Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 22, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Scope of SCN - State and its officers ought to have at least incorporate the specific details of the contents of the show cause notice which any prudent person can respond to as otherwise it would to fail to respond to such show cause notice which is bereft of details thereby making the mechanism of issuing show cause notice only a formality. - HC
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Refund of Reversal of Input Tax Credit (ITC) during investigation - allegation of coerced by the GST officers - bogus firms - Investigation into the matter is pending. Reply, and rejoinders are raising seriously disputed questions about how the ITC is reversed. It is not possible to render a finding in a writ jurisdiction that it was due to coercion. - HC
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Refund of IGST paid on export - no show cause notice has been given nor any opportunity given to represent the adjudication process - Earlier, protection was granted from inquiry proceedings by the HC - Refund allowed subject to enquiry / investigation proceedings. - HC
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Interest on delayed refund - Relevant date for Interest to be computed - From 60 days of the filing of the original application or from the date of fresh application - Refund granted as per the direction of HC - The Government cannot deprive the petitioner from entitlement of the interest. Therefore, this inaction is wholly unjustified and has deprived the petitioner where the petitioner could have earned interest during this period but because of the withholding, this could not be done. - HC
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Seeking grant of bail - evasion of GST - the personal liberty of accused persons cannot be deprived only on the ground that some other persons, who may be required for the investigation of the matter, are not traceable to the Department - Bail granted - DSC
Income Tax
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Revision u/s 263 - Exemption u/s 11 - Mere statement in the appeal filed by the Revenue before this Court that “no documentary evidence is submitted by the assessee in support of its claim” cannot be countenanced in view of categorical finding of fact by the AO as also the learned ITAT that the assessee-respondent did furnish statements, documents and details as sought for in compliance of notice issued for assessment u/s 143 of the IT Act before the Assessing Officer. - Revision not valid - HC
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Interest pertaining to non-performing assets - Reversal of income - it is not CBDT which has issued circulars or guidelines under Section 119 of the Act. On the other hand, circular has been issued by the RBI which is binding on all the banking companies in general. However, when it comes to assessment under the Act, the revenue authorities are bound by the provisions of the Act. Therefore, the claim of the assessee that interest paid on NPAs should be excluded from computation of income was rightly negatived - HC
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Non-grant of the refund as withheld with interest and additional interest u/s 244A - Respondent is not yet clear on the outstanding amount, however, it is volunteered that within three months, it shall be in a position to complete the same noticing the fact that the company has changed its name with all its past and future liabilities. - 3 months time granted, else compensation of Rs. 1 lacs to be paid - HC
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Penalty u/s. 271(1)(c) - non-disclosure of capital gains at the time of filing of return of income - it is a case where apparently a bonafide mistake was made by the assessee owing to lack of documents at the time of filing of return of income - No penalty - AT
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Addition u/s 68 - Bogus LTCG - It is a classic case of assessment framed on impressions and perceptions rather than on glaring facts. - The overwhelming factor of extra-ordinary period of holding of shares prior to sale transcends all other considerations and exonerates the Assessee from any kind of impropriety. - AT
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Penalty u/s 271AAA OR 271(1)(c) - issuance of a lawful notice u/s 274 - notice issued under wrong section - Reference in the second sentence is only to the making of the order u/s 271AAA. On the other hand, the notice part informing the assessee of the charge against him has only reference to section 271 and the ingredients of section 271(1)(c). - The penalty order is void - AT
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Disallowance claimed as bad debt/business loss - rejection of goods in inferior quality by the customers - simply because the customer of the assessee did not respond to notice u/s 133(6) of the Act the mail sent by the customer to the assessee rejecting the goods worth supplied for poor quality cannot be ignored and disbelieved only for the reason that the party did not respond to the notice issued by the AO. - AT
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Computation of LTCG - provisions of section 2(47)(v) applicability - assessee’s property is converted as stock-in-trade - the Revenue cannot assess the same as capital gains and this is to be assessed as business income - AT
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Income accrued or arose or deemed to accrues or arise in India - adjustment of notional interest - the word “paid” cannot be extended to “payable” in respect of interest under Article 11 of Indo-Cyprus treaty - AT
Customs
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Import of betel nuts - fixation of price - delegation of power - the authentication at the best can only be held as an executive exercise of a power by the President of India through the DGFT. Hence, the impugned notification published in the Gazette under Section 5 of the Foreign Trade Act cannot be held to be ultra vires as was contended by the Learned Counsel for the Writ Petitioners. - the principle of lex specialis derogat legi generali will not have any application to the case in hand. - HC
Service Tax
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Invocation of extended period of limitation - non-payment of service tax - take-away of food - take-away food items over the counter and not serving on the tables - when the department has accepted the decision of the Commissioner (Appeals) that no service tax is leviable on take-away food items, it is not open to the department to take a contrary stand in this appeal - AT
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Error in payment of service tax - service tax registration number of another unit used wrongly - merely because the service tax paid under different registration but by the same company, cannot be tent a mount to non- payment of service tax. Hence, the demand of service tax which was already paid cannot be made twice. - AT
Central Excise
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Violation of principles of natural justice - non-grant of opportunity of hearing - last hearing was virtual hearing granted only to main noticee with respect to only one show cause notice and noticee had sent the correction in record of personal hearing, which is not taken on record. - In this view, non-granting of effective hearing itself is in gross violation of natural justice. - Matter restored back - HC
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Waste and scrap - Regardless of the fact that the use of pipes is essential for production of oil, the pipes by themselves are capital goods and are not inputs. When such pipes need repair or replacing and waste is generated in the process, it is a waste generated during the repair or maintenance of capital goods and not during the process of production of oil or any process incidental or ancillary to it. - no excise duty can be charged on that scrap - AT
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Interest on refund of pre-deposit - Relevant Date - It is settled that the appellant are entitled for the interest on refund of pre-deposit amount @6% from the date of deposit till the date of refund. - AT
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Time Limitation - Refund of unutilized PLA balance - undisputedly the PLA balance for which refund is sought for is out of advance deposit made by the appellant in PLA and out of that unutilized balance has been claimed as refund. Therefore, limitation of Section 11B is not applicable. - AT
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Levy of penalty - The only dispute is that whether the goods should be valued under Section 4 or Section 4A. The company’s stand was that they were supplying goods to industries therefore, they were under belief that goods should be valued under Section 4 - There are no mala fide intention on the part of these appellants - No penalty - AT
VAT
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Levy of Sales Tax - customised Information Technology (IT) software - The decision of the Supreme Court in Tata Consultancy Services clearly supports the contention of the Commercial Tax Officer that the development of software solutions carried out by the petitioner was nothing but sale of goods and therefore, exigible to sales tax under the VAT Act read with the CST Act. - HC
Case Laws:
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GST
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2023 (2) TMI 821
Cancellation of registration certificate of petitioner - non-filing of return for a continuous period of six months - violation of principles of natural justice - HELD THAT:- It is deemed appropriate to entertain this petition essentially following the decision in the case of AGGARWAL DYEING AND PRINTING WORKS VERSUS STATE OF GUJARAT 2 OTHER (S) [ 2022 (4) TMI 864 - GUJARAT HIGH COURT] . The controversy there in the writ application was whether the show cause notice seeking cancellation of registration and the consequential order cancelling the registration under the GST Act was valid and sustainable in the eyes of law. The Court not only had examined the scheme of the Act but had also following various decisions of the Apex Court particularly on the necessity of giving reasons by a body or authority in support of the decision held that the absence of reasons renders an order indefensible and unsustainable particularly when it is subject to the appeal or revision. It also has amplified the decision of the KRANTI ASSOCIATES PVT. LTD. VERSUS MASOOD AHMED KHAN [ 2010 (9) TMI 886 - SUPREME COURT] where the Court has held that insistence on recording of reasons is meant to serve the vital principles of justice that justice must not only be done but it must also appear to be done as well. It would also operate as valid restraint on any possible arbitrary exercise of judicial and quasi judicial or even administrative power. It also reassures that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. The reasons have virtually become indispensable component of a decision making process Observing the principles of natural justice vide judicial, quasi judicial or even the administrative bodies. They would also facilitate the process of judicial review by the superior Court. Therefore, it has been held that the assignment of the reason is imperative in nature and speaking order doctrine mandates assigning the reasons which is heart and sole of the decisions and that must be the result of independent re-appreciation of evidence adduced and documents produced in the case. Applying these principles, the Court held that the State and its officers ought to have at least incorporate the specific details of the contents of the show cause notice which any prudent person can respond to as otherwise it would to fail to respond to such show cause notice which is bereft of details thereby making the mechanism of issuing show cause notice only a formality. In the instant case, what one finds is that it was a case of non-filing of return for six months. Assuming that requirement of filing of the return and the consequences for non-filing of return for six months is apparent in statutory provision, the very nature of notice has been held by this Court in the decision of Aggrawal Dyeing as cryptic and unsustainable under law. The writ application is allowed quashing the show cause notice and the consequential order cancelling registration with liberty to the respondent to issue fresh notice with particular reasons incorporating the details and a reasonable opportunity of hearing to writ applicant and to pass appropriate speaking order.
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2023 (2) TMI 820
Seeking declaration that the payment of tax by way of reversal of Input Tax Credit is coerced by the Respondents from the Petitioner and it should be refunded - bogus firms - Validity of investigations initiated and summons issued - HELD THAT:- The present civil writ petition for prayer of quashing the investigation and consequent summons, is not properly filed. The learned Counsel for the Petitioner then states that this prayer is not being pressed. Seeking refund of the ITC - HELD THAT:- The reversal of the ITC is done by the Petitioner; however, then it is stated that it was on coercion during the criminal investigation. We note that in this petition, the only parties are the Superintendent (Anti Evasion) and the Deputy Commissioner CGST and C-Excise, and they are not joined by name. It is stated that on account of the aggressive posture of authorities, the Petitioner proceeded to reverse the balance ITC and therefore, what is alleged is force and coercion by an individual officer, and in the reply affidavit filed by the Respondents, this fact has been denied, and the case against the Petitioner of creating fraudulent ITC has been refuted. Investigation into the matter is pending. Reply, and rejoinders are raising seriously disputed questions about how the ITC is reversed. It is not possible to render a finding in a writ jurisdiction that it was due to coercion. There could be various reasons why the Directors of the Petitioner have reversed the ITC. As an accused, if the Petitioner is subjected to a threat or coercion by the investigation officer, then the Petitioner would have their legal remedies open. If the Petitioner is entitled to a refund, on any other legal ground, that the Petitioner was not liable to reverse the ITC, then it is open to the Petitioner to apply for reversal/ refund by making a proper application or adopting such proceedings as available. The writ petition is disposed off.
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2023 (2) TMI 819
Refund of GST - Filing of fresh application in case of a deficiency - Constitutional Validity of Rule 90(3) of the Central Goods and Services Tax Rules, 2017, Para 12 of the Circular No. 125/44/2019-GST dated 18.11.2019 - vires of Section 54 of the Central Goods and Services Tax Act, 2017 - validity of Para 3(ii) of the Circular No. 157/13/2021-GST dated 20.07.2021 - vires of order issued under Article 142 of the Constitution by Hon ble Supreme Court in the matter of Re Cognizance for Extension of Limitation [ [ 2021 (5) TMI 564 - SC ORDER] ] or not. HELD THAT:- The prayers in the present petition are premised on the basis that the petitioner s application was, otherwise, beyond the stipulated period of two years. In view of the submission made by learned Counsel for the respondent, the petitioner s grievance against the Rule 90 and circular dated 18.11.2019 does not survive, therefore, we do not consider it apposite to examine the same in this petition. Since the petitioner s grievance in regard to the order dated 28.07.2021 stands addressed, no further orders are required to be passed in this petition - petition disposed off.
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2023 (2) TMI 818
Seeking direction to pay the balance outstanding in the Bills submitted by the petitoner forthwith - seeking declaration that Sree Sankaracharya University of Sanskrit, Kalady is liable for payment of applicable Goods and Services Tax for the Goods or Services availed by them - HELD THAT:- Clause 11(f) of the General Conditions of Tender specifically stipulate that all rates quoted should be inclusive of sales tax also. After introduction of the GST regime, the term sales tax has to be understood as goods and service tax. Thus, the tender document provided for inclusion of goods and service tax. Moreover, payment towards the second and final part were accepted by the petitioner without GST. Any doubt regarding inclusion of GST or otherwise, ought to have been cleared before participating in the bid. Instead, petitioner chose to participate and is questioning the terms in the tender document, after securing the contract and executing the work. It is settled law that after participating in a tender process, bidder cannot turn around and challenge the conditions in the bid document. Even otherwise, the factual disputes involved cannot be decided in a writ petition under Article 226. Petition disposed off.
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2023 (2) TMI 817
Refund of IGST paid on export - no show cause notice has been given nor any opportunity given to represent the adjudication process - Earlier, protection was granted from inquiry proceedings by the HC - principal grievance on the part of the petitioner is that the proceedings for scrutiny of refund of IGST for the export already made by the petitioner is initiated by the CGST Department even though the proper officer for grant of refund of IGST is the Custom Authorities and therefore, initiation of the actions on the part of the respondent is bad in law - Principles of natural justice. HELD THAT:- The order of provisional refund not being a subject matter of appeal nor is there any further proceeding in connection there with nor is any other proceedings of the Act pending for invocation of Section 39, nothing was there for the Court to hold that the order impugned before that Court without the condition precedents for exercise of such powers were satisfied and therefore, the Court held that the authority had lacked the jurisdiction. Before withholding the order, according to the Court, the Commissioner is empowered to withhold the same if he is of the opinion that such refund is likely to adversely affect the revenue. The Commissioner is required to form an opinion that grant of refund is likely to adversely affect and the fact regarding formation of such opinion needs to be reflected in the order passed under Section 39 withholding the refund. There was not a whisper as regards any opinion as envisaged and hence, the Court held that withholding of the refund was not in accordance with law. The Custom Authority having permitted the goods to be exported and the petitioner having paid the IGST on the export, the process of the refund on such IGST after clearance of the goods for export is what is being provided as Rule 96 is very clear that shipping bill of the export needs to be treated as the refund application. Grant of protection (earlier) There was no ambiguity in relation to the consignment except the wrong declaration of the address in the export documents i.e. Export Invoice Shipping Bill. The office of the Commissioner had proposed for lifting of detention of the cargo and it was urged that till the pendency of inquiry at the Customs, it was apprehended that the writ applicant may fly away or abscond if the Cargo is released and there may be heavy loss of custom refund for the different price of old mobile phone vis-a-vis old mobile phones. - The inquiry pertaining to ITC Chain was therefore, directed to be investigated by the office of the Joint Commissioner of CGST. This had made the petitioner to rush to this Court seeking to challenge this alleged action of respondent being high handed and not permitting the Rule 96 to come into operation. Refund allowed subject to enquiry proceedings. Keeping in mind the fact that this Court on noticing the overall circumstances, since had protected the writ applicant from the investigation which had been initiated, at no stage, the authority was precluded from initiating the proceedings of show cause notice. However, till date, it is not so done, therefore, to strike a balance this Court is of the firm opinion that when the export has been permitted by all concerned on the part of the respondents, the petitioner would become entitled to the refund and the same shall be paid with interest to the petitioner. Let the investigation be finalized in eight weeks period from the date of receipt of a copy of this order. Petition allowed.
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2023 (2) TMI 816
Cancellation of registration of petitioner - appeal not filed in time - HELD THAT:- The learned Division Bench of the High Court for the State of Telangana in M/S. CHENNA KRISHNAMA CHARYULU KARAMPUDI VERSUS THE ADDITIONAL COMMISSIONER APPEALS1 AND ANOTHER [ 2022 (7) TMI 82 - TELANGANA HIGH COURT] having considered the fact that GST Tribunal has not been constituted under Section 109 of the CGST Act and thereby, the petitioner could not be left without any remedy, held that it would be just and proper if the entire matter was remitted back to the 2nd respondent therein to reconsider the case of the petitioner and pass appropriate order in accordance with law. The petitioner preferred appeal but it was rejected for the reasons. In that view of the matter and as the GST Tribunal has not been constituted as per the provisions of the Act so as to enable the petitioner to pursue his further legal remedies, in the interest of justice, it is considered apposite to allow the writ petition and remit the matter back to the primary authority i.e., 1st respondent to re-consider the case of the petitioner and after affording a personal hearing to him, pass an appropriate order in accordance with law expeditiously but not later than two weeks from the date of receipt of copy of this order. Petition allowed by way of remand.
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2023 (2) TMI 815
Interest on delayed refund - Excess amount of CGST / SGST deposited during the initial face of GST - Relevant date for Interest to be computed - From 60 days of the filing of the original application or from the date of fresh application - Refund granted as per the direction of HC - HELD THAT:- Section 54 and 56 of the Act mandates the payment of interest from the date of application whereas the plea of the respondents about the period in which the application for payment of interest was made and the same has been processed within 60 days, hence the petitioner is not liable for the interest is not tenable as the respondents in any case, does not suffer any loss as money lain with the respondents for the continuous period of two and a half years, in fact even before the date of filing of the application for a refund under Section 56 of the Act and the time taken for a refund of the money in terms of the judgment dated 8/10/2021 is unreasonable. The petitioner was entitled to a refund as well as interest amount vide judgment dated 8.10.2021, wherein a specific direction was issued for a refund of Rs.108 crores approximately which was deposited by the petitioner towards CGST+SGST along with applicable interest within one month. Unfortunately, this has not been done and the respondents have no justification for withholding the interest amount, which is a negligent act on the part of the respondents. The Government cannot deprive the petitioner from entitlement of the interest. Therefore, this inaction is wholly unjustified and has deprived the petitioner where the petitioner could have earned interest during this period but because of the withholding, this could not be done. The position of law is well settled and the provisions relating to interest on delayed payment of refund have been consistently held as beneficial and non-discriminatory. It is true that in the taxing statute, the principles of equity may have little role to play, but at the same time, any statute in taxation matters should also meet the test of the constitutionality and the respondents were not able to explain in any manner the issue of delay in their reply as raised by the petitioner and the chart indicating the delay referred to above speaks for itself. The Impugned order dated 22.12.2021 (Annexure P-1) is hereby partially quashed qua interest part vide which the claim of interest has been rejected and respondents are liable to pay applicable interest in terms of Annexure P-3 annexed with writ petition, from the date of filing of the original application, i.e. 5.4.2019 - Petition allowed.
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2023 (2) TMI 814
Seeking grant of bail - evasion of GST - passing on fake ITCs, without actual supply of goods - HELD THAT:- It is matter of record as is reflected from the documents annexed with bail applications of accused/ applicants that the firm M/s Hindustan Papers Machinery Industries firstly received summons from Sr. Intelligence Officers of Gurgaon Zonal Unit of DGGI as is reflected from summons dated 02.11.2021 and summons dated 19.10.2022 in respect of alleged availing of ITC as one enquiry/investigation was initiated. Similarly same firm i.e. M/s Hindustan Papers Machinery Industries has again received summons from UP State GST on 03.06.2022, 13.06.2022, 04.07.2022, 27.07.2022 (copy of which are lying along with the application). It is thereafter DGGI DZU has also initiated the action with the same allegations of alleged evasion of tax by availing ITC on the basis of fake invoices. It is evident from bare language of the Section 6(2)(b) of CGST Act that once any action regarding subject matter of any offence committed under Section 132 of the CGST Act has been initiated, then in respect of same subject matter no other authority/proper officer under the Act would initiate the proceedings. Apparently such provision has been made to avoid multiplicity of enquiry/ investigation from different authorities because under the CGST Act there are authorities at State level as well as Central level. Legislature in its intentions had ultimate object to trace the evasion of tax and to collect the GST at State as well as Central level. From the scheme of CGST Act and the guidelines dated 17.08.2022 from GST Investigation Wing, Ministry of Finance, it is very much evident that the ultimate object of the Act of 2017 is to ensure assessment, levying of GST in accordance with Act and to ensure a deterrent procedure to avoid evasion of tax. Also, the personal liberty of accused persons cannot be deprived only on the ground that some other persons, who may be required for the investigation of the matter, are not traceable to the Department. The accused are ordered to be admitted to bail upon furnishing of bail bond in the sum of Rs.20,000/- with one surety in the equal amount each to the satisfaction of ld. MM/ Duty MM/ACMM/CMM/court concerned, subject to conditions imposed. Bail application allowed.
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Income Tax
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2023 (2) TMI 813
Reopening of assessment u/s 147 - Deduction u/s 80P - reopening beyond the period of four years - Scope of change of opinion - HELD THAT:- AO did not have any tangible material with him based upon which he could form his reason to believe that income had escaped assessment. The entire basis for reopening is nothing but a change of opinion on the part of the A.O. that the benefit of deduction under Section 80P ought not to have been allowed at all. As between the date of the assessment order under Section 143(3) of the Act and the date when the reasons were recorded, there has been neither any change in law nor any new material has been shown to have come to the knowledge of the A.O. This therefore is nothing but a clear case of change of opinion. As reasons recorded do not at all alleged any such failure on the part of the assessee which was a condition prerequisite for invoking jurisdiction for reopening in addition to the condition of reasons to believe as this was a case of reopening beyond the period of four years. For the reasons mentioned hereinabove, we have no hesitation in holding that in the facts and circumstances of the present case, the reopening of the assessment is unsustainable. Decided in favour of assessee.
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2023 (2) TMI 812
Revision u/s 263 - Exemption u/s 11 - depreciation made in the return - distinction between lack of inquiry and inadequate inquiry - difference between purported incomplete or inadequate verification or no verification whatsoever by the assessing office - HELD THAT:- As it is not gainsaid by the Revenue that the respondent-assessee has been following the practice of claiming depreciation in earlier years as that is claimed in the present year under assessment. There is no denial of fact by the Income Tax Department that the assessee is consistently claiming the depreciation as application of income without making the claim u/s 11 of the IT Act at the time of acquisition or purchase of assets as application of income. Mere statement in the appeal filed by the Revenue before this Court that no documentary evidence is submitted by the assessee in support of its claim cannot be countenanced in view of categorical finding of fact by the AO as also the learned ITAT that the assessee-respondent did furnish statements, documents and details as sought for in compliance of notice issued for assessment u/s 143 of the IT Act before the Assessing Officer. Therefore, such finding of fact falsifies the statement of the Revenue in paragraph 7 of the appeal that no documentary evidence is submitted by the assessee in support of its claim . Thus, the view of the Tribunal in allowing the Assessee-Respondent s appeal on the principle of consistency cannot, in the present facts, be faulted with. Proceeding initiated by the Commissioner of Income Tax (Exemption), Hyderabad by exercise of power under Section 263 of the IT Act is not tenable either on facts or in law, the learned ITAT has rightly quashed the consequential proceedings and orders allowing claim of depreciation on the assets. Interpretation of statutory provision and views expressed by different Courts qua dispute sought to be raised by initiating proceeding for revision - Revisional Authority- CIT (E) in his order, while exercising power under Section 263 placed reliance on a decision of Grama Vidiyal Trust [ 1985 (10) TMI 67 - GUJARAT HIGH COURT] without mentioning anything as to how there was factual similitude with that of the case of the respondent-assessee. Since the Revisional Authority has mechanically sought to apply the decision of learned ITAT in Grama Vidiyal Trust (supra) without application of mind, the impugned Order passed in exercise of power of suo motu revision stands vitiated.
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2023 (2) TMI 811
Validity of Reopening of assessment - notice in the name of deceased - HELD THAT:- Assessee died during the original assessment proceeding and the department was well aware of this fact that the original assessee had died. Respondent-authority itself passed an order wherein penalty proceeding initiated against the deceased assessee has been dropped by recording inter alia that the assessee has already died on 18.01.2016 and hence, imposing of penalty against the deceased assessee is bad in law. From bare perusal of the penalty order itself, it would be evident that Respondents were duly aware of the fact that the assessee has already died, and have treated the initiation of penalty proceeding against the deceased assessee as bad in law and has dropped the same. On the other hand, Department has proceeded to pass Re-assessment Order u/s 147/148 despite being aware that the assessee has already died on 18.01.2016. Thus, it appears that the very initiation of the re-assessment proceedings against the original-assessee is non est and void ab initio, especially because the said assessee had already died without even substituting and/or transposing legal heirs of the said assessee in accordance with law. - Decided in favour of assessee.
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2023 (2) TMI 810
Interest pertaining to non-performing assets - Reversal of income - Allowable deduction from the taxable income relating to an accounting year - permissible deduction from net profit on account of a provision made in respect of interest pertaining to non-performing assets u/s 28 - Whether Tribunal justified in holding that interest pertaining to non-performing assets cannot be deducted from the taxable income relating to an accounting year, even though the relevant assets have become non-performing assets only in that accounting year ? - reversal of credit entries relating to a past accounting year can be made in the current accounting year for the purposes of computing the taxable income of the current accounting year - HELD THAT:- Tribunal had considered the circular of RBI dated 04.07.2002 and held that once an income of a previous year is recorded, assessee cannot reduce the income of subsequent years on the ground that in the earlier year income was shown on actual basis wrongly. Tribunal held that such a claim of the assessee is not permissible under the provisions of the Act. Further, Tribunal held that assessee had also not written off the NPAs as bad debts under Section 36(1)(vii) of the Act. Therefore, there was no question of writing off such interest as a bad debt. In the hearing today, appellant has referred to Section 21 of the Banking Regulation Act, 1949 and submits that under sub-section (1) thereof, all banking companies are bound to follow policy of the RBI so determined. Therefore, assessee being a banking company had to comply with the RBI guidelines. Also in case M/s. Motor Industries Company [ 1983 (2) TMI 251 - SUPREME COURT] and submits that in that case under the Kerala General Sales Tax Act, 1963, Supreme Court had pointed out a way to overcome such a difficulty. Further reference has been placed on the decision of the Supreme Court in UCO Bank [ 1999 (5) TMI 3 - SUPREME COURT] to contend that it is always open to the Central Board of Direct Taxes (CBDT) to issue instructions under Section 119 of the Act to remove any difficulty in which event such instructions would be binding on the department. We are afraid we cannot accept such contention urged by appellant. In the present appeal, it is not CBDT which has issued circulars or guidelines under Section 119 of the Act. On the other hand, circular has been issued by the RBI which is binding on all the banking companies in general. However, when it comes to assessment under the Act, the revenue authorities are bound by the provisions of the Act. Therefore, the claim of the assessee that interest paid on NPAs should be excluded from computation of income was rightly negatived by the assessing officer, which has been affirmed by the two lower appellate authorities. As pointed out by the Supreme Court in M/s. Motor Industries Company (supra), it is always open for the assessee or appellant to file a revised return and claim the deduction. Even if assessment is completed, assessee could have demanded adjustment or refund by preferring the claim in time. But that was not done. No substantial question of law.
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2023 (2) TMI 809
Declaration under the Direct Tax Vivad Se Vishwas Act, 2020 - Taxation of LTCG @ 30% or 20% - correct tax liability determined earlier while issuing Form 3 - CIT-A revising the petitioner s declaration by issuing a revised Form 3 seeking additional demand - Rectification of mistake u/s 154 - Rectification application was allowed holding that there was an error in treating the income as taxable business income instead of taxable long term capital gains - HELD THAT:- The order having been passed on the application for rectification under section 154 assuming that the same was erroneous, as alleged, cannot simply be brushed aside. It would have been open to the authorities to take remedial measures to question the legality and correctness of the order. In so far as the claim under the Act of 2021 is concerned, a clarification issued by the Central Board of Direct Taxes clearly envisages that if there is a reduction or increase in the income and tax liability of the assessee as a result of rectification, the disputed tax in such cases would be calculated after giving effect to the rectification order passed, if any. Reference in this regard can be made to the clarification issued by the Central Board of Direct Taxes ( CBDT ) vide circular No.9 of 2020 dated 22 April 2020 and in particular Question No.25 thereof, it becomes clear that the respondents ought to have taken into consideration the aforementioned Circular, as also considered the rectification order passed, which the respondents clearly missed to do in the present case. In our opinion, issuance of revised Form 3 is clearly not sustainable. Be that as it may, we allow this petition. The orders impugned dated 20th September 2021 and 29th October 2021 are set aside. The respondents are directed to act in furtherance of the petitioner s declaration by way of Form-3.
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2023 (2) TMI 808
Non-grant of the refund as withheld with interest and additional interest u/s 244A - Compensation sought for non-payment of the statutory interest from the time - HELD THAT:- Considering the fact that both the provisions of Section 244 and 244A will be given effect to what the assessee is presently seeking is the compensation for the delay that has been caused in making the refund. It is not disputed that sub-section (1) of Section 244A requires the revenue to grant interest at the statutory rate if the refund becomes due to the assessee. Department since is not in a position to take shelter of pendency of the appeal, before this Court also, it is not necessary for this Court to give any directions with regard to the applicability of both the provisions and the requirement of the revenue to grant the refund bearing in mind the existing provisions. Compensation which is being sought for non-payment of the statutory interest from the time, this Court decided the appeal. much is insisted upon. Nima Specific Family Trust ( 2018 (10) TMI 441 - GUJARAT HIGH COURT] had noted various provisions and also the decision of the Gujarat Flourochemicals Ltd. [ 2015 (2) TMI 453 - GUJARAT HIGH COURT] to hold that there cannot be any direction for payment of interest on interest. The statute provided for interest on delayed refund under sub-section (1) of Section 244A, then newly inserted sub-section (1A) provides for additional interest. There cannot be any further directions for payment of interest over and above such statutory prescriptions and hence it had direction the cost of Rs.1 lac to the petitioner by way of compensation on the amount of interest which remained unpaid for long time. Respondent is not yet clear on the outstanding amount, however, it is volunteered that within three months, it shall be in a position to complete the same noticing the fact that the company has changed its name with all its past and future liabilities. As given e-pan number and it is the same pan number which was with M/s Bombardier Transportation, however, necessary procedure shall need to be completed by the petitioner and name change with supporting documents shall go to the concerned officer-ACIT Income Tax Vadodara both e-copies and physical copies through registered letter within one week from the date of receipt of this order. Let process be completed in a three months period, after receipt of such copies. If not done within three months, the amount of compensation to be paid shall be Rs.1 lacs.
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2023 (2) TMI 807
Penalty u/s. 271(1)(c) - non-disclosure of capital gains at the time of filing of return of income - assessee in the revised computation has shown 5% share in these lands on which capital gain was computed - as per AO assessee had furnished revised computation only when the show cause notice was issued to the assessee - CIT(A) held that since both the figures of sale consideration and cost of acquisition were taken incorrectly, the mistake prima facie appears to be inadvertent and error occurred owing to absence of purchase and sale deed at the time of filing of return of income, thus deleted addition - HELD THAT:- We find no infirmity in the order of CIT(A) so as to call for any interference. We further note that DR has not been able to point out any defect in the factual observations made by CIT(A) while allowing the appeal of the assessee. From the facts placed on record, in our considered view, it is a case where apparently a bonafide mistake was made by the assessee owing to lack of documents at the time of filing of return of income. Accordingly, we find no infirmity in the order of CIT(A) and the appeal of the Department is hereby dismissed.
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2023 (2) TMI 806
Unsecured loan u/s 68 - proof of creditworthiness of creditor - discharge of the initial onus - HELD THAT:- As creditworthiness of person advancing loans is evident from the details mentioned hereinabove and only because in the year under consideration he has declared business loss of Rs.20.85 lacs which cannot lead to an inference that he had no creditworthiness to give loan to assessee more particularly when in AY 2017-18 he has declared gross total income of Rs.12,03,800/- . Hence,t is found that the assessee has made full efforts to establish the creditworthiness of the creditors by filing his return and balance sheet for the last two years. Once the assessee had discharged the initial onus then the burden shifts on the Department to counter the facts brought on record by the assessee which could not be controverted by the ld. DR during the course of hearing - Decided in favour of assessee.
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2023 (2) TMI 805
Addition u/s 68 - Bogus LTCG - difference between transactions - New objection raised by assessee under Rule 27 of the Rules - AO alleged that the assessee has indulged in a dubious share transactions with intent to account for the undisclosed income in the garb of Long Term Capital Gains - As per assessee AO could not have invoked Section 68 in the absence of books of account - CIT-A deleted addition - HELD THAT:- It is wholly inconceivable to preordain a transaction of purchase and sale involving a gap of 15-25 years to record some unaccounted income. It defies one s imagination to think so. AO appears to have mechanically applied the findings of investigation report and imputed motive of price abuse in EFTL stock on the assessee in a hawkish manner without taking note of the peculiar fact of acquisition of shares decades ago and continually held thereafter. CIT(A), on the other hand, has recognized such overwhelming fact of long holding period and rightly cancelled the untenable additions. It is a classic case of assessment framed on impressions and perceptions rather than on glaring facts. Needless to say, the peculiarities and nuances of each case need to be seen in perspective. The overwhelming factor of extra-ordinary period of holding of shares prior to sale transcends all other considerations and exonerates the Assessee from any kind of impropriety. CIT(A), to our mind, has correctly approached the issue and recognized the difference between transactions which are pretense and the transactions which are real and rightly reversed the unsubstantiated additions. We thus see no reason to interfere with the conclusion drawn by the CIT(A). Objections raised by the assessee in terms of application filed under the shelter of Rule 27 of the Income Tax (Appellate Tribunal) Rules 1963 - In the instant case, the assessee has neither filed any cross-appeal nor cross-objection before ITAT in the Revenue appeal. The Assessee had not taken such ground earlier before CIT(A) either, to enable him to render its decision such point. In the absence of any ground on the point, the CIT(A) had thus no occasion to adjudicate the issue now raised before ITAT under Rule 27. The objections have been newly raised for the first time before ITAT taking shelter of Rule 27 of ITAT Rules. The language of Rule 27 is absolute and measured. Patently, the prerequisites of Rule 27 are not fulfilled in the instant case. There must exist a ground decided against the assessee by the CITA) to invoke Rule 27 as an adjunct to Revenue appeal. Such vital condition is not found to be met. In the factual matrix, the legislative fiat of Rule 27 does not permit the ITAT to entertain the impugned application moved by respondent assessee to exercise right under Rule 27 to defend the order of CITA). The judgment rendered in Sanjay Sawhney [ 2020 (5) TMI 441 - DELHI HIGH COURT] is premised upon altogether different facts. Hence, we decline to entertain the altogether new objection raised by the respondent assessee under Rule 27 of the Rules. Consequently, the plea raised on merits by the Assessee fades into insignificance. The impugned application filed under Rule 27 is thus rejected. Appeal of the Revenue is dismissed.
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2023 (2) TMI 804
Revision u/s 263 - Unexplained cash deposits - HELD THAT:- Merely because, the assessee has not produced the confirmation from other debtors, it does not mean that entire sales were not made to these debtors - we are of the considered view that the nature of business of kirana merchants, who is engaged in the sale of vegetables, dry fish and groceries are mostly by way of cash, wherein, AO has not disputed the fact of cash deposits in the assessee s bank account. In the absence of any dispute regarding the cash deposits are arising out of the cash sales by the AO in the original assessment and in the absence of any contrary findings by the Ld.AO, cash deposits cannot be treated as unexplained. Wife of the assessee is also a regular filer of income tax returns who has paid to the assessee, as per findings of Ld.CIT(A). Considering peculiarity of the trade in which the assessee is engaged, we find that the assessee has source for the cash deposits made for the purpose of investment in residential property. Additions cannot be made merely based on assumptions by the revenue authorities. We, therefore allow this ground raised by the assessee. Estimation of profit at 3.5% of the turnover - We are not inclined to intervene in the decision of the Ld.CIT(A) on this ground. Hence, this ground raised by the assessee is dismissed.
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2023 (2) TMI 803
Exemption u/s 11 - Charitable objects of the assessee society - denied registration u/s 12A - no charitable activity carried out by the assessee for grant of approval u/s 80G of the Act and rejected the application in Form No.10G - only grievance of the revenue is that the assessee has not started the activity on the date of filing of the application - HELD THAT:- We are of the firm view that without laboratory it is difficult to run a blood bank. There is no proof to establish that the assessee has been running a blood bank after issuance of license by the competent authorities. Therefore, we remit the matter back to the file of the CIT(E) to examine and grant 12A registration from the date of application, if the assessee is carrying the charitable activity from 13.12.2019, otherwise, the assessee is not entitled for grant of registration u/s 12A. Appeals of the assessee are allowed for statistical purpose.
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2023 (2) TMI 802
Revision u/s 263 - deduction u/s 80P(2)(d) in respect of interest income - HELD THAT:- As observed that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of a cooperative society on interest income on investments/deposits parked with a cooperative bank, which is a registered co-operative society as per section 2(19) defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative society registered. Similar view has been taken by the Pune Benches of the Tribunal in several cases including The Sesa Goa Employees Coop. Credit Society Ltd. [ 2022 (12) TMI 959 - ITAT PUNE] . In view of the fact that the Pune Benches of the Tribunal in series of decisions have held that the assessees are entitled to deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, we hold that the impugned orders cannot be sustained. All the orders are, therefore, overturned. All the appeals are allowed.
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2023 (2) TMI 801
Penalty u/s 271AAA OR 271(1)(c) - issuance of a lawful notice u/s 274 - notice issued under wrong section - HELD THAT:- The last para of the notice has two sentences. The first asks assessee the reasons: to show cause why an order imposing a penalty on you should not be made u/s 271. AO reiterated here the reference to section 271 for imposing the penalty, which also finds place in the opening part of the notice. The last sentence of the para simply states that: If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under section 271AAA . It is explicit that the second sentence contains a warning to the assessee to appear, failure of which would lead to making the order u/s 271AAA. Reference in the second sentence is only to the making of the order u/s 271AAA. On the other hand, the notice part informing the assessee of the charge against him has only reference to section 271 and the ingredients of section 271(1)(c). We are satisfied that the penalty order passed by the AO, pursuant to notice issued under wrong section, has been rendered void. We, therefore, set aside the penalty order as well as the consequential impugned order. Decided in favour of assessee.
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2023 (2) TMI 800
Correct head of income - profit earned from the sale of flat in Ramya Residency through JDA - income from short term capital gain/long term capital gain or income from business - assessment has been settled by the assessee under VSVS Scheme, 2020 - HELD THAT:- As full and final settlement of tax arrears u/s 5(2) r.w.s. 6 of Direct Tax Vivad Se Vishwas Act, 2020 in Form 5 has been passed by the Principal Commissioner of Income Tax (Central), Bengaluru confirming the payment under VSVS scheme, 2020. Thus, it means that assessment of income from Ramya Residency project has been accepted by the department as income from short term capital gain. Being so, lower authorities are not justified to treat the profit from same Ramya Residency as income from business instead of claim of assessee as income from short term capital gain/long term capital gain as the case may be in the assessment order passed u/s 143(3) - Accordingly, we direct the AO to treat the income from profit earned from the sale of flat in Ramya Residency through JDA as income from short term capital gain/long term capital gain only instead of income from business.
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2023 (2) TMI 799
Rectification of mistake u/s 154 - LTCG computation - cost of acquisition while computing the capital gains - AO/CPC not reducing a sum from working of the profits of business or profession as the said sum represented sale proceeds of immovable property which had been credited to the Profit and Loss Account and while filing the return, the same had been duly considered under the head income from capital gains - HELD THAT:- Adjustment to gross total income as per the intimation issued by the CPC has arisen on account of capital gains which has to be segregated from profit/loss and considered under the head capital gains . In the return of income, the assessee has reduced the sale consideration from profit /loss account and offered the same under the head long term capital gains. CPC however has adjusted and reduced only a figure of Rs 2,06,559/- which has resulted in higher income by Rs 17,83,441/-under the head profit/loss from business/profession . It is an admitted fact that the assessee has offered the long term capital on sale of the plot of land and which has been considered along with long term capital loss of Rs 23,31,449-/ and after setting off, long term capital loss has been allowed by CPC to the extent of Rs 17,51,746/-. In light of aforesaid, it is clearly a mistake apparent from record and the same is hereby directed to be deleted. Appeal of the assessee is allowed.
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2023 (2) TMI 798
Addition of LTCG - Determination of sale value - substitution of stamp duty valuation without referring the matter to DVO - Applicability of section 50C - AR submitted that the CIT(A) was not right in confirming the addition as the valuation of the DVO was not taken into account by the CIT(A) and in fact the Stamp Duty Valuation Authority s valuation has been adopted without giving any proper opportunity to the assessee at the time of assessment order - Assessee submitted that the valuation of the DVO should have been verified in consonance with the sale value taken by the assessee and thus the matter needs verification - HELD THAT:- There is a difference between the sale value as determined by the assessee in the sale deed and the value adopted by the Stamp Duty Valuation Authority and the same needs verification in respect of the Jantri value as well as actual value of the property. AO as well as the CIT(A) has not taken cognisance as per the provisions of Section 50C and, therefore, this requires proper verification and adjudication. Thus, the issue is remanded back to the file of the AOfor proper adjudication and verification in respect of valuation by DVO and Jantri value as well as the sale value taken into account by the assessee and by the Department and adjudicate the matter as per law. Decided in favour of assessee for statistical propose.
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2023 (2) TMI 797
Depreciation on Toll Road developed by the appellant - @ 10% OR @ 25% under the head Intangible Assets - HELD THAT:- Respectfully following the view express by Tribunal for A.Y. 2012-13 2013-14 [ 2021 (5) TMI 659 - ITAT DELHI ] we hold that under identical facts and circumstances the assessee is also eligible for depreciation at the rate of 25% as claim by the for A.Y. 2014-15 also. Provision made for Major Maintenance - disallowance on the ground that the said provision is contingent in nature and the assessee has not made any expenditure on that count during the year under consideration - HELD THAT:- Tribunal in assessee s own appeal for A.Y. 2012-13 2013-14 [ 2021 (5) TMI 659 - ITAT DELHI ] has allowed the claim of assessee for provision which was created for the provision made by the assessee in accordance with settled principle of law. Thus claim of assessee for provision made by the assessee is allowed.
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2023 (2) TMI 796
Genuineness of claim of bad debt/business loss - rejection of goods in inferior quality by the customers - HELD THAT:- Loss claimed by the assessee on account of inferior supply of goods was rejected by the AO disbelieving that such goods rejected by the customer has some value. In the course of appeal proceedings the assessee produced copy of ledger accounts of the assessee in the books of the customers and also the communication sent by the customer to the assessee rejecting the goods supplied for the inferior quality. These evidences were disbelieved by the CIT (A) for the reason that the customer of the assessee did not reply to the notice issued u/s 133(6) by the AO. It is the contention of the assessee that since there was dispute between the assessee and its customer the customer did not respond to the said notice. Customer had not been making any payment for almost two years on dispute raised by the assessee for poor/inferior quality of goods supplied and the assessee company could realize its out-standing debt only on settlement of the claim of the customer for inferior quality of goods. Therefore, it is the contention of the assessee that since there was dispute the customer did not respond to the notice issued by the AO. In our view simply because the customer of the assessee did not respond to notice u/s 133(6) of the Act the mail sent by the customer to the assessee rejecting the goods worth supplied for poor quality cannot be ignored and disbelieved only for the reason that the party did not respond to the notice issued by the AO. At the same time the ledger account show that the assessee had written off in its books of accounts the loss suffered on account of quality of supply of inferior goods. The assessee has credited the customers account with the said amount and finally settled its accounts with the customer. All these goes to show that the assessee has incurred loss in the course of business. Therefore, the write off of debtors is nothing, but bad debt / business loss. There is no justification in rejecting the claim of the assessee for write off of bad debts. Thus, we set aside the order of the CIT (A) and allow the grounds raised by the assessee.
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2023 (2) TMI 795
Disallowance made u/s 43B - Electricity Duty payable - HELD THAT:- As was held by the Tribunal for the assessment year 2014-15 [ 2020 (11) TMI 113 - ITAT DELHI] we hold that the AO is not justified in disallowing the Electricity Duty payable invoking the provisions of section 43B of the Act. Therefore, we set aside the order of the ld. CIT (Appeals) and allow the appeal of the assessee.
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2023 (2) TMI 794
Computation of LTCG - provisions of section 2(47)(v) applicability - assessee s property is converted as stock-in-trade - CIT(A) considered the arbitral award and noted that the assessee had to sell only 40 grounds and 1896 sq.ft. for a consideration and not the entire land for the consideration stated in the sale agreement - HELD THAT:- Once the property is converted into stock-in-trade by the assessee and which is undisputed fact and not disturbed by Revenue by rejecting the method of accounting adopted, the Revenue cannot assess the same as capital gains and this is to be assessed as business income. Even the sale is not compete and even the sale deed is not executed in this case till date as confirmed by the ld.AR for the assessee by making statement at bar. He made categorical statement that assessee is yet to transfer the land by executing sale deed. CIT(A) has erred in upholding the part consideration as capital gains qua 40 grounds and 1896 sq.ft. for a sale consideration of Rs.170 crores. We reverse the order of CIT(A) and allow this appeal of assessee. Consequently, the appeal of Revenue is dismissed.
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2023 (2) TMI 793
Addition u/s 68 - additions towards trade payables - assessee could not furnish confirmation from the parties - violation of rule 46A of the IT Rules, 1962 by CIT-A deleting addition - whether CIT-A admitting certain additional evidence without providing opportunity to the AO for his verification in violation of Rule 46A of the Income-tax Rules, 1962 - HELD THAT:- When the CIT(A) has recorded categorical finding that the assessee has furnished confirmation and also reproduced the party name and address from whom the assessee had transactions, there is no need to give opportunity to the Assessing Officer for his comments, because, the CIT(A) himself has verified confirmation filed by the assessee. Therefore, we are of the considered view that there is no error in the reasons given by the CIT(A) to partly allow appeal filed by the assessee. Thus, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the revenue.
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2023 (2) TMI 792
Assessment order u/s 144 - Unexplained cash deposits - assessee has not filed his return of income and just filed a single sheet containing abstract of cash deposits and reported availing of loan by the assessee as source for cash deposits - CIT(A) dismissed the appeal of the assessee in the absence of any response or written submissions, information or document - HELD THAT:- Since the assessee has not filed any details in support of the grounds of appeal filed by the assessee, we find no infirmity in the order passed the ld. CIT(A). Thus, the appellate order passed by the ld. CIT(A) stands confirmed. - Decided against assessee.
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2023 (2) TMI 791
Penalty u/s 271(1)(b) - non-compliance of the notices u/s 143(3) - HELD THAT:- As none appeared on behalf of the assessee, and in the absence of any representation the concurrent finding of both the authorities below that the assessee was unable to demonstrate reasonable cause for non compliance with notices issued remains uncontroverted. We have no other option therefore but to uphold the order of the Ld.CIT(A) confirming the levy of penalty u/s 271(1)(b). Addition made on account of unsecured loans - HELD THAT:- As authorities below have given concurrent finding of fact that the assessee has failed to establish genuineness of the loan allegedly received by it from one Shri Rohit N.Patel. In the absence of any representation from the assessee, and in the absence of any material on record to support the case of the assessee, the concurrent findings of the authorities below remain uncontroverted. The order of the Ld. CIT(A) upholding the addition accordingly calls for no interference. The ground of appeal of the assessee is dismissed. Invocation of section 115BBE - addition on account of unexplained unsecured loans was made by the authorities below u/s 68 and provision of section 115BBE was invoked for computing the tax liability on this addition - HELD THAT:- CIT(A) has noted that invocation of section 115BBE was proper. In the absence of any representation from the assessee to counter the finding of the CIT(A) we are constrained to confirm the order of the ld.CIT(A). Accordingly, we uphold the order of the CIT(A) on this issue and reject this ground of appeal No.2(B) of the assessee. CIT(A) directing the AO to bring to tax all income pertaining to the TDS deducted and claimed by the assessee - HELD THAT:- In the absence of material on record to and for want of representation from the assessee, we find no infirmity in the aforesaid direction of the Ld.CIT(A). In fact the Ld.CIT(A) has in all fairness allowed entire TDS credit to be given to the assessee but at the same time directed all income pertaining to the said TDS to be brought to tax. We see no reason to interfere in the well reasoned order of the Ld.CIT(A).
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2023 (2) TMI 790
Revision u/s 263 - wrong claim of deduction made u/s 43B - as per CIT with respect to the claim of interest expenses assessee claimed deduction for bank interest paid relating to another bank RCC Bank which had been paid through assessee s wife account - HELD THAT:- We find that the assessee had duly substantiated his claim of interest expenses under section 43B on payment basis. The ld.Pr.CIT has, except for stating that the payment has been made by his wife, and therefore, is not allowable, has pointed out no other anomaly in the explanation of the assessee nor has he pointed out why despite all the facts, as narrated and substantiated by the assessee, the claim was still disallowable under section 43B of the Act. The fact that payment made by his wife was on account of repayment of loan given by him to his wife was duly demonstrated with evidence to the Ld.PCIT. Even otherwise how the fact of payment of interest by any other person other than the assessee affects claim of expenses on payment basis as per section 43B of the Act has not been brought out by the Ld.PCIT. Therefore, we agree with the ld.counsel for the assessee that there is no error in the order of the AO allowing the assessee s claim of interest under section 43B Claim of interest u/s 36(1)(iii) - as per CIT there was a huge negative capital balance account of the assessee and on that basis he held that proportionate loans were utilized towards the negative capital account which tantamounted to utilization of the same for non business purposes and accordingly interest expenses relating to the same was not allowable - As noted that the assessee had explained to the ld.Pr.CIT that the loans appearing in his books of accounts were very old loans since 1999 and from RNSB and RCC Bank, and therefore, they could not be attributed to have been utilized for non-business purpose in the impugned year. Despite these explanations given by the assessee to the ld.Pr.CIT, the ld.Pr.CIT being aware of all these facts, he has still gone ahead to hold that interest expenses claimed by the assessee not allowable under section 36(1)(iii) - We are not in agreement with the ld.Pr.CIT on this aspect also, noting that the assessee has duly explained that there was no nexus between the loans and negative capital balance in the impugned year, the loans being very old pertaining to 1999. We agree with the ld.counsel for the assessee that there was no error in the order of the AO vis- -vis the allowability of claim of interest expenses under section 36(1)(iii) of the Act also. Thus order of the ld.Pr.CIT passed u/s 263 on the above two issues of disallowance is not sustainable in law, and there was no error in the order of the AO allowing both these claim to the assessee. Decided in favour of assessee.
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2023 (2) TMI 789
Income accrued or arose or deemed to accrues or arise in India - adjustment of notional interest - extension of word paid to payable in respect of interest under Article 11 of Indo-Cyprus treaty - assessee company is incorporated outside India - HELD THAT:- As decided in assessee own case [ 2021 (9) TMI 529 - ITAT DELHI] nowhere the TPO/AO has been able to establish that notional interest satisfy the test of income arising or received under the charging provision of Income Tax Act. If income is not taxable in terms of section 4, then chapter X cannot be made applicable, because section 92 provides for computing the income arising from international transactions with regard to the ALP. Only the interest income chargeable to tax can be subject matter of transfer pricing in India. Making any transfer pricing adjustment on interest which has neither been received nor accrued to the assessee cannot be held to be chargeable in terms of the Income Tax Act read with Article 11(1) of DTAA. Here it cannot be the case of accrual of interest also, because none of the investee companies have acknowledge that any interest payment is due, albeit they have been requesting for waiving of interest of even coupon rate of 4%, leave alone the return of 18% which was dependent upon some future contingencies. Assessee despite all its efforts has acceded to such request. As in view of Article 11(1) we hold that, only the interest which has actually been received can only be subject matter of taxation and no TP adjustment can be made on some hypothetical receivable amount which was contingent upon certain event which has actually not been taken place during the year. Thus, the order of the Direction of the DRP is upheld and the grounds raised by the revenue are dismissed. Since, the matter stands adjudicated by various orders of the Tribunal and Hon ble Courts that the word paid cannot be extended to payable in respect of interest under Article 11 of Indo-Cyprus treaty, we hereby allow the appeal of the assessee - Decided in favour of assessee.
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Customs
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2023 (2) TMI 788
Import of betel nuts - fixation of price - Constitutional Validity of Notification dated 4-6-2008 issued by the Director General of Foreign Trade - delegation of power - specific bar under Section 6(3) of the Foreign Trade (Development and Regulation) Act, 1992 - applicability of principle of lex specialis derogat legi generali. HELD THAT:- The import of betel nut/areca nut was permissible freely, provided the c.i.f. value (cost, insurance and freight) is Rs. 35 per kg. and above and subject to payment of customs duty prescribed by the Central Government. The reason for the Central Government for taking such a policy decision has also been explained by the appellants. Whether the impugned Notification issued by the DGFT is without jurisdiction in view of the specific bar under Section 6(3) of the Foreign Trade Act? - HELD THAT:- The Gujarat High Court had an occasion to deal with a similar Notification issued by the DGFT by prescribing a minimum c.i.f. value for cashew kernels and while dealing with the issue, the authentication order issued by the President of India in favour of the DGFT was considered in M/S. PAM AGRO INDUSTRIES A PARTNERSHIP FIRM 1 OTHERS VERSUS UNION OF INDIA 1 OTHERS [ 2021 (3) TMI 910 - GUJARAT HIGH COURT ] has held that DGFT has not exercised powers under section 3 of the Foreign Trade Act but has merely authenticated an order which relates to the DGFT in accordance with the authentication rules. Therefore, the contention raised by the petitioners that DGFT has no authority to issue such notification is not sustainable. Insofar as the Central Government authenticating the DGFT to issue the Notification, it must be deemed to be a notification issued only by the Central Government. Stricto sensu, the bar under Section 6(3) of the Foreign Trade Act would have applied only if the DGFT had exercised a statutory power - In the present case, the authentication at the best can only be held as an executive exercise of a power by the President of India through the DGFT. Hence, the impugned notification published in the Gazette under Section 5 of the Foreign Trade Act cannot be held to be ultra vires as was contended by the Learned Counsel for the Writ Petitioners. Even if the notification is taken to have been issued by the DGFT by virtue of authentication by the Central Government, whether such authentication can be made, in view of the specific manner/procedure provided under Section 6(3) of the Foreign Trade (Development and Regulation) Act, 1992, and where the Foreign Trade (Development and Regulation) Act, 1992, prescribes a procedure to be done in a particular manner? - HELD THAT:- Since the notification has been issued in line with Section 5 of the Foreign Trade Act and there are no illegality or diversion in the procedure since the notification was technically issued by the Central Government by authenticating the DGFT to issue the same. Thus, there was no delegation of power by the Central Government to DGFT and the Notification was issued in accordance with Section 5 of the Foreign Trade Act and the findings of the Learned Single Judge to the contrary are hereby set aside. Even if the impugned notification is taken to have been issued by the DGFT by way of authentication by the Central Government, whether the Central Government is entitled to place restriction on the import of areca nuts and fix the value under the Foreign Trade (Development and Regulation) Act, 1992 or such restriction of imports and fixation of tariff can be carried out only in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975? - HELD THAT:- The Central Government has been given very wide powers under Section 3(2) of the Foreign Trade Act which includes the power to prohibit, restrict or otherwise regulate in all cases or in specified classes of cases, import or export of goods. When any order is passed by the Central Government under Section 3(2) of the Foreign Trade Act, it shall be deemed to have been prohibited or restricted or regulated under Section 11 of the Customs Act. The Customs Tariff Act is nothing but an Act which provides for rates at which duties of customs shall be levied under the Customs Act as specified in the First and Second Schedules. This Act is not a stand-alone enactment and it goes along with the Customs Act. Hence, any order passed by the Central Government under Section 3(2) of the Foreign Trade Act must be considered to be an exercise of a wide power conferred on the Central Government and the provisions of the Customs Act and the Customs Tariff Act mutatis mutandis will automatically apply - the principle of lex specialis derogat legi generali will not have any application to the case in hand. There are no illegality in the issuance of the impugned notification dated 4-6-2008. The notification is only an expression of a policy decision taken by the Central Government and the DGFT was authenticated to issue the notification - petition dismissed.
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Corporate Laws
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2023 (2) TMI 787
Seeking dissolution of company - Section 481 of the Companies Act, 1956 - HELD THAT:- On perusal of the record of this report and in facts of this case and considering the ratio laid down by the Apex Court in the case of MEGHAL HOMES (P.) LTD. VERSUS SHREE NIWAS GIRNI KK. SAMITI [ 2007 (8) TMI 447 - SUPREME COURT] , the report deserves to be accepted. The Company, named, M/s. Yogi Polyester Ltd (In Liquidation) is hereby dissolved under Section 481 of the Act and the Official Liquidator attached to this Court stands discharged and is relieved as liquidator of M/s. Yogi Polyester Ltd. (In Liquidation). Application allowed.
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2023 (2) TMI 786
Seeking dissolution of company - section 481 of the Companies Act, 1956 - HELD THAT:- On perusal of the record of this report and in facts of this case and considering the ratio laid down by the Apex Court in the case of MEGHAL HOMES (P.) LTD. VERSUS SHREE NIWAS GIRNI KK. SAMITI [ 2007 (8) TMI 447 - SUPREME COURT] , the report deserves to be accepted, where it was held that This court do appreciate this aspect of the matter, having taken the view that the arrangement has to go back to the meeting of members, creditors, etc. of the company in terms of section 391 of the Act and once it is adopted or adopted with modifications with the requisite majority at the meeting, the arrangement would require a fresh scrutiny by the Company Court thereafter, we cannot avoid interfering with the decision of the Division Bench on the ground put forward by learned Senior Counsel of benefit to the workers. The Company, named, M/s. Mansukhram Textile Mills Pvt. Ltd. (In Liquidation) is hereby dissolved under Section 481 of the Act and the Official Liquidator attached to this Court stands discharged and is relieved as liquidator of M/s. Mansukhram Textiles Mills Pvt. Ltd.(In Liquidation). Application allowed.
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2023 (2) TMI 785
Seeking restoration of the name of the Company in the Register maintained by the Registrar of Companies (RoC), NCT of Delhi and Haryana - name was struck off on the ground that the company has done no business or operation for two immediately preceding financial years from the date of notice - HELD THAT:- The Audited Financial Statements for the Financial Years from 2014-15 to 2015-16 shows that the Appellant Company is having substantial movable as well as immovable assets and the Company was/is in operation when the name was struck off. Therefore, it cannot be said that the Appellant Company is not carrying on any business or operations. Hence, the order passed by the National Company Law Tribunal (New Delhi Bench, Court-II) as well as Registrar of Companies, NCT of Delhi Haryana is not sustainable in law. The name of the Appellant Company be restored to the Register of Companies subject to the compliances fulfilled - application allowed.
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PMLA
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2023 (2) TMI 784
Money Laundering - proceeds of crime - provisional attachment of property - gist of the objection raised by the ED is that the present writ petition is not maintainable in the High Court of Jharkhand - HELD THAT:- All that the petitioner-company wants is that its property should be released from attachment on its depositing the amount of value thereof . The petitioner-company has not raised any grievance against the investigation or adjudication, or even legality and proprietary of investigation and adjudication proceedings or for that matter against the attachment of other properties of the accused persons. In the present case, the proceeds of crime is in the form of money and in the prosecution complaint and supplementary complaint filed by the ED money-trail has been shown to lead to other properties but not to the subject-property. The right to property is a Constitutional right under Article 300-A of the Constitution of India and every citizen of the country has a right to deal with his property in whatsoever manner he wants to enjoy the property which shall include sale, lease, transfer, mortgage etc. Therefore the plea urged on behalf of the ED that the petitioner-company is in possession and enjoying the subject-property is not a valid objection and liable to be rejected summerily. The powers under Article 226 of the Constitution of India are plenary in nature and can be exercised by the High Court irrespective of any technical objection raised by the respondent. The prayer for release of the subject-property is accepted. The respondent no.2 is directed to accept the amount of Rs.12 Lakhs tendered by the petitioner-company through bank draft in the name of Directorate of Enforcement payable at Ranchi which shall be deposited in the interest-bearing account till completion of the trial in ECIR/RSZO/01/2015 - Petition allowed.
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Service Tax
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2023 (2) TMI 783
Invocation of extended period of limitation - non-payment of service tax - activity of take-away of food (take-away food items over the counter and not serving on the tables) - rent shared by the associated enterprise - privity of contract - composite services - period involved in the appeal is from April 2014 to June 2017 - HELD THAT:- The Circular dated 28.02.2011 issued by Ministry of Finance at the time when restaurant service was made taxable mentions that the levy was intended to be confined to the value of services contained in the composite contract and was not to cover either the meal portion of the composite contract or mere sale of food by way of pickup or home delivery. The clarification letter dated 13.08.2015 issued by the Deputy Commissioner also clarifies that in case of transaction involving pickup or home deliveries of the food sold by the restaurant, the dominating nature of the transaction is that of sale and not service, as the food is not served at the restaurant and no other element of service is offered. The said transaction would, therefore, not be leviable to service tax, being in the nature of sale only. The Madras High Court in ANJAPPAR CHETTINAD A/C RESTAURANT, M/S RSM FOODS (P) LTD, M/S. THALAPAKATTI HOTELS PVT. LTD, M/S PRASANAM FOODS (P) LTD. VERSUS JOINT COMMISSIONER, THE COMMISSIONER OF GST AND CENTRAL EXCISE, THE ADDITIONAL COMMISIONER OF GST AND CENTRAL EXCISE [ 2021 (6) TMI 226 - MADRAS HIGH COURT] , after examining the aforesaid Circular dated 28.02.2011 and the clarification letter dated 13.08.2015, also held that in take-away of food items service tax would not be leviable as it would be a case of sale. In the present case, when the department has accepted the decision of the Commissioner (Appeals) that no service tax is leviable on take-away food items, it is not open to the department to take a contrary stand in this appeal - it has to be held that no service tax can be levied on the activity of take-away of food items as it would amount to sale and would not involve any element of service. Levy of service tax - consideration received under the category of renting of immovable property - privity of contract - Whether permitting an associated enterprise to use a part of the premises for the sale of the product would amount to sub-letting? - HELD THAT:- It needs to be noted that the appellant had entered into a rental agreement with DIAL for leasing out premises at the airport, for which it paid a rental amount to DIAL. It also transpires that from the property leased out to the appellant, the appellant sells its own goods as well as goods of the associated enterprise purchased by the appellant - The associated enterprise is also not a party to the agreement between the appellant and DIAL for renting out the premises of the appellant. It is for this reason that the appellant claims that in the absence of a contractual relationship between the associated enterprises either with the appellant or DIAL, the amount paid by the associated enterprise cannot be subjected to service tax. According to the appellant, the amount paid by the associated enterprise to the appellant is not for any service but cost sharing between the associated enterprise and the appellant. The contention of the appellant that the consideration received by the appellant from the associated enterprise would not be leviable to service tax under the category of renting of immovable property deserves to be accepted. Appeal allowed.
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2023 (2) TMI 782
Levy of service tax - commercial construction service or not - construction service to GERMI (construction of a building is in respect of educational university which is under a trust) - HELD THAT:- The lower authorities had no occasion to deal with this issue. In this position, we are of the view that the issue in respect of construction of GERMI needs to be re considered from the angle of work contract service. As regard the issue of service tax on supply of furniture, the Lower Authority have held the said activity as commercial construction and demanded tax accordingly. Mere supply of readymade furniture cannot be classified as commercial construction service supply of furniture is nothing but sale of furniture. Hence the same cannot be classified as taxable services. Accordingly the service tax demand of Rs.52,228/- is not sustainable and the same is set aside. Demand of Service tax of Rs. 34,483/- on the activity of strengthening of culverts on roads - HELD THAT:- This service is directly connected to the road and any work related to the public road is excluded from the service of commercial or industrial construction. For this reason the same cannot be taxed under commercial or industrial construction service - the demand of Rs. 34,483/- is set aside. The appeal relates to demand ot Rs. 52,228/- of supply on furniture and Rs. 34,483/- relates to strengthening of culverts on road is allowed. Appeal relates to the issue of construction of building for GERMI is allowed by way of remand to the Adjudicating Authority for passing a fresh order on all the issues. Appeal allowed in part and part matter on remand.
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2023 (2) TMI 781
Levy of Service Tax - Management, Maintenance Repair Service or not - providing plant A, B D for exclusive use for the manufacture of goods on the input and packing material supplied by M/s. Gharda Chemicals Ltd (GCL) - case of the department is that by providing the plant exclusively for use by M/s. Gharda Chemicals Ltd the appellant have provided the services of Management, Maintenance or Repair and the same is liable to service tax under section 65 (105) (zzg) of the Finance Act, 1994. HELD THAT:- From the plain reading of the definition of Management, Maintenance Repair Service the main condition is that the Management, Maintenance Repair Service of the plant should belong to the service recipient and not to the service provider. In the present case the order impugned has held the appellant as service provider and Gharda Chemicals Ltd as service recipient. It is also not disputed that it is the service recipient M/s GCL is paying for the use of manufacturing facilities of the appellant for manufacture of the excisable goods of M/s Gharda chemicals. In this fact the appellant using their own plant machinery equipment that too for production of excisable goods on behalf of M/s Gharda chemical Ltd. In this undisputed fact by any stretch the activities of the appellant cannot be classified under Management, Maintenance Repair Service. The show cause notice has not alleged that the principle manufacture has not cleared their final product without payment of excise duty. Accordingly the activities at the most can be classified under sub clause of production or processing on behalf of the client under business auxiliary service - The activities carried out by the appellant are undoubtedly production of goods on job work basis on behalf of GCL. This position will not alter irrespective of fact that whether the plant, machinery equipment are used exclusively for GCL or partly for GCL or partly for others, therefore, on this basis the activity cannot be classified as Management, Maintenance Repair Service. Thus, the activity of the appellant is indeed manufacture of excisable goods in terms of section 2(f) of CEA, 1944. As per the definition of business auxiliary service manufacture of excisable goods in terms of section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of business auxiliary service. For this reason also, the demand of service tax is not sustainable. Appeal allowed.
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2023 (2) TMI 780
Error in payment of service tax - service tax registration number of another unit used wrongly - Non-payment of Service Tax at their Anjar unit on services received from abroad on reverse charge basis - instead of Anjar unit the service tax paid by the head office at Mumbai - HELD THAT:- There is no dispute as the same was admitted in the show cause notice as well as in the impugned order that the service tax of Rs. 78,17,225/- was deposited by the appellant s head office at Mumbai under different registration number of input service distributor. The appellant s Anjar unit is not a separate entity as the same is part of a single entity i.e. Welspun Gujarat Stahi Rohren Ltd which is now known as Welspun Corp Ltd. Therefore, the payment made by head office under different registration number cannot be demanded from the Appellant s Anjar Unit and if at all there is discrepancy of different registration of head office the department could have adjusted service tax paid by the head office against the service tax due of appellant s Anjar unit. From the Circular No 58/7/2003 dated 20.05.2003 it is clear that the discrepancy such as payment of service tax under wrong registration can be adjusted against the correct registration for which the service tax is actually due. In the present case even though the service tax was paid under the registration of head office Mumbai but the appellants Anjar unit as well as their Mumbai head office is one single entity. Accordingly, in the light of the above circular the department could have made the necessary adjustment instead of raising the demand twice on the appellant. The issue has been well settled in many cases. Reliance may be placed in the case of M/S. WESTERN COALFIELDS LTD VERSUS COMMISSIONER OF EXCISE SERVICE TAX [ 2019 (4) TMI 1075 - CESTAT MUMBAI] where it was held that As long as the duty is paid and credited duly to the Govt. of India account, procedural infractions which are curable in nature will not nullify such payments. Demanding such duty second time is certainly harsh and has no sanction of law, more so along with interest and penalty. From the above judgments and board circular cited it is settled that merely because the service tax paid under different registration but by the same company, cannot be tent a mount to non- payment of service tax. Hence, the demand of service tax which was already paid cannot be made twice. Accordingly, demand of service tax in this case is also not sustainable. Appeal allowed.
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2023 (2) TMI 779
Levy of Service tax - Construction of Residential Complex Service - Works Contract Service - appellant were engaged by Gujarat State Police Housing Corporation Ltd. (GSPHCL) - HELD THAT:- The definition of residential complex in Works Contract Service and Construction of Residential Complex Service excludes from the levy of Service Tax complex which is constructed by a person directly engaging any other person for designing or planning of the lay out and the construction of such complex is intended for personal use as residence by such persons. This expression has been interpreted by Tribunal in the case of M/S. SIMA ENGINEERING CONSTRUCTIONS, S. RAJANGAM, T.M. SARAVANAN, M/S. MARIMUTHU GOUNDER SONS VERSUS CCE, TRICHY [ 2018 (5) TMI 405 - CESTAT CHENNAI] where it was held that similar issue decided in the case of Nitesh Estates Vs. Commissioner of Central Excise [2015 (11) TMI 219 - CESTAT BANGALORE], where it was held that If the land owner enters into a contract with a promoter/builder/developer who himself provided service of design, planning and construction and if the property is used for personal use then such activity would not be subject to service tax. The use of the residential complex by (GSPHCL) is excluded from the definition of residential Complex as intended for personal use as residence by such persons - Appeal allowed.
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Central Excise
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2023 (2) TMI 778
Order beyond the scope of show cause notice - Rejection of stay application filed by the assessee against the demand of duty - stay granted only with respect to demand of interest and penalty - refusal to grant waiver of pre-deposit of the amount during the pendency of the appeal - HELD THAT:- In view of the fact that the main appeal is still pending and the arguments advanced are purely legal, present appeal is being disposed of at the fresh stage with the consent of parties. Submission is, the adjudicating authority could not have travelled beyond the scope of the show cause notice. Vide show cause notices dated 19.10.2007 and 29.4.2008, the assessee was only required to show cause why its claim of CENVAT credit may not be disallowed against the goods (specified in the notice) as they did not fall within the definition of the term 'Capital Goods'. No allegation was levelled in the show cause notice to disallow such claim on merits that input goods had not been purchased or received or used. However, while passing the adjudication order dated 14.10.2009, the adjudicating authority has fallen in error in rejecting the claim on the basis of utilisation which was not an issue to be adjudicated. It cannot be disputed that the issue on which adjudication was sought to be made and the issue that has been adjudicated appear to be different. Insofar as the issue on merits had not been opened in the show cause notice, prima facie case is made out for grant of interim protection. The present appeal is disposed of with the observation that the Tribunal shall make best efforts to hear and decide the above appeal within a period of three months.
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2023 (2) TMI 777
Violation of principles of natural justice - non-grant of opportunity of hearing - denial of cross-examination - entire Show Cause Notice is based on the Statements recorded under Section 14 of Central Excise Act and the impugned order has confirmed the demand qua M/s.Gyscoal Limited on the basis of those statements which are not subjected to cross examination - HELD THAT:- It is observed that all the hearings were granted physical hearing that too during complete lockdown and last hearing was virtual hearing granted only to main noticee with respect to only one show cause notice and noticee had sent the correction in record of personal hearing, which is not taken on record. However, there is an admission on the part of the Original Adjudicating Authority in its order in para 38.2. In this view, non-granting of effective hearing itself is in gross violation of natural justice. Denial of cross-examination - HELD THAT:- The Hon ble Apex Court in case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [ 2015 (10) TMI 442 - SUPREME COURT] , was dealing with a case where the assessee had not been allowed cross examination of the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order. It was held by Supreme Court that not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. The authority concerned is seeking to rely upon certain statements following the various decisions of this Court, the dialect of which is not necessary and the decision of the Apex Court is sufficient enough to bring to the fore the requirement of permitting the cross examination of witnesses whose statements are sought to be relied upon by the authorities - the order impugned passed by the authority concerned deserves to be quashed and set aside. Let the adjudicating authority decide the issue of the cross examination of the witnesses in two weeks thereafter - petition alllowed.
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2023 (2) TMI 776
Violation of principles of natural justice - non-availment of opportunity of cross-examination of the witnesses - non-grant of personal hearing as provided under the statute (audi alterem partem) - ex-parte order passed without hearing the petitioner or its authorized representative - HELD THAT:- This Court at the time of issuance of notice, had referred to the Section 33 of the Central Excise Act where the petitioner has pointed out that the action is violative of Section 33A of the Central Excise Act which otherwise, contemplates an opportunity of hearing to be granted minimum three times. Reference also made to the Circular No.1053/2/2017 dated 10.3.2017 issued by the Central Board of Excise and Customs, Ministry of Finance (Department of Revenue), New Delhi, where subject is `Master Circular on Show Cause Notice, Adjudication and Recovery Regarding . It makes it quite clear that the department had, by way of the present circular streamlined and reiterated the requirement of grant of three opportunities of personal hearing with sufficient interval to the noticee who can avail the opportunity of being heard. It also insist on the separate communications to be made to the noticee for each opportunity of personal hearing. In fact, the separate communication for each hearing extension would be issued at sufficient interval - Maintaining of record of personal hearing and written submissions made during the personal hearing is also insisted upon by this very circular. It also follows that the adjudication order should be a speaking order which should stand the test of legality, fairness and reason of the appellate forum. It would be pertinent to note that the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The order impugned passed by the authority concerned deserves to be quashed and set aside remitting the matter to the stage where it was left for the authority concerned to avail an opportunity within two weeks of the date of receipt of copy of this order through e-mail @ [email protected] as also through R.P.A.D. Once this opportunity of personal hearing is granted, without seeking any further adjournment, the petitioner shall cooperate - Petition allowed.
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2023 (2) TMI 775
Process amounting to manufacture or not - waste and scrap is a result of manufacture as defined in section 2 (f) of the Central Excise Act or not - whether the used/broken pipes which are generated as waste in this case arise out of the process of manufacture or out of the process of maintenance of the capital goods? - HELD THAT:- When some waste is generated in the process of manufacture of the goods it comes out of the inputs directly or the inputs transform into some form. Input is that substance or material which, after transformation, becomes the output. By contrast, capital goods are those goods which are used in the manufacture or production of the goods without they themselves getting transformed. A block of iron, for instance, is an input to manufacture a machine part. In the process of manufacture the turnings and other forms of steel scrap arise. However, the lathe machine, the forging equipment, etc. which participate in converting the block of iron into the final part are capital goods. In this case, the pipes do not get consumed and do not get transformed into oil. They are used to manufacture/production of oil. Regardless of the fact that the use of pipes is essential for production of oil, the pipes by themselves are capital goods and are not inputs. When such pipes need repair or replacing and waste is generated in the process, it is a waste generated during the repair or maintenance of capital goods and not during the process of production of oil or any process incidental or ancillary to it. For this reason, no excise duty can be charged on the scrap of pipes produced in this manner. Similarly, the empty barrels are only packing material in which the inputs are received and these barrels are not generated during the process of manufacture. Therefore, no excise duty can be charged even on that scrap. The impugned orders cannot be sustained and need to be set aside - Appeal allowed.
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2023 (2) TMI 774
Interest on refund of pre-deposit - Relevant Date - Relevant time for calculation of interest (on pre-deposit in a case where the Tribunal has finally passed the final order setting aside the demand) - Entitlement for interest from the date of deposit of pre-deposit or after the three months from the date of filing of refund application - HELD THAT:- On this issue Hon ble Supreme Court/ High Courts and this Tribunal has taken a view that in case of pre-deposit, interest should be given from the date of deposit. Reliance placed in the case of PRINCIPAL COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, NEW DELHI VERSUS M/S EMMAR MGF CONSTRUCTION PVT. LIMITED [ 2021 (12) TMI 243 - CESTAT NEW DELHI] where it was held that The issue is not longer res integra as the Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] , following the ruling of the Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] have held that such amount deposited during investigation and /or pending litigation is ipso facto pre-deposit and interest is payable on such amount to the assessee being successful in appeal, from the date of deposit till the date of refund. In the case of COMMISSIONER OF CENTRAL EXCISE, PANCHKULA VERSUS M/S RIBA TEXTILES LIMITED [ 2022 (3) TMI 693 - PUNJAB HARYANA HIGH COURT] the Hon ble Punjab Haryana High Court observed that Section 142 of the Act when read with Section 2(48) of the Act is a complete answer to the plea raised by the appellant qua the issue of jurisdiction. The provision explicitly provides that every claim of refund shall be dealt under the existing law i.e. Central Excise Act, 1944 and not by the provisions of the Act. Thus the plea of transfer of jurisdiction due to GST regime is not available to the appellant. It is settled that the appellant are entitled for the interest on refund of pre-deposit amount @6% from the date of deposit till the date of refund. Appeal allowed - decided in favour of appellant.
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2023 (2) TMI 773
Time Limitation - Refund of unutilized PLA balance - whether in respect of refund of unutilized PLA balance, limitation of one year, provided under Section 11B is applicable from the date of deposit in PLA? - HELD THAT:- The deposit in PLA is not a payment of duty whereas it is an advance deposit for future payment of duty. The PLA balance takes the color of duty only when duty payable is debited from the PLA balance. In the present case, undisputedly the PLA balance for which refund is sought for is out of advance deposit made by the appellant in PLA and out of that unutilized balance has been claimed as refund. Therefore, limitation of Section 11B is not applicable. This Tribunal considered identical issue in the case of SUN PHARMACEUTICAL INDUSTRIES LTD VERSUS C.C.E. S.T. -DAMAN [ 2022 (6) TMI 1176 - CESTAT AHMEDABAD ] has held that in case of PLA balance, it is not deposited as a duty but it is deposited as advance towards the duty. The PLA Amount takes the color of excise duty only when it is utilized for payment of duty on clearance of excisable goods. The unspent balance of PLA is only advance not duty therefore, Section 11B is not applicable. Appeal allowed - decided in favor of appellant.
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2023 (2) TMI 772
Levy of penalty under Rule 26(1) of Central Excise Rules, 2002 - company was adopting the valuation as per Section 4 of Central Excise Act, 1944 whereas the department s claim is that value should be determined in terms of Section 4A - suppression of facts with intent to evade duty or not - HELD THAT:- There is no dispute that the company M/s. JSL Industries Ltd. have been clearing their goods on payment of excise duty though valuing the goods under Section 4 and they were issuing the central excise invoices. The only dispute is that whether the goods should be valued under Section 4 or Section 4A. The company s stand was that they were supplying goods to industries therefore, they were under belief that goods should be valued under Section 4 - There are no mala fide intention on the part of these appellants. The penalty is set aside - appeal allowed.
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CST, VAT & Sales Tax
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2023 (2) TMI 771
Levy of Sales Tax - customised Information Technology (IT) software - constitutional validity of Entry 39(14) of Schedule IV of the then Andhra Pradesh Value Added Tax Act, 2005 - whether declaration that Section 65(53)(a) read with Section 65(105)(zzzze) of the Finance Act, 1994, is ultra vires and unconstitutional? - HELD THAT:- Tata Consultancy Services provides consultancy services, including computer consultancy services. As part of their business they prepare and load on customers computers custom-made software (uncanned software) and also sell computer software packages off the shelf (canned software). The canned software packages are of the ownership of companies/persons who have developed those software. Appellant was a licensee with permission to sub-licence these packages to others. The canned software programs are programs like Oracle, Lotus, Master Key etc. In respect of canned software, Commercial Tax Officer, Hyderabad, had passed a provisional order of assessment under the provisions of the Andhra Pradesh General Sales Tax Act, 1957, holding that the software were goods and accordingly, sales tax was levied thereon. The Supreme Court in TATA CONSULTANCY SERVICES VERSUS STATE OF ANDHRA PRADESH [ 2004 (11) TMI 11 - SUPREME COURT] has held that the test to determine whether a property is goods for purposes of sales tax is not whether the property is tangible or intangible or incorporeal. The test is whether the item concerned is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored, possessed etc. Admittedly, in the case of software, both canned and uncanned, all the above attributes are present. Thus, according to the Supreme Court, the word goods as defined in Article 366(12) of the Constitution of India is very wide and includes all types of movable properties, whether those properties be tangible or intangible. In case of software or sale of computer software it is clearly a sale of goods. Even an intellectual property, whether it be in the form of canvas or computer discs or cassettes and marketed, would become goods - Thus, unbranded software when it is marketed/sold may be goods. However, Supreme Court did not express final opinion on this aspect as this was not the issue before it. The question which fell for consideration of the Division Bench of the Karnataka High Court in SASKEN COMMUNICATION TECHNOLOGIES LTD. VERSUS JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEALS) -3 BANGALORE [ 2011 (4) TMI 566 - KARNATAKA HIGH COURT] was whether a contract for development of a software falls within the mischief of a works contract and whether upon development of the software it is vested with the customer from day one in which event whether it would amount to deemed sale under Article 336(29A)(b) of the Constitution of India? - it was held by the Karnataka High Court that the contracts in question were not works contract but contract for service simplicitor. Consequently, the orders passed by the taxing authority levying sales tax were set aside. The decision of the Supreme Court in Tata Consultancy Services clearly supports the contention of the Commercial Tax Officer that the development of software solutions carried out by the petitioner was nothing but sale of goods and therefore, exigible to sales tax under the VAT Act read with the CST Act. There are no merit in the challenge to the impugned orders dated 12.05.2008 - petition dismissed.
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