Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 1, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
GST - States
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ERTS (T) 65/2017/Pt. III/380 - dated
30-12-2022
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Meghalaya SGST
Amendment in Notification No. ERTS (T) 65/2017/12, dated the 29th June, 2017
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ERTS (T) 65/2017/Pt. III/379 - dated
30-12-2022
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Meghalaya SGST
Amendment in Notification No. ERTS(T) 65/2017/4, dated the 29th June, 2017
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ERTS (T) 65/2017/Pt. III/378 - dated
30-12-2022
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Meghalaya SGST
Amendment in Notification No. ERTS (T) 65/2017/2, dated the 29th June, 2017
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ERTS (T) 65/2017/Pt. III/377 - dated
30-12-2022
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Meghalaya SGST
Amendment in Notification No. ERTS (T) 65/2017/1, dated the 29th June, 2017
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ERTS (T) 65/2017/Pt. III/382 - dated
26-12-2022
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Meghalaya SGST
Specifies the provisions of sub-rule (4 A) of rule 8 of the Meghalaya Goods and Services Tax Rules, 2017 shall not apply in the State of Meghalaya
Money Laundering
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S.O. 446(E) - dated
30-1-2023
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PMLA
Notifies Aadhaar authentication service of the Unique Identification Authority of India under section 11A of the Prevention of Money-laundering Act, 2002
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Detention of goods - Levy of penalty - Movement of goods through valid e-way bill - bogus firms - Once, it is found that selling dealer was bogus firm, the goods carrying the e-way bill generated by such firm is of no benefit to the petitioners as the same has been used for transiting the goods from non bona fide dealer from undisclosed place. - HC
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Cancellation of registration of petitioner - the impugned order does not assign any reason whatsoever for cancelling registration of the petitioner and is passed only on the ground that reply to the show cause notice is not given. The non-submission of reply to the show cause cannot be a ground for cancellation of the registration. - HC
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Blocking of electronic credit ledger - appropriate authority directed to intimate to the appellant within ten days from the date of receipt of server copy of this judgment and order the reasons for which the electronic credit ledger of the appellant was blocked along with the information as to which authority had passed such an order. - HC
Income Tax
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Seeking no objection certificate from the Income Tax Department in order to leave India - no objection certificate is not being issued as the Petitioner does not have a PAN number - Let the company’s official along with the Petitioner appear before the Income Tax Department on 7th February, 2023 - On the said date whatever documents or undertakings are required from the Petitioner or his employer, shall be submitted to the Income Tax Department and Form 30B shall be issued within two weeks thereafter - HC
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Reopening of assessment u/s 147 - high value shares transaction/activities - Assessing Officer will carry out a de novo exercise from the stage at which notice under Section 148A(b) is positioned. Before proceeding further, the AO will furnish the relevant information concerning the petitioner, after redacting information which concerns third parties. - HC
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Jurisdiction to conduct search u/s 132 - it is statutorily enjoined for a search to be conducted by the jurisdictional officers of that assessee only. The sole exceptions to this rule are in regard to locations that fall within the jurisdiction of a different officer, subject to satisfaction of, and compliance with, the requisite conditions, under the proviso to Section 132 and Section 132(1A). - HC
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Disallowance of transport expenses - Estimation of income by applying the results for the second (subsequent) year, liable to be estimated, to the first year. That would be putting the cart before the horse. There has been clearly no adjudication by the ld. CIT(A) qua the disallowance of transport expenditure, made by the AO u/s. 37(1). - AT
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Assessment u/s 153A - Addition u/s 68 - bogus LTCG - we do not find any infirmity in the order of the learned CIT-A the extent holding that that the addition of unaccounted long-term capital gain which is proved to be bogus is based on material found during the course of search and satisfies all the conditions prescribed under section 153A - no merit in the cross objections of the assessee, hence it is dismissed. - AT
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Revision u/s 263 - In the instant case the PCIT has tried to super impose his view in exercise of powers u/s. 263 of the Act over one of the possible view taken by Assessing Officer. This is not in accordance with the settled law. - AT
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TDS u/s 194C - Disallowance made u/s 40(a)(ia) of the Act - the provisions of sec.194C are not attracted for expenses claimed as “security charges”. Supply of manpower may not fall under the provisions of sec. 194J relating to “professional fees”. - Additions deleted - AT
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Rectification u/s 154 - The AO had only denied the relief in the absence of any such clear cut evidence and the ld. AR has also failed to point out as to what was the mistake committed by the Revenue Authority while processing the return u/s 143(1) of the Act. - No merit in the appeal of the assessee - AT
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Allowability of deduction u/s 36(1)(viii) - specified entity being the cooperative bank - The term “long term finance” has been defined under clause (h) to mean any loan or advance provided for a period for not less than 5 years. We do not perceive any distinction between term “development of housing in India” and “purchase & construction of housing in India for residential purposes - Claim allowed - AT
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Income deemed to accrue or arise in India - amount received by the assessee on account of Time Charter of its ship as “royalty‟ and taxing the same u/s 9(1)(vi) - the payment received by the owner from the charterer has to be reckoned as payment from operations of carriage of goods from one port in India to another port in India, which falls under the ambit of carrying out shipping business or shipping operators. - the income of the assessee has rightly been offered to tax u/s 44B - AT
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Fees for technical services (FTS) - India France DTAA - claiming the benefit of the restricted definition under India USA DTAA - Since the assessee has been found not to have ‘made available’ any technical knowledge, experience, skill, or know-how, therefore, Management Service Fees received by the assessee cannot be taxed under the provisions of Article 13 of the India France DTAA read with para 7 of the Protocol to the India France DTAA and Article 12(4) of India USA DTAA. - AT
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Income deemed to accrue or arise in India - TSIS Service Fee received - The term ‘Royalty’ is not as widely defined in India France DTAA as in the India Singapore DTAA, which was taken into consideration by the coordinate bench of the Tribunal in the case of sister concern. - AO directed to delete the addition in respect of TSIS Service Fees received by the assessee. - AT
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Levy of interest u/s 234C and 234B - Estimation of income for advance tax - business of Portfolio Management Services - lower authorities had not controverted the facts reported by the assessee that because of uncertainty about the equity market it cannot estimate before hand amount of performance fees as discussed supra for the purpose of calculation of advance tax. - AT
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Exemption u/s 10(38) - LTCG - general insurance business - In the present assessment year the ld AO has himself allowed exemption u/s 10(15)(iv)(h) of the Act in regard to investment of tax free in public sector bonds. But still the Ld. AO, without citing reasons as to how u/s 10(15)(iv)(h) of the Act is applicable and Section 10(38) of the Act is not applicable, made the distinction and made the addition avoiding Section 10 of the Act. - the assessee is entitled exemption u/s 10(38) like any other assessee for computation of Income - AT
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TDS done by the Ld. AO on the interest granted u/s. 244A(1) - taxability of interest on refund in terms of Article 12(3)(a) of the India- Italy DTAA - the interest in question received by the assessee u/s. 244A(1) from the Government of India will not be taxable. Consequently, no tax was required to be deducted thereon by the Ld. AO while remitting the said interest to the assessee and thus AO is directed to grant the refund of the TDS so done. - AT
Customs
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Liability of nominee directors for offence / non compliance committed prior to their appointment - EPCG Scheme - non-fulfilment of export obligation - at the time when such nominee directors were appointed such obligations would not have been at the forefront and there is no justification in expecting the newly appointed directors to apply their minds to the obligations that had crystallized long prior to their appointment and previously in time. - Orders quashed - HC
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Refund of the Customs Duty paid in respect of the imported goods - Period of limitation - provisional assessment - The only provision, therefore, that applies is Section 27 and hence, the rejection of refund by taking recourse to Section 26A (3) by the authorities below is incorrect - Section 27 also prescribes a time-limit of one year, but the same is subject to the saving proviso provided under sub-section (1B). - AT
Indian Laws
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Key Expectations on Budget 2023 - Stay Tuned with us on Feb 1, 2023 since 11.00 AM onwards
Service Tax
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Rejection of declaration in Form-SVLDRS-1 - The SVLDR Scheme is a legislation introduced for liquidation of legacy disputes on the one hand and recovery of unpaid taxes to the government on the other. The Respondent cannot contend that the portal was not updated. Once SVLDRS-2 has been issued and there has also been a follow up from the Respondents with respect to the said Form as well as the hearing that was fixed at the appointed date and time, the Respondent-Authorities cannot renege on the same. - HC
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Levy of service tax - activity of soil conservation and land reclamation - the entire amount received by the appellant from the government in the shape of grant is in the nature of reimbursement i.e. to say the actual expenditure incurred for the provision of the service is reimbursed by the Government of Gujarat. For that reason also the amount paid by the Government to the appellant cannot be taxed as does not fall within the definition of consideration for service. - AT
Central Excise
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Levy of penalty - abating the fraud - ex-superintendent of Central Excise with other person - Rebate claim - habitual offender - Appellant had perpetuated the fraud - The economic offenders/ white collared criminals need to be dealt in the strictest manner so as maintain uniformity and well being in the society and not endanger the economy of the country - It has been settled by various authorities that the word “possession” or similar phrases used in the statute do not imply physical possession of the goods but would imply possession in law. - AT
VAT
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Interest on the refund amount - The contention that the petitioner is guilty of inaction for an inordinately long period is also unpersuasive. - Once the petitioner had filed the application for seeking refund of the amount along with interest, it was incumbent upon the respondents to either allow or reject the same as per law. The inaction, if any, is largely on the part of the respondents. - HC
Case Laws:
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GST
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2023 (1) TMI 1231
Cancellation of registration of petitioner - case of the petitioner is that he has not been able to get the show cause notice issued by the respondent and, therefore, he could not submit the reply within the stipulated time - HELD THAT:- The present petitioner is also entitled for the benefit of the order passed by this Court in TECHNOSUN INDIA PVT. LTD. LUCKNOW THRU. ITS DIRECTOR AMIT KUMAR GAUTAM VERSUS UNION OF INDIA THRU. PRIN. COMMISSIONER, CENTRAL G.S.T., LKO. U.P. AND 2 OTHERS [ 2022 (9) TMI 1412 - ALLAHABAD HIGH COURT] - In the said judgment, the Court has held that the impugned order does not assign any reason whatsoever for cancelling registration of the petitioner and is passed only on the ground that reply to the show cause notice is not given. The non-submission of reply to the show cause cannot be a ground for cancellation of the registration. The present petitioner is also entitled for the same relief. The benefit of the order shall also be made available to the present petitioner. The order is set aside and the petitioner is permitted to appear before the respondent along with the reply to show cause notice and the certified copy of this order within three weeks from today - Petition allowed.
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2023 (1) TMI 1225
Classification of supply - inter-state supply or intra-state supply? - supply of mobile recharge coupons and Direct To Home (DTH) recharge vouchers to recipients, who are located in other States - HELD THAT:- In view of the fact that the amount of tax due on the transaction has already been paid and only dispute is whether it is to be treated as intra-state sale or inter-state sale, recovery of the demand raised vide order dated December 3, 2022 shall remain stayed till the next date of hearing. Adjourned to April 27, 2023.
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2023 (1) TMI 1224
Detention of goods - Movement of goods through valid e-way bill - Levy of penalty under Section 129(1)(b) of the IGST Act, 2017 - bogus firms - it is alleged that selling dealer was non existent at the place where his firm is said to have been registered and only through the e-way bill generated, goods were being sent from some other undisclosed place and ITC was to be claimed - HELD THAT:- Both the authorities have recorded a categorical finding to the effect that selling dealer, M/s. Sunshine Overseas was registered at Shri Ram Colony, Siya Wali Masjid, Rajeev Nagar, North East Delhi, Delhi. The e-way bill mentioned the goods to have been dispatched from the said place. The statement of the driver recorded disclosed that goods were loaded from Mayapuri, Delhi, which is 18 kms. away from Rajeev Nagar. On physical verification of the premises of M/s. Sunshine Overseas, it is clear that no business transaction was being done from that place and the GST registration was suspended on 04.05.2022. The selling dealer till date has not responded to the notice of the taxing authorities nor has come forward to state that goods were sent by him through the e-way bill alleged to have been generated from the portal from the address mentioned therein. The taxing authorities had also scrutinized the records of the selling dealer for the assessment year 2021-22 and found that it was not indulging in any sale and purchase and bogus transactions were only made for claiming ITC. Once, it is found that selling dealer was bogus firm, the goods carrying the e-way bill generated by such firm is of no benefit to the petitioners as the same has been used for transiting the goods from non bona fide dealer from undisclosed place. Thus, no interference is required in the orders passed by respondent nos. 3 and 4 - petition dismissed.
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2023 (1) TMI 1223
Validity of summary SCN - Attachment of Bank Account of petitioner - input tax credit on inward supply in accordance with Section 16 of Jharkhand Goods and Services Tax Act, 2017 - HELD THAT:- It transpires that a show cause notice under Section 73(1) of the JGST Act, 2017 dated 7.1.2022 (Annexure-1) for the tax period January 2019-February 2019 was issued. However, from bare perusal of Annexure-1, it appears that the same is issued in a format without striking out of irrelevant particulars, thus the same is vague and does not spell out clearly the contravention for which the petitioner is charged. It is in fact, worse than summary of show cause notice in Form GST DRC-01 of the same date. Now it is well settled that the show cause notice issued under Section 73(1) of the Act is not mere a formality. As a matter of fact, the intent of legislature for issuing a show cause notice along with DRC-01 is that the DRC-01 is a summary of show cause notice and show cause notice should be in detailed giving the facts and circumstances and the grounds for levying tax. However, by going through the impugned show cause notice dated 7.1.2022, it appears that it is in a format without striking out the irrelevant particulars. It further transpires that the respondent Deputy Commissioner, Deoghar finally issued DRC-07 on 9.2.2022 without giving any further opportunity which is certainly beyond the provisions of law - the show cause notice is in a format and is not in a strict compliance of Section 73 (1) of the JGST Act and Rule 142(1)(a) of the Rules and since the principle of natural justice has not been complied in the instant case, the ground of alternative remedy is not acceptable by this Court. For the reasons stated hereinabove the instant application is allowed and the impugned show cause notice and DRC 01; both dated 7.1.2022 and also the summary of order issued under DRC-07 dated 9.2.2022, are hereby, quashed and set aside. The matter is remitted back to the Deputy Commissioner, State Tax Deoghar, Jharkhand to pass a fresh order after following due procedure of law from the stage of issuing fresh show cause notice strictly in accordance with law - Application allowed.
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2023 (1) TMI 1222
Blocking of electronic credit ledger - No reasons were informed - Prayer for grant of the interim order pending consideration of such declaratory relief - vires of Rule 86A of the Central Goods and Services Tax Rules, 2017 - HELD THAT:- The concession made by the learned advocate for the appellant on behalf of the appellant is placed on record and the prayer for declaration of Rule 86A of the said Rules as ultra vires is struck off. The other prayer made by the appellant/writ petitioner is to withdraw the blocking of the electronic credit ledger and restore the input tax credit. Such positive direction cannot be granted at this stage as the appellant does not know as to what are the reasons, which weighed in the mind of the appropriate authority before passing the order blocking the electronic credit ledger - the following order will meet the ends of justice and simultaneously protect the interests of revenue as well. The writ petition as well as this appeal and the connected application are disposed of by directing the appropriate authority to intimate to the appellant within ten days from the date of receipt of server copy of this judgment and order the reasons for which the electronic credit ledger of the appellant was blocked along with the information as to which authority had passed such an order.
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Income Tax
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2023 (1) TMI 1232
Disallowance of transport expenses - HELD THAT:- We may clarify that while the law provides for disallowance u/s. 37(1) even if an expenditure, though incurred, is not wholly and exclusively for the purpose of the assessee s business, the disallowance in the instant case is for the reason of it having not been incurred, i.e., to that extent. We may here also add that a disallowance would be sustainable on the assessee being unable to prove an expenditure, and it is not necessary for the Revenue to actually disprove the same. That we have found the same as, besides being unsubstantiated, grossly inflated and, further, in examining its genuineness, considered it from various angles, including its quantum, inasmuch the two were found inter-related, would not make it any less a disallowance s.37(1). And, further, not convert it into a case of estimation of income, i.e., merely because the same works to a tidy sum in relation to sales. The disallowance u/s. 37(1), as indeed an addition u/s. 41(1) or u/s. 68, is a specific adjustment/s (to the returned income), and would not for that reason make it a case of estimation of income. As explained by the Hon'ble Apex Court in Kale Khan Mohd. Hanif vs. CIT [ 1963 (2) TMI 33 - SUPREME COURT] ; CIT v. (M.) Ganpathi Mudaliar [ 1964 (4) TMI 22 - SUPREME COURT] ; and CIT vs. Devi Prasad Vishwanath Prasad [ 1968 (8) TMI 5 - SUPREME COURT] , there is nothing in law that prevents the assessing authority in taxing both, the cash credit, the nature and source of which is not satisfactorily explained, and the business income estimated by him after rejecting the books of account as unreliable. It would be a different matter though where the cash credit is explained in terms of secreted profit of the business for the current or a preceding year, so that relief is allowed on that basis, i.e., of the same income being subject to tax twice (also see: Anantharam Veerasinghaiah Co. [ 1980 (4) TMI 2 - SUPREME COURT] One thing to say that the operating result as derived for one year, for which books stand properly scrutinised and income assessed making specific adjustment/s to the returned income, is, on the premise of the same representing a normative profit, applied to another, subsequent, year, for which the book-results, though similarly disclosed; the books of account having not been produced in assessment, income has to be estimated, and quite another to do just the opposite, i.e., applying the results for the second (subsequent) year, liable to be estimated, to the first year. That would be putting the cart before the horse . There has been clearly no adjudication by the ld. CIT(A) qua the disallowance of transport expenditure, made by the AO u/s. 37(1). Disallowance being u/s. 37(1), inasmuch as the same bears no element of artificial disallowance (as u/ss. 40A(3), 40(a)(ia)), and is on account of genuineness of expenditure - Yes, we do find to state that the profit element upon disallowance of transportation works to 81.56%, i.e., too huge to be accepted. Without doubt, the disallowance being u/s. 37(1), inasmuch as the same bears no element of artificial disallowance (as u/ss. 40A(3), 40(a)(ia)), and is on account of genuineness of expenditure, the extent thereof, which is to be reasonable, is a relevant consideration. No basis for the said calculation (81.56%) has though been given, nor was argued/furnished before us. The same is clearly incorrect . The total transportation and loading charges is at Rs. 888.34 lacs, and the expenditure allowed, Rs. 400 lacs (see paras 2.5, 3.2), so that profit works to Rs. 488.34 lacs, or at 55% (of the receipt). There is however no separate income corresponding to the transportation expenditure incurred other than for transporting bauxite from the mine head to the railway siding. Labour expenditure on breaking, sorting, and screening of the ore - HELD THAT:- As mentioned that the return for AY 2011-12 was not subject to scrutiny, while that for the two preceding years were without any appraisal of evidence/s and, consequently, any finding/s, subject only to token disallowances. The same is itself not valid in law, as explained in Asst. CIT v. Arthur Anderson Co. [ 2004 (12) TMI 637 - ITAT MUMBAI] , relied upon by the assessee before the ld. CIT(A). The disallowance, as being confirmed by us, i.e., on the touch-stone of whether the assessee has been able to, in the conspectus of the case, prove the amount claimed (Rs. 361.19 lacs) as incurred wholly and exclusively for business purposes, the two indicating quantum and the purpose of the expenditure respectively, i.e., prove the expenditure in the sum claimed, and to which the answer is clearly in the negative, further finding the disallowance as made, i.e., Rs. 8.89 PMT (160.53 151.64), reasonable. No basis for reduction has been stated by the ld. CIT(A). Here it may be clarified that reference to the cost for the preceding year, as indeed to that of the comparable case, is only toward the reasonability of the disallowance made. Disallowance u/s. 40A(3) qua transport expenses - Quantum of disallowance u/s. 40A(3) and s.40(a)(ia), which could again overlap, shall be with reference to the total amount allowed, i.e., excluding, from the sum claimed the amount held as not allowable and confirmed for disallowance u/s. 37(1). NP estimation - CIT-A reducing the net profit by estimating the net profit of the assessee @2.57% of sale of bauxite - determine whether various activities constitute the same or separate business no single test can be devised as universal and conclusive - HELD THAT:- A case for retention of profit rate at 33% on the mining receipt, and revision thereof to 8% for the transport (and loading) receipt. We are conscious that decline in the transport receipt by Rs. 75 PMT (Rs. 354 Rs. 279) is compensated to some extent by the increase of Rs. 36 PMT in ore sale realisation, so that there has been a net decline by only Rs. 39 PMT. We, however, are inclined to regard the two receipts, though arising from and forming part of the same business, separately for the purpose of estimation of profit incident thereon. This is as, as already noted, the cost dynamics of the two are different and which perhaps has led to the two being billed separately to the buyer. Two, and equally important, we had found the profit rate on the transport receipt for AY 2012-13 as largely on account of exorbitant rate of Rs. 320 PMT. It is, this, that led to our finding of the profit rate thereon as matching the profit rate on the ore sale and, thus, corroborating the average profit rate of 33%. This, however, does not obtain for the current year, bringing down the profit margin thereon, and which has been found as conservatively reasonably estimated at 8%. As in view of the differences that obtain between the two years, approve of the applied rate of 8% in respect of transport activity for the current year. As regards the mining activity, the same clearly shows an upswing in terms of unit realization. The assessee has infact claimed even higher per unit charges than even the immediately preceding year. Under the circumstances, therefore, we find the applied rate of 32%, which is marginally lower than the average profit of 33% for the said year, as reasonable. Though, strictly speaking, the figures for AY 2013-14 (PB pgs. 71-92); the books of account having not been produced, ought not to be considered, the gross receipt and the quantity shipped and sold are not in dispute for any year, so that the same could be taken note of and factored into, the purport of an estimation exercise, which places a heavy onus on the authority estimating it, is to be as reasonable as the circumstances admit, looking at the matter from all angles. Addition in respect of profit of the mining business - CIT(A) being estimated @ 2.57% on the mining turnover (i.e., sale of bauxite and other minerals) - HELD THAT:- Inasmuch as the profit rate of the preceding year was also in reckoning, being subject to disallowance/s are equally relevant. Our adjudication thereof would thus cover the assessee s said ground as well. Likewise, for Gd. 2, which contests the application of profit rate of 8% on the transport and loading charges receipt, found by us as very reasonably estimated. The two issues being interrelated, the foregoing adjudication would thus cover the said Ground as well. Our adjudication of the Revenue s appeal would govern the assessee s CO as well. We cannot help here recording our appreciation for the discretion and circumspection exercised by the AO in determining and applying the estimates. Rather, as apparent from the foregoing, but for the sharp, though unexplained decline in the transport receipt, i.e., by 25% thereof; the two issues being interrelated, we might as well have restored the matter back to the AO for consideration on the lines suggested inasmuch as the Tribunal is to decide on the basis of findings of fact, based on material on record. The assessee s CO is accordingly held as without merit. We decide accordingly. Addition of bogus creditors - HELD THAT:- We confirm the disallowance for Rs. 121.68 lacs, i.e., corresponding to the 8 creditors in whose cases no payment stands made. For the balance 2, to whom payments for Rs. 25 lacs in aggregate stand made during the year, the matter is restored back to the file of the AO to allow the assessee an opportunity to show as to why, in the face of the finding of the expenditure being bogus and not genuine, should the disallowance in its respect be restricted to the sum outstanding in its respect as at the year-end, or Rs. 60.19 lacs, i.e., as against Rs. 67.94 lacs for which sum transport bills stand booked and expense claimed. The same would decrease the allowance marginally to Rs. 647 PMT. This restoration is apart from and independent of that may be required qua the whole or part of the disallowance toward application of s. 40(a)(ia), for which reference may be made to Shree Choudhary Transport Co. [ 2020 (8) TMI 23 - SUPREME COURT] Addition of bogus creditors u/s.41(1)(b) - HELD THAT:- As what was sought to be brought home by us in the preceding para that neither payment nor outstanding would have any bearing on the quantum of a disallowance of any expenditure found bogus or non-genuine. CIT(A) has allowed relief on the basis of an addition u/s. 41(1)(b) being impermissible under the circumstance of an opening balance not written back in the assessee's accounts. His order, though in result in agreement with our order, cannot have our approval inasmuch as he has on facts not confirmed the relevant disallowance (Rs.654.87 lacs), but approved of the assessee having incurred a cost of 92% of the transport receipt (Rs.802.91 lacs) for that year, i.e., at Rs.738.68 lacs. He also does not define the transport business . This becomes relevant as the assessee, apart from the transport of ore from mine head to siding, also incurs transport cost on removal of overburden and transfer of mined ore from deep mine to the surface, and the cost incurred and claimed by him is for all the three different works. Unless, therefore, his order is accompanied by a finding, either express or by necessary implication, as to disallowance of the impugned sum as not genuine, the stated reason will not apply to his orders. The addition is confirmed for deletion, and the Revenue fails on its Gd. 1(vi). Disallowance at 5% toward inflation of expenditure - HELD THAT:- As in every case a question of fact whether the expenditure was incurred wholly and exclusively for the purpose of trade or business of the assessee, which is to be decided based on evidence. We do not, in the facts of the case, find this positive and definite test as satisfied, i.e., of assessee having proved the expenditure in terms of s. 37(1). It is permissible for the tax authorities to consider disallowing the sum estimated as incurred in excess (Swadeshi Cotton Mills Co. Ltd. v. CIT [ 1966 (9) TMI 30 - SUPREME COURT] ; Lakshmiratan Cotton Mills Co. Ltd.[ 1968 (9) TMI 13 - SUPREME COURT] ; Lachminarayan Madan Lal [ 1972 (9) TMI 4 - SUPREME COURT] ) - The AO has, accordingly, made an estimate of the expenditure liable for disallowance, which we find as reasonable. We, accordingly, uphold the disallowance as made. Addition of interest component disallowed by the AO regarding it as the penalty under the sales-tax law - HELD THAT:- The basis of the relief (to the extent of Rs.3800) by the ld. CIT(A) is on the basis of the detail furnished by the assessee before him, claiming the amount impugned to be interest and not penalty. Before us, it was the admitted position that the penalty component cannot be allowed as a deduction inasmuch as infraction of law cannot be regarded as an incident of business. And that the matter may be remitted to the file of the AO. Surprisingly, the assessee has, neither before ld. CIT(A) nor before us, furnished any evidence toward penalty being at Rs.3,800, and the pleading for restoring the matter to the AO is an admission of same. The tax audit report u/s. 44AB for the relevant year reports the penalty at Rs.5808. Under the circumstances, we consider it appropriate to rely thereon and, accordingly, confirm the disallowance at Rs.5,808, so that the balance Rs. 6800 is to be allowed. Addition u/s. 56(2)(vii) - difference in valuation of property - HELD THAT:- The primary facts, as indeed the valuation, are not in dispute, and s.56(2)(vii)(b) is clearly attracted in principle in the instant case. The said provision, however, stands coopted on the statue-book w.e.f. 01.4.2014, i.e., AY 2014-15 onwards, so that it shall apply to a transaction during the relevant previous year, i.e., fy 2013-14. The transaction was in the instant case completed on 10.3.2013 and, therefore, the difference cannot be assessed u/s. 56(2)(vii) for AY 2014-15; the genuineness of the purchase transaction having not been doubted. Doubts were during hearing raised as to of there has been a typing mistake in the recording the purchase date as 10.3.2013 , i.e., instead of 10.3.2014 , which the parties were called upon to clarify, and which they did not. The balance-sheets for the relevant years stand also perused, to observe no addition in the landed property, except agricultural land Subject therefore to the verification of an addition of an immovable property at Indira Gandhi Ward, Katni during fy 2012-13, and not fy 2013-14, we confirm the deletion on account of non-applicability of 56(2)(viii), which shall otherwise hold. We decide accordingly. Disallowance toward transport expenditure - same having not been proved on the anvil of s.37(1), with, in fact, its genuineness being in serious doubt, rather, to our mind, disproved - payment in violation of s. 40A(3) - HELD THAT:- As disallowances of transportation expenses, effected for AYs. 2012-13 and 2014-15 respectively by the AO, and confirmed by us, is only u/s. 37(1). The same, as afore-stated, bears no element of any artificial disallowance, as u/s. 40A(3) (r.w.s. 40A(3A)) or s. 40(a)(ia), even as the same has been found to be applicable in principle. This is for the reason that the question of manner of payment or the non-deduction of tax at source, which triggers the said disallowances, become irrelevant where the expenditure itself is regarded as not genuine and, besides, would amount to a double disallowance. Where, however, the said disallowance/s, i.e., as confirmed, is reversed in further appeal, in whole or in part, i.e., on the expenditure being regarded as genuine to that extent, the same would become liable to be effected. The same would though require the assessee being heard on quantification, and may have a bearing in the assessment of a subsequent year/s as well The exercise for identifying the payment in violation of s. 40A(3) or, as the case may be, s.40A(3A), as indeed u/s. 40(a)(ia), would thus extend to the entire sum. Finally, we here also clarify that the disallowance u/s. 40A(3A), would, where so, stand to be made only in respect of the sums allowed u/s. 37(1) for AYs 2012-13 and 2014-15, and cannot extend to sums already allowed for preceding year, but liable to be disallowed in assessment for any of the three years under reference inasmuch as the same do not qualify as the subject matter of appeal.
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2023 (1) TMI 1230
Reopening of assessment u/s 147 - order issued u/s 148A(b) - high value shares transaction/activities - HELD THAT:- No information has been furnished to the petitioner as to how income chargeable to tax has escaped assessment, and since the order passed u/s 148A(d) of the Act only suggests that the assessee has not established his credit worthiness and failed to prove the source of investment, we are of the view that the best way forward would be to set aside the impugned order passed u/s 148A(d) with the following directions: Assessing Officer will carry out a de novo exercise from the stage at which notice under Section 148A(b) is positioned. Before proceeding further, the AO will furnish the relevant information concerning the petitioner, after redacting information which concerns third parties.
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2023 (1) TMI 1229
Jurisdiction to conduct search u/s 132 - Construction of Section 132 relating to search and seizure and Section 120 relating to jurisdiction of officers - powers to perform functions relating to search and seizure and corresponding penal and prosecution proceedings in respect of the territorial area of the whole of India and the preamble of the Notification - HELD THAT:- Section 132 contains specific situations where it applies, notwithstanding the requirement of territoriality under Section 120. These instances have been specifically noted and elaborated upon in the preceding paragraphs, per Section 132(1A) and the proviso to Section 132, both in the context of location only. Thus, the Notification relied upon by the revenue deals with extension of jurisdiction qua territory alone, and not with regard to an assessee . The Notification is in furtherance of the statutory sanction under the proviso to Section 132 and Section 132(1A), to enable officers in the Department to enter and search places located in areas other than those coming under the jurisdiction of the assessing officer holding jurisdiction over the assessee searched. Thus it is our considered view, based upon the scheme of the Act and the specific statutory provisions, that it is statutorily enjoined for a search to be conducted by the jurisdictional officers of that assessee only. The sole exceptions to this rule are in regard to locations that fall within the jurisdiction of a different officer, subject to satisfaction of, and compliance with, the requisite conditions, under the proviso to Section 132 and Section 132(1A). As called for the records of the search and verified that the warrant of authorisation dated 29.08.2017 in regard to the search conducted on 30.08.2017 has been issued in Form 45, in the name of the Petitioner, by R4 Deputy Director of Income Tax (Inv), Bengaluru. In line with the discussion and conclusions in the foregoing paragraphs of this order, Declaration, as sought, is issued and this writ petition is allowed.
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2023 (1) TMI 1228
Revision u/s 263 - no notional rent is offered to tax in respect of unsold flats lying vacant held as closing stock - As submitted Assessing Officer has taken one of the possible view - HELD THAT:- We find that in the case of Osho Developers vs. ACIT [ 2020 (11) TMI 218 - ITAT MUMBAI ] after considering judgment rendered in the case of CIT vs. Ansal Housing Finance Leasing Company Ltd. [ 2012 (11) TMI 323 - DELHI HIGH COURT ] and various other decisions, which inter-alia, includes decision in the case of CIT vs. Gundecha Builders [ 2019 (1) TMI 112 - BOMBAY HIGH COURT ], CIT vs. Sane Doshi Enterprises [ 2015 (4) TMI 882 - BOMBAY HIGH COURT ], CIT vs. Neha Builders [ 2006 (8) TMI 105 - GUJARAT HIGH COURT ] and K. Subramanian, ITO Another vs. Siemens India Ltd. [ 1983 (4) TMI 3 - BOMBAY HIGH COURT ] concluded that the annual letting value of flats held as stock-in-trade cannot be brought to tax under the head house property . While taking such view the Tribunal distinguished the decision rendered in the case of CIT vs. Ansal Housing Finance Leasing Company Ltd. (supra). Thus, as per the decision rendered in the case of Osho Developers vs. ACIT (supra) no addition could have been made u/s. 23 of the Act in respect of vacant flats held as stock-in-trade and carried forward as closing stock. It is a well settled law that where two views are possible and the Assessing Officer has taken one of the possible view, the PCIT cannot substitute his view in exercise of revisional jurisdiction u/s. 263 of the Act. In the instant case the PCIT has tried to super impose his view in exercise of powers u/s. 263 of the Act over one of the possible view taken by Assessing Officer. This is not in accordance with the settled law. Thus, the PCIT has exceeded his jurisdiction in exercise of revisionary powers. Appeal of the assessee is allowed.
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2023 (1) TMI 1227
Additions on account of special reserve - amount transferred to the capital reserve account - AR submits that the amount transferred to capital reserve fund represents the entrance fees collected from its shareholders, unclaimed deposit represents capital receipts, cannot be taxed as income - HELD THAT:- We are of the considered opinion that the entrance fees or subscription fees received by the members is on capital account does not form part of the revenue receipts. Similarly, as regards to the old balance of DD payable to sundry creditors, there is no cessation of liability and mere write off of the DD payable to sundry creditors etc and never the unilateral act on the part of the appellant by writing off of the amount and credit to Profit Loss Account neither amount to cessation of liability or income. In the circumstances, we direct the Assessing Officer to allow this ground of appeal no.1. Allowability of deduction u/s 36(1)(viii) - The appellant bank had derived income on lending money for the purpose of purchase construction of houses. There is no dispute that the appellant is specified entity being the cooperative bank as per sub-clause (4) of section 36(1)(viii) of the Act. The term long term finance has been defined under clause (h) to mean any loan or advance provided for a period for not less than 5 years. We do not perceive any distinction between term development of housing in India and purchase construction of housing in India for residential purposes. Thus, we are of the considered opinion that the claim made by the appellant clearly falls within the exemption under the provisions of section 36(1)(viii) of the Act and the assessee bank is entitled for deduction. Accordingly, the ground of appeal no.2 stands allowed.
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2023 (1) TMI 1226
Income deemed to accrue or arise in India - amount received by the assessee on account of Time Charter of its ship as royalty‟ and taxing the same u/s 9(1)(vi) - assessee is a company incorporated in and tax resident of UAE and is engaged in the business of shipping operation as entered into Time Charter contract with M/s Poompuhar Shipping Corp. Ltd. (PSCL) for transporting coal from Paradeep port to Tutucorine in Tamil Nadu, through its ship MV Eastern View - whether the income earned by the assessee is to be taxed u/s 44B of the Act on the presumption basis as claimed by the assessee in the return of income; or whether the receipt should be taxed as royalty for use of an equipment in terms of clause (iva) to Explanation 2 to section 9(1)(vi)? HELD THAT:- As payment was subject to load of the cargo and it was not simply for leasing or renting out the ship for the time charter period. Thus, from the reading of various clauses of the agreement, it cannot be inferred that it was purely fixed rental receipt by the assessee for lease of equipment. In fact all throughout the control of the equipment remained with the assessee and at no point of time owner has transferred the vessel to the charterer for carriage of goods. Albeit, the agreement envisages more of voyage charter by the vessel owner and therefore, in our opinion, the same cannot be fall strictly within the realm of definition provided of royalty in terms sub clause (iva) to Explanation 2. The concept of dominance or control over ship by the charterer on the equipment is paramount in determining the character of payment as payment of royalty and in absence of the same cannot be treated as royalty. This is also coupled of the fact that payment received by the owner from the charter is firstly, based on use of per running day; and secondly, calculation of dead freight was dependent upon the load per voyage. In such a situation, the payment received by the owner from the charterer has to be reckoned as payment from operations of carriage of goods from one port in India to another port in India, which falls under the ambit of carrying out shipping business or shipping operators. We find that this Tribunal in the case of Smit Singapore Pte Ltd. [ 2020 (11) TMI 415 - ITAT MUMBAI] similar charter agreement was under consideration by a foreign resident owning a ship who has given it on a time charter to an Indian company. Thus, in our view, the payment received by the assessee cannot be treated as royalty u/s 9(1)(vi). Case of M/S. POOMPUHAR SHIPPING CORPORATION LTD. AND OTHERS VERSUS THE INCOME TAX OFFICER, INTERNATIONAL TAXATION II AND OTHERS [ 2013 (10) TMI 936 - MADRAS HIGH COURT] is not applicable on assessee. The payment received by the assessee from M/s Poompuhar Shipping Corp. Ltd. is not in the nature of royalty and hence, the same is not taxable under section 9(1)(vi) of the Income Tax Act. Secondly, the agreement and the payment received by the assessee is for carriage of goods and for operating the ships, therefore the income of the assessee has rightly been offered to tax u/s 44B of the Act. Appeal filed by the assessee stands allowed.
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2023 (1) TMI 1221
Seeking no objection certificate from the Income Tax Department in order to leave India - no objection certificate is not being issued as the Petitioner does not have a PAN number - HELD THAT:- The company i.e., the Petitioner s employer, has submitted Form 30A under the Income Tax Act, 1961 giving an undertaking to the Commissioner of Income Tax and applied for the issuance of the No-Objection Certificate (NOC) under Form 30B, on behalf of the Petitioner. The said Form 30B is to be issued by the Income Tax Department. However, the issuance of the same seems to have been delayed. The case of the Petitioner is that the company i.e, his employer has given an undertaking as per Form 30A of the Income Tax Act, 1961 to the Income Tax Department in respect of any income tax liability which may become due and payable. Accordingly, reliance is placed upon the duly filled Form 30A which has been certified by the employer. As submitted by ld. Counsel for the Income Tax Department that if the company appears before the Income Tax Department or furnishes requisite documents relating to the Company and the Petitioner, the NOC under Form 30B, would be issued expeditiously. Let the company s official along with the Petitioner appear before the Income Tax Department on 7th February, 2023 - On the said date whatever documents or undertakings are required from the Petitioner or his employer, shall be submitted to the Income Tax Department and Form 30B shall be issued within two weeks thereafter. Upon receiving the NOC under Form 30B, the Petitioner shall then leave India. The requisite permit/exit clearance shall be extended till 15th March, 2023 within which period the Petitioner shall make all necessary arrangements to leave India.
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2023 (1) TMI 1220
Stay of demand - petitioner granted stay subject to payment of 15% of the demand - pending the decision in the appeals, the demand raised against the petitioner - HELD THAT:- The issue involved in all the appeals pending consideration before the CIT (A) is common. Six (6) of eight (8) appeals are ripe for a decision. The decision in these appeals would also govern, even according to Mr Rai, the remaining two (2) appeals. Secondly, Mr Rai has been unable to point out any provision in the Act, wherein demand can be raised against the petitioner with regard to withholding tax, for the failure to deduct the same at source. Petitioner s contention that the cost of free samples handed over to its vendors cannot be construed as commission or brokerage, is also required to be examined in the pending appeals. At worst, the petitioner is an assessee in default, therefore, only consequences provided in the Act will attach to it. Under Section 191 of the Act, the liability for tax, prima facie, would rest on the assessee i.e., the vendors in this case. We do that not do not want to express any final view on the merits of this aspect of the matter, since the appeals are pending consideration before the CIT (A). Given the aforesaid position, we are of the view that the best way forward in these cases would be to direct the CIT(A) to dispose of the six (6) appeals in which written submissions have already been filed. Insofar as the remaining two (2) appeals are concerned, reference to which is made hereinabove, the CIT(A) should issue notice within the next five days, whereupon the petitioner should file its written submissions, as early as possible, though, not later than two (2) weeks from the date of receipt of notice. CIT(A) will, then, dispose of the eight (8) appeals pending before it within the next eight (8) weeks. Pending the disposal of the appeals, the impugned order in the above-captioned writ petitions i.e., the order dated 16.12.2022, shall remain stayed. Once CIT(A) passes an order in the pending appeals, the fate of the petitioner will be governed by the order that would be passed by the CIT(A).
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2023 (1) TMI 1219
Reopening of assessment u/s 147 - unexplained cash credits - suspicious transactions carried out against Late Shri Chhotalal V. Doshi (Prop. of Abhi Enterprise) and it was found that he used to lend his bank account to other persons for commission - HELD THAT:- As the Revenue has not brought on record any corroborative evidence to demonstrate that the money deposited in the Bank Account operated by Late Shri Chottalal Doshi belong to the assessee, the Co-ordinate Bench has been pleased to delete the addition made by the authorities below. We, under the identical facts and circumstances of the case as relied upon by the assessee in the case of Shri Mukeshkumar Vrajlal [ 2022 (9) TMI 1115 - ITAT RAJKOT] do not find any reason to deviate from such stand taken by the Co-ordinate Bench. Hence, respectfully, relying upon the same, we delete the addition made by the authorities below. The appeal preferred by the assessee for A.Y. 2010-11 is, thus, allowed.
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2023 (1) TMI 1218
Characterisation of income - interest on the compensation received by the assessee -compensation exempt from tax u/s 10(37) or taxable u/s 56(2)(viii) - interest received on enhanced compensation treated as Income of the appellant - assessee was owner of agricultural land and the same was taken under compulsory acquisition by Government of Haryana - assessee claimed the entire enhanced compensation inclusive of interest as residual part of compulsory acquisition of agricultural land and claimed it as exempted u/s 10(37) - AO did not accept the contention of the assessee and held that the interest income as taxable income under the head income from other sources u/s 56(2)(viii) - HELD THAT:- As decided in SHRI SATBIR, SHRI VED PAL, SHRI SHEO CHAND, SHRI KARAMBIR, SHRI DHARAM PAL AND SHRI CHANDGI RAM [ 2018 (7) TMI 1163 - ITAT CHANDIGARH] as per proposition laid down in Ghanshyam, HUF [ 2009 (7) TMI 12 - SUPREME COURT] remains and which having been laid down by the Hon'ble Apex Court is the law of the land and has to be followed by all lower authorities. The interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable. Appeals of the assessees are allowed.
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2023 (1) TMI 1217
CIT(Appeals) dismissed the appeals of the assessee ex parte - Reopening of Assessment u/s 147 - reassessment pursuant to search proceedings conducted against the assessee as per the provisions of Section 153A - unexplained investments by the Assessing Officer in the absence of any response from the assessees - assessee contended that there is a petition pending before the Settlement Commission in the case of company wherein assessee made investment and the outcome of the decision of the Settlement Commission will have bearing on the appeals of the assessee - HELD THAT:- Taking the totality of facts and circumstances into consideration and since the assessments were made under 144 r.w.s. 147 of the Act and the Ld. CIT(A) also passed ex parte order rejecting the submission of the assessees to keep the appeal proceedings in abeyance and in the interest of justice, these appeals are restored to the file of the Assessing Officer for denovo assessment in accordance with law. The Assessing Officer shall provide adequate opportunity of being heard to the assessees. The assessees are at liberty to file necessary evidences in support of their claims. Grounds raised by the assessee are allowed for statistical purpose.
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2023 (1) TMI 1216
Assessment u/s 153A - Addition u/s 68 - bogus LTCG - As argued no incriminating material found during the course of search and therefore, no addition can be made in the hands of the assessee - HELD THAT:- During the course of search, the long-term capital gain earned by the assessee claimed as exempt under section 10 (38) of the act was found recorded in the books of account of these non-genuine companies. The statement recorded of the assessee under section 132 (4), assessee himself has explained whole modus operandi of the scheme and admitted that long-term capital gain claimed by the assessee and his family members and the companies is bogus, non-genuine and all out of many political and fraudulent transactions. Nothing is required to be unearthed during the course of search as more than enough incriminating material was already available with the search party confronted to the assessee were admitted having the unaccounted income. It is always not necessary that there have to be some paper trail, which should have been found during the course of search for making an addition. The statement made by the assessee confirming the information, admitting the unaccounted income, explaining the modus operandi of earning such income, naming the parties involved in such activity shows clear-cut evidences of earning unaccounted income. Therefore, we do not find any infirmity in the order of the learned CIT A the extent holding that that the addition of unaccounted long-term capital gain which is proved to be bogus is based on material found during the course of search and satisfies all the conditions prescribed under section 153A - no merit in the cross objections of the assessee, hence it is dismissed. Telescoping of the gross profit addition in the hands of this assessee company - The appeal filed by the learned assessing officer is allowed for statistical purposes setting aside back to the file of the learned CIT A to give clear-cut finding as to how merely an addition of ₹ 6 crores is enough where as bogus long-term capital gain earned is more than ₹ 120 crores. The learned CIT A is also directed to give a specific finding year wise, amount twice, assessee wise with reasons that how telescoping of the long-term capital gain earned by individuals and companies can be subsumed in a meager addition of ₹ 6 crores in the hands of Hazel Mercantile Ltd. Addition u/s 14A r.w.r. 8D - HELD THAT:- CIT A held that there is no dispute on applicability of section 14 A, the assessee is not given its working for the computation of disallowance, therefore the satisfaction recorded by the learned AO is correct. However, he held that the investment made by the assessee in its subsidiaries and where share capital and free reserve of the assessee stands at ₹ 616 crores, which is far in excess of the investment made in those subsidiary companies. Therefore he confirmed the disallowance only with respect to 0.5% of the administrative expenditure to ₹ 174634/ . No infirmity is pointed out. Therefore, the action of the learned CIT A cannot be found fault with. Ground number 7 of the appeal of the assessee for assessment year 2014 15 is dismissed. These findings also apply to the assessment year 2015 16. Disallowance of 10% of business promotion expenses - In absence of any details furnished by the assessee, disallowance was confirmed. As we also do not have any other details, we do not have any hesitation in confirming the disallowance. Ground number 8 is dismissed. For other years, also the above finding covers the issue against the assessee. Addition with respect to certain transactions pertaining to one-company Sumilon industries Ltd - assessee argued seized paper is merely a loose paper and irrelevant and inadmissible as evidence - HELD THAT:- CIT A considered the seized documents and held that an amount of ₹ 50 lakhs is written by hand against the above company and further there is an Angadia expenses on 30 July 2015 which clearly shows that assessee has sent the above amount through courier and commission is paid for the same. Accordingly applying the provisions of section 292C he confirmed the addition. We do not find any infirmity in the order of the learned CIT A as the seized documents clearly shows the nature of the payment, the amount paid, the party to whom it is paid and the courier details showing the commission how it is paid. Therefore, the addition deserves to be confirmed. Appeal filed by the assessee for all these years are dismissed and appeal of the learned assessing officer are allowed for statistical purposes.
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2023 (1) TMI 1215
Addition u/s 40A - Cash purchases - assessee argued addition made relying on third party statement without giving opportunity to the assessee to rebut such statement - HELD THAT:- It is stated by the assessee that requisite sale was duly reflected in the statutory return filed before the Excise and Sales-tax authorities. The assessee has stated that sales are duly supported by the requisite evidences. The fact that the sale was made and it is supported by the evidences, is required to be verified by the assessing authority. Therefore, the issue is restored to the file of the Assessing Officer to verify the correctness of the claim of the assessee that he had sold the material to M/s Haryana Traders and also reflected the sales in Excise/WAT returns. The Assessing Officer will verify from the record of the assessee whether such return was filed related to the transactions in question and other supporting evidences. This ground of the assessee s appeal is allowed for statistical purpose.
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2023 (1) TMI 1214
Penalty u/s 271(1)(c) - as submitted there is a confusion in the mind of AO about which limb penalty is to be levied - as per assessee A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income - HELD THAT:- We find the Jurisdictional Hon ble High Court of Bombay in Mohd Farhan A Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT ] has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. Thus we are of the view that in the present case the A.O has not has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of the CIT(A) and quash the penalty notice. And allow the grounds of appeal in favour of the assessee.
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2023 (1) TMI 1213
Revision u/s 263 - PCIT has held that the A.O. has not made proper verification as to the cash deposits during the demonetization period for which the assessee is said to have not furnished the documentary evidence in support of its claim - PCIT also stated that the A.O. has failed to call for the complete details of cash deposits (old and legal notes) from the banks and has also failed to make a comparative analysis of deposits of earlier year and subsequent year from the respective banks and also from the assessee - PCIT held that in view of the audit objection raised by the IAP as well as the direction received from CCIT, Pune, the assessment order passed by the A.O. u/s. 143(3) is held to be erroneous insofar as it is prejudicial to the interest of the Revenue - HELD THAT:- A.O. has sought for details pertaining to all the issues raised by the ld. PCIT during the assessment proceedings and has also received adequate reply from the assessee by way of written submission and documentary evidences to substantiate the assessee s claim, pertaining to these issues. So from this, we can infer that there was no lack of enquiry pertaining to the issues raised. While considering the fact that whether there was inadequacy in conducting the enquiry by the A.O. was to be looked into in view of the propositions laid by the various courts. The assessee has relied on the decision of Brahma Centre Development Pvt Ltd. [ 2021 (7) TMI 347 - DELHI HIGH COURT] wherein it was held that the inadequacy in conducting the enquiry by the A.O. cannot be the reason for the ld. PCIT to invoke the provision of section 263 of the Act. From the facts of the case, it is observed that the A.O. has enquired into the details of the cash deposits during demonetization period and there is no infirmity in the conclusion arrived at by the A.O. For the issue pertaining to the deduction u/s. 80P to the assessee for which the assessee has also furnished sufficient evidences in support of its claim, we are of the view that as there are divergent views in relation to interest received from the deposits made in co-operative banks, the A.O. is said to have taken one of the view possible and has allowed the impugned deduction. A.O. has considered the submissions of the assessee and has taken one of the plausible view and passed the assessment order. We find no latches and mistakes committed by the A.O. while passing assessment order. In view of the decision by Hon'ble Apex Court in Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] merely because two plausible views are available and the A.O. has taken one view, the jurisdiction u/s. 263 of the Act cannot be exercised and we thereby hold that exercise of power u/s. 263 of the Act was not in accordance with the law. Appeal filed by the assessee is allowed.
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2023 (1) TMI 1212
Disallowance of depreciation on purchase of assets from its holding company - HELD THAT:- CIT(A) has recorded a finding that though the transfer of assets was between holding company and subsidiary company, the exemption provided u/s 47 was not availed by the transferor company and the transferor company has offered capital gains on such transfer - we notice that the fifth/sixth proviso as the case may be, relates to the case of apportionment of depreciation between the transferor-company and transferee company. We also agree with the analysis made and decision given by CIT(A) holding that the provisions of Explanation 4A, 3 and 6 of Sec.43(1) shall not be applicable to the facts of the present case. The provisions of sec. 43(6)(c)(i)(C) was related to the computation of WDV and it is not applicable, since the assessee has purchased the assets in the hands of seller. We are of the view that the Ld CIT(A) was justified in holding that the assessee is entitled to claim depreciation on the purchase cost. Disallowance of depreciation on the claim of site restoration cost - We are of the view that the depreciation on site restoration cost is not allowable as deduction. Accordingly, we are of the view that the Ld CIT(A) was not justified in allowing depreciation on site restoration cost. Accordingly, we reverse the order passed by Ld CIT(A) on this issue and restore the disallowance made by the AO on site restoration cost. Depreciation claim relates to the disallowance of depreciation on new assets for want of evidences - HELD THAT:- We notice that the AO had made the disallowance of depreciation on the new additions without discussing anything in the assessment order. Only in the remand report, the AO has stated that the assessee did not produce bills. The submission of the assessee before CIT(A) was that the number of towers installed by TTSL on its behalf during November, 2007 to Feb. 2008 was 6603 and the assessee has installed 879 new towers. It is submitted that the materials are purchased in bulk and kept in ware houses. The materials were issued to the construction sites as per the requisition. It is also submitted that the assessee keeps track of goods received and goods issued (GR-GI) for the entire addition of fixed assets and each invoice can be tracked to GR-GI. The assessee being a limited company, its accounts are audited and hence the purchase of materials could not be doubted with. As noticed earlier, the assessee contends that the receipt and issue of materials could be tracked by it in its computer systems. The number of new towers added by the assessee during the period from November, 2007 to March, 2008 was not disputed. Hence the new towers added would definitely have corresponding cost. CIT(A) has observed that the assessee could bring 100 binders before him. Accordingly, under these set of facts, we are of the view that there is no reason to suspect the addition of new towers worth Rs.223.41 crores. Accordingly, we are of the view that the assessee would be entitled for depreciation claimed on the above said amount. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance of the same. TDS u/s 194C - Disallowance made u/s 40(a)(ia) of the Act - A.R contended that the supply of security personnal does not involve carrying on of any work including supply of labour for carrying out any work - HELD THAT:- In the instant case, the security charges involve supply of manpower only and the same does not involve carrying on of any work within the meaning of the definition of the term work given in the Explanation III. Hence we are of the view that the provisions of sec.194C are not attracted for expenses claimed as security charges . Supply of manpower may not fall under the provisions of sec. 194J relating to professional fees . Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete the additions made u/s 40(a)(ia) relating to security charges. The balance amount of addition excluding two items, viz., tower rents and security charges are related to Repairs and maintenance - P M, Rent, Repairs and Maintenance, Legal Professional Expenses, Interest and Others The assessee did not show as to how the provisions of tax deduction at source are not applicable to the above said remaining amounts. Accordingly, we confirm the disallowance made u/s 40(a)(ia) of the Act in respect of above said items.
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2023 (1) TMI 1211
Estimation of income - Deposits in the bank accounts - undisclosed turnover - Addition made @ 8% of the undisclosed turnover by applying the provisions of Section 44AD - As argued prevailing margin ranges from 0.75% to 1% of the turnover - HELD THAT:- We note that the assessee is doing the business of jute bag trading. We have also examined the Annual Report for 2018-19 of M/S Ludlow Jute Specialties Ltd wherein the net profit margin was only 0.42% in 31.03.2019 vis- -vis 0.53% in 31.03.2018. We also note that in the current year, the assessee s profit margin on sale was also around 1%. Therefore we deem it fit and reasonable to apply the rate of 1.25% on the undisclosed turnover of the assessee. We accordingly set aside the order of Ld. CIT(A) and direct the AO to apply the rate of 1.25% on undisclosed turnover instead of 8%. Accordingly the appeal of the assessee is partly allowed.
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2023 (1) TMI 1210
Rectification u/s 154 - disclosures made in the return were wrongly picked up or missed out while the return was processed u/s 143(1) - HELD THAT:- Assessee had filed the Income Tax Return for the year under consideration with assessed income and the same was processed u/s 143(1) of the Act on 20-07-2014. Thereafter, the assessee submitted an application dated 08-09-2017 with a request to allow the loss on depreciation on building which was claimed in the Income Tax Return and to make rectification u/s 154 to reduce the demand raised on processing of Income Tax Return u/s 143(1) dated 20-07-2014. From the material placed on record, it is found that the assessee has not been able to confirm that the disclosures made in the return were wrongly picked up or missed out while the return was processed u/s 143(1). The AO had only denied the relief in the absence of any such clear cut evidence and the ld. AR has also failed to point out as to what was the mistake committed by the Revenue Authority while processing the return u/s 143(1) of the Act. It is an admitted fact that the assessee had not filed any appeal against the relief denied to the assessee but at the same time the assessee could not point out the mistake committed by the Revenue Authority. In this situation, the Bench does not find any merit in the appeal of the assessee which is dismissed.
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2023 (1) TMI 1209
Income from house property - Addition of notional income on property [flat which was vacant, calculated @8.5% of the cost price of the flat - determination of annual letting value of the property - As the assessee owned a flat at Bandra Breeze in addition to its self-occupied property in Capri Tower AO computed the deemed rent from the 2nd property by considering 8.5% of the value of the flat as appearing in the balance sheet - HELD THAT:- In the present case, it is evident that the lower authorities have determined the annual letting value by considering 8.5% of the value of the flat as appearing in the balance sheet. CIT(A) also upheld the findings of the AO on the basis that standard rent under the Bombay Rent Control Act is to be fixed @8.5% of the total investment. As noted above, in Tip Top Typography [ 2014 (8) TMI 356 - BOMBAY HIGH COURT ] held that the AO either must undertake the exercise to fix the standard rent himself and in terms of rent control legislation, if the same is applicable or leave the parties to have it determined by the court or tribunal under the said legislation - Also held until then the AO may not be justified in applying any other formula or method and determine the fair rent . In the present case, it is evident that the AO did not follow the applicable rent control legislation while determining the deemed rent of the property @8.5% of the value of the flat. Further, nothing has been brought on record to support that the findings of the learned CIT(A) were reached after undertaking the exercise to fix the standard rent in terms of applicable rent control legislation. Thus, we deem it appropriate to remand this issue to the file of the AO for determination of annual letting value in terms of the applicable rent control legislation in light of aforesaid decisions of the Hon ble Jurisdictional High Court. Accordingly, grounds raised in assessee s appeal are allowed for statistical purposes.
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2023 (1) TMI 1208
Levy of penalty u/s 271(1)(c) - addition u/s 36(1)(iii) - appellant had failed to discharge the onus of demonstrating that the loans and advances are made for the business purpose - HELD THAT:- It is an admitted fact that the appellant had not agitated the additions in the appellate proceedings. It is clearly settled position of law that when an assessee not agitated the addition in the appellate proceedings does not amount to either concealment of income or furnishing of inaccurate particulars of income. We have carefully gone through the assessment order and find that the addition u/s 36(1)(iii) was made by the AO because the appellant had failed to demonstrate the advances to sister concern were made for the business purpose. A mere making claim which is not sustainable by law itself will not amount to furnish inaccurate particulars of income as held by the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] Thus we are of the considered opinion that the appellant cannot be held guilty of furnishing inaccurate particulars of income and, therefore, the Assessing Officer was not justified in levy of penalty u/s 271(1)(c) - Decided in favour of assessee.
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2023 (1) TMI 1207
Income deemed to accrue or arise in India - TSIS Service Fee received by the assessee is taxable as royalty- India France DTAA - HELD THAT:- We find that the taxability of income arising from similar services rendered by the assessee s group concern, namely, Edenred PTE Ltd came up for consideration before the coordinate bench of the Tribunal in Edenred PTE Ltd [ 2021 (1) TMI 76 - ITAT MUMBAI] for the assessment year 2013-14. The coordinate bench of the Tribunal after considering the facts of the case decided the similar issue in favour of the assessee s group concern and held that income arising from the provision of services by the assessee cannot be treated as royalty either under the provisions of the Act or under the India Singapore DTAA. An the present case, from the nature of services provided by the assessee, it is evident that the services are performed by the assessee s own personnel in France and the payment on account of search services was directly remitted by the Indian group companies to the assessee. As part of the TSIS Service Agreement, the Indian group companies only receive standard services and no licences in any software/right to use any software etc. is provided - there is no sharing of any confidential information by the assessee with the Indian group companies. The term Royalty is not as widely defined in India France DTAA as in the India Singapore DTAA, which was taken into consideration by the coordinate bench of the Tribunal in the case of sister concern. Since it has not been disputed that the facts of the present case are similar to the case of the assessee s group concern, wherein income arising from services of similar nature are held to be not taxable as royalty, therefore, we find merit in the plea of the assessee. Accordingly, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we direct the AO to delete the addition in respect of TSIS Service Fees received by the assessee. As a result, ground No. 2 raised in assessee s appeal is allowed. Management Service Fee received by the assessee in the nature of royalty - As per the assessee, the services are provided only to support the Indian group companies in carrying on business efficiently and running the business in line with the business model, policies, and best practices followed by the Edenred group. From the perusal of documents available on record, it is evident that the services are general management services rendered by the assessee to its Indian group companies on a recurring basis and there is no use or right to use any copyright, patent, trademark, design, etc. Further, there is no sharing of any confidential information by the assessee with the Indian group companies. Though the assessee is a resident of France and therefore, is entitled to provisions of the India France DTAA, however, even under the provisions of the Act the fees received by the assessee for rendering the aforesaid services do not constitute royalty. As the impugned management services rendered by the assessee are to be examined only on the touchstone of royalty in the present appeal, therefore, we are of the considered view that Management Service Fee received by the assessee is not in the nature of royalty and thus, the AO is directed to delete the addition on this account. As a result, ground No. 3 raised in assessee s appeal is allowed. Taxability of management service fees received by the assessee as fees for technical services - India France DTAA - HELD THAT:- As during the year under consideration, the assessee rendered the services to its Indian group companies under Management Services Agreement which was executed in the preceding assessment year. Under the agreement, the services provided by the assessee broadly include management services in the nature of public relations services, corporate social responsibility, partnership opportunities, networking coordination, financial services, legal services / advices, human resources. The assessee, inter-alia, claimed benefit under para 7 of the Protocol to the India France DTAA and submitted under the restrictive definition of fees are included services as provided in Article 12(4) of the India USA DTAA, the services provided by the assessee are not taxable. In order to decide the claim of the assessee, it is relevant to note the provisions of the Protocol to the India France DTAA. In the present case, the assessee is a resident of France and thus in view of para-7 of the Protocol to the India France DTAA has sought the benefit of the restricted scope of the definition of fees for included services as provided under the India USA DTAA. We are of the considered view that CBDT Circular No. 3/2022 dated 03/02/2022 is not applicable to the present appeal. Therefore, in view of the aforesaid findings, we are of the considered opinion that the assessee is entitled to claim the benefit of the restricted definition under India USA DTAA in view of the Protocol to the India France DTAA. Since the assessee has been found not to have made available any technical knowledge, experience, skill, or know-how, therefore, Management Service Fees received by the assessee cannot be taxed under the provisions of Article 13 of the India France DTAA read with para 7 of the Protocol to the India France DTAA and Article 12(4) of India USA DTAA. In view of the above, the alternative claim of the assessee under India Finland DTAA becomes academic. Further, once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Act, as in terms of section 90(2). The taxability of impugned receipts, u/s 9(1)(vii) of the Act, is thus wholly academic. Hence, the AO is directed to delete the addition on this account. Accordingly, ground No. 2 raised in assessee s appeal is allowed.
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2023 (1) TMI 1206
Income from other sources - netting method - assessee had earned interest on fixed deposits with IDBI Bank and assessee had set off the same against the interest expenditure incurred for construction etc. and the net amount was capitalized - as argued interest by the assessee was earned during the course of its business and as such the same has been correctly been capitalized after netting off - HELD THAT:- As in assessee s own case for assessment years 2012-2013 and 2013-2014 [ 2021 (2) TMI 1328 - ITAT HYDERABAD] Tribunal in the above case, by following the judgment of ACG Associates Capsules Pvt. Ltd. v. CIT [ 2012 (2) TMI 101 - SUPREME COURT ] had directed the A.O. to adopt the netting method. Thus we direct the A.O. to allow the netting off of interest.
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2023 (1) TMI 1205
Reopening of assessment u/s 147 - unexplained money u/s 69A - Validity of notice issued - HELD THAT:- It is pertinent to note that to meet the emergency situation of additional expenses by the assessee the assessee has obtained cash not only from assessee s father and mother but also the close relative i.e. the maternal uncle, maternal aunt as well as paternal uncle and paternal aunt and the said relation cannot be doubted by the Assessing Officer. The gift offered by this relatives are appears to be genuine and therefore, the CIT(A) was not right in confirming the addition of the extent of Rs. 4,00,000/-. Validity of notice - date of approval and date of issuance of notice was identical - As regards, the legal ground of the assessee merely that date of approval is identical to the issuance of notice cannot be treated as the time barring or non-valid notice under Section 148 of the Act. Therefore, the submission to that extent of the assessee is rejected. The appeal of the assessee is partly allowed.
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2023 (1) TMI 1204
Revision u/s 263 by CIT - Addition u/s 68 on account of bogus share capital - HELD THAT:- We are satisfied that the assessee has nothing to say in support of its alleged bogus share capital claim. Apart from the above, we also notice that impugned order was passed in 2016 by the ld. 1st Appellate Authority, whereas appeal has been filed in 2021. The only explanation taken by the assessee is that Certified Copy was obtained by the assessee on 03.12.2020. There is a huge gap of roughly four years, which has not been explained by the assessee, or no one has responded to the notices issued by the Tribunal. Accordingly we do not find any merit in this appeal, it is dismissed. Appeal of the assessee is dismissed.
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2023 (1) TMI 1203
Levy of interest u/s 234C and 234B - Estimation of income for advance tax - assessee has submitted that it is engaged in the business Portfolio Management Services and excess interest was charged by the CPC, Banglore because of performance fees which was reported by the assessee from its client on 31.03.2019 - HELD THAT:- As in the case of Prime Securities Ltd. [ 2010 (12) TMI 475 - BOMBAY HIGH COURT] and decision of Kotak Securities Ltd [ 2011 (7) TMI 1395 - ITAT MUMBAI] and Kumari Kumar Advani [ 2016 (7) TMI 1600 - ITAT MUMBAI] held that in the case of the assessee it had estimated its income and liability for payment of advance tax in accordance with law that was in force, therefore, there was no failure on the part of the assessee to pay advance tax in accordance with provision of Sec. 208 and 209. In the case of Prime Securities [ 2010 (12) TMI 475 - BOMBAY HIGH COURT] it is held that it was not possible for the assessee to anticipate the events that were to take place in next financial year and pay advance tax on the basis of those anticipated events. After considering all we observe that lower authorities had not controverted the facts reported by the assessee that because of uncertainty about the equity market it cannot estimate before hand amount of performance fees as discussed supra for the purpose of calculation of advance tax. No material has been brought by the revenue to controvert the aforesaid factual submission made by the assessee, therefore, following the finding of judicial pronouncements in the cases as referred above we consider that decision of ld. CIT(A) is not justified, therefore, we allow the ground of appeal of the assessee.
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2023 (1) TMI 1202
Exemption u/s 10(38) - AO has classified the gains from transfer of long term capital asset being as part of the business activities of the assessee and accordingly denied exemption u/s 10(38) - sale of investment does not qualify to be income from general insurance business therefore, section 40 of the Act is not applicable and the general section 28 of the Act will come into action - HELD THAT:- The words business of insurance here includes all the activities, which enable the insurance company to run the said business of insurance to not just earn profits and for gains but to indemnify the policy holders. Investment of funds in most secured modes has been ensured by IRDA guidelines and the Insurance Act, so that in an attempt of Insurance business company, trying to earn out of risk bearing investments, the insured persons is not left at loss. So, these investments cannot be termed as stock in trade of the to earn income and make gain, independently of the business of insurance run by the assessee and ld Tax authorities below have completely failed to take note of it and Ld. AO reached a erroneous conclusion that the assessee was doing two different business, one of general insurance business and second other business‟. In the present assessment year the ld AO has himself allowed exemption u/s 10(15)(iv)(h) of the Act in regard to investment of tax free in public sector bonds. But still the Ld. AO, without citing reasons as to how u/s 10(15)(iv)(h) of the Act is applicable and Section 10(38) of the Act is not applicable, made the distinction and made the addition avoiding Section 10 of the Act. As observed that Profits and gains of business‟ is one of the classified heads of the income as per Section 14 of the Act. To arrive at the income by way of Profits and gains of business‟ for the purpose of Section 14 of the Act, the scope of total income provided under Section 5 of the Act has to be read with Section 10 of the Act, which as part of Chapter III of the Act, falls under the heading incomes which do not form part of Total Income . So, in any case the income by way of Profits and gains of business‟ which here in case of assessee means Profits and gains of insurance business , has to be arrived after giving benefit of exclusion of the incomes falling under Section 10 of the Act. That would include disputed exemption of section 10(38) of the Act. Even otherwise, the issue about applicability of provisions of section 10 of the Act in case of general insurance company stands decided in favor of insurance business companies In any way we look, the assessee is entitled exemption u/s 10(38) like any other assessee for computation of Income and ld tax authorities below have fallen in error in not extending the benefit. In fact the ld CIT(A) has decided the issue against the assessee following his finding in Assessment Year 2007-08 wherein, the Tribunal‟s order dated 22.07.2011 for Assessment Year 2004-05 was followed. However, as a matter of fact in assessee‟s own case for Assessment Year 2005-06, reproduced above, issue were decided in favour of the assessee by the Hon ble Delhi High Court. Consequently, ground are decided in favour of the assessee by holding that assessee/appellant is entitled to benefit of Section 10(38) of the Act. However, the matter needs to be restored to the files of the Ld. AO to enquire that claim of assessee u/s 10(38), fulfills the desired conditions about payment of Securities Transaction Tax (STT). Applicability of section 115JB - HELD THAT:- Issue decided in assessee own case [ 2017 (9) TMI 172 - DELHI HIGH COURT] in favour of the Assessee and against the Revenue by holding that Section 115JB of the Act does not apply to insurance companies.
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2023 (1) TMI 1201
TP Adjustment - comparable selection - Functional dissimilarity - HELD THAT:- Assessee does Software development as per the basic design provided by its AEs. It is also mentioned in the TPSR that assessee also undertakes the design and other services in the entire Software development life cycle. Assessee also undertakes software coding, thus companies functionally dissimilar will be excluded.
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2023 (1) TMI 1200
TP Adjustment - comparable selection - HELD THAT:- Assessee reported international transactions in respect of Software Development Service (SWD), IT Enabled Services (ITeS). The arm's length price of the international transactions in SWD/ITeS segments provided to the associated enterprises (AE) has been determined by applying Transactional Net Margin Method (TNMM), stating to be the most appropriate method in the facts and circumstances of the case. The operating profit to operating cost ratio has been taken as the profit level indicator (PLI) in TNMM analysis. Companies functionally dissimilar with that of assessee need to be deselected. All comparable companies sought for inclusion by the assessee in SWD and ITES segment are remanded to the Ld.AO/TPO for reconsideration based on the details filed by the assessee. The Ld.AO is directed to verify the same in accordance with Law, by granting proper opportunity of being heard to the assessee. Direction to the Ld.AO/TPO to adopt correct margin in respect of the comparables that would be finally retained - We direct the Ld.AO/TPO to compute the margine as per rules while passing the OGE.
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2023 (1) TMI 1199
Nature of expenditure - Vehicle registration expenses - revenue expenditure - AO disallowed the same by holding it to be capital in nature - Disallowance of comprises of two components being as paid by the assessee as earnest money deposit with regards to Government tender applied during the period AND balance is in respect of registration of new vehicles and or vehicles that was transferred from Andhra Pradesh to Karnataka - HELD THAT:- In respect being the earnest money deposit there is a categorical observation by the Ld.CIT(A) that these are refundable deposits and therefore has been rightly treated as not revenue in nature which is disallowed by the Ld.CIT(A) u/s. 37(1). It is not in dispute that the said amount has not been expended for the purposes of business. Under such circumstances, the disallowance is not warranted. We therefore direct the Ld.AO to allow as an expenditure incurred by the assessee for the purposes of its business. Coming to the registration expenses incurred by assessee we note that the Ld.CIT(A) has rightly considered the vehicles to be capital asset as these vehicles are admittedly put to use for the purposes of business. Under such circumstances, granting of depreciation is rightly been directed by Ld.CIT(A), which is in accordance with law. We do not find any infirmity in the view taken by Ld.CIT(A) and the same is upheld. Loss as declared in the revised return - AO did not consider the claim disallowance if interest as per the revised return - HELD THAT:- As decided in case of Goetze India Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] this issue needs to be remanded to the Ld.AO to consider the loss as declared by the assessee in the revised return. Nature of expenditure - product development expenses - revenue or capital expenditure - HELD THAT:- As decided in own case [ 2022 (2) TMI 1338 - ITAT BANGALORE] it is necessary to find out as to whether the assessee has incurred all these expenses on its own account or on behalf of its AE. If the assessee has incurred expenses on behalf of the AE and the benefits of these expenses go the AE, then the Ld DRP was justified in disallowing this claim. If it is not so, then the assessee is required to prove that these expenses are not capital in nature. The facts available on record are not clear as to whether these expenses are routine expenses incurred for expansion of existing business or not. If it is so, then the relevant expenses are allowable as revenue expenditure. In the absence of relevant details, we feel it proper to restore this issue to the file of AO for examining it afresh in the light of discussions made supra and also in accordance with law. - Based on the above, we remand this issue to the Ld.AO for considering it afresh in light of the above observation by the coordinate bench. TP Adjustment - comparable selection - HELD THAT:- Inclusion of Bharat Insecticides Ltd. as this comparable is engaged in Pesticides Formulation and therefore is comparable to the assessee. Bharat Rasayan Ltd - This comparable has only segmental head from which, the revenue is generated being gross sales and assessee also has not bifurcated its revenue from the sales in local market and export sales. As far as the products manufactured and sold are concerned, this comparable is also manufacturing similar products(pesticides) like that of assessee. We therefore do not find any reason to exclude this comparable from the final list. The Ld.AR pointed out that in Ground no. 12, assessee seeks to rectify the errors while computing the margins of this comparable. We therefore direct the Ld.AO to compute the margins of this comparable correctly and in accordance with law. Rallis India Ltd - This company is into manufacturing non-pesticide kinds of products which are farmer friendly and in accordance with the changing agricultural needs. The basic raw materials for manufacturing such products are organic compost delivered out of the waste from sugarcane factories and has revealed itself to be a go green branded company. We note that from the functions performed by the assessee, before us, the assessee is into manufacturing of pesticides based on chemicals and formulations imported as raw materials from its AE. The basic ingredients forming part of raw materials are lithium metals etc which are chemical in nature and therefore cannot be compared with that of the present comparable sought for exclusion. We therefore direct the Ld.AO to exclude this comparable from the final list. Non granting of Working Capital Adjustment in respect of the comparables to iron out differences if any - DRP denied the claim as no details regarding the same were not furnished by the assessee - HELD THAT:- We direct the assessee to furnish all details to assist the Ld.AO/TPO to compute Working Capital Adjustment on actuals. We also draw support from the observation of Coordinate Bench of this Tribunal in case of Huawei Technologies India (P.) Ltd. [ 2018 (10) TMI 1796 - ITAT BANGALORE] - We thus remand this issue to the Ld.AO/TPO for considering the claim of the assessee of Working Capital Adjustment in accordance with the principles laid down supra. Adopting the foreign exchange revenue filter for excluding comparables having earnings in foreign currency exceeding 40 % as against 25% - HELD THAT:- Both sides submitted that Ground No.3-4 in revenue s appeal are also on the issue of arbitrary adoption of foreign exchange currency filter at 40%. It is submitted that this is the only issue raised by the revenue in its appeal. We have perused the submission advanced by both sides in light of records placed before us. As noted that, such filter has not been applied by the Ld.TPO. And there is no basis for adopting 40% filter, applied by the Ld.CIT(A). In the interest of justice, we remand this issue to the Ld.AO/TPO to consider a consistent approach in respect of selecting the range of this filter. In the interest of justice we remand this issue back to the Ld.AO/TPO to consider this claim in accordance with law. Not treating Foreign exchange loss as extra ordinary and therefore to be excluded for computing operating margin - HELD THAT:- The reliability and accuracy of adjustments would largely depend on availability of reliable and accurate data. For certain types of adjustment relevant data for comparables may either not be available in public domain or may not be readily determinable based on information available in public domain. Whereas it may be possible to make equally reliable and accurate adjustment of the tested party whose data is easily accessible. The purpose and intent of comparability analysis, is to examine as to whether, or not, the values stated for the international transactions are at arms length. It means, it is an exercise to ascertain, whether the price charged in case of a controlled transaction is comparable to the price charged under the uncontrolled transaction of similar nature. In our view the regulations do not cast any restriction to provide adjustment to be made on the tested party. Therefore if the data in respect of uncontrolled transactions are not sufficiently available in order to iron out the differences, the adjustment is to be made in the hands of the tested party. Accordingly we remand these issues back to the Ld.AO, with the direction to consider the claim of assessee based on the above discussions in respect of the forex loss earned by assessee on ECB loans for year under consideration, as non operative in the hands of assessee. TP adjustment to international transaction - HELD THAT:- As we direct the AO/TPO to restrict the transfer pricing adjustment to the international transactions relating to import of raw materials and finished goods entered with its A.Es.
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2023 (1) TMI 1198
Claim of interest u/s. 244A(1A) - Interest on refunds - days of delay for granting of additional interest as claimed by the assessee u/s. 244A(1A) - approval from the Pr. Commissioner or Commissioner for additional period of six months to give effect to the order - HELD THAT:- We find it proper to remit the matter on this issue to the file of Ld. AO for the limited purpose of verification of records to take note of the date on which the office of the Pr. Commissioner/Commissioner received the order of the Tribunal and if any approvals as required under the proviso to section 153(5) of the Act were obtained by the Ld. AO for the additional period of six months for giving effect to the order. AO is directed to grant additional interest as envisaged u/s. 244A(1A) of the Act by ascertaining the delay beyond three months from the end of the month in which the order of ITAT was received in the office of Pr. Commissioner/Commissioner. Further, in case, an extension was obtained by the Ld. AO for giving effect to the order of ITAT, then the delay, if any, in granting the refund will be calculated from the end of the month in which the cumulative time available to the Ld. AO for giving appeal effect expired i.e. the initial time of three months as well as the additional extended time granted by the Pr. Commissioner/Commissioner, to the date on which the actual refund was granted to the assessee. We also direct the assessee to provide all of its cooperation to the Ld. AO as and when called for in this respect. This ground of appeal for all the five years before us is allowed for statistical purposes. TDS done by the Ld. AO on the interest granted u/s. 244A(1) - taxability of interest in terms of Article 12(3)(a) of the India- Italy DTAA - Hon ble High Court of Madras in the case of Ansaldo Energio SPA [ 2016 (5) TMI 945 - MADRAS HIGH COURT] has held that the interest on income tax refund is a debt claim payable by the Revenue in terms of Article 12(3)(a) of the India-Italy Treaty and thus such interest is not taxable and no TDS ought to be done by the AO. We note that Ld. CIT(A) has wrongly interpreted this finding of the Hon ble Madras High Court as application of deeming provisions and, therefore, we set aside the finding of the Ld. CIT(A) on this aspect. Accordingly, we direct the Ld. AO to refund the TDS done on the interest paid to the assessee on the Income Tax refund under section 244A(1) of the Act. Thus we hold that in the present case of the assessee, the beneficial provision restricting the scope of taxability of interest in terms of Article 12(3)(a) of the India- Italy DTAA namely, non-taxability of interest on income tax refund by virtue of it being a debt claim from the Government of India as held by the Hon ble Madras High Court (supra) would be applicable in view of the Protocol to the India-Netherlands DTAA and, therefore, the interest in question received by the assessee u/s. 244A(1) from the Government of India will not be taxable. Consequently, no tax was required to be deducted thereon by the Ld. AO while remitting the said interest to the assessee and thus AO is directed to grant the refund of the TDS so done. This ground of appeal for all the five years is allowed. Short granting of interest u/s. 244A(1) - As contented AO has not granted interest in 244A(1) from the date of order giving effect i.e. 13.11.2019 up to the date on which actual refund was received by the assessee i.e. 02.03.2000 - As date from which the grant of interest on refund starts is not in dispute. The only dispute is in respect of whether the interest should be granted up to the date of preparation of order giving effect or it should be granted up to the date on which actual refund was received by the assessee - as per case of Small Industries Development Bank of India [ 2017 (9) TMI 1971 - ITAT MUMBAI] wherein it was held that assessee was justified in seeking interest u/s. 244A up to the date of receipt of the refund voucher. In our view the ground raised by the assessee for claiming interest u/s. 244A(1) up to the date on which actual refund was received i.e. 02.03.2020 is justified. Accordingly, we direct the Ld. AO to recompute the interest due to the assessee in compliance with our aforesaid decision. Accordingly, this ground of appeal for all the four years is allowed. Erroneous levy of interest u/s. 234C - erroneous adjustment of other payments against the refund determined by the Ld. AO - assessee has contended that no interest u/s. 234C of the Act is leviable in view of the fact that entire income of the assessee, who being a non-resident, was subjected to TDS - HELD THAT:- As per the provisions of section 234C of the Act, we find it proper to direct the AO to verify and ascertain that the return of income filed by the assessee was entirely subject to TDS and its tax liability on the returned income was in entirety covered by the TDS done. If found so, the interest charged u/s. 234C of the Act be deleted and the refund recomputed accordingly. Thus, this ground of appeal is allowed for statistical purposes. Ground taken for erroneous adjustment of other payments against the refund determined by Ld. AO , we direct the Ld. AO to provide the necessary details to the assessee in respect of adjustment made, for its verification and rebuttal. Based on the clarifications submitted by the assessee in respect of the other adjustments, the Ld. AO is directed to re-consider the adjustment in accordance with the provisions of law. Accordingly, this ground of appeal is allowed for statistical purposes.
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2023 (1) TMI 1197
TP Adjustment - International transaction involving AMP expenses - difference in the arms length price (ALP) of advertisement, marketing and promotion (AMP) expenses allegedly incurred on behalf of AE - HELD THAT:- After hearing the parties at length, the Hon'ble Delhi High Court including the decision in case of Maruti Suzuki India Ltd. [ 2015 (12) TMI 634 - DELHI HIGH COURT ] and held that the Revenue was unable to make out a case that there is an international transaction involving AMP expenses between the assessee and its AE. As observed, following the aforesaid decision of the Hon'ble Delhi High Court, the Tribunal held that AMP expenses incurred by the assessee cannot be treated as international transaction. Considering the fact that the issue is pending before the Hon'ble Supreme Court by way of an SLP filed by the Revenue, the Tribunal restored the issue back to the AO to decide afresh after considering the decision of the Hon'ble Supreme Court. In the context of the aforesaid decision of the Tribunal, learned Departmental Representative has submitted before us to remit the issue to the Assessing Officer. However, we have observed, while deciding identical issue in assessee s own case in assessment year 2015-16 [ 2020 (1) TMI 861 - ITAT DELHI ] the Tribunal has decided the issue in favour of the assessee. Disallowance Being expenditure incurred on credit card - HELD THAT:- It is evident, in compliance with the directions of learned DRP, the AO has accepted major part of the expenditure incurred by the assessee. However, he disallowed an amount alleging a difference between the payment actually made as per the assessee and payment as per AIR information, which the assessee failed to reconcile. Before us, it is the contention of the learned counsel for the assessee that the actual difference would work out to an amount. Keeping the assessee, we restore the issue back to the AO for verifying the factual details filed by the assessee and thereafter restrict the disallowance to the actual difference which the assessee will be unable to reconcile. This ground is allowed for statistical purposes. Disallowance being expenditure on account of daughter s marriage fund - HELD THAT:- It is a common point between the parties that the Tribunal has decided identical issue in favour of the assessee in assessment year 2015-16. As could be seen from the facts on record, the assessee incurs certain expenditure, being payment made to employees to meet some part of the marriage expenditure of their daughter. It is observed while deciding identical issue in assessee s own case in assessment year 2015-16, the Tribunal has restored the issue back to the Assessing Officer. Disallowance of loss claimed - AO noticed that the assessee has claimed expenditure under the head extraordinary item in the statement of profit and loss account - Being of the view that such claim is not allowable, the Assessing Officer disallowed it and the disallowance was also upheld by the learned DRP - HELD THAT:- The facts on record clearly reveal that the loss claimed by the assessee is only in the nature of a provision and is a projected figure. No material has been placed on record before us to demonstrate that the insurer has settled the claim in the financial year relevant to assessment year under dispute. On a specific query from the bench, learned counsel for the assessee has submitted that the insurance claim was settled in the next financial year relevant to assessment year 2017-18. Learned counsel was not able to furnish any documentary evidence, being any communication received from the insurer to demonstrate that the claim was settled at a particular amount in the impugned assessment year. This being the factual position emerging on record, it cannot be said that loss, if any, has crystallized in the impugned assessment year. In view of the aforesaid, we do not find any reason to interfere with the decision of the departmental authorities. Ground raised is dismissed. Disallowance being credit balance written back and treated as income under Section 41(1) - HELD THAT:- we restore the issue to the assessing officer for factually verifying assessee s claim that amount in dispute has already been offered to tax as part of other income. In case, assessee s claim is found to be correct, addition should be deleted. This ground is allowed for statistical purposes. Disallowance of the expenditure claimed towards travelling and conveyance - HELD THAT:- It is evident, the assessing officer has rejected a part of the expenditure incurred on conveyance and traveling purely on ad hoc basis. He has not pointed out any deficiency either in the accounts maintained by the assessee or the evidence furnished. When assessee s books of account are under statutory audit, such ad hoc disallowance in absence of any valid reasoning is unsustainable. Accordingly, we delete the disallowance. This ground is allowed. Disallowance being expenses on account of presents/gifts and personnel compensation cost and personnel relocation expenses - HELD THAT:- The relocation expenses are incurred by the assessee at the time of relocation/transfer of the employees from one state to another. The expenditure on account of gifts and presents are incurred by assessee towards gifts given to employees, trade partners, distributors etc. at the time of festivals or office celebrations or at the time of marriage of the employees. Thus, considering the nature of expenditure incurred by assessee, it cannot be said that they are not wholly and exclusively for the purpose of business. After all, from the nature of expenditure incurred, it is very much clear that they are for the benefit of employees. That being the factual position emerging from record, disallowance made is unsustainable. Accordingly, we delete them. This ground is allowed. Double taxation under Section 90/91 - HELD THAT:- Considering the submissions of the parties and also the fact that similar nature of dispute arising in assessment year 2015-16 [ 2020 (1) TMI 861 - ITAT DELHI ] was restored back to the Assessing Officer by the Tribunal, we are inclined to restore the issue back to Assessing Officer for fresh adjudication after factual verification. Needless to mention, assessee must be provided reasonable opportunity of being heard before deciding the issue. Deduction of education cess as business expenditure - HELD THAT:- After insertion of Explanation 3 to Section 40(a)(ii) of the Act, as noted above, education cess, being part of income-tax, cannot be allowed as expenditure. Admittedly, the decisions relied upon by learned counsel for the assessee are prior to the amendment made to section 40(a)(ii) of the Act by insertion of Explanation 3 - Thus assessee s claim of deduction of education cess has to be disallowed. Accordingly, we do so. This ground is dismissed.
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2023 (1) TMI 1196
Reopening of assessment u/s 147 - assessee has failed to submit truly and fully the entire process of fixing final sugarcane price during the original assessment proceedings - HELD THAT:- In case of sugarcane growers that the co-operative sugar factories of south Gujarat are following a practice of deciding the purchase price of sugarcane after finalisation of its accounts and its profits in the financial year subsequent to procurement of sugarcane. It was also recorded that till the time of finalization of the purchase price, ad hoc payments are distributed among the sugarcane farmers. The final price is declared after arriving at the profit earned by the cooperative sugar factories during the year of procurement of sugarcane. Thus, the ad hoc payments and final payments contain an element of profit of co-operative sugar factories, which are distributed amongst the sugar cane growers in the guise of cane price , without payment of income tax on the profit so earned. We find that exact reason of reopening was recorded for A.Y. 2007-08 - Copy of which is filed on record by Ld. CIT-DR for the revenue. Considering the fact that on similar set of fact, the re-assessment order has been quashed by Hon'ble High Court in [ 2015 (7) TMI 297 - GUJARAT HIGH COURT ] therefore respectfully following the same, we affirm the order of Ld. CIT(A). Appeal of the Revenue is dismissed.
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Customs
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2023 (1) TMI 1195
Liability of nominee directors for offence / non compliance committed prior to their appointment - EPCG Scheme - non-fulfilment of export obligation - nominee director and their contiguous liabilities - Section 140 of the Customs Act, 1962 - HELD THAT:- In the present case all directors have been appointed as nominees from among the consortium of banks to oversee the adherence of the company to its financial obligations. Their role and responsibility is thus specific and this is the context against which the liability cast in terms of Section 140 of the Companies Act, has to be tested - While there may be some justification in implicating a nominee director for statutory violations that are current, the violation in question touches upon alleged non-compliance with the terms EPCG licence issued in 2010, long prior to their appointment. No doubt, the terms of the EPCG licence required the assessee to comply with export obligations for a period of eight years after date of licence. However, at the time when such nominee directors were appointed such obligations would not have been at the forefront and there is no justification in expecting the newly appointed directors to apply their minds to the obligations that had crystallized long prior to their appointment and previously in time. It would be improper, unjustified and unwarranted to expect them to have had any participation or involvement in compliance with the continuing export obligation. Petition allowed.
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2023 (1) TMI 1194
Refund of the Customs Duty paid in respect of the imported goods - permission to re-export the imported goods - rejection of refund only on the ground that the refund claim of the appellant was hit by the provisions of Section 26A (3) ibid - HELD THAT:- The provisions of Section 26A and 27 of the Customs Act operate in different situations: Section 26A (1) specifically covers the refund of import duty in certain cases where the imported goods are found to be defective or not in conformity with the specifications, are identified to the satisfaction of the Assistant Commissioner, there is no claim of drawback and such goods are exported or the importer abandons the goods or they are destroyed or rendered commercially valueless. Thus, all the conditions at (a), (b), (c) and (d) provided under Section 26A (1) are to be satisfied cumulatively - Sub-section (3) to Section 26A prescribes that no refund under sub-section (1) shall be allowed in respect of perishable goods and goods which have exceeded their shelf life.. . Thus, in my view, the scope of sub-section (3) is limited to the cumulative conditions under (a) to (d) of Section 26A (1) ibid. and the refund claim of any duty that has been paid could be entertained provided the said goods are cleared for home consumption. By ordering destruction, the imported goods in question could never be cleared for home consumption and consequently, the provisions of Section 26A ibid. would not apply. The only provision, therefore, that applies is Section 27 and hence, the rejection of refund by taking recourse to Section 26A (3) by the authorities below is incorrect - Section 27 also prescribes a time-limit of one year, but the same is subject to the saving proviso provided under sub-section (1B). There is no dispute that the appellant paid the duty provisionally and the same is reflected in the orders of lower authorities, including the order of destruction dated 27.05.2015 and thus, in terms of clause (c) to sub-section (1B) of Section 27 ibid., the limitation (of one year), if at all, would apply from the date of adjustment of duty after the final assessment thereof. It is found that even there is no dispute that the Revenue authorities have not passed the final assessment order as yet, as could be gathered from the grounds-of-appeal - the authorities below have erred in rejecting the refund claim, in a haste, even before a final assessment could be made as required under law. Appeal allowed.
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Corporate Laws
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2023 (1) TMI 1193
Winding up petition - Sections 271 and 272 of the Companies Act, 2013 - HELD THAT:- The facts of the instant Appeal are same and identical to the case which was dismissed by this Appellate Tribunal in REGISTRAR OF COMPANIES NCT DELHI AND HARYANA VERSUS APOORVA LEASING FINANCE INVESTMENT CO LTD, UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF CORPORATE AFFAIRS, NEW DELHI. [ 2019 (12) TMI 1634 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], where it was held that It is apparent that without giving reasonable opportunity of representation to Respondent No.1 the sanction has been granted that too without applying the mind thus we find no ground to interfere in the order passed by the NCLT. Therefore, there is no merit in the Appeal, the instant Appeal is hereby dismissed.
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2023 (1) TMI 1192
Winding up petition under Section 271-272 of Companies Act, 2013 - reasonable opportunity of making representation - Whether the Central Government has accorded the sanction as per law? - HELD THAT:- The facts of the instant Appeal are same and identical to the case which was dismissed by this Appellate Tribunal in REGISTRAR OF COMPANIES NCT DELHI AND HARYANA VERSUS APOORVA LEASING FINANCE INVESTMENT CO LTD, UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF CORPORATE AFFAIRS, NEW DELHI. [ 2019 (12) TMI 1634 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], where it was held that It is apparent that without giving reasonable opportunity of representation to Respondent No.1 the sanction has been granted that too without applying the mind thus we find no ground to interfere in the order passed by the NCLT. Therefore, there is no merit in the Appeal, the instant Appeal is hereby dismissed.
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Insolvency & Bankruptcy
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2023 (1) TMI 1191
Seeking restraint order against respondent no. 2 to 5 except seeking direction to deposit their passport - whether the Appellant has locus to file application or not - whether the objection filed in application were valid? - HELD THAT:- It is clear that the Adjudicating Authority has observed that Application filed by the Applicant i.e. I.A. No. 287 of 2018 is not maintainable he being the Operational Creditor. I.A. No. 287 of 2018 was not listed for consideration and which Application is still pending and was not disposed of. In I.A. No. 287 of 2018, the Appellant has raised various issues and has prayed for several reliefs and without adverting to the said application and without giving opportunity to the Appellant on the said application it was not open for the Adjudicating Authority to make observations as noted above. When an Application is not listed before the Court nor the Adjudicating Authority heard the parties on the said application, any observations made in reference to the said application is bound to prejudice the rights of the Applicant. The Order impugned dated 05.05.2022 thus proceeded on misconception that I.A. No. 287 of 2018 was dismissed vide Order dated 14.02.2019 whereas on 14.02.2019 neither the I.A. No. 287 of 2018 was listed nor heard and nor decided. The Adjudicating Authority committed error in rejecting application - appeal allowed.
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2023 (1) TMI 1190
Maintainability of application filed under sections 33 and 34 of the IBC in relation to a previously sanctioned scheme for rehabilitation of the sick company JKSL under SICA - Whether the Adjudicating Authority was correct in giving liberty to the operational creditors to file application under section 33(3) of IBC? - HELD THAT:- The judgment in Pramod Kumar Pathak [ 2022 (12) TMI 613 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has clearly noticed the judgment of Hon ble Supreme Court in the matter of Spartek Ceramics India Ltd. [ 2018 (10) TMI 1660 - SUPREME COURT] where it was held that Judgment of NCLAT holding that the appeal filed by the Central Government in that case not maintainable in view of the fact that the Notification dated 24.05.2017 travels beyond the scope of the removal of difficulties provision is correct - Thus, it is amply clear that the notification dated 24.5.2017 issued by Central Government goes beyond the remit of removal of difficulties provision of IBC. Thus, liberty given by the Adjudicating authority in the Impugned Order to the operational creditor to file an application under section 33(3) of IBC is erroneous. While holding such a view we also note that the Adjudicating Authority in passing the Impugned Order has not noticed the law laid down by the Hon ble Supreme Court in the matter of Spartek Ceramics India Ltd. Whether the operational debt claimed by the appellants Surendra Singh Hada and Ors.is an operational debt as defined in IBC and whether it is in default and due for payment by the corporate debtor? - HELD THAT:- Whether the operational debt claimed by the appellants Surendra Singh Hada and Ors.is an operational debt as defined in IBC and whether it is in default and due for payment by the corporate debtor - the claims of workers were being paid under the monitoring and supervision of retired Hon ble Justice Mr. N.N. Mathur appointed by the State Government of Rajasthan. The substance of these public notices is that those workers/employees who have not received their past payment as admissible under the Tripartite Labour Settlement Agreements dated 9.10.2002 and 22.10.2002 should contact the Personnel Department of APPL, Kota, Acrylit Plant to receive the cheques of their due payments on any day between 1.6.2008 and 31.5.2009. Obviously, the issue of payment of past dues of former workers/employees of JKSL was being honoured by APPL and also overseen by the State Government of Rajasthan through Hon ble Justice Mr. N.N. Mathur. When we take a holistic view of the matter of payment of past dues to ex-employees, it is clear that there is no clarity about the past dues as to what was paid and what remained unpaid and also the default on the part of the corporate debtor APPL is not established, since right from 2007 onwards the corporate debtor and earlier JKSL has continued to make sincere efforts to pay such past dues. We are, therefore, quite clear that the default in payment of past dues as claimed by the Appellants Surendra Singh Hada and Others is not established in the present case. The Impugned Order insofar as it gives liberty to the purported operational creditor Surendra Singh Hada and 125 other employees to file application under section 33(3) of the IBC is not in accordance with law - It is thus concluded that in their application under section 9 the appellants Surendra Singh Hada Ors. have not been able to establish that the corporate debtor APPL committed a default which is ascribable to APPL in payment of any past dues of the ex-workers. Appeal disposed off.
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PMLA
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2023 (1) TMI 1189
Money Laundering - proceeds of crime - twin conditions as mandated under Section 45 of PML Act satisfied or not - corroborative evidences or not - tampering with the evidences or not - HELD THAT:- From the account of the A1 and A3, the money has been layered and operated the account where the proceeds of crime parked at Hong Kong. Hence, the petitioner parked a sum of Rs.59.47 crores outside the country with the support of money parked outside the country may go underground and as such it is impossible to make him to participate in the trial. Further, there is possibility of tampering with the evidence and influencing the co-accused. That apart, the twin conditions as mandated under Section 45 of PML Act shall apply in this case and the petitioner failed to adduce anything contrary to establish that he is not involved in the offence. Therefore, there is no change of circumstances to consider the present bail petition. This Court is not inclined to grant bail to the petitioner - Petition dismissed.
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Service Tax
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2023 (1) TMI 1188
Rejection of declaration in Form-SVLDRS-1 - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - It is the Petitioner s case that Petitioner never received the said communication of rejection of the declaration on 20 March 2020 either from Respondent No.4 or from the Designated Committed, prior to the 4th Respondent s letter dated 17 February 2022, by which the letter dated Nil March, 2020 rejecting the declaration was enclosed - HELD THAT:- For being eligible under the SVLDR Scheme, a written communication of the amount of duty liability admitted by the person concerned during enquiry, investigation or audit would be a quantification on or before 30 June 2019, which need not be determined upon completion of investigation by issuance of Show Cause Notice or upon adjudication. It is not in dispute that on 15 February 2018, the Superintendent of the Director General of GSTI and his team visited its office and Petitioner vide its letter dated 15 February 2018 informed the Superintendent that it had handed over the PPL to MCGM. From the definition of enquiry and investigation as set out above, it is clear that search of premises as in the case of Petitioner on 15 February 2018 falls under enquiry or investigation as defined in Section 121(m). By the said communication it was submitted that the Petitioner is entitled to the cenvat input tax credits since ultimate sale of flats was liable to tax as they had paid the same there would be no reason to issue Show Cause Notice nor impose any penalty and the proceedings be closed as they had complied with provisions of the Service Tax, MVAT and GST law. There has been no reply to this communication. The Designated Committee instead of issuing Form 3 and followed with Form 4 to Petitioner, issued a Show Cause Notice dated 21 June 2021. It is only pursuant to communication dated 14 February 2022 when request was made by Petitioner to issue Form SVLDRS-4 that vide communication dated 17 February 2022, the Respondent No.4- Additional Commissioner of CGST and Central Excise informed Petitioner that Form SVLDRS-1 filed by Petitioner had been rejected on 20 March 2020 and enclosed a copy of the said letter dated nil March 2020. Admittedly, the communication was handed over to the Petitioner on 17 February 2022. Even the SVLDRS portal still indicates the status of the applicant as Agreed by Taxpayer - It is not explained as to why if information was furnished to the Designated Committee vide letter dated 27 February 2020, a clarification was sought from the Petitioner on 22 January 2020, a date prior to the communication by the investigating agency. The SVLDR Scheme is a legislation introduced for liquidation of legacy disputes on the one hand and recovery of unpaid taxes to the government on the other. The Respondent cannot contend that the portal was not updated. Once SVLDRS-2 has been issued and there has also been a follow up from the Respondents with respect to the said Form as well as the hearing that was fixed at the appointed date and time, the Respondent-Authorities cannot renege on the same. Particularly so in the peculiar facts and circumstances of this case, where admittedly, the rejection of SVLDRS-1 was not communicated to Petitioner on 20 March 2020, but only communicated to them on 17 February 2022 i.e. after a request came from Petitioner to issue Form SVLDRS-4. Having held that the amount of Rs. 4,60,96,697/-, is the amount quantified pursuant to communication dated 23 March 2018 to the DGGSTI and the Designated Committee having issued Form SVLDRS-2 to Petitioner on 16 January 2020 and the communication of rejection having been communicated to Petitioner only on 17 February 2022, the action of the Respondent Authorities ought to be quashed and set aside - the communication dated nil March, 2020 as well as the Show Cause Notice dated 21 June 2021 cannot be sustained and are hereby quashed and set aside. Petition allowed.
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2023 (1) TMI 1187
Maintainability of petition - availability of alternative remedy of appeal - Respondents had contended that the Petitioner has an alternate remedy under the statute of filing an appeal - Demand of differential service tax - HELD THAT:- The learned Counsel for the Respondent No.2 states that instructions have been taken and the Commissioner who had passed the impugned order has expressed that there was an error in taking view and the decision in the case of M/S GO BINDAS ENTERTAINMENT PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, (NOIDA) [ 2019 (5) TMI 1487 - CESTAT ALLAHABAD ] will have to be kept in mind and dealt with, and cannot be ignored. In light of the stand taken by the Respondents, the impugned order will have to be quashed and set aside - Accordingly, the writ petition is disposed of by quashing and setting aside the impugned order dated 29 January 2021 passed by Respondent No.2. The proceeding stands restored to file of Respondent No.2, and it will be decided as per law.
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2023 (1) TMI 1186
Rejection of Petitioner s application for the benefit of the Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 - absence or inadequacy of reasons as to why the Petitioner s application for the benefit of the Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 was rejected - violation of principles of natural justice - HELD THAT:- In the cases at hand, either there are no remarks or cryptic unclear remarks. The Respondents have filed exhaustive replies seeking to place on record the reasons. Therefore, it is for the first time in this Court an adjudication will have to take place on the basis of replies filed. Such position cannot be countenanced. The Respondents cannot be permitted to abdicate their duty to fill up the Remarks column in SVLDRS-3 in a meaningful manner. The failure to do so is adding to the already crowded docket of this Court. The matters are remanded to emphasis upon and inculcate administrative discipline on the offices of the Respondents to provide reasons as required by the Statue, by setting aside the impugned orders/ communications and directing remedial action. Petition disposed off.
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2023 (1) TMI 1185
Levy of service tax - services provided by the public sector undertaking formed by the Government especially for the purpose of soil conservation and land reclamation - exemption to specified service including conservancy as per N/N. 25/2012 - scope of the term conservancy - supply of tangible service - rent-a-cab service - HELD THAT:- The activity undertaken by the appellant would be specifically covered by the Notification No. 25/2012 ST dated 20.06.2012 under Sr No.25 thereof. In view of services provided by the appellant would be exempt with effect from 20.06.2012 onwards under the notification. It is also noticed that the entire amount received by the appellant from the government in the shape of grant is in the nature of reimbursement i.e. to say the actual expenditure incurred for the provision of the service is reimbursed by the Government of Gujarat. For that reason also the amount paid by the Government to the appellant cannot be taxed as does not fall within the definition of consideration for service. In these circumstances, there are no merit in the demand of service tax under the head of business auxiliary service against the appellant. The demand on this count is set aside and the appeal on this count is allowed. Demand under the head of supply of tangible service - HELD THAT:- Neither show cause notice nor the impugned order gives any grounds to substantiate the claim that the physical possession and effective control of the equipment is not transferred to the clients but is retain to the appellant. In these circumstances, there are no evidence to support the charges levied on the appellant in regard to supply of tangible goods service - Demand on this count is also set aside and appeal is allowed. Demand under the category of rent-a-cab service - HELD THAT:- There are substantial force in the argument of the appellant that this is not a service provider/ service recipient relationship. The appellants are not in the business of rent a-cab providing rent a cab service and any recovery is made for private use of vehicle are in terms of the employment agreement. Thus, there are no merit in the argument of the Revenue - Demand on this count is also set aside and appeal is allowed. Appeal allowed.
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2023 (1) TMI 1184
CENVAT Credit - providing non-taxable output services also i.e. trading of goods as well as exempted output services - non-maintenance of separate records - Rule 6(2) of Cenvat Credit Rules, 2004 - failure to produce any of the original input service invoices for verification by audit officers and submission of randomly selected photocopies of input services invoices on Cenvat credit availed - HELD THAT:- The appellant has violated provisions of Rule 5A (2) of the Service tax Rules, 1994. Further they had availed Cenvat credit amounting to Rs. 7,10,60,401/- by making some consolidated entries in their Cenvat credit register during the period June 2014 to March 2015, which involves hundreds of input service invoices of 2007-2008 to 2013-14. The Cenvat credit has been availed without any proof of having valid documents as prescribed under Rule 9 of the Cenvat Credit Rules, 2004. They have not fulfilled the conditions of Rule 6(3A) of Cenvat Credit Rules 2004 - there is no manipulation in Cenvat credit register and all the documents and information has been provided to the department. All the original invoices are always available at their respective regional office where the input service is received. In this circumstance, the matter should go back to the adjudicating Authority for verification of the invoices /documents and Cenvat credit register maintained by the appellant - this matter is remanded to the adjudicating authority to give another opportunity to the appellant to establish its entitlement. The dispute relating to admissibility of Cenvat credit in the absence of exercise of option to avail proportionate Cenvat credit under the provisions of Rule 6 of Cenvat Credit Rules 2004 is also remanded to the adjudicating authority for a fresh decision - the condition in Rule 6(3A) to intimate the department is only a procedural one and such procedural lapse is condonable and denial of substantive right for such procedural failure is unjustified. The matter is remanded to the adjudicating authority to decide the matter a fresh after verifying the Cenvat records of the assessee - the appeal are allowed by way of remand to the adjudicating authority.
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Central Excise
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2023 (1) TMI 1183
Levy of penalty - abating the fraud - ex-superintendent of Central Excise with other person - Rebate claim - habitual offender - it is alleged that the goods were neither manufactured nor were exported and rebate claims were filed on the basis of fake documents - demand and recovery of erroneously sanctioned amount and paid as rebate of Central Excise Duty, alongwith interest and penalty - HELD THAT:- From the facts as stated in the impugned order, it is very clear mind that the appellants had conspired and perpetuated the alleged fraud by filing these rebate claims to defraud the exchequer of the amount claimed by them as rebate without payment of any central excise duty and without exporting any goods. It is settled principle in law and The legal maxim fraud vitiates everything is very relevant to the facts herein. The economic offenders/ white collared criminals need to be dealt in the strictest manner so as maintain uniformity and well being in the society and not endanger the economy of the country - It has been settled by various authorities that the word possession or similar phrases used in the statute do not imply physical possession of the goods but would imply possession in law. Reliance placed in the case of MOHAN LAL VERSUS STATE OF RAJASTHAN [ 2015 (4) TMI 688 - SUPREME COURT] , where interpreting the provisions of the Section 9 of Opium Act, 1978, and Section 18 of NDPS Act, 1985 Hon ble Supreme Court has held that A functional and flexible approach in defining and understanding the possession as a concept is acceptable and thereby emphasis has been laid on different possessory rights according to the commands and justice of the social policy. Thus, the word possession in the context of any enactment would depend upon the object and purpose of the enactment and an appropriate meaning has to be assigned to the word to effectuate the said object. Thus, it is established the phrases like Any person who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any good. used in the statute, need not be restricted to their literary meanings or imply actual physical possession or handling of the contraband goods, but these phrases refer to possession and handling of the contraband goods in law. This view has been expressed by the Hon ble Apex Court in the case of Mohan Lal, any contrary view cannot be upheld. In view of the fact that appellants were not only responsible for creating the fabricated documents but also responsible for producing the fabricated documents in respect of verification of the payment of duty and export of the goods from the port, cannot claim that they had not handled the goods in law in the manner as stated in Rule 26 of the Central Excise Rules, 2002 - thus, it is quite evident that Rule 25, 26 and 27 of the Central Excise Rules, 2002 have been framed in terms of the Rule to provide for the penalties that may be imposed for the offences as have been provided in terms of the Central Excise Act, 1944. Rule 26 either before the amendment nor after the amendment has created any offence which was not an offence as per the provisions of Section 9 of the Act. Thus, it transpires that Appellant 1 is habitual offender and has been making use of his official position to perpetuate such rebate frauds. He deserves no leniency - It is not the case that Appellant had perpetuated the fraud of Rs 1,59,07,687/- but they had filed 85 rebate claims, claiming rebate of Rs 8,32,00,658/- the fraud committed cannot be restricted to the amount claimed as rebates, as the fake documents which were prepared would be in respect of the value of goods which would be many times the amount claimed as rebate, might be in neighborhood of Rs 100 crores. The person preparing fake documents showing the export worth Rs 100 crores, without exporting any goods do not deserve any leniency. The misuse of the fake documents prepared cannot be limited to just claiming of the rebate, but these documents can be used for transporting the illegal or criminal wealth amassed by the fraudster elsewhere in the world to India through normal channels which can be used for laundering the money in India or perpetuating more criminal activities including the financing of the terror activities. Appeal dismissed.
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2023 (1) TMI 1182
CENVAT Credit - availment of input services for the taxable and exempted services - non-maintenance of separate records - whether credit of input services in respect of the Tower/Buildings were not admissible to the assessee post issuance of completion certificate? - gross violation of Rule 6(1) of the Cenvat Credit Rules, 2004 or not - HELD THAT:- There are various findings of fact recorded by the Ld. Commissioner (Appeals). One of the findings of fact recorded by the Commissioner (Appeals) is in paragraph 13 says The respondent vehemently objected to the remand made by the Ld. Commissioner (Appeals). However, the respondent without challenging the impugned order by filing an appeal or cross objection can not seek the quashing of the direction of the Ld. Commissioner (Appeals) for remand for requantification. Hence the submission of the respondent in this regard is rejected. Further it is found that the Ld. Commissioner (Appeals), decided the subject disputed matter on the basis of judgment of THE PRINCIPAL COMMISSIONER VERSUS M/S ALEMBIC LTD. [ 2019 (7) TMI 908 - GUJARAT HIGH COURT] and grievance of the revenue is that departmental appeal is pending against the decisions of said order. In these circumstances, the matter should be remanded to the original adjudicating authority to decide the matter afresh. Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2023 (1) TMI 1181
Interest on the refund amount - respondents contends that the amount deposited by the petitioner as a pre-condition for maintaining the appeal, is required to be considered as tax, as it was against the pending liability - inaction for an inordinately long period - Section 30(4) of the Delhi Sales Tax Act, 1975 - HELD THAT:- In the instant case the petitioner had pursued the respondents for processing its claim for tax and interest. Despite the same, the respondents had failed to take any action - Undisputedly, in compliance with the directions passed by this Court, the respondents were required to process the petitioner s application for refund along with interest in accordance with law. No contention has been advanced before this Court as to why the petitioner is not entitled to interest on the said amount. In the circumstances, we do not consider it apposite to relegate the petitioner to the alternate remedy, in this case. Guilty of inaction for an inordinately long period - HELD THAT:- Once the petitioner had filed the application for seeking refund of the amount along with interest, it was incumbent upon the respondents to either allow or reject the same as per law. The inaction, if any, is largely on the part of the respondents. First of all, the respondents ought to have refunded the amount as it was deposited to avail of the remedy of appeal without awaiting filing of any form - Admittedly, the petitioner had once again filed a written representation on 14.10.2020, however, this representation was also not disposed of within a reasonable period and the petitioner was constrained to approach this Court. The respondents are directed to pay interest on the sum of ₹10,00,000/- at the rates as specified under Section 30(4) of the Act, computed from the ninetieth day after the date of application dated 18.05.2012 till the date of payment - Petition allowed.
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2023 (1) TMI 1180
Refund of excess amount of CST paid - claim of sales at concessional rate of 2% has been rejected by the respondent no.3 on the ground that the tax had been borne by the petitioner and not by the Petronet - HELD THAT:- The legal issue is well settled not only by the decision of CARPO POWER LIMITED VERSUS STATE OF HARYANA AND OTHERS [ 2018 (4) TMI 146 - PUNJAB AND HARYANA HIGH COURT] , but also by the decision of this Court in the case of J.K. CEMENT LTD. VERSUS STATE OF GUJARAT [ 2020 (3) TMI 140 - GUJARAT HIGH COURT] , where this Court had categorically permitted the petitioner the refund of excess amount of the tax paid to the seller. It was a case where the petitioner had purchased from the Reliance Industries Limited the HSD in the course of inter-state trade for use of mining activities. The petitioners as the ultimate consumers had sought before the Court the amount of excess tax by producing the C-form, which had been issued by the Rajasthan authority. The excess tax had been collected by the seller Reliance Industries Limited, the CST Authority at Rajasthan. Since they issued the C-form declaration in respect of the transaction in question and the seller had already been collected the tax from the petitioner, the refund was directed not to be given by the Reliance Industries on the ground that it was not entitled to such refund as the claim would be hit by the principles of unjust, enrichment. In that case, the petitioner had furnished the statement showing the details of the purchases, tax charged and submission of C forms against the purchases as well as copy of sample invoices, etc. and the Court therefore, held that the petitioner duly complied with the direction issued by the Rajasthan High Court, the respondent authority was bound to process the refund claims under Section-11(B) of the Central Excise Act. The respondents accordingly were directed to process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller in accordance with law within stipulated time period. The respondents shall process the refund claim of the petitioner and grant the refund of tax amount collected from the petitioner and deposited by the seller in accordance with law, within period of four weeks from the date of receipt of a copy of this order - Petition allowed.
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2023 (1) TMI 1179
Levy of purchase tax - penultimate sale - raw hides and skin purchased without tax were converted as dress hides using materials purchased at concessional rate of tax under Section 3(3) of the TNGST Act - whether the exemption under Section 5(3) of the Centrals Sales Tax Act, 1956 r/w. Article 286 of the Constitution of India would inure to an exporter like the petitioner who purchased goods from a dealer without payment of sales tax, part of which was utilized for export? HELD THAT:- To facilitate a selling dealer to avail exemption, the exporter has to obtain Form-H prescribed under Rule 12(10) of the Central Sales Tax Act (Registration and Turnover) Rules, 1957 and furnish it to the dealer who effected such penultimate sale to the exporter. Only such penultimate sale prior to the export is exempt from sales tax under the respective enactment when read in conjunction with Article 286 of the Constitution of India - It is on the strength of Form H given by an exporter, the local dealer effecting a local sale or an inter-State sale can treat the sale as an exempted sale under Section 5(4) of the Central Sales Tax Act, 1956. This is the statutory mechanism prescribed for exempting a dealer effecting penultimate sale of goods to an exporter prior to export. As far as payment of purchase tax under Section 7A is concerned, there is no mechanism provided under the Act. If the ratio of the Hon ble Supreme Court in STATE OF KARNATAKA VERSUS AZAD COACH BUILDERS PVT. LTD. AND ANOTHER [ 2010 (9) TMI 879 - SUPREME COURT] is to be applied to the facts of the present case, the petitioner would be entitled to claim exemption provided the petitioner is able to establish an inextricable link between the purchase of raw hides and the export of goods viz., raw hides with the export order. There are no records to establish the same in the present case. Further, the petitioner also had local sales of dressed hides and skin. Though, on a cursory reading of the decision of the Hon ble Supreme Court, it may appear that there was an apparent contradiction between the law declared by it in Paragraph 19 and its conclusion in Paragraph 31. However, it must be borne in mind that what was sold by the assessee M/s.Azad Coach Builders (P) Limited to the exporter Tata Engineering Locomotive Co. Limited was bus body manufactured by it which was mounted on the chassis supplied by the exporter Tata Engineering Locomotive Co. Limited for export. Thus, sale of bus body was prior to the export and was a penultimate sale. It is in this background the Court held that same goods theory was not applicable to the facts of the case. In the present case, the petitioner purchased the raw hides and converted it into dress hides and skins. Thus, there was a change in the character of the goods in the hands of the petitioner before the goods were exported by the petitioner. What was purchased by the petitioner was different and what was exported by the petitioner was different - the petitioner is therefore not entitled to exemption under Sections 5(3) and 5(4) of the Central Sales Tax Act, 1956 in the light of the observations of the Hon ble Supreme Court in Paragraph No.19 in Azad Coach Builders (P) Ltd. There are no merits in the present case - petition dismissed.
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