Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 15, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Condonation of delay in filing an appeal before the appellate authority - Section 107(4) of GST - The respondent authority ought to have passed a speaking order by computing the limitation in the light of Section 107(4) of the GST Act. The matter is remanded back for consideration. - HC
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Cancellation of GST registration of petitioner - In cancellation of such GST registration for the reasons mentioned under the Section, it cannot be said that any third party rights are created against the assessee. No prejudice is caused to any other person, if the GST registration of the petitioner/assessee is revoked. No prejudice is caused to the revenue. Rather as discussed above, it will be in the interest of the revenue to permit the revocation of a cancellation of GST registration of an assessee like the petitioner so that it felicitates collection of revenue as mandated under the GST Regime. - HC
Income Tax
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Reopening of assessment u/s 147 - the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction u/s 147 - HC
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Reopening of assessment u/s 147 - Validity of order 148A - the reassessment proceedings initiated are unsustainable on the the ground of violation of the procedure prescribed u/s 148A(b) of the Act on account of failure of the AO to provide the requisite material which ought to have been supplied alongwith the information in terms of the said section. - The order impugned passed u/s 148A(d), the notice impugned u/s 148 of the Act are hereby quashed. - HC
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Income deemed to accrue or arise in India - Benefit of the Mauritius Double Taxation Avoidance Agreement (DTAA) - For the Authority to hold that if Petitioner was not interposed, the Bidvest group in accordance with the Indo-SA DTAA would have to pay capital gains on the share sale as the same is taxable in India is misplaced as not relevant as the investment is by the Petitioner. As noted above, the Petitioner has been incorporated in Mauritius, holds a TRC which is sufficient proof of its residence in Mauritius, which as noted above, cannot be enquired into unless there is a fraud or illegal activity, which in this case, has neither been alleged nor demonstrated. - HC
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Claim of exemption u/s. 10(22) and section 10(23C)(vi) - The respondents have not substantiated their bald statement that ASB/the petitioners have not invested the surplus money in accordance with law which in any event would not be a criteria at the initial stage of approval as held by the Apex Court in New Noble Society (supra). - Benefit of exemption allowed - HC
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Faceless assessment u/s 144B(1)(xvi)(a) - draft order was not prepared - However, an income or loss determination proposal was prepared. - the best way forward would be to set aside the impugned assessment order, with liberty to the Assessing Officer (AO) to conduct the proceedings de novo, after according personal hearing to the petitioner/assessee and/or his authorised representative. - HC
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MAT - computation of book profits - the claim of the assessee being lower of unabsorbed depreciation and business loss deserves to be set off against the current year book profit in terms of the provisions of clause (iii) of Explanation-1 of Section 115JB(2) - AT
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Disallowance of claim of brought forward business loss - the AO was under legal obligation to comply with the direction of higher authority. We therefore, considering the totality of the facts, direct the Assessing Authority to allow set off of the losses as claimed by the assessee before the Ld.DRP. - AT
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Revision u/s 263 - PCIT observed that AO had failed to examine and verify the issues related to share premium received and interest earned, which issues had remained unaddressed - The action of the Ld. PCIT is in direct contravention of the provisions of Explanation (a)(i) to section 56(2)(vii) of the I.T. Act read with rule 11UA(2)(b) of the I.T. Rules. - AO could not have changed the method of valuation opted by the Assessee - Revision order quashed - AT
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Disallowance of expenses on account of organizing conference and seminars for the doctors and healthcare professionals - the assessee has not supplied any name and address of the healthcare personnel, to whom the conference or travel expenses have been reimbursed. - These expenditure falls under prohibited activity and therefore, expenses incurred thereon have been validly disallowed - AT
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Revision u/s 263 by the ld. PCIT - Neither the AO had enquired into the sources of cash deposits nor the appellant had offered any explanation in support of the sources for cash deposits. This clearly goes to prove the AO had failed to examine this issue during the course of original assessment proceedings, which rendered the assessment order erroneous and prejudicial to the interests of the Revenue. - AT
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Credit of TDS - AO cannot simply decline the credit of TDS and he is bound to verify TDS certificate issue in accordance with provisions of law. Further, the AO is also directed to verify if any relief has already been granted in the rectification application filed by the assessee. If so then further benefit of TDS credit may not be allowed. - AT
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Unexplained investment - addition made on the basis of surrender/admission made by the assessee - statement recorded during survey can safely be stated to be retracted duly evidenced with documentary evidence, and in such circumstances, the statement of the assessee recorded u/s 133A of the Act carries no evidentiary value. - AT
Customs
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Levy of penalty on CHA u/s 114 (iii) and Section 114AA respectively of the Customs Act, 1962 - allegation of abatement - fraudulent export to claim duty drawback - The negligence of the CHA resulted into attempted of fraudulent export by his client. Therefore, the appellant is liable for penalty under Section 114(iii) and Section 114AA. - AT
IBC
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Initiation of CIRP - Admittedly, Distributorship Agreement between the parties is not disputed and the Appellant has claims against the Corporate Debtor. Appellant is free to take recourse to the mechanism as provided in the Distributorship Agreement for realisation of its dues. But present is not a case, where Section 9 proceedings under I&B Code can be initiated, when dispute is raised in reply to the Section 8 notice. - AT
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Initiation of CIRP - existence of debt and dispute or not - In the present factual matrix, the defence raised by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. - AT
Service Tax
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Remand of the matter - the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. This approach of Tribunal is not proper. We deem it appropriate to direct the Tribunal to decide the matter on merits. - HC
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Levy of Service Tax - banking and other financial services - Seed Capital Assistance Scheme - Though the term used in ‘service charge’ but the underlying nature of the 1% and 10% is nothing but interest on the seed capital loan, extended to the entrepreneurs. Therefore the same is not liable to service tax. - AT
Central Excise
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Valuation of export goods - method of valuation - toothbrushes supplied in bulk - to be further supplied under promotional scheme/ offer - as per standards of weights and measure Rules, the appellant are not under legal obligation to affix the retail sale price on this supplies. Therefore, the valuation of tooth brush when supplied in bulk quantity in carton was rightly valued under Section 4 of the Central Excise Act, 1944. - AT
VAT
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Input Tax Credit (ITC) - Genuineness - Onus to prove - Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. - SC
Case Laws:
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GST
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2023 (3) TMI 568
Condonation of delay in filing an appeal before the appellate authority - Section 107(4) of GST - Seizure of goods alongwith the vehicle - expiry mismatch of E-way bill with tax invoice HELD THAT:- The writ petition should be disposed of setting aside the impugned order dated 14.10.2022. The impugned order passed by the appellate authority do not disclose the reasons as to how the said appeal is barred by limitation. The respondent authority ought to have passed a speaking order by computing the limitation in the light of Section 107(4) of the GST Act. The matter is remanded back for consideration. The petition is disposed off.
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2023 (3) TMI 567
Cancellation of GST registration of petitioner - petitioner is aggrieved that there was no personal notice served upon the petitioner prior to suspension and cancellation of the GST registration rather a notice was simply uploaded in the website of the department - violation of principles of natural justice (non-issuance of SCN as well as audi alterem partem) - time limitation - HELD THAT:- Under Rule 23(1) of the GST Rules of 2017 it is provided that no application for revocation shall be filed unless such returns are furnished and any amount due as tax in terms of such returns has been paid along with any amount payable towards interest, penalty and late fee in respect of the said returns. The reasons for default on the part of the petitioner to submit its periodical returns as required under GST Act and the Rules, as pleaded in the present proceedings, are attributed to the financial losses suffered by the petitioner because of the COVID-19 Pandemic situation. It is the further case of the petitioner that against the order of cancellation of its GST registration, the petitioner had preferred an appeal before the Appellate Authority under Section 107 of the GST Act, 2017. The purpose of limitation being prescribed in a statute is two fold, namely, to ensure compliance of the statutory provisions by the persons on whom the provisions of the statute are applicable and further to ensure that no third party rights which may have been created in the meantime are permitted to be nonsuited/ unsettled. Under the scheme of GST Act and Rules, the non-revocation of cancellation of GST registration is likely to prejudice the assessee alone. In cancellation of such GST registration for the reasons mentioned under the Section, it cannot be said that any third party rights are created against the assessee. No prejudice is caused to any other person, if the GST registration of the petitioner/assessee is revoked. No prejudice is caused to the revenue. Rather as discussed above, it will be in the interest of the revenue to permit the revocation of a cancellation of GST registration of an assessee like the petitioner so that it felicitates collection of revenue as mandated under the GST Regime. A writ Court is empowered to condone the delay of any statutory or quasi judicial authority. Such power is inherent in a COMMISSIONER OF INCOME-TAX VERSUS PHEROZA FRAMROZE AND CO. [ 2017 (5) TMI 436 - SUPREME COURT] . Accordingly, in view of the above discussions and on the facts and circumstances of this case, this Court is of the considered view that the appeal before the Appellate Authority should be re-heard on merits by passing appropriate orders regarding the revocation of cancellation of GST. This Court is of the considered view that the appeal before the Appellate Authority should be re-heard on merits by passing appropriate orders regarding the revocation of cancellation of GST. The impugned order dated 25.01.2023 dismissing the appeal is hereby set aside - petition disposed off.
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Income Tax
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2023 (3) TMI 566
Exemption u/s 11 - scope of provision of Section 80G (5B) read with Rule 11 AA - whether registration u/s 12AA by itself is not automatic for granting approval u/s 80G? - HELD THAT:- The respondent assessee trust s objects include inter alia spiritual awakening of the common masses, spreading teachings of great Indian saints, organizing gatherings of the people desirous to be benefited from spiritual preachings, publicizing such preachings and philosophies of great saints and extending financial assistance to the poor, destitute etc. The Commissioner to whom the assessee applied for grant of exemption of the donations received by it, refused that benefit citing Section 80G (5B) and noticing that the assessee was spending more than 5% of the receipts for religious purposes such as puja expenses besides which it also incurred telecast expenses. ITAT and the High Court principally went by the circumstance that the certificate under Section 12AA of the Income Tax Act was subsisting. Having heard counsel for the parties and having considered the record, what is evident is that neither the order of refusal of the certificate under Section 80G (5B) nor the subsequent order of the ITAT dealt with essential facts as to the quantum of receipts and the expenditure incurred. While there can be no dispute that the assessee asserts that it continues to hold exemption under Section 12AA of the Income Tax Act, nevertheless, for the benefit u/s 80G (5B), the requirements of that provision have to be satisfied separately. Assessee had relied upon the judgment of this Court reported as Commissioner of Income Tax vs. M/S. Dawoodi Bohara Jamat, however, this Court is of the opinion that in view of the final order we proposed, there is no need to discuss the applicability or otherwise of that decision. In view of the fact that the Commissioner s order as well as the order of the ITAT are bereft of any factual details as to the nature of activities which the assessee/applicant carries on as well as the details of the accounts involved and furthermore, having regard to the fact that the assessee, for some reason, did not participate in the proceedings before the Commissioner of Income Tax except filing of written submissions, this Court is of the opinion that the matter requires to be considered afresh. The assessee had contended that it is recipient of the benefit under Section 80G (5B) for a subsequent period (AY 2022-23 to 2026-27). It is open to the assessee to rely on that aspect as well. The impugned order is hereby set aside. Commissioner of Income Tax Exemption, Chandigarh is directed to examine the matter afresh in light of the contentions to be urged on behalf of the assessee.
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2023 (3) TMI 565
Reopening of assessment u/s 147 - depreciation allowance claimed by the Petitioner for the relevant assessment year had been examined by the AO and had been accepted after scrutiny - HELD THAT:- Petitioner had disclosed all material facts for the Assessment Year 1997-98 including the transactions now referred to in the impugned notice under Section 148 of the Act. There was thus no foundational fact at all disclosed in the notice issued by the Respondent No.1 - Deputy Commissioner of Income Tax, Circle 2(2), Mumbai to assume jurisdiction to reopen the case of the Petitioner for Assessment Year 1997-98, more so to get over the bar of limitation of four years. The objections raised by the Petitioner in its reply dated 22.09.2004, that the reasons cited in the notice dated 22.03.2004 issued by the Respondent No.1 that the reopening was based upon a change of opinion without there being any sufficient cause for arriving at that conclusion is justified and correct. The reasons cited for rejection of the objections in the impugned order dated 04.03.2005, namely the reference to the specific transactions of sale and lease back for the Assessment Years 1996-97 and 1997-98 clearly do not constitute material to justify reopening of the assessment. As held the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction under Section 147 of the Act. In the present case, there is clearly a failure on the part of the Assessing Officer to set out such material that provided the basis for assumption of jurisdiction under Sections 147 and 148 of the Act. Decided in favour of assessee.
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2023 (3) TMI 564
Reopening of assessment u/s 147 - Validity of order u/s 148A - Obligation cast upon the revenue in terms of Section 148A(b) to provide to the assessee anything beyond providing him the information - HELD THAT:- In the present case admittedly, no material had been supplied to the Petitioner, notwithstanding the fact that there was material available with the AO as can be seen from the order passed by the assessing officer u/s 148A(d). This was in the shape of a statement recorded, during survey action of the partner of BGR Construction LLP. There also appears to be a sale list, which was allegedly found during the search operations containing the names of 72 investors including the Petitioner which although referred to in the order u/s 148A(d) as also in the clarification communication dated 21st March 2022 was not provided to the Petitioner. Interestingly, while the communication dated 21st March, 2022, did say that the list of total sale was being attached for the ready reference of the Petitioner for purposes of submitting a reply to the show cause notice, no such list was admittedly furnished . It goes without saying that providing information to the Petitioner, without furnishing the material based upon which the information is provided, would render an assessee handicapped in submitting an effective reply to the show cause notice, thereby rendering the purpose and spirit of Section 148A(b) totally illusive and ephemeral. The fact that the material also was required to be supplied can very well be gauged from the clear directions issued by the Supreme Court in the case of Union of India V/s. Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] Two other arguments were raised by Mr. Walve during the course of argument, pertaining to the failure on the part of the assessing officer to obtain the prior approval from the specified authority before issuing the clarification communication dated 21st March 2022, as also the fact that the assessing officer ought to have first conducted an inquiry in terms of Section 148A(a) of the Act. We do not deem it absolutely necessary to deal with these issues in the present petition. Be that as it may, we hold that the reassessment proceedings initiated are unsustainable on the the ground of violation of the procedure prescribed u/s 148A(b) of the Act on account of failure of the AO to provide the requisite material which ought to have been supplied alongwith the information in terms of the said section. Petition is allowed. The order impugned passed u/s 148A(d), the notice impugned u/s 148 of the Act are hereby quashed.
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2023 (3) TMI 563
Income deemed to accrue or arise in India - Benefit of the Mauritius Double Taxation Avoidance Agreement (DTAA) - Taxability of gains arising from the transaction from sale of shares, to be effected pursuant to the share purchase agreement held by the Petitioner in Mumbai International Airport Pvt. Ltd in India having regard to the provisions of Art 13 (4) of the India-Mauritius Double Taxation Avoidance Agreement - TDS u/s 195 - Petitioner filed an application under Section 245Q(1) before Respondent no.1 to determine the correctness of its belief that the capital gains that arose in the hands of the Petitioner by virtue of the sale of shares held by it in MIAL having regard to the provisions of the India-Mauritius DTAA would not be taxable in India - As per revenue Petitioner was a sham or a shell or a conduit incorporated only for the purposes of evading tax in India or as a device - HELD THAT:- We note from Article 13 with respect to capital gains that gains derived by a resident of a contracting State from the alienation of any property other than those mentioned in paragraphs 1, 2 and 3 of the Article shall be taxable only in that State i.e. in the present case in Mauritius and not in India. As per Circular No.682 dated 30th March 1994 issued by the CBDT which mentions that capital gains arising to a resident of Mauritius on the transfer of shares in an Indian Company would be liable to tax only in Mauritius, thus capital gains derived by a resident of Mauritius by alienation of shares of companies shall be taxable in Mauritius only and will not have any capital gains tax liability in India. Circular No.789 of 2000 dated 13th April 2000 clearly suggests that certificate of residence issued by Mauritian Authorities will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for the purposes of the Mauritius DTAA and that capital gains arising from sale of shares would not be taxable in India. It is not in dispute that Circular No.789 dated 13th April 2000 continued to be in force between India and Mauritius at the relevant time. From the facts on record it cannot be said that the Indian Authorities were not aware of the change or the introduction of the Petitioner as part of the Consortium. Parties arrange their affairs in a manner as to make their businesses viable and profitable and it is part of that exercise that the Petitioner appears have been introduced into the Consortium with full knowledge of all the authorities concerned. The entire structure as well as the transaction of sale was in the full knowledge of the Indian Authorities including the tax authorities. For the Authority to hold that if Petitioner was not interposed, the Bidvest group in accordance with the Indo-SA DTAA would have to pay capital gains on the share sale as the same is taxable in India is misplaced as not relevant as the investment is by the Petitioner. As noted above, the Petitioner has been incorporated in Mauritius, holds a TRC which is sufficient proof of its residence in Mauritius, which as noted above, cannot be enquired into unless there is a fraud or illegal activity, which in this case, has neither been alleged nor demonstrated. Even if as observed by the Authority that the entire value creation activities are happening in India leading to rise in share valuations, in our view absent any element of fraud or illegality that cannot be a reason to hold the Petitioner s investment as a device to evade tax. The suggestions / findings with respect to shell company / conduit, in our view, would apply only in accordance with Article 27A of the Mauritius DTAA which is applicable for investment with effect from 1st April 2017 and not prior to that, and therefore, same would have to be reconsidered in that light. Although the observations of the Authority in paragraph 62 with respect to the claim of treaty shopping of as well as the doctrine of substance over formed in paragraph 63 cannot be faulted with, however, it needs to be emphasized that the LOB clause has been made effective for investments only from 1st April 2017. As noted above, even the press release dated 29th August 2016 confirms that investments made before 1st April 2017 will not be subject to capital gains taxation in India. That being the position these observations of the authority appear to be misplaced. The investment by Petitioner in the JVC was with the knowledge and consent of the Government of India Authority viz., AAI. As noted above, Bidvest, the ultimate holding company, had informed AAI vide its letter dated 9th September 2005 that Petitioner would hold 27% of the share capital of JVC if the Consortium was selected as successful bidder. Not only that, it was submitted that the Consortium has addressed various letters dated 24th May 2005, 3rd June 2005, 7th July 2005 and 12th July 2005 to AAI seeking clarification to confirm the proposed change in the Consortium structure. Neither the Revenue nor the Authority have denied or disputed the aforesaid facts. After consideration of the technical and financial bid by the Consortium, the GVK-SA Consortium was selected as the successful bidder for the purposes of the project viz., modernization and development of the Mumbai Airport vide communication dated 4th February 2006. That, the Petitioner is one of the members of the offerer Consortium. Share holders agreement dated 4th April 2006 between the AAI, MIAL, GVK Airport Holdings Private Limited and Bid Services Division - Petitioner and ACSA Global Ltd., which is annexed to the Petition clearly indicates that the Petitioner is a shareholder of the JV Company i.e. Mumbai International Airport (Private) Limited. The Petitioner has statedly invested Rs.270 crores on the acquisition of 27 crore shares of MIAL. The AAI and MIAL have entered into an OMDA to undertake the project of designing, developing, constructing, financing, managing, operating and maintaining the Mumbai Airport. Perusal of the same nowhere indicates nor even remotely suggests that the Petitioner is an entity created or interposed to evade tax. The Schedule I of the said agreement at page 1522 also refers to Petitioner being one of the participants as prime member which are referred to as prime members at the time of submission of the RFP. It is in this background, that the Authority ought to have applied its mind before suggesting that the Petitioner was a sham or a shell or a conduit incorporated only for the purposes of evading tax in India or as a device. There does not appear to be any irregularity in complying with the Bid documents. And even if there was any irregularity, that was a matter between the AAI and the Consortium, which in our view would have been deemed waived, as not only the GVK-SA Consortium was declared a successful bidder but Petitioner has invested in the JV viz. in MIAL but the AAI has also entered into the OMDA with the Consortium for the purposes of the project of modernization of the Mumbai Airport. It is clear on the basis of ITREOI, EOI and RFP that the AAI had permitted use of special purpose vehicle structured for the purposes of submitting the technical and financial bid as well as for holding shares in MIAL. We have seen above from the shareholding pattern that Petitioner was part of the technical and financial bid submitted by the GVK-SA Consortium which would hold shares in the proposed joint venture company i.e. MIAL. Bidvest, the ultimate holding company was the evaluated entity and Petitioner is the prime member. Infact, as noted above, the Income Tax Director, International Taxation, New Delhi, had also issued a Nil withholding tax certificate to GAPHL who is the purchaser of the 13.5% shares from Petitioner to make payment / remittance of the purchase consideration to Petitioner for transfer of shares without TDS under Section 195 of the Act. Therefore, for the authority to hold that Petitioner s involvement at the stage of bidding process was without the approval of the authorities appears to be without substance. In our view, the logic that Petitioner was brought in for ease of doing business or for operational reasons and to provide supportive business environment appears to find favour with the aforesaid observations of the Hon ble Apex Court in Vodafone International Holding B.V. v. Union of India [ 2012 (1) TMI 52 - SUPREME COURT ] Having observed that the Advance Ruling Authority has failed to consider Circular 682 of 1994, 789 of 2000 , the Press release with respect to the TRC, the decision in the case of Union of India vs. Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPREME COURT ] the decision in the case of Vodafone Intl. Holding B.V. v. Union of India [ 2012 (1) TMI 52 - SUPREME COURT ] the applicability of the LOB clause as well as the Press Releases dated 1st March 2013 and 29th August 2016 which clearly grandfathers investments made before 1st April 2017 by stating that such investments will not be subject to capital gains taxation in India and the investment as well as the sale in the instant case being prior to 1st April 2017, in our view, the matter needs to be remanded back to the Authority. We, accordingly, quash and set aside the Ruling dated 10 th February, 2020 passed by the Respondent no.1 Authority for Advance Ruling, and remand the matter back to the Authority for reconsideration of Petitioner s application in the light of the above discussion, which the Authority shall consider and decide within a period of eight weeks from today after giving an opportunity of hearing to Petitioner and the Revenue Authorities.
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2023 (3) TMI 562
Claim of exemption u/s. 10(22) and section 10(23C)(vi) - whether any income of university or other educational institution, existing solely for educational purpose and not for purposes of profit? - HELD THAT:- Once it is established that the ASB/the petitioners exist to provide education and not for profit, the exemption cannot be denied. The Supreme Court in the case of American Hotel [ 2008 (5) TMI 17 - SUPREME COURT] has held that at the time of granting approval u/s. 10(23C)(vi) of the Act, the prescribed authority should not go into the examination of monitoring provision. That is the job of the assessing officer. In our view, in the present case there was absolutely no requirement to certify the correctness of the accounts of SAIESF as held by respondent no. 4 as being impossible and therefore, being led to believe that the conditions of clause (a) of the 3rd proviso to Section 10(23C)(vi) are not satisfied. As a matter of record, the department has granted ASB/the petitioners exemption under sections 10(22) and 10(23C)(vi) of the Act since AY 1999-2000 to 2002-03 and AY 2006-07 to AY 2026-27. It is therefore substantiated that the petitioner only exists for educational purposes and not for profit. The current matters under the writ petitions are covered by the petitioner s own case for A.Y. 1999-00, A.Y. 2000-01 and A.Y. 2001-02 by the decision of the Hob ble Delhi High Court [ 2015 (8) TMI 717 - DELHI HIGH COURT] Special Leave Petition of the Tax Authorities against the said order of the Delhi High Court has been dismissed by the Supreme Court [ 2008 (5) TMI 17 - SUPREME COURT] . The principles as laid down in the decision of the Supreme Court in the case of American Hotel (supra) apply to the current matters under the petition. The respondents can be concerned only with the application of income in the hands of ASB/the petitioners once received in India. This is because in the present case, ASB/the Petitioners are not transferring/repatriating any money outside India to any person or entity. Therefore, in our view the respondents can have absolutely no concern about the receipts and expenses made by an entity outside the country merely because it is transferring its surplus or even a portion thereof to an entity in India. In this case, the petitioners inasmuch as it would strictly be the concern between the person or entity transferring the surplus and the authorities of that country. Furthermore, it is not the case of the respondents that having received the monies in India, ASB/the petitioners have not utilized the funds in accordance with the objects for which it was founded. The respondents have not substantiated their bald statement that ASB/the petitioners have not invested the surplus money in accordance with law which in any event would not be a criteria at the initial stage of approval as held by the Apex Court in New Noble Society (supra). The most relevant proviso for deciding this appeal is the thirteenth proviso. Under that proviso, the circumstances are given under which the prescribed authority is empowered to withdraw the approval earlier granted. Under that proviso, if the prescribed authority is satisfied that the trust, fund, university or other educational institution etc. has not applied its income in accordance with the third proviso or if it finds that such institution, trust or fund etc. has not invested / deposited its funds in accordance with the third proviso or that the activities of such funds or institution or trust etc., are not genuine or that its activities are not being carried out in accordance with the conditions subject to which approval is granted that the prescribed authority is empowered to withdraw the approval earlier granted after complying with the procedure mentioned therein - we find no merit in the contentions of the respondents and consequently allow the petition in terms of prayer clause (a) and (b).
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2023 (3) TMI 561
Faceless assessment u/s 144B(1)(xvi)(a) - draft order was not prepared - HELD THAT:- In the instant case, clearly, as per the instructions received by Mr Kumar, a draft order was not prepared. However, an income or loss determination proposal was prepared. Given this position, the provisions of Section 144B(6)(vii) and (viii) would get triggered, notwithstanding the fact that the draft order was not prepared by the respondents/revenue. We are of the view, that the best way forward would be to set aside the impugned assessment order, with liberty to the Assessing Officer (AO) to conduct the proceedings de novo, after according personal hearing to the petitioner/assessee and/or his authorised representative.
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2023 (3) TMI 560
Recovery proceedings - want of conversion of leasehold right to ownership so as to enable dealing with the land for liquidating demands outstanding against the estate of Nanu Ram Agrawalla, since deceased - revenue submits, no transfer can be permitted as barred by section 281 in Income Tax Act, 1961 as conversion means that the government land will be transferred by the government, to petitioners - Whether estate has income tax dues, to enforce recovery of which there has been attachment of the property? - HELD THAT:- The leasehold is likely to have restriction on assignment and transfer of the interest. Petitioners have only leasehold interest and therefore some interest in the land. They seek conversion of their interest to ownership. Petitioners have averred and there has been reliance by revenue, on the averments that on conversion petitioners will deal with the land to pay the demand of revenue. We have before us State claiming recovery of certificate dues from the estate and the revenue claiming recovery of their demand, already put in enforcement by attachment of the property. How far the attachment may be built upon for the revenue to deal with the land is doubtful. Real opposition to recovery by revenue is from State, who wants to recover their certificate dues. The resistance to conversion on contention that late Daulatram Nanuram Agrawalla had applied for conversion by putting in the fees and without waiting for an order of conversion is not a contention that can bear scrutiny, neither for its substance nor because it is in trying to supplement reasons given in impugned order, impermissible as declared by the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner [ 1977 (12) TMI 138 - SUPREME COURT ] Opposition from the Sate being that the lease hold stands attached by revenue - We are convinced that in event petitioners obtain conversion, there will be better chance of recovery by revenue on proceeding with the attachment of land that would then be owned by the estate. On the grounds asserted in impugned order, State cannot sustain its opposition to the claim for conversion. In the facts and circumstances, in event revenue gives permission for the conversion, impugned order will stand set aside and quashed. Upon the permission granted under clause (ii) of the proviso in section 281, State will be bound to cause the conversion within four weeks thereof.
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2023 (3) TMI 559
Exemption u/s 11 - amount recd. from students over academic fee, being towards transportation /Mess etc. facilities as a separate business activity - HELD THAT:- It is not in dispute that the Revenue has accepted the case in the earlier as well as subsequent years with identical facts wherein no additions were made in respect of the amount received from the students over academic fees towards transportations/mess etc. Further, we observe that in the case of Daya Nanda Pushpa Devi Charitable Trust Vs. ACIT, Ghaziabad [ 2021 (7) TMI 124 - ALLAHABAD HIGH COURT ] held that activity of running hostel is an integral part of education so as to out of clutches of Section 11(4A) of the Act, though the assessee had maintain sufficient separate account in as much as separate ledger account for the same maintained. In view of the above settled position of law and considering the fact that the Revenue has accepted the case of the assessee on earlier as well as subsequent years with identical facts, we are of the opinion that the grounds of appeal of the assessee deserves to be allowed, accordingly the additions made by the A.O which was sustained by the CIT(A) is hereby deleted by allowing the Grounds of Appeal and consequently we hold that the assessee is entitled for the benefit u/s 11/12 of the Act. Appeal filed by the assessee is allowed.
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2023 (3) TMI 558
Adjustment in terms of clause (iii) of Explanation-1 to Section 115JB(2) for computation of book profits made by the AO resulting in lower adjustment - adjustment of carried forward business loss or unabsorbed depreciation whichever is lower, against Book Profit for the purposes of Section 115JB - HELD THAT:- The assessee has correctly considered the figure of unabsorbed depreciation for Financial Year 2010-11 in its working which portion has remained unabsorbed against the existing book profits of that year. CIT(A) in our view, has wrongly considered the entire depreciation allowance of Rs.39,38,03,227/- instead of restricting itself to the unabsorbed component. The figure of Rs.39,38,03,227/- considered by the CIT(A) is total depreciation allowance instead of unabsorbed depreciation and thus the position taken by the CIT(A) is contrary to the phraseology of clause (iii) of Explanation-1 to Section 115JB(2). To reiterate clause (iii) of Explanation-1 to Section 115JB(2) uses the expression unabsorbed depreciation which has distinct connotations vis- -vis total depreciation. We thus find merit in the plea of the assessee in justification of the computation of adjustment available to it against the book profit. In this view of the matter, the claim of the assessee being lower of unabsorbed depreciation and business loss deserves to be set off against the current year book profit in terms of the provisions of clause (iii) of Explanation-1 of Section 115JB(2) of the Act. Appeal of assessee allowed.
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2023 (3) TMI 557
Taxability of amount received in the arbitration settlement received from Indian Oil Infrastructure Energy Services Ltd. ( IOT ) - connection with the project office in India - HELD THAT:- We do not see any infirmity into the order of Ld.DRP as admittedly the settlement amount is related to project office of the assessee company. Therefore, the submission of the assessee is that it has no connection with the project office in India is misplaced and contrary to the records. We therefore, do not find any merit in the Ground No.1 raised by the assessee, the same is hereby dismissed. Disallowance of claim of brought forward business loss - AO did not allow set off of loss of earlier years on the basis that assessee has not claimed brought forward loss in the Income tax return for the year under consideration - HELD THAT:- We find that the Revenue has not disputed the fact that the expenses are related to the project office and claimed on the basis of audited financial statement. In our considered view, the AO ought to have given set off of losses in pursuance of the direction of Ld.DRP. The AO failed to take note of the fact that the assessee had raised its claim before the Ld.DRP. Therefore, the AO was under legal obligation to comply with the direction of higher authority. We therefore, considering the totality of the facts, direct the Assessing Authority to allow set off of the losses as claimed by the assessee before the Ld.DRP. Thus, Ground No.2 raised by the assessee is allowed in terms indicated herein above.
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2023 (3) TMI 556
MAT Computation - determining the book profit u/s.115JA - adding back the provision for doubtful advance to the book profits in the computation of income under Sec.115JA - distinguish between the provision for debt receivable and provisions for debt payable - HELD THAT:- . In this view of the matter and by respectfully following the decision of EID Parry (India) Ltd.[ 2019 (7) TMI 29 - MADRAS HIGH COURT] we are of the considered view that there is no error in the computation of book profit u/s.115JAA of the Act, by adding provision for doubtful debts, and thus, we are inclined to upholding the findings of the Ld.CIT(A) and dismiss the appeal filed by the assessee.
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2023 (3) TMI 555
Disallowance of interest expenses - assessee on one hand had paid interest on borrowed funds, whereas on the other hand had given interest free loans to its sister concerns and promoters - HELD THAT:- We observe that during the year under consideration, the assessee had substantial interest free funds to the tune of ₹ 9 crores as own funds at its disposal. Further, the assessee submitted before us copy of the ledger account of the parties to whom the aforesaid advances were made and it is evident that the said advances were made in the earlier assessment years. In the case of CIT v. Reliance Industries Ltd [ 2019 (1) TMI 757 - SUPREME COURT] held that where AO rejected assessee's claim u/s 36(1)(iii) taking a view that interest would not have been payable to banks if funds were not provided to subsidiaries, in view of fact that interest free funds were available to assessee which were sufficient to meet its investment in subsidiaries, appellate authorities were justified in allowing assessee's claim for deduction. Accordingly, since the assessee is having substantial interest free funds at its disposal amounting to ₹ 9 crores as against an advance of 19.7 lakhs approximately advanced to sister concerns, we are of the view that addition on this count cannot be sustained. Disallowance u/s 40(a)(ia) - assessee claimed rent expenses and the AO discovered that the assessee had not deducted TDS on rent - HELD THAT:- We observe that the assessee had filed a detailed chart giving details of rent before the assessing Officer vide submission dated 07-10-2014, however, evidently the same was not taken cognizance by the Revenue Authorities. Before us, assessee submitted that the assessee has correctly deducted TDS on rent as per law. TDS was not deducted only in cases where either the payment of rent was below the threshold limit or the recipient of rental income had furnished a lower tax withholding the certificate furnishing the rate at which taxes were to be deducted by the assessee. Accordingly, evidently the detailed chart filed by the assessee regarding TDS on rent payments, furnished during the course of assessment proceedings was not properly examined by the AO, we are hereby restoring the matter to the file of AO for proper examination of the details of rent paid and TDS deducted thereon, after giving due opportunity of hearing to the assessee. Disallowance of depreciation - HELD THAT:- We observe that identical set of facts and identical submissions on this issue were already made before the AO by the assessee during the course of assessment for assessment year 2009-10. In the said assessment order, the AO denied the assessee s claim for depreciation after discussing the issue in detail. Similar observations were also made by the AO in the assessment order for the present year as well. We find no infirmity in the order of ld. CIT(A) and we are not inclined to interfere with the order of CIT(Appeals) for the present year as well.
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2023 (3) TMI 554
Reopening of assessment u/s 147 - Failure to issue notice u/s. 143(2) - Scope of curable defect u/s 292BB - HELD THAT:- In view of the judgment of ACIT Vs. Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] non-issuance of notice u/s. 143(2) of the Act is a jurisdictional error on the part of Assessing Authority. Hence, Section 292BB of the Act would not help AO. The impugned assessment so framed without issuance of notice u/s. 143(2) is illegal, hence deserves to be annulled. It is pertinent to note that the judgment rendered in the case of Josh Builders Developers (P.) Ltd. [ 2016 (9) TMI 340 - PUNJAB AND HARYANA HIGH COURT] has been rendered on different set of facts, hence do not help Revenue. From the records placed before me it is evident that AO failed to issue notice u/s. 143(2) of the Act. Hence, the assessment framed by the AO is without authority of law. Decided in favour of assessee. Unexplained cash deposits in bank account - . From the bank statement it is seen that there are withdrawals and deposits by the assessee in his bank account. Further, it is stated that he had sold certain lands and the sale consideration was available with him to deposit such amount in the bank. Looking to the evidences submitted by the assessee it can be inferred that the assessee was having sufficient funds for making deposit coupled with the fact that there were withdrawals from the bank account. Hence, these facts ought to have been considered by the authorities below, which has not been considered. The addition made by the AO is not justified and the same is hereby deleted. Appeal of the assessee is allowed.
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2023 (3) TMI 553
Revision u/s 263 - PCIT observed that, AO had failed to examine and verify the issues related to share premium received and interest earned, which issues had remained unaddressed - justification behind rejecting the declared value of the shares - HELD THAT:- We are of the considered opinion that Assessee followed the DCF Method for valuing the shares, whereas the Ld. PCIT utilised the NAV Method to do so.This action of the Ld. PCIT is in direct contravention of the provisions of Explanation (a)(i) to section 56(2)(vii) of the I.T. Act read with rule 11UA(2)(b) of the I.T. Rules. AO could not have changed the method of valuation opted by the Assessee, in view of the statutory mandate of rule 11UA(2) of the Rules.The above is in keeping with the caselaws discussed hereinabove. Therefore, there was no error in the Assessing Officer's Order calling for revision under section 263 of the I.T. Act. Whether or not the AO inquired into the interest income earned by the Assessee on which, TDS was claimed, whereas as per the Ld. PCIT, no interest income was offered to tax by the Assessee? - In the present case, the Assessee's hotel was under construction - Had the fixed deposits not been made, the Assessee would not have been able to obtain bank guarantee against the EPCG licenses availed while importing machinery for its hotel, which was under construction. The fixed deposits, as such, were made to facilitate the construction of the Assessee's hotel, i.e., its fixed asset. The Assessee's arrangement with regard to the interest received on the fixed deposits was an arrangement intrinsically connected with the construction of the Assessee's hotel. Assessee adjusted the interest received, reducing it from the cost of construction of its hotel. The interest was set off against the total cost of capitalization during the construction period. The interest receipt, therefore, went to reduce the cost of construction. The fixed deposits and the interest received by the Assessee thereon were directly linked with the activity of setting up the hotel of the Assessee. The interest is linked inextricably with the process of setting up of the capital structure of the Assessee-company. It must, hence, in respectful conformity with 'Bokaro Steel' [ 1998 (12) TMI 4 - SUPREME COURT ] be viewed as a capital receipt going to reduce the cost of construction. Evidently, therefore, the view taken by the AO was a possible view and the order passed by the AO in this regard was not erroneous, much less prejudicial to the interests of the Revenue. This, though, the Ld. PCIT failed to take into consideration while passing the impugned order. Accordingly, on this issue also, the order of the Ld. PCIT is reversed and the assessment order is revived. To conclude, qua both the issues, the order of the Ld. PCIT is set aside and reversed and the assessment order is revived. The grievance of the Assessee allowed.
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2023 (3) TMI 552
Validity of Assessment u/s 153A - material found in the case of some other person - proof of incriminating materials found during the search about the assessee - HELD THAT:- In the present appeals for AY 2006-07 to 2009-10, there was a search u/s132 of the Act in the case of the assessee on 30.6.2011. No incriminating materials were found during the said search. It is not in dispute that none of the additions made in the aforesaid assessment years is based on material seized and found in the course of search conducted in the case of the assessee on 30.6.2011. After the search, notices under section 153A of the Act were issued on 30.11.2011 and thereafter assessments were framed by the AO. The material based on which the impugned additions were made by the AO were material found in the course of search of Smt. Adlene Kagoo on 12.4.2011. As per the second proviso to section 153C of the Act, the assessment proceedings pending under section 153A of the Act in the case of the assessee before the AO would abate on the date the AO receives the seized material from the AO of Smt. Adlene Kagoo and fresh proceedings under section 153C of the Act ought to have been initiated. As seen upon receipt of the said information/materials, the AO did not assume jurisdiction under section 153C of the Act, but rather chose to use the said materials/information for making additions in the impugned orders of assessment concluded under section 153A of the Act. The AO has discussed these additions in the order of assessment and clear referred to the documents found in the course of search of Smt. Adlene Kagoo. Thus, the AO has not followed the procedure laid down in section 153C of the Act for taking cognizance of the material found/seized in the case of Smt. Adlene Kagoo and making an assessment with reference to those materials in the case on hand. We are of the view that in the event the AO wanted to take cognizance of the seized materials, he ought to have invoked the provisions section 153C of the Act after recording his satisfaction based on material sent by the AO of Smt. Adlene Kagoo. This jurisdictional pre-condition laid down by the Legislature of recording of satisfaction for taking action under section 153C of the Act cannot be side-stepped/brushed aside and additions be made in proceedings pending under section 153A of the Act as the scope of assessments framed under sections 153A and 153C of the Act are quite different. In that view of the matter, we hold that the additions made by the AO in the impugned orders of assessment for Assessment Years 2006-07 to 2009-10 cannot be sustained as they are contrary to the provisions of the Act and are therefore to be deleted. Hence, those additions to the extent sustained by the CIT(A) are hereby deleted. - Decided in favour of assessee.
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2023 (3) TMI 551
Disallowance of free samples - Allowable business expenditure - CIT(A) observed that due to failure on the part of the assessee in providing list of the name and address of the recipient of free samples/products before the Assessing Officer, he made disallowance for 50% of the total expenses - HELD THAT:- As the contention of the assessee that this expenditure was for the purpose of its business, is not accepted as the distributing of free samples to healthcare personnel is prohibited. In view of provisions of reproduce above, we do not find any error in the order of the Ld. CIT(A) in upholding the disallowance made by the Assessing Officer following the ratio in the case of M/s Apex Laboratories Pvt. Ltd. [ 2022 (2) TMI 1114 - SUPREME COURT] Disallowance of expenses on account of organizing conference and seminars for the doctors and healthcare professionals - HELD THAT:- For disallowance of conference and seminars expenses, though the assessee has contested that same is a part of research and development activity which aids the assessee to gain knowledge, remain updated of development of related fields, and enables the assessee to innovate and improve products line, however, we find that the Hon ble Supreme Court in the case of Apex Laboratories [ 2022 (2) TMI 1114 - SUPREME COURT] has also considered the expenses on conference as disallowable in the form of freebies given to the healthcare practitioner/medical practitioners. In the instant case, the assessee has not supplied any name and address of the healthcare personnel, to whom the conference or travel expenses have been reimbursed. The section 4 of the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992, strictly prohibit offer of inducement of any other kind for the purpose of promoting the use or sale of the infant milk substitutes or infant foods for taking part in promoting of the infant milk substitutes, feeding bottles and infant foods. Therefore, though the assessee is claiming that the expenses on conference and seminars were for his business, however, same falls under prohibited activity and therefore, expenses incurred thereon have been validly disallowed of the Assessing Officer and confirmed by the Ld. CIT(A) invoking Explanation to section 37(1) of the Act, following Hon ble Supreme Court in Apex Laboratories Ltd. (supra). As far as the grievance of the assessee regarding the comment the Ld. CIT(A) we are of the opinion that the said comments without providing opportunity of being heard are not justified. To levy penalty or filing prosecution for violation of provisions of the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992, is within the domain of the relevant authority under said Act, following due procedure of law and Ld CIT(A) was not required to express his conclusion in said matters, that too without providing any opportunity of being heard. However, we also note the recognized principle of Criminal Jurisprudence that anyone can set or put the criminal law into motion except where the statue enacting or creating offence indicate to the contrary. We accordingly restore this matter back to ld CIT (A) for considering evidence on record and after providing due opportunity of being heard, express his opinion, if so, required in the matter. Appeal of the assessee is allowed partly for statistical purpose.
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2023 (3) TMI 550
Penalty u/s 270A - Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Assessee case was selected for scrutiny and assessment order was passed u/s 143(3) of the Act by making disallowance u/s 14A r.w Rule 8D - assessee himself did not make any disallowance u/s 14A towards earning of exempt income which are not includible in the total income of the assessee. During the impugned assessment year, he received exempt income of Rs.1,00,503/- and fresh investments was made during the year of Rs.8,20,300/- and the total investments in mutual fund is Rs.5,63,44,040/- at the year end. AO disallowed 1% of the average investments and accordingly it works out to Rs.5,63,440/- and initiated penalty u/s 270A of the I.T. Act.. The penalty order passed by the AO is on under reported income and whether that under report income is in consequence of any misreporting of income. CIT(A) confirmed the order of the AO during the course of hearing, we notice that the AO imposed penalty for not making suo moto any disallowance us/ 14A r.w Rule 8D. The similar issue has been decided by the Hon ble Delhi High Court in the case of Prom Brother Infrastructure LLP Vs. 110 National Face Less Assessment Center [ 2022 (6) TMI 130 - DELHI HIGH COURT ] Appeal of the assessee is allowed.
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2023 (3) TMI 549
Validity of assumption of jurisdiction u/s 263 by the ld. PCIT - case was selected under limited scrutiny for the purpose of verification of cash deposits - whether the Assessing Officer had examined the items which were subject matter of revision during the course of original assessment proceedings? - HELD THAT:- As gone through the assessment order passed consequent to the order u/s 263, wherein, the Assessing Officer only made addition in respect of cash deposits as the appellant had failed to offer any explanation in support of the sources for cash deposits, despite reasonable opportunity to the appellant. Moreover, the appellant also could not demonstrate before us that this issue was examined by the Assessing Officer during the course of assessment proceedings and took a plausible view. This fact only goes to prove that neither the Assessing Officer had enquired into the sources of cash deposits nor the appellant had offered any explanation in support of the sources for cash deposits. This clearly goes to prove the Assessing Officer had failed to examine this issue during the course of original assessment proceedings, which rendered the assessment order erroneous and prejudicial to the interests of the Revenue. In these circumstances, we are of the considered opinion that the ld. PCIT was justified in exercising the power of revision vested with him u/s 263 of the Act. Therefore, we do not find any merit in the appeal filed by the assessee.
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2023 (3) TMI 548
Credit of TDS - TDS on rental income from property and dividend income - AO did not allow credit of the TDS in respect of dividend income offered to tax under the head income from other sources - HELD THAT:- In the instant case, the assessee has offered the income following the accrual system. As far as rental income is concerned, if tax has been deducted and deposited in subsequent year, the assessee should be allowed credit of same in the year under consideration of tax which has been deducted subsequently. Assessee could not be allowed the benefit of the interest on refund which arise if any on account of credit of tax deducted and deposit in the subsequent assessment year. We accordingly set aside the finding of the Ld. CIT(A) on the issue-in-dispute and direct AO to verify the amount of tax deducted and deposited in respect of income from rental property which has been shown by the assessee in the year under consideration and allow the credit as directed above. TDS credit in respect of dividend income assessee is directed to furnish TDS certificate issued by the deductor and the Ld. Assessing Officer is directed to allow the credit of the said TDS after due verification. The Assessing Officer cannot simply decline the credit of TDS and he is bound to verify TDS certificate issue in accordance with provisions of law. Further, the Assessing Officer is also directed to verify if any relief has already been granted in the rectification application filed by the assessee. If so then further benefit of TDS credit may not be allowed. In view of the our direction above, the grounds of appeal of the assessee are accordingly allowed for statistical purposes.
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2023 (3) TMI 547
Unexplained investment - addition made on the basis of surrender/admission made by the assessee in his statement recorded during the course of survey - Whether addition to the income of the assessee cannot be made in the absence of any positive evidence solely on the basis of confessional statement recorded during the survey proceedings? - HELD THAT:- In the present case, the assessee has, with evidence demonstrated actual investment made in the impugned property. No infirmity has been pointed out by the Revenue in the said documents. Therefore, statement recorded during survey can safely be stated to be retracted duly evidenced with documentary evidence, and in such circumstances, the statement of the assessee recorded u/s 133A of the Act carries no evidentiary value. The Hon ble apex court in the case of CIT, Salem vs S. Kader Khan [ 2013 (6) TMI 305 - SC ORDER] has held that statement recorded u/s 133A of the Act has no evidentiary value and cannot be made basis of addition. Hon ble jurisdictional High Court in series of decisions has held that solely on the basis of statement recorded which was subsequently retracted with evidence, no addition could be made in the absence of any other corroborative material with the Revenue. That such addition was simply on the basis of surmises and conjectures and thus unsustainable in law. Thus we hold that addition made of unexplained investment solely on the basis of admission of the assessee is unwarranted and direct the same to be deleted. Appeal of the assessee is allowed.
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2023 (3) TMI 546
TP Adjustment - selection of MAM - rejection of Transactional Net Margin Method (TNMM) as the most appropriate method - rejection of comparables selected while benchmarking the transaction relating to import of finished goods from the Associated Enterprises (AE) - Assessee is a subsidiary of Medtronic USA Inc., a USA based company - HELD THAT:- As in view of the decision of the Hon'ble Jurisdictional High Court in Audco India Ltd. [ 2019 (5) TMI 694 - BOMBAY HIGH COURT ] the contention of the Revenue that Hon ble DRP/ TPO having accepted RPM as the most appropriate method should have undertaken a fresh benchmarking under RPM cannot be accepted. In such circumstances, when no other method is applicable, as a method of last resort, TNMM has to be applied as most appropriate method. As further noticed, in subsequent assessment years, not only the Assessee has benchmarked the import of finished goods from the AE by applying TNMM, but the Transfer Pricing Officer has also accepted it as the most appropriate method. For the aforesaid reasons, we do not feel the necessity to restore the issue to the Assessing Officer/Transfer Pricing Officer for fresh adjudication. The Revenue has not been able to controvert the submissions of learned counsel for the Assessee nor any decision contrary to the decision of Tribunal in Appellant s own case has been furnished by the Revenue. Thus, we find no reason to take a contrary view, hence, ground No. 4 to 7 of the appeal are allowed in similar terms TP adjustment on account of direct sales made by the AE to third parties in India - addition on account of commission on direct sales made by the AE to third customer in India was made on notional basis - HELD THAT:- For the earlier year of AY 2002-03 Tribunal restored the issue back to the Assessing Officer / Transfer Pricing Officer to verify whether there was any involvement of the Assessee in the direct sales made by the AE in India. Similar view was expressed by the Tribunal while deciding the issue in assessment years 2003 04, 2004 05 and 2007-08. Following the consistent view of the Tribunal cited supra, we restore the issue to the Assessing Officer for fresh adjudication in terms with the directions of the tribunal in the preceding assessment years as referred to above. Grounds are allowed for statistical purposes. Depreciation on plant and machinery and building - A.O while disallowing the assessee s claim for depreciation had relied on the orders passed in earlier years - HELD THAT:- We are of the considered view, that pursuant to the introduction of the depreciation on the written down value of the block of asset‟ by the Taxation Laws (amendment and miscellaneous provision) Act, 1986 w.e.f. 01.04.1988, depreciation is allowable on the WDV on the block of assets‟ and not on the individual items of the assets included in such block. In fact, we find that the Tribunal had consistently in the case of the assessee for other years [ 2015 (12) TMI 1673 - ITAT MUMBAI ] directed the A.O to allow depreciation on plant and machinery and building as claimed by the assessee. Allowable business expenses - Disallowance being expenditure incurred on gift articles -claim of the assessee that the expenditure incurred towards gift items given to the customers is wholly and exclusively for the purpose of assessee s business - HELD THAT:- Notably, while deciding identical issue in assessment years 2003 04, 2004 05 and 2007-08 in the orders referred to above, the Co ordinate Bench has held that the expenditure incurred on gift items being wholly and exclusively for the purpose of assessee s business, is an allowable expenditure. Disallowance of expenditure incurred in respect of foreign trip of doctors - HELD THAT:- In accordance with the decision rendered in the case of Apex Laboratories Pvt. Ltd. .[ 2022 (2) TMI 1114 - SUPREME COURT ] wherein disallowance was made for the expenditure and freebies incurred on or after 14 December 2009, the expenditure incurred on foreign trip of doctors for AY 2006-07 is allowable being incurred prior to 14 December 2009. Consequently, ground of the appeal is allowed. Disallowance of depreciation on goodwill - assessee claimed depreciation @ 25% on the written down value (WDV) of goodwill by treating it as an intangible asset - HELD THAT:- The issue relating to depreciation on goodwill by treating it as an intangible asset under section 32(1)(ii) of the Act is no more res integra in view of the decision of the Hon'ble Supreme Court in CIT v/s Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT ] as held that goodwill is in the nature of any other business or commercial right or similar in nature, hence, is to be treated as intangible asset. Thus we allow assessee s claim of depreciation on goodwill. Ground raised is allowed. Disallowance of expenditure in respect of provision of expenses written back - HELD THAT:- Hon ble Mumbai ITAT, in the Assessee s own case for AY 2003-04 [ 2017 (6) TMI 334 - ITAT AHMEDABAD ] has directed not to treat the reversal of provision as income in AY 2006-07. Notably, as Tribunal has directed to not the treat the same as income in AY 2006-07, we direct the AO to delete the addition made accordingly. This ground is allowed. Allowance of depreciation on non compete fee - additional ground raised - HELD THAT:- Undisputedly, in the year of payment of non compete fee i.e., A.Y. 2002 03, the assessee had claimed it as revenue expenditure. However, the Departmental Authorities as well as the Tribunal held that the expenditure incurred by the assessee is capital in nature. Of course, the Tribunal allowed depreciation on non compete fee by treating it as an intangible asset. Notably, in subsequent assessment years i.e., 2003 04, 2004 05, 2008 09, 2011 12, 2012 13, 2013 14 and 2014-15, the Tribunal has allowed assessee s claim of depreciation on non compete fee while entertaining additional ground raised by the assessee. Therefore, following the consistent view of the Tribunal AY 2008-09 [ 2018 (5) TMI 587 - ITAT MUMBAI ] we direct the Assessing Officer to allow depreciation on the opening WDV of the non compete fee. This ground is allowed. TP Adjustment - MAM selection - difference in price Transfer Pricing Officer charged by AEs to the assessee and third party distributors - whether TPO has accepted TNMM as the most appropriate method for majority of export of AE, erred in applying CUP method for some of the transactions as two methods cannot be applied for one class of transactions? - HELD THAT:- As it is a well settled principle of law by decisions of various Courts Tribunal that most appropriate method should be selected to benchmark international transactions of the assessee with its AE based on nature of transaction. However, it is incorrect to adopt two methods for one class of transaction and benchmarking such transaction by cherry picking a portion of the transaction undertaken by the assessee with its AEs and this principle is supported by the decision of ITAT Pune bench of Amphenol Interconnect India Pvt Ltd [ 2018 (3) TMI 536 - BOMBAY HIGH COURT ] upheld by the Hon ble Bombay High Court. Accordingly, we agree with the Appellants contentions and the said ground is allowed in favour of the Appellant. Expenditure incurred on purchase of catalogues and brochures - Assessee had imported and purchased catalogues and brochures separately because the catalogues and brochures - HELD THAT:- The issue is covered by Tribunal s order for AY 2004-05 [ 2017 (6) TMI 334 - ITAT AHMEDABAD ] as find no merit for disallowance of expenditure incurred on purchase of catalogues and broachers, which were wholly and exclusively for the purpose of business. Accordingly, AO is directed to delete the same. Disallowance of expenditure incurred on software - HELD THAT:- Relying on the submissions made by the assessee and the decisions of ACIT vs Asahi India Safety glass [ 2005 (12) TMI 454 - ITAT DELHI ], Empire Jute Co Ltd v CIT [ 1980 (5) TMI 1 - SUPREME COURT ] and Alembic Chemical Works Co. Ltd. [ 1989 (3) TMI 5 - SUPREME COURT ] we do not find any merit in disallowance of expenditure incurred on software which is lower in amount and for the business purpose of the assessee. Accordingly, AO is directed to delete the same. Disallowance of expenditure in respect of Earnest Money Deposit ( EMD ) written off - HELD THAT:- Relying on the details submitted, arguments put forth by the Ld. AR for the assessee and the decisions relied upon by the assessee, we are of the considered view that the Earnest Money Deposit written off is revenue in nature and allowable as expenditure in the event of forfeiture. Accordingly, AO is directed to delete the addition made. Payment non-compete fee - HELD THAT:- As ITAT has alreadyallowed depreciation holding that IMPL has acquired intangible assets innature of any other business of commercial rights. We accordingly directthe AO to allow depreciation on the non-compete fee so incurred by the assessee.
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Customs
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2023 (3) TMI 545
Levy of penalty on CHA u/s 114 (iii) and Section 114AA respectively of the Customs Act, 1962 - allegation of abatement - fraudulent export of ladies Leather Uppers Shoe for claiming Drawback Incentive Scheme from ICD - mis-declaration of quantity of export goods - HELD THAT:- The exporter has made a serious offence by mis-declaring the quantity i.e. against 30,000 pairs declared in the export document only physical quantity found 405 pairs. Moreover, the value was also shown exorbitantly high. Though the appellant has acted as CHA and it does not appear the direct involvement of the appellant in the fraud of export goods but when against one invoice, the exporter asked the appellant CHA to split the consignment and make 8 shipping Bills, that itself is a reason that the appellant should have acted diligently and inquired about the reason for this abnormal act of splitting the consignment into 8 shipping Bills. He was also supposed to inform this to the Customs authority. The Customs authority also found suspicious because of 8 shipping Bills against one consignment. Therefore, this negligence of the CHA resulted into attempted of fraudulent export by his client. Therefore, the appellant is liable for penalty under Section 114(iii) and Section 114AA. However, looking to the nature of role of the CHA in the entire episode, penalty of Rs. 5,00,000/- in each section is very harsh, therefore, the penalty reduced from 5 lakhs each under Section 114(iii) and Section 114AA to Rs. 2 Lakhs in each section. Appeal allowed in part.
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Insolvency & Bankruptcy
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2023 (3) TMI 544
Application filed u/s 9 of IBC dismissed - initiation of CIRP - Distributorship Agreement for realisation of its dues - Dismissal on the ground of pre-existing dispute - HELD THAT:- Reply to Section 8 notice has been annexed as Annexure A-10 to this Appeal where the Corporate Debtor has specifically denied the claim of the Appellant and has raised various claims in Para 9 to 14, totalling to Rs.3,45,59,139/-. The reply to the Section 8 notice raises issues pertaining to pre-existing dispute between the parties. The submission of the Appellant that dispute is a moonshine dispute, is not satisfying. Admittedly, Distributorship Agreement between the parties is not disputed and the Appellant has claims against the Corporate Debtor. Appellant is free to take recourse to the mechanism as provided in the Distributorship Agreement for realisation of its dues. But present is not a case, where Section 9 proceedings under I B Code can be initiated, when dispute is raised in reply to the Section 8 notice. The Adjudicating Authority did not commit any error in dismissing Section 9 application - Appeal dismissed.
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2023 (3) TMI 543
Admitting of petition filed u/s 9 of IBC - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not. Whether payment to the Operational Creditor was due from the Corporate Debtor and if so, whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt and whether there was any pre-existing dispute raised during the stage of Section 8 Notice? HELD THAT:- It is the case of the Respondent that the Corporate Debtor continues to hold possession of the said premises even beyond the 5 year term of the LLA and that neither outstanding license nor service charges have been paid so far and that there was a default in the payment of operational debt of Rs.7,66,52,157/- only. It is found that the Adjudicating Authority has noted that since the Corporate Debtor has not produced details of any payment in respect of monthly rent etc., operational debt and default is established and on this ground admitted the Section 9 petition. This finding of the Adjudicating Authority is erroneous and one-sided having not taken cognizance of the fact that the operational debt claimed by the Operational Creditor was never admitted at any stage by the Corporate Debtor. The series of correspondences make it amply clear that both the parties were at loggerheads on the issue of both rental and service charges in respect of the said premises and that this dispute also pre-dated the issue of Section 8 demand notice on 11.08.2021. It has also not escaped our attention that in their reply to Section 9 application, the Corporate Debtor has categorically mentioned that there is total absence of any enforceable debt outstanding against the Corporate Debtor as placed at page 199 of APB. The reply notice thus clearly amounted to a notice of dispute having unequivocally opposed the claim of the Operational Creditor s amount due. If the debt is disputed, the application of the Operational Creditor for initiation of CIRP must be dismissed. It is an undisputed fact that Clause 13 of the LLA and Clause 17 of SA provide for resolution of disputes by mutual negotiation failing which by arbitration. It is also clear from the facts on record that a notice invoking arbitration under Clause 17 of SA was invoked by the Operational Creditor on 06.08.2020 as seen at page 157 of APB and this has not been controverted by the Respondent - A plain reading of the arbitration notice makes it abundantly clear that there were serious disputes between the two parties and the Operational Creditor by their own admission stated that failure to get the dispute resolved through mutual negotiation compelled them to resort to arbitration. We also notice that the Corporate Debtor vide email dated 31.08.2020 had rejected the invocation of the arbitration and informed the Operational Creditor about already having filed a criminal complaint against him for misrepresentation and fraud. The Adjudicating Authority therefore clearly fell in error in admitting the Section 9 application while turning a blind eye to this voluminous exchange of correspondence between the Corporate Debtor and Operational Creditor spread over a long period of time on the availability of compliances/certificates from various competent authorities, which clearly establishes that there were serious differences between them in the nature of real pre-existing disputes. In the present factual matrix, the defence raised by the Corporate Debtor therefore cannot be held to be moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. The Adjudicating Authority committed serious error in admitting Section 9 application in the facts of the present case. The Impugned Order dated 12.05.2022 initiating CIRP of the Corporate Debtor and all other orders pursuant to Impugned Order are therefore set aside - Application disposed off.
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PMLA
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2023 (3) TMI 542
Seeking grant of bail - disproportionate assets of the present applicant which he, allegedly, could not explain - Scheduled/predicate offence - HELD THAT:- As a matter of fact, the present applicant is not in judicial custody since November, 2019. He remained in judicial custody w.e.f. 27.02.2017 in another matter of E.D. and w.e.f. 04.11.2017 in the present case of E.D. The maximum punishment prescribed under the offence of PMLA is seven years. At the time of hearing before the Apex Court seeking bail, the arguments relating to the twin conditions as prescribed under Section 45 of the PMLA must have been placed and the Apex Court has granted interim bail to the applicant. If the proceedings of predicate offence have been stayed, as shown by the learned counsel for the applicant, however, the proceedings under PMLA may go on but the final outcome of the proceedings relating to the offence of PMLA shall dependent upon the final outcome of the proceedings of predicate offence. Notably, proper opportunity has been given to the learned counsel for the E.D. and he has filed a detailed counter affidavit. Not only the above, neither learned counsel for the Union of India nor counsel for the E.D. has shown any order to show that the stay order staying the proceedings of the predicate offence has been vacated, rather those proceedings of the predicate offence have been stayed since 07.12.2018 i.e. more than four years and three months, so considering the facts and circumstances of the issue in its entirety, more particularly the fact that the present applicant is on interim bail since 15.11.2019 in this case granted by the Apex Court and there is no adverse report of misusing the liberty or flouting any condition of bail by the present applicant, besides, there was neither a flight risk, nor would he tamper with the evidence nor is influencing the trial proceedings, it is clear that the twin conditions of Section 45 of the PMLA are satisfied in the present case. It is not found proper to send the applicant to the judicial custody again - bail application allowed subject to conditions imposed.
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2023 (3) TMI 541
Seeking grant of bail - Money Laundering - scheduled offence - proceeds of crime - rebuttal of presumption - inviting deposits from general public promising to pay interest upto 90% per annum - effect of bar under Section 45(1)(ii) of PMLA - HELD THAT:- Admittedly, the accused was apprehended on 15.11.2022. Three months have already lapsed from the date of arrest. The complaint in the form of ECIR is filed on 13.01.2023 which is registered in PCR No. 4 of 2023. Details of the assets acquired and the money invested by the accused along with the details of bank account are stated in the complaint. It is the specific contention of the prosecution that accused No. 2 being one of the partner of accused No. 1 is in charge of investing the proceeds of crime in various assets as he has purchased the lands out of the amount so received by accused No. 1 and used to develop the same. There are no justification for non producing any of the documents in support of the allegations made in the complaint. Apparently, the statements of the petitioner recorded by the Investigating Officer disclose that the accused invited deposits promising exorbitant rate of interest, not subjected such monetary transaction for audit, not returned the amount i.e., due to the investors on time and on the other hand, the amounts were being invested in the landed properties in the name of the accused. Apparently, the petitioner could not justify collection of crores of rupees from thousands of depositors, promising to pay return as high as upto 90%. Prima facie, the intention of the accused may attract Section 420 of IPC, for which a criminal complaint is already lodged way back in the year 2018. To constitute the proceeds of crime as defined under Section 2(u) of PMLA, the prosecution has to prove that the properties derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. As per Section 3 of PMLA, even concealment, possession, acquisition, use of proceeds or claiming the proceeds of crime as untainted property would amount to money laundering - to constitute the offence of money laundering, the prosecution has to establish that the petitioner had indulged in criminal activity relating to scheduled offence, the property referred to in the complaint have been derived or obtained as a result of such criminal activity and the petitioner is involved in any process or activity connected with the said property being the proceeds of crime. Unless these basic requirements are fulfilled, the presumption under Section 24 of PMLA, cannot be raised. It is the contention of the prosecution that further investigation is still in progress. But at present, no prima facie materials, except the assertion made in the complaint are available to form an opinion that the accused is guilty of the offence which is one of the requirement under Section 45(1)(ii) of PMLA to deny bail to the petitioner. Without such materials on record, the accused is not required to be detained in custody as the same would amount to infringement of his right to life and liberty. It is not the contention of the prosecution that the petitioner would abscond as his passport is already said to have been seized. The interest of the prosecution could be safeguarded by imposing suitable conditions. The petitioner is ordered to be enlarged on bail on obtaining the bond in a sum of Rs. 2,00,000/- with two sureties for the likesum to the satisfaction of the jurisdictional Court, subject to the conditions imposed - application allowed.
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Service Tax
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2023 (3) TMI 569
Remand of the matter - It is the grievance of the petitioners that the Tribunal instead of deciding the matter has remanded it to the Assessing Officer in view of the fact that the matter being a case of M/s. PCM Cement Concrete Private Limited vs. Commissioner of Central Excise Customs and Service Tax [ 2017 (9) TMI 1382 - CESTAT KOLKATA ] is pending before the Hon ble Supreme Court. HELD THAT:- It is true that Civil Appeal Nos.005702-005703/2018 is pending before the Hon ble Apex Court. We notice that entire basis of remand ordered by the Appellate Tribunal in the present case is on the ground of pending aforesaid Civil Appeal. Secondly, the Tribunal has noted that to adjudicate the issue involved the matter needs to be reconsidered taking into account not only position of income tax but also on basis of terms and conditions of the employment of Directors. The petition requires consideration. Present petition stands disposed of with following direction:- In the instant case also, we notice that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. This approach of Tribunal is not proper. We deem it appropriate to direct the Tribunal to decide the matter on merits. We further reserve liberty to the parties to raise all contentions as raised by both the sides before this Court. Let the same be decided without further loss of time.
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2023 (3) TMI 540
Wrongful availment of CENVAT Credit - Input Services - Medical Insurance Services provided to its employees for the period 2007 08 to 2011 12 - rejection of appellant s VCES declaration on the ground that the working of the audit through the Internal audit report was the determination of liability by the Central Excise Officer - HELD THAT:- The show cause notice dated 19.10.2012 has been issued to the appellant alleging wrongful availment of CENVAT credit of Rs. 1,34,18,976/- on Medical Insurance Services provided to its employees for the period F.Y. 2007 08 to F.Y. 2011 12. This Notice was adjudicated in favour of the Appellant vide order dated 28.10.2016. A perusal of the list of services on which the appellant declared under the VCES does not include Medical Insurance Services . The VCES declaration indicates that appellant had declared nine other services on which they had chosen to pay the service tax dues under the VCES, 2013. So the argument that a notice on the said issues was pending as on 01.03.2013 is factually incorrect. Whether an Audit report forms determination of liability under section 106(1) 160(2) of the Finance Act, 2013? - Commissioner (Appeals) has rejected the appellant s VCES declaration on the ground that the working of the audit through the Internal audit report was the determination of liability by the Central Excise Officer - HELD THAT:- An order of determination under sections 72, 73 or 73A would be an order in relation to a show cause notice issued under such indirect tax enactment. An audit report cannot be regarded as an order of determination. If that be the case, it would render clause (b) of section 106(2) infructuous - the Commissioner (Appeals) has erred in holding that the audit report is akin to an order of determination under the relevant sections of the Scheme. The VCES declaration filed by the Appellant was correct - Appeal allowed.
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2023 (3) TMI 539
Classification of services - manufacturing railway sleeper falling under chapter heading 68109990 of the Schedule to the Central Excise Tariff Act, 1985 - reverse charge mechanism - whether the service received by the appellant is Manpower Supply Service or job work service? - HELD THAT:- As per the clause 1A(u) of N/N. 30/2012 ST dated 20.6.2012, supply of manpower for any purpose by the individual/proprietary firm, Hindu Undivided Family or partnership firm whether registered or not to a business entity registered as body corporate is liable to pay service tax. In this regard, the Commissioner (Appeals) has relied on the GAR-7 challans of M/s Balaji Udyog, one of the five service providers, who has classified their service under Manpower Recruitment Agency. Therefore, the Commissioner (Appeals) has concluded that the service received by the appellant are to be covered under reverse charge mechanism and service tax is payable on 75% of the value of service. A plain reading of Agreement between the appellant and service provider, M/s Balaji Udyog Ltd. clearly indicates that the service received is that of job work. Perusal of the invoices raised by the service provider to the appellant along with the statement of the job work done by them also shows that the appellant was receiving job work service from this service provider viz., Ms/ Balaji Udyog. It is not material to rely on the definition of the service indicated by the service provider in the GAR 7 challans, when the agreement between the appellant and the service provider is crystal clear. The issue is no longer res integra as Tribunal, in several decisions rendered in SHIVSHAKTI ENTERPRISES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2015 (12) TMI 682 - CESTAT MUMBAI ] and M/S. SHAILU TRADERS VERSUS C.C.E., INDORE [ 2018 (3) TMI 1282 - CESTAT NEW DELHI ] has held that where the service provider had deployed his employees in the manufacturing premises of the appellant for specified job works, the same cannot be held as Manpower Supply Services. Appeal allowed - decided in favour of appellant.
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2023 (3) TMI 538
Levy of Service Tax - banking and other financial services or not - State Financial Corporation / undertaking of the Government of Rajasthan and has been formed for non-business/ non commercial purposes to facilitate the growth of the industry in Rajasthan - renting of immovable property - sale of loan application forms - concessional interest charged under Seed Capital Assistance Scheme - foreclosure charges for premature payment of loans - annual service charges against Working Capital Term Loan - levy of penalty invoking section 80 of FA. Sale of loan forms - HELD THAT:- This issue stands decided by the Tribunal vide its order in the case of SADHANA EDUCATIONAL PEOPLE DEVELOPMENT SERVICES PVT LTD, SADHANA EDUCATIONAL EMPOWERMENT FOUNDATION, INSTITUTE OF MANAGEMENT EDUCATION VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2015 (6) TMI 694 - CESTAT MUMBAI] wherein it has held that amount collected for sale of forms prospectus etc. would not be includible in the taxable value for levy of service tax - thus, the sale of loan application forms is not a taxable service and therefore, no demand is leviable on such sale of loan forms. Seed Capital Assistance Scheme - HELD THAT:- Though the term used in service charge but the underlying nature of the 1% and 10% is nothing but interest on the seed capital loan, extended to the entrepreneurs. Therefore the same is not liable to service tax. As observed, it is a settled principle of law that interest on loans is not taxable to service tax. Service charge for prepayment/foreclosure of premature payment of loan - HELD THAT:- The leviability of Service Tax on foreclosure has been examined in detail by this Tribunal in COMMISSIONER OF SERVICE TAX, CHENNAI VERSUS M/S REPCO HOME FINANCE LTD. [ 2020 (7) TMI 472 - CESTAT CHENNAI ] where it was held that Foreclosure charges collected by the banks and non-banking financial companies on premature termination of loans are not leviable to service tax under banking and other financial services as defined under Section 65(12) of the Finance Act - thus, the service charges for pre-payment or foreclosure of loan amount by the customer cannot be treated as taxable service and is not chargeable to service tax. Service charge against Working Capital Term Loan - HELD THAT:- The scheme document has clearly differentiated between the interest liable to be charged on such loans and the service charges on such loan. Therefore service charges of 1% indicated separately clearly shows that this amount is a consideration for the services being provided by the appellant to the borrowers. It is apparent that the said service charge is a financial charge on account of providing financial services of loans and advances. In view of the same, it is held that service tax is leviable on the service charge, realized on Working Capital Term Loan by the appellant. Levy of penalty under Section 76, 77 78 of the Act - Suppression of facts or not - HELD THAT:- The Appellant is a State Government enterprise, and in such a case allegation of willful suppression of facts with an intention to evade the duty payment cannot be made. It is seen that the Tribunal in several cases has held that where the waiver of penalty under Section 80 of the Act is based on the bona fide belief on the part of the appellant that the extended period would not be invokable in as much as the same ingredients are required for invocation of extended period of limitation - there was certainly a bonafide belief of the Appellant that no service tax was leviable on the financial services provided by them. In view of the above, the waiver of penalty under section 80 of the Act has been correctly invoked by the Commissioner (Appeals). The demand of Rs. 16,99,443/- with applicable interest upheld. The remaining demand is set aside - appeal disposed off.
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2023 (3) TMI 537
Levy of Service Tax - various projects executed by the appellant under Construction of Residential Complex Service - Section 73(1) read with Section 73(2) of the Finance Act, 1994 - period from September 2007 to November 2009 - HELD THAT:- The issue involved is no more res integra as the same stands settled by the decision of the Hon ble Apex Court in the case of Commissioner of C.Ex. Cus., Kerala v. M/s. Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT ], which has been followed by the Chennai Bench of the CESTAT in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2018 (9) TMI 1149 - CESTAT CHENNAI ] where it was held that For activities of construction of new building or civil structure or new residential complex etc. involving indivisible composite contract, such services will require to be exigible to service tax liabilities under Works Contract Service‟ as defined under section 65(105)(zzzza) ibid. In view of the above ruling of the Chennai Bench of the CESTAT covers the period post 01.06.2007 also and hence, the ratio laid down therein applies to the case on hand. Therefore, the submissions of the Learned Advocate for the appellant that the issue is settled in favour of the appellant, is accepted. Appeal allowed.
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2023 (3) TMI 536
Violation of principles of natural justice - services provided by the appellants of providing scores of candidates appearing in the CAT Examination, conducted by IIM-Ahmedabad to other IIMs was covered under Mailing List Compilation and Mailing Service or not - SCN issued by invoking extended period of limitation - HELD THAT:- The appellant has tried to produce some evidences to justify that the service was indeed provided to education institutions. However, since there is finding to the contrary and appellants have not been given a fair chance to produce all evidences in support of their claim, even in a matter where Commissioner (Appeals) was differing from findings of the original authority and has done his own fact findings, there has been violation of natural justice. He has only provided limited opportunity to the appellants to rebut the fresh case and the same needs to be afforded fully, to allow to produce all evidences to justify their claim. Appellants have also raised the legal issue of whether the sequel demand by way of a letter only will be justified in the facts and circumstances of the case. The limited opportunity afforded to the appellants in view of specific facts of this case, whereby the order-in-original has been differed with, does not meet the ends of justice and full opportunity to adduce evidence needs to be afforded by the Commissioner (Appeals). Appeal is allowed by way of remand.
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Central Excise
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2023 (3) TMI 535
Levy of excise duty - spent earth arising out of the refined vegetable oil (intermediate goods) - exempt goods or not - HELD THAT:- The very same issue has been considered by this tribunal in the case of M/S PRIYANKA REFINERIES PVT LTD UNIT II VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX HYDERABAD - II [ 2019 (7) TMI 249 - CESTAT HYDERABAD] wherein, the tribunal has held that matter has been decided by the Larger Bench of the Tribunal in M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [ 2018 (2) TMI 1395 - CESTAT NEW DELHI] and it has been held that these products are not intentionally manufactured but only arise during the process of refining of crude vegetable oil and therefore should be considered as waste and they are entitled to the benefit of exemption N/N. 89/1995-CE. The issue is no longer res-integra accordingly, the impugned order is set aside - Appeal allowed.
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2023 (3) TMI 534
Valuation of export goods - method of valuation - Section 4A or Section 4 of Central Excise Act, 1944? - toothbrushes supplied in bulk in the carton to the principal manufacturer for further supply as under promotional scheme/ offer to supply the same free of cost with their toothpaste - HELD THAT:- There is no dispute on the fact of the present case that appellant are manufacturing tooth brush and supplying to their principal manufacturer M/s. Hindusan Unilever Ltd. Prime Healthcare Products. In some of cases the tooth brush is packed in retail pack and MRP, is affixed on it. On such goods, the appellant is discharging duty under section 4A on MRP based valuation, on which there is no dispute. The other type of supply is the tooth brush are packed in bulk quantity in loose form in a carton and supply to their principle manufacturer. The principle manufacturer use this brush for their promotional scheme and the same is packed in a combo pack of tooth paste and this tooth brush. In this case, the tooth brush is not meant for retail sale but it is for supply under promotional scheme. The appellant is also clearing the said goods in bulk form in a carton. Therefore, as per standards of weights and measure Rules, the appellant are not under legal obligation to affix the retail sale price on this supplies. Therefore, the valuation of tooth brush when supplied in bulk quantity in carton was rightly valued under Section 4 of the Central Excise Act, 1944. This very issue has been considered by this Tribunal in the case of M/S CONTEMPORARY TARGETT PVT LTD VERSUS C.C.E. S.T. -VADODARA-I [ 2019 (5) TMI 871 - CESTAT AHMEDABAD ] where it was held that the tooth brushes supplied by the appellant which is not for retail sale but for free supply by the tooth paste manufacturer will not be valued under Section 4A in the hands of the appellant - the value adopted by the appellant under Section 4 is correct and legal which does not need any interference. The impugned order is not sustainable. Accordingly, the same is set aside - Appeal allowed.
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CST, VAT & Sales Tax
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2023 (3) TMI 533
Input Tax Credit (ITC) - Genuineness - Onus to prove / burden of proof - Interpretation of statute - Section 70 of the Karnataka Value Added Tax Act, 2003 - Input Tax Credit claimed by the respective purchasing dealers - HELD THAT:- The provisions of Section 70, in its plain terms clearly stipulate that the burden of proving that the ITC claim is correct lies upon the purchasing dealer claiming such ITC. Burden of proof that the ITC claim is correct is squarely upon the assessee who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bona fide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such a burden of proof cannot get shifted on the revenue. Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The genuineness of the transaction has to be proved as the burden to prove the genuineness of transaction as per section 70 of the KVAT Act, 2003 would be upon the purchasing dealer. It is observed and held that mere production of the invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70 of the Act, 2003. In the present case, the respective purchasing dealer/s has/have produced either the invoices or payment by cheques to claim ITC. The Assessing Officer has doubted the genuineness of the transactions by giving cogent reasons on the basis of the evidence and material on record. In some of the cases, the registration of the selling dealers have been cancelled or even the sale by the concerned dealers has been disputed and/or denied by the concerned dealer - over and above the invoices and the particulars of payment, the purchasing dealer has to produce further material like the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods including actual physical movement of the goods, alleged to have been purchased from the concerned dealers. In absence of any further cogent material like furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. and the actual physical movement of the goods by producing the cogent materials, the Assessing Officer was absolutely justified in denying the ITC, which was confirmed by the first Appellate Authority. Both, the second Appellate Authority as well as the High Court have materially erred in allowing the ITC despite the concerned purchasing dealers failed to prove the genuineness of the transactions and failed to discharge the burden of proof as per section 70 of the KVAT Act, 2003. The impugned judgment(s) and order(s) passed by the High Court and the second Appellate Authority allowing the ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside - Appeal allowed.
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2023 (3) TMI 532
Seeking grant of anticipatory bail - any offence committed by the Director or not - for non-payment of tax, can the directors be made liable? - HELD THAT:- Going through the FIR as also the papers of investigation and the documents annexed with the application, without entering into the discussion in detail about invoking provisions of the Act, 2003 or the Penal Code, suffice it to say that its invocation in such set of facts, as stated, that too, against the Directors in absence of any specific provisions under the Act, 2003 and there is no provisions under the IPC, when coaccused is already considered by this Court and while admitting the present application detail reasons are assigned, on those reasons also, it is deemed fit to grant an order in the nature of anticipatory bail, which was continued since 17.02.2022. The present application is allowed by directing that in the event of applicant herein being arrested pursuant to FIR registered as C.R.No.I-11200011210293 of 2021 with Valsad Rural Police Station, Valsad, on his executing a personal bond of Rs.10,000/- with one surety of like amount on the conditions imposed - application allowed.
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Indian Laws
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2023 (3) TMI 531
Dishonour of Cheque - compounding of offences - instant complaint has been filed at a time when no cause of action was available to the opposite party - HELD THAT:- The petitioner no. 1 company is ready to pay to the opposite party the amount of the cheque dishonoured, (in respect whereof the present proceeding has been initiated) by the said demand draft. The impugned proceeding is a gross abuse of the process of court which if allowed to continue for a single day more beyond the stage it has already reached, will degenerate itself into a weapon of harassment and persecution and as such the same is liable to be quashed for the ends of justice - That it is expedient in the interest of justice, to uphold the dignity of law that the impugned proceeding is quashed. Vide order dated 07.12.2018 the Learned Magistrate was pleased to take cognizance and issue process against the /accused petitioners. Considering all the materials on record, it is before this court that a deed of settlement between the parties, regarding all their dues has been filed before the NCLT - the matter therein has been withdrawn in accordance with the three settlement agreements with liberty to file appropriate applications for revival of the company petition at stage at which it was left of in case there is default. In the present case, the opposite party/complainant has not appeared in spite of due service. The order dated 18.06.2019 passed by the Learned Additional Chief Judicial Magistrate, Bidhannagar, North 24 Parganas, in Case No. C 5223 of 2018 is set aside, not being in accordance with law and the matter is remitted to the Learned Magistrate to dispose of the case in view of the settlement between the parties, by ensuring the presence of both sides, in the interest of Justice within one month from the date of communication of this order - Application disposed off.
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