TMI Tax Updates - e-Newsletter
November 25, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax

TMI Short Notes

1. Supreme Court Upholds Validity of Re-Assessment Notices Issued During COVID-19 Lockdown

  Income Tax:

Articles

1. PENALTY ON DIRECTORS CONTRAVENING EXPORT REGULATIONS UNDER FOREIGN EXCHANGE MANAGEMENT ACT, 1999

   By: DR.MARIAPPAN GOVINDARAJAN

2. Difference between “License” and “Royalty”

   By: Vivek Jalan

3. Penalty proceedings under Section 130 of the CGST Act cannot be initiated if excess stock was found

   By: Bimal jain

News

1. DRI Apprehends Suspect with 3496 grams of Cocaine at Mumbai Airport

2. India is the best place in the world to provide sustainable infrastructure to the digital world: Shri Piyush Goyal

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD/POD-3/P/CIR/2024/162 - dated 22-11-2024

Guidelines to Stock Exchanges, Clearing Corporations and Depositories

GST - States

2. 21/2024-Kerala SGST - dated 18-11-2024

Kerala State Goods and Services Tax Act, 2017- Adjudication of Show Cause Notices- Common Adjudicating Authority

Highlights / Catch Notes

GST

• Goods matched documents like e-way bill and invoices; detention order quashed despite description mismatch.

  Case-Laws - HC : The court held that the goods were accompanied by relevant documents like e-way bill, tax invoice, and the HSN code and quantity mentioned therein matched the actual goods. Despite the goods being physically verified as PVC Aluminum Mixed Cable (Feeder Cable) instead of aluminum cable, the HSN code and tax rate remained the same. The authority failed to prove any material difference in HSN code or tax rate from the invoices. The court quashed the detention order, stating that once the HSN code and tax rate match, no adverse inference can be drawn, as the petitioner would not gain by misdescribing the goods, nor would the state lose legitimate tax.
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• Goods Inspection Matches E-Way Bill, Lack of Tax Evasion Intent Quashes Penalty.

  Case-Laws - HC : E-Way Bill was not properly filled, but upon inspection, no discrepancy was found between the physically available goods and the goods disclosed in the E-Way Bill. The assessee claimed no intent to evade tax. The authorities did not find any intent to evade tax. The High Court held that in cases of mere technical breaches, where substantial compliance is disclosed, physical inspection tallies with the goods declared in the E-Way Bill, and no intent of tax evasion is made out, proceedings u/s 129 of the GST Act become vitiated. Consequently, the impugned order was quashed, and the petition was allowed.
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Income Tax

• Reassessment Valid u/s 147: No Grounds for Section 153C as No Satisfaction Note Recorded in Search.

  Case-Laws - HC : Interplay between Sections 153C and 147 of the Income Tax Act, specifically whether recourse to Section 147 is available when the Assessing Officer (AO) is empowered to proceed u/s 153C. It was held that Section 153C enables the AO to assess or reassess income where incriminating assets, material, or documents are found during a search u/s 132 or requisition u/s 132A in respect of another person. However, in the present case, the jurisdictional conditions to initiate proceedings u/s 153C were not satisfied as the AO of the searched person did not record a satisfaction note and transmit relevant material to the Assessee's AO. The reassessment proceedings were initiated u/s 147 based on information received from the Investigation Wing regarding the Assessee's purchase of penny stock units. Since the AO did not assume jurisdiction u/s 153C, the non-obstante clause of Section 153C would not override Sections 147, 148, and 149, and the decision to reassess u/s 147 was upheld.
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• Tax Assessment Dispute: Sections 147 vs 153C, Appeal Allowed, Assessee's Case Reinstated for Further Review.

  Case-Laws - HC : Assessment u/s 147 versus 153C - choice of correct course of assessment. The assessee's name featured in the list of beneficiaries of accommodation entries by way of share capital premium/loan. The Assessing Officer did not record a satisfaction note or forward it to the assessee's Assessing Officer, failing to satisfy the conditions for reopening assessment u/s 153C. Recourse to Section 147 based on information received by the Investigation Wing was not precluded. The search in Jain Brothers' case was conducted on 14.09.2010. Section 153C(1) then allowed assessment/reassessment of income u/s 153C only if assets, documents, or books belonged to the person other than the searched person. On 12.03.2013, when the Assessing Officer received information, reassessment u/s 153C was impermissible. The amendment by Finance Act, 2015, applicable to searches before 01.06.2015, did not impact this case. The jurisdictional condition for the Assessing Officer to assume jurisdiction u/s 153C was not satisfied, aligning with Abhisar Buildwell (P.) Ltd. The appeal is allowed, and the assessee's appeal is restored before the ITAT for consideration on other grounds.
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• Tax Authority Cannot Disallow Losses Based on Assumptions; Court Upholds Legitimacy of Commercial Transactions.

  Case-Laws - HC : The High Court held that the Assessing Officer cannot disallow losses merely based on assumptions and surmises regarding the commercial expediency of transactions undertaken by the assessee. The transaction for sale and purchase of dies was a pure commercial transaction entered into by the assessee in its commercial wisdom, and the fact that the assessee incurred a loss in the said transaction was not disputed. There was no allegation of any undisclosed consideration or clandestine transaction to reverse the loss. The Assessing Officer made the addition solely based on their perception of what was commercially expedient, which is not within their purview. The assessee had justified its commercial decision by reflecting enhanced turnover and profits from its business, but even if profits were not earned, it would not make a difference, as the examination is limited to whether the transactions were genuine, not whether they were commercially expedient. The High Court found no material other than suspicion to justify the addition and decided in favor of the assessee.
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• Tribunal Overturns Disallowance of Depreciation, Remands Expense Verification to Assessing Officer for Further Review.

  Case-Laws - AT : The Income Tax Appellate Tribunal (ITAT) adjudicated on two issues: disallowance of excess depreciation claimed on a building and disallowance of expenses. Regarding the first issue, the ITAT held that the legal fiction u/s 50C for computing capital gains cannot be extended to Section 32 for claiming depreciation on a block of assets. The actual sale consideration, not the notional value u/s 50C, should be reduced from the opening written down value (WDV) for computing depreciation. The disallowance made by the lower authorities was set aside. Concerning the second issue, the assessee agreed to produce necessary evidence supporting the expenses claimed. The matter was restored to the Assessing Officer to verify the documentary evidence and decide accordingly.
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• Loan-to-Share Conversion Scrutinized Under Income Tax Act for Fair Market Value Compliance and Excess Premium Issues.

  Case-Laws - AT : Conversion of loan into share capital attracts provisions of Section 56(2)(viib) of the Income Tax Act. The term 'consideration' used in the section has wide implications, including non-monetary transactions. Conversion of loan into equity does not exempt the assessee from Section 56(2)(viib). The fair market value (FMV) of shares must be determined using prescribed valuation methods like discounted cash flow or net asset value consistently. Significant fluctuations in share premium within a short period without justification indicate undervaluation, attracting addition u/s 56(2)(viib) for excess premium over FMV. The assessee's contentions regarding non-applicability of Section 56(2)(viib) and lack of valuation rules were rejected. The Appellate Tribunal upheld the addition made u/s 56(2)(viib) for excess share premium over FMV.
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• Stamp Duty Value on Agreement Date Applies for Pre-Registration Payments in Joint Property Ownership.

  Case-Laws - AT : Addition u/s 56(2)(x) relates to joint ownership of property. If the consideration amount is fixed on the agreement date but registration occurs later, the stamp duty value on the agreement date should be considered. However, this applies only when the consideration is paid through banking channels before registration. In the present case, payments were made through proper channels before registration. Although the allotment letter is not a registered agreement, it contains agreed terms and conditions, making it covered under the proviso to section 56(2)(x). Since the assessee agreed to purchase the under-construction property in 2016 through the allotment letter and made payments before registration, the stamp duty value on the allotment date should be treated as the value for section 56(2)(x). The stamp duty value on the allotment date was within the 10% tolerance limit compared to the agreement value, so no addition is required u/s 56(2)(x) for the assessee or their spouse.
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• Tax Tribunal Dismisses Local Authority Appeal; Enforces Rs. 3 Lakh Leave Encashment Exemption for Non-Gov Employees.

  Case-Laws - AT : Section 10(10AA) of the Income Tax Act provides tax exemption for leave encashment upon retirement for Central/State government employees and employees other than Central/State government employees, subject to different limits. Section 10CC includes all individual employees deriving income other than by way of monies, irrespective of the category of employers. Leave encashment, retirement benefits, and perquisites received by employees are governed by Sections 10(10AA), 10C, and 10CC respectively. Local authorities like municipal corporations, panchayats, and cantonment boards are distinct from State and Central governments under the Income Tax Act and the Constitution. The assessee, being a local authority, is liable to deduct tax on leave encashment payments to its employees, subject to the exemption limit of Rs. 3 lakhs prescribed by Section 10(10AA) for non-Central/State government employees. The Revenue Authorities shall recompute the quantum of tax deductible accordingly. The appeals of the assessee are dismissed by the Appellate Tribunal.
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• Tribunal Voids Assessment Orders for 2011-12 & 2012-13 Due to AO's Lack of Jurisdiction; 1% Income Addition Deleted.

  Case-Laws - AT : The Appellate Tribunal held that the assessment orders issued u/s 153C for the assessment years 2011-12 and 2012-13 were beyond the jurisdiction of the Assessing Officer (AO) and void ab initio. The amendment to Section 153C with effect from April 1, 2017, had prospective effect, clarified by CBDT Circular 2/2018. The AO could only reopen assessments for the preceding six years from the year of satisfaction recorded on September 26, 2018, i.e., assessment years 2013-14 to 2018-19. Consequently, the impugned assessment orders for 2011-12 and 2012-13 were quashed. Regarding the reopening of assessments of other persons u/s 153C, the Tribunal held that the AO failed to record valid satisfaction year-wise and narrate specific documents relied upon for initiating proceedings. The satisfaction note lacked details of information and failed to establish a direct correlation between the incriminating material and the relevant assessment years. The addition of 1% representing income from commission and bank statement credits/debits was deleted due to the absence of valid satisfaction recorded, following the precedent in M/s Marconi Infratech.
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• Cash found in lockers linked to temple trust and educational foundation, not Bajaj family.

  Case-Laws - AT : The Income Tax Appellate Tribunal held that cash found in two lockers belonged to RNB Temple Trust and Ram Bajaj Foundation. The Trust's balance sheet showed cash in hand of Rs. 1,79,00,000, explaining the addition of Rs. 4,00,000 sustained by the CIT(A). The Foundation's balance sheet was accepted in its assessment, and the locker was operated before the search. The cash in the lockers, earmarked for temple construction and running an educational institution, matched the declared cash in both entities' balance sheets. Considering the circumstances, the Tribunal presumed the cash belonged to the Trust and Foundation, not the Bajaj family members, and deleted the addition made by the CIT(A), deciding in favor of the assessee.
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• Income Return Adjusted: Deposit Refund Disputed, Petrol Expenses Upheld, Salary Additions Deleted.

  Case-Laws - AT : The assessee filed a revised return of income to correct the addition based on professional receipts in the original return. The hospital made a total payment of Rs. 47,26,546 to the assessee during the year, shown as professional receipts. However, there is no evidence to suggest that Rs. 1,89,909 pertains to a partial refund of deposits. Therefore, the addition of Rs. 1,89,909 is confirmed. The assessee proved payment to an anesthetist, and the addition related to this payment is directed to be deleted. The assessee substantiated payment to Dr. RK as professional fees through evidence, and this addition is directed to be deleted as the expenditure was wholly and exclusively for business purposes. Regarding petrol and diesel expenditure, the assessee failed to provide specific evidence, and the addition of Rs. 1,05,230 is upheld. The salary and wages addition of Rs. 48,950 is directed to be deleted as the amount remained payable for March 2020, and the assessee provided supporting documents without any discrepancy.
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Customs

• Integrated Circuit MEMS Microphones Classified Under Customs Tariff Heading 8518 Due to Primary Function as Microphone.

  Case-Laws - HC : The core issue pertains to the appropriate customs tariff classification of 'Integrated Circuit Micro Electro Mechanical System Microphones' imported by the appellant. The court held that despite the product's description, its primary identity is that of a microphone enhanced by MEMS technology, rather than an integrated circuit (IC). The court opined that the product's classification is determined by its function as a microphone, not the underlying technology used. While MEMS technology enhances the microphone's capabilities, it does not change its fundamental nature. The court distinguished this case from scenarios where standalone ICs or MEMS sensors are imported, as the product in question is a fully assembled MEMS microphone with integrated components. Consequently, the court ruled that classifying the product under Customs Tariff Heading 8518 as a microphone, rather than under Heading 8542 as an electronic integrated circuit, is appropriate based on the Customs Tariff Act, Harmonized System nomenclature, and relevant explanatory notes.
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• Court Rules No Social Welfare Surcharge Due on Exempted Customs Duties; SWS Must Match Zero Duty Payment.

  Case-Laws - HC : A legal challenge was raised regarding the requirement to pay the Social Welfare Surcharge (SWS) on imported goods when the basic customs and additional duty were exempted through a scrip. The court examined Section 110 of the Finance Act, 2018, which levies SWS at 10% on the aggregate of duties collected under the Customs Act. The petitioner argued that since no customs duty was paid due to the exemption, the SWS, being a percentage of the duty paid, should also be zero. The court agreed with this reasoning, distinguishing it from previous cases on NCCD where the issue was the absence of a notification for levy. The court held that upon obtaining an exemption, the liability to pay duty is discharged, and no duty collection follows the levy. Consequently, if the duty paid is zero, the SWS, calculated as a percentage of the duty paid, must also be zero. The court granted a declaration that the petitioner is not required to pay SWS on customs duty exempted under the scrip.
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IBC

• Claim for Performance Pay Rejected: Not an Operational Debt Under IBC, Appeal Dismissed Due to Ambiguity in Notices.

  Case-Laws - AT : Maintainability of an application for initiation of Corporate Insolvency Resolution Process (CIRP) u/s 9 of the Insolvency and Bankruptcy Code (IBC). The key points are: The claim for performance pay, being subject to subjective assessment criteria, does not constitute an "operational debt" or a "debt" under the IBC. The Appellant issued both Form 3 and Form 4 notices u/s 8 of the IBC, indicating uncertainty about the nature of the claim. The issuance of multiple notices u/s 8 does not make the claim payable as an operational debt. The claim raised by the Operational Creditor does not qualify as an operational debt, and hence, the initiation of CIRP u/s 9 against the Corporate Debtor is not justified. The Adjudicating Authority's rejection of the claim through the impugned order is valid and does not warrant interference by the Appellate Tribunal u/s 61 of the IBC. Consequently, the appeal is dismissed.
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• NCLAT Revives Insolvency Application, Rejects Allegations of Malicious Intent Amid Ongoing SBI Recovery Proceedings.

  Case-Laws - AT : Rejection of an application filed u/s 10 of the Insolvency and Bankruptcy Code (IBC) by the Appellant, where the State Bank of India (SBI) had initiated proceedings u/s 13(2) of the SARFAESI Act prior to the filing. The Adjudicating Authority dismissed the Section 10 application, citing the Appellant's malicious and fraudulent intent to delay and halt SBI's recovery proceedings. However, the NCLAT held that merely filing a Section 10 application subsequent to Section 13(2) proceedings cannot be grounds for inferring fraudulent intent. The Tribunal relied on its previous judgment in Unigreen Global Private Limited vs. Punjab National Bank, which stated that pending SARFAESI or DRT proceedings cannot be grounds for rejecting a complete Section 10 application. The NCLAT ruled that the Adjudicating Authority erred in allowing SBI's Section 65 application and rejecting the Section 10 application solely based on the timing of the filings. The Tribunal revived the Section 10 application for fresh consideration by the Adjudicating Authority.
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• Inflated invoices by employees led to pre-existing dispute over payments under Master Agreement before insolvency demand.

  Case-Laws - AT : Pre-existing dispute between parties regarding inflated invoices issued by appellant's staff/employees for different project under same Master Service Agreement. Corporate debtor entitled to rights/liabilities under Principal Agreement, so dispute over invoices covered. Appellant commenced investigation, filed police complaint after learning of inflated invoices. Correspondence shows corporate debtor disputed entitlement/payment before demand notice, indicating pre-existing dispute. Adjudicating authority rightly rejected Section 9 application due to pre-existing dispute evident from prior correspondence. No error by adjudicating authority in rejecting application. Appeal dismissed by appellate tribunal as lacking merit.
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• Shareholder Disputes Under Companies Act Separate from IBC; Shareholders Lack Standing for IBC Appeal, NCLAT Rules.

  Case-Laws - AT : The NCLAT held that disputes related to shareholder oppression or mismanagement under the Companies Act are distinct from the Insolvency and Bankruptcy Code (IBC) and fall outside its purview. As a special statute, the IBC prevails over the Companies Act pursuant to Section 238. The appellant's contention regarding resolution of the Company Petition u/ss 241 & 242 of the Companies Act before the CIRP petition was rejected. The NCLT order complied with the IBC provisions, and there was no pleading of pre-existing dispute. Equity shareholders, as owners, are beneficiaries when the company performs well but lose their capital in liquidation. While erstwhile directors can intervene and file appeals u/s 61, individual or majority shareholders cannot pursue derivative action. The appellant's argument that the definition of 'aggrieved person' u/s 61 should include any party whose interests are impacted was rejected, as a restrictive interpretation is warranted. The appellant, being a shareholder, is not an "aggrieved party" under the IBC and has no locus to file this appeal, leading to its dismissal.
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Service Tax

• Reimbursable Charges Excluded from Taxable Value for Service Tax.

  Case-Laws - AT : The charges collected by the appellant from customers towards statutory obligations like electricity charges, water charges, and legal fees are reimbursable expenses and cannot be included in the taxable value for service tax u/s 67 of the Finance Act, 1994 read with Rule 2A of the Service Tax (Determination of Value) Rules. The issue of excluding reimbursable charges from taxable value is settled by the Supreme Court's decision in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. Consequently, the impugned order is set aside, and the appeal is allowed with consequential relief, if any, as per law.
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• Service Tax Exemption Granted for Business Transfer in Slump Sale as Independent Part of Business Under Income Tax Act.

  Case-Laws - AT : The case pertains to service tax liability arising from the sale/transfer of a business as a going concern by way of slump sale under the Income Tax Act, 1961. The issue was whether such transfer qualifies for exemption from service tax under Sr. No. 37 of Notification No. 25/2012-ST. The appellant had transferred an exclusive part of their software development business, which was earlier providing software solutions exclusively for the buyer (M/s ZeroChaos Workforce Solutions Private Limited), as a going concern. The Revenue denied the exemption, contending that the transferred business was not an independent part of the appellant's overall business. However, the CESTAT held that since the appellant had transferred an exclusive part of their business to the transferee, which they were not continuing after the transfer, it qualified as an "independent part thereof" under the exemption entry. Consequently, the appellant was entitled to exemption from service tax under Sr. No. 37 of Notification No. 25/2012-ST for the transfer of business as a going concern by way of slump sale.
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• Fire incident excuse inadequate; appeal dismissed for repeated adjournments beyond statutory limit.

  Case-Laws - AT : The court dismissed the appeal for non-prosecution in accordance with Rule 20 of the CESTAT Procedure Rules, 1982. The request for adjournment beyond the statutory maximum of three times was rejected. The counsel's justification of a fire incident in 2021 was deemed inadequate, as there was ample time to reconstruct the file or obtain relevant documents from the registry or the appellant. The court held that if the counsel was serious about the matter, they should have taken appropriate measures, and thus, the request for further adjournment could not be considered.
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• Refund Claims Denied: Appellate Tribunal Upholds Strict Procedure Compliance Under Unjust Enrichment Doctrine.

  Case-Laws - AT : Permissibility of refund claims and the applicability of the unjust enrichment doctrine. The judicial view emphasizes the principles of economic and distributive justice, equity, and good conscience, as enshrined in the Constitution's Preamble and Directive Principles. The Supreme Court's decision in Mafatlal Industries Ltd. clarifies that seeking a refund is not a matter of right, and a specific procedure must be followed. In the present case, the appellant did not follow the prescribed procedure, and the adjudicating authority invoked Section 11B of the Central Excise Act. The Appellate Tribunal upheld the order, dismissing the appeal and ruling that the refund claim is not maintainable in light of the Mafatlal decision, which upholds the unjust enrichment doctrine.
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Central Excise

• Mobile Service Providers Can Claim CENVAT Credit for Mobile Towers and Prefabricated Buildings as Capital Goods.

  Case-Laws - SC : Mobile service providers (MSPs) can claim CENVAT credit on excise duties paid on mobile towers and prefabricated buildings (PFBs) used for providing output services. Mobile towers and PFBs qualify as "capital goods" or "inputs" under the CENVAT Rules, enabling MSPs to claim credit. The Supreme Court applied the "marketability test" to determine movability, ruling that if goods can be dismantled, relocated without damage, and sold in the market, they retain mobility and qualify as movable property, not immovable. Towers and PFBs meet this test as they can be dismantled, relocated, and sold without losing their essential character. PFBs, housing BTS equipment and power backup, are accessories to antennas and BTS, which are capital goods. Therefore, towers and PFBs are "goods" and "inputs" under CENVAT Rules, allowing MSPs to claim credit on duties paid.
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Case Laws:

• GST

• 2024 (11) TMI 1074
  Violation of principles of natural justice - petitioner was completely denied opportunity of oral hearing before the Assessing Authority - challenge to order whereby demand has been raised against the present petitioner - HELD THAT:- Once it has been laid down by way of a principle of law that a person/assessee is not required to request for opportunity of personal hearing and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order, the fact that the petitioner may have signified No in the column meant to mark the assessee s choice to avail personal hearing, would bear no legal consequence. Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created - Not only such opportunity would ensure observance of rules of natural of justice but it would allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage, if required. The impugned order dated July 27, 2024 is set aside. The matter is remitted to the respondent no.2/Deputy Commissioner, State Tax, Sector-1, Basti, Gorakhpur to issue a fresh notice to the petitioner within a period of two weeks from today - Petition allowed.

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• 2024 (11) TMI 1073
  Seizure and detention of goods - goods in question was under valued - instead of aluminum cable, PVC Aluminum mixed cable (Feeder Cable) was found - HELD THAT:- On perusal of the records, it shows that the goods in question were accompanying with all the relevant documents i.e. e-way bill, GR, tax invoice etc. and in the e-way bill, the HSN Code 8544 were specifically been mentioned and quantity 3520 was mentioned. There was no difference in HSN Code and quantity as well as the tax leviable on the goods in question. However only on the ground that on physical verification PVC Aluminum Mixed Cable (Feeder Cable) was found, the goods were detained. Further before the appellate authority, new ground in respect of under valuation of the goods, was taken. The Commissioner, Commercial Tax, UP by way of Circular dated May 9, 2018 has specifically stated that no goods shall be detained on the ground of under valuation. In the present case, the respondent authority has failed to bring on record any material that the goods mentioned in the tax invoice accompanying with the goods, has different HSN Code and different rate of tax or mentioned in the detention memo dated 1.10.2019. Once this fact is not disputed that HSN Code and rate of tax is similar, no adverse inference can be drawn. The petitioner would not gain in not mentioning correct description of items or state would loose its legitimate tax. The impugned order dated 26.11.2020 cannot be sustained in the eyes of law and same is hereby quashed - Petition allowed.

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• 2024 (11) TMI 1072
  Quashing of impugned order under Section 129 of the GST Act - E-Way Bill was not properly filled - intent to evade tax or not - HELD THAT:- Upon inspection of the goods no discrepancy of physically able goods with the goods disclosed in the E-Way Bill. The assessee on show cause resisted the proceedings - According to the assessee there was no intent to evade the tax. The goods in the vehicle were fully reconciled with details stated in the E-Way bill. Non filling of the part of E-Way Bill would not trigger the proceedings under Section 129 of the GST Act. The facts which are admitted and disclosed from the records are these. There was no discrepancy in the goods which were physically found at the time of inspection and details of goods recorded in the E-Way Bill available with the driver of the vehicle. The authorities below have not found any intent to evade tax. This Court has set its face against initiation of proceedings under Section 129 of GST Act in the wake of mere technical breaches. When substantial compliance of the provisions is disclosed and when the physcial inspection of goods tallies with the goods declared in the E Way Bill and no intent of tax evasion is made out, proceedings under Section 129 of GST Act become vitiated. The impugned order dated 24.06.2024 passed by the respondent no. 1, Additional Commissioner, Grade-2 (Appeal), State Tax, Judicial Division, Etawah is unsustainable and is quashed - Petition allowed.

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• Income Tax

• 2024 (11) TMI 1071
  Overriding effect of Provisions of section 153C on the provisions of section 147 - interplay between the provisions of Section 153C and Section 147 of the Act - It is the Assessee s case that recourse to Section 147 would be unavailable in cases where the AO is empowered to proceed u/s 153C - HELD THAT:- The provision of Section 153C enables the AO to assess or re-assess the income of the assessee where any incriminating assets, material, books of account or documents are found (which either belongs to the assessee a person other than the searched person or contains information pertaining to the assessee), in a search conducted u/s 132 of the Act or requisition made u/s 132A of the Act in respect of another person. As stated above, the AO must be satisfied that the assets or material found or information contained in documents and books of account has a bearing on the income of the assessee for the six assessment years immediately preceding the AY relevant to the previous year in which the search was conducted or the requisition under Section 132A of the Act was made this is in terms of second proviso, which was inserted by Finance Act, 2012 with effect from 01.07.2012. By its very nature, Section 153C of the Act is an enabling provision, which enables the Assessing Officer to assume jurisdiction to assess/reassess the income of the Assessee, in cases where the jurisdictional conditions as set out in Section 153C are satisfied. The non obstante provision as contained in Section 153C(1) of the Act must necessarily be construed in the aforesaid context. In the facts of the present case, the Revenue disputes that a satisfaction note by the AO of the searched person (Jain Brothers) was forwarded to the AO of the Assessee along with the requisite documents. Thus, in the facts of the present case, the jurisdictional conditions to initiate further steps under Section 153C of the Act were not satisfied. However, the AO had received certain information from the AO. A report was also received from the Investigation Wing, Mumbai regarding the Assessee purchasing units of a penny stock during the financial year 2010-11. Based on the aforesaid information, including the information received from the Investigation Wing, Mumbai, the AO issued a notice dated 23.08.2018 under Section 148 of the Act. Admittedly, there is nothing on record to indicate that the AO of the searched person had recorded a satisfaction note and transmitted the relevant material containing information regarding the Assessee to the AO. There is also no material that the AO had on receipt of the said information issued a notice under Section 153C of the Act. Thus, in fact the AO did not assume jurisdiction under Section 153C of the Act. Absent assumption of any jurisdiction, the question of Sections 147, 148 and 149 of the Act being overridden by virtue of the non obstante clause of Section 153C of the Act, does not arise. The said clause would be operative only if the AO had in fact assumed jurisdiction under Section 153C of the Act. In that eventuality, recourse to the provisions as named in the opening sentence of Sections 139, 147, 149, 151 and 153 of the Act would be ousted. In the present case, the re-assessment proceedings are initiated under Section 147 of the Act not only on the basis of the material containing information that was found during the search conducted in respect of Jain Brothers, but is also founded on the basis of other information as obtained by the Investigation Wing, namely, that the Assessee had purchased units of a penny scrip named SVC Resource Ltd. This being the case, the decision of the Assessing Officer to re-assessee the income of the Assessee under Section 147 of the Act cannot be faulted.

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• 2024 (11) TMI 1070
  Assessment u/s 147 v/s 153C - choice of correct course of assessment - name of the Assessee featured in the list of beneficiaries of accommodation entries by way of share capital premium / loan - HELD THAT:- As in the present case, no satisfaction note was recorded by the AO of the search person or forwarded to the AO of the Assessee. Thus, in any event the conditions for reopening of the assessment u/s 153C of the Act were not satisfied. For this reason as well, recourse to Section 147 of the Act based on information as received by the Investigation Wing was not precluded. AO could not be faulted for proceedings under Section 147/148 of the Act instead of Section 153C of the Act. It is also material to note that the search in the case of Jain Brothers was conducted on 14.09.2010. Section 153C(1) of the Act as in force at the material time postulated that the assessment/reassessment of income of person (other than the searched person) u/s 153C of the Act could be initiated only if the assets, documents or books of accounts or material found during the search under Section 132 of the Act or requisitioned u/s 132A of the Act in respect of another person, belongs or belong to such person other than the one searched who could then be assessed u/s 153C of the Act subject to other conditions being satisfied. Thus, on the date on which the AO had received the information from the Investigation Wing, which is stated to be 12.03.2013, reassessment under Section 153C of the Act, was impermissible. Section 153(1) of the Act was amended subsequently by virtue of the Finance Act, 2015. As in Sujit Kumar Bhatia [ 2023 (4) TMI 296 - SUPREME COURT ] clarified that the amendment would also be applicable to search conducted prior to 01.06.2015. The present case is covered squarely by the decision of Abhisar Buildwell (P.) Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ] as the jurisdictional condition for the AO of the Assessee to assume jurisdiction under Section 153C of the Act was not satisfied. Present appeal is allowed and the Assessee s appeal is restored before the learned ITAT for consideration on other grounds as raised by the Assessee.

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• 2024 (11) TMI 1069
  Revision Application u/s 264 against an ex-parte assessment order passed u/s 143(3) read with the provision of Section 144B - HELD THAT:- As observed that by remedying such mistake by orders being passed u/s 264 of the Act, any illegality or injustice which would otherwise be caused to the assessee can be corrected, so as to maintain a lawful course of action being followed in the course of assessment. The Court also observed that the object of such provision appears to be that the law would not be oblivious to any bona fide human mistake which may occur at the end of the assessee and which if otherwise permitted to remain, may lead to injustice or the provisions of law being breached. Considering the aforesaid position in law, we are of the clear opinion that the cause in the present case warranted that the revision be decided on merits and more particularly considering the case of the petitioner, which although was noticed in the impugned order, was not taken to its logical conclusion, merely on a erroneous presumption in law that the revision is not maintainable for a reason that the petitioner had failed to produce certain materials in response to notice dated 15 April, 2021. In our opinion, there is a manifest error on the part of PCIT in coming to such conclusion to hold the revision not maintainable in the facts of the present case. The impugned order is quashed and set aside. The petitioner s Revision application are remanded to PCIT to be decided in accordance with law.

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• 2024 (11) TMI 1068
  Disallowance of loss - Bogus/sham transaction of sale and purchase of dies - HELD THAT:- It is settled law that the AO cannot supplant its view as to the commercial expediency of transactions in place of that of the Assessee. In the present case, the AO s decision to disallow the loss is based on surmises and assumptions. The fact that the Assessee had purchased some of the dies from HTIPL, which may be an affiliate of HCIL, did not in any manner indicate that the loss suffered by it was not genuine. It is material to note that neither HTIPL nor TITC are affiliate entities of the Assessee. There is also no allegation that the Assessee is affiliated to HCIL. It is, thus, apparent that the transaction for sale and purchase of dies was a pure commercial transaction entered into by the Assessee in its commercial wisdom. The fact that the Assessee had incurred a loss in the said transaction is also not disputed. There is no allegation that the Assessee was paid any undisclosed consideration from the parties in a clandestine secret transaction to reverse the loss. We find that the AO had made the additions solely on the basis of what the AO thought was commercially expedient an area which the AO was not required to tread. In the present case, the Assessee has also justified its commercial decision by reflecting the enhanced turnover and the profits earned by it from its business from HCIL. However, it would be apposite to add that even if the Assessee had not been able to earn profits in later years, the same would make no difference. It is not necessary that every business decision made by an assessee yields profit. The area of examination is only confined to whether the transactions entered into by the assessee are genuine and not whether they are commercially expedient. In the present case, there is no material other than just a sense of suspicion that has persuaded the AO and the CIT(A) to make the addition in question. Decided in favour of assessee.

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• 2024 (11) TMI 1067
  Addition of receipt not been offered for tax by the assessee - Impugned amount was apparently debited internally and shown as advance to Govt. account, while at the same time, it was credited to the Income and Expenditure Statement under the head grant-in-aid for establishment expenses - CIT(A) has recorded that in reality, no funds were received by the institution from any third party and this transaction was merely an inter head adjustment - HELD THAT:- It is seen that in the department s ground of appeal it is specifically mentioned that the mandate provided in Accounting Standard -12 ( AS-12 ) has not been kept in mind while ensuring an appropriate treatment of the impugned amount in the accounts. This Accounting Standard deals with treatment of Govt. grants in the books of account. As noticed that the AS-12, in question, as an individual issue was neither before the AO nor was it before the CIT(A). However, it needs to be mentioned that for recognition of an amount as a receipt under this Accounting Standard two conditions are required to be present viz. (a) if the Govt. grant is expected to be realised or its collection is reasonably certain, (b) conditions pertaining to the said Govt. grant have been complied with. As has been mentioned earlier, this issue of the specific Accounting Standard was not dealt with either by AO or CIT(A), hence, we deem it fit to remand the matter back to the file of the AO for verifying whether the said amount was actually receivable, whether the assessee has been accounting for such grants on receipt or mercantile basis in the past and finally whether there are any terms and conditions pertaining to the said arrangement between the assessee and the Govt. regarding the receipt of such amounts. AO would do well to analyse these issues and thereafter come to a conclusion as to whether the impugned amount would be treated as income for the year under consideration or alternatively treated as income in the year of actual receipt. Delayed filing of Form 10 which was required u/s 11(2) r.w.s. 13(9) - CBDT has its powers u/s 119(2)(b) of the Act to condone the delay and in case, the said action is done then the assessee would get consequential benefits u/s 11(2) r.w.s. 13(9) of the Act. This appeal is allowed for statistical purposes.

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• 2024 (11) TMI 1066
  Disallowance of excess depreciation claimed on building relying on the provisions of section 50C - computation of the written down value (WDV) as per the provision of section 43(6)(c)(i)(B) - According to the assessee for computing written down value of the block of the assets, consisting building, the actual sale consideration in respect of an asset sold from the block of the asset should be reduced from opening WDV, whereas according to the Revenue, the notional sale consideration of the asset sold as prescribed u/s. 50C should be reduced from opening WDV. HELD THAT:- We find that legislature has created the legal fiction u/s. 50C of the Act for the purpose of computing the capital gain on sale of capital assets. Similarly, while computing the profits and gains of the business, the legislature has introduced a legal fiction under section 43CA of the Act for substantiating the sale consideration by the Stamp Duty Value while transfer of an assets other than the capital asset, i.e., stock-in- trade, but no specific fiction has been created while computing deprecation on the block of the assets for substantiating the sale consideration by the Stamp Duty Valuation Authority. The present definition of the moneys payable therefore, cannot be construed as including as the Stamp Duty Valuation of the property and, therefore, the legal fiction for substantiating the sale consideration by the Stamp Duty Value created under either section 50 or section 43CA of the Act cannot be extended to section 32 of the Act for claiming depreciation on the block of the asset. In the instant case, the AO could have examined the applicability of section 41(2) for taxing the quantum of depreciation claimed on building in earlier years, which we don t know whether he had examined or not. The fiction of section 50C can t be extended to the facts of the case, accordingly, we set aside the finding of the ld. CIT(A) on the issue in dispute and we delete the disallowance made by the lower authorities. Ground no. 1 raised by the assessee in appeal is accordingly allowed. Disallowance of expenses - assessee submitted that it had already disallowed certain expenses appearing in the profit and loss account in computation of total income, but in absence of any details or supporting documents, the ld. A.O. disallowed 5% on ad-hoc basis - HELD THAT:- Before us, assessee fairly agreed and submitted that details were not filed before the lower authorities, therefore, the matter should be restored back to the file of the ld. AO. We find that the assessee is willing to produce all the necessary evidence in support of the expenses claimed and the ld. DR did not object to the proposal of the ld. Counsel for the assessee - restore this matter back to the file of the ld. A.O. with the direction to the assessee to produce all the necessary documentary evidence/voucher in support of the voucher claimed for verification by the ld. A.O. and, thereafter the A.O. shall decide the issue in accordance with the law. Ground no. 2 raised by the assessee in appeal is accordingly allowed for statistical purpose.

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• 2024 (11) TMI 1065
  Penalty u/s 271(1)(c) - disallowance of factory garden maintenance expenses - As argued no case of furnishing any inaccurate particulars of income was proved by the AO as assessee had submitted the details of invoices, ledger and payment details in respect of the expenses - HELD THAT:- There is no dispute that the said expenses were incurred by the assessee and all the information at the time of quantum addition have been provided by the assessee and same has not been disputed by the A.O. The penalty u/s. 271(1)(c) of the Act cannot be levied merely for the rejection of the claim of the assessee as held by the Hon ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] Respectfully following the same, we are of the opinion that the penalty levied by the ld. A.O. and upheld by the ld. CIT(A) is not sustainable. The ground of appeal of the assessee is accordingly allowed.

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• 2024 (11) TMI 1064
  Error in selection of section code in application for registration u/s 12AB - assessee was granted provisional registration u/s 12A(1)(ac)(vi) - assessee made an application under section 12A(1)(ac) of the Act by selecting the code (vi) instead of (i) - CIT(E) noticed that on an earlier occasion, the assessee applied under 12A(1)(ac)(vi) of the Act instead of 12A(1)(ac)(i) HELD THAT:- The assessee did not avail the opportunity of extension of time for filing application in Form 10A, if really its intention is to apply for 02-Sub clause (i) of clause (ac) of sub--section (1) of section 12A of the Act, by bringing the mistake to the notice of the authorities, since the assessee holds the registration under section 12A of the Act. When the CBDT took cognizance of the matter and by way of circulars extended the due date for filing Form 10A, it cannot be said that the learned CIT(E) can exercise jurisdiction to condone the delay in applying the Form 10A on the ground of mistake, because the time extended for such purpose by the CBDT expired by 30/06/2024. In these circumstances, we do not find anything illegality or irregularity in the rejection of application by the learned CIT(E). The fact remains that finally vide Circular No.7/2024 dated 25/04/2024, CBDT extended the date up to 30/06/2024, whereas the assessee filed Form 10A by 13/06/2023. Assessee filed another application on 30/06/2024 in Form 10AB by that date. Though in a wrong Form, the request of the assessee was pending before the due date. In this peculiarity of the circumstances, we deem it just and proper to condone the mistake committed by the assessee while applying registration by making a selection of wrong section code, namely, 02-Sub clause (vi) of clause (ac) of sub--section (1) of section 12A of the Act instead of 02-Sub clause (i) of clause (ac) of sub--section (1) of section 12A of the Act. We accordingly condone such a mistake. Learned CIT(E) will proceed to hear and dispose the request of the assessee by allowing it to apply now under Form 10A. Appeal of the assessee is allowed.

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• 2024 (11) TMI 1063
  Addition u/s 56(2)(viib) - assessee had introduced funds by way of issue of share capital - first contention of the assessee is that that there was no fresh inflow of funds in respect of allotment of shares and that it was only an accounting entry for conversion of loans into share capital and provision to Section 56(2)(viib) of the Act was not at all attracted - HELD THAT:- The provision of the Act as well as the Memorandum for introduction of this provision made it explicit that if the consideration was received for issue of shares that exceeded the fair value of such shares, then the consideration received for such shares, as exceeding the fair market value of the shares, shall be chargeable to tax under the head income from other sources. There is no stipulation in the section that it will be applicable only in the case of receipt of any amount or money on account of share application money. Rather the word used in the section is any consideration for issue of shares which has a very wide implication. ITAT, Mumbai in the case of Keep Learning Resources Pvt. Ltd.[ 2023 (8) TMI 1480 - ITAT MUMBAI] had categorically held that the conversion of loan amount into equity shares will not exonerate the assessee from application of provision of section 56(2)(viib) of the Act. Keeping in view, the language of section which uses the term consideration which is of wider import when compared with word amounts , we are inclined to agree with the decision of ITAT, Mumbai and ITAT, Kolkata on the issue. Therefore, the contention of the assessee that provision of section 56(2)(viib) of the Act will not be attracted in the case of conversion of loan amount into share capital is rejected. In our considered opinion the provisions of Section 56(2)(viib) of the Act do apply in the present case of conversion of loan into share capital and the view adopted by the ITAT Chandigarh Bench [ 2023 (12) TMI 702 - ITAT CHANDIGARH] will make the provisions of section 56(2)(viib) otiose for all such transactions of conversion of securities. Second contention of the assessee is that there was no prescribed method of valuation of shares during the year from 01.04.2012 to 28.11.2012 and, therefore, the machinery provision had failed - Since, the assessee had filed the valuation report of a much later date, the Revenue had rightly concluded that this valuation did not reflect the real and correct value but was only an afterthought to justify the valuation as adopted at the time of issue of first tranche of shares. It is true that the assessee has an option to adopt DCF or NAV method to determine the FMV of the shares. Whatever method is chosen by the assessee the same is required to be consistently applied. The basic question raised by the Revenue is that if the valuation of the share was so high to justify premium of Rs. 90/- on 03.11.2012, why premium of Rs. 31.67 per share only was charged in the subsequent allotment of shares on 26.03.2013 and this aspect has not been explained by the assessee. There cannot be such a wide fluctuation in the value of shares within a period of less than 5 months and that too within the same financial year. In the absence of any explanation for charging premium of Rs. 31.67 per share only in the subsequent allotment of shares on 26.03.2013, we are of the considered opinion that the Revenue had rightly made the disallowance u/s. 56(2)(viib) of the Act in respect of excess premium over and above FMV of the shares allotted on 03.11.2012. We are of the view that the Ld. CIT(A) was justified in confirming the addition made u/s. 56(2)(viib) of the Act in respect of excess share premium. We, therefore, uphold the order passed by the Ld. CIT(A). Appeal filed by the assessee is dismissed.

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• 2024 (11) TMI 1062
  Addition u/s 56(2)(X) - Joint ownership of the property - HELD THAT:- On reading of the first and second proviso if the date of agreement, the amount of consideration is fixed for the transfer of immovable property and the date of registration is not the same, then the Stamp duty Value on the date of agreement is to be taken. The section further provides that the value as on date of agreement can be taken only when, the amount of consideration in the agreement was paid by account payee cheque or through electronic clearing system through a bank account on or before the date of registration of such immovable property. In the present facts of the case there is no dispute regarding the payments made by any of the mode other than through banking channels. Thus, the aforesaid proviso carves out exception by taking the stamp duty value as on the date of agreement when the payments have been made through banking channels. AO has stated that allotment letter is not a registered agreement, therefore, the value of the property has to be taken as on the date of sale registration. First of all, when builder gives an allotment letter with terms and conditions and all the rights and the value of purchase is agreed upon which was accepted by the assessee and acted upon then it is clearly covered under aforesaid proviso to section 56(2)(x) of the Act. The assessee in the present facts agreed to purchase the immovable property in an under construction premises in the year 2016 in terms of allotment letter and also made the payments before the sale was registered. Therefore, based on the above discussions and the decisions relied by the Ld.AR on this issue, we are of the opinion that, the value as on date of allotment has to be treated as stamp duty value for the purpose of aforesaid provision of section 56(2)(x) of the Act. We further note that on the date of allotment the stamp duty value was admittedly Rs. 5,67,18,369/-, whereas, the agreement value was Rs. 5,30,87,707/-. Further, as the difference is within the 10% tolerance limit applicable as per the amendment to section 56(2)(X)(b)(ii) brought into the statute w.e.f. 1.04.2021, no addition is to be made in the present facts of the assessee or his wife. Ground raised by the assessee stands allowed.

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• 2024 (11) TMI 1061
  Default u/s 201 - deducting TDS on certain payment of leave encashment to certain employee - Revenue held that the payments are in excess of Rs. 3 lakhs, and since the recipients are neither State Government nor Central Government employees, hence the exemption limit cannot exceed Rs. 3 lakhs and accordingly the tax has to be deducted by the disbursing authorities - HELD THAT:- Section 10(10AA) specifically deals with tax exemption of the leave encashment at the time of retirement. Clause (i) of sub-section (10AA) deals with employees of Central Govt. or State Govt. Clause (ii) of sub-section (10AA) deals with employees other than Central Govt. or State Govt. The sub-section (10AA) specifically deals with Govt. and Non-Govt. employees under two different clauses. Sub-section 10CC includes all employees who are individuals deriving income other than by way of monies. This includes every employee irrespective of category of employers. Leave encashment at the time of retirement, benefits received at the time of voluntary retirement or termination of services, and perquisites received by the employees are all defined and subjected to various provisions of the Act, namely 10(10AA) for leave salary, 10C for retirement benefits and 10CC - for perquisites etc. In the governance of the Nation, three arms work in tandem namely Union Govt., State Govt. and Local Authorities. We have also gone through the notification issued by the Dy. Secretary, Govt. of Gujarat, Panchayat, Housing and Urban Development Department dated 30th January, 1978 which has transferred some functions and also included some villages near Vadodara to carve out Vadodara Development Authority from the erstwhile Vadodara Municipal Corporation. Even on that lines, the VUDA will become a subset of local authority. The municipal corporations, panchayats, district boards, cantonment boards are part of local authorities as per sub-section 10(20) of the Income Tax Act, and under clause (d) and (e) of Article 234 and Article 234P of the Constitution. Thus, the local bodies are distinct from State and Central Govt. Since the exemption given on account of leave encashment, retirement and perquisites varies according to the category of employees and since exemption of leave encashment is allowed to State and Central Govt. employees in full and exemption to other than State and Central Govt. employees is upto Rs. 3 lakhs as per the provisions of Section 10(10AA), it is hereby held that the assessee is liable to deduct tax on the payments made against leave encashment to their employees. The Revenue Authorities shall re-compute the quantum of tax deductible taking into consideration the exemption limit of Rs. 3 lakhs prescribed by the Act. Appeals of the assessee are dismissed.

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• 2024 (11) TMI 1060
  Validity of proceedings u/s 153C - determination of 6 Assessment Years - HELD THAT:- In the present case, the satisfaction has been recorded on 26/09/2018 by the A.O. of the Assessee which falls in the AY 2018-19, the immediate preceding six years would be AY 2013-14 to 2018-19, thus, in our considered opinion, the notice issued by the A.O. u/s 153C of the Act for AY 2011-12 and 2012-13 are beyond the jurisdiction of the A.O. Amendment to Section 153C of the Act w.e.f 01/04/2017 having prospective effect as clarified by the CBDT Circular of 2/2018 dated 15/02/2018, thus we find no reason to justify the action of the A.O. to issue notice u/s 153C for Assessment Year 2011-12 and 2012-13 as the same are not filing in the previous six years , accordingly, assumption of jurisdiction in reopening of assessment u/s 153C for Assessment Year 2011-12 and 2012-13 are void ab initio. Thus the impugned assessment orders for Assessment Year 2011-12 and 2012-13 are hereby quashed. Order to reopen the assessment of the other person u/s 153C - Addition based no no valid satisfaction recorded - Addition of 1% representing the income from commission and total credits and debits reflected in the bank statement of the Assessee company - HELD THAT:- AO failed to narrate the specific documents which he was relying upon for initiating the proceedings u/s 153C of the Act and not year wise satisfaction was recorded so as to assess or reassess the total income of the Assessee for the years under consideration. It is found that the A.O. satisfied with the documents seized containing the information relating to searched person and decided to issue notice to other person who is Assessee u/s 153C r.w. Section 153A of the Act. Thus the satisfaction note fails to depict the details of information. In the case of the one of the Company which was also subject to the proceedings u/s 153C pursuant to the very same search and seizure operation conducted on 21/07/2016, in the case of M/s Marconi Infratech[ 2024 (7) TMI 129 - ITAT DELHI] as deleted the addition on account of absence of valid satisfaction having been recorded. On plain reading of the provision of Section 153C it is clear that in order to reopen the assessment of the other person u/s 153C for the Assessment Years earlier to the year of search, direct co relation must exist between the existence of incriminating material and relevant Assessment Year and the reasoning should be logical while recording the satisfaction. In the present case, the seized document at Annexure A-3 does not speak about the issue in respect of the respective Assessment Years sought to be reopened which could ultimately be said to be unexplained and addition thereupon could be made and the said document is not establishing any co-relation, document wise with years under consideration. The essential element for invoking the provision of Section 153C is found missing in the satisfaction recorded on 25/09/2018. Assessee appeal allowed.

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• 2024 (11) TMI 1059
  Search and Seizure proceedings - cash found in the locker - HELD THAT:- Cash in two lockers were belonged to RNB Temple Trust and Ram Bajaj Foundation. What is relevant is cash available with the Trust. As per the Balance Sheet submitted before us, it clearly indicates that the Trust holds cash in hand to the extent of Rs. 1,79,00,000/-. Therefore, the cash found in the locker which pertains to RNB Temple Trust is already brought on record to the extent of Rs. 1,79,00,000/-. Accordingly, the addition sustained by the ld.CIT(A) to the extent of Rs. 4,00,000/- is already explained. Therefore, this addition of Rs. 4,00,000/- is also allowed. Cash found in other locker of SBI no doubt, the Balance Sheet finalized by the foundation was accepted in its assessment. It is also fact on record that the Balance Sheet was finalized subsequent to the search and further, the locker was also operated one day before the search operation. Keeping the overall facts on record, we observed that all the cash of RNB Temple Trust and the Ram Bajaj foundation was kept in the lockers operated by the family members of Bajaj Group and it is a fact on record that almost all the cash kept in the locker were belonged to the RNB Temple Trust and Ram Bajaj Foundation and 95% of the submissions made by the assessee are accepted by the ld. CIT (A). All the cash kept in the lockers which were specifically earmarked for the purpose of construction of temple and running of Ram Bajaj Foundation. Cash declared in the Balance Sheet of both the entities are matching with the cash found in the locker, one has to go by the circumstantial presumption that the cash found in the lockers are meant for the temple construction and for the purpose of running of educational institution. Therefore, there is no evidence brought on record to show that this cash belongs to the members of Bajaj Family except applying presumption. Accordingly, we are inclined to delete the addition made by the ld. CIT (A). Decided in favour of assessee.

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• 2024 (11) TMI 1058
  Reopening of assessment u/s 147 - Addition u/s 68 - bogus Long Term Capital Gains (LTCG) - AO relied on the statement of the principal officer of stock exchange and other persons - HELD THAT:- As the Assessee has demonstrated the genuineness of its claim by producing the payment voucher of purchase of shares, contract notes, shares in physical mode, Demat statement, broker ledger, statement bill cum transaction and bank statement etc. and none of the persons whose statements have been relied on by the AO, have made any allegations against the Assessee. Even otherwise the AO has not granted any opportunity to cross-examine the witnesses whose statements were recorded by the investigation wing as relied on by the AO. Further, there were/are no orders by the SEBI against the Assessee qua any irregularities or penalty. Whereas the Assessee has been able to discharge its prima-facie onus cast upon him u/s 68 of the Act, therefore the addition u/s 68 of the Act is at all unsustainable. Reopening of assessment - As we have observed above that in the case of South Yara Holdings [ 2019 (3) TMI 582 - BOMBAY HIGH COURT] has quashed the reopening of proceedings in the identical facts and circumstances, as involved in this case and therefore on that aspect as well, the impugned assessment made on the basis of the reasons recorded and the notice issued u/s 148 of the Act, is liable to be quashed. In cumulative effects, the addition on legal as well as on merits, is liable to be deleted, hence the same is deleted. In the result, the appeal filed by the Assessee stands allowed.

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• 2024 (11) TMI 1057
  Addition based on Professional Receipt in the Original Return of Income - Assessee filed a Revised Return of Income to correct the same - HELD THAT:- There is no reason why Six Sigma Medicare Research Limited should refund Rs. 1,89,909/- out of the total deposit of Rs. 28 lakhs, when assessee continues to be Consultant in the said hospital! Even otherwise, it is beyond comprehension that why a hospital shall refund an odd amount of Rs. 1,89,909/-. As an admitted fact that hospital has made total payment of Rs. 47,26,546/- to the Assessee during the year, which were shown as professional receipts by the assessee in the Original Return of Income. Out of the total Professional Receipts received from Six Sigma Medicare Research Ltd., there is no evidence to suggest that Rs. 1,89,909/- pertains to partial refund of deposits. Therefore, the addition of Rs. 1,89,909/- is confirmed. Payment made to Anesthetist - Assessee has proved that assessee had made payment to Anesthetist. Hence, we accept the assessee s contention and direct the Assessing Officer to delete the addition. Payment to Kochar(Anesthetist) as professional charges - We agree that these Operation Notes were not filed before the AO/CIT(A). These Operation Notes have been considered by us as an evidence only to substantiate the primary evidence filed by the assessee before AO and CIT(A). We have already discussed in earlier paragraphs the evidences filed by assessee before the AO and CIT(A) in the form of copy of bank statement of Dr.RK, copy of TDS Return etc. We are convinced that assessee had made payment to Dr. RK as professional fees. The said amount was wholly and exclusively for the purpose of the business of the assessee. Hence, we direct AO to delete the addition. Petrol and Diesel Expenditure - Accountant only considered Rs. 5,955/- and failed to consider remaining amount of Rs. 1,05,230/-. No specific evidence has been filed by the assessee before us to prove the Diesel Expenditure. Assessee merely filed a Ledger Account at page no.60 and 61 of the paper book. The Ledger Account shows certain cash payments at periodic intervals. However, that does not prove that the expenditure has been incurred wholly and exclusively for the purpose of the business of the assessee. Accordingly, addition of Rs. 1,05,230/- is upheld. Salary and Wages - The amount was the salary of March, 2020; hence, remained payable. It is observed from the submission of assessee before the AO dated 28.03.2022 that assessee had filed copy of salary register, name, PAN and Address of all the employees. Before us also assessee filed copy of ledger extract, copy of salary register - DR has not pointed out any discrepancy in these documents. On perusal of the Ledger Account, it is observed that Rs. 48,950/- was shown as payable on 31.03.2020. In these facts and circumstances of the case, we are convinced that it is an allowable expenditure. Accordingly, AO is directed to delete the addition.

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• Customs

• 2024 (11) TMI 1056
  Classification - Integrated Circuit Micro Electro Mechanical System Microphones [hereafter also referred to as the product ] being imported by the appellant - Customs Tariff Heading 8518, specifically Tariff Item 8518 10 00 OR under CTH 8542, specifically Tariff Item 8542 39 00. HELD THAT:- Technical literature, relied upon by the appellant, itself describes the product as a microphone or MEMS microphone and does not use the term Integrated Circuit MEMS Microphone anywhere. This supports the view of this Court that the core identity of the product is a microphone, though it is enhanced or powered by MEMS technology. Thus, while the appellant has referred to the product as an Integrated Circuit MEMS Microphone , it appears this terminology has been selectively chosen for potential classification advantage. The correct nomenclature for the product should simply be Microphone or MEMS Microphone or MEMS-Enabled Microphone . It is also clear from a reading of the Product Functioning provided by the appellant that the product acts as an energy conversion device and performs the functions of converting sound signals into electrical signals . We are of the opinion that, it is not the technology which is used in the product that defines the product and decides its classification under the CTH, but it is the product (which may be created using a particular technology) which decides the classification. For this reason, it is the microphone which has the technology of MEMS, which adds value to the microphone, and it is not the microphone which is adding value to the technology of MEMS. The inclusion of MEMS technology enhances the product s function but does not change its primary identity as a microphone. In the given case, the product is not a stand-alone sensor or an EIC. This is not a case where the appellant is importing a separate integrated circuit that could be combined with various other components to create devices with diverse functions. Had the appellant imported an individual integrated circuit (such as an ASIC chip) or standalone MEMS sensors, our findings may have differed. However, the item being imported is a fully assembled MEMS microphone, a final product with integrated components like the ASIC chip (an EIC) and MEMS sensor, pre-packaged and mounted on a PCB, creating a complete and tradable unit: a microphone. It is not the case of the appellant that it is importing only an integrated circuit sans the microphone. Had it been the case, our conclusion may have been different. As considering the Headings, Section Notes, Chapter Notes of the Customs Tariff Act as well as the Explanatory Notes to HSN, we are of the firm view that the contention of the appellant that the product should be classified as an EIC, under CTH 8542, and not as a microphone under CTH 8518, is unmerited.

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• 2024 (11) TMI 1055
  Requirement to pay Social Welfare Surcharge (SWS) - levy of SWS on imported goods, when the basic customs and additional duty of customs are debited in the scrip - HELD THAT:- We see from relevant provisions in section 110 reproduced above that the levy and collection is provided by sub-section (1). The levy is to be on goods imported into India and accordingly collected. Sub-section (3) is the charging provision. It says, the levy under sub-section (1) shall be calculated at 10% on the aggregate of duties, taxes and cesses, which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue) under section 12 of the Customs Act, 1962. There is no dispute before us that the scrip petitioner holds, exempts it on collection from it, the customs duty levied. In M/s. Unicorn Industries [ 2019 (12) TMI 286 - SUPREME COURT] case of appellant before the Supreme Court was in resisting the levy and collection of National Calamity Contingency duty (NCCD). A finding by the Supreme Court that appeared to be obvious from the beginning was, absence of any notification issued under the legislation or Act providing for the levy and charge for collection of NCCD, being Finance Act, 2001. On behalf of petitioner clear submission is, for furthering challenge in the writ petition reliance is not placed on M/s. Unicorn Industries (supra) nor SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT] . The challenge mounted is on case that where the charge is on amount of customs duty paid and such duty is exempt, the charge being a percentage of duty paid, must be zero. No duty was paid so there cannot be a percentage of it, to result in any sum payable as SWS. Upon a person obtaining exemption, he cannot be said to be discharging liability to pay duty. There is no fact of collection following the levy. The charging provision by sub-section (3) in section 110 is a percentage of customs duty paid, as collected by the Central Government. The duty paid being zero, collection is zero and percentage of it must also be zero. Our reasoning might appear to be similar to that made by the Supreme Court in SRD Nutrients [supra] but petitioner is not relying on the judgment, understandably so. Petitioner s case is of submitting to provisions in section 110 of Finance Act, 2018, as applicable to it but, working of the charging provision releasing it from paying SWS. Debits in the scrip is for purpose of measure of quantum of exemption utilized under it. Having said that, it appears petitioner has prayed for exemption in its prayer. It is competent for us to mould the prayer. On query made Mr. Sridharan submits, his client protested but the new system in place does not permit registration of any protest. As such, his client was compelled to pay. In the circumstances, petitioner is entitled to and gets declaration that it is not required to pay SWS calculated on customs duty, exempted under scrip held by it. WP allowed.

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• Insolvency & Bankruptcy

• 2024 (11) TMI 1054
  Maintainability of application - initiation of CIRP u/s 9 of the I B Code - performance pay - Operational Debt or not - Operational Creditor or not - issuance of Section 8 notice - HELD THAT:- Where a payment of a financial debt owing to the employment, if it is required to be arithmetically determined during the proceedings based upon a subjective satisfaction and application of criteria of performance pay, based upon the policy as referred to by the Learned Counsel for the Respondent i.e., 06.01.2019, that has to be read with the criteria of assessment of performance pay dated 24.04.2018, the amount claimed by the Appellant in his notice issued under Section 8, will fall to be a variable factor and that will not fall to be within the definition of the operational debt or even a debt as defined under the I B Code and thus the denial of the same by the Learned Adjudicating Authority cannot be said to be irrational or without an application of mind. There is yet another aspect which is required to be taken into consideration, its that at the stage of initiation of proceedings the issuance of demand notices under Section 8 of the I B Code, which is a condition precedent for raising a determined demand for the claim, which is falling within the purview of debt or an operational debt herein, the Appellant admittedly has issued Form 3and Form 4. In fact, the two forms provided under rules, of the raising of a demand they altogether intend to meet a distinct objective accordingly it classifies the demand itself. The rules prescribe that the Operational Creditor can send a demand notice, either in Form 3 or in Form 4 as contemplated under Section 8 of the I B Code, which is to be read with Rule 5 of the I B Code, as well as the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. The Learned Adjudicating Authority while considering the claim has further observed, that the sending of the notices under Form 3, as well as under Form 4, that itself depicts that the Appellant was not very sure about the nature of the claim and its classification, under which he was raising because he himself has not been able to classify as to under which form of debt, would his claim towards the performance pay, would lie and thus issuance of two forms, i.e., Form 3 and Form 4, since they intend to meet a difference objective, as it has been dealt with in the Impugned Judgment, the claim raised by the Appellant Operational Creditor will not fall to be payable by the issuance of multiple formulated notices under Section 8 of the I B Code and it cannot be taken as to be an operational debt for the purposes of invocation of the proceedings under Section 9 for drawing a CIRP proceedings against the Corporate Debtor. The claim as raised by the Operational Creditor, in the proceedings of the Company Petition, will not be an operational debt and hence drawing of a proceedings by invocation of Section 9 will not be justified, to bring a Corporate Debtor to face the CIRP proceedings and particularly when the Appellant himself was not very sure enough, that it was not a determined claim of a debt, which was being raised before the Learned Adjudicating Authority and hence the rejection of the claim by virtue of the Impugned Order, which is under challenge i.e., dated 02.05.2024, as it has been rendered in petition, do not suffer from any apparent illegality which may call for an interference in the exercise of ours Appellate Jurisdiction under Section 61 of the I B Code, 2016 and thus the reason which has been assigned by the Learned Adjudicating Authority is absolutely justified. This Appeal lacks merit and the same is accordingly dismissed.

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• 2024 (11) TMI 1053
  Maintainability of Civil suit - bar under Order 7 Rule 11 of CPC - Ownership and possession rights of the Appellant over the disputed land during CIRP proceedings - bar u/s 238 of I B Code - specific case has been made that the property in question is being used for the industrial purposes of the Corporate Debtor, which is a fact not denied by the appellants and it was falling within the premises of the Corporator Debtor which is already in custody of the Resolution Professional - HELD THAT:- The orders under Section 7 were reserved on 06.02.2023 and the Corporate Debtor itself vide its Diary No. 5214 dated 02.12.2022, had stated that it signifies its willingness to admit the application and the directions for initiation of the CIRP proceedings in view of financial stress. In these circumstances, sale of the said property immediately after reserving of the judgment on 06.02.2023, itself is an avert act, and actions of the Appellant with regard to the aforesaid transaction which is subject matter of the Civil Suit, which has been instituted at his behest together with chronological sequence of transactions in the scheduled land during the pendency of CIRP proceedings shows that the sale was not bonafide and apart from this, since the appellant himself has already questioned the rights of the respondent in a regular Civil Suit, and his rights over the property are yet to be determined by the competent Civil Court, which he himself has invoked at this stage the pendency of the Civil Suit cannot be taken as a reason for interference in the CIRP proceedings. Further, the resolution plan as filed through IA No. 02/2024 in its Clause 5, describes the assets of the Corporate Debtor, which also refers to the ensuing litigation being Suit O.S. No. 16/2024. The apprehension expressed on the basis of the written submissions is without basis, as the Resolution Plan since it does not in any manner transfer or affect the title of the subject property and there is no immediate change of ownership or the Applicant s right. In view of the discussions as above, it does not call for any interference at this stage and that too, while exercising the inherent powers under Rule 11 of the NCLT Rules, 2016. Having scrutinised the reasons which has been assigned by the Learned Adjudicating Authority in relation to the status of the property and the effect of the pendency of the Civil Suit filed by the Appellant, the rejection of the two applications of the Appellant by the Learned Adjudicating Authority by the Impugned order does not call for any interference in the exercise of the Appellate Jurisdiction under Section 61 of I B Code. Thus, these appeals lack merit and they are accordingly dismissed.

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• 2024 (11) TMI 1052
  Rejection of application filed by the Appellant under Section 10 of the Insolvency and Bankruptcy Code, 2016 - proceedings under Section 13, sub-section (2) of the SARFAESI Act was initiated by the SBI against the Appellant prior to filing of Section 10 Application - main reason for dismissing Section 10 application is that Applicant has filed Section 10 application with malicious and fraudulent intent to delay and halt the recovery proceedings initiated by Respondent Bank - whether filing of an application by the Appellant under Section 10, can be termed as initiation of proceedings with fraudulent and malicious intent? - HELD THAT:- The basis for Section 65 application filed by the SBI is the fact that SBI has initiated proceedings under Section 13, sub-section (2) of the SARFAESI Act vide notice dated 24.02.2023, prior to filing of the application under Section 10 by the Corporate Applicant. Admittedly, Section 10 application was filed by the Appellant, subsequent to initiation of proceedings under Section 13, subsection (2) by the SBI. The pleadings of the of the SBI in proceedings under Section 13, sub-section (2) were that 13(2) proceedings were on the verge of being completed, when Corporate Applicant has filed application under Section 10 with malafide and fraudulent intent. From the pleadings in Section 65 application, we do not find any foundation to come to the conclusion that application under Section 10 was fraudulently initiated. The learned Counsel for the Appellant has relied on judgment of this Tribunal in Unigreen Global Private Limited vs. Punjab National Bank and Ors. [ 2018 (1) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], where this Tribunal noticing Section 7 and Section 10 of the IBC held that, two factors are common i.e. the debt is due and there is a default - This Tribunal further held that action under Section 13(4) of SARFAESI Act against Corporate Debtor or proceedings before Debt Recovery Tribunal, if any, are pending, cannot be a ground to rejection application under Section 10, if the application is complete. The present is a case where Adjudicating Authority has allowed Section 65 application filed by the SBI principally based on the foundation of the SBI that Section 10 application filed at the time when proceedings under Section 13, sub-section (2) were on the verge of completion. Whether Section 10 application deserve to be admitted or not, is a decision, which has to be taken by the Adjudicating Authority on facts of each case. For allowing Section 65 application, fraudulent and malicious intent of CD has to be proved from some materials on record. Merely because proceeding under Section 13, sub-section (2) and (4) has been initiated by the creditor prior to filing of Section 10 application, cannot be a ground to hold that Section 10 application is filed with malicious and fraudulent intent. For proving fraudulent and malicious intent, something more is required to be pleaded and proved apart from initiation of proceedings under Section 13, sub-section (2) and (4) by the creditor against the Corporate Applicant. The Adjudicating Authority committed error in allowing Section 65 application filed by the SBI and rejecting Section 10 application. In event a proposition of law is accepted that when a creditor has initiated proceedings under Section 13, sub-section (2) against the CD, he is precluded to file Section 10 application, that proposition will be clearly against the intent and purpose of Section 10 of the IBC - the basis of rejection of Section 10 application is the finding by the Adjudicating Authority that application has been filed with malicious and fraudulent intent to delay and halt the recovery proceedings. There mere fact that application is filed, consequent of which the recovery proceedings may be halted, cannot lead to conclusion that intent and purpose of the application is malicious and fraudulent - Adjudicating Authority committed error in allowing Section 65 application filed by the SBI. The company petition filed under Section 10 is revived to be considered and decided by the Adjudicating Authority afresh - appeal allowed.

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• 2024 (11) TMI 1051
  Rejection of Section 9 Application filed by the Appellant - pre-existing disputes - dispute existed much before Demand Notice was issued - inflated invoices - HELD THAT:- When the Corporate Debtor is entitled to all rights, interests and has to discharge all liabilities obligations of Transferor under the Principal Agreement, any entitlement or liability of it, which flow from the Master Service Agreement has to be shouldered/claimed by the Corporate Debtor. It cannot be said that inflated invoices which is claimed to have been issued by staff and employees of the Appellant though related to the different Project under the same Master Service Agreement is alien or foreign to claim which has been raised by the Appellant. In the present case, after coming to know about the issue of inflated invoices, Appellant itself has commenced investigation and filed the Police Complaint as well as directed for investigation through Ernst and Young, which is an admitted fact. Appellant in his Appeal has brought on record the Police Complaint which was submitted by Appellant on 24.02.2023. The correspondence between the Parties which relates to the payments which are subject matter of Demand Notice and Section 9 Application is clear communication by Corporate Debtor that payments have been put on hold indicates that there was dispute raised by Corporate Debtor with regard to entitlement and payment of the invoices which are subject matter of Section 9 Application much before issuance of Demand Notice dated 06.11.2023. Thus, it is clear that the claim of Appellant for payment of invoices which are subject matter of Section 9 Application was disputed much before Demand Notice was issued - In facts of the present case, Adjudicating Authority has not committed any error in refusing to initiate CIRP, there being Pre-Existing Dispute which is reflected with the correspondence which took place between the Parties much prior to issuance of Demand Notice. Thus, no error has been committed by the Adjudicating Authority in rejecting Section 9 Application filed by the Appellant. There is no merit in the Appeal - The Appeal is dismissed.

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• 2024 (11) TMI 1050
  Maintainability of the appeal by a shareholder under Section 61 of the Insolvency and Bankruptcy Code, 2016 - pre- existing dispute between the appellant and Corporate Debtor/Respondent No.1 or not - interpretation of dispute under Section 5(6) of the code - HELD THAT:- The disputes related to shareholder oppression or mismanagement under the Companies Act, 2013 are distinct issues governed by separate statutory provisions and fall outside the purview of the Code. As a special statute, the IBC prevails over the Companies Act pursuant to Section 238, which has been affirmed by the Hon ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank [ 2017 (9) TMI 58 - SUPREME COURT ], which held that the resolution process under the IBC takes precedence over any conflicting laws. Hence, the contention of appellant regarding resolution of Company Petition under Section 241 242 of Companies Act, 2013 before the CIRP petition does not hold water. The NCLT has passed the order after hearing both the parties and it s an order complying with relevant provisions of the code. The debt and default are on record and there was no pleading of pre-existing dispute in this case. As owners the equity shareholders are biggest beneficiaries when the company does well. Their capital is multiplied due to increase in share prices and by receipt of dividends. On the other hand, if the company performs badly and goes in liquidation, the equity shareholders loose their entire share capital. The owners of the company have a major role to play in the proper functioning of the company, as equity shareholders are represented through the Board of Directors (BoD) and the BoD holds the management accountable for its proper functioning - As soon as the CIRP petition is admitted and IRP is appointed, the functions of the BoD are taken over by IRP. As a representative of Shareholders erstwhile Directors of CD are allowed to intervene and file appeals under Section 61, but the individual or even majority shareholders are not allowed to pursue derivative action. The appellant s argument is that the definition of aggrieved person under Section 61 should include any party whose legal interests are impacted by the outcome of insolvency proceedings, even if not directly named as a party in the original application. The restrictive interpretation conflicts with the broader intent of the IBC to allow for effective appeals by any stakeholder with a demonstrable interest, especially in complex insolvency scenarios where indirect impacts on third-party rights are substantial. Thus, the scope of aggrieved person must not be so narrowly construed as to exclude genuine stakeholders who have a legitimate legal or financial interest in the outcome of the case. The appellant being a shareholder of the company is not the aggrieved party as per the provisions of the Code. The appellant has no locus to file this appeal and the same is not maintainable. Accordingly, the appeal is dismissed.

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• Service Tax

• 2024 (11) TMI 1049
  Service tax on amounts related to execution of statutory obligations - whether the amounts collected by the appellant from their customers towards KEB, BWSSB and Advocate fees should be treated as taxable value u/s 67 of the Finance Act, 1994 read with Rule 2A of the Service Tax (Determination of Value) Rules - as argued service tax is not payable by the appellant prior to 01.07.2010 in view of the Board Circular No. 108/02/2009-ST dated 29.01.2009 and the amounts related to execution of statutory obligations cannot be levied to service tax HELD THAT:- The charges collected in dispute referred above are electricity charges, water charges and legal fees. These are statutory charges to be collected by the appellant and to be paid to the respective authorities are in the nature of reimbursable expenses. The issue of inclusion of reimbursable charges in the taxable value is no longer res integra in view of the decision by the Supreme Court in the case of Union of India Versus Intercontinental Consultants and Technocrats Pvt. Ltd. . [ 2018 (3) TMI 357 - SUPREME COURT] In view of the above, as rightly claimed by the appellant, the above statutory reimbursable amounts cannot form part of the gross amount on which service tax is to be charged. Therefore, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.

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• 2024 (11) TMI 1048
  Invoking extended period of limitation - Non discharge of service tax on the legal expenses incurred under the reverse charge mechanism - Appellant failed to register themselves under the Service tax since they are providing taxable service namely renting of Samudhaya Bhavana and also towards renting of shops for business purposes - HELD THAT:- As considering the communication made by Assistant Commissioner of Central Excise confirming that the Appellant is not liable for payment of service tax and in the absence of any allegation regarding any other service provided by appellant and without any amendment of relevant provision of law, no finding can be made that the Appellant who had registered under the Societies Act and filing income tax return regularly had suppressed the facts regarding service provided by them. Since the entire demand is made by invoking the extended period of limitation and no demand is falling under normal period, the demand is barred by limitation. Appeal allowed.

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• 2024 (11) TMI 1047
  Service tax liability - rendering of service - sale/ transfer as a going concern by way of slump sale as defined under the Income Tax Act 1961, amounts to service - exemption from service tax under Sr. No. 37 of Notification No. 25/2012-ST - demand for Service Tax under the Proviso to Section 73 (1) with interest u/s 75 and imposed penalty equal to the said amount of service tax u/s 78. HELD THAT:- As per entry in Notification No. 25/12 ST dated 20.06.2012 Services by way of transfer of the going concern as a whole or an independent part thereof is exempted. Revenue, in the impugned order has denied the aforesaid exemption on the ground that in the present case the transfer of business is not an independent part of the appellant for the reason that the appellant is involved in the business of Software Development and the transfer of business is also nothing but a business of software development. Therefore, it is not an independent part of the appellant s overall business. Appellant before transfer of as going concern, they were providing a software solution of a product exclusively developed for the buyer of the business in the present case i.e. M/s ZeroChaos Workforce Solutions Private Limited. Therefore, the activity of software development, which was sold to M/s ZeroChaos was exclusively being done for ZeroChaos, therefore, it is clear that the software solution business which were earlier provided to ZeroChaos was absolutely independent, than their other software development business meant for other customers. Therefore, it is clear that the transfer of business as per the business agreement dated 30.10.2014 an exclusive part of the business of the appellant was out rightly transferred to ZeroChaos. The term used in the exemption entry that an independent part thereof indicates that there should not be any situation where even though a business is transferred but the same is not independent and consequently the same is still continued by the transferor. In the present case, the business related to ZeroChaos was exclusively being done for M/s. ZeroChaos and the entire business which was being done for M/s. Zero Chaos has been transferred. As per the agreement, it is clear that the same business is not subsequently continued by the appellant, which is also otherwise not possible, since, software solution was made and carried out exclusively for M/s ZeroChaos, the same business cannot be retained by the appellant for some other customer. Appellant has transferred an exclusive part of their business to the transferee M/s. ZeroChaos, therefore, it is clearly an independent part. In this position, we do not find any doubt about the eligibility of the exemption to the appellant. Therefore, we hold that the appellant is entitled for the exemption under Sr. No. 37 of Notification No. 25/2012-ST dated 20.06.2012. Since, we decide that the demand is not sustainable only on the ground that the appellant is eligible for exemption Notification 25/2012-ST, we are not addressing the issue that whether the transfer of business as slump sale as going concern, is service or otherwise.

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• 2024 (11) TMI 1046
  Classification of services - demand service tax under the category of Scientific or Technical Consultancy Services on RCM basis on the expenditure in foreign currency declared under the head Professional fees and Sampling charges in the Profit Loss Account ( P L ) As submitted the demand confirmed in the instant case on the expenditure in foreign currency recorded under the head Professional fees and Sampling charges in the P L A/c for the relevant period does not tantamount to Scientific or Technical Consultancy service defined under Section 65(92) of the Finance Act, 1994 as applicable prior to 01.07.2012 inasmuch as the said category covers services provided by a scientist or a technocrat, or any science or technology institution or organization unlike the instant case - HELD THAT:- A perusal of the definition of Scientific or Technical Consultancy reproduced above indicate that any service rendered by them is classifiable under the category of Scientific or Technical Consultancy only when such service is provided by a scientist or a technocrat, or any science or technology institution or organization. In the instant case, from the agreements entered into by the appellants with the foreign vendors reveals that the service providers cannot be called as a science or technology institution or organization. They are merely experts conducting site visits for assisting the Appellant in taking informed decision on the viability of acquisition of coal mining assets situated outside India. Accordingly, we hold that the service received by the appellant from the experts cannot be classified under the category of Scientific or Technical Consultancy . Appellant has placed their reliance on the TRU Circular dated 09.07.2001 bearing F.No.B.11/1/2001-TRU, wherein it has been clarified that the scientific or technical consultancy service envisages expert opinion/ advice in one or more disciplines of science or technology. We observe that the activities under taken by the experts involves review and validation of the data pursuant to site visits, meetings and discussions w.r.t. estimated resources and reserves of the mines; geological data; geotechnical and hydrological conditions effecting mining etc. These activities performed by the Foreign Service providers evidently do not fall within the ambit of scientific or technical consultancy services. Thus, the Circular issued by the Board cited above also supports the view that the service rendered by the appellant can be categorized as Scientific or Technical Consultancy only when such service is provided by a scientist or a technocrat, or any science or technology institution or organization. All services provided in relation to mining of minerals, including the then existing taxable service of survey and exploration of mineral services were also brought under the taxable service of mining of mineral, oil or gas services . Thus, we observe that w.e.f. 01.06.2007, the service rendered by the appellant would fall under the taxable category mining of mineral, oil or gas as defined under Section 65(105)(zzzy) and 65(105(zzv) of the Act. We hold that the demand confirmed in the impugned order under the category of scientific or technical consultancy services is not sustainable. Demand of service tax confirmed in the impugned order on sampling charges - We observe that the payment in foreign currency has been made to third party inspection agencies for carrying out inspection w.r.t. the quality of iron ore exported by the Appellant as per the requirements of the export orders. Hence, the same is classifiable as Technical Inspection and Certification Service as defined under Section 65(108) of the Act. The services are not provided by a science or technology institution or organization and are merely in the nature of technical inspection and certification service. However, we observe there is no demand made under the category of Technical Inspection and Certification Service as defined under Section 65(105)(zzi) of the Act. Accordingly, we hold that the impugned order confirming the demand under scientific or technical consultancy services is not sustainable. In respect of services covered under Section 65(105)(zzi) and 65(105)(zzv) of the Act, the taxability shall arise when the services are performed in India. In the instant case, we observe that the mines are immovable property, which are situated outside India. Thus, we observe that the mining as well as technical inspection services have been performed outside India. Service tax liability w.r.t. Professional Fees - demand of service tax confirmed for the Negative List period, in terms of Section 66B of the Act - As in terms of Guidance Note 5 POPOS Rules, 2012 of Service Tax Education Guide, services connected with oil/gas/mineral exploration or exploitation relating to specific sites of land or the sea bed are specified as land-related services. In the instant case, we observe that the place of provision of service is outside India, as the service is provided by team of experts deployed by the foreign services providers to identify mines (immovable property) situated outside India. Accordingly, we hold that the same shall not be chargeable to service tax at the hand of the appellant, on RCM basis. Service Tax liability w.r.t. Sampling Charges - Para 5.4.1 of the Service Tax Education Guide specifies technical testing/ inspection/ certification service to be performance-based service covered under Rule 4 of the POPOS Rules. Hence, the place of provision in the instant case is the place where the services are actually performed (outside India). Accordingly, we hold that the same shall not be chargeable to service tax at the hand of the appellant, on RCM basis. We hold that the taxability does not arise in India in respect of either of the services and set aside the demands of service tax confirmed in the impugned order. Since the demand of service tax itself is not sustainable, the question of demanding interest and imposing penalty does not arise. The impugned OIO has confirmed the demand post 01.07.2012 based on provisions of the Act that are not applicable post 01.07.2012. Since the order does not make reference to the provisions pertaining to the Negative List regime under the Section of Discussion and Findings , which were applicable for the period post 01.07.2012, therefore, in the absence of such reference, we hold that the service tax demand confirmed for the period post 01.07.2012 is not sustainable on this ground also.

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• 2024 (11) TMI 1045
  Demand sustainability on the ground of limitation - Service tax demand under the category of Goods Transport Agency (GTA) services - mainly based on income tax data, form 26AS and balance sheets of the appellant s business of transportation of goods - HELD THAT:- As demand of service tax is raised and confirmed solely based on data received from income tax department viz. from 26AS and admittedly there was no independent examination carried out even considering such recorded income whether related to consideration received towards taxable services provided and leviability of service tax thereon. As seen from the records that appellant has filed ST-3 returns for the disputed period and maintained records which were furnished by the appellant during inquiry, in that view, nothing prevented department from verifying returns and raising query within normal period of limitation. It is further observed that there is no such specific finding in the show cause notice of wilful suppression of facts by the appellant except contending that it would not have come to the knowledge of department if the data from income tax returns were not received from income tax department. In this background, it cannot be alleged that appellant has wilfully suppressed facts from department with intention to evade tax. Therefore the demand is not sustainable on the ground of limitation. Without prejudice to the above finding, we further find that the transport in the present case was undertaken by the owners of the transport vehicles and no consignment note was issued. The transportation in the present case not being under GTA is not liable to service tax in terms of the above specific item in the negative list. Therefore for this reason also the transportation service in the facts of the present case is clearly not taxable. As per our above discussion and finding, the demand is not sustainable.

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• 2024 (11) TMI 1044
  Request for adjourning the matter beyond three times - HELD THAT:-The reason for seeking adjournment is that the fire took place in the office of Counsel in the year 2021 i.e. more than three years from today. Even from 2021 this matter has been listed five times in the year of 2024, as stated in para-1 above. If Counsel for the appellant was really serious about the matter, there was enough time to reconstruct the file or get the relevant documents from registry or from the appellant, for this reason also this request cannot be considered. No justification for adjourning the matter beyond three times which is the maximum number statutorily provided. Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.

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• 2024 (11) TMI 1043
  Rejection of refund claim - refund of the amount which was collected during investigation - refund of amount paid without liability whether permissible or not? - scope of assessee s substantive right to refund of the illegally recovered tax - HELD THAT:- The new judicial thesis instead rests on the principles of economic and distributive justice enshrined in the Preamble and the Directive Principles of State Policy. It also attaches significance to the unethical consequences which would flow and the fiscal and financial chaos which would follow if no bar of unjust enrichment is applied by the courts before ordering refunds. Article 265 and Section 72 should all be read and understood, says the majority view, in the light of the philosophy and the core values of (the Indian) Constitution and in keeping with equity and good conscience . As discussed decision of Hon ble Supreme Court Mafatlal Industries Ltd [ 1996 (12) TMI 50 - SUPREME COURT] are sufficient to clarify that seeking the refund is not a matter of right and the procedure as discussed in the decision has to be followed. In the present case, apparently none of the said procedure has been followed. Though there had been an earlier order of this Tribunal sanctioning the refund, however, the Tribunal remanded back the matter to the adjudicating authority to dispose of the refund application as per law. In compliance thereof, adjudicating authority has invoked section 11B of Central Excise Act. We do not find any infirmity in the same. We hold that the refund claim of appellant is not maintainable in the light of Mafatlal (supra) decision. Thus the order under challenge is upheld and the appeal is dismissed.

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• Central Excise

• 2024 (11) TMI 1042
  CENVAT Credit - capital goods - mobile service providers (MSPs) can claim CENVAT Credit on excise duties paid on mobile towers and prefabricated buildings (PFBs) or not - whether the credit so claimed can be used to pay service tax for the output services rendered by the MSPs? - HELD THAT:- Rule 3(1) of the CENVAT Rules enables a provider of taxable service to claim CENVAT credit on duties paid on any capital goods or input received in the premises of the service provider. Thus, if the mobile towers and prefabricated buildings, which are the items in issue here, qualify as capital goods or inputs received in the premises of the mobile service provider, the mobile service provider will be entitled to claim CENVAT credit which can be further used for paying service tax for the output services rendered by the mobile service provider. In the light of the provisions of the CENVAT Rules, if it is held that towers and/or parts thereof and prefabricated buildings (PFBs) are capital goods or inputs used for providing output service within the meaning of the aforesaid CENVAT Rules, then CENVAT credit can be claimed on these items. It appears that the definition of goods under the Sales of Goods Act, 1930 seems to be the basis of the term goods in other Statutes. Hence, we would primarily rely on the definition given in the Sale of Goods Act - the items in consideration viz., towers and prefabricated buildings are neither actionable claim nor money, nor do they come within the inclusive clause of the definition, viz., stocks, shares, growing crops, grass, and things attached to forming part of the land which are agreed to be severed before sale or under contract of sale. In order to determine whether any property is movable or immovable, this Court, in the light of the statutory provisions has applied certain principles. It has also been noted that such determination may be done not based on a single test but after applying several criteria on the facts of each case. In TRIVENI ENGINEERING INDUS. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2000 (8) TMI 86 - SUPREME COURT] , this Court applied the marketability test, in which it took the view that if the goods in question are capable of being taken into the market and sold, the same cannot be treated to be as immovable but movable property - This Court observed that marketability itself indicates movability of the property in issue. In the case of Sirpur Paper Mills Ltd. [ 1997 (12) TMI 109 - SUPREME COURT] , this Court again applied the test of marketability. The issue which arose for consideration in the said case was whether paper machines assembled at site were liable for duties under the Excise Act. It was the plea of the Assessee that since the machine was embedded in concrete base, it became an immovable property though embedding was for providing a wobble-free operation of the machine. This Court rejected the plea and held that merely because the machine was attached to the earth for efficient working and wobble- free operation, it did not per se render the said property immovable since the said machine can be sold in the market. In the present case, while mobile tower cannot be shifted to another location without dismantling it, it is to be noted that mobile tower itself was bought and brought in a completely knocked-down (CKD) or semi-knocked-down (SKD) condition and it was erected and installed at the site after assembling the parts. If the said mobile tower is to be shifted to another location, it obviously has to be dismantled and restored to its SKD or CKD condition and thereafter re-erected, which however, would not entail any damage to it. There can no dispute that if the newly set up BTS/BSC is relocated to another site it may entail certain damages. However, what is important to be noted is that the damage is qua the BTS/BSC or cables connecting the various components, but not the tower itself or PFB with which we are concerned. If the tower or the PFB can be dismantled and relocated in another site without causing any damage to either the tower or PFB, the mobility or the marketability of these items is retained. Thus, as far as the tower and PFBs are concerned, these exhibit the character of a movable property. Thus, merely because certain articles are attached to the earth, it does not ipso facto render these immovable properties. If such attachment to earth is not intended to be permanent but for providing support to the goods concerned and make their functioning more effective, and if such items can still be dismantled without any damage or without bringing any change in the nature of the goods and can be moved to market and sold, such goods cannot be considered immovable. The PFB houses other BTS equipment and alternative electricity source in the form of diesel generators and other equipment to provide alternative and uninterrupted power supply to the antenna so that in the event of failure of main power supply, the generator can instantly provide backup electricity supply to the antenna and BTS. The PFBs house electric cables, other equipment related to antenna, BTS and generator. Thus, PFBs enhance the efficacy and functioning of mobile antenna as well as BTS and accordingly, PFBs can also be considered as accessories to the antenna and BTS which are capital goods falling under Chapter 85 of the Schedule to the Central Excise Tariff. Having held that the tower and pre-fabricated buildings (PFBs) are goods and not immovable property and since these goods are used for providing mobile telecommunication services, the inescapable conclusion is that they would also qualify as inputs under Rule 2(k) for the purpose of credit benefits under the CENVAT Rules - Appeal disposed off.

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• 2024 (11) TMI 1041
  Eligibility of SSI exemption Notification No.08/2003-CE dated 01.03.2003 - clubbing of clearance value of two units - failure to consider various submission - violation of principles of natural justice - HELD THAT:- From the finding of this Tribunal, it can be seen that the Ld. Commissioner (Appeals) was directed to particularly, look into the financial transaction, day to day management etc. to arrive at conclusion of relationship between the two units. It was also observed that the Commissioner (Appeals) is supposed to reassess the evidences as brought out on record and also referred to specifically in the grounds of appeal and thereafter, applying the principles of natural justice reconsider the eligibility of SSI exemption Notification No.08/2003-CE. From the perusal of the impugned order, we find that the appellant have made multiple submissions such as limitation, discrepancy in issuance of the show cause notice and various records showing that there is no financial flowback and both the units are working separately and particularly, after certain stage, one factory was shifted to the different location. However, the Ld. Commissioner (Appeals) has not considered all this aspects in the proper perspective and passed the order without considering the various submissions and evidences produced by the appellant. The request of the Ld. Counsel on behalf of the appellant for remanding the matter is just and proper. Accordingly, the impugned order is set aside and the appeal is allowed by way of remand to Commissioner (Appeals) for passing a fresh order.

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• 2024 (11) TMI 1040
  Liability to pay 6% duty on by product namely Ammonium Sulphate - contravention of condition of Notification No.01/2011- CE - availment of Cenvat Credit on the inputs used in the Ammonium Sulphate - HELD THAT:- It is found that in the present case the demand of differential duty of 5% i.e. as against the 1% duty paid by the appellant and 6% duty was demanded on the ground that appellant have availed the Cenvat Credit on the input and used in the Ammonium Sulphate, hence, the Ammonium Sulphateis liable to duty at the rate of 6% instead of 1%. It is found that in the facts of the present case, Ammonium Sulphate is generated unavoidably as by product, in case of by product it cannot be said that any input stage credit was availed even if, the by product is cleared at nil rate of duty Cenvat credit cannot be demanded only on the pretext that the entire input on which the credit was taken has been used in the manufacture of the final product and not in manufacture of by product. Therefore, the exemption Notification No.01/2011which carries the condition of non availment of Cenvat Credit on input cannot be denied. This issue is no longer res-integra, in the appellant s own case, HINDUSTAN CHEMICALS COMPANY VERSUS COMMISSIONER OF C.E. S.T. -SURAT-II [ 2024 (5) TMI 459 - CESTAT AHMEDABAD] it was held that since the issue has been settled that Ammonium Sulphate being a by-product arising in the course of manufacture of final product, the demand under Rule 6(3) is not applicable. Accordingly, In the present case also being a similar issue, demand is not sustainable. In view of the above decision in the appellant s own case, it has been held that the reversal under Rule 6(3) of Cenvat Credit Rules in respect of Ammonium sulphate being by product is not required to be made. This has been held with a view that Cenvat Credit on the input cannot be said to have been availed when any by product is cleared. Therefore, in view of the above settled position, the demand of excise duty on the Ammonium Sulphate which was made on the basis that the Cenvat Credit was availed on the inputs is not sustainable. The impugned order is set aside - the appeal is allowed.

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• CST, VAT & Sales Tax

• 2024 (11) TMI 1039
  Levy of purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 during the Assessment Year 1994-1995 - defective parts that were collected from the customers by providing maintenance services to the customers / clients on behalf of the head office - HELD THAT:- A reading of sub-section (1) to Section 7-A of the Act makes it clear that the question of subjecting the respondent to purchase tax would arise only if there was a purchase of defective spare parts by the respondent from the customers / clients, question of involving Section 7-A of the TNGST Act, 1959 will apply. In the present case, it cannot be said that the respondent was purchasing the defective spare parts from the customers / clients. All that, the respondent did was to replace the old defective parts with the new parts and gave a discounts on the replaced new parts to the customers. Since there was no purchase of defective parts, question of levying purchase tax at the rate mentioned in Section 3 or Section 4 of TNGST Act, 1959 under Section 7-A of TNGST Act, 1959 does not arise - there are no merit in the challenge to the impugned order of the Tribunal - tax case dismissed.

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