TMI Tax Updates - e-Newsletter
February 9, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Supply of telecommunication services to a local authority is a taxable service

   By: Bimal jain

2. Integrated Desktop Computer cannot be classified as ‘portable device’

   By: Bimal jain

News

1. Government proposes quick settlement of contractual disputes to promote ease of doing business as announced in Union Budget 2023-24

2. Government has created the new Ministry of Cooperation to provide a separate administrative, legal and policy framework for strengthening the cooperative movement in country

3. Government e-Marketplace (GeM) suitably placed to exceed its ambitious target of ₹ 1.75 lakh crore: Shri PK Singh, CEO, GeM

4. Industrial growth during 2021- 22 stood at 11.7 per cent over the corresponding period of the last year

5. Eight projects under National Industrial Corridor Development and Implementation Trust (NICDIT) sanctioned and approved by Government

6. Coffee exports grow by 38% in 2021-22 as compared to 2020-21

7. 13,18,192 sellers registered in the Government e-Marketplace (GeM) to sell their products directly to various Government departments and organizations

8. Network Planning Group (NPG) under PM GatiShakti recommends 63 infrastructure projects on the Principles of PM GatiShakti

9. Products with export potential identified from all 765 districts of the country under the One District One Product- Districts as Export Hubs (ODOP-DEH) initiative

10. Monetary Policy Statement, 2022-23 Resolution of the Monetary Policy Committee (MPC) February 6-8, 2023

Notifications

Customs

1. G.S.R. 84 (E) - dated 7-2-2023 - Cus

Effective rates of customs duty and IGST for goods imported into India - Revise/provide exemption(s) on the specified goods - Corrigendum - Notification No. 2/2023-Customs, dated the 1st February, 2023

DGFT

2. 56/2015-2020 - dated 7-2-2023 - FTP

Addition of Gemological Science International (GSI) Pvt. Ltd., Mumbai, Maharashtra, India in Para 4.42 of Foreign Trade Policy (2015-20)

3. 55/2015-2020 - dated 7-2-2023 - FTP

Alignment of RoDTEP Schedule for chapter 28, 29, 30 & 73 with First Schedule of the Customs Tariff Act, 1975

Income Tax

4. 03/2023 - dated 7-2-2023 - IT

Centralised Processing of Equalisation Levy Statement Scheme, 2023

SEBI

5. SEBI/LAD-NRO/GN/2023/121 - dated 7-2-2023 - SEBI

Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2023

6. SEBI/LAD-NRO/GN/2023/120 - dated 7-2-2023 - SEBI

Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations, 2023

SEZ

7. S.O. 613 (E) - dated 7-2-2023 - SEZ

Inclusion of new members in CSEZ Authority - Seeks to amend Notification No. S.O. 3625(E) dated 17.09.2020

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/025 - dated 7-2-2023

Grant of extension of time to entities operating/ desirous of operating as Online Bond Platform Providers (OBPPs) for making an application to obtain certificate of registration as a stock broker under the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992

Customs

2. Instruction No. 05/2023 - dated 8-2-2023

Import of High risk food products at specific ports

Companies Law

3. 03/2023 - dated 7-2-2023

Extension of Time for filing of 45 company e-Forms and PAS-03 in MCA 21 Version 3.0 without additional fee

Highlights / Catch Notes

GST

• High Court Overturns Penalty u/s 129(3) of U.P. GST Act Due to Valid E-Way Bill Verification.

  Case-Laws - HC : Levy of penalty u/s 129(3) of the U.P. Goods and Services Tax Act, 2017 - demand based on mere presumptions - the proceedings has been initiated solely on the basis of presumption that goods having been brought into the State using two different vehicles by same e-way bill. Once, it was found that the vehicle was carrying the required documents along with the e-way bill, no question arose for taking some other view. - Order of penalty set aside - HC
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• Petitioner seeks refund of unutilised Input Tax Credit after correcting error in Annexure B submission. Authorities must process claim.

  Case-Laws - HC : Refund of unutilised Input Tax Credit - Annexure B was not complete in all respect - it was essential for the concerned authorities to examine the information as submitted by the petitioner and process its claim for refund in accordance with law. Clearly, the petitioner cannot be penalised for the inadvertent error in submitting an erroneous information against Column No. 7 of its form, which has since been rectified. - HC
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• Anticipatory bail denied in IGST fraud case due to non-cooperation with GST Intelligence investigation and ignoring summonses.

  Case-Laws - DSC : Seeking grant of Anticipatory Bail - fraudulent availment of IGST refund by exporters and passing fraudulent input tax credit (ITC) by their suppliers - In the present case it is found that applicant has not cooperated as mentioned in the reply of DGGI DZU that despite issuance of four summons accused/applicant has not turned up and has never furnished documents also in support thereof. - Bail application rejected - DSC
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Income Tax

• High Court to Decide on Interest Levy u/s 234B for Settled Cases with Prepaid Taxes Considered.

  Case-Laws - HC : Interest Liability u/s 234B - settlement of case u/s 245D(4) - Levy of interest on tax on additional income offered without providing the set off of the prepaid taxes already paid. - The plea on the part of the petitioner is that it has required to pay the interest at a specific rate on the additional amount of Income Tax offered before the Settlement Commission was not executed. - it cannot be expected to pay interest on the taxes already paid. - HC
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• Court Rules Interest from Disputed Deposit Taxable; Orders Refund of Incorrect TDS Deducted u/s 194A.

  Case-Laws - HC : Taxability of interest income - Interest on deposit while the matter was in dispute - claim arouse against accident under motor vehicle Act - TDS u/s 194A r.w.s. 56 of the Income Tax Act - Income was taxable - TDW was wrongly deducted - Amount of TDS directed to be refunded - HC
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• Tax Assessment Reopening Challenged: Section 151 Requires Thorough PCIT Approval, Not Just Mechanical Consent.

  Case-Laws - AT : Validity of reopening of assessment - necessity to have a valid approval under section 151 - PCIT while according to approval for reopening the assessment has either not perused these reasons and merely given a mechanical approval by stating in Item no. 13 of the approval granted dated 30.03.2019 that “Yes, I am satisfied case may be reopened” - AT
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• Penalty u/s 271E Wrongly Levied on Deceased, Notice Invalid as Issued in Deceased's Name, Not Heirs.

  Case-Laws - AT : Penalty u/s 271E levied on the deceased person - The notice of penalty was served in the name of dead person; no notice was served on the legal heirs of the deceased assessee. Such notices issued in the name of dead person, is not curable even by applying provisions of Section 292B - AT
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• Foreign exchange loss claimed by Assessee allowed as revenue expenditure u/s 37(1) of Income Tax Act.

  Case-Laws - AT : Disallowing foreign exchange loss - claim of exchange fluctuation loss in revenue account by the Assessee in accordance with generally accepted accounting practices and mandatory accounting standards notified by the ICAI - in the light of fact that the conversion in foreign currency loans which led to impugned loss, were dictated by revenue considerations towards saving interest costs etc. we have no hesitation in coming to the conclusion that loss being on revenue account is an allowable expenditure under S. 37(1) - AT
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• Civil contract u/s 13(2)(c) qualifies as services, no benefit to interested persons, exemption u/s 11 upheld.

  Case-Laws - AT : Exemption u/s. 11 - The civil contract awarded to a firm in which the managing trustee of the trust is proprietor is tantamount to services as defined u/s. 13(2)(c) - Since, payment made in pursuant to services rendered by the interested persons is not in excess of consideration paid for relevant work, it cannot be held that there is a direct or indirect benefit to the interested persons as referred to u/s. 13(2) of the Act and violation of provisions of section 13(1)(c) of the Act. - AT
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• No TDS liability for management fees u/s 40(a)(ia) as no technical knowledge transfer occurred.

  Case-Laws - AT : TDS u/s 195 - Disallowance u/s 40(a)(ia) - non-deduction of TDS on payment of management fees - It is not even the allegation of the revenue that the non-residents had made available to the assessee, the knowledge generated in the course of rendering managerial services. In our view the services rendered were purely managerial services and by no stretch of imagination can be considered as making available any technical knowledge, experience, skill, know-how or processes, to the assessee. - No TDS liability - AT
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Customs

• Appellant Fails to Prove Legal Importation of Gold Bars; Statement u/s 108 Deemed Reliable by Court.

  Case-Laws - AT : Smuggling - foreign origin gold bars - It is undisputed that it had foreign markings and has been certified by the jewellery expert to be of foreign origin. The only question which remains is if it was legally imported or smuggled and the burden of proving that it was legally imported rests upon the appellant. There is not even an assertion in the application before the learned CMM by the appellant that he had legally imported the gold. Therefore, we find no force in the submission of the appellant that his statement under Section 108 cannot be relied upon. - AT
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• India-EU Agreement Allows Duty-Free Import of Machinery Gifted by EU, Meeting Clause 8 Requirements.

  Case-Laws - AT : Exemption from the whole of the duty of customs - Import of Machinery as Gift - bilateral Agreement - This factual portion is also reflected from the Certificate dated 09.11.1999 given by the European Union. The Certificate clearly mentions that the plant and machinery was gifted free of cost to the Programme under the bilateral Agreement between the Government of India and the European Union - On a plain reading of the Agreement, it is clear that clause 8 of the exemption notification stands satisfied - AT
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IBC

• Appeal Questions Dismissal of Financial Creditor's Petition; IBBI Seen as Aggrieved Party, Not the Appellant.

  Case-Laws - AT : Maintainability of petition - aggrieved person being IBBI - The Appellant has nothing to do with the litigation between two parties i.e. ‘Financial Creditor’ and ‘Corporate Debtor’, in order to challenge the impugned order by which the petition filed by the Financial Creditor has been dismissed for whatever reasons. - AT
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• Section 96: Creditors of Personal Guarantors Can Exclude Moratorium Period from Limitation Period for Filing Applications.

  Case-Laws - AT : The creditors of the Personal Guarantors who are unable to file an application due to enforcement of moratorium under Section 96 can very well avail the benefit of period during which moratorium continues, hence, due to interim moratorium enforced by Section 96, the creditors like Central Bank of India and other creditors are in no manner prejudiced. If they have not filed any application during moratorium period, they have every right to file application and for computation of the period of limitation, period during which moratorium is in place is to be excluded - AT
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PMLA

• Territorial Jurisdiction in Money Laundering Cases: Factual Disputes Require Special Court, Not Writ Petition, u/s 3.

  Case-Laws - SC : Money Laundering - scheduled/predicate offence - territorial jurisdiction of Trial Courts - The issue of territorial jurisdiction cannot be decided in a writ petition, especially when there is a serious factual dispute about the place/places of commission of the offence. Hence, this question should be raised by the petitioner before the Special Court, since an answer to the same would depend upon evidence as to the places where any one or more of the processes or activities mentioned in Section 3 were carried out. - SC
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Central Excise

• Court Grants Waiver of 10% Pre-Deposit for Appeal in Clandestine Removal Case; Rs. 12.50 Crore Demand Stayed.

  Case-Laws - HC : Seeking waiver of pre deposit - Clandestine Removal - The impugned demand is to the extent of Rs.12.50 Crores. The pre-deposit of 10% would come to Rs.1.25 crores which this Court finds would be onerous for the petitioner unit which is closed since 20th September 2006 to furnish in order to effectively avail of the remedy of appeal before learned CESTAT. - Stay granted - HC
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• NCLT Dismisses Appeals as Infructuous, Allows Parties to Revisit if No Amicable Resolution Achieved.

  Case-Laws - AT : Pending appeals wherein, the IBC proceedings have been concluded by NCLT - Since the IBC proceedings have been concluded, these appeals shall stand infructuous accordingly, we dismiss these appeals as infructuous. Both the sides have liberty, in case of any amicable resolution is not arrived at between the appellant and the respondent, to approach to this tribunal to revive the present appeals and the same shall be decided on merit, if required. - AT
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• Appellant Wins Cash Refund for Unused Cenvat Credit on Education and Higher Education Cess; Denial Unjustified.

  Case-Laws - AT : Cash refund against the accumulated and unutilized Cenvat credit - From the Rule, under clause (vi) and (via), the credit of Education Cess and Secondary and Higher Education Cess is clearly allowed. Therefore, the appellant is legally entitled for Cenvat of Education Cess and Secondary and Higher Education Cess. Hence, on this count refund cannot be denied. - AT
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VAT

• Court Rules No Bias in Inquiry; Disciplinary Proceedings Against Revenue Officer to Continue.

  Case-Laws - HC : Validity of Departmental Eqquiry agaisnt the Revenue officer - alleged act or omission relating to exercise of his powers in the matter of passing orders of assessment/reassessment/refund of taxes to the dealers - This Court is of the considered view that although allegation of bias has been made but the allegations are not substantiated by any material or conduct of the inquiry officer in order to create any impression of bias against the petitioner, even remotely. - disciplinary proceedings to continue - HC
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Case Laws:

• GST

• 2023 (2) TMI 278
  Levy of penalty under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 - demand based on mere presumptions - HELD THAT:- This is a case where the authorities had proceeded merely on presumption that goods which were being transported from Birur (Karnataka) to Kanpur (U.P.) were in fact brought by the petitioner from Nagpur into the State of U.P. using two trucks, one U.P.-78DT/6036 and U.P.-78CN/4605. It was only when the Truck No. U.P.-78CN/4605 was detained at Lakhanpur, Kanpur on 22.10.2018, it was found that it was carrying the e-way bill No. 161073493422 along with all the required documents but a presumption was drawn that the earlier Truck No. U.P.-78DT/6036 had brought the goods from Nagpur to Kanpur (UP) using the same e-way bill. There is no material on record to demonstrate that goods were brought twice by the petitioner. The petitioner had brought on record the e-way bill through annexure no. 2 to writ petition which demonstrates that cosigner has sent the goods through the transporter and e-way bill was generated on 10.10.2018 which clearly reflects that goods originated from Birur and the transporter changed the truck at Amrawati and thereafter at Nagpur - the argument raised by learned Standing Counsel cannot be accepted which is based on presumption and without any valid material on record. From perusal of the order impugned, it is found that the proceedings has been initiated solely on the basis of presumption that goods having been brought into the State using two different vehicles by same e-way bill. Once, it was found that the vehicle was carrying the required documents along with the e-way bill, no question arose for taking some other view. The revision is allowed.

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• 2023 (2) TMI 277
  Maintainability of appeal - non-service of notice - opportunity of hearing not given - violation of principles of natural justice - HELD THAT:- This Court does not find it necessary for now further directing the respondent No. 1 to decide Annexure P/9 dated 24.01.2023 before considering the Appeal itself on merits. It goes without saying that since it is the substantive ground in the Appeal that the petitioner has raised so far as an opportunity of hearing being denied, it is this which would be first looked into by the Appellate Authority. It would also be left open for the Appellate Authority to consider whether there is justifiable reasons and grounds available for the petitioner in not preferring the Appeal under Section 107 before the Respondent No. 1 within the prescribed period or within the reasonable period of time. The Respondent No. 1 would be taking a decision on the said issue first before the proceeding further in the matter. Writ petition disposed off.

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• 2023 (2) TMI 276
  Refund of unutilised Input Tax Credit - Annexure B was not complete in all respect, as was necessary for processing the refund - failure to upload the same at the time of filing of the application - period of October, 2020 to December, 2020 - HELD THAT:- It is apparent that the rectified information as submitted by the petitioner was not taken into account by either of the concerned authorities while considering the petitioner s grievance regarding non-payment of its refund, as claimed. Thus, it was essential for the concerned authorities to examine the information as submitted by the petitioner and process its claim for refund in accordance with law. Clearly, the petitioner cannot be penalised for the inadvertent error in submitting an erroneous information against Column No. 7 of its form, which has since been rectified. Matter remanded to the Adjudicating Authority to consider the petitioner s response dated 07.06.2021 to the Show Cause Notice dated 22.05.2021 and to decide the matter afresh.

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• 2023 (2) TMI 275
  Seeking grant of Anticipatory Bail - fraudulent availment of IGST refund by exporters and passing fraudulent input tax credit (ITC) by their suppliers - HELD THAT:- At the outset it is required to be noted that the documents as relied upon by the ld. Counsel for the accused/applicant i.e. panchnama dated 11.09.2019, perusal of the same would clearly show that such proceedings were initiated by DGGI Head Quarter and it is mentioned in that panchnama that those proceedings were with regard to GST evasion initiated by Head Quarter of DGGI whereas the proceedings in question are initiated by DGGI DZU. As such document heavily relied upon by ld. Counsel for the accused/applicant is not only irrelevant to the proceedings rather a faint attempt to misguide the court. As per the allegations, accused/applicant being partner/proprietor of the firms has not only furnished ITC of GST in respect of his three firms to the total sum of Rs.10.11 crores but has also not joined the investigation and has never furnished any document of carrying on any business with AIPL. The ratio laid down in the judgment of Tarun Jain s case [[ 2021 (12) TMI 135 - DELHI HIGH COURT] ] are distinguishable to the facts of the present case. No doubt in para 44 of the said judgment it was noted that even in economic offences case if the scheme of CGST is such that most of the offences have been made compoundable, court should be liberal in granting of anticipatory bail. However at the same time it is also to be seen that whether accused seeking judicial indulgence has been cooperative in the investigation or not - In the present case it is found that applicant has not cooperated as mentioned in the reply dated 30.01.2023 of DGGI DZU that despite issuance of four summons accused/applicant has not turned up and has never furnished documents also in support thereof. First of all there is no document annexed with the bail application to substantiate the facts and that has also been disputed by the Department. As such above said fact also does not come to any help to the accused/applicant - bail application dismissed.

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• Income Tax

• 2023 (2) TMI 274
  Interest Liability u/s 234B - settlement of case u/s 245D(4) - Levy of interest on tax on additional income offered without providing the set off of the prepaid taxes already paid. - The plea on the part of the petitioner is that it has required to pay the interest at a specific rate on the additional amount of Income Tax offered before the Settlement Commission was not executed. - HELD THAT:- The credit of prepaid taxes was requested to be allowed and only on the balance additional tax payable, the interest u/s 234B(2A) of the Act was requested to be charged. The Commission did not accept the request on the ground that the prepaid taxes could not be excluded for computing interest. In our opinion, this approach is contrary to the settled position of law followed by this Court in case of Bharatbhai B. Shah vs. Income Tax Officer. The petitioner had already paid the tax on income which has gone to the government treasury and therefore, it cannot be expected to pay interest on the taxes already paid. It ought to have been allowed the credit of prepaid tax and only on the balance additional tax payable, interest under Section 234B(2A) ought to have been charged. This Court in case of Bharatbhai B. Shah [ 2013 (10) TMI 1025 - GUJARAT HIGH COURT ] has extensively dealt with the decision of Dr. Pranay Roy [ 2001 (12) TMI 68 - DELHI HIGH COURT ] which had been confirmed by the Apex Court in case of CIT vs. Pranay Roy [ 2008 (9) TMI 150 - SUPREME COURT ] had taken note of the various other decisions of the Apex Court as well to eventually hold that the double levy of interest is not permissible and that principle is applicable when the interest is chargeable more than once for the same set of infractions. It also has pointed out as to how the provisions of the Act operate in different fields and there is no statutory bar on the levying of the interest as the levy is separately for different infractions. Section 234B would apply when there is a defect in payment of advance tax. Under Section 245D(2C), the interest liability arises when within the time specified under sub-section (2A) the additional amount of income tax is not paid, whereas the interest needs to be paid under Section 245D(6A) when the tax payable in pursuance of an order under sub-section (4) is not paid within the specified time period. Resultantly, the petition is allowed to that extent quashing and setting aside the computation of interest directing the respondent no.2 to recover the interest on the additional tax paid as per the settled ratio.

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• 2023 (2) TMI 273
  Taxability of interest income - Interest on deposit while the matter was in dispute - claim arouse against accident under motor vehicle Act - TDS u/s 194A r.w.s. 56 of the Income Tax Act - gross amount payable to each of the petitioners-claimants towards interest calculated from date of application for claim on account of delay in deposit of amount of compensation as modified/reduced in the National Lok Adalat - petitioners, the wife and the children of the deceased, filed Motor Accident Claims u/s 166 of the Motor Vehicles Act, 1988 ( MV Act ) before the 3rd Motor Accidents Claims Tribunal, Jagatsinghpur (MACT) consequent upon death of Sri Mahendra Kumar Sahoo in road accident on 07.01.2013 Whether the opposite party No.4-National Insurance Co. Ltd. is justified in deducting income tax at source in terms of Section 194A(3)(ixa), as amended or Section 194A(3)(ix), as existed prior to amendment read with Section 56(2) of the Income Tax Act, 1961 in respect of interest computed from the date of application for claim till deposit of cheques before the learned Motor Accidents Claims Tribunal on account of delay in disbursal of the amount of compensation awarded to the petitioners-claimants? HELD THAT:- MV Act makes detailed provisions for awarding compensation for death or disablement of any person resulting from an accident arising out of the use of a motor vehicle. Essentially, such claim is in the nature of tortious liability. The concept of compulsory third party insurance has been statutorily introduced. The relationship between the insurer and the insured is basically a contractual relationship but interjected by a range of statutory provisions. Under such contract of insurance, the insurer undertakes to indemnify the insured to the extent agreed. The statutory provisions contained in the MV Act make third party insurance compulsory and limit the defences which the insurance company may raise to repudiate its liability. The purpose of granting compensation under the MV Act is to ameliorate the sufferings of the victims so that they may be saved from social evils and starvation, and that the victims get some sort of help as early as possible. It is just to save them from sufferings, agony and to rehabilitate them. The interest awarded in the motor accident claim cases from the date of the application for claim till the passing of the award or in case of Appeal, till the Judgment of the High Court in such Appeal, would not be exigible to tax, and such interest not being an income as such interest payable on account of delay in deposit of amount awarded shall not attract TDS under Section 194A. The nature of such interest paid/credited to the petitioners does not fall within the ambit of definition of interest contained in Section 2(28A). In the instant case, it is not denied that interest was paid for delay in depositing the awarded amount. The marginal heading of Section 194A suggests that said provision deals with TDS in respect of interest definition of which term is given in Section 2(28A), but not interest on securities which expression is defined in Section 2(28B). The amount of interest deposited by the opposite party No.4 with the MACT is on account of delay in deposit of compensation, which can neither be understood as borrowed or debt incurred nor does it fall within meaning of the term service fee or the expression other charge in respect of money borrowed or debt incurred or in respect of any credit facility which has not been utilized . The interest so deposited by the National Insurance Co. Ltd.-opposite party No.4 would not, therefore, be treated as income of the petitioners. Hence, the TDS deducted by the opposite party No.4 is liable to be refunded to the petitioners. This Court finds force in the argument of the learned counsel for the petitioners and it is found in the instant case that if the interest is spread over year to year, the amount would not exceed Rs.50,000/-. Under such premise, the deduction of tax at source in respect of interest for delay in deposit of compensation before the MACT would attract provisions of sub-section (3) of Section 194A of the IT Act. The amount so deducted towards tax at source, being on erroneous understanding of the opposite party No.4, said amount is liable to be refunded to the petitioners. This Court is, thus, inclined to hold that the tax is payable on the interest on the amount of compensation under the MV Act with a rider that the interest should not be more than Rs.50,000/- per claimant per financial year. In the present case, after the award being finalised, the opposite party No.4-National Insurance Co. Ltd. has calculated the interest payable on the entire amount of compensation. Had the interest in question been computed by spreading over for six years commencing from 2013-14 till the deposit is made, the interest would be less than Rs.50,000/-. In such eventuality in view of Section 194A(3)(ix) [pre-amendment]/ Section 194A(3)(ixa) [post amendment], TDS was not required to be deducted by the opposite party No.4. In the result, the writ petition is allowed and the TDS amount wrongly deducted will be refunded to the petitioners by the Income-tax Department not later than eight weeks from today, failing which simple interest at the rate of 6% per annum on the said sum will be paid to the petitioners for the period of delay.

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• 2023 (2) TMI 272
  Reopening of assessment u/s 147 - notice issued is on late Assessee - HELD THAT:- This Court in the case of Chandreshbhai Jayantibhai Patel [ 2019 (1) TMI 353 - GUJARAT HIGH COURT] has dealt with the very issue of issuance of notice to the dead person to hold that the same is unsustainable under the law and that defect of initiation of notice to the deceased cannot be cured for the notice has to be treated as invalid. The similar view is taken in case of Urmilaben Aniruddhasinhji Jadeja [ 2019 (9) TMI 356 - GUJARAT HIGH COURT] Resultantly, this petition is allowed. Quashing and setting aside the notice and all consequential orders. However, if otherwise permissible under the law, a fresh notice under Section 159(2)(b) of the Income Tax Act in this relation to the legal heirs is permitted. - Decided in favour of assessee.

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• 2023 (2) TMI 271
  Deemed dividend u/s 2(22)(e) - advance amount given to the Directors - whether business advances made by the Company cannot be held to be deemed dividend? - HELD THAT:- A portion of the agreement between M/s. DTDC and its Directors has been acted upon and an area of 963 sq. ft. in the ground floor has been sold in favour of M/s. DTDC. It is the specific contention of the assessee before this Court that the remaining amount out of Rs.39.60 Lakhs has also been beneficial to the Company because, the first floor and upper floors have been leased out on subsidized rental value. The impugned order by the ITAT has emanated out of the Assessment order dated 28.03.2003. In the said Assessment order, the sum of Rs.6.60 Lakhs has been treated as dividend paid to the share holder/Director. In our considered view, the AO CIT(A), as also the ITAT have missed a relevant point that the ground floor of the premises has been purchased by M/s. DTDC. If the consideration amount towards the ground floor is considered, the entire sum of Rs.6.60 Lakhs cannot be treated as dividend. Therefore, the matter requires reconsideration in the hands of ITAT which is the last fact finding authority. We also notice that ITAT has not recorded any reasons on this aspect. Appellant submitted that any finding recorded by this Court with regard to the construction value of Rs.8.87 Lakhs may influence the ITAT. We clarify that having noticed the sale of ground floor, in our view, at least the consideration amount of Rs.8.87 Lakhs ought to have been considered as a part of advance sale consideration. Therefore, the entire matter requires re-consideration. We make it clear and direct that the ITAT shall pass fresh orders wholly uninfluenced by any observations made by this Court. The matter is remitted to the ITAT to re-examine the matter and pass fresh orders in accordance with law.

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• 2023 (2) TMI 270
  Validity of order of assessment passed - non-service of show cause notice cum draft assessment order before finally making an assessment - HELD THAT:- Except the reply of the assessee which the respondent construe to be the opportunity as required to be granted under the law he has not been availed much less the offering of the personal hearing and issuance of the draft order after getting approval of the higher authority. The Assessing officer was promoted during April 2021 and therefore, was holding an additional charge in addition to his substantial charge with minimal supporting staff and without adequate infrastructural facilities from July 2021 and that hardly is the ground for non-compliance of the provision of the law. An attempt is made to explain that the AO needed to complete many time barring assessment cases and the penalty cases in both his charges and the above was not the only case. These according to us are very lame excuses and surely not expected to be given by the respondent authority. The least it could have done was to accept the aspect by seeking the permission to freshly initiate such action. This is not the case of failure of the system or any other shortcomings which had hampered the officer not allow his request. It is he who was short of time as the time limit of assessment was getting over by 30.9.2022. Even if non-issuance of show cause notice along with the draft assessment order was neither willful nor wanting the fact remains that the it must be supplied and hence it is clear and unequivocal act of breach of principles of natural justice warranting interference at the hands of the Court. Resultantly, the order of assessment passed in the instant case on 29.9.2021 is quashed and set aside along with the consequential setting aside of the penalty. The respondent is permitted to pick up the threads from where it was left by denying the opportunity to the petitioner. Let the sufficient opportunity as contemplated under the law be given.

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• 2023 (2) TMI 269
  Unexplained investment in unlisted equities - Identity and creditworthiness of entities from whom funds were taken to invest in unlisted equities during the financial year relevant to A.Y. 2015-16 were not established by the assessee company before the AO - HELD THAT:- The assessment order itself reveals that the assessee submitted before the Ld. AO confirmed copy of account of both the parties, namely M/s. Rasaraj Sales Ltd. and M/s. Gunvardhan Vyapaar Pvt. Ltd. and stated that both are group entities of the assessee company and furnished their complete address. In fact, AO himself says that the summons issued by him to both the concerns u/s 131 of the Act were served at the given address. Therefore, identity of the concerns from which the assessee received the amount utilised towards purchase of 2,80,000 shares of M/s. Spectrum Distributors Pvt. Ltd. cannot be doubted. Balance sheet of these concerns for the year indicating their high networth was placed on record establishing their creditworthiness. The shares were purchased by the assessee from M/s. Kashyap Property Pvt. Ltd. (now known as Rajdarbar Group Pvt. Ltd.). Documentary evidence, namely copy of bank statement of M/s. Rajdarbar Beverages (P) Ltd. for the period from 01.04.2014 to 31.03.2015 as also copy of confirmation along with bank statements and ITR of M/s. Kashyap Property (P) Ltd. was filed before the Ld. AO to prove the genuineness of the transaction. Payment was advanced by the assessee company as investment in shares which were, however not allotted. These findings could not be controverted by the Revenue by bringing on record any adverse material either before the Ld. CIT(A) or before us. We, therefore, endorse the findings of the Ld. CIT(A) and reject the ground taken by the Revenue before us. Decided in favour of assessee.

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• 2023 (2) TMI 268
  Estimation of income - bogus purchases - quantification of profit - CIT(A) sustaining the addition by estimating profit of 2.9% on alleged bogus purchase - HELD THAT:- As decided in M/s. Mohhomad Haji Adam Company [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. Addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases - we are of the considered view that on the same lines the profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. Thus, in terms of our aforesaid observations restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. Needless to say, the A.O shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee. Appeals of the assessee and revenue are allowed for statistical purposes.

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• 2023 (2) TMI 267
  Deduction u/s 80P - interest earned from investments made in any bank, not being a co-operative society - HELD THAT:- Tribunal in the case of M/s. Krishnarajapet Taluk Agri Pro Coop Marketing Society Ltd. [ 2022 (2) TMI 489 - ITAT BANGALORE] held that the ratio laid down by the Hon ble Karnataka High Court in the case of Totagars Cooperative Sales Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] is that in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a cooperative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d) of the Act. The Assessee would therefore be not entitled to deduction u/s.80P(2)(a)(i) or Sec.80P(2)(d) of the Act on the interest income in question. Assessee would not be entitled to deduction under section 80P(2)(d) of the Act in respect of interest received from another Co-operative Bank. The assessee would also not be entitled to deduction under section 80P(2)(a)(i) of the Act. Deduction of expenses earned in earning interest income - In so far as deduction u/s 57 of the Act is concerned, in terms of paragraph 16 of the Tribunal s order referred to above, the assessee will be entitled to deduction on account of expenses. The issue with regard to deduction u/s.57 of the Act is accordingly restored to the file of the AO to decide the same afresh in accordance with law after affording the assessee opportunity of being heard and in the light of the decisions referred to above. Appeal of the assessee is treated as partly allowed for statistical purposes.

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• 2023 (2) TMI 266
  Estimation of income - bogus accommodation entries - Estimation of commission - assessee s claim is that assessee is earning 0.5% commission as against 1.8% taxed by the authorities below - HELD THAT:- AO himself has estimated 0.5% rate of commission in some cases. Similarly, ITAT in the case of Adonis Financial Services Pvt. Ltd.[ 2019 (1) TMI 1266 - ITAT DELHI] held 0.50 paise or 0.50% should be taken as the reasonable rate of profit/commission in such clandestine activities. Also see M/S. BHAWANI PORTFOLIO PVT. LTD. [ 2021 (7) TMI 601 - DELHI HIGH COURT] We note that in several cases, ITAT has estimated the earning of commission @ 0.5% in the bogus accommodation entry business. Several ITAT orders have been referred above. It is not the case that any of them has been reversed by Hon ble jurisdictional High Court. Rather we have an example in the case of DCIT vs. Bhawani Portfolio Pvt. Ltd. (supra) wherein Hon ble Delhi High Court has approved the ITAT order of estimating the commission of 0.15% to 0.50% in such cases. Accordingly we direct the AO to estimate the commission in this case @ 0.5% as against 1.80% as made by the authorities below. Appeal of the assessee is partly allowed.

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• 2023 (2) TMI 265
  Penalty u/s 271(1)(c) - disallowance u/s 40(a)(ia) - payment of interest to India Bulls/Kotak Mahindra on which TDS was omitted to be deducted by the assessee required in terms of provision of Section 194A - HELD THAT:- Tribunal has set aside the issue of disallowance under Section 40(a)(ia) to the file of the Assessing Officer for verification of such interest by the payees as their income and reversal of disallowance. The payment of interest to the payees is not in dispute. Thus, admittedly the interest expenses have been actually incurred. The disallowance of interest expenditure was attracted only due to non deduction of TDS and it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars of income per se. The levy of penalty under Section 271(1)(c) is thus not attracted. Coupled with this, notice issued under Section 274 r.w. Section 271(1)(c) has been stated to be issued in a mechanical manner without striking of the inappropriate portion from the notice. It is thus not known the exact nature of default committed by the assessee. Hence when seen cumulative, assessee deserves to be exonerated from the clutches of penalty under Section 271(1)(c) of the Act. Appeal of the assessee is allowed.

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• 2023 (2) TMI 264
  Delayed remittance of EPF/ESIC contribution by the assessee - employees contribution paid before due date for filing the return of income u/s.139(1) whether otherwise allowable u/s.43B - HELD THAT:- As relying on case of Checkmate Services [ 2022 (10) TMI 617 - SUPREME COURT] the employees contribution to PF and ESI should be remitted before the due date as per explanation to section 36(1)(va) i.e., on or before the due date under the relevant employee welfare legislation like PF Act, ESI Act etc., for the same to be otherwise allowable u/s.43B. We therefore see no reason to interfere with the order of the CIT(Appeals). The grounds taken by the assessee on this issue are dismissed.

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• 2023 (2) TMI 263
  Validity of reopening of assessment - necessity to have a valid approval under section 151 - addition being a part of money received from M/s. Rahul Enterprises by invoking provisions of section 68 - HELD THAT:- Reasons states that M/s Rahul Enterprise is a proprietary concern ,from which the assessee has received money, has opened account no. 029005003254 on August, 2017 in Faizabad Branch, UP from ITO(Inv), Unit-1, Kolkata vide letter dated 4/8.3.2021. The instant assessment year before us is AY 2012-13 whereas the reasons state that account was opened in August, 2017 in Faizabad Branch, UP which is apparently wrong and contradictory and not practically possible. We note that there is a contradiction in the bank account and also the branch of the bank where the account was reopened. In other words, Para 2 states that account was opened in Faizabad Branch, UP whereas in page 5 of the PB stated that it has been opened in ICICI Bank, Kolkata. We are also failed to understand as to how the account could be reopened in August, 2017 as stated in Para 2 page 4 while the case at hand relates AY 2012-13. PCIT while according to approval for reopening the assessment has either not perused these reasons and merely given a mechanical approval by stating in Item no. 13 of the approval granted dated 30.03.2019 that Yes, I am satisfied case may be reopened . In our opinion such a casual approach on the part of the authorities cannot be appreciated and encouraged because by reopening the assessment, the settled assessment are being unsettled and authorities are supposed to exercise utmost care and caution while recording the reasons and also while granting the approval. On this count also, the reassessment proceeding as well as reassessment framed cannot be sustained. The case of the assessee find supports from the decision of Hon bleCalcutta High Court in the case of Harish GangjiDedhiya [ 2022 (4) TMI 1391 - BOMBAY HIGH COURT ] Thus reassessment proceedings as well as reassessment framed us/ 147 are liable to be quashed. On the issue reopening assessment beyond the period of four years where assessment is framed u/s 143(3), we are mindful of the condition as laid down by the first proviso to Section 147 of the Act which are required to be satisfied before reopening the assessment. The proviso states that there has to be failure on the part of the assessee to truly and fully disclose the material/ information which leads to escapement of income. In the present case, the assessment has been framed by the AO u/s 143(3) read with Section 153A and the assessee has provided details/information in the return of income as well as in the assessment proceedings. Therefore to draw inference that the assessee has failed to disclose truly and fully any material facts relating to assessment would be wrong. - Decided in favour of assessee.

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• 2023 (2) TMI 262
  Deduction u/s 54B - proof of agricultural activities on the land- whether the piece of land sold by the assessee is eligible for claiming exemption? - case of the assessee is that the assessee has inherited a piece of land and the same was sold in which assessee s share of sale consideration and the assessee has claimed exemption u/s 54B on the ground that the land was used for agricultural purposes for many years - HELD THAT:- The piece of land sold by the assessee is within the purview of Coastal Regulation Zone [CRZ] adjoining to sea. The case of the assessee is that he has carried agricultural operation. Except adangal, there was no evidence bought on record that the assessee carried agricultural operations. The adangal filed by the assessee shows that there were few coconut trees. Simply because, there are coconut trees, it does not mean that the assessee carried agricultural operation, particularly, when the assessee has not reported any agricultural income. Apart from that, the said extent of land was just adjacent to the sea not useful for any agricultural purposes, whereas, the assessee s statement is that he has carried agricultural operation. To carry agricultural operation water is very much required and sea water is not useful for carrying any agricultural activities or to raise any agricultural crop. Thus we are of the considered opinion that the assessee has not carried any agricultural activities and thus, we find no infirmity in the orders of authorities below and accordingly, the appellate order passed by the ld. CIT(A) is confirmed. Decided against assessee.

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• 2023 (2) TMI 261
  Intimation issued by the Central Processing unit u/s.143(1) - Disallowing credit for tax deducted at source by the employer that was not deposited with the exchequer - HELD THAT:- Important thing to be borne in mind in this regard is that though the word `paid has been used after the words `advance tax , but it is absent in the context of `tax deducted at source . The effect of this is that unlike advance tax, the credit for tax deducted at source is to be allowed only when it is deducted and there is no further stipulation of the same having been paid also as a condition precedent. As a sequitur, credit for the amount of tax deducted at source is not dependent upon its subsequent deposit by the deductor. Once there is deduction of tax at source, the benefit of such tax deduction has to be allowed in the hands of deductee u/s 143(1) of the Act irrespective of its subsequent deposit or non-deposit by the deductor. Our view is fortified by section 234B dealing with interest for default in payment of advance tax. This section provides that where an assessee fails to pay due advance tax etc., he shall be liable to pay simple interest at the specified rate on the amount of `assessed tax - if there is an income on which tax is deductible at source, then such income will be reduced for determining the advance tax liability and the consequential interest liability u/s 234B of the Act, even if no tax was actually deducted at source. The Finance Act, 2012 inserted a proviso to section 209(1) nullifying the above position of deducting income on which tax is deductible but not actually deducted. Instantly, we are confronted with a situation in which the deductor has duly deducted tax at source but not paid the same to the exchequer. Albeit gap between `tax which would be deductible as per section 209(1)(d) and `tax deducted at source has been abridged by insertion of proviso to section 209(1), but the open space between the tax deducted at source as per section 143(1)(c) and `tax deducted at source and deposited still persists. We find that the requirement for allowing credit is only of the amount of tax deducted at source and not the amount eventually getting deposited with the Government after deduction. Since a sum was duly deducted at source by the employer from the salaries credited/paid to the assessee for the year under consideration, we hold that benefit of such tax deducted at source has to be allowed in Intimation u/s 143(1) of the Act notwithstanding the fact that it was not deposited. The impugned order is overturned pro tanto. Assessee appeal is allowed.

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• 2023 (2) TMI 260
  Unexplained cash deposits - GP estimation - not considering the plea of assessee for 8% gross profit addition and in restricting the addition to the peak credit - HELD THAT:- Pattern of deposits in bank account shows that there are certain cheque deposits, deposits in cash and regular withdrawal of amount. The lower authorities have confirmed the entire aggregate of deposits and have not considered the withdrawal - entire amount of deposits cannot be considered for addition. The frequent deposit and withdrawal shows that the bank account in dispute was used for unreported business transactions. As recorded above the assessee claimed that the assessee was doing a small business of mobile, accessories and recharge coupons etc. Thus, after considering the submissions of assessee, find merit in his submission that the assessee was doing some business activity, though it was not disclosed to the department. In CIT Vs Pradeep Shantilal Patel [ 2013 (11) TMI 1646 - GUJARAT HIGH COURT ] held that where assessee admitted that cash deposit pertains to his retail business but details and nature of business were not forthcoming from record, considering the total turnover of assessee, net income had to be determined under Section 44AF As decided in this Tribunal in Smt. Krushangi Keyur Bhagat [ 2018 (9) TMI 2093 - ITAT SURAT ] assessee claimed that only peak credit appearing in the bank account should be considered which was not accepted and the amount after reducing the cheque deposits, remaining was treated as unexplained - on appeal before Tribunal, the plea of assessee that amount credited in the bank was a part of textile business and only profit element @ 5% of total deposit including of credit by way of cheque was considered as a profit element on the total deposits. Thus taxing the entire credit or restricting the addition on peak basis is not justified, and it would be justified if only profit element in such business activities from where the assessee generated the credit found in the bank account to avoid the possibility of revenue leakage. Therefore, 8% of total addition is considered as profit from such business activities. Accordingly, the Assessing Officer is directed to consider 8% of total deposit. We direct the Assessing Officer to restrict the addition @ 8% of credit in the bank account of assessee. In the result, ground No. 2 and 3 of appeal raised by assessee are allowed.

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• 2023 (2) TMI 259
  Penalty u/s 271E levied on the deceased person - cash loans from Asharam Bapu Group - violation of provisions of Section 269T - revenue submits that the representative of the assessee never informed about the death of assessee either at the time of issuance of show cause notice or during the penalty proceedings - CIT-A deleted penalty levy - HELD THAT:- Out of Rs. 5.00 crores taken as cash loan, as found from the evidence seized during the course of search, the HUF of assessee offered Rs. 2.00 crores in IDS and balance of Rs. 3.30 crores were brought to tax u/s 69A in the hands of HUF of assessee in the assessment completed by ITO, Ward 1(3)(1), Surat u/s 143(3) of the Act. No addition of cash loan was made in the hand of individual assessee. When the loan was taken in the hand of HUF, the penalty for repayment of loan cannot be levied in the hands of assessee individual. On legal issue the ld CIT(A) also held that assessment order under Section 143(3)/153A of the Act was passed on 30/12/2017 in the name of legal heirs of assessee. The notice of penalty was served in the name of dead person; no notice was served on the legal heirs of the deceased assessee. Such notices issued in the name of dead person, is not curable even by applying provisions of Section 292B as has been held in Sumit Balkrishna Gupta [ 2019 (2) TMI 1209 - BOMBAY HIGH COURT] and.Vikram Singh [ 2018 (1) TMI 1115 - DELHI HIGH COURT] and Rajendra Kumar Sehgal [ 2018 (12) TMI 697 - DELHI HIGH COURT] By referring the aforesaid decision, the ld. CIT(A) held that the penalty levied on deceased person is null and void. In our view the order passed by ld CIT(A) does not require any interference, which we affirm. - Decided against revenue.

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• 2023 (2) TMI 258
  Rectification of mistake u/s 154 - Apportionment of income between spouses governed by Portuguese Civil Code - Addition being 50% of share in the hands of assessee s spouse u/s. 5A - HELD THAT:- AO did not bring on record whether any notice issued to the assessee before passing an order u/s. 154 of the Act. DR did not bring on record any evidence whatsoever to show that any notice issued to the assessee in the alleged rectification proceedings. CIT(A) categorically acknowledged the order passed u/s. 155 of the Act is not valid, inspite of which, confirmed the order of AO even recording a finding to the extent that the AO has taken corrective steps in passing another rectification order u/s. 154 of the Act, in our opinion is not justified. Admittedly, there is no mistake apparent from the record in the case of assessee to rectify the total income determined by the AO u/s. 143(1) of the Act and as rightly pointed by the ld. AR that making addition in the hands of the assessee by taking into account 50% share from the assessment of assessee s spouse is not a mistake apparent from the record. Rectification order passed by the AO u/s. 155 of the Act as confirmed by the CIT(A) is invalid, liable to be quashed. Order of CIT(A) is not justified in confirming the order of AO passed u/s. 155 of the Act and it is set aside. Thus, the grounds raised by the assessee are allowed. Validity of reopening of assessment u/s 148 - HELD THAT:- No doubt the income of the husband and wife under any head of income except under the head salaries shall be apportioned equally between the husband and wife and the income so apportioned shall be included separately in the total income of the husband and of the wife respectively u/s. 5A of the Act which was inserted by the Finance Act, 1994 with retrospective effect from 01-04-1963. Admittedly, the scrutiny assessment u/s. 143(3) of the Act was completed in the case of assessee s husband and the AO required to apportion 50% from the total income determined in the case of assessee s husband to total income of the assessee. The said 50% income which was not included in the original assessment and also not taken into consideration in the original assessment, is to be termed as income which has escaped assessment within the meaning of section 147 such income cannot be brought to assessment and taxed except in accordance with the provisions thereof u/s. 147 - AO by following the procedure contemplated u/s. 147 and 153 of the Act reopened the assessment concluded under intimation u/s. 143(1) of the Act and brought to tax in the hands of the assessee i.e. 50% share from the total income determined under scrutiny assessment proceedings in the case of assessee s spouse correctly - ground No. 1 raised by the assessee is dismissed. Addition made in the hands of the assessee in terms of operation of provisions u/s. 5A - HELD THAT:- A new provisions u/s. 5A of the Act has been inserted by Finance Act, 1994 with retrospective effect from 01-04-1963 and the present year under consideration is being A.Y. 2009-10, the said provisions u/s. 5A is applicable to the facts on hand. The said new section was incorporated for determination of the income of persons governed by the Portuguese Civil Code, 1860 residing in the State of Goa, Union territories of Dadra and Nagar Haveli and Daman and Diu. Admittedly, the assessee and her spouse governed by the Portuguese Civil Code and therefore the provisions of section 5A is applicable. Provisions u/s. 5A(1) provides that the income from all the sources except from the head salaries shall be apportioned equally between the husband and of the wife and such income should not be assessed as income of community property. The income so apportioned will be included separately in the total income of the husband and of the wife. CIT(A) discussed the issue in ground Nos. 1 and 2 in detail vide paras 7 and 8 of the impugned order and by following the provisions of sub-section (1) of section 5A of the Act confirmed the order passed by the AO in apportioning the 50% share of income from her spouse determined under scrutiny assessment proceedings - We totally agree with the reasons recorded by the CIT(A) in confirming the order of AO - ground Nos. 2 and 3 raised by the assessee are dismissed.

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• 2023 (2) TMI 257
  Income from House property - grant of deduction u/s 24(a) of the Act on rental income earned by the assessee trust - HELD THAT:- The assessee during the year earned a rental income of Rs.79,15,551. While filing its return of income, the assessee reduced 30% as standard deduction from its rental income and declared as income from house property. Vide intimation issued u/s 143(1) of the Act, the standard deduction of 30% claimed by the assessee was disallowed, which was overturned by the learned CIT(A) granting relief to the assessee. Thus, the issue arises whether the assessee, being a trust, is entitled to claim a deduction of a sum equal to 30% of the annual value u/s 24(a) - We find that in CIT vs Rao Bahadur Calavala Cunnan Chetty Charities, [ 1979 (8) TMI 17 - MADRAS HIGH COURT ] held that the income from property held under trust would have to be arrived at in a normal commercial manner without reference to the provisions which are attracted by section 14. We direct the AO to disallow the deduction of 30% claimed by the assessee on rental income. As a result, grounds no. 1 and 2 raised in Revenue s appeal are allowed. Computation of exemption u/s 11 of the Act - CIT(A) directed the AO to allow 15% exemption under section 11(1)(a) and also directed that expenses be allowed to be set off to the extent of the income - HELD THAT:- As per section 11 of the Act, the income derived from property held under trust wholly for charitable or religious purposes, to the extent applied to such purposes in India shall be excluded while determining the total taxable income of the trust for the year under consideration. The said exemption shall not be in excess of 15% of such income accumulated, as per the provisions of section 11 - Since vide intimation u/s 143(1) the claim for accumulation under section 11(1)(a) was taken as Nil, therefore, we find no infirmity in the order passed by the CIT(A) directing the AO to allow 15% exemption u/s 11(1)(a) as claimed by the assessee as per the law. Since the expenditure actually incurred by the assessee is much higher than the 85% of income which is required to be spent under section 11, therefore, we find no infirmity in the direction of the CIT(A) to allow the set off of expenses to the extent of the income. As a result, grounds raised in Revenue s appeal are dismissed.

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• 2023 (2) TMI 256
  Disallowing foreign exchange loss - claim by the assesse on outstanding External commercial Borrowing loans - as argued said exchange loss is a business loss fully allowable under of the Income Tax Act, 1961 and hence the disallowance may be deleted - HELD THAT:- We observe that assessee has borrowed funds from ECB and incurred forex loss on account of outstanding ECB loan. This fact is also accepted by the tax authorities that assessee has borrowed funds from ECB and utilized the same to purchase the assets out of these funds were indigenous assets. Since borrowing for the purpose of business and incurring expenditure and loss is also the part of the business expenditure. It is also admitted fact that assessee has borrowed ECB to reduce the interest expenditure. On similar facts on record, we observe that ITAT bench of Pune Tribunal in the case of Cooper Corporation (P.) Ltd. v. DCIT [ 2016 (5) TMI 809 - ITAT PUNE] has considered the same facts and decided the issue in favour of the assessee as held in the absence of applicability of section 43A of the Act to the facts of the case and in the absence of any other provision of the Income Tax Act dealing with the issue, claim of exchange fluctuation loss in revenue account by the Assessee in accordance with generally accepted accounting practices and mandatory accounting standards notified by the ICAI and also in conformity with CBDT notification can not be faulted. No inconsistency with any provision of Act or with any accounting practices has been brought to our notice. Otherwise also, in the light of fact that the conversion in foreign currency loans which led to impugned loss, were dictated by revenue considerations towards saving interest costs etc. we have no hesitation in coming to the conclusion that loss being on revenue account is an allowable expenditure under S. 37(1) - Appeal filed by the assessee is allowed.

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• 2023 (2) TMI 255
  Exemption u/s 11- rejecting the application for registration u/s 12AB considering the objects of the assessee as non-charitable - HELD THAT:- Taking into consideration the Memorandum of Association of the assessee foundation and found that the activities undertaken by the assessee trust are interconnected with the object of the foundation undertaken. It is also mentioned in the Memorandum of Association that the objects of the company extend to the whole of India which are not of profit motive. The profits, if any, or other income and property of the company, whensoever derived, shall be applied, solely for the promotion of its objects as set forth in this memorandum as is mentioned in the Memorandum of Association of Keeday Makauday Foundation filed under the Companies Act, 2013 who has granted Licence under Section 8(1) of the Companies Act, 2013. From the entire conspectus of the issue in question, we feel that the CIT (E) is not justified in denying the registration 12AB of the Act when the assessee foundation/ trust has supplied all the desired information as per his query letter and he did not controvert them which indicates that the order passed by the ld. CIT(E)suffers from infirmity which cannot be sustained. Thus appeal of the assessee foundation is allowed.

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• 2023 (2) TMI 254
  Assessment u/s 153A/153C - Unexplained share application money - HELD THAT:- Facts the case in hand show that search and seizure operation u/s 132 of the Act alongwith survey operations u/s 133A of the Act were undertaken at various residential and business premises of Aseem Kumar Gupta and Group and other beneficiary group of cases on 26.03.2010. On the basis of documents seized and impounded at various premises of Aseem Kumar Gupta, notice u/s 153C of the Act was issued for the captioned Assessment Years and assessment in these cases were completed by the Assessing Officer and on these facts, the ld. CIT(A), Central-2, New Delhi by his order treated the impugned assessment as null and void. Jurisdiction u/s 153C for assessing 6 years preceding the year in which search was initiated can be invoked only when impugned documents are seized u/s 132 or requisitioned u/s 132A. It cannot be invoked in the case of impounding of documents u/s 133A. The very foundation for instituting the proceedings u/s 153C is missing. It has been held by ITAT, Chennai in the case of ACIT vs M.N. Rajaraman [ 2010 (4) TMI 922 - ITAT CHENNAI] and Meghmani Organics Ltd. [ 2013 (7) TMI 228 - GUJARAT HIGH COURT] that where the very foundation for instituting the proceedings by A.O. was missing, the consequential actions and orders must fail and that assessment made pursuant to such proceedings would have to be annulled. Since in the present cases there is no proper assumption of jurisdiction, the assessments made pursuant to such proceedings are annulled herewith. No submissions have been filed on other grounds. However, since the assessment is being treated as null and void - Decided in favour of assessee.

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• 2023 (2) TMI 253
  Allowable business expenses - Addition on account of sponsorship expenses incurred by the assessee company - addition made as expenses were not wholly and exclusively incurred for the purpose of business - HELD THAT:- Mr. Harshvardhan Barech went abroad for study which was sponsored by the assesse as authorized by the board of directors in its meeting held on 26.07.2011 and also an agreement signed with that person for getting his commitment to serve the assessee company after he comes back from his study. We note that the person Shri Harshvardhan Barech has honoured the commitment by serving the company after coming back from US. We also note that in AY 2012-13 and 2015-16 the appeal of the assessee were allowed by the Ld. CIT(A) on the similar issue and revenue has not preferred any appeal challenging the said appellate and thus issue has attained finality as the department has not challenged the order before the higher authority. In our opinion, once the order has attained finality in the earlier and succeeding assessment years then the revenue has no locus standi to agitate on the same issue and on same facts. This is in line with the ratio laid down in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] wherein it has been held that where there is no change in facts and circumstances and revenue has accepted decision in one year , then the revenue cannot be allowed to agitate the same in the other years. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Consequently ground no. 1 is allowed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We observe that the Ld. CIT(A) has principally agreed that only those investments are required to be considered for making disallowance under Rule 8D(2)(iii) which yielded exempt income during the year. However due to non-availability of the details of those investments the disallowance was upheld by ld CIT(A). In our opinion the Ld. CIT(A) has given correct findings that only those investments are required to be taken into accounts for calculating disallowance under Rule 8D(2)(iii). Accordingly we restore this issue to the file of AO to calculate the disallowance only by taking those investments which yielded exempt income during the year. The case of the assessee finds support from the decision of REI Agro Ltd. [ 2013 (9) TMI 156 - ITAT KOLKATA] and the decision of Ashika Global Securities Ltd. [ 2018 (7) TMI 1425 - CALCUTTA HIGH COURT] . Accordingly the ground no. 2 raised by the assessee is allowed for statistical purposes. Addition of prior period expenses on repairs to building - HELD THAT:- We note that the assessee has incurred expenses in the preceding financial year under the head capital work-in-progress which was completed during the year. During the year the same were charged to repairs of building and claimed accordingly. The AO rejected the claim of the assesse by adding the same to the income of the assessee. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by holding the amount pertains to prior period and cannot be allowed. CIT(A) has affirmed the disallowance. However we find force the alternative plea raised before us that depreciation has to be allowed on the applicable rate of depreciation. Accordingly we have allowed the alternative plea of the assessee by directing the AO to allow the depreciation on this account by capitalizing the said amount under the head building. Accordingly ground no. 2 is allowed. TDS u/s 194C - repairs to building on which the assessee failed to deduct tax - HELD THAT:- Assessee has purchased building materials, the details whereof has been placed before us and is available in the PB. We find that the assessee has purchased materials only comprised bricks, stones,sand and grite etc. from Mehmood Hassan on which the provisions of TDS are not applicable as provided u/s 194C of the Act as this is just a purchase of material and not a contract for supply of materials. The case of the assessee finds support from the case of CIT vs. Deputy Chief Accounts officer, Markfed [ 2008 (2) TMI 260 - PUNJAB AND HARYANA HIGH COURT] wherein it has been held that if a manufacturer purchases material on its own and manufactures a product as per the requirement of a specific customers, it is a case of sale and not a contract for carrying out any work. In this case before us also the assessee has carried out repairs itself by purchasing material from outside. In the present case also the case is only for the purchase for materials and not a work contract. We are not in agreement with the conclusion drawn by the Ld. CIT(A). Accordingly we reverse the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly ground no. 4 is allowed.

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• 2023 (2) TMI 252
  Revision u/s 263 - wrong and excess credit of brought forward MAT - HELD THAT:- We find from the facts /records before us that MAT credit has been strictly claimed as determined the order passed u/s 143(3) of the Act a copy of which is placed before us for our perusal. In view this fact ,we do not find any mistake in the claim of brought forward MAT by the assesse and accordingly the assessment order framed is neither erroneous nor prejudicial to the interest of the revenue. Provisions made for doubtful debts on which the PCIT revised the assessment - We observe that there is no mistake in the computation of disallowance. We note that the said observation of the Ld. PCIT is based upon the audit objection which has been replied by the assessee dated 10.11.2021 submitting therein that there is no mistake in making disallowance towards doubtful debts and computation of disallowance have duly been furnished in computation of taxable income. We also observe that the said figure of disallowance was arrived at on the basis of three amounts namely i) provisions for doubtful debts Rs. 55,03,00,000/-, ii) other provisions written back Rs. (- )39,10,00,000/- and iii) provisions for superannuation benefit of Rs. 33,04,58,000/- the net of which comes to Rs. 48,97,58,000/- which has been disallowed in the return of income filed by the assessee a copy of which is placed at page 39 of the PB. Accordingly on the second issue on which the ld CIT(A) revised the assessment order, there is no mistake in the assessment order Assessment order is neither erroneous nor prejudicial to the interest of the revenue. It is settled legal position that in order to invoke the revisionary jurisdiction u/s 263 of the Act , the satisfaction of twin condition is must i.e the order must be erroneous and secondly it must be prejudicial to the interest of the revenue. Even if one of the two condition is satisfied , the jurisdiction u/s 263 of the Act is not available. This is in consonance with the ratio laid down in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] - In view of this fact, we are inclined to quash the order passed by the PCIT u/s 263 of the Act. Appeal of assessee allowed.

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• 2023 (2) TMI 251
  Penalty u/s 271(1)(c) - Defective notice u/s 274 - non Specifying the default for which the Assessee is charged u/s 271(1)(c) - HELD THAT:- In the instant case, the AO initiated the penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of Income and thereafter issued the notice referred to above u/s 274 read with 271(1)(c) of the Act without specifying any particular limb of the penalty and finally imposed the penalty for furnishing inaccurate particulars of income. Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind. Thus having regard to the manner in which the Assessing Officer has issued the notice referred above under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceeding has been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which are bad in law, hence cannot be considered valid notice sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the penalty is not leviable - Decided in favour of assesee.

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• 2023 (2) TMI 250
  Correct head of income - Treatment of compensation received for breach of specific performance of the agreement - Business income or Income from other sources - HELD THAT:- Assessee did not lose any source of income or any profit / income deriving source but it was clearly a loan facility. The findings rendered with respect to re-stated agreement dated 15.02.2007 remain uncontroverted before us. All these facts would lead us to inevitable conclusion that the stated arrangement was nothing but loan facility extended by the assessee to the borrower. In return of loan facility, the assessee was to receive nothing but interest only. Therefore, the amount so received by the assessee has rightly been considered as interest income by Ld. AO and the adjudication as done by Ld. CIT(A), in the impugned order, to that extent, could not be faulted with. At the same time, it could be seen that the assessee is engaged in the business of making strategic investments in real estate space and having objective to invest in large projects both in commercial and residential space. The loans have been granted in furtherance of business objectives and therefore, interest income has to be considered as the Business Income of the assessee and not as Income from other sources . Therefore, AO is directed to compute the interest income earned by the assessee as Business Income and as a consequence, allow business expenditure, as allowable against the same. Applying the same reasoning, the interest earned by the assessee on inter-corporate deposits advanced to M/s Indus City Scapes Construction Pvt. Ltd. would be assessed as Business Income . We order so. The appeal stands partly allowed. Allowability of factoring charges - AO held that factoring charges was nothing but interest and therefore, the deduction of which would not be allowed to the assessee in terms of Sec.40(a)(ia), inter-alia, for want of deduction of tax at source - HELD THAT:- From the facts, it emerges that the assessee has availed factoring facility from EAFSL against receivables and paid factoring charges. We find that factoring charges could not be termed as interest u/s 2(28A) as per the decision of Hon ble High Court of Delhi in PCIT vs. M. Sons Gems N Jewellery (P) Ltd. [ 2016 (4) TMI 1132 - DELHI HIGH COURT ] This decision has referred to the decisions of Hon ble Kolkata High Court in CIT v. MKJ Enterprises Ltd. [ 2014 (12) TMI 682 - CALCUTTA HIGH COURT ] as well as another decision of Cargill Global Trading (P.) Ltd [ 2011 (2) TMI 209 - DELHI HIGH COURT ] Considering these binding decisions and in the absence of any contrary decision on record, we would hold that no such disallowance could have been made u/s 40(a)(ia). Since we have already directed that the interest income earned by the assessee would be assessable as business income and there is complete nexus of factoring charges with the funds advanced by the assessee and therefore, the factoring charges, would be an allowable deduction to the assessee. We order so. This Ground stands allowed.

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• 2023 (2) TMI 249
  Exemption u/s. 11 - income derived from property held under the Trust - violation of provisions of section 13(1)(c) - HELD THAT:- We find that the sole basis for the AO to deny exemption u/s. 11 of the Act, is in light of the transactions between appellant trust and Shri. Vekkaliamman Builders and Promoters, where the appellant trust has awarded civil contract for construction of building in the earlier financial years. AO, held that said transaction between appellant trust and firm is violation of section 13(1)(c), because the appellant trust did not follow due procedure while awarding tender and further the firm has earned substantial profit which amounts to direct benefit to the interested persons. Tribunal has held in the impugned assessment year that the appellant trust has followed due procedure while awarding tender. It is very clear that the observations of the Assessing Officer that the trust has not followed due procedure is devoid of merits. As regards, second observation of the AO with regard to profit earned by Shri. Vekkaliamman Builders and Promoters, the Tribunal has recorded a categorical finding in their order that the firm has earned net profit of Rs. 21.51 Lakhs and the profit earned by the firm is 4.28% of total turnover, which is quite reasonable. Therefore, from the above it is very clear that the observations of the AO, that the firm has made substantial profit which amounts to direct benefit to interested persons as referred to u/s. 13(1)(c) of the Act is also fails. Therefore, there is no error in the reasons given by the ld. CIT(A) to hold that there is no violation of provisions of section 13(1)(c) in respect of civil contract awarded to Vekkaliamman Builders and Promoters by the appellant trust and for this reason, the benefit of exemption u/s. 11 cannot be denied, and thus, we are inclined to uphold the findings of the CIT(A) and reject ground taken by the Revenue. Whether construction contract which has been granted to the firm in which the managing trustee was a partner would tantamount to service as contemplated u/s. 13(2)(c) of the Act. We find that civil contract has been included in the definition of services as per GST laws and also as per Erstwhile Service Tax laws. Therefore, in our considered view, civil contract awarded to a firm in which the managing trustee of the trust is proprietor is tantamount to services as defined u/s. 13(2)(c) - Since, payment made in pursuant to services rendered by the interested persons is not in excess of consideration paid for relevant work, it cannot be held that there is a direct or indirect benefit to the interested persons as referred to u/s. 13(2) of the Act and violation of provisions of section 13(1)(c) of the Act. We are of the considered view that there is no violation of provisions of section 13(1)(c) of the Act, in so far as payment made by the appellant trust to said Vekkaliamman Builders and Promoters for civil contract - CIT(A) after considering relevant facts has rightly held that there is no violation of provisions of section 13(1)(c) of the Act in respect of civil contract awarded to a firm in which managing trustee of the trust is proprietor. Thus, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue.

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• 2023 (2) TMI 248
  Order passed by the CIT(A) in ex-parte proceedings - CIT(A) passed the impugned order confirming addition made u/s 68 - HELD THAT:- FAA had issued notice of hearing to the assessee on five occasions through ITBA on different dates spread over the period starting from 21/01/2021 to 07/06/2022. The assessee failed to respond to any of the aforesaid notices. The contention of the assessee is that the notices were never served on the assessee. Without getting into the controversy of service or non service of the notices, we deem it appropriate to restore this appeal to the file of CIT(A) for de novo adjudication after affording reasonable opportunity of hearing/to make submissions to the assessee, in accordance with law. Assessee shall co-operate in First Appellate Proceeding and shall make submissions within the time specified by the CIT(A). The assessee is directed to respond to the notice(s) issued by CIT(A) without fail. The assessee if so advised may furnish its valid Email ID to the CIT(A) for service of the notice.

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• 2023 (2) TMI 247
  TP Adjustment - comparable selection - turnover filter - HELD THAT:- Companies whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies. Working capital Adjustment - As in case Huawei Technologies India Pvt. Ltd. [ 2018 (10) TMI 1796 - ITAT BANGALORE] observed that the guidelines conclude by observing that the purpose of working capital adjustments is to improve the reliability of the comparables. The Tribunal further observed that the data available with the Assessee and the Department would be the starting point and depending on the facts and circumstances of a case further details can be called for. As far as the Assessee is concerned, the facts and figures with regard to his business has to be furnished. Regarding comparable companies, one has to fall back upon only on the information available in the public domain. If that information is insufficient, it is beyond the power of the Assessee to produce the correct information about the comparable companies. Revenue has on the other hand powers to compel production of the required details from the comparable companies. If that power is not exercised to find out the truth then it is no defence to say that the Assessee has not furnished the required details and on that score deny adjustment on account of working capital differences. One has to see that reasonable adjustment is being made so as to bring both comparable and test party on same footing. We are therefore of the view that the issue with regard to the grant of working capital adjustment should be directed to be examined by the TPO/AO afresh in the light of the decision of the tribunal referred to above, after affording opportunity of being heard to the Assessee. Short term capital loss on transfer of investment - slump sale - Assessee incurred loss in the Sprinkler business and wanted to hive off the same, i.e., wanted to sell its Sprinkler business as a going concern, identifying it s assets and liabilities and Assessee sold its sprinkler business on a slump sale basis - HELD THAT:- The entire exercise of forming a subsidiary, selling the sprinkler business by way of slump sale, subscribing to the debentures and ultimately selling shares held in the subsidiary at a loss (much less than its value) and assigning debentures at virtually nil value, is well thought out and has been carried out with a view to gain tax advantage and to ultimately confer benefit to a third party. Interjecting Aigua Sprinkler in the transaction was only with a view to gain tax advantage and for no other purpose. It is a colorable device adopted by the Assessee. A method put in place to avoid a legal liability, involving an unacceptable form of avoidance that is not within the framework of the law. Whether the device should be accepted or not is a changing perception and Courts have been conservative in the present times than in the past in accepting such avoidance. The facts and circumstances of the present case shows that it would be a fit case to lift the corporate veil and by doing so, we will find the Assessee is the transferor and Mr.Gitendra Bhanot the transferee of the sprinkler business worth as per valuation a sum of Rs.14.7 Crores together with Rs.55 Crores of debenture money less Rs.12 Crores paid to Assessee by way of slump sale. Law is settled that if the Revenue finds that in an transaction an entity which has no commercial/business substance has been interposed only to avoid tax , then in such cases the Revenue would be entitled to ignore the separate legal identity or interposition of that entity, to look at the holding company as having directly done the transaction. In so far as the Assessee is concerned, the statutory provisions do not provide for any tax implications. The affairs have been arranged in such a way that there is tax advantage to the Assessee. The transaction of sale of shares of Aigua Sprinkler to Mr.Gitendra Bhanot will be ignored, by lifting the corporate veil and by construing the sale of sprinkler business by the Assessee to Mr.Gitendra Bhanot. Loss on sale of shares to exploit a loophole in the law, has been plugged by way of amendment from AY 18-19 by introduction of Sec.50CA - We do not wish to go into the tax implications in the hands of Mr.Gitendra Bhanot and whatever is the observations in this appeal is restricted to the tax implications in the hands of the Assessee. Therefore the better course of action would be to ignore the transaction of sale of shares as superfluous and entered into with a view to gain tax advantage. Short term capital loss would be nil, in the facts and circumstances of the present case. In the light of the above discussion, we reject the prayer of the Assessee to allow the short term capital loss on sale of shares as claimed by the Assessee and hold that the transaction of sale of shares deserves to be ignored and no loss can be determined nor can any short term gain be taxed. Thus the grounds relating to short term loss/gain on sale of shares are treated as partly allowed. TDS u/s 195 - Disallowance u/s 40(a)(ia) - non-deduction of TDS on payment of management fees - applicability of DTAA - HELD THAT:- TIMCO is the person with whom the Assessee entered into Agreement for providing managerial services. TIMCO nominated TIL Switzerland as billing and collecting agent and directed the payment to be made for management services to the agent. TIMCO is the beneficial owner of the payment and therefore taxability of the payment in India has to be considered in the hands of TIMCO and not TIL Switzerland. Therefore the applicable DTAA would only be India-USA DTAA and not India-Switzerland DTAA. The findings of the DRP on the MFN clause on India-Switzerland DTAA are therefore in our view superfluous. In so far as the payment made to Tyco International Asia, Inc. Singapore is concerned, it was not the case of the AO that the services rendered were not in the nature of managerial services. The DRP has given findings on its own without confronting to the Assessee as to the alleged discrepancy which it had noticed. The findings of the DRP in this regard is therefore held to be unsustainable. We have to therefore proceed to analyse the taxability of the payments towards management fees in the hands of the payee under the India-USA DTAA and India-Singapore DTAA. The relevant articles in the treaty between India and USA are is Article 12 which deals with taxability of Royalties and fees for included services. In terms of Article 12(1) - The same are the wordings in India-Singapore DTAA also. The discussion with regard to India-USA DTAA would therefore be applicable for payment made to Tyco International Asis Inc. Singapore. Royalties and fees for included services arising in a Contracting State (USA in this case) and paid to a resident of the other contracting State (India/Assessee in this case) may be taxed in that other state (i.e., USA). The relevant clause on which reliance was placed by the assessee for non taxability of the sum in question in India in the hands of iRunway Inc. USA was Article 12(4). In order to attract the taxability of an income under Article 12(4)(b), not only the payment should be in consideration for rendering of technical or consultancy services, but in addition to the payment being consideration for rendering of technical services., the services so rendered should also be such that make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. These worlds are which make available . The meaning of the expression make available were considered by the Tribunal in the case of Raymond Ltd. Vs. DCIT [ 2002 (4) TMI 891 - ITAT MUMBAI] rendering of technical services cannot be equated with making available the technical services. Tribunal was dealing with the scope of Article 13(4)(c) of the Indo-UK tax treaty which is admittedly in pari materia with Article 12(4) of the India-USA tax treaty with which we are presently concerned. The majority view was that in order to attract the provisions of the said article of the tax treaty, not only the services should be technical in nature but should be such as to result in making the technology available to person receiving the technical services in question. The Tribunal also referred to with approval the extracts from protocol to the Indo-US tax treaty to the effect that generally speaking, technology will be considered made available, when the person acquiring the service is enabled to apply the technology. It is not even the allegation of the revenue that the non-residents had made available to the assessee, the knowledge generated in the course of rendering managerial services. In our view the services rendered were purely managerial services and by no stretch of imagination can be considered as making available any technical knowledge, experience, skill, know-how or processes, to the assessee. The services provided by non-residents, did not make available any technical knowledge, experience, skill, know-how or processes to the assessee, the same cannot be regarded as taxable in India. Consequently, there was no obligation on the part of the assessee to deduct tax at source at the time of making payment. Hence, the disallowance made u/s 40(a)(ai) of the Act cannot be sustained and is directed to be deleted. Appeal of the Assessee is partly allowed.

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• 2023 (2) TMI 246
  Delayed Employees contribution to the Employees Provident Fund (EPF) and the Employees State Insurance Scheme (ESI) - Disallowance u/s 43B or u/s 36(1)(va) - amount claimed on payment of PF and ESI if deposited on or before due date of filing of return - HELD THAT:- As decided in PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. [ 2018 (9) TMI 2009 - DELHI HIGH COURT] and AIMIL LIMITED [ 2009 (12) TMI 38 - DELHI HIGH COURT] Hon ble Courts have allowed the employees contributions qua PF and ESI as expenditure on actual payment, may be made after the due date as prescribed in the relevant Acts, but before the due date of filing of return of income u/s.139(1) of the Act and also not drawn any distinction between the employee s and employer s share qua PF ESI contributions, hence, the conclusion drawn by the ld. Commissioner in directing the Assessing Officer to allow deduction if the payments are found made before due date of filing the return, do not require any interference as the impugned order does not suffers from any perversity, impropriety and/or illegality, consequently issue raised by the Revenue Department is not tenable - Appeal filed by the Revenue is dismissed.

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• Customs

• 2023 (2) TMI 245
  Levy of penalty under Section 114(i) of Customs Act, 1962 - whether the orders passed by the Commissioner of Customs (Appeals) and the learned Tribunal are unreasoned and non-speaking orders? - violation of principles of natural justice - HELD THAT:- The impugned decision turned on findings of facts as noted by the Adjudicating Authority. The order-in-appeal dated 13.05.2015 is a short order, however, it is not an unreasoned one. The Commissioner of Customs (Appeals) had found no infirmity with the decision of the Adjudicating Authority and its findings that certain parties were involved in the illegal export of Red Sandalwood/Red Sanders and therefore, did not interfere with the order passed by the Adjudicating Authority. The learned Tribunal has also not found any grounds to interfere with the findings recorded by the Adjudicating Authority. The learned Tribunal concluded that the appellant was remiss as he had not made proper enquiry. The learned Tribunal had also observed that the appellant was aware of the prohibited goods and accordingly dismissed the appeals. It is clear from the impugned order that the learned Tribunal had found no reason to interfere with the findings recorded by the Adjudicating Authority. Appeal dismissed.

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• 2023 (2) TMI 244
  Grant of stay in a case as the present would be different from examining the appeal on merits - import of Solar Inverter - benefit of Notification No.12/2012-CE dated 17.03.2012 - Revenue sought for review of the order of the Commissioner, which was not accepted and finally, the order in Annexure-D was questioned before the Customs, Excise Service Tax Appellate Tribunal, South Zonal Bench, Bangalore - HELD THAT:- A few grounds, both on the product and applicability of the exemption notification, have been stated by the Revenue before the Tribunal. The Tribunal is the final authority on a finding of fact. In the case on hand, the consideration that is weighed with authority or the Tribunal for granting or refusing stay is not always akin to the consideration the authorities would be taking for deciding the main case. It is appreciated that the Tribunal would have felt that the effort in disposing of the stay petition and the appeal could be the same. But what misses the attention of the Tribunal is that the argument will certainly be different in deciding a stay petition and the appeal. Though it has not been categorically stated that the appeal has been heard and disposed of along with the stay petition, from the reasons recorded by the Tribunal, we are satisfied that the appeal ought not to have been disposed for hearing and without posting the appeal for considering, disposing of the appeal is unsustainable. This material irregularity has certainly vitiated the consideration. The order under appeal warrants interference, and, accordingly, set aside. The matter is remitted to the Tribunal for consideration and disposal within three months from the date of receipt of the copy of the judgment.

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• 2023 (2) TMI 243
  Smuggling - foreign origin gold bars - absolute confiscation - penalty - confiscation of Mercedes car under Section 115 and its redemption on payment of fine of Rs. 10 lakhs correct - fine of Rs. 50 lakhs imposed on the appellant under Section 112(b)(i) - burden to prove - prohibited goods or not - Whether the seized gold was correctly confiscated? - HELD THAT:- Section 123 shifts the burden of proof from the Department to the person from whom the goods have been seized in respect to gold and certain other goods which are notified. Undisputedly, the bars in question were of gold and they had foreign markings and were packed in a bag with the address of the jeweller in Dubai. The bars were examined by an expert and were held to be foreign origin gold of 995 purity. All these gave the officers reasonable belief that the gold bars were of foreign origin. Since import of gold is restricted, if foreign origin gold bars were legally imported it was incumbent upon the importer and any other person to whom they may have been sold to show documents that the gold was legally imported. The seizure of the gold from the possession of the appellant as recorded in the Panchnama and admitted in the statement which is also affirmed the appeal before us by the appellant itself is undisputed. It is also undisputed that it had foreign markings and has been certified by the jewellery expert to be of foreign origin. The only question which remains is if it was legally imported or smuggled and the burden of proving that it was legally imported rests upon the appellant. There is not even an assertion in the application before the learned CMM by the appellant that he had legally imported the gold. Therefore, we find no force in the submission of the appellant that his statement under Section 108 cannot be relied upon. The other submission made by the learned counsel for the appellant is that nature of the gold is that he had requested Shri Ahadees to supply legally imported gold and, therefore, it should be considered so. This submission cannot be accepted for the reason for the simple reason that there was no documents at the time of seizure to show that the gold was legally imported. No documents have been produced till date to show that the gold was legally imported - the undisputed gold is of a foreign origin and was reasonably believed to be smuggled by the officers and was seized and the appellant had not discharged his burden to show that it was not smuggled gold. Therefore, the absolute confiscation of the disputed gold needs to be upheld. Mercedes car - HELD THAT:- The learned counsel for the appellant agrees that the appellant represents the company M/s PRK Diamond Pvt. Ltd. Since the show cause notice was issued to the appellant proposing confiscation of the car, we find no force in the argument that notice should have been issued to M/s PRK Diamond Pvt. Ltd. It is not open to the appellant to represent M/s PRK Diamond Pvt. Ltd. to seek release of the car but claim that he does not represent M/s PRK Diamond Pvt. Ltd. when it comes to receiving show cause notice and answering it. The car was allowed redemption on payment of fine of Rs. 10 lakhs - this is a reasonable amount of redemption fine imposed, if the appellant chooses to redeem the car. Penalty under Section 112(b)(i) of Rs. 50 lakhs imposed upon the appellant - HELD THAT:- s per Section 112(b) any person who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111 is liable to penalty. In case of prohibited goods this penalty shall not exceed the value of the goods or Rs. 5000/- whichever is greater. In this case, it is undisputed that the appellant was in possession of the confiscated gold. Even in the appeal before us, the appellant is not disputing this fact. Therefore, he is squarely covered by Section 112(b)(i). The value of the confiscated gold is Rs. 1,84,16,505.68. The penalty imposed is only Rs. 50 lakhs - this amount of penalty is reasonable and calls for no interference. Appeal dismissed.

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• 2023 (2) TMI 242
  Exemption from the whole of the duty of customs - Import of Machinery as Gift - bilateral Agreement - imported plant and machinery from the European Union for setting up a Fruit Processing Plant at Muvattupuzha in Kerala - exemption notification dated 18.07.1994 - whether the import could be treated as a free gift to enable the appellant to claim the benefit of the exemption notification? HELD THAT:- In view of the amendment incorporated in clause (b) of clause 3 on 08.03.2002, the capital investment cost of the Agro-Processing Component (85%) was to be provided as a grant and the working capital (15%) was to be provided as a loan to be repaid in a revolving fund - In the present case, the machinery and plant was a capital investment and so the cost was provided as a grant. A grant has been defined in Chambers Dictionary as something bestowed, an allowance; a gift . It would be seen from the Agreement that though initially the cost of Agro-Processing Component under clause 3 of the Annexure-A (Technical and Administrative Provisions) was to be transferred to the Project by the Government of India as a loan of 4.108 million euro, but subsequently an amendment was incorporated on 08.03.2002. The amended clause 3 provides that the Agro-Processing Component was increased from 4.108 million euro to 7.196 million euro and out of this amount, the capital investment cost (85%) was to be provided as a grant and the working capital (15%) was to be provided as a loan to be repaid in a revolving fund. Thus, the plant and machinery, which would be included in the capital investment cost, was provided as a grant which means as a gift. Clause 8 of the exemption notification would, therefore, be satisfied. This factual portion is also reflected from the Certificate dated 09.11.1999 given by the European Union. The Certificate clearly mentions that the plant and machinery was gifted free of cost to the Programme under the bilateral Agreement between the Government of India and the European Union - the Commissioner (Appeals) failed to notice the amendment made in clause 3(b) of Agreement while recording a finding that the plant and machinery was provided on a loan which was to be repaid. On a plain reading of the Agreement, it is clear that clause 8 of the exemption notification stands satisfied - appeal allowed.

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• 2023 (2) TMI 241
  Reduction in quantum of redemption fine and penalty - mis-declaration of imported goods - goods found as old used Hard Disc Drive 500 GB for desktop laptop and the quantity was also found as 20,512 against the declared 8,000 in the import documents - 2000 pcs of the RAM were also found which were not declared in the import documents - HELD THAT:- There is no merit in the grounds of appeal raised by revenue, as there can be no estoppel against law. The appellant have exercised their statutory right of appeal which is not liquidated, as they have submitted at the adjudication stage they are ready to pay fine and penalty. Appeal dismissed.

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• Insolvency & Bankruptcy

• 2023 (2) TMI 240
  Maintainability of petition - aggrieved person being IBBI - lack of authorization in favour of the authorized signatory of the Respondent No. 2 - HELD THAT:- The present appeal has been filed by the Insolvency and Bankruptcy Board of India impleading GTL Infrastructure Limited as Respondent and Canara Bank as Performa Respondent. It is averred in the appeal that the Appellant is responsible for the enforcement of various rules and regulations concerning the corporate insolvency resolution and amongst others. Therefore, it becomes imperative for the Appellant to file the instant appeal as the impugned order is based on an incorrect interpretation of the provisions of Insolvency Bankruptcy Code, inter alia Section 7. At the outset, Counsel for the Appellant has been asked as to how the Appellant Board is an aggrieved person especially when the aggrieved person (Canara Bank) has already filed the appeals i.e. CA (AT) (Ins) No. 68 69 of 2023. In merely requested that the present appeal may be renotified to be heard alongwith aforesaid two appeals on 17.03.2023. However, from the perusal of the memorandum of appeal, we could not find the cause of concern much less the grievance of the Appellant for preferring the present appeal especially when the appeals have already been filed by the aggrieved person. The Appellant has nothing to do with the litigation between two parties i.e. Financial Creditor and Corporate Debtor , in order to challenge the impugned order by which the petition filed by the Financial Creditor has been dismissed for whatever reasons. The appeal is thus totally misconceived and not maintainable and hence, the same is hereby dismissed.

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• 2023 (2) TMI 239
  Liquidation of Corporate Debtor - It is the version of the Petitioner that any delay in the Liquidation of the Corporate Debtor, will significantly deplete the Asset Maximisation, thereby, impacting all the Stakeholders of the Corporate Debtor - HELD THAT:- It comes to be known that before the Adjudicating Authority, the Appellant, had appeared and filed a Reply, objecting to the Liquidation of the Corporate Debtor, on the premise that the Corporate Debtor, is an MSME and since the Debts are duplicated in both the Corporate Debtors, the Appellant, may be permitted to submit a combined Resolution Plan, qua both the Corporate Debtors, before the Committee of Creditors, and direct them to reconsider the same - The version of the 1st Respondent / Appellant is that, BMW Group is controlling the Committee of Creditors of both the Corporate Debtors, as well as Koyenco Autos Private Limited, having 68.15% and 74.80% Voting Shares, respectively. This Tribunal, on going through the respective contentions advanced on either side, taking into account of the facts and circumstances of the instant case, in a conspectus fashion and also keeping in mind the full Claim of the Petitioner, was admitted by the Liquidator, this Tribunal comes to a consequent conclusion that the Petitioner / Intervenor, is not a necessary or a proper Party, to be arrayed, as one of the Respondents (Viz. proposed 3rd Respondent) and even without the Petitioner s presence, this Tribunal, is enjoined to dispose of the main Appeal. Appeal disposed off.

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• 2023 (2) TMI 238
  Parallel proceedings - whether when an application is filed against the Personal Guarantor whether another Lender of same transaction can proceed against the Personal Guarantor by filing another application under Section 95 of the I B Code? - HELD THAT:- The interim moratorium under Section 96 (1)(b)(ii) creates a prohibition on the creditors of the debtor from initiating any legal action in respect of any debt. The use of expression any debt also clearly indicate that debt on basis of which moratorium has commenced is not contemplated by the expression any debt . With regard to all debts of debtor i.e. Personal Guarantor in the present case, no proceeding can be initiated by virtue of Section 96(1)(b). The application filed by the Central Bank of India on 12.10.2021, thus, was clearly hit by Section 96(1)(b)(ii) and the Adjudicating Authority could not have proceeded with the said application and appointed the Resolution Professional. The order dated 13.06.2022 impugned in this Appeal is clearly unsustainable. The creditors of the Personal Guarantors who are unable to file an application due to enforcement of moratorium under Section 96 can very well avail the benefit of period during which moratorium continues, hence, due to interim moratorium enforced by Section 96, the creditors like Central Bank of India and other creditors are in no manner prejudiced. If they have not filed any application during moratorium period, they have every right to file application and for computation of the period of limitation, period during which moratorium is in place is to be excluded - Section 179 of the Code deals with individuals and partnership firms where similar provision has been made under Section 179 Sub-Section (3) giving benefit in computing the limitation for a suit or application in which period during which moratorium is in place is to be excluded. In view of the commencement of interim moratorium as per order dated 21.06.2021, as noticed above, the application filed by the Central Bank of India under Section 95 on 12.10.2021 could not have been proceeded with by passing the order dated 13.06.2022 - Appeal allowed.

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• 2023 (2) TMI 237
  Purposive interpretation of section 29-A of IBC - Eligibility of auction purchaser to bid during the e-auction of the corporate debtor as a going concern - whether the successful e-auction purchaser is an MSME to claim benefit under section 240-A? - HELD THAT:- In the matter of Bank of Baroda v. MBL Infrastructures Ltd. [ 2022 (1) TMI 811 - SUPREME COURT ], where Hon ble Supreme Court, while reiterating its earlier pronouncements, held that the provisions of Section 29-A continue to permeate section 31(1)(f) which is applicable during the liquidation process and that section 29-A has been enacted to facilitate corporate governance and in larger public interest. It is not in dispute that Mr. Gyandeep Kantipudi is a suspended director of the corporate debtor/UTM Engineering Pvt. Ltd. and is also a director of Redbrick Consulting Pvt. Ltd alongwith Ms. Radika Kantipudi. The Learned Counsel for Appellant/Liquidator has claimed that Mr. Gnyandeep Kantipudi or the successful auction purchaser do not carry any ineligibility under section 29-A of the IBC. The Arun Kumar Jagatramka [ 2021 (3) TMI 611 - SUPREME COURT ] reiterates the need to give a purposive interpretation of section 29-A as was held earlier by Hon ble Supreme Court in the matter of Arcelor Mittal v. Satish Kumar Gupta [ 2018 (10) TMI 312 - SUPREME COURT ] - the judgment of Hon ble Supreme Court lays down that a purposeful and contextual interpretation is necessary in the interpretation of the provision under section 29-A as against a wooden, literal interpretation . This judgment, therefore, points out to the necessity of piercing of corporate veil while examining the eligibility of a successful applicant or an auction bidder (in the case of liquidation). It is thus, seen that in the judgment in Bank of Baroda v. MBL Infrastructures Ltd., the Hon ble Supreme Court has held that a purposive interpretation of section 29-A is required when the primary aim is to restart the corporate debtor, which is also the case in the present appeal since the corporate debtor is being sold as a going concern - This judgment, in addition, also clarifies that the management which has ran the company aground, because of which the company has gone into insolvency resolution/liquidation, cannot be allowed to return in a new avatar as a resolution applicant. Thus, Mr. Gnyandeep Kantipudi, who by virtue of being a director of Redbrick Consulting Pvt. Ltd., controls and manages its affairs, cannot be allowed to take over control of the corporate debtor of which he is a suspended director. Relying on the principle of purposive interpretation of section 29-A of IBC, Redbrick Consulting Pvt. Ltd. was not eligible to bid for the corporate debtor in liquidation as a going concern . In view of the findings that the successful auction purchaser Redbrick Consulting Pvt. Ltd. is not entitled to receive benefit under section 240-A as an MSME, and that the liquidator was not correct in giving such a benefit to the Redbrick Consulting Pvt. Ltd., and also that the successful auction purchaser was not eligible to bid for the corporate debtor in liquidation as a going concern, it is opined that the Adjudicating Authority has correctly set aside the e-auction dated 16.6.2021 and directed the liquidator to re-auction the said property after obtaining fresh valuation of the said property from at least two valuers in the present time. Appeal dismissed.

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• PMLA

• 2023 (2) TMI 236
  Money Laundering - scheduled/predicate offence - initiation of crowdfunding campaign through an online crowdfunding platform named Ketto and ran three campaigns from April 2020 to September 2021 - whether the trial of the offence of money-laundering should follow the trial of the scheduled/predicate offence or vice versa? - HELD THAT:- The trial of the scheduled offence should take place in the Special Court which has taken cognizance of the offence of money-laundering. In other words, the trial of the scheduled offence, insofar as the question of territorial jurisdiction is concerned, should follow the trial of the offence of money-laundering and not vice versa - Since the Act contemplates the trial of the scheduled offence and the trial of the offence of money-laundering to take place only before the Special Court constituted under Section 43(1), a doubt is prone to arise as to whether all the offences are to be tried together. This doubt is sought to be removed by Explanation (i) to Section 44(1). Explanation (i) clarifies that the trial of both sets of offences by the same Court shall not be construed as joint trial. It may be seen from the principles culled out from Sections 177 to 184 of the Cr.P.C that almost all contingencies that are likely to arise have been carefully thought out and laid down in these provisions. The only contingency that could not have been provided in the above provisions of the Cr.P.C, is perhaps where the offence of money-laundering is committed. This is why Section 44(1) begins with a non-obstante clause. The whole picture is thus complete with a combined reading of Section 44 of the PMLA and the provisions of Sections 177 to 184 of the Cr.P.C. - Once this combined scheme is understood, it will be clear that in view of the specific mandate of clauses (a) and (c) of subsection (1) of Section 44, it is the Special Court constituted under the PMLA that would have jurisdiction to try even the scheduled offence. Even if the scheduled offence is taken cognizance of by any other Court, that Court shall commit the same, on an application by the concerned authority, to the Special Court which has taken cognizance of the offence of money-laundering. Whether the Court of the Special Judge, Anti-Corruption, CBI Court No.1, Ghaziabad, can be said to have exercised extra-territorial jurisdiction, even though the offence alleged, was not committed within the jurisdiction of the said Court? - HELD THAT:- A person may (i) acquire proceeds of crime in one place, (ii) keep the same in his possession in another place, (iii) conceal the same in a third place, and (iv) use the same in a fourth place. The area in which each one of these places is located, will be the area in which the offence of money laundering has been committed. To put it differently, the area in which the place of acquisition of the proceeds of crime is located or the place of keeping it in possession is located or the place in which it is concealed is located or the place in which it is used is located, will be the area in which the offence has been committed. Having seen the legal landscape on the question of jurisdiction, let us now come back to the facts of the case on hand. It is the case of the petitioner that what was attached by the Enforcement Directorate under Section 5 of the Act as proceeds of crime, was the bank account of the petitioner in Navi Mumbai, Maharashtra and that therefore the offence of moneylaundering, even according to the respondent has been committed in Maharashtra. The question of territorial jurisdiction in this case requires an enquiry into a question of fact as to the place where the alleged proceeds of crime were (i) concealed; or (ii) possessed; or (iii) acquired; or (iv) used. This question of fact will actually depend upon the evidence that unfolds before the Trial Court. The issue of territorial jurisdiction cannot be decided in a writ petition, especially when there is a serious factual dispute about the place/places of commission of the offence. Hence, this question should be raised by the petitioner before the Special Court, since an answer to the same would depend upon evidence as to the places where any one or more of the processes or activities mentioned in Section 3 were carried out. Therefore, giving liberty to the petitioner to raise the issue of territorial jurisdiction before the Trial Court, this writ petition is dismissed.

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• Service Tax

• 2023 (2) TMI 235
  Maintainability of petition - availability of alternative remedy of appeal - petitioner claims that the demand was raised beyond the period of one year, as stipulated under Section 73(4B) of the Finance Act, and therefore, is barred by limitation - HELD THAT:- The petitioner contends that there is no ground whatsoever in the impugned order, which could be read to indicate that it was not possible for the concerned authority to pass the order within the period as stipulated under Section 73(4B) of the Finance Act. Thus, the impugned order is barred by limitation. The petitioner also seeks to contest the demand on merits. Although, prima facie, the contention advanced by the petitioner appears merited, however, the petitioner has an equally efficacious alternate remedy. This Court does not consider it apposite to entertain the present petition. The same is disposed of with liberty to the petitioner to avail alternate remedies.

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• 2023 (2) TMI 234
  False declaration filed under Voluntary Compliance Encouragement Scheme [VCES], 2013 - it is alleged that the declaration was substantially false as the actual taxable receipts were Rs. 22,41,50,211/- on which a tax of Rs. 2,49,65,525/- was to be paid - was the appellant liable to pay service tax on various incentives, which it received from Tata as per the dealership agreement? - was the appellant was liable to pay service tax on the entire receipts from M/s Tata Motors on account of the warranty services including that of suppliers? - false declaration or not - levy of penalty under section 78. Tax on various incentives - HELD THAT:- The appellant has not disputed and has already paid service tax on various incentives, which it received from Tata as per the dealership agreement. Warranty services including that of suppliers - HELD THAT:- The demand on the warranty receipts part of the demand has already been dropped by the Commissioner in the impugned order. Part of the demand has been confirmed because the appellant was not able to give separately the receipts on account of supplies and consumables and labour receipts. The appellant has now submitted these details before us. There is no dispute regarding the taxability itself with respect to this part of the demand. Demand on the incentives received by the appellant from Tata Motors for meeting sales targets - HELD THAT:- It is undisputed that the agreement is titled dealership agreement and that it also clarifies that the appellant has to purchase vehicles from Tata Motors and then sell them. If it meets the targets it gets additional incentives. This in our considered view, is in the form of a trade discount. Trade discount can take many forms, such as, cash discount, quantity discount, year end discount, etc. These incentives are in the form of year end discount. This is an incentive given to encourage the dealer to buy and sell larger number of vehicles. It is not a payment for any service rendered to the manufacturer. In market, buyers who purchase larger quantities of any good often get a better price. The incentives in this case are of this nature. It has already been held by this Tribunal in the case of Sai Service Station Ltd. [ 2013 (10) TMI 1155 - CESTAT MUMBAI] and Rohan Motors Ltd. [ 2020 (12) TMI 1014 - CESTAT NEW DELHI ], that such incentives are not exigible to service tax - thus, the demand on the incentives received by the appellant are not exigible to service tax. It is found that of the Rs. 23,43,19,543/- on which service tax has been demanded, no service tax can be charged on Rs. 17,17,75,363/- and service tax has already been declared and paid on Rs. 2,33,48,828/-. Of the remaining Rs. 3,91,95,353/- part of the demand has already been dropped as the receipts were of prior to 2012. For the period 2012 to 2013 part of the services were rendered between 01.04.2012 to 30.06.2012 which are not taxable, but services post 01.07.2012 were taxable. However, the demand was confirmed for the entire year as the breakup of the receipts between 01.04.2012 to 30.06.2012 and the period from 01.07.2012 to 31.03.2013 were not available. These figures have now been presented before us by the learned Consultant. According to the learned Consultant on the basis of these figures a demand of Rs. 15,44,404/- as service tax deserves to be dropped. As the Commissioner had no opportunity to examine these figures and the relevant documents we find that it is a fit case to be remanded to the Commissioner for verification of these figures. Appeal allowed by way of remand.

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• 2023 (2) TMI 233
  Maintainability of appeal - time limitation - appeal of the appellant dismissed only on the ground of limitation as the appeal was filed beyond 90 days from the date of receipt of the order - HELD THAT:- As regard the limitation the learned Counsel has emphatically submitted that the order was not served in terms of Section 37C and he also placed heavy reliance on the Supreme Court judgment in the case of SARAL WIRE CRAFT PVT. LTD. VERSUS COMMISSIONER CUSTOMS, CENTRAL EXCISE AND SERVICE TAX OTHERS [ 2015 (7) TMI 894 - SUPREME COURT] - It is found that this legal aspect has not been examined properly by the learned Commissioner (Appeals). Therefore, the learned Commissioner (Appeals) needs to examine regarding the provision of service of order in the light of Apex Court judgment cited by the appellant. The appeal is allowed by way of remand to the Commissioner (Appeals).

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• Central Excise

• 2023 (2) TMI 232
  Seeking waiver of pre deposit - Clandestine Removal - suppressed production of MS Ingots - reliance placed upon technical opinion report of productivity of Induction Furnace - HELD THAT:- It is true that the amended provisions of Section 35F do not permit of any waiver. The vires of the aforesaid provision has been upheld by this Court in the case of Satya Nand Jha [ 2016 (7) TMI 1307 - JHARKHAND HIGH COURT ]. This Court however has also held that waiver of pre-deposit can be allowed in extreme cases in exercise of writ jurisdiction under Article 226 of the Constitution of India by holding that the impugned provisions are valid. It is, of course, clear that if gross injustice is done and it can be shown that for good reason the court should interfere, then notwithstanding the alternative remedy which may be available by way of an appeal under Section 20 or revision under Section 21, a writ court can in an appropriate case exercise its jurisdiction to do substantive justice. The opinion of the learned Coordinate Bench of this Court in Satya Nand Jha holds good till date. It further appears that Delhi High Court has also taken a similar view in the case of Shubh Impex [ 2018 (5) TMI 572 - DELHI HIGH COURT ]. Exercise of discretionary power under Article 226 of the Constitution of India is made to remedy extreme cases where the statutory provision does not permit of any exception. In the present case the petitioner unit is closed since 20.09.2006. The profit and loss statement enclosed as Annexure-1A-1 to the I.A. shows that for three consecutive financial years 2006-07, 2007-08 and 2008-09 the same is running in losses. The impugned demand is to the extent of Rs.12.50 Crores. The pre-deposit of 10% would come to Rs.1.25 crores which this Court finds would be onerous for the petitioner unit which is closed since 20th September 2006 to furnish in order to effectively avail of the remedy of appeal before learned CESTAT. The requirement of pre-deposit of 10% of the duty and penalty imposed or both for preferring appeal before learned CESTAT is waived. I.A. No.11581/2022 stands allowed - Petition disposed off.

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• 2023 (2) TMI 231
  Pending appeals wherein, the IBC proceedings have been concluded by NCLT - as per the NCLT order, all the government dues shall stand extinguished and no government dues including the dues involved in the present appeals is recoverable - HELD THAT:- The NCLT has passed an order by approving resolution plan of the company M/s. Alok Industries Limited in favor of JM Financial Asset Reconstruction Company Limited and Reliance Industries Limited, who are the resolution applicant. Since the IBC proceedings have been concluded in favour of M/s. Arcelormittal Nippon Steel India Ltd., these appeals shall stand infructuous accordingly, we dismiss these appeals as infructuous. Both the sides have liberty, in case of any amicable resolution is not arrived at between the appellant and the respondent, to approach to this tribunal to revive the present appeals and the same shall be decided on merit, if required. Appeal disposed off.

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• 2023 (2) TMI 230
  Cash refund against the accumulated and unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess - Time Limitation - HELD THAT:- The appellant have heavily relied upon various High Court decisions according to which refund was allowed considering Rule 5 of Cenvat Credit Rules, 2004. It is not disputed that the appellant are not in a position to utilize Cenvat credit of Education Cess and Secondary and Higher Education Cess due to introduction of GST with effect from 01.07.2017 - From the Rule, under clause (vi) and (via), the credit of Education Cess and Secondary and Higher Education Cess is clearly allowed. Therefore, the appellant is legally entitled for Cenvat of Education Cess and Secondary and Higher Education Cess. Hence, on this count refund cannot be denied. Time Limitation - HELD THAT:- The Hon ble High Court in various cases also considered limitation and held that in case of refund of accumulated unutilized credit, limitation shall not apply - Reliance placed in the case of UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [ 2006 (7) TMI 9 - KARNATAKA HIGH COURT] where it was held that There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly ruled by the Tribunal. Accordingly the appellant is entitled for cash refund of accumulated and unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess - appeal allowed.

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• 2023 (2) TMI 229
  Denial of CENVAT Credit - denial on the ground that credit was transferred two months before the period prescribed under Rule 10A of Cenvat Credit Rules - HELD THAT:- The transferor assessee is required to transfer the credit at the end of the quarter. In the present case, for the quarter ending December 2013, instead of transferring credit on 31.12.2013, it was transferred on 31.10.2013. Similarly for the quarter ending September 2014, instead of transfer of credit on 30.09.2014 it was transferred on 31.07.2014. I find that there is no dispute that the credit which was transferred was lying accumulated in the Cenvat account of transferor unit. The transfer of credit from one unit to another unit of the same assessee company in terms of Rule 10A is only a procedural requirement and it is not a case of any fresh payment of duty. The credit which is transferred is in respect of duty which was already paid. Therefore, by transfer of credit there is no Revenue implication. If at all there is lapse, it is on the part of the transferor unit against which the audit had already raised the issue and on payment of interest the issue was settled and no further action was taken against the transferor unit. For this reason also Cenvat credit should not have been denied to the appellant. There are no reason that in the facts and circumstances of the present case why the credit can be denied - appeal allowed.

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• 2023 (2) TMI 228
  Re-credit claim - area based exemption - whether the re-credit claimed by the appellant is correct or not in terms of para 2C of area based exemption Notification No. 39/2001- CE dated 31.07.2001? - time limitation - HELD THAT:- There are force in the argument of learned counsel that the Learned Commissioner (Appeals) instead of remanding the matter to the Jurisdictional Assistant Commissioner he could have decided the matter finally at his end. The appellant emphatically argued on the issue of limitation. The learned Commissioner (Appeals) instead of deciding the limitation remanded the matter which in our view is prima facie incorrect. It is the submission of the learned counsel that after holding the entire proceeding pre-mature the learned commissioner remanded the matter instead of deciding finally on this observation itself. We find that considering the facts and circumstance of the present case the learned Commissioner (Appeals) ought not to have remanded the matter to the Adjudicating Authority particularly when the appellant have raised the ground on limitation. The impugned order is set aside and matter remanded to the Commissioner (Appeals) for passing fresh order on all the grounds made before him by the appellant - Appeal is allowed by way of remand to the Commissioner (Appeals).

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• CST, VAT & Sales Tax

• 2023 (2) TMI 227
  Validity of Departmental Eqquiry agaisnt the Revenue officer - Jurisdiction - Refund claim - Whether the departmental proceedings could have been initiated against the petitioner for his alleged act or omission relating to exercise of his powers in the matter of passing orders of assessment/reassessment/refund of taxes to the dealers of coal companies? - Doctrine of Bias - HELD THAT:- Upon perusal of the allegations levelled against the petitioner, this Court finds that the charge No.-I was the consequence of the various acts and omissions alleged in charge Nos. II to VII and each of the charge in charge no. II to VII are distinct and relate to different stages in the matter of assessment/reassessment and refund of taxes. One of the main allegations levelled against the petitioner is that upon remand by the appellate authority, the petitioner allowed the change of the nature of sale without there being any cogent material and solely on the basis of revised return. There can be no doubt that the nature of sale has a direct bearing on the rate of tax and it is alleged that such action resulted in issuance of huge refund orders by the petitioner. Considering the nature of allegations levelled against the petitioner, this Court is of the considered view that on the face of the allegations made against the petitioner, there is prima facie material to show recklessness or misconduct in discharging of his official duty and that the petitioner did not act appropriately to safeguard the interest of revenue and had acted negligently and did not abide by the prescribed conditions for exercise of statutory powers which included acceptance of revised return without cogent material to change the nature of sale, which resulted in passing of the orders showing excess payment. This was coupled with the allegation that those refunds were further initiated by the petitioner although the refund applications for refund more than Rs.20,000/- were required to be filed before the Joint Commissioner and not before the assessing authority in terms of the Rules. The plea of examination/cross-examination of Shri Vidya Bhushan Verma on the basis of whose report it is stated that the departmental proceedings were initiated against the petitioner - HELD THAT:- The stand of the respondents is that the petitioner has not been prejudiced by not examining Shri Vidya Bhushan Verma who had prepared a report which was based on official records. The petitioner has not been able to demonstrate before this Court as to how the petitioner has been prejudiced by non-examination of Shri Vidya Bhushan Verma. However, this Court is of the considered view that the departmental proceedings is still pending on account of interim order passed by this court way back in the year 2010 and there is no harm if Shri Vidya Bhushan Verma is examined at the enquiry proceedings. This Court finds that the petitioner filed the present writ petition on 30.01.2010 challenging the initiation of enquiry proceedings against the petitioner vide resolution No. 2829 dated 13.12.2008. The respondents have not been able to point out any order rejecting the plea of the petitioner for production of Shri Vidya Bhushan Verma for examination. It is directed that the respondents will take all appropriate steps to examine/cross-examine Shri Vidya Bhushan Verma in the departmental enquiry and the official records which are the basis of allegations made against the petitioner be made available to the petitioner for inspection and for cross-examination of Shri Vidya Bhushan Verma. It has been stated in para 43 of the counter affidavit dated 19.04.2010 that all the relevant documents have been provided to the petitioner during the course of departmental proceedings but no rejoinder has been filed to deny or dispute the averments made in the counter affidavit. The entire allegations against the petitioner is based on official records resulting in passing of quasi-judicial orders of assessment/reassessment/refund etc. and as long as those records are available, no prejudice will be caused to the petitioner by not examining Shri Vidya Bhushan Verma for testifying and verifying the details of the report submitted by him. Alleged bias of the enquiry officer -Respondent no.3 against the petitioner - HELD THAT:- No rejoinder has been filed to the aforesaid counter affidavit filed by the respondents. The aforesaid statement made in the counter affidavit clearly reveal that the enquiry officer namely, Sri Niranjan Prasad Mandal, the then Joint Commissioner of Commercial Taxes (Admn.), Dhanbad Division, Dhanbad was posted at Dhanbad only for a period from 5.7.2008 to 14.12.2009 i.e., after the alleged events/incidents involving the petitioner was already over. This Court is of the considered view that although allegation of bias has been made but the allegations are not substantiated by any material or conduct of the inquiry officer in order to create any impression of bias against the petitioner, even remotely. The petitioner is directed to appear before the Respondent no.1 on 20.02.2023 for needful and shall fully cooperate for expeditious conclusion of the disciplinary proceedings - Interim order dated 19.03.2010 is vacated.

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