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TMI Tax Updates - e-Newsletter February 2, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI Short Notes Bill: OTHER LEGISLATIVE AMENDMENTS PERTAINING TO CUSTOMS Bill: AMENDMENTS IN THE CUSTOMS ACT, 1962 Bill: EXPLANATORY MEMORANDUM TO THE FINANCE BILL, 2022 Bill: Promoting Voluntary Tax Compliance and Reducing Litigation Bill: Definition of the term “slump sale”: Bill: Reduction of Goodwill from block of assets to be considered as ‘transfer’ Bill: Income-tax authorities for the purposes of section 133A of the Act Bill: Amendment in the provisions of section 119 of Income-tax Act Bill: Amendment in the provisions of section 263 of the Act Bill: Amendment to sub-section (1A) of section 35 Bill: Consequential Amendments Bill: Clarifying that application will be allowed only when its actually paid Bill: Voluntary Contributions for the renovation and repair of temples, mosques, gurudwaras, churches etc notified under clause (b) of sub-section (2) of section 80G Bill: Taxation of certain income of the trusts or institutions under both the regimes at special rate Bill: Providing clarity on taxation in certain circumstances Bill: The provisions of section 115TD to apply to any trust or institution under the first regime. Bill: Bringing consistency in the provisions relating to payment to specified person Bill: Bringing consistency in the provisions of two exemption the regimes Bill: Reference to the Principal Commissioner or Commissioner (PCIT/CIT) for the cancellation of registration/approval Bill: Penalty for passing on unreasonable benefits to trustee or specified persons Bill: Amendment in the provisions of section 179 of the Act Bill: Rationalization of the provisions of sections 271AAB, 271AAC and 271AAD of the Act Bill: Rationalization of provisions relating to assessment and reassessment Bill: Set off of loss in search cases - Amendment in the provisions of section 79A of the Act Bill: Amendment in Faceless Assessment under section 144B of the Act Bill: Faceless Schemes under the Act Bill: Similar amendment is proposed in Section 271C. Bill: Alignment of the provisions relating to Offences and Prosecutions under Chapter XXII of the Act Bill: Cash credits under section 68 of the Act Bill: Amendment in the provisions of section 248 of Income-tax Act and insertion of new section 239A Bill: Withdrawal of exemption under clauses (8), (8A), (8B) and (9) of section 10 of the Income-tax Act, 1961- reg Bill: Withdrawal of concessional rate of taxation on dividend income under section 115BBD Bill: Scheme for taxation of virtual digital assets Bill: Provisions pertaining to bonus stripping and dividend stripping to be made applicable to securities and units Bill: Widening the scope of reporting by producers of cinematograph films or persons engaged in specified activities Bill: TDS on benefit or perquisite of a business or profession Bill: Rationalization of provisions of TDS on sale of immovable property Bill: Rationalization of provisions of section 206AB and 206CCA to widen and deepen tax-base Bill: Facilitating strategic disinvestment of public sector companies Bill: Exemption of amount received for medical treatment and on account of death due to COVID-19 Bill: Condition of releasing of annuity to a disabled person Bill: Incentives to National Pension System (NPS) subscribers for state government employees Bill: Tax Incentives to International Financial Services Centre (IFSC) Bill: Rationalization of provisions of the Act to promote the growth of co-operative societies Bill: Extension of date of incorporation for eligible start up for exemption Bill: Extension of the last date for commencement of manufacturing or production, under section 115BAB, from 31.03.2023 to 31.03.2024 Bill: Consequence for failure to deduct/collect or payment of tax – Computation of interest Bill: Clarification regarding deduction on payment of interest only on actual payment Bill: Clarification in respect of disallowance under section 14A in absence of any exempt income during an assessment year Bill: Amendments related to successor entity subsequent to business reorganization Bill: Clarification regarding treatment of cess and surcharge Bill: Amendment in section 245MA of the Act related to Dispute Resolution Committee Bill: Litigation management when in an appeal by revenue an identical question of law is pending before jurisdictional High Court or Supreme Court. Articles ECONOMIC SURVEY AND BUDGET 2022 – AT A GLANCE Exemption of amount received for medical treatment and on account of death due to COVID-19 - BUDGET UPDATES 2022 AMENDMENT IN SECTION 201 OF INCOME TAX ACT - CONSEQUENCE OF FAILURE TO DEDUCT OR PAY Direct Taxes and Finance Proposals - Budget 2022 Budget 2022-23 - Quick Updates RECLASSIFICATION NOT SUSTAINABLE UNLESS PROPOSED IN SHOW CAUSE NOTICE IT Department cannot raise claims against the Corporate Debtor once the resolution plan is approved News ₹ 1,38,394 crore Gross GST Revenue collected for January 2022 Central Excise - Notifications - Budget 2021-22 Customs Notification - Budget 2022-23 SUMMARY OF UNION BUDGET 2022-23 HIGHLIGHTS OF THE UNION BUDGET 2022-23 UNION BUDGET PROPOSES TO FORM HIGH-LEVEL COMMITTEE TO REFINE URBAN DEVELOPMENT FOR A PARADIGM CHANGE FINANCE MINISTER ANNOUNCES TRUST-BASED GOVERNANCE FOR EASE OF DOING BUSINESS 2.0 WITH ADVENT OF AMRIT KAAL RISKS OF CLIMATE CHANGE ARE THE STRONGEST NEGATIVE EXTERNALITIES THAT AFFECT INDIA AND OTHER COUNTRIES: UNION BUDGET 2022-23 ₹ 60,000 CRORE ALLOCATED FOR ‘HAR GHAR, NAL SE JAL’ SCHEME; 3.8 CRORE HOUSEHOLDS TO BE COVERED INTRODUCTION OF CENTRAL BANK DIGITAL CURRENCY ‘DIGITAL RUPEE’ ANNOUNCED NEXT PHASE OF EASE OF LIVING TO BE LAUNCHED UNDER AMRIT KAAL : UNION BUDGET 2022-23 DESIGN-LED MANUFACTURING SCHEME PROPOSED BY BUDGET-2022-23 TO BUILD A STRONG ECOSYSTEM FOR 5G A NEW SCHEME, PRIME MINISTER’S DEVELOPMENT INITIATIVE FOR NORTH EAST ‘PM-DevINE’ ANNOUNCED; ₹ 1500 CRORE ALLOCATED GOVERNMENT TO CONTRIBUTE FOR R&D IN SUNRISE OPPORTUNITIES, IN ADDITION TO EFFORTS OF COLLABORATION AMONG ACADEMIA, INDUSTRY AND PUBLIC INSTITUTIONS ‘HEALTH AND EDUCATION CESS’ NOT ALLOWED AS BUSINESS EXPENDITURE TECHNOLOGY TAKES CENTRE-STAGE IN HEALTH BUDGET CUSTOMS ADMINISTRATION TO BE FULLY IT DRIVEN IN SEZs CO-OPERATIVES TO PAY ALTERNATE MINIMUM TAX AND SURCHARGE AT REDUCED RATE OF 15% AND 7% RESPECTIVELY DIRECT PAYMENT OF ₹ 2.37 LAKH CRORE MSP VALUE TO 163 LAKH FARMERS FOR WHEAT AND PADDY PROCUREMENT DURING 2021-22 ₹ 15,000 CRORE OUTLAY FOR THE “SCHEME FOR FINANCIAL ASSISTANCE TO STATES FOR CAPITAL INVESTMENT” IN RE 2021-22 SHARP INCREASE OF 35.4% IN CAPITAL EXPENDITURE RBI TO ISSUE DIGITAL RUPEE STARTING FROM 2022-23 NARI SHAKTI THE HARBINGER OF WOMEN-LED DEVELOPMENT DURING THE ‘AMRIT KAAL’ BUDGET REITERATES GOVERNMENT’S COMMITMENT TO PROMOTE ATMANIRBHARTA IN EQUIPMENT FOR ARMED FORCES NEW LEGISLATION TO REPLACE SPECIAL ECONOMIC ZONES ACT BUDGET SPEECH 2022-2023 FISCAL DEFICIT ESTIMATED AT 6.4% OF GDP IN 2022-23 STRATEGIC TRANSFER OF OWNERSHIP OF AIR INDIA COMPLETED FOCUS ON SKILLING AND EMPLOYABILITY - NATIONAL SKILL QUALIFICATION FRAMEWORK (NSQF) TO ALIGN WITH DYNAMIC INDUSTRY NEEDS TAXPAYERS CAN FILE UPDATED INCOME TAX RETURN WITHIN TWO YEARS PM GATISHAKTI NATIONAL MASTER PLAN TO ECOMPASS SEVEN ENGINES –ROADS,RAILWAYS,AIRPORTS,PORTS,MASS TRANSPORT,WATERWAYS AND LOGISTICS INFRASTRUCTURE FOR ECONOMIC TRANSFORMATION, SEAMLESS MULTIMODAL CONNECTIVITY AND LOGISTICS SYNERGY EMERGENCY CREDIT LINE GUARANTEE SCHEME TO BE EXTENDED UP TO MARCH 2023; GUARANTEE COVER TO BE EXPANDED BY RS. 50,000 CRORE TO SUPPORT HOSPITALITY AND RELATED ENTERPRISES BUDGET LAYS FOUNDATION AND STEERS ECONOMY FROM INDIA @75 TO INDIA @100 Budget 2022-23 + FINANCE Bill, 2022 + FINANCE Act, 2022 Combined Index of Eight Core Industries (ICI) increases by 3.8 per cent (provisional) in December 2021 Inflow of 48 billion dollars in investment in the first seven months of the current financial year testimony to the belief the global investor community has in India’s growth story- Shri Ram Nath Kovind Notifications Central Excise 01/2022 - dated 1-2-2022 - CE Effective Rate of Duty of excise - increase Basic Excise Duty on Unblended Petrol and Diesel, in order to promote Blending in the country - Seeks to further amend Notification No. 11/2017-Central Excise, dated 30th June, 2017 01/2022 - dated 1-2-2022 - CE (NT) Seeks to supersede notification No. 49/2008-Central Excise (N.T.) dated 24.12.2008, in order to align it with the current legal position, post roll-out of GST. Customs 07/2022 - dated 1-2-2022 - ADD Seeks to rescind the anti-dumping duty imposed on imports of “Flat rolled product of steel, plated or coated with alloy of Aluminum or Zinc” originating in or exported from China PR, Vietnam and Korea RP vide Notification No. 16/2020-Cus (ADD) dated 23.06.2020. 06/2022 - dated 1-2-2022 - ADD Seeks to rescind the anti-dumping duty imposed on imports of “High Speed Steel of Non-Cobalt Grade” originating in or exported from Brazil, China PR and Germany vide Notification No. 38/2019-Cus (ADD) dated 25.09.2019. 05/2022 - dated 1-2-2022 - ADD Seeks to rescind the anti-dumping duty imposed on imports of “Straight Length Bars and Rods of alloy-steel” originating in or exported from China PR vide Notification No. 54/2018-Cus (ADD) dated 18.10.2018. 15/2022 - dated 1-2-2022 - Cus Seeks to amend various notifications giving exemption to electronic items and medical devices. 14/2022 - dated 1-2-2022 - Cus Seeks to amend notification No. 25/1999-Customs dated 28.02.1999 to omit redundant and obsolete entries 13/2022 - dated 1-2-2022 - Cus Seeks to implement a graded BCD structure for smart meters and its parts, sub-parts and sub-assembly 12/2022 - dated 1-2-2022 - Cus Implement a graded BCD structure for hearable devices and its parts, sub-parts and subassembly. 11/2022 - dated 1-2-2022 - Cus Implement a graded BCD structure for wearable devices and its parts, sub-parts and sub-assembly. 10/2022 - dated 1-2-2022 - Cus Seeks to amend notification No. 27/2011-Customs dated 01.03.2011 to omit redundant entries and reduce export duty raw hides and skins of buffalo. 09/2022 - dated 1-2-2022 - Cus Seeks to amend notification Nos. 146/94-Customs, 147/94-Customs, 39/96-Customs, 50/96-Customs, 30/2004-Customs, 81/2005-Customs, 5/2017-Customs, 16/2017-Customs, 32/2017-Customs to prescribe end-dates as per Section 25(4A) of Customs Act, 1962 08/2022 - dated 1-2-2022 - Cus Seeks to amend Notification Nos. 104/2010-Customs, 38/96-Customs, 40/2017-Customs, 60/2011-Customs, 148/94-Customs to exempt AIDC/Health cess/RIC on goods imported under the said notifications. 07/2022 - dated 1-2-2022 - Cus Seeks to further amend Notification No. 82/2017-Customs dated 27.10.2017 to prescribe effective rate on certain Textile items upto 30.04.2022 06/2022 - dated 1-2-2022 - Cus Seeks to further amend Notification Nos. 52/2017-Customs dated 30.06.2017 and 37/2017-Customs dated 30.06.2017 to remove entries which are being operated from the First Schedule to the Customs Tariff Act and certain redundant entries. 05/2022 - dated 1-2-2022 - Cus Seeks to rescind Notification Nos. 10/95-Customs, 26/99-Customs, 27/2004-Customs, 14/2006-Customs, 48/2006-Customs, 90/2007-Customs, 8/2011-Customs, 24/2011-Customs, 49/2013-Customs, 23/2014-Customs, 37/2015-Customs, 11/2016-Customs, 20/2020-Customs, 40/2020-Customs which have become redundant. 04/2022 - dated 1-2-2022 - Cus Seeks to rescind notification Nos. 190/1978-Customs and 191/1978-Customs both dated 22th September, 1978 prescribing additional duty of customs on imports of transformer oil equivalent to such portion of the excise duty leviable on the raw material commonly known as transformer oil base stock or transformer oil feedstock. 03/2022 - dated 1-2-2022 - Cus Seeks to further amend notification No. 11/2018-Customs dated 2nd February, 2018 so as to exempt certain goods from Social Welfare Surcharge (SWS) and to withdraw SWS exemption on certain textile items. 02/2022 - dated 1-2-2022 - Cus Seeks to further amend notification No. 50/2017-Customs dated 30th June, 2017 so as to prescribe effective rate of Basic Customs Duty (BCD) 07/2022 - dated 1-2-2022 - Cus (NT) Seeks to further amend Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 so as to simplify and automate the procedures. 06/2022 - dated 31-1-2022 - Cus (NT) Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver 01/2022 - dated 1-2-2022 - CVD Seeks to rescind the countervailing duty imposed on imports of “Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products” originating in or exported from China PR vide Notification No. 1/2017-Cus (CVD) dated 07.09.2017. DGFT 53/2015-2020 - dated 1-2-2022 - FTP Extension of Last Date for Submitting applications for Scrip based FTP Schemes 52/2015-2020 - dated 31-1-2022 - FTP Amendment in Export Policy of Syringes Circulars / Instructions / Orders SEBI SEBI/HO/CFD/DIL2/CIR/P/2022/11 - dated 1-2-2022 Schemes of Arrangement by Listed Entities Customs D.O. F. No. 334/02/2020-TRU - dated 1-2-2022 Changes in Customs, Central Excise, GST law and rates have been proposed through the Finance Bill, 2022 Highlights / Catch Notes GST Refund of IGST amount and duty drawback - In view of the fact that the applications for refund of IGST and duty drawback are still pending, it is directed that the Respondent No. 3 to decide the applications for refund of IGST and duty drawback made by the Petitioner referred in aforesaid within a period of four weeks from today without fail. - if according to the Respondent No. 3 any further investigation is required to be made before granting final refund of IGST as well as duty drawback, the Respondent No. 3 shall pass the order for provisional refund within the time prescribed in terms of Section 54(6) of CGST - HC Visit to Get Source Detention of goods alongwith vehicle - detention of goods for indefinite time - few defects in the documents - It is, ultimately, for the Department to take the final call whether any case for confiscation has been made out or not. This Court should not come in the way of the Department in that regard. - The writ applicant is directed to deposit the amount with the respondent No.4, and upon deposit of such amount, the respondent No.4 shall, at the earliest, release the conveyance and the goods. - HC Visit to Get Source Income Tax Offence u/s 276C(2) - Default in payment of tax and payment of the tax in instalment - proof of mens rea - This Court is of the view that the prosecution in this case is nothing but shear waste of time and there was no intention or willful attempt made by the Assessee to evade the payment of tax. Only he expressed his inability and mere failure to pay a portion of the tax cannot be construed to mean that he has wilfully attempted to evade the payment of tax. - Prosecution proceedings quashed - HC Visit to Get Source Exemption u/s 11 - application u/s 12AA - charitable activity u/s 2(15) - the activities of the assessee as set out in the Trust Deed are covered within the ambit of charitable purpose being primarily for education. The aforesaid finding by the Tribunal has not been assailed as perverse in this appeal. Therefore, the issue with regard to the activity of the assessee being commercial or business in nature, cannot be gone into at the time of consideration of the application under Section 12AA of the Act. - HC Visit to Get Source Offence u/s 276C - incorrect claim of deduction u/s 54B - wilful evasion - Merely on the statement it is situated in urban area and the agriculture was not carried out at the relevant point of time, it cannot be said that there was suppression. At any event considering the factual aspects which was dealt by the Income Tax Appellate Tribunal, this Court is of the view that the continuation of the prosecution is waste of time and futile exercise. - HC Visit to Get Source Exemption u/s 11 - ITAT allowed the deduction and issues of application of income - No doubt, the sale proceeds are transferred to another charitable and religious purpose, the same would necessarily come within the ambit of Section 11(1A). Hence, the finding of the Tribunal placing reliance on the judgment of Al Ameen Educational Society, supra, though has not reached finality on the merits of the case for want of monetary reliefs, the same cannot be held to be invalid or illegal in view of the provisions of the Act as discussed above. - HC Visit to Get Source Reopening of assessment u/s 147 - Disallowance of custom duty paid - The claim of the assessee for the custom duty is not applicable in the given facts and circumstances for the reason that the present proceedings before us are under Section 147 of the Act which cannot extend any benefit to the assessee. Accordingly, before going into the intricacies whether the assessee is eligible for the custom duty paid by it as deduction or not is not within the provisions of law. Once, a claim is not admissible, we refrain ourselves from adjudicating the issue raised by the assessee on the admissibility of custom duty paid by it. Hence, the ground of appeal of the assessee is dismissed. - AT Visit to Get Source Addition u/s 2(22)(e) - deemed dividend - interest bearing Loans - proportionate ownership of property acquired out of borrowed fund by the “company” to the extent of loan/advance lies with the assessee - CIT(A) is justified in holding that the AO is not right in bring to tax sum as a deemed dividend in the hands of the assessee. Since, We held that the provision of section 2(22)(e) of the Act have no application to the facts of the case - AT Visit to Get Source Validity of reopening of assessment u/s 147 - assumption of jurisdiction by the ld. AO u/s.147 - He had categorically stated in the reasons that from the records these transactions were found. That itself goes to prove that the ld. AO had gone into the assessment records again and had sought to entertain the change of opinion on the same set of facts available in the records.Hence, the reopening of assessment in respect of capital gain on sale of TCS Ltd. shares and re-investment in preference shares of Tata Sons Ltd., is declared as bad in law. - AT Visit to Get Source Disallowing set off of losses claimed by the appellant set-off of business losses and carried forward losses against the undisclosed income - We are of the view according to the CBDT Circular No. 11 of 2019 business losses and brought forward losses can be set-off against the income assessed under section 115BBE - AT Visit to Get Source Disallowance of expenditure u/s 14A read with rule 8D - proportionate disallowance of interest - common pool of funds - if we apply the ratio laid down in the various decisions as discussed to the facts of the present case, the inescapable conclusion would be, as per the balance-sheet the assessee had sufficient interest free fund available with it to take care of the investment. That being the factual position, presumption would be, the investments have been made out of the interest free funds available with the assessee. Hence, no disallowance under rule 8D(2)(ii) can be made. - AT Visit to Get Source Assessment u/s 153A - Undisclosed sales - CIT(A) had made detailed discussion on facts and recorded the finding that no incriminating evidence material was found during the course of search operation and also the contention of the learned Counsel for the assessee that letters relied upon by Assessing Officer were not made available to assessee during the course of assessment proceedings and to the CIT(A) during the course of appeal hearings as such on that basis, ld. CIT(A) should have also deleted the addition of undisclosed sales - Decided in favour of assessee. - AT Visit to Get Source Customs Emergency power of Central Government to increase import duties - Validity of increase in rate of duty from 5% to 10% - the order of the learned Judge insofar as it examined the validity of the notification on the basis of the sufficiency of reasons/material available with the Central Government warranting exercise of its power in issuing such notification, is erroneous and unsustainable. - the order of the learned Judge in setting aside the notification, is erroneous and contrary to law. - The fact that the goods were in transit or the orders have been placed at the time when a lower rate of duty prevailed, will have no bearing for the rate of duty that would be applicable, shall be the rate of duty prevailing on the dates mentioned in Section 15 of the Customs Act, 1962 - HC Visit to Get Source Grant of export incentives under Merchandise Exports from India Scheme (MEIS) - seeking reopening of online portal to allow the petitioner to rectify the inadvertent error - It must be noted that "to err is human” and wherever such bonafide mistakes have happened procedures so designed ought to provide for a way to rectify such bonafide mistakes. An error arising out of lapse and where parties seek to have the same rectified, the system must accommodate necessary procedure to rectify it. - While noticing that mistake that has happened is a technical mistake and is bonafide, on such technicalities, to deny substantive relief to the petitioner would amount to denial of justice - HC Visit to Get Source 100% EOU - demand of customs duty on the raw material imported duty free - removal of finished goods in DTA without having any permission from the Development Commissioner - it is settled that once in the 100% EOU the raw material imported duty free is used in the manufacture of final product and final product is cleared on payment of duty in DTA, for any reason the customs duty on the raw material which was used in the finished goods cannot be demanded therefore, the demand of Customs duty on this ground is clearly not sustainable. - AT Visit to Get Source IBC Initiation of CIRP - The Appellant, who is a speculative investor, cannot claim status and benefits as financial creditor under Explanation (i) of Section 5(8)(f) of the IBC, and is not interested in the financial well-being, growth and vitality of the Corporate Debtor, but is just interested in her investment and has come in the garb of an allottee. In such a situation, the Appellant is certainly not a financial creditor holding financial debt, which is in default of payment by the Corporate Debtor. - AT Visit to Get Source Seeking Liquidation of Corporate Debtor - Eligibility under the amended MSME Act 2006, Notified on 26.06.2020 - After going through the contents of the Notification, dated 26.06.2020, under the MSME Act, 2006, this Tribunal arrives at a definite conclusion that the said notification is only ‘Prospective in nature’ and not a ‘Retrospective’ one because the said notification does not in express terms speak about the applicability of retrospective operation. The relevant words are conspicuously absent besides there being no implicit reference to be drawn for such a construction. - AT Visit to Get Source Entitlement of Appellant(s)/ Applicant to be given a copy of Resolution Plan or any part of the Resolution Plan in the Appeal - When the right to Appeal on the ground enumerated in sub-section (3) of Section 61 is provided, unless the Appellant is aware of the contents of the Resolution Plan, how he will be able to satisfy the Appellate Court that the grounds enumerated in sub-section (3) of Section 61 are made out in reference to approval of the Resolution Plan. The provision of Section 61, sub-section (3) reaffirms the view that after approval of the Resolution Plan, Resolution Plan does not remain a confidential document, so as to deny its perusal to a claimant, who is aggrieved by the Plan and has come up on the Appeal - However, We are not inclined to issue a direction to provide entire Resolution Plan to the Appellant herein. - AT Visit to Get Source Withdrawal of CIRP - Whether the Resolution Professional can be permitted to withdraw the CIRP against the Corporate Debtor by invoking inherent powers under Rule 11 of NCLT Rules? - Regulation 30A of CIRP Regulations provides for withdrawal of a petition before the constitution of the Committee by the Applicant through the IRP as well as after constitution of the Committee by the Applicant, as per procedure stated therein. Thus, the power under the above is discretionary while considering the Application filed by IRP for withdrawal of the Company Petition. - Application allowed - Tri Visit to Get Source Service Tax CENVAT Credit - input service or not - re-insurance being pooled through a mechanism provided by IRDA - respondent who is an insurance company, had been depositing its service tax on the amount of insurance premium - In case of PNB Metlife, which judgment has been accepted by the department, the High Court has held that the service tax paid on re-insurance would be allowable as input service under the CENVAT Credit Rules, 2004 - Credit allowed - HC Visit to Get Source Valuation of service tax - Commercial Coaching and Training Service - whether the deductions claimed by the Appellant firm towards reimbursement of expenses on account of Hostel & Mess Fee and books are admissible deductions or not? - The amount received on account of Hostel & mess and books is not directly related to provision of taxable service. It was purely optional for the students looking into the business model adopted by the Appellant firm. Regarding non-payment of Service Tax on amount collected towards Books, there are force in Appellant firm’s contention that the said amount is outside the purview of Service Tax - AT Visit to Get Source Reversal of CENVAT Credit - capital goods cleared as scrap - The appellant, being an output service provider, was not required to pay any amount in terms of rule 3(5A) of the Credit Rules during the period involved in the present appeal for clearance of capital goods as scrap. - The capital goods cleared as ‘scrap’ by the appellant are scrap and, therefore, the appellant, being an output service provider, was not required to pay any amount in terms of rule 3(5A) of the Credit Rules. - AT Visit to Get Source Restoration of penalty imposed u/s 76, 77 and 78 of FA - On being pointed out, the assessee has immediately paid the service tax along with interest. Given this factual matrix, we are inclined to conclude that these were mere careless mistakes by the assessee without any intention to evade service tax. They fall within the scope of reasonable cause for failure the cause being ignorance or lack of due care. Therefore, the case falls within the mischief of Section 80 of the Finance Act, 1994. - No penalty - AT Visit to Get Source Central Excise CENVAT Credit - credit on inputs lying in stock, work in progress and finished goods as on the date of rescinding of the exemption notification in terms of sub-rule 2 (3) of CCR, 2004 - The appellants have though not made out a case on merits of the issue, have certainly made out a strong case in their favour on limitation and succeed on this count - SCN is time barred - AT Visit to Get Source VAT Levy of Entry Tax - Motive of the appellant behind litigation - The order of the writ Court overlooks the fact that the view/stand taken by the petitioner, insofar as the leviability of entry tax on imported vehicles is the view taken by the Division Bench of Kerala High Court and also the Judgment of the Madras High Court and the matter was finally resolved by a Division Bench of the Hon'ble Supreme Court, after the Constitutional Bench of Nine Judges pronounced on the scope of Part XIII of the Constitution. The above sequence of litigation will clearly demonstrate that the appellant cannot be imputed with motive whatsoever and therefore, the disparaging remarks are clearly unwarranted. - HC Visit to Get Source Case Laws: GST 2022 (2) TMI 53 Refund of IGST amount and duty drawback - Section 54 (6) of the Central Goods and Services Tax Act, 2017 read with Central Goods and Services Rules, 2017 - HELD THAT:- It is not in dispute that the applications filed by the Petitioner for seeking refund from IGST is pending which was made vide letters dated 03/12/2021, 08/12/2021 and 16/12/2021. The Petitioner had also applied for duty drawback by those letters. There is no response received by the Petitioner to those letters/applications for seeking refund of IGST as well as duty draw back till date. In view of the fact that the applications for refund of IGST and duty drawback are still pending, it is directed that the Respondent No. 3 to decide the applications for refund of IGST and duty drawback made by the Petitioner referred in aforesaid within a period of four weeks from today without fail. It is made clear that if according to the Respondent No. 3 any further investigation is required to be made before granting final refund of IGST as well as duty drawback, the Respondent No. 3 shall pass the order for provisional refund within the time prescribed in terms of Section 54(6) of the Central Goods and Services Tax Act, 2017 read with Central Goods and Services Rules, 2017 - petition disposed off. 2022 (2) TMI 52 Detention of goods alongwith vehicle - detention of goods for indefinite time - few defects in the documents - HELD THAT:- The detention of the conveyance and the goods for an indefinite period of time is not going to serve any good purpose. As on date, there is no notice issued under Section 130 of the Act for the purpose of confiscation of the conveyance and the goods. It is, ultimately, for the Department to take the final call whether any case for confiscation has been made out or not. This Court should not come in the way of the Department in that regard. The writ applicant is directed to deposit the amount of ₹ 14,36,528/- with the respondent No.4, and upon deposit of such amount, the respondent No.4 shall, at the earliest, release the conveyance and the goods. We clarify that we have otherwise not expressed any opinion on the merits of the case - application disposed off. 2022 (2) TMI 51 Entitlement to get the GST disbursed / reimbursed - Scope of mutual contract / with the govt of state agriculture department - Alleged delay on the part of the respondents in sanctioning the amount of GST receivable by the petitioner - HELD THAT:- On a perusal of the representation submitted by the petitioner as well as the Government Orders, this Court is of the opinion that the 1st respondent has to take a decision on Ext.P8 and its reminder produced as Ext.P9, in a time bound manner, bearing in mind the claim put forth by the petitioner. There will be a direction to the 1 st respondent to consider Ext.P8 and its reminder Ext.P9, as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a copy of this judgment, after hearing the petitioner as well as the 4th respondent - Petition disposed off. Income Tax 2022 (2) TMI 50 Offence u/s 276C(2) - Default in payment of tax and payment of the tax in instalment - proof of mens rea - immovable property was attached and attachment is still continued - HELD THAT:- Mere failure to pay the tax in time without any intention or deliberate attempt to avoid tax in totality or without any mens rea to avoid the payment, the word employed wilful attempt cannot be inferred merely on failure to pay tax in time. If the intention of the assessee to evade the payment of tax was present from the very inception, he would not have made further payments. The statements filed by the Department would also indicate that he was continuously paying the taxes from the year 2017 by instalments and he has paid the tax from 2016 till 10.11.2021 around 40 instalments he paid about ₹ 1,95,76,736/-. His conduct itself shows that there was no wilful attempt to evade the payment of tax and payment of the tax in instalment in fact clearly probabalise his reply given to the show cause notice which has not taken note of the Revenue. It is also relevant to note that for non-payment of tax the attachment order also passed on the immovable property of the assessee in the year 2016 itself. The authorities have attached the property till now keeping silent without making any recovery proceedings as contemplated under Sections 222, 223 and 226 of the Act. It is also relevant to note that as per Sub-Clause 4 Section 220 of the Act, ff the tax is not paid within the time limited under sub- section (1) or extended under sub- section (3), as the case may be, the assessee shall be deemed to be in default. The word Wilful is also not included the above legal fiction. Having attached the property the department has not made any attempt to recover all the taxes. Therefore, when the immovable property was attached and attachment is still continued, it is common knowledge that liquidating the asset is very difficult. Therefore, explanation offered by the assessee in this case for failure to pay the amount is very reasonable. The conduct of making payment of tax to the tune of ₹ 1,95,00,000/- is also clearly show that he never had an intention to defeat the provision of law by evading the payment of tax. As long as there is no deliberate Act or willful act on the part of the accused to evade the payment of tax, mere failure to pay the tax will not constitute the offence under Section 276C(2). This Court is of the view that the prosecution in this case is nothing but shear waste of time and there was no intention or willful attempt made by the Assessee to evade the payment of tax. Only he expressed his inability and mere failure to pay a portion of the tax cannot be construed to mean that he has wilfully attempted to evade the payment of tax. Proceedings on the file of the learned Additional Chief Metropolitan Magistrate (Economic Offences)-II, Egmore at Allikulam, Chennai, is quashed. 2022 (2) TMI 49 Exemption u/s 11 - application u/s 12AA - charitable activity u/s 2(15) - HELD THAT:- Section 12AA of the Act provides for procedure for registration. The Commissioner of Income Tax is required to satisfy himself about the objects of the Trust and genuineness of its activities and has to grant registration only if it is so satisfied. The scope of examination is confined in ascertaining whether the Trust is constituted genuinely for carrying on charitable activities or whether it has the capacity to carry out its professed objects. It is also well settled legal proposition that at the time of grant of registration, Commissioner of Income Tax is not required to examine the application of income and has to examine whether the objects of the Trust are charitable and whether the application is made in consonant with requirements of Section 12A of the Act read with Rule 17F of the Income Tax Rules. The genuineness of the activities of the Trust is not a matter to be looked into at the time of dealing with the issue of registration of the Trust u/s 12AA. From conjoint reading of the aforesaid clauses of the Trust Deed, it is axiomatic that primary purpose / objects of the assessee enumerated in the Trust Deed are charitable in nature. The other clauses of the Trust Deed had to be necessarily read in the context of the aforesaid clauses. The Tribunal, after taking into account the relevant clauses of the Trust Deed has recorded a finding of fact that the primary object of the Trust is charitable in nature. Even otherwise, the activities of the assessee as set out in the Trust Deed are covered within the ambit of charitable purpose being primarily for education. The aforesaid finding by the Tribunal has not been assailed as perverse in this appeal. Therefore, the issue with regard to the activity of the assessee being commercial or business in nature, cannot be gone into at the time of consideration of the application under Section 12AA of the Act. Even otherwise, at the time of grant of registration the Commissioner of Income Tax, in the facts of the case could not have examined the genuineness of the activities of the assessee as its activity had not commenced. The issue regarding the satisfaction of genuineness of activity of a Trust is not a matter which can be looked into at the time of grant of registration under Section 12AA of the Act. Substantial questions of law Nos.1 to 3 involved in this appeal are answered against the revenue and in favour of the assessee. Grant of exemption or renewal as not automatic in character - HELD THAT:- As the decision of the High Court in 'GANJAM NAGAPPA SONS TRUST Vs. DIRECTOR OF INCOME TAX' [ 2004 (1) TMI 29 - KARNATAKA HIGH COURT] has no application to the facts of the case and therefore, aforesaid question is also answered against the revenue. 2022 (2) TMI 48 Offences u/s 276C - tax evasion - false or bogus claims - incorrect claim of deduction u/s 54B - penalty proceedings under Section 271(1)(c) of the Act has also initiated - HELD THAT:- It is not the case of the A.O.that the Asssessees claim were false or bogus. Excess amount was also paid by the Assessees. Thereafter penalty also levied. It is not in dispute that the above order has reached finality and the same has not been challenged. Therefore, any finding recorded by the ITAT in the similar allegations certainly binding on the Revenue. When the Tribunal has held that the Assessing Officer has presumed that the claim is bogus or false without making any enquiry. It is not the case of the Assessing Officer that the Claim is false or bogus. The Assessing Officer has not examined the claim of assessee and found whether they have given money to M/s. Alpha Commercials for the purpose of investment in the property. In the absence of any materials the Assessing Officer has presumed that the assessee claiming exemption is false or bogus. When the Appellate Tribunal has factually recorded the finding that there was no suppression of facts and the assessee has originally disclosed the receipt of the sale property, merely claimed deduction it cannot be said that there was wilful evasion of Tax. As recorded by the Appellate Tribunal the disclosure has been made. There is no suppression of facts. Therefore, it cannot be said that merely exemption is claimed to the property and the investment has not been made, the wilful evasion cannot be presumed as the Appellate Tribunal has found that there was no suppression. Therefore, initiation of prosecution on the similar allegations is nothing but futile exercise. It is also to be noted that the land in question measuring around 3.9 acres. Merely on the statement it is situated in urban area and the agriculture was not carried out at the relevant point of time, it cannot be said that there was suppression. At any event considering the factual aspects which was dealt by the Income Tax Appellate Tribunal, this Court is of the view that the continuation of the prosecution is waste of time and futile exercise. Accordingly, the proceedings initiated in E.O.C.C.75 of 2016 to E.O.C.C.82 of 2016 pending on the file of the of the Additional Chief Metropolitan Magistrate (E.O.II), Allikulam, Chennai, are quashed. - Decided in favour of assessee. 2022 (2) TMI 47 Reopening of assessment u/s 147 - reopening proposed after expiry of four years - Eligibility of reason to believe - HELD THAT:- As considered the reasons recorded for reopening and in our view, it does not disclose anywhere that there was failure on the part of petitioner to disclose fully and truly all material facts. Simply using the words, by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment, would be of no use to respondents since it is rather obvious that it is made only as an attempt to take the case out of the restrictions imposed by proviso to Section 147 of the Act. By no stretch of imagination, it can be held that there was non-disclosure on the part of petitioner. These facts have been brought to the notice of respondents by petitioner vide letter dated 10th October, 2019. Notwithstanding the same, the order on the objections dated 16th October, 2017 and impugned in the petition has been passed. Having heard the Counsels and considered the petition along with documents annexed thereto, the JAO has not verified the facts with the data available with him and simply on the basis of information received from DDIT, has issued the notice to petitioner. Therefore the condition precedent for taking action under Section 147 of the Act that mandates, it is exclusively the satisfaction of the assessing authority based on some direct, correct and relevant material has not been met. This Court in CIT vs. Shodiman Investment P. Ltd. [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] has held that reopening notice has to be issued by the Assessing Officer on his own satisfaction and not on borrowed satisfaction. As in the order disposing petitioner s objections, Assessing Officer has relied upon various judgments of which copies have not been provided or were brought to the notice of assessee before the order on objection was passed so that assessee could have suitably dealt with those judgments/orders. Therefore, we would add that there is also breach of principles of natural justice on the part of the Assessing Officer, who as a quasi judicial authority had an obligation to adhere strictly to the principles of natural justice. In the order disposing the objections, the JAO has gone beyond the reasons recorded for reopening inasmuch as according to him no bank statements or work contract receipts were inquired or submitted during the original assessment proceedings based on which the actual amount and the nature and genuineness of the work done by assessee for SECPL could have been verified. It is settled law that reasons cannot be improved upon and/or supplemented as held in First Source Solutions Limited [ 2021 (9) TMI 248 - BOMBAY HIGH COURT] In any event, the Assessing Officer is not correct inasmuch as petitioner, as recorded earlier, has provided the details regarding contract with SECPL. - Decided in favour of assessee. 2022 (2) TMI 46 Validity of assessment - As submitted that the assessee died on 09.05.2021 due to Covid-19 and therefore the notice issued under Section 142(1) of the Income Tax Act, 1961 remained unanswered - Assessment Order is being challenged primarily on the ground that the impugned order has been passed contrary to Section 159 of the Income Tax Act, 1961 and that it has been passed against the persons who has already died which is duly admitted and recorded in the impugned order - As noticed that the petitioner has also filed an appeal before the CIT (Appeals) under Section 146A - HELD THAT:- Since the petitioner has already filed a Statutory Appeal before the Appellate Commissioner, there is no merits in this writ petition as the petitioner has exercised the option of alternate remedy which indeed is more efficacious remedy under the facts and circumstances of the case. No merits in this writ petition. This writ petition stands dismissed with the above observations. 2022 (2) TMI 45 Exemption u/s 11 - ITAT allowed the deduction and issues of application of income - Capital asset transferred by the charitable trust and utilized for acquiring another capital asset - HELD THAT:- A legal fiction has been created by Section 11(1A) to consider such transfer of capital asset and the investment of sale proceeds for acquiring another capital asset to be so held by the Trust as applied to charitable or religious purposes under Section 11(1)(a). At any stretch of imagination, this legal fiction created under Section 11(1A) cannot be considered as a proviso to carve out an exception to the main provision. It is in the background of the circular instructions, referred to supra, in order to give statutory force, this provision has been inserted. Capital asset transferred by the charitable trust and utilized for acquiring another capital asset would alone cannot be the criteria for granting exemption under Section 11(1A) or in other words, no denial could be made if the sale proceeds are transferred to another charitable trust. Such inter-se transfer between two charitable trusts being not disputed by the department, cannot be a ground to deny the benefit under Section 11(1A) of the Act. The sale proceeds need not always be invested in another capital asset to be held in the name of the charitable trust. There may be circumstances where a charitable trust is not applying for charitable or religious purposes to the extent to which such income has to be applied to such purpose in India directly and intends to invest in another capital asset to be so held by such charitable institutions. Certainly, it is not a circumstance involved herein. No doubt, the sale proceeds are transferred to another charitable and religious purpose, the same would necessarily come within the ambit of Section 11(1A). Hence, the finding of the Tribunal placing reliance on the judgment of Al Ameen Educational Society, supra, though has not reached finality on the merits of the case for want of monetary reliefs, the same cannot be held to be invalid or illegal in view of the provisions of the Act as discussed above. As in the case of Commissioner of Income Tax v. Maria Social Service Society [ 2018 (11) TMI 1056 - KARNATAKA HIGH COURT] had considered the question relating to the return of income filed by the assessee and some foreign benefits received by the charitable trust and made over such remittance to another charitable trust which was newly constituted held to be not in contravention of the provisions of Section 11 of the Act as long as the subject matter of application of money is for the purpose of objects of the trust as envisaged under Section 11 and as such the said transfer could not be a ground for cancellation or rejection under Section 12AA - Decided in favour of assessee. 2022 (2) TMI 44 Addition u/s 68 - assessee could not explain the cash in hand as on 31.03.2016 since the cash balance was declared by him at NIL as on 31.03.2016 - HELD THAT:- We find merit in the arguments of the Assessee that the net cash in hand as on 31.03.2016 shown by him at ₹ 25,40,868.60 could not have been ignored by the A.O. merely on the ground that assessee could not justify the huge cash in hand. Since the A.O. has not looked into the various details filed before him during the course of assessment proceedings itself in the shape of balance-sheet and P L A/c of M/s. Arun Kapoor Water Cooling Plant and M/s. Eagle Water Cooling Plant of which the assessee is proprietor and since the assessee before me has explained the availability of cash in hand as on 31.03.2016 therefore, set aside the order of the Ld. CIT(A) and direct the A.O. to deletion of the addition. Grounds raised by the assessee are accordingly allowed. 2022 (2) TMI 43 Estimation of income - bogus purchases - HELD THAT:- The assessee has shown net profit @ 0.0051%, which is extremely on lower side. The submission of Ld. AR of the assessee on the basis of report of task force constituted by Department of Commerce, Ministry of Commerce Industry, wherein the industries have requested for presume to tax for net profit @ 2% which will encourage traders that BAP introduce by Government would achieve success. We are not convinced the submission of Ld.AR as the dispute before us is about the genuinely of purchases, which has been shown only to inflate the expenses and reduce the profitability. As we have already noted that the assessee had shown extremely low net profit. Therefore, we are of the view that the disallowance restricted by Ld. CIT(A) in on the lower side. Hence, we modify the order of the ld CIT(A) and restrict the addition of the disputed purchases to the extent of 6% and direct the AO to re-compute the disallowances accordingly. In the result, the grounds of appeal raised by the revenue are partly allowed. 2022 (2) TMI 42 Reopening of assessment u/s 147 - Disallowance of custom duty paid - deduction of custom duty on payment basis as provided under the provisions of Section 43B - Whether complete evidence of payment of custom duty in the relevant previous year along with bills of entries ? - HELD THAT:- The assessee has claimed the deduction for the custom duty in the proceedings under Section 143(3) of the Act first time before the ITAT which was admitted and allowed subject to the verification by order dated 3rd December 2004. Thus, the question arises, the claim which have been made by the assessee in the proceedings under Section 143(3) of the Act, can the assessee made a similar claim in the income escapement proceedings. Reassessment proceedings under Section 147 of the Act are for the benefit of the revenue and not for the assessee as held by the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [ 1992 (9) TMI 1 - SUPREME COURT] . It is not for the taxpayer to convert the reassessment proceedings in to a regular assessment proceeding and agitate issues which were concluded in the original assessment proceedings. The Income tax liability cannot be reduced to a figure less than that determined in the original assessment. The claim of the assessee for the custom duty is not applicable in the given facts and circumstances for the reason that the present proceedings before us are under Section 147 of the Act which cannot extend any benefit to the assessee. Accordingly, before going into the intricacies whether the assessee is eligible for the custom duty paid by it as deduction or not is not within the provisions of law. Once, a claim is not admissible, we refrain ourselves from adjudicating the issue raised by the assessee on the admissibility of custom duty paid by it. Hence, the ground of appeal of the assessee is dismissed. Netting of interest by AO while computing deduction u/s 80IA - HELD THAT:- As in original assessment proceeding under section 143(3) of the Act claim of the assessee for deduction on other income under section 80IA was disallowed by the AO. The mater reached to this tribunal [ 2004 (12) TMI 289 - ITAT AHMEDABAD-B] as confirmed the stand of the AO that other income should be excluded from the calculation of the deduction under section 80IA We hold that the claim of the assessee for the netting of interest income while computing the deduction under section 80-IA of the Act is not maintainable in the given facts and circumstances for the reason that the present proceedings before us are under Section 147 of the Act which cannot extend any benefit to the assessee. Accordingly, without going into the intricacies whether the assessee is eligible for the netting of interest for computing the deduction under section 80-IA of the Act, we hold that the claim of the assessee is not maintainable. Even on merit we note that the ITAT on the previous occasion has set aside the issue to the file of the AO in[ 2011 (10) TMI 723 - ITAT AHMEDABAD] with the direction to establish the nexuses between the interest income viz a viz the interest expenses. However, we note that assessee has not establish such nexuses based on the documentary evidence. Thus it appears to us, the assessee even on merit, fails. Hence, the ground of appeal of the assessee is dismissed. Disallowance of the depreciation on the amount of interest capitalized on machine - AO found that there was no payment of the interest to the ICICI bank by the assessee and amount of interest was converted into the principal amount of loan from ARCIL thus the impugned amount of interest expenses cannot be capitalized on the machines and cannot be subject to depreciation - HELD THAT:- There is no dispute to the fact that the payment was made by the assessee towards interest after converting the same as fresh loan from ARCIL - payment of interest to the ICICI Bank by way of acquiring the fresh loan is a valid mode of payment. Indeed, such fresh loan shall be treated as principal amount and the repayment of the same will be made over a period of time of the loan. However, the accounting adjustments the books of accounts for the interest expenses and repayment of the loan along with interest would have been made the regular course. There is no allegation by the revenue that such accounting adjustments have not been made in the books of accounts - the assessee has made the payment of interest expenses on the loan borrowed from ICICI bank by converting the same into of fresh loan from ARCIL. Accordingly we hold that, the assessee cannot be denied the depreciation allowance on the amount of interest capitalised on the machines. Consequently, set aside the finding of the learned CIT-A, and direct the AO delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition of prior period expenses - AO observed that the assessee should have claimed such expenses in the year to which it pertains as per the mercantile system of accounting - HELD THAT:- The genuineness of the expenses have nowhere been doubted by the authorities below. Thus it is transpired that the expenses claimed by the assessee were incurred for the purpose of the business in the earlier year and the same were eligible for deduction in that particular assessment year in which such expenses were incurred. Now the question arises the expenses genuinely incurred by the assessee in the earlier year could be disallowed in the year under consideration when such expenses were claimed. The answer stands in affirmative. It is for the reason that the expenses there is no loss to the revenue as there is no change in the rate of tax. See NAGRI MILLS CO. LTD. [ 1957 (9) TMI 30 - BOMBAY HIGH COURT ] - e find difficult to convince ourselves with the finding of the authorities below. Accordingly, we set aside the decision of the Ld. CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. Non-payment of outstanding dues under the provisions of Section 41(1) - assessee before Ld. CIT-A submitted that outstanding amount relates to purchase of motor car, therefore, the provision of Section 41(1) will not apply as the same is capital in nature - HELD THAT:- Provisions of Section 41(1) reveals that it is applicable with regard to an allowance or deduction in respect of loss, expenditure or trading liability incurred by the assessee. But the depreciation claimed by the assessee, though it is an allowance, but it is not in respect of loss, expenditure or trading liability as envisaged under the provisions of Section 41(1) of the Act. Accordingly, we are of the view that such outstanding liability against the car cannot be treated as trading liability and therefore the same is outside the purview of the provisions of Section 41(1) of the Act. In holding so, we draw support and guidance from the judgement of Hon ble Supreme Court in the case of Nectar Beverages (P.) Ltd. [ 2009 (7) TMI 5 - SUPREME COURT] . Once a transaction, representing loan against the capital assets, is not a trading liability as envisaged under the provisions of Section 41(1) of the Act. The same cannot be charged to tax on the reasoning that it has ceased to exist in the books of accounts. Accordingly we are not convinced with the finding of the authorities below. Thus, we set aside the finding of the Ld. CIT-A, and direct the AO to delete the addition made - Decided in favour of assessee. Disallowance of depreciation in respect of unit 1 on the reasoning that it was not in operation - HELD THAT:- On perusal of the provisions of Section 32 of the Act, it is one of the precondition for claiming the depreciation on a particular asset that it should be used for the purpose of the business. However, the Hon ble courts have interpreted the word used by holding that assets which are ready to use shall be considered as used for the purpose of the business. In other words, the assets which are not actively used but used passively are also eligible for depreciation under the provisions of section 32 of the Act. In holding so we draw support and guidance from the Judgment of Hon ble Delhi High Court in the case of Oawal Agro Mills Ltd. [ 2010 (12) TMI 947 - DELHI HIGH COURT] The assets deployed in the unit No. 1, though not in operation during the year, but assets were previously used and ready to use for the purpose of the business. Thus, it can be said that there was passive use of these assets. Assets used unit No. 1 became the part of the block of assets and lost their individual identity. Accordingly, the assets deployed in unit No. 1 cannot be segregated for the purpose of the depreciation. These assets will remain part of the block of assets and therefore would be entitle for depreciation even in a situation that assets were not used for a particular year for the purpose of the business. Accordingly, we set aside the finding of the Ld. CIT-A, and direct the AO to delete the disallowance made by him. Hence, the ground of appeal of the assessee is allowed. Addition of closing value of raw materials, spares, WIP and finished goods written off on account of obsolescence - AO disregarded the contention of the assessee by observing that there was no report furnished by the assessee of an expert suggesting that the impugned raw materials, stores and spares, working progress etc. either have nil value or negligible value - HELD THAT:- Before we touch the issue whether these items were known salable/nonmoving, it is pertinent to note that if the deduction in the closing stock is denied which will certainly enhance the profit of the assessee. But, the same closing stock will become the opening stock in the subsequent year and the profit of the subsequent year will reduce by the amount of such claim of the assessee. Thus, we note that there will not be any impact on the income of the assessee if we see from the overall position. The year under dispute, the income of the assessee will get enhance and the income of the assessee by the same amount will get the decrease in the next year. Thus, overall there will not be any impact on the taxable income of the assessee on account of such adjustment in the value of the closing stock. We also note that the Hon ble Supreme Court in the case of Mahindra Mills Ltd [ 1975 (3) TMI 1 - SUPREME COURT] has held that the closing stock of the year will become the opening stock of the next year hence the same telescoped - in our view no addition representing the adjustment in the value of closing stock is warranted. The stock has been written off from the books accounts in systematic manner by the approval of the Board of Directors. Therefore, all these details cannot be brushed aside - we hold that the assessee cannot be denied the deduction in the value of closing stock on account of non-moving/unsaleable items. Thus we set aside the order of the Ld. CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. Addition on account of non-ITA payment of employees contribution towards the Employees Provident fund and ESI which was paid within the grace period - HELD THAT:- Admittedly, the assessee is required deposit the employee s contribution towards the PF/ESI within the time specified under the respective Act. If it is not done so, the same is treated as income of the assessee under the provisions of Section 2(24)(x) read with Section 36 (1)(va) of the Act. Under the provision of PF and ESI Act, the period for making the payment has been specified within 15 days from the end of the month in which salary of the assessee became due. However, there has been given the grace period of 5 days under the relevant Act for making the payment of employee s contribution towards the PF/ESI. Therefore the assessee is liable to deposit the employee s contribution on or before 20th day of the month from the close of the month in which the salary was due for payment. Therefore in our considered view grace period of 5 days should also be allowed to the assessee as provided under the respective Act. See AMOLI ORGANICS (P) LTD. [ 2013 (11) TMI 971 - GUJARAT HIGH COURT] - thus we direct the AO to delete the addition to the extent of amount of PF/ESI deposited within grace period. Hence the ground of appeal of the Assessee is allowed in part. Depreciation for an amount on the written down value of the fixed assets - HELD THAT:- At the outset we note that impugned dispute for the depreciation on the written down value was emanating from the assessment year 2002-03 and onwards. Admittedly, the ITAT for the assessment year 2002-03 to 2005-06 was pleased to allow depreciation on the addition of the fixed assets which were in dispute.Once the ITAT has allowed the depreciation on the addition of the fixed assets in the initial assessment year, the question of making the disallowance of the depreciation on the same set of assets the subsequent year does not arise. Hence we set aside the finding of the Ld. CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. Addition on account of disallowances of provision for bad and doubtful debts - As bad and doubtful debt were not credited in P L account. Thus, the AO in view of submission of the assessee disallowed the same and added to the total income of the assessee - HELD THAT:- AR appearing on behalf of the assessee has not brought anything on record in order to comply the provisions as discussed above. Accordingly, the mere fact that bad debts has been written off in the books of accounts shall not extend any help to the assessee in the given facts and circumstances. Thus, we hold that there is no infirmity in the order of the authorities below. Accordingly, we confirm the same. Hence the ground of appeal of the assessee is hereby dismissed. 2022 (2) TMI 41 Penalty levied u/s. 271(1)(c) - claim made u/s. 10(38) not allowable - HELD THAT:- What is clearly coming out from the fact that it is not disputed by either party about the income arising as Capital Gain on SSNNL bond. It is mere claim of the assessee made in his return of income that the same is exempt u/s 10(38) is not considered by the assessing officer in the quantum order. Against the order of the quantum revenue and assessee has filed their respective appeals. In the case of Shri Manan Patel and in the case of Maulikumar M Patel. [ 2016 (11) TMI 1710 - ITAT AHMEDABAD] - these four appeals of assessee and revenue which is in relation to the order of the Ld. CIT(A) it was decided by the tribunal that the gain which is arising out of the SSNNL bond is capital gain and not interest on securities. Therefore, as contended by AR of the assessee that when the tribunal has already contended that the gain arising from the SSNNL bond is chargeable to capital gain only then the issue in the penalty proceeding is only disallowance of claim of the assessee and the case of the assessee is squarely covered with the decision of the Hon ble Supreme Court in the case of CIT Vs. Reliance Petro Products Ltd [ 2010 (3) TMI 80 - SUPREME COURT] We find force in the argument of AR of the assessee that considering the overall facts, at the best, the claim of the assessee can be regarded as wrong which cannot be equated with the furnishing of inaccurate particulars of income. Considering, the decision of the Honourable Supreme Court on the issue, we hold that there is no error in the order of the Ld. CIT(A) in law as well as on facts and the appeal is of the revenue is not maintainable and is dismissed. 2022 (2) TMI 40 Revision u/s 263 by CIT - eligibility for deduction u/s 80P(2)(a)(i) - HELD THAT:- A.O. in the original assessment order has not taken note of the judgment of the Hon ble jurisdictional High Court in the case of Pr.CIT Anr. v. Totagars Co-operative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] while granting deduction u/s 80P(2)(a)(i) of the I.T.Act in respect of the entire claim wherein as categorically held that interest income earned out of investment with co-operative banks are not entitled to deduction u/s 80P(2)(a)(i) nor u/s 80P(2)(d) of the I.T.Act. Since the A.O. has not taken notice of above mentioned jurisdictional High Court judgment, the CIT has correctly exercised the revisionary powers u/s 263 of the I.T.Act. Majority of the interest income is earned out of investments made with Central Co-operative Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules. If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business, which entails the benefit of deduction u/s 80P(2)(a)(i) of the I.T.Act. Insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, we make it clear that interest income received out of investments with cooperative societies alone is to be allowed as a deduction. AR had claimed that if interest income is to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 of the I.T.Act. We find an identical issue was considered by the Hon ble jurisdictional High Court in the case of Totagars Co-operative Sale Society Ltd. v. ITO [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] . The assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed (i.e. after deducting expenditure incurred for earning such income), this plea of the assessee has to be necessarily entertained. Therefore, in the light of the judgment of the Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors. v. CIT Anr. [ 2021 (1) TMI 488 - SUPREME COURT] AND the judgment of Totagars Co-operative Sale Society [Supra] and order of the Tribunal in the case of M/s.Vasavamba Co-operative Society Ltd [ 2021 (8) TMI 706 - ITAT BANGALORE] , the matter needs to be examined afresh by the A.O. de hors the observations of the CIT. The A.O. is directed to follow the dictum laid down by the above mentioned judicial pronouncements, while framing the fresh assessment. Appeal filed by the assessee is partly allowed. 2022 (2) TMI 39 Levy of penalty u/s 271AAA - need to specify the manner in which the undisclosed income had been derived - HELD THAT:- As on the statements of the Assessee and her husband recorded by the AO, nothing appears qua putting an specific query by referring the provisions of section 271AAA of the Act and drawing the attention of the Assessee to the same while asking her to specify the manner in which the undisclosed income had been derived, hence as per judgment of M/s Emirates Technologies Pvt. Ltd. [ 2017 (8) TMI 387 - DELHI HIGH COURT] wherein it has been affirmed when no specific query had been put to the Assessee by drawing his attention to Section 271 AAA of the Act asking him to specify the manner in which the undisclosed income, surrendered during the course of search, had been derived, the jurisdictional requirement of Section 271AAA was not met the penalty is not leviable. Even Hon‟ble Gujarat High Court in the case of CIT vs. Mahendra C shah [ 2008 (2) TMI 32 - GUJARAT HIGH COURT] and case of Radha Kishan Geol [ 2005 (4) TMI 47 - ALLAHABAD HIGH COURT] dealt with the identical situation and deleted the penalty. We are inclined to delete the penalty imposed by the AO and confirmed by the ld.CIT(A) u/s 271AAA - Decided in favour of assessee. 2022 (2) TMI 38 Assessment u/s 153C - Whether no nexus with the alleged material unearthed during the course of search operation? - HELD THAT:- The original assessment was framed vide order dated 13.12.2010 wherein short term capital gain was accepted as such. Therefore, in our considered opinion, in the assessment order framed u/s 153C of the Act, there has to be direct nexus between incriminating material found during the course of search qua the addition, devoid of which, the ratio laid down by the Hon'ble Jurisdictional High Court in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] squarely apply. Coming to the facts of Assessment Year 2009-10, we find that the assessee has returned short term capital loss on forfeiture of convertible share warrants which was accepted as such by order framed u/s 143(1) of the Act. However, in the order framed u/s 153C of the Act, the same was disallowed. A perusal of the assessment order clearly shows that there is no nexus between the addition made in the assessment order and in the incriminating material found at the time of search - we do not find any merit in the addition made in Assessment Year 2009-10. - Decided in favour of assessee. 2022 (2) TMI 37 Penalty levied u/s 271(1)(c) - deemed dividend u/s 2(22)(e) - HELD THAT:- The loan transaction was duly reflected in the books of account of the two companies and in fact, the loan transaction was treated as deemed dividend in the hands of M/s Raas Intratech [P] Ltd but subsequently, on the directions of the ld. CIT(A), the same was added in the hands of the assessee. At the inception itself, the issue being highly debatable, as to in whose hands the addition has to be made, therefore, the first appellate authority was convinced that the addition has been made in the deeming provision and is debatable. We are of the considered view that such a highly debatable issue at the relevant point of time [Assessment Years under consideration] cannot be the subject matter of filing inaccurate particulars of income or concealment of income when the facts were very much available with the Assessing Officer. Considering the facts of the case in totality, we do not find any reason to interfere with the findings of the ld. CIT(A). - Decide against revenue. 2022 (2) TMI 36 Exemption u/s 11 - Charitable object u/s 2(15) - main object of the assessee was to run a nation-wide academic and research network, to undertake and promote R D in the area of communication, develop policy options in the country for development of network infrastructure and to act as a research centre for technological and managerial resources in the area of computer network - as held that the appellant is covered by the proviso to amended definition contained in section 2(15) and its activities are not charitable and exemption under section 11 was denied - HELD THAT:- We find that this issue was discussed thread-bare by the Tribunal in the case for assessment years 2009-10 and 2010-11 [ 2018 (1) TMI 189 - ITAT DELHI] and held that no part of the function carried out by the assessee is in the nature of trade / business. The said order of the Tribunal has also been affirmed by the Hon ble Delhi High Court [ 2018 (5) TMI 1814 - DELHI HIGH COURT] and 2018 (9) TMI 1994 - DELHI HIGH COURT] respectively. Respectfully following the order of the Hon ble High Court, who has upheld the order of the Tribunal holding that the same has to be laid down by the Hon ble Delhi High Court in the case of M/s. GSI India Vs. Director General of Income Tax (Exemption) [ 2013 (10) TMI 19 - DELHI HIGH COURT] . Not only that again in the appeal for the assessment year 2011-12 passed by the Tribunal [ 2018 (11) TMI 509 - DELHI HIGH COURT] the Hon ble High court has again confirmed the said order. It has been brought on record that for the assessment year 2012-13 also and again for the assessment year 2015-16 same orders have been followed. Accordingly, we hold that the issues raised by the Revenue are squarely covered by the decision of the Hon ble Delhi High Court in the case of the assessee as well as by the Tribunal and, therefore, the appeals filed by the Revenue are dismissed. 2022 (2) TMI 35 Addition u/s 2(22)(e) - deemed dividend - interest bearing Loans - Property purchased for use by the company - Revenue contended that, the CIT(A) ought to have considered the fact of loan/advance reflected in the name of assessee in the books of account of company , coupled with the fact that proportionate ownership of property acquired out of borrowed fund by the company to the extent of loan/advance lies with the assessee and payment of full interest. The company also paid full amount of interest on entire loan and claimed as expenditure in the return of income. HELD THAT:- It is an admitted position that M/s. Bajaj Finance Ltd. sanctioned the loan only on the condition that the assessee should be a co-borrowers. Therefore, when the assessee signed the loan documents as a borrower the primary responsibility to repay the loan rests upon the assessee, to safeguard against any future liability on him. The assessee insisted the property be registered in his name which was being used by the business purpose of the company i.e. M/s. Subu Chem Pvt. Ltd. It is admitted position that the assessee is not enjoying own rent from the company. Therefore, this shows that substance of transaction is purchase of property for the purpose of business of the company i.e. M/s. Subu Chem Pvt. Ltd. and it cannot be called as a gratuitous loan or advance given by the company to the assessee. It is a pure business transaction carried out by the company i.e. M/s. Subu Chem Pvt. Ltd. and ratio laid down by the Hon ble High Court of Calcutta in the case of Pradeep Kumar Malhotra [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] is squarely applicable to the present case. CIT(A) is justified in holding that the AO is not right in bring to tax sum as a deemed dividend in the hands of the assessee. Since, We held that the provision of section 2(22)(e) of the Act have no application to the facts of the case, there is no necessity to deal with the other contentions raised on behalf of the assessee. Thus, grounds by the Revenue fails and are dismissed. Addition made on account of protective basis in the case of assessee - HELD THAT:- We note that the CIT(A) held in Para No. 7.3.4 that no addition is maintainable in the hands of the assessee as the same was retained in th hands of its Director on substantive basis. We dismissed in the aforementioned paragraph the similar ground raised by the assessee raised by the Revenue is misconceived and it is dismissed. Proportionate interest paid to NBFC for non-deduction of TDS - HELD THAT:- Since the assessee claimed the proportionate interest on loan granted to Director, Shri Jitendra K. Gupta in its books of account. On such submission the CIT(A) confirmed the addition in the hands of the assessee. Therefore, we find no infirmity in the order of CIT(A). DR has rightly pointed that the CIT(A) without making any detailed discussion on such amount simply allowed the said amount and vehemently argued to restore the issue to the file of AO for verification regarding the non-deduction of TDS - AO sought details but the assessee as it appears from Para No. 4.2 of AO s order that the assessee did not give any submissions but the CIT(A) discussed the issue in details in the impugned order in respect of interest paid to HDFC Bank Ltd. and Standard Chartered Bank, but, however, we find no reasons as to how the allowability given by the CIT(A), therefore, we deem it proper to remand the issue to file of AO for its verification in view of the grounds raised by the Revenue that the proportionate amount of interest paid to M/s. Bajaj Finance Ltd., a NBFC as claimed by the ld. DR in ground Nos. 2 and 3. raised by the Revenue is allowed for statistical purpose. 2022 (2) TMI 34 Reopening of assessment u/s 147 - disallowance of claim of the assessee u/s 80IA - HELD THAT:- The original assessment proceedings, Assessing Officer has not disputed the deduction under section 80IA of the Act,rather he disputed quantum of deduction. That is, assessing officer has nowhere stated that assessee is not eligible for deduction under section 80IA of the Act. The audit report may be filed at the time of making the assessment. We note that assessee company has claimed deduction under section 80IA for assessment year 2010-11 and for assessment year 2012-13, respectively. The audit report has been filed by the assessee during the course of assessment proceedings. The assessee`s books of accounts has been audited and subject to Tax Audit Report. The books of accounts have not been rejected by AO and assessee made compliance of provisions of section 80IA of the Act. The assessee had not considered the interest paid on loan taken for wind mill machinery; therefore deduction under section 80IA was rectified by assessee suo moto and hence claimed lower deduction under section 80IA of the Act. Based on this factual position, we allow both appeals of the assessee. The assessing officer is directed to allow deduction under section 80IA for assessment year 2010-11 and for assessment year 2012-13.Since, we have adjudicated both these appeals taking into account the peculiar facts of the assessee`s case, therefore it is made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year. - Decided in favour of assessee. 2022 (2) TMI 33 Validity of reopening of assessment u/s 147 - assumption of jurisdiction by the ld. AO u/s.147 - exemption u/s.11 of the Act claimed by the assessee is denied in view of violation of provisions of Section 13 of the Act and claim of exemption u/s.10(38) and 10(34) of the Act was also rejected by the ld. AO - claim of exemption u/s.10(34) in respect of dividend on investments in shares / units derived by the assessee trust - HELD THAT:- As at the time of recording the reasons, the ld. AO indeed had the benefit of the Tribunal order passed in the case of Jasubhai Foundation[ 2015 (4) TMI 305 - BOMBAY HIGH COURT] . Despite this, the ld. AO sought to take a divergent stand in respect of claim of exemption u/s. 10(34) of the Act for the dividend income and sought to reopen the assessment. Since, this issue is squarely covered by the decision of the Hon ble Jurisdictional High Court on merits also, the reopening made by the ld. AO for the purpose of consideration of the taxability of the dividend income is bad in law and is hereby quashed. Hence, we hold that the ld. AO could not have had a reason to believe that income of the assessee had escaped assessment in respect of this issue. Hence, reopening made in this regard is quashed. Claim of deduction of the assessee trust u/s.11(1)(a) being 15% of gross income - We find that out of the gross receipts of ₹ 43,28,77,779/- during the year under consideration, assessee trust had duly applied for charitable purposes of ₹ 38,77,22,817/- as against the mandated application as per law at 85% of ₹ 36,79,46,112/-. This goes to prove that assessee was statutorily entitled to accumulate 15% of gross receipts year after year for future application of funds for charitable purposes. This 15% accumulation of funds works out to ₹ 6,49,31,667/- which has been accumulated or set apart for charitable purposes by the assessee. There is absolutely no error in this regard. All these facts were duly reflected in the computation of income which was also filed along with the return of income. All these facts were indeed available before the ld. AO in the course of original assessment proceedings itself. Hence, there cannot be any failure in any manner whatsoever for making full and true disclosure of these particulars before the ld. AO in the course of original assessment proceedings. In any case, on this issue in the reasons recorded by the ld. AO, we find that the ld. AO had neither placed reliance on any tangible material nor recorded the fact that there is any failure on the part of the assessee in accordance with first proviso to Section 147 of the Act. Hence, it could be safely concluded that the ld. AO had clearly resorted to only change of opinion in this regard. The law is very well settled that no re-assessment could be framed based on change of opinion. Hence, the re-assessment proceedings on this issue is quashed. Capital Gains on Transfer of Capital Asset and Re-investment in Unquoted Shares - main grievance of the ld. AO seems to be that assessee had not reflected the capital gains in the income and expenditure account and in the computation of income - Admittedly the assessee had reflected the movement in investments in its balance sheet directly and the said balance sheet has been filed along with return of income. Infact, the balance sheet is a mandatory enclosure along with return of income u/s.139(9) of the Act. Hence, it cannot be said that there is a failure on the part of the assessee to disclose the capital gains on sale of TCS shares and re-investment made in preference shares of Tata Sons Ltd. We find with regard to the issue of capital gains on sale of TCS Ltd shares and re-investment in preference shares of Tata Sons Ltd., the ld. AO did not have any tangible material which enable him to form belief that income of the assessee had escaped assessment. He had categorically stated in the reasons that from the records these transactions were found. That itself goes to prove that the ld. AO had gone into the assessment records again and had sought to entertain the change of opinion on the same set of facts available in the records.Hence, the reopening of assessment in respect of capital gain on sale of TCS Ltd. shares and re-investment in preference shares of Tata Sons Ltd., is declared as bad in law. Thus the issues for which reasons were recorded for reopening the assessment completely fails and hence, no re-assessment could have been validly framed by the ld. AO consequently. Hence, the entire re-assessment proceedings framed are hereby quashed and declared void ab initio and hence, quashed - Decided in favour of assessee. 2022 (2) TMI 32 Addition u/s 68 - unexplained cash credit in respect of share capital and share premium received - HELD THAT:- We note that if at all these investments are made by bogus investors, then the AO is free to proceed against those investors as the assessee has provided all the details such as addresses, PAN numbers etc. of the investors to the AO and thus no addition can be made under section 68 of the Act in the hands of the assessee as has been held by the Hon ble Apex Court in the case of CIT vs. Lovely Exports Pvt. Ltd [ 2008 (1) TMI 575 - SC ORDER] which has been followed in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd [ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] and CIT vs. Orchid Industries Pvt. Ltd. [ 2017 (7) TMI 613 - BOMBAY HIGH COURT] We also note that the assessee has specifically requested the AO to provide cross examination to the assessee which has not been provided and on this count also the assessee finds support from the decision of Apex Court in the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] and Krishnachand Chellaram [ 1980 (9) TMI 3 - SUPREME COURT] wherein it has been held that additions can not be made without giving an opportunity of cross examination to the assessee - In view of these facts and the ratio laid down by the various judicial forums, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition as the assessee has proved all three ingredients of section 68 of the Act i.e. identity, creditworthiness of the investors and genuineness of the transactions. The ground no. 1 is allowed. Addition u/s 68 in respect of share application/unsecured loans received from M/s. Shyam Alcohol Chemical Ltd. - We note that the assessee has filed the ITRs, confirmations and bank statements from the lender/investor. The assessee has also filed before the AO the letter informing that the entire share application money has been paid subsequently. We also note that the lender has responded to the notice issued under section 133(6) of the Act by filing various documents therewith such as balance sheet, bank statements etc. beside filing affidavit of Shri Vipul Vidur Bhatt and thus confirmed the loan transactions. In our opinion, the issue decided in ground No.1 above is quite similar to the issue raised in the second ground by the assessee and therefore, our finding in ground No.1 would, mutatis mutandis, apply to this ground as well. Accordingly, we hold that assessee has proved the identity, creditworthiness of the lenders/investors and genuineness of the transactions. Resultantly, the order of Ld. CIT(A) is set aside and AO is directed to delete the addition. 2022 (2) TMI 31 Disallowance u/s 14A r.w Rule 8D (2)(i) - Suo moto disallowance made by assessee - as per assessee no objective satisfaction has been recorded by Ld. AO before proceeding to compute disallowance as per Rule 8D which is against the statutory mandate - HELD THAT:- We find that Ld. AO has failed to record any objective satisfaction as to why the assessee s stand was not acceptable having regards to the accounts of the assessee as per the mandate of Sec.14A. This jurisdictional requirement was not satisfied by Ld. AO in the present case and Ld.AO straightway proceeded to compute disallowance as per Rule 8D. The application of Rule 8D, in our considered opinion, was not mechanical or automatic. AO has mechanically applied the provisions of Rule 8D while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year. Nowhere a finding has been recorded by Ld. AO as to why the suo-moto disallowance as offered by the assessee was not acceptable. In the absence of such recorded satisfaction, the additional disallowance as made in assessment order could not be sustained in the eyes of law. Accordingly, we are inclined to delete the disallowance as made by Ld. AO while computing income under normal provisions as well as while computing Book Profits u/s 115JB. This ground stand allowed Disallowance of Short-Term Capital Loss on forfeiture of Share Warrants - AO rejected the assessee s claim on the ground that there was no transfer of capital asset - HELD THAT:- The definition of capital asset is wide enough to cover property of any king held by the assessee. The right acquired by the assessee through share warrants, in our considered opinion, was a valuable right and covered within the meaning of capital asset as defined in Sec. 2(14). Proceeding further, transfer as defined in Sec. 2(47) would include sale, exchange or relinquishment of the asset or extinguishment of any rights therein. Clearly, upon forfeiture of share warrants, the assessee s right in acquiring the warrants as well as resultant shares was extinguished and the assessee was deprived of a right in capital asset. Thus, the amount lost on forfeiture of share warrant, in our considered opinion, would give rise to capital loss in the hands of the assessee. It would be wholly immaterial as to how the recipient had accounted for such income in its computation of income. In the decision of CIT V/s Chand Ratan Bagri [ 2010 (1) TMI 123 - DELHI HIGH COURT] it was held that the forfeiture of convertible warrant would result into extinguishment of the right of the assessee to obtain a share. A share in a company is nothing but share in the ownership of the company. While the right of the assessee to share in the ownership of the company stand extinguished on account of forfeiture, the company, with all its assets, continues to exist. The forfeiture only results in one less shareholder. Therefore, the loss thus suffered by the assessee would be a capital loss. Thus we would hold that loss suffered by the assessee on account of forfeiture of share warrant would be deductible Short-Term Capital Loss. The observation of Ld. CIT(A) that such transactions are to be treated as sham transaction are mere allegations and bereft of any merits. No cogent material to substantiate this allegation is on record. Accordingly, Ld. AO is directed to allow the claim of the assessee. 2022 (2) TMI 30 Disallowing set off of losses claimed by the appellant set-off of business losses and carried forward losses against the undisclosed income - AO stated that the income disclosed u/s 69A of the Act is a headless income and accordingly it cannot be treated as income from other sources - HELD THAT:- Finally, the Legislature has put to rest the controversy by making an amendment in Section 115BBE (Charging section for income under section 68 to 69D) by expressly inserting in a sub-section (2) of section 115BBE, the word set off any loss vide Finance Act, 2017 which is applicable w.e.f. from 01/04/2017 - CBDT vide its Circular No 11 of 2019 has clarified that for period up to A.Y. 2016-17, the income computed u/s 115BBE (Section 68 to 69D) can be used for setting off losses if any. We are of the view according to the CBDT Circular No. 11 of 2019 business losses and brought forward losses can be set-off against the income assessed under section 115BBE - respectfully following the above CBDT circular as well as the orders passed by the Coordinate Benches of the various Tribunals and the Hon ble High Courts, we direct to delete the addition made by the A.O. and confirmed by the ld. CIT(A). - Decided in favour of assessee. 2022 (2) TMI 29 Disallowance of expenditure u/s 14A read with rule 8D - proportionate disallowance of interest - common pool of funds - Availability of interest free fund - disallowance of interest expenditure made under rule 8D(2)(ii) and administrative expenditure under rule 8D(2)(iii) - HELD THAT:- As in South Indian Bank [ 2021 (9) TMI 566 - SUPREME COURT ] while approving the theory of presumption that in case of common pool of funds, it will be presumed that interest free funds have been utilized for making the investments, the Hon ble Court went a step further and opined that in respect of payments made out of mixed funds, it is the assessee, who has the right of appropriation and also the right to assert from which part of the funds a particular investment is made and it may not be permissible for the revenue to make an estimation of a proportionate figure. While doing so, the Hon ble Supreme Court has approved the view expressed by the Hon ble Jurisdictional High Court in case of HDFC Bank Ltd vs DCIT[ 2014 (8) TMI 119 - BOMBAY HIGH COURT] Thus, the law declared by the Hon ble Supreme Court, as aforesaid, being the law of the land as per Article 141 of the Constitution of India, would be binding on all subordinate courts / tribunals / authorities, etc. Therefore, if we apply the ratio laid down by the Hon ble Supreme Court to the facts of the present case, it can be seen that though the assessee has common pool of funds; however, interest free fund available with the assessee is far in excess of the investments made. Therefore, the presumption that investments have been made out of interest free funds would automatically get triggered. Availability of interest free fund has to be seen with reference to date of investment and not the balance-sheet date. In this regard, we must observe, if the contention of the learned counsel for the revenue is accepted, applying the theory of presumption of surplus fund being used for the purpose of investments would not at all arise. If availability of interest free fund as on the date of investment is to be seen, then a direct nexus is established between the fund available and the investment made. The applicability of presumption would only arise in a case where the assessee has sufficient interest free funds available with it, being part of a common pool of funds, which is more than the investments made. Therefore, the position of interest free funds available with the assessee has to be seen as on the date of balance-sheet. Acceptance of revenue s contention that availability of interest free funds has to be seen as on the date of investment, in our view, would lead to absurdity. This is so, because, on each date of investment a balance-sheet has to be drawn up which is neither possible nor practicable. Therefore, the fund position of the assessee has to be seen as on the date of balance-sheet which is drawn up at the end of the financial year. This view of ours gets further strengthened by the decision of CIT vs Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] wherein, the Hon ble High Court has observed that availability of interest free fund has to be seen as on the date of balance-sheet. Thus, if we apply the ratio laid down in the decisions discussed herein before to the facts of the present case, the inescapable conclusion would be, as per the balance-sheet the assessee had sufficient interest free fund available with it to take care of the investment. That being the factual position, presumption would be, the investments have been made out of the interest free funds available with the assessee. Hence, no disallowance under rule 8D(2)(ii) can be made. Having found that the assessee had sufficient interest free funds available to take care of the investment made, we hold that no disallowance of interest expenditure under rule 8D(2)(ii) can be made. Accordingly, we delete the disallowance made under rule 8D(2)(ii). Disallowance under rule 8D(2)(iii) - In view of the ratio laid down by the Special Bench of this Tribunal in case of ACIT vs Vireet Investments Pvt Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] we accept the aforesaid contention. Accordingly, we direct the assessing officer to compute disallowance under rule 8D(2)(iii) considering only those investments which have yielded exempt income during the year. We are of the view that the issue whether the investments held by the assessee are in the nature of stock in trade or investment has become academic in the facts of the present case, since, we have deleted the disallowance made under rule 8D(2)(ii) and has directed the assessing officer to compute the disallowance under rule 8D(2)(iii) by considering only those investments which yielded exempt income during the year. Suffice to say, as per the ratio laid down by the Hon ble Supreme Court in case of Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT ] and South Indian Bank Ltd vs CIT (supra), the non SLR investments have to be treated as stock in trade. Hence, provisions of section 14A would not apply. Disallowance of expenses incurred towards employee stock option plan (ESOP) - HELD THAT:- We are of the view that assessee s claim of deduction of ESOP expenses by way of amortization over the period of grant has to be allowed keeping in view the decision of the ITAT, Special Bench in case of Biocon Ltd vs DCIT [ 2013 (8) TMI 629 - ITAT BANGALORE] wherein, it has been held that ESOP expenses are allowable as revenue expenditure under section 37(1) of the Act, we direct the assessing officer to allow assessee s claim of deduction. Also see NEW DELHI TELEVISION LTD. [ 2017 (2) TMI 1399 - DELHI HIGH COURT] - This ground is allowed. 2022 (2) TMI 28 Delayed payment of the Employees share of PF/ESI - scope of amendment in section 36(1)(va) as well as section 43B - HELD THAT:- The Hon ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee s contribution under section 36(1)(va) of the Act would also be covered u/s 43B and therefore if the share of the employee s share of contribution is made on or before due date for furnishing the return of income u/s 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon ble Karnataka High Court. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1) of the Act. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. - Decided in favour of assessee. 2022 (2) TMI 27 Penalty u/s 271(1)(c) - disallowance of interest paid on income tax - tax liability of the assessee u/s 115JB - HELD THAT:- As per CBDT Circular No.25/2015 dated 31.12.2015 we find that for the cases prior to A.Y. 2016-17 if taxes are levied under MAT provisions u/s 115JB/115JC of the Act then penalty u/s 271(1)(c) of the Act is not attracted with reference to addition/disallowance made under normal provisions. Examining the facts of the instant case, in light of the above circular we find that the assessee declared loss of ₹ 3,17,87,340/- in the e-return of income filed on 27.09.2012. However, since the assessee s book profit stood at ₹ 44,84,22,703/- it was liable to pay tax u/s 115JB of the Act and on perusal of the Income Tax Return Acknowledgment and computation of income we find that the assessee paid tax and interest u/s 234B and 234C - Further we find that even after making disallowance in the assessment order u/s 143(3) of the Act there was no impact on the tax liability of the assessee u/s 115JB of the Act. So it remains an undisputed fact that the assessee was liable to pay tax only as per the MAT provisions u/s 115JB of the Act as the normal assessed income was a loss. Under these given facts and circumstances the assessee case is squarely covered by this CBDT Circular No.25/2015 dated 31.12.2015 and no penalty u/s 271(1)(c) of the Act was leviable. We, thus, set aside the finding of Ld. CIT(A) and delete the penalty - Accordingly grounds raised by the assessee are allowed. 2022 (2) TMI 26 Assessment u/s 153A - Undisclosed sales from Silicon City Project - Proof of incriminating material found in search - Search and Seizure operations u/s 132 were carried out on the business as well as residential premises of the Jhaveri Group, Indore including the assessee along with other concerns/business associates - HELD THAT:- We find that out of four persons whose statements were relied upon by the Assessing Officer, two have discredited the statement and retracted from the same via affidavits as submitted by the assessee during first appellate proceedings. It is worthy to mention that the said affidavits cannot be said to be additional evidences but the same are supporting documents in respect of the assessee s contention as the affidavits submitted were not like any old document which existed during the assessment/search proceedings but was produced later before the appellate authorities because those were actually acquired by the assessee later from those people looking to the requirement of the matter. An additional evidence will be something that was already in existence previously but was submitted later, and this was not so in the present mater. Therefore, it cannot be termed as an additional evidence but as a supporting document. Further, we find that during the course of assessment proceedings, the assessee was not provided with the opportunity of cross-examination with the concerned persons on whose statements reliance was placed by the Assessing Officer. We also find that during the search proceedings no incriminating material was found from the assessee s premises relevant to the project Silicon City, therefore, the Assessing Officer wrongly presumed on the basis of some letters received from four persons that the assessee accepted large portion of Sale Consideration on sale of land in cash and the same was not accounted for by them. Thus, the additions were made by the Assessing Officer without appreciating the fact that neither any cash was found or seized nor any document relating to cash receipts was found or seized during the search proceedings. CIT(A) had made detailed discussion on facts and recorded the finding that no incriminating evidence material was found during the course of search operation and also the contention of the learned Counsel for the assessee that letters relied upon by Assessing Officer were not made available to assessee during the course of assessment proceedings and to the CIT(A) during the course of appeal hearings as such on that basis, ld. CIT(A) should have also deleted the addition of undisclosed sales - Decided in favour of assessee. Deemed dividend u/s 2(22)(e) - unsecured loan to another company in which directors have substantial interest - in the nature of business receipt or not - HELD THAT:- We find that the additions on account of deemed dividend u/s 2(22)(e) were not valid as the provisions of Section 2(22)(e) did not apply in the assessee s case as specifically recorded by the ld. CIT(A) in the appellate order in the light of the decision of the ITAT, Indore in case of Makhija Construction Co. [ 2011 (10) TMI 177 - ITAT, INDORE] wherein relying upon several decisions of Hon ble Supreme Court and Special Bench, it was held that if the assessee co. is not a registered holder of shares, the provisions of Section 2(22)(w) would not be applicable. In the instant case, since the assessee co. is not a registered holder of shares of M/s Ajitnath Reality Pvt. Ltd., we are of the view that ld. CIT(A) has rightly deleted the additions following the relevant judicial pronouncement - Decided in favour of assessee. 2022 (2) TMI 25 Revision u/s 263 by CIT - CIT directed the A.O. to redo the assessment for the purpose of computation of book profits u/s 115JB - Depreciation on Investment Portfolio - CIT rejected the claim of the assessee that such net depreciation on investment is a valuation loss and cannot be considered for computation of book profit u/s 115JB - HELD THAT:- As decided in M/S. TORRENT PRIVATE LIMITED [ 2019 (6) TMI 709 - GUJARAT HIGH COURT] issue decided in favour of the assessee and against the revenue. It is hereby held that the Income Tax Appellate Tribunal was justified in deleting the disallowance of provision for diminution in value of investment while computing book profit under section 115JB of the Income Tax Act, 1961. Also see M/S. RELIANCE WELFARE ASSOCIATION CIRCLE, MUMBAI [ 2018 (1) TMI 855 - ITAT MUMBAI] A.O. is directed to verify whether depreciation / diminution of value of investment to the extent of ₹ 3028.32 crore is concerned, the same has actually been reduced from the assets side of the balance sheet, and is in the nature of write off. Therefore, de hors the observation of the CIT, the AO is directed to complete the assessment in the light of the dictum laid down in the above cited judicial pronouncements. It is ordered accordingly. Hence, ground 3 is allowed for statistical purposes Disallowance u/s 14A for computation of book profit u/s 115JB - As per AO assessee had voluntarily disallowed expenses relatable to exempt income u/s 14A of the I.T.Act to the extent of 5% of income on adhoc basis - HELD THAT:- As relying on GUJARAT FLUOROCHEMICALS LTD [ 2019 (7) TMI 541 - GUJARAT HIGH COURT] ,VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] and TATA SONS LIMITED [ 2018 (12) TMI 916 - ITAT MUMBAI] disallowance u/s 14A of the I.T.Act cannot be incorporated in the computation of book profits u/s 115JB of the I.T.Act, we hold that the assessment order is neither erroneous nor prejudicial to the interest of the revenue on this point. It is ordered accordingly. Therefore, ground 4 is allowed. Provision created in Non Performing Assets - as submitted before the CIT that provision for NPA as per RBI Prudential norms is not covered by item (i) to Explanation to section 115JB(2) since it is not a provision but a write off, therefore, it was contended that it has to be treated as write off and not a provision - HELD THAT:- As relying on YOKOGAWA INDIA LTD. [ 2011 (8) TMI 766 - KARNATAKA HIGH COURT] A.O. is directed to verify de hors the observations of the CIT whether provisions created for NPA is reduced from the assets side of the balance sheet. If so, the same is to be treated as write off. With these observations, we dispose of ground 5. Customs 2022 (2) TMI 24 Emergency power of Central Government to increase import duties - Validity of increase in rate of duty from 5% to 10% with effect from 09.01.2002 - challenge on the premise that the circumstances/conditions precedent for exercise of power under Section 8A of the Customs Tariff Act, 1975, have not been set out in the notification - Validity of N/N. 2/2002-Customs dated 08.01.2002 - cotton in transit at the time of issuance of notification - cotton in respect of which orders have been placed with the foreign exporters prior to the issuance of impugned notification - Whether it is permissible to invalidate a notification only on the ground that the notification does not explicitly set out/elaborate the circumstances warranting the exercise of power and what is the relevance and sanctity which ought to be attached to a recital in a notification stating that the pre-requisites for issuance of notification exist? - HELD THAT:- On a reading of the impugned notification, it is apparent that it contains a recital showing the satisfaction/existence of the twin conditions which are sine qua non for exercise of power by the Central Government under Section 8A(1) of the Customs Tariff Act, 1975 - a recital in a notification raises a presumption though not conclusive, however, the burden is on the person who assails the recital as not reflecting the true state of affairs, to demonstrate the same by letting in cogent and appropriate material and mere assertion however strong, may not be an adequate discharge of such burden - The impugned notification expressly states that the twin conditions/prerequisites for issuance of notification under Section 8A(1) of the Customs Tariff Act, 1975, exist resulting in raising a presumption as to the correctness thereof and also casting a burden on the respondents challenging the correctness of the said recital. In the light of the view expressed by the Federal Court in EMPEROR VERSUS SIBNATH BANERJEE AND ORS. [ 1943 (8) TMI 7 - FEDERAL COURT ] which view has been affirmed by the Supreme Court in SWADESHI COTTON MILLS CO. LTD. VERSUS STATE INDUSTRIAL TRIBUNAL U.P. [ 1961 (3) TMI 105 - SUPREME COURT ] and which in turn has been reiterated in NARAYAN GOVIND GAVATE ETC. VERSUS STATE OF MAHARASHTRA [ 1976 (10) TMI 146 - SUPREME COURT ] with regard to the relevance and sanctity to be attached to a recital in the subordinate legislation, we are of the view that the notification cannot be said to be invalid, on the premise that the notification itself does not elaborate the circumstances/reasons for issuance of the same. Whether the order of the learned Judge setting aside the notification on the premise that the Central Government is unable to satisfy the Court that there was sufficient material , before the Central Government to satisfy itself that import duty leviable under Section 12 of the Customs Act, 1962 should be increased and circumstances exist rendering it necessary for immediate action under Section 8A(1) of the Customs Tariff Act, 1975, is legal and valid, when viewed in the light of the presumption as to the constitutionality of a subordinate legislation? - HELD THAT:- The legislature and its delegate are the sole repositories of the power to decide what policy should be pursued in relation to the matters covered by the Act and there is no scope for interference by the Court unless the particular action impugned before it, can be said to be wholly beyond the scope of the delegate or it being inconsistent with any of the provisions of the parent enactment or in violation of any of the limitations imposed by the Constitution. Thus, it may not be permissible for the Court to look at the adequacy of the material, which necessitated the issuance of a notification. The limitation on the power of judicial review of the subordinate legislation and also the presumption as to its Constitutionality would show that the order of the learned Judge insofar as it examined the validity of the notification on the basis of the sufficiency of reasons/material available with the Central Government warranting exercise of its power in issuing such notification, is erroneous and unsustainable. Whether the order of the learned Judge insofar as it placed reliance on the judgment of the Hon'ble Supreme Court in M.Jhangir Bhatusha v. Union of India [ 1989 (5) TMI 61 - SUPREME COURT ] to conclude that the notification itself must set out elaborately the circumstances/reasons which warranted exercise of power under Section 8A(1) of the Customs Tariff Act, 1975, is legal? - HELD THAT:- The Hon'ble Supreme Court in the case of M.Jhangir Bhatusha looked into the reasons in the order itself, since Section 25(2) of the Customs Act, 1962, necessitated that the order must set out/state the circumstances warranting exercise of power under Section 25(2) of the Customs Act, 1962. However, Section 8A of the Customs Tariff Act, 1975 which is the enabling provision, does not impose a condition on the delegate to set out /state the circumstances warranting exercise of power under Section 8A(1) of the Customs Tariff Act, 1975 in the notification itself and thus reliance on the decision in M.Jhangir Bhatusha is wholly misplaced. Whether a subordinate legislation can be challenged on the ground of non-compliance of the principles of natural justice? - HELD THAT:- It is submitted by the respondents that the notification which has resulted in certain adverse consequences, is bad inasmuch as it was made without affording an opportunity to the parties, who are likely to be adversely affected - The above submission is contrary to the well settled principle that delegated legislation, which is legislative in character, cannot be questioned for violating the principles of natural justice in its making, except where the statute itself provides for that requirement. It is thus clear that the submission of the respondents that the notification is bad for non-compliance of the principles of natural justice, is untenable. Whether the judgment of the Hon'ble Supreme Court in Mohinder Singh Gill AIR [ 1977 (12) TMI 138 - SUPREME COURT ] insofar as it holds that a counter cannot be used to improve an order is applicable while deciding the vires/validity of a notification? - HELD THAT:- The decision of the Hon'ble Supreme Court in Mohinder Singh Gill holding that an order cannot be improved upon through a counter, may not be relevant, while examining the validity of a notification. The above principle may have relevance only in relation to an administrative or a quasijudicial order, but not to a notification, which is legislative in character. Thus, the reliance on the decision of the Hon'ble Supreme Court in Mohinder Singh Gill case, while deciding the validity of a notification, which is a piece of a subordinate legislation is wholly misplaced and erroneous - the order of the learned Judge in setting aside the notification, is erroneous and contrary to law. Whether the impugned notification should not be made applicable to cotton in transit at the time of issuance of notification and also cotton in respect of which the orders have been placed with the foreign exporters at the time of the impugned notification? - HELD THAT:- Perusal of Section 15 of the Customs Act, 1962 would postulate that the rate of duty, which is applicable to any imported goods, shall be the rate in force in the case of goods entered for home consumption under Section 46 of the Customs Act, 1962, on the date of which the bill of entry is presented. Thus, if the bill of entry is presented for home consumption under Section 46 of the Customs Act, 1962 after the issuance of the impugned notification, the imports would be governed by the amended rate prevailing then. In other words, on the date when the bill of entry was presented under Section 46 of the Customs Act, 1962, the rate that was prevailing was 10% - It has been repeatedly held by the Hon'ble Supreme Court that irrespective of the circumstances/contingency the rate of duty that is applicable would be the date in force on the date on which the bill of entry is presented for home consumption under Section 46 of the Customs Act, 1962 (or) in the case of goods cleared from a warehouse under Section 68 of the Customs Act, 1962, the date on which the goods are actually removed from the warehouses (or) on the date of payment of duty. The rate of duty is governed by Section 15 of the Customs Act, 1962 and the same shall be the rate in force- a. In the case of goods entered for home consumption under Section 46 of the Customs Act, 1962 on the date on which bill of entry was presented for home consumption. b. In the case of goods cleared from a warehouse under Section 68 of the Customs Act, 1962 the date on which goods are actually removed from warehouse Substituted by Act 32 of 2003, S.106, for the goods are actually removed from the warehouse (w.e.f. 14-05-2003). (the date on which a bill of entry for home consumption in respect of such goods is presented under that section). c. In the case of any other goods on the date of payment of the duty. d. Provided that if a bill of entry has been presented before the date of entry inwards of the vessel or the arrival of the aircraft on the date of such entry inwards or arrival as the case may be. The fact that the goods were in transit or the orders have been placed at the time when a lower rate of duty prevailed, will have no bearing for the rate of duty that would be applicable, shall be the rate of duty prevailing on the dates mentioned in Section 15 of the Customs Act, 1962 - the contention of the respondents that the enhanced rate leviable by the impugned notification should not be made applicable to cotton in transit at the time of issuance of notification and cotton in respect of which orders were placed with foreign exporters prior to the issuance of impugned notification, cannot be accepted. Appeal allowed - decided in favor of Revenue. 2022 (2) TMI 23 Grant of export incentives under Merchandise Exports from India Scheme (MEIS) - seeking reopening of online portal to allow the petitioner to rectify the inadvertent error or to accept and process physical application to grant export incentives under MEIS to the petitioner - HELD THAT:- It is to be noticed that in the shipping bill, there is an intention of the petitioner to avail the benefit under the MEIS scheme as is revealed from the declaration, which is part of shipping bill at page No.108 and in the reward column, there is an entry which shows 'No'. Accordingly, the assertion of the petitioner that they inadvertently ticked NO instead of YES in the reward column is an assertion that is to be accepted. The Committee also accepts the factual assertion though concludes that in light of the automated system and noticing the mistake of the petitioner question of allowing rectification of the shipping bill did not arise. It must be noted that to err is human and wherever such bonafide mistakes have happened procedures so designed ought to provide for a way to rectify such bonafide mistakes. An error arising out of lapse and where parties seek to have the same rectified, the system must accommodate necessary procedure to rectify it. While noticing that mistake that has happened is a technical mistake and is bonafide, on such technicalities, to deny substantive relief to the petitioner would amount to denial of justice - the respondent No.1 to allow the benefit under MEIS to the petitioner in respect of the 17 shipping bills, which is the subject matter of the present petition - petition disposed off. 2022 (2) TMI 22 100% EOU - demand of customs duty on the raw material imported duty free - clearance of finished goods, sized yarn and polyester knitted fabrics in DTA without having any permission from the Development Commissioner - denial of exemption notification under which raw material was allowed to be imported duty free - failure to fulfil the condition of exemption Notification no. 52/2003-Cus dated 31.03.2003 - time limitation - HELD THAT:- There is no dispute in the fact that though the appellant have not obtained the permission from Development Commissioner for removal of goods in DTA but the appellant have paid full duty on the finished goods wherein, such imported raw material have been consumed. In case of 100% EOU, as per the policy, the appellant is required to clear the finished goods for export and if any part of the finished goods cleared in DTA, they are required to pay the excise duty equivalent to all customs duty. As per this policy in respect of DTA clearances, the customs duty which was forgone at the time of import of raw material gets subsumed in the excise duty paid on the finished goods at the time of clearance in DTA therefore, the customs duty which was forgone at the time of import stands paid in the form of excise duty on the finished goods. Once the duty free raw material got consumed in the manufacture of final product and the final product is cleared on payment of excise duty then demanding of customs duty on the raw material shall amount to double payment of duty. In the facts of the present case as the appellant have paid the full excise duty on the finished goods wherein, the raw material imported duty free has been consumed, no duty of customs can be demanded on such raw material - The issue has been considered in various judgments as cited by the appellant. In the case of COMMISSIONER OF C. EX. CUSTOMS VERSUS SURESH SYNTHETICS [ 2007 (8) TMI 33 - SUPREME COURT] it was held by the Apex Court that customs duty is not sustainable on the raw material when the finished goods have been cleared on payment of excise duty in DTA. Thus, it is settled that once in the 100% EOU the raw material imported duty free is used in the manufacture of final product and final product is cleared on payment of duty in DTA, for any reason the customs duty on the raw material which was used in the finished goods cannot be demanded therefore, the demand of Customs duty on this ground is clearly not sustainable. Time Limitation - HELD THAT:- The department has not raised any objection at the relevant time, it is only subsequently on scrutiny of ER-2 return were carried out. There is no change of circumstances at the time of clearance of goods, filing of ER2 return and the verification of the same at the later stage therefore, there is absolutely no suppression of fact or mis-declaration with intend to evade payment of duty on the part of the appellant - the extended period of demand cannot be invoked hence the demand for extended period is not sustainable on limitation also. In the present case since there is no suppression of fact on the part of the appellant as all the informations were available to the department in the form of ER2 return, the demand for extended period is not sustainable - Appeal allowed - decided in favor of appellant. Corporate Laws 2022 (2) TMI 21 Sanction of Scheme of Amalgamation - Sections 230-232 of the Companies Act, 2013 - HELD THAT:- After analyzing the Scheme in detail, this Tribunal is of the considered view that the scheme as contemplated amongst the Transferor and Transferee companies seems to be prima facie beneficial to the Companies and will not be in any way detrimental to the interest of the shareholders of the Companies. In view of the absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the Scheme of Arrangement appended as Annexure 1 with the Company Petition as well as the prayer made therein. The Scheme stands approved, subject to the approval by the NCLT, Bangalore Bench in respect of the Transferor Company. Application allowed. 2022 (2) TMI 20 Sanction of the Scheme of Amalgamation - Section 230(6) read with Section 232(3) of the Companies Act, 2013 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of notices also issued. The scheme is approved - application allowed. Insolvency & Bankruptcy 2022 (2) TMI 19 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - default in payment on the basis of settlement agreement - default of Financial Debt or not - HELD THAT:- In the present case, where an unduly high rate of interest of 24% p.a. on the deposited amount has been assured by the Corporate Debtor, coupled with the fact that after one year of booking the flats the first party (the allottee) can cancel or rescind the agreement and take back refund along with assured interest, the depositor cannot be considered a person who is genuinely interested in purchasing of flats/apartments and can therefore get the status of financial creditor being an allottee in accordance with Explanation (i) of section 5(8) of IBC. The status of Financial Creditor cannot be provided to a person who, in the garb of an allottee comes in the project as a speculative investor and for no reason cancels the allotment, which is the case in the present appeal. Therefore, the benefit of section 5(8)(f) of IBC will not enure in her favour. In the Agreement dated 20th July 2016 that the Appellant is relying on, there are no specified repayment schedules or consequences in the event of default. The assurance mentioned by the Appellant, and also claimed in the Corporate Debtor s letter dated 15.06.2019 are not in the nature of consequences in the event of default in payment of debt. It is also noted by us is that this letter dated 15.6.2019 was issued almost three years after the original Agreement dated 20.7.2016 was executed, and is certainly part of the agreement. Neither there is a date of default in the section 7 application, nor any repayment schedule has been outlined in the said agreement - the Appellant cannot claim the status and benefits as a financial creditor by virtue of being an allottee/homebuyer under explanation (i) to section 5 (8)(f) of the IBC. The Appellant, who is a speculative investor, cannot claim status and benefits as financial creditor under Explanation (i) of Section 5(8)(f) of the IBC, and is not interested in the financial well-being, growth and vitality of the Corporate Debtor, but is just interested in her investment and has come in the garb of an allottee. In such a situation, the Appellant is certainly not a financial creditor holding financial debt, which is in default of payment by the Corporate Debtor. Appeal dismissed. 2022 (2) TMI 18 Seeking Liquidation of Corporate Debtor - Section 34(1) of the Insolvency and Bankruptcy Code, 2016 - Corporate Debtor falls into the new classification criteria of MSME - benefit of exemption under Section 240A - Commercial Discussion of CoC - justifiable or not - Eligibility under the amended MSME Act 2006, Notified on 26.06.2020 - time limitation - HELD THAT:- The contention of the Learned Counsel for the Appellant that the date of NPA is 30.03.2015 and Section 7 Application was filed on 03.07.2018 and hence is barred by Limitation , is unsustainable as the material on record evidences the revival letters, written by the Corporate Debtor , the last one being 28.11.2015. It is seen that the Bank has enclosed these revival letters duly acknowledged and signed by the Corporate Debtor from time to time and the Section 7 Petition filed on 06.07.2018, cannot be said to be barred by Limitation . Commercial Discussion of CoC - justifiable or not - HELD THAT:- The Hon ble Supreme Court in Jaypee Kingston Boulevard Apartments Welfare Association Ors. [ 2021 (3) TMI 1143 - SUPREME COURT] has observed that there is an intrinsic assumption that Financial Creditors are fully informed about the viability of the Corporate Debtor and feasibility of the proposed Resolution Plan. They act on the basis of thorough examination of the proposed Resolution Plan and assessment made by their team of experts. The opinion on the said matter expressed by them after due deliberations in the CoC Meeting through e-voting, as per voting shares, is a collective business decision. The Legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual Financial Creditors or their collective decisions before the Adjudicating Authority that has made it non-justiciable - In the instant case, the Appellants have failed to establish by means of any documentary evidence that there was any material irregularity under Section 30(2) of the Code in the Order of the Liquidation passed by the Adjudicating Authority. Eligibility under the amended MSME Act 2006, Notified on 26.06.2020 - HELD THAT:- It is an admitted fact that the registration itself of the Appellant Company under MSME has not taken place. Further, it is subsequent to the initiation of the CIRP and therefore the Appellant is ineligible to take the benefits of Section 240A under the Code. The eligibility to be a Resolution Applicant is tested on the date of submission of the Plan. In the instant case, that stage of submission of Resolution Plan was completed and subsequently the CoC has decided by a vote of majority of 88.44% to liquidate the Company. It is significant to mention that the eighth CoC Meeting was held on 20.04.2020 which was attended by the Appellant wherein the status of the Liquidation Application was discussed - In the instant case, the MSME Act, 2006, was amended with effect from 01.07.2020 whereas the CIRP Admission Order was passed on 26.04.2019. After going through the contents of the Notification, dated 26.06.2020, under the MSME Act, 2006, this Tribunal arrives at a definite conclusion that the said notification is only Prospective in nature and not a Retrospective one because the said notification does not in express terms speak about the applicability of retrospective operation. The relevant words are conspicuously absent besides there being no implicit reference to be drawn for such a construction. Appeal dismissed. 2022 (2) TMI 17 Entitlement of Appellant(s)/ Applicant to be given a copy of Resolution Plan or any part of the Resolution Plan in the Appeal - whether the Appellant who has filed Appeal against the order of the Adjudicating Authority approving the Resolution Plan submitted by Respondent No.4 is entitled for a copy of Resolution Plan or any part of it in these proceedings? - HELD THAT:- Since Section 24 of the IB Code read with Regulation 21 (3) (iii) of Process Regulation 2016, makes it clear that all Members, who were to participate in the meeting of the Committee of Creditors had to be provided copies of all relevant documents. Thus, the entitlement of copy of documents during the CIRP is for only those who are to participate in CIRP. As per Section 24 of the Code, Operational Creditors or their representatives, if the amount of their aggregate dues is not less than 10% of the debt, are also entitled for notice of meeting of Committee of Creditors. Thus, the category of creditors including the Members of the suspended Board of Directors or the partners of the corporate persons, who are entitled to participate in the meeting of the Committee of Creditors are entitled to receive copies of all documents. Hon ble Apex Court had occasion to consider these provisions of Code and the Regulations in context of right to have access to Resolution Plan by erstwhile/ suspended Board of Directors of the Corporate Debtor in Vijay Kumar Jain vs. Standard Chartered Bank and Ors. [ 2019 (2) TMI 97 - SUPREME COURT] - The Hon ble Supreme Court held that Members of suspended Board are entitled to participate in the meeting of Committee of Creditors. They are also entitled to be given a copy of Resolution Plan before such meetings are held. When the right to Appeal on the ground enumerated in sub-section (3) of Section 61 is provided, unless the Appellant is aware of the contents of the Resolution Plan, how he will be able to satisfy the Appellate Court that the grounds enumerated in sub-section (3) of Section 61 are made out in reference to approval of the Resolution Plan. The provision of Section 61, sub-section (3) reaffirms the view that after approval of the Resolution Plan, Resolution Plan does not remain a confidential document, so as to deny its perusal to a claimant, who is aggrieved by the Plan and has come up on the Appeal - Resolution Plan after its approval by the Adjudicating Authority is no more a confidential document, so as to deny access to even a claimant. Now coming back to the facts of the present case, as submitted by the learned Counsel for the Respondent No.4 that there are more than 20,000 Operational Creditors apart from Financial Creditors and other stakeholders. It is noticed that before the Adjudicating Authority, Applications were filed by several Applicants including National Aviators Guild, Jet Aircraft Maintenance Engineers Welfare Association, Bhartiya Kamgar Sena, Jet Airways Cabin Crew Association etc. before the Adjudicating Authority praying for copy of Resolution Plan, which Application was rejected by detailed order dated 22nd February, 2021. We, thus, are not inclined to issue a direction to provide entire Resolution Plan to the Appellant herein. The prayer made by Appellant/ Applicant for the copy of Resolution Plan is decided accordingly. 2022 (2) TMI 16 Seeking dissolution of Corporate Debtor - section 59 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the steps taken and the satisfaction accorded by the voluntary liquidator by way of the present application, there is no legal impediment in allowing the prayer of the applicant. Accordingly, the Prayer of Liquidator to dissolve the Company u/s 59 of the Code is allowed and the said company is hereby dissolved with effect from the date of the present order. Application allowed. 2022 (2) TMI 15 Seeking dissolution of Corporate Debtor - Voluntary Liquidation - Section 59(7) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- On examining the submissions made by the Ld. Counsel for the Applicant and perusing the documents annexed to the Application it appears that the affairs of the Company have been completely wound up and the assets of the Applicant Company have been completely liquidated and as such the Applicant Company deserves to be dissolved. Accordingly, in exercise of the powers conferred under Section 59(8) of IBC, 2016, the dissolution of Singh Dugal Sons (Construction) Private Limited and the Applicant Company shall stand dissolved from the date of this order. The Company Application stands Allowed. 2022 (2) TMI 14 Withdrawal of CIRP - Whether the Resolution Professional can be permitted to withdraw the CIRP against the Corporate Debtor by invoking inherent powers under Rule 11 of NCLT Rules? - HELD THAT:- While Section 12A of the Code confers power on the Adjudicating Authority to allow the withdrawal of the petition admitted under Section 7 or 9 or 10 of the Code, when the application is made by the Applicant with the approval of 90% voting share of the CoC, in such manner as may be specified, Regulation 30A of CIRP Regulations provides for withdrawal of a petition before the constitution of the Committee by the Applicant through the IRP as well as after constitution of the Committee by the Applicant, as per procedure stated therein. Thus, the power under the above is discretionary while considering the Application filed by IRP for withdrawal of the Company Petition. Since CIRP gets terminated upon withdrawal of CIRP proceedings against the CD and the IRP/RP stands discharged, all such claimants are very much entitled to submit their claims before the Adjudicating Authority as per the procedure laid down under the Code. In second category of matters, the Financial/Operational Creditor whose claim before this Tribunal has been disposed of, with a direction to approach the IRP can seek revival of their company petition, in view of the changed circumstances, by filing necessary application before the Tribunal, to recall the said order. In so far as the third category of cases, the same can be continued before the Tribunal. Therefore, the argument that allowing withdrawal of the CIRP ordered against the Corporate Debtor, by virtue of a settlement would jeopardize recovery opportunity of the FC/OC, and amounts failure to hear the concerned parties is totally unfounded and mischievous. This is a fit case to exercise the inherent power under Rule 11 of NCLT Rules, 2016 by this AA, and accordingly hold that the application deserves to be allowed - application allowed. 2022 (2) TMI 13 Seeking voluntary liquidation - Section 59 of the Insolvency and Bankruptcy Code, 2016 (Code) read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - HELD THAT:- In the present case, it may be seen from the records the main intention for the company to wind up its services is that company decided to close down its business operations in India and doesn't intend to carry on its business operations and pursue objects for which it was incorporated. Further, the applicant has informed the concerned authorities i.e. IBBI, RoC and Income Tax Department and has also made paper publication in Form-A in two newspapers. The Liquidator has completed the final distribution of assets and has also closed the bank account. The Liquidator has also prepared and submitted the final report to the IBBI and RoC. The Application is duly supported by the affidavit of the Liquidator. The concerned RoC has also submitted in its report that as per data available and maintained, no inquiry/inspection/complaint/legal action has been proceeded/pending against the subject company. Further, it is submitted that the liquidation process of corporate person could not be completed within time period of one year as prescribed under Regulation of 37(1) of IBBI (Voluntary Liquidation Process) Regulation, 2017. The applicant Company is hereby dissolved in terms of Section 59(8) of the Insolvency Bankruptcy Code, 2016 with effect from the date of the present order - Application allowed. 2022 (2) TMI 12 Seeking Liquidation of Corporate Debtor - Section 33(2) read with 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Since no resolution plan has come before this Adjudicating Authority for approval and CoC has passed resolution approving the liquidation of corporate debtor, therefore, the Corporate Debtor has to be ordered for Liquidation. T his Authority hereby orders for liquidation of the Corporate Debtor (CD) viz., M/s. Narmada Cereals Pvt. Ltd. which shall be conducted in the manner as laid down in Chapter III of part II of the Insolvency Bankruptcy Code, 2016 - Application allowed Service Tax 2022 (2) TMI 11 CENVAT Credit - input service or not - re-insurance being pooled through a mechanism provided by IRDA - respondent who is an insurance company, had been depositing its service tax on the amount of insurance premium - HELD THAT:- In case of PNB Metlife [ 2015 (5) TMI 68 - KARNATAKA HIGH COURT] which judgment has been accepted by the department, the High Court has held that the service tax paid on re-insurance would be allowable as input service under the CENVAT Credit Rules, 2004 - In the present case, we are concerned with such re-insurance being pooled through a mechanism provided by IRDA. These directives had statutory force and the act of the insurance companies to create such a pool was not a voluntary act. The tribunal correctly therefore was of the opinion that this pooling system is nothing but a form of re-insurance. The term reinsurance has been defined under Section 2(16B) of the Insurance Act, 1938 as to mean the insurance of portion of one insurer s risk by another insurer who accepts the risk for a mutually acceptable premium. Section 101A of the Act makes it compulsory for every insurer to re-insure such percentage of the sum insured on each policy as may be specified by the authority with a previous approval of the Central Government. Appeal dismissed. 2022 (2) TMI 10 Valuation of service tax - Commercial Coaching and Training Service - whether the deductions claimed by the Appellant firm towards reimbursement of expenses on account of Hostel Mess Fee and books are admissible deductions or not? - levy of penalty on Appellant firm and the Proprietor - HELD THAT:- The Appellant has received the amount from students by way of cheques, bank transfer and also cash. The cash received has been deposited in the bank account. From the total amount deposited in bank account, the expenses towards Books and Hostel mess had been incurred on behalf of the students and on balance amount (the tuition fees) the Service Tax has been duly paid. The Appellant maintains a Student-wise wallet account for boarding, lodging and other expenses that are incurred on behalf of the students. The wallet amount of each student is maintained separately and the payment for Hostel and Mess are paid by the Appellant on behalf of the student. The amount is also utilized by the student for buying Books and the same are without fail paid by the Appellant on behalf of the students. The DGGI has taken the Gross Value based upon the comparison of highest figure as per IT Returns, invoices, Bank Statement and the account statement maintained in the CPU which was seized by the department. This is an arbitrary way of computation of demand and lacks uniformity and legal basis. Thus, it was observed that the data obtained from the CPU is the highest among all the financial documents available except 2013-14 wherein the value of the bank statement was the highest. This arbitrary selection of documents based on the highest figure is principally wrong and legally unsustainable - the Department never checked the veracity of the FIR and never analysed the impact on the valuation. It merely and blindly accepted the values mentioned in the CPU documents and concluded the demand without any investigation to this effect. The amount received on account of Hostel mess and books is not directly related to provision of taxable service. It was purely optional for the students looking into the business model adopted by the Appellant firm. Regarding non-payment of Service Tax on amount collected towards Books, there are force in Appellant firm s contention that the said amount is outside the purview of Service Tax in view of the benefit extended under Notification No. 12/2003-ST dated.20.06.2003. The said amount has been shown in Financial records as expenses made towards Books purchased (Tamil Nādu VAT is exempted) which were further provided to the students. Non-payment of Service Tax on amount collected towards Hostel and Mess - HELD THAT:- The Appellant s contention is that the said amount has been paid to the vendors (Hostel Mess service providers) on actual basis on behalf of the students. Such expenses on behalf of the students are reflected in the financial records. The Appellant firm produced the sample copies of invoices raised by the vendors - there are force in the said contention hence the demand on this point is also not sustainable in view of the fact that Hostel and Mess was optional for students. Penalty - HELD THAT:- With total disregard to the Principles of Natural Justice, the investigation and the Respondent has accepted and blindly relied the statements of the Proprietor of the Appellant which were immediately retracted vide retraction letters sent to the Investigating Officers. Consequently, no mala fide is established against the Proprietor hence no penalty is sustainable on the Proprietor - The Appellant firm and the Proprietor are not liable to any penalty. Appeal allowed in part. 2022 (2) TMI 9 CENVAT Credit - capital goods cleared as scrap - amount required to be paid in terms of rule 3(5A) of the Credit Rules - whether rule 3(5A) of the Credit Rules could have been invoked in the present case and for this purpose the scope of this rule as it stood prior to 27.09.2013 and post 27.09.2013? - HELD THAT:- The period of dispute in the present case is from 27.09.2013 to 31.03.2015. It is evident from the tabular chart given that in terms of payment of the amount under rule 3(5A) of the Credit Rules during the said relevant period, only a 'manufacturer' was required to pay the amount in case of clearance of capital goods as scrap and not an output service provider. The appellant, being an output service provider, was not required to pay any amount in terms of rule 3(5A) of the Credit Rules during the period involved in the present appeal for clearance of capital goods as scrap. Whether the capital goods involved in the present case which were cleared by the appellant without payment of any amount under rule 3(5A) of the Credit Rules can be considered as used capital goods or waste and scrap? - HELD THAT:- The capital goods cleared as scrap by the appellant undergo an extensive procedure, after which based on the evaluation of a third-party vendor, the goods are declared scrap and sold to scrap management companies who have taken certificates for recycling the said scrap under the Hazardous E-waste Management Rules - The items which were declared as scrap were sold to companies specializing in scrap management and these companies have also been granted a certificate for procurement and recycling of scrap under the Hazardous Waste Management Rues. The appellant, therefore, could not have undertaken the process of breaking the items and it cannot be urged that these items would not be scrap merely because they have not been broken before disposal. The capital goods cleared as scrap by the appellant are scrap and, therefore, the appellant, being an output service provider, was not required to pay any amount in terms of rule 3(5A) of the Credit Rules. It is not necessary to examine the contention advanced by learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the present case. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 8 Levy of Interest on delayed payment of service tax - reasonable cause for such failure present or not - HELD THAT:- The demand of interest under Section 75 of Finance Act, 1994 is mandatory and the assessee has no escape from this liability. Neither does this Tribunal have the power to waive the demand under Section 75 of the Finance Act, 1994 - there are no force in the submissions in the assessee s appeal seeking waiver of the interest on the service tax amount payable by them either on account of renting of immovable property service rendered by them or on account of service tax collected by them on the loan application fees which was not deposited. The assessee s appeals, therefore, deserve to be dismissed. Restoration of penalty imposed u/s 76, 77 and 78 of FA - assessee is a large non-banking finance corporation formed by the Government of Rajasthan - HELD THAT:- Merely because an organization is formed by the Government it does not get any special treatment with respect to the provisions of service tax. It is as liable to pay service tax as any other assessee. For failures, it is as liable to penalties as any other assessee. No more, no less. This takes us that the next question as to whether the assessee, in the factual matrix of this case can be said to have proved that it had reasonable cause for failure to pay service tax - On being pointed out, the assessee immediately paid the service tax along with interest. The assessee was also renting out some of its properties for commercial use and collected rent of about ₹ 13 lakhs. This activity was liable to service tax but the assessee had not paid service tax. On being pointed out, the assessee has immediately paid the service tax along with interest. Given this factual matrix, we are inclined to conclude that these were mere careless mistakes by the assessee without any intention to evade service tax. They fall within the scope of reasonable cause for failure the cause being ignorance or lack of due care. Therefore, the case falls within the mischief of Section 80 of the Finance Act, 1994. It has been rightly invoked by the Commissioner (Appeals) and the penalties have been waived by him correctly. Appeal dismissed. Central Excise 2022 (2) TMI 7 Recovery of Central Excise Duty at the tariff rate - writ applicants had not produced the Project Authority Certificates issued by the competent authority mentioned in N/N. 12/2012-CE, 18/12-CE and 64/1995-CE as regards the clearances of the goods to the Central Excise Department - HELD THAT:- When this matter was taken up for hearing and having noticed that the impugned order in original passed by the Principal Commissioner is an appealable order, we confronted Mr. Thakore in this regard and requested him to make us understand why we should entertain this writ application and whey we should not relegate the writ applicants to avail the alternative remedy of statutory appeal. Mr. Thakore would submit that he has prayed for a writ of certiorari on the premise that the impugned order passed by the Principal Commissioner travels much beyond the scope of the show-cause notice and no opportunity was given to the writ applicant to say anything as regards the alleged clearances of the goods under the Foreign Trade Policy without fulfilling the conditions stipulated therein. It is on such argument that Mr. Thakore wants this Court to entertain this writ application rather than asking the writ applicants to avail the statutory remedy of preferring an appeal. Let notice be issued to the respondents, returnable on 24.02.2022. 2022 (2) TMI 6 Recovery of duty on the captively consumed goods along with interest and for imposing penalty - intermediate goods captively consumed when the final products have been cleared to SEZ units - clearances are made to SEZ without payment of duty - benefit of exemption of Notification 67/95-CE denied - HELD THAT:- The said issue has been decided in favour of the appellant by this Tribunal in the appellant s own case in the above stated final orders by following the decision in the case of M/S ULTRATECH CEMENTS LTD AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, TIRUCHIRAPALLI AND OTHERS [ 2015 (10) TMI 1058 - CESTAT CHENNAI ] where it was held that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty. The demand cannot sustain - Appeal allowed - decided in favor of appellant. 2022 (2) TMI 5 CENVAT Credit - insufficient documents or not - credit availed on inputs without their receipt and use in or in relation to the manufacture of final products - HELD THAT:- It is not disputed that the appellant have manufactured dutiable finished goods by using the inputs in question, and have cleared the same on payment of duty. Further, no alternative source of raw material have been identified by Revenue - The appellant have clearly established the genuineness of the transaction as regards purchase and receipt of inputs from the first stage dealer. Thus, the appellant has discharged their onus for credit of the goods as required under the scheme of the Act read with Cenvat Credit Rules. The issue is squarely covered by the decision of Hon ble Allahabad High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS SERVICE TAX VERSUS M/S. JUHI ALLOYS LTD., ANIL KUMAR SHUKLA [ 2014 (1) TMI 1475 - ALLAHABAD HIGH COURT] , where it was held that The goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department, and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. The allegation of Revenue as regards non receipt of duty paid raw material is not substantiated by cogent evidence - Appeal allowed - decided in favor of appellant. 2022 (2) TMI 4 CENVAT Credit - credit on inputs lying in stock, work in progress and finished goods as on the date of rescinding of the exemption notification in terms of sub-rule 2 (3) of CCR, 2004 - credit denied on the ground that, in terms of proviso to Rule 4 (1) of the Cenvat Credit Rules, 2004, credit can be availed only within one year from the date of invoice - credit was sought to be availed after rescinding of N/N. 62/1995-CE dated 16.03.1995 - HELD THAT:- The provisions of Rule 4 are very clear as regards the time limit for availment of Cenvat credit. It is founs that the provisions of Rules cannot be read in isolation. The entire set of Rules covering availment/utilization of credit i.e., CCR, 2004, has to be read in a holistic manner and interpreted in a harmonious manner. The non obstante clause in Rule 3 (2) is not with reference to the entire Cenvat Credit Rules but, with respect to sub-rule 1 of Rule 3 alone. It means to say that the provisions of other Rules will have to be followed and the only relaxation given is with respect to availment of credit in transition from manufacture of exempted goods to manufacture of dutiable goods - thus, even the transitional credit will be subjected to the provisions of Rule 4 (1) of CCR, 2004. Time limitation - HELD THAT:-It is abundantly clear that the appellants have put the department to notice vide their letter dated 29.04.2016 and ER-1 Returns. Therefore, it was not open for the department to issue SCN dated 27.06.2019 after the lapse of more than two years there too alleging suppression of facts with intent to evade payment of duty etc. We find that there is not even an iota of truth in the allegation of the department as per the records of the case. Moreover, looking into the fact that the appellants are a company under the Ministry of Defence intention to evade payment of duty cannot be alleged - under the facts and circumstances of the case, even any other company could not have been charged with suppression of facts with an intention to evade payment of duty. The appellants have though not made out a case on merits of the issue, have certainly made out a strong case in their favour on limitation and succeed on this count - SCN is time barred - Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2022 (2) TMI 3 Levy of Entry Tax - Motive of the appellant behind litigation - whether the Entry Tax was compensatory in nature and thus, outside the purview of Part-XIII of the Constitution? - HELD THAT:- The order of the learned single Judge, wherein, certain disparaging remarks were made, appears to be wholly unwarranted, as there was uncertainty as to the state of law relating to Entry Tax and divergent views were expressed not only by the High Courts, but by the Supreme Court as well. Thus, to impute motives to a litigant or castigating him for taking a particular legal position or exercising his constitutional right under Article 226 is unwarranted. Inherent power and jurisdiction of this Court to expunge the alleged adverse remarks made by the Single Judge - HELD THAT:- It is difficult to suggest that the petitioner had acted with malafide and with deliberate intention and thus, the observation made by the learned single Judge, apart from being unwarranted, are irrelevant to decide the issue. The order of the writ Court also overlooks the fact that the view/stand taken by the petitioner, insofar as the leviability of entry tax on imported vehicles is the view taken by the Division Bench of Kerala High Court and also the Judgment of the Madras High Court and the matter was finally resolved by a Division Bench of the Hon'ble Supreme Court, after the Constitutional Bench of Nine Judges pronounced on the scope of Part XIII of the Constitution. The above sequence of litigation will clearly demonstrate that the appellant cannot be imputed with motive whatsoever and therefore, the disparaging remarks are clearly unwarranted. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 2 Interest on delayed refund of excess amount of tax paid by the petitioner - it is contended that petitioner was only entitled to interest of ₹ 3,68,871.00, calculated @12% for the period from 04.12.2000 to 01.02.2005 under sub-section (2) of Section 33F of the Act - HELD THAT:- On going through the provisions of Section 33F of the Act, we are not inclined to accede to the prayer made by the petitioner, that too at this distant point of time. Claim of the petitioner was duly considered by the respondent and thereafter, interest was paid for the delay in paying the tax refund. We do not find any error or infirmity in the view taken by the respondent. No case for interference is made out. Petition dismissed. Indian Laws 2022 (2) TMI 1 Dishonor of Cheque - discharge of legally enforceable debt or not - misuse of cheque or not - case of the revision petitioner/accused is that the 2nd respondent/complainant had taken one signed blank cheque, two unsigned blank cheques and promissory note from him with a promise to arrange a loan for him and thereafter, the 2nd respondent/complainant had misused the cheques - section 138 of NI Act - HELD THAT:- In the instant case, a perusal of the material available on record would show that the 2nd respondent/P.W.1 admitted in his cross-examination that he was an Income Tax Assessee, but he did not mention the loan transaction in his income tax returns. In the absence of any corroborative evidence and in view of the admission made by the 2nd respondent/PW1 that he is an Income Tax assessee, the question would be whether non-showing of the amount in his income tax return is sufficient to rebut a presumption that the cheque was not issued in discharge of a debt or liability. In the instant case, as per the evidence of the 2nd respondent/complainant, Ex.P2- pronote was executed by the revision petitioner/accused, on 26.08.1999, for ₹ 1,10,000/-, whereas the cheque under Ex.P1 was issued for ₹ 1,81,400/- on 05.07.2002. However, the 2nd respondent/complainant has not properly explained under what circumstances, the cheque was issued for ₹ 1,81,400/-. That apart, the 2nd respondent/complainant (P.W.1) has admitted in his cross-examination that he has withdrawn ₹ 30,000/- by depositing the cheque of the revision petitioner/accused on 01.12.2000, which clearly proves the contention of the revision petitioner/accused that the 2nd respondent/complainant had misused the cheques issued by him for obtaining a bank loan. The finding recorded by the learned trial Judge that the 2nd respondent/complainant had established that the cheque was issued towards discharge of legally enforceable debt, which was confirmed by the appellate Court, is suffered from illegality and caused miscarriage of justice. Hence, the conviction and sentence imposed against the revision petitioner/ accused for the offence punishable under Section 138 of the N.I. Act is liable to be set aside - Criminal revision case allowed.
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