Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 9, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of Show Cause notice - SCN issued to driver - Seeking release of goods - This Court is of the considered opinion that the petitioner was not given adequate opportunity. The petitioner has not received the show cause notice. The show cause notice was issued to the driver is not adequate. Therefore, the impugned order is liable to be set aside. - HC
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Seeking release of goods - Expired E-Way bill - The statements made at para-11 of the counter affidavit by the respondent regarding the mismatch in the quantity of goods with the Invoices are not substantiated by the physical verification report issued by the department in Form GST MOV- 04 (Annexure-7). The impugned action has entailed penalty without due consideration of the plea raised by the petitioner and without proper application of mind. - Matter restored back - HC
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Eligibility of avail ITC - Works contract services - input services - Housing society - The society itself is not works contract service provider, nor it is in the business of providing works contract services. The works contract services received by society, from appointed contractor, are for the common benefit of the members. Hence, the Society's contention that they are providing works contract services to their members, and hence, eligible for the ITC of the tax paid to their appointed contractor can't be agreed to. - AAAR
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Classification of goods - CRP Test Kit - Hb1Ac Test Kit - The impugned product CRP Test kit is based on mice anti- CRP antibody / mice antisera and thus covered under Chapter 30.02 as it is specifically excluded from Chapter 38.22. - The said product, CRP Test Kit, will attract GST at the rate of 5% - AAAR
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Classification of goods - CNG dispenser - can be construed as “pump” or otherwise - Since the impugned product, CNG Dispenser, does not use any external force driven by any electrical or mechanical devices, the same cannot be considered as pump in terms of its meaning provided under the explanatory note - AAAR
Income Tax
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Penalty u/s 271(1)(c) - when facts are disclosed in a return and are misstated, the raising of a legal plea of the exemption cannot make the return a false return within the meaning of Section 43(1). - IT has not committed any error while deleting the penalty - HC
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Scope of of Sections 44BB(1) and 44BB(2) - computation of the ‘presumptive taxable income’ - the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in Clauses (a) and (b) of sub-section (2) of Section 44 BB. - HC
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Disallowance of Advertisement expenses u/s. 37 - the assessee had treated the aforesaid expenses as capital work in progress - advertisement expenses were almost 4 times the turnover of the assessee in the first year of operations - the advertisement expenditure claimed by the assessee as revenue expenditure in the revised return of income is, allowable - AT
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Depreciation on goodwill - zero asset shown in the books - The contention of the Ld. DR that it has zero asset shown in the books of CRAZY NETWORK appears to be incorrect when the 5000 subscriber has entered into the partnership firm through CRAZY NETWORK which has added as assets to the partnership firm's assets. AO was not right in disallowing the claim of the assessee relating to depreciation on goodwill. - AT
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Denial of credit of tax deducted at source - Income not offered to tax - The Appellant has placed on record, separate ledger account maintained showing receipts from NHAI and corresponding payments to sub-contractors - Accordingly, AO is directed verify that the receipts and deducibility of the corresponding payments reflected in the aforesaid ledger account during the relevant assessment year, and thereafter, allow the claim of credit of tax deducted at source by NHAI - AT
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Nature of Interest Income - The nexus between the deposits and business compulsions should decide the head of income under which the interest income is assessable. Accordingly, the AO may examine this issue afresh after affording adequate opportunity of being heard to the assessee. - AT
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Addition u/s 68 - assessee has shown its return of income u/s 44AD - it is undisputed fact that the assessee had not maintained books of account that is why he opted for 8% income as per section 44AD - The section also does not put obligation on the assessee to maintain books of account, more so, in view of the fact that his income has been assessed as per section 44AD he cannot be punished for not maintaining the same. - AT
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Revision u/s 263 by CIT - Capital gain computation - the out of 100 % sales consideration 95.36 % is offered as capital gain and the claim of the assessee is less than 5 % of the total consideration in this case, thus, what more AO can find fault when he has already disallowed the cost which in his opinion is not supported and thus AO has already verified the issues which the PCIT is pointing out - Order of AO restored - AT
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Addition u/s 69C r.w.s.115BBE - Payment of credit card by cash as a unexplained expenditure - Without establishing conclusively, a section like 69C falling under the head Income from Other Sources and that is to, a deeming section, no adverse inference can be drawn against the assessee. We found the order of AO and Ld. CIT(A) are based on conjunction and surmises. - AT
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Weighted deduction u/s 35(1)(ii) - bogus donations - the donors in connivance with various brokers, entry operators, donees etc. misued the benefit conferred u/s 35(1)(ii) of the Act by undertaking bogus donations. - the assessee has adopted the unfair means to take the benefit under the garb of Section 35(1)(ii) - Additions confirmed - AT
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MAT - computation of book profits u/s. 115JB - provision for foreseeable losses - it could be seen that even on merits, the provision made for foreseeable losses would only be an ascertained liability and hence, it does not fall under any of the items listed in Explanation 1 to Section 115JB (2) of the Act warranting addition thereon. - AT
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Bogus share transaction - A.O has done his duty by issuing summons and has done detailed examination of the facts and circumstances of the case. However, the assessee-company has not submitted any documentary evidences for ascertaining whether the transactions were genuine or not and neither have established through any materials/documents that the share subscription money received were not bogus or that they were not name-lending entries - Additions confirmed - AT
Customs
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DFIA - Denial of exemption from Basic Customs Duty under Transferrable Duty Free Import Authorisation (DFIA) - Such beneficial DFIA scheme which is intended for export promotion, cannot be construed in such manner as suggested by the petitioner. Such recourse would be ex facie erroneous and illegal. - Neither the officers nor any Transferee of a transferrable DFIA issued by the office of DGFT can be subjected to any of the impediments as suggested by the petitioner in the garb of public interest. - HC
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Misdeclaration of imported goods - Aluminium Extrusion Scrap (Tread) - It appears that the said goods is used material therefore, the same can be classified as aluminium scrap however, only a prima facie view is drawn on the nature of the goods at this stage as the classification of goods attained finality with the assessment of bill of entry and the same was not challenged - the redemption fine and penalty imposed by the lower authorities are very excessive and the same deserves to be reduced. - AT
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Rejection of refund claim - the payment of anti dumping duty is not due to assessment or reassessment of Bills of entry but merely by a letter from the department, therefore there is nothing in the bills of entry to challenge. Even the amount collected thru a letter by the department was also not adjudicated by due process of law such as issuance of show cause notice and adjudication thereof - Refund allowed - AT
Indian Laws
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Election of the office bearers of the Regional Council of ICSI - There is a distinction between the absence and the post fallen vacant. Regulation 92(2) shall be applicable in a case where the Chairman and/or the office bearer though is not disqualified but is absent for some reason. - , in case of a vacation of office as per Regulation 117(2), such post fallen vacant is required to be filled in by election by electing another person from amongst its members to hold the office for the remaining period of a year (Regulation 119(2)) - SC
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Dishonor of Cheque - vicarious liability of the non-signing partners - It is settled that in terms of explanation of Section 141 of the NI Act, the expression “company” would mean any body corporate and includes a firm or other association of individuals. Sub-section 1 of Section 141 postulates that where an offence is committed under Section 138 by a company, the company as well as every person who, at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business shall be deemed to be guilty of the offence - HC
IBC
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Initiation of CIRP - Cheque was dishonoured - If the application under Section 7 of the Code could be filed only when the default occurs and the date of default is conspicuous by its absence in the pleadings of the Appellant, dishonour of the cheque, as alleged by the Appellant, could not be taken as the date of default. - AT
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Approval of Resolution Plan - Non-payment of full provident fund amount to the workmen and employees and the gratuity payment till the insolvency commencement date amounts to non-compliance of provisions of Section 30(2)(e) of the Code. However, in the facts of the present case - All other parts of the Resolution Plan have not been found to infirm in any manner, there are no case for interfering with the order approving the Resolution Plan - AT
Service Tax
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Withholding the refund of security deposit with the state government towards service tax - Revenue submitted that, Post GST service tax was not applicable and that no demand of service tax has ever been raised by the concerned department. - Consequently, the retention of the aforesaid security money deposited by the petitioner is per se not justified. - HC
Central Excise
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CENVAT Credit - Credit disallowed alleging that these services are consumed in the Mumbai office. It is not in dispute that the Mumbai office is an integral part of the business of the appellant and is doing the administrative work in respect of the appellant’s factory. For this reason, the credit availed by the appellant on Housekeeping Services at their Mumbai office is eligible. - AT
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Refund of CENVAT Credit reversed under protest - The factual matrix would be that the issue was in dispute and the appellant was disputing the amount alleged to be payable by them. The letters issued by the appellant every month intimating the reversal as well as reserving their right for litigation would show that the credit has been reversed under protest. - The allegation that the refund claim is hit by time-bar cannot sustain - Refund allowed - AT
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Conversion of 100% EOU to normal DTA Unit - work in process / semi-finished goods at the time of debonding of EOU - at the intermediate stage when the goods are not fully manufactured, the excise duty was not payable at the time of debonding, particularly when the goods were not cleared from the factory and were in the process of manufacturing. - AT
Case Laws:
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GST
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2022 (11) TMI 394
Validity of Show Cause notice - SCN issued to driver - Seeking release of goods - contention of the petitioner is that, mistakenly, in the consignment was mentioned as if it is transported to Chennai. After intercepting the consignment, the respondent has issued the impugned notice to the driver and the same was not received by the petitioner - petitioner claims that adequate opportunity was not granted to him - principles of natural justice - HELD THAT:- This Court is of the considered opinion that the petitioner was not given adequate opportunity. The petitioner has not received the show cause notice. The show cause notice was issued to the driver is not adequate. Therefore, the impugned order is liable to be set aside. The impugned order of Demand of Tax and Penalty in Form GST MOV-09, dated 21.10.2022, is hereby quashed. The respondent is directed to issue a fresh notice, thereafter, the petitioner shall submit his objection - petition allowed.
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2022 (11) TMI 393
Correctness of action of closing the facility to file Form GST TRAN 3 on the common portal of www.gst.gov.in - HELD THAT:- Supreme Court in Union of India vs. Filco Trade Centre Pvt. Ltd. [ 2022 (7) TMI 1232 - SC ORDER ] has directed Goods and Service Tax Network (GSTN) to open the common portal for filing concerned forms for availing transitional credit through TRAN-1 and TRAN-2 for two months with effect from 01.09.2022 to 31.10.2022 now extended to 30.11.2022. Further, GSTN has been directed to ensure that there are no technical glitches during the extended period. Concerned officials have been given 90 days time thereafter to verify the veracity of the claim/transitional credit and to pass appropriate orders thereafter. Supreme Court has also directed that the allowed transitional credit should be reflected in the electronic credit ledger. It would be in the interest of justice if the petitioner is allowed to upload table 2 of Form GST TRAN 3 within the aforesaid period which will however be subject to due verification of the respondents - Petition disposed off.
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2022 (11) TMI 392
Seeking a direction to the respondents to allow amendments in the GSTR-1 form filed - direction to the respondents to allow amendments in the GSTR-1 form filed - period January, 2018 to August, 2018 - HELD THAT:- Section 39 of the CGST Act as well as the TGST Act deals with furnishing of returns. As per sub-section (1) thereof, every registered person other than an input service distributor or a non-resident taxable person etc., for every calendar month or part thereof, furnish a return electronically of inward and outward supplies of goods and services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed. In Bharti Airtel Ltd. [ 2021 (11) TMI 109 - SUPREME COURT ], Supreme Court was of the view that the law provides for rectification of errors and omissions in the specified manner. Beyond the statutorily prescribed period, an assessee cannot be permitted to carry out rectification which would inevitably affect obligations and liabilities of other stakeholders because of the cascading effect in the electronic records. Supreme Court considered the mechanism provided by Section 39(9) of the CGST Act and thereafter took the view that allowing the assessee to carry out rectification of errors and omissions beyond the statutorily prescribed period would lead to complete uncertainty and collapse of the tax administration. Supreme Court took note of the fact that GSTR-2A form for rectification of omissions or incorrect particulars became operational from September, 2018 - the issue is squarely covered by the decision of the Supreme Court in Bharti Airtel Ltd. The writ petition is dismissed.
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2022 (11) TMI 391
Violation of principles of natural justice - seeking release of goods - discrepancy of goods being transported - Expired E-Way bill - Section 129(1)(b) of JGST Act, 2017 - HELD THAT:- It is true that neither the State Tax Officer nor Appellate Authority has examined the plea raised by the petitioner based on GPS tracking report of the vehicle. The impugned orders have been passed without taking into consideration the explanation and defence taken by the petitioner in their reply before the Tax Officer in response to the show-cause notice under GST MOV 07. The State Tax Officer has only taken into consideration one of the plea that the driver was illiterate/semi-literate and did not realize the consequences of expiry of e-way bill. The impugned order also does not reflect due consideration of plea taken by the petitioner based on GPS tracking report of the vehicle. The impugned orders therefore have been passed without proper application of mind and without dealing with the contention raised by the petitioner. It suffers from violation of principles of natural justice. The statements made at para-11 of the counter affidavit by the respondent regarding the mismatch in the quantity of goods with the Invoices are not substantiated by the physical verification report issued by the department in Form GST MOV- 04 (Annexure-7). The impugned action has entailed penalty without due consideration of the plea raised by the petitioner and without proper application of mind. As such, both the orders passed by the State Tax Officer (Annexure- 10) dated 12th July, 2018 and the appellate order dated 26th July, 2018 (Annexure-14) are set aside - the matter is remanded to the State Tax Officer to consider the plea raised by the petitioner in its reply and the plea based upon the amended Rule 138(3) of JGST Rules, 2017 brought into force with effect from 7th March, 2018 by notification dated 30th March, 2018, in accordance with law. Petition allowed by way of remand.
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2022 (11) TMI 390
Eligibility of avail ITC - Works contract services - Supply or not - activities of the society for its members - requirement to obtain registration under the GST law - If the activities of the applicant are treated as supply under the CGST Act, 2017 then whether the applicant is eligible to claim the ITC on input and inputs services for repairs, renovations rehabilitation works carried out by the Applicant? Whether the Appellant can be construed as providing works contract services to its members while undertaking the activities relating to major repairs, renovations and rehabilitation works for the society by entering into an agreement with a contractor, namely, M/s. Unique Rehab Pvt. Ltd., which carry out the said repair, renovation, and rehabilitation work of the society? HELD THAT:- The Appellant society has been formed with an objective to facilitate or benefit their members by way of undertaking the aforesaid activities, thereby, providing services to their members against certain considerations called charges in terms of their Bye-laws. Accordingly, they have been levying 18% GST on the taxable components of the charges collected by them from their members. The same is evident from the invoices submitted by them along with the subject appeal memorandum. Here, although the Appellant have not mentioned, on their invoices, the SAC (Service Accounting Code) of the services being provided by them to their members, it is worthwhile to mention that all the said underlying services provided by the Appellant-society will be covered under the heading 9995 enumerated at SI. No. 33 of the Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 having the description services of membership organization , as all the underlying services including the services related to building repair and renovation for which the Appellant society is charging, from their members, a contribution towards the building repair fund arc being supplied in the capacity of the cooperative society only, which is nothing but a membership organization. The Appellant's contention of providing the works contract services to their members is not acceptable on another ground that society provides many services, such as security services, cleaning services, repair and maintenance services, etc., for which they recover the cost from their members under the head maintenance charges , and the Appellant society are not claiming to be provider of the aforesaid services and charging for the said services under different heads - it is clearly evident that they are trying to take this stand of providing works contract services to their members solely to avail ITC of the tax paid to the contractor on the works contract services, which were otherwise not available to them under the restrictions imposed under section 17(5)(c) of the CGST Act, 2017. Section 17 says that ITC would be available on tax paid on works contract services when such services are the input services for further supply of works contract service. Appellant does not fulfill the conditions laid down above. It has to be understood that the exception carved out to provide ITC in the case of tax paid on works contract is for those who in turn provide works contract service. For e.g., when a principal gets a contract of work executed from a sub-contractor and provides the same to the employer. In such a case, the principal becomes eligible for ITC even though the contract results in immoveable property - The society itself is not works contract service provider, nor it is in the business of providing works contract services. The works contract services received by society, from appointed contractor, are for the common benefit of the members. Hence, the Society's contention that they are providing works contract services to their members, and hence, eligible for the ITC of the tax paid to their appointed contractor can't be agreed to. Accordingly, they are not eligible for the ITC of tax paid to their contractors in terms of the limitations provided under section 17(5)(c) of the CGST Act. 2017.
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2022 (11) TMI 389
Classification of goods - CRP Test Kit - Hb1Ac Test Kit - classifiable under HSN Code 30.02 at Entry No.125 of List 1 of Sr. No 180 under Schedule-I of the Notification No.1/2017-Central Tax (Rate), dated 28.6.2017 as Agglutinating Sera or under HSN Code 38.22 at Sr. No 80 under Schedule-II of the Notification No.1/2017-Central Tax (Rate), dated 28.6.2017 as diagnostic kits and reagents? HELD THAT:- The diagnostic kits can also be classified under the Chapter Heading 30.02 where the essential component of the kit to be classified is the one falling under the Chapter head 30.02. It is further provided under the aforementioned explanatory note that the common reaction occurring in such kits would inter alia include agglutination. As regards the provisions of the explanatory note to the Chapter Heading 30.02, it is observed here that the anti-human CRP antibody, i.e., antisera coated on the latex particles is the essential component of the impugned CRP Test Kit as discussed earlier and the reaction which occurs in the subject test kit is agglutination. Further, as has been discussed earlier, the essential character of the subject kit is given by the latex particles coated with antihuman CRP antibody, i.e., antisera, as it is the determining component for the agglutination which is the essentially the specificity of the test procedure. Therefore, the subject CRP Test Kit, being in the nature of a diagnostic kit for determining inflammation and infection in the human body, and satisfies all the conditions prescribed under the said explanatory note (E) to the Chapter heading 30.02, would aptly be covered under the Chapter Heading 30.02. The impugned product CRP Test kit is based on mice anti- CRP antibody / mice antisera and thus covered under Chapter 30.02 as it is specifically excluded from Chapter 38.22. Chapter Heading 30.02 is the default entry for diagnostic kits. If any product is covered by Chapter 30.02, then there is no need to visit Chapter 38.22. Whether the impugned product, i.e., CRP Test Kit, can be construed as agglutinating sera mentioned at SI. No. 125 of the List I appended to the Schedule I to the Notification No. 01/2017-C.T. (Rate) dated 28.06.2017, or not? - HELD THAT:- It is not in dispute that the said impugned product works on the principle of agglutination where the latex beads coated with the antisera reacts with the CRP of the human blood sample resulting into agglutination, which ultimately leads to diagnosis of inflammation or infection in the human body with the help of spectrophotometer. In view of this, it is held that the impugned product, i.e., CRP Test kit, which has been held as antisera, and which works on the principle of agglutination for the medical diagnosis of infection and inflammation in the human body, can aptly be construed as agglutinating sera. Thus, the impugned product will fall under entry agglutinating sera at SI. No. 125 of the list I appended to the Schedule I to the Notification No 01/2017-C.T. (Rate) dated 28.06.2017. The said product, CRP Test Kit, will attract GST at the rate of 5% in terms of the entry at SI. No. 180 of Schedule I to the Notification No. 01/2017-C.T. (Rate) dated 28.06.2017. C lassification and rate of tax in respect of another impugned product Hb1Ac Test Kit - HELD THAT:- In respect of the second impugned product, i.e., Hb1Ac Test Kit, it is seen that Hb1Ac Test Kit, much like the CRP Test Kit, is also a diagnostic kit having different components such as (i) Latex reagent, (ii) Buffered antibody reagent, (iii) Hemolysis Reagent, and (iv) Optional - Calibrator made from human blood, which works on the same principle of the agglutination as was the case with CRP Test kit. Further, as was the case with first impugned product, i.e., CRP Test kit, the principal component of the product under question is the antibody reagent, which is extracted from the antisera of the animals like mouse and goat, and which is primarily responsible for the agglutination process based on the interaction between the antibody and antigen, and which accounts for 75 % of the total cost of the impugned product. It is also seen that the impugned product under question is used for quantitative determination of hemoglobin A1c (HbA1c) in human blood and monitoring of glycemic control in diabetic patients. Thus, the impugned product is used as a diagnostic kit similar to that of CRP Test kit. The second impugned product, i.e., HbA1c, is very similar to the first impugned product, i.e., CRP Test kit, in terms of its constitutionality and functionality, and hence all the reasoning and rationale used for classification of the first impugned product, i.e., CRP Test kit, will apply mutatis-mutandis to the second impugned product, i.e., HbA1c, too. Thus, it is held that second impugned product, i.e., HbA1c, will be classified under the chapter heading 3002, and accordingly, will attract GST at the rate of 5%.
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2022 (11) TMI 388
Classification of goods - CNG dispenser - classifiable under Chapter Heading 84.13 placed at SI. No. 117, Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 or not - whether the impugned product can be construed as pump as provided under the relevant entry of the Notification No. 01/2017-C.T.(Rate) dated 28.06.2017? - HELD THAT:- It is observed that the term pump is neither defined under the GST law including Acts, rules, or notification issued thereunder, nor under the Customs Tariff Act, 1975, which has been referred to in the notification no. 01/2017-C.T. (Rate) dated 28.06.2017, for the purpose of determining HSN of the goods based on the descriptions contained in the Chapters of the first schedule to the Customs Tariff Act, 1975. It is evident that for any device or apparatus to qualify for the pump, it should transfer or deliver liquid or gases by using pressure or suction or both. On perusal of the descriptions of the impugned product, CNG Dispenser, as submitted by the Appellant, it is noticed that the impugned product does not use pressure or suction to transfer the gas from filling station to fuel tank of the vehicle. It is further observed that it is the difference between the pressures of the gas in the filling station and that in the fuel tank of the vehicle that actuate the flow of gas from the filling station to the fuel tank. That is, the pressure in the filling station is higher than that in the fuel tank. Since it is trite that the gas flows from high pressure to low pressure, accordingly, the gas in the filling station starts flowing into the fuel tank of the vehicle. The pump covered under Heading 84.13 is an instrument that is used for raising and/or displacing volumes of liquid from one place to another, using external forces, which may be in the nature of pressure or suction. Since the impugned product, CNG Dispenser, does not use any external force driven by any electrical or mechanical devices, the same cannot be considered as pump in terms of its meaning provided under the explanatory note - Since it has been established now that the impugned product is not a pump, which is the primary clause of the entry of the chapter heading 84.13, the same will not be classified under Chapter Heading 84.13. Since as per the submissions made by the Appellant regarding components of the impugned device which includes the components like pressure sensor, controller unit, which automatically control and regulate the pressure of CNG being dispensed into the fuel tank, it is observed that the impugned device would merit classification under the Chapter Heading 90.32 placed at SI. No. 422 of the Schedule III to the Notification No. 01/2017-C.T.(Rate) dated 28.06.2017.
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Income Tax
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2022 (11) TMI 387
Penalty u/s 271(1)(c) - amount received on extinguishment of rights and claims from a foreign collaborator and hence declared in ITR as capital receipt - HELD THAT:- To attract the provision of Section 271 (1)(c) the satisfaction is to be recorded that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In the present case, the respondent disclosed the source of income as a capital receipt. The source of receipt of the amount of Rs.5,18,02,396/- from Michelin Company was correctly disclosed. It might be on the basis of the opinion given the by tax consultant or Charted Accountant, it was shown in the capital receipt in the return however, that was a debatable issue, therefore, the reference was sent to High Court. Division Bench of this Court in case of Dadabhoy's New Chirmiri Ponri Hill Colliery Company Pvt. Ltd. Vs. Commissioner of Sales Tax [ 1978 (10) TMI 138 - MADHYA PRADESH HIGH COURT] has examined the imposition of penalty on the assessee u/s 43 (1) of the M.P. General Sales Tax Act, 1958 read with Section 9(3) of the Central Sales Tax Act, 1956 and opined that when facts are disclosed in a return and are misstated, the raising of a legal plea of the exemption cannot make the return a false return within the meaning of Section 43(1). Therefore, in view of the above discussion, the Appellate Tribunal of IT has not committed any error while setting aside the order passed by the Assessment Officer as well as CIT in respect of the imposition of penalty under Section 271 (1) (c). We do not find any substantial question of law involved in favour of the appellant hence the question of law No.1 is answered against the appellant and in favour of the respondent. So far as issue No.2 is concerned, as discussed above no case of imposition of penalty under Section 271(1) (c) - Decided in favour of assessee.
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2022 (11) TMI 386
Rectification of mistake u/s 154 - Reopening of assessment u/s 147 - Disallowance of write off of the bad debt - objection raised by the Audit Party on the sequence of set-off of losses - HELD THAT:- There was no mistake apparent in the computation of income in the assessment order dated 21st December, 2019, within the meaning of Section 154 of the Act, which could have been a subject matter of rectification. No find merit in the submission of the learned counsel for the Petitioner that the rectification order dated 15th February, 2021, effectively resulted in re-assessment of income and not rectification. She states that in the facts of this case, even a reassessment on the basis of the audit objection was not permissible. Upon a perusal of the counter-affidavit, it is borne out that the objection raised by the Audit Party on the sequence of set-off of losses is an opinion on law and that the AO had passed the rectification order only on the basis of the direction of the Audit Officer. The AO himself was not of the independent opinion that the original assessment order passed by him on 21st December, 2019, was erroneous in law. As it would be instructive to refer to the decision of the Supreme Court in M/s Indian Eastern Newspaper Society, New Delhi. [ 1979 (8) TMI 1 - SUPREME COURT] wherein, the Court held that an audit opinion by itself with respect to application or interpretation of law cannot be treated by the Income Tax Officer as information for reopening the assessment. In the facts of the present case, there was no new or fresh material before the AO except the opinion of the Audit Party. Since, it is settled law that mere change of opinion cannot form the basis for initiating reassessment proceedings as per the decision of the Supreme Court in CIT Vs. Kelvinator of India Ltd., [ 2010 (1) TMI 11 - SUPREME COURT] no reassessment could also have been permissible in the facts of the present case. It is also not apparent from record if the AO agreed with the objection of the Audit Party. Infact, the contents of the counter affidavit evidences that the AO was satisfied with the initial computation and has acted only upon the direction of the Audit Party while passing the impugned order. Lastly, as regards the objection of the counsel for the Petitioner that the impugned rectification order is barred under Section 5 of the Act of 2020, we find that the bar of the said provision is not attracted in the facts of his case. She contends that the provisions of the Act of 2020, have an overriding effect on the provisions of the Act of 1961, insofar as the determination of the tax arrears under Section 5 of the Act of 2020, is to be made on the basis of the facts, as they existed on the date of the filing of the application and the Revenue was precluded from undertaking any rectification after receipt of the Forms 1 and 2. The right of the Revenue to initiate any further proceedings with respect to the calculation of the disputed tax arrears are foreclosed after Form 3 has been issued by the Designated Authority under Section 5(1) of the Act of 2020, determining the full and final settlement of tax arrears. The Form 3 has admittedly not been issued in the present matter and therefore, the rigour of Section 5(3) of the Act of 2020 is not attracted in the facts of this case. Further, in the facts of this case, as per record the rectification proceeding was initiated consequent to an audit objection dated 31st August, 2020, even though, the rectification order finally came to be passed on 15th February, 2021 and therefore, we are unable to agree with the contention of the Petitioner that the rectification proceedings were initiated only upon receipt of the application of the assessee on 28th December, 2020 under the Act of 2020. Since we have held that the rectification order itself was incorrect and as held above, we have set aside the impugned rectification order dated 15th February, 2021. We also set aside the consequential order of the Respondent rejecting the Petitioner s application for settlement under the DTVSV Scheme, on the ground that the tax liability was not ascertained, and restore the application to the file of the AO as on 28th December, 2020. We direct the Respondent to determine the amount payable by the assessee in accordance with the provisions of the Act of 2020 and grant a Certificate to the assessee containing particulars of tax arrears and amount payable, in accordance with law, within a period of two weeks.
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2022 (11) TMI 385
Scope of of Sections 44BB(1) and 44BB(2) - whether the service tax collected by the assessees in the course of provision of services and facilities in connection with, or supply of plant and machinery on hire, in the prospecting for, or extraction or production of, mineral oils in India, was liable to be included in the amount paid or payable for the purpose of computation of the presumptive taxable income of the assessee? - HELD THAT:- Full Bench judgment of this Court in DIT (International Taxation) others vs. Schlumberger Asia Services Limited [ 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in Clauses (a) and (b) of sub-section (2) of Section 44 BB. Thus following the judgment of the Full Bench of this Court in DIT (International Taxation) others vs. Schlumberger Asia Services Limited (Supra), we are of the view that no fresh question of law arises for consideration in these appeals.
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2022 (11) TMI 384
Disallowance under Section 14A - No exempt income earned - HELD THAT:- As it is admitted that no exempt income was earned by the Assessee in AYs 2012-13 and 2013-14. The ITAT following the judgment of this Court in Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] has deleted the said disallowance made on account of Section 14A of the Act. TP adjustment on account of AMP expenditure - HELD THAT:- As the present appeals are disposed of in terms of the judgment of the Division Bench in the aforesaid Income Tax Appeals, however, it is made clear that the present decision will abide by the judgment of the Supreme Court [ 2018 (5) TMI 2131 - SC ORDER] preferred by the Revenue against the order passed by this Court in [ 2017 (5) TMI 1223 - DELHI HIGH COURT]
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2022 (11) TMI 383
Unexplained Cash deposit - HELD THAT:- On going through the paper book and the documents, we find that the source of cash deposit has been duly explained and the authorities below have erred in not accepting the same. The Revenue has not disputed that any item in paper book is fresh document being filed for the first time before the ITAT. Hence, in the background and examination of the aforesaid document, perusing of the records and hearing the learned counsel, we are of the considered opinion that cash deposits in this case has been duly explained. Hence, we direct that the addition be deleted. As regards, the addition of interest income, in absence of any explanation about them we confirm the order of the authorities below on this issue. Hence, the appeal of the assessee is partly allowed.
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2022 (11) TMI 382
Reopening of assessment u/s 147 - Notice beyond the period of four years - HELD THAT:- The reopening is only a change of opinion and no new tangible material came to the notice of the Assessing Officer to come to a different conclusion and thus, the change of opinion is not permissible in law as per the judgement of CIT v. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] Moreover, when the assessment is reopened after four years from the end of the relevant assessment year under consideration, AO has to establish that there is a failure on the part of the assessee to disclose fully and truly all material facts to complete the assessment. In this case, AO has failed to establish that there is a failure on the part of the assessee and therefore, the reopening of the assessment is invalid and bad in law. In view of the above facts and circumstances and respectfully following the decision of the Coordinate Benches of the Tribunal in assessee s own case for the assessment year 2008-09, we sustain the appellate order passed by the ld. CIT(A) in quashing the assessment order passed under section 143(3) r.w.s. 147 - Thus, the grounds raised by the Revenue are dismissed.
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2022 (11) TMI 381
Revision u/s 263 by CIT - disallowances of expenses were on adhoc basis - HELD THAT:- The purpose of framing scrutiny assessment u/s 143(3) inter-alia, to see that the Assessee is maintaining proper records, books of accounts etc. and compliance of various applicable provisions of the 1961 Act are made, to finally arrive at income chargeable to tax and compute tax liability of the tax-payer within the mandate of the provisions of the 1961 Act. In case of non compliances of various applicable provisions of the 1961 Act, consequential penal provisions are prescribed in the 1961 Act itself which will get attracted and which has direct bearing on computing income chargeable to tax. Thus, there is a complete non application of mind by the AO as the AO merely accepted the contentions of the assessee by accepting the replies filed by the assessee, without any verification . Interestingly, the AO who framed assessment for ay: 2014-15 is the same who framed the assessment for ay: 2016-17(year under consideration), and exactly similar additions under the same head of disallowance of expenses ( Labour Charges, Travelling Expenses and Office Expenses) were made in both the years, albeit in ay: 2014-15, the additions for aggregate of disallowance of expenses were to the tune of Rs. 45,000/-, while in the year under consideration the aggregate of disallowance of expenses under the same heads were to the tune of Rs. 20,000/- . In both these years, the aforesaid disallowances of expenses were on adhoc basis, without pinpointing the particular expenses which could not be verified by the AO. Thus, it appears that there is complete non application of mind by AO while framing assessment u/s 143(3) and the replies filed by the assessee were merely accepted by AO without making any enquiry / verification whatsoever to arrive at the income chargeable to tax. PCIT has rightly invoked provisions of Section 263 and rightly set aside the assessment order passed by AO , and directions were rightly issued by ld. PCIT for denovo assessment. Assessee in the proceedings before ld. PCIT u/s 263 of the 1961 Act gave general replies, but could not repel that the assessment order dated 22.02.2018 passed by the AO u/s 143(3) was suffering from complete non application of mind , and that merely contentions of the assessee were accepted by AO without any verification whatsoever. We hold that the clause (a) to Explanation 2 to Section 263(1) is clearly applicable, as the AO has passed an assessment order u/s 143(3) , dated 22.02.2018, without making inquiries and verifications which should have been made, and the replies filed by the assessee were simply accepted by AO without any application of mind whatsoever and without making any verifications .Thus, the assessment order passed by AO was clearly erroneous so far as prejudicial to the interest of Revenue and was rightly set aside by PCIT by invoking his revisionary powers u/s 263 and we uphold the revisionary order passed by ld. PCIT u/s 263. Appeal filed by assessee stands dismissed.
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2022 (11) TMI 380
Disallowance of Advertisement expenses u/s. 37 - primary reason for disallowance of advertisement expenses by the AO is that firstly, the assessee cannot be permitted to change its stand, wherein the original return, the assessee had treated the aforesaid expenses as capital work in progress and secondly, since the advertisement expenses were almost 4 times the turnover of the assessee in the first year of operations, the same are capital in nature - HELD THAT:- Various Courts and tribunals have consistently taken the position that advertisement/brand building expenditures are revenue nature and further there is no concept of deferment of revenue expenditure in the Income Tax Act. In the case of Salora International Limited [ 2008 (8) TMI 138 - DELHI HIGH COURT] the assessee claimed deduction of advertising expenditure of approximately Rs. 3.08 crores. According to the Assessing Officer, the expenditure was incurred for launching of its products. AO was of the view that such expenditure was of an enduring nature and, therefore, treated one-third as 'capital expenditure' and only allowed the two-thirds of the said amount as 'expenditure to the assessee'. The Tribunal held that there was a direct nexus between the advertising expenditure and the business of the assessee and that the assessee had to incur such expenditure to meet the competition in the Indian market for selling its products in India. It, therefore, allowed the assessee's claim. The High Court upheld the order of ITAT and held that advertisement expenditure for launching products is revenue expenditure. We are of the considered view that CIT(Appeals) has not erred in facts and in law in allowing the assessee s appeal and holding that the advertisement expenditure claimed by the assessee as revenue expenditure in the revised return of income is, allowable in the instant set of facts. Appeal of the Department is dismissed.
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2022 (11) TMI 379
Income taxable in India - Taxability of Inland Haulage Charges ( IHC ) - HELD THAT:- We find that similar issue was decided in favour of assessee by the coordinate bench of the Tribunal in CMA CGM SA vs ACIT, [ 2018 (3) TMI 1832 - ITAT MUMBAI] after following judicial precedents rendered in assessee's own case for preceding assessment years held that IHC, since, forms part of income from operation of ships in International Traffic, is covered under Article-9 of the India-France Tax Treaty, accordingly, not taxable in India. These grounds are decided allowed. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of Tribunal for preceding assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee‟s own case cited supra, we uphold the plea of the assessee and direct the AO to delete the addition on account of IHC. As a result, grounds raised in assessee‟s appeal are allowed. Taxability of freight charges from transportation of cargo through feeder vessels - HELD THAT:- As decided in own case assessment year 2016 17[ 2018 (3) TMI 1832 - ITAT MUMBAI] freight charges received from transportation of cargo through feeder vessels being part of shipping income in International Traffic is covered under Article-9(1) of the India-France Tax Treaty, hence, not toxable in India. In fact, the aforesaid view of the Tribunal was upheld by the Hon'ble Jurisdictional High Court while dismissing Revenue's appeal in assessee's own case in Assessment Year 2002-03 [ 2012 (8) TMI 1211 - BOMBAY HIGH COURT ] Treating the agent of assessee in India as permanent establishment of the assessee - HELD THAT:- As decided in own case assessment year 2016 17[ 2018 (3) TMI 1832 - ITAT MUMBAI] No material is brought on record to suggest that the transaction with Indian entity is not at arm's length. On the contrary assessee has demonstrated that transaction is as per APA therefore, no further adjustment is required. Respectfully following the decision of Co-ordinate Bench in assessee's own case for assessment year 2015-16 grounds are allowed.
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2022 (11) TMI 378
Net profit estimation - assessee is engaged in the business of iron ore - HELD THAT:- As profit percentage is varied in between 5.8% to 7.26% for the assessment years 2004-05 to 2008-09. This being so, we are of the view that respectfully following the decision of the Co-ordinate Bench, on identical facts in the case of Dillip Kumar Naik [ 2022 (11) TMI 215 - ITAT CUTTACK] the estimation of 10% as done by the ld CIT(A) stands reduced to 8%. Levy of penalty u/s.271F - HELD THAT:- As the facts of the present case are identical to the facts of the case of S.M.Enterprises [ 2022 (11) TMI 274 - ITAT CUTTACK] and also in the case of Gobardhan Matia [ 2022 (11) TMI 214 - ITAT CUTTACK] respectfully following the decision of the Co-ordinate Bench, in the above two cases, the penalty as levied u/s.271F of the Act by the AO and confirmed by the ld CIT(A) stands deleted. Penalty u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT:- AO has not struck out inappropriate words in the paragraphs of notice issued u/s.274/271(1)(c) of the Act and on account of the fact that income of the assessee has been assessed only on estimation basis and no evidence of concealment of income has been found in the case of the assessee - Thus as relying on decision of the Co-ordinate Bench of this Tribunal in a group concern M/s. S.M.Enterprises .[ 2022 (11) TMI 275 - ITAT CUTTACK] the penalty levied u/s.271(1)(c) by the AO and confirmed by the ld CIT(A) stands deleted. All the appeals of the assessee stand allowed.
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2022 (11) TMI 377
Estimation of income - bogus purchases - HELD THAT:- Keeping in view the gross profit earned by the assessee for the preceding years which is not more than 9%, addition @25% or 100% of bogus purchases is not sustainable in the eyes of law. Hence, direct the Assessing Officer to charge the assessee at the gross profit @9% on the bogus purchases for A.Y.2009-10 and for A.Y. 2010-11. Resultantly, appeals filed by the assessee are allowed.
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2022 (11) TMI 376
Unexplained cash credit u/s. 68 - undisclosed investment - addition by taking view that withdrawn from Dena Bank was made through ATM and deposits in ICICI Bank is after 2 to 3 days in some instances gap between withdrawals and deposits are more than 20 to 30 days - HELD THAT:- The entire credit in the bank account cannot be added as undisclosed income by ignoring the debit entry, particularly when the assessee has shown that cash deposit was made out of withdrawal from Dena Bank. Therefore, I restore back the case to the file of assessing officer to reconsider the issue afresh and pass order in accidence with law. The assessee is at liberty to prove that the cash deposit was out of the withdrawal from Dena Bank and remaining credit in ICICI bank was also a result of share transaction. Needless to direct that before passing the order afresh, the assessing officer shall grant opportunity of hearing to the assessee. The assessee is also directed to provide complete details, evidences and information to the assessing officer and not to take adjournment without any valid reasons. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.
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2022 (11) TMI 375
Addition in respect of Mine Closure expense treating the same as deposit not considering the same as actual payment of liability - HELD THAT:- It is pertinent to note that the assessee company made provision in Mining Closure Fund as per the guidelines issued by the Ministry of Coal which is mandatory to each mining company. It is not disputed fact that the assessee made claim u/s 43B every year as and when the actual expenditure is made. The department in the past has accepted this position. The said provision is mandatory and the assessee has made the said provision in books of accounts following the guidelines of the Ministry of Coal. The issue of ascertaining the said provision is covered in favour of the assessee by the decision of the Hon ble Rajasthan High Court in case of Rajasthan state Mines and Mineral Ltd. [ 2019 (6) TMI 305 - RAJASTHAN HIGH COURT] as per the contentions of the Ld. AR. But the observation of the CIT(A) that the said Mining Closure Funds is not in the nature of tax, duty, cess, fee etc. as per Section 43B, appears to be justifiable as the guideline of Ministry of Coal has given the procedure and time period for the closure expenses to be incurred by the coal mine owners who are operating coal mines without the approval of any Mine Closure Plan. Thus, Section 43B claim is not applicable in assessee s case. Thus, the CIT(A) was right in the said context. As regards the decision of the Hon ble Rajasthan High Court the same is in the context of Section 37 claim made by the assessee therein. Thus, the said argument of the Ld. AR is rejected. Alternate argument that even if the Tribunal is of the view that provision of Section 43B are not applicable to mine Closure Expense than the amount or provision of for mine closure already disallowed by the assessee company u/s 43B of the Act in its computation of income during A.Y. 2013-14, should be allowed as expenses as the same has been made on accrual basis as per the Guidelines issued by Ministry of Coal and same relates to the business of the assessee appears to be correct. Since the assessee has to make provision for mine closure as the requirement of the Mine owners, the same should be allowed as expenses. Thus, appeal of the assessee is partly allowed.
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2022 (11) TMI 374
Nature of expenses - expenditure towards furniture and maintenance expenditure which includes plywood purchases, hardware items and other carpentry works - revenue or capital expenditure - Assessee claims that the said expenditure is revenue in nature because the same has been incurred for the leased premises for the renovation of the branch office - HELD THAT:- Assessee has filed enough materials including certain judicial proceedings to justify its case, where the Hon ble High Court of Madras in case of Commissioner of Income Tax-I, Chennai Vs. Armour Consultants Private Limited [ 2013 (3) TMI 269 - MADRAS HIGH COURT] had considered very similar nature of expenditure like partitions, vinyl flooring and interior decorations for leased premises and held that the said expenditure incurred to make the lease premises workable and functional is revenue in nature. ITAT, Chennai in the case of Redington (India) Limited [ 2015 (8) TMI 40 - ITAT CHENNAI] held that office cabins, wooden partitions, plastering, water proofing treatment, installation charges, flooring charges, etc for leased premises is current repairs which cannot be considered as capital expenditure which gives enduring benefits to the Assessee. The substance of ratio laid down by various Courts and Tribunals is that, if certain expenditure incurred to make the leasehold premises functional like partitions works, temporary repairs, flooring, etc., then the said expenditure should be allowed as revenue in nature. Therefore, we are of the considered view that the Assessing Officer has completely erred in making addition on furniture and maintenance expenditure as capital in nature. CIT (Appeals) without appreciating the above facts had simply sustained the additions made by the Assessing Officer. Hence, we set aside the order passed by the learned Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the addition - Appeal of assessee allowed.
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2022 (11) TMI 373
Depreciation on goodwill - zero asset shown in the books - HELD THAT:- In the present case, the assessee has quantified the subscription fee in entirety as goodwill which is an intangible asset being service provided to its 5000 subscribers. Thus, the assessee has demonstrated that as part of market practice, there is no standard rate or standard method prescribed for acquisition of such businesses. The valuation of assets is altogether different issue and no such standard valuation method is prescribed. The acquisition price is determined through negotiation and any amount which is paid over and above the book value of assets and liabilities is recognized as Goodwill in the books of acquiring company. It works principally on one to one basis wherein factors such as synergy, weave length, future proximities, area, industry, number of years etc. are facts are considered in determining the business valuation. In this type of businesses, the valuation of business is identified generally by way of potential number of subscriber and rates of subscriber fees applicable to them. In case the subscribers decrease in subsequent to becoming the partnership firm, the depreciation is claim on that basis. These contentions of the Ld. AR are accepted. Thus, in case of Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT ] the claim of the assessee appears to be proper. The contention of the Ld. DR that it has zero asset shown in the books of CRAZY NETWORK appears to be incorrect when the 5000 subscriber has entered into the partnership firm through CRAZY NETWORK which has added as assets to the partnership firm's assets. AO was not right in disallowing the claim of the assessee relating to depreciation on goodwill. Thus, appeal of the assessee is allowed.
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2022 (11) TMI 372
Exemption u/s 54F - investment in two flats - Scope of word 'one residential unit' - whether Flat Numbers 604 and 904 are different residential units or it is one residential unit for the purpose of Section 54F ? - HELD THAT:- In the case before us, it is an admitted fact that the assessee had purchased flats number 604 and 904. These flats were in the same building but on different floors. Different Hon ble High Courts have echoed that expression a residential house' would encompass different residential units located on the different floors of the same building. Respectfully following it is held that Flat Number 604 and 904 constitute one residential unit for the purpose of Section 54F for AY 2014-15 and hence assessee has fulfilled the conditions of eligibility for claiming exemption u/s.54F for the year. Therefore, it is held that the assessee is eligible for exemption u/s 54F - Appeal of the Assessee is Allowed.
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2022 (11) TMI 371
Denial of credit of tax deducted at source - objection of the Revenue is that the Appellant is claiming credit for tax deducted at source corresponding receipts of which have not been credited to the profit and loss account and therefore, not offered to tax - stand of the Appellant is that there was back to back arrangement with the Sub-Contractor and therefore, the entire receipts were passed on to the Sub-Contractor leaving Nil income to be disclosed in the return of income - HELD THAT:- We are of the view that while the Appellant cannot be denied the credit for credit for tax deducted at source in the facts and circumstances of the present case, the Revenue cannot be denied opportunity to examine the receipts and corresponding payments. The Appellant has placed on record, separate ledger account maintained showing receipts from NHAI and corresponding payments to sub-contractors - Accordingly, AO is directed verify that the receipts and deducibility of the corresponding payments reflected in the aforesaid ledger account during the relevant assessment year, and thereafter, allow the claim of credit of tax deducted at source by NHAI - With the aforesaid directions and in view of our findings Ground No. 1 to 4 are disposed off.
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2022 (11) TMI 370
Nature of expenses - upfront fee and other charges - Revenue or capital expenditure - whether payment towards loan for acquisition of plant and machinery which is providing enduring benefit to the assessee? - CIT(A) deleted the addition - HELD THAT:- As decided in Hon'ble Supreme Court in the case of Shri Rama Multi Tech Ltd. [ 2017 (4) TMI 669 - SUPREME COURT] expenditure towards payment of interest and loans taken for setting up industries by the assessee and financial charges , upfront fee , professional expenses etc. are allowable as revenue expenditure , we do not find any infirmity in the order of the Ld. CIT ( A ) on this issue. Accordingly, the grounds raised by the revenue are dismissed.
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2022 (11) TMI 369
Addition being deposit in Bank - HELD THAT:- As assessee has submitted the cash deposit summary before the lower authorities. The proof of amount received from his father as a gift is placed at record. The assessee has business receipts from Kishorbhai Sheladiya, assessee has received business receipts from Bramani Fashion, business receipts and assessee has withdrawn cash on 20.03.2014. This way the assessee has explained the cash deposit. We note that all the evidences pertaining to this cash receipts have been furnished before the lower authorities and they did not point out any defects in the evidences and the documents submitted by the assessee. We note that Ld. CIT(A) has not refuted or discredited these evidences and documents submitted by the assessee. The Ld. CIT(A) did not mention in his order that why he is not accepting these evidences submitted by assessee. It is a well-settled law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Hence, we delete the addition sustained by ld. CIT(A). Appeal filed by the assessee is allowed.
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2022 (11) TMI 368
Assessment u/s 153A - addition on account of unaccounted income - notings in seized material decoded and deciphered by the assessing officer - AO rejected the contention of the assessee and observed that during the course of search proceedings certain loose papers were found and seized and cash was found - document seized from the branch office belonged to the assessee and the responsibility to explain the content of seized document lies with the assessee - CIT-A deleted the addition - HELD THAT:- CIT(A) held that income arising from business activities carried out at the premises at Kolkata, subjected to search action u/s. 132, has been owned up and offered to tax by Shri Rajendrakumar Ramdas Patel for relevant assessment years and this has been accepted by both Investigation-Wing assessing officer at Ahmedabad. The assessing officer of assessee firm at Surat has deviated from this view, however, he has not given/placed on record any cogent evidences or given any discernible line of reasoning. There is no whisper in assessment order, as to the reason for not accepting the above view. Therefore, Ld. CIT(A) held that there is no reason to make any addition in hands of assessee-firm, as the addition in the hands of Shri Rajendrakumar Ramdas Patel (one of the partners of the assessee firm) was deleted. Accordingly, the impugned additions for assessment years 2011-12 and assessment year 2014-15 were deleted. That being so, we decline to interfere with the order of Ld. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue of both appeals, are dismissed. Addition made on protective basis on account of cash seized - CIT-A deleted the addition - as per revenue actual effect of ROI filed in the case of Shri Rajendra Ramdas Patel for A.Y. 2014-15 wherein the income offered to tax on account of disclosure u/s. 132(4) has been reduced by claiming set off of unallowable bad debt and thereby substantially reducing incidence of tax on the income disclosed u/s. 132(4) of the Act - HELD THAT:- We note that during the appellate proceedings, the Ld. CIT(A) observed that assessing officer has made addition in respect of cash found during search action u/s. 132 at the premises in Kolkata in the hands of assessee-firm on protective basis. The Ld. CIT(A) noted that when the cash found is owned up and offered by Shri Rajendrakumar Ramdas Patel in his Income Tax Return and also assessed accordingly by the Jurisdictional assessing officer in his hands. Hence based on this factual position, Ld. CIT(A) deleted the addition. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the ground raised by the Revenue.
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2022 (11) TMI 367
Jurisdiction of an AO - Assessee submitted that the assessment order dated 14/12/2018 was passed by the Income Tax Officer, Ward-12(3), Hyderabad, which falls within the jurisdiction of Range-12, Hyderabad, which is a salary range, where only the tax payers who are having salaried income are assessed to tax, whereas the assessee is not a salaried employee and, therefore, the order passed by the learned Assessing Officer is without jurisdiction and assessment order is void ab initio - HELD THAT:- As undisputed that in the earlier years the assessee was a salaried employee and the assessment was taking place in the salary range. For this year, depending upon the PAN, the case was allotted to Income Tax Officer, Ward-12(3), Hyderabad. Assessee never objected for the jurisdiction of AO. At no point of time, the assessee brought it to the notice of the authorities that because there is no salary income in this year, though according to the PAN the matter was allotted to the Income Tax Officer, Ward-12(3), Hyderabad as a matter of fact, the salary range has no jurisdiction over the assessee for this year. For that matter, it is not the case of the assessee that she was never a salaried employee. Assessment order starts with the sentence that the assessee, salaried employees has filed , suggesting that the assessee filed returns of income earlier years as a salaried employee. Basing on the PAN, the case was picked up for scrutiny by the Income Tax Officer, Ward-12(3), Hyderabad. Assessee never objected to the jurisdiction of Income Tax Officer, Ward-12(3). On this aspect, section 124(3) of the Act mandates that no person shall be entitled to call in question the jurisdiction of an Assessing Officer, where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier. Having regard to the legislative policy in enacting 124(3) of the Act, no different conclusion can be reached in the case on hand. Legislature is very clear in laying down the policy that no questions relating to the jurisdiction of the learned Assessing Officer in a matter where the return under section 139(1) of the Act, shall be entertained after expiry of one month from the date on which the notice under section 142(1) of the Act was served. Thus neither the facts nor law are in favour of the assessee. Though the want of inherent jurisdiction vitiates the proceedings ab initio, lack of pecuniary or territorial jurisdiction does not vitiate the proceedings ipso facto but it requires the proof of resultant failure of justice because of such want of jurisdiction. This is the policy of the legislature under section 21 of the CPC as well as section 124(3) of the Act. We, therefore, find it difficult to sustain the argument advanced by the learned AR that the assessment is void ab initio for want of territorial jurisdiction with the learned Assessing Officer. We accordingly reject the contention advanced on behalf of the assessee that the assessee order is void ab initio for want of jurisdiction with the Income Tax Officer, Ward-12(3), Hyderabad. Deduction u/s 54 - Admittedly, assessee does not purchase the flat under the self-financing scheme of DDA. She, therefore, relies on Circular No. 672 wherein the board having considered the matter, decided that if the terms of the schemes of allotment and construction of a flats/houses by the cooperative societies or other institutions are similar to those mentioned in para to of the board circular No. 471, dated 15/10/1986, such cases may also be treated as cases of construction for the purpose of section 54 and 54F of the Act. Though reliance is placed on the Circular Nos. 471 and 672, no material is produced before us to show that the assessee purchased the flat from any co-operative society or other institution under the schemes of allotment and construction of flats/houses which have the trappings of the self-financing scheme of DDA referred to in Circular No. 471. Purchase of property from a private real estate agency cannot be equated with DDA or any co-operative society and essentially the terms of purchase should match the scheme under which the DDA/any co-operative society, allots and constructs the flats/houses. Admittedly, the assessee did not deposit the un-utilized amounts in a notified bank account as required under law. In Humayun Suleman Merchant [ 2016 (9) TMI 70 - BOMBAY HIGH COURT] it was held that where the assessee filed return of income and entire amount which was subjected to capital gain tax had not been utilized for the purpose of construction of new house, nor were un-utilized amounts deposited in notified bank accounts before filing return of income, the assessee is not entitled to claim deduction of that part of capital gains. This decision covers the case on hand. On a careful consideration of the facts and law on this aspect, we do not find anything illegality or irregularity in the action of the authorities below and accordingly the grounds of appeal are devoid of merits. - Decided against assessee.
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2022 (11) TMI 366
Disallowance of expenses claimed - assessee has not carried on any business activity - assessee is aggrieved by the decision of CIT(A) in upholding assessment of interest income under the head Income from other sources rejecting the claim of the assessee to assess the same under the head Income from business - HELD THAT:- On a perusal of the financial statements, we notice that the securities held as stock in trade has been attached by SEBI, meaning thereby, the assessee could not have carried on trading activities at all, even if the claim of the assessee is accepted on merits. This leads a situation that the assessee could not have carried on trading activities. Further, notice that the assessee has not brought in fresh funds in order to continue to carry on share trading activities. Under these set of facts, we do not find any merit in the contentions of the assessee and accordingly, we hold that the assessee has not carried on any business activity during the financial year relevant to AY 2008-09. CIT(A) has allowed part of expenses, but it is the contention of the assessee that the CIT(A) has not allowed all relevant expenses, particularly depreciation and other relevant expenses. Hence, the expenses required to be incurred in order to maintain the corporate status, legal expenses and other necessary expenses which are required to be incurred invariably to run the company should be allowed as deduction in the hands of the assessee. Accordingly, we modify the order passed by Ld CIT(A) on this issue and direct the AO to allow all expenses incurred to maintain corporate status, legal expenses and other necessary expense which are required to be incurred invariably in order to run the company. AO may decide the quantum of expenses after affording opportunity to the assessee. Nature of Interest Income - With regard to the issue of the head of income under which the interest income is assessable, restore this issue to the file of AO, since the AO has not made any discussion on the same. The nexus between the deposits and business compulsions should decide the head of income under which the interest income is assessable. Accordingly, the AO may examine this issue afresh after affording adequate opportunity of being heard to the assessee. With regard to the revaluation loss claimed by the assessee, same should be allowed as deduction, since the revaluation of stock as at the yearend was the consistent practice followed by the assessee. Such revaluation will not fall within the scope of ban imposed upon the assessee with regard to share broking and merchant banking activity of the assessee. Accordingly, direct the AO to allow loss arising on revaluation of stock of securities.
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2022 (11) TMI 365
Validity of reopening of assessment u/s 147 - Eligibility of reasons for reopening - HELD THAT:- Admittedly, in the instant case, the Assessing Officer has not stated or pointed out in the reasons recorded for reopening that there was such failure on the part of the assessee. Further, there are two different versions of reasons for reopening . Since the AO has reopened the assessment without pointing out that there was failure on the part of the assessee to disclose fully and truly all material facts, we hold that the impugned reopening is bad in law and accordingly quash the orders passed by the tax authorities for A.Y. 2011-12. Validity of assessment u/s 153A - HELD THAT:- In the instant cases, the assessments of AY 2012-13 to 2016-17 were not pending as on the date of search and hence they would fall under the category of unabated/finalized/completed assessments . There is also no dispute with regard to the fact that the search officials did not unearth any incriminating material during the course of search warranting interference of the issues already stood concluded in unabated assessments. Hence the decisions rendered by the Hon ble Jurisdictional Bombay High Court in the case of Continental warehousing Corporation (Nhava Sheva) Ltd [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] and Gurinder Singh Bawa [ 2015 (10) TMI 1761 - BOMBAY HIGH COURT] in our view, shall squarely apply to the facts of the present case. Accordingly we hold that the AO, in the absence of any incriminating material found during the course of search relating to the impugned additions, was not justified in assessing them in AY 2012-13 to 2016-17. Bogus LTCG - Addition made u/s 68 in respect of Long term capital gains shown by the assessee - HELD THAT:- We notice that an identical case of allegations that the assessee has availed accommodation entries by way of capital gains in order to convert unaccounted money into accounted one, was examined in the case of Shyam Power [ 2014 (12) TMI 977 - BOMBAY HIGH COURT] and in the present case as noticed that the AO has simply relied upon the report of the investigation department and held that the long term capital gains declared by the assessee are not genuine. No other material was brought on record by the AO to prove that the assessee has indeed availed only accommodation entries. We noticed that the assessee has furnished all documents relating to purchase and sale of securities. The shares have entered and exited his demat account. The purchase and sale transactions have been routed through the bank accounts of the assessee. All these documentary evidences produced by the assessee have not been disproved. Thus we hold that the tax authorities are not justified in disbelieving the long term capital gains declared by the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition - Decided in favour of assessee. Addition made on the basis of information found in the application filed before Income tax Settlement Commission - HELD THAT:- We notice that an identical issue has been examined by the co-ordinate bench in the case of A.T Trade Overseas P Ltd [ 2022 (5) TMI 152 - ITAT MUMBAI] wherein as deleted the additions made by the Assessing Officer by solely relying on the information submitted before ITSC without there being any material in support of proposed addition - thus in the present case we direct the AO to delete this addition. Charging of Education cess - HELD THAT:- As in view of the retrospective amendment brought in by Finance Act, 2022 holding that the education cess is not allowable as deduction, we hold that the claim of the assessee is not tenable. Accordingly, we reject this ground of the assessee. Cash credits in the form of unsecured loans received and also the interest paid on it - HELD THAT:- We notice that the ld CIT(A) has deleted the addition by making due enquiries, which have also been confronted with the AO. We further notice that the AO has examined source of source, i.e., the assessee had received loans from M/s Anjani Towers P Ltd and the AO has proceeded to examine the loans, in turn, received by M/s Anjani Towers P Ltd. In any case, the enquiries made by the Ld CIT(A) has shown that the said loans are genuine. The Ld CIT(A) has also given a finding that the assessee has discharged his initial onus placed upon him u/s 68 of the Act, which could not be disproved by the AO. Accordingly, we are of the view that the decision rendered by Ld CIT(A) on this issue does not call for any interference. Unexplained cash expenditure - HELD THAT:- There is some merit in the submission of Ld A.R that the expenses in cash could have also been incurred in the earlier years. The contention of the assessee was that these expenses have been incurred out of savings available with all the family members, even though the assessee could not substantiate the said claim. Hence, on a conspectus of the matter, we are of the view that it can be presumed that the major expenses would have been incurred in the earlier years and a portion might have been incurred in the year relevant to AY 2018-19. Accordingly, in order to put this issue at rest, we estimate that the assessee would have spent 10% of the cash portion of expenses during the year relevant to AY 2018-19. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict disallowance to 10% of the addition made by the AO. Unexplained expenditure - HELD THAT:- As all these expenses pertained to the period prior to 31.3.2017 and there is no evidence to show that these payments have been made after 1.4.2017. Hence, we are of the view that these addition cannot be made in A.Y. 2018-19. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete this addition. Addition u/s 68 - unexplained cash credit - basis for making this addition is a statement sheet found during the course of search - HELD THAT:- As noticed earlier, the cash transactions found in this impugned statement relate to the financial years 2011-2014. The case of the assessee is that the same represents commission income on the turnover canvassed by him during the financial years 2009-10 to 2012-13. In effect, none of these transactions pertained to 2018-19 and hence the Assessing Officer could not have made this addition in this year. Accordingly we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
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2022 (11) TMI 364
TDS u/s 194C - addition u/s. 40(a)(ia) - non-deduction of TDS on carting expenses - assessee has failed to furnish the details of PANs of the carting parties before the AO during the original assessment proceedings and therefore failed to comply the provisions of sec. 194C(6) of the Act - HELD THAT:- We note that assessee submitted before us, PANs of the payees and PAN is mentioned in respective bills. We also note that Form-26Q was verified by Ld. CIT(A) and after verification of Form-26Q, the CIT(A) deleted the addition. We note that assessee has furnished details of PAN which were mentioned in Form-26Q therefore as per the provision of section 194C(6) of the Act, the addition should not be made in the hands of assessee. For that, reliance can be placed on the order of Soma Rani Ghosh vs. Deputy Commissioner of Income-tax [ 2016 (10) TMI 55 - ITAT KOLKATA] Therefore, we note that since the assessee has filed Form-26Q, PAN number of the payees and the assessment year under consideration is A.Y. 2011-12, therefore we note that there is no infirmity in the order passed by Ld. CIT(A). That being so, we decline to interfere in the order passed by Ld. CIT(A) and Revenue's appeal is hereby dismissed.
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2022 (11) TMI 363
TP Adjustment - transaction of payment of royalty - HELD THAT:- As in not in dispute that Sony Corp has invested significant amount and efforts in developing, manufacturing intangibles and for which it should be suitably remunerated and since the assessee has received license to use these value intangibles during the course of its operations in India, the assessee was duty bound to pay royalty for the simple reason that Sony Corp would not allow any third party to use its intangible properties created through large amount of investment without receiving any sort of consideration. It is also not in dispute that the assessee has licensed technology and trade mark from Sony Corp and further licensed them to OEMs and the OEMs manufacture these goods based on technology sub licensed by the assessee and sells them back to the assessee for which the assessee pays royalty at an agreed percentage of net selling price and this payment of royalty by the assessee instead of OEMs is due to commercial necessity and payment of royalty transaction is already bench marked under TNMM. Considering the facts of the case in totality, we do not find any merit in the TP adjustment in respect of transaction of payment of royalty and accordingly direct the Assessing Officer to delete the adjustment - This ground with all its sub-grounds is allowed and accordingly, grievances raised vide Ground Nos. 1 to 40.6 become otiose. TP adjustment in respect of transaction of provision of Advisory Services - We find force in the concession made by the ld. counsel for the assessee and the ld. DR. We find that the DRP has, in fact, summarily rejected the contentions/objections of the assessee without giving any detailed findings on facts. Therefore, we restore this issue to the file of the DRP. The DRP is directed to decide the objections raised by the assessee by a detailed and speaking order after affording reasonable and adequate opportunity of being heard to the assessee. Accordingly, Ground Nos. 41 and 42 with all its subgrounds are allowed for statistical purposes. TP adjustment in respect of outstanding receivables - We find that the objections of the assessee have been suitably addressed by the DRP by extending credit period from 30 days to 60 days, netting off payables and charging of interest of net receivables and acceptance of LIBOR instead of SBI base rate. We, therefore, do not find any reason to interfere with the findings of the DRP. AO is directed to follow the directions of the DRP in letter and spirit and apply LIBOR rate without any further addition. Grounds Nos. 43 to 46 are accordingly decided as per our above directions. Disallowance of stock valuation loss - As we have to state that the observations/comments by the Assessing Officer on application of Accounting Standard 2 is without any merits and, in fact, uncalled for. Secondly, it is an undisputed fact that the assessee has been consistently following the same method of valuation of closing stock which was cost or net realizable value, whichever is lower. Thus we direct the Assessing Officer to delete the impugned addition/disallowance. Disallowance of expenses on corporate social responsibility u/s 115JB of the Act by treating it as apportion of profits - None of the clauses above provides that CSR expenses have to be added to book profit. Except for the wild imagination of the Assessing Officer by no stretch of imagination, it can be said expenditure on CSR expenses is a transfer to/from reserve. Hon'ble Apex Court in Apollo Tyers [ 2002 (5) TMI 5 - SUPREME COURT ] have clearly laid down that the AO or assessee, none can tinker with book profit disclosed in audited account. It is not the case that the accounts have not been prepared as per accepted accounting principle. Once the accounts have been prepared in accordance with standards in this regard, this tinkering by the Assessing Officer has no sanction of law. We have no hesitation in setting aside the addition to book profit in this regard. MAT computation u/s 115JB - As provision for warrantee is an ascertained liability, therefore, we direct the Assessing Officer to consider it as an allowable deduction in computing the book profit u/s 115JB. Non grant of deduction u/s 80G - We direct the Assessing Officer to consider the same as per the provisions of law. The assessee is directed to furnish necessary evidences in support of its claim and the Assessing Officer is directed to examine the same and decide the issue after affording reasonable and adequate opportunity of being heard to the assessee. This issue is allowed for statistical purposes.
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2022 (11) TMI 362
Exemption u/s 11 - assessee trust was not registered u/s 12AA - HELD THAT:- Undisputedly, the assessee trust though a charitable trust registered under Bombay Public Trust Act, has not been got itself registered under section 12AA of the Act, however got itself registered u/s 12A only on 24.09.2018 i.e. after completion of the assessment proceedings. It is also not in dispute that the assessee has claimed deduction on account of certain expenses claimed to have incurred on the object of trust, on account of legal and miscellaneous expenses etc. which have been disallowed by the AO on the sole ground that the assessee trust has not been registered under section 12A of the Act. Appeals filed by the assessee are dismissed.
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2022 (11) TMI 361
Reopening of assessment u/s 147 - HELD THAT:- We heard the rival submission and considered the documents available in the record related to the grounds of the appeal by challenging the notice u/s. 148, AO has erred to issue the notice by mentioning Rs. 10 lac paid by the assessee. The said notice has no relevance with the observation in factual aspect. The reasons recorded in fact there is no live nexus related to this payment and assessee's books of account. Recorded reasons itself erroneous and the notice is liable to be quashed. Bogus purchases - The assessee by his evidence able to prove the transaction with the party and also the next stage of transaction was also proved. None of the parties denied the said transactions. In fact, the assessee had not filed return during the assessment year. But in succeeding year the return was filed. There was no proof that the said amount was returned back to the assessee by other mode of transactions. Respectfully considered the order of the Apex Court, the assessee is able to proof the transaction with the party and business activities are going on just beyond the doubt.
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2022 (11) TMI 360
Addition u/s 68 - assessee has shown its return of income u/s 44 AD - Admittedly, the assesse declared deemed profit u/s 44AD being 8% business turn over - HELD THAT:- As in the present case, the provisions of section 69A cannot be applied. Asking the assessee to prove to the satisfaction of the AO the expenditure to the extent of 92% of gross receipts, would also defeat the very purpose of presumptive taxation as provided u/s 44AD or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses, AO could have made the addition un/s 69A of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD - No such exercise has been done either by the AO or by the CIT(A) in this case. From the record, it is undisputed fact that the assessee had not maintained books of account that is why he opted for 8% income as per section 44AD - The section also does not put obligation on the assessee to maintain books of account, more so, in view of the fact that his income has been assessed as per section 44AD he cannot be punished for not maintaining the same. Such additions go against the spirit of the Section 44AD of the Act, which was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis. Since, AO nor the CIT(A) had done any exercise to carved out the case out of the glitches of the provisions of section 44AD of the Act. The authorities below have not given any reason as to why the provisions of Section 44AD of the Act are not applicable to this case and hence, the addition confirmed was against the spirit of the Section 44AD of the Act. - Assessee appeal allowed.
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2022 (11) TMI 359
Revision u/s 263 by CIT - Capital gain computation - assessee furnished documentary evidences of all such expenses except documentary evidences of indexed cost of construction expenditure on account of RIICO norms for which the AO issued notice u/s 142(1) demanding the documentary evidences for the aforesaid expenses - HELD THAT:- Section 50 would not apply in such case. Even the ld. AR of the assessee demonstrated us that while calculating the effect of the depreciation claimed for one year is already given and the same is considered by the AO by taking a plausible view. Thus, it is found that the AO has rightly allowed the claim of the assessee and there is no infirmity in his order. As regards the capitalization of interest cost, it is noted that borrowing from SBBJ was duly reflected in the balance sheet as on 31-03-2002 as Loan (SBBJ) - The loan was taken in the name of partner but it was availed by the firm and duly appearing the in the books of the firm this fact is also not disputed by the revenue. The bank statement was furnished by the assessee and considered by the AO while passing the order and the ld. PCIT is finding fault from the same is taking a different view on the matter for which the AO has already applied his mind. As also notable that SBBJ had merged with SBI at the time when the assessee took the copy of the bank statement of earlier period. All these transactions are duly recorded in the audited books of accounts and has duly submitted in the assessment proceedings and the same is duly considered by the AO thought the specific comments does not hold the order as prejudicial to the interest of revenue. Thus, accepting the same has not resulted into any error on the part of the AO as it is a visible document already placed on record. Thus, there is no infirmity in the order of the AO. As regards the shop under construction, it is noted that the same was constructed in F.Y. 2000-01 and the opening balance as on 01- 04-1981 as per ledger account and the same was on account of software issue of tally software which the AO has not objected when the same is correctly claimed from the year when the construction is made instead of 01.04.1981. This fact in fact in the interest of revenue and correctly observed even by the PCIT in his order. It is also noted from the available records that this fact of construction falling in F.Y 2000-01 was conveyed by the assessee to the AO vide submission dated 18-08-2018 before him - Thus, it is found that the indexation was rightly claimed and allowed by the AO after proper satisfaction and we find no infirmity in his assessment order on the issue in question. Taking into consideration all the facts and points raised by the ld. Pr. CIT, Jaipur-1, it is found that the assessee complied with the enquiries made by the AO by filing the required details. This is not a case where the AO has not made any enquiry. We also find that in the present case the capital gain offered by the assessee is almost 95.36 % of the total sale consideration and has offered the substantial amount of capital gain and the deduction claimed is less than 5 % only and the issues raised in proceedings u/s 263 of the Act were already considered and examined by the AO. As also notable that initiation of proceedings u/s 263 of the Act amounts to second scrutiny/ investigation of the facts of the case and is mere suspicion on the plausible view taken by the AO, without any material on the record to show that assessment order passed by the AO was erroneous, the proceedings u/s 263 of the Act are not valid as held in the case of CIT vs. Trustees Anupam Charitable Trust [ 1986 (9) TMI 26 - RAJASTHAN HIGH COURT] , CIT vs. Godawari Sugar Mills Ltd. [ 1992 (11) TMI 35 - BOMBAY HIGH COURT] and CIT vs. Shakti Charities [ 2000 (2) TMI 75 - MADRAS HIGH COURT] The order passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. The AO adopted the plausible view and after considering the evidence submitted before him, in such a situation the invoking of provisions of Section 263 by the ld. Pr.CIT-1 is only to carry out fishing enquiries with objective of substituting his views in place of AO s view, which is not permissible in law as held by ITAT, Mumbai Bench in the case of Narayan Tatu Rane [ 2016 (5) TMI 1162 - ITAT MUMBAI] Considering all these ratios of the judgement and respectfully following the judgement of Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax, Vs Ganpat Ram Bishnoi where in the court has held that jurisdiction u/s. 263 cannot be invoked for making short enquires or to go into the process of assessment again and again merely on the basis of that more enquiry ought to have been conducted to find something more. In this case we have seen that the out of 100 % sales consideration 95.36 % is offered as capital gain and the claim of the assessee is less than 5 % of the total consideration in this case, thus, what more AO can find fault when he has already disallowed the cost which in his opinion is not supported and thus AO has already verified the issues which the PCIT is pointing out. Thus, in view of the above deliberations we do not concur with the findings of the ld. Pr.CIT and thus the order of the AO is restored by allowing the appeal of the assessee.
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2022 (11) TMI 358
Addition u/s 69C r.w.s.115BBE - Payment of credit card by cash as a unexplained expenditure - case was selected under CASS for limited scrutiny purposes to verify large cash payments made for credit card purchases - HELD THAT:- Addition made by AO without any adverse comment on the cash-book of the assessee (business cash book and personal cash book), additions made will be counted in the category of guess work and without application of mind. The order of Ld. CIT(A) is also absurd may he observed It is intriguing to note that why the appellant has an easy and convenient mode of payment to pay his credit card bills in the form of net banking, why would he get into a cumbersome mode of withdrawing cash from the bank account by physically going or sending a person to bank branch and then again go physically to the City Bank Branch to pay credit bills . This opinion of CIT(A) would have considered appropriate, in case AO had examined the cash book of the assessee and furnished specific remarks about the cash book. The power of CIT(A)is coterminous with that of AO, but an AO can do or his supposed to do, can be done by Ld. CIT(A) also. Being superior authority, his duty is to improve upon the assessment order passed by the AO considering the facts of the case and applicable law. Sec. 69C falls under income from other sources and in the category of deeming provision. Without establishing conclusively, a section like 69C falling under the head Income from Other Sources and that is to, a deeming section, no adverse inference can be drawn against the assessee. We found the order of AO and Ld. CIT(A) are based on conjunction and surmises. Appeal filed by the assessee is allowed.
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2022 (11) TMI 357
Reopening of assessment u/s 147 - weighted deduction u/s 35(1)(ii) - HELD THAT:- In order to be eligible for such weighted deduction u/s 35(1)(ii) assessee had given donation of Rs.1.00 Crore to School of Human Genetics and Population Health concern which is registered u/s 35 - As regards School of Human Genetics and Population Health (Research Organisation), a report was received by the investigation Wing, Kolkata to the AO that a survey action u/s 133A of the Act was conducted which had approval u/s 35(1)(ii). As further observed that during the course of survey proceedings conducted on 27-01-2015 in the case of School of Human Genetics and Population Health (Research Organisation), it came to the light that the donors in connivance with various brokers, entry operators, donees etc. misued the benefit conferred u/s 35(1)(ii) of the Act by undertaking bogus donations. The AO elaborately discussed the modus operandi of misusing the amount in the garb of donations to the School of Human Genetics and Population Health (Research Organisation) who subsequently disallowed the deduction and Rs.1.75 crore was added back to the income of the assessee. In first appeal, the assessee took the resort of ITAT, Jaipur Bench, Jaipur order dated 05-07-2018 whereby the appeal of the assessee for the assessment year 2012-13 was allowed by ld. CIT(A). It is noteworthy to mention when School of Human Genetics and Population Health (Research Organisation) before the Settlement Commission for the assessment year 2012-13, 2013-14 and 2014-15 had accepted that it did not carry out significant research work in the fields for which it was granted exemption/ approvals and the alleged donations received from the donors were refunded. All the judicial precedents available were even in the case of the assessee s own case and other relied upon judgments are prior to the decision of the settlement commission in the case of the party to whom the donation were given and also prior to the judgement of Honourable supreme court in case of CIT V Batanagar Education trust [ 2021 (8) TMI 139 - SUPREME COURT] where cancellation of registration of The Trust u/s 12 A as well as 80 G were upheld and this trust has also connection to the same society where the assessee has. Thus, when the recipient of donation has confirmed that donation were taken in lieu of cash and no activity is done, it would be too na ve to believe that assessee has donated sum in good faith. The Bench feels that the assessee has adopted the unfair means to take the benefit under the garb of Section 35(1)(ii) amounting to Rs.1.75 Crore. Hence, taking into consideration the above facts, circumstances of the case as well as the order of the Hon ble Settlement Commission, we do not concur with decisions of the ld. CIT(A). Thus, the appeal of the Department for the assessment 2012-13 is allowed. It is not imperative to repeat the facts of the Departmental appeal for the assessment year 2013-14 being similar issue, therefore, the decision taken by us in the appeal of the Department for the 2012-13 shall apply mutatis mutandis. Thus, both the appeals of the Department are allowed.
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2022 (11) TMI 356
Revision u/s 263 by CIT - disallowing the provision for foreseeable losses in the computation of book profits u/s. 115JB - HELD THAT:- Assessee has created provisions for foreseeable loss for complying with the requirements of AS-7 and hence is an allowable deduction as it is only an ascertained liability. The provision for foreseeable loss being an ascertained liability, the same is treated as an allowable expenditure while computing book profits u/s115JB of the Act. We also find that the Ld. AR rightly placed reliance on the co-ordinate bench decision of this tribunal in the case of Summit Securities Ltd. [ 2020 (10) TMI 1343 - ITAT MUMBAI] wherein this provision for foreseeable loss was accepted to be an ascertained liability and hence allowable as deduction. Moreover, even in the following judicial precedents, it has been held that provision for foreseeable loss created as per AS-7 is an allowable deduction u/s 37. It is trite law that there is no estoppel against the statute. PCIT is duty bound to bring on record that the said item would be an eligible item for adding back while computing book profits u/s. 115JB of the Act, which had admittedly not done by the Ld. PCIT in the instant case. PCIT has also not applied the ratio decidendi laid down in the case of Apollo Tyres Ltd. [ 2002 (5) TMI 5 - SUPREME COURT] wherein the Ld. AO could not make any additions or deletions beyond what is prescribed in the list of items as per Explanation 1 to section 115JB(2) of the Act. In the instant case, there is no dispute that the said provision for foreseeable loss has been made in accordance with the guidelines and mandate provided in AS-7 issued by ICAI and hence we hold that the said provision is an ascertained liability and hence an allowable expenditure under section 115JB of the Act. It is pertinent to note that the said practice has been consistently followed by the assessee in the previous as well as subsequent years and has been also accepted by the Department except for the year under consideration. Hence, it could be seen that even on merits, the provision made for foreseeable losses would only be an ascertained liability and hence, it does not fall under any of the items listed in Explanation 1 to Section 115JB (2) of the Act warranting addition thereon. Hence, even on merits, this provision deserves to allowed while computing book profits u/s. 115JB of the Act. Appeal of the assessee is allowed.
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2022 (11) TMI 355
Bogus share transaction - off-market share transactions as not genuine transactions - HELD THAT:- Entire case-records were confronted by the revenue authorities to the assessee and the modus of operation regarding these purchases and sales of shares through off-market trading but the assessee could not provide any answer. A.R before us also admitted that the share transactions entered into by the assessee were off-market transactions and not done through any recognized stock-exchange. A.R could not submit any reason why such off-market trading was resorted to when the share transactions could genuinely be done through recognized stock-exchange. Therefore, upon examination of the facts and circumstances of this case, we are in conformity with the submissions of the D.R that the modus of operations of the share transactions adopted by the assessee through off-market trading and the corresponding claim of loss and also the profit are fictitious, fabricated, false and bogus. We do not find any reasons to interfere with the findings of the CIT(A) and the same is upheld. Ground No. 1 of the appeal of the assessee is dismissed. Addition of share subscription money received - HELD THAT:- The assessee-company was under legal obligation to prove the genuineness of the transactions, identity and creditworthiness of the creditors and the investors and whether they have financial capacity to make the investments in question. This primary onus of the assessee has not been discharged as contemplated u/s 68 of the Act. A.O has done his duty by issuing summons and has done detailed examination of the facts and circumstances of the case. However, the assessee-company has not submitted any documentary evidences for ascertaining whether the transactions were genuine or not and neither have established through any materials/documents that the share subscription money received were not bogus or that they were not name-lending entries. In fact, the summons remained unanswered by these shareholders which were issued and served by the ld. A.O. We are therefore, of the considered view that the creditworthiness of the shareholders are not established, the genuineness of the transactions are also not established and in majority cases the identity of the creditors also not established by the assessee. Thus, there is no reason to interfere with the findings of the CIT(A) in this issue and the additions made by the ld. A.O of Rs. 2,55,00,000/- and as confirmed by the ld. CIT(A) is hereby upheld. Ground No. 2 of assessee s appeal is dismissed.
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2022 (11) TMI 354
Rejection of books of accounts - Net profit estimation - application of net profit rate of 8% on gross turnover - HELD THAT:- AO while framing assessment has totally lost sight of the fact that during the year under consideration the Audited Accounts for year under consideration as well as for past assessment years were undisputedly available with the Department. It is not the case of the AO by drawing comparison with the past years Audited Accounts in the year under consideration assessee had either shown certain expenses in abnormal terms or that certain expenses were debited for an abnormal amount. Hon'ble Delhi High Court in the case of Additional CIT Vs Jai Engineering Works [ 1978 (2) TMI 94 - DELHI HIGH COURT] had the occasion to consider a question that whether the report of the Auditor could be said to be 'material' on which reliance could be placed by the Income Tax Authorities. The Hon'ble High Court while approving the order passed by the Tribunal ruled that in case where books are not made available for AO's verification the AO should rely on the Audit Report because the said evidence is admissible under Indian Evidence Act, 1872. What would be the reasonable rate of Net Profit? - Since, the turnover has gone down but higher than the earlier years. Therefore, relying the past years trading results, in the present case, it may be an appropriate guide to go by past history. We are of the view, that it would be just fair, therefore, to apply N.P rate of 6% on gross receipts - We also make it clear that assessee shall not be entitled for any other deduction such as depreciation and interest paid. Thus, ground no. 1 is partly allowed.
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2022 (11) TMI 331
Addition made u/s. 69A r.w.s. 115BBE - cash deposited during demonetisation period as unexplained - HELD THAT:- As it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. Assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Appeal filed by assessee as well as the appeal of revenue stands allowed for statistical purposes.
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Customs
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2022 (11) TMI 353
Denial of exemption from Basic Customs Duty to goods imported by the Transferees under Transferrable Duty Free Import Authorisation (DFIA) - Seeking initiation of appropriate action against their erring Officers who have failed to deny exemption from Basic Customs Duty to goods imported by the Transferees under Transferrable Duty Free Import Authorisation (DFIA) - non-fulfilment of condition contained in first proviso to condition (iii) of the Custom Notification No.19 of 2015 and/or issued Transferrable DFIAs contrary to the provisions and spirit of Foreign Trade Policy. HELD THAT:- The petitioner cannot seek any action against the officers of the respondents who have reasonably construed the provisions of the FTP or the conditions of the Notification as per the plain language thereof. What petitioner seeks is to read into the provisions of FTP namely in Paragraphs 4.12(i) and 4.12(ii) and also in the first proviso to Condition (iii) of the Customs exemption notification, further words namely the same quality, technical characteristics and specification , which are specifically omitted. Such beneficial DFIA scheme which is intended for export promotion, cannot be construed in such manner as suggested by the petitioner. Such recourse would be ex facie erroneous and illegal. It is amply clear that whereas these further words i.e. same quality, technical characteristics and specification are categorically used in Paragraph 4.30 of FTP and also in the second proviso to the condition (iii) of the Customs Notification No.19 of 2015, however they are absent in Paragraph 4.12 of FTP and also in first proviso to condition (iii) of the said Customs Notification. These further words i.e. same quality, technical characteristics and specification cannot be read in Paragraph 4.12and also in first proviso to condition (iii). These further words would apply only while making declaration in shipping bills in respect of sensitive inputs specified in Paragraph 4.30 of FTP, while issuing DFIA in respect of such specified sensitive inputs, or while duty free import of such specified sensitive items under such DFIA to establish close nexus with the specified sensitive inputs used. Neither the officers nor any Transferee of a transferrable DFIA issued by the office of DGFT can be subjected to any of the impediments as suggested by the petitioner in the garb of public interest. The officers of the respondents are rightly complying with these binding precedents. Neither the officers of the respondents can be proceeded against for complying with the provisions and notification while following such binding precedents, nor can a Original Licence Holder or a Transferee can be denied issuance of any DFIA or exemption under a Transferrable DFIA by subjecting them to any such unintended onerous condition or declaration, direction for which are sought in the petition - no action is warranted against the officers of the respondent-Union of India even on prima facie basis. The PIL is liable to be dismissed.
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2022 (11) TMI 352
Misdeclaration of imported goods - Aluminium Extrusion Scrap (Tread) or Aluminium Tread grade (Aluminium sheet)? - Confiscation - redemption fine - penalty - HELD THAT:- The assessment was made on the basis of the department s claim and the appellant have paid the duty. The said assessment was not challenged by the appellant therefore at this stage, the classification cannot be conclusively decided. However, for the purpose of redemption fine and penalty, a prima facie view has to be taken on the nature of goods. From the inspection report, it is observed that the goods was found attached with panel board of Aluminium Sheet or the fresh tradable goods. In this fact, it is found that it cannot be conclusively held that the goods are not Aluminium scrap. From the description such as panel board, it appears that the panel board is made up article of aluminium sheet, the panel board cannot be said to be fresh material or Aluminium sheet. It appears that the said goods is used material therefore, the same can be classified as aluminium scrap however, only a prima facie view is drawn on the nature of the goods at this stage as the classification of goods attained finality with the assessment of bill of entry and the same was not challenged - thus, considering the prima facie view about the goods and in the facts and circumstances of the present case, the redemption fine and penalty imposed by the lower authorities are very excessive and the same deserves to be reduced. The redemption fine is reduced from Rs.6 lacs to Rs.1 lac and penalty is reduced from Rs.2 lacs to Rs.35,000 - appeal allowed in part.
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2022 (11) TMI 351
Rejection of refund claim - rejection on the ground that Appellant had not challenged the assessment of Bills of Entry - HELD THAT:- Hon‟ble Supreme Court in the case of PRIYA BLUE INDUSTRIES LTD. VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) [ 2004 (9) TMI 105 - SUPREME COURT] learned Commissioner (Appeals) has held that where an assessment order is final a refund claim cannot be filed without first challenging the assessment that was done by the officer. On a plain reading of Section 154 of the Act, it is manifest that not only clerical or arithmetical mistake in any decision or order, but errors arising from any accidental slip or omission may, at any time, be corrected by the concerned authority - the mention of wrong HSN code 28092010 instead of correct HSN code 28111990 in Bill of entry was an accidental slip and leading to erroneous collection of anti-dumping duty. The point of dispute is as to whether before filing the refund claim of the excess duty paid due to errors / mistakes, the assessment order was required to be challenged. This very issue had been dealt with by the Tribunal in the cases of TATA IRON STEEL CO. LTD. VERSUS COMMISSIONER OF CUSTOMS (PORT), KOLKATA [ 2006 (7) TMI 363 - CESTAT, KOLKATA] and CELCIUS REFRIGERATION PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2007 (3) TMI 446 - CESTAT, NEW DELHI] wherein the Tribunal has held that mention of wrong currency in the bill of entry as the application of wrong exchange rate is a clerical mistake and when on account of such clerical error a higher amount of duty has been paid the re-assessment is not required before filing of refund claim, as the clerical mistake can be corrected in terms of the provisions of Section 154 of the Customs Act, 1962. In the present case the payment of anti dumping duty is not due to assessment or reassessment of Bills of entry but merely by a letter from the department, therefore there is nothing in the bills of entry to challenge. Even the amount collected thru a letter by the department was also not adjudicated by due process of law such as issuance of show cause notice and adjudication thereof, for this reason also there is no need to file any appeal in order to claim the refund of anti dumping duty paid by the appellant. Appeal is allowed.
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Corporate Laws
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2022 (11) TMI 350
Seeking grant of bail - SFIO - offences under Companies Act, 2013 and offences under the IPC. - extension of remand of judicial custody - applicants submits that the custody of the applicants was illegal between 31.05.2022 to 06.08.2022, inasmuch as, there was no judicial order of remand but a mere endorsement on the warrant was made which does not fulfill the legal requirement of a valid remand order. Whether on 31.05.2022 a speaking order was required to be passed and further the remand period beyond more than 15 days can be accepted to be legal? - HELD THAT:- It is settled principle of law that courts should not place reliance on decisions without discussing how the factual situation of the case they are asked to adjudicate upon fits the facts situation of the decision on which reliance is placed. Circumstantial flexibility, one additional or different fact may make a world of difference between the conclusions to be reached in two cases. Observations of the courts are neither to be read as Euclid s Theorems nor as provisions of the statute, and are never to be taken out of contexts. Courts primarily interpret statutes, they do not interpret judgments. Each case depends on its own facts and a close similarity between one case and another may not be enough. In the case of Harshad S. Mehta v. CBI [ 1992 (10) TMI 271 - DELHI HIGH COURT] decided by this court, the question whether remand under Section 167(2) of Cr.P.C. has to be taken after every 15 days or not and whether after the initial remand of 15 days the accused can be remanded in perpetuity subject of course to the outer limit of 60/90 days was one of the issues. This Court in paragraph No. 22 of the said decision has held that in no case the Magistrate can authorise the detention beyond 90 days or 60 days as the case may be. But even beyond 15 days and up to the period of 60 days, the remand has to be taken of the accused 15 days each time. In the case in hand the applicants were taken into custody on 21.03.2022. The Status Report indicates that the investigation with respect to other accused persons is not complete in all respects. An apprehension has been raised by the prosecuting agency on the basis of the role of the respective applicants that the applicants being closely associated with various individuals and have considerable influence over most of the witnesses who were working under the applicants. Specific roles of the applicants have been detailed in respective Status Reports - It is thus seen that at this stage, it cannot be said that the constitutional right of the applicants for speedy trial is infringed and on the contrary this court is not satisfied that there are reasonable grounds to believe that the applicants are not guilty of the offences alleged against them. The applicants are not entitled for grant of bail even on merits - Bail application dismissed.
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2022 (11) TMI 349
Seeking approval of scheme of Capital Reduction - Section 66 of the Companies Act, 2013 - HELD THAT:- The Certificate issued by the Statutory Auditor confirming that the Applicant Company has no default in arrears of repaying deposits has been annexed at Annexure 8 to the Application. The affidavit of the Managing Director and the Director of the company verifying that there are NIL Secured and NIL unsecured creditors in the company is placed as Annexure-6 of the Application typeset. In consonance with the provisions of this Act as well as the rules framed thereunder, the Applicant Company amongst other documents, have also filed a certificate dated 28.07.2022 from the Statutory Auditor issued to the effect that the accounting treatment for the Reduction of Share Capital is in conformity with the Accounting Standards with respect to the same as specified by the Central Government read with Section 133 of the Companies Act, 2013. The Applicant Company is directed to give notice of the instant Application within a period of 7 days from the date of receipt of this order to the (i) Central Government, (ii) the Registrar of Companies having jurisdiction over the files of the Applicant Company (iii) SEBI and any other relevant sectoral regulators - Application allowed.
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Insolvency & Bankruptcy
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2022 (11) TMI 348
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The reasons given by the Adjudicating Authority while passing the impugned order is agreed upon and as the CoC has recommended for liquidation of the Company for which I.A. is pending before the Adjudicating Authority, hence this Appeal has become infructuous. The Impugned Order is hereby affirmed. The instant Appeal is hereby dismissed.
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2022 (11) TMI 347
Maintainability of petition - proforma to file application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Cheque issued by the Respondent was dishonoured - existence of debt and dispute or not - HELD THAT:- The Appellant has filed the application under Section 7 of the Code to initiate the CIRP against the Respondent by admission of the application. However, Section 7(1) provides that the application under Section 7 can be filed before the Adjudicating Authority to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor when a default has occurred. Similarly, Section 7(2) provides that the application provide under Section 7(1) has to be filed in the form and manner as prescribed. Thus, in order to initiate the proceedings under section 7 of the Code the date when the default has occurred is essential. The application is provided to be filed on a printed performa which is provided in Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. If the application under Section 7 of the Code could be filed only when the default occurs and the date of default is conspicuous by its absence in the pleadings of the Appellant, dishonour of the cheque, as alleged by the Appellant, could not be taken as the date of default. There was no effort on the part of the Appellant to get the pleadings amended before the Adjudicating Authority. Therefore, in the absence of necessary ingredients, pleaded in the application filed under Section 7 of the Code, on the basis of which the application could have been maintained, there are no reason to interfere in the impugned order. Appeal dismissed.
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2022 (11) TMI 346
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - main defence raised by the Corporate Debtor is that the Financial Creditor has failed to failed to provide any certificate under section 65B(4) of the Evidence Act 1872 - HELD THAT:- The Financial Creditor has filed several documents to substantiate its contention that there is a debt which exists between the Financial Creditor and the Corporate Debtor. The Financial Creditor has filed a supplementary affidavit which is in substance is sufficient to corroborate the pleadings and the debt and default of the Corporate Debtor - The Corporate Debtor has only objected to the admission of the calculation sheet submitted by the Financial Creditor, but has not objected to the fact that the Corporate Debtor was not in default. From the Bank Statements filed in the Supplementary Affidavit, it is clear that the Corporate Debtor has defaulted in payment of the debt. The present petition made by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time. Petition admitted - moratorium declared.
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2022 (11) TMI 345
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- There is a clear transaction of Rs. 70 Lacs dated 18.12.2015, which has been admitted by both the parties to the case wherein the Applicant has made a payment of Rs. 70 Lacs to the Corporate Debtor. The Applicant has contended that the transaction is a loan and since there is no written document, the loan is a short-term loan repayable on demand. The Corporate Debtor on the contrary has submitted that the said transaction is an investment made by the Applicant for a long period of time and repayable after 10 years. It is observed that books of accounts as filed by the Applicant can only be treated as corroborative evidence and such corroborative evidence must be supported by other evidence to establish the existence of a valid debt and default thereof. It is an established rule of law that burden of proof lies on the party who asserts except when the law states otherwise. To prove the existence of a debt, the Applicant has relied on the 4 dishonoured cheques amounting to Rs. 20,00,000/- but at the same time the Applicant has failed to provide a link between the said cheques being given for discharge of liability to the tune of Rs. 70,00,000/-. In any circumstances attribute a liability cannot be attributed which is greater in amount than the numbers mentioned on the cheques which have been dishonoured - Further, merely bringing it to the knowledge that TDS was deducted does not constitute a financial debt or loan in the present case. TDS can be deducted for various reasons and mere payment of TDS towards interest payable does not amount to acknowledgement of debt. The same cannot be treated as an acknowledgement of debt, more so a default of the alleged loan. A mere plain reading of the provisions under Section 7 of the IBC show that to initiate CIRP under Section 7 of the Code, the Applicant must establish that there is a financial debt and the default has been committed in respect of that financial debt by the Corporate Debtor. All of these aforementioned documents annexed by the Applicant are unable to prove any default of any debt which was owed by the Corporate Debtor to the Applicant - The transaction of Rs. 70,00,000/- effected between the Corporate Debtor and the Applicant but in absence of any Financial Contract, it cannot be categorised as a loan. The Corporate Debtor has admittedly stated that the said is an investment made by the Applicant repayable after 10 years against which the Applicant will be entitled to avail remedy when the amount becomes due. Hence, the CIRP of the Corporate Debtor need not be commenced. The Order in the present matter is made in terms of Section 7 of IBC, 2016 based on the facts and pleadings submitted by the parties in the instant case and shall not prejudice any matter or proceedings between the parties, if any, before any other Court, Tribunal or any judicial or other authority - Petition dismissed.
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2022 (11) TMI 332
Approval of Resolution Plan - extent and the limitation of the judicial review by the Adjudicating Authority and the Appellate Tribunal in context of a Resolution Plan approved by the CoC with requisite majority - entitlement to workmen and employees to receive the payment of provident fund, gratuity and other retirement benefits in full (not part of liquidation estate - entitlement to workmen and employees to receive minimum liquidation value envisaged under Section 30(2)(b) by referring to waterfall mechanism provided under Section 53(1) of the Code - resolution plan does not provide the minimum amount to the workmen/ employees as contemplated under Section 30(2)(b) - violation of provisions of Section 30(2)(b) of I B Code - resolution plan does not provided for retrenchment compensation to the workmen/employees - violation of Section 30(2)(e) of the Code - demerger of entire workforce except of 50 employees as Asset Protection Team to AGSL - violation of Section 30(2) of the Code - entitlement to workmen/employees to receive CIRP cost subsequent to insolvency commencement date - computation of payment to secured financial creditors under Section 53(1)(b) - allocation of fixed amount to the Operational Creditors (other than workmen/employees) - claim of Regional Provident Fund Commissioner, secured debt or not - charge in favour of the Department on the assets of the Corporate Debtor by virtue of operation of law. What is the extent and the limitation of the judicial review by the Adjudicating Authority and the Appellate Tribunal in context of a Resolution Plan approved by the CoC with requisite majority? - HELD THAT:- It is settled that commercial wisdom of CoC in approving the Resolution Plan is not to be interfered in exercise of jurisdiction of judicial review by Adjudicating Authority or by this Appellate Tribunal except in cases where Resolution Plan violates mandatory requirement as provided under Sub-section (2) of Section 30 of the Code. Whether the workmen and employees are entitled to receive the payment of provident fund, gratuity and other retirement benefits in full since they are not part of the liquidation estate under Section 36(4)(b)(iii) of the Code? - Whether the workmen and employees are entitled to receive their dues from the Corporate Debtor as per the provisions of the Code i.e. the minimum liquidation value envisaged under Section 30(2)(b) by referring to waterfall mechanism provided under Section 53(1) of the Code? - HELD THAT:- The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii) - The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(1)(b) at least to minimum liquidation value envisaged under Section 32(2)(b) read with Section 53(1). In admitted claim of workmen provident fund, gratuity and leave encashment was included, and payment proposed in plan partly satisfy above dues also. The workmen are entitled to full payment of provident fund and gratuity, hence, the balance of above dues are to be paid by the Successful Resolution Applicant, to satisfy statutory obligations. Non-payment of full provident fund and gratuity shall lead to violation of Section 30(2)(e), hence, to save the plan the above payments have to be made. Whether the Resolution Plan approved by the Adjudicating Authority violates the provisions of Section 30(2)(b) of the Code since it does not provide the minimum amount to the workmen/ employees as contemplated under Section 30(2)(b)? - HELD THAT:- The Resolution Plan clearly contains an undertaking of the Resolution Applicant that liquidation value due to Operational Creditors, i.e., employees and workmen shall be paid. When liquidation value has been estimated by Resolution Professional in Form-H as Rs.113 crores for workmen and employees, we fail to see the reason for allocating only Rs.52 crores towards dues of workmen. Hence, the workmen are entitled to at least Rs.113 crores, which is their minimum liquidation value estimated by Resolution Professional. The above fact clearly mandates direction to be issued to Resolution Applicant to pay at least Rs.113 crores towards workmen dues as per their entitlement under Section 30, sub-section (2) (b) read with Section 53(1) of the Code. There not been an undertaking as contained in paragraph 6.4.2 (c) for payment of liquidation value, allocation of Rs.52 crores only was in clear violation of Section 30, sub-section (2), sub-clause (b), but in view of the undertaking by the Resolution Applicant, we do not find any necessity of interfering with the Resolution Plan except issuing a direction for payment of Rs.113 crores, which is a minimum liquidation value of workmen dues. Whether the Resolution Plan as approved by the Adjudicating Authority violates provisions of Section 30(2)(e) of the Code since it contravenes provisions of Industrial Disputes Act, 1947 it having not provided for retrenchment compensation to the workmen/employees who were so entitled under Section 25-F and 25-FF of the Industrial Disputes Act, 1947 and other legislations? - Whether the demerger of entire workforce except of 50 employees as Asset Protection Team to AGSL is illegal and contrary to the provision of Section 25-FF of Industrial Disputes Act, thus, violates Section 30(2) of the Code? - HELD THAT:- The non-compliance of provisions of Employees' Provident Funds Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972. It is an admitted case that Corporate Debtor was covered by 1952 Act and Employees Provident Fund Scheme and it was statutory obligation of the Corporate Debtor to deposit provident fund contribution to EPFO. Resolution Professional in its affidavit dated 25.07.2022 has stated that no contribution was deposited after February, 2019, thus depositing of the provident fund contribution till 20.06.2019 was statutory obligation of Corporate Debtor and making no provision in plan for unpaid provident fund dues may lead to breach of Section 30(2)(e). Further, the payment of Gratuity Act, 1972 also cast a statutory obligation on Corporate Debtor to make payment of Gratuity for those workmen and employee for which it became due till insolvency commencement date. Whether the workmen/employees are entitled for payment of Rs.750 crores (or more) as CIRP cost subsequent to insolvency commencement date they being on the roll of the Corporate Debtor and principle of no work no pay could not have been applied by the Resolution Professional? - HELD THAT:- The employees have not been paid anything in the plan towards provident fund which became due till insolvency commencement date. The employees are entitled to be paid provident fund amount as admitted by Resolution Professional till insolvency commencement date. Similarly, the workmen whose gratuity amount became due before insolvency commencement date are also entitled to receive the same after adjusting the part amount of gratuity paid in the Plan. Employees who became entitled to gratuity before insolvency commencement date are also entitled to receive the same - The above deficiencies in the plan need to be remedied by issuing appropriate direction to the Successful Resolution Applicant to make requisite plan so that plan may become compliant of Section 30(2)(e). Whether for computing the payment to secured financial creditors under Section 53(1)(b) only the value of their security interest has to be taken into consideration or their entire financial debt is to be considered while computing their entitlement? - HELD THAT:- The Corporate Debtor had stopped its airline operations since April 2019 and during CIRP period till the approval of Resolution Plan, Corporate Debtor was not a going concern. There is no material on record to indicate that Corporate Debtor was a going concern during CIRP period - there are no error in not including the aforesaid claim of salary and wages of the workmen and employees after insolvency commencement date. Whether the Resolution Plan being contingent and conditional ought not to have been approved in view of the law laid down by the Hon ble Supreme Court in Ebix Singapore Pvt. Ltd. Vs. CoC of Educomp Solutions Ltd. Anr. [ 2021 (9) TMI 672 - SUPREME COURT ]? - HELD THAT:- The Report of the Insolvency Law Committee (February 2020) has opined that priority under Section 53(1)(b)(ii) should be only to the extent of the security interest of the Secured Creditor, but in the earlier part of the Report, it was opined that provision does not necessitate any further amendment. When no amendments have been made in the statute, i.e., Section 53(1)(b)(ii), the provisions cannot be interpreted in any manner except the plain and literal reading of the provisions. The Report of Insolvency Committee (February 2020) can at best be reason for making any further amendment in the statute, but till amendment is made, the provision of the statute has to be read as it exists as on the date - there are no substance in the submission of the learned Counsel that payment to the Secured Financial Creditors under Section 53(1)(b) has to be made as per their value of the security interest and the Resolution Plan did not take into consideration their debt, which is the debt of the Financial Creditors while allocating the amount. There are no substance in the submission of the Appellant that the resolution plan ought to have rejected in view of the condition precedent contained in the resolution plan. The Resolution Applicant has also completed all necessary condition precedents to the satisfaction of the Monitoring Committee. Whether the allocation of fixed amount of Rs.15,000/- each to the Operational Creditors (other than workmen/employees) in the resolution plan can be held to be fair and equitable and deserves no interference by this Appellate Tribunal? - HELD THAT:- The facts of the present case indicate that the Resolution Plan proposed almost nil amount to the Operational Creditor except the workmen. According to the Resolution Professional, the liquidation value of the employees as well as other Operational Creditors is nil, hence, they are not entitle for any amount under Section 30(2)(b) of the Code. The facts of the present case depicts that amount paid to the Operation Creditor except workmen is almost nil - In the present case, there is material on record to indicate that as explained by the Resolution Professional in Additional Affidavit dated 25.07.2022 that liquidation value for employees and other Operational Creditors except workmen is nil. The employees were also entitled to receive their full amount of provident fund to which they were entitled under 1952 Act and gratuity due till commencement of insolvency under the Payment of Gratuity Act, 1972, which they were entitled as per Section 30(2)(e) of the Code. However, the liquidation value of employees being nil under Section 30(2)(b), they were not entitled to receive any amount. Similarly, other Operational Creditors whose liquidation value was nil were not entitled to receive any amount under Section 30(2)(b). Whether the claim of Regional Provident Fund Commissioner verified to the extent of Rs.24,40,65,594/- arising out of an order dated 17.10.2018 passed under Section 14B of Employees' Provident Funds Miscellaneous Provisions Act 1952 can be treated as secured debt and the Appellant was entitled to receive the amount as secured creditors? - HELD THAT:- The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code - We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity. Whether the claim of Department of State Tax which was submitted within time created a charge in favour of the Department on the assets of the Corporate Debtor by virtue of operation of law and the State Tax Department has the security interest and is a secured creditor? - HELD THAT:- The first charge on the property which is envisaged by Section 82 is except as provided under Insolvency and Bankruptcy Code, 2016. Thus, Section 82 of the Maharashtra GST Act, 2017 shall not give any precedence to the charge of claim of the Appellant - The provisions of Section 82 of the Maharashtra GST Act, 2017, clearly contains an exception with regard to I B Code, hence, on the strength of dues under Maharashtra GST Act, 2017, no charge can be claimed on the assets of the Corporate Debtor. The view that Department of State Tax, the Appellant, is an Operational Creditor and its liquidation value being nil, on the ground raised by the Appellant, no interference is called for in approval of the Resolution Plan. The liquidation value of the workmen as has been referred to in Form-H preferred by the Resolution Professional is Rs.113 crores and workmen were entitled to receive at least Rs.113 crores as per Section 30(2)(b) read with Section 53(1)(b) of the Code. Shri Krishnendu Datta, learned Counsel for Successful Resolution Applicant during his submission, submitted that Successful Resolution Applicant shall be paying an amount of Rs.113 crores to the workmen as per the Resolution Plan, since it was contemplated that, if liquidation value is more than Rs.52 crores, the liquidation value shall be payable to the workmen - the workmen and employees are entitled to gratuity payments, due to them before the insolvency commencement date. Any claim towards gratuity payment after insolvency commencement date is not admissible, since the workmen and employees having demerged into AGSL and their services were not deemed to have been terminated. Thus, gratuity payment under the provisions of Payment of Gratuity Act, 1972 is confined only to the date of insolvency commencement date and Successful Resolution Applicant is also liable to make the said payment. Non-payment of full provident fund amount to the workmen and employees and the gratuity payment till the insolvency commencement date amounts to non-compliance of provisions of Section 30(2)(e) of the Code. However, in the facts of the present case, all other parts of the Resolution Plan have not been found to infirm in any manner, there are no case for interfering with the order approving the Resolution Plan. Appeal allowed in part.
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Service Tax
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2022 (11) TMI 344
Levy of Service Tax - Club and association services - appellant is an association of its members - applicability of principles of mutuality - time limitation - whether the services provided by the appellant to its own members (who are also separate legal entities) can be considered as service provided by one entity to another? - HELD THAT:- The Central Excise and Service Tax Appellate Tribunal has relied upon a decision of this Court in STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT] where it was held that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members clubs in the incorporated form. The appeal is dismissed.
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2022 (11) TMI 343
Recovery of service tax - failure to pay the discounted amount of service tax by the last date - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT: This Court is not inclined to interfere in the present petition and deems it appropriate to dismiss this petition for the reasons infra:- The decision of Coordinate Bench of this Court rendered at Indore in the case of M/s. Balaji Services [ 2021 (10) TMI 435 - MADHYA PRADESH HIGH COURT ] does not assist the petitioner since in the said scheme the question of extending the last date for submission of rebated amount of service tax was not raised or decided. The question before the Court was as to whether the rejection of application Form SVLDRS-1 can be made without affording opportunity of being heard to the assessee despite the scheme providing for such an opportunity. It is not disputed by the petitioner that all attempts made till 30.06.2020 to deposit the rebated amount of service tax had failed. The contention that the rebated amount was paid on the first/second July, 2020 is of no avail to the petitioner since it was after the last date statutorily mandated for deposit of rebated amount of service tax. More so, there is nothing on record to show that the last date was extended beyond 30.06.2020. Petition dismissed.
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2022 (11) TMI 342
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - claim put up before this Court is that some amount of tax was deposited by the petitioner earlier in regard to the same assessment year but due to inadvertence could not be claimed while applying under the said Scheme - demand by issuance of notice u/S. 87(b)(i) of the Finance Act, 1994 read with Section 174 of CGST Act, 2017 - HELD THAT:- What the petitioner wants in this petition is to reopen his case under the said Scheme after the last date which is not possible as that would amount to putting the clock back and tinkering with the scheme and allowing the petitioner to adopt procedure dehorse the Scheme. The Apex Court in M/s Yashi Constructions Vs. Union of India Ors. [ 2022 (3) TMI 110 - SC ORDER ] while dealing with somewhat similar situation has held that It is a settled proposition of law that a person, who wants to avail the benefit of a particular Scheme has to abide by the terms and conditions of the Scheme scrupulously. If the time is extended not provided under the Scheme, it will tantamount to modifying the Scheme which is the prerogative of the Government. This Court cannot help the petitioner and, therefore, the petitioner has to take recourse to remedy under the provisions of CGST Act, as per law - Petition dismissed.
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2022 (11) TMI 341
Withholding the refund of security deposit with the state government towards service tax - Seeking issuance of directions in the nature of 'mamdamus' to the respondents to decide the legal notice - seeking release of the petitioner lying deposited with respondent no. 3 - HELD THAT:- The stand of respondents no. 2 and 3 was to the effect that they had withheld the amount solely for the reason that service tax liability had not been cleared by the petitioner whereas the Department of Central Excise (as it was then), now the Assistant Commissioner Central GST clearly states that in the present case service tax was not applicable and that no demand of service tax has ever been raised by the concerned department. Consequently, the retention of the aforesaid security money deposited by the petitioner is per se not justified. The same is accordingly directed to be refunded expeditiously and preferably within a period of four weeks of the receipt of the certified copy of this order. It has also been pointed out by the petitioner that the aforesaid amount has been kept in a Fixed Deposit by respondents no. 2 and 3 - Petition allowed.
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2022 (11) TMI 340
Levy of service tax - Architect service or not - designing, planning, Architecture and Site Supervision of construction work - It was argued that the Architect service was brought into tax net with effect from 16.10.1998 whereas the appellant took registration only on 22.07.2003 - extended period of limitation - HELD THAT:- The appellant had paid an amount of Rs 1 Lac vide challan dated 22.09.2003 and the demand SCN was issued for Rs. 01,02,948/- after adjusting Rs 1 Lac already deposited by the appellant. It is noticed that the SCN nowhere alleges suppression or misdeclaration on the part of the appellant and therefore, there cannot be any ground for invocation of extended period of limitation. In this circumstance, the demand for extended period of limitation cannot be sustained. It is not in dispute that the appellant is not registered under section 23 of the Architect Act, 1972. Learned AR had argued that the appellant as commercial concerns is engaged in providing services in the nature of designing ,planning, Architecture and site supervision. It is apparent that without proper registration no one can provide services in the field of Architecture. Thus, the allegation that the appellant is providing services of Architect is unsubstantiated. Appeal allowed.
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2022 (11) TMI 339
Refund of unutilized CENVAT credit - input services used for providing e-publishing service which in effect was export of service - rejection of refund claims holding that the foreign remittances though were made into the same account were in three different names - Rule 5 of CENVAT Credit Rules, 2004 read with Notification 27/2012 - HELD THAT:- It is seen from the Order in Original dated 25.2.2021 that the appellant has been granted refund and the issue with regard to the remittances in different names has been discussed in detail. The appellant has made a request that they may be given a chance to furnish documents to explain how the remittances have been made. The matter requires to be remanded to the original authority who is directed to look into the orders passed by the authorities in the appellant s own case for refund claims and consider the same as expeditiously as possible - Appeal allowed by way of remand.
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Central Excise
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2022 (11) TMI 338
CENVAT Credit - capital goods after 01.04.2016 - housekeeping services - Equal penalty on the appellant under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - HELD THAT:- The definition of capital goods after 01.04.2016 does not exclude any equipment or appliance used in an office . For this reason, it is held that the credit availed by the appellant on the said computer server after 01.04.2016 would be eligible. It has also been stated by the appellant that these form an integral part of their manufacturing process as all the data is collected in the said server. Housekeeping services - HELD THAT:- The credit availed by the appellant has been disallowed alleging that these services are consumed in the Mumbai office. It is not in dispute that the Mumbai office is an integral part of the business of the appellant and is doing the administrative work in respect of the appellant s factory. For this reason, the credit availed by the appellant on Housekeeping Services at their Mumbai office is eligible. Equal penalty on the appellant under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - HELD THAT:- The issue being an interpretational one and the appellant having been eligible to avail the credit on the said capital goods after 01.04.2016 as well as the credit on Housekeeping Services, the penalty imposed requires to be set aside. Appeal allowed in part.
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2022 (11) TMI 337
Refund of CENVAT Credit reversed under protest - clearance of the waste products namely bagasse and press mud which emerged during the course of manufacture of sugar - time limitation u/s 11B of the Central Excise Act, 1944 - HELD THAT:- The appellant has reversed the credit for the period 1.4.2010 to 1.5.2013 and refund claim has also been filed for this period. The department has calculated the period of one year from the date of reversal and taken the view that the refund claim is barred by limitation. It is to be noted that the appellant had reversed the credit and intimated the department by issuing letters on various dates - the appellant has noted that they dispute the payment or reversal of credit. It is not necessary that the exact words payment made under protest has to be written by the assessee. Protest means disagreement. If a note is given along with the reversal of credit that they are paying the amount only by abundant caution and intend to proceed with litigation would necessarily mean that they are reversing the credit under protest. Further, in the present case a protest cannot be made on the invoice or bill of entry as is usually done. It is a case of making payment by reversal of credit in their CENVAT account. The only method by which the appellant could intimate or inform their protest is by issuing a letter to the department that they are paying the amount are disputing the payment made. The demand having been dropped by the department, the consequence would be that the appellant would be eligible for refund of the credit that has already been reversed. It clearly shows that the issue was under litigation which is indication of protest / disagreement. The factual matrix would be that the issue was in dispute and the appellant was disputing the amount alleged to be payable by them. The letters issued by the appellant every month intimating the reversal as well as reserving their right for litigation would show that the credit has been reversed under protest. The allegation that the refund claim is hit by time-bar cannot sustain and requires to be set aside - Appeal allowed.
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2022 (11) TMI 336
Conversion of 100% EOU to normal DTA Unit - work in process / semi-finished goods at the time of debonding of EOU - requirement to pay duty or not - HELD THAT:- As per the details submitted by the appellant which is not in dispute, the semi-finished goods/ work in process was not in fully manufactured form and the same was at different stages of the manufacturing process. The said goods are not marketable as such which were subjected to various other processes to attain the stage of final product, therefore, at the semi-finished stage, where no excisable goods came into existence, the demand of duty at the time of debonding is, in our view, incorrect in law. In any case, these semi-finished goods/ work in process will reach to the stage of final product and the same is liable for duty at the time of clearance from the factory. Therefore, at the intermediate stage when the goods are not fully manufactured, the excise duty was not payable at the time of debonding, particularly when the goods were not cleared from the factory and were in the process of manufacturing. No duty can be demanded on semi-finished goods/ work in process, lying at the time of debonding of 100% EOU - Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 335
Refund of excise duty - amount was paid under protest - Time Limitation - HELD THAT:- The larger bench of tribunal in the case of INDIA CEMENTS LIMITED [ 1984 (7) TMI 361 - CEGAT NEW DELHI ] where it was held that the result of the proposition that limitation does not extinguish the right but only bars the remedy would be that the Respondent, in this case, had a right to recover the amount by recourse to any other legal course open to him but not by recourse to Central Excise Rule 10 since limitation had, as on the date of invoking the right to demand the amount by recourse to that rule, extinguished that remedial right. It is also a fact that duty was paid under protest in case of INDIA CEMENTS LIMITED which is also true in the instant case and therefore, the arguments made by the learned counsel to distinguish the decision of tribunal in the case of INDIA CEMENTS LIMITED is not correct - Relying on the decision of larger bench in case of INDIA CEMENTS LIMITED, it is found that the appellants are not entitled to refund of the duty paid. Appeal dismissed.
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Indian Laws
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2022 (11) TMI 334
Election of the office bearers of the Regional Council for the year 2022 held in the 316th Meeting of Eastern India Regional Council of the Institute of Company Secretaries of India - Requirement of a meeting to be chaired/presided over by him in absence of the Chairman - whether the meeting i.e. 21.07.2021 was presided over by the person duly elected as Chairman for the remaining period? - HELD THAT:- On fair reading of Regulation 92(2) read with Regulation 117(2), we are of the opinion that Regulation 92(2) shall not be applicable at all. Regulation 92(2) shall be applicable only in a case of absence and not in a case where the post of Chairman and/or office bearer has fallen vacant. There is a distinction between the absence and the post fallen vacant. Regulation 92(2) shall be applicable in a case where the Chairman and/or the office bearer though is not disqualified but is absent for some reason. Regulation 117(2) shall be applicable in a case where the elected member of the Regional Council has been disqualified on he being found guilty of any professional or other misconduct and awarded penalty of fine. Therefore, in case of a vacation of office as per Regulation 117(2), such post fallen vacant is required to be filled in by election by electing another person from amongst its members to hold the office for the remaining period of a year (Regulation 119(2)) - Both, the learned Single Judge as well as the Division Bench of the High Court have not appreciated the distinction between the vacation of office under Regulation 117(2) of the Regulation and the absence of an office bearer under Regulation 92. Under the circumstances both, the learned Single Judge as well as the Division Bench of the High Court have seriously erred in quashing and setting aside the election of the office bearers of the EIRC of ICSI held in the meeting held on 27.12.2021 on the ground that the meeting was not presided over by the Vice Chairman (Respondent no.1 herein). As per Regulation 114(4) whether any dispute arises regarding any election to a Regional Council, the matter may be referred by the candidate concerned within 30 days from the date of the declaration of the result of the election, to the President and the decision shall be final. Under the circumstances, in view of Regulation 114(4) of the Regulations, the High Court ought not to have entertained the writ petition challenging the validity of the election. Even otherwise, it is required to be noted that even as per Regulation 114(4), the election can be challenged by the candidate concerned. In the present case respondent no.1 who challenged the election of the office bearers did not even contest the election. Under the circumstances the High Court erred in entertaining the writ petition challenging the election at the instance of the respondent no.1 who even did not contest the election of the office bearers. The impugned judgment and order passed by the Division Bench of the High Court as well as the learned Single Judge is set aside - appeal allowed.
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2022 (11) TMI 333
Dishonor of Cheque - vicarious liability of the non-signing partners - the case of petitioner is that the cheque in question had been drawn and issued by the other partners and was not issued by the petitioners - Section 141 of NI Act - HELD THAT:- The learned Metropolitan Magistrate found that accused No.5 and 12 were the signatories of the cheque and the accused No.10, 11, 12, 14, 15 and 16 are the license holder on behalf of the accused firm. The learned Metropolitan Magistrate did not find any specific role, so far as, other accused are concerned and, accordingly, he dropped the complaint against the remaining accused except to direct for issuance of summon against accused No.1, 5, 10, 11, 12, 14, 15 and 16. It is settled that in terms of explanation of Section 141 of the NI Act, the expression company would mean any body corporate and includes a firm or other association of individuals. Sub-section 1 of Section 141 postulates that where an offence is committed under Section 138 by a company, the company as well as every person who, at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business shall be deemed to be guilty of the offence - In the instant case specific averments have been made with respect to the present petitioners which have been considered by the concerned Metropolitan Magistrate. So far as the arguments advanced by the learned counsel appearing on behalf of the petitioners are concerned, the same would not require to be considered at the stage of summoning the petitioners. The Hon ble Supreme Court in the matter of S. P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan [ 2022 (9) TMI 846 - SUPREME COURT ] has dealt with the issue extensively, where, the High Court of Madras in exercise of its power under Section 482 of Cr.P.C allowed the petition and quashed the complaint under Section 138 of the NI Act on the ground of non-fulfillment of the requirement of Section 141 of the NI Act. The high court in that case held that merely by reciting the words used under Section 141 of the NI Act in the complaint, no vicarious liability can be fastened on the partners of the firm. In the absence of any sterling circumstances/evidence being produced by the petitioners, this court does not find it appropriate to exercise its power under Section 482 of the Cr.P.C. to quash the instant complaint - Application dismissed.
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