Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 3, 2023
Case Laws in this Newsletter:
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Ease in claiming deduction on amortization of preliminary expenditure - certain preliminary expenses which are required to approved by the Board (CBDT) - In order to ease the process of claiming amortization of these preliminary expenses, such condition is proposed to be removed.
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Extension of date of incorporation for eligible start-up for exemption - For 100% deduction on profit of eligible start-up business u/s 80-IAC will be available where such startups has been incorporation before 1st day of April 2024 (instead of 1.4.2023)
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TDS on certain income from units of a business trust u/s 194LBA - This budget removes the difficulty of obtaining certificate of lower deduction rate u/s 197, w.e.f. 1st April 2023.
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Relief to start-ups in carrying forward and setting off of losses - Relaxation in 51% holding of shares for the purpose of carry forward of losses of eligible star-up u/s 80IAC, provided carried forward of such losses has been allowed for 7 years from the year of incorporation upto 10years from date of incorporation. - Eligible start-up u/s 80IAC allowed to carried forward of losses for period of 10 years from date of incorporation as amended by proviso to sec 79(1).
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Taxability of Gift received by Non Residents / and Not ordinarily residents from a Person in India - Deeming provision u/s 9 extended to not-ordinarily resident with NR for the gifts / any sum of money more than 50,000/- as referred u/s 56(2)(x)
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Penalty for cash loan/ transactions against primary co-operatives - Section 269SS / 269T - Relief given to Primary Agricultural Credit Societies (“PACS”) and Primary Co-Operative Agricultural and Rural Development Bank (“PCARD”) On loan taken or deposit of such amount from any person in cash upto ₹2,00,000 and penalty will impose on any any sum exceeds ₹2,00,000 w.e.f 1st April, 2023.
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Removal of exemption of news agency under clause (22B) of section 10 - Exemption available to news agency withdrawn from 1st April 2024. - They will also be free from application such receipts in the specified manner.
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Agnipath Scheme, 2022 - For the benefits of employee under agniveer scheme, contribution of 30% of his salary per month to corpus fund u/s 80CCH and govt will also deposit the same amount and after ending of his tenure such accumulated amount in corpus fund will be given to such agniveer employee as 'Seva Nidhi' with interest thereon. - Such amount shall be exempt in the hands of Agniveer employee u/s 10(12C)
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Relief to sugar co-operatives from past demand - excess price paid for purchase of sugar cane over and above SMP shall be allowed as deduction for the period prior to 2016-17 as a one time measure to avoid litigation and clarity.
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Payment to MSME is allowed on actual payment basis - Any expenditure shall be allowed only if payment to MSME within 15 days or 45 days as the case may be - section 43B is being amended.
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SEZ - Repatriation of Foreign Exchange Earning of sales proceeds must be brought in India within six months from the end of the Previous Year or extended period - Benefit of export shall be available only if return is or before the due date of filing of ITR u/s 139(1)
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Business profit - benefits and perquisites in cash - the apex courts have interpreted that if the benefit or perquisite are in cash, it is not covered within the scope of this clause of section 28 of the Act - Now, the clause (iv) of section 28 is being amended so as the provisions of said clause also applies to cases where benefit or perquisite provided is in cash or in kind or partly in cash and partly in kind.
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Income Tax - Rebate u/s 87A - Benefit of full exemption from Income is extended where the total income is not exceeding Rs. 7 lakhs as computed under the New Tax Regime u/s 115BAC - For the old tax regime, the full tax exemption is limited to Rs. 5 lakhs only as earlier.
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AMENDMENTS TO THE CUSTOMS ACT, 1962 - Due to increase in Custom Duty these items will get costlier Compounded rubber, Articles made from gold bars, Electric Kitchen chimneys, Import of Electronic Vehicle, Imported bicycles and toys, Silver & Imitation Jewelry. whereas decrease in custom duty will make these items cheaper Open cell of TV Panels, Seeds of Lab-grown diamonds, Shrimp feed, Machinery for lithium ion batteries, Raw materials for EV industry & Certain inputs for mobile phone manufacturing.
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Rate of Income Tax - Now the facility of "new tax regime" is available to individual or HUF, association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person.
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TDS - Rates for deduction of income-tax at source during the financial year (FY) 2023- 24 from certain incomes other than “Salaries”. - now winning amount from online gaming is taxable @ 30%.
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Exemption u/s 11 - denial of the Registration u/s 12AA - The genuineness of the activities would mean to see that activities are not camouflage, bogus, artificial and should verify whether the activities are in accordance with the object of the institution. Commissioner (exemption) cannot extend the scope of the enquiry beyond that point. - CIT(E) has committed an error in not granting registration in the u/s 12AA read with Section 80G of the Act. - AT
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Taxability of rental income - The undisputed fact is that the ratio laid down in the case of Chennai Properties and Investments [2015 (5) TMI 46 - SUPREME COURT] squarely apply on the facts of the case, therefore, there is no error or infirmity in the decision of the CIT(A) wherein rental income has been taxed under the head profits and gains of business or profession. - AT
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RATES OF INCOME-TAX for the PY 2022-23 i.e. AY 2023-24 [As per previous year Budget and comparison with Budget 2023 proposals] - Notes In the new tax regime increase the tax slab and omitted 25% rate of tax as well as reduce surcharge rate from 37% to 25% for new tax regime, and allowed deduction Standard Deduction , Family pension deduction , Contribution to Agniveer corpus Fund u/s 80CCH, Rebate u/s 87A now upto 25000/-, that means not tax liability upto total income 7 lakhs.
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Addition u/s 56(2) - Allotment of shares - price less than the FMV - Merely by converting the share application money by allotting shares at a subsequent date cannot attract the provisions of section 56(2)(viia) as there is no change in the shareholding pattern subsequent to the allotment of shares by the subsidiary company. - AT
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Disallowance of employees’ contribution to Provident Fund as well as ESIC - Disallowance u/s 36(1)(va) - the assessee is not entitled for deduction u/s 36(1)(va) read with section 43B of the Act and the said amount has to be construed as deemed income of the assessee and added to his total income. - AT
Customs
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AMENDMENT TO SEVENTH SCHEDULE TO THE FINANCE ACT, 2001 - Cigarettes now will be more costly - as increase in custom duty (NCCD) on cigarettes of 16%.
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Violation of conditions of exemption notification - import of aircraft - the appellant has used the aircraft for its own use without any remuneration whatsoever, either from the passengers transported by it or from any other person. In the circumstances, it would be difficult to accept that the appellant has used the aircraft for providing ‘air transport service’ within the meaning of Rule 3(9) of the Aircraft Rules. - HC
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Re-assessment of goods / customs duty - Deputy Commissioner has clearly erred in issuing an assessment order under Section 17(5) after the goods were already cleared for home consumption. He had no authority to issue such an order because he could assess a bill of entry only if the goods are still “imported goods” and are “dutiable goods”. Once an order permitting clearance of goods for home consumption is given, they cease to be imported goods under Section 2(25) and cease to be dutiable goods under Section 2(14) - AT
Indian Laws
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New Provisions on Electronic Gold Receipt (EGR) :- 1. For the purpose of capital gain conversion of gold to EGR and vice versa is excluded from purview of 'Transfer" 2. Cost of acquisition of EGR shall be the cost of gold in hands of the assessee for the prupose of 'Capital Gain'. 3. Period of holding for EGR would include date on which gold first acquired and vice versa
IBC
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Initiation of CIRP - a dispute centering around breach of fiduciary duty by the Appellant in the context of Consultancy Agreement has been raised by the Respondents as their defence against the claim of the Appellant which is evidenced from the material placed on record. - NCLT rightly rejected the application - AT
PMLA
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Seeking grant of Bail - Money Laundering - round tripping of money - In the case on hand, the petitioner, claiming to be an uneducated or a little educated person, is said to have been deployed to act as Director in various Companies for several years by the main accused, which itself shows the understanding and relationship between them and the mens rea of the petitioner in abetting the offence of the main accused. - petitioner is not entitled to grant of bail at this stage - HC
Central Excise
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Area Based Exemption - Denial of budgetary support - It is material to note that it is not disputed that but for the controversy whether the petitioner was availing the benefit of the Notification, there is no other reason for denying the petitioner’s claim for budgetary support under the Scheme. - The respondents are directed to release the budgetary support amount as assessed to the petitioner in terms of the Scheme - HC
Case Laws:
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Income Tax
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2023 (2) TMI 59
Exemption u/s 11 - denying the Registration u/s 12AA of the Act and also rejected the exemption u/s 80G - RGG - Charitable activity u/s 2(15) - HELD THAT:- A plain reading of the object of the Company reveals that the assessee is having the object to carry out the activities of education and there is a specific bar/Clause that none of the object of the Company will be carried out on commercial basis . As also found that the assessee Company is engaging in imparting education in the field of mountaineering, rafting high attitude trekking, wilderness medicines and wilderness first aid. The assessee has produced the materials to show that the assessee company since from its existence from the year 2010 trained so many students including para military forces, BSF Officers. While disposing the application u/s 12AA of the Act the Commissioner is required to see whether the objects of the assessee are charitable in nature or not and also should verify whether the activities are genuine or not. The genuineness of the activities would mean to see that activities are not camouflage, bogus, artificial and should verify whether the activities are in accordance with the object of the institution. Commissioner (exemption) cannot extend the scope of the enquiry beyond that point. CIT(E) has committed an error in not granting registration in the u/s 12AA read with Section 80G of the Act. Therefore, we allow the Grounds of Appeal and further direct the CIT(E) to grant registration to the assessee u/s 12AA of the Act and also grant approval of registration u/s 80G of the Act afresh and grant approval subject to fulfillment of conditions mentioned in the said provision. Appeal of assessee allowed.
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2023 (2) TMI 58
TDS u/s 194C or 194I - account of CAM charges - Commissioner affirmed the action of the AO in holding that CAM charges paid by the Assessee are part of rent, liable for TDS u/s 194-I however, held that if the deductee has paid tax on the CAM charges received from the Assessee, then the Assessee cannot be treated as Assessee in default - HELD THAT:- In the instant case it is an admitted fact, as not refuted by the learned DR, that the Assessee has deducted TDS u/s 194C of the Act, and the facts are not distinguishable to the facts involved in Yum Restaurants India case [ 2022 (10) TMI 256 - ITAT DELHI] consequently we are inclined to direct the AO to recompute the tax liability accordingly.
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2023 (2) TMI 57
Deduction u/s 80P(2)(a)(i) - assessee received interest from Sardar Sarovar Narmada Nigam Limited (SSNL Ltd.) - HELD THAT:- Assessee received interest from Sardar Sarovaor Narmada Nigam Limited which is not co-operative society. The Interest earned on investment in SSNL Limited deposits though claimed as from the operational funds of the assessee society, the same is from surplus funds of the assessee society. The decisions cited by the Ld. AR in respect of Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Limited and others [ 2021 (1) TMI 488 - SUPREME COURT] has categorically mentioned in paragraph no.35 that interest or dividend income derived from Co-operative Society from investments with other Co-operative Society are entitled to deduct the whole of such income, but in earlier paragraph i.e. paragraph no.33 it has clearly stated/held that facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. Thus, in the entirety of the decision of the Hon ble Apex Court it has categorically differentiated the investments done in Co-operative Societies and non-co-operative Societies/non-members. In the present case, the SSNL Limited are not Co-operative Society or member as well as S.K. District Bank. Thus, the CIT(A) was right in confirming the disallowance. Appeal of the assessee is dismissed.
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2023 (2) TMI 56
Bogus LTCG - Addition u/s 68 - treating the purchase of shares as non-genuine and consequently sale of shares and LTCG as unexplained income of the assessee - HELD THAT:- The assessee,submitted before us that on 21.11.2014 the assessee sold 5000 shares in Bombay Stock Exchange at different dates and gained Rs.675 per share within 24 months. Thus, there was exorbitant scrip increase from 20.04.2012 to 27.12.2014. AO also made observations in the Assessment Order that the assessee bought shares at Rs.20./- when the market price was of Rs.17.45 on 02.04.2012 in fact. There was no basis from the analysis of the company that Kappac Pharma Limited scrip price shares. These objections are separate objections by the AO from the investigation report. The assessment order is not solely based on investigation but the AO has verified each aspect about increase in the share and how transaction took place in assessee s own case. Though the assessee has sold the scrip through Bombay Stock Exchange, it has not purchased from the stock exchange market and, therefore, the conclusion of the Assessing Officer was based on factual circumstances in assessee s own case. The purchase of Kappac Pharma Limited share is in fact appears bogus in nature as the scrip when having share price of Rs.17.45 was purchased by the assessee at Rs.20/- outside the regular stock exchange. The claim of the Ld. AR that the assessee has done the transaction and submitted his demat statement as well as transaction statement along with debit note and share certificate does not shun away the aspect that the assessee was very well aware about the brokers in respect of penny stock. Therefore, the contentions as well as the decision submitted by the assessee are not relevant in the present case. In fact, in case of Udit Kalra [ 2019 (4) TMI 834 - DELHI HIGH COURT ] decided has dealt with Kappac Pharma Limited scrip and held that the transaction in the said scrip was not genuine and bogus. Therefore, Assessing Officer and the CIT(A) has rightly denied LTCG exemption under Section 10(38) of the Act to the assessee. Appeal of the assessee is, therefore, dismissed.
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2023 (2) TMI 55
Revision u/s 263 - AO did not verify interest income offered and income as per Form 26AS - limited scrutiny case - assessee case was selected for scrutiny through CASS in the limited scrutiny to verify Large other expenses claimed in the profit loss A/c and mismatch in sales turnover reported in audit report ITR - HELD THAT:- We find in the case of Balvinderkumar [ 2021 (3) TMI 649 - ITAT DELHI] as quashed the 263 proceedings by holding that in case of limited scrutiny, the Assessing Officer cannot go beyond the reasons for which the matter was selected for limited scrutiny and therefore, it would not be open to pass a revisionary order u/s 263 by the CIT on other aspects. Since the case of the assessee in the instant case was selected for limited scrutiny to verify Large Other Expense claimed in the Profit Loss Account and mismatch in sales turnover reported in audit report and ITR therefore, the Assessing Officer could not have travelled beyond the reasons for which the case was selected for limited scrutiny. Therefore, the order cannot be said to be erroneous. It is the settled proposition of law that for invoking the jurisdiction u/s 263, the twin conditions namely the order is erroneous and the order is prejudicial to the interest of the Revenue must be satisfied. However, the order passed by the Assessing Officer in the instant case cannot be held to be erroneous although the same may be prejudicial to the interest of the Revenue. Thus, the twin conditions are not satisfied. Therefore, we are of the considered opinion that the learned PCIT/CIT could not have initiated proceedings u/s 263 - Appeal filed by the assessee is allowed.
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2023 (2) TMI 54
Addition u/s 68 - Addition of agricultural income as unexplained cash credit - main grievance of the lower authorities in the instant case is that the agricultural income is earned by the assessee in the distant location at Beed whereas the cash deposits were made by the assessee in a bank account maintained at Dadar - HELD THAT:- It is not in dispute that assessee had furnished entire cash book containing the cash inflows from various sources and cash outflows. Hence, what is to be seen is availability of positive cash balance with the assessee on each date of making cash deposits. In the instant case, the same has been duly complied with by the assessee as she is having sufficient cash balances in her books to make cash deposits in the bank account. It is not the case of the Revenue that the agricultural income earned by the assessee together with dairy receipts in cash were used by the assessee for some other expenses and the same is not available with her as cash source. Once the nature and source of cash deposits made in the bank account had been duly explained by the assessee with cogent evidences, there cannot be any addition u/s.68 of the Act as unexplained cash credit - no hesitation to direct the ld. AO to delete addition made - Decided in favour of assessee. Addition on account of gift received by the assessee from HUF by treating the same as undisclosed income - HELD THAT:- It is not in dispute that money has been received by the assessee from HUF as gift. In any case, the same would be exempt u/s.10(2) of the Act in the hands of the assessee individual as admittedly the said amount has been received by the assessee out of the current year s income of the HUF, which fact is evidenced from the financial statements of HUF and scrutiny assessment order of HUF u/s.143(3) of the Act for A.Y.2012-13. No hesitation in directing the ld. AO to delete the addition made towards gift received from HUF. Accordingly, the ground No.2 raised by the assessee is allowed.
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2023 (2) TMI 53
Correct head of income - treatment of surplus fund out of the sale of properties - business income as treated by the Assessing Authority or the capital gain as claimed by the assessee - whether the Assessing Authority justified to treat the transaction under the different head of income? - HELD THAT:- The assessee claimed it as gain arising out of transfer of capital asset. On the other hand, the AO treated it as business receipts arising from real estate business. Assessee laid great stress on intent of the assessee. Considering the fact that the properties in quantum were held for considerable longer period of time, it is not the case where the properties have been sold within a short span of time after their acquisition. Coupled with the fact that the assessee is not engaged into any systematic real estate business activity. Thus hold that the authorities below erred in treating the transaction as real estate business transaction under the facts and circumstances of the present case - we hereby direct the AO to delete the impugned addition. Thus, grounds raised by the assessee are allowed.
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2023 (2) TMI 52
Taxability of rental income - CIT-A held income of the appellant is chargeable under the head Income from Profits and Gains of Business and Profession as against the income offered to tax under the head Income from House Property by the appellant - Deduction of Interest paid on loan to acquire the property - disallowance u/s. 40(a)(ia) HELD THAT:- The undisputed fact is that the ratio laid down in the case of Chennai Properties and Investments [ 2015 (5) TMI 46 - SUPREME COURT] squarely apply on the facts of the case, therefore, there is no error or infirmity in the decision of the CIT(A) wherein rental income has been taxed under the head profits and gains of business or profession. Once the income has been held to be taxed under the head profits and gains of business or profession the same has to be computed as per the provision of section 28 to section 43D of the Act and to this extent also there is no infirmity in the directions of the CIT(A). Once the assessee has filed form 26A in respect of the interest payment the same has to be considered in the light of the provisions of section 201 of the Act vis a vis the applicability of the provision of section 40 (a)(ia) of the Act. Accordingly the directions of the CIT(A) are modified and the AO is directed to consider the claim of expenditure in the light of the relevant provisions of the Act after making due verification from the recipients of the interest. With the above modifications the appeal of the assessee is partly allowed.
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2023 (2) TMI 51
Delayed deposit of Employees Contribution to ESI/PF - assessment u/s 143(3) - Delay in depositing the employees contribution and the contribution has been deposited beyond the date stipulated under the relevant Fund Act - As argued disallowance made by the CPC Bengaluru while processing the return u/s 143(1) of the Act is beyond the scope of provisions of section 143(1(a) of the Act and, therefore, cannot be sustained - HELD THAT:- We have carefully perused the decision of the co-ordinate bench in the case of M/s P R Packaging Services [ 2022 (12) TMI 841 - ITAT MUMBAI] as not given any independent finding but has simply relied upon another decision of Kalpesh Synthetics Pvt Ltd [ 2022 (5) TMI 461 - ITAT MUMBAI] wherein the co-ordinate bench has based its decision on the interpretation and binding decision of the Hon'ble Jurisdictional High Court. In the case of Kalpesh Synthetics Pvt Ltd [supra], the Tribunal has held that the CPC Bengaluru cannot override the binding decision of the Hon'ble Bombay High Court while making the impugned disallowance on account of delay in the deposit of employees contribution to PF/ESI. The co-ordinate bench has ignored the binding ratio decidendi of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd [ 2022 (10) TMI 617 - SUPREME COURT] Hon'ble Supreme Court has categorically held that the employees contribution deposited after respective due date cannot be allowed as deduction, and, therefore, it would be incorrect to say that the decision of the Hon'ble Supreme Court is applicable only in the case of an assessment farmed u/s 143(3) of the Act. In our considered view, the ratio decidendi is equally applicable for the intimation framed u/s 143(1) of the Act. Now coming to the challenge that the impugned adjustment is beyond the powers of the CPC Bengaluru u/s 143(1) of the Act is also not correct. In light of the aforementioned decision of the Hon'ble Supreme Court [supra], as mentioned elsewhere, it cannot be stated that the impugned adjustment u/s 143(1) of the Act is beyond the powers of the CPC, Bengaluru. Power under sub-section (2) of section 143 of the Act leading to the passing of an order under subsection (3) thereof, is to be undertaken where it is considered necessary or expedient to ensure that the assessee has not understated income or has not computed excessive loss, or has not under paid the tax in any manner, If any narrow interpretation is given to the decisions of the Hon ble Supreme Court in the case of Checkmate Services Pvt Ltd [supra], it would not only defeat the very purpose of the enactment of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees contribution is deposited after the due date and in some cases the employer may not even deposit the employees contribution and those whose returns have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance. We are of the considered view that the ratio decidendi of the Hon'ble Supreme Court is equally applicable to the intimation u/s 143(1) of the Act and, therefore, the decision of the co-ordinate bench relied upon by the assessee is distinguishable. Therefore, respectfully following the binding decision of the Hon'ble Supreme Court [supra], all the three appeals of the assessee are dismissed and that of the revenue is allowed.
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2023 (2) TMI 50
Rectification of mistake u/s 154 - rectify the charge of interest income under the head Income from Other Sources[IOS]- contention of the assessee firm that the said amount of interest was wrongly added while filing ITR - HELD THAT:- The appellant s retuned income, after due examination and verification was accepted by an order dt. 07/12/2017 u/s 143(3) - Subsequently, on the receipt of demand intimation from CPC, the appellant finding fault with the tax liability determined u/s 143(3) of the Act, filed a rectification application dt. 14/05/2019 u/s 154 seeking thereby deletion of interest income charged to tax under IOS, alleging it as erroneously crept-in while filing the ITR, which both the Ld. TAB rejected as falling outside the jurisdiction of section 154 of the Act. In our considered view, no error can be said to be apparent on the face of the record if it does not manifest or self-evident and requires an examination or argument to establish it. As in the present case, the appellant after culmination of regular assessment proceedings brought up the matter u/s 154 before the Ld. TAB alleging the interest income charged to tax u/s 143(3) of the Act as unearned and wrongly crept-in in the ITR, which invariably requires to be established so only by re-examination of records which ispo-fact falls outside the jurisdiction of section 154 of the Act. Since the plea of the appellant is neither visible nor obvious nor self-evident on the face of the records which can be established without having re-examined the facts in the light of evidential document and without any lengthy and complicated arguments, hence to our considered view, sails out of apparent from record, for the reasons we approbate the action of both the Ld. TAB in the light of Hon ble Supreme Court s judgment of ITO Vs Volcart Bros. [ 1971 (8) TMI 3 - SUPREME COURT] categorically held that the mistake apparent from records must be obvious and patent, that is, the mistake may be a mistake of fact or mistake of law but it must not involve a debatable point of law. Appeal dismissed.
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2023 (2) TMI 49
Unexplained expenditure - payment of interest in cash which has not been recorded in the books of accounts - AR submitted that this enhancement of the assessment by the Ld. CIT (A) was made without providing any proper opportunity to the assessee - HELD THAT:- In this case, we find that no such opportunity was provided to the assessee. Therefore, following the principles of natural justice, we are of the considered view that the assessee shall be provided a reasonable opportunity with respect to enhancement of disallowance of interest - Accordingly, in order to provide a reasonable opportunity, we remit the issue back to the Ld. CIT(A) for deciding the issue afresh - Ground raised by the assessee is allowed for statistical purposes. Addition u/s 56(2) - allotment of shares - allegation that, appellant had received shares for a sum less than the FMV - HELD THAT:- In the instant case it is established that the assessee is holding 99.68% of the equity shares in the subsidiary company viz., M/s. UTPL. The assessee company being the holding company fully controls the management and affairs of M/s. UTPL. It is also noted that the entire assets and liabilities of the subsidiary company also belong to the assessee company as being a major shareholder and also the holding company. Considering the relationship between the assessee company and M/s. UTPL the allotment of the further equity shares in M/s. UTPL (subsidiary company) to the assessee company (holding company) does not alter neither the share holding pattern nor the ownership of the assets by the holding company. Section 56(2)(viia) is being introduced as an anti-abuse measure pursuant to abolition of Gift Tax Act. In the instant case, the assessee has made payments towards share application money in the earlier years to the subsidiary company which was not disputed by the Ld. Revenue Authorities. It was also submitted that only the allotment was made during the impugned assessment year at face value based on the share application money already made by the assessee company being the holding company. It is noted that the share application money, share capital and reserves and surplus are ownership funds and belong to the share holders. Merely by converting the share application money by allotting shares at a subsequent date cannot attract the provisions of section 56(2)(viia) as there is no change in the shareholding pattern subsequent to the allotment of shares by the subsidiary company. We are of the considered view that the provisions of section 56(2)(viia) cannot be invoked in the instant case considering the peculiar circumstances and hence we delete the addition made by the Ld. Revenue Authorities. - Decided in favour of assessee.
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2023 (2) TMI 48
Disallowance of employees contribution to Provident Fund as well as ESIC - Disallowance u/s 36(1)(va) - employees contribution towards PF though the same were paid before the due date for filing of return - HELD THAT:- In the present case, it is an admitted fact that the payment of employees contribution to the provident fund was made before the due date of filing of return of income u/s 139(1) of the Act but beyond the due date as provided in the respective Statutes. Essentially the condition precedent for deduction is that therefore, such amounts which are held in trust for the employees should be deposited by the employer on or before the due date as prescribed under the relevant Statutes - if this approach and reasoning is adopted then the non-obstante clause u/s 43B or anything contained in that provision would never absolve the assessee-employer from its liability to deposit employees contribution on or before the due date as mentioned in the respective enactments as a condition for deduction Respectfully following the judgment of Hon'ble Supreme Court in CHECKMATE SERVICES P. LTD. VERSUS COMMISSIONER OF INCOME TAX-1 [ 2022 (10) TMI 617 - SUPREME COURT] we hold that the assessee-employer was duty bound to deposit the employees contribution to provident fund within the due date as mentioned in the respective Statutes. Since this was not done the assessee is not entitled for deduction u/s 36(1)(va) read with section 43B of the Act and the said amount has to be construed as deemed income of the assessee and added to his total income. We do not find therefore, any infirmity with the findings of the Revenue authorities and both the appeals of the assessee are dismissed.
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Customs
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2023 (2) TMI 47
Violation of conditions of exemption notification - import of aircraft - Interpretation of statute - whether used for private purposes and not for providing non-scheduled (passenger) services or non-scheduled (charter) services? - violation of Condition no.104 of the Notification or not. - N/N. 21/2002-CUS, as amended by Customs Notification 61/2007-CUS Whether the learned Tribunal had erred in misinterpreting the Notification and concluding that the appellant had not complied with the conditions for availing duty exemption under the Notification? HELD THAT:- In terms of explanation (b) to Condition no. 104 of the Notification, the term non-scheduled (passenger) services is defined to mean air transport service other than scheduled (passenger) air transport service as defined in Rule 3 of the Aircraft Rules, 1937 (hereinafter the Aircraft Rules ). It is, thus, necessary to refer to the Aircraft Rules - In terms of explanation (b) to Condition no.104 of the Notification, 'non-scheduled (passenger) services' would mean air transport service other than the air transport service falling within the aforementioned definition. However, it is essential that the aircraft is used for air transport service. A plain reading of Rule 3(9) of the Air Craft Rules, indicates that the term air transport service is defined in wide terms and would cover transport by air of humans, animals, mails or any other things, animate or inanimate. However, it is necessary that the said service be provided for remuneration . The said definition also clarifies that the service may be for any kind of remuneration. However, for a service to fall within the meaning of air transport service as defined in Rule 3(9) of the Aircraft Rules, it is essential that the same is provided for some kind of remuneration. Clearly, flight service for no remuneration at all would not qualify to be considered as air transport service within the meaning of sub-rule (9) of Rule 3 of the Aircraft Rules - In the facts of the present case, the appellant has used the aircraft for its own use without any remuneration whatsoever, either from the passengers transported by it or from any other person. In the circumstances, it would be difficult to accept that the appellant has used the aircraft for providing air transport service within the meaning of Rule 3(9) of the Aircraft Rules. In the present case, the appellant has not used the aircraft for providing air transport service for remuneration of any kind. Even though it cannot be agreed with the learned Tribunal that the provision of non-scheduled (passenger) services as defined under clause (b) of explanation to Condition no.104 of the Notification, entails providing air transport services to public at large on payment of published tariff; but it is agreed with the conclusion that the appellant has not complied with the Condition no.104 of the Notification. Appeal disposed off.
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2023 (2) TMI 46
Jurisdiction - power of Deputy Commissioner to re-assess the goods u/s 17(5) after the goods have been cleared for home consumption - Rejection of self-assessment by the importer of the imported goods under CTH 20082000 and re-assessment under CTH 08119010 - Section 47 of the Customs Act, 1962 - whether the imported goods merit classification under CTH 20082000 or under CTH 08119010? HELD THAT:- Once the assessment is completed both sides can file an appeal before the Commissioner (Appeals). Further, Revenue can also review any assessment including self-assessment if duties have not been levied, short levied not paid or short paid and serve a notice to the importer or exporter under Section 28 within one year or five years, as the case may be. Explanation (i) to Section 28 clarifies that the relevant date for calculating the period of one year and five years for issue of notice is the date on which proper officer makes an order clearing the goods for home consumption. Thus, once the assessment under Section 17 comes to an end by issue of an order clearing the goods for home consumption, the clock starts ticking for limitation to issue a demand under Section 28. In this case, the Deputy Commissioner has clearly erred in issuing an assessment order under Section 17(5) after the goods were already cleared for home consumption. He had no authority to issue such an order because he could assess a bill of entry only if the goods are still imported goods and are dutiable goods . Once an order permitting clearance of goods for home consumption is given, they cease to be imported goods under Section 2(25) and cease to be dutiable goods under Section 2(14) - If an error is noticed in the assessment including self-assessment, the option available to the importer is to file an appeal before Commissioner (Appeals). The Deputy Commissioner has clearly issued the assessment order without any authority and, therefore, the Commissioner (Appeals) was correct in setting aside the assessment order. As the self assessment order by the Deputy Commissioner has been issued without any authority of law and has correctly been set aside by the Commissioner (Appeals), there is no need to go into the merits of the classification of the imported goods. The appeal filed by the appellant is rejected and the impugned order is upheld.
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Insolvency & Bankruptcy
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2023 (2) TMI 45
Termination of employment - breach of service contract by terminating the services - recovery towards arrears of service contract, compensation, encashment of leave amount, gratuity COLA/DA, damages with interest. Salary in lieu of notice - HELD THAT:- The definition salary was modified during the time when respondent was in appellant s employment. Clause 8(d) of Exhibit 49 defines what is salary in case respondent s services are terminated without notice. But that underwent a change when in March 2002 the salary and allowances payable to him was restructured. There was no COLA. Moreover, there is no evidence to indicate that basic pay mentioned in the revised compensation following the restructuring included COLA. That one has to only surmise. There is no cross examination of respondent also on this aspect. The Trial Court has not erred in applying the annual cost to company while determining the compensation in lieu of notice. It is also noted that if appellant had given 3 months notice for termination, appellant would have certainly paid respondent the entire compensation as payable under the cost to company formula. Damages - HELD THAT:- The court felt that the person, whose employment has been summarily terminated, would naturally suffer mental trauma. So also his family, and suddenly they would have no income also to survive. It is for that reason the appointment letter itself provided for 3 months notice or salary in lieu of 3 months notice. Appellant was duty bound to hand over the severance pay along with the letter of termination and not waited for two and half months to make that payment. Therefore, Trial Court was justified in granting the amount of Rs.2,50,000/- as damages. Perhaps, this would work as deterrent to all corporate employers that they cannot target a helpless employee by using its own muscle and money power. A sum of Rs.3,20,807/- together with proportionate interest be reduced from the decretal amount deposited in the Trial Court. That would leave us to decide what to do with this amount of Rs.3,20,807/- plus accumulated interest thereon. Appeal allowed in part.
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2023 (2) TMI 44
Initiation of CIRP - pre-existing dispute surrounding the operational debt or not - NCLT rejected the application - Section 9 petition filed before the Adjudicating Authority was a collusive petition or not - HELD THAT:- Given the framework of Section 9 of IBC, the remit of this Tribunal is summary in nature and it therefore does not behove this Tribunal to undertake either the comparative examination of the areas of specialisation of Caya and the Corporate Debtor company or to enquire into the veracity of the emails. All that is observed at this stage is that a dispute centering around breach of fiduciary duty by the Appellant in the context of Consultancy Agreement has been raised by the Respondents as their defence against the claim of the Appellant which is evidenced from the material placed on record. It has been contended by the Respondents that the claims by the Appellant is disputed. Further they have denied that any amount is due and payable by the Corporate Debtor to the Appellant. In the light of the submissions and pleadings made by the Learned Counsel for Respondent No.2 and 3 and after seeing the material on record it is satisfying that the dispute raised on behalf of the Corporate Debtor company is not a moonshine dispute or a bluster. The Adjudicating Authority has rightly dismissed the Section 9 application of the Appellant and that the impugned order does not warrant any interference - Appeal dismissed.
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PMLA
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2023 (2) TMI 43
Seeking grant of bail - money laundering - proceeds of crime - allegation of amassing property and cash - HELD THAT:- After reading the law laid down in Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ], this Court considers it expedient to reiterate that the Petitioner was acquitted of the criminal case in Barbil P.S. Case No. 58 of 2010 for offence U/Ss. 307/387 of IPC r/w Section 25 and 27 of the Arms Act which are considered to be the predicate offence leading to launching of prosecution under PML Act in the present complaint, but subsequently the property involved in such criminal case had been directed to be restored to the Petitioner in criminal appeal no. 11 of 2012 and whether such order is/was challenged in the higher forum has not been brought to the notice of this Court. No matter a complaint under PML Act has been filed and pending against the petitioner for commission of offence of Money Laundering, but the acquittal of the petitioner for commission of offence under IPC as scheduled offence under PML Act and direction of the Appellate Court for restoration of property to the petitioner relating to such offence of IPC, unless the same are varied or set aside reversing the findings therein, it appears to this Court that these circumstances of acquittal of petitioner and direction for restoration of the property to the petitioner are sufficient to consider about existence of reasonable grounds for believing the petitioner to have prima facie discharged the satisfaction of the rigors of Sec. 45(1) of PML Act, which appears to be logically justified and fortified. According to Sec. 3 of PML Act, whoever directly or indirectly attempts to indulge or knowingly assist or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money laundering. In this case, of course, the Petitioner is facing a proceeding under PML Act for commission of offence of Money Laundering and, therefore, the rival claims of ED and the petitioner with respect to the offence and the property attached or seized by the ED are subject of adjudication and presumption under PML Act but keeping the Petitioner in custody for the purpose of trial or in anticipation of any other complaint or supplementary complaint which is not in existence at present, would be devoid of any sound logic, especially when the petitioner had already been acquitted for commission of scheduled/ predicate offences and the property seized in connection with that case had already been directed to be returned back to the Petitioner, no matter the criminal appeal against such order of acquittal is pending before this Court. The bail application of the petitioner stands allowed and the petitioner be released on bail by the Court in seisin of the case on such terms and conditions as deem fit and proper and subject to his furnishing a cash surety of Rs. 5,00,000/- which shall be kept in fixed deposit/STDR in any Nationalised Bank, in addition to furnishing of property surety of Rs. 20,00,000/- and bail bonds of Rs. 10 lakhs with two solvent sureties each.
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2023 (2) TMI 42
Seeking grant of Bail - Money Laundering - round tripping of money - proceeds of crime - predicate offences - misappropriation and criminal breach of trust - manipulation of books of accounts through fictitious accounts - retraction of statements - conversion of property against unknown public servants - tampering with the evidences - mens rea - offences punishable under Sections 120-B read with Sections 420, 467, 468 and 471 IPC and Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988. Whether the petitioner, who is alleged to have abetted the main accused in the offence of money laundering, is entitled for bail or not? HELD THAT:- If the court finds a prima facie case against the accused, it cannot come to a satisfaction that there are reasonable grounds for believing that the accused is not guilty of such offence and that he is not likely to commit any offence while on bail as specified in Section 45(1)(ii) of the PML Act. The investigation so far done by the respondent, prima facie, leads to an inference that it is a classic case of money laundering by round tripping of money. Therefore, the stand taken by the respondent that even after commission of the scheduled offence and generatioin of proceeds of crime, different persons could join the main accused either as abettors or conspirators for committing the offence of money laundering by helping him in laundering the proceeds of crime and such persons might not have involved in the original criminal activity that had resulted in the generation of proceeds of crime and just because they were not prosecuted for the predicate offence, their prosecution for money laundering cannot be said to be illegal, appears to be a valid one. No doubt bail is a rule and jail is an exception and it has been time and again held by various courts that no person shall be deprived of his life or personal liberty except according to a procedure established by law. But, at the same time, the courts must strike a balance between the interest of the society in general and the right of an accused to personal liberty. In the case on hand, the petitioner, claiming to be an uneducated or a little educated person, is said to have been deployed to act as Director in various Companies for several years by the main accused, which itself shows the understanding and relationship between them and the mens rea of the petitioner in abetting the offence of the main accused. Therefore, this court cannot brush aside the objection of the respondent that in the event of the petitioner's coming out on bail at this stage, there is every possibility of his continuance in abetting the offence of the main accused in tampering with the evidence and interfering with the further investigation claiming that he does not have the so-called mens rea , by feigning ignorance as if he was a mere puppet at the hands of the main accused and thereby, this court is of the view that the petitioner has not complied with the second condition laid down under Section 45(1) of the Prevention of Money Laundering Act, 2002 for grant of bail. This court is of the view that the petitioner is not entitled to grant of bail at this stage - Petition dismissed.
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Central Excise
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2023 (2) TMI 41
Area Based Exemption - Denial of budgetary support under the Scheme of Budgetary Support under Goods and Services Tax (GST) Regime to units located in State of Jammu Kashmir, Uttarakhand, Himachal Pradesh and North-Eastern States including Sikkim - Denial on the ground that it did not fulfil the criteria of an Eligible unit under the Scheme as it was not availing the Area Based Exemption under the Notification - applicability of N/N. 50/2003-CE dated 10.06.2003 as amended from time to time. Whether the petitioner s unit was entitled to the benefit of the Notification, and was availing the exemption immediately before the first date of July 2017? HELD THAT:- In terms of paragraph 4.1 of the Scheme, a unit, which was eligible before the first day of July 2017 to avail the exemption under the Notification as specified in paragraph 2 of the Scheme and was availing such exemption before the cut-off date of first July 2017, would fall within the definition of the term eligible unit . In view of the orders dated 23.12.2011 passed by the Commissioner (Appeals) and the order dated 07.11.2017 passed by the learned CESTAT, it cannot be disputed that the petitioner was eligible for benefit under the Notifications ab-initio. There is no doubt that in the facts as obtaining in the present case, it is clear that the petitioner had from inception indicated its intention to avail of the benefits of the Notification. It had further pursued its right to such exemption. The petitioner had prevailed before the Commissioner (Appeals) prior to the roll out of the GST Regime. The fact that the respondents had carried the matter to learned CESTAT and in the meantime, had insisted on collecting the central excise duty, which was paid by the petitioner under protest, cannot be construed to hold that the petitioner had not availed of the benefits immediately prior to 01.07.2017. It is material to note that it is not disputed that but for the controversy whether the petitioner was availing the benefit of the Notification, there is no other reason for denying the petitioner s claim for budgetary support under the Scheme. The respondents are directed to release the budgetary support amount as assessed to the petitioner in terms of the Scheme as expeditiously as possible but in any event within a period of six weeks from today. Respondent no.3 is also directed to grant registration to the petitioner to enable it to file online claims as prayed for by the petitioner. Appeal allowed.
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2023 (2) TMI 40
Penalty under rule 26 of Central Excise Rules, 2002 - SSI exemption - use of brand name - it is alleged that goods having brandname Zapak affixed that did not belong to them and had wrongly availed exemption available under notification no. 8/2003- CE dated 1st March 2003 - HELD THAT:- In view of the decision of the Larger Bench of the Tribunal in STEEL TUBES OF INDIA LTD. VERSUS COMMISSIONER OF C. EX., INDORE [ 2006 (10) TMI 146 - CESTAT, NEW DELHI [LB] ] on the inapplicability of Rule 209A of Central Excise Rules, 1944 wherein it has been held that for imposition of penalty under Rule 209A of the Central Excise Rules, 1944, the person must have dealt with the excisable goods with knowledge that they are liable for confiscation. In a given situation, where an assessee is only issuing invoices wherein there is no movement of the goods, they cannot be visited with penalty under Rule 209A. The penalty imposed on the appellant in the impugned order is set aside - Appeal allowed.
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