TMI Tax Updates - e-Newsletter
December 11, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. AUTHORITIES UNDER GST LAW

   By: Dr. Sanjiv Agarwal

2. Gujarat High Court to examine the validity of Notification extending period for proceedings initiated by the Revenue Department

   By: Bimal jain

3. Resale method appropriate in Transfer Pricing where there is no Value Addition to traded goods by the distributor

   By: Vivek Jalan

4. Assessee entitled to interest on GST Refund from the date of expiry of 60 days of the application filed pursuant to refund claim attaining finality

   By: Bimal jain

News

1. Cabinet approves Additional allocation of Rs 2500 crore for continuation of Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit till 30.06.2024

2. Don't fall for predatory practices, low quality supplies from external sources: Shri Goyal

3. India-Korea Electronic Origin Data Exchange System (EODES) for faster clearance of imported goods launched

4. Sovereign Gold Bond Scheme 2023-24

Notifications

GST - States

1. ERTS(T)65/2017/Pt-III/Vol.I/600 - dated 29-9-2023 - Meghalaya SGST

Notify supply of online money gaming, supply of online gaming other than online money gaming and supply of actionable claims in casinos under section 15(5) of Meghalaya Goods and Services Tax Act, 2017

2. ERTS(T)65/2017/Pt-III/Vol.I/599 - dated 29-9-2023 - Meghalaya SGST

Seeks to bring in force provisions of Meghalaya Goods and Services Tax (Amendment) Act, 2023

3. ERTS(T)65/2017/Pt-III/Vol.I/597 - dated 29-9-2023 - Meghalaya SGST

Amendment in Notification No. ERTS(T)65/2017/1, dated the 29th June, 2017

4. ERTS(T)65/2017/Pt-III/Vol.I/598 - dated 25-9-2023 - Meghalaya SGST

Amendment in Notification No. 30/2023-State Tax, dated the 31st July, 2023

Indian Laws

5. G.S.R. 885 (E) - dated 8-12-2023 - Indian Law

Sovereign Gold Bond Scheme 2023-24

Money Laundering

6. S.O. 5213 (E) - dated 8-12-2023 - PMLA

Reporting Entities notified for Aadhaar authentication service of the Unique Identification Authority of India u/s 11A of the Prevention of Money-laundering Act, 2002

Highlights / Catch Notes

GST

• Appeal Dismissed for Non-Compliance with Mandatory Pre-Deposit via Electronic Cash Ledger Under CGST/BGST Act.

  Case-Laws - HC : Maintainability of appeal - appeal rejected as being defective for non-payment of the pre-deposit - the appeals filed by the instant petitioners u/s 107 of the CGST/BGST Act were not maintainable as the pre-deposit (10 percent) as per Section 107 (6)(b) of the Act, was not complied with by the petitioners - conclusion of the Appellate Authority that payment of pre-deposit (10 percent) can only be made through ECL, requires no interference by this court exercising jurisdiction under Article 226 of the Constitution of India. - HC
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Income Tax

• Calculate Profits for Section 80IA Using Market Power Rates, Not Assessee's Sale Rate to State Electricity Board.

  Case-Laws - SC : Deduction u/s 80IA - quantum of profits and gains of the eligible business - Scope of expression “market value” - The market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an industrial consumer could have purchased power in the open market. - SC
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• Revision of Deemed Dividends Under Income Tax Act: Examining Loans, Beneficial Ownership, and Voting Power Criteria.

  Case-Laws - AT : Revision u/s 263 - Deemed dividend u/s 2(22)(e) - loans received from another company - beneficial ownership - voting power fall below the specified criteria - finding of error by the CIT in the assessment order for non-invocation of section 2(22)(e) of the Act on the loans received by the assessee from MAP Ltd. palpably fails on facts recorded by the Ld.PCIT himself. - AT
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• Court Clarifies Property Ownership Under Tax Law: Partnership Firm, Not Individual, Deemed Buyer for Tax Purposes.

  Case-Laws - AT : Addition u/s 56(2)(vii) - real owners - partners v/s firm - property purchased by assessee-partner less than guideline value of the property - applying purposive construction to the facts of the present case, the property is deemed to have been acquired by the firm only and not by individual partners. Provisions of Sec.56(2)(vii)(b)(ii) could not be pressed into service since these provisions do not apply to partnership firm at the relevant point of time. - AT
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• Penalty for Cash Sale Invalidated Due to Lack of AO's Satisfaction in Assessment Order Under Income Tax Act.

  Case-Laws - AT : Penalty u/s 271D - assessee has accepted cash as part of sale consideration on sale of immovable property - the Ld.AO has not recorded the satisfaction regarding the initiation of penalty proceedings while passing the assessment order u/s. 143(3) of the Act which is a prerequisite for initiation of penalty u/s. 271D of the Act. We are of the considered opinion that issuing a notice u/s. 274 r.w.s 271D of the Act is nothing but an afterthought of the Ld. AO. - No penalty - AT
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• Exchange Rate Fluctuation Disallowance Overturned; IT Sector Business Not Engaged in Speculative Forex Trading.

  Case-Laws - AT : Disallowance on account of exchange rate fluctuation - speculative loss or not - AO has not given concrete findings on the explanation of assessee that Instruction No. 3 of 2010 issued by CBDT is applicable only where there is trading in forex derivatives, which situation does not exist in the instant case, as the AO herself has mentioned the nature of appellant's business as that of Information Technology line, i.e., IT related purchase/sales or services. - Additions deleted - AT
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• Under-Recognized Industrial Subsidy Credited to Current Profits, Maintained as Capital in Nature.

  Case-Laws - AT : Characterisation of receipt - industrial Promotion Subsidy (IPS) received - the subsidy was short recognized by the assessee in earlier years and therefore the excess amount i.e. difference between amount recognized and amount finally disbursed was credited in P&L A/c during the year. As rightly pointed out by the Ld. AR, the nature of the subsidy which was short recognized in earlier year/s remains the same i.e. capital in nature. - AT
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• Tribunal Rules Bank Passbook Credits Not Unexplained Cash; Upholds Agricultural Income, Deletes Section 68 Additions.

  Case-Laws - AT : Unexplained cash credit u/s. 68 r.w.s. 115BBE - Co-ordinate Benches of the Tribunal have held that any sum found credited in bank passbook could not be treated as an unexplained cash credit under section 68 of the Act, since the bank account of the assessee is not considered as part and parcel of the books of accounts. Thus the addition made by the Assessing Officer was deleted. - Claim of agriculture income sustained - Addition u/s 68 deleted - AT
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• Assessment Order Deemed Erroneous u/s 263 for AO's Initial Oversight; Revision Order Upheld to Protect Revenue Interests.

  Case-Laws - AT : Revision u/s 263 - when in the threshold itself, the AO has failed to do his duty in conducting and verifying the issues involved, then in such situation, explanation 2(a) to sec. 263 as clearly stated as a deeming provision that such an assessment order passed shall be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue shall apply. - Revision order sustained - AT
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Customs

• Customs Act Case: Statements Not Sole Evidence; Multiple Direct Proofs Justify Duty Liability, Petition Dismissed.

  Case-Laws - HC : Relevancy of statements u/s 138B of Customs Act - Section 138B per se does not provide for any cross examination, as the provision deals with relevancy of statements in the facts and circumstances of the case. - On a perusal of the impugned order-in-original which runs into 118 pages and on a holistic reading of the order, it cannot be said that the order is passed only on the statements of three witnesses of which cross-examination has not been granted, but there were various other direct evidences against the petitioner, for the duty liability to be fastened on the petitioner. - Petition dismissed - HC
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• Appellant Not Liable for Customs Duty Due to DGFT Delays in Issuing Export Obligation Discharge Certificate.

  Case-Laws - AT : Demand of customs duty - fulfillment of export obligation - In the present case the appellant had fulfilled the export obligations and submitted the requisite papers to DGFT for issuance of EODC well in time. However, the non co-operation of the two Departments, i.e. the Customs and the DGFT, the instant show cause notice and the impugned orders have resulted in denying the benefit to the appellant and imposing the liability to pay the custom duty, which prima-facie is unsustainable. The delay, if any, in issuance of the EODC was on the part of the DGFT and for which the appellant cannot be penalised. - AT
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• Vehicle Immobilisers Classified as Accessories, Not Electrical Apparatus, for Enhanced Anti-Theft Security Measures.

  Case-Laws - AT : Classification of imported goods - accessories of vehicles - Smartra Immobilisers - since admittedly the sole and principal use of smartra immobiliser is only as an accessory to the vehicle as an antitheft device, adding value to the vehicle in terms of security, the question of classifying the same under Chapter Heading 8536 does not arise. - AT
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• Refund Claim Allowed for Excess Duty After Certificate of Origin Submitted; ITC Limited Decision Not Applicable.

  Case-Laws - AT : Refund claim - The decision of ITC Limited is not applicable to the present facts and circumstances of the case as at the time of filing of Bills of Entry, the appellant was not entitled to claim the refund claim of excess duty paid by them. Later on, when the respondent was able to get Certificate of Country of Origin, they filed refund claim in terms of Notification No.55/2011-Cus (NT), which permits the respondent to file the refund claim within 12 months from the date of filing of the Bills of Entry. - Refund allowed - AT
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Indian Laws

• Nominee Brother Cannot Claim Insurance as Absolute Owner; Directed to Transfer Sum to Legal Heir Petitioner.

  Case-Laws - HC : Right of nominee as collector of sum or as absolute owner - Right of legal heirs - Payment of insurance claim amount in favour of the nominee - The Nominee, who is the brother of the deceased falls under the category Class-II legal heir and therefore, he is excluded from succeeding to the sum assured. Hence, in the absence of any dispute on the status of the parties, this Court in order to render substantial justice, directs the second respondent to hand over the entire sum assured to the petitioner. - HC
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SEBI

• SEBI Limited in Action Against Auditors Lacking Evidence of Fraud or Collusion; No Authority Over ICAI, NFRA Investigations.

  Case-Laws - AT : Power of SEBI to initiation action against Chartered Accountant (CA) / Auditor of the company - Once there is a finding that the appellants have not manipulated the books of accounts with knowledge and fraudulent intention or in connivance with the officers or management of the Company then no directions could be issued by the WTM to the ICAI or NFRA to consider dereliction of duties and abhorrence of due diligence while conducting statutory audit as in our opinion it was outside the domain of the WTM to issue such directions. At best, administrative directions could have been issued by SEBI to the aforesaid institutions to consider the alleged irregularities but beyond that no adjudicatory directions could be issued by the WTM. - AT
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Service Tax

• Show cause notice for service tax quashed due to vagueness in specifying taxable activities and unclear service nature.

  Case-Laws - AT : Demand of service tax - Vague show cause notice - SCN was completely silent on the nature of respective activities so as to fall under any specific ‘service’ - The department cannot take shelter on account of failure of the appellant to produce and supply the documents, and it was incumbent upon them to have ascertained the actual nature of the services for the purpose of levying the service tax under the respective clause - there are no hesitation in holding tht the show cause notice needs to be quashed being vague. - AT
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Central Excise

• Inserting Toothpaste and Toothbrush into Slots Not Manufacturing, Court Rules on Combi Pack Process Completion.

  Case-Laws - AT : Activity amounting to manufacture or not - appellant inserts 100gm toothpaste tube and one toothbrush in the blank slots - The appellants are merely completing the process of combi pack manufactured by the principal manufacturer i.e., M/s CPIL - the process undertaken by the appellants takes care of the manner in which the said product is marketed and in no case makes the goods marketable. Therefore, the process undertaken by the appellant does not amount to manufacture. - AT
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VAT

• High Court Upholds Entertainment Duty on Amusement Parks, Dismisses Legislative Debate Arguments and Refund Request.

  Case-Laws - HC : Refund of duty deposited - Levy of Entertainment Duty / Tax - Constitutional validity - Activity of amusement park and the water sports activity - The petitioners are not justified in relying upon the views of some members in the course of the debates in the Legislative Assembly for interpretation of provisions of Entertainment Duty Act when the Act itself is clear on this issue - HC
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Case Laws:

• GST

• 2023 (12) TMI 424
  Validity of Rule 96(10)(b) of Central Goods and Service Tax Rules, 2017, / State Goods and Service Tax Rules 2017 - HELD THAT:- Reliance placed in the order dated 06.04.2023, passed by the Coordinate Bench of this Court in CA (For Stay) No. 1 of 2023 in Special Civil Application No. 7711 of 2021 [ 2023 (4) TMI 1268 - GUJARAT HIGH COURT ], whereby, the Court has granted interim relief in favour of the petitioner, therein. Issue NOTICE, making the same returnable on 21ST JUNE, 2023.

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• 2023 (12) TMI 423
  Maintainability of petition - availability of alternative remedy - Provisional attachment of bank account - HELD THAT:- Now as an order has been passed by the adjudicating officer deciding the show cause notices and as the petitioner is now desirous to assail the said order-in-original by adopting the appropriate remedy as available in law, it would be appropriate for the petitioner to proceed with such course of action of filing of an appeal to assail the order-in-original. Mr. Pathak states that such appeal would be filed within a period of four weeks from today. In so far as the petitioner s bank account is concerned, it would be open for the petitioner to make an application before the appellate authority praying for appropriate orders in regard to the revoking of the provisional attachment, contending that the impugned order dated 27 June, 2023 provisionally attaching the petitioner s bank account is illegal. If such an application is made, the same be decided as expeditiously as possible and preferably within a period of three weeks from the date of filing of the said application. The petition stands disposed of

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• 2023 (12) TMI 422
  Recovery of amounts of ITC stated to be illegally availed by the company - HELD THAT:- It would be appropriate that the respondents move an application before the NCLT to seek appropriate orders on the action as sought to be taken against the petitioner. Status quo, as on today, be maintained for a period of one week from the day a copy of this order is available, only to enable the respondents department to approach the NCLT and to obtain appropriate orders. Petition disposed off.

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• 2023 (12) TMI 421
  Validity of SCN - levy tax on betting and gambling - Valuation - Constitutional validity of Section 15(5) of the Central Goods and Services Tax Act, 2017 - Rule 31A(3) of the Central Goods and Services Tax Rules, 2017 - provisions of the CGST Act, the CGST Rules and Notifications thereunder along with corresponding provisions of the MGST Act, the MGST Rules and Notifications thereunder, to the extent they purport to levy tax on betting and gambling in exercise of legislative power under Article 246A of the COI - restriction on Respondent No. 3 or its officers / sub-ordinates from taking any coercive action against the Petitioners - restricting the Respondent No. 4 and Respondent No. 5 from adjudicating the Impugned SCN pending final disposal of this writ petition. HELD THAT:- This Court considering the challenge to the provisions of the Act and Rules has admitted the petitions. Insofar as the show cause notice was concerned, the Court recorded a statement on behalf of the department that the petitioners in such case without prejudice to the rights and contentions as raised in the petitions, may file response to the impugned show cause notices, and that, the Adjudicating Officer would not pass any final orders on the show cause notice without leave of the Court. Such statement as made on behalf of the department came to be accepted by the Court. The petitioners were accordingly directed to respond to the show cause notice - Petitioner submits that similar order can be passed on the present proceedings. Attention also drawn to the orders passed by the High Court of Sikkim in the case of Delta Corp Limited and Anr. vs. Union of India ors. [ 2023 (10) TMI 1205 - SIKKIM HIGH COURT] , where the Court had directed that a status-quo be maintained on the show cause notices - attention also drawn to an order passed by Division Bench of the Gujarat High Court in the case of NXGN Sports Interactive Private Limited vs. Union of India ors [ 2023 (11) TMI 357 - GUJARAT HIGH COURT] wherein ad-interim relief was granted restraining revenue from taking any further steps on the adjudication of the show cause notice while permitting the petitioners to file a response to the show cause notice. Issue notice to the Attorney General, returnable on 17th January, 2024, insofar as the challenge to the provisions of Section 15(5) of the CGST Act, 2017 being unconstitutional and violative of Articles 246A and 366(12) of the Constitution of India is prayed for - Let the pleadings of the proceedings be completed on or before the adjourned date of hearing.

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• 2023 (12) TMI 420
  Seeking grant of bail - applicant has been arrested without assigning any reason to believe nor any satisfaction to justified his arrest as provided in the Code - HELD THAT:- The applicant has been arrested without assigning any reason to believe nor any satisfaction to justified his arrest as provided in the Act - Offences as alleged are punishable up-to 5 years imprisonment - No notice for recovery of G.S.T. has been issued against the applicant and he is illegally arrested. It is a settled law that while granting bail, the court has to keep in mind the nature of accusation, the nature of the evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, the circumstances which are peculiar to the accused, his role and involvement in the offence, his involvement in other cases and reasonable apprehension of the witnesses being tampered with. Let applicant, Prateek Mittal be released on bail in the aforesaid case crime number on his furnishing a personal bond and two reliable sureties each in the like amount to the satisfaction of the court concerned subject to the conditions imposed - application allowed.

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• 2023 (12) TMI 419
  Maintainability of appeal - appeal rejected as being defective for non-payment of the pre-deposit - whether by debiting ECRL, an assessee can claim to have satisfied the requirement of pre-deposit of a sum equal to 10 percent of the remaining amount of tax in dispute as per the order under appeal, for maintaining appeal as per Section 107 (6) of the CGST/BGST Act? - time limitation. HELD THAT:- Plain reading of the statutory provision reveals that the option of filing appeal before the Appellate Authority is only within three months from the date on which the order is communicated to the person. Under Sub-Section 4 of Section 107 of the CGST/BGST Act, the Appellate Authority, subject to satisfaction that the appellant was prevented by sufficient cause from presenting appeal within three month period, is left with discretion to allow presentation of the same within a further period of one month. The statute thus circumscribes the maximum time frame within which, the person may avail remedy of appeal before the Appellate Authority. Notification dated 26.12.2022 is concerned with Rule 108(3) of the CGST/BGST Rules regarding time limit for submission of certified copy of the decision or order appealed against, which is not the basis for holding the petitioner s appeal being barred by delay. This court would thus find that submissions based on notification dated 26.12.2022 ( supra ) is not relevant to the instant case which involves period of limitation for filing the appeal. In the instant case the issue is of filing of appeal being barred in view of limitation, specified and provided in Section 107 of the CGST/BGST Act, which provides for filing of appeal within three months. Section 107 (4) of the CGST/BGST Act also places a limit to the condonation of limitation. It specifically provides for allowing the appeal to be presented within a further period of one month only. In the instant case, it is not in dispute that even after allowing additional period of 30 days as per section 107 (4) of the CGST/BGST Act, the appeal has been filed belatedly. The appeals, therefore, were barred by limitation also. The irresistible conclusions from simple reading of Section 49 of the Act, therefore, is that amount in ECRL cannot be utilized for the purposes of paying the pre-deposit (10 percent) under Section 107 (6) of the CGST/BGST Act as this amount is neither an output tax under the BGST/SGST Act, nor is this amount due under the Integrated Goods and Services Tax Act. This is further clarified from perusal of Sub-Sections (1) and (2) of Section 49 of the CGST/BGST Act. From plain reading of these two provisions, it is clear that actual deposits are made in the ECL through internet banking, credit or debit cards or any FD or RTGS settlement or by such other mode. The balance in ECRL, however, is a self-assessed input tax credit of the registered person. The amounts are credited on a provisional basis in the Electronic Credit Ledger, which is apparent from Section 41 of the BGST/SGST Act and are subject to an assessment proceedings to determine the amount of credit eligible for being utilized by the registered person. This court is of the opinion that the appeals filed by the instant petitioners under Section 107 of the CGST/BGST Act were not maintainable as the pre-deposit (10 percent) as per Section 107 (6)(b) of the Act, was not complied with by the petitioners - conclusion of the Appellate Authority that payment of pre-deposit (10 percent) can only be made through ECL, requires no interference by this court exercising jurisdiction under Article 226 of the Constitution of India. Petition dismissed.

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• 2023 (12) TMI 418
  Seeking provisional release of the goods and the conveyance - HELD THAT:- By way of ad-interim relief, it is directed that the goods and conveyance of the petitioner shall be released provisionally, provided the petitioner complies with the conditions imposed. This petition shall be listed with Special Civil Application No.5525 of 2023.

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• Income Tax

• 2023 (12) TMI 417
  Deduction u/s 80IA - quantum of profits and gains of the eligible business - Scope of expression market value in relation to any goods - profits of eligible business of captive power generation plants - Re-computation of amount of deduction - revenue contended that the profits of eligible business of captive power generation plants of the assessees were inflated by adopting an excessive sale rate per unit for power supply to the assessees own industrial units for captive consumption as opposed to the rate per unit at which power was supplied by the assessees to the power distributing companies i.e. the State Electricity Boards which is contended to be the market rate. - High Court has decided the issue in favor of assessee. HELD THAT:- Being in a dominant position, the State Electricity Board could fix the price to which the assessee really had little or no scope to either oppose or negotiate. Therefore, it is evident that determination of tariff between the assessee and the State Electricity Board cannot be said to be an exercise between a buyer and a seller in a competitive environment or in the ordinary course of trade and business i.e., in the open market. Such a price cannot be said to be the price which is determined in the normal course of trade and competition. Thus, market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an industrial consumer could have purchased power in the open market. It is clear that the rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under Section 80 IA of the Act. We hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the revenue. Before parting with this issue, we may mention that reliance placed by Mr. Rupesh Kumar, learned counsel for the revenue on the definition of the expression market value as defined in the explanation below sub-section (6) of Section 80 A of the Act is totally misplaced inasmuch as sub-section (6) was inserted in the statute with effect from 01.04.2009 whereas in the present case we are dealing with the assessment year 2001-2002 when this provision was note even borne. That being the position, we have no hesitation in answering this issue in favour of the assessee and against the revenue. Depreciation - Determination of WDV - Exercise of option to Adopt written down value method - Rule 5 provides for the method of calculation of depreciation allowed under Section 32 (1) of the Act. It says that such depreciation of any block of assets shall be allowed, subject to provisions of sub-rule (2), as per the specified percentage mentioned in the second column of the table in Appendix-I to the Rules on the WDV of such block of assets as are used for the purposes of the business or profession of the assessee during the relevant previous year. In so far the present case is concerned, it is not in dispute that sub-rule (2) has no application. From a conjoint reading of Rules 5(1) and (1A) of the Rules read with Appendix-1 and Appendix-1A, it is evident that while subrule (1) provides for allowance of depreciation in respect of any block of assets in terms of the second column of the table in Appendix 1, sub-rule (1A) enables an assessee to seek allowance of depreciation of assets acquired on or after the 1st day of April, 1997 as per the percentage specified in the second column of the table in Appendix-1A on actual cost basis. However, the second proviso to sub-rule (1A) clarifies that an assessee may opt for depreciation under Appendix-1 instead of Appendix-1A but such option has to be exercised before the due date for furnishing the return of income under sub-section (1) of Section 139 of the Act. In the instant case, there is no dispute that the assessee had claimed depreciation in accordance with sub-rule (1) read with Appendix-I before the due date of furnishing the return of income. The view taken by the assessing officer as affirmed by the first appellate authority that the assessee should opt for one of the two methods is not a statutory requirement. Therefore, the revenue was not justified in reducing the claim of depreciation of the assessee on the ground that the assessee had not specifically opted for the WDV method. We are in agreement with the view expressed by the Tribunal and the High Court that there is no requirement under the second proviso to sub-rule (1A) of Rule 5 of the Rules that any particular mode of computing the claim of depreciation has to be opted for before the due date of filing of the return. All that is required is that the assessee has to opt before filing of the return or at the time of filing the return that it seeks to avail the depreciation provided in Section 32 (1) under subrule (1) of Rule 5 read with Appendix-I instead of the depreciation specified in Appendix-1A in terms of sub-rule (1A) of Rule 5 which the assessee has done. If that be the position, we find no merit in the question proposed by the revenue. The same is therefore answered in favour of the assessee and against the revenue. Genuineness of Professional expenses - Payment made by the assessee to Shri SK Gupta and his group of companies - From the materials on record, we find that the assessing officer had solely relied upon the statements made by Shri S.K. Gupta on 12.12.2006 and 23.12.2006 during the course of the search. However, the assessing officer overlooked the fact that within a short span of time, Shri S.K. Gupta had retracted from the said statements by filing an affidavit on 05.02.2007. Thereafter, he reiterated the statements made by him in the affidavit dated 05.02.2007 in a statement recorded on 08.02.2007. We find that in the later statements, Shri S.K. Gupta had categorically stated that he had rendered services to the assessee. He also mentioned that the name of the assessee was not referred to as one of the beneficiaries of the accommodation bills in his earlier statement. He had categorically stated that he had rendered service to the assessee and that the assessee had not obtained any bogus accommodation bills from him. Assessing officer had dis-believed the affidavit as well as the subsequent statement of Shri S.K. Gupta without any justifiable and cogent reason. That apart when the revenue had relied upon the retracted statement of Shri S.K. Gupta, it ought to have provided an opportunity to the assessee to cross-examine Shri S.K. Gupta which was however denied. Thus, revenue was not justified in disallowing the claim of professional expenses of the assessee on account of payment to Shri S.K. Gupta and his group of companies. Therefore, we agree with the view taken by the High Court. As noted by the High Court, the entire issue is based on appreciation of the materials on record. Tribunal had scrutinized the materials on record and thereafter had recorded a finding of fact that there were sufficient evidence to justify payment made by the assessee to Shri SK Gupta, a consultant of the assessee, and that the assessing officer had wholly relied upon the statement of Shri Gupta recorded during the search operation which was retracted by him within a reasonable period. There is no admissible material to deny the claim of expenditure made by the assessee. Accordingly, this issue is answered in favour of the assessee and against the revenue. Nature of receipts - carbon credit - capital or revenue receipt - HELD THAT:- As the issue relating to carbon credit was not raised or urged by the revenue. If that be the position, revenue would be estopped from raising the said issue before this Court at the stage of final hearing. That apart, there is no decision of the High Court on this issue against which the revenue can be said to be aggrieved and which can be assailed. In the circumstances, we decline to answer this question raised by the revenue and leave the question open to be decided in an appropriate proceeding.

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• 2023 (12) TMI 416
  Offence punishable u/s 276CC - assessee failure to file return of income - willful attempt or not? - As decided by HC 2022 (11) TMI 590 - MADRAS HIGH COURT] there is no evasion of tax. It is not the case that no return has been filed, thus there is no willful failure on the part of the petitioner to file return - HELD THAT:- No good ground to interfere with the impugned order passed by the High Court. The Special Leave Petition is dismissed.

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• 2023 (12) TMI 415
  Validity of Assessment u/s 153A - fresh material/information received after the date of search - HELD THAT:- Supreme Court in the case of Abhisar Buildwell [ 2023 (4) TMI 1056 - SUPREME COURT] approved of the view taken by this court in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] as held no addition can be made in respect of the completed assessments in absence of any incriminating material. Admittedly, the assessment for the Assessment Year 2011-12 was finalized on 20.01.2012 and no notice under Section 143(2) of the Act was issued, as such no assessment was pending on the date of search action i.e. 29.10.2013. Also admittedly, in the present case, during the search action against the respondent/assessee no incriminating material was found and the material in the form of statement of Shri B.P. Singh now sought to be relied upon by the appellant/revenue was recorded subsequent to the search action. Therefore, the proposed question of law cannot be admitted as substantial question of law.

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• 2023 (12) TMI 414
  Reopening of assessment - Exemption u/s 11 denied - notice after 4 years from the end of the relevant assessment year - revenue rejected the objections raised by the petitioner primarily on the ground that Form-10 was not submitted by the petitioner before the due date of filing of return u/s 139 (1) - whether factual aspect of late receiving of Form-10 came to the knowledge of the Assessing Officer on a later date and accordingly amounts to new material? - HELD THAT:- Form-10 under Rule 17 of the Rules is required to be filed before the Assessing Officer before he completes the assessment. In a case, where Form-10 is filed late but is filed before the Assessing Officer completes the assessment, benefit of Section 11(2) of the Act shall be available to the assessee. From a reading of impugned notice, and assessment order it appears that the Assessing Officer has paid no heed to the ratio laid down in the judgment of the Supreme Court Nagpur Hotel Owners Association [ 2000 (12) TMI 99 - SUPREME COURT] and various High Courts . Moti Ram Gopi Chand Charitable Trust, Sakal Relief Fund [ 2013 (12) TMI 609 - ALLAHABAD HIGH COURT] . We, accordingly, have no hesitation in holding that the entire process of reassessment that has been initiated by the Department holds no water and is without any legal basis whatsoever. We quash the notice issued under Section 148 - Decided in favour of assessee.

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• 2023 (12) TMI 413
  Cash seized by the Election Officer from the vehicle owned by the petitioner - cash was in demonitized currency notes of Rs. 500/- and Rs. 1000/- - scope Code of Conduct with regard to the elections of the Nagar Panchayat was in force and hence it was impermissible to carry cash of such value in the vehicle - RBI refused to accept Notes as its liabilities with regard to such notes ceased on 31/12/2016 and the notes of the said denominations were no longer a legal tender - petitioner received a communication from the Deputy Director of Income Tax (Inv.), Unit II, Nagpur in which it was stated that the specified bank notes (SBNs) could not be accepted for deposit without any Court orders HELD THAT:- Income Tax Authorities while acting under the Act of 1961 had seized the amount of Rs. 30,00,000/-. The procedure prescribed by Section 131 of the Act of 1961 was duly followed. The amount seized was thereafter declared as an additional income of the petitioner followed by payment of requisite income tax and interest. There does not appear any justifiable reason to preclude the petitioner from receiving the aforesaid amount in lieu of the seized SBNs. Much prior to the appointed day, the seizure had been effected and requisite formalities had been completed. The provisions of Chapter XIII of the Act of 1961 and especially Sections 131, 132 and 132B indicate that seizure of the SBNs in the present circumstances been undertaken by a Law Enforcement Agency referred to in the proviso to Section 5 of the Act of 2017 and hence the petitioner is entitled to return of the aforesaid amount. The interests of justice and fairplay warrant issuing of such direction to the RBI, which direction would be an order envisaged by proviso (d) to Section 5 of the Act of 2017. For the aforesaid reasons, it is held that the petitioner is entitled to return of the amount of Rs. 30,00,000/- that was seized by the Election Officer on 17/11/2016. To facilitate refund of the said amount, the Reserve Bank of India is directed to accept the SBNs valued at Rs. 30,00,000/- and thereafter deposit the same in the PD account of the Principal Commissioner of Income Tax (Central), Nagpur. On such deposit, the Assistant Director of Income Tax (Inv.) II, Nagpur shall take necessary steps to ensure that the said amount is refunded to the petitioner on completion of the requisite formalities. The entire exercise be completed within a period of six weeks from today.

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• 2023 (12) TMI 412
  Validity of reopening of assessment - correctness of order u/s 148A (d) challenged - notice has been issued under Section 148 - object behind insertion of Section 148A - steps/procedure have been followed by AO prior to issuance of notice u/s 148A(d) - scope of amendment by the Finance Act, 2021 - petitioner seeks to challenge the legality, validity and propriety of the notice issued u/s 148 of the Act seeking to reopen the assessment for the Assessment Year 2016-17 which is based on the order under Section 148(A)(d) - HELD THAT:- This Court has culled out the foundational prerequisite of Section 148A of the Act, as aforesaid, to emphasize that if the inquiry contemplated in Section 148A is interpreted to mean a detailed inquiry where both sides can seek and adduce evidence/material (documentary/ocular), then the entire object behind Section 148A would stand defeated. The object behind Section 148A as is evident from the findings in the fountainhead decision of GKN Driveshafts (India) Ltd.[ 2002 (11) TMI 7 - SUPREME COURT] is to enable the assessee to be informed of the reasons and information suggesting that income chargeable to tax has escaped assessment and, therefore, in turn to empower the assessee to prepare and file an effective reply and thereafter the Assessing Officer to pass an order under Section 148A(d), followed by issuance of notice under Section 148 of IT Act. The object behind insertion of Section 148A by the Legislature w.e.f. 01.04.2021 inter alia appears as follows:- (a) to prevent rampant and casual issuance of notice u/S. 148 by the Revenue; (b) to save unnecessary harassment to the assessee of being subjected to reopening a case under Section 148; (c) to save the Revenue of the time and energy which may be vested pursuing frivolous and fruitless proceedings u/S 148 Considering the aforesaid, normally, the writ Court should not interfere at such premature stage when the proceedings initiated against the assessee are yet to be concluded by the statutory authorities. This Court refrains to interfere with the order(s)/notice(s) impugned. Pertinently, the question of going into the veracity and genuineness of the material/evidence forming the opinion of the AO suggesting that income of petitioner/assessee has escaped assessment ought not to be gone into while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution of India.

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• 2023 (12) TMI 411
  Revision u/s 263 - unexplained gold jewellery found in search - unexplained investment u/s. 69/69B - scope of Board Instruction 1916 dated 11.05.1994 (BI 1916) for Streedhan applied by AO - Pr. CIT found the same as erroneous and prejudicial to the interest of the Revenue inasmuch as BI 1916 only seeks to regulate seizure by providing uniform parameters, to be applied across the country, to avoid arbitrariness in seizure and indeed harassment to tax payers, limited in its application to seizure, and its understanding by AO to imply a concession qua gold jewellery found though not seized in view of these norms, i.e., in the matter of assessment, is misplaced. The same is to be subject to assessment as per law. HELD THAT:- AO s, who claims to be in making the impugned assessment guided by the said BI, understanding thereof is, much less a reasonable construction, as contended, a disregard thereof; rather, contrary thereto. The argument is in fact misconceived inasmuch as a possible view, precluding revision, is only qua a provision of law, conspicuous by its absence. On merits, as explained, the Board cannot, as per settled law, travel outside its bounds under law or usurp the power of adjudication by the assessing authority. It has, as a matter of fact , not, so that questions of competence or reasonability of construction are academic, stated only to meet the arguments made during hearing. No reason for such construction, needless to add, stands furnished before us. The impugned assessment is a clear case of misapplication of law, liable for revision qua the relevant aspect. That some other authority may have read BI1916 likewise, i.e., contrary to what it says, is immaterial (Escorts Ltd. v. UoI [ 1992 (10) TMI 1 - SUPREME COURT] The same can, under the circumstances, only be regarded as it s view in the matter, not supported by any cannon of interpretation of statutes which the BI is in fact not, drawing inference from the fact of non-seizure advocated thereby, to thus travel outside its scope and purpose. Assessee s appeal is dismissed

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• 2023 (12) TMI 410
  Addition u/s 56(2)(viib) - assessee had issued shares at a value far exceeding its Fair Market Value - difference in the fair market value of the shares, as estimated by the AO and the premium at which the shares were issued to the assessee, was added to the income of the assessee - primary objection to the valuation report submitted by the assessee was the unusually enhanced value given to the asset of the assessee i.e. the land, which was noted to be valued at 10 times more than its purchase price. HELD THAT:- The assessee submitted a valuation report of the valuer for the valuation of piece of land at Rs. 87,62,200/- as against its purchase price of Rs. 8,74,460/-, but we have noted that the ld. CIT(A) found that while the asset was purchased in the same year at a fair lesser price and its jantri value was also fair less, the valuer had given no basis at all for valuing it at 10 times its actual cost at which it was acquired. The assessee has not been able to controvert this finding of the ld. CIT(A); therefore, the contention of the assessee that there was no basis given for rejecting the valuation report is found to be incorrect on facts and is accordingly rejected. No other arguments having been made by the assessee opposing or against the invocation of Section 56(2)(viib) of the Act in the present case, Ground raised by the assessee challenging the invocation of Section 56(2)(viib) of the Act in the present case is, therefore, dismissed. Addition enhanced by CIT(A) treating the difference in FMV of shares and their consideration as a whole, including face value of shares and premium , as liable to tax u/s 56(2)(viib) - While the section specifies that it would be invoked only when the consideration received exceeds the face value of shares, i.e. the assessee receives premium on issue of shares, the addition is to be made of the difference between fair market value of shares and the aggregate consideration received. Therefore, a plain reading of the section would reveal that the premium on issue of shares is relevant only for the purpose of invocation of section; while for the purpose of making addition to the income of the assessee, the difference between the consideration and the fair market value is to be taken. We are, therefore, in complete agreement with the ld. CIT(A) that the entire amount of consideration received falls within the scope of consideration of Section 56(2)(viib) of the Act. The contention of the assessee is accordingly rejected. Ground No.4 of the appeal is rejected.

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• 2023 (12) TMI 409
  Validity of reopening of assessment u/s 147 - as alleged no compliance of mandatory requirement of law to issue notice u/s 143(2) against return of income filed makes the impugned Assessment Order null and void - addition u/s 68 - HELD THAT:- It is to be noted that the A.O. had already issued notice u/s 143(2) of the Act to the assessee on 12/09/2017 which was issued to the assessee after the lapse of time limit given to the assessee to file the return of income in response to notice issued u/s 148 of the Act on 30/03/2017. Now, the assessee wants to do the things indirectly which cannot be done directly. In our opinion, there is no credential to the letter filed by the assessee dated 02/11/2017 requesting the A.O. to treat the original return filed on 16/03/2011 as return field in response to notice u/s 148 of the Act. The law assists the person who is vigilant and not to the person who sleep over the matter. It is a well settled principle that a person having done wrong cannot take advantage of his own wrong and plead for bar of any law to frustrate the lawful trial by a Competent Court. The principle of Latin Maxim Nullus Commodum Capera Potest De Injuria Sua Propria applies to the assessee. Thus, the notice issued u/s 143(2) of the Act issued on 12/09/2017 is a valid notice given to the assessee so as to frame the assessment u/s 143(3) read with Section 147 of the Act. Decided against assessee. Application of independent mind on the material or not? - Relevant assessment year as escaped assessment. In the present case, the A.O. has cause or justification to know that the income had escaped assessment. After going through the facts and circumstances of the case, and the reasons recorded by the A.O., found that the income had been escaped from the assessment and at the stage of reopening, the final outcome of the proceedings is irrelevant. At the initiation stage, what is required is reason to believe but not the established facts of escapement of income. At the stage of issuance of notice u/s 148 of the Act, the only question is whether there was relevant materials on record on which reasonable person could frame a requisite belief whether the material conclusively proved the escapement or not is the concerned at that stage. Because at that point of time the formation of belief by the A.O. is within the realm of subjective satisfaction. Being so, we do not find merit in the Ground No. 3 of the assessee, accordingly, Ground No. 3 of the assessee is dismissed. Sanction u/s 151 of IT Act as provided with the copy of the reason recorded shows mechanical satisfaction by sanctioning authority - There is no application for admission of additional grounds. Without prejudice to the same, u/s 151(1) of the Act no notice u/s 148 of the Act shall be issued by the A.O. after expiry of four years from the end of the relevant Assessment Year unless the PCIT or Chief Commissioner or Principal Commissioner or Commissioner is satisfied on the reasons recorded by the A.O, that it is fit case for issuance of such notice. No infirmity in the order of the authority prescribed u/s 151 (1) of the Act. Thus, the Ground No. 4 is dismissed. Addition u/s 68 - Assessee had failed to prove the three conditions wiz:- (i) The identity of the creditor, (ii) The capacity such creditor to additions the amount (iii) The genuineness of the transaction, in our considered opinion, the CIT(A) committed no error in confirming the addition made by the A.O. u/s 68. Assessee appeal dismissed.

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• 2023 (12) TMI 408
  Revision u/s 263 - Deemed dividend u/s 2(22)(e) - loans received from another company - beneficial ownership - HELD THAT:- Since as per the finding of the CIT himself, the assessee s beneficial ownership of the shares in MAP Ltd. alongwith voting power fall below the criteria specified for invocation of section 2(22)(e) of the Act, the said section was not applicable to the facts of the present case. Therefore, finding of error by the CIT in the assessment order for non-invocation of section 2(22)(e) of the Act on the loans received by the assessee from MAP Ltd. palpably fails on facts recorded by the Ld.PCIT himself. Accordingly, we hold that considering the facts noted by the ld.Pr.CIT himself, provisions of section 2(22)(e) of the Act were not attracted to the transaction of amounts/loan received by the assessee from MAP Ltd, and finding of the error by the ld.PCIT in this regard is, therefore, held to be not sustainable. Finding of error by the ld.Pr.CIT with regard to the loans received from MAP Cotton P.Ltd. qualifying as deemed dividend under section 2(22)(e) of the Act is against the principles of natural justice enshrined in section 263 of the Act itself, which categorically requires the assessee to be heard on the errors noted by the ld.Pr.CIT in the assessment orders for valid exercise of revisionary jurisdiction u/s 263 of the Act. Section 263(1) of the Act requiring powers of revision to be exercised by PCIT s/CIT s after giving opportunity of hearing to the assessee is reproduced - the finding of the error by the ld.Pr.CIT of non-invocation of section 2(22)(e) of the Act to the transaction of loan received by the assessee from MAP Cotton Ltd.is also held not sustainable in law. Assessee appeal allowed.

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• 2023 (12) TMI 407
  Maintainability of the reassessment proceedings - deduction u/s. 35(2AB) - non furnishing Form 3CL quantifying eligible expenditure u/s. 35(2AB) regarded in law as non-disclosure within the meaning of proviso to section 147 r/w Explanation 1 thereto - Notice issued beyond 4 years - HELD THAT:- The procedure of communication of Form 3CL direct by the prescribed authority to the Revenue giving rise to the presumption that the same would stand communicated to the AO, is, as afore-noted, not supported by the rule. The presumption, nevertheless, fails on facts, i.e., on the assessee receiving Form 3CL approving a reduced deduction u/s. 35(2AB) (w.r.t. that claimed) on which the assessee is not questioned during assessment. And which ought to have impelled the assessee to, in discharge of it s primary obligation, furnishing Form 3CL, either revise it s claim downward, or state it s reasons for persisting with it s claim, or both, i.e., in case of partial scaling down of it s claim. Why, in a given case, the AO may himself question the assessee on it s higher claim, implying knowledge of Form 3CL with the AO, validating the presumption afore-said, which would entitle the assessee to proceed accordingly. The assessee s disclosure obligation undergoes a qualitative change in light of this fact. Again, could the assessee s conduct be faulted where Form 3CL reports deduction in the same sum as claimed by the assessee? We say so to emphasizes the need to calibrate the conduct toward true and full disclosure with the facts circumstances of the case, which cannot be held as a constant or absolute. Tribunal in assessee s own case for AY 2012-13 [ 2017 (8) TMI 841 - ITAT COCHIN] being in fact undisputed, particularly considering that the claim for deduction made was much higher than that on the basis of expenditure approved thus by the prescribed authority. It is this variance, and not F/3CL per se , that is the undisclosed primary, material fact. The plea of presumption of the said Form being in the knowledge of the AOis not supported by the rule, i.e., not available legally and, besides, falls flat on facts, i.e.,in view of a complete absence of any enquiry or reference thereto in the original assessment and, therefore, a false plea by the assessee, who is obliged by law to disclose, fully and truly, all material facts necessary for assessment to the AO. Why, the knowledge of Form 3CL being at a variance with the assessee s claim with the AO, i.e., at the time of original assessment, may, where so , eschew reassessment proceedings even for AY 2011-12, rendering the same as a change of opinion. The two aspects are inter-related, with there being decisions, as in Ganga Saran Sons P. Ltd. v. ITO [ 1981 (4) TMI 5 - SUPREME COURT] wherein the Hon ble Apex Court found no failure on the part of the assessee to disclose material facts, holding, on that basis, the AO could not have a reason to believe that any part of income had escaped assessment. The matter is to be examined from the stand-point of the obligation on the assessee to disclose all material facts necessary for assessment, fully and truly, i.e. as mandated by law, and which, a positive requirement, we have, giving our reasons, found as not discharged. We are supported in our view by the decisions cited here-in-above, as well as that relied upon by the parties before us. The matter, as for AY 2011-12, shall travel to the file of the ld. CIT(A) for adjudicating the quantum adjustments in assessment under appeal before him after hearing the parties per a speaking order.

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• 2023 (12) TMI 406
  TP Adjustment - comparable selection - Application for admission of additional evidences - assessee submitted that in the present AY, being first year, the assessee had erroneously considered the comparable companies engaged in financial and leasing services (hire purchase and leasing services, investment services, other financial services, other consultancy services) to benchmark the subject international transaction instead of considering comparable companies engaged in providing business support services . HELD THAT:- Section 92CA(3) rests obligation on TPO to determine the arm s length price in relation to the international transaction in accordance with sub-section (3) of section 92C. This exercise at one end is to accept or discredit the TPSR of the assessee on the other hand obliges the TPO to make an independent enquiry of his own on the question of determination of ALP. The point is that in present AY the TPO accepted the comparables of segment taken by assessee without questioning if the assessee was right in taking up comparable of segment financial services/ selling of financial products however in same set and scope of business activity and model when accepted in AY 2008-09 onwards the assessee s changed stand with comparables of different segment of business support services . Thus the comparables of segment AY 2008-09 onwards are binding on the TPO and if those are accepted the whole TPSR becomes defective and that causes prejudice to both the parties. In any case, if additional evidence of fresh TPSR on new set of comparables is allowed, the TPO will still have a right to not consider the same and allege that in present AY the comparables of right segment were taken. Admissibility of additional evidence we are of the considered view that Rule 29, bars the right of parties to the appeal to produce additional evidence either oral or documentary. However, if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders, the additional evidence can be called for. Further the Rule 29 provides that for any other substantial cause also the Tribunal can allow the additional evidences. in the case in hand the facts and circumstances establish that either both TPO and the assessee or the TPO only hand failed to take comparables of correct segment. Thus, there is force in the contention of assessee that both the assessee and TPO were mistaken on facts of the functional profile of the assessee to consider comparables engaged in financial and leasing services instead of business support services . Hence at the end, before us, neither the assessee nor the Revenue can completely justify the comparables accepted by them. Assessee has sought indulgence of the Bench to allow the additional evidences of new set of comparables, but, the same require verification as the whole exercise has to be done again by the TPO who has right to rebut the same. Thus, the question of admissibility of these evidences as to the assessee had opportunity to lead this evidence at the first instance or that the assessee has created this evidence subsequently is not of much consequences. The evidence is from the contemporary data of relevant AY only so there is no question of assessee taking advantage of subsequent facts or something created by assessee ex post facto. The nature of fresh set of comparables require a fresh look into all the issues, substantially and incidentally involved due to erroneously taking comparables of wrong segment by both the assessee and the TPO. Thus, we are inclined to allow the application of the assessee. Impugned final assessment order is set aside and the TPO is directed to accept the fresh evidence and report of the assessee for the purpose of Section 92C of the Act r.w. Rule 10B of the Income-tax Rules, 1962 and, after giving further opportunity of hearing to the assessee pass a fresh order. The assessee will be at liberty to raise further incidental issues afresh before the TPO/AO. In the result, the appeal of the assessee be considered allowed for statistical purposes.

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• 2023 (12) TMI 405
  Addition u/s 56(2)(vii) - real owners - partners v/s firm - property purchased by assessee-partner less than guideline value of the property - addition made to the extent of assessee s share therein i.e., one-fourth - Assessee argued that entire amount to purchase the property was spent by the firm and the property actually belonged to the firm - as per AO the sale deed does not mention that the property was purchased in the capacity of the partners of the firm and the property was being acquired by the firm and loan was sanctioned in the name of the partners only and property was purchased in individual names only - HELD THAT:- As the impugned property has been purchased in joint ownership of 4 persons all of whom happens to be partner in a firm - From the financial statements as placed on record, it emerges that the said property has been introduced by the partners in the firm and the said property is in business use of the firm. The same is also evidenced by the fact that the depreciation has also been allowed to the firm. The firm is repaying the loan installment and for all practical purposes, it is the firm only which is exclusively using the property for its business use. We also find that the provisions of Section 14 of Indian Partnership Act provide that unless the contrary intention appears, property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm. Therefore, applying purposive construction to the facts of the present case, the property is deemed to have been acquired by the firm only and not by individual partners. Provisions of Sec.56(2)(vii)(b)(ii) could not be pressed into service since these provisions do not apply to partnership firm at the relevant point of time. Therefore, addition is not sustainable. Assessee appeal allowed.

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• 2023 (12) TMI 404
  Additions u/s 68 - bogus STCG - assessee has sold share within 12 days and earned short term capital gain. Financial result of transaction indicate that rise in price was a result of rigging - HELD THAT:- In the present case, the assessee has shown sufficient evidence about the purchase and sale of scrip of M/s Splash Media Infra Ltd.. No adverse material against such evidence was brought on record. No investigation was carried out by the Assessing officer. Assessee by furnishing complete details of their share transaction, has discharged primary onus upon them. As decided in Ranchhod Jivabhai Nakhava [ 2012 (5) TMI 186 - GUJARAT HIGH COURT] that once the assessee has discharged its primary onus, the onus shift upon the revenue to carry out further investigation to disprove the evidence of assessee. We find that in the present case, the Assessing Officer failed to carry out any investigation or brought any adverse material against the assessee. There is no dispute that the assessee made purchases of impugned shares through well-known stock broker Reliance Securities Limited. The transaction was carried out through Bombay Stock Exchange, therefore, find no justification to tax such short term capital gain as unexplained cash credit without bringing any adverse evidence on record. Accordingly, direct to delete the addition made by the Assessing Officer and confirmed by the ld. CIT(A). Decided in favour of assessee.

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• 2023 (12) TMI 403
  Penalty u/s 271D - assessee has accepted cash as part of sale consideration on sale of immovable property - contravention of the provisions of section 269SS - HELD THAT:- We find that the AO has enquired about the cash deposits made by the assessee and he convinced and accepted the explanation given by the assessee. Further, it is pertinent to mention that the Ld.AO has not recorded the satisfaction regarding the initiation of penalty proceedings while passing the assessment order u/s. 143(3) of the Act which is a prerequisite for initiation of penalty u/s. 271D of the Act. We are of the considered opinion that issuing a notice u/s. 274 r.w.s 271D of the Act is nothing but an afterthought of the Ld. AO. As case of CIT Vs Jai Laxmi Rice Mills [ 2015 (11) TMI 1453 - SUPREME COURT] we are of the considered view that the penalty order passed u/s. 271D deserves to be quashed. Appeal of the assessee is allowed.

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• 2023 (12) TMI 402
  Disallowance on account of exchange rate fluctuation - speculative loss or not - HELD THAT:- As decided in own case [ 2023 (5) TMI 577 - ITAT DELHI] Appellant is an NBFC and inter-alia is in the business of acquiring loan for onward lending. Appellant has incurred loss on foreign exchange fluctuation on account of ECB liability only. Therefore, the conclusion of the AO derived on the basis of CBOT Instruction No. 3 of 2010 in the above circumstances is not fit to be supported with respect to loss incurred on account of re-instatement of ECB liability. AO has not given concrete findings on the explanation of assessee that Instruction No. 3 of 2010 issued by CBDT is applicable only where there is trading in forex derivatives, which situation does not exist in the instant case, as the AO herself has mentioned the nature of appellant s business as that of Information Technology line, i.e., IT related purchase/sales or services. Therefore, the conclusion of the AO derived on the basis of CBDT Instruction No. 3 of 2010 in the above circumstances is not fit to be supported that the foreign exchange fluctuation loss is a speculative loss The issue has been decided in favour of the assessee by the decision (supra) of the Tribunal in its own case. Respectfully following the Tribunal s decision (supra) and agreeing with the submissions of the assessee, we delete the impugned disallowance. Disallowance u/s 36 (i) (viii) - whether taking cognizance of timeline prescribed under section 80IA to make the impugned disallowance u/s 36(1)(viii) is in accordance with law or not? - assessee submitted that it satisfies all the conditions prescribed under section 36(1)(viii) to claim deduction for the amount transferred to special reserve and taking cognisance of timelines prescribed under section 80IA for making any disallowance is not called for - The contention of the assessee is that section 36(1)(viii) is a complete code in itself and reference to section 80IA beyond what has been stated in the section itself is not warranted - HELD THAT:- Section 36(1)(viii) of 1961 Act corresponds to section 10(2)(xiva) of 1922 Act meaning thereby that the provision of special deduction to an specified entity existed in Income Tax Act 1922 and was retained in 1961 Act whereas the provision of section 80IA came into being w.e.f. 1.4.1991 and the provision for benefit of deduction has been amended many a times and at present section 80IA shall not apply to any enterprise which starts the development or operation and maintenance of infrastructure facility on or after 01.04.2017. There is nothing like that in section 36(1)(viii) of the Act. We, therefore hold that the Ld. AO erred in taking cognizance of timeline prescribed under section 80IA in making the impugned disallowance. The contention of the Ld. AR that the Revenue has allowed the claim of the assessee in AY 2017-18 and 2018-19 has not been refuted by the Ld. CIT-DR. We therefore do not find any justification in making the impugned disallowance which we hereby delete in both the assessment years. Disallowance of advertisement expenses - AO made the impugned disallowance for want of supporting documents - HELD THAT:- CIT(A) restored the matter to the Ld. AO with a direction to him to decide it afresh on production of ledger account containing the details of expenses with bills/vouchers by the assessee. The only grievance of the assessee has been lack of adequate opportunity given to it. Since opportunity to present its case again before the Ld. AO has been allowed by the Ld. CIT(A) we decline to interfere. Disallowance u/s 14A and Rule 8D - AO did not accept the explanation of the assessee and relying on several decisions held that investment decisions are very strategic decisions in which top management is involved and therefore proportionate management expenses are required to be deducted while computing the exempt income from dividend - HELD THAT:- It is observed that before the Ld. CIT(A) it was vehemently argued by the assessee duly supported by judicial pronouncements that disallowance cannot exceed the amount of exempt income earned during the year. The Ld. CIT(A) has accepted this argument of the assessee. We find no reason to interfere with the order of the Ld. CIT(A) and accordingly reject this ground of the assessee. Disallowance of depreciation - assessee has made investment in windmill to earn income from investments and such investment activity cannot be equated with activities in the nature of trade or business or adventure - CIT(A) deleted the impugned disallowances holding that the assessee can claim depreciation as it owns the assets and the same is put to use for business - HELD THAT:- The parties agree that this issue is covered against the Revenue by the decision of Hon ble Delhi Court [ 2023 (1) TMI 70 - DELHI HIGH COURT] - The appeal of the Revenue pertaining to AY 2012-13 against the deletion of similar disallowance by the Ld. CIT(A) has been dismissed by the Tribunal [ 2023 (5) TMI 577 - ITAT DELHI] Following the precedent as above, we find no merit in the appeals of the Revenue which we hereby reject. These grounds are dismissed. TDS u/s 194C or 194J - short deduction/non deduction of TDS - AO payments made by the assessee to Suzlon Energy Ltd. was in the nature of technical and professional services - CIT(A) relying on the decision of Hon ble Calcutta High Court in CIT vs. S.K. Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] deleted the impugned disallowance - HELD THAT:- As decided in Future First Info Services (P) Ltd. [ 2022 (7) TMI 748 - DELHI HIGH COURT] that in cases of short deduction of TDS disallowance under section 40(a)(ia) could not be made. The correct course of action would be to invoke section 201 of the Act. We therefore uphold the order of the Ld. CIT(A) and reject the appeal of the Revenue in both the AYs involved. Disallowance u/s 14A r.w.r. 8D - assessee itself computed disallowance on a prudent and reasonable basis - CIT(A) restricted the disallowance to the extent of exempt income and deleted the additional disallowance - HELD THAT:- As relying on assessee own case for earlier AYs ITA No. 349/2022 [ 2023 (1) TMI 70 - DELHI HIGH COURT] , 1268/Del/2015 [ 2023 (5) TMI 507 - ITAT DELHI] and 4985/Del/2017 [ 2023 (5) TMI 577 - ITAT DELHI] we confirm the order of the Ld. CIT(A) in both the AY(s) and consequently reject the appeals of the Revenue on the issue.

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• 2023 (12) TMI 401
  Validity of reopening of assessment u/s 147 - prior sanction of approval u/s 151 of the Act from the competent authority not taken - Exemption u/s 10(26BBB) denied - HELD THAT:- We find that prior sanction of approval u/s 151 of the Act from the competent authority is mandatory before the reopening of assessment. As it has been duly confirmed that no approval U/s 151 of the Act is on record for the years under consideration, the assumption of jurisdiction U/s 147 of the Act becomes void ab initio. Accordingly, the entire reassessment proceedings are hereby quashed. Assessee appeal allowed.

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• 2023 (12) TMI 400
  Levy of penalty u/s 271(1)(c) - defective notice - as alleged non specification of clear charge - Correct head of income - Assessee had offered the rental income as business income as compared to Income from house property as done by AO - HELD THAT:- AO initiated penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of Income leading to concealment of income and thereafter issued the notice u/s 274 read with 271(1)(c) of the Act without specifying any particular limb of the penalty and finally imposed the penalty for furnishing inaccurate particulars of income. The Assessee challenged the Imposition of penalty mainly on the basis of notice itself, therefore we deem it appropriate to decide the legal issue involved in the instant case, instead of going into other issue/merits of the case. The Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon ble High Court also held that the standard proforma of notice under section 274 of the Act without striking off the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind. The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. In the present case AO has issued the notice u/s 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the penalty is not leviable - Decided in favour of assessee.

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• 2023 (12) TMI 399
  Disallowing loss in F O due to change in client code modification done by broker - AO disallowed proportionate BSE/NSE charges by allocating the same in proportion of turnover of delivery and non-delivery based transaction - AO received information from the office of the Director of the Income-tax, Mumbai that assessee was one of the beneficiary of tax evasion by way of client code modification on stock exchange and taking excess loss - HELD THAT:- AO has nowhere provided details of the transactions where client code modification was carried out nor he given reasons as why the said client code modification was not for genuine purposes and for the purpose of the evasion of the tax. In absence of providing any such material to the assessee, the addition by the Assessing Officer is against the principle of natural justice. AO has neither called for the broker and made any inquiry and made addition simply on the basis of the report of the Director of the Investigation. Thus the addition made being on presumption that the client code modification carried out was for non-genuine purposes. Accordingly, the addition made by the AO and upheld by the Ld. CIT(A) being based on the presumption and being without supporting any documentary evidence that assessee has evaded the tax on those transactions and shown fictitious loss, is deleted and the order of Ld CIT(A) is set aside. The grounds of appeal of the assessee are accordingly allowed. Penalty u/s 271(1)(c) - Defective notice u/s 274 - Assessee argued that relevant limb for levy of the penalty i.e. concealment of the particulars of income or furnishing of inaccurate particulars of the income, has not been stricken off in the notice u/s 274 r.w.s. 271(1)(c) - HELD THAT:- We find that the AO has not stricken off the relevant limb for levy of the penalty and not specified whether the penalty has been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. The Hon ble Bombay High Court in the case of Mohd Farhan A Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] held that where penalty notice has not specified for charges for levy of the penalty, whether it is for concealment of the particulars of the income or furnishing inaccurate particulars of income, in such circumstances, levy of the penalty is bad in law and accordingly cancelled.

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• 2023 (12) TMI 398
  TP adjustment - specified domestic transaction covered u/s 40A(2)(b) - AO had noted that the assessee had entered into both International Specific domestic transactions with Associated Enterprises (AE s) and therefore made a reference u/s 92CA(1) to the TPO for determination of the Arm s Length Price (ALP) - As argued presumption ought to be that expenditure covered u/s 40A(2)(b) was never a specified domestic transaction and therefore by virtue of this amendment, the impugned transfer pricing adjustment made u/s 92BA of the Act be deleted on this score alone - also AR submitted that the TPO had erred in holding that the director s commission paid by the company was excessive and thereby making transfer pricing adjustment by applying TNMM Method - whether the director s remuneration was required to be benchmarked on aggregate basis or the salary commission was to be benchmarked separately and independent of each other? HELD THAT:- AR has rightly pointed out that the remuneration policies of companies in same industry may differ i.e. fixed variable pay may vary depending on each case but the overall remuneration policy shall be in accordance with the provisions of Companies Act, 2013. It is noted that Section 197 of the Companies Act 2013 sets the limits for payment of overall director s remuneration, by whatever name i.e. salary, fee or commission. Hence, we note that there is no distinction between salary or sitting fees or commission carved out in the Companies Act, 2013. This is indeed relevant in the present context as the said provision sets out the parameters for payment of overall remuneration to Directors in unison. We also note that Section 17(1) of the Act which defines salary , includes any commission paid in addition to salary and therefore the commission is noted to form part of the salary income of the employee / director. For the aforesaid reasons, we find merit in the plea of the appellant that the salary commission paid to the directors are closely related and forms part of the overall remuneration package and therefore it has to be aggregated and benchmarked as a single transaction. It is noted that applying the aggregate approach, the ratio of aggregate salary commission i.e. director s remuneration to the profit before tax of the appellant works out to 4.36% which is well within the permitted range of the six (6) comparables. Hence, the transfer pricing adjustment made by the TPO in relation to director s commission is held to be unjustified and the TPO is directed to delete the same. Since we have deleted the impugned transfer pricing adjustment on its merits, the alternative legal plea raised by the assessee has become academic and is therefore not being adjudicated upon. Accordingly Ground No. 1 stands allowed. Characterisation of receipt - industrial Promotion Subsidy (IPS) received - Capital or revenue receipt - HELD THAT:- Having regard to the principle as laid down Ponni Sugar Chemicals Ltd [ 2008 (9) TMI 14 - SUPREME COURT] it is noted that this Tribunal in assessee s own case for AYs 2010-11 2012-13 [ 2022 (1) TMI 412 - ITAT MUMBAI] had held the IPS subsidy received by the assessee from the Government of Maharashtra was towards setting up of the new unit at Jalgaon and therefore capital in nature. Similarly, it is noted that Industrial Policy of Assam in terms of which the assessee received IPS subsidy in relation to its Assam Unit, was examined by the coordinate bench of this Tribunal at Guwahati in the case of DCIT Vs Century Plyboards (I) Ltd in [ 2020 (12) TMI 55 - ITAT KOLKATA] and the subsidies received under this Industrial Scheme for setting up unit in Assam was held to be capital in nature - Thus we hold that the lower authorities had erred in holding the IPS subsidy received by the assessee under the State Industrial Schemes of Maharashtra, Madhya Pradesh Assam was revenue in nature. Thus the assessee recognizes subsidy on mercantile basis of accounting basis the terms of the initial sanction received from the State Government. The final approval or disbursement comes at a later date and there are instances of excess/ shortfall, which is appropriately accounted for by the assessee. It is noted that that the subsidy was short recognized by the assessee in earlier years and therefore the excess amount i.e. difference between amount recognized and amount finally disbursed was credited in P L A/c during the year. As rightly pointed out by the Ld. AR, the nature of the subsidy which was short recognized in earlier year/s remains the same i.e. capital in nature. Assessee appeal allowed.

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• 2023 (12) TMI 397
  Unexplained cash credit u/s. 68 r.w.s. 115BBE - Addition being 50 percent of agricultural income in the absence of books of accounts - assessee claimed that he is not interested in showing higher income though the basic exemption limit is not fully exhausted by the assessee - HELD THAT:- Agricultural income held by the assessee are cannot be doubted. However the Assessing Officer not satisfied with the evidences filed by the assessee treated 50% of the agricultural income are unexplained and invoked Section 68 r.w.s. 115BBE of the act which in our considered opinion, is not correct in law. The assessee has shown gross total income of Rs. 340 only for the Assessment Year and agricultural income of Rs. 28,65,563/-. Co-ordinate Benches of the Tribunal have held that any sum found credited in bank passbook could not be treated as an unexplained cash credit under section 68 of the Act, since the bank account of the assessee is not considered as part and parcel of the books of accounts. Thus the addition made by the Assessing Officer was deleted. The Bombay High Court in the case of CIT v Bhaichand N. Gandhi [ 1982 (2) TMI 28 - BOMBAY HIGH COURT] has held that the pass book supplied by the bank to the assessee cannot be regarded as a book maintained by the assessee or under his instructions. Accordingly, the Tribunal is justified in holding that a cash credit for the previous year shown in the assessee s bank pass book issued to him by the bank but not shown in the cash book maintained by him for that year, does not fall within the ambit of section 68 of the Act. No hesitation in holding that the Lower Authorities are not legally correct in invoking section 68 of the Act, as against the agricultural income shown by the assessee. Therefore the additions made on this count is liable to be deleted.

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• 2023 (12) TMI 396
  Bogus LTCG - assessee makes sale of shares of a company having no financial standing/base i.e. a penny stock company - HELD THAT:- AO has not doubted the purchase of shares were through banking channels. The assessee has placed on record copies of contract memos in connection with purchase and sale of shares. Besides the above shares, the assessee has also held shares of 84 other companies as well. In the present case, no material has been brought on record to suggest that assessee was involved in any price rigging and not has the case of assessee mentioned in the list of beneficiaries, by the persons whose statements were recorded. In the statements recorded, the name of the assessee as a beneficiary was not specifically mentioned this fact was also specifically taken noted by Hon ble Supreme Court in the case of Renu Aggarwal [ 2023 (7) TMI 288 - SC ORDER] AO has not brought any material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money. In the present case, despite the assessee s specific request, no opportunity of cross examination was provided to the assessee on the basis of whose statements reliance has been placed to hold that the sale of shares was sham / bogus. ITAT Kolkata and ITAT Mumbai with respect to the very same stock i.e. M/s Global Infratech and Finance Ltd. in three separate judgments (Mukesh Sharma [ 2019 (5) TMI 1845 - ITAT MUMBAI] , Kaushalya Agarwal [ 2019 (6) TMI 297 - ITAT KOLKATA] and Mangilal Jain [ 2019 (5) TMI 1694 - ITAT KOLKATA] ) have decided the issue in favour of the assessee by holding that the assessee was not engaged in bogus purchase and sale of shares. Accordingly, looking at decisions were rendered with respect to the same stock i.e. Global Infratech and Finance Ltd. which the assessee had sold during the impugned assessment year, and the recent decision of Hon ble Supreme Court in the case of Renu Aggarwal [ 2023 (7) TMI 288 - SC ORDER] we are of the considered view the Ld. CIT(Appeals) has not erred in facts and in law in allowing the appeal of the assessee. Unexplained expenses - CIT(Appeals) directed the AO to compute the addition on account of unexplained expenses and unexplained receipt pertaining to the year under consideration on pro rata basis - HELD THAT:- we observe that Ld. CIT(Appeals) has given a detailed basis of partially allowing the appeal of the assessee, and, the Ld. DR has not pointed out to any specific infirmity/factual inaccuracy in the observations made by Ld. CIT(Appeals) in the appellate order. Accordingly, looking into the facts of the instant case, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in partly allowing the appeal of the assessee, after taking into consideration the facts of the case. Decided against revenue.

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• 2023 (12) TMI 395
  Revision u/s 263 - assessment of trust - PCIT concluded that the assessee s case squarely falls within the ambit of proviso to section 2(15) of the Act and that since the aforesaid aspects were not properly examined by the ld. AO while framing the assessment - HELD THAT:- We find that this tribunal for Asst Year 2010-11 [ 2019 (1) TMI 880 - ITAT DELHI] had passed an order in assessee s own case in favour of the assessee where the revision order u/s 263 of the Act passed by the PCIT on identical grounds were quashed. Moreover, the Hon ble Jurisdictional High Court in assessee s own case had decided the issue in favour of the assessee in [ 2018 (3) TMI 1702 - DELHI HIGH COURT] holding the activities of the assessee to be charitable in nature. Hence on merits, the issue is already decided in favour of the assessee by the order of this tribunal in earlier years after duly considering the proviso to section 2(15) of the Act. There is absolutely no reason for the ld. AO to take a divergent stand when the matters on merits are already settled by this tribunal in assessee s own case. Infact the ld. AO had followed judicial discipline, which has been completely and conveniently ignored by the ld. PCIT in the instant case. Apart from this, we also find that the ld. AO had indeed made specific enquiries on the very same issues that were raised by the ld. PCIT in his revision order. Sufficient enquiries were indeed made by the various assessing officers in the course of assessment proceedings under faceless regime. It is not in dispute that the assessee had indeed filed complete details regarding the queries raised by the various assessing officers. Infact most of the queries raised were even repetitive in nature and details were filed by the assessee repeatedly. Moreover, we find that the AO under the faceless regime had even asked for the scrutiny assessment orders for the Asst Years 2016-17 and 2017-18 which were also filed by the assessee before him. Merely for substitution of a view by the ld. PCIT on matters already on record, revision proceedings u/s 263 of the Act cannot be initiated by the ld. PCIT. Further revision proceedings u/s 263 of the Act cannot be initiated for inadequate enquiry and the same could be done only for lack of enquiry. We hold that the issues raised by the ld. PCIT is already decided in favour of the assessee on merits and further since adequate enquiries were already carried out by the ld. AO in the course of assessment proceedings, the order of the ld. AO cannot be termed as erroneous - Assessee appeal allowed.

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• 2023 (12) TMI 394
  Revision u/s 263 - whether assessment order was just erroneous and not prejudicial to the interest of the Revenue ? - As per CIT AO has failed to carry out any enquiry or examination regarding the issue of interest paid on TDS and the applicability of deemed rent on the unsold flats - HELD THAT:- AO has not conducted any enquiry or verification regarding the disallowance of interest paid on TDS and the applicability of deemed rent on unsold flats. The argument of the AR cannot be accepted because the very fact that there was no enquiry conducted by the AO as per explanation 2(a) to sec. 263, such an assessment order is deemed to be erroneous so as to be prejudicial to the interest of the Revenue. Once that is so, the question does not arise whether the order of assessment was just erroneous and not prejudicial to the interest of the Revenue or just prejudicial to the interest of the Revenue but not erroneous.This interplay application of the provision becomes irrelevant when the said deeming provision is applied. Also if the AO had conducted enquiry regarding the disputed issues, then the argument of the ld.AR would have carried some weight as to whether the assessment order was just erroneous and not prejudicial to the interest of the Revenue. In such scenario also, the issue of satisfaction by the PCIT would have been relevant, but in the instant case when in the threshold itself, the AO has failed to do his duty in conducting and verifying the issues involved, then in such situation, explanation 2(a) to sec. 263 as clearly stated as a deeming provision that such an assessment order passed shall be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue shall apply. Decided against assessee.

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• 2023 (12) TMI 393
  Method of accounting for real estate project - Income recognition - Addition made applying Percentage of Completion Method [POCM] - Accrual of income for real estate - Rule of Consistency - AO referred to the Accounting Standard for real estate project issued by Institute of Chartered Accountant of India which provided that w.e.f. 01.04.2012 income has to be accrued in respect of all real estate on POCM - CIT(A) deleted addition - HELD THAT:- As prior to the impugned A.Y 2014-15, in the case of all previous A.Ys, assessment has been framed after thorough scrutiny and method of accounting has been accepted by the Assessing Officer. On such facts Rule of Consistency squarely applies. See Excel Industries Ltd [ 2013 (10) TMI 324 - SUPREME COURT] In so far as applicability of Accounting Standard Guidance Note is concerned, it is pertinent to mention that the same has not been notified by the Central Government for the purpose of section 145(2) of the Act. Therefore, no adverse inference can be drawn. See Para Buildtech India (P) Ltd [ 2015 (11) TMI 1217 - DELHI HIGH COURT] Also in the case of Bilhari Investment Pvt Ltd [ 2008 (2) TMI 23 - SUPREME COURT] to decide on choice of method of accounting every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted . It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method. Decided against revenue.

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• 2023 (12) TMI 392
  Unexplained advances from customers towards booking of plots - Addition u/s 68 - HELD THAT:- As assessee has received advance towards booking of plot and received further sums in subsequent financial year as well. That apart, the whole money was refunded through banking channel via bank a/c of director of assessee-company. The evidences placed by assessee in terms of Rule 29 to demonstrate these factual aspects are taken as authentic evidences and relying upon the same and having considered the explanations made by Ld. AR, we are inclined to accept that the advance received by assessee is proved appropriately and, therefore, addition made by AO deserves to be deleted. Decided in favour of assessee.

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• 2023 (12) TMI 391
  Addition u/s 69 - unexplained investments - Computation of peak unaccounted cash - CIT(A) held that the fact of unaccounted receipts and payments cannot be denied, since all the unaccounted transactions are in cash, the possibility of cash being rotated cannot be ruled out, hence, the benefit of peak is required to be given in the case of the assessee - Primary reason for treating the account code named AP in the Hazir Johri software seized during the course of search action on Jindal Bullion Ltd., is that the banking transactions between Priyanka Jewellers/ Sh. Anoop Soni and JBL group are reflected in the Hazir Johri data as well as in the Tally data. This according to the Assessing Officer alone is sufficient evidence to establish that the accounts maintained under the names AP in Hazir Johri software pertained to the assessee - HELD THAT:- The entire addition by treating the account AP as belonging to Anoop Soni has been made on the basis of presumption drawn and the statement of Shri Parul Ahluwalia. However, statement of the assessee has not been recorded on this issue either at the time of search, post search inquiries or even during the assessment proceedings. A careful examination of the account AP as reproduced in the assessment order would reveal that in the remarks column various acronyms have been used against different transactions such as JD, KCX, RBG Overseas, KMTY, Oven AJ, JBL Coins, Oppo Mobile, Satia, Ishaan, Anshul, Vinod 8676, Guddu etc. These abbreviations show that the transaction recorded is ne ither through bank nor cash because since specific acronyms have been used, these transactions cannot be inferred to be pertaining to the assessee even if it is presumed with account AP be longs to the assessee. Hence, keeping in view, the entire factual matrix of the case, we hold that no addition is warranted in the case of the assessee. In the result, the peak credit theory set out by the ld. CIT(A) would also be come infructuous. The appeals of the assessee on this ground are allowed. Addition on sale of gold - assessee argued that notwithstanding anything, if the gold is considered to be sold, the same ought to have been purchased by the assessee. Hence, only the profit needs to be taxed - HELD THAT:- The argument of the ld. AR is in tune with the regular business practice. Hence, the AO is directed to compute 2% on the said sale of gold. Addition u/s 69 - HELD THAT:- CIT(A) determined amount of unaccounted receipts also and accorded benefit of unaccounted receipts - Hence, we decline to interfere with the order of the ld. CIT(A). Addition of Trail Balance Profit - transactions are recorded in code names - CIT(A) confirmed the addition holding that the examination of the seized document would reveal that it is a single page of the printout, it is a part of the trial balance as on 03.01.2017 of multiple accounts which are named in the first column - HELD THAT:- Having gone through the entire factum, we hold that the credit balance on a single page without bringing any primary or corroborative evidence of conducting the business of dabba trading such as broker, terminal, computer back up, running account or any other evidence cannot be treated as profit earned by the assessee. Since, the document proves payment of cash, the addition is sustained to the tune of Rs. 1,16,365/-.

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• Customs

• 2023 (12) TMI 390
  Seeking grant of bail - Smuggling - Gold - foreign origin or not - HELD THAT:- Keeping in view the fact that the applicant claims to have purchased the gold through GST invoice; that the gold pieces/bars recovered do not contain any markings indicating that it was of foreign origin; that the applicant has no previous criminal history and he is languishing in jail since 16.09.2023 and without making any observation, which may affect the merits of the case, the aforesaid facts are sufficient for making out a case for enlargement of the applicant on bail in the aforesaid crime. Let the applicant-Ramrup Soni be released on bail in the aforesaid case on furnishing a personal bond and two sureties each in the like amount to the satisfaction of magistrate/court concerned, subject to conditions imposed - bail application allowed.

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• 2023 (12) TMI 389
  Maintainability of petition - availability of alternative remedy of filing an appeal - petitioner was not provided an opportunity to cross examine the persons whose statements came to be recorded in the course of the investigation - breach of the principles of natural justice - relevancy of statements u/s 138B of Customs Act - HELD THAT:- A plain reading of Section 138 B would show that this provision pertains to the relevancy of statements under certain circumstances which stipulates that a statement made and signed by a person before any Gazetted Custom Officers, may during the course of any inquiry or proceedings under the Customs Act, shall be relevant, for the purpose of proving, in any prosecution for an offence under the Customs Act, the truth of the facts which it contains eventualities as provided for in clauses (a) and (b) of sub-section (1). Sub-section (1)(a) stipulates the eventuality. Section 138B per se does not provide for any cross examination, as the provision deals with relevancy of statements in the facts and circumstances of the case. As to whether an opportunity of cross examination ought to be given in regard to the statements as recorded by the Customs Officer, would be required to be considered in the course of adjudication of the show cause notice. Considering the implications, the provisions of Section 138B would bring about, it is not found that in the facts and circumstances of the case, it can be argued by the petitioner as an absolute principle of law, that an opportunity of cross examination of three witnesses ought to have been granted to the petitioner. Sub-section (1) clearly provides for relevancy of statements as made and signed before the Gazetted Officer of the Customs only in relation to any prosecution for an offence under the Customs Act and not otherwise. Although sub-section (2) makes a provision that the provisions of sub-section (1) are applicable in relation to any proceeding under the Customs Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court, it cannot be countenanced that sub-section makes a blanket provision for cross examination of such persons whose statement have been recorded before any Gazetted Officer of the Customs during the course of any inquiry or proceedings. In fact clause (b) of sub-section (1) makes a contrary indication, when it refers to the statement of the persons who are dead or cannot be found or is incapable of giving evidence or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense, which are eventualities wherein such persons can never be available for cross examination. Sub-section (1) also does not in any manner take away the discretion of the Customs Officer to accord appropriate weightage to the material and / or evidence before him in adjudicating the show cause notice - the contention as urged on behalf of the petitioner cannot be accepted, that Section 138B be read as creating an absolute right of cross examination of such persons on behalf of the noticee in the event the statements are made before any Customs Officer, during the course of any inquiry which are subject matter of consideration in adjudication of the show cause. Even otherwise, it is also important to note that show cause notice was issued in March 2000 and the request for cross-examination was made for the first time on 15 February 2017 i.e. almost after a period of more than 17 years. In the intervening period, the petitioner took recourse for settlement of the show cause notice by approaching the Settlement Commission and the lis in regard to the Settlement Commission ultimately reached the Supreme Court and the Supreme Court granted 3 months time to the petitioner to approach the Settlement Commission - the petitioner now urging a plea of cross-examination not being granted after a period of 17 years, from the date of show cause notice, itself would show the lack of bonafides of the petitioner. On a perusal of the impugned order-in-original which runs into 118 pages and on a holistic reading of the order, it cannot be said that the order is passed only on the statements of three witnesses of which cross-examination has not been granted, but there were various other direct evidences against the petitioner, for the duty liability to be fastened on the petitioner. Thus, the petitioner s plea as urged are after 17 years, cannot be a ground for quashing the order-in-original. In our opinion, the petitioner is resorting to be selective to dodge the proceedings, on raising hyper technical issues, which even otherwise are without merit. There are no merit in this petition - petition dismissed.

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• 2023 (12) TMI 388
  Requirement to fulfil the export obligation within the time prescribed under the notification or the same is subject to the EODC Certificate issued by the DGFT - HELD THAT:- The responsibility and liability of the importer is to fulfil the export obligations and submit the requisite documents to the concerned authorities and the issuance of the EODC was on the concerned authority. From the records, it is also found that the export obligations were fulfilled by the appellant and communication in that regard was made by him on 01.10.2011, which was much prior to the block period, i.e., 10.01.2013. Both the Adjudicating Authority and the Appellate Authority are aware that the authority issuing the EODC is DGFT and therefore while adjudicating the show cause notice which was issued by the customs authority, it was incumbent to have verified the status of the issuance of the EODC by the competent authority. In the present case the appellant had fulfilled the export obligations and submitted the requisite papers to DGFT for issuance of EODC well in time. However, the non co-operation of the two Departments, i.e. the Customs and the DGFT, the instant show cause notice and the impugned orders have resulted in denying the benefit to the appellant and imposing the liability to pay the custom duty, which prima-facie is unsustainable. The delay, if any, in issuance of the EODC was on the part of the DGFT and for which the appellant cannot be penalised. The impugned order set aside - appeal allowed.

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• 2023 (12) TMI 387
  Debar from filing Bill of Entry manually as per Section 46 of the Customs Act, 1962 - cash refund - entitlement of DEPB Scrip - violation of principles of natural justice - HELD THAT:- The facts, which are not in dispute, are that the appellant was disallowed to file the Bill of Entry manually in terms of Section 46 of the Customs Act, 1962, which is the violation of principles of natural justice. The said act of the Adjudicating Authority debarred the appellant to avail the benefit of DEPB Scrip. In that circumstances, as the appellant is not able to take the benefit of DEPB Scrip, they are entitled to cash refund in terms of the order of this Tribunal in the case of COMMISSIONER OF CUSTOMS EXCISE, PARPARGANJ VERSUS M/S ARTEX TEXTILE PRIVATE LIMITED [ 2020 (3) TMI 166 - CESTAT NEW DELHI] , wherein this Tribunal has observed payment of duty by debiting the DEPB scrips is actually payment of duty as it is a valid mode of payment. Therefore, Artex Textile paid duty at the time of importation. It is entitled to refund of the duty and the Department cannot be permitted to pay it by a mode which is not in existence today. In any case, it should not matter to the Department by which mode the payment is made, once it is found as a fact that Artex Textile is entitled to refund of duty paid by Artex Textile. The appellant is entitled for cash refund as per entitlement of DEPB Scrip - Appeal allowed.

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• 2023 (12) TMI 386
  Classification of imported goods - Smartra Immobilisers - to be classified under Chapter Heading 8536 5090 as automatic regulating and controlling instrument and apparatus or under chapter heading 8708 9900 as accessories of vehicles? - HELD THAT:- The Hon ble Supreme Court of India in the case of WESTINGHOUSE SAXBY FARMER LTD. VERSUS COMMR. OF CENTRAL EXCISE CALCUTTA [ 2021 (3) TMI 291 - SUPREME COURT] was dealing with the question Whether the Relays manufactured by the appellant used only as Railway signaling equipment would fall under Chapter 86, Tariff Item 8608 as claimed by the appellant or under Chapter 85 Tariff Item No. 8536.90 as claimed by the Department - Hon ble Supreme Court allowed the appeal classifying the product under Chapter Heading 8608 and not under 8536 as claimed by the Revenue. In the present case, the facts are similar to the above case and therefore, since admittedly the sole and principal use of smartra immobiliser is only as an accessory to the vehicle as an antitheft device, adding value to the vehicle in terms of security, the question of classifying the same under Chapter Heading 8536 does not arise. Moreover, it is to be classified as part of motor vehicle unless excluded by the Section or Chapter Notes or if there is a specific entry in the Tariff as per the General Explanatory Notes. As already discussed, it is rightly classifiable under Chapter Heading 8708 as there is no specific entry elsewhere. Therefore, since the smartra immobiliser is only a security device to prevent a vehicle from being stolen it is rightly classifiable under Chapter Heading 8708 as parts of motor vehicle. When the primary evidences and criteria for classification do not allow classifying the items under Chapter Heading 8536, the question of following the Tariff Advice which is only a persuasive value does not arise. The impugned order is set aside - Appeal allowed.

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• 2023 (12) TMI 385
  Levy of penalty u/s 114 of the Customs Act, 1962 - allegation of being instrumental in arranging alleged illicit export of foreign currencies through carriers through Calicut Airport in connivance with Mr. P. V. Syed stationed at Sharjah - charges based on the statements of some of the co-noticees - no other additional evidence - HELD THAT:- The Trial Court based on the same facts and circumstances has found Mr. Mujeeb Rehaman as guilty and found nothing incriminating in the statement of Mr. Mujeeb Rehaman against Mr. C. M. Abdul Razak. The trial court also observed that there is no direct evidence against others including Mr. C.M. Abdul Razak and it held that the complainant (Revenue) has not succeeded to prove their guilt beyond reasonable doubt. The Trial Court held only the passenger Mr. Mujeeb Rehman as guilty and Mr. C. M. Abdul Razak one of the accused as not guilty and they were acquitted under Section 248(1) of CrPC. It is to be seen whether the evidences on record would require imposition of penalty under Section 114 of the Customs Act, 1962. The evidences as produced in the impugned order are in the form of statements of Mr. Somasundaram, wherein it was stated that he had got a call from Mr. C. M. Abdul Razak late in the night informing him that his man was caught by the Customs at the Airport while trying to smuggle out foreign currencies and he also informed him to contact Mr. Aslam at Dubai - The same set of facts were before the Trial Court, based on which it was held that there is nothing incriminating in the statement of Mr. Mujeeb Rehman incriminating Mr. C.M. Abdul Razak and there was no direct evidence against other accused including the appellant. In the case of S. DURAIAPPA VERSUS COMMISSIONER OF CUSTOMS, CHENNAI [ 2005 (9) TMI 204 - CESTAT, CHENNAI] wherein the question here arose whether on the same set of facts and evidences when the prosecution initiated by the customs authorities under Section 135 of the Customs Act, 1962 had resulted in an acquittal giving them the benefit of doubt at the hands of the competent criminal court, the penalty under Section 112b of the Customs Act, 1962 would sustain. The Hon ble Madras High Court held that in the absence of any additional or further material with the Revenue, we do not find any error committed by the Learned Tribunal to set aside the penalty under Section 112(b) of the Act on the basis of the order of acquittal by the concerned trial Court below. Similarly in the present case, there are no additional evidences other the statements of the co-accused produced by the Revenue other than those that have been placed before the trial court based on which the trial court has acquitted the appellant. In view of the above decision, there are no merit in the impugned order and accordingly, the order to the extent of penalty imposed on the appellant under Section 114 of the Customs Act, 1962, is set aside - The appeal is allowed.

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• 2023 (12) TMI 384
  Refund claim - rejection on the basis of the judgment of the Hon ble Apex Court in the case of ITC Limited Vs, Commissioner of Central Excise, Kolkata IV [ 2019 (9) TMI 802 - SUPREME COURT ] holding that without challenge/modifying the assessment of Bills of Entry, the refund is not entertainable - Certificate of Country of Origin not provided at the time of presenting the Bills of Entry - principles of unjust enrichment. Whether in the facts and circumstances of the case, the decision of ITC Limited Vs, Commissioner of Central Excise, Kolkata IV is applicable or not? - HELD THAT:- Admittedly, in the case in hand, the respondent was not having Certificate of Country of Origin at the time of filing of Bills of Entry and paid Customs duty. Accordingly, the goods were cleared for home consumption, but later on, the respondent was able to produce the Certificate of Country of Origin in terms of Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 and filed refund claim in terms of Notification No.55/2011-Cus (NT) dated 01.08.2011, which provides that the respondent is entitled for preferential tariff treatment and is entitled to file refund claims within twelve months from the date of filing of Bills of Entry - In this case, it is a fact that the respondent has filed the refund claim on production of Certificate of Country of Origin within twelve months of filing of Bills of Entry and claimed refund of excess duty paid in terms of Notification No.55/2011-Cus (NT) dated 01.08.2011. The decision of ITC Limited is not applicable to the present facts and circumstances of the case as at the time of filing of Bills of Entry, the appellant was not entitled to claim the refund claim of excess duty paid by them. Later on, when the respondent was able to get Certificate of Country of Origin, they filed refund claim in terms of Notification No.55/2011-Cus (NT) dated 01.08.2011, which permits the respondent to file the refund claim within 12 months from the date of filing of the Bills of Entry. The rejection of refund claim initially by applying the decision of ITC case is not sustainable to the facts and circumstances of the case - the refund claims filed by the respondents are allowed. Whether the bar of unjust enrichment is applicable to the facts and circumstances or not? - HELD THAT:- The respondent being a manufacturer and using the imported goods to manufacture the final product, which is exported, in that circumstances, the question of bar of unjust enrichment does not arise - the respondent has passed the bar of unjust enrichment in the facts and circumstances of the case. The respondent is entitled for refund as prayed - the adjudicating authority is directed to do the needful in accordance with law within 60 days from the date of receipt of this order. The appeal filed by the Revenue is dismissed.

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• 2023 (12) TMI 383
  Demand of differential duty of customs - import of Poppy Seeds from Turkey - declared price shown by the respondent is very less than the Poppy Seeds imported by the other importers - HELD THAT:- It is found that on the said allegation and on the basis of investigation conducted by the DRI, several show cause notices were issued all over India and in the case of AJAY EXPORTS, UTTAM IMPEX, RAKESH KUMAR BHATIA, RAJU BHATIA, RAKESH KUMAR CO, RAJU BHATIA, ARUSHI EXPORTS, TRADEX INDIA CORP PVT LTD, VIBHA BHATIA, MOTILAL, ARUN KAPOOR, LAXMI TRADING CO, AMERICAN ALMONDS CORPORATION, RADHEY SHYAM RATANLAL, SUNDER LAL, AJAY GUPTA, RATAN LAL, SONIA GUPTA, UTTAM CHAND, SUNDER LAL VERSUS CC (IMPORT) , MUMBAI AND OTHERS [ 2016 (2) TMI 8 - CESTAT MUMBAI] , this issue came up for consideration and this Tribunal after considering all the facts placed before it, observed that if the value of contemporaneous imports were accepted and the transaction value in those case are not doubted by the revenue in the assessment orders, it is not understandable why the said values could not have been used for the purposes of comparing the same with the value of the consignments in question in these appeals. There are no infirmity in the impugned order and the same is upheld - the appeal filed by the revenue is dismissed.

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• 2023 (12) TMI 382
  Interpretation of statute - Section 114A of the Customs Act, 1962 - whether the penalty under Section 114A of the Customs Act, 1962 be equivalent to the duty or interest or it should be duty and interest? - HELD THAT:- This issue has considered by the Hon ble Karnataka High Court in the case of THE COMMISSIONER OF CUSTOMS AND SERVICE TAX, BANGALORE VERSUS M/S. SONY SALES CORPORATION, [ 2021 (3) TMI 174 - KARNATAKA HIGH COURT] where it was held that The expression used is or which is disjunctive between duty or interest and further use of expression as the case may be clearly suggest that aforesaid provision refers to two different persons and two different situations viz., one in which a person will be liable to duty and in other he may be liable to pay interest only and provisions that in both the situations the person liable to duty would be liable to penalty equal to duty and person liable to interest would be liable to penalty equal to interest. Therefore, in view of law laid down by Constitution Bench of Supreme Court, the word or cannot be interpreted as and . Following the aforesaid judgment of the Hon ble High Court, it is found that interpretation recorded by the ld. Commissioner (Appeals) in computing the penalty under Section 114A of the Customs Act, 1962 is unsustainable in law - the impugned order set aside - appeal allowed.

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• Securities / SEBI

• 2023 (12) TMI 381
  Power of SEBI to initiation action against Chartered Accountant (CA) / Auditor of the company - misconduct dereliction of duties and abhorrence of due diligence while conducting statutory audit - auditor as directed that the certified copy of the order be forwarded to the Institute of Chartered Accountants of India ( ICAI ) and National Financial Reporting Authority ( NFRA ) for appropriate action against the appellants - HELD THAT:- The scope of inquiry by SEBI is very limited and is confined only to the charge of conspiracy of involvement of the appellant in the fraud, if any, and to take consequential action if there is connivance or conspiracy with the appellant and its directors. Only then, SEBI could take action under the SEBI Act and the PFUTP Regulations otherwise it is not open to SEBI to inquire into any charge of professional negligence of the auditor since the audit firm is not dealing directly in securities. The scope and jurisdiction of SEBI to conduct an inquiry against a Chartered Account or a Chartered Accountant Firm was considered by the Bombay High Court in Price Waterhouse Co. Another vs. SEBI [ 2010 (8) TMI 173 - HIGH COURT OF BOMBAY] it is not open to SEBI to encroach upon the powers vested with the Institute under the CA Act and if there is any material against the Chartered Accountant to the effect that he was instrumental in preparing false and fabricated accounts then SEBI has powers to take remedial or preventive measures under the SEBI Act. The Bombay High Court held that the jurisdiction of SEBI would also depend upon the evidence which is available during such inquiry and if it is found that a particular Chartered Accountant has concocted false accounts in connivance and in collusion with the Officers / Directors of the Company then SEBI could take action. Jurisdiction of SEBI would depend upon the evidence which is available and if there was some omission without any mens rea or connivance with anyone, in any manner then SEBI cannot issue any further direction and was required to drop the proceedings. In the instant case, the WTM has given a categorical finding that there is no evidence showing fraud or connivance by the appellants with the officers or directors of the Company. WTM has further given a finding that there is insufficient evidence to hold that the appellants had actually manipulated the books of accounts with knowledge and fraudulent intention and that there was no tangible evidence to show that the appellant had committed a fraud in collusion or connivance with the officers of the Company or its management. Once there is a finding that the appellants have not manipulated the books of accounts with knowledge and fraudulent intention or in connivance with the officers or management of the Company then no directions could be issued by the WTM to the ICAI or NFRA to consider dereliction of duties and abhorrence of due diligence while conducting statutory audit as in our opinion it was outside the domain of the WTM to issue such directions. At best, administrative directions could have been issued by SEBI to the aforesaid institutions to consider the alleged irregularities but beyond that no adjudicatory directions could be issued by the WTM.

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• Service Tax

• 2023 (12) TMI 380
  Export of service or not - services provided from India and used outside India - demand has been confirmed on the ground that the services rendered by the Appellant are not used outside India and have been consumed in India by the customers located in India and thus the same do not qualify as export of services due to non-fulfilment of the condition laid down in Rule 3(2)(a) of Export of Service Rules - HELD THAT:- The coordinate bench of the Tribunal in the case of ORBIT RESEARCH ASSOCIATES PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX (APPEALS-I) , NEW DELHI [ 2023 (8) TMI 246 - CESTAT NEW DELHI] has also relied upon the larger bench decision of the Tribunal in the case of M/S. ARCELOR MITTAL STAINLESS (I) P. LTD (NOW KNOWN AS M/S. ARCELOR MITTAL DISTRIBUTION SOLUTIONS INDIA PRIVATE LIMITED) VERSUS COMMISSIONER SERVICE TAX MUMBAI-II [ 2023 (8) TMI 107 - CESTAT MUMBAI-LB] and held that the assessee is not liable to pay service tax under Business Auxiliary Service because the service provided by the appellant falls under the category of export of service. Further, the Hon ble High Court of Bombay in the case of THE COMMISSIONER OF SERVICE TAX, MUMBAI-VI COMMISSIONERATE VERSUS M/S. A.T.E. ENTERPRISES PVT. LTD. [ 2017 (8) TMI 1233 - BOMBAY HIGH COURT] has dismissed the appeal of the Revenue and upheld the decision of the Tribunal and held that the assessee is not liable to pay service tax as the services rendered by the assessee falls within the definition of export of services. The impugned order is not sustainable in law and therefore set aside - appeal allowed.

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• 2023 (12) TMI 379
  Demand of service tax - Vague show cause notice - SCN issued without specifying the classification of services - Assessment in terms of Section 72(a) - failure to furnish the return under Section 70 of the Finance Act, 1994 as amended - Activity of transportation of concrete from L T to Delhi airport project site during the period 2008 09 and 2009 10 using their own vehicle - GTA Service or not. Assessment in terms of Section 72(a) - failure to furnish the return under Section 70 of the Finance Act, 1994 as amended - HELD THAT:- There is no clarity on the actual activity carried out by the appellant. The show cause notice is completely silent on the nature of respective activities so as to fall under any specific service as defined under the Finance Act. The authorities while issuing the show cause notice merely proceeded on the footing that the appellant has not submitted the relevant figures and therefore the department is left with no option but to issue the show cause notice on the basis of available facts and record with them. This Tribunal has time and again observed that the officers have ample powers under the statute to make effective enquiry and investigation. In M/S. SHUBHAM ELECTRICALS VERSUS CST ST, ROHTAK [ 2015 (6) TMI 786 - CESTAT NEW DELHI] , the Tribunal quashed the show cause notice for the simple reason that relevant facts have not been stated while issuing the show cause notice. Similar are the observations by the Ahmedabad Bench of the Tribunal in INDO NIPPON CHEMICALS CO. LTD. VERSUS CCE, VADODARA [ 2009 (4) TMI 140 - CESTAT AHMEDABAD ], observing that law gives sufficient powers to officers to conduct enquiries and investigations to bring out the truth, and without making any efforts, on the basis of non-production of documents, on the basis of assumptions and presumptions, a case cannot be made out against the appellant which is the case here. The department cannot take shelter on account of failure of the appellant to produce and supply the documents, and it was incumbent upon them to have ascertained the actual nature of the services for the purpose of levying the service tax under the respective clause - there are no hesitation in holding tht the show cause notice needs to be quashed being vague. The Principal Bench of this Tribunal in M/S EXPRESS ENGINEERS SPARES PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, GHAZIABAD AND SH. NARESH KUMAR GUPTA (DIRECTOR) VERSUS COMMISSIONER, CENTRAL TAX, GST CENTRAL EXCISE, MEERUT [ 2022 (1) TMI 564 - CESTAT ALLAHABAD ], referring to the decision of the Apex Court in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [ 2006 (3) TMI 1 - SUPREME COURT ], that the term transfer of right to use goods has neither been defined in the Constitution nor in any of the State VAT Acts or Central Sales Tax Act provided five attributes for a transaction to constitute a transfer of right to use goods. The activity of supplying the RMC by the appellant on which he has paid VAT, considering it to be a sale transaction has been considered earlier by this Tribunal in the case of GMK CONCRETE MIXING PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2011 (11) TMI 425 - CESTAT, NEW DELHI] , where the Principal Bench held that the appellant was engaged in preparation of Ready Mix Concrete (RMC) and while carrying out such dominant object, other ancillary and incidental activities were also carried out - the appellant is not liable to pay service tax on the supply of RMC to M/s L T and hence the demand of service tax in that regard is not sustainable. Activity of transportation of concrete from L T to Delhi airport project site during the period 2008 09 and 2009 10 using their own vehicle - HELD THAT:- The scope of liability of service tax in the category of Goods Transport Agency has been considered by the Tribunal in LAKSHMINARAYANA MINING CO. VERSUS COMMR. OF ST., BANGALORE [ 2009 (9) TMI 71 - CESTAT, BANGALORE ], where the contention of the appellant therein that the levy under the category of GTA was attracted, only when there was a relationship of Agency between the service provider and owner of the goods, carnage or the operators of the goods carriage was upheld in view of the definition of GTA and also the clarification given by the Finance Minister in the Budget Speech note, service tax is chargeable in respect of services received from individual truck owners. The impugned order set aside - the demand of service tax proposed in the show cause notice under commercial or industrial construction services as per section 65 (105) (zzq) defined as per section 65 (25b) and Works Contract Services as per section 65 (105) (zzzza) of the Act nor are they chargeable to service tax under Supply of Tangible Goods Use of Goods . Consequently, neither the extended period of limitation is invocable nor the penalty and interest is leviable under the Finance Act. Appeal allowed.

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• 2023 (12) TMI 378
  Refund under Notification No.27/2012-CE(NT) dated 18.06.2012 - export of output service without payment of service tax - Intermediary service - place of provision of service - HELD THAT:- It is also noted that the activity carried out by the appellant in respect of the German company remained the same for the period for which the present claims are filed and also for the period subsequent to the period for the present claims are filed and for the periods earlier to the present claims and subsequent to the present claims. As submitted by the appellant, refund of unutilized cenvat credit was allowed to the appellant. It is a fact that Revenue has not raised any service tax demand on the appellant for the period of the present appeal and also it is a fact that in respect of the claims in the present appeal, appellant has submitted FIRCs and Bank statement. It can be reasonably concluded that the activity is export of service. Since the FIRCs and individual invoices were not scrutinized by the original authority, the matter needs to be remanded to the original authority. The impugned order set aside - matter remanded to the original authority with a direction not to raise the issue of export of service and process the said five claims in accordance with law - appeal allowed by way of remand.

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• 2023 (12) TMI 377
  Levy of 15% penalty - suppression of facts - period April 2015 to June 2017 - royalty payment under reverse charge mechanism - HELD THAT:- There is no finding rendered in the order passed by the adjudicating authority in this regard. It is merely stated in the order that the appellant has paid the service tax along with interest and 15% penalty on 28.12.2020 (a day before issue of show cause notice). It is therefore concluded by adjudicating authority that it is voluntary payment made by the appellant. The facts show that the appellant has paid the service tax of Rs.3,95,743/- immediately on being pointed out by ECM. The SCN has been issued one day after payment of service tax. The original authority has confirmed the penalty of 15% observing that appellant has voluntarily paid the 15% penalty. When the appellant submitted their reply as well as contested the matter, it cannot be said that they do not dispute the imposition of penalty. There is no finding rendered with regard to the reasons for confirmation of penalty under Section 78 of the Finance Act 1994. Further, the service tax along with interest has been paid before issuance of SCN. The penalty of 15% imposed on Rs.3,95,743/- requires to be set aside - the confirmation of demand of Rs.3,95,743/- along with interest is not disturbed and only the penalty of 15% on this amount is set aside. Refund being 15% penalty - HELD THAT:- The adjudicating authority vide OIO dt. 15.4.2021 held that no penalty is required to be imposed under Section 78 in respect of Rs.25,04,156/- for the reason that when the audit pointed out that the amount of service tax to be paid on the royalty is Rs.25,04,156/- the appellant has paid the amount with interest. If the audit had informed that the appellant has to pay Rs.28,99,899/- (Rs.25,04,156 + Rs.3,95,743/-) the appellant would have paid the same - The short payment of Rs.3,95,743/- has been pointed out much later after two years. The appellant then paid the same with interest before issuance of SCN. Sub-section (3) of Section 73 provides that no SCN is to be issued when service tax along with interest is paid as pointed out by the officer of the department. In para 21 of OIO, the adjudicating authority has quoted para 8.2.2 of Audit Manual to hold that after payment as per audit objections the settlement is final - this view of the adjudicating authority is agreed upon. The said order has not been challenged by the department and has become final as against the department - as the department has not challenged the order passed by the original authority setting aside the penalty, the department cannot contend in the refund proceedings that penalty set aside is incorrect. The original authority has dropped the 15% penalty on Rs.25,04,156/. Hence Rs.3,75,623/- is eligible for refund. The impugned orders are set aside - Appeal allowed.

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• 2023 (12) TMI 376
  Levy of service tax - reverse charge mechanism - business auxiliary service - payment of commission to various agents for export transactions - agricultural produce - N/N. 13/2003-ST dated 20/06/2003 - Renting of Immovable Property service - residential accommodation to their staff and officers - extended period of limitation. Levy of service tax - reverse charge mechanism - business auxiliary service - payment of commission to various agents for export transactions - agricultural produce - N/N. 13/2003-ST dated 20/06/2003 - extended period of limitation - HELD THAT:- The Jute per se is being traded in the Commodity Exchange for being bought or sold. On the other hand, the Hessian Cloth manufactured by the Appellant by using this jute is a separate independent commodity which is being bought and sold for different purposes. The Hessian Cloth does not fall under the category of Agricultural Produce as per the definition given in the Explanation given in the Notification No. 13/2003-ST dated 20/06/2003 - The reliance placed by the Appellant in the case of M/S. GLENWORTH ESTATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, SALEM [ 2023 (5) TMI 1193 - CESTAT CHENNAI] , is distinguishable and cannot be applied to the facts of the present case - The demand on account of Business Auxiliary Services is required to be confirmed on merits. The demand in respect of Business Auxiliary services confirmed by the OIO is being upheld - However, it is seen that the Appellant has been showing all the details of commission paid in their P L Account and Balance Sheet and also regularly filing their ST-3 Returns. Therefore, no case have been made out towards suppression of facts. Accordingly, the demand in respect of the extended period is liable to be set aside on account of limitation. Renting of Immovable Property service - HELD THAT:- Since the amendment has been brought in with effect from 20.06.2010, the Service Tax is not leviable for the period prior to this date. The demand for the extended period is also legally not sustainable. Moreover, the Appellant claims that they can produce evidence with regard to the receipt of amounts on account of renting of immovable property for residential purposes and for commercial purposes separately, which was not clearly brought out before the Adjudicating Authority - Demand on account of Service Tax component of the rent received by them towards Renting of Immovable Property for residential purposes is fully set aside. The Adjudicating Authority should get these facts verified and quantify the demand only on account of the renting of immovable property for commercial purposes, for the normal period. Matter remanded to the Adjudicating Authority for the limited purposes and for quantifying the demand for the normal period in respect of the Business Auxiliary Services and for quantifying the demand for the normal period in respect of the Renting of Immovable Property services in respect of the rent received on account of commercial properties - appeal allowed by way of remand.

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• 2023 (12) TMI 375
  Refund of Service Tax - port services - C F Agency - HELD THAT:- This issue is no more res integra and has been settled in favour of the appellant in their own case MAX INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH [ 2013 (8) TMI 855 - CESTAT, NEW DELHI] - it is also found that even the department in the appellant s own case for the subsequent period has allowed the claim on the impugned services. The impugned order is not sustainable in law and the same is set aside - Appeal allowed.

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• Central Excise

• 2023 (12) TMI 374
  Activity amounting to manufacture or not - appellant inserts 100gm toothpaste tube and one toothbrush in the blank slots provided in the promo pack at their facility/ factory - eligibility for the exemption contained in the Notification No.50/2003 as the declaration was filed late - activity undertaken by the appellants attracts service tax or central excise duty - invocation of extended period of limitation - HELD THAT:- Having given the entire description of the combi pack received by the appellants and their activity of inserting 100 gm toothpaste and a toothbrush in the combi pack and closing the pack, learned Commissioner comes to the conclusion that the pack with complete contents is only marketable to the ultimate consumer and the job undertaken by the appellants amounts to manufacture - it is found that as per Chapter Note 6 cited above, the following processes amount to manufacture: (a) labelling or re-labelling of containers. (b) packing from bulk packs to retail packs. (c) adoption of any other treatment to render the product marketable to the consumer. The appellant s activity is not clearly covered by (a) or (b) above and it is not the case of the Department also. It is the contention of the Department that the process undertaken by the appellants falls under (c) and thus, amounts to manufacture - It is M/s CPIL that manufactures the toothpaste and purchases toothbrush on payment of duty and supplies the same to the appellant. The goods have already become marketable before they reach the premises of the appellants. It is the case of the Department that the process undertaken by the appellants makes them marketable as the combi pack contains a disclaimer that individual items are not for sale . The marketability of the goods and the manner in which they are marketed by an individual manufacturer are quite different. The manner in which the goods are marketed does not at all make them marketable. If that is the case, no toothpaste or toothbrush should have been marketed not only by M/s CPIL but also by others, in a standalone condition. However, it is everybody s knowledge that toothbrush and toothpaste are also sold as individual pieces. The scheme of offering them in a combi pack does not make them marketable only as a combo. To that extent, we find that learned Commissioner has failed to distinguish between marketability and the manner in which the said product is marketed . The appellants are merely completing the process of combi pack manufactured by the principal manufacturer i.e., M/s CPIL - the process undertaken by the appellants takes care of the manner in which the said product is marketed and in no case makes the goods marketable. Therefore, the process undertaken by the appellant does not amount to manufacture. Whether the appellants are eligible for the exemption contained in the Notification No.50/2003 as the declaration was filed late? - HELD THAT:- In terms of the Notification No.50/2003, a manufacturer who intends to avail of the exemption under the notification shall exercise his options in writing before affecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year. Further, the manufacturer shall while exercising the option under Condition as above inform in writing to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise giving the following particulars viz. (a) Name and address of the manufacturer, (b) Location/ locations of factory/ factories; (c) description of inputs used in manufacturer of specified goods; (d) description of the specified goods produced; (e) date on which option under this Notification has been exercised - by undertaking the activity in the specified area, the appellants have made themselves eligible as per the substantial condition of the notification. In such circumstances, it has to be held that the declaration is only procedural. Moreover, all the details as required as per the notification have been furnished by M/s CPIL. The appellants are eligible for the exemption contained in the Notification No.50/2003 as the declaration was filed late. Extended period of limitation - HELD THAT:- The Department was kept informed about the activities of the appellants by their principal manufacturer as early as 2007. Therefore, we find that there is no positive act on the part of the appellants to show intent to evade payment of duty. Further, the appellant has entertained a bona fide opinion that the said activity did not amount to manufacture but was exigible to service tax. At no point of time even though a couple of audit inspections were conducted, Department did not raise any objection as to the payment of service tax on the activity undertaken by the appellants. Therefore, Department has not made out any case for invocation of extended period. The impugned order set aside - appeal allowed.

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• 2023 (12) TMI 373
  Benefit under Notification No.12/2009 denied - Reversal of CENVAT credit availed on imported zinc skimming - service tax paid on transport of goods and Custom House Agent Services which are common services for the manufacture of zinc ingots and zinc ash - Violation of principles of natural justice - HELD THAT:- The learned Commissioner has not given any findings as to how the report dated 16.03.2010 was wrong and not required to be considered. This is a clear violation of principles of natural justice - it is also found that the appellants have not given suitable submissions as to whether the CENVAT credit of duty paid on the imported zinc skimming and the common input services has been reversed or not. It is also not clear from the records of the case as to whether the appellants reversed the duty paid on the zinc ash, though on a mistaken notion, or the credit availed on entire items and common input services. Under the circumstances, the matter needs to travel back to the Commissioner to examine the report dated 16.03.2010 and to record reasons as to why the same was not considered. The appeal is allowed by way of remand to the Adjudicating Authority.

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• 2023 (12) TMI 372
  Violation of principles of natural justice - appeal rejected without issuing a notice - appeal was time barred or not. Whether the Commissioner (Appeals) was correct in rejecting their appeal without issuing a notice to them as per principles of natural justice? - HELD THAT:- The principles of natural justice are not a straight-jacket formula. It has been held by courts that whether in fact, prejudice has been caused to the person by not doing a certain action, has to be considered on the facts and circumstances of each case. To sustain the allegation of violation of principles of natural justice one must establish that prejudice has been caused by non-observance thereof. This being a case where the burden of proof has been shifted by the department to the appellant by issue of letter dated 27.9.2021, it was for the Appellant themselves to demonstrate that the Appeal was filed within the time limit prescribed by the statute, no prejudice has been caused to them by not giving them a notice regarding time-bar - the Commissioner (Appeals) decision cannot be faulted on this score. Whether the appeals filed by them were time-barred? - HELD THAT:- The issue raised by the appellant involves a question of fact and law. Although the issue of fact was examined by the learned Commissioner (Appeals) before coming to a conclusion it is found that the Tribunal being the last fact-finding authority, it is essential that the Appellants pleading should be examined for its correctness. It is seen that a document is deemed to be served by post by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. It is seen that a document is deemed to be served by post by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. The Appellants pleadings fails both on facts and law - impugned order merits to be upheld - Appeal dismissed.

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• 2023 (12) TMI 371
  Entitlement for interest on refund of amount depositted as pre-deposit - interest on sanctioned amount of refund has been denied on the ground that refund has been sanctioned within three months from the date of communication of the order of appellate authority - Section 35FF of Central Excise Act, 1944 - HELD THAT:- The amount in question was not deposited under Section 35F, however is akin to predeposit for the reasons as discussed above. Resultantly, we hold that the said proviso is not applicable to the given set of circumstances. Irrespective that the amount in question except for Rs.3,11,00,000/- was deposited prior 06.01.2014 - the findings are liable to be set aside. Section 35FF itself prescribes the rate of interest in the range of 5% to 36% when these provisions is read in the light of the above provisions and the decisions with respect to the rate of interest. The appellant is entitled to receive interest at the rate of 12%. Though the department has impressed upon that the demand with respect to Rs.16,00,60,335/- has been remanded for de novo adjudication but apparently and admittedly as on date the said demand also stands set aside vide the final order of this Tribunal dated 20.10.2017 [ 2017 (12) TMI 7 - CESTAT NEW DELHI ]. The appellant is held entitled to have interest on the amount of refund sanctioned at the rate of 12% per annum from the date of the deposit of the amount till the date of refund thereof. Except that for an amount of Rs.13,50,500/- which was deposited during investigation but towards the duty liability that too from the Cenvat account. The appellant shall be entitled for the interest on the said amount from the date of the final order of the Tribunal dated 20.10.2017 (vide which the duty demand was set aside) till the date of payment thereof - Appeal allowed.

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• 2023 (12) TMI 370
  Exemption under N/N. 08/2003-CE dated 01.03.2003 availed - requirement of discontinuation of availment of cenvat credit - invocation of sub-rule (2) of Rule 11 of Cenvat Credit Rules, 2004 - HELD THAT:- In the final order of this Tribunal in the case of COMMISSIONER OF C. EX., CHANDIGARH VERSUS CNC COMMERCIAL LTD. [ 2006 (2) TMI 576 - CESTAT, NEW DELHI ] it was observed that the said rule contemplated that additional payment was not allowed to be demanded by invoking the said rule. The original authority has dropped the demand by relying on the final order of this Tribunal in the case of CNC Commercial Ltd. The said final order was ultimately affirmed by Hon ble Supreme Court. The order passed by the original authority through which proceedings initiated through show cause notice dated 09.06.2009 were withdrawn, is upheld - the impugned order set aside - appeal allowed.

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• 2023 (12) TMI 369
  CENVAT Credit - electricity is an excisable goods or not - demand of an amount equal to 10% of the electricity sold to PSEB and consumed by the appellant in their residential colony meant for their workers - applicability of Rule 6 of CCR - period from April 2006 to February 2009 - HELD THAT:- The appellant though had reversed the entire amount of Rs. 14,20,586/- availed on all input services (Manpower supply and Insurance Service) which has been used for generation of electricity but his defence is that in fact he was required to reverse only proportionate credit. The appellant has also furnished calculation chart of proportionate credit required to be reversed alongwith his reply to the show cause notice but the same was not considered by both the authorities. The main ground raised by the appellant before both the authorities regarding the non applicability of Rule 6 of CCR, 2004 has not been considered and not given any findings in the impugned order. There is no finding in the impugned order regarding the stand of the appellant to reverse only proportionate cenvat credit and not the whole cenvat credit on input services. This case needs to be remanded back to the Ld. Commissioner (Appeals) to decide afresh after considering all the pleas/grounds raised by the appellant - Appeal allowed by way of remand.

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• 2023 (12) TMI 368
  Activity amounting to manufacture or not - activity of galvanizing for goods falling under Chapter 72 of CETA - HELD THAT:- It is found that the activity of galvanizing of the items falling under chapter 72 amounts to manufacture was introduced w.e.f. 08.04.2011 through Chapter (V) of the Finance Act, 2011. As during the impugned period, galvanization of the items falling under chapter 72 of the CETA did not amount to manufacture, in that circumstances, the appellant is not liable to pay duty on galvanizing activity of the goods falling under chapter 72 of the Tariff Act during the impugned period. The demand of excise duty is not sustainable against the appellant - the impugned order set aside - appeal allowed.

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• 2023 (12) TMI 367
  Recovery of CENVAT Credit - credit passed on by the appellant as the first stage dealer/importer by debiting DEPB pass book - Rule 12 of Cenvat Credit Rules, 2002/ Rule 14 of Cenvat Credit Rules, 2004 - HELD THAT:- From a plain reading of the above provisions, it is clear that the Cenvat Credit has been taken and utilized wrongly, could be recovered from the manufacturer only. In the present case, the show cause notice has been erroneously issued to the appellant-dealer for passing on the credit by debiting the DEPB passbook instead of to the manufacturer , who received the credit. It is found that the purchasers, who have received the invoices, categorically denied availment/utilization of Cenvat Credit during the relevant period even though it was passed on to them in dealer s invoice. Necessary evidences have been annexed to the Appeal paper-book. No contrary evidence has been placed by the Revenue to rebut the same. Thus, recovery of credit from the first stage dealer/importer-appellant as confirmed in the impugned order, cannot be sustained. The impugned order is set aside - Appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (12) TMI 366
  Maintainability of revision petition - application seeking condonation of delay of 136 days in filing the Revision Petition before the High Court was not filed along with the Revision Petition but subsequently - HELD THAT:- No doubt the application seeking condonation of delay has to be filed along with the Revision Petition. But if the same had not been filed by the learned advocate appearing for the appellant, the appellant cannot be prejudiced on account of the failure of the advocate in not filing it along with the memorandum of Revision Petition. Therefore, the Revision Petition not being heard on merits, on that short ground alone, the impugned order is set aside - Appeal allowed.

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• 2023 (12) TMI 365
  Refund of duty deposited - Constitutional validity of proviso to Section 3(1) and sub-section (5A) of Section 3 of the Bombay Entertainment Duty Act, 1923, inserted by the Bombay Entertainment Duty (Amending) Act, 1998 - whether the Petitioner can justify in invoking Article 14 of the Constitution of India, to claim refund of duty deposited on the ground that the respondents have not collected duty from similarly placed persons? HELD THAT:- There are separate provisions dealing with the amusement park and the water sports activity. If the legislative intent was to cover only water sports activity by amusement park then the Acts would not have made a distinction between the amusement park and water sports activity. The levy is on the activities and not on the entity carrying on the activities. Therefore, whether water sports activity is carried on by amusement park or by non amusement park, both would be liable to pay the entertainment duty - It is also important to note that third proviso to Section 3(1) expressly provides that water sports activity whether situated within or outside the amusement park would be liable for entertainment duty. Therefore, the scheme of the Act clearly negatives the contention raised by the petitioners by relying on legislative debate that only water activities by amusement park are liable for duty. It is important to note that the petitioners have admitted that they are covered by the Entertainment Duty Act. After having admitted the same, the petitioners cannot turnaround and contend at the fag end of the proceedings that since the intention of the legislature is to cover water activities in amusement park and since their activities are not in amusement park, they are not liable for duty. Section 3(1) of the Act which is charging section imposes levy, not only on entertainment as defined by Section 2(a) of the Act but also covers various other activities including water sports activity and admittedly, the activities of the petitioners like water sking, wind surfing, sailing, kayaking, Jet boating etc. are water sports activities and hence covered by charging section. The petitioners having made an application and having taken benefit of no duty for the first three years now cannot turnaround, on expiry of three years when they are liable to pay duty at the rate of 50% and full amount thereafter, that their activities are not covered by the Bombay Entertainment Duty Act and therefore, the petitioners rightly began the arguments by stating that they are covered by the provisions of the Bombay Entertainment Duty Act. The petitioners are now estopped from contending otherwise. The claim of refund by the Petitioner is made of the duty which they themselves and rightly so paid. On these facts, in our view, the petitioners now cannot contend that their activities are not covered by the Entertainment Duty Act. The Supreme Court in case of Supreme Court in case of THE STATE OF TRAVANCORE-COCHIN AND OTHERS VERSUS THE BOMBAY COMPANY LTD., ALLEPPEY AND OTHERS [ 1952 (10) TMI 28 - SUPREME COURT] held that speeches made by the Members of Constituent Assembly in the course of debates on the draft constitution is unwarranted. The Supreme Court observed in the said judgment that this form of extrinsic aid cannot be used for interpreting any provisions of the statute and same has been generally accepted in England and in the construction of Indian Statutes as well. The petitioners are not justified in relying upon the views of some members in the course of the debates in the Legislative Assembly for interpretation of provisions of Entertainment Duty Act when the Act itself is clear on this issue - Petition dismissed.

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• Indian Laws

• 2023 (12) TMI 364
  Payment of insurance claim amount in favour of the nominee - Right of nominee as collector of sum or as absolute owner - Right of legal heirs - direction to disbursement of assured claim amount to the petitioner and her son, who are the legal heirs of the deceased S.Arul - whether the impugned communication of the second respondent requires the interference of this Court and this Court has to issue a consequential direction to the first and second respondents to pay the assured claim amount to the petitioner and her son? HELD THAT:- A beneficiary nominee means a nominee who is entitled to receive the entire sum assured under the insurance policy absolutely. On the other hand, a collector nominee means a nominee other than a beneficiary nominee It is true that on a plain reading of Section 39(7) of the Act, this distinction has been done away with. However, the legislature was careful enough to identity who all will fall within the category of nominees who in law will be considered as a beneficiary nominee. While categorizing those persons, the legislature was careful enough to bring in the parents, spouse, children, spouse and children or any of them. If the legislature had thought it fit to make everyone as a beneficiary nominee, there was no need for the legislature to specifically prescribe those persons who will fall within the ambit of Section 39 (7) of the Insurance Act, 1938. The fact that such a conscious description of persons, who fall under Section 39(7) of the Act has been prescribed by the legislature, shows that the legislature only wanted those persons who are closely related to the deceased policy holder alone to be treated as beneficiary nominees. In the instant case, the third respondent is admittedly the brother of the deceased policy holder and the third respondent cannot be brought within the scope of Section 39(7) of the Act. If the third respondent cannot be brought within the scope of Section 39(7) of the Act, it would only mean that he will be treated as a collector nominee. The concept of nomination is only to ensure that the Insurance Company does not get into the area of dispute and the Company washes of its hands by handing over the sum assured to the nominee. If the nominee falls within the scope of Section 39(7) of the Act, those persons described therein automatically takes it as a beneficiary nominee. If the person does not fall within the scope of Section 39(7) of the Act, he can only be treated as a collector nominee and he has to hold the money in trust subject to the claims made by the legal representatives who are entitled to a share in the sum assured. This position continues even after the amendment made to the Insurance Act in the year 2015. If every nominee is brought within the scope of Section 39(7) of the Act, this Court will be doing violence to the plain language used in the said provision and it will be certainly beyond the scope of the said provision. This Court holds that the third respondent as a nominee can only collect the sum assured from the Insurance Company and hold it in trust and it will be subject to the claims made by the legal heirs of the deceased under the personal law governing them. This Court cannot find fault with the impugned communication issued by the second respondent dated 24.06.2021, in this regard. Whether the petitioner and her son will have to once again go through the process of initiating recovery proceedings against the third respondent, if in case, the third respondent does not hand over the sum assured to them? - HELD THAT:- In the instant case, as between the petitioner and the third respondent, it is the petitioner and her son who are entitled to receive the sum assured as Class-I legal heirs. The Hindu Succession Act that governs the parties makes it very clear that the Class I legal heirs will be entitled to take the share absolutely to the exclusion of the other heirs. The third respondent, who is the brother of the deceased falls under the category Class-II legal heir and therefore, he is excluded from succeeding to the sum assured. Hence, in the absence of any dispute on the status of the parties, this Court in order to render substantial justice, directs the second respondent to hand over the entire sum assured to the petitioner. This Writ Petition is disposed of.

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