Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 27, 2021
Case Laws in this Newsletter:
GST
Income Tax
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
GST - States
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94/2020– State Tax - dated
24-11-2021
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Delhi SGST
Delhi Goods and Services Tax (Fourteenth Amendment) Rules, 2020.
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47/2020– State Tax - dated
24-11-2021
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Delhi SGST
Seeks to amend Notification No. 35/2020-State Tax, dated the 24th March, 2021
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24/2021– State Tax - dated
24-11-2021
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Delhi SGST
Amendment in Notification No. 14/2021-State Tax, dated the 17th November, 2021
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70/2020- State Tax - dated
23-11-2021
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Delhi SGST
Amendment in Notification No. 13/2020 – State Tax, dated the 31st March, 2021
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25/2021– State Tax - dated
23-11-2021
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Delhi SGST
Amendment in Notification No. 21/2019-State Tax, dated the 17th October, 2019
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19/2021– State Tax - dated
23-11-2021
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Delhi SGST
Amendment in Notification No. 76/2018– State Tax, dated the 3rd Sept, 2019
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18/2021– State Tax - dated
23-11-2021
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Delhi SGST
Amendment in Notification No. 13/2017 – State Tax, dated the 30th June, 2017
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of interest - No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. - HC
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Exemption from GST levy - Printing of Cheques - In view of the clarification issued by CBIC dated: 20.10.2017 it is clarified that where the applicant uses physical input, i.e., paper supplied by their client for the purpose of goods falling under chapter 48 or 49 of customs then the same will fall under Heading 9988 (ii)(a) and is taxable at 6% under CGST. - AAR
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Exemption under GST - Pilot Scheme on “Fortification of Rice &, its Distribution under the Public Distribution System” - Since the goods supplied satisfy the conditions 1 and 2, we hold that the applicant is eligible for the benefit of Notification No. 39/2017-C.T.(Rate) dated 18.10.2017 as amended by Notification No. 11/2021-C.T.(Rate) dated 30.09.2021, effective from 01.10.2021 only, on fulfilling the conditions stipulated thereon in column (d) for such periodic demand and supply of FRK (Premix) made by them and the concessional rate is not eligible to them for the period upto 30.09.2021. - AAR
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Input tax credit (ITC) or not - The interpretation of Sec 17(5)(c) wherein works contract services are excluded from claiming ITC will include all activities enumerated under Sec 2(119). And this definition does not exclude any species of works contract relatable to any immovable property where transfer of property in goods is involved. Thus the applicant who is purchasing building under an agreement of sale is not eligible to claim ITC under Sec 17 of the CGST Act, 2017. - AAR
Income Tax
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Deduction u/s 57(iii) - As long as the purpose of incurring expenditure is to earn income, the expenditure would have to be allowed as a deduction under Section 57(iii) of the Act. Under Section 57(iii) of the Act a nexus between the expenditure and income has to be ascertained. The assessee was therefore, entitled to deduction under Section 57(iii) of the Act. - The tribunal exceeded its jurisdiction in disallowing the entire interest expenditure - HC
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Validity of National Faceless Assessment - From the Affidavit-in-Reply filed by the Respondents, it is not in dispute that the draft Assessment Order was not served on the Petitioner. It is also not in dispute that the variation proposed in the draft Assessment Order is prejudicial to the assessee's interest. It is, therefore, clear that Respondent No.1 has not issued a show-cause notice to the assessee in the form of a draft Assessment Order and made an addition - Matter restored back - HC
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Exemption u/s 11 - cancel the registration granted under Section 12A - The exemption u/s 11 of the Act is denied in the present case mainly alleging breach of Section 13(1)(c) of the Act. The payment in the name of professional services fees/administrative services fees made to the trustees, the Tribunal having analyzed the matter in depth has given a finding that the said fees is not disproportionate to the services rendered by the said trustees - HC
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Exemption u/s 11 - activity of renting out the hostel facilities to the students - The proviso restricts the exemption to the trust if it’s activities falls in the last limb i.e. advancement of any other object of general public utility. In other words, the restrictions imposed under the proviso to section 2(15) of the Act cannot be made applicable in the case on hand as the assessee is engaged in the activity of education - AT
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Capital gain on sale of land - Nature of land sold - agricultural land - calculation of shortest route - , although there is no doubt that conflicting reports were issued by these authorities, but the conclusive report dated 14.12.2012 made it very clear that there are three road routes to reach the land in question, while the shortest road route is from Main Mirzapur Road , and the distance of Aarzai No. 318 is only 7.800 Kms., which is well within 8 kms. - The land in question is within 8kms from the Municipal limits and is a capital asset as defined u/s 2(14) and capital gains arising on the sale of land shall be chargeable to income-tax - AT
IBC
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Approval of Resolution plan - There can be no doubt that any fraud in process may vitiate the entire process but it is easy to allege fraud and collusion but difficult to prove the same. Apart from the bald allegation of collusion with the ‘Successful Resolution Applicant’, there is no other material to come to a finding that actually any fraud was played. The commercial wisdom of the Financial Creditors cannot be disregarded on bald allegation of fraud and collusion as raised by the Appellant. - None of the grounds to challenge the Resolution Plan had been made out. Hence the Adjudicating Authority rightly approved the Resolution Plan. - AT
Central Excise
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CENVAT Credit - input or not - The advertisement papers presented clearly shows that the advertisement is in respect of packaging material and it nowhere indicates the trading of packaging machinery - Since advertisement service was not used for trading of packaging machines, the value of packaging machines for calculating the reversal amount of CENVAT Credit cannot be taken into account. - AT
Case Laws:
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GST
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2021 (11) TMI 889
Provisional Attachment of petitioner's bank Account - Section 83 of the CGST Act, 2017 read with Rule 159(1) of the CGST Rules, 2017 - HELD THAT:- The issue brought before us is squarely covered by the decision of the Supreme Court in M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. [ 2021 (4) TMI 837 - SUPREME COURT] where it was held that The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue. The impugned communication dated 1.2.2021 issued under Section 83 of the CGST Act, 2017 is set aside. The aforesaid bank account of the petitioner may be released from attachment, forthwith - Petition allowed.
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2021 (11) TMI 888
Levy of interest - interest imposed on gross amount without deducting the Input Tax Credit which is already paid by the petitioner - appeal preferred by the petitioner has been rejected without any application of mind to the grounds of appeal raised by the petitioner - violation of principles of natural justice - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, we form an opinion that the order is bad in law. This we say so, for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. Petition disposed off subject to conditions agreed upon between parties.
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2021 (11) TMI 887
Exemption from GST levy - printing of pre-examination material items like Question Papers, OMR Sheets [Optical Mark Reading], Answer Booklets with/without OMR, Practical Answer Booklets, Hall Tickets and other examination material specific to various educational boards/Universities - printing of post-examination material like Rank Cards, Marks Cards, Grade Sheets and Certificates specific to various educational boards/ Universities - activity of evaluation of OMRS and answer sheets, i.e., scanning and processing of results of examination - amounts to provision of service or not - HELD THAT:- The Sl.No.66 of Notification No.12 of 2017-Central Tax (Rate), dt: 28-06-2017 provides for exemption for services related to admission to or conduct of examination by such institution. Therefore if the applicant is providing any service in relation to conduct of examination by an educational institution as defined in the notification above then such services qualified to be exempt under Entry No.66 of Notification No.12/2017. Printing of Cheques - HELD THAT:- The Notification No.2 of 2017 exempts supply of Cheques, lose or in book form at HSN code 4907. The applicant does not supply cheques to Bankers, it is the Bankers who are supplying cheques to their customers. The content of the cheque book is supplied by the banker and the banker is the person who owns usage rights to such intangible property. The applicant is printing cheques as per the directions of the Bankers and therefore in case of cheques where the applicant uses their own physical input, i.e., paper. The applicable rate of GST will be on different footing. In the case of the applicant he is providing services of printing and this activity of printing is not falling under item (i) of heading 9989 i.e., printing of newspapers, books (including Braille books), journals and periodicals and therefore is covered under Heading 9989 (ii) of Notification No.11/2017-Central Tax (Rate), dated: 28-06-2017 as amended and is taxable at 9% CGST 9% SGST - In view of the clarification issued by CBIC dated: 20.10.2017 it is clarified that where the applicant uses physical input, i.e., paper supplied by their client for the purpose of goods falling under chapter 48 or 49 of customs then the same will fall under Heading 9988 (ii)(a) and is taxable at 6% under CGST.
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2021 (11) TMI 886
Exemption under GST - Applicability of N/N. 39/2017-CT(R) dated 18.10.2017 read with G.O.Ms.No. 140 dated 17.10.2017 issued by the Commercial Taxes and Registration Department - activity of manufacture and supply of Fortified Rice Kernels to the Tamil Nadu Civil Supplies Corporation pursuant to the Pilot Scheme on Fortification of Rice , its Distribution under the Public Distribution System project launched by the Central Government - HELD THAT:- In the case at hand, the applicability of the Notification was raised before us for the FRK(Premix) supplied by the applicant to the Designated Rice Mills for mixing with the Rice in a fixed proportion and distributing the same under the Scheme duly approved by the Government. As per the submissions, it has been established by the applicant, that the product satisfies the conditions for classifying under CTH 19 basis the Laboratory report furnished by them. It is also established that they undertake supply of FRK as per the tender conditions and supplies the same to the Designated Rice Mills for intended supply under the scheme on mixing the FRK with the Rice in the given proportion. It is also seen that the supply is made based on the demand placed on them vide proceedings issued by the TNCSC and invoice is raised for each such period of supply. The product supplied by the applicant to the rice mills for blending with rice grains is Fortified Rice Kernel (FRK), which per-se is not a 'Food Preparation', in as much as the FRK cannot be consumed as such or after cooking, but FRK is 'goods'. Further the FRK is not directly supplied to the economically weaker sections, but only after blending with rice grains in designated rice mills. The Notification No. 39/2017-C.T.(Rate) dated 18.10.2017 provided the concessional rate to 'Food Preparation' subject to fulfillment of conditions at Column (4) before such amendment. Therefore, the concessional rate under Notification No.39/2017-C.T.(Rate) for the Period 18.10.2017 to 30.09.2021 is not available to the applicant for reasons, that;- (1) FRK is not a food preparation put up in unit containers for free distribution to economically weaker sections and; (2) Applicants are not involved in free distribution of FRK to economically weaker sections. Vide notification No. 11/2021-C.T. (Rate) dated 30.09.2021, the Notification 39/2017 dated 18.10.2017, was amended effective from 01.10.2021, by including the terms Fortified Rice Kernel (Premix) supply for ICDS or similar scheme duly approved by the Central Government or any' State Government in column (3) and also, the words 'Food Preparation' is amended as 'goods' in column (d) of the Notification - The applicant is eligible for the benefit of Notification No. 39/2017-C.T.(Rate) dated 18.10.2017 as amended by Notification No. 11/2021-C.T.(Rate) dated 30.09.2021, effective from 01.10.2021 only, on fulfilling the conditions stipulated thereon in column (d) for such periodic demand and supply of FRK (Premix) made by them and the concessional rate is not eligible to them for the period upto 30.09.2021.
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2021 (11) TMI 885
Exemption under GST - Services provided by the applicant to the recipient i.e. The Greater Chennai Corporation - service provided to the local authority by way of activity in relation to functions entrusted to a Panchayat. under article 243G and Municipality under article 243W of the Constitution - pure services or not - composite supply or not - time of supply - benefit of Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Difference of opinion - HELD THAT:- The issue is not answered and is deemed to be that no ruling is issued under Section 101(3) of the CGST/TNGST Act 2017 because of the divergence of opinion between both the Members.
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2021 (11) TMI 884
Classification of supply - deemed service or not - purchasing flats/buildings while they are under construction - immovable property should fall under the definition in clause 5(b) of Schedule II of SGST Act, 2017 or not - inward supply does fall under the exclusion provided in Sec 17 of the CGST Act, 2017 from availing input tax credit (ITC) or not - HELD THAT:- Though the construction of a building is covered by the definition of works contract still there are (2) separate entries in Schedule II which describe the eligibility of immovable property to tax. Both these entries read with Sec 7(1A) make the supply of immovable property taxable under the Act. However, the Schedule II carves out certain types of works contract under clause 5 to be treated differently from the types of works contract enumerated in Entry 6. This does not alter the basic definition of works contract given in Sec 2(119). It is a settled principle of interpretation that while interpreting the provision of taxing statute, a construction which would preserve the purpose of provision should be adopted. Therefore in the very nature of taxation statute the interpretation cannot be absolutely cast upon the logic. The purpose of introducing exceptions in Sec 17 of the CGST Act, 2017 is to distinguish it from other transactions. Wherever the legislature has considered it appropriated to ensure consistency in the working of various provisions and to avoid repugnancy and ambiguity in such places they have clearly enacted such exclusions. Where such clarity of excluding a particular transaction is not clearly mentioned it cannot be inferred by logic. The interpretation of Sec 17(5)(c) wherein works contract services are excluded from claiming ITC will include all activities enumerated under Sec 2(119). And this definition does not exclude any species of works contract relatable to any immovable property where transfer of property in goods is involved. Thus the applicant who is purchasing building under an agreement of sale is not eligible to claim ITC under Sec 17 of the CGST Act, 2017.
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2021 (11) TMI 865
Initiation of recovery proceedings of tax - requirement of service of order of assessment - section 78 of FA - HELD THAT:- Perusal of Notice (Annexure P-10) would show that in two of the notices i.e. Recovery No.34 of 2021 and 35 of 2021, order date is mentioned as 18.8.2021. Under Section 78 of the Act of 2017, the period of three months is provided for making payment of the tax assessed/ascertained by the Proper Officer but the letter/notice Annexure P-10 to third party under Section 79 (1) (c) of the Act of 2017 was issued on 1.10.2021 which is less than three months period from the date of the recovery order No.34 of 2021 and 35 of 2021. It is not disputed by learned counsel for the respondents that no specific reasons have been assigned for issuing notice under Section 79 (1) (c) of the Act of 2017 for initiating proceedings under Section 78 of the Act before lapse of three months period. Considering that no order was served upon the petitioner as required under Section 78 of the act of 2017, as an interim measure, it is directed that effect and operation of order /notice dated 01.10.2021 (Annexure P-10) shall remain stayed till the next date of hearing subject to petitioner depositing 50% of the total payable tax amount within a period of three weeks from today, adjusting amount which is already paid by the petitioner, pursuance to the notice. List this case in the week commencing 6th December 2021.
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Income Tax
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2021 (11) TMI 883
Deduction u/s 57(iii) - Tribunal justification in holding that on the borrowings in question, the appellant was neither entitled to claim any deduction under Section 57(iii) nor for a deduction u/s 36(1)(iii) - HELD THAT:- Sec 57(iii) of the Act mandates that income chargeable under the head 'income from other sources' shall be computed after making a deduction of any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income. Section 57(iii) of the Act does not require that the expenditure incurred is deductible only if expenditure has resulted in actual income. As long as the purpose of incurring expenditure is to earn income, the expenditure would have to be allowed as a deduction under Section 57(iii) of the Act. Under Section 57(iii) of the Act a nexus between the expenditure and income has to be ascertained. The assessee was therefore, entitled to deduction under Section 57(iii) of the Act. The tribunal exceeded its jurisdiction in disallowing the entire interest expenditure and the power of the tribunal is limited to passing of the order in respect of subject matter of the appeal. Thus substantial question of law is answered and is held that assessee is entitled to claim deduction under Section 57(iii) of the Act. Whether the appellant had failed to prove its contention in the alternative that he borrowings in question were made for business purposes? - Whether Tribunal has not been justified in making the observations that the deduction as claimed was not allowable not only in excess of interest expenditure over interest earned, but also the entire interest expenditure incurred on the borrowings in question? - The second and third substantial questions of law are answered in the affirmative and in favour of the assessee.
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2021 (11) TMI 882
Validity of National Faceless Assessment - as argued draft Assessment Order was not served on the Petitioner - HELD THAT:- In the fact situation of the present case, it appears that a notice u/s 142(1) of said Act along with questionnaire was issued on 23/12/2020 and 26/03/2021. The draft Assessment Order was prepared based on information furnished by the assessee to the said notices. It was sent to the Risk Management Unit, which accommodated it to the Review Unit. The Review Unit concurred with the draft Assessment Order and submitted its report on 25/04/2021. The impugned Assessment Order was passed on 26/04/2021, and demand notice u/s 156 was also issued on 26/04/2021. From the Affidavit-in-Reply filed by the Respondents, it is not in dispute that the draft Assessment Order was not served on the Petitioner. It is also not in dispute that the variation proposed in the draft Assessment Order is prejudicial to the assessee's interest. It is, therefore, clear that Respondent No.1 has not issued a show-cause notice to the assessee in the form of a draft Assessment Order and made an addition of ₹ 120,94 Crore and second demand of ₹ 8.14 Crore. As per the case of Multiplier Brand Solutions Pvt. Ltd. [ 2021 (11) TMI 822 - BOMBAY HIGH COURT] are of the view that the impugned order of assessment and consequent notice of demand cannot be sustained. Assessment Order passed under Section 143(3) read with Section 144 and notice of demand under Section 156 of the said Act are quashed and set aside.The matter is remanded to Respondent No.1 to complete assessment proceedings, by following procedure as contemplated by Section 144B.
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2021 (11) TMI 881
Exemption u/s 11 - cancel the registration granted under Section 12A - exemption under Section 11 of the Act is denied in the present case mainly alleging breach of Section 13(1)(c) - amendment of trust deed - HELD THAT:- As per in the case of Karnataka Badminton AssociationIn [ 2015 (1) TMI 1202 - KARNATAKA HIGH COURT] registration granted was cancelled in view of the amendment of first proviso to Section 2(15) of the Act, which is not a ground specified in the statute for cancellation of the registration. The Co-ordinate Bench of this Court considering Section 12AA(3) of the Act has held that a registration granted u/s 12A can be cancelled under two circumstances i.e., (i) if the activities of such trust or institution are not genuine, and ii) the activities of the trust or institution are not being carried out in accordance with the object of the trust or institution. Only on these two conditions/grounds found to be satisfied, the registration granted could be cancelled by the authorities under Section 12A. As further observed that notwithstanding the fact that the assessee is conferred registration under the provisions of 12A of the Act, unless the assessee falls within the provisions of Section 2 (15) of the Act, excluding the first proviso, it will not be entitled to the benefit of exemption of tax. If the case of the assessee falls in the first proviso, the benefit of registration which flows from Section 12A of the Act is not available. But on that ground, registration cannot be cancelled and accordingly, dismissed the appeal filed by the Revenue. Tribunal has made a threadbare examination of the amendment with the original Objects of the Act and has given a finding that it is in furtherance of the Objects and not contrary to the Objects. The exemption under Section 11 of the Act is denied in the present case mainly alleging breach of Section 13(1)(c) of the Act. The payment in the name of professional services fees/administrative services fees made to Sri. Suresh Nagpal and Smt. Geetha Nagpal, the Tribunal having analyzed the matter in depth has given a finding that the said fees is not disproportionate to the services rendered by the said trustees - payment made to the trustees towards the services rendered if found to be unreasonable, the same could not be construed as violation of Section 13(1)(c) to deny the exemption under Section 11 of the Act. The Hon ble Delhi High Court in the case of DIT (Exemption) vs. Agrim Charan Foundation [ 2001 (8) TMI 78 - DELHI HIGH COURT] has held that the legislature has clearly contemplated that in a case, where the whole or part of the relevant income is not exempted under Section 11 by virtue of violation of Section 13(1)(d) of the Act, tax shall be levied on the relevant income or a part of the relevant income at the maximum marginal rate. The Co-ordinate bench of this Court concurring with these judgments has held that for violating Section 11(5) of the Act, the entire income of the assessee - trust cannot be assessed for the tax. The same analogy would be applicable even to Section 13(1)(c) of the Act also. Thus, the entire income of the respondent - trust cannot be assessed for tax even for violation of Section 13(1)(c) of the Act. As regards the amendment of trust deed, the Tribunal has returned the finding that the objects of the assessee - trust even after amendment of the trust being continued to be charitable; the amendment is a mere power conferred on the trust or other institution. There is no finding recorded by the authorities that the amendment to the object clause has resulted in the trust or institution becoming non-charitable in character. Thereby no reason is forthcoming to establish the removal of foundation of charitable in nature on which the registration was granted was removed. We have no reasons to interfere with the finding recorded by the Tribunal since the Revenue itself was satisfied that the objects of the assessee - trust was imparting education and was charitable in nature. If any violation of Section 13(1)(c) of the Act is noticed, it was open to the assessing officer to examine the same and to bring the said transaction into taxable income but that would not be suffice to cancel the registration under Section 12AA(iii) of the Act. Adequate safe-guards being provided in Sections 12 and 13 of the Act, cancellation of registration on the allegation that education is being imparted on commercial lines is not valid reason for the cancellation of registration. We find no exception with the order impugned. - Decided in favour of assessee.
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2021 (11) TMI 880
Income accrued in India - treating the receipts of assessee's on account of sale of software to the Indian customers, as royalty - DTAA between India and Netherlands - HELD THAT:- As relying on ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VERSUS THE COMMISSIONER OF INCOME TAX ANR. [ 2021 (3) TMI 138 - SUPREME COURT] we are of the view that Ld. CIT(A) erred in treating the receipts from sale of software with the support services as royalty.
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2021 (11) TMI 879
TP Adjustment - determination of ALP of AMP expenses - HELD THAT:- In view of the above order of the Tribunal own case for assessment year 2015-2016 [ 2021 (2) TMI 857 - ITAT BANGALORE ] which is identical to the facts of the instant case, we restore the issue of determination of ALP of AMP expenses to the files of AO/TPO. AO/TPO is directed to afford a reasonable opportunity of hearing to the assessee and take a decision in accordance with law. It is ordered accordingly. Depreciation on intangible assets - whether design and technical knowhow, vendor network relationship (VR) acquires as part of slump sales? - HELD THAT:- An identical issue was considered in assessee's own case by the co-ordinate Bench of the Tribunal for assessment year 2015-2016 [ 2021 (2) TMI 857 - ITAT BANGALORE ] followed the Tribunal order for the assessment year 2011-2012 [ 2019 (11) TMI 1701 - ITAT BANGALORE ] and held that the assessee is entitled to depreciation on intangible assets. Deduction in respect of education cess and secondary higher education cess u/s 37(1) - HELD THAT:- The issue raised in the additional ground is a pure legal issue, which does not require any verification of facts. Therefore, we admit the same for adjudication. As in the case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] had held education cess is an allowable expenditure as the word cess is conspicuously absent under the provisions of section 40(a)(ii) . The Mumbai Bench of the Tribunal in the case of Voltas Limited [ 2020 (7) TMI 125 - ITAT MUMBAI] had admitted additional ground of appeal with regard to the claim of education cess and adjudicated the matter in favour of the assessee, by following the judgment of the Hon'ble Bombay High Court in the case of Sesa Goa Limited - In the light of the aforesaid judicial pronouncements, we hold that education cess is to be allowed as deduction. It is ordered accordingly.
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2021 (11) TMI 878
TP Adjustment - adjustment on account of interest on loan to Associated Enterprises (AE) while determining Arm s Length Price of international transaction - HELD THAT:- Unsecured loan to Associated Enterprise is outstanding on which Arm s Length Price for interest was computed by TPO in earlier years. Therefore, respectfully following the order of Co-ordinate Bench, we direct the AO/TPO to follow the order of the Tribunal in A.Y. 2008-09, 2010-11 and 2011-12 [ 2020 (4) TMI 522 - ITAT AHMEDABAD] and re-compute the interest adjustment.
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2021 (11) TMI 877
Unexplained payment of margin money and excess payment for purchase of two LPG Tankers - CIT-A enhanced the addition - HELD THAT:- For addition made by the Assessing Officer on account of payment based on the invoices issued on the M/s. Spark Engineers by treating the same as bogus the said addition is unwarranted as the assessee has shown the said payment as part of the total cost of the Tankers. CIT(A) has though taken up this issue but has not confirmed the said addition but enhanced the addition made by the Assessing Officer on account of the margin money. Even otherwise, once the payment of the said amount is not in dispute as the said payment was made through banking channel then the said payment considered by the Assessing Officer as excess cannot be treated as income of the assessee because the source of the said payment is not disputed. It may be an issue for determining the total cost of the capital asset in the shape of the two LPG Tankers but the amount cannot be added to the income of the assessee merely because the assessee has paid this amount in excess. Addition on account of margin money - Assessee has produced the invoices before the Assessing Officer by suppressing the total cost of two LPG Tankers so as to match the amount of payment being the loan amount of ₹ 50,00,000/- and cash payment of ₹ 50,000/-. Whereas at the time of taking the loan, the assessee has produced the invoices showing the total cost of two Tankers at ₹ 64,60,000/- out of which assessee undertook to pay ₹ 14,60,000/- as margin money from her own source. Since the assessee has paid only ₹ 50,000/- out of ₹ 14,60,000/- and the balance of ₹ 14,10,000/- was treated by the Assessing Officer as unexplained investment/payment. The Assessing Officer conducted an enquiry from the bank which has confirmed the fact that the total cost of two LPG Tankers as per the invoices/quotations filed by the assessee is ₹ 64,60,000/- out of which a margin money of ₹ 14,60,000/- was directly paid by the assessee to the supplier. Once the bank has confirmed the payment of margin money by the assessee to the suppliers then in the absence of explanation of source, this amount of ₹ 14,10,000/- is rightly added to the income of the assessee by the Assessing Officer. The CIT(A) enhanced the addition from ₹ 14,10,000/- to 15,38,880/- without issuing a show cause notice as required under section 251(2) of the Income Tax Act. Therefore, in the absence of the show cause notice, the enhancement made by the CIT(A) is not sustainable and liable to be deleted. Considering the facts and circumstances of the case, when the document produced by assessee as well as confirmation of the bank regarding the total cost of two LPG Tankers and payment of margin money by the assessee, the addition of ₹ 14,10,000/- is rightly made by the Assessing Officer. An explanation of the assessee is that the total cost of the Tankers is reduced to ₹ 50,50,000/- does not inspire confidence when there is significant discrepancies in the two set of invoices produced by the assessee. Accordingly, the addition to the extent of ₹ 14,10,000/- is confirmed. Non consideration of additional evidence by the CIT(A) - HELD THAT:- The assessee has raised this ground to challenge the impugned order of the CIT(A) on merit without considering additional evidence filed by the assessee. However, it is a matter of record that the CIT(A) sent all the documents and the contentions of the assessee to the Assessing Officer and called for remand report. The impugned order has been passed by the CIT(A) after considering the remand report of the Assessing Officer and therefore, it cannot be said that the CIT(A) has passed the order without considering these documents. Even otherwise when the contradictory records were filed by the assessee then the alleged additional evidence filed by the assessee would not help the case of the assessee.
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2021 (11) TMI 876
Exemption u/s 11 - activity of renting out the hostel facilities to the students - HELD THAT:- There was no change in the aims and objects of the trust. Accordingly in view of the above, we hold that the assessee was entitled to claim exemption under section 11 of the Act with respect to its activity of renting out the hostel facilities to the students being in the nature of education. Once the activity of the assessee has been held as educational in nature, then the proviso to section 2(15) shall not be applicable. The proviso restricts the exemption to the trust if it s activities falls in the last limb i.e. advancement of any other object of general public utility. In other words, the restrictions imposed under the proviso to section 2(15) of the Act cannot be made applicable in the case on hand as the assessee is engaged in the activity of education. See circular issued by the CBDT bearing no. 11 of 2008 dated 9 December 2008. We also draw support and guidance from the judgement of Hon ble Mumbai ITAT in case of All India Federation of Tax Practitioners case.[ 2021 (5) TMI 1002 - ITAT MUMBAI] Whether the income generated by the assessee from renting out the hall can be classified as educational activity in the manner provided under section 2(15) of the Act? - The activity of renting out the hall cannot be categorized as educational activity but the status of the assessee will not change being a charitable organization. It is for the reason that this activity is the ancillary activity which is supporting the assessee to achieve its goals of primary activities. Furthermore, there is no prohibition under the Act that the assessee being a charitable organization cannot carry on the business which is incidental to the attainment of the objective of the trust. Rather subsection (4A) to section 11 of the Act, authorizes the educational institution to carry on the business which is incidental to the attainment of the main objective of the trust. In this connection, we draw support and guidance from the judgement of Hon ble Delhi High Court in case of DGIT (Exemption) vs. ICAI reported [ 2013 (7) TMI 205 - DELHI HIGH COURT ] Deduction claimed by the assessee being corpus fund under the provisions of section 11(1)(d) - Deduction was denied by the authorities below on the reasoning that the assessee is not engaged in the educational activity and therefore no benefit can be extended under the provisions of section 11(1)(d) of the Act. However, we find that the tribunal has already held that the activity of the assessee is in the nature of educational activity vide paragraph No. 22-23 of this order. For detailed discussion, please refer the relevant paragraph. Accordingly, we hold that the assessee is eligible for deduction under the provisions of section 11(1)(d) of the Act.
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2021 (11) TMI 875
Exemption from the payment of tax as indigent person - assessee has filed appeal without paying of payment for requisite fee - assessee filed an affidavit before the Tribunal by stating that his day to day life runs only on the money provided by his son and he is not in a position to pay the fee as required by Income Tax Rules - HELD THAT:- As the case of the assessee is that he is an indigent person and he is depend upon the money send by his son. The assessee not filed any details to show that he is an indigent person such as bank statement and house which he is residing to show that it is not his own. The assessee except stating he is indigent person, no details was filed for the same. Under these facts and circumstances of the case and also by considering the conduct of the assessee, the assessee cannot be treated as indigent person. Accordingly, we reject the assessee's request for exemption from the payment of tax and this appeal is dismissed for non-rectifying the defect pointed out by the Registry. Appeal filed by the assessee is dismissed.
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2021 (11) TMI 874
Capital gain on sale of land - Nature of land sold - agricultural land - calculation of shortest route - whether the said land is within eight kilometers from the limits of municipal corporation of Allahabad , and thus falls within the inclusive definition of Capital Asset u/s 2(14)? - HELD THAT:- We have to consider shortest road route, and hence we are not concerned with the other two road routes which are not the shortest road routes. Unfortunately, the assessee is relying vide certificate dated 18.12.2012 issued by Tehsildar , Karchana who in turn is relying on afore-stated report dated 14.12.2012, but mentioning the longer road routes number 2 and 3 to reach the land in question, but there is no whisper of road route number 1 via Main Mirzapur road to reach the land in question. Thus, we reject the reliance of the assessee on this report dated 18.12.2012. CIT(A) has passed well reasoned and speaking order, after detailed inquiries and principles of natural justice were duly complied with as the assessee was confronted with the all the material . CIT(A) relied upon the certificates, reports and maps submitted by Land Revenue and Survey authorities who are Government Authorities assigned with duties of maintaining of land records and other relevant records connected thereto with measurement of land distance . Their reports can not be brushed aside lightly and has to be given weightage , although there is no doubt that conflicting reports were issued by these authorities, but the conclusive report dated 14.12.2012 made it very clear that there are three road routes to reach the land in question, while the shortest road route is from Main Mirzapur Road , and the distance of Aarzai No. 318 is only 7.800 Kms., which is well within 8 kms. Thus, we hold that the land in question is within 8kms from the Municipal limits of Allahabad and is a capital asset as defined u/s 2(14) and capital gains arising on the sale of land shall be chargeable to income-tax within the provisions of the 1961 Act. This effective issue is decided against the assessee Applicability of the Section 50C - assessee has challenged before us the value so adopted by stamp valuation authorities and has stated that fair market value is much lower than the said value as adopted by stamp valuation authorities and has claimed that the actual sale consideration of ₹ 48 lacs was the real consideration - As in fairness to both the parties and in the interest of justice ,we are remanding the matter back to the file of the AO for limited purposes of referring the matter to DVO for determining the fair market value of property , in accordance with provisions of Section 50C(2) and 50C(3) , for the purposes of ascertaining the full value of consideration of land in question for the purposes of Section 48 ,in order to bring to tax income chargeable to capital gain tax , of the which the assessee is liable to pay in accordance with the provisions of the 1961 Act - Appeal filed by the assessee is partly allowed for statistical purposes.
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2021 (11) TMI 873
TP adjustment with respect to receipt of Intra-Group Services - TPO was of the view that the assessee had not received any benefit from such services and hence, the Arm's Length Price of the alleged services were held to be NIL, on application of Comparable Uncontrolled Price ( CUP ) method - HELD THAT:- The issue of intra group services, availed by the assessee has been benchmarked by the TNMM which has been found to be acceptable by the Tribunal for the earlier year 2014-15 and 2015-16. Since, the facts are identical, we hereby allow the claim of the assessee. ALP of the royalty determined @1.73% - We have gone through the history of the case and found that the issue has been limited back to the file of the AO to carry out comparability analysis with direction to provide an opportunity to the assessee with benchmarking analysis adopted and the comparables applied so. For the sake of ready reference, the order of the Co-ordinate Bench of ITAT in the case of the assessee for the earlier year [ 2019 (10) TMI 1477 - ITAT DELHI] Since, the factual and legal position remains unaltered except the quantum involved, we hereby referred the matter to the TPO to examine the issue afresh after affording due opportunity to the assessee. Circuit Accruals - The assessee is estimating the expenses to be incurred on account of circuit accruals. The said accounting is through an automated system, which is used by the assessee as an operational tool and such method is followed by all the connected companies of the group worldwide. The assessee claimed the said expenditure as business expenditure. Further, the assessee also following recognized method wherein the actual expenditure incurred against the accrual/provisions for the year is accounted for in the subsequent year. This approach adopted by the assessee in recognizing the provision of circuit accruals was not accepted by the Assessing Officer/ DRP on the ground that similar disallowance was made in the earlier years. We find that the Tribunal has consistently from Assessment Years 2009-10 to 2014-15 allowed the claim of the assessee in entirely. Disallowance of year-end Accruals - The assessee was following systematic method of accounting from year to year and was creating year end accruals towards normal business expenditure and was debiting the expenditure when paid or reversed in the subsequent years. The said details were furnished before the authorities below and the AR for the assessee has also referred to them before us. The Tribunal in Assessment Year 2014-15 relying on the orders of the Tribunal in the case of the assessee in earlier years had allowed the claim of the assessee. Following the same parity of reasoning, we hold that the said expenditure is duly allowable in the hands of the assessee. Support Service Expenditure - The assessee had incurred the said expenditure of support services on account of services availed from the group company in different fields of operation, which was necessary and imperative for carrying on its business. No mark up was charged on the said services provided by the AE. The availment of the support services from the AE was through support services agreement. While deciding the said issue, the Tribunal has remitted the same to the file of Assessing Officer with the direction to consider the evidences filed by the assessee of availment of support services from its AE. The AR for the assessee pointed out that all these evidences were duly filed before the authorities below. However, following the same parity and reasoning as in Assessment Year 2015-16, we remit the issue back to the Assessing Officer to carry out the necessary verification exercise and decide the issue in accordance with our direction in the earlier years. Share based License Fee - We find that the issue stand squarely covered by the order of the Hon ble High Court in the case of CIT vs Bharti Hexacom Limited [ 2013 (12) TMI 1115 - DELHI HIGH COURT] wherein held that the Revenue share based license fee was an allowable revenue expenditure u/s 37(1) of the Act. Similar proposition is also being laid down by the Tribunal in assessee s own case in Assessment Year 2015-16. Since, the matter is repetitive in nature and in the absence of any change in the factual and legal propositions, we hereby direct that the addition made, be deleted. TDS on Lease Line Charges - TDS u/s 194I OR 194J - assessee had withheld tax on lease line charges paid to other telecom operators u/s 194J of the Act. The claim of the assessee was that the lease line services were standard automatic services which were availed by any telecom service provider for the transmission of data and was not under any exclusive arrangement - HELD THAT:-.As relying on Tribunal for Assessment Year 2014-15 [ 2019 (8) TMI 552 - ITAT DELHI] we hold that there was no requirement to deduct tax at source u/s 194I of the Act. Taxability on Education Cess - allowability of cess u/s 37 - HELD THAT:- As keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66 ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements of the Hon ble High Court of Bombay and Hon ble High Court of Rajasthan, we hereby hold that the assessee is eligible to claim the deduction of the Education Cess as per the provisions of Section 37 of the Income Tax Act.
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2021 (11) TMI 872
Revision u/s 263 by CIT - As per CIT AO has not examined the issue of set off of brought forward losses against book profit computed u/s.115JB which rendered assessment order erroneous insofar as it is prejudicial to the interests of revenue - HELD THAT:- PCIT did not dispute fact that brought forward business loss or unabsorbed depreciation as per books is at ₹ 120.46 crores. Further, brought forward book loss, has been increased to ₹ 153.16 crores, after giving effect order to CIT(A) order dated 27-10-2014, because of deletion of addition made by the AO towards brought forward loss of Amalgamated Company M/s Visakha Cement Industries Limited. Therefore, if recomputed book profit of ₹ 88.75 crores is taken in to account, then the assessee can completely set off its book profit of ₹ 88.75 crores, out of unabsorbed depreciation of assessment year 2006-07 of ₹ 153.16 crores and thus, there is no excess allowance of unabsorbed depreciation, while computing book profit u/s. 115JB for the impugned assessment year, as alleged by the ld. PCIT. Therefore, we are of the considered view that assessment order passed by the Assessing Officer on this issue is neither erroneous nor prejudicial to the interests of revenue. Expenditure incurred for premium on redemption of debentures - The assessee has paid ₹ 59.01 crores on redemption of OCDs and same was debited into profit loss account, but in the profit loss account the assessee has also credited equal amount of ₹ 59.01 crores by withdrawing from share premium account. This amount of ₹ 59.01 crores from share premium account is actually reduced from OCDs redemption expenditure of ₹ 59.01 crores debited into profit loss account and thus, there is no expenses debited into profit loss account . From the above, it is clear that the assessee has not claimed any deduction for expenditure incurred on redemption of FCCB/Debentures. Therefore, once no deduction was claimed for any expenditure by debiting into profit loss account, the question whether it is capital or revenue in nature does not arise. Whether total amount incurred for premium paid on redemption of debentures is deductible or not? - In this case, the issue of expenditure incurred on premium paid for redemption of debentures was thoroughly examined by the Assessing Officer not once, but twice, and after application of necessary facts to the relevant law has allowed claim of the assessee. Further, the issue of expenditure incurred for premium paid on redemption of debentures / FCCB is a subject matter of appeal before learned CIT(A) and the CIT(A) vide his order dated 27.10.2014 has held that assessee is eligible for reducing the amount of 59.01 crores from the net profit shown in profit loss account. Therefore, we are of the considered view that once the issue which was subject matter of proceedings u/s.263 was subject matter of appeal before learned CIT(A), then there is no power to the Pr.CIT to take up said issue in revision proceedings, as per clause (c) to Explanation (1) to section 263 of the Income Tax Act, 1961 - we are of the considered view that assessment order passed by the Assessing Officer on this issue is neither erroneous nor prejudicial to the interests of revenue and hence, assumption of jurisdiction by the Principal CIT u/s.263 of the Act fails. Investments in shares of M/s. Janani Infrastructure Ltd. - Admittedly, for the first time this issue has been taken up by the Principal CIT in the proceedings u/s.263 of the Act, on the basis of information received by the Assessing Officer from another Assessing Officer, after the Assessing Officer has passed assessment order u/s.143(3) r.w.s.263 of the Act dated 30.03.2013. This issue was not a subject matter of discussion either in the original assessment proceedings u/s.143(3) or revision proceedings u/s.263 of the Act, in first round of 263 proceedings. Therefore, when a issue which is not subject matter of any other proceedings, the period of limitation shall run from original assessment order passed u/s.143(3) of the Act for the purpose of invoking jurisdiction u/s.263 of the Act. If you consider original assessment order u/s.143(3) dated 22.12.2009, the Principal CIT can revise the assessment order within two years from the end of financial year in which the order sought to be revised was passed. In this case, if you take original assessment order dated 22.12.2009, the Principal CIT can issue show-cause notice on or before 31.03.2012. Since the Principal CIT has issued show-cause notice on 09.02.2015, which is clearly beyond the period of two years provided under the Act. Therefore, we are of the considered view that assumption of jurisdiction by the Principal CIT on this issue for revision of assessment order u/s.263 of the Act is bad in law and liable to be quashed. Assessment order passed by the Assessing Officer u/s.143(3) r.w.s 263 is neither erroneous nor prejudicial to the interests of revenue - Decided in favour of assessee.
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Insolvency & Bankruptcy
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2021 (11) TMI 871
Approval of Resolution plan - procedural breach in consideration of the Resolution Plan of the Appellant or not - HELD THAT:- It has been noted in the order of the Adjudicating Authority that by order passed on 04.04.2019, the Adjudicating Authority permitted Kals Distilleries Private Limited to submit a Resolution Plan, hence the same was duly accepted by the Resolution Professional. On 11.04.2019, the Appellant sent a protest to the Resolution Professional regarding Resolution Plan of Kals Distilleries Private Limited which protest was immediately replied by Resolution Professional on 12.04.2019 informing that the plan has been accepted by the order dated 04.04.2019 of the Adjudicating Authority. The Hon ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT] had occasion to consider the relevant provisions of the I B Code , including the provisions of Section 30. With regard to commercial wisdom of the Financial Creditor, the Hon ble Supreme Court laid down that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed Resolution Plan. There can be no doubt that any fraud in process may vitiate the entire process but it is easy to allege fraud and collusion but difficult to prove the same. Apart from the bald allegation of the Appellant that M/s. Mahalaxmi Traders colluded with the Successful Resolution Applicant , there is no other material to come to a finding that actually any fraud was played. The commercial wisdom of the Financial Creditors cannot be disregarded on bald allegation of fraud and collusion as raised by the Appellant. The Adjudicating Authority has in detail considered the submissions of the Appellant and has rightly come to the conclusion that the decision of the CoC rejecting the Resolution Plan of the Appellant does not require any interference. None of the grounds to challenge the Resolution Plan had been made out. Hence the Adjudicating Authority rightly approved the Resolution Plan. No ground has been made out to interfere with the order dated 13.10.2021 of the Adjudicating Authority. Appeal dismissed.
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2021 (11) TMI 870
Maintainability of petition - dismissal on the grounds of default and non-prosecution - non-appearance of petitioner in spite of being notices issued - HELD THAT:- Since, the Hon ble High Court has only granted interim stay with regard to remittance of fine as ordered in TIA/09/KOB/2019 and given 30 days time to file an appeal under Section 421 of the Companies Act 2013, before the Hon ble Appellate Authority, without obeying that order of the Hon ble High Court, the petitioner filed a Restoration Petition before this Tribunal to restore TCP/13/KOB/2019, that too by the same person who was restrained from representing in that matter, by this Tribunal. The order in TIA/9/KOB/2019 was passed on merits giving both sides ample opportunities to present their cases. Both the parties were heard extensively and only after that the order in TIA was passed. The applicant should have obeyed the order dated 29.09.2021 of the Hon ble High Court, if he is really aggrieved by the orders of this Tribunal dated 30.12.2019 TIA/9/KOB/2019. We do not find any substance in this application filed for restoration of TCP No. 13/KOB/2019. Restoration application dismissed.
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2021 (11) TMI 869
Seeking Liquidation of Corporate Debtor - Section 33 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- COC has approved the extension of 60 days as per section 12 of IBC because of COVID-2019 lockdown. The CIRP completion date will be on 10.10.2021. The resolution passed in the 10th COC meeting held on 06.08.2021. The tribunal also allowed the application of extension of CIRP period and extended up to 10.10.2021 - 11th COC meeting held on 10.09.2021 and a resolution for liquidation of the Corporate Debtor under Section 33 of IBC, 2016 was approved by the COC. The resolution was passed with 100% vote. It is noted that RP Sunil Kumar Agrawal has been appointed as liquidator under Section 34 of IBC, 2016 in 11th COC meeting of COC. The consent form AA is annexed herewith as Annexure A-10 - application allowed.
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Central Excise
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2021 (11) TMI 868
Grant of interest under Section 35FF, from the date of deposit till the date of refund - HELD THAT:- The applicable section for grant of interest is Section 35FF, which provides for grant of interest on the amount refundable pursuant to order of the Appellate Court. It is further provided in this section that interest should be granted from the date of deposit till the date of refund, without any discrimination. Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] wherein interest on pre-deposit (made during investigation), have been enhanced from 6% to 12%, following the ruling of the Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] . The Adjudicating Authority is directed to grant interest @ 12% per annum from the date of deposit till the date of refund. Such interest should be granted within a period of 45 days from the date of receipt or service of the copy of this order. Appeal allowed - decided in favor of appellant.
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2021 (11) TMI 867
CENVAT Credit - input or not - aseptic trading material - case of the Revenue is that since the advertisement pertained to traded goods of which credit itself was not available, hence the appellants are required to reverse the credit of advertisement service attributed to traded packaging material - HELD THAT:- The fact is not in dispute even as admitted in the show-cause notice that the advertisement service was in respect of trading of packaging material, however, for the purpose of calculating the reversal amount, the turnover of packaging machine was also taken into account. The advertisement papers presented clearly shows that the advertisement is in respect of packaging material and it nowhere indicates the trading of packaging machinery - Since advertisement service was not used for trading of packaging machines, the value of packaging machines for calculating the reversal amount of CENVAT Credit cannot be taken into account. The demand of CENVAT Credit in respect of input services i.e. advertisement services attributed to packaging machine is prima facie wrong. It is found that this issue has neither been raised by the appellants before the adjudicating authority nor has been considered by the adjudicating authority, hence the same needs to be reconsidered. Matter remanded to the adjudicating authority to reconsider the case - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2021 (11) TMI 866
Seizure of agricultural produce recovered from the godown - reliability of documents produced like photo copies of the revenue records like Khasara and Khatauni - scope of the term dealer - HELD THAT:- The proviso to the definition of dealer excludes a person who is not a body corporate, and who sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant, lessee or otherwise, in respect of such goods. From perusal of the record of this revision particularly the order of seizure as well as the first appellate order, this primordial aspect has not been taken into account by the authorities concerned. Under the circumstances and the facts of the present case, there is no such issue in the order passed by the Tribunal that may warrant framing of question of law under Section 58 of the Act. Revision fails - revision petition dismissed.
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