TMI Tax Updates - e-Newsletter
November 30, 2024

Case Laws in this Newsletter:

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

TMI Short Notes

1. The Doctrine of Natural Justice in GST Proceedings: A Case Study on Show Cause Notice u/s 74"

  GST:

2. Input Tax Credit (ITC) and the Concept of "Plant" under GST: Supreme Court

  GST:

3. Inordinate Delay in Adjudication: High Court's Stance on Quashing Show Cause Notices

  Customs:

4. Inordinate Delay in Adjudication: Upholding the Principles of Natural Justice

  Customs:

Articles

1. Why Internal Audits Are Essential for Business Success

   By: Sundaran Damodaran

2. Order liable to be set aside when credit reflected in GSTR-2A not taken into consideration

   By: Bimal jain

3. Common Errors to Avoid While Filing Spice+ Forms

   By: Ishita Ramani

4. Amount paid as differential dealer margin is taxable @ 18%

   By: Bimal jain

News

1. Advisory: E-Invoice Glossary and Steps

2. Monthly review of accounts of Government of India upto October, 2024 (FY 2024-25)

3. NCB signs two landmark MoUs for advancing decarbonization and technological innovation in cement industry

4. GST & Customs pavilion gets Bronze Medal for Excellence for the Public Communication and Outreach at IITF 2024

5. Investment Division, Department of Economic Affairs organises one-day Training Programme on ‘International Investment Law and Dispute Resolution’

Notifications

DGFT

1. 41/2024-25 - dated 29-11-2024 - FTP

Amendment in Import Policy Condition of ITC HS Codes 85423100, 85423900, 85423200, 85429000 and 85423300 covered under Chapter 85 of ITC (HS), 2022, Schedule-1 (Import Policy)

GST

2. S.O. 5128(E) - dated 29-11-2024 - CGST

Corrigendum - Notification No. S.O.5063 (E) which was issued to Amend Notification number S.O.3048(E) regarding Constitution of Principal and States benches of GSTAT.

Income Tax

3. 123/2024 - dated 28-11-2024 - IT

Central Government, specifies provisions of section 194N of IT Act 1961 after consultation with the Reserve Bank of India

SEBI

4. SEBI/LAD-NRO/GN/2024/212 - dated 28-11-2024 - SEBI

Securities and Exchange Board of India (Attestation of Documents) (Amendment) Regulations, 2024.

Highlights / Catch Notes

GST

• Court Allows GST Appeals with 10% Pre-Deposit Using Electronic Credit Ledger, Clarifying Input Tax Credit Use.

  Case-Laws - HC : The High Court held that petitioners are entitled to pay 10% of the disputed GST amount as a pre-condition for filing an appeal by debiting the amount available in the Electronic Credit Ledger. Section 49 of the TNGST Act allows the use of Electronic Credit Ledger for making any payment towards output tax. The word 'may' in the provision indicates it is not mandatory. Section 107(6) requires 10% of the disputed tax to be paid as a deposit, which means payment towards discharging output tax liability. Rule 86(2) allows debit from Electronic Credit Ledger for discharging liability u/ss 49, 49A or 49B. The circular dated 06.07.2022 clarifies that input tax credit can be utilized for payment of self-assessed output tax or tax payable due to proceedings under GST laws, including the 10% pre-deposit u/s 107(6). The statutory appeal form APL-01 also provides for pre-deposit payment through Electronic Credit Ledger. Therefore, the High Court quashed the impugned orders and directed allowing appeals where pre-deposit was made through Electronic Credit Ledger.
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• Proposed Amendment to CGST Act Section 16(4) May Ease Restrictions on Input Tax Credit Claims for Taxpayers.

  Case-Laws - HC : Section 16(4) of the CGST Act imposes a time limit for claiming input tax credit (ITC), restricting it to the due date of filing the return for September following the relevant financial year or the annual return, whichever is earlier. This provision violates Article 14 of the Constitution by arbitrarily depriving taxpayers of their right to claim ITC despite having paid taxes to suppliers. The GST laws lack provisions for revising returns, compelling taxpayers to exercise caution in filing March returns to reconcile entries. Allowing returns with late fees but disallowing ITC amounts to double punishment. Late fees and interest already compensate the treasury and deter delays. Imposing double tax through Section 16(4) is arbitrary and capricious. As the Central Government proposes to amend Section 16 by introducing Section 118, removing the time limit condition, the Court allows the petitions without examining Section 16(4)'s constitutional validity.
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• Validity of notices against non-existent entities post-amalgamation under CGST Act.

  Case-Laws - HC : The High Court addressed the validity of a show cause notice (SCN) and final order issued against a non-existent entity, the rectification of procedural defects, and the applicability of Sections 160 and 87 of the CGST Act, 2017, concerning amalgamated companies. Section 87 seeks to preserve and identify transactions between companies that ultimately amalgamate, fixing liabilities under the CGST Act. However, it cannot enable issuing notices or orders against a non-existent entity, as the liabilities would transpose to the amalgamated entity. Consequently, the impugned SCN and order were quashed, and the petition was allowed.
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• GST Registration Cancelled for Fake Invoices and False Business Claims; Court Dismisses Appeal, Suggests Fresh Application.

  Case-Laws - HC : Petitioner's GST registration was cancelled as petitioner had stopped business at registered premises and issued fake invoices without actual supply of goods. Original authority found petitioner not conducting business at registered premises based on landlord's statement that premises were leased out to petitioner for iron and steel business from 2012 to May 2017, but thereafter no business conducted and premises leased to another person unrelated to petitioner. Original authority held details provided during VAT to GST migration were false, warranting cancellation of registration. Appellate authority upheld cancellation. High Court found no reason to interfere with findings, noting petitioner can apply for fresh registration if intending to restart business. Writ petition dismissed.
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• Catering Services to Hospital Inpatients Taxed Under GST as Standalone Food Supply, Not Exempt Healthcare Service.

  Case-Laws - AAR : The applicant entered into an agreement with the Central Hospital, South Eastern Railway to provide catering services by running the in-house kitchen, for which the hospital is liable to pay consideration. The issue pertains to whether the supply of food to inpatients by the applicant is exempt from GST as a composite supply of healthcare services or is taxable as a standalone supply of food. The authority held that the applicant is supplying services to the hospital, which provides healthcare services to patients. The supply of food by the applicant to the hospital is a standalone service and cannot be considered a composite supply of healthcare services. GST is payable on the service of supplying food, and no exemption is provided as the service is outsourced by the hospital, and the applicant is not a clinical establishment. The authority relied on the Telangana AAR ruling, which held that GST is payable on outsourced food supply services by hospitals.
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• Dredging and Rejuvenation of Lamphelpat Waterbody in Manipur Exempt from Tax to Support Eco-Tourism and Water Management.

  Case-Laws - AAR : The supply of works contract services for dredging and rejuvenating Lamphelpat waterbody, a natural water body, to alleviate urban flooding, provide sustainable water source, and promote eco-tourism to the State Government of Manipur is exempted from tax under Serial Number 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 [corresponding State Notification No. 1136 F.T. dated 28.06.2017] and Serial No. 3A of Notification No. 9/2017 dated 28-06-2017 Integrated Tax (Rate). Although dredging a natural water body cannot be considered as removal of encroachment on public property, the supply is in relation to functions entrusted to a municipality under Article 243W of the Constitution, such as drinking water supply, environmental protection, and ecological promotion, as listed in the Twelfth Schedule.
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Income Tax

• Foreign representations, UN agencies & consulates exempt from tax deduction rules u/s 194N.

  Notifications : Central Government notification specifies provisions of section 194N of Income Tax Act 1961 shall not apply to Foreign Representations approved by Ministry of External Affairs, agencies of United Nations, International Organisations, Consulates and Offices of Honorary Consuls exempt from taxes in India under Diplomatic Relations (Vienna Convention) Act 1972 and United Nations (Privileges and Immunities) Act 1947, after consultation with Reserve Bank of India. Notification deemed effective from 1st December 2024.
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• Delayed filing of forms for tax rate option condoned under genuine hardship cases.

  Circulars : This circular from the Central Board of Direct Taxes (CBDT) condones the delay in filing Form No. 10-IC or Form No. 10-ID for Assessment Years 2020-21, 2021-22, and 2022-23 under certain conditions. Principal Commissioners/Commissioners of Income Tax can condone delays up to 365 days, while Principal Chief Commissioners/Chief Commissioners/Directors General can condone delays beyond 365 days. Conditions include timely filing of the return, opting for taxation u/s 115BAA/115BAB, and genuine hardship. Applications beyond three years from the assessment year's end won't be entertained. Pending applications as of the circular's issue date are covered. The circular aims to avoid hardship in exercising the option u/ss 115BAA/115BAB.
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• Cash deposits during demonetization, scrap sale, audit report scrutinized; ITAT's fact finding upheld.

  Case-Laws - HC : Revision u/s 263 challenged for lack of proper inquiry by Assessing Officer regarding cash deposits during demonetization, scrap sales, and non-submission of audit report. ITAT set aside revision order. Substantial question of law raised. Held that department only challenged factual findings of Tribunal. Supreme Court precedents establish that no substantial question of law arises from factual findings unless perverse. Perversity defined as finding without evidence, unreasonable, based on surmises or suspicion. Tribunal's factual finding perverse only if affecting substantial rights of assessee unreasonably based on record. Tribunal examined facts in detail before ruling in assessee's favor. No perversity found in Tribunal's fact finding.
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• Directors of public companies protected from tax recovery for company dues Hashtags.

  Case-Laws - HC : Section 179 of the Income Tax Act empowers tax authorities to recover outstanding dues from directors of private companies during the relevant previous year. The latter part casts a negative onus on directors to prove non-recovery was not due to gross neglect, misfeasance, or breach of duty. In this case, the company was incorporated as a public limited company, and the revenue authorities failed to dispute this status while initiating proceedings u/s 179. Consequently, the High Court held that Section 179 is inapplicable to public limited companies, and the writ petition was allowed.
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• Tax Notice Upheld: Court Dismisses Claims of Natural Justice Violation in Surprise Check Case.

  Case-Laws - HC : The respondent passed an order u/s 148A(d) and issued a consequential notice u/s 148 based on information gathered during a surprise check conducted by enforcement officials, relating to documents produced by the petitioner in support of their case when filing a reply. The petitioner claimed violation of Section 148A(b) and principles of natural justice, as the order/notice pertained to an issue not covered by the two show cause notices. However, the court held that the respondent acted based on irregularities found in the documents submitted by the petitioner during scrutiny of their replies. The petitioner was directed to file returns u/s 148, and if aggrieved, could file a reply to the notice. The court found no merit in the petitioner's contention.
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• Penalty for Additional Income Declared u/s 148 Not Justified Without Proof of Concealment or Inaccuracy.

  Case-Laws - AT : Penalty u/s 271(1)(c) is not leviable on additional income offered by the assessee in response to a notice issued u/s 148, as held in Kirit Dahyabhai Patel and Ravi Sud cases. Regarding the addition u/s 69 on account of a bank deposit, mere cash deposit cannot be considered the assessee's income. Failure to file an appeal does not imply admission by the assessee. Each addition cannot be the basis for levying a penalty u/s 271(1)(c) unless the Assessing Officer finds that the assessee deliberately furnished inaccurate particulars or concealed income. The assessee contended that the bank account credited with the deposit was shown in the cash book, and the deposit was not unexplained. Considering these facts, no justification exists for levying a penalty, even on the addition. The assessee's appeal is allowed.
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• Indian employee's short Indonesia stint income tax-exempt as non-resident.

  Case-Laws - AT : Income received and accrued in Indonesia for rendering services outside India by an employee of an Indian company sent on a short-term assignment to Indonesia is exempt from tax in India. The assessee, a non-resident u/s 5(2) of the Income Tax Act and Article 15(1) of the India-Indonesia DTAA, was present in India for only 61 days during the financial year. Only income received or deemed to have accrued or arisen in India is taxable for a non-resident. The failure to produce the Tax Residence Certificate is a procedural lapse and does not negate substantive compliance. Following the ITAT Kolkata decision in DCIT vs. Sudipta Maity, the addition made by the Assessing Officer is deleted, and the refund claimed by the assessee is allowed.
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• Correct application of tax laws on accommodation entries: Profit element alone taxable, not entire amount.

  Case-Laws - AT : The key points are: The Assessing Officer (AO) erroneously applied Section 69C of the Income Tax Act, which deals with unexplained expenditure, to transactions involving sales to SINPL. The Income Tax Appellate Tribunal (ITAT) held that since the assessee provided accommodation entries, only the profit element on the sales should be added to the income. The assessee admitted that a higher commission rate of 5% could be treated as profit on the accommodation entry transactions of Rs. 34,59,840/-. The ITAT directed the AO to apply the 5% profit rate, amounting to Rs. 1,73,000/-, and add it to the assessee's disclosed income, instead of the addition made u/s 69C.
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• Limitation Period for Income Tax Penalty Starts with Assessing Officer's Notice, Tribunal Upholds CIT(A) Decision.

  Case-Laws - AT : The case deals with the limitation period for initiating penalty proceedings u/s 271E of the Income Tax Act. It is well-established that the limitation period commences from the date of issuance of notice by the Assessing Officer, not from the subsequent notice by the Joint/Additional Commissioner. In this case, the Assessing Officer issued the penalty notice on 31/12/2010 along with the assessment order, while the Additional Commissioner issued another notice on 30/06/2011. The initial notice by the Assessing Officer remains valid and operative. Therefore, the imposition of penalty u/s 271E should have been done before 30/06/2011, not 31/12/2011. The CIT(Appeals), following judicial precedents and CBDT Circular, rightly deleted the penalty, and the Tribunal dismissed the Revenue's appeal, finding no merit.
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• Interest on Loans for Property Purchase Deductible in Capital Gains Pre-2024 Amendment, Tribunal and Court Uphold Favorable Ruling.

  Case-Laws - AT : Interest paid on borrowed funds for the purchase of property, prior to the amendment introduced by the Finance Act 2023 (effective from 01.04.2024), would be deductible while computing capital gains, in addition to the deduction claimed u/s 24(b) of the Income Tax Act. The Tribunal and the High Court have upheld the assessee's claim, following the principle that if two reasonable interpretations of a tax provision are possible, the interpretation favourable to the taxpayer should be adopted. The Tribunal and the Commissioner have consistently allowed the deduction in earlier years, adhering to the rule of consistency. The amendment restricting the inclusion of interest paid as part of cost of acquisition/improvement is prospective and cannot be applied retrospectively.
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• Tax Dispute: Partial Allowance of Expense Claims, Unjustified Disallowance on Depreciation and Late TDS Interest.

  Case-Laws - AT : Assessment u/s 153C - disallowance made u/s 37. Assessing Officer observed no supporting evidence for claimed expenses furnished by assessee and non-cooperation during search and post-search inquiries. Held: Expenses other than accommodation charges under 'Administrative Expenses', 'Business Promotion Expenses' and 'Tour & Travel Expenses' under 'Selling and Distribution Expenses' are routine and acceptable. Salary income received from assessee company offered, disallowance of depreciation and interest on late TDS deposit debited in P&L not justified. Claim of expenses partly acceptable as per CIT(A) decision. No evidence other than ledger accounts for accommodation, promotion, and travel expenses. Reasonable disallowance of Rs. 15 lakhs estimated considering assessee's offered disallowance of Rs. 9 lakhs from total Rs. 42,42,974 expenses. Proceedings u/s 153C upheld based on Nau Nidh Overseas Pvt. Ltd. case. Revenue appeal partly allowed.
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• Tribunal Allows Depreciation on Goodwill Post-Amalgamation; Denies Refund for Excess Tax on Dividends to Non-Residents.

  Case-Laws - AT : The Tribunal allowed the assessee's claim for depreciation on goodwill arising from amalgamation u/s 32(1)(ii), following the Supreme Court's decision in Smifs Securities Ltd. It held that once goodwill is recognized per Accounting Standard-14, depreciation is allowable. The sixth proviso to Section 32(1) was not applicable as the amalgamating company did not claim depreciation on goodwill. Provisions of Explanation 7 to Section 43(1), Section 49(1)(iii)(e), and Section 55(2)(a)(ii) were held inapplicable. The Tribunal also allowed depreciation on customer relationships and distribution network acquired through amalgamation, being intangible assets valued by an independent valuer. However, it dismissed the claim for refund of excess tax paid on dividends distributed to non-resident shareholders, following the Special Bench decision in Total Oil India Private Ltd.
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• SEZ unit profits deduction allowed before offsetting losses; interest on delayed TDS payments not deductible.

  Case-Laws - AT : The assessee derived profits from an SEZ unit before depreciation. The issue was whether business losses of earlier years should be reduced from eligible profits for claiming deduction u/s 10AA. It was held that the Supreme Court in Yokogawa India Ltd. case decided that deduction u/s 10A is to be allowed while computing gross total income, not at the stage of computing total income under Chapter VI. The Bombay High Court in Black & Veatch Consulting and Techno Tarp cases also held that Section 10A deduction for eligible units should be allowed before setting off brought forward depreciation and losses. Hence, the assessee's appeal was allowed on this ground. Regarding disallowance of interest on delayed TDS payment u/s 37, it was held that such interest is penal in nature for violating the law by late deposit of TDS. The Madras High Court in Chennai Properties case held that interest u/s 201(1A) for late TDS payment is not a business expense and cannot be allowed as deduction. Hence, the coordinate benches' view allowing such interest was rejected, and the disallowance was upheld. On setting off business losses, the issue was remitted back to the AO to determine the available brought forward losses based on the outcome of earlier years' appeals and allow set-off accordingly. Regarding leasehold improvement expenses.
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• Seized Materials Need Corroboration for Section 69B Additions; Presumptions Must Be Rebuttable, Not Based on Suspicion.

  Case-Laws - AT : Unsubstantiated and uncorroborated seized material alone cannot be considered conclusive evidence for additions u/s 69B. The words "may be presumed" in Section 132(4) provide an option to the Assessing Officer to presume, but it is rebuttable, and the assessee has the right to rebut. Additions cannot be made based on suspicion, conjectures, and surmises. The Assessing Officer must act judicially, fairly, and reasonably, and assessments u/s 153C should be supported by adequate material. Loose sheets, scribblings, and jottings without signatures or authorization from the assessee are unsubstantiated documents and cannot sustain additions. Non-speaking documents without corroborative material and evidence of undisclosed assets or income should be disregarded. Additions based solely on statements recorded u/s 132(4) are inadmissible, as voluntary admissions are not conclusive proof and can be explained or shown to be wrong. The burden lies on the assessee to prove the admission incorrect. Sworn statements cannot be relied upon without corroboration for making assessments. Additions based on agreements or transactions where the assessee is not a party or without examining the concerned parties are untenable. Income from transactions cannot be taxed in the hands of an individual if it pertains to a firm or separate.
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• Foreign Entity's Management Fees Not Taxable in India Under DTAA; No Technical Knowledge Transfer Involved.

  Case-Laws - AT : The summary relates to the taxability of management service fees received by a foreign entity from an Indian entity under the India-Netherlands Double Taxation Avoidance Agreement (DTAA). The key points are: The services rendered do not constitute "royalty" under Article 12(4) of the DTAA as there is no "make available" of technical knowledge, experience, skill, know-how, or process. The management service fees charged are an allocation of costs without any mark-up, and hence are in the nature of reimbursements, not royalty. Consistent with previous years' rulings, the Tribunal held that the services do not fall within the scope of "royalty" under the DTAA, and the payments received are reimbursements without mark-up, thus not taxable in India. The Tribunal directed the Assessing Officer to examine and grant appropriate credit for tax deducted at source amounting to Rs. 3,89,05,708/- as per Form 26AS.
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Customs

• Mandatory declaration of coal quality specs for imports from Dec 15, 2024 - coking coal ash% & non-coking coal GCV.

  Circulars : This circular mandates the declaration of additional qualifiers in import declarations for coking and non-coking coal effective December 15, 2024. For coking coal, subcategories based on ash percentage ranging from not exceeding 15% to exceeding 49% must be declared. For non-coking coal, subcategories based on gross calorific value (GCV) ranging from exceeding 7000 K.Cal./Kg. to exceeding 2200 and not exceeding 2500 K.Cal./Kg. must be declared. These additional qualifiers aim to improve assessment quality, intervention efficiency, and facilitation during import clearance. The circular includes annexures specifying the required qualifiers and their descriptions for the respective HS codes of coking and non-coking coal.
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• Manual filing of monthly import statement allowed temporarily before mandatory online filing.

  Circulars : The circular addresses the implementation of automation in the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022. It permits importers facing difficulties with electronic filing of the IGCR-3 monthly statement to manually file it before jurisdictional officers until January 31, 2025. From February 2025, online filing of the monthly statement is mandatory. An Excel utility will be made available by December 15, 2024, for electronic filing of IGCR-3/IGCR-3A statements, which must be completed by January 31, 2025. Public notices are to be issued for guidance, and any difficulties or doubts should be brought to the Board's notice.
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• Concessional Duty Clarified: IGCR and MOOWR Schemes Allow Dual Benefits for Manufacturers, Including Intermediate Goods Suppliers.

  Circulars : This circular clarifies the applicability of concessional duty under Import of Goods at Concessional Rate of Duty (IGCR) Rules, 2022 in certain instances. It addresses the simultaneous availment of IGCR along with Manufacture and Other Operations in Warehouse Regulations (MOOWR) scheme, and the applicability of IGCR benefit in cases involving import of certain goods specified for value-addition by MOOWR units for supply to final manufacturers of cellular mobile phones. The key points are: MOOWR units can avail IGCR exemption along with duty deferment under MOOWR simultaneously, provided conditions of both schemes are complied with. The expression "for use in manufacture of cellular mobile phones" in certain notifications does not restrict IGCR benefit only to final manufacturers; intermediate goods manufacturers under MOOWR supplying value-added goods to final cellular mobile phone manufacturers are also eligible for concessional duty under IGCR Rules, subject to fulfilling all conditions.
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• Interest Must Be Paid on Delayed Customs Refunds Post-Assessment, Tribunal Rules in Favor of Interest Liability.

  Case-Laws - AT : Non-payment of interest on refund u/s 18(4) of the Customs Act 1962 upon finalization of provisional assessment was challenged. Upon completion of the specified import quantity under the contract, provisional assessments were finalized, and a refund amount was ordered, but no interest was paid on the delayed refund payment, which is payable u/s 18(4) read with Section 27A. The Tribunal held that upon finalization of provisional assessment, if a refund is liable, it must be paid within 3 months from the final assessment date. Any delay in refund payment beyond 3 months attracts interest liability, irrespective of filing a refund application. Accordingly, the department was liable to pay interest for the delay in refund payment beyond 3 months from the final assessment date. The appeal was allowed.
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FEMA

• New Rule Allows FCRA Associations to File Multiple Form FC-6E Applications for Office Bearer Changes Simultaneously.

  Circulars : This public notice from the Ministry of Home Affairs pertains to the Foreign Contribution (Regulation) Act, 2010 and the associated Rules of 2011. It addresses the issue of FCRA-registered associations filing multiple Form FC-6E applications to intimate changes in office bearers, members, or key functionaries. The notice clarifies that even if an association's previous Form FC-6E application is pending, it can now submit another application for the same purpose. Upon initiating a new application, details from the previous one will be auto-filled. After submitting the new application, the previous one will be automatically closed with a remark "disposed as closed." This decision aims to facilitate associations in promptly reporting changes in their organizational structure as mandated by Rule 17A of the FCRA Rules, 2011.
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• Understanding FCRA Application Denials: Common Reasons Include Inactivity, Non-Compliance, and Potential Fund Misuse.

  Circulars : Denial/refusal of applications for registration and renewal under the Foreign Contribution (Regulation) Act, 2010 (FCRA) is governed by specific provisions. Common reasons include inactivity, pending prosecution or conviction of office bearers, non-compliance with information requests, concealment of facts, fictitious office bearers, previous cancellation of registration, diversion of funds for anti-development activities, likelihood of personal gain or undesirable activities, linkages with radical/terrorist entities, and adverse impact on social/religious harmony. For renewals, additional grounds are non-utilization of foreign contributions, non-filing of annual returns, and violations of the Act or Rules. For new registrations, criteria like minimum expenditure on core activities and minimum years of existence apply. The illustrative list covers key legal provisions attracting denial but is non-exhaustive.
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Corporate Law

• Regional Director Exceeded Authority in Company Name Dispute, Lacked Power to Decide Trademark Ownership.

  Case-Laws - HC : Section 16 of the Companies Act grants the Central Government, through the Regional Director (RD), the power to rectify a company's name. Subsection (1) allows rectification if the name resembles or is identical to an existing company. The RD can issue directions for a name change suo motu u/s 16(1)(a). However, the RD's jurisdiction differs from a civil court's authority in trademark disputes. The RD cannot determine ownership or similarity of marks as in a passing off action. In this case, the parties claimed ownership over the 'Panchhi' mark and were involved in intellectual property disputes. The Impugned Order by the RD erroneously adjudicated ownership of the mark, exceeding its jurisdiction u/s 16. The RD cannot undertake an examination of marks or decide ownership in a name rectification application where contentions are disputed. The Impugned Order is set aside.
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State GST

• Tax Waiver Available for 2017-20: Pay Full Amount by Due Date, Excluding Retrospective Amendments; Appeals Allowed.

  Circulars : Applicability: The waiver provisions u/s 128A apply to cases involving tax demands u/s 73 for financial years 2017-18, 2018-19, and 2019-20, and cases involving erroneous refunds. To avail the waiver, the full tax amount demanded must be paid by the notified date, excluding amounts no longer payable due to retrospective amendments to Section 16(5) and 16(6). Procedure: Applications for waiver must be filed in prescribed forms, and proper officers will examine eligibility. Notices may be issued, and applicants can file replies. Orders approving or rejecting waiver applications will be issued, with deemed approval if no order is passed within the time limit. Appeals against rejection orders are allowed. Payments: Amounts paid towards the demand before the notified date, including by tax officers recovering from other persons, are considered payments for eligibility. Interest/penalty amounts cannot be adjusted against tax dues. Partial payments do not qualify for waiver. ITC can be utilized for payment, except for reverse charge/e-commerce operator liabilities and erroneous refund demands. Clarifications: The circular provides clarifications on various issues, including applicability to IGST/Cess demands, transitional credit demands, penalties under other provisions, import IGST.
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• Guidance on Retrospective Input Tax Credit Adjustments Under CGST Act for Claims Since July 2017.

  Circulars : This trade circular clarifies issues regarding implementation of provisions related to input tax credit in sub-sections (5) and (6) of Section 16 of the CGST Act, 2017, inserted retrospectively from July 1, 2017. It provides guidance on various scenarios where demands were raised for wrong availment of input tax credit due to contravention of sub-section (4), but such credit is now available under sub-sections (5) and (6). Specific instructions are given for cases where no notice/order was issued, where notice was issued but no order, where appellate proceedings are pending, and where orders were passed but no appeal filed. A special procedure u/s 148 is notified for rectification of orders in eligible cases within six months. However, no refund of tax paid or credit reversed earlier is allowed u/s 150 of the Finance Act, 2024. The circular aims to ensure uniform implementation across field formations.
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• Tax Relief Opportunity: Erroneous Refunds, Transitional Credits & Past Dues.

  Circulars : Taxpayers can file applications for waiver of interest or penalty u/s 128A of CGST Act for demands related to erroneous refunds, transitional credits, and tax periods from 2017-18 to 2019-20. Applications must be filed after full payment of tax demanded, excluding amounts not payable due to retrospective amendments. Proper officers will examine applications, issue notices for rejection with opportunity for hearing. Orders accepting or rejecting waiver will be issued, with appeal remedies available against rejection orders. Detailed procedures, timelines, forms, and clarifications on various scenarios are provided for smooth implementation of the waiver scheme.
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• Kerala GST Act 2017: Streamlined Adjudication for SCNs by Common Authority Across State to Enhance Taxpayer Services.

  Circulars : The circular provides instructions for adjudication of show cause notices (SCNs) issued by various verticals under the Kerala State Goods and Services Tax Act, 2017. To ensure uniformity and consistency, a common adjudicating authority is designated for cases involving multiple taxpayers across the state interconnected in a single issue. Joint Commissioners of Taxpayer Services are empowered with state-wide jurisdiction for this purpose. The SCNs will be adjudicated by the Joint Commissioner of the district where the noticee with the highest tax/penalty demand is located. If multiple noticees are in the same district, the Joint Commissioner of that district will adjudicate all SCNs, irrespective of the amount involved. Connected penalty notices will also be adjudicated by the common authority. Previous circulars on the matter stand withdrawn, with actions already initiated remaining valid.
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IBC

• Tribunal Upholds Rejection of Section 9 Application Due to Pre-existing Dispute Over Quality of Supplied Goods.

  Case-Laws - AT : The Appellate Tribunal upheld the Adjudicating Authority's rejection of the Section 9 application filed by the Operational Creditor. The key points are: The Operational Creditor admitted to being unable to discharge obligations as per tender specifications, indicating a pre-existing dispute regarding the quality of pump sets supplied. The Adjudicating Authority correctly concluded that detailed inquiry into the pre-existing dispute was required, which is beyond its summary jurisdiction under IBC. Once plausibility of a pre-existing dispute is noticed, the Adjudicating Authority need not conduct further investigation. The Corporate Debtor's defence cannot be deemed moonshine or illusory. For such disputed operational debt, Section 9 proceedings cannot be initiated by the Operational Creditor. The Adjudicating Authority rightly rejected the application as conditions u/s 9 were not fulfilled. The Appellate Tribunal found no error in the impugned order and dismissed the appeal.
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• Personal guarantors without payments not financial creditors; excluded from voting in corporate insolvency resolution.

  Case-Laws - AT : The Appellate Tribunal held that personal guarantors who have not made any payment towards discharge of their guarantee cannot be considered financial creditors of the corporate debtor, nor can they be allocated voting shares in the corporate insolvency resolution process. The statutory scheme under the Insolvency and Bankruptcy Code requires that for a transaction to qualify as a financial debt, in addition to establishing a guarantee or indemnity, a liability in respect of the guarantee must also be established. Mere issuance of a guarantee without any actual payment does not create a financial debt. The Tribunal upheld the Adjudicating Authority's order excluding the appellants, who were personal guarantors but had not made any payments, from the committee of creditors and affirmed that there was no violation of natural justice. The appeal was dismissed.
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• Appeal Dismissed: Petition Filed Prematurely Violates Guarantee Terms; Appellate Tribunal Upholds Tribunal's Decision.

  Case-Laws - AT : The appeal arose from a dispute regarding the service of a demand notice and the subsequent filing of a petition u/s 95 of the Code. The appellant argued that the period for service of the demand notice should be counted as per Section 95(4)(b) of the Code, disregarding the period mentioned in the guarantee agreement. The Tribunal held that based on Clause 3 of the personal guarantee deed, the guarantor had 60 days from the date of the demand notice to pay the amount. The petition u/s 95 was filed prematurely, within one month of the demand notice, contrary to the agreement. The Tribunal correctly allowed the respondent's application and dismissed the appellant's petition u/s 95, along with imposing costs. The Appellate Tribunal found no merit in the appeal and dismissed it.
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Indian Laws

• Accountant Faces Six-Month Ban for Misconduct in Share Transfer Dispute, Court Affirms Professional Discipline.

  Case-Laws - HC : The respondent, a Chartered Accountant, purchased shares in 1997 but denied selling them to the complainant, despite admitting his signatures on the share transfer deed. His explanation of signing a blank transfer deed under the pretext of an unrelated share delivery issue lacked credibility. The respondent failed to provide a satisfactory explanation for the four-year delay in applying for duplicate share certificates and continued receiving dividends after the sale, indicating an attempt to benefit from shares he no longer owned. The Disciplinary Committee found the respondent's conduct derogatory and unbecoming of a Chartered Accountant, bringing disrepute to the profession. The High Court upheld the punishment of removing the respondent's name from the Register of Members for six months, finding the decision reasonable and not unduly harsh.
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SEBI

• Replaces notary attestation with self-attestation for documents & applications across various regulations.

  Notifications : This notification amends various SEBI regulations to replace the requirement of attestation by a notary public or sworn affidavit with self-attestation for certain documents and applications. The key changes involve substituting phrases like "attested as true by an authorized notary" or "supported by a duly sworn affidavit" with "self-attested" across multiple regulations governing custodians, credit rating agencies, substantial acquisition of shares, KYC registration agencies, buyback of securities, depositories, settlement proceedings, delisting of shares, and index providers. The amendments aim to simplify the submission process by eliminating the need for notarization or affidavits, promoting ease of compliance.
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• New Guidelines for Stock Exchanges: Continuity and Recovery Plans for Outages in Place by April 2025.

  Circulars : This circular provides guidelines for business continuity planning and disaster recovery for interoperable segments of stock exchanges. In case of outage at a trading venue, participants can hedge open positions by taking offsetting positions on another exchange for identical/correlated products. For exclusively listed scrips, exchanges must create reserve contracts to invoke during outages. Exchanges without correlated index derivatives should introduce such products. The affected exchange must intimate SEBI and the alternative venue within 75 minutes, which will invoke the business continuity plan within 15 minutes. Initially, NSE and BSE will act as alternative venues for each other, with a joint SOP to be submitted to SEBI within 60 days. Exchanges and clearing corporations must implement requisite infrastructure, amend bylaws, disseminate information, and update SEBI on implementation status. The provisions are effective from April 1, 2025.
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• New Valuation Rules for Mutual Fund Repo Transactions Effective Jan 2025: Mark-to-Market for All Except Overnight Repos.

  Circulars : This circular modifies the valuation methodology for repurchase (repo) transactions, including tri-party repo (TREPS), by mutual funds. Previously, repo transactions up to 30 days tenor were valued on cost plus accrual basis. The circular mandates valuing all repo transactions, except overnight repos, on a mark-to-market basis using prices from AMFI-empaneled valuation agencies, aligning with the valuation methodology for other money market and debt securities. Short-term bank deposits will continue to be valued on cost plus accrual basis. The changes aim to ensure uniformity in valuation methodology and address potential regulatory arbitrage concerns. The provisions are effective from January 1, 2025, under SEBI's powers to regulate securities markets and protect investor interests.
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• New Guidelines Enhance Governance and Accountability for Stock Exchanges and Depositories to Protect Investors.

  Circulars : This circular provides guidelines to stock exchanges, clearing corporations, and depositories to enhance accountability, supervision, monitoring mechanisms, and governance standards. Key points include separate meetings for public interest directors to review compliance, reporting by compliance officers and chief risk officers, disclosure of board meeting agendas and minutes, disciplinary procedures for key managerial personnel, strengthening whistle-blower policies, adopting technologies for regulatory oversight, monitoring members/participants and outsourced vendors, training for directors, data sharing policies, streamlining director appointments, and ensuring independence of key officers. The guidelines aim to protect investor interests and promote securities market development through improved governance and regulatory compliance by market infrastructure institutions.
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• Easing rules for public offerings: SEBI scraps 1% deposit mandate for issuers.

  Circulars : SEBI has withdrawn the requirement for issuer companies to deposit 1% of the issue size with the designated stock exchange prior to a public offering, as per the amendment to the ICDR Regulations in May 2024. The Master Circular on issuance of No Objection Certificate for release of the 1% deposit stands withdrawn. Stock exchanges must frame a joint SOP for releasing previously deposited 1% amounts. The circular is applicable immediately, and exchanges must notify listed companies, update bylaws, and implement the changes. The move aims to facilitate ease of doing business for issuer companies undertaking public offerings.
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• SEBI Updates CRA Guidelines: New Protocols for Handling Non-Payment Issues Beyond Issuer's Control.

  Circulars : The circular amends paragraph 15 of the Master Circular for Credit Rating Agencies (CRAs), providing guidance on treatment of technical defaults. It clarifies that in scenarios where non-payment of debt occurs due to reasons beyond the issuer's control, such as failure to remit due to incorrect investor account details or instructions from authorities, CRAs shall verify availability of funds, reasons for failure, and payment into an escrow account. CRAs must furnish details to stock exchanges, depositories, and debenture trustees, who shall disseminate the information. CRAs must sensitize issuers to use penny-drop verification facility to prevent such occurrences. The term "technical default" is omitted from paragraph 15.3, which now covers scenarios fundamentally altering the defaulting firm's credit risk profile. The circular is applicable immediately and issued under SEBI's powers to protect investors and regulate securities market.
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Service Tax

• Service Tax Demand Overturned; Cenvat Credits for Employee Services and Accommodations Upheld.

  Case-Laws - AT : Taxability of service tax on transporting goods by road covered u/s 66D(p), appellant not being GTA or courier agency, amount towards facilitation of freight and insurance by appellant, service tax demand wrongly raised. Reversal of Cenvat credit denied on services of hiring water tankers, mechanized canteen cleaning, catering services as per Sections 44 and 46 of Factory Act, credit rightly availed. Services like hotel accommodation for personnel imparting training to employees, not for personal use, credit rightly availed. Meaning of terms "includes", "in relation to", "such as" discussed based on judicial precedents. Credit on short-term accommodation/hotel services for inspection and testing of goods by customers, directly related to manufacturing, denial of credit not sustainable. Order under challenge set aside, appeal allowed.
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• Compensation for Early Job Termination Not Taxable as Service, Tribunal Rules; Employer Not Rendering Service.

  Case-Laws - AT : The issue revolves around the service tax levied on amounts received by an employee from the employer upon premature termination of the employment contract. The Tribunal held that the employer cannot be considered as rendering a taxable service by merely facilitating the employee's exit upon compensation for the sudden termination. The definition of service u/s 66E is not attracted as the employer has not 'tolerated' any act of the employee but has permitted a sudden exit upon being compensated. While a contract of employment is typically read as a whole, certain situations like breach of a non-compete clause may constitute rendering of service. However, notice pay in lieu of sudden termination does not give rise to the rendition of service by either the employer or the employee. Consequently, the jurisdictional Commissioner of Service Tax's appeal was dismissed as lacking merit.
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• Data Collection Services Not "Market Research," Revenue Appeal Dismissed; No Evasion or Extended Notice Period Needed.

  Case-Laws - AT : Overseas service providers provided data collection services to the respondent. The activities were merely data collection through questionnaires, with no research or interpretation. The raw data was supplied back to the respondent for further analysis. These services cannot be classified as "Market Research Services" as there was no research involved. The services were akin to an architect outsourcing land surveying, which is an input but not architectural services itself. Similarly, a tour operator hiring buses does not make it a bus service. The classification as "Online Information and Database Access or Retrieval Services" is irrelevant. The demand to classify data collection as market research cannot be sustained. Additionally, the extended period of limitation for issuing the show cause notice cannot be invoked as there was no mala fide intent or evasion. Any service tax payable would have been available as CENVAT credit, making it revenue neutral. The revenue appeal was dismissed by the CESTAT.
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• Construction Services and Works Contracts: Land Exclusion and Cancellation Charges Clarified; Extended Limitation Period Dismissed.

  Case-Laws - AT : The summary covers the classification of services as works contract services or construction of residential complex service, valuation of services, inclusion of land value in construction services, redetermination of value by revenue for balance works as finishing services, demand on cancellation charges, and limitation period for issuing show cause notice. The key points are: works contract for construction of villa classified u/s 66E(b), value of land cannot be included in works contract value, balance works classified as original works u/r 2A(ii)(A) not finishing services under 2A(ii)(B), cancellation charges cannot be treated as separate service under 66E(e) when already taxed as works contract, and invoking extended period of limitation unsustainable as no suppression of facts. The impugned order and demands were set aside by the Appellate Tribunal.
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Case Laws:

• GST

• 2024 (11) TMI 1334
  Cancellation of GST registration of petitioner due to non-filing of the GSTR 3B returns - dismissal of appeal on the ground of limitation - non-application of mind on the part of respondents - violation of principles of natural justice - HELD THAT:- On perusal of record of this case, this Court finds that for non-filing of GST returns, the petitioner was issued a Show Cause Notice dated 21.11.2019 for cancellation of registration as he has not filed returns for a continuous period of six months - On perusal of the said show cause notice, it is not clear that reply submitted by the petitioner has not been considered. Thus, the aforesaid show cause notice shows and impugned order are passed without application of mind on the part of respondents. The appeal filed by the petitioner against order dated 09.06.2022, has been dismissed by the Appellate Authority by the impugned order dated 29.05.2024 on the ground of limitation - In the impugned order dated 09.06.2022, it is observed that the petitioner is required to pay the following amount, however, the amount is mentioned as zero . Therefore, there was no occasion to deposit the amount because the respondents did not mention the amount to be paid. The orders dated 09.06.2022 passed by the Adjudicating Authority and order dated 29.05.2024 passed by the Appellate Authority are hereby set aside - Consequently, the petition is allowed.

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• 2024 (11) TMI 1333
  Levy of differential GST on account of tax liability difference between Form GSTR-1 and GSTR-3B Returns filed for the period of 2017 to 2018 - Whether the petitioners are entitled to pay 10% of the disputed amount as a pre-condition in filing appeal by way of debiting the amount available in the Electronic Credit Ledger? - HELD THAT:- A reading of the Section would show that the amount available in the Electronic Credit Ledger may be used for making any payment towards output tax. The word used in the above provision is may and it is not shall . In the event if the word shall is used, the amount available in the Electronic Credit Ledger shall be utilized only for the purpose of payment of output tax. Further, in terms of Section 107(6) of TNGST Act, if 10% of the disputed tax has to be paid, it means that the deposit is made only towards discharging liability of output tax. In the event if the appellants are not succeeding, the amount paid by utilizing the Electronic Credit Ledger will be taken as output tax alone. Therefore, at no stretch of imagination, one can arrive at a conclusion that 10% of the amount paid as pre-condition for filing an appeal can be utilized other than the discharge of output tax. Rule 86(2) of TNGST Rules provides that Electronic Credit Ledger shall be debited to the extent of discharge any liability in accordance with the provisions of Section 49 or 49A or Section 49B. A reading of the Circular dated 06.07.2022 shows that input tax credit can be utilized not only for payment of the self assessed output tax but also payable as a consequence of the proceeding instituted under the provisions of GST Laws. This circular also clarifies the position that to discharge the liability of 10% of the output tax liability in terms of Section 107(6) of TNGST Act, the amount can be remitted through Electronic Credit Ledger. Further, as contended by the petitioners that the only restrictions on the usage of Electronic Credit Ledger for payment of pre-deposit is in respect of tax payable under reverse charge mechanism, as the same is outside the ambit of Section 2(82) of TNGST Act. In the present case, there was no remark under reverse charge mechanism on the petitioners in these proceedings. It is to be noted that the statutory appeal form APL-01 provides for the mechanism to pay pre-deposit by utilizing Electronic Credit Ledger as well. Further, vide circular dated 02.11.2023 the CBI C prescribed special procedure for filing appeals beyond the time period specified under Section 107 of TNGST Act on condition that out of 12.5% of the prescribed mandatory deposit, 20% ie., (2.5%) has to be paid by debiting the Electronic Cash Ledger. Therefore, it is evident that the remaining statutory mandatory pre-deposit (10% of the disputed tax) under Section 107(6) of TNGST Act can be very well made by using the amount available in Electronic Credit Ledger. This Court has no hesitation to come to the conclusion that the pre-deposit can be made through Electronic Credit Ledger. Therefore, the impugned orders passed by the 1st respondent are liable to be quashed, accordingly, quashed - Writ Petitions are allowed with a direction to the 1st respondent to take up the appeals filed by the petitioners on record, in the event if the appeals are dismissed only on the ground that pre-deposit has been made through Electronic Credit Ledger.

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• 2024 (11) TMI 1332
  Imposition of time limit for claiming ITC under Section 16(4) of the CGST Act - violation of Article 14 of the Constitution of India - doctrine of legitimate exception - HELD THAT:- As per Section 16(4) of the Act, the assessee or a registered person shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under Section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier - The provision of Section 16(4) of the CGST Act which restricts the claim of ITC only on the ground that a return is filed after the date prescribed is arbitrary as well as the tax payer who is claiming the ITC has already made the payment of tax to the supplier from whom the foods and services has been received. The payments include both cost of service or goods and the amount of Tax, thus the taxpayer cannot be deprived from his right to claim ITC. The GST laws do not have any provision and scope for filing a revised return, taxpayers are extremely cautious to file the monthly return for March and may like to wait for a longer time to reconcile the entries and ensure that there is no unnecessary mismatch between the GST returns and the financial records - Allowing a taxpayer to file returns with payment of late fees and then disallow him the ITC, because the return was filed belatedly, is punishing him twice for a single default so committed. Moreover, with the payment of late fee u/S 47 as well as payment of interest u/S 50, the treasury has been suitably compensated for the postponement of the tax. Payment of late fees and interest are already there as deterrent for the taxpayers forcing them to be disciplined. Under such circumstances, saddling with double payment of tax by way of Section 16(4) is arbitrary and capricious. Since, the Central Government by way of the Act of 2024 has proposed to amend Section 16 of the GST Act by introducing Section 118 of the Act of 2024, thereby jettisoning the condition of time limit, this Court is of the considered opinion that this batch of petitions deserves to be allowed without examining the constitutional validity of Section 16(4). Petition allowed.

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• 2024 (11) TMI 1331
  Validity of Show Cause Notice (SCN) and final order issued against a non-existent entity - rectification of procedural defects - Applicability of Section 160 of the CGST Act, 2017 - application of Section 87 of the CGST Act, 2017, concerning amalgamated companies - HELD THAT:- Section 87 essentially seeks to preserve and identify the transactions which may have occurred between two or more companies which ultimately amalgamate and merge. In order to fix the liabilities that would accrue under the CGST Act and to avoid a contention being raised that the Amalgamating Company and transactions undertaken with it would no longer be subject to tax, the Legislature, ex abundanti cautela, has come to place Section 87 on the statute book and which bids us to bear in mind that notwithstanding an order of amalgamation or a scheme of merger coming to be approved, for the purposes of the CGST Act, the two entities would be treated as a distinct companies for the period up to the date of the order of the competent court or tribunal approving the scheme and the registration certificate of the companies being cancelled. Section 87 cannot be read as enabling the respondents to either continue to place a non-existent entity on notice or for that matter to pass an order of assessment referable to Section 73 against such an entity. In fact, in terms of Section 87, the liabilities of the non-existent company would in any case stand transposed to be borne by the amalgamated entity. This is, therefore, not a case where the Revenue would stand to lose or be deprived of their right to subject transactions to tax. The impugned SCN dated 3 December 2023 as well as the impugned order dated 27 April 2024 quashed - petition allowed.

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• 2024 (11) TMI 1330
  Refund of IGST on ocean freight - Constitutionality of N/N. 8/2017 and N/N. 10/2017 dated 28.06.2017 - HELD THAT:- The issue of levy of IGST on ocean freight is no longer res integra and has decided by the Hon ble Apex Court in case of UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2022 (5) TMI 968 - SUPREME COURT] and the decision of various High Courts including this Court in case of BLA COKE PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2024 (10) TMI 492 - GUJARAT HIGH COURT] , wherein, it has been categorically held that when the Notification itself is struck down, the respondent-authorities cannot insist for levy of IGST on the amount of ocean freight. Such being the position, the main issue falls for determination of this Court is whether the prayers for refund of the amount of levy are maintainable and whether this Court must direct the respondents to refund the same to the petitioner. In case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] , the Apex Court has gone on to hold that for the first type of cases namely unconstitutional levy, the remedy of writ jurisdiction exists, both under Articles 32 and 226 of the Constitution of India respectively. The writ petition filed by the petitioner seeking refund of the IGST is maintainable and must be allowed as the levy has been held to be unconstitutional. Impugned order is hereby quashed and set aside - The petition, therefore, succeeds and is accordingly allowed.

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• 2024 (11) TMI 1329
  Cancellation of GST registration of the petitioner - petitioner had stopped business at the place mentioned in the certificate of registration - issuance of certain fake invoices without actual supply of goods - HELD THAT:- The petitioner has not made out any case for interference with the impugned orders. A perusal of Ext.P4 order of the original authority will show that the contentions taken by the petitioner had been considered by the original authority, and there was a specific finding that the petitioner was not conducting business in the premises mentioned in the certificate of registration. It is also seen from Ext.P4 that, according to the statement recorded from the landlord of the petitioner, the premises in question were leased out to the petitioner for conducting iron and steel business from 2012 to May 2017, and thereafter no business had been conducted by the petitioner in the said premises. It is also seen that the premises were thereafter leased out by the landlord to another person, who had no relation whatsoever with the petitioner. The original authority therefore recorded that it is evident that the details provided at the time of migration from the registration under the VAT to GST were false and the registration of the petitioner is therefore liable to be cancelled. There is nothing on record to indicate that any of the findings recorded by the Appellate Authority are wrong and require interference at the hands of this Court under Article 226 of the Constitution of India. That apart, as rightly pointed out by the learned Government Pleader, if the petitioner intends to restart the business, it will always be open to the petitioner to apply for fresh registration after complying with formalities. There are no reason to entertain this writ petition - petition dismissed.

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• 2024 (11) TMI 1328
  Exemption from GST - supply of food to all the inpatients - composite supply or not - Applicability of N/N. 12/2017 read with Sec. 8(a) of the GST Act - raising invoices by considering the services provided to the Central Hospital, South Eastern Railway, Garden Reach Road, Kolkata 700043 falling under the SAC 999311 - exempty as per entry N/N. 12/2017 Central Tax (Rate) dated 28.06.2017 or not. HELD THAT:- In the instant case, the applicant has entered into the agreement with the Central Hospital, South Eastern Railway for provide catering services by running the in-house kitchen of the hospital and for which the Central Hospital is liable to pay the consideration to the applicant. So, there can be no dispute that the applicant is supplying the services to the Central Hospital who is engaged in providing health care services to the patients. So, it is the Central Hospital and not the applicant who provides health care services. The Telengana Authority for Advance Ruling in the case of IN RE: M/S. NAVNEETH KUMAR TALLA, [ 2020 (8) TMI 104 - AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA] held that GST is payable on the service of supplying food and no exemption is provided as service is outsourced by the hospital and the applicant is not a clinical establishment. Composite supply thus is constituted with two or more taxable supplies which are naturally bundled and supplied in conjunction with each other. In the instant case, the Central Hospital, being a clinical establishment, provides food to the in-patients. Such food has been outsourced by the Hospital from the applicant. Therefore, food supplied to the in-patients as advised by the doctor/nutritionists constitutes a part of composite supply of health care services in the hand of the Central Hospital itself. Supply made by the applicant to the Central Hospital is a standalone service of supply of food and in no way can be considered as a composite supply of health care services.

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• 2024 (11) TMI 1327
  Scope of supply - supply of works contract services - Sl. No. 3A Notification No.9/2017 dated 28-06-2017 Integrated Tax (Rate) or Sl. No. 3A of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time - effective GST tax rate applicable to the supply - whether the services are in relation to any functions entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India? - HELD THAT:- The expression public property has been defined in the Prevention of Damage to the Public Property Act, 1984 which inter alia includes any property, whether immovable or movable which is owned by, or in the possession of, or under the control of (i) the Central Government; (ii) any State Government; or (iii) any local authority. Lamphelat Lake, which is a natural water body, therefore comes under the purview of public property . However, dredging of a natural water body cannot be considered as services in regard to Removal of Encroachment on Public Properties . We are therefore unable to accept the contention of the applicant that maintenance of the natural water body can be regarded as maintenance of community assets as specified in the Eleventh Schedule [Article 243G of the Constitution (Seventy-Third Amendment) Act, 1992]. The work to alleviate urban flooding is not listed in the Eleventh and/or Twelfth Schedule supra. However, the functions entrusted to a Panchayat or to a municipality as listed in the Twelfth Schedule include the functions viz. (i) drinking water or water supply for domestic, industrial and commercial purposes and (ii) protection of the environment and promotion of ecological aspects. In the instant case, the objective of the project inter alia includes improvement of water security and enhancement of environmental situation which is a subject matter of Twelfth Schedule [Article 243W of the Constitution (Seventy-Fourth Amendment) Act, 1992]. The supply made by the applicant to the Government of Manipur is in relation to a function entrusted to a Municipality under article 243W of the Constitution. Supplies made by the applicant for rejuvenating Lamphelpat waterbody to alleviate urban flooding, providing sustainable water source for Imphal City and promoting eco tourism to the State Government of Manipur are exempted from payment of tax vide serial number 3A of the N/N. 12/2017 Central Tax (Rate) dated 28.06.2017 [corresponding State N/N. 1136 F.T. dated 28.06.2017], as amended or Sl. No. 3A N/N. 9/2017 dated 28-06-2017 Integrated Tax (Rate).

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• Income Tax

• 2024 (11) TMI 1326
  Validity of search - Petitioners state that the Revenue does not have the satisfaction note - Delay filling SLP - as decided by HC [ 2023 (9) TMI 1599 - BOMBAY HIGH COURT] Even if the search is held to be invalid, the information or material gathered during the course thereof may be relied upon by Revenue for making adjustment to assessee s income in an appropriate proceeding, if so advised, and Revenue may utilize the information or material in such proceeding, as is permissible in law - HELD THAT:- There is a delay of 323 and 322 days in filing the Special Leave Petitions respectively which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petitions and do not find any merit in the same. Special Leave Petitions are, therefore, dismissed on the ground of delay as well as on merits.

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• 2024 (11) TMI 1325
  Revision u/s 263 - no proper enquiry has been conducted by the AO on issue of cash deposited during demonetization period, scrap sale and non-submission of audit report - ITAT set aside revision order - substantial question of law - HELD THAT:- In the instant appeal the department has only challenged the fact finding of the Tribunal. A catena of Supreme Court judgments have concluded that in relation to facts, no substantial question of law would arise unless the finding of fact is perverse. A factual decision is perverse when it is without any evidence or when it cannot be reasonably arrived at by a prudent man. Finding based upon surmises, conjectures or suspicion or when they are not rationally possible, have to be struck down. One may therefore examine the interpretation of perversity by various Courts including the Supreme Court. Unless there is any perversity in finding of facts, no substantial question of law would arise. Furthermore, for the Tribunal s fact finding to be perverse, it would have be established that the finding of fact by the Tribunal directly or indirectly affects substantial rights of the assessee in the sense that it is such as could not have been reasonably arrived at on the material placed on record before the Tribunal. In the present factual matrix, it is crystal clear that the Tribunal has examined the facts in great detail, and only thereafter, held in favour of the assessee.

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• 2024 (11) TMI 1324
  Recovery of the outstanding dues of Public Limited Company from the Director by invoking Section 179 - Liability of directors of private company - HELD THAT:- Section 179 of the Act empowers the Income Tax Authorities to recover dues of a private company from the person who was Director during the relevant previous year. Latter part of Section 179(1) casts a negative onus on the Director to prove that non-recovery was not attributable to gross neglect, misfeasance or breach of duty on part of Director in relation to the affairs of the Company. In response to the show cause notice, it was specifically pleaded that since 1997 the Company was incorporated as Public Limited Company and is registered with the Registrar of Companies, Rajasthan. While passing the order under Section 179 of the Act, the fact that Company is a Public Limited Company was not refuted. Similar is position in the reply filed to the writ petition. There is no dispute that Company was not a private company. Revenue Authorities failed to lay down the factual foundation in the notice and order passed under Section 179 of the Act to dispute the status of the Company being the public limited company. The contention of counsel for the petitioner that no proceedings can be initiated under Section 179 of the Act against the petitioner being a Director of Public Limited Company, deserves acceptance. The Section does not apply to the public limited company. WP allowed.

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• 2024 (11) TMI 1323
  Validity of Assessment Order passed - shorter period to respond to SCN - petitioner had been served with the Show Cause Notice dated 21.09.2021. The petitioner was to respond to the same by 23.59 hours on 24.09.2021 - HELD THAT:- Assessment order has been passed in a hurry perhaps with a view to avoid the assessment getting lapsed due to the limitation under the Act. Although the respondents cannot have found fault with as the respondents are constrained to pass orders within the time stipulated u/s 153 of the Act. At the same time, the principles of natural justice cannot be casualty to sacrifice the rights of an assessee. Therefore to balance the interest, the Court is inclined to quash the impugned order and remit the case back to the respondent to pass a fresh order on merits and in accordance with law and expeditiously as possible preferably within a period of three months from the date of receipt of a copy of this order.

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• 2024 (11) TMI 1322
  Order passed u/s 148 (d) in respect of the issue which was not the subject matter of the two show cause notices - violation of provisions contemplated under Section 148 A (b) and also violation of principles of natural justice - Since the respondent was completely silent about the information available with them with regard to the search conducted with the Political Party, in relation to the donation receipt issued by the petitioner for a sum to political party, therefore, the impugned order/notice are liable to be set aside. HELD THAT:- This Court is not inclined to accept the contention of the petitioner for the reason that, the petitioner submitted replies to show cause notices, annexing certain documents and the respondent, after going through those replies and on through scrutiny of the documents, found some irregularities with regard to the genuineness of such documents, hence, they conducted a investigation and gathered certain informations, based on which, an order was passed u/s 148A (d) of the Act. Respondent passed such an order u/s 148A (d) and issued consequential notice u/s 148 only based on the informations, which were gathered during the surprise check conducted by the Enforcement Officials, which was in relation to the document produced by the petitioner in support of his case at the time of filing reply. Further, by virtue of the notice issued u/s 148, the petitioner was directed to file returns within the specified time, therefore, the petitioner shall file returns in terms of Section 148 of the Act and if the petitioner is aggrieved by the Section 148 notice, the petitioner can very well file reply to the said notice. No merit in the contention raised by the petitioner.

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• 2024 (11) TMI 1321
  Levy of late fee charged u/s. 234E - assessee has deliberately not filed the respective statements for the financial years under consideration within the due date - Whether the levy of late fees is permissible under section 234E for three quarters of Financial year 2012-13 relevant to A.Y.2013-2014 and four quarters for Financial year 2013-14 relevant to A.Y.2014-2015, especially in view of the fact that the intimation u/s. 200A brought in statute w.e.f. 01.06.2015 ? - HELD THAT:- Section 234E of the Act by itself cannot make computation without the provisions of section 200A of the Act, when the empowering section came into effect only w.e.f. 1.6.2015. Thus, the enabling provision came into effect only w.e.f. 1.6.2015, obviously, 234E would be leviable only from the time the enabling section came into effect. This being so, as also after noticing that the ld CIT(A) has followed the decision ofTB and ID Hospital vs ITO-TDS(1) [ 2018 (8) TMI 1550 - ITAT CUTTACK] as also the decision of Fatehraj Singhvi Ors vs Union of India [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] and also followed the judicial discipline, we find no error in the orders of CIT(A) to interfere in respect of three quarters of F.Y. 2012- 2013 relevant to A.Y.2013-2014 and four quarters of F.Y. 2013-2014 relevant to A.Y.2014-2015. Appeals of the revenue are dismissed.

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• 2024 (11) TMI 1320
  Revision u/s 263 - eligibility of exemption u/s 11 - assessee had not filed the original return of income u/s 139 within the due date and also the audit report (Form 10B) within the due date specified for filing the audit report. Hence, assessee was not eligible for any claim of exemption u/s 11 and 12 - HELD THAT:- There is no dispute regarding the fact that assessee had not filed its return of income u/s 139 of the Act. It filed the return of income, declaring total income only after receiving notice u/s 148 of the Act. The AO has passed the order accepting the returned income after considering explanation and details filed by assessee. As decided in case of United Educational Society [ 2019 (7) TMI 738 - ITAT DELHI ] filing of income u/s 139(4A) of the Act was not statutorily compulsory in AY.2017-18. Hence, the AO has rightly accepted the return of the assessee field u/s 148 of the Act. We find that clause (ba) to sub-section (1) of section 12A was inserted by Finance Act, 2017 w.e.f. 01.04.2018. The said clause provides w.e.f. 01.04.2018, and applicable for AY.2018-19 and subsequent years, that the person in receipt of income shall furnish the return of income referred to in sub-section (4A) of section 139 within the time allowed under that section. The assessment year involved in this appeal is AY.2017-18 which is prior to insertion of clause (ba) of section 12A(1) by Finance Act, 2017. When the provisions were not in the statute, the AO could not have invoked the provision and asked the assessee to fulfil the conditions included therein. AO has taken the correct view while passing the order and he has adopted one of the courses permissible in law. The CIT(E) has stated that the amendment is only clarificatory and the decision of ITAT is not mandatory. In the memorandum explaining the above provisions of the Finance Bill, it was explained that the amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to AY.2018-19 and subsequent years. The clause will not be applicable to the subject AY.2017-18. As clause (ba) of sub-section (1) of section 12A is applicable for AY.2018-19 onwards and not for AY.2017-18 with which we are concerned. Hence, we hold that the order of AO was not erroneous and prejudicial to the interests of revenue and therefore, it was not amenable to revision u/s 263. Appeal of the assessee is allowed.

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• 2024 (11) TMI 1319
  Penalty u/s 271(1)(c) - additional income offered by assessee in the return filed in response notice issued u/s 148 as well as addition made u/s 69 on account of deposit in City Bank - HELD THAT:- So far as additional income offered by assessee in response to notice u/s 148 is concerned, we find that such income is accepted by Assessing Officer and by accepting such additional income no penalty is leviable as has been held in the case of Kirit Dahyabhai Patel [ 2015 (1) TMI 201 - GUJARAT HIGH COURT] Similar view was taken in the case of Ravi Sud v [ 2015 (10) TMI 1476 - ITAT MUMBAI] . Addition u/s 69 - No penalty is leviable as mere cash deposit cannot be considered income of the assessee. It is also matter of record that no further appeal is filed by the assessee. The assessee has not filed further appeal due to smallness of the addition. Mere no further appeal is filed; it cannot be taken as admission on the part of the assessee. Each and every addition cannot be a basis for levying a penalty under section 271(1), unless there is a finding of AO that the assessee has deliberately furnished inaccurate particulars or concealed the income. Assessee is her submissions categorically submitted that the bank account on the credit of which, the penalty is levied, was shown in his cash book and such deposit was not unexplained. Thus, we considering the aforesaid facts we do not find any justification for levying penalty even on the addition - Appeal of the assessee is allowed.

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• 2024 (11) TMI 1318
  Demand u/s. 206C(1C) and (6) (7) - assessee was to be held as being default for not collecting tax at source (TCS) a/w. interest on illegal mining, illegal storage and illegal transportation u/s. 206C(1C) and (6) (7) and for its failure to deduct tax at source in respect of contribution towards District Mining Fund (DMF) - HELD THAT:- Issues involved here had been deliberated at length in the cases of District Mining Officer, Bemetara Vs. DCIT (TDS), Raipur (C.G) ORs. [ 2023 (8) TMI 31 - ITAT RAIPUR] , therefore, no infirmity did emerge from the order of the CIT(Appeals) who had rightly followed the same and dismissed the appeal of assessee.

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• 2024 (11) TMI 1317
  Addition u/s 14A r.w.r. 8D - assessee contended that the assessee has not earned any exempt income and has also not incurred any expenditure as there was no such exempt income for the year under consideration - HELD THAT:- As observed that the assessee has not earned any exempt income during the impugned year and it is now a settled preposition of law that disallowance u/s. 14A cannot be made when the assessee has not earned any exempt income during the year under consideration. It is also pertinent to point out that the amendment brought about in Section 14A introduced vide Finance Act, 2022 w.e.f. 01.04.2022 is prospective in nature which provides that disallowance u/s. 14A is to be made even when the assessee has not earned any exempt income and the same has been reiterated by the decision of Era Infrastructure (India) Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] which has been followed in various other subsequent decisions. Appeal filed by the assessee is allowed.

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• 2024 (11) TMI 1316
  Income deemed to accrue or arise in India - income received and accrued in Indonesia for rendering service outside India - assessee, an employee of an Indian company sent on a short-term assignment to Indonesia - number of days of stay in India [61 days] - CIT(A) contending that the foreign income during service rendered outside India qualifies for exemption u/s 5(2) of the Act and Article 15(1) of the India Indonesia DTAA - HELD THAT:- Assessee was present in India for only 61 days during the financial year 2015-16 which qualifies as a non-resident u/s 5(2) of the Act and only income received or deemed to have accrued or arisen in India, is taxable for a non-resident. We undisputedly note that the assessee is a non-resident employee in IBM India Pvt. Ltd. (an Indian Company) and was sent to abroad to Indonesia for rendering services there. We find no dispute that the services were rendered in Indonesia and the foreign assignment allowances received by the assessee for services rendered in Indonesia and no evidence suggests that income accrued or arose in India. We note that the assessee failed to produce the TRC before the AO which is a procedural lapse and does not negate the substantive compliance. After considering the facts and circumstances of the case and following the decision in the case of DCIT vs. Sudipta Maity [ 2018 (8) TMI 730 - ITAT KOLKATA] we find it necessary to delete the addition made by the Assessing Officer based on the fact that the income related to services rendered received outside India is not taxable in India. The Assessing Officer is also directed to allow the refund as claimed by the assessee.

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• 2024 (11) TMI 1315
  Disallowance of interest paid - AO observed on the basis of evidences filed by the assessee that assessee had paid interest on borrowed money whereas he has not charged any interest on the loan given to various parties - CIT(A) deleted addition - HELD THAT:- As observed by us from the order of the Ld. CIT(A) that assessee s own interest free funds comprising of share capital, reserves and surplus and interest free loans were far more than the interest free loans then the presumption is that interest free loans were advanced out of interest free own funds available with the assessee and consequently no disallowance could be made with respect to interest paid which are relatable to interest free loans. The case of the assessee is squarely covered by the decision of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT Vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] No infirmity in the order of the Ld. CIT(A) and accordingly, the same is affirmed by dismissing the appeal of the revenue.

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• 2024 (11) TMI 1314
  Addition u/s 69C - bogus purchases - HELD THAT:- The transactions were relating to sales to SINPL and therefore, the same could not be added u/s 69C of the Act as has been erroneously done by the Ld. AO and also confirmed by the Ld. CIT(A). The provisions of Section 69C of the Act relate to unexplained expenditure which are not recorded in the books of accounts. AO was incorrect in law in applying the provisions of Section 69C on the transactions shown as sales to SINPL. The result of search itself indicated that SINPL had made payments against the purchase of machinery and parts from various entities which were bogus and were involved in providing bogus accommodation entry in the form of bogus sales. Since the purchases were made by SINPL, the disallowance, if any, should have been made in the case of SINPL. There is merit in the argument of the assessee and which is also borne out from the facts of the case that since the assessee was providing accommodation entries, only the profit element on the sale could have been added. AR was fair enough to admit that a higher amount of 5% may be treated as commission on the transactions of Rs. 34,59,840/-. Accordingly, the Ld. AO is directed to apply the profit rate of 5% on the sales shown which are admitted to be accommodation entries, which works out to Rs. 1,72,992/- and is rounded off to Rs. 1,73,000/- on the transactions of Rs. 34,59,840/- and accordingly, add the same to the income of the assessee disclosed in the return of income in place added u/s 69C. Commission rate of 5% is applied in place of 1% on the bogus accommodation sales bill entries instead of 1% mentioned in the ground of appeal.

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• 2024 (11) TMI 1313
  Disallowance on account of excess production and broadcasting fee - payment under the head Production and Broadcast Fees has not been made or that it was not genuine and also the fact that Production and Broadcasting Fees was allowed @18.5% for AY 2012-13 deleted the disallowance - HELD THAT:- AO has not made any adverse comment on the merits of the allowability of the expenses towards Production and Broadcasting Fees @15.70% and has only objected to the filing of the agreement in this regard effective from 01.04.2013 before the Ld. CIT(A) and not during the assessment proceedings despite opportunities given. There is no ground to interfere with the finding of the CIT(A) in deleting the disallowance. Further, as per the submissions of the AR about the short time made available to the assessee company for submitting the agreement effective from 01.04.2013, which has not been contested by the AO, it is held that there is no violation of Rule-46A in this case in admitting the agreement effective from 01.04.2013 by the Ld. CIT(A). Ground no.1 and 2 of the appeal is dismissed.

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• 2024 (11) TMI 1312
  Addition u/s 36(1)(iii) - assessee had advanced interest-free loans while incurring significant interest expenses on unsecured borrowings - AO held that the assessee failed to establish a nexus of these advances with interest-free funds and did not demonstrate any business purpose - HELD THAT:- We find that the assessee had sufficient interest-free funds which were more than adequate to cover the interest-free advances - CIT(A) did not address the assessee s submission that no disallowance was made in earlier years despite similar advances. The principle of consistency was disregarded. CIT(A) s emphasis on the absence of a fund flow statement is unjustified, as the assessee s financial statements clearly indicated the sufficiency of interest-free funds. CIT(A) s reliance on S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] is misplaced. While that case emphasizes the requirement of commercial expediency, the principles laid down in CIT v. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] a subsequent Hon ble Supreme Court s decision, clarify that where sufficient interest-free funds are available, the presumption arises that such advances are made from those funds. Following the principle established in CIT v. Reliance Industries Ltd. (supra), it is presumed that such advances are made from interest-free funds. The Revenue has failed to establish a direct nexus between borrowed funds and these advances. Therefore, the disallowance of interest expenses u/s 36(1)(iii) cannot be sustained. Disallowance on account of sundry balances written off, citing non-compliance with Section 36(2) - The write-off pertains to non-recoverable advances given to employees, which are incidental to the assessee s business operations. Such advances, though not strictly satisfying Section 36(2) qualify as deductible business expenses u/s 37. Considering the nominal amount involved, disallowance on this account is unwarranted. Appeal of the assessee is allowed.

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• 2024 (11) TMI 1311
  Addition u/s 68 - assessee has deposited huge cash in the bank account during the demonetization period - HELD THAT:- It is clear that the assessee is unable to adduce any records to substantiate the source of cash deposit. Considering the conduct of the assessee, AO estimated business income of 8% against normal deposits which was reduced to 5% by Ld. CIT(A). This estimation, in our considered opinion, is quite reasonable and the same, therefore, would not require any interference on our part. Artificial distinction created in deposits made during demonetization period is not correct. The transactions have happened throughout the year and the nature of transaction is similar. Therefore, similar estimation could be made against demonetization deposit - AO is directed to adopt similar estimation of 5% against these deposits.

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• 2024 (11) TMI 1310
  Penalty u/s 271E as barred by limitation - HELD THAT:- It is well settled law that the period of limitation for initiating the penalty starts from the date of issuance of notice by the AO and not from the issuance of penalty notice by the JCIT/Addl.CIT. In the present case, the penalty notice has been issued by the AO on 31/12/2010 along with the passing of the assessment order and subsequent issue of another notice by Addl. CIT was on 30/06/2011. It would not mean that initial notice issued by the A.O. would seized to be valid or operative. Thus, the imposition of penalty u/s 271E to be done before 30/06/2011 and not 31/12/2011. CIT(A) by following the judicial precedents of the Hon ble High Courts and the Apex Court and also following the CBDT Circular 9 dated 26/04/2016, deleted the penalty which requires no interference by the Tribunal. Finding no merit in the Grounds of Appeal of the Revenue, we dismiss the same.

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• 2024 (11) TMI 1309
  Penalty u/s 271(1)(c) - Defective notice u/s 274 - No specific limb as to whether it is an instance of concealment or that of furnishing of inaccurate particulars thereof - HELD THAT:- This being the clinching fact emerging from the case file, the hon ble jurisdictional high court in PCIT Ors. V. M/s Sahara India Life Insurance Co. Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] has already settled the issue in taxpayer s favour and against the department that such failure indeed vitiates the entire penalty proceedings. Accordingly, accept the assessee s sole substantive grievance in very terms. Assessee appeal allowed.

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• 2024 (11) TMI 1308
  Differential value and service tax - activity of renting shops fall under the taxable category of Renting of Immovable Property - Appellant has received the rent in excess of the rent booked in the books of accounts on the basis of four tenants statements out of total tenants - As argued Revenue has calculated the service tax demand on hypothetical basis on the basis of assumption only on the basis of shop owners statements regarding the payment to agent in cash, however no cash receipts has been found by the department from the tenants HELD THAT:- Burden of proof is on the Revenue and same is required to be discharged effectively. Without corroborative evidence only on the basis of statements of few tenants it cannot be concluded that the appellant has collected the part of rent in cheques and balance is taken in cash. In the present matter tenants nowhere produced any records/piece of paper in support of their statement. The only oral statements of service recipient cannot be accepted as admissible piece of evidence. No cash receipts has been relied upon by the department, no financial flow back has been relied upon by the department for the alleged collection of rent in cash, no rent agreement has been found by the department for the support of excess rent , no ledger entry in the books of accounts of the appellant found for so called excess collected rent. Moreover, none of the persons on whose statements reliance was placed by the department were cross-examined by the Ld. Adjudicating authority in the present matter. Clearly, the Adjudicating Authority had failed to follow the requirement of Section 9D of the Central Excise Act, 1944 regarding examination in chief of witness, therefore quantification of demand of service tax on the basis of statements of persons is not sustainable. Before fastening the service tax demand, it was incumbent on the revenue to come up with tangible evidence to prove the suppression of taxable value and quantify the demand on the basis of documentary evidences. We also find that in the present matter appellant also produced the details of rent received from each tenant and shops during the disputed period before revenue and both Adjudicating authority. However, department has calculated the demand of services tax on all the shops for whole periods without verifying the details that whether the said shops has been given on rent during the whole disputed period or not; whether shops has been given on rent or sale basis; what is the actual rent recoverable or received by the appellant; how many months occupant s have been holding the shops as a tenant. We noticed that in the present matter revenue has not considered the proper facts while calculating the liabilities against the appellant. We, therefore, reduce the demand of Service tax from Rs. 25,81,955 to Rs. 9,52,944/- together with interest and remaining demand is set aside. Penalties imposed - We find that the appellant in the present matter not has disputed the liability of services tax i.e. reduced amount as above and has admittedly paid the service tax well before the issuance of show cause notice. In these circumstances, we do not find that there was any mala fide on the part of the appellant. Therefore, benefit of Section 80 should be extended to the appellant and penalties imposed by the Ld. Adjudicating Authority are set aside.

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• 2024 (11) TMI 1307
  Validity of approval granted u/s 153D - authority to approval granted by Ld. JCIT - JCIT had granted 39 approvals - HELD THAT:- Impugned approvals is invalid as approval has to be granted for separately for each assessment year for each assessee and in absence of it approval granted is not in accordance with law. We have no hesitation in holding that the approval u/s 153D of the Act granted by Learned JCIT in the instant cases were in mechanical manner without due application of mind. Accordingly, the grounds by all the assessees for all the assessment years under consideration are allowed. Since, the entire search assessment in the hands of all the assesses have been declared as bad in law and illegal the other grounds raised by assessee need not be gone into.

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• 2024 (11) TMI 1306
  Rejection of books of accounts - Estimation of income - addition on account of suppression of closing stock - HELD THAT:- We find that, the AO had observed that, there was suppression of closing stock in FY 2012-13 and consequently the opening stock of subsequent FY 2013-14 was also under-reported by the same amount. It is not in dispute before us that, if the closing stock of the asseessee is enhanced by adding Rs. 1.5 crores in AY 2013-14, then, consequently in the subsequent financial year, there will be a corresponding increase in the opening stock which would reduce the profits for AY 2014-15 to such extent and therefore overall, the net effect would be NIL. We however find ourselves in agreement with the Ld. CIT(A) that, once the books of accounts have been rejected u/s 145(3) and the profits for the year is being estimated, then the effect of increase in closing stock in AY 2013-14 increase in opening stock in AY 2014-15 will get subsumed therein and hence no separate addition in this regard is warranted. As noted that the above findings of the CIT(A) is supported by the decision of Bahubali Neminath Muttin [ 2017 (1) TMI 820 - KARNATAKA HIGH COURT] wherein it was held that, once the books of accounts have been rejected, then the same cannot be relied upon for arriving at closing stock. The Hon ble High Court accordingly deleted the addition made on account of suppressed closing stock. Addition of advances received by the assessee - Assessee was unable to conclusively substantiate that the aggregate sales towards which the impugned sum was received, had indeed formed part of the reported turnover and been offered to tax. Having considered the material placed before us and in light of several accounting anomalies found in the books of accounts maintained in tally software, we are in agreement with the foregoing finding of the CIT(A). At the same time, it is noted that, the CIT(A) held that, the entire sales value cannot be considered as income and instead only the profit element embedded therein ought to be taxed. Having already rejected the books of accounts of the assessee, it is noted that the Ld. CIT(A) directed the AO to increase the reported turnover by the impugned sum and estimate the profit at the rate of 2.21% on such increased turnover. We find this action of the CIT(A) to be supported by the decision of CIT Vs President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] wherein it was held that the amount of receipts/ sales by itself would not represent the income of the assessee. We find that similar view has been taken in the cases of PCIT Vs. Anupam Organiser [ 2020 (9) TMI 973 - GUJARAT HIGH COURT] CIT Vs. Abhishek Corporation [ 1999 (10) TMI 742 - GUJARAT HIGH COURT] and Hon ble Bombay High Court in the case of CIT Vs Sumer Builders [ 2024 (2) TMI 468 - BOMBAY HIGH COURT] In all these decisions, it was held that the entire sale proceeds cannot be brought to tax but only the profit element embedded therein. Following these decisions (supra), we do not see any reason to interfere with the Ld. CIT(A) s finding directing the AO to assess the profit element of 2.21% on the impugned advances.

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• 2024 (11) TMI 1305
  Gain on sale of property - LTCG or STCG - date of acquisition of the property - Entitlement to exemption us 54EC - HELD THAT:- Original lands were owned by late husband of the assessee, in Kaushambi area of Ghaziabad. It is a fact on record that abovesaid lands were acquired by Ghaziabad Development Authority in the year 1984. It is also fact on record that because of acquisition of abovesaid lands, GDA was to grant equivalent piece of land in Kaushambi. The abovesaid order of 1996 was a subject matter of dispute and finally on 15.03.2002, late husband of the assessee was allotted land at Kaushambi which was 56% equivalent of the total lands acquired by the GDA. As per the abovesaid allotment letter, late husband of the assessee entitled to the land admeasuring 3474.74 sq. mtrs. In Kaushambi which was acknowledged by GDA gainst the payment of development fee and freehold charges. As assessee is not in a position to make such payment, accordingly a MOU was entered by the assessee with Meenal Housing Pvt. Ltd. and a consideration was fixed who paid the above charges to GDA directly on behalf of the assessee and also paid to the assessee an amount. Thus it is clear that assessee being the legal heir of late husband was holding a lien on the land owned by late Ram Prakash Goel and only because of the lien held by the assessee through her late husband, the GDA has allotted the land admeasuring 3475sq.mts. on payment of development fees, lease rent and freehold charges. The above facts are demonstrated by the assessee by filing the relevant letters and communications with the GDA in the form of paper book. It is clear that the assessee has owned lands which were acquired by the GDA in the year 1984. The GDA has merely acknowledged and finally transferred the title of the property only on 25.04.2014 and handed over the property title to the assessee on 25.11.2014. It does not mean that assessee has acquired the property only on 25.11.2014. It clearly shows that the assessee held the right of lien on the lands not physically but originally claimed with the GDA. Assessee held the right on the land from the date of original purchase date of the property which was acquired by the GDA in the year 1984. Therefore, the property was transferred by the assessee for development to M/s. Royce Developers Pvt. Ltd. during the current assessment year. Therefore, we hold that the lands transferred by the assessee are a long term assets. Cost of acquisition and cost of improvement - As the assessee having the rightful right over the property and the assessee was able to get the earmarked amount of lands sanctioned in the name of the assessee only on payment of development fees, lease rent and freehold charges to GDA and since assessee was not in a position to make such payments, Meenal Housing Pvt. Ltd. came into the picture by signing a MOU with the assessee and it is also a fact on record that Meenal Housing Pvt. Ltd. paid the above fees to GDA directly. Therefore, the assessee is eligible to claim indexed cost on cost of purchase as on 30.03.1987 and the payment of development fees etc. to GDA on 07.02.2013. Payment made to Meenal Housing Pvt. Ltd., the assessee has made compensation to clear the title from all encumbrances and the abovesaid payment is nothing but a charge on the property as a lien. Therefore, the abovesaid payment has to be allowed as cost directly connected to the sale of the above land and stamp duty borne by the assessee of Rs. 9,67,5000/-. Therefore, we direct the AO to allow the claim of the assessee to the extent of above cost of improvement and cost of expenditure directly linked to the sale of the property. Accordingly, grounds raised by the assessee are allowed. Exemption claimed by the assessee u/s 54EC - Since the issue under consideration is already addressed by ld. CIT (A) by remitting the issue back to the file of AO to verify the relevant bonds and allow the same after verification. Therefore, we do not see any reason to disturb the same. We direct AO accordingly. Disallowance claim of expenditure on transfer charges as assessee has not made any fresh submission by bringing any material to substantiate its claim.

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• 2024 (11) TMI 1304
  Validly assumed jurisdiction u/s 153C - deficiencies are evident from satisfaction note - Bogus LTCG - HELD THAT:- First of all there was no search conducted in the hands of the assessee. Hence factually incorrect statement was made in the satisfaction note. The satisfaction note does not make any reference to any seized material found in the hands of Dev Priya Group of cases. On what basis, the investigation team or the Assessing Officer of Dev Priya Group had come to a conclusion that the exempt long term capital gain (LTCG) derived by the assessee on sale of shares of CCL International Ltd is bogus is not brought out. Neither the seized material, if any, to support the said allegation is brought on record by the ld AO nor the findings of the investigation team to prove categorically that the exempt LTCG declared by the assessee is bogus. Satisfaction note clearly states the intention of the ld AO that he intends only to examine the exempt LTCG of the assessee on sale of shares of CCL International Ltd. Hence there was no conclusion drawn by the ld AO that the assessee s claim of exemption of LTCG is bogus as such or such conclusion is drawn from any seized material or investigation findings. It is trite law that no assessment proceedings u/s 153C of the Act could be initiated on a person merely to examine a particular aspect. This examination should be done prior to initiation of proceedings u/s 153C of the Act only then satisfaction could be drawn by the assessee that exempt LTCG shown by the assessee is only out of conversion of his unaccounted income. If this is not done, then the element of satisfaction of the ld AO to initiate proceedings u/s 153C of the Act preceded by formation of his opinion vanishes in thin air. The entire satisfaction note does not even state that whether the findings of investigation , if any, or the seized documents, if any, on the aspect of exempt LTCG has any bearing on determination of total income of the assessee before us. We hold that the entire assumption of jurisdiction u/s 153C of the Act in the instant case is void- ab-initio and hence quashed. Assessee appeal allowed.

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• 2024 (11) TMI 1303
  LTCG - interest paid is a cost of acquisition/improvement or not? - Whether the benefit of indexation is to be allowed to the interest cost? - HELD THAT:- Assessee in the earlier years, as claimed in the A.Y. 2013-14 under consideration, has also claimed the similar deduction of the interest expenditure under the head income from house property and as cost of acquisition/improvement, which has been continuously allowed by the revenue Authorities and therefore the rule of consistency is required to be followed. We are in agreement with the explanation offered by Ld. Sr. Advocate that from the aforesaid observations of the AO and the Ld. Commissioner it shows without saying that the Assessee has not claimed any double deduction and even otherwise in the earlier assessment years the same deduction was claimed and has been allowed. Are agreeable that even otherwise before considering/calculating the capital gain, we should consider the provisions of section 48 of the Act, wherein the provision has been inserted in clause II vide Finance Act, 2023 and w.e.f. 01.04.2024, whereby it is provided that the cost of acquisition of the asset or the cost of improvement thereto shall not include the deductions claimed on the account of interest under clause (b) of section 24 or under the provisions of chapter VIA. And therefore for the period prior to that provision inserted and made applicable from 01.04.2024, no such restriction can be imposed and/or made applicable. This particular amendment has been taken care of by the Ld. Commissioner, who by determining that the said amendment not being clarificatory in nature and therefore cannot be applied retrospectively. The Ld. Commissioner at last by considering the explicit provisions of section 24(b) of the Act as existed and applicable as on 31.03.2013, applied the same to the instant case and by following the decisions of the jurisdictional Tribunal favoring the Assessee and the dictum laid down in the case of CIT vs. Vegetable Products Ltd. [ 1973 (1) TMI 1 - SUPREME COURT ] wherein it was held that if two reasonable constructions of a taxing provision are possible, then the construction which favors the taxpayers must be adopted ultimately allowed the claim of the Assessee. Admittedly, prior to insertion of provision vide Finance Act, 2023 and made applicable from 01.04.2024, there was no such provision/restriction for excluding the deduction claimed on account of interest paid, under clause (b) of section 24 or under the provisions of chapter VIA of the Act. Hon ble Delhi High Court has also considered the judgment passed in Fort Gloster Industries Ltd. [ 1969 (6) TMI 16 - CALCUTTA HIGH COURT ] and ultimately held that the interest amount towards the actual cost of the land, was rightly added by the Tribunal. Interest paid on the borrowed funds for the purchase of property for the period prior to the provision inserted vide Finance Act, 2023 which was made applicable from 01.04.2024, over and above claimed u/s 24(b) of the Act, would be deductable while computing the capital gains. Decided in favour of assessee.

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• 2024 (11) TMI 1302
  Assessment u/s 153C - disallowance made u/s 37 - AO observed no supporting evidence in respect of expenses claimed has been furnished by the assessee and the assessee did not cooperate during the search and post search enquiries - HELD THAT:- As other than expenses towards the Accommodation Charges under the head Administrative Expenses , Business Promotion Expenses and Tour Travel Expenses under the head Selling and Distribution Expenses , the other expenses are of routine nature and are acceptable. Shri Jatinder Pal Singh has offered an amount as salary income received from the assessee company. Further, the assessee company had disallowed depreciation debited in the P L Account and therefore the disallowance of the same by the AO is not justified. Similarly, the assessee company had disallowed interest on late deposit of TDS debited in the P L Account and therefore the disallowance of the same by the AO is not justified. Therefore, the claim of expenses partly is acceptable and to that extent the decision of the ld. CIT(A) is acceptable. However, no evidence other than the ledger account of accommodation charges, business promotion expenses and tour and travel have been filed. Further, there are no details available in respect of the balance amount of salary. Apart from the ledger account, etc. other supporting evidences of these expenses are not available. This being the old matter and purpose will not be served in sending back to the AO and hence, we can estimate a reasonable disallowance. For computing the reasonable disallowance, we have to consider that the assessee itself has offered disallowance of Rs. 9 lakhs and considering the same, out of total expenses of Rs. 42,42,974/-, we restrict the disallowance of Rs. 15 lakhs. Challenging the proceedings u/s 153C of the Act is dismissed in view of the decision of Nau Nidh Overseas Pvt. Ltd [ 2017 (3) TMI 108 - DELHI HIGH COURT] wherein on similar facts, the Hon ble Court upheld the proceedings u/s 153C of the Act. Appeal of the Revenue is partly allowed.

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• 2024 (11) TMI 1301
  Disallowance of depreciation claimed on goodwill - AO held that the assessee has failed to substantiate the nature and elements of goodwill that it has acquired from the amalgamating company upon amalgamation - primary contention of the assessee is that the goodwill recognised by the assessee in the process of amalgamation of the amalgamating company with the assessee company falls within the ambit of the expression business or commercial rights of similar nature under section 32(1)(ii) HELD THAT:- There is no dispute regarding the fact that the amalgamation was accounted by the assessee in its books as per the Purchase Method as prescribed by Accounting Standard-14. We find that due disclosure in this regard was also made by the assessee in its audited financial statements for the year under consideration. W find that in the facts of Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] the excess consideration paid by the taxpayer over the value of net assets acquired of the amalgamating company was considered as goodwill arising on account of amalgamation. It is further evident that the AO in the aforesaid decision concluded that no amount was actually paid on account of goodwill. However, in further appeal, the learned CIT(A) concluded that the difference between the cost of an asset and the amount paid constituted goodwill and the taxpayer in the process of amalgamation has acquired a capital right in the form of goodwill because of which the market worth of the taxpayer stood increased. It is evident from the perusal of the aforesaid decision that the aforesaid finding of the learned CIT(A) was upheld by the Tribunal and in further appeal, the Revenue restricted its challenge only qua the question as to whether the goodwill is an asset under section 32 of the Act and whether depreciation on goodwill is allowable under the said section. Therefore, it is evident from the record that the method of calculation of goodwill on which depreciation was claimed in Smifs Securities Ltd. (supra), i.e. the difference between the value of net assets acquired and consideration paid, is similar to the instant case. Thus, at the outset, we are of the considered view that the Revenue having once accepted the computation of goodwill in one case and not challenged its correctness, it will not be opened to the Revenue to challenge its correctness in the case of the other assessee without just cause. In support of the aforesaid conclusion, gainful reference can be made to the decision of the Hon ble Supreme Court in Berger Paints India Ltd. [ 2004 (2) TMI 4 - SUPREME COURT] Submission of the Revenue that the amount is merely the difference between the purchase consideration and the net assets acquired of the amalgamating company and the goodwill was nothing but a balancing factor while merging the accounts of the amalgamating company into the accounts of the assessee - As following the Purchase Method of accounting for amalgamation as per Accounting Standard-14, the assessee sought a valuation report dated 04/07/2016 to estimate the fair value of identified intangible assets, i.e. Dealer Network and Customer Relationships ( Identified Intangible Assets ) and major tangible fixed assets i.e. land, buildings and plant and machinery ( Specified Tangible Fixed Assets ) as per the Indian Accounting Standards for the purpose of purchase price allocation exercise as at 31/03/2015, i.e. the valuation date. As noted in the foregoing paragraphs, Accounting Standard-14 further requires that any excess of the amount of the consideration over the value of net assets of the amalgamating company acquired by the amalgamated company should be recognised in the amalgamated company s financial statements as goodwill on amalgamation. Therefore, even though there is no intangible asset under the head goodwill in the books of the amalgamating company on the date of acquisition by the assessee and the goodwill was not already recorded in the books of the amalgamating company which was valued by the independent merchant banker, it is pertinent to note that the value of the goodwill arose in light of the principles of Accounting Standard-14 followed by the assessee to account for the amalgamation in its accounts. Once goodwill has been recognised by the assessee in its financial statement, pursuant to the amalgamation, we are of the considered view that it is entitled to claim depreciation on the same under section 32(1)(ii) of the Act in light of the decision of the Hon ble Supreme Court in Smifs Securities Ltd. (supra). Anticipated advantages/benefits/profitability to its business which is attributable to the goodwill - We find that the Hon ble Karnataka High Court in Padmini Products (P.) Ltd. [ 2020 (10) TMI 424 - KARNATAKA HIGH COURT] held that fifth proviso (now sixth proviso) to section 32(1)(ii) of the Act restricts aggregate deduction by the predecessor and successor and if in a particular year there is no aggregate deduction, the provisions of the proviso shall not be applicable. It was further held that until and unless it is the case of aggregate deduction, the proviso has no role to play. Thus, adverting to the facts of the instant case, since the amalgamating company did not have any goodwill recorded in its books of accounts or as part of a block of depreciable assets, prior to amalgamation, therefore the question of claim of depreciation on goodwill by the amalgamating company does not arise in the instant case. Accordingly, we are of the considered view that the provisions of the sixth proviso to section 32(1) of the Act are not applicable to the facts of the present case since the goodwill did not exist in the books of the amalgamating company but has arisen in the process of amalgamation. Reliance upon the provisions of Explanation 7 to section 43(1) - As relying on Urmin Marketing (P.) Ltd. [ 2020 (11) TMI 47 - ITAT AHMEDABAD] we are of the considered view that provisions of the sixth proviso to section 32(1), Explanation 7 to section 43(1) and Explanation 2(b) to section 43(6) of the Act have no applicability to the facts of the present case. Applicability of provisions of section 49(1)(iii)(e) and section 55(2)(a)(ii) - As it is pertinent to note that these provisions form part of the Chapter dealing with Capital Gains and section 47 of the Act specifically excludes transfer of capital assets, pursuant to a scheme of amalgamation, from the purview of section 45 of the Act. Therefore, we are of the view that these provisions have no relevance to the facts of the present case. Thus the assessee is entitled to claim depreciation on goodwill arising on account of amalgamation under section 32 of the Act. Accordingly, the AO is directed to allow the claim of the assessee. As a result, the impugned order on this issue is set aside and ground no.1 raised in assessee s appeal is allowed. Disallowance of depreciation on the distribution network and customer relations - HELD THAT:- Accounting Standard-14 provides that the identifiable assets and liabilities may include assets and liabilities not recorded in the financial statement of the transferor company. Thus, similar to our findings rendered in respect of the claim of depreciation on goodwill, we find no merits in the findings of the lower authorities that no separate asset under the head of assets by the name of customer relationship or distribution network was existing in the books of the amalgamating company. Further, we also do not find any merits in the findings of the learned CIT(A) that the aforementioned two intangible assets are actually the balancing figures while merging the accounts of the amalgamating company, as the fair value of these assets was specifically computed by the independent valuer vide valuation report dated 04/07/2016. We find merit in the claim of the assessee and accordingly we direct the AO to grant the depreciation on customer relationship and distribution network arising on account of amalgamation under section 32 of the Act. As a result, grounds no.2 and 3 raised in assessee s appeal are allowed. Claim of refund of excess tax paid on dividend distributed by the assessee to its non-resident shareholder - We find that this issue is covered in favour of the Revenue by the decision of Total Oil India Private Ltd, [ 2023 (4) TMI 988 - ITAT MUMBAI (SB)] . Accordingly, respectfully following the aforesaid decision of the Special Bench of the Tribunal, ground no.9 is dismissed.

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• 2024 (11) TMI 1300
  Addition u/s 68 - appellant has proved the identity, creditworthiness of the creditor and genuineness of the transaction - onus to prove - CIT(A) deleted addition - HELD THAT:- The primary onus has been duly discharged by filing relevant confirmation, ITR, Bank statements etc which all have been glossed over and ignored by the AO.In such circumstances, the assessee could do nothing any further and as such had discharged the burden. It has been rightly pointed out that although the AO issued notice u/s 133(6) of the Act and obtained all relevant documents from SDPL, he without making any further enquiry or investigation summarily treated it as paper company. Once the assessee has proved the identity of his creditors the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that the amount in ques-tion, actually belonged to, or was owned by the assessee himself. A delicate balance must be maintained while walking the tightrope of section 68.The burden of proof cannot be discharged to the hilt by the assessee. If the Assessing Officer harbors any doubt about the legitimacy of the loan, he is empowered to carry out investigations thoroughly. But if he is unable to unearth any discrepancy, he cannot obdurately adhere to his suspicion and treat the loan as unexplained. Thus, we hold that the AO was not justified in invoking provisions of section 68 - Decided in favour of assessee.

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• 2024 (11) TMI 1299
  Reopening of assessment u/s 147 - Addition u/s 68 - unexplained cash credits - objection raised by the assessee (Respondent) under Rule 27 of the Income Tax Appellate Tribunal Rules 1963 - HELD THAT:- In the Forms for recording the reasons for initiating proceedings u/s 147 of the Act at Column No.6 it is required to specify the quantum of income escaped assessment. However, without specifying the amount of income escaped, the assessing officer has only mentioned more than Rs. 1 lakh. Therefore, it is evident that the AO has not complied with the mandatory requirement of quantifying the escaped assessment and merely stated that income escaping assessment was more than Rs. 1 lakh. Similarly, in the other column i.e. 9 in the Form For recording the Reasons the AO considered that assessment in the case of the assessee to be made for the first time as no prescribed information specified by the AO against the required particulars. It is also evident that noticed u/s 148 was issued in the case of the assessee on 03.03.2017 pertaining to the A.Y. 2011-12 after the expiry of four years from the end of relevant assessment year. As per section 147 no action can be initiated under section 147 of the Act after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment for the reason of failure on the part of the tax payer to disclose fully all material facts necessary for assessment. Nowhere the AO has brought on record in the reasons recorded the fault of the assessee in not disclosing the true and full facts of the case. During the original assessment order passed u/s 143(3) AO has also made verification on the issue of exemption claimed by the assessee in respect of long term capital gain. We consider that in the case of the assessee the assessing officer has failed to establish that there was any failure on the part of the assessee to disclose fully and truly any material fact in the case before reopening of the completed assessment after the 4 years from the end of the relevant assessment year. We have also gone through the decision in the case of Tanhee Heights [ 2023 (2) TMI 596 - BOMBAY HIGH COURT] wherein held that for reopening of the assessment beyond 4 years from the end of the relevant assessment year, the assessing officer has to additionally satisfied that in a case where assessment u/s 143(3) of the Act had been completed, the assessee had failed to disclose fully and truly of material fact necessary for assessment during the original assessment proceedings. As perused the decision of ITAT, Mumbai in the case of Ankur Power Projects Pvt. Ltd. [ 2023 (11) TMI 1313 - ITAT MUMBAI] wherein the reopening of assessment held as bad in law because of various defects in the reasons recorded i.e. the assessment had earlier been completed u/s 143(3) but the AO referred only to the intimation issued u/s 143(1) in the reasons recorded, in the application submitted to JCIT seeking his approval, the AO has stated that assessment was proposed as first assessment etc. We find that in the case of the assessee, it is evident from the material and information as discussed above in this case that there is no application of mind at the level of assessing officer as in the reasons recorded the assessing officer has stated that assessment is proposed for the first time whereas the case of the assessee was already originally assessed u/s 143(3) of the Act. Further the AO has also not specified the amount of escapement of income in the form for recording the reasons as discussed supra in the order. Even the case of the assessee was reopened after end of 4 years from the relevant assessment year however as required in the provisions of Act, the assessing officer has failed to specify how the assessee has failed to disclose fully and truly the material facts in the original assessment proceedings. Thus, reopening of assessment is not valid because of various defects and irregularities evident in the reassessment proceedings initiated in the case of the assessee as demonstrated from the material facts discussed supra in this order. As a result, the objection raised by the assessee (Respondent) under Rule 27 of the Income Tax Appellate Tribunal Rules 1963 is allowed. As a consequence thereto, the appeal of the Revenue is dismissed and issues raised on merit are left open. Decided in favour of assessee.

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• 2024 (11) TMI 1298
  Reopening of assessment u/s 147 - denying claim of exemption under section 10(38) of the Act in respect of Long Term Capital Gain (LTCG) on sale of shares of Sunstar Realty Development Ltd. (SRDL) - HELD THAT:- Assessee s case does not fall under the modus operandi stated by the learned AO in the aforesaid reasons. As stated earlier, the assessee has bought the shares in IPO by making payments through cheque. The assessee held the shares for more than a year and sold it in open market through a registered share broker by suffering STT. Due reduction of shares have also been made from the Demat statement of the assessee to the extent of sales made by the assessee. Hence, it could be safely concluded that the very basis of formation of belief of the learned AO that income has escaped assessment in the reasons recorded is fallacious. AO also refers to split of the shares of SRDL which had happened in the year 2015 so as to allege malafide motive on the part of the assessee. But it is pertinent to note that assessee herein had actually sold the shares in June, 2014 itself much before the act of splitting of shares. Hence, we have no hesitation to hold that the case of the assessee does not fall under modus operendi mentioned in the reasons recorded by the AO thereby making his entire formation of belief per se fallacious. Accordingly, the reasons recorded does not have live link to the formation of belief of the learned AO vis- -vis the facts of the instant case. Hence, the reopening made under section 147 of the Act is based on incorrect assumption of facts. Decided against revenue. Addition made on account of cash deposits made during the demonetization period - There is absolutely nothing unusual in the act or conduct of the assessee during the demonetization period. Further, the entire cash sales made by the assessee were duly reflected in the VAT returns of the assessee. The assessee had indeed sufficient cash balance in its kitty to make the cash deposits throughout the year and also during the demonetization period. The assessee also submitted the entire sale bills before the learned AO. These facts were duly appreciated by the learned CIT(A) and accordingly the addition made by the learned AO under section 69A of the Act stood deleted by the learned CIT(A). We do not find any infirmity in the said action of the learned CIT(A). Accordingly, the grounds raised by the Revenue are dismissed.

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• 2024 (11) TMI 1297
  Accrual of JDA revenue - Revenue from a JDA the terms of which admittedly were not fulfilled in AY 2014-15 - AO has resorted to Sections 53A read with Section 2(47) of the Act even when the piece of land was demonstrably held as stock-in-trade - As argued JDA could not be completed and hence, there was no ground for any revenue from the JD HELD THAT:- The document indicating cancellation of JDA has been used to demonstrate that while the JDA was not implemented even in the AY 2014-15, it was eventually cancelled due to legal and operational difficulties. Thus, even if we are to confine ourselves to the facts available for the AY 2014-15, it is clear that in that year the JDA was not implemented at all and therefore, considering the authorities discussed (supra) and the position of law, there could not have been any revenue whatsoever merely on the basis of valuation by the Stamp Valuation Authority. So far as the contention that the CIT(A) has relied upon the registered cancellation agreement without calling for the comments of the ld. AO on this fresh evidence is concerned, it is to be noted that the powers of ld. CIT(A) are co-terminus with that of the ld. AO. The cancellation agreement in question produced by the assessee was a registered cancellation agreement and the ld. CIT(A) rightly admitted and considered the same in deciding the case before him. No useful purpose will be served in restoring the matter to the ld. AO only because of that the comments of the ld. AO were not sought on the said document whereas, the ld. CIT(A) being higher authority and being in possession of all the powers that are available to the ld. AO, has rightly considered the evidence before him which was in the shape of registered deed and there was no question of any manipulation or creation of this document afterwards. Decided against revenue.

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• 2024 (11) TMI 1296
  Eligibility of exemption u/s 10(10) and 10(10AA) - Eligibility for full exemption - assessee being an employee of Maharashtra State Electricity Transmission Co. Ltd. which is a Public Sector Undertaking (PSU) - disallowance of excess exemption claimed by the assessee for retirement gratuity and leave encashment respectively - HELD THAT:- Perusal of the chart submitted by the Ld. AR reveals that the assessee joined Maharashtra State Electricity Board on 02.07.1981 and he retired on 30.11.2018 from Maharashtra State Electricity Transmission Co. Ltd. Out of his total service tenure of about 37 years, his tenure with Maharashtra State Electricity Board was about 24 years and with Maharashtra State Electricity Transmission Co. Ltd. was about 13 years. Accordingly, the assessee is entitled to claim exemption for retirement gratuity and leave encashment received by him at the time of superannuation on the proportionate/prorata basis based on his employment tenure with the State Government i.e. Maharashtra State Electricity Board and his employment tenure with PSU i.e. Maharashtra State Electricity Transmission Co. Ltd. - assessee has contended before us that the balance amount of retirement gratuity of Rs. 11,49,579/- is also eligible for full exemption as it is fully covered within the limit laid down as per section 4(3) of the Payment of Gratuity Act, 1972 (as amended) - With respect to the claim of exemption for leave encashment amounting to Rs. 23,99,740/- full exemption shall be available in respect of the proportionate amount of Rs. 15,33,910/- and for the balance of Rs. 8,65,830/- the assessee shall be entitled to claim exemption to the extent of Rs. 3,00,000/- only and the remaining amount of Rs. 5,65,830/- shall be taxable. This view finds support by the decision of Adinath Wandhekar [ 2024 (4) TMI 666 - ITAT PUNE] . However, the present facts need verification. Accordingly, we set aside this issue to the file of Ld. AO for verification of the details/calculation submitted by the assessee and allow the claim of exemption for retirement gratuity and leave encashment received by the assessee at the time of his superannuation on proportionate basis, as per law keeping in view his employment tenure with Maharashtra State Electricity Board and Maharashtra State Electricity Transmission Co. Ltd. The assessee shall co-operate fully before the Ld. AO and provide requisite details/explanation as may be required/called for in support of his claim. Unexplained investments made in mutual funds u/s 69 - CIT(A) restricted the said addition for the same reason in spite of the bank statement furnished by the assessee showing the deposits and investments made during the relevant period - AR therefore urged that given an opportunity the assessee is in a position to explain the source of investments in mutual funds by filing supporting documentary evidence before the Ld. AO - HELD THAT:- As we deem it fit to restore this issue back to the file of Ld. AO to verify the claim of the assessee and if found correct delete the addition sustained by the Ld. CIT(A) by suitable modifying the assessment order. We order accordingly.

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• 2024 (11) TMI 1295
  Deduction u/s 10AA - assessee has derived the profit of SEZ unit before depreciation and depreciation of that assessee unit - claim of the assessee is that for the purpose of claim of deduction u/s 10AA the business losses of the earlier year should not be reduced from the eligible profit - HELD THAT:- We find that now the honourable Supreme Court has decided this issue in case of Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT] wherein it has been held that the deduction u/s 10 A of the act is provision for deduction and the sale of deduction would be while computing the gross total income of the eligible undertaking and chapter IV of the act and not at the stage of computation of total income under chapter VI of the act. As in case of black Veatch consulting private limited [ 2012 (4) TMI 450 - BOMBAY HIGH COURT] has also held that deduction u/s 10 A in respect of eligible unit has to be allowed before setting off of brought forward depreciation and losses of non eligible units. Same is the view expressed in case of Techno Tarp and Polymers Private Limited [ 2015 (12) TMI 909 - BOMBAY HIGH COURT] Appeal of the assessee is allowed. Disallowance on delayed payment of tax deducted at source u/s 37 - HELD THAT:- We find that this amount of expenditure is incurred by the assessee being interest on late payment of tax deduction at source. We find that interest on late payment of tax deduction at source by the assessee is not shown before the lower authorities that how it has been incurred wholly and exclusively for the purposes of the business of the assessee. In fact, such interest is in infraction of the law of the provisions of the income tax act when tax deducted at source required to be deposited after collecting from third parties to the credit of Central Government is deposited late. It is penal in nature. In the case of CIT v. Chennai Properties Investment Ltd. [ 1998 (4) TMI 89 - MADRAS HIGH COURT] declared that the assessee s payment of interest u/s 201(1A) does not qualify as a business expense and cannot be seen as a compensatory payment. The payment of interest on late deposits of TDS assessed under Section 201(1A) is not an expense solely and exclusively expended for business purposes; hence it is not deductible u/s 37(1). Even if the deduction and remittance of TDS to the government are essential components of business operations, the assessee is nonetheless liable for this interest amount. This suggests that the assessee does not have the right to spend the money on the government s behalf. The character of the interest payment is determined by the sort of tax utilised to pay it. The several decisions of the coordinate benches cited before the learned CIT A does not hold water in view of the decision of the honourable Madras High Court specifically saying that such interest does not qualify as deductible expenditure. Computation of setting off of the business loss of the correct some - HELD THAT:- Claim of the assessee is that the business loss claimed by the assessee in its return of income should be allowed whereas the claim of the AO is that as per the past record only the claim of business loss is available. As the amount of claim of the business loss is dependent on the adjudication process of the appeal of the assessee for earlier years, we restore this issue back to the file of the learned assessing officer to determine the available set off of brought forward business losses and then grant it to the assessee in accordance with the law. Ground number 4 is allowed with above direction. Expenditure incurred on leasehold improvements - nature of expenditure - HELD THAT:- This ground of appeal is in consequence to the assessment and appellate proceedings arising out of the assessment year 2013 14 and not this impugned assessment year. In that year the claim of the assessee is that assessee has incurred total leasehold improvements expenditure out of which assessee considered as revenue expenditure spent on fixtures and the balance sum is capital expenditure. The learned assessing officer for that assessment year has considered the whole of the sum is capital expenditure and allowed depreciation at the rate of 5%. As this issue pertained to that year, the appeal of which pending before the learned CIT A. Therefore, the learned assessing officer is directed to consider the claim of the assessee if it is already decided in favour of the assessee by the appellate authority in accordance with the law. Accordingly ground number 5 of the appeal of the assessee is allowed with above direction.

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• 2024 (11) TMI 1294
  Assessment u/s 153A - Additions u/s 69B - assumptions and presumptions based on the loose sheet found at the time of search - HELD THAT:- The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words may be presumed in section 132(4) given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same. The entire case depends upon the rule of evidence. There is no conclusive presumption with regard to unsubstantiated seized material to come to the conclusion that assessee has unaccounted transactions. In the present case, the assessee categorically denied unaccounted transactions. The AO cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong, cannot take place the material in place of evidence brought on record. AO should act in a judicial manner, proceed in a judicial spirit and come to the judicial conclusions. AO is required to act fairly as a reasonable person, not arbitrarily and capriciously. The assessment u/s 153C should have been supported by adequate material and it should stand on its own leg. This notebook or loose sheets found during the course of search is only circumstantial evidence and not full proof evidence to sustain the addition. No addition can be made in the absence of any corroborative material. If it is circumstantial evidence in the form of loose sheets and notebook, it is not sufficient to come to the conclusion that there is conclusive evidence to hold that assessee has any unaccounted transactions. The notes in the diary/loose sheets are required to be supported by corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of AO that assessee has unaccounted transactions. There are various loose sheets, scribblings and jottings having no signature or authorization from the assessee s side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. The seized material relied by the assessing officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a non- speaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. Addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting s in the absence of any corroborative material and this material cannot be considered as transactions carried on by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee. Admissibility of statements recorded u/s 132(4) as evidence - Admission made by the assessee will constitute a relevant piece of evidence but if the assessee contends that in making the admission, he had proceeded on a mistaken understanding or on misconception of facts or untrue facts, such admission cannot be relied upon without considering the aforesaid contention. In our opinion, the voluntary admission are not conclusive proof of the facts admitted and may be explained or shown to be wrong but they do raise an estoppel and shift the burden of proof to the person making the admission. It is to be noted that, unless shown or explained to be wrong, they are an efficacious proof of the facts admitted. Thus, the burden to prove admission as incorrect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction or proved sufficiently, the earlier stated facts lose their effect and relevance as binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admission will not be enough after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded was involuntary and it was made under coercion, the statement has no legal validity. Thus, the above additions cannot be made solely based on the statements recorded u/s 132(4). See Commissioner of Income-tax v. Harjeev Aggarwal [ 2016 (3) TMI 329 - DELHI HIGH COURT ] The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondent- assessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands. A sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. Balance addition contention of the ld. D.R. is that this is based on the statement recorded u/s 132(4) and also evidence inventorized as A/MI/4 page no.1 to 24 which has been seized at the premises of the assessee - It is an agreement for Joint Development Agreement and sharing of shops/apartments entered into on 26.11.2012 between Mr. K.L. Chayabba and Mr. Mohammed Ali in one part as owner of the land and Mr. Mohammed Ibrahim, the present assessee in his individual capacity as a developer of the property for constructing the residential cum commercial project Rose Garden with a super built up area of 39,816 sq.ft. at Deralakatte, Mangalore. As per this agreement, the assessee paid a sum of Rs. 10 lakhs refundable security deposit, out of which sum of Rs. 4 lakhs was by cash. This was admitted by the assessee in section 132(4) statement recorded on 31.8.2017 and also on 30.10.2017. Further, it was admitted by assessee in sworn statement recorded u/s 131 of the Act on 5.9.2017 but however, the assessee was not adhered to his statement while filing return of income. This addition is based on only unsubstantiated statement recorded u/s 132(4) of the Act and 131 of the Act without any supporting evidence as discussed in earlier paras. we are of the opinion that addition cannot be made on the basis of statement recorded u/s 132(4). Assessee appeal allowed. Addition u/s 69 of the Act placing reliance on the seized material at the residence of assessee, which is in the agreement for purchase of non-agricultural property - As per agreement, total consideration was Rs. 20 lakhs and the assessee has paid Rs. 5 lakhs on the date of agreement. The assessee has confirmed the payment vide statement u/s 132(4) of the Act and also statement recorded u/s 131 - HELD THAT:- In this case, addition was based on the statement recorded u/s 132(4) 131 of the Act on various dates from assessee. There is no corroborative material to suggest that this is unaccounted payment made by the assessee in the assessment year under consideration. The assessee has been assessed to tax and offered the income in the assessment year under consideration on the basis of presumptive income declared u/s 44AD of the Act. The seized material relied by the AO i.e. A/MI/06 is not self-sufficient to sustain the addition. More so, the revenue authorities have not examined the parties concerned who has received the payment to prove conclusively that there was an actual payment made by assessee, which was undisclosed by the assessee in his books of accounts. The evidence brought on record by the department is not enough to fasten additional tax liability on the assessee. The department without examining Mrs. Gulzara Banu had came to a conclusion that there was unaccounted payment made by assesse by way of cash to her. In our opinion, this addition is based only on conjectures and surmises and not based on corroborative material. As such, we are not in a position to sustain the addition. Further, the ld. AO has failed to establish live link between the seized material and the statement of recipient who has received this payment. There is no conclusive presumption to say that actual payment has been passed to Mr. Gulzara Banu unless he has confirmed this payment and there after given a cross examination to the present assessee so as to make addition. Hence, we delete the additions. Addition made on the basis of 26QB Challan, wherein it was showing the TDS made on the immovable property transaction u/s 194IA - This is the project by name Sita Plaza Developed Mr. Manohar B. Shetty, joint development agreement with Hindusthan Infrastructure Developers (HID) wherein the present assessee Mohammed Ibrahim is the Managing Partner of (HID). In our opinion, the transaction took place in the hands of firm in the name of Hindusthan Infrastructure Developers (HID) cannot be brought to tax in the hands of the present assessee who is only the managing partner of the said firm (HID) since the present assessee and that firm are two different taxable units and each one is distinguished and separate assessable unit for the purpose of Income Tax. Accordingly, this impugned amount cannot be taxed in the hands of present assessee in his individual capacity. Accordingly, the addition is deleted. Addition under the head income from other sources - There is a sale agreement dated 17.9.2016 which shows the payment. However, the contention of the assessee is that the assessee has offered the profit arose from this transaction in subsequent assessment years as soon as the project is completed, which is required examination. Accordingly, the issue is remitted to the file of ld. AO for fresh consideration to verify whether this income is subject to tax in any subsequent assessment year. Addition towards bogus loan based on the seized material marked - This addition has been made only on the basis of statement recorded u/s 132(4) of the Act which is unsubstantiated document without verifying the concerned persons involved therein i.e. Mr. Abdul Saleem GH. The addition based only on the basis of sworn statement recorded u/s 132(4) of the Act cannot be based for addition without any corroborative material as discussed in earlier para of this order. This addition is deleted. Addition u/s 69 - assessee has deposited to various bank accounts during demonetization period - As it was submitted that assessee had sufficient withdrawals from various bank accounts and past savings which arise out of agricultural income. Hence, the addition cannot be made. The order of the ld. AO is ex-parte. Before ld. CIT(A), assessee has not placed necessary evidence to explain the source of deposits whether it is from agricultural activities or from earlier savings/past withdrawals. It is the duty of the assessee to explain the source for deposit of said amount of Rs. 63.27 lakhs during the course of demonetization. Accordingly, we remit this issue to the file of ld. AO to examine the same.

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• 2024 (11) TMI 1293
  Rejection of books of accounts - AO had pointed out defects in the books of accounts of the assessee, which are again thoroughly discussed by the Ld. CIT(A) - HELD THAT:- Issue regarding rejection of books of accounts has been dealt and deliberated by the CIT(A) at length and has noted that in light of various defects / deficiencies / irregularities a/w assessee s evasive approach towards explanations sought by the Ld. AO, the allegation that the rejection of books was done in arbitrary manner does not hold any ground. Such observations of Ld. CIT(A) are worth accepting, for the reason that in absence of requisite details or non-maintenance of certain prescribed records necessary to find out the true and fair picture of the books of accounts, it is not possible for the Ld. AO to work out the correct profit of the assessee. Accordingly, the rejection of books u/s 145(3) on account of dissatisfaction of the AO was justified, which has led the Ld. AO to estimate the profit of the assessee. In view of such observations, ground no. 1 of the present appeal of the assessee stands rejected. Estimation of profit at 10% before interest and depreciation which was scaled down by the Ld. CIT(A) to 6% - we find force in the contention of the Ld. AR that the estimation should be on a logical basis, might be on the basis of comparable instances and in case no comparable instances available then the best ratio to be adopted should be the past performance of the assessee itself. As relying on Action Electricals vs. DCIT [ 2002 (7) TMI 64 - DELHI HIGH COURT] in absence of any comparative instances of similar assessee s in the same line of business, dehors any explanation, reasoning supported with evidence to show as to how the profit of the current year is low, any other factor brought to our knowledge by the either side in support of their contentions, we are of the considered opinion that the past history of the assessee herself would be best indicator / major / benchmark to estimate the profits, particularly in a situation, wherein the assessee is unable to produce proper books and evidence before the Ld. AO. Accordingly, in the present case, we find it appropriate to estimate the profit of the assessee at a percentage worked out on the basis of preceding 3 years profit of the assessee herself. For this limited purpose only, the issue raised in ground no. 2 3 by the assessee are restored back to the files of Ld. AO to recompute the taxable income of the assessee.

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• 2024 (11) TMI 1292
  Taxability of income in India - Taxability of Management Service Fees - royalty receipts treatment under Article 12(4) of India-Netherland DTAA - services fees are charged as a percentage of turnover carried out by VOIPL during the year without any mark up - Indian entity/VIOPL is totally dependent upon the foreign enterprise for its experience in industrial, commercial and scientific field - assessee s main contention had been that, the services rendered in pursuance of the service agreement are not in the nature of FTS under the DTAA, because there is no make available of any technical knowledge, experience, skill, know how or process, etc HELD THAT:- As in own case (A.Y. 2003-04) [ 2012 (6) TMI 483 - ITAT, CHENNAI] , (A.Y. 2009-10) [ 2016 (11) TMI 1249 - ITAT MUMBAI] and (A.Y. 2017-18) [ 2023 (10) TMI 1181 - ITAT MUMBAI] we hold that none of the services provided by the assessee in the term of service agreement falls within the scope and ambit of royalty as defined in Article 12(4) of the DTAA. 16. Here again, Management services fees charged is an allocation of cost which is without mark-up, hence it has been stated that the same being in nature of reimbursements do not constitute Royalty as per India-Netherlands Double taxation avoidance agreement (DTAA ). Once this issue consistently have been allowed in favour of the assessee, holding that none of the services provided by the assessee in terms of service agreement falls within the scope of Royalty as defined in Article 12(4) of the India Netherlands DTAA and also that the payments received by the assessee are in the nature of reimbursement without any mark-up and therefore, the same cannot be held to be Royalty and not taxable in India. Further, Management Services if represents the allocation of the actual cost incurred which has been certified by the auditors and the Tribunal has held that Management Services Fee are not taxed in India. Accordingly, this issue is decided in favour of the assessee. Short grant of tax deducted at source - As it has been stated that in the return of income filed for A.Y.2017-18, assessee had claimed credit of TDS of Rs. 3, 89, 05,708/-, however, the ld. AO has not granted any credit, despite the fact that the same amount appearing in form no. 26AS. Accordingly, we direct the ld. AO to examine the issue and grant appropriate credit of tax after verification.

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• Customs

• 2024 (11) TMI 1291
  Non-payment of interest on refund u/s 18(4) of the Customs Act 1962 on account of finalization of provisional assessment - on completion of the specified quantity of import under the contract, the provisional assessments were finalized and an amount was ordered to be refunded - No interest was paid to the appellant on such delayed payment which is payable as per Section 18(4) read with Section 27A of the Customs Act 1962 HELD THAT:- From the Section 18(4) read with Section 27A of the Customs Act 1962, we observe that upon finalization of provisional assessment, if there is a refund liable to be paid, then it is to be paid within 3 months from the date of final assessment. If there is any delay in payment of the refund, then interest is liable to be paid for the delay in refund. We observe that this section does not talk about filing of the refund application. As per section 18(4), if the refund is not paid within 3 months from the date of final assessment, then interest is payable. Accordingly, we hold that the department is liable to pay interest for the delay in payment of refund, beyond 3 months from the date of final assessment. Thus, allow the appeal filed by the appellant.

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• Corporate Laws

• 2024 (11) TMI 1290
  Rejection of Application filed by Petitioner for rectification/change in the name of the Respondent No. 4 Company - Section 16 (1) (b) of the Companies Act, 2013 - HELD THAT:- Section 16 of the Companies Act gives the power to the Central Government through the Office of the concerned Regional Director [hereinafter referred to as RD ] to rectify the name of a company. Sub-Section (1) of Section 16 of the Companies Act contemplates two circumstances under which the name of a company can be rectified. If such name resembles the name of an existing company or is identical to the name of an existing company, the RD may suo moto under the provisions of Section 16 (1)(a) of the Companies Act issue directions to a company to change its name, which directions require compliance within three months. A Coordinate Bench of this Court in a case CGMP Pharmaplan (P) Ltd. v. Regional Director, Ministry of Corporate Affairs [ 2010 (7) TMI 272 - HIGH COURT OF DELHI] has while explaining this provision, relied on a Judgment of the Division Bench in Montari Overseas Ltd. v. Montari Industries Ltd. [ 1995 (12) TMI 268 - HIGH COURT OF DELHI] to explain that the powers of a Civil Court while examining and determining in a passing off action, if one name is confusingly deceptive or similar to another name, is independent of the jurisdiction of the Regional Director in respect of registering of a company s name. It was however held that the Regional Director cannot approach the case, as it would in a trademark dispute. In the facts of the present case, both the parties have claimed ownership and rights over the mark Panchhi and have disputed each other s submissions. Admittedly, both Petitioner and Respondent No. 4 form part of the same extended family. Both are also engaged in legal proceedings in various fora including against each other in relation to the impugned trademark and other intellectual property related rights. The Impugned Order refers to these disputes, however, it goes on to give a finding of ownership on the mark Panchhi , which cannot be sustained. In the present case, the parties are two entities which are from the same lineage, which are embroiled in disputes over the intellectual property of a brand. The Regional Director while deciding an Application under Section 16 of the Companies Act cannot undertake an examination of the marks as the Intellectual Property Division of a Court would. It cannot also decide the ownership of a mark while deciding such an Application under Section 16 of Companies Act, where these are disputed contentions. The same is not the subject matter of jurisdiction of the Regional Director under the Companies Act. The Impugned Order is set aside - Petition disposed off.

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• Insolvency & Bankruptcy

• 2024 (11) TMI 1289
  Entitlement to raise an objection to the Resolution Plan - Whether the appellant, GNOIDA, is to be treated as a financial creditor? - HELD THAT:- The appellant, GNOIDA, will be entitled to raise all claims in this regard in accordance with law and in terms of the provisions of the Insolvency and Bankruptcy Code, 2016. Recording the aforesaid, the appeal is dismissed.

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• 2024 (11) TMI 1288
  Maintainability of Section 9 application - rejection due to pre-existing disputes - operational debt - whether there is any infirmity in the impugned order passed by the Adjudicating Authority dismissing the Section 9 application on the ground that the operational debt claimed by the Appellant was embedded with pre-existing disputes? HELD THAT:- It is clear from the agreement arrived at the meeting held on 26.01.2021 that the Operational Creditor had agreed to replace the defective pump sets and meet the standards as per the tender conditions which is a clear admission on their part for having been unable to discharge their obligations up to the expectations of the tender specifications. The Appellant has however contended that these minutes indicate that the dispute had come to an end and stood amicably settled - merely because a meeting was held between the two parties to overcome the shortcomings in the meeting the obligations of supply and installation of pump-sets cannot be taken to imply that all disputes between the parties had subsided without the parties being at ad idem on whether the obligations stood discharged on a mutually satisfactory basis. The Adjudicating Authority has concluded at paragraph 7 of the impugned order that the dispute which existed between the Operational Creditor and the Corporate Debtor prior to the demand notice about the quality of the pump sets supplied requires detailed inquiry and investigation by the proper forum and that the Adjudicating Authority is not that forum - the Adjudicating Authority did not commit any error in returning this finding keeping in mind that IBC bestows only summary jurisdiction upon the Adjudicating Authority. Once plausibility of a pre-existing dispute is noticed, it is not required of the Adjudicating Authority to make further detailed investigation. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court. It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. There was no requirement for the Adjudicating Authority in the present case to go under the skin of dispute and therefore the Adjudicating Authority rightly held that the Section 9 application was not maintainable in the present factual matrix. The defence taken by the Appellant that the Corporate Debtor was trying to manufacture disputes fails to succeed. The defence raised by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. The Adjudicating Authority has therefore correctly noted that the conditions laid down in Section 9 having not been fulfilled, the application deserved to be rejected. There are no good reasons to disagree with the findings of the Adjudicating Authority. The Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant - There is no merit in the Appeal - Appeal is dismissed.

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• 2024 (11) TMI 1287
  Re-constitution of the Committee of Creditors (CoC) by excluding Appellants - misinterpretation of provisions of Section 140 of the Indian Contract Act - Application filed by the Central Bank of India, Appellants were not heard - violation of principles of natural justice - whether the Appellant are the Financial Creditor of the Corporate Debtor and they are entitled to be part of the CoC as has been allowed by the RP, which inclusion has been set aside by the Adjudicating Authority by the Impugned Order? HELD THAT:- The plain language of Section 5(8)(i) clearly indicates that any of the Guarantee or indemnity for any of the items referred to in sub-Clauses (a) to (f) may also be Financial Debt. In event, there is any amount of any liability in respect of . Thus, by giving Guarantee to a transaction referred to in (a) to (i) will not be covered by Financial Debt unless there is any liability in respect of the Guarantee. Thus, Guarantee given by a Guarantor plain and simple cannot be basis for a Financial Debt, unless there is an amount of any liability in respect of such Guarantee. Thus, a Financial Debt will arise only when in respect to Guarantee as covered by Section 5(8)(i) any liability has arisen which is the Statutory Scheme of the IBC - Personal Guarantors claim which obviously will be Rs.10 Crore each is accepted the Bank s voting share shall be reduced to only 20% and 3 Guarantors shall be given 20% vote shares each and 1 Guarantor against whom Rs.25 Lakhs have been realised, his claim shall be entitled to be accepted, and he shall also be entitled for voting shares of 2.5%. The above interpretation shall lead to reducing the Bank s share to minority, which cannot be the scheme of IBC. The Statutory Scheme is thus clear that for accepting transaction as a Financial Debt, in addition of establishing a Guarantee or indemnity liability in respect of Guarantee has also to be established - The Personal Guarantor while giving the Guarantee for Guarantee of repayment to the loan has guaranteed for repayment of the loan, in event, principal failed to make a payment to the Guarantor. Thus, Guarantor in the present case has to make payment and performance of all that is liable for is payment to the Bank none-else. Personal Guarantors who have not made any payment in discharge of their Guarantee given to the Central Bank of India cannot be accepted as Financial Creditor of the Corporate Debtor, nor any voting share can be allocated to them in the CIRP of the Corporate Debtor.There are no error in the Order of the Adjudicating Authority holding that Appellants who have not made any payment to the Creditor cannot be treated to be a Financial Creditor. There is no infirmity in the Order passed by the Adjudicating Authority allowing I.A. No. 294/2020 filed by the Bank. Appeal dismissed.

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• 2024 (11) TMI 1286
  Service of demand notice - whether petition filed under Section 95 was premature? - appellant argued that period of service of demand notice has to be counted in terms of Section 95(4)(b) of the Code and the period mentioned in the guarantee agreement should not be taken into consideration - HELD THAT:- The facts are not in dispute that a personal guarantee deed was executed on 27.07.2011 amongst the Appellant as a lender, SPIL as the Borrower and Respondent No. 2 as the Guarantor. Clause 3 of the said agreement categorically lays down that the Guarantor would pay the amount of ICD of Rs. 1 Cr. 75 Lac to the lender within 60 days from the date of demand notice served by the Lender requiring the payment. Therefore, from the plain reading of this clause it is apparent that the liability to pay by the Guarantor to the lender shall arise only in two circumstance firstly, on the service of demand notice and secondly, within the period of 60 days from the receipt of demand notice. In fact the time was provided in the agreement to the guarantor to arrange payment of the lender to avoid legal complications. The right to file the petition under Section 95 thus would not arise after 14 days of service of the notice in view of the specific agreement between the parties that after the demand notice is served, 60 days time shall remain available with the guarantor for discharging his liability whereas in the present case the demand notice is dated 01.11.2021 and the application was filed on 01.12.2021, just after the expiry of one month, which is contrary to clause 3 of the agreement. It is obvious from the dates because the petition under Section 9 of the Act was filed by Respondent No. 1 on 30.11.2021 and when the case was adjourned to 03.12.2021 for orders, the petition under Section 95 was filed on 01.12.2021 as a result of which the petition filed under Section 9 had to be adjourned by the Hon ble Bombay High Court. There are no error in the findings recorded by the Tribunal for not only allowing the application of the Respondent No. 1 but also dismissing the application filed under Section 95 of the Code by the Appellant and imposition of cost. There are no merit in the present appeal and hence, the same is hereby dismissed.

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• Service Tax

• 2024 (11) TMI 1285
  Taxability of service tax on transporting goods by road itself - appellant has employed GTAs for the purpose, but in those cases the appellant has discharged the service tax liability under Reverse Charge Mechanism (RCM) and has taken credit of such service tax paid in their Cenvat account at appropriate percentage in terms of Rule 6 (3) of Cenvat Credit Rules, 2004 - HELD THAT:- Since admittedly the appellant is neither the GTA, nor the Courier agency hence, the activity of transportation of goods by road by them is well covered under the aforesaid provision. The amount in question is an amount towards facilitation of freight and insurance by the appellants themselves. The said perusal of section 66D (p) in itself is sufficient to hold that the service tax on the said amount has wrongly been demanded. The order to that extent is therefore liable to be set aside. Demand of reversal of Cenvat credit on the services of hiring of water tankers, mechanized canteen cleaning, catering services - Section 44 of the Act requires every factory owner to make suitable arrangements for sitting of all workers obliged to work in standing position and even for all other workers engaged in a particular manufacturing process or working in a particular room. Section 46 of Factory Act requires the existence of canteen in the factory and the cleanliness thereof. In the light of the above discussed statutory mandate the services of hiring of water tankers having mechanized canteen cleaning and that of catering services, to our opinion are the eligible input services. Hence we hold that the Cenvat credit has wrongly been denied to the appellant. In the present case the services like hotel accommodation etc. were for the personnel called for imparting training to the employees of the appellants. Hence it is clear that services were not meant for personal use of the employee. We hold that the credit of these services has been rightly availed. Meaning of terms Includes , in relation to and such as referred in view of the following Decisions in Bakelite Hylam [ 1998 (7) TMI 92 - SUPREME COURT ], Azad Coach Builders [ 2006 (2) TMI 171 - SUPREME COURT ] and CCE v. JK Cement Works [ 2009 (1) TMI 146 - CESTAT NEW DELHI ], TTK Pharma Ltd v. CCE [ 1992 (8) TMI 183 - CEGAT, NEW DELHI ] respectively. Credit on short term accommodation/hotel services was with respect to the visits in factory for inspection and witnesses of the test on the goods ordered by the customers for giving certificate of acceptance. Hence, the expenditure was directly related to the manufacture of goods and rendering of services by the appellant. Resultantly, the denial of availment of Cenvat Credit is not sustainable. The order to this extent is also liable to be set aside. In the light of entire above discussion the Order in Original/ Order under challenge is set aside. Consequent thereto the appeal is hereby allowed.

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• 2024 (11) TMI 1284
  Service tax on amounts received by an employee from the employer on premature termination of contract of employment - HELD THAT:- We find that the issue is no longer res integra in view of the decision of GE T D INDIA LIMITED (FORMERLY ALSTOM T D INDIA LIMITED) VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE [ 2020 (1) TMI 1096 - MADRAS HIGH COURT] as followed in M/S HCL LEARNING LIMITED [ 2019 (12) TMI 558 - CESTAT ALLAHABAD] wherein held the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit. The definition in clause (e) of Section 66E is not attracted as the employer has not tolerated any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard. Though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of noncompete. Notice pay, in lieu of sudden termination however, does not give rise to the rendition of service either by the employer or the employee. No merit in the appeal of jurisdictional Commissioner of Service Tax which is dismissed.

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• 2024 (11) TMI 1283
  Demand of service tax by invoking extended period of limitation - technical knowhow falls under the category of Consulting Engineer Service and is liable to service tax under reverse charge mechanism, invoking section 66A of the Finance Act, 1994 - HELD THAT:- We find that the impugned order has not examined the aspect relating to payment of duty and availment of credit thereon. The impugned order takes note of service tax paid by the appellant and also the fact that the credit of same has been availed as can be seen from impugned order. Therefore, it is apparent that there is no dispute that whatever service tax was to be paid by the respondent would have been available as cenvat credit to them instantly. In these circumstances, invocation of extended period of limitation cannot be sustained. See Nayara Energy Ltd. [ 2023 (12) TMI 252 - CESTAT AHMEDABAD ] and Chiripal Polyfilms Ltd. [ 2021 (3) TMI 1345 - CESTAT AHMEDABAD] Thus it can be held that there was no malafide or intention to evade on the part of the respondent and therefore, extended period of limitation could not have been invoked. Consequently no penalty u/s 11AC could be imposed. The appellant has already discharged the duty liability.

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• 2024 (11) TMI 1282
  Classification of services received from overseas service providers - Determination of place of provision of such services - services received by the respondent from the overseas service providers is Online Information and Database access or retrieval services OR Market Research Services HELD THAT:- The activities done by the Foreign Service provider are merely in the nature of the data collection activities with no research or interpretation of the data. The raw data collected in terms of questionnaire designed by the respondent is supplied back to the respondent in the raw form. Research on the said data is done by the respondent. It is like an architect outsourcing services of a surveyor to map a piece of land as input for the architectural services that he may provide. Merely because survey is necessary input for providing architectural services the outsourced activity of survey cannot be classified as architectural service. Similar is the case of a tour operator hiring buses. While the service provided by tour operator is that of tour operator, the service availed by hiring buses does not become tour operator service although it is a necessary component of tour operator service. No merit in holding that foreign service provider is providing market research service. The issue if the said service was classified as Online Information and Data Basis Access or Retrieval Service or not is not relevant in this background. The charge made in the show cause notice seeking to classify the service of data collection as market research cannot survive. Invoking larger period of limitation for issue of show cause notice - As on merits, the demand has not survive before Commissioner (Appeals) as well as Tribunal and therefore, it cannot be said that the interpretation of respondent was malafide or with intent to evade payment of duty. In these circumstances, extended period could not have been invoked to raise this demand show cause notice. As claimed by the respondent that the entire service tax if any payable on the services received from Foreign Service Provider would have been available as cenvat credit to the respondent. In that scenario, the entire exercise would have been Revenue neutral. This would be another reason to say that there would have been no intention to evade payment of duty. Revenue appeal dismissed.

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• 2024 (11) TMI 1281
  Service tax on amounts received by the Local Cable Operators (LCOs) - invocation of extended period of limitation - proof of suppression of material on the part of the appellant HELD THAT:- Department has not been able to establish the suppression of material on the part of the appellant who is only a small service provider. Further, the appellant has filed all the relevant documents and has not concealed any information from the department so as to invoke the extended period of limitation. It has been consistently held by the Courts in various decisions that in order to invoke extended period, there must be some positive act on the part of the party to establish either wilful mis-declaration or wilful suppression - mis-statement or suppression of facts must be wilful and deliberate. As decided in Chemphar Drugs Liniments [ 1989 (2) TMI 116 - SUPREME COURT] that Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability . Thus, the invocation of extended period of limitation is not justified in the present case and therefore hold that the entire demand is barred by limitation. We are not going into the merits of the controversy as held in the case of Commissioner of Customs vs. B.V. Jewels[ 2004 (9) TMI 104 - SUPREME COURT]

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• 2024 (11) TMI 1280
  Classification of services - works contract services or Construction of Residential Complex service - valuation of services - values of sale of land and construction of framework were clubbed and abatement of 70% was deducted in order to arrive at the value of taxable services - clause (b) of section 66E of the Finance Act, 1994 - liability of service tax on the amount retained by the appellant upon cancellation of the booking by the buyer on which tax was paid earlier as part of works contract services. HELD THAT:- The revenue has not disputed that the appellant has used own goods while carrying out the construction activities. It is also found that another aspect of the construction of villa, which relates to construction of balance works, was classified as works contract services and accepted by the revenue in impugned order. The appellant has vehemently pressed that the construction of balance works in indispensable part for construction of villa and which submission has not been controverted by the revenue with plausible explanations or contemporary evidences. It is also found that the revenue has not disputed that the activity of constructing framework was indivisible in nature with respect to goods and services and value of goods was not separately measured by the appellant. The adjudicating authority has deemed the transaction as that of sale of villa instead of construction whereas the adjudicating authority has classified the transaction under clause (b) which deemed construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority . Needless to elaborate that the very applicability of clause (b) would also require services by way of construction of a complex or building and sale thereof before completion of construction, which apparently and unequivocally transpires from the plain language of clause (b). If the transaction, according to the adjudicating authority, is limited to that of sale of villa and not involving agreement to construct the same, the same cannot fall within the scope of clause (b) whereas the adjudicating authority has classified the transaction under clause (b) - the arguments and averments made by adjudicating authority in the impugned order to declassify the transactions under works contract and to classify them under the construction services are self-contradictory as well as preposterous. In view of decision of Supreme Court in case of Larsen Toubro v. State of Karnataka [ 1992 (11) TMI 254 - SUPREME COURT ], it is abundantly clear that the sale of a building prior to completion of construction constitutes a works contract and the issue is no more res integra and thus contention made by adjudicating authority in impugned order to draw distinction between sale of villa prior to completion of construction and agreeing to construction activity is unacceptable and contrary to settled position of law - there are force / merit in the argument placed by Shri Rahul Patel that amendment in rule 2A retrospectively by way of section 129 of Finance Act, 2017 shows the clear intention of the government to align the valuation machinery with the law settled by the Supreme Court. Inclusion of value of land in the value of construction services by the revenue - HELD THAT:- Since there is no contention in the impugned order or allegation in the show cause notice to re-determine the value of works contract services under rule 2A to include the value of land, value determined by the appellant under rule 2A shall be accepted as final. However, it is found that the appellant has raised various grounds and substantiated with the help of logical interpretation that the value of land cannot be included in the value of works contract under rule 2A - there are force in the clarity brought on record by him that the service tax cannot be extended to the value of land which is not a necessary an integral element of works contract like goods. Since the land is subject matter of State levy, same cannot be deemed as part of the service so defined in section 65B(44) of the Act. Thus, it is necessarily transpiring that the works contract is comprised of only two elements i.e. goods and service and does not include land as integral part of it. However, this may not have any restriction to combine the works contract along with land under commercial arrangement and if that has been done the arrangement needs to be vivisected so as to separate the works contract from the land. It is a settled position of law that where the tax is imposed on the subject matter the measure for levying such a tax can only be the value of such subject matter. Though the works contract is a different and distinct specie of contracts and distinct from a contract for service simplicitor, measure of tax is considered divisible so as to ensure that the tax is imposed only on that value which attributes to the powers available with respective tax authority. The Supreme Court has categorically held that the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be stuck down. This necessitates a complete segregation of the elements involved in the works contract to ensure compliance with constitutional mandates. Any reference to the measure of taxable event shall be on the basis of measure of works contract by excluding the actual value of goods involved or be on the basis of measured as per fictional machinery provided in rule 2A(ii), however measure of levy cannot solely depend upon the measure of a bundle comprising works contract and land - it is not a case of revenue leading to overvaluation of land by the appellant. Accordingly, the value agreed upon with the buyer with respect to land and indicated in the agreement shall be the value of land required to be separated from the works contract. Accordingly, there are force in the argument that the land value is not includable in the value of works contract irrespective of and regardless of the option exercised by the appellant for valuation of works contract services under rule 2A. Re-determination of the value by the Revenue concerning the construction of balance works by treating them as finishing services under Rule 2A(ii)(B) instead of Rule 2A(ii)(A), as adopted by the appellant - HELD THAT:- The transaction of constructing balance of works are in relation to construction of villa and which is classified as works contract. Construction of framework and construction of balance works collectively resulted into construction of villa which is a residential dwelling for the buyer. Thus, it is found that the treatment available to the construction of framework shall be the treatment for construction of balance work. Since it is already decided that the construction of framework is works contract and the appellant has classified them as original works under rule 2A(ii)(A), construction of balance works deserves classification under same machinery and not under the rule 2A(ii)(B). The construction of balance works merits classification under rule 2A(ii)(A) as per its plain language - it is observed that clause (B) of Rule 2A(ii) expressly begins with the words, in the case of works contract, not covered under sub-clause (A), which implies that clause (B) applies exclusively to works that do not qualify under clause (A). Given that the construction of balance works, even if involving finishing services, qualifies as original works, their valuation must be determined under clause (A) and not clause (B) - the contention of the Revenue in the show cause notice and the impugned order, which seeks to determine the value under Rule 2A(ii)(B), is incorrect. Accordingly, the demand for service tax amounting to Rs. 1,53,07,940/- based on the higher rate of valuation under clause (B) is unsustainable and is liable to be set aside. Demand of service tax amounting to Rs. 3,29,637/- confirmed in relation to cancellation charges - HELD THAT:- The Revenue has treated the retained amounts as consideration for agreeing to an obligation, classifiable under clause (e) of Section 66E, and quantified the tax liability on the portion exceeding the value determined under works contract services at the rate of 40%. Since the Revenue itself, as evident from the facts stated in the show cause notice, has deducted the amounts on which service tax was paid under works contract services by the appellant, it follows logically that the amounts now subject to the impugned demand represent retentions from the payments originally received towards works contract services. Consequently, these amounts cannot simultaneously be treated as consideration for a new and distinct service provided by the appellant under clause (e) of Section 66E of the Act - the cancellation charges, even if considered distinct from their prior taxation under works contract services, do not fall within the ambit of clause (e) of Section 66E of the Act. Accordingly, the demand for service tax on cancellation charges is unsustainable and is liable to be set aside. Limitation for issuance of the show cause notice - HELD THAT:- The period covered by the notice is 2015-16 to June 2017, while the show cause notice was issued on 22-12- 2020. Additionally, we find that the ST-3 return for the period ending June 2017 was filed on 27-09-2017. Thus, the entire demand is raised under the extended period of limitation. The Revenue has invoked the extended period on the grounds of alleged suppression of facts by the appellant - the appellant has clearly disclosed the amounts in Form ST-3 under the category of works contract services. These facts unequivocally demonstrate that the Revenue was aware of the appellant s business activities and the classification adopted - it would be inappropriate to attribute serious allegations of suppression of facts or an intent to evade payment of tax to the appellant - the invocation of the extended period of limitation is unsustainable. The impugned order and the demands arising from the impugned order are legally as well as factually incorrect and unsustainable and hence set aside - Appeal allowed.

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• Central Excise

• 2024 (11) TMI 1279
  Maintainability of appeal - monetary limit invloved in the appeal - Activity amounting to manufacture or not - HELD THAT:- In terms of National Litigation Policy, this appeal is required to be dismissed on this count alone. The issue involved in this case is as to whether activity undertaken by the appellant amounts to manufacture or not. In case it amounts to manufacture, the appellant would be required to pay Excise Duty of Rs.8,57,549/- as confirmed by the Adjudicating Authority. It is found that the Commissioner (Appeals) has given a very detailed findings and has made a considered decision to allow the appeal filed by the respondent. There are no reason to interfere with the same. The appeal filed by the Revenue is dismissed.

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• 2024 (11) TMI 1278
  Valuation of captively consumed goods - valuation of goods is required to be determined on the basis of cost of production, as prescribed by the Institute of Cost Works Accountants of India in the Cost Accounting Standard-4 (CAS-4), in accordance with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Section 4 (1)(b) of theCentral Excise Act, 1944 or not - denial of CENVAT credit to recipient sister units - penalty under Section 11AC of the Central Excise Act, 1944 - HELD THAT:- It is an admitted fact on record that the appellants have themselves computed the differential duty liability and also paid the same along with interest, upon finalization of the books of accounts in form CAS-4 for effecting supply of goods to their sister units. The differential duty was paid and the same was invoiced to the sister units, by issuance of the supplementary invoices. Rule 9 of the Rules of 2004, has prescribed various documents, based on which CENVAT credit shall be taken by the manufacturer. Sub-rule (1)(b) of Rule 9 ibid recognizes supplementary invoice as the proper document for availment of CENVAT credit based thereon. However, there is an embargo being created in the said sub-rule that whenever any additional amount of duty became recoverable from the manufacturer of excisable goods on account of any non-levy or short levy, by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of statute, then taking of CENVAT credit of such additional duty is prohibited. In the present case, the books of accounts for the year 2011-2012 were required to be finalized by September, 2012, which was in fact complied with by the appellants inasmuch as such compliance part has not been disputed by the department. Further, we also notice that in the letter dated 15.05.2014, the jurisdictional Range Superintendent had informed his counterpart in the Audit wing, mentioning that the audit para does not appear to be sustainable and that based on the statement along with invoices particulars furnished by the sister units, the draft SCNs were prepared by him. Thus, under such circumstances, it cannot be said that the appellants had suppressed any material particulars to the department or indulged into any malpractice, with an intent to evade payment of additional amount of Central Excise duty. In view of the fact that issuance of supplementary invoices by the units in H-25 and B-82/1, are the prescribed documents under Rule 9 of the Rules of 2004, denial of the CENVAT credit to the recipient units cannot be questioned inasmuch as there is no element of fraud, collusion, wilful misstatement etc., in making payment of such additional duty into the Government exchequer. Therefore, we are also of the considered opinion that taking of CENVAT credit by the recipient units viz., E-60,61,62 and B-82/1 on the basis of the supplementary invoices issued by the manufacturing units is in conformity with the CENVAT statute. There are no merits in the impugned orders, insofar as confirmation of the adjudged demands on the appellants are concerned - Therefore, the impugned orders are set aside - the appeals are allowed in favour of the appellants.

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• CST, VAT & Sales Tax

• 2024 (11) TMI 1277
  Imposition of condition relating to C form over and above what has been contained in the Notification - Whether the Notification under Section 8(5) would run in parimeteria with the rates of tax stipulated in the Schedule and whether the conditions stipulated in Section 8(4) have to be read into the Notification itself? - HELD THAT:- Reference may be made to the decision of the Jharkhand High Court in TATA MOTORS LIMITED VERSUS STATE OF JHARKHAND AND OTHERS [ 2012 (9) TMI 911 - JHARKHAND HIGH COURT] . In that case, the benefit of reduced rate of tax per a Notification issued under Section 8(5) of the CST Act had been refused on the ground that the parties were unregistered dealers - In that case as well, the assessee has unfortunately not brought to the notice of the Bench the judgment in the case of DEPUTY COMMISSIONER OF SALES TAX VERSUS AYSHA HOSIERY FACTORY (P.) LTD. (AND OTHER APPEALS) [ 1992 (1) TMI 303 - SUPREME COURT] and what has been cited are the judgements STATE OF RAJASTHAN AND ANOTHER VERSUS SARVOTAM VEGETABLES PRODUCTS (AND OTHER APPEALS) [ 1996 (4) TMI 405 - SUPREME COURT] and several other judgments. However, and fortuitously for the assessee in that case, the High Court has been persuaded to make distinction between the applicability of a Section 8(5) Notification in the case of a transaction under Section 8(1) of the CST Act vis-a-vis a transaction under Section 8(2) of the CST Act. In the former, the rate of tax stipulated is qua the registered dealer, whereas in the latter, the rate of tax stipulated is qua the unregistered dealer. In our respectful opinion, this distinction is one without a difference as Section 8(5) makes no distinction between its applicability qua a situation falling either in Section 8(1) or 8(2), unless the Notification under Section 8(5) itself makes such distinction, stipulating that the reduced rate is applicable only on transactions falling either under Section 8(1) or 8(2). In the Notification in question, it is an omnibus reduction of rate and there is no denial of rate to any specific category of transaction. The impugned order of assessment is quashed and this Writ Petition is allowed.

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• 2024 (11) TMI 1276
  Assessment of turnover under the Tamil Nadu General Sales Tax Act, 1959 for the periods 1996-97, 1997-98, and 1999-00 - inclusion of freight charges in the sale price of cement - HELD THAT:- None of the orders of assessment conduct an examination of the nature envisaged by the AAC in remand order dated 31.08.2000. No doubt, the assessing authority has attempted a cursory comparison of the transactions pre and post 05.10.1996 in the order for the period 1996 97, noting that the sale price was Rs. 84,975/- for 10 tonnes of white cement vide invoices upto 5.10.96 and Rs. 85,670/- for 10 tonnes vide invoice dated 26.11.1996. It cannot be understood how the above figures support the department s contention that there has been suppression of freight in the second invoice dated 26.11.1996 as that figure is, in fact, higher than the sale price pre 05.10.1996. As far as 1997 98 is concerned, there is no question of comparison, as all the transactions have taken place post 05.10.1996. In this case, there is reference to a single invoice dated 31.3.1995 and again, it cannot be appreciated how, based on this invoice, the assessing officer comes to the conclusion of suppression. As far as 1998 99 is concerned, three invoices had been examined, one dated 31.3.1995, the second, a depot transfer invoice dated 17.02.1999 and the third, an invoice dated 14.02.1999. Learned Additional Government Pleader would draw attention to the fact that the depot transfer invoice relates only to a transfer between Kottayam and Coimbatore and was for a sum of Rs. 74,644/-. This price would, admittedly, not include a component of freight. The object of Section 12A of the TNGST Act is to bring to tax turnover that, according to the authority, has been supressed by reduction of sale price in the accounts of an assessee. The suppression, in this case, is said to be the freight. An important factor in this matter is that the books of the petitioner have not been rejected and the assessments are based on the books. The admitted position is that the books reflect the component of freight charges and the cost of cement. The impugned orders are set aside - these writ petitions are allowed.

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• Indian Laws

• 2024 (11) TMI 1275
  Seeking grant of bail - smuggling of huge commercial quantity of heroin - recording of statements u/s 67 of Narcotic Drugs and Psychotropic Substances Act, 1985 - existence of other corroborative evidences or not - right of Accused of speedy trial - HELD THAT:- Admittedly the record show that present Applicant and Accused No. 1 were partners in a firm dealing with clearing of the consignment. It is also claimed that Accused No.1 and the present Applicant are related with each other. In such circumstance, phone calls between Accused Nos. 1 and 2 are but natural, on personal front as well as on business transaction - The transactions which have been pointed out on behalf of the respondent are only with regard to charge of fees with regard to clearance of the consignment. Such amounts are only in few thousand and not having any suspicion with regard to the contention of dealing in drugs. The Clearing Agent or a person who is facilitating the agent to clear the consignment is not supposed to know an exact material which is found in the said consignment though such bills required to be mentioned about it. Admittedly such consignment was received from a foreign country and it requires customs clearance since the customs authorities suspected some foul play, they alerted the DRI and accordingly raid was conducted - Applicant was not present when the consignment was opened and search was carried out. It was Accused No.1, who was present during the search of the said consignment and he was responsible for clearing the said consignment though claimed for and on behalf of Accused Nos.2 and 4. Thus the material which has been collected by the complainant qua the present Applicant is not enough to sufficiently corroborating the case and existence of the call details and forwarding of the bills to Accused No.1 cannot be considered as presumption of the knowledge of the Applicant about the drugs concealed in the said consignment. In the case of SATENDER KUMAR ANTIL VERSUS CENTRAL BUREAU OF INVESTIGATION ANR. [ 2022 (8) TMI 152 - SUPREME COURT] , the Apex Court has observed that prolong incarceration and inordinate delay engaged in the conclusion or the trial would certainly affect the right of Accused of speedy trial and in such circumstance, Section 37 of NDPS Act or such provisions under the Special Acts would not be an impediment to grant bail. The Apex Court further observed that the person seeking bail is still an Accused and not a convict and thus he is entitled for a speedy trial and if it is not possible to decide his case as enshrined under Article 21 of the Constitution and if he is kept inside without any progress in the matter, such Accused is certainly entitled to be released on bail. Similar observations are found in the case of ANKUR CHAUDHARY VERSUS STATE OF MADHYA PRADESH [ 2024 (5) TMI 1463 - SC ORDER] by the Apex Court which consider the embargo under Section 37 of the NDPS Act. The Apex Court found that failure to conclude trial within a reasonable period resulting in prolong incarceration militates against the precious fundamental right guaranteed under Article 21 of the Constitution of India and as such, conditional liberty overriding the statutory embargo created under Section 37 of the NDPS Act could be considered. Coming back to the matter in hand, it is no doubt true that a huge commercial quantity of heroin was found in the container, but except statement under Section 67 of NDPS Act which is otherwise not admissible in evidence as far as admissions/ confessions of the present Applicant are concerned, there is hardly any corroborative evidence. Thus the provisions of Section 37 of the NDPS Act would not be considered as an embargo in the present matter even though commercial quantity was detected and seized - Applicant is in custody from last 3 years and till date there is absolutely no progress in the said matter. The conclusion of trial in near future is again a remote possibility. Accordingly, I am of the considered opinion that the Applicant is entitled for the bail in connection with the present matter. However, on strict conditions. Applicant shall be released on furnishing a personal bond of Rs.1 Lakh with two solvent sureties in the like amount to the satisfaction of the Learned Special Court and on the fulfilment of conditions imposed - bail application allowed.

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• 2024 (11) TMI 1274
  Misconduct under the Chartered Accountants Act, 1949 - removal of respondent s name from the Register of Members for a period of six months - scope of the disciplinary proceedings - HELD THAT:- The present disciplinary proceedings cannot be said to have been affected due to the absence of the complainant. Admittedly, respondent had purchased the shares in the year 1997, but denied having sold them to the complainant. Surprisingly, the signatures on the share transfer deed has been admitted by the respondent. He tried to render an explanation that an employee of the broker made him sign the blank transfer deed on the pretext that it was needed for some unrelated share delivery issue, which may have been fraudulently used for the purpose of selling shares to the complainant. However, the explanation given does not look probable, inasmuch as, respondent is a qualified Chartered Accountant and it is difficult to believe that he would sign blank transfer deed - Respondent has also failed to render any explanation for four years delay in applying for duplicate share certificates. No satisfactory explanation for four years delay in applying for duplicate share certificates has been put forth by the respondent. The continued receipt of dividends after the sale of certificates reflects an attempt on his behalf to take benefit from shares, he no longer owned. It is well settled that the scope of interference with the decision of any Authority under Article 226 of the Constitution of India is limited. Even though, it was contended on behalf of the respondent that the decision of the Disciplinary Committee was perverse and unreasonable, the said contention is found to be wholly bereft of any merit - the Disciplinary Committee found that respondent had failed to act in a bona fide manner and the said conduct was derogatory in nature and highly unbecoming of a Chartered Accountant and brought disrepute to the profession. The punishment awarded to the respondent is not unduly harsh. The recommendation of the Council to the effect that the name of respondent be removed from the Register of Members for a period of six months, accepted - Reference disposed off.

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