TMI Tax Updates - e-Newsletter
December 21, 2023

Case Laws in this Newsletter:

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

Articles

1. Sec 16(4) Of The CGST Act – Why It May Never Be Struck Down

   By: Rupesh Sharma

2. Deciphering the Riddle - The Legitimacy of Imposing Export Duty on Supply of Goods from DTA to SEZ

   By: Pratik Trivedi

3. Budget 2024: Some suggestions for amendment / clarification on S.80-IAC related to eligible Start-up.

   By: DEVKUMAR KOTHARI

4. Entire amount of pre-deposit not to be paid from Electronic Cash Ledger for filing appeal under Amnesty Scheme

   By: Bimal jain

5. COGNIZANCE OF OFFENCES UNDER SECTION 137 OF CUSTOMS ACT, 1962

   By: DR.MARIAPPAN GOVINDARAJAN

6. Revenue Department has no power to re-adjudicate or re-quantify Refund Order

   By: Bimal jain

News

1. PM GatiShakti National Master Plan to provide multimodal connectivity infrastructure to various economic zones

2. Government takes various export promotion initiatives like New Foreign Trade Policy, extension of Interest Equalization Scheme on pre and post shipment rupee export credit, etc.

3. Auction for Sale (re-issue) of (i) ‘7.33% GS 2026’, (ii) ‘7.18% GS 2037’ and (iii) ‘7.25% GS 2063’

4. Gross Direct Tax collections for FY 2023-24 register a growth of 17.01%

5. Hon’ble Union Minister Bhupender Yadav launches a NITI Aayog report, ‘A Green and Sustainable Growth Agenda for the Global Economy’

6. Revised Fund Flow Procedure Under MPLAD Scheme

7. 7th ECONOMIC CENSUS

8. Union Minister of Commerce and Industry Shri Piyush Goyal holds bilateral meeting with Minister for Trade of New Zealand Hon. Todd McClay

Notifications

GST - States

1. S. R. O. No. 1328/2023 - dated 12-12-2023 - Kerala SGST

Amendment in Notification S.R.O. No. 968/2023 dated 13th September, 2023

2. S. R. O. No. 1327/2023 - dated 12-12-2023 - Kerala SGST

Amendment in Notification S.R.O. No.639/2017 dated 21st October, 2017

3. F.12 (11)FD/Tax/2023-65 - dated 20-12-2023 - Rajasthan SGST

Seeks to amend Notification No. F. 12(46) FD/Tax/2017-Pt-II-143 dated 15.11.2017 to exclude specified actionable claims

4. F.12 (11)FD/Tax/2023-64 - dated 20-12-2023 - Rajasthan SGST

Seeks to 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 RGST Act

5. F.12 (11)FD/Tax/2023-63 - dated 20-12-2023 - Rajasthan SGST

Seeks to notify the provisions of the Rajasthan Goods and Services Tax (Amendment) Ordinance, 2023

Income Tax

6. 104/2023 - dated 19-12-2023 - IT

Amendments in Rule 10TA and 10TD of Safe Harbour Rules for International Transactions - Income-tax (Twenty-Ninth Amendment) Rules, 2023

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2023/191 - dated 20-12-2023

Amendment to Circular dated July 31, 2023 on Online Resolution of Disputes in the Indian Securities Market

Highlights / Catch Notes

GST

• Composite Works Contract Supply Classified as Service, Taxed at 18% Under CGST Act 2017; No Principal Supply Identification Needed.

  Case-Laws - AAR : Classification of supply of services - Since CGST Act, 2017 itself classifies the instant supply of composite supply of works contract as "supply of service", which has been found exigible to tax @ 18% [CGST @9% + CGGST @9%] as above, there exist no-reason to identify the "principal supply" in the instant transaction. - AAR
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• Job-Work Classification for RLNG Processing Under GST Law: Conditions Met for Returning Goods Within One Year.

  Case-Laws - AAR : Classification of service - Job-work - it is found that the processed goods (RLNG) is to be supplied back to the customers of the Applicant within one year (as declared by the Applicant). So, all the pre-requisites are apparently satisfied for an activity to be 'Job work'. - AAR
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• Advance Ruling Application Rejected Due to Ongoing Investigation Proceedings.

  Case-Laws - AAR : Scope of Advance Ruling application - Investigation proceedings already initiated - The application for advance ruling filed by the Applicant is not maintainable under law and liable for rejection. - AAR
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Income Tax

• Unexplained Cash Credits Must Meet Criteria at Time of Entry Under Income Tax Act; Later Repayments Irrelevant.

  Case-Laws - AT : Unexplained cash credit u/s.68 - Mere repayment of the loans subsequently does not make the original acceptance of loan as genuine. Such an argument is against the language of the provision of section 68 of the act. Criteria of "identity, creditworthiness and genuineness" are to be tested at the time of amount credited in the books of the assessee. All subsequent events are immaterial. - AT
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• Tax Calculation u/s 115BBE Not Required Due to No Income Additions u/ss 68-69D.

  Case-Laws - AT : Computation of tax u/s 115BBE - as argued when no income was brought to tax u/s 68, 69, 69A, 69B, 69C or 69D, then no computation of tax u/s 115BBE was required to be made - A perusal of the assessment order would suggest that there is no addition under these sections mentioned above and there could not be any computation of tax under section 115BBE. This ground of the assessee is allowed. - AT
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• Transition to Ind AS: GAAP Financial Statements Invalidated for 2017-18, De-Novo Adjudication Ordered.

  Case-Laws - AT : Inflated cost of land - GAAP v/s Ind AS for financial statement recording - As per the guidelines given by the Government of India, the assessee was required to prepare the financial statements for FY 2017-18 and onwards as per Ind AS which is a new system of accounting - The financial statements prepared as per GAAP became non-est during the course of assessment proceedings itself. - AO directed for de-novo adjudication based on the revised financial statement - AT
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• Business Advances Written Off to Secure Future Supplies Deemed Reasonable and Justified.

  Case-Laws - HC : Bad debts - Write off of the business/trade advances receivable from a sick company - The assessee was thus compelled to make the payment in order to ensure future supplies and thus the assessee is justified in making a decision to write off the trade advance. This is perfectly probable and acceptable. - HC
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• Interest Calculation on Tax Refunds: Section 244A(1A) Applies from June 1, 2016, Until Refund Receipt Date.

  Case-Laws - AT : Adjustment of refund for arriving at interest - calculation of interest u/s 244A is the way in which the AO has adjusted the refunds issued - the provisions of section 244A(1A) would be applicable in assessee's case from 01.06.2016 till the date of actual receipt of refund - AT
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• Assessment Reopening Denied for Marble Traders Due to Unjustified Gross Profit Shift and Lack of Expense Evidence.

  Case-Laws - AT : Reopening of assessment - commission income on the turnover of amount in the bank account which was used to facilitate for the marble traders - the swing from charging commission to charge the GP as marble trader has no basis and are contrary to the facts already on record. - we see no reason to consider the claim of the 25 % as allowable and therefore, the same is not be considered as expenses in the absence of any details or evidence. - AT
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• Depreciation Allowed: Leasehold Land Use Rights Recognized as Intangible Asset, Uncontested by Tax Authorities.

  Case-Laws - AT : Disallowance of deprecation claimed on “right to use leasehold land” - the recognition of the right to use lease hold land as intangible asset as per the statement of account and the same was not disputed by the Department at any stage. - Claim allowed - AT
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• TPO Must Include Full Costs, Adjust Depreciation Rates for Fair Margin in Software Development Segment.

  Case-Laws - AT : TP Adjustment - Determination of ALP - TPO directed to consider the entire cost for the purposes of computing the margin of assessee under the software development segment as per the following directions. While computing the ALP of assessee, the depreciation as per schedule to Companies Act, is to be included as an element of operating cost. In the event, there is a difference in the rate of depreciation between the assessee vis-a-vis the comparables, suitable adjustments are to be granted in accordance with law. - AT
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Customs

• Export Unit Wins Duty Remission for Fire-Destroyed Goods, No Anti-Dumping Duty Required.

  Case-Laws - AT : 100% EOU - Remission of duty on goods destroyed in the fire - liability to pay anti-dumping duty (ADD) - The goods imported were destroyed in fire and therefore, there is no requirement to look into the fulfilment of the conditions of Notification No.52/2003 dated 31.03.2003 - the appellant is eligible for remission of duty. - AT
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Indian Laws

• Chartered Accountant's Membership Suspension Upheld for Professional Misconduct; Petition Dismissed by High Court.

  Case-Laws - HC : Challenge to order directing the removal of the name of the Petitioner from the Register of Members maintained by the ICAI for a period of nine months - challenge to order passed by the Disciplinary Committee of the ICAI holding the Petitioner guilty of Professional Misconduct - Writ petition dismissed - HC
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• Court Limits High Court's Power to Extend Payment Deadlines in Cheque Dishonor Cases to Protect Complainant Rights.

  Case-Laws - HC : Dishonour of Cheque - time limit for payment of fine or compensation awarded - power of High Court to extend the time under Section 482 of Cr.P.C. - The Court cannot do justice to the accused and injustice to the complainant. When the legislature has enacted a provision to ensure that the complainant should promptly get at least some of the amount, the Court cannot circumvent the intention of the legislature by holding that the time can be extended by the High Court. - HC
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IBC

• Court Rules Insolvency Professionals Not Public Servants Under Corruption Law; Legislative Omission Upheld.

  Case-Laws - HC : Allegation of Corruption against RP/IRP - public servant or not - In the opinion of this Court, the Constitutional Courts would be loath in reaching such drastic conclusion, that too by process of judicial interpretation. - The omission to not include the IP within Section 232 is willful and deliberate and therefore, it cannot be a case of casus omissus. - an Insolvency Professional does not fall within the meaning of “public servant” as ascribed in any of the clauses of sub-section (c) of section 2 of the Prevention of Corruption Act, 1988. - HC
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PMLA

• Court Allows Petition on Property Sale Amidst Money Laundering Case, Overrides Registrar's Refusal to Register Auction Sale.

  Case-Laws - HC : Money Laundering - proceeds of crime - provisional attachment order - refusal by the Registrar of documents to register the Sale Certificate - In the present case, the property in question had been sold in auction to the Petitioner herein before the steps under Section 17 of the PMLA were initiated, and, therefore, this Court in the facts of the present case is inclined to exercise its jurisdiction under Article 226 of the Constitution of India even though the matter is pending before the Tribunal - Petition allowed. - HC
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Service Tax

• Penalty Imposed Under Service Tax Act Invalidated Due to Lack of Appeal and Exceeding Original Order Scope.

  Case-Laws - AT : Levy of penalty u/s 76 - Power of Commissioner (appeals) to impose penalty - It is found that the impugned order has travelled beyond the OIO because in the OIO, the original authority held that the appellant is not liable to penalty under Section 76 and against the said finding, no appeal was filed by the department and no cross objections were filed before the lower authorities which also shows that the impugned order imposing penalty under Section 76 is bad in law and the same has travelled beyond the OIO - AT
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Central Excise

• Show Cause Notice Proceedings Dismissed Due to 12-Year Statute of Limitations; Circular Exceeds Legal Boundaries.

  Case-Laws - HC : Proceedings are barred by time limitation or not - Adjudication of show cause notice (SCN) after 12 years - Citing the internal circular issued by the respondents to keep the matters in the call book, the respondents have failed to adhere to the time limit provided in the statute. The circular is beyond the scope of the provisions of the Act and notifications provided therein. - This Court is of the considered view that present proceedings could not be allowed to continue after a period of 12 years, particularly, when there is no mistake on the part of the petitioner. - HC
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VAT

• Software Contract Deemed Service, Not Works; Indivisible Agreement Focused Solely on Service Provision.

  Case-Laws - HC : Scope of contract - transfer of software that has come into existence - The pith and substance of the contract or true nature of the transaction shows that the contract is a contract for service simplicitor and is not a works contract or composite contract consisting of 2 contracts - one for service and one for sale, but is an indivisible contract for service only. On examination of the contract as a whole, it becomes obvious that the contract is essentially an agreement to render service. The theory of works contract or the concept of aspect theory is not attracted. - HC
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Case Laws:

• GST

• 2023 (12) TMI 894
  Rejection of appeal filed by the petitioner - time limitation - rejection on the ground that there was a delay of 158 days in filing the said appeal - HELD THAT:- On perusal of the N/N. 53/2023-Central Tax dated 02.11.2023, it appears that even after the rejection of appeal on the aspect of delay, the petitioner can very well avail the Amnesty scheme. In such view of the matter, this Court directs the petitioner to avail the Amnesty scheme in terms of Notification No.53/2023-Central Tax dated 02.11.2023. Thereafter, the 1st respondent is directed to consider the same in accordance with law. This writ petition is disposed of.

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• 2023 (12) TMI 893
  Validity of best judgment assessment orders - attachment of the petitioner s Bank Accounts without any prior intimation to the petitioner or raising any demand - petitioner had filed returns for all the periods - HELD THAT:- This Court is of the considered view that since the petitioner has filed the returns for the Assessment Years 2019-2020 to 2022-23 subsequent to restoration of GST Registration, the best judgment assessment orders passed by the 1st respondent dated 22.11.2022 25.11.2022, which are under challenge in WP Nos.4675, 4676, 4677 and 4684 of 2023 are liable to be set aside and the 1st respondent has to pass fresh assessment orders. The impugned orders are set aside and respondents are directed to pass fresh assessment orders, based on the returns filed by the petitioner for the Assessment Years 2019-2020 to 2022-23. Since the impugned best judgment assessment order is set aside, the consequential bank attachment order is stand lifted to the entire extent - Petition allowed.

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• 2023 (12) TMI 892
  Seizure of goods - jurisdiction to seize the goods - goods seized from the premises of the consignee - goods not in transit - HELD THAT:- A perusal of Annexure P-3 would go on to show that the inspection of the goods under movement was required to be done to ascertain the genuineness of the goods in transit or verification of documents and it is on that account, show cause notice as such was issued. It is settled principle that the writ Court is not to go into the disputed questions of facts and it is for the petitioner as such to place the relevant material before the respondents to show whether there was any substance in the show cause notice and tax was not being avoided by it. In M/s. Shiv Enterprises case [ 2023 (1) TMI 842 - SUPREME COURT] , the co-ordinate Bench as such had set aside the order issued by the Assistant Commissioner of State Tax, Mobile Wing, Chandigarh and the notice dated 14.09.2021 issued under Section 130 of the Central Goods Service Tax Act, 2017. Resultantly, directions were issued to release the conveyance and the goods in question. The order of detention had apparently been passed and also show cause notice dated 14.09.2021 had been issued. The Apex Court accordingly came to the conclusion that it is not for this Court to opine anything whether there was any evasion of tax or not while not interfering in the orders releasing the goods in question. The petitioner has an alternative remedy as such to put forth his case before the respondents and thereafter the respondents shall proceed in accordance with law. Accordingly, no cause is made out to entertain the writ petitions any further - Petition disposed off.

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• 2023 (12) TMI 891
  Appeal dismissed on the ground of being time barred - cancellation of the GST registration - HELD THAT:- This Court in Prakash Purohit s case [ 2022 (11) TMI 742 - RAJASTHAN HIGH COURT] has observed that in absence of GST registration, a person would not be able to continue with his business and thus, would be deprived of his livelihood which amounts to violation of right to life and liberty as enshrined in Article 21 of the Constitution of India. Having heard learned counsel for the parties and taking into consideration the judgment passed by the Co-ordinate Bench of this Court in Prakash Purohit s case, it is opined that the writ petition filed by the petitioner deserves to be allowed as the petitioner has sufficiently explained the reasons for filing the appeal with delay. The impugned order dated 18.09.2023 is set aside - writ petition allowed.

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• 2023 (12) TMI 890
  Classification of supply of services - composite supply with principal supply of goods under the Third Contract - supply made by the Applicant under Fifth Contract - supply of services of transportation, freight and insurance under the Fifth Contract provided for the goods supplied - Business Support Services or not. HELD THAT:- Having arrived at the considered conclusion that the instant activity of the applicant of construction, erection and commissioning of the said 800 KV, 6000 MW HVDC terminals at Raigarh, Chhattisgarh from Raigarh which includes the services of transportation, insurance and freight, is a composite works contract service classifiable under construction services falling under SAC 9954, attracting GST @18%, there are no reason to discuss the alternate opinion expressed by the applicant of the said service being in the nature of business support services - there exist no grounds whatsoever, in the case in hand warranting exemption as specified under SI. No. 18 of the Notification No. 12/2017-CT (Rate) dated 28.06.2017, which exclusively covers services by way of transportation of goods. Supply of goods under the Third Contract being the principal supply - HELD THAT:- Section 7(1 A) of the CGST Act, 2017 read with para 6 (a) of Schedule II to the CGST Act, 2017 stipulates that composite works contracts as defined in section 2(119) of the CGST Act, 2017 shall be treated as supply of services. Thus, when the CGST Act, 2017 itself classifies the instant supply of composite supply of works contract as supply of service , there exist no reason to identify the principal supply in the instant transaction, more so when Notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended prescribes the applicable tax rate in such work contract services. As the supply of services made by the applicant under Fifth Contract relating to construction, erection, civil works, testing, commissioning etc. of the said 800 KV, 6000 MW HVDC terminals at Raigarh, Chhattisgarh which includes the services of transportation, freight, and insurance, has been held to be a composite supply of Works contract, the alternate suggestion put forth by the applicant of the same being Business Support Service is not taken up for decision.

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• 2023 (12) TMI 889
  Classification of service - Job-work - applicant s activity of providing service of re-gasification of Liquified Natural Gas owned by its customers (Who are registered under GST Act) to convert to Re-gasified LNG by raising the temperature of the received LNG in its plant at Dhamara and sending/delivering the RLNG back to its customers through pipelines (as per Job Work Service agreement) - classifiable under entry (id) of Heading No 9988 at SI. No. 26 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended vide Notification No. 20/2019- CT (Rate) dtd. 30.09.2019 and chargeable to GST @ 12%? HELD THAT:- The subject activity of conversion of LNG into RLNG is a process undertaken by the Applicant on LNG belonging to other GST Registered persons, namely Gail India Limited Odisha (GSTN 21AAACG1209J2Z7), GAIL India Limited, Uttar Pradesh (GSTN 09AAACG1209J3ZS), GAIL India Limited, Madhya Pradesh (GSTN 23AAACG1209J4Z1 / 23AAACG1209J3Z2), Indian Oil Corporation Limited, Odisha (GSTN 21AAACI1681G1Z1). It is noted that LNG is goods classified at HSN 2711. Further, it is found that the processed goods (RLNG) is to be supplied back to the customers of the Applicant within one year (as declared by the Applicant). So, all the pre-requisites are apparently satisfied for an activity to be Job work . Government Circular No. 126/45/2019-GST dated 2211-19 has clarified this issue beyond any doubt. Hence, the subject activity of conversion of LNG to RLNG merits to be covered at entry id of Heading 9988 at SI. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017 as amended.

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• 2023 (12) TMI 888
  Scope of Advance Ruling application - Investigation proceedings already initiated - Compensation Cess paid by the Applicant on purchase of Coal which remained as unutilized ITC in the electronic credit ledger - whether credit will be available to the Applicant or the Applicant is required to reverse the same? - HELD THAT:- As per the information available to this forum, we see that DGGI, Rourkela Regional Unit under letter Ref No. DGGI/INV/GST/2873/2021-Gr-A/1698 dated 15.12.2021 DGGI/ENV/GST/2873/2023-Gr A/212 dated 02.03.2023 has informed that an investigation has been initiated against M/s. National Aluminium Company Ltd. for excess/irregular availment of Compensation Cess which is in advance stage of culmination and a Demand Cum Show Cause Notice is on the verge of issuance. In this regard, it would be pertinent to mention here that the proviso to sub-Section (2) of Section 98 of the CGST Act, 2017 provides that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act . The application for advance ruling filed by the Applicant is not maintainable under law and liable for rejection. Hence, the said application is rejected in terms of Section 98(2) of the CGST Act, 2017 read with Section 97(2) of the said Act.

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• 2023 (12) TMI 835
  Input Tax Credit (ITC) - eligibility criteria - Section 16(4) - Achallenge to its validity on the ground that it violates Article 14, 19(1)(g), and 300A of the Constitution of India; whether the non-obstante clause in Section 16(2) of the APGST, CGST Act, 2017 would prevail Section 16(4) of the APGST/CGST Act, 2017. - Scope for passing interim order - requirement of affidavit from the respondent for final adjudication - HELD THAT:- The Hon ble Supreme Court in ALD AUTOMOTIVE PVT. LTD. VERSUS THE COMMERCIAL TAX OFFICER NOW UPGRADED AS THE ASSISTANT COMMISSIONER (CT) ORS. [ 2018 (10) TMI 814 - SUPREME COURT] while considering a challenge to Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006 requiring the claim for Input Tax Credit to be made within 90 days from the date of purchase or before the end of the financial year whichever is later as being ultra vires to a statutory claim of the Act, considered as to the principles for interpreting law dealing with economic activities. While doing so, the Hon ble Supreme Court referred to the decision of the Constitution Bench in RK. GARG VERSUS UNION OF INDIA AND OTHERS [ 1981 (11) TMI 57 - SUPREME COURT ] wherein it was held that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It was further held that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any Doctrinaire or straight jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, larger play has to be allowed to the legislature. In the ALD Automotive Private Limited an alternate submission was made on behalf of the assessee that Section 19(11) of the Tamil Nadu Value Added Tax Act cannot be held to be mandatory and it is only a directory provision non-compliance with which cannot be a ground of denial of Input Tax Credit to the appellant therein. After noting the conditions enumerated in Section 19 of the said Act, it was held that the conditions under which the concession and benefit is given is always to be strictly construed and if the contention that there is no time period for claiming Input Tax Credit is accepted, the provision becomes too flexible and gives rise to a large number of difficulties including difficulty in verification of claim of Input Tax Credit. Further it was held that the taxing statutes contain self-contained scheme of levy, computation and collection of taxes. The time under which a return is to be filed for the purpose of assessment of tax cannot be dependent on the will of a dealer. Ultimately it was held that the time period prescribed under Section 19(11) of the Tamil Nadu Value Added Tax Act was mandatory. The Hon ble Supreme Court in TVS Motor Company Limited [ 2018 (10) TMI 887 - SUPREME COURT] after taking note of the decision in ALD Automotive held that ITC is a form of concession which is provided by the Act; it cannot be claimed as a matter of right but only in terms of the provision of the statute; therefore the conditions mentioned had to be fulfilled by the dealer. Very recently, the Hon ble Division Bench of the High Court of Andhra Pradesh had considered an identical case as that of the case on hand, wherein a pari materia provision under the Andhra Pradesh General Sales Tax, 2017 namely Section 16(4) of the Act was considered in a challenge to its validity on the ground that it violates Article 14, 19(1)(g), and 300A of the Constitution of India; whether the non-obstante clause in Section 16(2) of the APGST, CGST Act, 2017 would prevail Section 16(4) of the APGST/CGST Act, 2017. There are no ground to grant the relief sought for by the petitioner in the writ petition - the appeal as well as the writ petition are dismissed.

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• Income Tax

• 2023 (12) TMI 895
  Jurisdiction of income tax authorities to issue notice u/s 143(2) - ACIT or ITO - Legality of AO jurisdiction to issue and frame the assessment - case of the assessee was selected for scrutiny through CASS on the basis of information received from the Investigation wing to verify suspicious transactions relating to long term capital gain in penny stocks - According to assessee since the income tax return filed by the assessee is less than Rs. 30 Lakh therefore, the jurisdiction to issue notice u/s 143(2) of the Act to frame the assessment was with the ITO and not with the ACIT - HELD THAT:- Since the income tax return filed by the assessee is less than Rs. 30 Lakh therefore, the jurisdiction to issue notice u/s 143(2) of the Act to frame the assessment was with the ITO and not with the ACIT. Ld. Counsel for the assessee submitted that the case of the assessee is squarely covered by the decision of the Hon ble Jurisdictional High Court in the case of PCIT vs. Shree Shoppers Ltd. [ 2023 (3) TMI 1432 - CALCUTTA HIGH COURT] Thus as per the relevant statutory provisions not only the territorial jurisdiction but also the pecuniary jurisdiction of the Income Tax Officers/Assessing Officer has been fixed by the CBDT and that if the returned income is less than Rs.30 lacs in case of corporate assessee in metro cities, the jurisdiction to frame the assessment lies to the Income Tax Officer whereas if the returned income is more than Rs.30 lacs, the jurisdiction lies with the concerned ACIT/JCIT. Thus we are of the view that ACIT, Circle-43, Kolkata has no jurisdiction to frame the assessment order and to issue notice u/s 143(2) of the Act. Decided in favour of assessee.

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• 2023 (12) TMI 887
  Delay in paying the audit fee - Petitioner was engaged as an auditor in exercise of the Assessing Officer s (AO) powers u/s 142(2A) - HC held [ 2023 (2) TMI 861 - DELHI HIGH COURT] there is enormous delay in each case in payment of the determined audit fee. The delay is nearly four years in each case and interest ought to be paid to the petitioner at the rate of 7% per annum. Interest will run from the date of determination in each case till the date of payment of audit fee was made. HELD THAT:- There is a delay of 204 days in filing the Special Leave Petition. The delay has not been satisfactorily explained. The Special Leave Petition is dismissed on the ground of delay.

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• 2023 (12) TMI 886
  Reopening of assessment u/s 147 - escapement of income on account of bank interest and cash deposits in two of its bank accounts - scope of 3rd proviso to Section 12A(2) - Validity of order passed u/subsec (d) of Section 148A being without jurisdiction and against the 3rd proviso to Section 12A(2) of the Act - petitioner uploaded its reply taking a plea that as per 3rd proviso to Section 12A(2) of the Act, there was a bar to take any action u/s 147 for any preceding year, in which the registration was granted - As decided by HC [ 2023 (7) TMI 506 - PUNJAB HARYANA HIGH COURT] Registration of the petitioner-trust was granted on 30.09.2016 which was applicable from the assessment year 2016-17 and as such, said registration was valid for claiming the benefit under Sections 11 and 12 no proceedings under Section 147 can be initiated for the assessment year 2015-16 and impugned notices and the consequent order passed under Section 148A(d) being contrary to the 3rd proviso to Section 12A(2) of the Act, are set aside. HELD THAT:- Though there is delay of 191 days in filing this special leave petition, we have heard learned ASG, appearing for the petitioners on merits also. We are not inclined to interfere in the matter(s). Hence, the Special Leave Petition is dismissed.

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• 2023 (12) TMI 885
  Rectification of the Assessment Order u/s 143 - whether application for rectification had been filed beyond the period of limitation ? - action for reflection of the TDS deducted against the new PAN Number obtained by the petitioner - Application for granting permission u/s 119(2)(b) - issuance of new pan - TDS deductions not reflected in Form 26AS - Petitioner seeking to rectify its Income Tax return qua the TDS now being reflected under the correct PAN - Income Tax Authorities have also reflected the TDS amount of old PAN against the new PAN Number of the petitioner, as an Association of Persons . As decided by HC [ 2023 (4) TMI 340 - UTTARAKHAND HIGH COURT] rectification application could be filed by the petitioner within four years of the expiry of the Assessment Year. Admittedly, the petitioner did not do so. By resorting to Clause 3 of Circular No. 9/2015, the petitioner could have sought condonation of delay, in moving the rectification application by another two years. The petitioner did not file the rectification application either within the period of limitation, or even within the period for which the delay could be condoned, i.e. up to six years. The petitioner moved the rectification application only in the year 2021, i.e. after over 12 years. HELD THAT:- As petitioner submitted that permission may be granted to the petitioner herein to withdraw this Special Leave petition with liberty to make a representation to the Central Board of Direct Taxes (CBDT) under Section 119 of the Income Tax Act, 1961 so as to seek adjustment in view of the rectification made by the Department with regard to the PAN number of the petitioner/entity. The submission of learned senior counsel is placed on record. The Special Leave Petition is dismissed as withdrawn reserving aforesaid liberty to the petitioner. It is needless to observe that if any representation is made by the petitioner to the CBDT, the same shall be considered expeditiously and in accordance with law and a copy of the order passed thereon shall be communicated to the petitioner herein. Since, the plea made by the petitioner herein in these proceedings was rejected on the ground of delay and not on merits as such, the representation to be made by the petitioner to the CBDT shall be considered on its own merits without being influenced by the impugned order(s).

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• 2023 (12) TMI 884
  Gain arising from slump sale - Capital gain OR business income - assessee transferred its business activities relating to assembling of seats and seating products located at Pune, on slump sale basis - whether the transaction does not satisfy the condition prescribed u/s. 50B? - HELD THAT:- CIT(A), referring to the provisions of Section 28(iv) which the AO felt the transaction was covered under, correctly came to a conclusion that the consideration is received in terms of money whereas Section 28(iv) refers to the value of any benefit or perquisite whether convertible in money or not and Courts have held that where the consideration is monetary, Section 28(iv) of the Act will not apply. CIT(A) also relied upon various judgments of the ITAT and came to a conclusion that assessee has rightly computed the capital gain under Section 50B of the Act. The ITAT, in the order impugned, has come to a factual finding that no material was placed before the Tribunal by the Revenue to contradict the finding given by the CIT(A). There is no challenge to this finding before us. Therefore, no question of law, let alone a substantial question of law, will arise as regards the proposed first question. Write off of the business/trade advances receivable from a sick company - ITAT allowed deduction - ITAT relied upon various decisions of co-ordinate Benches and reiterated the well settled legal proposition that Tax Authorities should not sit in the arm chair of a businessman and assume his role to decide the correctness of a commercial decision. The ITAT has also taken support from the decision of the Hon ble Supreme Court of India in the case of CIT v. Mysore Sugar Company Ltd. [ 1962 (5) TMI 3 - SUPREME COURT] to hold that unrecoverable trade advance is allowable as business loss and it would certainly be allowable as a deduction under the Act. ITAT has also considered the factual position that the shares of RCVPL being listed in the Bombay Stock Exchange, is a widely held Company in terms of the provisions of the Income Tax Act and thus, it cannot be said that the promoters of the assessee Company would be benefited by decision taken by them. ITAT has specifically noted the absence of any finding either by the AO or by the CIT(A) that the transaction to write off was a mere eye wash. Thus, based on the facts available on record, it cannot be said that the motive to write off was only to reduce the tax liability. As evident from the explanation of the assessee that the decision taken by it to write off the trade deposit was based on commercial sense and cogent reasoning since RCVPL was already declared as sick Company. Furthermore, RCVPL did not adjust the trade deposit against the trade deposit as per the terms of the agreement and was asking for payments against the bills. The assessee was thus compelled to make the payment in order to ensure future supplies and thus the assessee is justified in making a decision to write off the trade advance. This is perfectly probable and acceptable. Moreover, even the Hon ble Supreme Court in its decision into the case of Mysore Sugar Company Ltd. (supra), has observed that the money lost in doing business based the character of current expenses. Thus we find that the matter is purely factual in nature. We do not find it jurisdictionally proper and necessary to substitute the view of the Tribunal with our view, especially since the same is based on facts. The Revenue is unable to indicate any question of law, leave aside any involving a substantial legal proposition. We do not find any error in the order of the Tribunal, impugned herein. The Appeal is thus without merit.

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• 2023 (12) TMI 883
  Income taxable in India - attribution of profits at the rate of 50% to the India centre - fixed place PE in India or not? - core business of assessee concerns providing testing services to its clients, concerning transmission systems designed for automobiles at its centers located in U.K. - assessee had filed its Return of Income (ROI) in which it declared its income as nil as income earned by it from customers located in India was not taxable - AO concluded that assessee had a Permanent Establishment (PE) in India in the form of its subsidiary - AO proceeded to attribute 50% of the business profits by applying the global profit ratio HELD THAT:- The record shows that the Tribunal has returned a finding of fact that the respondent/assessee does not dispute that it had a fixed place PE in India in the form of Ricardo India. Inter alia, what persuaded the Tribunal to rule in favour of assessee is the other aspect which was that if the commission/remuneration paid to Ricardo India was reduced from the profit attributed to the PE, then no further attribution could have been made. Thus when RIPL, a domestic subsidiary company, has already been remunerated at arm s length no further attribution of profit to PE would be warranted. Even otherwise by following the order passed by the coordinate Bench of the Tribunal in assessee s own case for AY 2007-08 [ 2020 (11) TMI 206 - ITAT DELHI] when we deduct the remuneration/commission paid to RIPL from the amounts of profit attributed to the PE as detailed in para 11 of this order, no taxable income left in the hands of the PE. Consequently, additions made by the AO and confirmed by ld. CIT(A) are ordered to be deleted being not sustainable in the eyes of law. Given the finding of fact returned by the Tribunal that no further profit could be attributed if commission/remuneration paid to Ricardo India is adjusted against the profit attributed to the PE, we are not inclined to interfere with the impugned order. Appeals filed by the assessee are hereby allowed.

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• 2023 (12) TMI 882
  Addition u/s 41 - liability outstanding or not? - HELD THAT:- Under the schedule trade payables there is no liability outstanding under the name of Axom Communications - We have carefully gone through the entire financial statements and we could not find any mention of any liability in the name of Axom Communication where from the AO has picked up this figure is not known since it is not part of the financial statement. We do not find any logic / reason for making the impugned addition. For the liability in the name of Web Com India Private Limited the bills are placed and the liability pertains to the year under consideration only. For the reasons given here in above, we do not find any merit in this addition u/s.41 of the Act. Thus the addition is deleted.Decided in favour of assesee. Disallowance u/s.40a(ia) - non deposit of tax deducted at source - scope of amendment made by the finance No.2 Act 2014 - as argued there is no doubt the tax was deducted at source from the impugned payments but was not deposited on or before the due date of filing of the return but instead of entire disallowance 30% of the total sum should have been disallowed as per the amended provision of section 40 a(ia) - HELD THAT:- It is true that the amendment made by the finance No.2 Act 2014 is effective from 01.04.2015 but we are of the considered view that it has retrospective effect as held by the coordinate Bench in the case of Smt. Kanta Yadav [ 2017 (5) TMI 1565 - ITAT NEW DELHI] modify the orders of the authorities below and direct the Assessing Officer to restrict the addition to 30% of the total addition made on account of deduction of TDS u/s 40(a)(ia). Decided in favour of assesee partly. Ad-hoc disallowance of 20% of expenditure - HELD THAT:- AO himself mentions that the expenses claimed by the assessee were also test checked and while making the addition the AO says that the books of account vouchers were not produced. The logical question arises if the books and vouchers were not produced then from where the AO test checked the expenses. We do not find in the assessment order where the AO asked the assessee to produce books of accounts / vouchers for verification. Once again a logical question arises why 20% and why not 30, 50 even 100%. Without pointing out any specific defect in the audited books of accounts the AO cannot and should not make any estimated addition. We, therefore, direct the AO to delete the impugned addition - Decided in favour of assesee. Levy of penalty u/s. 271 (1)(c) - allegation of non specification of clear charge - defective notice u/s 274 - HELD THAT:- We are of the considered view that when the notices issued by the AO are bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Decided in favour of assesee.

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• 2023 (12) TMI 881
  Unexplained cash credit u/s.68 - assessee taken loan from nine parties being companies connected with an accommodation entry provider - mere submission of PAN, account number and books of accounts could not establish the creditworthiness of the parties - CIT(A) deleted addition on the basis of details/documents submitted by the assessee - HELD THAT:- The assessee submitted the reply with respect to these 9 loans, submitting the ledger confirmation, their bank statements, their return of income and their balance sheet.The assessee also categorically stated that there is no material provided to the assessee, which suggests that the loans taken by the assessee are not genuine. Assessee further stated that AO has relied upon the statement of accommodation entry provider, however, neither the cross examination of the same despite request, was provided and further no material was also given by AO to show that the impugned loans are not genuine. Ld AO did not give any evidence to the assessee to show that loans are not genuine. When the assessee has discharged its initial onus, it is duty of AO to carry out necessary enquiries either [1] by issuing notice under Section 133(6) of the Act to the lenders, [2] by issuing summons to the parties, [3] by asking the assessee to produce parties or [4] by deputing the inspectors for verification, or [5] or carry out survey etc. at the premises of the lenders. AO has not conducted any enquiry with respect to all or any of the lenders. This is also when the assessee has made a written request to the ld AO to examine his evidences submitted and make inquiry. Despite this, LD AO did not conduct any inquiry. It merely stated that income shown by the parties from trading activities is a loss to offset interest income, etc. That may be the reasons for suspicion, the learned Assessing Officer should have conducted further enquiry to support his suspicion, and otherwise the suspicion merely remains suspicion. If it is without any evidence, it has no value. So We agree with the argument of the learned Authorized Representative that mere suspension without further enquiry does not take place of proof or evidence that the loans are not genuine. We agree with the arguments of DR that mere repayment of the loans subsequently does not make the original acceptance of loan as genuine. Such an argument is against the language of the provision of section 68 of the act. Criteria of identity, creditworthiness and genuineness are to be tested at the time of amount credited in the books of the assessee. All subsequent events are immaterial. Thus the order of the CIT (A) in deleting the addition under Section 68 confirmed - Decided against revenue. Interest disallowance with respect to lenders whose loans are added u/s 68 - As we find that addition u/s 68 is deleted of those parties; consequent disallowance of interest also cannot survive. Accordingly, we confirm the order of the learned CIT (A) in deleting the disallowance on account of interest. Ground no.2 of the appeal is also dismissed. Disallowance u/s 14A - HELD THAT:- As we find that assessee has suo moto disallowed Rs.9,60,000/-, whereas exempt income earned by the assessee is merely Rs.4,60,006/-, CIT (A) has correctly deleted the disallowance following the decision of Hon ble jurisdictional high court in M/S. NIRVED TRADERS PVT. LTD. [ 2019 (4) TMI 1738 - BOMBAY HIGH COURT ] - Thus, the learned CIT (A) s order deleting the disallowance under Section 14A of the Act is upheld and ground no. 3 and 4 of the appeal is dismissed.

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• 2023 (12) TMI 880
  Bogus purchases - protective addition of 5% in hands of assessee - addition on account of alleged commission/brokerage as business income - HELD THAT:- Tribunal in its decision in the case of Orient Craft Ltd. [ 2021 (10) TMI 154 - ITAT DELHI] had held that purchases made by M/s. Orient Craft Ltd. from the assessee were genuine. Hence, protective addition in the hands of the assessee in all the assessment years under consideration here is not sustainable. As a sequel, the order of the ld. CIT (A) making addition of alleged commission/brokerage as business income in the hands of the assessee for all the assessment years cannot be sustained. Decided in favour of assessee.

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• 2023 (12) TMI 879
  Reassessment order issued without mentioning DIN as per CBDT s Circular No.19 of 2019 - legality of communication issued by any income tax authority w/o DIN - HELD THAT:- From the perusal of the CBDT Circular No.19 of 2019 dated 14/08/2019, we find that in order to maintain a proper audit trail of all the communication, the CBDT in the exercise of its power u/s 119 of the Act had decided that no communication shall be issued by any income tax authority, inter-alia, relating to assessment to the assessee or any other person, on or after 01/10/2019 unless a computer-generated DIN has been allotted and duly quoted in the body of such communication. In the present case, it is undisputed that such a DIN as required in para 2 of the aforesaid Circular is not mentioned in the body of the assessment order dated 05/12/2019. In Ashok Commercial Enterprises v/s ACIT, [ 2023 (9) TMI 335 - BOMBAY HIGH COURT] as held that the object of the said Circular is clear and laudatory and intended to ensure that proper trail of all assessment and other orders are maintained and further that any deviation therefrom can only be undertaken after prior written approval of the higher authorities under the Act. Accordingly, the Hon ble jurisdictional High Court quashed the communication issued without mentioning DIN as per CBDT s Circular No.19 of 2019. As para 2 of CBDT Circular No.19 of 2019 specifically mentions that the computer-generated DIN is to be duly quoted in the body of communication, which in the present case is the assessment order dated 05/12/2019. Therefore, we are of the considered view that the intimation letter dated 09/12/2019 intimating that the DIN generated in respect of the computation sheet may be treated as common DIN for the relevant order and all its annexures is not sufficient compliance with the aforesaid Circular No.19 of 2019, as no DIN is mentioned in the body of assessment order passed on 05/12/2019. Accordingly, the assessment order dated 05/12/2019 passed under section 143(3) read with section 147 of the Act is set aside as being not in compliance with the CBDT Circular No.19 of 2019. Assessee appeal allowed.

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• 2023 (12) TMI 878
  Revision u/s 263 - assessee had transferred capital asset which is an agriculture land which resulted in capital gain within the scope of section 45(3) - in respect of capital gain revealed that capital asset was held by the assessee for less than two years and deduction claimed u/s 54B was therefore incorrectly claimed by the assessee - As per CIT AO while framing the assessment order u/s 143(3) of the Act has not looked into this issue, which is erroneous and prejudicial to the interest of the Revenue - HELD THAT:- The assessee herein is one of the co-owners of the land. Even in this case, the assessee and the legal heir failed to produce any material evidence in support of the grounds raised in the appeal. In the absence of the same, we do not find any infirmity in the order passed by the Ld. PCIT, that the assessment order passed by the Assessing Officer is an erroneous order and prejudicial to the interest of Revenue, which is correctly revised by invoking power u/s. 263 of the Act. Thus the grounds raised by the assessee are devoid of merits and the same are hereby rejected.

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• 2023 (12) TMI 877
  Treatment of LTCG as unexplained cash credit u/s. 68 - AO has made proper enquiries before concluding the transaction as a sham - as per AO the assessee has involved in manipulating the stock prices in penny stocks and has derived LTCG and has claimed exemption u/s. 10(38) by manipulating the share prices - loose sheets found and seized at the residence of the assessee wherein the sale of shares, quantity sold, date, sale price and the computation of the LTCG were found and seized - HELD THAT:- In the instant case, since the transactions were through proper banking channels, this case is of no help to the Revenue. Similarly, the decision in the case of Sanjay Bimalchand Jain [ 2017 (5) TMI 983 - BOMBAY HIGH COURT] it is distinguishable on the fact that the details of persons who purchased the shares were not provided. In the instant case, the details of buyers are very much available in the order of the Ld. AO and hence this decision cannot be applied. Further, in the case of Pr. CIT vs. Mehndipur Balaji [ 2022 (7) TMI 294 - ALLAHABAD HIGH COURT] relied on by the Ld. DR, the addition for the bogus LTCG received by the assessee were made on the basis of the incriminating material available on record. However, in the instant case, no such incriminating material along with corroborative evidence has brought on record to say that the assessee has involved in manipulation of the stock prices to earn bogus LTCG. It is also noted that the assessee has sold the shares through recognized Stock Exchange and hence he is not aware of the company of the buyers and therefore the arguments of the Ld. DR are not accepted - thus we find that the assessee has not involved in manipulation of stock prices for the purpose of earning bogus LTCG and hence we are inclined to allow the ground raised by the assessee. Treatment of commission expenditure as unexplained expenditure u/s 69C - Since the LTCG earned by the assessee are bonafide in nature, the commission expenditure shall be allowed as a deduction from the LTCG and hence this ground raised by the assessee is allowed.

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• 2023 (12) TMI 876
  Disallowance u/s 14A r.w.r. 8D - disallowance suo moto computed by the appellant - HELD THAT:- Disallowance offered u/s 14A as per Rule 8D in the return of income for AY 2018-19 was Rs. 14,19,009/-. Having regard to the above calculation, it is thus held that direct expenses disallowable under Rule 8D(2)(i) was Rs. 8,369/- and the AO had wrongly computed the same at Rs. 9,80,615/-. Coming to the disallowance as per Rule 8D(2)(ii), as noted that the disallowance suo moto computed by the appellant at Rs. 14,10,610/- exceeded the sum of Rs. 13,32,000/- worked out by the AO. AR fairly stated that the correct sum disallowable under Rule 8D(2)(ii) was Rs. 14,10,610/-. We thus hold that the aggregate sum disallowable u/s 14A read with Rule 8D for the relevant year was Rs. 14,19,009/- [8,399 + 14,10,610] which is noted to have already been offered by the appellant in the return of income. Hence, the plea of the assessee that no further disallowance u/s 14A is warranted on these given facts, is accepted. Accordingly, the excess disallowance of Rs. 8,93,606/- retained by Ld. CIT(A) is directed to be deleted. Ground Nos. 1 2 of the appeal are therefore allowed. Disallowance of the deduction claimed u/s 35(2AB) - appellant had incurred scientific research expenditure, both revenue and capital, at their approved in-house R D facility at Bengaluru - HELD THAT:- It is noted that the DSIR has issued Form 3CL dated 31.08.2023, in terms of which, the appellant is entitled to weighted deduction of Rs. 25,89,66,000/- [17,26,44,000 X 150%] u/s 35(2AB) of the Act. The balance sum of Rs. 55,00,605/- [17,81,44,605 17,26,44,000] however is only eligible for normal deduction, as rightly held by the Ld. CIT(A). Accordingly, the total deduction allowable u/s 35(2AB) and 35(1)(i)/(iv) of the Act works out to Rs. 26,44,66,605/- [25,89,66,000 + 55,00,605] as opposed to the deduction of Rs. 26,72,16,908/- claimed by the appellant in the return of income. Accordingly, the disallowance of Rs. 8,90,72,303/- confirmed by the Ld. CIT(A) stands restricted to Rs. 27,50,303/- [26,72,16,908 - 26,44,66,605]. These grounds are therefore partly allowed. Admissibility of claim not made in ROI - Computation of short term capital on sale of listed investments following FIFO Method - whether the claim made by the appellant regarding re-computation of STCG on sale of investments on FIFO basis in the course of assessment, is admissible in absence of such claim being raised in the return of income ? - HELD THAT:- As in the appellant s own case which is reported in Commissioner of Income Tax, Kolkata Versus M/s Britannia Industries Ltd. [ 2017 (7) TMI 502 - CALCUTTA HIGH COURT ]. In the decided case the Hon ble Court after considering the decision of Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT ] and Gurjargravures (P.) Ltd. [ 1977 (11) TMI 1 - SUPREME COURT ] has held that the appellate authority has the power to entertain new claim if the grounds raised are bonafide. Thus, in principle, we agree that the appellant is legally entitled to raise this claim before us. Whether short term capital gain is to be worked out on FIFO Method and not weighted average cost method? - According to the appellant, the short term capital gain which was originally computed by following weighted average cost method shall stand rectified under the FIFO Method. The lower authorities have, however, observed that the appellant did not furnish any document / calculation in support of its claim. To this, the Ld. AR showed us that the complete statement giving scrip-wise break-up was furnished before the AO vide letter. Having regard to the same, we set aside this issue to the file of the AO to verify the calculation/computation submitted by the assessee and accordingly re-compute/quantify the correct taxable short term capital gain in terms of Section 45(2A) of the Act. This ground is therefore allowed for statistical purposes. Disallowance of deduction claimed u/s 80G - appellant had contributed sum towards its CSR obligations to Nowrosjee Wadia Maternity Hospital and Sir Ness Wadia Foundation - appellant had disallowed and added back the aforesaid expenditure in terms of Explanation 2 to Section 37(1) of the Act, while computing the taxable business income - HELD THAT:- Explanation (2) to Section 37 of the Act which denies deduction for the expenses incurred on CSR initiative by way of deduction from computation of Business Income cannot be read into Chapter VI of the Act, which is applicable for arriving at taxable income from the Gross Total Income. It is also noted that wherever the Legislature intended that CSR contributions to any specific charitable trusts should be denied deduction, necessary provisions were incorporated in the specified subclauses, viz. sub-clauses (iiihk) and (iiihi). It is noted that no such debar has been set out by the Legislature in any other sub-clauses of Section 80G of the Act. As far as the reasoning given by the AO to deny the deduction is concerned, we find the same to be of no relevance as the same is not borne out from the provisions contained in Section 80G of the Act. As decided in JMS Mining Pvt. Ltd. [ 2021 (7) TMI 907 - ITAT KOLKATA ] specific prohibition/restriction has been made for CSR contributions only to two eligible charitable organizations, then it automatically implies that there is no prohibition/restriction in respect of claim of CSR expenses, in any other cases, which are otherwise eligible under Section 80G of the Act. Following the same, this Tribunal in the case of Acme Chem Ltd Vs ACIT [ 2023 (3) TMI 1434 - ITAT KOLKATA] has deleted similar disallowance made by the AO u/s 80G of the Act in relation to the CSR donations made to registered charitable trusts. Thus we are inclined to hold that the assessee is eligible for deduction claimed u/s 80G of the Act.

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• 2023 (12) TMI 875
  Adjustment of refund for arriving at interest - calculation of interest u/s 244A is the way in which the AO has adjusted the refunds issued - AR submitted that where the refunds have been issued in parts, the AO while adjusting the refund issued earlier has erred in apportioning amount of earlier refund towards the principal and interest component determined then i.e. without considering the present relief - AO has reduced interest only to the extent it was determined at the point of issuance of the earlier refunds, thus, leading to larger adjustment of the refund towards the tax component as against the interest component - HELD THAT:- Amount of interest u/s. 244A is to be calculated by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Therefore we hold that the manner in which the assessing officer has adjusted the refund is not correct and that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Tribunal. AR during the course of hearing submitted a detailed working of the manner in which the AO has calculated the interest and also the correct way in which the same is to be calculated - Accordingly the assessing officer is directed to compute interest u/s 244A as per the claim of the assessee after giving a proper opportunity of being heard. Thus as relying on Pfizer Limited [ 1991 (3) TMI 121 - BOMBAY HIGH COURT] as well as the decision of CIT vs. K.E.C International [ 2005 (7) TMI 733 - BOMBAY HIGH COURT] assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 18.08.2022. Accordingly the AO is directed to re-calculate the interest up to the date of actual receipt of refund by the assessee. Interest calculation is that additional interest u/s. 244A(1A) to be calculated on the total amount of refund including Interest - The provisions of sub-section (1A) to section 244A are inserted by the Finance Act, 2016 as a remedial measure to compensate the assessee in cases where there are delays in granting refunds due on account of delay in passing order giving effect to appellate or revisional orders. Applying the ratio laid down in the case of Bharat Petroleum Corporation Ltd [ 2021 (7) TMI 215 - ITAT MUMBAI] we are of the considered view that the provisions of section 244A(1A) would be applicable in assessee s case from 01.06.2016 till the date of actual receipt of refund and accordingly we remit the issue back to the AO to examine the issue afresh and calculate the additional interest under section 244A(1A) in accordance with law.

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• 2023 (12) TMI 874
  Validity of assessment order passed u/s. 143(3) with no quote/state any Document Identification Number (DIN) as per mandate of CBDT Circular 19/2019 dated 14.08.2019 - Subsequent generation of DIN - HELD THAT:- As all the communication to the assessee should have DIN generated from ITBA to maintain proper audit trail of all the communications. In para 3 of this circular, the it had provided that in exceptional circumstances, wherein communication is to be issued manually, the reasons have to be recorded in the file and prior written approval of the CCIT/DGIT may be obtained in such cases. As per para 5, such communication shall have to be regularized within 15 working days by uploading the manual communication on system, compulsory generating the DIN on system and communicating to the assessee. Ostensibly, the assessment order in question does not comply with the requirements of Para-3 of the Circular (supra) and thus, we find no reason to uphold the decision of the CIT(A) on this aspect. We may note here that this facet of the controversy has been specifically dealt with in the case of Ashok Commercial Enterprise [ 2023 (9) TMI 335 - BOMBAY HIGH COURT] wherein it has been held that the subsequent generation of DIN can only regularize the failure to generate the DIN, but yet the requirements of Paragraph-3 remaining uncomplied, would result in the communication being treated as invalid and never to have been issued. The aforesaid judgment completely dispels the stand of the CIT(A) in the present case. Therefore, we deem it fit and proper to treat the assessment order dated 31.12.2019 as invalid and is deemed to have never been issued and is accordingly set-aside. We hold so.

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• 2023 (12) TMI 873
  Levy of penalty u/s 270A - defective notice - as per assessee AO had not struck off the irrelevant portion and no specific offence committed by the assessee was mentioned by the ld. AO in the show cause notice - whether the assessee has underreported its income or misreported its income - HELD THAT:- We find that the assessee being a charitable trust enjoying registration u/s 12AA of the Act consequentially eligible for exemption u/s 11 of the Act had claimed disallowance of depreciation on certain fixed assets as an application of income, ignoring the amendment brought u/s 11(6) of the Act w.e.f. 01.04.2015. This disallowance of deprecation was accepted by the assessee in the quantum proceedings. AO initiated penalty proceedings u/s 270A of the Act on 01.11.2019 wherein in the said notice issued u/s 274 r.w.s. 270A of the Act, the ld. AO had not struck off the irrelevant portion i.e. whether the assessee has underreported its income or misreported its income. We also find that different rates of penalty are stipulated in Section 270A of the Act for underreporting of income; for misreporting of income and for underreporting as well as misreporting of income. Hence, it is even more onerous on the part of the ld. AO to specifically mention the offence committed by the assessee whether it had underreported the income or misreported the income or committed both the offence so as to apply the respective penalty amounts as stipulated u/s 270A of the Act. This onerous task being not fulfilled by the AO would result in entire penalty proceedings getting vitiated. In view of the specific provisions of the Act and in view of the decision of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) ], we direct the AO to delete the penalty levied u/s 270A of the Act in the facts and circumstances of the instant case - Appeal filed by the assessee is allowed.

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• 2023 (12) TMI 872
  Validity of Reopening of assessment u/s 147 - as argued approval u/s 151 was mechanically accorded and that too without application of mind - addition u/s 68 on the ground that the assessee has received the said sum from two parties which remained unexplained - HELD THAT:- Approval has been granted in a mechanical manner without application of mind and is therefore, against the spirit of the Act in which this mechanism has been provided that approval has to be taken u/s 151 of the Act by the competent authority so that a settled assessment is not unsettled in a casual manner. The competent authority after going through the proposal of the AO if finds the proposal cogent and plausible, only then the approval is to be granted but in the present case, Addl. CIT, Range-4, Kolkata has just signed the proforma placed before him without any application of mind. The said re-opening of assessment on the basis of the approval granted by Addl. CIT, Range-4, Kolkata vide approval dated 30.03.2015 is therefore, not as per the provisions of the Act and cannot be sustained. The case of the assessee finds support from the decision of Ajay Trading Company [ 2023 (2) TMI 263 - ITAT KOLKATA] Thus approval granted without application of mind and in a mechanical manner would render the reopening of assessment as void and invalid. Accordingly, we quash the reopening of assessment. Decided in favour of assessee.

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• 2023 (12) TMI 871
  Reopening of assessment - commission income on the turnover of amount in the bank account which was used to facilitate for the marble traders of Kishangarh - either the assessee is the owner of the money found deposited in her bank accounts as claimed or the assessee is merely a facilitator and earns commission income - HELD THAT:- Even though there was direction of the bench the revenue has not placed on record the report or the records of the investigation wing. Therefore, we believe that the assessee has already provided the information which she possessed and revenue (Investigation wing) was satisfied with the information submitted by the assessee. It is not disputed that the assessment was reopened to tax the commission income on the transactions facilitated by the appellant for the marble traders of Kishangarh. This aspect of the reasons recorded by the revenue has not been controverted. Therefore, considering the decision of the apex court in the case of Sun Engineering [ 1992 (9) TMI 1 - SUPREME COURT] while assessing the income of the assessee reasons recorded are to be considered. CIT(A) while deciding the appeal of the assessee has dealt with the two-remand report of the assessing officer on of March 2015 and another of August 2015. The non disputed facts emergeis that the assessee admitted that bank accounts were opened, wherein different parties at different places deposited the money, in turn at Kishangarh, the money was withdrawn and after charging commission, which was ranging from Rs. 100 to Rs. 300 per lac and the remaining amount was given back to the persons as advised by the depositors. CIT(A) noted that the assessee reminded that the ld. AO himself agreed to these facts in the first half of the assessment order that the money was deposited by different Marble Traders were given back to them after withdrawing from the bank. CIT(A) noted that there is no basis to swing in the position from taxing commission on the transaction facilitated by the appellant to estimating gross profit as marble trader. CIT(A) also noted that none of the corroborative factors that were inquired into through remand report proceeding support such imaginary action of the ld. AO. In the remand report the ld. AO admit that the assessee neither have any establishment nor infrastructure to conduct business of marble trading. Considering the above aspect of the matter the swing from charging commission to charge the GP as marble trader has no basis and are contrary to the facts already on record. Considering all these aspects of the case discussed here in above we find no infirmity in the finding of facts that the income of the assessee be taxed on commission, however, as regards the ld. CIT(A) contention of allowing 25 % from the commission income estimated has no basis or proof that has been argued by the ld. AR of the assessee and therefore, we see no reason to consider the claim of the 25 % as allowable and therefore, the same is not be considered as expenses in the absence of any details or evidence.

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• 2023 (12) TMI 870
  Depreciation on land development expenditure incurred on lease hold property - disallowance of and leveling expenses incurred for creating a backup yard is treated as building, wherein depreciation was claimed @ 10% of total cost incurred on land development - HELD THAT:- The issue on hand first arose in the hands of the assessee in the assessment year 2011-12 [ 2023 (3) TMI 1350 - ITAT AHMEDABAD] In that assessment year, the assessee claimed the depreciation which was disallowed by the AO and subsequently the order of the AO was also upheld by the learned CIT-A. Against the finding of the learned CIT-A, the assessee did not challenge the same before the higher forum. Thus, the finding of the learned CIT-A reached the finality. Now, the controversy arises whether the issue relating to the depreciation can be raised by the assessee in the subsequent year without challenging the initial/ first assessment year as discussed above. The answer stands against the assessee. In simple words, the assessee in its own case has admitted the disallowance of depreciation and therefore the same cannot be agitated in the later years. Hence, the ground of appeal of the assessee is hereby dismissed. Disallowance of deprecation claimed on right to use leasehold land - assessee has been allotted land on lease basis by the Gujarat Maritime Board (GMB). The assessee accounted for the right to use leasehold land in the A.Y. 2011-12 at present value of future annual lease and claimed depreciation on the same @ 25% by treating the same as intangible assets - HELD THAT:- It is pertinent to note that the recognition of the right to use lease hold land as intangible asset as per the statement of account and the same was not disputed by the Department at any stage. Thus, the claim of depreciation was correctly made and the same should have been taken into account by the Assessing Officer as well as CIT(A). Thus, this ground allowed. Disallowances u/s 14A - AO has worked out the amount of disallowance u/s 14A as per the provision of rule 8D of Income Tax Rule which includes disallowances on account of interest expenses as well administrative expenses - AO has also made the addition to the book profit calculated under the provisions of section 115JB - CIT(A) restricted the quantum of disallowance under section 14A of the Act to the extent of exempted income only whereas deleted the addition to book profit in entirety - HELD THAT:- It is settled position of law by several competent court that if there are mixed funds or interest free funds exceed the amount of investment then the power of presumption would be that the investment has been made out of interest free funds. In holding so, we draw support and guidance from the judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Torrent Power Ltd [ 2014 (6) TMI 185 - GUJARAT HIGH COURT] In the case of the present assessee, the interest free fund of the assessee exceeds the amount of the investment yielding the exempted income. Therefore, no disallowance can be made on account of interest expenditure under the provision of rule 8D IT rule in the given facts and circumstances. Disallowance of administrative expenses , in our considered opinion, the contention of the assessee cannot be accepted that no expenditure in relation to the investment was incurred. Therefore, the disallowance of administrative as per rule 8D of the Income Tax Rule needs to be made. As per the provision of rule 8D(2)(iii) the amount of administrative expense shall be equal to 0.5% of average value of the investment, income from which does not or shall not form part of total income. Question arises while computing the average value of investment whether all the investment capable of yielding exempted income shall be considered or only those investments which yielded exempted income during the year shall be considered. The question has been answered in the case of ACIT vs. Vireet Investment (P.) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that only those investment shall be considered which yielded exempted income during the year. Thus amount of disallowance under rule 8D(2)(iii) shall be computed only considering the investment in Kutch Railways Company Ltd of which average value stand at Rs. 4000 Lacs only and accordingly the amount of disallowance shall be at Rs. 20 Lacs only whereas the assessee has already made disallowances of Rs. 25 lacs. Therefore no further disallowance is required to be made - appeal of the assessee allowed. Addition to book profit computed u/s 115JB - We hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - There is no mechanism/ manner given under clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore, we feel that adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. In the given the assessee itself has made adhoc disallowances of Rs. 25 Lacs under normal computation of income in connection with the exempted income earned during the year. Therefore amount which been admitted by the assessee itself as incurred in connection with exempted shall be added to the book profit as per the provion of clause (f) to explanation 1 of section 115JB of the Act. Thus we direct the AO to make the addition of Rs. 25 Lacs as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus, the ground of appeal of the Revenue in relation to addition to book profits is partly allowed. Deduction u/s. 80IAB on sale of scrap - gain on foreign currency derivative swap as eligible income under section 80IAB and holding derivative swap loss as business loss - HELD THAT:- As respectfully following the order of the tribunal in the own case of the assessee as 122 167/AHD/2015 for AY 2011-12 [ 2023 (3) TMI 1350 - ITAT AHMEDABAD] , we do not find any infirmity in the finding of the learned CIT(A) and direct the AO to delete the disallowance made by him. Depreciation on the block office equipment @ 15% allowec by following the order of this tribunal in the case M/s Adani Enterprise Ltd. [ 2019 (2) TMI 2018 - ITAT AHMEDABAD] in ITA No. 1840/Ahd/2012. TP Adjustment - corporate guarantee - an international transaction or not? - HELD THAT:- The provisions of section 92B of the Act define the parameters of what constitute an international transaction. Although, the ambit of international transaction was wide enough, yet due to judicial interpretation, certain classes of transactions were being left out of the transfer pricing net. To tackle the same, by the Finance Act of 2012 an Explanation to Section 92B[2] of the Act was brought in the statute with retrospective effect from 1st April 2002. The explanation is clarificatory in nature and added certain categories of transactions, inter alia, the transaction as specified under clause (c) of explanation (i) to section 92B of the Act within the ambit of international transactions. The corporate guarantee was included within the ambit of international transaction by the Finance Act 2012 with retrospective effect. Thus, there remains no ambiguity to the fact that the corporate guarantee extended by the assessee to its AE is an international transaction and therefore the same has to be benchmarked at the arm length price. We find that in the case of PCIT vs. Redington (India) Ltd. [ 2020 (12) TMI 516 - MADRAS HIGH COURT] has held that corporate guarantee is covered under the limb of international transaction and having bearing on profit and loss account. Thus we hold that the bank/corporate guarantee extended to AE is an international transaction. Therefore, the same has to be bench marked for determining the ALP. Determine the benchmarking for working out the ALP of the impugned international transaction - Coming to the case on hand, we note that assessee has borrowed loan from the Standard Chartered bank at an effective rate of interest at 4.06% per annum whereas the AE has borrowed loan at the rate of 4.92% per annum despite the corporate guarantee furnished by the assessee The assessee has not obtained any saving of the interest/bank charges. Accordingly, the question arises, whether the assessee should be made subject to the addition for the corporate guarantee furnished by it in the given facts and circumstances. To our understanding, on applying the interest saving approach, it is not justifiable to make any addition on account of furnishing the corporate guarantee to the AE. In other words, the assessee would have saved huge interest cost if it would have advanced money on interest to the AE after borrowing at its own from the Standard Chartered Bank. Hence, we do not find any infirmity in the order of learned CIT-A. Thus, the ground of appeal of the revenue is hereby dismissed. Upward adjustment in TP on account of interest - HELD THAT:- CIT(A) failed to appreciate the fact that in the given case a holding company extended interest free loans and advances to its foreign subsidiary to grow the business. Such a transaction cannot be compared with loan extended by the banks whose main activity is extending loans to generate revenue. In holding so, we draw support and guidance from the judgment of judgment of Hon ble Bombay High Court in case of CIT vs. Everest Kento Cylinders Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] The above finding of the Hon ble Bombay High Court is in relation to extension of corporate guarantee, but the principle laid down can be applied here in the case of extension of loans and advances also. Therefore, in our considered TPO was not right in considering the upfront fee charged by the bank as well adjustment of risk associated with unsecured loan. We also note that in case of M/s Arvind Ltd [ 2023 (6) TMI 1065 - ITAT AHMEDABAD] where the facts and circumstances were identical to the case on hand, the tribunal after considering series of finding of different tribunal held that in case of loan extended by parent company to foreign subsidiary the reasonable rate of interest should be LIBOR +2% - Thus we hereby hold that suo-moto notional interest offered by the assessee at LIBOR + 2.8 % is ALP and no further adjustment is required to be made. Hence, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the upward adjustment made on account of benchmarking of interest free loan to AE.

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• 2023 (12) TMI 869
  Addition u/s 68 - assessee has received the amount in dispute as unsecured loan - as per DR assessee has failed to prove through supporting evidences that the amount of Rs. 35 lakhs was towards repayment of loan - HELD THAT:- Assessee had advanced an amount to the said entity through cheque on 23.06.2008. The said amount was repaid to the assessee in two tranches respectively. Even the repayments to the assessee were through banking channel. Though, FAA has alleged that interest received on such advance has not suffered TDS and no documentary evidences have been furnished to establish the fact that the interest income was received, however, the materials on record are to the contrary. From the evidences furnished as observed that the assessee has received interest on the advances and after deduction TDS assessee has offered the net interest amount of Rs. 4,12,042/-. Pertinently, though, AO has accepted the amount of Rs. 15 lakhs received by the assessee from the very same entity, strangely enough, he has treated the balance amount of Rs. 35 lakhs as unexplained cash credit. This, in our view is unsustainable. Since, the source of credit in the books of the assessee is well explained; we are of the view that the addition made is unsustainable. Accordingly, we delete the addition - Decided in favour of assessee.

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• 2023 (12) TMI 868
  TP Adjustment - Comparable selection - Excluding two comparable companies M/s Exclerx Services Ltd. and M/s Vishal Information Technologies Ltd. from the set of comparables for benchmarking assessee s international transaction of provision of back office support services - HELD THAT:- Vishal Information Ld. Outsourced significant portion of its business whereas assessee company entirely carried out its business without outsourcing therefore we justify the decision of ld. CIT(A) in excluding this company from the list of comparable. In respect of Eclerx Service Ltd. we find that the function of that company was not similar to the assessee company therefore we do not find any merit in the ground of appeal of the Revenue. No infirmity in the decision of ld. CIT(A). Accordingly, ground no. 1 of the appeal of the revenue is dismissed. M/s R System International Ltd. company was functionally comparable with the assessee company and consistently accepted as a comparable for the earlier years by the lower authorities, we don t find any reason to interfere in the decision of ld. CIT(A) for including this company in the set of comparable. Therefore this ground of appeal of the revenue is dismissed.

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• 2023 (12) TMI 867
  Addition u/s 68 - unexplained cash credit - unexplained cash sales proceeds/receipts received from the customers - addition based on the statement u/sec 131 - CIT(A) deleted addition - HELD THAT:- The assessee has submitted the details of cash sales/receipts and party wise details of sales above and below Rs. 2 lakhs was submitted. Further the Ld.AR demonstrated the sample Tax Invoice below Rs. 2 lakhs in the demonetization period and the invoice contains, name and address etc and the Ld.AR referred to the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 21.10 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 17.69crs as per the audited financial statements, further the cash sales are part of the stocks maintained by the assessee which is not disputed. Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit Loss account as income/ receipts and again if the cash deposits are added under section 68 of the Act, it will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. AO has not pointed out any specific adversity but made a generalize additions covering the demonization period, cash deposits and RTGS credits without considering the factual aspects and primary evidences. A.O has failed to make further enquiries on the information filed and the assessee has discharged the initial burden placed by submitting the information and details. AO has not disputed on the quantity of stocks maintained in the register, and stock valuation in the Audited financial statements and also the turnover reflected by way of cash sales and bank credits. The assessing officer has accepted the sales and corresponding nexus with the purchases and closing stock of goods. We find the CIT(A) has dealt on the facts, provisions of law, submissions and judicial decisions and has passed a conclusive and reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) on the disputed issues and uphold the same and dismiss the grounds of appeal of the revenue. Estimation of profit on the sale value/ receipts - CIT(A) has granted relief to the assessee on the alleged additions made by the A.O, but estimated the profit element on sales/receipts - We find the books of accounts are Audited and the assessee has disclosed the sales under the heading revenue from operations in the Profit Loss account, whereas the A,O has not accepted certain sales value transactions and rejected the books of accounts u/s 145(3) of the Act. Whereas the CIT(A) having deleted the additions considering the submissions, provisions and evidences produced in support of cash sales deposits in the bank accounts, which are based on the invoices and stocks maintained and is not disputed. But the CIT(A) having granted the relief to the assessee on the sales which are already offered and credited to the Profit Loss account and the profit embedded is part of sale value. Again estimating the profit element @1.35% on the sale values is subjected to double taxation, which is not acceptable/permissible in law. We considering the facts, circumstances and material evidences substantiating the sale values are of the view that the estimation of income @1.35% on the sales value is not warranted. Accordingly, we direct AO to delete the addition of impugned estimation of income on percentage basis on sales values and allow the grounds of appeal filed by the assessee.

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• 2023 (12) TMI 866
  Disallowance u/s 14A r.w.r 8D(2)(ii) - AO has disallowed the expenditure on account of expenditure incurred for earning tax-free income - HELD THAT:- There is no demonstrable evidence showing as to how expenditure has been worked out for making a disallowance u/s 14A. The assessee has raised only peripheral pleas that management had looked into all other incidental issues for the purpose of disallowing expenditure themselves u/s 14A, but this objective is not discernable either in the accounts or otherwise. The assessee has been earning huge dividend income on short-term funds, which are required to be reinvested. It has not demonstrated that these were reinvested in the same Mutual Funds otherwise they will be converted to long-term investment. Faced with the above difficulties, AO has thought it fit to apply the formula and worked out the disallowances. After going through the finding of AO we do not find any error in it except in the total quantification of disallowance. Onc eAO has worked out the disallowance with the help of Rule 8D(2), then, he was not required to add the amount suo motu disallowed by the assessee. Disallowance worked out by him will look all the considerations and there is no need to make separate addition of Rs. 9,134/- made by the assessee on its own estimate. In the present case, there are expenditures, but the expenditures relatable to exempt income could not be demonstrable. Ld. Assessing Officer has to take help of the formula under Rule 8D and worked out the disallowance. Therefore, the assessee could not buttress its case on the strength of the above decisions. We do not find any merit in these grounds of appeal. They are rejected. Computation of tax u/s 115BBE - as argued when no income was brought to tax under sections 68, 69, 69A, 69B, 69C or 69D, then no computation of tax under section 115BBE was required to be made - HELD THAT:- A specific reference is being made to serial nos. 10 and 25 of the computation sheet. If that be the situation, then ld. Assessing Officer could not compute the tax under section 115BBE out of the disallowance under section 14A of the Income Tax Act. The ld. CIT(A) has no power to relegate any issue to the Assessing Officer. In other words, ld. CIT(A) has no power to remand an issue to the Assessing Officer. It has to decide the issue himself. A reference to this effect is being made to Section 251 of the Income Tax Act. Sub-clause (1)(a) has been amended by Finance Act, 2001 w.e.f. 1st June, 2001 and the power of the ld. CIT(Appeals) to set aside any issue has been omitted. Therefore, he cannot set aside any issue to the file of ld. Assessing Officer for redetermination. A perusal of the assessment order would suggest that there is no addition under these sections mentioned above and there could not be any computation of tax under section 115BBE. This ground of the assessee is allowed. Deduction of Education Cess u/s 37(1) - HELD THAT:-As decided in M/S. KANORIA CHEMICALS INDUSTRIESITA [ 2021 (10) TMI 1153 - ITAT KOLKATA] that Education Cess is not an allowable expenditure. The ld. 1st Appellate Authority has mainly reproduced the decision of the Coordinate Bench in the above finding and we find that ITAT, Kolkata has based its finding on the basis of Hon ble Supreme Court s decision in the case of CIT vs.- K. Srinivasan [ 1971 (11) TMI 2 - SUPREME COURT] After going through the above, we do not find any merit in it. Hence this ground of appeal is rejected.

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• 2023 (12) TMI 865
  Rectification u/s 154 - AO is seeking to disallow the claim of deduction u/s 80P to the extent of interest income, earned from banks - HELD THAT:- It is admitted fact that interest income received from Corporation Bank. Interest income received from a Bank cannot be allowed as a deduction under sections 80P(2)(a)(i) or 80P(2)(d) of the Act in the light of the judgment of PCIT Vs. Totgars Co-operative Society Ltd [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] Limited prayer of the assessee in this appeal is to be provide deduction of cost of funds and proportionate administrative expenses as a deduction under section 57 of the Act for interest income assessed as Income from Other Sources . This prayer of the assessee has been accepted by the jurisdictional High Court in the case of Totgars Co-operative Society Ltd., Vs. ITO [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] In light of the above AO is directed to allow cost of funds and proportionate administrative expenses for earning interest income as deduction under section 57 of the Act. It is ordered accordingly.

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• 2023 (12) TMI 864
  Inflated cost of land - GAAP v/s Ind AS for financial statement recording - AO based on the financial statement prepared as per GAAP and also considering the cost of land as computed by the assessee based on West Bengal Consultancy Organization Ltd. (WEBCON) s report and based on the accounting system, consistently adopted by the assessee i.e., percentage of completion method (PCM), came to a conclusion that the assessee had made over statement of cost of land in the profit and loss account - AO examined the financial statements based on GAAP and did not take note of the financial statements prepared as per Ind AS, which were filed by the assessee during the course of assessment proceedings - HELD THAT:- As per the guidelines given by the Government of India, the assessee was required to prepare the financial statements for FY 2017-18 and onwards as per Ind AS which is a new system of accounting West Bengal Housing Infrastructure Development Corporation Limited based on the concept of fair market value whereas the accounts under GAAP are prepared on Historical Cost Concept. The assessee prepared revised financial statement as per Ind AS and the same was approved by the Board of Directors The financial statements prepared as per GAAP became non-est during the course of assessment proceedings itself. Under these facts and circumstances, where the case of the assessee was selected for scrutiny on various issues, the ld. AO ought to have carried out the scrutiny proceedings on the basis of revised financial statements as per Ind AS and should have accepted the revised computation of income filed by the assessee and all the other details as necessary should have been called for in order to complete the scrutiny proceedings. Perusal of the impugned order indicates that the ld. CIT(A) had summarily dismissed the assessee s grounds without giving any reasoning before confirming the impugned addition and the order of the ld. CIT(A) is purely a non-speaking one. Since time limit to file revised return lapsed before the preparation of financial statements as per Ind AS and AO has also not scrutinised the assessee s case on the basis of the revised financial statements as per Ind AS furnished during the course of assessment proceedings, we are of the considered view that the issues raised in the instant appeals deserve to the restored to the Assessing Officer for de-novo adjudication based on the revised financial West Bengal Housing Infrastructure Development Corporation Limited statement as per the Ind AS and scrutiny shall be done in accordance with law. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (12) TMI 863
  TP Adjustment - margin of the Assessee computed in terms of the APA stands at 18% - methodology for preparation of segmental accounts as agreed upon in the APA - HELD THAT:- Considering the submissions and the APA agreement entered into by assessee with the CBDT for the subsequent assessment years, we direct the computation of the margin to be carried out as per the terms agreed in the APA in respect of the services rendered by assessee under ITeS segment. We direct the Ld.AO/TPO to determine the arms length price of the international transaction under the ITeS segment that was the subject matter of order passed u/s. 92CA in accordance with the APA entered into by assessee for subsequent assessment years dated 22.03.2022. Comparable selection - CRA Online Ltd. - The assessee before us is providing assistance to the AE while interacting with the client when the service module is being conceptualized, client interaction in the initial stages of the contract negotiations, client interaction when the service goes live and decisions regarding and in the interaction when the service goes live and decisions regarding general administration, accounting, legal, finance and personnel matters in the US etc. In our considered opinion, this company cannot be held to be a fit comparable with that of assessee. We accordingly, direct the Ld.AO/TPO to exclude this company from the final list. Cosmic Global Ltd.company was not excluded by the Ld.TPO but has been excluded by the DRP suomoto on the ground that it has a different working model. Further it is noted that such kind of filter has never been applied by the Ld.TPO and that the Ld.TPO has held this company to be functionally similar with assessee. Under such circumstances, we do not find any reason for this company to be excluded as the functionality has been not disputed by the revenue. Informed Technologies India Ltd. and Inhouse Production Ltd. - Details based on which these comparables were excluded by the Ld.TPO/DRP are verifiable from the annual reports. We direct the Ld.AO/TPO to verify the details and to consider this comparable as they have not disputed the functional dissimilarities. Disallowance of depreciation claimed on the balance goodwill as made on the basis of case of CIT vs. Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] - HELD THAT:- This Tribunal has the power to direct the Ld.AO to claim verify the assessee. Accordingly, we direct the Ld.AO to consider the claim of assessee in the light of the directions by Hon ble Supreme Court in case of CIT vs. Smifs Securities Ltd. (supra) and also in accordance with law.

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• 2023 (12) TMI 862
  TP Adjustment - comparable selection - Tech Mahindra Business Services Ltd. and Infosys BPM Services Pvt. Ltd. fails in upper turnover filter which has not been applied by the Ld.TPO - HELD THAT:- Respectfully following the case of Mindteck (India) Ltd. [ 2022 (11) TMI 1367 - ITAT BANGALORE] we direct the Ld.TPO to exclude Tech Mahindra Business Services Ltd. and Infosys BPM Services Pvt. Ltd. from the final set. whose turnover in the current year is more than Rs. 200 Crores. Determination of arms length price (ALP) - Asset received free of cost received by the assessee from its AE being capitalised by the Ld.AO u/s. 28(iv) and considering depreciation in operating cost under all segments proportionately - HELD THAT:- There is no doubt that the equipments received by the assessee are custom made which are used for the business of the assessee and are not available in the open market for purchase for commercial purposes. The AEs provided these equipments to the assessee in respect of the projects undertaken by assessee on their behalf. On a query being raised by the bench to the Ld.AR regarding the return policy of these assets, the Ld.AR very fairly admitted that the assets or goods or equipments received by it has never been returned in the past assessment years. Under such circumstances, it definitely amounts to enduring benefit in the hands of the assessee. In our view, the asset received free of cost has been rightly capitalised in the hands of the assessee. It was also the correct approach by the TPO by granting depreciation in respect of the same. However, the double disallowance made in respect of the cost of asset received free from the assessee is not acceptable. TPO increased the operating cost base by allocating the depreciation at 60% on the cost of the assets under the three segments based on the operating revenue to compute the markup. This approach by the Ld.TPO are not based on sound principles of transfer pricing adjustments. The assessee has been submitting that the assets received free of cost from its AE are utilised for the purposes of rendering services under software development segment. Therefore we direct the Ld.TPO to consider the entire cost for the purposes of computing the margin of assessee under the software development segment as per the following directions. While computing the ALP of assessee, the depreciation as per schedule to Companies Act, is to be included as an element of operating cost. In the event, there is a difference in the rate of depreciation between the assessee vis-a-vis the comparables, suitable adjustments are to be granted in accordance with law. (Ref. Rule 10B(e) (i) to (iii)). We also direct the Ld.AO to delete the disallowance made u/s. 28(iv) as the same has been considered in the transfer pricing adjustment. Comparability analysis - R D filter applied by the Ld.TPO is without granting any opportunity to the assessee - We note that for applying the R D filter, to select the comparables under SWD segment, assessee was issued one notice by the Ld.TPO on 09.01.2021. However on perusal of the said notices we note that the query raised was in respect of ITeS and MSS segment. There is no specific query raised by the Ld.TPO regarding application of R D filter to the SWD segment for which assessee could have furnished any submissions. In the interest of justice, we remand the selection of comparables under SWD segment to the Ld.TPO for fresh consideration based on the filters that has been consistently applied in case of assessee in the preceding and subsequent assessment years. Datamatics Business Solutions Ltd. - As the assessee has made significant investment which can be seen from the paper book at page Nos.1336 1359 and the assessee is engaged in diversified range of activities. In our opinion, these are to be relooked into by the AO/TPO while examining the functionality of the comparable. Accordingly, this issue is remitted to the file of AO/TPO for fresh consideration. Manipal Digital Systems Pvt. Ltd be deselected from list of comparable. Inteq BPO Services Pvt. Ltd is involved in business process management services and cannot be considered as a comparable to a company providing ITeS such as the assessee. Informed Technologies Ltd. has been excluded by the Ld.TPO as there was no documentation and that this comparable was failing the service revenue filter of more than 75% - We note that the annual reports of the above comparables are to be verified before excluding them. The assessee is directed to furnish the annual reports before the Ld.TPO which shall be verified and the filters applied by the Ld.TPO shall be considered for its exclusion / inclusion as there is no dispute by the Ld.TPO regarding the functional dissimilarities the filters applied by the Ld.TPO are directed to be verified from the annual reports. All necessary data for such verification shall be provided by the assessee. Pressman Advertising Ltd.is functionally not similar to that of assessee as it is engaged in the business of advertising services, selling of space for advertisement in print media and public relations and engaged in providing market research services, which is nothing but knowledge process outsourcing services. Scarecrow Communications Ltd. is not functionally comparable with that of assessee as it is engaged in the business of advertising, communication, and public relations and lacks segmental information. Majestic Research Services Solutions Ltd.is not functionally similar with that of assessee as it is engaged in rendering knowledge process outsourcing services and it is a product company and also engaged in providing market research services which is knowledge process outsourcing services. Interest on delayed receivables - Assessee contends the outstanding receivables could not be made subject matter of TP adjustment as the same is not covered under the provisions of Section 92B - Alternatively, as also argued that working capital adjustment subsumes sundry creditors and in such situation computing interest on outstanding receivables and lones and advances to international transaction would amount to double taxation - HELD THAT:- This Bench referred to decision of Special Bench of this Tribunal in case Instrumentation Corpn. Ltd. [ 2016 (7) TMI 760 - ITAT KOLKATA] held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. Thus we deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down by Hon ble Delhi High Court in case of CIT vs. Cotton Naturals (I) Pvt. Ltd., [ 2015 (3) TMI 1031 - DELHI HIGH COURT] by considering a credit of 90 days. Disallowance of salaries paid and reimbursement of expenses made towards seconded employees - AR submitted that TDS has been deducted on the entire salary paid by assessee to the seconded employees and what is reimbursed is the payment which has been partly made by the AE to the families of such seconded employees and that though the 100% salary has been subjected to TDS assessee has paid only part of the salary to the seconded employees in India and balance of such salary has been reimbursed to the AE as the same has been paid by the AE to the employees - HELD THAT:- We note that the evidences filed by assessee has not been considered by the revenue authorities. We therefore remand this issue to the Ld.AO to consider the claim in accordance with the decision of M/s. Toyota Boshoku Automotive India Pvt. Ltd. [ 2022 (4) TMI 1443 - ITAT BANGALORE] , Goldman Sachs Services Pvt. Ltd. [ 2022 (4) TMI 1444 - ITAT BANGALORE] having regard to the evidences filed by the assessee. Needless to say that proper opportunity of being heard must be granted to assessee in accordance with law. Nature of expenses - bonding and debonding charges - HELD THAT:- We note that the bonding and debonding expenses have been incurred by assessee in respect of capital asset. Assessee is seeking depreciation on such charges as the same were disallowed u/s. 37 of the Act. The assessee has not filed any evidences in support of its claim however the Ld.AR has submitted that assessee may be provided an opportunity to substantiate the claim. We accordingly remand this issue to the Ld.AO to verify the evidences if any filed by the assessee and to consider the alternate claim of deprecation in accordance with law.

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• 2023 (12) TMI 861
  Unexplained investments - cash payment from undisclosed sources for purchasing a shop - CIT(A) deleted addition - HELD THAT:- Gujarat High Court in the case of Krishna Textiles vs CIT [ 2008 (7) TMI 291 - GUJARAT HIGH COURT] has held that assessee cannot be called upon to explain the source of income, even if credited by the third party as assessee claimed that no such amount was invested or paid by it to third party. In this case addition was sought to be made on the basis of entries in the books of third party showing payment made by assessee to said party. We have no hesitation in upholding the order passed by the Ld. CIT(A) who deleted the addition as unexplained investments in the hands of the assessee. Thus we do not find any merits in the grounds raised by the Revenue and the same is hereby dismissed.

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• Customs

• 2023 (12) TMI 860
  Recovery of customs duty - warehoused goods - priority to recover dues - attachment of property - charge created by the second respondent Bank / financial institution, being a secured creditor - overriding effect of SARFAESI Act, 2002 on the provisions of the Central Excise Act of 1944 or not - HELD THAT:- Having heard learned ASG for the petitioner, the special leave petition is dismissed both on the ground of delay (404 days) as well as on merits.

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• 2023 (12) TMI 859
  100% EOU - Remission of duty on goods destroyed in the fire - liability to pay anti-dumping duty (ADD) - eligibility for the benefit of notification No.52/2003 CUS, in respect of the materials destroyed in the fire accident. HELD THAT:- In the present case, Notification No.96/2007 CUS dated 29.08.2007, which imposes the levy of anti-dumping duty on the goods does not make any mention that it is specifically made applicable to EOU/SEZ. The second condition is that the goods imported are either cleared as such into DTA or used in the manufacture of any goods that are cleared into the DTA. The goods having been destroyed in fire, there is no occasion of the goods cleared as such into DTA or used in the manufacture of finished products for clearance into DTA - The department has relied upon Notification No.5/1994 CUS dated 18.11.1994. The said notification also states that only if the goods are cleared as such into DTA or used for manufacture of finished products and are cleared into DTA, the exemption of the notification would become ineligible. The goods imported were destroyed in fire and therefore, there is no requirement to look into the fulfilment of the conditions of Notification No.52/2003 dated 31.03.2003 - the appellant is eligible for remission of duty. Having been paid under protest, the appellant is eligible for refund. The impugned order is set aside. The appeal is allowed

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• Insolvency & Bankruptcy

• 2023 (12) TMI 858
  Allegation of Corruption against RP/IRP - whether the petitioner who is a Resolution Professional is a public servant or not and thus, would be liable for the offence punishable under Prevention of Corruption Act? - Registration of impugned FIR in question against the petitioner consequent upon which the impugned remand order has been passed. HELD THAT:- On a general perusal of the IBC, it appears that the IP has been given various roles, responsibilities and duties which would aid and assist the NCLT to either revive a Corporate Debtor by approving a resolution plan or to liquidate it as a last resort. Sections 18, 20 and 25 of the IBC refer to the various duties and functions of the IP which would extend to preserving the CD by stepping into the shoes of the management, appointing agencies if so required for the purposes of proper management of the CD, and managing its affairs. Sections 20 and 25 confer authority to the IP to enter into contracts on behalf of the CD or amend or modify the pending contracts; raise interim finance subject to Section 28 of the Code; issue appropriate instruction as may be necessary to keep the CD as a going concern apart from appointing accountants, legal or other professionals as may be necessary. It is also a responsibility of the IP under the IBC to preserve and protect the assets of the CD including the continued business operations of the CD. Section 28 is a relevant provision which restricts, prohibits and curtails certain rights and duties of the IP as enumerated above, subject to the approval of the Committee of Creditors (CoC) - Section 21 of the IBC mandates formation of CoC by the IP, which decides on the ultimate fate of the CD viz., whether to resolve the insolvency or to liquidate the CD. According to Section 23, the IP shall conduct the Corporate Insolvency Resolution Process during the interregnum till a final decision is reached insofar as the fate of the CD is concerned. Issue regarding public duty , public character and public servant - HELD THAT:- It is trite that every duty, even if has a colour of public duty , may necessarily not be of a character which is public in nature. There could be many instances where a role or a responsibility of an individual in a particular statute would assume the nature of public duty but sans the Public Character - it is not necessary that all duties which are broadly defined as public duty would encompass within itself public character . Merely because the IP is vested with certain roles, responsibilities and duties which could partake the nature of public duties , it is not a necessary conclusion or a definite inference that the same are being discharged in the nature of public character . With the ever evolving laws and roles and duties cast upon various individuals under such enactments, the responsibilities of individuals and in some cases, institutions may have overlapping character and may be intertwined with public duty but that by itself would not be a legally determined benchmark to categorise all such individuals or institutions, as the case may be, as public servants for the purposes of Section 21 IPC or Section 2(c) PC Act, 1988. That too, when the Legislature appears to have deliberately omitted such individual or institution from such ambit. Thus, in the opinion of this Court, the Constitutional Courts would be loath in reaching such drastic conclusion, that too by process of judicial interpretation. Codification of IBC - the need and historical perspective - HELD THAT:- The objective of the IBC was to consolidate or re-organize all such laws including to amend, if required, for the purposes enumerated in it. As such, it is clear that while codifying the IBC, the legislature had before it, the aforesaid Acts and all the relevant material to facilitate such codification - In fact, before such codification, the Government of India had constituted the Bankruptcy Law Reforms Committee, 2015 to study the entire gamut of the insolvency and the bankruptcy laws and make appropriate recommendations. The said recommendations were accepted and codified and promulgated as IBC, 2016. Effect of section 232 and 233 of IBC - HELD THAT:- The omission in Section 232 was not inadvertent but a deliberate omission to not include IP within its ambit. It is trite that Courts would not interfere if the omission is deliberate since that would tantamount to legislating and supplying casus omissus which is prohibited and not within the jurisdiction of the Courts - it is manifest, that the IP was not included within the ambit of Section 232 of IBC. As a necessary corollary, it can be safely inferred that the IP, according to the provisions of IBC as it stands today, was not considered to be a public servant by the legislature. While examining the present legal issue is the promulgation of Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, in the year 2018, whereby the Administrator to be appointed ought to be an IRP registered with IBBI and who according to sub regulation (5) of Regulation 5 of the said Regulations, is deemed to be a Public Servant within the meaning of Section 21 of the IPC. If the Legislature had intended, at any point of time, even after IBC was codified in the year 2016 to include IP in Section 232 of IBC, the same could have been engrafted or inserted in Section 232 itself or elsewhere, in or about the time when the aforesaid SEBI Regulations were brought into effect in the year 2018. The same has not been done till now. This itself is a strong indicator and a clear pointer towards the fact that the omission to not include the IP within Section 232 is willful and deliberate and therefore, it cannot be a case of casus omissus. Doctrine of Casus Omissus - HELD THAT:- The law in respect of the doctrine of casus omissus is fairly well settled. The jurisdiction and authority conferred upon the Constitutional Courts is to interpret the law and not legislate. It is also fairly well settled that if a provision of law is misused and subjected to abuse of the process of law, it is for the legislature to amend, modify or to repeal it, if deemed necessary. The legislative casus omissus cannot be supplied by judicial interpretative process - In the present case, as could be seen, Section 232 brooks no ambiguity nor is it repugnant to the aims and objects of the IBC. Applicability or otherwise of section 2(c) of PC Act, 1988 - HELD THAT:- It is clear to this Court that despite having all the previous Acts on the instant subject like The Provincial Insolvency Act, 1909, the Insolvency Act, 1920, SICA 1985, RDDBFI Act 1994 and SARFAESI 2002 which were codified to form IBC and despite being aware of the roles and duties ascribed upon the individuals who were appointed by the Courts or Boards contained therein as Liquidators, Receivers and the like, and having all relevant materials before it, the Legislature, in its wisdom, thought it fit and prudent not to include IP as public servant and such non inclusion was, thus, a willful and deliberate omission. It is trite that what is not specified may not be readily inferred, particularly if the same would be penal in nature. In other words, any provision of law entailing penal consequences ought to be strictly construed and nothing specified therein should not be read in or filled up readily. The omission to include IP in section 232 IBC is not inadvertent but a thoughtful, willful and deliberate one by the Legislature, and the Courts of law being empowered to interpret the same, ought not to legislate or supply casus omissus, which in any case is prohibited - Whether the IP is or is not a public servant according to IBC or PC Act 1988 or Section 21 IPC, 1860, is purely the domain of the Legislature and if required and necessitated, the legislature may carry out necessary amendments to the legislations. In view of the analysis and the conclusions arrived at by this Court above, the need to make any observations/findings on facts would not arise in as much as the arguments on facts were predicated on the assumption of the Petitioner falling within the ambit and definition of a Public Servant , as stipulated in Section 2(c) of the PC Act, 1988 which has been held in the negative - an Insolvency Professional does not fall within the meaning of public servant as ascribed in any of the clauses of sub-section (c) of section 2 of the Prevention of Corruption Act, 1988. Petition disposed off.

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• 2023 (12) TMI 857
  Approval of Resolution Plan - treatment of claims as being inconsistent with the objectives of the IBC - whether, in the facts of the present case, the Appellants were entitled to any proceeds under the resolution plan at a time when the liquidation value payable to them as Operational Creditors is nil? - HELD THAT:- As per the law which exists as of date, the Respondent No.1 is agreed with, that the question with respect to payments to Operational Creditors under resolution plan as per the scheme of the IBC is no longer res-integra. The Appellants as Operational Creditors are entitled to the minimum entitlement as per Section 30(2)(b) of the IBC. There is no dispute that liquidation value of the Appellants in the present case is nil. That being so, we are not in a position to accept the submissions made by the Appellants that since nil amount has been allocated to them, the plan cannot be accepted. CoC in its commercial wisdom has decided not to allocate any amount to the other creditors while following the water fall mechanism as contained in Section 53 of the IBC. The Appellants have failed to point out any material irregularity or contravention of any provision of law by the CoC in approving the plan. That being the case, the Adjudicating Authority with the limited powers of judicial review available to it, cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan unless it is found to be contrary to the express provisions of law or there is sufficient basis which establishes material irregularity. There can be no fetters on the commercial wisdom of CoC and the supremacy of commercial wisdom of CoC has been reaffirmed time and again by the Hon ble Supreme Court in a catena of judgements including K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT ]. The resolution plan which has been approved by the Adjudicating Authority does not require any interference - there are no cogent reasons to interfere with the impugned order - appeal dismissed.

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• 2023 (12) TMI 856
  Maintainability of Section 9 application - initiation of Corporate Insolvency Resolution Process (CIRP) - Corporate Debtor did not reply to the demand notice or send a notice of dispute - debt due and payable or not - default in payment of dues or not - pre-existing dispute between the parties or not - HELD THAT:- A plain reading of the Clause 17 of the work agreement, clearly shows that in terms of Clause 17 of the Agreement, payment was to be made to the Operational Creditor only after corresponding payment was received by the Corporate Debtor from HG Infra. There is nothing shown by the Operational Creditor to substantiate that payments had been received by the Corporate Debtor and had therefore become due for payment to them. Further, the Operational Creditor was required to raise a notice for claims within 14 days of the date of occurrence of event and since no such notice had been raised, it is clear that no payment was claimed by the Operational Creditor in terms of Clause 18 of the Agreement. Further the final payment to the Operational Creditor was subject to a Taking Over Certificate for the work which certificate is also not placed on record - the Adjudicating Authority committed no error in relying on these clauses of the Work Order Agreement to come to the conclusion that the Operational Creditor has failed to establish default on part of the Corporate Debtor in payment of the operational debt. The Adjudicating Authority committed no error in concluding that the debit notes issued on grounds of defect in quality of services testifies the existence of a dispute. It is amply clear that there exists a pre-existing dispute with respect to the quality of services provided by the Operational Creditor to the Corporate Debtor. Present is a case where it cannot be said that defence taken by the Corporate Debtor in their reply affidavit is a moonshine defence unsupported by any evidence. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational proceeding under IBC cannot be initiated at the instance of the Operational Creditor - It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. The Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant on the ground of pre-existing dispute. There is no merit in the Appeal - Appeal is dismissed.

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• PMLA

• 2023 (12) TMI 855
  Money Laundering - proceeds of crime - provisional attachment order - refusal by the Registrar of documents to register the Sale Certificate executed by the Respondent No. 4/Bank - HELD THAT:- Admittedly, on the date when the property in question was put to public auction and on the date when the consideration amount was deposited by the Petitioner and on the date when the possession of the property in question was handed over to the Petitioner by the Respondent No. 5/Bank, there was no communication from the Respondent No. 3/ED to the Registering authority informing the Registrar of documents regarding the fact that the property could be tainted with the proceeds of crime. Section 17 (4) of the PMLA mandates that the authority seizing any record or property under sub-section (1) or freezing any record or property under sub-section (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing served under sub-section (1A), before the Adjudicating Authority. Admittedly, this procedure has also not been complied with by the authority - It is also well settled that a Sale Certificate which is issued to an Auction Purchaser by a bank in public auction is an evidence of title and the Auction Purchaser derives title on the confirmation of Sale in his favour. This Court does not find any impediment for the Registrar of documents to proceed ahead and register the Sale Certificate in favour of the Petitioner. It is trite law that availability of an alternate remedy alone is not an absolute bar for a High Court to refuse to entertain a petition under Article 226 of the Constitution of India. In the present case, the property in question had been sold in auction to the Petitioner herein before the steps under Section 17 of the PMLA were initiated, and, therefore, this Court in the facts of the present case is inclined to exercise its jurisdiction under Article 226 of the Constitution of India even though the matter is pending before the Tribunal - Petition allowed.

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• Service Tax

• 2023 (12) TMI 854
  Penalty for delayed payment of tax - Seeking review of the order - Review Petitioner contended that, it is incorrect to state that evasion of service tax has come to the notice of the Department only after detailed investigation of the assessee account - HELD THAT:- As per second proviso of Section 73, if the tax is paid within a period of 30 days, the penalty payable would be within a period of 30 days of the date of service of the notice under proviso to sub Section (1) of Section 73, the penalty payable shall be 15% of such service tax and proceedings in respect of such service tax, interest and penalty shall be deemed to be concluded - In the case on hand, notice under Section 73(1) of the Act came to be issued by the authorities, the first show cause notice issued by the authorities is on 08.08.2007. Again, the second show cause notice was issued on 18.09.2008. The material on record would also disclose that the service tax has been paid subsequently with accrued interest even before the show cause notice has reached the review petitioner - Surprisingly, the Additional Commissioner has observed in his order that the service tax has not been paid. The show cause notice itself shows that there was a payment of service tax along with interest by the review petitioner. Therefore, the order of the Additional Commissioner is factually incorrect. This Court is of the considered opinion that a case is made out by the Review Petitioner RP No.384/2022 to pay a sum of Rs.2,50,000/- towards penalty proceedings initiated by the Department and put an end to the litigation. Revision petition disposed off.

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• 2023 (12) TMI 853
  Levy of Service Tax - grants / funds / consideration received by the appellant in respect of projects under sponsored research under Scientific and Technical Consultancy Services - provision of service in respect of sponsored research classifiable under Scientific and Technical Consultancy Service or not - activity / events undertaken by the Appellant at its Convention center - eligibility to avail input service credit on Travel, Postage and freight relating to Scientific and Technical Consultancy services rendered - invocation of extended period in terms of Section 73(1) of the Finance act, 1994. Whether any service is rendered in respect of sponsored research projects and whether such a service can be classifiable under Scientific and Consultancy Services in terms of Section 65(92) of the Finance Act, 1994? - HELD THAT:- It is found that CBEC Circular B/11/1/2001 TRU dated 09.07.2001, relevant extracts of which have been reproduced below, clarified that Service Tax was liable to be paid when any scientific or technical consultancy service is rendered whether by Public Funded institutions or by private agencies. Further it was clarified that Service Tax is not payable when Public funded research institutions received grants in aid from the Government for conducting research/ project work and service tax is payable only if service is rendered on payment basis. In the instant case, the Appellant is entering into a MOU with their Clients as per which consideration is being paid towards Research Development and conduct of workshops by IIT, Madras. The Appellant has received consideration in the form of grants for research activities from JK Tyres, Cadbury India Ltd., Tata Steel, etc. during the aforesaid period. Besides, the Appellant is also receiving amounts in Foreign Currency from overseas clients like World bank, Chevron Products Corporation, Hewlett Packard Company, Proctor and Gamble, etc. From the above it is clear that the Appellant is conducting research work for various clients and workshops are being conducted for dissemination of research findings to academic community and others involved. The Appellants are receiving consideration from various Sponsors towards grants for the above work. As per the terms and conditions of MOU entered into with Sponsors, the research leading to patentable invention is being used by the Sponsor after entering into a separate contract in its manufacturing facility and if not, the Appellant has the right to license it to third party to generate revenue and if the Sponsor licenses it to third party, then the revenue generated is shared between the Sponsor and Appellant. If any commercially viable results emerge on account of such a research, a separate agreement is entered into and any consideration received is charged to Service Tax. In respect of Government of India Sponsored projects the grants are received by an order from the Ministry of Science and Technology (MST), Government of India for which separate audited accounts are maintained for each project. As per the Order, we find that even if interest is earned by way of keeping the grant in bank accounts, the Ministry should be accordingly informed. Further the Appellants are required to furnish to the MST utilisation certificate and audited statement of accounts pertaining to the grant immediately after the end of each financial year - the Service Tax is not payable when Public funded research institutions like IIT receive grants or aid from the Government for conducting research / project work - thus, in respect of sponsored research, there is no provision of service. The services provided are in the nature of furtherance of education and promotion of sharing of knowledge. Many times, the projects include organising workshops, international conferences and conducting seminars. As such, the impugned Order-in-Original No. 11/2013 (RST) dated 31.05.2013 demanding Service Tax in respect of sponsored research projects cannot be sustained. Demand of Service Tax on Convention services - HELD THAT:- The CBEC Circular No. 86/04/2006-ST does not pertain to clarification on Convention services and hence not applicable to the facts of the case - it is found that the Centre for Industrial Consultancy and Sponsored research (IC SR) building of the Appellant had facilities for conferences, meetings and video conferencing and facilities were available to respective departments of the Appellant, the cultural affairs secretary and private industries, industrial associations and other professional bodies, for organising seminars/ technical sessions and conferences and a tariff was fixed for them and collected by the Appellant - the contention of the appellant agreed upon that some of these conferences / meetings may be open to the public and students and some of the events may be related to cultural activities. But, taking an overall view that there is no convention service is not supported by evidence and facts. So, the demand in respect of convention services is required to be upheld. Availment of CENVAT Credit on Travelling and Postal Expenses, etc. - HELD THAT:- The lower adjudicating authority has disallowed the CENVAT Credit concluding that these services are not input services under Rule 2(l) of CENVAT Credit Rules, 2004. However, it is found that the appellant is rendering consultancy services and also discharging Service Tax. As such, there are no reason for disallowing the CENVAT Credit on these services. Invocation of Extended period of limitation - HELD THAT:- In the instant case, the Appellant is an Autonomous Organisation under the Ministry of Science and Technology and cannot be attributed with any malafide intention for non-payment of service tax in as much as they are already registered with Service Tax for various services and regularly paying Service Tax and filing periodical returns and being so, their records were always available for audit and scrutiny. The Appellant were under the reasonable belief that the Services rendered by them were not liable for Service Tax. Further taxability of sponsored research is interpretational in nature - the extended period of limitation is not invokable in this case and the penalty imposed under Section 78 of Finance Act, 1994 in the impugned order is set aside. Thus, the demand raised in respect of Scientific and Consultancy Services is set aside being not sustainable. The demand in respect of convention service is upheld for the normal period - the appellant is eligible for the CENVAT Credit availed on Travelling and Postal Services, etc., being a service provider of Consultancy Services. Penalties imposed are also ordered to be set aside. The Appeal is partly allowed.

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• 2023 (12) TMI 852
  Non-payment of service tax - providing security guards to various organizations - intent to evade service tax or not - invocation of extended period of limitation - penalty - HELD THAT:- Appellant have been registered with Service Tax department w.e.f.14.09.2000 and regularly paying service tax and filing returns. The Appellant submits that they have been providing security agency service mainly to Government agencies and some of the agencies to whom they provided security agency service declined to pay service tax - It is observed that the explanation offered by the Appellant for non payment of service tax is not acceptable. It is the responsibility of the Appellant to collect service tax from their clients on the invoices raised towards rendering of security services. There is no specific exemption available to security services rendered by the Appellant to Government Agencies. Thus, the appellant is liable to pay service tax on the taxable services rendered by them during the period under dispute. The Appellant have been registered with Service Tax department w.e.f.14.09.2000 and regularly paying service tax and filing returns. The department raised the demand based on the service tax paid by the Appellant which have been reflected in the service tax returns. Thus, the returns filed by the Appellant indicate the taxable value of the services rendered by them and the actual service tax paid by them. After the search by the department, they have again raised separate invoices demanding service tax from the organizations who have not paid service tax, but they declined to pay service tax This clearly indicate that the Appellant has not suppressed any information from the department with an intent to evade payment of service tax. Appellant has not suppressed any information from the department and hence extended period cannot be invoked in this case to demand service tax - the demands confirmed in the impugned order by invoking the extended period is not sustainable on the ground of limitation. The Appellant is liable to pay service tax, if any, along with interest, for the normal period of limitation. As suppression with intent to evade payment of tax has not been established, no penalty imposable on the Appellant. The demands confirmed in the impugned order by invoking the extended period is not sustainable. The Appellant is liable to pay service tax, if any, along with interest, for the normal period of limitation. No penalty imposable on the Appellant - Appeal disposed off.

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• 2023 (12) TMI 851
  Levy of penalty u/s 76, 77 and 78 of FA - penalty not quantified - it is submitted that the impugned order has gone beyond the scope of OIO and appeal/cross objections filed - extended period of limitation - HELD THAT:- It is found that as soon as audit objection was raised demanding service tax of Rs. 7,31,324/- the appellant deposited Rs. 5,49,050/- alongwith interest on 02.07.2009 pertaining to the period after 18.04.2006 and contested the demand of Rs. 1,82,274/-. Further, we find that the period involved in the present case is 2005-2006 and 2006-2007 and the Hon ble Supreme Court in the case of Indian National Shipowners Association [ 2009 (12) TMI 850 - SC ORDER ] held that the assessee is not liable to pay service tax prior to 18.04.2006 and settled the issue finally which also shows that the issue relates to interpretation of law and extended period of limitation is not invokable and therefore, the penalty cannot be imposed. It is found that the impugned order has travelled beyond the OIO because in the OIO, the original authority held that the appellant is not liable to penalty under Section 76 and against the said finding, no appeal was filed by the department and no cross objections were filed before the lower authorities which also shows that the impugned order imposing penalty under Section 76 is bad in law and the same has travelled beyond the OIO - further it is also found that the appellant had a bonafide belief that he is not liable to pay tax and as soon as it was pointed out; he paid the tax as per his liability and contested that the demand is barred by limitation, which was accepted by the appellate authority. Further, in this case, there was no intention to evade the payment of service tax because the appellant would have been claimed cenvat credit of the tax paid by him which makes the entire transaction as revenue neutral. The imposing of penalty under Section 76 , 77 and 78 are not sustainable in law - Appeal allowed.

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• 2023 (12) TMI 850
  Levy of service tax - work contract service for construction of residential apartments and service apartments - Construction of Complex Service and Commercial and Industrial Complex Service or not - period June, 2005 to March, 2006 - HELD THAT:- As per the clauses of the agreement and subsequent RA bills show that the activity carried out by the appellant is a composite contract. As per the law laid down by the Hon ble Apex Court in the case of Commissioner of Central Excise Customs Kerala Vs. Larsen Toubro Ltd [ 2015 (8) TMI 749 - SUPREME COURT ], the activities carried out by the appellant, which fall under the category of works contract are subject to levy of service tax only after 01.06.2007. Further, the Learned AR submits that at the relevant time the service rendered by the appellant was subject to service tax and considering the law laid down by Apex Court in the matter of M/s Larsen Toubro Ltd Vs. Commissioner of Service Tax, Kolkata [ 2019 (12) TMI 69 - CALCUTTA HIGH COURT ] service tax is not applicable in appellant case. Appeal allowed.

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• 2023 (12) TMI 849
  Entitlement to the benefit of cum tax value - non-production of evidence to the effect that the considerations received were inclusive of service tax - HELD THAT:- It is apparent from the Special Conditions of the tender documents that the service tax was to be included in the rates quoted by the respondent in the tender document. It is for this reason that the Commissioner (Appeals) in the order dated March 15, 2011 had recorded that the appellant had received the gross amount inclusive of service tax and VAT during the period 2006-07 to 2008-09 and so the benefit of cum-tax was required to be given. It is, therefore, not possible to accept the contention of the Department that as the respondent is not entitled to the benefit of cum-tax value, the appeal filed by the Department assailing the finding should be allowed - In view of the fact that the respondent is entitled to the benefit of cum-tax value, the appeal filed by the Department will have to be dismissed as earlier the other two grounds raised in the appeal had not found favour of the Tribunal. Appeal dismissed.

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• 2023 (12) TMI 848
  Classification of activities of wireline logging and perforation during the relevant period from 14.05.2003 to 31.03.2008 - technical testing and analysis services or not - whether the term technical testing and analysis agency has been defined under section 65(107) of the Finance Act? HELD THAT:- The activities undertaken by the appellant do not involve testing or analysis. It is the data procured by the appellant that is communicated to ONGC which, thereafter, independently analyses the same for determining the course of action. The function required to be performed by the appellant is strictly limited to the scope of measuring different parameters related to the oil rigs, and additionally, perforation, which has no relation to testing and analysis services - It can safely be concluded that the appellant was responsible for mobilizing equipment necessary for conducting the measurement/logging activities at the site and undertake perforation of the oil rigs casings. These activities do not involve any testing or analysis and accordingly, cannot be classified under technical testing and analysis service . Whether the activity carried out by the appellant would fall under TTA services prior to 01.06.2007? - HELD THAT:- It will be pertinent to refer to the decision of the Bombay High Court in INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [ 2009 (3) TMI 29 - BOMBAY HIGH COURT] . It was held that introduction of a new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said services. It was also observed that creation of the new entry was not by way of amending the earlier entry and it was not carved out of any earlier entry - In the instant case, the definition of TTA did not undergo any change when a new service in relation to mining was introduced w.e.f. 01.06.2007. The department admits that w.e.f. 01.06.2007, the activity carried out by the appellant is covered under the category of service in relation to mining. This activity could not, therefore, have been categorized under TTA service prior to 01.06.2007 - As it has been found that the activity undertaken by the appellant w.e.f. 01.06.2007 pertains to mining services as made taxable under section 65(105)(zzzy) of the Finance Act, service tax under TTA services cannot be charged from the appellant prior to 01.06.2007. It also transpires from the records that the appellant had filed refund applications in 2005 since the appellant was not required to deposit service tax under the TTA services. The returns filed by the appellant from 2004 onwards show that the appellant has consistently informed the department that the services performed by the appellant would not fall under the TTA services. Whether the Commissioner was justified in holding that the extended period of limitation contemplated under section 73(1) of the Finance Act was correctly invoked in the facts and circumstances of the case? - HELD THAT:- In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. The records indicate that the appellant had repeatedly informed the department from 23.12.2004 that prior to 01.06.2007 it had not been discharging service tax on wireline logging, perforation and data processing services under the category of TTA services and by a letter dated 25.10.2007 the appellant had also informed the department that it had started paying service tax on mining services when it was introduced for the first time w.e.f. 01.06.2007. Yet, the show cause notice was issued to the appellant only on 23.10.2008. Thus, the extended period of limitation could not have been invoked in the facts and circumstances of the case. The impugned order passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.

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• Central Excise

• 2023 (12) TMI 847
  Burden to prove - failure to appreciate that onus lay on the respondent to prove that the conditions imposed in Notification Nos. 4/97-CE, 5/98-CE, 5/99-CE, 6/00-CE were satisfied in the instant case - failure to discharge the onus of proving that the two conditions mentioned in the said Notifications - role of the apex bodies was in the nature of selling or commission agents and not that of direct purchasers of the said goods from the Respondent. HELD THAT:- In the midst of argument, learned counsel for the appellant prayed that the matter may be taken up tomorrow so that he may prepare the case thoroughly. List the matter on 15th December, 2023 at 10:30 A.M. for further hearing.

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• 2023 (12) TMI 846
  Proceedings are barred by time limitation or not - main grievance of the petitioner is that after a period of 12 years, the respondents have no locus standi to proceed against the petitioner. HELD THAT:- The petitioner falls under Section 11(b) of CEA. Therefore, the respondents are supposed to have determined the amount of duty within a period of two years. Merely because the words where it is possible to do so are provided in the Act, it does not mean that they can take their own time to determine the excise duty. It must be done within a reasonable time i.e. within one or two years. In the present case, the delay is more than 12 years, which is an inordinate one - In the circular dated 21.12.1992, it is clearly stated that the Board s D.O.F.No.223/8/85-CX.6, dated 21-3-1985 had already stipulated a maximum period of 6 months from the date of issue of show cause notice within which the case is to be decided and as far as possible, this limit is to be adhered to. The said circular is in force as on today. In the present case, admittedly no intimation was provided to the petitioner with regard to keeping the call book and even in that case also, the Act provides time limit of six months to pass orders. However, in the present case, citing the internal circular issued by the respondents to keep the matters in the call book, the respondents have failed to adhere to the time limit provided in the statute. The circular is beyond the scope of the provisions of the Act and notifications provided therein. Therefore, keeping the call book without intimation to the petitioner and beyond the scope of the Act is unacceptable - the respondent department cannot keep the matter pending for a period of 12 years and thus, the present proceedings is clearly barred by limitation. This Court is of the considered view that present proceedings could not be allowed to continue after a period of 12 years, particularly, when there is no mistake on the part of the petitioner. Adjudication of proceedings after a long period would cause serious prejudice to the parties. Hence, this Court holds that the present proceedings is barred by limitation and is unjustifiable. The Show Cause Notice dated 09.03.2011 issued by the first respondent, is hereby quashed - Petition allowed.

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• 2023 (12) TMI 845
  Recovery of wrongly availed CENVAT Credit - common input services used in or in relation to manufacture as well as trading - Head Office distributed credit availed on common input services used for both manufacture of finished goods as well as trading of goods - periods October 2012 to June 2013 and July 2013 to June 2014 - HELD THAT:- The foremost argument put forward by the Ld. counsel for the appellant is that the Department ought to have issued Show Cause Notice to the Head Office as it is the Head Office which has availed credit and distributed to the appellant as per the provisions of CENVAT Credit Rules, 2004. The Show Cause Notice is issued invoking Rule 14 of CENVAT Credit Rules, 2004. The said Rule states as credit wrongly availed or utilized . The credit is utilized by the appellant. In such circumstances, the Show Cause Notice issued to the appellant alleging wrongful availment of credit, is valid though it is the Head Office which has distributed the credit. The second argument advanced by the appellant is that the Head Office has been maintaining separate accounts and that the Head Office has not distributed credit of input services pertaining to trading. The appellant has furnished detailed reconciliation statement. However, this requires to be verified - the matter requires to be remanded to the adjudicating authority who is directed to verify the contention of the appellant that credit pertaining to trading has not been distributed by Head Office and availed by the appellant. The adjudicating authority is also directed to verify the reconciliation statement furnished by appellant. The impugned order is set aside - Appeal is allowed by way of remand.

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• 2023 (12) TMI 844
  Eligibility for the benefit of exemption of Notification No. 67/95 dated 16.03.1995 read with CENVAT Credit Rules, 2004, on jig wires and jig rods - intermediate goods or not - definition of capital goods as per CENVAT Credit Rules, 2004 cover goods falling under Chapter Heading 76 or not - HELD THAT:- The issue stands decided in the appellant s own case for earlier as well as subsequent periods - The Tribunal in NEEDLE INDUSTRIES (INDIA) PRIVATE LTD. VERSUS COMMISSIONER OF C. EX., SALEM [ 2014 (8) TMI 980 - CESTAT CHENNAI] , held that these items are intermediate products captively used in the manufacture of dutiable final product and therefore, Cenvat credit cannot be denied. After appreciating the facts as well as evidence placed and following the decision of the Tribunal in the appellant s own case, the demand cannot sustain - the impugned order is set aside. The appeals are allowed.

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• 2023 (12) TMI 843
  Levy of Service tax on Ocean freight - Refund pertaining to SB Cess and KK Cess - appellants did not file refund of the Service tax amount paid but only for the amount available as credit to the appellants - inapplicability in view of section 148(8)(a) of CGST Act. Whether Service Tax demand on Ocean freight is sustainable? - HELD THAT:- It is found from the facts of the case that the Appellant pursuant to Audit findings have voluntarily paid the Service Tax on Ocean Freight along with interest - The issue of Service Tax on Ocean Freight was the subject matter of dispute in the case of M/S ASIATIC DRUGS PHARMACEUTICALS PVT LTD VERSUS COMMISSIONER CGST-ALWAR [ 2022 (6) TMI 305 - CESTAT NEW DELHI] where it was held that I find that the transaction value for Customs duty and Excise duty (CVD), includes the Ocean Freight , and accordingly I hold that the appellant has suffered the double taxation, by again paying the service tax on the Ocean Freight, as demanded by the Revenue - thus, the recovery of Service Tax on Ocean freight is not legally justified and hence the demand is not maintainable. Whether the appellants are eligible for sanction of refund of Service Tax paid on Ocean Freight and on licence fee paid to Government under Reverse Charge basis paid for the period prior to 01.07.2017, under Section 142(3) of CGST Act,2017? - whether the said refund becomes inapplicable in view of section 148(8)(a) of CGST Act? - HELD THAT:- The refund claim has been rejected by Commissioner (Appeals) by resorting to Section 142(8)(a) of GST Act, 2017 - it is found that similar issue was analyzed by the Tribunal regarding the issue of sanction of refund of Service Tax paid during the GST era in M/S INDO TOOLING PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX CENTRAL EXCISE, INDORE (M.P) [ 2022 (3) TMI 1100 - CESTAT NEW DELHI] wherein it was held that from a conjoint reading of sub-sections (3), (5) and (8)(a) of the CGST Act, it is evident that an assessee is entitled to claim refund of service tax under RCM paid after the appointed day under the existing law and such claim has to be disposed of according to the provisions of the existing law. As the appellant was entitled to Cenvat credit of the said amount of Rs. 9,85,827/-, which is now no longer available due to GST regime, they are entitled to refund of the said amount. The rejection of refund claims cannot be justified - the impugned order is set aside and appeal is hereby allowed.

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• 2023 (12) TMI 842
  Recovery of CENVAT Credit alongwith interest and penalty - input services - erection, installation and commissioning of research and development centre - garden maintenance service - canteen services - bus transport service - HELD THAT:- The biggest component of the disallowance in the impugned order is the service availed for establishment of research and development centre at the premises of appellant and, primarily, based on circular of Central Board of Excise Customs (CBEC) issued in 2008. The said circular relates to availment of services of commercial and industrial construction service which, to the extent utilized for erection of immovable property, was ruled as ineligible - it is found that this narrow perspective of the activity undertaken by the appellant is not appropriate inasmuch as it was not restricted to construction of a building but outfitting as research and development centre which was essential for manufacture. The issue which came to be considered by the Central Board of Excise Customs (CBEC) was the excisability of movable goods, upon being fixed permanently, to acquire the character of non excisability which excluded application of Central Excise Act, 1944 while the present dispute does not relate to output service but to the manufacturing undertaken by the appellant which stands on an entirely different footing. Insofar as garden maintenance service is concerned, the reliance placed by the Learned Authorised Representative on the decision in STANADYNE AMALGAMATIONS PVT. LTD. VERSUS COMMISSIONER OF C. EX., CHENNAI [ 2011 (2) TMI 644 - CESTAT, CHENNAI] does not appear to reflect the correct law inasmuch as the decision that maintenance and repair of photocopier, air conditioner, water cooler etc., are essential without, which the factory cannot run; therefore, the service tax paid on the services is admissible as credit. Likewise, on the aspect of canteen facility , several decisions of the Tribunal enumerated have set out the terms for availment of credit of tax paid on such services - It would also appear that the appellant has reversed credit insofar as the bus transport service is concerned which, thus, no longer continues as dispute. Thus, on the entitlement of tax paid on the services as CENVAT credit, the impugned order lacks merits - appeal allowed.

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• 2023 (12) TMI 841
  Disallowance of credit - goods transport agency service - other services related to storage and warehousing of goods after clearance from the factory of production - Penalty u/r 15 of CENVAT Credit Rules, 2004 - HELD THAT:- It is found from the records that the adjudicating authority has examined the definition of excisable goods and place of removal in Central Excise Act, 1944. It is worth noting that place of removal is relevant only for the purpose of determination of transaction value in section 4 of Central Excise Act, 1944. Furthermore, place of removal is a concept which enables duty leviable on manufacture to be restricted to such value as is attributable to cost involved in production and clearance from the factory but which, nevertheless, includes such expenses when such sale occurs at a further point. There is no doubt that the goods removed by the appellant are subject to assessment at value declared as retail selling price subject to abatement. The amendment effected in rule 2(l) of CENVAT Credit Rules, 2004 enabling goods transport agency service to be availed of till place of removal and the consequential decision of the Hon ble High Court of Karnataka affirmed by the Hon ble Supreme Court in Commissioner of Central Excise, Belgaum v. Vasavadatta Cements Ltd [ 2018 (3) TMI 993 - SUPREME COURT] did not exclude the possibility of such outward transport included in the assessable value from being eligible for availment of credit when circumstances so warranted. Evaluation of the submissions of the appellant on this score had not been undertaken by the original authority. Impugned order set aside - matter remanded to the original authority for a fresh decision keeping all issues open - appeal allowed by way of remand.

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• 2023 (12) TMI 840
  Entitlement to pay the duty by utilizing their Cenvat credit account during the period when asked to pay the duty consignment wise, through PLA - Rule 8(3A) of the Central Excise Rules, 2002 - HELD THAT:- In this case, the Appellant has partly used Cenvat credit for discharging their duty liability during the debarred period - It is observed that the issue is no longer res integra as the Hon ble Calcutta High Court in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT] has declared Rule 8 (3A) as ultra vires - in the case of M/S. RANA SPONGE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, BBSR-I [ 2023 (3) TMI 689 - CESTAT KOLKATA] , by following the decision of the Hon ble Calcutta High Court, this Tribunal has set aside the demand confirmed. The Appellant is entitled to pay the duty by utilizing their Cenvat credit account during the period when they were asked to pay the duty consignment wise, through PLA, under Rule 8(3A) of the Central Excise Rules, 2002 - the impugned order confirming the demand is not sustainable. Since, the demand itself is not sustainable, the question of demanding interest or imposing penalty does not arise. The impugned order set aside - appeal allowed.

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• 2023 (12) TMI 839
  Valuation of Excise Duty - facility charges collected by the Appellant from TISCO is includable in the assessable value or not - invocation of extended period of limitation - HELD THAT:- The facility charges are recovered from TISCO in terms of Para 7.15.2 of the agreement. These charges are payable towards the fixed assets developed/ deployed and the operation and maintenance of the same, irrespective of the supply of DM water. The Appellant submits that they were under the bonafide belief that the same did not merit inclusion in the assessable value. It is observed that contention of the Appellant is supported by the decision of the Tribunal, Kolkata in the case of BOC INDIA VERSUS COMMISSIONER OF CENTRAL EXCISE, JAMSHEDPUR [ 2004 (11) TMI 219 - CESTAT, KOLKATA] . In the said decision, the Tribunal kolkata has held that the facility charges collected by the assessee from those customers on whose factory they have erected and maintained Vacuum Insulated Storage Tank, is not includable in the assessable value as these charges are no way connected with the sale of gases. Extended period of limitation - HELD THAT:- There are merit in the contention of the Appellant that there is no suppression of fact involved in this case. It is observed that penalty cannot be imposed when the Appellant is acting under a bona fide belief - the extended period of limitation is not invocable in this case and for the same reason no penalty imposable on the Appellant. The demand of duty confirmed in the impugned order and the penalty imposed set aside, by invoking the extended period of limitation.

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• CST, VAT & Sales Tax

• 2023 (12) TMI 838
  Scope of contract - contract of services or a contract of supply and/or sale of software - requirement to follow decision of the Hon ble Karnataka Sales Tax Tribunal in the case of M/s. IBM India Pvt. Ltd. vs. State of Karnataka and the judgment of the Hon ble Karnataka High Court in the case of Saskan Communication Technologies Limited vs. Joint Commissioner of Commercial Taxes [ 2011 (4) TMI 566 - KARNATAKA HIGH COURT] - failure to take into account the Affidavit dated 18.12.2014 as relevant evidence of conduct of the parties to the Agreement dated 1.1.2006 and to determine the nature of the services and the work performed thereunder - for removing or fixing of bug/error within the basic software, which is in the nature of repair of the basic software, amounts to development/enhancement/customization of the existing software or not. HELD THAT:- It is clause 4 of the agreement that has been totally misunderstood and misread by both the Commissioner as well as the Tribunal. The lower authorities have purported to hold that the said clause shows that there is a transfer of software that has come into existence. On the contrary the aforesaid clause appears to be, when the contract is read as a whole, a standard clause inserted into such contracts for repair and service and is a clause, it appears, to have been inserted by way of abundant precaution to overcome a situation where the service provider would misuse the QAD software or claim ownership over the same. In fact, this clause shows that appellant had neither any ownership of the original software nor ownership of anything that came into existence whilst resolving customer issues. The said clause, on the contrary, shows that from the very inception everything belongs to QAD and the moment anything comes into existence by virtue of any work done by appellant s employees the same is deemed to have always been owned by QAD and appellant is not deemed to be the author of anything done. In fact, appellant was not even entitled to utilize any such work or material or product that may have come into existence and there could have been no question of any sale, as nothing belongs to appellant. When nothing belongs to appellant it is not possible to come to the conclusion that there was a transfer of goods or a sale as held by the lower authorities. Assuming that any software has been developed or there is some change in the source code, no new or saleable software comes into existence. Appellant s employees had merely worked on the old software remotely as the same is located on QAD USA s server situated in the USA. The alteration in such software is to meet the requirements of the QAD India s customer, which at all times belonged to the QAD India. There is no sale to QAD India, and no sale was involved in the contract. In fact, the terms of the contract makes it clear that the contract was one for rendering service. In fact, even before rendering any service, appellant had given up their right to any development to the software. The consideration involved is not for the sale of any software but for the services rendered by appellant s employees. All IT property rests with QAD India. Mastek Limited case relied upon by the Tribunal is not applicable to the facts and circumstances of the case. In the case of Mastek Limited, Mastek was required to use its professional intelligence to solution the requirements of HDFC for its Home Loan Applications; evolve a software programme to meet the requirement of the HDFC and encode a programme on its medium. HDFC s source codes were shared, unlike in appellant s case, to do the required alteration and modification to develop a programme which will meet functional requirement of HDFC. The software programme so developed was owned by Mastek and was then subsequently sold to HDFC through a medium. Hence there was clearly a sale in this case. Even the judgments in the matter of Direction Software Solutions V/s. Income Tax Officer [ 2008 (4) TMI 332 - ITAT BOMBAY-E] and ISBC Consultancy Services Ltd. V/s. Deputy Commissioner of Income Tax [ 2002 (8) TMI 840 - ITAT MUMBAI] relied upon by the Tribunal are not applicable to the facts and circumstances of the case. The reliance by the Tribunal on these two decisions is totally misplaced. These were cases where the assessee(s) contended that they had developed software and were entitled to a deduction in terms of Section 10A of the Income Tax Act, 1961 which defined computer software to mean inter alia any customised electronic data or any product or service of any similar nature which is transmitted or exported from India to any place outside India by any means. It has been clarified by appellant that other activities captured side agreement development of Just in Time Sequencing Product or development of any other OAD product was never undertaken by appellant. The Karnataka Appellate Tribunal in IBM India Private Limited, Bangalore when discussing levy of VAT by activity performed by ERP Implementation Specialists noted that the codes which such Professionals insert in that software are not proprietary codes, having a marketability of their own which the concerned customer can possess or transfer or sell. In other words, there is no marketable commodity in existence to be sold and unless such commodity, whether tangible or intangible, exists there cannot be a sale or a works contract. This aspect was summarily dismissed by the Tribunal and the proprietary nature of the ERP software was not duly considered - The case at hand is also similar to the one dealt by the Hon ble High Court of Karnataka in the case of Sasken Communication Technologies Ltd. The Tribunal distinguished this judgment on the ground that in this particular case, the ownership vested with the customer from the very inception. A true and proper reading of Clause 4 of appellant s agreement with QAD India, it would be absolutely clear that from the very inception all property is owned by QAD India and vests with QAD India. No doubt that at the end of the day, the software, which is developed is embedded on the material object that exclusively belong to QAD. In the entire contract there is nothing to indicate that appellant after developing any software has to embed the same on a material object and then deliver the same to the customer so as to affect title to the project which is developed. The title in any case, always lived and vested with QAD. The pith and substance of the contract or true nature of the transaction shows that the contract is a contract for service simplicitor and is not a works contract or composite contract consisting of 2 contracts - one for service and one for sale, but is an indivisible contract for service only. On examination of the contract as a whole, it becomes obvious that the contract is essentially an agreement to render service. The theory of works contract or the concept of aspect theory is not attracted. The questions of law as framed by this Court on 8th December 2015 are answered in favour of appellant. The agreement dated 1st January 2006 between appellant and QAD is a contract of service and would not be a contract for sale as defined under Section 2(24) of the MVAT Act. Appeal disposed off.

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• Indian Laws

• 2023 (12) TMI 837
  Challenge to order directing the removal of the name of the Petitioner from the Register of Members maintained by the ICAI for a period of nine months - challenge to order passed by the Disciplinary Committee of the ICAI holding the Petitioner guilty of Professional Misconduct under the Chartered Accountants Act, 1949 - violation of principles of natural justice or not. The only argument, raised before the Appellate Authority was that the punishment imposed on the Petitioner is disproportionate to the misconduct committed by him and more so because the entire money has been returned back to the Society. HELD THAT:- Material on record indicates that proper notices have been given to the Petitioner and the procedure as laid down in the Conduct Rules has been followed. The prima facie opinion of the Disciplinary Directorate, along with all the relied on documents were forwarded to the Petitioner and the Petitioner has been given full opportunity to defend his case. There is nothing on record which discloses that the Petitioner had asked for cross examination of witnesses and, in the absence of any material, this Court is not inclined to accept the contention of the learned Counsel for the Petitioner that the correct procedure had not been followed - Though it has been stated in the present Writ Petition that the composition of the members of the Committee changed, the same was not objected to in the hearing. In fact, the material on record discloses that the Petitioner was explicitly asked if he had any objections and the Petitioner did not raise any objection to the change in the composition of the Committee. It is well settled that while exercising jurisdiction under Article 226 of the Constitution of India, the Courts, while interfering with the decision of Disciplinary Committee, must only look into the decision-making process and not the decision as such. If the decision-making process is fair, then Writ Courts must not interfere with the findings of a Disciplinary Committee. In the instant case, the Petitioner has not been able to demonstrate as to how the procedure adopted by the Disciplinary Committee is not reasonable or fair or is violative of the principles of natural justice. The Petitioner is guilty of a very serious misconduct that has the ability to shake the faith of persons in the profession of Chartered Accountancy and the larger Institute of Chartered Accounts. The Appellate Authority has been considerably lenient on the Petitioner by reducing the period of punishment from one year to nine months. This Court is of the opinion that no further reduction in the quantum of punishment is necessary. Keeping in mind the seriousness of allegations against the Petitioner which have been proved in the proceedings, this Court is not inclined to interfere with the judgment passed by the Appellate Authority - Writ petition is dismissed.

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• 2023 (12) TMI 836
  Dishonour of Cheque - time limit for payment of fine or compensation awarded - power of High Court to extend the time under Section 482 of Cr.P.C. - HELD THAT:- Section 148 of the Negotiable Instruments Act provides that in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the Trial Court. This amount shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant. The Hon ble Supreme Court held in Suridner Singh Deshwal vs Virender Gandhi another [ 2019 (5) TMI 1626 - SUPREME COURT ], that Section 148 of the N.I.Act was introduced to avoid the delaying tactics of the drawers due to easy filing of an appeal and obtaining the stay of the proceedings. This was frustrating the very purpose of enactment of Section 138 of the Negotiable Instruments Act 1881; therefore, the Parliament decided to provide that 20% amount shall be deposited by the appellant. In the present case, the words of the statutes are clear that the amounts shall be deposited within 60 days or within such further time not exceeding 30 days as may be directed by the Court on sufficient cause being shown. These words are capable of only one interpretation that an initial time of 60 days can be granted which can be extended by 30 days on sufficient cause being shown. There is no ambiguity in the words of the statute, hence, the plain words are to be given effect - In the present case, the mischief was delay by the drawer in the payment of the compensation by filing an appeal; hence the interpretation to avoid the delay has to be preferred. By considering the provision as mandatory the mischief would be avoided whereas by considering the provision as directory the mischief will be perpetuated and the purpose of enacting the provision would be defeated. It was submitted that provision of Section 148 of the N.I. Act, 1881 binds the Appellate Court and not this Court. This Court has inherent power vested under Section 482 of Cr.P.C. to pass any order to do substantial justice. This submission cannot be accepted. Substantial justice has to be rendered to both the parties, namely, the complainant and the accused. The Court cannot do justice to the accused and injustice to the complainant. When the legislature has enacted a provision to ensure that the complainant should promptly get at least some of the amount, the Court cannot circumvent the intention of the legislature by holding that the time can be extended by the High Court. Thus it is not permissible to exercise the power conferred under Section 482 of Cr.P.C. to defeat the provisions of the law and extend the time beyond the period of 90 days. Doing so will amount to encroachment in the field of the legislation, which is impermissible - the submission that the power can be exercised to extend the time beyond that prescribed by the legislature is not acceptable. Therefore, the learned First Appellate Court had rightly held that it had no power to extend the time beyond 90 days and this Court does not have the power under Section 482 of Cr.P.C. to extend the time granted by the legislature under Section 148(2) of N.I.Act - Petition dismissed.

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