TMI Tax Updates - e-Newsletter
March 15, 2024

Case Laws in this Newsletter:

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

Articles

• WAIVER OF THE REQUIREMENT OF PRE DEPOSIT FOR FILING APPEAL BEFORE APPELLATE TRIBUNAL UNDER SECTION 21 OF THE RECOVERY OF DEBTS AND BANKCUPTCY ACT, 1993
• Appeal allowed where pre-deposit made through Form GST DRC-03 due to technical glitch
• What content is included in idea- stage startups pitch desk?

News

• Government of India and ADB sign $23 million loan agreement to strengthen fintech ecosystem in India

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• MoU signing between DGFT and DHL

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• Government of India, ADB sign $181 million loan to improve livability and mobility in Ahmedabad

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• DRI’s busts major gold smuggling syndicate; seizes over 61 kg gold worth Rs. 40 crore in a Pan-India Operation ‘Rising Sun’

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Notifications

Customs

• 21/2024 - dated 12-3-2024 - Cus (NT)
  Amendment to Notification No. 12/97-Customs (N.T.) dated the 2nd April, 1997 - Inland Container Depots for loading and unloading of goods - Bihta in Bihar included in the list for the purpose of "Unloading of imported goods and loading of export goods"

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GST - States

• 07/GST-2 - dated 14-3-2024 - Haryana SGST
  Notification under Rule 123 of the HGST Rules, 2017 read with Rule 123(2) of the CGST Rules, 2017 to constitutes the designation wise State Level Screening Committee for Anti-Profiteering Authority under the HGST Act, 2017

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• 06/GST-2 - dated 14-3-2024 - Haryana SGST
  Notification to notify “Public Tech Platform for Frictionless Credit” as the system with which information may be shared by the common portal based on consent under sub-section (2) of Section 158A of the Haryana Goods and Services Tax Act, 2017

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Income Tax

• 31/2024 - dated 13-3-2024 - IT
  National Forensic Sciences University, Gandhinagar under the category of ‘University, college or other institution’ for ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of section 35

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• 30/2024 - dated 13-3-2024 - IT
  Sardar Vallabhbhai National Institute of Technology, Surat under the category of ‘University, college or other institution’ for ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of section 35

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• 29/2024 - dated 13-3-2024 - IT
  Indian Institute of Technology, Kharagpur under the category of ‘University, college or other institution’ for ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of section 35

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Circulars / Instructions / Orders

SEBI

• SEBI/HO/CFD/PoD-1/P/CIR/2024/ 016 - dated 13-3-2024
  Repeal of circular(s) outlining procedure to deal with cases where securities are issued prior to April 01, 2014, involving offer / allotment of securities to more than 49 but up to 200 investors in a financial year

DGFT

• 51/2023 - dated 14-3-2024
  Amendments in Para 4.14 and 4.06 of the Handbook of Procedures 2023

Highlights / Catch Notes

GST

• Dismissal of an appeal due to the non-submission of a certified copy of the impugned order within the prescribed time frame. - The High court, upon reconsideration, held that the appeal should not be dismissed solely on the grounds of not submitting the certified copy within the specified time frame, citing precedents from various High Courts.
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• Scope of SCN - Refund claim - Unutilised Input Tax Credit (ITC) - applicability of principle of res judicata - Adherence to the Accounting Standards or not - Specific goods have not been capitalised by the Petitioner in accordance with Accounting Standard 10. - The Court found merit in the Company's contention that the tax authorities' approach lacked consistency. It emphasized the importance of uniform treatment for similar factual and legal circumstances, highlighting that the arbitrary withholding of refunds for the disputed periods was unjustified.
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• Classification of JAC OLIVOL BODY OIL - classifiable under HSN 3004 as a medicament Or under HSN 3304 (cosmetic) - The AAAR’s split decision illustrates the complexity of classifying products that straddle the line between medicaments and cosmetics. It highlights the challenges in applying the common parlance test and ingredient test to products with dual purposes. - The absence of a conclusive ruling from the AAAR means that the original ARA ruling stands, leaving room for further legal debate and potential legislative clarification on the matter.
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• Liability to charge GST - Public Distribution System (PDS) - Fair Price Shop - Supply of goods i.e. S. K. Oil to ration card holders - license issued by the Government of West Bengal, authorizing as a “Dealer” as defined under Kerosene Control Order, 1968 - The AAAR held that their services were exempt from GST, rendering the question of charging GST to the State Government inapplicable. - The AAAR concluded that since the appellant acted as an agent for the State Government and their services were exempt from GST, the ancillary charges associated with the distribution of SK Oil were also not subject to GST. - On the issue of composite supply, AAAR held that it was identified as a single supply of service to the State Government by distributing SK Oil to ration card holders. Therefore, the concept of composite supply was not applicable to this case.
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Income Tax

• Entitlement to Nil/lower rate withholding tax certificate u/s 197 - Absence of a Permanent Establishment (PE). - The High Court found that the assistance and training provided by SFDC Ireland were ancillary to the sale of its products and did not constitute the provision of technical services as defined under the DTAA. - The judgment clarified that the payments made to SFDC Ireland were for the purchase of software products for resale by SFDC India and not for the provision of technical services. The court emphasized that the technical support and training offered were related to the usage of these products and did not amount to FTS. - Matter restored back for fresh consideration.
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• Exemption u/s 10(23C) (iv) - Charitable activity u/s 2(15) or not? - The petitioner, an institution promoting trade, sought exemption under Section 10(23C)(iv) of the Income Tax Act. The Revenue rejected the claim, citing the proviso to Section 2(15) of the Act. The petitioner challenged this decision, relying on a subsequent ITAT judgment. The court upheld the retrospective application of judicial decisions and emphasized the binding nature of appellate authority's orders on revenue officers. It quashed the impugned order and remanded the matter for reconsideration in light of the ITAT's decision.
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• Addition on account of revenue recognition following percentage of completion method (POCM) - as per AO assessee had incurred substantial expenses on construction but the revenue had not been recognized on the basis of percentage of completion method - It was found by the ITAT that the Assessee had already shown 98.62% of the total revenue in subsequent years based on POCM. The Tribunal agreed with the Assessee's contention that revenue recognition based on POCM in the current year would lead to complications and would not benefit the Revenue. - The addition made by the Assessing Officer was deleted based on these findings.
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• TDS u/s 194I or 194IB - Disallowance u/s 40(a)(ia) - TDS was deducted but the section 194IB was mentioned wrongly instead of section 194I(b) - The Tribunal ruled in favor of the assessee regarding the disallowance under section 40(a)(ia) of the Act, finding that tax had indeed been deducted at source on rental expenditure. However, the claim for a refund of excess DDT was dismissed based on legal precedent.
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• Addition u/s 69A - unsecured loans - interest expenditure - The case involved disputes over the addition of unsecured loans under section 69A and the disallowance of interest expenses. The assessee provided adequate documentation to prove the genuineness of the loans and the business purpose of interest payments. Consequently, both additions made by the assessing officer were overturned, and the appeal of the assessee was allowed by the appellate tribunal.
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• The appeals pertain to assessments for the years 2015-16, 2016-17, and 2017-18. This case involves multiple legal and factual issues related to income tax assessments for a banking institution, focusing on disallowances and write-offs. - The tribunal's decision touches upon complex aspects of tax law, including the interpretation of provisions related to bad debts, CSR expenses, ESOS, depreciation on investments, and others. Each issue involves interpreting specific sections of the Income Tax Act, considering the factual circumstances of the bank's operations and the legal precedents.
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• TDS on certain foreign payments - reimbursements of expenses - independent professional service - The case involves a dispute over the classification of services obtained from foreign entities by the appellant, a law firm proprietor. While the appellant argues that these services constitute legal services exempt from TDS, the Assessing Officer contends that they fall under 'Fees for Technical Services', warranting TDS deductions. The court directs a reevaluation of the nature of services and compliance with DTAA provisions, highlighting the appellant's right to seek exemption under 'Independent professional services'.
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• Validity of reopening of the case u/s. 147 - Reasons to believe - addition as unexplained cash credit u/s. 68 against sale of shares / investments along with share premium - The ITAT found that the reasons recorded for reopening were vague and lacked specificity, and the approval obtained was mechanical. Additionally, it concluded that the transactions in question were sales of shares held as investments, supported by evidence provided by the appellant. Consequently, the ITAT ruled in favor of the appellant, allowing the appeals and rejecting the additions made by the AO.
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• Taxability in India - amount received by the assessee from offshore supplies of plants and equipments - PE in India or not? - The Tribunal questioned the differential treatment of the assessee's receipts by the department. While the receipts from the sale of plant and equipment were subjected to taxation, other receipts were offered as Fees for Technical Services (FTS) under the India-Germany Double Taxation Avoidance Agreement (DTAA). The Tribunal found this inconsistency unjustified, especially considering the lack of valid reasoning provided by the department to establish the existence of a Permanent Establishment (PE) in India.
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• Income accrues or arises or deemed to accrue or arise in India - Unexplained foreign income - residential status of the assessee - The Tribunal upheld the CIT(A)'s decision, noting the AO had treated the assessee as a non-resident and that the global income would only be taxable in India if it accrued or arose in India. - Further, the Tribunal reversed the CIT(A)'s decision on the disallowance of land filling expenses, accepting the assessee's argument regarding non-applicability of TDS deduction requirements due to not being under tax audit as per section 44AB in the preceding year.
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• Scope of rectification of mistake - The case revolved around the disallowance of EPF and ESI contributions by the Assessing Officer u/s 154 of the Income-tax Act, 1961. The key contention was whether the AO was justified in exercising rectification powers under Section 154 due to conflicting judgments and the absence of a clear error apparent on record. The Appellate Tribunal ruled in favor of the assessee, holding that the AO's action was not justified as the issue was debatable and there was no clear error evident at the time of the original assessment.
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Customs

• Provisional attachment of bank accounts of petitioner - Smuggling - Gold - The Bombay High Court conducted a detailed analysis of Section 110(5) of the Customs Act, emphasizing the need for a written order to provisionally attach bank accounts and the importance of serving such an order on the account holder. The court found that the respondents failed to comply with these requirements, rendering the provisional attachment of the petitioners' bank accounts illegal.
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• Advance Authorisation Scheme - Non-fulfilment of Export Obligation - fraudulent activities - allegation of collusion with the Customs officials - The CESTAT examined the allegations against the appellant and the findings of the adjudicating authority. It noted that while the adjudicating authority implicated the appellant in fraudulent activities, there was a lack of concrete evidence supporting these allegations. Furthermore, the court observed that the involvement of customs officers, mentioned in the proceedings, was not substantiated with adequate details or evidence. Consequently, the court found that the penalties imposed on the appellant lacked a legal basis.
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• Refund of SAD - The tribunal noted that the Adjudicating Authority had accepted the CA Certificate in support of the refund claim for some Bills of Entry but had requested a cost structure certificate for others, which was not required by the relevant notification or circular. They emphasized that the key factor was whether the SAD had been paid, regardless of whether goods were imported on a transaction value or MRP basis. The tribunal found that the appellant had established through the CA Certificate that the duty burden had not been passed on to the customer, rendering them eligible for a refund. Therefore, they set aside the rejection of the refund claim.
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FEMA

• Offence under FEMA/FERA - Levy of penalty - Review petition - The case involves allegations of violating foreign exchange regulations regarding securing export value without proper authorization. Penalties were imposed on the appellants and a proforma respondent. Despite multiple opportunities for appeal and review, the appellants failed to comply with orders and continued to file petitions, leading the court to conclude that the appeal was a gross abuse of the legal process.
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Indian Laws

• Constitutional validity of Electoral Bond Scheme and the provisions of the Finance Act 2017 which amended the provisions of the Representation of People Act 1951 and the Income Tax Act 1961 - The Supreme Court ruled the Electoral Bond Scheme and related amendments unconstitutional due to violations of citizens' right to information and arbitrariness. It mandated disclosure of transaction details by the State Bank of India within set deadlines, rejecting pleas for extension citing complexity. The Election Commission was tasked with compiling and publishing the disclosed information.
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• Legislative competence, the constitutional validity and the vires of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023 - The court concluded that the levy of water cess on hydropower generation by the Himachal Pradesh government is essentially a tax on the generation of electricity, not merely on the use of water. This determination was based on the analysis that the cess varies with the quantum of electricity generated rather than the quantity of water drawn, indicating that the essence of the tax relates to electricity generation. Therefore, the Act was deemed beyond the legislative competence of the State, as it encroached upon the domain reserved for the Parliament under the Constitution, specifically under entries related to taxation and electricity in the Union List.
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• Seeking exemption from pre-litigation mediation, as required by Section 12-A of the Commercial Courts Act, 2015 - Proceedings u/s 138 of the Negotiable Instruments Act, 1881 - suit for recovery alongwith interest and future interest - However, the court found no evidence of a failed mediation attempt and dismissed the application for exemption. The court also rejected the plaint, stating that pre-litigation mediation is mandatory unless urgent interim relief is sought. The appellant was given liberty to file a fresh suit after complying with the provisions of Section 12-A of the Commercial Courts Act, 2015.
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IBC

• Undervalued/preferential/fraudulent transactions - Failure to adjudicate about the ingredients of Section 43, 45, 49 and 66, specifically - need for separate consideration of preferential, undervalued, and fraudulent transactions, each requiring distinct scrutiny and evidence - NCLAT found that the Adjudicating Authority's order lacked sufficient scrutiny and analysis. The Court observed that the Authority merely recorded its conclusions without adequately considering the individual nature of each transaction and without referencing the pleadings or materials on record. Specifically, the Tribunal noted that the Authority's conclusion of fraudulent transactions lacked detailed reasoning and examination of the ingredients required to establish fraud.
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PMLA

• Seeking grant of Regular Bail - Money Laundering - proceeds of crime - predicate offence - subsidy fraud in IFFCO by opening Kisan International Trading - The Delhi High Court granted bail to the petitioner charged under the PMLA, after examining the evidence and submissions presented. The court found inconsistencies in the prosecution's allegations, particularly regarding the inflation of prices for fertilizer imports and the establishment of an unbroken money trail to prove the proceeds of crime. The decision emphasized the importance of substantiating allegations with concrete evidence and highlighted issues with witness reliability in the context of PMLA charges.
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• Grant of anticipatory bail - Money Laundering - siphoning off of funds - The court interprets Section 3 of the PMLA Act, emphasizing that it encompasses individuals who knowingly assist or are involved in activities connected to proceeds of crime, regardless of their direct implication in the FIR. - The court concludes that the applicant's failure to appear before the court, despite the issuance of a warrant, further weakens his claim for anticipatory bail. Consequently, the court dismisses the anticipatory bail application and advises the applicant to surrender and apply for regular bail.
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Service Tax

• Valuation - The case involves disputes regarding the inclusion of certain expenses in the taxable value of services provided by the appellant, the denial of abatement/exemption claimed by the appellant, and the imposition of interest and penalties. The CESTAT found that the appellant did not adequately support their claims and failed to address key issues during the adjudication process. As a result, the court remanded the case back to the Original Authority for further consideration.
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Central Excise

• Process amounting to manufacture or not - activity of “labelling or relabeling, declaration by affixing fresh Maximum Retail Price (MRP) stickers” on each unit pack, by altering the retail price stickers already affixed on the watches - The tribunal concluded that relabeling and affixing new MRP stickers do not amount to manufacture. It relied on precedents stating that such activities, not enhancing the goods' marketability, do not meet the manufacture criteria under the Excise Act. - The tribunal supported the appellants' view that Section 2(f)(iii) does not apply to goods manufactured under ABE, as applying the concept of deemed manufacture to such goods would counteract the exemption's intent.
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• Maintainability of appeal - non-prosecution of the case - Request for adjournment, which cannot be accepted in virtual hearing - The case involved repeated requests for adjournment by the appellant's counsel during the hearing of an appeal. Despite statutory limitations and the Supreme Court's condemnation of the misuse of adjournments, the appellant's counsel persisted in seeking adjournments. As a result, the CESTAT dismissed the appeal for non-prosecution, emphasizing the importance of timely justice delivery and discouraging the practice of seeking repeated adjournments.
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Case Laws:

• GST

• 2024 (3) TMI 632
  Dismissal of an appeal due to the non-submission of a certified copy of the impugned order within the prescribed time frame. - Direction to appellate authority to de novo hear the appeal filed by the petitioner and pass a reasoned order on merits within a period of three months - HELD THAT:- Upon reconsideration of the order passed, this Court, suo motu, is of the view that paragraph 4 of the judgment and order dated February 12, 2024 [ 2024 (2) TMI 718 - ALLAHABAD HIGH COURT] is required to be substituted. Accordingly, paragraphs 4, 4(i) and 4(ii) of this order be read in place of paragraph 4 of the judgment and order dated February 12, 2024 and this order be treated as part and partial of the said judgment and order. The Registrar Compliance of this Court is directed to communicate this order to the parties.

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• 2024 (3) TMI 631
  Scope of SCN - Refund claim - Unutilised Input Tax Credit (ITC) - applicability of principle of res judicata - whether principle of res judicata does not apply in matters of taxation and merely because refund claims have been sanctioned previously, does not mean that the refund claims for subsequent period will also be sanctioned? - adherence to the Accounting Standards or not - Specific goods have not been capitalised by the Petitioner in accordance with Accounting Standard 10. HELD THAT:- The inconsistency and irrationality displayed by the Department in withholding refund claims for July-September 2019 and October-December 2019, despite having sanctioned similar claims in the past and in the future are indefensible. - The Supreme Court in Bharat Sanchar Nigam Ltd. And Anr. v. Union of India [ 2006 (3) TMI 1 - SUPREME COURT ] and others and other decisions has consistently emphasized that Revenue cannot take a different stand when facts are almost identical. These judgments underscore the significance of consistency in tax administration and the need for tax authorities to adhere to established principles and precedents. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity. It is evident in the instant case that the Department has deviated from the show cause notice, and as such any order passed by it running contrary to the grounds taken in the show cause notice, cannot be sustained. Issuance of the show cause notice represents a pivotal juncture in legal or administrative proceedings, demarcating the boundaries within which any authority can exercise its powers. Adhering to the confines of the show cause notice upholds principles of fairness, accountability, procedural regularly, and legal certainty essential for the legitimacy and effectiveness of the governance systems. Any attempt to transcend these limits not only violates the rights of the individuals or entities involved but also undermines the rule of law and public trust in the institutions tasked with upholding it. Therefore, adherence to the show cause notice is not merely a procedural formality but a mandatory requirement, beyond the scope of which, no action can be taken. While the principle of res judicat a does not apply to taxation matters, it is incumbent upon authorities to take a consistent approach when dealing with similar factual and legal circumstances. The principle of consistency states that when faced with analogous factual and legal circumstances, the treatment should remain uniform. Taxpayers have a legitimate expectation that similar factual and legal circumstances will be met with uniform treatment, and any deviations from this principle undermine the credibility and legitimacy of the actions taken by tax authorities. When facts and circumstances in a subsequent assessment year are the same, no authority, whether quasi-judicial or judicial can generally be allowed to take a contrary view. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity. Capital goods, are intended for long-term use and are typically subject to capitalization. However, inputs, are goods used in the day-to-day operations of the business and are not subject to capitalization. While issuing a Show Cause Notice, it is incumbent upon the Department to clearly outline the specific allegations or concerns against the recipient. In no case, the Department can be allowed to traverse beyond the confines of the Show Cause Notice, since the same will trample upon the recipient s right to defend itself. Any attempt by the issuing authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the show cause notice would constitute a violation of the principles of natural justice. Such actions would not only undermine the recipient s right to a fair hearing but also erode trust in the integrity and impartiality of the adjudicatory process. Any action taken beyond the confines of the Show Cause Notice, is void ab initio and cannot be sustained. It is evident that the impugned orders dated October 25, 2021 and February 24, 2023 are palpably erroneous, and cannot be sustained. Accordingly, let there be a writ of certiorari issued against the orders dated October 25, 2021 and February 24, 2023 passed by the Respondent No. 2. The said orders are hereby quashed and set aside. Petition allowed.

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• 2024 (3) TMI 630
  Validity of Demand order including penalty - Show Cause Notice issued u/s 61 of the Act, with regard to discrepancies - mismatch of Input Tax Credit [ITC] - HELD THAT:- Perusal of the Show Cause Notice shows that the Department has given separate heading of excess claim Input Tax Credit [ITC]. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving full disclosures under the said head. The observation in the impugned order dated 29.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper officer had to at least consider the reply on merits and then form an opinion whether the reply was not satisfactory. He merely held that the reply is not satisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner. Further, if the Proper Officer was of the view that reply was not satisfactory and further details were required, the same could have been specifically sought from the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details. Thus, the order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 29.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. Petition is disposed of in the above terms.

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• 2024 (3) TMI 629
  GST registration cancelled retrospectively - Show Cause Notice issued without specify any cogent reason for cancellation - HELD THAT:- In terms of Section 29(2) of the Act, Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. We may also note that the Show Cause Notice did not put the noticee to notice that registration was liable to be cancelled retrospectively. It may be further noted that both the Petitioners and the department want cancellation of the GST registration of the Petitioner, though for a different reason. Thus, Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 31.07.2019 is modified to the limited extent that registration shall now be treated as cancelled with effect from 14.03.2018 i.e., the date when Sh. Krishan Mohan passed away. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration. Petition is accordingly disposed of.

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• 2024 (3) TMI 628
  Cancellation of GST registration with retrospective effect - Application seeking cancellation of GST registration rejected - taxpayer found non-existent at the principal place of business - thereafter, defective Show Cause Notice issued - HELD THAT:- Clearly, the order for cancellation on the ground that petitioner was found non-existent on 30.05.2023 ex-facie is not sustainable for the reason that on 12.04.2023, petitioner had himself applied for cancellation of registration on the ground of closure of business. It is but obvious that on 30.05.2023, when an inspection was carried out, petitioner was not found available at the subject premises. The Show Cause Notice dated 06.06.2023 does not bear the name and designation of the officer issuing the Show Cause Notice, though it required the petitioner to appear before the issuer of the notice. Further, the order of cancellation dated 15.06.2023 also does not give any reasons. It merely states reference to the Show Cause Notice issued dated 06.06.2023 and then states that the effective date of cancellation of registration is 26.10.2023 i.e., a retrospective date. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. Thus, the impugned order dated 15.06.2023 and the Show Cause Notice dated 06.06.2023 are modified to the extent that the registration of the petitioner shall now be deemed cancelled with effect from 12.04.2023 i.e., when the petitioner applied for cancellation of registration. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration. Petition is accordingly disposed of in the above terms.

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• 2024 (3) TMI 627
  Contempt case - willful violation of the order passed - transitional input tax credit by filling up the Form GST TRAN-I - HELD THAT:- The learned counsel for the petitioner, on instructions, submits that the present contempt case has been rendered infructuous because necessary order has now been passed by the respondent-authority. Contempt Case stands disposed of as such.

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• 2024 (3) TMI 626
  Contempt case - willful violation of the order passed - HELD THAT:- The learned counsel for the petitioner, on instructions, submits that in view of the subsequent developments the present contempt case has been rendered infructuous. Contempt Case stands disposed of as such.

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• 2024 (3) TMI 625
  Classification of JAC OLIVOL BODY OIL - classifiable under HSN 3004 as a medicament Or under HSN 3304 (cosmetic) - GST at the rate of 12% (6% CGST 6% WBGST) - twin tests of classification - ''the Common Parlance test and the Ingredients test-to-determine whether a product qualifies as a medicament under Chapter 30'' - Difference Of opinion between members - HELD THAT:- In this particular instance, the appellant accompanied their additional written submission with a certificate from the Directorate of ISM Drugs Control, Government of West Bengal, which granted approval for the drug formulation of JAC OLIVOL Herbal Body Oil. The certificate detailed the constituents of the product, including their respective quantities and names, and included Haridra, Manjistha, Arjuna, Daruharidra, Karpoor, Nimba Oil, Badam Oil, and Oilve Oil, among others. The assertion that all of these constituents possess medicinal properties has not been contested by WBAAR. Therefore, it appears that the instant product satisfies the second criterion of the twin test that is the Ingredients test . The judgment in the case of The Commissioner Commercial Tax Uttarakhand Vs Perfetti Van Melle India Pvt Ltd [ 2008 (7) TMI 870 - UTTARAKHAND HIGH COURT] holding that only for the reasons these items (Chlormint, Happydent) are also purchased by some customers for taste also, does not make them confectionary items particularly when the same are manufactured under a valid drug licence. Based on this decision, it can be deduced that the perceived utility of a product does not necessarily serve as a determining factor in its classification. WBAAR's classification of the product, which was predicated primarily on the Common Parlance test and neglected a number of previously discussed factors and cited decisions of the Honourable Courts, is therefore rejected. Thus, it is held that the product JAC OLIVOL BODY OIL intended to be manufactured sold by the applicant would be covered under Heading 3004 of THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT and would be taxed accordingly under the GST Act. As per Mr. Devi Prasad Karanam, Member - Whether the instant product is to be classified as a cosmetic or a medicine mainly rests on the twin tests - HELD THAT:- Appellant has stated that the instant product can be used for treating minor burns and prevents blisters. Now, in light of 'common parlance', if we ask - what will be the requirement of someone in case of treating a minor burn - an anti-burn ointment or the instant product, the answer would tend to the former option. Now, the issue of therapeutic i.e. relating to the healing of disease or prophylactic i.e. intended to prevent disease of the product comes in question. Also, a valid question comes regarding the issue of cure vs. care. As submitted by the appellant, Jac Olivol Body Oil has certain skin care properties. It can be used in winter for curing dry skin and also has its use for curing body ache. Now, dry skin can occur normally due to loss of skin moisture in winter season or misuse of external agents like soap. At the same time it can occur due to skin diseases like atopic dermatitis (eczema) or psoriasis. Now, as we all know any body-oil like mustard oil, coconut oil or olive oil has a natural property to retain skin moisture resulting in minimization of dry skin. But that does not necessary imply that mustard oil, coconut oil or olive oil can cure skin diseases like eczema or psoriasis. In the same way, as claimed by the appellant, the product Jac Olivol Body Oil can be used to relieve body ache, joint knee pains. It is a well-accepted fact that a body massage using any body-oil like mustard oil, coconut oil or olive oil can give relief to body spasm and ache. But at the same time, pain and ache arising out of arthritis, tendinitis, gout, spondylitis etc demand specified medical treatment with medicines. Thus, there is a wide gap between the word 'cure' and 'care' so far as the instant product is concerned. Thus, it can be opined that the product Jac Olivol Body Oil intended to be manufactured sold by the applicant shall not be covered under Heading 3004 of the First Schedule to the Customs Tariff Act as appealed for. Instead, it would get covered under Heading 3304 of the First Schedule to the Customs Tariff Act and would be taxed accordingly under the GST Act. The WBAAR Ruling is confirmed and the Appeal stands rejected. As the members of the West Bengal Appellate Authority for Advance Ruling differ on the classification of the instant product i.e. 'JAC OILVOL BODY OIL', it is deemed that no Advance Ruling can be issued in respect of the questions under appeal as per the provisions of Section 101 sub-section (3) of the GST Act. Thus the Advance Ruling No. 19/WBAAR/2023-24 dated 10.08.2023 is deemed to be not in operation.

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• 2024 (3) TMI 624
  Liability to charge GST - Public Distribution System (PDS) - Fair Price Shop - Supply of goods i.e. S. K. Oil to ration card holders - license issued by the Government of West Bengal, authorizing as a Dealer as defined under Kerosene Control Order, 1968 - composite supply - HELD THAT:- The appellant purchases S.K. Oil from agents of the Oil Companies who have an agreement with the concerned Oil Marketing Company. The agents have been granted a licence authorizing him/her to carry on trade in Kerosene as Agent. Also, the appellant is obligated as a Dealer to comply with the provision of the West Bengal Kerosene Control Order, 1968, Notification No. 2567/FS/FS/Sectt/Sup/4M-16/2014 dated 03/11/2014 issued by the Department of Food and Supply, Government of West Bengal. Memorandum No. DCG-16016(99)/l/2022-SEC(DCG)-DCG-Part(l)/711 dated 13.05.2022 fixes the price of S. K. Oil at which the agent will sell S. K. Oil to the dealers and the retail price of S. K. Oil at which the Dealers will sell S. K. Oil to the consumers, i.e. the Ration Card holders. (i) Whether the applicant being a Fair Price Shop as defined under the Notification No. 2565/FS/FS/Sectt/Sup/4M-16/2014 dated 3rd November 2014 issued by the Government of West Bengal, is liable to charge GST from the State Government against the supply made by them? - The appellant in the present case, is a Fair Price Shop and is providing service to the State Government by way of distributing of S. K. Oil as agent, it decided that the afore-mentioned notification is applicable for the appellant and the appellant is entitled for the benefit extended by the said notification. Since, in terms of the said Notification, the Tax liability of the appellant while providing service to the State Government is NIL the question of charging GST from the State Government becomes inapplicable. (ii) Whether the other charges like Dealer s commission, Dealers Transport Charges, Stationery Charges, H E Loss etc. would be chargeable to GST or treated as exempt? - Appellant s sale price included components such as dealer s commission, dealer s transport charges, stationery charges, Compensation for Handling and Evaporation loss, among others, in order to guarantee a reasonable return on the capital invested and are actually Commission received by the appellant from the State Government. The government is able to regulate the price of S. K. Oil disseminated via PDS by granting these terms in this manner. In terms of Chapter 4 of the GST Rules, The value of supply of goods between the principal and his agent (iii) Whether the supply of S.K. Oil along with charges would be treated as a composite supply wherein the principal supply would be the supply of S.K. Oil ? - Supply of S.K. Oil along with charges shall not be treated as a composite supply. The supply made by the appellant in the instant case, is supply of Service to the State Government. The appellant makes a single supply of service as an agent to the State Government by way of distributing S. K. Oil to the ration card holders. As a result, we conclude that no additional discussion is necessary, and this case does not qualify as Composite Supply under the GST Act of 2017.

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• Income Tax

• 2024 (3) TMI 623
  Refund of TDS - applications for condonation of delay in filing returns claiming refund - ACIT (TDS) Jurisdiction to pass the order - Deduction of TDS in the name of their contractors/sub-contractors - Whether the contractors/ sub-contractors have availed of its credit in their tax returns? As decided by HC [ 2023 (2) TMI 224 - JHARKHAND HIGH COURT] ACIT (TDS) who passed the impugned order was having no jurisdiction in view of the pecuniary limit fixed vide Circular No.9/2015 and reasons recorded the impugned order is quashed on the point of lack of jurisdiction and the case of the petitioner is remitted to the Board to pass a fresh order of refund in accordance with law. HELD THAT:- There is delay of 274 days in filing the present special leave petition, which has not been satisfactorily explained. Even on merits, we do not see any good ground and reason to interfere with the impugned judgment. Recording the aforesaid, the application for condonation of delay and consequently the Special Leave Petition are dismissed.

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• 2024 (3) TMI 622
  TDS u/s 194I OR 194C - External Development Charges ( EDC ) paid to Haryana Urban Development Authority ( HUDA ) - As decided by HC [ 2023 (4) TMI 399 - DELHI HIGH COURT] as reject the contention that the findings of the AO regarding the nature of EDC charges as well at the provisions referred by him for determining the petitioner s liability are not material and Petitioners in these petitions were required to deduct TDS from EDC u/S194-I HELD THAT:- Having regard to the order passed by this Court in Joint Commissioner of Income Tax vs. M/S Experion Developers Pvt. Ltd. [ 2024 (2) TMI 894 - SC ORDER] arising from the very same impugned final judgment and order [ 2023 (4) TMI 399 - DELHI HIGH COURT] by the Delhi High Court and following the order of this Court [ 2021 (2) TMI 623 - SC ORDER] BPTP Limited in SLP (C) Diary No.19436/2020, this special leave petition is also dismissed.

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• 2024 (3) TMI 621
  TDS u/s 194H - non-deduction of taxes on payments made to distributors towards price protection and special price clearance discounts - relationship between the assessee and the distributor is that of Principal to Principal OR Principal to Agent - as decided by HC [ 2023 (8) TMI 456 - KARNATAKA HIGH COURT] inventory risk after acquiring the product is that of the distributor. Payment from the distributor to assessee has no link with the further sales made by the distributor. commission or brokerage is described in explanation to Section 194H and CIT(A) that payment from the distributor to the assessee has no link with the further sale made by the distributor and same having been confirmed - HELD THAT:- As petitioner submits that the matter is covered by the decision of this Court in Bharti Cellular Limited (Now Bharti Airtel Limited) [ 2024 (3) TMI 41 - SUPREME COURT] - In view of the statement made, Special Petition is dismissed as being covered by the above-mentioned decision.

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• 2024 (3) TMI 620
  Entitlement to Nil/lower rate withholding tax certificate u/s 197 - determination of consideration for providing technical services - payments were received by the petitioner SFDC Ireland Limited [SFDC Ireland] pursuant to the arrangement embodied in the Amended and Restated Reseller Agreement [Reseller Agreement] - second respondent has denied the withholding tax certificate in terms as requested by SFDC Ireland and permitted it to receive payment upon deduction of 10% as TDS on the entire amount of INR 518,21,03,624/- which it was to receive from SFDC India for Financial Year [FY] 2023-2024 HELD THAT:- SFDC Ireland was obliged to extend technical assistance and training and thus clearly qualifying technical service which forms the subject matter of Article 12(3)(b) of the DTAA. As pertinent to note that within the United Nations Committee of Experts itself there appeared to be a divergence of opinion in respect of how the FTS issue was to be tackled. As we are concerned, the issue of technical service has to be examined on the anvil of not only a specially crafted and individualised rendition but additionally upon it being found that services of a technical character were provided. Reseller Agreement may now be tested on the aforenoted precepts. In order for receipts of SFDC Ireland being characterized as FTS, one would have to discern and find the existence of an exclusive and special service of a technical character which was provided to the recipient. Not only would that service have to be unique and tailored to the requirements of the seeker, it must also be technical. Unless one finds the transfer of technological knowledge which is exclusive and specialised to the need of the recipient, it would clearly not fall within the scope of technical service. While in today s age it may not be appropriate to understand the word technical to be confined to industrial or applied sciences or for that matter the use of an instrument or facility, the test of exclusivity, individualization and specially crafted solutions would continue to govern. As per terms of the Reseller Agreement, its stipulations do not appear to contemplate any technology transfer to SFDC India. The Indian entity appears to have been designated merely to act as the Reseller which would engage with and onboard customers within the territory for use of SFDC products. As is evident from the definition of SFDC Products, it speaks of customer relationship management offerings, applications, platforms, products and offerings exclusively for resale in the territory. The obligation of SFDC Ireland as per Section 4 of the Reseller Agreement was to provide SFDC products as notified from time to time. The price for those products was to be as per the stipulations contained in Exhibit A. The aforesaid clauses merely speak of the Reseller being accorded the right to sell SFDC products as distinct from what would constitute technical service. The technical assistance and training imparted to SFDC India staff appears to be aimed at enabling them to understand the various attributes and capabilities of SFDC Products so as to be informed when interacting with prospective customers in the territory. The technical assistance and training as in the Reseller Agreement does not appear to bear the characteristics of a conferral of specialised or exclusive technical service. In any case, the training and assistance proffered by SFDC was a concomitant to the sale of its principal products in the territory and fundamentally aimed at readying SFDC India to undertake the marketing of those products. The technical assistance and training did not constitute either the core or the foundational basis of the consideration which was received by SFDC Ireland. Products for SFDC India s internal use were concerned, they stood restricted to those which would enable SFDC India to demonstrate the functionality of SFDC products in trade shows and exhibitions, to train its customers and employees on the use of those products and products to administer and manage customer accounts. None of these aspects would appear to be imbued with a technical hue. Imparting training or educating a person with respect to the functionality and attributes of a software or application would clearly not amount to the rendering of technical service under the DTAA. More importantly, the technical assistance and training which the petitioner proposed to provide was confined to marketing, distribution, support and sale of SFDC products. The assistance and training which Section 4.3 of the Reseller Agreement speaks of was concerned with fields wholly unrelated to providing technical service. The training and assistance was thus primarily aimed at the sale of SFDC products and customer related issues. This does not appear to comprise a transmission of specialised knowledge or skill. This more so when we bear in mind the indubitable fact that the phrase technical service is to be read in conjunction with managerial and consultation and it being the settled position in law that the principle of noscitur a sociis is to apply. With advancements in computing capabilities and the range of software applications that stretch the boundaries of analytics and predictive abilities each day, business enterprises are empowered to plan, review and evaluate data in ways unknown in the past. However, these attributes and hallmarks alone would not justify jettisoning the tests formulated in the decisions aforenoted and which have while interpreting FTS consistently recognised them to be the rendering of specialised and customized service of a technical character. It is this precept which would continue to constitute the lodestar for answering the issues which arise from Article 12(3)(b) of the DTAA. Respondents failed to allude to any material which may have even remotely established that the platform or for that matter the software was being customized or specially designed for a consumer and which constituted the basis of the consideration received. The respondent holds against the petitioner additionally on the ground that it was providing comprehensive services experience or solutions with the help of technology embedded in the software . Even if that were to be accepted as a correct appreciation of the SFDC bouquet of products, it would remain a facet or attribute of the software application available to any customer. This would again fall within the standard scope of service as opposed to an individualization of the application. In any case, a service experience or solution cannot possibly be countenanced as the correct test for the purposes of answering the issue of technical services. More fundamentally, the allusion to non-standardized software and comprehensive service experiences would have been pertinent provided those were applicable to the position in which SFDC India stood placed under the Reseller Agreement. The said entity was merely designated as the Reseller with rights as specified in that agreement. It was merely tasked with the marketing, sale and distribution of SFDC Products as also the onboarding of potential customers. It was not the ultimate recipient of those products or of those services. The respondent was thus required to confine the scope of the enquiry to the nature of the service extended by SFDC Ireland to SFDC India as opposed to the potential benefits that could have been derived from the products in question by the end customer. In order to fall within the ambit of FTS, it was incumbent upon the respondents to establish an indelible link between the payment received by SFDC Ireland and the same constituting consideration for providing technical services. Presently and on the state of the record as it exists today, the respondents do not appear to have evaluated the claim for withholding tax as raised on the touchstone of whether the remittances made to SFDC Ireland was for customized technical services. The impugned order does not proceed on the basis of any material or evidence which may have indicated that the moneys remitted to the assessee could be said to constitute consideration for technical services. According to SFDC Ireland, no remuneration is charged or received for providing technical assistance and training. It is also unclear from the record whether SFDC Products for Resellers Internal Use and which were restricted to training of customers and employees on the use of SFDC Products as also for managing customer accounts are charged for. The aforenoted conclusions thus clearly merit the impugned order being quashed and set aside with liberty being reserved to the respondent to examine the issue in light of the above. We allow the instant writ petition and quash the order as well as the certification. The matter shall in consequence stand remitted to the respondent for considering the application of SFDC Ireland afresh bearing in mind the observations entered hereinabove.

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• 2024 (3) TMI 619
  Exemption u/s 10(23C) (iv ) - Charitable activity u/s 2(15) or not? - Respondent no. 2 rejected petitioner s application for grant of approval u/s 10(23C) (iv) primarily by invoking the provisions of proviso to Section 2(15) as petitioner is not a charitable institution because it carries on the activities mentioned in the impugned order - HELD THAT:- Since the order of the ITAT for Assessment Year 2016-2017 and 2017-2018 has been passed after the impugned order was passed, in our view, respondent no. 2 should be given an opportunity to apply the law as laid down by the ITAT. It will be useful to reproduce paragraph 14 of the judgment of this Court in Indusind Bank Ltd.[ 2023 (7) TMI 135 - BOMBAY HIGH COURT] As revenue submitted that the order of the ITAT for Assessment Year 2016-2017 and 2017-2018 has been challenged in this Court by way of an appeal which is still pending. Further submitted that, therefore, the Revenue has not accepted the findings of the ITAT. The Apex Court in Union of India and Ors. V/s. Kamlakshi Finance Corporation Ltd. [ 1991 (9) TMI 72 - SUPREME COURT] held that the mere fact that the order of the appellate authority is not acceptable to the department-in itself an objectionable phrase-and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. The Court further observed that if this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. Thus as submitted that petitioner is an institution that has been formed and established for promoting, advancing and protecting trade, commerce and industry in India and has been in existence for over 100 years and was established in the year 1907 and petitioner might have chosen not to contest the order for Assessment Year 2013-2014. But that cannot alter the fact that the law, as laid down by the ITAT, is the law on the subject. We hereby quash and set aside the impugned order dated 23rd September 2015 and remand the matter to respondent no. 2 for de novo consideration.

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• 2024 (3) TMI 618
  Claim for refund on income tax or TDS paid - compensation received pursuant to acquisition by the State/KIADB [Karnataka Industrial Areas Development Board] - exemption from payment of income tax on the land acquisition compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Claim rejected on ground that the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ( RFCTLARR Act ) was not applicable to the compensation payable in favour of the petitioner - HELD THAT:- As rightly contended by the petitioner, perusal of the impugned Order will indicate that respondent No. 2 has committed an error in proceeding on the erroneous premise that compensation payable in favour of petitioner was on account of Metro Rail Project which was not covered by the provisions of Section 96 of RFCTLARR Act. Respondent No. 2 failed to consider and appreciate that the compensation was paid in favour of petitioner pursuant to the agreement dated 06.03.2019 entered into between the petitioner and the Special Land Acquisition Officer, KIADB, under Section 29(2) of the KIAD Act, in respect of which, petitioner would not be liable to pay income tax nor be liable to get the tax deducted at source, as held by the Division Bench of this Court in the case of Bangalore Metro Rail Corporation Limited vs. M/s Sri Balaji Corporate Services and Others [ 2023 (9) TMI 1443 - KARNATAKA HIGH COURT] Order - The impugned order of the respondent No. 1 is set aside and is directed to refund the entire tax collected by the respondents back to the petitioner as expeditiously as possible and at any rate within a period of one month from the date of receipt of a copy of this order.

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• 2024 (3) TMI 617
  Addition on account of revenue recognition following percentage of completion method (POCM) - as per AO assessee had incurred substantial expenses on construction but the revenue had not been recognized on the basis of percentage of completion method - AO considered the total saleable construction cost up to 31.03.2014 as 58.49% and accordingly, held that revenue was required to be recognized on the basis of POCM - CIT(A) deleted addition - HELD THAT:- t none of the aforesaid factual observations made by the ld CIT(A) were controverted by the revenue by bringing in contrary materials before us. Further, we find the rate of tax in AY 2014-15 and 2015-16 remains the same. It is a fact that the assessee had indeed started offering income from the project under POCM commencing from AY 2015-16 onwards which is evident from table reproduced supra. Hence, the entire exercise of the revenue in trying to shift the year of taxability to the year under consideration is purely academic in nature. See Gee Industrial Enterprises [ 2015 (8) TMI 181 - PUNJAB HARYANA HIGH COURT] which comes to the rescue of the assessee. This decision has duly considered the decision in the case of Dinesh Kumar Goel [ 2010 (10) TMI 287 - DELHI HIGH COURT] and Excel Industries Ltd [ 2013 (10) TMI 324 - SUPREME COURT] - Thus no infirmity in the order of the CIT(A) and accordingly, ground 1 raised by the revenue is dismissed. Disallowance u/s 14A of the Act where there is no exempt income - HELD THAT:- This issue is no longer res integra in view of the recent decision of PCIT Vs. Era Infrastructure Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] wherein, it was held categorically that if there is no exempt income earned by the assessee, disallowance u/s 14A of the Act cannot be pressed into service. Respectfully following the same, ground No. 2 raised by the revenue is dismissed.

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• 2024 (3) TMI 616
  TDS u/s 194I or 194IB - Disallowance u/s 40(a)(ia) - TDS was deducted but the section 194IB was mentioned wrongly instead of section 194I(b) - HELD THAT:- The rental expenditure had been duly subjected to deduction of tax at source at the applicable rates and one party RMZ Ecoworld Infrastructure Private Limited had even obtained lower deduction certificate u/s 197 of the Act from the TDS officer. When these facts are staring at us, the action of the lower authorities in making a mamooth disallowance merely on the wrong mentioning of section 194IB instead of section 194I(b) of the Act cannot be sustained. Hence we have no hesitation to delete the disallowance u/s 40(a)(ia) - Ground raised by the assessee are allowed. Additional claim for refund of excess Dividend Distribution Tax (DDT) - HELD THAT:- This issue is no longer res integra in view of the recent decision of Total Oil India Pvt Ltd [ 2023 (4) TMI 988 - ITAT MUMBAI (SB)] wherein it was held that Double Taxation Avoidance Agreement (DTAA) does not get triggered at all when a domestic company pays DDT u/s 115O of the Act where contracting states to a tax treaty intend to extend treaty protection to domestic company paying dividend distribution tax, only then, domestic company can claim benefit of DTAA, if any. Ground raised by the assessee are dismissed.

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• 2024 (3) TMI 615
  Addition u/s 69A - unsecured loans - as assessee did not furnish loan confirmation, copy of letter and bank statement of the lenders, thus credit worthiness and genuineness of the transaction cannot be proved - HELD THAT:- From the perusal of the bank statements, it is seen that both the parties had sufficient credit balance in their bank account before transferring the amount through RTGS to the assessee s account and they have also acknowledged in the confirmation about giving of the loan to the assessee. Once these documents are there on record, it cannot be held that the loan is not genuine or parties did not have the creditworthiness. Accordingly, addition on account of loan is deleted. Disallowance of interest expenditure - HELD THAT:- Assessee before us has filed copy of ledger account and bank statement of the assessee and it is seen that these interests are duly reflected in the audited accounts as well as in the bank statements. From the perusal of the balance sheet it is seen that assessee had disclosed financial expenses. For interest on bank OD assessee had filed copy of ledger account of SBI and the interest was paid to the bank on OD account. Similarly, for secured and unsecured loans assessee has filed copy of bank statement and ledger account of interest paid to various parties on the loans taken. Thus, there is a genuine outgoing of interest to the banks as well as to the parties, either for OD account or the loans taken in the earlier years. Nowhere it has been brought on record or it is the case of the AO that that loans taken earlier or during the year is not for business purpose. The reason for disallowance by the ld. AO is that since assessee has not submitted how the capital went negative after the receipt of loans and how the business went into losses after receipt of loans. This cannot be the reason for disallowance of interest without doubting genuineness of the payments itself. If there are loans outstanding in the balance sheet and assessee has paid interest to these parties from his bank account, there is no reason for making any such disallowance, unless the loans in the balance sheet have been found to used for non-business purpose. Accordingly, the disallowance of interest is deleted. Assessee appeal allowed.

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• 2024 (3) TMI 614
  Registration u/s. 80G(5) - Rejection of application due to delay in filling Form 10AB - as argued application was filed within six months of commencement of activities as per clause (iii) of first proviso to sub-section 5 of section 80G - HELD THAT:- Tribunal has power to condone the delay. We note that application was filed by the assessee on 02.12.2022. However, as per CBDT circular No.8/2022 application in Form No.10AB, u/s. 80G(5)(iii) of the Act, should have been filed by assessee on or before 30.09.2022, hence there is delay in filing the appeal. Respectfully following the order of Co-ordinate Bench in the case of Vananchal Kelavani Trust [ 2024 (1) TMI 877 - ITAT SURAT] we condone the delay. Therefore, we deem it fit and proper to set aside the order of the ld. CIT(E) and remit the matter back to the file of the ld. CIT(E) to adjudicate the issue, pertaining to filing in Form No.10AB, u/s. 80G(5) (ii) of the Act, afresh on merits. The assessee is also directed to file the relevant details and documents, before ld CIT(E), as and when required by ld CIT(E). For statistical purposes, the appeal of the assessee is treated as allowed.

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• 2024 (3) TMI 613
  Disallowance of CSR expenses - allowable business expenditure or not? - AO disallowed CSR expenses on the ground that, as per Explanation (2) to section 37 CSR expenses cannot be allowed as deduction to be an expenditure incurred by the assessee for the purpose of business or profession - HELD THAT:- When an expenditure is incurred out of profit of an assessee, it partakes the nature of appropriation of profit, but not expenditure incurred wholly and exclusively for the purpose of business of the assessee. Further, Explanation (2) to section 37 of the Act, put a restriction on deductibility of expenditure of any kind referred to u/s. 135 of the Companies Act, 2013 i.e., corporate social responsibilities expenses, w.e.f. assessment year 2015-16. Although, the assessee has relied upon the decision of Gujarat Narmada Valley Fertilizer and Chemicals Ltd [ 2019 (8) TMI 1288 - GUJARAT HIGH COURT ] but in our considered view, said judgments were rendered before insertion of Explanation (2) to section 37 of the Act and thus, the ratio laid down by the Karnataka High Court and also Hon ble Gujarat High Court is not applicable to the facts of the present case. Thus we are of the considered view that the assessee is not entitled for deduction towards CSR expenses and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the assessee. Disallowance of ESOS expenses and enhancement of disallowance of ESOS expenses - Addition on the ground that in case of ESOP, the whole idea of treating differential value of shares as expenses is based on the misconception and thus, the question of allowing deduction towards difference between market price and exercise price does not arise - HELD THAT:- When there is no ambiguity in computation of expenditure deductible towards ESOS expenses and also said deduction has been computed in light of SEBI guidelines, the Assessing Officer is erred in re-computing allowable expenses by adopting his own formula is incorrect. Since, the appellant has deducted difference between market price and the price at which the option is exercised by the employees is deductible expenditure u/s. 37(1) of the Act, in our considered view the AO is completely erred in re-computing the deduction without assigning proper reasons. Further, this principle is supported by the decision of PVP Ventures Ltd [ 2012 (7) TMI 696 - MADRAS HIGH COURT ] where it has been clearly held that the difference between the market price and the price at which the option is exercised by the employees is to be debited to the profit and loss account as an expenditure. A similar view has been taken in the case of CIT vs M/s. ALSEC Technologies Ltd [ 2017 (12) TMI 1581 - MADRAS HIGH COURT ] where it has been held that difference between market price and the employees stock option plan is revenue expenditure and allowable u/s. 37(1) of the Act. Thus following the decision of M/s. ALSEC Technologies Ltd [ 2017 (12) TMI 1581 - MADRAS HIGH COURT ] we are of the considered view that ESOS expenses is allowable deduction u/s. 37(1) of the Act and thus, we direct the Assessing Officer to delete additions made towards disallowance of expenses and also enhancement made by the ld. CIT(A). Depreciation on investments - AO disallowed excess depreciation claimed on certain investments on the ground that, said depreciation is contrary to RBI guidelines and vide Circular no. 17/2008, dated 26th Nov, 2008. assessee has classified all its securities as stock in trade for the purpose of Income Tax Act, which provides a separate investment trading account and offers the net result of the trading account to tax - HELD THAT:- This is a recurring issue and as per appellant s own case in CIT vs City Union Bank [ 2016 (12) TMI 1789 - ITAT CHENNAI ] has decided the issue in favour of the assessee. The Hon ble High Court, after considering relevant facts and also by following the decision of South Indian Bank Ltd. [ 2002 (11) TMI 53 - KERALA HIGH COURT ] held that depreciation on investment as per market price as on the date of balance sheet is eligible for deduction. In the present case, the assessee has followed different method of accounting for the purpose of Income tax Act and claimed that it has investments under one category and followed cost or market price whichever is lower, which is different from valuation of securities for the purpose of books which is as per RBI guidelines. Thus AO is erred in making additions towards disallowance of depreciation on investments and thus, we direct the Assessing Officer to delete additions made towards disallowance of depreciation on investments. Disallowance of interest u/s. 40(a)(ia) - non-deduction of tax at source u/s. 194A - appellant has failed to comply with provisions of section 197A(1A), 197A(1B) 197A(1C) - as claimed by the Ld. Counsel for the assessee, interest payment to trust and institutions are exempt u/s. 11 12, then it is for the declarants to obtain necessary certificates u/s. 197 of the Act, from the Assessing Officer and produce before the appellant s bank for compliance - HELD THAT:- Since, income of trust and associations is exempt u/s. 11 12 of the Act, unless otherwise said exemption was either withdrawn or not granted by the authorities, in our considered view, this aspect needs to be verified by the Assessing Officer in light of averments made by the Ld. Counsel for the assessee and also necessary evidences that may be placed before the Assessing Officer to prove its claim. Similarly, in respect of remaining interest disallowance of Rs. 3,72,35,522/-, it is the claim of the appellant s bank that in most of the cases, the deductees have already filed return of income and paid income tax on interest payment made by the bank. This fact also needs to be verified by the Assessing Officer, with necessary evidences that may be filed by the appellant. Therefore, we are of the considered view that this issue needs to go back to the file of the Assessing Officer for further verification and thus, we set aside the order of the ld. CIT(A) on this issue and restore the issue back to the file of the Assessing Officer with a direction to reexamine the claim of the assessee. Disallowance of QIP expenses - AO disallowed 1/5th of the share issue expenses under QIP mode on the ground that QIP expenses is not eligible for deduction u/s. 35D of the Act, as no extension of existing business is undertaken - HED THAT:- t no evidences has been placed before us to prove that the assessee has spent the amount for extension of its existing business by setting up new branches and ATMs etc. Further, this issue has been covered by the decision of IDBI Bank Ltd [] 2020 (1) TMI 213 - ITAT MUMBAI ] where a similar view has been expressed by the Tribunal. Therefore, we are of the considered view that the matter needs to go back to the file of the Assessing Officer to verify the claim of the assessee, in light of amount spent towards extension of existing business like setting up new branches, ATMs etc. Deduction u/s. 36(1)(vii) and 36(1)(viia) - provision for bad debts and bad debts actually written off in the books of accounts of the assessee - HELD THAT:- In this view of the matter and by respectfully following the decision of Karnataka Bank vs DCIT [ 2022 (5) TMI 1537 - ITAT BENGALURU ] as further strengthened by the decision of Oriental Bank of Commerce [ 2023 (10) TMI 1244 - DELHI HIGH COURT ] we are of the considered view that, the bad debts written off relating to non-rural advances is not required to be adjusted against provision for bad and doubtful debts allowed u/s. 36(1)(viia) of the Act and thus, we direct the Assessing Officer to re-compute deduction in respect of write off of non:- rural debts without any adjustment to credit balance in the provision for bad and doubtful debts account in respect of rural advance. Additions u/s. 36(1)(vii) r.w.s. 36(2)(v) - We have dealt with the issue of deduction towards provision for bad and doubtful debts u/s. 36(1)(viia) of the Act and deduction for write off of actual bad debt u/s. 36(1)(vii) of the Act in previous paragraph and held that while allowing deduction for actual write off of non-rural debts, same need not be adjusted against credit balance in provision for bad and doubtful debts account. Therefore, we direct the Assessing Officer to verify the facts with regard to amount claimed by the assessee and in case, the AO found that what was claimed as deduction is pertains to write off of non-rural debts, then the same should be allowed as deduction without adjusting against credit balance in provision for bad and doubtful debts account created u/s. 36(1)(viia) of the Act. Deduction u/s. 36(1)(vii) of the Act towards write off of non-rural debts - This ground also pertains to deduction towards actual write off of non-rural debts as claimed by the assessee. If the claim of the assessee is correct, then the same needs to be considered for the purpose of deduction u/s. 36(1)(vii) of the Act, without any adjustment to credit balance in provision for bad and doubtful debts account created u/s. 36(1)(viia) of the Act in respect of rural debts. But, facts are not clear. There is no details with us with regard to actual write off of bad debts to ascertain whether it is for rural debt or non-rural debt. Therefore, we are of the considered view that, this issue needs to go back to the file of the Assessing Officer for fresh verification. Addition of Deduction @20% in respect of income earned from providing long term finance to eligible business u/s. 36(1)(viii) - AO recomputed deduction of eligible profit u/s. 36(1)(viii) of the Act, on the ground that, as per provisions of section 36(1)(viii) of the Act, prescribed method has been provided for computing deduction for eligible profit and as per said section, an amount not exceeding 20% of profit derived from eligible business computed under the head profit and gains of business or profession (before making any deduction under this clause) carried to such reserve account - HELD THAT:- n the present case, the facts are not clear whether the interest earned from eligible business and corresponding expenditure incurred for said business is separately available with the assessee or not. Further, the assessee has computed profit and apportioned various expenses into three businesses and this method followed by the assessee has been disapproved by us. If the assessee is able to furnish necessary details with regard to interest income earned from eligible business and corresponding total expenditure incurred for the activity, then there is no problem for computing eligible profit. In case, the assessee does not have any details, then the method followed by the Assessing Officer should be accepted. Since, facts are not clear, we are of the considered view that this issue needs to go back to the file of the Assessing Officer for fresh consideration. Deduction claimed u/s. 36(1)(viia) - assessee bank had made a provision for bad and doubtful debts u/s. 36(1)(viia) of the Act and while computing the deduction has considered total aggregate average advance made by rural branches in terms of Rule 6ABA of I.T. Rules, 1962 - HELD THAT:- We are of the considered view, that the Assessing Officer is erred in computing deduction u/s. 36(1)(viia) of the Act, by considering only incremental advances made by rural branches of appellant bank as against the aggregate average advances made by rural branches of appellant bank as outstanding at the end of the financial year and thus, we direct the Assessing Officer to consider aggregate average advances outstanding at the end of the relevant financial year for the purpose of computing deduction u/s. 36(1)(viia) of the Act. Further, to compute correct amount of deduction, the matter has been set aside to the file of the Assessing Officer with a direction to reconsider the issue in light of our discussions given herein above and also the details that may be filed by the assessee. Addition u/s. 14A r.w.r. 8D - contention of the appellant that the appellant had not incurred any expenditure to earn exempt income - HELD THAT:- No reason was assigned by the AO for rejecting the explanation of the assessee. In the circumstances, ratio of the decision of Hon'ble Supreme Court in the case of Maxopp Investment Ltd.[ 2018 (3) TMI 805 - SUPREME COURT ] is squarely applicable. We direct the Assessing Officer to delete the addition made u/s. 14A of the Act. Additions made towards Excess cash, Stale drafts and Branch suspense account - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by the decision of Hon ble High Court of Madras in appellant s own case reported in [ 2020 (3) TMI 475 - MADRAS HIGH COURT ] wherein by following the decision of Raddi Sahakara Bank Niyamitha [ 2017 (2) TMI 734 - KARNATAKA HIGH COURT ] held that Excess cash, Stale drafts and Branch suspense account cannot be treated as income of the assessee, because as per RBI guidelines/notifications said amount should be transferred to Depositors Education and Awareness Fund. We are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. Depreciation @ 60% on ATMs - HELD THAT:- The issue of depreciation @60% on ATMs is no longer res-integra. The coordinate bench of ITAT, in appellant s own case for assessment year 2012-13 2013-14 [ 2019 (9) TMI 1225 - ITAT CHENNAI ] has considered an identical issue and after considering relevant facts held that ATMs are akin to computer and computer software and are eligible for higher depreciation @ 60%, but not depreciation @ 15% as applicable to plant and machinery and as claimed by the Assessing Officer. The ld. CIT(A) deleted additions made by the Assessing Officer towards excess depreciation by following the decision of Hon ble Supreme Court in the case of CIT vs State Bank of Patiala [ 2016 (4) TMI 1430 - SC ORDER ] has dismissed SLP filed by the revenue against the decision of Hon ble Punjab and Haryana High Court. Therefore, no error in the reasons given by the ld. CIT(A) to delete additions made towards excess depreciation claimed on ATMs - reject ground taken by the revenue. Additions made towards interest on non-performing assets - AO has made additions towards interest accrued, but not due of NPA on the ground that NPA should be classified as per Rule 6EA of I.T. Rules, 1962, which says account can be treated as non-performing asset only, if the interest is overdue for more than 6 months - HELD THAT:- As decided in in the case of Karur Vysya Bank [ 2021 (11) TMI 568 - ITAT CHEENAI ] wherein after referring to the decision of Vasisth Chay Vyapar Ltd [ 2018 (3) TMI 56 - SUPREME COURT ] interest income cannot be said to have been accrued to the assessee on the non performing assets accounts. Accordingly, we direct the Assessing Officer to delete the addition made on interest on non performing assets accounts.

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• 2024 (3) TMI 612
  Deduction u/s 80P - assessee had never claimed it before the AO during the assessment proceedings - HELD THAT:- Before us, the Assessee had not filed a single document to demonstrate that the Assessee had made claim for Deduction u/s 80P of the Act. It means the assessee had never claimed any deduction u/s80P of the Act. It is a fact that the Assessee had not filed Return of Income. Hence, the AO has rightly not allowed the deduction u/s 80P of the Act as the assessee had never claimed it before the AO during the assessment proceedings as it appears from the assessment order. As per Section 80A(5) assessee has to make a claim for deduction u/s 80P of the Act in the Return of Income. In this case it is an admitted position that No Return of Income had been filed by the assessee. Also we have mentioned in earlier paragraph that no document has been filed by the assessee to prove that Assessee had made a claim for deduction u/s 80P of the Act before the AO. Hon ble Gujarat High Court in the case of Rachna Infrastructure Pvt. Ltd [ 2022 (3) TMI 256 - GUJARAT HIGH COURT] held that assessee was not eligible for deduction u/s 80IA as per Section 80A (5) of the Act as Assessee had not claimed the deduction in the Return of Income. Decided against assessee.

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• 2024 (3) TMI 611
  TDS demand and interest u/s 201(1) / (1A) - assessee failed to deduct Tax at source (TDS) on certain foreign payments - AR submitted that these payments include reimbursements of expenses which do not require any TDS and all these payees are covered under DTAA which has independent professional service clause in their DTAA - HELD THAT:- Considering the plea of Ld. AR and keeping in mind the fact that the issues raised by the assessee, in this regard, were not addressed by Ld. CIT(A), we set-aside the impugned order and restore the issue back to the file of Ld. AO qua disallowance against impugned payment - AO is directed to consider this claim of the assessee and revise the TDS demand and interest u/s 201(1) / (1A), if required, after meeting the plea raised by Ld. AR. The assessee is directed to substantiate its case.

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• 2024 (3) TMI 610
  Validity of reopening of the case u/s. 147 - Reasons to believe - addition as unexplained cash credit u/s. 68 - transactions are in the nature of sale of shares questioned - HELD THAT:- Admittedly, it is a fact on record that the transaction undertaken by the assessee in both the years under appeal before us are in respect of sale of shares held as investment which had been duly reported in the audited financial statements, giving their opening balances from the preceding years. The reasons recorded by the assessee for reopening the case do not in any way point out towards this nature of transaction. They only suggest that assessee had received the amounts from these companies which have been alleged to be fictitious shell companies. Further, in AY 2012-13, the AO himself has taken note of the approval granted u/s. 151 which in itself suggest that it is mechanical in nature without application of mind. As gone through the documents placed in the paper book which evidently demonstrates that the assessee has sold its shares which were held as investment and the amount has been received through proper banking channel from the companies, against the said sale of shares. We have also taken note of the basis of addition which has been noted by the authorities below as amount received towards issue of share capital and share premium by the assessee to the respective companies from whom the amount is received, as not a correct fact. Thus we hold that the reassessment proceeding initiated u/s. 147 are not in accordance with law. Further, on the merits of the case, assessee has evidently demonstrated the nature and source of the amount received in its bank account which is against the investment held by it in the Balance sheet. Accordingly, grounds taken by the assessee filed on the legal and merits of the case are allowed. Penalty u/s 271(1)(c) - HELD THAT:- Since the quantum appeal is held in favour of the assessee in terms of the observations and findings noted above, the penalty so imposed is not justified, since there is no tax sought to be evaded as contained in explanation to section 271(1)(c). Also notice issued for the penalty proceedings does not have any specific charge. Thus as decided in Dr. Murari Mohan Koley [ 2018 (9) TMI 1 - CALCUTTA HIGH COURT] specific charge ought to be mentioned in the notice for levy of penalty u/s. 271(1)(c). Thus,assessee succeeds and the penalty is accordingly deleted. All the appeals of the assessee are allowed.

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• 2024 (3) TMI 609
  Taxability in India - amount received by the assessee from offshore supplies of plants and equipments - PE in India or not? - assessee, a non-resident corporate entity, is incorporated in Federal Republic of Germany - DRP held that the assessee had a PE in India and assessee is involved in building production unit in relation to air gas separation and renewable and low-carbon hydrogen process solutions. Therefore, it would be covered u/s 44BB - HELD THAT:- The terms of payment as per Article 5 of the agreement says that 10% of the price has to be paid as advance and 80% of the price has to be paid upon delivery FOB/FCA Japanese Seaport/Airport/Warehouse out of an unconditional irrevocable and documentary Letter of Crodit which shall be opened within 30 days of the issuance of company s purchase order. Whereas, balance 10% will be paid upon successful completion of test run. The bill of lading indicates that freight and charges are payable at the destination only. The invoice for supply of plant and machinery shows that place of delivery is Moji Port, Japan and the value of invoice is on FOB basis. Thus, the aforesaid facts clearly establish that the situs of sale of plant and equipment was in Japan and not within the territory of India. Therefore, in our view, the ratio laid down in case of Ishikawajma-Harima Heavy Industries Ltd [ 2007 (1) TMI 91 - SUPREME COURT] clearly applies to the facts of assessee s case and no part of the receipts in dispute is taxable in India as the sale event and transfer of title over the goods have taken place outside the territory of India. In the facts of the present appeal, admittedly, the assessee is not engaged in the business of providing services or facilities in connection with prospecting for, or extraction or production of mineral oils in India. Neither the assessee has supplied plant and machinery on hire for use or to be used in prospecting for, or extraction or production of mineral oils. The assessee has sold the plant and equipment to BPCL for setting up a plant in its facilities at Kochi. Therefore, in our opinion, the conditions of section 44BB of the Act do not apply. In case, the Department was convinced that the assessee had a PE in India all the receipts should have been brought to tax under domestic law, either under section 44BB or section 44DA or section 9(1)(vii) of Act, as the case may be. Further, though, the departmental authorities have concluded that the assessee had a PE in India, however, they have not established how the conditions of Article 5(1) of the tax treaty are satisfied and what is the nature of PE in India. On careful scrutiny of the assessment order and directions of learned DRP, we find that except general observations, no valid reasoning has been provided by the departmental authorities to establish existence of PE. Thus we hold that the receipts from sale/supply of plant and equipment are not taxable in India. Accordingly, ground no. 1 is allowed.

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• 2024 (3) TMI 608
  Income accrues or arises or deemed to accrue or arise in India - Unexplained foreign income - residential status of the assessee - as submitted assessee has stayed in India during the previous year for 166 days (which exceeds 60 days) and more than 365 days in preceding four years thereby completely becoming a resident in India as per the provisions of Section 6(1)(c) - claim of the assessee that he has left for employment outside India and therefore stay of 182 days in the previous year are required for becoming the resident - whether CIT(A) wrongly held that the assessee as non-resident under the provisions of section 6? - HELD THAT:- As per the provision of clause (c) of sub-section 1 to section 6 the assessee shall be treated as resident under the Act. Further, the contention of the revenue that the provisions of explanation (1)(a) below section (6)(1) provides that citizen of India leaves India for the purpose of employment outside India, the word 60 days under clause (c) of subsection shall be replaced with 182 cannot be applied in the case of the assessee as there is no evidence submitted by the assessee establishing that the assessee leaves India for employment purpose. Before going into specific contention of the revenue, we note that the AO himself, while finalizing the assessment order, has treated the assessee as non-resident. Therefore, in our considered view there no dispute remains on this issue. Hence, as per the provision of section 5 of the Act only those income which accrues or arises or deemed to accrue or arise in India will be brought to tax under this Act. Protective addition made on account of the expenses incurred on the accommodation, tuition fee and utility bills in Singapore - CIT(A) deleted addition - We note that wife of the assessee has admitted having incurred impugned expenses out of the loan taken from the companies incorporated in the Singapore in which the assessee and his wife are shareholders and directors. The AO, in the case of wife, has not accepted the explanation and added the loan amount to her total income by holding that the companies from which loan claimed to be taken are loss making. On appeal by her to the first appellate authority, the learned CIT(A) accepted the source of the loan amount and deleted the addition on merit of case. Once the substantive addition deleted on merit of the case the consequent addition on protective does not hold ground. In holding, so we draw support and guidance from the judgment of Panchmukhi Management Services (P.) Ltd. [ 2022 (9) TMI 1331 - DELHI HIGH COURT] where it was held as this Court by a separate order in a batch of appeals has upheld the order of the Tribunal deleting the substantive addition on merit made in different concerns, consequently, the issue of protective addition in the hand of the respondent-assessee does not arise. Thus, no infirmity in the order of the learned CIT(A) with respect to protective addition deleted by him. Moreover, once the assessee has been accepted as Non-resident by Revenue, then the addition in the hands of the cannot be made unless there it is accrued or arose/ deemed to accrue and arise India. Addition on account of deposit in the bank account of the assessee in Singapore - The fact that assessee has business operation in Singapore through multiple companies incorporated by him in Singapore was doubted. The bank account in question is also maintained in Singapore. The assessee is also a non-resident. Thus, considering the status of the assessee and his business operation in Singapore, the deposit made/amount credited in bank account maintained outside India cannot be taxed in India unless the revenue brings corroborative material that the amount deposited outside India were accrued or arose or deemed to accrue or arise to the assessee in India. However, no such material has been brought on record by the AO. Hence the learned CIT(A) rightly deleted the addition. Investment in the shares of companies based in Singapore - we note that the assessee during the assessment proceeding furnished copy of financial statement of Singapore companies. All these documents were also submitted by the assessee before Accounting and Regulatory Authority Singapore . The AO also made independent inquiry by referring to Competent Authority of India in Singapore. However, no adverse material resulted from such enquiry for holding the investment made by the assessee was sourced from the income accrued or arose in India. There was no material before us brought by the learned DR contrary to finding of the learned CIT(A). Therefore, considering categorical finding of the learned CIT(A) and the status of the assessee being non- resident the investment made outside India cannot be brought to tax in India - Decided against revenue. TDS u/s 194C - disallowance of land filling expense on account of non-deduction of tax at source - Assessee submitted that the assessee was not subject to the provisions of audit u/s 44 AB for the immediately preceding assessment year and therefore the assessee cannot be held as assessee in default on account of non-deduction of TDS - HELD THAT:- The above contention of the assessee has nowhere been doubted by the CIT-A. As such the order of CIT(A) on the contention raised by the assessee is silent. Thus, we can presume that the assessee was not subject to the provisions of section 44AB of the Act in the immediately preceding year and therefore the assessee cannot be made liable to deduct the TDS u/s 194C of the Act on account of land levelling expenses. Accordingly, we set aside the finding of learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.

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• 2024 (3) TMI 607
  Addition u/s 68 - Exemption of capital gains u/s 10(38) denied - bogus LTCG - case of the Assessing Officer is that the appellant is a beneficiary of accommodation entries or long term capital gains from Calcutta Entry Provider - machinations of fraudulent, manipulative and deceptive dealings and how the stock exchanges system was misused to generate bogus LTCG - HELD THAT:- The appellant deliberately withheld the information from the Assessing Officer as well as the ld. CIT(A) which is within exclusive knowledge of appellant to establish the genuineness of transactions of purchase of shares of that company. It is nothing but a fraud played by the appellant against the Assessing Officer as well as the ld. CIT(A) who are quasi judicial authorities employed for execution of the provisions of the Income Tax Act. Therefore, the principle of fraud can be squarely applied to the facts of the present case and principles of natural justice have no application. Applying the said doctrine, we have no hesitation to hold that the transaction of purchase and sale of shares of M/s. Corporate Commodity Broker Pvt. Ltd. under consideration before us is void ab-initio, this is nothing but sham, make believe and colourful device adopted with excellent paper work with intention bringing the undisclosed income into books of account. Accordingly, we confirm the orders of the Assessing Officer as well as the ld. CIT(A) and find no merits in the appeal preferred by the assessee before us. Decided against assessee.

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• 2024 (3) TMI 606
  Scope of rectification of mistake - disallowance on account of EPF and ESI vide order u/s 154 - HELD THAT:- AO had accepted the return filed u/s 139 of the Act vide intimation u/s 143(1) of the Act dated 24.11.2019. The same was based on the tax audit report in form no. 3CB and 3CD. Thus, the question of delay in deposit of the employees contribution was very much in the assessment records upon which the intimation u/s 143(1) was served upon the assessee. As at relevant time there was law in favour of assessee allowing such expenditure so it has to be concluded that assessee was benefited by same and failure to follow a divergent view in favour of Revenue cannot be considered to be an error apparent on record and thus learned AO was not justified to substitute his opinion by invoking provision of Section 154. The question of relying any judgment in favour of Revenue to invoke section 154 powers is not manifested from the order u/s 154 and thus the learned CIT(Appeals) too erred to sustain the order on the basis of the judgment in Checkmate Services Pvt. Ltd. case [ 2022 (10) TMI 617 - SUPREME COURT] Hon ble High Court [ 2004 (10) TMI 36 - MADHYA PRADESH HIGH COURT] held that as on the date, when the assessee claimed the benefit of investment allowance, i.e., on 31-3-1989, the issue in regard to its claim was debatable one as there was cleavage of judicial opinion between several High Courts. On the date of rectification i.e., on 19-10-1992, the decision in N. C. Budharaja [ 1993 (9) TMI 6 - SUPREME COURT] was not rendered by the Supreme Court, therefore, invocation of provisions of section 154 was not justified. Assessee appeal allowed.

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• Customs

• 2024 (3) TMI 605
  Smuggling - Gold - provisional attachment of bank accounts of petitioner - proper officer has not passed any order in writing which fulfils the requirements of Section 110(5) of Customs Act, before provisional attachment - It is the Petitioner s case that, on making oral enquiries with the bank, the Petitioner was informed that the account had been frozen pursuant to customs investigation against the Petitioner - jurisdiction of Court to entertain these Petitions - HELD THAT:- On a bare perusal of the provisions of Section 110(5) of the Act, it can be seen that a bank account can be provisionally attached if the proper officer forms an opinion that, for the purpose of protecting the interest of revenue or preventing smuggling, it is necessary so to do. Further, an order directing provisional attachment of the bank account has to be in writing - The proper officer must form an opinion that it is necessary to provisionally attach the bank account for the aforesaid reasons and not only expedient to do so. Moreover, the necessity has to be for the purpose of protecting the interest of revenue or preventing smuggling and not for any other purpose. While conditioning the exercise of power on the formation of an opinion of the Principal Commissioner / Commissioner that, for the purpose of protecting the interest of revenue or preventing smuggling it is necessary so to do , it is evident that the statute has not left formation of the opinion to an unguided subjective discretion of the proper officer or for that matter the Principal Commissioner / Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of government revenue and / or preventing smuggling. Further, considering the drastic nature of this power, such an order in writing directing provisional attachment should be served not only on the bank but also on the bank account holder, as, in the absence of such an order in writing being served on the bank account holder, it will be at a great disadvantage if he deems fit to challenge such a provisional attachment. The law is well settled by the judgment of the Division Bench of this Court in the case of Boxster Impex Pvt. Ltd. vs. Union of India [ 2020 (10) TMI 50 - BOMBAY HIGH COURT] . This judgment was delivered in respect of the provisions of Section 110(5) of the Act held that Learned counsel for the respondents could not show any other provision in the Customs Act which empowers or authorizes the customs department to freeze the bank account of a person other than sub-section (5) of Section 110. Such attachment of bank account of the petitioner on 1st March, 2019 and its continuation thereafter being in breach of Section 110(5) is therefore, without any authority of law. In the present case, before provisionally attaching the bank accounts of Petitioners, the proper officer has not passed any order in writing which fulfils the requirements of Section 110(5) of the Act. No such order in writing has been placed on record before us by the Respondents. In fact, in paragraph 11 of its Affidavit in Reply, Respondent No. 3, quite surprisingly, contended that, as per the provisions of Section 110(5) of the Act, no written order for provisional attachment of a bank account is required to be passed - such an order in writing ought to have been served on the Petitioner / bank account holder. In the present case, no order in writing records the opinion of the proper officer, namely that, for the purpose of protecting the interests of revenue or preventing smuggling, it had become necessary to provisionally attach the bank accounts of the Petitioners. In our view, there is a total non-compliance of the provisions of Section 110(5) of the Act while provisionally attaching the bank accounts of the Petitioners. For this reason, the provisional attachment on all the bank accounts of the Petitioners will have to be declared as illegal and lifting the impugned provisional attachment and defreezing of the bank accounts of the Petitioners will have to be directed. Jurisdiction of the Court to entertain the petition - HELD THAT:- As a part of the cause of action clearly arises within the territorial jurisdiction of this Court, this Court would have jurisdiction to entertain these Petitions so as to issue a writ under the powers conferred under Article 226 of the Constitution. It is declared that the provisional attachment of the bank accounts of the Petitioners is illegal and contrary to the provisions of Section 110(5) of the Act - The said provisional attachment of the bank accounts of the Petitioners is hereby set aside and the Respondent banks are directed to permit the Petitioners to operate their respective bank accounts without any hindrance - Petition allowed.

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• 2024 (3) TMI 604
  Advance Authorisation Scheme - Non-fulfilment of Export Obligation - fraudulent activities - allegation of collusion with the Customs officials - non-export of goods and getting the benefit of various export oriented schemes - only allegation was on the ground that because of his active connivance and participation of the Customs staff posted at Tikonia Land Customs Station, the Appellant has prepared fake documents showing fulfillment of Export Obligation in a fraudulent manner - HELD THAT:- When the charges against the Appellant are observed, it is clear that only charge against the Appellant is towards preparing the fake documents showing fulfillment of Export Obligations in a fraudulent manner with the active connivance and participation of the Customs Staff posted at Tikona Land Customs Station. On the other hand, the Adjudicating Authority himself has held that no proper evidence is found towards their (Customs Officers) involvement in the fraud. In such a case, the allegation that the Appellant has actively colluded with the Customs officials cannot legally sustain. Therefore, on this ground, the penalty imposed on the Appellant is set aside. The same set of facts were before the Hon ble Tribunal wherein the present Appellant was not a Noticee at all. Therefore, it leads the conclusion that the present Appellant has been added merely based on certain presumptions and assumptions without any corroborative evidence by the Department. Even from the allegations given in the Show Cause Notice and the Findings in the OIO, as observed above, no case has been made out against the Appellant. Therefore, even on this count, the penalty imposed on the Appellant set aside. Appeal allowed.

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• 2024 (3) TMI 603
  Refund of SAD - denial on the ground that appellant has not produced documents to establish that the SAD has not been passed on to another - HELD THAT:- The appellant has furnished the CA Certificate. The Adjudicating Authority while sanctioning the refund has taken note of this Certificate and allowed the refund in respect of few Bills of Entry. It is not understood why the Adjudicating Authority has requested for a Certificate of cost structure in regard to certain Bills of Entry. The Notification No. 102/2007 or the Circular issued by the Board does not make any requirement for filing a cost structure along with the refund-claim. On perusal of the CA Certificate produced along with the appeal book, it is seen that the said Certificate has categorically stated that the SAD has not been passed on to the customer. In such circumstances, the Department ought not to have rejected the refund-claim in respect of few Bills of Entry only. From the arguments advanced by the Ld. counsel as well as on perusal of records, we find that the Department has insisted on submission of cost structure in case of imports made on MRP basis. The refund is sanctionable only when evidence as to VAT payments made on sale of imported goods is produced before the refund sanctioning authority. The direction to produce cost structure of imported goods does not have any legal basis when the appellant has produced the Chartered Accountant s Certificate to the effect that duty burden has not been passed on to the customer/s as specified in the relevant Notification. The CA Certificate establishes that the duty has not been passed on to the customer. The appellant is eligible for refund. The impugned order to the extent of rejecting the refund-claim to the tune of Rs.2,18,490/- and Rs.2,32,950/- is set aside - appeal allowed.

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• Insolvency & Bankruptcy

• 2024 (3) TMI 602
  Permission to withdraw the present Special Leave Petition - Right to get registered as RP - Rejection of application of the Petitioner herein for registration as a Resolution Professional - It was held by High Court that This Court is of the opinion that the decision taken by the Board does not suffer from any irregularity which requires interference by this Court under Article 226 of the Constitution of India - HELD THAT:- Permission as sought for is granted. The Special Leave Petition is dismissed as withdrawn.

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• 2024 (3) TMI 601
  Undervalued/preferential/fraudulent transactions - Failure to adjudicate about the ingredients of Section 43, 45, 49 and 66, specifically - Adjudicating Authority in the impugned order has only noticed the opinion of the Resolution Professional - Need for separate consideration of preferential, undervalued, and fraudulent transactions, each requiring distinct scrutiny and evidence - HELD THAT:- The Adjudicating Authority has recorded only its conclusions and that too without considering the preferential, undervalued and fraudulent, each transaction separately and there is general observation that the transactions are undervalued transactions as well as preferential and fraudulent transactions. The ingredients of preferential, undervalued and fraudulent transaction are entirely different and there has to be application of mind to the ingredients of each transaction to come to conclusion that ingredients are satisfied and the transaction falls in the said category adverting to the given pleadings in the application. The Adjudicating Authority ought to have adverted to the said pleadings and returned the finding regarding the fulfilment of ingredients of each provision. The Adjudicating Authority has only in two paras i.e. 27 and 28 has recorded his conclusion without giving any reason and without adverting to any pleadings or materials on record. The order passed by the Adjudicating Authority cannot be sustained. Order impugned is set aside - Application revived before the Adjudicating Authority to be heard afresh and decided in accordance with law. Appeal disposed off.

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• FEMA

• 2024 (3) TMI 600
  Offence under FEMA/FERA - Levy of penalty - Review petition - proceedings against matter had gone up to the Hon ble Apex Court and the SLP had been dismissed - taking or refraining from taking action which had the effect of securing receipt of the full export value of the goods exported from the country of final destination had been delayed beyond the prescribed period in contravention of Section 18 (2) of the FERA read with notification dated 01.01.1974 issued by the Central Government - penalty imposed upon the appellants and the proforma respondent vide order dated 14.07.2009 (Annexure A-4), they were directed to make a pre-deposit of 10% of the amount of penalty within a period of 30 days HELD THAT:- Section 19 of FEMA deals with appeals to the Appellate Tribunal and provides that any person appealing against the order of the Adjudicating Authority levying any penalty shall, while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government. The proviso lays down that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship, the Appellate Tribunal may dispense with such deposits, subject to such conditions as it may deem fit to impose so as to safeguard the realization of penalty. Strangely enough, after the dismissal of the SLP, instead of complying with the order and depositing the 10% amount, the appellants and the proforma respondent filed a review petition before the Appellate Tribunal. It was pleaded before the Appellate Tribunal that the appellant company was willing to tender the amount and that in case the order was not reviewed, the delay in depositing the amount be condoned. The review petition was, however, dismissed vide order dated 24.06.2015 (Annexure A-6). Thereafter, the proforma respondent filed CWP before this Court, which was decided [ 2017 (8) TMI 1723 - PUNJAB AND HARYANA HIGH COURT] and the condition of pre-deposit of the 10% of the penalty amount was set aside. The stand taken before the Co-ordinate Bench in the writ petition (IBID) was that the proforma respondent had never been the Director of the company and that she was only a Director in M/s Sachdeva and Sons Rice Mills Ltd. which was a separate legal entity. This stand was accepted and the writ petition was allowed. It would be essential to notice that all this while, the matter having gone up to the Apex Court was concealed. After the aforesaid decision, the appellants filed a review petition before the Appellate Tribunal which was dismissed by way of order dated 06.06.2019, leading to the filing of the present appeal. The Appellate Tribunal dismissed the review petition by observing that repeated petitions were being filed and one such review petition had already been dismissed on 24.06.2015 - Here also, it appears that the Tribunal was not apprised that the matter had already been decided by the Apex Court. Undeterred by all proceedings which had gone against the appellants, the appellants preferred the present appeal. In the considered opinion of this Court, the present appeal is nothing but a gross abuse of the process of law. The appellants have misled the Courts at every step and despite the matter having been finalized by the Apex Court, the appellants have raked up the same in subsequent petitions. The conduct of the appellants is highly deprecated. Once the matter had gone up to the Hon ble Apex Court and the SLP had been dismissed, no further proceeding would lie. In the present appeal, the appellants have selectively filed documents and have also made attempts to mislead this court

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• PMLA

• 2024 (3) TMI 599
  Maintainability of petition - petitioners are basically aggrieved with certain observations made in the impugned judgment and order against the State Police Machinery - HELD THAT:- The respondents fairly states that the respondents are not interested in maintaining those observations. He submits that if those observations are expunged, the respondents would have no objection. It is not required to entertain the petition in so far as final directions given in the impugned order are concerned - SLP disposed off.

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• 2024 (3) TMI 598
  Seeking grant of Regular Bail - Money Laundering - proceeds of crime - predicate offence - subsidy fraud in IFFCO by opening Kisan International Trading - exchange of illegal commissions in import of raw materials and fertilizers - manipulation of sales data of fertilizers for claiming higher subsidy etc. - specific allegation against the petitioner is that he along with the co-accused acted as intermediaries who channelized the ill-gotten money through various firms and companies registered either in their names or in the names of the sons of the Managing Directors of IFFCO and IPL. CBI's Jurisdiction to register the RC - HELD THAT:- The first submission of the learned Senior Counsel for the petitioner is that since IFFCO and IPL are no longer government entities and it is not yet clear whether the co-accused namely, P.S. Gahlaut and U.S. Awasthi are public servants , hence, no offence under the provisions of the Prevention of Corruption Act is made out. It was further elaborated that even an inquiry by CBI in respect of IPL was closed stating that it has no jurisdiction over IPL since it is not a public authority. The said submission cannot be gone into at this stage as a co-ordinate Bench of this Court is stated to be seized of the specific issue with regard to the jurisdiction of the CBI to register the RC, in the writ petitions filed by the co-accused - Both offences under Section 120-B and Section 420 IPC find mention in Schedule-A of the PMLA, therefore, such offences by themselves can be a predicate offence to trigger the offence of money laundering under the PMLA. To what extent reliance could be placed on the statement under section 50 of PMLA at the stage of considering bail application - HELD THAT:- The principle that emerges from Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] as regards the statement recorded under Section 50 of the Act is that such statements are recorded in a proceeding which is deemed to be a judicial proceeding within the meaning of Section 193 and Section 228 of the Indian Penal Code and is admissible in evidence. The said statements are to be meticulously appreciated only by the Trial Court during the course of the trial and there cannot be a mini-trial at the stage of bail. However, when the statements recorded under Section 50 of PMLA are part of the material collected during investigation, such statements can certainly be looked into at the stage of considering bail application albeit for the limited purpose of ascertaining whether there are broad probabilities, or reasons to believe, that the bail applicant is not guilty. Whether the confessional statement of co-accused u/s 50 of PMLA can be used against other accused - HELD THAT:- It is trite that the court cannot start with the confession of the co-accused to arrive at a finding of guilt but rather after considering all other evidence placed on record and arriving at the guilt of the accused, can the court look at the statement of the co-accused to receive assurance to the conclusion of guilt - In Surinder Kumar Khanna vs. DRI [ 2019 (1) TMI 828 - SUPREME COURT ] the Hon ble Supreme Court tracing the law as regards the general application of a confession of a co-accused as against other accused under Section 30 of the Evidence Act, laid down that the Court cannot start with the confession of a co-accused person; it must begin with other evidence adduced by the prosecution and after it has formed its opinion with regard to the quality and effect of the said evidence, then it is permissible to turn to the confession in order to receive assurance to the conclusion of guilt which the judicial mind is about to reach on the said other evidence. Thus, the confessional statement of a co-accused under Section 50 of the PMLA is not a substantive piece of evidence and can be used only for the purpose of corroboration in support of other evidence to lend assurance to the Court in arriving at a conclusion of guilt. Money trail should remain unbroken to hold the petitioner guilty - HELD THAT:- For an offence of money laundering, there should be generation of proceeds of crime from the scheduled offence and the person sought to be prosecuted should be directly or indirectly involved in any process or activity connected with the said proceeds of crime. Thus, the existence of proceeds of crime is essential for initiation of prosecution under the PMLA. It is the case of the respondent/ED that the petitioner has received proceeds of crime through two routes which before reaching the petitioner passed through the hands of various individuals/entities. Thus, there are two money trails which have been referred to hereinabove. To hold the petitioner guilty there has to be an unbroken money trail i.e., generation of proceeds of crime which eventually leads to the petitioner and in case there is a break in the trail, the said break shall enure to the benefit of the petitioner. Before proceeding to examine the two money trails/routes, it is required to be noticed that the first two steps viz., (i) payment of inflated prices inclusive of commission/bribe money by IFFCO/IPL to Uralkali Trading for the import of fertilizers from it, and (ii) payment of commission/bribe money by Uralkali to Rajeev Saxena, are common to both the trails/routes, therefore, apt would it be advert to the same at the outset - The two steps are Step 1: Inflation of prices and Step 2: Flow of proceeds of crime from Uralkali Trading to Rajiv Saxena. The lack of evidence at Step 1 , as well as, the conflicting stand of Rajeev Saxena in Step 2 , are circumstances, which cannot be ignored altogether at this stage. Direct route through Ratul Puri - HELD THAT:- It is the case of the respondent that thereafter the proceeds of crime were collected by one Puneet Banthia (employee of Sanjay Jain) from Ratul Puri/Rajiv Aggarwal. However, neither Rajiv Aggarwal (employee of Ratul Puri) nor Ratul Puri, has admitted to dealing with Puneet Banthia for the purpose of handing over cash to him to transport the same to the petitioner - Thus, it is only Puneet Banthia who has supported the case of the prosecution in his statement dated 10.10.2022 recorded under Section 50 of PMLA to the effect that he was asked by the petitioner to pick up some cash from the office of Moser bear and have it delivered at the office of Sh. Sanjay Jain in Defence Colony. He has also stated that he carried cash in the year 2016, whereas the transactions in Rajeev Saxena s ledgers connected with Uralkali are up to the year 2014. In this backdrop, the contention of the learned Senior Counsel for the petitioner that even if the statement of Puneet Banthia is taken on face value, the cash carried by him has no connection with the import by IPL / IFFCO from Uralkali, cannot be said to be wholly without substance. Indirect route through Alankit Group - HELD THAT:- It is the case of the respondent that thereafter the proceeds of crime from Rayon Trading have come to Alankit Group. At this stage, suffice it to note that Alok Aggarwal in his statement dated 28.11.2022 under Section 50 has made it clear that the money received from Rayon Trading is for genuine purposes/transaction. Therefore, Alok Kumar Aggarwal has not supported the case of the prosecution. Further, Alok Kumar Aggarwal is a co-accused in the present matter, therefore, as already noted above, his statement can only be used for the purpose of corroboration and is not a substantive piece of evidence - It is further case of the respondent that the proceeds of crime from Alankit Group to Sanjay Jain/petitioner have come through cash/bank transfer and for this purpose, the respondent has relied upon the ledger maintained by one employee of Alok/Ankit Aggarwal namely, Sunil Kumar Gupta, but said Sunil Kumar Gupta in his statement recorded under Section 50 of PMLA has admitted that he has no knowledge whether the said payment was actually made to the petitioner as he was merely noting the entries at the instructions of Alok/Ankit Aggarwal. Therefore, his statement at best is hearsay as he has not witnessed the transaction himself. Claim of higher subsidy on inflated prices - HELD THAT:- There is no document to indicate that IFFCO / IPL are industry leaders. Assuming arguendo, that the said entities are market leaders and they could manipulate the average industry prices, but there is not an iota of evidence to demonstrate that the average industry price was actually manipulated by IFFCO and IPL. Further, in this regard the observations of this Court under the heading Step 1 may be referred to - On the other hand, it can be seen that after 01.04.2010, the Nutrient Based Subsidy Scheme [ NBS Scheme ] became applicable whereunder the cost of production/import price of the fertilizers has no relevance to the amount of subsidy which could be claimed by the importer. Therefore, there seems to be some merit in the contention of the learned Senior Counsel for the petitioner that post introduction of the NBS Scheme the case set up by the CBI and the Respondent itself appears to have become improbable. Examination of the predicate offence - HELD THAT:- As this Court has prima facie observed that there is no material showing imports at inflated prices by IFFCO/IPL and consequent payment of higher subsidy and there appears to be a break in the money trails, therefore, the evidence to prove conspiracy or wrongful loss to IFFCO/IPL, its shareholder and to the Public Exchequer and the resultant wrongful gain to the petitioner, is lacking. Thus, at this stage based upon the material produced before the Court, it can be said that prima facie the predicate offence appears to be weak in nature and the petitioner is entitled to the benefit of the same. Bail on the ground of parity - HELD THAT:- There is merit in the contention of the learned Senior Counsel for the petitioner that non-arrest of co-accused is a relevant factor which can be taken into account in addition to other surrounding factors to grant the concession of bail to the petitioner - the petitioner is also entitled to the benefit of the fact that the main accused, as well as, some other accused have not been arrested and bail has already been granted to other co-accused - On the basis of the material available on record, this Court is satisfied that there are reasonable grounds for believing that the petitioner is not guilty of the offence and that he is not likely to commit any offence while on bail. Thus, the petitioner has made out a case for grant of regular bail. Accordingly, the petitioner is enlarged on bail subject to fulfilment of conditions imposed - bail application allowed.

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• 2024 (3) TMI 597
  Grant of anticipatory bail - Money Laundering - siphoning off of funds - sale of the properties belonging to Kalpataru Grih Nirman Society, in which, FIR has been registered against Dilip Sisodia for defrauding the society by diverting Rs. 4.89 Crores in his own personal account - HELD THAT:- Section 3 of the PMLA Act says that whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering. Therefore, the allegation in the ECIR against the applicant that he was involved in the process or activity connected with the proceed for crime and its concealment. Therefore, even if, as on today, he is not an accused in the FIR will not be a ground for anticipatory bail in view of rigor of Section 45 of the PMLA Act. At this stage, this Court cannot held that the applicant is not guilty of the offence under the PMLA Act. In the case of Y.S. Jagan Mohan Reddy [ 2013 (5) TMI 896 - SUPREME COURT ] the apex Court has held While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations. Even otherwise, the warrant has been issued by the Court but the present applicant is not appearing before the Court, therefore, he is not entitled for anticipatory bail. The applicant may surrender and apply for regular bail - Application dismissed.

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• Service Tax

• 2024 (3) TMI 596
  Levy of service tax - Business Auxiliary Service - incentives received from the airline companies - Department has filed the cross appeal on the bifurcation of the income under the category as Commission and Incentive and further the bifurcation of incentives to incentive , discount and market price adjustments on which demand has been dropped. HELD THAT:- The amount received as Commission is distinguishable from the amount received as Incentive for the simple reason that Commission has direct nexus to the service which the appellant is providing, i.e. booking of space with the airlines whereas Incentive as explained by the appellant is the profit which they earn from the difference in the amount which they generally charge from their clients which is higher than the price they have negotiated with the airlines. Therefore, the amount received by way of incentive is not on account of rendering any services but on account of trading activity which is not taxable under the Act - The findings of the adjudicating authority that incentive received by the appellant is also another form of consideration given by the airlines for providing the service for promotion of their business needs to be set aside in view of the decision of the Larger Bench, where it was specifically concluded that by booking air tickets the air travel agent is promoting its own business and is not promoting the business of the airlines. The terms incentive , discount or market price adjustment used in the CSR has been considered differently by the adjudicating authority which has been challenged both by the assessee as well as by the revenue. No service tax can be levied on incentive . In so far as the appeal filed by the revenue against the demand being dropped on discount and market price adjustment is concerned the same has been dropped as they are directly linked to freight which has been held to be non-taxable by the adjudicating authority and the same has not been challenged by the Revenue. The learned Authorized Representative has relied on the decision in M/S. APL LOGISTICS INDIA (PVT) LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2018 (2) TMI 317 - CESTAT CHENNAI] however there are no relevance of the same in the present context, though the Tribunal observed that there was no merit in the Revenue s case that the appellant has provided Business Auxillary Service. The impugned order set aside - appeal of Revenue dismissed.

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• 2024 (3) TMI 595
  Valuation - cleaning services - inclusion of value of 'consumable stores' and 'salary paid to their staff as deducted by the party from the gross receipts of taxable services in taxable value - recovery of short paid service tax alongwith interest and penalty - Violation of principles of natural justice - non-speaking order - non-application of mind - HELD THAT:- The appellant has not made any submissions before the adjudicating authority on most of the issues raised in the show cause notice. It is found that the demand has been confirmed by the Original Authority without any response from the appellant and in its without consideration of various issues in proper perspective. In the absence of any response on these issues the order is a nonspeaking order and it requires the application of mind of the Adjudication Authority to these issues which are being raised by the appellant in the appeal. These go to the root of matter and require a finding from the original authority before that can be considered in appeal. Without expressing anything on the merits arguments the matter needs to be remanded for denovo consideration by the Adjudicating Authority. Appeal is allowed by way of remand.

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• 2024 (3) TMI 594
  Short payment of service tax - Commercial and Industrial Construction Services - constructions provided to Educational institutions - construction of commercial and industrial complexes - Department was of the view that the assessee has short paid service tax under CICS for the reason that Educational Institutions also fall under the category of CICS - denial of benefit of Notification No.01/2006 for the construction services rendered to spinning mills (Construction of Commercial / Industrial Complexes) - HELD THAT:- The construction services for the entire period are in the nature of composite services, which involves both supply of materials as well as rendering of services. Being composite services, the demand for the period prior to 01.06.2007 cannot be sustained under CICS as decided by the Hon ble Apex Court in the case of Larsen and Toubro [ 2015 (8) TMI 749 - SUPREME COURT] . For the period after 01.06.2007 the Tribunal in the case of Real Value Promoters Ltd., [ 2018 (9) TMI 1149 - CESTAT CHENNAI] has held that the demand can be only under Works Contract Services - In the case of Real Value Promoters, the Tribunal held that the demand for the period prior to 01.07.2012 can be made only under WCS and the demand made under CICS (RCS) etc., cannot be sustained. In the present case for the entire period the demand is raised under CICS. As per the definition of CICS in the Finance Act 1994 [Sec 65 (25b)], it does not specify that a contract which involves transfer of property in goods would fall under this category. Whereas, the definition of Works Contract Services introduced w.e.f. 1.6.2007 specifies that when the execution of contract involves both transfer of property in goods and rendering of services, such activity would fall under WCS. In present case, all the works executed are composite in nature involving both transfer of property in goods and rendering of services. Therefore, the demand has to be under WCS only. Denial of benefit under Notification No. 1/2006 alleging that the assessee has received free supplies of materials - HELD THAT:- The Hon ble Supreme Court in the case of CST Vs. Bhayana Builders (P) Ltd., [ 2018 (2) TMI 1325 - SUPREME COURT] has held that even if the assessee receives free supplies, the benefit of abatement as per the Notification cannot be denied - the decision passed by Commissioner in Order-in-Original No. 04/2019 dated 28.06.2019 dropping the demand in respect of construction services rendered to spinning mill is legal and proper. Appeal disposed off.

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• 2024 (3) TMI 593
  Interest in case of delayed refund - Section 11BB of the Central Excise Act, 1944 - interest sought on the ground that the refund was not sanctioned within three months - HELD THAT:- The Hon ble Supreme Court in UNION OF INDIA OTHERS VERSUS M/S HAMDARD (WAQF) LABORATORIES [ 2016 (3) TMI 68 - SUPREME COURT] came to the conclusion that it was obligatory on the part of department also to initiate deficiency memo as well as correspondence with the party relating to any deficiency in the refund claim within two days with the receipt of the application. Thus, it becomes important, the department to indicate that it actually gave a deficiency memo within two days of the receipt of the refund application filed with the department or to pay interest as per provisions of Section 11B. The matter is therefore remanded to the Commissioner (Appeals) to consider the same in view of cited decision as well as to consider the fact as asserted that no deficiency memo within the stipulated period of two days was given to the party. Appeal is allowed by way of remand.

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• Central Excise

• 2024 (3) TMI 592
  Condonation of gross delay of 412 days in filing these appeals - justification for delay or not - HELD THAT:- The appellant sought to justify the delay - the reasons assigned for condonation of delay not impressive and the same are not acceptable. The application seeking condonation of delay is dismissed.

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• 2024 (3) TMI 591
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- The respondent had applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and the application was processed and eventually certificates dated 24.01.2020 and 07.02.2020 under SVLDRS-4 scheme has already been given resolving the dispute. The statement of the learned counsel for the respondent is recorded and the Civil Appeals disposed off in view of the above statement.

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• 2024 (3) TMI 590
  Condonation of delay in filing the appeal - impugned order was reviewed by the concerned committee of Chief Commissioner beyond the prescribed period of three Months, from the date of receipt of the order - Section 35E of CEA - HELD THAT:- It is seen that as per proviso to Sub-Section (3) only the Board has power to condone the delay in reviewing the order beyond three Months and no other Authority could have condoned the said delay. The Tribunal also has no authority to condone this delay. The Chief Commissioner has no authority to condone such delay or permit the committee of Commissioners to review the order beyond a stipulated period of three months. The provisions for review are to be construed very strictly as has been held by various authorities including the Hon ble Supreme Court in the case of COLLECTOR OF CENTRAL EXCISE VERSUS MM RUBBER CO. [ 1991 (9) TMI 71 - SUPREME COURT] , wherein it was held that the period of one year fixed under sub- section (3) of Section 35E of the Act should be given its literal meaning and so construed the impugned direction of the Board was beyond the period of limitation prescribed therein and therefore invalid and ineffective. This application for Condonation of delay has been filed without any jurisdiction and authorization. Tribunal does not have any power to consider and condone this delay so the same is dismissed.

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• 2024 (3) TMI 589
  Maintainability of appeal - non-prosecution of the case - Request for adjournment, which cannot be accepted in virtual hearing - While making the request for virtual hearing, Counsel also undertakes that he will not seek adjournment in this matter - HELD THAT:- It is also observed that the matter has been listed on the request of the Counsel for the appellant. This appeal has been listed for hearing on 16.08.2023, 15.09.2023, 20.10.2023 and for today. The Counsel for the appellant either in person or through the letter has only sought taking adjournments in the matter. In case of ISHWARLAL MALI RATHOD VERSUS GOPAL AND ORS. [ 2021 (9) TMI 1301 - SUPREME COURT] condemning the practice of adjournments sought mechanically and allowed by the Courts/Tribunal s Hon ble Supreme Court has observed considering the fact that in the present case ten times adjournments were given between 2015 to 2019 and twice the orders were passed granting time for cross examination as a last chance and that too at one point of time even a cost was also imposed and even thereafter also when lastly the High Court passed an order with extending the time it was specifically mentioned that no further time shall be extended and/or granted still the petitioner defendant never availed of the liberty and the grace shown. In fact it can be said that the petitioner defendant misused the liberty and the grace shown by the court. There are no justification for adjourning the matter beyond three times which is the maximum number statutorily provided - Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.

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• 2024 (3) TMI 588
  Process amounting to manufacture or not - activity of labelling or relabeling, declaration by affixing fresh Maximum Retail Price (MRP) stickers on each unit pack, by altering the retail price stickers already affixed on the watches - demand of central excise duty on the watches cleared by them after labelling/relabeling, affixing fresh MRP stickers - demand based on statements of Store Manager of Showroom at Hosur and General Manager (Commercial) - alleged wilful suppression with intent to evade payment of duty against the showrooms and CFA premises or not - Extended period of limitation - HELD THAT:- The department does not have a case that appellant has for the first-time mentioned brand name Titan, or any such new details while affixing the fresh MRP stickers. The appellant has merely changed the MRP in fresh stickers. The distinction between a label and an MRP sticker was analysed in the case of COMMISSIONER OF C. EX., NEW DELHI VERSUS PANCHSHEEL SOAP FACTORY [ 2002 (4) TMI 152 - CEGAT, NEW DELHI] . A sticker merely containing the name of importer and MRP was held to be not a label . In common parlance, a label on a product is understood to contain description of the goods, its character, usage, expiry date etc., A label is a brief and quick information to the consumer as to the details of the product. A MRP sticker is information about its price only. The Tribunal in the said case was considering Note 6 to the Chapter 34 which is similarly worded as 2 f (iii). It was held by Tribunal that simply putting a MRP sticker does not amount to manufacture. It was also observed that the products were already marketable and the activity of affixing the MRP sticker did not enhance its marketability. Again, the allegation is that the activity of affixing altered MRP amounts to deemed manufacture. There is no allegation that such activity has rendered the product marketable to the ultimate consumer. In the case of Lakme Lever Ltd., Vs CCE [ 2000 (10) TMI 96 - CEGAT, MUMBAI] , the Tribunal observed that the process/activity should attribute marketability to the product which was otherwise not marketable. In the case of CCE Vs. Rafique Malik [ 2018 (1) TMI 109 - BOMBAY HIGH COURT] similar issue was considered. It was held that affixing brand name on finished footwear received in labelled boxes affixed with MRP did not amount to manufacture. The meaning of marketability is that the goods must be capable of being bought and sold as such. In order to fall within definition of manufacture , the process or activity must bring some transformation to the article in such manner that was not present on the article earlier. In the present case the watches are already marketable and the affixing of MRP does not enhance marketability. From the discussions above and following the decisions there are no hesitation to conclude that the activity does not amount to manufacture. The factory at these places have not discharged duty as they have availed benefit of ABE notification. The demand, if any can be raised only against the manufacturer. As no manufacturing activity has taken place at Showrooms and CFAs, the duty demand raised against them cannot be sustained. The issue on merits is answered in favour of appellant and against the Revenue. Time Limitation - Suppression of facts or not - HELD THAT:- The issue is purely interpretational. The issue as to whether the activity of affixing MRP amounts to manufacture has always been under litigation based on facts of each case. The department has not adduced any positive act of suppression against the appellant. The revised price list was available for perusal in the accounts maintained by appellant - there are no suppression of fact with intend to evade payment of duty on the part of the appellant. The show cause notice is time barred. The issue on limitation is answered in favour of appellants and against Revenue. The impugned orders are set aside. The appeals are allowed.

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• CST, VAT & Sales Tax

• 2024 (3) TMI 587
  Levy of VAT on royalty on which Service Tax has already been paid - It is the respondent s contention that the assessment orders dated 29 March, 2019 and 31 March, 2020 could not have been passed by the Assessing officer at Mazgaon jurisdiction and in fact such orders ought to have been passed by the Assessing Officer at the Kalyan jurisdiction - HELD THAT:- Insofar as the period which was spent by the petitioner in pursuing the present proceedings are concerned, which is the period from 11 November, 2022 till the passing of this order, the petitioners would be entitled to avail of the benefit under the provisions of Section 14 of the Limitation Act - Insofar as the period of limitation for filing the statutory appeal is concerned, all contentions of the respondents in regard to any issue of limitation and more particularly on the question that the assessment orders dated 2 March, 2017 and 7 June, 2017 were not served in September, 2022 but earlier thereto, we keep open the contentions of the parties. Needless to observe that for the period 2010-11, 2011-12 in respect of which assessment orders dated 29 March, 2019 and 31 March, 2020 are sought to be withdrawn, the petitioners would be entitled to file statutory appeal as permissible in law within a period of six weeks from today. If so filed, let the appeals be decided without an objection as to limitation and on merits. Petition disposed off.

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• Indian Laws

• 2024 (3) TMI 586
  Constitutional validity of Electoral Bond Scheme and the provisions of the Finance Act 2017 which amended the provisions of the Representation of People Act 1951 and the Income Tax Act 1961 - non-disclosure of information regarding the funding of political parties is violative of the right to information of citizens under Article 19(1)(a) of the Constitution or not - crux of the submission of the SBI is that the matching of information to ascertain who contributed to which political party is a time-consuming process since the information is maintained in two separate silos - HELD THAT:- The Miscellaneous Application filed by the SBI seeking an extension of time for the disclosure of details of the purchase and redemption of Electoral Bonds until 30 June 2024 is dismissed. SBI is directed to disclose the details by the close of business hours on 12 March 2024. During the pendency of the proceedings before the Constitution Bench, ECI had, in compliance with the interim order passed by this Court, filed its statements which have been maintained in the custody of the Court. Copies of the statements which were filed by the ECI before this Court would be maintained in the Office of the ECI. ECI shall forthwith publish the details of the information which was supplied to this Court in pursuance of the interim orders on its official website. The Miscellaneous Application for extension of time shall accordingly stand dismissed.

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• 2024 (3) TMI 585
  Legislative competence, the constitutional validity and the vires of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023 - Case of State is that Since water is a State s subject matter and comes under entry 17 of List-II, therefore, the State has legislative competence to make law and hence there is no violation of article 265 of the Constitution of India. Nature and event of taxation under the impugned Act - HELD THAT:- The power to tax is on generation of electricity and user of water is only incidental. The user of water is not being taxed and it is only the user of water for generation of electricity , who is being taxed. Therefore, it is a tax on generation of electricity. If it was the quantum of water used, then the height from which the water would fall as a measure to determine the rate of cess would be wholly irrelevant. It is evidently clear from the aforesaid notification dated 16.02.2023 that the quantification is not based on the use of water, but is based on the height from which the water falls. The use of water in fact does not go by the text of the impugned Act. It is generation of electricity that is the bone and water drawn is only the flesh . The taxable event is hydropower generation and not the usage of water because if there is no generation, then there is no tax . Moreover, if the cess was on usage of water , then how could the height, at which the water falls on the turbine, be made the taxable event? It is settled principle of law that standard adopted as a measure of levy, although not determinative, is at least indicative of the nature of the tax. Weighed alongwith and in the light of other relevant circumstances, the method adopted by the legislature would be relevant in determining the character of the impost. The impugned levy varies in quantum with the quantum of electricity generated but not the quantum of water drawn and, thus, makes it clear that its character or nature is such that it is inextricable with electricity generation. Thus, there are no hesitation to answer the point in favour of the petitioners by concluding that by the impugned Act cess is sought to be imposed on generation of electricity as against water and, therefore, it is a misnomer that tax is levied on water and not generation of electricity , and is, therefore, not a water tax - answered in favour of petitioners. Pith and substance of the taxing legislation which assumes significance not to the question of bonafides or malafides but in examining the competence of the legislature - HELD THAT:- In determining whether an enactment is a legislation with respect to the given power, what is relevant is whether in its pith and substance , it is law upon the subject matter in question. Therefore, it is necessary here to subject the impugned Act to the test of pith and substance to ascertain its true intent and character, which is relevant in determining as to which list it would fall under and also to trace the State's competence to have promulgated the impugned Act arises. As per Article 265, no tax can be levied or collected except by authority of law. Competence of the State to promulgate the impugned Act whether can be traced to Entry 49 of List-II to the Seventh Schedule of the Constitution as contended by the State - HELD THAT:- It is well settled that while the widest amplitude should be given to the language used in one entry, every attempt has to be made to harmonise its contents with those of other entries, so that the latter may not be rendered nugatory. Competence to promulgate the impugned Act whether can be traced to Entry 50 of List-II as contended by the State - HELD THAT:- The State's competence to impose impugned levy cannot be traced to Entry 50 of List-II as contended by it. Activity of non-consumptive drawl of water for generation of hydropower, where the water drawn is allowed to flow back to its source, being a single inextricable event cannot be brought under the purview of taxing mineral rights - even Entry 50 of List-II cannot be held to countenance the States taxation on water drawl for generation of electricity. Competence to promulgate whether can be traced to Entry 45 of List-II - HELD THAT:- The State's competence to promulgate the impugned Act cannot be traced to Entry 49 of List-II. Therefore, Rekchand's case [ 1997 (5) TMI 441 - SUPREME COURT ] is not applicable in the present case and the State's competence cannot be traced to Entry 45 of List-II - in Rekchand case, the levy was imposed on drawl of flowing water by artificial contrivance for industrial purpose. The rates of such levy were specified under Resolution. It was on account of the definition of land under the Transfer of Property Act, 1882, which included right to water flowing therefrom, the said levy was sustained by the Hon'ble Supreme Court under Entry 45, List-II. Competence to promulgate whether can be traced to Entries 17 18 read with 66 of List-II as a tax - HELD THAT:- The State has relied on Entries 17 18 of List-II to demonstrate its competence to have legislated the Impugned Act. In this regard, it is a settled principle of law that taxation entries are distinct from general regulatory entries. Entries 1 to 44 in List-II are regulatory, whereas Entries 45 to 63 are taxing entries. Therefore, the legislative competence to impose any tax on water drawn for hydropower generation cannot be imposed by the State by referring to Entries 17 18 of List-II being regulatory entry - considering the charging section, taxable event and nature of levying under the impugned Act as well as subjecting the impugned Act to the test of pith and substance , it is absolutely clear that the impugned Act imposes tax on generation of electricity and not merely on water as a subject or on drawl of water, which the State is not competent to do. It also imposes an inter-State tax on inter-State supply of electricity for which again the State is not competent to do so. Competence to promulgate whether can be traced to Entries 17, 18 read with 66 of List II as a fee - HELD THAT:- Once it is held that the cess sought to be imposed by the impugned Act is not on the water drawn but on the generation of electricity , then, it is the Central Government alone which could levy tax on generation electricity - Noticing that electricity is goods - the Hon ble Supreme Court CST vs. M.P. Electricity Board [ 1968 (11) TMI 85 - SUPREME COURT ] observed that levy of State duty on production of electricity is covered with the phrase other goods manufactured in Entry 84 of List I and this is within the exclusive jurisdiction of the Parliament. Consequently, it was declared that the State has competence to levy tax only on the sale and consumption of electricity - the Hon ble Supreme Court held that the levy on generation of electricity is not within the legislative competence of the State - Point answered in favor of petitioner. Without prejudice, the impugned Act is unconstitutional for it suffers from vice of excessive delegation - HELD THAT:- In the instant case, three essential components can be clearly identified within the impugned statute, which are taxable events, the person liable to pay tax and the rate of tax . However, the impugned legislation fails to identify the fourth and equally critical component i.e. measure of tax, which is the value on which the rate of tax will be applied for computing the tax liability - In exercise of powers vested under Section 15(2) of the impugned Act that the State Government issued a Notification dated 26.08.2023, whereby the tariff structure on water cess was fixed on the basis of Head . However, even the said notification failed to prescribe the measure of tax and instead proceeded to prescribe tariff rate without any indication or measure on which such tariff rate will be applied. Moreover, measure of tax being vague, based upon the assessment or water drawn, which would form the basis of the tax imposed is also vague and fraught with lack of adequate guidelines, as is evident from the combined reading of Section 12 with Section 17 of the impugned Legislation. The preamble of the impugned Act merely states that it is an act to levy water cess on hydropower generation in the State of Himachal Pradesh, the Statement of Objects and reasons merely states that the objective of the impugned Act is revenue generation. Therefore, on account of having delegated power to fix rates of impugned levy to Government of Himachal Pradesh without any legislative policy or guidance, the impugned Act is unconstitutional - point is accordingly answered in favour of the petitioners. Promissory Estoppel - HELD THAT:- The question of promissory estoppel has been rendered academic and, therefore, need not be answered. To conclude, it was held as follows: (i) The provisions of the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023, are declared to be beyond the legislative competence of the State Government in terms of Articles 246 and 265 of the Constitution of India and, thus, ultra vires the Constitution. (ii) Consequently, the Himachal Pradesh Water Cess on Hydropower Electricity Generation Rules 2023, are also quashed and set aside. (iii) Sections 10 and 15 of the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023, as have been made applicable to the existing projects, are also declared to be ultra vires the Constitution and are accordingly quashed and set aside. (iv) The amount, if any, recovered by the respondents from the petitioners under the provisions of the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023 and the Rules framed thereunder are ordered to be refunded within four weeks from today. (v) The letter/notice issued by the State Government/Himachal Pradesh State Commission for Water Cess on Hydropower Generation pursuant to the impugned Act, Rules, seeking recovery of water cess from the petitioners, are declared as illegal and are accordingly quashed and set aside. The petition is allowed.

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• 2024 (3) TMI 584
  Seeking exemption from pre-litigation mediation, as required by Section 12-A of the Commercial Courts Act, 2015 - Proceedings u/s 138 of the Negotiable Instruments Act, 1881 - suit for recovery alongwith interest and future interest - HELD THAT:- The plaintiff s case here is predicated only on the fact that it has already undertaken efforts to settle the disputes between parties. Appellant refers to in paragraph 3 of the application, wherein it is stated that the parties were also referred to mediation. However, I do not find this case to be supported by the documents annexed to the application. There is no report of any mediation centre stating that mediation has failed. The orders of the learned Judicial Magistrate, Chandigarh, annexed to the application, also demonstrate only that the parties submitted before the Court that there was chance of compromise, but the attempt was ultimately found to be futile. In the present case, there is no record that an attempt has been made in mediation, and that no urgent relief is sought. Pre-litigation mediation was therefore mandatory. The application is consequently dismissed, and the plaint is also rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908. The suit is accordingly dismissed.

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• 2024 (3) TMI 583
  Arbitration agreement - Refusal to grant work order - L1 bidder in the tender process - forfeiture of the Earnest Money Deposit (EMD) - GST payable was @ 12% - Subsequently, by a notification of the Government, rate was enhanced from 12% to 18% - Wednesbury test - it is argued that if prayer of the petitioner, is allowed, would tantamount to a modification of the tender terms - since there was an acceptance on the part of the parties with regard to the tender conditions, the same has to be treated on the same footing as a contract. HELD THAT:- In the facts of the present case, although the State takes a stand that the prayer of the petitioner would tantamount to rewriting the contract between the parities, it is not so in view of the Memorandum issued by the State itself on November 22, 2022. The said Memorandum, in no uncertain terms, provides for enhancement of GST by 6% from 12% to 18%, even in cases where work order has been issued. In cases where the tender is under process and there is clear indication of rate of GST @ 12%, the Memorandum provides for enhancement by 6% on account of GST. The acceptance order dated January 16, 2023 was issued subsequent to the November 22, 2022 Memorandum and, as such, was subject to the operation of the said Memorandum. Since the petitioner had participated in the tender before the enhancement of GST from 12% to 18%, the provisions of the Memorandum dated November 22, 2022 were squarely applicable in the present case. Thus, the respondent authorities ought to have honoured the commitment of the State issued by way of a Memorandum dated November 22, 2022 by enhancing the GST from 12% to 18% and/or permit the petitioner to refurnish the quotations by incorporating such 6% enhancement, which was the precise request of the petitioner vide its communication dated April 17, 2023. It is well-settled that State actions have to be scrutinized on a higher standard of fairness than the action of private employers. Supreme Court in [ 2019 (3) TMI 600 - SUPREME COURT] categorically applied the Wednesbury test and opened up a window for judicial review even regarding the tender terms where there is arbitrariness, discrimination, unreasonableness and malice. The present instance is one where there is palpable arbitrariness and discrimination against the petitioner insofar as the respondents refused to apply the provision of the Memorandum dated November 22, 2022 to the petitioner, despite the petitioner coming under the purview of the same. Hence, on the score of such arbitrariness and discrimination, the respondent authorities fail the Wednesbury test and, as such, their action is palpably unreasonable and discriminatory against the petitioner. Since the expression of the petitioner s interest to terminate the tender was obviously under State coercion and duress, the same cannot said to be an unqualified intention on the part of the petitioner or any admission on the part of the petitioner regarding termination of the tender or the work order envisaged thereunder. Hence, the said action of the petitioner cannot be held to be on such a high footing that the same would preclude the petitioner s very challenge to the respondents action in not giving effect to the Memorandum dated November 22, 2022 in respect of the petitioner. Thus, the respondents were duty-bound to permit the petitioner to enhance the GST rates by 6 per cent in terms of their own Memorandum dated November 22, 2022 read in conjunction with Notification No. 03/22-Central Tax (Rate) dated July 13, 2022 whereby the enhancement of GST rates took effect, coupled with WBGST Rate Notification No. 1393-FT dated August 23, 2022 whereby the State of West Bengal adopted the GST enhancement. Thus, the impugned action of the respondents in refusing such request of the petitioner and consequential refusal to issue work order and forfeiture of the EMD cannot be sustained. Thus, as a consequence of the setting aside of the refusal by the respondents to give the work order to the petitioner, all subsequent action taken by the State, including subsequent tender, if any issued, are hereby set aside. The respondents shall issue work order to the petitioner by permitting the petitioner to incorporate the enhancement of 6% to the GST rates in its freshly quoted rates. Such fresh quotation shall be given by the petitioner to the respondent authorities within a week from date. Upon such rates being served on the respondent authorities, the respondent authorities shall issue the work order in terms thereof in favour of the petitioner pursuant to the tender-in-question. Alternatively, the respondent will be at liberty to refund the entire earnest money paid by the petitioner with interest @ of 10% till the date of such payment to the petitioner, in which case subsequent action taken by the State in issuing fresh tender shall be sustained.

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