Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 19, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
Articles
Notifications
Highlights / Catch Notes
GST
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Validity of assessment order - copy of the SIB report not provided to the assessee - The court held that the petitioner's version was not considered by the authorities due to its non-appearance before the appellate authority and that the petitioner was not provided with a copy of the SIB report, despite the entire assessment being based on it. This lack of access to crucial information severely prejudiced the petitioner's ability to defend itself, constituting a violation of natural justice. - The adjudicating authority is directed to provide the petitioner with a copy of the SIB report and any other material forming the basis of the demands and adjudicate the matter providing a full opportunity of hearing to the petitioner.
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Validity of assessment order - The High court notes that the assessment orders contain unreasoned findings regarding director's remuneration, miscellaneous expenses, and exempted turnover. Despite the petitioner's submissions and reliance on relevant provisions and circulars, the assessing officer imposed tax liabilities without proper consideration. - The High Court quashed the order and restored the matter back to AO.
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Reversal of Input Tax Credit (ITC) - The court notes that the impugned order reversed the ITC based solely on the cancellation of the supplier's registration and disregarded the documents submitted by the petitioner. The court opines that the petitioner may be required to prove the existence of the supplier at the relevant time and demonstrate the genuineness of the transaction with relevant documents. - The assessing officer is directed to consider whether the transaction was genuine by examining all relevant documents in that regard.
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Scope of supply - Providing canteen facilities for employees - The AAR concluded that GST is not applicable on the amount recovered from permanent employees for canteen facilities as it doesn't qualify as 'supply' under GST law. However, amounts recovered from employees of SMC on deputation, MSIL on business travel, and temporary workers are taxable. Suzuki is eligible for Input Tax Credit (ITC) on GST paid to the canteen service provider for permanent employees' facilities but not for the other groups or for kitchen utensils and equipment used in providing these facilities.
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Entitlement to claim input tax credit - The AAR concluded that the applicant is not entitled to claim ITC for expenses incurred specifically for the restaurant service availing a 5% GST rate without ITC. For general expenses potentially related to other business activities, ITC claims may be subject to restrictions and reversal as per the relevant GST provisions and rules. Rule 42/43 of the CGST Rules regarding the apportionment and reversal of ITC are applicable to the applicant's case.
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Disallowance of ITC - mismatch between GSTR-3B and GSTR- 2A - Rectification of GSTR-1 return - The Bombay High Court, considering the circumstances and precedent, allowed the petition, permitting the petitioner to rectify the GSTR-1 for the specified period.
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Validity of SCN issued u/s 73 of the CGSTAct, 2017, for the tax period April, 2018 to March, 2019 to the extent of confirming demand along with interest and penalty - Similar SCN struck off earlier - The High court found the new notice to be vague and lacking in details, similar to the previous one. It allowed the writ petition, setting aside the latest Show Cause Notice, and reserved the right of the respondent authorities to take appropriate action in accordance with the law.
Income Tax
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Capital gain computation - disallowance of interest on housing loan which has been claimed as part cost of acquisition - The ITAT upheld the CIT(A)'s decision, agreeing that the interest payment did not have a direct nexus with the acquisition of the property and, therefore, could not be included in the cost of acquisition for calculating LTCG.
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Unexplained investment in agricultural lands - loose paper seized relied upon - The ITAT found that the firm had shown the sale of some lands and offered the gain as business profit, supporting the argument that the lands belong to the firm. - The ITAT upheld the CIT(A)'s decision, noting that the seized document did not specifically mention the assessee's or the firm's names and the transactions mentioned in the document pertained to a different assessment year.
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Revision application filed u/s 264 - Upon perusal of the documents, the High Court noted that the matter was not heard and decided on the initial date, and no notice was given to the petitioner for the subsequent date. The court opines that the officer should have granted another opportunity to the petitioner to appear and present their case before passing an adverse order. The failure to do so constitutes a violation of principles of natural justice. Accordingly, the HC directed the PCIT to re-consider the matter.
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Reopening of assessment - concept of change of opinion - The court agreed with the petitioner's argument, stating that the reopening of the assessment was indeed based on a change of opinion by the Assessing Officer, as the issue had already been considered and no additions were made during the original assessment proceedings. The court held that such a change of opinion did not justify the assumption that income chargeable to tax had escaped assessment.
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Assessment of trust - Disallowance of revenue expenditure - The Tribunal held that, since the surplus income does not exceed 15% of the total receipts of the assessee trust, the same has to be carried forward for subsequent application of this income for charitable purposes. Therefore, no addition is called for.
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Entitlement to foreign tax credit - The Tribunal concludes that the filing of Form 67 is a procedural requirement and should be construed as directory rather than mandatory. It emphasizes that the violation of procedural norms does not extinguish the substantive right of claiming the foreign tax credit. - The Tribunal directs the Assessing Officer to grant the foreign tax credit to the assessee, based on its interpretation of the relevant provisions and judicial precedents.
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Reopening of assessment u/s 147 - additions of cash deposits - The Tribunal held that, the Assessing Officer has treated the cash deposit merely on the basis of human probability without bringing any adverse evidence on record that such cash deposit was unexplained money of assessee when the assessee was having sufficient money in his two NRE and one NRO account and explained the investment during the relevant period. - Additions directed to be deleted.
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Black Money - Beneficial ownership - undisclosed foreign income/asset - The ITAT recognized that the investments were either made by the assessee's son or were explained by loans from banks, and not by the assessee himself. Consequently, it was held that the assessee was not the beneficial owner of the trusts in question and had not made any undisclosed foreign investments. - The held that, the allegation that, because the assessee is a settlor of the trust, he remains principal beneficiary is totally incorrect and devoid of merits, more particularly in the context when other trustee are managing the affairs of the trust and also beneficial owners of trust properties.
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Deduction of research and development expenses claimed u/s 35(2AB) - weighted deduction - whether the expenditure claimed by the assessee is required to be approved by the DSIR? - The Tribunal held that in view of decision of High Court, AO directed to verify the correctness of the claim of the actual expenses incurred by the assessee in respect of scientific research in-house research and development facility. If the claim of assessee is found to be correct he would delete the impugned disallowance of expenditure.
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TP Adjustment - comparable selection - The ITAT that the turnover filter cannot be applied as a tool for cherry picking the comparables at the later stage after completion of the search process with the object of excluding comparables which was otherwise found to be functionally comparables after the Functions Assets Risks (FAR) Analysis. - The application of the second lower turnover filter by the TPO without rejecting the first turnover filter adopted by the Appellant resulted exclusion of two companies which were otherwise functionally comparable and thus, resulted in cherry picking. - TPO directed to recompute the arm's length price (ALP) accordingly.
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Entitlement to waive off the pre-deposit of 20% of the assessed tax liability being high pitched assessment - The High Courd held that, considering that the ACIT and PCIT have exercised their discretionary power by granting installment facilities 9 and 20 installments respectively, we not find that any irregularity or illegality has been committed by the revenue authorities. Accordingly, the writ petition deserves to be and is hereby dismissed.
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Unexplained expenditure u/s. 69C - Assessment u/s 153A post search - The High Court observed that the documents found and seized from the assessee’s premises were written by Appellant no. 2 , wife of Appellant no. 1. The entries in this document is relating to the business of assessee of liaisoning for which commission has been received from time to time. Assessee has made payment, as explained, in getting clear the properties or vacating the same from unauthorized occupants. Assessee does not deny that these entries did not relate to the activities carried out by him. He also admits that only part of the entries are correct. - Additions made got confirmed.
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Addition u/s 68 - Addition as income of brokerage/commission @ 2% of cash deposits as accommodation entry provider - onus to prove - The High Court concluded that the respondent had disclosed complete details of the bank accounts and transactions, and the income was correctly determined as brokerage/commission on the cash deposits. - The peak credit adopted by the ITAT to determine income of the assessee does not require interference. - The order of ITAT deleting the additions confirmed.
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Validity of Revision u/s 263 against invalid assessment - The Tribunal held that the original assessment order, being framed in the name of a deceased person, was invalid. They cited various court rulings supporting this position and concluded that the order passed under section 263 was not valid. The appeal of the assessee was allowed, and the order under section 263 was set aside.
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TDS u/s 194C - Disallowance u/s 40(a)(ia) - Non deduction of TDS on minimum guarantee expense - The Tribunal analyzed the business model of the assessee and concluded that no work was carried out, thus section 194C of the Act did not apply. The ITAT directed the Assessing Officer to delete the disallowed expenses.
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Addition u/s 43CA - difference in the value of sale consideration of the of property as shown by the assessee and value adopted by the Sub-Registrar for stamp duty purposes - ITAT held that Section 43CA, which mandates consideration of stamp duty value for tax purposes, is applicable. However, given the agreement and most payments were made in 2008, and considering the provision of Section 43CA(3), the tribunal found that the addition made by the AO was not justifiable, since the provisions are not retrospective.
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Income taxable in India or not - FTS/FIS - payments received by the assessee from its Indian customers on account of Centralized Services - absence of PE in India - The Tribunal upheld CIT(A)'s decision, emphasizing the payments received for Centralized Services are not to be classified as FTS/FIS under the Act or India-USA DTAA, aligning with precedent judgments. It was highlighted that such income constitutes business profits, not taxable in India in the absence of a Permanent Establishment (PE) of the assessee, as per the DTAA.
Customs
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Import of Plastic Injection Moulds - News goods or used / second hand goods - The CESTAT observed that, The expert is not to expected to give his impressions but has to state the facts on which he draws the opinion. - The tribunal evaluates various pieces of evidence, including the purchase order, drawings, and photographs, to conclude that it is probable and acceptable that the goods imported are indeed new, contrary to the Chartered Engineer's opinion.
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Confiscating absolutely seven gold bars having foreign make marking - Smuggling - Hyundai Verna Car - sufficient evidence to prove foreign origin goods - The Tribunal found that there was insufficient evidence to establish that the seized gold bars were smuggled. Mere foreign markings on the gold bars were not enough to prove their foreign origin. Additionally, there was no evidence to support the claim that the nine other gold bars were used to conceal the smuggled gold bars. Therefore, the confiscation of both the gold bars and the Hyundai Verna car was deemed unjustified, and the impugned orders were set aside.
Indian Laws
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Challenging the constitutional validity of the Electoral Bond Scheme “Electoral Bond Scheme” or “Scheme” - The Supreme Court held that, the Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional. - The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14
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Dishonour of Cheque - acquittal of accused - rebuttal of presumption - The High court found that the evidence presented by the complainant was sufficient to establish the accused's liability. The discrepancies in the complainant's testimony did not undermine the documentary evidence. - The court cited legal precedent to support its conclusion that once the signature on the cheque is admitted, the burden shifts to the accused to rebut the presumption of a legally enforceable debt. - Consequently it is held that, the acquittal of the accused was deemed erroneous and against established legal principles.
Service Tax
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Renting of immovable property service - Liability of Appellant (Partnership Firm) is liable to discharge service tax on property jointly owned by parents of the Appellant Firm - benefit of SSI Exemption - The tribunal held that each individual co-owner should be treated as a separate service provider for renting out their share of the property. Therefore, if the rent received by an individual does not exceed the threshold limit, they are not liable to pay service tax.
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Reversal of Cenvat Credit - Whether the appellant is liable to pay 5% / 6% / 7% of the value of exempted services (trading) as they failed to maintain separate accounts of common inputs availed for taxable services and exempted services? - The tribunal determined that the department could not deny the appellant the option to reverse proportionate credit attributable to trading, even without prior intimation. The demand for payment of 5%, 6%, or 7% of the value of exempted services was found unsustainable.
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Levy of service tax - Business Auxiliary services - incentives received from M/s. Volkswagen and M/s. Castrol India - reverse charge mechanism - The tribunal found that these incentives were related to the sales transaction and not for providing services of promoting business. As the relationship was on a principal-to-principal basis, the appellant was interested in selling more cars for profit, not promoting Volkswagen's or Castrol's business. Hence, no service tax could be levied on these incentives. - Regarding the issue of Service Tax Liability on Forfeited Advance Amount, the Tribunal held that, he forfeited advance amounts were not for providing any service but were penalties for cancellation, thus not liable to service tax.
Central Excise
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CENVAT credit - capital goods installed in the distillery plant used for manufacture of Ethyl Alcohol - The CESTAT ruled in favor of the appellant, emphasizing that Cenvat credit cannot be denied on capital goods based on the stage at which the final goods become liable to central excise duty. - Regarding the eligibility of Cenvat credit on input services used in setting up the distillery plant post-April 1, 2011, the tribunal held that such services qualify as input services under the Cenvat Credit Rules, 2004.
Case Laws:
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GST
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2024 (2) TMI 859
Profiteering - Constitutional validity of Section 171 of the Central Good and Services Tax Act, 2017 and Rules 122, 124, 126, 127, 129, 133 and 134 of the Central Good and Services Tax Rules, 2017 - legality of the notices proposing imposition or orders imposing penalty issued by the National Anti-Profiteering Authority (NAA) under Section 122 of the Act, 2017 read with Rule 133(3)(d) of the Rules, 2017 - Direction to pass on the commensurate benefit of reduction in the rate of tax or the Input Tax Credit to its consumers / recipients along with interest. It was held by High Court that The constitutional validity of Section 171 of Act, 2017 as well as Rules 122, 124, 126, 127, 129, 133 and 134 of the Rules, 2017 is upheld. This Court clarifies that it is possible that there may be cases of arbitrary exercise of power under the anti-profiteering mechanism by enlarging the scope of the proceedings beyond the jurisdiction or on account of not considering the genuine basis of variations in other factors such as cost escalations on account of which the reduction stands offset, skewed input credit situations etc. However, the remedy for the same is to set aside such orders on merits. HELD THAT:- Issue notice. However, the issuance of notice by this Court shall not be construed either by the parties or by the High Court as a restraint on the High Court for the disposal of the main petition, including WPC No 1655 of 2019, under Article 226 of the Constitution.
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2024 (2) TMI 858
Validity of assessment order - entire exercise was conducted on the basis of the SIB report and it was stated that neither by the adjudicating authority nor by the appellate authority the petitioner was provided copy of the SIB report - whether the petitioner was provided copy of the SIB report which forms basis of the entire assessment made against the petitioner? - Violation of principles of natural justice - HELD THAT:- Undoubtedly, from the aforesaid written instructions it is clear that the SIB report was never given to the petitioner and there is no dispute with regard to the same. Undisputedly, the entire assessment having been made on the basis of the SIB report it was incumbent upon the the adjudicating authority to have provided a copy of the same to the petitioner while issuing notice to him and not giving a copy of the SIB report has severely prejudiced the case of the petitioner and this Court has no hesitation in holding that the proceedings were in gross violation of the principles of natural justice. Wherever any person is asked to give his response and the charges are bases on certain matterial and documents then it is mandated that the delinquent should be provided all the material on the basis of which the said charges are framed and by not giving such materials will severely prejudice the case of a person who is asked to respond to the said charges. In the present case not providing copy of the SIB report has severely prejudiced the case of the petitioner and accordingly on this ground alone the proceedings are arbitrary being in violation of the principles of natural justice. The matter is remitted back to the adjudicating authority to provide the petitioner a copy of the SIB report and any other material which forms basis of the demands issued against the petitioner - petition allowed by way of remand.
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2024 (2) TMI 857
Cancellation of registration of petitioner - time limitation - cancellation of registration has been passed without any application of mind - no reply to SCN has been submitted - violation of principles of natural justice - HELD THAT:- In the present case, the facts are similar to one in SURENDRA BAHADUR SINGH VERSUS STATE OF U.P. THRU. PRIN. SECY. COMMERCIAL TAX (GST) LKO. AND 2 OTHERS [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT ], wherein the appeal was barred by time under Section 107 of the Act. However, the Division Bench in Surendra Bahadur Singh's case took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. The orders impugned herein are liable to be set aside. Accordingly, the order in original dated November 15, 2022 and the appellate order dated December 30, 2023 are quashed and set aside. The petitioner is directed to file its reply to the show cause notice within three weeks from date and the adjudicating authority is directed to proceed de novo and pass order after granting opportunity of hearing to the petitioner. The writ petition is allowed.
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2024 (2) TMI 856
Validity of assessment order - impugned assessment order was issued without considering the petitioner's replies and that such orders disclose non-application of mind - violation of principles of natural justice - HELD THAT:- The impugned assessment order records the finding that the tax payer did not clarify whether the director is a whole time director, independent director or part time director. It is further recorded therein that the company did not clarify whether such director was paid salary. On examining the reply dated 15.06.2023 of the petitioner, the petitioner has stated categorically that remuneration was paid to Dinesh Victor, Managing Director of the company. In view of such reply, the conclusion that the petitioner did not clarify the category of directorship is unsustainable. Material documents such as the employment contract, if any, or the terms of employment, TDS deduction particulars and the like were, however, not submitted by the petitioner. Miscellaneous expenses - HELD THAT:- The imposition of tax, penalty and interest on the basis of the total expenditure incurred towards advertisement and business promotion, repairs and maintenance, and computer and software maintenance, by drawing on figures provided in the respective financial statement is a conclusion reached without proper application of mind. Exempted turnover - reliance placed on N/N. 12/2017 - HELD THAT:- In spite of the petitioner's replies to such effect, the Assessing Officer recorded the bizarre conclusion that the petitioner was engaged in the sale of painting and art works. These conclusions indicate non application of mind to the material placed on record. Hence, the orders impugned herein warrant interference. This matter is remanded for reconsideration by the Assessing Officer. The petitioner is directed to submit all relevant documents within a maximum period of two weeks from the date of receipt of a copy of this order - petition allowed by way of remand.
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2024 (2) TMI 855
Reversal of Input Tax Credit (ITC) availed of by the petitioner - reversal on the ground that the GST registration of the relevant supplier was cancelled with retrospective effect - HELD THAT:- The contentions of the petitioner were rejected entirely on the ground that the petitioner should have proved the existence of M/s.Shikhar Technologies. The petitioner purchased goods in 2017-2018 and, at the highest, the petitioner may be called upon to produce evidence of the existence of the supplier at the relevant point of time. In addition, the petitioner may be called upon to prove that the transaction was genuine by providing relevant documents such as tax invoices, e-way bills, lorry receipts, delivery challans, proof for payment and the like. In the case at hand, it appears that the petitioner submitted such documents but these documents were disregarded. The impugned assessment order is unsustainable in the facts and circumstances. Hence, the impugned assessment order is quashed and the matter is remanded for reconsideration. The assessing officer is directed to consider whether the transaction was genuine by examining all relevant documents in that regard - Petition disposed off by way of remand.
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2024 (2) TMI 854
Seeking grant of regular bail - utilizing bogus Input Tax Credit (ITC) through fake documents - fraudulently registering the firm under GST Act, solely for the purpose of doing fraud with the Government Revenue, by way of utilizing bogus ITC via paper transactions only, with mala fide intention of not paying taxes - HELD THAT:- From the record it is apparent that the petitioner is in custody since 09.12.2022 i.e for the last more than one year. All the offences are triable by the Court of Magistrate and the conclusion of the trial may take quite a long time. Apart from that, the petitioner was involved on the basis of the statement made by Amit Kaushik, who has already been granted the concession of bail by this Court, vide order Annexure P-4. The petitioner is ordered to be released on bail subject to his furnishing bail bonds/surety bonds to the satisfaction of the trial Court/Duty Magistrate/Chief Judicial Magistrate - the present petition is allowed.
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2024 (2) TMI 853
Disallowance of ITC - mismatch between GSTR-3B and GSTR- 2A - Rectification of GSTR-1 return - case of the petitioner is that the petitioner approached the jurisdictional officer/respondent no. 2 to allow the petitioner to alter/amend the invoice details pertaining to F.Y. 2017-18 in GSTR-1 for the month of December, 2019 - HELD THAT:- The petitioner has placed reliance on the decision in the case of STAR ENGINEERS (I) PVT. LTD. VERSUS UNION OF INDIA, STATE OF MAHARASHTRA AND DEPUTY COMMISSIONER OF STATE TAX-GST [ 2023 (12) TMI 729 - BOMBAY HIGH COURT ] wherein similar issues had fell for consideration of this Court. The court considering the provisions of the CGST Act had observed that in cases where there was a bonafide error in filing of the return and when there was no loss of revenue caused to the Government/exchequer, the technicalities on any legitimate rectification ought not to come in the way of the assessee, so as to suffer an inadvertent error, which would have a cascading effect. The present situation as brought before the Court is certainly covered as discussed by the Court in Star Engineers (I) Pvt. Ltd. The petition is allowed by permitting the petitioner to rectify the GSTR-1 for the period 2017-18.
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2024 (2) TMI 852
Making prayer for direction upon the authority concerned to not to levy and collect tax on petroleum and diesel - reliance placed on Article 279A(5) of the Constitution of India by contending that the GST on petroleum, crude and high-speed diesel can be levied only after recommending the date on which the same will be leviable by the GST council - HELD THAT:- This writ petition is disposed of by setting aside the aforesaid impugned order dated 29th November, 2023 and the matter is remanded back to the respondent adjudicating authority concerned to pass a fresh order in accordance with law after giving opportunity to the petitioner to produce the relevant documents which have been indicated in paragraph 7.6 of the impugned order and if petitioner produces the documents indicated in the impugned order which according to the adjudicating authority have not been produced during the adjudication proceeding in that event petitioner shall not be asked to pay CGST on the petroleum and diesel, particularly by taking into consideration that the CGST council till date has not notified the date from which the aforesaid products will be leviable for CGST. Petition disposed ff by way of remand.
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2024 (2) TMI 851
Maintainability of petition - For want of availability of portal the petitioner could not file appeal against assessment orders - petitioner is seriously prejudiced due to non-availability of alternative mode of filing of appeal - HELD THAT:- Revenue on instructions, states that though their is no notification so far issued under Rule 108 of CGST Rules, nevertheless, if this Court directs the petitioner to file appeal by physical mode, the same shall be entertained and decided on merits. If the petitioner files offline appeal against the assessment orders passed for the assessment years 2019-20 and 2020-21 through physical mode, the same shall be accepted by the Competent Authority for decision, provided the appeal is filed within ten days from today - petition disposed off.
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2024 (2) TMI 850
Validity of SCN issued u/s 73 of the CGSTAct, 2017, for the tax period April, 2018 to March, 2019 to the extent of confirming demand along with interest and penalty - Similar SCN struck off earlier - HELD THAT:- Surprisingly, in spite of the earlier show cause notice dated 29.09.2023, being struck down by this Court by the aforesaid order as early as on 19.12.2023 which was a by-party order passed in the presence of the learned counsel for the Department as well, the respondent authorities have now passed a fresh show cause notice for the subsequent year, where, prima facie, it appears that the authorities concerned have not considered the judgment rendered by this Court on 19.12.2023 on identical set of facts in respect of the very same assessee. This appears to be somewhat strange on the part of the respondent authorities. What is also surprising to be taken note is the fact that the petitioner herein had already provided all necessary information available with them in respect of the manufacture of various products, different rate of taxes applicable on each of the products and also the details of the supply made by the petitioner to their suppliers. In spite of this information being within the knowledge of the respondent authorities, yet without any further preliminary investigation, enquiry or scrutiny being done at their level, the respondents have issued yet another vague notice bereft of details. The writ petition allowed on the same terms in which the earlier writ petition of the petitioner was passed and decided reserving the right of the respondent authorities, if permissible under law to take appropriate recourse in accordance with law.
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2024 (2) TMI 849
Maintainability of petition - requirement to deposit 50% of the disputed tax liability - HELD THAT:- Reliance placed on an order passed by coordinate bench of this Court in M/S N.G. ENTERPRISES AND ANOTHER VERSUS STATE OF U.P. AND 3 OTHERS [ 2023 (12) TMI 992 - ALLAHABAD HIGH COURT ]. It was in favour of the same petitioners, as in the present petition, but for different assessment year, where it was held that The petitioner shall deposit 20% of the disputed tax liability in addition to the earlier deposit before the assessing authority (which is 10% of the disputed tax amount). Subject to the aforesaid deposit, the recovery proceedings of the balance amount shall remain stayed till the decision of this writ petition. The view taken by the coordinate bench is agreed upon, and accordingly, similar direction is issued in the present case - It is directed that the petitioner shall deposit 20 per cent of the disputed tax liability in addition to the earlier deposit before the assessing authority (which is 10% of the disputed tax liability) - petition disposed off.
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2024 (2) TMI 848
Scope of supply - Providing canteen facilities for employees - Levy of GST on the portion of the amount recovered by the applicant from its employees towards the canteen facilities provided to them - Input Tax Credit on GST paid on the canteen services received from the CSP in terms of the proviso to section 17(5)(b) of the CGST Act - input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees on deputation and on business travel and temporary workers - input tax credit in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities to its employees. Whether the deduction of nominal amount made by the applicant from the employees who are availing canteen facilities in the factory premises would be considered as a 'supply under the provisions of section 7 of the CGST Act, 2017? - HELD THAT:- In terms of Section 7 ibid, supply means all forms of 'supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The exception being Schedule I, which includes the activities made or agreed to be made without a consideration and Schedule III, which includes activities which shall be treated neither as a supply of goods or services. The applicant's case is that they employ more than 250 employees who have been provided with canteen facility in terms of section 46 of the Factories Act, 1948. Now in terms of circular No. 172/04/2022-GST, it is clarified that perquisites provided by the 'employer' to the 'employee' in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same is provided in terms of the contract between the employer and employee - It is found that factually there is no dispute as far as [a] the canteen facility is provided by the applicant as mandated in Section 46 of the Factories Act, 1948 is concerned; and [b] the applicant has provided a copy of the Meal Policy. In view of the foregoing, it is held that the deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply' under the provisions of section 7 of the CGST Act, 2017. Employees of SMC on deputation, employees of MSIL on business travel and Temporary/Contract worker's portion of canteen charges - HELD THAT:- It is evident that the instant case in respect of temporary/contract workers, employees on deputation and employees on business travel, does not pass the test of employer-employee relationship and therefore does not fall within the ambit of entry 1 of Schedule III of CGST Act, 2017 - From the plain reading of the definition of business , it can be safely concluded that the supply of food by the applicant to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, would definitely come under clause (b) of section 2(17) as a transaction incidental or ancillary to the main business as the contractual worker are working for the company to run the business activity of the applicant. Even though, there is no profit as claimed by the applicant on the supply of food to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is indeed a supply , as provided in Section 7(1)(a) of the CGST Act, 2017. The applicant would definitely come under the definition of supplier , as per sub-section (105) of Section 2 of the CGST Act, 2017. Since the applicant recovers the cost of food from their contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is 'consideration', as defined in Section 2(31), ibid. - the applicant has established canteen facilities as mandated under section 46 of the Factories Act, 1948 and supplies food at a subsidized cost through CSP. The supply of food by the applicant is 'supply of service' by the applicant to such worker/s, the cost, which is recovered from the workers, as deferred payment is 'consideration' for the supply and GST is liable to be paid. Whether ITC of GST charged by the CSP can be availed by the applicant? - HELD THAT:- ITC will be available to the applicant in respect of food and beverages as canteen facility is to be obligatorily provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only - Input Tax Credit will be available to the applicant in respect of canteen facility which is obligatory under the Factories Act, 1948. read with Gujarat Factories Rules, 1963. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only. The recovery of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] would fall within the ambit of the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST. However, in terms of section 17(5)(b)(i), ITC is restricted in respect of supply of food and beverages. Thus, the applicant is not eligible for ITC in respect of the GST charged by the CSP for the canteen facilities provided to employees on deputation, employees on business travel and temporary/contract workers in terms of section 16 of the CGST Act, 2017. ITC in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities - HELD THAT:- In terms of section 17(5)(b)(i) of the CGST Act, 2017 and notification No. 13/2018-CT (Rate) dated 26.7.2018 wherein the GST rate is without input tax credit on supply of food or any other article for human consumption or any drink at a canteen, mess etc., it is held that the applicant is not eligible for ITC on kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc. - the applicant is not eligible to avail ITC in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities.
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2024 (2) TMI 847
Entitlement to claim input tax credit - expenses incurred for the general expenses of the Company which are meant for the purpose of business - entitlement to enjoy the benefit of the input tax credit based on the square foot area of usage of the premises - applicability of provisions of Rule 42/43 of the CGST Rules, read with SGST Rules for the claim of the input tax credit of the applicant as the declared tariff of the hotel rooms never exceeds Rs. 7499/- at any time during the year. Whether applicant are entitled to claim ITC of the expenses incurred for the general expenses of the Company which are meant for the purpose of business? - HELD THAT:- The applicant has stated that they are providing restaurant services and discharging GST @ 5% by availing the benefit of notification 11/2017-CT (Rate) as amended - A conjoint reading of the facts mentioned with the wording in the notification under which the applicant discharges GST, depicts that the applicant by virtue of providing restaurant service at a premises other than at a specified premises is eligible for availing the benefit of the notification subject to the condition that input tax charged on goods and services used in supplying the service has not been taken. Explanation (iv) would come to play meaning thereby that credit of input tax charged on goods or services used exclusively in supplying restaurant service is not eligible. Further, credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for ITC, is reversed as if supply of such service is an exempt supply attracting provisions of section 17(2) of the CGST Act, 2017 and the rules made thereunder. The applicant has not mentioned as to what other supplies are being made by them. Non mentioning of the details of such other supplies, if any, by the applicant has resulted in a situation wherein we can only state that if/since they are only providing restaurant services the question of availing ITC in respect of expenses incurred for general expenses of company, does not arise. However, if they are engaged in providing certain other supplies eligible for ITC, information of which are not privy to, in such a situation explanation (iv) (b) of the basic notification No. 11/2017-CT (Rate) would apply and credit would be eligible subject to the same. Whether applicant are entitled to enjoy the benefit of the input tax credit based on the square foot area of usage of the premises? - Whether the provisions of Rule 42/43 of the CGST Rules, read with SGST Rules are not applicable to the claim of ITC of the applicant as the declared tariff of the hotel rooms never exceeds Rs. 7,499/- at any time during the year? - HELD THAT:- If the applicant is engaged in providing certain other supplies eligible for ITC, information of which we are not privy to, in such a situation explanation (iv) (b) of the basic notification No. 11/2017-CT (Rate) would apply and credit would be eligible subject to the same. The credit however, shall be restricted in terms of section 17(2) of the CGST Act, 2017. The manner of determination of ITC in respect of inputs or input services and reversal thereof would clearly be governed by Rule 42 of the CGST Rules, 2017. Likewise, in the manner of determination of ITC in respect of capital goods and reversal thereof would clearly be governed by Rule 43 of the CGST Rules, 2017. The applicant has stated that section 17 of the CGST Act, 2017 would not be applicable to the present case. However, there are no merit in the argument more so since it is found that the argument is made ignoring explanation (iv) of the basic notification no. 11/2017-CT( Rate) dated 28.6.2017.
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Income Tax
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2024 (2) TMI 867
Capital gain computation - disallowance of interest on housing loan which has been claimed as part cost of acquisition - case of the assessee that deduction u/s 24(b) of the Act as claimed when the assessee declares income from house property whereas the indexed cost of the said asset was taken into consideration when the asset was sold and capital gains are computed u/s 48 - HELD THAT:- As per Section 48 of the Act, the cost of acquisition is the value for which the property has been acquired by the assessee and, therefore, expenses of capital nature for completing or acquiring the title of the property are includable in the cost of acquisition. Further it is also claimed that the assessee has not taken benefit of the interest or claimed the same under any of the provisions of the Act. As per Section 55(2) of the Act, the interest due or paid on the money borrowed from the date of borrowing of money and till the last day of previous year prior to the previous year of construction/acquisition shall be accumulated and such accumulated interest shall be allowed as deduction in five equal installments starting from the previous year in which construction of the house is completed or the house is acquired and interest from the seat of construction or acquisition of house till it is repaid, shall be allowed as deduction in respective previous years to which it belongs. Where the house property is sold within 5 years of the year of purchase or construction and the interest for the pre-construction period could not be claimed as deduction as it is allowed as deduction in five equal installments starting from the previous year m which construction of the house is completed or the house is acquired, the balance interest may be treated as part of cost of asset for computing capital gain. Thus, in our considered view, the cost of acquisition will include only the amount which has direct nexus with the purchase of property and the interest on the loan taken has no direct nexus with the property purchases. The Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Tata Iron Steel [ 1997 (12) TMI 5 - SUPREME COURT] held that the cost of asset and cost of raising money for purchase of asset are two different and independent transactions and even subsequent to acquisition of assets cannot change the price paid for it. Thus we find no error or infirmity in the order of the Ld. CIT(A) in confirming the disallowance being indexation cost of acquisition of property on account of interest paid on borrowed capital - Decided against assessee.
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2024 (2) TMI 866
Unexplained investment in agricultural lands - loose paper seized relied upon - HELD THAT:- From perusal of this loose paper the cash transactions are between 31.08.2006 to 17.12.2006 which pertaining to the Assessment Year 2007-08. Whereas the purchase of lands by the assessees in the name of the Firm were between 17.04.2008 to 08.10.2008 which is clearly falls under the Assessment Year 2009-10. However the Ld AO determined the cash and cheque ratio as 4.5 : 1 based on this seized loose sheets which has no relevance to the purchase of agricultural lands by the assessee in the name of its Partnership Firm VIDC. On perusal of the various Sale Deeds executed in the names of the assessees herein, the original land owners only executed the Sale Deed in favour of the assessee on behalf of the Firm VIDC and the Partnership Firm VIDC had made cheque payments to the sellers of the land, which is reflecting in the various Sale deeds executed at the office of the Sub Registrar. Furthermore, the Partnership Firm VIDC sold few part of the lands during the Asst. Year 2012-13 for a consideration which is clearly shown in the Profit and Loss account of the firm as business profit and offered for taxation while filing the Return of Income in Form ITR-5. Further the sale consideration received by the Firm VIDC is reflected in its bank account. This apart the very same seized material is used by the department in the case of M/s. Sopan Industrial Infrastructure Park relating to the Assessment Year 2007-08 wherein this Hon ble Tribunal dismissed the Revenue appeal. On further appeal by the Revenue before the Hon ble Gujarat High Court [ 2019 (4) TMI 569 - GUJARAT HIGH COURT] the Hon ble High Court dismissed the Revenue appeal observing that there is nothing to connect the assessee with the contents of the seized material. Loose sheets was not seized from the assessee but on the basis of some noting made by a third party. No conclusion could be drawn that the same pertains to the assessee namely Sopan Industrial Infrastructure Park and no conclusion could be drawn that the same pertains to the assessee, more so, when the seized documents nowhere referred to the assessee. Thus no hesitation in confirming the order passed by the Ld. CIT(A) who was deleted the addition made by the Assessing Officer. Decided in favour of assessee.
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2024 (2) TMI 865
Revision u/s 263 - assessment order framed u/s 147 r.w.s 143(3) questioned - non-verification/non-application of mind by the AO - HELD THAT:- As regards to the non-verification/ mismatching in the amount of freight advances vis-a-vis freight charges shown in the balance sheet as on 31/03/2012, we note that the AO has verified the necessary details during the income escaping proceedings and reached to the conclusion that there is no mismatch in the amount of freight advances shown in the ledger vis-a-vis shown in the balance sheet requiring any addition. There remains no ambiguity to the fact that the AO has applied his mind during the assessment proceedings and therefore assessment order cannot be held as erroneous in so far prejudicial to the interest of revenue on account of non-verification. In holding so, we draw support and guidance from the judgment of Design mate India (P.) Ltd.[ 2017 (8) TMI 959 - GUJARAT HIGH COURT] As perused the copy of the ledger under the head Cement Freight paid advance the entire amount of such advance was adjusted against the cement freight expenses and therefore, no closing balance shown against such cement freight paid advance in the balance sheet. As such, what we find is this that the Ld. PCIT has referred to the cement freight paid advances ledger showing under the debit column after ignoring credit shown under such advance ledger. PCIT after ignoring the credit entries in such ledger has wrongly assumed that the advances shown under the debit column should match with the advances shown in the balance sheet as on 31/03/2012. However, we find that the approach adopted by the PCIT was erroneous as he cannot pick and choose only debit side of ledger after ignoring credit entries shown in such ledger account. In view of the above, we dis-agree with the findings of the Ld. PCIT. Who will acquire the satisfaction as provided under the provision of 147? - It is the satisfaction of the AO who can touch the issues which came to his/her notice during the proceeding u/s 147 of the Act but same was not subject matter of reopening of the assessment u/s 147 of the Act. PCIT cannot go to touch those issues with respect to which the AO was satisfied in the proceeding s u/s 147 of the Act, and therefore he chooses not to touch those other issues. Admittedly, the assessee did not appear before the ld. PCIT, yet the ld. PCIT has to pass the order within the framework of the law. In the present case the ld. PCIT has picked up part of the information from the ledger copy discussed above to hold the order of the AO as erroneous in so far prejudicial to the interest of the revenue. In our considered view, such basis is not permissible under the provision of law. Decided in favour of assesse.
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2024 (2) TMI 864
TP Adjustment - Import of APIs from AEs - contention of the assessee is that the assessee be treated as VAD instead of Licensed Manufacturer as has been classified by the assessee in TP study report - HELD THAT:- The assessee uses manufacturing facility i.e. machines and manpower of the Toll manufacturer (i.e. Gland Pharma) to process APIs into FDF as the assessee does not have its own manufacturing unit. As is emanating from the impugned orders, the assessee has entered into an agreement with Gland Pharma for Toll manufacturing, APIs procurement by the assessee from AEs as well as non-AEs. The assessee in proceedings before the TPO has only sought to re-characterize its status as Licensed Manufacturer to VAD qua the APIs procured from AEs. The assessee is not seeking re-characterization in respect of second segment i.e. procurement of APIs from non-AEs and manufacturing of FDFs through Toll manufacturer, though the manner of operation in both the segments is same, except for source of procurement of APIs. Taking into consideration the facts, we are unable to accept the plea of assessee to re-characterize assessee Value Added Distributor . We find no infirmity in the findings of TPO/DRP on the issue, hence, the first plea of assessee is rejected. Comparable selection - since TPO has selected comparables from TIPS data base, where information regarding comparables is not completely available i.e. deficit with respect to quality, etc. the comparable so selected would not be ideal for applying CUP method - We are of the considered view that the objection raised by the assessee with regard to use of TIPS data base for selection of comparables is unfounded. However, while using TIPS data base reasonable adjustment qua quality, etc. can be allowed. In the instant case, the assessee has vehemently argued that the APIs procured by the assessee are higher in price because of superior quality. Neither before the TPO nor before the DRP any comparative analysis of the quality of the APIs imported by the assessee and the comparable selected by the TPO was available. Hence, we are of the considered view that reasonable adjustment with regard to quality of the comparables can be allowed to the assessee. TP adjustment under Licensed manufacturing segment - MAM selection - assessee has applied TNMM as the most appropriate method to benchmark its transaction of import of APIs from the AEs - TPO rejected the same and applied CUP as the most appropriate method to determine the ALP of APIs from the AEs - primary objection of the assessee in application of CUP is selection of comparable by the TPO from TIPS data base - HELD THAT:- We find that in Assessment Year 2003-04 the Tribunal in ITA No.6154/Mum/2011 has considered the issue of most appropriate method applicable to the similar transaction, the Co-ordinate Bench after examining the issue threadbare came to the conclusion that CUP is the most appropriate method for benchmarking the transaction for purchase of Netilmicine by the assessee vis- -vis the APIs procured by Cipla Ltd and Mometasone Furoate by the appellant vis- -vis Ranbaxy Laboratories Ltd. We find that the same very APIs are subject matter of TP adjustment in the impugned assessment year. In the instant Assessment Year the assessee has applied TNMM as the most appropriate method. The provisions of section 92C of the Act requires to compute ALP by following the most appropriate method. Once the Tribunal holds that CUP is the most appropriate method to benchmark a particular transaction without there being any change in the facts and nature of transaction, now it cannot be argued that CUP is not the most appropriate method. The assessee has not brought before us any material to show difference in the nature of transaction or variation in the terms and conditions for import of APIs from the AEs in the impugned assessment year. We see no reason to take a different view in accepting CUP as the most appropriate method for benchmarking the transaction in the impugned assessment year. TP Adjustment - distribution of FDF(Import of formulation) - HELD THAT:- Taking into consideration the facts and terms and conditions of the Agreement we are of considered view that segregation of Contract Manufacturing activity and Distribution is fair and reasonable. Merely for the reason that the assessee committed error in TP study to merge the two distinct segments under one head would not mean that the error cannot be rectified, subsequently. Since, the TPO has not examined the transaction after segregation of the two segments, we deem it appropriate to restore this issue to AO/TPO for fresh examination of Distribution segment after segregation. The ground no. 2 of appeal is thus allowed pro tanto for statistical purpose.
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2024 (2) TMI 863
Revision u/s 263 - as per CIT by not considering the physical transfer of leasehold property right registered by a sale deed during the year under consideration and consequently by not determining the undisclosed income arising from capital gain of assessee, the scrutiny assessment order apparently has become erroneous in so far as it is prejudicial to the interest of revenue HELD THAT:- We find that the assessee was quite aware of the proceeding before the ld. PCIT with reference to the dates 27.09.2019 and also 23.10.2019. The explanation(2) to section 263 provides that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner , (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. The above explanation squarely applicable to the facts of the case and hence, we decline to interfere with the order of the ld. PCIT passed u/s. 263. Appeal of the assessee is dismissed.
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2024 (2) TMI 862
Addition based on statement recorded during the course of search u/s 132(4) - addition u/s 68 - HELD THAT:- It is settled law that no addition can be made solely on the basis of statement recorded u/s 132(4) of the Act in the absence of any corroborative material or evidence to support the disclosure or the addition. We, therefore, respectfully following the decision of M/s. Ultimate Builders [ 2019 (9) TMI 1172 - ITAT INDORE] , and under the given facts and circumstances of the case find that the ld. AO was not justified in making addition only on the basis of statement recorded during the course of search u/s 132(4) of the Act which has subsequently been retracted and no other incriminating material was found during the course of search which could have a live link with the addition made in the hands of the assessee. We thus, uphold the findings of the ld. CIT(A) deleting the additions made by the Assessing Officer and dismiss all the grounds of appeals raised by the revenue.
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2024 (2) TMI 861
TP Adjustment - Time limit for passing of the order by the TPO u/s 92CA (3) - HELD THAT:- As final assessment order passed is beyond the prescribed period of limitation u/s 153 of the Act thus, barred by limitation and is hereby quashed. Decided in favour of assessee.
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2024 (2) TMI 860
Foreign Tax Credit (FTC) u/s 90 denied - mistake in not filing Form 67 along with the return of income rectified filling revised return - procedural lapses - assessee, after filing Form 67 made several attempts to get the rectification done through CPC with no efforts fructified - HELD THAT:- As decided in Vinodkumar Lakshmipathi [ 2022 (10) TMI 87 - ITAT BANGALORE] Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Thus we direct the AO to give credit for foreign tax as per Form 67 filed belatedly - Decided in favour of assessee.
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2024 (2) TMI 846
Entitlement to waive off the pre-deposit of 20% of the assessed tax liability being high pitched assessment - AO and PCIT have already granted monthly installment facility to the petitioner -genuine hardship substantiated or not? - HELD THAT:- As revenue authorities have considered the grievances of the petitioner by granting monthly installment Rs. 13,85,000/- from December, 2023 and the record of the case would clearly demonstrate that petitioner neither submitted his genuine hardship at the time of filing of the application under Section 220(6) of the Income Tax Act before ACIT or before PCIT. Even before this Court very vague statements have been made. The petitioner has not substantiated genuine hardship by placing materials, evidence regarding its financial crisis, if any, suffered by the petitioner or losses which has ruined the business completely. The revenue authorities have considered the application submitted by the petitioner and granted relief to the petitioner by directing monthly installment of Rs. 13,85,000/- which cannot be said to be arbitrary or suffers from non-application of mind. Even the record would show that the assessment order for the assessment year 2018-19 was passed on 28.03.2023 and more than 10 months have been lapsed, the petitioner is not taking recourse by filing an application for stay before the CIT(A) who is empowered under Section 246 of the Income Tax Act to waive the pre-deposit of 20%. Thus, considering that the ACIT and PCIT have exercised their discretionary power by granting installment facilities 9 and 20 installments respectively, we not find that any irregularity or illegality has been committed by the revenue authorities. Accordingly, the writ petition deserves to be and is hereby dismissed.
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2024 (2) TMI 845
Revision application filed u/s 264 - main contention of the petitioner is that there has been violation of principles of natural justice as no opportunity was granted to the petitioner for presenting his reply and making his submissions in person. HELD THAT:- Upon a perusal of the documents, it appears that though the matter was fixed for March 10, 2021 but no order was passed by the officer concerned on that date. In fact, the matter was posted for a subsequent date wherein no notice was given to the assessee. The documents reveal that on March 10, 2021 there was no noting whatsoever done by the officer concerned. In fact, it was not even noted that the petitioner did not appear on that date. As the revision application was filed by the petitioner under Section 264 of the Act, the officer concerned ought to have granted a further opportunity to the petitioner to appear since the matter was not heard out and decided on that date. One need not elaborate on the virtues of hearing in person before an adverse order is passed against an assessee. In light of the same, the officer concerned should have granted another opportunity to the petitioner and only thereafter passed an order that was adverse to the petitioner. Not having done so, there appears to be a violation of principles of natural justice. Order is quashed and set-aside with a direction given to the officer concerned to issue notice for hearing to the petitioner and hear out the matter within a period of two months from date.
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2024 (2) TMI 844
Reopening of assessment - concept of change of opinion - eligibility of reasons to believe - short term capital gain on asset/flat sold - HELD THAT:- It is clear case of change of opinion. We say this because the issue as to whether there was a short term capital gain with respect to the said flat, was the subject matter of consideration during the assessment proceedings. It is settled law that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. In fact, the AO in the assessment order has noted that the issue of investment in immovable property and capital gain / income on sale of property was considered under limited scrutiny assessment and in view of the material on record no addition on the issue is made. The information relied upon while issuing notice under Section 148A(b) also relates to the said flat and entirely contradictory view is taken in the impugned order that the asset sold was short term capital asset and gain arising on transfer of the said flat is short term capital gain. Thus the reopening of the assessment is purely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings. This change of opinion does not constitute justification for assuming that income chargeable to tax has escaped assessment. Decided in favour of assessee.
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2024 (2) TMI 843
Validity of reopening of assessment u/s 147/148A - tangible matter to issue notice under Section 148A or Section 148 - reasons to believe - unaccounted income, which included on-money (cash) receipts on sale of certain flats/units by different entities - only basis on which an allegation is made that Petitioner has paid cash is a statement of somebody from Lucina that it received cash from Petitioner HELD THAT:- There is nothing on record to indicate that Petitioner has paid the entire amount. Further, in the order, it is stated that the income of source for purchase of immovable property remained unexplained and therefore, it would fall within the meaning of assets as per Explanation-1 of Section 149 of the Act. There is no explanation as to when it is the AO s case that the market value of the flat itself was only Rs. 51,55,000/-, how could the property be valued at Rs. 64,94,200/-. This has been done, in our view, simply to get over the fetters placed u/s 149(1)(b) of the Act. AO has not explained any of these factors. Even in the assessment order, it is stated therefore, during the assessment proceedings, the source of payments alongwith on-money payment towards the purchase of flat have been asked to assessee. However, assessee has failed to provide the justified reply in regard to the complete source of payments, which have been made during the Assessment Year under consideration for purchase of flat. During the assessment year, only a payment of Rs. 10,00,000/- has been paid and there is nothing that the AO has produced to show that any amount in excess of Rs. 50,00,000/- has been paid during the assessment year. The entire basis is the letter received from Lucina. In our view, that alone is not enough, particularly when assessee has denied having paid any cash to Lucina. The onus is on the Revenue to show evidence that assessee has in fact paid cash and purchased immovable property of Rs. 64,94,200/-. Simply relying on a letter allegedly from Lucina is not enough. In our view, there is no tangible matter to issue notice under Section 148A or Section 148 of the Act. We also note from the assessment order that in any case this amount of Rs. 20,91,200/- has been offered by Lucina to tax before the Settlement Commission. If that is the case, we wonder how can the amount be taxed again in the hands of Petitioner. Thus the impugned order passed u/s 148A(d) has to be quashed and set aside. Decided in favour of assessee.
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2024 (2) TMI 842
Unexplained expenditure u/s. 69C - addition based on transactions mentioned in the seized diary found in search - as per Revenue transactions noted in the diary were different from the real estate business on which the assessee had received commission and the amount was spent on some activities which have not been explained - CIT(A) observed that assessee has not brought on record any evidence to establish that entries pertain to any other assessment year and as such AO cannot be faulted for considering the transactions mentioned therein for the period relevant for he period 2001-02 HELD THAT:- The peak of amount in which commission was shown as received from January-2001 to February-2001 was produced during inquiry. It was not available on the date of search at the premises and entries are made after search to co-relate the amounts mentioned in the seized diary. The fact remains that assessee s stand of having received commission income for transaction with Dempo for assisting M/s. Devashri Real Estate Developers for eviction of tenants, is repudiated by the fact that names and amounts given by M/s. Devashri Real Estate Developers are not dealing with the names and amounts found written in the seized material. It is the claim of M/s. Devashri Real Estate Developers that amounts were directly paid by them to the tenants by cheques or pay orders. Besides there being variations in the names and amounts, the assessee had no occasion to refer such payments made by M/s. Devashri Real Estate Developers and therefore Assessing Officer was right in treating the transaction recorded in the seized papers as distinct from the payments made by M/s. Devashri Real Estate Developers. It is pertinent to note that the documents found and seized from the assessee s premises were written by Appellant no. 2 , wife of Appellant no. 1. The entries in this document is relating to the business of assessee of liaisoning for which commission has been received from time to time. Assessee has made payment, as explained, in getting clear the properties or vacating the same from unauthorized occupants. Assessee does not deny that these entries did not relate to the activities carried out by him. He also admits that only part of the entries are correct. The authorities below have found that explanation given by the assessee is not tenable and it does not support his case. Nexus of payment by M/s. Dempo has not been established with the payment shown as made in the lose sheets found in the house of assessee. The assessee was unable to explain the source of availability of funds. Payments are not disclosed by assessee in the regular returns of income tax filed prior to the date of search. The entries in the lose sheets has not been explained. The authorities below have rightly rejected the claim of the assessee being devoid of any merit - Decided against assessee.
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2024 (2) TMI 841
Addition u/s 68 - Addition as income of brokerage/commission @ 2% of cash deposits as accommodation entry provider - onus to prove - HELD THAT:- We find that the assessee has disclosed complete details of bank accounts, cheques issued and the cash received from those to whom accommodation entries were given, which fact has not been disputed by the appellant/department and, instead, brokerage/commission on the aforesaid cash deposit was determined as income of the assessee for giving accommodation entries. Thus, once the source of cash deposit was disclosed and in respect of such cash deposit the respondent/assessee was treated as accommodation entry provider and accordingly brokerage/commission on aforesaid cash deposit was determined as income of the assessee for providing service in the form of accommodation entry, then Section 68 becomes uninvokable on facts of the present case. In the present set of facts we find that there being cash deposit in the bank accounts, there was prima facie evidence against the assessee i.e. receipt of money. Assessee explained it that cash were given by those to whom cheques of equal amount were issued. He furnished complete details of cheques issued and the cash deposits. The assessee was held to be sub-broker of the principal broker engaged in providing accommodation entries. On these facts the assessing officer himself has treated the activity of the respondent/assessee as accommodation entry provider on brokerage/ commission basis and, accordingly, determined the income of the respondent/assessee @ 2% as brokerage on entire cash deposits of Rs. 166.59 crores. AO has not inferred that the sum credited in the books of the assessee constituted income of the previous year and instead held that the income of the respondent/assessee is 2% of the cash deposits, as brokerage. This leads to an irresistible conclusion that cash deposits was not receipt of income of the assessee and instead his income was brokerage/commission @ 2% of cash deposits as accommodation entry provider. Thus addition in the hands of the respondent/assessee u/s 68 was correctly set aside by the ITAT. As initial onus is on the assessee to establish by cogent evidence; genuineness of the transaction and creditworthiness of the investors under Section 68 by submitting proof of identity of the creditors; capacity of creditors to advance money and genuineness of the transaction. We find that the facts disclosed by the respondent/assessee before the authorities as briefly noted/discussed above, regarding cash deposits has not been disputed by the assessing officer in the assessment order and instead he held that the assessee is engaged in providing accommodation entries by receiving cash and issuing cheques and accordingly he determined the income of the respondent/assessee from brokerage @ 2% on the cash deposits. Under the circumstances, the addition made by the assessing officer under Section 68 of the Act, 1961 was unsustainable. Decided in favour of assessee.
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2024 (2) TMI 840
Validity of Revision u/s 263 enhancing scope of limited scrutiny proceedings - differential amount was received from Co-operative bank which was not eligible for deduction u/s 80P(2)(d) - As per CIT deduction claimed u/s 80P(2)(d) in respect of interest income wholly received from Co-operative Bank is not eligible for deduction u/s 80P(2)(d) - HELD THAT:- PCIT cannot enhance the scope of limited scrutiny proceedings by restoring to proceedings under section 263 of the Act. The assessment proceedings had been initiated for examining the issues like Investments/Advances/Loans, Disallowance u/s. 40(9) (Contribution to Fund, etc.) and Disallowance u/s. 40A(7) (Gratuity provision), however, in the 263 proceedings, the PCIT sought to revise the assessment order on the ground of non-consideration of claim of deduction of interest under Section 80P of the Act. In our view, this is not permissible. It is not open to the PCIT, while exercising powers under Section 263 of the Act, to find fault with assessment order on the ground of it being erroneous on an issue not covered by the scope of limited scrutiny assessment, when the Assessing Officer could not have possibly examined such issue under limited scrutiny assessment. Decided in favour of assessee.
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2024 (2) TMI 839
Assessment of trust - Disallowance of revenue expenditure - AO disallowed 10% of the revenue expenditure as the assessee has failed to prove the genuineness of the expenditure - HELD THAT:- We find merit in the submission made on behalf of the assessee trust that disallowance of revenue expenditure would only inflate the surplus income of the assessee trust. Since the surplus income does not exceed 15% of the total receipts of the assessee trust, the same has to be carried forward for subsequent application of this income for charitable purposes. Therefore, no addition is called for. The additional ground of appeal filed by the assessee stands allowed.
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2024 (2) TMI 838
Foreign Tax Credit u/s 90 - FTC denied as assessee has filed the From No. 67 beyond the due date u/sec 139(1) - mandatory v/s directory obligation - HELD THAT:- As there is no amendment on these aspects in the Section 90 of the Act and the rules cannot override the Act and therefore the filing of Form. No. 67 is not mandatory but it is directory. Accordingly, we restore the disputed issue for limited purpose to the file of the assessing officer to grant Foreign Tax Credit after verification and in accordance with the law - Appeal filed by the assessee is allowed for statistical purposes.
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2024 (2) TMI 837
Entitlement to foreign tax credit - assessee had filed Form 67 beyond the end of the relevant assessment year - violation of procedural norms - HELD THAT:- Admittedly in the instant case, the Form 67 was filed by the assessee before the AO before the due date prescribed u/s 139(4) of the Act. This issue is no longer res integra in view of the decision of the coordinate Bangalore Bench in the case of Brinda Ramakrishna Vs. ITO [ 2022 (2) TMI 752 - ITAT BANGALORE] On perusal of the Rule 128(9) of the Rules, it is nowhere provided that if the said Form 67 is not filed within the prescribed time, the relief as sought by the assessee u/s 90 of the Act would be denied. Either way the disallowance of FTC u/s 90 of the Act is not provided in the Act or in the Rules. Hence, it can be safely concluded that the intention of the legislature is not to deny the FTC merely on the ground that Form 67 was filed belatedly. This makes the filing of Form 67 a procedural requirement and hence to be construed only directional in nature and not mandatory. It is trite law that violation of procedural norms does not extinguish the substantive right of claiming the FTC credit. There are many sections in the Act which specifically deny deduction or exemption or relief in case the return/form is not filed within prescribed time limits such as sections 80AC, 80-1A(7), 10A(5) and 10A(5) etc, wherein there is specific provision for disallowance of deduction/exemption if audit report is not filed along with the return. We find that various Hon ble High Courts have taken a view that filing of audit report is directory and not mandatory. Such language is not used in Rule 128(9) of the Rules. Therefore, such condition cannot be read into Rule 128(9) of the Rules. Assessee appeal allowed.
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2024 (2) TMI 836
Validity of Revision u/s 263 against invalid assessment - original assessment order has been framed in the name of a deceased person - whether the legal heir of the deceased person is under legal obligation to inform the Tax Department about the demise of the assessee? - HELD THAT:- In absence of any specific statutory provision under the Income Tax law which requires the legal heirs to intimate the Income Tax Department about the death of the assessee, we are of the view that the assessment order cannot be to be held to be valid in the eyes of law only for the reason that the legal heirs of the deceased assessee has not informed the Income Tax Department about the death of the assessee. It is a well established law that no assessment can be framed in the name of a person who has since expired. Any assessment order framed in the name of a deceased person without bringing the legal heirs of such person on record, is invalid in the eyes of law. As in the case of Pravinchandra A Shah [ 2023 (8) TMI 385 - GUJARAT HIGH COURT ] held that reopening notice under section 148 issued upon deceased assessee was a nullity, therefore, consequential proceedings and orders passed thereon were to be quashed and set aside. Thus we are of the considered view that the order passed under section 263 of the Act is not valid in the eyes of law, since the original assessment order having been framed in the name of a deceased person is not valid in the eyes of law - Decided in favour of assessee.
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2024 (2) TMI 835
TDS u/s 194C - Disallowance u/s 40(a)(ia) - Non deduction of TDS on minimum guarantee expense - HELD THAT:- Facts on record show that the assessee for the purpose of carrying on its business operations enters into merchant agreement with various hotels for facilitating reservation/booking of hotel rooms through the platform of the assessee. As per the terms of the said agreement, the hotel conducts its operations in terms of providing lodging and accommodation services whereas the assessee provides technology, sales and marketing services to the hotels relating to provision of lodging and accommodation services through its platform. Assessee being a service provider assures the minimum benchmarks which the service recipient will receive or expect to receive from service provider. In case such benchmarks is exceeded, then the service fee is payable by the service recipient to service provider and in case of shortfall, the service provider is required to meet the same. On such business model, provisions of section 194C of the Act provides that any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and a specified person shall deduct tax on the sum paid or credited to the account of the contractor, s ine qua non for applicability of this provision is Carrying out any Work . Facts on record show that no work has been carried out. Therefore, in our considered opinion, provisions of section 194C of the Act have no application. The assessee is merely compensating the shortfall pursuant to the agreement. Contention of the ld. DR that in furtherance of its business objectives/model, the assessee is providing service, cannot be accepted as neither the AO nor the ld. CIT(A) have invoked the relevant provisions of the Act applicable for provisions of service. On the facts of the case, we hold that section 194C of the Act is not applicable. The Assessing Officer is directed to delete the impugned addition. Assessee appeal allowed.
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2024 (2) TMI 834
Addition u/s 68 r.w.s.115BBE - cash deposit made during the demonetization period - HELD THAT:- It is fact on record that assessee had indeed made cash withdrawals in the month of October 2016 itself which is just a month prior to the announcement of demonization by the Govt. of India. Assessee also explained that the purpose of withdrawals cash was for the purpose of payment to his factory workers as there was labour unrest in his factory at the end of September 2016. The assessee had furnished week-wise cash sales of cash deposit made during the period 08.11.2016 to 31.12.2016 providing the details of opening cash in hand, cash withdrawals made from the bank, cash deposits made in the bank, cash sales made during the period and closing cash balance. In the instant case, the assessee had given proper explanation for withdrawal of cash in whole sums in the month of October, 2016 which evidently enabled him to hold huge cash balance to make cash deposit (i.e. during demonetization period). As stated earlier, similar cash deposit made by the assessee in the sum of Rs. 12 lakhs in July 2016 was also sourced out of cash balance available with the assessee in its books, which has been accepted by the revenue. From the perusal of the cash book, we find that there was absolutely no negative cash balance with the assessee on any single day. Once the cash book together with audited books of account and tax audit report filed by the assessee before the AO had not been rejected and once, there is sufficient cash balance available with the assessee to make cash deposit and the same are duly reflected in the books of account, there is no case for the revenue to hold that cash deposit were made out of undisclosed source of income of the assessee warranting any addition u/s 68. In any case, it is for the revenue to prove that the cash withdrawals made earlier had been utilized by the assessee for some other purposes and the same was not available with the assessee as a cash source to explain the cash deposits. Hence, we have no hesitation to delete the addition made towards unexplained cash deposits during demonetization period in the instant case - Assessee appeal allowed.
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2024 (2) TMI 833
Accrual of income in India - existence or otherwise of PE of the assessee in India - HELD THAT:- As we hold that the assessee has no PE in India in the year under consideration; hence, no profit can be attributed to such non-existent PE. Accordingly, the AO is directed to delete the addition. Decided in favour of assessee.
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2024 (2) TMI 832
Unexplained money u/s. 69A - addition made in absence of any satisfactory explanation with respect to nature and source of cash deposit made during the demonetization period - AO rejected evidences and documents submitted by AO - HELD THAT:- AO has not refuted or discredited these evidences and documents. AO does not mention why he is not accepting these evidences. On the contrary, the AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. It is true that the AO is not bound to accept as true any possible explanation which the assessee may put forth, the AO cannot also arbitrarily rejects the assessee's explanation. assessee has practically submitted all possible evidences in support his claim. When the evidence available with the assessee, which support the claim of the assessee, the AO was not right in suspecting the same on the basis of mere surmises and conjectures. (Om Prakash K Jain and Ors. [ 2009 (1) TMI 453 - BOMBAY HIGH COURT] . AO has not discussed any of the evidences submitted by the assessee. No word as to why these documentary evidences furnished by assessee are not acceptable to the Assessing Officer. The Assessing Officer has not found any defect / irregularities in the documents and evidences submitted by the assessee. Therefore, based on the factual position narrated above, delete the addition made by the Assessing Officer. Appeal filed by the assessee is allowed.
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2024 (2) TMI 831
Addition u/s 43CA - difference in the value of sale consideration of the of property as shown by the assessee and value adopted by the Sub-Registrar for stamp duty purposes - as submitted 90% payment made by the seller within 4-5 days of agreement dated 10.09.2008 prior to registration date - revenue s only contention is that on the date of the agreement the assessee is has not received any money and on this aspect of ld. DR relied on the decision of Spytech Buildcon [ 2021 (7) TMI 725 - ITAT JAIPUR] - HELD THAT:- Assessee had entered into the sale agreement for sale of the immovable property for a consideration of Rs. 1,51,00,000/- on 10/09/2008, i.e. much earlier to enactment of provisions of Sec. 43CA in the statute w.e.f. 01/04/2014 applicable from assessment year 2014-15. That apart, the peculiar feature of the case is that in the case of the assessee received 90% of the sale consideration within just five days of the date of agreement on 10/09/2008, i.e. by 15/09/2008 and the balance consideration was also received on 19/03/2014 at the time of final sale deed. Thus, the assessee would not have anticipated or predicted the enactment of new provisions of Sec. 43 CA from assessment year 2014-15 while executing the agreement to sell on 10/09/2008 and even the provision of section 43CA (3) deals with such a situation. DR reliance on the decision of Spytech Buildcon (Supra) is unacceptable as facts that pari materia different is that in this case the agreement is supported by the flow of consideration by an account payee cheque and 90 % of the money received in the 5 days of the agreement to sale in year 2008. The bench noted section 43CA provides that when an assets being stock in trade on the date of agreement provided the consideration or a part of it has been received by him on or before the date of agreement. In case the date of agreement fixing consideration and date of registration are different, then for the purposes of determination of value under the section, the value as on the date of agreement shall be considered, provided the consideration or part of consideration is received the value as on the date of agreement shall be considered, provided the consideration or part of consideration is received prior to date of agreement by any mode other than cash. As assessee when entering into the final sell deed also has reference to the same consideration that has been flowed in 2008 and based on that agreed rate the sell deed is executed. The provision of section 43CA(3) already dealt with the exception and therefore, we found merits in the facts that the assessee has agreed by an agreement to sell the property at predetermined price at Rs. 1,51,00,000/- and the consideration to that has been flowed for an amount of Rs. 1,35,90,000 and a sum of Rs. 1,34,90,000 received by a banking challan. Based on that set of facts provision of section 43CA(3) clearly attract and thus, the addition is vacated. Decided in favour of assessee.
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2024 (2) TMI 830
Income taxable in India or not - FTS/FIS - payments received by the assessee from its Indian customers on account of Centralized Services - absence of PE in India - Fee for Technical Services as defined u/s 9(1)(vii) of the Income Tax Act, 1961 or Fee for included services as defined under Article 12(4)(a) of the Indo-US DTAA - assessee is a non-resident company incorporated in USA engaged in the business of providing various services to hotels in different countries across the world, including India - assessee claimed that the receipts from Indian Hotel owners towards centralized services, are in the nature of business profit and in absence of Permanent Establishment ( PE ) in India are not taxable in terms of India USA DTAA HELD THAT:- In assessee s own case in [ 2023 (9) TMI 1434 - ITAT DELHI] for AY 2019-20 2020-21 wherein the Tribunal relying on the decision of the Tribunal in assessee s own case in [ 2022 (7) TMI 781 - ITAT DELHI ] for AY 2015-16 held that the impugned receipts in the hands of the assessee cannot be treated as FTS/FIS either under the provisions of the Act or under the India- USA DTAA. The fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable. Appeal of the Revenue is dismissed.
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2024 (2) TMI 829
Reopening of assessment u/s 147 - additions of cash deposits - as per AO assessee failed to file cash flow statement and other objection of assessing officer was that assessee was using cash deposit for making demand draft - HELD THAT:- AO has not brought any material on record that assessee spent/incurred such amount elsewhere. The dispute is of only time period between the withdrawal and the cash deposit. There is no dispute that mother of assessee was living in Surat. Assessee and his other family members are residing abroad. The status of assessee is accepted by Assessing Officer as NRI. Assessee has not done any business activity during the said period and stayed in India for a very few days. During stay in India, the assessee claimed that for personal need, he made withdrawal from ATM between the period 01/04/2009 to 31/03/2012. No adverse material was brought by ld. CIT(A) against such contention nor any remand report to disregard such fact was brought on record. In our view, the Assessing Officer has treated the cash deposit merely on the basis of human probability without bringing any adverse evidence on record that such cash deposit was unexplained money of assessee when the assessee was having sufficient money in his two NRE and one NRO account and explained the investment during the relevant period. In view of aforesaid observation, the additions are not justified. In the result, ground of the appeal is allowed.
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2024 (2) TMI 828
Black Money - Beneficial ownership - undisclosed foreign income/asset u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015 - CRS information in Insight portal with the Department, there is an investment outside India in Windsor Trust and Dalham Trust and assessee being a beneficial owner of the trust could not explain source for investment in both trusts - nature of 'account' for which appellant is alleged as beneficial owner - whether CIT(A) erred in confirming the additions made without being in possession of any basic details of alleged undisclosed asset and without any corroborative evidence in this regard? - assessee submitted that the Windsor Trust and the Dalham Trust were formed by him as a Settlor and also as the First Beneficiary in 2003. But, all contributions to the trusts, including initial contribution was made by his son. HELD THAT:- We do not find any merits in the findings of the Assessing Officer for the simply reasons that, except CRS information, the Assessing Officer does not have any other evidence to allege that the assessee has made contribution to the above trusts. The Assessing Officer neither having the bank statement of the assessee to allege that the assessee has made outward remittance of funds, nor proved that the assessee is deriving any income from above trusts outside India. Although, initial contribution of 3,500 GBP towards corpus of the trust was shown to have paid by the assessee as a Settlor, but the assessee has proved that even said contribution was made by his son, a citizen of USA. The allegation of the Assessing Officer and CIT(A) that, because the assessee is a settlor of the trust, he remains principal beneficiary is totally incorrect and devoid of merits, more particularly in the context when other trustee are managing the affairs of the trust and also beneficial owners of trust properties. For account balance in the Windsor Trust represented as an immovable property in London has been explained out of loan borrowed from bank. The assessee neither contributed any money nor received any benefit from the trust. Therefore, the findings of the ld. CIT(A) that the assessee is a beneficial owner of the trust, because of a Settlor and also certain clauses in trust deed with reference to revocation of trust is totally baseless and devoid of merits - The account balance in the Windsor Trust considered by the Assessing Officer for the purpose of assessment in the hands of the assessee u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, stands fully explained by the trust with known source of income. Therefore, we are of the considered view that the Assessing Officer is erred in making additions As decided in the case of Central Warehousing Corporation vs Adani Ports Special Economic Zone Ltd (APSEZL), ( 2022 (10) TMI 465 - SUPREME COURT] in the context of dispute between two parties held that two ministries of Union of India cannot take diagonally opposite stand to each other. In the present case, AO has taken one stand and stated that the assessee is the beneficial owner of the trust and value of investment in said trust is taxable in the hands of the assessee, whereas, the Enforcement Directorate, Chennai Zonal Office, has stated that the investment in Windsor Trust has been explained out of loan borrowed from the bank and the assessee has not made any contribution to the Windsor Trust. We also referring to the decision of Joginder Singh Chatha vs ITO [ 2022 (6) TMI 1443 - ITAT AMRITSAR] where the Tribunal held that when the account was opened by a person as beneficial owner and the other person i.e, the assessee was named as Settlor out of love and affection, no tax can be levied towards value of account in the name of said person, unless the Assessing Officer prove with corroborative evidence that the assessee being an owner of alleged bank account and he has made any contribution to the funds of the trust. Coming back to the investment in Dalham Trust once investment in trust has been owned up and explained by a non-resident, then the question of making additions towards investment in said trusts in the hands of the assessee only on the basis of recitals of trust deed is incorrect, more particularly when the assessee is able to explain with necessary evidences that he has not made any contribution to the trust. In the present case, the Assessing Officer except CRS information in Insight portal, does not have any other evidence to prove his allegation that the assessee is invested in the trusts. Therefore, we are of the considered view, that the Assessing Officer is erred in making additions towards account balance in the Dalham Trust as unexplained investment in foreign asset/income of the appellant u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. Non-disclosure of foreign asset/income in income tax returns filed by the assessee - As in our considered view, when assessee does not have any investment in foreign asset or does not earn any income from foreign asset, then the question of disclosure in ITR does not arise and thus, on that basis no adverse inference can be taken against the assessee. AO is completely erred in making additions towards account balance in the name of the Windsor Trust and Dalham Trust, in the hands of the assessee as undisclosed foreign income/asset u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. CIT(A), without appreciating relevant facts simply sustained additions made by the AO. Decided in favour of assessee.
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2024 (2) TMI 827
Deduction of research and development expenses claimed u/s 35(2AB) - weighted deduction - whether the expenditure claimed by the assessee is required to be approved by the DSIR? - HELD THAT:- So far issue related to approval by the DSIR there is no quarrel in the year under appeal. The only dispute is whether the expenditure claimed by the assessee ought to have been allowed in totality dehors allowance of the expenditure restricted by the DSIR. We, in the light of the above decision of CLARIS LIFESCIENCES LTD. [ 2008 (8) TMI 579 - GUJARAT HIGH COURT] direct the AO to verify the correctness of the claim of the actual expenses incurred by the assessee in respect of scientific research in-house research and development facility. If the claim of assessee is found to be correct he would delete the impugned disallowance of expenditure. The ground raised by the assessee is allowed for statistical purposes.
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2024 (2) TMI 826
TP Adjustment - comparable selection - cherry picking the comparables - Appellant had applied lower turnover filter of INR 1 Crore - as argued TPO did not accept the economic analysis conducted by the Appellant and applied certain additional filters - additional turnover filter of 1/10th to 10 times of Turnover was introduced by the TPO to rejected the two comparables selected by the Appellant namely (a) APITCO Ltd, and (b) IDMA laboratories HELD THAT:- It emerges that the Appellant had applied lower turnover filter of INR 1 Crore. The TPO did not reject the aforesaid lower turnover filter and introduced additional upper/lower turnover filters. Thus, the TPO applied second lower turnover filter of 1/10th of Turnover on application of which two companies selected by the Appellant were excluded from the list of 8 comparables selected by the Appellant. The upper filter selected by the TPO had no application in the facts of the present case and therefore, the decisions cited by the Ld. Departmental Representative have no application in the facts of the present case. We concur the observations made by the Tribunal that turnover filter cannot be applied as a tool for cherry picking the comparables at the later stage after completion of the search process with the object of excluding comparables which was otherwise found to be functionally comparables after the Functions Assets Risks (FAR) Analysis. We are of the view that the application of the second lower turnover filter by the TPO without rejecting the first turnover filter adopted by the Appellant resulted exclusion of two companies which were otherwise functionally comparable and thus, resulted in cherry picking. It is not the case of the Revenue that the comparables excluded were not functionally comparable with the Appellant. The lower turnover of filter adopted by the Appellant and the explanation provided by the Appellant for adopting the same was not rejected by the TPO. CIT(A) upheld the adoption of additional turnover filter on the incorrect premise that in the Transfer Pricing Study Report the Appellant did not apply any filters while selecting the comparables. Accordingly, we find merit in the contentions advanced on behalf of the Appellant and direct the TPO/Assessing Officer to re-compute the ALP and transfer pricing adjustment, if any, after including (a) APITCO Limited and (b) IDMA Laboratories Limited in the final set of comparables.
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Customs
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2024 (2) TMI 825
Import of Plastic Injection Moulds - News goods or used / second hand goods - Benefit of Notification No.22/2013 dt. 18.4.2013 was denied - Mis-declaration of imported goods - Order for clearance of the goods on payment of appropriate duty - confiscation - redemption fine - penalty - enhancement of value - HELD THAT:- As per para 5.1 (e) of FTP, the second hand goods are not permitted to be imported under EPCG scheme. From the records, it is seen that the goods were examined by a Chartered Engineer who has reported that the goods are used and not new . It is to be noted that in the purchase order the appellant has mentioned the supplier to comply with the specifications / requirements. So also, the purchase order shows the drawing number, description of the material (As per Annexure to Purchase Order No.00029). This proves that the appellant had submitted drawings of the items to their supplier. The said drawings are enclosed in the appeal paper book. These drawings show that the word SALZER has to be etched on the moulds. The photographs of the imported goods have been placed before us. On perusal of these photographs, it is seen that the item bears the etching of the word SALZER . The appellant has submitted that they do not have any other company outside India - the opinion of the Chartered Engineer that the moulds are used and not new does not seem to be factually proper. It requires to be mentioned that even though the etching of word SALZER is prominent in the photographs, the Chartered Engineer has not mentioned anything about this in the report. Further, the report says that it is not rapidly used. The appellant has stated that other than the trial runs, the moulds have not been used and are entirely new. The report given by the Chartered Engineer that the goods appear to be used is not supported by any scientific or technical basis. The expert opinion cannot be used as a conclusive proof and is only corroborative in nature - Though opinion of an expert does help Court to arrive at a satisfactory conclusion; but this not mean that an expert opinion has to be accepted invariably in all situations. This would amount to delegation of judicial function. The report does not state the facts on which the Chartered Engineer made the conclusion that the moulds are used, second hand moulds. The expert is not to expected to give his impressions but has to state the facts on which he draws the opinion. The reliance placed by the adjudicating authority and Commissioner (Appeals) solely on the expert opinion cannot be accepted. Enhancement of value of goods - HELD THAT:- The impugned order does not give how such enhanced value has been arrived at by the department. There are no satisfactory reasons given for doubting and rejecting the transaction value. Though the department has accepted the report of the Chartered Engineer in regard to the opinion that the imported items are used and second hand, surprisingly, the opinion given by him that the value declared by the importer is fair and reasonable, has been rejected. The reasons for such rejection is not available. Thus, as per the records such as date and description in purchase order, drawings and the photographs, the contention of the appellant that the goods imported are new is probable and acceptable. The overseas supplier has issued a certificate stating that the goods are new. The said certificate though produced before the authorities, was not considered at all. There are no grounds to deny the benefit of exemption of Notification No.22/2013 dt. 18.04.2013. So also, there is no legal basis for enhancement of the value. The duty demand, confiscation or redemption fine and the penalties cannot sustain. The impugned order is set aside. The appeal is allowed.
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2024 (2) TMI 824
Confiscating absolutely seven gold bars having foreign make marking - Smuggling - Hyundai Verna Car - sufficient evidence to prove foreign origin goods - HELD THAT:- It can be seen that authorities below have placed heavy reliance on the fact that gold seized from the possession of appellant had foreign make markings to conclude that the same are smuggled in nature. In this behalf it is observed that Hon ble Bombay High Court in the case of STATE OF MAHARASHTRA VERSUS PRITHVIRAJ POKHRAJ JAIN [ 1973 (6) TMI 68 - BOMBAY HIGH COURT] has held that foreign markings are not sufficient to establish the foreign origin of the goods and that such markings do not speak for themselves and are in the nature of hearsay evidence. It is held in the said judgment that no presumption about the foreign origin of goods arises from the foreign markings unless there is evidence to show that the same were put by the particular foreign company in ordinary course of business. Admittedly, there is no evidence in the present case that the foreign markings appearing on the seized gold bars had indeed been put by the foreign companies whose markings they purport to be and that therefore as laid down in the aforesaid judgment of the High Court no presumption of the foreign origin of the goods can arise from such markings. It is further observed that even when established that the seized Gold Bars were of foreign origin, that by itself does not establish the smuggled nature of the gold, as import of gold into India is not absolutely prohibited and there is large quantity of gold which is legally imported and is available for sale in the local market and hence merely because the seized gold had foreign markings that itself is not sufficient to infer that the same was smuggled into India. Reasonable belief cannot be based on suspicion or speculation or merely on the ground that the person from whom seizure was effected was unable to account for the same and that to form reasonable belief there must be some evidence to show that the goods were brought into the country contrary to prohibition imposed by law. Since such prima facie evidence to form reasonable belief that the goods were of foreign origin and were brought into the country illegally was lacking, mere circumstance that after purchasing the gold bars from the sellers of gold at Surat and carrying it to Delhi without any further evidence to show that the gold bars were brought into India from abroad illegally cannot afford a ground for forming the reasonable belief that the same were smuggled into India. In view of above, there exist no circumstance for forming a reasonable belief that the seized gold is smuggled gold and consequently, section 123 has no application. As regards confiscation under section 119 of Customs Act, 1962 upheld in respect of nine gold-bars on the premise that the said gold-bars were obtained without any bill/invoice/bill of entry etc. and were used for concealment of smuggled goods in order to camouflage the identity of seven foreign origin smuggled gold bars; Undisputedly, the gold bars were not found in concealed state from the appellants. There is no evidence to show that appellant knew or had reason to believe that the gold bars were of smuggled nature - the seven gold bars itself cannot held as foreign origin smuggled gold; the nine gold bars cannot be said as imported contrary to any prohibition imposed by or under the Act or any other law as provided under section 111(d) of the Act. In that view, imposition of fine of Rs. 7,00,000/- in lieu of confiscation under section 125 of the Customs Act, 1962 imposed as regards the above nine gold bars cannot be sustained. Hyundai Verna Car - HELD THAT:- Admittedly appellant was found in possession of the car, undisputedly seized gold was not found concealed manner in the car, further in view of above discussion, it is not established that seized gold was smuggled one. Consequently, section 115 of the Act is not applicable and hence confiscation of car and redemption fine so imposed also cannot be sustained. The impugned order is liable to be set aside. Since confiscation of gold is not tenable, fine and penalty is also cannot be sustained. Accordingly, the impugned orders are set aside - Appeal allowed.
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2024 (2) TMI 823
Violation of principles of natural justice - Change in classification of export goods REFORMATE without putting the Appellant to Notice - classification changed from 27101219 to CTH 27101990 - benefit of N/N. 12/2012-Cus dated 17 March 2012 and N/N. 12/2012-CE dated 17 March, 2012 denied - time limitation - HELD THAT:- It cannot be seen as to how the Commissioner (Appeals) has ignored the Appellant‟s letter dated 20/05/2015 seeking amendment/rectification of Bill of Entry and subsequent amendment/rectification of the same on 01/07/2015 while coming to a conclusion that the date of assessment of Bill of Entry is 11/04/2015. After holding that the Bill of Entry was assessed on 11/04/2015, he has dismissed the Appeal on the ground of time bar. This is not only a gross error but reeks of injustice on his part to pass an Order against reputed Public Sector Undertaking, which on its own had voluntarily sought re-assessment seeking to reverse the benefit received by them under the said Notifications. It is found from the records that the Appellant has filed the Appeal before the Commissioner (Appeals) within about 50 days from the date of re-assessed Bill of Entry. Therefore, dismissal of the Appeal on account of time bar is erroneous and the impugned OIA is set aside. Re-assessment taken up by the Assessing Officer - HELD THAT:- AO has arbitrarily changed the classification from CTH 27101219 to 27101990 without putting the Appellant to Notice. Principle of natural justice requires that whenever the classification is sought to be modified, the importer/assessee is required to be given a notice for the proposed change in the CTH, which has not been done in this case. After going through the Shipping Bill, it is seen that export of the same product Reformate is being done under CTH 27101219. This shows that the Customs Department has adopted two different stands by classifying the imported goods under one classification and subsequently the exported goods under different classification - there exists no logic towards the same. Matter remanded to the Assessing Authority who should issue the Show Cause Notice seeking to modify the CTH along with the ground towards the same. The Appellant should be given opportunity to make their submissions in defence of their case and principles of natural justice should be followed. Appeal allowed by way of remand.
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Service Tax
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2024 (2) TMI 822
Levy of Service Tax - Business Auxiliary Services - it is the case of the revenue that the appellant was actively engaged in the business promotion of the main dealer and acting as a commission agent of the said main dealer - period October 2007 to March 2012 - HELD THAT:- From N/N, 6/2005-Service Tax dated 01.03.2005, as amended by N/N. 08/2008-S.T. dated 01.03.2008, it is clear that a service provider has the option not to avail the exemption benefit under notification 6 abid and, clearly, once such option is exercised by the service provider in a financial year, then the same shall not to be withdrawn during the remaining part of such financial year. The take-away from the above is that during the same financial year if option to avail or not to avail the exemption is exercised, such option shall hold good throughout the financial year. That means, since each year is to be considered independently, any exercise of the above option would end with that financial year and the same cannot act as a permanent block for all the subsequent years to come-in. Moreover from the facts available on record, the revenue has nowhere disputed the claim of the appellant that the aggregate value of the taxable service for the years under dispute is less than the threshold limit prescribed under the above notifications. It has been held by the Hon ble Apex Court in COMMISSIONER OF INCOME-TAX, MADRAS VERSUS MAHALAKSHMI TEXTILE MILLS LIMITED [ 1967 (5) TMI 4 - SUPREME COURT] by a three judge bench, that when the grant of relief to a tax payer is justified on any ground, the Tribunal would be under a duty to grant that relief. Hence, the demand raised and confirmed in the impugned order cannot survive, for which reason the same requires to be set aside. The impugned order is set aside - appeal allowed.
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2024 (2) TMI 821
Eligibility for exemption under N/N. 01/2006-ST dated 01.03.2006 - credit was availed and utilised on input services under CENVAT Credit Rules, 2004 but paid back along with interest on being pointed out - HELD THAT:- The issue is no more res-integra and squarely covered by various decisions of the Tribunal which have held that when availed CENVAT Credit is reversed along with interest, the appellant is eligible for abatement and the claim of exemption under Notification No. 01/2006-ST dated 01.03.2006 not barred. In the case of M/S. OLD WORLD HOSPITALITY LIMITED VERSUS CST, NEW DELHI [ 2017 (2) TMI 1176 - CESTAT NEW DELHI ] it has been held that the appellant is eligible for abated rate of duty as they have reversed the Cenvat credit availed during the material time, fully. As such, the bar on claiming on such exemption is no more applicable. The Tribunal New Delhi in the case of M/S. TRAVEL INN INDIA PVT. LTD. VERSUS C.S.T., DELHI [ 2015 (6) TMI 626 - CESTAT NEW DELHI ] has held that On being realisation that they are not entitled to take the Cenvat credit if they are availing the benefit of exemption Notification No.1/2006-ST. Therefore, we hold that the reversal of Cenvat credit by the appellant amounts to non-availment of Cenvat credit. Thus, after appreciating the above judicial decisions, the facts being the same, the appeal is allowed.
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2024 (2) TMI 820
Renting of immovable property service - Liability of Appellant (Partnership Firm) is liable to discharge service tax on property jointly owned by parents of the Appellant Firm - benefit of SSI Exemption under notification No. 06/225-ST dated 01.03.2005 - denied to the co-owners of jointly owned property on the ground that aggregate value of service (rent arising from the said property is beyond threshold limit, regardless of the fact that rent received by each of the co-owners was much lower than the threshold limit - HELD THAT:- There is no dispute that irrespective of any agreement of RM with the present appellant the rent was paid by RM individually to the co-owners and TDS from the amount payable was deducted by RM. No amount was received by the appellant being a partnership. In this case the person who received the amount of rent directly from RM shall be treated a person liable to pay Service Tax. However, since the total receipt of rent by individual is less than the threshold limit as provided under exemption notification No. 6/2005/ST dated 01.03.2005 co-owners are not liable to pay Service Tax. This issue has been considered time and again in various judgments. It is settled that even though for one single property if the co-owners are receiving the rent individually in their account the total rent cannot be considered as one for levy or Service Tax. Every individual who receive the rent as co-owners he should be treated as individual Assessee and if the total receipt does crosses threshold limit of exemption they are liable to pay Service Tax otherwise not. Applicability of judgement in the case of Gtail Corporation - HELD THAT:- As regard the judgment relied upon by the revenue in the case of Gtail Corporation, on going through the same, it is found that in that case the fact are totally different in as much as the rent was first received by the partnership firm and subsequently the partnership firm has distributed amount of rent to individual partners. Accordingly, it is a firm who is the recipient of the rent and thereafter individual share has been distributed. Whereas, in the present case it is not the appellant (partnership firm) received the rent but the rent was directly received by individual in their account. Therefore, the ratio of the judgment in the case of Gtail Corporation is not applicable being its fact is totally different - the ratio of the judgment in the case of Gtail Corporation is not applicable being its fact is totally different. The demand against the appellant who is not the recipient of the rent cannot be sustained - the impugned order is set aside. The appeal is allowed.
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2024 (2) TMI 819
Liability of discharge the service tax prior to 12/2015 as they have taken over the business of M/s. JMWPL only with effect from 12/2015 - levy of service tax - Business Auxiliary services - incentives received from M/s. Volkswagen and M/s. Castrol India - reverse charge mechanism - amount of advance forfeited due to cancellations - CENVAT Credit - liability under Rules 6 (3A) (i) to pay an amount of 5%, / 6% / 7% of value of exempted services (trading) when the appellant has already reversed proportionate credit as under Rule 6 (3 A) (ii) which is attributable to trading. Levy of Service Tax - amount of advance forfeited due to cancellations - case of the department is that the appellant is providing services of sales promotion and marketing to M/s. Volkswagen and M/s. Castrol and incentives and discounts received are nothing but consideration for such services and would fall under BAS - HELD THAT:- The incentives offered for achieving targets of sale cannot be said to be incentives for promoting the sale of M/s. Volkswagen as the appellant is interested to do more sales for their own benefit of making more profit. It cannot be said that they promote the sales of M/s. Volkswagen or M/s. Castrol India Ltd. The incentives depend on the targets achieved which the appellant is interested to achieve as they would earn more profit. Even if there was no such incentive the appellant would be attentive and focused to sell cars to their maximum possible. The incentive is not in the nature of any consideration for providing services to M/s. Volkswagen and M/s. Castrol India Ltd. The Tribunal in the case of M/s. S.K. Cars India (P) Ltd. Vs. Commission of GST and CE, Sale, [ 2023 (6) TMI 243 - CESTAT CHENNAI] had occasion to consider a similar issue. It was held that the incentive / discount are in regard to sales transaction and cannot be subject to service tax. For the period after 01/07/2012, the demand has been made under the definition of service under Section 65 (44) B. It is already concluded that there is no element of service. The incentives are purely on the basis of sales and not for providing service of promoting the business of M/s. Volkswagen / Castrol India. The demand made after 01/07/2012 also is not sustainable. From the above discussions and following the decision, there are no hesitation to hold that the demand of service tax raised on incentives / discounts from M/s. Volkswagen and M/s. Castrol cannot sustain and requires to be set aside. Demand confirmed on amount of advance forfeited at the time of cancellation of booking of car - HELD THAT:- In the case of Lemon Tree Hotel Vs. Commissioner, GST CE Customs, Indore [ 2019 (7) TMI 767 - CESTAT NEW DELHI] a similar question was considered wherein the demand of service tax was raised by department on the amount retained on cancellation of advance booking made for accommodation in hotel. It was held that such amount is not liable to levy of service tax under Section 66 E (C) of Finance Act 1994 or under Section 65 (105) (zzz-w) of Finance Act 1994. Similarly, in the case of M/s. Bharat Heavy Electricals Ltd. Vs. Commission of GST and CE Thiruchirappalli [ 2023 (9) TMI 654 - CESTAT CHENNAI] the question arose as to whether appellant is liable to pay service tax on the liquidated damages recovered for delay in supply and service. The Tribunal answered in the negative and in favour of the assessee. The above decisions are squarely applicable to the facts and the issue as to whether appellant is liable to pay service tax on advance amount forfeited on cancellation of booking. The demand of service tax cannot be sustained. This issue is answered in favour of the appellant and against the department. Whether the appellant is liable to pay 5% / 6% / 7% of the value of exempted services (trading) as they failed to maintain separate accounts of common inputs availed for taxable services and exempted services? - HELD THAT:- The issue as to whether the assessee is required to follow only Rule 6 (3) (i) on failure to intimate the department as to the option to reverse proportionate credit is no longer res-integra. It has been held in various decisions that the requirement for giving an intimation is only procedural in nature and the department cannot deny to an assessee the option available under Rule 6 (3) (ii) only because they did not comply with the procedure of prior intimation - reliance can be placed in the case of Mercedes Benz India Pvt. Ltd. Vs CCE, Pune [ 2015 (8) TMI 24 - CESTAT MUMBAI] - the demand raised alleging that appellant has to pay 5% / 6% / 7% of the value of exempted services even though they have reversed proportionate credit cannot sustain. This issue is found in favour of appellant and against the department. Whether the appellant is liable to pay service tax for the period prior to 12/2015? - HELD THAT:- The appellant company has come into existence only in 2015 and therefore cannot be called upon to pay service tax prior to 2015. As the issue is already found on merits for the demands for the period prior to 2015 and after 2015 to be not sustainable, any further discussion on this issue would be of no consequence - it is thus not necessary to delve into this issue which is of technical nature. The confirmation of demand of service tax, interest and penalties cannot be sustained. In the result, the impugned order is set aside - Appeal allowed.
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Central Excise
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2024 (2) TMI 818
Compliance with the pre-deposit - Section 35-F of the Central Excise Act, 1944 - Article 14 and 19(1)(g) of the Constitution of India - petitioner desires to have an adjudication on merits without complying with this condition - it was held by High Court that If the petitioner/original appellant complies with the statutory condition of pre-deposit within four months from the date of receipt of a copy of this order and reports compliance to the Tribunal, the Tribunal shall restore the appeal of the petitioner/original appellant for adjudication on merits. HELD THAT:- There are no reason to interfere in the matter - SLP dismissed.
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2024 (2) TMI 817
Rejection of claim of the appellant for remission of duty on the finished goods which were destroyed in fire - whether the consequential demand confirmed by the Adjudicating authority is correct or otherwise? - HELD THAT:- It is found that the Adjudicating Authority rejected the claim for remission of duty made by the appellant, on the assumption and presumption that the appellant have not taken proper steps to avoid the fire accident. From the facts which is revealed in detail from the survey report of the survey conducted by the insurance company, it was found that the fire accident has taken place due to short circuit and immediately when the fire broken out the appellant s staff have properly taken the steps to call the fire extinguisher. Therefore, the defense of the appellant appears to be reasonable. It is found that one of the reasons given for rejection of remission claim is that there is discrepancy in the plot number in the Central Excise Registration of the appellant. However, the appellant have submitted that there was an inadvertent mistake in their registration which was subsequently rectified - once a mistake has been rectified, the rectification should be considered retrospectively as the same is inadvertent mistake. Accordingly, the correct registration should be considered for processing the remission claim. The learned Commissioner must reconsider the overall case and re-adjudicate both the matters of remission as well as demand of duty. Needless to say that the appellant have relied upon numerous judgments on the identical issue, same also need to be considered while passing the de-novo orders - Appeals are allowed by way of remand to the Adjudicating Authority.
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2024 (2) TMI 816
Disallowance of credit availed by the appellant on security services - security services provided for the factory premises as well as trading premises is covered under Rule 6(5) of the CENVAT Credit Rules, 2004 or not - non-maintenance of separate books of account for the common input services - HELD THAT:- The First Appellate Authority (FAA) has analysed the scope of Rule (3) of CENVAT Credit Rules vis- -vis, the activities carried on by the appellant. The First Appellate Authority (FAA) has observed that with regard to the credit of goods, the appellant was neither a manufacturer/producer nor a provider of taxable output service, since at the material time trading was neither taxable nor exempted. Moreover, according to the First Appellate Authority (FAA) exempted goods would refer only to the goods manufactured by the appellant, on which no duty was payable, but here the appellant had only bought and sold goods instead of those which were manufactured by it. In view of the above discussions, the First Appellate Authority (FAA) has concluded that the appellant was not entitled to credit attributable to credit of goods by virtue of Rule 3 which restricts and allow credit only to the manufacturer of goods or to the provider of output services. It is not the case of the revenue that security service was used exclusively in the manufacturing unit or used exclusively in the trading unit of the appellant, but the appellant has all along claimed that the said service was used as a common service in both the units. The amendment to Rule 2(e) was not applicable since the period under dispute is from June 2007 to January 2009 and hence, it is difficult to construe trading activity as an exempted service and that the service in question cannot be held to have been used in the provision of exempted service alone. The impugned order of the First Appellate Authority is unsustainable in law - appeal allowed.
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2024 (2) TMI 815
CENVAT credit - capital goods installed in the distillery plant used for manufacture of Ethyl Alcohol - period from June 2011 to June 2012 - Erection, Commissioning Installation services as input services availed after 01.04.2011 for setting up and installation of the distellery plant - exemption under Notification No. 67/1995-CE dt.16.03.1995 on the molasses consumed captively to manufacture Ethyl Alcohol - Requirement to pay an amount equal to 6% of value of the exempted goods in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004 [CCR, 2004] under Rule 14 read with Sec 11A of the Central Excise Act, 1944 - levy of interest and penalty. Whether the Appellant is entitled to Cenvat credit on the capital goods installed in the distillery plant used for manufacture of Ethyl Alcohol during the period from June 2011 to June 2012? - HELD THAT:- While it is true that in the process of manufacture of the excisable goods, viz, denatured Alcohol, Ethyl Alcohol, which is otherwise not chargeable to central excise duty arises at an intermediate stage, and the last step of denaturing takes place in tankers itself. The manner in which the goods have left the factory is what matters with respect to central excise duty, whether it is a question of payment of central excise duty or the admissibility of CENVAT credit on the capital goods, inputs or input services. There is no good reason as to why the Cenvat credit on capital goods used in the distillery should be denied to the Appellant - neither the factor that an exempted good, viz, Ethyl Alcohol comes into existence prior to the manufacture of denatured Alcohol nor the fact that denatured Alcohol is not produced within the distillery machines, but in the tankers within the factory, should make any difference to the entitlement of Cenvat credit. Nothing in the CCR determines the eligibility of CENVAT credit based on at what stage the final goods become liable to central excise duty, and so long as the goods which are cleared from the factory are excisable goods, CENVAT credit on the capital goods cannot be denied. Revenue relied on the decision of Division Bench of this Tribunal in RAI BAHADUR NARAIN SINGH SUGAR MILLS LTD VERSUS COMMISSIONER OF CENTRAL GST, DEHRADUN [ 2023 (11) TMI 1163 - CESTAT NEW DELHI] to assert that no Cenvat credit can be given on capital goods used in the manufacture of a distillery unit. We have examined the decision in Rai Bahadur Narain Singh Sugar Mills. The facts in that case were different. The Assessee in that case was entitled to an Area based exemption notification, which it availed and hence it would not have been entitled to CENVAT credit on captial goods - In this case, there is no exemption for denatured Alcohol and CO2 manufactured by the Appellant from duty and there is no dispute that duty was liable to be paid and was paid. Since the present case is different on facts, we find that the decision relied upon by the Revenue will not come to its rescue. Whether the Appellant is entitled to Cenvat credit on the Erection, Commissioning Installation services as input services availed after 01.04.2011 for setting up and installation of the distellery plant? - HELD THAT:- This Bench held in PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI [ 2021 (7) TMI 1094 - CESTAT HYDERABAD] that after 01.04.2011, although the services rendered in relation to installation and commissioning of the plant were not in the inclusive part of the definition but they were not excluded either and the main part of the definition of input service is broad enough to include the input services used in setting up and installation of the plant and machinery and hence CENVAT credit is admissible - the Appellant is entitled to Cenvat credit on the inputs used in setting up the plant and machinery. Whether the Appellant is entitled to claim exemption under Notification No. 67/1995-CE dt.16.03.1995 on the molasses consumed captively to manufacture Ethyl Alcohol? - HELD THAT:- There are no strong force in the submission of the learned Counsel that the adverse report of the Range Superintendent obtained after the Hearing was over, cannot be relied upon unless a copy is served upon the Appellant and it is given an opportunity to defend. The only matter of fact to be determined is if the appellant had fulfilled the requirements under Rule 6 of CCR or not. In view of the above, it is found that it is a fit case to be remanded to the Commissioner on this question, with a direction to provide or send a copy of the report of the Range Superintendent to the appellant and after giving the appellant sufficient opportunity to rebut the report and explain how it had fulfilled the obligation under Rule 6 of CCR, and pass a reasoned order after following principles of natural justice. Whether the Appellant is required to pay an amount equal to 6% of value of the exempted goods in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004 [CCR, 2004] under Rule 14 read with Sec 11A of the Central Excise Act, 1944? - HELD THAT:- In M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] , it has been held by the Hon ble High Court that the obligations under Rule 6(1) or Rule 6(2) or Rule 6(3) are various options given to the assessee and it is not for the Department to choose an option for the Assessee. If the assessee does not follow any of the options and fulfill its obligations, demand can be raised to deny the entire amount of Cenvat credit, but the assessee cannot be forced to pay an amount equal to 6% under Rule 6(3)(i) of CCR, 2004. Therefore, the demand equal to 6% of the value of exempted goods sold, under Rule 6(3) of CCR, 2004, cannot be sustained and needs to be set aside. Appeals are partly allowed and partly remanded.
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2024 (2) TMI 814
Compounding of duty - unsealing of one pouch making machine or not - one pouch packing machine that was installed in separate room as per the ground plan and used for packing sweet supari - HELD THAT:- No evidence has been produced by the revenue to establish that this machine was being used for packing Gutkha. All the evidences produced in form of declaration, ground plan and correspondences show that this machine was installed in the separate room and was used only for the purpose of packing sweet supari. Accordingly, there are no merits in the impugned order to that extent. It demands duty contrary to the declaration filed along with the ground plan, which is required in terms of Pan Masala Packing Machines (Determination of Capacity and Collection of Duty) Rules, 2008. Appeal allowed.
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2024 (2) TMI 813
Availment of inadmissible self credit of Education Cess and S H Education Cess in contravention of para 2C of the Notification - recovery alongwith interest and penalty - HELD THAT:- The identical issue was considered by this Tribunal in the case of M/S ALU BOND ENTERPRISES VERSUS THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAMMU KASHMIR [ 2023 (12) TMI 1290 - CESTAT CHANDIGARH] , wherein the Division Bench of this Tribunal has held The impugned order cannot be sustained and is accordingly set aside. Since the issue is no more res integra and this Tribunal in the above cited case has held that the impugned order is not sustainable in law; therefore, by following the ratio of said decision in the above cited case, it is held that the impugned order is not sustainable and the same is set aside by allowing the appeal of the appellant - appeal allowed.
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Indian Laws
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2024 (2) TMI 812
Unlimited corporate funding to political parties - Infringement of principle of free and fair elections - violation of Article 14 of the Constitution - non-disclosure of information on voluntary contributions to political parties - Application of the doctrine of proportionality Challenging the constitutional validity of the Electoral Bond Scheme Electoral Bond Scheme or Scheme which introduced anonymous financial contributions to political parties -Challenge to the provisions of the Finance Act 2017 which, among other things, amended the provisions of the Reserve Bank of India Act 1934, Section 135 of the Finance Act 2017, the Representation of the People Act 1951, Section 137 of the Finance Act 2017, the Income Tax Act 1961, Section 11 of the Finance Act 2017, and the Companies Act 2013, Section 154 of the Finance Act 2017. Whether unlimited corporate funding to political parties, as envisaged by the amendment to Section 182(1) of the Companies Act infringes the principle of free and fair elections and violates Article 14 of the Constitution? Whether the non-disclosure of information on voluntary contributions to political parties under the Electoral Bond Scheme and the amendments to Section 29C of the RPA, Section 182(3) of the Companies Act and Section 13A(b) of the IT Act are violative of the right to information of citizens under Article 19(1)(a) of the Constitution? HELD THAT:- Doctrine of proportionality - The test of proportionality comprises four steps: (i) The first step is to examine whether the act/measure restricting the fundamental right has a legitimate aim (legitimate aim/purpose). (ii) The second step is to examine whether the restriction has rational connection with the aim (rational connection). (iii) The third step is to examine whether there should have been a less restrictive alternate measure that is equally effective (minimal impairment/necessity test). (iv) The last stage is to strike an appropriate balance between the fundamental right and the pursued public purpose (balancing act). The test of proportionality is now widely recognised and employed by courts in various jurisdictions like Germany, Canada, South Africa, Australia and the United Kingdom. However, there isn t uniformity in how the test is applied or the method of using the last two prongs in these jurisdictions. The first two prongs of proportionality resemble a means-ends review of the traditional reasonableness analysis, and they are applied relatively consistently across jurisdictions. Courts first determine if the ends of the restriction serve a legitimate purpose, and then assess whether the proposed restriction is a suitable means for furthering the same ends, meaning it has a rational connection with the purpose. In the third prong, courts examine whether the restriction is necessary to achieve the desired end. When assessing the necessity of the measure, the courts consider whether a less intrusive alternative is available to achieve the same ends, aiming for minimal impairment. As elaborated, this Court Anuradha Bhasin [ 2020 (1) TMI 1387 - SUPREME COURT] , relying on suggestions given by some jurists, emphasised the need to employ a moderate interpretation of the necessity prong. To conclude its findings on the necessity prong, this Court is inter alia required to undertake an overall comparison between the measure and its feasible alternatives. We will now delve into the fourth prong, the balancing stage, in some detail. This stage has been a matter of debate amongst jurists and courts. Some jurists believe that balancing is ambiguous and value-based. This stems from the premise of rule-based legal adjudication, where courts determine entitlements rather than balancing interests. However, proportionality is a standard-based review rather than a rule-based one. Given the diversity of factual scenarios, the balancing stage enables judges to consider various factors by analysing them against the standards proposed by the four prongs of proportionality. This ensures that all aspects of a case are carefully weighed in decision-making. This perspective finds support in the work of jurists who believe that constitutional rights and restrictions/measures are both principles, and thus they should be optimised/balanced to their fullest extent. While balancing is integral to the standard of proportionality, such an exercise should be rooted in empirical data and evidence. In most countries that adopt the proportionality test, the State places on record empirical data as evidence supporting the enactment and justification for the encroachment of rights. This is essential because the proportionality enquiry necessitates objective evaluation of conflicting values rather than relying on perceptions and biases. Empirical deference is given to the legislature owing to their institutional competence and expertise to determine complex factual legislation and policies. However, factors like lack of parliamentary deliberation and a failure to make relevant enquiries weigh in on the court s decision. In the absence of data and figures, there is a lack of standards by which proportionality stricto sensu can be determined. Nevertheless, many of the constitutional courts have employed the balancing stage normatively by examining the weight of the seriousness of the right infringement against the urgency of the factors that justify it. Examination under the first three stages requires the court to first examine scientific evidence, and where such evidence is inconclusive or does not exist and cannot be developed, reason and logic apply. We shall subsequently be referring to the balancing prong during our application of the test of proportionality. In our view, proportionality analyses would be more accurate when empirical inquiries on causal relations between a legislative measure under review and the ends of such a measure are considered. It also leads to better and more democratic governance. While one cannot jump from is to ought , to reach an ought conclusion, one has to rely on accurate knowledge of is , for is and ought to be united. While we emphasise the need of addressing the quantitative/empirical deficit for a contextual and holistic balancing analysis, the pitfalls of selective data sharing must be kept in mind. After all, if a measure becomes a target, it ceases to be a good measure It is held in the present case as follows:- a. The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional; and b. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14. The following directions are issued: a. The issuing bank shall herewith stop the issuance of Electoral Bonds; b. SBI shall submit details of the Electoral Bonds purchased since the interim order of this Court dated 12 April 2019 till date to the ECI. The details shall include the date of purchase of each Electoral Bond, the name of the purchaser of the bond and the denomination of the Electoral Bond purchased; c. SBI shall submit the details of political parties which have received contributions through Electoral Bonds since the interim order of this Court dated 12 April 2019 till date to the ECI. SBI must disclose details of each Electoral Bond encashed by political parties which shall include the date of encashment and the denomination of the Electoral Bond; d. SBI shall submit the above information to the ECI within three weeks from the date of this judgment, that is, by 6 March 2024; e. The ECI shall publish the information shared by the SBI on its official website within one week of the receipt of the information, that is, by 13 March 2024; and f. Electoral Bonds which are within the validity period of fifteen days but that which have not been encashed by the political party yet shall be returned by the political party or the purchaser depending on who is in possession of the bond to the issuing bank. The issuing bank, upon the return of the valid bond, shall refund the amount to the purchaser s account.
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2024 (2) TMI 811
Dishonour of Cheque - acquittal of accused - rebuttal of presumption - Whether Respondent No. 1 succeeded in rebutting presumption under Section 139 of Negotiable Act? - HELD THAT:- There is a clear statement by PW-1 and that too in the cross-examination that the amount of loan was disbursed thought the account of the Accused. He also denied the suggestion that he failed to produce sufficient documents to show the liability of the Accused. The cross-examination of this witness is basically on the aspect of instalments and the amount paid by the Accused in such instalments. The specific suggestion was put to this witness which he denied - There is no dispute raised by the Accused that such notice was never received by him. Besides, the notice is addressed to the registered address of the Accused. The mandate of Section 138 of the Negotiable Instruments Act is to send notice to the Accused on his registered address, which has been complied with by the Complainant. No defence has been raised about such notice. No reply was given by the Accused to such legal notice. There is absolutely no defence raised by the Accused on receipt of legal notice issued by the Complainant. Thus once the signature on the cheque is admitted, the Court is duty bound to presume in favour of the Complainant that the cheque was issued for legally enforceable debt. In the case of BIR SINGH VERSUS MUKESH KUMAR [ 2019 (2) TMI 547 - SUPREME COURT ], the Apex Court considering the statutory presumption under Section 139 of the Negotiable Instruments Act and observed that on meaningful reading of the provision of the Negotiable Instruments Act, it makes amply clear that the person who signs the cheque and makes it over to the payee, remains liable himself unless he adduces evidence to rebut the presumption that the Cheque had been issued for payment of debt or in discharge of liability. It is immaterial that the cheque may have been held in by any person other then the drawer, if the cheque is duly signed by the Drawer. If the cheque is otherwise valid penal provision of the Section 138 would be attracted. In the present matter the documentary evidence placed on record clearly proves that the Accused obtained loan of Rs. 6,00,000/- with an undertaking to repay it in 60 instalments together with an interest at the rate of 15% per annum - There is no other material to show that prior to the date Ninety-Eight. 30.10.2012 any repayment was made by the Accused. Thus the amount outstanding in the loan ledger account is much more than the one mentioned in the cheque - This documentary evidence is sufficient enough to strengthen the case of the Complainant. Such material cannot be disbelieved only because representative of the Society was unable to give the bifurcation of the amount or the fact that he paid some instalments prior to the date of the cheque. The learned Magistrate has completely ignored the fact that repayment was with 15% interest. Therefore, even if some amount was paid, the amount outstanding shown in the ledger account and that too maintained during their regular business activities could not have been disbelieved. Apart from some discrepancies found in the deposition of PW1, there is absolutely no material to show that the Accused succeeded in rebutting presumption under Section 139 of the Negotiable Instruments Act. The Complainant established that the loan was sanctioned and availed by the Accused to the tune of Rs. 6,00,000/- (Rupees Six Lakhs only) and the amount mentioned in the cheque is certainly less than the outstanding amount shown in the ledger book. Thus, there was absolutely no material in favour of the Accused to claim the rebuttal evidence. The presumption stands in favour of the Complainant and accordingly, the only option with the learned Magistrate was to hold Accused guilty. By ignoring the settled proposition and the documentary evidence and giving unnecessary importance to oral testimony the learned magistrate committed an error in acquitting the Accused. The Impugned order is accordingly quashed and set aside - Appeal allowed.
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