Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 21, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Cancellation of GST registration of the petitioner with retrospective effect - According to Section 29(2) of the Central Goods and Services Tax Act, 2017, GST registration can be cancelled retrospectively if certain circumstances are satisfied. However, such cancellation should not be mechanical and must be based on objective criteria. - The high court modifies the cancellation order to operate from 31.03.2020, the date when the petitioner discontinued business activities.
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Input Tax Credit (ITC) - Wrong availing of input tax credits by the petitioner under the provisions of the respective GST Enactments - Proper officer of GST could not conduct the inspection since the premises of the assessee was under the custody of bank under the SARFAESI Act. - The High court set aside the impugned orders on the grounds of violation of natural justice, particularly the denial of cross-examination rights to the petitioner. - Matter restored back.
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Seeking revocation of order of cancellation of registration - The High Court directed the petitioner to file returns for the period prior to the cancellation of registration within 45 days from the date of receipt of the order. This includes paying tax dues, interest, and fees for belated filing of returns. - Any unutilized Input Tax Credit shall not be allowed to be used for payment of tax, interest, or fine/fee unless scrutinized and approved by an appropriate officer. - The restoration of the GST registration is subject to and conditional upon fulfilling the conditions imposed.
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Issuance of summons u/s 70 of the Central Goods and Excise Taxation Act., 2017 - duplication of proceedings - After reviewing the documents and submissions, the Court found merit in the petitioner's claim of duplication of proceedings. Additionally, the Court acknowledged the existence of a prima facie case in favor of the petitioner and determined that the balance of convenience favored the petitioner. - the High Court stayed the impugned order till further order.
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Ex-parte order - The High court sets aside the impugned assessment order and directs the petitioner to file a reply to the show cause notice by a specified date. - The assessing authority is directed to consider the petitioner's response and pass a fresh assessment order within a stipulated timeframe.
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Validity of show cause notice/assessment orders issued by the respondent, GST Department raising demand of GST on royalty paid to the respondent - Mining Department towards mining lease - The Revenue's counsel argues that the issue has already been settled by the court in previous cases where it was held that the imposition of GST on royalty is justified. - The court dismisses the writ petition in accordance with the decisions made in Sudershan Lal Gupta’s case and Shree Basant Bhandar Int Udyog’s case.
Income Tax
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TDS u/s 195 - Addition u/s 40(a)(i) - remittances without deducting tax at source [TAS] - disallowances qua payments made by assessee concerning purchases from its seven (07) group companies - The High court held that this aspect was concededly not the subject matter of the disallowance ordered under Section 40(a) of the Act. The disallowance under the said provision was confined to payments made by the respondent/assessee against purchases required to conform to the equal treatment clause or the non-discrimination Clause contained in Article 24(3)/26(3). Perhaps for this reason, the AO did not take recourse to the provisions of Article 9 of the respective DTAAs. - The High court found that the ITAT was correct in its interpretation of the DTAA provisions, which override domestic tax laws where more beneficial to the assessee.
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Assessment of housing society - consideration received on the transaction carried out for redevelopment of the land (LTCG) taxation in the hands of the society or not? - The High Court observed that, No authority is required to hold that terms ‘land or building' ‘or both' do not include development rights and that in the case before there was transfer of such rights only. Thus we hold that FAA was not justified in taxing sum in the hands of the assessee, as same was the income of the members of the society. - Thus, HC confirmed the order of ITAT.
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Assessment u/s 144B - Disallowance of commission paid to the Foreign Company and Local Agents/Parties and expenses incurred by the petitioner on account of purchase of bullion - The High court noted the petitioner's failure to satisfactorily explain the disallowed commission payments and purchases. It was highlighted that the petitioner did not provide necessary documents, such as GST returns in Form GST 2A, to substantiate the transactions. - Writ Petition dismissed.
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Grant of interest u/s 244A(1)(a) on the refund admissible to appellant - ITAT refused to grant interest on the ground that the refund arising on regular assessment after allowing TDS and advance tax is less than 10% of the tax as determined on regular assessment - The High Court examines the arguments presented by both parties and concludes that the appellant is entitled to interest under Section 244A of the Act on the refunded amount.
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Unaccounted income on sale of plots in cash - estimation of Net profit - estimation on the on- money received by the assessee - The Tribunal dismissed the Assessee's appeal, rejecting their argument regarding the taxation of the profit element in the on-money received. It held that the method adopted for estimating net profit in real estate transactions was not applicable in this case.
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Revision u/s 263 - Method of revenue recognition (project completion vs. percentage completion method), and the allocation of interest and Transferable Development Rights (TDR) expenses. - The ITAT observed that, CIT has not substantiated that how the assessment order passed by the assessing officer is erroneous as well as prejudicial to the interest of revenue. Therefore, ground of the appeal of the assessee are allowed.
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Capital gain computation - The Tribunal observed that, the DVO has not given opportunity nor given benefit of encroachment which has been examined by the Assessing Officer. Hence, in view of the additional grounds taken up, the change in the circle rates owing to decline in the market demand, non-deduction of expenses and value owing to the encroached portion, we deem it fit to remand the matter to the file of the Assessing Officer to adjudicate the issue afresh.
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Nature of expenditure - Revenue expenditure or capital expenditure - The ITAT held that, it is now well settled that revenue expenditure is allowable in entirety in the year in which it is incurred though it is written off in the books over a period of year - treatment of any particular expenditure/income in the accounts has no bearing on the allowance or otherwise under the Act. Accordingly, the Assessee Company has claimed the said expenditure in the current year in which such expenditure is incurred u/s 37 of the Act.
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Exemption u/s 11 - charitable purposes u/s 2(15) or not? - The Tribunal held that, mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided u/s 11.
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Transfer Pricing Adjustment on Delayed Sales Proceeds - Normally there would be a difference between the lending rate and borrowing rate in each country. Some authors and writers suggest that the average or mid-point between the two should be taken. However, others like Klaus Vogel have suggested that economic purpose and substance of the debt-claim or debt for which granting of credit calls for the lending rate would be determinative. - The ITAT observed that, we do not deem it necessary to enter into this controversy and express our view as regards the same. - The ITAT held that the interest rate on delayed sales proceeds should be based on the currency in which the loan is to be repaid, favoring the application of LIBOR over the Indian Prime Lending Rate (PLR).
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Bank liability to deduct TDS in respect of the LTC/LFC bills - assessee in default u/s 201(1)(1A) for non-deduction of tax under Section 192 - The ITAT, aligning with the Supreme Court's decision, held the assessee accountable for TDS deduction on LTC/LFC payments. - While confirming the liability of the assessee, the ITAT also upheld the relief granted by the CIT(A) in favor of assessee.
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Exemption u/s 11 - assessment of trust - The Tribunal observed that, to serve a charitable purpose, it is not necessary that the objects should benefit the whole of mankind or all persons in a country or a state. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of community sought to be benefited must be sufficiently definite and identifiable by some common quality of a public or impersonal nature. - Regarding corpus donation, ITAT observed that, if the intention of the donor is to give that money to a trust to keep in trust the account in deposit and utilize the income there from for carrying on a particular activity, it satisfies the definition part of the corpus. - CIT(A)/NFAC is taken a correct view in granting the exemption under sec. 11 of the Act to the assessee and same is confirmed.
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Taxability of income in India - Income attributable to India - income of advertisement and subscription revenue - Permanent Establishment (PE) - business connection - The Tribunal upheld that the assessee has a 'Business Connection' in India. However, it was determined that since the assessee compensated its Indian agents (ZTL and El-Zee) at an arm's length price, no further income from advertisement and subscription revenue is attributable to the assessee from operations carried out in India. - The Tribunal upheld the CIT(A)'s acceptance of the assessee's cash system of accounting, aligning with the consistency in the assessee's past accounting practices.
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Addition u/s 68 - bogus LTCG on shares - onus to prove - - Despite opportunities provided, the assessee company failed to adequately explain the nature and source of the funds received from the share subscriber companies. This failure to discharge the burden of proof led the A.O. to conclude that the transactions were suspicious. - The assessee company argued that it merely acted as a facilitator for transferring funds to the real beneficiary. However, this contention was not accepted by the ITAT as there was insufficient evidence to prove that the funds were indeed transferred for legitimate purposes. Argument of double taxation also not find favor of the tribunal - Additions confirmed by the tribunal.
IBC
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Scope and ambit of Section 29A (c) of IBC - Disqualification to submit the Resolution Plan u/s 29A - The Tribunal observed that, Section 29A, sub-section (c) does, not only disqualify, those who were in management and control of the Corporate Debtor at the time when its account was declared NPA, but also disqualifies those, who were in management and control of the Corporate Debtor and in close proximity of time, before submission of Resolution Plan, who failed to clear the debts of the Corporate Debtor. - The NCLAT analyzed the MoU and subsequent actions by the appellant, concluding that the appellant had de facto control over the corporate debtor, including the right to nominate directors and make significant management decisions. This control started from the date of the MoU, making the appellant ineligible under Section 29A.
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Rejection of approval Plan - CIRP - One of the reasons given by the Adjudicating Authority for rejection is that the claim of Income Tax Department of dues to be paid has not been proposed - The NCLAT directs the Resolution Professional to convene a meeting of the Committee of Creditors (CoC) to consider the proposal mentioned in the affidavit of the SRA. If approved by the CoC, the Resolution Professional is instructed to submit a fresh application for approval of the plan along with any addendum to the plan.
Service Tax
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Taxable service or not - providing commission on profit to one of the directors - existence of employer/employee relationship or not - The Tribunal held that the commission paid to the director falls within the purview of an employer-employee relationship. They cited precedent cases to support their decision and set aside the impugned order-in-original.
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Valuation - Composite services - GTA Services on reverse charge basis - non-inclusion of various expenses in the taxable value - The Tribunal found that the services received by the appellant from different providers for "Loading and Unloading Charges" and "Pole Shifting and Stacking Services" cannot be clubbed under GTA services as composite services. It was clarified that since these services were received from separate sources and accounted for separately, they should not be included in the taxable value for GTA services.
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Classification of services - Franchise Service or Business Auxiliary Service? - Race Promotion Contract - The CESTAT found that the contract did not constitute a Franchise Service as defined under Section 65(105)(zze) of the Finance Act, 1994 because it did not involve the transfer of representational rights to JSIL by FOWC. Consequently, the demand of service tax on this basis was not sustainable. - The appeal was allowed, setting aside the demand of service tax, penalties under Sections 77 and 78.
Central Excise
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Recovery of excise duty, which got extinguished on approval of resolution plan - Section 31(1) of the IBC, 2016 mandates that the resolution plan approved by the NCLT shall be binding on the corporate debtor and its stakeholders, including creditors, central government, state government, or local authorities to whom statutory dues are owed. - The Department did not make any claim before the Corporate Insolvency Resolution Process regarding the demands arising from the impugned orders. They acknowledge that the Resolution Plan has been approved, and therefore, all claims are settled, discharged, and extinguished.
Case Laws:
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GST
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2024 (2) TMI 946
Cancellation of GST registration of the petitioner with retrospective effect - failure to file returns for a continuous period of six months - no reply to SCN submitted - violation of principles of natural justice - HELD THAT:- There is no material on record to show as to why the registration is sought to be cancelled retrospectively - Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The order of cancellation is modified to the extent that the same shall operate with effect from 30.09.2020, i.e., the period upto which the Petitioner has filed its GST returns - Petition disposed off.
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2024 (2) TMI 945
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - under declaration of output tax - excess claim Input Tax Credit, under declaration of ineligible ITC - ITC claim from cancelled dealers - HELD THAT:- The impugned order, however, after recording the narration, records that the reply uploaded by the taxpayer is not satisfactory. It merely states that no reply/explanation has been received from the taxpayer despite sufficient opportunities, which indicate that the taxpayer has nothing to say in the matter. Hence, the undersigned, being the Proper Officer, is left with no other option but to create a demand ex parte, in accordance with provisions of CGST/DGST Act, 2017 . The Proper Officer has opined that reply is not clear and unsatisfactory - In case the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been sought by the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details. Further petitioner was not provided with an adequate opportunity to defend the show cause notice by way of a hearing. The order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order and show cause notice is set aside. The matter is remitted to the Proper Officer for re-adjudication - Petition allowed by way of remand.
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2024 (2) TMI 944
Cancellation of GST registration of the petitioner with retrospective effect - failure to file returns for a continuous period of six months - no reason for cancellation stated in SCN - violation of principles of natural justice - HELD THAT:- Neither the show cause notice nor the order spell out the reasons for cancellation. In fact, order dated 29.01.2021 does not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. The order of cancellation is modified to the extent that the same shall operate with effect from 31.03.2020, i.e., the date on which the petitioner discontinued business - Petition disposed off.
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2024 (2) TMI 943
Requirement of submission of GST certificate, which was valid at the time of submission of his tender documents, in terms of Clause 8(f) of the Tender Notice, submitted or not - HELD THAT:- Section 22 of the Central GST Act, 2017 provides that every supplier shall be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakhs rupees. Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakhs rupees. Section 23 provides the class of persons, who are not liable for registration under the Central GST Act, 2017 - As Assam is a special category State under the Central GST Act, 2017, the petitioner and the respondent No.7 are required to submit valid GST Certificates, as their bid value is above 10 lakh rupees. Whether the respondent No.7 had submitted a valid GST Certificate along with his bid/quotation? - HELD THAT:- The GST Certificate which is a part of the tender documents shows that GST Certificate of the respondent No.7 had been issued on 04.06.2023. The issuance of the GST certificate could not have been done prior to registration. One of the issues that has also cropped up and would have to be decided is, whether a person can have two GST registration numbers. Due to the disputed questions of facts involved in the present case, this Court is of the view that the said issue would have to be decided by the respondents No. 2 and 6. The respondents No. 2 and 6 are directed to make an inquiry into the validity of the GST Certificate submitted by the respondent No.7 along with his tender documents. If it is found upon inquiry that the respondent 7 had submitted an invalid or fabricated GST Certificate, the settlement of the market with the respondent No.7 should be set aside by cancelling the Settlement Order dated 07.07.2023. The State respondents should thereafter take immediate steps to settle the market with the second highest bidder. The respondents No. 2 and 6 shall make their inquiry and take a decision on the same within a period of 1(one) month from the date of receipt of a certified copy of this order - Petition disposed off.
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2024 (2) TMI 942
Principles of natural justice - requirement of grant of an opportunity of personal hearing before any adverse decision is taken against any person - HELD THAT:- Upon service of notice the petitioner had been called to file its reply only. Non-compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate in the oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped - the rules of natural justice as are ingrained in the statute prescribe dual requirement. First with respect to submission of written reply and the second with respect to oral hearing. Failure to avail one opportunity may not lead to denial of the other. The two tests have to be satisfied independently. On merits, learned counsel for the petitioner further states that detailed reply was not required. The discrepancies in the returns as noticed by the adjudicating authority would have been clarified if opportunity of personal hearing had been granted. Thus, no useful purpose may be served in keeping this petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy. The order impugned has been passed contrary to the mandatory procedure. The deficiency of procedure is self-apparent and critical to the outcome of the proceedings - matter is remitted to the respondent No. 2 to pass a fresh order - petition allowed by way of remand.
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2024 (2) TMI 941
Input Tax Credit (ITC) - Wrong availing of input tax credits by the petitioner under the provisions of the respective GST Enactments - non-compliance with the requirements of Section 67 of the TNGST Act, 2017 - Proper officer of GST could not conduct the inspection since the premises of the assessee was under the custody of bank under the SARFAESI Act. - neither a Show Cause Notice was issued to the petitioner nor a reply was called for from the petitioner - violation of principles of natural justice - HELD THAT:- There is no doubt that the impugned orders have been passed in violation of principles of natural justice in as much as, the petitioner was not allowed to cross examine the officers of the 2 nd respondent s who had taken possession of the factory of the petitioner under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 read with Security Interest (Enforcement) Rules, 2002 - on this short point alone impugned orders are liable to be set aside and the cases have remitted back to the 1st respondent to pass fresh orders on merits after giving the petitioner an opportunity to cross examine the officers of the 2 nd respondent and after being heard. Denial of transitional credit under the aforesaid provisions of the respective GST Enactments can be justified only if the petitioner did not have unutilised credit of Rs. 10,83,115/- as on 30.6.2017. This would have been reflected in the Returns of the petitioner which the petitioner would have filed before the Commercial Tax Department under the provisions of the Tamil Nadu Value Added Tax Act, 2006. This aspect can be verified by the Department by drawing informations from its archives under the provisions of the Tamil Nadu Value Added Tax Act, 2006 - Proviso to Section 16 (2) of the Tamil Nadu Goods and Service Tax Act, 2017 and the Central Goods and Service Tax Act, 2017 contemplates that where a recipient fails to pay the supplier of the goods or services or both, other than the supply on which tax is payable on reverse charge basis, the amount towards the value of supply along with the tax payable thereon, within the period of 180 days from the date of issuance of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed. Whether Rule 37 of the respective Goods and Service Tax Rules, 2017 were satisfied or not? - HELD THAT:- If the petitioner had availed input tax credit on any goods or services or both but failed to pay the supplier thereof, for the value of such supply along with the tax payable thereon, within the time limit specified under Section 16(2), the petitioner was required to furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in Form GSTR-2 for the month immediately following the period of 180 days from the date of issue of the invoice - If the petitioner has not paid the amount as is contemplated under 2nd proviso to Section 16 (2) of the respective GST enactments, the respondent will be justified in demanding credit availed notwithstanding the fact that the cross-examination of the officers of the 2nd respondent was denied. Therefore, notwithstanding the non-availability of the documents such as invoices and the manual registers, the petitioner would be entitled to input tax credit as also transitional credit if they were validly availed provided the details were captured and available in the system both at the end of the petitioner and the supplier and in the information furnished by the petitioner in various GSTR Forms with the department. The impugned orders are quashed and the cases are remitted back to the respondent to pass a fresh order on merits and in accordance with law keeping the observation in mind, within a period of six months from the date of receipt of this order - Petition allowed by way of remand.
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2024 (2) TMI 940
Seeking revocation of order of cancellation of registration - HELD THAT:- Considering the submissions, it is not necessary to adjudicate this matter on merits. Instead, by following the decision in Suguna Cutpiece, this writ petition is disposed of by issuing the directions imposed - the order issued in Suguna Cutpiece [ 2022 (2) TMI 933 - MADRAS HIGH COURT] , was a conditional order and that the petitioner should be directed to comply with all conditions stipulated therein. The restoration of the GST registration is subject to and conditional upon fulfilling the conditions imposed - petition disposed off.
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2024 (2) TMI 939
Issuance of summons u/s 70 of the Central Goods and Excise Taxation Act., 2017 - duplication of proceedings in so far as dealing of the petitioner with M/S R.J. Trading Company is concerned - HELD THAT:- Based on the documents placed on record, a prima facie case exists in favour of the petitioner. Balance of convenience also lies in favour of the petitioner. Grave irreparable loss, which cannot be compensated in terms of money shall be occasioned to the petitioner, if in case the respondents are not restrained from giving effect to Annexure P-10, i.e. order dated 20.05.2023. The impugned order dated 20.05.2023, is stayed till further order. The application stands disposed of.
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2024 (2) TMI 938
Ex-parte order - petitioner was unable to appear and did not even file a reply to the show cause notice (SCN) - violation of principles of natural justice - HELD THAT:- The Petitioner has explained how he was suffering from Reeling of Head Imbalance of Gait problem for which he was receiving treatment. The medical certificate has also been enclosed. This Court is of the view that the petitioner ought to be given one more chance to first reply to the SCN and then appear before the assessing authority for a fresh assessment order to be passed in accordance with law. The impugned assessment order set aside - petition allowed.
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2024 (2) TMI 937
Validity of show cause notice/assessment orders issued by the respondent, GST Department raising demand of GST on royalty paid to the respondent - Mining Department towards mining lease - HELD THAT:- Learned counsel for the petitioner is not in a position to dispute the fact that the issue regarding demand of GST on royalty paid to the respondent - Mining Department towards mining lease has already been decided by this Court in Sudershan Lal Gupta s case [ 2022 (10) TMI 43 - RAJASTHAN HIGH COURT] and Shree Basant Bhandar Int Udyog s case [ 2022 (9) TMI 1442 - RAJASTHAN HIGH COURT] . This writ petition is dismissed in terms of the orders passed by this Court in Sudershan Lal Gupta s case and Shree Basant Bhandar Int Udyog s case.
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2024 (2) TMI 936
Seeking revocation of order of cancellation of registration certificate and restore the same in favour of the petitioner - delay in petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules - delay can be condoned or not - HELD THAT:- Issue notice to the opposite parties. Put up this matter after two weeks.
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2024 (2) TMI 935
Rejection of refund claim - remand order passed with specific direction upon the Adjudicating Authority to consider the petitioner s application and pass a speaking order - remand order passed by the higher authority by clearly defying and in violation of the order of the higher Appellate Authority which was binding upon the Adjudicating Authority being a subordinate to the Appellate Authority. HELD THAT:- Learned Advocates appearing for the respondents are not in a position to defend such conduct of the respondents/Adjudicating Authority. The impugned order dated 21st February, 2022, is set aside and the matter is remanded back to the Adjudicating Authority concerned to pass a fresh speaking order in accordance with law after giving an opportunity of hearing to the petitioner or its authorised representative, within a period of four weeks from the date of communication of this order - Petition disposed off.
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Income Tax
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2024 (2) TMI 934
Penalty imposed u/s 271C - Bar of limitation for imposing penalties - Delay in issuing the impugned SCN - fixation of period of limitation when penalty is sought to be imposed as fallout of action taken in another proceeding - As decided by HC [ 2023 (3) TMI 369 - DELHI HIGH COURT] delay in issuing the impugned SCN dated 09.11.2017 was inexcusable. There is no explanation, whatsoever, available on the record, as to why the SCN under Section 274 of the Act was not issued in 2013-14, if not earlier. HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is, accordingly, dismissed.
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2024 (2) TMI 933
TDS u/s 195 - Addition u/s 40(a)(i) - remittances without deducting tax at source [TAS] - disallowances qua payments made by assessee concerning purchases from its seven (07) group companies - as per AO transactions entered into between the respondent/assessee and its seven (07) group companies were composite transactions - disallowance of the expenditure incurred for purchases made was triggered as TAS had not been deducted by assessee - Whether the ITAT fell into error in holding that Section 40(a)(i) of the Income Tax Act, 1961 cannot be applied in view of the provisions of the Double Tax Avoidance Agreement between the Indian (sic) and Japan and India and the US? AO concluded that all seven (07) group companies had PE in India - HELD THAT:- As is evident upon perusal of Clause (ia) of Section 40(a), it did not bring payments made towards purchases to resident- vendors within its net. Therefore, the respondent/assessee argued that even after the amendment in Section 40(a) w.e.f. 01.04.2005, unequal treatment, i.e., discrimination, obtained with regard to payments made against purchases to resident-vendors. The expenditure incurred on payments made to resident-vendors against purchases could thus, be taken into account while computing income chargeable under the head profits and gains of business or profession . This disparity was removed by FA 2014, albeit w.e.f. from 01.04.2015, when the ambit of disallowance was enlarged by bringing any sum payable to a resident within the four corners of Clause (ia) of Section 40(a). Since the period in issue is AY 2006-07, the amendment brought about in Section 40(a) by virtue of FA 2014 would have no relevance. Therefore, in my opinion, the equal treatment or the non-discrimination Clause obtaining in Articles 24(3) and 26(3) of the India-Japan/India-USA DTAAs would apply with regard to the payment for purchases made by the respondent/assessee concerning the following five companies: MC (Japan); Metal One Corporation (Japan); Tubular (USA); Petro (Japan) and Miteni (Japan). There can be no cavil with the proposition advanced on behalf of the respondent/assessee that since the provision of Article 24(3)/26(3) of the India-Japan and India-USA DTAAs respectively are more beneficial, it is entitled to rely upon the same, in support of its stand that the disallowance had been rightly deleted by the Tribunal. The argument advanced on behalf of the appellant/revenue that since provisions of Article 9 of the respective DTAAs apply, the equal treatment/non-discrimination clause incorporated in Article 24(3)/26(3) would have no application to my mind, is untenable for reason as Article 9 captures transactions that an assessee may enter with an AE, which may result in a transfer pricing adjustment. In the instant case, the transfer pricing adjustment impacted the payments received by the respondent/assessee against services rendered by it to its group companies. This aspect was concededly not the subject matter of the disallowance ordered under Section 40(a) of the Act. The disallowance under the said provision was confined to payments made by the respondent/assessee against purchases required to conform to the equal treatment clause or the non-discrimination Clause contained in Article 24(3)/26(3). Perhaps for this reason, the AO did not take recourse to the provisions of Article 9 of the respective DTAAs. Transactions entered into by the respondent/assessee with the remaining two entities, i.e., MC Metal (Thailand) and Metal One (Singapore) - Since the two companies referred to above, i.e., MC Metal Thailand and Metal One Singapore, do not have a PE in India, the payments made to them are not chargeable to tax in India. Articles 7 of the India- Thailand and India-Singapore DTAAs, respectively, provide complete clarity in that behalf - Given this position, as correctly argued on behalf of the respondent/assessee, it was not obliged to deduct TAS from payments made to MC Metal (Thailand) and Metal One (Singapore). Chargeability to tax is the paramount condition for triggering the obligation to deduct TAS. The plain language of sub-section (1) of Section 195 brings this aspect of the matter to the fore. The reliance on the judgment rendered by the Supreme Court in Transmission Corporation of AP Ltd. [ 1999 (8) TMI 2 - SUPREME COURT] is misplaced, as that was a case involving a composite transaction where the trading receipt was embedded with a component of income. Question 2, however, is modified as - Whether the ITAT was in error in reversing the findings of the DRP with respect to the existence of PEs as well as a business connection in India? - Ld' Judge could not have reformulated the question after the pronouncement of the judgment. As indicated above, the respondent/assessee could have taken recourse to the DTAAs qua the reformulated question since the provisions contained therein were more beneficial. [See Section 90(2) of the Act.] Therefore, the business connection test had no relevance once it was established that MC Metal (Thailand) and Metal One (Singapore) did not have a PE in India. Assessee appeal allowed.
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2024 (2) TMI 932
Assessment of housing society - consideration received on the transaction carried out for redevelopment of the land (LTCG) taxation in the hands of the society or not? - HELD THAT:- As decided in Raj Ratan Palace Co-operative Housing Society [ 2011 (2) TMI 96 - ITAT MUMBAI] Society was only the lessee and what was transferred to the developer is development rights not land or building Section 50C of the Act stipulates as where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both. No authority is required to hold that terms ‘land or building' ‘or both' do not include development rights and that in the case before there was transfer of such rights only. Thus we hold that FAA was not justified in taxing sum in the hands of the assessee, as same was the income of the members of the society. We should also note that against the order of this Court [ 2013 (2) TMI 933 - BOMBAY HIGH COURT] in Raj Ratan Palace CHS (supra), Revenue had preferred a Special Leave Petition in the Apex Court, which came to be dismissed on 28th October 2013 [ 2013 (10) TMI 1579 - SC ORDER] . This will take care of Questions 1 and 3 proposed in the appeal. Nature of receipt - Corpus fund taxability in the year of receipt - as submitted assessee is following mercantile system of accounting - CIT(A) held that on Rs. 3.50 Crores which was taxable under the head ‘income from other sources’ only could be taxed for the year under consideration - ITAT after hearing the parties came to a conclusion that in view of the fact that assessee had not given possession of the land to the Developer during the year under consideration, the money received by assessee during the year was to be assessed under the head ‘capital gains’ - HELD THAT:- We are unable to find any error in the conclusion arrived at by the ITAT. No substantial questions of law arise.
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2024 (2) TMI 931
Assessment u/s 144B - Disallowance of commission paid to the Foreign Company and Local Agents/Parties and expenses incurred by the petitioner on account of purchase of bullion - HELD THAT:- The petitioner appears to be the company which was incorporated only in the year 2019. The petitioner had filed return of Income u/s 139 on 15.03.2022. After the return was filed, the petitioner was called upon to furnish the details of the purchases made by the petitioner from various dealers particularly three dealers mentioned above. There is a huge purchase quantum of bullion/ jewellery from there sellers. The petitioner was called upon to furnish the details of purchase from these sellers. M/s.Surana Corporation Limited was under liquidation and has apparently sold jewellery to the petitioner on 20.07.2020 pursuant to an auction notice dated 12.07.2020 conducted by the Company Secretary appointed as Insolvency Resolution Professional who was later appointed as the liquidator of the said Company by the National Company Law Tribunal (in short, NCLT), Chennai, by its order dated 25.10.2019. As noticed that the petitioner has attached sample invoice issued by the Company Secretary in Practice and Insolvency Professional who was appointed as the liquidator of the said company. However, before this Court the petitioner has filed copies of invoice for a sum of Rs.127,35,78,406/-. There is no clarity on the same. The explanation of the petitioner has not been accepted by the AO. Although, during the period dispute, the movement of jewellery items including bullion are not required to accompany e-way bill in terms of Rule 138 (4)(a) of the GST Rule 2017, as amended by Notification No.12/2018 Central Tax with effect from 01.04.2018, GST Returns of the supplier and GST Returns of the petitioner would have registered the transaction of gold, the petitioner ought to have filed the GST Returns in Form GST 2A before the respondent. These documents have not been furnished by the petitioner. Also the other issues regarding payment of commission to both Indian and Foreign agents have not been properly explained by the petitioner. There are several dispute question of facts who do not call for adjudication in a summary proceedings under Article 226 of the Constitution of India. Therefore, there are no valid grounds to interfere with the impugned assessment order passed under Section 143(3) r/w 144B. Decided against assessee.
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2024 (2) TMI 930
Grant of interest u/s 244A(1)(a) on the refund admissible to appellant - ITAT refused to grant interest on the ground that the refund arising on regular assessment after allowing TDS and advance tax is less than 10% of the tax as determined on regular assessment HELD THAT:- ITAT has completely misdirected itself in adjudicating the controversy involved inasmuch in the facts and circumstances of the case it is wholly academic whether the words regular assessment appearing in the proviso to Section 244A(1)(a) of the Act means the original assessment order or the assessment order passed giving effect to the CIT(A) order. The real controversy is whether the words amount of refund in the proviso must be given its natural meaning and, therefore, the actual amount of refund ought to be considered or does it contemplate an artificial split of the amount of refund into various components of advance tax, TDS, SA Tax and taxes paid pursuant to demand raised. The words amount of refund must mean, in our view, the whole of the refund, and not an artificial split as canvassed by the Department. Therefore, irrespective of what the words regular assessment mean, the proviso would not be attracted. The words amount of refund must be given their natural/neutral meaning and must, therefore, mean whole of the refund. These words must not be read as permitting an artificial split of the amount into various components of advance tax, TDS, SA Tax and tax paid pursuant to demand. This Court, in J.K. Industries V/s. Krishna Sahal, Commissioner of Income Tax [ 2023 (6) TMI 1037 - BOMBAY HIGH COURT] wherein the word amount in the context of interest payable under the old Section 244A(1A) of the Act was interpreted, held, as being a neutral expression wide enough to include even the interest collected by the Department alongwith the tax and it was consequently held that appellant therein was entitled to interest on the aggregate amount. If the Revenue s contention that appellant is entitled to interest on advance tax and TDS under Section 244A(1)(b) of the Act is to be upheld, then appellant would be entitled to interest from the date of actual payment (i.e., for a period even prior to the first day of the assessment year) and the exchequer will only have to pay more interest to appellant, as is clear from the plain reading of Section 244A(1)(b) of the Act. The Explanation to Section 244A(1)(b) of the Act, giving a meaning to the phrase date of payment as being the date of notice of demand u/s 156 of the Act, has no application to cases where taxes have been paid voluntarily by an assessee as held by the Hon ble Apex Court in Tata Chemicals Ltd. [ 2014 (3) TMI 610 - SUPREME COURT] Questions of law as framed have to be answered in favour of assessee, i.e., appellant. Appellant would be entitled to interest under Section 244A.
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2024 (2) TMI 929
Validity of reopening of assessment - as argued reasons for re-opening the assessment were not provided - Assessment was completed u/s 147 r.w.s 144 for non-compliance and non filing of return - whether the impugned assessment order should be interfered with in exercise of discretionary jurisdiction? - HELD THAT:- Re-assessment proceedings commence with a notice calling upon the assessee concerned to file the return of income. Upon receipt of said notice, assessee had two options. The first option was to file a revised return of income and request for reasons for re-opening the assessment. The second option was to inform the assessing officer that the original return of income may be treated as the return in response to the notice u/s 148. If the second option had been availed of, it would still have been open to the petitioner to request for reasons for re-opening the assessment as per principles laid down in Tiwari Kanhaiya Lal and S.G.Portfolio. The petitioner did not, however, resort to either option. Thereafter, AO issued notice u/s 142(1) calling upon the assessee to produce the documents specified in such notice. The annexure to the notice indicates that the petitioner did not comply with the notice u/s 148. Upon receipt of this notice, the petitioner replied asking for reasons for reopening the assessment and attached certain documents, while requesting for further time to submit other documents. This communication was issued more than six months after receipt of notice u/s 148. As contended if the petitioner had provided a revised return of income or called upon the assessing officer to treat the original return of income as the return in response to notice u/s 148, the petitioner would have been entitled to challenge the proceedings on the ground that reasons for re-assessment were not provided, but not otherwise. The impugned order does not warrant interference on the ground that principles laid down in GKN Driveshafts [ 2002 (11) TMI 7 - SUPREME COURT ] were not complied with. For the same reason, i.e. non-filing of return, and the consequential assessment on best judgment basis u/s 144, the impugned order does not call for interference in exercise of discretionary jurisdiction on the ground of non-issuance of notice u/s 143(2). Referring to the statements on which reliance was placed in the impugned order - As with regard to the execution of civil work, the petitioner stated that she did not have the experience in mass excavation and sandfilling. Her husband said that he too did not possess the requisite experience and that the sub-contractors had the experience. One of the sub-contractors, M/s.Meenakshi Timber Plywood, issued a statement that the work was executed by the proprietary concern of the petitioner, thereby completing a circle leading back to the petitioner. The impugned order was also assailed on the ground that no opportunity to cross-examine Mr. Manuel Joseph was provided. As stated earlier, Mr.Manuel Joseph stated that he did not have experience in mass excavation and sand filling. In those circumstances, the denial of the request for cross-examination does not warrant interference under Article 226. Undoubtedly, in cases where the assessee concerned is able to provide some indication of real prejudice, not providing the opportunity to cross-examine would justify interference while exercising discretionary jurisdiction, but not otherwise. Petitioner assailed the impugned order was that a remand should not be made for a second time and that the time limit for issuing the assessment order was close to expiring when the assessment order was issued - The broad proposition that there should be no remand for a second time is not supported by statute or precedent and, in any event, on account of conclusions recorded earlier, the petitioner cannot succeed on this basis. Petitioner was provided a reasonable opportunity to place on record evidence of execution of civil work (mass excavation and sand-filling), such as contracts for hiring excavation and other equipment, running account and final bill, proof of payment by the employer, contracts with sub-contractors, running account and final bills of sub-contractors, proof of payment to sub-contractors, and the like - Apart from producing work orders, photographs and the offer letter of employment of Mantri Developers Private Limited, the petitioner did not place any other evidence on record leading to the inference in the impugned order that no proof of carrying out work was submitted by the assessee. In these facts and circumstances, conclude that there is no justification for exercising discretionary jurisdiction. The impugned assessment order does not warrant interference under Article 226 of the Constitution of India.
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2024 (2) TMI 928
Validity of reassessment order/proceedings - as argued concerned authority has neither considered reply filed alongwith documents nor supplementary reply by the petitioner - HELD THAT:- Perusal of the impugned order indicates that though it has been recorded in it that reply of the assessee has been considered, but there is no reference with respect to reply and documents filed by the petitioner and there is no consideration with respect to supplementary/additional reply filed by the petitioner. So far as plea of the respondents that supplementary reply filed by the petitioner was not received by the concerned authority, is falsified from the document filed by the respondents themselves with their reply it has been clearly reflected that on 03.04.2023 reply from the assessee was filed. Thus it is apparently clear that concerned authority has neither considered reply filed alongwith documents nor supplementary reply filed by the petitioner. There is no speaking order assigning reason for conclusion arrived at that income/transactions has escaped assessment in the Assessment Year 2019-2020. Thus reopening order and notice are quashed and set aside and matter is relegated to the concerned authority for deciding afresh by taking into consideration reply as well as supplementary reply alongwith documents filed therewith, by passing a speaking and reasoned order.
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2024 (2) TMI 927
Capital gain computation - FMV determination - reference to DVO - whether fair market value of the property sold by the assessee could be substituted with the value sought to be determined by the Departmental Valuation Officer (DVO) in terms of section 50C(2) of the Act when the variance between the actual consideration and DVO value is 4.97%? HELD THAT:- Variance between the value as determined by the ld DVO and the value as declared of the assessee is just 4.97%. We find that 3rd proviso to section 50C(1) of the Act gives leeway to the assessee to accommodate the variance up to 10% of the actual consideration. We find that though this amendment had been introduced in the statute by the Finance Act, 2018 w.e.f 01.04.2019, this amendment has been held to retrospective in the case of Maria Fernandes Cheryl [ 2021 (1) TMI 620 - ITAT MUMBAI] wherein it was held that amendment made in scheme of section 50C(1) of the Act by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis- -vis stamp duty valuation from 5 per cent to 10 per cent are effective from date on which section 50C, itself was introduced, i.e 1-4-2003. Respectfully following the same, we hold that no substitution of sale consideration need to be made in the case of the present assessee and sale consideration at Rs. 1.10 lakhs reported by the assessee is to be accepted for the purpose of computation of Long Term Capital Gain. Accordingly, grounds raised by the assessee are allowed.
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2024 (2) TMI 926
Unaccounted income on sale of plots in cash - estimation of Net profit - estimation on the on- money received by the assessee - assessee submitted that the entire on-money is taxed by the Ld. Assessing Officer whereas the profit element at 8% embedded therein is only taxable in the hands of the assessee HELD THAT:- Assessee company was incorporated on 01.04.2010 and developed residential 358 plots in Phase-I ranging from 500 to 1398 sq. yds. and 397 plots in Phase-II ranging from 150 to 300 sq.yds. Price of the plots are determined based on the improvements/growth of particular area are based on its infrastructure, development, public utilities, etc. Market value of the land and Jantry value differs from place to place. More unaccounted moneys are utilized on sale and development of lands/plots which are converted from Agricultural to Non- Agricultural purpose. In such cases it is impossible to estimate the net profit unless the method adopted in manufacturing activities. Therefore the claim of the assessee that net profit is to be adopted in the land development transactions, wherein on-money was received by the assessee is legally not tenable. Assessee failed to disclose the proper details of expenses, development charges, etc. before the lower authorities even in the second round also. Therefore the claim made by the assessee to adopt net profit method on the on-money received by it, in real estate transaction is hereby rejected and the case laws relied before us are clearly distinguishable, which are not relating to development of plots. Decided against assessee.
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2024 (2) TMI 925
Revision u/s 263 - CIT said AO in the assessment order has not mentioned whether the assessee was following percentage completion method or project completion method for recognising the revenue - PCIT held AO had failed to examine method of revenue recognition interest on loan and nature of expenses as capital in nature therefore held that order passed u/s 143(3) of the Act on 02.03.2021 was erroneous insofar as it was prejudicial to the interest of revenue. HELD THAT:- As assessee has filed the relevant copies of audit report and information pertaining to revenue recognition demonstrating that assessee has followed the percentage completion method and not the project completion method as mentioned by the ld. Pr.CIT in her order passed u/s 263 of the Act. In relation to the above the assessing officer has also called the various details like project wise value of work-in-progress and finished stock, detail of cost incurred and adjusted against sales reported project wise, party wise sale, receipts of each project and project wise gross profit etc. As undisputed fact that it has also been brought to the notice of ld. Pr.CIT that it has already been verified in the assessment order passed u/s 143(3) for assessment year 2012-13 to 2015-16, 2017-18 and 2018-19 that assessee has constantly followed the percentage completion method. As evident from the various information obtained by the assessing officer during the course of assessment proceedings that AO has verified and considered the various detail in respect of the method adopted by the assessee for recognizing the revenue. CIT has not disproved the material placed on record by the assessee in support of their claim that they have followed percentage completion method and not project completion method. In respect of claim of TDR expenses as undisputed fact that assessee was engaged in the business of construction and development of building. The assessee has explained that TDR was a right of construction in form of FSI relating to land and building which was part of stock in trade in the business carried out by the assessee, therefore, we consider that treating TDR in the nature of capital expenditure was not justified. CIT has not substantiated that how the assessment order passed by the assessing officer is erroneous as well as prejudicial to the interest of revenue. Therefore, ground of the appeal of the assessee are allowed. Pr.CIT jurisdiction to pass order u/s 263 over order passed by the faceless assessment u/s 144B - HELD THAT:- Once the record are transferred to the jurisdictional assessing officer on completion of assessment the jurisdictional PCIT assume jurisdiction therefore can exercise power u/s 263 of the Act over the order passed by the faceless assessment unit. Therefore, we don t find any merit in the ground no. 3 of the appeal of the assessee and the same stand dismissed.
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2024 (2) TMI 924
Capital gain computation - Validity of CIT(A) enhancing the assessment by an amount on the basis of report of DVO without giving the appellant a reasonable opportunity of showing cause against such enhancement - HELD THAT:- We find that the objections of the assessee are genuine and need to be considered by the Revenue. The DVO has not given opportunity nor given benefit of encroachment which has been examined by the Assessing Officer. Hence, in view of the additional grounds taken up, the change in the circle rates owing to decline in the market demand, non-deduction of expenses and value owing to the encroached portion, we deem it fit to remand the matter to the file of the Assessing Officer to adjudicate the issue afresh. Appeal of the assessee is allowed for statistical purpose.
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2024 (2) TMI 923
Nature of expenditure - Mine Development Expenditure - Addition u/s 35E or 37(1) - Assessee contended that Section 35E is applicable only when the assessee is owner of mines and / or in the business of prospecting of minerals and it is neither owns the mines nor is in business of prospecting of minerals, hence, Section 35E of the Act is not Applicable - CIT(A) observed that the expenditure incurred by Assessee on removal of overburden is held to be a Revenue expenditure and not capital expenditure HELD THAT:- Deduction u/s 37(1) could not be declined on the ground that the expenditure in question was eligible for deduction u/s 35E. The deduction u/s 35E is normally available in respect of the expenditure which is not eligible for deduction u/s 37 (1) and just because the deduction u/s 35E may be available in respect of an expenditure, even if that be so, cannot be reason enough to decline the deduction u/s 37 Of course, it is besides the fact that once the commercial production had commenced in the respective mines, there was no occasion to invoke the provisions of Section 35E in respect of any expenditure incurred in the years after the year of commercial production. Assessee company cannot be called as a Mining Company as stipulated u/s 35E of the Act. As such, the impugned expenditure incurred by assessee cannot fall u/s 35E of the Act and it should be allowed u/s 37 of the Act. As per the accounting policy of the company vide Note no 1.17 of notes to accounts the Assessee Company amortizes the Mining development expenditure in proportion of quantity of lignite mined vis-a-vis the total minable reserves. However, such amortization is not permissible under the Income Tax Act, 1961. It is now well settled that revenue expenditure is allowable in entirety in the year in which it is incurred though it is written off in the books over a period of year - treatment of any particular expenditure/income in the accounts has no bearing on the allowance or otherwise under the Act. Accordingly, the Assessee Company has claimed the said expenditure in the current year in which such expenditure is incurred u/s 37 of the Act. The accounts and accounting policies disclosed by assessee is under Company Act and for the purpose of computation of income of the assessee, which should be governed by Income Tax Act not under Company Act. AO is not justified in holding that since the assessee has disclosed the accounting policies and its income to be recognized as per accounting policies disclosed in the financial statements is not justified. In other words, the accounting of the assessee is governed by Section 145 of the Act. If there is deviation from the method of accounting as per section 145 of the Act, the ld. AO should tinker the same. On the other hand, the ld. AO cannot rest upon the computing the income of the assessee under Company Act. In view of this, we uphold the order of ld. CIT(A) on this issue and dismiss the revenue s appeal.
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2024 (2) TMI 922
Exemption u/s 11 - charitable purposes u/s 2(15) or not? - assessee is an authority constituted under the UP Urban Planning and Development Act, 1973 to promote and secure the development of areas according to plan HELD THAT:- As similar issue involved in has been decided in favour of the assessee by the Hon ble Allahabad High Court [ 2022 (8) TMI 1400 - ALLAHABAD HIGH COURT] wherein held that for the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15). There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11 for the relevant assessment year. From the record, it also appears that the authority had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15 th January, 1998, the money transferred to this funds is to be utilized for the purpose of project as specified by the committed having constituted by the State Government under the said notification and the same could not be treated to be belonging to the authority or the receipt of taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility. The findings and observations in the aforesaid judgment are squarely applicable in the case in hand also. Decided in favour of assessee. Treating the income/loss earmarked relating to infrastructure fund as taxable - By respectfully following the orders of the Hon ble High Court own case [ 2022 (8) TMI 1400 - ALLAHABAD HIGH COURT] the Tribunal in Assessee s own case [ 2021 (9) TMI 698 - ITAT DELHI] we remand the matter to the file of the AO to decide the issue afresh keeping the ratio laid down in Saharanpur Development Authorities [ 2021 (3) TMI 1223 - ITAT DELHI] and Khurja Development Authoritie [ 2019 (4) TMI 361 - ITAT DELHI] with a view that source of funds transferred to Infrastructure Development Fund, control over the same and obligation of its utilization is required to be examined to ascertain the real nature of Infrastructure Development Fund. Accordingly, direct the Assessing Officer to adjudicate the issue afresh.
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2024 (2) TMI 921
Expenditure by way of payments made to clubs - HELD THAT:- As decided in assessee's own case for AY 2005-06 [ 2020 (3) TMI 799 - ITAT MUMBAI] as noted that in assessee s own case for Assessment Year 1996-97, 1997-98 1998-99, the co-ordinate bench of Tribunal in allowed similar claim in favour of assessee as held that the payment made to clubs are revenue in nature and are allowable as such. Decided in favour of assessee. Addition u/s 14A - expenditure incurred on earning exempt income - HELD THAT:- As relying on the decision of Hon ble jurisdictional High Court in the case of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank Ltd [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] wherein it has been held that where the Appellant's own funds are in excess of investments then it should be presumed that the investments are made from the Own Funds and not from Borrowings, consequently disallowance u/s. 14A of the Act cannot be made - there is no need to discuss alternative arguments raised by the assessee. As far as disallowance of 0.5% on average investment is concerned, it is found there is no specific finding or working has been done by the AO and Ld. DRP, hence same need not be sustained here also. In view of the above, ground no. 2 raised by the assessee is allowed and AO is directed to delete the same. TP Adjustment - transaction of providing Letter of Comfort would fall within the ambit of the term 'international transaction' u/s. 92B or not? - HELD THAT:- As decided in assessee own case [ 2020 (3) TMI 799 - ITAT MUMBAI] held that Letter of Comfort merely indicates the appellant's assurance that respondent would comply with the term of financial transaction without guaranteeing performance in the event of default. The co- ordinate bench of Tribunal in India Hotels Co. Ltd. ( 2019 (9) TMI 1340 - ITAT MUMBAI] on similar ground of appeal held that Letter of Comfort does not constitute international transaction. So far as contention of Id. DR for the revenue that after amendment in Explanation to section 92B is concerned, we have noted that co- ordinate bench in SIRO Clinpharm P. Ltd. ( 2016 (5) TMI 633 - ITAT MUMBAI ) held that amendment in Explanation to section 92B by Finance Act, effective from 01.04.2012 is to be treated as effective at the best from A.Y. 2013-14. TP adjustments - interest on delayed realisation of sales proceeds from its AEs - applicability of interest rate on amounts due from AEs is to be calculated based on PLR rate declared by RBI (being Central Bank of India where assessee is based) or LIBOR rate (as AE is based outside India) - HELD THAT:- It s a legal issue and precisely the same issue has been dealt in by the Hon ble Delhi High Court in the case of CIT-I vs. Cotton Naturals (I) (P) Ltd [ 2015 (3) TMI 1031 - DELHI HIGH COURT] as held Chapter 10 of UN Transfer Pricing rightly stipulates that inter-company loans would require examination of the loan agreement, comparison of the terms and conditions of loan agreements, the determination of credit rating of the lender and the borrower, identification of comparable third party loan agreements and suitable adjustments should be made. In addition to the aforesaid factors, the comparability analysis should also take into account the business relationship and the functions performed by the subsidiary AE for the parent company. Normally there would be a difference between the lending rate and borrowing rate in each country. Some authors and writers suggest that the average or mid-point between the two should be taken. However, others like Klaus Vogel have suggested that economic purpose and substance of the debt-claim or debt for which granting of credit calls for the lending rate would be determinative. Thus, in case of a capital investment, the borrowing rate will apply, whereas in case of credit allowed to a customer on sale of goods, the lending rate would apply. We do not deem it necessary to enter into this controversy and express our view as regards the same. Decided in favour of assesee. Disallowing expenditure by way of Additional Sales Tax paid - HELD THAT:- As gone through the application for admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. Assessee submitted appeal orders and challan in relation to additional sales tax liability (not submitted earlier before the authorities below). We find the same is in order and complying with Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. In view of above, this matter is restored to the file of the jurisdictional AO for verification and to examine the nature of payment made i.e. payment is not in the nature of penalty and the same is allowable as per law. In the result, this ground of assessee is allowed for statistical purposes. Disallowing expenditure by way of professional charges paid - HELD THAT:- It is found that assessee is substantially failed to adduce any evidence of services rendered in the category of professional fee. We have gone through the contents of agreement reproduced nowhere it looks like an agreement for rendering professional services. Assessee s argument that for earlier 2 years, the same expense was allowed and they are relying on the decision of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] is not applicable here based on the facts of the case. Principle of consistency should have been followed as far as possible and permitted by the facts of the case, but as the concept of res-judicata is also there, to be considered before any adjudication. Hence, in the present situation we also asked the AR of the assessee to substantiate the claim by placing on record any cogent evidence which confirms delivery of service by M/s. VCCPL. But at this stage also, assessee is substantially failed to substantiate its claim. MAT addition on disallowance u/s 14A - held that:- As no addition under clause (f) of Explanation 1 to section 115JB (2) of the Act is warranted and as hold that the appellant has not incurred any expenditure towards earning exempt income addition otherwise also cannot be made. In view of this AO is directed to delete the addition made u/s. 115JB of the Act. Charging an amount as Amount already refunded - HELD THAT:- As in the computation sheet attached to the Assessment Order, the AO has mentioned that amount has been refunded to the appellant. The appellant has not received any refund for the Assessment Year under reference. A copy of Indemnity Bond filed with the Ld. AO is enclosed herewith. In view of the above, the appellant requests to give necessary direction to grant relief after verification. Additional Income Tax and Interest Payable on Distributed Profits - HELD THAT:- The appellant during the year under reference distributed dividend of Rs. 4,00,00,000/- and has paid dividend distribution tax of Rs. 67,98,000/- on the same on 19th September 2007. The said details are duly reflected in the Income Tax Return filed by the appellant and Tax Audit Report for the year under reference. Relevant extract of Income Tax Return and Tax Audit Report are enclosed herewith, the appellant requests to give necessary direction to grant relief after verification. Recovering interest u/s. 244A though the same was not received by the appellant - HELD THAT:- As mentioned above in Ground No 9, the appellant has not received any refund for the year under reference and accordingly have not received interest u/s. 244A of the Act. In view of the same the appellant requests to give necessary direction to grant relief after verification.
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2024 (2) TMI 920
Capital Grants and Subsidies and Consumers Contribution - addition of 15% Capital Grants as against 10% offered by the assessee - HELD THAT:- This issue was considered by the Co-ordinate Bench of this Tribunal in assessee s own case [ 2023 (2) TMI 1267 - ITAT AHMEDABAD] as held as per provisions of section 43(1) of the Act, the capital grant should be reduced from the cost/WDV of the relevant asset, and thereafter the depreciation is to be calculated. Thus, the capital grant receipt in respect of asset, on which depreciation is allowable at the rate different from 15% should be worked out as per the applicable rate. The DR could not point out any mistake in the above submission of the assessee, which we find is in accordance with law. We, therefore, set aside the orders of the lower authorities on this issue, and restore the matter back to the file of the AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset, and applying the actual rate of depreciation which relate to these assets. Thus, this ground of appeal of the assessee is allowed for statistical purpose. MAT - addition on account of capital grants and Consumer Contribution while calculating book profit u/s. 115JB - HELD THAT:- We find it fit and proper to remit the issue to the file of the Ld. AO to adjudicating the issue taking into consideration the Capital Grant and subsidies and consumers contribution made by the assessee and pass orders in accordance with law upon granting a reasonable opportunity of being heard to the assessee. Additional depreciation - Disallowance of claim on the ground that the assessee failed to submit the details and establish the genuineness of the expenditure - CIT(A) held that the assessee has not produced the details of additional depreciation before the AO - HELD THAT:- As seen from the submissions made by the assessee detailed submissions on additional depreciation with Annexures were submitted by the assessee. But the lower authorities failed to consider the amended provisions of law and denied the claim of additional depreciation to the assessee. Therefore, in the interest of Principle of Natural Justice, we hereby set aside this issue to the file of Jurisdictional Assessing Officer to verify the claim of additional depreciation. Correct head of income - treatment to interest income received on the loans and advances to staff loans as income from other sources instead of business income - HELD THAT:- As perused the relevant material and the judgment of the Odisha High Court in the case of Odisha Power Generation Corporation Ltd. [ 2022 (3) TMI 539 - ORISSA HIGH COURT] In view of the same, we find it proper to direct the A.O. to consider the issue afresh upon examining the same in regard to the heads of income after considering the facts of the case. Miscellaneous receipts - income from other sources or business income - HELD THAT:- Hon ble Madras High Court in the case of CIT vs. New India Maritime Agencies (P.) Ltd [ 2001 (6) TMI 27 - MADRAS HIGH COURT] wherein it was held that the company had given the houses owned by it, to its Directors for their residences, it is doing so only in the course of his business. The principle is that if the owner of a property carries on business with a property owned by him, the income from that property must be assessed as only income from business . Since the Tribunal found that the house property had been used by the assessee as a part of the business and treated as business, the finding of the Tribunal that the income from the property could not be assessed separately as income from house property and included in the assessee s business income, was correct. Hon ble Delhi High Court in the case of Triveni Engg. Industries Ltd., [ 2010 (9) TMI 26 - DELHI HIGH COURT] wherein the loss on account of non-recovery of loan given to employees was treated as loss incidental to business activity, then the interest on such loan falls within the purview of business activity only and not income from other sources - we find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. Receipt on sale of Scrapes - income from other sources or business income - HELD THAT:- Considering the asset value of the assessee company and the nature of transmission business the claim of Scrap sales is very negligible only. However the lower authorities has not given specific reasons to assess the sale of scrapes as income from other sources . We find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. Disallowance of interest expenditure as attributable to capital work in progress and was liable to be capitalized - CIT(A) deleted the addition - HELD THAT:- We do not find any infirmity in the order passed by the Ld. CIT[A], it is further seen that the addition made by the Ld. AO was only on notional basis of 12% without bringing any evidence on record to show whether the entire Capital Work In Progress was financed by borrowings alone. Whereas the assessee has given the detailed workings of CWIP and also breakup of the amount capitalized during the year. Further in the earlier assessment years the workings given by the assessee were accepted and no additions made by the Ld. AO. CIT DR could not place on record any justifiable reason to sustain the addition, thus the ground raised by the Revenue is devoid of merits and liable to be dismissed.
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2024 (2) TMI 919
Bank liability to deduct TDS in respect of the LTC/LFC bills - assessee in default u/s 201(1)(1A) for non-deduction of tax under Section 192 - HELD THAT:- We have perused the order of the Hon'ble Madras High Court [ 2015 (2) TMI 1378 - MADRAS HIGH COURT ] and observed that a writ petition was filed challenging the circular issued by the SBI to the effect that officers/employees would not be entitled to visit Overseas Countries/Centers as part of LTC /HTC. In the interim order passed by the Hon'ble Madras High Court, it has been held that any amount paid to the petitioner towards LTC/reimbursement of LTC pursuant to the impugned order would not amount to income so as to enable the bank to deduct tax at source. We further observed that the Hon'ble Madras High Court in its interim order held that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the bank. However, recently, the Hon'ble Supreme Court in the case of the assessee STATE BANK OF INDIA VERSUS ASSISTANT COMMISSIONER OF INCOME TAX [ 2022 (11) TMI 426 - SUPREME COURT] affirmed the order of the Hon'ble Delhi High Court in holding that the assessee is liable to deduct tax at source on the payments made to its employees towards LTC bills. In view of the decision of the Hon'ble Supreme Court, the interim stay granted by the Hon'ble Madras High Court is of no help to the assessee bank. Thus we hold that the assessee is in default within the meaning of section 201(1)(1A) of the Act for non-deduction of tax under Section 192 of the Act on the reimbursement of LTC (Leave Travel Concession) /LFC (Leave Fare Concession) and HTC (Home Travel Concession).
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2024 (2) TMI 918
Exemption u/s 11 - assessment of trust - AO denied the exemption by observing that the assessee is not performing any charitable activity within the meaning of sec. 2(15) - AO considered the contribution received from MYMUL as income of the assessee from other sources by denying exemption u/s 11 - DR submitted that the assessee in the present case is formed for the benefit of its members which will not fall u/s 2(15) and not carried out any activities which are in the charitable nature for the benefit of public at large - HELD THAT:- In this case, the assessee has been granted approval u/s 12AA of the Act and 80G of the Act by CIT(A), Mysore noted that at the time of granting approval u/s 12AA competent authority was of aware of fact that the assessee has catering the needs of particular class of public and accordingly, approval authority found that objects of the trust constitutes charitable purpose within the meaning of 2(15) of the Act. The objects listed in the above trust deed have been continuously and consistently carried on by the assessee from year to year and there was no dispute on these facts by the AO. To serve a charitable purpose, it is not necessary that the objects should benefit the whole of mankind or all persons in a country or a state. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of community sought to be benefited must be sufficiently definite and identifiable by some common quality of a public or impersonal nature. CIT(A)/NFAC is taken a correct view in granting the exemption under sec. 11 of the Act to the assessee and same is confirmed. This ground of the appeals of the Revenue is dismissed. Corpus donation receipts - HELD THAT:- In this present case, the CIT(A) granted the exemption without verifying the records and also not called for remand report from the AO. In our opinion, it is appropriate to remit the issue to the file of AO to examine the issue afresh in the light of the judgment of jurisdictional High Court in the case of Sri Ramakrishna Seva Ashram [ 2011 (10) TMI 369 - KARNATAKA HIGH COURT] and decide it accordingly wherein as held it is not necessary that a voluntary contribution should be made with a specific direction to treat it as corpus. If the intention of the donor is to give that money to a trust to keep in trust the account in deposit and utilize the income there from for carrying on a particular activity, it satisfies the definition part of the corpus. The assessee would be entitled to the benefit of exemptions from payment of tax. to view of the language employed in clause (d) of sub-section (1) of section 11, the requirement is that the voluntary contributions have to be made with a specific direction. Amount incurred for giving mementoes to President and Secretaries of Milk Producers Association as an expenditure fall under the purview of section 13(1)(c) r.w.s 13(2) and 13(3) - claim of the assessee is that it has not been claimed as application of fund, the said amount cannot be taxed in the hands of the assessee - HELD THAT:- In our opinion, whether it was spent out of tide up grants or from assessee s corpus fund, it has not been used for charitable purpose and the benefit has been gone to the President and Secretaries of other Milk Producers Association. In our opinion, this is covered u/s 13(1) of the Act, as such, provision of sec. 11 or 12 cannot be applied. Since there was a contravention, this amount spent on mementoes given to President and Secretaries of Milk Producers Association to be taxed in the hands of assessee and the same was brought to tax by the NFAC, Delhi and we do not find any infirmity in the order of the NFAC, New Delhi and the same is confirmed and this ground of assessee in both the appeals is dismissed.
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2024 (2) TMI 917
Taxability of income in India - Income attributable to India - income of advertisement and subscription revenue - Permanent Establishment (PE) in India at arm s length or not? - whether assessee has business connection in India as per section 9(1)(i) r.w.s 5(2) of the IT Act? - AO estimated 15% of the net advertisement revenue as Business Income of the assessee u/s. 9(1)(i) as attributable to India and held subscription income as royalty u/s 9(1) (vi) of the Act and has taxed the same @20% - case of assessee is that since assessee has remunerated Indian agents i.e. ZTL and El-Zee at arm s length, no further income is attributable to the assessee from operations carried out in India. HELD THAT:- The assessee accepted the position that it has business connection in India. No meaningful arguments against the findings of CIT(A) on this issue were advanced by the ld. Counsel in the instant appeal. In this factual matrix, we have no hesitation in upholding that the assessee has Business Connection in India. Taxability of revenue from operations in India - Explanation 1(a) to section 9(1)(i) of the Act contemplates that a where a non resident has business connection in India and his business operations are carried out partly abroad and partly in India, in such a situation revenue only from operations in India shall be taken into account and a reasonable portion thereof shall be treated as income accruing or arising in India. As relying on Set Satellite (Singapore) PTE Ltd. [ 2008 (8) TMI 96 - BOMBAY HIGH COURT] where the overseas entity has remunerated PE in India at arm s length nothing further is liable to be taxed in the hands of non-resident entity. It is not the case of Revenue that the assessee has not compensated it s India agents viz. ZTL and El Zee at arm s length. The ld. Counsel for the assessee made a categoric statement that remuneration paid to ZTL and El-Zee is commensurate to industry rates. This fact has not been rebutted by the Department. Therefore, the rate at which the assessee has remunerated ZTL and El-Zee are considered at arm s length. Thus, we find merit in ground No.2 of appeal by the assessee. The Assessing Officer is directed to delete addition confirmed by the CIT(A) on account of assessee s income from operations in India.
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2024 (2) TMI 916
Addition u/s 68 - bogus LTCG on shares - onus to prove - share application money and premium received from two share applicants unexplained - statutory obligation to substantiate the nature and source - Whether Appellant discharged the burden of proving identification, credit-worthiness and genuineness of transaction? HELD THAT:- As per the mandate of Section 68 of the Act, i.e., post- amended vide the Finance Act, 2012 w.e.f. 01.04.2013, where the sum credited in the books of the assessee company consists of share application money, share capital, share premium, or any such amount by whatever name called, an additional onus is cast upon the assessee company, as per which the person being a resident in whose name such credit is recorded in the books of the assessee company is required to offer to the satisfaction of the A.O an explanation about the nature and source of such sum so credited. When the aforesaid sum is found to be credited in the books of the assessee company, which had been disclosed by the latter as an amount received by it as share application money from the aforementioned share subscriber companies, then, the assessee company remains under a statutory obligation to substantiate the nature and source of the said sum credited as per the mandate of Section 68 of the Act, failing which, the same is to be treated as unexplained cash credit in its hand. There is no material available on record that would conclusively prove to the hilt that the assessee company had merely acted as a facilitator for routing the unaccounted money to the latters coffer; therefore, the said claim of the assessee cannot be accepted. We are of the considered view that as the aforesaid contention of the Ld. AR that it had merely acted as a facilitator for routing the funds from the share subscriber companies, is devoid and bereft of any merits, thus, the same does not merit acceptance. We, thus, in terms of our aforesaid observations, find no infirmity in the view taken by the CIT(Appeals), who had rightly concluded that the amount received by the assessee company in the garb of share application money was rightly held by the A.O as unexplained cash credit u/s. 68 - Decided against assessee.
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Customs
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2024 (2) TMI 915
Smuggling - Betel nuts (foreign Origin goods) - goods notified under Section 123 of the Customs Act or not - burden to prove - reliability on statements which were subsequently retracted - it was held by High Court that Based on presumptions and assumptions, it cannot be held that the goods were smuggled goods and in the absence of any evidence produced by the revenue to discharge the burden cast upon them, the Tribunal noting the facts of the case had rightly granted the relief in favour of the respondents - HELD THAT:- In view of the concurrent finding of fact, no case for interference with the impugned order is made out. SLP dismissed.
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Insolvency & Bankruptcy
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2024 (2) TMI 914
Scope and ambit of Section 29A (c) of IBC - Disqualification to submit the Resolution Plan under Section 29A (c) of the IBC - Decision of Resolution Professional ( RP ) and Committee of Creditors ( CoC ) to declare the Appellant as disqualified under Section 29A rejected - eligibility to file a Resolution Plan under Section 29A(c) of the IBC - transfer of 100% of shareholding by the Appellant in its subsidiary. Whether Section 29A, sub-section (c) disqualify only those persons who were in management and control of the Corporate Debtor at the time when Corporate Debtor s account was declared NPA or the persons/ entity, which is in control of the management of the Corporate Debtor at the time of submission of Resolution Plan can also be held ineligible under Section 29A, sub-section (c)? - HELD THAT:- The RIPL being 100% subsidiary of the Appellant, it cannot be held that the Appellant was exercising any management or control over the Corporate Debtor through its subsidiary RIPL. By amendment made in Section 29A by Act 26 of 2018 in Section 29A, sub-section (c), the words at the time of submission of resolution plan has an account , declared that ineligibility has to be seen under Section 29A at the time of submission of Resolution Plan. In the present case, date of submission of Resolution Plan by the Appellant is 04.06.2018. The learned Counsel for the Appellant placed reliance on the judgment of the Hon ble Supreme Court in Arcelormittal India Private Limited vs. Satish Kumar Gupta and Ors. [ 2018 (10) TMI 312 - SUPREME COURT ]. In Arcelormittal, the Hon ble Supreme Court had occasion to examine the validity of Section 29A of the IBC - The observations made by the Hon ble Supreme Court in Arcelormittal in paragraph 60, makes it clear that, those who were at a reasonably proximate point of time before the submission of Resolution Plan were in control of the affairs of the Corporate Debtor and they have arranged the affairs, as to avoid paying off the debts of the non-performing asset, such persons must also be held to be ineligible to submit a Resolution Plan. The persons in the management and control of the affairs of the Corporate Debtor, who led the Corporate Debtor to slip into NPA and persons, who are in the management and control of the affairs of the Corporate Debtor in the close proximate of time, before the submission of Resolution Plan, who failed to pay the debt of the Corporate Debtor, are also ineligible - it is satisfying that narrow interpretation of Section 29A (c) put by learned Counsel for the Appellant, cannot be accepted. Thus, the submission of the Appellant that since the Appellant was not in control and management of the Corporate Debtor admittedly on 31.05.2013, when the Corporate Debtor s account declared as NPA, he cannot be held to be ineligible under Section 29A, cannot be accepted. The relevant date for examining the ineligibility is the date of submission of Resolution Plan. Thus, Section 29A, sub-section (c) does, not only disqualify, those who were in management and control of the Corporate Debtor at the time when its account was declared NPA, but also disqualifies those, who were in management and control of the Corporate Debtor and in close proximity of time, before submission of Resolution Plan, who failed to clear the debts of the Corporate Debtor. Whether as per Second MoU dated 23/28.03.2016 entered between the Appellant, Corporate Debtor and Athena Group, the Appellant can be held to be in control and management of the Corporate Debtor with effect from the date of execution of the MoU? - Whether transfer of 100% of shareholding by the Appellant in its subsidiary RIPL on 22.09.2017 was a sham transaction? - Whether the Adjudicating Authority committed error in holding Appellant, disqualified, to submit the Resolution Plan under Section 29A (c) of the IBC? - HELD THAT:- MoU cannot be read to mean that management and control was to be given to the Appellant only after investment of 51% of equity shares by the Appellant. The investment and running of the Company, are two different aspects, which were captured by the MoU and management and control of the Corporate Debtor was given to the Appellant, which is clear from various clauses as noted above. Thus, as per second MoU, the Appellant has to be held to be in control of the management of the Corporate Debtor from the date of execution of the MoU, i.e., 23/28.03.2016 - It is to be noted that it is the Indian Bank, who filed the Application under Section 7, which led to CIRP of the Corporate Debtor. Thus, the Appellant had every opportunity and right to clear the debt of short-term loan, which led to insolvency and the Appellant, who was in management and control of the Corporate Debtor, cannot be heard in saying that it has no opportunity to clear the debt in the proximate time of commencement of CIRP. On the question as to whether the transaction entered on 22.09.2017, under which the Appellant came to have transferred the 100% shareholding to the RIPL, the Adjudicating Authority has considered the issue in detail and recorded that the said transfer was made after the filing of Section 7 Application by the Financial Creditor and was six days before the order was passed initiating the CIRP. The transaction was carried on in cash consideration of Rs.1 lakh, which is despite the fact that the Appellant had given loan of Rs.328 Crores to RIPL. The shareholding was transferred to only two persons, i.e., Mr. K. Vijaybhaskar and C. Vijay Kumar, who were all Directors and Officials of NEC and C. Vijay Kumar was also related. The Adjudicating Authority after considering all materials including the Balance Sheets/ Financial Statements etc. of RIPL has come to the finding that transaction dated 22.09.2017 was a sham transaction - the view of the Adjudicating Authority is agreed upon that transaction of shares to RIPL on 22.09.2017 was a sham transaction with the object to claim that Appellant has nothing to do with RIPL. The Appellant was very much in control of the Corporate Debtor as per the MoU dated 23/28.03.2016. The Adjudicating Authority did not commit any error in holding the Appellant disqualified under Section 29A, sub-section (c) of the IBC. The order of the Adjudicating Authority rejecting the Application of the Appellant has been passed after considering all relevant materials and submissions of the parties - there are no error in the order passed by the Adjudicating Authority warranting interference - appeal dismissed.
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2024 (2) TMI 913
Rejection of approval Plan - CIRP - One of the reasons given by the Adjudicating Authority for rejection is that the claim of Income Tax Department of dues to be paid has not been proposed - HELD THAT:- In the facts of the present case, the Resolution Professional may convene a meeting of the CoC for consideration of the proposal as contained in paragraphs 5 and 6 of the Affidavit of SRA as extracted above, as an Addendum to the resolution plan which was approved by the CoC. The Resolution Professional may place the Addendum for approval and make a fresh application for approval of the plan along with the Addendum, if any, in accordance with the law. The order is set aside - appeal disposed off.
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PMLA
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2024 (2) TMI 912
Seeking grant of anticipatory bail - Money laundering - predicate offence - proceeds of crime - petitioner knowingly assisted Veerendra Kumar Ram who is accused in the first prosecution complaint for laundering of bribed money which was accumulated by him from the commission/bribe amount being a public servant - said money was getting routed by the petitioner who is Delhi based CA, to the bank accounts of family members of Veerendra Kumar Ram with the help of bank accounts of petitioner's employees/relatives - HELD THAT:- As per the para 5.2 of the prosecution complaint various records, documents, digital devices, cash, jewellery, vehicles were recovered and seized during course of search conducted on 21.02.2023. The case record depicts that it was the petitioner who assisted the prime accused, Veerendra Kumar Ram, in the commission of the offence of money laundering with the help of his employees by depositing the crime proceeds in different bank accounts opened by fake names or companies, and later on the transfer of money to the prime accused in the bank accounts of his relatives to remove the taint. The material collected by the Enforcement Directorate had also not been rebutted, which prima facie reflected the involvement of the petitioner in the alleged offence. It is evident that the petitioner happens to be a Chartered Accountant and he used to divert the money which has been obtained by way of illegal means. It is required to refer herein that the Hon'ble Apex Court in the case of Pavana Dibbur vs. The Directorate of Enforcement passed in Criminal Appeal No. 2779 of 2023 [ 2023 (12) TMI 49 - SUPREME COURT] has considered the effect of the appellant not being shown as an accused in the predicate offence by taking into consideration the Section 3 of the Act, 2002 - The Hon'ble Apex Court by interpreting the provision of Section 3 of the Act, 2002 has come out with the finding that on a plain reading of Section 3, unless proceeds of crime exist, there cannot be any money laundering offence. Based upon the definition Clause (u) of sub-section (1) of Section 2 of the Act 2002 which defines proceeds of crime , the Hon'ble Apex Court at paragraph-12 has been pleased to observe that clause (v) of sub-section (1) of Section 2 of PMLA defines property to mean any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible. This Court, in view of the judgment rendered by the Hon'ble Apex Court in Vijay Madanlal Choudhary and Ors. Vs. Union of India and Ors.[ 2022 (7) TMI 1316 - SUPREME COURT ] and Pavana Dibbur vs. The Directorate of Enforcement wherein it is evident from paragraph-16 therefrom that if the prosecution for the scheduled offence ends in the acquittal of all the accused or discharge of all the accused or the proceedings of the scheduled offence are quashed in its entirety, the scheduled offence will not exist, and therefore, no one can be prosecuted for the offence punishable under Section 3 of the PMLA as there will not be any proceeds of crime. It is further evident from the discussion so made in both the judgments as would appear from paragraph-27 of the judgment rendered in Pavana Dibbur vs. The Directorate of Enforcement that the issue of whether the appellant has used tainted money forming part of the proceeds of crime for acquiring the second property can be decided only at the time of trial. The offence becomes schedule offence by virtue of clause-3 of Part-C of the Schedule if the offence has crossed border implication as per the offence included in Part-A and B of the Schedule while the offences referred in Part-C of the Schedule will be said to be punishable under Section 3 of the Act, 2002 if the offences has crossed border implication. It needs to refer herein, the judgment rendered by the Hon'ble Apex Court in Pavana Dibbur vs. The Directorate of Enforcement is with respect to quashing of the proceeding filed by the concerned accused person invoking the inherent jurisdiction of the High Court under Section 482 of Cr.P.C. The aforesaid judgment therefore, has examined the availability of the ingredient of offence said to be committed under the Act, 2002 wherein the aforesaid judgment has been pleased taking note of the penal provision of the Act, 2002 as contained under Section 3 of the Act, 2002 and the offences enumerated under the Schedule thereof. Applying the principle to consider the application for pre-arrest bail is required to be considered by passing an order for grant of pre-arrest bail if prima facie case is not made out. Here, in the instant case, prima-facie it appears that the present petitioner is involved in concealment and diversification of the property/money of Veerendra Kumar Ram as would appear from the ECIR which is having cross-border implication since the money was concealed and diversified in Delhi which has been procured by Veerendra Kumar Ram while working as Engineer in Jamshedpur in the State of Jharkhand - This Court, in view of the aforesaid material available against the petitioner, is of the view, that in such a grave nature of offence, which is available on the face of the material, applying the principle of grant of anticipatory bail wherein the principle of having prima facie case is to be followed, the nature of allegation since is grave and as such, it is not a fit case of grant of anticipatory bail. The applicant failed to make out a special case for exercise of power to grant bail and considering the facts and parameters, necessary to be considered for adjudication of anticipatory bail, without commenting on the merits of the case, this Court does not find any exceptional ground to exercise its discretionary jurisdiction under Section 438 of the Code of Criminal Procedure to grant anticipatory bail. Therefore, this Court is of the view that the anticipatory bail applications are liable to be rejected. This Court is of the view that the instant application is fit to be dismissed and as such, stands dismissed.
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Service Tax
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2024 (2) TMI 911
Non-payment of service tax - non-payment of tax on the ground that those services are related to software services which became taxable only with effect from 16.05.2008 where as the period in the present case involved is from March, 2006 to March, 2008 - time limitation - Suppression of facts or not - HELD THAT:- It is found that prima facie force in the claim of the appellant that the services are not classifiable under management consultant service whereas the same is prima facie classifiable as software services in view of the judgment in the case of IBM INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE [ 2009 (4) TMI 314 - CESTAT, BANGALORE] and the services of software came under the tax net w.e.f. 16.05.2008. However, without going into the merit of the case, the appellant have made out a strong case on limitation. In the present case against the same contract the appellant have been paying service tax in respect of some of the activity of service received from the board, whereas in respect other activities, they have not paid the service tax under a bona fide belief that those are related to software services. On the entire services they have been paying service tax while providing services to M/s Reliance Industries Ltd. It is also fact that whatever service tax was paid on the part of the activity i.e. project management and validation service, the appellant have availed the Cenvat credit and they are discharging the service tax in respect of overall services which includes all the activity of service received form abroad, while forwarding to M/s Reliance Industries Ltd. - the entire exercise is revenue neutral. In this position, no mala fide can be attributed to the appellant as there is no intent to evade payment of tax due to revenue neutrality of the case. It is settled law that when there is a revenue neutrality in any demand no suppression of the fact can be attributed to the assessee. The present case is on much batter footing as the appellant has paid service tax on the part of the activity of the service received from abroad. Therefore, there was no suppression of fact on the part of the appellant. Moreover, the present case is clearly of revenue neutral. In the present case, the demand was raised for the period from March, 2006 to March, 2008 whereas the show cause notice was issued on 20.06.2011 i.e. much after the normal period. Accordingly, the entire demand falls under the extended period. The demand is not sustainable on the ground of limitation itself. Hence, impugned order is set aside and appeal is allowed.
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2024 (2) TMI 910
Taxable service or not - providing commission on profit to one of the directors - existence of employer/employee relationship or not - adjudicating authority has not considered the submissions made by appellant at the time of adjudication - non-speaking order - violation of principles of natural justice - HELD THAT:- The matter is no longer res-Integra as this Tribunal in the case of M/S BENGAL BEVERAGES PVT. LTD. VERSUS CGST EXCISE, HOWRAH [ 2020 (11) TMI 622 - CESTAT KOLKATA ] has held when the very provisions of the Companies Act make whole-time director (as also in capacity of key managerial personnel) responsible for any default/offences, it leads to the conclusion that those directors are employees of the assessee company. Since, the facts and circumstance of the present case are akin to, the above mentioned decision of this Tribunal and therefore same is squarely applicable in the present case also. The impugned order-in-original is without any merit and is set aside - appeal allowed.
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2024 (2) TMI 909
Valuation - Composite services - GTA Services on reverse charge basis - non-inclusion of various expenses in the taxable value - non-payment of service tax in respect of the amounts shown under the category of Legal and Professional Charges - levy of penalties. GTA Services - HELD THAT:- It appears that the authorities below have totally misunderstood the scheme of taxation on GTA under RCM scheme. Admittedly appellant is paying the service tax on the value of GTA Service as per consignment note/ bilty/ invoices of the GTA service provider on RCM basis. They are receiving certain other services from different service provider which they have put under the category of Loading and Unloading Charges, Pole shifting and stacking services. When the services are received from two different sources how can the same been clubbed under the category of GTA services as composite service. The entire case of the revenue is based creating a composite service of GTA by including these charges while determining the taxable value. Appellant is not providing GTA service to their customers PVVNL, but are manufacturing and selling the PCC Poles to their customers, which they deliver to their customer at the location specified by the customer. It is not even the case of the revenue that the GTA was providing the services categorized under category of loading and unloading charges and pole shifting and stacking charges . It is also not the case of revenue that the charges in respect of these service received by the appellant were paid to GTA. Not even a single invoice to this effect has been produced or relied upon by the revenue in entire proceedings - there are no merits in this demand. Professional and Legal Services - HELD THAT:- There are no merits in respect of the demand made by the revenue on the expenditure incurred by the appellant which they have categorized under the category of Professional and Legal charges , which in fact are not paid to advocate or the firms of advocate. Along with the appeal appellant have furnished the vouchers of payment, ledger accounts in respect of these expenses, which substantiate their claim that these expenditures were made for the purchase of stamp papers, for TDS return filing, cost of court expenses/ fees etc. The ledgers of these expenditure were also produced before the lower authorities, and Commissioner (Appeal) has in the impugned order referred to some of the entries made in these ledgers - this demand also cannot be upheld. There are no merits in these two demands and the impugned order upheld to the extent of tax deposited by the appellant along with interest during the course of investigation (Rs 3181/- + Rs 573/-). This amount had been deposited by the appellant even prior to issuance of the SCN. As the amount is meager and has been deposited even prior to issuance of SCN, the penalty under Section 78 which has been imposed against this amount, cannot be upheld. All other penalties which have been imposed in terms of Section 77 (1) (a), 77 (2) and 78 also cannot be upheld as the demand itself has no merits. Appeal allowed.
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2024 (2) TMI 908
Dismissal of appeal - failure to deposit the statutory pre-deposit amount contemplated under section 35F of the Central Excise Act, 1994 - HELD THAT:- It transpires from the records that as the appellant had not made the statutory pre-deposit contemplated under section 35F of the Central Excise Act, the Commissioner (Appeals) dismissed the appeal. However, what needs to be noted is that the appellant had stated before the Commissioner (Appeals) that the main contractor i.e. M.P. Housing Board had deposited the required service tax amount and, therefore, the appellant, as a sub-contractor, would not be required to deposit service tax. There was some confusion at the relevant point of time in 2016 as there were contrary decisions of the Tribunal, and ultimately a Larger Bench of Tribunal in COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI-LB] held that a sub-contractor would have to pay the service tax, even if the main contractor had paid the service tax. In such peculiar circumstances, when there was some confusion at the relevant point of time, we consider it appropriate to remand the matter to the Commissioner (Appeals) to hear the appeal on merits since the appeal was dismissed solely for the reason that the statutory requirement of pre-deposit had not been deposited. The appeal may be heard on merits as the appellant has deposited 10% of the duty confirmed while filing this appeal and so it would not be necessary for the appellant to deposit the statutory amount required to be deposited before the Commissioner (Appeals). The matter is remitted to the Commissioner (Appeals) to decide the appeal on merits. The appeal is allowed by way of remand.
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2024 (2) TMI 907
Classification of services - Franchise Service or Business Auxiliary Service? - Race Promotion Contract dated 13.09.2011 executed between JSIL and FOWC - correctness in issuing SCN dated 09.07.201 in respect of tax liability under the Service Agreement dated 13.09.2011, when the entire service tax liability along with interest on this issue was deposited on 06.06.2012 - Invocation of extended period of limitation - penalties. Whether the Race Promotion Contract dated 13.09.2011 executed between JSIL and FOWC is covered by the expression franchise as defined under Section 2(47) of the Finance Act, 1994 and therefore a taxable service under Section 65(105)(zze) of the said Act? - HELD THAT:- This Tribunal in Global Transgeme Limited v. Commr. of Central Excise [ 2013 (8) TMI 748 - CESTAT MUMBAI] has held that the foremost requisite for a service to qualify as a taxable franchise service is that the franchisee should have been granted a representation right and that in a franchise transaction, the franchisee loses its individual identity and represents the identity of franchisor to the outside world. In Tata Consultancy Services Ltd. v. Commissioner of Central Excise [ 2019 (6) TMI 109 - CESTAT MUMBAI] , this Tribunal held that the grant of a representational right would imply that the person to whom such a right has been granted undertakes the entire activity as if it had been undertaken by the person granting such rights. The franchise means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. The sine-qua-non for Franchise Service is therefore grant of representational right to sell or manufacture goods, or to provide service or to undertake any process identified with the franchisor. It is not possible to hold that the Race Promotion Contract is a Franchise Agreement, under which FOWC provided franchise service to JSIL and consequently the demand of service tax of Rs.20,36,32,619/- is clearly not sustainable. Whether the show cause notice dated 09.07.2014 was rightly issued in respect of tax liability under the Service Agreement dated 13.09.2011, when the entire service tax liability along with interest on this issue was deposited on 06.06.2012? - HELD THAT:- The demand of Rs.1,12,23,633/- pertains to payment of US $ 20,00,00 to FOM arising out of Service Agreement dated 13.09.2011, for which invoice was issued by FOM on 17.04.2012, payment was made by JSIL on 16.05.2012 and service tax of Rs.1,34,68,358/- (inclusive of interest) was deposited on 06.06.2012, which fact is also recorded in the impugned. Apparently when the entire amount of service tax along with interest was deposited, we find no reason for issuance of show cause notice on this count in view of specific provisions contained in sub-section (3) of Section 73. However, since the ld. counsel for the appellant has fairly not pressed the demand on merits, no further findings in this regard are necessary. Whether extended period of limitation was rightly invoked in the facts and circumstances of the present case? - HELD THAT:- The fact that the entire facts were known to the revenue even before filing of return wherein no tax liability was admitted and in absence of any other positive act on the part of JSIL to deliberately suppress correct information with the intent to evade payment of tax. In these facts, the invocation of extended period of limitation cannot be sustained in view of dicta laid down in Padmini Products Limited [ 1989 (8) TMI 80 - SUPREME COURT] and Pushpam Pharmaceuticals Company v. CCE [ 1995 (3) TMI 100 - SUPREME COURT] . Whether penalties imposed under Sections 77 and 78 are justified in the facts and circumstances of this case? - HELD THAT:- Once the demand of Rs.20,36,32,619/- is not found sustainable on merits, the question of imposition of penalty under Section 78 does not arise. The penalty of Rs.1,12,23,633/- is also not sustainable in view of Explanation 2 to Section 73(3), which provides that no penalty is to be imposed when short paid service tax is deposited along with interest prior to the issuance of show cause notice. The demand being not sustainable on merits, the imposition of penalty under Section 77 and demand of interest is also not sustainable. Thus, the demand of service tax to the extent of Rs.20,36,32,619/-, penalty imposed under Sections 78 and 77 and demand of interest cannot be sustained and the same are accordingly set-aside - appeal allowed.
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Central Excise
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2024 (2) TMI 906
Recovery of excise duty, which got extinguished on approval of resolution plan - HELD THAT:- The NCLT, Chennai has approved Resolution Plan vide its order No.25/27-June 2019. The Hon'ble Supreme Court in the case of GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT ] has held that all dues including the statutory dues owed to the Central Government any State Government or any local authority including tax authorities, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 of IBC can be continued. It is also stated that the Department has not made any claim before the Corporate Insolvency Resolution Process in respect of the demands arising out of the orders impugned in these three appeals. Since the Resolution Plan has been approved, as per para 8 of the Resolution Plan, all claims shall stand irrevocably and unconditionally settled, discharged and extinguished in perpetuity. Appeal dismissed.
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2024 (2) TMI 905
Clearance of goods in the nature of ceramic fiber board and ceramic fiber twisted rope - goods are used for insulating the furnaces /Kilns - benefit of N/N. 33/2005-CE dated 08.09.2005 denied - HELD THAT:- It is seen that the main reason for denying the benefit of Notification is that these goods do not have any direct role in power generation - the said view cannot be endorsed upon. The Ceramic Fiber Board and Ceramic Fiber Twisted Rope are required for making the insulation on the furnace and without such insulation the heat cannot be controlled and so also the safety around the furnace cannot be ensured. These form essential part of the boiler and therefore are eligible for the benefit of Notification. The Tribunal in the case of CHEMPLAST SANMAR LTD. VERSUS COMMISSIONER OF C. EX., TIRUCHIRAPALLI [ 2006 (8) TMI 51 - CESTAT, CHENNAI] had observed that these materials are eligible for credit as capital goods as these form part of the furnace and pipeline used in the factory. Again it is to be stated that as per the exemption Notification, all items which are used for setting up of the project for generation of power using non-conventional materials is eligible for the benefit of exemption. The demand cannot sustain. The impugned order is set aside - Appeal allowed.
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2024 (2) TMI 904
Refund/rebate claim under N/N. 41/2012-ST on the credit availed on debit notes - rejection only on the ground that credit has been availed on debit notes and that these are not valid documents for availing credit as per Rule 9 of CENVAT Credit Rules, 2004 - HELD THAT:- On perusal of Order in Original No. 84/2013 dated 4.10.2023, it is stated by the adjudicating authority that the refund claim was verified and service tax could be correlated with the export documents. So also it is seen that specified services were received by the appellant and all documents were and required certificates submitted along with the refund claim. In para 9, it is stated that the refund claim was verified thoroughly and it is arithmetically in order. The department has conducted proper verification as to whether service tax was paid and services were availed by the appellant. The proviso to Rule 9 states that in case of any doubt with regard to the particulars mentioned in the document on which credit has been availed, the AC/DC can conduct verification and on being satisfied can allow the credit. In the present case, there is no evidence to show that the appellant has not paid service tax or not availed the specified services. The reason for rejection of refund / rebate is that debit notes are not valid documents under Rule 9 of CCR, 2004. The above issue as to whether debit notes can be accepted as documents for availing credit is settled by various decisions. In the case of M/S. GATES UNITTA INDIA COMPANY PVT. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2021 (9) TMI 688 - CESTAT CHENNAI] , the Tribunal held that the credit cannot be denied on the ground that document on which credit is availed is a debit note. The rejection of refund claim is not justified. The appellant is eligible for refund. The impugned order is set aside - Appeal allowed.
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