally common training etc. Such services have benefited the assessee in human resource development, recruitment of suitable candidates and cost saving by avoiding consultant, identify and implementing further improvements in compensation structure, human resource development and recruitment of suitable talent, effective compliance with labour laws, lesser rate of attrition thereby saving time and cost etc. The conclusion drawn by the departmental authorities are not based on materials on record, but more on conjectures and surmises. When the assessee has furnished evidences to demonstrate that services indeed were received from AEs, the departmental authorities cannot ignore such evidences. In any case of the matter, the TPO could not have determined the ALP at nil under CUP method without bringing on record any comparable uncontrolled transaction. TP adjustment made to the price paid for purchase of fixed asset - TPO has determined the ALP at the cost of the goods purchased while disallowing the mark-up. While doing so, the TPO has not benchmarked the transaction under any one of the available methods. Whereas,Commissioner (Appeals) has allowed 2% mark-up on the written down value of the expenses. Thus, as could be seen, the approach adopted both by TPO and Commissioner (A) is purely adhoc and not in accordance with Rule 10B. The fact that similar transaction was accepted by the TPO in past assessment years has not been countered by the department, though they have simply stated that each assessment, being a separate unit, the decision taken in earlier assessment years would not be applicable. The departmental authorities have failed to bring out any factual dissimilarity between the earlier years and the impugned assessment year. In any case of the matter, the approach of the TPO and learned Commissioner (A) in determining the ALP is not in accordance with the transfer pricing provisions. Therefore, we are inclined to delete the adjustment.
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2023 (11) TMI 803
Disallowance of depreciation on Lifts - assets given on hire - area given on rent and standard deduction claimed - nexus of claim of depreciation on Fixed Assets used in maintenance business and business of Hiring of assets from which these was income with earning of rental income - Revenue stated that maintenance services provided to tenants were related to the building given on rent by the assessee and assessee has claimed deduction u/s 24(a) @ 30% of rent received and standard deduction in respect of house property income which covers deduction in respect of all repairs, maintenance charges, depreciation charges etc.- HELD THAT:- The contention of the Revenue is contrary of facts on record as assessee has not claimed standard deduction @ 30% in respect of maintenance income received and offered to tax under the head 'Business income'. There were two separate agreements for providing maintenance services with tenants. There were of maintenance income and rental income which are totally different and expenses of different business cannot have same ratios and expenses cannot be disallowed simply on the basis of ratio of income of different business. The activity of maintenance and rental income is totally separate and identifiable activity and nothing to do with area given on rent and standard deduction was claimed in respect of rental income and not in respect of maintenance charges which can be verified from the computation - The property was given on Rent and no depreciation on Property was claimed on by assessee. There was no nexus of these maintenances expenses incurred and claimed with earning of rental income. It is a fact on record that in the AY 2013-14 no disallowance has been made on the same issue and the return income has been accepted. Assessment proceedings on similar facts for AY 2011- 12 and AY 2013-14 , AY 2014-15 are completed without making any addition / disallowance in respect of same assessee on same set of facts on this issue which shows that no such disallowances and additions were made in case of same assessee on same facts in earlier as well as later years. Rule of consistency demand that the same should be allowed in the year under consideration as well as there is no change in the facts. Reliance is being placed on the decision rendered in the case of CIT vs. Excel Industries [ 2013 (10) TMI 324 - SUPREME COURT] Wherein it was held that, once having accepted this position, the Assessing Officer cannot change his opinion in immediate next and previous assessment year without there being any change in facts and circumstances. Taking into consideration the action of the Revenue in the case of the assessee for different years , and considering the of judicial pronouncements we hold that no disallowances is called for in this case. Decided in favour of assessee.
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2023 (11) TMI 802
DRP directions communicated without mentioning DIN - whether a curable defect? - HELD THAT:- It mandates that on or after 1st day of October, 2019, no communication will be issued without a computer generated DIN, which has to be quoted in the body of the communication - HELD THAT:- This issue of quashing of the order owing to absence of quoting of mandatory DIN by the Officers in their orders stands adjudicated by the Co-ordinate Bench of ITAT in the case of Sh. Rajesh Chaudhary [ 2023 (11) TMI 737 - ITAT DELHI] as held that any communication, which is not in conformity with paragraphs 2 and 3 of the circular shall be treated as invalid and shall be deemed to have never been issued. In the absence of any material change in the factual matrix, legal proposition and in the circular no. 19 of the CBDT, we hereby hold that the Assessment Orders have to be declared as non-est and deemed to have never been issued.
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2023 (11) TMI 801
TP adjustment - comparable selection - HELD THAT:- Aptico Limited company is basically involved in project development, sharing of resources and facilities etc. from the nature of revenue earned, it can be seen that, if at all, the revenue earned from research studies and tourism can to some extent be comparable to the assessee, as the assessee is also involved in marketing research activity, though in a different field. However, the TPO has considered the entire revenue earned by this company from all activities for comparability analysis. This, in our view, is unacceptable. Segment-wise breakup of expenses of the company is not available in the financial statement. In fact, no expenses were earmarked to the research studies and tourism. There are no details available regarding nature of research studies and tourism. Thus, in our view, since, the company is engaged in diversified activities and proper segmental details have not been maintained, it cannot be treated as comparable to the assessee. The Assessing Officer is directed to exclude this company. Indus Technical and Financial Consultants - As per the information available in the website of the company, it is engaged in providing high-end technical services in the areas of environment and pollution control, technology management, financial services, administrative and legal services, project selection and project implementation services, energy and power services etc. Thus, it is evident, though the company is engaged in various activities, however, adequate segmental information is not available in the annual report. Considering the aforesaid aspects, the coordinate Bench in case of Motorola Solution India Pvt. Ltd. [ 2019 (11) TMI 333 - ITAT DELHI] has excluded this company from the list of comparables. Technicom- chemie (India Ltd.) company has shown income from commission, consultancy and services. Whereas, the segmental details relating to the aforesaid segments are not available. Considering the aforesaid aspects, the coordinate Bench in case of Motorola Solutions India Pvt. Ltd. [ 2019 (11) TMI 333 - ITAT DELHI] which is for the very same assessment year, has excluded this company. Due to parity of facts, we follow the decision of coordinate Bench in the case of Motorola Solution India Pvt. Ltd. (supra) and direct the Assessing Officer to exclude this company. WAPCOS Ltd is a techno-commercial organisation under the aegis of Ministry of Water Resources and utilizes the talent and expertise developed in the various organisations of Government of India and State Governments. Under segment reporting, it has reported segment revenue from consultancy and engineering projects and lump sum turnkey projects. Though, the Revenue earned from different segments have been mentioned, however, such details relating to expenses are not there. Therefore, the annual report lacks proper segmental reporting. Thus, as could be seen, the company is functionally different from the assessee in the sense that the assessee has only one segment, whereas it has a number of segments including implementing turnkey projects. Whereas, sufficient segmental details are not available. Thus, we direct the Assessing Officer to exclude this company from the list of comparables. India Tourism Development Corporation Ltd. - only reason for which he has rejected the company is, because the revenue earned from service segment is less than 75% of the total revenue. Considering the fact that in assessee s own case [ 2016 (8) TMI 1470 - DELHI HIGH COURT] dated 02.08.2016 has accepted ITDC as a comparable to the assessee, we hold that it is comparable to the assessee. Accordingly, the Assessing Officer is directed to include this company as a comparable. Idma Laboratories Ltd. though, the company is not involved in any kind of market research, but the testing segment profile can be comparable to the assessee, hence, has directed inclusion of this company as a comparable. In view of the aforesaid facts, we are of the opinion that this company has to be included as a comparable. The Assessing Officer is directed accordingly. Computational error while computing the working capital adjustment - We restore the issue to the Assessing Officer with a direction to compute the working capital adjustment correctly after providing due and reasonable opportunity of being heard to the assessee.
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2023 (11) TMI 800
Disallowance of interest paid on loans taken u/s.40A(2)(b) - excessive or unreasonable expenditure - CIT allowing the interest @15% instead of the claimed amount @ 18% - HELD THAT:- As rightly pointed out by assessee that there has been no basis given by the AO or by the CIT(A) for holding that the rate of interest paid by the assessee to directors on loan taken from it at the rate of 18% was excessive. In fact, we note that even the CIT(A) has noted neither the assessee has justified the rate of interest at the rate of 18% nor the AO has justified the rate of interest of 12% applied by him. Clearly, it shows that even CIT(A) found that there is no basis given by the AO for finding the rate of interest paid by the assessee has been excessive. CIT(A) has also, we find , not given any basis for finding the rate adopted by the assessee as excessive or the rate applied by him of 15% as reasonable. Without establishing with cogent basis as to what was the reasonable /fair market value of rate of interest on loan, the entire exercise of the Revenue authorities below, we hold, fails. Neither the AO nor the Ld.CIT(A) have demonstrated as to how the rate of interest applied by them was the fair rate , nor have they demonstrated as to how the rate applied by the assessee was unreasonable. As in the case of CIT vs NEPC India Ltd. [ 2006 (12) TMI 129 - MADRAS HIGH COURT] has held that there should be some material available for the assessing officer for invoking section 40A(2)(a) to initiate action to disallow excessive or unreasonable expenditure. That before taking any final decision by invoking the power u/s 40A(2)(a) such decision should be based on reasons well founded which are judiciously acceptable. This proposition was reiterated in another decision in the case of CIT vs Forbes Tea Brokers [ 2009 (6) TMI 50 - MADRAS HIGH COURT] The conditions to be fulfilled for applying the provisions of section 40A(2) of the Act were clearly not satisfied in the present case. Disallowance, therefore, made in the case of the assessee by treating 15% rate of interest as the reasonable rate of interest, as opposed to 18% claimed by the assessee is, we hold not tenable in law. The AO is directed to delete the disallowance made on interest paid to directors under section 40A(2)(b) of the Act. Commission paid on sale of goods disallowed for want of evidence - AO and the CIT (A) arrived at this conclusion on the basis that the assessee was unable to file any detail, showing country-wise sales made and being unable to file documentary evidences of exchange of communication between the assessee and its agents - HELD THAT:- We have noted that it is fact on record, which has not been controverted by the Revenue, that the assessee is into business of manufacturing of pharmaceutical drugs and it is a hundred percent export-unit making all sales outside the country. It is also not denied that it has no persons outside the country to manage its sales. The fact that the sale of pharmaceutical drugs to any other jurisdiction requires necessary approvals and compliances is also not denied. It is not improbable but in fact is quite normal and necessary for any entity to engage services of certain persons to ensure uninterrupted sale of its products outside the country. Besides, we have noted that the assessee has filed all details of sales made to different countries. The assessee has also filed confirmation from all six agents who in some cases have mentioned invoices against which the commission has been paid. The assessee has also filed copies of shipping bills mentioning the fact of commission paid to the assessee. No infirmity worth its name has been pointed out by the ld.CIT(A), we fail to understand how any person of reasonable mind could arrive at a finding that the genuineness of the expenditure has not been established. It is not the case of the Revenue that the parties to whom the payment has been made and who have confirmed the same also, in any case denied the said facts in any inquiry conducted by the Revenue. Merely because, certain evidences indicating exchange between the assessee and its agents were not filed by the assessee, it does not take away the weight of all other voluminous evidences filed by the assessee to establish genuineness of the transactions. Moreover, we find that in the preceding, i.e A.Y 2011-12 and succeeding year , A.Y 2014-15, identical commission paid by the assessee has been accepted by the Revenue in scrutiny assessment. We hold that the assessee has established the genuineness of the claim of commission expenses and denial of the same is uncalled for, and therefore, the AO is directed to allow the claim of commission expenditure. Decided in favour of assessee.
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2023 (11) TMI 799
Capital loss on account of destruction of superstructure building - Asset/ building destroyed in an earthquake - scope of term transfer u/section 2(47) - year of allowability of claim - applicability of section 45(1A) - AO stated that as per section 45(1A) it is only on receipt of insurance claim that transfer of the destroyed asset is to be deemed and gains computed and in the facts of the present case, he noted that since the assessee s claim was rejected by the insurer and matter was pending before the Hon ble High Court, there was no case of any capital loss being returned in terms of section 45(1A) in the impugned year - CIT(A) has applied section 45(1A) of the Act to the issue and held that the loss is allowable in the year the insurance claim is settled by the Hon ble High Court HELD THAT:- We are in agreement with the CIT(A) that the computation of capital gains in the present case is governed by section 45(1A) of the Act, but at the same time we do not agree with the interpretation of the said section by the Ld.CIT(A) to the effect that the transfer of the destroyed asset will be deemed in the year the assesses claim is finally settled in appeal by the Hon ble High Court. Section 45(1A) specifically deals with capital gains on assets destroyed on which insurance claims are received, deeming the capital gains in such circumstances attributable to the year in which claim is received. In the facts of the present case the asset/ building undoubtedly has been destroyed in an earthquake and the assessee has claimed compensation from the insurance company on the same, the receipt of which is subject matter of appeal before the Hon ble High Court. Therefore, capital gains is to be determined in accordance with section 45(1A) of the Act. For year in which the capital gain/loss is to be deemed to relate to as per the section we hold that it pertains to the year in which the claim of the assessee was initially rejected by the insurance company. Therefore, accepted position of the Revenue is that section 45(1A) of the Act is invoked on the settlement of the insurance claim of the assessee, and even if the claim is rejected, it isto be treated as Zero receipt of insurance claim, and capital gain or loss to be computed accordingly. AO s reference to the Memorandum explaining the provision of section 45(1A) of the Act fortify our view mentioning that section 45(1A) is beneficial for the assessee to claim the loss on destroyed assets on the settlement of their insurance claim. Therefore, we hold that for all purposes, the year in which assesses claim for insurance is rejected will invoke provision of section 45(1A) of the Act in the said year. Receipt of insurance claim, as per the ld.CIT(A), is to be treated as zero and the assessee accordingly is entitled to compute his capital loss and claim the same in the said year. We hold, therefore, that the capital loss of the assessee on the destroyed building is to be computed in terms of section 45(1A) of the Act, and as per the facts and circumstances of the case, it pertains to the Asst. Year when its insurance claim was rejected by the Insurance Company. The assessee is, therefore, entitled to claim capital loss on account of destroyed building in the said Asst. Year. AO is directed to treat the capital loss on account of destroyed building as pertaining to the Asst. Year in which his claim for insurance was rejected by the Insurance Company and allow set off of the same against the capital gain on sale of land, if within the period specified in the Statute .
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2023 (11) TMI 798
Eligibility of exemption u/s 10(1) - Agriculture income - income earned from the sale of hybrid seeds - Agriculture process - AO held that the ownership or lawful possession of land is a basic prerequisite for claiming exemption u/s 10(1) and thus the assessee should have derivative interest in land, either as an owner or as a tenant or mortgagee with possession and not merely as a license holder to enter upon the land - HELD THAT:- It is evident from the record that the AO as well as the CIT(A) placed reliance upon the decision of Namdhari Seeds Pvt. Ltd. [ 2014 (7) TMI 1348 - KARNATAKA HIGH COURT] wherein it was held that where the taxpayer entered into an agreement with farmers for production of open hybrid seeds on the land for its own benefit, income arising to the taxpayer from sale of hybrid seeds grown by farmers would not be agricultural income. Having considered the decisions passed by various Hon ble Courts/Tribunal, we are of the considered view that each case has been decided on its own facts and accordingly the Hon ble Court/Tribunal came to the conclusion regarding the eligibility of exemption u/s 10(1). As noted above, in the assessee s own case, the Hon ble jurisdictional High Court affirmed the findings of the coordinate bench of the Tribunal granting benefit of section 10(1) to the assessee in respect of income earned from growing and selling of hybrid seeds jointly with the farmers. Therefore, reliance on any other decision is not of much importance in the present case, as the issue has been consistently considered in assessee s own case for the past 18 years, i.e. from the assessment year 1990-91. As noted above, in the present case, the lower authorities came to the conclusion that the AO has brought on record material to prove that the assessee has not carried out any agricultural operations, therefore this year is different from the preceding years. However, as we have found above, the new material as sought to be relied upon by the AO does not support the case of the Revenue and therefore we are of the considered view that the said material cannot be the basis to deviate from the previous decisions rendered in assessee s own case, wherein similar allegations of the Revenue were rejected. It is pertinent to note that the coordinate bench of the Tribunal vide its order dated 26/11/2007, for the assessment year 1993-94, etc., apart from placing reliance upon the decision of another coordinate bench in Namdhari Seeds Pvt. Ltd. also considered the factual aspect involved in the appeal including the rule of consistency as in the assessment years 1990-91 to 1992-93, a similar issue was decided in favour of the assessee. Therefore, basis on which the Revenue denied the exemption claimed u/s 10(1) in the present case, are only the different facets of the same argument that the assessee has not carried out agricultural operations as are normally undertaken by the cultivator. Since the manner in which the agricultural process as undertaken by the assessee in the year under consideration is similar to the preceding years, respectfully following the judicial precedents in assessee s own case we are of the considered view that the assessee is entitled to claim exemption u/s 10(1) in respect of income earned from growing and selling of hybrid seeds. Accordingly, the only issue arising in the present appeal is decided in favour of the assessee. Employee Stock Option Plan ( ESOP ) expenses - AO disallowed the deduction primarily on the basis that the expenditure incurred is not real expenditure and is notional in nature so as to claim deduction u/s 37(1) - HELD THAT:- We find that similar contentions of the Revenue were rejected in CIT v/s Biocon Ltd [ 2013 (8) TMI 629 - ITAT BANGALORE] wherein the Hon ble High Court dismissed the appeal filed by the Revenue and upheld the decision of the Special Bench of the Tribunal in Biocon Ltd. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] - we find no infirmity in the impugned order passed by the learned CIT(A) in allowing the claim of deduction of ESOP expenses under section 37(1) of the Act. Accordingly, grounds no. 1 to 6 raised in Revenue s appeal are dismissed. Disallowance u/s 14A r.w.r. 8D - submissions of the assessee that substantial dividend income was earned without incurring any expenditure - HELD THAT:- After rejecting the submissions of the assessee that substantial dividend income was earned without incurring any expenditure whatsoever including management or administrative expenses, the AO held that the investment decisions are generally taken in the meetings of the Board of Directors for which administrative expenses are incurred. The AO further held that the assessee could not establish that the expenses debited to the profit and loss account do not relate to the investment activity. Accordingly, by applying the computation mechanism as provided under Rule 8D(2)(iii), the AO, inter-alia, computed the disallowance u/s 14A of the Act, i.e. 0.5% of the average value of the investment. It is further pertinent to note that even the disallowances as computed by the assessee during the assessment proceedings are on an ad hoc basis by considering 25% of the cost of the Treasury Department without taking into consideration the involvement of the Board of Directors for which administrative expenses are also incurred. In view of the above, we find no merits in the submission of the learned AR. Accordingly, we are of the considered view that the action of the AO in computing the disallowance u/s 14A read with Rule 8D(2)(iii) is in conformity with the provisions of the Act and is therefore upheld. As a result, grounds raised in assessee s appeal are dismissed.
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2023 (11) TMI 797
TP Adjustment - international transactions of the assessee pertaining to payment of management fees - CIT(A) restricting the arms length price of international transaction of management fees paid by the assessee to 1.5% of the operating revenue of the assessee - HELD THAT:- In view of the observations made by the ITAT in assessee s own case for assessment year 2011-12 [ 2020 (1) TMI 154 - ITAT AHMEDABAD] we observe that the ITAT has clarified that 2% of the operating revenue of manufacturing segment would be allowable to the assessee towards management charges. Excess depreciation claimed on computer software license - assessee had claimed depreciation @ 60% on computer software installed during the year under consideration - AO considered this software as intangible and restricted the depreciation on such software @ 25% - HELD THAT:- We observe that in the case of CIT vs. Computer Age Management Services [ 2019 (7) TMI 1153 - MADRAS HIGH COURT] has held that where software license acquired by the assessee was in the nature of software application, the assessee was eligible to claim depreciation @ 60%. Again, in the case of A.R. Kema Medical India Pvt. Ltd. [ 2022 (4) TMI 1182 - ITAT MUMBAI] again held that where the assessee purchased license of ERP SAP Software, the assessee was entitled to depreciation on such license @ 60%. Again, in the case of Castus Imaging India Pvt. Ltd. [ 2018 (5) TMI 636 - MADRAS HIGH COURT] decided that printer being part of computer, it is eligible for depreciation at higher rate of 60%. Thus CIT(A) has not erred in allowing depreciation @ 60% on such computer software. Decided in favour of assessee. Excess claim of consumption of own generation of electricity - HELD THAT:- We observe that on perusal of the paper book, it is seen that the assessee had filed various invoices for hiring of generator sets, which have not been disputed. Further, the assessee had also submitted that invoices for purchase of oil for running the DG sets. More importantly, it is also observed that the production in the aforesaid units had also taken place during the impugned year under consideration and the income therefrom has been offered to tax. Accordingly, assessee has produced necessary invoices for taking the DG sets on rent and the invoices for the purchase of oil for running the aforesaid DG sets. Income from manufacturing units have duly been offered to tax by the assessee and also that while disallowing the aforesaid expenditure, AO has also not rejected the books of accounts of the assessee. Accordingly, we find no infirmity in the order of ld. CIT(A) while allowing this ground of appeal of the assessee.
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2023 (11) TMI 796
DRP directions communicated without mentioning DIN - whether a curable defect? - HELD THAT:- It mandates that on or after 1st day of October, 2019, no communication will be issued without a computer generated DIN, which has to be quoted in the body of the communication A perusal of the DRP order shows that it is clear in the body of DRP order, no DIN number is mentioned nor there is any reason of not mentioning the DIN number in order of the DRP. Is such a situation, the DRP order will lose its validity. Subsequent separate communication of DIN is a superfluous exercise. Thus, keeping in view the clear language above the assessment orders have to be declared as non-est and deemed to have never been issued. While coming to such conclusion, we find support from various judicial precedents cited before us by learned counsel for the assessee, including the decision of Brandix Mauritius Holdings Ltd [ 2023 (4) TMI 579 - DELHI HIGH COURT] . Assessee appeal allowed.
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2023 (11) TMI 795
Validity of penalty levied u/s 271(1)(c) where the validity of assessment order itself is in doubt - Assessment u/s 153A questioned on approval Granted u/s 153D - addition to the total income of the assessee in the assessment framed u/s 153C r.w.s. 143(3) - difference in profit and capital balance reported in books of account maintained for income tax return purpose viz-a-viz books of account seized during the search - HELD THAT:- We find that the ACIT has granted approval under section 153D of the Act in a mechanical manner and without the application of mind and without considering the materials on record. Furthermore, the approval was granted on the very same day. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the JCIT Commissioner before granting the approval. Therefore, we have no hesitation holding that the assessment order made u/s 143(3) of the Act r.w. sec. 153C of the Act is bad in law and deserves to be annulled. The assessee accepted the assessment framed under section 153C read with section 143(3) of the Act despite the fact that the procedures as specified under section 153D of the Act were not complied with by the AO - As decided in M/s Atlanta Electricals Pvt. Ltd. [ 2019 (9) TMI 1235 - ITAT AHMEDABAD] wherein as held in such like non-descript and innocuous situation, where the quantum assessment itself is susceptible, the consequences in form of penalty under s.271(1)(c) of the Act would not, in our view, be justified - Decided in favour of assessee.
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2023 (11) TMI 794
Revision u/s 263 - taxability of Government grants - As per CIT grants received by the assessee in such year were wrongly taken as capital receipt - HELD THAT:- The entire show cause notice that the initiation of revision is premised only on the report submitted by the AO requesting for the revision of the assessment order. During an earlier hearing, the ld. DR was directed to produce the said report of the AO forming part of the show cause notice. DR produced the file in original containing the AO s letter dated 22-03-2018 requesting for the revision of the assessment order and such request having been routed through the range JCIT with his own letter dated 27-03-2018. Pursuant to such letter of the AO, the ld. PCIT issued the above show cause notice on 29-05-2018. It is apparent that the entire foundation of the revision is based on the AO requesting the ld. PCIT to revise the assessment order. Both the conditions, namely, the CIT calling for and examining the record and then considering the assessment order passed by the AO to be erroneous and prejudicial to the interest of the Revenue are to be cumulatively satisfied by the CIT alone. The use of the word `and between the two expressions amply demonstrates that the calling for and examining the record by the CIT should precede and his such examination should culminate in getting satisfied that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue . If one of these conditions gets negated, that is, either he does not call for and examine the record or such examination does not lead him to satisfying the assessment order erroneous etc., the jurisdiction u/s. 263 is not activated. Revision u/s. 263 is concerned, it is the sole prerogative of the Pr. CIT, who needs to take suo motu action on calling for and examining the record of any proceedings under this Act and on the basis of such examination considering the assessment order erroneous and prejudicial to the interest of the Revenue. It is evident from the show cause notice that the ld. PCIT initiated revisionary proceedings just on the basis of the AO s report without carrying out any independent examination of the record followed by independently satisfying himself that the assessment order required revision. Thus we are satisfied that the ld. PCIT exercised his jurisdiction to initiate the revision proceedings in a wrongful manner, which, ergo, cannot be accorded our imprimatur. Assessee created the bedrock for challenging the revision through the additional ground, on the basis of the show cause notice issued by the ld. PCIT, which is part of the assessee s paper book. Our decision of quashing the revision on this legal issue is based on such show cause notice - The additional ground raises a pure question of law, for which no fresh investigation of facts is required. That is raison d etre for our admitting the additional ground and then espousing it for consideration. It is, therefore, ultimately held that the ld. Pr. CIT was not justified in invoking the revision jurisdiction. Decided in favour of asses
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2023 (11) TMI 793
Revision u/s 263 - claim of exemption u/s. 11 12 - Revision based on the decision of Supreme Court in another case - allegation of violation as per proviso to the provision of section 2(15) - HELD THAT:- CIT(Exemption) while passing revision order has not at all examined the aspect of violation of the proviso to provision of section 2(15) of the Act and moreover the AO while framing assessment u/s. 143(3) of the Act has examined the claim of exemption u/s. 11 of the Act, as is evident from the above computation reproduced from the assessment order. We noted that the Hon ble Supreme Court while delivering judgment in the case of Ahmedabad Urban Development Authority, [ 2022 (10) TMI 948 - SUPREME COURT] has elaborately laid down certain principles and legal position was interpreted vis-a-vis the claim of exemption u/s. 11 12 r.w.s. 2(15) of the Act. But subsequently vide order [ 2022 (11) TMI 255 - Supreme Court ] it is clearly clarified that interpreting charity under section 2(15) by holding that law declared in its judgment had to be understood in context that they were applicable for assessment years in question, however, future applications had to be understood in context for assessment years which were not called upon and accordingly law declared in said judgment would be applicable, as per facts of each such assessment year. Hence simply on the judgment of Hon ble Supreme Court in the case of Ahmedabad Urban Development Authority, supra, the revision is not possible. We also noted from the revision order apart from that the CIT(Exemption) has not at all deliberated how the assessee has violated the proviso to the provision of section 2(15) of the Act and how the AO has not examined the issue. We could not find anything which proves that there is violation of the proviso to provision of section 2(15) of the Act. Hence, we quash the revision order and allow the appeal of assessee.
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2023 (11) TMI 792
Revision u/s 263 - Taxability of surrendered income - addition u/s 68 r.w.s. 115BBE - as per CIT surrendered income was in the nature of unexplained cash and unexplained stock and the same was liable to be added as income from other sources and tax was liable to be paid @ 60% u/s 115BBE of the Act which the Ld. AO failed to do - HELD THAT:- We respectfully follow the decision of the Tribunal in the case of Shri Bharat Malhotra [ 2022 (11) TMI 1427 - ITAT DELHI] - We do not agree with the contention of the Ld. CIT-DR that the Ld. AO had not made any enquiry. We have observed that the Ld. AO had issued questionnaire along with statutory notice(s) sent to the assessee in response to which the assessee had filed written reply along with necessary documents and evidence. He perused and considered them. Not only this, the Ld. AO called for books of account which he verified. In our considered view it is not a case of no enquiry. Thus we vacate the order of the Ld. PCIT and restore the assessment order passed by the Ld. AO under section 143(3) of the Act. Decided in favour of assessee.
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2023 (11) TMI 791
Loss of immunity from Penalty u/s. 271AAA - Delay in payment full tax as per the order of Settlement Commission (ITSC) - till the disposal of assessment assessee only paid 30 lacs and the balance was till outstanding - According to the ld. AO the provisions of section 245H(1A) an immunity granted to a person from penalty and prosecution shall stand withdrawn if he fails to pay any sum specified in order of Settlement within the time specified in such order - HELD THAT:- On perusal of the documents, we find that the assessee paid the tax not within the stipulated period but paid as per the list - reflection of payment was also found in Form 26AS. In any case, the assessee had not failed to comply the payment as directed by the ITSC. We fully relied on the order of the Sandeep Singh [ 2017 (1) TMI 1147 - SUPREME COURT] - The ITSC has power to extend the limitation period for payment of tax. For application of Section 271AAA of the Act, the statute grants immunity in Sub-Section2(i) for non-specification of undisclosed income u/s 132(4) of the Act. In the statement recorded no such undisclosed income was derived. It is duty of the Authorised Officer to ask the relevant question to ascertain the undisclosed income during the statement recorded in search proceeding, relied on Jayendra N. Shah[ 2018 (3) TMI 950 - ITAT AHMEDABAD] - DR in argument mentioned that the assessee had lost the immunity, so penalty is justified. But remained silent about the application of Section 271AAA(2)(i) - In our considered view, the assessee is eligible for granting immunity for application of penalty u/s 271AAA - Decided in favour of assessee.
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2023 (11) TMI 790
Revision u/s 263 - Characterization of income - CIT asking the AO to treat the agricultural income as unexplained income of the assessee - HELD THAT:- In view of the exercise undertaken by the AO we are compelled to hold that the AO has made sufficient and adequate enquiry on the sole issue under the purview of limited scrutiny and thereafter, accepted the claim of assessee regarding exemption of agricultural income. Thus, we are not in agreement with the conclusion drawn by the Ld. PCIT that the AO has allowed claim of assessee without making any inquiry or verification. On the other hand, as we have noted above the AO has taken a plausible and sustainable view after detailed examination and verification of claim of assessee earning exempt agricultural income therefore, the assessment order cannot be alleged as erroneous and prejudicial to the interest of revenue. Our conclusion gets supports from the judgment of Malabar Industries ltd Vs. CIT [ 2000 (2) TMI 882 - SUPREME COURT] The ld counsel has relied on the order of Rakesh Kumar Vs. CIT [ 2018 (12) TMI 1718 - ITAT DELHI] wherein, it was held that when the AO has raised specific question on the issue of verified required details then it cannot be said that the assessment order is erroneous and prejudicial to the interest of the revenue. In our considered opinion, in such a condition the conclusion drawn by the ld PCIT to set aside the assessment order is not correct and sustainable. Decided in favour of assessee.
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2023 (11) TMI 789
Addition u/s 68 - unexplained unsecured loan - capacity/creditworthiness of creditor - creditor being non-filer of income tax returns (ITR) - HELD THAT:- On a careful consideration, we find the assessee has filed three documents to AO which are un-disputably accepted by both AO and CIT(A), namely (i) A/c confirmation, (ii) Bank Pass-Book and (iii) PAN card. The A/c confirmation is duly signed by creditor and contains full address as well as PAN of creditor. Thus, the identity of creditor is duly proved by these primary documents. Bank Pass Book clearly shows that the creditor received a sum through clearing and the loan was given to assessee out of it. Therefore, the capacity/creditworthiness of creditor to give loan to assessee is proved. The creditor has given loan to assessee out of proceeds held in Bank A/c from clearing of cheque and not from his income. Therefore, it is prima facie wrong to judge the capacity/creditworthiness of creditor with his income. Regarding non-filing of income-tax return by creditor, the point is well decided in Metachem Industries [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] where it has been categorically held Whether that person is an income-tax payer or not or from where he has brought this money is not the responsibility of the firm . The last element of genuineness of loan is also established by the Bank Pass-Book which clearly reflects that the loan has been taken through banking channel and there is no involvement or flow of cash. Thus, all elements of section 68 are satisfied. Regarding the contention of revenue that the assessee has not paid any interest, the same is fully corroborated by the A/c Confirmation acknowledged by the creditor which does not contain any entry of interest payment. Obviously, the assessee has received interest-free loan from creditor. Lastly, we also find sufficient merit in the contention of Ld. AR that the assessee has discharged primary burden cast upon it and still if the AO was not satisfied, he could very well make enquiry or field enquiry from/of the creditor. AO has not done any enquiry, much less field-enquiry, from/of creditor and fastened the tax liability upon assessee by treating the loan as unexplained without any basis. This approach of AO is not acceptable as decided by Hon ble Delhi High Court in Gangeshwari Metal [ 2013 (1) TMI 624 - DELHI HIGH COURT] Even this approach does not get support from NRA Iron [ 2019 (3) TMI 323 - SUPREME COURT] . Thus addition made/confirmed by lower authorities is not sustainable. Decided in favour of assessee.
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2023 (11) TMI 788
TP Adjustment - selection of tested party - CIT(A) did not allow the plea of foreign AE to be the tested party for the purposes of computing the arms length margin - HELD THAT:- It is a settled principle in the transfer pricing provisions that the tested party should be the party in respect of which reliable data for comparison is easily and readily available. This view has been considered by Hon ble Delhi Tribunal in case of Ranbaxy Laboratories Ltd. vs. ACIT [ 2008 (1) TMI 445 - ITAT DELHI-H] . As relying on assessee own case for A.Ys. 2010-11 to 2011-12 [ 2021 (3) TMI 146 - ITAT BANGALORE] we direct the Ld.AO/TPO to consider foreign AE as the tested party.
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2023 (11) TMI 787
Nature of land sold - gain on sale of land - agricultural land or capital asset - definition of 'local authority' - HELD THAT:- Gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a municipality only, irrespective of the name by which such municipality is called. This fact is further substantiated by the provisions contained under clause (b) wherein it has been clearly provided that the authority referred to in clause (a) was only municipality. We find force in the argument of the AR that clarifying within the brackets in the section 2(14)(iii)(a) is for the apparent reason that the name of the local body varies based on the nature of the area for which it is constituted and also for the reason that there is a lack of uniformity all over India with reference to the nomenclature of the urban local authority. In fact, municipality is known by different names in various parts of the country. This fact is also evident from Art.243Q of the Constitution of India, dealing with creation of municipalities. In the light of decision of R.C. Jain [ 1981 (2) TMI 200 - SUPREME COURT] we have observe that land in question also not located in any local authority. Land does not fall in sub- clause (a) of section 2(14)(iii) of the Act as the land is outside of any municipality. Further we have to see whether the land falls in clause (b) of section 2(14)(iii). This section prescribes that any area within such distance, not being more than 8 km from the local limit of any municipality or cantonment board as referred to in sub-clause (a) of section 2(14)(iii) of the Act, as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette. The outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. When the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, and also it is not the transfer of any share in the right in the development of such land through any joint development agreement, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset. Being so, in our opinion, land in question cannot be treated as non-agricultural land on the reasons explained above and to be treated as agricultural land not liable for tax on capital gain. Assessee appeal allowed.
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2023 (11) TMI 786
Revision u/s 263 - nature of income surrendered in survey proceedings - deeming provision r.w.s 115BBE - Higher Rate of Tax - certain discrepancy were observed and confronted to the assessee and in response, the assessee offered towards unexplained cash in hand, towards unexplained advances and towards furniture, fixture and equipment - HELD THAT:- Assessee has been asked specific questions not just regarding the discrepancy found during the course of survey but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income so surrendered is from the assessee s business of running Orthopaedics and Dental Clinic operation which he is running since 2014. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn t satisfy the second condition for invoking the deeming provisions of section 69-69D - AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the assessee, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income. The order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction under section 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. Decided in favour of assessee.
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2023 (11) TMI 785
Carry forward of unabsorbed depreciation or business loss - belated filing of Return - DR said return filed by the assessee was belated one and it is not specifically forth coming whether the loss claimed by the assessee is unabsorbed depreciation or the business loss - HELD THAT:- It is found from the record that the assessee suppose to file its return of income u/s 139(1) of the Act on or before 30 th September, 2010 but the assessee had filed return of income on 28/01/2013, further it is also observed that though the assessee AR contended that assessee has not claimed business loss and the claim of assessee was unabsorbed depreciation, but it is found that as per the assessment order, the assessee had claimed loss and it is not coming forth clearly as to the loss claimed by the Assessee was either business loss or unabsorbed depreciation. Therefore, in our opinion, the issue involved in Ground No. 1 requires to be adjudicated afresh by the A.O. Accordingly, the issue involved in the Ground No. 1 of the Assessee s appeal remanded to the file of the A.O. for de-novo adjudication with a direction to the assessee to substantiate its claim of unabsorbed depreciation. Accordingly, the Ground No. 1 of the assessee is partly allowed for statistical purpose. Depreciation on land computed by estimating the cost of land out of the total consolidated cost of hotel building complex - assessee vehemently submitted that the entire hotel building complex was purchased at consolidated value vide a registered deed without any mention of separate cost of hotel land, therefore, the reduction of depreciation made by the A.O. is bad in law - HELD THAT:- Merely because the parties have not specified the separate value of the land and building in the conveyance deed for the reasons based known to them, the same would not enable an Assessee to claim the depreciation on the land on which the assessee is not eligible to claim the depreciation. If the assessee is allowed to claim the depreciation on the land in the manner contended by the assessee herein, which would promote the mischief of not specifying the value separately which is basis on which valuation is normally done and which could possibly lead to creation of loophole by deliberately not mentioning value of the land and building and by way of paying composite value to the land and building only to claim depreciation contrary to the law. Therefore, in our considered opinion, the assessee is not eligible for depreciation on land cost as per Section 32 of the Act. Since, the assessee himself has bifurcated the value of the land and the building during the registration of conveyance deed and the stamp duty has been collected by State Government based on the circle rate on the value of the land and the building which are identifiable separately, the judicial pronouncements relied by the assessee are not applicable to the present case, Thus, we dismiss the Ground No. 2 of the assessee.
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2023 (11) TMI 784
Penalty u/s 270A - misreporting of income - Assessee on ad hoc basis filed a claim of deduction u/s 80G - assessee did not substantiate this claim of donation by filing the relevant proof of claim and in the assessment proceedings, the assessee has surrendered the said amount in assessment proceeding - HELD THAT:- Assessee did not produce the proof and the AO based on the information placed on record nothing contrary placed on record that the claim of the assessee in real terms not given. The assessee has given the name of trust, pan number and amount of donation given was made in the return of income the assessee has withdrawn the said claim of donation and ld. AO did not investigate this matter further considered the revised computation and in that there is no further amount of tax or interest payable and the details of the donation was already available on record. Assessee in the assessment proceeding submitted that Regarding Donation-I don t any document slip so request you to cancel the same and offer my apology and promise to not put any kind of non-documentary submission in future. This version does not establish that the claim of the assessee is bogus or non genuine nothing contrary brought on record. Considering the facts and circumstances of the case the penalty is not sustainable in light of this circumstances of the case, we are of the considered view that the penalty of levy of the lower authorities confirmed by the CIT(A) u/s 270A of the Act does not have any legs to stand, therefore, the same is deleted based on stated facts. Appeal of the assessee is allowed.
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Customs
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2023 (11) TMI 783
Valuation - Aviation Turbine Fuel (ATF) remained on board - conversion into domestic flight - Methodology adopted in computing assessable value on fuels - loading of the prices with 1% landing charges - 20% transportation cost - 1.125% of insurance - to be included to the transaction value for re-determining the duty liability or not - HELD THAT:- The Larger Bench in the case of Jet Airways [ 2021 (5) TMI 908 - CESTAT MUMBAI (LB)] held that No amount towards alleged transportation cost is required to be included in the value of remnant ATF under Rule 10(2) of the 2007 Rules for determining the transaction value under Section 14(1) of the Customs Act. Therefore, the notional value of transportation under proviso to Rule 10(2) of the Customs Valuation Rules, 2007 cannot be added to the transaction value. Based on the above observation of the Larger Bench of the Tribunal, Tribunal in the case of JET AIRWAYS (INDIA) LTD. VERSUS COMMISSIONER OF CUSTOMS (AIRPORT) , MUMBAI [ 2021 (12) TMI 971 - CESTAT MUMBAI ] observed that in the transaction value, methods of valuation, these costs are irrelevant and extraneous and accordingly, held that the transaction value excludes the scope for addition of freight, insurance and landing charges to the cost of supply for discharge of duty liability on the fuel available on board upon conclusion of an international leg. Thus, going by the reasoning for not adding the transportation charges, it is obvious that none of these charges can become part of transaction value as per Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. This issue is no more res integra as it is settled in favour of the appellants in the case of Jet Airways India. The impugned order set aside - appeal allowed.
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Insolvency & Bankruptcy
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2023 (11) TMI 782
Initiation of CIRP - Maintainability of joint application u/s 7 - separate corporate entities - sharing of Revenue - fulfilment of threshold as prescribed under the IBC or not - existence of financial debt against each applicant or not - time limitation. Whether the joint application under Section 7 against Anand Infoedge Pvt. Ltd. , Mist Avenue and Mist Direct is maintainable? Three Respondents- Appellants herein being separate corporate entities? - HELD THAT:- It is clear that all the three Appellants i.e. Anand Infoedge Pvt. Ltd., Mist Direct Sales Pvt. Ltd. and Mist Avenue Pvt. Ltd. are intrinsically interwoven with the project in question i.e. Festival City in which the Respondents allottees were allotted units. Collaborator No. 1 and 2 are part of project who were entrusted with the development and sale of units. It was collaborator No. 1 who received the payment from the allottees towards allotment of units in favour of the Respondents. All the three Appellants being involved with the one single project in which the allottees have been allotted units, all are necessary ingredients of any resolution which may help the allottees to receive their units, in absence of any of the appellants in Corporate Insolvency Resolution Process, Resolution of project and revival of the Resolution of project is impossible. Thus, Section 7 Application filed against all the three appellants together is maintainable. The three appellants being part of one Common Real Estate Project and the Applicants of Section 7 Application being part of the said project they had every right to initiate Section 7 Application against all the three appellants together - the decision of the Adjudicating Authority upheld holding that application under Section 7 is maintainable. Whether Section 7 Application filed by the allottees fulfils the threshold as prescribed under the IBC? - Whether while scrutinizing the claims of each applicants of joint application filed under Section 7, it has to be established that the financial debt exist against each applicant in which default has been committed and the claim of the applicants is not barred by limitation and applicants fulfil all eligibility of valid allottee who is entitled to file Section 7 application? - HELD THAT:- From the ratio of the Judgment of Hon ble Supreme Court in Manish Kumar [ 2021 (1) TMI 802 - SUPREME COURT] , following conclusions are irresistible (i) In event the default of Rs. 1 Crore is made out against the Corporate Debtor it is not necessary that the default of Rs. 1 Crore should be qua of the applicants individually or separately if default of Rs. 1 Crore is made out qua any of the applicants or any other financial creditor who is not even part of the Application, application under Section 7 is maintainable. (ii) what is required to be proved under Section 7 is that the default of Rs. 1 Crore which is due on the Corporate Debtor is not barred by limitation if default of Rs. 1 Crore due of corporate debtor is within limitation the fact that claim of certain other allottees who were joint in the application is barred by limitation is insignificant. In Manish Kumar itself it has been answered that requirement of threshold under proviso in Section 7(1) must be fulfilled as on the date of filing of the Application. The fact that eight allottees have settled the matter is thus inconsequential and eight allottees cannot be excluded in the counting of 100 allottees which are required to be fulfilled as threshold. The provision of Section 7(1) Second Proviso inserted by Act No. 1 of 2020 having been explained by the Hon ble Supreme Court, the law is well settled that all applicants who have joined the Section 7 Application have not fulfilled the threshold individually nor claim of all the applicants individually has to be within time in event there is default of more than Rs. 1 Crore and default of Rs. 1 Crore on basis of which the application is filed is well within time. The mere fact that claim of some other barred by time is insignificant. Application under Section 7 of the Code triggered when default of Rs. 1 Crore qua some of the applicant or some other financial creditors is fulfilled, Insolvency Resolution Process under Section 7 can commence. The Adjudicating Authority did not commit any error in returning the finding that threshold as required by Section 7(1), second proviso is fulfilled. In the present case, the Application under Section 7 is maintainable and objection that application is not maintainable on the ground that it does not fulfil the threshold as provided under Section 7(1) Second Proviso has righty been rejected. Thus, no error has been committed by the Adjudicating Authority in holding that application under Section 7 filed by the Respondents allottees is maintainable - there are no grounds raised in these Appeals to interfere with the Impugned Order - appeal dismissed.
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2023 (11) TMI 781
Initiation of CIRP - NCLT admitted the application u/s 7 - period of limitation - case is that Section 7 application which was filed after 18 years in October 2019 was way beyond the prescribed limitation period of 3 years under Section 18 of the Limitation Act, 1963 and thus the petition stood barred by limitation. HELD THAT:- The law is well settled that for finding out acknowledgement within the meaning of Section 18 of the Limitation Act, balance sheets can be looked into. Hon ble Supreme Court in Bishal [ 2021 (4) TMI 753 - SUPREME COURT] has extensively examined the question in reference to Section 18 of the Limitation Act and upheld the consideration of balance sheets as a valid acknowledgment of debts but also observed that it would depend on the facts of each case as to whether an entry made in a balance sheet qua, any particular creditor, is unequivocal or has been entered into with caveats - the status of balance sheets as valid acknowledgment of debts needs to be examined depending upon the facts of each case while considering the mention of such non-acknowledging statements in the annexed notes or the auditor s report. The Adjudicating Authority has concluded after scrutinizing the balance sheet and the caveats/notice attached thereto that acknowledgments contained in the balance sheet extends the limitation period and hence the Section 7 application is well within the extended limitation period and thus maintainable. The balance sheets contain an acknowledgement of debt from SBI, the original lender and assignment of the said debt to KMBL. Merely because the notes to the account and the director s report narrate the different stages of subsequent litigation with respect to the said unsecured loan, it cannot be said that these notes in any manner diminish the relevance and import of the debt which finds mention in the balance sheets for the purposes of Section 18 of the Limitation Act. Such caveat/information, read together with the balance-sheet do not negate the acknowledgment of that liability - Adjudicating Authority therefore committed no error in holding that the Section 7 application filed by the Respondent No. 1 was not barred by time there being continuous acknowledgment in their respective balance sheets of the Corporate Debtor which acknowledgment was within the meaning of Section 18 of the Limitation Act extending the period of limitation by fresh period of limitation by each acknowledgment. Section 7 of the IBC allows a financial creditor to initiate an insolvency resolution process against the corporate debtor upon showing a default in debt owed by the corporate debtor. The trigger under Section 7 of IBC is non-payment of dues owed to creditors. In the given facts of the case, where debt and default on the part of the Corporate Debtor qua KMBL stands established, there were no cogent grounds for not admitting the Section 7 petition. There are no error in the impugned order passed by the Adjudicating Authority admitting the Section 7 application. There is no merit in the Appeal - appeal dismissed.
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Service Tax
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2023 (11) TMI 821
Maintainability of petition - petition dismissed on the ground that the petitioners have approached the court belatedly challenging a demand which was raised in the year 2019 - HELD THAT:- The authority has not considered or adjudicated the correctness of the stand taken by the appellant-assessee and continued to issue demand notices alleging default in service tax liability. At that stage, the petitioners had filed the writ petition assuming the audit being of the department had, prima facie, come to a conclusion that there is a default in payment of service tax liability, such audit para will be forwarded to the concerned jurisdictional officer, who, in turn, will put on the assessee on notice to enable the assessee to respond to the allegation. It is thereafter the case will be adjudicated after affording an opportunity to the assessee and an order will be passed by the jurisdictional officer. However, in the instant case such procedure has not been followed. Be that as it may, the assessee is entitled to an opportunity and the assessee should be permitted to place its stand before the jurisdictional officer who has to adjudicate the same and thereafter come to a conclusion by passing a speaking order. This procedure having not been adopted in the instant case, appropriate direction needs to be issued to the authority to do so in the matter. The writ petition is disposed of by directing the petitioners to treat the allegations in para 2 of the Draft Audit Report in Draft Audit Report No.191/ST/DGP Audit/Gr.-02/17-18 which was appended to the notice dated 24.04.2019 as a show cause notice and submit their objections within 30 days from the date of receipt of the server copy of this order.
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2023 (11) TMI 820
Levy of Service Tax - Banking and other financial service - sale of stamp paper, wherein they earned commission income - case of the department is that there is difference between consideration shown in the balance sheet and ST-3 return and on such difference according to department the Service Tax was not paid - HELD THAT:- Firstly the Adjudicating Authority as well as the Commissioner (Appeals) has not come to conclusion that the difference between the figure of ST-3 return and balance Sheet is against which head of service. It is a settled law that without determining the fact about which service is involved demand prima facie cannot be sustained. However, now the appellant has given the complete detail in their appeal regarding the differences. Therefore, the same needs to be re-verified and re-considered. The matter is remanded to Adjudicating Authority by keeping all the issues open - appeal allowed by way of remand.
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2023 (11) TMI 819
Short payment of service tax - Works Contract Service - contract with Tamilnadu Water and Drainage Board (TWAD) which was a turnkey / composite contract for supply of PSC pipes, for laying of the pipes as well as for executing other installations for the transportation of water as per terms of the contract of water project formulated by TWAD Board - HELD THAT:- The appellant has been given a contract by TWAD Board for laying pipelines for drinking water supply project. In page 36 of the appeal paper book the appellant has enclosed letter dt. 17.09.2008 issued by the TWAD with regard to the contract. From perusal of same, it cannot be said that appellant is a sub-contractor for providing the services - On perusal of the definition of Works Contract Service, it can be seen that the sub-clause (b) of the definition provides that the laying of pipeline for non-commercial or non-industrial purposes would not attract levy of service tax. In the present case, the activity of laying of pipelines is done by the appellant for TWAD Board which is for the Government and included for supply of drinking water project. The very same issue was considered by the Larger Bench of the Tribunal in the case of M/S. LANCO INFRATECH LTD. AND OTHERS VERSUS VERSUS CC, CE ST, HYDERABAD [ 2015 (5) TMI 37 - CESTAT BANGALORE (LB)] where it was held that Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract in respect of dam and is thus excluded from the scope of Works Contract Service defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision. The decision of the Larger bench was followed recently by the Hyderabad Bench of the Tribunal in the case of PROGRESSIVE CONSTRUCTIONS LTD. VERSUS COMMISSIONER OF SERVICE TAX HYDERABAD SERVICE TAX [ 2023 (4) TMI 1132 - CESTAT HYDERABAD] to hold that demand cannot sustain - This Bench also in the case of M/S. SHRIRAM EPC LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI [ 2018 (11) TMI 1083 - CESTAT CHENNAI] had considered similar issue and held that demand of service tax on the activity of laying of pipelines for drinking water supply cannot sustain. The impugned order is set aside. Appeal is allowed.
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Central Excise
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2023 (11) TMI 818
Time limitation - non-inclusion of entire input stock for the purpose of expunging the credit during transition from duty paying unit to the SSI unit - HELD THAT:- The appellant had disclosed the purchase of raw materials after 15.3.2007 in their excise records and also in the cenvat registers. It is submitted by the learned counsel that they had not included this in the closing stock on the understanding that the only the credit availed by them upto the last clearance is to be expunged. On being pointed out by department they have immediately accepted the demand and paid the amount at the time of filing the appeal. Taking note of the fact that the appellant is not contesting this amount admitted by them and as these invoices have been reflected in their ER.1 returns, it is found that it is a bonafide mistake on the part of the appellant that these invoices were not included in the closing stock. The demand raised beyond the normal period cannot sustain. Assessee succeeds on the ground of limitation. However, as the liability to the tune of Rs.1,38,141/- is admitted and not contested in this appeal, the same is upheld along with interest. The impugned order is modified to the extent of upholding the demand of Rs.1,38,441/- along with interest and setting aside the remaining demand interest and penalties. The penalty in regard to Rs.1,38,441/- is also set aside - Appeal allowed in part.
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CST, VAT & Sales Tax
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2023 (11) TMI 817
Condonation of delay of 15 years i.e. 5,484 days in filing appeal - inordinate delay was explained by the applicant-assessee stating that a letter had been written to the General Manager of the assessee seeking guidelines with reference to the aforesaid assessment order dated 7.8.2003 - it was held by High Court that The fact that the assessee had been writing letters internally is also of no consequence, inasmuch in the context of delay of 15 years procedural delays that sometimes occur in such matters and which are often accepted as due explanation of the delay do not are of few days or few months, not 15 years. The delay is wholly inordinate and excessive. HELD THAT:- There are no reason to interfere with the impugned order(s). The Special Leave Petitions are hence dismissed.
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2023 (11) TMI 816
Eligibility for input tax credit - exemption of inter-state sales from tax - HELD THAT:- Since the statutory provisions under the KVAT Act restrict the availment of input tax credit to only such situations where tax is payable on outward sales and there is a prohibition against availment of input tax credit in situations where the outward inter-state sale is exempted, the issuance of the exemption notification by the State Government under Section 8(5) of the CST Act must be seen as bringing into operation the prohibition under the 3rd proviso to Section 11(3) in respect of input tax credit and the 3rd proviso to Section 12(1) in the case of special rebate - the question really is not whether the petitioners had an option to avail the exemption envisaged in the notifications or not; rather, the point is that by virtue of the notifications aforementioned, the inter-state sale of rubber had to be seen as exempted for the purposes of the 3rd proviso to Section 11(3) and the 3rd proviso to Section 12(1) of the KVAT Act. The petitioners were therefore not entitled to avail input tax credit of the tax paid on purchases of rubber within the State so long as Annexures-I and II notifications were in force and operational. The amendments to the said notifications in 2019, with retrospective effect, only enable those who had paid CST in terms of Section 8(1) of the CST Act to adjust the said payments towards the demands served on them consequent to the disallowance of the input tax credit/special rebate availed by them. The impugned order of the Tribunal which grants the petitioners the limited relief aforesaid does not require modification or interdiction - Revisions are therefore disposed by answering the questions of law raised therein against the assessees and in favour of the Revenue.
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2023 (11) TMI 815
Permission to petitioner to issue/generate the 1st respondent to allow the petitioner to generate Form C declaration under the Central Sales Tax Act, 1956 - purchase of Extra Neutral Alcohol (ENA) effected from outside the State of Tamil Nadu - HELD THAT:- The product supplier of ENA have been following the Central Sales Tax Act and have paid the tax accordingly. In the present case, the petitioner's supplier also paid the tax under the CST Act and their assessment have been pending for the reason that they have not furnished Form 'C' by the petitioner due to the reason that the respondents have blocked the portal. As contended by the learned Additional Advocate General, the fact remains that no decision has been taken by the GST Council with regard to whether ENA has to be included in the CST regime or excluded. All the States have been consistently following CST and taxes also been paid accordingly. In view of the fact that in the recent 52nd GST Council Meeting held on 07.10.2023, a decision was taken to keep the ENA used for manufacture of alcoholic liquor for human consumption to keep the same outside the purview of GST, this Court is of the considered view that it would be appropriate to direct the respondents to issue Form 'C' from 01.07.2017 to till date for all the purchases made by the petitioner from outside the State or inside the State and further, this Court also directs the respondent to keep open the web portal for the ENA commodity, so that the petitioner can upload the purchases of ENA alongwith 'C' Form etc. - It is made clear that the State shall issue Form 'C' for the purchases made from the other states until the Law Committee issues suitable amendment in law to exclude ENA for use in manufacture of alcoholic liquors for human consumption from the ambit of GST, as per the decision taken in the 52nd GST Council Meeting held on 07.10.2023. This writ petition is disposed of.
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Indian Laws
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2023 (11) TMI 814
Condonation of delay of around 479 days in presentation of the appeal - whether the first respondent had shown sufficient cause for which the appeal could not be presented within the prescribed period of limitation? - HELD THAT:- The High Court s decision to condone the delay on account of the first respondent s inability to present the appeal within time, does not suffer from any error warranting interference. STATE OF NAGALAND VERSUS LIPOK AO [ 2005 (4) TMI 321 - SUPREME COURT] arose out of an appeal where this Court condoned the State s delay of 57 days in applying for grant of leave to appeal before the high court against acquittal of certain accused persons. This Court observed that in cases where substantial justice and a technical approach were pitted against each other, a pragmatic approach should be taken with the former being preferred. Further, this Court noted that what counted was indeed the sufficiency of the cause of delay, and not the length, where the shortness of delay would be considered when using extraordinary discretion to condone the same. In BALWANT SINGH VERSUS JAGDISH SINGH [ 2010 (7) TMI 556 - SUPREME COURT] , this Court refused to condone the delay of 778 days in bringing on record the legal heirs of the petitioner therein through an application filed under Order XXII Rule 9 of the Code of Civil Procedure, 1908. It was observed that though sufficient cause should be construed in a liberal manner, the same could not be equated with doing injustice to the other party. For sufficient cause to receive liberal treatment, the same must fall within reasonable time and through proper conduct of the concerned party. The Court emphasised that for such an application for condonation to be seen in a positive light, the same should be bona fide, based on true and plausible explanations, and should reflect the normal conduct of a common prudent person. As the aforementioned judgments have shown, such an exercise of discretion does, at times, call for a liberal and justice-oriented approach by the Courts, where certain leeway could be provided to the State. The hidden forces that are at work in preventing an appeal by the State being presented within the prescribed period of limitation so as not to allow a higher court to pronounce upon the legality and validity of an order of a lower court and thereby secure unholy gains, can hardly be ignored. Impediments in the working of the grand scheme of governmental functions have to be removed by taking a pragmatic view on balancing of the competing interests. The special circumstances obtaining here that the impugned order reasonably condones the delay caused in presenting the appeal by the first respondent before the High Court, the present appeal is, accordingly, dismissed.
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2023 (11) TMI 780
Seeking grant of bail - Smuggling - supply of Ketazee 500 injections - recovery of Pseudoephedrine Hydrochloride, which is a controlled substance under the NDPS Act, and Ketamine Hydrochlroide, which is psychotropic substance under the NDPS Act - applicability of Section 37 of the NDPS Act - HELD THAT:- In N.C. Chellathambi v. N.C.B. [ 2005 (4) TMI 647 - DELHI HIGH COURT] , this court granted bail to the applicant in a case of recovery of Ephedrine, a controlled substance. In view of the recovery of Pseudoephedrine, which is a controlled substance, this Court is of the opinion that Section 37 of the NDPS Act will not be attracted in the present case as the allegations with respect to the present applicant are covered under Section 25A of the NDPS Act. In view of the facts and circumstances of the present case, the applicant is admitted to bail upon his furnishing a personal bond in the sum of Rs. 1,00,000/- along with two sureties of the like amount, to the satisfaction of the Learned Trial Court/Link Court, further subject to the conditions imposed - application allowed.
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